ITAT Allows Section 80IA(4)(i) Deduction On Developing, Operating And Maintaining Infrastructure Facilities

The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has allowed the deduction under Section 80IA(4)(i) of the Income Tax Act on developing, operating, and maintaining the infrastructure facilities.

The bench of Suchitra Kamble (Judicial Member) and Narendra Prasad Sinha (Accountant Member) has observed that the maintenance of the infrastructure in each of these 17 projects, though deferred, is more than 30 months, which means almost two years. Therefore, the assessee has established that the assessee was the sole developer in the present contracts, which are related to developing, operating, and maintaining the infrastructure facilities as envisaged under Section 80IA(4)(i) of the Income Tax Act.

The appellant/assessee is in the business of civil construction and filed its original return of income by declaring income after claiming deduction under Section 80IA(4)(i) of the Income Tax Act, 1961. The assessee filed the first revised return of income on January 10, 2009, declaring total income. The assessee company again filed the second revised return of income on October 31, 2009, declaring total income. It was processed under Section 143(1) of the Income Tax Act. The case was selected for scrutiny and a notice under Section 143(2) issued to the assessee on August 19, 2009, which was served upon the assessee. A notice under Section 142(1) of the Income Tax Act was issued, which was served upon the assessee. Due to the change of the assessing officer, notice under Section 143(2) was issued and served upon the assessee. In response to notice under Section 143(2), the tax consultant of the assessee attended the assessment proceedings from time to time and submitted the details as called for.

The assessing officer observed that the assessee claimed a deduction under Section 80IA(4), but the assessee did not fulfill the conditions laid down under Section 80IA(4) for allowing the deduction. Therefore, the Assessing Officer, via show cause notice, called upon the assessee to explain why the claim for deduction under Section 80IA should not be disallowed.

In response to the notice, the assessee company furnished the reply. The assessee highlighted in the said reply that the assessee is doing the development of infrastructure faciality and, therefore, entitled to deduction under Section 80IA(4)(i).

The assessee was dealing with the development work of Infrastructure Faciality and was also given the details of the same, which was carried out during the year. The assessee submitted that project-wise accounts were not prepared as there was more than one infrastructure facility that was carried out by the assessee. Section 80IA does not mention that separate project-wise accounts should be maintained to claim the deduction under Section 80IA. The business of the assessee company is a composite one in which various infrastructure facilities are carried out along with various non-infrastructure facilities, and in fact, the audit report in Form No. 10CB has given all the details of 35 infrastructure facilities carried out during the year.

The Assessing Officer held that any person who executes the work contract entered into with undertakings or enterprises shall not be eligible for the deduction under Section 80IA. Thus, it was concluded that the assessee company is not entered in the BOT, BOOT, and BOLT systems and, therefore, is not entitled to deduction under Section 80IA(4)(i). and thus made disallowance. The assessing officer also made an addition to the late remittance of employee contributions to the PF and the disallowance of interest on income tax amounts.

The assessee filed an appeal before the CIT (A). The CIT (A) partly allowed the appeal of the assessee.

The department contended that the CIT(A) was not right in deleting the disallowance of deduction made by the Assessing Officer under Section 80IA(4)(i). The assessee company was registered as a company, and the documents related to the work contracts were entered by the firm. The separate project-wise report was required under Sub-clause-2 of Rule 18BBB of the Income Tax Rules, 1962. The assessee company has entered into a contract agreement as a “Contractor” and earned income as a “Contract Receipt,” and, therefore, its income is not entitled to deductions under Section 80IA(4)(i) of the Income Tax Act.

The tribunal, while dismissing the appeal, held that when the assessee is developing the infrastructure facility and maintaining it at its own risk, as well as when the accounts were also presented, including all the projects of the infrastructure facility, the assessee has fulfilled all the requirements as envisaged under Section 80IA, and, therefore, there is no need to interfere with the findings of the CIT(A).

Counsel For Petitioner: H.Phani Raju

Counsel For Respondent: Bandish Soparkar

Case Title: The Assistant Commissioner of Income Tax Versus Ranjit Buildcon Limited

Case No.: ITA Nos.2116 & 2117/Ahd/2013

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