Agreement With Principal Must Be Examined To Ascertain Nature Of Work Executed By Civil Contractor And Deciding Sec 80IA Deduction: Chennai ITAT
The Chennai ITAT has remanded the matter to the AO for reconsideration of disallowance u/s 80IA(4), after finding that the AO has not examined the agreement entered into by the assessee with various government and semi-government departments before invoking such disallowance.The Bench of Manjunatha G (Accountant Member) and Manomohan Das (Judicial Member) observed that “The terms and...
The Chennai ITAT has remanded the matter to the AO for reconsideration of disallowance u/s 80IA(4), after finding that the AO has not examined the agreement entered into by the assessee with various government and semi-government departments before invoking such disallowance.
The Bench of Manjunatha G (Accountant Member) and Manomohan Das (Judicial Member) observed that “The terms and conditions and the nature of work specified in the agreement can only decide whether the assessee is a developer of an infrastructure project or a simple work contractor who executes civil construction work for a developer”. (Para 6)
As per the brief facts of the case, the assessee company, engaged in the business of civil construction, filed its return disclosing total income of Rs. 74,70,298/- and claiming deduction u/s. 80-IA(4) of the Income-tax Act towards various projects executed for Government and semi-government undertakings. The Assessing Officer, disallowed deduction claimed u/s 80-IA(4) on the basis of disallowance of deduction for assessment year 2009-10 and concluded that, in cases of a simple civil contractor who executes works for various government and semi-government undertakings, deduction u/s. 80-IA(4) of the Act, cannot be allowed.
The Bench perused the nature of agreements entered into by the assessee with various departments of government, to found that the assessee is a works contractor executing civil construction work for various government or semi-government departments.
The Bench also stated that in order to ascertain the nature of works executed by the assessee, the basic documents required to be examined is an agreement entered into with the principals.
As per the provisions of section 80-IA(4) of the Act, an enterprise should be owned by an Indian company and further it should entered into an agreement with the central or state government or a local authority, added the Bench.
The Bench also stated that deduction u/s. 80-IA(4) of the Act, shall not be allowed to an enterprise which carries a civil contract work for a developer of infrastructure facility.
The ITAT therefore directed the AO to re-examine the claim of deduction u/s. 80-IA(4) of the Act, in light of necessary evidences including agreement entered into by the appellant with various departments and ascertain the nature of works executed by the assessee, in order to consider for the purpose of section 80-IA(4) of the Act.
Counsel for Appellant/ Assessee: D. Anand
Counsel for Respondent/ Revenue: P. Sajit Kumar
Case Title: Bharat Engineering Construction Co. Pvt Ltd verses ACIT
Case Number: ITA No.: 905/Chny/2018
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