Income Tax Appellate Tribunal - Pune
Rohan & Rajdeep Infrastructure, Pune vs Assessee
Author: G.S. Pannu
Bench: G.S. Pannu
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
BEFORE: SHRI G.S. PANNU, ACCOUNTANT MEMBER
AND
SHRI R.S. PADVEKAR, JUDICIAL MEMBER
ITA No.1214/PN/2010
Assessment Year :2006-07
Rohan & Rajdeep Assistant Commissioner of
Infrastructure, The Reverie, Income Tax, Cir.-3, Pune
1st Floor, 805, Bhandarkar Vs.
Institute Road, Pune-411004
(Appellant) (Respondent)
PAN No.AAFFR9455F
Appellant By: Shri S.V. Pathak
Respondent By: Ms. Ann Kapthuama
ORDER
PER R.S. PADVEKAR, JM:-
This appeal is filed by the assessee challenging the impugned order of the Ld.CIT(A)-II, Pune dated 27-07-2010 for the A.Y. 2006-07.
2. The assessee has taken the following ground:
"On the facts and circumstances prevailing in the case and as per provisions of the Act it be held that, the appellant project known as BOT project at Hanumangad is eligible in terms of provisions of sec. 80IA of the Act to the extent of claim of Rs.2,07,51,140/-. It further be held that the claim is allowable to the appellant in full. It further be held that rejection of the claim by the AO and that confirm by the 1st appellate authority is contrary to provisions of law and facts prevailing in the case. The claim be allowed in full. The appellant be granted just and proper relief as per provisions of law and facts prevailing in the case."
3. The issue in controversy is eligibility of the deduction u/s.80IA (4) of the Act in respect of the project i.e. Hanumangarh - Suratgarh Road, Rajasthan which has been completed by the assessee. As noted by the Assessing Officer, for A.Y. 2006-07 the assessee filed the return of income in which deduction u/s.80IA(4) to the extent of Rs.4,29,66,129/- has been claimed. The said deduction was claimed u/s.80IA in respect 2 ITA No.1214/PN/2010, Rohan & Rajdeep Infrastructure, Pune of "Hanumangarh - Suratgarh via Pilibangan Road" which contract has been executed by the assessee in Rajasthan. In the opinion of the Assessing Officer, as per the contract with the Government of Rajasthan dated 15-12-2000, the project executed by the assessee is of strengthening and improvement of Hanumangarh - Suratgarh via Pilibangan Road. The Assessing Officer has observed that to claim the deduction u/s.80IA(4), basic pre-requisite is that the concerned development should be of a new infrastructure facility. The Assessing Officer referred to and relied on CBDT Circular No. 733, part of said circular is reproduced in the assessment order. The Assessing Officer rejected the claim of the assessee for deduction u/s.80IA(4) of Rs.4,29,66,129/- which is in respect of the project of Hanumangarh - Suratgarh Road in Rajasthan.
4. The assessee carried the issue before the Ld.CIT(A). The assessee raised the grievance that there was no adequate opportunity given by the Assessing Officer and hence, the assessee filed the additional evidence in support of the claim of deduction. The Ld.CIT(A) called for the remand report from the Assessing Officer and part of the same is reproduced in the order of the Ld.CIT(A). It appears that the assessee had claimed the deduction in respect of the said project u/s.80IA (4) for the A.Ys. 2004- 05 and 2005-06 also. The said project was awarded to the assessee on 15-12-2000 and has been completed on 18-05-2006. In respect of the merit of the claim, the comments of the Addl. CIT Range-3, Pune dated 17-03-2010 which were submitted to the Ld.CIT (A) are as under:
"The additional evidences submitted by the assessee in respect of the execution of the project on BOT basis are examined. The submissions made by the assessee to the CIT(A)-II, Pune, which were forwarded by you were also considered. It is seen that the A.O. has disallowed the claim of deduction u/s.80IA by holding that work executed by the assessee was not for the development of "new" infrastructure facility. The assessing officer relied upon circular no. 733 of the 3 ITA No.1214/PN/2010, Rohan & Rajdeep Infrastructure, Pune CBDT which stipulates the condition that the infrastructure facility developed by the assessee should be a "New Infrastructure Facility". It is seen that the assessee in his latest submission has nowhere challenged the decision of the assessing officer to test the claim of deduction u/s.80IA(4) on the condition of development of "New Infrastructure Facility".
Instead the assessee has gone into dictionary meaning of 'development1, 'infrastructure facility' and 'improvement'. The evidences submitted by the assessee in fact prove that the work undertaken by the assessee was the work of mere improvement of existing infrastructure facility. Kind attention is invited to the document / report having the title B.O.T. project on page no.2 of this document / report under the heading 'Necessity' at para 8 the purpose for the project has been mentioned as follows:
"At present the road has got crust thickness of 25 cm only while the present day traffic is 15-26 nos. commercial vehicles per day which requires minimum crust thickness of 37 cms. Thus, the work was to increase the thickness of existing roads having length of 26 kms and width of 7 mtrs from 25 cms to 37 cms.
At page no. 4 of the documents / report at para 10 under the heading "Proposal" the exact information of the work done is mentioned as follows:
"The proposal - 75 mm thick dense bitumen macadam by 40mm thick A.C. as wearing coat. Thus the assessee was required to provide additional thickness of dense bitumen of 7.5 cm and A. C. wearing coat of 4 cm."
The assessee has also provided lists of completed projects in infrastructure under Public Private Partnerships. The list contains information about 32 completed projects, 2 ongoing projects and 3 projects in pipeline. It is seen that there are few projects in this lists which prima-facie look like new infrastructure project. The project at sr.no. 1 in the list of completed projects is in respect of "Karawati Bridge". It seems that this project is to be constructed newly under the P. P. P. project. Similarly, the projects at sr.no.9 to 11 in respect of Sihar Bypass, Bharatpur Bypass and .Pa// Bypass seem to be prima-facie new infrastructure projects, .are very much distinguishable from the project undertaken by the assessee. However, the work undertaken by the assessee in merely of increasing the thickness of the existing road of 26 kms length without even increasing the width of the road.
Thus, the information submitted by the assessee as additional evidences itself goes to prove that the assessee has not developed "New Infrastructure Facility" while undertaking the work in respect of 26 kms of road as claimed in the return of income."
5. The assessee filed his reply to the remand report of the Assessing Officer as well as comments by Addl. CIT before the Ld.CIT(A). The 4 ITA No.1214/PN/2010, Rohan & Rajdeep Infrastructure, Pune Ld.CIT(A) confirmed the view of the Assessing Officer by giving the following reasons:
"4.5. I have considered the submissions of the appellant and the material available on record. First of all, the additional evidence furnished by the appellant with an application u/r.46A of I.T. Rules has been considered by the Assessing Officer and the Addl.CIT in their reports. It is also noticed that it is a fact that the assessment proceedings were actually taken up for hearing in December, 2008 with the time barring dated was 31.12.2008 and therefore, there was not much opportunity given to the appellant nor there was sufficient time available. The relevance of the documents produced by the appellant is also not in dispute. Considering the same, the documents produced by the appellant have been duly taken into consideration and is therefore, being admitted u/r.46A of I.T. Rules. Now, it is a matter of record that the agreement for Hanumangarh - Suratgarh Road of the Rajasthan Government was for strengthening and improving of the road and increasing its thickness. The Addl. CIT's report dtd.17.3.2010 has clearly brought this fact on record, citing from the relevant paras of these documents / agreement regarding BOT project under which the work was awarded to the appellant. For the sake of clarity, para 4 of the Addl.CVT's report is again being reproduced below :
"Kind attention is invited to the document I report having the title B.O.T. project on page no.2 of this document / report under the heading 'Necessity' at para 8 the purpose for the project has been mentioned as follows :
"At present the road has got crust thickness of 25 cm only while the present day traffic is 15-26 nos. commercial vehicles per day which requires minimum crust thickness of 37 cms. Thus, the work was to increase the thickness of existing roads having length of 26 kms and width of 7 mtrs from 25 cms to 37 cms. At page no.4 of the documents / report at para 10 under the heading "Proposal" the exact information of the work done is mentioned as follows : "The proposal - 75 mm thick dense bitumen macadam by 40mm thick A.C. as wearing coat. Thus the assessee was required to provide additional thickness of dense bitumen of 7.5 cm and A.C. wearing coat of 4 cm."
4.6. The CBDT Circular No.733 mentioned by the Assessing Officer also clearly stipulate that the infrastructure facility developed by the assessee should be new infrastructure facility. Still further, the CBDT has come up with a new circular No.4/2010 vide F.No.178/14/2010 - ITA No.1 dated 18.5.2010 in which it has been stated as under:
" Circular No.4/2010
Subject :- Widening of existing road - definition of a new infrastructure facility- clarification regarding.5 ITA No.1214/PN/2010, Rohan & Rajdeep Infrastructure, Pune
Reference have been received by the Board as to whether widening of existing roads constitutes creation of new infrastructure facility for the purpose of section 80IA(4)(i) of thel.T.Act, 1961.
Section 80IA(4)(i) provides for a deduction to an undertaking engaged in developing, or operating and maintaining, or developing, operating and maintaining any infrastructure facility subject to satisfaction of the conditions laid down in the section. The Explanation to subsection 80IA(4)(i) states that for the purpose of this clause, infrastructure facility means inter alia :-
"(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.
The issue has been examined by the Board. It has been decided that widening of an existing road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80IA(4)(i). However, simply relaying of an existing road would not be classifiable as a new infrastructure facility for this purpose."
4.7. Therefore,, the appellant's contention and explanation furnished with the letters dated 3rd May, 2010 and 24th July, 2010 are not found to be tenable. The contention made in the letter dated 24.7.2010 that these circular No.4/2010 supports the appellant's claim is not correct. In the appellant's case it was merely a case of thickening and strengthening of road, by increasing the thickness from the existing thickness of 25 cms to 37 cms i.e. an increase by 12 cm. The strengthening was for the purposes of extra load of traffic. No where the tender document stipulate that it was for addition of extra lanes as a part of the highway project. To my mind, merely increasing the thickness of an existing road would not qualify as a new infrastructure project. Accordingly, and also considering the Circular No.4 of CBDT, the appellant's project does not fit within the parameters of a new infrastructure facility.
4.8. In view of the above discussion, and considering the remand report of the Assessing Officer and the Addl.CIT read with the CBDT circulars referred to above, the appellant's case does not qualify for deduction u/s.80IA(4). Therefore, the disallowance of the claim u/s.80IA(4) made by the Assessing Officer is upheld. Ground No. 2 is therefore, dismissed.
Now the assessee is in appeal before us.
6. The learned counsel for the assessee at the outset submits that the road constructed by the assessee is close to India - Pakistan Border and there is heavy traffic due to Oil Depots - Oil Tanker passing though 6 ITA No.1214/PN/2010, Rohan & Rajdeep Infrastructure, Pune said road and also Heavy Military Traffic being a border road. The existing road was not having the strength so as to coup up the traffic. He submits that it was not merely a repairing of road but re-doing of the entire road work so as to have the required strength and width. He submits that the said project was on the BOT basis i.e. Built, Operate and Transfer and the assessee was authorized to collect toll. He submits that as per the Government policy various projects are undertaken on the Public and Private partnership. Even though in the tender, the project is described as "Improving and Strengthening" of the road but the fact remained that considering the work executed, it remains the infrastructure projects only. He further submits that it was not merely a repairing of the road as concluded by the Ld.CIT(A) but in fact, the width of the road is also increased. He submits that the word "New" does not always mean that it never existed before or it should be fresh. He submits that on the examination of the tender documents the project road completed by the assessee is not merely improvement and Strengthening of the road, but in fact, it was total new road which is much wider, much smoother and having much more Strength so as to take on the load of increase in the traffic of the oil tankers as well as defence vehicles. Nowhere it is disputed by the authorities below that the capacity and Strength of the new road was never in the old road and entire road is rebuilt. He submits that the assessee's claim is well supported by the CBDT Circular No. 4/2010 dated 18-05-2010 6.1. He further submits that in the tender documents details of the earthworks to be carried out on the said road project are given which involved cutting, dressing, lying of soil etc., to increase the thickness of the foundation of the road by 12 cm. He submits that there is widening of the road which was to extent of from both side 1 Meter and the construction included the earth work, shoulders work, WBM work and 7 ITA No.1214/PN/2010, Rohan & Rajdeep Infrastructure, Pune bituminous work. He also invited our attention to the total expenditure involved in the execution of the contract and submits that such used expenditure to the tune of Rs.6.3 Cr. does not give any indication that it was not merely maintenance or repair work. In respect of comment of the Addl. CIT that there is no widening of said Road, the Learned Counsel submits that the said comment is not factually correct as per the drawing which is supporting the argument of the assessee that the road was widened. He submits that the formation width of existing road is not stated in the said drawings as it was varying and hence needed widening of formation. He submits that hard bolders of 1m width on either side were newly introduced and that resulted into widening of the road. He submits that the road project undertaken by the assessee is 26 km which is State-highway and for the execution of the said work the assessee was given right to toll collection for 65 months. The learned counsel heavily relied on the CBDT Circular No. 4/2010 dated 18-05- 2010. He also placed reliance on the following precedents/decisions:
1. CIT Vs. Tata Hydro Electric Power Supply Co. 122 ITR 288 (Bom)
2. Shristi Infrasturcture Development Corporation Ltd. Vs. ITO 33 SOT 407 (Del) He finally pleaded for allowing the claim of the assessee.
7. Per contra the Ld. DR relied on the orders of the authorities below and pleads for confirming the order of the Ld.CIT(A).
8. We have heard the rival submissions of the parties and perused the record. The assessee company is in the business of Developing and Execution of infrastructure contracts. It is necessary to examine the terms of the contract with the Govt. of Rajasthan. The assessee has filed the Paper Book and a copy of agreement/contract with the Govt. of Rajasthan dated 15-12-2000 which is placed at page no. 70 to 79. As 8 ITA No.1214/PN/2010, Rohan & Rajdeep Infrastructure, Pune per the title to the Agreement it is mentioned that - "IMPROVEMENT AND STREGTHENING OF HANUMANGARH - SURATGARH ROAD VIA PILIGANGA KM. 0/0 TO 26/0 ON BOT BASIS". The said Agreement is in the form of lease of land as mentioned in the recital. It is asserted that lessor "Govt. of Rajasthan" is desirous to entrust Improvement and strengthening of Hanumangarh - Suratgarh Road via Pilibangan on BOT basis. The Bid document as well as Project report are made a part of the Agreement/Contract. As per the document on record, the length of the road is shown as 26 Km and the project cost is shown at Rs.643.02 Lacs. The necessity for carrying out the improvement and strengthening of the said road is stated that said road has got crust thickness of 25 cm only, while the present day traffic is 1526 no. commercial vehicle per day which requires minimum crust thickness of 37 cm. The exiting width of carriage way was 7.00 M. (page no. 84 of the P/B). After considering the project report which is the part of the Agreement/Contract it appears that Government has made the estimation of cost as well as the revenue collection by authorizing the toll collection to the private parties. As per the terms of agreement, the height of the road has been increased by 12 cm. It is mentioned in the specification that the road is to be widened by 1 mtr. vide shoulders by using Dalmera Kankar in 50 cm thickness. In sum and substance, width of the exiting road is also enhanced by 1 mtr. each side to coup up traffic/vehicle movements.
9. Now in the background of the above facts, we have to examine whether the deduction claimed by the assessee in respect of the project improvement and strengthening of Hanumangarh - Suratgarh Road via Pilibangan which is for 26 Km qualify for deduction u/s.80IA(4) as a new infrastructure facilities. We are not going into the cost working but the drawing specifications are necessary to understand what exact work is done by the assessee on said road.
9ITA No.1214/PN/2010, Rohan & Rajdeep Infrastructure, Pune (A) Name of Work:-Improvement by Strengthening of Hanumangarh-
Suratgarh Road km. 0/0 to 26/0 via Pilibangan
--------------7.00 mts. Carriage Way ---------------
20 mm P.M.C. 100 mm Thick (Compacted) Jhamma Ballast 15cm Brick on EDGE Soiling X-Section of existing Carriage Way (Crust) (B) Name of Work:-Improvement by Strengthening of Hanumangarh-
Suratgarh Road km. 0/0 to 26/0 via Pilibangan
---------Formation Width 12.00 Mts ----------- X-Section of Crust of existing & Proposed The above drawings (part of Bid Document) shows Existing Road (A) and New Road (B) which support the contention of the assessee that the thickness as well as the width of the road have been increased. Now the question is whether can it be said that it is merely repair and maintenance work? And our answer should be in favour of the assessee that it is not merely a repair and maintenance work but doing entire restructuring of existing road. The learned counsel has placed is reliance on the CBDT Circular No. 4/2010 dated 10-05-2010 which is as reproduced here as under:-
10ITA No.1214/PN/2010, Rohan & Rajdeep Infrastructure, Pune
F. No.l'78/14/2010-ITA.I Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, the 18th May, 2010.Circular No. 4 /2010
Subject:- Widening of existing road ,- definition of a new infrastructure facility - clarification regarding. References have been received by the Board as to whether widening of existing roads constitutes creation of new infrastructure facility for the purpose of Section 80IA (4)(i) of the Income Tax Act, 1961.
Section 80IA (4)(i) provides for a deduction to an undertaking engaged in developing, or operating and maintaining, or developing, operating and maintaining any infrastructure facility subject to satisfaction of the conditions laid down in the Section. The Explanation to subsection 80IA(4)(i) states that for the purpose of this clause, infrastructure facility, means inter alia:-
"(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;"
The issue has been examined by the Board. It has been decided that widening of an existing road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of Section 80IA (4)
(i). However simply relying of an existing road would not be classifiable as a new infrastructure facility for this purpose.
(RAMAN CHOPRA) Director (ITA-I) Telefax:23092107
10. The CBDT has clarified the expression "new infrastructure facility". In fact the said circular supports the claim of the assessee that the widening of existing road by constructing additional lane as a part of the highway project is a new infrastructure facility. So far as the Hanumangarh - Suratgarh Road is concerned the width is also increased as one additional lane is developed. In addition to increasing the thickness of the road, it is pertinent to note here that the project report which is the part of the agreement clearly suggest that the existing road was not capable of taking the increased load of the vehicles and hence, there was necessity for strengthening as well as widening the said road. It is not the case that merely some minor work like carpeting has been 11 ITA No.1214/PN/2010, Rohan & Rajdeep Infrastructure, Pune done to be done but the additional lane of 1 mtr. widening with 12 cm increased thickness has been done.
11. In the case of Tata Hydro Electric Power Supply Co. (supra) the old irrigation dam was strengthened by using modern technique. On the expenditure incurred for strengthening of the dam, the assessee claimed the development rebate with the plea that it was a new plant. As per the provisions of law Development Rebate was allowable on a new plant. When the matter reached before Hon'ble High Court the issue was decided in favour of the assessee and Hon'ble High Court held that the assessee incurred a huge expenditure which resulted into increasing the life of the existing dam and it was the work of the creation of new plant and the assessee was entitled for the Development Rebate. It is true that the parameters for the development rebate are different than the deduction to be claimed for developing infrastructure facilities but the principles underline the concept whether the "new infrastructure" mean which is never in existence at all and the said principles can be applied to the assessee's case. We find that in the case of Shristi Infrasturcture Development Corporation Ltd. (supra) on the identical facts i.e. for strengthening and improving of the existing road the Tribunal held that the work is to be considered as new infrastructure facilities.
12. It is true that each case is to be examined on it's own facts. So far as the present case is concerned, we do not agree with the authorities below that it is merely work of the maintenance and repairs but in fact it is a work of bringing into existence new infrastructure facility which is in the nature of road. We, therefore, allow the ground taken by the assessee and hold that the assessee is entitled for deduction u/s.80IA(4) of the Act and direct the Assessing Officer to allow deduction to the assessee.
12ITA No.1214/PN/2010, Rohan & Rajdeep Infrastructure, Pune
13. In the result, the assessee's appeal is allowed.
Pronounced in the open Court on 05-04-2013.
Sd/- Sd/-
(G.S. PANNU) (R.S. PADVEKAR)
ACCOUNTANT MEMBER JUDICIAL MEMBER
RK/PS
Pune, Dated: 05th April, 2013
Copy to
1 Assessee
2 Department
3 The CIT (II), Pune
4 The CCIT, Pune
5 The DR, ITAT, "A" Bench, Pune.
6 Guard file.
//True Copy//
By Order
Private Secretary
Income Tax Appellate Tribunal
Pune