2015 (5) TMI 669 - HC - Income Tax

Entitlement to deduction under Section 80-IA(4) - Whether the business activity of the respondent-assessee would fall within the ambit of the expression Infrastructure Facility as occurred in Section 80-IA of the Income-tax Act, in particular the Explanation appended to sub-Section (4) thereof? - Held that - the assessee in the present cases though has erected bus-shelters, beautified the road median, erected street lights and footbridge in the specified place as per the specifications and erected advertisement hoardings for earning income from the said advertising business, it cannot be treated as infrastructure facility as explained in the Explanation of Section 80-IA of the Act. It was not an engineering or construction company that puts up public infrastructure. The assessee, which, eventually is an advertising company, is interested only to find out the best space at the best locations for advertisements. The assessee does not claim that he has any experience of raising/erecting infrastructure facility as contemplated by the Explanation of Section 80-IA of the Act. Thus the activities indulged by the assessee are part of its normal activities of advertising and publicity rather than one of infrastructure development. The business activities of the assessee do not involve (a) Development (b) Operating; and (c) Maintenance. For the purpose of its business, the assessee has taken up erection/construction of bus-shelter for its advertisement business. The circular issued by the CBDT makes it clear that the income eligible for deduction has to be arisen from the use of facility, for example, collection of toll from the road users. The said income has to be treated as income derived from the infrastructure facility. In the instant case, the assessee derives income only from the advertisement hoardings erected on the bus-shelters, road medians and the street light poles. Hence, the said income cannot be treated as income derived from the infrastructure facility. The income earned by the assessee do not fall under Section 80-IA(4). We find that the order passed by the Tribunal is contrary to the intendment of the Act. The benefit under Section 80-IA can be extended only to those assessees who have developed infrastructure facility as defined under sub-Section (4) of Section 80-IA. In the instant case, the assessee has not developed road or a toll road, bridge, highway or a rail system. - Decided against assesse.

Summary

Issues Involved:
1. Eligibility for deduction under Section 80-IA(4) of the Income-tax Act, 1961.
2. Classification of business activities as "Infrastructure Facility" under Section 80-IA(4).

Issue-wise Detailed Analysis:

1. Eligibility for Deduction under Section 80-IA(4):

The respondent-assessee, a Private Limited Company engaged in Outdoor Advertisement, Media Advertising, and Development of Infrastructure, claimed deduction under Section 80-IA(4) of the Income-tax Act, 1961. The Assessing Authority denied this deduction, concluding that the activities performed by the assessee-construction of bus shelters, installation of street lights, beautification of road medians, and construction of a footbridge-did not qualify as infrastructure development. The First Appellate Authority upheld this decision, emphasizing that the assessee's primary business was advertising and not infrastructure development. The Income Tax Appellate Tribunal (Tribunal) reversed this decision, holding that the assessee was entitled to the deduction, as the construction and maintenance of bus shelters, road medians, and street lights were integral to infrastructure development.

The High Court, however, found that the Tribunal's decision was contrary to law. The Court emphasized that the income derived by the assessee was from advertisements and not from the infrastructure development itself. The Court noted that the agreements with the local authority (BBMP) were temporary and primarily for advertising purposes, thus not meeting the conditions for deduction under Section 80-IA(4).

2. Classification of Business Activities as "Infrastructure Facility":

The core issue revolved around whether the activities performed by the assessee fell within the ambit of "Infrastructure Facility" as defined under Section 80-IA(4). According to the Act, "infrastructure facility" includes a road, bridge, rail system, highway project, water supply project, and similar major infrastructure projects. The High Court scrutinized the agreements between the assessee and BBMP, revealing that the assessee was only licensed to construct and maintain bus shelters, street lights, road medians, and a footbridge for a specified period, primarily for advertising purposes.

The Court concluded that these activities did not constitute permanent infrastructure development. The income derived from these activities was from advertisements, not from the infrastructure itself. The Court highlighted that the exemption under Section 80-IA(4) is intended for income derived from the use of infrastructure facilities, such as toll collections from roads, which was not the case here.

Conclusion:

The High Court held that the activities performed by the assessee did not qualify as infrastructure development under Section 80-IA(4). The income derived from advertisements on bus shelters, road medians, and street lights could not be treated as income from infrastructure facilities. Consequently, the Court set aside the Tribunal's order and upheld the decisions of the lower authorities, denying the deduction under Section 80-IA(4) to the assessee.