Case Law Details
IN THE ITAT AHMEDABAD BENCH ‘D’
Sugam Construction (P.) Ltd
versus
Income-tax Officer, Ward-8(2), Ahmedabad
IT APPEAL Nos. 1787, 1788, 1828 & 1864 (Ahd.) of 2010 &
402 to 404 & 602 (Ahd.) of 2012
[Assessment years 2001-02, 2005-06 to 2008-09]
December 21, 2012
ORDER
Mukul Kr. Shrawat, Judicial Member
[A] For A.Y. 2001-02 cross appeals (ITA No.1828/Ahd/2010 – by Assessee and ITA No.1787/Ahd/2010 – by Revenue) have been filed, emanating from the order of CIT(A)-XIV, Ahmedabad dated 16.2.2010.
Grounds raised by the Assessee as well as by the Revenue are as follows:-
2. Assessee’s Ground Nos.1 & 2 read as under:
(1) The order passed by the Learned C.I.T.(A) is against law, equity & justice.
(2) The Learned CIT(A) has grievously erred in law and/or facts in restricting relief to the extent of Rs.10,35,199/- instead of Rs.12,40,087/- prayed by the appellant.
Revenue’s Ground Nos.1 & 2 read as under:
(1) The Ld. Commissioner of Income-tax-XIV, Ahmedabad has erred in law and on facts in deleting the addition of Rs.1035199/- made by the Assessing Officer on account of unexplained cash credit u/s.68 of the Act.
(2) The ld. Commissioner of Income-tax(A)-XIV, Ahmedabad has erred in law and on facts in admitting fresh evidence in violation of Rule 46A and not allowing the Assessing Officer an opportunity to verify & comment upon the fresh evidences furnished by the assessee.
2.1 In respect of the issue raised, facts in brief as emerged from the corresponding assessment order passed u/s.143(3) r.w.s. 254 dated 16.10.2008 were that in the past, the ITAT “A” Bench in ITA No.3028/Ahd/2004 (for A.Y. 2001-02) vide an order dated 29.07.2005 has restored the issue back to the file of AO, relevant paragraphs reproduced below:-
“10. Apropos ground No.3, during the course of assessment proceedings it was found by the AO that there were credits appearing in the books of accounts of assessee in the names of following two persons:-
| P.G. Shringapure | Rs. 1,90,000/- |
| Dipen U.Patel | Rs.11,27,387/- |
In absence of any explanation having been offered by the assessee the above mentioned amounts were added to the income of assessee under the provisions of section 68 of the IT Act. The ld. CIT(A) has dealt with this issue in para 4.1 and 4.2 of the impugned order which is reproduced below for the sake of convenience:-
“4.1 The second ground of appeal relates to addition of Rs. 12,40,087/- u/s 68 of the Act. The assessee had taken loan from Dipen Patel & Shringarpure amounting to Rs. 11,27,387/- and Rs.1,12,700/- respectively and in response to query the assessee has stated that it has submitted the confirmation, but on verification, it was noticed by the AO that the assessee submitted only copy of a/c of Ushakantbhai Patel and Nicolian Bros. The assessee was asked to produce both those parties to explain difference of Rs.1,12,700/- appearing between the confirmation of Shringarpure and the figures shown in 3CD report at Rs. 1,90,000/- which was not done by the assessee. In spite of the fact that the assessee has been issued show cause notice, it could not explain the difference as stated above and, therefore, it was held by the AO that the deposits from these two persons stand unexplained.
4.2. During the course of appellate proceedings, the appellant’s counsel has not been able to provide any fresh evidence/documents to prove that the deposits from these two persons are genuine, except filing ack.Receipt of Shri P.G.Shringarpure copy of a/c from the books of Sugam Constru.Ltd. and copy of a/c Dipen U.Patel. It is strange to notice a special phenomena in the account of Shri Dipen U. Patel that the appellant is making advance payment pertaining to different sites, but no TDS has been deducted. The payment during the whole year comes to Rs.11,27,387/-, but not a single penny of TDS has been deducted, what to talk of making payment to Govt. treasury. The appellant has not been able to establish the genuineness of the payment to this party, because normally the contractor makes the payment after the bills are submitted by the labour contractor, here, the payment is made in advance and the bills are raised after a period of 7 months. This is not the practice in this line of business. In such like cases, the work is first executed, then it is measured and after satisfying the technical aspect of the work executed, some payment is retained, which is due to the labour contract and balance payment is made, with due care of deducting the TDS and making payment thereof. The work account itself appears to be just an adjustment and the AO is, therefore, fully justified in making an addition of Rs.12,40,087/- under the provisions of Sec.68 and no interference whatsoever is called for.”
11. It was pleaded before us, that it was submitted to CIT(A) that Shri P.G. Shringarpura is assessed to tax. His copy of statement of total income and acknowledgement receipt of return of income were also filed. Similarly it was contended that in respect of credit of Shri Dipen U.Patel pertained to work done by him for assessee and the payment amount was credited to his account and the payment was made against his bill. Copy of account of Shri Dipen U.Patel was also produced. Thus it was pleaded that ld.AO as well as the CIT(A) did not properly consider the submissions of the assessee. It was pleaded that assessee can properly explain these credits and, therefore, the issue may be restored back to the file of AO for reconsideration.
12. On the other hand, the ld.DR relied on the orders of AO and the CIT(A).
13. We have carefully considered the rival submissions in the light of material placed before us. Keeping in view the entirety of facts and interest of justice we restore this issue to the file of AO for examination afresh as per provisions of law. Needless to observe the AO will give reasonable opportunity of hearing to the assessee to place all material and evidence on record to justify its claim. After receiving the explanation of assessee he will decide the issue in accordance with law. This ground is allowed for statistical purposes.”
2.2 Consequent thereupon, the AO had granted opportunity to the assessee and asked to furnish the following details:-
(a) To file supporting evidence for work carried out by Shri Dipen U.Patel at Sardar Patel University.
(b) Regarding transactions with Shri P.G.Shringarpure also, relevant documents of transactions.
2.3 The allegation of the AO was that in spite of several opportunities the requisite details were not furnished by the assessee. As per AO, the assessee had failed to produce confirmation of the parties. The AO has further observed that no document was filed to prove that the work was carried out at Sardar Patel University by the said parties. There was no evidence that any labour work at all was carried out by those parties. Since the assessee had failed to discharge its primary onus, hence an addition of Rs. 12,40,087/- was made. The matter was carried before ld. CIT(A). The assessee’s contention was that during the year under consideration, total labour expenses claimed at Rs. 75,88,499/- which included the labour charges to the said two parties. It was informed that Shri Dipen U.Patel had filed his return of income u/s.44AD and disclosed the income @ 8% on the total work executed by him. In respect of the addition in the name of Shri P.G. Shringarpure, it was informed that the amount reflected was salary payable in the books of account. It was pleaded that there was no new deposit but only salary was payable, hence no disallowance u/s.68 should have been made. After considering the rival submissions, ld. CIT(A) has opined that in the absence of verification, the AO was justified in taxing the amount. There was an argument of the assessee that the ITAT Ahmedabad has directed to adopt net profit @ 8% but that direction was in respect of certain other disallowances which are to be made as deemed income of the assessee. The non-cooperation of the assessee was mala fide in the opinion of ld. CIT(A). Ld. CIT(A) has commented that in fact it was a case of “bogus liability”, claimed without any credible evidence. The addition in respect of Shri Dipen U. Patel was confirmed by ld. CIT(A). In respect of the addition pertaining to Pradeep G. Shringarpure, it was informed that there was a clerical mistake in the Tax Audit Report and a certificate to clarify that mistake was furnished. As per ld. CIT(A), it was a self-surving evidence, thus could not be treated as a credible evidence. The conclusion of the ld. CIT(A) was that the liability shown by the assessee in the name of said two parties was no longer in existence and it was a case of a claim of a bogus liability. The conclusion drawn by the ld. CIT(A) is as under:-
“In conclusion, the outstanding liability shown by the appellant in the name of Shri Dipen U. Patel and Shri Pradeep G. Shringapure amounting to Rs. 1,73,728/- and Rs. 31,160/-, i.e. in total of Rs. 2,04,888/- are held as liability no longer existing or bogus liability and deemed to be the income of the appellant u/s.41(1) of the Act since the same were shown after claiming expenses and salary expenses to these persons. The A.O’s addition u/s.68 of the Act is, therefore, held not proper and justified, but now the additions are made u/s.41(1) of the Act as per law considering the fact and circumstances in the case of appellant. The app gets partial relief to the extent of Rs. 10,35,199/-. (12,40,087 – Rs.2,04,888).”
2.4 Therefore, in view of the above para, the ld. CIT(A) has changed the head under which the AO has taxed the impugned amount. Instead of applying the provisions of section 68 of IT Act, ld. CIT(A) had applied the provisions of section 41(1) and granted relief of Rs.10,35,199/-. In respect of rest of the amount, ld. CIT(A) has held that the liability was no longer in existence and being a bogus liability, therefore not to be allowed.
3. Having heard the submissions of both the sides, we have noted that the Revenue Department has strongly objected the entertaining of certain evidences by ld. CIT(A) without granting an opportunity to the AO. One of the grounds of the Revenue, i.e. Ground No.2 is also in respect of infringement of the provisions of Rule 46A of IT Act. Now the ld. AR has informed that the labour charges have actually been paid in the subsequent years. He wanted to draw our attention on certain evidences to corroborate that the balance outstanding amount had already been paid as on date, therefore should have been allowed. At this stage of second appeal, it is not possible for us to examine the veracity of such documents which were not placed before the AO. We therefore consider it proper as also justifiable to again restore this issue back to the file of the AO, so that the Revenue Department can examine the correctness of the claim that the amount in question in fact was not an amount as qualified u/s.68 of IT Act, but the impugned amounts were in the nature of the amounts which are qualified u/s.41(1) of IT Act. By adopting the recourse of setting aside to assessment stage , the grievance of infringement of Rule 46A is also addressed. After ascertaining that the amounts in question in fact were the liabilities to be paid by the assessee and not cash deposits or loans, the AO is then directed to verify the correctness of the claim now made before us that those liabilities were squared up by making the payment in the years to come. If it is found correct that the liability has been paid by the assessee, then naturally in consequence thereof the assessee shall get the relief as per law. Side by side, we also direct the assessee to fully co-operate with the investigation. Rather, considering the fact that the assessee is already in second round of appeal, we hereby direct that the assessee shall suo motu approach the AO within 20 days on receipt of this order, without waiting for any notice with all documents, so that the matter should get addressed at an early date. After receiving the basic information, such as, copies of accounts, acknowledgements and details of payment, the AO is at liberty to take the required legal action as per law. With these directions, the grounds of the Assessee as also the Revenue both are allowed but for statistical purposes only. As a result, the appeal of the Assessee as well as Revenue for A.Y. 2001-02 both are allowed but for statistical purposes.
[B] ITA Nos.402/Ahd/2012 & 602/Ahd/2012 for A.Y. 2005-06 (cross appeals – By Assessee & Revenue respectively)
4. For A.Y. 2005-06 cross appeals have been filed arising from the order of ld. CIT(A)-XIV, Ahmedabad dated 30/12/2011. We shall first take up the appeal of the Assessee, hence the grounds raised are reproduced below:-
Grounds of Assessee’s appeal
(1) The order passed by the Ld. CIT(A) is against law equity and justice and same is wholly illegal, unlawful and bad in law.
(2) The Ld. CIT(A) has erred in law and on facts in upholding the order of the Ld. A.O. of re-opening of the assessment U/s.148 of the Act.
(3) The Ld. CIT(A) has erred in law and/or facts upholding the order of the Ld. A.O. of rejecting of deduction U/s.80-IA of the Act for eligible project of infrastructure executed by the appellant.
4.1 Apropos to Ground Nos.1 & 2, ld. AR Mr. Dhiren Shah has stated that Ground No.1 is general in nature and Ground No.2 is not going to be contested. In the light of the statement of ld. AR made at the Bar these grounds being not pressed are hereby dismissed.
4.2 Apropos to Ground No.3, facts in brief as emerged from the corresponding assessment order passed u/s.143(3) dated 30/12/2010 were that the assessee-company is in the business of construction. The assessee had carried out the construction of bridges (over-bridge/under-bridge) of certain Government Organizations, viz. AUDA, AMC, etc. Total receipts were stated to be Rs. 6,55,43,956/- and the Net Profit was shown at Rs. 1,28,641/-. The issue involved as per the ground is that the assessee had claimed a deduction u/s.80-IA of the Act. As per assessee, the income from the eligible business of Rs. 4,79,508/- was 100% exempt in view of the provisions of section 80-IA of the Act. The details of the total receipt of Rs.6,55,43,956/- from various parties/organization has been furnished by the assessee as under:-
| No. | Authority from whom contract taken | Contract Amount/Receipts |
| 1. | RCC Box New Delhi Ghaziabad | 6638045 |
| 2. | W.Rly.ADI/45 | 1792542 |
| 3. | Pradeep Port Orissa | 79175 |
| 4. | RCC Box N.Rly. Allahabad | 1149190 |
| 5. | GWSSB NC/12 | 1204558 |
| 6. | RCC Box W.Rly.ADI/62 | 3962213 |
| 7. | RCC Box Vizag – Br. 313 | 3069999 |
| 8. | RCC Box Vizag – Br. 303 | 1633847 |
| 9. | RCC Box W.Rly. B4.125 | 3853402 |
| 10. | AUDA – Sola PIEP (Water Supply) | 1976848 |
| 11. | AUDA – RUB (Traged) RCC Box | 23662054 |
| 12. | Enviro Const.Co. (Junagadh) | 2739879 |
| 13. | R.P.Shah (Anik Depot) | 515000 |
| 14. | Box L&T Junagadh | 1532906 |
| 15. | AUDA Traged Pipe Pushing | 4635085 |
| 16. | RCC Box N.Rly. GNR Delhi | 3082497 |
| 17. | Chennai Const. | 150000 |
| 18. | Ghai Const.Ltd. (Pune) | 1501500 |
| 19. | ARB. Award Br. 40 – Andheri | 1480077 |
| 20. | Skanska – New Delhi | 400200 |
| 21. | Sales | 474760 |
| 22. | Trading A/c. | 10179 |
| TOTAL RECEIPTS | 6,55,43,956 |
4.3 The fundamental objection of the AO was that the assessee was not a “developer” but merely a “contractor”. According to AO, the assessee had entered into a work contract agreement with different authorities, such as, AUDA, GWRDC, Enviro Const., and Chennai Const.,etc. A show-cause was issued and the assessee was asked to justify the claim of deduction u/s.80IA and to produce Auditor’s Report in Form No.10CCB. In compliance, the assessee has submitted as follows; only relevant portion is reproduced:
“Assessee is a developer of the Under bridges applying owned design, investments. In the such development of infrastructure projects. Risk, responsibilities and fund for execution of projects are of the assessee itself. As assessee engaged in development of infrastructure hence entitles for deduction u/s.80IA of the Act.”
** ** **
“The reading of the provisions of the Act, no where in the said provision, it is required that the infrastructure should be owned by the assessee. Assessee has entered into projects with state & central Govt. as required under the Act and hence assessee entitles for deduction u/s.80IA of the Act. Assessee relies on the following decisions in support of its contentions.”
4.4 The AO has discussed the provisions of section 80IA and in his opinion, the assessee had fallen under the first category of enterprises claiming deduction u/s.80-IA. The first category of enterprises pertained to an enterprise carrying on the business of developing an infrastructure facility. But the AO has raised preliminary question that whether the assessee happened to be a “developer” or not and in this regard he has discussed the dictionary meaning in the following manner:-
“3.4. Now coming to the point whether the assessee can be called as a “developer” within the meaning of Section 80IA(4) of the I.T. Act, the word “developer” and “constructor” have not been defined in Section 80IA or anywhere in the Act. These words are also not defined in General Clause Act. Therefore, one has to go by the dictionary meaning. According to Oxford Learners Dictionary “developer” is a person or a company that designs or creates new products whereas a contractor is a person or a company that has a contract to do work or provides service or goods to another. The new shorter Oxford Dictionary defines the word contractor as person who enters a contract or agreement. Now, precisely, a person that undertakes work by contract especially for building to a specified plan, is a contractor. From the above, it is very clear that a developer is a person who designs and creates new products. He is the one who conceives the project. He may execute the entire project by himself or some part of it to others. On the contrary, a contractor is a person who is assigned to do a particular work to be completed on behalf of the developer. A contractor’s duty is to translate such design into reality. There may be overlapping the work of developer and contractor. A developer, who assigns the job to a person becomes contractor.”
4.5 In addition to the above objection, the AO had also raised two more objections, first, that the benefit u/s.80IA was to be granted to an enterprise who had not only developed the infrastructure but also operated the same, is to be eligible for deduction. The second objection of the AO was that the Auditor’s Report on Form No.10CCB, along with the copy of the agreement of the assessee with Central Government/State Government/Local Authority, was not furnished. The AO has discussed a contract with AUDA and commented in the following manner:-
“(i) Contract with AUDA
As regards the construction work entered into with AUDA for the construction of under-bridges the assessee has entered into with a contract for the work of manufacturing, testing, supplying, transporting, loading-uploading, at site laying and pushing in Railway limit M.S. casing pipes and providing and laying M.S. carrier pipes as pr tender specification. The work includes all necessary excavation dewatering by deploying necessary no.of pumps as per required refilling trenches after completion of pushing work all necessary temporary work for pushing of pipes. Deploying sufficient manpower, all types of machineries required for pipe pushing in proper line and level as per approval & instruction of railway authority. The work also includes the maintenance of railway tract proper position at work site during pushing of pipes & still completion of work. The work also includes maintaining all safety norms required for safe railway traffic as per instruction of site in charge as well as railway authority.
From the above, it is clear that the assessee never owned the railway underpass but only constructed the under pass as per the contract agreement entered into with the principal. It is also seen the assessee never owned and maintained the underpass so as to eligible for the deduction u/s.80IA of the I.T.Act. Therefore, the assessee’s claim for deduction u/s.80IA of the I.T.Act, on the profit arose on this contract is not in accordance with u/s.80IA of the I.T.Act, and the same is rejected. It is to be mentioned here that the decision quoted by the assessee in the case of CIT Vs. ABG Heavy Industries & Brothers reported in 322 ITR 323, the same is not applicable to the assessee’s case. In that case the company has entered into agreement with JNPT on BLOT (BUILT,OWN, LEASE & TRANSFER). In that case the contract for building operating leasing and transfer. As stated above, the assessee was merely a contractor for construction of an underpass only.”
4.6 So, the conclusion of the AO for rejection of the claim was that the infrastructure which was constructed was not owned by the assessee.
The assessee had not owned the “Railway Under Pass” but only constructed the same. An another question has also been raised by the AO that the concerns for which claim was made were not the Government Undertaking and the parties at Sl.No.3,12,17,18,19,20 & 21 were the private parties.
In the assessment order, there was a reference of a decision of ITAT Mumbai pronounced in the case of B.T. Patil & Sons Belgaum Construction (P.) Ltd. v. Asstt. CIT [2010] 35 SOT 171 (LB), wherein the word “Developer” and the word “Contractor” have been deliberated upon. The AO has placed reliance on the said order of the Tribunal. Apart from the said order, AO has also referred an Explanation which was inserted under the section which prescribes that the benefit shall not apply to a person who executes a work contract. Thereafter, the conclusion drawn by the AO was that the assessee was not a “Developer” but the income was derived as a “Work Contractor”, hence not eligible for deduction u/s.80IA of Rs. 4,79,508/- for the year under consideration. This action of the AO was challenged before the ld. CIT(A).
5. It was pleaded that the assessee had constructed several over-bridges as also under-bridges for Central Government and State Government Projects and thereupon claimed a deduction u/s.80IA of an amount of Rs. 4,79,508/- being 100% of the profit u/s.80IA. It was explained that 13 projects were carried out and the assessee was assigned those projects being known for development of bridges and canals. The assessee has furnished a copy of the “work order” to explain the nature of the work executed. The assessee has also furnished the details in respect of application of own design and assessee’s deployment of technique. The explanation of the assessee was that its own funds were utilized. Further in respect of execution of project the risk and the responsibility was taken by the assessee. Before ld. CIT(A), the appellant has referred an order passed u/s.144A of the Act, relevant portion extracted below:-
“Extract of the order passed U/S 144A of the Act by the Additional Commissioner of I. Tax for the A.Y. 2004-05 is as under.
“Further considering the assessee’s reply dated 14/12/06 placed before the A.O. as well as A.O’s report submitted as per para 5 noted above, the A.O. was asked to visit the project sites of the assessee and submit her detailed factual report to ascertain the assessee’s submission noted above. The AO vide her office letter No.Wd.8(2)/Sugam/06-07 dated 21/12/2006 has submitted that she has visited two project sites of the assessee located in Ahmedabad viz. Nirnaynagar Underpass, Nirnaynagar, Ahmedabad and AUDA, Ring Road, at village Tragad, B/h.Nirma University Ahmedabad on 21/12/2006. It is further reported that the first project is at its beginning state; whereas the second project is just completed. She has further elaborated her report in three separate parts viz. Nature of business, Method of construction & Eligibility of Section 80IA. The same is reproduced as below:
1. Nature of the business: The assessee is specializing in construction of Road-under bridges i.e. wherever a road is to be constructed below a railway line, the assessee is construction the under bridge below the railway line. Usually whenever it is not possible to construct an over bridge because of different factors like insufficient length of approach road and high rise building situated very near the site, the authority finds it necessary to construct an under pass. Therefore, this activity of the assessee is an infrastructure activity which adds to the infrastructural development of a city or a village as decided by the jurisdictional development authority. Apart from the above sites, the assessee has constructed such under passes invarious cities all over India. The list of which has been submitted by the assessee ad placed on file.
2. Method of construction : The assessee first obtains a contract from the Indian Railway or the State Govt. and prepares a structural design of the under bridge to be constructed. For preparing this design, the assessee company has appointed its own consultant engineers. Thereafter, the design is approved by the Railways. Since the under pass is to be constructed without disturbing the railway traffic the assessee company is using the Box Pushing Technique to construct the under pass. The assessee first builds the thrust block which is the foundation is concrete, reinforcing steel and shuttering equipment. Thereafter, the entire under bridge is constructed on the foundation by using the same materials which are used for the foundation. Hence, the Rcc Box acting as under bridge is cast. After the total strength of the under bridge has been achieved, it is then pushed below the railway track with the help of hydraulic pump and 250 ton capacity hydraulic jacks. As this under pass is slowly being pushed below the railway track, the earth is being excavated simultaneously from within the box. At a stretch, 30 Cms. Of pushing can be achieved in a day. This process is repeated day after day till the final pushing is completed. And the result is that the under bridge is constructed and the load of the railway line is resting on the concrete RCC bridge without disturbing the railway traffic. After this, the finishing touches of plastering, water proofing is done and whenever required, the retaining walls on the sides of the road leading to the under pass is also constructed. Finally, the whole underpass is ready through which the vehicular traffic is allowed to pass. Throughout the construction of the under bridge, various officials of Railways, AIDA, State Govt. continuously inspect and monitor the project till completion.
3. Eligibility of section 80IA: As I have personally visited the site and seen the projects, it is found that the assess company is constructing the entire under bridge and not only a box. The term box has been used only to describe the technology for constructing the under bridge. As per the Act, a bridge has not been defined but going by the simple oxford meaning a bridge includes over bridges, bridges across rivers, railway bridges ad under bridges.”
6. It has also been pleaded that while deciding the appeal of the assessee for A.Y. 2006-07, ld. CIT(A) vide an order dated 18.2.2010 has allowed some of the projects as eligible for the deduction u/s.80IA. The assessee has also placed reliance on CIT v. ABG Heavy industries Ltd. [2010] 322 ITR 323, Ayush Ajay Construction Ltd. v. ITO [2001] 79 ITD 213 (Indore), Patel Engg. Ltd. v. Dy.CIT [2005] 94 ITD 411 (Mum.), Shristi Infrastructure Development Corpn. v. ITO [2009] 33 SOT 407 (Delhi) and Om Metals Infraprojects Ltd. v. CIT 26 DTR 359 (Jp)(Tirb).
7. Ld. CIT(A) was of the view that the assessee had worked as a “Contractor” and not as a “Developer” of the projects executed. He has cited one of his decided case of Vijay M. Mistry & Construction (P.) Ltd. for A.Y. 2007-08, Appeal No. CIT(A) XIV/AC. Cir.8/249/09-10 dated 21/10/2011. Ld. CIT(A) has quoted the relevant paragraph from the Finance Act, 1995 to explain the purpose of the rebate granted as follows:-
“Applying commercial principles in the operation of infrastructure facilities can provide both managerial and financial efficiency. In view of this, a ten-year concession including a five – year tax holiday has been allowed for any enterprise which develops, maintains and operates any new infrastructure facility such as road, highways, expressways, bridges, airports, ports and rail systems or any other public facility of similar nature as may be notified by the Board to BOT or BOOT or similar other basis (where there is an ultimate transfer of the facility to a Government or public authority). The enterprise has to enter into an agreement with the Central or State Government or a local authority or any other statutory authority for this purpose. The period within which the infrastructure facility has to be transferred needs to be stipulated in the agreement between the undertaking and the Government concerned. The enterprise has to be owned by a company registered in India or a consortium of such companies. The tax holiday will be in respect of income derived from the use of the infrastructure facilities developed by them.”
7.1 He was of the view that the assessee is entitled for deduction if satisfies the conditions mentioned in section 80IA(4) of IT Act which are enumerated in sub-clauses (a), (b) & (c) of the Act. He has emphasized the insertion of Explanation to section 80IA, wherein it is provided that nothing contained in section 80IA shall apply in relation to a business referred to in sub-section(4) which is in the nature of “work-contract”. According to him, one of the important ingredient for entitlement of deduction u/s.80IA is the financial investment and financial risk of an enterprise. He has mentioned Memorandum explaining the provisions of Finance Bill of 2007 and quoted that where a person makes investment and himself executes the development work, carries out the civil construction work, then eligible for tax benefit u/s.80IA. The first condition to be satisfied is that an enterprise should be a developer of the infrastructure facility. To emphasize the meaning of word “developer” he has also quoted Radhe Developers v. Union of India [2008] 23 SOT 420 (Ahd.). He has clarified that although the issue in the said appeal before the ITAT Bench was related to the deduction u/s.80IB(10) of IT Act yet the observations defining the term “developer” were relevant for the present appeal. After an elaborate discussion of B.T. Patil & Sons Belagum Construction (P.) Ltd. (supra), ld. CIT(A) has summarized the term “developer” and according to him, it has following characteristics:
“In view of the above discussion, we can say that a developer has following characteristic;
(i) He conceives the project. That means the basic study about feasibility of the project, economic benefits arising out of the project, the evaluation of the funds required to construct the project etc. is done by him.
(ii) The financial investment in the project is made by him.
(iii) The financial risk is borne by him. That means in case due to some reason the project does not click or the expected financial returns are not received the loss or the profit in case the project works belongs to him.
(iv) He may or may not execute the project himself.
(v) He has the dominant control over the work that is being carried on and for changing any specification of the project he need not take anybody’s permission. He has all the authority and control about the execution of the project.
The ‘contractor’ is a person who undertakes to produce a given result for any establishment by employing building workers. He executes the job assigned to him as per the specified parameters and specifications. After the completion of the project, the principal checks whether the job has been carried out as per the desired specifications and then the payment is made to the contractor in accordance with the terms and conditions.
Therefore, it can be seen from the above that there is a vast difference between the contractor and a developer. The most important difference is that a developer conceives the project whereas the contractor executes it. The other difference is that of financial risk. The developer bears the financial risk and makes the investment whereas the contractor does not make the investment and take any financial risk, he gets the payment for the work done by him and is not concerned about anything else. The developer can modify the project as per his desire whereas the contractor has to stick to the specifications given to him.”
7.2 Ld. CIT(A) has also reproduced the work undertaken or executed by the assessee during the year. In the said chart, there was a description of nature of the work undertaken by the assessee and the commencement of the year of the said work. It was not in dispute that the assessee had undertaken the construction of under-bridge of the Railways. Assessee was asked to give the details of the contract, which were submitted. On that basis, ld. CIT(A) has also discussed few of the contracts with Railways as also with AUDA and GWSSB. Thereafter, he has concluded (i) that the investment was not made by the appellant, (ii) that the design and planning for development of infrastructure project was not of the appellant,(iii) that there was no financial risk belonged to the assessee, (iv) that there was no mobilization of technical expertise or supervision or control of the assessee. Resultantly, the claim of the assessee were dismissed in the following manner:
“The claim of the appellant are examined with reference to the terms and conditions of the various contracts taken by it. The contracts have been discussed in the preceding paragraphs. It is apparent from the discussion of all the contracts that –
(i) The investment is not made by the appellant. It is made by the government body. The project has been fully financed by the government and the appellant was getting regular payment in accordance with the progress of work. The investment in the projects were very limited and was similar to the investment made by any contractor in executing the contract. For claiming that the investment in the projects has been made by the appellant, total funds should be invested by it or major portion of the investment should belong to the appellant. In the projects that have been executed by the appellant, the investment has been made by the appellant only in the initial stage that too has been reimbursed when the construction work starts. In some of the case, the appellant has been received the mobilization advance which enabled him to start the project without any initial investment.
(ii) The claim that the design and planning for development of infrastructure project was that of the appellant is also misplaced. There is no doubt that the appellant has made design in certain projects but that is only the small part of the total work of planning which has been done by the authority. The plan that particular project, or the bridge or some other infrastructure facility is to be created was not made by the appellant but it was made by the authority which invited the tender for construction.
(iii) The claim of the appellant that financial risk belongs to the appellant is also not properly placed. There is no financial risk that is taken by the appellant. The conditions of the contract clearly show that it will get regular payment in accordance with the progress of construction. The risk involved was normal risk which is there for any contractor in executing any normal contract. The appellant has never taken the financial risk which is equal to the cost of the project. The contract documents also provides for limited liability on the appellant which would be restricted to certain amount depending on the breach of contract. For claiming that the financial risk is there the appellant would own and develop the project and then transfer it to the concerned authority.
(iv) The appellant ha also claimed that it was mobilizing and synthesizing people, plants, technical expertise, supervision, co-ordinating and control, etc. to develop and create the infrastructural facility. This claim is also without factual support. The appellant has not developed and created the facility. It has also only executed the work assigned to him which was part of the infrastructural facility being planned by the government authority. The plan of the project was not made by the appellant. The appellant is expert in box pushing technique and all the projects have been executed by using that technique. In most of the contracts the appellant has executed the part of the work which relates to creating of under pass below the railway line. In Sujlam Suflam Scheme the appellant has executed that part of the project which involves construction of boxes. Therefore, the claim of the appellant that it has developed and created the infrastructure facility is not acceptable. The ground of appeal is, therefore, dismissed.”
8. From the side of the appellant, ld. AR Mr.Dhinen Shah appeared. After describing the nature of the development work executed by the assessee, he has emphasized that some of the projects were held as eligible in A.Y. 2006-07 by ld. CIT(A). The work carried out in those projects was identical with the projects undertaken by the assessee for the year under consideration as well. The ld. AR has therefore pleaded that on the basis of the view taken by the ld. CIT(A), this appeal can also be decided. He has cited a latest decision of Hon’ble Gujarat High Court dated 11.01.2012 pronounced in the case of Ganesh Housing Corpn. Ltd. v. Dy. CIT [2012] 207 Taxman 180, wherein although the issue was reassessment u/s.148 but the income of the petitioner was within the claim of deduction u/s.80IA(4)(iii) of the Act. The AO had reopened the assessment mainly on the ground that the deduction u/s.80IA(4)(iii) was wrongly granted. Ld. AR has pleaded that the granting of deduction u/s.80IA(4) was upheld and the reopening was quashed. That decision of the Hon’ble Gujarat High Court was challenged, however the Special Leave Petition of the Revenue Department was dismissed by the Hon’ble Supreme Court vide order dated 17.09.12. He has placed reliance on following decisions:
| Sr. No. | In the case of .. | Reported in .. |
| 1. | ABG Heavy Industries Ltd. | (supra) |
| 2. | CIT v. ABG Heavy Industries Ltd. | [SLP (Civil) No.32861 of 2010] 336 ITR (Statutes) 15. |
| 3. | CIT v. Radhe Developers | [2012] 341 ITR 403 |
| 4. | GVPR Engineers Ltd. v. Asstt. CIT | [2012] 51 SOT 207 |
| 5. | Sanee Infrastructure (P.) Ltd. v. Asstt. CIT | [2012] 138 ITD 433 |
| 6. | Nagarjuna construction Co. Ltd. v. ACIT | ITA No.141/Hyd/2007 |
| 7. | Koya & Co. Construction (P) Ltd. v. Asstt. CIT | [2012] 51 SOT 203 |
| 8. | Asstt. CIT v. Bharat Udyog Ltd. | [2009] 118 ITD 336 (Mum.) |
| 9. | Shristi Infrastructure Development Corpn. Ltd. | (supra) |
| 10. | Om Metals Infraprojects Ltd. | (supra) |
| 11. | Laxmi Civil Engg. (P) Ltd. v. Addl. CIT | ITA Nos.431 & 435 (PN) of 2007, 254 (PN) OF 2008 & 766/PN/09 |
| 12. | Tarmat Bel (JV) v. ITO | ITA No.111/RJT/2010 |
9. From the side of the Revenue, ld.CIT DR Mr D.P. Gupta appeared and main plank of his argument was that considering the nature of work executed by the assessee, it was clear that the assessee had acted only as a “contractor” and not as a “developer”. He has pleaded that there was no financial risk of the assessee, since the assessee has furnished the “work bill” time to time and received the payment from the Government. The Government has granted him a small work to be executed. It was a part of a large project and not a project as such. The assessee has not developed an infrastructure project as a whole. He has pleaded that the assessee has not conceptualized the project. The project was planned by the Government. The assessee was asked to complete only a part of the project that too on contract basis. Neither there was “risk” nor there was “reward” for the assessee. The assessee has simply tendered the bills of the work executed and received the payment. He has drawn our attention on “Notes on Accounts” and informed that as per the “Revenue Recognition” the income was accounted on the basis of the bills certified by the Government Department. The escalation claimed and arbitration award was accounted on the basis of the receipt. He has pleaded that on account of escalation in the price, the assessee has accordingly claimed as per the bills, therefore there was no risk of the assessee. Placing reliance on the orders of the authorities below, he has contested that the claim of deduction was rightly rejected, hence deserves to be confirmed. Ld.DR has drawn our attention on the details of payment made by Ahmedabad Urban Development Authority and informed that the total tender amount was at Rs.6,42,49,057/- against that amount of work done upto the final bill was found to be Rs.10,85,28,873/- and there was an escalation of Rs.3,06,54,690/-. According to ld.DR, the entire tender amount was covered by the bills and on top of it, there was payment for escalation of cost of project. Therefore, there was no element of risk involved and the assessee has also not made any investment out of its own funds. One of the argument of ld.DR is that the each work is very small in comparison to the total volume of the infrastructural work and that small work assigned to this assessee has also been identified along with the value of the work. As per ld.DR, one of the work given to the assessee was “Earthwork”. He has also mentioned that painting work has also been given to the assessee. One of the argument of ld.DR was that the term “contractor” has been used in all the agreements. This term itself has removed all doubts that the assessee has entered into an agreement with all the concerned Government Authority as a “contractor”. Those authorities have also treated this assessee as a “contractor” and not as a “Developer”. Because of this reason, the assessee was required to deposit a “security deposit” of the tender amount, as it was prevailing in the case of a “contractor’s agreement”, Mr. Gupta CIT concluded.
10. Both the sides were heard at length. The assessee is stated to be in construction business. As per the submissions of the assessee, placed in writing before the lower authorities, we have noted that the assessee has claimed that the construction of Rail Bridges and Road Bridges was primarily carried out by the assessee. In this regard, our attention has been drawn on the nature of the said construction.
About the nature of the work carried-out it was explained that the RCC Box Bridge was constructed by pre-cast RCC Box by applying pushing technique. Further it is explained that Jacked Box Tunneling is a non-intrusive method for constructing a new under-bridge, culvert or subway beneath existing surface infrastructure, for example railways and highways. Ld. AR has informed that the assessee construction company has developed an expertise and by this method there was no disturbance in the traffic and no inconvenience is caused which otherwise was earlier experienced while applying traditional construction method. Further, safe running of trains have also been achieved by this method. As per the contents of the paper-book, there is a description of box pushing technique, quote “R.C.C. Box is pushed through the embankment with the help of hydraulic jacks to create a passage. Execution of this work is similar to the construction of well foundation. Wells will be sunk into the ground either by self-sinking or with the help of kentledges. In case of box push bridge, precise box segments will be pushed in horizontal direction with the help of hydraulic jack by taking reaction from thrust bed.” Unquote. The assessee has also furnished certain photographs to demonstrate the nature of work executed.
11. The next contention of the assessee is that the activity carried on was within the definition of “infrastructure facility” as defined in Explanation to section 80IA(4) means a “road including toll road, a bridge or a rail system” .
In support assessee has placed on record the definition of “bridge” means “A building of stone or wood erected across a river or canal, for the common ease and benefit of travellers.” “A bridge is a structure of wood, iron, brick, or stone, ordinarily erected over a river, creek, pond, or lake; or over a ravine, railroad, canal, or other obstruction in a highway, so as to make a continuous roadway, and afford to travellers a convenient passageway from one bank to the other. While a bridge is a part of the highway which passes over it, no definite rule can be laid down as to where one terminates and the other begins.” “A road culvert is regarded as a bridge structure, even in Engineering Terminology. Standard Specifications and Code of Practice page 2, defines ‘bridges’ as follows. The term ‘bridges’ as used in this code will mean all types of structures, such as culverts, cause-ways and viaducts unless it is repugnant to the context.”
11.1 By this definition, the appellant has tried to demonstrate that a bridge can be an “under-bridge” or an “over-bridge”. Even “culvert” is also a type of a bridge structure. This technical aspect appears to be correct, rather there should not be any dispute about this fact that the assessee had undertaken the construction of under/over bridges and both must fall within the definition of “Infrasturcture facilities” as prescribed in the statute. We hereby hold accordingly.
11.2 Next, the assessee has also brought on record the Agreements executed with several authorities. Photocopies of the agreement has also been placed on record in respect of following authorities.
| A | Agreement with Northern Railway |
| B | Agreement with AUDA |
| C | Agreement with East-cost Railway |
| D | Agreement with Central Railway |
| E | Agreement with Western Railway Ahmedabad |
| F | Agreement with Western Railway Mumbai |
| G | Agreement with G.W.R.D.C. |
| H | Agreement with Irrigation Dept. |
| I | Agreement with G.W.S.S.B |
11.3 To examine whether the work assigned to this assessee was in the capacity of a “Contractor” or the assessee has executed the work as a “Developer”, we have perused the terms of some of the agreements. Our attention has been drawn on an agreement with “Northern Railway”, wherein the scope of the work has been defined as follows:-
“2. SCOPE OF WORK:
2.1 Procurement/Fabrication of necessary plant and equipment like, jacking jigs, sumps and any other plants equipment required for execution of this work.
2.2 Designing of box section as per approved profit sketch General Arrangement Plan No.NRHQE (P) Plan No. P-1770-SB/1998/R-3. The design will be based on modified broad gauge Railway loading-1987. The design shall be from reputed Consultant to be approved by Railway and the same be got Proof checked from RITES/technical institution such as Indian Institute of Technology/Roorkee. Contractor has to make his designer available for any clarifications for checking of the design/drawings by the Northern Railway. The final approval of design and drawings shall be given by the Railway. In the area of existing arch, twin box of 2×8.50 Mtr x 5.75 Mtr. will have to be designed and constructed in lieu of individual boxes No.2 & 3. Box No.1 & 4 will be designed as single boxes each of size 8.50 Mtr. x 5.75 Mtr. one each on either side of the existing Arch.
2.3 The contractor has to submit detail arrangement alongwith design calculations for supporting of arch during pushing of box and same is to be got cleared from Railway before commencement of work.
However, the dismantling of Arch for pushing the Box shall be done under running traffic condition. The contractor shall ensure the stability of the existing arch during pushing the box. For any damage done to the Arch such as formation of the cracks etc. due to pushing or due to any other reasons the contractor shall arrange to repair the same with satisfaction of Engineer at site i.e. grouting of the cracks/rectification as required at his own cost. The rates quoted against N.S.Item No.1 (a) & (b) shall be deemed to have included the cost of this element of work and nothing extra will be paid on this account.
2.4 During pushing process of RCC Box, the temporary supporting of the buttreses of the existing arch shall be arranged by the contractor if required as per site requirement for safety consideration and nothing extra shall be payable on this account. The rate quoted against N.S. Item No.1(a) & (b) shall be deemed to have been included in the element of work.”
11.4 In the light of the above description, an argument has been raised that the design of the construction-work was developed by the assessee. The said design was required to be approved by the Engineers of the Railway Department. Therefore, it was not merely a contract to execute a simple job of construction but it was a contract for construction of a specialized job work. Not only this, terms of the agreement have also demonstrated that the assessee has to bear the cost of damages or any loss incurred during the execution of the construction. Had it been a case of a contractor simplicitor then the damages ought to have been borne by the owner. Since the contract was awarded to the assessee with a pre-condition that damages, if any caused, is to be repaired by the assessee, therefore, the assessee has not acted as a “contractor” but as a “developer”.
11.5 One of the special condition as per the standard specification was that the design was to be prepared by the assessee and the assessee shall be fully responsible for safe functioning of the “thrust bed”. One of the specification was stated to be like this viz. quote, “Earthwork in excavation for thrust bed, return wall, curtain wall, drop wall flooring and box pushing including disposal of the excavated earth in the near by available Rly.Land within a maximum lead of 10 Kms and the remaining surplus earth outside the Rly.land as directed by the Engineer at contractor’s own cost.” Unquote. So these clauses have affixed certain liabilities as also responsibilities on the assessee which were apparently more than the responsibility generally been fixed on a “contractor”.
11.6 The construction material which is used by the assessee was also the property of the assessee and in this regard one of the clause was stated to be as under:-
“Pre-casting and curing of RCC Box units including fixing of front end frame/cutting shield, with all fabricated enabling work remaining the property of contractor, after completion of the work.”
Had it been the work executed as a contractor then the construction material ought to be the property of the owner but the clauses have said otherwise, thus buttress the arguments of the assessee.
11.7 It was clarified that the infrastructure as a whole, i.e. the bridges are naturally the property of the Government Department. But the appellant was further given the responsibility of maintenance of the work executed and one of the condition was stated to be that the maintenance period of the work should be six months. Ld. AR has therefore pleaded that in the case of a “contractor” simplicitor there would be no such clause of maintenance.
11.8 The assessee has also constructed an under pass and the contract was awarded by Ahmedabad Urban Development Authority. Name of the work was stated to be “Construction of Underpasses by R.C.C. Box Jacking/Pushing Technique at Chainage 564014.59 and Chainage 55167.81 between stations Gandhinagar-Ahmedabad and Khodiyar-Ahmedabad.” In this regard, the scope of the work was as under:-
“2. Scope of Work:
The Scope of Work to be performed by the contractor is described Broadly as Under:
A. Demarcating the site, Providing and Maintaining the Diversion for existing Road Traffic to move in smooth and safe manner.
B. Dismantling the Road Crust in the Approach portion and excavating to depth and length as required for preparing casting bed and Box Pushing Operations.
C. Shifting the Utility and Service Lines likely to interfere with the Project work.
D. Preparing Detail Designs and Working Drawings of RCC Box as per GAD alignment and other related items, Retaining walls and all other items as may be required and getting the approval from railway authorities for work in railway limit ad for structural items in AUDA limit from AUDA.
E. Preparing and Providing casting bed as approved by railways.
F. Providing by Laying and Casting RCC Box in segments as approved by Railways.
G. Providing required equipment, making arrangements and pushing the RCC Box by Box Pushing Technique under full supervision and directions of railway engineers under running train conditions.”
11.9 In respect of this contract, our attention has been drawn on one of the condition in respect of the designing of the job and ld .AR has explained that the design was required to be developed by the assessee and for that purpose a design consultant was employed. Relevant clause of the said agreement was as under:-
“2.14 The contractor shall employ a Design Consultant who has adequate experience of design and planning of casting bed, thrust beds and RCC Box Pushing technique. The contractor shall also engage a Senior Engineer, who is well Experienced in RCC Box Pushing jobs in running railway conditions as site engineer in charge of work, for which the concurrence of AIDA shall be obtained. Any change of the Site Engineer as has been proposed in PQ documents and also during the progress of work shall be done only after obtaining the concurrence or instructions of AUDA.”
11.10 The assessee was made responsible for any error in the execution of the work. It was the responsibility of the contractor i.e. the assessee, for damage-free execution of the work. Otherwise, generally a contractor is not held responsible or not required to repair the damages at his own cost. One of the clauses with South-Eastern Railway was that the contractor was required to submit its own drawings along with his tender. The structural design including method of construction as proposed by contractor was to be submitted by the contractor. Therefore on the basis of these clauses it is demonstrated that there were certain special terms and conditions, distinguishable from the ‘works-contract’, under which this assessee had executed the assined construction.
11.11 Next, our attention has also been drawn on “Sujalam Sufalam Yojna”. As per the tender notice, Government of Gujarat has an aim to transfer surplus water of rivers in Central and South Gujarat to Water scarce area of North Gujarat, Kachch and Saurashtra. For that purposes, Sealed tenders for constructing and insertion of RCC Box across Railway lines and other works on approaches of the project of proposed Sujalam Sufalam Spreading Canal (in short SSSC) are publicly invited from the contractors having experience and who have satisfactorily completed at least two works of RCC Box construction of minimum size 3.00 mt. x 3.00mtr. and pushing below railway tracks using drag sheets. The assessee was thereafter assigned the tender of insertion of “Pre-cast RCC Box” under meter-gauge Railway Line. The said sanctioning of tender in assessee’s favour have thus demonstrated that the construction-work in question was very much technical in nature which was assigned to the assessee only on the basis of it’s past experience and expertise developed to execute efficiently.
12. With this factual background, we have examined few case laws to ascertain whether the assessee’s nature of work had fallen under the definition of a “contractor” or a “developer”. In this regard, we have perused an order of Tribunal pronounced in the case of B.T. Patil & Sons Belgaum Construction (P.) Ltd. (supra). Vide paragraph No.39, the Respected Bench has clarified that the words “developer” and “contractor” have not been defined for the purpose of application of section 80IA. According to the Bench, it is a settled legal position that ordinary meaning is required to be given for a word used in the Statute. Rather the Bench has said that a word used in one Statute cannot per se be imported into another. A reference of General Clauses Act, 1897 was made, but it was found that the word “contractor” or “developer” had not been defined therein. Then, the Respected Bench has taken the help of Oxford Advanced Learners’ Dictionary. As per the said dictionary, the word “developer” means a person or a company that designs or creates new product. Whereas as per the dictionary meaning, the word “contractor” is a person or a company that has a contract to do work or provide services or goods to another.
As per new shorter Oxford dictionary, the word “contractor” means a person who enters into a contract or agreement. As per the Bench, a developer is a person who conceives the project. He may execute the entire project himself or assign some part of it to others. As per Respected Bench, on the contrary, a contractor is the one who is assigned a particular job to be accomplished on behalf of the developer. The duty of a contractor is to translate such design into reality. The role of a developer is much larger than that of the contractor. As per Bench, it is no doubt that in certain circumstances a developer may also do the work of a contractor but a mere contractor per se can never be called as a developer, who undertakes to do work according to the pre-decided plan. These findings have indeed helped us in deciding the issue in hand.
12.1 This technical term, i.e. “developer” was also under question in the case of Radhe Developers (supra), wherein vide an order dated 13.12.2011, the Hon’ble Court has quoted as under:
“Secondly, term “developer” has been understood in common parlance as well as in legal sense carrying a much wider connotation. The Tribunal itself in the impugned order has traced different meanings of the term “developer” explained in different dictionaries, which read as under:
“1. The Webster’s Encyclopedia unabridged of the English language gives the following meaning of the term developer as :
1. One who or that which develops;
2. A person who invests in and develops the urban or suburban potentialities of real estate.
b. Oxford Advanced Learners Dictionary of Current English, Fourth Indian Edition, gives meaning of the term ‘developer’ as persons or company that develops land.
c. Random House Dictionary of the English Language, the following can be found.
Develop
a. To bring out the capabilities or possibilities of; bring to a more advanced or effective state.
b. To cause to grow or expand.
Developer
a. The act or process of developing; progress.
b. Synonym : Expansion, elaboration, growth, evolution, unfolding, maturing, maturation.
d. Webster Dictionary, the following definitions emerge:
a. To realize the potential of ;
b. To aid in the growth of strength, develop the biceps,
c. To bring into being: make active (develop a business)
d. To convert (a tract of land) for specific purpose, as by building extensively.
e. Law lexicon Dictionary : The following definitions could be seen.
Development
a. To act, process or result of development or growing or causing to grow; the state of being developed.
b. Happening.”
12.2 There is an another decision which has been cited before us pronounced by ITAT Hyderabad Bench in the case of GVPR Engineers Ltd. (supra), wherein the assessee-company had entered into a contract with the Government to develop an infrastructure facility. The AO’s objection was that the assessee had entered into a contract for building for which the entire investments were made by the Government and the assessee was paid “on running bill to bill basis”. This question was elaborately dealt with by the Respected Co-ordinate Bench and after due consideration of the work executed by the said concern, it was opined that the words “developer” and “contractor” have not been defined in section 80IA of the Act. It was noted that the BOT/BOOT models seek to augment infrastructural assets in addition to Government spending and not simply feed on Government expenditure. As per the Tribunal, the deduction u/s.80IA is available to the former and not to the latter. The term “developer” has to be seen de hors the contract. The Bench has also opined that word “ownership” is attributable only to the enterprise carrying on the business which would mean that only companies are eligible for deduction u/s.80IA(4).
12.3 An another controversy in such type of cases is in respect of the term “ownership” prescribed as per the language of the Section. The Section 80IA(4) prescribes that it applies to any enterprise carrying on the business of developing, operating and maintaining any infrastructure facility which fulfils the conditions, namely, it is owned by company registered in India or by a consortium of such companies and that it has entered into an agreement with the Central Government or State Government and that it has started operating and maintaining the infrastructure facility on or after 1995. The term “it is owned” has been defined by the Revenue Department as if the infrastructure facility is to be owned by the enterprise claiming 80IA(4) deduction. But the view expressed by the Hon’ble Courts is entirely different. In one of the decision pronounced by ITAT Hyderabad Bench in the case of Koya & Co. Construction (P.) Ltd. (supra), it is held that the word “owned” is attributable to the enterprise carrying on the business. Further, the word “it” denotes the enterprise carrying on the business. The word “it” do not relate to the “infrastructure facility”. The infrastructure facility, such as, rail system, high-way projects, irrigation project, port, air-port, etc. cannot be owned by an enterprise other than the Government.
12.4 An another reason for not granting the deduction u/s.80IA(4) by the Revenue Department was generally because of the reason of insertion of Explanation by Finance Act (No.2), 2009 with retrospective effect from 1.4.2000 which says that for the removal of doubts, it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in sub-section(4) which is in the nature of a work contract awarded by Central or State Government and executed by an Undertaking or an Enterprise. Due to this Explanation, Revenue has taken a stand that the eligibility is to be granted only to a “developer” and if the nature of activity is a “works contract”, then the deduction is not be granted. However, in the case of Koya & Co. Construction (P.) Ltd. (supra), this issue was dealt with elaborately, wherein it was held that pure development is eligible for claim of deduction. It was clarified that to avoid misuse of the provisions, the said Explanation was inserted in section 80IA, so that mere “works contract” would not be eligible for deduction u/s.80IA. Certainly the said Explanation has been inserted to deny the tax holiday to an entity who does only “work contract” or acted merely as a sub-contractor, apparently being distinct from the developer. Applying this ratio on the present set of facts and circumstances it can be held that the nature of construction executed by this assessee had fallen under the category of “developer” and not under the category of ” “works-contract”.
12.5 Next, an another controversy has also been raised by the Revenue Department that in the agreements in question the term “contractor” has been referred by the Government. This question has been duly addressed by ITAT Mumbai Bench in the case of Bharat Udyog Ltd. (supra), wherein Patel Engg. Ltd. (supra) was followed and it was opined that the term “contractor” is not essentially in contradiction to the term “developer”. By entering into a lawful agreement and thereby becoming a “contractor” in no way bar an enterprise to execute the work as a “developer”. It was opined that merely because in the agreement for development of infrastructure facility an enterprise is referred to as a contractor do not detract an enterprise from the position of being a “developer”. In number of decisions, the Coordinate Benches have cited ITAT Pune Bench decision pronounced in the case of Laxmi Civil Engineering Pvt. Ltd. (supra), wherein it is mentioned as under:-
“2. Tracing the background of the case, learned counsel for the assessee mentioned that in the first round, the appeals were decided relying on the decision of the Third Member in the case of B.T.Patil & Sons 126 TTJ 577 vide order dated 18.02.2010. Subsequently, the said order of the Tribunal was recalled in view of the binding jurisdictional high Court’s judgment pronounced on 15.02.2010 in the case if ABG Heavy Engg. Ltd. reported in 37 DTR (Bom) 233.”
13. In the background of the above discussion, it can be summarized that an enterprise has to enter into an agreement with the Central or State Government or a Local Authority or any Statutory Authority. That undisputedly the infrastructure facility belonged to the Government, therefore the infrastructure facility is owned by the Government. But the enterprise which is developing or constructing the infrastructure facility is to be owned by a Company registered in India. The Act also says that an enterprise which is constructing or developing the infrastructure facility can be a consortium of such companies. Such an arrangement is eligible for the claim of deduction. Few Circulars have been issued by CBDT through which it has also been clarified, as discussed in the foregoing case-laws, that the benefit of the impugned deduction is available to an enterprise which either develops or maintains or operated or executed the combination of these three, inter alia as a Build, Operate and Transfer (BOT), or, Build, Own, Operate and Transfer (BOOT), or, Build, Own, Lease and Transfer (BOLD) basis or similar other basis where ultimately the infrastructure facility so constructed is ultimately transferred to Government or Public Authority, then such an enterprise is within the ambits of qualification of deduction. The explanatory memorandum to the Finance Act, 2007, as quoted before us, states that the purpose of the tax benefit has all along been to encourage investment in development of infrastructure sector and not for the persons who merely execute the civil construction work.
13.1 In the light of the above discussion and the view expressed by the Hon’ble Courts, a conclusion can be drawn that there is a distinction between “developer” and a “contractor”. (i) That in a case of civil contractor, it’s duty is only of civil construction. (ii) That after the civil construction is over, he is paid for the job of civil construction as per the bills raised. (iii) That at that point of time, his contract is over and the agreement ends. (iv) That after the completion or at the end of the agreement, a civil contractor hand over the site to the owner. (v) That a civil contractor constructs as per the specifications given. (vi) That a contractor does not involve much of his own money but raises bill of his civil construction work time-to-time to collect the expenditure incurred. (vii) That a contractor has no domain over the land or the site. (viii) That his access to the site is restricted and limited from commercial angle.
(ix) That on the basis of the project he cannot raise the funds from the private financial institutions. (x) That “a contractor” is not responsible for the development of the project but his responsibility is limited to the job-assigned to him. (xi) That a “contractor’s” duties and responsibilities can only be examined on the basis of the terms and conditions of the contract agreement.
13.2. Now we shall examine about a “developer”. From the above reading we have also gathered (a) That a developer is a person who undertakes the responsibility to develop a project. (b) That a developer is therefore not a civil contractor simplicitor. (c) That if we apply the commercial aspect, then a developer has to execute both managerial as well as financial responsibility. (d) That the role of a developer, according to us, is larger than that of a contractor. (e) That when a person is acting as a developer, then he is under obligation to design the project, it is an another aspect that such design has to be approved by the owner of the project, i.e. the Government in the present case. (f) That he has not only to execute the construction work in the capacity of a contractor but also he is assigned with the duty to develop, maintain and operate such project. (g) That to ascertain whether a civil construction work is assigned on development basis or contract basis can only be decided on the basis of the terms and conditions of the agreement. Only on the basis of the terms and conditions it can be ascertained about the nature of the contract assigned that whether it is a “work contract” or a “development contract”. (h) That in a “development contract” responsibility is fully assigned to the developer for execution and completion of work. (i) That although the ownership of the site or the ownership over the land remains with the owner but during the period of development agreement the developer exercise complete domain over the land or the project. (j) That a developer is not expected to raise bills at every step of construction but he is expected to charge the cost of construction plus mark-up of his profit from the assignee of the contract. (k) That a developer is therefore expected to arrange finances and also to undertake risk. (l) That in contrast to the rights of a “contactor” a “developer” is authorized to raise funds either by private placement or by financial institutions on the basis of the project. These are few broad qualities of a developer through which the character of a developer can be defined.
14. FINDING : Next, we have to examine the details/ bifurcation of the total revenue receipts. The total turnover of the assessee during the year under consideration was undisputedly shown at Rs.6,55,43,956/-. This amount was received, as listed and reproduced above, mainly in respect of development of arch-bridges, made over railway-track or under bridges. On Delhi Ghaziabad Section work executed at Rs. 66,38,045/-. The assessee has also executed the “RCC Box Bridge” by applying pushing method for passing under main track on Delhi Gaziabad section and executed contract for Rs. 30,82,497/-. The assessee has also provided under-bridge below railway-track at Tragad and executed for Rs. 2,36,62,044/-. Certain other infrastructure project, such as, construction of water-way of 48 meters long was made between Simliguda and Karakavalasa and executed for Rs. 30,69,999/-. The assessee has also constructed Railway under-bridge for a contract of Rs. 39,62,213/-. It has also been stated that by applying Jacking method RCC Box were provided through Railway Embankment for providing distributory channel projecting for Narmada Project. The assessee has also designed and constructed “New Box Culvert” between Jonathpur-Ahura Road Station. Such details are available in the compilation.
On the basis of this examination we, therefore, give a finding that it was wrong on the part of the AO to hold that the assessee has merely acted as a contractor. By analyzing the nature of work executed by the assessee, it can be gathered that the assessee had acted as a developer. The assessee has undertaken the responsibility of execution of the work. The assessee has developed its own design and on getting approval applied the technology for completion of infrastructure facility. Terms and conditions of the agreement executed with certain Government Departments have also established that the risk in execution of work has also been undertaken by the assessee. Rather, the assessee was held responsible for any damage or loss to the property. We have also noted that the Revenue Department has wrongly interpreted the word “owned” in section 80IA(4)(i)(a) of the IT Act. As discussed hereinabove, we hereby conclude that an enterprise which is either developing or operating or maintaining the infrastructure facility is required to be owned by a company or a consortium of companies duly registered in India. The act do not prescribe that the infrastructure facility is to be owned by such an enterprise. The infrastructure facility is always the property of the Government and an enterprise is bound by the agreement to transfer the same after the settled period. The assessee’s execution of work fall within first category, i.e. developing of infrastructure facility. It was incorrect on the part of the AO to hold that the assessee being fallen within the first category not entitled for the deduction. The decisions of ABG Heavy Industries Ltd. (supra), Koya & Co. Construction (P.) Ltd. (supra), and Radhe Developers (supra) and Bharat Udyog Ltd. (supra) thus support the stand taken by the assessee. The assessee has executed the construction of infrastructure facility in respect of the Government Projects, as is evident from the list of the agreements placed on record, hence it was a factual error on the part of the AO to say that the assessee had entered in some contract with few private parties. We therefore hold that the assessee is eligible for the deduction u/s.80IA as claimed of Rs.4,79,508/-. The ground raised in this regard for the year under consideration is hereby allowed.
15. Revenue has raised the following ground (A.Y. 2005-06):-
(1) The Ld. Commissioner of Income-tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the disallowance of Rs.66,14,143/- made by the Assessing Officer on account of freight and warehouse charges u/s.40(a)(ia) of the Act.
15.1 On verification of details, it was noted by the AO that the assessee has paid labour charges of Rs.1,31,08,065/-. The assessee has also paid freight charges of Rs. 16,91,327/-. The assessee has furnished the details of the tax deducted on such payments. It was noted by the AO that in respect of payment of labour charges and freight charges upto the month of February-2005, the assessee had deducted the tax in the month of March-2005, however the same was paid in the month of May-2005. As per AO, the assessee had made late payment. According to him, as per the first proviso to section 40(a)(ia) it is provided that where in respect of any such sum tax has been deducted, then such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. According to him, a plain reading of this proviso, it is clear that if the TDS has been deducted during the last month of the previous year but paid after the said due date, then the deduction is not allowable. The AO has made out a list of alleged late payment and by invoking the provisions of section 40(a)(ia) a total disallowance of Rs. 66,14,143/- was made. The matter was carried before the first appellate authority.
16. Before ld. CIT(A), it was pleaded that the assessee had deducted the tax and paid to the Central Government before the due date of filing of the return. In support, case laws cited were Bapusaheb Nanasaheb Dhumal v. Asstt. CIT [2010] 40 SOT 361 (Mum.) and H.S. Mohindra Traders v. ITO [2011] 44 SOT 43 (Delhi) (URO). After hearing the submission and the connected case laws, it was noted that there was a decision of the Special Bench in the case of Bhrarti Shipyard Ltd. v. Dy. CIT [2011] 132 ITD 53, wherein it was held that the amendment was prospective, i.e. from 1.4.2010 and not retrospective from 1.4.2005. Thereafter, ld. CIT(A) has concluded as under:-
“However, after going through the facts, it is seen that the appellant had been making certain payments to the various contractors and he has raised a final bill at the end of the year and deducted tax on the final amount. The tax deducted in the month of March has been paid by him on 31/03/2005 which is before due date of filing of return as per the provisions of section 139(1) of the Act. I am inclined to accept the submission made by the appellant that it has deducted the tax in the month of March and made the payment before due date and, therefore, there was no violation of the provisions of section 40(a)(ia) of the Act. It is not the claim of the AO that the tax has not been deducted at all, but he has held that the appellant did not deduct any tax upto the month of February and deducted tax only in the month of March. He has not held that there was a short deduction of tax or adequate has not been deducted on the total payments during the year. The disallowance u/s.40(a)(ia) shall be as per the conditions provided under this section itself. The proviso to section 40(a)(ia) makes it further clear that even in the case where the tax has been deductible as per the provisions of chapter XVII, but deducted in subsequent year or deducted during last month of previous year but paid after due date under section 139(1) of the Act or deducted during other month of the previous year except last month but paid after the end of the said previous year then the said sum shall not be allowed as deduction in computing the income of the previous year but allowed in the previous year in which the said tax has been paid. The deduction is disallowed only in case when either no tax was deducted or it was not paid after deduction but when the tax is deducted may be belatedly and deposited belatedly then the deduction is allowable in the previous year in which it was so deposited. The provisions of chapter XVII are relevant only for ascertaining the deductibility of the tax at source and not for the actual deduction in payment for attracting the provisions of section 40(a)(ia) of the Act. In the present case, the tax has been deducted in the last month of the previous year i.e. March, 2005 and deposited on 31/05/2005, the case of the appellant is covered in the main provisions of the law and the amendment which was made by Finance Act, 2008 with retrospective effect from 01/04/2005. Reliance is placed on the decision of Hon’ble Gujarat High Court in Tax Appeal No.706/2010 dated 18/07/2011 in the case of CIT v. J.K. Construction Co. and also on the decisions in the case of Bapu Saheb Nana Saheb Rumal [132 ITJ 694][Mum.] & H.S. Mohindra Traders [132 TTJ 701] [Del.]. Therefore, no disallowance u/s.40(a)(ia) can be made on these facts of the case.”
17. Having heard the submissions of both the sides, we are of the considered view that there was no fallacy in the view taken by ld. CIT(A). Now this issue is very well settled. In one of the case, the Respected Coordinate Bench “D” ITAT Ahmedabad in the case of Sanjaybhai A.Sarvaiya v. Jt. CIT bearing ITA No.4006/ahd/2008 (A.Y. 2005-06) order dated 13/07/2012 held as under:-
“5. Having heard the submissions of both the sides, we are of the view that the first question whether the amount remained payable at the end of the year is first to be ascertained and in this regard after perusing the records and the accounts of the assessee as also considering the submissions of the assessee, there is no dispute that there was no amount payable at the end of the year. After ascertaining this fact that there was no amount remained payable at the end of the accounting period, we have perused the order of the Respected Special Bench pronounced in the case of Merilyn Shipping & Transports (supra), wherein the conclusion was drawn as under:-
“The provisions of section 40(a)(ia) of the Act are applicable only to the amounts of expenditure which are payable as on the date 31st March of every year and it cannot be invoked to disallow which had been actually paid during the previous year, without deduction of TDS.”
5.1. Further, an another fact has also been ascertained by us that although the amounts were paid to the sub-contractors during the entire financial year under consideration on different dates but finally the entire payment of TDS to the Government Exchequer was paid on 31.5.2005, admittedly before the due date of filing of the return. On this aspect, we have found that the Hon’ble Jurisdictional High Court in a latest decision dated 18/07/2011 in Tax Appeal No.706 of 2010 in the case of CIT v. J.K. Construction Co. has held as under:-
“From the record, it emerges that for payment to contractor, the assessee had made deduction as required under law from time to time and in particular latest by 31.3.2005. This is clear from chart supplied by the assessee before CIT (Appeals) which would establish that deduction in case several contractors were made on 31.3.2005. All such amounts were deposited with the Government on or around 28.5.2005. In background of above undisputed facts, tribunal was of the opinion that by virtue of amended provisions of Section 40 (a)(ia) of the Income Tax Act, 1961, assessee has not breached the requirement of deduction and depositing of TDS.
Section 40(a)(ia) of the Act as amended with effect from 1.4.2005 read as under:
(ia) any interest, commission, or brokerage, (rent, royalty) fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139.”
Plainly speaking, assessee had to make deduction before 31st March of the year in question and as long as such amounts were deposited before last date of filing of the return, requirements of law would be fulfilled. It was on this basis that tribunal was of the opinion that the assessee committed no wrong and was therefore, entitled to seek deduction of Rs.32,94,149/- from the income which amount the assessee had deducted from payments of contractors and had also deposited with Revenue before the last date of filing of the return. We do not find any illegality in order of tribunal. Tax Appeal is therefore, dismissed.”
6. Under the totality of the facts and circumstances of the case and following the view taken by the Hon’ble Courts, we find no reason for disallowance of the entire amount, therefore direct the AO to delete the same.”
17.1 Now the Hon’ble Jurisdictional High Court as cited supra has taken a view which is now been consistently followed by us, therefore under a situation when the TDS amount is duly deposited in the Government Exchequer before the due date of filing of return, then the provisions of section 40(a)(ia) are not to be invoked for the purpose of disallowance of expense. In the present case, on the basis of the undisputed fact that the TDS was deposited within the said prescribed date, therefore we hereby dismiss this ground of the Revenue.
[C] Assessee’s appeal; ITA No.1864/Ahd/2010 for A.Y. 2006-07
18. Ground Nos.1 & 2 of the assessee is in respect of the claim of deduction u/s.80IA. The main grievance of the assessee is that ld. CIT(A) has restricted the claim of deduction u/s.80IA in respect of sum of the contracts but not in respect of all the contracts. The assessee had claimed deduction of Rs.28,17,450/-.
18.1 The main controversy has already been dealt with by us in the foregoing paragraphs while deciding the appeals for A.Y. 2005-06. Facts in brief for A.Y. 2006-07 as emerged from the corresponding assessment order passed u/s.143(3) dated 17.12.2008 were that the assessee had claimed the deduction u/s.80IA of Rs.28,17,450/-. Undisputedly for the year under consideration, the assessee had undertaken the construction/development of certain infrastructure projects of State Government and Central Government. The work executed for the year under consideration was listed as under:-
| Sl. | Details of work | Address of Authority | Amount accrued during the year |
| 1. | Tender No. DYCE(C&S) ADI-45, providing branch cannel crossing by box pushing and jacking method through railway embankment | Western Railway, Baroda | Rs.3.27 lacs |
| 2. | Providing and laying 1700 mm RCC box push through method below railway track Nr. Tragad | AUDA | Rs.70.07 lacs |
| 3. | Construction of road under bridge at Tragad below Ahmedabad-Delhi main M.G. Line and Ahmedabad Gandhinagar BG Line | AUDA | Rs.237.99 lacs |
| 4. | Construction of under bridge under BG railway line at Unjha – Cast in situ RCC box and cannel work | Executive Engineer (GWR Division) Ahmedabad | Rs.65.80 lacs |
| 5. | Construction of under bridge under meter guage railway line at Gozaria Cast in situ RCC box and cannel work | -do- | Rs.54.43 lacs |
| 6. | Providing and laying of RCC box push through method below railway track between Malia and Wadharva | GWSSB – NC6 | Rs.5.76 lacs |
| 7. | Providing and laying of RCC box push through method below railway track between Malia and Indiranagar | GWSSB – NC9 | Rs.11.25 lacs |
| 8. | Construction of Arch by providing 04 RCC box by box pushing technic under railway track at Delhi | Northern Railway | Rs.2.36 lacs |
| 9. | Construction of bridge by providing 04 RCC box by box pushing technic under railway track at Virar-Surat Section | Western Railway | Rs.50.08 lacs |
| 10. | Construction of bridge by providing 1 RCC box by box pushing technic under railway track between Kalway Road and Palghar Station | Western Railway | Rs.26.80 lacs |
| 11. | Civil work at MDL | Mazgaon Dock Ltd. | Rs.28.85 lacs |
| 12. | Construction of water way with RCC box by box pushing method at Similiguda | Eastern Cost Railway | Rs.14.44 lacs |
19. The AO has discussed the civil work carried by the assessee. He has arrived at the conclusion that the assessee had not constructed any bridge but only carried out a civil work on contract basis which was not in the nature of Development of Infrastructure Facility. The claim of the assessee was disallowed. Being aggrieved the matter was carried before the first appellate authority.
20. Ld. CIT(A) has discussed the issue at length and also examined the work executed of each contract. He has also examined the dictionary meaning of the words “bridge” and “culvert”. The case law of Patel Engg. Ltd. (supra) has also been discussed. In respect of the contracts at Sl.Nos.1, 2, 3, 8 & 12 the disallowance u/s.80IA was upheld. In respect of projects mentioned 4,5,6 & 7, it was held by the ld. CIT(A) that the contract work executed by the assessee was part of the irrigation and water project. The projects involved an under-way below the railway lines for S.S.S.Y. canal work. Such activity in his opinion was within the meaning of “infrastructure facility”, hence eligible for deduction under section 80IA. In respect of the Project at Sl.Nos.9 & 10, ld. CIT(A) has held that the pushing of RCC Box was in the nature of repair and fabrication of an existing bridge, hence not eligible for deduction u/s.80IA. In respect of the contract work at Sl.No.11 of Mazgaon Dock Ltd., ld. CIT(A) has noticed that the civil work was in respect of “Concrete flooring with anchor plate in Alock yard in between existing Gantry rail track”. According to him, it was nothing but a repair work of already existing road and rail track. Because of the part- relief, now both the sides are before us.
21. Having heard the submissions of both the sides, we are of the considered view that the nature of work executed by the assessee, as listed at Sl.Nos.1 to 10 and 12, has already been discussed supra at length while deciding the appeal for A.Y.2005-06. We have examined the contract agreement executed between the Assessee and the Government Agencies. We have also examined that the assessee has applied the technology for which he was awarded the contract. Although the bills of the work executed were raised by the assessee, but there was an element of risk due to the reason that the assessee was made responsible for any damages or loss in execution of the work. After considering the nature of the work and other allied factors, we have taken a conscientious view in respect of those projects that the assessee is entitled for the deduction u/s.80IA(4) of the Act. In the like manner, for the year under consideration as well, we hereby hold that the assessee is entitled for these projects for the claim of deduction u/s.80IA.
21.1 However, in respect of the civil work executed at Mazgaon Dock Ltd. (in short MDL), the nature of work was found to be a repair work. The assessee has not demonstrated that there was development of any infrastructure facility. Facts as culled out from the records are examined. The assessee had carried out the civil work like excavation, concrete flooring and also provided steel enforcement bar for RCC flooring, etc. The assessee has informed that the nature of work was precisely, “Concrete flooring with anchor plate Alcock yard between existing Gantry Rail track at Mazgaon Dock Ltd., Mumbai”. Since the basic condition is that for the purpose of claim of deduction u/s.80IA(4) an Enterprise should develop an infrastructure facility as defined in Explanation and the work executed with Mazgaon Dock Ltd. was not within the said definition, therefore the nature of civil work executed did not qualify for deduction u/s.80IA(4). We have been informed that the payment in respect of excavation and concrete flooring received from MDL Mumbai was Rs. 28,85,115/-. The corresponding net profit as per the books of accounts of the assessee, which was claimed as deduction u/s.80IA(4), is hereby directed to be disqualified so the assessee shall not be entitled in respect of the profit earned on the said execution of work. Resultantly, the ground raised by the assessee is partly allowed.
22. Ground No.3 (concise ground) reads as under:-
“3. That the learned CIT(A) has erred in law and on facts while upholding the disallowance of deduction of Rs.1,00,000/- which has been paid by the appellant as per Court Settlement.”
22.1 It was noted by the AO that an expenditure of Rs. 2 lacs was claimed. In this regard, it was informed that one Shri Rajesh Bharadwaj had filed a suit which was settled by mutual understanding subject to payment of Rs. 2 lacs. As per the said understanding, the assessee had paid Rs. 1 lac through demand draft dated 9.1.2006. The AO’s allegation was that the mutual agreement was only for a sum of Rs.1 lac and there was no reference of commitment of payment of Rs.2 lacs. Resultantly, the balance amount was disallowed. When the matter was carried before the ld. CIT(A), the claim of the assessee was disallowed after assigning following reason:
“3.3. I have considered the facts of the case and the submissions of the appellant. The A.O. after verifying the copy of understanding held that it has commitment to pay Rs.1 lac only and therefore, remaining Rs.1 lac is not allowable as expenditure. During the course of appellate proceedings, the appellant claimed that Rs.1 lac was already paid to Shri Rajendra Bhardwaj, Prop. of Bhardwaj & Sons as advance and the balance Rs.1 lac as settled hence claim of Rs.2 lac. The appellant filed a copy of ledger a/c. of Bharat Co-op. Bank Ltd. Baroda in the books of appellant showing that Rs.1 lac was paid by the appellant on 7-11-95 vide voucher No.391/1 in the account code PS077 to Shri Bharadwaj as advance. This evidence was filed to justify the claim of Rs.2 lac i.e. Rs.1 lac already paid advance and Rs.1 lac as per M.O.U. vide DD No.562797 dt: 9-1-06 of State Bank of Saurashtra. I am not inclined to accept the contention of appellant since other evidences do not reflect this. The appellant in its written submission filed a copy of petition filed by Shri Rajendra Singh Gyansingh Bhardwaj before the Hon’ble Nadiad Civil Court No.12/2001 which shows that Shri Rajendra Singh Gyan Singh carried out work as per the details and instructions of the appellant for which appellant had already received the payment from M/s.NBCC but an amount of Rs.10 lac is outstanding to him from appellant as follows:-
| Total value of work carried out | Rs.46,69,158.76 |
| Less: Advances and part bill recd. | Rs.39,21,481.00 |
| Balance outstanding: | Rs. 7,47,677.76 |
| Add: Rate difference | Rs. 1,34,355.00 |
| Loss @ 12% on a/c. of Rate diff. | Rs., 1,17,967.24 |
| Total outstanding: | Rs.10,00,000.00 |
This status is shown as on 15-2-01. In another evidence dt: 9-1-200 being notice to appellant from Shri Ramesh M.Jaraiya, Advocate, the detail of transaction is explained showing once again total outstanding of Rs. 9,71,754/-. The Agreement dt: 16-1-06 only talks about Rs.1 lac paid by appellant vide DD dt: 9-1-06. It is, therefore, there is no reference of earlier Rs.1 lac advance as claimed by appellant. Further, as discussed above the recipient (Shri Rajendra Bhardwaj) given the working of outstanding of a much later date, i.e. Feb.2001 and Jan.2000 and, therefore, Rs.1 lac advance given on 7-1-95 cannot be presumed as outstanding and not considered in computation under the head “Advance and part bill receipt of Rs.39,21,481″. The appellant has not filed any other evidence to support its contention. It is, therefore, the A.O. is justified in disallowing claim of Rs.1 lac. The ground of appeal in this regard is rejected.”
23. We have heard both the sides. We have noted that the Revenue Authorities have appreciated the evidence and thereafter arrived at the conclusion that there was no justification for claim of an amount Rs. 1 lac due to lack of factual as also legal corroboration. The assessee has not substantiated its claim in respect of an outstanding liability per-say of Rs. 1 lac, therefore in the absence of any cogent evidence, we hereby affirm the factual finding of the authorities below and dismiss this ground.
24. Ground No.4 reads as under:-
“4. That the Learned CIT(A) has erred in law and on facts while upholding the disallowance of deduction of Rs.1,73,107/- on account of liquidated damages retained by the appellant’s customer.”
24.1 An amount of Rs. 1,73,107/- was claimed as liquidated damages levied by Mazgaon Dock Ltd. On verification of the letter, it was noted that the MDL had deducted the said sum as “provisional liquidated damages” at 6%. It was further noted that in A.Y. 2008-09, MDL had deducted Rs. 1,31,610/- as liquidated damages, and paid the remaining amount of Rs. 41,497/-. The AO has therefore held that the claim was crystallized only in the year of 2008-09 therefore the entire amount was disallowed in the year under consideration. When the matter was carried before the first appellate authority, the assessee has cited a decision of Rotork Controls India (P.) Ltd. v. CIT [2009] 314 ITR 62. However, ld. CIT(A) was not convinced and held as under:-
“4.3. I have considered the facts of the case and the submissions as advanced by the appellant. I am not inclined to accept the contention of the appellant. With due regards to Hon’ble Supreme Court, the ratio of case as relied on by the appellant is not applicable in its case. The appellant was asked to file complete details in respect of such deduction by the Mazagaon Dock Ltd. and correspondence with them to evidence why out of Rs. 1,73,107/- they refunded Rs. 41,497/-. In the absence of such details, it is not possible to ascertain the nature of this transaction and therefore, the claim of the appellant. The onus to claim any expenditure is on appellant as per settled proposition. Therefore, the A.O. is justified in holding the same as contingent liability and rejecting the claim of expenditure. The ground of appeal is therefore, rejected.”
25. We have heard both the sides and perused the material placed before us. The assessee has furnished the copy of account of MDL in its book. The assessee has also furnished a letter of the Chief Manager (CW) dated 08/06/2005, wherein as per the subject the assessee has executed “Concrete flooring with anchor plate in Alcok Yard in between existing Gantry rail track” and retained liquidated damages provisionally at 6% amounting to Rs.1,73,106/-. Later on, an amount of Rs.41,497/- was refunded. The MDL has deducted Rs.1,31,610/- as per letter dated 10.10.2008 as liquidated damages. We are of the view that in terms of the provisions of section 41(1), the assessee is under obligation to account for the impugned claim in Asst. Year 2008-09. As per this section, where an allowance has been made which ceased to exist the benefit of which had already been made, then the same is to be treated as gain of the said amount which was claimed earlier. The correct position of law thus is that in terms of the law pronounced by the Hon’ble Supreme Court in the case of Rotork Controls India (P.) Ltd. (supra), the incurrence of the liability is admissible for the year under consideration, however, the adjustment due to cession of liability is to be made in A.Y. 2008-09, the year it was accounted for. This ground is, therefore, allowed.
26. Ground No.5 reads as under:-
“5. That the learned CIT(A) has erred in law and on facts while upholding the disallowance of deduction of Rs.1,91,409/- on account of depreciation on motor cars on the ground that the cars in question were in the name of the directors of the appellant company.”
26.1 It was noted by the AO that there are two cars registered in the name of Director Shri Dipen Patel. The claim of depreciation of Rs. 1,91,409/- was disallowed. When the matter was carried before the ld.CIT(A), the action of the AO was confirmed mainly on the ground that since the asset was not owned by the assessee-company, therefore not entitled for depreciation.
26.2 Now, before us an order of ITAT Ahmedabad in the case of ITO v. Electro Ferro Alloys Ltd. [2012] 25 taxmann.com 458 has been cited, wherein the Tribunal has decided the issue in assessee’s favour. Likewise, the Hon’ble Gujarat High Court in the case of CIT v. Aravali Finlease Ltd. [2012] 341 ITR 282 was held that although the vehicle was registered in the names of the Directors but it was asset of the assessee, hence Tribunal was right in allowing the depreciation on the said vehicle.
26.3 Rest of the grounds are general in nature not contested before us, hence no adjudication is required.
( D ) Revenue’s appeal, ITA No.1788/Ahd/2010 for A.Y. 2006-07:
27. The Revenue has also challenged the part relief granted by ld. CIT(A) in respect of claim of deduction u/s.80-IA.
27.1 While deciding the assessee’s appeal hereinabove for A.Y. 2006-07, we have held that barring civil work in respect of MDL Mumbai, the assessee is entitled for claim of deduction u/s.80IA(4) in respect of all the infrastructure work executed during the year under consideration. In the result, we hereby hold that the Revenue’s ground is also partly allowed.
(E) Assessee’s appeal, ITA No.403/Ahd/2012 for A.Y. 2007-08:
28. The Assessee has raised the only ground in respect of rejection of claim of deduction u/s.80-IA.
28.1 We have perused the impugned assessment order and thereupon noted that the AO has mentioned 12 projects which were executed during the year. The AO has not pin-pointed any particular project for discarding the claim but taken an overall view that all the projects did not qualify for the claim of deduction. On the other hand, we have noted , as culled out from the records, that the projects are like construction of road, under-bridge, AUDA Authority Ahmedabad, construction of under-bridge GWR Division Ahmedabad, Construction of bridge Western Railway Dadar Mumbai, construction of water-way East-Cost Railway Visakhapatanam, Construction of bridge, water supply project Ahmedabad, Construction of RCC Box of various authorities of Railway Mumbai, spreading of canal of SSSY Project, etc. Since the Revenue Department has not referred any particular project for this qualification, however on the other hand, we have examined these projects hereinabove, therefore on the same lines we hereby hold that the assessee is entitled for claim of deduction u/s.80IA in respect of these projects for the year under consideration as well. Resultantly, assessee’s ground and appeal is allowed.
[F] Assessee’s appeal, ITA No.404/Ahd/2012 for A.Y. 2008-09
29. Grounds raised read as under:-
(1) The order passed by the Ld. CIT(A) is against law equity and justice and same is wholly illegal, unlawful and bad in law.
(2) The Ld. CIT(A) has erred in law and/or facts upholding the order of the Ld. A.O. of rejecting of deduction U/s.80IA of the Act for eligible projects of infrastructure executed by the appellant.
(3) The Ld. CIT(A) has erred in law and/or facts upholding the order of the Ld. A.O. of making disallowance of U/s.40(a)(ia) of the Act.
29.1 Apropos to Ground No.2, ld. CIT(A) has noted the nature of work which was granted by the assessee by various Government Departments. In all 14 such projects were undertaken by the assessee. Those projects were in the nature of railway under-bridge, construction of road, construction of Sujalam Sufalam Spreading Canal, construction of Arch bridge on Delhi-Ghaziabad Section, construction of under-bridge road at Ahmedabad section, Vadodara Section, construction of water way, etc. From the side of the Revenue, it was not alleged that any particular project was not in respect of Development of infrastructure facility. It was also not an allegation of the Revenue that for the year under consideration the assessee has entered into an agreement with a private party instead of the Government Departments. In the absence of any such specific allegation, we are of the conscientious view, in the light of the foregoing discussion, that for the year under consideration the projects in question do qualify for the claim of deduction u/s.80IA(4). Resultantly, the view taken by the Revenue Authorities is hereby reversed and this ground is allowed.
30. Apropos to Ground No.3, the same is not pressed by ld. AR, hence dismissed being not pressed.
31. Rest of the grounds are general in nature not contested before us, hence no adjudication is required. Assessee’s appeal for A.Y.2008-09 is partly allowed.
32. We summarize the result as under:-
(1) Assessee’s appeal, ITA No.1828/Ahd/2010 for A.Y.2001-02 is treated as allowed for statistical purposes.
(2) Revenue’s appeal, ITA No.1787/Ahd/2010 for A.Y. 2001-02 is treated as allowed for statistical purposes.
(3) Assessee’s appeal, ITA No.402/Ahd/2012 for A.Y.2005-06 is partly allowed.
(4) Revenue’s appeal, ITA No.602/Ahd/2012 for A.Y. 2005-06 is dismissed.
(5) Assessee’s appeal, ITA No.1864/Ahd/2010 for A.Y.2006-07 is partly allowed.
(6) Revenue’s appeal, ITA No.1788/Ahd/2010 for A.Y. 2006-07 is partly allowed.
(7) Assessee’s appeal, ITA No.403/Ahd/2012 for A.Y. 2007-08 is allowed.
(8) Assessee’s appeal, ITA No.404/Ahd/2012 for A.Y. 2008-09 is partly allowed.
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