DCIT CIR -3, THANE v. SMC INFRASTRUCTURE P. LTD, THANE

ITA 515/MUM/2009 | 2005-2006
Pronouncement Date: 01-02-2010 | Result: Allowed

Appeal Details

RSA Number 51519914 RSA 2009
Assessee PAN AACCS3437L
Bench Mumbai
Appeal Number ITA 515/MUM/2009
Duration Of Justice 1 year(s) 9 day(s)
Appellant DCIT CIR -3, THANE
Respondent SMC INFRASTRUCTURE P. LTD, THANE
Appeal Type Income Tax Appeal
Pronouncement Date 01-02-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted E
Tribunal Order Date 01-02-2010
Date Of Final Hearing 22-01-2010
Next Hearing Date 22-01-2010
Assessment Year 2005-2006
Appeal Filed On 23-01-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI RAJENDRA SINGH (AM) ITA NO.515/MUM/2009 ASSESSMENT YEAR : 2005-06 DY. COMMISSIONER OF INCOME TAX CIRCLE-3 VARDAAN BUILDING LOWER GR. FLOOR MIDC WIE THANE(W)-400 604. ..( APPELLANT ) VS. M/S. SMC INFRASTRUCTURE PVT. LTD. 1 ST FLOOR KONARK TOWER GHANTALI ROAD THANE. ..( RESPONDENT ) P.A. NO. (AACCS 3437 L) APPELLANT BY : SHRI HEMANT J. LAL RESPONDENT BY : SHR I M. SUBRAMANIAN O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 22.10.08 PASSED BY THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2005-06. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COMPAN Y IS ENGAGED IN THE BUSINESS AS A CIVIL CONTRACTOR FOR INFRAST RUCTURE PROJECTS AND WATER PIPELINES PROJECTS AND OTHER CIVIL WOR KS. IT FILED RETURN DECLARING TOTAL INCOME OF RS.55 63 500/-. DURI NG THE COURSE ITA NO.515/M/09 A.Y: 05-06 2 OF ASSESSMENT IT WAS INTERALIA OBSERVED BY THE AO THAT TH E ASSESSEE HAS CLAIMED DEDUCTION U/S.80-IA OF THE INCOME TAX ACT 1961(THE ACT) AMOUNTING TO RS.1 23 61 952/- WHICH WAS SUBSEQUENT LY REVISED TO RS.1 16 91 444/-. THE AO AFTER CONSIDERING THE ASSESSEES REPLY WAS OF THE VIEW THAT THE ASSESSEE HAS EXECUTED A WORK CONTRACT IN THESE PROJECTS AND IS IN NO WAY A DEVEL OPER OF AN INFRASTRUCTURAL FACILITY AS ENVISAGED IN SEC.80-IA AND ACCO RDINGLY HE DISALLOWED THE DEDUCTION U/S.80-IA CLAIMED BY THE ASSESSEE RS.1 23 61 952/- (SAY IN REVISED FIGURE RS.1 16 91 444/ -) AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. APART FROM T HIS THE AO ALSO MADE DISALLOWANCE U/S.40A(IA) RS.1 11 62 555/- ON THE GROUND THAT THE TDS ON THESE CONTRACT PAYMENTS WERE NOT DEPOSITED INTO THE CENTRAL GOVT. ACCOUNT WITHIN THE STI PULATED TIME AND ACCORDINGLY COMPLETED THE ASSESSMENT AT AN INCOME OF RS.2 90 88 000/- VIDE ORDER DT.31.12.2007 PASSED U/S.14 3(3) OF THE ACT. ON APPEAL THE LD. CIT(A) WHILE FOLLOWING THE DECISION OF THE ITAT MUMBAI IN ACIT VS. BHARAT UDYOG LTD. IN IT A NO.6137/MUM/2005 PATEL ENGG. LTD. (94 ITD 144) AND THE CLARIFICATION GIVEN BY THE CBDT VIDE EXPLANATORY NOT ES ON THE PROVISIONS OF FINANCE BILL 2007 DIRECTED THE AO TO A LLOW DEDUCTION OF RS.1 16 91 444/- TO ALLOW CONTRACT PAYMENT AMOUNTI NG TO RS.53 42 426/- MADE IN THE MONTH OF MARCH 2005 AS THE TDS ITA NO.515/M/09 A.Y: 05-06 3 THEREON HAS BEEN DEPOSITED BEFORE FILING THE RETURN A ND OTHER PAYMENTS WILL BE ALLOWED IN THE RELEVANT ASSESSMENT YEAR IN WHICH TAX ON THESE PAYMENTS ARE DEPOSITED IN THE CENTRAL GOV T. ACCOUNT AND ACCORDINGLY PARTLY ALLOWED THE APPEAL. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE REVENUE IS IN APPEAL BEFORE US TAKING THE FOLLOWING EFFECTIVE GROU ND OF APPEAL. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A)-I THANE WAS NOT JUSTIFIED IN A LLOWING DEDUCTION U/S.80IA OF THE INCOME TAX ACT 1961 RELY ING UPON ORDER OF THE ITAT MUMBAI IN THE CASE OF M/S. PATEL ENGG. LTD. [ (2004) 84 TTJ (MUM) 646] INASMUCH AS THE DEPARTMENT HAS NOT ACCEPTED THE REFERRED ORDER OF T HE ITAT AND PREFERRED AN APPEAL TO HIGH COURT MUMBAI AGAINST THE SAME. 4. AT THE TIME OF HEARING BOTH PARTIES HAVE AGREED T HAT THE ISSUE IS COVERED IN FAVOUR OF REVENUE AND AGAINST THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ACIT VS. SMC INFRAST RUCTURE PVT. LTD. IN ITA NO.4757/MUM/2006 FOR ASSESSMENT YEAR 2003-0 4 DATED 10.11.2009 THEREFORE THE ISSUE MAY BE DECIDED ACCORDIN GLY. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO PLACED ON RECORD THE COPY O F THE SAID ORDER OF THE TRIBUNAL . 5. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RIVAL P ARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND MER IT IN THE PLEA OF THE PARTIES THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE REVENUE ITA NO.515/M/09 A.Y: 05-06 4 AND AGAINST THE ASSESSEE BY THE ORDER OF THE TRIBUNAL I N ASSESSEES OWN CASE (SUPRA) IN WHICH THE TRIBUNAL HAS FOLLOWED THE DECISION OF THE LARGER BENCH OF THE TRIBUNAL IN M/S. B.T. PATIL & SONS BELGAUM CONSTRUCTION PRIVATE LIMITED VS. ACIT IN ITA NO.1408 & 1409/PN/2003 FOR ASSESSMENT YEARS 2000-01 AND 2001-02 DATED 26.10.200 9 SINCE REPORTED IN (2010) 35 SOT 171 (MUM.)(LB) WHEREIN IT HAS BEEN HELD VIDE PARA-57 AND 59 OF THE ORDER AS UNDER : 57. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE EXPLANATION AS INSERTED BY THE FINANCE ACT 2007 WIT H RETROSPECTIVE EFFECT FROM 1.4.2000 MADE IT CLEAR TH AT THE BENEFIT OF SECTION 80-IA SHALL NOT BE EXTENDED TO A PERSON WHO EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE ELIGIBLE ENTERPRISE. IT HAS BEEN CLARIFIED THAT THE PROVISIONS OF SECTION 80-IA SHALL NOT APPLY TO A PE RSON WHO EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE REFERRED TO IN THE SAID S ECTION. THOUGH THE INTENTION WAS TO CLARIFY THAT THE BENEFI T OF DEDUCTION IS NOT TO BE ALLOWED TO A CIVIL CONTRACTO R BUT IT WAS INTERPRETED BY SOME QUARTERS AS APPLYING ONLY T O THE SUB-CONTRACTOR AND NOT TO THE CONTRACTOR. WITH A VI EW TO CLARIFY THE POSITION BEYOND ANY DOUBT THE SAID EXPLANATION WAS SUBSTITUTED BY THE FINANCE ACT 200 9 WITH A NEW EXPLANATION TO CLARIFY THAT THE DEDUCTIO N IS NOT AVAILABLE TO BUSINESS REFERRED TO IN SUB-SECTION (4 ) WHICH IS IN THE NATURE OF A WORKS CONTRACT AWARDED BY ANY PERSON (INCLUDING THE CENTRAL OR STATE GOVERNMENT) AND EXECUTED BY AN ENTERPRISE REFERRED TO IN SUB-SECTIO N (1). NOW WITH THIS SUBSTITUTION OF EXPLANATION BELOW SEC TION 80-IA(13) THE ENTIRE CONTROVERSY CREATED FOR NO R EASON TO NEEDLESSLY DISTINGUISH BETWEEN CONTRACTOR AND DEVELOPER HAS SUBSIDED. THE POSITION WHICH WAS EA RLIER APPARENT ON A CAREFUL LOOK OF THE PROVISIONS OF SUB -SECTION (4) HAS NOW BEEN MADE AVAILABLE EVEN AT THE CURSO RY LOOK THROUGH THE EXPLANATION BY CLARIFYING THE HITH ERTO INTENTION OF THE LEGISLATURE THAT NO PERSON EXECUTI NG THE WORKS CONTRACT SHALL BE ELIGIBLE FOR DEDUCTION U/S 80-IA EVEN IF IT IS AN ENTERPRISE AS REFERRED TO IN SUB-S ECTION (1). THE LANGUAGE OF THIS EXPLANATION MAKES IT CRYSTAL CLEAR ITA NO.515/M/09 A.Y: 05-06 5 THAT THE BENEFIT UNDER SUB-SECTION (4) CANNOT BE PR OVIDED TO A BUSINESS REFERRED TO IN SUB-SECTION (4) WHICH IS IN THE NATURE OF WORKS CONTRACT AWARDED BY ANY PERSON INCL UDING THE CENTRAL OR STATE GOVERNMENT AND EXECUTED BY THE UNDERTAKING OR ENTERPRISE REFERRED TO IN SUB-SECTIO N (1). FROM THE MEMORANDUM EXPLAINING THE RATIONALE BEHIND THE SUBSTITUTION OF EXPLANATION IT CAN BE EASILY SE EN THAT THE LEGISLATURE CLARIFIED ITS INTENTION BEYOND ANY DOUBT THAT THE DEDUCTION CANNOT BE ALLOWED IN RELATION TO AN ELIGIBLE BUSINESS WHICH IS IN THE NATURE OF WORKS C ONTRACT. EVEN IF ONE PRESUMES FOR A MOMENT THAT ALL THE CONDITIONS SET OUT IN SUB-SECTION (4) CLAUSE (I) AR E SATISFIED WHICH ARE ACTUALLY NOT FULFILLED IN THE INSTANT CASE AND THE ENTERPRISE IS COVERED UNDER SUB-SECTI ON (1) THEN ALSO DEDUCTION CANNOT BE ALLOWED IN RELATION T O A BUSINESS WHICH IS IN THE NATURE OF A WORKS CONTRACT . 59. WITHOUT THE AID OF EXPLANATION TO THIS SE CTION WE HAVE CONCLUDED ABOVE THAT THE CONDITIONS SET OUT IN SUB- SECTION (4) CLAUSE (I) ARE NOT SATISFIED AND HENCE THE ASSESSEE CANNOT CLAIM DEDUCTION UNDER THIS SECTION. THE INSERTION AND SUBSTITUTION OF THE EXPLANATION IS ON LY TO CLARIFY THAT THE DEDUCTION CANNOT BE ALLOWED IN REL ATION TO A BUSINESS IN THE NATURE OF WORKS CONTRACT UNDER AN Y CIRCUMSTANCE. IN OTHER WORDS THE VIEW EMERGING FROM THE CAREFUL CIRCUMSPECTION OF SUB-SECTION (4) HAS BEEN ENDORSED BY THE EXPLANATION AND THAT TOO WITH RETROSPECTIVE EFFECT FROM 1.4.2000 THEREBY COVERING BOTH THE YEARS UNDER CONSIDERATION. WE THEREFORE ANSWE R QUESTION NO.1 IN NEGATIVE BY HOLDING THAT THE ASSES SEE IS NOT ENTITLED TO DEDUCTION UNDER THE PROVISIONS OF S ECTION 80-IA(4) IN RESPECT OF THE PROJECTS UNDERTAKEN. IT HAS BEEN HELD BY THE TRIBUNAL (SUPRA) THAT THE A SSESSEE BEING A CONTRACTOR ONLY IS NOT ENTITLED TO DEDUCTION U/S.80-IA( 4). RESPECTFULLY FOLLOWING THE ABOVE DECISIONS WE ARE OF THE VIEW THA T THE ASSESSEE BEING A CONTRACTOR IS NOT ENTITLED TO DEDUCTION U/S.80I A(4) IN RESPECT OF THE ABOVE SAID PROJECTS UNDERTAKEN BY HIM. THE ORD ER PASSED BY ITA NO.515/M/09 A.Y: 05-06 6 THE LD. CIT(A) ON THIS ACCOUNT IS REVERSED AND THAT OF AO IS RESTORED. THE GROUNDS TAKEN BY THE REVENUE ARE THEREFORE ALLO WED. 6. IN THE RESULT THE REVENUES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01.02.2010. SD/- SD/- (RAJENDRA SINGH) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 01.02.2010. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR E BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI. ITA NO.515/M/09 A.Y: 05-06 7 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 22.1.10 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 25.1.10 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 01.02.10 SR.PS/PS 7. FILE SENT TO THE BENCH CLERK 03.02.10 SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER