DCIT, Central Circle-5, Hyderabad v. M/s. GVPR Engineers Ltd, Hyderabad

ITA 1473/HYD/2011 | 2009-2010
Pronouncement Date: 29-02-2012 | Result: Dismissed

Appeal Details

RSA Number 147322514 RSA 2011
Assessee PAN AAACG7614F
Bench Hyderabad
Appeal Number ITA 1473/HYD/2011
Duration Of Justice 6 month(s) 11 day(s)
Appellant DCIT, Central Circle-5, Hyderabad
Respondent M/s. GVPR Engineers Ltd, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 29-02-2012
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 29-02-2012
Assessment Year 2009-2010
Appeal Filed On 17-08-2011
Judgment Text
I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B' HYDERABAD BEFORE SHRI CHANDRA POOJARI ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN JUDICIAL MEMBER SL. NO. ITA NO. & A.Y. APPELLANT RESPONDENT 1. 347/HYD/2008 A.Y. 2004-05 M/S. GVPR ENGINEERS LTD. HYDERABAD PAN: AAACG7614F ACIT CIRCLE-2(3) HYDERABAD 2. 1323/HYD/2008 A.Y. 2005-06 3. 1471/HYD/2011 A.Y. 2006-07 DCIT CENTRAL CIRCLE-5 HYDERABAD M/S. GVPR ENGINEERS LTD. HYDERABAD PAN: AAACG7614F 4. 1472/HYD/2011 A.Y. 2007-08 5. 1473/HYD/2011 A.Y. 2009-10 6. 1481/HYD/2011 A.Y. 2003-04 M/S. GVPR ENGINEERS LTD. HYDERABAD PAN: AAACG7614F ACIT CENTRAL CIRCLE-5 HYDERABAD 7. 1482/HYD/2011 A.Y. 2004-05 8. 1483/HYD/2011 A.Y. 2005-06 9. 1484/HYD/2011 A.Y. 2006-07 10. 1485/HYD/2011 A.Y. 2007-08 11. 1486/HYD/2011 A.Y. 2008-09 12. 1487/HYD/2011 A.Y. 2009-10 13. 1359/HYD/2011 A.Y. 2008-09 DCIT CENTRAL CIRCLE-5 HYDERABAD M/S. GSP INFRATECH DEVELOPMENT HYDERABAD PAN: AABCG5845P 14. 1401/HYD/2011 A.Y. 2008-09 M/S. GSP INFRATECH DEVELOPMENT HYDERABAD PAN: AABCG5845P ACIT CENTRAL CIRCLE-5 HYDERABAD 15. 1488/HYD/2011 A.Y. 2007-08 SRI G. SIVA SHANKAR REDDY HYDERABAD PAN: AHAPG3919M 16. 1489/HYD/2011 A.Y. 2009-10 SRI G. SIVA SHANKAR REDDY HYDERABAD PAN: AHAPG3919M 17. 1491/HYD/2011 A.Y. 2007-08 SRI G.S.P. VEERA REDDY HYDERABAD PAN: AABCG5845P 18. 1490/HYD/2011 A.Y. 2008-09 SRI G. VEERA SEKHAR REDDY HYDERABAD PAN: AHAPG3918L ASSESSEE BY: SHI A.V. SADASIVA & SHI M.V. ANIL KUMAR REVENUE BY: SMT. K. MYTHILI RANI D ATE OF HEARING: 05.01.2012 DATE OF PRONOUNCEMENT: 29.02.2012 I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 2 O R D E R PER CHANDRA POOJARI AM : THESE ARE EIGHTEEN APPEALS BY THE REVENUE AND DIFF ERENT ASSESSEES ARE DIRECTED AGAINST THE DIFFERENT ORDERS OF THE CIT (A)-III AND CIT (A)-VII HYDERABAD FOR THE ABOVE ASSESSMEN T YEARS. SINCE THE ISSUES INVOLVED IN THESE APPEALS ARE COMM ON IN NATURE ALL THESE APPEALS ARE CLUBBED TOGETHER HEARD TOGETH ER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE WILL TAKE UP APPEALS RELATING TO M/S. GVP R ENGINEERS LTD. HYDERABAD IN ITA NOS. 1481 1482 14 83 1484 1485 1486 1487 OF 2011 347/HYD/08 1323/HYD/08 1471 1472 AND 1473 OF 2011. 3. THE FIRST COMMON GROUND IN ASSESSEES APPEALS NAMEL Y ITA NOS. 1481/HYD/2011 TO 1487/HYD/2011 IS WITH REGARD TO THE FRAMING THE ASSESSMENT UNDER SECTION 153A OF THE AC T IN SPITE OF ABSENCE OF VALID SEARCH AND ANY INCRIMINATING MATER IAL FOUND AT THE PREMISES OF THE ASSESSEE. ACCORDING TO THE ASSE SSEE THE ASSESSING OFFICER SHOULD NOT HAVE ISSUED NOTICE UND ER SECTION 153 OF THE ACT. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. THERE WAS A SEARCH OPERATION CONDUCTED IN THE CASE OF SRI VENKATA KUTUMBARAO AND OTHERS ON 28-7-2008 AND ALSO SEARCH WAS CONDUCTED AT THE BUSINESS PREMISES OF GVPR ENGINEER S LIMITED AND THERE WAS SEIZURE OF SOME INCRIMINATING DOCUMEN TS AND THE CASES WERE NOTIFIED WITH THE DCIT CENTRAL CIRCLE-5 HYDERABAD. THEREAFTER NOTICE UNDER SECTION 153A HAS BEEN ISSU ED CONSEQUENT TO THE SEARCH ACTION. BEING SO WE FIND NO MERIT IN THE GROUND. ACCORDINGLY THIS GROUND OF THE ASSESSEE IS DISMISS ED. I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 3 4. THIS BEING THE SOLE GROUND IN ITA NO.1481/HYD/2011 THIS APPEAL IS ACCORDINGLY DISMISSED AND IN OTHER APPEAL S THIS GROUND IS DISMISSED. 5. SECOND COMMON GROUND IN ITA NOS. 1482 TO 1485/HYD/ 2011 347/HYD/08 AND 1323/HYD/08 IS WITH REGARD TO NON GRANTING OF DEDUCTION UNDER SECTION 80IA OF THE ACT WITHOUT PROPER APPRECIATION OF THE FACT THAT THE ASSESSEE IS NOT A CONTRACTOR BUT A DEVELOPER OF INFRASTRUCTURE FACILITY AND ELIGIBLE F OR DEDUCTION UNDER SECTION 80IA OF THE ACT. 6. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE CLAI MED DEDUCTION UNDER SECTION 80IA OF THE ACT FOR THESE A SSESSMENT YEARS AS THE PROFIT AND GAINS IS FROM INDUSTRIAL UN DERTAKING ENGAGED IN INFRASTRUCTURE DEVELOPMENT. THE SAME WAS DENIED BY THE LOWER AUTHORITIES ON THE REASON THAT THE ASSESS EE NOT DEVELOPED ANY NEW INFRASTRUCTURE FACILITY AS REQUIR ED UNDER SECTION 80IA(4)(I)(B) OF THE INCOME-TAX ACT. ACCORDING TO THE REVENUE THE ASSESSEE HAD ONLY TAKEN UP THE RENOVATION AND MODER NISATION OF THE EXISTING NET WORK/INFRASTRUCTURE FACILITIES. IT IS ALSO OBSERVED THAT AS PER AGREEMENT THE ASSESSEE ENTERED FOR BUI LDING OR CONSTRUCTING THE WHOLE OR PART OF THE PROJECT FOR WHICH THE ENTIRE INVESTMENTS WERE MADE BY THE GOVERNMENT AND THE ASS ESSEE WAS PAID ON RUNNING BILL TO BILL BASIS. HENCE THERE WAS NO STIPULATION IN ANY OF THE CONTRACTS THAT THE FACILITY BUILT W OULD BE TRANSFERRED OR HANDED OVER BACK TO THE OWNER/EMPLOYER. BEING S O SUCH CONTRACTS ARE NOT ELIGIBLE FOR DEDUCTION UNDER SECT ION 80IA OF THE ACT. AGAINST THIS THE ASSESSEE IS IN APPEAL BEFOR E US. 7. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESS EE DREW OUR ATTENTION TO THE PROVISIONS OF SECTION 80 IA (4 ) OF THE ACT. HE READ BEFORE US THE SAID SECTION 80 IA(4)(I) OF THE ACT AND SUBMITTED I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 4 THAT BY THE FINANCE ACT 2001 WITH EFFECT FROM 1-4- 2002 WHICH WAS AMENDED AS FOLLOWS:- (I) DEVELOPING OR (II) OPERATING AND MAINTAINING O R (III) DEVELOPING OPERATING AND MAINTAINING A MEW INFRASTRUCTURE SUBSTITUTED (I) DEVELOPING (MAINTA INING OR OPERATING OR (III) DEVELOPING MAINTAINING AND OPERATING. 8. HE ALSO DREW OUR ATTENTION TO THE CIRCULAR NO.14 OF 2001 WHICH READS AS UNDER:- CIRCULAR NO.14/2001 EXPLANATORY NOTES FINANCE ACT 2001 - EXPLANATORY NOTES ON PROVISIONS RELATING TO DIRECT TAXES DEFINITION OF 'INFRASTRUCTURE FACILITY' IN SECTION 10(23G) TO BE SAME AS THAT IN SECTION BO-IA(4) 17.1 UNDER THE EXISTING PROVISIONS CONTAINED IN CLA USE (23G) OF SECTION 10 ANY INCOME OF AN INFRASTRUCTURE CAPITAL FUND OR AN INFRASTRUCTURE CAPITAL COMPANY BY WAY OF INTEREST DIVIDEND (OTHER THAN DIVIDENDS REFERRED TO IN SECTION 115-0) AND LO NG TERM CAPITAL GAINS FROM INVESTMENT MADE BY WAY OF EQUITY OR LONG -TERM FINANCE IN AN APPROVED ENTERPRISE WHOLLY ENGAGED IN THE BUS INESS OF (I) DEVELOPING (II) MAINTAINING AND OPERATING OR (III ) DEVELOPING MAINTAINING AND OPERATING AN INFRASTRUCTURE FACILIT Y SHALL NOT BE INCLUDED IN COMPUTING THE TOTAL INCOME. 17.2 FISCAL INCENTIVES FOR DEVELOPMENT OF INFRASTRU CTURE HAVE BEEN PROVIDED IN THE INCOME-TAX ACT AS A PACKAGE SO THA T TAX HOLIDAY IS ALLOWED UNDER SECTION 80-IA TO THE INFRASTRUCTURE E NTERPRISE AND INCOME FROM LONG-TERM INVESTMENT MADE BY THE INFRAS TRUCTURE CAPITAL COMPANY OR INFRASTRUCTURE CAPITAL FUND IN T HE APPROVED ENTERPRISE IS EXEMPT UNDER SECTION 10(23G). THUS W HENEVER A DECISION IS TAKEN TO REVISE THE SCOPE OF FISCAL INC ENTIVES TO INFRASTRUCTURE BY AMENDING SECTION 80-1A NECESSARY AMENDMENTS ARE REQUIRED TO BE MADE IN SECTIONS 10(23G) AS WELL . 17.3 THUS AS A MEASURE OF RATIONALISATION FINANCE ACT 2001 HAS AMENDED SECTION 10(23G) SO AS TO PROVIDE THAT INCOM E BY WAY OF INTEREST DIVIDEND OR LONG TERM CAPITAL GAINS OF AN INFRASTRUCTURE CAPITAL FUND OR AN INFRASTRUCTURE CAPITAL COMPANY FROM INVESTMENTS IN ANY ENTERPRISE OR UNDERTAKING WHOLLY ENGAGED IN THE BUSINESS REFERRED TO IN SUB-SECTION (4) OF SECT ION 80-IA OR IN A HOUSING PROJECT REFERRED TO IN SUB-SECTION (10) OF SECTION 80-18 WILL NOT BE INCLUDED IN COMPUTING THE TOTAL INCOME. THIS WILL REMOVE THE REQUIREMENT OF CONSEQUENTIAL AMENDMENT I N SECTION I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 5 10(23G) AS A RESULT OF ANY FUTURE CHANGE IN SECTION BO-IA REGARDING INFRASTRUCTURE. 17.4 THIS AMENDMENT WILL TAKE EFFECT FROM 1ST APRIL 2002 AND WILL ACCORDINGLY APPLY IN RELATION TO THE ASSESSM ENT YEAR 2002-03 AND SUBSEQUENT ASSESSMENT YEARS. [SECTION 5(G)] TAX HOLIDAY FOR INFRASTRUCTURE RATIONALISED 47.1 UNDER THE PROVISIONS OF SECTION BO-IA ROADS HIGHWAYS BRIDGES AIRPORTS PORTS AND RAIL SYSTEMS ARE REGAR DED AS INFRASTRUCTURE FACILITY AND THE ENTERPRISES ENGAGED IN DEVELOPING OR OPERATING AND MAINTAINING OR DEVELOPING OPERATI NG AND MAINTAINING SUCH INFRASTRUCTURE ARE ENTITLED TO A T AX HOLIDAY FOR FIVE YEARS AND A DEDUCTION OF 30% OF PROFITS FOR TH E NEXT FIVE YEARS. THIS BENEFIT IS APPLICABLE IN RESPECT OF SUCH SPECI FIED INFRASTRUCTURAL FACILITY BECOMING OPERATIONAL ON OR AFTER 1ST APRIL 1995. THE ENTERPRISE CLAIMING SUCH BENEFIT HAS TO E NTER INTO AN AGREEMENT WITH THE CENTRAL OR STATE GOVERNMENT OR A LOCAL AUTHORITY OR ANY OTHER STATUTORY AUTHORITY BY WHIC H 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 B OOT (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 PAR TICULAR A NEED TO ENCOURAGE INVESTMENT IN THE AREA OF SURFACE TRANSPO RT WATER SUPPLY WATER TREATMENT SYSTEM IRRIGATION PROJECT SANITATION AND SEWERAGE SYSTEM OR SOLID WASTE MANAGEMENT SYSTEMS. WITH THIS IN VIEW SECTION BO-IA HAS BEEN AMENDED TO RELAX THE E XISTING TWO TIER BENEFIT TO PROVIDE A TEN YEAR TAX HOLIDAY. KEE PING IN VIEW THEIR CAPITAL INTENSIVE NATURE THE HIGHER ALLOWANC ES OF DEPRECIATION IN THE INITIAL YEARS TO SUCH ENTERPRIS ES 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 H OLIDAY 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 BE GINS OPERATING THE INFRASTRUCTURE FACILITY. 47.3 IN THE CASE OF OTHER INFRASTRUCTURE NAMELY F OR AIRPORT PORT INLAND PORT AND INLAND WATERWAYS SECTION BO-IA HAS BEEN FURTHER AMENDED TO RELAX THE EXISTING TWO TIER FISCAL INCEN TIVE. INSTEAD AN I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 6 IDENTICAL TEN YEAR TAX HOLIDAY MAY BE AVAILED OF IN A BLOCK OF INITIAL FIFTEEN YEARS. 47.4 THE CONDITION THAT SUCH INFRASTRUCTURE FACILIT Y SHALL BE TRANSFERRED TO THE CENTRAL GOVERNMENT STATE GOVERN MENT OR LOCAL AUTHORITY HAS ALSO BEEN REMOVED. HOWEVER THE AGREE MENT WITH SUCH AUTHORITIES FOR CREATION OF SUCH INFRASTRUCTUR E WILL HAVE TO BE ENTERED INTO. 47.5 UNDER SUB-SECTION (B) OF SECTION BO-IA WHERE ANY GOODS ARE TRANSFERRED FOR A CONSIDERATION TO ANY OTHER BUSINE SS OF THE ASSESSEE THE CONSIDERATION SHOULD CORRESPOND TO TH E MARKET VALUE OF SUCH GOODS. AS IN CERTAIN CASES THE TRANSFER MA Y RELATE TO SERVICES THE PROVISION HAS BEEN ACCORDINGLY AMENDE D 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 F OR DISTRIBUTION OF ELECTRICITY AND SPECIFIED MARKETABLE SERVICES IN TE LECOM. INSTEAD OF THE WORDS 'INDUSTRIAL UNDERTAKING' OCCURRING IN SEC TION 8O-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. ON READING THE ABOVE SECTION AND THE NOTES ON C1AUS ES/CBOT CIRCULAR IT IS VERY CLEAR ~ THAT WITH EFFECT FROM 1 -4-2002 ' THE ENTERPRISES ENGAGED IN DEVELOPING OR OPERATING AND MAINTAINING OR DEVELOPING OPERATING AND MAINTAINING SUCH INFRA STRUCTURE ARE ENTITLED TO A TAX HOLIDAY. EARLIER TO THE ABOVE SUB STITUTION THERE WAS NO 'OR' BETWEEN THE WORD M DEVELOPING (II) MAI NTAINING AND OPERATING OR (III) DEVELOPING MAINTAINING AND OPER ATING ON ENTERING INTO AN AGREEMENT WITH GOVERNMENT WOULD BE ELIGIBLE FOR DEDUCTION UNDER SECTION 801A. 9. FROM THE ABOVE HE SUBMITTED THAT THE ENTERPRISES E NGAGED IN DEVELOPING OR OPERATING AND MAINTAINING OR DEVEL OPING OPERATING AND MAINTAINING SUCH INFRASTRUCTURE ARE E NTITLED TO A TAX HCOLIDAY. EARLIER TO THE ABOVE SUBSTITUTION THERE W AS NO WORD 'OR' BETWEEN THE WORD DEVELOPING (II) MAINTAINING AND O PERATING OR (III) DEVELOPING MAINTAINING AND OPERATING ON ENTERING INTO AN AGREEMENT WITH GOVERNMENT WOULD BE ELIGIBLE FOR DED UCTION UNDER SECTION 801A OF THE ACT. HE DREW OUR ATTENTION TO T HE DECISION OF I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 7 THE MUMBAI ITAT IN THE CASE OF ACIT VS. BHARAT UDYO G LIMITED (118 ITD 336) WHEREIN HELD THAT:- THE AMENDMENT IN SECTION 80-IA WAS BROUGHT ABOUT B Y THE FINANCE ACT 1995 WITH EFFECT FROM 1-4-1996. B Y VIRTUE OF THIS AMENDMENT THE DEDUCTION UNDER SECTI ON 80-IA WAS PROVIDED TO ANY ENTERPRISE CARRYING ON TH E BUSINESS OF DEVELOPING MAINTAINING AND OPERATING T HE INFRASTRUCTURE FACILITY. THUS TO BE ELIGIBLE FOR T HIS DEDUCTION AN ASSESSEE WAS REQUIRED TO CARRY OUT AL L THE THREE ACTIVITIES I.E. (I) TO DEVELOP (II) TO MAINTAIN AND (III) TO OPERATE. AFTER THE AMENDMENT EFFECTED IN SECTION 80-IA BY THE FINANCE ACT 1999 WITH EFFECT FROM 1-4-2000 THE DEDUCTION UNDER SECTION 80-IA(4) BECA ME AVAILABLE TO ANY ENTERPRISE CARRYING ON THE BUSINES S OF (I) DEVELOPING OR (II) MAINTAINING AND OPERATING O R (III) DEVELOPING MAINTAINING AND OPERATING ANY INFRASTRUCTURE FACILITY. [PARA 7] SUB-CLAUSE (C) OF SECTION 80-IA(4) IS APPLICABLE TO AN ENTERPRISE WHICH IS ENGAGED IN OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTE R 1-4- 1995. IT IS NOT APPLICABLE TO THE CASE OF AN ENTERP RISE WHICH IS ENGAGED IN MERE DEVELOPMENT OF INFRASTRUCTURE FACILITY AND NOT ITS OPERATION AND MAINTENANCE. THEREFORE THE QUESTION OF OPERATIN G AND MAINTAINING OF INFRASTRUCTURE FACILITY BY SUCH AN ENTERPRISE BEFORE OR AFTER ANY CUT OFF DATE CANNOT ARISE. WHEN THE ACT PROVIDES FOR DEDUCTION UNDER SECTION 8 0- IA(4) UNDISPUTEDLY FOR AN ENTERPRISE WHICH IS ONL Y DEVELOPING THE INFRASTRUCTURE FACILITY UNACCOMPA NIED BY OPERATING AND MAINTAINING THEREOF BY SUCH ENTI TY THERE CANNOT BE ANY QUESTION OF PROVIDING A CONDITI ON FOR SUCH AN ENTERPRISE TO START OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER 1-4- 1995. SINCE THE ASSESSEE WAS ONLY A DEVELOPER OF TH E INFRASTRUCTURE PROJECT AND IT WAS NOT MAINTAINING A ND OPERATING THE INFRASTRUCTURE FACILITY SUB-CLAUSE ( C) OF SUB-SECTION (4) OF SECTION 80-IA WAS NOT APPLICABLE . [PARA8] FURTHER FROM THE ASSESSMENT YEAR 2000-01 DEDUCTIO N UNDER SECTION 80-IA(4) IS AVAILABLE IF THE ASSESSEE CARRIES ON THE BUSINESS OF ANY ONE OF THE ABOVE- MENTIONED THREE TYPES OF ACTIVITIES. WHEN AN ASSESS EE IS ONLY DEVELOPING AN INFRASTRUCTURE FACILITY/PROJE CT AND IS NOT MAINTAINING NOR OPERATING IT OBVIOUSLY SUCH AN I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 8 ASSESSEE WOULD BE PAID FOR THE COST INCURRED BY IT; OTHERWISE HOW WOULD THE PERSON WHO DEVELOPS THE INFRASTRUCTURE FACILITY PROJECT REALIZE ITS COST? IF THE INFRASTRUCTURE FACILITY JUST AFTER ITS DEVELOPMENT IS TRANSFERRED TO THE GOVERNMENT NATURALLY THE COST W OULD BE PAID BY THE GOVERNMENT. IF A PERSON WHO ONLY DEVELOPS THE INFRASTRUCTURE FACILITY IS NOT PAID BY THE GOVERNMENT THE ENTIRE COST OF DEVELOPMENT WOULD BE A LOSS IN THE HANDS OF THE DEVELOPER AS HE IS NOT OPE RATING THE INFRASTRUCTURE FACILITY. WHEN THE LEGISLATURE H AS PROVIDED THAT THE INCOME OF THE DEVELOPER OF THE INFRASTRUCTURE PROJECT WOULD BE ELIGIBLE FOR DEDUCT ION IT PRESUPPOSES THAT THERE CAN BE INCOME TO DEVELOPER I.E. TO THE PERSON WHO IS CARRYING ON THE ACTIVITY OF ON LY DEVELOPING INFRASTRUCTURE FACILITY. OBVIOUS AS IT IS A DEVELOPER WOULD HAVE INCOME ONLY IF HE IS PAID FOR DEVELOPMENT OF INFRASTRUCTURAL FACILITY FOR THE SI MPLE REASON THAT HE IS NOT HAVING THE RIGHT/AUTHORIZATIO N TO OPERATE THE INFRASTRUCTURE FACILITY AND TO COLLECT TOLL THERE FROM AND HAS NO OTHER SOURCE OF RECOUPMENT OF HIS C OST OF DEVELOPMENT. THEREFORE THE BUSINESS ACTIVITY OF THE NATURE OF BUILD AND TRANSFER ALSO FALLS WITHIN ELIG IBLE CONSTRUCTION ACTIVITY THAT IS ACTIVITY ELIGIBLE F OR DEDUCTION UNDER SECTION 80-IA INASMUCH AS MERE DEVELOPMENT AS SUCH AND UNASSOCIATED/ UN- ACCOMPANIED WITH OPERATE AND MAINTENANCE ALSO FALLS WITHIN SUCH BUSINESS ACTIVITY AS IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IA. THEREFORE MERELY BECAUSE THE ASSESSEE WAS PAID BY THE GOVERNMENT FO R DEVELOPMENT WORK IT COULD NOT BE DENIED DEDUCTION UNDER SECTION 80-IA (4). A PERSON WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON WOULD BE A CONTRACTOR NO DOUBT; AND THE ASSESSEE HAVING ENTERED INTO AN AGREEMENT WITH THE GOVERNMENT AGENCIES FOR DEVELOPMENT OF THE INFRASTRUCTURE PROJECTS WAS OBVIOUSLY A CONTRACTOR; BUT THAT DID NOT DEROGATE T HE ASSESSEE FROM BEING A DEVELOPER AS WELL. THE TERM CONTRACTOR IS NOT ESSENTIALLY CONTRADICTORY TO TH E TERM DEVELOPER. ON THE OTHER HAND RATHER SECTION 80-I A(4) ITSELF PROVIDES THAT THE ASSESSEE SHOULD DEVELOP TH E INFRASTRUCTURE FACILITY AS PER THE AGREEMENT WITH T HE CENTRAL GOVERNMENT STATE GOVERNMENT OR A LOCAL AUTHORITY. SO ENTERING INTO A LAWFUL AGREEMENT AND THEREBY BECOMING A CONTRACTOR SHOULD IN NO WAY BE A BAR TO THE ONE BEING A DEVELOPER. THEREFORE MERELY BECAUSE IN THE AGREEMENT FOR DEVELOPMENT OF INFRASTRUCTURE FACILITY ASSESSEE WAS REFERRED TO A S CONTRACTOR OR BECAUSE SOME BASIC SPECIFICATIONS WER E I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 9 LAID DOWN IT DID NOT DETRACT THE ASSESSEE FROM THE POSITION OF BEING A DEVELOPER; NOR WOULD IT DEBAR T HE ASSESSEE FROM CLAIMING DEDUCTION UNDER SECTION 80- IA(4).[PARA9] THEREFORE THE ASSESSEE WHO WAS ONLY ENGAGED IN DEVELOPING THE INFRASTRUCTURAL FACILITY I.E. ROAD AND NOT ENGAGED IN THE OPERATING AND MAINTAINING THE SAID FACILITY WAS ENTITLED TO THE BENEFITS OF THE DEDUC TION UNDER SECTION 80-IA(4). THE PROVISIONS OF SUB-CLAUS E (C) OF CLAUSE (I) OF SECTION 80-IA (4) WERE INAPPLICABL E TO THE INSTANT CASE. HENCE THE ORDER OF THE COMMISSIONER (APPEALS) WAS CORRECT. [PARA 13] 10. FURTHER HE DREW OUR ATTENTION TO THE DECISION OF B OMBAY HIGH COURT IN THE CASE OF CIT VS. GLENMARK PHARMACE UTICALS LIMITED (319 ITR 199) THE RELEVANT EXTRACT OF THE HEAD NOTE READS AS UNDER:- BY THE FINANCE ACT OF 2009 WHICH SUBSTITUTED THE PROVISIONS OF SECTION 194C THE EXPRESSION 'WORK' H AS NOW BEEN DEFINED IN CLAUSE (IV ) OF THE SUBSTITUTED EXPLANATION. CLAUSES (A) TO (D ) ARE THE SAME AS CL AUSE (A ) TO (D) OF THE ERSTWHILE EXPLANATION III. HOWEV ER THE EXPLANATION (E ) HAS NOW BEEN INSERTED. [PARA 26] WHAT HAS WEIGHED IN THE INTRODUCTION OF CLAUSE (E ) OF THE EXPLANATION WAS ONGOING LITIGATION ON THE QUEST ION AS TO WHETHER TDS WAS DEDUCTIBLE ON OUTSOURCING CONTRACTS. CLAUSE (E) WAS INTRODUCED 'TO BRING CLAR ITY ON THIS ISSUE' OR IN OTHER WORDS TO REMOVE THE AMBIG UITY ON THE QUESTION. CLAUSE (E) AS INTRODUCED CONTAINS A POSITIVE AFFIRMATION THAT THE EXPRESSION 'WORK' WIL L COVER MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USIN G MATERIAL PURCHASED FROM SUCH A CUSTOMER. CLAUSE (E) HAS PLACED THE POSITION BEYOND DOUBT BY INCORPORATI NG LANGUAGE TO THE EFFECT THAT THE EXPRESSION 'WORK' S HALL NOT INCLUDE MANUFACTURE OR SUPPLY OF A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL WHICH IS PURCHASED FROM A PERSON OTHER THAN SUCH CUSTOMER. IN OTHER WORDS TH E CIRCUMSTANCE THAT THE REQUIREMENTS OR SPECIFICATION S ARE PROVIDED BY THE PURCHASER IS NOT REGARDED BY THE STATUTE AS BEING DISPOSITIVE OF THE QUESTION AS TO I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 10 WHETHER A CONTRACT CONSTITUTES A CONTRACT OF WORK O R SALE. WHAT IS OF SIGNIFICANCE IS WHETHER MATERIAL H AS BEEN PURCHASED FROM THE CUSTOMER WHO ORDERS THE PRODUCT. WHEN THE MATERIAL IS PURCHASED FROM THE CUSTOMER WHO ORDERS THE PRODUCTS IT CONSTITUTES A CONTRACT OF WORK WHILE ON THE OTHER HAND WHERE T HE MANUFACTURER HAS SOURCED THE MATERIAL FROM A PERSON OTHER THAN THE CUSTOMER IT WOULD CONSTITUTE A SALE . WHAT IS SIGNIFICANT IS THAT IN USING THE WORDS WHIC H CLAUSE (E) USES IN THE EXPLANATION THE PARLIAMENT HAS TAKEN NOTE OF THE POSITION THAT WAS REFLECTED IN TH E CIRCULARS ISSUED BY THE CBDT SINCE 29-5-1972. THE JUDGMENT OF THE SUPREME COURT IN ASSOCIATED CEMENT CO. LTD. V. CIT [1993J 201 ITR 435/ 67 TAXMAN 346 GAVE AN EXPANSIVE DEFINITION TO THE EXPRESSION 'WOR K' AND REJECTED THE ATTEMPT OF THE ASSESSEE IN THAT CA SE TO RESTRICT THE EXPRESSION 'WORK' TO WORKS CONTRACT. B OTH BEFORE AND AFTER THE JUDGMENT OF THE SUPREME COURT THE EXPANSIVE DEFINITION OF THE EXPRESSION 'WORK' CO-EX ISTED WITH THE REVENUE'S UNDERSTANDING THAT A CONTRACT FO R SALE WOULD NOT BE WITHIN THE PURVIEW OF SECTION 194 C. THE REVENUE ALWAYS UNDERSTOOD SECTION 194C TO MEAN THAT THOUGH A PRODUCT OR THING IS MANUFACTURED TO THE SPECIFICATIONS OF A CUSTOMER THE AGREEMENT WOULD CONSTITUTE A CONTRACT FOR SALE IF (I ) THE PROPERT Y IN THE ARTICLE OR THING PASSES TO THE CUSTOMER UPON THE DELIVERY; AND (II) THE MATERIAL THAT WAS REQUIRED W AS NOT SOURCED FROM THE CUSTOMER/ PURCHASER BUT WAS INDEPENDENTLY OBTAINED BY THE MANUFACTURER FROM A PERSON OTHER THAN THE CUSTOMER. THE RATIONALE FOR T HIS WAS THAT WHERE A CUSTOMER PROVIDES THE MATERIAL WH AT THE MANUFACTURER DOES IS TO CONVERT THE MATERIAL IN TO A PRODUCT DESIRED BY THE CUSTOMER AND OWNERSHIP OF TH E MATERIAL BEING THAT OF THE CUSTOMER THE CONTRACT ESSENTIALLY INVOLVES WORK OF LABOUR AND NOT OF A SA LE. THE PARLIAMENT RECOGNIZED THE DISTINCTION WHICH HEL D THE FIELD BOTH ADMINISTRATIVELY IN THE FORM OF CIR CULARS OF THE CBDT AND JUDICIALLY IN THE JUDGMENTS OF THE SEVERAL HIGH COURTS. CONSEQUENTLY THE PRINCIPLES UNDERLYING THE APPLICABILITY OF SECTION 194C AS CONSTRUED ADMINISTRATIVELY AND JUDICIALLY IN DECIDE D CASES FIND STATUTORY RECOGNITION IN THE EXPLANATIO N. THE EXPLANATION THEREFORE AS THE MEMORANDUM EXPLAININ G THE CLAUSES OF THE FINANCE BILL 2009 STATES WAS I N THE NATURE OF A CLARIFICATION. WHERE AN EXPLANATORY PROVISION IS BROUGHT TO REMOVE AN AMBIGUITY OR TO C LEAR A DOUBT IT IS REFLECTIVE OF THE LAW AS IT HAS ALWA YS STOOD IN THE PAST WHEREAS IN THE INSTANT CASE AN I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 11 EXPLANATION IS INTRODUCED STATUTORILY TO ADOPT AN UNDERSTANDING OF THE LAW-BOTH IN THE FORM OF THE CIRCULARS OF THE CBDT AND IN JUDICIAL DECISION. THE PARLIAMENT MUST BE REGARDED AS HAVING INTENDED TO AFFIRM THAT INTENT. IN THE INSTANT CASE THE INTENT HAS HELD THE FIELD FOR OVER THREE DECADES. [PARA 28) THE FACT THAT THE SPECIFICATIONS WERE PROVIDED BY T HE ASSESSEE TO THE MANUFACTURER/SUPPLIER WOULD MAKE NO DIFFERENCE TO THE LEGAL POSITION. THE AGREEMENT IN THE INSTANT CASE WAS ON A PRINCIPAL-TO-PRINCIPAL BASIS. THE MANUFACTURER HAD HIS OWN ESTABLISHMENT WHERE THE PRODUCT WAS MANUFACTURED. THE MATERIAL REQUIRED IN THE MANUFACTURE OF THE ARTICLE OR THING WAS OBTAINE D BY THE MANUFACTURER FROM A PERSON OTHER THAN THE ASSESSEE. THE PROPERTY IN THE ARTICLES PASSED UPON THE DELIVERY OF THE PRODUCT MANUFACTURED. UNTIL DELIVER Y THE ASSESSEE HAD NO TITLE TO THE GOODS. THE GOODS HAD A N IDENTIFIABLE EXISTENCE PRIOR TO DELIVERY. [PARA 31) THE REASON THAT A SPECIFICATION OR REQUIREMENT IS ENUNCIATED BY THE ASSESSEE CONSTITUTES A MATTER OF BUSINESS EXPEDIENCY. A PURCHASER WHO DESIRES TO GET THE PRODUCT WHICH HE INTENDS TO SELL UNDER HIS BRA ND NAME OR TRADEMARK MANUFACTURED FROM A THIRD PARTY WOULD BE INTERESTED IN ENSURING THE QUALITY OF THE PRODUCT. THE TRADEMARK HAS ASSOCIATED WITH IT AN ASSURANCE OF THE QUALITY OF THE GOODS WHICH ARE MARKETED AND ARE TRACEABLE TO THE ORIGIN OF THE GOO DS. ASSOCIATED WITH THE TRADEMARK IS THE GOODWILL AND REPUTATION WHICH IS ASSOCIATED WITH THE MARK. THIS IS PARTICULARLY SO IN THE CASE OF A PHARMACEUTICAL PRO DUCT WHERE THE ULTIMATE CONSUMER IS LEGITIMATELY ENTITLE D TO ENSURE THAT HER HEALTH IS NOT PREJUDICED BY THE CONSUMPTION OF A PRODUCT NOT MEETING PRESCRIBED STANDARDS. THE OWNER OF A MARK THEREFORE INTRODUC ES SPECIFICATIONS TO ENSURE THAT THE PRODUCT MEETS THE STANDARDS JUSTIFIABLY ASSOCIATED WITH THE REPUTATIO N OF THE MARK. THE SPECIFICATION ENSURES THE OBSERVANCE OF STANDARDS. SIMILARLY A CLAUSE RELATING TO EXCLUSIV ITY IS NOT INCONSISTENT WITH A TRANSACTION OF SALE. HERE A GAIN MUCH DEPENDS UPON THE NATURE OF THE PRODUCT. RESTRICTIVE COVENANTS OF THIS KIND ARE INTENDED TO PROTECT THE INTELLECTUAL AND OTHER PROPERTY RIGHTS OF A PARTY WHICH MARKETS ITS GOODS BY REQUIRING A MANUFACTURER TO OBSERVE NORMS OF SPECIFICATIONS AND EXCLUSIVITY. I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 12 THE LAW IS THEREFORE CONSISTENT WITH THE TRANSACT ION BEING REGARDED AS A TRANSACTION OF SALE PROVIDED T HAT THE REQUIREMENTS OF A CONTRACT OF SALE ARE MET. THE Y WERE NET IN THE INSTANT CASE. THE CONTRACT ENTERED INTO BY THE ASSESSEE WAS NOT A CONTRACT FOR CARRYING ON ANY WORK WITHIN THE MEANING OF SECTION 194C. [PARA 32] 11. FURTHER HE SUBMITTED THAT IN THE CASE OF THE ASSES SEE IRRIGATION AGREEMENTS ENTERED WITH THE STATE GOVERN MENT AND NOT PART OF THE WORK. THE SITE HAS BEEN HANDED OVER TO THE ASSESSEE FOR CARRYING ON THE WORK AS PER THE REQUIREMENTS OF THE GOVERNMENT AND ALSO OPERATING SYSTEM FOR A CERTAIN PERIOD MENTIONED THEREIN AND COMPLETED THE PROJECT AT THE END OF THE ABOVE SAID PERIOD AND AS SUCH THE ASSESSEE IS A DEV ELOPER AND ALSO OPERATING THE SYSTEM FOR A CERTAIN PERIOD. ACCORDI NGLY THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80 IA OF THE ACT. HE SUBMITTED THAT THE ASSESSING OFFICER IGNORED THE FACT IN ALL THE CONTRACTS HANDED OVER TO THE ASSESSEE FOR DEVELOPME NT OF THE INFRASTRUCTURE FACILITY. IN FEW CASES AFTER OPERA TION FOR CERTAIN PERIOD HAD TO RE-HAND OVER BACK THE ENTIRE SITE WI TH THE INFRASTRUCTURE FACILITY DEVELOPED TO THE OWNER. HE DREW OUR ATTENTION TO THE COPIES OF AGREEMENT ENTERED WITH T HE STATE GOVERNMENT. HE DREW OUR ATTENTION TO PARA-5 OF THE ASSESSMENT ORDER WHERE THE ASSESSING OFFICER NOTED AS FOLLOWS: - 5. IN VIEW OF THE AFORESAID JUDICIAL PRONOUNCEMENT S 'IT CAN BE HELD THAT DEDUCTION U/S 80LA CANNOT BE COMPUTED IN RESPECT THOSE WHO ONLY BUILT THE INFRASTRUCTURE FACILITY BUT DID NOT BEGAN TO OPERATE IT SINCE IN SUCH CASES THE COMPUTATION PR OVISION OF SUB SECTION (2) OF SECTION 8OLA FAIL. THE HARMONIOUS CO NSTRUCTION OF SECTION 8OIA(2) AND SUB-CLAUSE (B) OF CLAUSE (I) OF SUB-SECTION (4) OF SECTION 8OLA WITH OTHER PARTS OF SECTION 8OLA IS THAT THE WORD 'DEVELOPER' REFER TO AN ENTERPRISE WHO BUILDS AND S TARTS OPERATING THE INFRASTRUCTURE FACILITY. THE ENTERPRISE WOULD B E ELIGIBLE FOR DEDUCTION FROM THE YEAR IN WHICH IT STARTS OPERATIN G THE INFRASTRUCTURE FACILITY. WITHOUT SUCH OPERATION HE CANNOT RECOUP ITS COST. THE OTHER WAY TO RECOUP ITS COST IS TO TR ANSFER THE FACILITY TO ANOTHER PERSON FOR CERTAIN CONSIDERATION WHO IN TURN WILL RECOUP ITS COST OF ACQUISITION BY OPERATING IT. BUT IN SUCH SITUATION THE DEDUCTION WILL BE ALLOWED TO THE OPERATOR ONLY AND NOT TO THE I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 13 MERE BUILDER OF THE FACILITY WHO NEVER OPERATED IT. IN CASE THE 'DEVELOPER' TRANSFERS THE FACILITY TO ANOTHER ENTER PRISE AFTER OPERATING IT FOR FEW YEARS THE DEDUCTION U/S 8OLA WILL BE ALLOWED TO THE DEVELOPER TILL THE DATE OF TRANSFER AND THER EAFTER IT WILL BE AVAILED BY THE TRANSFEREE ENTERPRISE OPERATING AND MAINTAINING SUCH FACILITY FOR THE REMAINING PERIOD OUT OF THE P ERIOD OF TEN CONSECUTIVE YEARS. IF SUCH INTERPRETATION IS APPLIE D NONE OF THE PROVISIONS OF SECTION 8OLA WOULD BECOME REDUNDANT I N ANY SITUATION.' 12. HE SUBMITTED THAT THE ABOVE OBSERVATION OF THE ASSE SSING OFFICER IS FACTUALLY INCORRECT AS IT CAN BE SEEN FR OM THE AGREEMENTS AND CONTRACTS THE SITE IF HANDED OVER BACK TO THE E MPLOYER AFTER DEVELOPMENT OF THE ENTIRE FACILITY AND IN FEW CASES AFTER OPERATION AND MAINTENANCE FOR A PERIOD SPECIFIED THEREIN. A CCORDING TO THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE THE ASSE SSEE HAS UNDERTAKEN THE CONSTRUCTION OF THE ENTIRE INFRASTRU CTURE FACILITY AS ENVISAGED BY THE RESPECTIVE CENTRAL OR STATE GOVERN MENT IN THE AGREEMENTS. THE ASSESSEE HAS ENTERED INTO AGREEME NT WITH CENTRAL OR STATE GOVERNMENT THEREBY SATISFYING THE CONDITIONS ENVISAGED IN SECTION 80IA OF THE ACT. HE ALSO SUBM ITTED THAT THE FOLLOWING OBSERVATION AT PARAS 7 7.1 IS INCORRECT WHICH READS AS FOLLOWS:- 7. THE ASSESSEE'S AR HAS FILED A CHART GIVING THE DETAILS OF ALL THE CONTRACTS UNDERTAKEN DURING THE YEAR IN RESPECT OF WHICH DEDUCTION U/S 8OLA WAS CLAIMED. IT IS EVIDENT FROM THE CHART THAT SOME OF THE AGREEMEN TS HAVE BEEN ENTERED INTO BY THE ASSESSEE WITH GOVERNMENT OF INDIA UNDERTAKINGS BESIDES STATE GOVT . DEPARTMENTS. 11 CANNOT THEREFORE BE SAID THAT THE ASSESSEE ENTERED INTO AN AGREEMENT WITH A STATUTORY BODY FOR DEVELOPMENT OF AN INFRASTRUCTURE FACILITY WHICH IS A MANDATORY CONDITION LAID DOWN IN SECTION 8OLA (4)(I)(B) OF THE ACT. NONE OF THE CONTRACTS UNDERTA KEN BY THE ASSESSEE ARE ON BOT/BOOT MODEL. ON THE PERUSAL OF THE NATURE OF WORK DONE IN THESE CONTRACTS IT I S EVIDENT THAT NONE OF THE PROJECTS WERE CONCEIVED DESIGNED AND PLANNED BY THE ASSESSEE. IN NONE OF TH E PROJECTS THE ASSESSEE HAS UNDERTAKEN THE OPERATION AND MAINTENANCE OF THE FACILITIES BUILT. MOREOVER THE ASSESSEE WAS NOT GIVEN THE CONTRACT FOR BUILDING TH E I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 14 ENTIRE FACILITY. ONLY CONSTRUCTION OF PART OF THE P ROJECT WAS GIVEN TO THE ASSESSEE. THESE PROJECTS WERE NOT FUNDED-BY THE ASSESSEE AND THE ENTIRE CAPITAL INVESTMENT-WAS MADE BY THE GOVERNMENT/LOCAL AUTHORITY / STATUTORY BODY WHO AWARDED THE CONTRACT S TO THE ASSESSEE. HENCE IT CANNOT BE SAID THAT THE ASSESSEE HAS ENTERED INTO THESE CONTRACTS FOR DEVELOPING AN INFRASTRUCTURE FACILITY IN VIEW OF MY DISCUSSION ABOVE WHERE I HAVE HELD THAT DEVELOPMENT OF AN INFRASTRUCTURE FACILITY CONCEIVING DESIGNING PLANNING FINANCING BUILDING AND OPERATING FACILIT Y. 7. 1 THE AGREEMENTS ENTERED BY THE ASSESSEE WERE FO R BUILDING OR CONSTRUCTING THE WHOLE OR PART OF THE P ROJECTS IN WHICH THE ENTIRE INVESTMENT WAS MADE BY THE GOVERNMENT AND THE ASSESSEE WAS PAID ON 'RUNNING BI LL TO BILL' BASIS. HENCE THERE WAS NO STIPULATION IN ANY OF THE CONTRACTS THAT THE FACILITY BUILD WILL BE TRANS FERRED OR HANDED OVER BACK TO THE OWNER/EMPLOYER. SUCH CONTRACTS ARE NOT ENVISAGED BY THE LEGISLATURE FOR ALLOWING THE BENEFIT OF SECTION 8OLA OF THE ACT. TH US THE ASSESSEE HAS NOT FULFILLED THIS CONDITION OF SECTI ON 8OLA (4)(I)(B). ' WE DRAW YOUR ATTENTION TO A SAMPLE OF THE AGREEMENT IN WHICH THE NATURE OF WORK IS 'SURVEYING DESIGN SUP PLY INSTALLATION TESTING AND COMMISSIONING LIFT IRRIGA TION SYSTEM FOR UBRANI-AMRUTHAPURA ON TURNKEY BASIS CONSISTING OF THE FOLLOWING: PUMPING MACHINERIES TRANSFORMER SUB-STATIONS RAISING MAIN CONSTRUCTIO N OF DELIVERY CHAMBERS JACKWELL CUM PUMP HOUSE TRANSITION APPROACH CHANNEL M.S. MANIFOLD ELECTRI CAL WORKS EOT CRANES ETC. CONSTRUCTION OF ALL C.D. WO RKS APPROACH ROADS DEVIATION ROADS CLEANING AND TRIMMING OF EXISTING NATURAL NALLA TO THE REQUIRED LENGTH SERVICE ROADS ETC. COMPLETE. SUPPLY OF SPA RE PARTS AND/TOOLS INCLUDING OPERATION OF SYSTEM FOR T WO YEARS AFTER THE DATE OF COMPLETION AND COMMISSIONI NG FOR 2ND STAGE OF URBAN-AMRUTHAPURA MULTIPURPOSE LIF T IRRIGATION SCHEME ON TURNKEY BASIS. 13. HE DREW OUR ATTENTION TO ALL THE BELOW MENTIONED AGREEMENTS WHICH WERE CARRIED OUT BY THE ASSESSEE I N THESE ASSESSMENT YEARS. I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 15 GVPR ENGINEERS LIMITED STATEMENT SHOWING THE DETAILS FOR CLAIMING DEDUCTION U NDER SECTION 80-IA F.Y. 2003-04 A.Y. 2004-05 ANDHRA PRADESH STATE SL. NO. NAME OF THE PROJECT NAME OF THE WORK NATURE OF FACILITY AGREEMENT ENTERED IN CONNECTION WITH WORK WITH 1 ELECTRICAL WARANGAL DISTRIBUTION SYSTEM IMPROVEMENT WORK UNDER APL-1 SUPPLEMENTARY IN WARANGAL (WC-35) POWER DISTRIBUTION ANDREW YULE I CO LTD (A GOVT INDIA UNDERTAKING ) 2 NTPC PARWAD CONSTRUCTION OF RAW WATER RESERVOIR OTHER THAN LIVE STORAGE AREA AT SIMHADRI THERMAL POWER PROJECT FOR NTPC NEAR VIZAG A.P. SIMHADRI THERMAL POWER BHARAT HEAVY ELECTRICALS LTD ( A GOVT. OF INDIA UNDERTAKING ) 3 SRSP- HUZURABAD EARTHWORK EXCAVATION & FORMING EMBANKMENT CONSTRUCTION OF STRUCTURES AND CC LINING FROM KM. 9.00 TO 26-25 (TAIL-END) OF 4F-21IR OF DEM. 48 AND ITS MINORS IRRIGATION PROJECT SUPERINTENDING ENGINEER CONSTRUCTION CIRCLE HUZURABAD. A.P. 4 SRSP-FFC 21- 22 EARTH WORK EXCAVATION AND FORMING EMBANKMENT FROM KM. 21.00 TO KM 22.00 OF FFC FROM SRI RAM SAGAR PROJECT IRRIGATION PROJECT THE EXECUTIVE ENGINEER SRSP - FFC DIVISION NO. 2 METTPALLY KARIMNAGAR DIST. 5 KC CANAL LCB-01 EARTHWORK EXCAVATION AND CC LINING TO DISTRIBUTARIES OF KC CANAL INCLUDING CONSTRUCTION OF STRUCTURES FROM KM. 0.000 TO KM. 1`20.190 IN REACH - I UNDER LCB - 01 IRRIGATION PROJECT SUPERINTENDING ENGINEER KCCMP CONSTRUCTION CIRCLE NO. 1 KURNOOL A.P. 6 ELECTRICAL NIZAMABAD DISTRIBUTION SYSTEM IMPROVEMENT WORKS UNDER APL-1 SUPPLEMENTARY IN NIZAMABAD AND ADILABAD TOWNS ELECTRICAL WORK 7 SANGA REDDY ROAD WORK LAYING OF CC ROAD OVER THE WBM ROAD IN RAJAMPET LOCALITY INDIRA COLONY PRASHANTH NAGAR COLONY ROAD WORK M.C.H. SANGA REDDY A.P. 8 SRBC-37 EARTH WORK EXCAVATION AND CONSTRUCTION OF STRUCTURES FOR MICRO NETWORK DISTRIBUTION SYSTEM IN BLOCK NOS. XI XIA AND XII (PACKAGE NO. XXXVII) IRRIGATION PROJECT THE SUPERINTENDING ENGINEER SRBC CIRCLE NO. 1 NANDYAL KURNOOL A.P. KARNATAKA STATE 9 GADAG WATER SUPPLY COMBINED WATER SUPPLY SCHEME TO ABADRAHALLI AND 7 OTHER VILLAGES IN MUNDARGI TALUK OF GADAG DISTRICT DEVELOPMENT OF WATER SUPPLY SYSTEM THE EXECUTIVE ENGINEER ZPE DIVISION GADAG KARNATAKA. 10 BHALKI WATER REMODELLING OF WATER SUPPLY DISTRIBUTION SYSTEM TO GADAG BETAGIRI CITY DEVELOPMENT OF WATER SUPPLY SYSTEM ENGINEERING PROJECTS (I) LTD (A GOVT. OF INDIA UNDERTAKING ) 11 KSCB - HOSPET SLUM UP - GRADATION & DEVELOPMENT PROGRAMME UNDER NIRMALA JYOTHI SCHEME IN HOSPET CITY CONSTRUCTION OF SEWERAGE SYSTEMS THE COMMISSIONER KARNATAKA SLUM CLEARANCE BOARD BANGALORE I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 16 12 KSCB - GULBARGA SLUM UP - GRADATION & DEVELOPMENT PROGRAMME UNDER NIRMALA JYOTHI SCHEME IN GULBARGA CITY CONSTRUCTION OF SEWERAGE SYSTEMS THE COMMISSIONER KARNATAKA SLUM CLEARANCE BOARD BANGALORE 13 KSCB - BIDAR SLUM UP - GRADATION & DEVELOPMENT PROGRAMME UNDER NIRMALA JYOTHI SCHEME IN BIDAR CITY CONSTRUCTION OF SEWERAGE SYSTEMS THE COMMISSIONER KARNATAKA SLUM CLEARANCE BOARD BANGALORE 14 KSCB - BELLARY SLUM UP - GRADATION & DEVELOPMENT PROGRAMME UNDER NIRMALA JYOTHI SCHEME IN BELLARY CITY CONSTRUCTION OF SEWERAGE SYSTEMS THE COMMISSIONER KARNATAKA SLUM CLEARANCE BOARD BANGALORE 15 KARWAR COMPREHENSIVE WATER SUPPLY TO GOKARNA AND 7 OTHER VILLAGES IN U.K. DISTRICT IN KARNATAKA CONSTRUCTION OF SEWERAGE SYSTEMS THE EXECUTIVE ENGINEER ZPE DIVISION KARWAR KARNATAKA. GVPR ENGINEERS LIMITED STATEMENT SHOWING THE DETAILS FOR CLAIMING DEDUCTION U NDER SECTION 80-IA F.Y. 2004-05 A.Y. 2005-06 ANDHRA PRADESH STATE SL. .NO. NAME OF THE PROJECT NAME OF THE WORK NATURE OF FACILITY AGREEMENT ENTERED IN CONNECTION WITH WORK WITH 1 SRSP HUZURABAD EARTHWORK EXCAVATION & FORMING EMBANKMENT CONSTRUCTION OF STRUCTURES AND CC LINING FROM KM. 9.00 TO 26-25 (TAIL-END) OF 4F-21IR OF DEM. 48 AND ITS MINORS IRRIGATION PROJECT SUPERINTENDING ENGINEER CONSTRUCTION CIRCLE HUZURABAD. A.P. 2 SRSP-FFC 21-22 EARTHWORK EXCAVATION AND FORMING EMBANKMENT FROM KM. 21.00 TO KM 22.00 OF FFC FROM SRI RAM SAGAR PROJECT IRRIGATION PROJECT THE EXECUTIVE ENGINEER SRSP - FFC DIVISION NO. 2 METTPALLY KARIMNAGAR DIST. 3 SRBC-38 EARTHWORK EXCAVATION AND CONSTRUCTION OF STRUCTURES FOR MICRO NETWORK DISTRIBUTION SYSTEM FOR BLOCK 13 & 14 OF PACKAGES NO. 38 IRRIGATION PROJECT THE SUPERINTENDING ENGINEER SRBC CIRCLE NO. 1 NANDYAL KURNOOL AP 4 KC CANAL LCB- 01 EARTHWORK EXCAVATION AND CC LINING TO DISTRIBUTARIES OF KC CANAL INCLUDING CONSTRUCTION OF STRUCTURES FROM KM. 0.000 TO KM. 120.190 IN REACH - I UNDER LCB 01 IRRIGATION PROJECT SUPERINTENDING ENGINEER KCCMP CONSTRUCTION CIRCLE NO. 1 KURNOOL A.P. 5 SRSC FFC 0-7 CONSTRUCTION OF CM &D WORKS (8 NOS.) INCLUDING EARTH WORK EXCAVATION AND FORMING EMBANKMENT OF CANAL GAPS FROM KM 0.000 TO KM 7.000 IRRIGATION PROJECT SUPERINTENDING ENGINEER SRSP-FLOOD FLOW CANAL CIRCLE DHAROOR CAMP JAGTIAL 6 SANGA REDDY ROAD WORK LAYING OF CC ROAD OVER THE WBM ROAD IN RAJAMPET LOCALITY INDIRA COLONY PRASHANTH NAGAR COLONY ROAD WORK M.C.H. SANGA REDDY A.P. 7 SRBC-37 EARTH WORK EXCAVATION AND CONSTRUCTION IRRIGATION THE SUPERINTENDING ENGINEER SRBC 8 SRBC POTHIREDDY PADU REMOVAL OF OBSTRUCTION FOR THE APPROACH AT POTHY REDDY PADU HEAD REGULATOR TO RECEIVE WATER IRRIGATION PROJECT THE SUPERINTENDING ENGINEER IRRIGATION DEPT. POTHIREDDYPADU A.P I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 17 KARNATAKA STATE 9 MYSORE- BANGALORE CONSTRUCTION OF APPROACH ROAD TO NEW ROAD OVERBRIDGE NEAR PONDAVARPURA RAILWAY STATION ROAD WORK THE EXECUTIVE ENGINEER KARNATAKA 10 BHALKI WATER CONSTRUCTION OF CONNECTION PIPELINE JOCK WELL CUM PUMP HOUSE RAW WATER RAISING MINE PURE WATER PUMP HOUSE DEVELOPMENT OF WATER SUPPLY SYSTEM THE EXECUTIVE ENGINEER BALKI KARNATAKA 11 KSCB-HOSPET SUM UPGRADATION & DEVELOPMENT PROGRAMME UNDER NIRMALA JYOTHI SCHEME IN HOSPET CITY CONSTRUCTION OF SEWERAGE SYSTEMS THE COMMISSIONER KARNATAKA SLUM CLEARANCE BOARD BANGALORE 12 KSCB-GULBARGA SUM UPGRADATION & DEVELOPMENT PROGRAMME UNDER NIRMALA JYOTHI SCHEME IN GULBARGA CITY CONSTRUCTION OF SEWERAGE SYSTEMS THE COMMISSIONER KARNATAKA SLUM CLEARANCE BOARD BANGALORE 13 KSCB-BIDAR SUM UPGRADATION & DEVELOPMENT PROGRAMME UNDER NIRMALA JYOTHI SCHEME IN GULBARGA CITY CONSTRUCTION OF SEWERAGE SYSTEMS THE COMMISSIONER KARNATAKA SLUM CLEARANCE BOARD BANGALORE 14 KSCB-BELLARY SUM UPGRADATION & DEVELOPMENT PROGRAMME UNDER NIRMALA JYOTHI SCHEME IN GULBARGA CITY CONSTRUCTION OF SEWERAGE SYSTEMS THE COMMISSIONER KARNATAKA SLUM CLEARANCE BOARD BANGALORE 15 KARWAR COMPREHENSIVE WATER SUPPLY TO GOKARNA AND 7 DEVELOPMENT THE EXECUTIVE ENGINEER ZPE DIVISION 16 ROB YELHANKA CONSTRUCTION OF ROB IN LIEU OF AT YELHANKA CHICKBALLAPUR ?RAILWAY STATION WORK FOR NHAI ROAD WORK THE EXECUTIVE ENGINEER YALLAHANKA KARNATAKA 17 KPCL BELLARY THE WORK OF SURVEY DESIGN SUPPLY TESTING & FABRICATION GALVANISING ERECTION OF COMMISSIONING OF 33 KV ELECTRICAL WORK ELECTRICAL WORK CHIEF GENERAL MANAGER KARNATAKA POWER CORP. BELLARY TOTAL MADHYA PRADESH STATE 18 MP ROAD WORK CONSTRUCTION/UPGRADATION OF RURAL ROADS UNDER PMGSY PACKAGE NO. MP 2913 DISTRICT RAISON ROAD WORK THE PROJECT GENERAL MANAGER M.P.R.D.A. BHOPAL GVPR ENGINEERS LIMITED STATEMENT SHOWING THE DETAILS FOR CLAIMING DEDUCTION U NDER SECTION 80-IA F.Y. 2005-06 A.Y. 2006-07 ANDHRA PRADESH STATE SL. NO. NAME OF THE PROJECT NAME OF THE WORK NATURE OF FACILITY AGREEMENT ENTERED IN CONNECTION WITH WORK WITH 1 TGP-EWE&FE OF DISTRIBUTARIES IN BLOCK NO. 20 & 21 22-28 AND 29 TO 37 EARTH WORK EXCAVATION OF CANAL AND FORMING BANKS INCLUDING CONSTRUCTION OF STRUCTURES OF THE DISTRIBUTOR SYSTEM IN BLOCK NO-20- 21 22-27 28 AND 29-37 OF T.G.P. UNDER VBR IRRIGATION PROJECT SUPERINTENDING ENGINEER TELUGU GANGA PROJECT CIRCLE NANDYAL 2 EARTHWORK EXCAVATION AND FORMING EMBANKMENT FROM KM. 70.00 TO KM 86.00 OF FFC FROM SRI RAM SAGAR PROJECT EARTH WORK EXCAVATION AND FORMING EMBANKMENT FROM KM. 70.00 TO KM 86.00 OF FFC FROM SRI RAM SAGAR PROJECT IRRIGATION PROJECT SIMPLEX-SUBASH JV KOLKATA I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 18 3 ELECTRICAL CABLE WORK IN DILSUKHNAGAR & NARAYANGUDA AREA ELECTRICAL CABLE WORK IN DILSUKHNAGAR & NARAYANGUDA AREA ELECTRICAL WORK CHIEF GENERAL MANAGER (OPERATIONS APCPDCL HYDERABAD) 4 ELECTRICAL CABLE WORK IN CHARMINAR AREA ELECTRICAL CABLE WORK IN CHARMINAR AREA ELECTRICAL WORK CHIEF GENERAL MANAGER (OPERATIONS APCPDCL HYDERABAD) 5 ELECTRICAL WORK IN MAHABOOB NAGAR CIRCLE ELECTRICAL CABLE WORK IN MAHABOOB NAGAR CIRCLE ELECTRICAL WORK CHIEF GENERAL MANAGER (OPERATIONS APCPDCL HYDERABAD) KARNATAKA STATE 6 CONSTRUCTION OF CONNECTING PIPE LINE JACK WELL CUM PUMP HOUSE WORK CONSTRUCTION OF HEADWORKS MS & DI FEEDER LINE 10-00 LAKHS LITRES CAPACITY RCC OH AND OTHER ALLIED WORKS UNDER IWSS TO BHALKI TOWN WITH THE RIVER KARNJA AS SOURCE IRRIGATION PROJECT THE EXECUTIVE ENGINEER KUWS & DB BIDAR 7 ELECTRICAL WORK IN BANGALORE SHIFTING OF ELECTRICAL UTILITIES INCLUDING SUPPLY OF MATERIAL / ERECTION / TESTING AND COMMISSIONING AT BANGALORE - MYSORE STATE HIGHWAY (SH-17) ELECTRICAL WORK THE MANAGING DIRECTOR KRDCL BANGALORE 8 SUM UP - GRADATION & DEVELOPMENT PROGRAMME UNDER NIRMALA JYOTHI SCHEME IN BIDAR CITY SLUM UP - GRADATION & DEVELOPMENT PROGRAMME UNDER NIRMALA JYOTHI SCHEME IN BIDAR CITY CONSTRUCTION OF SEWERAGE SYSTEMS THE COMMISSIONER KARNATAKA SLUM CLEARANCE BOARD BANGALORE 9 SUM UP - GRADATION & DEVELOPMENT PROGRAMME UNDER NIRMALA JYOTHI SCHEME IN BELLARY CITY SLUM UP - GRADATION & DEVELOPMENT PROGRAMME UNDER NIRMALA JYOTHI SCHEME IN GULBARGA CITY CONSTRUCTION OF SEWERAGE SYSTEMS THE COMMISSIONER KARNATAKA SLUM CLEARANCE BOARD BANGALORE 10 CONSTRUCTION OF UNDER DRAINAGE WORK AT BANGALORE CITY REMODELLING OF PRIMARY SECONDARY STORM WATER DRAINS AND BRIDGES AND CULVERTS ACROSS STORM WATER DRAINS IN CHALGATTA VALLEY IRRIGATION PROJECT THE COMMISSIONER BANGALORE MAHANAGARA PALIKE BANGALORE 11 ELECTRICAL WORK IN BIJAPUR & GADAG DISTRICTS ELECTRICAL WORK THE SUPERINTENDING ENGINEER EI (T & P) CORPORATE OFFICE HESCOM HUBLI 12 ELECTRICAL WORK IN BIJAPUR & GADAG DISTRICTS 2X5 MC33/11 KV SUBSTATION AT CHAMNAL IN SHAHAPUR TALUK GULBARGA DIST ON TOTAL TURNKEY BASIS SUPPLY & ERECTION & COMMISSIONING ELECTRICAL WORK THE CHIEF ENGINEER ELECY. CORPORATE OFFICE GESCOM GULBARGA I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 19 GVPR ENGINEERS LIMITED STATEMENT SHOWING THE DETAILS FOR CLAIMING DEDUCTION U NDER SECTION 80-IA F.Y. 2006-07 A.Y. 2007-08 ANDHRA PRADESH STATE SL. NO. NAME OF THE PROJECT NAME OF THE WORK NATURE OF FACILITY AGREEMENT ENTERED IN CONNECTION WITH WORK WITH 1 SRSP HUZURABAD EARTHWORK EXCAVATION AND FORMING EMBANKMENT CONSTRUCTION OF STRUCTURES AND CC LINING FROM KM. 9.00 TO 26-25 (TAIL -END) OF 4F-21IR OF DEM.48 AND ITS MINORS IRRIGATION PROJECT SUPERINTENDING ENGINEER CONSTRUCTION CIRCLE. HUZURABAD A.P. 2 SRSC FFC 0-7 CONSTRUCTION OF CM & D WORKS (8 NOS.) INCLUDING EARTH WORK EXCAVATION AND FORMING EMBANKMENT OF CANAL GAPS FROM KM 0.000 TO KM 7.000 IRRIGATION PROJECT SUPERINTENDING ENGINEER SRSP- FLOOD FLOW CANAL CIRCLE DHAROOR CAMP JAGTIAL 3 TGP WORK EARTHWORK EXCAVATION OF CANAL AND FORMING BANKS INCLUDING CONSTRUCTION OF STRUCTURES OF THE DISTRIBUTOR SYSTEM IN BLOCK NO-20-21 22-27 28 AND 29-37 OF T.G.P. UNDER VBR IRRIGATION PROJECT SUPERINTENDING ENGINEER TELUGU GANGA PROJECT CIRCLE NANDYAL 4 SRSP FFC21-23 EARTHWORK EXCAVATION AND FORMING EMBANKMENT FROM KM 21.00 TO KM 23.00 OF FFC FROM SRI RAM SAGAR PROJECT MINORS IRRIGATION PROJECT THE EXECUTIVE ENGINEER SRSP-FFC DIVISION NO. 2 METTPALLY KARIMNAGAR DIST 5 SRSP FFC KM 70-86 EARTHWORK EXCAVATION AND FORMING EMBANKMENT FROM KM.70.00 TO KM. 86.00 OF FFC FROM SRI RAM SAGAR PROJECT IRRIGATION PROJECT SIMPLEX-SUBASH JV KOLKATA 6 SHILPARAMAM ELECTRICAL CABLE WORK IN DILSUKHNAGAR & NARAYANGUDA AREA ELECTRICAL WORK CHIEF GENERAL MANAGER ( OPERATIONS APCPDCL HYDERABAD) 7 UG CABLE WORK CHARMINAR ELECTRICAL CABLE WORK IN CHARMINAR AREA ELECTRICAL WORK CHIEF GENERAL MANAGER ( OPERATIONS APCPDCL HYDERABAD) 8 ELECTRICAL WORK IN MAHABOOB NAGAR ELECTRICAL CABLE WORK IN MAHABOOB NAGAR CIRCLE ELECTRICAL WORK CHIEF GENERAL MANAGER ( OPERATIONS APCPDCL HYDERABAD) KARNATAKA STATE 9 KUDUPU WORK CONSTRUCTION OF HEAD WORKS MS & DI FEEDER LINE 10-00 LAKHS LITRES CAPACITY RCC OH AND OTHER ALLIED WORKS UNDER IWSS TO BHALKI TOWN WITH THE RIVER KARNAJA AS SOURCE IRRIGATION PROJECT THE EXECUTIVE ENGINEER KUWS & DB BIDAR. 10 ROB YELHANKA CONSTRUCTION OF ROB IN LIEU OF AT YALLAHANKA CHICKBALLAPUR RAILWAY STATION WORK FOR NHAI ROAD WORK THE EXECUTIVE ENGINEER YALLAHANKA KARNATAKA I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 20 11 BMP WORKS REMODELLING OF PRIMARY SECONDARY STORM WATER DRAINS AND BRIDGES AND CULVERTS ACROSS STORM WATER DRAINS IN CHALLGATTA VALLEY IRRIGATION PROJECT THE COMMISSIONER BANGALORE MAHANAGARA PALIKE BANGALORE 12 HESCOM BIJAPUR & GADAG 2X5 MVA 33/11 KV SUBSTATION AT CHAMNAL IN SHAHAPUR TALUK HUBLI DIST ON TOTAL TURNKEY BASIS SUPPLY & ERECTION & COMMISSIONING ELECTRICAL WORK THE SUPERINTENDING ENGINEER EI (T & P) CORPORATE OFFICE HESCOM HUBLI 13 GESCOM- BIJAPUR & GADAG 2X5 MVA 33/11 KV SUBSTATION AT CHAMNAL IN SHAHAPUR TALUK HUBLI DIST ON TOTAL TURNKEY BASIS SUPPLY & ERECTION & COMMISSIONING ELECTRICAL WORK THE CHIEF ENGINEER ELECY. CORPORATE OFFICE GESCOM GULBARGA 14. HE SUBMITTED THAT OUT OF THE ABOVE AGREEMENTS THE F OLLOWING MENTIONED CONTRACTS ARE ENTITLED FOR DEDUCTION U/S 80IA:- AY 2004-05 SL. NO. OF ELIGIBLE PRODUCTS ASSESSMENT YEAR 2004-05 CLAUSE UNDER WHICH EXEMPTION IS CLAIMED PAPER BOOK PAGE NO. 2 NTPC PARWAD-BHEL 22.1.PERIOD OF MAINTENANCE 12 MONTHS 12 3 4 SRSP FFC 21-22KM HANDING OVER OF SITE AND DEFECT LIABILITY PERIOD OF 24 MONTHS 47 5 KC CANAL 21. POSITION OF SITE G) DEFECTS LIABILITY PERIOD SHALL BE 24 MONTHS 80-83 8 SRBC-37 21. POSSESSION OF SITE 58. OPERATION AND MAINTENANCE MANUALS 26 27 15 KARWAR 14. MAINTENANCE PERIOD FOR CONTRACT WORK 18 & 60 AY 2005-06 SL. NO. OF ELIGIBLE PRODUCTS ASSESSMENT YEAR 2004-05 CLAUSE UNDER WHICH EXEMPTION IS CLAIMED PAPER BOOK PAGE NO. 1 2 SRSP FFC-21-23 HANDING OVER OF SITE AND DEFECT LIABILITY PERIOD OF 24 MONTHS 51 4 KC CANAL 21. POSSESSION OF SITE G.) DEFECTS LIABILITY PERIOD SHALL BE 24 MONTHS 80-83 5 SRSC FFC -07 HANDING OVER OF SITE AND DEFECT LIABILITY PERIOD OF 24 MONTHS 54 3 SRBC-38 21 POSSESSION OF SITE 58 OPERATION AND MAINTENANCE MANUALS 22 7 SRBC-37 21 POSSESSION OF SITE 58 OPERATION AND MAINTENANCE MANUALS 26 27 I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 21 AY 2006-07 SL. NO. OF ELIGIBLE PRODUCTS ASSESSMENT YEAR 2004-05 CLAUSE UNDER WHICH EXEMPTION IS CLAIMED PAPER BOOK PAGE NO. 1 TGP EWE & FE 9.1 THE DEFECT LIABILITY PERIOD SHAL L BE 2 YEARS (MAINTENANCE PERIOD) 29 2 FFC FROM SRI RAM SAGAR PROJECT ( C)MAINTENANCE OF THE PROJECT FOR 24 MONTHS APPENDIX CW OM SCOPE OF SERVICE-OPERATION & MAINTENANCE OF THE SYSTEM 82-86 10 CONST. DRAINAGE BNGL 1.1. MAINTENANCE PERIOD SHALL BE 24 MONTHS ARTICLE-8 DEFECTS LIABILITY PERIOD AND MAINTENANCE PERIOD. 34 & 35 AY 2007-08 SL. NO. OF ELIGIBLE PRODUCTS ASSESSMENT YEAR 2004-05 CLAUSE UNDER WHICH EXEMPTION IS CLAIMED PAPER BOOK PAGE NO. 1 SRSP- HUZURABAD IRRIGATION PROJECT 13 2 SRSC FFC0-7 HANDING OVER OF SITE AND DEFECT LIABILITY PERIOD OF 24 MONTHS 54 3 TGP WORK 9.1 THE DEFECT LIABILITY PERIOD SHALL BE 2 YEARS (MAINTENANCE PERIOD) 29 4 SRSP FFC 21-23 HANDING OVER OF SITE AND DEFECT LIABILITY PERIOD OF 24 MONTHS 47 5 FFC FROM SRI RAM SAGAR PROJECT (C) MAINTENANCE OF THE PROJECT FOR 24 MONTHS APPENDIX-CW OM SCOPE OF SERVICE-OPERATION & MAINTENANCE OF THE SYSTEM 82-86 6 BMP WORKS 1.1. MAINTENANCE PERIOD SHALL BE 24 MONTHS ARTICLE 8- DEFECTS LIABILITY PERIOD AND MAINTENANCE PERIOD 34 & 35 7 HESCOM BIJAPUR & GADAG 2.1.1 DESIGN ENGINEERING TESTING SUPPLY ERECTION AND COMMISSIONING. 2.2 COMPLETE THE WORK AND SUCCESSFUL TESTING & COMMISSIONING OF THE TRANSMISSION LINES. 42 8. GESCOM BIJAP[UR & GADAG 2.1.1. DESIGN ENGINEERING TESTING SUPPLY ERECTION AND COMMISSIONING. 2.2. COMPLETE THE WORK AND SUCCESSFUL TESTING & COMMISSIONING OF THE TRANSMISSION LINES. 42 15. ACCORDING TO THE AUTHORISED REPRESENTATIVE ALL THE CONTRACTS OF THE SITE WHICH WAS HANDED OVER BY THE GOVERNMEN T TO THE ASSESSEE FOR DEVELOPMENT OF THE INFRASTRUCTURE FACI LITY AND ON COMPLETION IN FEW CASES AFTER OPERATION FOR CERTAI N PERIOD THE ENTIRE SITE WITH THE INFRASTRUCTURE FACILITY DEVELO PED TO THE OWNER. HE SUBMITTED THAT THE LOWER AUTHORITIES WRONGLY REL IED ON THE ORDER OF THE TRIBUNAL IN THE CASE OF PATEL ENGINEER ING LIMITED (94 ITD 411) WHEREIN THE TRIBUNAL HAS NOT CONSIDERED TH E I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 22 RETROSPECTIVE AMENDMENT BY FINANCE ACT 2007. ACCO RDING TO THE AUTHORISED REPRESENTATIVE AFTER AMENDMENT TO SECTI ON 80IA(4)(I)(B) WHICH READS AS IT HAS ENTERED INTO AN AGREEMENT W ITH THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORI TY OR ANY OTHER STATUTORY BODY FOR (I) DEVELOPING (II) OPERAT ING AND MAINTAINING OR (III) DEVELOPING OPERATING AND MAIN TAINING A NEW INFRASTRUCTURE FACILITY; THE WORD IT MEANS UNDERT AKING AND DEVELOP IS INDEPENDENT OF OPERATING AND MAINTAINI NG OR DEVELOPING OPERATING AND MAINTAINING. FOR THIS PU RPOSE HE RELIED ON THE ORDER OF THE ITAT MUMBAI LARGER THIRD MEMB ER BENCH IN THE CASE OF B.T. PATIL & SONS BELGAUM CONSTRUCTION PVT. LTD. (126 TTJ (MUMBAI) 577; 35 SOT 171 32 DTR 1. HE SUBMITT ED THAT THE ASSESSEE ENGAGED IN DEVELOPMENT OF INFRASTRUCTURE F ACILITY BY WAY OF CONSTRUCTING IRRIGATION CANALS AND IRRIGATION SY STEMS. IN THIS CONNECTION HE DREW OUR ATTENTION TO THE ORDER OF T HE TRIBUNAL IN THE CASE OF B.T. PATIL & SONS CITED SUPRA SPECIFICA LLY TO PARAS 36 TO 41 WHICH READS AS FOLLOWS:- 36. HERE IT IS IMPORTANT TO MENTION THAT THE LEGIS LATURE INSERTED THE WORD 'OR' BETWEEN (I) AND (II) WITH EF FECT FROM 1-4-2002 WHICH IS APPLICABLE TO ASSESSMENT YE AR 2002-03. SO WITH EFFECT FROM THE ASSESSMENT YEAR 2002-03 NOT ONLY THE ENTERPRISE (I) DEVELOPING (I I) OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILI TY SHALL BE ENTITLED TO DEDUCTION BUT ALSO THE ENTERP RISE WHICH IS ONLY (I) DEVELOPING OR (II) OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY. FROM SUCH YEAR ONWARDS THE ENTERPRISE WHICH ONLY DEVELOPS THE INFRASTRUCTURE FACILITY AND THEREAFTER TRANSFERS IT TO SOMEONE ELSE FOR OPERATING AND MAINTAINING ON BEHAL F OF TRANSFEREE SHALL ALSO BE COVERED FOR THE PURPOSE S OF GRANTING BENEFIT. THE DIFFERENCE IN THE SITUATION B ETWEEN ASSESSMENT YEAR 2002-03 ONWARDS AND PRIOR TWO YEARS IS THAT WHEREAS THE OPERATION AND MAINTENANCE OF TH E INFRASTRUCTURE FACILITY ON BEHALF OF THE ENTERPRISE DEVELOPING IS NECESSARY IN THE FORMER PERIOD BUT I N THE LATER PERIOD THE OPERATION AND MAINTENANCE SHALL B E ON BEHALF OF THE TRANSFEREE ENTERPRISE ITSELF. SINCE I N THE YEARS IN QUESTION THE TRANSFER OF THE ENTERPRISE F OR OPERATION AND MAINTENANCE HAS NECESSARILY TO BE ON I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 23 BEHALF OF THE ENTERPRISE DEVELOPING THE INFRASTRUCT URE FACILITY AND FOR THE TIME BEING ASSUMING WITHOUT ADMITTING THE CONTENTION OF THE ID. AR THAT THE ASS ESSEE IS DEVELOPER OF INFRASTRUCTURE FACILITY IT DOES NO T SATISFY THE OTHER CONDITION OF ITS TRANSFER FOR OPERATING A ND MAINTAINING ON ITS BEHALF FOR THE OBVIOUS REASON TH AT THERE IS NO TRANSFER AT ALL OF ANY INFRASTRUCTURE F ACILITY FROM THE ASSESSEE MUCH LESS FOR OPERATING AND MAINTAINING ON ITS BEHALF 37. BE THAT AS IT MAY IT REMAINS TO BE EXAMINED AS TO WHETHER THE ASSESSEE CAN BE CALLED AS 'DEVELOPER' WITHIN THE MEANING OF SECTION 80IA(4). THE LEARNED COUNSEL SUBMITTED THAT THE WORK DONE BY THE ASSESSEE MADE IT A DEVELOPER ENTIT LED TO DEDUCTION. SHRI VIJAY MEHTA THE LEARNED COUNSEL FOR THE INTERVENER CONTENDED THAT THE 'WORKS CONTRACT' HAS NOT BEEN DEFINED IN THE CONTEXT OF SECTION 8O-IA AN D HENCE IN THE ABSENCE OF ASSIGNMENT OF ANY DEFINITI ON BY THE STATUTE ITS MEANING SHOULD BE UNDERSTOOD IN THE COMMON PARLANCE. ACCORDING TO HIM A DEVELOPER IS A PERSON WHO DEVELOPS THE FACILITY AND SUCH PERSON MAYOR MAY NOT BE A CONTRACTOR. ON THE OTHER HAND A CONTRACTOR IS STATED TO BE A LEGAL TERM WHOSE RIGHT S AND DUTIES VIS-A-VIS CONTRACT ARE DETERMINED BY WAY OF LEGAL DOCUMENT CALLED THE CONTRACT. HE CITED AN EXAMPLE T HAT IF A CONTRACT TO CONSTRUCT A HIGHWAY FROM MUMBAI TO DELHI IS GIVEN TO A PERSON HE IS CONTRACTOR AS WELL AS DEVELOPER. AS AGAINST THAT A PERSON WHO HAS BEEN GIVEN A CONTRACT FOR PAINTING OR BEAUTIFICATION IS MERELY A CONTRACTOR BUT NOT A DEVELOPER. ACCORDING TO HIM WHILE DEVELOPING A PROJECT A DEVELOPER HAS TO MAKE TECHNOLOGICAL INPUTS ENTREPRENEURIAL INPUTS ETC. BESIDES THERE IS FINANCIAL INVOLVEMENT IN TERMS OF DEPLOYMENT OF MAN AND MACHINE AS WELL AS BANK GUARANTEES. HE WENT ON TO EXPLAIN THAT THE DEVELOPE R UNDERTAKES THE RISK AND REWARD OF THE PROJECT AND I S ACCOUNTABLE TO THE AUTHORITIES FOR THE DEVELOPMENT WORK CARRIED OUT BY HIM. IN HIS OPINION THE ASSESSEE IN THE PRESENT CASE CANNOT BE CHARACTERIZED ANYTHING OTHER THAN A DEVELOPER. 38. IN THE CIRCUMSTANCE THE LEAR NED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE CONSTRUCTION IS A MINOR PART OF THE DEVELOPMENT. ACCORDING TO HIM DEVELOPMENT INCLUDES THE WORKS TO BE DONE RELATING TO THE PLANNING DESIGNING ENGINEERI NG AND FINANCING ETC. OF THE PROJECT. HE RELIED ON T HE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F HINDUSTAN AERONAUTICS LTD. V. STATE OF ORISSA [1984 ) 55 STC 327 IN WHICH IT HAS BEEN OBSERVED THAT IN A CONTRACT FOR WORK THE PERSON PRODUCING HAS NO PROP ERTY I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 24 IN THE THING PRODUCED AS A WHOLE EVEN IF PART OR W HOLE OF THE MATERIAL USED BY HIM MAY HAVE BEEN HIS PROPERTY EARLIER. HE ALSO RELIED ON ANOTHER JUDGMEN T OF THE HON'BLE SUPREME COURT IN THE CASE OF TAMIL NADU V. ANANDAM VISHWANATHAN [1989) 1 SCC 613 IN WHICH IT WAS HELD THAT THE NATURE OF CONTRACT CAN BE FOUND O NLY WHEN THE INTENTION OF PARTIES IS FOUND OUT. THE FAC T THAT IN THE EXECUTION OF THE WORKS CONTRACT SOME MATERIA L ARE USED AND THE PROPERTY IN THE GOODS SO USED PASSES T O THE OTHER PARTY THE CONTRACTOR UNDERTAKING THE WOR K WILL NOT NECESSARILY BE DEEMED ON THAT ACCOUNT TO SELL THE MATERIAL. IT WAS THEREFORE ARGUED THAT THE DEVELOPER IS A PERSON WHO BRINGS IN ADDITIONAL RESOURCES BY WAY OF INVESTMENT AND TECHNICAL EXPERT ISE FOR DEVELOPING THE INFRASTRUCTURE FACILITIES. SINCE THE ASSESSEE HAD SIMPLY DONE A PART OF WORK OF CIVIL CONSTRUCTION RELATING TO THE INFRASTRUCTURE FACILIT Y HE STATED THAT IT IS NOT ELIGIBLE FOR DEDUCTION. 39. WE FIND IT AS AN UNDISPUTED POSITION THAT THE W ORDS 'DEVELOPER' AND 'CONTRACTOR' HAVE NOT BEEN DEFINED IN OR FOR THE PURPOSES OF SECTION 80-1A. THE PRIMARY QUES TION WHICH ARISES IS THAT HOW TO FIND OUT THE MEANING OF A WORD OR AN EXPRESSION WHICH IS NOT DEFINED IN THE A CT. IT IS A SETTLED LEGAL POSITION THAT ORDINARILY THE MEA NING OR DEFINITION OF A WORD USED IN ONE STATUTE CANNOT PER SE BE IMPORTED INTO ANOTHER AS HAS BEEN HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF UNION OF INDIA V. R.C. JAIN [1981]2 SCC 308. THEREFORE THE MEANING O F THE WORDS 'DEVELOPER' AND 'CONTRACTOR' AS PUT FORT H BEFORE US BY THE RIVAL PARTIES FROM OTHER LEGISLATI ONS BE THEY STATE OR CENTRAL ENACTMENTS CANNOT BE AUTOMATICALLY APPLIED IN THE PRESENT CONTEXT. IN OR DER TO ASCERTAIN THE MEANING OF A WORD NOT DEFINED IN THE ACT A USEFUL REFERENCE CAN BE MADE TO THE GENERAL CLAUS ES ACT 1897. IF A PARTICULAR WORD IS NOT DEFINED IN T HE RELEVANT STATUTE BUT HAS BEEN DEFINED IN THE GENERA L CLAUSES ACT SUCH DEFINITION THROWS AMPLE LIGHT FOR GUIDANCE AND ADOPTION IN THE FORMER ENACTMENT. ACCORDING TO SECTION 3 OF THE GENERAL CLAUSES ACT THE DEFINITIONS GIVEN IN THIS ACT SHALL HAVE APPLICABIL ITY IN ALL THE CENTRAL ACTS UNLESS A CONTRARY DEFINITION I S PROVIDED OF A PARTICULAR WORD OR EXPRESSION. ON SCANNING SECTION 3 OF THE GENERAL CLAUSES ACT WE OBSERVE THAT NEITHER THE WORD 'CONTRACTOR' NOR 'DEV ELOPER' HAS BEEN DEFINED THEREIN. THUS THE GENERAL CLAUSES ACT IS ALSO OF NO ASSISTANCE IN THIS REGARD. GOING AHEAD WHEN THESE WORDS ARE NEITHER DEFINED IN THE INCOME- TAX I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 25 ACT 1961 NOR IN THE GENERAL CLAUSES ACT THE NEXT QUESTION IS THAT WHERE FROM TO FIND THE MEANING OF SUCH WORDS. THERE IS NO NEED TO WANDER HERE AND THERE IN SEARCH OF ANSWER WHICH HAS BEEN APTLY GIVEN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF ABDULGAFAR A. NADIADWALA V. ASSTT. CIT [2004] 267 I TR 4881 (BOM.) WHEREIN THE HON'BLE HIGH COURT WAS LOOKING INTO THE MEANING OF THE WORDS 'GOODS' AND 'MERCHANDISE' WHICH ARE NOT DEFINED UNDER SECTION 80HHC IN THE CONTEXT OF INCOME-TAX ACT 1961. THE HON'BLE HIGH COURT HELD THAT : 'IT IS WELL-SETTLED THAT IN THE ABSENCE OF THERE BEING ANYTHING CONTRARY TO THE CONTEXT THE LANGUAGE OF A STATUTE SHOULD BE INTERP RETED ACCORDING TO THE PLAIN DICTIONARY MEANING OF THE TE RMS USED THEREIN'. SIMILAR VIEW HAS BEEN EXPRESSED BY T HE HON'BLE SUPREME COURT IN THE CASE OF CWT V. OFFICER -IN- CHARGE (COURT OF WARDS) [1976]105 ITR 133 IN WHICH IT WAS HELD THAT THE ORDINARY DICTIONARY MEANING OF A WORD CANNOT BE DISREGARDED. 40. COMING BACK TO OUR POINT OF ASCERTAINING THE MEANING OF THE WORDS 'CONTRACTOR' AS WELL AS 'DEVEL OPER' WHICH HAVE NEITHER BEEN DEFINED IN THE ACT NOR IN T HE GENERAL CLAUSES ACT WE FALL UPON OXFORD ADVANCED LEARNER'S DICTIONARY TO FIND OUT THEIR MEANING. ACCORDING TO THIS DICTIONARY . 'DEVELOPER' IS A PE RSON OR COMPANY THAT DESIGNS AND CREATES NEW PRODUCTS WHEREAS 'CONTRACTOR' IS A PERSON OR A COMPANY THAT HAS A CONTRACT TO DO WORK OR PROVIDES SERVICES OR GOODS TO ANOTHER. THE NEW SHORTER OXFORD DICTIONARY DEFINES THE WORD 'CONTRACTOR' AS : PERSON WHO ENTERS INTO A CONTRACT OR AGREEMENT. NOW CHIEFLY SPEC. A PERSON O R FIRM THAT UNDERTAKES WORK BY CONTRACT ESP. FOR BUI LDING TO SPECIFIED PLANS'. IN THE LIGHT OF THE MEANING AS CRIBED TO THESE WORDS BY THE DICTIONARIES IT IS OBSERVED THAT THE DEVELOPER IS A PERSON WHO DESIGNS AND CREATES N EW PRODUCTS. HE IS THE ONE WHO CONCEIVES THE PROJECT. HE MAY EXECUTE THE ENTIRE PROJECT HIMSELF OR ASSIGN SO ME PARTS OF IT TO OTHERS. ON THE CONTRARY THE CONTRAC TOR IS THE ONE WHO IS ASSIGNED A PARTICULAR JOB TO BE ACCOMPLISHED ON THE BEHALF OF THE DEVELOPER. HIS DU TY IS TO TRANSLATE SUCH DESIGN INTO REALITY. THERE MAY I N CERTAIN CIRCUMSTANCES BE OVERLAPPING IN THE WORK O F DEVELOPER AND CONTRACTOR BUT THE LINE OF DEMARCATI ON BETWEEN THE TWO IS THICK AND UNBREACHABLE. WHEN THE PERSON ACTING AS DEVELOPER WHO DESIGNS THE PROJECT ALSO EXECUTES THE CONSTRUCTION WORK HE WORKS IN TH E CAPACITY OF CONTRACTOR TOO. BUT WHEN HE ASSIGNS THE JOB I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 26 OF CONSTRUCTION TO SOMEONE ELSE HE REMAINS THE DEVELOPER SIMPLICITER WHEREAS THE PERSON TO WHOM T HE JOB OF CONSTRUCTION IS ASSIGNED BECOMES THE CONTRA CTOR. THE ROLE OF DEVELOPER IS MUCH LARGER THAN THAT OF T HE CONTRACTOR. IT IS NO DOUBT TRUE THAT IN CERTAIN CIRCUMSTANCES A DEVELOPER MAY ALSO DO THE WORK OF A CONTRACTOR BUT A MERE CONTRACTOR PER SE CAN NEVER B E CALLED AS A DEVELOPER WHO UNDERTAKES TO DO WORK ACCORDING TO THE PRE-DECIDED PLAN. ` 41. FURTHER IT IS RELEVANT TO NOTE THAT THE WORD 'DEVELOPING' USED IN SUB-SECTION (4) IS WITH REFERE NCE TO 'INFRASTRUCTURE FACILITY'. WHEN WE FURTHER PERUSE T HE MEANING OF THE WORD 'INFRASTRUCTURE FACILITY' AS PE R EXPLANATION IT IS FOUND TO HAVE BEEN DEFINED EXHAUSTIVELY BY REFERRING TO A ROAD PROJECT AIRPOR T PORT ETC. A HIGHWAY PROJECT A WATER SUPPLY PROJECT AND IRRIGATION PROJECT ETC. THEREFORE THE USE OF WORD 'DEVELOPING' IN JUXTA-POSITION TO INFRASTRUCTURE FA CILITY INDICATES THAT WHAT IS ELIGIBLE FOR DEDUCTION UNDER THIS SUB-SECTION IS THE PROFITS AND GAINS DERIVED FROM T HE DEVELOPMENT OF INFRASTRUCTURE FACILITY AND NOT SOME THING DE HORS IT. SO IN ORDER TO BE ELIGIBLE FOR DEDUCTIO N THE DEVELOPMENT SHOULD BE THAT OF THE INFRASTRUCTURE FA CILITY AS A WHOLE AND NOT A PARTICULAR PART OF IT AS HAS BEEN CONTENDED BY THE ID. AR. IT MAY BE POSSIBLE THAT SO ME PART OF DEVELOPMENT WORK IS ASSIGNED BY THE DEVELOP ER TO SOME CONTRACTOR FOR DOING IT ON HIS BEHALF. THAT WILL NOT PUT THE DOER OF SUCH WORK INTO THE SHOES OF A DEVELOPER. 16. FURTHER HE RELIED ON THE JUDGMENT OF BOMBAY HIGH C OURT IN THE CASE OF ABG HEAVY INDUSTRIES LIMITED 322 ITR 32 3 (BOM) WHEREIN HELD THAT: SECTION 80-IA OF THE INCOME-TAX ACT 1961 WAS INTRODUCED TO PROVIDE AN IMPETUS TO THE GROWTH OF INFRASTRUCTURE IN THE NATION. A SOUND INFRASTRUCTUR E IS A SINE QUA NON FOR ECONOMIC DEVELOPMENT. ABSENCE OF INFRASTRUCTURE POSES SIGNIFICANT BARRIERS TO GROWTH AND DEVELOPMENT. A MODEL WHICH RELIED EXCLUSIVELY ON TH E PROVISION OF BASIC INFRASTRUCTURE BY THE STATE WAS FOUND TO BE DEFICIENT. SECTION 80-LA WAS AN INSTRUMENT OF LEGISLATIVE POLICY CONCEIVED WITH A VIEW TO PROVID E AN IMPETUS TO PRIVATE SECTOR PARTICIPATION IN INFRASTR UCTURAL PROJECTS. CONTEMPORANEOUSLY WITH THE PROVISIONS WH ICH WERE MADE BY PARLIAMENT IN SECTION 80-IA OF THE ACT I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 27 EXPLANATORY CIRCULARS ISSUED IN AN ADMINISTRATIVE CAPACITY BY THE CENTRAL BOARD OF DIRECT TAXES HELD THE FIELD. THESE CIRCULARS GAVE EXPRESSION TO THE SCOPE AND AMBIT OF THE CONCESSION WAS PROVIDED BY SECTION 80- LA. THE EVOLUTION OF SECTION 80-LA WOULD SHOW A PROGRESSIVE LIBERALISATION OF THE LEGISLATIVE SCHEM E IN THE INTERESTS OF AIDING THE GROWTH OF INFRASTRUCTUR E. THE ADMINISTRATIVE CIRCULARS ISSUED BY THE CENTRAL BOAR D OF DIRECT TAXES IN IMPLEMENTATION OF SECTION 80-IA SIMILARLY LIBERALISED THE SCHEME CONSISTENT WITH T HE ACT. THE EXPRESSION DEVELOPMENT' HAS NOT BEEN ARTIFICIA LLY DEFINED FOR THE PURPOSES OF SECTION 80-LA OF THE AC T AND MUST THEREFORE RECEIVE ITS ORDINARY AND NATURAL MEANING. AN ASSESSEE DOES NOT HAVE TO DEVELOP THE ENTIRE PORT IN ORDER TO QUALIFY FOR A DEDUCTION UND ER SECTION 80-LA. PARLIAMENT DID NOT LEGISLATE A CONDI TION IMPOSSIBLE OF COMPLIANCE. A PORT IS DEFINED TO BE A N INFRASTRUCTURE FACILITY AND THE CIRCULAR OF THE BOA RD CLARIFIED THAT A STRUCTURE FOR LOADING UNLOADING STORAGE ETC. AT A PORT WOULD QUALIFY FOR DEDUCTION UNDER S ECTION 80 IA. PARLIAMENT AMENDED THE PROVISION OF SECTION 80 IA OF THE ACT SO AS TO CLARIFY THAT IN ORDER TO AVA IL OF A DEDUCTION THE ASSESSEE (I) DEVELOP (II) OPERATE AN D MAINTAIN OR (II) DEVELOP OPERATE AND MAINTAIN TH E FACILITY. THE CONDITION AS REGARDS DEVELOPMENT OPERATION AND MAINTENANCE OF AN INFRASTRUCTURE FACI LITY WAS CONTEMPORANEOUSLY CONSTRUED BY THE AUTHORITIES AT ALL MATERIAL TIMES TO COVER WITHIN ITS PURVIEW THE DEVELOPMENT OF AN INFRASTRUCTURE FACILITY UNDER A SCHEME BY WHICH AN ENTERPRISE WOULD BUILD OWN LEA SE AND EVENTUALLY TRANSFER THE FACILITY. THIS WAS PERH APS A PRACTICAL REALISATION OF THE FACT THAT A DEVELOPER MAY NOT POSSESS THE WHEREWITHAL EXPERTISE OR RESOURCES TO OPERATE A FACILITY ONCE CONSTRUCTED. PARLIAMENT EVENTUALLY STEPPED IN TO CLARIFY THAT IT WAS NOT INVARIABLY NECESSARY FOR A DEVELOPER TO OPERATE AND MAINTAIN THE FACILITY. IN BAJAJ TEMPO V. CIT [1992] 196 ITR188 THE SUPREME COURT EMPHASIZED THAT A PROVISION IN A TAXING STATUTE GRANTING INCENTIVES F OR PROMOTING GROWTH AND DEVELOPMENT SHOULD BE CONSTRUED LIBERALLY. IN THE PRESENT CASE THE ADMINISTRATIVE CIRCULARS ISSUED CENTRAL BOARD OF DI RECT TAXES PROCEEDED ON THAT BASIS BY ADOPTING A LIBERAL VIEW OF THE SCOPE AND AMBIT OF THE PROVISIONS OF SE CTION 80-IA OF THE ACT. PARLIAMENTARY INTERVENTION ENDORS ED THE ADMINISTRATIVE PRACTICE. AFTER SECTION 80-IA WA S I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 28 AMENDED BY THE FINANCE ACT OF 2001 THE SECTION APPLIES TO AN ENTERPRISE CARRYING ON THE BUSINESS O F (I) DEVELOPING; OR (II) OPERATING; MAINTAINING; OR (III ) DEVELOPING OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY WHICH FULFILS CERTAIN CONDI TIONS. THOSE CONDITIONS ARE OWNERSHIP OF THE ENTERPRISE BY A COMPANY REGISTERED IN INDIA OR BY A CONSORTIUM (II) AN AGREEMENT WITH THE CENTRAL OR STATE GOVERNMENT LOC AL AUTHORITY OF STATUTORY BODY; AND (III) THE START OF OPERATION AND MAINTENANCE OF INFRASTRUCTURE FACILIT Y ON OR AFTER APRIL 1 1995. THE REQUIREMENT THAT THE OPERATION AND MAINTENANCE OF THE INFRASTRUCTURE FAC ILITY SHOULD COMMENCE AFTER APRIL 1 1995 HAS TO BE HARMONIOUSLY CONSTRUED WITH THE MAIN PROVISION UNDE R WHICH A DEDUCTION IS AVAILABLE TO AN ASSESSEE WHO DEVELOPS; OR 'OPERATES AND MAINTAINS; OR DEVELOPS OPERATES AND MAINTAINS AN INFRASTRUCTURE FACILITY. UNLESS BOTH THE PROVISIONS ARE HARMONIOUSLY CONSTRU ED THE OBJECT INTENT UNDERLYING THE AMENDMENT OF THE PROVISION BY THE FINANCE ACT OF 2001 WOULD BE DEFEATED. A HARMONIOUS READING OF THE PROVISION IN ITS ENTIRETY WOULD LEAD TO THE CONCLUSION THAT THE DEDU CTION IS AVAILABLE TO AN ENTERPRISE WHICH (I) DEVELOPS; O R (II) OPERATES AND MAINTAINS; OR (III) DEVELOPS MAINTAINS AND OPERATES THAT INFRASTRUCTURE FACILITY. HOWEVER THE COMMENCEMENT OF THE OPERATION AND MAINTENANCE OF TH E INFRASTRUCTURE FACILITY SHOULD BE AFTER APRIL 1 19 95. THE ASSESSEE IN TERMS OF THE POLICY OF THE GOVERNM ENT OF INDIA TO ENCOURAGE PRIVATE SECTOR PARTICIPATION IN THE DEVELOPMENT OF INFRASTRUCTURE BID FOR AND WAS AWARDED A CONTRACT FOR LEASING OF CONTAINER HANDLIN G CRANES AT THE JAWAHARLAL NEHRU PORT TRUST (JNPT). I N PURSUANCE OF THE CONTRACT THE ASSESSEE DEPLOYED RA IL MOUNTED QUAY SIDE CRANES RAIL MOUNTED GANTRY CRANE S AND RUBBER TIRED GANTRY CRANES AT THE CONTAINER HANDLING TERMINAL OF THE JNPT. JNPT HAD A DEDICATE D CONTAINER HANDLING TERMINAL. ACCORDING TO THE ASSES SEE THE ONLY ACTIVITIES OF THE TERMINAL CONSISTED OF LO ADING UNLOADING AND STORAGE OF CONTAINERS. UNDER CONTRACT S DATED SEPTEMBER 2 1994 AND OCTOBER 16 1995 JNPT ACCEPTED THE BID SUBMITTED BY THE ASSESSEE FOR SUP PLY INSTALLATION TESTING COMMISSIONING AND MAINTENANC E OF THE CRANES. BY THE TERMS OF THE AGREEMENT JNPT AGR EED TO PAY LEASE CHARGES IN A TOTAL SUM OF RS. 215.50 C RORES OVER A PERIOD OF TEN YEARS. THE CONTRACT ENVISAGED TWO OPTIONS. UNDER THE FIRST OPTION OPERATION AND MAINTENANCE WAS TO BE CARRIED OUT BY THE ASSESSEE. I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 29 UNDER THE SECOND OPTION ONLY MAINTENANCE WAS TO BE CARRIED OUT BY THE ASSESSEE. UNDER THE CONTRACTS J NPT RESERVED THE RIGHT TO EXERCISE THE OPTION TO REQUES T THE ASSESSEE TO CARRY OUT BOTH OPERATION AND MAINTENANC E DURING THE LEASE PERIOD OR TO CARRY OUT ONLY MAINTENANCE WHILE OPERATION WAS DONE BY JNPT. THE CONTRACTS STIPULATED INTER ALIA THE SUBMISSION OF A PERFORMANCE GUARANTEE BOND REPRESENTING 10 PER CEN T OF THE AVERAGE ANNUAL CONTRACT VALUE COMPUTED WITH REFERENCE BOTH TO MAINTENANCE AND OPERATION. THE ASSESSEE ASSUMED THE RESPONSIBILITY OF MAKING THE EQUIPMENT AVAILABLE FOR OPERATION FOR A MINIMUM NUMBER OF DAYS AS STIPULATED IN THE CONTRACT AND BECAME LIABLE TO PAY LIQUIDATED DAMAGES FOR NON- AVAILABILITY OF THE EQUIPMENT AFTER COMMISSIONING. AFTER THE EXPIRY OF THE LEASE PERIOD OF TEN YEARS THE AS SESSEE WAS LIABLE TO HAND OVER THE EQUIPMENT TO JNPT FREE OF COST. UNDER THE CONTRACT THE ASSESSEE FURNISHED AN INDEMNITY TO JNPT TOWARDS DAMAGES THAT MAY BE SUSTAINED TO THE EQUIPMENT OR TO ANY PROPERTY OF TH E PORT TRUST OR TO THE LIVES PERSONS OR PROPERTIES OF OTHERS. THE ASSESSEE ASSUMED OTHER CONTRACTUAL OBLIGATIONS INCLUDING AMONGST THEM THE LIABILITY TO INSURE THE EQUIPMENT TO INDEMNIFY JNPT TOWARDS THE CLAIMS OF WORKERS' COMPENSATION AND FOR COMPLIANCE WITH LABOU R LEGISLATION. THE ASSESSEE CLAIMED SPECIAL DEDUCTION UNDER SEC. 80-IA. THE ASSESSING OFFICER REJECTED TH E CLAIM BUT THE COMMISSIONER (A)) AND TRIBUNAL ALLOWE D IT. ON APPEAL TO THE HIGH COURT: HELD DISMISSING THE APPEAL THAT ON MAY 31 2004 JNPT ISSUED A CERTIFICATE CONFIRMING THE AWAR D OF CONTRACTS TO THE ASSESSEE ON SEPTEMBER 2 1994 AND OCTOBER 16 1995 FOR SUPPLY INSTALLATION TESTING COMMISSIONING AND MAINTENANCE OF CONTAINER HANDLING EQUIPMENT ON LEASE FOR A PERIOD OF TEN YEARS FOR LO ADING AND UNLOADING OF CONTAINERS AT THE PORT AND THAT TH E CRANES THAT WERE TO BE SUPPLIED BY THE ASSESSEE FORMED AN INTEGRAL PART OF THE PORT. JNPT CLARIFIED THAT THE CONTRACTS HAD BEEN EXECUTED UNDER THE BOLT SCHEME AND IN ACCORDANCE WITH ITS DIRECTIONS; THE CRANES WOULD BE TRANSFERRED TO THE PORT TRUST AT NO COST ON THE EXPIRY OF A PERIOD OF TEN YEARS OF THE COMMENCEMENT OF THE CONTRACT. THE OBLIGATIONS WHICH HAD BEEN ASSUMED BY THE ASSESSEE UNDER THE TERMS OF THE CONTRACT WERE OBLIGATIONS INVOLVING THE DEVELOP MENT OF AN INFRASTRUCTURE FACILITY. SECTION 80-IA OF THE ACT ESSENTIALLY CONTEMPLATED A DEDUCTION IN A SITUATION I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 30 WHERE AN ENTERPRISE CARRIED ON THE BUSINESS OF DEVELOPING MAINTAINING AND OPERATING AN INFRASTRUC TURE FACILITY. A PORT WAS DEFINED TO BE INCLUDED WITHIN THE PURVIEW OF THE EXPRESSION 'INFRASTRUCTURE FACILITY' . THE OBLIGATIONS WHICH THE ASSESSEE ASSUMED UNDER THE TERMS OF THE CONTRACT WERE NOT MERELY FOR SUPPLY AN D INSTALLATION OF THE CRANES BUT INVOLVED A CONTINUO US OBLIGATION RIGHT FROM THE SUPPLY OF THE CRANES TO INSTALLATION TESTING COMMISSIONING OPERATION AND MAINTENANCE OF THE CRANES FOR A TERM OF TEN YEARS A FTER WHICH THE CRANES WERE TO VEST IN JNPT FREE OF COST. AN ASSESSEE DID NOT HAVE TO DEVELOP THE ENTIRE PORT IN ORDER TO QUALIFY FOR A DEDUCTION UNDER SECTION 80-I A. THE CONDITION OF A CERTIFICATE FROM THE PORT AUTHORITY WAS FULFILLED AND JNPT CERTIFIED THAT THE FACILITY PROV IDED BY THE ASSESSEE WAS AN INTEGRAL PART OF THE PORT. THE ASSESSEE DEVELOPED THE FACILITY ON A BOLT BASIS UND ER THE CONTRACT WITH JNPT. ON THE FULFILMENT OF THE LE ASE OF TEN YEARS THERE WAS A VESTING IN THE JNPT FREE OF COST. THE FINDING THAT THE ASSESSEE HAD DEVELOPED THE INFRASTRUCTURE FACILITY AND THAT IT WAS ENGAGED IN OPERATING THE CRANES WAS THEREFORE BASED ON THE MATERIAL ON RECORD. THE FACT THAT THE ASSESSEE WAS ALSO MAINTAINING THE CRANES WAS NOT DISPUTED. THE FACILI TY WAS COMMENCED AFTER APRIL 1 1995. THE ASSESSEE WAS ENTITLED TO THE SPECIAL DEDUCTION UNDER SECTION 80- IA. 16.1 THE LEARNED COUNSEL FOR THE ASSESSEE PLACED RE LIANCE ON TWO DECISIONS- MUMBAI HIGH COURT IN THE CASE OF CIT VS. ABG HEAVY INDUSTRIES LIMITED 322 ITR 323 AND ITAT PUNE BENCH IN THE CASE OF LAXMI CIVIL ENGINEERING PVT. LTD. VS. ADDL. CIT KOLHAPUR (UNREPORTED/ITA NO.766/PN/09 DATED 8-6-2011). IT W AS URGED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THESE DE CISIONS SUPPORTED THE PROPOSITION THAT (I) THE ITATS DECI SION IN THE CASE OF B.T. PATIL & SONS LARGER BENCH (MUMBAI) REPORTE D IN 126 TTJ 577 IS NO LONGER GOOD LAW AND (II) THE DISTINCTIO N BETWEEN DEVELOPER AND CONTRACTOR IS NO LONGER RELEVANT IN T HE CONTEXT OF CHANGED LAW EXPLAINED BY THE MUMBAI HIGH COURT IN T HE CASE OF ABG HEAVY INDUSTRIES (SUPRA) AND FOLLOWED WITHIN IT S JURISDICTION BY THE PUNE BENCH OF THE ITAT IN THE CASE OF LAXMI CIVIL ENGG. (SUPRA). I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 31 17. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REPRESE NTATIVE SUBMITTED THAT THE MEANING OF THE WORD DEVELOPER AND THE ELIGIBILITY OF THE BUSINESS TO CLAIM DEDUCTION MEAN T FOR DEVELOPMENT OF INFRASTRUCTURAL FACILITIES WITHIN THE MEANING OF SECTION 80IA HAS TO BE SEEN IN THE CONTEXT OF THE G ENESIS AND LEGISLATIVE HISTORY OF THE SECTION AS HELD BY THE S UPREME COURT IN THE CASE OF CIT VS. N.C. BUDDHIRAJA (204 ITR 412 43 3) THE PROVISION AS INTRODUCED BY THE FINANCE ACT 1991 AS AMENDED BY FINANCE ACT 1996 FINANCE ACT 1999 FINANCE ACT 2001 UP TO FINANCE ACT 2007 AND FINANCE ACT 2009 AND AS EXPLA INED BY CIRCULAR 794 DATED 9-8-2000 CIRCULAR 779 DATED 14-9 -1999 (240 ITR ST. 32) CIRCULAR 794 DATED 9-8-2000 CIRCULAR 779 DATED 14- 98-1999 (240 ITR ST. 32) CIRCULAR 794 DATED 19-8-2 000 CIRCULAR 14/2001 (252 ITR ST. 98) AND CIRCULAR 3/2008 DATED 12-03-2008 (168 TAXMAN ST. 12 54) BRINGS OUT THE OBJECTIVES OF THE STATUTE AND EXPECTATIONS OF THE LAW-MAKERS IN BRINGING THE ENAC TMENT. THE STATUTORY PROVISIONS AS WOULD BE APPARENT FROM THE CIRCULARS AND EXPLANATORY NOTES REFERRED TO HEREIN-ABOVE SEEK TO INCORPORATE A QUID PRO QUO BETWEEN INTRODUCTION OF INVESTMENT AND ENTREPRENEURIAL RESOURCES FROM THE PRIVATE SECTOR A ND A TAX DEDUCTION FROM THE GOVERNMENT TO ENABLE RECOUPMENT OF EXPENDITURE INCURRED. THE BOT/BOOT MODELS SEEK TO AUGMENT INFRASTRUCTURAL ASSETS IN ADDITION TO GOVERNMENTAL SPENDING AND NOT SIMPLY FEED ON GOVERNMENT EXPENDITURE. THE DED UCTION UNDER SECTION 80IA IS THEREFORE AVAILABLE TO THE FORMER AND NOT TO THE LATTER FORMS OF BUSINESS. THE DEDUCTION CLAIMED U NDER SECTION 80IA OF THE ACT AS PRESCRIBED IN SUB-SECTION (1) IS IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION. ... IN SUB SECTION (2) IT IS STATED THAT THE DEDUCTION IS AVAILABLE F OR THE SPECIFIED NUMBER OF YEARS BRINING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE AN Y INFRASTRUCTURE FACILITY OR STARTS PROVIDING TELECOMMUNICATION SERV ICES OR... IT IS I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 32 CLEAR THEREFORE THAT THE DEDUCTION IS INEXTRICABLY CONNECTED TO THE COMMENCEMENT OF OPERATIONS OF THE INFRASTRUCTURE FA CILITY. IT IS IMMEDIATELY APPARENT THAT THE FACILITY HAS TO BE CO NCEIVED OF IN ITS TOTALITY BECAUSE PART OF THE INFRASTRUCTURE FACILIT Y HAS NOT EXISTENCE INDEPENDENT OF THE WHOLE. A CERTAIN NUMBER OF KILO METRES OF A HIGHWAY OR IRRIGATION CANAL HAS NO EXISTENCE BY ITS ELF AND IS INCAPABLE OF BECOMING OPERATIONAL WITHOUT REFERENCE TO THE REST OF THE PROJECT OF WHICH IT IS ONLY A PART. IT IS EVID ENT FROM THE ENCLOSURES THAT THE ASSESSEE UNDERTOOK TO EXECUTE THE WORK AS PER AGREED SPECIFICATIONS AT RATES AGREED UPON SU BJECT TO MAINTENANCE WITHIN A PERIOD OF 24 MONTHS OF COMMEN CEMENT. 18. THE SUBSEQUENT PARTS OF THE PAPER BOOK DETAILS IN T HE RATE ANALYSIS BILL OF QUANTITIES ETC. MAKE IT CLEAR TH AT THE ASSESSEE HAD NO AUTONOMY IN MATTERS OF DESIGN AND SPECIFICATION WHICH COMPLETELY VESTED WITH THE EMPLOYER. THE ONLY LAWF UL ENTITLEMENT OF THE ASSESSEE WAS TO BE PAID FOR THE MEASUREMENT OF WORK COMPLETED AT RATES AGREED UPON. THE PARTIAL AND SECTIONAL NATURE OF THE PROPOSED WORK IS IMMEDIATELY CLEAR FROM THIS NOTICE AND IT IS ALSO APPARENT FROM THIS THAT THE SECTION OF THE ROA D PROPOSED FOR IMPROVEMENT HAS NO INDEPENDENT EXISTENCE CAPABLE OF SATISFYING THE REQUIREMENT OF SECTION 80 IA (2). THEREFORE T HIS PROJECT IS INCAPABLE OF COMMENCEMENT OF OPERATIONS BY ITSELF OR TO QUALIFY THE LARGER INFRASTRUCTURE FACILITY OF WHICH IT IS A PART. 19. THE DR SUBMITTED THAT THE CONTRACTOR WAS GRANTED MOBILISATION ADVANCE AS WELL AS INTEREST-FREE ADVAN CE FOR MACHINERY PURCHASE SHOULD BE REQUIRED THEM AND IT WOULD BE READILY APPARENT FROM THE AGREEMENT THAT THERE IS N O ELEMENT OF ENTREPRENEURIAL INITIATIVE OR FINANCIAL PARTICIPATI ON OF THE CONTRACTOR IN THIS KIND OF A PROJECT THE SUCCESSFU L BIDDER MERELY EXECUTES A GOVERNMENT CONTRACT AND GETS PAID FOR IT AT MUTUALLY I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 33 AGREED RATES AND THE NATURE OF RESPONSIBILITIES ASS UMED UNDER THE OTHER CONTRACTS AS PER AGREEMENTS INCLUDED IN THE P APER BOOK ARE SIMILAR. IT IS FURTHER STATED THAT DURING THE HEARI NG THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE WAS AT PAINS TO EMPH ASISE THAT THE ASSESSEE UNDERTOOK MAINTENANCE WORK AND WAS HENCE I T IS TO BE TREATED AS A DEVELOPER. HOWEVER IT IS CLEAR FROM THE DOCUMENT AS FURNISHED IN THE PAPER BOOK THAT THE MAINTENANCE FU NCTION WAS ACTUALLY REMEDYING OF DEFECTS FOR A PRESCRIBED PERI OD. NO SEPARATE CHARGES HAVE BEEN COLLECTED AND THIS CANNOT BE SEEN AS A MAINTENANCE FUNCTION. 20. ON THESE FACTS HAVING REGARD TO THE RESPONSIBILITI ES ASSUMED UNDER THE AGREEMENT THE ASSESSEE CANNOT BE SEEN AS A DEVELOPER INSTEAD HE PLAYS THE ROLE OF AN EXECUTOR /CONTRACTOR. BE THAT AS IT MAY IT WAS URGED BY THE DEPARTMENTAL RE PRESENTATIVE IN THE REPLY THAT THE ISSUE WHETHER THE ASSESSEE WAS A DEVELOPER FOR THE PURPOSES OF SECTION 80IA AFTER THE CHANGES IN L AW W.E.F. 1-4- 2002 IS NOT MATERIAL FOR ADJUDICATION OF THE GROUND S IN THE IMPUGNED APPELLATE ORDERS. THIS IS BECAUSE IN SO F AR AS THE CONTRACTS IN QUESTION ARE IN THE NATURE OF WORKS CO NTRACTS THE EXPLANATION INSERTED BELOW SECTION 80IA (13) WITH R ETROSPECTIVE EFFECT FROM 1-4-2000 HAS OVER-RIDING INFLUENCE AND DEBARS THE ASSESSEES CLAIM. FURTHER IT IS CONTENDED THAT TH E INTRODUCTION OF THE EXPLANATION BELOW SECTION 80 IA(13) IN 2007 WIT H RETROSPECTIVE EFFECT FROM 1-4-2000 PUTS MATTERS BEYOND DOUBT. TH E LAW ON THE SUBJECT OF APPLICATION OF A RETROSPECTIVE AMENDMENT IS CLEAR FROM THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE C ASE OF AQUARIUS TRAVELS P LTD. VS. ITO (111 ITD 53). SUCH PROVISIO NS SHOULD BE APPLIED IN PENDING PROCEEDINGS EVEN WHEN THEY HAVE NOT BEEN INVOLVED EARLIER. AS MATTERS STAND THEREFORE THE MOST IMPORTANT QUESTION FOR EXAMINATION ON FACTS IS WHETHER THE BU SINESS AGREEMENT IN QUESTION CAN BE TERMED A WORKS CONTRAC T OR NOT. IF THE ANSWER IS IN AFFIRMATIVE NOTHING ELSE MATTERS BECAUSE THE I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 34 EXPLANATION TAKES OVER. IF NOT THE OTHER NUANCES SUCH A DEVELOPMENT/OPERATION ETC. AND OTHER SPECIFIED CON DITIONS BECOME RELEVANT. RELIANCE WAS PLACED IN THIS REGARD ON TH E DECISION OF THE MUMBAI HIGH COURT IN THE CASE OF GLENMARK PHARMA (3 24 ITR 199 207) WHICH DIGESTS THE CASE LAW FOR ASCERTAINM ENT OF WHETHER FACTS OF THE AGREEMENT WOULD AMOUNT TO A CONTRACT FOR WORK OR FOR SALE. 21. THE LD. DR PLACED RELIANCE ON THE DECISION OF JURIS DICTIONAL HIGH COURT IN THE CASE OF DR. MRS. RENUKA DATLA VS. CIT (240 ITR 463) (AP) THAT PROVISIONS GRANTING EXEMPTIONS HAVE TO BE STRICTLY CONSTRUED. IT WAS HELD BY THE SUPREME COURT IN THE CASE OF IPCA LABORATORY LIMITED VS. DCIT (SC) 266 ITR 521 THAT W HEN THERE IS NO AMBIGUITY PROVISIONS CANNOT BE INTERPRETED TO C ONFER A BENEFIT UPON THE ASSESSEE. THE PROVISION IS INCAPABLE OF A PPLICATION TO THE FACTS OF THE ASSESSEES CASE BECAUSE THE ASSESSEE I S ONLY AN EXECUTOR OF A CONTRACT WHICH IS IN TURN PART OF A LARGER PROJECT UNDERTAKEN BY THE GOVERNMENT OR ITS AGENCY. IT H AS BEEN ARGUED IN REJOINDER BY THE DEPARTMENTAL REPRESENTATIVE THA T SUCH RELIANCE IS NEITHER CORRECT NOR RELEVANT IN DECIDING THE ISS UES ON HAND. IN THE CASE OF LAXMI CIVIL ENGG. PVT. LTD. THE ARGUME NT OF THE ASSESSEE THAT WAS ACCEPTED BY THE ITAT PUNE BENCH IS BROADLY- THE ASSESSEE IS A CONTRACTOR EVERY CONTRACTOR IS A DEVELOPER AS PER THE MUMBAI HIGH COURT DECISION IN THE CASE OF ABG H EAVY INDUSTRIES AND A DEVELOPER NEED NOT OPERATE AND MAI NTAIN THE INFRASTRUCTURE FACILITY AS HELD BY THE MUMBAI HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRIES. 22. THE DR SUBMITTED THAT THE DECISION OF THE PUNE BENC H OF THE ITAT IN THE CASE OF LAXMI CIVIL ENGG. (SUPRA) IS O F NO HELP IN DECIDING THE ISSUES IN THE IMPUGNED APPEALS FOR THE REASON THAT THE TERMS AND CONDITIONS OF THE CONTRACTS AND THE N ATURE OF OBLIGATIONS ASSUMED THERE-UNDER BY THE BUSINESS A RE NOT I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 35 DISCUSSED IN THE SAID ORDER. THIS IS THE FACTUAL FU LCRUM ON WHICH THE DECISION OF THE ITAT (LARGER BENCH) IN B.T. PAT IL AS WELL AS THE MUMBAI HIGH COURT IN ABG CASE WAS DECIDED. WITHOUT SUCH DETAIL THERE IS NO POINT OF COMPARABILITY BETWEEN THE PUNE BENCH DECISION AND THE OTHER CASES. THE UNANSWERED QUEST IONS EMERGING THERE-FROM ARE I) CAN WE ASSUME THAT THERE WAS A BOLT CONTRACT OR WAS IT A WORKS CONTRACT? II) CAN WE ASSUME THAT THE ASSESSEE TOOK OWNERSHIP CONTROL OF THE ASSET CREATED? III) THE CIRCUMSTANCES UNDER WHICH THE ENTERPRISE IN ABG HEAVY INDUSTRIES BECAME AKIN TO A DEVELOPER AND DO THEY OBTAIN IN THE CASE OF LCE? SUCH AS 10 YEAR OWNERSHIP; RETRANSFER; ASSUMPTION OF ASSURED RESPONSIBILITY REGARDING OPERATIONAL READINESS ETC . NOTICED IN ABG HEAVY INDUSTRIES ARE NOT NOTICED IN THE FACTS OF THE CASE AS DIGESTED BY THE AFORE MENTIONE D DECISION OF THE PUNE BENCH OF THE ITAT IN THE CASE OF LCE. IV) THE UNBUNDLING OF CONDITIONS OF DEVELOPMENT OPERATION & MAINTENANCE AND DEVELOPMENT OPERATION AND MAINTENANCE IN THE SENSE OF MAKING THEM NON CUMULATIVE BY AMENDMENT OF LAW EFFECTIVE FROM 1-4- 2002 IS NOT THE ONLY RELEVANT ISSUE. THE LARGER IS SUE IS WHETHER THE ASSESSEE IS A DEVELOPER IN THE FIRST PL ACE. V) IN THE CASE OF B.T. PATIL THE CUMULATIVE OR NON CUMULATIVE SATISFACTION OF CONDITIONS IN SECTION 80IA(4)(I) WAS NEVER A MATERIAL FACT. THIS WAS SO NOT ONLY BECAUSE THE IMPUGNED APPEALS RELATED TO PRE 1- 4- 2002 PERIOD BUT ALSO BECAUSE THE MATTER WAS DECI9DED ON THE PRELIMINARY ISSUE OF WHETHER THE ASSESSEE WAS A DEVELOPER OR NOT IN THE FIRST PLACE. VI) SOME OF THE ATTRIBUTES OF A DEVELOPER WERE DISCUSSE D IN THE CASE OF B.T. PATIL NONE OF WHOM WERE ABSENT IN THE CASE OF ABG HEAVY INDUSTRIES. 23. ACCORDING TO THE DR THE DECISION OF THE MUMBAI HIG H COURT THOUGH LATER IN TIME WAS DIFFERENT IN FACTS THAT THERE WAS NO OCCASION EVEN TO REFER TO THE ITATS DECISION IN TH E CASE OF B.T. PATIL. THEREFORE IT CAN BE SAID THAT THE DECISION OF THE MUMBAI I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 36 HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRIES WILL BE BINDING IN ITS JURISDICTION FOR INFRASTRUCTURE CONTRACT CASES ONLY IN SO FAR AS THE FACTS OF THE CASE ARE COMPATIBLE. FOR THE SAME REASON THERE CAN BE NO ADVERSE IMPLICATION FOR THE PRECEDENT VAL UE OF THE B T PATIL CASE. AS SUBMITTED HEREINABOVE ON IMMEDIATE AND NECESSARY CONSEQUENCE OF THE RETROSPECTIVE AMENDMENT INTRODUC ED BY THE FINANCE ACT 2009 INSERTING EXPLANATION BELOW SECTI ON 80 IA(13) IS THAT ANY BUSINESS TRANSACTED IN TERMS OF A WORKS CONTRACT STANDS DISQUALIFIED FROM SEEKING DEDUCTION UNDER SE CTION 80I(A(4). THE DECISION OF THE MUMBAI HIGH COURT IN THE CASE O F ABG WOULD HAVE NO APPLICATION FROM THIS POINT OF VIEW ALSO. SINCE THE AGREEMENT IN ABG WAS A BOLT AGREEMENT AND NOT A WOR KS CONTRACT THEIR LORDSHIPS HAD NO OCCASION TO CONSIDE R THE EXPLANATION INTRODUCED IN FINANCE ACT 2009 WITH EF FECT FROM 1-4- 2001. EVEN IF IT IS ASSUMED HYPOTHETICALLY THAT THE AGREEMENT IN ABG WAS IN THE NATURE OF A WORKS CONTRACT OR THAT EVERY CONTRACTOR WAS A DEVELOPER THE DECISION OF THE MUM BAI HIGH COURT WITHOUT CONSIDERING THE EXPLANATION CANNOT OPERATE TO OVERRULE THE ITATS DECISION IN THE CASE OF B.T. PATIL WHERE THE BENCH OF THE TRIBUNAL CONSIDERED THE EFFECT OF THE EXPLANATION A ND IT WAS EXPLAINED BY THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF HYDERABAD CHEMICALS SUPPLIES LIMITED (ITA NO.352/HY D/2005 AND 6 OTHERS APPEALS DATED 21-1-2011 IN THE CONTEX T OF AN APPARENT CONFLICT BETWEEN A SPECIAL BENCH (AHMEDABA D) DECISION OF THE ITAT AND MADRAS HIGH COURT AT PARA-15 ON PAG E-8 AS FOLLOWS:- FURTHER JUDGMENT OF HIGH COURT THOUGH NOT OF THE JURISDICTIONAL HIGH COURT PREVAILS OVER AN ORDER O F THE SPECIAL BENCH EVEN THOUGH IT IS FROM THE JURISDICTI ONAL BENCH OF THE TRIBUNAL HOWEVER WHERE THE JUDGMENT OF THE NON JURISDICTIONAL HIGH COURT THOUGH THE ONLY JUDGMENT ON THE POINT HAS BEEN RENDERED WITHOUT HAVING BEEN INFORMED ABOUT CERTAIN STATUTORY PROVIS IONS THAT ARE DIRECTLY RELEVANT IT IS NOT TO BE FOLLOWE D. I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 37 24. WITHOUT PREJUDICE TO THE ARGUMENT THAT THE STAND TH AT THE MUMBAI HIGH COURTS ORDER IN ABG RUNS ON COMPLETELY DIFFERENT FACTS IT IS RESPECTFULLY POINTED OUT THAT THIS DEC ISION CANNOT BE A BINDING PRECEDENT IN ANY CASE FOR THE ABOVE-CITED REASON ALSO AND THIS ISSUE CAN BE SEEN IN ANOTHER PERSPECTIVE. THE RE IS NOTHING IN THE CASE OF ABG HEAVY INDUSTRIES THAT SUPPORTS THE VIEW THAT THE DEVELOPER HAS TO E SEEN DE HORS THE CONTRACT AND ITS STIPULATIONS. IN THE CASE OF ABG HEAVY INDUSTRIES THE REVENUE TOO K THE STAND THAT THE ASSESSEE WAS NOT A DEVELOPER BECAUSE IT WA S ONLY A SUPPLIER OF THE EQUIPMENT. THIS DID NOT FIND FAVOUR BECAUSE IT WAS HELD THAT THE NATURE OF THE BUSINESS HAD TO BE SEEN IN TERMS OF THE OBLIGATIONS ASSUMED UNDER THE CONTRACT WHICH INCLUD ED NOT ONLY SUPPLY AND INSTALLATION OF THE CRANES BUT ALSO TEST ING COMMITMENT OF OPERATIONAL READINESS FOR A PERIOD OF TEN YEARS ON THE PAIN OF LIQUIDATED DAMAGES AND EVENTUAL RE-TRANSFER AFTER S UCH PERIOD. IN THE CASE OF ABG HEAVY INDUSTRIES THE CREATION OF C ERTAIN STANDALONE PARTS OF THE PART COMPLEX QUALIFIED FOR BEING TERMED ON INFRASTRUCTURE PROJECT BECAUSE THE BOARD CIRCULAR 7 93 DATED 23-6- 2000 CLARIFIED THAT PART OF THE PROJECT WOULD QUALI FY IF SO CERTIFIED BY THE PORT AUTHORITIES. THE CONTAINER HANDLING CR ANES ASSEMBLY WAS CERTIFIED TO BE AN INTEGRAL PART OF THE PORT CO MPLEX BY THE PORT AUTHORITY. THIS IS CONTEXTUALLY VERY DIFFERENT FRO M PARTS OF THE RUNNING LENGTH OF A HIGHWAY OR IRRIGATION CANAL BEI NG EXECUTED ON A RATE CONTRACT. THE DEPARTMENTS ARGUMENT THAT TH E ASSESSEE DID NOT ACTUALLY OPERATE OR MAINTAIN THE FACILITY IN QU ESTION WAS NOT UPHELD BECAUSE THE BENEFITS OF THE SECTION WERE HEL D TO BE AVAILABLE TO BOT/BOLT CONTRACTS BY CBDT CIRCULARS WHICH WERE ANY WAY BINDING ON THE IT AUTHORITIES. IN THE CASE OF THE PRESENT CASE IT IS NOT EVEN CLAIMED BY THE ASSESSEE THAT T HE WORK WAS CARRIED OUT UNDER A BOT/BOLT CONTRACT OR THAT IT W AS NOT A WORKS CONTRACT. IT IS FURTHER SUBMITTED THAT THE D ISTINCTION I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 38 BETWEEN BUSINESS OF DEVELOPMENT OPERATION/MAINTENAN CE AND DEVELOPMENT/OPERATION/MAINTENANCE WAS REMOVED WITH THE CHANGE IN LAW EFFECTIVE FROM 1-4-2002 AND THAT THI S WAS EXPLAINED BY THE DECISION OF THE MUMBAI HIGH COURT IN THE CAS E OF ABG HEAVY INDUSTRIES IS FALLACIOUS FOR THE FOLLOWING RE ASONS: THE MUMBAI HIGH COURT DECISION WAS RENDERED IN THE CONTEXT OF A BOLT CONTRACT WHICH WAS IN ANY CASE CLARIFIED BY THE BOARD CIRCULAR TO QUALIFY FOR THE DEDUCTION UNDER SECTION 80IA. IT WAS NOTICED BY TH EIR LORDSHIPS THAT THE SUBSEQUENT CHANGES IN THE LAW EFFECTIVE FROM 1-4-2002 MERELY MIRRORED THIS LIBERA LISED OUTLOOK. THAT IS NOT THE SAME THING AS SAYING THAT A BUSINESS IN THE NATURE OF A WORKS CONTRACT QUALIFIE D FOR THE DEDUCTION IN SPITE OF NOT OPERATING/MAINTAINING THE FACILITY. THE DECISION OF THE LARGER BENCH IN THE CASE OF B.T. PATEL WAS NOT UN-WARE OF THE CHANGE IN LAW EFFECTIVE FROM 1-45-2002 AS WOULD BE EVIDENT FROM P ARA 36 OF THE ORDER. THE CHANGE MAKING THE CONDITIONS OF DEVELOPMENT/OPERATION/MAINTENANCE NON CUMULATIVE WAS NOT RELEVANT SINCE THE CASE RELATED TO PRE 1-4- 2002 PERIOD. IN THE CASE OF B.T. PATEL THE LARGER BENC H ENUNCIATED CERTAIN TESTS TO DETERMINE WHETHER THE BUSINESS WAS ONE OF A DEVELOPER OR A MERE CONTRACTOR. THE BRIEFLY STATED FACTS ARE AS FOLLO WS: THE DISTINCTION BETWEEN CREATION OF PRODUCT VS. RENDERING OF SERVICE (PARA -40) OWNER VS. EXECUTOR OF OWNERS PLAN WITH REFERENCE TO PROJECT SPECIFICATIO N (PARA-42) VESTING OF PROPERTY SUBJECT TO RETRANSF ER IF NEED BE (PARA 46) AND NEED FOR INTERPRETATION TO AV OID ABSURD RESULTS (PARA 50). 25. THE DR SUBMITTED THAT IN VIEW OF THE TERMS OF THE R ELEVANT CONTRACT IT WAS POSSIBLE TO GIVE A FINDING THAT TH E BUSINESS WAS NOT ONE OF DEVELOPMENT PER SE. THEREFORE THE CH ANGES IN LAW AFTER 1-4-2002 WERE NOT EVEN CALLED INTO PLAY IN TH E CASE OF B.T. PATIL. IT IS FURTHER SUBMITTED THAT THE MUMBAI HI GH COURTS DECISION IN THE CASE OF ABG HEAVY INDUSTRIES NOT ON LY RUNS ON DIFFERENT FACTS IT DOES NOT EVEN REFER TO THE CASE OF B T PATIL. FURTHERMORE THE MUMBAI HIGH COURTS STAND THAT THE NATURE OF I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 39 THE BUSINESS SHOULD BE SEEN IN THE CONTEXT OF THE O BLIGATIONS ASSUMED UNDER THE CONTRACT ONLY COMPLEMENTS NOT CO NTRADICTS THE LARGER BENCHS DISTINCTION BETWEEN A DEVELOPER AND CONTRACTOR SIMPLICITER AS NOTED HEREINABOVE. IT WOULD BE WRO NG AND THEREFORE TO SUGGEST THAT THE CASE OF B.T. PATIL HAS BEEN IMP LIEDLY OVER-RULED BY THE HIGH COURTS DECISION. THE DEPARTMENTAL R EPRESENTATIVE ALSO PLACES RELIANCE ON ANOTHER DECISION OF THE MUM BAI BENCH OF THE TRIBUNAL IN THE CASE OF INDIAN HUME PIPE CO. LT D. VS. DCIT ITA NO.5172/MUM/2008 DATED 29-7-2011 FOR ASSESSMEN T YEAR 2004-05. THIS DECISION PRONOUNCED AFTER THE PUNE B ENCH DECISION IN THE CASE OF LAXMI CIVIL ENGG.. CONSIDERS THE TRI BUNAL DECISION OF B.T. PATIL AS WELL AS ITS JURISDICTIONAL HIGH COUR T DECISION IN THE CASE OF ABG AND GOES ON TO HOLD THAT THE ASSESSEE I S NOT ENTITLED TO THE DEDUCTION UNDER SECTION 80IA (4) IN VIEW OF THE EXPLANATION INTRODUCED WITH RETROSPECTIVE EFFECT. 26. WE HAVE CONSIDERED THE ELABORATE SUBMISSIONS MADE B Y BOTH THE PARTIES AND ALSO PERUSED THE MATERIALS AVA ILABLE ON RECORD. WE HAVE ALSO GONE THROUGH ALL THE CASE LAWS CITED BY BOTH THE PARTIES. WE FIND THAT THE PROVISIONS OF SECTION 80IA (4) OF THE ACT WHEN INTRODUCED AFRESH BY THE FINANCE ACT 1999 THE PROVISIONS UNDER SECTION 80IA (4A) OF THE ACT WERE DELETED FROM THE ACT. THE DEDUCTION AVAILABLE FOR ANY ENTERPRISE EAR LIER UNDER SECTION 80IA (4A) ARE ALSO MADE AVAILABLE UNDER S ECTION 80IA (4) ITSELF. FURTHER THE VERY FACT THAT THE LEGISLATUR E MENTIONED THE WORDS (I) DEVELOPING OR (II) OPERATING AND MAINT AINING OR (III) DEVELOPING OPERATING AND MAINTAINING CLEARLY IND ICATES THAT ANY ENTERPRISE WHICH CARRIED ON ANY OF THESE THREE ACTI VITIES WOULD BECOME ELIGIBLE FOR DEDUCTION. THEREFORE THERE IS NO AMBIGUITY IN THE INCOME-TAX ACT. WE FIND THAT WHERE AN ASSESSEE INCURRED EXPENDITURE FOR PURCHASE OF MATERIALS HIMSELF AND E XECUTES THE DEVELOPMENT WORK I.E. CARRIES OUT THE CIVIL CONSTR UCTION WORK HE I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 40 WILL BE ELIGIBLE FOR TAX BENEFIT UNDER SECTION 80 I A OF THE ACT. IN CONTRAST TO THIS A ASSESSEE WHO ENTERS INTO A CON TRACT WITH ANOTHER PERSON INCLUDING GOVERNMENT OR AN UNDERTAKI NG OR ENTERPRISE REFERRED TO IN SECTION 80 IA OF THE ACT FOR EXECUTING WORKS CONTRACT WILL NOT BE ELIGIBLE FOR THE TAX BE NEFIT UNDER SECTION 80 IA OF THE ACT. WE FIND THAT THE WORD OWNED IN SUB-CLAUSE (A) OF CLAUSE (1) OF SUB SECTION (4) OF SECTION 80IA OF THE ACT REFER TO THE ENTERPRISE. BY READING OF THE SECTION IT IS CL EARS THAT THE ENTERPRISES CARRYING ON DEVELOPMENT OF INFRASTRUCTU RE DEVELOPMENT SHOULD BE OWNED BY THE COMPANY AND NOT THAT THE INF RASTRUCTURE FACILITY SHOULD BE OWNED BY A COMPANY. THE PROVISI ONS ARE MADE APPLICABLE TO THE PERSON TO WHOM SUCH ENTERPRISE BE LONGS TO IS EXPLAINED IN SUB-CLAUSE (A). THEREFORE THE WORD O WNERSHIP IS ATTRIBUTABLE ONLY TO THE ENTERPRISE CARRYING ON THE BUSINESS WHICH WOULD MEAN THAT ONLY COMPANIES ARE ELIGIBLE FOR DED UCTION UNDER SECTION 80IA (4) AND NOT ANY OTHER PERSON LIKE INDI VIDUAL HUF FIRM ETC. 27. WE ALSO FIND THAT ACCORDING TO SUB-CLAUSE (A) CLAU SE (I) OF SUB SECTION (4) OF SECTION 80-IA THE WORD IT DENO TES THE ENTERPRISE CARRYING ON THE BUSINESS. THE WORD IT CANNOT BE RELATED TO THE INFRASTRUCTURE FACILITY PARTICULARL Y IN VIEW OF THE FACT THAT INFRASTRUCTURE FACILITY INCLUDES RAIL SYSTEM HIGHWAY PROJECT WATER TREATMENT SYSTEM IRRIGATION PROJECT A PORT AN AIRPORT OR AN INLAND PORT WHICH CANNOT BE OWNED BY ANY ONE. E VEN OTHERWISE THE WORD IT IS USED TO DENOTE AN ENTER PRISE. THEREFORE THERE IS NO REQUIREMENT THAT THE ASSESSEE SHOULD HA VE BEEN THE OWNER OF THE INFRASTRUCTURE FACILITY. 28. THE NEXT QUESTION IS TO BE ANSWERED IS WHETHER THE ASSESSEE IS A DEVELOPER OR MERE WORKS CONTRACTOR. THE REVEN UE RELIED ON THE AMENDMENTS BROUGHT IN BY THE FINANCE ACT 2007 A ND 2009 TO I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 41 MENTION THAT THE ACTIVITY UNDERTAKEN BY THE ASSESS EE IS AKIN TO WORKS CONTRACT AND HE IS NOT ELIGIBLE FOR DEDUCTIO N UNDER SECTION 80IA (4) OF THE ACT. WHETHER THE ASSESSEE IS A DEV ELOPER OR WORKS CONTRACTOR IS PURELY DEPENDS ON THE NATURE OF THE W ORK UNDERTAKEN BY THE ASSESSEE. EACH OF THE WORK UNDERTAKEN HAS T O BE ANALYZED AND A CONCLUSION HAS TO BE DRAWN ABOUT THE NATURE O F THE WORK UNDERTAKEN BY THE ASSESSEE. THE AGREEMENT ENTERED INTO WITH THE GOVERNMENT OR THE GOVERNMENT BODY MAY BE A MERE WOR KS CONTRACT OR FOR DEVELOPMENT OF INFRASTRUCTURE. IT I S TO BE SEEN FROM THE AGREEMENTS ENTERED INTO BY THE ASSESSEE WITH TH E GOVERNMENT. WE FIND THAT THE GOVERNMENT HANDED OVER THE POSSESS ION OF THE PREMISES OF PROJECTS TO THE ASSESSEE FOR THE DEVELO PMENT OF INFRASTRUCTURE FACILITY. IT IS THE ASSESSEES RESPO NSIBILITY TO DO ALL ACTS TILL THE POSSESSION OF PROPERTY IS HANDED OVER TO THE GOVERNMENT. THE FIRST PHASE IS TO TAKE OVER THE EX ISTING PREMISES OF THE PROJECTS AND THEREAFTER DEVELOPING THE SAME INTO INFRASTRUCTURE FACILITY. SECONDLY THE ASSESSEE SH ALL FACILITATE THE PEOPLE TO USE THE AVAILABLE EXISTING FACILITY EVEN WHILE THE PROCESS OF DEVELOPMENT IS IN PROGRESS. ANY LOSS TO THE PUB LIC CAUSED IN THE PROCESS WOULD BE THE RESPONSIBILITY OF THE ASSESSEE . THE ASSESSEE HAS TO DEVELOP THE INFRASTRUCTURE FACILITY. IN TH E PROCESS ALL THE WORKS ARE TO BE EXECUTED BY THE ASSESSEE. IT MAY B E LAYING OF A DRAINAGE SYSTEM; MAY BE CONSTRUCTION OF A PROJECT; PROVISION OF WAY FOR THE CATTLE AND BULLOCK CARTS IN THE VILLAGE ; PROVISION FOR TRAFFIC WITHOUT ANY HINDRANCE THE ASSESSEES DUTY IS TO DEVELOP INFRASTRUCTURE WHETHER IT INVOLVES CONSTRUCTION OF A PARTICULAR ITEM AS AGREED TO IN THE AGREEMENT OR NOT. THE AGREEMEN T IS NOT FOR A SPECIFIC WORK IT IS FOR DEVELOPMENT OF FACILITY AS A WHOLE. THE ASSESSEE IS NOT ENTRUSTED WITH ANY SPECIFIC WORK TO BE DONE BY THE ASSESSEE. THE MATERIAL REQUIRED IS TO BE BROUGHT I N BY THE ASSESSEE BY STICKING TO THE QUALITY AND QUANTITY IR RESPECTIVE OF THE COST OF SUCH MATERIAL. THE GOVERNMENT DOES NOT PRO VIDE ANY I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 42 MATERIAL TO THE ASSESSEE. IT PROVIDES THE WORKS I N PACKAGES AND NOT AS A WORKS CONTRACT. THE ASSESSEE UTILIZES ITS FUNDS ITS EXPERTISE ITS EMPLOYEES AND TAKES THE RESPONSIBILI TY OF DEVELOPING THE INFRASTRUCTURE FACILITY. THE LOSSES SUFFERED E ITHER BY THE GOVT. OR THE PEOPLE IN THE PROCESS OF SUCH DEVELOPMENT WO ULD BE THAT OF THE ASSESSEE. THE ASSESSEE HANDS OVER THE DEVELOPE D INFRASTRUCTURE FACILITY TO THE GOVERNMENT ON COMPLE TION OF THE DEVELOPMENT. THEREAFTER THE ASSESSEE HAS TO UNDER TAKE MAINTENANCE OF THE SAID INFRASTRUCTURE FOR A PERIOD OF 12 TO 24 MONTHS. DURING THIS PERIOD IF ANY DAMAGES ARE OCC URRED IT SHALL BE THE RESPONSIBILITY OF THE ASSESSEE. FURTHER DU RING THIS PERIOD THE ENTIRE INFRASTRUCTURE SHALL HAVE TO BE MAINTAIN ED BY THE ASSESSEE ALONE WITHOUT HINDRANCE TO THE REGULAR TRA FFIC. THEREFORE IT IS CLEAR THAT FROM AN UN-DEVELOPED AREA INFRAST RUCTURE IS DEVELOPED AND HANDED OVER TO THE GOVERNMENT AND AS EXPLAINED BY THE CBDT VIDE ITS CIRCULAR DATED 18-05-2010 SUC H ACTIVITY IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA (4) OF TH E ACT. THIS CANNOT BE CONSIDERED AS A MERE WORKS CONTRACT BUT HAS TO B E CONSIDERED AS A DEVELOPMENT OF INFRASTRUCTURE FACILITY. THERE FORE THE ASSESSEE IS A DEVELOPER AND NOT A WORKS CONTRACTOR AS PRESUM ED BY THE REVENUE. THE CIRCULAR ISSUED BY THE BOARD RELIED O N BY LEARNED COUNSEL FOR THE ASSESSEE CLEARLY INDICATE THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA (4) OF TH E ACT. THE DEPARTMENT IS NOT CORRECT IN HOLDING THAT THE ASSES SEE IS A MERE CONTRACTOR OF THE WORK AND NOT A DEVELOPER. 29. WE ALSO FIND THAT AS PER THE PROVISIONS OF THE SECT ION 80IA OF THE ACT A PERSON BEING A COMPANY HAS TO ENTER INTO AN AGREEMENT WITH THE GOVERNMENT OR GOVERNMENT UNDERTAKINGS. SU CH AN AGREEMENT IS A CONTRACT AND FOR THE PURPOSE OF THE AGREEMENT A PERSON MAY BE CALLED AS A CONTRACTOR AS HE ENTERED INTO A CONTRACT. BUT THE WORD CONTRACTOR IS USED TO DENOTE A PERSO N ENTERING INTO AN AGREEMENT FOR UNDERTAKING THE DEVELOPMENT OF INF RASTRUCTURE I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 43 FACILITY. EVERY AGREEMENT ENTERED INTO IS A CONTR ACT. THE WORD CONTRACTOR IS USED TO DENOTE THE PERSON WHO ENTER S INTO SUCH CONTRACT. EVEN A PERSON WHO ENTERS INTO A CONTRACT FOR DEVELOPMENT OF INFRASTRUCTURE FACILITY IS A CONTRAC TOR. THEREFORE THE CONTRACTOR AND THE DEVELOPER CANNOT BE VIEWED D IFFERENTLY. EVERY CONTRACTOR MAY NOT BE A DEVELOPER BUT EVERY D EVELOPER DEVELOPING INFRASTRUCTURE FACILITY ON BEHALF OF THE GOVERNMENT IS A CONTRACTOR. 30. WE FIND THAT THE DECISION RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE IN THE CASE OF CIT VS. LAXMI CIVIL ENG INEERING WORKS [SUPRA] SQUARELY APPLICABLE TO THE ISSUE UNDER DISP UTE WHICH IS IN FAVOUR OF THE ASSESSEE WHEREIN IT WAS HELD THAT MER E DEVELOPMENT OF A INFRASTRUCTURE FACILITY IS AN ELIGIBLE ACTIVIT Y FOR CLAIMING DEDUCTION UNDER SECTION 80IA OF THE ACT AFTER CONSI DERING THE JUDGEMENT OF THE MUMBAI HIGH COURT IN THE CASE OF A BG HEAVY ENGINEERING [SUPRA]. THE CASE OF ABG IS NOT THE PUR E DEVELOPER WHEREAS IN THE PRESENT CASE THE ASSESSEE IS THE P URE DEVELOPER. WE ALSO FIND THAT SECTION 80IA OF THE ACT INTENDED TO COVER THE ENTITIES CARRYING OUT DEVELOPING OPERATING AND MAI NTAINING THE INFRASTRUCTURE FACILITY KEEPING IN MIND THE PRESENT BUSINESS MODELS AND INTEND TO GRANT THE INCENTIVES TO SUCH E NTITIES. THE CBDT ON SEVERAL OCCASIONS CLARIFIED THAT PURE DEV ELOPER SHOULD ALSO BE ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 8 0IA OF THE ACT WHICH ULTIMATELY CULMINATED INTO AMENDMENT UNDER SE CTION 80IA OF THE ACT IN THE FINANCE ACT 2001 TO GIVE EFFECT TO THE AFORESAID CIRCULARS ISSUED BY THE CBDT. WE ALSO FIND THAT T O AVOID MISUSE OF THE AFORESAID AMENDMENT AN EXPLANATION WAS INSE RTED IN SECTION 80IA OF THE ACT IN THE FINANCE ACT-2007 AN D 2009 TO CLARIFY THAT MERE WORKS CONTRACT WOULD NOT BE ELIGI BLE FOR DEDUCTIONS UNDER SECTION 80IA OF THE ACT. BUT CER TAINLY THE EXPLANATION CANNOT BE READ TO DO AWAY WITH THE ELIG IBILITY OF THE I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 44 DEVELOPER; OTHERWISE THE PARLIAMENT WOULD HAVE SIM PLY REVERSED THE AMENDMENT MADE IN THE FINANCE ACT 2001. THUS THE AFORESAID EXPLANATION WAS INSERTED CERTAINLY TO D ENY THE TAX HOLIDAY TO THE ENTITIES WHO DOES ONLY MERE WORKS CO NTACT OR SUB- CONTRACT AS DISTINCT FROM THE DEVELOPER. THIS IS CL EAR FROM THE EXPRESS INTENSION OF THE PARLIAMENT WHILE INTRODUCI NG THE EXPLANATION. THE EXPLANATORY MEMORANDUM TO FINANCE ACT 2007 STATES THAT THE PURPOSE OF THE TAX BENEFIT HAS ALL ALONG BEEN TO ENCOURAGE INVESTMENT IN DEVELOPMENT OF INFRASTRUCTU RE SECTOR AND NOT FOR THE PERSONS WHO MERELY EXECUTE THE CIVIL CO NSTRUCTION WORK. IT CATEGORICALLY STATES THAT THE DEDUCTION UN DER SECTION 80IA OF THE ACT IS AVAILABLE TO DEVELOPERS WHO UNDERTAKE S ENTREPRENEURIAL AND INVESTMENT RISK AND NOT FOR THE CONTRACTORS WHO UNDERTAKES ONLY BUSINESS RISK. WITHOUT ANY DOUB T THE LEARNED COUNSEL FOR THE ASSESSEE CLEARLY DEMONSTRAT ED BEFORE US THAT THE ASSESSEE AT PRESENT HAS UNDERTAKEN HUGE RI SKS IN TERMS OF DEPLOYMENT OF TECHNICAL PERSONNEL PLANT AND MACHIN ERY TECHNICAL KNOW-HOW EXPERTISE AND FINANCIAL RESOURCES. FURTHE R THE ORDER OF TRIBUNAL IN THE CASE OF B.T.PATIL CITED SUPRA IS PR IOR TO AMENDMENT TO SEC 80IA(4) AFTER THE AMENDMENT THE SECTION 80I A(4) READ AS (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (II I) DEVELOPING OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILI TY PRIOR TO AMENDMENT THE OR BETWEEN THREE ACTIVITIES WAS NO T THERE AFTER THE AMENDMENT OR HAS BEEN INSERTED W.E.F. 1-4-20 02 BY FINANCE ACT 2001. THEREFORE IN OUR CONSIDERED VIEW THE A SSESSEE SHOULD NOT BE DENIED THE DEDUCTION UNDER SECTION 80IA OF T HE ACT IF THE CONTRACTS INVOLVES DESIGN DEVELOPMENT OPERATING & MAINTENANCE FINANCIAL INVOLVEMENT AND DEFECT CORRECTION AND LI ABILITY PERIOD THEN SUCH CONTRACTS CANNOT BE CALLED AS SIMPLE WORK S CONTRACT TO DENY THE DEDUCTION U/S 80IA OF ACT. IN OUR OPINION THE CONTRACTS WHICH CONTAIN ABOVE FEATURES TO BE SEGREGATED ON TH IS DEDUCTION U/S. 80-IA HAS TO BE GRANTED AND THE OTHER AGREEMEN TS WHICH ARE I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 45 PURE WORKS CONTRACTS HIT BY THE EXPLANATION SECTION 80IA(13) THOSE WORK ARE NOT ENTITLE FOR DEDUCTION U/S 80IA O F THE ACT. THE PROFIT FROM THE CONTRACTS WHICH INVOLVES DESIGN DEVELOPMENT OPERATING & MAINTENANCE FINANCIAL INVOLVEMENT AND DEFECT CORRECTION AND LIABILITY PERIOD IS TO BE COMPUTED B Y ASSESSING OFFICER ON PRO-RATA BASIS OF TURNOVER. THE ASSESSIN G OFFICER IS DIRECTED TO EXAMINE THE RECORDS ACCORDINGLY AND GRA NT DEDUCTION ON ELIGIBLE TURNOVER AS DIRECTED ABOVE. IT IS NEED LESS TO SAY THAT SIMILAR VIEW HAS BEEN TAKEN BY THE CHENNAI BENCH OF THE TRIBUNAL AND DEDUCTION U/S. 80IA WAS GRANTED IN THE CASE OF M/S. CHETTINAD LIGNITE TRANSPORT SERVICES (P) LTD. IN I TA NO. 2287/MDS/06 ORDER DATED 27 TH JULY 2007 FOR THE ASSESSMENT YEAR 2004-05. LATER IN ITA NO. 1179/MDS/08 VIDE ORDER D ATED 26 TH FEBRUARY 2010 THE TRIBUNAL HAS TAKEN THE SAME VIEW BY INTER-ALIA HOLDING AS FOLLOWS: 7. MOREOVER THE REASONS FOR INTRODUCING THE EXPLA NATION WERE CLARIFIED AS PROVIDING A TAX BENEFIT BECAUSE M ODERNISATION REQUIRES A MASSIVE EXPANSION AND QUALITATIVE IMPROV EMENT IN INFRASTRUCTURES LIKE EXPRESSWAYS HIGHWAYS AIRPORT S PORTS AND RAPID URBAN RAIL TRANSPORT SYSTEMS. FOR THAT PURPO SE PRIVATE SECTOR PARTICIPATION BY WAY OF INVESTMENT IN DEVELO PMENT OF THE INFRASTRUCTURE SECTOR AND NOT FOR THE PERSONS WHO M ERELY EXECUTE THE CIVIL CONSTRUCTION WORK OR ANY OTHER WORK CONTR ACT HAS BEEN ENCOURAGED BY GIVING TAX BENEFITS. THUS THE PROVIS IONS OF SECTION 80IA SHALL NOT APPLY TO A PERSON WHO EXECUTES A WOR KS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE REF ERRED TO IN THE SECTION BUT WHERE A PERSON MAKES THE INVESTMENT AND HIMSELF EXECUTES THE DEVELOPMENT WORK HE CARRIES OUT THE C IVIL CONSTRUCTION WORK HE WILL BE ELIGIBLE FOR THE TAX BENEFIT UNDER SECTION 80IA. 31. THE ABOVE ORDER WAS FOLLOWED IN SUBSEQUENT ASSESSME NT YEARS 2007-2008 & 2008-09 IN ITA NOS. 1312 & 1313/M DS/2011 VIDE ORDER DATED 18.11.2011 IN THE CASE OF THE SAME ASSESSEE. BEING SO WE ARE INCLINED TO PARTLY ALLOW THE GROUN D RELATING TO CLAIMING OF DEDUCTION U/S. 80IA. I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 46 32. THE NEXT GROUND IN ITA NOS. 1484 1485 AND 1487/HYD / 2011 (ASSESSEES APPEALS) AND REVENUE APPEALS VIZ. 1471 TO 1473/ HYD/2011 IS WITH REGARD TO THE SUSTAINING/DELETING OF THE EXPENSES IN THE ABSENCE OF BILLS AND VOUCHERS. 33. THE ASSESSING OFFICER FOR ASSESSMENT YEAR 2006-07(I TA NO.1484/HYD/2011) DISALLOWED 15% OF THE AMOUNT OF RS.4 06 91 006/- ON THE REASON THAT THE VOUCHERS AR E NOT SUPPORTED BY ANY EVIDENCE AS TO THE IDENTITY OF PE RSONS QUANTUM OF WORK AND NATURE OF WORK DONE BY THE ASSESSEE. T HE ASSESSING OFFICER ALSO OBSERVED THAT THE ASSESSEE HAS CLAIMED HUGE EXPENSES TOWARDS WORK DONE AND IN THE ABSENCE OF THE DETAILE D VOUCHERS AND SOME OF THE VOUCHERS NOT SUPPORTED BY ANY EVIDE NCE AS TO THE IDENTITY OF PAYEE HE DISALLOWED 15% OF THE EXPENDI TURE. ON APPEAL THE CIT (A) SUSTAINED 7% OF THE ABOVE EXPEN SES. AGAINST THIS BOTH ARE IN APPEAL BEFORE US. 34. FOR ASSESSMENT YEAR 2007-08 (ITA NO.1485/HYD/11) T HE ASSESSING OFFICER DISALLOWED 20% OF THE TRANSPORTA TION AND HIRE CHARGES OF RS.3 58 88 209/- WHICH WORKS OUT TO RS. 70 77 643/- THAT THE EVIDENCE ADDUCED NOT ENOUGH TO PROVE THE I DENTITY OF THE PAYEE NATURE OF PAYMENT AND QUANTUM OF WORK DONE. ON APPEAL THE CIT (A) SUSTAINED 10% OF THE DISALLOWANCE. AGA INST THIS BOTH ARE IN APPEAL BEFORE US. 35. FOR ASSESSMENT YEAR 2009-10 (ITA NO.1487/HYD/11) T HE ASSESSING OFFICER DISALLOWED 15% OF THE WORK EXPENS ES WHICH WORKED OUT TO RS.1 39 75 073/-. THE CIT (A) CONFIR MED THE DISALLOWANCE AT 7%. AGAINST THIS BOTH ARE IN APPE AL BEFORE US. 36. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. WE FIND THAT THE ISSUE INVOLV ED FOR CONSIDERATION IN THIS APPEAL HAS ALREADY BEEN DEALT WITH BY US IN THE CASE OF M/S GSP INFRATECH DEVELOPMENT LTD. HY DERABAD IN I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 47 ITA NOS. 1396/HYD/2011 AND OTHERS VIDE ORDER DATED 27 TH DECEMBER 2011 WHEREIN WE HAVE CONFIRMED THE DISALL OWANCE AT 5% OF SUCH EXPENSES BY HOLDING AS FOLLOWS IN PARA-9 :- WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE IS A SUBCONTRACTOR. ASSESSEE IS ENGAGI NG LABOUR AT SITE AT FAR FLUNG PLACES. IN SUCH CIRCUMSTANCES I T IS DIFFICULT TO HAVE DOCUMENTS FOR SUCH EXPENDITURE TO THE SATISFA CTION OF THE ASSESSING OFFICER. IT IS ALSO DIFFICULT TO VERIFY THE IDENTITY OF THE LABOUR AFTER LAPSE OF MANY YEARS. THE ACCOUNTS OF THE ASSESSEE HAVE BEEN AUDITED AND AUDITORS CERTIFICATE UNDER S ECTION 44AB HAS ALSO BEEN FURNISHED. THE ASSESSING OFFICER HAS NOT ANALYSED THE EXPENSES COMPARED TO THE TURNOVER FOR THE EARLI ER YEARS. A SEARCH HAS BEEN MADE IN THE PREMISES OF THE ASSESSE E AND NO INCRIMINATING EVIDENCE IN THIS REGARD HAS BEEN FOUN D. ONLY AN AD HOC DISALLOWANCE OF EXPENDITURE CLAIMED BY THE ASSE SSEE HAS BEEN MADE. HOWEVER FROM THE OBSERVATIONS OF THE LOWER A UTHORITIES IT CAN BE INFERRED THAT FULL DETAILS OF EXPENDITURE HA VE NOT BEEN PROPERLY DOCUMENTED. HENCE THE POSSIBILITY OF SOM E INFLATION OF SUCH EXPENSES CANNOT BE RULED OUT. CONSIDERING TOTA LITY OF FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE OPINIO N THAT DISALLOWANCE OF 5% OF LABOUR AND SITE EXPENSES ARE REASONABLE. 37. IN VIEW OF THIS WE CONFIRM THE DISALLOWANCE OF EXP ENSES IN THESE YEARS ALSO AT 5%. THIS GROUND IN ASSESSEE AP PEALS I.E. ITA NOS. 1484/HYD/11 1485/HYD/11 AND 1487/HYD/2011 IS P ARTLY ALLOWED AND REVENUES APPEALS IN 1471/HYD/11 1472/ HYD/11 AND 1473/HYD/11 IS DISMISSED. 38. THE NEXT COMMON GROUND IN ASSESSEE APPEAL ITA NO.1485/HYD/2011 AND REVENUE APPEAL 1472/HYD/2011 FOR ASSESSMENT YEAR 2007-2008 IS WITH REGARD TO SUSTAIN ING THE DISALLOWANCE OF RS.75 LAKHS OUT OF RS.2.5 CRORES DI SALLOWED BY THE ASSESSING OFFICER. AGAINST THIS ISSUE BOTH ARE IN APPEAL BEFORE US. 39. BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE HAD PRODUCED ONLY SELF MADE VOUCHERS AND BILLS IN RESPECT OF PUR CHASE OF SAND. THEREFORE HE HAS DISALLOWED RS.2.50 CRORES OUT OF RS.54 66 15 221/-. ON APPEAL THE CIT (A) SUSTAINE D RS.75 LAKHS OUT OF RS.2.50 CRORES. AGAINST THIS BOTH ARE IN A PPEAL BEFORE US. I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 48 40. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. IT IS ADMITTED FACT THAT THE EXPENDITURE R ELATING TO PURCHASE OF SAND AT KADAPA IS SUPPORTED BY SELF-MAD E VOUCHERS. AS SUCH THERE ARE CHANCES OF INFLATING THE EXPENDI TURE. IN THIS CASE REASONABLE DISALLOWANCE COULD BE MADE IF THE ASSESSEE HAS NOT PRODUCED ANY DETAILS OF PAYEE AND QUANTUM OF WO RK DONE. BEING SO WE DIRECT THE ASSESSING OFFICER TO DISALL OW RS.50 LAKHS OF THE EXPENDITURE INCURRED BY THE ASSESSEE AS IT IS N OT SUBSTANTIATED. GROUND IN ASSESSEE APPEAL PARTLY AL LOWED AND GROUND BY REVENUE IS DISMISSED. 41. IN ASSESSEE APPEAL IN ITA NO.1487/HYD/2011 AND RE VENUE IN ITA NO. 1473/HYD/201 GROUND IS WITH REGARD TO S USTAINING AN AMOUNT OF RS.15 LAKHS OUT OF RS. 25 LAKHS DISALLOWE D BY THE ASSESSING OFFICER TOWARDS REPAIR EXPENSES. BRIEF F ACTS OF THE ISSUE ARE THAT THE ASSESSEE INCURRED EXPENDITURE OF RS.39 18 702/- TOWARDS REPAIRS OF MACHINERY. THE ASSESSING OFFICER DISALLOWED RS. 25 LAKHS AS THE ASSESSEE HAS NOT PRODUCED AUTHENTIC VOUCHERS AND BILLS DURING THE ASSESSMENT PROCEEDINGS. ON AP PEAL THE CIT (A) DISALLOWED RS.15 LAKHS OUT OF THE AMOUNT OF RS. 25 LAKHS DISALLOWED BY THE ASSESSING OFFICER. AGAINST THIS BOTH THE ASSESSEE AS WELL AS THE REVENUE IS IN APPEAL BEFORE US. 42. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. IN OUR OPINION DISALLOWANCE O F RS.15 LAKHS OUT OF RS.39 18 708/- IS AT HIGHER SIDE. THERE IS NO ALLEGATION THAT THE EXPENDITURE IS NOT INCURRED FOR THE PURPOSE OF BUSINESS. IN OUR OPINION THE ASSESSING OFFICER DOUBTED ONLY THE VOLUME OF EXPENDITURE. HE HAS NOT DOUBTED THE CAPACITY OF TH E PAYEE ALSO. BEING SO THIS EXPENDITURE OF THE DISALLOWANCE IS N OT WARRANTED. ACCORDINGLY WE DELETE THE DISALLOWANCE. THIS GROU ND RAISED IN THE ASSESSEES APPEAL IS ALLOWED AND IN THE REVENUES A PPEAL IS DISMISSED. I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 49 43. THE NEXT GROUND RAISED IN ITA NO.1486/HYD/ 2011ASSESSMENT YEAR 2008-2009 IS WITH REGARD TO AN ADDITION OF RS.3 26 15 537/- BEING THE DIFFERENCE IN PROFIT AS PER THE UNSIGNED OR NOT AUDITED PROJECTED STATEMENTS AND THE AUDITED STATEMENTS AS ON 31-3-2008 IN THE ABSENCE OF ANY SEIZED MATERIAL TO SAY THAT INCOME HAS NOT BEEN ACCOUNTED IN THE BOOKS OF ACCOU NTS. BRIEF FACTS OF THE CASE ARE THAT CERTAIN LOOSE SHEETS AND OTHER INCRIMINATING MATERIAL WERE FOUND. AS PER THE PAGE S NO.1 TO 16 OF THE SEIZED ANNEXURE AAA/GVPR/02 PAGE NOS. 39 AND 44 OF THE SEIZED ANNEXURE NO.AAA/GVPR/03 THE ASSESSEE HAD PR EPARED THE PROVISIONAL FINANCIAL STATEMENTS. ACCORDING TO WHIC H THE ASSESSEES INCOME IS SHOWN AS RS.13 05 81 000 AS PE R ANNEXURE AAA/GVPR/02. AS PER ANNEXURE AAA/GVPR/03 THE PROFI TS ADMITTED ARE RS.13 85 81 000/-. IT WAS ALSO NOTICE D THAT PAGE NOS. 39 TO 44 OF THE SEIZED MATERIAL ANNEXURE NO. A AA/GVPR/03 IS ALSO FINANCIAL STATEMENTS OF THE COMPANY FOR THE FINANCIAL YEAR 2007-08. IN THE ANNEXURE AAA/GVPR/01 TO AAA/GVPR/0 3 WERE ALSO SEIZED WHICH REPRESENT THE EXPENDITURE OF RS .22.60 LAKHS FOR THE YEAR UNDER CONSIDERATION WAS NOT RECORDED IN TH E BOOKS OF ACCOUNT. ACCORDING TO THE ASSESSING OFFICER THE D IFFERENCE BETWEEN PROVISIONAL BALANCE SHEET AND FINAL FINANCIAL STATE MENT WORKS OUT TO RS.3 26 15 537 AND THE SAME WAS ADDED TO THE IN COME OF THE ASSESSEE AND THIS WAS CONFIRMED BY THE CIT (A). AG AINST THIS THE ASSESSEE IS IN APPEAL BEFORE US. 44. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. IN THIS CASE THE ADDITION IS MADE TOWARDS THE DIFFERENCE BETWEEN PROJECTED/PROVISIONAL BALANCE-SH EET AND THE FINAL BALANCE-SHEET. THE ASSESSEE HAS GIVEN EXPLAN ATION BEFORE THE LOWER AUTHORITIES THAT IT HAS PREPARED THE BALANCE- SHEET SHOWING HIGHER PROFIT WHICH IS ON ACCOUNT OF SHOWING HIGHER WORK IN PROGRESS WITH A VIEW TO OBTAIN HIGHER FINANCIAL ASS ISTANCE FROM I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 50 BANKS. IT WAS ALSO AGREED BY THE MANAGING DIRECTOR IN HIS DEPOSITION DATED 12-9-2008 THAT HE IS HAVING NO KNO WLEDGE OF IMPACT OF HIS STATEMENT. THE ACTUAL FACT IS THAT T HE DEPARTMENT HAS NOT COME ACROSS ANY SEIZED MATERIAL REFLECTING THE INFLATION OF STOCK/WORK IN PROGRESS. IN THIS COMMERCIAL WORLD IT IS NOT UNCOMMON TO FURNISH BALANCE-SHEET AND PROFIT AND LOSS ACCOUNT REFLECTING HIGHER PROFIT OR CLOSING STOCK WITH A VI EW TO AVAIL HIGHER FINANCIAL ASSISTANCE OR TO SHOW ATTRACTIVE NET PROF IT RATIO DEBT EQUITY RATIO OR RETURN ON THE INVESTMENT. THE PROVI SIONAL BALANCE- SHEET CANNOT BE CONSIDERED FOR DETERMINING THE UNDI SCLOSED INCOME. HOWEVER AS PER DISPOSITION AN AMOUNT OF R S.80 LAKHS WAS AGREED TO BE ADMITTED AS INCOME THE SAME BE CO NSIDERED AS INCOME ON THIS COUNT AND NO SET OFF COULD BE GIVEN TOWARDS WORK- IN-PROGRESS IN ANY SUBSEQUENT ASSESSMENT YEAR. THIS GROUND OF ASSESSEE PARTLY ALLOWED. 45. THE NEXT GROUND IN ITA NO. 1487/HYD/2011 IS WITH RE GARD TO ADDITION OF RS.2.01 CRORES BEING CASH SEIZED FR OM SRI K. VENKATA KUTUMBA RAO EVEN THOUGH THE ASSESSEE HAD O FFERED SATISFACTORY EXPLANATION FOR THE SOURCES AND THE CI RCUMSTANCES UNDER WHICH THE CASH WAS HANDED OVER TO SHRI K.V. K UTUMBA RAO WHERE THERE WAS NO INCRIMINATING MATERIAL FOUND IN THE PREMISES OF THE ASSESSEE AND SEARCH OPERATION WAS ONLY CONSE QUENTIAL AND SEIZED OPERATIONS CONDUCTED IN THE PREMISES OF SRI K.V KUTUMBA RAO AND MATERIAL FOUND THERE. SIMILAR ISSUE WAS AL SO FOR CONSIDERATION IN ITA NO.1489/HYD/2010 IN THE CASE O F GSP VEERA REDDY WHERE THE ADDITION WAS ON PROTECTIVE BASIS. BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSING OFFICER ADDED THE ABOVE SAID AMOUNT IN THE ASSESSEES HANDS AS UNEXPLAINED CASH AND ALSO MADE SIMILAR ADDITION IN THE HANDS OF SRI G. SHIVA SHANKER REDDY ONE OF THE DIRECTORS OF THE ASSESSEE-COMPANY. THE ASSESSING OFFICER HAS NOT APPRECIATED THE FACTS THAT THE ASSE SSEE HAD WITHDRAWN THE AMOUNT FROM ITS BANK ACCOUNT AND THE SAME MONEY I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 51 WAS POOLED AND WAS TO BE TRANSFERRED TO BANGALORE T O MEET THE EXPENSES AT WORK SPOTS. HOWEVER IN VIEW OF THE FA CT THAT THERE WAS A SEARCH IN THE CASE OF SRI K. VENKATA KUTUMBA RAO WHO WAS FOUND WITH THE ABOVE SAID AMOUNT AND WHO ALSO CLAI MED THAT THE SAID MONEY AS HANDED OVER TO HIM BY SRI SIVA SHANKE R REDDY ONE OF THE DIRECTORS OF THE ASSESSEE-COMPANY. THE AS SESSING OFFICER WAS OF THE OPINION THAT THE ASSESSEE HAS NOT CONCLU SIVELY PROVED THAT THE SAID AMOUNT WAS WITHDRAWN FROM THE BANK AC COUNT OF THE ASSESSEE COMPANY. THE ASSESSEE ALSO NOT EXPLAINED THE SAID MONEY AS WITHDRAWN FROM BANK ACCOUNT OF THE ASSESSE E COMPANY. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE S AID MONEY BELONGED TO SRI G. SIVA SHANKER REDDY WHO HANDED OV ER THE SAID AMOUNT TO SRI K. VENKATA KUTUMBA RAO. THEREFORE T HE ADDITION WAS MADE IN THE HANDS OF THE ASSESSEE COMPANY ON PR OTECTIVE BASIS AND ON SUBSTANTIVE BASIS IN THE CASE OF SRI S IVA SHANKER REDDY. 46. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. IN THIS CASE IT IS ADMITTED FACT THAT THE CASH WAS FOUND IN THE HANDS OF SRI K. VENKATA KUTUMBA RAO. IT WAS AD MITTED FACT THAT THE CASH WAS GIVEN BY SRI SIVA SHANKER REDDY T O SRI K. VENKATA KUTUMBA RAO. THERE IS NO DISPUTE THAT THE SAID CASH WAS FOUND WITH K. VENKATA KUTUMBA RAO AND THE BANK ACCOUNTS OF THE ASSESSEE COMPANY REFLECTED THE HUGE WITHDRAW AL ON VARIOUS DATES PRIOR TO SEARCH ACTION. IT IS NOT DISPUTED T HAT M/S. GVPR ENGINEERS LIMITED OWNED THIS CASH AND CONFIRMED T HAT IT IS BELONGED TO THEM WHICH IS MEANT TO BE SENT TO VA RIOUS PROJECT SITES WHERE THE WORK WAS GOING ON. THE DEPARTMENT IS NOT READY TO ACCEPT THIS EXPLANATION INSTEAD THEY ARE OF THE OPINION THAT THE CASH ACTUALLY BELONGED TO SRI SIVA SHANKER REDDY ON LY. IN OUR OPINION THIS VIEW OF THE DEPARTMENT IS NOT CORRECT . IF SRI K. VENKATA KUTUMBA RAO IS NOT EXPLAINED THE SOURCES OF THE CASH AT THE BEST IT CAN BE TREATED AS UNEXPLAINED INCOME OF SRI K. VENKATA I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 52 KUTUMBA RAO ONLY AND NOT IN THE HANDS OF ANY OTHER PERSON. THE DEPARTMENT IN THIS CASE ACCEPTING THE EXPLANATION OF THE ASSESSEE IN PART HAS IT IS NOT BELONGING TO SRI K. VENKATA KUTUMBA RAO. ON THE HAND IT IS NOT ACCEPTED THE OTHER PART OF T HE EXPLANATION OF THE ASSESSEE THAT IT IS BELONGED TO THE ASSESSEE. EITHER THE ASSESSEES EXPLANATION IS TO BE ACCEPTED AS A WHOL E OR REJECTED AS A WHOLE. THEY CANNOT PICK AND CHOSE ACCORDING TO T HEIR CONVENIENCE AND MAKE ADDITION. IN OUR O OPINION T HE ADDITION MADE TOWARDS CASH FOUND AT THE PREMISES OF SRI K. V ENKATA KUTUMBA RAO CANNOT BE MADE EITHER IN THE HANDS OF THE ASSESSEES COMPANY I.E. M/S GVPR ENGINEERS LIMITED OR IN THE HANDS OF SRI SIVA SHANKER REDDY. ACCORDINGLY THIS GROUND OF ASSESSEE IS ALLOWED. 47. NOW WE WILL TAKE UP ITA NO.1401/HYD/11 AND ITA NO.1359/HYD/2011. THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER OF THE CIT (A) DATED 10-5-2011. 48. THE FIRST GROUND IN ASSESSEES APPEAL IS WITH REGAR D TO CONFIRMATION OF THE ASSESSMENT ORDER PASSED UNDER S ECTION 153A OF THE ACT . THE LD. COUNSEL FOR ASSESSEE SUBMITTED THAT THERE W AS NO VALID SEARCH AND NO INCRIMINATING MATERIAL FOUND AT THE PREMISES OF THE ASSESSEE THE ISSUE OF NOTICE UNDER SECTION 153A OF THE ACT IS BAD IN LAW. 49. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. THER E WAS A SEARCH OPERATION CONDUCTED IN THE CASE OF SRI VENKA TA KUTUMBARAO AND OTHERS ON 28-7-2008 AND ALSO SEARCH WAS CONDUCTED AT THE BUSINESS PREMISES OF GVPR ENGINEER S LIMITED AND THERE WAS SEIZURE OF SOME INCRIMINATING DOCUMEN TS AND THE CASES WERE NOTIFIED WITH THE DCIT CENTRAL CIRCLE-5 HYDERABAD. THEREAFTER NOTICE UNDER SECTION 153A HAS BEEN ISSU ED CONSEQUENT I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 53 TO THE SEARCH ACTION. BEING SO WE FIND NO MERIT IN THE GROUND. ACCORDINGLY THIS GROUND OF THE ASSESSEE IS DISMISS ED. 50. THE NEXT COMMON GROUND IN BOTH THESE APPEALS IS WIT H REFERENCE TO THE DISALLOWANCE OF EXPENSES. THE ASS ESSING OFFICER DISALLOWED 10% OF OTHER EXPENSES CLAIMED BY THE ASS ESSEE AT RS.10 27 85 383/- WORKED OUT AT RS.1 02 78 538. T HE CIT (A) SUSTAINED THE DISALLOWANCE AT 7% OF THIS EXPENDITUR E AS AGAINST 10% DISALLOWED BY THE ASSESSING OFFICER. ON SIMILA R ISSUE WE HAVE GIVEN FINDINGS IN ITA NOS. 1484/HYD/2011 1485/HYD/ 2011 AND 1486/HYD/2011 WHEREIN WE HAVE SUSTAINED THE DISALLO WANCE AT 5% OF THE EXPENDITURE BY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S GSP INFRATECH DEVELOPMENT LTD. HYDERAB AD IN ITA NOS. 1396/HYD/2011 AND OTHERS VIDE ORDER DATED 27 TH DECEMBER 2011 WHEREIN WE HAVE CONFIRMED THE DISALLOWANCE AT 5% OF SUCH EXPENSES . ACCORDINGLY THIS GROUND IS PARTLY ALLOW ED. 51. THE NEXT GROUND IN ITA NO.1401/HYD/11 IS WITH REGA RD TO CONFIRMATION OF ADDITION OF RS.1 31 07 090/- BEING THE DIFFERENCE IN PROFIT AS PER THE PROJECTED STATEMENT AND AUDITE D STATEMENT AS ON 31-3-2006 AND IN THE ABSENCE OF ANY SEIZED MATER IAL TO SAY THAT THE INCOME HAS NOT BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS. WE HAVE DECIDED THIS ISSUE IN THE CASE OF GVPR ENGI NEERS IN ITA NO.1486/HYD/2011 FOR ASSESSMENT YEAR 2008-09 IN EAR LIER PARAGRAPH NOS. 41 TO 42 OF THIS ORDER. THEREFORE ON SIMILAR LINES WE DECIDE THIS ISSUE ALSO IN FAVOUR OF THE ASSESSEE SUBJECT TO SUSTAINING OF ADDITION OF RS.50 LAKHS ADMITTED BY T HE ASSESSEE AS INCOME TOWARDS WORK IN PROGRESS. HENCE THIS GROUN D OF THE ASSESSEE IS PARTLY ALLOWED. 52. THE NEXT GROUND IN REVENUES APPEAL NO.1359/HYD/08 IN THE CASE OF GSP INFRA TECH IS WITH REGARD TO THE DELETI ON OF ADDITION MADE ON PROTECTIVE BASIS ON ACCOUNT OF PURCHASES OF LAND BY THE I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 54 ASSESSEE COMPANY IN ITS NAME. SIMILAR ISSUE FOR CO NSIDERATION IN ASSESSEE APPEAL IN ITA NO.1490/HYD/2011 IN THE CASE OF G. VEERA SHAKER REDDY FOR ASSESSMENT YEAR 2008-09 IN THE CAS E OF VEERA SEKHAR REDDY WHERE THE SUBSTANTIVE ADDITION WAS CON FIRMED BY THE CIT(A). 51.1 BRIEF FACTS OF THIS ISSUE ARE THAT DURING THE COURSE OF SURVEY OPERATION CONDUCTED AT THE PREMISES OF S.K. BUILDE RS ABIDS HYDERABAD CERTAIN PAPERS/DOCUMENTS WERE FOUND AND S EIZED VIDE ANNEXURE NO.A/MKN/1 AND A/SKB/01 WERE FOUND AND IMPOUNDED. IN THESE MATERIAL VIDE PAGE NOS.48 TO 5 1 OF ANNEXURE A/SKB/01 THERE IS AN AGREEMENT OF SALE EXECUTED ON 22-11-2007 JOINTLY BY AZIZ MOHD. KHAN ZAMEEL MOHD. KHAN MATI N SARIF AND USMAN SALMAD IN FAVOUR OF GSP INFRATCH DEVELOPMENT LIMITED I.E. THE ASSESSEE COMPANY. SIMILARLY A COPY OF RECEIPT FORMING PART OF THIS AGREEMENT WAS FOUND AND IMPOUNDED AS PART OF T HE SAME AGREEMENT VIDE PAGE NO.47. THIS WAS IN CONNECTION WITH PURCHASE OF LAND FOR RS.3 37 77 500 AND PAID AN AMOUNT OF RS .14 00 000 BY WAY OF CHEQUES AND AN AMOUNT OF RS.53 98 750/- BY W AY OF CASH TO THE VENDORS. THE BALANCE AMOUNT OF RS.2 69 78 7 50/- WAS TO BE PAID TO THE VENDORS BY 22.12008. THE ASSESSING O FFICER ASKED TO VERIFY WHETHER IT HAS PAID THE BALANCE CONSIDERATIO N TO THE VENDORS AND GOT REGISTERED IF SO EXPLAIN THE SOURCE FOR TH E SAME. HOWEVER ON ENQUIRY IT WAS STATED BY SRI ZAMEEL AHMED KHAN PARTNER OF M/S S K BUILDERS VIDE LETTER DATED 8-11-2010 THAT HIS FIRM HAD ENTERED INTO SALE AGREEMENT WITH M/S GSP INFOTECH L IMITED ON 22- 11-2007 FOR A CONSIDERATION OF RS.3 37 77 500 TOWAR DS 11.18 ACRES OF AGRICULTURAL LANDS IN SURVEY NOS. 309 310 AND 3 11 AT NARKODA VILLAGE SHAMSHABAD MANDAL RANGA REDDY DISTRICT AN D THE TOTAL LAND OF 11.18 ACRES OF AGRICULTURAL LAND WAS SUBSE QUENTLY SOLD TO SMT G. VIJAYALAXMI W/O SRI GSP VEERA REDDY ADMEASUR ING 4 ACRES FOR A CONSIDERATION OF RS.4 68 000 THROUGH CHEQUES AND BALANCE IN CASH AND TO SRI G. VEERA SHEKAR REDDY S/O SRI GSP VEERA REDDY I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 55 ADMEASURING 3.18 ACRES OF AGRICULTURAL LAND FOR A C ONSIDERATION OF RS.6 04 000 THROUGH CHEQUES AND BALANCE IN CASH. THE PARTNER OF M/S SK BUILDERS SUBMITTED THE REGISTERED DOCUMEN TS IN FAVOUR OF SALE AFFECTED ON THE DIRECTORS OF THE ASSESSEE C OMPANY SUBSEQUENT TO THE AGREEMENT OF SALE ENTERED INTO BY GSP INFRATECH DEVELOPMENT LIMITED ON 22-11-2007. AS THE PARTNER O F M/S SK BUILDERS HAS CATEGORICALLY STATED THAT THE SALE AGR EEMENT IS ENTERED INTO WITH GSP INFRATECH LIMITED FOR A CONSI DERATION OF RS.3 37 77 500/- AND ALSO TAKING INTO THE FACT OF T HE ASSESSEE COMPANYS REJECTION OF THE SAME STATING THAT THE TR ANSACTION HAS BEEN CANCELLED THE SUM OF RS.3 37 77 500/- IS ADDE D TOWARDS RETURNED INCOME OF THE ASSESSEE COMPANY ON PROTECTI VE BASIS IN THE HANDS OF VEERA SHEKAR REDDY. ON APPEAL THE C IT (A) GAVE DIRECTION TO THE ASSESSING OFFICER NOT TO MAKE ADDI TION IN THE CASE OF THE ASSESSEE IF THERE IS ADDITION IN THE HANDS O F SMT VIJAYALAKSHMI W/O SRI GSP VEERA REDDY. 53. IN THE CASE OF SRI VEERA SHEKAR REDDY IN ITA NO.1490/HYD/2011 THE CIT (A) CONFIRMED THE ADDITIO N OF RS.95 73 500/- MADE BY THE ASSESSING OFFICER. AGAI NST THIS THE ASSESSEE IS IN APPEAL BEFORE US. 54. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. THE DEPARTMENT CANNOT HAVE ANY GRIEVANCE IN DELETION OF THIS AMOUNT IN THE HANDS OF GSP INFRATECH MADE ON PROTECTIVE BASIS BECAUSE THE CIT (A) CONFIRMED THE ADDITION IN THE HANDS OF SRI VEERA SHEKAR REDDY. THE LEARNED AUTHORISED REPRESENTATIV E SUBMITTED BEFORE US WITH REGARD TO THE ADDITION IN THE HANDS OF VEERA SHEKAR REDDY (ITA 1490/11) THAT THE ASSESSEE SRI VEERA S HEKAR REDDY HAS DISCLOSED AN AMOUNT OF RS.88 82 800/- AND THE O NLY DIFFERENCE COULD BE ADDED AS UNDISCLOSED INCOME OF THE ASSESSE E. ACCORDING TO HIM TOTAL INVESTMENT IN THIS PROPERTY WAS RS.1 01 75 500/- AND AS SUCH RS.12 94 700/- COULD BE THE UNDISCLOSED IN COME OF THE I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 56 ASSESSEE. ON THE OTHER HAND THE LEARNED DEPARTMEN TAL REPRESENTATIVE SUBMITTED THAT THE AMOUNT ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE IS WITH REGARD TO THE DEVELOPMENT CHARGES NOT RELATING TO THE PURCHASE CO NSIDERATION AND HAS RELIED ON THE ORDER OF THE CIT (A). IN OU R OPINION THESE FACTS REQUIRES RE-EXAMINATION OF THE BOOKS OF ACCO UNTS OF THE ASSESSEE AND THE ASSESSEE IS REQUIRED TO SUBSTANTIA TE WHETHER THE ENTRIES FOUND IN THE BOOKS OF ACCOUNTS RELATE TO TH E DEVELOPMENT CHARGES OR TOWARDS THE PAYMENT OF PURCHASE CONSIDE RATION. ACCORDINGLY WE SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION. 55. NEXT WE WILL TAKE UP ITA NOS. 1491 AND 1488/HYD/201 1. THE COMMON GROUND IN THESE TWO APPEALS IS WITH REGA RD TO THE ISSUE OF NOTICE UNDER SECTION153A OF THE ACT CLAIMI NG THAT IT IS BAD IN LAW THOUGH THERE WERE NO INCRIMINATING MATERIAL FOUND. THIS GROUND IS DISMISSED AS DECIDED IN PARA 3 OF THIS OR DER. 56. THE NEXT COMMON GROUND IS WITH REGARD TO THE DISCLO SING OF INCOME BY THE ASSESSEE LESSER THAN THE ADMITTED IN THE DEPOSITION MADE U/S 132(4) OF THE ACT. IN THE CASE OF SRI GSP VEERA REDDY THE ASSESSEE ADMITTED UNDER SECTION 132(4) OF THE A CT DECLARING INCOME AT RS. 60 LAKHS. HOWEVER IT FILED THE RETU RN OF INCOME AT RS.45.60 LAKHS CLAIMING DEDUCTION OF RS.14.40 LAKHS CLAIMING DEDUCTION U/S. 80C OF THE ACT. SIMILARLY IN THE C ASE OF SRI G. SIVA SHANKER REDDY THE ASSESSEE OFFERED INCOME UND ER SECTION 132(4) AT RS.40 LAKHS. HOWEVER IT FILED RETURN OF INCOME AT RS.37 72 760/- AFTER CLAIMING DEDUCTION UNDER SECTI ON 80C OF THE ACT AT RS.2 27 240/-. THE ASSESSING OFFICER IN THE SE CASES DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE AN D THE ASSESSEE HEREIN HAD CONSIDERED THIS AMOUNT AS DISCLOSED BY THE ASSESSEE UNDER SECTION 132(4) OF THE ACT AT RS. 60 LAKHS AND RS.40 LAKHS IN I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 57 THE CASES OF GSP VEERA REDDY AND SRI G. SHIVA SHANK ER REDDY RESPECTIVELY. AGAINST THIS BOTH ARE IN APPEAL BEF ORE US. 57. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. EVEN IN THE BLOCK ASSESSMENT THE INCOME OF THE ASSESSEE HAS TO BE CO MPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. WHEN WE SAY THAT THE UNDISCLOSED INCOME OF THE BLOCK ASSESSMENT IS TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT THEN THE PROVISIONS OF CHAPTER VI-A ALSO TO BE TAKEN INTO CONSIDERATION. FOR THIS PURPOSE WE PLACE RELIANCE ON THE JUDGMENT OF MADRA S HIGH COURT IN THE CASE OF ANBU TEXTILES VS. ACIT (262 ITR 68 4) WHEREIN HELD THAT IN VIEW OF RETROSPECTIVE AMENDMENT OF S. 158BB PROVIDING THAT UNDISCLOSED INCOME OF BLOCK PERIOD SHALL BE CO MPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT PROVISIO NS OF CHAPTER VI OF THE ACT SHOULD ALSO BE TAKEN INTO CONSIDERATION. 58. IN VIEW OF THE ABOVE THIS GROUND OF THE ASSESSEE I S ALLOWED. 59. IN THE RESULT ASSESEE APPEAL IN ITA NO.1481/HYD/11 IS DISMISSED. ASSESSEE APPEALS IN ITA 1488 AND 1491/HY D/2011 (2 APPEALS) ARE ALLOWED. ASSESSEE APPEALS IN ITA NOS. 1482 TO 1487/ HYD/2011 AND 1489/HYD/11 AND 1490/HYD/11 1401/HYD/ 11 347/HYD/08 & 1323/HYD/08 (11 APPEALS) ARE PARTLY AL LOWED. REVENUE APPEALS IN 1359/11 1471 TO 1473/HYD/11 AND 1359/HYD/11 (4 APPEALS) ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH FEBRUARY 2012 SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD DATED THE 29 TH FEBRUARY 2012 I.T.A. NOS. 347/HYD/2008 & 17 OTH ERS GVPR ENGINEERS &OTHERS HYD. ========================== 58 COPY FORWARDED TO: 1. SRI G.S.P. VEERA REDDY C/O. M/S. M. ANANDAM & CO. CHARTERED ACCOUNTANTS 7A SURYA TOWERS S.P. ROAD SECUNDERABAD-500 003. 2. SRI G. VEERA SEKHAR REDDY C/O. M/S. M. ANANDAM & C O. CHARTERED ACCOUNTANTS 7A SURYA TOWERS S.P. ROAD SECUNDERABAD-500 003. 3. SRI G. SIVA SHANKAR REDDY C/O. M/S. M. ANANDAM & C O. CHARTERED ACCOUNTANTS 7A SURYA TOWERS S.P. ROAD SECUNDERABAD-500 003. 4. M/S. GVPR ENGINEERS LTD. C/O. M/S. M. ANANDAM & CO . CHARTERED ACCOUNTANTS 7A SURYA TOWERS S.P. ROAD SECUNDERABAD-500 003. 5. M/S. GSP INFRATECH DEVELOPMENT LTD. SIVA SAI SANNI DHI PLOT NO. 32 HINDI NAGAR PUNJAGUTTA HYDERABAD. 6. M/S. GSP INFRA TECH DEVELOPMENT LTD. C/O. M/S. M. ANANDAM & CO. CHARTERED ACCOUNTANTS 7A SURYA TOWERS S.P. ROAD SECUNDERABAD-500 003. 7. THE ASST. COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE - 5 HYDERABAD. 8. THE ASST. COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE - 2(3) HYDERABAD. 9. THE DEPUTY COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE - 5 8 TH FLOOR AAYAKAR BHAVAN BASHEERBAGH HYDERABAD. 10 . THE CIT(A) - VII HYDERABAD. 11. THE CIT(A) - III HYDERABAD. 12. THE CIT - II HYDERABAD 13 . THE CIT (CENTRAL) HYDERABAD 14 . THE DR B BENCH ITAT HYDERABAD JMR*/TPRAO