S.80IA: Industrial undertakings - Infrastructure--Development of projects-Developer-Works contract-
Deduction was allowed. (S 132, 153A)
S. 80IA(4) allows deduction to “any enterprise carrying on the business of (i) developing or (ii) operating and
maintaining or (iii) developing, operating and maintaining any infrastructure facility”. The Explanation provides that it shall not apply to “business which is in the nature of a works contract”. Whether an assessee is a developer or works contractor depends on the nature of the work undertaken by the assessee. The word ‘contractor’ is used to denote a person entering into an agreement for undertaking the development of infrastructure facility. Every agreement entered into is a contract. Therefore, the contractor and the developer cannot be viewed differently. Every contractor may not be a developer but every developer is a contractor. Contracts involving design, development, operating and maintenance, financial involvement, and defect correction and liability period cannot be called as simple works contract. A case where in an undeveloped area, infrastructure is developed and handed over to the Government cannot be considered as a mere works contract but has to be considered as a development of infrastructure facility. If the contract is composite, it will have to be segregated so as to allow deduction on the parts that involve design, development, operating and maintenance, financial involvement etc. and to deny on those which are pure works contracts. On facts, the assessee had made substantial investments in fixed assets and was exposed to various kinds of risks. It was not a mere contractor. It is enough if the assessee is a developer. It need not also maintain & operate the infrastructure facility (Patel Engineering Ltd v. Dy. CIT (2004) 94 ITD 411 (Mum) &GVPR Engineers Ltd (included in file) followed).Deduction under section 80IA was allowed. (A. Y. 2000 – 01 to 2005-06)
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