Matching Fragments
(a) Development of infrastructure facility
(b) Operation and maintenance of infrastructure facility
(c) Development, operation and maintenance of infrastructure
facility
6.2 Now the assessee in the given case is a company which, pursuant to
agreements with various Government bodies, engaged itself in the
development of infrastructure facility as defined in the Explanation to sub
section 4 of section 80-IA . These set of facts have not been disputed by the
AO. The Ld. AO disallowed the claim on the ground that the assessee has
challenged the provisions of explanation to section 80IA of the Act to the
Hon'ble High Court and the Court has restrained to enforce the demand that
may be raised in pursuance to the explanation to section 80IA of the Act.
The Hyderabad bench of Tribunal in case of M/s. GVPR Engineers Ltd. Vs.
ACIT (2012) 32 CCH 0296 HydTrib (2012) 51 SOT 0207 (Hyd) (URO). The
relevant extract of the order is reproduced as under :
"The next question to be answered is whether the assessee is a developer or
mere works contractor. Whether the assessee is a developer or works
contractor is purely depends on the nature of the work undertaken by the
assessee. Each 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.
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 infrastructure facility. In the process, all the
works are to be executed by the assessee. It may be laying of a drainage
system; may be 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 Govt. 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 12 to 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
DCIT, Cir-12, Kol Vs. M/s Simplex Infrastructure Ltd. Page 9
assessee alone without hindrance to the regular traffic. Therefore, it is clear
that from an un-developed 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 80IA (4) of the
Act. This cannot be considered as a mere works contract but has to be
considered as a development of infrastructure facility. Therefore, the
assessee is a developer and not a works contractor as presumed by the
Revenue. The department is not correct in holding that the assessee is a
mere contractor of the work and not a developer."
The ITAT (Mumbai) in case of ACIT v. Bharat Udyog Ltd. (2009) 123 TTJ
0689 : (2009) 23 DTR 0433 : (2009) 118 ITD 0336 : (2008) 24 SOT 0412
"After the amendment effected by Finance Act, 1999 w.e.f. 1st April,
2000, the deduction under s. 80-IA(4) has become available to any
enterprise carrying on the business of (i) developing, or (ii) maintaining
and operating, or (iii) developing, maintaining and operating any
infrastructure facility. Sub-cl. (c) of cl. (i) of s. 80-IA(4) is obviously
applicable to an enterprise which is engaged in 'operating and
maintaining' the infrastructure facility on or after 1st April, 1995. It is not
applicable to the case of an enterprise which is engaged in mere
'development' of infrastructure facility and not its 'operation' and
'maintenance'. Therefore, the question of 'operating and maintaining' of
infrastructure facility by such enterprise before or after any cut off date
cannot arise. However, if the contention of the Departmental
Representative is accepted, it would obviously/understandably lead to
manifestly absurd results. When the Act provides for deduction
undisputedly for an enterprise who is only 'developing' the
infrastructure facility, unaccompanied by 'operating and maintaining'
thereof by such person, there cannot be any question of providing a
condition for such an enterprise to start operating and maintaining the
infrastructure facility on or after 1st April, 1995. Since the assessee is
only a developer of the infrastructure project and it is not maintaining
and operating the infrastructure facility, sub-cl. (c) of cl. (i) of sub-s. (4)
of s. 80-IA is not applicable. The interpretation of Revenue is absurd
also in view of the rationale of the provisions of s. 80-IA(4)(i). From the
asst. yr. 2000-01, deduction is available if the assessee carries on the
business of any one of the three types of activities. When an assessee
is only developing an infrastructure facility project and is not
maintaining nor operating it, obviously such an assessee will be paid
for the cost incurred by it; otherwise, how will the person who develops
the infrastructure facility project, realise its cost ? If the infrastructure
facility, just after its development, is transferred to the Government,
naturally the cost would be paid by the Government. Therefore, merely
because the transferee has paid for the development of infrastructure
facility carried out by the assessee, it cannot be said that the assessee
DCIT, Cir-12, Kol Vs. M/s Simplex Infrastructure Ltd. Page 12
did not develop the infrastructure facility. If the interpretation canvassed
by the Revenue authorities is accepted, no enterprise, carrying on the
business of only developing the infrastructure facility, would be entitled
to deduction under s. 80-IA(4), which is not the intention of the law. If a
person who only develops the infrastructure facility is not paid by the
Government, the entire cost of development would be a loss in the
hands of the developer as he is not operating the infrastructure facility.
When the legislature has provided that the income of the developer of
the infrastructure project would be eligible for deduction, it presupposes
that there can be income to developer, i.e., to the person who is
carrying on the activity of only developing infrastructure facility.
Obvious as it is, a developer would have income only if he is paid for
development of infrastructure facility, for the simple reason that he is
not having the right/authorisation to operate the infrastructure facility
and to collect toll therefrom, and has no other source of recoupment of
his cost of development. Considered as such, the business activity of
the nature of build and transfer also falls within eligible construction
activity, that is, activity eligible for deduction under s. 80-IA inasmuch
as mere 'development' as such and unassociated/ unaccompanied
with 'operate' and 'maintenance' also falls within such business activity
as is eligible for deduction under s. 80-IA. Therefore, merely because
the present assessee was paid by the Government for development
work, it cannot be denied deduction under s. 80-IA(4). A person who
enters into a contract with another person will be a contractor no doubt;
and the assessee having entered into an agreement with the
Government agencies for development of the infrastructure projects, is
obviously a contractor but that does not derogate the assessee from
being a developer as well. The term "contractor" is not essentially
contradictory to the term "developer". On the other hand, rather s. 80-
IA(4) itself provides that assessee should develop the infrastructure
facility as per agreement with the Central Government, State
Government or a local authority. So, entering into a lawful agreement
and thereby becoming a contractor should, in no way, be a bar to the
one being a developer. Therefore, merely because in the agreement
for development of infrastructure facility, assessee is referred to as
contractor or because some basic specifications are laid down, it does
not detract the assessee from the position of being a developer; nor will
it debar the assessee from claiming deduction under s. 80-IA(4).
Therefore, an assessee who is only engaged in the developing the
infrastructural facility i.e., road and not engaged in the 'operating and
maintaining' the said facility is entitled to the benefits of the deduction
under s. 80-IA(4).--Patel Engineering Ltd. vs. Dy. CIT (2004) 84 TTJ
(Mumbai) 646 followed. Provisions of sub-cl. (c) of cl. (i) of s. 80-IA(4)
are inapplicable to the assessee which is engaged in mere developing
of the infrastructure facility and, therefore, an assessee who is only
engaged in developing the infrastructure facility and not in 'operating
and maintaining' the said facility is entitled to the benefit of deduction
under s. 80-IA(4); merely because assessee is referred to as
'contractor' in the agreement for development of infrastructure facility or
DCIT, Cir-12, Kol Vs. M/s Simplex Infrastructure Ltd. Page 13
some basic specifications are laid down, would not debar the assessee
from claiming deduction under s. 80-IA(4)."
If a person who only develops the infrastructure facility was not paid by the
Government, the entire cost of development would be a loss in the hands of
the developer as he was not operating the infrastructure facility. Merely
because the assessee was paid by the Government for development work it
could not be denied deduction under section 80-IA(4). The Chennai Bench of
Tribunal in case of R.R. Constructions, Chennai vs. Department of Income tax
held that "When an assessee is only developing an infrastructure facility
project and is not maintaining nor operating it, obviously such an assessee
will be paid for the cost incurred by it; otherwise, how will the person, who
develops the infrastructure facility project, realize its cost? If the infrastructure
facility, just after its development, is transferred to the Government, naturally
the cost would be paid by the Government. Therefore, merely because the
transferee had paid for the development of infrastructure facility carried out by
the assessee, it cannot be said that the assessee did not develop the
infrastructure facility. If the interpretation done by the Assessing Officer is
accepted, no enterprise carrying on the business of only developing he
infrastructure facility would be entitled to deduction under section 80IA(4),
which is not the intention of the law. An enterprise, which develops the
infrastructure facility is not paid by the Government, the entire cost of
development would be a loss in the hands of the developer as he is not
operating the infrastructure facility. The legislature has provided that the
income of the developer of the infrastructure project would be eligible for
deduction. It presupposes that there can be income to developer i.e. to the
person who is carrying on the activity of only development infrastructure
facility. Ostensibly, a developer would have income only if he is paid for the
development of infrastructure facility, for the simple reason that he is not
having the right/authorization to operate the infrastructure facility and to
collect toll there from, has no other source of recoupment of his cost of
development.
