2011 (9) TMI 1053 - AT - Income Tax

Deduction under section 80IA(4)- Held that - A developer who only develops (i.e. constructs) an infrastructure facility and is not envisaged to operate and maintain such facility, cannot be expected to fulfil the condition in clause (c) of section 80IA(4) since it would be an impossibility. Therefore, in view of the construction placed on the requirements of clause (c) of section 80IA(4)(i), requiring it to be harmoniously read with the main clause of section 80IA(4)(i), we find that the objection raised by the Revenue in the present case is devoid of merits

Summary

Issues:
Appeals consolidated due to common issue of deduction under section 80IA of the Income Tax Act for assessment years 2003-04 to 2006-07.

Analysis:

Issue 1: Claim of Deduction under Section 80IA
The primary dispute in the appeals was the assessee's claim for deduction under section 80IA of the Income Tax Act, which was disallowed by lower authorities. The core contention was whether the assessee, a contractor-cum-developer, qualified for the deduction. The assessee relied on a judgment by the Bombay High Court in the case of ABG Heavy Engg. Ltd. to support its claim that even contractors employed by the government were entitled to the deduction under section 80IA(4). The Revenue, on the other hand, argued that the assessee, as a contractor, did not meet the criteria of a "developer" under section 80IA. The Revenue emphasized that the assessee's income was solely from the contract and not from the developed asset itself.

Issue 2: Interpretation of Section 80IA(4)(i)
The crux of the controversy revolved around section 80IA(4)(i), which outlines the conditions for claiming the deduction. The Revenue contended that the assessee, as a contractor, did not fulfill the requirements of developing, operating, and maintaining an infrastructure facility as per the section. The Revenue specifically pointed to sub-clause (c) of section 80IA(4)(i), which stipulates that the operation and maintenance of the infrastructure facility should commence after April 1, 1995. The interpretation of this provision was crucial in determining the eligibility of the assessee for the deduction.

Judgment and Conclusion
The ITAT Pune, after considering the arguments and the judgment of the Bombay High Court in the ABG Heavy Engg. Ltd. case, held in favor of the assessee. The ITAT Pune found that the assessee, even as a contractor, fulfilled the conditions of section 80IA(4)(i) and was eligible for the deduction. The ITAT Pune emphasized the harmonious reading of the provisions and the High Court's interpretation that developers who do not operate and maintain the infrastructure facility are still entitled to the deduction under section 80IA(4). Consequently, the appeals of the assessee were allowed, and the deduction was granted for the relevant assessment years.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, the interpretation of relevant legal provisions, and the final decision rendered by the ITAT Pune in favor of the assessee based on the precedent set by the Bombay High Court.