Tapsi Prestressed Products Ltd.,, vs Department Of Income Tax

DCIT, Circle-2, Jalgaon .......... अपीलाथ / Appellant बनाम v/s

Tapi Prestressed Products Ltd., .......... यथ / Gat No.537, Bank of Tapi River, Respondent Anjale, Tal : Yawal, Dist. Jalgaon. PAN No. AAACT6669D

अपीलाथ क ओर से / Appellant by : Shri Nikhil Pathak

यथ क ओर से / Department by : Shri.S.K. Rastogi, CIT

सन ु वाई क तार ख / घोषणा क तार ख / Date of Hearing :29.07.2015 Date of Pronouncement:31.07.2015

आदे श / ORDER

PER R.K. PANDA, AM :

This appeal filed by the assessee is directed against the order

dated 13-09-2013 of the CIT(A)-II, Nashik relating to A.Y. 2009-10.

2. Facts of the case, in brief, are that the assessee is a limited

company engaged in a variety of activities such as undertaking of

contract work relating to infrastructure projects like water supply and

lift irrigation project, road constructions contract on BOT basis,

manufacturing of PSC pipes, trading in MS plates and pipes etc. The 2 ITA No.2139/PN/2013

assessee filed the return of income on 30-09-2009 declaring total

income of Nil after claiming deduction of Rs.15,33,36,705/-

u/s.80IA(4) of the I.T. Act which was revised to Rs.10,92,36,658/-

during the course of assessment proceedings. The AO disallowed the

claim of deduction u/s.80IA(4) amounting to Rs.15,33,36,705/- which

was revised to Rs.10,92,36,658/- on the ground that the assessee is

not eligible for deduction u/s.80IA(4) of the Act. While doing so, the

AO followed the order of his predecessor for A.Y. 2007-08 wherein

similar disallowance was made for the following reasons :

"i. The assessee company is only a contractor and not a developer of any infrastructure project.

ii) There is no clause in tender document/agreement by which the ownership of the land or any property is entrusted to the contractor i.e. the assessee company.

iii) The drawings and designs of the projects have been prepared by the contractees and have not been prepared by the assessee company.

iv) The assessee company is not operating and maintaining any infrastructure project as required by section 80IA(4) of the Act. The assessee is not collecting finance by way of toll in the capacity of owner of the project for specified period

v) The project was financed by the contractee and not by the appellant company.

vi) The decisions relied on by the assessee in the case of Laxmi Civil Engineering Pvt. Ltd., Kolhapur Vs. Addl CIT-R-2, Kolhapur of IT AT, Pune and the decision of Hon'ble Bombay High Court in the case of CLT Vs. ABG Heavy Industries Ltd. and Ors. are distinguishable on facts.

3. In appeal the Ld. CIT(A) following the order for A.Yrs. 2007-08

and 2008-09 in case of the assessee allowed the claim of deduction

u/s.80IA(4) of the I.T. Act.

4. Aggrieved with such order of the CIT(A) the Revenue is in appeal

before us with the following grounds :

3 ITA No.2139/PN/2013 "1. On the facts and in the circumstances of the case, the CIT(A) erred in relying on the decisions of Hon'ble ITAT Pune in the cases of Laxmi Civil Engg. (P) Ltd. and Pratibha Construction & Engineering (P) Ltd., in as much as the facts of those cases are different from that of assessee's case.

2. On the facts and in the circumstances of the case, the CIT(A) has not appreciated the fact that assessee failed to establish that it was a developer as stipulated in the provision of section 80IA(4) of the Act; hence ineligible for claimed deduction.

3. On the facts and in the circumstances of the case, the CIT(A) did not appreciate the fact that on being confronted by the Assessing officer during assessment proceedings for A.Yr.2009-10 regarding eligibility for deduction u/s.80IA(4), assessee voluntarily revised its claim of deduction from Rs. 15,33,36,705/- to Rs.10,92,36,658/-. The CIT has erred in allowing deduction u/s 80(IA)(4) Rs 10,92,36,658/-

4. On the facts and in the circumstances of the case, the CIT(A) has not appreciated the fact that survey action u/S.133A was conducted in assessee's case and CIT(A) confirmed the additional income declared on account of deficiencies in expenses, however, findings of survey party regarding deduction u/s.80IA(4) were not taken into account.

5. The appellant craves leave to amend, add, alter the above grounds, if felt necessary, later."

5. We have considered the rival arguments made by both the sides,

perused the orders of the Assessing Officer and the CIT(A) and the

Paper Book filed on behalf of the assessee. We find identical issue

had come up before the Tribunal in assessee's own case for A.Yrs.

2007-08 and 2008-09 where the claim of deduction u/s.80IA(4) which

was denied by the AO was allowed by the CIT(A) and on further appeal

the Tribunal dismissed the appeal filed by the Revenue by observing as

under :

"3.3 After going through the rival submissions and material on record, we find that the Revenue has challenged the order of the CIT(A) who has held that the assessee was developer and entitled to claim deduction under section 80IA(4) of the Act. The assessee before CIT(A) had relied on above mentioned orders/Judgments and contended that the assessee

-company had correctly claimed the deduction u/s. 80IA(4) of the Act.

3.4 The Assessing Officer stated that the appellant, who has in fact developed the infrastructure facility, is a contractor and hence not eligible for deduction u/s. 80IA(4). According to Learned Authorized Representative in case it is accepted, then the said deduction shall not be allowable to any person in India as all such infrastructure work is 4 ITA No.2139/PN/2013

awarded by Govt. & Semi govt. Departments to developer contractors through tenders and thereafter entering into contract for the work with the developers. In case the Assessing Officer's contention is accepted then certainly provision for allowing deduction u/s. 80IA(4) for developing infrastructure shall become redundent". The Assessing Officer has ignored the decision of the ITAT Pune Bench - in the case M/s Pratibha Construction & Engineering Pvt. Ltd, wherein relying on the decision of Bombay High Court in the case of ABG Heavy Engineering Ltd., has decided issue in favour of assessee. The assessee company is developing project of water supply and Lift Irrigation. Assessing Officer concluded that the assessee is merely a contractor and the work will be closely looked after or supervised by the contractee, when the work is closely supervised which means that assessee in a merely contractor. The Assessing Officer has also referred the contract received from JMC and preliminary condition of designing and drawing essential for developer is lacking and therefore the assessee company could not be called to be a developer.

3.5 CIT(A) held that the Assessing Officer has erred by misunderstanding the conditions eligible for deduction specified u/s 80IA(4).

What is eligible for deduction u/s 80IA(4) is the profits and gains derived from development of infrastructure facility, such as road project, airport, port inland waterways, irrigation projects, water supply projects etc. In order to be eligible for deduction the development should be that of the infrastructure facility as a whole and not a part of it.

3.6 The appellant is developer/contractor of eligible infrastructure project. The whole infrastructure project of water supply and lift irrigation has been executed by the appellant. The 2/3 engineers/officers of JMC have only supervised the work executed by the appellant company to ensure the quality of the work and the proper execution of the project by devoting part of their time. By any stretch of imagination it cannot be accepted/perceived that the said 2/3 engineers/officers have executed the said infrastructure project of water supply and lift irrigation. The Assessing Officer has not justified to hold that the work has been executed by JMC as developer and the appellant is a mere contractor.

3.7 As regards preparation of design and drawing of the project it is evident form the following documents/papers that the appellant has in fact prepared the same. Annex-4, appearing on page no. 177 of the tender of Mokhabardi Lift Irrigation Scheme, relevant portion of which reads as under :

"PARAMETERS FOR DESIGN AND DRAWING"

1.0 SCOPE OF PROPOSED IRRIGA TION SCHEME As stated in Annex "A " of Section-1.

2.0 DESIGN AND DRA WING.

2.1 The contractor/consultant shall carry out layout studies including cost economics by examining, all possible alternative to prepare detailed layout, design and drawings of all components of the work stated in Annex A. The contractor/consultant shall use guide lines in the relevant ISI codes/CDO codes prepared by 5 ITA No.2139/PN/2013

ISI/CDO for various components of the project in the lift irrigation scheme.

2) CPWD manual relevant papers at page Nos. 74 & 75.

3) Letter dated 24-08-2006 filed with Supdt. Engineer(PHs), Central Designs Organisations, Nashik.

4) Letter dated 07-10-2006 issued by Chief Engineer, Nagpur to the appellant.

5) Letter dated 13-10-2006 issued by Supdt. Engineer, Ambadi (Bhandara) to the appellant.

6) Letter dated 14-07-2006 issued by Supdt. Engineer, Ambadi (Bhandara) to the appellant.

7) Letter dated 27-07-2006 issued by Supdt Engineer, Ambadi (Bhandara) to the appellant.

In the view of above facts drawings and designs of the project are in fact prepared by the appellant which are approved by Vidarbha Irrigation Development Corporation and Jalgaon Municipal Corporation etc.

3.8 CIT(A) has observed that the appellant has claimed deduction u/s 80IA(4) in respect of profit on infrastructure projects of water supply and lift irrigation Project. As stated above Assessing Officer has disallowed deduction in respect of water supply and lift irrigation projects on the ground that the appellant was a contractor and work executed by it was covered under 'works contract' and hence deduction was not admissible in view of Explanation to Section 80IA introduced by Finance Act, 2007 and amended by Finance Act 2009 with retrospective effect from 01-04- 2000. Assessing Officer has also disallowed the appellant's claim for deduction u/s 80IA(4) of the Act, holding that the appellant was not a developer but only a contractor. Further, according to the AO, the 'explanation' inserted below Sub-sec. 80IA(13) by the Finance Act, 2007 and later amended by Finance Act 2009, effective retrospectively from 01-04-2000 also made the appellant ineligible for deduction u/s 80IA(4) of the Act. Assessing Officer has given a detailed analysis of appellant's contract with Jalgaon Municipal Corporation (JMC) in the assessment order for A. Y. 2008-09 and also referred to the statement of Dy. Engineer JMC recorded on oath wherein he is stated to have told that the project with JMC was a "works contract". On the basis of the contract document and the above referred statement of Dy. Engineer, JMC, AO held that the appellant did not fulfill the conditions of S. 80IA(4) of the Act. She disallowed the deduction of Rs. 17,21,46,986/- claimed by the appellant u/s 80IA(4) of the Act. As mentioned in statement of facts, a similar claim of Rs. 13,16,13,885/- u/s 80IA(4) was disallowed by the AO in A. Y. 2007-

08. Assessing Officer has not properly appreciated the various case laws i.e. Laxmi Civil Engineering (supra), Om Metals Infra Projects Ltd (supra) and Pratibha Constructions and Engineers (supra) on facts vis-a-vis facts of the appellant's case. CIT(A) observed that the status of the appellant was similar to that of Laxmi Civil Engg. (P) Ltd and Mahalaxmi Corporation i.e. the nature of work was also more or less similar. The similarities in the 6 ITA No.2139/PN/2013

tender documents pertaining to the projects undertaken by these persons suggest that the terms and conditions were by and large identical. Further, tender document for Goshikhurd Project awarded to Om Metal Infra by VIDC proves that it was for irrigation work and the terms and conditions were akin to that of Mokabardi Irrigation Project awarded to the appellant i.e. Tap/ Prestess Products Ltd., by VIDC. CIT(A) in his concluding para has rightly held that keeping in view the principles of judicial precedent, Judicial discipline and also in order to maintain the rule of consistency and uniformity in respect of identical facts, he was of the considered view that the above discussed decisions of the Hon'ble ITAT, Pune, Jaipur Benches and ABH Heavy Industries (supra) in regard to claim of deductions u/s. 80IA(4) of the Act are squarely applicable to the appellant's case. Nothing contrary was brought to our knowledge on behalf of revenue. In view of above judicial precedents the appellant has rightly been held eligible for deductions u/s. 80IA (4) of the Act in respect of the infrastructural projects undertaken by it during Ays 2007-08 and 2008-09. We uphold the same."

6. We find on further appeal filed by the Revenue against the order

of the Tribunal, the Hon'ble Bombay High Court vide ITA No.106 and

107 of 2014 order dated 02-07-2015 dismissed the appeal filed by the

Revenue by observing as under:

"2. The respondent assessee claimed that he is beneficiary of the provisions of section 80IA(4) of the Income Tax Act because he has developed, atleast partly, an infrastructure project. The assessee was given a contract by the Local authority. It was a scheme for lifting water for domestic consumption in the city and also for irrigation.

3. The project was of such a nature that the designs were supposed to be developed by the contractor. The assessee being such contractor, developed the designs for this project, which were approved by the authorities of the principal. Thereafter, the project was undertaken and completed.

4. The question that arose between the parties was, whether the assessee could be said to be a developer of such project. The authorities below on facts came to the conclusion that the assessee could be said to be a developer as contemplated by section 80IA(4). We have perused both the judgments and noticed that the authorities below have considered facts quite meticulously by minutely going through the terms of the contract and came to an unanimous conclusion that the assessee was a developer of the project.

5. In view of this, we are unable to find a substantial question of law arising in these appeals. The appeals are therefore dismissed."

7. Since the issue has been decided in favour of the assessee by the

decision of the Tribunal which has been upheld by the Hon'ble 7 ITA No.2139/PN/2013

jurisdictional High Court, therefore, in absence of any contrary

material brought to our notice by the Ld. Departmental

Representative, the order of the CIT(A) is upheld and the grounds

raised by the Revenue are dismissed.

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

Order pronounced in the open court on 31-07-2015.

Sd/- Sd/- (VIKAS AWASTHY) (R.K. PANDA) या!यक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER

iq.ks Pune; दनांक Dated : 31st July, 2015. lrh'k

आदे श क' (!त*ल प अ+े षत/Copy of the Order forwarded to :

1. अपीलाथ / The Appellant

2. यथ / The Respondent

3. आयकर आय% ु त(अपील)-II, ना(सक / The CIT(A)-II, Nashik

4. ु त-II, ना(सक / The CIT-, II, Nashik आयकर आय%

5. )वभागीय ,त,न-ध, आयकर अपील य अ-धकरण, "ए" iq.ks / DR, ITAT, "A" Pune;

6. गाड1 फाईल / Guard file.

आदे शानस ु ार/ BY ORDER,स या)पत ,त //True C स या)पत ,त //True Copy// व3र4ठ ,नजी स-चव / Sr. Private Secretary आयकर अपील य अ-धकरण, iq.ks / ITAT, Pune