The Income Tax Appellate Tribunal ( ITAT ) Mumbai has ruled in favor of Patil Construction and Infrastructure Ltd., allowing deductions under Section 80IA of the Income Tax Act, 1961 for Assessment Years 2014-15, 2015-16, and 2017-18. The tribunal upheld the company’s claim and concluded that it qualifies as a developer rather than merely a contractor.
The Assessing Officer (AO) had denied the company’s claim for deduction under Section 80IA, arguing that it was only executing government projects as a contractor and not developing infrastructure facilities. The AO asserted that the company had only rehabilitated and widened existing roads rather than developing new ones, which, according to the Revenue, did not meet the conditions of Section 80IA.
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Based on this reasoning, the AO disallowed the deduction of Rs.4.4 crore for AY 2014-15, contending that the company was engaged in works contracts and did not qualify for tax benefits under Section 80IA(4).
The Commissioner of Income Tax (Appeals) CIT(A) reviewed the case and overturned the AO’s decision, allowing the deduction. The Revenue then appealed before the ITAT Mumbai, arguing that the company had not met the statutory conditions necessary to claim the tax benefit.
The ITAT dismissed the Revenue’s appeal and ruled that Patil Construction and Infrastructure Ltd. qualified as a developer rather than just a contractor. The tribunal noted that the company had made substantial investments, procured materials, and assumed financial risks to complete the infrastructure projects.
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Since the company was responsible for quality control and defect liability periods, the tribunal concluded that it met the criteria of a developer under Section 80IA.
The tribunal also referred to CBDT Circular No. 4/2010, which clarifies that contractors can qualify as developers if they assume responsibilities beyond mere execution of work. The ITAT found that the company had taken on risks and responsibilities that extended beyond those of a standard contract job, fulfilling the conditions outlined in the circular. The tribunal also cited previous judicial decisions, including CIT vs. ABG Heavy Industries Ltd. and Pr. CIT vs. Montecarlo Construction Ltd. (2024), which established that infrastructure development firms engaged in road widening and expansion qualified for Section 80IA benefits.
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A Two Member Bench composed of Sandeep Gosain(Judicial Member) and Padmavathy S (Accountant Member) observed that the company had long-term maintenance obligations and was responsible for any defects, reinforcing its role as a developer rather than a contractor. Based on these findings, the ITAT upheld the CIT(A)’s decision and allowed the company’s Section 80IA deductions for AYs 2014-15, 2015-16, and 2017-18.
The ITAT Mumbai’s ruling reinforces that infrastructure companies involved in road development, even as part of government contracts, can qualify for Section 80IA deductions.
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