ACIT, CHENNAI V. M/s. V.A.Tech Wabag Pvt. Ltd., CHENNAI

ITA 1636/CHNY/2012

• Counselvise Citation: 163621714 RSA 2012
• Duration Of Justice: 4 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2017
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 02-11-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 21-08-2012

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , . , $ % BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 / ASSESSMENT YEAR : 2002-03, 2003-04, 2004-05, 2006-07, 2007-08 & 2009-10 ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE - III(4), CHENNAI - 600 034. VS. M/S. V.A. TECH WABAG PVT. LTD., NO.11, MURRAYS GATE ROAD, ALWARPET, CHENNAI - 600 018. [PAN: AABCV 0225G] ( / APPELLANT) ( / RESPONDENT ' ( / APPELLANT BY : SHRI S. BHARATH, CIT , DR +' ( / RESPONDENT BY : SHRI PERCY PAR DIWALA, SR. COUNSEL ( /DATE OF HEARING : 02.11.2016 ( /DATE OF PRONOUNCEMENT : 25.01.2017 /O R D E R PER BENCH: THE REVENUE HAS FILED APPEALS AGAINST THE DIFFERE NT ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS) - III, CHENNAI IN ITA NO. 737, 738/06-07 & 141/TR. 1/12-13/A.III, DATED 18.05.2012 FOR THE A SSESSMENT YEARS 2002-03, :-2-: I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 2003-04, 2004-05, ITA NO. 439/08-09/A-III, DATED 24 .02.2012 FOR THE ASSESSMENT YEAR 2006-07, ITA NO. 574/10-11/A.III, DATED 24.02.2012 FOR THE ASSESSMENT YEAR 2007-08, AND ITA NO. 488/11-12/A.II I, DATED 22.08.2012 FOR THE ASSESSMENT YEAR 2009-10. THE ISSUES IN THESE A PPEALS ARE COMMON IN NATURE AND ARE CLUBBED, HEARD AND DISPOSED OFF BY T HIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. WE TAKE UP THE FACTS NARRATED IN ITA NO. 1225/MDS/2012 FOR THE ASSESSMENT YEAR 2006-07. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 2.1 THE CIT(A) ERRED IN DELETING THE DISALLOWANCE O F DEDUCTION U/S. 80IA. 2.2 THE CIT(A) OUGHT TO HAVE APPRECIATED THAT, AS P ER SEC. 80IA(4)(I), ANY ENTERPRISE CARRYING ON BUSINESS OF (I) DEVELOPING OR ; (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAI NTAINING ANY INFRASTRUCTURE FACILITY ALONE IS ELIGIBLE FOR DEDU CTION U/S. 80IA. 2.3 THE CIT(A) FAILED TO APPRECIATE THAT THE GOVE./ LOCAL BODIES WHICH OWN THE INFRASTRUCTURE IS THE DEVELOPER AND THE ASSESS EE IS A MERE CONTRACTOR AND HENCE NOT ELIGIBLE TO THE DEDUCTION U/S. 80IA. 2.4 THE CIT(A) FAILED TO APPRECIATE THAT AS PER SEC . 80IA(1), THE ASSESSEE IS ELIGIBLE FOR DEDUCTION ONLY FOR THE PROFITS AND GAINS DERIVED FROM ANY BUSINESS REFERRED TO IN SEC. 80IA(40 AND IN THE AS SESSEE'S CASE, THE NET INCOME DERIVED BY THE ASSESSEE BY ENTERING INTO A MERE CONTRACT AGREEMENT FOR DEVELOPMENT OF INFRASTRUCTURAL FACIL ITIES CANNOT BE EQUATED TO PROFITS AND GAINS DERIVED BY THE ASSESS EE'S UNDERTAKING :-3-: I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 DERIVED FROM THE PROFITS AND GAINS OF DEVELOPMENT OF INFRASTRUCTURAL FACILITIES. 2.5 THE CIT(A) OUGHT TO HAVE APPRECIATED THAT SOME OF THE WORKS EXECUTED BY THE ASSESSEE WERE RELATED TO EXPANSION OF ALREADY EXISTING INFRASTRUCTURE FACILITIES, WHICH DOES NOT SATISFY THE CONDITION THAT, FOR CLAIMING DEDUCTION U/S. 80IA, THE INFRASTRUCTURE P ROJECTS SHOULD BE A NEW ONE. 2.6 THE CIT(A) FAILED TO APPRECIATE THAT THE ASSESS EE DOES NOT HAVE THE ENTIRE PLANT AND MACHINERY FOR THE EXECUTION OF TH E WORKS, BUT HAS SUB-CONTRACTED THE WORK TO OTHER PERSONS, THUS MAK ING IT INELIGIBLE FOR DEDUCTION U/S. 80IA(4). 2.7 IT IS SUBMITTED THAT THE DECISION OF THE ITAT I N THE CASE OF EAST COAST CONSTRUCTIONS (ITA NO. 544/MDS/2010 FOR ASSESSMENT YEAR 2004-05 DATED 13.09.2011) HAS NOT BEEN ACCEPTED BY THE REV ENUE AND AN APPEAL U/S. 260A BEFORE THE HIGH COURT HAS BEEN FI LED. 2.8 THE CIT(A) OUGHT TO HAVE FOLLOWED THE DECISION OF ITAT IN THE CASE OF ACIT VS. INDWELL LININGS P. LTD. (122 TTJ (CHENNAI ) 137), WHEREIN IT WAS HELD THAT 'WHERE ASSESSEE TOOK CONTRACT WORK OF CEMENT LINING FOR WATER SUPPLY PROJECT OF GUJARAT WATER SUPPLY AND S EWERAGE BOARD (GUJARAT GOVERNMENT UNDERTAKING), IT BEING A CONTR ACTOR AND NOT DEVELOPER WAS NOT ENTITLED TO DEDUCTION U/S. 80IA [ IN FAVOUR OF REVENUE] [ ASSESSMENT YEAR 200-03]' :-4-: I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 2.9 THE CIT(A) ERRED IN DELETING THE DISALLOWANCE O F RS. 45,00,613/- MADE TOWARDS FOREX EXCHANGE LOSSES. 2.10 THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE AO MADE THE DISALLOWANCE ON ACCOUNT OF THE FACT THAT THE ASSES SEE FAILED TO PROVE WITH EVIDENCE THAT THE ABOVE LOSS WAS INCURRED IN THE REGULAR BUSINESS TRANSACTION. 2.11 THE CIT(A) ERRED IN ACCEPTING THE ASSESSEE'S C ONTENTION THAT THE EXCHANGE LOSSES ARE LOSSES INCURRED BY THE ASSESSE E IN RESPECT OF FLUCTUATION DIFFERENCE IN FOREIGN EXCHANGE WHILE M AKING PAYMENTS ON VARIOUS RAW MATERIALS IMPORTED BY THE APPELLANT FO R BUSINESS PURPOSES, WITHOUT REFERENCE TO THE AO AND WITHOUT AFFORDING AN OPPORTUNITY TO THE AO TO VERIFY THE ASSESSEE'S CLAIM MADE FOR THE FIRST TIME BEFORE CIT(A). 3. THE BRIEF FACTS OF THE CASE THAT THE ASSESSEE CO MPANY IS ENGAGED IN BUSINESS OF ENGINEERING DESIGN AND EXECUTING TURNKE Y INFRASTRUCTURE PROJECTS OF WATER/WASTE WATER TREATMENT PLANTS AND SEWERAGE TRE ATMENT PLANTS AND FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 ON 20.11.2016 WITH TOTAL INCOME OF RS. 1,92,24,966/- AND COMPLIED THE PROVIS IONS OF SECTION 115JB OF THE ACT, SUBSEQUENTLY THE RETURN OF INCOME WAS PROCESSE D U/S. 143(1) ON 25.03.2008 AND THE CASE WAS SELECTED FOR SCRUTINY A ND NOTICE U/S. 143(2) AND 142(1) ALONG WITH QUESTIONNAIRE WAS ISSUED. IN COM PLIANCE TO NOTICE, LD. AR APPEARED FROM TIME TO TIME AND FURNISHED THE DETAIL S AS CALLED FOR. THE LD. AO IN :-5-: I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 THE ASSESSMENT FOUND THAT THE ASSESSEE COMPANY HAS ASSAILED DEDUCTION U/S. 80IA RS. 14,28,54,064/- AND CLAIMED TO HAVE COMPLIE D THE CONDITIONS STIPULATED U/S. 80IA(4) OF THE ACT. THE LD. AO PERUSED THE MA IN CONDITIONS FOR CLAIM OF DEDUCTION U/S. 80IA BEING (I) THE ASSESSEE MUST BE AN ENTERPRISE CARRYING ON A BUSINESS OF DEVELOPING INFRASTRUCTURE FACILITY; (II ) IS OWNED BY THE ASSESSEE ; (III) AND ENTERED INTO AN AGREEMENT WITH LOCAL AUTHORITIE S FOR INFRASTRUCTURE DEVELOPMENT FACILITIES, TO BE ELIGIBLE TO CLAIM DED UCTION U/S. 80IA OF THE ACT. THE LD. AR FILED THE INFORMATION OF EXECUTION OF CIVIL CONTRACT WORKS AND CLAIMED AS A DEVELOPER AND SUPPORTED WITH THE TRIBUNAL DECISION OF MUMBAI IN THE CASE OF PATEL ENGINEERS VS. DCIT, 94 ITT 411(MUMBAI) WHERE IT WAS CLARIFIED THAT: 'A PERSON WHO ENTERS INTO AN CONTRACT WITH ANOTHER PERSON, WILL BE A CONTRACTOR NO DOUBT; AND THE ASSESSEE HAVING ENTERE D INTO AN AGREEMENT WITH THE GOVERNMENT OF AUTHORITY FOR DEVELOPMENT OF THE INFRASTRUCTURE PROJECTS WAS OBVIOUSLY A CONTRACTOR BUT THAT DID NO T DEROGATE THE ASSESSEE FROM BEING A DEVELOPER AS WELL. THE TERM 'CONTRACT ' IS NOT ESSENTIALLY CONTRADICTORY TO THE TERM 'DEVELOPER'. ON THE OTHE R HAND, RATHER SEC. 80IA(4) ITSELF PROVIDED THAT ASSESSEE SHOULD DEVELO P THE INFRASTRUCTURE FACILITY AS PER AGREEMENT WITH THE CENTRAL GOVERNME NT, STATE GOVERNMENT OR A LOCAL AUTHORITY. SO ENTERING INTO A LAWFUL AG REEMENT AND THEREBY BECOMING A CONTRACTOR SHOULD, IN NO WAY, BE A BAR T O THE ONE BEING A DEVELOPER. THE ASSESSEE HAD DEVELOPED INFRASTRUCTU RE FACILITY AS PER AGREEMENT WITH THE CHENNAI METRO. THEREFORE, MEREL Y BECAUSE IN THE AGREEMENT FOR DEVELOPMENT OF INFRASTRUCTURE FACILIT Y THE ASSESSEE WAS REFERRED TO AS CONTRACTOR OR BECAUSE SOME BASIC SPE CIFICATIONS WERE LAID DOWN, IT DID NOT DETRACT THE ASSESSEE FROM THE POSI TION OF BEING A DEVELOPER; NOR WOULD IT DEBAR THE ASSESSEE FROM CLA IMING DEDUCTION U/S. 80IA(4). :-6-: I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 THE ASSESSEE ALSO MENTIONED THAT: THE MOOT QUESTION REQUIRED TO BE CONSIDERED IN THE INSTANT CASE WAS WHETHER THE ASSESSEE COULD BE SAID TO BE DEVELOPER WHEN THE AMOUNT HAD BEEN PAID TO IT FOR THE DEVELOPMENT WORK CARRIED OU T BY IT. AS PER THE LEGISLATIVE HISTORY OF SEC. 80-A, THE AMENDMENT IN SEC. 80IA WAS BROUGHT ABOUT BY THE FINANCE ACT, 1995 W.E.F. 01.04.1996. BY VIRTUE OF THE AMENDMENT, EXEMPTION U/S. 80-IA WAS PROVIDED TO ANY INFRASTRUCTURE FACILITY. THUS, TO BE ELIGIBLE FOR THIS DEDUCTION, AN ASSESSEE WAS REQUIRED TO CARRY OUT ALL THE THREE ACTIVITIES I.E., (I) TO DEVELOP (II) TO MAINTAIN AND (III) TO OPERATE. AFTER THE MODIFICATION EFFECTED BY THE FINANCE ACT 1999 W.E.F. 01.04.2000 DEDUCTION U/S. 80IA HAS BECOME AV AILABLE TO ANY ENTERPRISE CARRYING ON THE BUSINESS OF (I) DEVELOPI NG OR (II) MAINTAINING AND OPERATING OR (III) DEVELOPING, MAINTAINING AND OPER ATING ANY INFRASTRUCTURE FACILITY. THEREFORE, FROM ASSESSMENT YEAR 2000-01 DEDUCTION IS AVAILABLE IF THE ASSESSEE CARRIED ON THE BUSINESS OF ANY ONE OF THE ABOVE MENTIONED THREE TYPES OF ACTIVITIES AND ACCORDINGLY ALSO WHEN THE ASSESSEE IS CARRYING ON THE ACTIVITY OF ONLY DEVELOPING. WHEN AN ASSESSEE IS ONLY DEVELOPING AN INFRASTRUCT URE FACILITY/PROJECT AND IS NOT MAINTAINING AND NOT OPERATING IT, OBVIOU SLY, SUCH AN ASSESSEE WILL BE PAID FOR THE COST INCURRED BY IT, OTHERWISE HOW WILL BE PERSON, WHO DEVELOPS THE INFRASTRUCTURE FACILITY PROJECT, REALI SE ITS COST? IF THE INFRASTRUCTURE FACILITY IS JUST AFTER ITS DEVELOPME NT, TRANSFERRED TO THE GOVERNMENT, NATURALLY THE COST WOULD BE PAID BY THE CENTRAL GOVERNMENT. THE AMENDMENT BROUGHT IN BY THE FINANCE ACT, 1999 WAS WITH THE SOLE INTENTION/PURPOSE OF PROVIDING DEDUCTION U/S. 80IA TO THE PERSON, WHO ONLY DEVELOPS OR WHO ONLY MAINTAINS AND OPERATES AN INFR ASTRUCTURE FACILITY. IF A PERSON WHO ONLY DEVELOPS THE INFRASTRUCTURE FACIL ITY IS NOT PAID BY THE GOVERNMENT, THE ENTIRE COST OF DEVELOPMENT WOULD BE A LOSS IN THE HANDS OF THE DEVELOPER AS HE IS NOT OPERATING THE INFRAST RUCTURE FACILITY. WHEN THE LEGISLATURE HAS PROVIDED THAT THE INCOME OF THE DEVELOPER OF THE :-7-: I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 INFRASTRUCTURE PROJECT WOULD BE ELIGIBLE FOR DEDUCT ION, IT PRESUPPOSES THAT THERE CAN BE INCOME TO DEVELOPER, I.E. TO THE PERSO N WHO IS CARRYING ON THE ACTIVITY OF ONLY DEVELOPING INFRASTRUCTURE FACILITY . OBVIOUS AS IT IS, A DEVELOPER WOULD HAVE INCOME ONLY IF HE IS PAID FOR DEVELOPMENT OF INFRASTRUCTURE FACILITY, FOR THE SIMPLE REASON THAT HE IS NOT HAVING THE RIGHT/AUTHORISATION TO OPERATE THE INFRASTRUCTURE F ACILITY AND TO COLLECT TOLL THEREFROM, AS HE HAS NO OTHER SOURCE FOR RECOUPMENT OF HIS COST OF DEVELOPMENT.' IN APPLYING THE ABOVE PRINCIPLES THE ASSESSING OFFI CER OBSERVED THAT IT MUST ENTER INTO A CONTRACT WITH STATE GOVERNMENTS AND LOCAL AU THORITIES TO EXECUTE INFRASTRUCTURE WORKS AS PER THE TERMS AND CONDITION S OF CONTRACT AND AGREEMENT AND TO CLAIM DEDUCTION U/S. 80IA FOR THE CONSTRUCTI ON AND MAINTENANCE OF INFRASTRUCTURAL WORKS. BUT THE ASSESSING OFFICER V IEW THAT THE ASSESSEE COMPANY HAS NOT MADE AN AGREEMENT WITH CENTRAL OR STATE GOV ERNMENT, LOCAL AUTHORITIES OR ANY OTHER STATUTORY BODY FOR THE PURPOSE OF DEVE LOPING INFRASTRUCTURE FACILITY AS REQUIRED UNDER THE LAW AND RELIED ON THE CBDT CI RCULAR NO. 717 ISSUED IN AUGUST, 1995,AND CAME TO A CONCLUSION THAT DUE TO F INANCIAL, MANAGERIAL HARDSHIP OF THE GOVERNMENT BY APPLYING COMMERCIAL PRINCIPLES IN OPERATION OF INFRASTRUCTURE FACILITIES FOR MASSIVE EXPANSION AND QUALITATIVE IMPROVEMENT IN INFRASTRUCTURE OF THE COMPANY. THE SPECIFIC INFRAS TRUCTURE WORKS WHICH HAVE BEEN DEVELOPED OR OPERATED AND MAINTAINED OR DEVELO PED, OPERATED AND MAINTAINED BY THE INFRASTRUCTURE COMPANIES SHALL ON LY ELIGIBLE FOR DEDUCTION U/S. 80IA AND UNDER THE PROVISIONS OF SECTION 80IA(4)(I) ANY ENTERPRISE CARRYING THE BUSINESS OF (I) DEVELOPING OR (II) OPERATING AND MA INTAINING OR (III) DEVELOPING, :-8-: I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 MAINTAINING AND OPERATING IN INFRASTRUCTURE FACILIT IES ARE ENTITLED FOR DEDUCTION U/S. 80IA OF THE ACT. THE LD. AO DEALT ON THE ISSUE S OF THE OWNERSHIP OF THE PROJECTS AND INCOME OF DEVELOPERS FROM INFRASTRUCTU RE WORKS AND THE DEFINITION OF DEVELOPERS AND CONTRACTORS AT PAGE 5 TO 7 OF HIS OR DER AND CAME TO A UNILATERAL CONCLUSION THAT THE DEVELOPMENT AND CONSTRUCTION OF HOUSING PROJECT SHOULD BE BRAINCHILD OF THE DEVELOPERS AND ALSO BROUGHT OUT C OMPARISON OF DEDUCTION U/S. 80IA WITH 80IB(10) TO BE ALLOWED ONLY TO DEVELOPER S. THE LD. AO EMPHASIZED THAT THE DEVELOPMENT OF NEW PROJECT IS THE RE-REQUI SITE CONDITION FOR CLAIM OF DEDUCTION U/S. 80IA. THE LD. AO CONSIDERED THE PRO VISIONS, CBDT CIRCULAR, SUBMISSIONS OF ASSESSEE AND CONTRACTING INFRASTRUCT URE WORKS IS OF THE OPINION THAT THE ASSESSEE COMPANY IS NOT ELIGIBLE FOR DEDUC TION U/S. 80IA OF THE ACT AS THE INCOME IS NOT DERIVED FROM INFRASTRUCTURE FACIL ITIES AND THE ASSESSEE IS NOT A DEVELOPER OF THE PROJECT BUT A MERE CONTRACTOR. AN D ALSO ASSESSEE IS NOT AN OWNER NOR HAVING PLANT AND MACHINERY FOR EXECUTION OF WORKS, BUT ONLY SUB- CONTRACTING THE WORKS TO OTHERS AND REVENUE HAS NOT ACCEPTED DECISION OF CIT(A) IN EARLIER YEARS AND FILED APPEAL BEFORE TRIBUNAL A ND DISALLOWED THE CLAIM OF DEDUCTION U/S. 80IA RS. 14,28,54,064/- AND ALSO DIS ALLOWED FOREX EXCHANGE LOSS OF RS. 45,00,613/-, AS THE ASSESSEE COMPANY COULD N OT PROVE WITH EVIDENCE WHETHER THE FOREX EXCHANGE LOSS WAS INCURRED IN REG ULAR BUSINESS TRANSACTION OR WAS DUE TO FORWARD CONTRACTS AND PASSED THE ORDER U /S. 143(3) DATED 26.12.2008 DETERMINING TOTAL INCOME OF RS. 17,17,02,474/- AND RAISED THE DEMAND. :-9-: I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 4. AGGRIEVED BY THE ORDER, THE ASSESSEE FILED AN AP PEAL WITH THE CIT(A). THE LD. AR ARGUED THE GROUNDS AND REITERATED THE SU BMISSIONS ALONG WITH THE EVIDENCE MADE IN THE ASSESSMENT PROCEEDINGS IN SUPP ORTING THE CLAIM OF DEDUCTION U/S. 80IA. THE LD. CIT(A) VIEWED THE FIN DINGS AND DEALT EXHAUSTIVELY ON THE PROVISIONS AND RELIED ON THE JUDICIAL DECISI ONS AND MADE AN DISTINCTION BETWEEN THE DEVELOPER AND CONTRACTOR AND ALSO CONSI DERED THE WRITTEN SUBMISSIONS, CONTRACT AGREEMENTS, BIDDING DOCUMENTS , VARIOUS DRAWINGS AND DESIGNS SUBMITTED FOR THE DEVELOPMENT OF INFRASTRUC TURE FACILITIES AND TOOK SUPPORT FROM THE DECISIONS OF HIGH COURT AND TRIBUN AL AND EARLIER YEARS CIT(A) DECISIONS IN ASSESSEE'S OWN CASE. THE LD. CIT(A) F OUND AS PER THE AMENDMENT IN FINANCIAL ACT, 1999 EFFECTIVE FROM 01.04.2000, T HE ASSESSEE ENTERPRISE NEED NOT CARRY ALL THE THREE ACTIVITIES OF DEVELOPING, O PERATING AND MAINTAINING INFRASTRUCTURE FACILITIES TO CLAIM DEDUCTION. THE LD. CIT(A) DEALT EXHAUSTIVELY ON THE SUBMISSIONS SUPPORTING THE CLAIM AND THE DECISI ON OF THE BOMBAY TRIBUNAL IN THE CASE OF PATEL ENGINEERING VS. DCIT 94 ITD 411, WHERE THE DEDUCTION HAS TO BE ALLOWED TO COMPANIES PROCESSING ANY ONE OF THE T HREE ACTIVITIES AND AS PER CIRCULAR NO. 717 DATED 14.08.2015 IT IS NECESSARY T HAT ENTERPRISE MUST BE OWNED BY THE COMPANY. THE LD. CIT(A) DEALT ON THE INCORP ORATION OF THE COMPANY IN INDIA AND EXPLAINED THAT ASSESSEE COMPANY IS A SUBS IDIARY COMPANY OF VA TECHNOLOGIES AG, AUSTRIAN COMPANY AND IS THE THIRD LARGEST GROUP ESTABLISHED IN WATER ENGINEERING BUSINESS WORLDWIDE AND ALSO PROVI DES TOTAL MANAGEMENT SOLUTIONS ACROSS WIDE SPECTRUM OF INDUSTRIES AND MU NICIPALITIES ETC., IN THE FINANCIAL YEAR 2005-06, THE ASSESSEE COMPANY HAD EN TERED INTO AN AGREEMENT :-10-: I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 WITH CHENNAI METROPOLITAN WATER SUPPLY AND SEWERAGE BOARD AND SIMILARLY WITH BANGALORE AND KOLKATA MUNICIPAL CORPORATIONS. THE LD. CIT(A) FIND THE ASSESSEE COMPANY HAS ENTERED INTO THE DEVELOPMENT, OPERATING AND MAINTAINING OF INFRASTRUCTURE FACILITIES FOR CONSTRUCTION OF WATER SUPPLY AND SEWERAGE SYSTEM REFERRED AT PAGE 4 TO 6 OF THE ORDER AND COMPARED T HE CONTENTIONS AND REASONS OF THE LD. AO IN DISALLOWING THE CLAIM OF DEDUCTION U/S. 80IA. THE LD. CIT(A) ALSO CONSIDERED SUBMISSIONS OF THE ASSESSEE COMPANY BEING A DEVELOPER OF INFRASTRUCTURE FACILITIES AND NOT A MERE CONTRACTOR AND VIEWED FINANCIAL ASPECTS RELYING ON THE FINANCIAL STATEMENTS. THE ASSESSEE COMPANY TAKES UP DEVELOPMENT ACTIVITIES AND BRINGS INTO EXISTENCE TH E INFRASTRUCTURE FACILITIES WITH USAGE OF MATERIAL AND MACHINERY AND DEPLOYMENT OF S KILLED AND SEMI-SKILLED HUMAN RESOURCES. THE LD. CIT(A) DEALT ON THE ENGIN EERING STRENGTH OF THE ASSESSEE COMPANY WERE MORE THAN 250 PERSONNEL INCLU DING BOTH TECHNICAL AND SEMI-TECHNICAL BEING SPECIALISTS IN DESIGNING PROJE CTS TO CARRY OUT ENGINEERING AND PROCUREMENTS AND EXECUTION OF PROJECT AT CLIENT SIT E. THE LD AR DEMONSTRATED ON VARIOUS INSURANCE POLICIES OF ASSESSEE COMPANY ON T HE PROJECTS REFERRED IN TABULAR FORM AT PAGE 10 AND ALSO THE ASSESSEE COMP ANY HAS OUTSTANDING RECEIVABLES AS ON 31.03.2006 RS. 69,68,30,089/-, TO SUBSTANTIATE THE INVESTMENT OF THE ASSESSEE COMPANY IN THE PROJECT UNDERTAKINGS AND WORKING CAPITAL FACILITY OF RS. 62,10,00,000/- AS ON 31.03.2006 TO SUPPORT T HE ASSESSEE COMPANY, ABUNDANT INVESTMENTS IN EXECUTION OF THE INFRASTRUC TURE PROJECTS AND EQUIPMENTS AS A PART OF CONTRACT AGREEMENT. THE LD. CIT(A) RE FERRED TO THE INVESTMENTS MADE IN VARIOUS ENGINEERING SOFTWARE TO BE UTILISED BY THE ASSESSEE TO EXECUTE :-11-: I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 THE PRELIMINARY AND ENGINEERING DRAWINGS FOR THE PR OJECTS AND HAD DEVELOPED MORE THAN 160 PROCESS AND PRODUCTION PATENTS. THE ASSESSEE COMPANY IS A PIONEER IN WATER AND SEWERAGE TREATMENT TECHNOLOGY HAVING RESEARCH AND DEVELOPMENT CENTRES IN SWITZERLAND, VIENNA, AUSTRIA , CHENNAI AND HAS MOBILIZED AND SYNTHESIZED PEOPLE, PLANS, TECHNICAL EXPERTISE, SUPERVISION, CO-ORDINATION AND CONTROL ETC., TO DEVELOP AND CREATE THE INFRASTRUCT URE FACILITIES AND ALSO DEVELOPER IN ALL PROJECTS ENTERED WITH CHENNAI METRO WATER SE WERAGE BOARD AND THE GOVERNMENT OF WEST BENGAL. THE LD. CIT(A) FOUND TH AT THE ASSESSEE COMPANY HAS SATISFIED THE RATIO LAID DOWN IN THE TRIBUNAL D ECISIONS OF PATEL ENGINEERING'S (SUPRA) AND OM METAL INFRA PROJECTS (SUPRA) AND DE ALT ON THE OWNERSHIP AND FINANCIAL SOURCES AND THE PROJECTS AT KOLKATA, BANG ALORE AND CHENNAI AND INCLUDING THE PROJECT OF KODAMBAKKAM AND ARUMBAKKAM PROJECT. THE LD. CIT(A) DEALT ON SUB-CONTRACTING VARIOUS ACTIVITIES AND CON TENTION OF ASSESSING OFFICER THAT THE PROFITS ARE NOT DERIVED FROM DEVELOPMENT O F INFRASTRUCTURE FACILITIES. THE LD. CIT(A) TEST CHECKED THE CRITERIA AND CONDITIONS PRESCRIBED U/S. 80IA(4)(I) APPLICABLE TO THE ASSESSEE IN RESPECT OF ENTERPRIS E INVOLVED IN (I) DEVELOPING OR, (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY ELIGIBLE FOR DEDUCTION. TH E LD. CIT(A) PERUSED THE PROJECTS AND NATURE OF WORKS UNDERTAKEN AT THE BANGALORE, CH ENNAI, KOLKATA, WEST BENGAL AND PUNE AND ALSO RELIED ON THE TRIBUNAL DECISIONS AND JURISDICTIONAL HIGH COURT DECISION REFERRED AT PAGE 24 TO 25 OF THE ORDER AND SATISFIED THAT THE ASSESSEE HAS COMPLIED THE CONDITIONS NECESSARY FOR THE CLAIM OF DEDUCTION U/S. 80IA OF THE ACT AND THE ASSESSEE COMPANY IS A DEVELOPER AND REL IED ON THE BOMBAY HIGH :-12-: I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 COURT DECISION IN THE CASE OF CIT VS. M/S. ABG HEAV Y INDUSTRIES 322 ITR 323 AND CO-ORDINATE BENCH DECISION EAST COAST CONSTRUCTIONS AND INDUSTRIES VS. DCIT (MDS) AND OTHER DECISION AND CONCLUDED THAT THE ASS ESSEE COMPANY HAS EMPLOYED LARGER NUMBER OF ENGINEERS AND EMPLOYEES I NVOLVED IN DESIGNING THE PROJECT AND CARRYING OUT THE DETAILED ENGINEERING, MANAGEMENT AND PROCUREMENT OF EXECUTION OF PROJECTS AND RELIED ON OBSERVATIONS OF CIT(A) -III, IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2002-03 AT PAGE 29 WHI CH READS AS UNDER: 'THE APPELLANT HAS EXECUTED TURN KEY PROJECTS FOR WATER TREATMENT AND SEWERAGE TREATMENT PLANTS AT VARIOUS PLACES IN CHEN NAI AND UTTAR PRADESH IN ACCORDANCE WITH THE TERMS AND CONDITIONS FOR THE CONTRACTS ENTERED WITH THE LOCAL AUTHORITIES OF THE GOVERNMENT. THE OWNER SHIP OF THE SAID PROJECTS VESTS WITH THE LOCAL AUTHORITIES/GOVERNMEN T WHO HAD AWARDED THE SAID CONTRACTS TO THE APPELLANTS. THE APPELLANT HA S EXECUTED THE SAID PROJECTS TO THE SATISFACTION OF THE LOCAL AUTHORITI ES AND HAS DERIVED INCOME IN THE FORM OF CONTRACT RECEIPTS. THE APPELLANT HA S BROUGHT ON RECORD THE RELEVANT FACTS SUCH AS ORIGINAL DRAWINGS, LOCATION OF SITES, THE COPIES OF A FEW CONTRACT AGREEMENTS ETC., IN ORDER TO PROVE TH AT EVERY PROJECT UNDERTAKEN BY THEM WAS INDEPENDENT AND IT WAS COVER ED UNDER THE DEFINITION OF INFRASTRUCTURE FACILITIES MENTIONED I N SECTION 80IA(4) OF THE ACT. THE APPELLANT HAS FILED COPIES OF PLANTS/DRAW INGS OF THE RELEVANT PROJECTS IN ORDER TO SUPPORT THE CONTENTIONS THAT T HE WORK UNDERTAKEN BY THEM WAS TOTALLY NEW AND INDEPENDENT AND HENCE THE SAME CANNOT BE STATED TO BE REPAIR OR RENOVATION AND THE EXISTING OLD PROJECTS. IT WAS SUBMITTED THAT THE APPELLANT HAS DEVELOPED THE SAID INFRASTRUCTURE FACILITIES RIGHT FROM START FOR EACH PROJECT AND WHEREVER IT I S DESCRIBED AS EXPANSION OF THE PROJECT, IT IS WITH REFERENCE TO ONLY THE IN FRASTRUCTURE FACILITY EARLIER EXISTING BUT THE PROJECT UNDERTAKEN BY THE APPELLAN T IS ALSO PHYSICALLY INSPECTED A FEW SITES OF THE APPELLANT SUCH AS EXPA NSION PROJECT (WATER :-13-: I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 PUMPING) OR SEWERAGE SYSTEM OF T. NAGAR WHICH HAVE BEEN INCLUDED IN THE CATEGORY OF 'EXPANSION' OF INFRASTRUCTURE FACIL ITIES. IN FACT, SUCH PROJECTS HAVE BEEN DEVELOPED BY THE APPELLANT QUITE INDEPENDENT OF THE EXISTING FACILITY. THEREFORE, IN MY CONSIDERED VIE W, THE EXPANSION PROJECTS UNDERTAKEN AND DEVELOPED BY THE APPELLANT ARE REQUI RED TO BE CONSIDERED AS INDEPENDENT PROJECTS ELIGIBLE FOR DE U/S. 80IA.' FINALLY LD. CIT(A) BASED ON DETAILS EXHAUSTIVE SUBM ISSIONS AND JUDICIAL DECISIONS CONSIDER THE ASSESSEE AS DEVELOPER EXCEPT THE PROJE CT AT ALLANDUR WHERE THERE IS NO CLARITY ON THE EXECUTION OF WORK ON SUB-CONTRACT BASIS AND THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 80IA OF THE ACT AND PAR TLY ALLOWED THE APPEAL. 5. SIMILARLY, THE ASSESSEE HAS RAISED THE GROUND ON THE FOREX EXCHANGE LOSS RS. 45,00,673/- WERE EXCHANGE LOSS WAS INCURRE D DURING THE COURSE OF NORMAL BUSINESS ACTIVITY OF THE ASSESSEE DUE TO FLU CTUATION IN FOREIGN EXCHANGE WHILE MAKING PAYMENT ON VARIOUS RAW MATERIAL IMPORT ED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS. THE LD. CIT(A) RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SUTLEJ COTTON MILLS LT D., 116 ITR 1 (SC) AND WOODWARD GOVERNORS INDIA PVT. LTD., 312 ITR 254 (SC ) AND HELD THAT THE FOREX EXCHANGE LOSS IS EXPENDITURE INCURRED BY THE ASSESS EE IS RELATED TO BUSINESS AND ALLOWED THE GROUND OF THE ASSESSEE. 6. AGGRIEVED BY THE CIT(A) ORDER, REVENUE HAS ASSAI LED AN APPEAL WITH THE TRIBUNAL. THE LD. DR ARGUED THE FIRST GROUND T HAT THE CIT(A) HAS FAILED TO :-14-: I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 CONSIDER THE FACTS THAT THE DEDUCTION U/S. 80IA(4)( I) OF THE ACT IS ALLOWED TO ENTERPRISE CARRYING ON THE BUSINESS OF DEVELOPING O R OPERATING AND MAINTAINING OR DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRU CTURE FACILITY. WHEREAS, THE ASSESSEE IS ONLY A MERE CONTRACTOR AND SOME OF THE WORKS EXECUTED RELATING TO EXPANSION OF ALREADY EXECUTED INFRASTRUCTURE FACILI TIES, AND ALSO THE ASSESSEE DOES NOT HAVE THE ENTIRE PLANT AND MACHINERY FOR EX ECUTION OF WORK BUT IS SUB- CONTRACTED THE WORK TO OTHER PERSONS, WHICH CANNOT BE CONSIDERED. FURTHER, THE CO-ORDINATE BENCH DECISION OF EAST COAST CONSTRUCTI ONS (ITA NO. 544/MDS/2010) DATED 13.09.2011 HAS NOT ACCEPTED BY THE REVENUE AN D APPEAL HAS BEEN FILED WITH THE HIGH COURT OF MADRAS AND THE SAME IS PENDI NG AND PRAYED FOR SETTING ASIDE THE ORDER OF CIT(A). CONTRA, THE LD. AR RELI ED ON THE ORDERS OF THE CIT(A) OF THE TRIBUNAL AND HIGH COURT ORDERS AND ALSO IN A SSESSEE'S OWN CASE FOR THE EARLIER ASSESSMENT YEARS. THE LD. AR SUBSTANTIATED THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 80IA(4)(1) OF THE ACT, CONSIDERI NG THE FACTUAL ASPECTS AND PROVISIONS OF LAW AND SUPPORTED HIS ARGUMENTS WITH THE DECISIONS OF SL. NO DECISION/CASE LAW ITAT/HIGH COURT NO. 01. EAST COAST CONSTRUCTIONS CHENNAI ITAT ITA NO. 5 44/MDS/2010 02. LAXMI CIVIL ENGINEERING P LTD., PUNE ITAT ITA N O. 766/PN/09, 254/PN/08, 431?PN/07 & 435/PN/07 03. BT PATIL & SONS BELGAM CONSTRUCTIONS (P) LTD, BOMBAY HC ITA NO. 1307/2011 04. BT PATIL & SONS BELGAM CONSTRUCTIONS (P) LTD, PUNE ITAT ITA NO. 1408 & 1409/PN/2003 05. ABG HEAVY INDUSTRIES LTD BOMBAY HC 322 ITR 323 06. KOYA & COMPANY CONSTRUCTIONS PVT. LTD, HYDERABAD ITAT ITA NO. 180/HYD/2006, 167-168/HYD/08, 221/HYD/09 :-15-: I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 THE LD. AR ALSO FILED ADDITIONAL PAPER BOOK AND THE WRITTEN SUBMISSIONS SUPPORTING THE CASES FOR ALLOWING THE DEDUCTION AND EMPHASISED ON THE CO- ORDINATE BENCH DECISION OF EAST COAST CONSTRUCTIONS INDIA LTD. (SUPRA) AND PRAYED FOR DISMISSING THE REVENUE GROUND. 7. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATE RIAL ON RECORD AND JUDICIAL DECISIONS. THE SOLE CRUX OF THE ISSUE ENV ISAGED BY THE LD. DR THAT THE 07. SIVA SWATHI CONSTRUCTIONS P. LTD HYDERABAD ITAT ITA NO. 1008- 1009/HYD/2013 08. RAMKI INFRASTRUCTURE LTD., HYDERABAD ITAT ITA N O 472- 475/HYD/09 & ITA NO. 1906, 1668/HYD/2011 09. GVPR ENGINEERS, GSP INFRATECH, G SIVA SANKAR REDDY, GSP VEERA REDDY HYDERABAD ITAT 10. SUSHEE HI TECH CONSTRUCTIONS HYDERABAD ITAT ITA NO. 269 & 1165/HYD/2009 & 1171/HYD/2010 11. KMC CONSTRUCTIONS LTD., HYDERABAD ITAT ITA NO. 233/HYD/2001 12. M/S. AYYAPPA INFRA PROJECTS PVT. LTD HYDERABAD ITAT ITA NO. 734/HYD/2010 & ITA NO. 1832/HYD/2012 13. OM METALS INFRAPROJECTS LTD JAIPUR ITAT 26DTR 3 59 14. SUGAM CONSTRUCTIONS AHMEDABAD ITAT ITA NO. 1828 , 787, 1864, 1788/AHD/2010 & ITA NO. 402, 403, 404 & 602/AHD/2012 15. MODERN CONSTRUCTIONS CO. P LTD AHMEDABAD ITAT I TA NO. 264/AHD/2008, 572/AHD/2008 & 950/AHD/2010 16. M/S. PRATHIBA INDUSTRIES LTD., MUMBAI ITAT ITA NOS. 2197- 2199,2200- 2202/MUM/2008 17. ARSS INFRASTRUCTURE PROJECTS LTD CUTTACK ITAT I TA NO. 142 & 142/CTK/2010 :-16-: I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 CIT(A) HAS ERRED IN ALLOWING THE CLAIM ON DEDUCTION U/S. 80IA(4) TO THE ASSESSEE COMPANY IS NOT A DEVELOPER BUT CONTRACTOR. WE PER USED THE FINDINGS OF THE ASSESSING OFFICER AND THE MATERIAL PLACED BEFORE TH E LD. CIT(A). THE LD. DR EMPHASIZED THAT THE ASSESSEE COMPANY IS NOT A DEVEL OPER, THEREFORE IS NOT ELIGIBLE FOR DEDUCTION U/S. 80IA(4) OF THE ACT AND THE DECISION RELIED BY THE LD. CIT(A) OF CO-ORDINATE BENCH EAST COAST CONSTRUCTION S INDIA LTD., (SUPRA) IS NOT ACCEPTED BY THE REVENUE AND CHALLENGED BEFORE THE H ON'BLE HIGH COURT OF MADRAS AND THE SAME IS PENDING. WE HAVE PERUSED TH E SYMPHONISES OF SUBMISSIONS BY THE LD. AR MR. PERCY PARDIWALA AND F OUND THAT THE LD. AR EMPHASIZED ON THE OBJECTS OF THE ASSESSEE COMPANY A ND SUPPORTED WITH THE MEMORANDUM OF ASSOCIATION, WHERE MAIN OBJECTS OF TH E ASSESSEE COMPANY REFERRED AT PAGE 1 PARA 1.1 AS UNDER: ' TO CARRY ON BUSINESS AS GENERAL ENGINEERS, MECHA NICAL ENGINEERS, PROCESS ENGINEERS, CIVIL ENGINEERS, GENERAL MECHANI CAL AND CIVIL CONTRACTORS, WET AND DRY COOLING SYSTEMS SPECIALIST S AND TO ENTER INTO CONTRACTS AND JOINT VENTURES IN RELATION TO AND TO CRUEL, CONSTRUCT, SUPERVISE, MAINTAIN, ALTER, REPAIR, PULL DOWN AND R ESTORE, EITHER ALONE OR JOINTLY WITH OTHER COMPANIES OR PERSONS, WORKS OF A LL DESCRIPTIONS INCLUDING PLANTS OF ALL DESCRIPTIONS, FACTORIES, MILLS, REFIN ERIES, PIPELINES, GAS WORKS, ELECTRIC WORKS, POWER PLANTS, WATER WORKS, WATER TR EATMENT PLANTS AND TO UNDERTAKE TURNKEY PROJECTS OF EVERY DESCRIPTION AND TO UNDERTAKE THE SUPERVISION OF ANY PLANT OR FACTORY AND TO INVEST I N OR ACQUIRE INTEREST IN COMPANIES CARRYING ON THE ABOVE BUSINESS. ' THE LD. AR SUBMITTED THAT THE ASSESSEE'S COMPANY M AIN OBJECTS ARE COMPLIED AND IS INVOLVED IN EXECUTION OF INFRASTRUCTURE PROJ ECTS FROM THE CONCEPTUALIZATION :-17-: I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 TO COMMISSIONING SUCH AS DESIGNING, BASIC & DETAILE D ENGINEERING, PROCUREMENT, CONSTRUCTION, ERECTION, TESTING AND COMMISSIONING, TRIAL RUN AND SUBSEQUENT OPERATION AND MAINTENANCE (O & M) OF WATER/WASTE WA TER TREATMENT PLANTS AND SEWERAGE SYSTEM. WE FOUND THE ASSESSEE SUBSTANTIAT ED IT WORKS WITH THE PROCESS FLOW CHART OF TURNKEY PROJECT ON EXECUTION OF EFFLUENT TREATMENT PLANT OF DIFFERENT PROJECTS REFERRED AS ANNEXURE-2 INVOLVING ACTIVITY OF MORE THAN 20 STAGES. THE ASSESSEE COMPANY HAS ENTERED INTO AGRE EMENT WITH VARIOUS MUNICIPAL BODIES/ LOCAL AUTHORITIES, STATE GOVERNME NT AUTHORITIES FOR EXECUTION OF PROJECTS FOR DEVELOPMENT OF NEW WATER TREATMENT PLA NTS, WHEREAS, THE ASSESSING OFFICER CONSIDERED THAT THE ASSESSEE IS NOT A DEVEL OPER OF THE PROJECTS BUT IS A MERE CONTRACTOR AND SUB-CONTRACTS PART OF THE WORK. THE LD. AR FILED THE CHART OF TURKEY PROJECTS ANNEXURE-3 WITH DETAILS OF DIFFE RENT PROJECTS AND CLAIM MADE IN THE ASSESSMENT ORDERS. THE LD. AO DISALLOWED TH ESE CLAIMS OF PROJECTS CONSIDERING AS SUB-CONTRACTS, WHEREAS, THE LD. CIT( A) HAS RELIED ON THE EXPLANATIONS ON THE PROJECTS WITH FINANCIAL INVESTM ENT AND NEW INFRASTRUCTURE FACILITIES IN DEVELOPING AND SUPPLY OF SEWERAGE SYS TEM IN ORDER TO CATER TO THE POPULATION OF CHENNAI CITY. THE LD. AO MAIN CONTEN TION THAT THE ASSESSEE IS ONLY THE CONTRACTOR AND NOT A DEVELOPER BUT THE PERSON W HO DEVELOPS THE INFRASTRUCTURE FACILITIES PURSUANT TO CONTRACT WITH THE STATE GOVERNMENT SHALL BE CONSIDERED AS DEVELOPER. WE FOUND THE CO-ORDINATE BENCH DECISION OF EAST COAST CONSTRUCTIONS (SUPRA) AND BOMBAY BENCH DECISION BT PATIL AND JAIPUR BENCH DECISION OF OM METAL INFRA PROJECTS (SUPRA) AND HO N''BLE HIGH COURT OF BOMBAY IN THE CASE OF ABG HEAVY INDUSTRIES LTD., 322 ITR 3 23 HAS CONSIDERED SIMILAR :-18-: I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 ACTIVITIES PERFORMED BY THE ASSESSEE COMPANY IS DEV ELOPING INFRASTRUCTURE I.E., CONCEPTUALIZATION OF DESIGNS, LEVEL OF INVESTMENT S HOULD BE CONSIDERED TO BE CALLED AS DEVELOPER. CONSIDERING THE JURISDICTIONA L TRIBUNAL CASE OF EAST COAST CONSTRUCTIONS LTD., AND SEVERAL OTHER DECISIONS OF THE VARIOUS BENCHES. WE FOUND THAT THE ASSESSEE COMPANY UNDERTAKES THE ENTIRE RES PONSIBILITY FROM CONCEPT TO COMMISSIONING OF DEVELOPING THE ENTIRE FACILITY. B ASED ON CUSTOMER SPECIFICATIONS, CONCEIVES THE DESIGNS AND TECHNICAL PLANS, CHOOSES THE TECHNOLOGY REQUIRED FOR TREATMENT OF THE EFFLUENTS AND EXECUTE S THE PROJECT THROUGH A SKILLED TEAM OF MORE THAN 250 - 300 ENGINEERS. THE WORK PE RFORMED INCLUDES THE BASIC DESIGN OF THE PLANT, DETAILED ENGINEERING, PROCUREM ENT OF EQUIPMENT AND COMPONENTS, DELIVERY OF SUPPLIES AT SITE, CIVIL CON STRUCTION OF THE STRUCTURE, INSTALLATION OF EQUIPMENT AT SITE, INTERFACING THRO UGH PIPING AND CABLES, TESTING AND COMMISSIONING AND SUBSEQUENT O&M. THE ASSESSEE COMPANY HAVING WORKING CAPITAL FACILI TY FROM EARLIER YEARS AND INVESTMENTS ARE MADE IN PROJECT IN EACH Y EAR BELOW: ASSESSMENT YEAR RECEIVABLES RS. MARGIN MONEY DEPOSIT WITH BANKS IN RS. BANK GUARANTEES 2002-03 8,94,65,141 6,80,000 13,37,42,649 2003-04 9,15,83,458 80,000 41,18,50,954 2004-05 22,19,79,451 80,000 55,90,27,996 2006-07 69,68,13,089 58,53,877 1,16,90,76,966 2007-08 1,19,04,09,447 6,94,930 1,76,97,65,551 :-19-: I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 THE ASSESSEE COMPANY HAS UTILIZED ITS OWN FUNDS, B ORROWINGS AND INTERNAL EARNINGS AND PROVIDED GUARANTEES FOR UNDER TAKING THE PROJECTS WHERE FUNDS ARE INVESTED AND TAKEN VARIOUS INSURANCE POL ICIES TO PROTECT THE INTEREST OF THE ASSESSEE IN ALL THE PROJECTS TO COVER THE RISK S AND HAS INVESTED IN ASSETS FOR THE EXECUTION OF THE PROJECT AND HAS REGISTERED PAT ENTS AND CONTINUOUSLY ENGAGES IN RESEARCH AND DEVELOPMENT ACTIVITIES. 8. THE LD. AR ELABORATELY DEMONSTRATED THE FACTS A ND DEALT ON SPECIFIC FINDINGS IN THE ORDER OF CIT(A) AND SUPPORTED WITH PAPER BOOK CONTAINING DETAILS OF COPIES OF CONTRACTS AND FINANCIAL STATEMENTS. W E FIND THAT LD. AO HAS PLACED RELIANCE ON THE TRIBUNAL DECISION OF THE INDWEL LIN ING (P) LTD., 122 TTJ 137 (MDS) WHICH WAS CONSIDERED BY THE EAST COAST CONSTRUCTION S LTD., (SUPRA) AND WAS DISTINGUISHED WHERE ASSESSEE WAS ONLY CIVIL CONTRAC TOR AND DID ONLY CIVIL WORKS. WHEREAS, LD. DR FOCUSED ON THE LATER DECISION OF TH E TRIBUNAL ACIT VS. SREE SELLA INFRASTRUCTURE & PROJECTS LTD., IN ITA NO. 1294/MDS /2011 FOR THE ASSESSMENT YEAR 2008-09 DATED 28.09.2012 AT PAGE 7 PARA 6 WHERE DED UCTION U/S. 80IA(4) WAS DENIED AS UNDER: 'WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECORDS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE INV OLVED IN THIS APPEAL IS WHETHER THE ASSESSEE IS ELIGIBLE FOR THE DEDUCTION U/S. 80IA(4) OF THE ACT OR NOT. ACCORDING TO THE ASSESSING OFFICER THE ASS ESSEE COMPANY HAD CONSTRUCTED WATER TREATMENT PLANT FOR CMWSSB AND SO ME PRIVATE ENTITIES AND AS PER THE CONSTRUCTION CONTRACT THE ASSESSEE H AD SIMPLY EXECUTED WORKS CONTRACT ON JOB WORK BASIS FOR CMWSSB AND THE REFORE WAS DENIED THE DEDUCTION U/S. 80IA(4) OF THE ACT. IN APPEAL T HE LD. CIT(A) SIMPLY :-20-: I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF PATEL ENGINEERING LTD., (94 ITD 141) ALLOWED THE DEDUCTION CLAIMED BY THE A SSESSEE U/S. 80IA(4) OF THE ACT. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS CATEGORICALLY GIVEN THE FINDINGS THAT THE ASSESSEE IS A WORK CONTRACTOR AND HE HAD CONSTRUCTED THE WATER TREATMENT PLANT FOR CM WSSB ON JOB WORK BASIS. THE FACT WAS NOT DISPUTED BEFORE US. IT IS CLEAR FROM THE FACTS AVAILABLE ON RECORD THAT THE ASSESSEE HAS EXECUTED THE WORKS CONTRACT, I.E., WATER TREATMENT PLANT FOR CMWSSB AND HAS CLAI MED DEDUCTION U/S. 80IA(4) OF THE ACT. THE ASSESSEE IS UNABLE TO ESTA BLISH AS TO HOW IT HAD MADE INVESTMENT IN THE PROJECT. APART FROM THAT TH E ASSESSEE IS NOT ABLE TO PROVE THAT IT HAS NOT EXECUTED THE WORK CONTRACT BY PRODUCING RELEVANT MATERIAL TO CONTRADICT THE FINDING GIVEN BY THE ASS ESSING OFFICER. WE, THEREFORE, HOLD THAT THE ASSESSEE IS A WORKS CONTRA CTOR.' WE FOUND THAT CO-ORDINATE BENCH DECISION OF THIS T RIBUNAL ABOVE CONSIDERED THE FACTS FOR DENIAL OF CLAIM THAT THE ASSESSEE HAS NOT DEMONSTRATED HOW THE PROJECTS ARE FUNDED. IN THE PRESENT CASE LD. AR OF THE ASSESSEE HAS DEMONSTRATED THE INVESTMENTS OF THE COMPANY IN PROJ ECT FROM THE ASSESSMENT YEAR 200-03 TO 2007-08 CONSISTING OF RECEIVABLES, M ARGIN MONEY WITH THE BANK, AND BANK GUARANTEES FOR PERFORMANCE GUARANTEE. THE SE FINANCIAL ASPECTS PROVE THAT THE ASSESSEE COMPANY HAS FUNDED FINANCES IN IN FRASTRUCTURE AND EXECUTION OF PROJECTS. WE ARE OF THE OPINION THAT THE ASSESS EE HAS COMPLIED THE CONDITIONS U/S. 80IA(4) OF THE ACT AND DEMONSTRATED THE FUNDIN G OF THE PROJECTS WITH FINANCIAL STATEMENTS. WE FOUND THAT THE CO-ORDINAT E BENCH OF THIS TRIBUNAL IN THE CASE OF EAST COAST CONSTRUCTIONS LTD., (SUPRA) HELD AT PAGE 21 PARA 14 WHICH READ AS UNDER: :-21-: I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 ' NOW, LET US EXAMINE THE FACTS OF THE GIVEN CASE. I T IS AN UNDENIABLE FACT THAT THE ASSESSEE IS ENGAGED IN THE CIVIL CONSTRUCTION WORK LIKE CONSTRUCTION OF FLYOVER, BRIDGE UNDERPASS , SEWERAGE, WATER SUPPLY ETC. FOR VARIOUS LOCAL BODIES, RAILWAYS, CEN TRAL/STATE GOVERNMENTS. IN FACT, AS PER THE TERMS OF AGREEMENT , EVEN THE INITIAL PROPOSALS FORMULATED BY THE DEPARTMENT WHICH ARE ST ATED TO BE TENTATIVE, THE ASSESSEE HAS THE LIBERTY TO MAKE DIF FERENT PROPOSALS WITHOUT DETRIMENTAL TO THE GENERAL FEATURES OF THE DEPARTMENTAL PROPOSAL, LIKE ROAD LEVEL/BOTTOM OF DECK LEVEL, MFL , SILL LEVEL, LINEAR WATER WAY, WIDTH OF THE BRIDGE ETC. RIGHT FROM THE DRAWINGS TO THE WORK OF CONSTRUCTION HAS BEEN DONE BY THIS ASSESSEE AND HAS BORNE THE COST ITSELF. THE COMPANY HAS CONSTRUCTED, DELIVERE D AND MAINTAINED AND SECURITY IS ALSO MAINTAINED THEREAFTER. SO, TH IS IS A CASE OF TRANSFER OF PROPERTY CHATTER AND NOT A CONTRACT OR SERVICE. A DEVELOPER AS PER THE ADVANCED LAW LEXICON MEANS A PERSON ENGAGED IN DEVELOPMENT OR OPERATION OR MAINTENANCE OF SPECIAL ECONOMIC ZONE, AND ALSO INCLUDES ANY PERSON AUTHORIZED FOR SUCH PURPOSE BY ANY SUCH DEVELOPER. IN THE CASE OF ACIT VS BHARAT UDYOG LTD, F BENCH OF ITAT MUMBAI, HAS CONCLUDED THAT ANY ASSESSEE WHO IS ENGAGED IN DEVEL OPING THE INFRASTRUCTURE FACILITY AND ALSO OPERATING AND MAI NTAINING THE SAME, IS ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80IA(4). A COPY OF THIS DECISION IS ENCLOSED AT PAGE 139 OF THE PAPER BOOK. IN THE CASE OF PATEL ENGINEERING LTD VS DY. CIT, 84 TTJ (MUMBAI) 646 [CO PY ENCLOSED AT PAGE NO.145 OF THE PAPER BOOK], IT HAS BEEN HELD TH AT A PERSON, WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON WILL BE TREATED AS A CONTRACTOR UNDOUBTEDLY; AND THAT ASSESSEE HAVING ENTERED INTO AN AGREEMENT WITH THE GOVERNMENT OF MAHARASHTRA AND AL SO WITH APSEB FOR DEVELOPMENT OF THE INFRASTRUCTURE PROJECTS, IS OBVIOUSLY A CONTRACTOR BUT DOES NOT DEROGATE THE ASSESSEE FROM BEING A DE VELOPER AS WELL. :-22-: I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 THE TERM CONTRACTOR IS NOT NECESSARILY CONTRADICT ORY TO THE TERM DEVELOPER. ON THE OTHER HAND, RATHER SECTION 80I A(4) ITSELF PROVIDES THAT ASSESSEE SHOULD DEVELOP THE INFRASTRUCTURE FAC ILITY AS PER THE AGREEMENT WITH THE CENTRAL GOVERNMENT, STATE GOVERN MENT OR A LOCAL AUTHORITY. SO, ENTERING INTO A LAWFUL AGREEMENT A ND THEREBY BECOMING A CONTRACTOR SHOULD IN NO WAY BE A BAR TO THE ONE B EING A DEVELOPER. THE ASSESSEE HAS DEVELOPED INFRASTRUCTURE FACILITY AS PER THE AGREEMENT WITH MAHARASHTRA GOVERNMENT/APSEB, THEREFORE, MEREL Y BECAUSE IN THE AGREEMENT FOR DEVELOPMENT OF INFRASTRUCTURE FACILIT Y THE ASSESSEE IS REFERRED TO AS A CONTRACTOR OR BECAUSE SOME BASIC S PECIFICATIONS ARE LAID DOWN, IT DOES NOT DETRACT THE ASSESSEE FROM THE POS ITION OF BEING A DEVELOPER; NOR WILL IT DEBAR THE ASSESSEE FROM CL AIMING DEDUCTION U/S 80IA(4). THE FACTS OF THE PRESENT CASE ARE EXACTL Y IDENTICAL TO THE FACTS OF THAT CASE RENDERED BY ITAT MUMBAI BENCH IN WHICH UNDER IDENTICAL FACTS AND CIRCUMSTANCES, THE ASSESSEE HAS BEEN HELD TO BE ELIGIBLE FOR DEDUCTION U/S 80IA(4). SECTION 80IA(4)(I)(B) REQUI RES DEVELOPMENT OF INFRASTRUCTURE FACILITY AND TRANSFER THEREOF AS PER AGREEMENT AND IT CANNOT BE DISPUTED IN VIEW OF THE MATERIAL ON RECOR D THAT THE ASSESSEE HAS TRANSFERRED THE INFRASTRUCTURE FACILITY DEVELOP ED BY IT BY HANDING OVER THE POSSESSION THEREOF TO THE CONCERNED AUTHOR ITY AS REQUIRED BY THE AGREEMENT. THE HANDING OVER OF THE POSSESSION OF DEVELOPED INFRASTRUCTURE FACILITY/PROJECT IS THE TRANSFER OF THE INFRASTRUCTURE FACILITY/PROJECT BY THE ASSESSEE TO THE AUTHORITY. THE HANDING OVER OF THE INFRASTRUCTURE FACILITY/PROJECT BY THE DEVELOPE R TO THE GOVERNMENT OR AUTHORITY TAKES PLACE AFTER RECOUPMENT OF THE DEVEL OPERS COSTS WHETHER IT BE BT OR BOT OR BOOT BECAUSE IN BOT AND BOOT THIS RECOUPMENT IS BY WAY OF COLLECTION OF TOLL THEREFRO M WHEREAS IN BT IT IS BY WAY OF PERIODICAL PAYMENT BY THE GOVERNMENT/AUTH ORITY. THE LAND INVOLVED IN INFRASTRUCTURE FACILITY/PROJECT ALWAYS BELONGS TO THE :-23-: I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 GOVERNMENT/LOCAL AUTHORITY ETC., WHETHER IT BE THE CASE OF BOT OR BOOT AND IT IS HANDED OVER BY THE GOVERNMENT/AUT HORITY TO THE DEVELOPER FOR DEVELOPMENT OF INFRASTRUCTURE FACILIT Y/PROJECT. THE SAME HAS BEEN THE POSITION IN THE GIVEN CASE AS WELL. S O, DEDUCTION U/S 80IA(4) IS ALSO AVAILABLE TO THIS ASSESSEE WHICH HA S UNDERTAKEN WORK OF A MERE DEVELOPER. RATHER, THE STATUTORY PROVISIO N AS CONTAINED IN SECTION 80IA WHICH PROVIDES FOR DEDUCTION OF INFRA STRUCTURE FACILITY NO WAY PROVIDES THAT ENTIRE INFRASTRUCTURE FACILITY PR OJECT HAS TO BE DEVELOPED BY ONE ENTERPRISE. THUS, AS PER SECTION 80IA THE ASSESSEE SHOULD DEVELOP THE INFRASTRUCTURE FACILITY AS PER T HE AGREEMENT WITH THE CENTRAL/STATE GOVERNMENT/LOCAL AUTHORITY. ENTERING INTO A LAWFUL AGREEMENT AND THEREBY BECOMING SHOULD, IN NO WAY BE A BAR TO THE ONE BEING A DEVELOPER. IN THIS REGARD, AS WE HAVE AL READY STATED, THE DECISION OF ACIT VS BHARAT UDYOG LTD, 118 ITD 336 A ND PATEL ENGINEERING LTD VS DY. CIT, 84 TTJ 646, ARE RELEVAN T. AS PER CIRCULAR NO.4/2010[F.NO.178/14/2010-ITA-I] DATED 18.5.2010, WIDENING OF EXISTING ROADS CONSTITUTES CREATION OF NEW INFRASTR UCTURE FACILITY FOR THE PURPOSE OF SECTION 80IA(4)(I) . THE ASSESSEE IS NO T REQUIRED TO DEVELOP THE ENTIRE ROAD IN ORDER TO QUALIFY FOR DEDUCTION U /S 80IA AS HAS BEEN HELD BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE O F CIT VS ABG HEAVY INDUSTRIES LTD, 322 ITR 323. THE NEWLY INSER TED EXPLANATION 2 TO SECTION 80IA VIDE FINANCE ACT, 2007, DOES NOT APPLY TO A WORKS CONTRACT ENTERED INTO BY THE GOVERNMENT AND THE ENTERPRISE. IT APPLIES TO A WORK CONTRACT ENTERED INTO BETWEEN THE ENTERPRISE A ND OTHER PARTY THE SUB-CONTRACTOR. THE AMENDMENT AIMS AT DENYING DE DUCTION TO THE SUB CONTRACTOR WHO EXECUTES A WORK CONTRACT WITH THE EN TERPRISE AS HELD BY THE ITAT, JAIPUR A BENCH IN THE CASE OF OM METAL INFRAPROJECTS LTD VS CIT-I, JAIPUR, IN I.T.A.NO. 722 & 723/JP/2008 DATED 31.12.2008. THE RELIANCE BY THE LD. CIT(A) ON THE DECISION OF ITAT, CHENNAI BENCH IN THE :-24-: I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 CASE OF ACIT VS INDWELL LIANINGS PVT. LTD, 313 ITR( AT) 118, HAS BEEN ENLARGED IN ITS FINDING BY THE ITAT, MUMBAI F BEN CH IN ITS DECISION RENDERED IN THE CASE OF ACIT VS BHARAT UDYOG LTD , BY HOLDING THAT SUCH A DEDUCTION IS ONLY TO BE DENIED TO A SUB-CONT RACTOR AND NOT A MIN CONTRACTOR. SIMILAR VIEW HAS BEEN TAKEN BY THE IT AT CHENNAI BENCH IN THE CASE OF ACIT VS SMT C.RAJINI (SUPRA) IN WHICH B OTH OF US CONSTITUTED THE BENCH. IN THIS DECISION THE DEFINITION AND DIF FERENCE BETWEEN WORKS CONTRACTOR AND A DEVELOPER HAS BEEN EXAMINED IN DET AIL. THE MAIN THRUST OF THE DECISION IS THAT A DEVELOPER NEED NOT BE THE OWNER OF THE LAND ON WHICH DEVELOPMENT IS MADE. ALTHOUGH THAT DECISION WAS RENDERED IN THE CONTEXT OF A DEVELOPER OF BUILDINGS AND THE DEDUCTION WAS IN RESPECT OF 80IB(10), BUT THE DEFINITION OF DEVELOPER GIVEN IN THAT CASE IS ALSO RELEVANT FOR THIS PURPOSE. MOREO VER, WE ARE IN AGREEMENT THAT IN INCENTIVE PROVISIONS, THE CONSTRU CTION SHOULD BE LIBERALLY GIVEN AS HELD BY THE HON'BLE SUPREME COUR T RENDERED IN THE CASE OF BAJAJ TEMPO LTD VS CIT, 196 ITR 188. THUS, WHEN THE ASSESSEE MAKES INVESTMENT AND HIMSELF EXECUTES DEVELOPMENT WORK AND CARRIES OUT CIVIL WORKS, HE IS ELIGIBLE FOR TAX BENEFIT U/ S 80IA OF THE ACT. ACCORDINGLY, WITH THE FOREGOING DISCUSSION, WE HOLD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IA(4) OF THE ACT, AND T HEREFORE, WE ORDER TO DELETE THE ADDITION MADE IN THIS RESPECT.' WE ARE OF THE OPINION THAT THE ABOVE CO-ORDINATE B ENCH DECISION IS CHALLENGED BY THE REVENUE BEFORE HIGH COURT AND THE SAME IS PENDING. BUT AS A JUDICIAL PRECEDENCE AND THE FACTS EXPLAINED BEFORE US ARE SUPPORTED BY THE EVIDENCE BY THE LD. AR RELYING ON CO-ORDINATE BENCH DECISION. ACCORDINGLY, WE ARE NOT INCLINED TO INTERFERE WITH THE ORDERS OF TH E CIT(A) WHO HAS DISCUSSED AND :-25-: I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 EXAMINED THE ISSUE VIS-A-VIS EXPLANATIONS OF THE AS SESSEE AND WE UPHELD THE SAME. 9. IN THE RESULT, THE GROUND OF THE REVENUE IS DISM ISSED. 10. ON THE NEXT GROUND OF FOREX EXCHANGE LOSS, WE F OUND THAT THE LD. CIT(A) RELIED ON THE DECISION OF THE SUTLEJ COTTON MILLS (SUPRA) AT PAGE 31 OF ORDER AS UNDER: 'THE LAW MAY THEREFORE, NOW BE TAKEN TO BE WELL SE TTLED THAT WHERE PROFIT OR LOSS ARISES TO AN SE ON ACCOUNT OF APPREC IATION OR DEPRECIATION IN THE VALUE OF FOREIGN CURRENCY HELD BY IT, ON CON VERSION INTO ANOTHER CURRENCY, SUCH PROFIT OR LOSS WOULD ORDINARILY BE T RADING PROFIT OR LOSS IF THE FOREIGN CURRENCY IS HELD BY THE ASSESSEE ON REV ENUE ACCOUNT OR AS A TRADING ASSET OR AS PART OF CIRCULATING CAPITAL E MBARKED IN THE BUSINESS. BUT, IF ON THE OTHER HAND, THE FOREIGN C URRENCY IS HELD AS A CAPITAL ASSET OR AS FIXED CAPITAL SUCH PROFIT OR LO SS WOULD BE OF CAPITAL NATURE.' WE FIND THE LOSS DUE TO FOREX EXCHANGE DIFFERENCE A S ON THE DATE OF BALANCE SHEET IS EXPENDITURE FALLS U/S. 37(1) OF THE ACT. THE OUTSTANDING LIABILITY RELATING TO THE IMPORT OF RAW MATERIAL BASED ON CLOSING RATE OF FOREIGN EXCHANGE AND IF ANY DIFFERENCE BY LOSS OR GAIN ARISING ON CONVERSIO N LIABILITY SHOULD BE ROUTED THROUGH PROFIT AND LOSS ACCOUNT. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND UPHELD THE SAME AND DISMISS THE G ROUND OF THE REVENUE. IN THE RESULT, THE REVENUE APPEAL IS DISMISSED. :-26-: I.T.A. NOS. 1635, 1636, 1637, 1225, 1226 & 2167/MDS/2012 11. SIMILARLY, THE APPEALS OF THE REVENUE IN ITA NO . 1226/MDS/2012 FOR THE ASSESSMENT YEAR 2007-08, ITA NO. 1635/MDS/2012 FOR THE ASSESSMENT YEAR 2002-03, ITA NO. 1636/MDS/2012 FOR THE ASSESSMENT YEAR 2003-04, ITA NO. 1637/MDS/2012 FOR THE ASSESSMENT YEAR 2004-05 & ITA NO. 2167/MDS/2012 FOR THE ASSESSMENT YEAR 2009-10 ARE DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 25TH DAY OF JANU ARY, 2017 AT CHENNAI. SD/ - ( ) (SHRI PRAMOD KUMAR) ' / ACCOUNTANT MEMBER SD/ - ( . ) (G. PAVAN KUMAR) $ ' /JUDICIAL MEMBER /CHENNAI, 0 /DATED: 25TH JANUARY, 2017 JPV ( $23 43 /COPY TO: 1. APPELLANT 2. +' /RESPONDENT 3. 5 ( )/CIT(A) 4. 5 /CIT 5. 3 $$ /DR 6. 8 /GF