Laxmi Civil Engineering Pvt Ltd vs. ACIT (ITAT Pune)

S. 80-IA(4) deduction available even to contractor who merely develops but does not operate & maintain the infrastructure facility

Relying on the judgement of the Larger Bench in B. T. Patil & Sons 126 TTJ 577 (Mum), the assessee’s claim for deduction u/s 80-IA(4) was denied by the Tribunal on the ground that the assessee was only a contractor and had not complied with all the conditions specified in sub-clauses (a), (b) & (c) of clause (i) of s. 80-IA(4). The order was recalled pursuant to the assessee’s MA claiming that the judgement of the Bombay High Court in ABG Heavy Industries Ltd 322 ITR 323 covered the issue in its favour. HELD deciding the issue afresh:

The issues as to (i) whether the word “contractor” is synonymous with “developer” within the meaning of s. 80-IA(4)(i) and (ii) whether the condition in clause (c) is applicable to a developer who is not carrying on the business of operating and maintaining the infrastructural facilities are covered by the judgement in ABG Heavy Industries 322 ITR 323 (Bom). There, it was held that the department’s contention that since the assessee was not “operating and maintaining the facility”, he was not eligible for s. 80-IA(4) deduction was wrong because a harmonious reading of s. 80-IA(4) led to the conclusion that the deduction was available to an assessee who (i) develops or (ii) operates and maintains or (iii) develops, operates and maintains the infrastructure facility. The 2001 amendment made it clear that the three conditions of development, operation and maintenance were not intended to be cumulative in nature. A developer who is only developing the infrastructure facility cannot be expected to fulfill the condition in sub-clause (c) which is an impossibility and requiring it to be fulfilled will be an absurdity. The result is that even a contractor who merely develops but does not operate or maintain the infrastructure facility is eligible for s. 80-IA(4) deduction (B.T.Patil & Sons Belgaum vs. ACIT 126 TTJ 577 (Mum) impliedly held not good law).