Deduction u/s 80IA(4) cannot be disallowed, merely on the ground that assessee is not the owner of infrastructure facilities

Citation of the case:

En-Vision Enviro Engineers (P) Ltd. Vs DCIT,  (ITAT Ahmedabad),  ITA Appeal  No.1593/Ahd/2011, Date of Decisions: 10th June 2015

Brief of the case:

In the case of En-Vision Enviro Engineers (P) Ltd. Vs DCIT,  ITAT Ahmedabad held that deduction u/s 80IA(4) cannot be disallowed, merely on the ground that the assessee must be owner of the infrastructure facilities and the assess should be a developer and not contractor.

Facts of the case:

The assessee company is engaged in the business of consulting of pollution control and environmental related works, erection and commissioning of plant and also providing service of the treatment and disposal of bio medical waste. The assessee filed its E-return of income on 29.09.2008 showing total income at Rs.24,32,420/-. The return was processed u/s 143(1). The case was taken up for scrutiny assessment and accordingly notice u/s 143(2) of the Act was issued and served upon the assessee. Subsequently notice dated 13.08.2010 u/s 142(1) of the Act was also issued and duly served upon the assessee along with detailed questionnaire.

In response to the notices the assessee filed written submissions. After considering the submissions of assessee the AO rejected the claim of the assessee and made addition of Rs.66,53,384/- on account of disallowance of claim u/s 80IA(4) of the Act.

Contention of the revenue:

The Revenue submitted that the assessee company had claimed deduction of Rs.66,53,384/- in respect of the income derived from the business of ‘work contract’ which was awarded by some other person and executed by the assessee company.

The assessee does not own any infrastructure facilities of its own which is a prime condition for allowance of deduction u/s 80IA(4) of the Act. The assessee has not fulfilled the prime conditions laid down for claiming deduction u/s 80IA(4) of the I.T. Act therefore, the assessee is not eligible for deduction claimed u/s 80IA(4) of Rs.66,53,384/-.

Contention of the Assessee:

The assesse submitted that the issue is covered in favour of assessee by the order of the Tribunal in ITA Nos. 2902/Ahd/2008 for AY 2005-06 and others dated 30/4/2012. She placed on record a copy of the Tribunal’s order in ITA No.2902/Ahd/2008 for AY 2005-06 and others where it was observed as follows:

The assessee has developed the infrastructure meant for “solid waste management system”. The assessee has entered into an agreement with the Municipal Council Udaipur (Rajasthan) dated 15/07/2004. The assessee has also entered into an separate agreement with Surat Municipal Corporation dated 14/11/2002. We have examined both the agreements. Undisputedly, the assessee has been referred as a “Contractor” in the agreement dated 15/07/2004. However, it was not so in the agreement dated 14/11/2002 executed with Surat Municipal Corporation. Be that as it was, merely mentioning the assessee as “Contractor” the exact nature of the execution of the work do not alter. Rather, this controversy has been resolved by Respected Co-ordinate Bench in the case of Patel Engineering Ltd. 94 ITD 411(Mum.) cited-supra. We are convinced with the argument of the ld.AR that a contractor can also be a developer. In this context, our attention has been drawn on a latest decision of Hon’ble Gujarat High Court pronounced in the case of CIT vs. Radhe Developers (2012)341 ITR 403 (Guj.), wherein the ITA Nos.2902,3077-08,1798-09,934, 1194-10, 1596-11 and CO 177-11 (Assessee’s appeals & Revenue’s Appeals) [ En-vision Enviro Engineers P.Ltd. vs. DCIT ] – 11 – issue was in respect of claim of deduction u/s.80IB(10) of IT Act and the assessee happened to be “developer-cum-building contractor”. The Hon’ble Court has held that the said developer had to make the construction and to engage labour on contract, therefore the term “developer” has to be understood in common parlance as well as in legal sense.

Held BY ITAT:

Facts being similar, following the above reasoning, we concur with the order of ld. CIT(A) in deleting the addition of Rs.66,53.384/- made on account of disallowance of deduction claimed u/s 80IA(4) of the Act. The same is upheld.

In the result, the appeal filed by the Revenue is dismissed.

By CA Ghanshyam Vaswani