Income Tax Appellate Tribunal - Mumbai
Gleg Engineers Pvt Ltd.,,Mumbai vs Ito 12(2)(3), Mumbai on 16 April, 2026
IN THE INCOME-TAX APPELLATE TRIBUNAL "G" BENCH, MUMBAI BEFORE SHRI JUSTICE (RETD.) C. V. BHADANG, PRESIDENT & SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No. 4242/MUM/2019 (A.Y. 2003-04) ITA No. 4243/MUM/2019 (A.Y. 2004-05) ITA No. 4244/MUM/2019 (A.Y. 2005-06) ITA No. 4245/MUM/2019 (A.Y. 2006-07) ITA No. 4246/MUM/2019 (A.Y. 2007-08) ITA No. 4247/MUM/2019 (A.Y. 2009-10) ITA No. 4248/MUM/2019 (A.Y. 2010-11) ITA No. 4249/MUM/2019 (A.Y. 2011-12) ITA No. 4250/MUM/2019 (A.Y. 2012-13) ITA No. 4501/MUM/2019 (A.Y. 2008-09) M/s Gleg Engineers Pvt . v/s. Income Tax Officer - 12(2)(3) Ltd. बनाम Room No. 226, Aaykar Bhavan, 302-303, Dheeraj Plaza, Hill Maharishi Karve Road,New Road, Bandra (West), Mumbai Marine Lines, Mumbai -
- 400 050, Maharashtra 400050, Maharashtra स्थायी लेखा सं ./जीआइआर सं ./ PAN/GIR No: AAACG8338G Appellant/अपीलाथी .. Respondent/प्रतिवादी For Assessee Shri Rajiv Khandelwal & Akash Kumar, ARs For Revenue Shri Swapnil Choudhary, (Sr.DR) Page |2 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai Date of Hearing 13.03.2026 Date of Pronouncement 16.04.2026 आदे श / O R D E R PER PRABHASH SHANKAR [A.M.] :-
The above captioned appeals emanating from the appellate order of even date have been preferred by the assessee pertaining to assessment orders passed u/s. 143(3) r.w.s 254 of the Income-tax Act, 1961 [hereinafter referred to as "Act"]as passed by the Learned Commissioner of Income-tax, Appeal, CIT(A) -20, Mumbai [hereinafter referred to as "CIT(A)"] for Assessment Years 2003-04, 2004-05, 2005-06, 2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011- 12 & 2012-13. Since most of the issues involved are common, the facts being identical, barring figurative variations and also that appeals were heard together, they are being taken up for adjudication vide this composite order for the sake of brevity. We take up appeal for the AY 2003-04 first as the'Lead case'.
2. The grounds of the appeals are as under:-
ITA No. 4242/MUM/2019 (A.Y. 2003 -04)Grounds as per original appeal
1. The Ld. CIT(A) erred in confirming denial of deduction u/s 80IA(4) on the ground that the appellant is not a developer.
2. The Ld. CIT(A) erred in confirming disallowance of Rs.2,97,287/-.
Page |3 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai Additional ground: The appellant claims by abundant caution, though the claim already exists, that deduction u/s 80IA(4) should be allowed on interest incomeof is Rs.24,79,818/- on FD with banks as the same inextricably linked with business as deposits with banks were made out of business necessity and were not out of surplus funds and that Hon‟ble ITAT had also directed the AO to re-decide the issue in accordance with Hon‟ble SC decision.
Grounds of appeal
1. On the facts and in the circumstances and in law, the learned CIT(A) erred in confirming the action of the A.O., even without appreciating the facts and circumstances of the case fully and properly.
2. On the facts and in the circumstances of the case and in law, the learned C.I.T.(A) erred in confirming the order of disallowance by the A.O. in denying the benefits of the provisions of section 80IA of the IT. Act.
3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the order of disallowance of the A.O. in disallowing business expenses amounting to Rs.2,97,287/-although made on an adhoc basis.
3. At the outset,it may be pointed out that the instant appeals before the Bench are part of third round of litigation as in the previous two rounds,the assessee still remained aggrieved on account of rejection of its claim of deduction u/s 80IA(4) of the Act.Brief facts of the case are that the assessee, a Private Limited company is stated to be carrying on the business of designing and developing infrastructural facilities of water supply projects, water treatment systems etc.For the year under consideration, it filed a return declaring income of Rs Page |4 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai 24,79,828/- on 28.11.2003 after claiming deduction under section 80IA of the Act. The AO completed the original assessment by passing an order u/s.143(3) of the Act and determining the income at Rs.64,14,830/- by disallowing the above stated deduction claimed on the observations and findings that the assessee had only executed aContract work awarded to it by local and the State Government authorities on time bound completion period which would be owned by the authority thereafter and out of the total construction expenditure of Rs.588.10 lakh, more than 72% of the expenditure was made towards payments made to subcontracts and petty contracts. Therefore, the assessee did not develop any infrastructure project and was eligible to this deduction.Being aggrieved against the above said assessment order, appeal was filed before the ld.CIT (A), who in turn, partly sustained the disallowances made by the AO vide order dated 08.03.2007.Being aggrieved further against above order by ld. CIT (A), appeal was filed before the ITAT, Mumbai which vide order dated 28.04.2009 restored the matter and remanded back to the AO to examine the issue of disallowance u/s 80IA(4) of the Act in detail, vis-à-vis the conditions specified therein with reference to the work undertaking by the assessee whether they were water supply projects of simple contract work and Page |5 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai whether each of the conditions specified therein under clause (a), (b) and (e) of 80 IA(4) (i) were fulfilled or not?
3.1 However, the ΑΟ once again denied the benefit of deduction u/s 80IA vide order dated 04.11.2010 stating that the assessee company had not developed any new infrastructure projects which satisfied the conditions specified u/s 80IA(4) of the Act.Being aggrieved against the above said assessment order, appeal was filed again before the CIT (A),who confirmed the order vide order dated 02.11.2011 and recorded an observation that in view of the retrospective amendment w.e.f 01/04/2000 in Explanation below section 80IA, the assessee did not satisfy the condition under section 80IA(4) of the Act.Consequently,appeal was filed again by the assessee before ITAT, Mumbai, which vide order dated 23.11.2015 recorded that claim of deduction could not be denied in the case of work contracts and restored the matter once again to the file of the AO with a direction to decide the issues afresh in the light of the decision of the Hon‟ble jurisdictional Bombay High court in the case of ABG Heavy Industries Ltd reported in 322 ITR 323(Bom) and also the decision of the coordinate bench of ITAT,Mumbai in the case of NCC-SMC (JV) in ΙΤΑ.Νο. 4842/M/06, 514/M/09, 7885/M/10 and 283/M/2011, after giving reasonable and fair opportunity of being heard to the Page |6 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai assessee. The relevant portion of the order of the ITAT dated 23.11.2015 is reproduced below:
"8 we have given a thoughtful consideration orders of the authorities below. We have also considered the decision of the Tribunal (supra). Undisputedly, the claim has been denied as the assessee has executed works contract. At this stage must admit that much water has been flown under the bridge since the decision of the 1st Appellate authority. The Hon'ble jurisdictional High Court of Bombay in the case of ABG Heavy Industries Ltd 322 ITR 323 has held that the claim of deduction cannot be denied the case of works contract. This decision of the Hon‟ble Jurisdictional High Court has made the decision in the case of BT Patel & Sons 36 SOT 171 no more a good law. It would not be out of place to mention that the decision in the case of BT Patel & Sons have been reversed by the Hon‟ble High Court of Bombay in favour of the assessee and against the Revenue. The Revenue authorities have heavily relied upon the amendments brought to the provisions of Sec. 80 IA (4) of the Act. This amendment has been taken care of by the Hon‟ble High Court of Gujarat in the case of Katira Construction Ltd. 352 ITR 513. Considering these cons on the facts of the case in all fairness, the restore the matter once again to the file of the AO with a direction to decide the issue afresh in the light of the decision of the Hon‟ble jurisdictional High Court in the case of ABG Heavy Industries Ltd (supra) and decision of the Co ordinate Bench in the case of NCC-SMC (IV) in ITA Nos. 4842/M/06, 514/M/09, 7885/M/10 and 283/M/2011 after giving reasonable and fair opportunity of being heard to the assessee."
4. Pursuant to the order of the ITAT(supra), notice was issued by the AO to the assessee calling upon it to make submissions on specific issues.In the impugned order, the AO has observed that the decision of the Hon‟ble ITAT in the case of NCC SMC (IV) in ITA No. 4842/M/06, 514/M/09, 785/M/10 was against the appellant as the Hon‟ble ITAT had in that the order dated 09.02.2010, following the larger bench decision in the case of B.T. Patil & Sons Belgaum Construction Pvt. Ltd.
vs ACIT, decided the issue against the assessee. However, in this regard, Page |7 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai the ld.AR before us pointed out that the AO,failed to note that subsequently, NCC SMC (JV) had filed a Miscellaneous Application contending that in view of the subsequent decision of Hon‟ble Bombay High Court in the case of ABG Heavy Industries, 322 ITR 323, the larger Bench decision in the case of B.T. Patil & Sons Belgaum Construction Pvt. Ltd. was no more good law. The Miscellaneous Application filed by NCC SMC (IV) was allowed and a fresh order dated 20.06.2014 was passed the ITA No.4842/Mum/2006 which was referred to by the Hon‟ble ITAT in its order dated 23.11.2015 pertaining to this case.
4.1 In the impugned order, the AO has made a detailed analysis of all the relevant facts and the circumstances of the case,duly examining the provisionsof the Act in this regard in the light of terms of contracts of various projects and the judgment in the case of ABG Shipyards Ltd(supra).The relevant parts of the order are reproduced as below for the sake of brevity and clarity:
"Disallowance of claim of deduction u/s 80IA of the Act:
"16. The Hon‟ble ITAT has directed to re-adjudicate the issue of allowance/disallowance of the claim of the assessee for deduction u/s 801A of the act. in view of the decision of the Hon‟ble jurisdictional High Court in the case of ABG Heavy Industries Ltd 322 ITR 323 and the decision of the coordinated bench in the case of NCC SMC (IV) in ITA No. 4842/M/06, 514/M/09, 785/M/10.To understand the Jurisprudence. Applicability and Scope of the provisions of the section 80IA of the act a brief background and history needs to be visited. The Hon‟ble Bombay High Court in the case of ABG Heavy Industries Ltd has elaborately discussed the issue.
Page |8 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai
29. In the case of ABG Heavy Industries Ltd the Hon‟ble Bombay High Court has allowed the claim of the assessee keeping in aforesaid arguments that the entity had on its own cost installed, maintained and operated cranes in the JNPT Port and was under obligation to keep all the cranes in a proper working condition for a period of 10 years and at the end of the period the company was also under obligation to transfer the said asset to JNPT Port. Thus the income that arose to ABG Heavy Industries Ltd was from the lease/operation of the cranes and not from sale proceeds of the cranes.
30. The Hon‟ble ITAT, has „inter alia‟ directed decide the issue of eligibility of the assessee company for claiming deduction u/s 801A (4) of the act a fresh, „inter alia‟, in view of the decision of the coordinate bench in the case of NCC SMC (IV) in ITA No. 4842/M/06, 514/M/09, 785/M/10. On perusal of the said decisions it is noted that the decisions are in favour of the revenue and against the assessee company as in the said decisions the Hon‟ble ITAT has upheld the appeal of the department and disallowed the claim of deduction u/s 801A to the assessee concern. This fact of the present case in comparation with the facts in the case of ABG Heavy Industries Ltd and other case laws are discussed in details here in after.
31. In light of the above decision the facts in the case of the assessee company are discussed herein after. The brief facts of the present case are that the assessee is a company engaged in the business of civil works and execution and erection of water tanks and water retaining structures for various municipalities and other Government, and Semi Government agencies on rate contract basis. The company which is a civil contractor, during the year under consideration, and it has carried out certain contract works allotted by various State Governments agencies and municipalities with regard to construction of water tanks and similar civil projects. The assessee company has claimed that they had developed infrastructure facilities like water supply system, etc. on its own, and accordingly claimed deduction u/s. 801A of Rs. 30,19,545/-.
32. The assessee company was requested to furnish details of projects and development work carried out by them with respect to the deduction claimed u/s 80IA as above. In response thee to the assessee company has submitted copies of the work tenders received from various State Government, Semi government and Municipal authorities, ie. Navi Mumbai Municipal Corporation, Kalyan Dombivali Municipal Corporation, Maharashtra Jeevan Pradhikaran, Khambat Nagar Palika, Nanded Wagala City Municipal Corporation, Surat Municipal Corporation, Bhopal Municipal Corporation, Limdi Municipal Corporation.From the above documents it is seen that the assessee company executed limited purpose contracts for building water storage tank and other related contracts as per rate tender from these Government, Semi government and Municipal authorities/Municipal Bodies.
Page |9 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai The assessee has not derived its income from a profit and gains particular project as envisaged u/s 80IA of the act but as received its profit and gains from the execution of various work contracts on cash bases.
33. After going through the tender document details relating to work contracts/Cash Contracts in executing the various projects as mentioned above, the claim of the assessee company for deduction u/s 80IA is examined as under. It is observed that deduction u/s. 80IA is available to an assessee whose gross total income includes any profits and gains derived by an enterprise, from any business referred to in suhsection (4) of u/s. 80IA of the Income-tax Act. According to sec. 80IA(4)(i), 100% deduction has been provided in respect of profits and gains derived by any enterprise carrying on the business of a) Developing orb) Maintaining and operating orc) Developing, maintaining and operating, an Infrastructure facility.
34. It is also noted that in order to qualify such deduction the following conditions are to be satisfied:
a) The enterprise carrying on infrastructure business is owned by a company registered in India or by a consortium of companies registered in India.
b) The enterprise has entered into an agreement with the Central Government or State Government or a Local Authority or any other Statutory Body for (1) developing or (ii) operating and maintaining or and (iii) developing, operating an infrastructural facility.
c) The enterprise should start operating and maintaining the facility on or after 1st April, 1995.
35. Referring to CBDT Circular No. 14/2001, it is noted that the required condition for availing the said benefit is that transfer under BOT (build, own, transfer) and BOOT(build, own, operate and transfer) schemes have to be met.
It is noted that the amendments envisaged were to take effect from 1.4.2002 i.e., in relation to assessment years 2002-03 onwards. Accordingly, it is noted that as per the provisions of sec. 80IA and the said circular, to qualify for deduction u/s. 801A for an infrastructure facility, the enterprise of the assessee has to satisfy the following conditions:
a) it has to enter an agreement with Central Government or State Government or local authority or any other statutory body for (a) developing (b) operating and maintaining and (c) developing, operating and maintaining a new infrastructure facility, and
b) The infrastructure facility should be a new one and that the specified infrastructure facilities are road, highway project, water supply project, water treatment system, irrigation project, sanitation and sewerage system, solid waste management system, port including an airport.
36. Accordingly, the contracts executed by the assessee are examined for the eligibility for claiming deduction u/s. 80IA of the Act: în respect of the P a g e | 10 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai Tender work contract projects submitted by the assessee company, it is seen that the Navi Mumbai Municipal Corporation, Kalyan Dombivali Municipal Corporation, Maharashtra Jeevan Pradhikaran, Khambat Nagar Palika, Nanded Wagala City Municipal Corporation, Surat Municipal Corporation, Bhopal Municipal Corporation, Limdi Municipal Corporation and other Government Bodies who were giving work contracts on cash basis to the assessee company, were in fact actually developing the projects whereas the assessee is merely a work contractor and, therefore, was not entitled to deduction u/s. 801A of the Act.
37. It is noted that to be eligible for deduction under u/s 80IA(4) of the Act, all the three conditions mentioned in the sub-section should be cumulatively fulfilled. The assessee should have been engaged in development and maintenance of infrastructure facility. A mere work contractor/alleged developer is not eligible for deduction u/s 80IA (4) of the Act. In this regard, reference is made to sub-section (2) of u/s 80IA(4) and also sub clause(c) of the u/s 80IA(4) (1). The words used in sub-clause (c) "started" or "starts" operating and maintaining infrastructure facility on or after first of April, 1995 would apply only to the second type of enterprise who undertakes the work of "maintaining and operation". It would not apply to a person who is engaged in developing infrastructure facility as the word "developed" is not used in the said sub clause.
38. Further, this is analyzed by various courts. It is held clearly that such a provision i.e. clause (c) would apply only to such enterprises engaged in maintaining and operating the infrastructure. The Bombay High Court in the case of CIT vs. ABG Heavy Industries Ltd. [322 ITR 323] observed that the requirement that the operation and maintenance of the Infrastructure facility came after first of April, 1995 has to be harmoniously considered with the main provision under which deduction is available to the assessee which develops or operates, maintains and develops or operates and maintains infrastructure facility. There is significance for clause-(c) in so far as the enterprises carrying on business of developing and maintaining and operating infrastructure facility are concerned. To be eligible for deduction under sub- section (4A). any enterprise has to commence its operation on or after 01-04- 1995. This clarified that any enterprise commencing its operations prior to the said date, but continuing to do the said activity for the assessment years 1996- 97 and onwards would, not be eligible.
42. A certain number of kilometers of a highway or irrigation canal or a water tank has no existence by itself, and is incapable of becoming operational without reference to the rest of the project, of which it is only a part. It is evident from the agreements filed by the assessee that the assessee undertook to execute the work of construction of water tank on the various Municipal P a g e | 11 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai corporations & other Government bodies specifications, at rates agreed upon and on cash basis, subject to measurement, within a period specified there in from the date of commencement.
43. It is stated that Tender documents/as agreement filed by the assessee company during the course of assessment wherein the details of rate analysis, Bill of quantities etc., make it clear that the assessee had no autonomy in matters of design and specification which completely vested with the employer being the Municipal corporations & other Government bodies. The only lawful entitlement of the assessee was to be paid for the measurement of work completed at rates agreed upon. The partial and sectional nature of the proposed work is immediately clear from this notice and it is also apparent from this that the building of water Tanks has no independent existence capable of satisfying the requirement of section 80 IA (2). Therefore, these projects are incapable of commencement of operations by itself, or to quality the larger infrastructure facility of which it is a part.
44. The assessee company receives the amount of contract value on cash basis and there is no element of entrepreneurial initiative or financial participation of the contractor in this kind of a project. The successful bidder merely executes a Government contract and gets paid for it at mutually agreed rates and the nature of responsibilities assumed under the other contracts as per agreements. It is further stated that during the hearing, the authorised representative of the assessee was at pains to emphasis that the assessee undertook maintenance work and was hence in the same league as a developer. However, it is clear from the document as furnished in the Tender documents that the maintenance function was actually remedying of defects for a prescribed period. No separate charges have been collected and this cannot be seen as a maintenance function.
45. It is noted that on these facts, having regard to the responsibilities assumed under the agreement, the assessee cannot he seen as a developer; instead it plays the role of an executor/contractor. The contracts in question are in the nature of works contracts on cash basis, and the explanation inserted below section 80IA (13) of the Act with retrospective effect from 1-4- 2000 has over riding influence and debars the assessee‟s claim. The law on the subject of application of a retrospective amendment is clear from the special Bench decision of the Tribunal in the case of Aquarius Travels P Ltd. Vs. ITO (111 ITD 53). Such provisions should be applied in pending proceedings, even when they have not been involved earlier.
46. As matters stand, therefore, the most important question for examination on facts is whether the business agreement in question can be termed a works contract or not. If the answer is in affirmative, nothing else matters because the Explanation takes over. If not, the other factors such a development/operation etc, and other specified conditions become P a g e | 12 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai relevant.Reliance was placed in this regard on the decision of the Mumbai High Court in the case of Glenmark Pharma (324 ITR 199) which digests the case law for ascertainment of whether facts of the agreement would amount to a contract for work or for sale.
47. Further reliance on the decision of Andhra Pradesh High Court in the case of Dr. Mrs. Renuka Datta vs. CIT (240 ITR463) (AP), the provisions granting exemptions have to be strictly construed. It was held by the Supreme Court in the case of IPCA Laboratory Limited vs. DCIT (SC) 266 ITR 521 that when there is no ambiguity, provisions cannot be interpreted to confer a benefit upon the assessee. The provision is incapable of application to the facts of the assessee‟s case because the assessee is only an executor of a contract, which is in turn, part of a larger project undertaken by the Government, or its agency.
48. The Director of the assessee company has relied upon the decision of the Jurisdictional, Mumbai High Court in the case of CIT vs. ABG Heavy Industries Limited reported in 322 ITR 323, and has further submitted that this decision supported the proposition that (1) the ITAT‟s decision in the case of B.T. Patil & Sons, Larger Bench (Mumbai) reported in 126 TT) 577 is no longer good law, and (ii) the distinction between developer and contractor is no longer relevant in the context of changed law explained by the Mumbai High Court in the case of ABG Heavy Industries (supra) In this regard, it is to be noted that such reliance is neither correct nor relevant in deciding the issues on hand. This position is elaborated in the following paras.
49. In the case the assessee is a contractor, every contractor is a developer as per the Mumbai High Court decision in the case of ABG Heavy Industries and a developer need not operate and maintain the infrastructure facility, as held by the Mumbai High Court in the case of ABG Heavy Industries. It is to be noted that the decision of the Mumbai High Court in the case of ABG Heavy Industries is of no help in deciding the issues in the impugned case for the reason that the terms and conditions of the contracts and the nature of obligations assumed there-under, by the business are not discussed in the said order. This is the factual fulcrum on which the decision of the ITAT (larger Bench) in the case of B.T. Patil as well as the Mumbai High Court in ABG case was decided. Without such detail, there is no point of comparability other cases. The unanswered questions emerging there-from are asunder:-
i.) Can we assume that there was a BOLT contract or was it a works contract?
ii) Can we assume that the assessee took ownership control of the asset created?
iii) The circumstances under which the enterprise in ABG Heavy Industries became akin to a developer, and do they obtain ownership in the case of ABC?
Such as 10 year ownership; retransfer; assumption of assured responsibility P a g e | 13 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai regarding operational readiness, etc., issues noticed in ABG Heavy Industries are not noticed in the facts of the present case.
iv) The unbundling of conditions of development, operation & maintenance, and development operation and maintenance, in the sense of making them non-cumulative by amendment of law effective from 1-4-2002 is not the only relevant issue. The larger issue is whether the assessee is a developer in the first place.
v) In the case of B.T. Patil, the cumulative or non-cumulative satisfaction of conditions in u/s 80IA(4)(i) was never a material fact. This was so not only because the impugned appeals related to pre1-4-2002 period, but also because the matter was decided on the preliminary issue of whether the assessee was a developer or not in the first place.
vi) Some of the attributes of a developer were discussed in the case of B.T. Patil, none of which were absent in the case of ABG Heavy industries.
50. The decision of the Mumbai High Court, though later in time was different in facts that there was no occasion even to refer to the ITAT‟s decision in the case of B.T. Patil. Therefore, it can be said that the decision of the Mumbai High Court in the case of ABG Heavy Industries will be binding in only for infrastructure developer contractor cases, only in so far as the facts of the case are compatible. For the same reason, there can be no adverse implication for the precedent value of the B.T.Patil case. As stated hereinabove, on immediate and necessary consequence of the retrospective amendment introduced by the Finance Act, 2009 inserting Explanation below section 80 IA(13), is that any business transacted in terms of a works contract stands disqualified from seeking deduction under section 80IA(4). The decision of the Mumbai High Court in the case of ABG would have no application from this point of view also. Since the agreement in ABG was a BOLT agreement and not a works contract their Lordships had no occasion to consider the Explanation introduced in Finance Act 2009 with effect from 1-4- 2001.
51. Even if it is assumed hypothetically, that the agreement in ABG was in the nature of a works contract, or that every contractor was a developer, the decision of the Mumbai High Court without considering the Explanation cannot operate to overrule the ITAT‟s decision in the case of B.T. Patil where the Bench of the Tribunal considered the effect of the explanation and it was explained by the Hyderabad Bench of the Tribunal in the case of Hyderabad Chemicals Supplies Limited (ITA No.352/Hyd/2005) and 6 others appeals dated 21-1-2011.
52. In the context of an apparent conflict between a Special Bench (Ahmedabad) decision of the ITAT and Madres High Court at para-15 on page- 8 as follows: "Further, judgment of High Court though not of the P a g e | 14 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai jurisdictional High Court, prevails over an order of the Special Bench even though it is from the jurisdictional Bench of the Tribunal, however, where the judgment of the non-jurisdictional High Court, though the only judgment on the point, has been rendered without having been informed about certain statutory provisions that are directly relevant, it is not to be followed."
53. Without prejudice to the argument that the Mumbai High Court‟s order in ABG runs on completely different facts, it is respectfully pointed out that this decision cannot be a binding precedent, in any case, for the above- cited reason also and this issue can be seen in another perspective. There is nothing in the case of ABG Heavy Industries that supports the view that the „developer‟ has to be seen de-hors the contract and its stipulations. In the case of ABG Heavy Industries the Revenue department took the stand that the assessee was not a developer because it was only a supplier of the equipment. This did not find favour because it was held that the nature of the business had to be seen in terms of the obligations assumed under the contract which included not only supply and installation of the cranes but also testing, commitment of operational readiness for a period of ten years on the pain of liquidated damages and eventual re-transfer after such period. In the case of ABG Heavy Industries, the creation of certain standalone parts of the part complex qualified for being termed on infrastructure project because the Board Circular 793 dated 23-6-2000 clarified that part of the project would qualify if so certified by the Port Authorities. The container handling cranes assembly was certified to be an integral part of the Port Complex by the Port Authority.
54. This is contextually very different from parts of the construction of Water Tank etc, being executed on a rate contract. The Department‟s argument that the assessee did not actually operate or maintain the facility in question was not upheld because the benefits of the section were held to be available to GOT/BOLT contracts by CBDT Circulars, which were any way binding on the IT authorities. In the case of the present case, it is not even claimed by the assessee that the work was carried out under a BOT/BOLT contract terms, or that it was not a works contract.
55. It is further stated that the distinction between business of development operation / maintenance and development / operation / maintenance was removed with the change in law effective from 1-4-2002, and that this was explained by the decision of the Mumbai High Court in the case of ABG Heavy Industries is fallacious for the following reasons: The Mumbai High Court decision was rendered in the context of a BOLT contract, which was in any case clarified by the Board Circular to qualify for the deduction under section 80IA. It was noticed by their Lordships that the subsequent changes in the law effective from 1-4-2002 merely mirrored this liberalised outlook. That is not the same thing as saying that a business in the nature of a P a g e | 15 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai works contract qualified for the deduction in spite of not operating/maintaining the facility. The decision of the larger Bench in the case of B.T. Patil was not unaware of the change in law effective from. 1-4-2002 as would be evident from para 36 of the order. The change making the conditions of development/operation/maintenance non-cumulative was not relevant since the case related to pre 1-4-2002 period. In the case of B.T. Patil, the larger Bench enunciated certain tests to determine whether the business was one of a „developer‟ or a mere „contractor‟.
56. The briefly stated facts are as follows: The distinction between creation of product vs. Rendering of service, owner vs. Executor of owner‟s plan with reference to project specification, vesting of property, subject to re- transfer if need be and need for interpretation to avoid absurd results.
57. In view of the terms of the relevant contract, it was possible to give a finding that the business was not one of „development‟ per se. Therefore, the changes in law after 1-4-2002 were not even called into play in the case of B.T. Patil. It is further noted that the Mumbai High Court‟s decision in the case of ABG Heavy Industries, not only runs on different facts, it does not even refer to the case of B T Patil. Furthermore, the Mumbai High Court‟s stand that the nature of the business should be seen in the context of the obligations assumed under the contract only complements, not contradicts the larger Bench‟s distinction between a developer and contractor simplicity, as noted hereinabove.
58. It would be wrong and therefore to suggest that the case of B.T. Patil has been impliedly over-ruled by the High Court‟s decision. Reliance is also placed on another decision of the Mumbai Bench of the Tribunal‟ in the case of Indian Hume Pipe Co. Ltd, vs. DCIT in ITA No.5172/Mum/2008, dated 29-7- 2011 for assessment year 2004-05.This decision pronounced after the Pune Bench decision in the case of Laxmi Civil Engg considers the Tribunal decision of BT. Patil as well as its jurisdictional High Court decision in the case of ABG and goes on to hold that the assessee is not entitled to the deduction u/s 80IA(4) in view of the Explanation introduced with retrospective effect.
59. It is further relied upon subsection (2) of Sec. 80IA of the Act and it is to be stated that the deduction under sub-section (1) would be available for a period of 10 consecutive assessment years out of 15 years beginning from the year in which an undertaking or enterprise develops, begins to operate any infrastructure facility or starts providing telecommunication system. Therefore, it is stated that that unless operation of the infrastructure facility is also undertaken; the assessee would not be eligible for deduction. It is stated that this section provides for an option to the assessee to choose to claim deduction for any 10 years out of 15 years commencing from the date of commencement of the maintenance and operation. For that limited purpose of P a g e | 16 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai facilitating an assessee who becomes eligible for deduction u/s 80IA(4) in choosing the period of 10 years, the said provision was introduced. This cannot be considered as applicable to every enterprise eligible for deduction u/s 80IA(4). This would apply to an enterprise which requires choosing the period of 10 years during which deduction is to be claimed. Only when the assessee has to exercise the choice, this section comes to operation. Other-wise this section would not operate.
60. Further reference is made to the Finance Bill, 1995 and the Circular No.717 dated 14.8.1995 reported in 215 ITR 70 (statutes). The said circular explained that an enterprise which is engaged in the business of develops, operate and maintain infrastructure facility alone was eligible for deduction. An enterprise which only develops infrastructure facility was not eligible for deduction up to the assessment year 2000-01. The provisions of Sec.801A(4A) were made applicable only to the enterprise which develop, maintain and operates infrastructure facility. The assessee did not claim deduction u/s 80IA(4A) of the Act. Therefore, neither the circulars issued up to that date nor the provisions of the law as were existed up to the assessment year 1999-2000 can be applied for the purpose of determining the allow-ability of deduction u/s 80IA(4) claimed by the assessee herein.
61. Further, the Circular reported in 240 ITR 32 (statutes). In the said circular it is clarified by the CBDT that the benefit in the amended provisions of Sec. 80IA (4) would extend to those undertakings which develop, operate and build, operate and transfer. It is only a clarificatory circular. As stated earlier, Section 80IA (4) and Section 80IA (4A) were in statute. Sub-section (4A) dealing with the deduction in respect of business of development, operation, maintenance was deleted. Sub-section (4) which was applicable to Hotels was substituted by another provision which allow deduction to an enterprise which develops or operates and maintains or develops, operates and maintains. At that stage, an explanation was needed to be provided to mention that earlier sub section (4A) is re-introduced as a part in sub section (4) in a different shape. Therefore, a clarification was necessary and the said clarification was issued. It is also noted that the development and risk are not undertaken by the assessee. It is further relied on the judgement of Gujarat High Court in the case of Katira Construction Ltd. v. Union of India & Ors, 352 ITR 513 and some other case laws which is, „inter alia‟ discussed below.
62. Recently there was a judgement from Hon‟ble Gujarat High Court in the case of Katira Construction Ltd. v. Union of India & Ors, 352 ITR 513 wherein it was held as follows:
"The Explanation inserted below sub-section (13) of section80-IA of the Income-tax Act, 1961, by the Finance (No. 2) Act, 2009, with retrospective effect from April 1, 2000, which provides that nothing contained in the section shall apply in relation to a business referred to in sub-section (4) P a g e | 17 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai which is in the nature of a works contract awarded by any person and executed by an undertaking or enterprise, is valid, Parliament has power not only to legislate with respect to the subject matter on hand, but also with retrospective effect, if so found necessary. In the field of taxation, Parliament enjoys considerable latitude in framing and implementing policies. The wisdom of Parliament in enacting a statute cannot be questioned in a court of law. Ordinarily on Explanation is introduced by the Legislature for clarifying some doubts or removing confusion which may be possible from the existing provisions Normally, therefore, an Explanation would not expand the scope of the main provision and the purpose of the Explanation would be to-fill a gap left in the statute, to suppress a mischief to clear a doubt or as is often said to make explicit what was implicit.
SUNDARAM PILLAI (S.) v. V. R. PATTABIRAMAN [1985] AIR 1985 SC 582, KESHAVJI RAVJI AND CO. v..CIT (1990) 183 ITR 1 (SC), CIT v. GOLD COIN HEALTH FOOD (P.) LTD. [2003] 304 ITR 308 (SC) and HIRA LAL RATTAN LAL v. STO [1973] 31 STC 178 (SC) relied on There is an intrinsic difference between developing an infrastructure facility and executing a works contract. What the Explanation aims to achieve is to clarify that deduction under section BO-IA(4) of the Act would not be available in case of execution of works contract. Even „Without the aid of the Explanation, it was possible to contend that such expression did not include on enterprise executing a works contract. There would certainly be a demarcation between developing the facility and execution of works contract awarded by an agency engaged in developing such facility.
CIT v. RADHE DEVELOPERS [2012] 341 ITR 403 (Guj) relied on. From the inception in the year 1996, deduction under sub-section (4A) of section 80-1A of the Act was available to an enterprise engaged in developing, maintaining and operating any infrastructure facility. At the very first stage, the deduction was made available to draw additional resources for fulfilling the requirements of the country of rapid improvement in infrastructure such as, expressways, highways, airports, ports, in which areas development was found to be deficient. The principal idea behind granting deduction was to achieve rapid growth in infrastructure development with private participation. Even after bifurcation of section 80-1A into section 80- IA and section 80-1B, with effect from April 1, 2000, this fundamental concept was not discarded. Sub- section (4) which formed part of the recast section 110-1A did not P a g e | 18 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai carry any material changes from the earlier provisions of sub-section (4A) of section 80-4Awhich existed prior to April 1, 2000.
With effect from April 1, 2002, some significant changes were made in the provisions. Such changes were (i) that sub-section (4) of section 80-1A now required the enterprise to carry on the business of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility in contrast to the previous requirement of all three conditions being cumulatively satisfied; (ii) that the Explanation of the term infrastructure facility was changed to besides others, a road including toll road instead of the hitherto existing expression road, and
(iii) that the requirement of transferring the infrastructural facilities developed by the enterprise to the Central or the State Government or the local authority within the time stipulated in the agreement was done away with. These changes, however, would not alter the situation vis-a- vis the Explanation. The basic requirement of the enterprise carrying on the business of developing or operating and maintaining or developing, operating and maintaining infrastructure facility was not done away with. Even as amended with effect from April 1, 2002, section 80-1A(4) could be construed as not including execution of works contract as one of the eligible activities for claiming deduction.
In 2007, the Explanation below sub-section (13) of section 80-1A came to be added which clarified that nothing contained in the section shall apply to a person who executes a works contract entered into with the undertaking or enterprise, as the case may be. However, this was not found to be sufficient. With a view to preventing such misuse of the tax holiday under section 80IA, it was proposed to amend the Explanation to clarify that nothing contained in the section shall apply in relation to a business which is in the nature of a works contract executed by an undertaking. What the Explanation, did was to clarify a statutory provision which was at best possible of a confusion. If that be so, the Explanation must be seen us one being in the nature of plain and simple Explanation and not either adding or subtracting anything to the existing statutory provision. If the Explanation was purely explanatory in nature and did not mend the existing statutory provisions, the question of levying any tax with retrospective effect would not arise. The Explanation only supplied clarity where confusion was possible in the unamended provision. In that view of the matter, this cannot be seen as a retrospective levy."
Conclusion:
63. Considering the discussion made herein above the various case facts of the assessee company, the background of the section 80IA it is concluded that the assessee company is only a work contractor who have executed the works P a g e | 19 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai allotted by the respective Municipal Corporation and Other Government and Semi Government Bodies on fix rate on cash contract basis, and as per the tender successfully secured by them. It is further concluded that the assessee company is not coming within the provisions of any subsection of u/s 80IA. Accordingly, the deduction claimed u/s. 80IA is to be disallowed.
64. It is reiterated that the assessee company is a work contractor and the works allotted to them by various Semi government and other government bodies which are specific types of works and the assessee does not get entitled for deduction u/s 80IA. It is to be stated that the assessee-company is not a developer of any projects mentioned u/s 80IA and is not entitled to deduction under the said section. Accordingly, the assessee company fails to have a claim of deduction u/s 80IA of the act of Rs. 30,19,545/-.Similar is the position in other assessment years and there is only change in figures against the denial of deduction u/s. 80IA(4) of the Act."
5. In the subsequent appeal, the ld.CIT(A) concurring with the AO affirmed the addition inter alia holding that that Hon‟ble Tribunal passed order based on the decision of the Hon‟ble Bombay High Court in the case of ABG Heavy Industries Ltd. (supra). In that case, the Hon‟ble Tribunal did not decide any question of law. It considered the facts relating to the case of NCC-SMC(JV).The Hon‟ble Tribunal noted that the Hon‟ble High Court had held that the benefit under 80IA(4) cannot be denied merely on the ground that:
(i) the appellant did not develop the entire project
(ii) deduction be available in enterprise engaged in (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining the infrastructure facility.
5.1 The Hon‟ble Tribunal did not give any new interpretation of provisions of sec 80IA(4). Rather, it gave a finding of fact that as per the interpretation of the decision of the Hon‟ble Bombay High Court in the P a g e | 20 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai case of ABG Heavy Industries Ltd., deduction u/s 80 IA(4) was admissible in the NCC-SMC(JV) for AY 2004-05. In other words, the Hon‟ble ITAT had merely followed the decision of the Hon‟ble Bombay High Court in the case of ABG Heavy Industries Ltd. The Hon‟ble ITAT certainly did not give an interpretation that all work contractors who execute work allocated relating to any project as mentioned in section 80IA(4) shall be eligible for deduction under that section. The concluding part of the order of the Hon‟ble ITAT in the case of NCC-
SMC (JV) is reproduced below:
10.4 ..... Keeping in view the entirety of facts and aforementioned decision of Hon‟ble Bombay High Court, it cannot be said that assessee did not act in the capacity of developer and has already been mentioned that to be entitled to claim deduction under section 80 IA(4) it is not necessary that the infrastructure project should be developed by the assessee and it has already been mentioned to be entitled to claim deduction under section 801A(4), it is not necessary that entire infrastructure project should be developed by the assessee.
10.5 Now the next question will be that whether to claim deduction under section 80IA but also to operate and maintain the infrastructure facility. This issue is also no more res-integra and is covered by the afore mentioned decision of the Hon‟ble Bombay High Court in the case of CIT vs. ABG Heavy Industries Ltd. (supra).
10.6 According to the aforementioned observations of their Lordships, pre or post amendment the requirement of section 801A(4) is that deduction will be available an enterprise engaged in (i) developing, or (ii) operating and maintaining or (iii) developing, operating and maintaining the infrastructure facility and such position was to be always construe to hold the field.
Therefore, only development of infrastructure project is sufficient to make entitle an enterprise to be eligible for deduction under section 80IA(4). 10.9 In view of the above discussion, we hold that the assessee is entitled for deduction under section 80IA(4) and Departmental appeal for AV 2004-05 and 2005-06 are dismissed"
P a g e | 21 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai 5.2 Therefore,theld.CIT(A) noted that no new principle was laid down by the Hon‟ble ITAT in that order. In this case, the appellant did not develop the project or part of the project but it merely executed the contract. The profit which the assessee claimed as deduction was not profit derived from the operation of the infrastructure, rather it was profit derived from executing the contract work and that profit was earned even before the project had become operational. In the case of ABG Heavy Industries Ltd, profit was derived after the crane systems had become operational,the profit was derived from maintenance and not from construction and installation of the crane system.
5.3 He observed that a developer of an infrastructure project is different from a contractor who carries out part of construction or installation work relating to an infra project. A developer is one who envisages a project, carry out feasibility of the project, draws out a plan, arrange finance and execute the project. A contractor who carries out a part of the project is not a developer. In the assessment order, the AO has discussed the allowability of the deduction in the light of the decision of the Hon‟ble Bombay High Court in the case of ABG Heavy Industries Ltd.
5.4 In the course of the appellate proceedings, the assessee was requested to furnish a copy of Audit Report u/s 80IA(7) in the Form P a g e | 22 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai 10CCB in respect of its claim for examining the appellant‟s claim. In reply, the appellant submitted a report. The report also suffered from many defects.He observed that as per provisions of Section 80IA(7), deduction under section 80IA(1) from profits and gains derived from an undertaking shall not be admissible unless the accounts of the undertaking for the previous year relevant to the assessment year for which deduction is claimed has been audited by an Accountant, as defined in Explanation below sub-section (2) of Section 288A and the assessee furnishes, along with return of income, the report of such audit in the prescribed form duly signed and verified by an Accountant.
Therefore, the aforementioned deficiencies are crucial for deciding the allowability of deduction.
5.5 To sum up, the ld.CIT(A) concluded that the profit in respect of which the deduction had been claimed was not derived from operation of any undertaking or project. The profit had been derived from the work contract in relation to the project and not from development or maintenance or operation of the project. The Form 10CCB suffered numerous deficiencies as mentioned above. The appellant had not been able to prove that the A.Y. 2004-05 falls under the 10 consecutive assessment years from the initial assessment year The income in the instant case was not income derived from the P a g e | 23 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai operation of the water supply scheme or any other infrastructure facility;
rather it was profit derived from construction of the project before, it was operational. The Auditors had not struck off the non applicable sections in the declaration in Form 10CCB. Therefore, the auditors have failed to specify the section under which the deduction was admissible according to them.
5.6 He further stated that in the order of NCC SMC (JV) the Hon‟ble ITAT did not consider any question of law and it only gave a factual finding in the light of the decision of the Hon‟ble High Court in the case of ABG. The case of ABG Heavy Industries Ltd. is distinguished from the instant case on the following grounds:
the crane system was operational and ABG was maintaining it crane system belonged to ABG and was handed over to the JNPT only after 10 years the profit derived from maintenance and operations was after the crane system had come operational.
In case of ABG, it was found that ABG was operating and maintaining the facility [para 22 of the order of High Court in the case of ABG Heavy Industries Ltd.] In view of the above, the grounds of appeal No. 1 to 5 are dismissed.
6. Before us,the ld.AR has reiterated the same contentions as made before the lower authorities.It is stated by him that the Tribunal decision in the case of NCC-SMC (JV) was wrongly stated by the AO to be in favour of the Revenue without realising the fact that the said decision was made original appellate order was later reversed P a g e | 24 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai subsequent to a Miscellaneous application filed by the said assessee herein the Tribunal followed the decision in the case of ABG and held the assessee eligible for the deduction.The AO did not consider the decision at all. It was reiterated by the ld.AR that the assessee was not a case of pure work contract but was a turnkey project involving all aspect of an infrastructure development as right from inception to execution and further maintenance the assessee was awarded the said works by various government bodies.Theassessee did invest in the said project,designed the same and executed the work,took financial and related risks and was liable to penalty consequences as well.It generally carried out business of developing infrastructure facility and maintain them for 5 years. In some cases, the assessee, besides developing infrastructure, also carried out operations and maintenance.The assessee was not a piecemeal contractor but a „Turnkey Contractor‟ who designed and developed infrastructure facilities for government works.
It was investing capital in the execution of contract; executed contract based on the design of the project awarded and also carried out the development of land allotted as per tender and specifications; executed of the contract involves financial risk because contract was awarded at predetermined cost specified in the tender with or without cost P a g e | 25 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai escalation clause.Its case was similar to those in above cited High Court and ITAT decisions.
6.1 The ld.DR on the other hand, contested the contentions of the assessee and placed reliance on the orders of the authorities below.He also took us through the various tender and terms of agreements of certain projects which have also been analysed by the AO.It is submitted that from the terms on and conditions laid therein, the assessee got merely a contract job in the capacity of a contractor for certainspecific projects laying setting up underground water tanks and installation of pump therein.The nature of work involved limited technical expertise and investment.A major part of the expenses was incurred on payment of labour charges/sub contracts only.
7. We have carefully considered all the relevant facts the case.In the instant case,in so far as the deductibility u/s 80IA(4) of the Act is concerned,the AO was given specific direction by the ITAT to examine the facts in the light of the decision of jurisdictional High Court.The AO examined the same and his observations an conclusions are narrated in the preceding paras. The ld.CIT(A) affirmed the assessment order placing reliance on the assessment order.The limited mandate in the case revolved around the examination of the claim of deduction u/s 80IA(4) of the Act in the light of decision of hon‟ble High Court ABG P a g e | 26 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai Heavy Industries Limited(2010) 322 ITR 323(Bom). Before going further, it would be relevant to reproduce the said decision as under for the sake of clarity:
"2. The following substantial question of law arises in the batch of appeals filed by the Revenue under Section 260 A of the Income Tax Act, 1961 (`Act') :-
"Whether the assessee is entitled to the benefit of a deduction under Section 80IA of the Act and whether the Tribunal was justified in holding that the assessee had carried on the business of developing, maintaining and operating an infrastructural facility so as to entitle it to a deduction under Section 80IA ?"
3. The appeal arises out of an order of the Income Tax Appellate Tribunal for Assessment Years (A.Ys) 1997-98, 1998-99, 1999-2000, 2000-2001 and 2005-2006.
4. The assessee, in terms of the policy of the Government of India to encourage private sector participation in the development of infrastructure, bid for and was awarded a contract for leasing of Container Handling Cranes at the Jawaharlal Nehru Port Trust (`JNPT‟). In pursuance of the contract, the assessee deployed Rail Mounted Quay Side cranes, Rail Mounted Gantry cranes and Rubber Tyred Gantry Cranes („the cranes‟) at the Container Handling Terminal of the JNPT.
JNPT has a dedicated Container Handling Terminal. According to the assessee the only activities of the Terminal consist of loading, unloading and storage of containers.
5. Under contracts dated 2 September 1994 and 16 October 1995, JNPT accepted the bid submitted by the assessee for supply, installation, testing, commissioning and maintenance of the cranes. By the terms of the agreement, JNPT agreed to pay lease charges in a total sum of Rs.215.50 crores over a period of ten years. The contract envisaged two options. Under the first option, operation and maintenance was to be carried out by the assessee. Under the second option, only maintenance was to be carried out by the assessee. In the event that the assessee was not to carry out operation of the cranes, the lease charges were to be less to the extent of Rs.40,00,000/-. For instance, in the first year of operation the lease charges payable to the assessee for operation and maintenance were to be Rs.16.35 crores, whereas if any maintenance was to be carried out by the assessee, the lease charges were to be Rs.15.95 crores. Under the contracts, JNPT reserved the right to exercise the option to request the assessee to carry out both operation and maintenance during the lease P a g e | 27 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai period or to carry out only maintenance while operation was done by JNPT. The contracts stipulated inter alia the submission of a Performance Guarantee Bond representing 10% of the average annual contract value computed with reference both to maintenance and operation. The assessee assumed the responsibility of making the equipment available for operation for a minimum number of days as stipulated in the contract and became liable to pay liquidated damages for non- availability of the equipment after commissioning.After the expiry of the lease period of ten years, the assessee was liable to hand over the equipment to JNPT free of cost. Under the contract, the assessee furnished an indemnity to JNPT towards damages that may be sustained to the equipment or to any property of the Port Trust or to the lives, persons or properties of others. The assessee assumed other contractual obligations including amongst them, the liability to insure the equipment, to indemnify JNPT towards the claims of workers‟ compensation and for compliance with labour legislation.
6. By a letter dated 27 March 2000, JNPT clarified that the amount of Rs.40,00,000/- per annum comprised of salaries, wages and other emoluments of operators provided by JNPT; that it was the responsibility of the assessee to guarantee the availability of the equipment, to ensure that it is in operation on a "round the clock basis" and to meet the cost of repair; and that the overall responsibility for ensuring the operation of the equipment, and for guaranteeing the availability of the equipment would be that of the assessee.
7. The assessee claimed the benefit of a deduction under Section 80IA of the Act, upon which the dispute in the appeals centers. The Assessing Officer was of the view that the assessee was merely engaged in the business of supplying, installing, testing, commissioning and maintaining cranes at the Port and was not in the business of developing, maintaining and operating a Port. Consequently the assessee was held not to be in the business of developing an infrastructural facility.The Commissioner of Income Tax (Appeals) allowed the benefit of a deduction under Section 80IA of the Act to the assessee on appeal. The Tribunal in a further appeal held that the assessee was entitled to the benefit of a deduction under Section 80IA of the Act and confirmed the order of the Commissioner of Income Tax (Appeals).
8. On behalf of the Revenue, it has been submitted that: (i) Section 80IA of the Act requires the assessee to have developed, operated and maintained an infrastructural facility in order to qualify for a deduction. The assessee is not a developer of the facility but had only supplied and installed the Container Handling Cranes at JNPT; (ii) The assessee is not operating the equipment and is, therefore, not eligible for a deduction under Section 80IA of the Act; and (iii) The equipment which has been installed is not a structure for loading and unloading at a port.
P a g e | 28 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai XXXXXXXXXXXXXXXXXXXXX
15. At this stage, it would be necessary to note that on 31st May 2004, JNPT issued a certificate confirming the award of contracts to the assessee on 2nd September 1994 and 16th October 1995 for supply, installation, testing, commissioning and maintenance of Container Handling equipment on lease for a period of ten years for loading and unloading of containers at the Port and that the cranes that were to be supplied by the assessee form an integral part of the Port.JNPT clarified that the contracts have been executed under the BOLT Scheme and in accordance with its directions, the cranes would be transferred to the Port Trust at no cost on the expiry of a period of ten years of the commencement of the contract.
16. Now, it is in the background of the evolution of the law that the controversy in the present case would have to be considered. The contention of the Revenue is that the assessee was not engaged in developing the facility at all and that under the Contract that was entered into between the assessee and JNPT all that the assessee was required to carry out was to supply and install cranes at the Port. The submission cannot be accepted. The expression „development‟ has not been artificially defined for the purposes of Section 80IA of the Act and must, therefore, receive its ordinary and natural meaning. Under the terms of the contract between the assessee and JNPT, the assessee undertook an obligation for supplying, installing, testing, commissioning and maintenance of Container Handling equipment namely, the cranes in question. JNPT has a dedicated Container Handling Terminal. The case of the assessee is that the only activity at the Terminal consists of the loading, unloading and storage of containers. Under the contract, the assessee was obligated to provide the equipment in question in an operable condition. The contract envisaged two different options; the first being one under which the assessee would carry out operation and maintenance of the equipment while the second consisted of an option to JNPT to carry out operations.The terms of the contract however made it clear that it was the obligation of the assessee to make the equipment available for operation for a stipulated minimum number of days during the year and made the assessee liable to liquidated damages in the event that this was not possible. JNPT by its letter dated 27th March 2000 clarified that the difference between the two options that had been given to the assessee consisted of a payment of Rs.40,00,000/- which was to be retained by JNPT in the event that the operators were provided by the Port for operating the cranes. At the same time, JNPT clarified that it was the responsibility of the assessee to guarantee the availability of the equipment; to ensure that the equipment is in operation on a round the clock basis; to provide for repairs and to ensure the operation and availability of the equipment in accordance with the terms of the contract.
P a g e | 29 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai
17. The obligations which have been assumed by the assessee under the terms of the contract are obligations involving the development of an infrastructure facility. Section 80IA 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.Anassessee did not have to develop the entire port in order to qualify for a deduction under Section 80IA. Parliament did not legislate a condition impossible of compliance. A port is defined to be an infrastructure facility and the circular of the Board clarified that a structure for loading, unloading, storage etc. at a port would qualify for 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 assessee developed the facility on a BOLT basis under the contract with JNPT. On the fulfillment of the lease of ten years, there was a vesting in the JNPT free of cost.
18. Before the Tribunal, material was placed on record by the assessee to indicate the nature and extent of the activities undertaken by it in ensuring that the equipment which was supplied was fully operational. The assessee had in its employment diverse employees, including a Senior Manager, a Manager, Assistant Manager and five Deputy Managers (Operations) in addition to Assistant Engineers, Technical Officers and Operators-cum-Technicians. On considering the material on record including letters of the Port Authority, the Tribunal came to the conclusion that as a matter of fact the assessee was also engaged in activities of operating the equipment. The finding that the assessee had developed the infrastructure facility and that it was engaged in operating the cranes is, therefore, based on the material on record. The fact that the assessee was also maintaining the cranes is not disputed. There is also no merit in the submission that what the assessee constructed was not a structure for loading, unloading, storage etc. at the port.Plainly, the assessee did so.
19. On behalf of the Revenue it was sought to be urged that at the material time for A.Ys 1997-98 and 1998-99, it was necessary for the assessee to cumulatively fulfill the requirement of developing, operating and maintaining the infrastructure facility. It was urged that the assessee, even if it be held to have developed the facility, cannot be regarded as operating the facility. For the reasons already indicated, it is not possible to accept the submission. As we have already noted the assessee had as a matter of fact developed the facility. The Tribunal has also arrived at a finding of fact that the assessee was under the contract required to P a g e | 30 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai operate the facility. Merely because the operators of the cranes were provided by the Port Authority did not absolve the assessee of the overall responsibility of operating the cranes, under the terms of the contract.
XXXXXXXXXXXXXXXXX
22. Another submission which was urged on behalf of the Revenue is that under clause (iii) of sub-section (4A) of Section 80IA, one of the conditions imposed was that the enterprise must start operating and maintaining the infrastructure facility on or after 1st April 1995. The same requirement is embodied in sub-clause(c) of clause (i) of sub-section (4) of the amended provisions of Section 80IA. On this basis, it was urged that since the assessee was not operating and maintaining the facility, he did not fulfill the condition. This submission is fallacious both in fact and in law. As a matter of fact, the Tribunal has entered a finding that the assessee was operating the facility and this finding has been confirmed earlier in this judgment. That the assessee was maintaining the facility is not in dispute. The facility was commenced after 1st April 1995. Therefore, the requirement was met in fact. Moreover, as a matter of law, what the condition essentially means is that the infrastructure facility should have been operational after 1st April 1995. After Section 80IA was amended by the Finance Act of 2001, the section applies to an enterprise carrying on the business of (i) developing; or (ii) operating and maintaining; or (iii) developing, operating and maintaining any infrastructure facility which fulfills certain conditions. Those conditions are : (i) Ownership of the enterprise by a Company registered in India or by a consortium; (ii) An agreement with the Central or State Government, local authority or statutory body; and (iii) The start of operation and maintenance of the infrastructure facility on or after 1st April 1995. The requirement that the operation and maintenance of the infrastructure facility should commence after 1st April 1995 has to be harmoniously construed with the main provision under which a deduction is available to an assessee who develops; or operates and maintains; or develops, operates and maintains an infrastructure facility. Unless both the provisions are harmoniously construed, the object and intent underlying the amendment of the provision by the Finance Act of 2001 would be defeated. A harmonious reading of the provision in its entirety would lead to the conclusion that the deduction is available to an enterprise which (i) develops; or
(ii) operates and maintains; or (iii) develops, maintains and operates that infrastructure facility. However, the commencement of the operation and maintenance of the infrastructure facility should be after 1st April 1995. In the present case, the assessee clearly fulfilled this condition.
23. In the view which we have taken, all the assessment years in question to which this batch of appeals relates would be governed by the same principle. The subsequent amendment of Section 80IA (4A) of the Act to clarify that the P a g e | 31 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai provision would apply to an enterprise engaged in (i) developing; or (ii) operating and maintaining; or (iii) developing, operating and maintaining an infrastructure facility was reflective of a position which was always construed to hold the field. Before the amendment that was brought about by Parliament by Finance Act of 2001, we have already noted that the consistent line of circulars of the Board postulated the same position. The amendment made by Parliament to Section 80IA (4) of the Act set the matter beyond any controversy by stipulating that the three conditions for development, operation and maintenance were not intended to be cumulative in nature.
23. In view of the aforesaid observations, the question of law shall accordingly stand answered in favour of the assessee and against the Revenue."
7.1 In the light of the above decision, it would be relevant to examine the claim of the assessee qua the facts of the case as per the tender and the terms of agreement in respect of various projects on which the deduction has been claimed though purportedly done by the AO as discussed in the preceding paras. The ld.AR has submitted Paper books in a three volumes incorporating various aspects of the project containing copies of various tenders, conditions laid down therein,general and specific agreements etc. We have also examined the various clauses etc.as enshrined in the tender agreements. In the course of hearing,as per the directions of the Bench,the assessee has also submitted a chart in respect of all 22 projects making pagewise reference to various aspects of those projects so as to arrive at a conclusion in the light of the decisions of ABG and NCC SMC (IV) in ITA No. 4842/M/06 (supra). The same is reproduced below:
P a g e | 32 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai SN Name of project Scop Design Mai Financial Supply Bank Defect Timely Insura e and nten involveme of Guarant liability completi nce drawi ance nt and material ee/Secur and on and ngs source of and ity warrant liquidat Investmen machine Deposit y period ed t ry damages 1 Designing and 3 22 44 18 3 18 15 7 constructing sump and providing and erecting VT pumps at Patherly ESR in Dombivali East 2 Additional water supply 47 72, 735 48, 63, 62, 54, scheme for Mira 736 734 742 Bhayander Municipal 747 740, 738 Corporation : Designing, Providing & 741, Constructing RCC sump and Pump House at 743, Navghar, Kanakiya park, Silver Park & Sudam 744, nagar in Bhayander Municipal Corporation 749 Area 3 Water Supply to Vasai 142 134 751 130 145 129 127, 148 Virar Sub-Region:
Designing & 128,
Construction of Break
pressure tank at Hillock 147
near Trimbakpada and
MBR at kashidkopar
village, including plot
development and
contracting approach
road for MBR
4. Designing, Providing, 161 165 159, 160, 155 156 155,
constructing, testing and 165 756 754,
commissioning Ground 756 157
Service reservoir (GSR)
at
GandhibhavanS.No.35,
Kothrud, Pune
5. Improvement to 174 193 760 188, 173 178 186
Kulgaon-badlapur water 757
supply scheme:
Designing, providing,
constructing RCC
elevated master
balancing reservoir at
Shirgaon (badlapur
MIDC Area)
6. Augmentation to 224 224 762 763 202 212 207
Amravati water supply 764 764
P a g e | 33
ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai scheme: Designing and constructing RCC ESRs 4nos, at different places in Amravati & Bandera Town
7. Restructuring water 231 231 230 765 232, 236 236 238 supply scheme of 233 Bharuch Nagar Palika at Maktampur, Bharuch & inclusive of civil, structural, piping, electrical & allied services and structures 8 Khambhat Town water 257, 257 767 256 253 250 252, supply scheme. Tal 766 Khambhat & Dist. 255 Anand: Planning, Designing, Constructing RCC Elevated Service reservoir capacity and BB Masonry Pump House at Nareshwar head works.
9 Designing and 277 277 277 770, 285 286, 285, 772 287
constructing master 770 772 771 771
balancing reservoir at
sector 19, Nerul
Designing and 273 273 273 783 285 286, 285, 788
constructing of GSR & 783 784 784
ESR at Gothivali &
Rabada Gaon in
Ghansoli Ward
Designing and 267 267 269 267, 301 297, 301, 797 298
constructing of GSR at 795 795, 796 796
Chinchpada in Airoli 797
Node
Designing and 276 276 276 809 278 280, 280, 811 279
constructing of GSR & 809 810 810
ESR at Koparipada in
Turbhe ward
Designing and 270 270 270 823 289 824 289, 825
constructing of GSR at 823 824
Sathenagar, Ramnagar,
Ganeshnagar &
Ambedkar nagar at
Digha ward
Designing and 272 272 264 259, 288 260, 260, 261 296
constructing of GSR at 837 837 295, 838
Gavetewadi, 838 839
Vishnunagar,
Pandharinagar,
Ilthanpada &
P a g e | 34
ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai Subhashnagar at Digha Ward Designing and 275 275 275 851 852 852 853 constructing of ESR at 851 Talavali gaon in Ghansoli Ward Designing and 274 2748 863 865 865 866 constructing of ESR at 63 Turbhe stores in Turbhe ward
10. Water supply 306 306 873 305, 325, 330, arrangement to Navi 339 328 332 331 Mumbai and Nhava Sheva Sub-Region Stage III : Designing, providing, constructing Two(2) numbers of RCC elevated service reservoirs of 10 ML capacity each at Gavan-
phata Tal.: Panvel, Dist:
Raigad 11 (1) RCC U/G Sump 346 346 874 875 342 360, 361 344, (2) RCC ESR 372 374 (3) Pump Room for U/G Sump at New Water Works near Bhathi Hanuman 12 Constructions of 3 nos of 376 401 877 876 383 377 389 385, ESR and 2 nos of MBR 393 with its allied works in various sectors at Kharghar along with the water supply distribution networks at Kharghar node.
13 Rehabilitation and 422 406 878, 878 404 412 408 405, Augmentation of Nanded 422 879 421 City Water Supply Design, Construction, Testing and Commissioning of 7 No. of RC.C. Elevated Service Reservoirs of various capacities in South area of NWCMC Rehabilitation and 429 429 880, 881 427, 435 431 428, Augmentation of Nanded 445 881 430 444 City Water Supply Design, Construction, Testing and Commissioning of 5 No. of RC.C. Elevated P a g e | 35
ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai Service Reservoirs of various capacities in North East of North Nanded of NWCMC
14. Construction of 22.5 ML 453 477 453 467 454 464 capacity RCC Elevated Reservoir at Dumbal Water Distribution Station, Surat Construction of RCC 451 477 450 467 461 472 Elevated Reservoir at Athwa Water Distribution Station, Surat 15 Project Uday : Urban 488 488 882 886 485 885 486 487, water supply and to 883 884 environmental 490 improvement project in 883 Madhya Pradesh :
Design and construction of RCC elevated service reservoirs & ground service reservoirs at various locations in Bhopal
16. Designing and 494 492 492 887 492, 495, 499 construction of RCC 524 498 503 sump of with pump house including providing installing VT pumps of various capacities and operation and maintenance of pumping machinery for period of five years at Dombivali (East) 17 Construction of ESR 528 543 527 536 526, 535 531 with providing, laying 530 and joining transmission network at Govind Wadi area in Kalyan 18 Designing, Constructing 553 553 888 553 560 571 570 558, & commissioning of one 562 ESR capacity alongwith allied works at the risk and cost of the defaulting contractor in Sector 11 at Kharghar 19 RMD Re-circulatory 632 612 599 612 600 system - Construction of overhead water tank with observation gallery at top, Underground water P a g e | 36 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai tank and pump house in RLG, North Site, BARC, Trombay 20 Construction of 30 mts 680 890 889 635 646, 636 647, staging height capacity 648 648 underground sump, Pump House, Transformer room, Compound wall, 450 dia HS feeder line (3450mt), 500, 450 dia CI Pipeline (1000 mt. FP.56 t.p.11 @sama, Vadodara 21 Construction of RCC 691 691 891, 892 902 ESRs, HGLRs and 733 900 sumps of various capacity and height including lowering, laying and jointing of various kind and sizes of pipelines with hydraulic testing including excavation and refilling and inside and outside coating complete under Pasavi Zone group water supply scheme of Talaja and Mahuva Talukas of Bhavnagar district based on distribution network of mahi Pipeline 22 Construction of RCC overhead tank ofat JNV Palghar for CPWD Mumbai 400099 7.2 We have examined the respective agreement etc.with reference to the above chart.Although all the projects pertain to Design,Development,Engineering,Construction,Maintenance,Financial involvement, construction of sump and installation of pumps,most of the features which are observed to common in almost all the projects are as below :
P a g e | 37 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai
-The assessee undertook an obligation for construction of sump andinstallation as also supplying materials, installing, testing, commissioning and maintenance
- Design to be submitted by the assessee to be approved by the contractee
- Deposit of Earnest money and Security deposit
- Liability to Damages and penalty involving RISK
- Maintenance/Operation for certain period of completion
- The assessee also liable for liquidated damages and the maximum amount for penalty has been prescribed which is not to exceed 5% of the contract value.
- GUARANTEE PERIOD
- Materials-All materials to be supplied by the assesse
- Investment from own sources though Payments-RA
Bills made periodically
- Employing its own STAFF
- The assessee assumed other contractual obligations including
amongst them, the liability to insure the equipment, to indemnify towards the claims of workers' compensation and for compliance with labour legislation.
- Shouldering investment and technical risks by employing team of technically and administratively qualified personnel and also liable for liquidated damages, if failed to fulfill the obligations laid down in the Agreement.
- All the works starting from conception to commissioning have been taken over by the appellant in contradistinction to the part of work which normally happens in a case of works contract.
- The appellant is also liable for financial requirements as is evident from the Bank Guarantee offered and Insurance cover obtained.
- Defect correction of the contract during the warranty period.
- Employ plant equipment and labor and its own
machinery
- Medical and sanitary arrangement
- Experienced engineer for supervision
P a g e | 38
ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai
- Indemnify against any loss
- New materials and equipments-best quality
- Defects and rectification and continuing obligation
- Liability for insurance
- Guarantee upto 24 months from the date of acceptance certificate
- No compensation entitlement for any loss
- Liable for damage upto 5 years for unsatisfactory performance-
- Liable for compensation to workmen as per relevant
Act
- Insurance against loss of propertyetc.
- Minimum wages act
- Designing,providing,constructing,testing and
commissioning of ground service reservoir
- Performance guarantee
- Public Safety and Environmental Standards
7.3 We notice that in most of the projects, the assessee was involved from the designing to commissioning and even subsequent maintenance after completion of the project. The assessee had taken all connected risks including financial one. Similar was the factual position in the case of ABG decide by the hon‟ble Bombay High Court.It may be stated here that the word „Developer‟ has not been defined under this Act. However, several judicial authorities havedefined it as the one who makes the things happen by mobilizing plan, technical expertise, fund, manpower, supervision and control etc. It also mobilizes and synthesizes people, plan, technical expertise, supervision and by employing all these resources create new infrastructure facility. Further, entering into agreement with Government/local authority/statutory body for P a g e | 39 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai development of infrastructure facility is pre-condition to claim deduction under section 80IA(4) of the Act. There is no dispute over the fact that the assessee company had entered into the agreement with the State Government/Local authorities. The projects relating to water storage etc.was executed by it, which the assessee claims to be development of infrastructure facility pursuant to the contract entered into between the assessee company and the State Government.The scope of work detailed in the agreements involve infrastructure development, including the design, engineering, and construction of various critical components of the water supply. Given that the assessee was responsible for the execution of these projects and their subsequent operation and maintenance, it qualifies as a developer under the relevant provisions of the Act. The general conditions of the contract are mentioned in the agreement. From the perusal of these contract agreements/tenders etc., it is evident that the assessee was actively involved in the designing, execution, and completion of the project, fulfilling all contractual obligations. In line with the contract, the assessee was responsible for paying all applicable duties, levies, and charges, as required, ensuring full compliance with the contractual and legal framework.With respect to functioning of the assessee, it had taken bank guarantee, insurance and had also deposited earnest money and also undertaken various P a g e | 40 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai functions as required under law.The assessee can be said to have undertaken financial risk as well. Here, the assessee‟s responsibilities in the project extended to all aspects of project design, execution, and handover. The assessee here maintained autonomy, bearing control over all phases of execution, despite needing certain government approvals,employment and management of skilled workforce, technical know-how and expertise. The assessee‟s experience in similar projects and its use of technical knowledge in the projects align well with the standards set in these decisions, showing that it actively contributed specialized expertise to the project. Therefore, it is noted that the assessee‟s comprehensive control, significant financial risk, and managerial responsibilities align with the characteristics of a developer as outlined above.
7.4 However,we notice that in respect of Sl.no.22 above which pertained to construction of RCC overhead tank of at JNV Palghar for CPWD Mumbai, none of the above stated criteria are satisfied as admitted in the aforesaid chart.Therefore,such a work cannot be treated as infrastructure project but is merely a work contract for a P a g e | 41 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai specific work .Therefore,such a project is held to be ineligible for deduction u/s 80IA(4) of the Act.
7.5 In the light of the decisions cited above,merely executing a construction contract does not automatically disqualify an entity from claiming deductions under Section 80IA(4) of the Act. The legislative intent behind Section 80IA of the Act was to incentivize infrastructure development, and, thus, the term "developer" should be interpreted broadly. As outlined above in the preceding paras,the assessee bore significant financial and operational risks, including providing performance guarantees, facing potential liquidated damages for delays, and being liable for retention money. These elements evidenced the assessee‟s entrepreneurial risk, a hallmark of developer activities under Section 80IA of the Act. The assessee‟s involvement in project outcomes, liability for delays, and management of quality control processes indicated that it functioned as an independent developer.We find that all the works starting from conception to commissioning have been taken over by the assessee in contradistinction to the part of work which normally happens in a case of works contract. The appellant is also liable for financial requirements as is evident from the Bank Guarantee offered and Insurance cover obtained.Accordingly, we find sufficient merits in P a g e | 42 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai the contentions of ld.AR that assessee was not working as a contractor but as a developer of the infrastructure projects.
7.6 It would be relevant to mention here that the coordinate bench of ITAT, Mumbai in the case of NCC SMC Indu Jv, Thane vs Department Of Income Tax in ITA No.3070/Mum/2014 (AY 2009-10) dated 03.02.2016 involving similar projects allowed the claim of deduction 80IA(4) on almost identical set of facts while placing reliance on the judgement in the case of CIT vs. ABG Heavy Industries Ltd.(supra). The relevant parts are reproduced as under:
"This is an appeal filed by the revenue against the order of CIT(A), Mumbai, for the assessment year 2009-2010, in the matter of orderpassed u/s.143(3) of the I.T. Act, wherein following grounds have been raised by the revenue :-
"1. On the facts and circumstances of the case and in law, the Ld. CIT (A)-II, Thane has erred in allowing the deduction u/s 80IA at Rs.
2,94,16,222/- without appreciating the fact that being a Contractor the deduction u/s 80IA is not allowable to the assessee.
2. On the facts and circumstances of the case and in law, the Ld. CIT (A)-II, Thane has erred in not appreciating the fact that the assessee has merely got the work executed by sub-contracting 100% of work on same terms and conditions (as in original agreement) and that the assessee has shown the receipts under head works contract receipts and has paid works contracts tax and that tax has been deducted at source on the contract receipts.
3. On the facts and circumstances of the case and in law, the Ld. CIT (A)-II Thane has erred in not appreciating the fact that deduction u/s 80IA is available to an enterprise carrying on the business of developing an infrastructure facility or maintaining and operating an infrastructure facility or developing, maintaining and operating a infrastructure facility subject to fulfillment of certain conditions. Thus, primary condition for claiming deduction u/s 80IA is that the assessee P a g e | 43 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai should be a developer of an infrastructure facility. Being a Contractor the assessee has merely executed works contract by sub-contracting 100% of work on same terms and conditions (as in original agreement) and thus cannot be acknowledged as a developer and hence deduction u/s 80lA is not allowable to the assessee.
4 The appellant prays the order of the ld. CIT(A)-I. Thane. may be vacated and that of the Assessing Officer be restored."
Rival contentions have been heard and record perused. Facts in brief are that the assessee is a Joint Venture between Nagarjuna Construction Co. Ltd., SMC Infrastructure Pvt. Ltd. & Indu Project Ltd.engaged in the business of Civil Construction for infrastructure projects. It has filed return of income on 06/07/2009 showing NIL income. During the year under consideration, the assessee had executed works contracts amounting to Rs. 99,05,53,214/- showing net income of Rs. 2,94,16,222/-.The deduction u/s. 80lA has been claimed in respect of the entire income.
4.1 At the outset, it is worthwhile to mention that it is an established legal position that the nature of entries in the Books of Account are not relevant for taxability of a particular receipt or otherwise. Similarly as to whether assessee has paid works contract tax or not, or tax has been deducted on such receipts or not, are also irrelevant factors. Thus, the issue for consideration and determination is whether the appellant is a works contractor as per Explanation to section 80IA(13) or a developer of infrastructure project as envisaged in section 80IA(4). Undisputedly, the appellant is a consortium of the Companies registered in India and has entered into an agreement with the Local Authority i.e. Pimpri Chinchwad Municipal Corporation (PCMC) for erection of direct water pipeline from Pawana Dam to Water Treatment Plant at Sector-23 in PCMC area. Copy of the Agreement dt. 30/04/20-08 furnished by the appellant vide reply dt.09/01/2014 is placed on record. As per this agreement, PCMC has accepted the "Bid" of the appellant for execution of "JNNURM Project for Pimpri Chinchwad City, Water Supply Project for direct pipeline from Pawana Dam to Water Treatment Plant at Sector-23, Nigadi in PCMC area at a price of Rs.397.93 cr. The work has been entrusted for execution, completion and remedying of any defects therein.
Vide clause 4 of the Agreement, various documents including Notice Inviting Tender, Contractor's Bid, etc. have been made part of the Agreement. Accordingly, the appellant P a g e | 44 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai has been given the Work Order vide letter No.PAPU/NI/KAVI/396/08 dt. 30/04/2008 on furnishing of security of Bank Guarantee of Rs. 15,91,75,000/-. Copy of the work order has been placed on record by the appellant vide its letters dt. 11/09/2013 & 09/01/2014.
4.2 On perusal of the copies of Tender Documents filed vide letter dt. 24/01/14, it is noticed that the Tender was issued for following works:-
(i) Project (Para-1, Vol.1/3) Water Supply Project under JNNRUM GOI funding for Pimpri Chinchwad Municipal Corporation, Pune - Direct pipeline from Pawana Dam upto WTP within PCMC area, Pune.
(ii) Job (Para 2, Vol. 1/3) Designing, Providing, Erecting Testing, Commissioning and Trial Run for the Complete System of direct pipeline from Pawana Dam upto City. This comprises of Approach Channel, Jack Well - Pump house, Electro-mechanical Installations, Approach Bridge/Bund, Rising Main, MBR, Gravity Mains, etc/complete to carry 525 ML in 20 Hrs.
(iii) Land Conditions & Layout (Para 9, Vol. 1/3) The owner will furnish & pay for land, easements and rights-of-way for the works. The contractor (i.e. assessee) shall, however, help the owner to obtain consents from the various authorities such as Irrigation, National Highway, Express Highway, Village area, enroute property owners.
Make all necessary arrangements, and account for all miscellaneous expenses for the completion of the said task of land acquisition/or access ....
(iv) Clearing of site including Jungle clearance (Para-1, Vol. 2/3) Before starting the work, the site shall be cleared of all shrubs, grass, and other vegetation including large and small bushes, all stumps, removal of roots, cutting and disposal of small trees The Contractor shall make himself familiar with the local rules and regulations pertaining to land clearance, environmental aspects including special requirements of forest areas, wherever applicable and the work shall be carried out in strict accordance therewith.
(v) Scope of work (para 2, Vol. 2/3) Besides various items of water systems, the work also includes Construction of service road.
4.2.1 In addition to the general responsibility of the contract, the appellant is also responsible and liable for the following:-
P a g e | 45 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai
(i) Loss or damage and Indemnity Agreement (Para 10.2. Vol.
1/3) The Contractor shall be responsible during the progress as well maintenance for any liability imposed by law for any damage to the work or any part thereof or to any of the materials or other things used in performing the work or for injury to any person or persons or for any property damaged in or outside the works limit. The contractor shall indemnify and hold the owner and the Engineers harmless against any or all liabilities, claims, loss or injury, including costs, expenses and attorney‟s fees incurred in defence of the same whatsoever during the progress and maintenance of the work.
(ii) Defects and Rectification (Para 26. Vol. 1/3) For the period stated below from the date of issuance of completion certificate, the contractor shall remain liable for any of the work or works or parts thereof or equipment and fittings supplied which in the opinion of the Engineer fail to comply with the requirements of the contract or are in any way unsatisfactory or defective.
The defect liability period has been mentioned in Form B-1 and the same ranges from one year to five years for different items.
(iii) Defective work is liable to be rejected at any stage. The contractor, on no account can refuse to rectify the defects merely on reasons that further work has been carried out. No extra payment shall be made for rectification (Para 51.8, Vol. 1/3).
(iv) Contractor's liability and Insurance (Para 62.2, Vol. 1/3) Without limiting his obligations and responsibilities, the contractor shall insure in the joint name of the PCMC and contractor against all loss or damage from whatever cause .
It is noticed that the appellant has taken an Insurance cover for entire value of the project estimated at Rs. 397.93 crs. from Oriental Insurance Company Ltd. vide Policy No. 123105/44/2009/10 and accordingly, total premium of Rs. 1,17,05,582/- was to be paid in 10 installments starting from 19/06/2008 to 19/06/2010.
4.3 As per the Agreement of Joint Venture dt. 25/04/2008, the Joint Venture (JV) has been created for the Special purpose of executing the Water Supply project and it will stand dissolved on completion of the same. All the three constituent companies of the JV have experience and technical expertise for development of the infrastructure project as detailed below:-
P a g e | 46 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai Nagarjuna Construction Company Ltd. is a reputed Civil Engineering Company having wide experience in constructions and execution of the Road, Mass concreting and Other Infrastructure Projects.
(ii) SMC Infrastructure Pvt. Ltd. is a reputed Civil Engineering Company having wide experience in construction and execution of Pipelines, Bridges, Mass concreting and Other Infrastructure Projects.
(iii) Indu Project Ltd. is a reputed Civil Engineering Company having wide experience in constructions and execution of Tunnel, Building, Roads, Mass concreting and other Infrastructure Projects.
Accordingly, the project of Water Supply systems under consideration is being executed by above companies.
4.4 From the above facts, it emerges that the appellant JV has entered into an Agreement with the Local Authority for execution of new infrastructure facility i.e. a Water Supply Project.All the works starting from conception to commissioning have been taken over by the appellant in contradistinction to the part of work which normally happens in a case of works contract.The appellant is also liable for financial requirements as is evident from the Bank Guarantee offered and Insurance cover obtained. In view of this factual matrix of the case of appellant following decisions relied upon support its case favourably:-
(a) CIT Vs. ABG Heavy Industries Ltd. (I.T. Appeals No. 1687, 2121,2291 and 2663 of 2009 & 416 of 2010) - Order dt. 15/02/2010 of Bombay High Court:-
In this case, the assessee was awarded a contract for leasing of Container Handling cranes at JNPT. The contention of the Revenue that the assessee was not engaged in developing the facility at all was not accepted. It was held that the term "development"has not been defined for the purpose of section 80IA and must, therefore, receive its ordinary and natural meaning. Under the terms of contract with JNPT, the assessee undertook an obligation for supplying, installing, testing, commissioning and maintenance of Container Handling equipment namely, the cranes in question. Considering other aspects, the assessee was held to be a developer of infrastructure facility.
P a g e | 47 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai
(b) M/s. Maytas - NCC(JV) Vs. ACIT (ITA No. 1292/Hyd/2010, A.V. 2007-08) - Order dated 27/08/2012 of ITAT, Hyderabad.
In this case‟, it has been held that if the contracts involve design, development, operation & maintenance, financial involvement, and defect correction and liability period, then such contracts cannot be called as simple works contract, to deny deduction u/s. 80IA.
(c) DCIT Vs. Koya & Company Construction Pvt. Ltd. (ITA No. 1840 8t 1843 of 2012, A.V. 2007-08), Order dated 05/04/2013 of ITAT, Hyderabad.
In this case, it has been clarified that every contractor may not be a developer but every developer developing Infrastructure facility‟ on behalf of the Govt. is a contractor.
The word "contractor" is used to denote a person entering into an agreement with the Govt. or Govt. undertakings. Such an agreement is a contract and for the purpose of the agreement, a person may be called as contractor 9S he entered into a contract.
Therefore, the contractor and developer cannot be viewed differently. The developer takes the entrepreneurial and investment risks in terms of deployment of technical personnel, plant and machinery, technical know-how, expertise and financial resources while contractor takes only business risks. The Explanation below section 80IA(13) has been inserted to deny tax exemption to the entities who does only mere works contract or sub-contract as distinct from a developer.
(d) B. T. Patil & Sons Belgaum Constructions Pvt. Ltd. (ITA No. 1408 & 1409/PN/2003) Order dt. 28/02/2013 of ITAT, Pune.
In this case, original appeal could not be decided because of difference of opinion between Hon‟ble Members of the Pune Bench of ITAT. Accordingly, a larger Bench was constituted and the issue of deduction u/s. 80IA(4) was decided against the assessee vide order reported in B.T. Patil & Sons Belgaum Construction Pvt. Ltd. Vs. ACIT (2009) 126 TTJ 577 (Mum) (TM). After this decision, appeal of assessee was refixed for giving effect to the decision of larger Bench u/s. 255(4). However, the same was dismissed in limine because P a g e | 48 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai of non-appearance on behalf of the assessee. Aggrieved assessee moved a Miscellaneous Application before the Hon‟ble ITAT, Pune to recall the order. With the abundant precaution, appeal was also filed before the Hon‟ble High Court, Bombay. In the meantime, Hon'ble Bombay High Court passed an order in the case of CIT Vs. ABG Heavy Industries Ltd. & Ors (2010) 322 ITR 323 (Bom) allowing deduction u/s. 80IA(4) to the contractors engaged in development of infrastructure facility. Further, appeal of assessee was recalled by the Hon‟ble ITAT and accordingly, the assessee requested to withdraw appeal before the Hon‟ble High Court. The Hon'ble High Court, Bombay passed an order directing the ITAT, Pune to consider the decision in the case of the ABG Heavy Industries Ltd. (Supra) while passing order giving effect of opinion of Third Member u/s. 255(4). In view of this development, Honble ITAT, Pune passed an order dt. 28/02/2013 holding that the Amendment of 2009 in not applicable in the case where the assessee executes the work by shouldering Investment and Technical risk by employing team of technically and administratively qualified persons and it is liable for liquidated damages if failed to fulfill the obligation laid down in the agreement and also securing by Bank guarantee. It was further held that practically the opinion of Third Member was overruled by Hon‟ble Bombay High Court that even a Contractor is a developer. Accordingly, the opinion of Third Member of Hon‟ble Tribunal was held to be no longer good law. In result, deduction u/s. 80IA(4) was allowed to assessee B.T. Patil & Sons Belgaum Construction Pvt. Ltd.
It is noticed that in the case of group concern of the assessee on hand i.e. SMC Infrastructure Pvt. Ltd., deduction u] s. 80IA(4) was disallowed by the CIT(A) & Hon‟ble ITAT, Mumbai in earlier years following the decision of larger Bench of Hon'ble ITAT in the case of B.T. Patil & Sons Belgaum Construction Pvt. Ltd. (supra) which now stands overruled, rather reversed and hence, very basis of disallowance of deduction u/s. 80IA(4) no longer survives.
4.5 Therefore, in view of the above facts and legal position, it emerges that the appellant Joint Venture has conceived the new infrastructure facility being Water Supply System & designed also. It is executing and finally will commission the same by shouldering investment and technical risks by employing team of technically and administratively qualified personnel P a g e | 49 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai and also liable for liquidated damages, if failed to fulfill the obligations laid down in the Agreement and also securing by Bank Guarantee. The appellant is also liable for defects correction upto a period of five years from the date of commencement. Further, the appellant has been given work of entire project worth Rs.397.93 crs. and not part of it and hence, I hold that the appellant is a "developer" and not merely a "works contractor". Thus, respectively following the above mentioned decisions of Hon‟ble Tribunals & jurisdictional High Cout, I further hold that the appellant is entitled for deduction u/s. 80IA(4). Hence, the appellant succeeds in respect of Grounds No. 1 & 2."
4. Against the above order of CIT(A), the revenue is in further appeal before us.
5. It was contended by ld. DR that the Tribunal have decided similar issue in the sister concern of the assessee, therefore, the AO has correctly disallowed the assessee‟s claim u/s.80IA of the Act. He further relied on the order of the AO.
6. On the other hand, it was contended by ld. AR that similar issue has been decided by the Tribunal in case of associate concern of the assessee exactly on the issue of 80IA. He invited our attention to the various orders of the Tribunal in case of group concerns, which are placed on record. Ld. AR also invited our attention to the findings recorded by CIT(A) with respect to each and every objection raised by the AO in assessment order. As per ld. AR the issue is squarely covered by the order of the Tribunal in case of group concerns and the facts of the instant case are exactly similar, therefore, appeal of the revenue deserves to be dismissed.
7. We have considered rival contentions and carefully gone through the orders of the authorities below as well as order of the Tribunal in the case of group concern of the assessee placed on record, as well as order of Hon'ble Bombay High court in the case of ABG Heavy Industries Ltd., 189 Taxmann 54. We found that the CIT(A) has dealt with each and every objection/observation of the AO and after recording due finding reached to the conclusion that the assessee was engaged in the infrastructure project and not merely acting as a contractor. The detailed findings recorded by the CIT(A) at para 4 as reproduced above, have not been controverted by department by bringing any positive material on record.We also found that the CIT(A) had P a g e | 50 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai considered each and every project undertaken by the assessee and recorded a finding to the effect that the assessee has entered into an Agreement with the Local Authority for execution of new infrastructure facility i.e. a Water Supply Project. All the works starting from conception to commissioning have been taken over by the appellant in contradistinction to the part of work which normally happens in a case of works contract. The appellant is also liable for financial requirements as is evident from the Bank Guarantee offered and Insurance cover obtained. Accordingly, we do not find any reason to interfere in the findings recorded by CIT(A) in reaching to the conclusion that assessee was not working as a contractor but as a developer of the infrastructure project. We had also gone through the terms and conditions of work order of water supply and drainage department, Pimpri Chinchwad corporation, Pune along with detailed tender notice of direct pipeline from Pawana Dam, agreement dated 30th April, 2008 between Pimpri Chinchwad municipal Corporation and NCC-SMC-INDU(JV), agreement of Joint Venture dated 25th April, 2008 and detailed tender of direct pipeline project - Pawana Dam. As per the terms and conditions of the work order, we found that assessee has worked as developer and not as a contractor. Furthermore, the Tribunal in case of group concerns of the assessee SMC Infrastructure Pvt. Ltd. vide order dated 14-11- 2014 have decided the issue in favour of the assessee after having following observations :-
" 2. Rival contentions have been heard and perused the records. So far as ground with regard to the claim of deduction u/s 80IA of the Income Tax Act, 1961 is concerned, the Tribunal has decided the issue in favour of the assessee in ITA No. 4842/Mum/2006, ITA No. 514/Mum/2009, ITA No. 7885/Mum/2010 & ITA No. 283/Mum/2011 order dated 20-6-2014.
3. The Tribunal vide its order dated 25th June, 2014 for A.Ys 2004- 05, 2005-06 and 2007-08 after following the decision of Hon‟ble Bombay High Court in the case of CIT vs. ABG Heavy Industries Ltd., 189 Taxmann 54 held that the assessee was entitled for claim of deduction u/s 80IA(4) of the Act. The precise observation of the Tribunal was under:-
"10. We have heard both the parties and their contentions have carefully been considered. We have carefully gone through the assessment order for A.Y 2004-05 which is the base year for which the assessee is claiming that it is entitled to get deduction under section 80 IA(4). The first and foremost objection of the AO is that assessee, P a g e | 51 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai while executing the project, had acted in the capacity of a contractor, therefore, the deduction cannot be allowed to the assessee as pre- requisite of the section to enable the assessee to claim deduction is that he should be a developer.
10.1 The second contention of AO is that assessee has only built some part of the project and it has neither operated or maintained the infrastructure project which is also a condition precedent to grant deduction under section 80 IA(4). The AO has rejected the contention of the assessee that its case is squarely covered by decision of ITAT in the case of Patel Engineering Ltd. (supra). As against such case of the AO Ld. CIT(A) has followed mainly the decision of ITAT in the case of Patel Engineering Ltd. (supra) and has allowed relief to the assessee. We have to examine that whether or not assessee is entitled to get deduction under section 80 IA(4) in the light of aforementioned objection of the AO and plea of the assessee. It is the case of the assessee that AO has committed an error in holding that assessee has acted as a contractor in place of the claim of the assessee that it has worked as a developer of the infrastructure project. For raising such contention the assessee has placed reliance not only on the decision in the case of Patel Engineering Ltd. (supra) but also on the decision of Hon‟ble Bombay High Court in the case of ABG Heavy Industries Ltd. (supra). It may be mentioned here that AO has passed the impugned assessment order for A.Y 2004-05 on 31/3/2006 when the benefit of decision of Hon‟ble Bombay High Court in the case of CIT v/s ABG Heavy Industries Ltd. was not available. The assessee in that case did not develop, operate or maintain the entire port but only part of the function of the port was developed and maintained by the assessee. Ld. AO in that case was of the view that the assessee merely engaged in the business of supplying, installing, testing, commissioning and maintaining cranes at the port and was not in the business of developing, maintaining and operating of port. This contention of the assessee is also recorded in para -7 of the decision which has already been reproduced in the above part of this order. (para-7).
10.2 While adjudicating the aforementioned contention of the Revenue , their Lordships in para-16 have observed that such submission cannot be accepted. The expression "development"has not been artificially defined for the purpose of section 80 IA(4) of the Act must, therefore, received its ordinary and natural meaning. Under the terms of the contract between the assessee and JNPT the assessee undertook an obligation to supply, installing, testing, commissioning and P a g e | 52 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai maintenance of container handling equipments namely the cranes in question. Their Lordships in para-17 have observed that the obligations which have been assumed by the assessee under the terms of the contract are obligations involving the development of an infrastructure facility. Section 80 IA(4) of the Act essentially contemplated a deduction in a situation where an enterprise carried on a business of developing, maintaining and operating infrastructure facility. A port was defined to include 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 from the supply of the cranes to the installation, testing, commissioning, operation and maintenance of cranes for a term of 10 years, after which the cranes were to vest in JNPT free of cost. The assessee did not have to develop the entire port in order to qualify for deduction under section 80 IA(4). Parliament did not legislate a condition impossible of compliance.
10.3 If the facts of the present case are to be examined in the light of aforementioned decision of Hon'ble Bombay High Court, then it can be said that for claiming deduction under section 80 IA(4), it is not necessary for the assessee to develop the entire project in order to qualify for a deduction under section 80 IA(4). If the provisions are so construed then it will be a condition impossible of compliance because of the magnitude of the entire project. For qualifying deduction under section 80 IA(4) what would be necessary will be that the work carried on by the assessee must be an integral part of the project and if it is so, then it cannot be said that assessee is not eligible for deduction under section 80 IA(4) for the reason that the assessee on its own did not develop an infrastructure project. Therefore, observations of the AO that assessee did not develop an infrastructure project and only part of the work was carried out cannot disentitle the assessee to claim the deduction.
10.4. The nature of works carried out by the assessee regarding the project have been stated in para-4 of the assessment order for A.Y.2004-05. It inter-alia include manufacturing ,supplying , lowering, laying, jointing, testing and commissioning of 2200 mm diameter MS Pumping Main with cement mortar. In-lining & out- coating from clear water reservoir at Godakondala to MBR at Gungal and similar P a g e | 53 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai activities were carried out in respect of other places which have been specified by the AO. The activity of the assessee is not limited only to construction of the project but as per the tender the assessee had to submit bank guarantee for completion of the contract and as per clause-88 of the contract the assessee is also liable for liquidated damages and the maximum amount for penalty has been prescribed which is not to exceed 5% of the contract value. There is also description of defect liability period in clause-89 which is the liability of the assessee under the contract for 24 months from the date of successful completion of the work and taken over by Visakhapatnam Municipal Corporation. Keeping in view the entirety of facts and aforementioned decision of Hon‟ble Bombay High Court, it cannot be said that assessee did not act in the capacity of developer and it has already been mentioned that to be entitled to claim deduction under section 80 IA(4) it is not necessary that entire infrastructure project should be developed by the assessee.
10.5 Now the next question will be that whether to claim deduction under section 80 IA(4) it is necessary for an assessee not only to develop the project but also to operate and maintain the infrastructure facility. This issue is also no more res-integra and is covered by the aforementioned decision of Hon‟ble Bombay High Court in the case of CIT vs. ABG Heavy Industries Ltd. (supra). In that case it was the contention of the Revenue that for assessment year 1997- 98 and 1998-99, it was necessary for the assessee to cumulatively fulfill the requirement of developing, operating and maintaining infrastructure facility. It was pleaded by the Revenue that, even if it be held to have developed the facility it cannot be regarded as operating the facility. Their Lordships have referred to such contention of Revenue in para-19 of the decision and they observed that it is not possible to accept such submissions. Their Lordships have observed that it has already been noted that assessee had as a matter of fact developed the facility. Their Lordships after considering the provisions and various circulars of CBDT and also the judicial pronouncements have concluded in para-22 of the decision that after section 80IA was amended by Finance Act, 2001, the section applies to an enterprise carrying on the business of (i) developing; or (ii) operating and maintaining; or(iii) developing, operating and maintaining any infrastructure facility which fulfills certain P a g e | 54 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai conditions. For the sake of completeness para-22 & 23 of the decision is reproduced below:
"22. Another submission which was urged on behalf of the revenue is that under clause (iii) of sub-section (4A) of section 80-IA, one of the conditions imposed was that the enterprise must start operating and maintaining the infrastructure facility on or after 1-4-1995. The same requirement is embodied in sub-clause (c) of clause (i) of sub-section (4) of the amended provisions of section 80-IA. On this basis, it was urged that since the assessee was not operating and maintaining the facility, he did not fulfill the condition. This submission is fallacious both in fact and in law. As a matter of fact, the Tribunal has entered a finding that the assessee was operating the facility and this finding has been confirmed earlier in this judgment. That the assessee was maintaining the facility is not in dispute. The facility was commenced after 1- 4-1995. Therefore, the requirement was met in fact. Moreover, as a matter of law, what the condition essentially means is that the infrastructure facility should have been operational after 1-4-1995.
After section 80-IA was amended by the Finance Act of 2001, the section applies to an enterprise carrying on the business of (i) developing; or(ii)operating and maintaining, or(iii) developing, operating and maintaining any infrastructure facility which fulfils certain conditions. Those conditions are (i) Ownership of the enterprise by a Company registered in India or by a consortium; (ii) An agreement with the Central or State Government, local authority or statutory body; and (iii) The start of operation and maintenance of the infrastructure facility on or after 1-4-1995. The requirement that the operation and maintenance of the infrastructure facility should commence after 1-4-1995 has to be harmoniously construed with the main provision under which a deduction is available to an assessee who develops; or operates and maintains; or develops, operates and maintains an infrastructure facility. Unless both the provisions are harmoniously construed, the object and intent underlying the amendment of the provision by the Finance Act of 2001 would be defeated. A harmonious reading of the provision in its entirety would lead to the conclusion that the deduction is available to an enterprise which (i) develops; or(ii) operates and maintains; or (iii) develops, maintains and operates that infrastructure facility. However, the commencement of the operation and maintenance of the infrastructure facility should be after 1-4-1995. In the present case, the assessee clearly fulfilled this condition( emphasis ours).
P a g e | 55 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai
23. In the view which we have taken, all the assessment years in question to which this batch of appeals relates would be governed, by the same principle. The subsequent amendment of section 80- IA(4A) of the Act to clarify that the provision would apply to an enterprise engaged in (i) developing; or (ii) operating and maintaining; or (iii) developing, operating and maintaining an infrastructure facility was reflective of a position which was always construed to hold the field. Before the amendment that was brought about by Parliament by the Finance Act of 2001, we have already noted that the consistent line of circulars of the Board postulated the same position. The amendment made by Parliament to section 80-IA(4) of the Act set the matter beyond any controversy by stipulating that the three conditions for development, operation and maintenance were not intended to be cumulative in nature".
10.6 According to aforementioned observations of their Lordships, pre or post amendment the requirement of section 80 IA(4) is that deduction will be available an enterprise engaged in (i) developing; or(ii) operating and maintaining or (iii) developing, operating and maintaining the infrastructure facility and such position was to be always construe to hold the field. Therefore, only development of infrastructure project is sufficient to make entitle an enterprise to be eligible for deduction under section 80 IA(4).
10.7 It may also be pointed out that the appeal filed by the Revenue for A.Y 2004-05 was earlier allowed by the Tribunal on the basis of Larger Bench decision in the case of M/s. B.T.Patel& Sons Belgaum Construction Pvt. Ltd.(supra) and it was brought to our notice that in view of the subsequent decision of Hon‟ble Bombay High Court, Larger Bench decision was not followed by the Tribunal and the matter was decided by the Tribunal vide its order dated 28/2/2013 in the case of B.T.Patel& Sons Belgaun Construction Pvt. Ltd.(supra), a copy of this decision was placed on our record. The directions of Hon‟ble Bombay High Court in pursuance to which such order was passed are also described in the order in para-5 and the relevant para -5 is reproduced below:
5. The Hon‟ble Bombay High Court permitted the Counsel of the assessee to withdraw the said appeals. While passing the order the Hon‟ble Court has kept all the contentions open and further directed the Tribunal to consider the decision of the ABG Heavy Industries and other decisions while passing their order giving effect to the opinion of the Third Member as per the provisions of section 255(4) of the Act. The relevant portion of the said order of Hon‟ble Jurisdictional High Court in ITA No.1307 of 2011 for a.Y.2000-01 and 1640 of 2011 for A.Y 2001-02 is as under:
P a g e | 56 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai "1. Since the Tribunal has recalled the impugned order dated 23.03.2011, the appellant is withdrawing its appeal.
2. Further, while considering the matter afresh, the Tribunal will take into consideration all decisions including the decision of this court in the matter of CIT v. ABG Heavy Industries Ltd. Reported in 322 ITR
323. All contentions are kept open."
3. The appeal is dismissed of in above terms."
10.8 In the order the Tribunal after considering the decision of Hon‟ble Bombay High Court in the case of CIT vs. ABG Heavy Industries Ltd. (supra) has decided the issue in favour of assessee. While deciding the present appeal vide order dated 9/2/2010 it was found by the Tribunal that both sides were in agreement that the facts and circumstances are mutatismutantis similar to those considered by the Larger Bench of the Tribunal in the case of B.T.Patel& Sons Belgaun Construction Pvt. Ltd.(supra). The said order of the Tribunal was recalled only for the reason that the Larger Bench decision in the case of M/s. B.T.Patel& Sons Belgaum Construction Pvt. Ltd.(supra) was no more good law in view of subsequent decision of Hon‟ble Bombay High Court in the case of CIT vs. ABG Heavy Industries (supra). The order in the case of present assessee was not recalled for the reason that there is any difference in the facts and circumstances of the present case and the decision in the case of B.T.Patel& Sons Belgaun Construction Pvt. Ltd.(supra). Now the decision of Larger Bench is no more good law and the Division Bench of the Tribunal in the case of B.T.Patel & Sons Belgaun Construction Pvt. Ltd.(supra) has decided this issue in favour of the assessee following the decision of Hon‟ble Bombay High Court in the case of ABG Heavy Industries Ltd. (supra). Para -4 of the said order is reproduced below:
"14. In this background, the assessee could certainly claim the deductions under the provision of Section 80 IA. One has to see the substance and not the Form Essentially, though it was a Joint Venture, it was converted into assessee‟s venture. The Other Venturer withdraw and the entire work was executed by the assessee though in the name of Joint Venture. The Joint Venture is nothing but the venture of the assessee company and the other person not being a party after drawing the question of Joint Venture does not arise. The Venture was fully carried out by the assessee company. Taking the substance of the transaction, the assessee are entitled to all the profits in respect of the contract executed by them, hence the assessee would certainly be entitled to deduction under the provisions of 80IA as they have fulfilled all the other conditions. This view get from decision in the case of ITAT, Indore Bench, in case of Ayush Ajay Constructions Ltd.
P a g e | 57 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai (supra). Thus, while giving effect to the opinion of Third Member u/s.255(4) of the Act, we take view in conformity with order of jurisdictional High Court in case of ABG Heavy Industries Ltd. (supra) available at this time though contrary to the opinion expressed by the Third Member. So in view of above discussion, following the ration of Jurisdictional High Court in the case of ABG Industries Ltd. (supra), the Assessing Officer is direct to allow deduction u/s. 80 IA of the Act to the assessee with regard to the projects in question for both the years. This matter is disposed off accordingly."
Therefore, also the issue is covered in favour of the assessee by the aforementioned decision of Co-ordinate Bench.
10.9 In view of above discussion, we hold that assessee is entitled for deduction under section 80 IA(4) and Departmental appeal for A.Y 2004-05 and 2005-06 are dismissed.
11. So far as it relate to appeals of the assessees for A.Y 2007-08, it has already been mentioned that following the aforementioned decision of Larger Bench in the case of B.T.Patel& Sons Belgaun Construction Pvt. Ltd. (supra), Ld. CIT(A) has held that assessee is not entitled to get deduction under section 80 IA(4). It has already been pointed out that the Larger Bench decision in the case of B.T.Patel& Sons Belgaun Construction Pvt. Ltd. (supra) is no more a good law and in the case of that assessee itself, Division Bench has held that assessee is entitled for deduction under section 80IA(4) of the Act. We have already held that assessee is entitled for deduction under section 80 IA(4) in respect of A.Y. 2004-05 and 2005-06. That decision will be applicable for A.Y 2007-08 in case of both the assesees. Therefore, these appeals of the assessees are also allowed."
4. We have carefully gone through the order of the Tribunal in assessee‟s own case/associated concern‟s case as reproduced above and found that issue 80IA(4) was decided by the Tribunal. The facts and circumstances in the case during the year under consideration are exactly same. Respectfully following the order of the Tribunal, we direct the A.O. to allow the claim for deduction u/s 80IA(4) of the Act."
8. We also found that the Tribunal in case of NCC-SMC(JV) and M/s SMC Unity(JV), ITA No.4842/Mum/2006 and ITA No.514/Mum/2009, respectively decided the issue of 80IA in favour of the assessee vide order dated 20-6-2014. The Tribunal in case of NCC SMC Unit (JV), ITA No.7398/Mum/2011, vide order dated 25-6-2014 has also decided the similar ground in favour of the assessee. The „H‟ bench of Mumbai Tribunal in case of P a g e | 58 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai M/s SMC Infrastructure Pvt. Ltd., ITA No.5503/Mum/2011 has also decided the issue of deduction u/s.80IA(4) in favour of the assessee. Respectfully following these orders of the Tribunal, we do not find any merit in the action of the AO for disallowing assessee‟s claim for deduction u/s.80IA by wrongly observing that assessee was working as a contractor and not as a developer of infrastructure project.
9. In view of the above discussion, we do not find any infirmity in the order of CIT(A) for allowing assessee‟s claim for deduction u/s.80IA(4) of the Act.
10. In the result, appeal of the revenue is dismissed."
7.7 As stated earlier, in the instant case as well, the assessee is also responsible to arrange method of the execution of work along with detailed drawings, sketches, furnish the details of sufficient plants, equipment and labour. Besides, the assessee was to pay the liquidated damages in case of completion of project after the date of intended completion of project and other defaults. Thus, the fact that the assessee deploys its resources, material, machinery, labour etc. in the construction work clearly exhibits the risks undertaken by it. The assessee was to furnish a security deposit to the Government and indemnify at the same time of any losses/damage caused to any property/life in course of execution of works. Further, the assessee was responsible for the correction of defects arising in the works at its own cost. For that purpose, the contactee retained the money payable to the assessee as a measure to ensure the quality of the work and to make liable the assessee in the event of the defect, if any. Thus, it is more than P a g e | 59 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai apparent that the assessee had undertaken all related risks in the given facts and circumstances especially when the assessee has undertaken the project as a whole for the development of the projects from the beginning till the end. Thus, on perusal of the terms and conditions in the tender documents furnished by the assessee, it is clear that the assessee was not a works contractor simply but a developer.
7.8 Further, we draw support by placing our reliance on the judgment of Hon‟ble ITAT Kolkata in case of Asstt. CIT v. Simplex Infrastucture Ltd Ltd. in ITA. No. 01/Kol/2020 vide order dated 10/03/2021 wherein it was held as under:
"It is noted that in a development contract, responsibility is fully assigned to the developer for execution and completion of work. It is evident that the assessee, vide the agreements, has clearly demonstrated the various risks undertaken by it. In all the agreements, relevant portions of which are reproduced supra, the assessee has undertaken huge risks in terms of deployment of technical personnel, plant and machinery, technical knowhow, expertise and financial resources. Hence, undoubtedly entering into lawful agreements and thereby becoming a contractor should, in no way, be a bar to the one being a developer since the role of a developer is larger than that of a contractor. As such it follows from the above that the assessee, who is engaged in developing the infrastructural facility, is rightfully entitled to the benefits of deduction u/s.80IA(4) of the Act"
7.9 Besides, it is relevant here to mention the judgment of Hon'ble Gujarat High Court in an identical case in PCIT Vs. M/s.
N.C.C.M.S.K.E.L (JV) reported in 2024(11) TMI 91 (Tax Appeal No.781 of 2024 dt.15.10.2024). In this case, while dealing with the P a g e | 60 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai issue of airport construction, the Hon‟ble High Court, in paras 3.6 and 4 of the order, held that even the development of airports by the assessee, amounts to the creation of an infrastructure facility and such activity qualifies the assessee as a developer, as it assumes financial and entrepreneurial risks associated with the development of new project.
Consequently, the assessee qualifies as a developer as stated below:
"17. In this case, we observe that the assessee entered into contract a contract for construction of new domestic arrival block at Sardar Vallabhbhai Patel International Airport, Ahmedabad (refer Pages 144 145 of Paper Book and Pages 27,28-30 of CIT (Appeals) order). It is observed that Ld. CIT(A) at Page 28 of his order observed that theassessee was awarded a contract for full- fledged development undefined of an Airport along-with all facilities like AC, flight information display system, full electrification etc. Therefore, evidently the contract has not been awarded to the assessee for carrying out any repairs, maintenance or upkeep etc. of existing airport facility, but the assessee has been awarded contract for bringing into existence a new infrastructural facility in place being new domestic arrival block at Sardar Vallabhbhai Patel International Airport. Accordingly, the assessee in our view is has been entrusted the responsibility of bringing into existence and "new infrastructure facility" being a new domestic arrival block at Sardar Vallabhbhai Patel International Airport."
7.10 In the light of above discussion and more specifically in view of the jurisdictional High Court decision in ABG Heavy Industries and the coordinate Benches of ITAT as mentioned above, we are of the considered opinion that the lower authorities erred in denying the claim of deduction u/s 80IA of the Act on incorrect appreciation of facts by concluding that the projects were mere work contracts and not infrastructure projects.Accordingly,the impugned orders are set aside and the AO is directed to allow the deduction claimed by the assessee in P a g e | 61 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai respect of all the above project excepting sl. no.22 discussed in para 7.4 above in the relevant assessment year. In the result,ground no.1 is allowed.
8. In ground no.2, the assessee has contested disallowance of various expenditure which has been made by the AO at the rate of 20% on ad hoc basis while framing original order u/s 143(3) of the Act which was restricted to 5% by the ld.CIT(A).The Tribunal in the first round,however,directed the AO to verify the expenses but the assessee failed to produce relevant evidences and the addition was sustained.It is stated by the AO that the assessee did not contest the addition before CIT(A).Moreover,in the instant proceedings,no supporting were furnished. Consequently,the addition was retained.
9. In this regard, we find that action of the CIT(A) cannot be faulted with as the assessee could not establish with cogent evidence that the entire expenditure was incurred wholly and exclusively for the purposes of business as enshrined in section 37 of the Act.Therefore,no interference is called and the appellate order is upheld dismissing the ground of appeal in this regard.
10. In the Additional ground, the assessee has claimed that the lower authorities erred in treating the interest received on Fixed Deposit P a g e | 62 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai as Income from Other sources.In the assessment order, the AO disallowed the claim of deduction u/s 80IA on Rs. 16,57,017/-, treating the interest income from fixed deposits as Income from Other sources as against Business income claimed by the appellant. On appeal, the ld.CIT(A) dismissed its appeal. Thereafter, the Hon‟ble ITAT by a common order for AY 2003-04 to 2009-10 dated 23.11.2015, directed that the same may be decided in the light of the decision of the Hon'ble Supreme Court in the case of Liberty India vs. CIT 317 ITR 218. The relevant portion of the order of the ITAT is reproduced below:
11. Insofar as the issue relating to the treatment of income received from fixed deposit and its eligibility for the claim of deduction, the AO is directed to decide the same in the light of the decision of the Hon‟ble Supreme Court in the case of Liberty India vs. CIT 317 ITR 218."
11. Pursuant to the order of the ITAT, in the impugned order passed, the AO again treated the interest income earned from fixed deposits as Income from other sources.
12. In the course of the appellate proceedings before the ld.CIT(A), the assessee submitted that the Fixed Deposits were all towards securities / sureties towards various infrastructure projects. These were either in the form of Earnest Money Deposits or Security Deposits or Performance Guarantees for longer period.Some of them were kept due P a g e | 63 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai to strict conditions of contract and some to avoid giving bank guarantees, as bank guarantees carry Bank commissions which add to overall cost of the projects. Also the assessee had a fixed Bank Guarantee limit.Some of the FD‟s were kept for overdraft facilities and Bank guarantee facilities and pledged to bank, for the same.Hence, all these FDs were business oriented and not some fixed deposits lying unused in Bank for earning interest on FDs.Theld.CIT(A) however,rejected the contentions stating that the Hon‟ble Supreme Court, in the case of Liberty India vs. CIT 317 ITR 218, held that only income derived from Industrial Undertaking should be considered for claiming deduction u/s.80I, 80IA and 80IB of the Act; that income which are merely attributable to business of the Industrial Undertaking but not derived from such undertaking are not eligible for deduction u/s 80IB or u/s 80IA. Therefore, he held that the interest income was not derived from its purported business of developing infrastructure. The interest income in this case represented unearned income derived from investment. The earning of the income did not entail any significant risk, marketing efforts, enterprise etc. usually associated with business income. Therefore, he confirmed the finding of the AO that the interest income was assessable under the head "Income from other sources.
P a g e | 64 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai
13. Before us,it is contended that the assessee was required to provide bank guarantee immediately after the acceptance of tender for the performance of work. Thus, the assessee to obtain such Bank guarantee was required to keep certain amount in fixed deposit with the bank. Therefore, the interest income was connected with the business of the assessee.Without prejudice to the above, the assessee also submitted that if the interest income is excluded while computing the deduction u/s 80IA(4) of the Act, then it is to be only net interest income that needs to be considered.The ld.DR relied on the orders of authorities below.
13.1 On careful consideration of the facts of the case,we find no infirmity in the conclusion drawn by the ld.CIT(A).The limited mandate before the lower authorities in this regard by the ITAT was to consider the applicability of the landmark decision in the case of Liberty India(supra) so as to find out whether such interest income was derived from the income eligible for deduction u/s 80IA(4) of the Act or not. We concur that such interest income is not derived from the business of developing infrastructure facilities and has no direct nexus with it.
Therefore, no deduction u/s 80IA(4) of the Act could be allowed thereon in the light of the ratio laid down in the case of LibertyIndia(supra) by the hon‟ble Supreme Court. Another notable judgment on the issue is in P a g e | 65 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai the case of Sterling Foods 237 ITR 53 (SC). Herein also, the Apex Court opined that where the nexus between the income and the industrial undertaking was not direct but was only incidental, it would not fall within the expression „profits derived from industrial undertaking‟. Similar is the decision of theHon‟ble Apex Court in the case of Pandian Chemicals Ltd. 262 ITR 278(SC). Their Lordships, in the aforesaid case, were dealing with the question as to whether the interest derived from the deposit made with the Electricity Board could be construed as a profit derived from the industrial undertaking of the assessee for the purposes of deduction under Section 80HH.According to the Hon‟ble Apex Court, the said income was not eligible for the purposes of the claim under Section 80HH. Therefore, certain income falling within the parameters of being incidental to business, can fall within the scope of the business of the assessee, yet it cannot be said to have been derived from the eligible industrial undertaking of the assessee, so as to be eligible for deduction under Section 80-IA of the Act.Therefoer,we hold that the authorities below rightly disallowed the claim of deduction u/s 80IA(4) on the impugned interest income. The ground in this regard,therefore, falls.
13.2 The ld.AR in the alternative has claimed that only net interest income i.e. interest after setting off from interest paid is P a g e | 66 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai required to be excluded.We do find some merit in the contention.
However, it for the assessee to demonstrate that the impugned interest income had direct nexus with interest bearing borrowed funds.Nothing has been brought out before us in this regard.However,in the interest of justice,we remand the issue for the limited purpose of examining the claim of set off to the file of the AO who would call for necessary details in this regard from the assessee and act as per the provisions of law.Therefore,the alternative plea of the assessee is allowed for statistical purposes.
14. In the result,appeal of the assessee is partly allowed.
15. ITA No. 4243/MUM/2019 (A.Y. 2004 -05)
1. On the facts and in the circumstances and in law, the learned CIT(Appeal) erred in confirming the action of the A.O. that is even without appreciating the facts and circumstances of the case fully and properly.
2. On the facts and in the circumstances of the case and in law, the learned CIT(Appeal) erred in confirming the action of the A.O. in denying the benefits of the provisions of sections 80IA of theIncome Tax Act, 1961.
3. On the facts and in the circumstances of the case and in law, the learned C.I.T(Appeal) erred in treating Rs.16,57,017/- being interest received on Fixed Deposit‟s as income from other sources, The learned assessing officer failed to appreciate that having regard to the nature of appellant‟s business, certain Bank Guarantees/ earned money deposits are to be provided to the local authorities for which the appellant has to keep fixed deposits in bank. The interest on such deposits is form part of business income and may please be treated as business income.
P a g e | 67 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai
16.ITA No. 4244/MUM/2019 (A.Y. 2005 -06)
1. On the facts and in the circumstances and in law, the learned C.I.T. (Appeal) erred in confirming the action of the A.O. that too without appreciating the facts and circumstances of the case fully and properly.
2. On the facts and in the circumstances of the case and in law, the learned CIT (Appeal) erred in confirming the action of the A.O. in denying the benefits of the provisions of sections 80IA of the Income Tax Act, 1961.
3. On the facts and in the circumstances of the case and in law, the learned C.I.T (Appeal) erred in treating Rs. 6,85,278/-being interest received on Fixed Deposit‟s as income from other sources, The learned assessing officer failedto appreciate that having regard to the nature of appellant‟s business, certain Bank Guarantees/earned money deposits are to be provided to the local authorities for which the appellant has to keep fixed deposits in bank. The interest on such deposits areform part of business income and may please be treated as business income.
17.ITA No. 4245/MUM/2019 (A.Y. 2006 -07)
1. On the facts and in the circumstances and in law, the learned C.I.T. (Appeal) erred in confirming the action of the A.O. that too without appreciating the facts and circumstances of the case fully and properly.
2. On the facts and in the circumstances of the case and in law, the learned CIT (Appeal) erred in confirming the action of the A.O. in denying the benefits of the provisions of sections 80IA of the Income Tax Act, 1961.
3. On the facts and in the circumstances of the case and in law, the learned C.I.T (Appeal) erred in treating Rs. 11,57,491/- being interest received on Fixed Deposit‟s as income from other sources. The learned assessing officer failed to appreciate that having regard to the nature of appellant‟s business, certain Bank Guarantees/earned money deposits are to be provided to the local authorities for which the appellant has to keep fixed deposits in bank. The interest on such deposits areform part of business income and may please be treated as business income.
P a g e | 68 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai
18. Both the grounds involving claim of deduction u/s 80IA(4) and interest income claimed for such deduction have already been adjudicated by us in the para 14 above in appeal for AY 2003-04 wherein appeal of the assessee has been partly allowed.The decision therein applies mutatis mutandis to the above appeals as well. Accordingly, ITA No.4243 to 4245/Mum/2019 are partly allowed.
19. ITA No. 4246/MUM/2019 (A.Y. 2007 -08)
1. On the facts and in the circumstances and in law, the learned C.I.T.(A) erred in dismissing the appeal.
2. On the facts and in the circumstances of the case and in law, the learned C.I.T (A) erred in dismissing the appeal and that too without giving full and proper opportunity of being heard in the matter.
3. On the facts and in the circumstances of the case and in law, the learned C.I.T(A) erred in dismissing the appeal and that too without appreciating the facts and circumstances of the case fully and properly.
4. On the facts and in the circumstances of the case and in law, the learned C.I.T (A) erred in upholding the action of the A.O. in denying the benefits of the provisions of section 80IA of the IT. Act 1961.
5. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the action of the A.O. in making an addition of Rs.1,00,000/- out of labour charges.
6. On the facts and in the circumstances of the case and in law, the interest charged u/s.234B of the I.T. Act is invalid and bad law.
7. On the facts and in the circumstances of the case and in law, the interest charged u/s.234D of the I.T. Act is invalid and bad law.
20. Ground nos. 1 t0 4 pertain to deduction claimed u/s 80IA(4) of the Act are allowed following our orders above.
P a g e | 69 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai
21. Ground no.5 pertain to ad hoc disallowance of Rs 1 lakh out of labour expenses for want of necceasry evidences.Before the AO the assessee claimed deduction of Labour charges of Rs 1 lakh in the original proceedings leading to its addition which was upheld by the ld.CIT(A) while ITAT restored the issue for examine it based on necessary evidences.As no new evidences were furnished in this remand proceeding,the addition was retained and the same was upheld by the ld.CIT(A). Nothing has been brought to our knowledge to rebut the action of the lower authorities.Accordingly,no interference is called for and appellate order is upheld dismissing the ground of appeal.
22. Ground no.6 and 7 are consequential in nature which do not require any adjudication at this stage.
23. In the result,appeal of the assessee is partly allowed.
24. ITA No. 4247/MUM/2019 (A.Y. 2009 -10)
1. On the facts and in the circumstances and in law, the learned CIT(A) erred in confirming the action of the A.O. that too without appreciating the facts and circumstances of the case fully and properly.
2. On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in confirming the action of the A.O. in denying the benefits of the provisions of section 80IA of the IT. Act.
3. On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in confirming the action of the A.O. in disallowing business expenses amounting to Rs.2,45,641/-although made on an adhoc basis.
P a g e | 70 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai
25. Ground no. 1 is general in nature while ground no.2 pertain to deduction claimed u/s 80IA(4) of the Act are allowed following our orders above.
26. In respect of ground no.3, according to the assessment order, disallowance of Rs 2,45,641/- was made and upheld by the CIT(A) .However, subsequent to the directions of ITAT, the assessee was requested to prove the expenditure which it failed and the ld.CIT(A) upheld the addition. As no new evidences were furnished in this remand proceeding, the addition was retained and the same was upheld by the ld.CIT(A).Nothing has been brought to our knowledge to rebut the action of the lower authorities.Accordingly,no interference is called for and appellate order is upheld dismissing the ground of appeal.
27. In the result,appeal of the assessee is partly allowed.
28. ITA No. 4248/MUM/2019 (A.Y. 2010 -11)
1. On the facts and in the circumstances and in law, the learned C.I.T (A) erred in confirming the action of the A.O. that too without appreciating the facts and circumstances of the case fully and properly.
2. On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in confirming the action of the A.O. in denying the benefits of the provisions of section 80IA of the IT. Act.
3. On the facts and in the circumstances of the case and in law, the learned C.I.T (A) erred in confirming the action of the A.O. in disallowing business expenses amounting to Rs.3,85,798/-although made on an adhoc basis.
P a g e | 71 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai
29. Ground nos. 1 is general in naturewhile ground no.2 pertains to deduction claimed u/s 80IA(4) of the Act are allowed following our orders above.
30. In respect of ground no.3, according to the assessment order, disallowance of unproved cash expenses Rs.3,85,798/-was made and upheld by the CIT(A) though is stated by him that the assessee had filed necessary vouchers before which hefound not serially numbered and therefore upheld the addition.
31. We find that the addition has been confirmed by the ld.CIT(A) on a very flimsy ground without making any effort to examine the validity of the claim qua the evidences produced. The reasons stated for confirming the addition lacks any mind application and is therefore, is set aside. The AO would allow the deduction.
32. In the result,appeal of the assessee is allowed.
33.ITA No. 4249/MUM/2019 (A.Y. 2011 -12)
1. On the facts and in the circumstances and in law, the learned C.I.T (A) erred in confirming the action of the A.O. that too without appreciating the facts and circumstances of the case fully and properly.
2. On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in confirming the action of the A.O. in denying the benefits of the provisions of section 80IA of the IT. Act.
3. On the facts and in the circumstances of the case and in law, the learned C.I.T (A) erred in confirming the action of the A.O. in disallowing P a g e | 72 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai business expenses amounting to Rs. 1,68,445/-although made on an adhoc basis.
34.Ground no. 1 is general in nature while ground no.2 pertains to deduction claimed u/s 80IA(4) of the Act are allowed following our orders above.
35. In respect of ground no.3, according to the assessment order, disallowance of Unproved cash expenses Rs. 1,68,445/- was made and upheld by the CIT(A) though is stated by him that the assessee had filed necessary vouchers before him which hefound not serially numbered and therefore upheld the addition.
36. We find that the addition has been confirmed by the ld.CIT(A) on a very flimsy ground without making any effort to examine the validity of the claim qua the evidences produced. The reasons stated for confirming the addition lacks any mind application and is therefore, is set aside. The AO would allow the deduction.
37. In the result,appeal of the assessee is allowed.
38.ITA No. 4250/MUM/2019 (A.Y. 2012 -13)
1. On the facts and in the circumstances and in law, the learned C.I.T (A) erred in confirming the action of the A.O. that too without appreciating the facts and circumstances of the case fully and properly.
2. On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in confirming the action of the A.O. in denying the benefits of the provisions of section 80IA of the IT. Act.
P a g e | 73 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai
3. On the facts and in the circumstances of the case and in law, the learned C.I.T (A) erred in confirming the action of the A.O. in disallowing business expenses amounting to Rs.1,36,088/-although made on an adhoc basis.
39.Ground no. 1 is general in nature while ground no.2 pertains to deduction claimed u/s 80IA(4) of the Act are allowed following our orders above.
40. In respect of ground no.3, according to the assessment order, disallowance of Unproved cash expenses Rs.1,36,088/-was made and upheld by the CIT(A) though is stated by him that the assessee had filed necessary vouchers before him which hefound not serially numbered and therefore, upheld the addition.
41. We find that the addition has been confirmed by the ld.CIT(A) on a very flimsy ground without making any effort to examine the validity of the claim qua the evidences produced. The reasons stated for confirming the addition lacks any mind application and is therefore, is set aside. The AO would allow the deduction.
42. In the result,appeal of the assessee is allowed.
43.ITA No. 4501/MUM/2019 (A.Y. 2008 -09)
1. On the facts and in the circumstances of the case and in law, the learned C.I.T (A) erred in confirming the action of the A.O. in denying the benefits of the provisions of section 80IA of the IT. Act.
P a g e | 74 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai
2. On the facts and in the circumstances and in law, the learned C.I.T (A) erred in partly sustaining the disallowances made and that is even without giving full and proper opportunity of being heard in the matter.
3. On the facts and in the circumstances and in law, the learned C.I.T (A) erred in partly sustaining the disallowances made and that too without appreciating the facts and circumstances of the case fully and properly.
4. Without prejudice to ground no.2 and 3, and on the facts and in the circumstances of the case and in law, the learned C.I.T (A) erred in sustaining the disallowance to the extent of Rs.2,80,558/-out of Labour Muster Expenses disallowed of Rs.7,43,958/-.
5. Without prejudice to ground no.2 and 3, and on the facts and in the circumstances of the case and in law, the learned C.I.T (A) erred in sustaining the disallowance to the extent of Rs.3,61,752/-out of Labour Expenses Site disallowed of Rs.18,52,739/-.
6. Without prejudice to ground no.2 and 3, and on the facts and in the circumstances of the case and in law, the learned C.I.T (A) erred in sustaining the disallowance to the extent of Rs.1,13,538/-out of Labour Muster Surat disallowed of Rs.11,14,944/-.
7. Without prejudice to ground no.2 and 3, and on the facts and in the circumstances of the case and in law, the learned C.I.T (A) erred in sustaining the disallowance to the extent of Rs.1,36,827/- out of Petty Site Material Expenses disallowed of Rs.6,84,137/-.
44.Ground nos. 1 to 3 pertain to deduction claimed u/s 80IA(4) of the Act are allowed following our orders above.
45. Ground nos. 4 to 7 pertain to various disallowance of expenditure claimed by the assesee in respect of Labour muster expenses, labour expenses and petty site material expenses.As per the original assessment order,the AO made certain disallowance of P a g e | 75 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai expenditure which were treatedas unproved cash expenses.Total expenditure was Rs 56,11,376/-. In the subsequent appeal in the original appeal,based on Remand report the ld.CIT(A)allowed relief of Rs 37,17,295/- and the balance of Rs 18,94,081/- was upheld.However,subsequent to the directions of ITAT,the assessee was requested to prove such expenditure.The AO after necessary verification of the details ,retained the addition of Rs 11,14,944/- in respect of Labour Muster of Surat as he found many discrepancies and also noted that the expenses were supported by self made vouchers only.Accordingly,he sustained addition to the extent of Rs. 2,80,558/-, Rs. 3,61,752/- and Rs. 11,14,944/- out of Labour Muster,Labour expenses site and Labour muster,Surat respectively which was partly upheld by the ld.CIT(A) in the subsequent appeal.
46. As no new evidences were furnished in this remand proceeding, the addition was retained and the same was upheld by the ld.CIT(A).Nothing has been brought to our knowledge to rebut the action of the lower authorities.Accordingly,no interference is called for and appellate order is upheld dismissing the ground of appeal.
47. In the result,appeal of the assessee is partly allowed.
P a g e | 76 ITA No.4242 4243 4244 4245 4246 4247 4248 4249 4250 4501/Mum/2019 A.Ys. 2003-04, 2004-05, 2005-06,2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12& 2012-13 M/s Gleg Engineers Pvt. Ltd, Mumbai
48. In the final summing up, ITA Nos. 4242, 4243, 4244, 4245, 4246, 4247 and 4501/Mum/2019 are partly allowed while ITA Nos.4248, 4249, 4250/Mum/2019 are allowed.
Order pronounced in the open court on 16.04.2026.
Sd/- Sd/- [Justice (Retd.)C. V. BHADANG] ( PRABHASH SHANKAR) PRESIDENT ACCOUNTANT MEMBER Place: मुंबई/Mumbai दिन ुंक /Date 16.04.2026 Lubhna Shaikh / Steno
आदे श की प्रतितलतप अग्रेतिि/Copy of the Order forwarded to :
1. अपीलार्थी / The Appellant
2. प्रत्यर्थी / The Respondent.
3. आयकर आयुक्त / CIT
4. विभागीय प्रविवनवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai
5. गार्ड फाईल / Guard file.
सत्यावपि प्रवि //True Copy// आदे शानुसार/ BY ORDER, उप/सहायक पंजीकार(Dy./Asstt. Registrar) आयकर अपीलीय अतधकरण/ ITAT, Bench, Mumbai.