Case Law Details
ITAT CHENNAI BENCH ‘B’
Eshwarnath Constructions
versus
Assistant Commissioner of Income-tax
IT Appeal No. 185 (Mds.) of 2012
[ASSESSMENT YEAR 2008-09]
Date of Pronouncement -15.01.2013
ORDER
S.S. Godara, Judicial Member
This assessee’s appeal arises from the order of the Commissioner of Income Tax (Appeals) XIII, Chennai dated 28.11.2011 in ITA No. 196/10-11 for the assessment year 2008-09, in proceedings under section 143(3) of the Income Tax Act, 1961 [in short the “Act”].
2. Brief facts of the case are that the assessee is a partnership firm; engaged in the business of civil constructions, contractors, engineers and builders. For the impugned assessment year, it had filed its ‘return’ on 11.09.2008 declaring income of Rs. 13,05,189/- along with a claim of deduction under section 80I of the “Act” to the tune of Rs. 1,42,75,227/-.
3. The assessee is an Indian Railways contractor, who carries out construction on behalf of the Indian Railways for constructing rail over bridges, foot over bridges, new railway station buildings and new minor bridges etc. Its gross receipt for the impugned assessment year was Rs. 1,55,80,416/-. Needless to mention that the assessee had claimed deduction under section 80IA i.e. subject matter of the instant appeal.
4. In ‘scrutiny’ proceedings, the Assessing Officer formed an opinion that being a contractor instead of developer of infrastructure, assessee’s claim of deduction was not acceptable. The contention of the assessee in support of its claim was that it could not be treated as only a works contractor since it was contributing in raising infrastructure having being assigned constructions and development of various infrastructure facilities. It also sought support from the CBDT Circular No. 4/2010 (F. No. 178/14/2010-ITA.1) dated 18.05.2010. Still the Assessing Officer was not convinced. Therefore, in the assessment order dated 08.12.2010, he held that the assessee being a ‘contractor’ could not be treated as a ‘developer’ so as to avail deduction under section 80IA(4) of the “Act”. Accordingly, he made dis allowance of assessee’s claim of Rs. 1,42,75,227/- under section 80IA and added it in assessee’s total income.
5. The assessee carried the matter in appeal. We find from the order passed by the CIT(A) that while upholding the findings of the Assessing Officer, he has considered a catena of case law as well as explanation entrusted in the relevant provisions vide Finance Act, 2009 with retrospective effect from 01.04.2000 and held that the assessee firm is a works contractor only, therefore, not entitled for deduction under section 80IA(4) of the “Act”.
It is in this backdrop of the facts that the assessee is in appeal before the “Tribunal”.
6. The AR representing the assessee has reiterated various pleas raised in the grounds and submitted that the assessee is not only a contractor, but a developer as well, and entitled for deduction under section 80IA of the “Act”. In addition to this, he also placed reliance on the definition of the word “body” from the Law Lexicon to submit that the assessee satisfies all the terms and conditions enumerated under section 80IA(4) of the “Act”.
7. Per contra, the Revenue through DR has chosen to strongly support the CIT(A)’s order and prayed for confirming the same.
8. We have given our thoughtful consideration to the submissions of both parties and also gone through the findings of the Assessing Officer and CIT(A). The voluminous paper book referred to by the assessee has also been perused. The undisputed facts of the case are that the assessee’s claim raised under section 80IA of the “Act” has been negatived by the Assessing Officer as well as the CIT(A) on the ground that it is a contractor and not a developer. At this stage, we deem it appropriate to reproduce hereunder section 80IA of the “Act” providing deduction in respect of profits and gains from industrial undertaking or enterprises engaged in infrastructure development which reads as follows:-
80IA. (1)Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years.
(2) …………………..
(2A) …………………
(3) …………………..
(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 fulfils all the following conditions, namely:—
(a) it is 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;
(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 transferor 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) ………………
(13) …………….
*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).
*It introduced by Finance (No.2) Act, 2009 w.r.e.f. 1.4.2000.
A perusal of the statutory provisions makes it clear that it does not provide a blanket deduction i.e. in order to succeed in a claim of deduction; the concerned assessee has to derive profits and gains from any business referred to in sub-section (4). Further, sub-section (4) prescribes applicability of clause i.e. the case in which the deduction provision would apply. It is in this sub-section that the legislature has enumerated the nature of the undertakings, their activities in contributing raising of infrastructure. Further, in the explanation attached to the sub-section, the legislature has also entrusted the meaning of the infrastructure facilities. In our opinion, an assessee while claiming deduction has to satisfy all conditions in sub-section (4)(1)(a) or (b) or (c). It is mandatory for the assessee to first satisfy sub-section clause (i)(a), then (b) then (c), then proviso and so on. In case the concerned assessee fails in any one of the clauses, even if it satisfies the other part of the sub-section, the claim has to be rejected. Now we proceed to decide as to whether the assessee firm satisfies sub-section (4)(i) of the “Act” or not. For the said sub-section, a reading of the provision makes it unambiguous that the concerned claimant has to be an enterprises carrying on the business of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility and it has to be owned by a consortium of such company or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act. Admittedly, the assessee is a partnership firm. As we notice from the relevant statutory provision, the enterprise in the nature of firm nowhere finds mention in the mandate of the legislature. Although the assessee has emphasized from the definition of the word ‘body’ in the Law Lexicon which reads as follows:
“Statutory definition, includes partnership, Financial Services and Markets Act, 2000 (c.8), S. 367(2) (Stroud, 6th Edn., 2000, Supplement, 2003).
It also includes group of bodies, partnership of enterprise card on by one or more persons or bodies and a body which is substantially the same at or successor, to, another body, Government Resources and Accounts Act, 2000 (c.20), S. 17(7) (Stroud, 6th Edn., 2000, Supplement, 2003).
The main-central or principal part [Art. 110 (2), Const.]; physical or material frame of a man or animal; gang of thieves etc.”
In our opinion, the said definition being a general preposition does not help the assessee’s case. It is a trite preposition of law while interpreting a statute and more so a fiscal statute, neither the judicial forum concerned can insert its own words nor it can take away any from the statute. As it is seen, the earlier portion of the statutory provision prescribes a company registered in India or a consortium of such companies or by an authority or corporation or any other body established or constituted and so on. In our view, the latter part is liable to be read in the light of the earlier part by following the principles of ejusdem generis. The vehement contention of the assessee is that it is also a body established or constituted under a Central Act as it is governed by Partnership Act, cannot be accepted for the reason that under the provisions of Partnership Act a firm is not created i.e. it is not a creation of statute, but it is a body of individual regulated by the statute namely Partnership Act. Hence, we hold that the assessee fails to satisfy the applicability clause of the provision as envisaged under section 80IA(4)(i) of the “Act”.
9. So far as catena of the judgments submitted by the AR of the assessee, we notice that they only pertain to section 80IA(4)(i)(b) i.e. regarding the issue of contractor viz-a-vis developer. Hence, we do not deem it appropriate to decide on the said issue since the assessee does not fulfill the condition enumerated in the first part of the statutory provision. We make it clear that although the issue adjudicated by us has not been looked into by the Assessing Officer or CIT(A), but in the larger interest of the justice and in view of the fact that before availing deduction under section 80IA, all the necessary conditions have to be satisfied we have proceeded to examine the applicability of the deduction provision contained in section 80IA(4)(i) of the “Act”.
10. Consequently, in the light of our above discussion, the assessee’s appeal fails. Accordingly it is dismissed being devoid of any merits.
