DCIT Vs Gondwana Engineers Ltd. (ITAT Nagpur)
Summary : ITAT Nagpur allowed the Revenue’s appeals concerning AYs 2015-16 and 2016-17, holding that the assessee failed to establish eligibility for deduction under section 80-IA of the Income Tax Act. The Tribunal found insufficient documentary evidence to establish that the assessee acted as a developer of eligible infrastructure facilities rather than a contractor or sub-contractor. It also noted that Form No. 10CCB was obtained after filing the return, while the tax audit report certified NIL deduction under section 80-IA. Accordingly, the CIT(A)’s relief was set aside and the AO’s disallowance of the section 80-IA deduction was restored. On employees’ PF and ESI contributions, the Tribunal held that Rs. 4,97,352/- was deposited beyond the statutory due dates and therefore disallowable under section 36(1)(va) read with section 2(24)(x), relying on the Supreme Court decision in Checkmate Services (P.) Ltd. v. CIT. The CIT(A)’s deletion of this addition was also set aside and the AO’s disallowance restored. The Revenue’s appeals were consequently allowed.
ITAT Nagpur allowed the Revenue’s appeals and restored the AO’s disallowance of deduction under section 80-IA, holding that the assessee failed to discharge the statutory burden of proving that it had itself developed the eligible infrastructure facilities rather than merely acting as a contractor/sub-contractor, particularly in the absence of documentary evidence of deployment of its own financial resources, technical expertise, plant, machinery and manpower; the Tribunal also restored the disallowance of employees’ PF/ESI contribution under section 36(1)(va), following the binding judgment of the Supreme Court in Checkmate Services (P.) Ltd. v. CIT, notwithstanding payment before the due date of filing the return under section 139(1).
The appeals were heard by Shri Anubhav Sharma, Judicial Member and Shri Khettra Mohan Roy, Accountant Member. ITA No. 93/NAG/2025 relating to AY 2015-16 was treated as the lead case, while the facts and issues in ITA No. 80/NAG/2025 relating to AY 2016-17 were held to be identical, subject to variation in figures.
Facts of the Case The assessee, M/s. Gondwana Engineers Ltd., was engaged in the business of developing, operating and maintaining water supply projects, water treatment plants and sewage treatment plants for various Government departments, local authorities and statutory bodies. For AY 2015-16, the assessee filed its return declaring total income of ₹99,89,890 after claiming a substantial deduction of ₹5,91,41,256 under section 80-IA of the Income-tax Act. During assessment proceedings, the AO examined the claim and took the view that the assessee was not eligible for deduction under section 80-IA. The AO also made an addition of ₹4,97,352 under section 36(1)(va) read with section 2(24)(x) on account of delayed deposit of employees’ contribution towards PF and ESI.
The projects undertaken by the assessee involved designing, engineering, procurement, construction, installation, testing, commissioning and operation and maintenance of infrastructure facilities. The assessee’s case was that it executed these activities by deploying its own technical expertise, manpower, plant and machinery and by assuming entrepreneurial and execution risks. The assessee therefore claimed that it was a developer of eligible infrastructure facilities and not merely a works contractor or sub-contractor hit by the Explanation to section 80-IA(4).
Core Legal Issue The principal issue before the Tribunal was whether the assessee was entitled to deduction under section 80-IA(4) when the Revenue alleged that it was merely a contractor or sub-contractor and had not established, through adequate documentary evidence, that it had itself developed the eligible infrastructure facilities. The Revenue particularly relied upon the fact that the assessee had worked under M/s. Doshion Veolia Water Solutions Pvt. Ltd., that certain projects were awarded through Joint Ventures, that tax was deducted under section 194C, that revenue was recognised under Accounting Standard-7, that work contract tax was debited in the books and that the tax audit report itself certified NIL deduction under Chapter VI-A.
The second legal issue was whether employees’ contribution towards PF and ESI, which had not been deposited within the statutory due dates prescribed under the respective welfare enactments but had admittedly been deposited before the due date for filing the return under section 139(1), could nevertheless be allowed as a deduction.
AO’s Finding The AO rejected the assessee’s claim of deduction under section 80-IA. The Revenue’s case before the Tribunal was that the assessee itself had described its activities as those of a contractor and had worked under the principal contractor/JV arrangement. The AO therefore considered the assessee to be a contractor/sub-contractor rather than a developer entitled to section 80-IA deduction. The Revenue also relied upon the assessee’s debit of approximately ₹4.48 crore towards work contract tax, recognition of revenue under AS-7 and deduction of tax at source under section 194C as circumstances supporting the conclusion that the assessee was executing works contracts.
The AO further disallowed ₹4,97,352 under section 36(1)(va) read with section 2(24)(x), representing employees’ PF and ESI contribution which had not been deposited within the respective statutory due dates. The assessment was accordingly completed under section 143(3).
CIT(A)’s Finding The CIT(A), however, accepted the assessee’s claim under section 80-IA. The CIT(A) found that the assessee had undertaken the projects by deploying its own technical expertise, manpower, plant and machinery and had assumed entrepreneurial and execution risks. On this basis, the CIT(A) concluded that the assessee could not be regarded as merely a works contractor or sub-contractor for purposes of the Explanation to section 80-IA(4). The CIT(A) also held that mere deduction of tax under section 194C or recognition of revenue under Accounting Standard-7 could not determine the real character of the assessee’s activities. The CIT(A) consequently directed the AO to allow the deduction of ₹5,91,41,256 under section 80-IA.
In relation to employees’ PF and ESI contribution, the CIT(A) deleted the disallowance of ₹4,97,352 by following the judicial position prevailing at the relevant time, under which payment made before the due date for filing the return under section 139(1) was considered allowable.
Revenue’s Main Contention Before ITAT The Revenue challenged the CIT(A)’s finding on the ground that the assessee had failed to establish that it was actually a developer of eligible infrastructure facilities. The Department particularly pointed out that the assessee was a subsidiary of M/s. Doshion Veolia Water Solutions Pvt. Ltd., which held 98.51% of its share capital, and that the relevant contracts had been awarded to Joint Ventures. According to the Revenue, the assessee merely executed the work under those arrangements and therefore occupied the position of a sub-contractor.
The Revenue further relied upon the tax audit report, wherein NIL deduction under Chapter VI-A had been reported and the auditor had certified that no deduction under section 80-IA was admissible. It was therefore argued that the assessee’s own tax audit report contradicted the subsequently raised claim of deduction.
Assessee’s Defence The assessee submitted that the Joint Venture was created merely to satisfy eligibility requirements contained in Government tender documents and that the Joint Venture itself did not possess independent infrastructure, technical personnel or machinery for execution of the projects. According to the assessee, the entire work of designing, engineering, procurement, construction, testing, commissioning and operation was actually undertaken by the assessee. It was therefore argued that merely because a contract was formally awarded to a Joint Venture, the assessee could not automatically be characterised as a sub-contractor.
The assessee also contended that the objection concerning Form No. 10CCB was procedural and technical because the audit report was subsequently furnished during assessment proceedings and all relevant particulars were made available to the AO. The assessee further argued that the observations in the tax audit report could not determine its substantive statutory entitlement to deduction under section 80-IA.
ITAT’s Finding on Section 80-IA — Burden of Proof The Tribunal took a fundamentally different view from the CIT(A). It held that the burden of establishing fulfilment of the statutory conditions for claiming deduction under section 80-IA squarely rested upon the assessee. On examination of the material available before it, the Tribunal found that the assessee had failed to discharge that burden.
The Tribunal specifically noted that the assessee had not placed sufficient documentary evidence to establish that it had undertaken the projects as a developer of eligible infrastructure facilities rather than merely as a contractor or sub-contractor. General submissions regarding deployment of resources were not considered sufficient. The assessee had not produced audited financial statements or other supporting material establishing deployment of its own financial resources, technical expertise, plant and machinery or manpower in execution of the projects. In the absence of such evidence, the Tribunal declined to accept the assertion that the assessee was acting as a developer.
Form 10CCB — Procedural Compliance The Tribunal also attached significance to compliance with the prescribed audit-report requirement. It observed that deduction under section 80-IA is available when the claim is made in accordance with the statutory provisions and is duly supported by the prescribed Form No. 10CCB. The assessee itself had admitted that Form No. 10CCB was obtained subsequent to filing the return. The Tribunal therefore questioned how the assessee could have validly quantified and claimed the deduction in the original return when the prescribed audit report had not been obtained at that stage.
The Tribunal further observed that there was no sufficient material demonstrating whether a similar section 80-IA claim had actually been made and allowed in earlier years or continued in subsequent years. Consequently, the Tribunal did not accept the assessee’s plea that the claim was covered by a consistent position in earlier years.
Other Circumstances Considered by ITAT
The Tribunal also found that several circumstances relied upon by the Revenue supported the conclusion that the assessee had failed to establish its eligibility. These included the assessee’s own description of itself as a contractor, deduction of tax under section 194C, recognition of revenue under Accounting Standard-7, execution of projects through Joint Ventures and the adverse observation in the tax audit report. The Tribunal treated these factors cumulatively rather than as isolated determinative tests.
The Tribunal ultimately held that, in the absence of cogent evidence demonstrating fulfilment of the statutory requirements of section 80-IA, the order of the CIT(A) could not be sustained. It therefore set aside the CIT(A)’s order and restored the AO’s disallowance of the section 80-IA deduction. Grounds 1 and 2 raised by the Revenue were accordingly allowed.
CBDT Circular No. 22/2015 — PF and ESI Issue
The Revenue’s third ground concerned employees’ contribution towards PF and ESI. The Revenue relied upon CBDT Circular No. 22/2015 dated 17.12.2015, which had clarified the distinction between employer’s contribution and employees’ contribution and stated that the Supreme Court decision in CIT v. Alom Extrusions Ltd. did not apply to employees’ contribution governed by section 36(1)(va).
The assessee, on the other hand, contended that the employees’ contribution had been deposited before the due date of filing the return under section 139(1), and therefore, based upon the judicial position prevailing for AY 2015-16, no disallowance was warranted.
ITAT Finding on Employees’ PF and ESI Contribution
The Tribunal rejected the CIT(A)’s approach and held that the issue was conclusively settled by the Supreme Court in Checkmate Services (P.) Ltd. v. CIT, (2022) 448 ITR 518 (SC). The Supreme Court had categorically held that employees’ contribution governed by section 36(1)(va) is subject to the due dates prescribed under the respective welfare legislation and that section 43B has no application to such employees’ contributions. Therefore, if employees’ contribution is deposited after the statutory due date under the PF/ESI legislation, the deduction is disallowable even if the payment is made before the due date for filing the income-tax return under section 139(1).
In the present case, it was undisputed that out of employees’ PF and ESI contribution of ₹15,13,928, an amount of ₹4,97,352 had not been deposited within the due dates prescribed under the respective welfare statutes. Consequently, the Tribunal held that the AO was justified in making the disallowance under section 36(1)(va) read with section 2(24)(x). The CIT(A)’s order deleting the addition was set aside and the AO’s order was restored.
Cases and Legal Authorities Relied Upon
On the section 80-IA issue, the assessee relied upon decisions of the Supreme Court, High Courts and Coordinate Benches, including decisions in the assessee’s own case for earlier assessment years, contending that the assessee had consistently been recognised as a developer rather than a works contractor. The CIT(A) had also relied upon those earlier decisions while granting relief. However, the present Tribunal found that the assessee had not placed sufficient documentary material before it to establish the necessary factual foundation for the claim in the years under consideration.
On the PF/ESI issue, the earlier decision relied upon by the CIT(A), namely M/s. Frigorifico Allana Pvt. Ltd., ITA No. 1860/Mum/2018, dated 27.06.2019, was held to be no longer applicable to the extent it was inconsistent with the subsequent binding judgment of the Supreme Court in Checkmate Services (P.) Ltd. v. CIT, (2022) 448 ITR 518 (SC).
Final Legal Ratio The decision lays down an important evidentiary principle concerning section 80-IA: the mere assertion that an assessee has undertaken development activity, assumed risks or deployed its own resources is insufficient; the assessee claiming a statutory deduction must produce cogent documentary evidence establishing fulfilment of every statutory condition. Where the record does not establish actual deployment of the assessee’s own financial resources, technical expertise, plant, machinery and manpower, the Tribunal may reject the claim notwithstanding the assessee’s description of its activities as development work.
The decision further demonstrates that the character of an infrastructure activity has to be established from the actual contractual and factual arrangement, and factors such as the assessee’s own description as a contractor, section 194C TDS, AS-7 accounting treatment, Joint Venture execution and the tax audit report can cumulatively support the Revenue’s position where the assessee fails to produce contrary documentary evidence.
On employees’ contribution, the legal position is now settled by Checkmate Services: payment before the section 139(1) return-filing deadline does not cure a payment made beyond the statutory PF/ESI due date, and section 43B cannot be invoked to allow such employees’ contribution.
Outcome The Revenue’s appeals for AY 2015-16 and AY 2016-17 were allowed. The Tribunal set aside the CIT(A)’s relief on the section 80-IA claim and restored the AO’s disallowance. It also restored the disallowance of ₹4,97,352 relating to employees’ PF and ESI contribution under section 36(1)(va). The findings in ITA No. 93/NAG/2025 were directed to apply mutatis mutandis to ITA No. 80/NAG/2025. Thus, the Revenue succeeded on both principal issues before the Nagpur ITAT.
FULL TEXT OF THE ORDER OF ITAT NAGPUR
These appeals filed by the Revenue are directed against the separate orders of National Faceless Appeal Centre, Delhi & Commissioner of Income Tax (Appeals)-1, Nagpur, (for short, “CIT(A)”), dated 18/12/2024 & 10.07.2020 passed under section 250 of the Income Tax Act, 1961 (for short, “Act”) which are emanating from the separate assessment orders dated 30.12.2018 & 22.12.2017 passed u/s. 143(3) of the Act by the ACIT & DCIT, Circle-1, Nagpur, for the Assessment Years (AY) 2016-17 & 2015-16 respectively.
2. Since the facts and issues involved in both the appeals are identical, they were clubbed, heard together, and are being disposed of by this common order for the sake of convenience and brevity. The facts are, however, being narrated from ITA No. 93/NAG/2025 pertaining to A.Y. 2015–16, which is treated as the lead case.
3. Department has raised the following grounds of appeal:
1. On the facts and circumstances of the case and in law; the Ld. CIT(Appeals), Nagpur has erred in treating the assessee as contractor but it was seen that the assessee had worked under M/s Doshin Veolia Water Solution Pvt. Ltd. who is the principal contractor hence the assessee is sub-contractor and the deduction claimed u/s 80IA (4)(b) is not allowable to the assessee.
2. On the facts and circumstance of the case and in law; the Ld. CIT(Appeals), Nagpur has erred in accepting contrasting view that at one point assessee has entered into Joint Venture and executed three projects namely (1) Stp. Ludhiana (ii) Stp 50MLD Jalandhar and (iii) Stp MLD Nagolkarar, Jalandhar and on the same project assessee himself has claimed deduction u/s 80IA, whereas he can only be termed as sub- contractor for these projects.
3. On the facts and circumstance of the case and in law, the Ld. CIT(Appeals), Nagpur has erred in allowing relief to the assessee from the addition made by the AO u/s 36(i) (va) r.w.s. 2(24)(x) without appreciating the fact that CBDT vide Circular No. 22/2015 dated 17.12.2015 has clarified that Apex Court decision in the case of M/s Alom extrusion P. Ltd. & other co. is not applicable for disallowance u/s 36(i) (va) thereby questioning the validity of CBDT Circular No. 22/2015 dated 17.12.2015.
4. Any other ground, which may be raised at the time of hearing.
4. Ground Nos.1 & 2 relate to the allowability of deduction claimed by the assessee U/s. 80-IA of the Act. Brief facts of the case are that assessee is a company engaged in the business of developing, operating and maintaining water supply projects, water treatment plants and sewage treatment plants for various local authorities and statutory bodies. For the A.Y. 2015-16, assessee filed its return of income on 23.09.2015 declaring a total income of Rs. 99,89,890/- after claiming deduction of Rs. 5,91,41,256/- u/s. 80-IA of the Act. Case was selected for scrutiny under the CASS. Accordingly, statutory notices u/s. 143(2) & 142(1) of the Act, along with questionnaires, were issued and duly served upon the assessee. In response, assessee furnished the requisite details, books of account and documentary evidence in support of the return of income and the claim of deduction u/s. 80-IA. During the course of assessment proceedings, the Ld. AO examined the assessee’s claim of deduction under Chapter VI-A amounting to Rs. 5,91,41,256/- u/s. 80-IA of the Act.
The Ld. AO was of the view that the assessee was not eligible for the said deduction and accordingly disallowed the entire claim. Besides the aforesaid disallowance, the Ld. AO also made an addition of Rs. 4,97,352/- on account of delayed deposit of employees’ contribution towards Provident Fund (PF) and Employees’ State Insurance (ESI) u/s. 36(1)(va) r.w.s.2(24)(x) of the Act, and a further addition of Rs. 4,92,885/- on account of interest on TDS. Consequently, the assessment was completed under section 143(3) of the Act.
5. Aggrieved by the assessment order, assessee preferred appeal before the Ld. CIT(A). After considering the assessment order, written submissions of the assessee, documentary evidence placed on record and the applicable judicial precedents, Ld.CIT(A) held that the assessee had satisfied the conditions prescribed u/s. 80-IA(4) of the Act. Ld. CIT(A) observed assessee had executed the projects by deploying its own technical expertise, manpower, plant and machinery, and had assumed the entrepreneurial and execution risks associated with the projects. Therefore, the assessee could not be regarded as a mere works contractor or sub-contractor so as to attract the mischief of the Explanation to section 80-IA(4) of the Act. Ld. CIT(A) further held that mere deduction of tax at source u/s. 194C, recognition of revenue in accordance with Accounting Standard-7 adopted in the books of account would not determine the true character of the assessee’s activities. The eligibility for deduction u/s. 8 0-IA has to be examined on the basis of the nature of the obligations undertaken and the responsibilities discharged by the assessee under the contract. Accordingly, the assessee could not be denied deduction merely because the contracts had initially been awarded to a Joint Venture. Relying upon the decisions of the Hon’ble Supreme Court, various High Courts and the Coordinate Benches of the Tribunal, including the decisions rendered in the assessee’s own case for the earlier assessment years on identical facts, Ld. CIT(A) directed the Ld. AO to allow the deduction u/s. 80-IA amounting to Rs. 5,91,41,256/-.
5.1 With regard to the disallowance of Rs. 4,97,352/-made u/s. 36(1)(va) r.w.s. 2(24)(x) of the Act, the Ld.CIT(A), following the judicial precedents applicable to the assessment year under consideration, held that the employees’ contribution towards PF and ESI having been deposited before the due date of filing the return of income u/s. 139(1), no disallowance was called for. Accordingly, the addition was directed to be deleted.
5.2 Aggrieved by the relief granted by the Ld.CIT(A), the Revenue is in appeal before this Tribunal. Learned Departmental Representative (DR), vehemently supporting the assessment order, submitted that Ld. CIT(A) erred in allowing the deduction u/s. 80-IA of the Act. It was contended that at para 4.4 of the assessment order, the assessee itself had admitted that it was functioning as a contractor and not as a developer. Referring to the findings recorded in the assessment order, Ld.DR submitted that assessee’s activities are squarely covered by the Explanation to section 80-IA(4) of the Act, which excludes a person executing works contract from claiming deduction u/s. 80-IA. Ld.DR further submitted that assessee had debited an amount of Rs.4,48,23,100/-towards work contract tax in its Profit and Loss Account, which, according to him, clearly establishes that the activities carried out by the assessee were in the nature of works contract. He further pointed out that assessee recognized its revenue in accordance with Accounting Standard-7 relating to construction contracts and that tax had been deducted at source u/s. 194C of the Act, as reflected in Form No. 26AS. These factors demonstrate that assessee was merely a contractor and not a developer of infrastructure facilities eligible for deduction u/s. 80-IA. It was further contended that assessee had failed to furnish the audit report in Form No. 10CCB electronically within the prescribed time, thereby violating the mandatory requirements of section 80-IA. According to the learned DR, non-compliance with this statutory condition itself disentitled the assessee from claiming the deduction. Ld. DR also submitted that assessee is a subsidiary of M/s.Doshion Veolia Water Solutions Pvt. Ltd., which holds 98.51% of its share capital. The contracts in question, according to him, had been awarded to a Joint Venture (JV), which is an independent legal entity, and the assessee had executed the work only as a sub-contractor under the said Joint Venture. Therefore, assessee was not the developer of the infrastructure facility but merely a sub-contractor and was consequently not entitled to deduction u/s. 80-IA. He further contended that the Ld. CIT(A) failed to appreciate that, in respect of the projects namely, (i) STP Ludhiana, (ii) STP 50 MLD Jalandhar and (iii) STP Nagolkarar, Jalandhar, the assessee had admittedly executed the work through the Joint Venture and, therefore, could not claim the status of an eligible developer. He drew our attention to column No. 33 of the tax audit report, wherein the auditor had reported “Nil” deduction under Chapter VI-A and had certified that no deduction u/s. 80-IA was admissible. According to him, the Ld.CIT(A) failed to appreciate the evidentiary value of the audit report while allowing the claim of deduction.
5.3 With regard to the deletion of disallowance u/s. 36(1)(va) r.w.s.2(24)(x) of the Act, Ld.DR submitted that Ld.CIT(A) erred in deleting the addition of Rs.4,97,352/-towards employees’ contribution to PF & ESI. He contended that CBDT Circular No.22/2015 dated 17.12.2015 specifically clarifies that the decision of the Hon’ble Supreme Court in the case of CIT v. Alom Extrusions Ltd. is not applicable to employees’ contribution governed by section 36(1)(va). Therefore, according to the Ld.DR, Ld. CIT(A) was not justified in granting relief to the assessee by disregarding the binding CBDT Circular. He, therefore, prayed that the order of the Ld.CIT(A) be set aside and that of the Assessing Officer be restored.
6. Per contra, learned counsel for the assessee strongly supported the order of the Ld.CIT(A) and submitted that Ld. AO had wrongly denied the deduction u/s. 80-IA by erroneously treating the assessee as a mere works contractor. It was submitted that the assessee is engaged in the business of developing, operating and maintaining water supply schemes, water treatment plants and sewage treatment plants for Government departments, local authorities and statutory bodies. The projects undertaken by the assessee involve designing, engineering, procurement, construction, installation, testing, commissioning and operation and maintenance of infrastructure facilities. The assessee executes the projects by deploying its own technical expertise, manpower, plant and machinery and assumes the entire entrepreneurial and execution risks. Therefore, the assessee satisfies all the conditions prescribed under section 80-IA(4) of the Act. Merely because the contracts describe the assessee as a contractor or tax has been deducted at source u/s. 194C, it cannot be inferred that assessee is not a developer. The nature of deduction of tax at source, recognition of revenue under Accounting Standard-7 made in the books of account have no bearing on the eligibility of deduction u/s. 8 0-IA.
6.1 Refuting the contention of the Revenue regarding execution of projects through a Joint Venture, the learned counsel submitted that Joint Venture was constituted only to satisfy the eligibility conditions contained in the tender documents issued by the Government authorities. The Joint Venture itself did not possess any independent infrastructure, technical personnel or machinery for execution of the projects. The entire work relating to designing, engineering, procurement, construction, testing, commissioning and operation was carried out by the assessee. Merely because the contract was awarded to the Joint Venture, the assessee cannot be regarded as a sub-contractor so as to deny the benefit of section 80-IA. It was submitted that the assessee had independently undertaken the execution of the projects and had borne all contractual and financial risks associated therewith. Learned counsel further submitted that objection regarding non-filing of Form No. 10CCB is purely technical in nature. The audit report was duly furnished during the assessment proceedings and all particulars necessary for examining the claim u/s. 80-IA were made available before the Ld. AO. Therefore, a procedural lapse, if any, cannot defeat a substantive claim otherwise admissible under the Act.
6.2 With regard to the observations made in the tax audit report, the learned counsel submitted that the auditor’s remarks cannot determine the assessee’s statutory entitlement u/s. 80-IA. The eligibility of deduction has to be examined independently on the basis of the provisions of the Act and the facts on record. He argued that the issue is squarely covered in favour of the assessee by the decisions of the Coordinate Benches of the Tribunal in the assessee’s own case for the earlier assessment years, wherein it has been held that the assessee is a developer of infrastructure facilities and not merely a works contractor and, therefore, eligible for deduction u/s. 80-IA of the Act. Since there is no change either in the nature of the projects or in the terms and conditions of the contracts during the year under consideration, the Ld.CIT(A) has rightly followed the earlier decisions while granting relief to the assessee.
6.3 As regards the disallowance u/s. 36(1)(va) r.w.s. 2(24)(x), learned counsel submitted that the employees’ contribution towards Provident Fund and ESI had been deposited before the due date of filing the return of income u/s. 139(1). For Assessment Year 2015-16, the issue was governed by the judicial precedents prevailing at the relevant point of time, under which no disallowance was warranted if the payments were made before the due date prescribed u/s. 139(1). Ld. CIT(A), therefore, rightly deleted the addition by following the settled legal position. He, therefore, prayed that the grounds raised by the Revenue deserve to be dismissed.
7. We have heard rival contentions of both the parties and perused the material available on record.
7.1 The primary issue for our consideration is whether the assessee is entitled to deduction u/s. 80-IA of the Act. The burden to establish fulfilment of the statutory conditions for claiming deduction u/s. 80-IA squarely rests upon the assessee. On a careful consideration of the material placed before us, we find that assessee has failed to discharge the said burden. The assessee has not placed on record sufficient documentary evidence to demonstrate that it had undertaken the projects as a developer of the eligible infrastructure facility and not merely as a contractor or sub-contractor. Except for making general submissions, no material has been produced to establish that the assessee had deployed its own financial resources, technical expertise, plant and machinery or manpower in developing the infrastructure projects. Even before us, the assessee has not filed copies of the audited financial statements or any other supporting documents evidencing deployment of its own resources and manpower in the execution of the projects. In the absence of such evidence, the claim that the assessee acted as a developer cannot be accepted.
7.2 We find merit in the contention of the Revenue regarding the procedural compliance prescribed under the Act. Deduction u/s. 8 0-IA is available only when the claim is made in accordance with the provisions of the Act and is duly supported by the audit report in the prescribed Form No. 10CCB. Such claim can ordinarily be made only if the deduction has been duly quantified in the audit report accompanying the return of income. In the present case, the assessee itself has admitted that the audit report in Form No.10CCB was obtained subsequent to the filing of the return of income. In such circumstances, it is not clear as to how the assessee could have validly quantified and claimed deduction u/s. 80-IA in the return originally filed. This aspect has remained unexplained throughout the proceedings. Further, there is no material on record indicating whether a similar claim u/s. 80-IA had been made and allowed in the earlier assessment years or was continued in the subsequent assessment years. In the absence of any history of claim or any evidence demonstrating consistency in the assessee’s stand, we are unable to accept the contention that the assessee had been consistently eligible for deduction u/s. 80-IA. The other circumstances relied upon by the Revenue, namely, the assessee’s own description of itself as a contractor, deduction of tax at source under section 194C, recognition of revenue in accordance with Accounting Standard-7, the execution of projects through the Joint Venture and the observations contained in the tax audit report, further lend support to the conclusion that the assessee has failed to establish its eligibility for deduction u/s. 80-IA.
7.3 In view of the totality of the facts and circumstances and in the absence of cogent evidence establishing compliance with the statutory requirements of section 80-IA, we are unable to sustain the order of the Ld. CIT(A). The stand of the Ld. AO is vindicated by the fact that the auditor has certified NIL deduction u/s. 80IA which is an admitted fact. We, therefore, set aside the order of the Ld.CIT(A) on this issue and restore that of the Ld. AO disallowing the deduction claimed u/s. 80-IA of the Act. Accordingly, ground Nos. 1 & 2 raised by the Revenue are allowed.
8. Ground No.3 relates to the deletion of disallowance made u/s. 36(1)(va) r.w.s. 2(24)(x) of the Act, 1961 on account of delayed deposit of employees’ contribution towards Provident Fund (PF) and Employees’ State Insurance (ESI). It is an undisputed fact that assessee had collected employees’ contribution towards PF and ESI amounting to Rs. 15,13,928/-. Out of the said amount, a sum of Rs. 4,97,352/- was admittedly not deposited within the due dates prescribed under the respective welfare statutes. The Ld. AO, therefore, disallowed the said amount u/s. 36(1)(va) r.w.s. 2(24)(x) of the Act. Ld.CIT(A), however, deleted the addition by following the decision of the Coordinate Bench of the Mumbai Tribunal in the case of M/s. Frigorifico Allana Pvt. Ltd. in ITA No. 1860/Mum/ 2018, dated 27.06.2019. We are unable to concur with the findings of the Ld.CIT(A). The issue relating to the allowability of employees’ contribution to PF and ESI deposited beyond the due dates prescribed under the respective Acts is no longer res integra and stands conclusively settled by the Hon’ble Supreme Court in the case of Checkmate Services (P.) Ltd. v. CIT [(2022) 448 ITR 518 (SC)]. The Hon’ble Apex Court has categorically held that employees’ contribution covered under section 36(1)(va) is governed by the due dates prescribed under the respective welfare enactments and that section 43B has no application to such contributions. Consequently, any delay in depositing the employees’ contribution beyond the statutory due dates attracts disallowance u/s. 36(1)(va) of the Act, even if such payment is made before the due date of filing the return of income u/s. 139(1). In view of the judicial precedent in Checkmate Services (P.) Ltd. (supra), the earlier decisions of various High Courts and Coordinate Benches, including the decision of the Mumbai Bench in M/s. Frigorifico Allana Pvt. Ltd. (supra) relied upon by the Ld.CIT(A), cannot be applied to the extent they are inconsistent with the law declared by the Hon’ble Supreme Court. Since, admittedly, the employees’ contribution amounting to Rs.4,97,352/- was not deposited within the due dates prescribed under the respective PF and ESI Acts, the Ld. AO was justified in making the disallowance u/s. 36(1)(va) r.w.s. 2(24)(x) of the Act. The order of the Ld. CIT(A) deleting the addition is, therefore, set aside and that of the Ld. AO is restored. Accordingly, Ground No.3 raised by the Revenue is allowed.
9. The facts and issues involved in ITA No. 80/NAG/2025 are identical to those in ITA No. 93/NAG/2025, except for the variation in the quantum of figures. Therefore, the findings and conclusions recorded by us in ITA No. 93/NAG/2025 shall apply mutatis mutandis to ITA No. 80/NAG/2025 as well.
In the result, appeals filed by the Revenue are allowed.
Order pronounced on 10.08.2026 under Rule 34 of Income Tax (Appellate Tribunal) Rules, 1963
