By TIOL News Service

MUMBAI, FEB 06, 2015: THE issue before the Bench is - when the assessee did not develop an infrastructure project and carried out only a part of the work, it can still claim Sec 80IA(4) benefits. YES is the answer.

Facts of the case

Assessee is engaged in development of infrastructure facilities. A JV agreement was entered with 'NS'. Assessee was awarded contracts one by Hyderabad Metropolitan Water supply & Sewerage Board for augmentation of drinking water supply to Hyderabad City & other by Visakhapatnam Municipal Corporation for Godavari Water supply Project. AO rejected the claim of assessee u/s 80IA(4) stating that the contract awarded to the assessee, it contributed only part of the whole Krishna water supply project and therefore the work of the assessee was not regarding entire water supply project. Installation and commissioning of pipe lines alone does not constitute whole water supply project. Thus, it was held that assessee is only a contractor who was awarded a contract to set up only a part of the whole Krishna drinking water supply project and the assessee did not have either control or domain over facility being developed and no risk was borne by the assessee as far as the work executed by them is concerned.

After hearing both the parties, the ITAT held that,

++ in the preceding assessment years, it was held by ITAT that for claiming deduction under section 80 IA(4), it is not necessary for the assessee to develop the entire project in order to qualify for a deduction under section 80 IA(4). If the provisions are so construed then it will be a condition impossible of compliance because of the magnitude of the entire project. For qualifying deduction u/s 80 IA(4) what would be necessary will be that the work carried on by the assessee must be an integral part of the project and if it is so, then it cannot be said that assessee is not eligible for deduction u/s 80 IA(4) for the reason that the assessee on its own did not develop an infrastructure project. Therefore, observations of the AO that assessee did not develop an infrastructure project and only part of the work was carried out cannot disentitle the assessee to claim the deduction;

++ after section 80IA was amended by Finance Act, 2001, the section applies to an enterprise carrying on the business of (i) developing; or (ii) operating and maintaining; or (iii) developing, operating and maintaining any infrastructure facility which fulfills certain conditions. The amendment made by Parliament to section 80-IA(4) of the Act set the matter beyond any controversy by stipulating that the three conditions for development, operation and maintenance were not intended to be cumulative in nature". Therefore, only development of infrastructure project is sufficient to make entitle an enterprise to be eligible for deduction under section 80 IA(4). Thus assessee is entitled for deduction u/s 80IA(4).

(See 2015-TIOL-136-ITAT-MUM)