80IA(4)(i) Deduction can’t be denied on Ground that assessee deducted TDS under Section 194C: ITAT [Read Order]

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) in the case of Porel Dass Water and Effluent Control Pvt. Ltd, v ITO held that the assessee cannot be a denied S. 80IA(4)(i) deduction on the ground that it deducted TDS as per provisions of Section 194C of the Income Tax Act.

The Assessing Officer (AO) asked for explanation from the assessee, who had claimed deduction under S. 80IA(4)(i) of the Act. The AO on submission of such explanation noted that the assessee is engaged in ‘works contract’ since there is no element of ‘operating and maintaining, or developing’ infrastructure facility involved and is ineligible for the claimed deduction. Further, aggrieved by the Order of Commissioner of Income Tax (Appeals) the present appeal was filed.

The issue before the present Authority was whether the assessee is a developer or mere works contractor and not eligible for deduction u/s 80IA (4)(i) of the Act.

The assessee has submitted that the company is a “Developer” and has fulfilled all the conditions to claim deduction under Section 80IA(4) (i). The Departmental Representative hence contended the contrary.

After perusing the contentions raised by both the parties, the Authority came to the conclusion that definition of “Work” mentioned in the Explanation to section l94C cannot be used for the assessee under consideration for the purpose of section 80IA(4)(i) of the Act. Moreover, just because the assessee has deducted TDS while making some payment or received amount after deducting TDS as per provisions of section 194C, does not make the assessee to be engaged in execution of ‘works contract’.

The Bench constituting of Judicial Member A.T. Varkey and Accountant Member Dr. A.L. Saini held that the assessee company has fulfilled all the conditions for availing of deduction and that the assessee is not a works contractor but a developer on the ground that there is no element of “operating and Maintaining” or “Developing, Operating and maintaining” infrastructure facility involved”.