Directing to the decision of CIT vs. ABG Heavy Industries Ltd. (2010) 322 ITR 323, the Pune ITAT repeated that an enterprise can claim deduction under section 80IA if it develops, operates, and maintains the infrastructure facility, subject to the beginning of operation & maintenance of the infrastructure facility after April 01, 1995.
The Bench of R.K. Panda (Vice President) and Astha Chandra (Judicial Member) marked that the “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”.
The same observation arrived concerning the taxpayer, a company in the business of contracting like bridges & development projects, had claimed a deduction u/s 80IA(4) at Rs.7,21,32,410. AO sought the taxpayer to elaborate on its entitlement to avail of this deduction particularly when identical disallowance was incurred in the preceding assessment years.
AO post examining the provisions of sec 80IA(4), noted that the use of the word developing in juxtaposition to infrastructure facility shows that what is eligible for deduction is the profit made via the development of infrastructure facility and not something de hors it.
It was marked by the Assessing Officer(AO) that the taxpayer has availed for deduction under section 80IA(4) even on profits made through the projects that were obtained on sub-contract grounds from independent private pirates instead of from the government/local authority. Therefore the AO disallowed the deduction claim under section 80IA(4) up to Rs 40,91,541.
Regarding the concern of the balance amount, the AO directed to Explanation to Sec 80IA(13) to remark the benefit of Sec 80IA(4) shall not be extended to a person who implements a works contract.
It was discovered from the Bench that the AO does not refuse the claim under section 80IA(4) for the reason that the taxpayer has claimed a deduction towards 44 infrastructure utilities created through it, from which certain infrastructure facilities do not come in the description of ‘infrastructure facility’ like the reconstruction of the bus station with sub work.
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Meanwhile, the Bench directed to the submission that the taxpayer is not a works contractor and is a developer who performs the project, develops and constructs the same as per their risk, and is obligated similarly to a developer.
Also, the bench regarded the taxpayer’s claim that it invested its funds, given a bank guarantee, engaged requisite qualified/skilled / semi-skilled staff, and brought plant & machinery to be utilized in the project.
The taxpayer complied with the due date for finishing the project via undertaking the risk and outcomes for the delay and regarded the defect obligation duration including retention money/security deposit for due compliances, the Bench said.
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It was seen by the Bench that the AO does not proceed via the terms and conditions of each project that the taxpayer undertakes and indeed failed to discuss the binding clarification furnished via the CBDT vide Circular No.3/2008.
The Bench clarified that the assumed view of AO regarding the assessee being a works contractor rather than a developer is not acceptable.
Consequently, the ITAT returned the matter to the AO for re-evaluation, instructing them to reconsider the issue anew, taking into account the ruling in CIT vs. ABG Heavy Industries Ltd., along with CBDT Circular No. 3/2008 and the specific terms and conditions of each project undertaken by the assessee.
| Case Title | T and T Infra Limited Vs ACIT |
| Citation | ITA No.291/PUN/2020 |
| Date | 01.10.2024 |
| Appellant by | Shri Tarun Ghia |
| Department by | S/Shri Ajay Kumar Keshari and Sourabh Nayak |
| Pune ITAT | Read Order |
