The ITO, Ward-1(1),, RAJKOT-GUJARAT v. M/s. BBEL - STPL JV - Backbone Enterprise,, RAJKOT-GUJARAT

ITA 507/RJT/2012 | 2009-2010
Pronouncement Date: 28-10-2016 | Result: Dismissed

Appeal Details

RSA Number 50724914 RSA 2012
Assessee PAN AAAAB7752M
Bench Rajkot
Appeal Number ITA 507/RJT/2012
Duration Of Justice 4 year(s) 1 month(s) 23 day(s)
Appellant The ITO, Ward-1(1),, RAJKOT-GUJARAT
Respondent M/s. BBEL - STPL JV - Backbone Enterprise,, RAJKOT-GUJARAT
Appeal Type Income Tax Appeal
Pronouncement Date 28-10-2016
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 28-10-2016
Date Of Final Hearing 06-10-2016
Next Hearing Date 06-10-2016
Assessment Year 2009-2010
Appeal Filed On 05-09-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH RAJKOT BEFORE: SHRI S.S. GODARA JUDICIAL MEMBER AND S H RI AMARJIT SINGH ACCOUNTANT MEMBER [CONDUCTED THROUGH E - COURT AT AHMEDABAD] THE ITO WARD 1(1) RAJKOT (APPELLANT) VS M/S. BBEL STPL JV BACKBONE ENTERPRISE M - 43 BACKBONE HOUSE KALAVAD ROAD RAJKOT PAN: AAAAB775 2M (RESPONDENT) REVENUE BY : S H RI ARVIND N. SONTAKKE D . R. ASSESSEE BY: S H RI D.M. RINDANI A.R. DATE OF HEARING : 06 - 10 - 2 016 DATE OF PRONOUNCEMENT : 28 - 10 - 2 016 / ORDER P ER : AMARJIT SINGH ACCOUNTANT MEMBER : - THI S REVENUE S APPEAL FOR A.Y. 2009 - 10 AR ISES FROM ORDER OF THE CIT(A) - I RAJKOT DATED 29 - 06 - 2012 IN APPEAL NO. CIT(A) - I / RJT/172/11 - 12 IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT 19 61; IN SHORT THE ACT . I T A NO .507 / RJT /20 12 A SSESSMENT YEAR 200 9 - 10 I.T.A NO. 50 7/RJT /20 12 A.Y. 2009 - 10 PAGE NO ITO VS. M/S. BB EL STPL - JV 2 2. THE ASSES SEE HAS RAISED FOLLOWING GROUND OF APPEAL: - 1. THE LEARNED CIT(A) - I RAJKOT ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF RS. 49 46 122/ - MADE ON ACCOUNT OF DISALLOWANCE OF DEDUCTION U/S. 80IA(4) OF THE I.T. ACT. 3. IN THIS CASE ASSESSEE HAS FILED RETURN OF INCOME DECLARING TOTAL INCOME AT RS. NIL ON 23 RD SEP 2009. ASSESSEE IS ENGAGED IN THE BUSINESS ACTIVITIES OF EXECUTING CIVIL CONTRACT AND DOING CIVIL CONSTRUCTION. DURING THE COURSE OF ASSESSMENT PROCEED INGS THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS CLAIMED DEDUCTION OF RS. 49 46 123/ - UNDER THE PROVISION OF SECTION 80 - IA( 4 ) AGAINST ITS WORK CONTRACT INCOME WHICH THE ASSESSING OFFICER SAID IS NOT IN ACCORDANCE WITH LAW. THE ASSESSING OFFICER ISSUE D SHOW CAUSE NOTICE TO THE ASSESSEE THAT WHY THE AFORESAID DEDUCTION SHOULD NOT BE DISALLOWED. IN THIS CONNECTION THE ASSESSEE HAS REPLIED TO THE SHOW CAUSE NOTICE WHICH IS REPRODUCED AS UNDER: - 4. IN RESPONSE THE ASSESSEE VIDE REPLY DATED 14 - 11 - 2011 S TATED AS UNDER: - 'WITH REFERENCE TO THE ABOVE UNDER INSTRUCTION AND ON BEHALF OF OUR ABOVE NAMED CLIENT WE SUBMIT THE FOLLOWING FOR YOUR HONOUR'S KIND AND SYMPATHETIC CONSIDERATION: 1.0 THE APPLICANT IS ASSESSED UNDER THE NAME AND STYLE OF BBEL STPL (JV) RAJKOT. THE APPLICANT IS DOING THE INFRASTRUCTURE WORK ASSIGNED BY THE GOVERNMENT NATIONAL AIRPORT AUTHORITY FOR CONSTRUCTING AIRPORT RUNWAYS ETC. HOWEVER YOUR HONOUR INTENDS TO WITHDRAW THE CLAIM OF DEDUCTION U/S.80IA(4) OF THE IT ACT AMOUNTING TO RS. 49 46 122/ - IN VIEW OF THE LATEST AMENDMENT IN THE EXPLANATION 13 OF SECTION 80/A(4). 2.2 IN THIS CONTEXT IT IS TO BE STATED THAT THE APPLICANT IS VERY MUCH ENTITLED TO ITS CLAIM FOR DEDUCTION ON THE PREMISES THAT IT WAS NOT ONLY HIT BY THE NEWLY INSERTE D EXPLANATION TO SEC. 80IA BUT IT ALSO SATISFIED I.T.A NO. 50 7/RJT /20 12 A.Y. 2009 - 10 PAGE NO ITO VS. M/S. BB EL STPL - JV 3 THE ELIGIBILITY CONDITIONS OF SUB SECTION (4) THEREOF WHICH IS SUMMARIZED AS UNDER: (I) IT IS THE PRIMARY CONTENTION OF THE ASSESSING OFFICER THAT THE APPLICANT BEING ENGAGED ONLY AS A WORKS CONTRACTOR UNDE R CONTRACTS AWARDED TO IT BY STATE GOVERNMENT IT HAS CARRIED ONLY WORKS CONTRACT AND HENCE IT WAS COVERED BY THE NEWLY INSERTED EXPLANATION WHICH DISENTITLED IT FROM THE DEDUCTION UNDER SUB SECTION (4) HOWEVER CONSIDERING THE NATURE OF THE BUSINESS OF T HE APPLICANT IN PROPER PERSPECTIVE THE CONTENTION OF THE ASSESSING OFFICER DESERVES TO BE SET ASIDE. THE B USINESS CARRIED ON BY THE APPLICANT HAS MANY ELEMENTS OF THE NATURE OF DEVELOPING OF NEW INFRASTRUCTURE FACILITY IN VIEW OF THE FACTS ON RECORD WHICH ARE UNCONTROVERTED AND MORE SO WHEN SAME KIND OF NATURE OF BUSINESS WAS CARRIED ON BY THE ASSESSEE IN EARLIER YEAS WHEREIN SIMILAR DEDUCTION HAS BEEN ALLOWED AFTER DUE CONSIDERATION AND/OR IN APPELLATE PROCEEDINGS. (II) THE EXPLANATION DOES NOT IN ANY WAY CREATE AN ARTIFICIAL FICTION ABOUT THE NATURE OF BUSINESS OF THE UNDERTAKING BUT IT ONLY STATED THAT NO DEDUCTION SHALL BE ADMISSIBLE IN THE CASE WHERE AN APPLICANT CARRIED ON BUSINESS IN THE NATURE OF A WORKS CONTRACT. THIS CLEARLY MEANS THAT IF THE NATU RE OF BUSINESS IS NOT JUST A WORKS CONTRACT BUT SOMETHING MORE THE APPLICANT CANNOT BE HIT BY THE RIGOURS OF THE EXPLANATION. AS FAR AS THE APPLICANT AND ITS FACTS ON RECORD OF REVENUE ARE CONCERNED THE NATURE OF BUSINESS CARRIED ON BY IT' ALBEIT UNDER A CONTRACT WITH THE STATE GOVERNMENT IS NOT JUST OF A WORK CONTRACT BUT IT ALSO HAS MANY SHADES COLOURS HUES AND TRAPPINGS OF DEVELOPING OF NEW INFRASTRUCTURE FACILITY AND FOR THIS REASON ITSELF THE DEDUCTION CANNOT BE DENIED TO THE APPLICANT THIS YEAR NOTWITHSTANDING THE INSERTION OF THE EXPLANATION. (III ) THAT THE APPLICANT ALSO CARRIED ON ACTIVITIES BY WAY OF DEVELOPING OF INFRASTRUCTURE FACILITY IS ALSO PATENT FROM ITS FINANCIAL STATEMENTS. THE ASSESSEE HAS MADE HUGE INVESTMENTS OF OWN AS WELL AS B ORROWED FUNDS AND HAS INVESTED THE SAME IN ALL KINDS OF RESOURCES FOR ITS BUSINESS NAMELY PLANT AND MACHINERIES STRUCTURES AT SITES WORKING CAPITAL HUMAN RESOURCES TECHNICAL EXPERTISE ETC. THE APPLICANT POSSESSES ITS OWN TECHNICAL KNOWLEDGE OF HOW TO DEVELOP AND LAY ROADS DAMS BRIDGES ETC. AND IT HAS ITS OWN TECHNICAL AS WELL AS MANAGERIAL POOL OF MANPOWER FOR THE SAME. PROOFS REGARDING TECHNICAL AND FINANCIAL CAPACITY OF THE CONTRACTOR ARE REQUIRED TO BE FURNISHED TO THE GOVERNMENT. IN SOME CASES E VEN THE DESIGN OF THE INFRASTRUCTURE PROJECT IS FIRST PREPARED BY THE APPLICANT AND THEN SUBMITTED TO THE GOVERNMENT. THE APPLICANT HAS PURCHASED AND I.T.A NO. 50 7/RJT /20 12 A.Y. 2009 - 10 PAGE NO ITO VS. M/S. BB EL STPL - JV 4 EMPLOYED ITS OWN MATERIALS FOR DEVELOPMENT AND CONSTRUCTION OF THE INFRASTRUCTURE FACILITY. SUB LETTING IS A L SO NOT PERMITTED. ALTHOUGH IT WAS REQUIRED TO ACT UNDER A CONTRACT IT HAS DONE SO AS IT IS REQUIRED TO HONOUR A CONTRACTUAL OBLIGATION WITH THE GOVERNMENT BUT AT THE SAME TIME NEITHER THE CONTRACT NOR THE GOVERNMENT IMPARTED THE TECHNICAL KNOW HOW OR RESOURCES TO THE ASSESSEE AS ALL THESE FACTORS OF BUSINESS DEVELOPMENT HAVE BEEN FACTUALLY IMPARTED AND LOOKED AFTER BY THE APPLICANT ITSELF UNDER ITS OWN ACUMEN AS AN ENTREPRENEUR. THE ENTIRE PLANNING OF ITS BUSINESS AS A L SO THE WORK HAS BEEN DONE BY TH E APPLICANT AND NOT BY THE GOVERNMENT. THE SPECIFICATIONS OF THE WORK MAY HAVE BEEN PRESCRIBED IN THE CONTRACT IN ADVANCE BUT HOWEVER BUILDING OF INFRASTRUCTURE FACILITIES REQUIRES THE APPLICANT ITSELF TO POSSESS TECHNICAL AND ENGINEERING KNOW HOW AS TO H OW TO LAY ROADS ETC. THE APPLICANT ALSO PURCHASED MANY MATERIALS OF CONSTRUCTION WHICH WENT INTO THE INFRASTRUCTURE BUILT BY IT. I F THE PERSON AWARDING THE CONTRACTS AND ENTERING INTO OF CONTRACTS IS REQUIRED BY THE SECTION ITSELF LAYS DOWN CERTAIN COND ITIONS AND SPECIFICATIONS IN THE CONTRACT AS THE PRINCIPAL THE EXISTENCE OF PRE DECIDED CONTRACTUAL SPECIFICATIONS CANNOT BE HELD AS A FACTOR AGAINST THE ASSESSEE BECOMING A DEVELOPER. ACCORDING TO THE AR A/I THESE ASPECTS PUT TOGETHER CLEARLY SHOW THAT THE APPLICANT WAS (IV) THE HON'BLE SUPREME COURT IN THE CASE OF GUJARAT INDUSTRIAL DEVELOPMENT CORPORATION AND OTHERS - 227 ITR 414 HAS CONSIDERED THE MEANING OF 'DEVELOPER' AND HAS HELD THAT THE WORD 'DEVELOPMENT' SHOULD BE UNDERSTOOD IN ITS WIDER SENSE A ND THAT DEVELOPMENT MEANS THE REALIZATION OF POTENTIALITY OF LAND OR TERRITORY BY BUILDING OR MINING. YOUR HONOUR KIND ATTENTION IS ALSO INVITED TO THE DECISION OF THE AHMEDABAD TRIBUNAL IN THE CASE OF RADHE DEVELOPERS AND OTHERS VS. ITO 113 TTJ 300 WHEREI N IT IS OBSERVED THAT THE TERM CONTRACTOR IS NOT CONTRADICTORY TO THE TERM DEVELOPER AND WHEN THE APPLICANT IS WORKING FOR ITSELF TO EXPLOIT THE POTENTIAL OF ITS BUSINESS IN ITS OWN INTEREST IT IS A DEVELOPER. EVEN AFTER THE INSERTION OF THE SAID EXPLANAT ION THE IMPORTANCE OF ACTIVITY AS A DEVELOPER IS NOT LOST BECAUSE THE EXPLANATION APPLIES ONLY IF THE NATURE OF BUSINESS IS THAT OF WORKS CONTRACT AND NOTHING MORE OR LESS. FURTHER THE MEANING OF THE TERM 'DEVELOPMENT' WITH REFERENCE TO VARIOUS DICTIONAR IES AS ALSO THE LAW LEXICON AND THE CENTRAL MEANING COMING OUT OF THESE DEFINITIONS IS THAT DEVELOPING SHOULD BE UNDERSTOOD REASONABLY AS BRINGING ABOUT PRODUCING A NEW FACILITY WHEREIN CERTAIN RISKS ARE ASSUMED AND AT THE SAME TIME THE KNOW HOW OR FUNDS O R RESOURCES AS WELL AS ART OF CREATION ARE SUPPLIED BY THE DEVELOPER AND NOT SOMEONE ELSE. IN THE CASE OF THE ASSESSEE I.T.A NO. 50 7/RJT /20 12 A.Y. 2009 - 10 PAGE NO ITO VS. M/S. BB EL STPL - JV 5 THE ROLE AS DEVELOPER GETS FURTHER ACCENTUATED BY THE FACT THAT IT IS BEING REQUIRED NOT ONLY TO OFFER BANK GUARANTEES AND PLACE EARNEST MONEY DEPOSITS BUT IS. ALSO REQUIRED TO GRANT CERTAIN PERIODIC PERFORMANCE GUARANTEES AND/OR FREE MAINTENANCE OF FACILITIES TO THE GOVERNMENT. HENCE THE APPLICANT BOTH IN VIEW OF THE NATURE OF BUSINESS AS ALSO ACCEPTANCE OF THE SAME IN PAST BY THE DEPART MENT CANNOT BE SAID TO BE ENGAGED IN THE BUSINESS OF WORKS CONTRACT ONLY. V) MERELY BECAUSE THE APPLICANT HAS ACTED UNDER A GOVERNMENT CONTRACT IT CANNOT BE DENIED DEDUCTION NOR CAN IT BE HELD THAT IT HAS ACTED ONLY AS A WORKS CONTRACTOR. THIS IS MORE SO BECAUSE ONE OF THE FUNDAMENTAL PRE - CONDITIONS OF SEC. 80IA(4) IS THAT THE INFRASTRUCTURE FACILITY MUST HAVE BEEN DEVELOPED OR DEVELOPED OPERATED AND MAINTAINED BY ENTERING INTO A CONTRACT WITH THE GOVERNMENT. THEREFORE CONTRACT WITH THE GOVERNMENT IS A S INE QUA NON FOR BECOMING ELIGIBLE FOR THE DEDUCTION. THEREFORE CONTRACTING BY ITSELF CANNOT MAKE THE APPLICANT A WORKS CONTRACTOR. IN OUR COUNTRY ALL LANDS AND INFRASTRUCTURE OTHER THAN THOSE PRIVATELY OWNED BELONG TO THE STATE AND HENCE ONE CAN DEVELOP INFRASTRUCTURE FACILITY ONLY UNDER A GOVERNMENT MANDATE WHICH IS GIVEN IN THE FORM OF A CONTRACT. ONCE THERE IS A CONTRACT FOR A NEW FACILITY THERE ARE BOUND TO BE OBLIGATIONS UNDER THE CONTRACT WHICH INCLUDE OBLIGATIONS OF INTER ALIA OBSERVING THE SPEC IFICATIONS OF THE INFRASTRUCTURE FACILITY. HENCE ALTHOUGH THERE MAY BE SUCH PRE DECIDED SPECIFICATIONS IN THE CONTRACT THE EXECUTION THEREOF FOR BUILDING AND CREATING THE INFRASTRUCTURE LEAVES MUCH SCOPE AND FREEDOM TO THE PERSON CARRYING OUT THE CONTRAC T BY WAY OF ITS PLANNING DESIGNING KNOW HOW FUNDS RISKS HUMAN RESOURCES ETC. ALL OF WHICH ARE CARRIED OUT AT THE SOLE RISK OF THE ASSESSEE. (VI) THE EXPLANATION TO ANY SECTION HAS TO SUB SERVE THE MAIN PROVISIONS OF THE STATUTE AND IT CANNOT BE READ TO CURTAIL IT OR OVERRIDE IT AS HELD BY 'THE SUPREME COURT IN MANY CASES SUCH AS UNDERRAM PILLAI AIR 1985 (SC) 582. THEREFORE IT THE APPLICANT CONTINUES TO BE ELIGIBLE UNDER THE SUBSTANTIVE PROVISIONS OF SUB SECTION (4) AS HAVING ACTED AS A DEVELOPER TH E EXPLANATION CANNOT TAKE AWAY THE BENEFIT OF THE SECTION. THERE BEING NO MATERIAL CHANGE IN THE NATURE OF BUSINESS THE INSERTION OF A EXPLANATION CANNOT TAKE AWAY THE BENEFIT OTHERWISE AVAILABLE TO IT. MOREOVER THE EXPLANATION CANNOT BE APPLIED TO - EVER Y TYPE OF CONTRACT OTHERWISE IT WILL LEAD TO ABSURDITY AND IRRATIONALITY MORE SO WHEN ALL INFRASTRUCTURE BASICALLY BELONGS TO GOVERNMENT AND WITHOUT CONTRACTS BEING AWARDED BY THE GOVERNMENT NO INFRASTRUCTURE FACILITY CAN BE CREATED UNDER THE I.T.A NO. 50 7/RJT /20 12 A.Y. 2009 - 10 PAGE NO ITO VS. M/S. BB EL STPL - JV 6 PRIVATE PA RTICIPATION POLICY ADOPTED BY THE GOVERNMENTS IN CURRENT TIMES IN INDIA. (VIII) THE WORDS 'DEVELOPMENT' AND 'DEVELOPER' HAVE BEEN DEFINED IN DICTIONARIES AND IN LAW LEXICON AS FOLLOWS FROM WEBSTER: DEVELOPMENT A. TO REALIZE THE POTENTIAL OF B. TO AID IN T HE GROWTH OF: STRENGTHEN DEVELOP THE BICEPS. TO BRING INTO BEING: MAKE ACTIVE (DEVELOP A BUSINESS) TO CONVERT (A TRACT OF LAND) FOR SPECIFIC PURPOSE AS BY BUILDING EXTENSIVELY FROM LAW LEXICON: DEVELOPMENT: 1. THE ACT PROCESS OF RESULT OF DEVELOPING OR G ROWING OR CAUSING TO GROW; THE STATE OF BEING DEVELOPED; 2. HAPPENING DEVELOPMENT OF LAND: THE EXPRESSION 'DEVELOPMENT' MEANS THE REALIZATION OF POTENTIALITIES OF LAND OR TERRITORY BY BUILDING OR MINING. SADRUDDEIN SULEMAN VS. J.H. PATWADLEN AIR 1965 BOM 244 242 (CONSTITUTION OF INDIAN ARTICLE 31). THE WEBSTER'S ENCYCLOPEDIA DEFINES THE TERM 'DEVELOP' AS TO BRING OUT THE CAPABILITIES OR POSSIBILITIES OF; BRING TO A MORE ADVANCE OR EFFECTIVE STATE; TO DEVELOP NATURAL RESOURCES. (IX) THE APPLICANT IS DIREC TLY ENGAGED IN THE SIMILAR NATURE OF BUSINESS FOR EARLIER YEARS ALSO WHICH ASPECT HAS BEEN THOROUGHLY EXAMINED BY THE AUTHORITIES. THE WELL ESTABLISHED RULE OF CONSISTENCY ALSO LAYS DOWN THAT IF A DEDUCTION HAS BEEN GRANTED IN EARLIER YEARS AFTER DUE APPLI CATION OF MIND THE SAME SHOULD NOT BE DISTURBED ORDINARILY. FOR THIS PROPOSITION RELIANCE IS PLACED ON SEVERAL DECISIONS OF. HIGH COURTS AND TRIBUNALS REPORTED AT - 104 TTJ 881 (DEL) 289 ITR 318 (DEL) 245 ITR 492 (DEL) 311 ITR 346 (P&H). RELIANCE IS P LACED ON THE DECISION OF APEX COURT IN THE CASE OF RADHASOAMI SATSANG VS. CIT - 193 ITR 321 (SC) WHEREIN THE HON'BLE COURT HAS STATED THAT IN THE ABSENCE OF ANY MATERIAL CHANGE IN CIRCUMSTANCES OF THE CASE A DIFFERENT VIEW THAN THAT TAKEN IN EARLIER YEARS COULD NOT BE TAKEN. . (X) IT IS PERTINENT TO MENTION HERE THAT ONCE THE APPLICANT BECOMES AN ELIGIBLE UNDERTAKING UNDER THE SUBSTANTIVE AND PRIMARY PROVISIONS OF SUB SECTION - (4) NAMELY THAT OF DEVELOPING OF NEW INFRASTRUCTURE FACILITY IT CANNOT BE DENI ED DEDUCTION ON THE GROUND OF OPERATING AND MAINTAINING OF THE SAME. RELIANCE IS PLACE UPON THE DECISION IN THE CASE OF OM METAL INFRAPROJECTS LTD. (2009) 26 DTR (JP) 359. THE APPLICANT RELIES UPON THE ORDER OF THE HON'BLE ITAT RAJKOT BENCH RAJKOT PASSED IN THE CASE OF M/S. KCL BEL TARMAT (JV) VS. ITO WARD.1(2) RAJKOT IN ITAT NO.1112/RJT/2010 FOR A.Y. 2007 - 08 I.T.A NO. 50 7/RJT /20 12 A.Y. 2009 - 10 PAGE NO ITO VS. M/S. BB EL STPL - JV 7 DATED 23.09.2010 WHEREBY THE HON'BLE ITAT DECIDED THE APPEAL IN FAVOUR OF THE ASSESSEE. THE HON'BLE ITAT RAJKOT BENCH RAJKOT HAS ALLOWED THE AP PEAL IN FAVOUR OF THE ASSESSEE IN THE FOLLOWING CASES ON THE SAID ISSUE: (1) M/S. TARMAT BEL (JV) VS. ITO WARD. 1(4) RAJKOT ITA NO. 1111/RJT/2010 - A.Y. 2007 - 08 DATED 23.09.2010 (2) M/S. KISHOR PROJECTS PVT. LTD. VS. DCIT CIRCLE - 1 RAJKOT ITA NO. 1119/RJT/2010 - A.Y. 2007 - 08 DATED 27.09.2010 _ (3) M/S. CLASSIC NETWORK PVT. LTD. VS. DCIT CIRCLE - 1 RAJKOT ITA NO. 1110/RJT/2010 - A.Y. 2007 - 08 DATED 23.09.2010 (4) M/S. KETAN CONSTRUCTION LTD. VS. DCIT CIRCLE - 1 RAJKOT ITA NO. 1107/RJT/2010 - A.Y. 2007 - 08 DATED 23.09.20 10 (5) M/S. KCL BEL TARMAT JV. VS. ITO WARD. 1(2) RAJKOT ITA NO. 1112/RJT/2010 - A.Y. 2007 - 08 DATED 23.09.2010 (6) M/S. BACKBONE ENTERPRISE LTD. VS. DCIT CIRCLE - 1 RAJKOT ITA NO. 1108/RJT/2010 - A.Y. 2007 - 08 DATED 27.09.2 010 SPECIAL CIVIL APPLICATION PREFERRED BEFORE THE HON'BLE GUJARAT HIGH COURT ON THE ABOVE MATTER BY THE ASSESSEE'S ENGAGED IN INFRASTRUCTURE DEVELPERS. THE HON'BLE GUJARAT HIGH COURT HAS ISSUED NOTICE AND GRANTED INTERIM RELIEF WHEREBY FURTHER PROCEEDING OF RE - ASSTT. U/S. 148 ARE STAYED ON THIS ISSUE. CONSIDERING THE TOTALITY OF THE FACTS ON RECORD AS ALSO THE DEVELOPMENT OF LAW CONCERNING THE GRANTING OF DEDUCTIONS FROM GROSS TOTAL INCOME THE APPLICANT IS ENTITLED TO DEDUCTION U/S. 80IA(4) OF THE ACT A S IT HAS FULFILLED ALL CONDITIONS OF ELIGIBILITY. 4. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE AND S TATED THAT DEDUCTION U/S. 80 - IA SUB - SECTION 4 IS AVAILABLE TO A DEVELOPER OF THE INFRASTRUCTURAL FACILITIES AS PROVIDED WITHI N THE MEANING OF THE SAID SECTION AND NOT TO THE CONTRACTOR WHO SIMPLY EXECUTES THE WORK AS PER WORK CONTRACT RECEIVED FROM EITHER CENTRAL GOVERNMENT OR STATE GOVERNMENT OR ANY OTHER AGENCY. HE ALSO STATED THAT THE EXPLANATION BELOW SUB - SECTION 13 OF SECT ION 80 - IA INSERTED BY THE FINANCE ACT 2009 WITH RETROSPECTIVE EFFECT FROM 01 - I.T.A NO. 50 7/RJT /20 12 A.Y. 2009 - 10 PAGE NO ITO VS. M/S. BB EL STPL - JV 8 04 - 2000 HAS ONLY CLARIFIED THAT THE DEDUCTION IS NOT AVAILABLE TO BUSINESS REFERRED TO IN SUB - SECTION 4 WHICH IS IN THE NATURE OF WORK CONTRACT AWARDED BY ANY PERSON INCLUDING TH E CENTRAL GOVERNMENT OR STATE GOVERNMENT. THE ASSESSING OFFICER HELD THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION OUT OF BUSINESS INCOME UNDER THE PROVISION OF THE SAID SECTION. AGAINST THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE FILED THE APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX(A). THE LD. COMMISSIONER OF INCOME TAX(A) HAS ALLOWED THE DEDUCTION AND THE DECISION OF THE THE LD.CIT(A) IS REPRODUCED AS UNDER 3.3 THE CASE OF THE APPELLANT IS IDENTICAL. IN THE PRESENT CASE ALSO THOUGH TH E APPELLANT ENTERED INTO A CONTRACT WITH GOVERNMENT OR SEMI - GOVERNMENT AUTHORITIES BUT SUCH A CONTRACT IS A PART OF THE PRIMARY CONDITION MENTIONED IN SECTION 80IA(4) AND FURTHER THE NATURE OF WORK CARRIED OUT BY THE APPELLANT SHOWS TH AT THE APPELLANT NOT ONLY DIRECTLY CARRIED OUT WORK AS PER THE OF ALLOTTED JOB BUT IT ALSO EMPLOYED VARIOUS RESOURCES OF ITS OWN BY WAY OF MACHINERIES TECHNICAL KNOWLEDGE MANPOWER MATERIAL ETC. AND ALSO FUNDED THE SAME OUT OF IT OWN CAPITAL AND BORROW INGS. THE APPELLANT WAS REQUIRED TO FURNISH GUARANTEES INCLUDING FREE MAINTENANCE OF INFRASTRUCTURE FACILITIES. ALL THESE FACTOR COMBINED CLEARLY SHOW THAT THE APPELLANT ASSUMED CONSIDERABLE RISK IN THE CAPACITY OF A BUSINESSMAN AND THUS ALL THE FACTOR S MENTIONED IN THE ABOVE APPELLATE ORDER OF THE HON'BLE ITAT RAJKOT BENCH SQUARELY APPLIES TO THE APPELLANT'S CASE ALSO. APART FROM THIS THE DECISION OF THE HON'BLE ITAT HYDERABAD BENCH IN THE CASE OF M/S. KMC CONSTRUCTION LTD. IN ITA NO. 666/HYD/2003 DA TED 16.03.2012 IS ALSO SQUARELY APPLICABLE TO THE FACTS OF THE APPELLANT'S CASE. THERE IT HAS BEEN OBSERVED THAT THE GOVERNMENT OF INDIA WITH A VIEW TO DEVELOP THE INFRASTRUCTURE FACILITY PROVIDED VARIOUS INCENTIVES TO THE INDIAN CONCERNS FOR DEVELOPMENT OF SUCH INFRASTRUCTURE FACILITY AND ACCORDINGLY THE LEGISLATURE INTRODUCED AMENDMENT TO SECTION 80IA(4) IN THE FINANCE BILL 1999 TO BE EFFECTIVE FOR AND FROM THE A.YS. 2000 - 01 & ONWARDS. THE PROVISIONS OF SUB SECTION (4A) WHICH WERE EARLIER APPLICABLE TO T HE ENTREPRENEURS ENGAGED IN DEVELOPING I.T.A NO. 50 7/RJT /20 12 A.Y. 2009 - 10 PAGE NO ITO VS. M/S. BB EL STPL - JV 9 MAINTAINING AND OPERATING WAS DELETED WITH EFFECT FROM 1/4/2000 BUT IS INCORPORATED IN SECTION 80IA(4) OF THE ACT AND THUS IT IS CLEAR THAT THE ENTERPRISES WHICH WERE DEVELOPING OPERATING AND MAINTAINING AND DEVELO PING OPERATING AND MAINTAINING WERE ONLY ELIGIBLE FOR SUCH DEDUCTION UPTO A.Y. 1999 - 2000 BY VIRTUE OF THE PROVISIONS OF SECTION 80IA(4A) AND WITH THE INTRODUCTION OF THE NEW SECTION 80IA(4) AMENDING THE SUB SECTION (4) OF SECTION 80IA AND DELETING THE SU B SECTION (4A) THE LEGISLATURE PROVIDED DEDUCTION FOR ANY ENTERPRISE CARRYING ON THE BUSINESS EITHER DEVELOPING OR OPERATING AND MAINTAINING OR DEVELOPMENT OPERATING AND MAINTAINING INSTEAD ALLOWING DEDUCTION ONLY TO THE ENTERPRISES ENGAGED IN ACTIVITY CO VERING ALL THE THREE ACTIVITIES TOGETHER. THUS THE LEGISLATURE SPECIFICALLY ADDED THE CONJUNCTION 'OR' BETWEEN THE WORDS - DEVELOPING; OPERATING AND MAINTAINING; DEVELOPING OPERATING AND MAINTAINING). THE HON'BLE ITAT HYDERABAD ALSO DREW SUPPORT FROM THE CBDT CIRCULAR NO.3 OF 2008 DATED 12/3/2008 WHEREIN THE CLARIFICATION ISSUED BY THE BOARD MAKES IT CLEAR THAT AN ASSESSEE WHO EXECUTES THE DEVELOPMENT WORK AND CARRIED OUT THE CIVIL CONSTRUCTION WORK IS A DEVELOPER. THE BOARD IS ALSO OF THE VIEW THAT THOSE PERSONS WORKING FOR OTHERS AR E THE WORKS CONTRACTORS AND NOT THE DEVELOPERS. MOREOVER THE BOARD'S CIRCULAR NO.793 DATED 23/6/2000 CLARIFIED THAT PART OF THE PROJECT WOULD ALSO QUALIFY IF SO CERTIFIED BY THE AUTHORITIES CONCERNED. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE AND THE LEGAL POSITION IN THE ABOVE - REFERRED JUDICIAL DECISIONS IT IS HELD THAT THE APPELLANT IS ENTITLED/TO A DEDUCTION U/S.80IA(4) AND ACCORDINGLY THE AO IS DIRECTED TO ALLOW THE SAME. 5. DURING THE COURSE OF AP PELLANT PROCEEDING BEFORE US THE LEARNED DR CONTENDED THAT THE LEARNED CIT (A) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER . THE LD. CIT(A) ALSO PL ACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. HE A LSO STATED THAT THE PURPOSE OF DEDUCTION IS TO PROVIDE INCENTIVE TO THE ASSESSEE WHEN HE INVEST AND BUILT AND DEVELOP THE PROJECT THROUGH HIS OWN INVESTMENT. HE ALSO PLACED RELIANCE ON THE JUDICIAL I.T.A NO. 50 7/RJT /20 12 A.Y. 2009 - 10 PAGE NO ITO VS. M/S. BB EL STPL - JV 10 PRONOUNCEMENT IN THE CASE OF B. T. PATIL & SONS BELGAUM CONSTRUCTION (P) LTD. V/S ACIT (2010) 35 SOT 171 (MUM). ON THE OTHER HAND THE LEARNED COUNSEL HAS PLACED RELIANCE ON THE ORDER OF LEARNED CIT( APPEAL ) . HE ALSO SUBMITTED A COPY OF THE DECISION RENDERED BY THE ITAT RAJKOT BENCH RAJKOT IN THE CASE OF M/S KETAN CONST RUCTION LTD. V/S DCIT ITA NO.1107/RJT/2010 AND STATED THAT THE CASE OF BP PATIL & SONS BEGAUM CONSTRUCTION HAS ALREADY BEEN DEALT AND DISTINGUISHED IN THIS ORDER. T HE ISSUE IS COVERED BY THE DECISION OF T HE HON'BLE ITAT RAJKOT BENCH RAJKOT IN THE FOLL OWING CASES ON THE SAID ISSUE: (2) M/S. TARMAT BEL (JV) VS. ITO WARD. 1(4) RAJKOT ITA NO. 1111/RJT/2010 - A.Y. 2007 - 08 DATED 23.09.2010 (2)M/S. KISHOR PROJECTS PVT. LTD. VS. DCIT CIRCLE - 1 RAJKOT ITA NO. 1119/RJT/2010 - A.Y. 2007 - 08 DATED 27.09.2010 _ (3) M/S. CLASSIC NETWORK PVT. LTD. VS. DCIT CIRCLE - 1 RAJKOT ITA NO. 1110/RJT/2010 - A.Y. 2007 - 08 DATED 23.09.2010 (4) M/S. KETAN CONSTRUCTION LTD. VS. DCIT CIRCLE - 1 RAJKOT ITA NO. 1107/RJT/2010 - A.Y. 2007 - 08 DATED 23.09.2010 (5) M/S. KCL BEL TARMAT JV. VS. ITO W ARD. 1(2) RAJKOT ITA NO. 1112/RJT/2010 - A.Y. 2007 - 08 DATED 23.09.2010 (6) M/S. BACKBONE ENTERPRISE LTD. VS. DCIT CIRCLE - 1 RAJKOT ITA NO. 1108/RJT/2010 - A.Y. 2007 - 08 DATED 27.09.2010 I.T.A NO. 50 7/RJT /20 12 A.Y. 2009 - 10 PAGE NO ITO VS. M/S. BB EL STPL - JV 11 6 . WE HAVE CONSIDERED THE CONTENTION S OF BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD CAREFULLY. WE OBSERVED THAT T HE NATURE OF WORK CARRIED OUT BY THE ASSESSEE SHOWS THAT IT HAD EMPLOYED VARIOUS RESOURCES BY WAY OF MACHINERIES TECHNICAL KNOWLEDGE MANPOWER MATERIAL ETC. SECTION 80I A(4) APPLIES TO ( I ) ANY ENTERPRISE CARRYING ON THE BUSINESS [OF ( I ) DEVELOPING OR ( II ) OPERATING AND MAINTAINING OR ( III ) DEVELOPING OPERATING AND MAINTAINING] ANY INFRASTRUCTURE FACILITY WHICH FULFILS ALL THE FOLLOWING CONDITIONS NAMELY : ( A ) IT IS OWNED BY A COMPANY REGISTERED IN INDIA OR BY A CONSORTIUM OF SUCH COMPANIES [OR BY AN AUTHORITY OR A BOARD OR A CORPORA - TION OR ANY OTHER BODY ESTABLISHED OR CONSTITUTED UNDER ANY CENTRAL OR STATE ACT;] [( B ) IT HAS ENTERED INTO AN AGREEMENT WITH THE CENT RAL GOVERNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORITY OR ANY OTHER STATUTORY BODY FOR ( I ) DEVELOPING OR ( II ) OPERATING AND MAINTAINING OR ( III ) DEVELOPING OPERATING AND MAINTAINING A NEW INFRASTRUCTURE FACILITY;] ( C ) IT HAS STARTED OR STARTS OPERATIN G AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER THE 1ST DAY OF APRIL 1995: 7. W E NOTICED THAT THE ASSESSEE ENTERED INTO A CONTRACT WITH THE GOVERNMENT AND THE NATURE OF WORK CARRIED OUT SHOWS THAT THE I.T.A NO. 50 7/RJT /20 12 A.Y. 2009 - 10 PAGE NO ITO VS. M/S. BB EL STPL - JV 12 ASSESSEE CARRIED THE WORK DIRECTL Y AND IT HAS EMPLOYED VARIOUS RESOURCES AS STATED ABOVE. THE ASSESSEE HAS MADE HUGE INVESTMENTS IN ALL KINDS OF RESOURCES FOR ITS BUSINESS NAMELY PLANT AND MACHINERIES STRUCTURES AT SITES WORKING CAPITAL HUMAN RESOURCES TECHNICAL EXPERTISE ETC. THE AS SESSEET POSSESSES ITS OWN TECHNICAL KNOWLEDGE OF HOW TO DEVELOP AND LAY ROADS DAMS BRIDGES ETC.. THE ASSESSEE HAS PURCHASED AND EMPLOYED ITS OWN MATERIALS FOR DEVELOPMENT AND CONSTRUCTION OF THE INFRASTRUCTURE FACILITY. THE ENTIRE PLANNING OF ITS BUSINES S AS ALSO THE WORK HAS BEEN DONE BY THE ASSESSEET AND NOT BY THE GOVERNMENT. CONSIDERING THE ABOVE STATED FACTS THE ASSESSEE CAN BE SAID TO BE A DEVELOPER AND CANNOT BE DENIED DEDUCTION FROM THE PROFITS OF DEVELOPING THE INFRASTRUCTURE FACILITY THOUGH IT M AY NOT OPERATE OR MAINTAIN THE SAME PARTICULARLY IN VIEW OF THE IN INSERTION OF THE WORD OR IN SEC.80 - IA(4) OF THE ACT. IN VIEW OF THE FACTS AND CIRCUMSTANCES AS STATED ABOVE AND LEGAL LEGAL FINDINGS AS REFERRED IN THE ABOVE JUDICIAL PRONOUNCEMENTS WE C ONSIDERED THAT THE ASSESSEE IS ENTITLED TO A DEDUCTION UNDER SECTION 80IA(4) OF THE ACT THEREFORE WE UPHOLD OF THE ORDER OF THE LEARNED CIT (A) 8 . IN THE END THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OUR T ON 28 - 10 - 201 6 SD/ - SD/ - (S.S. GODARA ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 28 /10 /2016 AK I.T.A NO. 50 7/RJT /20 12 A.Y. 2009 - 10 PAGE NO ITO VS. M/S. BB EL STPL - JV 13 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT ( A) 5. DR ITAT AHMEDABAD 6. 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