ITO, Wd-33(4), Kolkata, Kolkata v. M/s Somdatt Builders Simplex JV, Kolkata

ITA 286/KOL/2014 | 2009-2010
Pronouncement Date: 07-10-2016

Appeal Details

RSA Number 28623514 RSA 2014
Assessee PAN AABAS9777J
Bench Kolkata
Appeal Number ITA 286/KOL/2014
Duration Of Justice 2 year(s) 7 month(s) 19 day(s)
Appellant ITO, Wd-33(4), Kolkata, Kolkata
Respondent M/s Somdatt Builders Simplex JV, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 07-10-2016
Appeal Filed By Department
Bench Allotted B
Tribunal Order Date 07-10-2016
Date Of Final Hearing 15-09-2016
Next Hearing Date 15-09-2016
Assessment Year 2009-2010
Appeal Filed On 17-02-2014
Judgment Text
I.T.A. NOS. 285 286 287 & 288/KOL./2014 ASSESSMENT YEARS: 2008-2009 TO 2010-11 & 2007-2008 PAGE 1 OF 18 IN THE INCOME TAX APPELLATE TRIBUNAL B BENC H KOLKATA BEFORE SHRI WASEEM AHMED AM & SHRI K. NARASIMHA C HARY JM ./ ITA NOS.285 286 287 & 288/KOL/2014 ( / ASSESSMENT YEARS :2008-09 2009-10 2010-11 & 2007-08) INCOME TAX OFFICER WARD-33(4) KOLKATA 10-B MIDDLETON ROW 3 RD FLOOR KOLKATA-700071 VS. M/S SOMDATT BUILDERS SIMPLEX JV 12/1 NEELIE SENGUPTA SARANI KOLKATA- 87 ./ ./PAN/GIR NO. : AABAS 9777 J ( /APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : NONE /ASSESSEE BY : SHRI RAVI TULSIYAN FCA / DATE OF HEARING : 27.09.2016 /DATE OF PRONOUNCEMENT : 07/10/2016 / O R D E R PER SHRI K. NARASIMHA CHARY JM: THE ABOVE FOUR APPEALS ARE DIRECTED BY THE REVENUE AGAINST THE RESPECTIVE ORDERS PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)- XIX KOLKATA IN CASE OF ONE ASSESSEE FOR THE DIFFER ENT ASSESSMENT YEARS I.E. AYS.2008-09 2009-10 2010-11 & 2007-08 RESPECTIVEL Y. I.T.A. NOS. 285 286 287 & 288/KOL./2014 ASSESSMENT YEARS: 2008-2009 TO 2010-11 & 2007-2008 PAGE 2 OF 18 2. SINCE COMMON GROUNDS ARE INVOLVED IN ALL THE APP EALS OF THE REVENUE THEREFORE FOR THE SAKE OF CONVENIENCE WE PROCEED TO DISPOSE OFF ALL THE APPEALS BY THIS CONSOLIDATED ORDER. 3. BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE I S AN AOP AND A JOINT VENTURE OF M/S SOMDATT BUILDERS PVT LTD AND M/S SIMPLEX INFRAS TRUCTURES LTD. ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTIONS AND DEVELOPMENT OF INFRASTRUCTURE FACILITY. ASSESSEE UNDERTOOK THE WORK OF DEVELOPING CERTAIN INFRASTRUC TURAL FACILITY UNDER CERTAIN CONTRACTS OF NATIONAL HIGHWAY AUTHORITY OF INDIA W HICH WERE IN THE NATURE OF IMPROVEMENT OF ACCESS TO GOLDEN QUADRILATERAL CORRI DOR BY FREE FLOW FACILITIES ALONG NH-4 45 AND 205 WITHIN THE CITY OF CHENNAI. 4. ASSESSEE FILED RETURN OF INCOME IN RESPECT OF AY S 2007-08 2008-09 2009-10 AND 2010-11 ON 9.10.2007 26.9.2008 22.9.2009 AND 25.9.2010 DECLARING GROSS INCOME OF RS. 1 01 12 456/- RS. 97 47 931/- RS.1 21 65 674/- AND RS. 79 93 761/- RESPECTIVELY ARISING FROM THE ABOVE BUSINESS AND CL AIMING DEDUCTION UNDER SECTION 80-IA OF THE ACT IN RESPECT OF THE ENTIRE INCOME AN D THEREBY SHOWING THE NET INCOME AS NIL. HOWEVER THE ASSESSMENT OFFICER BY WAY OF ORDERS UNDER SECTION 143(3) OF THE ACT DT. 31.12.2009 23.3.2010 24.11.2011 AND 2 3.4.2012 IN RESPECT OF THE AYS 2007-08 2008-09 2009-10 AND 2010-11 RESPECTIVELY DISALLOWED THE DEDUCTION UNDER SECTION 80-IA OF THE ACT IN VIEW OF THE EXPLANATIO N TO SUCH SECTION INTRODUCED BY THE FINANCE ACT 2009 WITH RETROSPECTIVE EFFECT FROM 1. 4.2000 AND COMPUTED THE NET INCOME OF THE ASSESSEE AT RS. 1 01 12 456/- RS. 97 47 931/- RS.1 21 65 674/- AND RS. 79 93 761/- RESPECTIVELY. AGGRIEVED BY THE SAID DI SALLOWANCE OF THE DEDUCTION AND ADDING BACK THE AMOUNT ASSESSEE CARRIED THE MATTER S IN APPEAL AND THE LEARNED CIT BY WAY OF IMPUGNED ORDERS ALLOWED THE DEDUCTIONS AN D DELETED THE ADDITIONS MADE BY THE ASSESSMENT OFFICER. I.T.A. NOS. 285 286 287 & 288/KOL./2014 ASSESSMENT YEARS: 2008-2009 TO 2010-11 & 2007-2008 PAGE 3 OF 18 5. CHALLENGING THE ACTION OF THE LEARNED CIT IN ALL OWING THE APPEALS OF THE ASSESSEE REVENUE CAME IN THESE APPEALS ON THE FOLL OWING GROUNDS: GROUNDS OF APPEAL IN ITA NO. 285/KOL/2014 : GROUND NO. 1. 'THAT ON THE FACTS AND IN CIRCUMSTAN CES OF THE CASE AND IN LAW THE LD. CIT(APPEALS) ERRED IN ALLOWING RELIEF TO TH E ASSESSEE BY HOLDING THAT AO'S ACTION IS NOT WELL FOUNDED IN POSITION OF LAW. ' GROUND NO.2 'THAT ON THE FACTS AND CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT(APPEALS) HAS ERRED IN UNDERSTANDING THE WHO LE GAMUT OF THE CASE WHERE CONSIDERATION OF ASSESSEE AS WORKS CONTRACTOR BY THE A.O. WAS COMPLETELY OVERLOOKED AND CONSIDERED THE ASSESSEE A S DEVELOPER. ' GROND NO. 3 'THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(APPEALS) HAS ERRED IN DIRECTING THE ASSESSI NG OFFICER TO DELETE THE ADDITION.' GROUND NO.4 'THAT THE APPELLANT CRAVES LEAVE TO SUB MIT ADDITIONAL GROUNDS OF APPEAL IF ANY AT OR BEFORE THE TIME OF HEARING AN D/OR ALTER MODIFY REFRAME ANY GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. GROUNDS OF APPEAL IN ITA NO. 286/KOL/2014 GROUND NO. O. 1. 'THAT ON THE FACTS AND IN CIRCUMS TANCES OF THE CASE AND IN LAW THE LD. CIT(APPEALS) ERRED IN ALLOWING RELIEF TO THE ASSESSEE BY HOLDING THAT AO'S ACTION IS NOT WELL FOUNDED IN POSITION OF LAW.' GROUND NO.2 'THAT ON THE FACTS AND CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. SIT(APPEALS) HAS ERRED IN UNDERSTANDING THE WHO LE GAMUT OF THE CASE WHERE CONSIDERATION OF ASSESSEE AS WORKS CONTRACTOR BY THE A.O. WAS COMPLETELY OVERLOOKED AND CONSIDERED THE ASSESSEE A S DEVELOPER. ' GROND NO. 3 'THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(APPEALS) HAS ERRED IN DIRECTING THE ASSESSI NG OFFICER TO DELETE THE ADDITION.' GROUND NO.4 'THAT THE APPELLANT CRAVES LEAVE TO SUB MIT ADDITIONAL GROUNDS OF APPEAL IF ANY AT OR BEFORE THE TIME OF HEARING AN D/OR ALTER MODIFY REFRAME ANY GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. ' I.T.A. NOS. 285 286 287 & 288/KOL./2014 ASSESSMENT YEARS: 2008-2009 TO 2010-11 & 2007-2008 PAGE 4 OF 18 GROUNDS OF APPEAL IN ITA NO. 287/KOL/2014 GROUND NO. 1. 'THAT ON THE FACTS AND IN CIRCUMSTAN CES OF THE CASE AND IN LAW THE LD. CLT(APPEALS) ERRED IN ALLOWING RELIEF TO TH E ASSESSEE BY HOLDING THAT AD'S ACTION IS NOT WELL FOUNDED IN POSITION OF LAW. ' GROUND 0.2 'THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(APPEALS) HAS ERRED IN UNDERSTANDING THE WHO LE GAMUT OF THE CASE WHERE CONSIDERATION OF ASSESSEE AS WORKS CONTRACTOR BY THE A.O. WAS COMPLETELY OVERLOOKED AND CONSIDERED THE ASSESSEE A S DEVELOPER. GROUND NO. 3 'THAT ON THE FACTS AND CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT(APPEALS) HAS ERRED IN DIRECTING THE ASSESSI NG OFFICER TO DELETE THE ADDITION. GROUND NO.4 'THAT THE APPELLANT CRAVES LEAVE TO SUB MIT ADDITIONAL GROUNDS OF APPEAL IF ANY AT OR BEFORE THE TIME OF HEARING AN D/OR ALTER MODIFY REFRAME ANY GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. GROUNDS OF APPEAL IN ITA NO. 288/KOL/2014 GROUND NO. 1. 'THAT ON THE FACTS AND IN CIRCUMSTAN CES OF THE CASE AND IN LAW THE LD. CIT(APPEALS) ERRED IN ALLOWING RELIEF TO TH E ASSESSEE BY HOLDING THAT AO'S ACTION IS NOT WELL FOUNDED IN POSITION OF LAW. ' GROUND NO.2 'THAT ON THE FACTS AND CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT(APPEALS) HAS ERRED IN UNDERSTANDING THE WHO LE GAMUT OF THE CASE WHERE CONSIDERATION OF ASSESSEE AS WORKS CONTRACTOR BY THE A.O. WAS COMPLETELY OVERLOOKED AND CONSIDERED THE ASSESSEE A S DEVELOPER. GROND NO. 3 'THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(APPEALS) HAS ERRED IN DIRECTING THE ASSESSI NG OFFICER TO DELETE THE ADDITION.' GROUND NO.4 'THAT THE APPELLANT CRAVES LEAVE TO SUB MIT ADDITIONAL GROUNDS OF APPEAL IF ANY AT OR BEFORE THE TIME OF HEARING AN D/OR ALTER MODIFY REFRAME ANY GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. 6. IT IS THE ARGUMENT OF THE LD. AR THAT THE ASSESSMEN T OFFICER HAS NEVER DOUBTED THE FACTS SUBMITTED BY THE ASSESSEE REGARDI NG THEIR ACTIVITIES BUT HAVING CONSIDERED SUCH ACTIVITIES REACHED A WRONG CONCLUS ION THAT ASSESSEE IS NOT A I.T.A. NOS. 285 286 287 & 288/KOL./2014 ASSESSMENT YEARS: 2008-2009 TO 2010-11 & 2007-2008 PAGE 5 OF 18 DEVELOPER OF AN INFRASTRUCTURAL FACILITY BUT THEY A RE ONLY A WORK CONTRACTOR TO DENY THE DEDUCTIONS U/S.80IA OF THE ACT. HE FURTHER SUBM ITTED THAT WORKS CONTRACT IS CONTRACT IN WHICH THE CONTRACTOR IS NOT FASTENED WI TH ANY RESPONSIBILITY THAN PROCUREMENT AND DEPLOYMENT OF LABOUR WHEREAS IN TH E INSTANT CASE THE ASSESSEE ALSO UNDERTAKES SO MANY RESPONSIBILITY AND RISKS IN CORPORATED IN THE GENERAL CONDITIONS DOCUMENT WHICH FORMS PART OF THE CONTRAC T AGREEMENT. IN THIS PROCESS LEARNED AR DREW OUR ATTENTION SO MANY CLAUSES OF TH IS GENERAL CONDITIONS OF CONTRACT. ASSESSEE MEETS THE INITIAL INVESTMENT FOR MEN MATERIAL MACHINERY AND OTHER REQUISITE COMPONENTS TO CONVERT THE SITE PROV IDED BY THE GOVERNMENT INTO AN INFRASTRUCTURAL FACILITY UNDERTAKING SUBSTANTIAL RE SPONSIBILITY AND RISK IN THIS PROCESS. JOB OF ASSESSEE DOES NOT END WITH ACCOMPLISHING A T ASK IN THE PROJECT BUT IT IS A COMPREHENSIVE AND INTEGRATED ONE INASMUCH AS HE IS EXPOSED TO THE RISK AND ATTENDANT CONSEQUENCES FOR COMPLETION OF WORK WITHI N TIME DAMAGE TO THE WORKS SITE ETC. AND ESCALATION IN THE PRICES OF MATERIAL. A CUMULATIVE RESULT OF ALL THESE THINGS MAKES OUT THE ASSESSEE A DEVELOPER OF AN INF RASTRUCTURAL FACILITY BUT NOT A MERE WORKS CONTRACTOR. 7. ARGUMENT OF THE LEARNED DR IS THAT THE GOVERNMEN T IS THE EMPLOYER OF THE ASSESSEE BY PROVIDING INVESTMENT AND THE ASSESSEE R ECEIVES RUNNING ACCOUNT PAYMENT/LUMP SUM PAYMENTS AS SUCH ASSESSEE IS EXECU TING THE PROJECT ONLY AS A WORKS CONTRACTOR WITHIN THE MEANING OF EXPLANATION TO SECTION 80-IA OF THE ACT AND THE ASSESSMENT OFFICER RIGHTLY DISALLOWED THE DEDUC TION OF THE CLAIM U/S.80-IA(4) OF THE ACT AND ADDED BACK THE AMOUNT TO THE TOTAL INCO ME OF THE ASSESSEE. HE HEAVILY RELIED UPON THE ORDER OF ASSESSMENT OFFICER. 8. ON THE ABOVE FACTUAL MATRIX AND RIVAL CONTENTION S THE POINT THAT ARISES FOR OUR CONSIDERATION IN THESE APPEALS IS AS TO WHETHER THE ASSESSEE IS A WORK CONTRACTOR OR A DEVELOPER OF INFRASTRUCTURAL FACILITY THEREBY ENTIT LED FOR DEDUCTION U/S.80-IA(4) OF THE ACT? I.T.A. NOS. 285 286 287 & 288/KOL./2014 ASSESSMENT YEARS: 2008-2009 TO 2010-11 & 2007-2008 PAGE 6 OF 18 POINT: 9. A CAREFUL READING OF SECTION 80-IA CLEARLY SHOWS THAT IN ORDER TO AVAIL DEDUCTION U/S 80-IA ALL THE FOLLOWING CONDITIONS SH OULD BE SATISFIED: A) THE ASSESSEE IS A COMPANY OR A CONSORTIUM OF COMPAN IES; B) THERE EXISTS AN AGREEMENT WITH THE CENTRAL GOVERNME NT STATE GOVERNMENT LOCAL AUTHORITY OR ANY OTHER STATUTORY BODY AND C) PURSUANT TO THE AGREEMENT SPECIFIED IN POINT (II) T HE COMPANY ENGAGES ITSELF IN ANY OF THE FOLLOWING ACTIVITIES: I. DEVELOPMENT OF INFRASTRUCTURE FACILITY II. OPERATION AND MAINTENANCE OF INFRASTRUCTURE FACILIT Y III. DEVELOPMENT OPERATION AND MAINTENANCE OF INFRASTRU CTURE FACILITY 10. ADMITTEDLY THE ASSESSEE IS A CONSORTIUM OF COMP ANIES. THERE IS AN AGREEMENT WITH THE NATIONAL HIGHWAYS AUTHORITY OF INDIA. PUR SUANT TO SUCH AGREEMENT THE CONSORTIUM ENGAGED ITSELF IN THE IMPLEMENTATION OF THE PROJECT MEANT FOR IMPROVEMENT OF ACCESS TO GOLDEN QUADRILATERAL (GQ) CORRIDOR BY CONSTRUCTION OF FREE FLOW FACILITIES ALONG NH-4 45 AND 205 WITHIN CHENN AI CITY. IN THIS CONTEXT WE SHALL PROCEED TO EXAMINE THE ENTITLEMENT OF THE ASSESSEE FOR DEDUCTIONS UNDER SECTION 80- IA OF THE ACT. VIDE EXPLANATION TO SECTION 80-IA O F THE ACT FOR THE PURPOSES OF CLAUSE (4) THEREOF 'INFRASTRUCTURE FACILITY MEANS (A) A ROAD INCLUDING TOLL ROAD A BRIDGE OR A RAIL SYSTEM; (B) A HIGHWAY PROJECT INCLUDING HOUSING OR OTHER AC TIVITIES BEING AN INTEGRAL PART OF THE HIGHWAY PROJECT; (C) A WATER SUPPLY PROJECT WATER TREATMENT SYSTEM IRRIGATION PROJECT SANITATION AND SEWERAGE SYSTEM OR SOLID WASTE MANAGEMENT SYSTEM; (D) A PORT AIRPORT INLAND WATERWAY [INLAND PORT O R NAVIGATIONAL CHANNEL IN THE SEA.] [(II) ANY UNDERTAKING WHICH HAS STARTED OR STARTS PROVIDING TELECOMMUNICATION SERVICES WHETHER BASIC OR CELLULAR INCLUDING RADIO PAGING DOMESTIC SATELLITE SERVICE NETWORK OF TRUNKING BROADBAND NETWORK AND INTERNET SERVICES ON OR AFTER THE 1ST DAY OF APRIL 1995 BUT ON OR BEFORE THE [31ST DAY OF M ARCH 2005;] THIS EXPLANATION CLEARLY COVERS THE ACTIVITY OF THE ASSESSEE TO MEAN THAT IS CREATION OF 'INFRASTRUCTURE FACILITY. I.T.A. NOS. 285 286 287 & 288/KOL./2014 ASSESSMENT YEARS: 2008-2009 TO 2010-11 & 2007-2008 PAGE 7 OF 18 11. NOW COMING TO THE ASPECT OF THE STATUS OF THE A SSESSEE IT IS NECESSARY TO REFER TO THE RESPONSIBILITIES AND RISKS OF THE ASSE SSEE INVOLVED IN IMPLEMENTING THE PROJECT. IT IS THE ARGUMENT OF THE LEARNED AR THAT T HE CONDITIONS LISTED IN THE AGREEMENT CLEARLY GO TO ESTABLISH THAT THE ASSESSEE WAS A DEV ELOPER AND NOT A MERE WORKS CONTRACTOR. FOR THIS PURPOSE HE INVITED OUR ATTENTION TO VARIOUS CLAUSES OF GENERAL OBLIGATIONS OF THE AGREEMENT AND WE SHALL EXTRACT THEM IN A SUMMARY FORM FOR THE PURPOS E OF CONVENIENCE. CLAUSE 8.1 STIPULATES THAT THE CONTRACTOR SHALL WI TH DUE CARE AND DILIGENCE DESIGN (TO THE EXTENT PROVIDED FOR BY THE CONTRACT) EXECUTE AND C OMPLETE THE WORKS AND REMEDY ANY DEFECTS THEREIN IN ACCORDANCE WITH THE PROVISIONS O F THE CONTRACT. THE CONTRACTOR SHALL PROVIDE ALL SUPERINTENDENCE. LABOUR. MATERIALS. PLA NT. CONTRACTOR'S EQUIPMENT AND ALL THE OTHER THINGS. WHETHER OF A TEMPORARY OR PERMANENT N ATURE. REQUIRED IN AND FOR SUCH DESIGN EXECUTION COMPLETION AND REMEDYING OF ANY DEFECTS. SO FAR AS THE NECESSITY FOR PROVIDING THE SAME IS SPECIFIED IN OR IS REASONABLY TO BE INF ERRED FROM THE CONTRACT' FROM THE ABOVE IT IS CLEAR THAT THE ASSESSEE WAS NOT MERELY PROVIDING LABOUR UNDER THE CONTRACT. IN ADDITION TO LABOUR IT WAS REQUIRED TO MAKE ALL ARRANGEMENTS INC LUDING MATERIALS EQUIPMENT SUPERINTENDENCE AND ANY OTHER THING REQUIRED FOR CO MPLETION OF THE WORK. IN RESPECT OF DRAWINGS CLAUSE 6.6 SAYS 'WORKING D RAWINGS FOR CULVERTS BASED ON THE TYPICAL DRAWINGS PROVIDED IN THE CONTRACT & DESIGN CALCULAT IONS AND FABRICATION DRAWINGS FOR TEMPORARY WORKS ................................... ..... SHALL BE PREPARED BY THE CONTRACTORS AT HIS O WN COST'. UNDER CLAUSE 14.1 UNDER THE CAPTION SUBMISSION OF PROGRAMME AND ESTIMATION OF CASH FLOWS THE ASSESSEE WAS REQUIRED TO SUBMIT A DETAIL ED PROGRAMME FOR THE EXECUTION OF THE WORKS. FURTHER UNDER CLAUSE 14.3 IT WAS REQUIRED TO PROVIDE THE ENGINEER A DETAILED CASH FLOW ESTIMATE WITHIN 28 DAYS. AS PER CLAUSE 14.4 S UBMISSION OF THE PROGRAMME AND ITS APPROVAL BY THE ENGINEER DID NOT RELIEVE THE ASSES SEE OF ITS DUTIES AND RESPONSIBILITIES SUPERINTENDENCE OF ASSESSEE IN RESPECT OF WORK VID E CLAUSE 15.1 THE ASSESSEE WAS TO PROVIDE ALL NECESSARY SUPERINTENDENCE DURING THE EX ECUTION OF WORKS. UNDER CLAUSE 34.1 THE ASSESSEE WAS REQUIRED TO MAK E HIS OWN ARRANGEMENTS FOR PROCURING AND DEPLOYING OF ALL STAFF AND LABOUR LOCAL OR OTH ER AND FOR THEIR PAYMENT HOUSING FEEDING AND TRANSPORT. I.T.A. NOS. 285 286 287 & 288/KOL./2014 ASSESSMENT YEARS: 2008-2009 TO 2010-11 & 2007-2008 PAGE 8 OF 18 TESTING OF MATERIALS AND PLANT IS THE RESPONSIBILIT Y OF THE ASSESSEE: IN ADDITION TO PROVISION OF SPECIFIED PLANT AND MATERIAL THE ASSESSEE WAS REQU IRED TO PROVIDE ASSISTANCE LABOUR ELECTRICITY FUELS STORES APPARATUS AND INSTRUMEN TS AS ARE NORMALLY REQUIRED FOR EXAMINING MEASURING AND TESTING ANY MATERIALS OR PLANTS. (CLA USE 36.1). THE COST OF MAKING THE TEST WAS TO BE BORNE BY THE ASSESSEE (CLAUSE 36.2 AND 36.3) UNDER CLAUSE 19.1 (B) ASSESSEE HAS TO TAKE CARE OF SAFETY SECURITY AND PROTECTION OF THE ENVIRONMENT. THE ASSESSEE WAS REQUIRED TO PROVIDE A ND MAINTAIN AT HIS OWN COST ALL LIGHTS GUARDS FENCING WARNING SIGNS AND WATCHING WHEN O R WHERE NECESSARY. FURTHER UNDER PARA (C) IT WAS TO TAKE ALL THE STEPS TO PROTECT THE EN VIRONMENT. VIDE CLAUSE 28.2 THE ASSESSEE WAS REQUIRED TO PAY ALL TONNAGE AND OTHER ROYALTIES RENT AND OTHER PAYMENTS OR COMPENSATION IF ANY FOR GETTING STONE SAND GRAVEL CLAY OR OTHER MATERIALS REQUIRED FOR THE WORK UNDER CLAUSE 30.2 THE ASSESSEE WAS RESPONSIBLE FOR PAYING THE COST OF STRENGTHENING ANY BRIDGES OR IMPROVING ANY ROAD COMMUNICATING WITH OR ON THE ROUTES TO THE SITE TO FACILITATE THE MOVEMENT OF EQUIPMENT AND OTHER TEMPORARY WORKS . IN RESPECT OF RIGHTS OF WAY CLAUSE 42.3 THE ASSES SEE WAS REQUIRED TO BEAR ALL THE COSTS RELATING TO RIGHTS OF WAY REQUIRED BY IT IN CONNECT ION WITH ACCESS TO THE SITE. IN ADDITION TO THE ABOVE THE ASSESSEE WAS EXPOSED TO THE FOLLOWING RISKS: CLAUSE 20 AND 21 DEAL WITH THE INSURANCE POLICIES A GAINST DAMAGES: THE ASSESSEE WAS RESPONSIBLE FOR ANY DAMAGE CAUSED TO THE WORKS OR A NY PART THEREOF DURING THE PERIOD OF EXECUTION OF WORKS AND THE DEFECT LIABILITY PERIOD. IT WAS TO RECTIFY ANY SUCH DAMAGES AT ITS OWN COST. (CLAUSE 20.2). IN ORDER TO COVER THE SAID RISK THE ASSESSEE WAS OBTAIN INSURANCE POLICIES TO INSURE THE WORKS MATERIAL PLANT & EQU IPMENT ETC. UNDER CLAUSE 22.1 THE ASSESSEE IS RESPONSIBLE FOR THE INDEMNIFICATION AGAINST LOSSES. THE ASSESSEE WAS TO IDEMINFY THE EMPLOYER AGAINST ALL L OSSES AND CLAIMS IN RESPECT OF: I.T.A. NOS. 285 286 287 & 288/KOL./2014 ASSESSMENT YEARS: 2008-2009 TO 2010-11 & 2007-2008 PAGE 9 OF 18 DEATH OF OR INJURY TO ANY PERSON LOSS OF OR DAMAGE TO ANY PROPERTY WHICH MAY ARISE IN CONSEQUENCE OF THE EXECUTION AND COMPLETION OF WORKS VIDE CLAUSE 24.1 THE EMPLOYER WAS NOT LIABLE FOR A NY DAMAGES OR COMPENSATION PAYABLE TO ANY WORKMAN OR OTHER PERSON IN EMPLOYMENT OF THE AS SESSEE. THE ASSESSEE WAS TO INSURE AGAINST ANY SUCH LIABILITY. IN RESPECT OF LIQUIDATED DAMAGES THE STIPULATION I S THAT THE ASSESSEE WAS TO COMPLETE THE WORK WITHIN TIME. IN THE EVENT OF ANY FAILURE IN TH IS REGARD IT WAS LIABLE TO LIQUIDATED DAMAGES AS SPECIFIED IN CLAUSE 47. WHILE DEALING WITH THE CLAUSE RELATING TO RELEASE O F RETENTION AFTER DEFECT LIABILITY PERIOD AGREEMENT PRESCRIBES THAT EVEN AFTER THE COMPLETION OF THE WORKS THE RESPONSIBILITY OF THE ASSESSEE DID NOT END. IN CASE OF ANY DEFECTS FOUND IN THE WORKS IT WAS TO REMEDY THE SAME AT ITS OWN COST. (CLAUSE 49). THE RETENTION MONEY D EPOSITED BY THE ASSESSEE WAS TO BE RELEASED AFTER THE COMPLETION OF THE DEFECT LIABILI TY PERIOD. EVEN THE PERFORMANCE SECURITY FURNISHED BY THE ASSESSEE COULD BE CLAIMED ONLY AFT ER THE COMPLETION OF THE DEFECTS LIABILITY PERIOD.( CLAUSE 10.2) 12. IN THE LIGHT OF THE ABOVE RISKS AND RESPONSIBIL ITIES IN ADDITION TO MERE RENDERING LABOUR STIPULATED IN THE AGREEMENT NOW W E SHALL LOOK AT THE LAW ON THE QUESTION WHETHER THE ASSESSEE IS A WORK CONTRACTOR OR A DEVELOPER OF AN INFRASTRUCTURAL FACILITY. LEARNED AR HEAVILY RELIED ON AND WE WOULD PROFITABLY REFER TO THE FOLLOWING EXTRACTS OF THE ORDER OF THE COORDINA TE BENCH OF THIS TRIBUNAL IN DCIT VS. M/S SPML INFRA LTD (ERSTWHILE M/S SUBHASH PRJEC TS & MARKETING LTD) ITA NO.1291-1292/KOL/2013 DATED 24-08-2016 8.1 NOW THE ASSESSEE IN THE GIVEN CASE IS A COMPAN Y WHICH PURSUANT TO AGREEMENTS WITH VARIOUS GOVERNMENT BODIES ENGAGED ITSELF IN T HE DEVELOPMENT OF INFRASTRUCTURE FACILITY AS DEFINED IN THE EXPLANATION TO SUB SECTION 4 OF S ECTION 80-IA . THESE SET OF FACTS HAVE NOT BEEN DISPUTED BY THE AO. THE LD. AO DISALLOWED THE CLAIM ON THE GROUND THAT THE ASSESSEE WAS A MERE WORKS CONTRACTOR CONDUCTING MERE CIVIL C ONSTRUCTION AND HENCE AS PER THE EXPLANATION TO SECTION 80- IA(13) THE DEDUCTION IS NOT AVAILABLE TO HIM. ACCORDING TO THE AO THE INVESTMENTS WERE MADE BY THE GOVERNMENT AUTHORI TIES BECAUSE THE ASSESSEE WAS RECEIVING PAYMENTS IN PROGRESS OF THE WORKS ON MEAS UREMENT. ATTENTION IN THIS REGARD IS I.T.A. NOS. 285 286 287 & 288/KOL./2014 ASSESSMENT YEARS: 2008-2009 TO 2010-11 & 2007-2008 PAGE 10 OF 18 FIRSTLY INVITED TO THE PROVISIONS OF THE EXPLANATIO N OF SECTION 80-IA OF THE ACT AS PRODUCED BELOW: 'FOR THE REMOVAL OF DOUBTS IT IS HEREBY DECLARED T HAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY IN RELATION TO A BUSINESS REFER RED TO IN SUB-SECTION (4) WHICH IS IN THE NATURE OF A WORKS CONTRACT AWARDED BY ANY PERSO N (INCLUDING THE CENTRAL OR STATE GOVERNMENT) AND EXECUTED BY THE UNDERTAKING OR ENTE RPRISE REFERRED TO IN SUB- SECTION (1). ' FROM A PLAIN READING OF THE ABOVE IT IS CLEAR THAT DEDUCTION U/S 80-IA DOES NOT APPLY TO WORKS CONTRACT. NOW THE RELEVANT QUESTION ARISES BEFORE U S FOR ADJUDICATION IS THAT WHAT CONSTITUTES A WORKS CONTRACT. SECTION 80-IA NOWHERE DEFINES THE TERM ' WORKS CONTRACT ' HENCE THE NATURAL MEANING OF THE WORD SHALL APPLY. AS PER THE OXFORD DICTIONARY THE TERM 'WORK' MEANS APPLICATION OF EFFORT TO A PURPOSE OR USE OF ENERGY . THUS GOING BY THE DICTIONARY MEANING WE MAY SAY THAT A WORKS CONTRACT IS A CONTRACT WHICH I NVOLVES EFFORT OR IN OTHER WORDS LABOUR OF THE CONTRACTOR. FURTHER AS PER THE BLACK'S LAW DICT IONARY THE TERM 'WORK' MEANS LABOUR OR IN OTHER WORDS PHYSICAL AND MENTAL EXERTION TO ATTAIN AN END ESP. AS CONTROLLED BY AND FOR THE BENEFIT OF THE EMPLOYER. THUS AS PER BLACKS'S LAW A LSO A WORKS CONTRACT IS A LABOUR CONTRACT UNDER WHICH THE CONTRACTOR MERELY EMPLOYS HIS LABOU R AS PER THE DIRECTIONS OF THE CONTRACTEE. FURTHER ATTENTION IS INVITED TO RELEVANT EXTRACTS OF SECTION 194C OF THE IT ACT: '(IV) 'WORK' SHALL INCLUDE- (A) ADVERTISING; (B) BROADCASTING AND TELECASTING INCLUDING PRODUCTI ON OF PROGRAMMES FOR SUCH BROADCASTING OR TELECASTING; (C) CARRIAGE OF GOODS OR PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN BY RAILWAYS; (D) CATERING; (E) MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCH ASED FROM SUCH CUSTOMER BUT DOES NOT INCLUDE MANUFACTURING OR SUPPLYING A PRODU CT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PU RCHASED FROM A PERSON OTHER THAN SUCH CUSTOMER.' THUS AS PER SECTION 194C ALSO ' WORKS CONTRACT ' DOES NOT INCLUDE A CONTRACT WHEREIN THE CONTRACTOR IN ADDITION TO EMPLOYING LABOUR PROCURE S MATERIAL FROM A THIRD PARTY. THUS CONTRACTS INVOLVING MERE LABOUR OF THE CONTRACTOR A RE INCLUDED IN THE PURVIEW OF 'WORKS CONTRACT'. FURTHER ATTENTION IS INVITED TO THE JUD GMENT OF THE SUPREME COURT IN CASE OF I.T.A. NOS. 285 286 287 & 288/KOL./2014 ASSESSMENT YEARS: 2008-2009 TO 2010-11 & 2007-2008 PAGE 11 OF 18 ASSOCIATED CEMENT CO. LTD. VS. CIT [201 ITR 435] W HEREIN THE HON'BLE COURT WHILE INTERPRETING THE TERM ' WORK ' U/S 194C HELD THAT WORDS `ANY WORK' IN SUB-S. (1) OF S. 194C MEANS AN Y WORK INCLUDING SUPPLY OF LABOUR TO CARRY OUT WORK AND IS NOT INTENDED TO BE CONFINED TO OR RESTRICTED TO WORKS CONTRACT THEREFORE A PERSON WHO CREDITS TO THE ACCOUNT OF OR PAYS TO A CONTRACTOR ANY SUM PAYABLE ON BEHALF OF ORGANIZAT IONS SPECIFIED IN S. 194C(1) FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK) IS LIABLE TO DEDUCT INCOME-TAX AS REQ UIRED UNDER THAT SUB- SECTION. THE WORDS IN THE SUB-SECTIONS (1) OF 194C `ON INCOME COMPRISED THEREIN' APPEARING IMMEDIATELY AFTER THE WORDS `DED UCT AN AMOUNT EQUAL TO TWO PER CENT OF SUCH SUM AS INCOME-TAX' FROM THEIR PURPORT CANNOT BE UNDERSTOOD AS THE PERCENTAGE AMOUNT DEDUCTIBLE FROM THE INCOME OF THE CONTRACTOR OUT OF THE SUM CREDITED TO HIS ACCOUNT O R PAID TO HIM IN PURSUANCE OF THE CONTRACT BUT DEDUCTION IS TO BE MADE OUT OF PAYMENTS MADE TO THE CONTRACTOR. 8.2 WE SEE NO REASON TO CURTAIL OR TO CUT DOWN THE MEANING OF THE PLAIN WORDS USED IN THE SECTION. ''ANY WORK' MEANS ANY WORK AND NOT A ' WORKS CONTRACT '' WHICH HAS A SPECIAL CONNOTATION IN THE TAX LAW. INDEED IN THE SUB-SECTI ON THE ' WORK ' REFERRED TO THEREIN EXPRESSLY INCLUDES SUPPLY OF LABOUR TO CARRY OUT A WORK. IT I S A CLEAR INDICATION OF THE LEGISLATURE THAT THE ' WORK ' IN THE SUB-SECTION IS NOT INTENDED TO BE CONFINED TO OR RESTRICTED TO ' WORKS CONTRACT '. THE ISSUE BEFORE THE SUPREME COURT IN THE AFORES AID CASE WAS WHETHER THE TERM ' WORK ' USED IN SECTION 194C NEEDS TO BE RESTRICTED TO 'W ORKS CONTRACT'. THE APEX COURT LAID OUT THAT THE TERM 'WORK' USED IN SECTION 194C NEED NOT BE RESTRICTED TO ' WORKS CONTRACTS ' (I.E. LABOUR CONTRACTS) BECAUSE THE SUB-SECTION EXP RESSLY INCLUDES SUPPLY OF LABOUR TO CARRY OUT WORK. IN OTHER WORDS IT IS IMPLIED THAT WORKS CONT RACT MEANS SUPPLY OF LABOUR TO CARRY OUT WORK. THUS FROM THE ABOVE WE MAY SAY THAT A WORKS C ONTRACT CONSTITUTES A CONTRACT UNDER WHICH THE CONTRACTOR IS MERELY EMPLOYING HIS EFFORT S OR LABOUR. UNDER SUCH A CONTRACT THE CONTRACTEE PROVIDES THE MATERIAL AND OTHER REQUISIT ES (A COMPLETE INFRASTRUCTURE) NEEDED TO CARRY OUT THE DESIRED WORK TO THE CONTRACTOR WHO BY APPLYING HIS LABOUR TO THE SAID MATERIAL TURNS THE MATERIAL INTO A DESIRED PRODUCT. FURTHER ATTENTION IS INVITED TO THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL 2007 REPORTED IN [2007] 289 ITR (ST.) 292 AT PAGE 312 WHICH READS AS UNDER: 'SECTION 80-LA INTER ALIA PROVIDES FOR A TEN-YEAR TAX BENEFIT TO AN ENTERPRISE OR AN UNDERTAKING ENGAGED IN DEVELOPMENT OF INFRASTRUCTUR E FACILITIES INDUSTRIAL PARKS AND SPECIAL ECONOMIC ZONES. THE TAX BENEFIT WAS INTRODU CED FOR THE REASON THAT INDUSTRIAL MODERNIZATION REQUIRES A PASSIVE EXPANSION OF AND QUALITATIVE IMPROVEMENT IN INFRASTRUCTURE (VIZ. EXPRESSWAYS HIGHWAYS AIRPOR TS PORTS AND RAPID URBAN RAIL TRANSPORT SYSTEMS) WHICH WAS LACKING IN OUR COUNTRY . THE PURPOSE OF THE TAX BENEFIT HAS ALL ALONG BEEN {OR ENCOURAGING PRIVATE SECTOR P ARTICIPATION BY WAY OF INVESTMENT IN DEVELOPMENT OF THE INFRASTRUCTURE SECTOR AND NOT {OR THE PERSONS WHO MERELY EXECUTE THE CIVIL CONSTRUCTION WORK OR ANY OTHER WO RKS CONTRACT. I.T.A. NOS. 285 286 287 & 288/KOL./2014 ASSESSMENT YEARS: 2008-2009 TO 2010-11 & 2007-2008 PAGE 12 OF 18 ACCORDINGLY IT IS PROPOSED TO CLARIFY THAT THE PRO VISIONS OF SECTION 80- IA SHALL NOT APPLY TO A PERSON WHO EXECUTES A WORKS CONTRACT ENTERED INTO W ITH THE UNDERTAKING OR ENTERPRISE REFERRED TO IN THE SAID SECTION. THUS IN A CASE WH ERE A PERSON MAKES THE INVESTMENT AND HIMSELF EXECUTES THE DEVELOPMENT WORK I.E. CARRIE S OUT THE CIVIL CONSTRUCTION WORK HE WILL BE ELIGIBLE FOR TAX BENEFIT UNDER SECTION 80- IA OF TH E ACT. IN CONTRAST TO THIS A PERSON WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON (I.E. UNDERTAK ING OR ENTERPRISE REFERRED TO IN SECTION 80- IA) FOR EXECUTING WORKS CONTRACT WILL NOT BE ELIGI BLE FOR TAX BENEFIT UNDER SECTION 80- IA. THIS AMENDMENT WILL TAKE RETROSPECTIVE EFFECT FROM 1 ST APRIL 2000 AND WILL ACCORDINGLY APPLY IN RELATION TO THE ASSESSMENT YEAR 2000-01 AND SUBSEQU ENT YEARS. THE EXPLANATORY MEMORANDUM CLEARLY LAYS OUT THAT PURPOSE OF EXTENDI NG TAX BENEFIT U/S 80-IA WAS TO ENCOURAGE INVESTMENTS FROM THE PRIVATE SECTOR AND H ENCE WORK CONTRACTS I.E. CONTRACTS INVOLVING MERELY LABOUR (OR MERE EXECUTION OF CONST RUCTION WITHOUT MAKING INVESTMENTS) ARE OUTSIDE THE PURVIEW OF THE PROVISIONS OF SECTION 80 -1A. THUS THE TERM ' WORKS CONTRACT ' USED IN EXPLANATION TO SECTION 80-IA(L3) MEANS A CONTRAC T OF DEVELOPING INFRASTRUCTURE BY MERELY EMPLOYING LABOUR AND MAKING NO INVESTMENTS. WE ALSO FIND SUPPORT FROM THE FOLLOWING JUDGMENTS: THE HYDERABAD BENCH OF TRIBUNAL IN CASE OF M/S. GVP R ENGINEERS LTD. VS. ACIT (2012) 32 CCH 0296 HYDTRIB (2012) 51 SOT 0207 (HYD) (URO). THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED AS UNDER : THE NEXT QUESTION TO BE ANSWERED IS WHETHER THE AS SESSEE IS A DEVELOPER OR MERE WORKS CONTRACTOR. WHETHER THE ASSESSEE IS A DE VELOPER OR WORKS CONTRACTOR IS PURELY DEPENDS ON THE NATURE OF THE W ORK UNDERTAKEN BY THE ASSESSEE. EACH OF THE WORK UNDERTAKEN HAS TO BE ANA LYZED AND A CONCLUSION HAS TO BE DRAWN ABOUT THE NATURE OF THE WORK UNDERT AKEN BY THE ASSESSEE. THE AGREEMENT ENTERED INTO WITH THE GOVERNMENT OR THE G OVERNMENT BODY MAY BE A MERE WORKS CONTRACT OR FOR DEVELOPMENT OF INFRAST RUCTURE. IT IS TO BE SEEN FROM THE AGREEMENTS ENTERED INTO BY THE ASSESSEE WI TH THE GOVERNMENT. THE GOVERNMENT HANDED OVER THE POSSESSION OF THE PREMIS ES OF PROJECTS TO THE ASSESSEE FOR THE DEVELOPMENT OF INFRASTRUCTURE FACI LITY. IT IS THE ASSESSEE'S RESPONSIBILITY TO DO ALL ACTS TILL THE POSSESSION O F PROPERTY IS HANDED OVER TO THE GOVERNMENT. THE FIRST PHASE IS TO TAKE OVER THE EXISTING PREMISES OF THE PROJECTS AND THEREAFTER DEVELOPING THE SAME INTO IN FRASTRUCTURE FACILITY. SECONDLY THE ASSESSEE SHALL FACILITATE THE PEOPLE TO USE THE AVAILABLE EXISTING FACILITY EVEN WHILE THE PROCESS OF DEVELOPMENT IS I N PROGRESS. ANY LOSS TO THE PUBLIC CAUSED IN THE PROCESS WOULD BE THE RESPONSIB ILITY OF THE ASSESSEE. THE ASSESSEE HAS TO DEVELOP THE INFRASTRUCTURE FACILITY . IN THE PROCESS ALL THE WORKS ARE TO BE EXECUTED BY THE ASSESSEE. IT MAY BE LAYIN G 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 H INDRANCE THE ASSESSEE'S DUTY IS TO DEVELOP INFRASTRUCTURE WHETHER IT INVOLVES CO NSTRUCTION OF A PARTICULAR ITEM AS AGREED TO IN THE AGREEMENT OR NOT. THE AGRE EMENT 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 IN BY THE ASSESSEE BY STICKING TO THE QU ALITY AND QUANTITY IRRESPECTIVE OF THE COST OF SUCH MATERIAL. THE GOVE RNMENT DOES NOT PROVIDE ANY MATERIAL TO THE ASSESSEE. IT PROVIDES THE WORKS IN PACKAGES AND NOT AS A I.T.A. NOS. 285 286 287 & 288/KOL./2014 ASSESSMENT YEARS: 2008-2009 TO 2010-11 & 2007-2008 PAGE 13 OF 18 WORKS CONTRACT. THE ASSESSEE UTILIZES ITS FUNDS IT S EXPERTISE ITS EMPLOYEES AND TAKES THE RESPONSIBILITY OF DEVELOPING THE INFRASTR UCTURE FACILITY. THE LOSSES SUFFERED EITHER BY THE GOVT. OR THE PEOPLE IN THE P ROCESS OF SUCH DEVELOPMENT WOULD BE THAT OF THE ASSESSEE. THE ASSESSEE HANDS O VER THE DEVELOPED INFRASTRUCTURE FACILITY TO THE GOVERNMENT ON COMPLE TION OF THE DEVELOPMENT. THEREAFTER THE ASSESSEE HAS TO UNDERTAKE MAINTENAN CE OF THE SAID INFRASTRUCTURE FOR A PERIOD OF 12 TO 24 MONTHS. DUR ING THIS PERIOD IF ANY DAMAGES ARE OCCURRED IT SHALL BE THE RESPONSIBILITY OF THE ASSESSEE. FURTHER DURING THIS PERIOD THE ENTIRE INFRASTRUCTURE SHALL HAVE TO BE MAINTAINED BY THE ASSESSEE ALONE WITHOUT HINDRANCE TO THE REGULAR TRA FFIC. THEREFORE IT IS CLEAR THAT FROM AN UN-DEVELOPED AREA INFRASTRUCTURE IS D EVELOPED AND HANDED OVER TO THE GOVERNMENT AND AS EXPLAINED BY THE CBDT VIDE ITS CIRCULAR DATED 18- 05-2010 SUCH ACTIVITY IS ELIGIBLE FOR DEDUCTION UN DER SECTION 80IA (4) OF THE ACT. THIS CANNOT BE CONSIDERED AS A MERE WORKS CONT RACT BUT HAS TO BE CONSIDERED AS A DEVELOPMENT OF INFRASTRUCTURE FACIL ITY. THEREFORE THE ASSESSEE IS A DEVELOPER AND NOT A WORKS CONTRACTOR AS PRESUM ED BY THE REVENUE. THE DEPARTMENT IS NOT CORRECT IN HOLDING THAT THE ASSES SEE IS A MERE CONTRACTOR OF THE WORK AND NOT A DEVELOPER. 8.3 IT WAS ALSO OBSERVED THAT 'THE EXPLANATORY MEMORAND UM TO FINANCE ACT 2007 STATES THAT THE PURPOSE OF THE TAX BENEFIT HAS ALL ALONG B EEN TO ENCOURAGE INVESTMENT IN DEVELOPMENT OF INFRASTRUCTURE SECTOR AND NOT FOR TH E PERSONS WHO MERELY EXECUTE THE CIVIL CONSTRUCTION WORK. IT CATEGORICALLY STATES TH AT THE DEDUCTION UNDER SECTION 80IA OF THE ACT IS AVAILABLE TO DEVELOPERS WHO UNDERTAKE S ENTREPRENEURIAL AND INVESTMENT RISK AND NOT FOR THE CONTRACTORS WHO UNDERTAKES ON LY BUSINESS RISK. 13. IN THIS DECISION IT WAS FURTHER OBSERVED THAT: SIMILARLY THE CHENNAI BENCH OF TRIBUNAL IN CASE OF R.R. CONSTRUCTIONS CHENNAI VS DEPARTMENT OF INCOME TAX 2013) 35 CCH 05 47 CHEN TRIB (2015) 152 ITD 0625 (CHENNAI) HELD THAT 'WHEN THE ASSESSEE MAKES INVESTMENT AND HIMSELF EXECUTES DEVELOPMENT WORK AND CARRIES OUT C IVIL WORKS HE IS ELIGIBLE FOR TAX BENEFIT U/S 80IA OF THE ACT. ACCORDINGLY W ITH THE FOREGOING DISCUSSION WE HOLD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IA(4) OF THE ACT AND THEREFORE WE ORDER TO DELETE THE ADDITION MADE IN THIS RESPECT' THUS THE MEMORANDUM EXPLAINING THE PROVISIONS IN T HE FINANCE BILL 2007 FURTHER STRENGTHENS THE CONTENTION OF THE ASSESSEE THAT A W ORKS CONTRACT IS A CONTRACT WHICH INVOLVES MERE LABOUR OF THE CONTRACTOR. HOWEVER IF UNDER A CONTRACT THE CONTRACTOR EMPLOYS HIS CAPITAL AND ENTERPRISE IN ADDITION TO L ABOUR THEN THE SAID CONTRACT DOES NOT CONSTITUTE A WORKS CONTRACT UNDER THE EXPLANATI ON TO SECTION 80-IA(L3) AND THE CONTRACTOR SHALL BE ELIGIBLE FOR DEDUCTION U/S 80-I A. NOW COMING TO THE FACTS OF THE CASE IT IS SUBMITTED THAT THE ASSESSEE WAS NOT MER E WORKS CONTRACTOR WHO HAD MERELY EMPLOYED ITS LABOUR UNDER THE PROJECTS FROM THE VARIOUS GOVERNMENT AUTHORITIES. THE ASSESSEE WAS A DEVELOPER. IN ADDIT ION TO EMPLOYING LABOUR IT MADE INVESTMENTS IT DEVELOPED AN ENTERPRISE/INFRASTRUCT URE TO SUPPORT THE WORK UNDER THE VARIOUS PROJECTS. IN ADDITION TO LABOUR IT DEPLOYE D ITS MACHINERY MATERIALS AND DID I.T.A. NOS. 285 286 287 & 288/KOL./2014 ASSESSMENT YEARS: 2008-2009 TO 2010-11 & 2007-2008 PAGE 14 OF 18 ALL THE THINGS NECESSARY (I.E. PROVIDED AN ENTERPRI SE) TO SUPPORT THE CONSTRUCTION WORK UNDERTAKEN UNDER THE VARIOUS PROJECTS. THE ASSESSEE WAS PROVIDED WITH THE SITE ALONE AND BY PUTTING ITS OWN INPUTS (NOT LABOUR ALONE) HE CONVERTED THE SITE INTO AN INFRASTRUCTURAL FACILITY. 14. TESTING ON THE ABOVE OBSERVATIONS WE SAFELY REA CH A CONCLUSION THAT THE ASSESSEE IS ONLY A DEVELOPER OF AN INFRASTRUCTURAL FACILITY BUT NOT A MERE WORKS CONTRACTOR. AT THIS STAGE IT IS RELEVAN T TO REFER TO A DECISION OF T HE BOMBAY HIGH COURT AND A COORDINATE BENCH OF CUTT ACK TRIBUNAL. IN COMMISSIONER OF INCOME-TAX V. ABG HEAVY INDUSTRIES LI MITED [322 ITR 323] THE BOMBAY HIGH COURT HELD THAT PLAINLY RIGHT FROM 1996 CBDT WAS SEIZED WITH THE Q UESTION AS TO WHETHER INFRASTRUCTURE FACILITIES DEVELOPED UNDER A BOLT PROJECT WOULD QUA LIFY FOR EXEMPTION UNDER S. 80-IA OF THE ACT. THE FIRST CIRCULAR IN THAT REGARD THAT WAS ISS UED ON 3RD JAN. 1996 SPECIFICALLY DEALT WITH WHETHER S. 80-IA(4A) OF THE ACT WOULD BE APPLICABLE TO A BOLT SCHEME INVOLVING AN INFRASTRUCTURE FACILITY FOR THE INDIAN RAILWAYS. TH E CIRCULAR CLARIFIED THAT AN INFRASTRUCTURE FACILITY SET UP ON A BOLT BASIS FOR RAILWAYS WOULD QUALIFY FOR A DEDUCTION. THAT WAS FOLLOWED BY THE TWO CIRCULARS OF THE BOARD DT. 23RD JUNE 20 00 AND 16TH DEC. 2005. THE FIRST OF THOSE CIRCULARS RECOGNIZES THAT STRUCTURES FOR STORAGE L OADING AND UNLOADING ETC. AT A PORT BUILT UNDER A BOT AND BOLT SCHEME WOULD QUALIFY FOR A DED UCTION. NOW THERE IS NO QUESTION OF AN ENTERPRISE OPERATING A FACILITY IN A BOLT SCHEME BE CAUSE SUCH A SCHEME CONTEMPLATES THAT THE ENTERPRISE WOULD BUILD OWN LEASE AND EVENTUAL LY TRANSFER THE FACILITY TO THE AUTHORITY FOR WHOM THE FACILITY IS CONSTRUCTED. THE SUBSEQUENT CI RCULAR DT. 16TH DEC. 2005 ONCE AGAIN CLARIFIED THE POSITION OF CBDT THAT STRUCTURES WHIC H HAVE BEEN BUILT INTER ALIA UNDER A BOLT SCHEME UPTO ASST. YR. 2001-02 WOULD QUALIFY FOR A D EDUCTION UNDER S. 80-IA OF THE ACT. IN FACT FROM ASST. YR. 2002-03 THE PROCESS WAS FURTHER LIB ERALIZED CONSISTENT WITH THE BASIC PURPOSE AND OBJECT OF GRANTING THE CONCESSION. IN THIS BACK GROUND PARTICULARLY IN THE CONTEXT OF THE OBJECTIVE SOUGHT TO BE ACHIEVED AND IN THE ABSENCE OF ANY CHALLENGE ON THE PART OF THE REVENUE ON THE APPLICABILITY OF THE BINDING CIRCULA RS OF CBDT WE ARE OF THE VIEW THAT THE CONDITION AS REGARDS DEVELOPMENT OPERATION AND MAI NTENANCE OF AN INFRASTRUCTURE FACILITY WAS CONTEMPORANEOUSLY CONSTRUED BY THE AUTHORITIES AT ALL MATERIAL TIMES TO COVER WITHIN ITS PURVIEW THE DEVELOPMENT OF AN INFRASTRUCTURE FACILI TY UNDER A SCHEME BY WHICH AN ENTERPRISE WOULD BUILD OWN LEASE AND EVENTUALLY TRANSFER THE FACILITY. THIS WAS PERHAPS A PRACTICAL REALISATION OF THE FACT A DEVELOPER MAY NOT POSSESS THE WHEREWITHAL EXPERTISE OR RESOURCES TO OPERATE A FACILITY ONCE CONSTRUCTED. PARLIAMENT EV ENTUALLY STEPPED IN TO CLARIFY THAT IT WAS NOT INVARIABLY NECESSARY FOR A DEVELOPER TO OPERATE AND MAINTAIN THE FACILITY. PARLIAMENT WHEN IT AMENDED THE LAW WAS OBVIOUSLY AWARE OF THE ADMINISTRATIVE PRACTICE RESULTING IN THE CIRCULARS OF CBDT. THE FACT THAT IN SUCH A SCHEME AN ENTERPRISE WOULD NOT OPERATE THE FACILITY ITSELF WAS NOT REGARDED AS BEING A STATUTORY BAR TO THE ENTITLEMENT TO A DEDUCTION UNDER S. 80-IA OF THE ACT. THE COURT CANNOT BE UNMINDFUL IN THE PRESENT CASE OF THE UNDERLYING OBJECTS AND REASONS FOR A GRANT OF DEDUCTION TO AN ENTERPRI SE ENGAGED IN THE DEVELOPMENT OF AN I.T.A. NOS. 285 286 287 & 288/KOL./2014 ASSESSMENT YEARS: 2008-2009 TO 2010-11 & 2007-2008 PAGE 15 OF 18 INFRASTRUCTURE FACILITY. THE PROVISION WAS INTENDED TO GIVE AN INCENTIVE TO INVESTMENT FOR INFRASTRUCTURAL GROWTH IN THE COUNTRY. 15. IN ARSS INFRASTRUCTURE PROJECTS LD. VS. ASSTT. COMMISSIONER OF INCOME-TAX ITA NOS. 142 & 143/CTK/2010 AND ITA NOS. 483 & 484 /CTK/2011 THE CUTTTACK BENCH OF THIS TRIBUNAL HELD AS FOLLOWS: NOW COMING TO THE MERITS OF THE DEDUCTION U/S. 80IA (4) OF THE ACT. A PERUSAL OF THE PROVISIONS OF SECTION 80IA(4) OF THE ACT SHOWS THAT IN THE EXPLANATION 'INFRASTR UCTURE FACILITY' HAS BEEN SPECIFIED TO MEAN A ROAD INCLUDI NG A TOLL ROAD A BRIDGE OR A RAIL SYSTEM. ADMITTEDLY THE ASSESSEE IS DOING THE BUSIN ESS OF DEVELOPMENT OF RAILWAY TRACKS AND BRIDGES THEREOF AS ALSO ROADS. IF WE AR E TO ACCEPT THE CONTENTION OF THE LD. CIT THAT THE PROVISIONS OF SECTION 80IA(4) OF THE ACT AFTER THE SUBSTITUTION OF THE EXPLANATION TO SECTION 80IA OF THE ACT WAS INTRODUCED WAS ONLY FOR THE PURPOSE OF GIVING THE BENEFIT TO BOT CONTRACTS THEN THE EXPLA NATION TO SECTION 80IA(4) OF THE ACT BECOMES OTIOSE. THIS IS AS EXPLANATION TO SECTION 80IA(4) OF THE ACT SPECIFICALLY PROVIDES FOR THE ROAD TO INCLUDE A TOLL ROAD A BRI DGE OR A RAIL SYSTEM. BOT CONTRACT IN RESPECT OF THE RAILWAY SYSTEM CAN NEVER EXIST. FURT HER A PERUSAL OF THE PROVISIONS OF SECTION 80IA OF THE ACT SHOWS THAT THE TERM 'WORKS CONTRACT' IS NOT DEFINED IN THE SAID SECTION. HOWEVER THE TERMS 'WORKS' AND 'CONTRACT' IS DEFINED IN THE PROVISIONS OF SECTION 194C OF THE ACT. IF A PARTICULAR WORD OR TERM IS NOT DE FINED IN THE SPECIFIC SECTION THEN ONE COULD GO TO OTHER SECTIONS IN THE SAID ACT WHERE THE DEFINITION WOULD BE AVAILABLE TO DRAW A MEANING TO THE SAID TERMS. I N THE PROVISIONS OF SECTION 194C OF THE ACT WORK HAS BEEN GIVEN AN INCLUSIVE DEFINITIO N BUT IN THE SUBSEQUENT PORTION IT HAS EXCLUDED THE MANUFACTURING OR SUPPLYING A PRODU CT ACCORDING TO REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCH ASED FROM A PERSON OTHER THAN SUCH CUSTOMER. AS HAS BEEN SPECIFIED BY THE LD. AR THE ASSESSEE IS DOING CONTRACT WORK BUT THAT WORK IS ACCORDING TO THE REQUIREMENT AND SPECIFICATION OF THE CUSTOMER AND THE SAME HAS BEEN DONE BY USING MATERIALS PURCH ASE FROM THIRD PARTIES OTHER THAN THE CUSTOMERS. THUS THOUGH THE ASSESSEE IS DOING A WORKS CONTRACT THE SAME WOULD NOT FALL WITHIN THE MEANING OF THE WORD 'WORKS CONT RACT' FOR THE PURPOSE OF THE ACT DUE TO THE EXCLUSION PROVIDED IN THE MEANING OF 'WORK' IN SECTION 194C OF THE ACT. THE ISSUE RAISED BY THE LD. CIT THAT THE ASSESSEE IS NO T DOING THE DEVELOPMENT WORK BUT IS ONLY DOING THE CONTRACT ALSO DOES NOT STAND TO TEST AS THE ASSESSEE ADMITTEDLY IS DEVELOPING THE ROADS AND RAILWAY LINES AND THE BRID GES THEREOF. DEVELOPMENT ENCOMPASSES WITHIN ITSELF CONTRACT WORK. THE AGREEM ENT BETWEEN THE ASSESSEE AND THE CUSTOMER BEING THE GOVERNMENT IS FOR THE DEVELOPMEN T OF THE INFRASTRUCTURE FACILITY BEING ROADS AND RAIL SYSTEMS AND BRIDGES BY PARTICI PATING IN THE TENDERS. 16. ON THE ASPECT OF THE ASSESSING OFFICERS REASON ING FOR THE NON-ENTITLEMENT OF THE ASSESSEE TO CLAIM DEDUCTION UNDER SECTION 80-IA OF THE ACT WHEN THE GOVERNMENT HAS MADE PAYMENT TO THE ASSESSEE IN RESPECT OF THE PROJECT OF INFRASTRUCTURE DEVELOPMENT UNDERTAKEN BY IT IN TERMS OF RESPECTIVE AGREEMENT E NTERED INTO WITH GOVERNMENT SIMILAR QUESTION I.T.A. NOS. 285 286 287 & 288/KOL./2014 ASSESSMENT YEARS: 2008-2009 TO 2010-11 & 2007-2008 PAGE 16 OF 18 WAS CONSIDERED BY THE INDORE BENCH OF THE TRIBUNAL IN CASE OF SANEE INFR ASTRUCTURE PVT. LTD. VS. ACIT [138 ITD 433] HELD THAT AS PER OUR CONSIDERED VIEW AFTER AMENDMENT BY THE FINANCE ACT 2002 FOR CLAIM OF DEDUCTION U/S 80IA(4) INFRASTRUCTURE FACILITY IS ON LY REQUIRED TO BE DEVELOPED AND THERE IS NO CONDITION THAT ASSESSEE SHOULD ALSO OPERATE THE SAM E. THUS AFTER AMENDMENT WHEN THE ASSESSEE IS NOT REQUIRED TO OPERATE THE FACILITY T HE PAYMENT FOR DEVELOPMENT OF SUCH INFRASTRUCTURE IS REQUIRED TO BE MADE BY THE GOVERN MENT ONLY. HOWEVER AS PER PRE-AMENDED LAW WHEN THE ASSESSEE WAS NOT ONLY REQUIRED TO DEVE LOP BUT ALSO REQUIRED TO OPERATE AND MAINTAIN THE INFRASTRUCTURE FACILITY THERE WAS COL LECTION OF REVENUE THROUGH TOLL TAX BY WHICH ASSESSEE COULD HAVE RECOVERED NOT ONLY ITS COST PAR T BUT ALSO PROFIT THEREON. AFTER AMENDMENT WHEN ASSESSEE UNDERTAKES TO DEVELOP THE INFRASTRUCTURE FACILITY ONLY IT IS THE GOVERNMENT WHO WILL MAKE PAYMENT TO ASSESSEE IN RES PECT OF INFRASTRUCTURE FACILITY DEVELOPED BY IT IN TERMS OF AGREEMENT SO ENTERED WI TH GOVERNMENT. THUS WE DO NOT FIND ANY INFRINGEMENT OF CONDITIONS FOR CLAIM OF DEDUCTION U /S 80IA(4) WHEN THE GOVERNMENT HAS MADE PAYMENT TO THE ASSESSEE IN RESPECT OF THE PROJ ECT OF INFRASTRUCTURE DEVELOPMENT UNDERTAKEN BY IT IN TERMS OF RESPECTIVE AGREEMENT E NTERED INTO WITH GOVERNMENT. IT IS PERTINENT TO MENTION HERE THAT FOR CLAIM OF DEDUCTI ON THE INFRASTRUCTURE PROJECT SHOULD BE COMPLETELY DEVELOPED BY THE ASSESSEE AND NOT PART O F IT. 17. THE STREAM OF JUDICIAL REASONING REFERRED TO AB OVE MAKES IT CLEAR THAT THE FACT THAT THE ASSESSEE HAD RECEIVED PAYMENTS FROM THE GO VERNMENT IN PROGRESS OF ITS WORK HAS NO BEARING ON ELIGIBILITY OF DEDUCTION U/S 80- IA. IT ALSO NEGATES THE CONTENTION OF THE REVENUE THAT THE CONTRACTS ENTERE D INTO BY THE ASSESSEE WERE MERELY 'CONSTRUCTION CONTRACTS' SINCE THE ASSESSEE IS NOT EXPOSED TO ANY ENTREPRENEURIAL AND INVESTMENT RISK. THE GENERAL CO NDITIONS REFERRED SUPRA MAKES IT CLEAR THAT THE ASSESSEE WAS RESPONSIBLE FOR OVERALL DEVELOPMENT OF THE INFRASTRUCTURE FACILITY AND THE GOVERNMENT WAS MERELY PROVIDED WIT H THE SITE WHICH IT HAD TO DEVELOP INTO AN INFRASTRUCTURAL FACILITY BY DEPLOYI NG HIS RESOURCES I.E. MATERIAL PLANT & MACHINERY LABOUR SUPERVISORS ETC. ASSESSEE ALON E WAS RESPONSIBLE FOR ANY DAMAGE/LOSS CAUSED TO ANY PROPERTY OR LIFE IN COURS E OF EXECUTION OF THE WORKS. ASSESSEE WAS EVEN RESPONSIBLE FOR REMEDYING OF THE DEFECTS IN THE WORKS AT ITS COST AND THEY ARE ALSO REQUIRED TO OPERATE AND MAINTAIN THE INFRASTRUCTURE FACILITY. THE ASSESSEES DEPLOYMENT OF RESOURCES (MEN MONEY MAT ERIAL MACHINERY ETC) IN THE I.T.A. NOS. 285 286 287 & 288/KOL./2014 ASSESSMENT YEARS: 2008-2009 TO 2010-11 & 2007-2008 PAGE 17 OF 18 CONSTRUCTION WORK CLEARLY EXHIBITS THE RISKS UNDERT AKEN BY THE ASSESSEE. FURTHER THE ASSESSEE VIDE THE AGREEMENTS HAS CLEARLY DEMONSTRAT ED THE VARIOUS RISKS UNDERTAKEN BY IT. THE ASSESSEE WAS BOUND TO FURNISH A SECURITY DEPOSIT TO THE EMPLOYER AND INDEMNIFY THE EMPLOYER OF ANY LOSSES/DAMAGE CAUSED TO ANY PROPERTY/LIFE IN COURSE OF EXECUTION OF WORKS. APART FROM THIS THE ASSESSE E WAS RESPONSIBLE FOR THE CORRECTION OF DEFECTS ARISING IN THE WORKS AT IT CO ST. IN THESE CIRCUMSTANCES IT CANNOT BE SAID THAT THE ASSESSEE HAD NOT UNDERTAKEN ANY RI SK. HENCE IT CANNOT BE SAID THAT THE CONTRACT WITH THE GOVERNMENT WAS TO CARRY OUT M ERE CIVIL CONSTRUCTION. 18. A PERUSAL OF THE TERMS AND CONDITIONS OF WORK IN THE LIGHT OF THE JUDICIAL INTERPRETATION OF DIFFERENT FACTS OF ENTREPRENEURIA L WORK INVOLVED IN THE PROJECT IT IS CLEAR THAT THE ASSESSEE WAS NOT A WORKS CONTRACTOR SIMPLICITOR AND WAS A DEVELOPER FULFILLING ALL THE CONDITIONS REQUIRED UNDER SECTIO N 80-IA OF THE ACT TO ENTITLE THEMSELVES FOR THE DEDUCTIONS THEREUNDER. EXPLANATI ON TO SECTION 80- IA(13) HAS TO APPLICATION TO THE CASE OF ASSESSEE. THE IRRESISTI BLE CONCLUSION THAT FLOWS FROM THE ABOVE IS THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTIO N U/S 80-1A OF THE ACT. HAVING TAKEN THIS VIEW WE DO NOT PROPOSE TO INTERFERE IN THE OR DER OF LD. CIT(A). GROUNDS OF APPEAL OF THE REVENUE ARE THEREFORE DISMISSED. 19. IN THE RESULT REVENUES APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07/10/2016 . SD/ - (WASEEM AHMED) S D/ - (NARASIMHA CHARY) #!$ / ACCOUNTANT MEMBER !$ / JUDICIAL MEMBER /KOLKATA ; $% DATED 07/10/2016 & ()* /PRAKASH MISHRA . / PS I.T.A. NOS. 285 286 287 & 288/KOL./2014 ASSESSMENT YEARS: 2008-2009 TO 2010-11 & 2007-2008 PAGE 18 OF 18 ! %&' ( ' / COPY OF THE ORDER FORWARDED TO : ! / BY ORDER / ( ASSTT. REGISTRAR) / ITAT 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 4 ( ) / THE CIT(A) KOLKATA. 4. 4 / CIT 5. 56 7 8 8# / DR ITAT KOLKATA 6. 7 9 / GUARD FILE. 5 //TRUE COPY//