Nila Bauart Engineering Limited, ... vs Acit., Circle-4,, Baroda on 13 April, 2017

[Cites 16, Cited by 1]

Income Tax Appellate Tribunal - Ahmedabad

Nila Bauart Engineering Limited, ... vs Acit., Circle-4,, Baroda on 13 April, 2017

आयकर अपील
य अ धकरण, अहमदाबाद यायपीठ 'डी', अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
" D " BENCH, AHMEDABAD

सव ी द प कुमार के डया, लेखा सद य एवं महावीर साद, या यक सद य के सम ।
BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
And SHRI MAHAVIR PRASAD, JUDICIAL MEMBER

1. आयकर अपील सं./I.T.A. No.2485/Ahd/2010
2. आयकर अपील सं./I.T.A. No.2486/Ahd/2010
( नधा रण वष A ssessment Years :2003-04 & 2004-05 r e s p e c t i v e l y )

Nila Baurat Engineering Ltd. बनाम/ The ACIT
611, Yashkamal Building Vs. Circle-4
Sayajigunj, Baroda Baroda
थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AAACN 7066 N
(अपीलाथ& /Appellant) .. ( 'यथ& / Respondent)
अपीलाथ& ओर से / Appellant by : Ms.Urvashi Shodhan &
Shri Parin Shah, ARs
'यथ& क) ओर से/Respondent by : Shri Vijay Kumar Singh, Sr.DR

ु वाई क) तार ख /
सन Date of Hearing 11/04/2017
घोषणा क) तार ख /Date of Pronounce ment 13/ 04 /2017

आदे श / O R D E R

PER PRADIP KUMAR KEDIA, AM:

The captioned two appeals by the Assessee are directed against the separate orders of the Commissioner of Income Tax(Appeals)-III, Baroda [CIT(A) in short] identically dated 31/05/2010 for the Assessment Years (AYs) 2003-04 & 2004-05.

ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05 -2-

2. Since common issues are involved in both these appeals, these were heard together and are being disposed of by way of this consolidated order for the sake of convenience.

3. We shall first take up ITA No.2485/Ahd/2010 - AY 2003-04 as a lead case for the purpose of determination of issues involved.

4. In its main ground of appeal, the assessee has assailed the order of the CIT(A) wherein the action of the Assessing Officer (AO) in disallowing the deduction of Rs.13,71,617/- claimed by the assessee under s.80IA of the Income Tax Act, 1961 (hereinafter referred to as "the Act") was confirmed. The assessee also raised 'additional grounds' of appeal in terms of Rule 11 of the ITAT Rules, 1963 whereby the validity of reopening of assessment by the AO was also put under challenge.

4.1 The original ground and the additional ground raised by the assessee is extracted hereunder:-

Original Ground The Learned CIT(A) has grossly erred in law and on facts in confirming action of the Assessing Officer in disallowing the deduction of Rs.13,71,617/- claimed u/s.80IA of the Act and originally allowed to the assessee in order u/s.143(3) of the Act.

Additional Ground ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05 -3- Ld. CIT(A) erred in law and on facts in confirming the validity of the reopening of the assessment by AO on the basis of observation of Hon'ble ITAT in order of third party. Ld.CIT(A) ought to have held the assessment void ab initio & bad in law based on change of opinion when full information with respect to deduction claimed u/s.80IA was before AO and discussed in order u/s.143930 of the Act.

5. The additional grounds filed under Rule 11 of ITAT involves examination of legal question on facts available on record. Accordingly, we admit the same for adjudication.

6. Briefly stated, the assessee is a Limited Company engaged in the business of civil construction and installation of various Industrial projects on contract basis. The assessee filed return of income for the impugned AY 2003-04 declaring income at Rs.20,92,317/-. The return of the assessee was subjected to scrutiny assessment. As a sequel thereto, the assessment order under s.143(3) was framed assessing the income at Rs.78,10,220/- after making various disallowances vide order dated 27/03/2006. After the completion of the assessment, the case was reopened under s.147 of the Act by issuance of notice under s.148 of the Act dated 26/03/2009 to the assessee. While framing the re-assessment dated 19/11/2009, the AO rejected deduction claimed under s.80IA(4) of the Act. The assessee challenged the aforesaid re-assessment order before the CIT(A). However, the CIT(A) sustained the disallowances of deduction under s. 80IA of Rs.13,71,617/- made by the AO.

ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05 -4-

7. Aggrieved thereto, the assessee is in appeal before the Tribunal.

8. The Ld.AR for the assessee Ms.Urvashi shodhan at the outset submitted that the reassessment order framed by the AO suffers from jurisdictional defect and therefore the reassessment order framed in pursuance thereof is vitiated and is a nullity. The Ld.AR in the same vain also submitted that the denial of deduction under s.80IA(4) claimed by the assessee is also not justified on merits.

8.1. The Ld.AR at the further outset adverted our attention to the reasons recorded for re-opening of completed assessment for AY 2003- 04 and submitted that the impugned action of the AO is merely owing to 'change of opinion' which is not permissible in law. The Ld.AR submitted that the assessment in this case was completed under s.143(3) wherein the claim of deduction of the assessee under s.80IA was examined and claim of the assessee of Rs.18,37,099/- was revised at Rs.13,71,617/- after application of mind. Thereafter, the AO claims to have received information from another AO at Jaipur having jurisdiction over a concern namely, M/s.Rameshwaram Tolls Pvt.Ltd. ("RTPL") alleging that the assessee herein Nila Bauart Engineering Ltd. (NBEL) has transferred its infrastructure facility (Sirohi Road Project) to RTPL with effect from 18/11/2001 relevant to AYs 2002-03, 2003-04 & 2004- ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05 -5-

05. Based on information supplied, the AO herein observed that RTPL has also parallely claimed deduction under s.80IA(4) of the Act on this infrastructure facility. The AO accordingly found that both the assessee as well as RTPL are claiming exemption on this facility simultaneously which is patently wrong. The AO noted that ITAT Jaipur Bench while deciding the appeal in the case of RTPL held that RTPL was entitled to deduction under s.80IB and not the assessee. The Ld.AR in this context reiterated with force that the claim of deduction was specifically examined by the AO in the course of the original assessment proceedings and a portion of the total claim was disallowed after examining the claim of deduction in detail. The Ld.AR accordingly submitted that the AO having examined the issue of claim of deduction as stated aforesaid could not have reopened the assessment as it is a case of mere change of opinion. The ld.AR exhorted that it is well-settled that a completed assessment cannot be reopened on a mere change of opinion. It was thus submitted that the issuance of notice under s.148 is a bad in law and the assumption of jurisdiction consequent thereupon suffers from the vice of illegality.

8.2. The Ld.AR next contended that findings recorded in the assessment of one party (RTPL) is not binding in the proceedings of another assessee notwithstanding some plea or finding were found recorded in the assessment of the another assessee for or against the ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05 -6- interest of the present assessee. It is always open for the Revenue to reach a different conclusion in the two assessment proceedings on the basis of material placed in respective proceedings. For this proposition, the Ld.AR relied upon the decision of the Hon'ble Gujarat High Court in the case of Chandravadan R.Patel vs ACIT in Civil Application No.657 of 1999, order dated 03/08/1999 (copy placed in file). As a corollary, the Ld.AR for the assessee pressed that the decision in the appeal of RTPL cannot adversely impact the case of the assessee herein which was rendered without hearing the assessee - an affected party. The Ld.AR thus contends that the reopening of the assessment of the assessee based on the order of the ITAT Jaipur in the case of RTPL without hearing the assessee is not a valid foundation for reopening the assessment.

8.3. On merits, the Ld.AR adverted our attention to various clauses of agreement entered into by assessee with Government of Rajasthan and contended that relevant infrastructure facility has been constructed, developed and maintained by the assessee for which loan was obtained by the assessee and bank guarantee was furnished to the Government of Rajasthan. The toll tax has been collected by RTPL in the capacity of an 'agent' to the assessee. Referring to various clauses of the agreement, the Ld.AR harped that the control over the facility continued with the assessee. The Ld.AR submitted with vehemence that agreement for development operation and maintenance of infrastructure facility with ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05 -7- Government of Rajasthan has not been assigned or transferred to RTPL at all nor could have been, as there was not power available to the assessee for assignment or transfer of the facility to any third party in view of specific clause No.13 of the agreement with Government of Rajasthan. The Ld.AR pointed out that RTPL could not be construed as the owner of the infrastructure facility in view of the term of agreement between the assessee and RTPL. It was argued that it is the assessee which has entered into an agreement with Government of Rajasthan. The RTPL has been merely assigned work of collection of Toll and they are merely rendering the aforesaid services for and on behalf of the assessee. The agreement with RTPL as Toll collection agent was initially entered for one year in the first instance and thereafter renewed year-after-year keeping in mind their satisfactory performance. The Ld.AR thus submitted that the assessee enjoys complete command over the infrastructure facility without any demur. Moreover, the land for labour colony, staff quarters and other expenses have been borne by the assessee. The Ld.AR also added that certain operative expenses have also been incurred by the assessee towards the aforesaid infrastructure facility which proves their case for eligibility of deduction under s.80IA(4) as a rightful claimant. The Ld.AR accordingly contended that merely on the basis of certain observations of the ITAT in the case of RTPL while passing the order without having the benefit of representation from the assessee, the claim of assessee cannot be denied.

ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05 -8- 8.4. The Ld.AR submitted in conclusion that the assessee is entitled to relief on both counts, one towards lack of jurisdiction under section 147 of the Act, and other, on merits as claimed.

9. The Ld.DR Mr.Vijay Kumar Singh, on the other hand, relied upon the order of the CIT(A) and submitted in furtherance that the ITAT Jaipur in the case of RTPL has clearly found as a matter of fact that it was assessee therein which was entitled for claim of deduction under s.80IA(4) of the Act for the impugned infrastructure facility. Thus, in the light of the decision of the ITAT, the benefit of deduction has already been accorded to RTPL which will operate in exclusion to NBEL. The Ld.DR submitted that both assessee as well as RTPL cannot claim the deduction in respect of the same infrastructure facility as it will amount to double deduction on the same facility to two parties. Such act would be inherently opposed to scheme of the Act. He accordingly submitted that no interference with the order of CIT(A) is called for.

10. We have carefully considered the rival submissions. The first issue in stake raised by the assessee is towards validity of assumption of jurisdiction under s.147/148 of the Act. The issue concerns conferment of jurisdiction and thus goes to the root of matter and thus assumes primacy in the matter of deliberation.

ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05 -9- 10.1. We note that the assessment of the assessee was reopened on the basis of decision of the Coordinate Bench of ITAT Jaipur in the case of RTPL whereby it was found that RTPL is eligible for claim of deduction under s.80IA(4) of the Act in respect of the impugned infrastructure facility (Sirohi Project). The assessee has also claimed the deduction under s.80IA(4) in respect of the same facility. Therefore, based on the finding of fact rendered by the Tribunal in respect of the given infrastructure facility, the view taken by the AO that the assessee has wrongly claimed deduction under s.80IA(4) and consequently chargeable income has assessment has prima-facie tangible basis indeed. No doubt, the AO did examine the claim of the deduction under s.80IA(4) in the original assessment in the light of facts available before it. This was, however, without the knowledge of the fact that deduction has been claimed and allowed in the hands of third party namely - RTPL. In these circumstances, it cannot be said that AO had formed an opinion that it was the assessee and not the third party which was eligible for deduction under s.80IA(4) of the Act. In the absence of opinion formed in this regard at the first instance, there is no case for any change of opinion. Thus, the plea raised on behalf of assessee finds no resonance on this score. It is apparent that the AO has accepted the claim of aforesaid deduction in sync with the scope of assessment without examining the eligibility or otherwise in the hands of some other party. When seen in perspective, fresh material/information coming to the ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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possession of the AO which seeks to unearth vital information towards double claim of deduction based on opinion of final fact finding authority would give prima-facie cause to believe that chargeable income has escaped assessment. In the circumstances, the formation of belief on escapement of chargeable income is clearly held in good faith and not merely a pretense. The information in the form of order of ITAT on the same infrastructure facility clearly establishes rational connection and live link between the reason and formation of belief.

10.2. It is trite that s.147 envisage holding of belief need to be only prima-facie and need not be infallible or conclusive so long as based on germane and relevant material. The sufficiency or correctness of the reason or cause is not a thing to be considered at the initial stage of reopening action. It is open to assessee to prove that assumption of facts made in that notice is extraneous at the time of assessment. Useful reference may be made to the decision in Raymond Woollen Mills Ltd. vs. ITO (1999) 236 ITR 34(SC) & ACIT vs. Rajesh Jhaveri Stock Brokers Pvt.Ltd. (2007) 291 ITR 500 (SC) in this regard. Therefore, we fail to comprehend the plea of the assessee questioning the jurisdiction assumed by the AO on the ground of change of opinion.

10.3. The reliance placed on the decision of Hon'ble Gujarat High Court in the case of Chandravadan R.Patel (supra) is grossly misplaced. In that ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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case, the applicant sought to be impleaded as a party in the proceedings in the case of one CR Patel instead of merely an intervener. In this context, the Hon'ble Gujarat High Court observed that there is no room for third parties to intervene in the process of assessment except if they are persons required as witness for eliciting the evidence. It was also observed that findings recorded in the assessment of one party is not binding in the proceedings against another assessee. It is always open for the revenue to reach a different conclusion in the two assessment proceedings on the basis of material placed in respective proceedings. It was held that for the purposes of jurisdiction of the authority, the strangers have no role to play. On this background, the applicant of the petitioner seeking to be impleaded as a party to the matter was rejected. We fail to visualize how such observations prohibit the AO to take cognizance of judicial order passed in the case of third party having the direct bearing on the subject matter of assessment. At the time of assumption of jurisdiction under s.147 of the Act what is imperative is relevancy of material to trigger belief contemplated under s.147 and not the merits or demerits of respective claim. The AO is not expected to embark rigorous enquiry on the material at pre-reassessment stage as long as reasons available are capable of giving reasonable basis to hold belief of escapement. This view has been endorsed by Hon'ble Supreme Court consistently noted above. The right to opportunity by assessee would arise only in the course of assessment where it is naturally open to ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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assessee to rebut the initial belief of the AO. The plea of the assessee thus is without any force.

10.4. No other ground has been marshaled to impeach the validity of action under s.147 of the Act on behalf of the assessee. We thus find no case for alleged transgression of authority conferred upon AO under s.147 of the Act.

10.5. Consequently, the additional ground raised by the challenging the validity of reopening is dismissed.

11. We shall now address the main ground raised by the assessee towards eligibility of claim of deduction under s.80IA(4) of the Act on merits.

11.1. The substantive plea on behalf of the assessee is that the assessee was entrusted with the construction of infrastructure facilities (Sirohi Road Project) on build, operate and transfer basis (BOT basis) at its own cost in the state of Rajasthan. The assessee has developed finance for construction of the project and built it through its own resources and was entitled for recovery of investment so made in the project through levy of toll on the usage of Road Project. The agreement with the ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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Government of Rajasthan for this purpose is specified to be nearly 5 years.

11.2. At this stage, we take note of clause No.13 of the agreement entered into by the assessee with Government of Rajasthan heavily relied upon by the assessee. It reads as under:-

(13) The 'Lessee' will not assign the 'demised property' or transfer the benefit of the lease to any third party. 'Lessee' will also not mortgage the 'demised land' to any Financial Institution or Individual for raising capital for construction of the Project or for any other purpose."

11.3. We also simultaneously take note of the agreement entered into by the assessee dated 10/11/2001 with RTIL. As per aforesaid agreement, RTIL are specialized toll collection contractors who have been awarded the right to collect the Toll at the project site for a period of one year as against the right vested with the assessee by Government of Rajasthan for a period of five years. As per the aforesaid agreement, the RTIL has been appointed as collecting agents of the assessee for collection of Toll from traffic-line through the said infrastructure facilities at a lump-sum consideration of Rs.328 lakhs. As per agreement, RPTL is under contractual obligation to pay the aforesaid amount to the Assessee irrespective of actual toll collection by them. Thus, on holistic reading of the agreement between the Government of Rajasthan and the assessee on one hand and another agreement between the assessee and RTPL on the ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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other hand, there is no manner of doubt that it is the assessee who was the developer of the infrastructure facility.

11.4. At this juncture, we also simultaneously take note of certain observations made by the Coordinate Bench of ITAT in the case of ITO vs. RTPL in ITA No.464/JP/2008 for AY 2003-04 order dated 29/08/2008 which triggered the cause for action. The ITAT has clearly recorded a finding of fact that the RTPL was appointed as agent by the assessee for collection of Toll on road developed by the assessee. The period of agreement is for 365 days w.e.f. 18/11/2001 at the first instance which was extended and renewed on the same terms and conditions before the expiry of the initial period. The AO of RTPL in fact, came to the conclusion that the assessee herein (NBEL) is rightful claimant for deduction under s.80IA of the Act being developer of the infrastructure facility. However, the ITAT on interpretation of contractual agreement of RTPL with assessee came to the conclusion that RTPL was ultimately entrusted with the requisite work of operating and maintaining the infrastructure facility. The ITAT thus held after examining terms of agreement between the RTPL that the assessee that the agreement executed between the assessee and RTPL was not only for execution of work of collection of Toll only. In the light of various clauses of the agreement between the parties, it was held that transfer of rights was available to the assessee herein after developing the facilities for ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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collection of toll. Thus, operation of facility as well as maintenance thereof stood transferred to RTPL. The ITAT found that the transfer of right of operation and maintenance of facility was complete and in fact carried by RTPL. The ITAT in conclusion held that RTPL was rightful claimant of the deduction under s.80IA(4) of the Act.

11.5. It will be apt to reproduce the appropriate portion of the order of the ITAT Jaipur in ITA No.464/JP/2008 dealing with the issue in favour of RTPL.

"For a ready reference we first reproduce the provisions of section 80IA of the I.T.Act, 1961 hereunder:-

(4) This section applies to--

(i) any enterprise carrying on the business [of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining]any infrastructure facility which fulfils all the following conditions, namely :--

(a) it is owned by a company registered in India or by a consortium of such companies [or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act;]

(b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i)developing or (ii)operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility;]

(c) it has started or starts operating and maintaining the infrastructure ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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facility on or after the 1st day of April, 1995:

Provided that where an infrastructure facility is transferred on or after the 1st day of April, 1999 by an enterprise which developed such infrastructure facility (hereafter referred to in this section as the transferor enterprise) to another enterprise (hereafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place. The following second proviso shall be inserted after the existing proviso to clause (i) of sub-section (4) of section 80-IA by the Finance Act, 2016, w.e.f. 1-4-2017 :

Provided further that nothing contained in this section shall apply to any enterprise which starts the development or operation and maintenance of the infrastructure facility on or after the 1st day of April, 2017. [Explanation.--For the purposes of this clause, "infrastructure facility" means--

(a) a road including toll road, a bridge or a rail system;

(b) a highway project including housing or other activities being an integral part of the highway project;

(c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system;

(d) a port, airport, inland waterway [, inland port or navigational channel in the sea];]

(ii) any undertaking which has started or starts providing telecommunication services, whether basic or cellular, including radio paging, domestic satellite service, network of trunking, broadband network and internet services on or after the 1st day of April, 1995, but on or before the 31st day of March, [2005].] Explanation.--For the purposes of this clause, "domestic satellite" means a satellite owned and operated by an Indian company for providing telecommunication service;

(iii) any undertaking which develops, develops and operates or maintains and ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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operates an industrial park [or special economic zone]notified by the Central Government in accordance with the scheme framed and notified by that Government for the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, [2006]:

[Provided that in a case where an undertaking develops an industrial park on or after the 1st day of April, 1999 or a special economic zone on or after the 1st day of April, 2001 and transfers the operation and maintenance of such industrial park or such special economic zone, as the case may be, to another undertaking (hereafter in this section referred to as the transferee undertaking), the deduction under sub-section (1) shall be allowed to such transferee undertaking for the remaining period in the ten consecutive assessment years as if the operation and maintenance were not so transferred to the transferee undertaking :

[Provided further that in the case of any undertaking which deve-lops, develops and operates or maintains and operates an industrial park, the provisions of this clause shall have effect as if for the figures, letters and words "31st day of March, 2006", the figures, letters and words "31st day of March, [2011]" had been substituted;]

(iv) an [undertaking]which,--

(a) is set up in any part of India for the generation or generation and distribution of power if it begins to generate power at any time during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, [2017];

(b) starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the period beginning on the 1st day of April, 1999 and ending on the 31st day of March, [2017]:

Provided that the deduction under this section to an [undertaking]under sub-clause (b) shall be allowed only in relation to the profits derived from laying of such network of new lines for transmission or distribution;

[(c) undertakes substantial renovation and modernisation of the existing network of transmission or distribution lines at any time during the period beginning on the 1st day of April, 2004 and ending on the 31st day of March, [2017].

Explanation.--For the purposes of this sub-clause, "substantial renovation and modernisation" means an increase in the plant and machinery in the network of transmission or distribution lines by at ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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least fifty per cent of the book value of such plant and machinery as on the 1st day of April, 2004;] [(v) an undertaking owned by an Indian company and set up for reconstruction or revival of a power generating plant, if--

(a) such Indian company is formed before the 30th day of November, 2005 with majority equity participation by public sector companies for the purposes of enforcing the security interest of the lenders to the company owning the power generating plant and such Indian company is notified before the 31st day of December, 2005 by the Central Government for the purposes of this clause;

(b) such undertaking begins to generate or transmit or distribute power before the 31st day of March, [2011];] There is no doubt as per the terms of agreement between the assessee and NBEL that the assessee was appointed for operating and maintaining including collection of tolls as the collecting agent from traffic plying on the Sirohi-Anadara-Reodr-Mandar Road for the prescribed distance. Hence, in our view, the AO was wrongly assumed that the agreement executed between the developer and the assessee was for execution of work collection tolls only. As per language used in the agreement it is a case of transfer of rights available to the transferor i.e. NBEL after developing, the facilities for collection of tolls (which is the only work of operating of facility) as well as maintaining the facility, for both the purposes in all respect and in accordance with the terms of the agreement executed by the developer NBEL with the State Government of Rajasthan. In our view, the transfer does not mean and imply transfer of any property, which also never vests in the hands of the developer of the facility and it should not be construed in a conservative manner. Here 'transfer' only means the transfer of right of operation and maintenance of the facility, which was completely transferred and in fact carried out by the assessee. The AO also failed to appreciate this material fact that in terms of the agreement dated 16.8.2002 the assessee got the facility of operating, collecting and maintaining for whole period i.e. upto 5.12.2005 available to the developer (NBEL). The Assessing Officer has ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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also failed to consider clause (1) of the agreement dated 16.8.2002 which specifically provides that it is irrevocable and to remain in force permanently. In the case of Ocean Sparkle Ltd. Vs. DCIT (supra), operation and maintenance of infrastructure facility was transferred by developer to another enterprise for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Government, it was held that the provisions of section 80IA is equally applicable to the transferee for the unexpired period during which the transferor would have been entitled to deduction if the transfer had not taken place. It was held that proviso to section 80IA(4) does not require that there should be a direct agreement between the transferee and the specified authority of the Government. The assessee, transferee therein was thus held eligible for deduction under section 80IA in terms of proviso to section 80IA(4). In the case of Patel Engineering Co. Vs. DCIT (supra), the Mumbai Bench of the Tribunal after discussing the case in detail has come to the conclusion that the fact that the land belong to the Government would make no difference as sub- clause (c) of section 80IA(409i) would not be applicable to a developer simplicitor. Under these circumstances, we are of the view that as per the terms of agreement between the assessee and NBEL and the nature of work executed by the assessee, the ld.CIT(A) has rightly found the assessee eligible for the claimed deduction under section 80IA(4)(i) proviso. The first appellate order on the issue is thus upheld. The ground is thus rejected."

11. 6. On careful analysis of the decision of the Coordinate Bench of ITAT Jaipur, we are not impressed with the case made out by the Revenue on merits. It is essentially the case of the Revenue that deduction under s.80IA(4) of the Act has been claimed and allowed in the hands of RTPL in view of the decision of the ITAT Jaipur and thus the deduction on the same infrastructure facility cannot be extended in ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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the hands of the assessee herein. In this regard, as we understand, the assessee has developed the infrastructure facility and presumably transferred the operation and maintenance of the aforesaid infrastructure facility to RTPL at a pre-determined cost as found by ITAT in the case of RTPL. Thus, while the assessee is entitled to draw benefit from the infrastructure facility to the extent of agreed amount as per the agreement between the assessee and RTPL, the other party namely RTPL will be entitled to avail the benefit of the infrastructure facility over and above the cost incurred by them towards transfer as per the agreement. There does not appear to be any overlapping of claim of deduction. In this situation, the quantum of deduction by respective parties are mutually exclusive and not in conflict with each other notwithstanding the fact that it emanates from same infrastructure facility.

11.7 At this juncture, we note that benefit of section 80IA(4) is available to an enterprise carrying on the business of developing or operating and maintaining the infrastructure facility etc. subject to fulfillment of certain conditions with which we are not concerned at present. Thus, it is manifest that as per 80IA(4) of the Act, benefit is available to both class of assessee (i) who has developed the infrastructure facility and (ii) other, who is engaged in operation and maintenance of facility. Therefore, there does not appear to be any impediment in section 80IA(4) of the Act to avail the benefit by more ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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than one assessee albeit on their respective component of profits. In the instant case, the assessee has received agreed amount by virtue of agreement from RTPL. The assessee is seeking deduction under s.80IA(4) of the Act on receipt recovered from RTPL subject to claim of certain expenses thereon. RTPL, on the other hand, is seeking claim of deduction on the profits over and above the equivalent cost incurred and payable to the assessee herein subject to some other expenses. Thus, both assessee as well as RTPL are claiming deduction on profit element which operates in mutual exclusion to each other. Receipt in the hands of assessee is cost in the hands of RTPL. Therefore, the eligibility of deduction under s.80IA(4) of the Act in the hands of assessee do not impinge upon the right of RTPL to avail benefit of 80IA(4) which is naturally restricted to an amount after excluding the cost incurred on payment to the assessee herein. Therefore, the entire profits derived from the infrastructure facility, (i) towards development thereof in the hands of the assessee and other (ii) towards operation and maintenance thereof in the hands of RTPL is eligible for deduction. Ostensibly, there is no case of double deduction of the same amount as incorrectly argued on behalf of the Revenue. To reiterate, while the assessee herein is seeking claim of deduction on profit from one part of the activity, RTPL has claimed deduction on other part of the profit from other set of activities. Therefore, no conflict appears to arising as a result of the decision of the Coordinate Bench of the Tribunal in RTPL. In this view of the matter, ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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the claim of the assessee towards deduction under s.80IA(4) of the Act on receipts against its efforts for development of the infrastructure facility deserves to be accepted. Accordingly claim of deduction u/s.80IA(4) of the Act in the hands of assessee is allowed on merits.

12. As a result, ground of appeal towards deduction under s.80IA(4) on merits is allowed, while additional grounds of appeal challenging the jurisdiction is dismissed.

13. In the result appeal of the assessee in ITA No.2485/Ahd/2010 for AY 2003-04 is partly allowed.

ITA No.2486/Ahd/2010 - AY 2004-05 - Assessee's appeal

14. In this appeal, the assessee is aggrieved by -

(i) alleged illegal action of the AO in invoking the section 147 of the Act based on change of opinion in terms of additional ground filed.

(ii) denial of deduction of Rs.30,49,558/- under s.80IA(4) of the Act.

ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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(iii) disallowance of claim of Rs.45,29,321/- claimed as business loss on account Jhalawar-Indore Road Project.

15. Both the sides consented that facts and issue in this appeal are identical in material aspect in so far as ground Nos.(i) and (ii) summarized above are concerned. Thus, our observations in ITA No.2485/Ahd/2010 for AY 2003-04 above shall apply mutatis mutantis to this appeal. Accordingly, in parity with the reasons, challenge to jurisdiction under s.147 is dismissed and the eligibility of the assessee under s.80IA(4) of the Act on merits is allowed.

16. This leaves us with ground No.(iii) concerning allowability or otherwise of loss of Rs.45,29,321/- arising from Jhalawar-Indore Road Project.

17. Brief facts germane to the issue are that the assessee entered into an agreement with Government of Rajasthan on 30/03/2001 for improvement of Jhalawar-Indore Road Project in BOT (Build Operate and Transfer) basis. The assessee was given right to collect toll from the users of this road in consideration thereof. However, as claimed by the assessee, the project was not found viable and therefore the same was terminated in September-2004 vide office order of the Chief Engineer CPWD dated 04.10.2004. It is the case of the assessee that it had ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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incurred certain expenditure on this project which were claimed as 'revenue'loss during the year. The AO did not accept the expenditure incurred on the aforesaid project so abandoned as business expenditure of revenue nature and treated the same as capital expenditure. In first appeal, the CIT(A) also did not find merit in the case of the assessee and rejected the claim of ordinary business loss of the aforesaid amount of Rs.45,29,321/- on the ground that the Jhalawar-Indore Road Project was a new business and has nothing to do with the existing business of the assessee. It was observed that as the project did not fructify and therefore expenditure incurred over a period cannot be allowed as Revenue expenditure against the income of the existing business. The CIT(A) also added another dimension to the case of the assessee. It was observed by the CIT(A) that Jhalawar-Indore Road Project was terminated in September-2004 which is after the closure of the financial year attributable to the AY 2004-05 in appeal and thus not a permissible deduction in the year in appeal. On this premise also, it was held the the claim of the assessee towards business expenditure was liable for disallowance in so far as AY 2004-05 is concerned. Accordingly, the CIT(A) rejected the aforesaid claim of the Assessee.

18. Aggrieved by the order of the CIT(A), the assessee has inter-alia taken up the aforesaid issue in the present appeal before the Tribunal.

ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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19. The Ld.AR for the assessee submitted that the Government of Rajasthan issued Letter of Intent (LOI) for carrying out work of improvement of Jhalawar-Indore State Highway on BOT basis. The total cost of project was nearly Rs.715 lacs for the concessional period of 129 months. After the LOI, the agreement was made. The main object of the project was to connect the state of Madhya Pradesh and Rajasthan. The work was commenced pursuant to the arrangement and a sizable amount was spent. Meanwhile, in the ensuing period, SICOM Ltd. cancelled the loan originally granted to the assessee. The funds for the project could not be arranged and therefore the project could not be completed and got delayed. Due to the aforesaid problems, the project was severally affected and was rendered unviable. Thus, after the re- assessment of the situation, the assessee had no option but to drop the project in its business interest. The Ld.AR contended that expenditure incurred for the project was, nevertheless, in connection with the acquisition of a trading right i.e. the right to collect the toll charges for a specific period and the expenditure was not incurred for any acquisition of asset. The assessee were never to become the owner of the asset by virtue of the project undertaken. The Ld.AR next contended that the entire agreement with the Government was on a Build Operate and Transfer basis and the assessee were to acquire merely a right to collect the toll charges for a specific period. The ownership of the Road, i.e. asset in question always belonged to the Government. Thus, the right to ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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collect toll charges was a trading asset and the expenditure was consequently incurred for the purposes of business only. The expenditure was incurred for acquiring the right to use the asset for the purpose of ongoing business of the assessee. The Ld.AR accordingly contended that loss incurred by the assessee on relinquishment of its right relating to toll collection in favour of the third party is intrinsically of a trading nature and therefore business expenditure loss of Rs.45,29,321/- cannot be denied to the assessee.

20. The Ld.AR next contended that had the project been commissioned as proposed, the total cost of the project kept as 'work-in-progress' would have been allowed as Revenue expenditure against the toll income. Therefore, the mere fact that project has been abandoned ought not to have made any difference to the nature of expenditure which is essentially a revenue expenditure and incurred to acquire a trading business right of toll collection. To buttress the position of law on this count, the Ld.AR placed reliance on host of decisions noted hereunder:-

1. Dy.CIT vs. Gujarat Narmada (2015) 57 Valley Fertilizers Co.Ltd. Taxmann.com 250 (Guj.)

2. CIT vs. Gujarat Mineral (2009)314 ITR 322 Development Corporation Ltd. (Guj.)

3. Binani Cement Ltd. vs. CIT (2015) 60 taxmann.com 384 (Cal.)

4. CIT vs. Idea Cellular Ltd. 76 Taxmann.com 77 (Bom.) ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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21. The Ld.DR, on the other hand, relied upon the order of the CIT(A) and submitted that the loss on the abandoned project has been rightly been disallowed as capital expenditure. Without prejudice to the aforesaid contention, the Ld.DR further pointed out that in any event, the aforesaid loss got crystallized in the subsequent financial year owing to the closure of the project. Thus, the impugned loss cannot be considered with reference to the assessment year in question.

22. We have carefully considered the rival submissions. The short controversy in question is whether the loss incurred by the assessee as a result of relinquishment of project is in the nature of trading loss and allowable as a business expenditure or otherwise. In the background of the facts, elaborately noted above, we find that there is a direct and proximate nexus between the business operation and the loss which is incidental to it. The Jhalawar-Indore Road Project could not be completed due to commercial impediments as pointed out on behalf of the assessee and therefore the project was abandoned. The expenditure incurred on the efforts made in the project was claimed as business expenditure. The key facts relevant for determination of the issue are that by virtue of the agreement with the state, the assessee was not vested with the ownership right of the asset in any manner. The assessee was ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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entitled to use the road for collection of toll charges to recoup the expenditure incurred. Thus, the expenditure incurred was inherently trading in nature which was permissible for set off as business expenditure against the trading income on matching principle basis. As noted, the project could not be completed and hence the loss incurred thus far was saddled on the assessee. Under the circumstances, the loss incurred for improvement of road project which was ultimately abandoned due to certain commercial reasons are clearly incurred for the purposes of assessee's business engaged in the similar line of activity. The road project was meant for the purposes of generating revenue by collecting toll charges. The toll charges were to be collected by utilizing the road project for certain specific period. Thus, the potential collection of toll is not an independent source of income. The assessee has incurred expenditure and undertook the risk which is inherent in carrying on such business. The loss thus incurred is clearly incidental to the nature of assessee's business and is allowable without any doubt. The argument set up by the CIT(A) that the aforesaid Road Project is a new line of activity and thus a new business in distinction with the existing business is singularly fallacious. Admittedly, the assessee is systematically engaged in the road construction/improvement activity. The impugned project giving rise to the loss is merely another activity of similar nature. Each road project by itself cannot be seen as a separate business per se as claimed by the Revenue. Therefore, we do not find any substance in ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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such line of argument raised on behalf of the Revenue. Thus, in our firm opinion, the loss incurred on closure of Jhalawar-Indore Road Project bears the character of revenue expenditure.

23. However, we find some force in the alternative argument on behalf of Revenue that the project was terminated in September-2004 after the closure of the financial year. Therefore, the accumulated expenditure claimed to be the business loss is not attributable to the financial year 2003-04 relevant to AY 2004-05 in appeal. We subscribe to the alternative plea raised on behalf of the Revenue that the accumulated loss on the aforesaid project should be considered to have been crystallized in the year in which the project was ultimately abandoned. Therefore, in our view, the relief towards impugned claim of revenue expenditure is attributable to the subsequent AY 2005-06 where it is crystallized. To this limited extent, the plea of the Revenue is found tenable. Consequently, the loss claimed on the aforesaid project cannot be claimed as allowable business expenditure relevant to the AY 2004-05 in appeal. However, the assessee shall be at liberty to claim the aforesaid loss held to be business expenditure in the AY 2005-06 in accordance with law.

24. Subject to aforesaid observations, this issue raised by the assessee is disposed of as dismissed.

ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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25. As a result, assessee's appeal in ITA No.2486/Ahd/2010 for AY 2004-05 is partly allowed.

26. In the combined result, both the appeals of the assessee are partly allowed.

This Order pronounced in Open Court on                                      13 / 04 /2017


               Sd/-                                                     Sd/-
         (महावीर  साद)                                            ( द	प कुमार के डया)
        या यक सद य                                                     ले खा सद य
 ( MAHAVIR PRASAD )                                     ( PRADIP KUMAR KEDIA )
JUDICIAL MEMBER                                         ACCOUNTANT MEMBER

Ahmedabad;            Dated             13 / 04 /2017
ट	.सी.नायर, व. न.स./T.C. NAIR, 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. संबं6धत आयकर आयु8त / Concerned CIT

4. आयकर आयु8त(अपील) / The CIT(A)-III, Baroda

5. 9वभागीय त न6ध, आयकर अपील य अ6धकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड फाईल / Guard file.

आदे शानुसार/ BY ORDER, स'या9पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad आयकर अपील य अ धकरण, अहमदाबाद यायपीठ 'डी', अहमदाबाद ।

IN THE INCOME TAX APPELLATE TRIBUNAL " D " BENCH, AHMEDABAD सव ी द प कुमार के डया, लेखा सद य एवं महावीर साद, या यक सद य के सम । BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER And SHRI MAHAVIR PRASAD, JUDICIAL MEMBER

1. आयकर अपील सं./I.T.A. No.2485/Ahd/2010

2. आयकर अपील सं./I.T.A. No.2486/Ahd/2010 ( नधा रण वष A ssessment Years :2003-04 & 2004-05 r e s p e c t i v e l y ) Nila Baurat Engineering Ltd. बनाम/ The ACIT 611, Yashkamal Building Vs. Circle-4 Sayajigunj, Baroda Baroda थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AAACN 7066 N (अपीलाथ& /Appellant) .. ( 'यथ& / Respondent) अपीलाथ& ओर से / Appellant by : Ms.Urvashi Shodhan & Shri Parin Shah, ARs 'यथ& क) ओर से/Respondent by : Shri Vijay Kumar Singh, Sr.DR ु वाई क) तार ख / सन Date of Hearing 11/04/2017 घोषणा क) तार ख /Date of Pronounce ment 13/ 04 /2017 आदे श / O R D E R PER PRADIP KUMAR KEDIA, AM:

The captioned two appeals by the Assessee are directed against the separate orders of the Commissioner of Income Tax(Appeals)-III, Baroda [CIT(A) in short] identically dated 31/05/2010 for the Assessment Years (AYs) 2003-04 & 2004-05.

ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05 -2-

2. Since common issues are involved in both these appeals, these were heard together and are being disposed of by way of this consolidated order for the sake of convenience.

3. We shall first take up ITA No.2485/Ahd/2010 - AY 2003-04 as a lead case for the purpose of determination of issues involved.

4. In its main ground of appeal, the assessee has assailed the order of the CIT(A) wherein the action of the Assessing Officer (AO) in disallowing the deduction of Rs.13,71,617/- claimed by the assessee under s.80IA of the Income Tax Act, 1961 (hereinafter referred to as "the Act") was confirmed. The assessee also raised 'additional grounds' of appeal in terms of Rule 11 of the ITAT Rules, 1963 whereby the validity of reopening of assessment by the AO was also put under challenge.

4.1 The original ground and the additional ground raised by the assessee is extracted hereunder:-

Original Ground The Learned CIT(A) has grossly erred in law and on facts in confirming action of the Assessing Officer in disallowing the deduction of Rs.13,71,617/- claimed u/s.80IA of the Act and originally allowed to the assessee in order u/s.143(3) of the Act.

Additional Ground ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05 -3- Ld. CIT(A) erred in law and on facts in confirming the validity of the reopening of the assessment by AO on the basis of observation of Hon'ble ITAT in order of third party. Ld.CIT(A) ought to have held the assessment void ab initio & bad in law based on change of opinion when full information with respect to deduction claimed u/s.80IA was before AO and discussed in order u/s.143930 of the Act.

5. The additional grounds filed under Rule 11 of ITAT involves examination of legal question on facts available on record. Accordingly, we admit the same for adjudication.

6. Briefly stated, the assessee is a Limited Company engaged in the business of civil construction and installation of various Industrial projects on contract basis. The assessee filed return of income for the impugned AY 2003-04 declaring income at Rs.20,92,317/-. The return of the assessee was subjected to scrutiny assessment. As a sequel thereto, the assessment order under s.143(3) was framed assessing the income at Rs.78,10,220/- after making various disallowances vide order dated 27/03/2006. After the completion of the assessment, the case was reopened under s.147 of the Act by issuance of notice under s.148 of the Act dated 26/03/2009 to the assessee. While framing the re-assessment dated 19/11/2009, the AO rejected deduction claimed under s.80IA(4) of the Act. The assessee challenged the aforesaid re-assessment order before the CIT(A). However, the CIT(A) sustained the disallowances of deduction under s. 80IA of Rs.13,71,617/- made by the AO.

ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05 -4-

7. Aggrieved thereto, the assessee is in appeal before the Tribunal.

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assessee to rebut the initial belief of the AO. The plea of the assessee thus is without any force.

10.5. Consequently, the additional ground raised by the challenging the validity of reopening is dismissed.

11. We shall now address the main ground raised by the assessee towards eligibility of claim of deduction under s.80IA(4) of the Act on merits.

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Government of Rajasthan for this purpose is specified to be nearly 5 years.

11.2. At this stage, we take note of clause No.13 of the agreement entered into by the assessee with Government of Rajasthan heavily relied upon by the assessee. It reads as under:-

(13) The 'Lessee' will not assign the 'demised property' or transfer the benefit of the lease to any third party. 'Lessee' will also not mortgage the 'demised land' to any Financial Institution or Individual for raising capital for construction of the Project or for any other purpose."

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other hand, there is no manner of doubt that it is the assessee who was the developer of the infrastructure facility.

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11.5. It will be apt to reproduce the appropriate portion of the order of the ITAT Jaipur in ITA No.464/JP/2008 dealing with the issue in favour of RTPL.

"For a ready reference we first reproduce the provisions of section 80IA of the I.T.Act, 1961 hereunder:-

(4) This section applies to--

(i) any enterprise carrying on the business [of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining]any infrastructure facility which fulfils all the following conditions, namely :--

(a) it is owned by a company registered in India or by a consortium of such companies [or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act;]

(b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i)developing or (ii)operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility;]

(c) it has started or starts operating and maintaining the infrastructure ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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facility on or after the 1st day of April, 1995:

Provided that where an infrastructure facility is transferred on or after the 1st day of April, 1999 by an enterprise which developed such infrastructure facility (hereafter referred to in this section as the transferor enterprise) to another enterprise (hereafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place. The following second proviso shall be inserted after the existing proviso to clause (i) of sub-section (4) of section 80-IA by the Finance Act, 2016, w.e.f. 1-4-2017 :

Provided further that nothing contained in this section shall apply to any enterprise which starts the development or operation and maintenance of the infrastructure facility on or after the 1st day of April, 2017. [Explanation.--For the purposes of this clause, "infrastructure facility" means--

(a) a road including toll road, a bridge or a rail system;

(b) a highway project including housing or other activities being an integral part of the highway project;

(c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system;

(d) a port, airport, inland waterway [, inland port or navigational channel in the sea];]

(ii) any undertaking which has started or starts providing telecommunication services, whether basic or cellular, including radio paging, domestic satellite service, network of trunking, broadband network and internet services on or after the 1st day of April, 1995, but on or before the 31st day of March, [2005].] Explanation.--For the purposes of this clause, "domestic satellite" means a satellite owned and operated by an Indian company for providing telecommunication service;

(iii) any undertaking which develops, develops and operates or maintains and ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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[Provided that in a case where an undertaking develops an industrial park on or after the 1st day of April, 1999 or a special economic zone on or after the 1st day of April, 2001 and transfers the operation and maintenance of such industrial park or such special economic zone, as the case may be, to another undertaking (hereafter in this section referred to as the transferee undertaking), the deduction under sub-section (1) shall be allowed to such transferee undertaking for the remaining period in the ten consecutive assessment years as if the operation and maintenance were not so transferred to the transferee undertaking :

[Provided further that in the case of any undertaking which deve-lops, develops and operates or maintains and operates an industrial park, the provisions of this clause shall have effect as if for the figures, letters and words "31st day of March, 2006", the figures, letters and words "31st day of March, [2011]" had been substituted;]

(iv) an [undertaking]which,--

(a) is set up in any part of India for the generation or generation and distribution of power if it begins to generate power at any time during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, [2017];

(b) starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the period beginning on the 1st day of April, 1999 and ending on the 31st day of March, [2017]:

Provided that the deduction under this section to an [undertaking]under sub-clause (b) shall be allowed only in relation to the profits derived from laying of such network of new lines for transmission or distribution;

[(c) undertakes substantial renovation and modernisation of the existing network of transmission or distribution lines at any time during the period beginning on the 1st day of April, 2004 and ending on the 31st day of March, [2017].

Explanation.--For the purposes of this sub-clause, "substantial renovation and modernisation" means an increase in the plant and machinery in the network of transmission or distribution lines by at ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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least fifty per cent of the book value of such plant and machinery as on the 1st day of April, 2004;] [(v) an undertaking owned by an Indian company and set up for reconstruction or revival of a power generating plant, if--

(a) such Indian company is formed before the 30th day of November, 2005 with majority equity participation by public sector companies for the purposes of enforcing the security interest of the lenders to the company owning the power generating plant and such Indian company is notified before the 31st day of December, 2005 by the Central Government for the purposes of this clause;

(b) such undertaking begins to generate or transmit or distribute power before the 31st day of March, [2011];] There is no doubt as per the terms of agreement between the assessee and NBEL that the assessee was appointed for operating and maintaining including collection of tolls as the collecting agent from traffic plying on the Sirohi-Anadara-Reodr-Mandar Road for the prescribed distance. Hence, in our view, the AO was wrongly assumed that the agreement executed between the developer and the assessee was for execution of work collection tolls only. As per language used in the agreement it is a case of transfer of rights available to the transferor i.e. NBEL after developing, the facilities for collection of tolls (which is the only work of operating of facility) as well as maintaining the facility, for both the purposes in all respect and in accordance with the terms of the agreement executed by the developer NBEL with the State Government of Rajasthan. In our view, the transfer does not mean and imply transfer of any property, which also never vests in the hands of the developer of the facility and it should not be construed in a conservative manner. Here 'transfer' only means the transfer of right of operation and maintenance of the facility, which was completely transferred and in fact carried out by the assessee. The AO also failed to appreciate this material fact that in terms of the agreement dated 16.8.2002 the assessee got the facility of operating, collecting and maintaining for whole period i.e. upto 5.12.2005 available to the developer (NBEL). The Assessing Officer has ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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12. As a result, ground of appeal towards deduction under s.80IA(4) on merits is allowed, while additional grounds of appeal challenging the jurisdiction is dismissed.

13. In the result appeal of the assessee in ITA No.2485/Ahd/2010 for AY 2003-04 is partly allowed.

ITA No.2486/Ahd/2010 - AY 2004-05 - Assessee's appeal

14. In this appeal, the assessee is aggrieved by -

(i) alleged illegal action of the AO in invoking the section 147 of the Act based on change of opinion in terms of additional ground filed.

(ii) denial of deduction of Rs.30,49,558/- under s.80IA(4) of the Act.

ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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(iii) disallowance of claim of Rs.45,29,321/- claimed as business loss on account Jhalawar-Indore Road Project.

16. This leaves us with ground No.(iii) concerning allowability or otherwise of loss of Rs.45,29,321/- arising from Jhalawar-Indore Road Project.

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18. Aggrieved by the order of the CIT(A), the assessee has inter-alia taken up the aforesaid issue in the present appeal before the Tribunal.

ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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1. Dy.CIT vs. Gujarat Narmada (2015) 57 Valley Fertilizers Co.Ltd. Taxmann.com 250 (Guj.)

2. CIT vs. Gujarat Mineral (2009)314 ITR 322 Development Corporation Ltd. (Guj.)

3. Binani Cement Ltd. vs. CIT (2015) 60 taxmann.com 384 (Cal.)

4. CIT vs. Idea Cellular Ltd. 76 Taxmann.com 77 (Bom.) ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

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such line of argument raised on behalf of the Revenue. Thus, in our firm opinion, the loss incurred on closure of Jhalawar-Indore Road Project bears the character of revenue expenditure.

24. Subject to aforesaid observations, this issue raised by the assessee is disposed of as dismissed.

ITA Nos.2485 & 2486/Ahd/2010 Nila Bauart Engineering Ltd. vs. ACIT Asst.Years - 2003-04 & 2004-05

- 30 -

25. As a result, assessee's appeal in ITA No.2486/Ahd/2010 for AY 2004-05 is partly allowed.

26. In the combined result, both the appeals of the assessee are partly allowed.

This Order pronounced in Open Court on                                      13 / 04 /2017


               Sd/-                                                     Sd/-
         (महावीर  साद)                                            ( द	प कुमार के डया)
        या यक सद य                                                     ले खा सद य
 ( MAHAVIR PRASAD )                                     ( PRADIP KUMAR KEDIA )
JUDICIAL MEMBER                                         ACCOUNTANT MEMBER

Ahmedabad;            Dated             13 / 04 /2017
ट	.सी.नायर, व. न.स./T.C. NAIR, 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. संबं6धत आयकर आयु8त / Concerned CIT

4. आयकर आयु8त(अपील) / The CIT(A)-III, Baroda

5. 9वभागीय त न6ध, आयकर अपील य अ6धकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड फाईल / Guard file.

आदे शानुसार/ BY ORDER, स'या9पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad

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Income Tax Appellate Tribunal - Ahmedabad

Nila Bauart Engineering Limited, ... vs Acit., Circle-4,, Baroda on 13 April, 2017