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July 22, 2022

Deduction u/s 80IA(4) can be claimed by developer engaged in development of infrastructure

Deduction u/s 80IA(4) can be claimed by developer engaged in development of infrastructure

Facts and Issues of the case

The issue is this that the appellant is a private limited company engaged in the business of Infrastructure Development, filed its return of income on 28.11.2003 declaring total income of Rs. 5,18,334/- which was processed under Section 143(1)(a) of the Act followed by a scrutiny proceeding. Notice under Section 143(2) dated 12.10.2004 was issued under Section 142(1) along with detailed questionnaire and after notice under Section 143(2) The assessee claimed deduction under Section 80IA(4)(i) of the Act of Rs. 48,19,950/- arising out of engagement in the development of roads for the year under consideration. The assessee claimed to have required qualification for coming under the zone of deduction in terms of the said section. However, such claim of the assessee was not found allowable and the assessment was completed with addition of Rs. 48,19,650/- disallowing claim under Section 80IA(4) which was, in turn, confirmed by the First Appellate Authority.

Observation by the Court

The court has already dealt with relevant clauses of the tender documents stipulating various conditions viz. financial involvements, risks, obligations and responsibilities of the assessee in developing, operating and maintaining of infrastructure facilities, which clearly make the case of the assessee within the scope and ambit of Section 80IA(4) of the Act so as to claim the impugned deduction.

The tender work under consideration are not for a specific work, rather they are for development facility as a whole. The responsibility is fully assigned to the developer for execution and completion of the work. Various stipulations contained in the Tender documents demonstrate various risks undertaken by the assessee for execution of the project work awarded by the competent authority in terms of financial resources, manpower deployment, both technical and administrative expertise, drawing and designing of the project specifications and getting approval from the competent authority, safety and security of project and human resources, compliances of various statutory rules and laws. Therefore, merely because in the agreement for development of infrastructure facility, assessee is referred to as contractor or because if some basic specifications are laid down, it does not detract the assessee from the position of being a developer, nor will deprive the assessee from claiming deduction under Section 80IA(4) of the Act. As such, looking to the overall aspects of work undertaken by the assessee the court can safely come to the conclusion that the assessee is engaged in development of the infrastructure facility and therefore, a developer, which entails the assessee to claim benefits under Section 80IA(4) of the Act. Thus, the issue of claim of deduction under Section 80IA(4) of the Act is allowed in favour of the assessee and against the Revenue.


All the appeals of the assessee is allowed by the court.


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