ITA NO. 3339/Del/2014

Asstt.Year: 2009-10

1

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH `D’ NEW DELHI

BEFORE SHRI T.S. KAPOOR, ACCOUNTANT MEMBER

AND

SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER

I.T.A. No. 3339/Del/2014

Asstt.Year: 2009-10

Jaypee Infratech Ltd., vs Commissioner of Income Tax,

Sector-128, Noida Aaykar Bhawan,

Noida. A-2D, Sector 24, Noida.

(PAN: AABCJ9042R)

(Appellant) (Respondent)

Appellant by: S/Shri Anil Chopra,CA & V.K. Garg, Adv.

Respondent by : Ms Shulekhi Verma, CIT DR

Date of Hearing: 09.02.2015

Date of pronouncement:

O R D E R

PER CHANDRA MOHAN GARG, JUDICIAL MEMBER

This appeal has been filed by the assessee against the order of the ld.

CIT(A), Noida dated 30.3.2014 for AY 2009-10, passed u/s 263 of the Income

Tax Act, 1961 (for short the Act).

2. The assessee has raised following grounds in this appeal:-

“1. That the Learned CIT (Ld. CIT) has erred on facts

and in law in setting aside the assessment to be made de novo.

2. That the order of the Ld. CIT is unlawful and

beyond permissible jurisdiction under section 263 of the

Income Tax Act (Act). The order of the Learned Assessing

Officer (Ld. AO) is not an erroneous order prejudicial to the

ITA NO. 3339/Del/2014

Asstt.Year: 2009-10

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interest of the revenue within the meaning of section 263 of the

Act. As such too the order of the Ld. CIT is unlawful and is

liable to be quashed.

3. That the assessment under section 143(3) has been

processed by the Ld. AO after duly considering the material

explanations and submissions on record including in context

of applicable law. Mere difference of view between the view of

the Ld. CIT and the Ld. AO cannot form the basis of action

under section 263. Provisions of section 263 do not permit

substitution of the Ld. CIT's opinion for the opinion of the Ld.

AO, particularly when the view of the Ld. CIT are contrary to

the record, to precedents and case laws in appellants favour

and contrary to the provisions of the Act.

4. That the appellant is entitled to the deduction

under section 80IA(4) as allowed by the Ld. AO in the

assessment under section 143(3). Appellant is entitled to its

claim inter alia in view of precedents in favour of the

appellant. As such too, the Ld. CIT has erred in invoking

jurisdiction under section 263 and setting aside the assessment

to be made de novo. Moreover, it is settled law that even if two

views are reasonably' possible, the view favouring the

appellant is to be adopted and further the beneficial provisions

of deductions from taxable income to promote investment in

and development of infrastructure facility are to be interpreted

liberally, so as to advance their objectives.

5. That, inter alia, the appellant is entitled to

deduction u/s 80IA(4) on the facts and law involved as a

developer of the infrastructure facility, even if it has not

commenced operating and maintaining but is developing the

same, in view of direct decisions in its favour including inter

alia reported in ACIT v. Bharat Udyog Ltd. 118 ITO 336

which follows the decision of the Hon'ble Apex Court in K. P.

Verghese v. ITO 131 ITR 597 (SC) and as held in TRG

Industries (P) Ltd. v. OCIT (2013) 35 Taxmann.com 253

(Amritsar - Tribunal).

6. That the Ld. CIT has erroneously relied on non

applicable CBDT Circular No. 1/2006 dated 12.1.2006 which

relates to effluent treatment and conveyance system and not to

a toll road or highway project, which is the case of the

appellant. In any case, the said circular is not binding on the

ITA NO. 3339/Del/2014

Asstt.Year: 2009-10

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appellant. The Ld. CIT has relied on irrelevant and erroneous

material and basis for passing the order under appeal and as

such too his order deserves to be quashed.

7. That the Ld. CIT has erred in stating that the Ld.

AO has not applied his mind to other claims for example

deduction in respect of interest on FDs and whether

depreciation was admissible even while the project was not

complete. These claims have been processed and correctly

allowed after due consideration. There is no final finding by

the Ld. CIT that these claims are incorrect. The assessee was

duly entitled to these claims which are correctly allowed and

as such too setting aside the assessment to be made de novo is

unlawful and the order of the Ld. CIT deserves to be quashed.

8. That the order of the Ld. CIT is based on erroneous

views and non-appreciation of the facts and law involved

including binding case law supporting the appellant which

include decisions of the Hon'ble Apex Court and Hon'ble

Jurisdictional High Courts. Inter alia the Ld. CIT has erred in

not following the ratio of the decision in 131 ITR 597 (SC) in

the case of K.P. Vargheese v. ITO wherein it was held that

literal construction that leads to absurdity, unjust result or

mischief is to be avoided. Construction which permits

achieving the obvious intention of the legislature and

provisions of rational construction are to be adopted. As such

too, the assessee's claim under section 801A(4) has been

correctly allowed by the Ld. AO. The Ld. CIT has erred in

setting aside the assessment.

9. That without prejudice, in the alternative, as the

appellant is eligible for deduction under section 80IA(6), even

as per the view of the Ld. CIT, then in any case on the facts

and law involved, the assessee is entitled to relief and

deduction in this matter, be it under 801A(4) OR 80IA(6).

Setting aside the assessment to be made de novo is unlawful,

uncalled for and would be merely an academic exercise if

permitted.

10. That the Grounds of Appeal as herein are without

prejudice to each other.”

ITA NO. 3339/Del/2014

Asstt.Year: 2009-10

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3. Briefly stated, the facts giving rise to this appeal are that the assessee

filed its return of income declaring nil income on 30.03.2009 for AY 2009-10

through e-filing acknowledgement. Subsequently, the case was selected for

scrutiny through CASS and accordingly notice u/s 143(2) of the Act was issued

on 25.8.2010. In response to the said notice, Senior Vice President (Finance)

and DGM (Finance) of the assessee company attended the assessment

proceedings from time to time and furnished details and replies to the queries

raised during the course of the assessment proceedings. Books of accounts

along with relevant bills and vouchers were also produced and test checked.

The AO noted that the assessee claimed set off on account of loss for the

preceding year and the assessee has claimed deduction u/s 80IA of the Act on

the gross total income and, therefore, the assessee declared total income at nil.

The AO observed that the books of accounts were audited and copy of audit

report in Form 3CD was furnished during the assessment proceedings and the

assessee also furnished tax details and documents from time to time during the

assessment proceedings that have been looked into and verified. The AO also

noted that the assessee has also furnished Form No. 10CCB regarding

computation of book profit u/s 115JB of the Act.

3.1 The AO, after having gone through and considering the replies submitted

by the assessee, inter alia concession agreement and assignment agreement

with the Taj Expressway Industrial Development Authority (TEA) held that

the assessee has furnished necessary details/documents in respect of its claim

of deduction u/s 80IA of the Act in respect of its eligible business u/s

ITA NO. 3339/Del/2014

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80IA(4) of the Act. The AO finalised the assessment proceedings with a final

conclusion that on the facts of the case, the assessee is eligible for deduction u/s

80IA(4) of the Act and therefore, the assessee’s claim of deduction u/s 80IA of

the Act is accepted.

4. Subsequently, the CIT, Noida called the record of the regular assessment

proceedings for examination and noted that the regular assessment was

completed by the AO by passing the assessment order u/s 143(3) of the Act on

30.12.2011. The CIT, Noida made a prima facie opinion that the AO not only

overlooked the applicability of provisions of section 80IA(2), (4) and (6) of the

Act but also ignored the clarificatory and Circular No. 1/2006 dated 12.1.2006

issued by CBDT and the other relevant statutory provisions of the Act and the

Income Tax Rules 1962. The CIT, Noida issued a notice u/s 263 of the Act to

the assessee on 11.3.2014. For the sake of clarity in our findings and

conclusion, the notice issued by CIT Noida u/s 263 of the Act dated 11.3.2014

is being reproduced as under:-

“F.No. CIT/Noida/2013-14/7691 Dated: 11.3.2014

To,

The Principal Officer,

Jaypee Infratech Ltd.,

Sector-128, Noida (UP).

Sub: Show Cause Notice u/s 263 of the IT Act,1961 in respect of

the assessment order for A. Y. 2009-10 to afford the assessee

company an opportunity of being heard-

ITA NO. 3339/Del/2014

Asstt.Year: 2009-10

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A perusal of the assessment order for the Assessment Year

(hereafter A. Y.) 2009-10 passed on 30-12-2011 shows that the

assessee M/s Jaypee Infratech Ltd., sector-128, Noida (UP)

furnished its return of income on 30-09-2009 through e-filing

declaring Nil income. The assessment record shows that the

case has been picked up for scrutiny (i.e. regular assessment)

through CASS (i.e. Computer Assisted Scrutiny Selection). The

nature of business of the company is reported by the assessee as

development, operation, maintenance of the six-lane access

controlled expressway along with road and associated

structures & sale/development of lease hold land along the

expressway.

2. A Perusal of Form No. 3CD (Rule 6G(2)) filed for this A. Y.

certifies that there is no change in the above business of the

assessee company. As regards, the method of accounting a/50,

there is no change from A. Y. 2008-09 as certified in the said

Form. In schedule “K" regarding 'Significant Accounting

Policies' in A. Y. 2008- 09 under the heading 'Revenue

Recognition', it is declared that the company is carrying on the

business of developing a highway project including housing or

other activities being an integral part of the highway project.

Many other crucial documents such as the following further

show that clause (b) of the Explanation to sub-section (4)(i) of

section BO-IA is the 'infrastructure facility' in assessee's case

and housing or residential development or sale of land ete. is an

integral part of assessee company's highway project:

I. (i) The Report of the Commission of Inquiry headed by

Hon'ble Justice Sidheswar Narayan (Retd.) in chapter XIII

describes one of the following obligations on the part of TEA-

‘The Concessionaire shall be granted, by TEA, rights for land

development of 25 million sq. meters of land along the proposed

Expressway for commercial, amusement, industrial,

institutional and residential development. ’

1I. The Final Report in Volume I on Traffic and Revenue

Forecast Study for Yamuna Expressway in the State of Uttar

Pradesh at page 9 under the heading Revenues states as under:

The Revenues from the Project will come from two streams as

under:

a} From Land for Development

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b) From toll from the users of the Expressway

Revenues from Land Development

Land for Development measuring about 2500 hectares shall be

made available at 5 or more locations along the Expressway for

commercial, amusement, industrial, institutional and residential

development. There can be many alternative business models in

relation to the said Land for Development some of such

business models could be as under:

a) To sell the Land for Development on "As is where is

basis" without making any further investment.

b) To sell the Land for Development in bulk areas after

preparing layout plan identifying various areas for various uses

as per applicable bye-laws and with limited or comprehensive

internal development such as roads, water supply, drainage,

electric supply etc. This will require additional investment and

additional period to realize the revenue.

c) By selling fully developed plots for different purposes

after completing all external and internal development. This

will require further additional investment and additional period

to realize the revenue.

d) By constructing residential/ commercial building,

including all internal and external developments and then

selling it either during construction stage itself or after

complete construction. This will require further additional

investment and additional period to realize the revenue.

III. In addition, the assessee company has itself submitted a

note on Yamuna Expressway Project which under the heading

Land for Development has stated the following:

'6.2 There can be many alternative business models in relation

to the said Land for Development. Some of such business

models could be as under:

a) .....

b) .....

c).. ..

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d) By constructing residential/commercial building, including

all internal and external developments and then selling it either

during construction stage itself or after complete construction.

This will require further additional investment and additional

period to realize the revenue.'

IV. Most importantly, a concession agreement was entered into

between the Taj Expressway Development Authority and Jay

Prakash Industries Ltd. on 07-02-2003. In this agreement the

word 'Project' (which is assigned to Jay Prakash Industries

Ltd.) is defined to mean preparation of TEFR and DPRJ design,

engineering, financing, procurement, construction; operation,

and maintenance of the Expressway and management of land

for development in accordance with the provisions of this

agreement and shall include all works relating to or in respect

of the Expressway and the land for development. Further, the

agreement mentions that the assessee company has been

granted by TEA, rights for land development of 25 million sq.

mts. of land along the proposed Expressway for commercial,

amusement, industrial, institutional, and residential

development. This would, therefore, show that land

development and institutional and residential development are

integral part of the highway project unambiguously and

indisputably establishing that the 'infrastructure facility' of the

assessee falls in clause (b) of the Explanation appearing at the

end of sub-section (4)(i) of section 80-IA of the IT Act 1961.

3. All the submissions of the assessee company furnished in

writing before the A.O, have been carefully gone through. From

them it is, inter alia, seen that the assessee company has itself

made several statements during the assessment proceedings to

the effect that the land for development admeasuring about

2500 hectares shall be made available at 5 or more locations

along the Expressway jar commercial, amusement, industrial,

institutional and residential developments. On account of

irrefutable admission on the part of the assessee as to its one of

the avowed objects of residential and institutional development

consisting of sale of plots and buildings, these activities of

housing and sale of land etc. are an integral part of the

assessee's proposed highway project.

Since, no change is certified in the nature of business in

this assessment year the same business continues as 'eligible

business' in terms of section 80-IA (1) and the business of the

ITA NO. 3339/Del/2014

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assessee company by its own admission continues to be the

same as stated above and the 'infrastructure facility' that the

assessee has been developing clearly falls under clause (b) of

the Explanation appearing after sub-section (4) (i) of section

80-IA and not under clause (a).

4. However; contrary to the above established position as

regards the nature of 'infrastructure activity', when the

assessment records were examined, a perusal of Form No. 10

CCB (Rule 18BBB) in A. Y. 2009-10 showed that the tax

auditors of the assessee company have though reiterated its

nature of business being the same as what is mentioned at para

2 & 3 above, but, under the heading 'Eligible Business Under

Section BO-IA', they have specified the 'infrastructure Facility’

as Road including toll road. The A.D. has failed to notice this

contradiction while passing the erroneous assessment order

allowing deduction u/s 80-IA not realizing that the assessee has

not begun to operate the toll road which is a mandatory

condition u/s 80-IA (2) of the IT Act, 1961 for being considered

for deduction. Where is the question of allowing any profits as

deduction when there are no profits in this year from the

operation of the toll road?

5. In the above context, however, if Road including toll road, as

mentioned as above by the tax auditors in Form no. 10CCB is to

be considered as the 'infrastructure facility' of the assessee

company as per clause (a) of the Explanation to sub-section (4)

(i), then the assessee company gets out of the ambit of section

80-IA for the simple reason that in order to qualify for

deduction u/s 80-IA (2), it has to have profits derived from the

operation of the road including the toll road which is not the

case here as assessee company's Expressway became

operational only in F. Y. 2012-13 and would in that case qualify

for deduction (of course subject to fulfilling all other attendant

conditions under the section) for the first time in A. Y. 2013-14.

This is because the assessee company has not developed and

begun to operate the toll road in A. Y. 2009-10 and, therefore,

the provisions of section 80-IA are not even attracted in terms

of the requirement under sub- section (2) of section 80-IA. As

against this position of law, the assessee in its letter dated 21-

12-2011 to the A. O. has contended that it is eligible for

deduction u/s 80-IA 4)(i) as the deduction is available even to

an enterprise only 'developing' the 'infrastructure facility'.

ITA NO. 3339/Del/2014

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Ironically, as mentioned earlier, the assessing officer has failed

to notice the contradiction on the same page of Form no.

10CCB mentioning at S.no. 6 thereof the following:

Yamuna Expressway Project- Development, Operation and

Maintenance of Noida and Agra along with service road and

associated structures and sale/development of lease hold land

along the proposed Expressway.

Whereas at the S. no. 14 (b) on the same page of form no.

10CCB the tax auditors have specified the 'infrastructure

facility' as under:

Road including toll road

However, as stated earlier the assessee company gets out of the

ambit of section 80-IA, the moment it mentions its

'infrastructure facility' as road including toll road for the

reason that the toll road has not begun to operate, a condition

which is mandatory to be complied with in terms of sub-section

(2) of section 80-IA. As dealt with at para 2, hereinbefore, the

declared 'infrastructure facility' of the assessee company as per

its significant accounting policy and as per the concession

agreement between TEA and JPI Ltd. is carrying on the

business of developing a highway project including housing or

other activities being an integral part of the highway project. In

fact, in this assessment year, the assessee has itself made the

claim of deduction against the profits from sale of land which

are otherwise never eligible for deduction u/s 80-IA but for the

non-obstante provision under sub-section (6) which if complied

with enables the eligible business to lodge a claim for deduction

u/s 80-IA of the IT Act, 1961.

The above would abundantly clarify why the 'infrastructure

facility' of the assessee is not road including toll road and the

A.O. could have considered its claim for deduction only in the

light of its averment in several documents including the

agreement dated 07-02-2003 entered into between TEA and JPI

Ltd.(dealt with at para 2 hereinbefore) in addition to its own

accounting policy that it is a highway project including housing

or sale/development of lease hold land along the Expressway

and all other activities are an integral part of the highway

project.

ITA NO. 3339/Del/2014

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6. After examination of the above facts and issues from the

assessment records for AY 2009-10, it is noticed that the AO

has stated at para 4 of the assessment order that the assessee is

eligible for deduction u/s 80-IA of the IT Act, 1961 after getting

a clarification from the assessee (vide order sheet entry dated

23-12-2011) to the effect that assessee's income during the year

had come mainly from the sale of land to 4 parties and that,

deduction u/s 80-IA was claimed in respect of such income

derived from the sale of land. The A.O. has then passed an

erroneous order in as much as he failed to understand that

there are no provisions u/s 80-IA which allow for deduction of

profits derived from sale of land i.e. no deduction is available

u/s 80-IA in a business dealing in sale of properties. However,

where sale of land; as is the case of the assessee, is an integral

part of the highway project, it is the non-obstante provisions of

sub-section (6) of section 80-IA which carve out an exception

for such profits to be transferred to a special reserve account so

that such profits are actually utilized for the highway project

only, before the expiry of three years following the year in

which profits were transferred to the reserve account. Further,

such profits do not qualify for deduction u/s 80-IA (6) of the IT

Act, 1961 also, unless such profits are computed in the

prescribed manner. He has thus passed an order which is

erroneous in as much as the activity of sale of land was an

integral part of assessee's highway project as mentioned in

several documents including in its 'Significant Accounting

Policies'. Since, the assessee has not computed its profits from

the sale of land or other activities (being an integral part of its

highway project) in the prescribed manner in terms of rule

18BBE and has not filed Form No. 10CCC prescribed under

that rule, the profits from sale of land worked out by it are

entirely taxable and deduction in respect of such profits without

creation of the special reserve is not envisaged under section

80-IA of the IT Act, 1961. It is ironic that the assessee company

on the one hand contends that its infrastructure facility is only

road, including toll road and yet it claims deduction in respect

its profits derived from the infrastructure facility as per clause

(b) of the Explanation without creation of special reserve

against the profits derived from the sale of land. Despite, such

an incorrect claim and arguments put up to justify the same, the

A. O. has, on account of sheer incompetence failed to

understand that only the amount utilized, out of the amounts

credited to the reserve account, for the purposes of the highway

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project is admissible as deduction u/s 80-IA of the IT Act, 1961

and no other amount is even eligible for deduction in terms of

section 80-IA (6) where the project is integrated such as this

particular project.

7. By allowing an absolutely incorrect claim of deduction u/s

80-IA in A. Y. 2009-10 in the regular assessment made by the

A.O. u/s 143 (3) of the IT Act, 1961 on 30-12-2011 as brought

out in the foregoing paragraphs, he has passed an assessment

order which is erroneous as the order has completely glossed

over the provisions of sub-section (2), (4) and sub-section (6) of

the IT Act, 1961, the latter read with Rule 18BBE of the income

Tax Rules, 1962. The order thus passed is prejudicial to the

interests of the revenue as a wrong deduction u/s 80-IA has

been allowed by not following and implementing the

aforementioned provisions of law, thereby causing substantial

loss of revenue. The assessee is, accordingly, being afforded an

opportunity of being heard before the undersigned on 19-03-

2014 at 11:30 AM to enable it to make its written and oral

contentions so as to rebut the above by way of personal

appearance or through a duly authorized representative.

(D. P. Semwal)

Commissioner of Income Tax,

Noida. ”

5. In response to the said notice u/s 263 of the Act (supra) as reproduced

hereinabove, the assessee submitted the first reply dated 19.3.2014 and the Joint

Managing Director and officers of the assessee company along with Assessee’s

Representative (the AR) made detailed submissions, on the statutory aspects

elaborating written submissions concerning the admissibility of the claimed

deduction u/s 80IA of the Act applicable to the case of assessee company. The

assessee filed a reply to the notice of ld. CIT Noida issued u/s 263 of the Act

(supra) on 19.3.2014 and supplemented the same by the second reply dated

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25.3.2014 and lastly in continuation also filed third reply on 27.3.2014. The ld.

CIT, Noida rejected the objections and submissions of the assessee filed

objecting to the validity and legality of the notice u/s 263 of the Act (supra) and

passed the impugned order on 30.3.2014. The main operative part of the

impugned order reads as under:-

“14. Shri Anil Kumar Chopra, CA, elaborated on the

merit of the case also in the written submissions beginning

from page no. 2 to 9 of the reply dated 19-03-2014 and the

same are contained in Annexure A to this order. As heard

during the proceedings and explained in the other two written

submissions dated 25-03- 2014 {Annexure B} and 27-03-2014

(Annexure C) and as also dealt with in the preceding

paragraphs, the assessee company has mainly contended the

following:

. (i) The A.O. in A.Y. 2009-10 & 2010-11 has allowed

deduction u/s 80-IA (4)(i) read with Explanation (a) and that

this is the correct view because deduction has been allowed

after enquiries by A.O. and it cannot be said that the view

adopted by the A.O. in A.Y. 2009-10 in assessee's favour is

completely unsustainable. Further, in its letter dated 25-03-

2014 (pages 18 & 19), the assessee states that it had filed a

letter before the A.O. dated 28-12-2011 which explained that

assessee's claim for eligibility was u/s 80-IA (4) (i) in the

context of 'developing' the 'Infrastructure Facility', The said

letter to the A.O., it is stated, further explained how 3D-lA (2)

did not cast any restriction on the assessee's claim. In the

context of this reply of the assessee, it is necessary to clarify

here that deduction u/s 80-IA is not admissible in terms of sub-

section (4) as this sub-section only mandates applicability of

section 80-IA to the eligible business. Deduction is admissible

in terms of sub-sections (1), (2), (4), and (6). Later, in letter

dated 27- 03-2014, the assessee has again referred to

revenue's insistence on the expression 'begins to operate' and

has stated that sub-section 80-IA (2) is subservient to 80-IA

(4). It is contended that the word land' used in 80-IA (2) has to

be read as 'and/or’ in the context of section 80-IA (4) or to be

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read as 'or' so as to avoid unworkable, unreasonable, or

absurd interpretation which is not reconcilable with the rest of

the statued/section 3D-lA (4). The assessee has also referred

to the ruling in 103 ITR 613 (ORI) (FB) wherein it has been

held that the word 'and' should be construed as 'or' where the

context so requires. The asseessee has cited the ruling in the

case of Ishwar Singh Bindra 1968 AIR 1450 where the Hon'ble

Supreme Court held that the word 'and' had to be read as 'or'.

A perusal of the ruling of Hon'ble Orissa High Court in CIT v.

Gangaram Chapolia (103 ITR 0613)(1976) together with the

omitted provisions of clause (a) of section 271 (1) would show

that the decision to use 'or' in place of 'and' is rendered to

enable the A.O., wherever he is satisfied, to impose penalty if

the return is not filed within time 'or' not filed in the manner

required under the various provisions. Here in this case if

'and' is not read as 'or' the assessee would be let off on the

ground that both the conditions should not be complied with to

attract the penalty and if only one is complied with no penalty

would be imposable. The situation and the context with

reference to the expression (develops and begins to operate'

used in section 80-IA (2) is entirely different as replacement of

'and' by 'or' here would not be in consonance with the other

words used in respect of other eligible businesses such as

'starts' providing telecommunication, 'generates' power or

'commences' transmission, etc. This would show that the Ld.

A.R. has drawn completely wrong parallels. Similarly, the

parallel drawn by the Ld. A.R. with the ruling of Hon'ble Apex

Court in Ishwar Singh Bindra & Ors. is far more discordant.

The above argument of the Ld. A.R. even though is not

acceptable by virtue of the specific merit of the use of the word

'and' under sub- section (6) as explained above that its

replacement would be incongruous and discordant to the use

of other words in the same sub-section in respect of other

activities, the following observations of the Hon'ble Apex

Court in Smt. Tarulata Shyam v. CIT [108 ITR 345 (SC)]

would put to rest all doubts and clarify that the expressions

used under a taxing statute should receive a strict construction

so that the interpretation therefrom is in consonance with the

avowed aim and object of the legislature and not such as

would defeat the same.

“To us, there appears no justification to depart from the

normal rule of construction according to which the intention of

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the legislature is primarily to be gathered from the words used

in statute. It will be well to recall the words of Rowlatt J. in

Cape Brandy Syndicate v, Inland Revenue Commissioners

(1921) 1 KB 64 (KB) at page 71J that:

“ ••••• in a taxing Act one has to look merely at what is

clearly said. There is no room for any intendment. There is n9

equity about a tax. There is no presumption as to a tax.

Nothing is to be read in, nothing is to be implied. One can only

look fairly at the language used".

Once it is shown that the case of the assessee comes

within the letter of the law, he must be taxed, however great

the hardship may appear to the judicial mind to be.”

(ii) The assessee has then referred to its letters written to the

A.O. dated 23-11-2011, 21-12-2011, 23-12-2011, 28-12-2011,

and 29-12-2011 and contended that assessee's claim had been

correctly allowed after considering the contents of all these

letters. In this context, it would be proper to record that all

these letters were duly perused from the assessment record

and thereafter only jurisdiction u/s 263 of the LT. Act, 1961

was assumed by issuing a show cause issued on 11-03-2014.

References is assessee's contentions in the aforesaid letters

have figured in the discussion on preceding pages answering

how jurisdiction was assumed.

(iii) On page 4 of the aforesaid letter dated 19-03-2014, the

assessee has explained that through the aforementioned letters

it was clarified to the A.O. that deduction was available u/s

80-IA (4)(i) even to an enterprise only ( developing the ‘the'

Infrastructure Facility’ and as to how section 80-IA (4)(i)

would override 80- lA (2). While asserting so, the Ld. Counsel

Shri Chopra, CA, explained that a provision should be

interpreted in a manner that it subserves the purpose it is

enacted for and not in a manner that frustrates it. The A.O. has

not examined assessee's claim of deduction u/s 80-IA in terms

of section 80-IA (2) whereunder the qualifying condition

regarding admissibility of the deduction is provided for in

respect of assessee's claimed 'Infrastructure Facility' - a road

including toll road . The said sub-section (2) of section 80-IA

mandates that the deduction becomes available, at the option

of the assessee, in any 10 consecutive assessment years out of

20 years beginning from the year in which the assessee

ITA NO. 3339/Del/2014

Asstt.Year: 2009-10

16

develops and begins to operate the 'Infrastructure Facility'.

The assessee picks up half the sub-section on the one hand to

claim that the deduction is available to it in 10 A.Ys. out of 20

years and on the other states that the other half of sub-section

(2) is not applicable to it. The assessee has been reluctant to

answer the question that if this sub-section {2} is not

applicable to it how it contends that it can avail of deduction

in 10 A.Ys. out of 20 years mentioned under the other half of

the same sub-section? Stated in other words, how can the

assessee contend in the same breath that the condition of

develops and begins to operate the ‘Infrastructure Facility' is

not applicable to it while it asserts that the deduction is

available to it in 10 A.Ys. out of 20 years as the period of time

for availing the deduction available under the same sub-

section.

(iv) In its reply dated 27-03-2014, the assessee has further

contended that the profit derived by it is from the toll road and

includes the profit from sale/sub lease on development of land

which form intrinsic part of the Infrastructure Facility/toll

road. The assessee has in the same paragraph mentioned that

the Hon'ble Supreme Court in the matter of Nand Kishore

Gupta & Ors. Vs State of U.P. & Ors., has held that the

creation of the Expressway and the Five land parcels are

complementary to each other and the entire project is of

immense public importance.

(iv) (a) In the context of assessee's reference to the above

observations of the Hon'ble Apex Court, one cannot be blind

as not to see and appreciate the convergence between the

observations of the Hon'ble Supreme Court in the

aforementioned case and the provisions of sub-section (6) of

80-IA, in as much as, the Hon'ble Apex Court clarifies that

development of land parcels and other activities is

complementary to the creation of the highway project and the

provisions of sub-section (6) subserve the same objective by

providing for utilization of the profits from sale of land, etc.

only for the highway project. Here also it is not difficult to

discern that the assessee on the one hand contends that the

provisions of sub-section (6) are not applicable to it and on the

other draws support from the observations of the Hon'ble

Supreme Court in the aforementioned PIL. It would, therefore,

seem that Assessee's contradictory contentions have instead

ITA NO. 3339/Del/2014

Asstt.Year: 2009-10

17

helped conclude that the Hon'ble Supreme Court's

observations and the objective of the provisions of sub-section

(6) are identical. Therefore, the inescapable and logical

conclusion would be that the assessee ought to have complied

with the provisions of sub-section (6) of section 80-IA which it

has not. The contention of the assessee that the volume of

expenditure/investment in the year (Rs. 3,377 crores) was far

more than the profits earned during the year from the sale of

land is no reason for not complying with the statutory

conditions of creating the special reserve to channelize the

profits therefrom for utilization for the highway project. The

sub-section, as stated earlier, carves out an umbilical

relationship between the profits earned from the 'other

activities' and their utilization for the highway project only, so

that the profits earned from the 'other activities' are not

utilized for further acquiring or expanding housing and other

activities.

(v) With reference to compliance of sub-section (6) of section

80-IA, assessee's contention (on page 5 of reply dated 27-03-

2014) that entries in the books of account or mere

nomenclature are not decisive to ascertain the taxable income,

the discussion at para 3 above would sufficiently bring out that

the object of sub- section (6) is to preclude abuse of the

provisions by diverting the profits from the 'other activities' for

creation of other business opportunities and thus these are

anti-abuse provisions which cannot be brushed aside by

branding them as procedural aspect or relating to entries in

books of account or mere nomenclature etc. Accordingly, it is

consciously felt that reliance placed on the rulings of the

Hon'ble Apex Court in the context of the anti-abuse objective

is misdirected.

(vi) The extracts from Explanatory Memorandum to Finance

Bill, 1999, 2001 and circular no. 14/2001 dated 09-11-2011

have been carefully gone through and these clarifications in

no way dilute the operation the provisions of sub-sections (1),

(2), (4), and (6) of section 80-IA in unison.

15. Apart from the above, a perusal of the assessment order

further brings out that the assessee has claimed deduction u/s

80-IA on interest income also and the interest has been earned

by parking its surplus funds in various FDs in banks. The A.O.

has not applied the law u/s 8O-IA as only income derived from

ITA NO. 3339/Del/2014

Asstt.Year: 2009-10

18

any business referred to in sub-section (4) is eligible for

deduction under that section and no other income. In any case,

interest income falls under the head 'income from other

sources' as per the settled law in TUTICORIN ALKALIES VS.

CIT 227 ITR 172 (Se). The A.O. has not even considered this

decision of the Hon'ble Apex Court while making assessment.

Similarly, the assessee has claimed depreciation amounting to

Rs. 22,67,17,792 in the computation of income. The A.O. has

not examined whether this was admissible even while the

highway project was still going on and was yet to be

completed.

16. The foregoing discussion would amply bring out that the

A.O. passed an erroneous order in as much as he failed to

appreciate the facts of the case, did not apply the correct law

to the facts and circumstances of the assessee company, did

not apply his mind to the assertions made by the assessee and

did not even comply with CBOT's circular no. 01/2006 dated

12-01-2006, as a result of which an erroneous order was

passed being full of errors which has led to loss of revenue

and has the effect of perpetuating losses in subsequent years;

the order , therefore, simultaneously being prejudicial to the

interests of revenue. The A.O. has not applied his mind to

other claims also, for example whether he should have allowed

deduction in respect of interest on FDs in the face of the

relevant ruling of the Hon'ble Supreme Court and whether

depreciation was admissible even while the project was not

complete, thereby, further rendering the order erroneous and

prejudicial to the interests of revenue. The assessment thus

completed as a result of wrong appreciation of facts on the

record and non- application of mind is set aside, to be made

de-novo. The A.D. is, accordingly, directed to make the

regular assessment afresh after affording an opportunity of

being heard to the assessee.”

6. Finally, the ld. CIT Noida held that the AO passed an erroneous

assessment order inasmuch as he failed to appreciate the facts of the case and

did not apply the correct law to the facts and circumstances of the case of the

assessee company and also opined that the AO did not apply his mind to the

ITA NO. 3339/Del/2014

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19

assertions made by the assessee and did not comply with the CBDT Circular

No. 01/2006 dated 12.1.2006 and other relevant provisions of the Act and the

Income Tax Rules, 1962. With these observations, the ld. CIT, Noida

concluded that the AO passed an order which was erroneous and prejudicial to

the interest of revenue and the CIT Noida set aside the original assessment order

and directed the AO to make regular assessment afresh after affording an

opportunity of being heard to the assessee. Being aggrieved by the above

impugned order, the assessee company has preferred present appeal with the

grounds as reproduced hereinabove.

7. Before we proceed to consider the rival submissions of both the sides and

to adjudicate the core issue involved in this appeal, we find it appropriate to

mention chronological order of relevant dates of important events which would

be referred subsequently during our further deliberation and adjudication in this

order, which are as follows:-

Chart showing sequence of dates & events.

(i) Date of filing of Return for A.Y 2009-10 30/9/2009

(ii) Date of Notice u/s 143(2) of the Act 25/8/2010

(iii) Date of Query raised by the AO

(iv) Dates of Replies filed by the assessee 23/11/2011, 21/12/2011, 23/12/2011

before AO, 28/12/2011& 29/12/2011

(v) Date of 18 pages office note sheet

of the AO which adjudicated the

ITA NO. 3339/Del/2014

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20

queries of the AO 29/30.12.2011

(vi) Date of passing of Assessment order 30/12/2011

(vii) Date of Notice issued by Ld. CIT u/s 263 of the Act 11/3/2014

(viii) Date of replies filed by the assessee before

Ld. CIT, Noida 19/3/2014, 25/3/2014 & 27/3/2014

(ix) Date of the order of the Ld. CIT 30/3/2014

8. We have heard arguments of both the sides and carefully perused the

relevant material placed on record, inter alia, paper book filed by the assessee

spread over 229 pages, gist of case laws relied upon by the appellant assessee,

brief written submissions of the assessee, written submissions of ld. CIT-DR

and paper book of case laws spread over 22 pages relied by the ld.CIT- DR.

9. For just and proper adjudication of the case, we also find it appropriate to

reproduce brief written submissions made by the ld. AR, on behalf of the

assessee, which read as under:

“In the above matter, the appellant begs to submit

herein brief written submissions. These are in addition to oral

submissions being made, paper book filed and case law gist

filed and relied upon.

The appellant is a listed company that has been formed as a

single object company for carrying on the business of an

infrastructure facility as defined in section 80lA of the Income

Tax Act (Act). The profits and gains derived from the said

eligible business are entitled to deduction u/s 80lA of the Act

be it u/s 80IA( 4) or in the alternative without prejudice u/s

80IA(6). In assessment for assessment year involved i.e. 2009-

10 in assessment order dated 30.12.2011 the appellant was

correctly allowed deduction u/s 801A. The Learned CIT,

Noida (Ld.CIT) has set aside the assessment order to be made

de novo after opportunity by Ld. AO to the appellant vide his

ITA NO. 3339/Del/2014

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21

order dated 30.03.2014 u/s 263 of the Act. Similar deduction

u/s 80lA has been allowed to the appellant vide assessment

order dated 12.03.2013 in assessment year 2010-11 i.e. in the

next year. In short, the deduction was held to be allowable by

two separate Assessing Officers in two separate years. While

setting aside the assessment in the order under appeal, the Ld.

CIT has not arrived at any final finding that the appellant is

not eligible for the deduction u/s 801A.

The appellant fervently believes that it is eligible for

deduction in respect of the infrastructure facility involved u/s

801A( 4) Explanation (a) in respect of its infrastructure facility

being road including toll road. Without prejudice to the

aforesaid, the appellant also has alternate claims based on

which its income from the infrastructure facility would be

entirely eligible for deduction of 100% of its profits and gains

derived from its eligible business. The above appeal is against

order u/s 263 dated 30.03.2014 of Ld. CIT. Order is patently

erroneous, unlawful and contrary to the facts and accordingly

the same is unsustainable and liable to be quashed. This is

seen inter alia from the grounds of appeal filed in this case.

The issues on which relief is sought in the grounds of appeal

are covered in the appellant's favour by binding precedents

including of the Hon'ble Apex Court, the Hon'ble jurisdictional

High Court and others.

Regarding Grounds No. 1,2,3 and 4:

1. Ld. CIT has erred in setting aside the assessment to be

made de novo without recording a final finding as to what

would be the correct view to be adopted for the assessee's

claim u/s 801A.

2. Order of Ld. CIT is unlawful and beyond permissible

jurisdiction u/s 263 of the Act. Order of the Ld. AO is not an

erroneous order, prejudicial to the interest of revenue within

the meaning of section 263 of the Act.

3. The assessment under section 143(3) has been processed

by the Ld. AO after duly considering the material explanations

and submissions on record including in context of applicable

law. Mere difference of view between the view of the Ld. CIT

and the Ld. AO cannot form the basis of action under section

263. Provisions of section 263 do not permit substitution of the

Ld. CIT's opinion for the opinion of the Ld. AO, particularly

ITA NO. 3339/Del/2014

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when the views of the Ld. CIT are contrary to the record, to

precedents and se laws in appellant's favour and contrary to

the provisions of the Act.

4. The appellant is entitled to the deduction under section

80IA( 4) as allowed by the Ld. AO in the assessment under

section 143(3). Appellant is entitled to its claim inter alia in

view of precedents in favour of the appellant. As such too, the

Ld. CIT has erred in invoking jurisdiction under section 263

and setting aside the assessment to be made de novo.

Moreover, it is settled law that even if two views are

reasonably possible, the view favouring the appellant is to be

adopted and further the beneficial provisions of deductions

from taxable income to promote investment in and

development of infrastructure facility are to be interpreted

liberally, so as to advance their objectives.

Regarding Ground No. 1 - as seen from Page 28, Para 16 of

the Ld. CIT order, the assessment has been merely set aside to

be made de novo.

The Ld. CIT has relied on irrelevant and erroneous material

for passing the order under appeal without taking a final

decision in this matter. He has also relied on and taken an

erroneous interpretation of non applicable circular 01/2006

dated 12.1.2006 relating to Effluent Treatment and

Conveyance System and not applicable to a toll road or

highway project which is the case of the appellant. The said

circular, in any case, is not binding on the appellant and in

fact supports the appellant.

Similarly the Ld. CIT has not applied his mind to other

claims, for example deduction in respect of FD income and

whether depreciation was admissible. These claims have been

processed and correctly allowed after due consideration.

There is no final finding by the Ld. CIT that these claims are

incorrect. As such too setting aside assessment to be made de

novo is unlawful. Moreover, the Ld. CIT has also erred in

setting aside the assessment because without prejudice, in the

alternative, as the appellant would be eligible for deduction

under section 80IA(6), even as per the view of the Ld. CIT,

then in any case on the facts and law involved, the assesse is

entitled to relief and deduction in this matter, be it under 80IA(

4) or 80IA(6). Setting aside the assessment to be made de novo

ITA NO. 3339/Del/2014

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in unlawful, uncalled for and would be merely an academic

exercise if permitted.

Under section 263 CIT should take a final decision and cannot

merely set aside assessment to be made de novo:

• 203 ITR 108 (Born.) CIT v. Gabriel India Ltd.

It was held that Commissioner, exercising powers under

section 263, cancelled order of the ITO observing that order of

ITO did not contain discussion in regard to allowability of

claim for deduction which indicated non-application of mind

and that claim of assessee required examination as to whether

expenditure in question was a revenue or capital expenditure

and directed ITO to make a fresh assessment on lines

indicated by him - Whether under section 263 substitution of

the judgment of the Commissioner for that of the ITO is

permissible - Held, no - Whether ITO's conclusion can be

termed as erroneous simply because Commissioner does not

agree with his conclusion - Held, no - Whether ITO's order

could be held to be 'erroneous' simply because in his order he

did not make an elaborate discussion - Held, no - Whether

provisions of section 263 were applicable to instant case and

Commissioner was justified in setting aside assessment order -

Held, no.

In CIT v. Hotz Industries Ltd 49 Taxmann.com 267

(Del.), it was held that remanding matter for fresh examination

was not permissible as Commissioner must reach finding that

final finding in assessment order was erroneous and incorrect.

We also rely on:

• 12 Taxmann.com 118 (Alla.) CIT v. Shiv Prasad

• 171 ITR 698 (Alla.) CIT v. Goyal Private Family Specific

Trust

• 297 ITR 99 (Alla.) CIT v. Mahendra Kumar Bansal

• 369 ITR 14 (Del.) Globus Infocom Ltd. v. CIT

• 367 ITR 377 (Raj.) CIT v. Deepak Real Estate

Developers (I) P. Ltd.

ITA NO. 3339/Del/2014

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Please see gist of case law filed.

Regarding Grounds No. (2), (3) and (4)

The assessment order is not erroneous and not

prejudicial to the interest of revenue within the meaning of

section 263. The assessment was after due process, after

considering explanations, filings and submissions on record in

context of applicable law. The Ld. CIT has himself noted that

the Ld. AO has recorded a 17 pages long 'office note' to the

assessment order. Mere difference of view between the Ld. CIT

and Ld. AO does not permit action u/s 263. Section 263 does

not permit substitution of the Ld. CIT's opinion for the opinion

of the Ld. AO particularly when two views are reasonably

possible and when there are precedents and case laws in

appellant's favour. If two views are possible and the Ld. AO

has taken one view with which the Ld. CIT does not agree, it

cannot be treated as an erroneous order prejudicial to interest

of revenue unless the view taken by the Ld. AO is

unsustainable.

Please see numerous cases in gist of case law filed, in

support of appellant's contentions under these grounds.

Brief Facts regarding Business of the Enterprise

Company

a) Jaypee Infratech Limited is a company incorporated

under the Companies Act, 1956. It is formed as a Special

Purpose Vehicle (SPV) on 05/04/2007 for developing,

operating and maintaining the toll road between Greater

Noida and Agra along with service road and associated

structures with rights to collect toll during the Concession

period and also the rights for sub lease/ development of land

as integral part of the Yamuna Expressway Project.

b) Taj Expressway Industrial Development Authority (TEA)

(constituted by

Government of Uttar Pradesh (GoUP) vide Notification No.

697/77-4-2001-3(N)/2001 dated 24.04.2001 under U.P.

Industrial Area Development Act, 1976) invited offers from

interested parties of National/International Stature. The offers

were invited by TEA on 14.05.2001 for development, operation

and maintenance of 6 lane access controlled Expressway.

ITA NO. 3339/Del/2014

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c) M/s Jaiprakash Associates Ltd. (formerly known as

Jaiprakash Industries Ltd.) was declared the successful

Bidder. The Concession Period offered by it was 36 Years.

d) As per the directions of Inquiry Commission headed by

Shri. Sidheshwar Narayan, Justice (Retired) High Court Patna

and Calcutta, and TEA, M/s JAL incorporated a Special

Purpose Vehicle (SPV) viz. Jaypee Infratech Limited for

development, operation and maintenance of 6 lane access

controlled Expressway.

e) An Assignment Agreement was executed amongst JAL, JIL

and TEA for assignment of the Concession Agreement in the

name of Jaypee Infratech Limited OIL) on 19/10/2007.

f) Objects of Jaypee Infratech Limited

Main Objects:

To implement all the objects of the Concession Agreement

dated 7/2/2003 between Jaiprakash Industries Ltd. (now

Jaiprakash Associates Ltd.) and Taj Expressway Industrial

Development Authority (TEA).

g) Project Details

i) The concept of the Project Taj Expressway was an

outcome of the Policy

decision of the Government of V.P. under the statute called

V.P. Industrial Area Development Act, 1976 (V.P. Act No of

1976).

ii) The State Government, in exercise of the power as

vested under section 3 of the said Act, constituted, just prior to

launching the Project, an Implementing Authority, namely,

"Taj Expressway Industrial Development Authority" (in Short

TEA).

iii) The length of the expressway connecting Noida

with Agra was about 160 Kms and it was to pass through a

virgin area along the Yamuna River.

iv) Land Offered:

TEA has granted rights for land development of 25 million sq.

mtrs of land on 90 years lease along the proposed 100 meters

ITA NO. 3339/Del/2014

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26

wide Expressway for commercial, amusement, industrial,

institutional and residential development to the SPV Company.

TEA provided the "land for development" along the

Expressway at five or more locations of which one location

was in Noida or Greater Noida with an area of 5 million sq.

mtrs. The aforesaid land for development was in addition to

the land for construction of Expressway and was an intrinsic

part of the infrastructure facility project.

v) Consideration for Infrastructure Facility:

Concessionaire OIL shall be entitled to collect and retain the

Fee and toll from the users of the Expressway for concession

period of 36 years and amounts from rights to further lease out

the developed/undeveloped land (at five or more locations with

an area of 5 million sq. mtrs. per land parcel) to sub-leases/

end-user.

The toll fee to be charged from the customers was not to

exceed the fee as may have been notified by GOUP

(Government of State of UP) "Land for Development" is a

Concession like the toll fee since the toll fee alone would not

have been able to ensure positive return on equity on the

Project. This is further substantiated by:

• Notice inviting bids for the Project, whereby Land

including 100 meters for the Expressway at five or more

locations of which one location was to be in Noida or Greater

Noida with an area of 5 million square meters along the

Expressway for commercial, amusement, industrial,

institutional and residential development was offered on

acquisition cost for development, operation and maintenance

of the six lane super expressway (the Yamuna Expressway)

between Noida and Agra.

• Obligations of the assessee as set forth under the

Concession Agreement.

• The Constitutional documents of the Assessee viz

Memorandum of Association (MOA) that bars the Company

from the undertaking any other business except all the objects

of the Concession Agreement dated 07.02.2003.

h) Observation of Supreme Court Judgment in Appellant's

favour:

ITA NO. 3339/Del/2014

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A Public Interest Litigation was filed for inadequate

consideration of acquisition of land. The Project was cleared

by the Inquiry Commission Report and the PIL also ended in

favour of the Government of U.P.

The Hon'ble Supreme Court of India in the case of Nand

Kishore Gupta & Ors V. State of UP & Others also held that

the Expressway is a work of immense public importance and

the creation of land parcels would give impetus to the

industrial development of the State creating more jobs and

helping the economy and thereby helping the general public.

i) Inquiry Commission

The Inquiry commission was appointed by the Governor of UP

by a Notification No. 1889/77-4-2004-10N/2004, Lucknow

dated June 22, 2004 to ascertain the facts and position of

transparency of the Project.

• Findings of the Hon'ble Commission of Inquiry under the

chairmanship of Shri Sidheshwar Narayan, Justice (Retired)

High Court Patna and Calcutta, which states that

"Considering the capital cost, gestation period and the

uncertainties involved in the revenue from toll collection,

inflation etc, it was necessary to strengthen the economic

viability of the Project by some mechanism and, accordingly, it

was decided to provide 2500 hectares of Land for

Development to the successful Bidder along the Expressway".

The Commission further held that:

"The Taj Expressway Project being a land mark event in the

Industrial development of State of U.P. is of immense public

utility and also in the national interest".

j) Techno Economic Feasibility Report (TEFR) as

submitted by the Assessee to YEA and the fact that the toll fee

has a 'Negative' Net Present Value (NPV) of the toll fee during

the entire concession period (Refer Halcrow Report August,

2013).

There is no obligation under the Concession Agreement to

carry out housing on

"Land for Development".

ITA NO. 3339/Del/2014

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Section 801A

In the instant case the infrastructure facility is the toll road

(160 kms long six lane access controlled expressway) and the

consideration for developing, operating and maintaining the

said infrastructure facility, is by way of toll fee and through

the right to develop and sub-lease the land along the toll road.

During the period covered by the relevant assessment, the

assessee has been rapidly developing the said toll Toad.

Section 80 IA: Objective

The provisions as contained under section 80IA are for

promoting and facilitating investment and development of

infrastructure in the country and accordingly need to be

interpreted so as to advance their objective.

Being an infrastructure Company, the Company has

been granted Tax Holiday U/s 80 (IA) of the Income Tax Act

1961.

Section 80IA applies as provided in clause (i) of sub-

section (4) to any enterprise carrying on the business of (i)

developing or (ii) operating and maintaining or (iii)

developing, operating and maintaining any infrastructure

facility which fulfills the following conditions, namely:

a) It is owned by a company registered in India or by a

consortium of such companies 28[or by an authority or a

board or a corporation or any other body established or

constituted under any Central or State Act;

b) It has entered into an agreement with the Central

Government or a State Government or a local authority or any

other statutory body for (i) developing or (ii) operating and

maintaining or (iii) developing, operating and maintaining a

new infrastructure facility;

c) It has started or starts operating and maintaining the

infrastructure facility on or after 01.04.1995.

It may be pertinent to mention that clause (c) hereinabove

requires that the enterprise "has started or starts operating

and maintaining the infrastructure facility on or after the 1st

day of April, 1995". The expression 'has started' indicates

events which have already occurred whereas the expression

ITA NO. 3339/Del/2014

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'starts' indicates the events which would occur. Moreover 'it

has started or starts operating and maintaining the

infrastructure facility' in context of this section means started

developing the infrastructure facility, which has duly been

done by the Assessee Company.

Applicability of 801A (4) in the case of appellant

801A( 4) Scope of Business Activity

The word 'business' is wide enough to cover within its

scope all activities that are 'Integral' part of the business of

toll road development.

Deduction u/s 80IA (1) is to be profits and gains derived

from an undertaking or enterprise from any business referred

to in sub-section 4 i.e. eligible business. Thus, it is the income

from business undertaking which is to be deducted and not

only the toll fee. We refer with advantage to the under-

mentioned decisions that the income from business would

include all income emanating from the same. Please refer gist

of case law attached.

• 317 ITR 353 (Del.) CIT v. Dharam Pal Prem Chand

Ltd.

(SLP rejected against Dharam Pal Prem Ch and (SC) in 2010

TIOL-1S-SC-IT)

• 300 ITR 6 (Del.) CIT v. Eltek SGS P. Ltd.

Income during the year from sale of plots, built up

properties, FDRs, bank interest etc. is derived from and forms

an intrinsic part of the infrastructure facility project income.

Accordingly, any income arising from such land would

also be regarded as income derived from the business of

development, operation and maintenance of the infrastructure

facility i.e. the toll road and it is that income which we have

claimed as deduction under section 80IA(4) during the

captioned assessment year. The word 'business' is wide enough

to cover within its scope the profits from all activities that are

integral part of the business of toll road development. It is

humbly submitted that since sub-lease of the plots of land is

made pursuant to the authority granted under the Concession

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Agreement, there can be no doubt that the sub-lease income is

income derived from the 'business' of toll road development.

Where income falls under anyone head of exemption [say

explanation (a)], it would be free from tax even if the condition

of another head of exemption [say explanation (b)] was not

satisfied.

The Assessee Company is in the business of developing,

operating and maintaining, 'road including toll road', which

business has commenced on April 5, 2007. Undoubtedly,

therefore, the operating and maintenance of such road would

start only after April 1, 1995. Accordingly, it is submitted that

the condition laid down in clause (c) of sub-section 4(i) of the

section 80lA is satisfied in the Assessee Company's case and

accordingly, the deduction under section 80lA ought to be

allowed to the Assessee Company.

As seen from order of Ld. CIT itself, assessment order,

office note to assessment order and paper book, the issues

regarding 80lA and its admissibility was intensively processed,

enquired into and considered by the Ld. AO who after due

consideration correctly allowed the claim. On mere difference

of view, Ld. CIT cannot substitute his view for view of AO. The

view of the Ld. AO is correct in law and facts and even if two

views be possible even then revision u/s 263 is not permissible.

The view of Ld. AO is not an unsustainable or undisputedly,

patently erroneous view. Rather it is the view of the Ld. CIT

which is incorrect and contrary to binding judgments. The

claim was allowed by two Assessing Officers in two

assessments i.e. A.Y. 2009-10 and 2010-11. Both of whom

allowed deduction u/s 80IA(4)(i) read with Explanation (a).

The submissions and contentions of the assessee u/s 263

are supported by decisions of the Apex Court, decisions of the

jurisdictional High Court and other High Courts, as seen from

gist of case law filed. Jurisdictional High Court decisions are

reported in Page 3 of Annexure-A to CIT order:

297 ITR 99 (All.) CIT v. Mahendra Kumar Bansal

171 ITR 698 (All.) CIT v. Goyal Private Family Specific Trust

12 Taxmann.com 118 (Alia.) CIT v. Shiv Prasad

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We have respectfully and humbly explained at length

that our case is covered by section 80IA(4)(i) as read with

explanation (a). We have also explained at length as to how

we fall under explanation (a) to the said 80IA( 4)(i). We have

further explained and submitted that we are an infrastructure

facility under the said explanation (a) as a road including toll

road and that accordingly we fall in the definition of

infrastructure facility as defined in the said explanation. The

development rights of land and income therefrom are an

integral and intrinsic part of consideration to us in respect of

infrastructure facility involved being toll road. The limits of

section 80IA(6) apply to infrastructure facilities that fall in the

definition of highway project including housing or other

activities being an integral part of the highway project as

defined in the said explanation (b) and not to infrastructure

facility referred in the said explanation (a).

The deduction provided u/s 80IA(4)(i) is the relevant

deduction for infrastructure facility as in our case. There is no

restriction in our case u/s 80IA(6). The limits and

requirements of 80IA(6) apply to highway project as defined in

the said explanation (b) and not to road including toll road

including intrinsic land as consideration for that infrastructure

facility project as defined in said explanation (a). Accordingly,

the requirements of 80IA(6) are not applicable to us. However,

kindly note that in the alternative without prejudice to our

contention that we are eligible under 80IA(4) as read with

explanation (a), we have made an alternate claim u/s 80IA(6)

as if our project is not eligible under said explanation (a] it is

then eligible under said explanation (b).

Regarding reference to accounting note to balance sheet

in earlier financial year 2007-08 when no claim for deduction

was made u/s 80IA, the same has been clarified fully including

inter alia on Page-6 of Annexure A to Ld. CIT order. Please

note that Paper Book-Page 79, Tax Audit Report states

business of the company as follows "the company is engaged

in development, operation and maintenance of the six-lane

access controlled expressway along with service road and

associated structures & sale I development of leasehold land

along the proposed expressway". Paper Book- Page 85 for

A.Y. 2009-10 80lA Auditor's Report, Form 10CCB states

business as follows "Yamuna Expressway Project

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Development, Operation and maintenance of the six-lane

access controlled expressway between Noida and Agra along

with service road and associated structures and

sale/development of leasehold land along the proposed

expressway".

Lack of jurisdiction and unlawful order under section 263

Further regarding lack of jurisdiction u/s 263 and

unlawful order u/s 263, it is submitted as under:

The Hon'ble Supreme Court in the case of Malabar Industrial

Co. Ltd. vs. CIT (243 ITR 83) has held that a bare reading of

section 263 makes it clear that the pre-requisite to exercise of

jurisdiction by the Commissioner is that the order of the AO is

erroneous in so far as it is prejudicial to the interests of the

Revenue. The Commissioner has to be satisfied with twin

conditions, namely (i) the order sought to be revised is

erroneous; and (ii) it is prejudicial to the interests of the

Revenue.

Further, the Supreme Court has held that when an ITO

adopted one of the courses permissible in law and it has

resulted in loss of revenue, or where two views are possible

and the ITO has taken one view with which the Commissioner

does not agree, it cannot be treated as an erroneous order

prejudicial to the interests of the Revenue unless the view

taken by the ITO is unsustainable in law.

In this regard, it is humbly submitted that where there

has been a detailed application of mind by the AO during the

assessment proceedings, after which a view has been formed

by him, the said view cannot be said to be erroneous or

prejudicial to the interest of the revenue and be revised by

invoking the provisions of section 263. The Hon'ble Supreme

Court in the case of Malabar Industrial Co. Ltd. vs. CIT (243

ITR 83) has held that the provisions of section 263 can be

invoked, inter alia, where the order passed is without

application of mind. However, in the present case, it is

abundantly clear that the deduction has been allowed to us by

the AO after proper application of mind.

In this regard, attention is also invited to the decision of

the Gujarat High Court in the case of CIT vs. Arvind Jewellers

(259 ITR 502) wherein it is held that where material was on

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record and said material was considered by ITO and a

particular view was taken, mere fact that different view could

be taken, should not have been basis for an action u/s. 263.

Attention is also invited to another decision of the Delhi

High Court in CIT vs. Honda Siel Power Products Ltd. (194

TAXMAN 175). In that case, the Assessing Officer had allowed

deduction under sections 80HHC and 80-lB. The

Commissioner, while exercising his powers under section 263,

held that the assessment orders passed by the Assessing

Officer were erroneous and prejudicial to the interests of the

revenue inasmuch as the Assessing Officer had not applied the

provisions of section 80-IB(13)/80-IA(9) and had wrongly

calculated the deduction under section 80HHC without

reducing the claim already allowed as deduction to the extent

of such profits and gains under section 80-lB from the profits

and gains computed for allowing such deduction. However, on

appeal, the High Court held as under:

"When a regular assessment is made under section 143(3), a

presumption can be raised that the order has been passed

upon an application of mind. No doubt, this presumption is

rebuttable, but there must be some material to indicate that the

Assessing Officer had not applied his mind. In the instant case,

there was no material to indicate that the Assessing Officer

had not applied his mind to the provisions of section80-IB(13),

read with section 80-IA (9). The presumption that the

assessment order passed under section 143(3) by the Assessing

Officer had been passed upon an application of mind, had not

been rebutted by the revenue. No additional facts were

necessary before the Assessing Officer for the purpose of

construing the provisions of section 80-IB(13), read with

section 80-IA(9]. It was only a legal consideration as to

whether the deduction under section BOHHC was to be

computed after reducing the amount of deduction under

section 80-IB from the profits and gains. There was no doubt

that the Assessing Officer had allowed the deduction under

section BOHHC without reducing the amount of deduction

allowed under section BO-IB from the profits and gains. He

did not say so in so many words, but that was the end result of

his assessment order. It could not be said that the Assessing

Officer had failed to make any enquiry because no further

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enquiry was necessary and all the facts were before the

Assessing Officer".

(underlined for emphasis)

Further, in (IT vs. Honda Siel Power Products Ltd. (194

TAXMAN 175) (DEL), it is held that in cases where the

Assessing Officer adopts one of the courses permissible, in

law, or where two views are possible and the Assessing Officer

has taken one of the possible views, the Commissioner cannot

exercise his powers under section 263 to differ with the view of

the Assessing Officer, even if there has been a loss of revenue.

On each of the issues raised by the Ld. CIT, the AO has

made detailed enquiries and after proper application of mind

had passed the assessment order. It is further submitted that in

the captioned assessment year, the AO has rightly allowed us

deduction u/s. 80IA( 4) for the profits derived from sale of land

and other income since the same are profits and gains derived

from the business of developing, operating or maintaining an

infrastructure facility i.e. a road including toll road. It is

humbly submitted that as is clear from the activities carried

out by us as also the Concession Agreement, the land received

for sale and/or development under the Concession Agreement

is in fact a part of the compensation received by us for

developing, operating and maintaining the toll road. Indeed,

without the revenue from said land, the toll road project would

not be viable, since the mere collection of the toll from such

road, would not even meet the cost of construction of the toll

road. The detailed submission in this regard has been made in

the subsequent part of this letter and also borne out by

submissions made during assessment proceedings.

Accordingly, it is submitted that, even on merits, the profits

derived by us from sale of land is a profit derived from our

business of developing, operating and maintaining the toll

road and accordingly, the deduction allowed to us by the AO

u/s. 80IA(4) is neither erroneous nor prejudicial to the interest

of the revenue.

The Hon'ble Gauhati High court has in case of

Bongaigaon Refinery and Petrochemicals Ltd. Vs. Union of India And others (287 ITR 120) stated that error in the order

of the Assessing officer and resultant prejudice to the interest

of the revenue are twin factors to co-exist for conferring

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authority on the commissioner to invoke powers under section

263. Entertainment of a view different from the one adopted by

the assessing officer, if plausible would not clothe the

commissioner with the power to interfere.

In CIT v. Gabriel India Limited 203 ITR 108 (Bom.), it

was held if an ITO acting in accordance with law makes a

certain assessment, the same cannot be branded as erroneous

by the Commissioner simply because, according to him, the

order should have been written more elaborately. This section

does not visualise a case of substitution of the judgment of the

Commissioner for that of the ITO, who passed the order. Also,

the Supreme Court in CIT v. Max India Ltd. (295 ITR 282) has

held that since different views existed on day when the

Commissioner passed his order and moreover mechanics of

section have become so complicated over years that two views

were inherently possible. Where two views are possible and

the Assessing Officer has taken one view with which the

Commissioner does not agree, it cannot be treated as an

erroneous order prejudicial to revenue.

On the facts and law involved, the views and order of

the Ld. CIT are erroneous and not sustainable. This is also as

per gist of case law referred to herein clearly supporting the

appellant. The Ld. CIT's reliance on the decision in Smt.

Tarulata Shyam v. CIT 108 ITR 345 (SC) in fact the decision

supports the appellant as it says the interpretation of taxing

statutes should be in consonance with the avowed aim and

object of the legislature which is the interpretation being

sought by the appellant for grant of allowance and for removal

of any doubts. The Ld. CIT has also not been able to properly

rebut or distinguish much binding case law relied by the

appellant. Moreover, it is well known decision like in the K.P.

Verghese v. ITO 131 ITR 597 (Se) which governs

interpretation of statute in India wherein it was held that a

statutory provision must be so construed that absurdity and

mischief may be avoided so as to achieve obvious intention of

the legislature and produce a rational construction.

Beneficial Tax Deduction provisions to be interpreted

liberally

The beneficial tax deduction provisions provided by

Section 80IA are to promote investment in and development of

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infrastructure facility. Accordingly they are to be interpreted

liberally so as to advance their objectives.

(a) 196 ITR 188 (Se) Bajaj Tempo Ltd. V. CIT

Interactive of Statutes-Taxing Statute-Incentive for

growth and development- Provision interpreted liberally-

Restriction on exemption- To be construed so as to advance

objective and not frustrate it.

(b) 2371TR 662 (Mad.) CIT v. Salem Textiles Ltd.

Interpretation of taxing statutes-Liberal construction of

beneficial provisions.

The provisions of section 33 of the Act have to be

construed purposefully and beneficially to achieve the object

behind section 33 of the Act and it cannot be construed in a

restricted or mechanical manner. The provision should be

construed with common sense so that unnecessary difficulties

are not created against the assessee in claiming development

rebate.

(c) 342 ITR 366 (Kar.) ClT v. J. Palemar Krishna

(d) 236 ITR 130 (Allah.) ClTv. Laxmi Metal Industries

(e) 248 ITR 94 (J&K) CIT v. Jammu and Kashmir Tourism

Development Corporation

It is a settled law that in taxing statute, if two

reasonable views are possible, then the view favouring the

assessee is to be adopted:

Inter alia in the following, it has been held that in

interpretation of taxing statute, meaning of words and phrases

has to be seen as understood in common parlance in

commercial circles i.e. the meaning that people conversant

with the subject matter would attribute to it.

144 ITR 225 (SC) CIT v. Mahindra and Mahindra Ltd.

Our case is also clearly supported by the decision of the

Supreme Court in 231 ITR 814 (SC) Kerala State Co-operative

Marketing Federation Ltd. v. CIT wherein it was held that the

correct way of reading the different heads of exemption

enumerated in the section would be to treat each as a separate

ITA NO. 3339/Del/2014

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and distinct head of exemption. Whenever a question arises as

to whether any particular category of an income of a co-

operative society is exempt from tax what has to be seen is

whether the income fell within any of the several heads of

exemption. If it fell within any one head of exemption, it would

be free from tax notwithstanding that the conditions of another

head of exemption are not satisfied and such income is not free

from tax under that head of exemption.

A word acquires meaning only with reference to its text

and context.

Please note that it is also settled law that specific

provisions would override general provisions. Toll roads

would generally be highways which are toll road. In context of

the special terms, as in the Concession involved relating to

right of the assessee to gather toll and to develop, operate and

maintain the facility as toll road, the infrastructure facility of

the assessee falls in definition of toll road. We again rely on

the said decision in 231 ITR 814 (SC) that where income falls

under anyone head of exemption [said clause (a)], it would be

free from tax even if the condition of another head of

exemption [said clause (b)] was not satisfied.

The assessee has invested over Rs. 11,000 crores in its

toll road project. The assessee's investment in the toll road

project upto 31.3.2011 aggregates to Rs. 10,159 crores. A

certificate was filed in this regard from M/s. R. Nagpal

Associates, Chartered Accountant and statutory auditor of the

assessee. The overall utilization and investment in the project

far exceeds the income of the year and as such even the

alternate claim u/s 80IA(6) would be eligible to the appellant.

Ground No. 5 "That, inter alia, the appellant is entitled to

deduction u/s 80IA(4) on the facts and law involved as a

developer of the infrastructure facility, even if it has not

commenced operating and maintaining but it is developing the

same, in view of direct decisions in its favour including inter

alia reported in ACIT v. Bharat Udyog Ltd. 118 ITD 336

which follows the decision of the Hon'ble Apex Court in K. P.

Verghese v. ITO 131 ITR 597 (SC) and as held in TRG

Industries (P) Ltd. V. DCIT (2013) 35 Taxmann.com 253

(Amritsar- Tribunal)". This issue is covered by binding

judgments in appellant's favour.

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The appellant also respectfully relies on submissions in

Annexure- Band C to Ld. CIT order. Please see gist of case

law attached on this ground on which we rely. Moreover, it is

humbly submitted that there is no requirement at under section

80IA( 4) that the deduction would be available only after the

assessee has begun the operation of the infrastructure facility.

If that was the case, then the deduction available under section

80IA( 4) to enterprises that are only into 'development' of

infrastructure facility would never be allowed to them.

Section 80IA(2) subservient to Section 80IA( 4)

• Section 80IA(2) is subservient to 80IA( 4) and is to be

seen in context of 80IA( 4).

• Section 80IA(2) reads "The deduction specified in sub-

section (1) may, at the option of the assessee, be claimed by

him for any ten consecutive assessment years out of fifteen

years beginning from the year in which the undertaking or the

enterprise develops and begins to operate any infrastructure

facility or starts providing telecommunication service or

develops an industrial park 23[or develops 24[***J a special

economic zone referred to in clause (iii) of sub-section (4)J or

generates power or commences transmission or distribution of

power 25[or undertakes substantial renovation and

modernisation of the existing transmission or distribution

lines." (Underlining ours)

With reference to our various earlier submissions and

further to the same, it is once again submitted that 80IA(2) is

subservient to 80IA(4) and is to be seen in context of 80IA(4).

The word 'and' as underlined above in 80IA(2) has to be read

as 'and / or' in context of 80IA(4) or to be read as 'or' so as to

avoid unworkable, unreasonable or absurd interpretation

which is not reconcilable with the rest of the statute/section

80IA(4).

As submitted earlier, section 80IA( 4) permits deduction

to:

80IA(4) (i)

“(i) any enterprise carrying on the business of (i)

developing or (ii) operating and maintaining or (iii)

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developing, operating and maintaining any infrastructure

facility which fulfills all the following conditions, namely.-"

(Underlining ours)

When and in context of 80IA(2) as aforesaid includes or

and is to be read as and / or that would further make it clear

that an enterprise 'developing' an infrastructure facility is

entitled to the said deduction. When 'and' is read as 'or' it

would make the provisions of section 80IA(4)(i) and 80IA(2)

harmonious, workable and be in accordance with the text,

context and object of the provisions.

In 103 ITR 613 (ORI) (FB) it has been held that the word

'and' should be construed as 'or' where the context so requires.

In the case of Iswhar Singh Bindra 1968 AIR 1450, the

Hon'ble Supreme Court held in context of interpretation of

statute in that case, that the word 'and' had to be read as 'or'.

Copy of the said decision is attached. The Hon'ble Apex Court

quoted from Stroud's Judicial Dictionary, 3rd ED to state that

sometime 'and' by force of contents, reads as 'or'. They also

quoted Maxwell on interpretation of statute, 11th ED that to

carry out the intention of the legislature, it is occasionally

found necessary to read 'or' or 'and' one for the other.

Kindly also see our submissions as contained in

Annexures to Ld. CIT order including particularly Annexure-

C.

Ground No. 6 "That the Ld. CIT has erroneously relied on non

applicable CBDT Circular No. 1/2006 dated 12.1.2006 which

relates to effluent treatment and conveyance system and not to

a toll road or highway project, which is the case of the

appellant. In any case, the said circular is not binding on the

appellant. The Ld. CIT has relied on irrelevant and erroneous

material and basis for passing the order under appeal and as

such too his order deserves to be quashed".

The said circular relates to effluent treatment and

conveyance system and not to toll road or highway project. It

is not binding on appellant. It in fact supports appellant by

saying that the deduction is available even to an enterprise

carrying on the business of developing any infrastructure

facility. The purpose of the circular was to clarify availability

of the deduction to effluent treatment and conveyance system.

There is nothing in the circular which says that the benefit

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would not be available to an enterprise developing any

infrastructure facility. The use of the word 'and' in passing that

"the deduction is available for any ten consecutive assessment

years out of twenty assessment years beginning from the year

in which the enterprise develops and begins to operate any

infrastructure facility" in the circular has to be understood as

aforesaid in context in which used to mean (and/or) for

effluent treatment and conveyance system.

Ground No. 7 "That the Ld. CIT has erred in stating that the

Ld. AO has not applied his mind to other claims for example

deduction in respect of interest on FDs and whether

depreciation was admissible even while the project was not

complete. These claims have been processed and correctly

allowed after due consideration. There is no final finding by

the Ld. CIT that these claims are incorrect. The assessee was

duly entitled to these claims which are correctly allowed and

as such too setting aside the assessment to be made de novo is

unlawful and the order of the Ld. CIT deserves to be quashed".

Here too, these are some observations of the Ld. CIT and no

final finding against the appellant as to how the view of the Ld.

AO was unsustainable. The depreciation relates to business

being carried on which income has earned. It is on assets used

for the business and the interest involved emanates from the

business of infrastructure facility for the single object

company.

Decision in Tuticorin mentioned by Ld. CIT relates to

interest income during pre- commencement of business period.

The appellant's business has commenced and business income

has been earned and assessed correctly for interest income.

In Lok Holdings - 308 IT 356 (BOM)- business income

assessed in respect of bank interest for an assessee engaged in

construction business. This was for surplus money with bank

in course of the business. Tuticorin distinguished as above in

this case.”

10. Further, we also find it just and proper to reproduce reply and submissions

of the ld. DR on behalf of the revenue which read as under:-

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• Section 80-IA(1) grants deduction in respect of any

profits and gains derived by an undertaking from any business

referred to in sub-section (4) thereof.

• Under sub-section (2), the deduction is admissible for a

period of ten consecutive years out of 20 years beginning with

the year in which the undertaking develops and begins to

operate the infrastructural facility referred in clauses (a), (b)

and (c) to Explanation to sub-section (4).

• As per sub-section (2A), the admissible deduction is

100% of the profits and gains of eligible business for first five

Assessment Years, "commencing at any time during the period

as specified in sub-section (2)" i.e., from the year in which "the

undertaking or enterprise develops and begins to operate any

infrastructural facility" and thereafter, 30% of profits and

gains for the further period of five years.

• As per clause (c) of sub section( 4), the start of the

operation and maintenance of a infrastructure project is an

essential pre requisite for the eligibility for deduction.

• The clause (a) of the Explanation to sub-section (4)

covers infrastructural facility being " a road including a toll

road, a bridge or a rail system" whereas clause (b) thereof

refers to" a highway project including housing or other

activities being an integral part of the highway project".

• Sub-section (6) states that notwithstanding anything

contained in sub-section (4), where housing and other

activities are an integral part of the highway project and the

profits of which are computed on such basis and manner as

may be prescribed, "such profit shall not be liable to tax where

the profit has been transferred to a special reserve account

and the same is actually utilized for the highway project. ..

before the expiry of three years ... ".

• The basis and manner in which the profits of housing and

other activities are to be computed for the purposes of sub-

section (6) are specified in Rule 18BBE which mandates

maintenance of separate accounts for the activities of housing

and other activities and submission of a certificate specifying

the amount credited to the reserve account and the amount

utilized during the relevant previous year for the highway

project. The certificate is to be furnished in Form 10CCC

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which is to be required to be submitted along with the return

of income.

• From the above, it is apparent that in respect of an

assessee claiming to be engaged in building and

infrastructural facility in the nature of a highway project

including housing and other activities being an integral part of

the highway project, the profits arising from housing and other

activities would be exempt from tax under sub-section (6)

whereas the profits arising exclusively from highway project

would be admissible for deduction under sub-section (1) read

with sub-section (2) and (2A).

• Any relaxation of the provisions of Chapter VI-A

(including the prescribed Rules thereto) is governed by Section

119(2)(c) of the Act which mandates only the Board in the

event that it finds it desirable or expedient to avoid genuine

hardship in any case, to do so subject to the condition that the

default (in compliance for which the relaxation is sought) was

due to circumstances beyond the control of the assessee and it

has complied with such requirement before the completion of

the assessment. Further, every such order is to be laid before

each House of Parliament.

• The assessee has begun to operate the infrastructural

facility w.e.f. 09.08.2012 and hence prior to this date it had

only profits which are attributable to sale of land, transferred

to it in terms of Concessionaire Agreement. Therefore, in

respect of profits exclusively from the highway project, the

assessee would be eligible for deduction under Section 80-1A

only w.e.f Assessment Year 2013-14.

• The case of the assessee squarely falls within clause (b)

of Explanation to sub-section (4) and therefore, the assessee

would be eligible for exemption in respect of profits from

housing and other activities wholly under sub-section (6) of

section 80lA of the Act. The failure of the AO to examine the

claim of the assessee with reference to the applicable

provisions of the Act i.e. clause (b) of the Explanation to sub

section (4) read with subsection (6) of section 801A

indisputably was an error on the part of the AO and

resultantly, the assessment order became erroneous.

• Without prejudice to the contention that the claim of the

assessee is squarely covered under sub-section (6) of section

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80lA of the Act, even if the argument of the assessee that its

case falls under sub section (4) thereof is accepted, it is

undeniable that the assessee has entered into an agreement

with the State Government for 'Developing, operating and

maintaining a new infrastructure facility and therefore its

activity squarely falls within (iii) of clause (b) of sub section

(4) of section 801A. Since sub section (2) of section 801A

categorically states that the deduction will be admissible

'beginning from the year in which the under taking or the

enterprise develops and begins to operate any infrastructure

facility' no deduction for income generated by activities of

such infrastructure facility and/or any allied activity would be

eligible for deduction in any year prior to the beginning of

operations of the infrastructural facility. Further such section

4 states that the deduction would be admissible to the

enterprise which, inter alia, "has started or starts operating

and maintaining the infrastructural facility on or after 1st day

of April, 1995." Thus the deduction to the assessee which has

entered into an agreement for developing, operating and

maintaining an infrastructure facility, under the provisions of

sub section (4), would be admissible only from the year the

operation of the facility begins.

• The A.O. had raised this issue in the assessment

proceedings. In response, the assessee advanced twin

arguments. Firstly, it referred to the wordings of clause (c) of

subsection (4) 'it has started or starts operating and

maintaining the infrastructure facility'. The assesee has tried

to interpret the expression 'starts' to cover future events. The

assessee deliberately omits reference to the phrase "after 1st

April, 1995" which occurs in the said clause(c). Clearly, the

word "started" is intended to cover cases where the operation

and maintenance has commenced prior to 114/1995 and the

work "starts is intended to cover cases where the

commencement is after 114/95. Clause (c) specifies one of the

conditions of eligibility of deduction and only clarifies that

projects which has started operation and maintenance prior to

the specified date or after the specified date will be eligible for

the deduction. The said clause in no way can or is intended to

override the stipulation in sub section (2) which mandates

availing of deduction, in cases of eligible projects, only from

the beginning of the operation of the facility. In fact the

wording of clause © of sub section (4) reiterates the condition

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44

of sub section (2) in as much as it makes the start of the

operation and maintenance of a infrastructure facility, a pre

requisite for the grant of deduction. It may be relevant to

mention that the deduction u/s 801A to infrastructure facility

was for the first time introduced in the statute, sub section (4A)

of section 80lA as it stood prior to 114/1999, w.e.f. A.Y. 1996-

97 (i.e.lst April, 1995) and clause (c) brings into the ambit of

eligibility projects which has started before this date and also

subsequent to this date. The second argument taken is that the

deduction u/s 801A(4 )(i) is admissible also to an undertaking

which only develops the infrastructure facility but does not

operate it. Therefore the admissibility cannot be reckoned with

reference to the commencement of operation. This argument is

un-acceptable for the reason that the undeniably, case of the

assessee is one in which it has entered into an agreement for

developing, operating and maintaining the infrastructure

facility a distinct category of eligible project specifically

covered under sub clause (iii) of clause ( c) of sub section 4.

Assessee has not entered into an agreement only for

developing of an infrastructure facility envisaged in sub clause

(i) of clause (c) of sub section (4). In case of the assessee, the

unambiguous provision of the statute is that the deduction

would be admissible only on the commencement of the

operation. The AO, in accepting the said argument of the

assessee, was indisputably in error in rendering the

consequential assessment order erroneous.

• Without prejudice to the contention made in the preceding

point, the question that the developer of an infrastructural

facility, who is an eligible entity, will not be able to claim the

same since it does not operate the facility and hence could not

have commenced operation, points to an apparent ambiguity

in law. Firstly, no such ambiguity arises in the present case

where the assessee has not entered into an agreement, in terms

of sub clause (b) of sub section (4), only for development of the

infrastructure facility but for the development, operation and

maintenance of the facility. The AO in accepting the

contention of the assessee has taken into consideration an

ambiguity that never existed in the case and had no relevance

to the case and was therefore clearly in error. Secondly,

actually there is no ambiguity. There can be an instance where

an assessee has entered into an agreement with the

Centre/State Govt./Statutory Authority only for development of

ITA NO. 3339/Del/2014

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45

the infrastructure facility but thereafter transfers such facility

to another entity or the Centre/State Govt/Statutory Authority

and in consideration thereof, is entitled to the reverse stream

arising to the transferor entity, either wholly or partially, for a

specified time period. The statute provides that in such cases

also, the deduction would be admissible to the developer. This

interpretation is supported by the proviso to clause (c) of sub

section 4 which envisages transfer of an infrastructure facility

from a developer to another enterprise for operation and

maintenance.

• As regards the provisions of sub section (6), the assessee

has admittedly not created any special reserve. Neither has it

maintained separate accounts for housing and other activities

nor has it furnished Form 10CCC during either with return of

income or during the assessment proceedings. Acceptance of

the claim of deduction by the AO without ensuring the

fulfillment of the aforesaid statutory prescription applicable to

the case of the assessee, or even without seeking a response

from the assessee in respect of such failure undoubtedly was

an error on the part of the AO and the consequential order

granting the deduction squarely falls in the category of an

erroneous order, contemplated in section 263 of the Act.

• That the filing of Form No. 10CCC, creation of a special

reserve and utilisation of such reserve are mandatory

conditionalities for availing of deduction U/S 80IA(6) of the

Act, being the statutory provision under which the claim of the

assessee appropriately falls, has been accepted by the assessee

company in as much as in its annual account for the F.Y.

2013-14, note no. 26 states that ' Accordingly, in compliance

of the provisions contained therein, a 'Special Reserve'

aggregating Rs. 2800,69,052 (F.Y.2008-09 Rs. 255,36,26,035;

F.Y. 2009-10 Rs. 362,48,77,424; F.Y. 2010-11 Rs.

1168,12,74,807 & F.Y. 2011-12 Rs. 1014,71,29,786) has been

created during the year for the respective years. Since the said

sum has been utilised by the Company for development of the

infrastructure facility (the Yamuna Expressway) during the

respective years an aggregate amount of Rs. 2800,69,08,052 ...

has been transferred from 'Special Reserve Account to 'Special

Reserve Utilisation Account' during the year, for the respective

years". Thus, the assessee itself acknowledges that the

conditionalities specified in 80IA(6) is applicable to its case

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and requires to be fulfilled for the grant of deduction in

respect of an infrastructure facility being a highway project

including housing or other activities being an integral part of

the highway project.

• The denial of claim for deduction by the Assessing

Officer In the proceedings under Section 143(3) for A.Y.2011-

12 was based on identical grounds and has been upheld as

such by the CIT (Appeals) in the appellate order for A.Y.2011-

12 dated 12.01.2015, notwithstanding that during the course of

the appellate proceedings Form No. 10CCC for that year and

had also filed a copy of its annual account for F.Y. 2013-14,

wherein, as referred to above, a special reserve had been

created, purportedly in compliance with sub-section (6) of

section 801A. It is significant that the assessee itself has

submitted before the Assessing Officer Form No. 10CCC for

the A.Y. 2009-10 during set aside order in respect of which the

revisionary order has been passed.

• The plea of the assessee that by creating a special

reserve much after the relevant previous year and even the

assessment proceedings for both A.Ys. 2009-10 and 2011-12,

that it has complied with the provisions of Section 80-IA(6) in

spirit is fallacious in as much as firstly, the substantive

provisions of the statute, which grants a vested right either to

the revenue ought to the assessee, cannot be ignored and

secondly that the circumstances under which the provisions of

Chapter VI-A can be relaxed has been provided for in the

statute itself in Section 119(2)( c) of the Act. The assessee's

action of creating special reserve post facto after the

conclusion of assessment proceedings and furnishing a

certificate of Form 10CCC dated 15.11.2014 is irrelevant for

determining the eligibility of the deduction .

• A proposal for action under Section 263 of the Act for

A.Y. 2010-11 has been submitted by the Assessing Officer and

Joint Commissioner of Income Tax concerned vide their letters

dated 21.08.2014 and 25.08.2014 to the Commissioner of

Income Tax and the show cause notice for the year has been

issued on 19.01.2015 .

• The order under Section 263 for A.Y. 2009-10 dated

30.03.2014 categorically states that "the inescapable and

logical conclusions would be that the assessee ought to have

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complied with provisions of sub-section (6) of Section 80- IA

which it has not". Further, the CIT has also noted that the

assessee had claimed deduction u/s 80lA on interest income

from FDs made by deploying its surplus funds and the same

has been erroneously accepted by the A.O. In this context,

reference is invited to the decision of the ITAT Chandigarh

Bench A in the case of Vodafone Essar Ltd., (2013) 153 TTJ

(Chd) 451, wherein an identical issue had been over looked by

the AO and the CIT had invoked the powers available u/s 263

of the Act. It was held that the AO had failed to make proper

investigation into the eligibility of the assessee in relation to

the claim of deduction u/s 80IA of the Act both on the business

profits, interest income and other income received during the

year. The order passed by the AO was an erroneous order and

in the facts and circumstances of the case it was validly

exercised. Moreover, the assessee has claimed depreciation

amounting to Rs 22.67 crores and had been granted by the

Assessing Officer even while the highway project had not been

completed. The order of the Assessing Officer, which allowed

the deduction under Section 80-IA and the depreciation, was

patently erroneous and prejudicial to the interest of the

revenue and was, without an iota of doubt, liable for the

exercise of revisionary jurisdiction under Section 263 of the

Act.

• In the case of Malabar Industrial Co. Ltd. (243 ITR

83), the Hon'ble Supreme Court held that and incorrect

application of law or orders passed without application of

mind, would render it as erroneous. The jurisdictional High

Court in the case of Jagdish Kumar Gulati (269 ITR 71) .held

that if the AO fails to make proper inquiry, the order would be

erroneous and prejudicial to the interest of revenue. In the case

of Bhagwan Das (272 ITR 367), the Allahabad High Court

reiterated the principle that grant of exemption to an assessee,

without any discussion and without any application of mind,

was erroneous and prejudicial to the interest of revenue. In the

case of Tara Devi Agarwal (88 ITR 323), it was held that where

the AO fails to make inquiries which are called for in the facts

and circumstances of the case such order would be rendered

erroneous. Merely making some queries without addressing the

basic issues involved would amount to non application of mind

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as has been held by the Guwahati High Court in the case of

Parasmal Jain (249 CTR 534). ”

11. The ld. AR briefly reiterated his written submissions and arguments

before us and contended that the AO took a reasonable and sustainable view

while granting deduction u/s 80IA(4) of the Act. Ld. CIT-DR also contended

and took us through her written submissions as reproduced hereinabove and

submitted that the AO allowed deduction to the assessee without any valid

reason and keeping aside the relevant provisions of the Act and IT Rules 1962

and CBDT Circular No. 1/2006 dated 12.1.2006. The ld. CIT DR mainly

harping on the factual and legal contention that the assessee is in the business of

development of a highway project including housing and other activities being

an integral part of the highway project and defined in clause (b) of Explanation

to section 80IA(4)(i) of the Act. Ld. CIT-DR further contended that the income

from sale or sub lease & land is not an income from the business of

infrastructure development business, hence, deduction thereon is not allowable

u/s 80IA(4) of the Act.

12. Ld. CIT DR drawing our attention to the impugned notice issued to the

assessee and the impugned order passed u/s 263 of the Act, revising the

assessment order, submitted that the business of infrastructure facility

development was not started in the assessment year under consideration and the

same actually became operational on 9.4.2012 when the project was

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inaugurated and hence the assessee is not entitled for deduction on the income

from such activity which is not a part of infrastructure facility development

business. Ld. CIT-DR further pointed out that if for the sake of argument it is

accepted that the income of the assessee is entitled for deduction, then again the

same cannot be allowed for the assessee was the assessee has not complied with

the mandatory provisions of sub-section (6) of section 80IA of the Act and Rule

18BBE of IT Rules, prescribes the manner in which the profits of housing and

other activities are to be computed for the purpose of sub-section (6) which

mandates maintenance of separate books of accounts for the activities of

housing and other activities and submission of a certificate specifying the

amount credited to the reserve account and the amount utilized during the

relevant previous year for the highway in Form No. 10CCC along with return of

income.

13. Ld. CIT DR vehemently contended that the assessee is not entitled for

deduction u/s 80IA(4) of the Act on the profits and gains earned from sale/sub

lease of land during the financial period under consideration as first, this

activity is out of ambit of infrastructure facility development, secondly, the

assessee did not commence its business operations during the financial year

under consideration and thirdly, the assessee did not comply with the mandatory

provisions of sub-section (6) of section 80IA of the Act and Rule 18BBE of IT

Rules, 1962. Therefore, the assessment order has been passed grating deduction

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u/s 80IA of the Act, without application of mind, without analysing the facts of

the case in the light of relevant provisions of the Act, relevant IT Rules and

CBDT Circular 1/2006 dated 121.1.2012, which is not in accordance with law

and unsustainable, hence, the ld. CIT rightly invoked provisions of the section

263 of the Act by issuing notice and by passing impugned order setting aside

the assessment order to be made de novo. Ld. CIT DR also pointed out that as

extracts from assessee’s Annual Report/Account for AY 2013-14 and certificate

of Auditor in Form 10CCC dated 15.11.2014 (Paper Book of the

Revenue/submissions of case laws page 13 to 19) shows that the assessee tried

to patch up deficiency in statutory compliance of sub section (6) and the IT Rule

18BBC of Income Tax Rules.

14. The ld. AR placed a brief rejoinder to aforesaid contentions of the

Revenue and submitted that as per stipulations, terms and conditions of the

concession agreement between the assessee and the TEA, the assessee assigned

work of development of Expressway and not a highway. The ld. AR further

contended that the main object of work assigned to the assessee was to develop

6 lane Expressway with controlled access and exit points for fast moving traffic

and the users of Expressway has to pay a toll at toll plazas situated at entry or

access points and therefore the assessee has to develop a toll road connecting

Noida to Agra. The ld. AR, repeating his written submissions, also submitted

that, since the assessee was under obligation to pay cost of land acquisition plus

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Rs. 100/- per hectare per annum lease rent on land for construction and

development of Expressway, in addition to bearing cost of construction of

Expressway and development of land, therefore, the project could not be viable

unless the absolute rights on the land for development are given to the assessee

as the only toll revenue was not sufficient even to meet cost of construction and

development.

15. The ld. AR pointed out that assessee’s business commenced from the date

of its incorporation i.e. 5.4.2007 as prior to incorporation, the bid of holding

company was accepted and the TEA allowed the successful bidder to create a

Special Purpose Vehicle (SPV) company in order to implement the project

successfully, hence, when the business of development of infrastructure facility

was started during the financial year under consideration, then the income

earned from sale/sub lease of land for development is an income of first degree

business operations and hence, the same is eligible for deduction u/s 80IA(4) of

the Act. The ld. AR also contended that since the asessee has developed toll

road and opted to avail deduction u/s 80IA(4) of the Act for AY 2009-10,

therefore, the assessee also complied with the provisions of Rule 18BBB of the

Income Tax Rules, 1962 and also submitted certificate in Form no. 10CCB.

16. The ld. AR has also drawn our attention towards paper book page page

228 and 229 and submitted that the assessee also complied with provisions of

sub-section (6) of section 80IA of the Ac t and Rule 18BBC of Income Tax

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Rules 1962 only support this fact that assessee is a sincere and honest taxpayer

and to fulfil requirements of the alternate claim of the assessee which does not

mean that the assessee concedes that its claim falls under clause (b) of

Explanation 80IA(4)(i) of the Act.

17. Main controversy revolves around the fact that the assessee has claimed

deduction u/s 80IA(4) of the Act on the basis that as per concession agreement

between the TEA and the assessee company, the assessee develops

“infrastructural facility” as per clause (a) of Explanation to section 80IA(4)(i)

which was granted by the AO and subsequently, the ld. CIT, Noida issued

notice u/s 263 of the Act on the contention that the claim of the assessee does

not fall in clause (a) of Explanation to section 80IA(4)(i) of the Act and the AO

passed an assessment order which was not only erroneous but also prejudicial to

the interest of the revenue and he rejected the objections and submissions of the

assessee company and directed the AO to frame afresh de novo assessment by

passing the impugned order.

18. When computation of income and audit report filed along with return of

income, queries of the AO, replies of the assessee dated 23.11.2011,

21.12.2011, 23.12.2011, 28.12.2011 and 29.12.2011 filed during assessment

proceedings, office note dated 29/30.12.2011 of the AO, original assessment

order passed u/s 143(3) of the Act, notice issued by ld. CIT Noida u/s 263 of the

Act (supra), written submissions and contentions of the assessee objecting to the

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proceedings u/s 263 of the Act dated 19.3.2014, 25.3.2014 and 27.3.2014,

impugned order, rival written submissions and contentions of both the sides (as

reproduced hereinabove) placed before us and the ratio of the case laws relied

by both the parties and specially, grounds raised by the assessee before us in

this appeal are kept in close juxtaposition, side by side, the following prime

issues emerge for our consideration for proper adjudication of the present

appeal:

(i) Whether in view of concession agreement and allied documents,

the assessee claim falls u/s 80IA(4)(i) Explanation clause (a) or (b)

and whether the assessee is developing a road (including toll road)

or highway?

(ii) Whether in the background of concession agreement and judgment

of the Hon’ble Supreme Court in the case of Nand Kishore Gupta

vs State of UP, the AO was correct in treating the subject year as

falling in the eligible period u/s 80IA(2) of the Act in the light of

the fact that the assessee did commence the development of the

infrastructure facility since 5.4.2007 and was actively developing

the infrastructure facility during the assessment year under

consideration?

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(iii) Whether the AO took a plausible reasonable and sustainable view

by allowing the assessee claimed deduction under clause (a) of

Explanation to Section 80IA(4)(i) of the Act?

(iv) Whether the assessment order questioned and alleged by the ld.

CIT, is unsustainable and not in accordance with law and has been

passed without application of mind, in the peculiar facts and

circumstances of the case, specially in the light of the provisions of

section 80IA(4) r/w its sub-sections (2) & (6) and other relevant

provisions of the Act and the Income Tax Rules, 1962.

(v) Whether the CIT Noida was in error by invoking provisions of

section 263 of the Act in the peculiar facts and circumstances of

the present case, specially when he has not decisively concluded

the issue i.e. whether the assessee is developing a toll road or a

highway project and left it midway without any decisive

conclusion/direction?

(vi) Whether the ld. CIT exercised its powers u/s 263 of the Act in

revising the assessment order on the issue of allowability of

deduction u/s 80IA(4) of the Act on interest earned from FDR and

without show causing the assessee in the notice u/s263 of the Act

&on the issue of allowability of depreciation and, therefore, the

same is not valid and void ab initio on these issues.

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19. In order to decide above prime issues, we deem it appropriate to

reproduce relevant provision of the concession agreement for effective and

proper adjudication of the case which read as under:-

The provisions of section 80IA(1)(2), (4) and (6):

Deduction in "respect of profits and gains from' industrial

undertakings or enterprises engaged in infrastructure

development, etc.

[(1) Where the gross total income of an assessee includes any

profits and gains derived by an undertaking or an enterprise

from any business referred to in sub-section (4) (such

business being hereinafter referred to as the eligible business),

there shall, in accordance with and subject to the provisions of

this section, be allowed, in computing the total income of the

assessee, a deduction of an amount equal to hundred per cent

of profits and gains derived from such business for ten

consecutive assessment years.]

(2) The deduction specified in sub-section (1) may, at the

option of the assessee, be claimed by him for any ten

consecutive assessment years out of fiteeen years beginning

from the year in which the undertaking or the enterprise

develops and begins to operate any infrastructure facility or

starts providing telecommunication service or develops an

industrial park (or develops a special economic zone)

rendered to in clause (iii) of sub-section (4) or generates

power or commences transmission or distribution or power (or

undertakes substantial renovation and modernisation of the

existing transmission or distribution lines.”

(3) xxxxxx

(4) This section applies to-

(i) any enterprise carrying on the business l[of (i) developing or

(ii) operating and maintaining or (iii) developing, operating

and maintaining] any infrastructure facility which fulfils all the

following conditions, namely:

a) it is owned by a company registered in India or by a

consortium of such companies 2[ or by an authority or a board

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or a corporation or any other body established or constituted

under any Central or State Act.]

(5) xxxxxxx

(6) The amount of deduction in the case of the business of a

ship shall be thirty per cent of the profits and gains derived

from such ship for a period of ten consecutive assessment

years including the initial assessment year provided that the

ship -

(i) is owned by an Indian company and is wholly used for the

purposes of the business carried on by it ;

(ii) was not, previous to the date of its acquisition by the

Indian company, owned or used in Indian territorial waters by

a person resident in India; and

(iii) is brought into use by the Indian company at any time

during the period beginning on the 1st day of April, 1991 and

ending on the 31st day of March, 1995.”

20. First of all, we may point out that the nucleus of the activities and

business of the assessee is the concession agreement (hereinafter “Agreement”)

executed on 7.2.2003 between the Taj Expressway Industrial Development

Authority (in short “TEA”) a statutory body constituted under U.P Industrial

Development Act, 1976, and the assessee company. The relevant provisions of

this agreement read as under:-

Objects of the Agreement (Assessee’s Paper Book at page 100)

“A. The Government of UP has Set up TEA for

anchoring development of Taj Express way Project, which,

interalia, includes construction of six lane, 160 km long Super

Expressway with service roads and associated facilities

connecting Noida and Agra, passing through a virgin area

along the Yamuna River.

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B. TEA has invited bids for development of a Techno

Economic Feasibility Report (TEFR) and Detailed Project

Report (OPR), arrangement of finance, construction and

operation of the said Expressway subject to and on the terms

and conditions contained in the Notice inviting offers and the

company had also submitted a bid on the due date i.e.

18.01.2003.

C. After evaluation of the Bids so received, TEA accepted the

BID of the Company and issued letter of Acceptance No.

TEA/341/2003 dated 23.01.2003 to the Company (Annexure-A).

D. The Company informed TEA Vide its letter No. JIL/302

dated 23.01.2003 (Annexure - B) that:

a. it opts to take up the Project exclusively by itself without

any equity participation by TEA; and

b. it opts for "Schedule For land release" as per Option-II

specified in Notice Inviting Offer, to develop the Project in three

phases.

E. TEA and the Company have mutually agreed on the terms

and Conditions of the Concession Agreement to be executed

between the Parties.”

CHAPTER - II

SCOPE OF WORK

2.1 The “Work” shall include preparation of TEFR and

Detailed Project Report (DPR), arrangement of finances,

design, engineering, construction and operation of six-lane

Expressway alongwith service roads and associated structures

as per requirement, between Noida and Agra in Uttar

Pradesh, India except the construction of Expressway between

Noida and Greater Noida, which is already under execution

jointly by NOIDA and GNIDA and shall be completed in all

respects, operated and maintained jointly by NOIDA and

GNIDA at its own cost till the start of the Concession Period.

This road would have provision for expansion to 8-lane in

future based on traffic volume.

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2.2 The scope of Work also includes operation and

maintenance of the Expressway, including collection and

retention of Fees during the term of the Concession Period.

2.3 The Expressway shall be developed in following 3

phases :-

Phase 1 : Expressway stretch between Greater Noida and

the proposed Taj International Airport.

Phase 2 : Expressway stretch between the proposed Taj

International Airport and an intermediate destination between

the proposed Taj International Airport and Agra as may be

mutually agreed between the Parties.

Phase 3: Expressway stretch between the aforesaid

intermediate destination and Agra.

CHAPTER – III

GRANT OF CONCESSION

3.1 Subject to and on the terms and conditions set forth

in this Agreement, TEA hereby undertakes to cause Goup to

grant to the Concessionaire and the Concessionaire hereby

accepts the Concession for a period of thirty six years

commencing from the COD including the exclusive right,

license and authority during the subsistence of this Agreement

to implement the Project.

3.2 Subject to and on the terms and conditions set

forth in this Agreement, the Concession hereby granted shall

oblige the Concessionaire to undertake the following in

accordance with the provisions of this Agreement, the

Applicable Laws and the Applicable Permits.

i To develop, design, engineer, finance, procure and

construct the Expressway within the Construction Period;

ii Upon completion of the Expressway and during the

Concession Period to manage, operate & maintain the

Expressway and regulate the use thereof by third parties;

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iii Demand, manage and collect appropriate Fees from

vehicles and persons liable to payment of Fees for using the

Expressway or any part thereof and refuse entry of any vehicle

to the Expressway if the due Fees is not paid;

iv Perform and fulfil all of the Concessionaire’s obligations

under this Agreement;

v Bear and pay all expenses, costs and charges incurred in

the fulfilment of all the Concessionaire’s obligations under

this Agreement.

3.3 The Concessionaire shall be granted, by TEA, rights for

land development of 25 million sq. Mtrs of land along the

proposed Expressway for commercial, amusement, industrial,

institutional and residential development. The land for the

purpose of development shall be provided by TEA along the

Expressway at five or more locations of which one location

shall be in Noida or Greater Noida with an area of 5 million

sq. mtrs. The aforesaid land for development shall be in

addition to the land for construction of Expressway.

3.4 The Expressway between Noida Toll Bridge and

Greater Noida (about 25 Kms) has already been constructed

and opened for general public by GOUP. In consideration of

capital cost of this Expressway between Noida and Greater

Noida, the TEA shall grant leave and license to the

Concessionaire to use it for concession during the Concession

Period. The capital cost of this already constructed Noida—

Greater Noida Expressway shall be treated as interest free

loan to the Concessionaire, which shall be repaid by the

Concessionaire to TEA in 15 equal yearly instalments starting

from 11th

year of the Concession Period.

3.5 The Concessionaire shall submit TEFR / DPR within 2

years of signing the Concession Agreement.

3.6 The Concession Period shall commence on COD and

shall end on the date of expiry of period of 36 (thirty six) years

plus any extensions thereto provided in accordance with the

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provisions of this Agreement. However in case COD is not

achieved within 7 (seven) years or such extended period as

may be approved by TEA, after signing of this Agreement

solely on account of Concessionaires default, the Concession

Period shall be reduced by the period of delay in achieving the

COD.

3.7 Concessionaire shall be entitled to collect and retain

the Fee from the users of the Expressway between Noida and

Greater Noida during the terms of the Concession Agreement.

3.8 The alignment of the Expressway between Greater

Noida and Agra shall be finalised by the Concessionaire in

consultation with TEA.

CHAPTER – IV

LAND

4.1 Land for construction of Expressway shall be provided

by TEA to the Concessionaire, generally in a width of 100

meters along the alignment of the Expressway with additional

land width, where required, for developing other facilities like

Toll Plazas etc., on following terms & conditions.

a. The land for construction of Expressway shall be

released as per following 3 stages:

Stage – 1 - Land for Phase 1 of Expressway within 6 (six)

months of finalisation of Alignment of the Expressway

Stage – 2 - Land for Phase 2 of Expressway within 12

(twelve) months of finalisation of Alignment of the Expressway

Stage – 3 - Land for Phase 3 of Expressway within 18

(eighteen) months of finalisation of alignment of the

Expressway

b. The land shall be leased for a period starting from the

date of transfer till the end of the Concession Period through

such lease deed as may be mutually agreed between the

Parties.

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c. The land shall be free from Encumbrances.

d. The sole premium of the transferred land shall be

equivalent to the acquisition cost plus a lease rent of Rs.

100.00 (Rupees one hundred) only per hectare per year. The

acquisition cost shall be the actual compensation paid to the

land owners without any additional charge and shall be

payable by the Concessionaire as per applicable rules. The

lease rent shall be payable annually.

4.2 The land for development shall be released as per

following 3 stages :

Stage 1 : 10% land (250 hectare) for development would

be made available after Concessionaire makes financial

arrangements for Phase – 1 to the satisfaction of TEA.

Stage 2 : 10% land (250 hectare) for development would

be made available within 6 (six) months of stage – 1, provided

the Concessionaire

- Finalises the DPR / TEFR study

- Commences construction of phase – 1

- Makes financial arrangement for Phase – 2 to the satisfaction

of TEA

Stage 3 : balance 80% land (2000 hectare) for

development would be made available within 12 (twelve)

months of stage -1, provided TEA accepts the DPR / TEFR

study prepared Concessionaire.

- TEA is satisfied with the physical progress of phase – 1 and

phase – 2

- Concessionaire makes financial arrangement for phase -3 to

the satisfaction of TEA.

For the purpose of satisfaction of TEA in respect of Financial

Arrangement as aforesaid, the Concessionaire shall submit

phasing of estimated expenditure, source of funds including

own funds and copies of communication from the lenders in

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case of debt by way of term loan, NCD or any other instrument

showing their intention for providing the debt.

4.3 Land for development shall be transferred by TEA to

the Concessionaire free from all Encumbrances on following

terms & conditions :

a. It shall be on lease for a period of 90 (ninety) years from

the date of transfer through such lease deeds as may be

mutually agreed between the Parties.

b. The land to be transferred shall be as per the request

and choice of the Concessionaire subject to availability, in

such a manner that the Concessionaire is entitled to achieve

150 Floor Area Ratio (FAR) on such land. If due to local

byelaws or other statutory provisions, it shall not be possible

to achieve 150 FAR, then TEA shall evolve suitable

mechanism, as may be mutually agreed between the TEA and

the Concessionaire, so as to enable the Concessionaire to

achieve 150 FAR.

c. The sole premium of the transferred land shall be

equivalent to the acquisition cost plus a lease rent of Rs.

100.00 (Rupees one hundred) only per hectare per year. The

acquisition cost shall be the actual compensation paid to the

land owners without any additional charge and shall be

payable by the Concessionaire as per applicable rules. The

rent shall be payable annually for 90 (Ninety) years from the

date of transfer of land.

d. The Concessionaire shall be entitled to further sub-

lease developed / undeveloped land to sub-lessees / end-users

in its sole discretion without any further consent or approval

or payment of any charges / fee etc. To TEA or any other

relevant authority.

e. After sub-lease of part of the land by the Concessionaire,

the same can be transferred / assigned without requiring any

consent or approval of or payment of any additional charges,

transfer fee, premiums etc. To TEA or to any other relevant

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authority and/or there can be subsequent multiple sub-leases

of the land in smaller parts. The lease rent of the respective

sub-leased portion of land shall be paid by the sub-lessees /

transferees to TEA directly on pro-rata basis @ Rs. 100.00

(Rupees one hundred) per hectare per year. The

Concessionaire shall be required to pay lease rent to TEA for

the portion of land remaining in its possession after sub-lease,

on pro-rata basis at the aforesaid prescribed rate. Total lease

rent paid by the Concessionaire and various sub-lessees /

transferees shall be Rs. 100.00 (Rupees one hundred) per

hectare per year.

f. Each sub-lease and/or transfer shall after the execution

thereof be notified by the transferor or the transferee or the

sub-lessor/sub-leassee to TEA and till such time it is so

notified the transferor/sub-lessor shall remain jointly and

severally liable alongwith the transferee / sub-lessee for

payment of lease rent to TEA.

g. The Concessionaire may make a request to TEA to

execute the lease deed directly in favour of Concessionaire’s

subsidiaries, assigns, transferees etc. In respect of any portion

of the land on the same terms and conditions as mentioned

above, and on receipt of such request TEA shall execute the

lease deed in respect of such portion of land directly in favour

of such subsidiaries, assigns and transferees.

h. In case TEA and the Concessionaire consider it

appropriate, tripartite agreement for sub-lease deed may be

executed between the TEA, Concessionaire and the Sub-lessee.

4.4 The Concessionaire shall be free to decide the

purpose for which transferred land will be used i.e. for

commercial, amusement, industrial, institutional, residential

etc. And also for the area of land to be allocated for different

uses. The Concessionaire shall also be free to decide whether

the sub’-leased land shall be in the form of plots or

constructed properties. No permission of TEA shall be

required either for the land use or for transfer of leasehold /

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sub-leasing / multiple sub-leasing of land. The land use shall

however be as per applicable Master Plan and other

regulations.

4.5 The rights of the sub-lessees / end-users shall not be

affected by termination of this Agreement, or expiry of

Concession Period and subsequent renewals shall be granted

by TEA without any additional cost to transferees / sub-lessees

/ end-users, standard terms and conditions notwithstanding.

The Concessionaire / sub-lessees / end-users shall follow the

statutory laws / byelaws etc. for the land use.

4.6 If the land is not made available by TEA to the

Concessionaire at Stages 1, 2 & 3 according to the schedule

mentioned in Clause 4.1 and 4.2 above for any reason other

than attributable to the Concessionaire, TEA, at its discretion,

shall either reimburse to the Concessionaire the additional

cost and loss of revenue occasioned to the Concessionaire on

account of the said delay or the Concessionaire shall be

compensated by suitably extending the Concession Period.”

21. In view of above agreement, the assessee was under obligation to do

“work” as mentioned in para 2.1 of chapter II and in turn, concession was

granted by the TEA to the assessee as mentioned in chapter III, the land for

construction of Expressway and land for development was provided to the

assessee and the same was released by the TEA, as per terms of 4.1 and 4.2,

respectively, of Chapter IV of the agreement. As per above provisions and

terms of the agreement, the TEA has to provide land for expressway and land

for development to the assessee on cost of acquisition plus a lease rent of

Rs.100/- per hectare per year. The assessee was under obligation to construct

Expressway between Agra and Noida in U.P. and concession as mentioned in

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Chapter-III was granted to the assessee. From vigilant perusal of the concession

agreement, we note that the assessee, in turn, was given the right to collect toll

fees from expressway users and also granted right to decide the disbursement

and purpose of land given for development and the rights to use the land as its

own or to sub-lease the same to a third party in accordance with urban

development policy and applicable rules of the Government of UP.

22. Ld. AR has also drawn our attention towards observations of the Hon’ble

Supreme Court in the judgment of Nandkishore Gupta vs State of UP in Civil

Appeal No. 7468 of 2010 dated 8.9.2010 in para 30 & 34 and submitted that the

project commissioned by the assessee was of immense public importance and

the implementation of the said project resulted into existence of five developed

parcels/centres in the state for the use of citizens and creation of these five

parcels was also insuring the maximum utilisation of the Expressway. The ld.

AR also submitted that the creation of the Expressway and five land parcels was

complimentary to each other and can be viewed as important parts of integral

scheme. The relevant observations of Hon’ble Apex Court read as follows:-

“The Expressway is a work of immense public importance.

The State gains advantages from the construction of an

Expressway and so does the general public. Creation of a

corridor for fast moving traffic resulting into curtailing the

traveling time, as also the transport of the goods, would be some

factors which speak in favour of the Project being for the public

purpose. Much was stated about the 25 million square meters of

land being acquired for the five parcels of land. In fact, in our

opinion, as has rightly been commented upon by the High Court,

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the creation of the five zones for industry, residence, amusement

etc., would be complimentary to the creation of the Expressway.

It cannot be forgotten that the creation of land parcels would

give impetus to the industrial development of the State creating

more jobs and helping the economy and thereby helping the

general public. There can be no doubt that the implementation of

the Project would result in coming into existence of five

developed parcels/centers in the State for the use of the citizens.

There shall, thus, be the planned development of this otherwise

industrially backward area. The creation of these five parcels

will certainly help the maximum utilization of the Expressway

and the existence 3 of an Expressway for the fast moving traffic

would help the industrial culture created in the five parcels.

Thus, both will be complimentary to each other and can be

viewed as parts of an integral scheme. Therefore, it cannot be

said that it is not a public purpose.

.................. (last part of para 30)

We have already considered this question that in the

present case, there is nothing to indicate that the acquisition is

for the Company i.e. for Jaiprakash Industries Ltd. It is only,

therefore, that we are at pains to point out that the Government

was only using the Company for implementing its policy.”

(last part of para 34)

23. Hence, in view of above observations of Hon’ble Apex Court in para 30,

we may safely infer that the land for development of the Expressway and

development of five land parcels for industrial, commercial, amusement and

residential purposes was allotted to the assessee under concession agreement.

The work of the development of the Expressway and development of the land

are integral and inseparable part of the project/scheme. We may also point out

that the land for development was not allotted only for residential/housing

purpose but also for the purpose of industrial, commercial and amusement etc.,

hence the concession agreement was intended to use the assessee company for

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implementation of the development policy of U.P. Government as observed by

Hon’ble Apex Court in last operative part of para 34 of the judgment in the case

of Nand Kishore Gupta (supra).

24. The ld. DR vehemently contended that as per language used by the

legislature in sub-section (2) to section 80IA of the Act and the similar language

which was again used by the CBDT in Circular No. 1/2006 stipulates that the

assessee will be entitled for exemption u/s 80IA(4)(i) of the Act only when the

enterprise develops and begins to operate infrastructure facility, means the

exemption is not available when the enterprise only develops infrastructure

facility because the word “and” used by the legislature in sub-section (1) and

CBDT circular (supra) between the word “develops” and “begins to operate”

between the word “develops” and “begins to operate” requires both the

conditions to be fulfilled simultaneously and the assessee has begun to operate

the infrastructure facility only when the toll road was actually inaugurated by

the Hon’ble Chief Minister of UP on 9.8.2012, which is related to FY 2012-13

pertaining to AY 2014-15, then exemption is not allowable for AY 2009-10 i.e.

the assessment year under appeal.

25. Ld. AR replied that the assessee is entitled to deduction u/s 80IA(4) of the

Act on the fact and law involved and relevant to the issue as a developer of the

infrastructure facility, even if it has not commenced operating and maintaining

but it is developing the same. Placing reliance on the decisions of Hon’ble

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Supreme Court in the case of K.P. Vergese vs ITO 131 ITR 597 (SC), the

order of ITAT Mumbai in the case of ACIT vs Bharat Udyog Ltd. 118 ITD

336 (Mumbai Tribunal) and on the order of ITAT-Amritsar in the case of

TRG Industries (P) Ltd. vs DCIT (2013) 35 Taxman.com 253 (Amritsar

Tribunal) submitted that this issue is covered in favour of the assessee by the

ratio of these judgments and orders.

26. Ld. AR reiterating its argument submitted before the ld. CIT Noida and

relying on written submissions dated 19.3.2014, 25.3.2014 and 27.3.2014

(annexed to order of CIT as Annexure A, B & C) placed before the ld. CIT

during proceedings u/s 263 of the Act, submitted that there is no requirement u/s

80IA(4) that the deduction would be available only after the assessee has begun

the operation of the infrastructure facility. Ld. AR strenuously contended that it

is a well accepted proposition that the taxing statutes and provisions conferring

benefit for the assessee should be given an interpretation which enables the

assessee to secure benefit and it should be so interpreted and the words used

therein should be assigned such meaning as would enable the assessee to secure

the benefit and deduction intended to be given by the legislature to the assessee.

Ld. AR also contended that if the meaning adopted by the Revenue and the ld.

CIT is accepted, that deduction u/s 80IA(4)(i) of the Act would be available

only after assessee has begun the operation of the infrastructure facility then the

deduction u/s 80IA(4) would be available only after completion of project

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which is obviously spread over several years and exemption to those

enterprises, which are involved only into the “development” of infrastructure

facility, would never be available and this interpretation would defeat and

frustrate the very purpose of the beneficial taxation legislation.

27. Ld. AR further submitted that section 80IA(2) and is to be seen in the

context of section 80IA(4) and the words used in sub-section (2) viz. “develops

and begins to operate” has to be read and interpreted in the context of intention

and spirit of section 80IA(4) and the words “and” in section 80IA(2) may be

read or used as “or” as to avoid unworkable, unreasonable or absurd

interpretation which is not reconcilable with the intention and literal meaning of

sub-section (4). Ld. AR placing reliance on the decision of Hon’ble Supreme

Court in the case of Ishwar Singh Bindra vs State of UP 1968 AIR 1450

(SC) and decision of Full Bench of Hon’ble Orissa High Court in the case of

CIT vs Gangaram Chapolia (1976) 103 ITR 613 (Orissa-FB), submitted that

the conjunctive “and” in sub-section (2) of section 80IA of the Act between

“develops” and “begins to operate” and should be construed as “or” to save the

very purpose of the beneficial provisions of Section 80IA of the Act and CBDT

Circular 1/2006 (supra). Ld. AR also pointed out that the allegation of non-

compliance of CBDT Circular (supra) has not been mentioned in the notice u/s

263 of the Act and the same cannot be used for revising the assessment order.

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28. On careful consideration of above rival submissions of both the sides,

firstly we are in agreement with the contentions of the ld. AR that the allegation

of non-compliance of the CBDT Circular No. 1/2006 (supra) has not been

mentioned by the ld. CIT Noida in the notice issued to the assessee u/s 263 of

the Act (supra). Secondly, the construction of language and words used by the

legislature in sub-section (2) of section 80IA of the Act and used by the CBDT

in Circular No. 1/2006 (supra) are similar viz. “develops and begins to operate”.

The heading given by the legislation to section 80IA of the Act reads as

“Deductions in respect of profits and gains from industrial undertaking or

enterprise engaged in infrastructure development etc.” which, to our humble

understanding, express the intention of the legislature that the exemption therein

section 80IA of the Act is available for the undertakings or enterprise which are

engaged in the business of infrastructure development etc. Meaning thereby

infrastructure development is paramount consideration for grant of exemption

u/s 80IA of the Act. If the literal meaning is given to the conjunctive word

“and” between “develops” and “begins to operate” then the enterprise would be

entitled to exemption only when the enterprise develops and begins to operate

infrastructure facility on or after 1.4.1995, as required by condition (c) of

section 80IA(4)(i) of the Act.

29. Under said interpretation as given by the Revenue authorities, the

enterprise would be entitled for exemption u/s 80IA(4) of the Act only after

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completion of the project even if development takes more than one year to start

operations and then only the income derived from operating and maintaining of

infrastructure facility would be eligible for exemption and enterprises engaged

in development activities would never be entitled for exemption. Obviously,

this cannot be an intention of legislature and CBDT circular (supra) while

framing the provision of section 80IA of the Act and issuing Circular No.

1/2006 (supra) respectively.

30. At this juncture, we respectfully take cognizance of the decision of

Hon’ble Supreme Court in the case of K.P. Verghese (supra) and decision of

Full Bench of Hon’ble Orissa High Court in the case of Gangaram Chopalia

(supra) and decision of Hon’ble Jammu & Kashmir High Court in the case of

CIT vs J&KTDC (2001) 248 ITR 94 (J&K), as relied by the ld. AR. In the case

of K.P. Varghese v ITO (supra), the Apex Court held that the interpretation of a

statute being an exercise in the ascertainment of meaning, everything which is

logically relevant should be admissible. The relevant part of the decision reads

as under:-

“A statutory provision must be so construed, if possible,

that absurdity and mischief may be avoided. Where the plain

literal interpretation of a statutory provision produces a

manifestly absurd and unjust result which could never have been

intended by the legislature, the court may modify the language

used by the legislature or even do some violence to it, so as to

achieve the obvious intention of the legislature and produce a

rational construction.

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Speeches made by the members of the legislature on the floor

of the House when the bill is being debated are inadmissible for

the purpose of interpreting the statutory provision but the speech

made by the mover of the Bill explaining the reason for its

introduction can certainly be referred to for the purpose of

ascertaining the mischief sought to be remedied by the legislation

and the object and purpose for which the legislation is enacted.

This is in accord with the recent trend in juristic thought not only

in western countries but also in India, that the interpretation of a

statute being an exercise in the ascertainment of meaning,

everything which is logically relevant should be admissible.”

31. Ld. AR placing reliance on the decision of Hon’ble Supreme Court in

the case of Bajaj Tempo Ltd. vs CIT (1992) 196 ITR 188 (SC), the ld. AR

submitted that if provision for checking abuse is found to have resulted into

nullifying the very purpose of its enactment then the provisions of taxing

statutes should be interpreted liberally so as to advance the objective of the

provisions and not frustrate it. Ld. AR has further drawn our attention towards

decision of Hon’ble Bombay High Court in the case of CIT vs ABG Heavy

Industries Ltd. (2010) 322 ITR 323 (Bombay) and submitted that after

considering the ratio of the decision of Hon’ble Apex Court in the case of Bajaj

Tempo Ltd. (supra) it was also held that an assessee did not have to develop the

entire part of eligible business or activity in order to qualify for a deduction u/s

80IA of the Act.

32. Ld. DR contended that the toll was inaugurated on 9.8.2012 (relevant to

AY 2013-14). Hence, literal meaning does not allow to grant exemption u/s

80IA of the Act from AY 2009-10. Ld. AR placing rejoinder submitted that the

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assessee started its operation from 5.4.2007. Hence income earned from the

activities which are inextricably linked with the main object and scope of work,

commencement of business operation are eligible for exemption u/s 80IA of the

Act. Firstly, we note that Hon’ble Apex Court laid a basic principle for

interpretation of beneficial taxation statutes in the case of Bajaj Tempo Ltd.

(supra) which reads as follows:-

“A provision in a taxing statute granting incentives for

promoting growth and development should be construed

liberally; and since a provision for promoting economic

growth has to be interpreted liberally, the restriction on it too

has to be construed so as to advance the objective of the

provision and not to frustrate it.

BY THE COURT: “If a provision for checking abuse is found

to have resulted in nullifying the very purpose of its enactment

and the Legislature intervenes, then it can be assumed that the

Legislature, having been satisfied of the failure of the purpose

for which the provision was inserted, proceeded to cure the

defect by suitably amending the provision or removing it.”

33. In the decision of ABG Heavy Industries (supra) the Hon’ble Bombay

High Court referring to the ratio of the decision of Hon’ble Apex Court in the

case of Bajaj Tempo (supra) held the assessee did not have to develop the entire

port/project into to qualify for a deduction u/s 80IA of the Act. Their lordships

further held that the Parliament did not legislate a condition impossible of

compliance. The relevant operative part of this order reads as follows:-

“19 . The obligations which have been assumed by the

assessee under the terms of the contract are obligations

involving the development of an infrastructure facility. Section

80-IA of the Act essentially contemplated deduction in a

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situation where an enterprise carried on the business

developing, maintaining and operating an infrastructure

facility. A port was defined to be included within the purview

of the expression "infrastructure facility". The obligations

which the assessee assumed under the terms of the contract

were not merely for supply and installation of the cranes, but

involved a continuous obligation right from the supply of the

cranes to the installation, testing, commissioning, operation

and maintenance of the cranes for a term of ten years after

which the cranes were to vest in JNPT free of cost. An assessee

did not have to develop the entire port in order to qualify for a

deduction under section 80-IA. Parliament did not legislate a

condition impossible of compliance. A port is defined to be an

infrastructure facility and the circular of the Board clarified

that a structure for loading, unloading, storage, etc., at a port

would qualify for deduction under section 80-IA. The condition

of a certificate from the Port Authority was fulfilled and JNPT

certified that the facility provided by the assessee was an

integral part of the port. The assessee developed the facility on

a BOLT basis under the contract with JNPT. On the fulfilment

of the lease of ten years, there was a vesting in the JNPT free

of cost.”

34. Therefore, in view of ratio laid down by Hon’ble Apex Court in the case

of Bajaj Tempo (supra) and by Hon’ble Bombay High Court in the case of ABG

Heavy Industries (supra), we respectfully note that a provision in taxing statute

granting incentives for promoting growth and development should be construed

liberally and since a provision for promoting economic growth has to be

interpreted liberally, the restriction on it also has to be construed so as to

advance the objective of the provision and not to frustrate it or to defeat its

purpose. We further respectfully note the ratio of the decision of Hon’ble

Bombay High Court in the case of ABG Heavy Industries (supra) wherein it

was categorically held that the assessee did not have to develop the entire port

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or project in order to qualify for exemption u/s 80IA of the Act and that should

not be an intention and expectation of legislature to legislate a condition

impossible of compliance.

35. Turning to the facts and circumstances of the present case, we note the ld.

AR has contended that at the instance of the AO, the assessee submitted various

replies to the queries of the AO including reply dated 28.12.2011(PB page 187

to 193) wherein it was submitted that as per requirement of section 80IA(4)(i)

of the Act the assessee company is a special purpose vehicle (SVP) company

incorporated and registered in India and it has entered into a concession

agreement with a statutory body i.e. Taj Expressway and Industrial

Development Authority (TEA) constituted under the UP Industrial

Development Act, 1976 and has also started its operation from April 5, 2007,

therefore, the condition laid down in clause (c) is wholly satisfied. Ld. AR

further pointed out that u/s 80-IA (4)(i) of the Act, deduction is available even

to an enterprise only developing the infrastructure facility. Ld. AR further

explained that an enterprise not operating and maintaining the infrastructure

facility but only developing the same is also eligible for exemption u/s 80IA of

the Act. The ld. AR also pointed out that if a view is taken that as per clause (c)

of section 80IA(4)(i) of the Act, the deduction is available only after the

enterprise starts “operating and maintaining” the infrastructure facility, the

enterprise only developing such infrastructure facility would never be eligible

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for any deduction under this section, because after completion of only

development of infrastructure facility, such an enterprise would never “operate

and maintain” the infrastructure facility.

36. Ld. AR, reiterating its earlier arguments submitted that it is a well settled

position that the beneficiary provisions in the taxation statutes should be

interpreted in such a manner so it subserves the purpose for which it is enacted

and does not frustrate the object behind the statute and its purpose.

Accordingly, ld. AR submitted that in order to fulfil the purpose of section

80IA(4)(i) i.e. to make even income from development of infrastructure facility

eligible for deduction u/s 80-IA(4)(i) of the Act, clause (c) of the same

provision of the Act should be read as “has started or starts developing or

operating or maintaining or developing, operating and maintaining the

infrastructure facility on or after 1st day of April 1995.”

37. Ld. AR strenuously contended that if clause (c) is interpreted in the

manner as adopted by the ld. CIT, the it would be interpreted to cover the cases

only relating to operation and maintenance of the infrastructure facility, the

entire reason and purpose for amending section 80IA(4)(i) to separately allow

deduction for development of infrastructure facility would lose its purpose.

38. Having heard arguments of both the sides and after having gone through

relevant material placed on record, written submissions, gist of case laws relied

by both the parties, we note that the main controversy in this case is mainly that

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the assessee is claiming that as per objects of the company, concession

agreement and main activities of the company, the company developed a toll

road between Noida and Agra and his claim for deduction falls on four corners

within the ambit of clause (a) of Explanation to section 80IA(4)(i) of the Act.

Per contra, the main contention of the ld. CIT, Noida is that the assessee

developed “a highway project” which was inaugurated on 9.8.2012 by Hon’ble

Chief Minister, Government of UP which falls under clause (b) of Explanation

to section 80IA(4)(i) of the Act and said period is related to financial year 2012-

13 pertained to AY 2013-14 and since the project of the assessee had not started

its operation in the period related to AY 2009-10, therefore, the AO wrongly

allowed the claim of the assessee.

39. Ld. AR submitted that the assessee company was incorporated under the

Companies Act 1956 as a special purpose vehicle (SPV) on 5.4.2007 for

developing, operating and maintaining the toll road between Noida and Agra

along with service road and associated structures with rights to collect toll

during the concession period and also given rights for sub-lease/development of

land as an integral part of Expressway project. Ld. AR further submitted that

Taj Expressway Industrial Development Authority (TEA) was constituted by

Government of UP vide Notification No. 697/77-4-2001-03(N)/2001 dated

24.04.2001 under UP Industrial Area Development Act 1976 which invited

offers from interested parties of national and international stature on 14.5.2001

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for development/operation and maintenance of six lane access controlled

Expressway.

40. Ld. AR further submitted that M/s Jaiprakash Associates Ltd. (JAL)

(formerly known as Jaiprakash Industries Ltd.) was declared the successful

Bidder as the Concession Period offered by it was lowest i.e. 36 Years. Ld. AR

further submitted that as per the directions of Inquiry Commission headed by

the former Hon’ble Judge of High Court of Patna and Calcutta, the TEA and the

JAL incorporated Special Purpose Vehicle (SPV) viz. Jaypee Infratech Limited

the assessee company, for development operation and maintenance of 6 lane

access controlled Expressway by way of execution of an Assignment

Agreement for the purpose of assigning the assignment of the Concession

Agreement in the name of assessee company i.e. Jaypee Infratech Limited (JIL)

on 19/10/2007. The ld. AR also pointed out that to implement all the objects of

the Concession Agreement dated 7/2/2003 between Jaiprakash Industries Ltd.

(now Jaiprakash Associates Ltd.) and Taj Expressway Industrial Development

Authority (TEA), the assessee company was formed as a Special Purpsoe

Vehicle (SVP) on 5.4.2007 and after incorporation of assessee company, the

said assignment agreement (supra) was also executed on 19/10/2007.

41. Elaborating objects and project details, the ld. AR submitted that the

concept of the Taj Expressway project was an outcome of the Policy decision

of the Government of U.P. under the statute called U.P. Industrial Area

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Development Act, 1976 (U.P. Act No of 1976) and in exercise of the power as

vested under section 3 of the said Act, the Government of UP constituted an

Implementing Authority namely, "Taj Expressway Industrial Development

Authority" (TEA) just prior to launching the project viz. the expressway

connecting Noida with Agra was about 160 Kms of length and it was to pass

through the virgin area of UP State along the Yamuna River.

42. Ld. AR further submitted that the TEA has granted rights of land

development ofn25 million sq. mtrs land provided to the assessee on lease for

the period of 90 years, along the proposed 100 meters wide Expressway for

commercial, amusement, industrial, institutional and residential development.

Ld. AR pointed out that the TEA provided the "land for development" along the

Expressway at five or more locations of which one location was in Noida or

Greater Noida with an area of 5 million sq. mtrs. The aforesaid land for

development was in addition to the land for construction of Expressway and

was an integral and inseparable part of the infrastructure facility project. Ld. AR

also contended that the land for expressway and land for development was made

available by the TEA for the assessee company at the consideration of cost of

acquisition plus Rs.100 per hectare per year lease rent and the assessee

company was not given any title right on the land used for expressway which

was agreed between the parties of the Agreement to be returned after expiry of

concession period of 36 years.

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43. Ld. AR elaborating the consideration for infrastructure facility submitted

that the assessee company was entitled to collect and retain the Fee or toll from

the users of the Expressway for concession period of 36 years and amounts

from the rights to further lease out the developed/undeveloped land (at five or

more locations with an area of 5 million sq. mtrs. per land parcel) to sub-

leases/end-user out of the land provided by the TEA to the assessee. Ld. AR

further submitted that the toll fee to be charged from the customers was not to

exceed the fee as may have been notified by Government of UP. Ld. AR

strongly pointed out that the "Land for Development" is actually a consideration

like the toll fee since the toll fee alone would not have been able to ensure

positive return on equity on the Project.

44. Ld. Counsel has also drawn our attention towards decision of Hon’ble

Supreme Court of India dated 8.9.2010 in Civil Appeal No. 7468 of 2010

Nand Kishore Gupta & Others vs State of UP with other civil appeals and

submitted that a public interest litigation was filed with an allegation of

inadequate consideration of acquisition of land which was dismissed by Hon’ble

Supreme Court by holding that the expressway is a work of immense public

importance and creation of land parcels by way of land development along with

expressway would give impetus to the industrial development of the state

creating more jobs and helping the state economy and thereby helping the

general public. Ld. AR has further drawn our attention towards findings of the

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Inquiry Commission headed by Hon’ble Former High Court Judge, and

submitted that Inquiry Commission also held that it was necessary to strengthen

economic viability of the project by some mechanism and, therefore, it was

decided to provide 2500 hectare of land for development to the successful

bidder along with the proposed expressway. Ld. AR also added that the inquiry

commission held that the Taj Expressway, being a landmark event in the

industrial development of state of UP, is of immense public utility and also in

the national interest. Ld. AR specially pointed out that there is no obligation on

the assessee company under the concession agreement to carry out housing

activities on the land for development which is a narrow area and land for

development was given along the proposed the 100 metre expressway, for

industrial, commercial, institutional, amusement and residential development to

the assessee company.

45. Ld. AR also again took us to the provisions of section 80-IA of the Act

and submitted that the deduction u/s 80IA(1) is to be given on profits and gains

derived from an undertaking or enterprise from any business referred to in sub-

section 4 i.e. eligible business and the word “business” is wide enough to cover

within its scope all activities that are “integral part” of the business of toll road

development. Ld. AR also submitted that it was the income from business

undertaking which is to be deducted and not only the income or revenue from

toll fee. Placing reliance on the decision of Hon’ble Delhi High Court in

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Dharam Pal Prem Chand Ltd. 317 ITR 353 (Del.) and another decision in

the case of CIT v. Eltek SGS P. Ltd. 300 ITR 6 (Del.) submitted that the

term “income from business” would include all income emanating from the

same.

46. Ld. AR turning to the facts of the present case submitted that any income

arising from such land, allotted to the assessee for development, would also be

regarded as income derived from the business of development, operation and

maintenance of the infrastructure facility i.e. the toll road and it is that income

which the assessee company has claimed as deduction under clause (a) of

explanation to section 801A(4)(i) of the Act, during the assessment year under

consideration. Ld. AR also submitted that the word 'business' is wide enough to

cover within its scope the profits from all activities that are integral part of the

business of toll road development which obviously falls under clause (a) of

Explanation to section 80IA(4) of the Act and the same would be exempt from

tax. Ld. AR has further pointed that the assessee company is in the business of

developing, operating and maintaining “road including toll road” which was

commenced on 5.4.2007, therefore, the conditions laid down in clause (c) of

sub-section 4(i) of section 801A is satisfied in the present case and accordingly,

the deduction under section 801A ought to be allowed to the Assessee Company

and the view taken by the AO while granting exemption to the assessee is a

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plausible and reasonable view which cannot be said to be a view erroneous or

prejudicial to the interest of revenue and unsustainable in law.

47. Ld. AR reiterating its written submissions vehemently contended that

case of the assessee is covered by section 80IA(4)(i) r/w clause (a) of

explanation thereto, as we are developing, maintaining and operating

infrastructure facility as defined in the said explanation (a) as “road including

toll road”. Ld. AR elaborating the financial rights and obligations on the

assessee company submitted that the development rights on the land and income

therefrom are integral and inseparable part of the consideration to the assessee

company in respect of facility involved being toll road the rider created in

section 80IA(6) apply to the infrastructure facility entity that fall in the

definition of “highway project including housing or other activities being an

integral part of the highway project” as defined in clause (b) of explanation to

section 80IA(6) of the Act. Ld. AR vehemently contended that the restriction

imposed by the legislature u/s 80IA(6) is not applicable to the assessee company

and the limits and requirement in the said section apply to “highway project” as

defined in clause (b) of explanation to section 80IA(4)(i) of the Act and not to

the “road including toll road” as mentioned in clause(a) of Explanation to

section 80IA(4)(i) of the Act, including integral and inseparable part of the

development rights and income therefrom on the land given to the assessee

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company for development as major part of consideration for the infrastructure

facility project.

48. Ld. AR also submitted that the assessee company is eligible for

exemption under clause (a) of Explanation 80IA(4)(i) of the Act, the assessee

company, without prejudice to the aforesaid contentions, have also made an

alternative claim u/s 80IA(6) of the Act, that if it is concluded that the assessee

company is not eligible for exemption under clause (a) of explanation, then the

assessee company may be considered eligible under clause (b) of explanation to

section 80IA(4) of the Act. Ld. AR further pointed out assessee’s Paper Book

page no. 79 and tax audit reports and submitted that the business of the assessee

company is that the assessee company is engaged in development, operation and

maintenance of six lane access controlled Expressway along with service road

and associated structures and sale/development of leasehold land provided by

TEA for development along the proposed expressway. Ld. AR has also drawn

our attention to assessee’s paper book page no. 85 and submitted that as per

auditor’s report, form no. 10CCB for AY 2009-10, the assessee company’s

business was development, operation and maintenance of six lane access

controlled Expressway between Noida and Agra along with service road and

associated structures and sale/development or leasehold land along with the

proposed Expressway.

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49. Precisely, the contentions of the appellant company are that the assessee

has entered into a contract with TEA for development of a expressway and

development of 25 million sq mtr land adjacent to expressway which is a “toll

road” as the assessee was granted right to collect toll/ fee from the users of

expressway, therefore, the assessee is entitled for exemption under clause (a) of

explanation to section 80IA(4)(i) of the Act. It is also the contention of the

assessee company that the assessee is in the business of developing, operating

and maintaining “road including toll road”, for which the business has

commenced on 5.4.2007, therefore, the operation and maintenance of such road

had started after 1.4.1995, accordingly, the condition laid down in clause (c) of

sub-section 4(i) of section 80IA of the Act is satisfied in the assessee’s case and

exemption under clause (a) of Explanation to Section 80IA(4)(i) of the Act was

rightly allowed to the assessee.

50. The precise reply and contentions of the revenue is that the assessee’s

business activities fall under clause (b) of explanation to section 80IA(4)(i) of

the Act i.e. “a highway project including housing or other activities being an

integral part of the highway project”. The ld. CIT DR further contended that

since the assessee company has not commenced business operations during the

year under consideration and the assessee has begun to operate infrastructure

facility w.e.f. 9.8.2012, when the expressway was inaugurated, hence, prior to

this date, the assessee had earned only profits which are attributable to sale of

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land which was transferred to it in the terms of concession agreement, therefore,

the assessee would be eligible for deduction u/s 80IA only w.e.f. AY 2013-14.

On this issue, it was also contended by the ld. CIT DR that in respect of an

assessee claiming to be engaged in building infrastructure facility in the nature

of a highway project including housing and other activities being an integral

part of the highway project, the profits arising from housing and other activities

would be exempt from tax under sub-section (6) of the section 80IA. Further,

the manner in which the profits of housing and other activities are to be

computed for the purpose of sub-section (6) are specified in rule 18BBE of the

IT Rules, 1962 which mandates the maintenance of separate books of accounts

for the activities of housing and other activities and also requires the submission

of a certificate specifying the amount so credited to the reserve account and the

amount utilized during the relevant previous year for highway project and it was

also required that such certificate is to be furnished in Form 10CCC which

should be submitted along with return of income.

51. Ld. AR also placed a rejoinder to the above submissions of the ld. CIT

DR that the concession agreement was executed for development of expressway

and development of road. Ld. AR has further drawn our attention towards

assessee’s paper book page 180 to 184 and submitted that it was clarified before

the AO that in consideration of the assessee, in agreeing to develop, design,

engineer, finance, procure and construct toll road, the assessee has been granted

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right for land development of 25 million sq mtr of land in addition to the right to

collect “toll fee” and the revenue/profits generated from sub-leasing of the

plots/land earned by the assessee company or the income derived from the

“business” of development of road also covers within its scope the profits from

all activities that are integral part of the business of the road development. Ld.

AR also invited our attention towards Form No. 10CCB r/w auditor’s certificate

under Rule 18BBB that the assessee is certified to be engaged in developing,

operating and maintaining the infrastructure facility which is certified to be

“road including toll road”.

52. On careful consideration of above rival submissions, we note that firstly it

would be just and proper to consider the meaning of the “highway”,

“Expressway”, “Toll”, “Toll gate”, “toll plaza” and “road including toll road”

which are being repeatedly used by both the sides during arguments. We may

point out that these words have not been defined in Income Tax Act and neither

the ld. AR nor ld. CIT-DR has placed any reference of meaning to the above

stated terms. Therefore, we are compelled to refer available dictionaries to

properly understand the appropriate meaning of these terms/words for proper

adjudication of actual aspects of this case, which read as under:-

(A) Highway - a public road that everyone has right to use (Ref.

Chamberlain dictionary, First Indian Edition 2001 at page 635)

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- A public road especially an important road that joins cities

or towns together (Ref. Cambridge Dictionary, low price

edition 1996 at page 669)

(B) Expressway - a major road for fast moving traffic, especially

with three lane per carriageway and limited access and exit points

(Ref. Chamberlain dictionary, first Indian edition 2001 at page 462 &

892.)

- A wide road built for fast moving traffic travelling long

distances with a limited number of points at which drivers

can enter and leave it. (Ref. Cambridge dictionary, low

price edition 1996 at page 485)

(C) Toll - a charge payable to use of a bridge or road (Ref. Concise

Oxford Dictionary, at page 1507)

(D) Toll gate - a barrier across a road where a charge must be paid to

proceed further (Ref. Concise Oxford Dictionary, Edition at page

1507).

- A gate at the start of a road or a bridge at which you pay an

amount of money in order to use the road or bridge.

(Cambridge Dictionary, low price edition 1996 at page

1533)

(E) Toll Plaza - a row of toll booths on a toll road (Ref. Concise Oxford

Dictionary edition at page 1507)

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(F) It is pertinent to note that “Toll plaza” has also been defined at page 9

of the concession agreement as structures and barriers erected on the

Expressway. For the purpose of regulating the entry/exit of vehicles

in accordance with the provisions of this Agreement.” The word

“Tolling contract” has been also defined at page 9 of the agreement as

the contract, if any, entered into by the concessionaire i.e. assessee

with tolling contractor for operation of “Toll Plazas”, including

collection of fees for and on half of the concessionaire.”

53. In view of above referred definitions, in our humble understanding, a

“highway” is a public road that everyone has right to use; an “Expressway” is

major road for fast moving traffic with three lane per carriage way, meaning

thereby both way six lane, with controlled limited access and exit points;

whereas a “Toll” is a fee or charge payable to use of a road or bridge; Tollgate”

is a gate at the start of a road or bridge at which user pays an amount of money

(toll). For the use of road or bridge; and “Toll plaza” is a row of toll booths on

a toll road.

54. Turning to the facts of the present case, we may note that in the

concessionaire agreement the words, “highway” and “toll road” have not been

used and the word “Expressway” has been used several times which has been

defined at page 6 of the agreement as the access controlled 6-lane Expressway

between Noida and Agra with service roads and associated facilities and on the

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same page 6 of the agreement the word “Fees” has also been defined as “Fees

means the charges levied on and payable for vehicles using the Expressway in

accordance with the fees as may be settled under this agreement.” The

cumulative meaning of these words used in definitions and other stipulations of

the agreement make it vivid that there was a contract between assessee company

and the TEA for developing, operating and maintaining a six lane controlled

access Expressway with limited access and exit points between Noida and Agra

and a fees/toll was payable to assessee company for vehicles using the

Expressway at toll plazas i.e. at row of toll booths on toll road.

55. Ld. DR placing reliance on the decision of Hon’ble Supreme Court in the

case of Ishikawaijima Harima Heavy Industries Ltd. vs DIT, Mumbai

(2007) 288 ITR 408 (SC) submitted that the object of the contract in question

may be inferred from the stipulation and terms and conditions of the contract

and as per intention of the parties to the contract, any other meaning or intention

can not be given to the contract and the agreement (supra) between the assessee

company and TEA is intended to develop, operate and maintain a “toll road”,

therefore, the AO took a reasonable and plausible view in allowing exemption

u/s 80IA(4) of the Act.

56. The relevant operative part of decision of Hon’ble Supreme Court in the

case of Ishikawaijima Harima Heavy Industries Ltd. (supra) reads thus:-

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“In constructing a contract, the terms and conditions

thereof are to be read as a whole. A contract must be construed

keeping in view the intention of the parties. No doubt, the

applicability of the tax laws would depend upon the nature of the

contract, but the same should not be construed keeping in view

the taxing provisions.”

57. On the basis of foregoing discussion, we are of the considered opinion

that the business activities of the assessee company fall within the ambit of

clause (a) of Explanation to section 80IA(4)(i) of the Act. We decline to agree

with the ld. CIT-DR that the assessee is engaged in the development of

infrastructure facility of a “highway including housing or other activities being

an integral part of the highway project”.

58. Although the ld. AR has also placed an alternative claim u/s 80IA(6) but

in view of our observations and findings, as set out above, the alternative said

claim of the assessee and objections of ld. CIT DR about non-compliance of

requirement of sub-section (6) of section 80IA of the Act becomes academic

and infructuous and we refrain ourselves to deliberate further on the alternate

claim of the assessee as well as legal objections of ld. CIT DR.

59. Now reaching to next issue that whether the assessee company is eligible

for exemption u/s 80IA(4)(i) of the Act for its income from sale/sub-lease of

land for assessment year under consideration viz. 2009-10, ld. DR, at the very

beginning, submitted that the AO granted exemption under clause (a) of

explanation to section 80IA(4)(i) of the Act not only in AY 2009-10 but the

same deduction under similar set of facts and circumstances was also granted to

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the assessee for AY 2010-11. Ld. AR placing reliance on the decision of

Hon’ble Supreme Court/High Court in the case of Ishika (supra) submitted that

the meaning and object of a contract can only be understood by the contents of

contract and the intention and purpose of the contracting parties and no

authority including taxing authorities are allowed to interpret the contract in

arbitrary manner which goes beyond the contents of the contract and intention

of the contracting parties.

60. Ld. AR further contended that the assessee company entered into any

concession agreement with TEA for development of an Expressway between

Noida and Agra and assessee was given a right to collect toll/fees from the users

of Expressway, hence, Expressway was actually a toll road. Ld. AR further

pointed out that the assessee company, in addition to collection of toll right, was

also granted 25 million sq. Meter land for development on cost of acquisition

plus lease premium of Rs. 100/- per hectare per annum and in turn the assessee

company was under obligation to develop, design, engineer, frame, procure and

construct toll road and hence, the income from sale/development of land was

indeed income derived from “Business” of development of road and would be

eligible for deduction.

61. Ld. AR, reiterating assessee’s arguments and submissions before AO vide

letter dated 21.12.2011, submitted that the consideration for developing,

operating and maintaining the said infrastructure facility is provided, inter alia,

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by way of right to develop and sub lease the adjoining land allotted to assessee

is evident from concession agreement executed between assessee and the TEA

and relevant extracts, conditions and clauses clearly demonstrate that the

assessee was under obligation of development, operation and maintenance of

the Expressway and development of 25 million sq. Metre land along the

proposed Expressway for commercial, industrial, institutional, amusement and

residential development. It was also explained that as per concession

agreement, the assessee company was under obligation to pay cost of

acquisition plus lease rent of Rs.100/- per hectare per annum for the land

proposed to be used for construction of Expressway and also for the 25 million

square Meter land for development along the proposed expressway at five or

more locations. Ld. AR further explained that the assessee was not granted any

title over the Expressway and land used for construction of Expressway except

right to collect toll/fees as prescribed by Govt. of UP from time to time only

during concession period of 36 years and assessee was granted land for

development with right to further sub-lease developed or undeveloped land to

sub lessees or land users.

62. Ld. DR has further drawn our attention towards Chapter IV of concession

agreement clauses 4.3(d), 4.4 and 4.5 and submitted that the object of the

infrastructure scheme can be seen from the global tender notice inviting offers

to show that the infrastructure facility as envisaged was road including toll road

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along with development of infrastructure for commercial, industrial,

amusement, residential and institutional development. Further, the land was to

be offered on acquisition cost on lease for 90 years by the TEA and the

development of the said land and works thereon was a means for compensation

and consideration to the infrastructure developer i.e. the assessee in view of the

same. It was an obligation on the assessee towards the objective of the

infrastructure development and as source of funds for meeting the investment

involved in the project. Ld. AR vehemently contended that in view of above

facts, the revenue/profits generated from sub-leasing of plots/land earned by the

assessee are definitely an income derived from the “Business” of development

of road and would be eligible for deduction. Ld. AR pointed out that the

development of land was an integral and inseparable part of the business of road

development due to its inextricable proximity with financial viability of the

project and the word “Business” is wide enough to cover within its scope the

profits from all activities that are integral part of road development. To support

assessee’s claim, ld. AR also pointed out that since sub-lease of plots is made

pursuant to the rights granted under the concession agreement, therefore, the

income earned from sub-lease of land plots is the income derived from

“Business” of road development and hence, the same eligible for exemption u/s

80IA(4)(i) of the Act because the assessee started its business operations from

5.4.2007 onwards.

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63. Ld. AR has again drawn our attention towards submissions of the

assessee dated 23.12.2011 before the AO and submitted that the income from

sub-lease of land for development is income derived from the business of

infrastructure facility. Ld. AR further illustrated that in case the assessee had

received a sum of money as consideration from the state government, then

undisputedly the said sum of money would be income from the business of

infrastructure facility and if instead of a sum of money, the assessee has been

allotted land for development with related rights and obligations, then obviously

the income on sub-lease of the land is just a sum of money in kind on its

realisation and is income from the business of said infrastructure facility. Ld.

AQR further contended that the said income from sub lease of land has been

utilized for developing the infrastructure facility and same was actually utilized

during the relevant financial year for infrastructure facility project and the

overall cost/capital expenditure was for exceeding from the income derived

therefrom and as such there was no taxable income.

64. Ld. CIT DR replied in her written submissions that the clause (b) of

Explanation to section 80IA(4)(i) of the Act refers to a “highway project

including housing or other activities being an integral part of the highway

project” is applicable to the extant case and so sub section (6) states that

notwithstanding anything contained in sub-section (4) of section 80IA of the

Act, where housing and other activities are integral part of the highway project

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and the profits of which are computed on such basis and manner in which the

profits of housing and other activities are to be computed for the purpose of sub-

section (6), are specified in Rule 10BBE. The said Rule mandates maintenance

of separate books of accounts for the activities of housing and other allied

activities and further submission of an auditors’ certificate in Form 10CCC is

required certifying that the amount of income was credited to reserve account

and the said amount was utilized during the relevant previous year for the

highway project. Ld. CIT DR strenuously contended that when it is apparent

from the concession agreement and other relevant facts that in respect of an

assessee claiming to be engaged in building and infrastructural facility in the

nature of a highway project including housing and other activities being an

integral part of the highway project, the profits arising from housing and other

activities would be exempt from tax under sub-section (6) of section 80IA of the

Act whereas the profits arising exclusively from highway project would be

admissible for deduction u/s 80IA(i) r/w sub-section (2) and (2A) and since the

assessee has not maintained separate books of accounts, has not transferred the

amount of profit from housing and other activities to a special reserve and also

has not submitted a required certificate in Form No. 10CCC to certify the fact

that the amount of reserve has been actually utilized for the highway project

during relevant previous year, therefore, the assessee is not eligible for

exemption u/s 80IA of the Act for income derived during the year under

consideration.

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65. Ld. CIT DR also contended that the assessee has begun to operate the

infrastructure facility w.e.f. 9.8.2012 when the Expressway was inaugurated by

the Hon’ble Chief Minister of UP and hence prior to this date, it had only

earned profits from sale or sub lease of land which was admittedly transferred to

the assessee under terms of the concession agreement and therefore the assessee

would be eligible for deduction/exemption u/s 80IA of the Act only w.e.f. AY

2013-14 (relevant to FY 2012-13).

66. Ld. CIT DR also submitted that without prejudice to the contention that

the claim of the assessee is squarely covered under sub-section (6) of section

80IA of the Act, even if the argument of the assessee that the claim of the

assessee falls under sub-section (4) thereof is accepted, and when the assessee

entered into an agreement with the State Government of UP for “developing,

operating and maintaining a new infrastructure facility and therefore its business

activities squarely falls within clause (b) of Explanation to section 80IA(4)(i)

f/w clause (iii) of the Act and since sub-section (2) of section 80IA categorically

states that the deduction will be admissible “beginning from the year in which

the undertaking or the enterprise develops and begins to operate any

infrastructure facility” no deduction for income generated by activities of such

infrastructure facility and/or any allied activity would be eligible for deduction

in any year prior to the beginning of operations of the infrastructure facility.

Ld. CIT DR also pointed out that as per sub-clause (c) of clause (i) of sub-

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section (4) of section 80IA of the Act, the deduction would be admissible to the

enterprise which “has started or starts operating and maintaining the

infrastructure facility on or after 1st day of April, 1995” and therefore, the

deduction to the assessee which has entered into an agreement for developing,

operating and maintaining an infrastructure facility, under provisions of section

80IA(4) of the Act would be admissible only from the year in which the

operation of facility begins.

67. Ld. CIT DR pressing its written submissions, further argued that in

response to query raised by the AO, the assessee advanced twin arguments,

firstly, referring to the words and language of clause (c) of sub section (4) “it

has started or starts operating and maintaining the infrastructure facility” the

assessee submitted that the expression “starts” covers future events and the

assessee deliberately omitted to refer the last part of clause (c) i.e. after 1st April

1995”. Ld. CIT-DR has drawn our attention towards page 4 of her written

submissions and submitted that the word “started” is intended to cover cases

where the operation and maintenance has commenced prior to 1.4.1995 and

word “starts” is intended to cover cases where the commencement is after

1.4.1995. Ld. CIT DR further pointed out that clause (c) specifies one of the

mandatory conditions of eligibility of deduction and only clarifies that the

projects which have started operation and maintenance prior to the specified

date or after the specified date will be eligible for deduction and clause ( c), in

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no way can or is intended to override the stipulation in sub-section (2) which

mandates availing of deduction, in the cases of eligible projects, only from the

beginning of the operation facility. Ld. CIT DR also pointed out that the

wording of clause ( c) of sub section (4) reiterates the condition of sub section

(2) inasmuch as it makes the start of the operation and maintenance of

infrastructure facility, a prerequisite for the grant of deduction.

68. Ld. CIT DR further drawing our attention towards her written arguments

submitted that the assessee raised second argument before the AO that the

deduction u/s 80IA(4)(i) is admissible also to an undertaking which only

develops the infrastructure facility but does not operate it, therefore, the

admissibility cannot be reckoned with reference to the commencement of

operation. Ld. CIT DR vehemently contended that this argument of the

assessee is not acceptable because the case of the assessee is one in which it has

entered into an agreement for developing, operating and maintaining

infrastructure facility a distinct category of eligible project specifically covered

under sub-clause (iii) of clause (c) of section 80IA(4) of the Act and the

assessee has not entered into an agreement only for developing of infrastructure

facility as envisaged in sub-clause (i) of clause (c) of sub-section (4) and as per

provisions of the Act, the exemption/deduction would be admissible only on the

commencement of the operation.

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69. Ld. CIT DR also tried to lead us to interpret the relevant provisions of the

Act and submitted that the contention of the assessee is not acceptable that the

development of infrastructure facility would not be eligible for exemption if the

commencement of operation of infrastructure facility is accepted as pre-

requisite for exemption as the assessee has not entered into an agreement only

for development of infrastructure facility but for development, operation and

maintenance of infrastructure facility. Ld. CIT DR also submitted that there can

be an instance where an assessee has entered into an agreement with

Centre/State Govt./Statutory Authority only for development of infrastructure

facility and after completion of development, the developer assessee transfers

such facility to another entity and in consideration thereof, receives

consideration and earns profits, then transferor is entitled to deduction arising to

it i.e. transferor entity and for this situation, the statute of the Act provides that

in such cases also, the deduction would be available to the developer and

therefore a provision has been provided to clause (c) of sub-section 4 of section

80IA of the Act.

70. Ld. AR placing rejoinder to the above legal contentions of the revenue,

submitted that the language used in clause (c) is “has started” or “starts”. The

expression “has started” indicates the events which have already occurred

whereas the expression “starts” indicates the events which would occur and

since the assessee is in the business of developing, operating and maintaining

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“road including toll road” which business has commenced on 5.4.2007,

therefore, the condition laid down in clause (c) of sub-section 80IA(4)(i) is

wholly satisfied. Ld. AR, reiterating his arguments before the AO, submitted

that deduction is available even to an enterprise only “developing the

infrastructure facility”, meaning thereby an enterprise not operating and

maintaing the infrastructure facility but only developing the same is also

eligible for deduction u/s 80IA of the Act. Ld. AR also contended that if a view

is taken that as per clause (c) of section 80IA(4)(i) the deduction is available

only after the enterprise starts “operating and maintaining” the infrastructure

facility, the enterprise only developing such infrastructure facility would never

be eligible for any deduction under this section, because such an enterprise

would never “operate or maintaining” the infrastructure facility. Ld. AR

repeated his earlier arguments and submitted that it is a settled legal preposition

that a provisions should be interpreted in such a manner so that it subserves the

purpose for which it is enacted and does not frustrate the same.

71. In our humble understanding, statutory provision should be interpreted in

the light of intention of legislation, heading given to the provision, language

used therein and the context in which the particular proviso of the Act requires

interpretation. The heading given by legislature to section 80IA of the Act

reads as under:-

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“Deduction in respect of profits and gains from

Industrial undertaking or enterprises engaged in infrastructure

development etc. ”

72. Meaning thereby the provisions of Section 80IA of the Act is related to

the deduction in respect of profits and gains from enterprises engaged in

infrastructure development etc. We further note that as per language used

therein sub-section (1) grants deduction in respect of any profits and gains

derived by an undertaking or an enterprise from any business referred to in sub-

section (4) thereof, under sub-section (2) the admissible deduction is 100% of

the profits and gains of eligible business for ten (10) consecutive assessment

years (AY) out of twenty (20) AYs beginning with the AY in which such

undertaking or enterprise develops and begins to operate any infrastructure

facility referred in clause (iii) of sub-section (4).

73. We may further note that sub-section (4)(i) r/w clause (a) and (b) are

related to deduction in respect of the enterprise carrying on business of (i)

developing or (ii) operating and maintaining or (iii) developing, operating and

maintaining any infrastructure facility which fulfils the following conditions:-

(a) It is owned by a company registered in India or by consortium of such

companies;

(b) It has entered into an agreement with Central Government or a State

Government or a local authority or any Statutory Body for (i)

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developing or (ii) operating and maintaining or (iii) developing,

operating and maintaining a new infrastructure facility.

(c) It has started or starts operating and maintaining the infrastructure

facility on or after 1st day of April, 1995. As per proviso to sub-clause

(c) above in case of transfer of infrastructure facility or after 1.4.1999

by an enterprise which developed such infrastructure facility or

transferor enterprise to another enterprise i.e. transferee enterprise

shall apply to the transferee enterprise as if it were the enterprise to

which this clause (c) applies and the deduction form profits and gains

would be available to such transferee enterprise for the remaining or

unexpired period. The above noted meaning of aforesaid provisions is

apparent from the language used therein.

74. Now if we consider the object of legislation, then as we have noted earlier

that as per the heading given to the provision of section 80IA of the Act, the

object of legislation is to provide deduction to the enterprises which are engaged

in infrastructure development etc. It means that the infrastructure development

is the main object of this provision to encourage entrepreneurs to put their

resources and endeavours towards infrastructure development. In sub-section

(2) the words “develops and begins to operate any infrastructure facility” have

been used. We also note that explaining the first and second condition or

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eligibility of deduction is prescribed in clauses (a) and (b) to sub-section (4)(i)

of the Act.

75. Noticeably, sub-section (4)(i) mandates that any Enterprise carrying on

the business of (i) development or (ii) operating and maintaining or (iii)

developing, operating and maintaining any new infrastructure facility will be

entitled for deduction explaining the third condition for eligibility of deduction

whereas in clause (c) to sub-section (4)(i) it has been prescribed that the

enterprise would be eligible for deduction when it started or starts operating and

maintaining the infrastructure facility on or after 1st day of April 1995.

76. Before going further to interpret third condition prescribed in clause (c)

of sub-section (4)(i) as per our humble understanding, we note that the

development is a continuous process which starts from the date of

commencement of business and beginning of the development activities and

comes to an end when development work concludes and thereafter operation

and maintenance thereto is started. When the intention of legislation is that the

entrepreneurs should be encouraged and promoted towards infrastructure

development etc., then it is a positive inference that the legislation intended to

grant deduction for the enterprises which only develops or which operates and

maintains or which develops, operate and maintain infrastructure facility. Our

aforesaid view also finds support from proviso to sub clause (c) to section 80IA

(4)(i) of the Act, wherein it is also provided that if developer of an infrastructure

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facility transfers the same, then the transferee enterprise would also be eligible

for deduction as if it were the enterprise to which this clause (c) applies i.e.

transferor enterprise, meaning thereby the enterprise which only develops

infrastructure facility is eligible for deduction and in case developer transfers

the facility for operation or maintenance to another enterprise then the transferee

would also be eligible to deduction for the remaining or unexpired period as per

sub section (2) or other relevant provisions of the Act. Hence, in view of above

discussion, we may point out that the legislation has categorically adopted the

date of 1st day of April 1995 for mandatory starting or commencement date of

infrastructure facility development and the enterprises which started developing

or starts operating and maintaining infrastructure facility on or after 1str day of

April, 1995 are held to be eligible for deduction u/s 80IA(4)(i) of the Act.

77. We may further observe that the elaborate meaning of collective and

cumulative reading of sub section (2) and (4)(i) mandates three pre-conditions

in clause (i) of sub-section (4) viz. (a), (b) and (c) and it is required for the

enterprise which claim deduction that all three conditions should be fulfilled

simultaneously. If the intention of legislation was the deduction would be

allowed only to the enterprise who develops and begins to operate and maintain

infrastructure facility then it was not required to segregate or mandate the

business of (i) developing or (ii) operating and maintaining or (iii) developing,

operating and maintaining as stipulated in sub section (4)(i) and condition (a)

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and (b) thereto. This interpretation also finds support from proviso to sub-

clause (c) i.e. third condition wherein the transferee of infrastructure facility is

also held to be eligible in the same manner in which the transferor which

developed such infrastructure facility, is eligible for the remaining or unexpired

period of deduction. In this situation, we may safely infer or draw a conclusion

that the intention of the legislation is to grant deduction not only to an enterprise

which develops, operates and maintains but also to an enterprise which only

develop infrastructure facility. We, therefore, decline to acceptance

interpretation of section 80IA of the Act as given by ld. CIT DR in her written

submissions placed before us during arguments.

78. We further consider the contention of the ld. AR that the company started

and began to operate its business activities from 5.4.2007 and irrespective of the

fact that the infrastructure facility was formally inaugurated by the Hon’ble

Chief Minister of UP Government on 9.8.2012, the assessee is eligible for

deduction w.e.f. AY 2009-10 (relevant to Financial Year 2008-09) and onwards

as and when business activities of developing infrastructure has begun, then

income derived from business would be certainly eligible for deduction. Ld.

AR has also contended that the activity of sub lease or sale of land for

development, which was received by the assessee as a major part of

consideration of project, is an integral and inseparable part of main business

activity of development of infrastructure facility, therefore, income/profits

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derived during AY 2009-10 from sub-lease of land are the first degree

operational profits of the business which is eligible for deduction u/s 80IA(4)(i)

read with Explanation (a) thereto.

79. Since we have already held that the assessee company is in the business

of development of “road including toll road” infrastructure facility and the

enterprises which only develops infrastructure facility are eligible for deduction

u/s 80IA(4)(i) of the Act from the date when it begins to operate its business

activity of development of infrastructure facility. Ld. CIT DR could not

demolish these contentions of the assessee including the contention that the

business operations of eligible enterprises visualises the development of

infrastructure facility. When development activities come to an end or

completed and such activity begins to facilitate the intended users, the act of

operation and maintenance starts only after creation of entire or part

development of infrastructure facility as per requirement. Further, the

development work may spread over years which falls under several assessment

period/years and if the beneficiary is expected to complete the project or

completion of project is considered to be a pre-condition for deduction, then the

eligible developing enterprise will have to wait till completion of the entire

project during whole development period, which may have spread over several

years, for want of this impractical condition. In this situation, the eligible

enterprise would become eligible only in the last year of development wherein

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development work ends and infrastructure facility begins to operate, this

certainly can not be an intention of the beneficial taxation legislation.

80. We further decline to accept the contention of ld. CIT, Noida and ld. CIT

DR that since the assessee has not maintained separate books of accounts and

has not created a reserve as required in Rule 18BBC and has not field required

utilization certificate in Form 10CCC, therefore, the assessee is not entitled for

deduction u/s 80IA(4)(i) of the Act as the sale of land or other activities being

integral part of its highway project because since by earlier part of this order,

we have held that the assessee is in the business of development of

infrastructure facility of “road including toll road” and the assessee activities

fall within the ambit of clause (a) of Explanation to sub-section (4)(i) of section

80IA of the Act and allegations and conclusion of ld. CIT, Noida are contrary to

the facts and circumstances of the Act.

81. In view of foregoing discussion, we are of the considered view that the

beneficial taxation provisions deserve a liberal interpretation which actually

subserve the very purpose and object of the legislation and does not defeat or

frustrate the same as has been held in several decisions and orders of Hon’ble

Supreme Court and High Court including decision in the case of Hon’ble Apex

Court in the case of CIT vs Vatika Township Ltd. 367 ITR 466 (SC).

82. A plethora of judgments of Hon’ble Supreme Court and various Hon’ble

High Courts have firmly laid down the Rule that a provision for deduction,

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exemption, incentives, benefits and relief should be interpreted liberally,

reasonably and in favour of the assessee as observed by the Hon’ble Apex Court

in the judgement in the case of CIT vs. South Arcot City 176 ITR 117 at page

119 (SC). In the judgment of Hon’ble Supreme Court in the case of CIT vs.

Mahindra 144 ITR 225 at page 239 (SC) it was further held that the beneficial

taxation provisions should be so construed as to effectuate the object of the

legislature and not to defeat it .

83. The Hon’ble Supreme Court in the judgment in the case of

Prabhakar P.R. Vs. CIT 284 ITR 549 (SC) held that although the exemption

provisions are to be construed strictly as regards the applicability thereof to the

case of the assessee but once it is found that the same is applicable, the same are

required to be interpreted liberally. As per ratio the judgment of Hon’ble

Madras High Court in the case of AGS Tiber vs. CIT 233 ITR 207

(Madras), the interpretation of beneficial taxing statue should be liberal but

logical. Subsequently, the Hon’ble Supreme Court in the judgment in the

case of Mysore Minerals vs. CIT 239 ITR 775 (SC) also held that the

beneficial provision should be assigned such meaning as it would enable the

assessee to secure benefit intended to be given by the legislature to the

assessee.

84. We are sincerely conscious about our limits that we cannot amend, alter

or modify the statutory provision in any manner and also it would not be

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reasonable or permissible for the court to rewrite the section or substitute the

words of its own for the actual words used by the Legislature in the name of

giving effect to the reposed or supposed underlying object of the statue as

observed by Hon’ble Supreme Court in the case of CIT vs. Budhiraja vs.

204 ITR 412(SC). AT the same time, we respectfully take guidance from the

recent judgment of the full bench of Hon’ble Supreme Court in the case of CIT

vs. Vatika Township Ltd. 3 (supra) wherein, speaking for the constitution bench

of Apex Court, their Lordship held as follows at page 494):

“To attain welfare state is our constitutional goal as well,

enshrined as one of its basic features, which runs through our

Constitution. It is for this reason, specific provisions are made in

the Constitution, empowering the Legislature to make laws for levy

of taxes, including the income-tax. The rationale behind collection

of taxes is that revenue generated therefrom shall be spent by the

Governments on various developmental and welfare schemes,

among others.

At the same time, it is also mandated that there cannot be

imposition of any tax without the authority of law. Such a law has to

be unambiguous and should prescribe the liability to pay taxes in

clear terms. If the conceptible to two interpretations, the

interpretation which favours the sub-established principle of

statutory interpretation, to help finding out as to whether particular

category of assessee are to pay a particular tax or not. No doubt,

with the application of this principle, courts make endeavour to find

out the intention of the Legislature. At the same time, this very

principle is based on “fairness”doctrine as it lays down that if it is

not very levied to a particular class of persons or not, the subject

should not be fastened with any liability to pay tax. This principle

also acts as a balancing factor between the two jurisprudential

theories of justice – Libertarian theory on the one hand and

Kantian theory along with Egalitarian theory propounded by John

Rawls on the other hand.

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Tax laws are clearly in derogation of personal rights and

property interests and are, therefore, subject to strict construction,

and any ambiguity must be resolved against imposition of the tax.”

85. In the shadow of above considerate view if we analyse the facts of the

present case, then we have to hold that the AO took a reasonable and plausible

view that the assessee is eligible for deduction u/s 80IA(4)(i) read with clause

(a) of Explanation thereto. Sub-section (2) also clarifies that the deduction shall

be at the option of the assessee and the assessee is eligible for deduction on the

income earned from sub-lease/sale of land which was provided by the TEA to

the assessee with an absolute right to use it, undisputedly the assessee company

has started its business of developing the infrastructure facility w.e.f. 5.4.2007

and the same was continuing during relevant period pertaining to relevant

assessment year under consideration i.e. AY 2009-10, and if assessee wants to

avail its legal option to claim deduction u/s 80IA(4)(i) of the Act, then the

assessee cannot be denied for the same by following a hyper technical approach

which is contrary to letter and spirit of the beneficial taxation legislation.

Accordingly, issue no. (i), (ii) and (iii), as set out by us, are decided in favour of

the assessee.

Validity of the Action u/s 263 of the Act.

86. On the question (iv) & (v) and (vi) as set out above by us, regarding

examination of validity of issuance of notice, assumption of jurisdiction and

passing of impugned order u/s 263 of the Act, the Ld. AR placing reliance on

the decision of Hon’ble Supreme Court in the case of Malabar Industries Co.

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Ltd. Vs. CIT (supra) submitted that as per 263 of the Act it is clear that the pre

requisite to exercise of jurisdiction by the Commissioner is that the order of the

AO, in question, is erroneous in so far as it is prejudicial to the interest of the

Revenue and the commissioner has to be satisfied with twin conditions, namely,

(i) the order sought to be revised is erroneous; and (ii) prejudicial to the interest

of the Revenue. The Ld. AR, further submitted that when the Assessing Officer

adopted one of the courses permissible in law and it has resulted in loss of

revenue, or where two views are possible and the AO has taken one view with

which the commissioner does not agree, it cannot be treated as an erroneous

order prejudicial to the interest of the Revenue unless the view taken by the AO

is unsustainable in law and the same is found to be passed without application

of mind.

87. Further, placing reliance on the decision of the Hon’ble Gujrat High

Court in the case of CIT Vs. Arvind Jewellers (Supra) submitted that where the

relevant material was on record which was duly considered by the AO and a

reasonable and sustainable view was taken then merely because different view

can be taken, should not have been the basis for invoking the revisionary

powers under the section 263 of the Act. The Ld. AR, further contended that

when a regular assessment is made u/s 143(3) of the Act, a presumption must be

drawn that the order has been passed upon an application of mind and the

Commissioner has to rebut such presumption with the support of some cogent

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material to show that the AO had not applied his mind while passing the

assessment order. To support this preposition, the Ld. AR has relied on the

decision of the Hon’ble High Court of Delhi in the case of CIT vs. Honda Siel

Power Products Ltd. (Supra) and also contended that where the AO adopts one

of the courses permissible in law or where two views are possible and the AO

has taken one of the possible views then the commissioner cannot exercise his

powers under section 263 of the Act to differ with the view taken by the AO,

even if there has been a loss of Revenue.

88. The Ld. AR has further drawn our attention towards assessee’s paper

book from page 93 to 196 and submitted that the AO has made detailed

enquiries and after proper application of mind, has passed assessment order u/s

143(3) of the Act. The Ld. AR further contended that the AO has rightly

allowed deduction u/s 80 IA (4) of the Act for the profits derived from the sale

of land and other income since the same are profits and gains derived from the

business of developing, operating and maintaining of an infrastructure facility

i.e. a road including toll road and from the main business activities carried out

by the assessee during the period under consideration. The Ld. AR, also pointed

out that the land for development which was received by the assessee under

concession agreement, was, in fact, an important part of consideration received

by the assessee for developing, operating and maintaining the toll road and

without earning the revenue from said land, the toll road project would not be

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viable because only collection of the toll from such road would not even meet

the cost of construction of toll road. The Ld. AR strenuously contended that

aforesaid facts were submitted before the AO replying to the queries of the AO

during assessment proceeding through vide replies dated 23.11.2011,

21.12.2011, 23.12.2011, 28.12.2011 & 29.12.2011 and the AO adjudicated his

queries after considering the explanation, replies and documents by way of

passing a note sheet entry consisting of 18 pages. Hence, the AO had made a

detailed inquiry about the claim of deduction u/s 80 IA (4) of the Act before

allowing the same to the assessee. Further, stressing upon the above facts, the

Ld. AR, also contended that in the light of above exercise and detailed enquiry

conducted by the AO prior to allowing the deduction to the assessee, the Ld.

CIT, Noida was not correct in holding that the AO passed assessment order

without making proper enquiry and without application of mind and the same

was erroneous and prejudicial to the interest of the Revenue.

89. Placing reliance on the decision of Hon’ble Gauhati High Court in the

case of Bongaigaon Refinery and Petro Chemicals Ltd. vs. Union of India

(Supra), the Ld. AR contended that the error in the order of the Assessing

Officer and resultant prejudice to the interest of Revenue are twin factors to co-

exist for conferring authority on the commissioner to invoke powers u/s 263 of

the Act. Merely entertaining a different view from the one adopted by the AO,

which is plausible and reasonable, would not clothe the Commissioner with

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power to revise or interfere u/s 263 of the Act. Further, placing reliance on the

decision of Hon’ble Bombay High Court in the case of CIT vs. Gabriel India

Ltd. (Supra), the Ld. AR pressed into service another proposition that if the AO,

while framing assessment in accordance with law, makes certain assessment,

then the same cannot be branded as erroneous unless it is not in accordance with

law, by the Commissioner simply because, according to him, i.e. the

Commissioner, the order should have been written more elaborately, as the

section 263 of the Act does not allow substitution of the order of the AO for that

of the commissioner. On behalf of the assessee, reliance was also placed on the

ratio of the decision of the Hon’ble Supreme Court in the case of CIT vs. Max

India Ltd. (Supra) wherein it was held that since different views existed on the

day when the Commissioner passed the order and the mechanics of that section

had become so complicated over the years, the subsequent amendment of

section 80 HHC of the Act, even though retrospective, would not be attracted.

In this case Hon’ble Apex Court, referring and reiterating the ratio laid down in

its earlier order in the case of Malabar Industries Ltd. (supra), has held that

where two views are possible and the AO has taken one view in the assessment

order with which the commissioner does not agree, then the same cannot be

termed as an erroneous order prejudicial to the interest of revenue unless the

view taken by the AO is “unsustainable” in law.

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90. The Ld. AR, vehemently contended that a plethora of judgments of

Hon’ble Supreme Court and Hon’ble various High Courts have firmly laid

down the rule that a provision for deduction, exemption or relief should be

interpreted liberally and reasonably in favour of the assessee and these

provisions should be so construed as to achieve the object of the beneficiary

taxation legislation and not to frustrate the same. Reliance was placed on the

decision of Hon’ble Supreme Court in the cases of CIT vs. South Arcot Society

176 ITR (SC) and CIT Vs. Mahindra 144 ITR 225 at page 239 (SC).

91. The Ld. AR has also drawn our attention towards recent decisions/

judgment of Hon’ble Delhi High Court in the case of CIT vs. DLF Ltd. (2013)

350 ITR 555 (Delhi), decision of Hon’ble Andhra Pradesh High Court in the

case of Spectra shares and Scrips Pvt. Ltd. (2013) 354 ITR 35(AP) and decision

of Hon’ble Calcutta High Court in the case of CIT vs. J.L. Morrison (India) Ltd.

(2014) 366 ITR 593 (cal.) and submitted that there should be an essential

element of “unsustainability” in the order of the AO, and not mere prejudicial to

the interest of the Revenue or a mere erroneous view, which can be revised u/s

263 of the Act.

92. The Ld. AR, also forwarded a preposition by drawing our attention

towards recent decision of Hon’ble High Court of Delhi in the case of Globus

Infocum Ltd. vs. CIT 369 ITR 14 (Delhi) and submitted that under section 263

of the Act, the Commissioner should take a final decision and not merely set

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aside the assessment order to be made afresh de novo and remanding the matter

for fresh examination is not permissible as the commissioner must reach to a

conclusion and finding that final finding in assessment order was erroneous and

incorrect. The Ld. AR also reiterated his arguments and lastly contended that in

view of several decisions on this issue including decisions of Hon’ble Delhi

High Court in the case of Honda Siel Power Products Ltd. (Supra) , decision of

the Hon’ble Gujarat High Court in the case of CIT vs. Nirma Chemicals Works

P. Ltd. 309 ITR 67 (Gujarat), decision of the Hon’ble Gauhati High Court in the

case of Bongaigaon Refinary (Supra) and decision of the Hon’ble Punjab &

Haryana High Court in the case of CIT vs. Dipak Mittal 324 ITR 411 (P & H )

submitted that jurisdiction cannot be invoked u/s 263 of the Act where two

views are possible and merely because the CIT is not agree with the view

taken by the Assessing Officer does not allow the commissioner to avail valid

jurisdiction to revise the order.

93. To above submissions of the Ld AR, on behalf of the Revenue, the Ld.

CIT- DR, drawing our attention towards last page 7 & 8 of her written

submissions (as reproduced hereinabove), contended that the Ld. CIT in his

order categorically states that “the inescapable and logical conclusions would be

that the assessee ought to have complied with the provisions of sub section (6)

of section 80IA which it has not” and the Ld. CIT also noted that the assessee

had claimed deduction u/s 80IA of the Act on interest income on FDs made by

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deploying its surplus funds in the bank and the same has been erroneously

accepted by the AO. The Ld. CIT- DR, referring to the decision of ITAT

Chandigarh Bench “A” in the case of Vodaphone Essar Ltd. (2013) 153 TTJ

(Chd) 451, contended that where, in a given situation, an identical issue had

been overlooked by the AO and the CIT had invoked the powers available u/s

263 of the Act, it was held the AO had failed to make proper investigation into

the eligibility of the assessee in violation to the claim of deduction u/s 80 IA of

the Act on the business profits, interest and other income received during the

year, therefore, the order of the AO was held to be erroneous and prejudicial to

the interest at the Revenue and the Tribunal upheld the order of the CIT u/s

263 of the Act.

94. The Ld. CIT-DR also pointed out that the Assessee had claimed

depreciation amounting to Rs. 22.97 crores and had been granted by the AO

even while the highway project had not been completed, therefore Ld. CIT

rightly held that the assessment order was patently erroneous and prejudicial to

the interest of the Revenue. The Ld. CIT DR parted with the argument on this

issue with a final submission that the Ld. CIT was quite judicious and correct in

holding that the AO passed an erroneous order inasmuch as he failed to

appreciate the facts of the case, did not apply the correct law to the facts and

circumstances of the assessee company, did not apply his mind to the assertions

made by the assessee and did not even comply with the CBDT circular no.

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1/2006 dated 12.1.2006 and thus, due to these reasons, order passed by the AO

u/s 143(3) of the Act was erroneous and also has the effect of perpetuating

losses in the subsequent years, therefore, the same was also prejudicial to the

interest of the Revenue.

95. The Ld. AR placed brief rejoinder to the above submissions and

contentions of the Ld. CIT-DR and pointed out that the AO made sufficient and

required enquiry about claim of the assessee as the AO raised several queries

during assessment proceedings and the assessee submitted detailed replies

supported by various documents and evidence to show that the claim of the

assessee is sustainable and further, the AO adjudicated the queries by passing a

detailed note sheet vide dated 30.12.2011 and therefore, it cannot said that the

AO did not make adequate, proper and required enquiry while allowing the

claim of the assessee. The Ld. AR also pointed out that the AO took a

reasonable and plausible view which cannot be held as unsustainable by any

stretch of imagination. The Ld. AR finally submitted that the Ld. CIT did not

conclusively hold that the order of the AO is not sustainable and the Ld. CIT is

not empowered to set aside the assessment order, without any conclusion, for

fresh adjudication without any legal cause or basis, hence, impugned order is

not valid and justified.

96. On vigilant and careful reading of section 263 of the Act we may note

that there are four main stages of the power of revision granted to the

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Commissioner under supervisory jurisdiction. Firstly, the Commissioner has

power to call and examine assessment records and for that the commissioner

does not need to show any reason as its part of administrative control to call for

records of any proceeding under the Act, and examine the same. Secondly, the

Commissioner can also consider that any order passed under the Act is

erroneous in so far as it is prejudicial to the interest of the Revenue and for this

purpose, having regard to the stipulation and fabric of language of section 263

of the act it is vivid that the Commissioner may exercise his powers by calling

and examining the records in the manner as indicated above and at this stage of

consideration of the appearance of intended assessee or his representative is not

required and therefore, there is no question or situation for the assessee to

appear, object and making any submissions before the commissioner. We also

note that at this stage after calling for and examining the records, if the

commissioner reaches to a prime facie conclusion that the assessment order is

erroneous and in so far it is prejudicial to the interest of the revenue, then the

third stage of section 263 of the act comes.

97. In our humble understanding of this provision, aforesaid two stages are

purely administrative and the proceeding of the third stage is quasi-judicial and

the same requires the commissioner to discharge his duties as per letter and

spirit of the section 263 of the Act, which reads as under :-

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(1) The Commissioner may call for and examine the record of

any proceeding under this Act, and if he considers that any order

passed therein by the [Assessing] Officer is erroneous in so far

as it is prejudicial to the interests of the revenue, he may, after

giving the assessee an opportunity of being heard and after

making or causing to be made such inquiry as he deems

necessary, pass such order thereon as the circumstances of the

case justify, including an order enhancing or modifying the

assessment, or cancelling the assessment and directing a fresh

assessment.

[Explanation.—For the removal of doubts, it is hereby declared

that, for the purposes of this sub-section,—

(a) an order passed [on or before or after the 1st day of June,

1988] by the Assessing Officer shall include—

(i) an order of assessment made by the Assistant Commissioner

[or Deputy Commissioner] or the Income-tax Officer on the basis

of the directions issued by the [Joint] Commissioner under

section 144A;

(ii) an order made by the [Joint] Commissioner in exercise of the

powers or in the performance of the functions of an Assessing

Officer conferred on, or assigned to, him under the orders or

directions issued by the Board or by the Chief Commissioner or

Director General or Commissioner authorised by the Board in

this behalf under section 120;

(b) “record” [shall include and shall be deemed always to have

included] all records relating to any proceeding under this Act

available at the time of examination by the Commissioner;

(c) where any order referred to in this sub-section and passed by

the Assessing Officer had been the subject matter of any appeal

[filed on or before or after the 1st day of June, 1988], the powers

of the Commissioner under this sub-section shall extend [and

shall be deemed always to have extended] to such matters as had

not been considered and decided in such appeal.]

[(2) No order shall be made under sub-section (1) after the

expiry of two years from the end of the financial year in which

the order sought to be revised was passed.]

(3) Notwithstanding anything contained in sub-section (2), an

order in revision under this section may be passed at any time in

the case of an order which has been passed in consequence of, or

to give effect to, any finding or direction contained in an order of

the Appellate Tribunal, [National Tax Tribunal,] the High Court

or the Supreme Court.

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Explanation.—In computing the period of limitation for the

purposes of sub-section (2), the time taken in giving an

opportunity to the assessee to be reheard under the proviso to

section 129 and any period during which any proceeding under

this section is stayed by an order or injunction of any court shall

be excluded.”

98. In the light of language stipulations used by the Legislature in section 263

of the Act, at third stage the Commissioner may, after giving an opportunity

being heard for the assessee and after making such enquiry, as he deems

necessary, pass such order as per facts and circumstances of the case including

an order enhancing or modifying the assessment, or cancelling the assessment

and directing the AO for fresh assessment. Meaning thereby, that the

Commissioner must give an opportunity of being heard on the issues raised by

the Commissioner in the notice u/s 263 of the act and it also confers on the

Commissioner the powers to issue show cause to the assessee and to make such

enquiry, as required under the factum and allegations against the assessee and

reply and objections thereto submitted by the assessee, as the Commissioner

deems necessary. The fourth stage u/s 263 of the Act provides that in the order

the Commissioner is empowered to enhance or modify the assessment and if

situation requires he is also empowered to pass an order cancelling the

assessment to direct the AO for framing of afresh assessment.

99. In the light of above stages emerged from the language used in section

263 of the Act and the proposition & ratio of the decisions relied by both the

parties, we proceed to examine the validity of assumption of jurisdiction.

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100. On careful consideration of aforesaid rival contentions of both the sides,

at the very outset, we find it appropriate to go through the paper book filed by

the assessee wherein the AO has raised several queries by way of note sheet

entries and letter dated 16.12.2011, 21.12.2011, 23.12.2011 and 28.12.2011

respectively (paper book page 93-94). We further note that the assessee

submitted various relevant documents, inter alia, concession agreement,

assignment agreement along with its first reply dated 23.11.2011, second reply

on 21.12.2011, third reply on 23.12.2011, fourth reply on 28.12.2011 and last

reply on 29.12.2011 regarding its claim of deduction u/s 80 IA (4) of the Act. It

is also pertinent to note that the AO adjudicated the issue of queries and replies

in regard to said claim by passing a detailed note sheet entry spread over 18

pages, which we are making part of this order, as Annexure – A, for sake of

proper and just appreciation of assessment proceedings, said note sheet entry

clearly shows the deliberations between the AO and the assessee company on

the said issue and adjudication by the AO supporting the allowability of the

claim of deduction to the assessee company.

101. We may further note that by the earlier part of this order, we have held

that the assessee company is into the business of development of infrastructure

facility i.e. which is a toll road as per its operational features and controlled and

chargeable access and exit and the assesses’ claim under clause (a) of

Explanation to section 80IA (4) (i) of the Act is justifiable and plausible as per

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relevant provisions of the Act in the light of the character, facts and

circumstances of the business of the assessee. Hence, we are of the considered

opinion that the prepositions of two views is not applicable to the present case

and even if view posed by the Ld. CIT is analysed then we note that the Ld. CIT

himself has not conclusively decided that the assessees’ claim of deduction falls

under ambit of clause (b) of explanation to section 80IA (4) (i) of the Act.

102. In the case of CIT vs. Gabriel India Ltd. (supra), the Hon’ble Bombay

High Court has held that the power u/s 263 (1) of the Act is in the nature of

supervisory jurisdiction and can be exercised only if the circumstances must

exist to enable the Commissioner to exercise power of revision subsection (1)

of section 263 of the Act viz. (i) the order should be erroneous; and (ii) by

virtue of the order being erroneous and prejudicial to the interest of the revenue.

Speaking for Hon’ble Bombay High Court, their Lordships held that an order

cannot be termed as erroneous unless it is not in accordance with law and if the

AO, acting in accordance with law makes certain assessment, the same cannot

be branded as erroneous by the Commissioner simply because, according to him

(Ld. CIT), the order should have been written more elaborately. Their Lordships

further went on to hold that there must be some prima facie material on record

to show that the tax which was lawfully eligible has not been imposed.

103. In the present case, the AO has raised a number of queries regarding the

claim of the assessee u/s 80IA (4) of the Act which were replied by the assessee

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through detailed submissions supported by relevant documents and other

evidence coupled with several legal propositions and decisions. It is also

pertinent to note that the AO has passed a detailed order / note sheet entry

(enclosed here with this order as Annexure – A for sake of clarity and brevity)

while dealing and adjudication the issue of allowability of the claim of the

assessee for deduction u/s 80 IA (4) of the Act. We may respectfully take note

of the decision of Hon’ble Bombay High Court in the case of Gabriel India Ltd.

(supra) and hold that the order of the AO cannot be held as erroneous merely

because, according to the Ld. Commissioner, the order should have been written

more elaborately in so many words for invoking supervisory provisions u/s 263

of the Act. There must be some prima facie material on the record to show that

the order is unsustainable in law and the tax which was legally eligible has not

been imposed.

104. The ratio of the judgments of Hon’ble Delhi High Court relied by the Ld.

CIT-DR in the cases of Geevee Enterprises Vs. CIT 99 ITR 375 (Delhi) and in

the case of Duggal F. Co. Vs. CIT 220 ITR 456 (Delhi) is that the order of the

AO becomes erroneous because such an enquiry had not been made and not

because there was anything wrong with the assessment order if all the facts

stated therein were assumed to be correct. The Ld. CIT- DR has also placed

reliance, to support impugned order, on the judgments of Hon’ble Supreme

Corut in the cases of Malabar Industries Co. Ltd. vs. CIT 243 ITR 83 (SC) and

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Smt. Tara Devi Aggarwal vs. CIT (1973) 88 ITR 323 (SC) and submitted that

the incorrect application law and ignorance of binding board circular or order

passed without application of mind would render it erroneous.

105. Furthermore, the Ld. CIT-DR placing reliance on the decisions of

Hon’ble Jurisdictional High Court of Allahabad in the case of Jagdish Kumar

Gulati vs. CIT (2004) 269 ITR 71 (All.) submitted that in the assessment order

passed vs. 143(3) of the Act it is expected that the AO will make a detailed

enquiry to find out correct income of the assessee and not to accept facts placed

by the assessee on their face value. The Ld. AR, pointed out this is a case of an

assessee who was the owner of a number of properties and the order was held

be erroneous and prejudicial to the indirect of the Revenue by holding that the

AO could not find out the correct income from the house property and he also

failed to investigate the investments made by the assessee in construction of a

particular house property. The Ld. AR vehemently contended that the present

case is that wherein proper, detailed and adequate enquiry has been made.

106. The Ld. CIT-DR has also pressed the ratio of the judgments as Hon’ble

Jurisdictional Allahabad High Court in the case of CIT vs. Bhagwandas (2005)

272 ITR 367 (All.) and submitted that if it is found that there was no discussion

in the assessment order regarding the question as to whether the amount of

income shown by the assessee which was being claimed to be exempt, had

actually been earned by the assessee or not then the commissioner had rightly

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initiated the assessment proceedings u/s 263 of the Act as the exemption has

been granted by the AO without any discussion and without application of

mind. The Ld. AR, pointed out that the facts of the present case are not similar

to the case of Bhagwan Das (Supra) as there are detailed queries of the AO and

detailed replied by the assessee followed by detailed note sheet entry

adjudication hence, present case is not case wherein as enquiry has been made

or the claim of the assessee is allowed without any discussions and without

application of mind.

107. The Ld. CIT-DR also pointed out that the Ld. CIT has rightly followed

judgment of ITAT Chandigarh in the case of Vodaphone Essar Ltd. vs. CIT

(supra), as no enquiry or investigation was made by the AO while considering

the admissibility of claim of deduction vs. 80IA of the Act in the hand of

assessee and in the present case also the AO, while adjudicating the claim of

deduction vs. 80IA (4) of the assessee, has not made any inquiry or

investigation and an identical issue had been over looked by the AO and in

these set of facts and circumstances it was held that the AO had failed to make

proper investigation into the eligibility of the assessee in relation to claim

deduction vs. 80IA of the act. The Ld. AR, also contended that the case of

vodaphone (Supra) is the case of no enquiry and in the present case there is

detailed enquiry, hence, facts of the present case are not similar.

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108. On thoughtful perusal and consideration of the judgments relied by Ld.

CIT-DR, we note that the decisions of Hon’ble Delhi High Court in the case of

Gee Vee Enterprises (Supra) and Duggal & Co. (supra) are pertaining to the

situation when there was no enquiry about the issues raised by the Ld. CIT and

the AO failed to make any enquiry regarding claims and details submitted by

the assessee and as such there was no enquiry by the AO and the details and

claims filed along with the return of the assessee were accepted without making

any enquiry. The judgments of Hon’ble Supreme Court in the case of Malabar

Industries Co. Ltd. (Supra) are also related to a situation where the AO had

accepted the entry in statement of account filed by the assessee in absence of

any supporting materials without making any enquiry. Furthermore, the Hon’ble

Apex Court, in the case of Smt. Taradevi Agarwal (supra) held that where an

income has not been earned and is not assessable , merely because the assessee

wants it to be assessed in his or her hands in order to assist someone else who

would have been assessed to a larger amount, an assessment so made can

certainly be erroneous and prejudicial to the interest of the revenue.

109. The judgment of Hon’ble Jurisdictional High Court of Allahabad in the

case of Jagdish Kumar Gulati, (supra) as relied by the Ld. CIT-DR, is the case

of a property owner wherein the assessing officer could not find out the correct

income from House property and also failed to investigate investment made by

the assessee in construction of a property and the facts and details of the

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assessee were accepted by the AO on face value, hence, it was held that the

order is erroneous and prejudicial to the interest of the Revenue. Further, from

the another judgment of Hon’ble High Court of Allahabad, as relied by Ld.

CIT-DR, in the case of Bhagwandas (Supra) we note that the order of the

commissioner passed u/s 263 of the Act was upheld in a peculiar situation

wherein the assessing officer passed an order without any discussion and

without application of mind and there was no discussion regarding the question

as to whether the amount of income shown by the assessee which was claimed

being exempt had actually been earned by him or not. It is also pertinent to note

that the order of ITAT, Amritsar in the case of Vodaphone (Supra) is also a case

of “no enquiry” wherein the AO finalized the assessment without placing any

document on record as to when the business of the assessee had commenced,

and no enquiry or investigation was made by the AO while considering the

eligibility of the claim of deduction u/s 80IA of the Act in the hands of the

assessee.

110. In view of ratios laid down by the judgments, as relied by the Ld. CIT-

DR and having gone through the facts of these cases, at the outset, we sincerely

note that judgments are the light houses in the path of adjudication of taxation

appeals but we respectfully observe that the benefit of the ratio of the same is

not available to the Revenue as the present case is neither a case of “no

enquiry” nor is a case where the AO, failed to make necessary enquiry and the

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assessment order was passed without any discussion or enquiry and the AO

allowed the claim of the assessee without application of mind and thus, we

respectfully hold that the benefit of the ratio of these orders/ judgments are not

available for the Revenue in the present appeal as the facts and circumstances of

the present case are clearly distinguishable from the facts of these cases and

instant case is not a case wherein the AO passed assessment order without any

enquiry, without application of mind and the AO failed to make proper enquiry.

111. Turning to propositions and ratio of the judgments, as relied by the

assessee, at the cost of repetition, we note that as per land mark decision of

Hon’ble Apex Court in the case of Malabar Industrial Co. Ltd. (supra),

prerequisite for exercise of jurisdiction u/s 263 of the Act is satisfaction of the

AO by twin conditions namely (i) the order of the AO sought to be revised is

erroneous and (ii) it is prejudicial to the interest of the Revenue. It was further

held that where two views are possible and the AO has adopted one of the two

views then the assessment order is not erroneous and prejudicial to the interest

of revenue merely because the Ld. Commissioner is not agree to the view

adopted by the AO. The same view has been reiterated by Hon’ble Apex Court

in the case of CIT vs. Max India Ltd. (Supra) and by Hon’ble High Court of

Delhi in the case of CIT vs. New Delhi Television Ltd. (supra).

112. At this point, the Ld. AR has also pressed in to service the ratio of the

decision of Hon’ble High Court of Delhi in the case of CIT vs. DLF Ltd. (2013)

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350 ITR 555 (Delhi) and submitted that it is not mere prejudice to the Revenue

or a mere erroneous view which can be revised u/s 263 of the Act but also there

should be the element of “unsustainability” in the order of the assessing officer,

which empowers the commissioner to issue notice and to proceed to pass an

appropriate order. On careful reading of the same we note that Hon’ble High

Court has held as under (at page 562) :

“In this case, the record reveals that the Assessing Officer

had issued notice, and held proceedings on several dates (of

hearing) before proceeding to frame the assessment. He added

nearly Rs. 2 crores to the income at that time. The

Commissioner took the view that the assessment order disclosed

an error, in that the deduction under section14 A had not been

made. Now, while the statutory direction to the Assessing

Officer to calculate, proportionately, the expenditure which an

assessee may incur to obtain the dividend income, for purposes

of disallowance, cannot be lost sight of, equally, such a

requirement has to be viewed in the context and circumstances

of each given case. In the present case, it was repeatedly

emphasized that the assessee’s dividend income was confined to

what it received from investment made in a sister concern, and

that only one dividend warrant was received. These facts, in the

opinion of this court, were material, and had been given

weightage by the Tribunal in its impugned order. There is no

dispute that the investment to the sister concern, was not

questioned; even the Commissioner has not sought to

undermine this aspect. Equally, there is no material to say that

apart from that single dividend warrant, any other dividend

income was received. Furthermore, there is nothing on record

to say that the assessee had to expend effort, or specially

allocate resources to keep track of its investments, especially

dividend yielding ones. In these circumstances, it can be said

that whether the deduction under section 14A was warranted,

was a debatable fact. In any event, even if it were not debatable,

the error by the Assessing Officer is not “unsustainable”.

Possibly he could have taken another view; yet, that he did not

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do so, would not render his opinion an unsustainable one,

warranting exercise of section 263.”

113. The Ld. AR has also placed reliance on the decision of Hon’ble Gujarat

High Court in the case of Arvind Jewellers (Supra) wherein it was held thus :

“Held, that the finding of fact by the Tribunal was that the

assessee had produced relevant material and offered

explanations in pursuance of the notices issued under section

142(1) as well as section 143(2) of the act and after considering

the material and explanations, the Income-tax Officer had come

to a definite conclusion. Since the material was there on record

and the said material was considered by the Income-tax Officer

and a particular view was taken, the mere fact that different

view can be taken should not be the basis for an action under

section 263. The order of revision was not justified.”

Hence, as per the preposition and ratio laid down by Hon’ble Gujarat High

Court is that when the assessee had produced relevant material and offered

explanation in pursuance of notices u/s 143(2) and 142(1) of the Act and after

considering the material and explanations, the AO had come to a definite

conclusion. Their Lordship further held that in this situation, since the material

was there on record and the said material was considered by the AO and a

particular view was taken, the mere fact that a different view can be taken

should not be the basis for a valid action u/s 263 of the Act and therefore,

dismissing the appeal of the revenue the Hon’ble High Court held that the order

u/s 263 of the Act was not justified and valid.

114. The Ld. AR also sought support from preposition laid by Hon’ble

Jurisdictional High Court of Allahabad in the judgment passed in the case of

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CIT vs. Shiv Prasad (2011) 12 Taxmann. Com 118 (All.) and submitted that the

proceedings u/s 263 of the act can only be taken in case if the assessment order

is found to be erroneous and prejudicial to the interest of the Revenue and if one

condition does not exist the revisional powers u/s 263 can not be exercised. The

Ld. AR further submitted that as per ratio of the judgment of Hon’ble High

Court of Allahabad in the case of CIT vs. Goyal Private Family specific Trust

(1988) 171 ITR 698 (All.) in absence of specific findings that the assessment

order was erroneous the cancellation of assessment was not justified.

115. The Ld. AR further, placing reliance on the decision of Hon’ble

Jurisdictional High Court of Allahabad in the case of CIT vs. Mahendra Kumar

Bansal (2008) 297 ITR 99 (All.) vehemently contended that merely because the

Assessing Officer had not written a lengthy order, without bringing on record,

specific instances it would not establish that the assessment order passed u/s

143(3)/148 of the Act is erroneous and prejudicial to the interest of the

Revenue. In this case, their Lordship further held that even though, in the

assessment order, there was no mention that the detailed enquiry had been

made nor any evidence had been discussed, yet the returned income was

accepted even then the order was not erroneous and could not be revised u/s 263

of the Act.

116. On behalf of the assessee, it was also contended that the Commissioner,

instead of commenting upon or giving a final finding, simply observed that it

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was possible to take another view then the word “Possible” would indicate that

there was no finding or adjudication by the Commissioner and his observations

were based on mere suspicion and uncertain. The Ld. AR also drawn our

attention to the recent decision of Hon’ble High Court Delhi in the case of

Globus Infocom Ltd. vs. CIT (supra) wherein it was held thus :

“ Thus, in cases of wrong opinion or finding on merits, the CIT

has tocome to the conclusion and himself decide that the order is

erroneous, by conducting necessary enquiry, if required and

necessary, before the order under Section 263 is passed. In such

cases, the order of the Assessing Officer will be erroneous

because the order passed is not sustainable in law and the said

finding must be recorded. CIT cannot remand the matter to the

Assessing Officer to decide whether the findings recorded are

erroneous. In cases where there is inadequate enquiry but not

lack of enquiry, again the CIT must give and record a finding

that the order/inquiry made is erroneous. This can happen if an

enquiry and verification is conducted by the CIT and he is able to

establish and show the error or mistake made by the Assessing

Officer, making the order unsustainable in Law. In some cases

possibly though rarely, the CIT can also show and establish that

the facts on record or inferences drawn from facts on record per

se justified and mandated further enquiry or investigation but the

Assessing Officer had erroneously not undertaken the same.

However, the said finding must be clear, unambiguous and not

debatable. The matter cannot be remitted for a fresh decision to

the Assessing Officer to conduct further enquiries without a

finding that the order is erroneous. Finding that the order is

erroneous is a condition or requirement which must be satisfied

for exercise of jurisdiction under Section 263 of the Act. In such

matters, to remand the matter/issue to the Assessing Officer

would imply and mean the CIT has not examined and decided

whether or not the order is erroneous but has directed the

Assessing Officer to decide the aspect/question.

17. This distinction must be kept in mind by the CIT while

exercising jurisdiction under Section 263 of the Act and in the

absence of the finding that the order is erroneous and prejudicial

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to the interest of Revenue, exercise of jurisdiction under the said

section is not sustainable. In most cases of alleged “inadequate

investigation”, it will be difficult to hold that the order of the

Assessing Officer, who had conducted enquiries and had acted as

an investigator, is erroneous, without CIT conducting

verification/inquiry. The order of the Assessing Officer may be or

may not be wrong. CIT cannot direct reconsideration on this

ground but only when the order is erroneous. An order of remit

cannot be passed by the CIT to ask the Assessing Officer to decide

whether the order was erroneous. This is not permissible. An

order is not erroneous, unless the CIT hold and records reasons

why it is erroneous. An order will not become erroneous because

on remit, the Assessing Officer may decide that the order is

erroneous. Therefore CIT must after recording reasons hold that

the order is erroneous. The jurisdictional precondition stipulated

is that the CIT must come to the conclusion that the order is

erroneous and is unsustainable in law. We may notice that the

material which the CIT can rely includes not only the record as it

stands at the time when the order in question was passed by the

Assessing Officer but also the record as it stands at the time of

examination by the CIT [see CIT vs. Shree Manjunathesware

Packing Products, 231 ITR 53 (SC)]. Nothing bars/prohibits the

CIT from collecting and relying upon new/additional

material/evidence to show and state that the order of the Assessing

Officer is erroneous.

18. It is in this context that the Supreme Court in Malabar Industrial

Co. Ltd. vs. Commissioner of Income Tax, (2000) 243 ITR 83 (SC),

had observed that the phrase “prejudicial to the interest of Revenue”

has to be read in conjunction with an erroneous order passed by the

Assessing Officer. Every loss of Revenue as a consequence of an order

of the Assessing Officer cannot be treated as prejudicial to the interest

of Revenue. Thus, when the Assessing Officer had adopted one of the

courses permissible and available to him, and this has resulted in loss

to Revenue; or two views were possible and the Assessing Officer has

taken one view with which the CIT may not agree; the said orders

cannot be treated as an erroneous order prejudicial to the interest of

Revenue unless the view taken by the Assessing Officer is

unsustainable in law. In such matters, the CIT must give a finding that

the view taken by the Assessing Officer is unsustainable in law and,

therefore, the order is erroneous. He must also show that prejudice is

caused to the interest of the Revenue.”

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117. The Ld. AR also took us through the judgment of Hon’ble Rajasthan

High Court in the case of CIT Vs. Deepak Real State Developers (I) P. Ltd.

(2014) 367 ITR 377 (Raj.) and submitted that where the Commissioner did

neither reject the documents or records to be irrelevant, nor lacking in their

probative worth and he simply remanded the matter to the Assessing Officer

observing that these ought out to have been laid before the AO and should be

examined at the time of assessment then it was held that the order of revision

u/s 263 of the Act was not valid.

118. Continuing with arguments on the validity of assumption of jurisdiction

u/s 263 of the Act, the Ld. AR also brought to our notice the recent decision of

Hon’ble High Court of Delhi in the case of CIT vs. Hotz Industries Ltd. (2014)

49 Taxmann. Com.267 (Delhi) and contended that once inquiries were

conducted and a decision was recorded by the AO, it cannot be said that it was

a case of “no inquiry” and the commissioner must reach to a finding that the

finding recorded by the AO was erroneous, not because no inquiries were

conducted, but because final conclusion in the assessment order was wrong and

untenable or unsustainable in law. The relevant operative para of this order is

reads as follows :

“Commissioner in the order under Section 263 did not go into the

said question on merits, but observed that the “Assessing Officer

it appears” ad not caused any inquiries or investigation, but

accepted the contention of the assessee. Commissioner observed,

“therefore, meaningful inquiry should be conducted”. This does

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not meet the requirement that the decision of the Assessing

Officer should be erroneous. Once inquiries were conducted and

a decision was reached by the Assessing Officer, it cannot be

said that it was a case of no inquiry. In such cases, the

Commissioner must reach a finding that the finding of the

Assessing Officer was erroneous, not because no inquiries were

conducted, but because the final finding was wrong and

untenable.”

119. At this juncture, we further find it appropriate to address rival legal

contentions of both the sides on the issue of revision of assessment order on

other two issues viz. allowbility of deduction on the income earned by the

assessee from interest on fixed deposits of surplus funds with banks and

allowability of depreciation as mentioned in para 15 of the impugned order (as

reproduced hereinabove) of the Ld. CIT, Noida. Firstly, the Ld. AR pointed out

that these two issues were not mentioned by the Ld. CIT in the notice u/s 263 of

the Act, hence, revision on these two issues is not permissible for the

commissioner u/s 263 of the Act. The Ld. CIT-DR pointed out that the assessee

has not taken this ground, hence, the same cannot be entertained. The Ld. AR,

vehemently contended that in all the grounds raised by the assessee specially in

grounds no. 1 the assessee has challenged the validity of assumption of

jurisdiction to issue notice and to revise assessment order u/s 263 of the Act

which obviously covers validity of revision on these issues also, hence, the

assessee has right to elaborate its contentions and allege the impugned order

with this allegation. On careful consideration of above submissions we are of the

considered opinion that the assessee, in its grounds of appeal, has challenged,

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inter alia, validity of the notice, assumption of jurisdiction and impugned order

passed u/s 263 of the Act, hence, the assessee has legal right to question the

validity of revisional action of the of the Ld. CIT in the impugned order on all

four corners specially under Ground no. 7 and other grounds raised before us.

Ground No. 7

120. The ld. AR has drawn our attention to para 15 of the impugned order, as

reproduced hereinabove in para 4 of this order and vehemently contended that

the CIT Noida has disputed only sole issue pertaining to allowability of

assessee’s claim under clause (a) of Explanation to section 80IA(4)(i) of the Act

and in the notice dated 11.3.2014 issued u/s 263 of the Act (supra) but in the

final impugned order passed u/s 263 of the Act dated 30.3.2014, the CIT Noida

has also disputed and revised two more issues in para 15 of the impugned order

viz. issue of interest earned by the assessee by parking its surplus funds in

various fixed deposits accounts in the bank and issue of claim of depreciation

on the project which was yet to be completed in addition to the main issue

which is not permissible. To support above contention, the ld. AR has placed

reliance on the decision of Hon’ble Andhra Pradesh High Court in the case

of CIT vs G.K. Kabra (1995) 211 ITR 336 (AP) and deicison of ITAT Delhi

in the case of B.S. Sangwan vs ITO (2015) 53 Taxman.com 402 (Delhi-

Tribunal) to which one of us (C.M. Garg, JM) was the co-author.

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121. Ld. DR replied that the AO did not examine and verify the issue of

allowability of interest earned by the assessee from parking of surplus funds in

the fixed deposit accounts in the banks and allowed the same. Ld. DR further

contended that the AO has not applied the law u/s 80IA of the Act as only

income derived from any business referred to in sub section (4) is eligible for

deduction under that section and no other income. The ld. DR also contended

that the AO ignored the settled law rendered in the case of Tuticorin Alkalis vs

CIT (supra). The ld. DR also submitted that the AO wrongly allowed claim of

depreciation in computation of income without examining the fact whether the

same was admissible even while the project was still going on and yet to be

completed.

122. The ld. AR, placing rejoinder to the above submissions of the revenue,

replied that it is not open and allowable to the CIT Noida to issue notice on one

and only one reason and revising the assessment u/s 263 of the Act on two more

issues or reasons which were not mentioned in the notice u/s 263 of the Act in

the light of decisions of Hon’ble High Court of Andhra Pradesh and in the case

of G.K. Kabra (supra) and decision of Coordinate Bench of ITAT Delhi in the

case of B.S. Sangwan (supra) and decision in the case of Genesis Colors (P)

Ltd. vs CIT (2014) 42 Taxmann.com 552 (Delhi-Trib). Alternatively, the ld.

AR further submitted that without prejudice to above contentions, on merits it is

considered that the claim of the assessee in regard to interest income and

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depreciation have been processed and correctly allowed by the AO after due

consideration and examination by the AO. The ld. AR placing reliance on the

decision of Hon’ble Bombay High Court in the case of Lok Holding 308

ITR 356 (Bombay) submitted that the business income assessed in respect of

earned bank interest for an assessee engaged in construction business is

business income as this has been earned from parking of surplus funds with the

banks in the course of business. The ld. AR pointed out that the Hon’ble

Bombay High Court has considered the ratio of the decision of Hon’ble Apex

Court in the case of Tuticorin Alkali (supra) and has distinguished the same.

Ld. AR strenuously contended that the claim of depreciation relates to business

being carried on and it was claimed on the assets used for the business and

interest involved emanates from the business of development of infrastructure

facility for the single object company. Ld. AR also submitted that when

business income of the assessee was exempted u/s 80IA(4) of the Act, then why

assessee would assail wrong claim of depreciation. On careful consideration of

above rival submissions of both the parties, at the very outset, we note that the

CIT, Noida has issued notice u/s 263 of the Act (supra), only raising and

disputing the sole issue, the AO allowed exemption to the assessee under clause

(a) of Explanation to Section 80IA(4)(i) of the Act and the assessee was

showcaused on this sole allegation only which clearly show that the notice u/s

263 of the Act was not given on the issues of interest but it is apparent from

page 27 and 28 in para 15 of the impugned order that the CIT, Noida also

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revised the assessment order passed u/s 143(3) of the Act on the issue of

allowability of exemption on the interest income and allowability of claim of

depreciation in the computation of income. We may further observe that the

ITAT-Delhi in the order passed in the case of Genesis Color Pvt. Ltd. (supra)

had also considered the ratio of the decisions of Hon’ble High Court of Delhi

in the cases of CIT vs Ashish Rajpal (2010) 320 ITR 674 Delhi and decision

in the case of CIT vs Contimeters Electricals P. Ltd. (2009) 317 ITR 249

(Delhi) wherein dismissing the appeal of the Revenue, it was held that the issue

which had not been part of notice u/s 263 of the Act could not form basis for

revision of the assessment order u/s 263 of the Act. In the light of decision of

Hon’ble High Court of Andhra Pradesh in the case of G.,K. Kabra (supra), the

case of B.S. Sangwan (supra) and Genesis Colour Pvt. Ltd. vs CIT (supra), we

are inclined to hold that it is not open and permissible for the CIT to revise the

original assessment order on the ground(s) which has not been mentioned in the

notice u/s 263 of the Act and on which assessee was not showcaused in the said

notice. In the present case, the CIT, Noida has revised the assessment on the

issues of allowability of exemption on interest income and allowability of claim

of depreciation and this factum is fatal to the assessment order. This issue is

covered in favour of the assessee on all four corners, Accordingly, we are

inclined to accept the contention of the ld. AR that the ld. CIT was not

empowered to revise assessment order u/s 253 of the Act on the issue of

allowability of deduction u/s 80IA(4) of the Act on the interest earned from

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deposit of surplus funds, which were undisputedly received from sub-lease/sale

of land in short term fixed deposits within the banks and on the issue of

allowability of claim of depreciation because these two issues viz. interest on

FDs and depreciation have not been disputed and alleged in the notice u/s 263

of the Act and assumption of jurisdiction u/s 263 of the Act was not valid and

impugned order on these issues is void ab initio.

123. On careful and vigilant reading of the operative parts of the impugned

order (as reproduce hereinabove) From para 7, we note that the Ld. CIT has

annexed reply of the assessee, as Annexure A to the impugned order, thereafter,

mentioning the cases laws relied by the assessee the Ld. CIT pointed out that an

incorrect assumption of the facts or an incorrect application of law will satisfy

the requirement of the order being erroneous as it is passed after wrong

appreciation of fact available before the AO and non-application of mind on the

part of the AO which has resulted in allowing the deduction u/s 80IA of the Act

which was not admissible, if the AO had taken in to account and followed the

law under the provision of sub section (2), (4) and (6) of the section 80IA of the

Act and clarification under CBDT’s circular no. 1/2006 dated 12.1.2006 (supra).

Thereafter, the Ld. CIT observed that the order passed by the AO has been

rendered erroneous and in so far as it is prejudicial to the interest of the

Revenue as the tax which was lawfully eligible on profit from sale of land has

not been levied due to such omission of the part of the AO to follow sub

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sections (2), (4) & (6) of section 80IA of the Act, CBDT Circular (Supra), and

Rule 18BBE of the Income Tax Rules, 1962. This allowance of deduction has

lead to loss of Revenue, therefore order is also prejudicial to the interest of the

Revenue. In subsequent para, the Ld. CIT further note that an order is erroneous

deviating from law and the expression prejudicial to the interest of Revenue is

of wide import which is not confined to mere loss of tax.

124. In the subsequent paras of the impugned order the Ld. CIT also observed

that the AO in this case omitted to apply and invoke all the discussed provisions

of the Act and corresponding Rules and this grievous error has set a bad trend

for similar assessments causing prejudice to the whole of revenue

administration. These allegation have also been repeated into the subsequent

paras. But we are unable to see any discussions or deliberations on the

submission of the assessee before Ld. CIT, himself or before the AO during

assessment proceedings.

125. We may further note that the Ld. CIT has not conclusively decided that

the claim of the assessee does not fall under clause (a) of Explanation to section

80IA (4) (i) of the Act and same falls under clause (b) of same provision. There

is no further logical findings by the Ld. CIT to this effect that since the claim of

the assessee falls under clause (b) Explanation to section 80IA (4) (i) and hence,

the provisions of sub section 6 to section 80IA (4) (i) is applicable to the case of

the assessee which was not complied. The Ld. CIT, without giving any

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findings, has set aside the assessment order to be made de novo without

conclusively deciding the issue in one way or the other which comes within the

teeth of the observations and ratio of the judgment of Hon’ble Delhi High Court

in the case of Globus Infrocom Ltd. vs. CIT (Supra). From the operative part of

this order, as reproduced herein above, it is clear that while invoking section

263 of the Act the commissioner should take a final decision that the law

applied by the assessee to the facts of case is not in accordance with law and

thus it is not sustainable. Mere set aside of assessment order to be made de novo

without any conclusion on facts and applicability of law is not valid.

126. We further note that the judicial propositions and opinion are unanimous

that the expression and essence as appearing in the fabric & language of the

Section 263 of the Act must be confined to Jurisdictional errors. Erroneous

assessment refers to an assessment that deviates from the law and is, therefore,

invalid and unsustainable. An assessment order cannot be alleged as erroneous,

unless it is not in accordance with law. This section does not allow substitution

of the judgment of the commissioner for that of the AO, who passed the

assessment order in question, unless the order of the AO is held to be erroneous,

untenable and unsustainable in law in the light of facts and circumstances of the

particular case under revision. We may further point out that when the AO takes

a view and the commissioner, without recording any finding, that the view taken

and order passed by the AO is not correct and therefore, the same is erroneous

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and prejudicial to the Revenue; holds that the assessment order is revisable u/s

263 of the Act, then the order of the Commissioner is not valid and sustainable.

We may further note that it would be incorrect to say as broad proposition that

an assessment order cannot be erroneous, if the AO has adopted one out of two

possible views. In this situation, the order of the AO can be held as erroneous

only when the commissioner holds and is able to demonstrate that the view

taken by the AO was not plausible and reasonable, being legally unsustainable,

untenable and incorrect, but the said finding must be recorded by the

commissioner to provide legitimate life to the order of revision u/s 263 of the

Act.

127. In the light of aforesaid discussion, if we analyse the facts and

circumstances of the present case, we observe that the assessee company is in

the business of developing, operating and maintaining infrastructure facility

project since its incorporation w.e.f. 5.4.2007. We also observe that the

development of the toll road with controlled access and exit points and right to

collect toll from the users clearly put the Expressway within the ambit of road

which is a toll road. We further hold that the development of the Expressway

between Noida and Agra and development of Five land parcels adjacent to

Expressway are inseparable and integral part of one project and the assessee is

entitled and eligible for deduction u/s 80IA (4) of the Act on the income earned

and derived from the business of development of Infrastructure facility during

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AY 2009-10 after commencement of its business w.e.f. 5.4.2007 at the option of

the assessee which cannot be denied by wrongly putting the case of the assessee

in clause (b) of Explanation to section 80IA(4)(i) of the Act.

128. In view of our aforesaid observations and conclusion, on the facts of the

case, we are inclined to hold that the view taken by the AO, while granting

deduction u/s 80IA (4) of the Act to the assessee, is a reasonable and plausible

which cannot be held as legally unsustainable and not in accordance with law

and also being passed without application of mind. We, therefore, are of the

considered opinion that the impugned notice and order of Ld. CIT is not valid

and void ab initio on the following reasons:-

(i) The view taken by the AO while granting deduction u/s 80IA(4) of

the Act, in respect to income from sale/ sub lease of land for

development, is reasonable, plausible and the same cannot be held

as unsustainable and not in accordance with law and therefore, the

assessment order cannot be alleged as erroneous and prejudicial to

the interest of the Revenue.

(ii) The revision of the assessment order on the issue of allowability of

deduction u/s 80IA(4) of the Act in regard to the income of interest

accrued to the assessee from the deposit of surplus funds in the

fixed deposit banks accounts and allowability of depreciation is

also not valid because these issues had not been raised or pointed

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out in the notice issued u/s 263 of the Act and thus, it is not open

and permissible for the Ld. CIT to revise the assessment order on

these grounds. Since assumption of jurisdiction u/s 263 of the Act

was not valid on these two issues, the grounds raised by the

assessee on merit become academic and infructuous.

(iii) On threadbare analysis of operative part of the impugned order, as

discussed herein above, we also hold that the Ld. CIT has not

conclusively decided the issue with a conclusion in one way or the

other and has left it midway, which covers this case in favour of

the assessee by the recent judgment of Hon’ble Delhi High Court

in the case of Globus Infocum Ltd. vs. CIT (Supra).

(iv) In view of our findings and conclusion, as recorded hereinabove,

on the facts of the case and the relevant provisions of the Act, we

have no hesitation to hold that the assumption of Jurisdiction to

issue notice to the assessee u/s 263 of the Act (supra) and to set

aside the assessment order, by passing the impugned order u/s 263

of the Act was not valid and the same was void ab initio. Hence,

the notice issued by the Ld. CIT u/s 263 of the Act, impugned

order without any conclusive findings, setting aside and revising

the assessment order to be reframed de novo and all subsequent

proceedings conducted and orders, if any, passed in pursuance

thereto deserve to be quashed and we quash the same. We order

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accordingly. Thus, issues number (iv) is decided in the negative

and issue no. (v) & (vi) are decided in the affirmative, in favour of

the assessee.

129. Finally, the grounds raised by the assessee and issues for determination,

as set out by us (supra) are decided in favour of the assessee and consequently

appeal of the assessee is allowed in the manner as indicated above.

Order pronounced in the open court on 13/4/15

Sd/- Sd/-

(T.S. KAPOOR) (CHANDRAMOHAN GARG)

ACCOUNTANT MEMBER JUDICIAL MEMBER

DT. 13th

APRIL 2015

‘GS’

Copy forwarded to:-

1. Appellant

2. Respondent

3. C.I.T.(A)

4. C.I.T.

5. DR

By Order

Asstt.Registrar