No Sec. 80-IA Deduction if Assessee Was Only a Contractor for Execution of Work Awarded to It | ITAT

Case Details: Deputy Commissioner of Income-tax vs. Gulermak TPL Joint Venture - [2025] 171 taxmann.com 384 (Mumbai-Trib.)

Judiciary and Counsel Details

• Saktijit Dey, Vice President & Narendra Kumar Billaiya, Accountant Member
• J.D. Mistry, Sr. Adv. & Hiten Thakkar, A/Rs for the Appellant.
• Kishor Dule, CIT DR, for the Respondent.

Facts of the Case

The assessee was an unincorporated association formed between two companies. It was awarded a contract with Lucknow Metro Rail Corporation Ltd. (LMRCL) for the purpose of designing and constructing a tunnel, including three underground metro stations, namely, Hussainganj, Sachivalaya, and Hazratganj. The assessee claimed deduction under section 80-IA in its return of income.

During the proceedings, the Assessing Officer (AO) asked the assessee to justify that its business was an eligible business in terms of Section 80-IA of the Act. The assessee was specifically asked to justify its claim as the agreement has to be with (a) Central Government, (b) State Government, (c) Local Authority, or (d) Statutory Authority, and LMRCL does not fit in any of the four categories.

The assessee filed a detailed reply justifying its claim of deduction, which did not find any favour with the AO. The AO denied the claim of deduction, and the matter reached the Mumbai Tribunal.

ITAT Held

The Tribunal held that the assessee was allowed mobilisation advance and plant and machinery advance, which were payable against planned equipment and machinery. These advances were to be used only for the work contract awarded. This showed that not only was the project conceived by LMRCL, but it was also funded by it. The assessee was acting as a contractor to execute the work awarded to it. Once the final certificate of completion is issued, the contract is complete, and the assessee has no role insofar as the revenue from Metrorail is concerned.

It was not a case where the assessee would receive revenue from Metrorail for a certain period. This fact was in contradiction to the facts considered by the Hon’ble Gujarat High Court in the case of Ranjit Projects Private Limited [2018] 94 taxmann.com 320 (Gujarat). In the said case, the assessee agreed to a road development project with GSRDC. GSRDC was treated as a statutory body since it was a government agency defined under the Gujarat Infrastructure Development Act, 1999. LMRCL is a body corporate, although the Central and State Governments are the major shareholders.

The assessee may have constructed the Metrorail project as per the contract awarded to it. Still, it does not carry on the business of developing, operating and maintaining any infrastructural facility that fulfils the condition for the claim of deduction under section 80-IA. It is a simple case of hiring a contractor by issuing a tender. It is not a case of build-own-trade (BOT). The business pertains to LMRCL, the ownership vests with LMRCL, and it is LMRCL that is carrying on the business of developing, operating, and maintaining an infrastructural facility, i.e., underground Metrorail.

Accordingly, the assessee could not claim the deduction under section 80-IA.

List of Cases Referred to

• CIT v. Ranjit Projects (P.) Ltd. [2018] 94 taxmann.com 320/408 ITR 274 (Gujarat) (para 7)
• CIT v. ABG Heavy Industries Ltd. [2010] 189 Taxman 54/322 ITR 323 (Bombay) (para 10).