Income Tax Appellate Tribunal - Hyderabad
Rithwik Projects Private Limited, ... vs Assessee on 4 July, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "A" : HYDERABAD
BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER
AND
SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
ITA.No.1781/Hyd/2013
Assessment Year 2009-2010
M/s. Rithwik Projects P. Ltd., JCIT, Circle-3(1)
Hyderabad. vs. Hyderabad.
PAN AABCR5748L
(Appellant) (Respondent)
ITA.No.1552/Hyd/2014
Assessment Year 2010-2011
M/s. Rithwik Projects P. Ltd., JCIT, Circle-3(1)
Hyderabad. vs. Hyderabad.
PAN AABCR5748L
(Appellant)
[[
(Respondent)
For Assessee : Mr. P. Muralimohan Rao
For Revenue : Mr. P. Somasekhar Reddy
Date of Hearing : 05.04.2016
Date of Pronouncement : 04.07.2016
ORDER
SMT. P. MADHAVI DEVI, J.M. Both the above are assessee's appeals for the A.Ys. 2009-10 and 2010-2011 respectively. In these appeals, the assessee is mainly aggrieved by the disallowance of assessee's claim of deduction under section 80IA(4) of the I.T. Act and the consequent addition. In the appeal for the AY 2009-2010 grounds 2 to 4 are against the above disallowance while the other grounds 5 to 7 are against the (i) addition of Rs.17,70,000 2 ITA.Nos. 1781/H/2013 & 1552/H/2014 M/s. Rithwik Projects P. Ltd., Hyderabad.
made by the A.O. towards unexplained expenditure; (ii) addition of Rs.9 lakhs made by the A.O. towards unexplained expenditure; and (iii) addition of Rs.21,35,295 by way of disallowance under section 40A(3) of the I.T. Act respectively.
2. At the time of hearing, the Ld. Counsel for the assessee submitted that the assessee is not interested to press ground of appeal No.5 against the addition of Rs.17,70,000. The said ground of appeal is accordingly rejected as not pressed.
3. As regards the grounds of appeal Nos. 2 to 4 against the disallowance of the claim of deduction U/S 80IA(4) of the Act, the brief facts of the case are as follows:The assessee company is engaged in the business of executing contracts like dams, roads, bridges, tunnels, reservoirs and canals etc., It filed its original return of income for the A.Y. 2009-2010 on 30.09.2009 declaring income of Rs.50,83,53,564 without making any claim under Chapter-VIA of the I.T. Act. Subsequently, the assessee filed its revised return of income on 09.03.2010 declaring income of Rs.23,34,33,257 after claiming deduction of Rs.34,24,73,802 under section 80IA of the I.T. Act.
4. During the assessment proceedings under section 143(3) of the I.T. Act, the A.O. called for various details which were filed by the assessee. On perusal of the same, the A.O. observed that the assessee company had carried out execution of certain contract works and had claimed deduction under section 80IA(4) of the Act to the tune of Rs.34,24,73,802 being 100% of the profits from the construction of Koteshwar Dam at Uttarakhand, in the revised return of income filed by the assessee on 09.03.2010.
3ITA.Nos. 1781/H/2013 & 1552/H/2014 M/s. Rithwik Projects P. Ltd., Hyderabad.
The A.O. observed that as per the provisions of section 80IA(4) and the explanation thereto, the benefit of the deduction under section 80IA is not allowable to works contracts, including those who are awarded such contracts by the Government itself. He also considered the CBDT Circular No.14 of 2001 which states that the applicable schemes are either BOT ("Built, Own and Transfer") or BOOT ("Built, Own, Operate and Transfer"). He observed that in both the claims, the assessee shall not only build but also own the infrastructure facility before it is transferred. After considering the budget speech for 1995-1996 which was delivered by the then Minister of Finance on 15th March, 1995, setting out the intention behind introducing the deduction, the A.O. held that the legislature intended that the benefit of deduction was meant to be extended only to those private enterprises which develop infrastructure facility in the collective role of a funds investor - builder - operator, but not merely as a works contractor.
4.1. Thereafter, the AO proceeded to examine the nature of works undertaken by the assessee and the various clauses of sub-contract agreement and observed that the sub-contract was only for execution of the 'work contract' received by the PCL Intertech Lenhydro Consortium JV and that whatever contract work was received by the principal, has been given to the assessee. Thus, he came to the conclusion that the contract to the assessee was a 'works contrat' and further that the contract to the assessee has not been awarded by any State Government or Central Government or Local Authority and therefore, the first condition laid down in clause (b) of section 80IA(4)(i) has not 4 ITA.Nos. 1781/H/2013 & 1552/H/2014 M/s. Rithwik Projects P. Ltd., Hyderabad.
been fulfilled by the assessee for claiming deduction. Further, the A.O. also examined the role of the assessee in execution of the contract and observed that the assessee is only a sub- contractor. He therefore, issued a show cause notice to the assessee asking its explanation as to why the deduction claimed under section 80IA(4) should not be disallowed.
4.2 In reply thereto, the assessee, vide letter dated 19.12.2011, submitted that the construction of civil works of dam, spill-way and power house at Koteshwar Dam, Uttarakhand State was awarded to the principal company PCL Intertech Lenhydro Consortium J.V.by THDC India Limited, a Joint Venture formed by Government of India and Government of U.P. under an agreement, which in turn, has sub-contracted the work to the assessee on back to back basis. It was also submitted that the assessee-company is having the required expertise and infrastructure facility to execute the said work and that the only contract executed by the assessee is the contract in question for the A.Y. 2009-2010 and therefore, the assessee is eligible to claim deduction under section 80IA as even the principal contractor has not claimed any deduction with regard to the said contract.
4.4 The A.O. however, did not accept the assessee's contentions and held that the assessee has not made any investment in the form of infrastructure. He therefore, held that the assessee is only a works contractor. Further he also held that the assessee has failed to prove that it has received a works order directly from THDC Ltd., and that the works executed by the assessee are purely as per the contract agreement entered into with PCL-
5ITA.Nos. 1781/H/2013 & 1552/H/2014 M/s. Rithwik Projects P. Ltd., Hyderabad.
ILHC J.V. which according to him is a works contract. He, therefore, disallowed the claim of deduction under section 80IA(4) and brought it to tax.
5. Aggrieved, assessee preferred an appeal before the CIT(A) by reiterating the contentions made before the A.O. The Ld. CIT(A), after considering the assessee's contentions, has, at para 4.1.3of his order, held that the only contract entered into by the local authority i.e., THDCL was with PCL-Intertech Lenhydro Consortium J.V. and not with the assessee herein in its own right or as a principal of a J.V. She observed that the contracts entered into by the assessee, whether as a member of J.V. on 16.11.2002 or in its own right by agreement dated 01.04.2008 with PCL-Intertech Lenhydro Consortium J.V. can not be considered as an agreement with the Central Government or a State Government or a Local Authority or any other statutory body as required under section 80IA (4)(i)(b) of the Act. Thus, she held that the assessee is not eligible to claim deduction under section 80IA of the Act. She thereafter, considered it irrelevant to go into the fact as to whether the assessee can be termed as a developer or a contractor and did not adjudicate the issue. The CIT(A) thus, upheld the disallowance made by the A.O. and the assessee is in second appeal before us.
6. The learned Counsel for the assessee reiterated the submissions made by the authorities below and have also filed detailed written submissions before us which are at pages 1 to 6 of the paper book filed by the assessee on 4.9.2015. He has also 6 ITA.Nos. 1781/H/2013 & 1552/H/2014 M/s. Rithwik Projects P. Ltd., Hyderabad.
placed reliance upon the following decisions in support of his above contentions:
i) ITAT Indore in the case of Ayush Ajay Constructions Ltd, reported in 79 ITD 213
ii) ITAT Pune in the case of T. Patil & Sons Belgaum Constructions P Ltd reported in (34 Taxmann.com
97)
iii) ITAT Pune in the case of Laxmi Civil Engineering P Ltd (ITA No.766/PN/09)
iv) ITAT Hyderabad in the case of GVPR Engineers Ltd (ITA No.1482/H/2011)
v) ITAT Hyderabad in the case of Madhucon Projects Ltd in ITA No.1970/H/2011.
vi) ITAT Amritsar in the case of TRG Industries P Ltd reported in (35 Taxmann.com 253)
vii) Hon'ble High Court of Madras in the case of AL Logistics P Ltd reported in (55 taxmann.com 283)
viii) ITAT Hyderabad in the case of Siva Swathi Constructions P Ltd in ITA No.189/H/2015.
7. The learned DR, on the other hand, supported the orders of the authorities below and submitted that the assessee's contract was not with the Central or a State Government or any local authority or statutory body and further that the entire work was not executed by the assessee as the initial agreement for execution of the contract was entered into by PCL-ILHC with the joint venture of Rithwik Swathi Joint Venture and the assessee was a constituent of the said JV. Further, according to him, the project executed by the assessee is not an infrastructure facility as defined u/s 80IA(4) of the I.T. Act.
8. In rebuttal, the learned Counsel for the assessee has drawn our attention to page 264 of the paper book filed by the assessee wherein the THDC India Ltd had certified that the work for construction of spillway work at Koteshwar Hydro Electro 7 ITA.Nos. 1781/H/2013 & 1552/H/2014 M/s. Rithwik Projects P. Ltd., Hyderabad.
Projects was awarded to M/s. PCL-ILHC J.V. and against contract No. THDC/RSH/CV/187/80 dated 14.11.2002 M/s. Rithwik Projects (P) Ltd was the back to back sub contractor for the said work and further that Koteshwar Hydro Electric Projects is a multi purpose project where Hydro power generation, water supply and irrigation for D/S areas are involved and that this project is regulating water, release from Tehri Reservoir for irigation purpose. The certificate is dated 13.10.2015 i.e after the disposal of the appeal of the assessee by the learned CIT (A). The assessee has filed an application for admission of the additional evidence stating that the letter has been received by the CIT (DR) only during the appeal proceedings before the ITAT and since the additional evidence filed is connected to the matter involved in the appeal, the additional evidence may be admitted and considered. Finding favour with the assessee's contention on the additional evidence, we deem it and fit and proper to admit the same and consider it for adjudication of the issue.
8. Having regard to the rival contentions and the material on record, we find that the undisputed facts are that the Govt. of India and Gov. of U.P formed a joint venture by the name of Tehri Hydro Development Corporation (THDC in short) with equity in the ratio of 75:25 between the Govt. of India and the Govt. of UP for the power component. The said company was incorporated in July 1988 to develop, operate and maintain the 2400 MW Tehri Hydro Power Complex and other hydro projects. Koteshwar Hydro Electric Project (400 MW) located 22 kms downstream of Tehri, is an integral part of Tehri Power Complex comprising of Tehri Dam & HPP (1000 MW), Tehri PSP (1000 8 ITA.Nos. 1781/H/2013 & 1552/H/2014 M/s. Rithwik Projects P. Ltd., Hyderabad.
MW) and Koteshwar HEP (400 MW) to develop hydro-electric potential of river Bhagirathi, to facilitate the functioning of Tehri Power Complex as a major peaking station in Northern Grid as reservoir created by Koteshwar Dam having a live storage capacity of 35.0 MCM will function as lower (balancing) reservoir for Tehri PSP. This project is also regulating water releases from Tehri reservoir for irrigation purpose.
8.1. A joint venture was formed on 30.01.2002 between M/s Progressive Constructions Ltd (1st Party) and M/s Inter Tech Service Russia and Institute Len Hydro Project (2nd Party) for the purpose of pre-qualification bid submitted to the Tehri Hydro Development Corporation Ltd. The joint venture was called as PCL-Intertech Lenhydro Consortium Joint Venture (PCL-ITHL in short). THDC had awarded the contract to M/s PCL Intertech Lenhydro Consortium and an agreement was entered into on 14.11.2002 for "Construction of Civil Works of Dam, Spillway & Power House of Koteshwar Hydro Electroc Project, Koteshwar (Uttaranchal)". Meanwhile a joint venture is formed between Rithwik Projects Pvt. Ltd and M/s. Swathi Constructions vide a Memorandum of Understanding (MOU) dated 6.9.2012 and the JV was known as Rithwik Swathi JV. As per the MOU, Rithwik Projects Private Ltd's share in joint venture was 60% and share of Swathi Constructions was at 40%.
8.2. Consequent to the agreement between THDC and M/s PCL Intertech Lenhydro Consortium JV dated 14.11.2002, an agreement between M/s PCL Intertech Lenhydro Consortium JV and M/s Rithwik Swathi JV was executed on 16.11.2002 by virtue of which, Rithwik Swathi JV was to execute and complete 9 ITA.Nos. 1781/H/2013 & 1552/H/2014 M/s. Rithwik Projects P. Ltd., Hyderabad.
the work as mentioned in the original agreement on back to back basis. This sub contract agreement was permissible as per clause 56 of the original agreement. The work was executed by the joint venture partly, while on 31.03.2008, there was a dissolution of the joint venture by virtue of which the joint venture "Rithwik Swathi JV" was dissolved by mutual consent w.e.f. 1.4.2008. As per the said dissolution deed, Rithwik Projects Private Limited was entitled to carry on and continue the business of Koteshwar Dam work and shall take over all the assets and liabilities of RSJV with respect to assets of Koteshwar Dam Work. Further, as per the agreement, M/s Swathi Constructions was not entitled to any claim or credit for the work experience with respect to Koteshwar Dam work.
8.3. Subsequent to the dissolution deed, a fresh sub- contract agreement between PCL-Intertech LenHydro Consortium JV (Principal) and Rithwik Projects Pvt Ltd (RPL) was entered on 1.4.2008 in respect of Koteshwar Dam work. According to the agreement, the assessee shall undertake, execute and complete on a back to back basis all the work to be carried out by the Principal and as more particularly detailed and described in the original contract. Assessee also undertook to take over all responsibilities, all the rights including all claims and all sums thereof, all obligations, all liabilities, all guarantees, all promises of the Principal to the employer or to any other related to the execution of the original contract. It was also agreed that the Principal shall not have any objection to issue the TDS certificate in favour of the assessee for the amount deducted by THDC on account of the Principal. Thereafter, the 10 ITA.Nos. 1781/H/2013 & 1552/H/2014 M/s. Rithwik Projects P. Ltd., Hyderabad.
assessee executed the entire work of Koteshwar Dam on its own by employing its investments and, deploying its labour and technology, assuming all the risks and carrying out the entire development activity. Thus the assessee has claimed the deduction u/s 80IA of the Act as no other party including PCL- ITLH or any of its constituents has either booked the revenue or claimed deduction u/s 80IA for the Koteshwar Dam Project for the years under consideration.
8.4 One of the objection of the AO which has been confirmed by the CIT (A) is that the assessee has not entered into the contract directly with THDC. The THDC being the joint venture between the Govt. of India and the Govt. of UP is no doubt a local authority as defined u/s 80IA(4) of the Act. From the above facts, it is seen that the THDC has awarded the contract to PCL- ILHC JV which in turn had sub contracted the work to Rithwik Swathi JV and the assessee was a constituent of Rithwik Swathi JV. We also find that part of the contract was executed by M/s Rithwik Swathi JV as well. Therefore, the assessee's claim has to be considered in the light of all the above facts. The assessee has relied upon the decision of the ITAT at Indore in the case of Ayush Ajay Constructions Ltd (Supra) for the proposition that though the assessee has not entered into an agreement with the State Govt., but having obtained a contract through a valid agreement, it shall be deemed to have been entered into an agreement with the Govt. and thus eligible for deduction u/s 80IA(4) of the Act. Further, he has also relied upon the decision of the Hon'ble Madras High Court in the case of A.L. Logistics P Ltd (Supra) for the proposition that an assessee is eligible to 11 ITA.Nos. 1781/H/2013 & 1552/H/2014 M/s. Rithwik Projects P. Ltd., Hyderabad.
claim deduction u/s 80IA of the Act, even in the absence of specific agreement with Central/State Govt. provided the sequences of events clearly show that the assessee is providing the facility in accordance with the conditions laid down by the Government.. Let us therefore, first examine the applicability of these decisions to the case before us.
9. The first case is of Ayush Ajay Constructions Ltd., vs., ITO reported in (2001) 79 ITD 213 (IND.). In this case, the Coordinate Bench of this Tribunal at Indore has considered similar set of facts and has at paras 18 and 19 of its order held as under :
"18. If we examine the relevant provisions of s. 80-IA(4A) of the Act and the object of its insertion to the tax statute in the light of the budget speech of the Hon'ble Finance Minister and the above said judicial pronouncements, we would find that the legislature has given a fillip of deductions to those enterprises who engage themselves in developing, maintaining and operating any infrastructure facilities for economic growth of the nation as it was felt by the legislature that inadequate infrastructure was a key constraint of our economic progress. As held by the apex Court in the case of Bajaj Tempo Ltd. vs. CIT (supra), the provisions of promoting economic growth should be interpreted liberally and the restriction on it too has to be construed so as to advance the objective of the provisions and not to frustrate it. If we put the facts of the case with the parameter laid down by the apex Court and the various High Courts, we would find that the assessee though not entered into an agreement with the State Government at the initial stage but has obtained the tender/contract by virtue of a valid assignment, which was duly recognised by the State Government, should be deemed to have entered into an agreement with the State Government for construction of the impugned bridge on BOT basis. It is not the case of the Revenue that the entire expenditure incurred in the construction of the aforesaid bridge was not borne by the assessee but by M/s Ajay Constructions, the main tenderer. The Revenue has rejected the claim of the assessee for the simple reason that the assessee had never entered into any contract with the State Government and the assessee-company is nothing 12 ITA.Nos. 1781/H/2013 & 1552/H/2014 M/s. Rithwik Projects P. Ltd., Hyderabad.
but a colourable device to evade tax. It is a settled position of law that the company is a juristic entity and it should be considered independent from the shareholders or the directors. Admittedly, M/s Ajay Construction, the original tenderer, have assigned the remaining work of the contract/tender along with the expenditure incurred by it to Smt Usha Agrawal, the promoter of the assessee- company though an agreement dt. 1st April, 1995 and thereafter the construction work was undertaken by the promoter of the assessee-company till its incorporation. When the permission of the assignment was granted by the State Government, fresh agreement was executed between the assessee-company and the main tenderer, M/s Ajay Constructions, in which the assessee- company has ratified all the deeds and acts of its promoter, Smt. Usha Agrawal, and owned/taken over all the assets and liabilities of its promoter. The action of assigning and the work of construction undertaken by the assessee was recognised by the State Government and a tripartite agreement was executed between the assessee, M/s Ajay Constructions and the State Government through which the State Government have recognised that the assessee has stepped into the shoes of M/s Ajay Constructions and notified authorising the assessee to collect the toll tax for a particular period. A copy of the letter dt. 22nd May, 2000, to this effect is also placed before us. The assessee has also placed various correspondence entered into between the assessee and the State Government and the letter dt. 26th Aug., 1995, through which the assessee was informed about the notification in his favour to collect the toll tax. A copy of the letter placed at p. 140 of the compilation of the assessee. Copies of the notification and various receipts of toll tax are also placed on record for our perusal. It is also revealed from various correspondence of the assessee with the State Government that the assignment of contract was duly recognised by the State Government and it was admitted by them that the actual construction work was undertaken by the assessee only.
19. From a careful perusal of the text and tenor of the tender we are of the view that the tender can be duly assigned with the approval of the Chief Engineer of PWD in favour of any person and the assignee would step into the shoes of the tenderer on the same terms and conditions. Since the assessee-company has ratified all acts and deeds of its promoter, Smt. Usha Agrawal, and owned all the assets and liabilities of its promoter through an agreement of assignment dt. 21st July, 1995, executed between the assessee and M/s Ajay Constructions after obtaining approval from the State Government, the assessee shall be deemed to have undertaken the construction work since 1st 13 ITA.Nos. 1781/H/2013 & 1552/H/2014 M/s. Rithwik Projects P. Ltd., Hyderabad.
April, 1995. We have also carefully perused the statements of accounts in the light of various judgments referred to by the parties and find that though the financial assistance and the machineries were provided by M/s Ajay Constructions to the assessee-company in which the proprietor of M/s Ajay Constructions and his wife are the sole directors but this fact cannot be ignored that ultimately the contract was executed by the assessee-company and the act of assignment was duly recognised by the State Government. No doubt, it is true that in view of the judgment of the apex Court in the case of Juggilal Kamlapat vs. CIT and McDowell & Co. vs. CTO (supra), the judicial authorities are competent enough to pierce the corporate veil and to ascertain the real state of affairs. If we look, into the real state of affairs, we would find that Ajay Agrawal has obtained the tender through its proprietorship concern, M/s Ajay Constructions from the State Government and later on it assigned the contract to the assessee-company i.e. Ayush Ajay Constructions in which Mr. Ajay Agrawal and his wife Smt. Usha Agrawal, were the sole directors, to avail the tax deductions under s. 80-IA(4A) of the Act inasmuch as the deductions are only given to those enterprises which are owned by the companies registered in India or by a consortium of such companies. Since the Government has provided this deduction in order to encourage economic growth of the country, the plentitude of exemption should not be whittled down by laying stress on ambiguity here and there. If it is proved that the assessee- company has obtained the status of a tenderer by virtue of a valid assignment, it should not be denied from the benefit of deduction provided by the Central Government through introduction of sub-s. (4A) of s. 80-IA of the Act. The action of Ajay Agrawal, proprietor of Ajay Constructions and the assessee can only be termed as a valid tax planning which is permissible under the law as held by the apex Court in the case of McDowell & Co. Ltd. (supra), that tax planning may be legitimate provided it is within the framework of law. We, therefore, have no hesitation in holding that the assessee-company has fulfilled the requirements provided in cl. (ii) of sub-s. (4A) of s. 80-IA of the Act for claiming deduction under this section because had it not been recognised as a valid assignment of the tenderer by the State Government or had it not stepped into the shoes of the main tenderer, the State Government would not have notified authorising the assessee to collect the toll tax for a particular period as stipulated in the tender/agreement dt. 14th Feb., 1995. We, therefore, set aside the order of the CIT(A) on this count and direct the AO to allow the deductions claimed by the assessee under s. 80-IA(4A) of the Act."14
ITA.Nos. 1781/H/2013 & 1552/H/2014 M/s. Rithwik Projects P. Ltd., Hyderabad.
9.1. Following the above decision, the Coordinate Bench of the Tribunal at Amritsar in the case of TRG Industries (P.) Ltd., vs. DCIT, Circle-1, Jammu (2013) 35 taxmann.com 253 (Amritsar - Trib.) has at para 15.11 has also given similar finding.
9.2. Further, the Hon'ble Madras High Court in the case of CIT, Chennai vs. AL Logistics P. Ltd., (2015) 55 taxmann.com 283 (Mad.) at paras 7 to 13 has held as under :
"7. Now, we proceed to the next issue, whether in the absence of specific agreement with the Central/State Government, local authority or Statutory Body, the assessee is entitled to claim the benefit of section 80IA( 4) (i). The assessee had made an application for setting up of CFS at Haldia. In response to the application of the assessee, the Department of Commerce, Infrastructure Division, Ministry of Commerce and Industry approved the proposal of the assessee for setting up of CFS at Haldia for handling import/export of cargo subject to execution of certain documents and compliance of other terms and conditions as stated in the letter; The ld. Counsel for the assessee has placed on record letter dt. 27-05-2003 from the Ministry of Commerce and Industry permitting the assessee to set up CFS at Haldia. The contents of the letter are reproduced herein below :
"No.16/6/2003-lnfra-I Government of India Ministry of Commerce & Industry Deptt. of Commerce Infrastructure Division Udyog Bhawan, New Delhi, Dated the 27th May, 2003 To The Director, M/s.AL Logistics Pvt. Ltd., Chennai.
Subject: Setting up of an CFS at Haldia.15
ITA.Nos. 1781/H/2013 & 1552/H/2014 M/s. Rithwik Projects P. Ltd., Hyderabad.
Sir, I am directed to refer to your application dated 8.2.2003 on the above subject and to say that the Government has approved your proposal for setting up of an Container Freight Station at Haldia for handling import and export cargo. The approval is subject to the following terms and conditions:-
(a) The Letter of Intent holder shall take adequate steps to create proper infrastructure keeping in view the indicative norms given in Parts A & B of the Guidelines for setting up Inland container Depots/ Container Freight Stations (ICDs/CFs) within a period of one year from the date of issue of this letter.
(b) Necessary bond and guarantees, as required, would be executed with the concerned Commissioner of Customs and Central Excise.
(c) The approval would be subject to cancellation in the event of violation of the Customs and other laws of the land and Rules.
(d) A quarterly progress report of the implementation shall be sent to the Ministry of Commerce.
(e) The working of the CFS will be to review by the Inter Ministerial Committee.
(f) Formalities in respect of acquisition/possession of the land shall be completed within 60 days and intimated to the M/o Commerce, failing which the approval granted would be automatically cancelled.
2. The facility to be set up shall be full computerized, with EDI compatibility and a minimum complement of equipment and accessories as necessary shall be made available at the facility. The indicative list of equipment/accessories considered necessary is annexed. The status regarding confirmation of the installation/availability of the items shall be furnished 16 ITA.Nos. 1781/H/2013 & 1552/H/2014 M/s. Rithwik Projects P. Ltd., Hyderabad.
to the appropriate authorities to facilitate issue of requisite notification.
3. Please acknowledge receipt of this letter.
Yours faithfully, Sd/ (N.G.Biswas) DIRECTOR A perusal of clause 'b' of the above letter shows that the assessee was required to execute necessary bond and guarantees with the concerned Commissioner of Customs and Central Excise. It was only on the compliance of all the terms and conditions mentioned in the aforesaid letter that the assessee was allowed to carryon the services of CFS. The assessee on the compliance of the terms and conditions as mentioned in the letter, was notified as CFS Complex for the purpose of receiving, storing, import containers, receiving/consolidating export cargo etc. vide Public Notice dt.l0-11-2013. The Public Notices were issued by the office of the Commissioner of Customs (Port) Kolkatta.
8. Thus, it is evident that the proposal of the assessee was accepted by the Government on certain conditions which were duly complied with by the assessee. There may not be any specific agreement, but the sequences of events clearly show that the assessee is providing CFS facility in accordance with the conditions laid down by the Government. In such circumstances there is no need to insist for the specific execution of agreements.
The co-ordinate bench of the Tribunal in the case of United Liner Agencies of India (Private) Ltd; v. Joint CIT (OSD) in ITA Nos.273&275/Mum/2013 (supra), has taken a similar view. Where no specific agreement with the State Government was entered into but from the approvals granted to the assessee it was inferred that assessee should be deemed to have entered into an agreement with the State Government. Thus, we are of the considered view that the assessee has complied with all the provisions of section 801A(4) (i) and is eligible to claim deduction under the said section. The impugned order is set aside. The appeal of the assessee is allowed."
17ITA.Nos. 1781/H/2013 & 1552/H/2014 M/s. Rithwik Projects P. Ltd., Hyderabad.
13. In paragraph 7 of the order of the Tribunal, the letter issued by the Government of India, Ministry of Commerce, which has been extracted as such, clearly state that with reference to the letter dated 8.2.2003, the Government has approved the proposal for setting up of a Container Freight Station at Haldia for handling import and export cargo. Therefore, there cannot be any doubt in the light of the approval given by the Government. The reason of the Tribunal is unimpeachable."
9.3. On going through the above decisions, we find the Tribunal in the case of Ayush Ajay Constructions (cited supra) has held that where an assessee has obtained a contract through a valid agreement, though not directly with the State Government, it shall be deemed to have entered into an agreement with the Government. The Hon'ble Madras High Court has held that where the Government has given an approval for setting-up of an infrastructure facility, even though there is no specific agreement with the Government, the assessee is eligible to claim deduction under section 80IA of the I.T. Act for such facility. Applying the said ratio to the facts of the case before us, we find that the initial agreement has been entered into by the Government Agency i.e., THDC with PCL-ILHC which has further sub-contracted the entire execution of the work to Rithwik Swati J.V. Though the Rithwik Swati J.V. has executed part of the agreement, it was dissolved thereafter and the entire project has been sub-contracted to the assessee herein with all its assets and liabilities and risks involved, as per the original contract. It is seen that at page 110 of the paper book filed by the assessee, vide letter dated 28.02.2011, the Chief General Manager of THDC India Ltd., has certified that the official sub-contractor for the construction of civil works of dam, spillway, power-house 18 ITA.Nos. 1781/H/2013 & 1552/H/2014 M/s. Rithwik Projects P. Ltd., Hyderabad.
and switchyard of Koteshwar Dam HEP is M/s. Rithwik Projects P. Ltd., Hyderabad (assessee herein). Thus, it can be seen that the THDC i.e., the Joint Venture between the Government of India and State of Uttar Pradesh has officially recognised M/s. Rithwik Projects P. Ltd., Hyderabad as the official sub- contractor. Further, we also find from the income tax returns of PCL-ILHC and also the returns of Ritwik Swati JV for the A.Ys. 2003-04 to 2008-09 that none of them have booked the income from the said project. Further, the assessee has also furnished a certificate from PCL-ILHC to state that there was no claim of deduction made under section 80IA of the Act for the said project. The assessee has also filed copies of performance guarantees given by the assessee on behalf of PCL-ILHC as an additional evidence to prove that the assessee had undertaken the financial obligations as well. On going through these documents, we find that the Government Agency i.e., THDC has accepted the assessee to be the official sub-contractor executing the entire project and even the original contractor and the Rithwik Swati J.V. have accepted the assessee to be the sub- contractor who has taken on all the assets, risks and liabilities of the contract. Though in the case of Ayush Ajay Constructions Ltd., (cited supra) there was a tripartite agreement between the assessee therein, the original contractor and the Government, in the case of the A.L. Logistics P. Ltd., the Hon'ble Madras High Court has held that where the Government has given an approval to the assessee to execute the work, even in the absence of any specific agreement, the assessee is eligible for deduction under section 80IA of the Act. Taking all the above into consideration, we are in agreement with the contentions of 19 ITA.Nos. 1781/H/2013 & 1552/H/2014 M/s. Rithwik Projects P. Ltd., Hyderabad.
the assessee that the assessee is eligible for making claim under section 80IA(4) of the I.T. Act as the assessee is considered to be the official sub-contractor of the said project and also in view of the fact that the employer or the original contractor or the Rithwik Swati JV have not claimed the deduction under section 80IA of the Act. This issue is therefore decided in favour of the assessee.
9.4. As regards the other conditions laid down under section 80IA(4) of the Act and as to whether the assessee has fulfilled the said conditions, we find that the CIT(A) has not given any finding on this issue. The A.O. had held that the assessee was a mere 'works contractor', whereas, the assessee has filed before us voluminous documents to demonstrate that it has invested money and technical labour for execution of the work and therefore, is not a 'works contractor' but is a contractor as per the conditions laid down under section 80IA(4) of the I.T. Act. Since the CIT(A) has not given any finding on this issue and particularly because the assessee has filed additional evidence before us in the form of performance guarantees given on behalf of PCL-ILHC to THDL, we deem it fit and proper to admit the additional evidence and remand the issue to the file of the CIT(A) to give a finding as to the nature of the work carried out by the assessee herein and also whether the assessee is eligible for deduction under section 80IA(4) on such grounds.
9.5. Further, one of the arguments taken-up by the Ld. D.R. was that the project was not an infrastructure facility as defined under section 80IA(4). The assessee had filed additional evidence in the form of a letter dated 13.10.2015.As discussed in 20 ITA.Nos. 1781/H/2013 & 1552/H/2014 M/s. Rithwik Projects P. Ltd., Hyderabad.
the earlier paragraphs that the Koteshwar Dam is a multipurpose project where Hydro-power generation, water supply and irrigation for D/S are involved and that it is an irrigation project,this additional evidence also needs to be considered by the authorities below. In view of the same, we admit the said additional evidence also and remand the issue to the file of the CIT(A) for reconsideration in accordance with law. Needless to mention that the assessee shall be given a fair opportunity of hearing. Thus grounds of appeal 2 to 4 of the assessee are treated as allowed for statistical purposes.
10. As regards Ground No.6 against the addition of Rs.9.00 lakhs made by the AO towards unexpalined expenditure, the brief facts are that the assessee had shown sub contract payment of Rs.9.00 lakhs to have been made to one Shri B. Prabhakar Naidu. During the course of the assessment proceedings, the assessee furnished the address and PAN of the said person. Summon u/s 131 was issued to the said person for examining him on oath. When Mr. Prabhakar Naidu was questioned as to the details of the work taken up by him in Rithwik Projects Ltd, consideration received through cheque and as to how the contract receipts were utilised, the said person replied that he did not do any sub contract work with M/s Rithwik Projects (P) Ltd and that the total sum of Rs.9.00 lakhs has been received by him through RTGS on various dates at the request of one Mr. Ratakonda Sagar Reddy, S/o Ranga Reddy and that it was withdrawn by the assessee and handed over to him again. He also submitted that he has shown the amount received from Rithwik Projects Ltd for which he has received 21 ITA.Nos. 1781/H/2013 & 1552/H/2014 M/s. Rithwik Projects P. Ltd., Hyderabad.
form No.16A by post. He submitted that he does not know the person who has posted form 16 and that he has not entered into any agreement for any work nor is any work order received from them till the date of statement. Taking the same into consideration, the AO disallowed the same as unexplained expenditure and brought it to tax. On appeal, the CIT (A) confirmed the said disallowance and the assessee is in 2nd appeal before us. The learned Counsel for the assessee submitted that though the party to whom the payment has been made has denied executing any work to the assessee company, they have not denied the receipt of payment. He submitted that the payments were for the execution of certain work and that the Revenue has not doubted the incurring of expenditure, but has only doubted the quantum of the payment and the recipient of the payment. Therefore, according to him, only a percentage of expenditure and not the entire expenditure should be disallowed. The learned DR, however, supported the orders of the authorities below and stated that the onus was on the assessee to prove the business expediency and genuineness of the expenditure. Since the assessee has failed to establish both the above criteria, according to the learned DR, the disallowance has been rightly upheld.
11. Having regard to the rival contentions and the material on record, we are satisfied that the assessee has not proven that the expenditure has been incurred for the business purpose of the assessee and since the recipient has denied having executed any work, it cannot be considered as genuine 22 ITA.Nos. 1781/H/2013 & 1552/H/2014 M/s. Rithwik Projects P. Ltd., Hyderabad.
expenditure and cannot be allowed. Hence Ground No.6 is rejected.
12. As regards Ground No.7 against the disallowance u/s 40A(3) of the I.T. Act, the brief facts are that during the assessment proceedings, AO verified the books of accounts and found that the assessee has made payments totalling to Rs.21,35,295 in cash in excess of Rs.20,000. He therefore, disallowed the entire amount of Rs.21,35,295 u/s 40A(3) and brought it to tax. Aggrieved, the assessee preferred an appeal before the CIT (A) stating that the AO had taken into a/c the payments from Head office to various sites towards site expenditure on an emergency basis from time to time for disallowance u/s 40A(3) of the Act. It was submitted that the amount has been paid to a persons who do not have any bank account and that the assessee had no alternative but to incur the expenditure in cash. The CIT (A) confirmed the order of the AO by holding that the AR has furnished any explanation, leave alone but the evidence to show that it was covered by any of the expenses given under Rule 6DD. Aggrieved, the assessee is in appeal before us. The learned Counsel for the assessee reiterated the submissions made before the CIT (A) and submitted that if at all the disallowance is to be made, it should be restricted to the percentage of the disallowance made by the AO.
13. Having regard to the rival contentions, the assessee has not filed any evidence in support of his contentions either before the CIT (A) or before us. In view of the same, we do not find any reason to interfere with the order of the learned CIT (A) and this ground of appeal is also rejected.
23ITA.Nos. 1781/H/2013 & 1552/H/2014 M/s. Rithwik Projects P. Ltd., Hyderabad.
14. In the result, assessee's appeal for A.Y 2009-10 is partly allowed.
15. As regards assessee's appeal for A.Y 2010-11, Ground No.2 to 6 are against the disallowance of the claim made u/s 80IA of the Act. The facts and circumstances and the reasons for the disallowance of the claim are the same as in the earlier year. For the detailed reasons given by us in the assessee's appeal for A.Y 2009-10 above, these grounds are also set aside to the file of the learned CIT (A) for fresh consideration in the light of the directions given therein. These grounds are therefore, treated as allowed for statistical purposes.
16. Ground No.7 is against the addition made on account of disallowance of deduction u/s 80G of the Act of Rs.1,30,000, the learned Counsel for the assessee submitted that the assessee is not pressing this ground of appeal. This ground is accordingly rejected as not pressed.
17. As regards Ground Nos. 8 to 10, they are against upholding the restriction of TDS claim of the assessee by the AO, merely basing on the Form 26AS. We deem it fit and proper to remand these grounds also to the file of the CIT (A) for reconsideration in accordance with law after giving the assessee a fair opportunity of hearing.
18. As regards Ground No.11 against the initiation of penalty proceedings u/s 271(c) of the Act, we reject the same as it is a premature ground.
19. Ground Nos. 1 and 12 being general in nature need no adjudication.
24ITA.Nos. 1781/H/2013 & 1552/H/2014 M/s. Rithwik Projects P. Ltd., Hyderabad.
20. In the result appeals for the A.Ys 2009-2010 and 2010-11 are treated as partly allowed for statistical purposes.
Order pronounced in the open Court on 04.07.2016.
Sd/- Sd/- (B. RAMAKOTAIAH) (SMT. P. MADHAVI DEVI) ACOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated 04th July, 2016 VBP/- & PVV Copy to :
1. M/s. Rithwik Projects P. Ltd., Hyderabad.
C/o. Mr. P. Murali & Co., Chartered Accountants, 6- 3-655/2/3, 1st Floor, Somajiguda, Hyderabad.
2. The JCIT, Circle-3(1), Hyderabad.
3. CIT(A)-IV, Hyderabad.
4. CIT-III, Hyderabad.
4. D.R. ITAT 'A' Bench, Hyderabad.
5. Guard File