S.80-IA: Industrial undertakings-Infrastructure development–Developer –Contractor:

 

 

Assessee-company was in business of construction and had carried out construction of bridges of

certain Government Organizations. As per assessee, income from eligible business was 100 percent

exempt in view of provisions of section 80-IA. AO held that assessee was not a "Developer" but

income was derived as a "Work Contractor", hence not eligible for deduction u/s 80IA. The Tribunal

held that, an enterprise had to enter into an agreement with Central or State Government or a Local

Authority or any Statutory Authority. Infrastructure facility belonged to Government. But enterprise

which was developing or constructing infrastructure facility was to be owned by a Company

registered in India. Act also says that an enterprise which was constructing or developing

infrastructure facility could be a consortium of such companies. Such an arrangement was eligible for

claim of deduction u/s 80IA. Few Circulars had been issued by CBDT through which it has also been

clarified, that benefit of impugned deduction was available to an enterprise which either develops or

maintains or operated or executed combination of these three, inter alia as a Build, Operate and

Transfer (BOT), or, Build, Own, Operate and Transfer (BOOT), or, Build, Own, Lease and Transfer

(BOLD) basis or similar other basis where ultimately infrastructure facility so constructed is

ultimately transferred to Government or Public Authority, then such an enterprise is within ambits of

qualification of deduction. Explanatory memorandum to Finance Act, 2007, states that purpose of tax

benefit has all along been to encourage investment in development of infrastructure sector and not for

persons who merely execute civil construction work. Thus, there was a distinction between

"developer" and a "contractor". It was wrong on part of AO to hold that assessee had merely acted as

a contractor. By analyzing the nature of work executed by assessee, it could be said that assessee had

acted as a developer. An enterprise which was either developing or operating or maintaining

infrastructure facility was required to be owned by a company or a consortium of companies duly

registered in India. Act does not prescribe that infrastructure facility was to be owned by such an

enterprise. Infrastructure facility was always property of Government and an enterprise was bound by

agreement to transfer same after settled period. Assessee’s execution of work was development of

infrastructure facility. Assessee had executed construction of infrastructure facility in respect of

Government Projects. Hence it was a factual error on part of AO to say that assessee had entered in

some contract with few private parties. Therefore, assessee was eligible for the deduction u/s 80IA. (A . Y. 2001-02)

Sugam Construction (P.) Ltd. v. ITO (2013) 56 SOT 45(URO) (Ahd.)(Trib)