Income Tax Appellate Tribunal - Chennai
Dcit Corporate Circle 2(1), Chennai vs Eco Protection Engineers Pvt. Ltd., ... on 11 April, 2019
आयकर अपील य अ धकरण, 'डी' यायपीठ, चे नई।
IN THE INCOME TAX APPELLATE TRIBUNAL
'D' BENCH: CHENNAI
ी जॉज माथन, या यक सद!य एवं
ी एस. जयरामन, लेखा सद!य के सम'
BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND
SHRI S. JAYARAMAN, ACCOUNTANT MEMBER
आयकर अपील सं./ITA No.2148/Chny/2017 & ITA No.1023/Chny/2018
नधारण वष /Assessment Years: 2013-14 & 2014-15
&
Cross-Objection No.3/Chny/2018
(in ITA No.2148/Chny/2017)
नधारण वष /Assessment Years: 2013-14
The Dy. Commissioner of Income Tax, Vs. M/s.Eco Protection Engineers-
Corporate Circle-2(1), Pvt. Ltd.,
Chennai-600 034. No.943, TVS Colony,
54th Street, Anna Nagar,
West Extension,
Chennai-600 101.
[PAN: AACCE 2151 P]
(अपीलाथ)/Appellant) (*+यथ)/Respondent/
Cross Objector)
Department by : Ms.Subashri, JCIT
Assessee by : Mrs.Jharna B. Harilal, CA
सुनवाई क- तार ख/Date of Hearing : 10.04.2019
घोषणा क- तार ख /Date of Pronouncement : 11.04.2019
आदे श / O R D E R
PER GEORGE MATHAN, JUDICIAL MEMBER:
ITA No.2148/Chny/2017 & ITA No.1023/Chny/2018 are the appeals
filed by the Revenue against the Order of the Commissioner of Income Tax (Appeals)-6, Chennai, in ITA No.163/CIT(A)/2016-17 dated 28.06.2017 for the AY 2013-14 & in ITA No.489/CIT(A)-6/2016-17 dated ITA No.2148/Chny/2017 ITA No.1023/Chny/2018 & CO No.3/Chny/2018 (in ITA No.2148/Chny/2017) :- 2 -:
29.12.2017 for the AY 2014-15. Cross-Objection No.3/Chny/2018 filed by the assessee in the Revenue's appeal No.2148/Chny/2017 for the AY 2013-14.
2. Ms.Subashri, JCIT, represented on behalf of the Revenue and Mrs.Jharna B. Harilal, CA, represented on behalf of the assessee.
3. It was submitted by the Ld.AR that the Cross-Objection filed by the assessee is in support of the order of the Ld.CIT(A). No other grounds have been raised in the Cross-Objection in respect of the appeals filed by the Revenue.
4. It was submitted by the Ld.DR that in ITA No.2148/Chny/2017 for the AY 2013-14, Ground Nos.1.2 to 1.7 were against the action of the Ld.CIT(A) in granting the assessee the benefit of deduction u/s.80IA of the Act and in ITA No.1023/Chny/2018 for the AY 2014-15, Ground Nos.2.1 to 2.4 were against the action of the Ld.CIT(A) in deleting the addition made by the AO on account of the non-payment of the employee's contribution to PF & ESI within the due date of relevant acts. It was submitted by the Ld.DR that the assessee is a company which is in the business of Engineering, Procurement and Construction. During the relevant assessment year, the assessee had done multi disciplinary engineering and turnkey contracts in the field of water, sewage and industrial ITA No.2148/Chny/2017 ITA No.1023/Chny/2018 & CO No.3/Chny/2018 (in ITA No.2148/Chny/2017) :- 3 -:
effluents. The projects undertaken by the assessee were specified in Page No.2 of the Assessment Order. It was a submission that as the projects undertaken by the assessee were only construction projects and consequently, had not complied with the provisions of Sec.80 IA(4) and consequently, was not eligible for deduction u/s.80 IA(4). It was a submission that the Ld.CIT(A) erred in granting the assessee the benefit of deduction u/s.80 IA(4) of the Act. In respect of the grounds in relation to employee's contribution to PF & ESI, it was submitted by the Ld.DR that the assessee has not made the payment within the due date as prescribed under the relevant Act and consequently, the disallowance was liable to be upheld. The Ld.DR vehemently supported the order of the AO.
5. In reply, the Ld.AR drew our attention to various contracts entered into by the assessee with the various government agencies. It was a submission that the projects which have been undertaken by the assessee were clearly developing, operating and maintaining of the various water treatment plants and sewage treatment plants. The Ld.AR vehemently supported the order of the Ld.CIT(A)
6. In respect of the issue of employee's contribution to PF & ESI, it was submitted by the Ld.AR that the issue is now squarely covered by the decision of the Hon'ble Jurisdictional High Court in the case of M/s.Industrial Security & Intelligence India Pvt. Ltd. in Tax Case (Appeal) ITA No.2148/Chny/2017 ITA No.1023/Chny/2018 & CO No.3/Chny/2018 (in ITA No.2148/Chny/2017) :- 4 -:
Nos.585 & 586 of 2015 dated 24.07.2015 wherein Para Nos.5 & 6 as held as under:
5. We find that the Tribunal has rightly relied on the decision of the Supreme Court in the case of. CIT V. Alom Extrusions Ltd. reported in 319 ITR 306, whereby, the Supreme Court held that omission of second proviso to Section 435 and amendment to first proviso by Finance Act, 2003 are curative in nature and are effective retrospectively, i.e., with effect from 1.4.1988 i.e., the date of insertion of first proviso. The Delhi High Court in the case of CIT V. Amil Ltd. reported in 321 ITR 508 held that if the assessee had deposited employee's contribution towards Provident Fund and ESI after due date as prescribed under the relevant Act, but before the due date of filing of return under the Income Tax Act, no disallowance could be made in view of the provisions of Section 435 as amended by Finance Act, 2003.
6. In the present case, the assessee had remitted the employees contribution beyond the due date for payment, but within the due date for filing the return of income. Hence, following the above-said decisions, we find no reason to differ with the findings of the Tribunal. Accordingly, we find no question of law much less any substantial question of law arises for consideration in these appeals. Accordingly, both the Tax Case (Appeals) stand dismissed. No costs. Consequently, M.P.No.1 of 2015 is also dismissed.
7. We have considered the rival submissions.
8. At the outset, in respect of the issue of the deduction u/s.80 IA(4) in respect of the contract entered into by the assessee with government agencies, it is noticed that the issue is now squarely covered by the decision of the Hon'ble Jurisdictional High Court in the case of M/s.V.A.Tech Wabag Pvt. Ltd., in T.C.A.Nos.196 to 201 of 2019 dated 07.03.2019 as also the decision of the Hon'ble Jurisdictional High Court in the case of M/s.Chettinad Lignite Transport Services Pvt. Ltd., in TCA Nos.741, 1266 of 2009 and 162 of 2015 dated 06.03.2019, wherein, the Hon'ble Jurisdictional High Court has held as follows:
6. Having heard the learned counsel for the parties, we are satisfied that the findings of facts rendered by the learned Tribunal as well as the First Appellate Authority do not deserve any interference by this Court under Section 260A of the Act and no Substantial Question of Law arises in these Appeals filed by the Revenue. Since the Assessee admittedly entered into contract with Local Bodies or Municipal Bodies for undertaking the ITA No.2148/Chny/2017 ITA No.1023/Chny/2018 & CO No.3/Chny/2018 (in ITA No.2148/Chny/2017) :- 5 -:
contract works for developing the infrastructure~sewage system, he is directly entitled to get the benefit of such deductions under Section 80IA (4) of the Act. The said Section, in fact, even extends the benefit to the Contractor, who is transferred with such Infrastructure Facility for operating and maintaining the same as per the Proviso to Section 80IA (4) of the Act. We have already dealt with this controversy in a judgment delivered by us in the case of Commissioner of Income Tax v. M/s.Chettinad Lignite Transport Services Private Limited in T.C.A.No.741 of 2009 decided on 06.03.2019, the relevant portion of which order is quoted below for ready reference :
8. From a reading of the aforesaid Provisos to Section 80IA(4), it is clear that the Legislature intended to extend the said benefit under Section 80IA of the Act to an enterprise involved in (i) developing or; (ii) operating and maintaining or; (iii) developing, operating and maintaining any infrastructure facility. The term "infrastructure facility" has been defined in the Explanation and the same includes a toll road, a bridge or a rail system, a highway project, etc. These are, obviously, big infrastructure facilities for which the enterprise in question should enter into a contract with the Central Government or State Government or Local Authority.
However, the Proviso intends to extend the benefit of the said deduction under Section 80IA of the Act even to a transferee or a contractor who is approved and recognised by the concerned authority and undertakes the work of the said development of infrastructure facility or only operating or maintaining the same. The Proviso to sub~section (4) stipulates that subject to the fulfillment of conditions, the transferee will be entitled to the said benefit, as if the transfer in question had not taken place. It has been found by the Assessing Authority himself, in the present case, that the present Assessee M/s.Chettinad Lignite Transport Services Private Limited under an Agreement dated 16.04.2002, captioned as Lignite Transport System with M/s.ST~CMS Electric Company Private Limited, had undertaken the work of developing the said railway sidings and was operating and maintaining the same. The only ground on which, the Assessing Authority denied the said benefit was that the Assessee himself did not enter into any such contract with the Railways or with the Central Government.
9. The learned Tribunal, however, in our opinion, rightly applied the Proviso to Section 80IA(4) of the Act and held that since the Assessee was recognised as contractor for these railway sidings, which undoubtedly fell under the definition of "infrastructure facility", it was entitled to the said benefit under Section 80IA of the Act. The grounds on which the Assessing Authority denied the said benefit to the Asessee ignoring the effect of Provisos to Section 80IA(4), therefore, could not be sustained. The learned Tribunal, in our opinion, has rightly held that the Proviso does not require that there should be a direct agreement between the transferee enterprise and the specified authority for availing the benefit under Section 80IA of the Act. There is no dispute before us that the Assessee was duly recognised as transferee or assignee of the principal contractor M/s.ST~CMS Company Private Limited and was duly so recognised by the Railways to operate and maintain the said railway sidings at Vadalur and Uthangalmangalam Railway Stations. The findings of fact with regard to the said position recorded by the learned Tribunal are, therefore, unassailable and that clearly attracted the first Proviso to Section 80IA(4) of the Act.
10. The learned counsel for the Revenue relied upon a decision of this Court in the case of M/s.Covanta Samalpatti Operating Private Limited, Chennai~20 v. The Assistant Commissioner of Income Tax, Company Circle I (3), Chennai~34, reported in (2018) 93 Taxmann 38. In the said case, the claim of the Assessee company, which was engaged in power generation, for deduction under Section 80IA of the Act was denied by the Revenue on the ground that the Assessee Undertaking had not been set up for generation and distribution of power and that the Assessee was only a contractor for the maintenance work of power plant, which was owned by Samalpatti Power Corporation Private Limited (SPCL). On these facts, the Court held that the Assessee was not entitled to deduction under Section 80IA of the Act. We do not find any parity of facts of the said case ITA No.2148/Chny/2017 ITA No.1023/Chny/2018 & CO No.3/Chny/2018 (in ITA No.2148/Chny/2017) :- 6 -:
with the facts available before us. The power generating companies are entitled to deduction under Section 80IA of the Act in different sub clauses viz., under Section 80IA(4)(iv) of the Act. Where there is no such Proviso, as is available in clause (i) of Section 80IA(4) of the Act, which deals with deduction to enterprise involved in developing, operating and maintaining the infrastructure facilities. Obviously, if the Assessee is getting only fees for the maintenance of certain power generating plant, as was the case before the Co~ordinate Bench of this Court in Covanta case (supra), he may not be entitled to such deduction, but the fact situation before us is entirely different and, therefore, we do not find any support from the said case cited by the learned counsel for the Revenue.
11. We are, therefore, of the considered opinion that there is no merit in these appeals filed by the Revenue and the questions of law framed above deserve to be answered in favour of the Asessee and against the Revenue. We hereby do so. The appeals preferred by the Revenue deserve to be dismissed and accordingly, the same are dismissed. No costs."
9. As it is noticed that the issue is now squarely covered by the decision of the Hon'ble Jurisdictional High Court in the case of M/s.V.A.Tech Wabag Pvt. Ltd., & M/s.Chettinad Lignite Transport Services Pvt. Ltd., referred to supra, the findings of the Ld.CIT(A) on this issue, which are as under:
4.7 In the context of these factual parameters, let us examine the stipulations as per Section 801A(4) of the Act. The deduction under Section 801A is allowable to any enterprise carrying on the business of
(i) Developing or
(ii) Operating and maintaining
(iii) Developing, operating and maintaining any, infrastructure facility.
4.7.1 The factual matrix as it emerges dearly establish that the appellant company has undertaken risks and not only designed and executed the project, but also made substantial investments in terms of skilled manpower as well as plant and machinery and raw materials. I find the reasoning of the AO to be erroneous when he states that the appellant company is a mere contractor and that it is not the owner of the infrastructure projects. If the interpretation of the AO is taken to its logical culmination, it would only be the Governments or local bodies that can claim deduction under Section 801A of the Act. This is dearly not the intention behind the incorporation of the provisions on the statute. The fact is that the amendments made through the Finance Act, 2001 the scope of deduction has been considerably widened so as to grant the deduction to any enterprise engaged only in the "developing of an infrastructure project". The fact that the appellant company has executed infrastructure projects is not disputed by the AO. What is disputed is that the appellant was not a developer but merely a contractor. The ld. Chennai Tribunal, in its decision in the case of B. Dhanasekaran has deliberated on the distinction between a 'developer' and a 'works contractor' as under:
"8. We have considered the elaborate submissions made by both the parties and also perused the materials available on record. We have also gone through all the case laws cited by both the parties. We find that the provision of Section 801A(4) of the Act when introduced afresh by the Finance Act, 1999, the provisions under ITA No.2148/Chny/2017 ITA No.1023/Chny/2018 & CO No.3/Chny/2018 (in ITA No.2148/Chny/2017) :- 7 -:
section 801A(4A) of the Act were deleted from the Act. The deduction available for any enterprise earlier under section 80IA(4A) of the Act were deleted from the Act. The deduction available for any enterprise earlier under section 801A(4A) are also made available under Section 801A(4) itself. Further, the very fact that the legislature mentioned the words (i) "developing' or (ii) "operating and maintaining"
or (iii) "developing, operating and maintaining "clearly indicates that any enterprise which carried on any of these three activities would become eligible for deduction. Therefore, there is no ambiguity in the Income Tax Act. We find that where an assessee incurs expenditure on its own for purchase of materials and towards labour charges and itself executes the development work i.e., carries out the civil construction work, It will be eligible for tax benefit under section 80 IA of the Act. In contrast to this, an assessee who enters into a contract with another person including Government or an undertaking or enterprise referred to in Section 80 IA of the Act, for executing works contract, will not be eligible for the tax benefit under section 80 IA of the Act." (Sic') 4.7.1 The facts of the appellant's case clearly establish that the contracts entered into involve design, development, in some cases operation and maintenance, financial involvement, risks, defect correction and liability period. The design of the project, the procurement of materials, payment to labour and other personnel are all appellant's responsibilities. In my considered view, these are not simple works contract, but come within the perimeter of "developing an infrastructure facility" within the meaning of Section 80IA of the Act.
4.7.2 Two peripheral arguments have been made by the AO in disallowing the claim under Section 80IA.
i. That the profit has not been "derived from" the business of developing infrastructure projects.
ii. That the appellant has itself accepted that it is a contractor by accepting tax to be deducted as per the provisions of Section 194C of the Act.
4.7.3 On examination of the financial statements as well as the Auditors' Certificate in Form 10CCB, I find that the appellant company has claimed deduction under Section 801A only From the projects eligible for the claim. The details are mentioned as below:
a) Total Turnover of the Appellant Rs.57,84,65,1 07/-
b) Eligible Turnover of the Appellant Rs.9,48,46,926/-
c) Profit as per the Profit & Loss Account Rs.3,01,12,568/-
d) Profit Eligible for Deduction under
Section 80IA of the Act Rs.2,05,54,143/-
B
C x --------
A
4.7.3.1 Hence, the contention of the AO that the profits are not derived from the business of developing infrastructure project is not valid.
4.7.4 The Id. Mumbai Tribunal in the case of Assistant Commissioner of Income-tax Vs. Pratibha Industries Limited in ITA Nos.2197 to 2199 /Mum/2008 dealt in the issue of deduction under Section 194C of the Act vis-à-vis the claim of being a 'developer' in terms of Section 80IA of the Act. Reliance is placed on the judgement dated 19.12.2012, wherein the id. Mumbai Tribunal held as under:
"14. The other argument by the AO and the DR had been that the assessee accepted itself to be a contractor, by accepting the tax to be deducted under Section 194C, which is relevant, only in the case of a contractor, also cannot be accepted. Because, first, we have to ascertain whether the assessee falls under ITA No.2148/Chny/2017 ITA No.1023/Chny/2018 & CO No.3/Chny/2018 (in ITA No.2148/Chny/2017) :- 8 -:
Section 801A/80IA(4), because Chapter XVIII, wherein Section 194C is embedded, is only machinery chapter for collection and recovery of taxes."
4.8 In view of the facts, circumstances, and judicial pronouncements as discussed above, I find the appellant company to be a developer of infrastructure projects, eligible for deduction under Section 80IA of the Act. The disallowance made by the AO stands deleted. This ground is allowed.
The above findings of the Ld.CIT(A) on this issue stand upheld.
10. In the result, Ground Nos.1.2 to 1.7 of the Revenue appeal in ITA No.2148/Chny/2017 for the AY 2013-14 are dismissed and Ground Nos.2.1 to 2.6 of the Revenue appeal in ITA No.1023/Chny/2018 for the AY 2014-15 are dismissed.
11. In respect of the issue of employee's contribution to PF & ESI, as it is noticed that the Ld.CIT(A) followed the decision of the Hon'ble Jurisdictional High Court in the case of M/s.Industrial Security & Intelligence India Pvt. Ltd., referred to supra, we do not find to interfere with the findings of the Ld.CIT(A). Consequently, Ground Nos.2.1 to 2.4 of the Revenue appeal in ITA No.2148/Chny/2017 for the AY 2013-14 are dismissed and Ground Nos.3.1 to 3.4 of the Revenue appeal in ITA No.1023/Chny/2018 for the AY 2014-15 are dismissed.
12. As we have already upheld the order of the Ld.CIT(A) and it was submitted by the Ld.AR that the Cross-Objection filed by the assessee in ITA No.2148/Chny/2017 ITA No.1023/Chny/2018 & CO No.3/Chny/2018 (in ITA No.2148/Chny/2017) :- 9 -:
Revenue appeal No.2148/Chny/2017 is in support of the order of the Ld.CIT(A), the same stands dismissed as infructuous.
13. In the result, the appeals filed by the Revenue in ITA No.2148/Chny/2017 & in ITA No.1023/Chny/2018 are dismissed and Cross-Objection No.3/Chny/2018 filed by the assessee stands dismissed as infructuous.
Order pronounced on the 11th day of April, 2019, in Chennai.
Sd/- Sd/-
(एस जयरामन) (जॉज माथन)
(S. JAYARAMAN) (GEORGE MATHAN)
लेखा सद!य/ACCOUNTANT MEMBER या यक सद!य/JUDICIAL MEMBER
चे नई/Chennai,
2दनांक/Dated: 11th April, 2019.
TLN
आदे श क- * त3ल4प अ5े4षत/Copy to:
1. अपीलाथ)/Appellant 4. आयकर आय6
ु त/CIT
2. *+यथ)/Respondent 5. 4वभागीय * त न ध/DR
3. आयकर आय6
ु त (अपील)/CIT(A) 6. गाड फाईल/GF