2017 (8) TMI 1190 - HC - Income Tax

Benefit of deduction u/s 80-IA - agreement for operating and maintaining the infrastructure facility viz the airport - entitlement to the benefit of deduction from which year - whether MOU entered into by the assessee with the Airport Authority of India could be taken as an agreement as contemplated in clause (b) of Section 80-IA(4)? - Held that - Having read clause-(b) of sub-section (4) of Section 80- IA, we are not persuaded to think that to satisfy the requirement of clause-(b), the agreement should be one entered into by an airport which is already functional. An airport to be operational require the facilities that are agreed to be provided by the Airport Authority vide Annexure-C and Annexure-K. It is only on installation and operation of such equipments can the airport be operated and maintained. Such an agreement would be an agreement for operating and maintaining the infrastructure facility viz the airport and for the purpose of Section 80- IA, the statute does not contemplate that the airport should already be on stream and that the agreement should be entered into thereafter. Further, this argument of the revenue would also militate against sub-section 2 which provides that the assessee would be entitled to the benefit of deduction from the year in which the undertaking or enterprise develops or begins to operate any infrastructure facility. Necessarily, therefore, the agreement and the installation of the equipments for the operation of the airport should precede the commencement of operation of the infrastructure facility to avail the benefit of deduction. The statutory provision and the agreement being as above, we cannot uphold the conclusion of the Tribunal that both the agreements could not constitute agreements specified in clause-(b. Accordingly, the findings of the Tribunal with reference to clause-(b) of sub-section (4) of Section 80-IA are set aside. The matter will stand remitted to the Assessing Officer for fresh examination - Decided in favour of assessee.

Summary

Issues Involved:
1. Interpretation of clause (b) of Section 80-IA(4) of the Income Tax Act concerning agreements with statutory bodies.
2. Validity of the Tribunal's decision to set aside the Commissioner of Income Tax (Appeals) decision regarding Annexure C agreement.
3. Legitimacy of the Tribunal's interference with the order of the Commissioner of Income Tax (Appeals).

Issue-Wise Detailed Analysis:

1. Interpretation of Clause (b) of Section 80-IA(4) of the Income Tax Act:
The primary issue is whether the agreement with the Airports Authority of India (AAI), a statutory body, satisfies the requirements of clause (b) of Section 80-IA(4) of the IT Act. The appellant company established an airport and claimed the benefit of deduction under Section 80-IA for the assessment years 2005-2006 to 2007-2008. The Assessing Officer rejected the claim, stating that the conditions specified in sub-section (4) were not met.

The Court examined whether the agreements (Annexures C and K) between the appellant and AAI qualify as agreements with a statutory body for "operating and maintaining" an infrastructure facility. The Court noted that AAI, established under the Airports Authority of India Act, 1994, is a statutory body responsible for managing airports and providing air traffic services. The obligations undertaken by AAI in the agreements included providing CNS equipment, air traffic services, and maintaining the airport facilities, which are statutory functions of AAI.

The Court concluded that these agreements qualify as agreements with a statutory body for operating and maintaining an infrastructure facility, thus satisfying clause (b) of sub-section (4) of Section 80-IA. The Court rejected the Revenue's argument that the agreement should be with an already operational airport, stating that the statute does not require the airport to be operational before the agreement.

2. Validity of the Tribunal's Decision to Set Aside the Commissioner of Income Tax (Appeals) Decision:
The Tribunal had set aside the decision of the Commissioner of Income Tax (Appeals), which had allowed the appellant's claim for deduction under Section 80-IA, stating that the agreements did not constitute agreements specified in clause (b) of sub-section (4). The Tribunal also noted that the basic particulars regarding clause (c) were not verified by the Assessing Officer.

The Court disagreed with the Tribunal's conclusion regarding clause (b), stating that the agreements with AAI do qualify as agreements with a statutory body for operating and maintaining the airport. Therefore, the Tribunal's decision to set aside the Commissioner’s order on this ground was incorrect.

3. Legitimacy of the Tribunal's Interference with the Order of the Commissioner of Income Tax (Appeals):
The Tribunal had restored the matter to the Assessing Officer for fresh examination concerning the basic particulars under clause (c) of sub-section (4). The Court upheld this part of the Tribunal's order, agreeing that the matter required further examination by the Assessing Officer.

Conclusion:
The Court answered the questions of law in favor of the appellant, setting aside the Tribunal's findings regarding clause (b) of sub-section (4) of Section 80-IA. The matter was remitted to the Assessing Officer for fresh examination as ordered by the Tribunal. The appeals were disposed of accordingly.