Entity Operating, Developing, And Maintaining Infrastructure Facility Is Eligible For Benefit U/S 80IA Of IT Act: Pune ITAT

The Bench of R.K. Panda (Vice President) and Astha Chandra (Judicial Member) observed that “requirement that the operation and maintenance of the infrastructure facility should commence after 1st April 1995 has to be harmoniously construed with the main provision under which a deduction is available to an assessee who develops; or operates and maintains; or develops, operates, and maintains an infrastructure facility”.

Such observation came in reference to the assessee, a company engaged in contracting business such as bridges & development projects, had claimed deduction u/s 80IA(4) at Rs.7,21,32,410/-. The AO however asked assessee to explain its entitlement to claim such deduction especially when similar disallowance was made in the preceding assessment years. After analysing the provisions of sec 80IA(4), the AO observed that the usage of word 'developing' in juxtaposition to infrastructure facility indicates that what is eligible for deduction is the profit derived from development of infrastructure facility and not something de hors it.

The AO noted that assessee has claimed deduction u/s 80IA(4) even on profits derived from projects which were received on sub-contract basis from independent private parties and not from government/ local authority. Hence, the AO disallowed the claim of deduction u/s 80IA(4) to extent of Rs.40,91,541/-.

So far as the balance amount is concerned, the AO referred to Explanation to Sec 80IA(13) to state that the benefit of sec 80IA(4) .shall not be extended to a person who executes works contract.

The Bench found that the AO had denied the claim u/s 80IA(4) on the ground that assessee has claimed deduction in respect of 44 infrastructure facilities developed by it, out of which some infrastructure facilities do not fall within the definition of 'infrastructure facility' such as reconstruction of bus station with sub work.

At the same time, the Bench referred to the submission that, assessee is not a works contractor and is a developer who undertakes the project, develops and construct the project on its own risk and responsibility like that of a developer.

The Bench also considered the submission that assessee has invested its own funds, given bank guarantee, engaged requisite qualified / skilled / semi-skilled staff and brought plant & machineries to be utilized in the project.

Further, the assessee had adhered to the timelines for completing the project by undertaking the risk and consequences for delay, and considered defect liability period along with retention money / security deposit for due compliances, pointed the Bench.

The Bench found that the AO did not go through the terms & conditions of each project undertaken by assessee, and also failed to discuss the binding clarification given by the CBDT vide Circular No.3/2008.

Thus, the presumed opinion of AO that assessee is a works contractor and not a developer, cannot be accepted, clarified the Bench.

Hence, the ITAT restored the issue to the file of AO with a direction to decide the issue afresh in light of the decision of CIT vs. ABG Heavy Industries Ltd. and the CBDT Circular No.3/2008, as well as the terms & conditions of each project undertaken by assessee.

Counsel for Appellant/ Assessee: Tarun Ghia

Counsel for Respondent/ Revenue: Ajay Kumar Keshari and Sourabh Nayak

Case Title: T and T Infra Limited versus ACIT

Case Number: ITA No.291/PUN/2020

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