Acquafil Polymers Co.Pvt.Ltd.,, Ahmedabad v. The CIT-I,, Ahmedabad

ITA 811/AHD/2010 | 2005-2006
Pronouncement Date: 30-09-2016 | Result: Allowed

Appeal Details

RSA Number 81120514 RSA 2010
Assessee PAN AABCA7902R
Bench Ahmedabad
Appeal Number ITA 811/AHD/2010
Duration Of Justice 6 year(s) 6 month(s) 14 day(s)
Appellant Acquafil Polymers Co.Pvt.Ltd.,, Ahmedabad
Respondent The CIT-I,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 30-09-2016
Date Of Final Hearing 19-07-2016
Next Hearing Date 19-07-2016
Assessment Year 2005-2006
Appeal Filed On 16-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE SHRI R.P. TOLANI JM & SHRI MANISH BORAD AM. SL. NO. ITA NO. ASST. YEAR APPELLANT VS. RESPONDENT 1 811/AHD/2010 2005-06 ACQUAFIL POLYMERS CO.PVT. LTD. 202/203 SHYMAK COMPLEX B/H KAMDHENU COMPLEX POLYTECHNIC AHMEDABAD. . ITO WARD-1(3) AHMEDABAD. 2 732/AHD/2013 2005-06 DCIT CIR-1 AHMEDABAD. ACQUAFIL POLYMERS CO.PVT. LTD. 3 812/AHD/2010 2006-07 ACQUAFIL POLYMERS CO.PVT. LTD. ITO WARD-1(3) AHMEDABAD. 4 2132/AHD/2011 2006-07 DCIT CIRCLE-1 AHMEDABAD ACQUAFIL POLYMERS CO.PVT. LTD. 5 250/AHD/2011 2007-08 ITO WARD-1(2) AHMEDABAD. ACQUAFIL POLYMERS CO.PVT. LTD. 6 CO NO.30/AHD/2011 IN ITA NO.250/AHD/11 `2007-08 ACQUAFIL POLYMERS CO.PVT. LTD. ITO WARD-1(3) AHMEDABAD. 7 487/AHD/2013 2008-09 ACQUAFIL POLYMERS CO.PVT. LTD. ADDL.CIT RANGE-1 AHMEDABAD. 8 733/AHD/2013 2008-09 DCIT CIRCLE-1 AHMEDABAD ACQUAFIL POLYMERS CO. PVT. LTD. 9 488/AHD/2013 2009-10 ACQUAFIL POLYMERS CO. PVT. LTD. ADDL.CIT RANGE-1 AHMEDABAD 10 935/AHD/2013 2009-10 DCIT CIRCLE-1 AHMEDABAD ACQUAFIL POLYMERS CO. PVT. LTD. APPELLANT VS. RESPONDENT PAN AABCA7902R APPELLANT BY SHRI S. N. SOPARKAR & SHRI PARIN SHAH ARS RESPONDENT BY SMT. VIBHAS BHALLA CIT DR AND SHRI PRASOON KABRA SR.DR DATE OF HEARING: 19.7.2016 DATE OF PRONOUNCEMENT: 30/9/2016 O R D E R ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 2 PER MANISH BORAD ACCOUNTANT MEMBER. THESE 9 APPEALS AND ONE CROSS OBJECTION OUT OF WHI CH 4 APPEALS AND ONE CROSS OBJECTION ARE AT THE INSTANCE OF ASSESSEE AND 5 APPEALS BY REVENUE FOR ASST. YEAR 2005-06 TO ASST . YEAR 2009-10. SINCE THE APPEALS AND THE CROSS OBJECTION RELATE TO THE SAME ASSESSEE AND MOST OF THE ISSUES RAISED THEREIN ARE COMMON THEREFORE THEY WERE HEARD TOGETHER AND ARE BEING D ISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE TAKE UP ITA NO.811/AHD/2010 & ITA NO. 812/AHD/2010 ITA NO. 732/AHD/2013 AND ITA NO.2132/ AHD/2011. ASSESSEE IS IN APPEAL FOR ASST. YEAR 2005-06 AND AS ST. YEAR 2006-07 VIDE ITA NOS.811/AHD/2010 AND 812/AHD/2010 AGAINST THE ORDER U/S 263 OF THE ACT PASSED BY CIT-1 AHMEDABAD OF EVEN D ATE 5.3.2010 WHEREAS REVENUE IS IN APPEAL VIDE APPEAL NOS.732/AH D/2013 AND 2132/AHD/2011 FOR ASST. YEARS 2005-06 & 2006-07 RES PECTIVELY AGAINST THE ORDERS DATED 24.12.2012 AND 23.6.2011 B Y CIT(A)-VI AHMEDABAD PASSED AGAINST THE ORDER FRAMED BY ASSESS ING OFFICER U/S 143(3) R.W.S. 263 OF THE ACT. 3. WE WILL FIRST TAKE UP ASSESSEES APPEAL AGAINST THE ORDER OF CIT U/S 263 OF THE ACT FOR ASST. YEAR 2005-06. 4. BRIEFLY STATED FACTS OF THE CASE ARE THAT ASSESS EE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE MANUFACTURING OF WAS TE WATER AND EFFLUENT TREATMENT PLANT. RETURN OF INCOME WAS FILE D ON 27.10.2005 ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 3 DECLARING TOTAL INCOME OF RS.5 17 644/- WHICH WAS F OLLOWED BY REVISED RETURN FILED ON 04.12.2006 SHOWING INCOME AT RS.NIL AND CLAIMING DEDUCTION U/S 80IA OF THE ACT AT RS.33 10 007/-. TH E CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) OF THE ACT WAS ISSUED ON 06/06/2006 FOLLOWED BY NOTICE U/S 142(1) ALONG WITH QUESTIONNAIRE CALLING FOR REQUISITE DETAILS. NECESSARY DETAILS WE RE FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND RETURN OF INCOME WAS ACCEPTED INCLUDING THE ALLOWABILITY OF DEDUCTION OF RS.33 10 007/- U/S 80IA OF THE ACT. THEREAFTER RECORDS OF THE ASSESSEE WERE VERIFIED IN THE OFFICE OF CIT AND ON THE BASIS OF DETAILS AVAIL ABLE PRIMA FACIE IT WAS OBSERVED THAT ASSESSEE IS NOT A DEVELOPER BUT H AS EXECUTED THE WORK CONTRACT AND ASSESSING OFFICER HAS WRONGLY ALL OWED THE DEDUCTION U/S 80IA OF THE ACT WITHOUT MAKING PROPER ENQUIRY/VERIFICATION OR ANALYZING THE SAID ISSUE. T HE ASSESSEE MADE NECESSARY SUBMISSIONS WITH REQUISITE DETAILS OF THE CONTRACT AWARDED NATURE OF WORK ENTRUSTED ON THE ASSESSEE AND IN THE SE CONTRACTS IN ORDER TO PROVE THAT SCOPE OF WORK INCLUDED DESIGNIN G (PROCESS HYDRAULIC STRUCTURE EQUIPMENT AND AESTHETICALLY) CONSTRUCTING AND COMMISSIONING CONVENTIONAL WATER TREATMENT PLANT CO NSISTING OF ALL CIVIL MECHANICAL AND ELECTRICAL COMPONENTS INCLUDI NG NECESSARY HYDRAULIC TESTING STRUCTURAL TESTING EQUIPMENT TE STING TRIAL RUN ETC. THE ASSESSEE ALSO SUBMITTED THAT ALL THESE DETAILS WERE PUT FORTH BEFORE THE ASSESSING OFFICER ALSO. HOWEVER LD. CIT WAS NOT CONVINCED AND WAS OF THE VIEW THAT ASSESSMENT U/S 1 43(3) OF THE ACT DATED 20.12.2007 PASSED BY THE ASSESSING OFFICER WA S ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE TO THE E XTENT OF ALLOWANCE OF DEDUCTION CLAIMED BY THE ASSESSEE U/S 80IA OF THE A CT AT ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 4 RS.33 10 007/- AND ORDERED FOR SETTING ASIDE THE IM PUGNED ASSESSMENT ORDER U/S 143(3) OF THE ACT TO THE EXTEN T THAT ASSESSING OFFICER WILL ADJUDICATE ON THE ISSUES OF ALLOWANCE OF CLAIM OF DEDUCTION U/S 80IA OF THE ACT AFRESH IN ACCORDANCE WITH LAW. 5. AGGRIEVED ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 6. LD. AR SUBMITTED THAT PROFITS FROM THE PROJECTS AWARDED BY GUJARAT WATER SUPPLY AND SEWERAGE BOARD (GSSB) RELA TING TO ASIAN DEVELOPMENT BANK PROJECT (ADB) GWSSB (GONDAL/KOTHA RIA) SPECIAL AREA DEVELOPMENT AUTHORITY (SADA) GWALIOR M.P. & GWSSB (MADHUKA) HAVE BEEN CLAIMED AS DEDUCTION U/S 80IA OF THE ACT. IN ALL THESE PROJECTS THE ASSESSEE COMPANY HAS CARRIED OUT WORK OF PLANNING DESIGNING TESTING COMMISSIONING OF W ATER TREATMENT PLANT & MARKETING AND IN VIEW OF VARIOUS LEGAL DECI SIONS THESE JOINT OPERATIONS ARE UNDER THE CATEGORIZED DEVELOPER AND THE LD. ASSESSING OFFICER HAS RIGHTLY ALLOWED THE DEDUCTION U/S 80IA OF THE ACT. FURTHER LD. AR REFERRED TO THE AGREEMENT AND WORK ORDERS PL ACED ON RECORD MAKING IT EVIDENTLY CLEAR THAT ASSESSEE COMPANY HAS DESIGNED CONSTRUCTED COMMISSIONED TESTED OPERATED MANUFA CTURED WATER TREATMENT PLANT AND HAS TRAINED THE PERSONNEL OF GW SSB WHICH ARE ENOUGH TO SATISFY THAT WORKS WERE CARRIED OUT ON TI ME BASIS AS DEVELOPER AND NOT AS CONTRACTOR. 7. LD. AR ALSO SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALL NECESSARY DETAILS WERE PLACED BEFOR E THE ASSESSING AUTHORITY WHICH ARE EVIDENCED IN THE ASSESSMENT ORD ER ITSELF AND LD. ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 5 ASSESSING OFFICER HAS APPLIED HIS MIND WITHIN THE F OUR CORNERS OF LAW. ON THE BASIS OF DETAILS AVAILABLE ON RECORD THE DI SCRETIONARY POWER WAS WITH THE ASSESSING AUTHORITY TO TREAT THE ASSES SEE AS A DEVELOPER OR A WORKS CONTRACTOR WHICH IN THIS CASE TILTED IN FAVOUR OF ASSESSEE AS IT WAS TREATED AS A DEVELOPER. THERE ARE SERIES OF JUDGMENTS AND DECISIONS WHEREIN IT HAS BEEN HELD THAT IF THE ASSE SSING AUTHORITY AT SOME JUNCTURE HAS TWO POSSIBLE LEGAL VIEWS AND HE O PTS FOR ONE THEN IT CANNOT BE SAID TO BE PREJUDICIAL TO THE INTEREST OF REVENUE NOR IT CAN BE TERMED AS ERRONEOUS ORDER. LD. AR RELIED ON THE JUDGMENT OF HON. JURISDICTIONAL HIGH COURT IN THE CASE OF PRINCIPAL CIT VS. SHRI PRAKASH BHAGCHAND KHATRI IN TAX APPEAL NO.177 & 178 OF 2016 JUDGMENT OF HON. DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL HOUSING & CONSTRUCTION LTD. (2014) 45 TAXMANN.COM 223 (DELHI) DECISION OF THE CO-ORDINATE BENCH PUNE IN THE CASE OF KIRLOSKAR BR OTHERS LTD. VS. ACIT IN ITA NO.636 & 637/PN/2008. 8. ON THE OTHER HAND LD. DR RELIED ON THE ORDER OF CIT U/S 263 OF THE ACT. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. SOLITARY GRIEVANCE OF THE ASSESSEE IS AG AINST THE ORDER U/S 263 OF THE ACT FRAMED BY LD. CIT HOLDING THAT THE A SSESSMENT ORDER PASSED U/S 143(3) OF THE ACT IS ERRONEOUS AND PREJU DICIAL TO THE INTEREST OF REVENUE TO THE EXTENT OF ALLOWANCE OF D EDUCTION U/S 80IA OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE I MPUGNED ASSESSMENT ORDER WAS PASSED UNDER PROPER ENQUIRY AND VERIFICAT ION. WE OBSERVE THAT ASSESSEE HAS CLAIMED DEDUCTION U/S 80IA OF THE ACT OF ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 6 RS.33 10 007/- TOWARDS PROFIT EARNED FROM THE PROJE CTS AWARDED BY GWSSB AND SADA GWALIOR M.P. TOWARDS DESIGNING CO NSTRUCTING COMMISSIONING TESTING OPERATING AND MAINTENANCE O F WATER TREATMENT PLANTS AND TRAINING THE PERSONNEL OF GWSS B. NECESSARY AGREEMENTS AND CONTRACTS ARE PLACED ON RECORD. RELE VANT PORTION OF THE PROVISION RELATING TO DEDUCTION U/S 80IA SUB-SE CTION (4) OF THE ACT APPLICABLE IN THE CASE OF ASSESSEE READS AS FOLLOWS :- SEC.80IA: (4) THIS SECTION APPLIES TO ( I ) ANY ENTERPRISE CARRYING ON THE BUSINESS [OF ( I ) DEVELOPING OR ( II ) OPERATING AND MAINTAINING OR ( III ) DEVELOPING OPERATING AND MAINTAINING] ANY INFRAS TRUCTURE FACILITY WHICH FULFILS ALL THE FOLLOWING CONDITIONS NAMELY : ( A ) IT IS OWNED BY A COMPANY REGISTERED IN INDIA OR B Y 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 CEN TRAL GOVERNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORITY OR ANY OTHER STATUT ORY BODY FOR (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING OPERATING AND MAINTAINING A NEW INFRASTRUCTURE FACILITY;] ( C ) IT HAS STARTED OR STARTS OPERATING AND MAINTAININ G THE INFRASTRUCTURE FACILITY ON OR AFTER THE 1ST DAY OF APRIL 1995: PROVIDED THAT WHERE AN INFRASTRUCTURE FACILITY IS TRANSFERRE D ON OR AFTER THE 1ST DAY OF APRIL 1999 BY AN ENTERPRISE WHICH DEVELOPED SUCH I NFRASTRUCTURE FACILITY (HEREAFTER REFERRED TO IN THIS SECTION AS THE TRANSFEROR ENTER PRISE) TO ANOTHER ENTERPRISE (HEREAFTER IN THIS SECTION REFERRED TO AS THE TRANS FEREE ENTERPRISE) FOR THE PURPOSE OF OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILI TY ON ITS BEHALF IN ACCORDANCE WITH THE AGREEMENT WITH THE CENTRAL GOVERNMENT STA TE GOVERNMENT LOCAL AUTHORITY OR STATUTORY BODY THE PROVISIONS OF THIS SECTION SHALL APPLY TO THE TRANSFEREE ENTERPRISE AS IF IT WERE THE ENTERPRISE TO WHICH THIS CLAUSE APPLIES AND THE DEDUCTION FROM PROFITS AND GAINS WOULD BE AVAILABLE TO SUCH TRANSFEREE ENTERPRISE FOR THE UNEXPIRED PERIOD DURING WHICH THE TRANSFERO R ENTERPRISE WOULD HAVE BEEN ENTITLED TO THE DEDUCTION IF THE TRANSFER HAD NOT TAKEN PLACE. [ EXPLANATION .FOR THE PURPOSES OF THIS CLAUSE INFRASTRUCTURE FACILITY MEANS ( A ) A ROAD INCLUDING TOLL ROAD A BRIDGE OR A RAIL SY STEM; ( B ) A HIGHWAY PROJECT INCLUDING HOUSING OR OTHER ACTI VITIES BEING AN INTEGRAL PART OF THE HIGHWAY PROJECT; ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 7 ( C ) A WATER SUPPLY PROJECT WATER TREATMENT SYSTEM I RRIGATION PROJECT SANITATION AND SEWERAGE SYSTEM OR SOLID WASTE MANAGEMENT SYSTEM; ( D ) A PORT AIRPORT INLAND WATERWAY [ INLAND PORT OR 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 O N OR AFTER THE 1ST DAY OF APRIL 1995 BUT ON OR BEFORE THE 31ST DAY OF MARCH 34 [2005].] EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE DOME STIC SATELLITE MEANS A SATELLITE OWNED AND OPERATED BY AN INDIAN COMPANY FOR PROVIDI NG TELECOMMUNICATION SERVICE; 10. FROM GOING THROUGH THE ABOVE PROVISIONS AND APP LYING THE FACTS AVAILABLE ON RECORD WE OBSERVE THAT ASSESSEE ALSO IS ENGAGED IN OPERATING MAINTENANCE OF THE PROJECTS ENTERED INTO AGREEMENT WITH THE GOVERNMENT/LOCAL AUTHORITIES. WE FURTHER OBSERV E THAT EXPLANATION TO SECTION 80IA OF THE ACT WAS INSERTED BY FINANCE (NO.2) ACT 2009 WITH RETROSPECTIVE EFFECT FROM 1.4.2000 W HICH READS AS UNDER :- SEC.80IA [ EXPLANATION. FOR THE REMOVAL OF DOUBTS IT IS HEREBY DECLARED T HAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY IN RELATION TO A BUSINESS REFERRED TO IN SUB-SECTION (4) WHICH IS IN THE NATURE OF A WORKS CONTRACT AWARDED BY ANY PERSO N (INCLUDING THE CENTRAL OR STATE GOVERNMENT) AND EXECUTED BY THE UNDERTAKING OR ENTE RPRISE REFERRED TO IN SUB-SECTION (1).] THE ABOVE WAS SUBSTITUTED AT THE PLACE OF FOLLOWING EXPLANATION WHICH READS AS UNDER :- FOR THE REMOVAL OF DOUBTS IT IS HEREBY DECLARED TH AT NOTHING CONTAINED IN THIS SECTION WAS APPLIED TO A PERSON TO EXECUTE WORKS CONTRACT ENTER ED INTO WITH THE UNDERTAKING OR ENTERPRISE AS THE CASE MAY BE. ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 8 ABOVE AMENDMENT WHICH CAME INTO EFFECT WITH THE FIN ANCE (NO.2) ACT 2009 WHEREAS THE ASSESSMENT ORDER WAS FRAMED U/ S 143(3) OF THE ACT ON 20.12.2007 WHICH IS MUCH BEFORE THE AMEN DMENT AND CERTAINLY ASSESSING OFFICER HAS APPLIED HIS MIND ON THE BASIS OF EXISTING PROVISIONS AS ON THE DATE OF PASSING THE O RDER. 11. WE FURTHER OBSERVE THAT HON. JURISDICTIONAL HIG H COURT IN THE CASE OF PRINCIPAL CIT VS. SHRI PRAKASH BHAGCHAND KH ATRI (SUPRA) DEALING WITH SIMILAR ISSUE U/S 263 OF THE ACT HAS O BSERVED AS UNDER :- 5) HAVING HEARD LEARNED COUNSEL FOR THE PARTIES AN D HAVING PERUSED DOCUMENTS ON RECORD WE NOTICE THAT THOUGH IN THE ORDER OF AS SESSMENT THE ASSESSING OFFICER HAS NOT DISCUSSED THE CLAIM OF THE ASSESSEE OF LONG TERM CAPITAL GAIN AND DEDUCTION UNDER SECTION 54F OF THE ACT OUT OF SUCH CAPITAL GAIN HE HAD RAISED MULTIPLE QUERIES ABOUT SAID ASPECTS. IN THE ORDER S HEET THE ASSESSMENT OFFICER HAD CALLED UPON THE ASSESSEE TO FURNISH VARIOUS DET AILS INCLUDING 'THE DETAILS OF FIXED ASSETS AND DETAILS OF SALE OF LAND'. THUS DE TAILS THE ASSESSEE HAD PROVIDED UNDER A COMMUNICATION MADE IN OCTOBER 2012 IN WHIC H HE HAD PROVIDED DETAILS OF FIXED ASSETS AND DETAILS OF SALE OF LAND. ON 28. 2.2012 THE ASSESSEE HAD WRITTEN TO THE ASSESSING OFFICER AS UNDER: 'THIS IS WITH REFERENCE TO THE DATE OF CONSTRUCTION OF NEW ASSET FOR THE PURPOSE SECTION 54/54F WITHIN A PERIOD OF THREE YEA RS WE WOULD LIKE TO MENTION AS FOLLOWS: 1. SECTION 54F OF THE INCOME-TAX ACT PROVIDES FOR E XEMPTION FROM TAX ON LONG TERM CAPITAL GAINS ARISING FROM TRANSFER OF A CAPITAL ASSET OTHER THAN A RESIDENTIAL HOUSE PROPERTY PROVIDED THE NET CONSID ERATION IS INVESTED IN A NEW ASSET BEING A RESIDENTIAL HOUSE PROPERTY. FOR A VAILING OF THE EXEMPTION THE ASSESSEE IS REQUIRED TO DO FOLLOWING ACTS IN ADDITION TO SATISFYING OTHER CONDITIONS: *PURCHASE THE RESIDENTIAL HOUSE PROPERTY WITHIN A P ERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER *CONSTRUCT THE RESIDENTIAL HOUSE PROPERTY WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER OF THE ASSET. ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 9 2. SECTION 54 OF THE INCOME TAX ACT DEALING WITH EX EMPTION FROM TAX FOR LONG TERM GAINS ON TRANSFER OF A LONG TERM CAPITAL ASSET OTHER THAN A RESIDENTIAL HOUSE PROVIDES AS UNDER (RELEVANT EXTRA CTS ONLY): 'CAPITAL GAIN ON TRANSFER OF CERTAIN CAPITAL ASSETS NOT TO BE CHARGED IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE. . . - : 54F. (1) [SUBJECT TO THE PROVISIONS OF SUB-SECTION (4) WHERE IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDE D FAMILY] THE CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG-TERM CAPI TAL ASSET NOT BEING A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERR ED TO AS THE ORIGINAL ASSET) AND THE ASSESSEE HAS WITHIN A PERIOD OF ON E YEAR BEFORE OR [TWO YEARS] AFTER THE DATE ON WHICH THE TRANSFER TOOK PL ACE PURCHASED OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE [CONSTRUCTED A RESIDENTIAL HOUSE] (HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW A SSET) THE CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOL LOWING PROVISIONS OF THIS SECTION THAT IS TO SAY (A) IF THE COST OF THE NEW ASSET IS NOT LESS THAN T HE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET THE WHOLE OF SUCH CA PITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45 ; (B) IF THE COST OF THE NEW ASSET IS LESS THAN THE NET C ONSIDERATION IN RESPECT OF THE ORIGINAL ASSET SO MUCH OF THE CAPIT AL GAIN AS BEARS TO THE WHOLE OF THE CAPITAL GAIN THE SAME PROPORTION AS TH E COST OF THE NEW ASSET BEARS TO THE NET CONSIDERATION SHALL NOT BE CHARGE D UNDER SECTION 45: 3. THE MAJOR POINTS TO BE NOTED ON THE ISSUE ARE AS UNDER: *SECTION 54F OF THE INCOME TAX ACT IS A BENEFICIAL PROVISION WHICH IS TO BE INTERPRETED LIBERALLY FOR ACHIEVING THE PURPOSE FOR WHICH IT WAS INSERTED. THE PURPOSE OF THE SECTION IS TO ENCOURAGE CONSTRUC TION OF THE HOUSES. *FOR THE PURPOSE OF INTERPRETATION OF THE WORD 'PUR CHASED' OR 'CONSTRUCTED' WHAT IS ESSENTIAL IS THE INVESTMENT OF THE CAPITAL GAIN IN THE RESIDENTIAL HOUSE. THE CAPITAL GAIN SHOULD BE PARTED WITH BY TH E ASSESSEE AND INVESTED IN EITHER PURCHASING OR CONSTRUCTING THE H OUSE. 4. ONE OF THE CONDITIONS FOR GETTING BENEFIT OF SEC TION 54/54FIS THAT ON SALE OR TRANSFER OF THE OLD HOUSE THE ASSESSEE SHOULD E ITHER PURCHASE A NEW HOUSE WITHIN ONE YEAR BEFORE SALE OR WITHIN 2 YEARS AFTER SALE OR SHOULD CONSTRUCT A NEW HOUSE WITHIN 3 YEARS OF THE SALE OF OLD HOUSE BY INVESTING THEREIN THE NEST AMOUNT OF CAPITAL GAIN ARISING FRO M THE SALE OR TRANSFER OF THE OLD HOUSE.' ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 10 6) IT CAN THUS BE SEEN THAT THOUGH FINAL ORDER OF ASSESSMENT WAS SILENT ON THIS ASPECT THE ASSESSING OFFICER HAD CARRIED OUT INQUI RIES ABOUT THE NATURE OF SALE OF LAND AND ABOUT THE VALIDITY OF THE ASSESSEE'S CLAIM OF DEDUCTION UNDER SECTION 54F OF THE ACT. LEARNED COUNSEL FOR THE REVENUE HOW EVER SUBMITTED THAT THESE INQUIRIES WERE CONFINED TO THE CLAIM OF DEDUCTION U NDER SECTION 54F OF THE ACT IN THE CONTEXT OF FULFILLING CONDITIONS CONTAINED THER EIN AND MAY POSSIBLY HAVE NO RELEVANCE TO THE QUESTION WHETHER THE SALE OF LAND GAVE RISE TO A LONG TERM CAPITAL GAIN. LOOKING TO THE TENOR OF QUERIES BY THE ASSESS ING OFFICE AND DETAILS SUPPLIED BY THE ASSESSEE WE ARE UNABLE TO ACCEPT SUCH A CON DITION. IN THAT VIEW OF THE MATTER THE OBSERVATION OF THE TRIBUNAL THAT THE AS SESSING OFFICER HAVING MADE INQUIRIES AND WHEN TWO VIEWS ARE POSSIBLE REVISION AL POWERS COULD NOT BE EXERCISED CALLED FOR NO INTERFERENCE. SINCE WITH R ESPECT TO COMPUTATION AND ASSERTIONS OF OTHER ASPECTS OF DEDUCTION UNDER SECT ION 54F OF THE ACT THE TRIBUNAL HAS REMANDED THE PROCEEDINGS NOTHING STAT ED IN THIS ORDER WOULD AFFECT EITHER SIDE IN CONSIDERATIONS OF SUCH CLAIM. 12. SIMILAR ISSUE RELATING TO DEDUCTION U/S 80IB R. W.S. 263 OF THE ACT CAME UP BEFORE HON. DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL HOUSING & CONSTRUCTION LTD. [2014] 45 TAXMANN.COM 2 23 (DELHI) WHEREIN FOLLOWING FACTS WERE DEALT :- THE COMMISSIONER INITIATED REVISION PROCEEDINGS ON THE GROUND THAT THE ASSESSING OFFICER HAD ALLOWED DEDUCTION UNDER SECTION 80-IB(1 0) WITHOUT EXAMINING WHETHER ALL THE CONDITIONS PRESCRIBED BY THE SECTION WERE S ATISFIED AND HENCE ASSESSMENT WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. THE TRIBUNAL IN ITS ORDER HELD THAT AS REGARDS THE INTERPRETATION PLACED ON SECTION 80- IB(10). THERE WAS NO DISPUTE THAT THE PROJECT WAS A PPROVED BY LOCAL AUTHORITIES AND WAS DEVELOPED ON LAND EXCEEDING 1 ACRE AS REQUIRED BY THE SECTION. IT FURTHER HELD THAT EVEN IF SOME FLATS EXCEEDED 1000 SQ. FT. OF TH E BUILT-UP AREA THAT DID NOT DISENTITLE THE ASSESSEE TO THE DEDUCTION RATHER A PROPORTIONAT E DEDUCTION ON FLATS WHICH EXCEED THE STATUTORY LIMIT OF 1000 SQ. FT. ALONE COULD BE DISALLOWED. ON AN APPEAL : HON. COURT ADJUDICATED THE ISSUE BY UPHOLDING THE O RDER OF THE TRIBUNAL BY OBSERVING AS UNDER :- 12 . THE TRIBUNAL WAS OF OPINION THAT MERELY BECAUSE THE RE WAS A HONEST AND BONA FIDE DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE ASSESSING OFFICER ON THE ONE HAND AND THE ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 11 CIT ON THE OTHER WITH REGARD TO THE INTERPRETATION TO BE PLACED ON A PROVISION OF LAW OR THERE WAS A POSSIBILITY OF MORE THAN ONE REASONABLE VIEW OF THE STATUTORY PROVISION IT CANNOT BE SAID THAT THE ASSESSMENT WAS ERRONEOUS OR PREJUDICI AL TO THE INTEREST OF THE REVENUE. IN THIS VIEW OF THE MATTER THE TRIBUNAL VACATED THE ORDERS OF THE CIT PASSED UNDER SECTION 263 OF THE ACT FOR BOTH THE YEARS. IT MAY BE ADDED THAT TH E TRIBUNAL PLACED RELIANCE ON THE FOLLOWING JUDGMENTS OF THE SUPREME COURT: (1) MALABAR INDUSTRIES CO. LTD. V. CIT [20001 243 ITR 83/109 TAXMAN 66 (SO. C/TV. G.M. MITTAL [20031 253 ITR 255/130 TAXMAN 67 (SO. (2) C/TV. MAX INDIA LTD. 120071 295 ITR 282/166 TAXMAN 188 (SO 13 . THE TRIBUNAL HOWEVER OBSERVED THAT SINCE NO SUBMIS SIONS WERE MADE BY THE ASSESSEE AS REGARD THE DISALLOWANCE UNDER SECTION* 14A THE ORD ERS OF THE CIT ON THAT ISSUE HAD TO BE AFFIRMED. 14. WE ARE NOT PERSUADED TO TAKE A VIEW DIFFERENT FROM THE VIEW TAKEN BY THE TRIBUNAL. A CLEAR FINDING WAS RECORDED BY THE TRIBUNAL THAT THE ASSESSEE HAD FILED THE DETAILS AND CALCULATIONS ABOUT THE BUILT-UP AREA OF THE RESIDEN TIAL UNITS. IT WOULD BE UNREASONABLE TO HOLD'THAT THE ASSESSING OFFICER IGNORED THOSE DETAI LS. MOREOVER THE STATUTORY AUDITORS HAD CLEARLY MENTIONED THE DATES OF APPROVAL OF THE LAY OUT PLAN OF THE RESIDENTIAL COLONIES. THE ASSESSING OFFICER WAS THUS MADE AWARE OF THE DATES ON WHICH THE APPROVALS WERE GRANTED IN RESPECT OF EACH OF THE FOUR HOUSING PROJECTS. THE M ORE IMPORTANT ASPECT WAS THE APPLICABILITY OF CLAUSE (A) OF SECTION SOIB(IO). ON THIS ASPECT T HE TRIBUNAL HELD THAT ANY CONSTRUCTION CARRIED OUT BEFORE THE RECEIPT OF NECESSARY APPROVA LS WOULD BE UNAUTHORIZED ARID COULD NOT BE RECOGNIZED. IT WAS FOUND BY THE TRIBUNAL THAT IN AN Y CASE THERE WAS ONLY SITE DEVELOPMENT BY FILLING OF PITS LEVELING OF LAND CONSTRUCTION OF ROADS WELLS LAYING OF SEWERAGE AND ELECTRICITY LINES ETC. FURTHER THERE WAS NO DISPUTE REGARDING T HE DATE OF COMMENCEMENT OF CONSTRUCTION WITH RESPECT TO THE PROJECTS NAMELY GOLF LINK-II AND EAST END LONI. THE TRIBUNAL HAS FOUND THAT BOTH THESE PROJECTS COMMENCED AFTER 1ST OCTOBE R 1998. WITH REGARD TO THE OTHER TWO PROJECTS NAMELY GOLF LINK-I AND AVANTIKA AKRUTI THE TRIBUNAL HELD THAT THE DATE OF COMMENCEMENT OF CONSTRUCTION HAD TO BE RECKONED FRO M THE DATE WHEN THE CONSTRUCTION OF THE BUILDING PLAN OF EACH PROJECT WAS APPROVED BY T HE CONCERNED AUTHORITY. ON EXAMINATION OF THE DETAILS OF THE CHRONOLOGICAL EVENTS FURNISHE D BY THE ASSESSEE IT WAS HELD BY THE TRIBUNAL THAT THE BUILDING PLANS OF EACH HOUSE SUBM ITTED BY THE ASSESSEE WERE NOT SANCTIONED AS SUCH BY THE COMPETENT AUTHORITY BEFORE 1ST OCTOB ER 1998. THEY WERE REJECTED AND TIME AND AGAIN MODIFICATIONS WERE PROPOSED BY THE AUTHOR ITY; FINALLY THE APPROVALS OF THE BUILDING PLANS WERE ISSUED AFTER 1ST OCTOBER 1998 EXCEPT F OR 26 HOUSES IN AVANTIKA AKRUTI PROJECT. THE TRIBUNAL HAS ALSO REFERRED TO CERTAIN ORDERS OF THE PUNE AND BOMBAY BENCHES OF THE TRIBUNAL WHERE THE DATE OF APPROVAL BY THE COMPETEN T AUTHORITY WAS CONSIDERED CRUCIAL TO DETERMINE THE DATE OF COMMENCEMENT OF DEVELOPMENT O R CONSTRUCTION. THIS DISCUSSION OF THE TRIBUNAL SHOWS THAT THE DETERMINATION OF THE QUESTI ON AS TO WHEN THE UNDERTAKING COMMENCED DEVELOPMENT AND CONSTRUCTION IN THE ABSENCE OF ANY STATUTORY PRESCRIPTION HAS TO BE DECIDED IN A PRAGMATIC AND REASONABLE WAY. IT WOULD HAVE BE EN AN ENTIRELY DIFFERENT ISSUE HAD THERE BEEN A STATUTORY PRESCRIPTION OF WHAT WOULD BE THE DATE OF COMMENCEMENT OF CONSTRUCTION OR DEVELOPMENT. IT IS CERTAINLY A DEBATABLE ISSUE ON W HICH MORE THAN ONE PLAUSIBLE VIEW IS REASONABLY POSSIBLE AND MERELY BECAUSE THE ASSESSIN G OFFICER HAS TAKEN ONE PLAUSIBLE VIEW IT CANNOT BE SAID THAT THE ASSESSMENT IS ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF THE REVENUE. THIS POSITION STANDS WELL SETTLED BY THE JUDGMENTS OF THE SUPREME COURT CITED SUPRA. THE TRIBUNAL APPLIED THE TESTS LAID DOWN IN THESE JUDGM ENTS TO THE CASE. ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 12 15. FOR THE ABOVE REASONS WE ARE OF THE VIEW THAT NO SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR CONSIDERATION IN ITA NOS.485/2010 & 480/2010. T HE ORDERS OF THE TRIBUNAL ARE ACCORDINGLY UPHELD AND APPEALS FILED BY THE REVENUE ARE DISMISSED. 13. FURTHER WE ALSO OBSERVE THAT SIMILAR ISSUE ALSO CAME UP BEFORE THE CO-ORDINATE BENCH PUNE IN THE CASE OF KIRLOSKA R BROTHERS LTD. VS. ACIT IN ITA NO.636 & 637/PN/2008 ASST. YEARS 2003- 04 & 2004-05 WHEREIN VIDE ITS ORDER DATED 28 TH FEBRUARY 2011 DECIDED THE ISSUE BY OBSERVING AS UNDER :- 15. AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATER IAL ON RECORD WE FIND THAT HON'BLE SUPREME COURT IN THE CASE OF MAX INDIA LTD. (SUPRA) HAS HELD THAT IN CASE AT THE KIRLOSKAR BROTHERS A.Y. 2003-04 & 2004-05 TI ME OF PASSING AN ORDER U/S 143(3) TWO VIEWS WERE INHERENTLY POSSIBLE ON THE WO RD 'PROFITS' OCCURRING IN THE PROVISO TO SECTION 80-HHC(3) AND THEREFORE SUBSEQUENT AMENDMENT OF SECTION 80-HHC MADE IN THE YEAR 2005 THOUGH RETROSPECTIVE DID N OT RENDER THE ORDER OF THE ASSESSING OFFICER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE THE CIT COULD NOT EXERCISE POWERS U/S 263 OF THE ACT. F OLLOWING THE SAME ANALOGY WE FIND THAT AT THE RELEVANT POINT OF TIME TWO VIEWS WERE POSSIBLE BEFORE RETROSPECTIVE AMENDMENT TO SECTION 80-IA WHEREBY EXPLANATION WAS INSERTED BY THE FINANCE (NO. 2) ACT 2009 WITH RETROSPECTIVE EF FECT FROM 1-4-2000 WHICH READS AS UNDER: 'EXPLANATION - FOR THE REMOVAL OF DOUBTS IT IS HER EBY DECLARED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY IN RE LATION TO A BUSINESS REFERRED TO IN SUB-SECTION (4) WHICH IS IN THE NATU RE OF A WORKS CONTRACT AWARDED BY ANY PERSON (INCLUDING THE CENTRAL OR STA TE GOVERNMENT) AND EXECUTED BY THE UNDERTAKING OR ENTERPRISE REFERRED TO IN SUB-SECTION (1)' IT WAS SUBSTITUTED BY THE FINANCE (NO. 2) ACT 2009 WITH RETROSPECTIVE EFFECT FROM 1-4-2000. PRIOR TO ITS SUBSTITUTION EXPLANATION A S INSERTED BY THE FINANCE ACT 2007 WITH RETROSPECTIVE EFFECT FROM 1-4-2000 READ AS UNDER: 'EXPLANATION - FOR THE REMOVAL OF DOUBTS IT IS HER EBY DECLARED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY TO A PERSON WHO EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE AS THE CASE MAY BE' 16. THUS THE ABOVE AMENDMENT TO THE EXPLANATION TO SECTION 80-IA WAS MADE BY THE FINANCE (NO. 2) ACT 2009 WHILE THE ASSESSMENT O RDER PASSED ON 28-3-2006 AND THE ORDER OF THE CIT WAS PASSED ON 13-3-2008. I N THIS SITUATION THE ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 13 RETROSPECTIVE INSERTION OF THE EXPLANATION TO SECTION 80-IA AND AMENDMENT THEREOF WITH RETROSPECTIVE EFFECT DOES NOT RENDER T HE ASSESSMENT ORDER ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTERESTS OF REVENU E SO AS TO INVOKE PROVISIONS OF SECTION 263 OF THE ACT AS HELD BY HON'BLE SUPREME COURT IN TH E CASE OF MAX INDIA LTD. (SUPRA). HERE WE ARE CONFINED TO THE LIM ITED ISSUE OF INVOKING THE PROVISIONS OF SECTION 263 . ACCORDING TO US THE ASSESSING OFFICER HAS TAKEN ONE OF THE POSSIBLE VIEWS AVAILABLE AT THE RELEVANT POINT OF TIME. IN VIEW OF THIS WE ARE NOT INCLINED TO AGREE WITH THE FINDING OF THE CIT. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT PASSED U/S 263 FOR A.Y. 2003-04. S IMILAR IS THE ISSUE RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO. 637/PN/2008 F OR A.Y. 2004-05. FACTS BEING SIMILAR SO FOLLOWING THE REASONING GIVEN WHILE DEA LING WITH THE APPEAL FOR A.Y. 2003-04 THE ORDER PASSED BY THE CIT INVOKING THE P ROVISIONS OF SECTION 263 FOR A.Y. 2004-05 IS ALSO SET ASIDE. 14. RESPECTFULLY FOLLOWING THE JUDGMENTS AND DECISI ON AS REFERRED ABOVE WE ARE OF THE VIEW THAT IN THE GIVEN FACTS A ND CIRCUMSTANCES OF THE CASE ASSESSING OFFICER WAS HAVING TWO LEGAL PO SSIBLE VIEWS OF EITHER TREATING THE ASSESSEE AS A DEVELOPER OR A WO RKS CONTRACTOR AND ON THE BASIS OF DETAILS AVAILABLE LD. ASSESSING OF FICER TREATED THE ASSESSEE AS A DEVELOPER ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. 15. IN VIEW OF THIS IT CAN BE SAID THAT THE ASSESS MENT U/S 143(3) OF THE ACT IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. ACCORDINGLY WE DISAGREE WITH THE FINDING OF LD. CI T AND SET ASIDE HIS ORDER U/S 263 OF THE ACT AND RESTORED THE ASSESSMEN T ORDER U/S 143(3) OF THE ACT. THEREFORE ISSUE RAISED IN THIS A PPEAL IS DECIDED IN FAVOUR OF ASSESSEE. ACCORDINGLY THE APPEAL OF ASSE SSEE IS ALLOWED. 16. IN APPEAL OF ASSESSEE IN ITA NO.812/AHD/2010 FO R ASST. YEAR 2006-07 THE ISSUE RAISED IS SIMILAR TO THAT OF APP EAL IN ITA NO.811/AHD/2010 FOR ASST. YEAR 2005-06. WE THEREFOR E APPLY OUR DECISION TAKEN IN ITA NO.811/AHD/2010 AND SET ASIDE THE ORDER OF LD. ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 14 CIT U/S 263 OF THE ACT AND RESTORE THE ORDER OF ASS ESSING OFFICER U/S 143(3) OF THE ACT DATED 28.3.2008 ALLOWING DEDUCTIO N U/S 80IA OF RS.38 35 761/-. THIS APPEAL OF THE ASSESSEE IS ALSO ALLOWED. 17. NOW WE TAKE UP ITA NO.732/AHD/2013 FOR ASST. Y EAR 2005-06 AND APPEAL IN ITA NO.2132/AHD/2011 FOR ASST. YEAR 2 006-07 (REVENUES APPEALS). REVENUE IS IN APPEALS AGAINST THE ORDERS PASSED U/S 143(3) R.W.S. 263 ALLOWING THE DEDUCTION U/S 80IA OF THE ACT TO THE ASSESSEE. 18. AS WE HAVE ALREADY DECIDED THE APPEAL IN FAVOUR OF ASSESSEE IN ITA NO.811/AHD/2010 & ITA NO.812/AHD/2010 FOR ASST . YEAR 2005- 06 & ASST. YEAR 2006-07 QUASHING THE ORDER U/S 26 3 OF THE ACT PASSED BY LD. CIT IT WILL BE ACADEMIC TO DEAL WITH THESE TWO APPEALS OF REVENUE AGAINST THE ORDER OF LD. CIT(A) PASSED U /S 143(3) R.W.S. 263 FOR ASST. YEAR 2005-06 & ASST. YEAR 2006-07. TH EREFORE WE DISMISS BOTH THESE APPEALS. 19. IN THE RESULT ITA NO.732/AHD/2013 FOR ASST. Y EAR 2005-06 AND ITA NO. 2132/AHD/2011 FOR ASST. YEAR 2006-07 ARE DI SMISSED. 20. NOW WE TAKE REVENUES APPEALS IN ITA NO.250/AHD /2011 FOR ASST. YEAR 2007-08 IN ITA NO.733/AHD/2013 FOR ASST . YEAR 2008-09 & ITA NO.935/AHD/2013 FOR ASST. YEAR 2009-10 REVENUE HAS CHALLENGED THE ORDERS OF LD. CIT(A) DATED 29.12.201 0 DATED 26.12.2012 AND DATED 2.1.2013 RAISING COMMON GROUND AGAINST THESE ORDERS ALLOWING CLAIM U/S 80IA OF THE ACT AT RS.42 19 807/- ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 15 RS.35 26 005/- AND RS.52 26 225/- RESPECTIVELY FOR ASST. YEARS 2007- 08 2008-09 AND 2009-10. 21. WE TAKE UP THE FACTS FOR ASST. YEAR 2007-08 FOR ADJUDICATING THE ISSUE. BRIEFLY STATED FACTS ARE THAT THE RETURN OF INCOME WAS FILED ON 29.10.2007 DECLARING TOTAL INCOME AT RS.49 19 090/- FOLLOWED BY REVISED RETURN DATED 22.02.2009 DECLARING THE SAME INCOME. CASE WAS SELECTED FOR SCRUTINY ASSESSMENT. NECESSARY DET AILS AS REQUIRED BY ASSESSING OFFICER WERE FILED BY THE ASSESSEE. AS SESSMENT WAS COMPLETED AT AN ASSESSED INCOME OF RS.1 22 70 657/- AFTER MAKING ADDITION TOWARDS DISALLOWANCE OF DEDUCTION U/S 80IA OF THE ACT AT RS.49 47 687/- DISALLOWANCE OF CLAIM OF BAD DEBT/B USINESS LOSS AT RS.17 77 540/- AND DISALLOWANCE OF BAD DEBT AT RS.6 26 340/-. APPEAL OF THE ASSESSEE WAS PARTLY ALLOWED BY LD. CIT(A). 22. NOW REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AG AINST THE ALLOWABILITY OF CLAIM OF DEDUCTION OF RS.49 19 807/ - U/S 80IA OF THE ACT ON ACCOUNT OF THREE PROJECTS NAMELY GWSSB-ADB GON DAL GWSSB-GONDAL & MPAKVN. 23. LD. DR SUPPORTED THE ORDER OF LD. ASSESSING OFF ICER. 24. ON THE OTHER HAND LD. AR SUPPORTED THE ORDER O F LD. CIT(A) AND AT THE OUTSET SUBMITTED THAT FACTS AND ACTIVITIES U NDERTAKEN BY THE ASSESSEE COMPANY IN COMPLETION OF THE PROJECTS ARE SIMILAR TO THOSE ADJUDICATED BY THE CO-ORDINATE BENCH HYDERABAD IN THE CASE OF SUSHEE HI TECH CONSTRUCTIONS (P) LTD. VS. DCIT (201 3) WHEREIN IT HAS ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 16 BEEN HELD THAT THE PROFITS FROM SUCH CONTRACTS WHIC H INVOLVE DEVELOPMENT OPERATING MAINTENANCE FINANCIAL INVO LVEMENT AND DEFECT CORRECTION THEN SUCH CONTRACT CANNOT BE CALL ED A SIMPLE WORKS CONTRACT AND THE ASSESSEE IN SUCH CIRCUMSTANCES SHA LL BE ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. 25. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON THE RECORD AND ALSO GONE THROUGH THE DECISION RE LIED ON BY THE LD. AR. SOLITARY GRIEVANCE OF THE REVENUE IS AGAINST TH E ORDER OF LD. CIT(A) ALLOWING THE CLAIM OF RS. 42 19 807/- U/S 80 IA OF THE ACT. WE OBSERVE THAT LD. CIT(A) HAS ALLOWED THE CLAIM UNDER SECTION 80IA OF THE ACT TOWARDS PROFIT EARNED FROM THREE PROJECTS N AMELY GWSSB- ADB GONDAL GWSSB-GONDAL & MPAKVN BY OBSERVING AS BELOW :- 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE ASSESS MENT ORDER AND APPELLANTS SUBMISSION. APPELLANT CLAIMED DEDUCTION U/S 80IA(4) OF IT ACT ON FIVE INFRASTRUCTURE DEVELOPMENT PROJECTS BEFORE ASSESSIN G OFFICER AS UNDER :- 1. GWSSB ASIAN DEVELOPMENT BANK (ADB) PROJECT 2. GWSSB GONDAL/KATHARIA 3. AHMEDABAD MUNICIPAL CORPORATION 4. GWSSB NADIAD 5. MP AUDYOGIK KENDRA VIKAS NIGAM LTD. (IMPAKVN) HOWEVER IN APPEAL SUBMISSION DATED 27.10.2010 APPEL LANT DID NOT PURSUE ITS CLAIM IN RESPECT OF TWO PROJECTS NAMELY AHMEDABAD MUNICIPAL CORPORATION AND GWSSB NADIAD IT WAS SUBMITTED THAT THESE PROJECTS RELATES TO MAINTENANCE AND OTHER SERVICES AND NOT INFRASTRUCTURE DEVELOPMENT T HEREFORE 80IA CLAIM IN RESPECT OF THESE PROJECTS WERE NOT PURSUED. IN VIEW OF THIS APPELLANTS CLAIM IN RESPECT OF THESE TWO PROJECTS IS REJECTED. COMING TO THE OTHER THREE PROJECTS APPELLANT SUBMIT TED DETAILED SUBMISSION IN RESPECT OF EACH PROJECT AND DEMONSTRATED THAT AS PE R THE BID DOCUMENT AND TERMS OF THE AGREEMENT THE WORK INCLUDED DESIGNING CONSTRUCTION COMMISSIONING TESTING TRIAL RUN ETC. THIS ALSO IN CLUDED TRAINING OF THE PERSONNEL. ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 17 ALL THREE AGREEMENTS WERE PRODUCED AND WERE EXAMINE D IN DETAIL. APPELLANTS CLAIM THAT IT WAS NOT A MERE CONTRACTOR WAS EVIDENC ED FROM THESE DOCUMENTS. APPELLANT WAS FOUND TO BE A DESIGNER OF THE INFRAST RUCTURE FACILITIES WITH ITS TECHNICAL TEAM. IT ALSO CONSTRUCTED INFRASTRUCTURE FACILITIES WITH ITS RISK AND ALSO COMMISSIONED THE SAME AND CARRIED OUT TRIAL RUN. AP PELLANT ALSO OPERATED AND MAINTAINED THE INFRASTRUCTURE FACILITIES CREATED BY IT FOR SOME TIME AND ALSO TRAINED THE PERSONNEL WHEN REQUIRED. CONSIDERING THESE FACT S IT CANNOT BE SAID THAT APPELLANT WAS A MERE CONTRACTOR AND NOT A DEVELOPER . ALL THE DECISIONS REFERRED BY THE ASSESSING OFFICER AND APPELLANT WERE ANALYSE D AND IN THE LIGHT OF FACTS OF THE APPELLANT IT IS QUITE CLEAR THAT IN RESPECT OF THESE THREE PROJECTS APPELLANT WAS DEVELOPER. APPELLANT RELIED UPON A RECENT DECIS ION OF ITAT RAJKOT DATED 23.9.10 IN ITA NO.1111/RJT/2010 IN THE CASE OF M/S TARMET BEL (JV) KCL RAJKOT VS. ITO WD 1(4) RAJKOT. ALL RELEVANT DECISION OF T HE ISSUE WERE DISCUSSED IN THIS DECISION. THE RELEVANT EXTRACT OF THIS ORDER IS AS UNDER :- IN THE PRESENT CASE WE HOVE ALREADY HELD THAT ALTHOUGH THE APPELLANT ENTERED INTO A CONTRACT WITH THE GOVT. THE CONTRACT IS PART OF THE PRIMARY CONDITION OF SEC. 80IA(4) AND FURTHER THE NATURE OF WORK CARRIED OUT SHOWS THAT T HE APPELLANT NOT ONLY DIRECTLY (AND NOT INDIRECTLY) CARRIED OUT WORK AS PER THE CONTRACT BUT IT EMPLOYED VARIOUS RESOURCES OF ITS OWN BY WAY OF MAC HINERIES TECHNICAL KNOWLEDGE TECHNICAL AND OTHER MANPOWER MATERIALS ETC. AND ALSO FUNDED THE SAME OUT OF ITS OWN CAPITAL AND BORROWINGS. THE APPELLAN T WAS REQUIRED TO FURNISH GUARANTEES INCLUDING FREE MAINTENANCE OF THE INFRAS TRUCTURE FACILITIES. ALL THESE FACTORS COMBINED CLEARLY GO TO SHOW THAT THE APPELL ANT ALSO ASSUMED CONSIDERABLE RISK IN THE CAPACITY OF A BUSINESSMAN AND THE SUCH TASKS AS UNDERTAKEN ALTHOUGH UNDER A CONTRACT AS MANDATED B Y THE SECTION WOULD REQUIRE SKILLS OF PLANNING OF WORK EMPLOYING TECHN ICAL KNOW-HOW TO EXECUTE THE WORK AND TO FACE THE CONSEQUENCES OF ATTENDANT RISK S. WE FIND THAT THE RISKS ORE UPON THE ASSESSEE AND NOT UPON THE GOVT THESE ELEMENTS ARE GENERALLY MIS SING IN THE CASE OF A SUB-CONTRACTOR. HERE THE APPELLANT IS DIRECTLY ENGAGED IN PERFORMING ITS FUNCTIONS FURTHER IN THE CASE OF OM METALS INFRAPROJECTS LTD.( SUPRA) IT IS HELD THAT IF IT IS THE ASSESSEE MOBILIZING PE OPLE PLANTS TECHNICAL EXPERTISE ETC. THE ASSESSEE CAN BE SAID TO BE A DEVELOPER AND THAT THE ASSESSEE CANNOT BE DENIED DEDUCT/ON FROM THE PROFITS OF DEVELOPING THE INFRASTRUCTURE FACILITY THOUGH IT MAY NOT OPERATE OR MAINTAIN THE SAME PARTICULARLY IN VIEW OF THE INSERTION OF THE WORD 'OR' IN SEC. 80IA{4).' HONORABLE 1TAT HELD THAT IF ASSESSEE ASSUMES THE RI SK OF PROJECT PLAN THE PROJECT WORK EMPLOY TECHNICAL SKILLS MOBILIZE PEO PLE FUNDS AND RESOURCES THEN ASSESSEE CANNOT BE DENIED THE DEDUCTION FROM T HE PROFIT OF DEVELOPING INFRASTRUCTURE. APPELLANT'S CASE IS IDEN TICAL SINCE IN RESPECT OF THESE THREE PROJECTS APPELLANT DESIGNED THE INFRAST RUCTURE PROJECTS TOOK RISK OF THE PROJECT COMMISSIONED THE PROJECT AND C ONDUCTED TRIAL RUN DEPLOYED ITS OWN RESOURCES. IN THE LIGHT OF THESE F ACTS APPELLANT CANNOT BE TERMED AS MERE CONTRACTOR. SINCE APPELLANT PERFORM ALL THOSE TASKS WHICH ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 18 IS PERFORMED BY A DEVELOPER APPELLANT CANNOT BE DE NIED THE BENEFIT AVAILABLE TO THE DEVELOPER. ALL THE ARGUMENTS OF TH E ASSESSING OFFICER HAVE BEEN MET BY THE APPELLANT IN DETAILED SUBMISSIONS Q UOTED EARLIER. RESPECTFULLY FOLLOWING THE RECENT DECISION OF 1TAT RAJKOT BENCH WHICH SQUARELY APPLIES TO THE FACTS OF THE APPELLANT'S CA SE ASSESSING OFFICER IS DIRECTED TO ALLOW DEDUCTION U/S 80IA OF IT ACT IN R ESPECT OF THE THREE PROJECTS NAMELY GWSSB-ADB PROJECT GWSSB-GONDAL AND MPAKVN PROJECT. 26. WE FURTHER OBSERVE THAT FROM THE AGREEMENT ENTE RED INTO BY THE ASSESSEE WITH GWSSB & MPAKVN WITH REGARD TO THEIR S COPE OF WORK WHEREIN ASSESSEE IS REQUIRED TO DESIGNING (PROCESS HYDRAULIC STRUCTURE EQUIPMENT AND AESTHETICALLY) PROVIDING CONSTRUCTING AND COMMISSIONING CONVENTIONAL WATER TREATMENT PLANT CO NSISTING OF ALL CIVIL MECHANICAL AND ELECTRICAL COMPONENTS INCLUDI NG NECESSARY HYDRAULIC TESTING STRUCTURAL TESTING EQUIPMENT TE STING TRIAL RUN ETC. THE ASSESSEE IS ALSO REQUIRED TO ARRANGE CEMENT SA ND STEEL AND EQUIPMENTS ETC. AND UNDERTAKE SOIL INVESTIGATION AN D OTHER EXPLORATION WORK. IN ALL THE ASSESSEE COMPANY HAS T O DESIGN CONSTRUCT COMMISSION TEST/OPERATE AND MAINTAIN WA TER TREATMENT PLANT. ALL THESE CONDITIONS AKIN TO THE CONTRACT AW ARDED TO THE ASSESSEE DULY COME WITHIN THE AMBIT OF THE CONDITIO NS LAID DOWN U/S 80IA SUB-SECTION (4) OF THE ACT. 27. WE FURTHER OBSERVE THAT SIMILAR ISSUE CAME UP B EFORE THE CO- ORDINATE BENCH HYDERABAD IN THE CASE OF GVPR ENGIN EERS LTD. VS. ACIT (2012) TAXMANN.COM 25 (HYD) WHEREIN IT HAS BEE N HELD AS UNDER :- ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 19 HELD-I THE PROVISIONS OF SECTION 80-IA(4) WHEN INTRODUCED AFRESH BY THE FINANCE ACT 1999 THE PROVISIONS UNDER SECTION 80-IA(4A) WERE DELETED FRO M THE ACT. THE DEDUCTION AVAILABLE FOR ANY ENTERPRISE EARLIER UNDER SECTION 80-IA(4A) IS A LSO MADE AVAILABLE UNDER SECTION 80-JA(4) ITSELF. FURTHER THE VERY FACT THAT THE LEGISLATURE MENTIONED THE WORDS (I ) 'DEVELOPING' OR (II) 'OPERATING AND MAINTAINING' OR (III) 'DEVELOPING O PERATING AND MAINTAINING' CLEARLY INDICATES THAT ANY ENTERPRISE WHICH CARRIED ON ANY OF THESE T HREE ACTIVITIES WOULD BECOME ELIGIBLE FOR DEDUCTION. THEREFORE THERE IS NO AMBIGUITY IN THE ACT. WHERE AN ASSESSEE INCURRED EXPENDITURE FOR PURCHASE OF MATERIALS HIMSELF AND E XECUTES THE DEVELOPMENT WORK I.E. CARRIES OUT THE CIVIL CONSTRUCTION WORK HE WILL BE ELIGIBLE FOR TAX BENEFIT UNDER SECTION 80-1A. IN CONTRAST TO THIS AN ASSESSES WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON INCLUDING GOVERNMENT OR AN UNDERTAKING OR ENTERPRISE REFERRED TO IN SECTION 80-IA FOR EXECUTING WORKS CONTRACT WILL NOT BE ELIGIBLE FOR THE TAX BENEFIT UNDER SECTION 80-IA. THE WORD 'OWNED' IN SUB- CLAUSE (A.) OF CLAUSE (I) OF SUB-SEC. (4) OF SECTION 80-IA REFERS TO THE ENTERPRISE. BY R EADING OF THE SECTION IT IS CLEAR THAT THE ENTERPRISES CARRYING ON DEVELOPMENT OF INFRASTRUCTURE DEVELOPMENT SHOULD BE OWNED BY THE COMPANY AND NOT THAT THE INF RASTRUCTURE FACILITY SHOULD BE OWNED BY A COMPANY. THE PROVISIONS ARE MADE APPLICABLE TO THE PERSON TO WHOM SUCH ENTERPRISE BELONGS TO IS EXPLAINED IN SUB-CLAUSE (A). THEREFORE THE WORD 'OWNERSHIP' IS ATTRIBUTABLE ONLY TO THE ENTERPRISE CARRYING ON THE BUSINESS WHICH WOULD MEA N THAT ONLY COMPANIES ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IA(4) AND NOT ANY OTHER PERSON LIKE INDIVIDUAL HUF FIRM ETC. [PARA 26] ACCORDING TO SUB-CLAUSE (A ) CLAUSE ([) OF SUB-SEC TION (4) OF SECTION 80-IA THE WORD 'IT' DENOTES THE - ENTERPRISE CARRYING ON THE BUSINESS. THE WORD 'IT' CANNOT BE RELATED TO (HE INFRASTRUCTURE FACILITY PARTICULARLY IN VIEW OF THE FACT THAT INF RASTRUCTURE 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. EVEN OTHERWISE THE WOR D 'IT' IS USED TO DENOTE AN ENTERPRISE. THEREFORE THERE IS NO REQUIREMENT THAT THE ASSESSE E SHOULD HAVE BEEN THE OWNER OF THE INFRASTRUCTURE FACILITY. [PARA 27] THE NEXT QUESTION TO HE ANSWERED IS WHETHER THE ASS ESSEE IS A DEVELOPER OR MERE WORKS CONTRACTOR. THE REVENUE RELIED ON THE AMENDMENTS BR OUGHT IN BY THE FINANCE ACT 2007 AND 2009 TO MENTION THAT THE ACTIVITY UNDERTAKEN BY THE ASSE SSEE IS AKIN (O WORKS CONTRACT AND IT IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IA(4). WHET HER THE ASSESSEE IS A DEVELOPER OR WORKS CONTRACTOR PURELY DEPENDS ON THE NATURE OF THE WORK UNDERTAKEN BY THE ASSESSEE. EACH OF THE WORK UNDERTAKEN HAS TO HE ANALYSED AND A CONCLUSION HAS TO BE DRAWN ABOUT THE NATURE OF THE WORK UNDERTAKEN BY THE ASSESSEE. THE AGREEMENT ENTERED I NTO WITH THE GOVERNMENT OR THE GOVERNMENT BODY MAY BE A MERE WORKS CONTRACT OR FOR DEVELOPMEN T OF INFRASTRUCTURE. IT IS TO BE SEEN FROM THE AGREEMENTS ENTERED INTO BY THE ASSESSEE WITH THE GO VERNMENT. THE GOVERNMENT HANDED OVER THE POSSESSION OF THE PREMISES OF PROJECTS TO THE ASSES SEE FOR THE DEVELOPMENT OF INFRASTRUCTURE FACILITY. IT IS THE ASSESSEE'S RESPONSIBILITY TO DO ALL ACTS TILL THE POSSESSION OF PROPERTY IS HANDED OVER TO THE GOVERNMENT. THE FIRST PHASE IS TO LAKE OVER THE EXISTING PREMISES OF THE PROJECTS AND THEREAFTER DEVELOPING THE SAME INTO INFRASTRUCTURE FACILITY. SECONDLY THE ASSESSEE SHALL FACILITATE THE PEOPLE TO USE THE AVAILABLE EXISTING FACILITY E VEN WHILE THE PROCESS OF DEVELOPMENT IS IN PROGRESS. ANY LOSS TO THE PUBLIC CAUSED IN THE PROC ESS WOULD BE THE RESPONSIBILITY OF THE ASSESSEE. THE ASSESSEE HAS TO DEVELOP THE INFRASTRUCTURE FACI LITY. IN THE PROCESS ALL THE WORKS ARC TO BE EXECUTED BY THE ASSESSEE. IT MAY BE LAYING OF A DRA INAGE SYSTEM: MAY BE CONSTRUCTION OF A PROJECT: PROVISION OF WAY FOR CATTLE AND BULLOCK CARTS IN TH E VILLAGE; PROVISION FOR TRAFFIC WITHOUT ANY HINDRANCE THE ASSESSEE'S DUTY IS TO DEVELOP INFRAS TRUCTURE WHETHER IT INVOLVES CONSTRUCTION OF A PARTICULAR HEM AS AGREED TO IN THE AGREEMENT OR NOT . THE AGREEMENT IS NOT FOR A SPECIFIC WORK IT IS FOR DEVELOPMENT OF FACILITY AS A WHOLE. THE ASSE SSEE IS NOT ENTRUSTED WITH ANY SPECIFIC WORK TO ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 20 HE DONE BY THE ASSESSEE. THE MATERIAL REQUIRED IS T O BE BROUGHT IN BY THE ASSESSEE BY STICKING TO THE QUALITY AND QUANTITY IRRESPECTIVE OF THE COST O F THE SUCH MATERIAL. THE GOVERNMENT DOES NOT PROVIDE ANY MATERIAL TO THE ASSESSEE. IT PROVIDES T HE WORKS IN PACKAGES AND NOT AS A WORKS CONTRACT. THE ASSESSEE UTILIZES ITS FUNDS ITS EXPE RTISE ITS EMPLOYEES AND TAKES THE RESPONSIBILITY O F DEVELOPING THE INFRASTRUCTURE FACILITY. THE LOSSES SUFFERED EITHER BY THE GOVERNMENT OR THE PEOPLE IN THE PROCESS OF SUCH DEVELOPMENT WOULD BE THAT OF THE ASSESSEE. THE ASSESSEE HANDS OVER THE DEVELOPED INFRASTRUCTURE FACILITY TO THE GOVERNMENT ON COMPLETION OF THE DEVELOPMENT. THEREAFTER THE ASSESSEE HAS TO UNDERTAKE MAINTENAN CE OF THE SAID INFRASTRUCTURE FOR A PERIOD OF 12 TO 24 MONTHS. DURING THIS PERIOD IF ANY DAMAGES ARE OCCURRED IT SHALL BE THE RESPONSIBILITY OF THE ASSESSEE. FURTHER DURING THIS PERIOD THE ENTI RE INFRASTRUCTURE SHALL HAVE TO BE MAINTAINED BY THE ASSESSEE ALONE WITHOUT HINDRANCE TO THE REGULAR TRAFFIC. THEREFORE IT IS CLEAR THAT FROM AN UNDEVELOPED AREA INFRASTRUCTURE IS DEVELOPED AND H ANDED OVER TO THE GOVERNMENT AND AS EXPLAINED BY THE CBDT VIDE ITS CIRCULAR DATED 18-5 -2010 SUCH ACTIVITY IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IA (4). THIS CANNOT BE CONSIDERED AS A MERE WORKS CONTRACT BUT HAS TO BE CONSIDERED AS A DEVELOPMENT OF INFRASTRUCTURE FACIL ITY. THEREFORE THE ASSESSEE IS A DEVELOPER AND NOT A WORKS CONTRACTOR AS PRESUMED BY THE REVENUE. THE CIRCULAR ISSUED BY THE BOARD CLEARLY INDICATE THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTIO N UNDER SECTION 8()-IA(4). THE DEPARTMENT IS NOT CORRECT IN HOLDING THAT THE ASSESSEE IS A MERE CONT RACTOR IJ THE WORK AND NOT A DEVELOPER. [PARA 28] AS PER THE PROVISIONS OF SECTION 80-IA A PERSON BE ING A COMPANY HAS TO ENTER INTO AN AGREEMENT WITH THE GOVERNMENT OR GOVERNMENT UNDERTAKINGS. SUC H 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 INFRASTRUCTURE FACILITY. EVERY A GREEMENT ENTERED INTO IS A CONTRACT. 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 F ACILITY IS A CONTRACTOR. THEREFORE THE CONTRACTOR AND THE DEVELOPER CANNOT HE VIEWED DIFFERENTLY. EVE RY CONTRACTOR MAY NOT BE A DEVELOPER HUT EVERY DEVELOPER DEVELOPING INFRASTRUCTURE FACILITY ON BEHALF OF THE GOVERNMENT IS A CONTRACTOR. {PARA 29] SECTION 80-IA INTENDS TO COVER THE ENTITIES CARRYIN G OUT DEVELOPING OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY KEEPING IN MIND THE PRESENT BUSINESS MODELS AND INTEND TO GRANT THE INCENTIVES TO SUCH ENTITIES. THE CBDT ON SEVERAL O CCASIONS CLARIFIED THAT PURE DEVELOPER SHOULD ALSO BE ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 8 0-1A WHICH ULTIMATELY CULMINATED INTO AMENDMENT UNDER SECTION 80-IA IN THE FINANCE ACT 2 001 TO GIVE EFFECT TO THE AFORESAID CIRCULARS ISSUED BY THE CBDT. TO AVOID MISUSE OF THE AFORESAI D AMENDMENT AN EXPLANATION WAS INSERTED IN SECTION 80-IA IN THE FINANCE ACT 2007 TO 2009. TO CLARIFY THAT MERE WORKS CONTRACT WOULD NOT HE ELIGIBLE FOR DEDUCTIONS UNDER SECTION 80-IA. BUT C ERTAINLY THE EXPLANATION CANNOT BE READ TO DO AWAY WITH THE ELIGIBILITY OF THE DEVELOPER; OTHERWI SE THE PARLIAMENT WOULD HAVE SIMPLY REVERSED {HE AMENDMENT MADE IN THE FINANCE ACT 2001. THUS THE AFORESAID EXPLANATION WAS INSERTED CERTAINLY TO DENY THE LAX HOLIDAY TO THE ENTITIES WHO DO MERE WORKS CONTRACT OR SUB-CONTRACT AS DISTINCT FROM THE DEVELOPER. THIS IS CLEAR FROM THE EXPRESS INTENTION OF THE PARLIAMENT WHILE INTRODUCING THE EXPLANATION. THE EXPLANATORY MEMORANDUM TO FINANCE ACT 2007 STA TES THAT THE PURPOSE OF THE TAX BENEFIT HAS ALL ALONG BEEN TO EN COURAGE INVESTMENT IN DEVELOPMENT OF INFRASTRUCTURE SECTOR AND NOT FOR THE PERSONS WHO M ERELY EXECUTE THE CIVIL CONSTRUCTION WORK. IT CATEGORICALLY STATES THAT THE DEDUCTION UNDER SECTI ON 80-IA IS AVAILABLE TO DEVELOPERS WHO UNDERTAKES ENTREPRENEURIAL AND INVESTMENT RISK AND NO! TO THE CONTRACTORS WHO UNDERTAKE ONLY BUSINESS RISK. WITHOUT ANY DOUBT THE ASSESSEE CLEA RLY DEMONSTRATED THAT IT HAS UNDERTAKEN HUGE RISKS IN TERMS OF DEPLOYMENT OF TECHNICAL PERSONNEL PLANT AND MACHINERY TECHNICAL KNOW-HOW EXPERTISE AND FINANCIAL RESOURCES. AFTER THE AMENDM ENT SECTION 80-IA(4) IS READ AS (\) DEVELOPING ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 21 OR (\\) OPERATING AND MAINTAINING OR (\\\) DEVELOPI NG OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY. WHILE PRIOR TO AMENDMENT T HE 'OR' BETWEEN THREE ACTIVITIES WAS NOT THERE AFTER THE AMENDMENT 'OR' HAS BEEN INSERTED WITH EFF ECT FROM 1-4-2002 BY FINANCE ACT 2001. THEREFORE IF THE CONTRACTS INVOLVE DESIGN DEVELOP MENT OPERATING AND MAINTENANCE FINANCIAL INVOLVEMENT AND DEFECT CORRECTION AND LIABILITY PE RIOD THEN SUCH CONTRACTS CANNOT BE CALLED AS SIMPLE WORKS CONTRACT TO DENY THE DEDUCTION UNDER . SECTION 80-IA. THE CONTRACTS WHICH CONTAIN ABOVE FEATURES TO BE SEGREGATED THIS DEDUCTION UND ER SECTION 80-IA HAVE TO BE GRANTED AND THE OTHER AGREEMENTS WHICH ARE PURE WORKS CONTRACTS HIT BY THE EXPLANATION TO SECTION 80-JA(13) THOSE WORK ARE NOT ENTITLED FOR DEDUCTION UNDER SEC TION 80-IA. THE PROFIT FROM THE CONTRACTS WHICH INVOLVE RESIGN DEVELOPMENT OPERATING AND MAINTENANCE FINANCIAL INVOLVEMENT AND DEFECT CORRECTION AND LIABILITY PERIOD IS TO BE COMPUTED B Y THE ASSESSING OFFICER ON PRO RATA BASIS OF TURNOVER. THE ASSESSING OFFICER IS DIRECTED TO EXAM INE THE RECORDS ACCORDINGLY AND GRANT DEDUCTION ON ELIGIBLE TURNOVER AS DIRECTED ABOVE. [ PARA 30] 28. FURTHER SIMILAR ISSUE ALSO CAME UP BEFORE THE T RIBUNAL HYDERABAD BENCH IN THE CASE OF SUSHEE HI TECH CONST RUCTIONS (P) LTD. VS. DCIT (2013) 33 TAXMANN.COM 236 (HYDERABAD- TRIB) WHEREIN DEALING WITH THE ISSUE HAS DECIDED THE SAME BY OBSE RVING AS BELOW :- FACTS -1 THE ASSESSEE HAD UNDERTAKEN THE DEVELOPMENT OF IRRI GATION CANALS AND RAILWAY TRACKS INCLUDING CONVERSION OF GAUGE. THE PROJECT PREMISES WAS HANDED OVER BY THE GOVERNMENT TO THE ASSESSEE FOR DEVELOPING INTO AN I NFRASTRUCTURE AND THE SCOPE OF WORK INVOLVED TAKING OVER OF THE SITE AND DEVELOPIN G THE SITE RE-HANDING OVER OF THE SITE AFTER DUE DEVELOPMENT. THEREAFTER THE ASSESSE E WOULD HAVE TO MAINTAIN THE DEVELOPED INFRASTRUCTURE FACILITY FOR A CERTAIN PER IOD AS PROVIDED IN THE AGREEMENT. THE RISK INVOLVED DURING THE PERIOD FROM THE DATE O F TAKING OVER TILL THE DATE OF HANDING OVER OF THE INFRASTRUCTURE WOULD BE THAT OF THE ASSESSEE. ANY LOSS SUFFERED IN THE PROCESS OF DEVELOPMENT WOULD BE THAT OF THE ASS ESSEE. ASSESSEE CLAIMED THAT ACTIVITIES UNDERTAKEN BY IT WERE DEVELOPMENT OF INF RASTRUCTURE FACILITY AND THEREFORE IT WAS ENTITLED TO DEDUCTION UNDER SECTION 80-IA(4) . THE LOWER REVENUE AUTHORITIES DISALLOWED THE DEDUCT ION ON THE GROUND THAT ASSESSEE WAS A MERE WORKS CONTRACTOR AND NOT A DEVELOPER. TH E AUTHORITIES TOOK THE VIEW THAT UNLESS OPERATION OF THE INFRASTRUCTURE FACILITY WAS ALSO UNDERTAKEN THE ASSESSEE WOULD NOT BE ELIGIBLE FOR DEDUCTION. ON APPEAL HELD I OWNERSHIP OF INFRASTRUCTURE FACILITY NOT REQUIRED FOR DEDUCTION UNDER SECTION 80-IA ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 22 THE PROVISIONS OF SECTION 80-1 A(4) WHEN INTRODUCED AFRESH BY THE FINANCE ACT 1999 THE PROVISIONS UNDER SECTION 80-IA(4A) WERE DELETED FROM THE ACT. THE DEDUCTIONS AVAILABLE FOR ANY ENTERPRISE EARLIER UNDER SECTION 80-1A(4A) ARE ALSO MADE AVAILABLE UNDER SECTION 80-IA(4) ITSELF. FURTHER THE VERY FA CT THAT THE LEGISLATURE MENTIONED THE WORDS (/') 'DEVELOPING' OR (//) 'OPERATING AND MAIN TAINING 1 OR (/;'/') 'DEVELOPING OPERATING AND MAINTAINING 1 CLEARLY INDICATED THAT ANY ENTERPRISE WHICH CARRIE D ON ANY OF THESE THREE ACTIVITIES WOULD BECOME ELIGIBLE FOR DEDUCTION. THEREFORE THERE IS NO AMBIGUITY IN THE INCOME-TAX ACT. WHERE AN ASSESSEE INCURRES EXPENDITURE FOR PURCHASE OF MATERIALS HIMSELF AND EXECUTES THE DEVE LOPMENT WORK I.E. CARRIES OUT THE CIVIL CONSTRUCTION WORK HE WILL BE ELIGIBLE FOR TA X BENEFIT UNDER SECTION 80-IA. IN CONTRAST TO THIS AN ASSESSEE WHO ENTERS INTO A CO NTRACT WITH ANOTHER PERSON INCLUDING THE GOVERNMENT OR AN UNDERTAKING OR ENTERPRISE REFE RRED TO IN SECTION '80-IA FOR EXECUTING WORKS CONTRACT WILL NOT BE ELIGIBLE FOR THE TAX BENEFIT UNDER SECTION 80-IA. THE WORD 'OWNED' IN SUB-CLAUSE (A] OF CLAUSE (1) OF SUB-SECTION (4) OF SECTION 80-IA REFERS TO THE ENTERPRISE. BY READING OF THE SECTION IT IS CLEAR THAT THE ENTERPRISES CARRYING ON DEVELOPMENT OF INFRASTRUCTURE DEVELOPME NT SHOULD BE OWNED BY THE COMPANY AND NOT THAT THE INFRASTRUCTURE FACILITY SH OULD BE OWNED BY A COMPANY. THAI THE PROVISIONS ARE MADE APPLICABLE TO THE PERSON TO WHOM SUCH ENTERPRISE BELONGS TO IS EXPLAINED IN SUB-CLAUSE (A). THEREFORE THE WORD 'OWNERSHIP' IS ATTRIBUTABLE ONL Y TO THE ENTERPRISE CARRYING ON THE BUSINESS WHICH WOULD MEAN THAT ONLY COMPANIES ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 80-1 A(4) AND NOT ANY OTHER PERSON LIKE INDIVIDUAL. HUF FIRM. ETC. [PARA 31] ACCORDING TO SUB-CLAUSE (A) CLAUSE (/) OF SUB-SECTION (4) OF SECTION 80-IA. THE WORD 'IT' DENOTES THE ENTERPRISE CARRYING ON (HE BUSINES S. THE WORD 'IT' CANNOT BE RELATED TO THE INFRASTRUCTURE FACILITY PARTICULARLY IN VIEW O F THE FACT THAT INFRASTRUCTURE FACILITY INCLUDES RAIL SYSTEM. HIGHWAY PROJECT WATER TREATM ENT SYSTEM IRRIGATION PROJECT A PORT AN AIRPORT OR AN INLAND PORT WHICH CANNOT BE OWNED BY ANY ONE. EVEN OTHERWISE THE WORD 'IT' IS USED TO DENOTE AN ENTER PRISE. THEREFORE THERE IS NO REQUIREMENT THAT THE ASSESSEE SHOULD HAVE BEEN THE OWNER OF THE INFRASTRUCTURE FACILITY. [PARA 32] ASSESSEE IS A DEVELOPER AND NOT A WORKS CONTRACTOR WHETHER THE ASSESSEE IS A DEVELOPER OR WORKS CONTRA CTOR IS PURELY DEPENDS ON THE NATURE OF THE WORK UNDERTAKEN BY THE ASSESSEE. BACH OF THE WORK UNDERTAKEN HAS TO BE ANALYZED AND A CONCLUSION HAS TO BE DRAWN ABOUT THE NATURE OF THE WORK UNDERTAKEN BY THE ASSESSEE. THE AGREEMENT ENTERED INTO WITH TH E GOVERNMENT OR THE GOVERNMENT BODY MAY BE A MERE WORKS CONTRACT OR FOR DEVELOPMEN T OF INFRASTRUCTURE. IT IS TO BE SEEN FROM THE AGREEMENTS ENTERED INTO BY THE ASSESS EE WITH THE GOVERNMENT. IN THE INSTANT CASE THE GOVERNMENT HANDED OVER T HE POSSESSION OF THE PREMISES OF PROJECTS TO THE ASSESSEE FOR THE DEVELOPMENT OF INF RASTRUCTURE FACILITY. IT IS THE ASSESSEE'S RESPONSIBILITY TO DO ALL ACTS TILL THE P OSSESSION OF 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 INFRASTRU CTURE FACILITY. SECONDLY THE ASSESSEE SHALL FACILITATE THE PEOPLE TO USE THE AVA ILABLE EXISTING FACILITY EVEN WHILE THE PROCESS OF DEVELOPMENT IS IN PROGRESS. ANY LOSS TO THE PUBLIC CAUSED IN THE PROCESS WOULD BE THE RESPONSIBILITY OF THE ASSESSEE. THE AS SESSEE HAS TO DEVELOP THE ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 23 INFRASTRUCTURE FACILITY. IN THE PROCESS ALL THE WO RKS ARE TO BE EXECUTED BY THE ASSESSEE. IT MAY BE LAYING OF A DRAINAGE SYSTEM; CONSTRUCTION OF A PROJECT; PROVISION OF WAY FOR THE CATTLE AND BULLOCK CARTS IN THE VILLAGE; PROVIS ION FOR TRAFFIC WITHOUT ANY HINDRANCE THE ASSESSEE'S DUTY IS TO DEVELOP INFRASTRUCTURE WH ETHER IT INVOLVES CONSTRUCTION OF A PARTICULAR ITEM AS AGREED TO IN THE AGREEMENT OR NO T. THE AGREEMENT 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 QUALITY AND QUANTITY IRRESPECTIVE OF THE COST OF SUCH MATERIAL. THE GOVERNMENT DOES NOT PROVIDE ANY MATERIAL TO THE ASSESSEE. IT PROVIDES THE WORKS IN PACKAGES AND NOT AS A WORKS CONTRACT. THE ASSESSEE UTILIZES ITS FUNDS ITS EXPERTISE ITS EMPLOYEES AN D TAKES THE RESPONSIBILITY OF DEVELOPING THE INFRASTRUCTURE FACILITY. THE LOSSES SUFFERED EITHER BY THE GOVI. OR THE PEOPLE IN THE PROCESS OF SUCH DEVELOPMENT WOULD BE THAT OF THE ASSESSEE. THE ASSESSEE HANDS OVER THE DEVELOPED INFRASTRUCTURE FA CILITY TO THE GOVERNMENT ON COMPLETION OF THE DEVELOPMENT. THEREAFTER THE ASSE SSEE HAS TO UNDERTAKE MAINTENANCE OF THE SAID INFRASTRUCTURE FOR A PERIOD OF I 2 (O 24 MONTHS. DURING THIS PERIOD IF ANY DAMAGES ARE OCCURRED IT SHALL BE TH E RESPONSIBILITY OF THE ASSESSEE. FURTHER DURING THIS PERIOD THE ENTIRE INFRASTRUCT URE SHALL HAVE TO BE MAINTAINED BY THE ASSESSEE ALONE WITHOUT HINDRANCE TO THE REGULAR TRA FFIC. THEREFORE IT IS CLEAR THAT FROM AN UNDEVELOPED AREA INFRASTRUCTURE IS DEVELOPED AN D HANDED OVER TO THE GOVERNMENT AND AS EXPLAINED BY THE CBDT VIDE ITS CIRCULAR DATED 18-05-2010. SUCH ACTIVITY IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IA (4). THI S CANNOT BE CONSIDERED AS A MERE WORKS CONTRACT BUT HAS TO BE CONSIDERED AS A DEVELO PMENT OF INFRASTRUCTURE FACILITY. THEREFORE : THE ASSESSEE IS A DEVELOPER AND NOT A WORKS CONTRA CTOR AS PRESUMED BY THE REVENUE. THE CIRCULAR ISSUED BY THE BOARD CLEARLY I NDICATES THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IA (4). THE DEPARTME NT IS NOT CORRECT IN HOLDING THAT THE ASSESSEE IS A MERE CONTRACTOR OF THE WORK AND N OT A DEVELOPER. [PARA 33] ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80- IA AS PER THE PROVISIONS OF THE SECTION 80-IA A PERS ON BEING A COMPANY HAS TO ENTER INTO AN AGREEMENT WITH THE GOVERNMENT OR GOVERNMENT UNDE RTAKINGS. SUCH 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 W ORD 'CONTRACTOR' IS USED TO DENOTE A PERSON ENTERING INTO AN AGREEMENT FOR UNDERTAKING T HE DEVELOPMENT OF INFRASTRUCTURE FACILITY. EVERY AGREEMENT ENTERED INTO IS A CONTRAC T. THE WORD 'CONTRACTOR' IS USED TO DENOTE THE PERSON WHO ENTERS INTO SUCH CONTRACT. EV EN A PERSON WHO ENTERS INTO A CONTRACT FOR DEVELOPMENT OF INFRASTRUCTURE FACILITY IS A CONTRACTOR. THEREFORE THE CONTRACTOR AND THE DEVELOPER CANNOT BE VIEWED DIFFE RENTLY. EVERY CONTRACTOR MAY NOT BE A DEVELOPER BUT EVERY DEVELOPER DEVELOPING INFRA STRUCTURE FACILITY ON BEHALF OF THE GOVERNMENT IS A CONTRACTOR. [PARA 34] SECTION 80-IA INTENDED TO COVER THE ENTITIES C ARRYING OUT DEVELOPING OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY KEEPING IN MIND THE PRESENT BUSINESS MODELS AND INTENDS TO GRANT THE INCENTIVES TO SUCH ENTITIE S. THE CBDT ON SEVERAL OCCASIONS CLARIFIED THAT PURE DEVELOPER SHOULD ALSO BE ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80-IA WHICH ULTIM ATELY CULMINATED INTO AMENDMENT ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 24 UNDER SECTION 80-IA IN THE FINANCE ACT 2001. TO GI VE EFFECT TO THE CIRCULARS ISSUED BY THE CBDT. LO AVOID MISUSE OF THE AFORESAID AMENDMEN T AN EXPLANATION WAS INSERTED IN SECTION 80-IA IN THE FINANCE ACT 2007 AND 2009. TO CLARIFY THAT MERE WORKS CONTRACT WOULD NOT BE ELIGIBLE FOR DEDUCTIONS UNDER SECTION 80-IA. BUT. CERTAINLY THE EXPLANATION CANNOT BE READ TO DO AWAY WITH THE ELIGIBILITY OF T HE DEVELOPER; OTHERWISE THE PARLIAMENT WOULD HAVE SIMPLY REVERSE D THE AMENDMENT MADE IN THE FINANCE ACT 2001. THUS THE AFORESAID EXPLANATION WAS INSERTED CERTAINLY TO DENY THE TAX HOLIDAY TO THE ENTITIES WHO DO MERE WORKS C ONTACT OR SUB-CONTRACT AS DISTINCT FROM THE DEVELOPER. THIS IS CLEAR FROM THE EXPRESS INTENSION OF THE PARLIAMENT WHILE INTRODUCING 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 INFRASTRUCTURE SECTOR AND NOT FOR TH E PERSONS WHO MERELY EXECUTE THE CIVIL CONSTRUCTION WORK. IT CATEGORICALLY STATES TH AT THE DEDUCTION UNDER SECTION 80-IA IS AVAILABLE TO DEVELOPERS WHO UNDERTAKE ENTREPRENE URIAL AND INVESTMENT RISK AND NOT FOR THE CONTRACTORS WHO UNDERTAKE ONLY BUSINESS RI SK. WITHOUT ANY DOUBT THE ASSESSEE CLEARLY DEMONSTRATED THAT IT HAS UNDERTAKE N HUGE RISKS IN TERMS OF DEPLOYMENT OF TECHNICAL PERSONNEL PLAIN AND MACHIN ERY TECHNICAL KNOW-HOW EXPERTISE AND FINANCIAL RESOURCES. FURTHER AFTER THE AMENDMENT THE SECTION 80 -IA(4) READ AS (/) DEVELOPING OR (//') OPERATING AND MAINTAINING OR (///') DEVELOPING OPE RATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY. PRIOR TO AMENDMENT THE 'OR ' BETWEEN THREE ACTIVITIES WAS NOT THERE AFTER THE- AMENDMENT 'OR' HAS BEEN INSERTED WITH EFFECT FROM 1-4-2002 BY FINANCE ACT 2001. THEREFORE THE ASSESSEE SHOULD NOT BE DENIED THE DEDUCTION UNDER SECTION 80-IA AS IF THE CONTRACTS INVOLVE DEVELOPMENT OPERATING MAINT ENANCE FINANCIAL INVOLVEMENT AND DEFECT CORRECTION AND LIABILITY PERIOD THEN SU CH CONTRACTS CANNOT BE CALLED AS SIMPLE WORKS CONTRACT. THE CONTRACTS WHICH CONTAIN ABOVE FEATURES ARE TO BE SEGREGATED AND ON THIS DEDUCTION UNDER SECTION 80-I A HAS TO BE GRANTED AND THE OTHER AGREEMENTS WHICH ARE PURE WORKS CONTRACTS HIT BY T HE EXPLANATION TO SECTION 80- IA(13) ARE NOT ENTITLED FOR DEDUCTION UNDER SECTIO N 80-IA. THE PROFIT FROM SUCH CONTRACTS WHICH INVOLVE DEVELOPMENT OPERATING MAI NTENANCE FINANCIAL INVOLVEMENT AND DEFECT CORRECTION AND LIABILITY PERIOD IS TO BE COMPUTED BY ASSESSING OFFICER ON PRO-RATA BASIS OF TURNOVER. THE ASSESSING OFFICER IS DIRECTE D TO EXAMINE AND GRANT DEDUCTION ON ELIGIBLE TURNOVER AS DIRECTED ABOVE. [ PARA 35] FURTHER WHERE THE ASSESSEE HAS CARRIED OUT TH E DEVELOPMENT OF INFRASTRUCTURE WORK IN CONSORTIUM AND NOT AS A SUB-CONTRACTOR THEN ALSO T HE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80-IA. THE SAME IS ALSO APPLICABLE IN CASE OF WORK ALLOTTED BY GOVERNMENT CORPORATION/GOVERNMENT BODIES. [PARA 37] 29. RESPECTFULLY FOLLOWING THE DECISIONS OF THE CO- ORDINATE BENCH IN THE ABOVE REFERRED CASES AND APPLYING THE FACTS TO THESE FACTS AS WELL AS THE PROVISIONS OF SEC.80IA SUB-SEC.(4) OF THE AC T WE ARE OF THE ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 25 CONSIDERED VIEW THAT ASSESSEE IS NOT MERELY A CONTR ACTOR BUT A DEVELOPER LOOKING TO THE SCOPE OF ACTIVITIES UNDERT AKEN BY IT FOR THE COMPLETION OF THE PROJECT AND THEREFORE ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. WE THEREFORE FIND NO REASON TO IN TERFERE WITH THE ORDER OF LD. CIT(A) AND UPHOLD THE SAME. THE GROUND RAISED BY THE REVENUE IS DISMISSED. THE APPEAL OF REVENUE IS DISM ISSED. 30. IN APPEAL IN ITA NO.733/AHD/2013 AND ITA NO. 9 35/AHD/2013 FOR ASST. YEARS 2008-09 AND 2009-10 REVENUE HAS RAI SED SIMILAR ISSUE AGAINST THE ORDERS OF LD. CIT(A) FOR ALLOWING RS. RS.35 26 005/- AND RS.52 26 225/- RESPECTIVELY. 31. AS THE ISSUE IS SIMILAR TO THAT WHICH WE HAVE A DJUDICATED FOR ASST. YEAR 2007-08. WE APPLY THE SAME DECISION TO T HESE APPEALS AND WE FIND NO REASON TO INTERFERE WITH THE ORDERS OF LD. CIT(A) WE UPHOLD THE SAME. ACCORDINGLY THE APPEALS FILED BY THE REVENUE ARE DISMISSED FOR ASST. YEAR 2008-09 AND ASST. YEAR 200 9-10. 32. FOR ASST. YEAR 2007-08 ASSESSEE HAS FILED CROSS OBJECTION NO.30/AHD/2011 IN ITA NO.250/AHD/2011 AGAINST THE C ONFIRMATION OF DISALLOWANCE OF BUSINESS LOSS OF RS.17 77 540/- HOL DING AS TRADING LOSS AND THE ASSESSEE COMPANY BEING UNABLE TO PROVE THE LOSS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS LD. AS SESSING OFFICER OBSERVED ASSESSEE PLACED BANK GUARANTEE OF RS.44 37 500/- WHICH WAS GIVEN TO RAJKAMAL BUILDERS OUT OF WHICH PART PA YMENT WAS RECEIVED AND AFTER CARRYING OUT CERTAIN DEBITS AND CREDITS FOR VARIOUS TRANSACTIONS THE BALANCE OF RS.17 77 540/- WAS OUTS TANDING AS ON ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 26 31.03.2007 WHICH WAS DUE TO BE RECEIVED BY THE ASSE SSEE. THIS AMOUNT OF RS.17 77 540/- WAS CLAIMED AS BUSINESS LO SS BY THE ASSESSEE. HOWEVER LD. ASSESSING OFFICER WAS OF THE VIEW THAT THE ADVANCE GIVEN TO RAJKAMAL BUILDERS WAS OF CAPITAL N ATURE AND THEREFORE THIS AMOUNT OF RS.17 77 540/- IS MERELY A CAPITAL LOSS AND NOT REVENUE LOSS AND CLAIM IS TREATED AS LIABILITY. AGAINST THIS ADDITION ASSESSEE WENT IN APPEAL BEFORE LD. CIT(A) BUT LD. C IT(A) CONFIRMED THE ADDITION OF DISALLOWANCE OF BUSINESS LOSS OF RS .17 77 540/- BY OBSERVING AS UNDER :- 3 3. I HAVE CONSIDERED THE FACTS OF THE CASE ASSES SMENT ORDER AND APPELLANT'S SUBMISSION. I HAVE GONE THROUGH THE DECISIONS RELIE D UPON BY THE ASSESSING OFFICER AS WELL AS APPELLANT. CLAIM OF BUSINESS LOS S UNDER SECTION 28 IS POSSIBLE IF FOLLOWING CONDITIONS ARE FULFILLED- 1-THE LOSS SHOULD BE INCIDENTAL TO THE BUSINESS. 2-THE LOSS SUFFERED SHOULD BE PROVED. IN THE CASE OF APPELLANT FACTS HAVE BEEN ELABORATE LY DISCUSSED IN ASSESSMENT ORDER AS WELL AS APPELLANT'S SUBMISSION. IT IS NOT IN DISPUTE THAT APPELLANT MADE DEPOSIT FOR THE PROJECT JOINTLY BID BY IT. WITHOUT SUCH DEPOSIT/ADVANCE APPELLANT WOULD NOT HAVE BEEN ELIGIBLE FOR THE PROJECT. THERE FORE THE ADVANCE/DEPOSIT WAS GIVEN IN THE NORMAL COURSE OF RUNNING THE BUSINESS. SUCH LOSSES ARE ALLOWABLE AS BUSINESS LOSS UNDER SECTION 28 IN VIEW OF THE VARIO US DECISIONS RELIED UPON BY THE APPELLANT. THE NATURE OF LOSS CAN BE CAPITA! OR REV ENUE DEPENDING UPON THE PURPOSE FOR WHICH IT WAS GIVEN. IF THE LOSS IS SUFF ERED IN THE PROCESS OF CREATION OF CAPITAL ASSET SUCH LOSS WILL BE CAPITAL. HOWEVER IF THE LOSSES SUFFERED FOR RUNNING THE BUSINESS IT WILL BE REVENUE IN NATURE. LIKE ST OCK IS AN ASSET BUT LOSS SUFFERED IN FIRE IS ALLOWABLE AS REVENUE. SIMILARLY CASH EMB EZZLED BY EMPLOYEE IS REVENUE THOUGH CASH IS AN ASSET. IN VIEW OF THIS THE PURPOS E FOR WHICH THE LOSS IS SUFFERED IS IMPORTANT RATHER THAN THE ITEM ON WHICH LOSS IS SUFFERED. ACCORDINGLY THE BUSINESS ADVANCE GIVEN BY THE APPELLANT FOR OBTAINI NG PROJECT IS HELD TO BE IN THE NORMAL COURSE OF BUSINESS AND SUCH LOSSES ARE REVEN UE IN NATURE. HOWEVER FOR ALLOWING SUCH LOSS OTHER CONDITION IS THAT IT SHOULD BE PROVED AS LOSS. APPELLANT HAS NOT SUBMITTED EVIDENCE TO PROVE THAT THE LOSS IS FINAL AND THERE IS NO SCOPE OF RECOVERY. IT IS NOT A CLAIM OF BAD DEBTS WHERE MERE WRITING OFF IS SUFFICIENT. FOR CLAIMING LOSS UNDER SECTION 28 ONUS IS ON THE APPELLANT TO PROVE ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 27 THAT IT IS FINAL. SINCE APPELLANT HAS NOT PROVED TH E LOSS THE SAME IS NOT ALLOWABLE IN THIS YEAR. HOWEVER IF APPELLANT IS ABLE TO PROVE THE LOSS IN A NY FUTURE YEAR THE SAME WILL BE ALLOWABLE IN THAT YEAR AS BUSINESS LOSS UNDER SECTI ON 28. 33. NOW CROSS OBJECTION HAS BEEN FILED BY THE ASSES SEE. 34. LD. AR AT THE OUTSET REQUESTED THAT LD. CIT(A) HAS SUSTAINED THE DISALLOWANCE FOR THE VERY REASON THAT ASSESSEE HAS BEEN UNABLE TO PROVE THE LOSS BY NOT SUBMITTING ANY EVIDENCE. LD. AR MADE A REQUEST THAT IF THE MATTER IS SET ASIDE TO THE ASSE SSING OFFICER FOR EXAMINING THIS ISSUE NECESSARY EVIDENCE WILL BE PLA CED FOR VERIFICATION BEFORE LD. ASSESSING OFFICER TOWARDS J USTIFICATION OF THE CLAIM THAT THE IMPUGNED AMOUNT OF RS.17 77 540/- IS MERELY A BUSINESS LOSS. 35. LD. DR RELIED ON THE ORDERS OF LOWER AUTHORITIE S AND DID NOT OBJECT TO THE SUBMISSIONS OF LD. AR FOR SETTING ASI DE THE MATTER TO THE FILE OF ASSESSING OFFICER. 36. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE GRIEVANCE OF THE ASSESSEE THROUGH TH IS CROSS OBJECTION IS AGAINST THE SUSTAINING OF ADDITION TOW ARDS DISALLOWANCE OF RS.17 77 540/-. FROM GOING THROUGH THE OBSERVATI ON OF LD. CIT(A) WE FIND THAT IMPUGNED TRANSACTION OF GIVING BANK GU ARANTEE TO RAJKAMAL BUILDERS WAS IN THE COURSE OF BUSINESS FOR CARRYING OUT OF THE CONTRACT FOR CONSTRUCTION OF WATER TREATMENT OF GWSSB & ADB AND AMOUNT OF RS.17 77 540/- WAS OUTSTANDING TO BE RECEIVED HAS ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 28 BEEN CLAIMED AS BUSINESS LOSS AS THERE WAS NO POSSI BILITY TO RECOVER THE SAME. HOWEVER THESE FACTS COULD NOT BE PROVED BY THE ASSESSEE WITH THE SUPPORT OF NECESSARY DOCUMENTS. LD. AR HAS MADE A REQUEST FOR SETTING ASIDE THE ISSUE FOR EXAMINATION TO WHICH LD. DR DID NOT OBJECT. THEREFORE WE SET ASIDE THIS ISSUE TO T HE FILE OF ASSESSING OFFICER FOR THE PURPOSE OF VERIFICATION OF NECESSAR Y EVIDENCE/DOCUMENTS WHICH WILL BE SUBMITTED BY ASSES SEE. NEEDLESS TO MENTION THAT REASONABLE OPPORTUNITY OF BEING HEA RD WILL BE PROVIDED TO THE ASSESSEE. ACCORDINGLY THE C.O. OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 37. NOW WE TAKE UP APPEALS IN ITA NOS.487/AHD/2013 FOR ASST. YEAR 2008-09 AND 488/AHD/2013 FOR ASST. YEAR 2009-1 0 FILED THE ASSESSEE. FOLLOWING GROUNDS HAVE BEEN RAISED IN THE SE APPEALS :- ITA NO.487/AHD/2013 (ASSESSEES APPEAL) FOR ASST. Y EAR 2008-09. GROUNDS OF APPEAL 1. A) THE ID. COMMISSIONER OF INCOME TAX (APPEALS): VI AHMEDABAD [HEREINAFTER REFERRED TO AS C1T(A)] HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN EXCLUDING RS. 2 05 556/- BEING INTEREST EARNED ON BANK FDRS FRO M THE PROFITS DERIVED FROM PROJECTS ELIGIBLE U/S. 80IA IN TOTAL DISREGARD OF T HE FACT THAT THE SAID BANK DEPOSITS WERE PLACED BY THE APPELLANT COMPANY ACCORDING TO T HE TERMS OF THE CONTRACTS AWARDED THROUGH TENDERS. B) THE ID. CIT(A) SHOULD HAVE RESTRICTED HIMSELF T O THE EXCLUSION OF ONLY DIVIDEND INCOME; INTEREST ON INCOME TAX REFUND FROM THE PROF ITS DERIVED FROM THE PROJECTS ELIGIBLE U/S. 80IA. THE APPELLANT COMPANY CRAVES LEAVE TO ADD TO ALTER AMEND MODIFY SUBSTITUTE ANY OF THE GROUND AS AND WHEN THE OCCASION MAY ARIS E. ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 29 ITA NO.488/AHD/2013 (ASSESSEES APPEAL) FOR ASST. Y EAR 2009-10 GROUNDS OF APPEAL 1. THE ID. COMMISSIONER OF INCOME TAX (APPEALS): VI AHMEDABAD [HEREINAFTER REFERRED TO AS CIT(A)] HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN ISSUING DIRECTION TO EXCLUDE INTEREST EARNED ON BANK FDR WHICH WERE PLACED IN TERMS OF CONTRACTS AWARDED THROUGH TENDER S FROM THE PROFITS DERIVED FROM PROJECTS ELIGIBLE U/S. 80IA (PARA: 3.4 PAGE: 11 OF THE APPELLATE ORDER). 2. THE ID. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS. 3 21 458/- (THE CORRECT AMOUNT IS RS. 3 19 458/-) U/S. 2(24)(X) R.W.S. 36(1)(VA) ALTHOUGH RS. 2 02 010/- H AS BEEN PAID DURING THE RELEVANT PREVIOUS YEAR AND RS. 1 17 448/- HAS BEEN PAID BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME U/S. 139(1) OF T HE INCOME TAX ACT. 3. THE APPELLANT COMPANY CRAVES LEAVE TO ADD TO AL TER AMEND MODIFY SUBSTITUTE ANY OF THE GROUND AS AND WHEN THE OCCASI ON MAY ARISE. 38. GROUND NO.1 IS COMMON IN THESE TWO APPEALS OF A SSESSEE AGAINST THE ORDERS OF LD. CIT(A) FOR NOT ALLOWING D EDUCTION U/S 80IA OF THE ACT TOWARDS INTEREST EARNED ON BANK FDRS. LD. A R DID NOT PRESS THIS COMMON GROUND IN BOTH THESE APPEALS AND THEREF ORE THE SAME IS DISMISSED. 39. NOW WE TAKE UP GROUND NO.2 OF ITA NO.488/AHD/20 13 AGAINST THE ORDER OF LD. CIT(A) CONFIRMING THE DISALLOWANCE OF RS.3 21 458/- (CORRECT AMOUNT IS RS.3 19 458/-) U/S 2(24)(X) R.W. S. 36(1)(VA) OF THE ACT TOWARDS NON-PAYMENT OF EMPLOYEES CONTRIBUTION T O THE GOVERNMENT. 40. LD. DR SUBMITTED THAT THIS ISSUE HAS NOW BEEN SETTLED IN FAVOUR OF REVENUE BY THE JUDGMENT OF HON. JURISDICT IONAL HIGH COURT IN THE CASE OF CIT VS. GUJARAT STATE ROAD TRANSPOR T CORPORATION 366 ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 30 ITR 170 (GUJ). LD. AR ACCEPTED THAT THIS ISSUE IS D ECIDED AGAINST THE ASSESSEE IN THE LIGHT OF ABOVE REFERRED DECISION. 41. WE OBSERVE THAT THIS GROUND RELATES TO DISALLOW ANCE OF RS. 3 21 458/- (CORRECT AMOUNT IS RS.3 19 458/-) U/S 2( 24)(X) R.W.S. 36(1)(VA) OF THE ACT TOWARDS DELAYED PAYMENT OF EM PLOYEES CONTRIBUTION TO PF IN THE GOVERNMENT ACCOUNT. SUCH DELAYED PAYMENT HAS BEEN DISALLOWED FOR CLAIMING AS AN EXPE NDITURE AS PER THE JUDGMENT OF HON. JURISDICTIONAL HIGH COURT IN T HE CASE OF CIT VS. GUJARAT STATE ROAD TRANSPORT CORPORATION WHEREIN IT HAS DECIDED THE ISSUE BY OBSERVING AS UNDER :- 7.00. HEARD THE LEARNED ADVOCATES APPEARING ON BEHA LF OF THE RESPECTIVE PARTIES AT LENGTH. 8.00. IN VIEW OF THE ABOVE AND FOR THE REASONS STAT ED ABOVE AND CONSIDERING SECTION 36(1)(VA) OF THE INCOME TAX ACT 1961 READ WITH SUB -CLAUSE (X) OF CLAUSE 24 OF SECTION 2 IT IS HELD THAT WITH RESPECT TO THE SUM RECEIVED BY THE ASSESSEE FROM ANY OF HIS EMPLOYEES TO WHICH PROVISIONS OF SUB-CLAUSE (X) OF CLAUSE (24 ) OF SECTION (2) APPLIES THE ASSESSEE SHALL BE ENTITLED TO DEDUCTION IN COMPUTING THE INC OME REFERRED TO IN SECTION 28 WITH RESPECT TO SUCH SUM CREDITED BY THE ASSESSEE TO THE EMPLOYEES ACCOUNT IN THE RELEVANT FUND OR FUNDS ON OR BEFORE THE DUE DATE MENTIONED IN EXPLANATION TO SECTION 36(1)(VA). CONSEQUENTLY IT IS HELD THAT THE LEARNED TRIBUNAL HAS ERRED IN DELETING RESPECTIVE DISALLOWANCES BEING EMPLOYEES CONTRIBUTION TO PF A CCOUNT / ESI ACCOUNT MADE BY THE AO AS AS SUCH SUCH SUMS WERE NOT CREDITED BY THE RESPECTIVE ASSESSEE TO THE EMPLOYEES ACCOUNTS IN THE RELEVANT FUND OR FUNDS (IN THE PRES ENT CASE PROVIDENT FUND AND/OR ESI FUND ON OR BEFORE THE DUE DATE AS PER THE EXPLANATI ON TO SECTION 36(1)(VA) OF THE ACT I.E. ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 31 DATE BY WHICH THE CONCERNED ASSESSEE WAS REQUIRED A S AN EMPLOYER TO CREDIT EMPLOYEES CONTRIBUTION TO THE EMPLOYEES ACCOUNT IN THE PROVI DENT FUND UNDER THE PROVIDENT FUND ACT AND/OR IN THE ESI FUND UNDER THE ESI ACT. CONSEQUENTLY ALL THESE APPEALS ARE ALLOWED AND THE IMPUGNED JUDGEMENT AND ORDERS PASSED BY THE TRIBUNAL IN DELETING THE DISALLOWANCE S MADE BY THE AO ARE HEREBY QUASHED AND SET ASIDE AND THE DISALLOWANCES OF THE RESPECTI VE SUMS WITH RESPECT TO THE PROVIDENT FUND / ESI FUND MADE BY THE AO IS HEREBY RESTORED. THE QUESTIONS RAISED IN PRESENT APPEAL ARE ANSWERED IN FAVOUR OF THE REVENUE. WITH THIS ALL THESE APPEALS ARE ALLOWED. 42. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT OF HO N. JURISDICTIONAL HIGH COURT WE ARE OF THE VIEW THAT LD. CIT(A) HAS RIGHTLY DISALLOWED THE EXPENDITURE OF EMPLOYEES CONTRIBUTION TO P.F. D EPOSITED AFTER THE DUE DATE. WE DISMISS THIS GROUND OF ASSESSEE. 43. ITA NO.487/AHD/2013 AND 488/AHD/2013 OF THE ASS ESSEE ARE DISMISSED. 44. OTHER GROUNDS OF THE APPEALS ARE OF GENERAL NAT URE WHICH NEED NO ADJUDICATION. 45. IN THE RESULT ITA NO.811/AHD/2010 AND 812/AHD/2 010 OF ASSESSEE ARE ALLOWED ITA NO.732/AHD/2013 ITA NO.2 132/AHD/2011 ITA NO.250/AHD/11 ITA NO.733/AHD/2013 & ITA NO.935 /AHD/2013 OF REVENUE ARE DISMISSED CO NO.30/AHD/2011 BY ASSESSE E IS ALLOWED ITA NO.811/AHD/2010 & 9 OTHERS ASST. YEAR 2005-06 & OTHERS 32 FOR STATISTICAL PURPOSES AND ITA NOS.487 & 488/AHD/ 2013 BY ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER 2016 SD/- SD/- (R.P. TOLANI) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 30/9/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR ITAT AHMEDABAD 1. DATE OF DICTATION: 22-23-26/09/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 28/09/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 30/9/2016 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: