En-Vision Enviro Engineers Pvt.Ltd.,, ... vs Department Of Income Tax

Date of pronouncement : 10/06/2015 ITA No.1593/Ahd/2011 2 Asst. Year 2008-09

ORDER

PER SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER.

This is an appeal filed by the Revenue against the order of ld.

CIT(A)-1, Surat, dated 14.3.2011 wherein the following effective

ground has been raised :-

1. On the facts and circumstance of the case and in law, the ld.

CIT(A) has erred in deleting the addition of Rs.66,53,384/- made on account of disallowance of deduction claimed u/s 80IA(4) without appreciating the material facts that for eligible of deduction u/s 80IA(4), the assessee must fulfill the prime condition that '' The assessee must be owner of the infrastructure facilities'', within the meaning of section 80IA(4) of the Act and assessee had failed to fulfill the said prime condition.

2. The assessee company is engaged in the business of

consulting of pollution control and environmental related works,

erection and commissioning of plant and also providing service of

the treatment and disposal of bio medical waste. The assessee filed

its E-return of income on 29.09.2008 showing total income at

Rs.24,32,420/-. The return was processed u/s 143(1) of the I.T. ITA No.1593/Ahd/2011 3 Asst. Year 2008-09

Act, 1961 (herein after the Act). The case was taken up for scrutiny

assessment and accordingly notice u/s 143(2) of the Act was issued

and served upon the assessee. Subsequently notice dated

13.08.2010 u/s 142(1) of the Act was also issued and duly served

upon the assessee along with detailed questionnaire. In response to

the notices the assessee filed written submissions. After

considering the submissions of assessee the AO rejected the claim

of the assessee and made addition of Rs.66,53,384/- on account of

disallowance of claim u/s 80IA(4) of the Act for the following

reasons :-

1. The assessee company has claimed deduction of Rs.66,53,384/- in respect of the income derived from the business of 'work contract' which was awarded by some other person and executed by the assessee company.

2. The assessee does not own any infrastructure facilities of its own which is a prime condition for allowance of deduction u/s 80IA(4) of the Act. The assessee has not fulfilled the prime conditions laid down for claiming deduction u/s 80IA(4) of the I.T. Act therefore, the assessee is not eligible for deduction claimed u/s 80IA(4) of Rs.66,53,384/-.

ITA No.1593/Ahd/2011 4 Asst. Year 2008-09

3. The assessee went in appeal before the ld. CIT(A) who has

deleted the impugned addition. The revenue is in appeal before us.

4.. The ld. DR supported the order of AO and submitted that the

ld. CIT(A) has wrongly deleted the addition. Therefore, the order

of ld. CIT(A) be set aside and that of the AO be restored

5. On the other hand the ld. AR supported the order of ld.

CIT(A). She submitted that the issue is covered in favour of

assessee by the order of the Tribunal in ITA Nos. 2902/Ahd/2008

for AY 2005-06 and others dated 30/4/2012. She placed on record

a copy of the Tribunal's order in ITA No.2902/Ahd/2008 for AY

2005-06 and others.

6. After considering the rival submissions and going through

the material on record, we are of the view that the ld. CIT(A) has

rightly deleted the addition. We find that the issue has been ITA No.1593/Ahd/2011 5 Asst. Year 2008-09

decided by the Tribunal in assessee's own case vide its order dated

30/04/2012 with the following observations:-

''7. We have heard both the parties at some length. We have perused the compilation filed, in the light of the provisions of the Act. Section 80IA was subject to a change on several occasions in the past, however for the year under consideration,i.e.A.Y.2005-06, the section substituted by the Finance Act, 2001 w.e.f. 1/4/2002 is applicable. This section prescribes that in respect of profits and gains from an Industrial Undertaking engaged in infrastructure development; a deduction of an amount equal to 100% of the profits shall be allowed. Section 80IA(4) prescribes that an Enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility shall qualify for the deduction. This sub- section says that the Enterprise has to enter into an agreement with the Government, either Central or State, for developing or operating and maintenance or developing, operating and maintenance of a new infrastructure facility and that it has been started on or after first day of April-1995, as also owned by a company registered in India or by Consortium of such companies. Through an Explanation, annexed to the said section;

"infrastructure facility" is defined as road, bridge, rail system, high-way project, irrigation product, sewerage system or "solid waste management system". With these submissions of legal requirement, our attention has been brought on the fact that the assessee has developed the infrastructure meant for "solid waste management system".

The assessee has entered into an agreement with the Municipal Council Udaipur (Rajasthan) dated 15/07/2004. The assessee has also entered into an another agreement with Surat Municipal Corporation dated 14/11/2002. We have examined both the agreements. Undisputedly, the assessee has been referred as a "Contractor" in the agreement dated 15/07/2004. However, it was not so in the agreement dated 14/11/2002 executed with Surat Municipal Corporation. Be that as it was, merely mentioning the assessee as "Contractor" the exact nature of the execution of the work do not alter. Rather, this controversy has been resolved by Respected Co-ordinate Bench in the case of Patel Engineering Ltd. 94 ITD 411(Mum.)cited-supra. We are convinced with the argument of the ld.AR that a contractor can also be a developer. In this context, our attention has been drawn on a latest decision of Hon'ble Gujarat High Court pronounced in the case of CIT vs. Radhe Developers (2012)341 ITR 403 (Guj.), wherein the ITA Nos.2902,3077-08,1798-09,934, 1194-10, 1596-11 and CO 177-11 (Assessee's appeals & Revenue's Appeals) [ En-vision Enviro Engineers P.Ltd. vs. DCIT ] - 11 - issue was in respect of claim of deduction u/s.80IB(10) of IT Act and the assessee happened to be "developer-cum-building contractor". The Hon'ble Court has held that the said developer had to make the construction and to engage labour on contract, therefore the term "developer" has to be understood in common parlance as well as in legal sense. The Hon'ble Court has taken the help of Websters- encyclopedia and other dictionaries and thereupon opined that the term "developer" carries a much wider connotation. As far as the agreement with Surat Municipal Corporation is concerned, the assessee has been referred as "party of the first part", hence no serous objection has been raised by the Revenue. On account of these reasons and following the view expressed by the Hon'ble ITA No.1593/Ahd/2011 6 Asst. Year 2008-09 Court as also considering the nature of the work executed by this assessee, we are not inclined to agree with the AO that the assessee has acted merely as a "contractor", rather, we hereby hold that the assessee has acted as a "developer". Here-in-below are few other reasons hereby assigned by us.

7.1. As per the terms of the agreement, the assessee has to set up "biomedical waste treatment facility". One of the clauses [clause-(ii)] prescribes that the plant shall be set up at assessee's own cost at the site. For the purpose of construction of the said facility "local body" has provide land only. Thereafter, clause(iii) says that the said facility shall be operated without any hindrance during the term of lease for thirty years. Only a token Re.1/- is charged as lease amount. We have also noted that vide clause(v) the Collector is authorized to observe the operation and maintenance of the facility. But it does not mean that the Municipal Council has financed the said project. This clause is meant only for supervision of the operation & maintenance. Therefore, according to us, it is a far fetched proposition on the part of the Revenue to argue that the entire project has been developed by the Municipal Corporation through a contractor i.e. the assessee.

7.2. As far as the objections of the Revenue is concerned, the clauses are very clear that the bio-medical waste shall be collected and transferred by the assessee upto the plant. For this purpose, the assessee shall be paid for the treatment and the disposal of the waste in accordance with the tender and Letter of Indent (LOI). For that purpose, a provision has been made for the execution of a separate agreement with the Medical College. One of the clauses says that the treated bio-medical waste shall be disposed-off along with other municipal solid waste. The transportation of the waste is to be carried out by the assessee. The clauses have also provided that for collection, transportation, storage and disposal of bio-medical waste after treatment within specified time shall be the responsibility of the assessee. However, the assessee has been entitled to use or sale any of the bio-product.

7.3. We have also examined the other agreement dated 14/11/2002 which in its nomenclature says "Agreement for treatment of Bio Medial waste on BOOT (Build, Own, Operator, Transfer) basis between Surat Municipal Corporation and En-Vision Enviro Engineers Pvt.Ltd." For the removal and disposal of refuse, rubbish and garbage of various hospitals, clinics, nursing homes in Surat, it was required by the Municipal Corporation to handle and manage the same, hence, invited Boot Tender. The assessee has offered and on a token rent of Re.1/- per square meter per annum, the said agreement was entered into for seven years. The assessee is to make the construction on the land as per the approved plans. The assessee has to install necessary equipment and machinery. One of the clauses is very clear that "En-Vision shall bear all the expenses for putting up the said plan". The assessee is entitled to charge for treatment of waste per kg. as fixed by Municipal Corporation from time to time. One of the clauses, thus is clear that the rate shall be as per the quotations agreed upon. On termination of agreement, the project is to be taken over. At this juncture, ld.AR has also mentioned the change in the Statute through which one of the condition of transfer of the infrastructure back to the Government has been waived of.

ITA No.1593/Ahd/2011 7 Asst. Year 2008-09

8. As far as the TDS certificates are concerned, we have examined that the assessee has raised bills and the TDS certificates are issued by the Corporation for bio-medical waste treatment (charges) and for the services rendered to various hospitals and the amount of bill represented payment attributable to waste treatment and not in respect of any construction or development. We have also seen the "invoices" and the description therein was also "bio-medical waste treatment facility". Because of this reason, we are not inclined to accept the allegation of the Revenue Department that since on TDS certificate the assessee has been mentioned as "Contractor", therefore the assessee has not acted as a "Developer". These TDS certificates evidently were not in respect of the developing or maintaining or operating or construction of the said infrastructure facility but only in respect of the charges for treatment of waste.

8.1. As far as the balance-sheets are concerned, it has been demonstrated that year-wise the assessee has shown the said "infrastructure" as fixed assets. The assessee has shown the investment in its books of account and we have been informed that because of the said reason the assessee has claimed depreciation which was also allowed to the assessee by the Revenue Department. 8.2. With this factual background, we have perused the decision of ABG Heavy Industries Ltd. 322 ITR 323(Bom.), wherein scope of the provision of section 80IA have been discussed and held as under:-

''The obligations which had been assumed by the assessee under the terms of the contract were obligations involving the development of an infrastructure facility. Section 80-IA of the Act essentially contemplated a deduction in a situation where an enterprise carried on the business of developing, maintaining and operating an infrastructure facility. A port was defined to be included within the purview of the expression "infrastructure facility". The obligations which the assessee assumed under the terms of the contract were not merely for supply and installation of the cranes, but involved a continuous obligation right from the supply of the cranes to the installation, testing, commissioning, operation and maintenance of the cranes for a term of ten years after which the cranes were to vest in JNPT free of cost. An assessee did not have to develop the entire port in order to qualify for a deduction under section 80IA. The condition of a certificate from the port authority was fulfilled and JNPT certified that the facility provided by the assessee was an integral part of the port. The aa developed the facility on a BOLT basis under the contract with JNPT. On the fulfilment of the lease of ten years, there was a vesting in the JNPT free of cost. The finding that the assessee had developed the infrastructure facility and that it was engaged in operating the cranes was, therefore, based on the material on record. The fact that the assessee was also maintaining the cranes was not disputed. The facility was commenced after April, 1995. The assessee was entitled to the special deduction under section 80-IA."

9. Under the totality of the facts and circumstances of the case and after due consideration of the legal provisions in the light of the case law cited, we hereby hold that the assessee is entitled for the claim of deduction u/s.80IA(4) of IT Act. In the result, we hereby confirm the findings of ld.CIT(A) and dismiss the grounds of the Revenue. Since for rest of the A.Ys. 2004-05, 2006-07 & 2007-08, the issue raised by the Revenue is ITA No.1593/Ahd/2011 8 Asst. Year 2008-09 identical (including AY 2005-06), therefore on the same lines, grounds are dismissed. Revenue's appeals for all the four years are hereby dismissed.''

Facts being similar, following the above reasoning, we concur with the order of ld. CIT(A) in deleting the addition of Rs.66,53.384/- made on account of disallowance of deduction claimed u/s 80IA(4) of the Act. The same is upheld.

7. In the result, the appeal filed by the Revenue is dismissed.

Pronounced in the open Court on this the 10th day of June, 2015 Sd/- Sd/-

(Anil Chaturvedi) (Shailendra Kumar Yadav) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated :_10/06/2015.

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

Dy.Registrar,ITAT, Ahmedabad ITA No.1593/Ahd/2011 9 Asst. Year 2008-09

1. Date of dictation: 2/62015 2. Date on which the typed draft is placed before the Dictating Member: 9/6/2015 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 the Dictating Member for pronouncement: __________

5. Date on which the fair order comes back to the Sr. P.S./P.S.:

6. Date on which the file goes to the Bench Clerk:11/06/2015

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: