INCOME TAX ACT, 1961

Section 80-IA

Deduction under section 80-IA - Allowability - AO disallowed deduction for want of valid agreements and treating assessee as a works contractor simplicitor -

Assessee showed gross income from projcts of Road Construction being an infrastructure facility carried out as developer and against such income, claimed deduction undr section 80-IA(4). AO disallowed deduction on the ground that assessee did not have any formal agreement with any government authorities for all of 17 road projects and assessee had not start operating and maintaining infrastructure facility. Fuurther, assessee had not submitted separate Form 10CCB for each infrastructure facility. Further, assessee was merely a contractor for work, thus covered under Explanation below 80-IA(13). Held: Assessee filed copies of tender documents along with 'letter of intent' and 'work award order' and these tender documents contained all the terms and conditions for contracts awarded to assessee which were equivalent to the valid agreements under amended provisions of section 80-IA(4). Deduction under section 80-IA is also available to assessee who is engaged only in development of infrastructure facility or only engaged in operation & maintenance of infrastructure facility or engaged in both developing and operating & maintaining any infrastructure facility. Also there could not be any dispute regarding quantification deduction claimed by assessee under sectioln 80-IA(4) based on combined and cumulative audit report for all the projects/infrastructure facilities as all the projects were eligible projects and assessee had furnished audited profit and loss account and Form 10CCB combinedly along with income details of each project eligible for deduction under section 80-IA. Further, assessee in the tender documents had clearly demonstrated various risks undertaken by it. Assessee was to furnish security deposit to government and indeminify at the same time of any loss/damage caused to any property/life in course of execution of works. It was responsible for correction of defects arising in works at its own cost. For that purpose government retained money payable to assessee as a measure to ensure quality of work and to make liable assessee in the event of defect, if any. Thus, it could not be said that assessee had not undertaken any risk. Thus it was clear that assessee was not a works contractor simplicitor but a developer and hence Explanation to section 80-IA(13) did not apply to assessee. In view of all this, assessee was eligible for deduction under section 80-IA in resepct of eligible infrastructural facilities.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2010-11

INCOME TAX ACT, 1961

Section 143(3)

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