Laxmi Civil Engineering Pvt Ltd vs. ACIT (ITAT Pune)
S. 80-IA(4) deduction available even to contractor who merely develops but does not operate & maintain the infrastructure facility
Relying on the judgement of the Larger Bench in B. T. Patil & Sons 126 TTJ 577 (Mum), the assessee™s claim for deduction u/s 80-IA(4) was denied by the Tribunal on the ground that the assessee was only a contractor and had not complied with all the conditions specified in sub-clauses (a), (b) & (c) of clause (i) of s. 80-IA(4). The order was recalled pursuant to the assessee™s MA claiming that the judgement of the Bombay High Court in ABG Heavy Industries Ltd 322 ITR 323 covered the issue in its favour. HELD deciding the issue afresh:
The issues as to (i) whether the word contractor is synonymous with developer within the meaning of s. 80-IA(4)(i) and (ii) whether the condition in clause (c) is applicable to a developer who is not carrying on the business of operating and maintaining the infrastructural facilities are covered by the judgement in ABG Heavy Industries 322 ITR 323 (Bom). There, it was held that the department™s contention that since the assessee was not operating and maintaining the facility, he was not eligible for s. 80-IA(4) deduction was wrong because a harmonious reading of s. 80-IA(4) led to the conclusion that the deduction was available to an assessee who (i) develops or (ii) operates and maintains or (iii) develops, operates and maintains the infrastructure facility. The 2001 amendment made it clear that the three conditions of development, operation and maintenance were not intended to be cumulative in nature. A developer who is only developing the infrastructure facility cannot be expected to fulfill the condition in sub-clause (c) which is an impossibility and requiring it to be fulfilled will be an absurdity. The result is that even a contractor whomerely develops but does not operate or maintain the infrastructure facility is eligible for s. 80-IA(4) deduction (B.T.Patil & Sons Belgaum vs. ACIT 126 TTJ 577 (Mum) impliedly held not good law).
Follows the order:
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH A PUNE BEFORE SHRI I.C.SUHIR JM AND SHRI D. KARUNAKARA RAO,AM ITA Nos. 766/PN/09, 254/PN/08, 431/PN/07 & 435/PN/07(A. Y. 2006-07, 2005-06, 2003-04, 2004-05)
Laxmi Civil Engg..P. Ltd. vs Addl/ CIT Range-2 Kolhapur 1148/E, Sykes Extension, Kolhapur- 416001, PAN AAACL5602N
Appellant: Shri M. K. Kulkarni, AR
Respondent: Shri Mukesh Dubey CIT DR,
Per D. Karunakara Rao, AM:
There are four appeals under consideration and the issue for adjudication is one and the same. At the very outset, the learned counsel for the assessee mentioned that the issue under consideration has to be decided in accordance with the modified ground raised by the assessee.
The said modified ground which is common in all appeals read as under:-
1) On the facts and in the circumstance of the case and in law the Ld. Authorities below were not justified in rejecting the claim of deduction of the appellant Company u/s 80-IA holding that the appellant was a contractor and also holding that all the three conditions
embodied in S.80-IA(4)(i) were required to be simultaneously fulfilled when Hon™ble Bombay High Court in its subsequent judgment pronounced on 15.02.2010 in the case of ABC Heavy Engg. Ltd. (Supra) held that the amended provisions effective from the parliament did not intend that such conditions should be simultaneously fulfilled. It is also held that the third condition also was required to be harmoniously construed. Since the Ld. C.I.T.(A) held that the appellate company has fulfilled first two condition and failed to fulfill the third condition for denial of deduction u/s 80-IA of the Act, it was not according to jurisdictional High Court Judgment (supra) and therefore, deduction be allowed to the appellant company
2. Tracing the background of the case, learned counsel for the assessee mentioned that in the first round, the appeals were decided relying on the decision of the Third Member in the case of B.T. Patil & Sons 126 TTJ 577 vide order dated 18.02.2010. Subsequently, the said order of the Tribunal was recalled in view of the binding jurisdictional High Court™s judgment pronounced on 15.02.2010 in the case if ABG Heavy Engg. Ltd. reported in 37 DTR (Bom) 233.
3. Detailing the facts of the instant case of assessee, learned counsel for the assessee mentioned that the assessee is a contractor/developer and claimed deduction under section 80- IA(4) of the Income-tax Act. The claim was denied by both the authorities of the revenue stating that the assesses is only a contractor and the assessee felled to comply with all the conditions specified in sub-clauses (a), (b) & (c) of clause (i) of sub-section (4) of section 80IA of the Act.. In other words, the revenue authorities are of the view that the assessee being a contractor cannot be a developer and when he is a developer as he has not complied with all the three conditions specified in sub-clauses (a) (b) & (c) of said clause (i) of the said section. Stating that this issue is decided in favour of the assessee Bombay High Court in the case of ABG Heavy Engg Ltd (supra), learned counsel took us though para-22 of the said judgment of the Bombay High Court for the proposition that the assessee, being contractor of the Government or Government Undertakings, are entitled the said deduction under section 80I(4)and also for the proposition that the debatable condition placed in sub-clause (c) i.e. It has started or starts operating and maintaining the Infrastructure facility on or after 1st day of April, 1995 should be harmoniously interpreted with the main provision placed in clause (i) of section 80IA (4) of the Act. The case of the assessee is that he being a contractor-cum-developer, who is eligible for deduction in that capacity, has noting to do with the operating and maintaining and therefore he is independently eligible for deduction, independent of the conditions at said sub clause (c) of the said section 80IA (4) of the Act.
4. Per contra, learned CIT-DR argued vehemently stating that the language of the section isclear and he mentioned that assessee to be eligible for deduction must fulfill all the three condition including the one at the said sub clause (c). While placing his reliance entirely on the language used in the section, he argued stating that the assessee is not entitled for deduction since he has not complied with the conditions placed at sub-clause referred to above. He mentioned that the every assessee when claimed deduction under section 80IA (4) must fulfill all the conditions of sub-clauses (a) (b) and (c) of section 80IA (4) (I) of the Act.
5. We heard both the parties and perused the orders of the revenue. The contentions issues before us are (i) whether the contractor is synonymous with the developer within the meaning of section 80IA (4)(i) of the Act; (ii) whether the condition placed in clause (c) is applicable to the case of a developer, who is not carrying on business of operating and maintaining the infrastructural facilities. In our opinion, the answer to these question are provided by the judgment of the Bombay High Court in the case of ABG Heavy Engg Ltd (supra). In this regard, we perused the above cited para-22 of the said judgment and for the sake of completeness, the said paragraph is reproduced as under:-
22. The submission which was urged on behalf of the Revenue is that Clause (iii) of sub-section (4A) of section 80-IA, one of the conditions imposed was that the enterprise must start operating and maintaining the infrastructure facility on or after 1st April, 1995. The same requirement is embodied in sub-clause (1) of sub-clause (4) of the amended provisions. It was urged that since the assessee was not operating and maintaining the facility, he did not fulfill the condition.
The submission is fallacious both in fact and in law. That the assessee was maintaining the facility is not in dispute. The facility was commenced after 1st April, 1995. Therefore, the requirement was met in fact.
Moreover, as a matter of law, what the condition essentially means is that the infrastructure facility should have been operational after 1st April, 1995. After Section 80 IA was amended by the Finance Act, 2001, the section applies to an enterprise carrying on the business of (i) developing; or (ii) operating and maintaining; or (iii) developing, operating and maintaining any infrastructure facility which fulfills certain conditions. Those conditions are (1) ownership of the enterprises by a company registered in India or by a consortiums; (II) an agreement with the central or State Government, local authority or statutory body; and (iii) The Start of operation and maintenance of the infrastructure facility should commence after 1st April, 1995. The requirement that operation and maintenance of the infrastructure facility should commence after 1st April, 1995 has to be harmoniously construed with the main provision under which deduction is available to an assessee who develops or operates and maintains, or develops, operates and maintains an infrastructure facility.
A harmonious reading of the provisions in its entirity would lead to the conclusion that the deduction is available to an enterprise which (i) develops; or operates and maintains; or (iii) develops, maintain and operates that infrastructure facility. However, the commencement of the operation and maintenance of the infrastructure facility should be after 1st April, 1995. In the present case the assessee clearly fulfilled this condition.
Before the amendment that was brought about by parliament by Finance Act, 2001 we have already noted that the consistent line of circulars of the Board postulated the same position. The amendment made by Parliament to S.80-IA (4) of the Act, set the matter beyond any controversy by stipulating that the three conditions for development, operation and maintenance were not intended to be cumulative in nature.
6. The above judgment of the Hon™ble High Court is delivered in the case of ABG Heavy Engg Ltd (supra), who is a contractor for the JNP Trust and that contactor, assessee is found to be an eligible developer for making claim of deduction u/s section 80IA (4) of the Act. From the above, it is evident that the person who only develops the infrastructure do not have the occasion to operate and maintain the infrastructure. It is further evident that the harmonious reading is necessary and mandatory in view of High Court™s judgment in the case of an enterprise carrying on business or developing which is the case of the assessee, all the conditions referred to clause (i) of section 80IA (4) should refer to the conditions as applicable to the developer. In other words, the developer who is only developing the infrastructure facilities since he does not operate and maintain Infrastructural facilities, cannot be expected to fulfill the condition at subclause(c) which is an impossibility and the requirements to fulfill the said condition shall amount to absurdity and therefore uncalled for. Therefore, we find requirement of harmonious reading of sub-clause (c) vis-Ã -vis of clause (i) of section 80IA (4) of the Act. Thus, the discussion in High Court™s decision in paragraph-22 extracted above, is directly applicable to the facts of the case and eventually is entitled for the deduction under section 80IA (4) of the Act. Accordingly, the modified ground, which is common in all the four appeals is allowed in favour of the assessee.
7. In the result, all four appeals of the assessee are allowed.
Order was pronouncement in the Court on 08.6.2011.
(IC.Sudhir) (D. Karunakara Rao)
Judicial Member Accountant Member