The Tax Publishers2020 TaxPub(DT) 3106 (Rkt-Trib)

INCOME TAX ACT, 1961

Section 80-IA(4) Section 80-IA(13), Expln.

Deployment of own resources and undertaking of risk in the execution of civil construction contract awarded by assessee showed that assessee was not a works contractor simplicitor but a developer and hence Explanation to section 80-IA(13) did not apply to assessee and, therefore, denial of deduction under section 80-IA(4) was not justified.

Deduction under section 80-IA(4) - Allowability - AO treated assessee as works contractor and not developer - Assessee deployed own resources and undertook risks

Assessee, a private limited company, was a Government approved 'AA' Class contractor and as such, carried out projects like construction of hospitals, roads, bridges, etc. for Government, Semi-Government and other institutions, etc. It was awarded an infrastructure housing project by GIDC, and in respect of such contract assessee claimed a deduction under section 80-IA(4). AO took the view that project carried out by assessee was in the nature of work contract and accordingly, AO held that assessee was not eligible for deduction under section 80-IA(4) in pursuance to Explanation attached below section 80-IA(13). Held: The fact that assessee deployed its resources (material, machinery, labour, etc.) in construction work clearly exhibited risks undertaken by assessee. Further, assessee in tender documents had clearly demonstrated various risks undertaken by it. Assessee was to furnish security deposit to government and indemnify at the same time of any losses/damage caused to any property/life in course of execution of works. Further, assessee 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 the work and to make liable the assessee in the event of the defect, if any. Thus, it could not be said that assessee had not undertaken any risk. Thus, on perusal of terms and conditions in the agreement, 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 and accordingly denial of deduction under section 80-IA(4) was not justified.

Supported by:Asstt. CIT v. Pratibha Industries Ltd. (2012) 28 Taxmann.com 246 (Mum-Mag) : (2013) 141 ITD 151 (Mum-Trib) : 2013 TaxPub(DT) 667 (Mum-Trib), Sushee Hi Tech Constructions (P.) Ltd. v. Dy. CIT (2013) 33 Taxmann.com 236 (Hyd-Trib) : (2013) 58 SOT 111 (Hyd-Trib) (URO), Bhinmal Contractors Property & Land Developers (P.) Ltd. v. Asstt. CIT/DCIT (2018) 93 Taxmann.com 296 (Mum-Trib) : 2018 TaxPub(DT) 2310 (Mum-Trib), B.T. Patil & Sons Belgaum Constructions (P.) Ltd. (2013) 34 Taxmann.com 97 (Pune-Mag-Trib) : (2013) 59 SOT 61 (Pune-Trib) (URO), CIT v. ABG Heavy Industries Ltd. (2010) 322 ITR 323 (Bom-HC) : (2010) 189 Taxman 54 (Bom-HC : 2010 TaxPub(DT) 1513 (Bom-HC) and Bajaj Tempo Ltd. v. CIT (1992) 196 ITR 188 (SC) : 1992 TaxPub(DT) 1271 (SC).

SUBSCRIBE TaxPublishers.inSUBSCRIBE FOR FULL CONTENT