Contractor Label Cannot Defeat Section 80-IA Developer Deduction: ITAT Chennai

DCIT Vs Eco Protection Engineers Private Limited (ITAT Chennai)

EPC Contractor Is Not a “Mere Contractor” Where It Designs, Develops and Bears Project Risks – Section 80-IA Deduction Allowed

Summary: The Chennai Bench of the Income Tax Appellate Tribunal has held that an enterprise executing Government infrastructure projects cannot be denied deduction under Section 80-IA(4) merely because it is described as a “contractor” in the agreement. Where the assessee undertakes the complete responsibility for design, engineering, procurement, construction, erection, testing, commissioning and maintenance, and also bears substantial financial, technical and performance risks, it performs the role of a developer of infrastructure facilities and not that of a mere works contractor.

The assessee, Eco Protection Engineers Private Limited, was engaged in executing multidisciplinary engineering and turnkey contracts in the field of water supply, sewage treatment and industrial effluent management. For Assessment Year 2017-18, it filed its return declaring a total income of Rs.4.75 crore and book profit of Rs.6.54 crore under Section 115JB. The assessee claimed deduction of Rs.1,96,78,063 under Section 80-IA(4) in respect of profits earned from four infrastructure projects executed at Rajkot, Periyakulam, Aizawl and Agartala for Government and State Government agencies. The gross receipts from these eligible projects aggregated to approximately Rs.32.01 crore. The prescribed audit report in Form 10CCB had also been filed within the due date.

The Assessing Officer rejected the deduction on the ground that the assessee was only executing construction contracts and was not itself operating or maintaining the infrastructure facilities after their completion. According to the Assessing Officer, the assessee was a works contractor hit by the Explanation to Section 80-IA(13), introduced by the Finance Acts of 2007 and 2009, and not an infrastructure developer entitled to the tax holiday.

The CIT(A), however, examined the nature of the agreements and found that the assessee had undertaken the complete scope of the projects, including design, procurement, supply, erection, testing, commissioning and maintenance. The assessee was responsible for procurement of materials, engagement of labour, deployment of technical personnel and performance of the projects during the defect-liability and maintenance periods. Payments were linked to progressive milestones, and the assessee had deployed substantial technical and financial resources in executing the projects. The CIT(A), therefore, held that the assessee was engaged in developing infrastructure facilities and deleted the disallowance.

The Revenue carried the matter before the Tribunal, contending that the income was derived from execution of construction contracts and not from operating an infrastructure facility. It was further argued that the amendments to Section 80-IA(13) specifically excluded works contractors from the benefit of the deduction.

The Tribunal observed that, after the amendment made by the Finance Act, 2001, Section 80-IA(4) applies independently to an enterprise carrying on the business of developing; or operating and maintaining; or developing, operating and maintaining an infrastructure facility. Therefore, an enterprise engaged exclusively in developing an infrastructure facility need not necessarily operate and maintain that facility after its completion.

More importantly, the same issue had already been decided in favour of the assessee for Assessment Years 2013-14 and 2014-15. In those years, the Chennai Tribunal had followed the jurisdictional Madras High Court decisions in V.A. Tech Wabag Private Limited and Chettinad Lignite Transport Services Private Limited and held that execution of an infrastructure project pursuant to an agreement with a Government authority does not automatically reduce the enterprise to the status of a mere works contractor.

The Tribunal explained that the terms “contractor” and “developer” are not mutually exclusive. A person who enters into an agreement with the Government would undoubtedly be a contractor in the contractual sense. However, that description does not prevent the same person from being a developer for the purposes of Section 80-IA(4). The decisive factor is not the nomenclature employed in the contract but the nature, substance and extent of the responsibilities actually undertaken.

The Tribunal also rejected the suggestion that acceptance of tax deduction under Section 194C amounted to an admission that the assessee was merely a contractor. Section 194C is contained in the machinery provisions relating to collection and recovery of tax. Deduction of tax under that provision cannot determine or curtail the substantive eligibility of an assessee under Section 80-IA(4).

The Tribunal further noticed that the assessee had been claiming the deduction from Assessment Year 2013-14 onwards and its claim had been upheld in the earlier years. Even in the immediately succeeding Assessment Year 2018-19, the Assessing Officer had accepted the claim in an assessment completed under Section 143(3). The Revenue failed to demonstrate any material change in the facts or law or to cite any contrary decision of a higher judicial forum.

At the same time, the Tribunal clarified that the principle of consistency cannot, by itself, confer a statutory deduction where the prescribed conditions are not satisfied. In the present case, however, the claim had already been examined and accepted on substantially identical facts. In the absence of any material change, judicial discipline required the Tribunal to follow its earlier order.

Accordingly, the Tribunal upheld the order of the CIT(A) allowing the deduction of Rs.1,96,78,063 under Section 80-IA(4) and dismissed the Revenue’s appeal.

Author’s Comments

The decision does not lay down that every civil or EPC contractor is automatically entitled to deduction under Section 80-IA. The Explanation to Section 80-IA(13) continues to exclude an enterprise that merely executes a conventional works contract without assuming the entrepreneurial functions and risks associated with infrastructure development. The real test is whether the assessee has merely supplied labour or executed predetermined work on behalf of another developer, or whether it has itself undertaken substantial responsibilities relating to design, procurement, financing, technical execution, performance guarantees, defect correction and commissioning.

Thus, the name “contractor” appearing in the agreement is not decisive. Equally, deduction of tax under Section 194C does not settle the issue. Substance must prevail over contractual nomenclature. Where the assessee demonstrates that it has actually developed the infrastructure facility, deployed its own technical and financial resources and assumed meaningful project risks, it cannot be denied Section 80-IA deduction merely because the project was executed under a Government contract.

Cases Discussed

• ACIT vs. Bharat Udyog Ltd. (2008) 118 ITD 336
• ACIT vs. B. Dhanasekaran in ITA No.620/Mds/2013 and 320/Mds/2015
• East Coast Constructions & Industries Ltd. vs. DCIT in ITA No.544/Mds/2010
• Patel Engineering vs DCIT 94 ITD 411 (Mum)
• CIT vs. M/s. ABG Heavy Industries Ltd. (ITA No.1687/2009)
• M/s. V.A. Tech Wabag Pvt. Ltd., T.C.A.Nos.196 to 201 of 2019 dated 07.03.2019
• M/s. Chettinad Lignite Transport Services Pvt. Ltd., TCA Nos.741, 1266 of 2009 and 162 of 2015 dated 06.03.2019
• M/s. Covanta Samalpatti Operating Private Limited, Chennai-20 v. The Assistant Commissioner of Income Tax, Company Circle I (3), Chennai-34, reported in (2018) 93 Taxmann 38
• Assistant Commissioner of Income-tax Vs. Pratibha Industries Limited in ITA Nos.2197 to 2199/Mum/2008

FULL TEXT OF THE ORDER OF ITAT CHENNAI

1. This appeal has been preferred by the Revenue against the order passed by the Learned Commissioner of Income Tax, Appeal (Appeals), Chennai – 19, [hereinafter referred to as “the Ld. CIT(A)”], dated 19.11.2025, arising from the assessment order dated 27.11.2019 for the Assessment Year (AY) 2017-18 passed by the Assistant Commissioner of Income-tax, Corporate Circle-2(1), Chennai [hereinafter referred to as “the AO”], u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”).

2. The brief facts of the case emanating from the records are that the assessee is a company engaged as an EPC contractor. The assessee is a multi-disciplinary engineering and turkey contracts company in the field of water, sewage and Industrial effluents and filed its return of income for AY 2017-18 on 27.10.2017 by declaring total income as Rs.4,75,79,620/- and Book Profit of Rs.6,54,81,808/- u/s.115JB of the Act. Later the case was selected for scrutiny under CASS and the statutory notices were issued. The Assessing Officer concluded the assessment by making the following additions vide the Assessment Order dated 27.11.2019:

3. Aggrieved by the additions made in the assessment order, the assessee preferred an appeal before the Ld.CIT (A) on 24.12.2019. The Ld.CIT(A), upon consideration of the facts and submissions on record, partly allowed the appeal by deleting the disallowance u/s.80IA of the Act amounting Rs.1,96,78,063/-, while confirming the disallowance made u/s.2(24)(x) r.w.s 36(1)(va) of the Act.

4. Being aggrieved by the order of the ld.CIT(A) dated 19.11.2025, the Revenue is in appeal before us by raising the following grounds of appeal:-

“1. The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law.

2. The Ld. CIT (A) erred in deleting the addition of Rs. 1,96,78,063/- made on account that the assessee was ineligible for deduction u/s 80-IA by the AO.

3. The Ld. CIT (A) erred in not taking cognizance of the fact that the assessee’s income was not derived from the operation of infrastructure facilities but from the execution of construction contracts.

4. The Ld. CIT(A) erred in not noting that the assessee neither operated nor maintained any infrastructure facility after completion of construction, thereby, conditions u/s 80-IA(1), (2), and (4) of the Act were not fulfilled..

5. The Ld. CIT(A) erred in not taking cognizance of Finance Act, 2007 and Finance Act, 2009 amendments introducing the Explanation to section 80-IA(13) of the Act, which explicitly barred contractors executing works contracts from claiming deduction u/s 80-IA of the Act.

6. For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the Order of Ld.CIT(Appeals) may be set aside and that of Assessing Officer may be restored.”

5. The Assessing Officer contended that the claim of the assessee u/s.80 IA(4) of the Act is not found to be maintainable as assessee has been found to be involved with infrastructure projects in the capacity of a contractor rather than actually running a business of developing or operating and maintaining or developing, maintaining and operating any infrastructure facility. Hence claim of deduction u/s.80IA of the Act amounting to Rs.1,96,78,063/- is hereby rejected and disallowed.

6. Before the ld.CIT(A) the assessee stated that they are engaged in the business of carrying out infrastructure projects of the Government in the field of water, sewage and industrial effluents. The assessee also carries out the projects proposed by various state government agencies. Agreements are entered with those state government agencies which contains the terms of agreement, the scope of work, project cost, duties and responsibilities of the assessee and timelines of the project. Hence, the assessee eligible for the deduction u/s.80IA of the Act. The extracts from provisions of Section 80IA are reproduced below:

“(1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this Section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive Assessment Year.

(4) This Section applies to-

(i) any enterprise carrying on the business of (i) developing or (ii) operating and maintaining any infrastructural facility which fulfils all the following conditions, namely: –

(a) It is owned by a company registered in India or by a consortium or any other body established or constituted under Central or State Act;

(b) It has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility.

(c) It has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995.

7. As one can understand from simple reading of the provisions of Section 80IA of the Act, the deduction is available to an enterprise from the business of developing or operating and maintaining or developing, operating and maintaining of infrastructure facility if it is owned by a company and has entered into an agreement with Central Government, state government, local body or any other Government agencies for carrying on such business.

8. The benefit of deduction under this section, when it was initially introduced, was available for an enterprise carrying on the business of developing, maintaining and operating any infrastructure facility fulfilling certain conditions. Recognizing the need for investments in infrastructure, the Finance Act, 2001 made certain amendments to the provisions of this section which includes giving the benefit of this section to any enterprise carrying on the business of developing; or operating and maintaining; or developing operating and maintaining of infrastructure facility is also eligible for deduction and it need not operate and maintain such infrastructure facility.

9. During the year, the income derived by the assessee comprises of profits from undertaking which are eligible for deduction u/s.80IA of the Act vide ANNEXURE – A which is detailed as below:

10. The assessee had filed form 10CCB on 27.10.2017 which falls within the due date and rightly claimed the deduction u/s.80IA.

11. Further, the assessee stated that the AO in his Assessment order vide Para 4.11 states that the assessee is only a mere contractor and not developer and “the scheme of tax holiday devised u/s.80IA (4) of the Act is not just meant for contractors. It meant for developers who would contribute to/supplement the Government’s effort in building infrastructure using their own capital, expertise and enterprise. The AO erred in concluding that the respondent has not used his funds as capital whereas the respondent has deployed its funds in carrying out the project. Further, the assessee has been awarded for the only reason that it has the infrastructure and expertise in that field and the projects are executed by the respondent and alongwith JV partner for certain projects. Under these circumstances the AO erred in concluding that section 80IA(4) of the Act is not applicable to the assessee. Further the AO in his Assessment order vide para 4.12 has summarised that the assessee has not fulfilled the conditions stipulated u/s.80IA of the Act and rejected the claim of the assessee.

12. The assessee also relied on the ITAT Mumbai in the case of ACIT vs. Bharat Udyog Ltd. (2008) 118 ITD 336 held that:

“A person who enters into a contract with another person will be a contractor no doubt; and the Respondent having entered into an agreement with Government of Maharashtra and also with APSEB for development of the infrastructure projects, is obviously a contractor but that does not derogate the Respondent from being a developer as well. The term ‘contractor’ is not essentially contradictory to the term ‘developer’.

On the other hand, rather Section 801A(4) itself provides that Respondent should develop the infrastructure facility as per agreement with Central Government, State Government or a local authority. So, entering into a lawful agreement and thereby becoming a contractor should, in no way, be a bar to the one being a developer. The Respondent, presently under consideration before us, has developed infrastructure facility as per agreement with Maharashtra State government/ APSEB, Therefore merely because in the agreement for development of infrastructure facility, Respondent is referred to as contractor or because some basic specifications are laid down, it does not detract the Respondent from claiming deductions u/s. 80IA(4). Discussed/ considered as above, we hold that the Respondent having carried out the work of constructing the abovementioned two projects, is appropriately a developer of the said infrastructure facilities, and in turn is entitled, and entitled justifiably, to claim deduction u/s 80IΑ.

It was also held in this case as follows:

“It is noteworthy that the conditions at cl. (c) of Section 80IA(4)(i), which reads ‘It has started or starts operating and maintaining the infrastructure facility on or after 1st April 1995’ is obviously applicable to an enterprise which is ‘maintaining and operating’ the infrastructure facility, it cannot apply to the case of an enterprise, which has undertaken merely ‘development’ of infrastructure facility, and not its ‘maintenance’ of infrastructure facility by such enterprise before or after any cutoff date cannot arise. However, if the contention of the learned CIT-Departmental Representative is accepted, it would obviously / understandably lead to manifestly absurd results. When that Act provides deduction for a person who is only ‘developing’ the infrastructure facility, unaccompanied by ‘operating’ thereof by such person, there can be no question of providing a condition for such an enterprise to start operating and maintaining the infrastructure facility on or after 1st April, 1995. In that view of the matter, we find substance in the contentions of learned authorized Representative of Respondent and inescapably we have but to hold that the conditions at clause(c) is applicable to an enterprise, which is carrying on the business of maintaining and operating the infrastructure facility cl.(c) of sub-section (4) is not applicable to the present assessee”.

13. The above principle has also been rendered by Hon’ble Chennai Tribunal in ACIT vs. B. Dhanasekaran in ITA No.620/Mds/2013 and 320/Mds/2015 in East Coast Constructions & Industries Ltd. vs. DCIT in ITA No.544/Mds/2010 and by Hon’ble Bombay Tribunal in Patel Engineering vs DCIT 94 ITD 411 (Mum).

14. The Hon’ble Bombay High Court in the case of CIT vs. M/s. ABG Heavy Industries Ltd. (ITA No.1687/2009) held that

“After Section 801A was amended by the Finance Act 2001, the section applies to an enterprise carrying on the business of (i) developing, or (ii) operating and maintaining; or (iii) developing, operating and maintain any infrastructure facility which fulfills certain conditions. The requirement that the operation and maintenance of the infrastructure facility should commence after 1st April 1995 has to be harmoniously construed with the main provision under which a deduction is available to an respondent who develops; or operates and maintains an infrastructure facility. Unless both the provisions are harmoniously construes, the object and intent underlying the amendment of the provision by Finance Act of 2001 would be defeated”.

15. When the Act is recognizing the need for investment in infrastructure and allows deduction to any enterprise that only develops infrastructure facility, the AO’s contentions that the assessee’s involvement in the projects is not for long term and its income is not derived from the use of infrastructure facility developed by it is not as per law. The AO failed to appreciate that in order to be eligible for deduction u/s.80IA, it is sufficient if one develops infrastructure facility and not required to operate and maintain the infrastructure facility developed by one.

16. Further, the assessee relied on the decision of the Chennai Tribunal in assessee’s own case for the A.Y. 2013-14 and 2014-15 vide ITA Nos.2148/Chny/2017 & 1023/Chny/2018 dated 11.04.2019, wherein the tribunal has decided the same issue in favour of the assessee in a similar set of facts.

17. On perusal of the submissions the ld.CIT(A) has deleted the disallowance made by the AO on account of deductions claimed u/s.80IA of the Act by holding as under :-

“6.2.5 The undersigned after careful consideration of the assessment order, the submissions made, and the judicial precedents cited, observes that:

The appellant is engaged in the development of infrastructure facilities such as water and sewage treatment plants, pursuant to agreements entered into with State and Local Government authorities.

The agreements demonstrate that the appellant undertakes the complete scope of engineering, procurement, and construction, including design, supply, erection, testing, commissioning, and maintenance of the facilities.

The appellant bears risks associated with design, material procurement, and performance guarantees during the defect liability and maintenance periods.

The payments are linked to progressive milestones and not to supply of material alone, and the appellant has deployed significant technical and financial resources in executing these projects.

6.2.6 As in the appellant’s own case, the Hon’ble ITAT, Chennai, has already adjudicated the issue for AY(s) 2013-14 and 2014-15 in favour of the appellant holding that it is eligible for deduction u/s 80-IA(4) of the Act. Since the facts and nature of business remain identical in the present year, the principle of judicial consistency requires that the same view be adopted unless there is a change in facts or law, which has not been demonstrated by the AO. Accordingly, it is held that the appellant is engaged in developing infrastructure facilities within the meaning of section 80-IA(4) of the Act and is entitled to deduction thereunder. Therefore, all the grounds raised upon this issue are treated as allowed and the AO is directed to delete the disallowance of Rs.1,96,78,063/- made for the AY 2017-18.”

18. The ld.DR for the revenue reiterating the grounds of appeal filed, supported the order of the AO and prayed for setting aside the order of the ld.CIT(A).

19. Per contra, the ld.AR for the filed a paper book consisting of 89 pages, wherein the ld.AR filed with written submissions, note on eligibility of deduction, break up of turnover from projects, Form CCB, order of the Tribunal, Circular No.717 dated 14.08.1995, Assessment order for the A.Y.2018-19 dated 21.08.2019 and letter of intent with Govt. authorities. The ld.AR submitted that the ld.CIT(A) has rightly followed the order of the Chennai Tribunal for the A.Y.2013-14 and 2014-15 in assessee’s own case, which have decided by the Tribunal under the identical set of facts in favour of the assessee.

20. The ld.AR submitted that the assessee is claiming the deduction u/s.80IA of the Act from the A.Y.2013-14, which has been upheld by this Tribunal (supra). Further, the ld.AR also drew our attention that the AO in the immediate subsequent assessment year 2018-19 has accepted the claim made by the assessee u/s.80IA of the Act and passed the Assessment order u/s.143(3) dated 21.08.2021. The copy of the Order along with its show cause notice are enclosed in the paper book page No.61 to 88.

21. In view of the above, the ld.AR submitted that there is no reason to the Tribunal to interfere with the order of the ld.CIT(A) and hence prayed for dismissing the appeal of the revenue.

22. We have heard the rival submissions perused the material available on record and gone through the orders of the authorities along with the paper book filed and case laws relied on. The solitary issue arising for our consideration in the present appeal of the Revenue is with regard to the allowability of deduction claimed by the assessee u/s.80-IA(4) of the Act amounting to Rs.1,96,78,063/- in respect of the infrastructure projects undertaken by the assessee.

23. The assessee is engaged in the business of EPC contracting and undertakes multidisciplinary engineering and turnkey projects in the field of water, sewage and industrial effluents. During the relevant assessment year, the assessee claimed deduction u/s.80-IA of the Act in respect of profits derived from various infrastructure projects executed for Government authorities and State Government agencies. The AO rejected the claim primarily on the ground that the assessee was merely a contractor and had not itself developed or operated and maintained the infrastructure facilities.

24. The ld.CIT(A), however, after considering the nature of the activities carried out by the assessee and the provisions of section 80-IA(4), deleted the disallowance of Rs.1,96,78,063/-. The ld.CIT(A) noted, inter alia, that the assessee had entered into agreements with Government agencies containing the scope of work, project cost, duties and responsibilities and timelines for execution of the projects.

25. We find that the controversy before us is no longer res integra insofar as the assessee is concerned. The assessee has specifically relied upon the decision of the co-ordinate Bench of this Tribunal in its own case for AYs 2013-14 and 2014-15 in ITA Nos.2148/Chny/2017 & 1023/Chny/2018 dated 11.04.2019, wherein, on similar facts, the Tribunal had considered the assessee’s eligibility for deduction u/s.80-IA of the Act and decided the issue in favour of the assessee as under :

8. of At the outset, in respect of the issue of the deduction u/s.80 IA(4) in respect of the contract entered into by the assessee with government agencies, it is noticed that the issue is now squarely covered by the decision of the Hon’ble Jurisdictional High Court in the case M/s.V.A.Tech Wabag Pvt. Ltd., in T.C.A.Nos.196 to 201 of 2019 dated 07.03.2019 as also the decision of the Hon’ble Jurisdictional High Court in the case of M/s. Chettinad Lignite Transport Services Pvt. Ltd., in TCA Nos.741, 1266 of 2009 and 162 of 2015 dated 06.03.2019, wherein, the Hon’ble Jurisdictional High Court has held as follows:

6. Having heard the learned counsel for the parties, we are satisfied that the findings of facts rendered by the learned Tribunal as well as the First Appellate Authority do not deserve any interference by this Court under Section 260A of the Act and no Substantial Question of Law arises in these Appeals filed by the Revenue. Since the Assessee admittedly entered into contract with Local Bodies or Municipal Bodies for undertaking the contract works for developing the infrastructure~ sewage system, he is directly entitled to get the benefit of such deductions under Section 801A (4) of the Act. The said Section, in fact, even extends the benefit to the Contractor, who is transferred with such Infrastructure Facility for operating and maintaining the same as per the Proviso to Section 80IA (4) of the Act. We have already dealt with this controversy in a judgment delivered by us in the case of Commissioner of Income Tax v. M/s.Chettinad Lignite Transport Services Private Limited in T.C.A.No. 741 of 2009 decided on 06.03.2019, the relevant portion of which order is quoted below for ready reference :

8. From a reading of the aforesaid Provisos to Section 801A(4), it is clear that the Legislature intended to extend the said benefit under Section 80IA of the Act to an enterprise involved in (i) developing or; (ii) operating and maintaining or; (iii) developing, operating and maintaining any “infrastructure facility” has been defined in the Explanation and the same includes a toll road, a bridge or a rail system, a highway project, etc. These are, obviously, big infrastructure facilities for which the enterprise in question should enter into a contract with the Central Government or State Government or Local Authority. However, the Proviso intends to extend the benefit of the said deduction under Section 80IA of the Act even to a transferee or a contractor who is approved and recognised by the concerned authority and undertakes the work of the said development of infrastructure facility or only operating or maintaining the same. The Proviso to sub~section (4) stipulates that subject to the fulfillment of conditions, the transferee will be entitled to the said benefit, as if the transfer in question had not taken place. It has been found by the Assessing Authority himself, in the present case, that the present Assessee M/s.Chettinad Lignite Transport Services Private Limited under an Agreement dated 16.04.2002, captioned as Lignite Transport System with M/s.ST~CMS Electric Company Private Limited, had undertaken the work of developing the said railway sidings and was operating and maintaining the same. The only ground on which, the Assessing Authority denied the said benefit was that the Assessee himself did not enter into any such contract with the Railways or with the Central Government.

9. The learned Tribunal, however, in our opinion, rightly applied the Proviso to Section 801A(4) of the Act and held that since the Assessee was recognised as contractor for these railway sidings, which undoubtedly fell under the definition of “infrastructure facility”, it was entitled to the said benefit under Section 80IA of the Act. The grounds on which the Assessing Authority denied the said benefit to the Asessee ignoring the effect of Provisos to Section 801A(4), therefore, could not be sustained. The learned Tribunal, in our opinion, has rightly held that the Proviso does not require that there should be a direct agreement between the transferee enterprise and the specified authority for availing the benefit under Section 80IA of the Act. There is no dispute before us that the Assessee was duly recognised as transferee or assignee of the principal contractor M/s.ST~ CMS Company Private Limited and was duly so recognised by the Railways to operate and maintain the said railway sidings at Vadalur and Uthangalmangalam Railway Stations. The findings of fact with regard to the said position recorded by the learned Tribunal are, therefore, unassailable and that clearly attracted the first Proviso to Section 80IA(4) of the Act.

10. The learned counsel for the Revenue relied upon a decision of this Court in the case of M/s.Covanta Samalpatti Operating Private Limited, Chennai~20 v. The Assistant Commissioner of Income Tax, Company Circle I (3), Chennai~34, reported in (2018) 93 Taxmann 38. In the said case, the claim of the Assessee company, which was engaged in power generation, for deduction under Section 80IA of the Act was denied by the Revenue on the ground that the Assessee Undertaking had not been set up for generation and distribution of power and that the Assessee was only a contractor for the maintenance work of power plant, which was owned by Samalpatti Power Corporation Private Limited (SPCL). On these facts, the Court held that the Assessee was not entitled to deduction under Section 80IA of the Act. We do not find any parity of facts of the said case deduction under Section 801A of the Act in different sub clauses viz., under Section 80IA(4)(iv) of the Act. Where there is no such Proviso, as is available in clause (1) of Section 80IA(4) of the Act, which deals with deduction to enterprise involved in Assessee is getting only maintaining the infrastruct of certain power generating developing, if the plant, as was the case before the Co~ordinate Bench of this Court in Covanta case (supra), he may not be entitled to such deduction, but the fact situation before us is entirely different and, therefore, we do not find any support from the said case cited by the learned counsel for the Revenue.

11. We are, therefore, of the considered opinion that there is no merit in these appeals filed by the Revenue and the questions of law framed above deserve to be answered in favour of the Asessee and against the Revenue. We hereby do so. The appeals preferred by the Revenue deserve to be dismissed and accordingly, the same are dismissed. No costs.”

9. As it is noticed that the issue is now squarely covered by the decision of the Hon’ble Jurisdictional High Court in the case M/s.V.A.Tech Wabag Pvt. Ltd., & M/s.Chettinad Lignite Transport Services of Pvt. Ltd., referred to supra, the findings of the Ld.CIT(A) on this issue, which are as under:

4.7 In the context of these factual parameters, let us examine the stipulations as per Section 801A(4) of the Act. The deduction under Section 801A is allowable to any enterprise carrying on the business of

(i) Developing or

(ii) Operating and maintaining

(iii) Developing, operating and maintaining any, infrastructure facility.

4.7.1 The factual matrix as it emerges dearly establish that the appellant company has undertaken risks and not only designed and executed the project, but also made substantial investments in terms of skilled manpower as well as plant and machinery and raw materials. I find the reasoning of the AO to be erroneous when he states that the appellant company is a mere contractor and that it is not the owner of the infrastructure projects. If the interpretation of the AO is taken to its logical culmination, it would only be the Governments or local bodies that can claim deduction under Section 801A of the Act. This is dearly not the intention behind the incorporation of the provisions on the statute. The fact is that the amendments made through the Finance Act, 2001 the scope of deduction has been considerably widened so as to grant the deduction to any enterprise engaged only in the “developing of an infrastructure project”. The fact that the appellant company has executed infrastructure projects is not disputed by the AO. What is disputed is that the appellant was not a developer but merely a contractor. The Id. Chennai Tribunal, in its decision in the case of B. Dhanasekaran has deliberated on the distinction between a ‘developer’ and a ‘works contractor’ as under:

“8. We have considered the elaborate submissions made by both the parties and also perused the materials available on record. We have also gone through all the case laws cited by both the parties. We find that the provision of Section 801A(4) of the Act when introduced afresh by the Finance Act, 1999, the provisions under section 801A(4A) of the Act were deleted from the Act. The deduction available for any enterprise earlier under section 80IA(4A) of the Act were deleted from the Act. The deduction available for any enterprise earlier under section 801A(4A) are also made available under Section 801A(4) itself. Further, the very fact that the legislature mentioned the words (i) “developing’ or (ii) “operating and maintaining” or (iii) “developing, operating and maintaining “clearly indicates that any enterprise which carried on any of these three activities would become eligible for deduction. Therefore, there is no ambiguity in the Income Tax Act. We find that where an assessee incurs expenditure on its own for purchase of materials and towards labour charges and itself executes the development work i.e., carries out the civil construction work, It will be eligible for tax benefit under section 80 IA of the Act. In contrast to this, an assessee who enters into a contract with another person including Government or an undertaking or enterprise referred to in Section 80 IA of the Act, for executing works contract, will not be eligible for the tax benefit under section 80 IA of the Act.” (Sic’)

4.7.1 The facts of the appellant’s case clearly establish that the contracts entered into involve design, development, in some cases operation and maintenance, financial involvement, risks, defect correction and liability period. The design of the project, the procurement of materials, payment to labour and other personnel are all appellant’s responsibilities. In my considered view, these are not simple works contract, but come within the perimeter of “developing an infrastructure facility” within the meaning of Section 80IA of the Act.

4.7.2 Two peripheral arguments have been made by the AO in disallowing the claim under Section 80ΙΑ.

i. That the profit has not been “derived from” the business of developing infrastructure projects.

ii. That the appellant has itself accepted that it is a contractor by accepting tax to be deducted as per the provisions of Section 194C of the Act.

4.7.3 On examination of the financial statements as well as the Auditors’ Certificate in Form 10CCB, I find that the appellant company has claimed deduction under Section 801A only From the projects eligible for the claim. The details are mentioned as below:

a) Total Turnover of the Appellant Rs.57,84,65,1 07/-

b) Eligible Turnover of the Appellant Rs.9,48,46,926/-

c) Profit as per the Profit & Loss Account Rs.3,01,12,568/-

d) Profit Eligible for Deduction under Section 801A of the Act Rs.2,05,54,143/-

B

C x —————–

A

4.7.3.1 Hence, the contention of the AO that the profits are not derived from the business of developing infrastructure project is not valid.

4.7.4 The Id. Mumbai Tribunal in the case of Assistant Commissioner of Income-tax Vs. Pratibha Industries Limited in ITA Nos.2197 to 2199/Mum/2008 dealt in the issue of deduction under Section 194C of the Act vis-à-vis the claim of being a ‘developer’ in terms of Section 80IA of the Act. Reliance is placed on the judgement dated 19.12.2012, wherein the id. Mumbai Tribunal held as under:

“14. The other argument by the AO and the DR had been that the assessee accepted itself to be a contractor, by accepting the tax to be deducted under Section 194C, which is relevant, only in the case of a contractor, also cannot be accepted. Because, first, we have to ascertain whether the assessee falls under Section 801A/801A(4), because Chapter XVIII, wherein Section 194C is embedded, is only machinery chapter for collection and recovery of taxes.”

4.8 In view of the facts, circumstances, and judicial pronouncements as discussed above, I find the appellant company to be a developer of infrastructure projects, eligible for deduction under Section 801A of the Act. The disallowance made by the AO stands deleted. This ground is allowed.

The above findings of the Ld.CIT(A) on this issue stand upheld.”

26. The principle emerging from the said decision is also consistent with the settled interpretation of section 80-IA(4), namely, that merely because an enterprise executes an infrastructure project pursuant to an agreement with the Government and is described as a “contractor”, it cannot, by that description alone, be denied the benefit of section 80-IA of the Act. What is relevant is the nature and substance of the activities actually undertaken by the assessee and whether the statutory conditions prescribed u/s.80-IA(4) of the Act are satisfied.

In this regard, the assessee has placed on record the agreements entered into with Government authorities, details of the projects, break-up of turnover from the eligible projects, Form 10CCB and other supporting documents. The paper book filed before us also contains the earlier order of the Tribunal in the assessee’s own case and other relevant material concerning the eligibility of the deduction.

27. We further note that the assessee has been claiming deduction u/s.80-IA of the Act from AY 2013-14 onwards and such claim was upheld by the Tribunal in the assessee’s own case. The ld.AR has also brought to our notice that in the immediately subsequent assessment year, i.e. AY 2018-19, the AO, in the assessment completed u/s.143(3) of the Act, accepted the assessee’s claim u/s.80-IA of the Act.

28. In the present year also, the assessee has demonstrated that the profits in respect of which deduction has been claimed arose from specified infrastructure projects undertaken for Government/Government agencies. The details placed on record show gross receipts from the eligible projects aggregating to Rs.32,01,08,637/- and deduction u/s.80-IA claimed at Rs.1,96,78,063/-. The assessee had also furnished Form 10CCB within the prescribed time.

29. The Revenue has not brought before us any material to demonstrate that the facts obtaining in the year under consideration are materially different from those considered by the co-ordinate Bench in the assessee’s own case for AYs 2013-14 and 2014-15. Nor has the Revenue brought any contrary decision of a higher judicial forum or any other material which would warrant taking a view different from the view already taken by the co-ordinate Bench in the assessee’s own case.

30. We are conscious of the fact that the principle of consistency cannot, by itself, confer a statutory deduction where the conditions prescribed under the Act are not fulfilled. However, in the present case, the claim has already been examined in the assessee’s own case on substantially similar facts and has been allowed by the Tribunal. In the absence of any material change in the facts or law, judicial discipline requires us to follow the decision of the co-ordinate Bench.

31. Further, the contention of the AO that the assessee is merely a contractor and, therefore, automatically falls outside the ambit of section 80-IA(4) cannot be accepted. The material placed on record indicates that the assessee had undertaken the infrastructure projects pursuant to agreements with Government authorities and had actually executed the projects in accordance with the terms and specifications stipulated therein. The assessee’s contractual relationship with the Government agencies, by itself, does not determine its eligibility u/s.80-IA(4) of the Act. The Tribunal in the assessee’s own case has already considered this very controversy and allowed the claim.

32. We also find that the ld.CIT(A), after examining the issue, has followed the earlier decision of the Tribunal in the assessee’s own case and deleted the disallowance. The Revenue, apart from reiterating the reasoning adopted by the AO, has not brought any distinguishing feature or fresh material warranting interference with the well-reasoned finding of the ld.CIT(A).

33. Therefore, respectfully following the decision of the co-ordinate Bench of this Tribunal in the assessee’s own case for AYs 2013-14 and 2014-15 in ITA Nos.2148/Chny/2017 & 1023/Chny/2018 dated 11.04.2019, and considering that the Revenue has failed to establish any material difference in facts for the year under consideration, we find no infirmity in the order of the ld.CIT(A) in allowing the assessee’s claim of deduction u/s.80-IA(4) of the Act.

34. Accordingly, the order of the ld.CIT(A) deleting the disallowance of Rs.1,96,78,063/- made u/s.80-IA of the Act is upheld. The grounds raised by the Revenue on this issue are dismissed.

35. In the result, the appeal filed by the Revenue is dismissed.

Order pronounced in the open court on 18th September, 2026 at Chennai.