Bogus Purchase Addition Deleted Because Material Movement, Site Records & Banking Proof Established Genuineness: ITAT

SPS Construction India Private Ltd. Vs DCIT (ITAT Chandigarh)

Section 80-IA Deduction Allowed Because Developing Infrastructure Alone Meets Statutory Requirement: ITAT; 80-IA Benefit Cannot Be Denied Because EPC Contractor Lacked Ownership of Infrastructure Asset: ITAT; Infrastructure Tax Deduction Allowed Because ‘Developing’ Alone Is Enough Under Section 80-IA: ITAT Chandigarh; Bogus Purchase Addition Deleted Because Material Movement, Site Records and Banking Proof Established Genuineness: ITAT; Section 69A Addition Deleted Because Search Records Were Not Linked to Assessee Company: ITAT; Cash Seizure Addition Removed Because Ownership of Cash Was Not Proved Against Assessee: ITAT; Third-Party Statement Addition Fails Because No Corroborative Evidence Supported Cash Return Allegation: ITAT; 80-IA Deduction Upheld Because EPC Execution Involving Technical and Contractual Risk Qualified as Development Activity: ITAT

The appeals before the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, concerned Assessment Years 2019-20 to 2023-24 and involved multiple issues, the principal one being denial of deduction under Section 80-IA of the Income-tax Act, along with additions on account of alleged bogus purchases, unexplained cash entries, cash found during search, and alleged unexplained receipts.

Claim of deduction under Section 80-IA

The assessee was engaged in construction and maintenance of infrastructure projects such as bridges, flyovers, elevated roads, metro structures, highways, railway overbridges and related infrastructure works awarded by government departments, statutory bodies and agencies including DMRC, NHAI, state PWDs and other public authorities. For AY 2019-20, it claimed deduction under Section 80-IA amounting to ₹76.18 crore, and similar claims were made in subsequent years.

The assessee submitted that it was not merely executing civil construction work, but was engaged in development of infrastructure facilities through Engineering, Procurement and Construction (EPC) contracts. It stated that its role involved survey, site investigation, design inputs, drawing approvals, project planning, procurement of materials, arranging plant and machinery, deployment of manpower, furnishing bank guarantees, obtaining insurance coverage, quality control, execution responsibility, and bearing contractual liabilities for delay or non-performance. According to the assessee, these functions showed entrepreneurial and investment risk, making it a developer eligible for deduction under Section 80-IA.

The Assessing Officer, however, held that the assessee was only a works contractor. According to the department, the assessee merely executed construction according to specifications laid down by government authorities, had no ownership rights over infrastructure, did not operate or maintain the facility after construction, and was compensated through running bills. The deduction was therefore denied. The CIT(A) affirmed this view, holding that the assessee neither owned, operated, nor maintained the infrastructure facility and functioned only as contractor.

The Tribunal reversed this finding. It held that a plain reading of Section 80-IA(4) shows that deduction is available where an enterprise carries on any one of the three specified activities—(i) developing, or (ii) operating and maintaining, or (iii) developing, operating and maintaining infrastructure facility. It is not necessary that all three activities must be carried on cumulatively.

The Tribunal further held that the ownership condition in Section 80-IA(4) refers to ownership of infrastructure facility by an Indian company, consortium, authority, board or statutory body, and does not require the developer itself to own the facility.

On facts, the Tribunal noted that the assessee had executed around thirty infrastructure projects during the relevant year involving bridges, elevated roads, highways, metro viaducts, flyovers and major civil infrastructure works. It had furnished Form 10CCB, contracts, award letters and related records supporting its claim.

The Tribunal concluded that the lower authorities wrongly interpreted Section 80-IA by insisting that the assessee must also own, operate and maintain the facility. It held that if the assessee demonstrated that it was engaged in development of eligible infrastructure facility, that was sufficient compliance. Accordingly, deduction under Section 80-IA was allowed for all relevant years.

Addition on account of alleged bogus purchases

The department alleged that purchases from five suppliers aggregating to ₹15 crore were bogus and were booked to suppress profits. The allegation was based largely on statements recorded from employees and certain suppliers, along with invoices that allegedly lacked site receipt stamps.

The assessee denied the allegations and submitted purchase invoices, transport receipts, weighbridge slips, border crossing slips, stock summaries, site-wise utilization records, sales tax returns, ledger accounts, supplier confirmations and banking records. It argued that materials had actually moved across states, passed through tolls and barriers, were used at construction sites, and payments were made through banking channels. It also pointed out absence of any evidence showing cash return from suppliers.

The Tribunal accepted the assessee’s explanation. It observed that the assessee could not have executed large infrastructure projects without actual material consumption. It noted that there was no finding that the assessee consumed material in excess of tender requirements. Documentary evidence supported movement, receipt and utilization of material, and payments were through banking channels. No corroborative evidence established bogus purchases.

Applying the principle that documentary substantiation cannot be discarded solely on statements without supporting material, the Tribunal deleted additions relating to purchases from Devansh Overseas, Shree Radhey Traders, Aggarwal Traders, Mahadev Stone Crusher Co., and Gaurav Steel.

Addition of ₹2.72 lakh under Section 69A

This addition arose from two registers found at Patna premises containing cash receipt and expenditure entries allegedly recorded on instructions of one employee, Shri Suresh Kumar Singla.

The department treated these registers as belonging to the assessee and made addition under Section 69A. The assessee maintained that these transactions related to Shri Suresh Kumar Singla’s independent activities and not to the company.

The Tribunal found no material linking the registers to the assessee-company. It held that the department had failed to establish that the registers were maintained on behalf of the assessee or represented company transactions. In absence of linkage, the addition of ₹2.72 lakh was deleted.

Addition of ₹10.02 lakh cash found during search

Cash of ₹10.02 lakh was found at a Patna premises. The department treated it as unexplained money of the assessee because no satisfactory explanation was furnished by Shri Suresh Kumar Singla.

The Tribunal noted that no evidence established that the cash belonged to the assessee-company. Mere failure of another person to explain it could not automatically justify addition in assessee’s hands. Since ownership was not established, the addition was deleted.

Addition of ₹14.27 lakh cash found during search

Cash of ₹14.27 lakh was found at another Patna premises. The assessee explained that it formed part of imprest balance lying in names of company officials and produced imprest account records.

The Tribunal found that the documentary evidence substantiated the source of cash and accepted the explanation. The addition was therefore deleted.

Addition of ₹35 lakh based on third-party statement

The department made addition of ₹35 lakh on basis of statement recorded during survey at a third-party company, where one employee vaguely stated that around ₹30–35 lakh had been returned in cash to the assessee after RTGS or banker’s cheque payments.

The Tribunal held that the addition was unsupported by corroborative evidence. The statement was vague, lacked details, and no independent evidence substantiated the allegation. It was also based solely on third-party statement. Accordingly, the addition was deleted.

Final outcome

The Tribunal allowed the assessee’s claim for deduction under Section 80-IA for AYs 2019-20 to 2023-24. It also deleted additions relating to alleged bogus purchases, unexplained cash entries, cash found during search, and alleged unexplained receipts. A MAT credit computation issue for AY 2021-22 was remanded to the Assessing Officer for verification and correction. All appeals were partly allowed.

FULL TEXT OF THE ORDER OF ITAT CHANDIGARH

1.1 Aforesaid appeals by assessee for captioned Assessment Years (AY) have common issues. First, we take up appeal ITA No.1193/Chandi/2025 for AY 2019-20 which arises out of a common order passed by learned Commissioner of Income Tax (Appeals)-3, Gurgaon [CIT(A)] on 04-09-2025 in the matter of an assessment framed by Ld. AO u/s 143(3) on 12-07­2021. The impugned order as passed by Ld. CIT(A) is common order for AYs 2019-20 to 2023-24. The grounds of appeal for AY 2019-20 read as under: –

1.(a) That the order passed u/s 250(6) of the Income Tax Act, 1961 by the Learned Commissioner of Income Tax (Appeals)-3, Gurgaon is against law and facts on the file in as much as the Learned CIT(A) was not justified to uphold the action of Learned Assessing Officer in denying the claim of deduction u/s 80-1A at Rs.76,18,45,477/- made by the appellant while filing return of income u/s 139(1) of the Income Tax Act, 1961.

1.(b) That the Learned CIT(A) was not justified to uphold that the appellant did not fulfil the conditions as enumerated u/s 80-1A of the Act.

1.(c) That the Learned CIT(A) was not justified to deny the claim of deduction u/s 80-1A by upholding the observations of the Learned Assessing Officer that the appellant is a works contractor whereas it had been demonstrated through various documents that the appellant is a developer.

2.(a) That Ld. CIT(A) gravely erred in upholding the action of Ld. Assessing Officer in treating the purchases made from the following parties as bogus and disallowing the same u/s 37-

-M/s Devansh Overseas Rs. 4,98,68,463/-

-M/s Shree Radhey Traders Rs. 8,51,29,066/-

-M/s Aggarwal Traders Rs. 29,80,774/-

-M/s Mahadev Stone Crushers Rs.1,19,08,540/-

-M/s Gaurav Steels Rs. 1,50,000/-

2.(b) That the principles of natural justice were grossly violated in as much as reliance was placed on the statements of some persons without affording my opportunity to cross examine the said persons despite a specific request from the appellant.

2(c) That without prejudice Ld. CIT(A) was not justified to not consider the prayer of the appellant is allowing claim of deduction u/s 80-1A on additions made in respect of purchase of Rs.15,00,36,843/-.

3. That the Ld. CIT(A) further gravely erred in upholding the action of Learned Assessing Officer in making such additions/disallowances despite the fact that no incriminating material was found during the course of search at the premises of the appellant.

4. That the Learned CIT(A) gravely erred in upholding the validity of the assessment order dated 12.07.2021 particularly when the proceedings conducted by the Ld. Assessing Officer were not in the manner prescribed by the Department Instructions from time to time which were mandatory for compliance by the Learned Authorities particularly with respect to mentioning of DIN.

5. That the Learned CIT(A) gravely erred in upholding the validity of the assessment order particularly when the approval granted by the Learned Additional Commission of Income Tax u/s 153D of the Income Tax Act, 1961 before passing the impugned order was mechanical in nature and deserves to be quashed.

6. That the Learned CIT(A) was further not justified to arbitrarily uphold the action of the Learned Assessing Officer in making an addition of Rs.2,72,000/- u/s 69A r.w.s. 115BBE of the Act in respect of alleged receipts from Sh. Suresh Kumar Singla recorded in Annexure PDI-01 and PDI-02 whereas it was clearly substantiated that such dealings were on his own account and the appellant had no connection with such transactions.

7. That the Learned CIT(A) was not justified to arbitrarily uphold an addition of Rs.10,02,060/- and Rs.14,27,000/- by treating the amount of cash found from various premises located at Patna as unexplained by resort to provisions of Section 69A r.w.s. 115BBE.

8. That the Learned CIT(A) gravely erred in upholding the addition of Rs.35,00,000/- made by the Learned Assessing Officer on account of alleged unexplained receipts in cash from M/s P&R Infra Projects Ltd. placing reliance on statement of 3rd person without affording an opportunity to cross examine.

1.2 The Ld. AR advanced arguments on legal grounds as well as on merits. Reference has been made to various documents and reliance has been placed on various judicial decisions. The copies of the same have been placed on record. The Ld. CIT-DR also advanced arguments supporting the orders of lower authorities. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. As is evident, the issues, on merits, that fall for our consideration is – (i) Denial of Deduction u/s 80-IA; (ii) Addition of Alleged Bogus purchases; (iii) Addition u/s 69A for Rs.2.72 Lacs; (iv) Addition of cash found for Rs.10.02 Lacs & Rs.14.27 Lacs; (v) Addition of Rs.35 Lacs as alleged unexplained receipts. The assessee has also raised legal issues. The facts of all these issues are as under: –

Assessment Proceedings

Issue No.1 – Denial of deduction u/s 80-IA

2.1 The assessee being resident corporate assessee was subjected to search action u/s 132 on 09-08-2018. The assessee filed return of income for this year on 24-10-2019 declaring an income of Rs.38.01 Crores after claiming deduction u/s 80-IA for Rs.76.18 Crores. During the course of assessment proceedings, statutory notices u/s 142(1) were issued by Ld. AO to the assessee from time-to-time which were duly been responded to by the assessee. During this year, the assessee was engaged in the construction and maintenance of bridges, flyovers and elevated roads against projects awarded by NHAI and various other government departments / agencies including Delhi Metro Rail Corporation (DMRC).

2.2 The first issue that was flagged by Ld. AO was assessee’s claim of deduction u/s 80-IA. The assessee, in its detailed replies dated 22-02-2021, 25-03-2021 & 15-04-2021, justified the claim so made by it u/s 80-IA. The assessee claimed that it was engaged in the business of development and maintenance of infrastructural facilities through Engineering, Procurement and Construction (EPC) contracts as awarded to the assessee which involved various development activities like survey of site, design, preparation of the drawing, approval of drawing from the client, planning the basics, development of site for office / staffers / construction yard, management / purchase of raw material, consumables plant and machine, shuttering, bars, manpower of all kind, arranging bank guarantee to cover the technical risks, insurance, execution of work at site, trial quality control / assurance, contractual assurances, timely execution of the project and hold liability for non-fulfillment of obligations. It was further submitted that mere mention of the term civil contractor or civil construction does not bar the assessee to claim the impugned deduction since all the award letters clearly stipulated that they were awarding the assessee a contract to undertake including but not limited to survey, investigation, design, development, engineering, procurement, construction and maintenance of the project and comply with and perform all its obligations in respect of infrastructural facility i.e., flyover / bridge / elevated road etc. Reference was made to CBDT Circular No.3/2008 dated 12-03-2008 elaborating the scope and effect of the amendment made in this section w.e.f. 01-04-2008 as under: –

34. Clarification regarding developer with reference to infrastructure facility, industrial park, etc. for the purposes of section 80-IA.

34.1 Section 80-IA provides for a ten-year tax benefit to an enterprise or an undertaking engaged in development or operation and maintenance or development, operation and maintenance of infrastructure facilities, providing telecommunication service, generation or generation and distribution of power or development of an Industrial Parks or a Special Economic Zones.

34.2 The tax benefit was introduced for the reason that industrial modernization requires a massive expansion of, and qualitative improvement in, infrastructure (viz., expressways, highways, airports, ports and rapid urban rail transport systems) which was lacking in our country. The purpose of the tax benefit has all along been for encouraging private sector participation by way of investment in development of the infrastructure sector and not for the persons who merely execute the civil construction work or any other works contract. The incentive has all along been intended to benefit developers who undertake entrepreneurial and investment risk and not contractors who only undertake business risk.

34.3 Accordingly, it has been clarified by inserting an explanation that the provisions of section 80-IA shall not apply to a person who executes a works contract entered into with the undertaking or enterprise referred to in the said section. Thus, in a case where a person makes the investment and himself executes the development work i.e., carries out the civil construction work, he will be eligible for tax benefit under section 80-IA. In contrast to this, a person, who enters into a contract with another person (including Government or an undertaking or enterprise referred to in section 80-IA) for executing works contract, will not be eligible for the tax benefit under section 80-IA.

34.4 Applicability– This amendment will take effect retrospectively from the 1st day of April, 2000 and will, accordingly, apply in relation to the assessment year 2000-2001 and subsequent assessment years. [Section 28]

2.3 The Ld. AO observed that the provisions of Sec.80-IA were introduced by Finance Act, 1991 with a view to encourage private sector participation and attract capital funds on infrastructural development. The Finance Act, 1995 envisaged tax holiday to an enterprise which develops, maintains and operates a new infrastructural facility such as roads, highways, expressways etc. as notified by the Board on BOT or BOOT or similar basis. It was made clear that the enterprise has to be owned by the company registered in India or by consortium of such companies. It was further stated that tax holiday will be in respect of income derived from the use of the infrastructure facility being developed by them. The Finance Act, 1999 introduced new sections 80-IA and 80-IB. The new section 80-IA provide for deduction in respect of profits and gains from industrial undertaking or enterprises which are engaged in infrastructural development etc.

2.4 The provisions of new Section 80-IA were analyzed in para 10.1 and it was observed that the deduction would be allowed only for that part of profit which results from eligible business. It applies only to Profit and gains of eligible enterprises and not to the assessee owning such enterprises. The provision would indicate that the infrastructure facility should not only be developed but also be operated by the assessee so as to make its income qualify for deduction. Further, the period of ten years out of first fifteen years was to commence when the enterprise develops and start to operate any infrastructure facility. The eligibility of deduction cannot be prior to the development and operation of the infrastructure facilities. Unless the assessee really develops and begins to operate infrastructure facility, there is no question of granting any deduction for the reason that the period of deduction cannot commence unless the enterprise develops and begins to operate the infrastructure facility.

2.5 The Ld. AO further observed that, in the present case, the assessee was only a civil contractor who was assigned the job of civil construction such as constructing the roads and bridges, dams, flyovers etc. and it was not the case that the said projects were being developed and operated by the assessee. The assessee’s duty ends when the roads / bridges / flyover / dam etc. is constructed according to the specification as given by the Government / various statutory bodies. The infrastructure facility as such will start to operate only after the assessee has done his job and other necessary work in connection with the development of infrastructure facility is completed. Since the assessee is out of sight much prior to actual operation of the infrastructure facility, the mandate of sub-section (2) was failing in the present case.

2.6 Another objection was that sub-clause (a) of clause (i) of sub-section (4) provide that infrastructure facility should be owned by the company registered in India or by a consortium of such companies so as to make him entitle for the said deduction. It was clear that the assessee acted as contractor for carrying out the specified work. It was axiomatic that the doing of work as assigned to the assessee, religiously in accordance with the given specifications subject to the terms and conditions of the agreement and control of the authority would not put the assessee in the capacity of owner. Even if the assessee had to make some investment for the time being in the shape of purchase of some raw material or incurring of expenditure which is recouped from time to time by furnishing bills, he could not claim itself to be the owner of the work done by it. The assessee was a mere contractor whose tenders were accepted by the competent authorities for carrying out the specified job but the property vested in the Government or local authority. It was, therefore, clear that since the work done by the assessee was not owned by it, the assessee did not satisfy the conditions of sub-clause (a) of Sec. 80-IA(4)(i).

2.7 It was further held by Ld. AO that the assessee did not qualify the condition of sub-clause (b) also since the assessee could not be called as developer of the new infrastructure facility nor was there any stipulation in the agreement by which the infrastructure facility would be transferred to the Government or other statutory bodies within the period stipulated in the agreement. A thing could be transferred only when a person holds some ownership or possessory rights over it. The assessee did not own any part of such facility and therefore, there was no question of transferring the same. In the present case, the infrastructure facilities in respect to which the assessee was claiming deduction, were being set up by the Government / statutory authorities and the assessee was simply engaged in some construction work thereby contributing partly to the attainment of the object of developing the infrastructure facilities which was akin to a contractor. The assessee simply undertook part of work of civil construction relating to the infrastructure facility.

2.8 An explanation below Sec.80-IA(13) was inserted by Finance Act, 2007 with retrospective effect from 01-04-2000 which provide that nothing in this section would apply to a person who executes a work contract entered into with the undertaking or enterprise etc. The memorandum explaining the provisions of Finance Bill, 2007 clearly provide that the purpose of tax benefit was to encourage private sector participation and not for the persons who merely execute the civil construction work or any other works contract. In case a person makes the investment and himself executes the development work i.e., carry out the civil construction work, he would be eligible for benefit of Sec.80-IA

2.9 Thereafter, Finance Act, 2009 substituted Explanation below Sec.80-IA with retrospective effect from 01-04-2000 which provideed that nothing contained in the section would apply in relation to a business as referred to in sub-section (4) which was in the nature of works contract awarded by any person and executed by the undertaking or enterprises referred to in sub­section (1). The said amendment clarified that nothing in the nature of works contract would be allowed as deduction u/s 80-IA even if the contract was awarded by the government. The insertion and substitution of the explanation was only to clarify that the deduction could not be allowed in relation to a business which was in the nature of works contract.

2.10 The Ld. AO issued notice u/s 133(6) on sample basis to some department of State / Central Govt. who had awarded work contracts to the assessee. The reply as received from DMRC furnished the copies of contract agreement and letter of acceptance. In point no. (4), it was stated that the contract was partly EPC and partly on works contract basis while major portion was on EPC basis. The design work was stated to be carried out by DMRC through M/s Ayesa Ingenieria under CCDD-2 contract. The Executive Engineer, Deepak project, C/o 56 APO provided the requisite details and stated that the assessee did not design the bridge and it was designed by ASC Infratech Pvt. Ltd. which was the proof checked by IIT, Mumbai. The reply of Sr. Project Engineer, Bihar Rajya Pul Nirman Nigam Ltd., Nalanda like-wise stated that designing work was undertaken by IIT, Delhi. The Ld. AO concluded that the assessee did not originally design the projects but it was building on the already existing designs as evolved by the respective department and it was working within the strict framework laid down by the respective department which could be done by any contractor and noting in the sense of actual development has been done by the assessee. The assessee pointed out that as per the terms of respective contracts, the risk in execution of work was undertaken by the assessee and the assessee was held responsible for any damage or loss to the property. However, Ld. AO continued to maintain that the replies of the contractor pointed out that the designing work of the projects had not been done by the assessee and it clearly mentioned the scope and the detailed specifications which should be followed by the assessee-contractor. There was no actual freedom or space for the assessee to go beyond the framework as given by the contractee. The entrepreneurial risk as claimed by the assessee would be common to all the contractors. The assessee did not have any significant risk as it would be in the case of a developer. The assessee merely completed the project and obtained the payment by raising running bills which was evident from Form 26AS. Finally, the impugned deduction as claimed by the assessee was denied to the assessee.

2.11 In AY 2020-21, an assessment has been framed against the assessee u/s 143(3) on 30-09-2022 wherein Ld. AO, taking the same view, denied deduction u/s 80-IA as claimed by the assessee in its return of income as filed on 01-02-2021.

2.12 In AY 2021-22, an assessment has been framed against the assessee u/s 143(3) on 31-12-2022 wherein Ld. AO, taking the same view, denied deduction u/s 80-IA as claimed by the assessee in its return of income as filed on 09-03-2022.

2.13 In AY 2022-23, an assessment has been framed against the assessee u/s 143(3) on 31-03-2024 wherein Ld. AO, taking the same view, denied deduction u/s 80-IA as claimed by the assessee in its return of income as filed on 28-10-2022.

2.14 In AY 2023-24, an assessment has been framed against the assessee u/s 143(3) on 24-03-2025 wherein Ld. AO, taking the same view, denied deduction u/s 80-IA as claimed by the assessee in its return of income as filed on 18-04-2024.

2.15 The Ld. CIT(A), vide common order dated 04-09-2025 has upheld the action of Ld. AO in denying impugned deduction u/s 80-IA to the assessee. Aggrieved as aforesaid, the assessee is in further appeals before us in all the years.

Issue No.2: Addition of alleged Bogus purchases

3.1 The Ld. AO alleged that the assessee made bogus purchases to scale down its overall profits. Five such suppliers were identified for this year which is as under: –

No.	Name	Amount(Rs.)
1.	M/s Devansh Overseas	4,98,68,463/-
2.	M/s Aggarwal Traders	29,80,774/-
3.	M/s Shree Radhey Traders	8,51,29,066/-
4.	M/s Mahadev Stone Crusher Co.	1,19,08,540/-
5.	M/s Gaurav Steels	1,50,000/-
	Total	15,00,36,843/-

The allegation of alleged bogus purchases stems from statement of Shri Manoj Kumar (Accountant) as recorded u/s 132(4) during search at the premises of the assessee. In Q.No.4, he was confronted with the purchases made by the assessee from M/s Haryana Steel Mongers Pvt. Ltd. of Faridabad and M/s Vardhman Enterprises of Mandi Gobindgarh. His reply was with respect to these two entities. He was asked to distinguish between the genuine and non-genuine purchase bills. He stated that purchase invoices along with transport bilties carry / bear rubber stamp from the sites. Such stamp is placed on the bills once the materials are received at the sites. The same would indicate that the purchased material was actually received at that site and the purchases made against such invoices would be genuine in nature. The purchases invoices maintained at the corporate office which do not contain the receipt stamp are non-genuine / bogus purchase bills where no actual material was delivered at the construction sites. Such bogus billing was done to suppress profits of the assessee. The Ld. AO sought corroboration of his statement from Shri Vikas Goyal (Purchase Manager) wherein a statement was recorded u/s 131(1A). He endorsed the finding that if stamp is missing on the purchase bills, then it is confirmed from the authorized store in-charge whether material had actually been delivered or not. Once it was confirmed that the material reached to construction site, the invoices are certified by his team members. Thereafter, he would sign the bills either after seeing site receipt stamp or after the verification has been done by his team following which the purchase invoices are updated in his purchase ledger. During survey action at Alaknanda office of the assessee, statement of another employee Shri Vipan Kumar (procurement / purchase head) was recorded u/s 131(1A) wherein he endorsed that the bills which have stamp of construction sites are genuine bills and the bills which do not have receipt stamp are bogus bills. On these facts, Ld. AO concluded that it was established that the assessee had devised a well establish model which was known to all the employees to book alleged bogus purchases.

3.2 During search, purchase invoices of M/s Devansh Overseas from FYs 2014-15 to August, 2018 were also found and it was seen that substantive number of purchase invoices and transport bilties did not contain any receipt from the construction site. Such invoices for this year were quantified at Rs.1,39,46,806/-. Post-search proceedings, summons was issued to Shri Ankur Goel of M/s Devansh Overseas and his statement was recorded u/s 131(1A) wherein he was confronted with the bills having no receipt stamps and also with the statement of Shri Manoj Kumar (Accountant) of the assessee company. He admitted that no material was supplied by them against the said bills. They made genuine as well as bogus sales to the assessee. In case of genuine bills, the bills are sent to construction sites along with the material where the bills are duly verified and stamped by the site-in-charge. They receive the payments only when they furnished the duly stamped bills. In respect of fictitious sales, the bills are directly sent to the assessee and the payment is received through RTGS and cash equivalent is given back to the assessee. He also agreed that he provided purchase entry for Rs.734.83 Lacs to the assessee during the period from 01-04-2014 to 09-08-2018. The fact of bogus purchases was confronted to Shri Sat Paul Singla (director of the assessee company) on 03-10-2018. However, he stated that he would explain it later.

3.3 During assessment proceedings, this issue was confronted to the assessee vide show-cause notice dated 11-03-2021.The assessee, vide reply dated 07-04-2021, refuted the allegations of Ld. AO primarily on the ground that the statements were unreliable and uncorroborated one and therefore, no addition could be made on such statements. All the purchases were duly supported by purchase invoices, transport receipts, weigh bridge slips, border crossing slips which were furnished to Ld. AO. The assessee could not carry out its work without utilizing the actual material. The assessee has not consumed the units of items more than what was committed in the respective tenders. The assessee also furnished site-wise stock summary along with supporting documents. The goods were purchased inter-state and had gone through various tolls / barriers which will prove that the goods had actually moved and reached the assessee. The assessee further furnished copies of sales tax return. The payments to supplier were through banking channels and there was no iota of evidence which could even remotely suggest that there was any exchange of cash between the parties evidencing that such purchases were bogus. The assessee also furnished confirmed copy of account of the suppliers. Reference was made to the decision of Hon’ble Apex Court in the case of Odeon Builders Pvt. Ltd. (418 ITR 315) holding that where the assessee substantiates the purchases through documentation like purchase bills, transport bills etc., the purchases could not be treated as non-genuine purchase especially in a case where there was no corroborating material on record except statements of some employees of the company. The statement recorded from the employees was stated to be obtained under mental and physical pressure and was in violation of CBDT Instruction F.No.286/22003-IT(inv) dated 10-03-2003.The assessee furnished site-wise stock summary as well as sales tax returns along with quantity purchased & site-wise utilization of the material. It was argued that the statement of Shri Vikas Goyal was contrary to the conclusions drawn by Ld. AO. No opportunity of cross-examination of Shri Ankur Goel was afforded to the assessee. It was stated that no corroborating evidences was unearthed during the course of search to support the said allegations. It was finally submitted that the assessee had discharged the onus of establishing the purchases to be genuine one. The conclusion of Ld. AO was solely based on statement of third-person without any evidentiary support substantiating the statement as relied upon by Ld. AO. No opportunity of cross-examination of witnesses was granted to the assessee. The statements of Shri Manoj Kumar, Shri Vipan Kumar and Shri Ankur Goel stood retracted subsequently which was evidenced by their respective retraction letters. There was no evidence to suggest cash exchange between the parties.

3.4 However, the retraction of the statements was not accepted by Ld. AO. The statements were coupled with unstamped physical bills as found and seized. Thereafter, the retraction was held to be mere after-thought. All the objections as raised by the assessee were rejected and finally, the purchases so made from M/s Devansh Overseas for Rs.1,39,46,806/- was disallowed u/s 37(1) and added to the income of the assessee. However, while computing the income of the assessee, this figure has been considered for Rs.4,98,68,463/- which is clearly erroneous computation.

3.5 The assessee had made purchases from another supplier M/s Shree Radhey Traders (Prop. Shri Satish Kumar) who was subjected to survey action. It transpired that this concern made purchases from Shri Ganesh Enterprises having same proprietor. Shri Ganesh Traders, in turn, made purchases from Shree Balaji Traders (Prop. Shri Vikram Singh). During survey, statement of Shri Balvir Singh (Accountant) of Shree Radhey Traders was recorded u/s 131(1A) who could not clarify the same. Shri Satish Kumar was not aware about the address of Shree Radhey Traders but stated that he obtained GST for this concern. The perusal of Income Tax Return of Shri Satish Kumar established that he declared profit of 1.5% only on total sales during AYs 2011-12 to 2016-17. The field enquiries about Shree Balaji Traders revealed that Shri Vikarm Singh did not have any designated office or shop. His house was located in a poor locality. In recorded statement, Shri Vikram Singh stated that majority of the sales of Shree Balaji Traders was done to Shree Ganesh Enterprises, Shree Radhey Traders and M/s Mahadev Stone Crusher Co. However, he did not maintain any bills and failed to produce original bills of sales during investigation. In reply to Q. No.24, he stated that he would produce the original bills by 04-10-2018. However, he furnished bills from 30-09-2017 till date. To produce bills of earlier period, he demanded more time. On these facts, Ld. AO concluded that these three entities were merely book entities who were providing bills without any actual supply of material. Therefore, the assessee was show-caused.

3.6 The assessee refuted the allegations of Ld. AO and furnished all the bills along with transport receipts, weigh bridge slips, border crossing slip, site-wise stock summary, site of utilization, copies of sales tax returns etc. in support of these purchase. The payments were through banking channels and there was no evidence of cash exchange to support the allegation of Ld. AO. The confirmed copies of accounts were also furnished. It was brought to the notice that there was no mention of transaction between the assessee and Shri Radhey Trades by Shri Balvir Singh, in his statement, he was only questioned about the genuineness of transactions between M/s Shree Radhey Traders and Shree Balaji Traders. The same could be no reason to conclude or treat the transactions undertaken between the assessee-company and Shree Radhey Traders to be non-genuine. However, all these arguments stood rejected by Ld. AO and the purchases as made by the assessee from this entity were disallowed u/s 37(1).

3.7 During survey on Shri Satish Kumar, books of accounts of M/s Aggarwal Traders were also found. Shri Balvir Singh stated that this concern as well as M/s Mahadev Stone Crusher Co. is operated by Shri Avinash Goyal and these concerns are used to issue bills. It was also seen by Ld. AO that M/s Aggarwal Traders was making purchase from Shree Radhey Traders. Shri Avinash Goyal did not attend the proceedings. Therefore, this concern was also held to be bogus entity. Though the assessee refuted the allegation of Ld. AO on various similar grounds and furnished documentary evidences, the same stood rejected by Ld. AO and the purchases made from M/s Aggarwal Traders was disallowed u/s 37(1). Similar findings were rendered with respect to M/s Mahadev Stone Crusher Co. and the purchases made from this entity were also disallowed u/s 37(1) on similar lines.

3.8 During search, two registers were found from Patna premises. The same were marked as PD1-01 and PD1-02. Shri Niraj Prasad (Office assistant), in recorded statement stated that as per instructions of Shri Suresh Kumar Singla, cash entries were made by him either in loose sheets or in registers. PD1-01 was one such register which contained entries pertaining to cash receipts and cash expenses. The register PD1-02, had cash received on left side whereas right side contained cash expenses incurred by him. He stated that said cash was received by him from M/s Gaurav Steel, Rinku Ji and one Sh. Awadh Bihari Dubey whose identity was not known to him. The said cash was received on verbal instructions of Shri Suresh Kumar Singla (Area Manager, Bihar). The Ld. AO concluded that these entries were nothing but cash received in lieu of bogus purchases bills. The assessee refuted the allegations of Ld. AO on similar arguments and documentary evidences which finally stood rejected by Ld. AO and the purchases as made from this entity was disallowed u/s 37(1).

Issue No.3: Addition of unexplained income u/s 69A

4.1 This addition has been made in similar background of facts on the basis of two registers which are marked as PD1 -01 and PD2-02. During search, two registers were found and seized as PD1-01 and PD2-02 from Kanak Braj Complex, Boring Road, Patna. During search proceedings, the statement of Shri Niraj Prasad (Office Assistant) was recorded wherein he stated that the registers contain details of cash received by him and cash expenses incurred on various dates. The entries were stated to be made on the instructions of Shri Suresh Kumar Singla (Area Manager, Bihar). The entries appearing the name of Shri Suresh Kumar Singla were consolidated and the same aggregated to Rs.149.24 Lacs for FYs 2015-16 to 2018-19.

Applying the presumption of Sec. 132(4A), the said registers were treated to be belonging to assessee. The assessee, vide reply dated 07-04-2021, stated that in the statement, it has nowhere been stated that the said transactions pertained to the assessee or were made at the instructions of any of the key management persons. It was pointed out that Shri Suresh Kumar Singla was found to have made investment in some company i.e., M/s Deepshree Properties Pvt. Ltd. on his own accord which is also engaged in the construction business. As per Annexure SKS4, there were some pages suggesting that an agreement to sell was entered into by the said company to develop multi-story society wherein certain persons had made the investment. All these persons were relatives of Shri Suresh Kumar Singla. Therefore, these transactions did not pertain to the assessee-company. However, Ld. AO rejected the same on the ground that Shri Suresh Kumar Singla was an employee of the assessee company and the premises belonged to the assessee-company. The presumption of Sec. 132(4A) would apply and finally, the amount of Rs.2.72 Lacs pertaining to this year was added u/s 69A.

Issue No.4: Addition of Cash found for Rs.10,02,060/-

5. During search, cash of Rs.10,02,060/- was found from Flat No.202, C2, Kokil Complex Apartment, Boring Road, Patna. The cash of Rs.10 Lacs was seized. The statement of Shri Amarjeet Kumar, an employee of the assessee, was recorded u/s 131(1A). It was stated by him the Shri Suresh Kumar Singla (Area Manager) could explain the same. During assessment proceedings, this issue was confronted to the assessee and the assessee took the same stand i.e., the same belong to Shri Suresh Kumar Singla. However, applying the presumption of Sec.132(4A), Ld. AO added back this amount as unexplained money u/s 69A.

Issue No.5: Addition of Cash found for Rs.14,27,000/-

6. Similarly, cash of Rs.14.27 Lacs was found during search at 4th& 5th Floor, Kanak Braj Complex, Boring Road, Patna and statement of Shri Pawan Kumar (Accountant) was recorded. He stated that the same could be explained by Shri Suresh Kumar Singla. Post search proceedings, summons was issued to Shri Suresh Kumar Singla who failed to appear before the department to offer any explanation. The assessee stated that cash was part of imprest amounting to Rs.28,38.093/- lying in the name of Shri Parveen Kumar Rathore, General Manager / N.K. Chaudhary. However, the explanation stood rejected by Ld. AO and the cash so found was added to the income of the assessee as unexplained money u/s 69A. Issue No.6: Addition u/s 69A for Rs.35 Lacs

7. During pre-search enquiries, M/s P&R Infraprojects Ltd. of Chandigarh was identified to be an entity which was facilitating the assessee entity to suppress its profits. Accordingly, a survey u/s 133A was carried out at the premises of M/s P&R Infraprojects Ltd. on 09-08-2018 wherein statement of Shri Inder Mal Jain (AVP) was recorded u/s 131(1A). He stated that around Rs.30 Lacs to Rs.35 Lacs was returned back in cash to the assessee after they had received payment through RTGS / Banker’s Cheque. He failed to provide any details thereof. The statement was confronted to Sh. Paveljeet Singh Ruppal, director of that entity who could not say anything on this issue and stated that he will submit explanations later on. Considering the same, Ld. AO made addition of Rs.35 Lacs in the hands of the assessee u/s 69A and framed the assessment. The assessment so framed was subjected to assessee’s challenge in first appeal.

Appellate Proceedings

8.1 The assessee assailed the assessment proceedings on legal grounds as well as on merits by way of detailed written submissions which have been extracted in the impugned order. The assessee vehemently assailed the assessment so made by Ld. AO on various grounds.

8.2 On the issue of deduction u/s 80-IA, it was submitted that there was no requirement in the statute that the infrastructure facility should be owned by the assessee. Reference was made to the Circular No.717 of 14-08­1995 explaining the provisions of Finance Act, 1995 and also Circular No.3/2008 dated 12-03-2008 as well as the decision of Hon’ble Gujarat High Court in the case of CIT vs. Radhey Developers (341 ITR 403) wherein similar deduction was allowed to the assessee. In this decision, it was held that the person who undertakes to develop real estate project by developing and constructing housing project, would be eligible undertaking within the meaning of Sec.80-IB (10). The Pune bench of Tribunal in the case of B.T. Patil and Sons Belgaun Construction Pvt. Ltd. (34 Taxmann.com 97) held that the assessee would be developer even if only a part of infrastructure project work was being executed by it since it had undertaken various investments and technical risks. Similar was the decision of Ahmedabad Tribunal in Akash Infra projects Pvt. Ltd. (141 Taxmann.com 516) which had similar facts. The decision of Mumbai Tribunal in Bharat Udyog Ltd. (118 ITD 336) and Agra Tribunal in PNC Construction Co. Ltd. (37 Taxamnn.com 361) was on similar lines. This decision stood affirmed by Hon’ble Allahabad High Court (55 Taxmann.com 21) by relying on the decision of Hon’ble High Court of Bombay in the case of ABG Heavy Industries Ltd. (189 Taxman 54).

8.3 The assessee further stated that it filed voluminous documents to demonstrate that it had undertaken entrepreneurial risks and to establish the fact that it had acted as a developer and not as a contractor. The assessee was responsible to undertake survey, investigation, design, engineering, procurement, construction and maintenance of various projects. It had to bear all losses / damages during construction period at his own costs. The assessee carried out infrastructural facilities of constructing bridges, roads etc. In the execution of these projects, the assessee undertook various activities of survey of sites, designing, drawings, development of sites, purchase of material, execution of work, quality control, furnishing bank guarantee etc. which would enable it to lay claim on impugned deduction.

8.4 In Para 7.2.2, Ld. CIT(A) considered the CBDT Circular No.717 which provide that deduction would be available to an enterprise which develop, maintain or operate any new infrastructural facility on a Build, Operate and Transfer (BOT) basis, or operate and transfer basis (BOOT) or similar other basis where there was an ultimate transfer of the facility to the Government or public authority. As per Circular No.733 dated 03-01-1996, deduction would be available to Build, Own and Transfer (BOLT) scheme of the Indian Railways for the development of the railway system also. However, the assessee did not enter into BOT or BOOT model and therefore, it was not eligible for impugned deduction. As per the provisions of sub-section (1), the assessee is allowed deduction in respect of profits and gains derived from the eligible business. As per sub-section (2), the deduction is available to the assessee for ten consecutive years out of fifteen years beginning from the year in which the enterprise develops and begins to operate any infrastructural facility. The word ‘and’ clearly brings out that both the conditions need to be cumulatively satisfied by the eligible business. It indicates that the infrastructure facility should not only be developed but also be operated by the assessee so as to make its income qualify for deduction. Further, the eligibility of deduction could not be prior to development and operation of the infrastructural facility. Unless the assessee really develops and begins to operate any infrastructural facility, there is no question of granting any deduction for the reason that the period of deduction could not commence unless the enterprise develops and begins to operate the infrastructural facility.

8.5 In the present case, the assessee acted only as a civil contractor who was assigned the job of civil construction such as constructing the roads and bridges etc. There was no evidence that the said projects were developed and operated by the assessee. The duty of the assessee would end when the road / bridges / flyover etc. is constructed according to the specifications given by the government / statutory bodies. The infrastructure facility as such will begin to operate or start only after the assessee has done his job and other necessary work in connection with the development of infrastructure facility are completed by the assessee. Since the assessee was out of the sight much prior to the actual operation of the infrastructure facility, the mandate as prescribed by sub-section (2) was failing in this case.

8.6 It was further observed by Ld. CIT(A) that the assessee must also fulfill the conditions set out in sub-clauses (a), (b) and (c) of Section 80-IA(4)(i) cumulatively. The relevant provisions of sub-section (4) of Section 80IA read as under: –

(4) This section applies to-

(i) any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfills all the following conditions, namely:-

(a) it is owned by a company registered in Indian or by a consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act;

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

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

Provided that where an infrastructure facility is transferred on or after the 1st day of April, 1999 by an enterprise which developed such infrastructure facility (hereafter referred to in this section as the transferrer enterprise) to another enterprise (hereafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place.

Explanation. – For the purposes of this clause, “infrastructure facility” means-

(a) a road including toll road, a bridge or a rail system;

(b) a highway project including housing or other activities being an integral part of the highway project;

(c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system;

(d) a port, airport, inland waterway, inland port or navigational channel in the sea

The first condition as per sub-clause (a) was that the enterprise should be owned by a company which is registered in India or by a consortium of such companies. No doubt the assessee-entity was a company registered in India however, the requirement was that the facility should be ‘owned’ by the assessee so as to make him entitle for the deduction. It was amply clear that the concerned authorities and not the assessee owned the infrastructural facility. The assessee was referred to as the contractor to carry out specified work only. It is axiomatic that the doing of the work by the assessee, strictly in accordance with the given specification subject to the terms and conditions of the agreement and the control of the authority, could not put the assessee in the capacity of an owner. Even if the assessee had made some investment in the shape of purchase of raw material or incurring of labour, which is recouped from time to time by furnishing running bills, the assessee cannot claim himself to the owner of the work done by it. The assessee was a mere contractor whose tenders were accepted by competent authorities for carrying out the specified job and the property remains vested in the Government or local authority. Therefore, the condition of this sub-clause was not fulfilled by the assessee. 8.7 Coming to sub-clause (b), the assessee merely entered into agreement with the State Government or local authorities for doing the specified works contract only and therefore, the assessee could not be called as the developer of the new infrastructure facility. Moreover, there was not any stipulation in the agreement by which the infrastructure facility would be transferred to the Government, local authorities or such other statutory bodies within the period stipulated in the agreement. A thing could be transferred only when a person holds some ownership or possessory rights over it. In the present context, the point of transferring the infrastructural facility would arise only if such a facility was owned by someone. Since the assessee did not own any area built by it on behalf of the Government or Local Authorities, there was no question of transferring such infrastructural facility. The assessee merely carried out the construction of roads / bridges as per the specifications laid by various authorities and therefore, it had not operated the said facility. There was no ultimate transfer of the facility to government or public authority after operation The agreements as entered into by the assessee with such authorities also do not mention about the period within with such infrastructural facility were to be ultimately transferred back to such authorities. Therefore, the conditions of sub-clause (b) read with Circular No.717 were also not satisfied.

8.8 As per sub-clause (c), the eligible enterprise is to start operating and maintaining infrastructure facility on or after 01-04-1995. Therefore, as per clause (c), the eligible enterprise has additional responsibility to operate as well as to maintain infrastructure facility in order to eligible for deduction u/s 80-IA. As per the proviso to Sec. 80-IA(4)(i) where the enterprise transfers the infrastructure facility developed by it to another enterprise for the purpose of operating and maintaining the same on its behalf in accordance with the agreement entered with the relevant Central / State Government authorities, provision of section 80-IA shall apply to the transferee enterprise and accordingly, deduction from profit and gains would be available to such transferee enterprise for the unexpired period only. From composite reading of sub-clause (c) and the proviso, it was clear that in order to be eligible for deduction u/s 80-IA, the eligible enterprise which has developed such facility has to operate and maintain the facility as well. In the given facts of the case, it was evident that the appellant had not operated and maintained such facility and did not transfer the same for the operation and maintenance of the said facility on its behalf to another enterprise in accordance with the agreement entered with Central / State Government authorities. The role of the assessee was over as soon as it has finished the construction of civil work as per the terms and conditions of the tendered document. The agreement nowhere provided that the appellant was to operate and maintain the same as well after completing the construction work. Therefore, the condition of sub-clause (c) was also not fulfilled.

8.9 Since the assessee failed to satisfy the requirement of all the three sub-clauses, it could not be conferred the benefit of impugned deduction as claimed by the assessee. The assessee merely acted as contractor only and such benefit could not be extended to the contractor in terms of Circular No.717 dated 14-08-1995, Circular No.14 of 2001, Circular no.3 of 2006 and 2008. The intention of the legislature was not to provide deduction under this section to anyone except the person or authority which is directly engaged in developing, maintaining and operating the infrastructure facility. In order to be eligible for the benefit of this deduction, it should be a complete development of the infrastructure facility and not just association with such development. In the instant case, the infrastructure facilities in respect of which the assessee was claiming deduction were being set up by the State, Government(s) or local / statutory authorities and the assessee was simply engaged in construction work, thereby contributing partly to the attainment of the object of developing the infrastructure facility, akin to a contractor. Under such circumstances, it do not qualify for deduction within the framework of sub-section (4)(i) itself.

8.10 To support the above conclusion, Ld. CIT(A) referred to first proviso to Sec.80IA(4)(i). This proviso was related to transfer of infrastructure facility by transferor enterprise (which developed it) to transferee enterprise (for the purpose of operating and maintaining the same on its behalf in accordance with the agreement entered with relevant authorities). The legislature has used specific words and they carry the specific meaning. The law recognized transfer of infrastructure facility and also recognized rights of the transferee enterprise to claim deduction for the unexpired period. It was clear that the rights get created to the transferor company which had developed such infrastructure facility (in accordance with the agreement entered with relevant authorities) and thus, it could transfer such rights / infrastructural facility. In the contest of highway infrastructure projects / bridges, such rights get created in the concessionaire through concession agreement with Government/Authority. On the other hand, it is also mentioned here that no such rights get created or accrued or vested in favour of the contractors including the EPC contractors. Thus, to sum up, the proviso envisages a situation where say an undertaking or enterprise which undertook development of infrastructure facility under concession agreement obtains rights over the facility and can also transfer such rights to another enterprise for the purpose of operating and maintaining the infrastructure facility. Therefore, such enterprises will be entitled to claim deduction under this clause. However, in the case of contractors including EPC contractors, no such rights to transfer infrastructure facility get vested, therefore, they remain contractors. Therefore, there would be important distinction between the developer and the contractor. The concessionaire or the developer, after entering into concession agreement, makes investment in creation of infrastructure facility along with rights to charge usage fee / toll. These rights are thus transferable and the proviso is clearly talking of such developers. Therefore, in that sense if the infrastructure facility is owned by the undertaking or enterprise and then that enterprise can transfer infrastructure facility to another enterprise i.e., transferee enterprise. On the other hand, in the construction agreements, the contractors are given right of access to the location by the owner or the authority or the government, who allots the work contract. After the completion of the construction work of infrastructure facility, the contractor hands it over to the government/owner of the infrastructure facility for which such facility is created. Thus, on such facts, it is evident that the appellant did not act as a developer in this case as no such rights get created or accrued or vested in favour of the appellant.

8.11 The Ld. CIT(A), at para 8.2, alleged that the designing work of the projects was not done by the assessee and the concerned departments have given detailed specification which should be followed by the assessee. Therefore, the assessee could design only within the framework as issued by the concerned department and there was no freedom for the assessee to go beyond this framework. In case of DMRC project, the designing part of the project was done through M/s Ayesa Ingenieria under CCDD 2 contract and not by the assessee. It was also observed that the assessee only executed the work. Therefore, the assessee worked as work contractor and not as a developer. Similar observation was made for other projects.

8.12 It was further observed by Ld. CIT(A) that the assessee was bearing normal business risk like any other business The payment pattern would reveal that the assessee gets money from the relevant departments from time-to-time against running bills raised periodically. The assessee did not have any rights which would enable him to transfer the project to Infrastructure facility. The agreements would show that the overall control, design, specification etc. remained with the concerned department through the engineers appointed by them and the assessee contractor was handed over the possession of site for construction work and after completion of work, the same is undertaken by the concerned department. Therefore, the work of the assessee would fall in the category of works contract which is not eligible for impugned deduction.

The Ld. CIT(A) discussed about salient features of model concession agreement as issued by Ministry of Road Transport and Highways. As per these guidelines, the concessionaries is required to transfer the project to the government or the authority after the expiry of the concession period or upon termination of agreement as mentioned in Circular No. 717 as well as in Sec.80-IA(4). In the case of construction agreement, the contractor would not get any vested right over the infrastructural facility and he also do not get concession whereby it gets right to collect appropriate fees / toll to operate / maintain the project and thus, the contract did not enable him to transfer infrastructure facility after expiry of concession period or upon termination of the agreement.

8.13 The Ld. CIT(A), at para 9.1, referred to Explanation below Sec.80IA(13), as inserted by Finance Act 2007 with retrospective effect from 01-04-2000. It was clarified that nothing contained in this section would apply to a person who executes work contract entered into with the undertaking or enterprise, as the case may be. The Finance Act, 2009 substituted this Explanation with retrospective effect from 01-04-2000 to provide that nothing contained in this section would apply in relation to a business as referred to in sub-section (4) which is in the nature of a works contract awarded by any person (including the Central or State Government) and executed by the undertaking or enterprises referred to in sub-section (1). The same would make it crystal clear that the assessee would not be eligible for the said deduction. When the words are clear in the provision and convey proper meaning, no liberal interpretation could be allowed to give an unintended benefit as per settled legal position.

8.14 The Ld. CIT(A), at para 9.8, referred to CBDT Circular No.3 of 2008 which prohibit impugned deduction to a person who execute works contract. The incentive was intended to benefit developers who undertake entrepreneurial and investment risk and not to contractors who only undertakes business risk. The capital investment of the assessee was related to construction activity only and the assessee was compensated for the work done by way of running account bills as evident from Form 26AS and TDS certificates. There was no operational risk in execution of contracts as scope of work was defined against agreed consideration to be paid periodically as per the contract. The designing and execution were undertaken by the assessee within prescribed framework of the agreement / contract and no original ideas of development were shown to have been contributed by the assessee while executing the projects. The appellant had entered into agreements, after successful bidding and worked according to the prescribed obligations / designs. Thus, the responsibilities of the assessee as per the contract were based upon scope as defined in the contract.Further, the risk and performance guarantees of the assessee were restricted and limited only to work done / construction work carried out by it and not to whole project but lies with the ultimate developer of the projects and not with the assessee.

8.15 At para 10.1, the Ld. CIT(A) referred to Oxford Advanced Learner’s Dictionary which defined ‘developer’ to mean a person or company that designs and creates new products whereas ‘contractor’ is a person that has a contract to do work or provides services or goods to another. Thus, the developer is a person who design and create a new product. He is the one who conceives the project. He may execute the entire project himself or assign some part of it to others. On the contrary, contractor is a person who is assigned a particular job to be accomplished on behalf of the developer. The role of developer is much larger than that of the contractor. In certain circumstances, a developer may also do the work of a contractor but a mere contractor per se could never be called as a developer.

8.16 Further, in order to be eligible for deduction, the development should be of infrastructure facility as a whole and not a particular part of it. It may be possible that some part of development work is assigned by the developer to some contractor for doing it on his behalf. However, the same would not put the contractor of such work into the shoes of the developer. The activity of construction is a sub-part of the development. The activity of development includes wide area of work to be done relating to the planning, designing, engineering, financing, taking various statutory approvals, carrying out various projections etc. in addition to construction in respect of project. Since the assessee had simply done a part of work of civil construction relating to the infrastructure facility, it is not eligible for deduction. The sphere of work assigned to the assessee was only to carry out job of civil construction of roads, bridges in accordance with the terms of specifications as mentioned in the contract. The assessee was bound to carry out construction work as per specifications / scope of work as prescribed by the State Government(s)/statutory bodies and could not deviate from the plan assigned to it. Even otherwise. The work of the contractor was subject to approval by the engineers of the authority or the government body. Thus, the assessee acted merely as a work contractor and not as developer and, therefore, the assessee was not eligible for impugned deduction.

8.17 To support its conclusion, Ld. CIT(A) extensively referred to the observations of Third Member of Tribunal in the case of B.T. Patil and Sons Belgaun Construction Pvt. Ltd. (34 Taxmann.com 97). The decision of Hon’ble Bombay High Court in the case of ABG Heavy Industries Ltd. (322 ITR 323), as quoted by the assessee, was in specific background of ‘port’ as an infrastructural facility. Though the decision in the case of B.T. Patil and Sons Belgaun Construction Pvt. Ltd. (supra) was finally decided by Tribunal in assessee’s favor while giving effect to the findings of Third Member bench, however, the said decision of Tribunal did not consider that the facts in the case of M/s ABG Shipyard (supra) were relating to the infrastructural facility in the nature of a ’port’ which was much different than the other works such as bridges and roads. Further, the division bench did not consider the decision of the Third-Member in the case of B. T. Patil & Sons (supra) on various other issues as discussed above such as compliance with conditions as prescribed u/s 80IA(2), working as contractor by executing work contract (i.e. difference between developer and contractor) and not carrying out development of infrastructure facility, conditions prescribed u/s 80IA(4)(i), effect of Explanation provided to section 80IA(13); which have not been considered or overruled by the Hon’ble Bombay High Court. Therefore, this decision could render no assistance to the case of the assessee. The other decisions as cited by the assessee were also considered. Finally, the impugned deduction was denied to the assessee for AYs 2019-20 to 2023­24. Aggrieved, the assessee is in further appeal before us for all these years.

8.18 The other additions as made by Ld. AO was also confirmed by Ld. CIT(A) by endorsing the relevant facts as enumerated by Ld. AO in the assessment order. Aggrieved, the assessee is in further appeal before us.

Our findings and Adjudication

9. The primary issue that fall for our consideration is assessee’s claim of deduction u/s 80-IA. From the enumerated facts, it emerges that the assessee is engaged in executing various infrastructural projects for various Government Agencies / Local Authorities. The assessee has claimed impugned deduction in earlier years also wherein impugned deduction stood denied to the assessee on similar lines. The matter for AYs 2013-14 to 2018-19 reached up-to Tribunal vide ITA Nos.140 to 145/Chd/2024 order dated 17-01-2025, a copy of which has been placed on record. Upon perusal of the same, it could be seen that the assessments for all those years stood quashed by Tribunal on legal ground of mechanical approval u/s 153D. Consequently, the issue on merits was not adjudicated by the bench. The assessee, as in earlier years, has continued to claim impugned deduction u/s 80-IA in AYs 2019-20 to 2023-24.

10. From the records and written submissions of Ld. AR before Ld. AO, it emerges that the assessee company was incorporated on 19-01-1996. The assessee company is stated to be engaged in the business of development and maintenance of infrastructural facilities i.e., to develop various types of bridges, flyovers and elevated roads, metro of national / state importance for NHAI, Indian Railways and Ministry of Road, Transport and Highways, Borders Road Organization, Delhi Metro Rail Corp. Ltd. (DMRC), BRPNL, SAIL and PWD of various states. The assessee filed original return of income on 24-10-2019 claiming deduction u/s 80-IA. Pursuant to search action, the case of the assessee was subjected to scrutiny. During the course of assessment proceedings, the assessee duly furnished copies of Form 10CCB, award letters of various authorities, copies of contracts / agreements etc. to substantiate the said claim u/s 80-IA. These documents have also been placed on Page Nos.178 to 420 of paper-book. Upon perusal of the same, it could be seen that the assessee has carried out as many as thirty projects with various authorities during this year which are in the nature of construction of lane bridges, reconstruction of bridges, construction of approach roads, construction of bus rapid transport system, elevated roads, flyovers etc. The details of these projects, for ease of reference, could be tabulated as under: –

Sr. No.	Client	Project Name	Eligible Entity	Receipt 2018-19	Deduction Claimed 2018-19	Particulars
1.	Sr. Project Engineer, Bihar Rajya Pul Nirman Nigam Ltd. Spl. Works	C/o 2×2 Lane Bridge with footpath across river Ganga between Sultanganj (Bhagalpur District) Anguwani ghat (Khagaria District) including Navigational span of cable stayed and approaches	Yes	1,02,66,00,177	8,62,70,404	Aguwanighat
2.	Executive Engineer, Construction Divn. PWD Pauri Garjwal	Tender for Re-construction of 190meter span steel girder Double Lane Class “A” Loading Duct type R.C.C. slab bridge over Alaknanda River to join H.N.B. Garhwal Central University Chaurass campus to Srinagar (Pauri) Uttarakhand under SPA	Yes	1,20,34,319	48,14,482	Alaknanda River Bridge, Srinagar
3.	Executive Engineer, NH Division, R.C.D. Khagaria	“RECONSTRUCTION OF THE AFFECTED SPAN OF B.P. MANDAL BRIDGE IN 16TH KM OF ND-107 IN KHAGARIA DISTRICT, BIHAR on turnkey contract basis (Design & Build) 2013-14 (hereinafter called ‘the Contract’	Yes	11,42,93,368	49,56,536	B P Mandal
4.	Senior Project Engineer, World Bank Project Special Division, Bihar Rajya Pul Nirman Nigam Ltd. Patna.	Construction of Swap and grade separated U-turn based multi sectional interchange at Bailey Road, Patna (In between Lalit Bhawan & Vidyut Bhawan) with multiple underpasses, Flyover, elevated section using U girders & extra dosed cable stayed structures with State of art, Pavement finished road appurtenance, pedestrian crossing, Software controlled solar lighting, Landscaping, and integrated drainage system etc.	Yes	39,28,42,150	49,56,536	Bailey Road
5.	Sr. Project Engineer, Bihar Rajya Pul Nirman Nigam ltd., Works Divn No.2, Patna	C/o three lane 1506 mtr long H.L.RCC bridge at Bangra ghat over river Gandak connecting Sh-74 and Sh-90 of Muzaffarpur Saran District along with 2225 Meters Long Guide Bund and 18.5 km long approach road	Yes	68,64,28,833	2,23,99,094	Bangra Ghat
6.	Superintending Engineer, Construction Circle, Pb. PWD B&R Branch, Amritsar	Construction of Approaches to Road over Bridge (excluding Railway portion) on lever Crossing no. A044/T3 on Jalandhar – Amritsar railway line at Beas (distt. Amritsar)	Yes	1,19,19,607	2,80,49,585	Beas Punjab
7.	Executive Engineer, Bhadrak (R&B) Division, Bhadrak	Construction of H.L. Bridge over river Mantei at 10 Km. on Digacchia – Bansada Road including approach road on both sides in the district of Bhadrak on Turnkey basis under NABARD Assistance	Yes	3,54,99,838	16,67,698	Bhadrak
8.	Executive Engineer, Central Works Division No.2, PWD B&R, Amritsar	Construction of Bus Rapid Transit System from Bhandari Bridge Loop Excluding Railway Portion (Corridor No.2) under Bus Rapid Transit System (BRTS) Amritsar	Yes	2,50,97,363	12,37,612	Bhandari Bridge
9.	Executive Engineer/ Tender for Managing Director	Design & Construction ramp of 0.15 km and viaduct of length 2.557 km from H. Nizamuddin (Ch 33869.243m) to MayurVihar-1 (Excl.) (Ch 37179.00m) excluding Yamuna Bridge of 602.8m (from chainage 33869.243 m to 37179.00m) on Mukundpur – Yamuna Vihar corridor (line-7) of Phase-III Delhi MRTS	Yes	26,26,818	23,74,701	CC 19R Sarai Kale Khan
10.	Chief Project Manager – 7, Delhi Metro Rail Corporation Ltd., Metro Bhawan, fire Brigade Lane, Baramkhamba Road, New Delhi	Contract CC-82: Design & C/o Viaduct of Length 2.977 Km. from Yamuna River near Kalindi Kunj (Ch.33467.491) to Botanical Garden Noida (Ch. 6732.308) including Special Spans of 2 Nos. (2×56=112m), and Construction of Elevated Stations at Amity & Botanical Garden Noida including Architectural Finishing, water supply, Sanitation Installation & Drainage Works on Janakpuri (west) to Botanical Garden Corridor (Line-8) of Phase – III Delhi MRTS	Yes	34,56,254	2,61,617	CC 82 Noida
11.	Chief Engineer, World Bank Projects, Odisha, Bhubaneshwar	Construction of high-level bridge over river Mahanadi connecting Cuttack City to Nuapatana in the District of Cuttack in the State of Odisha” (hereinafter referred to as “the project”)	Yes	2,72,93,387	27,85,356	Cuttack
12.	Superintending Engineer, Construction Circle, Pb. PWD B&R Branch, Sangrur	Construction of Approaches to Road over Bridge (excluding Railway portion) on level Crossing no. A-52 and A-63 on Ludhiana – Jakhal & Dhrui – Railway Line at Dhuri (Distt. Sangrur)	Yes	71,42,858	69,22,956	Dhuri
13.	Executive Engineer, Central Works Division No.1, PWD B&R, Amritsar	C/o Two lane Elevated Road from Celebration Mall to Verka Chowk Under Bus Rapid Transit System (BRTS) in District Amritsar (Corridor No.5(i))	Yes	3,13,46,993	39,78,091	Elevated Road, Amritsar
14.	Goa State Infrastructure Dev. Corp. Ltd. Panaji, Goa	Construction of Bridge at Gaundali including approaches	Yes	–	74,92,046	Goa
15.	Executive Engineer, HUDA, Divn. No. II, Gurgaon	Design & C/o approaches to 4 lane road over Bridge (ROB) on Delhi -Rewari Railway line between crossing Np.29-30 at Junction of Sector – 10 and 37 D in Gurgaon Haryana and all other works contingent thereto	Yes	–	26,77,121	Gurgaon
16.	C.E., N.H. PWD, Pb. Patiala	Construction of Four Lanes with paved side shoulder of Harike Bypass of NH-15 from existing km 158.350 to km 166.925 of Nh-15 in the State of Punjab under NHDP-IV” on Engineering Procurement and Construction	Yes	6,76,00,870	98,51,297	Karike Pattan
17.	The Chief Engineer, HP, PWD, Zone Hamirpur	Construction of High-Level Bride Over Swan River between Village Rampur & Haroli in District Una (HP) (SH: C/O Pre-stressed Concrete Bride 19spans on 40.70 m each total span 773.30, span bridge except both sides approaches).in Tehsil & Distt. Una H.P	Yes	75,36,633	3,13,861	Haroli
18.	SE, NH Circle No.2, PW Roads Directorate, Kolkata	Construction of High-level PSC Bridge over rive hatania-Doaniaat Ch. 112.297km of NH-117 including both sides approach on Engineering, Procurement and Construction	Yes	30,92,63,488	1,79,93,832	Hatania Donia
19.	Chief Engineer, PW (R&B) Department, Jammu	Construction of major bridge including approaches across Ravi River in Village Keerian – Gandial, district Kathua, Jammu and Kashmir on Engineering, Procurement and Construction	Yes	55,60,50,812	7,01,02,860	Kathua
20.	Project Director, Delhi Metro Rail Corporation, Kochi Metro Rail Project, Eastern Entry Tower, Kochi	Construction of Elevated Cast-in-situ Balanced Cantilever (1×65+1×90 +1×65) and approach spans of PSC I Girders (from chainage 19329.685m to 19677.211m) on Aiwaye – Petta line of Kochi Metro Rail Project	Yes	17,14,61,781	64,05,547	Kochi Metro
21.	The Superintending Engineer, National Highway Circle-II, P.W. (Roads) directorate, West Bengal	Construction of a Major Bridge on the river FULAHAR at Nakatti Point for connecting Mahanandatola and Belaimari with main- land of Malda district of West Bengal as well as Katihar District Headquarters of Bihar.”	Yes	33,20,47,672	10,96,14,566	Maida
22.	Sr. Project Engr. Works Div No.1, BRPNNL Patna	Construction of flyover (2 x 2 lane of carriageway 5.50m) from Mithapur ROB to Chiraiyat and flyover via Station Road (854m elevated + 207m ramp) AND extension of Chiraiyat and flyover (1 x 2 lane Carriageway 7.5m) upto Gandhi Maidan in Exhibition Road (612m elevated + 147m filled up) in Patna Town in State of Bihar	Yes	6,09,03,880	89,65,000	Mithapur
23.	Executive Engineer, Constn Divn No.1, Pb. PWD B&R Cr., Mohali	Construction of Approached to Road over Bridge (excluding Railway portion) on level Crossing no. C-64 on Jalandhar – Pathankot Railway Line at Tanda (Distt. Hoshiarpur)	Yes	4,15,62,500	5,08,99,387	Mohali (Tanda)
24.	E-in-C(Civil), Odisha Nirman Soudha, Keshari Nagarm Unit- V, Bhubaneshwar	Construction of High level bridge over river Mahanadi at Nelson Mandela Chowk (Kacheri Chowk) to Chaurpur Road along with both side approaches in the district of Sambalpur in the State of Odisha on Engineering, Procurement and Construction	Yes	5,36,65,331	5,39,425	Nelson Mandela
25.	Jammu and Kashmir State Power Development Corporation Limited, Srinagar Kashmir	“Investigation, Design & C/o 178m long Steel Bridge for Class 50R loading as per IRC-6:2000, over River Chenab, at CH: 2700m Right Bank Portal Road (Sindhu Village), of External Access Road to Sawalkote Hydro-electric Project with approaches, including approach road of length 300m approximately leading to Diversion Tunnel (Tulsien Nallah)	Yes	19,92,59,576	4,66,71,493	Ramban
26.	Executive Engineer, Central Works Division No.1, PWD B&R, Amritsar	C/o Four land Railway Over Bridge near Verka Level Crossing (Excluding Railway spans) Under Bus Rapid Transit System (BRTS) in District Amritsar (Corridor No.7)	Yes	33,77,590	16,43,151	Rob Verka
27.	Chief Project Manager, Varanasi, Project Implementation Unit, RVNL, Varanasi (UP)	Construction of Roadbed, viaduct, Major & Minor Bridges, RUBs, ROBs, Track Linking (Excluding Supply if Rails and Main Line Sleepers) and General Electrical Works at both the approaches of Rail cum Road Bridge at Ghazipur (18.8km) in connection with Construction of New BG line from Mau to Tarighat in Varanasi Division of N.E. Railway and Danapur Division of E.C. Railway in Uttar Pradesh, India” under Invitation for Bids No 2018/RVNL/BSB/GB-GCT/VIADUCT dated 18/01/2018	Yes	1,27,26,59,940	3,11,85,743	RVNL Ghazipur
28.	Bihar Rajya Pul Nirman Nigam Ltd. Patna	Construction of approach to Rail cum Road bridge across river Ganga at Digha ghat near sonepur from Ch. 110.00 to ch.2560.00 (upto RCD road) In State of Bihar	Yes	5,55,37,388	37,97,300	Sonpur
29.	The Superintending Engineer, National Highway Circle-II, P.W. (Roads) Directorate, West Bengal	Construction of Long Span High-level Road Bridge over River Teesta with Approaches near Haldibari, connecting Sub-Divisional Head Quarter at Mekhligan j/ Haldibari in the District of Coochbehar, West Bengal on Engineering, Procurement and Construction	Yes	1,16,93,88,995	20,79,50,018	Teesta
30.	Bihar Rajya Pul Nirman Nigam Ltd. Patna	Construction of 1840 m long 4-Lane High Level Bridge Over River Kosi near Vijayghat in the District of Bhagalpur including 10.87 km approach road.”	Yes	21,44,42,088	1,77,09,088	Vijayghat & ROB Vijayghat
Total 6,89,13,40,508 76,18,45,477

The project with DMRC is to design and construction of Viaduct of length 2.977 KM, construction of elevated stations, architectural finishing, water supply, sanitary installation and drainage work etc. The receipts from these projects aggregates to Rs.689.13 Crores yielding profits of Rs.76.18 Crores which has been claimed as deduction u/s 80-IA. For each of the projects, the assessee has maintained separate accounts and filed Form No.10CCB for each of these projects. The copies of letter of acceptance / awards with various authorities would show that the assessee has obtained the contracts under bidding system mostly in EPC / Turn Key mode. To undertake these projects, the assessee is required to advance performance guarantee to the relevant authorities. The assessee carries the risks associated with the execution of the projects. While completing EPC contracts as awarded to the assessee, the assessee undertakes various activities which include survey of the site, design of the bridge, preparation of the drawing, approval of drawing from the client, planning the basic, development of site for office / construction yard, management / purchase of raw material, consumables plant and machinery, shuttering, bars, manpower of all kind, arranging bank guarantee to cover the technical risks, insurance, execution of work at site, trial quality control / assurance, contractual assurances, timely execution of the project and hold liability for non-fulfillment of obligations. During the course of assessment proceedings, voluminous documents were filed by the assessee to establish the said claim.

11. In furtherance of its claim, the assessee had submitted copy of the agreement with M/s Bihar Rajya Pul Nirman Ltd who is one of largest customer of the assessee. It was pointed out that the terms of the agreement would show that the assessee was responsible to undertake survey, investigation, design, engineering, procurement, construction, and maintenance of the Bridge Project and shall remedy any / all loss or damage to the Bridge Project from the appointed date until the end of the construction period at the assessee’s cost. As per Article-9 of the agreement, the assessee was responsible to engage personnel / manpower for the purpose of execution of the project etc. The Article 12 of the agreement specifically provided that all risks relating to the project shall be borne by the appellant alone. The Article 13 provided that the assessee would provide for insurance in the joint name to cover risks relating to loss of project, equipment, property, injury of personnel, etc. The Article 14 provides that site investigation shall be done by the contractor being the assessee and the employer shall not be liable for correctness of data. The Article 15 provides that appellant shall execute the contract in accordance with specification approved including procurement, etc. As per Article 18, the assessee would be responsible for all types of designs (permanent or temporary) in respect of such work and shall obtain approval of third parties, where required and the same shall only be approved by the engineer. As per Article 19, the contractor would be responsible for safety of all activities onsite. The Article 34 of the agreement provided that the appellant shall be responsible to rectify defects, if any, for a specified period after completion of the project. The Article 51 of the agreement provided that the appellant shall be obligated to provide irrevocable and unconditional bank guarantee to secure the performance of the project. Similar are the terms of agreement as executed with the Office of Executive Engineer, National Highway Division, Khagaria which is for reconstruction of affected span of BP Mandal bridge by cable stayed extradosed super structure in KM 16 of NK-107 in the state of Bihar on Turn Key basis. Upon perusal of these conditions, it could be well said that the role of the assessee was not that of a mere works contractor but much broader than that of a contractor simplicitor. The assessee executed the project on its own behalf, bearing risks and rewards of the same. On the basis of these facts, it could be said that the activities of the assessee would fall in the category of developer rather than in the category of contractor simplicitor.

12. The main emphasis as laid down by Ld. AO was on the fact that the undertaking or the enterprises should be owned by the company which is registered in India. The deduction would be available for profits which results from eligible business and not to the assessee owning such enterprises. The provision would indicate that the infrastructural facility should not only be developed but it should also be operated by the assessee. The period of deduction would commence only when the enterprise develops and starts to operate any infrastructural facility. The eligibility of deduction could not be prior to the development and operation of the infrastructural facility. In other words, the assessee should not only develop the infrastructure facility but it should also operate the same. The assessee was not engaged in development, operation & maintenance of projects but it merely acted as a contractor only. The ownership of various projects as undertaken by the assessee was not with the assessee and assessee merely contributed to the attainment of the object of developing the infrastructural facility which would be akin to a contractor. Since the assessee has merely done a part of work of civil construction relating to infrastructural facility and the assessee entered into works contacts and therefore, he would not eligible for deduction u/s 80-IA read with Explanation to Sec.80-IA(4). It was also observed that the assessee merely acted as a civil contractor who was assigned the job of civil contractor. The said projects were not developed and operated by the assessee. The infrastructural facility would start to operate only when the assessee had finished its activities. The assessee was not the owner of such facility. Therefore, the condition of sub-clause (a) of Sec.80-IA (4)(i) was not fulfilled. There was no stipulation in the agreement that such facility would be transferred to the government body or statutory bodies. Since the assessee did not own such facility, there would be no question of transferring the said facility. Finally, reference has been made to Explanation below Sec.80-IA(13) which deny such deduction to those assessee who merely execute civil construction work. Much emphasis has been laid on the fact that the assessee did not design these projects rather these activities were undertaken by other parties. Accordingly, the impugned deduction was denied to the assessee.

13. The Ld. CIT(A) endorsed the view of Ld. AO on the fact that the assessee did not enter into BOT or BOOT model. Further, sub-section (2) mandate that the assessee should develop and also operate such infrastructural facility so as to make him eligible for the said deduction since expression ‘and’ was used between these activities. Another argument was that the assessee merely acted as works contractor. The Ld. CIT(A) further held that the assessee was not the owner of infrastructural facility and therefore, the condition of sub-clause (a) of Sec. 80-IA(4)(i) was not satisfied. The sub-clause (b) was not satisfied since the facility was not owned by the assessee and therefore, there would be no question of transferring of infrastructural facility. As per sub-clause (c), the eligible enterprises had additional responsibility to maintain such a facility and this condition was also not fulfilled by the assessee. Much emphasis has been laid on the Third Member decision in the case of B.T. Patil and Sons Belgaun Construction Pvt. Ltd. (supra) though this decision has ultimately been decided in assessee’s favor considering the decision of Hon’ble High Court of Bombay in the case of ABG Heavy Industries Ltd. (189 Taxman 54).

14. At this juncture, it would be useful to consider the relevant provisions of Sec.80-IA which read as under: –

80IA. Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc.

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

(2) The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park or develops a special economic zonereferred to in clause (iii) of sub-section (4)or generates power or commences transmission or distribution of power or undertakes substantial renovation and modernisation of the existing transmission or distribution lines

Provided that where the assessee develops or operates and maintains or develops, operates and maintains any infrastructure facility referred to in clause (a) or clause (b) or clause (c) of the Explanation to clause (i) of sub­section (4), the provisions of this sub-section shall have effect as if for the words “fifteen years”, the words “twenty years” had been substituted.

…………….

(4) This section applies to-

(i) any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintainingany infrastructure facility which fulfills all the following conditions, namely:-

(a) it is owned by a company registered in Indian or by a consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act;

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

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

Provided that where an infrastructure facility is transferred on or after the 1st day of April, 1999 by an enterprise which developed such infrastructure facility (hereafter referred to in this section as the transferrer enterprise) to another enterprise (hereafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place.

Explanation. – For the purposes of this clause, “infrastructure facility” means-

(a) a road including toll road, a bridge or a rail system;

(b) a highway project including housing or other activities being an integral part of the highway project;

(c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system;

(d) a port, airport, inland waterway, inland port or navigational channel in the sea;

…………………

(5) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made.

……………..

Explanation. – 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 works contract awarded by any person (including the Central or State Government) and executed by the undertaking or enterprise referred to in sub-section (1).

A bare perusal of the aforesaid provisions would show that these provisions envisage deduction in cases where the gross total income of the assessee includes any profits and gains derived by an undertaking or an enterprise from any eligible business then the assessee is allowed deduction of amount of such profits and gains derived from such business for ten consecutive years. The sub-section (2) provide that such deduction could be claimed for any ten assessment years out of fifteen years beginning from the year in which the enterprise or undertaking develops and begins to operate any infrastructural facility or starts providing the eligible services.

The proviso to this sub-section provides that where the assessee develops or operates and maintains or develops, operates and maintains any infrastructural facility as referred to in clauses (a), (b) or (c) of the explanation to clause (i) of sub-section (4), the period of fifteen years would stand substituted by period of twenty years. The clause (i) of sub-section (4) makes these provisions applicable to an enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructural facility which fulfils the prescribed conditions as enumerated in clauses (a), (b) and (c). The first condition is that it (here it would mean infrastructural facility) is owned by company registered in India or by a consortium of such companies or by an authority or board or corporation or any other body establish or constituted under any Central or State Act. The clause (b) mandate that the assessee must enter into an agreement with Central Government or State Government or a local authority or any statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any new infrastructural facility. The last condition in clause (c) is that it should start operating and maintaining the infrastructural facility on or after 01-04-1995. The proviso to this sub-section provides for deduction to the transferee company to which such an infrastructural facility is transferred by an enterprise which has developed such infrastructural facility for the purpose of operating and maintaining the infrastructural facility on its behalf. The explanation to this clause defines infrastructural facility to mean a (a) road including toll road, a bridge or rail system; (b) a highway project including housing or other activities being an integral part of the highway project; (c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or sold waste management system; (iv) a port, airport, inland waterways, inland port or navigational channel in the sea. The Explanation to Sec.80-IA(13) clarifies 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 works contract awarded by any person (including the Central or State Government) and executed by the undertaking or enterprise referred to in sub-section (1).

15. On a bare reading of sub-section (4) of Section 80-IA, it could be seen that such provisions apply to any enterprises carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility. Upon perusal of the same, it could be seen that the only mandate is that the assessee must engage in one of the three activities i.e., developing or operating and maintaining or developing, operating and maintaining any infrastructure facility. It is not, at all, necessary that the assessee must do all the activities viz., develop or operate and maintain or develop, operate and maintain any infrastructural facility simultaneously. Even if any one of the specified activities is carried out by the assessee, the assessee would be eligible to lay claim on this deduction. Even if the assessee is able to demonstrate that it was in the business of developing the eligible infrastructure facility, it would be sufficient compliance to claim benefit u/s 80-IA. Therefore, the conclusion of lower authorities that the assessee must own the said facility or also maintain the said facility after development is against the express provisions of sub-section (4). The other conditions as stipulated in sub­section (4) is that the infrastructure facility should be owned by a company registered in India or by a consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act. This condition, in our considered opinion, does not mean that the assessee or the developer must own the infrastructure facility. The condition so prescribed only means that the infrastructure facility should be owned by any company registered in India or by specified consortium. This condition is duly fulfilled in the present case. So far as the issue of assessee being mere contractor, as raised by lower authorities, is concerned, we find that the provisions of Sec.80-IA provide for tax holiday in respect of profits derived by any enterprise, which has entered into an agreement with the specified authorities for (i) developing, or (ii) operating and maintaining or (iii) developing, operating and maintaining an infrastructure facility. Such tax holiday is available in respect of profits of such enterprise @ 100% of profits for any ten consecutive assessment years falling in the block of initial twenty assessment years, commencing with the year in which the enterprise develops and begins to operate any infrastructure facility. Further, the Explanation to Section 80-IA of the Act as inserted by the Finance (No. 2) Act, 2009 w.e.f. 01-04-2020, clarifies that mere works contract would not be eligible for deduction under this section.

16. At this juncture, attention may be drawn to Explanatory notes as contained in Circular No. 717 dated 14-08-1995 as issued by CBDT (clarifying the amendments of Finance Act, 1995) at the time of insertion of Section 80-IA of the Act in the statute. This Circular clearly highlights the need for growth of infrastructural facility in the country as the underlying intent for granting tax holiday. The para 34.2 of the said circular provides that the objective of introduction of these provisions stem from the fact that Industrial modernization requires a massive expansion of and qualitative improvement in infrastructure. Since the country is very deficient in infrastructure such as expressways, highways, airports, ports and rapid urban rail transport systems, additional resources are needed to fulfill the requirements of the country within a reasonable time frame. In many countries, the BOT (build-operate-transfer) or the BOOT (build-own-operate-transfer) concepts have been utilized for developing new infrastructure. 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 roads, highways, expressways, bridges, airports, ports and rail systems or any other public facility of similar nature as may be notified by the Board on 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 the 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. It is quite discernible that the said benefits were introduced to confer tax benefit to an assessee whose gross total income included income of an enterprise engaged in infrastructure facility, with the intention of encouraging setting up and development of infrastructure facilities in the country. Upon perusal of the same, it could be said that the intention of the legislature, while introducing the provisions of section 80-IA of the Act, was to provide managerial and financial resources required for development of infrastructure facility in India and at the same time to incentivize the private sector, incurring massive cost of development and bearing the huge risk in this regard. The developers in the private sector usually form consortiums to win bids from the Government. On successful grant of the award, constituents of the consortium either form Joint venture (JV) or Special purpose vehicle (SPV), as a pass-through entity, for the limited purpose of executing the contract with the Government. In such cases, though the bid may be awarded to the JV/SPV, the work is executed by the constituents. Consequently, the incomes of the constituents include income from development / operation of the infrastructure facility. Therefore, the assessee would be entitled to claim impugned deduction if gross total income of such assessee includes profits and gains derived by an undertaking or an enterprise from eligible business as referred to in sub-section (4) and such enterprise engaged in carrying out specified activity which may be developing or operating and maintaining or developing, operating and maintaining any eligible infrastructure facility. The other conditions are that the facility should be owned by a company registered in India or by a consortium of such companies and it must enter into an agreement with the specified authority and such agreement should be for developing or operating and maintaining or developing, operating and maintaining a new infrastructure facility and not as a contractor.

17. This is undisputed fact that the assessee is engaged in construction of infrastructural facilities viz. bridges, roads, highways etc. and the income of the assessee include profits and gains derived from such activity. There are three primary conditions to lay claim on the impugned deduction viz. (a) there must be an “enterprise” carrying on eligible business; (b) such an “enterprise” should be owned by a “company” or “consortium of such companies”; (c) income of such enterprise from the eligible business must form part of gross total income of the assessee. The use of the words “consortium of such companies” by the legislature indicates that the legislature was aware of the object of formation of consortium for obtaining contracts from the Government for execution by its constituents. Usually, the consortium of companies either form SPV or JV for the limited purpose of bidding for the contracts and accordingly, agreement is between the Government and the SPV or JV, and not with the constituent companies. Apparently, this is the reason that Section 80-IA of the Act refers to the enterprise entering into an agreement with the Government and such enterprise being owned either by a company or consortium of companies. This is logical too considering that companies come together to form a consortium for the purpose of fulfilling the bidding requirements with prior understanding regarding role of each constituent with respect to bearing of costs, risks, rewards, etc. On successful award of the contract, it is practically not possible for the Government to enter into an agreement with each constituent of the consortium, since from the Government’s perspective, such a consortium is the single contracting entity to whom the entire contract is awarded, which is responsible to the contractee for successful performance of the contract, irrespective of the pre-agreed understanding amongst the constituents of the consortium regarding their roles, cost, risks and responsibilities, etc. It may be noted that different aspects of the development may be carried out by different entities and may be sub-contracted, but the entity that receives the award will be eligible to claim the benefit u/s 80IA of the Income Tax Act 1961.

18. At this stage, reference may be made to Circular No. 14 dated 09-11­2001 which clarified the rationale of amendment to Sec.80-IA by Finance Act 2001 as under: –

Tax holiday for infrastructure rationalised

47.1 Under the provisions of section 80-IA, roads, highways, bridges, airports, ports and rail systems are regarded as infrastructure facility and the enterprises engaged in developing or operating and maintaining or developing, operating and maintaining such infrastructure are entitled to a tax holiday for five years and a deduction of 30% of profits for the next five years. This benefit is applicable in respect of such specified infrastructural facility becoming operational on or after 1st April, 1995. The enterprise claiming such benefit has to enter into an agreement with the Central or State Government or a local authority or any other statutory authority, by which the enterprise which develops such facility, has to transfer such facility to the Government or public authority after the stipulated period. In other words, the required condition for availing of this benefit is that transfer under BOT (Build, Own, Transfer) or BOOT (Build, Own, Operate and Transfer) schemes has to be met.

47.2 Investments in infrastructure have to compete with investment in other sectors to be attractive. There is, in particular, a need to encourage investment in the area of surface transport, water supply, water treatment system, irrigation project, sanitation and sewerage system or solid waste management systems. With this in view, section 80-IA has been amended to relax the existing two-tier benefit to provide a ten year tax holiday. Keeping in view, their capital intensive nature, the higher allowances of depreciation in the initial years to such enterprises and the need for improved cash flows, an infrastructure facility in the nature of a road (including a toll road), bridge, rail system, highway project, water supply project, sanitation, sewerage and solid waste management system shall be allowed a ten year tax holiday in place of a two-tier tax holiday. Such an enterprise may avail of the tax holiday consecutively for any ten years out of twenty years beginning from the year in which the undertaking begins operating the infrastructure facility.

47.3 In the case of other infrastructure, namely, for airport, port, inland port and inland waterways, section 80-IA has been further amended to relax the existing two tier fiscal incentive. Instead, an identical ten year tax holiday may be availed of in a block of initial fifteen years.

47.4 The condition that such infrastructure facility shall be transferred to the Central Government, State Government or local authority has also been removed. However, the agreement with such authorities for creation of such infrastructure will have to be entered into.

47.5 Under sub-section (8) of section 80-IA, where any goods are transferred for a consideration to any other business of the assessee, the consideration should correspond to the market value of such goods. As in certain cases, the transfer may relate to services, the provision has been accordingly amended to clarify that this would include services. Such services may include marketable services of operation and maintenance (O&M) in case of infrastructure facilities, marketable services for distribution of electricity and specified marketable services in telecom. Instead of the words “industrial undertaking” occurring in section 80-IA, the word “undertaking” has also been substituted in the provision for the same reason.

47.6 These amendments will take effect from the 1st day of April, 2002, and will, apply in relation to the assessment years 2002-03 and subsequent years. [Section 44].

The para 47.4 clearly stipulates that the condition that such infrastructure facility shall be transferred to the Central Government, State Government or local authority has been removed to provide further incentive. However, the agreement with such authorities for creation of such infrastructure will have to be entered into. The condition has duly been fulfilled by the assessee. 19. Reference may further be made to Circular No.03/2008 dated 12-03­2008 which clarified the rationale of amendment to Sec.80-IA by Finance Act, 2007 as under: –

Clarification regarding developer with reference to infrastructure facility, industrial park, etc. for the purposes of section 80-IA.

1.Section 80-IA provides for a ten-year tax benefit to an enterprise or an undertaking engaged in development or operation and maintenance or development, operation and maintenance of infrastructure facilities, providing telecommunication service, generation or generation and distribution of power or development of an Industrial Parks or a Special Economic Zones.

2.The tax benefit was introduced for the reason that industrial modernization requires a massive expansion of, and qualitative improvement in, infrastructure (viz., expressways, highways, airports, ports and rapid urban rail transport systems) which was lacking in our country. The purpose of the tax benefit has all along been for encouraging private sector participation by way of investment in development of the infrastructure sector and not for the persons who merely execute the civil construction work or any other works contract. The incentive has all along been intended to benefit developers who undertake entrepreneurial and investment risk and not contractors who only undertake business risk.

3. Accordingly, it has been clarified by inserting an explanation that the provisions of section 80-IA shall not apply to a person who executes a works contract entered into with the undertaking or enterprise referred to in the said section. Thus, in a case where a person makes the investment and himself executes the development work i.e., carries out the civil construction work, he will be eligible for tax benefit under section 80-IA. In contrast to this, a person, who enters into a contract with another person (including Government or an undertaking or enterprise referred to in section 80-IA) for executing works contract, will not be eligible for the tax benefit under section 80-IA.

By way of para-2, it has been clarified that the purpose of the tax benefit was to encourage private sector participation by way of investment in development of the infrastructure sector and not for the persons who merely execute the civil construction work or any other works contract. The incentive has all along been intended to benefit developers who undertake entrepreneurial and investment risk and not contractors who only undertake business risk. Accordingly, as per para-3, the provisions of section 80-IA shall not apply to a person who executes a works contract entered into with the undertaking or enterprise. In a case where a person makes the investment and himself executes the development work i.e., carries out the civil construction work, he will be eligible for tax benefit u/s 80-IA. In contrast to this, a person, who enters into a contract with another person (including Government or an undertaking or enterprise referred to in section 80-IA) for executing works contract, will not be eligible for the tax benefit under section 80-IA. Thus, the whole emphasis is on entrepreneurial and investment risk. In a case, where a person makes the investment and himself executes the development work i.e., carries out the civil construction work, he will be eligible for tax benefit under section 80-IA. If these factors are applied to the assessee’s case, in terms of contractual stipulations, as enumerated by us in preceding paras 10 & 11, we find that the assessee has duly fulfilled these requirements and the assessee’s role is much larger than that of a civil contractor.

20. The Pune Tribunal in the case of B.T. Patil and Sons Belgaun Construction Pvt. Ltd. (34 Taxmann.com 97; 28-02-2013), considering the decision of Hon’ble High Court of Bombay in ABG Heavy Industries Ltd. (supra) as well as in the light of directions of the court in the case of that very assessee, held that the law interpreted by the Third member is no longer a good law and therefore, the same could not be applied. Finally, Ld. AO was directed to allow deduction u/s 80-IA(4). Though Ld. CIT(A) has observed that the decision in the case of ABG Heavy Industries Ltd. (supra) was on different facts, however, the facts remain that the bench has opined that the said decision would be applicable and finally allowed the deduction to the assessee. Nothing has been shown to us that this decision has subsequently been reversed by any higher judicial forum. Therefore, the adjudication by Third Member, as referred to by Ld. CIT(A), could not be accepted and the view of the co-ordinate bench is to be followed.

21. Proceeding further, we find that, considering various judicial decisions, identical issue has been adjudicated by Ahmedabad Tribunal in the case of Akash Infra projects Pvt. Ltd. (141 Taxmann.com 516; 22-06-2022). The findings of the bench were as under: –

24. The primary condition is that the enterprise must carry on the work of “developing” an infrastructure facility. As mentioned above, Explanation under sub-section (13) of section 80-IA clarifies that this section will not apply to any business which is in the nature of a “works contract”. In other words, the essence of this section is that, the benefit of section 80-IA(4) would be available to a developer and not to a contractor simplicitor. In the present case the lower authorities have denied the benefit of Section 80-IA(4) to the appellant-company on the assumption that the appellant-company is engaged in executing merely a work contract and it is not carrying on the business of developing an infrastructure facility. The assessee has undertaken entirely and exclusively the projects awarded by the local government authorities, as it is evident from the records as explained and already narrated hereinabove and therefore, there is hardly any basis for assuming that it is merely a contractor executing a works contract. The difference between a “developer” and a “contractor” has to be properly analyzed and understood. This issue has come up before the Hon’ble ITAT, Amritsar Bench in the case of M/s. TRG Industries P. Ltd. in ITA Nos. 433 etc./Asr/2009. The Tribunal after relying various case laws has laid down the following parameters when to treat an assessee as a developer or contractor. (i) The assessee does not have to develop the entire infrastructure facility to qualify for deduction u/s.80-IA(4) and if only a part of the infrastructure facility is developed, the assessee would be eligible for deduction. (ii) The three requirements of section 80-IA(4) viz. development, operation and maintenance are not cumulative. Thus, an enterprise which only develops facility would also be entitled to the benefit of section 80-IA(4). (iii) Merely because the assessee is referred to as a contractor in the agreement, it would not debar it from claiming deduction. (iv) Direct agreement between the transferee-assessee and the specified authority is not a mandatory requirement u/s.80-IA(4) of the I.T. Act. Needless to mention that the assessee qualified all the criterion fixed by the Amritsar Bench.

25. We have already dealt with relevant clauses of the tender documents stipulating various conditions viz. financial involvements, risks, obligations and responsibilities of the assessee in developing, operating and maintaining of infrastructure facilities, which clearly make the case of the assessee within the scope and ambit of section 80-IA(4) of the Act so as to claim the impugned deduction.

26. We have considered the judgements relied upon by the Ld. AR passed by different judicial forums including the judgement passed in the matter of Patel infrastructure and Katira construction (supra) passed by the Rajkot Bench and Katira construction passed by the Hon’ble jurisdictional High Court wherein the constitutional validity of insertion of explanation below sub-section (13) of section 80-IA of the Act was challenged. The Ld. Representative appearing for the Revenue vehemently argued on this point that the jurisdictional High Court in the said matter already decided the issue against the assessee. Fact remains that the jurisdictional High Court in that particular matter dealt with the constitutional validity of the insertion of explanation as mentioned hereinabove and decided the same in favour of the revenue to this effect that such explanation brought with retrospective effect from 1-4-2000 by the Finance Act No. 2 of 2009 was very well within the competence of Parliament. As such there was no issue whether the assessee was acting as a developer or contractor was raised before the Hon’ble Jurisdictional High Court neither the said has been decided in the said judgment.

27. We are further noted that relief under section 80IA(4) of the Act has been granted in favour of the assessee for A.Ys. 2009-10, 2010-11 & 2011-12 by the Ld. CIT(A). Upon perusal of the said orders passed by the Ld. CIT(A) being part of the Paper Book filed before us it appears that the Ld. CIT(A) has considered identical work pattern executed by the assessee and finally decided the issue in favour of the assessee. It is relevant to mention that no appeal has been preferred by the Revenue against these orders.

28. In the light of the above discussion and perusal of various clauses of Tender documents and case laws relied upon by both the parties, it reveals that the tender work under consideration are not for a specific work, rather they are for development facility as a whole. The responsibility is fully assigned to the developer for execution and completion of the work. Various stipulations contained in the Tender documents demonstrate various risks undertaken by the assessee for execution of the project work awarded by the competent authority in terms of financial resources, manpower deployment, both technical and administrative expertise, drawing and designing of the project specifications and getting approval from the competent authority, safety and security of project and human resources, compliances of various statutory rules and laws. Therefore, merely because in the agreement for development of infrastructure facility, assessee is referred to as contractor or because if some basic specifications are laid down, it does not detract the assessee from the position of being a developer, nor will deprive the assessee from claiming deduction under section 80-IA(4) of the Act. As such, looking to the overall aspects of work undertaken by the assessee we can safely come to the conclusion that the assessee is engaged in development of the infrastructure facility and therefore, a developer, which entails the assessee to claim benefits under section 80-IA(4) of the Act. Thus, the issue of claim of deduction under section 80-IA(4) of the Act is allowed in favour of the assessee and against the Revenue. This common ground raised in all the appeals are accordingly disposed of.

As per the said decision, the assessee do not have to develop the entire infrastructure facility to qualify for deduction u/s.80-IA(4) and if only a part of the infrastructure facility is developed, the assessee would be eligible for deduction. The three requirements of Sec.80-IA(4) viz. development, operation and maintenance are not cumulative. Thus, an enterprise which only develops facility would also be entitled to the benefit of section 80-IA(4). Merely because the assessee is referred to as a contractor in the agreement, it would not debar it from claiming deduction. This decision clearly supports the case of the assessee.

22. In the case of Katira Construction Ltd. (119 Taxmann.com 489) as adjudicated by Rajkot Tribunal, the bench held that the assessee would be eligible for such benefit even if it was engaged only in developing the infrastructure facilities. If the contention of the AO is believed to be true that the deduction would be available to the assessee only after infrastructure started or starts operating, then the assessee who only develop the infrastructure facility will not be entitled for the deduction u/s 80-IA (4) since he would never operate and maintain such infrastructure facility. It was further held by the bench that the developers would be the persons who are carrying out the business of developing or operating and maintaining or developing, operating and maintaining the infrastructure facility whereas the contractors are those persons who merely execute part of these functions on behalf of developer and do not own any risks and responsibilities of the work. This distinction could be drawn only on the basis of the terms and conditions of the agreement. It was finally concluded that even after the amendment by the Finance Act, 2007 and the Finance Act, 2009, the contractors performing the work in the nature of a developer-cum-contractor and assuming risks and responsibilities shall be eligible for deduction under section 80-IA in respect of the eligible infrastructural facilities. Finally, the impugned deduction was allowed to the assessee. This decision has considered various other decisions which include the decision of Mumbai Tribunal in Bharat Udyog Ltd.(supra), the decision in B.T. Patil & Sons Belgaum Constructions (P.) Ltd. (supra), the decision in ABG Heavy Industries Ltd. (supra), the decision of Mumbai Tribunal in Pratibha Industries Ltd. (28 Taxmann.com 246), the decision of Hyderabad Tribunal in the case of Sushee Hi Tech Construction (P.) Ltd. (33 Taxmann.com 236) which has also been quoted by Ld. AR before us. The decision of Agra Tribunal in PNC Construction Co. Ltd. (37 Taxamnn.com 361) was on similar lines. This decision stood affirmed by Hon’ble Allahabad High Court (55 Taxmann.com 21) by relying on the decision of Hon’ble High Court of Bombay in the case of ABG Heavy Industries Ltd. (189 Taxman 54). Similar is the subsequent decisions of Ahmedabad Tribunal in the cases of Sugam Construction Pvt. Ltd. (30 Taxmann.com 331) as well as in En-vision Enviro Engineers (P.) Ltd.(31 Taxmann.com 319). We find that all these decisions lay down more or less similar proposition and clearly support the case of the assessee.

23. Finally, considering the facts and circumstances of the case and in the light of various judicial decisions as referred to by us in the preceding paragraphs, it was to be concluded that the assessee is to be considered as ‘developer’ and accordingly, it qualifies for impugned deduction u/s 80-IA. The assessee made sufficient capital investments in the project and also undertook entrepreneurial risks involved in the execution of the project. The assessee had undertaken the responsibility for execution of the projects from beginning till the final stage. It was not just involved in raising the structure but also involved in project design, lay-out plan, structural design etc. The assessee was required to provide various types of guarantees in respect of the project and also responsible for rectifying defects and trial runs. The assessee was responsible for procuring/ purchasing material and arranging manpower and it was responsible for risks associated thereto. The fact that the assessee received payment against running bills or how these entries are reflected in Form 26AS is not much of relevance while considering the claim of the assessee u/s 80-IA. The emphasis laid down by lower authorities on the fact that the designs were not prepared by the assessee overlook the overall responsibility of the assessee under various projects. The relevant articles of the agreement clearly stipulate and substantiate that the assessee was responsible to undertake survey, investigation, design, engineering, procurement, construction, and maintenance of various projects until the end of construction period. On these facts, it is to be concluded that the assessee would fall in the category of a ‘developer’ and consequently, eligible to lay claim on the impugned deduction. Accordingly, Ld. AO is directed to grant impugned deduction as claimed by the assessee under Section 80-IA for AYs 2019-20 to 2023-24. The corresponding grounds of appeal, as raised in respective assessment years, stand allowed.

24. The second issue that fall for our consideration is addition of alleged bogus purchases against the assessee. It could be seen that Ld. AO has made addition with respect to five suppliers which is primarily based on the statement of Shri Manoj Kumar (Accountant). From the enumerated facts at para 3.1, it could be seen that in Q.No.4, he was confronted with the purchases made by the assessee from M/s Haryana Steel Mongers Pvt. Ltd. of Faridabad and M/s Vardhman Enterprises of Mandi Gobindgarh. He stated that the invoices which bear rubber stamp from the sites would be genuine bills whereas the other invoices which do not contain such stamp were non-genuine. However, he has not been confronted with the invoices of any of the impugned five suppliers. The Ld. AO has applied the same analogy to the five suppliers. Pertinently, the said statement run contrary to the statement of Shri Vikas Goyal (Purchase Manager) who stated that when the stamp is missing on the purchase bills, then it is confirmed from the authorized store in-charge whether material had actually been delivered or not. Once it was confirmed that the material reached the construction site, the invoices are certified by his team members. Thereafter, he would sign the bills either after seeing site receipt stamp or after the verification has been done by his team following which the purchase invoices are updated in his purchase ledger. He nowhere admitted that such invoices were non-genuine. His statement is in contradiction to the statement of Shri Manoj Kumar and Shri Vipan Kumar (procurement / purchase head) and no concrete conclusions could be drawn on the basis of these statements.

25. To support the allegation, summons was issued by Ld. AO to Shri Ankur Goel of M/s Devansh Overseas and his statement was recorded u/s 131(1A). He had stated that that they have made genuine as well as bogus sales to the assessee. However, no opportunity of cross-examination has ever been provided to the assessee which run contrary to the decision of Hon’ble Apex Court in the case of Andaman Timber Industries vs. CCE (281 CTR 0241). The denial of such an opportunity of cross-examination is in clear violation of principle laid down by Hon’ble Apex Court in the case of Andaman Timber Industries vs. CCE (281 CTR 0241) holding that not allowing assessee to cross-examine witnesses by adjudicating authority though statements of those witnesses were made as basis of impugned order, amount to serious flaw which make impugned order nullity as it amounts to violation of principles of natural justice. In the present case, we find that such an opportunity of cross-examination has never been provided by Ld. AO to the assessee which would make the impugned addition nullity. If the statement of deponent is ignored, nothing would be left with Ld. AO to support its allegation. The statement taken from the employees of the assessee runs contrary to each other. As against this, the assessee filed ample documentary evidences in the shape of purchase invoices, transport receipts, weigh bridge slips, border crossing slips, ledgers, bank statements etc. to substantiate the purchases. We are of the considered opinion that the assessee could not carry out its work without utilizing the actual material. Pertinently, the assessee is not shown to have consumed more material than what was committed in the respective tenders. The assessee also furnished site-wise stock summary along with supporting documents. The goods were purchased inter-state and passed through various tolls / barriers which will prove that the goods have actually moved and reached the assessee. The copies of Sales Tax Returns were as also filed wherein the purchases have been accepted. The payments to supplier were through banking channels and there was no evidence of cash exchange between the assessee and the suppliers. The assessee also furnished confirmed copy of account of the suppliers. By furnishing these documents, the onus of the assessee, in our considered opinion, stood discharged and it was the onus of Ld. AO to prove its allegation. We do not find any such corroborative material on record which would prove the allegation of Ld. AO. Therefore, this addition could not be sustained in law considering the decision of Hon’ble Apex Court in the case of Odeon Builders Pvt. Ltd. (418 ITR 315) holding that where the assessee substantiates the purchases through documentation like purchase bills, transport bills etc., the purchases could not be treated as non-genuine purchase especially in a case where there was no corroborating material on record except statements of some employees of the company.

26. The addition of Shree Radhey Traders has been made on irrelevant facts on the ground that that firm made purchases from Shri Ganesh Traders, who, in turn made purchases from Shree Balaji Traders. The supplies made by Shree Radhey Traders have been disallowed since the sales made by Shri Balaji Traders remained doubtful. However, it has clearly been recorded by Ld. AO that Shri Satish Kumar of Shree Radhey Traders declared low profit of 1.5% on sales. The fact of low profitability could not make the purchases of the assessee to be non-genuine rather it supports the case of the assessee that the sales made to the assessee were offered to tax by that entity. It is another fact that Shri Vikram Singh of Shree Balaji Traders furnished bills from 30-09-2017 onwards till date which prove that such purchases could not be held to be non-genuine. As against this, the assessee furnished ample documents as in the case of M/s Devansh Overseas to discharge its onus. Similar are the facts for M/s Aggarwal Traders and M/s Mahadev Stone Crusher Co. Therefore, in the absence of any corroborative evidence to disbelieve such purchases, the addition for these three suppliers could not be sustained. We order so.

27. The addition of M/s Gaurav Steel has been made on the basis of two register as found from Patna premises. The same were marked as PD1 -01 and PD1-02. Shri Niraj Prasad (Office assistant), in recorded statement, stated that as per instructions of Shri Suresh Kumar Singla, cash entries were made by him either in loose sheets or in registers. PD1 -01 was one such register which contain entries pertaining to cash receipts and cash expenses. The register PD1-02, had cash received on left side whereas right side contain cash expenses incurred by him. He stated that said cash was received by him from M/s Gaurav Steel, Rinku Ji and one Sh. Awadh Bihari Dubey whose identity was not known to him. The said cash was received on verbal instructions of Shri Suresh Kumar Singla (Area Manager, Bihar). On the basis of these facts, Ld. AO concluded that these entries were nothing but cash received in lieu of bogus purchases bills. On the basis of these registers, Ld. AO has also made addition of Rs.2.72 Lacs. However, it could be seen that no linkage of these registers with the assessee has been established by Ld. AO. There are no factual findings corroborating the fact that these registers pertained to assessee-company. The registers are not shown to have been maintained on behalf of the assessee. Rather, it was always the stand of the assessee that Shri Suresh Kumar Singla was found to have made investment in some company i.e., M/s Deepshree Properties Pvt. Ltd. on his own accord which was also engaged in the construction business. As per Annexure SKS4, there were some pages suggesting that an agreement to sell was entered into by the said company to develop multi-story society wherein certain persons had made the investment. All these persons were relatives of Shri Suresh Kumar Singla. Therefore, these transactions do not pertain to the assessee-company. The rejection of these submissions by Ld. AO has no sound basis. The presumption of Sec. 132(4A) would apply to the statement of Shri Niraj Parsad also who has submitted that these registers were being maintained at the behest of Shri Suresh Kumar Singla only. Therefore, in the absence of any linkage of these registers with the assessee, the addition of alleged bogus purchases for Rs.1.50 Lacs and the addition of Rs.2.72 Lacs stand deleted. The alternative plea to enhance the deduction u/s 80-IA by the amount of alleged bogus purchases has been rendered infructuous.

28. The next addition is addition of cash found for Rs.10.02 Lacs. This addition is on the basis of statement of Shri Amarjeet Kumar who stated that such cash could be explained by Shri Suresh Kumar Singla only. Since Shri Suresh Kumar Singla did not attend the proceedings, this addition has been made in the hands of the assessee without establishing the fact that this cash belonged to the assessee. There is no evidence to hold that the cash belong to the assessee entity. In the absence of any such concrete evidences, this addition could not be sustained. We order so.

29. The next issue is addition of cash found for Rs.14.27 Lacs which is stated to be part of imprest amounting to Rs.28,38.093/- lying in the name of Shri Parveen Kumar Rathore, General Manager / N.K. Chaudhary. The assessee has placed on record copy of imprest account in the name of Shri N.K. Chaudhary on Page Nos.1134 to 1148 of the paper-book. The same substantiate the explanation of the assessee. The assessee has well demonstrated that the said cash was part of imprest account only. Since the source of cash stood explained, the addition made by Ld. AO stands deleted.

30. The last addition, on merits, is the addition of Rs.35 Lacs which is wholly based on survey statement u/s 133A on third-party M/s P&R Infraprojects Ltd. Shri Inder Mal Jain (AVP) merely stated that around Rs.30 Lacs to Rs.35 Lacs was returned back in cash to the assessee after receipt of RTGS / Banker’s Cheque. This addition is bereft of any corroborating evidences and the addition is based solely on a third-party statement which has not been even confronted to the assessee. Even the statement is a vague statement. No such addition could be made, in this manner. Therefore, we delete the same.

31. Ground Nos. 1(a), (b) & (c) is with respect to claim of deduction u/s 80-IA which stand allowed. In Ground Nos. 2(a) & (b), the assessee has assailed quantum addition of alleged bogus purchases. These grounds stand allowed which render alternative ground 2(c) as infructuous. Ground No.3 is general in nature. Ground No.4 raises a legal ground with respect to mentioning of DIN. This issue, admittedly, is sub-judice before higher judicial forum and therefore, left open. In Ground No.5, the issue of approval u/s 153D has been raised. However, this same is not relevant since the assessment has been framed u/s 143(3). In Ground Nos.6, 7 & 8, the assessee has raised the issue of quantum addition of Rs.2.72 Lacs, Rs.10.02 Lacs, Rs.14.27 Lacs and Rs.35 Lacs which stand allowed in assessee’s favor. The appeal for AY 2019-20 stands partly allowed.

32. In AY 2020-21, the only issue is assessee’s claim of deduction u/s 80-IA which stand allowed in assessee’s favour. The legal ground qua DIN is left open. The appeal stands partly allowed.

33. In AY 2021-22, the only issue is assessee’s claim of deduction u/s 80-IA which stand allowed in assessee’s favour. The second issue is qua MAT credit. The Ld. AR has tabulated that MAT credit of Rs.12,71,98,877/- was utilized during AY 2020-21. The balance MAT credit brought forward to AY 2021-22 was shown to be Rs.53,52,55,295/-. However, in subsequent AY 2021-22, due to some error, amount utilized / set-off in earlier years have been considered to be Rs,18,11,76,102/- as against actual utilization of Rs.12,71,98,877/-. In other words, earlier years’ utilization has been reported in excess in AY 2021-22 by an amount of Rs.5,39,77,225/- which has resulted into lower carry forward of MAT credit in subsequent assessment years. Apparently, the same is a clerical error. The Ld. AO is directed to verify the same and compute correct figures of MAT credit. The assessee is directed to furnish relevant computations and forms to substantiate the same. In the legal ground, the assessee has assailed the approval as given by Ld. Joint Commissioner of Income Tax. However, since the assessee has assailed the issue of MAT credit computations, this ground need not be adjudicated. Moreover, the issue on merits of deduction u/s 80-IA has already been decided in assessee’s favor. Accordingly, this ground has been rendered infructuous. The appeal stands partly allowed.

34. In AY 2022-23, the only issue is assessee’s claim of deduction u/s 80-IA which stand allowed in assessee’s favour. The legal ground of approval has been rendered infructuous. The appeal stands partly allowed.

35. In AY 2023-24, the only issue is assessee’s claim of deduction u/s 80-IA which stand allowed in assessee’s favour. The legal ground of approval has been rendered infructuous. The appeal stands partly allowed.

Conclusion

36. All the appeals stand partly allowed.

Order pronounced on 21/04/2026