The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) held that, merely because in the agreement for development of infrastructure facility, the assessee is referred to as contractor or just because some basic specifications are laid down, it does not detract the assessee from the position of being a developer, nor will deprive the assessee from claiming deduction under Section 80IA(4) of the Income Tax Act.
The assessee filed its original return of income on 30.01.2006 declaring NIL income. Further revised return on 19.02.2007 showing NIL income was filed assessment whereof was finalized upon acceptance of the return under Section 143(3) of the Income Tax Act dated 10.04.2008 by the AO. Subsequently, re-assessment order under Section 147 of the Income Tax Act was passed on 31.03.2009 computing NIL income allowing the deduction under Section 80IA(4) of the Act amounting to Rs.2,43,70,059/-.
However, the PCIT issued a notice dated 01.03.2011 under Section 263 of the Income Tax Act opining that the work executed by the appellant was a contract work with the National Highway Authority of India and therefore not be eligible for the tax benefit under Section 80IA of the Income Tax Act.
Furthermore, ownership of the development project etc. are required to be verified. Apart from that whether the AOP was the owner of the infrastructure facility or not, or that the AOP is in operation and maintaining infrastructure facility or that the AOP had secured operation as well as maintenance contract and the assets had been transferred to the AOP for such purpose or not were to be verified as of the opinion of the PCIT.
In that view of the matter, the order passed by the AO dated 31.03.2009 under Section 143(3) read with section 147 of the Income Tax Act was found to be erroneous and prejudicial to the interest of the Revenue. By the said notice dated 01.03.2011, the appellant was granted opportunity to reply the same. The assessee, thereafter, on 15.03.2011 replied to the said show cause issued by the PCIT.
The reply of the assessee was reproduced by PCIT in the order impugned dated 18.03.2011. The main contention of the assessee, therefore, is this that the status of the assessee claiming as joint venture, the claim of deduction under Section 80IA(4) of the Income Tax Act, the disallowance of interest expenditure under Section 40(a)(ia) of the Income Tax Act and exemption of receipt of insurance claim under the Act had been duly verified by the AO in the re-assessment proceeding itself which is clearly evident from the order passed by the AO under Section 143(3) read with Section 147 of the Income Tax Act.
The assessee further clarified that the assessee made substantial investment for developing the infrastructure facility with supporting financial documents. It was further mentioned that the entire investments were made by the appellant and no subsidy and/or assistance from any other prescribed authority was received.
After hearing both the parties, the tribunal noted that it reveals that the tender work under consideration are not for a specific work, rather they are for development facility as a whole. The responsibility is fully assigned to the developer for execution and completion of the work. Various stipulations contained in the Tender documents demonstrate various risks undertaken by the assessee for execution of the project work awarded by the competent authority in terms of financial resources, manpower deployment, both technical and administrative expertise, drawing and designing of the project specifications and getting approval from the competent authority, safety and security of project and human resources, compliances of various statutory rules and laws.
Therefore, merely because in the agreement for development of infrastructure facility, the assessee is referred to as contractor or just because some basic specifications are laid down, it does not detract the assessee from the position of being a developer, nor will deprive the assessee from claiming deduction under Section 80IA(4) of the Income Tax Act.
The two member bench consisting of Waseem Ahmed (Accountant member) and Madhumita Roy (Judicial member) held that the assessee is engaged in development of the infrastructure facility and therefore, a developer, which confers right of eligibility to the assessee to claim benefits under Section 80IA(4) of the Income Tax Act. Thus the appeal was allowed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
