The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) rejected the claim of deduction under Section 80 IA of the Income Tax Act, 1961 stating that it is not available to individuals engaged in executing works contracts.
The only issue agitated in all these appeals related to the eligibility of the assessee to claim deduction under Section 80IA of the Income Tax Act. Since both the tax authorities have held that the assessee is not eligible for deduction under Section 80IA of the Income Tax Act.
The Commissioner of Income Tax (Apeals) [CIT (A)] also noticed that the most of the work has been completed in the earlier years and the assessee has not furnished proof to show that it has executed works mentioned under the “Scope of work” and accordingly, held that the assessee was not eligible for deduction under Section 80IA of the Income Tax Act, in all the years under consideration.
The counsels for the assessee Mr F.V. Irani & Mr Madhur Agrawal submitted that the assessee along with its consortium members was awarded the work of development of infrastructure facility. In order to execute the Concession Agreement with NHAI, a Special Purpose Vehicle (SPV) was formed. The work of development of infrastructure facilities was divided and allocated to the various consortium members. Accordingly, it was contended that the SPV is only an ‘enterprise’ or ‘undertaking’ of the assessee. Accordingly, further contended that the income received by the assessee from its undertaking is eligible for deduction under Section 80IA of the Income Tax Act.
However, a perusal of the provisions of Section 80IA (4) would show that the “Enterprise”, which is executing the infrastructure facility is eligible for the deduction under Section 80IA of the Act subject to the condition that :
(a) The said enterprise is owned by an Indian company or other forms of organization mentioned in under Section 80IA (4) (i) (b) of the Income Tax Act
(b) The said enterprise has entered into an agreement with Government or other statutory body mentioned in Section 80IA (4) (i) (b) of the Income Tax Act and
(c) The said enterprise has started its operation on or after 1st day of April, 1995.
The two member bench of the tribunal comprising Pavan Kumar Gadale ( Judicial member) and B.R.Baskaran ( Accountant member) observed that the AO was right in holding that the assessee has only executed a works contract allotted to it by the SPVs. There should not be any dispute that the deduction under Section 80IA of the Income Tax Act, is not available to the persons executing works contract.
ITAT concluded that the CIT (A) was justified in affirming the decision of the AO in rejecting the claim for deduction under Section 80IA of the Income Tax Act, accordingly all the appeal filed by the assessee was dismissed.
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