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IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "F", MUMBAI
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Before Shri Joginder Singh, Judicial Member
And Shri Sanjay Arora, Accountant Member
ITA NO. 3466 /MUM/2011 (A.Y. 2003-04)
ITA NO. 3467 /MUM/2011 (A.Y. 2004-05)
ITA NO. 3468 /MUM/2011 (A.Y. 2005-06)
ITA NO.3469 /MUM/2011 (A.Y. 2006-07)
ITA NO.3470 /MUM/2011 (A.Y. 2007-08)
M/s. Unity Infraprojects DCIT Central Circle-45
Ltd.1252, Pushpanjali / Aayakar Bhavan
Apartments, Old Prabhadevi Mumbai-400 020.
Vs.
Road, Prabhadevi,
Mumbai-400 025.
( /Appellant) (×/Respondent)
/Appellant by : Shri Vijay Mehta
× /Respondent by : Shri Rajesh Ranjan
Prasad
/
/ Date of Hearing 16.09.2014
/ 10.10.2014
Date of Pronouncement :
/ O R D E R
PER JOGINDER SINGH (JM) :
This bunch of five appeals by the assessee for different
Assessment Years having identical grounds challenging the
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impugned orders all dated 16/2/2011 wherein the ld. First
appellate authority confirmed the disallowance of deduction
u/s.80IA and sec.80IB of the Income tax Act, 1961 (the Act).
2. During hearing of these appeal the ld. Counsel for the
assessee, Shri Vijay Mehta, did not press the additional
grounds raised in the respective appeals, therefore, the
additional grounds, so raised, are dismissed as not pressed.
Broadly, the ld. Counsel for the assessee contended that one
tender was allotted to the assessee for
developing/constructing houses on turnkey basis at
Bakarwala and Narela, by Delhi Development Authority
(DDA), on the terms and conditions contained in the order for
which our attention was invited to pages 27 to 38 of the paper
book. It was submitted that as per the work execution it
includes planning, designing, soil testing, earth filling, civil
work including its electrification, infrastructure and services
like sewerage, drainage, street lighting, roads, water supply,
horticulture, landscaping etc. The assessee was argued to be
responsible for complete development, thus it was not
simplicitor execution of work contract rather complete
development of the project, therefore, the assessee is entitled
to deduction u/s. 80IB /80IA. It was further submitted that
the project was to be developed till the stage of fit for
habitation without any additional cost with all services. It was
explained that before taking up the work the lay-out plan as
well as building plan and structural design etc. were to be got
approved from DDA/competent authority. The ld. Counsel
further submitted that even the whole planning was done by
the assessee and further asserted that the assessee is a
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creator of this facility, purchased own material having entire
risk qua the project, thus, the assessee is a developer.
Reliance was placed upon the decision in the case of VRM
(India) Ltd. )ITA No.811/Del/2008 date 23/04/2010 and by
further contending that for Assessment Year 2008-09 the ld.
CIT(A) decided the issue in favour of the assessee vide order
dated 30/12/2013. Reliance was also placed on the decision
from Hon'ble Bombay High Court in CIT vs. ABG Heavy
Industries Ltd.(322 ITR 323), ITO vs. Suraksha Realtors (ITA
No.4223/Mum/2010, M/s. Pratibha Constructions &
Engineers (I) P. Ltd. vs. ACIT (ITA No.118/PN/2008) and
Mahalaxmi Constructions vs. ACIT (ITA No.433/PN/2007).
The ld. AR furnished the copies of aforementioned/cited
cases.
2.1 On the other hand, the ld. DR defended the conclusion
drawn in the impugned orders by submitting that the
assessee is merely a work contractor for DDA and the
development is done by the authority because the assessee
merely executed the work given by the DDA. Plea was also
raised that the budget was allocated by the DDA and even the
risk factor is of DDA and not of the assessee . It was pleaded
that the DDA provides houses to the public, land is owned by
DDA, financed by DDA, policy and decision making is with
DDA. It was asserted that if due to any reasons the project
fails it is the responsibility of the DDA and not of the
assessee. Any kind of loss suffering was also argued to be of
DDA. Further plea was raised that there is a possibility that
DDA might have claimed the deduction therefore, if further
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deduction is allowed to the assessee it will amount to double
deduction. Broadly the conclusion drawn in assessment
order/impugned order was defended. In reply the ld. Counsel
for the assessee submitted that DDA never claimed the benefit
under the impugned section, therefore, there is no question of
double deduction.
3. We have considered the rival submissions and perused
the material available on record. Since common issues are
involved in all these appeals, therefore, for the sake of brevity
these appeals are being disposed off by this common and
consolidated order. The facts in brief are that the assessee
company undertook the development and construction of
residential buildings pursuant to contracts awarded by Delhi
Development Authority (DDA). The assessee claimed
deduction u/s.80IA(4) and 80IB(10) of the Income tax Act,
1961. The ld. AO disallowed the claim of the assessee on the
ground that the assessee is not a developer of the project and
merely worked as a contractor and placed reliance upon the
decision of the Tribunal in the case of M/s. B.T. Patil and
Sons, Belgaum Constructions (P) Ltd. vs. ACIT (2010) 35 SOT
171 wherein it was held that the claimed deduction is
allowable only to the enterprise which is engaged in
developing the infrastructure projects. On appeal, the ld.
CIT(A) affirmed the stand of the AO, resultantly, the assessee
is in appeal before this Tribunal .
3.1 Before coming to any conclusion we are reproducing
hereunder the relevant provisions of the Act for ready
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reference and its analysis with respect to the facts of the
present appeals:-
"80IA (4A) This sec. applies to any enterprise
carrying on the business of developing, maintaining
and operating any infrastructure facility which fulfils
all the following conditions namely :-
(i) the enterprise is owned by a company
registered in India or by a consortium of such
companies;
(ii) the enterprise has entered into an agreement
with the Central Government or a State
Government or a local authority or any other
statutory body for developing, maintaining and
operating a new infrastructure facility subject to
the condition that such infrastructure facility
shall be transferred to the Central Government,
State Government, local authority or such other
statutory body, as the case may be, within the
period stipulated in the agreement;
(iii) the enterprise starts operating and maintaining
the infrastructure facility on or after the 1st day
of April, 1995."
"80IB(10) The amount of profits in case of an
undertaking developing and building housing
projects approved by a local authority, shall be
hundred per cent. of the profits derived in any
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previous year relevant to any assessment year
from such housing project if,--
(a) such undertaking has commenced or
commences development and construction of the
housing project on or after the 1st day of
October, 1998, and completes the same before
the 31st day of March, 2001 ;
(b) the project is on the size of a plot of land
which has a minimum area of one acre ; and
(c) the residential unit has a maximum built-up
area of one thousand square feet where such
residential unit is situated within the cities of
Delhi or Mumbai or within twenty-five kilometers
from the municipal limits of these cities and one
thousand and five hundred square feet at any
other place."
3.2 For fair analysis of the matter we are expected to
examine the terms and conditions agreed between the
assessee and the DDA. We are reproducing hereunder the
conditions of the award/allotment, as a sample, which are
identical in all the cases as contained in negotiated tender
and award of work (No.F.54(163)/SWD-9/DRK/DDA/A/2001-
2002/1541 160/ dt.28 /2/02)
Terms & Conditions
1) the flats shall be 5 (five) storeyed framed
structure (1000 Nos.) with plinth area of
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42 sqm. each, In case the number of
units/plinth area decreases due to
unavoidable reasons, the cost shall be
proportionately reduced to Rs.7,190/-
(Rs.Seven Thousand one hundred ninety
only) per sqm.
ii) The scope of work as stated in the N.I.T. to
be executed on Turnkey basis includes
planning, designing, s oil-res ting,
e ar t h - f i l l i n g , civil wo r k s ,
including i ts electrification,
infrastructure services, like str eet
lighting , se we r age, water supply,
dr ain age, ro ads, hor ticul ture,
l andsc aping, provision of du al water
suppl y s ys tem, r ain water
har ves ting as also cons tr uction of
Co mmuni ty Hal l, Shopping cen tr e,
Boundary wall, electric sub-station,
installation of transformer & equipment in
it, laying of H.T. cables, L. T. network
service cables etc. and making the units
complete and habitable including watch &
ward for 3 (three) years from the date of
recorded completion. This scope of work
given in the NIT is only indicative and not
exhaustive. The agency shall be
responsible for execution of all items
required for completing these houses
in all respects to make these units
habitable and ready for occupation
as well as functioning of all services,
making environment -fit for
habitation wi thou t any additional
cost, complete as per direc tion of the
Engineer-in-charge
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iii) The Flats will be maintained till these
are handed over to the Engineer-in-
charge in good conditions and free from
all defects.
iv) The services will be handed over to the
var ious local bodies af ter its completion
as per approved plans, etc. as stated in
the NIT also.
v) Bef ore taki ng up the wo r k, the
l ayo u t pl ans as well as bui l d in g pl ans ,
s tr u c tu ra l de si gn s e tc . ar e to be g o t
ap pr o v ed from DD A/c o mp e te n t
A u tho r i ty as men ti on ed in the N IT b y
ad he r ing to the ti me s c hedul e l aid
do wn in the N IT
v i ) T h e ag e n c y wi l l al s o b e r e s p o n s i b l e
for g e t ti n g th e fire fighting
arrangements , approved from the Delhi
Fire Services before execution of the water
supply scheme
vii) The r ei mburs e men t of increase i n c ost
of mater i al, l abour e tc . wil l be
ap pl ic abl e f r om the d ate of sub miss ion
of Envelope -C i .e. revi se d fi n anc ial
bi d ins te ad o f s ubmission of tender
initially and such reimbursement for
escal ation in cost under clause-14
would be payable during the stipul ated
period of completion only. You are
requested to attend this office to sign
the agreement on Non- judic i al s tamp
p aper of Rs .50/- (Rs .Fif ty o nl y) wi thi n
f if tee n d ays f ro m the d ate of is sue of
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thi s le tte r . Pl eas e no te th at i f you f ai l
to a tte nd the o f f ice of the unders igned
wi thin f if teen d ays f r o m the date of
issue of this Le tter, the acceptance of
the tender is liable to be withdrawn and the
earnest money forfeited.
You are also requested to contact
Asstt. Engineer-II of this divi sion and
s tar t the wor k at once. Ple as e no te
t h a t t h e t i m e a l l o we d f o r c a r r y i n g
o u t t h e w o r k a s en ter ed in the te nder
s hal l be rec kone d f ro m the 15 t h d ay
af te r th e d ate of i ss ue of th i s l e tte r to
c o mme nc e the work.
T he ti me al l o we d f o r the ex e c u tio n
of the wo r k shall be 30 (thirty) months only.
Your negotiation letter
no.UIL/Bakkarwala/D02 dt. 18/02/2002
along with letter no. F.54(163)/SWD-
9/DWK/DDA/A/2001-02/2804 dt.06/11/01
and even no.s2907 dt. 22/11/01, shall also
form part of the agreement.
3.3 If the aforesaid conditions are analysed certain
undisputed facts are oozing out which are summarized as
under :-
a) The flats which are to be constructed shall be having
plinth area of 42 sq.mtr.
b) The work is to be executed on turn-key basis
including planning, designing, soil testing, earth-
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filling etc. and complete development of the project
including services like sewerage, drainage, water
supply, roads, electrification, rainwater harvesting,
laying of HT cables and other facilities which are
required and stipulated in the aforesaid terms and
conditions.
c) As per condition No.(V) before starting the work the
layout plans, building plans, structural designs etc.
were to be got approved from the competent
authority as mentioned in the NIT adhering to the
time schedule so laid down alongwith fire fighting
system.
d) The conditions stated herein above clearly leads to
the conclusion that the assessee has merely not
constructed the flats rather developed the
infrastructure right from filling the earth and soil-
testing etc., therefore, the assessee cannot be said to
be a contractor simplicitor.
e) As per the conditions after complete development of
the project meaning thereby the units and other
facilities includes watch and ward for 3 years from
the date of completion of the project, and the
assessee shall be responsible for execution of all
items required for completing the project in all
respect along with all services without any
additional cost. And not only this all the services
was to be handed over to the local bodies after its
completion as per approved plans. All these terms &
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conditions are clearly indicative of the fact that the
assessee is not a contractor rather a developer
because it is not the case that part of the work was
completed by different persons rather, it was
completed/developed in all respects by the assessee
itself.
3.4. Now we are expected to analyze the aforementioned
provisions of the Act. Sub-section (10) to sec. 80IB of the Act
speaks about an undertaking developing and building
housing projects approved before a specified date by the local
authority and, if the conditions are fulfilled, then the profit
derived therefrom shall be 100% of the profits, derived in the
previous year relevant to any Assessment Year. In these
appeals, we note that the project was duly approved by the
competent authority, therefore, condition No.(i) is fulfilled,
likewise the condition contained in (ii) is also fulfilled and
similar is the position with respect to condition as contained
in (iii). So far as, condition contained in sub clause (b) is
concerned the size of the plot is also within the prescribed
limit of more than one acres and the development of the
project was carried out in accordance with the scheme framed
by the government. So far as built up area condition is
concerned this is also within the specified limit, meaning
thereby all the conditions as stipulated in this section are
complied with by the assessee. The position has been further
explained by the Explanation inserted by the Fin.(No.2)Act, of
2009 with retrospective effect from 01.04.2001 and further
amendments made from time to time. As per the Explanation
nothing contained in the sub-section shall apply to any
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undertaking which executes the housing project as a work
contract awarded by any person (including Central or State
Government). The totality of facts are clearly indicative to the
conclusion, as discussed earlier also, that the assessee is not
a work contractor, rather, it developed the project in every
respect right from soil-testing, earth filling, designing,
planning, sewerage, drainage, and till the final completion of
the project. It is worth quoting that as per condition No. (iii)
the flats were to be maintained till they are handed over to the
Engineer in Charge.
3.5 We also note that broadly while disallowing the claim of
the assessee the ld. AO, and also the ld. DR before us, heavily
relied upon the decision of the Tribunal in the case of B.T.
Patil & Sons, Belgaum Constructions Pvt. Limited (supra),
whereby the assessee was treated as works contractor.
However, subsequently the Hon'ble Jurisdictional High Court
in the case of ABG Heavy Industries Ltd. (189 Taxmann 54)
(Bom.) decided the similar case in favour of the assessee
treating him to be a developer. The expression "development"
has not been artificially defined for the purposes of
sec.80IA/80IB of the Act, therefore, it should receive its
ordinary and natural meaning. The Parliament in its wisdom
amended the provisions of sec.80IA/80IB of the Act so as to
clarify that in order to avail a deduction the assessee should
(i) develop or (ii) operate and maintain or (iii) develop, operate
and maintain the facility. Parliament eventually stepped into
to clarify that it was not invariably necessary for a developer
to operate and maintain the facility. Even the Hon'ble Apex
Court in Bajaj Tempo vs. CIT (196 ITR 188) emphasized that a
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provision in a taxing statute granting incentive for promoting
growth and development should be construed liberally. After
sec.80IA was amended by the Fin. Act of 2001 the Section
applies to an enterprise carrying on the business of (a)
developing or (b) operating and maintaining or (c) developing,
operating and maintaining any infrastructure facility subject
to fulfillment of certain conditions. Thus, the provision has to
be construed harmoniously. While coming to a particular
conclusion the Hon'ble Apex Court considered the decision in
allied Motors Pvt. Ltd. vs. CIT (224 ITR 677)(SC)(para-23), CIT
vs. Alom Extrusions Ltd. (319 ITR 306)(SC)(para-23). It is
noteworthy that the Pune Bench of the Tribunal in the case of
M/s. Pratibha Constructions & Engineers (I) P. Ltd. (supra), on
identical fact deliberated upon the issue and decided in favour
of the assessee. It is worth mentioning that Hon'ble
Jurisdictional High Court in the case of ABG Heavy
Engineering Ltd. (supra), decided the issue. The relevant
portion is worthy of notice.
"22 The submission which was urged on
behalf of the revenue is that under clause
(iii) of subsection (4) of section 801A, 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
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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. 200,
the section applies to an enterprise carrying on
the business of (1) 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
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develops, operates and maintains an
infrastructure facility."
A harmonious reading of the provisions in its
entirety would lead to the conclusion that the
deduction is available to an enterprise which (i)
develops: or operates and maintains: or (iii)
develops, maintains 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
circular of the Board postulated the same
position The amendment made by Parliament
to S. 80IA(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." (underlined for
emphasis by us)."
3.6. So far as, the contention of the Revenue that the
assessee is not the owner of the project. We note that the
section nowhere put a condition that for claiming deduction
under these sections necessarily the assessee has to be the
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owner of the project. This is not the intention of the
legislature otherwise nothing prevented it to include such
clause at the time of legislating/inacting the provision. If the
contention of the ld. DR is accepted then whole purpose of
inacting such provision and consequent development of
infrastructure will be defeated.
3.7. Identically, in the case of Mahalaxmi Constructions
(ITA No.433/PN/2007 order dt 6/2/12 the decision in the case
of B.T. Patil and Sons, Belgaum Constructions (P) Ltd. (supra),
along with aforesaid decision from Hon'ble Bombay High Court
was discussed and held that the assessee is eligible for claim
of deduction u/s. 80IA(4) of the Act. In view of the clear facts
available on record and the judicial pronouncements
discussed hereinabove clearly indicates that the assessee is
entitled for claimed deductions. Therefore, all the appeals are
disposed off as indicated hereinabove.
Order pronounced in the open court in the presence of
ld. Representatives from both sides at the conclusion of the
hearing on 10th Day of October, 2014 .
10.10.2014
Sd/- Sd/-
(Sanjay Arora) (Joginder Singh)
/ACCOUNTANT MEMBER Û / JUDICIAL MEMBER
Mumbai; Dated : 10th Oct. 2014.
JV, Sr.PS/Shekar.PS
/ Copy of the Order forwarded to :
1. / The Appellant
2. × / The Respondent.
17 I TA N O . 3 4 6 6 , 6 7 , 6 8 , 6 9 & 7 0 / M U M / 2 0 1 1
Unity Infraprojects Ltd.
3. () / The CIT, Mumbai.
4. / CIT(A)-13, Mumbai
5. , ,
/ DR, ITAT, Mumbai
6. [ / Guard file.
/ BY ORDER,
× //True Copy//
/ (Dy./Asstt. Registrar)
/
, / ITAT, Mumbai
,
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