Tantia Constructions Limited v. Deputy Commissioner of Income-tax, Central Circle-XIII, Kolkata
[Citation -2016-LL-0923-97]

Citation 2016-LL-0923-97
Appellant Name Tantia Constructions Limited
Respondent Name Deputy Commissioner of Income-tax, Central Circle-XIII, Kolkata
Court ITAT-Kolkata
Relevant Act Income-tax
Date of Order 23/09/2016
Assessment Year 2004-05
Judgment View Judgment
Keyword Tags mercantile system of accounting • development of infrastructure • search and seizure operation • infrastructure development • warehousing corporation • infrastructure facility • computation of income • performance guarantee • technical expertise • plant and machinery • method of valuation • regular assessment • technical know-how • immovable property • state government • civil contractor • deferred payment • eligible project • mercantile basis • retention money • local authority • works contract • accrual basis • receipt basis
Bot Summary: Consequent upon search and seizure operation u/s 132 of the Act conducted on 17.3.2010 at the office premises of the assessee company and its group concerns as well as survey operations at various places of the company, a notice u/s 153A of the Act dated 12.1.2011 was served on the assessee. The ld AR argued that the assessee had to change its stand in offering the retention money on receipt basis based on the decision of the Hon ble Calcutta High Court in the case of CIT vs Simplex Concrete Piles Pvt Ltd reported in 179 ITR 8 which came to the knowledge of the assessee only after the search. The assessee explained that the assessee originally claimed deduction u/s 80IA of the Act for Rs. 10,64,04,988/- in respect of 16 construction projects. The ld AO observed that in view 9 ITA No.58-62/Kol/2012 69-71/Kol/ 2013, AYs 2004-05 to 2008-09 Tantia Constructions Limited of the substituted Explanation, the assessee had executed only the works contract awarded by the Central / State Government and Local Authorities not eligible for deduction u/s 80IA. In order to arrive at this conclusion, the ld AO referred to the definition of work contract as per the Government of Puducherry, payment of sales tax and work contract tax by the assessee, reference of the assessee company as contractor in the agreements / contracts. In view of above, the ld AO held that all the works executed by the assessee during the year falls under works contract and assessee have also paid the works contract tax and sales tax. The ld CITA further observed that on going through the agreements / contracts , the assessee had carried out set of activities to develop the infrastructure project using its technical expertise, technical and other skilled and non-skilled manpower and it plant and machineries to execute the projects which were sourced out of own and borrowed funds by the assessee. The decision rendered in assessee s appeal for Asst Year 2004-05 would apply with equal force for other assessment years in the appeals of the assessee.


ITA No.58-62/Kol/2012 & 69-71/Kol/ 2013, AYs 2004-05 to 2008-09 Tantia Constructions Limited IN INCOME TAX APPELLATE TRIBUNAL C BENCH: KOLKATA [Before Shri M. Balaganesh, AM & Shri S. S. Viswanethra Ravi, JM] I.T(SS).A No. 58 & 60/Kol/2012 Assessment Years: 2004-05 & 2005-06 & I.T(SS).A No. 59,61 & 62/Kol/2012 Assessment Years: 2006-07, 2007-08 & 2008-09 Tantia Constructions Limited Vs. Deputy Commissioner of Income-tax, (PAN:AABCT0811E) Central Circle-XIII, Kolkata. (Appellant) (Respondent) & I.T.A No. 69 to 71/Kol/2013 Assessment Years: 2006-07 to 2008-09 Deputy Commissioner of Income-tax, Vs. Tantia Constructions Limited Central Circle-XIII, Kolkata. (Appellant) (Respondent) Date of hearing: 23.08.2016 Date of pronouncement: 23.09.2016 For Assessee: Shri Manish Tiwari, AR For Revenue : Shri G. Mallikarjuna, CIT, DR ORDER Per Shri M. Balaganesh, AM: All these appeals of assessee are arising out of separate orders of CIT(A), Central-II, Kolkata vide appeal No. 129,131,130/CC-XIII/CIT(A)C-II/11-12 dated 08.10.2012 and 132&133/CC-XIII/CIT(A)C-II/11-12 dated 09.10.2012 and 10.10.2012. All these appeals of revenue are arising out of separate orders of CIT(A), Central0II, Kolkata vide appeal Nos. 131, 132 & 133/CC-XIII/CIT(A)C-II/11-12 dated 08.10.2012, 09.10.2012 and 10.10.2012. Assessments were framed by DCIT, C.C-XIII, Kolkata u/s. 153A/143(3) of Income tax Act, 1961 (hereinafter referred to as Act ) for AYs 2004-05 to 2008-09 vide his separate orders dated 16.08.2011. Both appeals are taken up together for sake of convenience 2 ITA No.58-62/Kol/2012 & 69-71/Kol/ 2013, AYs 2004-05 to 2008-09 Tantia Constructions Limited Assessee Appeals 2. only issue to be decided in appeals of assessee is as to whether retention money credited to profit and loss account is to be brought to tax on accrual basis or on receipt basis in facts and circumstances of case. 3. brief facts of this issue is that assessee is public limited company engaged in business of civil construction through process of tender. major projects where construction activities were carried on during years under appeal were awarded by following authorities :- (a) Hooghly River Bridge Commissioner (b) P.W.D., Mizoram (c ) P.W.D., Patna (d) East Central Railway (e) Central Public Works Deptt. 3.1. facts for Asst Year 2004-05 are stated herein and taken up for adjudication of disputed issues and same would apply with equal force for other asst years also in view of identical facts involved except variance in figures. 3.2. Consequent upon search and seizure operation u/s 132 of Act conducted on 17.3.2010 at office premises of assessee company and its group concerns as well as survey operations at various places of company, notice u/s 153A of Act dated 12.1.2011 was served on assessee. assessee filed its return in response to notice u/s 153A of Act on 11.2.2011 declaring loss of Rs. 74,72,430/- and determining taxable income u/s 115JB of Act as declared earlier. In return filed originally u/s 139(1) of Act, assessee declared income from construction business based on gross contract receivable from Principals / Clients as per bills raised on them. Since Principals / Clients retain part of such bill amount pending verification regarding satisfactory performance which normally takes time, assessability of such retention money became subject matter of 3 ITA No.58-62/Kol/2012 & 69-71/Kol/ 2013, AYs 2004-05 to 2008-09 Tantia Constructions Limited dispute. assessee in its original return u/s 139(1) had offered same on accrual basis on basis of bills raised on Principals / Clients. But in return filed in response to notice u/s 153A of Act, assessee chose to offer same on receipt basis (i.e. retention money offered in year of receipt) by placing reliance on following decisions :- CIT vs Ignifluid Boilers (I) Ltd reported in (2006) 283 ITR 295 (Mad) CIT vs P & C Constructions (P) Ltd reported in (2009) 2 taxmann.com 47 (Mad) CIT vs Simplex Concrete Piles (India) Pvt Ltd reported in (1989) 179 ITR 8 (Cal) 3.3. assessee tried to explain that since section 153A of Act authorizes ld AO to assess or reassess total income in respect of each asst year falling within such six years, said assessments have to be framed as per law and only such receipt which can be legally includible can be brought to taxation. Since retention money is taxable only in year of release by respective authorities as per judicial decisions referred earlier, same should be taxed accordingly. 3.4. ld AO rejected claim , inter alia, on ground that assessee had accounted retention money in profit and loss account following mercantile system from year to year and such claim was not made in its original return filed u/s 139(1) of Act. Moreover, assessee has been following consistently method of accounting in respect of retention money by offering same on mercantile basis and accepted by revenue in earlier years. Hence said method should not be changed in section 153A proceedings by assessee. observations of ld AO in his order are as under:- assessee neither reduced retention money in profit and loss account nor it did reduce from computation of income while filing return of income filed u/s 139(1) of Act. assessee had taken opportunity to revise return u/s 153A of Act filed in consequence to search dated 17.03.2010. Importantly , not single document emanates from search and seizure operation which could prompt assessee to reduce its income by revising its return of income already accounted for in regular books of accounts. 3.5. taxability of retention money under dispute on mercantile basis is as under:- 4 ITA No.58-62/Kol/2012 & 69-71/Kol/ 2013, AYs 2004-05 to 2008-09 Tantia Constructions Limited Asst year 2004-05 - 1,35,96,919/- Asst year 2005-06 - 46,90,919/- Asst year 2006-07 - 1,52,69,653/- Asst year 2007-08 - 3,42,11,947/- Asst year 2008-09 - 7,01,40,322/- Asst year 2009-10 - 9,77,65,108/- Asst year 2010-11 - 10,65,10,578/- 4. ld CITA upheld treatment of retention money given by ld AO by observing as under:- 5. I have considered submission of appellant and perused assessment order. facts of case have already been discussed above. It is apparent that appellant company is following mercantile system of accounting and, therefore, in its books of account company had accounted for receipt of retention money on accrual basis. In its financial statements also retention money had been accounted for on accrual basis and hence amount of retention money is credited to P&L A/C. Accordingly, return of income was filed u/s 139(1) of Act and assessment was completed. However, in return filed u/s 153A, appellant shifted from its original stand and claimed that retention money is to be accounted for on receipt basis for purpose of taxation. Therefore, in return filed u/s 153A, appellant reduced amount of retention money directly in computation of income. On careful consideration of facts and in law, I am of opinion that appellant company is not entitled to change its stand in return filed u/s 153A of Act. appellant company is not entitled for change in method of accounting or method of valuation in proceedings initiated u/s 153A of Act. proceedings u/s 153A of Act is for benefit of Revenue and not for benefit of assessee. Hence, I am of considered opinion that AO has rightly disallowed claim of appellant for reduction of amount of retention money of Rs. l,35,96,919/- from gross contract receipt. 5. Aggrieved, assessee is in appeal before us on following grounds:- 1. A). That observations / findings of Ld. CIT (A) that "retention money" 'having been credited in P&L A/ c. on accrual basis, appellant cannot shift and claim reduction for retention money from its income are opposed to following decisions: - a) CIT - Vs. - Ignifluid Boilers (I) Ltd. 283 ITR 295 (Mad) b) CIT - Vs. - P & C Constructions (P) Ltd. 2 Taxman. Corn 47 (Mad) c) CIT - Vs. - Simplex Concrete Piles (India) Pvt. Ltd. 179 ITR 8 (Cal) B.) That Ld. CIT(A) has erred in not holding that A.O. has failed to consider that if in law certain receipt is not taxable mere fact that such receipt was accounted in books of account or offered in return of income cannot make receipt as taxable. 2. That finding of Ld. CIT (A) that appellant is not entitled to change its stand to claim reduction of income for retention money as taxable on receipt basis in course of proceeding u/s 153A of I. T. Act is not maintainable in law. 5 ITA No.58-62/Kol/2012 & 69-71/Kol/ 2013, AYs 2004-05 to 2008-09 Tantia Constructions Limited 3. That on facts and in circumstances of case, Ld. CIT (A) is wrong and unjustified in upholding action of Assessing Officer who denied claim for reduction of retention money and thereby enhancing return income filed u/s. 153A of Act by Rs.1,35,96,919/-. 4. That on facts and in circumstances of case, Ld. CIT(A) has erred in not holding that A.O. has traveled beyond jurisdictional limit as envisaged in Section 153A of Income Tax Act, 1961 while rejecting claim of taxability of Retention Money on receipt basis. 6. ld AR argued that assessee had to change its stand in offering retention money on receipt basis based on decision of Hon ble Calcutta High Court in case of CIT vs Simplex Concrete Piles (India) Pvt Ltd reported in (1989) 179 ITR 8 (Cal) which came to knowledge of assessee only after search . Accordingly, he reiterated submissions made by him before lower authorities. He further argued that provisions of section 153A of Act which is stated by ld CITA as meant for benefit of revenue and accordingly assessed income u/s 143(3) of Act earlier cannot be reduced in search assessment. He argued that these observations do not draw any support from provisions of Act and moreover, decision relied upon by ld CITA on Hon ble Apex Court in case of CIT vs Sun Engg. Works (P) Ltd reported in 198 ITR 297 (SC) was rendered in context of section 147 proceedings and not for search proceedings. He further argued that claim made by assessee were allowed by ld CITA and on further appeal to this tribunal by revenue, same were dismissed vide ITA Nos. 346 & 347/Kol/2015 dated 17.6.2015. 7. In response to this, ld DR fairly agreed that no incriminating materials were found during course of search to disturb treatment of retention money so as to take different stand from section 143(3) proceedings. He reiterated findings of ld AO and argued that there is no good reason for assessee to shift its stand by not offering retention money on mercantile basis in return filed in response to notice issued u/s 153A of Act. 8. We have heard rival submissions and perused materials available on record. facts stated hereinabove remain undisputed and hence same are not reiterated for sake of brevity. We find that though Hon ble Calcutta High Court in case referred to supra had held that retention money would be taxable in year of receipt due to contingencies involved therein for releasing payment by Contractees to assessee, but it cannot be 6 ITA No.58-62/Kol/2012 & 69-71/Kol/ 2013, AYs 2004-05 to 2008-09 Tantia Constructions Limited ignored that assessee had offered retention money year after year on mercantile basis and assessments framed accordingly. Without existence of any incriminating materials found during course of search with regard to issue of retention money, we are of considered opinion that assessments framed already should not be disturbed in section 153A proceedings. Our understanding on this issue is further sanctified and approved by recent decision of Hon ble Calcutta High Court in case of CIT vs Veerprabhu Marketing Ltd in ITA 661/2008 dated 4.8.2016 and also by decision of Hon ble Bombay High Court in case of CIT vs Continental Warehousing Corporation (Nhava Sheva) Ltd and All Cargo Global Logistics Ltd reported in (2015) 374 ITR 645 (Bom) vide order dated 21.4.2015. 8.1. With regard to decision relied upon by ld AR on Co-ordinate bench of this tribunal in assessee s own case supra, we find that assessments for first time in those years were made u/s 143(3) of Act vide orders dated 31.12.2010 and 30.12.2011. Hence in case of regular assessment, change in stand could be taken by assessee and same was also duly appreciated by ld CITA and further by this tribunal vide abovementioned order. Hence we hold that decision relied upon by ld AR does not support case of assessee. 8.2. In view of these judicial precedents, we find no infirmity in order of ld CITA on impugned issue. Accordingly, grounds raised by assessee in its appeals are dismissed. Revenue Appeals 9. only issue to be decided in appeals of revenue is as to whether assessee is entitled for deduction u/s 80IA (4) of Act in facts and circumstances of case. 10. brief facts of this issue is that assessee is public limited company engaged in business of civil construction through process of tender. major projects where 7 ITA No.58-62/Kol/2012 & 69-71/Kol/ 2013, AYs 2004-05 to 2008-09 Tantia Constructions Limited construction activities were carried on during years under appeal were awarded by following authorities :- (a) Hooghly River Bridge Commissioner (b) KSHIP, Bangalore (c ) Kolkata Municipal Corporation (d) Indian Oil Corporation Ltd (e) Central Public Works Deptt. 10.1. facts for Asst Year 2006-07 are stated herein and taken up for adjudication of disputed issues and same would apply with equal force for other asst years also in view of identical facts involved except variance in figures. 10.2. assessee filed its return originally on 30.11.2006 declaring total income at Rs. Nil after claiming deduction u/s 80IA of Act in sum of Rs. 7,68,59,145/-, but paid tax on basis of book profits u/s 115JB of act. assessment was completed u/s 143(3) of Act by allowing claim of deduction u/s 80IA of Act amounting to Rs. 5,93,37,353/-. Consequent upon search and seizure operation u/s 132 of Act conducted on 17.3.2010 at office premises of assessee company and its group concerns as well as survey operations at various places of company, notice u/s 153A of Act dated 12.1.2011 was served on assessee. assessee filed its return in response to notice u/s 153A of Act on 11.2.2011 declaring total income of Rs. 27,71,510/- but showed its liability to tax at book profit u/s 115JB of Act as declared earlier. ld AO sought to deny claim of deduction u/s 80IA of Act in search assessment proceedings u/s 153A of Act. assessee explained that assessee originally claimed deduction u/s 80IA of Act for Rs. 10,64,04,988/- in respect of 16 construction projects. Later on, claim was confined to 13 projects for Rs. 9,34,19,846/-. then ld AO after examination allowed claim to extent of Rs. 5,92,22,478/- in respect of 9 projects on basis of detailed findings recorded in order. dispute was contested in appeal but ld CITA on basis of findings recorded in his order confirmed action of ld AO. Therefore this issue had reached finality and should be considered as allowable in course of assessment u/s 153A of Act in as much as no 8 ITA No.58-62/Kol/2012 & 69-71/Kol/ 2013, AYs 2004-05 to 2008-09 Tantia Constructions Limited incriminating materials were found in course of search warranting any disturbance to claim of deduction u/s 80IA of Act. It was also explained that so far as Explanation inserted at end of section 80IA by Finance Act, 2007 and substitution by Finance (No.2 ) Act, 2009 with retrospective effect from 1.4.2000 to deny benefit to person who executes works contract, Explanatory Memorandum to Union Budget 2007-08 explained that those contractors who have taken contract directly from Governments or Statutory Bodies should not get affected because they still comply with conditions specified in section. explanation would only change position of sub-contractors. 10.3. ld AO examined claim of deduction u/s 80IA of Act with reference to various agreements entered into by company with Central / State Governments and Local Authorities etc. deduction u/s 80IA of Act was originally allowed u/s 143(3) proceedings to tune of Rs. 5,93,37,353/- as against Rs. 10,64,04,988/- in respect of profits derived from 9 development projects. In search proceedings u/s 153A of Act also, ld AO again called for copies of all agreements / contracts to examine eligibility and allowability of deduction u/s 80IA of Act. ld AO was of opinion, that in respect of 5 projects, conditions of section 80IA were satisfied and profit from such 5 projects to extent of Rs. 4,12,88,960/- was eligible for deduction u/s 80IA of Act. In assessment order, ld AO had listed particulars of these 5 projects in Table A. In case of rest of 4 projects from which profit of Rs. 1,79,33,518/- was derived, ld AO was of opinion that these projects did not satisfy conditions of Section 80IA of Act because there was no new development of infrastructure facilities and in these contracts, company had only executed work of renovation of existing facilities. details of these 4 projects have been given by ld AO in Table B of order. Thus after verification and examination of agreements, ld AO was of opinion that assessee was eligible for deduction u/s 80IA to extent of profit derived from business of development of infrastructure facilities. But ld AO observed that said deduction u/s 80IA of Act is not eligible for assessee because of Explanation in Section 80IA inserted by Finance Act 2007 w.r.e.f 1.4.2000 and further substituted by Finance (No. 2) Act, 2009 w.r.e.f. 1.4.2000 , though, primary conditions for allowability of deduction are satisfied. ld AO observed that in view 9 ITA No.58-62/Kol/2012 & 69-71/Kol/ 2013, AYs 2004-05 to 2008-09 Tantia Constructions Limited of substituted Explanation, assessee had executed only works contract awarded by Central / State Government and Local Authorities, therefore, not eligible for deduction u/s 80IA. In order to arrive at this conclusion, ld AO referred to definition of work contract as per Government of Puducherry, payment of sales tax and work contract tax by assessee, reference of assessee company as contractor in agreements / contracts. ld AO also got lead from fact that no claim of deduction u/s 80IA of Act was made by assessee for Asst Years 2009-10 and 2010-11 pursuant to Explanation in Section 80IA supra. 11. ld CITA went to history of provisions of section 80IA of Act and observed that prior to 1.4.2002, agreements/contacts awarded to enterprise for development of new infrastructure facility are to be executed under BOLT scheme i.e. Build, Own, Lease and Transfer, because as per provisions, all three activities of development, maintenance and operation had been carried on by same enterprise. However, from assessment year 2002-03 onwards there was no such condition and to make itself being eligible for deduction u/s 80IA, enterprise could carry on anyone of three or all three activities. Thus, in sense, provisions were liberalized for being eligible for deduction. This was perhaps practical realization of fact that developer may not possess wherewithal, expertise or resources to operate facility, once constructed. Parliament eventually stepped in to clarify that it was not invariably necessary for developer to operate and maintain facility. Thus, in case where enterprise has entered in to agreement with Central/State Government or local authority, only for development of new infrastructure facility, it has to recoup its investment from someone because it has not entered in to contract to simultaneously maintain and operate such developed new infrastructure facility. In such cases, developer receives money from person with whom agreement for development of facility is made. Such payment also include profit element of enterprise eligible for deduction u/s 80IA subject to fulfillment of other conditions. If, enterprise which only develops infrastructure facility, would not receive money from Central Government or State Government or local authority, its entire investment in development would be loss because it could not transfer facility developed by it to any other enterprise 10 ITA No.58-62/Kol/2012 & 69-71/Kol/ 2013, AYs 2004-05 to 2008-09 Tantia Constructions Limited for maintenance and operation to recover its investment. Therefore, in cases where enterprise has only developed infrastructure facility as per contract and receive money in one go or in phases from government for executing work, it cannot be said that such enterprise was only contractor who has executed works contract in lieu of money from government or local authority etc. 11.1. ld CITA observed that ld AO relied on meaning of works contract as per Government of Puducherry, according to which, any agreement for execution of works relating to civil works, construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning of any movable or immovable property for cash / deferred payment or other valuable consideration is works contract. It further says that when contract fulfilling above conditions is executed by dealer, he is liable to pay tax on sale value of goods involved in execution of works contract at rates provided in schedule. In view of above, ld AO held that all works executed by assessee during year falls under works contract and assessee have also paid works contract tax and sales tax. Further in contracts / agreements, company has been denoted as contractor. ld CITA observed that this understanding and conclusion of ld AO and consequentially disallowing claim of deduction u/s 80IA of Act is unjustified in as much as , if this view of ld AO is accepted, then in that situation no enterprise which entered into agreement with Government for only development of new infrastructure facility would be eligible for deduction u/s 80IA because in all such agreements, enterprise is referred to as contractor and in almost all infrastructure development activities, civil work, construction , fabrication, erection, installation, repair and commissioning ,etc. are involved. enterprise has to receive payment from Government for work of development because with such enterprise there is no other source to recover its investment made in executing work of development of infrastructure project awarded to it. Such enterprise also has to pay state tax as per provisions of law existing in state where infrastructure facility is developed. It means that all sort of works executed by enterprise by virtue of agreement / contract awarded by Government, only for development of infrastructure facility, would have to be treated as works contract and such enterprise would 11 ITA No.58-62/Kol/2012 & 69-71/Kol/ 2013, AYs 2004-05 to 2008-09 Tantia Constructions Limited not be entitled for deduction u/s 80IA of Act. However, on going through provisions of section 80IA of Act w.e.f. 1.4.2002, it does not appear to be intention of legislation because legislation intends to provide benefit of incentive to such enterprises also who only develop new infrastructure facility. If view taken by ld AO is to be accepted, then very purpose of legislature to extend incentive for development of infrastructure would be frustrated. Accordingly, ld CITA held that it will not be correct to say that assessee company was not developer of infrastructure facility , but only contractor and it has merely executed works contract. ld CITA further observed that on going through agreements / contracts , assessee had carried out set of activities to develop infrastructure project using its technical expertise, technical and other skilled and non-skilled manpower and it plant and machineries to execute projects which were sourced out of own and borrowed funds by assessee. Hence on this count itself, it cannot be said that assessee is merely works contractor. ld CITA further held that every contractor may not be developer but every developer developing infrastructure facility on behalf of Government is contractor. 11.2. ld CITA observed that from decision of Co-ordinate Bench of Hyderabad Tribunal in case of KMC Constructions Ltd vs ACIT reported in (2012) 21 taxmann.com 138 (Hyd.) , it is clear that in case of agreement entered into by enterprise with Government, such enterprise is denoted by word contractor;, but it does not mean that such enterprise is work contractor and not developer. nature of all agreements entered into have to be looked into and if enterprise has entered into contract with Government / Government Bodies for development of infrastructure facility and such development has been carried out by enterprise itself by doing composite work by deploying its technical manpower, labour, technical knowhow, its expertise and finance and plant and machinery, etc., such development agreement cannot be treated as simple work contract and on such contracts assessee will be eligible for deduction u/s 80IA of Act. 11.3. ld CITA ultimately held that assessee is only developer and accordingly eligible for deduction u/s 80IA of Act by observing as under:- 12 ITA No.58-62/Kol/2012 & 69-71/Kol/ 2013, AYs 2004-05 to 2008-09 Tantia Constructions Limited 8.8 In case of appellant company, facts are similar to facts involved in case of KMC Constructions Ltd. (supra). As mentioned earlier in this order, in course of assessment proceedings, AO called for and examined all agreements entered into by appellant company with Government/ Government bodies. After examining agreements, he made two tables i.e. 'Table - A' containing agreements which according to him fulfills conditions laid down in section 801A( 4) and, therefore, eligible for deduction u/s 80lA otherwise than Explanation below sub-section (13) of section 80lA, and 'Table - B', having projects which in ,his opinion did not qualify for deduction u/s 80lA being in nature of only repair and renovation of existing facilities. AO did not allow deduction u/s. 80IA on projects listed in Table - for reason that he was of opinion that appellant was work contractor who executed work contracts. He made this opinion on basis of appellant company was denoted as contractor in agreements, paid work contract tax and also paid performance guarantee etc to Government. agreements produced before AO were also produced by appellant during appellate proceedings and same were examined and verified with reference to decision of ITAT, Hyderabad in case of KMC Constructions Ltd. (supra). On going through agreements entered into by appellant company with Government/ Government Bodies, it is observed that by virtue of these agreements, appellant company is required to develop new infrastructure facility and, therefore, appellant has acted as developer of infrastructure facility and it is not mere works contractor within meaning of Explanation below sub-section (13) of section 801A inserted by Finance Act, 2007 and substituted by Finance (No.2) Act, 2009, as held by AO. It is observed that appellant company had carried out composite activities to develop infrastructure facility once possession of land/site is handed over to appellant. On completion of work, developed infrastructure facility is handed over back to Government/Government Body. Even after handing over facility to Government, appellant company has to maintain facility for 12 to 48 months free of cost for any defect or damages etc. appellant company designs new infrastructure facility as per requirement of Government, deploy its technical experts, technical know-how, labour, expertise, plant and machinery, purchases materials required for project and also deploy substantial fund of its own and borrowed funds. Therefore, it cannot be said that appellant company was only works contactor with reference to all agreements and not developer. For example, appellant company entered into agreement with East Central Railway, for construction of new Bridge No.26 ( 4*76.2m + 2*30.5m through girder & well foundation) at Km. 16.848, Bridge No.27(5*30.Sm under slung girder & bored cast in situ piles) at Km.17.140 & Bridge No.28(5*18.30m composite girder and bored cast in situ piles) at Km.18.240 over Tilaiya Reservoir between Koderma & Hazaribagh in connection with new BG Rail line between Koderma & Ranchi to Railway Administration. As per agreement company was required to acquaint itself, at its own responsibility, risk and expense, with all information of site of work and their neighborhoods, actual working and other prevalent conditions, laws/regulations, availability and suitability of local laborers, materials, surface and sub-soil condition, accessibility of site of work sources and availability of water, electricity, camp site, market, banking facilities etc. company was also required to submit specific details of technical personnel and plant and machinery to be used, to submit samples of materials procured by company to execute work. It was responsibility of enterprise to bear loss or damage to its materials, equipments, tools and plant and machinery etc. work to be carried out under this agreement/contract shall include all labour, materials, construction plant, equipments and transport which may be required in preparation of and for full and entire execution and successful completion of works. possession of site will be handed over by Engineer concerned and its area of occupation will be defined. contractor shall make his own arrangement at his own cost for any addition; requirement by him for purpose of executing work. As per clause 29.2, contractor shall 13 ITA No.58-62/Kol/2012 & 69-71/Kol/ 2013, AYs 2004-05 to 2008-09 Tantia Constructions Limited on his own cost provide, if necessary, or if required on site, all temporary access thereto and shall alter, adopt and maintain same as required from time to time and shall take up and clear them away as and when no longer required and make good all damages done to site. These accesses will also be permitted to be used by other agencies. clause 32.1 says that contractor shall at his own expense, provide all materials required for was and shall maintain minimum stock of at least 3 months consumption of all materials required for work. As per clause 32.3, for stocking cement, contractor shall at his own cost build suitable damp proof godowns at site of work and make all satisfactory arrangements to see that strength of cement is not deteriorated. contractor has to make arrangements on its own for electric power. As per clause 41.4.2. before work is started, site shall be cleared of all obstructions like trees and bushes along with their roots, heavy grass and shrubs by contractor at his own cost. clause 41. 9 says that if in opinion of engineer, any of works had been executed with improper materials or defective workman-ship, contractor shall re-execute same and substitute proper materials and workman-ship forthwith at his own cost. As per clause 42, on completion of work, it will be taken over by Engineer. From date of taking over, contractor shall be responsible for maintenance of work for further period of 12 months. contractor shall make good and remedy at his own expense, any defect which may develop or may be noticed before expiry of period of 12 months. Thus, appellant company, in this contract, was involved in development of new infrastructure facility in form of construction of foundations, sub-structure and super structure for Rail Bridge over Tiliaya Reservoir between Koderma and Hazaribagh in connection with new B.G. Railway line between Koderma and Ranchi. It cannot be said that by developing new Bridge, appellant company had executed only works contract as held by AO. In view of decision of ITAT, Hyderabad, in case of KMC Constructions Ltd. (supra), appellant company has executed development contract and not works contract and, therefore, eligible for deduction u/s 80lA of Act. Similar is situation with other four contracts entered Into by company with government/government bodies and listed in Table-A of assessment order. 12. Aggrieved, revenue is in appeal before us on following grounds:- 1. That on facts and in circumstances of case and in law, Ld CIT (Appeals) erred in allowing deduction u/s 80lA claimed by assessee. 2. That order of learned CIT(A) is bad on facts and in law. 3. That Ld CIT (Appeals) failed to appreciate fact that i assessee was mere contractor who merely executed works contract and hence not entitled to get deduction u/s 801A. 4. That order of learned CIT(A) in allowing deduction to assessee u/s 80lA is in error of law and in error of facts. 5. That learned CIT(A) has failed to understand meaning of "Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development" referred to in section 801A. 6. That learned CIT(A) has failed to understand meaning of terms, '(1) Where gross total income of assessee includes any profits and gains derived by undertaking or enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as eligible business)' in section 80IA(1). 14 ITA No.58-62/Kol/2012 & 69-71/Kol/ 2013, AYs 2004-05 to 2008-09 Tantia Constructions Limited 7. That learned CIT(A) failed to understand meaning of section 80IA(2), " .... year in which undertaking or enterprise develops and begins to operate any infrastructure facility or .. \ 8. That Learned CIT(A) failed to understand meaning of eligible project in proviso below section 80IA(2) for eligible project .. where assessee develops or operates and maintains, or develops, operates, and maintenance any infrastructure facility referred to in 9. That learned CIT(A) failed to understand meaning of eligible project and profits from eligible project for purpose of section 80IA(4). 10. That Ld. CIT(A) failed to understand that first project has to be completed, and be in operation, and result in profits before said profits can be considered to be eligible for deduction u/s 801A. Before project is completed, and comes into operation by being put to business use, it cannot be said to yield any profits. (For example, when infrastructure project, say airport or highway, is completed and in operation and yields in eligible profits or income u/s 80IA(1). 11. That Ld. CIT(A) failed to understand in respect of eligible project, meaning of (1) developing or (ii) operating and maintaining or (iii) developing operating and maintaining any infrastructure of (iii) developing operating and maintaining any infrastructure facility .. in section 80IA(4). 12. That learned CIT(A) failed understand provisions of section 80IA(5) that first eligible business or project has to yield profits after it is completed, and then only question of deduction of such profits of project (revenue receipts from operations of completed project less eligible deductions) arises u/s 801A. 13. That learned CIT(A) failed to understand provisions of s.80IA(7) which clearly indicates that where incidental income arises from project, such income can be adjusted against income of project when it is completed, further clarifying that it is income from completed project (after completion, revenue receipts from operations less deductible expenses) that would be eligible for deduction u/s 801A. 14. That learned CIT(A) failed to understand provisions of section 80IA(7) wherein it is clearly stated that accounts have to be prepared for each 'enterprise' of assessee showing profits and gains derived from such enterprise, and certificate obtained from authorized accountant that such enterprise has yielded such income. learned CIT(A) further failed to appreciate that no income can arise from eligible project of enterprise even before it is completed, ready for operations and actually yields profits and gains. 15. That learned CIT(A) failed to appreciate that Proviso below section 80IA(8) enables Assessing Officer to compute profits of eligible business in appropriate manner and AO came to conclusion that since project had not yet been completed or yielded any profits after commencing operations, eligible profits were nil. 16. That learned CIT(A) has failed to understand provisions of section 80IA(9) that only profits from 'enterprise' or 'undertaking' can be considered for deduction in hands of assessee after such 'enterprise' or 'undertaking' starts yielding profits, which cannot arise unless said activity is ready and fit to yield income, and actually yields income from operations as is commonly understood. 15 ITA No.58-62/Kol/2012 & 69-71/Kol/ 2013, AYs 2004-05 to 2008-09 Tantia Constructions Limited 17. That learned CIT(A) failed to understand provisions of Explanation below section 801A( 13) which is only clarificatory, and not amendatory. 18. That learned CIT(A) also failed to understand simple meaning of income from eligible project can commence only after project is completed and starts earning income. 13. revenue had also raised following additional ground for all years :- That on Hon'ble Gujrat High Court in Special Civil Application No.11781 of 2009 order dated 28.02.2013/04.03.2013 in case of 'Katira Construction Ltd. Vs. Union of India' have upheld that deduction u/s.80IA is to be given only to developer and not to contractor, and that Explanation below section 80lA of Act inserted by Finance (No.2) Act, 2009 w.r.e.f. 01.04.2000 or by Finance Act 2007 w.r.e.f. 01.04.2000 was only c1arificatory and not amendatory in nature." 14. We have heard rival submissions and perused materials available on record. ld DR vehemently supported order of ld AO. He further stated that reliance placed by ld CITA on certain decisions are not relevant as in those cases, issue was only remanded back to ld AO for verification. Accordingly he prayed for setting aside of issue to file of ld AO. In response to this, ld AR vehemently supported orders of ld CITA. He stated that decisions relied upon by ld CITA are squarely applicable to facts of instant case , in as much as, in those cases, relevant clauses of agreements / contracts were not looked into by lower authorities and hence tribunal had in interest of justice had remanded matter back to file of ld AO to go through agreements / contracts. Whereas , in instant case, entire agreements / contracts were very much produced before ld AO both in original scrutiny assessment proceedings u/s 143(3) and also in section 153A proceedings which only enabled ld AO to prepare tabulation in Table and Table B in his assessment order. ld AR further argued that absolutely no incriminating materials were found during course of search which would enable department to change its stand about status of assessee , being developer or contractor. Accordingly he prayed that status of assessee being developer and claim of deduction u/s 80IA cannot be disturbed in section 153A proceedings. He placed reliance in this regard on Co-ordinate Bench of this Tribunal in case of ACIT vs Kanchan Oil Industries Ltd in ITA No. 725/Kol/2011 , ITA Nos. 1390,1391 & 1553/Kol/2010 dated 9.12.2015. 16 ITA No.58-62/Kol/2012 & 69-71/Kol/ 2013, AYs 2004-05 to 2008-09 Tantia Constructions Limited 14.1. We find lot of force in arguments of ld AR that all agreements / contracts were filed before lower authorities and ld CITA had gone into relevant clauses of agreements / contracts , analysed same in his elaborate order and then arrived at conclusion that assessee is only developer and not merely works contractor and accordingly eligible for deduction u/s 80 IA of Act. We also find that Co-ordinate Bench of Chennai Tribunal in case of ACIT vs R.R.Constructions in ITA No. 2061/Mds/2010 dated 3.10.2011 had occasion to consider similar issue wherein it was held as under :- assessee has also produced all six agreements regarding six projects undertaken before AO, whose copies are available before us also. It is fact that even after taking contract from Government, if assessee develops infrastructure facilities, it would be regarded as 'developer: and not as 'works contractor'. assessee has carried on entire construction/development of infrastructure facilities and satisfy all conditions of section 80IA(4)(i)(a). It is undeniable fact that assessee has taken development of infrastructure facility agreement from State Government/ local authority. contractor who develops infrastructure facility becomes developer to claim deduction u/s 80IA(4). Hon'ble Bombay Bench of ITAT while deciding case of Patel Engineering Ltd. v. DCIT in ITA No. 1221/Mum/2004 has gone extent of holding that assessee, civil contractor, having executed part of contracts of irrigation and water supply on 'build and transfer' basis and handed over them to contractee Governments, was eligible for deduction u/s 80IA( 4). similar view was taken by us in case of East Coast Constructions & Industries Ltd. v. DCIT, ITA No. 554/Mds/2010 dated 13.09.2011. Therefore, we confirm findings of CIT(A) and do not find any valid merit in Revenue's appeal" 14.2. We find that ld CITA had granted relief for claim of deduction u/s 80IA of Act in respect of profits mentioned in projects in Table of assessment order. ld CITA observed that profit to tune of Rs. 1,79,33,518/- mentioned in projects in Table B of assessment order, assessee failed to substantiate its claim of deduction u/s 80IA of Act and accordingly confirmed disallowance made thereon. We find that against this, assessee had not preferred any appeal before us. Hence we refrain to give our comments on same. 14.3. We also find that ld CITA had duly met one of observations of ld AO that assessee suo moto refrained from making any claim of deduction u/s 80IA of Act for Asst Years 2009-10 and 2010-11 in return pursuant to Explanation brought out in 17 ITA No.58-62/Kol/2012 & 69-71/Kol/ 2013, AYs 2004-05 to 2008-09 Tantia Constructions Limited Finance (No.2) Act, 2009 w.r.e.f. 1.4.2000. We find that ld CITA in this regard had stated that each assessment year is separate unit and decision has to be taken on basis of facts in that particular year. We find that revenue cannot take undue advantage of ignorance of assessee by collecting undue taxes which would admittedly be against Article 265 of Constitution. 14.4. We find that , in any case, revenue had conceded to fact that there was absolutely no incriminating materials found during course of search which would enable ld AO to take different stand with regard to status of assessee (whether developer or contractor). Admittedly, assessment framed in impugned appeal is pursuant to search conducted u/s 132 of Act wherein no incriminating materials were found, which fact is not disputed before us. Moreover, it is not in dispute that claim of deduction u/s 80IA of Act has been accepted by revenue in section 143(3) proceedings and there is no reason to disturb same in section 153A proceedings without there being any incriminating materials to contrary. In this regard, we find that issue is squarely covered by co-ordinate bench decision of this tribunal in case of Kanchan Oil Industries Ltd supra. 14.5. With regard to additional ground raised by assessee, in view of our aforesaid findings, we do not deem it fit to go into additional ground raised by assessee as same would only be superfluous in nature. 15. In view of our aforesaid findings and respectfully following various judicial precedents relied upon hereinabove, we hold that assessee has to be treated only as developer in facts and circumstances of case and not merely as works contractor , thereby eligible for deduction u/s 80IA of Act in respect of profits derived from projects mentioned in Table of assessment order to tune of Rs. 4,12,88,960/- which has been rightly allowed by ld CITA. In any case, we hold that said claim cannot be disturbed by ld AO in section 153A proceedings in absence of any incriminating materials to contrary found in course of search . Hence we do not find any infirmity in order of ld CITA in this regard. Accordingly, grounds raised by revenue are dismissed. 18 ITA No.58-62/Kol/2012 & 69-71/Kol/ 2013, AYs 2004-05 to 2008-09 Tantia Constructions Limited 16. decision rendered in assessee s appeal for Asst Year 2004-05 would apply with equal force for other assessment years in appeals of assessee. Similarly decision rendered here in for revenue s appeal for Asst Year 2006-07 would apply with equal force for other assessment years in appeals of revenue. 17. In result, both appeals of assessee as well as revenue are dismissed. Order pronounced in open court on 23.09.2016 Sd/- Sd/- (S.S. Viswanethra Ravi) (M. Balaganesh) Judicial Member Accountant Member Dated : 23rd September, 2016 Jd.(Sr.P.S.) Copy of order forwarded to: 1. APPELLANT DCIT, Central Circle-XIII, Kolkata. 2 Respondent M/s. Tantia construction Ltd.,25-27, Netaji Subhas Road, Kolkata-700 001. 3. CIT(A), Kolkata 4. CIT , Kolkata 5. DR, Kolkata Benches, Kolkata /True Copy, By order, Asstt. Registrar. Tantia Constructions Limited v. Deputy Commissioner of Income-tax, Central Circle-XIII, Kolkata
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