Income Tax Appellate Tribunal - Ahmedabad
Enviro Control Associated Pvt.Ltd., ... vs Dy.Cit.,Circle-1,, Surat on 16 November, 2016
आयकर अपीलीय अिधकरण,
अिधकरण अहमदाबाद यायपीठ 'डी
डी'
डी अहमदाबाद।
IN THE INCOME TAX APPELLATE TRIBUNAL
"D" BENCH, AHMEDABAD
BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER
AND SHRI S.S. GODARA, JUDICIAL MEMBER
आयकर अपील सं./ ITA No. 1259/Ahd/2011
नधारण वष/Assessment Year: 2008-09
M/s. Enviro Control Associates Vs. DCIT,
(I) Pvt Ltd, Circle-1,
Enviro House, Opp. Bank of Surat
Maharashtra, Ghod Dod Road,
Surat
PAN : AAACE 8700 C
अपीलाथ / (Appellant) यथ / (Respondent)
Assessee by : Shri Rashesh Shah, AR
Revenue by : Shri Jayant Javeri, Sr DR
सुनवाई क तार ख/ Dateof Hearing : 10/11/2016
घोषणा क तार ख / Date of Pronouncement: 16/11/2016
आदे श/O R D E R
PER N.K. BILLAIYA, ACCOUNTANT MEMBER:
With this appeal the assessee has challenged the correctness of the order of the CIT(A)-I, Surat dated 01.04.2011 pertaining to AY 2008-09.
2. The sole grievance of the assessee is that the CIT(A) erred in confirming the action of AO in disallowing deduction u/s 80IA(4) of the Act amounting to Rs.8,52,50,413/-.
3. The assessee-company is engaged in the business of development of various infrastructure facilities relating to water and sewage treatment and its operation and maintenance. During the year, the assessee has claimed deduction of Rs.8,52,50,413/- u/s 80IA(4) of the Act in respect of profit from infrastructure development and their operation and maintenance activities.
ITA No. 1259/Ahd/2011Enviro Control Associates (I) Pvt Ltd vs. DCIT AY : 2008-09 2
4. The AO asked the assessee to justify its claim of deduction. The assessee filed a detailed reply justifying its claim of deduction and in support of its claim, filed copy of order of the Tribunal in assessee's own case in AYs 2003-04 and 2004-05 in ITA Nos. 1681 & 1682/Ahd/2006.
5. The claim of the assessee was not acceptable to AO. The AO stated that the decision of the Tribunal has not been accepted by the Revenue which has preferred appeal before the Hon'ble High Court; and secondly, the assessee is merely a contractor, doing its job as required by the agencies and does not own the infrastructure facilities.
6. Aggrieved by the decision of the AO, the assessee carried the matter before the CIT(A) and reiterated its claim. After considering the facts and the submissions, the CIT(A) dismissed the appeal of the assessee by making following observations:-
"The argument of the appellant that the Hon'ble ITAT has allowed the claim of the appellant for AYs 2003-04 & 2004-05 is, with due respect, not acceptable because even though the facts in the current assessment year and those years are similar but there are two crucial point which were not there in the assessment order for A.Y.s 2003-04 & 2004-05 and which the Hon'ble ITAT has not considered. Firstly, by the Finance Act, 2009 an Explanation has been inserted at the end of Section 80IA w.e.f 1.4.2000 according to which nothing contained in Sec. 80IA shall apply to a person who executes work contract. The appeals for A.Ys 2003-04 & 2004-05 were decided by the CIT(A) on 22.3.2006 and 12.04.2006_respaetively. At that time this explanation was not on the statute. Further the order of the I Hon'ble ITAT dt.20.3.2009 for these two assessment years have not considered this Explanation while deciding the revenue's appeal. Secondly, in the recent decision dt.4.11.2009, the Hon'ble ITAT, Mumbai larger bench has in the case of B.T. Patil & Sons Vs. ACIT decided that the deduction u/s 80IA(4) is not available to contractors. It can be seen that the Hon'ble ITAT has clearly differentiated between developer and contractor and has stated that the developer designs and conceives new projects while the contractor executes the same. Since the appellant is only executing the project it is only a ITA No. 1259/Ahd/2011 Enviro Control Associates (I) Pvt Ltd vs. DCIT AY : 2008-09 3 contractor. Since this decision is given by a larger bench, therefore, the decision of the Hon'ble ITAT, Ahmedabad in its own case for A.Y.2003-04 & 2004-05 relied upon by the appellant is distinguishable.
In view of the above discussion, the decision of the Hon'ble ITAT, Ahmedabad relied upon by the appellant in its own case for A.Ys. 2003-04 & 2004-05 is distinguishable because as stated above the explanation inserted by the Finance Act, 2009 w.e.f 1.4.2000 has not been considered by the Hon'ble ITAT and also because in the case of B.T. Patil & Sons (supra) a larger bench of the Hon'ble ITAT has reversed the decision of Patel Engineering and has clearly defined that a developer is one who designs and conceives new projects whereas the contractor merely executes the same.
We find that the appellant's case for claiming deduction u/s.80IA to the tune of Rs. 8,52,50,413/- fails because of the following reasons among others (as discussed above ):
i. The appellant does not own the facility.
ii. The appellant is not a developer within the meaning of Sec.80IA(4).
iii. The appellant is also hit by the provisions of Sec.80IA(2).
iv. The appellant is engaged only in works contract and is thus hit by newly inserted explanation by finance Act, 2009 which denies benefit to persons engaged in works contract.
v. The appellant has not brought private capital in the development of infrastructure facility which is the purpose of granting benefit u/s.80IA.
v. The decision in the case of M/s. B.T. Patil has taken away the basis on which ITAT, Ahmedabad decided the matter in favour of appellant for A.Y.2003-04 & 2004-05.
Thus, the claim of the appellant for grant of benefit u/s.80IA is without any basis and the disallowance made by the A.O. is upheld. Thus, this ground of appeal is dismissed. '"
7. Aggrieved by this, the assessee is before us.
8. The Counsel for the assessee vehemently stated that the reasons given by the CIT(A) has been already taken care of by the Tribunal in subsequent years, i.e. AY 2005-06 in ITA No.2369/Ahd/2011, AY 2006-07 in ITA ITA No. 1259/Ahd/2011 Enviro Control Associates (I) Pvt Ltd vs. DCIT AY : 2008-09 4 No.2589/Ahd/2009, AY 2007-08 in ITA No.783/Ahd/2010 and AY 2009-10 in ITA No.2083/Ahd/2012. It is the say of the Counsel that the Tribunal in assessee's own case in preceding as well as subsequent assessment years has allowed the claim of deduction and therefore, the same should be allowed for the year under consideration also.
9. Per contra, the DR strongly supported the findings of the Revenue Authorities.
10. We have given a thoughtful consideration to the orders of the authorities below. We have also gone through the decisions of the Co- ordinate Bench (supra). We find force in the contention of the ld. Counsel. We find that the Co-ordinate Bench, after considering all the issues raised by the Revenue, by a consolidated order for AYs 2005-06 to 2007-08 and 2009-10 vide order dated 30.04.2013 has held as under:-
"6. We have heard both the sides at length in the light of the orders of the authorities below and the case-law cited. We have examined the facts of the case and thereupon came to know about the work of the assessee as discussed by the AO that the assessee has developed an infrastructure project as per the terms and conditions laid down by an agreement entered into with Surat Municipal Corporation. The facts have revealed, as discussed by ld.CIT(A), that Surat Municipal Corporation has informed that the assessee has made an offer not only for the development of the said infrastructure facility but also for the operation and maintenance for 60 MLD capacity sewerage treatment plant at Surat for five years for an amount of Rs.1,32,00,000/- which was accepted by the Standing Committee vide Resolution described therein. In that contract, all risks were belonged to the assessee and the assessee was required to have a Insurance Policy to cover all third party risks. What we have noted that otherwise the assessee qualifies u/s.80IA(4) because as per the definition prescribed in Explanation to Section 80IA(4) a "Sewerage System" is within the definition of "Infrastructure facility".
Now, hereinbelow we shall deal, as also consider, the point-wise objection of the Revenue Department and examine whether those objections have rightly been raised in the case of the assessee.
ITA No. 1259/Ahd/2011Enviro Control Associates (I) Pvt Ltd vs. DCIT AY : 2008-09 5
(a) The objection of the Revenue Department is that the assessee has been termed as "contractor" as per the terms of the agreement with SMC. This very objection has been dealt with by ITAT "D" Bench Ahmedabad in the case of En-vision Enviro Engineers Pvt.Ltd. vs. DCIT (in ITA No.2902/Ahd/08 & others for AY 2005-06) order dated 30/04/2012, wherein we have opined, quote "We have examined both the agreements. Undisputedly, the assessee has been referred as a "Contractor" in the agreement dated 15/07/2004. However, it was not so in the agreement dated 14/11/2002 executed with Surat Municipal Corporation. Be that as it was, merely mentioning the assessee as "Contractor" the exact nature of the execution of the work do not alter. Rather, this controversy has been resolved by Respected Coordinate Bench in the case of Patel Engineering Ltd. 94 ITD 411(Mum.)cited-supra. We are convinced with the argument of the ld.AR that a contractor can also be a developer. In this context, our attention has been drawn on a latest decision of Hon'ble Gujarat High Court pronounced in the case of CIT vs. Radhe Developers (2012)341 ITR 403 (Guj.), wherein the issue was in respect of claim of deduction u/s.80IB(10) of IT Act and the assessee happened to be "developer-cum-building contractor". The Hon'ble Court has held that the said developer had to make the construction and to engage labour on contract, therefore the term "developer" has to be understood in common parlance as well as in legal sense. The Hon'ble Court has taken the help of Websters- encyclopedia and other dictionaries and thereupon opined that the term "developer" carries a much wider connotation. As far as the agreement with Surat Municipal Corporation is concerned, the assessee has been referred as "party of the first part", hence no serous objection has been raised by the Revenue. On account of these reasons and following the view expressed by the Hon'ble Court as also considering the nature of the work executed by this assessee, we are not inclined to agree with the AO that the assessee has acted merely as a "contractor", rather, we hereby hold that the assessee has acted as a "developer". Here-in-below are few other reasons hereby assigned by us." unquote. The present assessee also falls in the same category, therefore we hereby hold that factually the assessee has undertaken the project not merely as a contractor but also as a developer.
(b) The Revenue has raised an objection that after the introduction of Explanation by Finance Act (2) of 2009 with retrospective effect from 1.4.2000, the assessee is not entitled for the deduction being the nature of work was a "works-contract". Even this question has been duly answered in favour of the assessee by the Tribunal in the case of En- vision Enviro Engineers Pvt.Ltd. (supra), wherein paragraph No.7.3. it was held, quote "7.3. We have also examined the other agreement dated 14/11/2002 which in its nomenclature says "Agreement for treatment of Bio Medial waste on BOOT (Build, Own, Operator, Transfer) basis ITA No. 1259/Ahd/2011 Enviro Control Associates (I) Pvt Ltd vs. DCIT AY : 2008-09 6 between Surat Municipal Corporation and En-Vision Enviro Engineers Pvt.Ltd." For the removal and disposal of refuse, rubbish and garbage of various hospitals, clinics, nursing homes in Surat, it was required by the Municipal Corporation to handle and manage the same, hence, invited Boot Tender. The assessee has offered and on a token rent of Re.1/- per square meter per annum, the said agreement was entered into for seven years. The assessee is to make the construction on the land as per the approved plans. The assessee has to install necessary equipment and machinery. One of the clauses is very clear that "En-Vision shall bear all the expenses for putting up the said plan". The assessee is entitled to charge for treatment of waste per kg. as fixed by Municipal Corporation from time to time. One of the clauses, thus is clear that the rate shall be as per the quotations agreed upon. On termination of agreement, the project is to be taken over. At this juncture, ld.AR has also mentioned the change in the Statute through which one of the condition of transfer of the infrastructure back to the Government has been waived of." unquote. The totality of the facts and circumstances of the case as also the material placed before us, we hereby hold that the said Explanation is not applicable on the assessee because the project assigned to the assessee by Surat Municipal Corporation was not merely in the nature of "works-contract" but much more that i.e. to develop the infrastructure and to operate the same.
(c) An another objection of the Revenue Department is that the said infrastructure facility is not owned by the company. We want to clarify that a view has already been taken in this regard and it was held after analyzing the language of section 80IA(4) that the enterprise carrying on the business of development and maintenance of any infrastructure facility is to be owned by a company registered in India or by a Consortium of such companies. Thus, this section says that an Enterprise is to be owned by the assessee company which is in the business of development, maintenance and operation of infrastructure facility. It is not the intention of this section that the infrastructure facility is to be owned by the assessee-company. Otherwise also, an infrastructure facility mostly/generally belongs to the Government, hence there is no question of an infrastructure facility to be owned by a private person.
(d) The decision of Patel Engineering Ltd.(84 TTJ 646) has been discussed by the Revenue Authorities and we are also of the opinion that the ratio laid down in the said decision is to be applied on the facts of the present case to allow the claim of deduction u/s.80IA(4) of IT Act.
(e) There is a discussion of B.T.Patil & Sons Belgaum Construction (P.) ltd. vs. Asst.CIT (2010) 35 SOT 171 (Mum.) (LB), but the latest position is ITA No. 1259/Ahd/2011 Enviro Control Associates (I) Pvt Ltd vs. DCIT AY : 2008-09 7 that the ITAT "B" Bench Pune passing the consequential order has held as per an order pronounced on 28.2.2013 that in the light of a latest decision of Hon'ble Bombay High Court pronounced in the case of ABG Heavy Industries Ltd. 322 ITR 323 is to be followed and therefore it was held that the law as interpreted by the Larger Bench is no longer a good law. The outcome of the judgement is that, quote"14. In this background, the assessee could certainly claim the deductions under the provision of Section 80IA. 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 withdrew 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 withdrawing the question of Joint Venture does not arise. The Venture was fully carried out by the assessee and it was entirely executed 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 strength from decision in the case of ITAT, Indore Bench, in case of Ayush Ajay Constructions Ltd. (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 ratio of jurisdictional High Court in case of ABG Heavy Industries Ltd. (supra), the Assessing Officer is directed to allow deduction u/s.80IA(4) of the Act to the assessee with regard to the projects in question for both the years. The matter is disposed off accordingly." unquote.
7. Finally, the decision of Hon'ble Bombay High Court in the case of ABG Heavy Industries 322 ITR 323(Mum.) is directly applicable on the assessee, wherein it was opined that the said assessee entered into a contract for supply, installation, testing, commissioning and maintenance of container handling cranes at JNPT for a term of 10 years whereafter the same would vest in the letter, is entitled for deduction u/s.80IA(4). This decision of the Hon'ble Court is directly applicable on the facts of the case.
8. In the light of the overall discussion and specially considering the fact that in assessee's own case for AYs 2003-04 & 2004-05 vide an order dated 20/03/2009(supra), the Respected Coordinate Bench has already granted the deduction claimed by the assessee, therefore for the years under consideration the assessee is entitled for the deduction u/s.80IA(4) of the IT Act as per law."
ITA No. 1259/Ahd/2011Enviro Control Associates (I) Pvt Ltd vs. DCIT AY : 2008-09 8
11. Respectfully following the decision of Co-ordinate Bench (supra), we set aside the findings of the CIT(A) and direct the AO to allow the assessee the deduction of Rs.8,52,50,413/- u/s 80IA(4) of the Act.
12. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the Court on 16th November, 2016 at Ahmedabad.
Sd/- Sd/-
(S.S. GODARA) (N.K. BILLAIYA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 16/11/2016
Biju T., Sr.PS
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. संबं!धत आयकर आयु#त / Concerned CIT
4. आयकर आयु#त(अपील) / The CIT(A)
5. &वभागीय त न!ध, आयकर अपील य अ!धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड फाईल / Guard file.
/ BY ORDER,
आदे शानुसार
TRUE COPY
उप/सहायक पंजीकार (Dy./Asstt.Registrar)
/ ITAT, Ahmedabad
आयकर अपील#य अ$धकरण, अहमदाबाद