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27. We further observe that similar issue came up before the Co- ordinate Bench, Hyderabad in the case of GVPR Engineers Ltd. vs. ACIT (2012) taxmann.com 25 (Hyd) wherein it has been held as under :-

Asst. Year 2005-06 & others HELD-I The provisions of section 80-IA(4), when introduced afresh by the Finance Act, 1999, the provisions under section 80-IA(4A) were deleted from the Act. The deduction available for any enterprise earlier under section 80-IA(4A) is also made available under section 80-JA(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 Act. Where an assessee incurred expenditure for purchase of materials himself and executes the development work, i.e., carries out the civil construction work, he will be eligible for tax benefit under section 80-1A. In contrast to this, an assesses, who enters into a contract with another person including Government or an undertaking or enterprise referred to in section 80-IA, for executing works contract, will not be eligible for the tax benefit under section 80-IA. The word 'owned' in sub- clause (a.) of clause (I) of sub-sec.(4) of section 80-IA refers to the enterprise. By reading of the section, it is clear that the enterprises carrying on development of infrastructure development should be owned by the company and not that the infrastructure facility should be owned by a company. The provisions are made applicable to the person to whom such enterprise belongs to is explained in sub-clause (a). Therefore, the word 'ownership' is attributable only to the enterprise carrying on the business which would mean that only companies are eligible for deduction under section 80-IA(4) and not any other person like individual, HUF, firm etc. [Para 26] According to sub-clause (a ), clause ([) of sub-section (4) of section 80-IA, the word 'it' denotes the - enterprise carrying on the business. The word 'it' cannot be related to (he infrastructure facility, particularly in view of the fact that infrastructure facility includes Rail system, Highway project, Water treatment system, Irrigation project, a Port, an Airport or an Inland port which cannot be owned by any one. Even otherwise, the word 'it' is used to denote an enterprise. Therefore, there is no requirement that the assessee should have been the owner of the infrastructure facility. [Para 27] The next question to he answered is whether the assessee is a developer or mere works contractor. The revenue relied on the amendments brought in by the Finance Act 2007 and 2009 to mention that the activity undertaken by the assessee is akin (o works contract and it is not eligible for deduction under section 80-IA(4). Whether the assessee is a developer or works contractor purely depends on the nature of the work undertaken by the assessee. Each of the work undertaken has to he analysed and a conclusion has to be drawn about the nature of the work undertaken by the assessee. The agreement entered into with the Government or the Government body may be a mere works contract or for development of infrastructure. It is to be seen from the agreements entered into by the assessee with the Government. The Government handed over the possession of the premises of projects to the assessee for the development of infrastructure facility. It is the assessee's responsibility to do all acts till the possession of property is handed over to the Government. The first phase is to lake over the existing premises of the projects and thereafter developing the same into infrastructure facility. Secondly, the assessee shall facilitate the people to use the available existing facility even while the process of development is in progress. Any loss to the public caused in the process would be the responsibility of the assessee. The assessee has to develop the infrastructure facility. In the process, all the works arc to be executed by the assessee. It may be laying of a drainage system: may be construction of a project:

But the word 'contractor' is used to denote a person entering into an agreement for undertaking the development of infrastructure facility. Every agreement entered into is a contract. The word 'contractor' is used to denote the person who enters into such contract. Even a person who enters into a contract for development of infrastructure facility is a contractor. Therefore, the contractor and the developer cannot he viewed differently. Every contractor may not be a developer hut every developer developing infrastructure facility on behalf of the Government is a contractor. {Para 29] Section 80-IA intends to cover the entities carrying out developing, operating and maintaining the infrastructure facility keeping in mind the present business models and intend to grant the incentives to such entities. The CBDT, on several occasions, clarified that pure developer should also be eligible to claim deduction under section 80-1A which ultimately culminated into amendment under section 80-IA in the Finance Act, 2001, to give effect to the aforesaid circulars issued by the CBDT. To avoid misuse of the aforesaid amendment, an Explanation was inserted in section 80-IA, in the Finance Act, 2007 to 2009. to clarify that mere works contract would not he eligible for deductions under section 80-IA. But, certainly, the Explanation cannot be read to do away with the eligibility of the developer; otherwise, the Parliament would have simply reversed {he amendment made in the Finance Act, 2001. Thus, the aforesaid Explanation was inserted, certainly, to deny the lax holiday to the entities who do mere works contract or sub-contract as distinct from the developer. This is clear from the express intention of the Parliament while introducing the Explanation. The explanatory memorandum to Finance Act, 2007 states that the purpose of the tax benefit has all along been to encourage investment in development of infrastructure sector and not for the persons who merely execute the civil construction work. It categorically states that the deduction under section 80-IA is available to developers who undertakes entrepreneurial and investment risk and no! to the contractors, who undertake only business risk. Without any doubt, the assessee clearly demonstrated that it has undertaken huge risks in terms of deployment of technical personnel, plant and machinery, technical know-how, expertise and financial resources. After the amendment section 80-IA(4) is read as (\) developing Asst. Year 2005-06 & others or (\\) operating and maintaining or (\\\) developing, operating and maintaining any infrastructure facility. While prior to amendment the 'or' between three activities was not there, after the amendment 'or' has been inserted with effect from 1-4-2002 by Finance Act, 2001. Therefore, if the contracts involve design, development, operating and maintenance, financial involvement, and defect correction and liability period, then such contracts cannot be called as simple works contract to deny the deduction under .section 80-IA. The contracts which contain above features to be segregated, this deduction under section 80-IA have to be granted and the other agreements which are pure works contracts hit by the Explanation to section 80-JA(13), those work are not entitled for deduction under section 80-IA. The profit from the contracts which involve Resign, development, operating and maintenance, financial involvement, and defect correction and liability period is to be computed by the Assessing Officer on pro rata basis of turnover. The Assessing Officer is directed to examine the records accordingly and grant deduction on eligible turnover as directed above. [Para 30]

• The lower revenue authorities disallowed the deduction on the ground that assessee was a mere works contractor and not a developer. The authorities took the view that unless operation of the infrastructure facility was also undertaken, the assessee would not be eligible for deduction.

On appeal Held -I Ownership of infrastructure facility not required for deduction under section 80-IA Asst. Year 2005-06 & others • The provisions of section 80-1 A(4) when introduced afresh by the Finance Act, 1999, the provisions under section 80-IA(4A) were deleted from the Act. The deductions available for any enterprise earlier under section 80-1A(4A) are also made available under section 80-IA(4) itself. Further, the very fact that the Legislature mentioned the words (/') 'developing' or (//) 'operating and maintaining1 or (/;'/') 'developing, operating and maintaining1 clearly indicated 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. Where an assessee incurres expenditure for purchase of materials himself and executes the development work, i.e., carries out the civil construction work, he will be eligible for tax benefit under section 80-IA. In contrast to this, an assessee, who enters into a contract with another person including the Government or an undertaking or enterprise referred to in section '80-IA for executing works contract, will not be eligible for the tax benefit under section 80-IA. The word 'owned' in sub-clause (a] of clause (1) of sub-section (4) of section 80-IA refers to the enterprise. By reading of the section, it is clear that the enterprises carrying on development of infrastructure development should be owned by the company and not that the infrastructure facility should be owned by a company. Thai the provisions are made applicable to the person to whom such enterprise belongs to is explained in sub-clause (a). Therefore, the word 'ownership' is attributable only to the enterprise carrying on the business which would mean that only companies are eligible for deduction under section 80-1 A(4) and not any other person like individual. HUF, firm. etc. [Para 31] • According to sub-clause (a), clause (/) of sub-section (4) of section 80-IA. the word 'it' denotes the enterprise carrying on (he business. The word 'it' cannot be related to the infrastructure facility, particularly in view of the fact that infrastructure facility includes Rail system. Highway project, Water treatment system, Irrigation project, a Port, an Airport or an Inland port which cannot be owned by any one. Even otherwise, the word 'it' is used to denote an enterprise. Therefore, there is no requirement that the assessee should have been the owner of the infrastructure facility. [Para 32] Assessee is a developer and not a works contractor • Whether the assessee is a developer or works contractor is purely depends on the nature of the work undertaken by the assessee. Bach of the work undertaken has to be analyzed and a conclusion has to be drawn about the nature of the work undertaken by the assessee. The agreement entered into with the Government or the Government body may be a mere works contract or for development of infrastructure. It is to be seen from the agreements entered into by the assessee with the Government.

• In the instant case, the Government handed over the possession of the premises of projects to the assessee for the development of infrastructure facility. It is the assessee's responsibility to do all acts till the possession of property is handed over to the Government. The first phase is to take over the existing premises of the projects and, thereafter, developing the same into infrastructure facility. Secondly, the assessee shall facilitate the people to use the available existing facility even while the process of development is in progress. Any loss to the public caused in the process would be the responsibility of the assessee. The assessee has to develop the Asst. Year 2005-06 & others infrastructure facility. In the process, all the works are to be executed by the assessee. It may be laying of a drainage system; construction of a project; provision of way for the cattle and bullock carts in the village; provision for traffic without any hindrance, the assessee's duty is to develop infrastructure whether it involves construction of a particular item as agreed to in the agreement or not. The agreement is not for a specific work; it is for development of facility as a whole. The assessee is not entrusted with any specific work to be done by the assessee. The material required is to be brought in by the assessee by sticking to the quality and quantity irrespective of the cost of such material. The Government does not provide any material to the assessee. It provides the works in packages and not as a works contract. The assessee utilizes its funds, its expertise, its employees and takes the responsibility of developing the infrastructure facility. The losses suffered either by the Govi. or the people in the process of such development would be that of the assessee. The assessee hands over the developed infrastructure facility to the Government on completion of the development. Thereafter, the assessee has to undertake maintenance of the said infrastructure for a period of I 2 (o 24 months. During this period, if any damages are occurred, it shall be the responsibility of the assessee. Further, during this period, the entire infrastructure shall have to be maintained by the assessee alone without hindrance to the regular traffic. Therefore, it is clear that from an undeveloped area, infrastructure is developed and handed over to the Government and as explained by the CBDT vide its Circular dated 18-05-2010. such activity is eligible for deduction under section 80-IA (4). This cannot be considered as a mere works contract but has to be considered as a development of infrastructure facility.