2018 (5) TMI 1174 - HC - Income Tax

Disallowance of deduction u/s 80IA (4) - assessee undertaken road development project, as entered into an agreement with Gujarat State Road Development Corporation which was incorporated by the Government for the special purpose - Assessee contended that the GSRDC was performing all the functions of the State Government and therefore the concession agreement executed by GSRDC should be treated to have been entered into by the State Government - Tribunal deleted the disallowance of deduction made by the Assessing Officer - Revenue argues that the agreement entered into between the assessee and GSRDC does not fulfill this condition since GSRDC is neither State Government, Central Government or any statutory body. Held that - Act of 1999 makes detail provisions for awarding contracts for infrastructure development within the State through private participation. In the process, the Government could take assistance of a Government agency or a specified Government agency. The selection of the person would either be on the basis of competitive public bidding as provided in section 9 of the Act or through direct negotiations as provided in section 10. The Act of 1999 also lays down broad parameters of the concession agreement that such a person would enter into with the Government, Government agency or the specified Government agency as the case may be. GSRDC was a nodal agency constituted by the State Government for the purpose of executing road development projects through private participation and was a Government agency as defined in section 2(e) of the Act of 1999. Significant factors in the present case are that the road widening project was cleared by the Government, land for such purpose was alloted by the Government. The concession agreement which GSRDC executed was approved by the Government. It was under the Government Resolution that the assessee would collect toll upon completion of such project. Upon the completion of the project period, the entire infrastructure so developed would vest in the Government. Signatory to the applicant may be GSRDC for all practical purposes and in essence, it was the agreement between the assessee and the State Government. Rigid interpretation of this provision as canvassed by the Revenue would only result into the assessees involved in genuine infrastructure development projects for and on behalf of the Government or local authorities would be denied the deduction merely on the ground that the State Government had created a nodal agency for working out the finer details and nittygritty of such infrastructure development. The purpose of creating such nodal agencies as well as the legislative intent of granting deduction to the assessee engaged in developing, maintaining or operating any infrastructure projects for Central or State Government or local or statutory authorities would frustrate.- Decided against revenue.

Summary

Issues:
- Disallowance of deduction made by the Assessing Officer under section 80IA(4) of the Income Tax Act
- Interpretation of the term "Government agency" under the Gujarat Infrastructure Development Act, 1999

Analysis:
1. Disallowance of Deduction under Section 80IA(4): The case involved an appeal by the Revenue against the deletion of disallowance of deduction under section 80IA(4) of the Income Tax Act. The key question was whether the agreement between the assessee and the Gujarat State Road Development Corporation (GSRDC) fulfilled the conditions of section 80IA(4) of the Act. The Assessing Officer doubted the fulfillment of requirements, but the Commissioner of Income Tax (Appeals) and the Tribunal found in favor of the assessee, leading to the present appeal before the High Court.

2. Interpretation of "Government Agency" under the Gujarat Infrastructure Development Act, 1999: The analysis delved into the definition of a "Government agency" under the Gujarat Infrastructure Development Act, 1999. The Act defined a Government agency as a Corporation or a body owned or controlled by the State Government, an authority established by law, or local authorities. The Act also detailed provisions for concession agreements and the procedure for selection of persons for infrastructure development projects through private participation.

3. The Court examined the facts surrounding the case, emphasizing that the GSRDC, being wholly Government-owned and controlled, acted as a nodal agency for infrastructure development projects. The Court highlighted that the GSRDC's actions were approved and controlled by the State Government, and the infrastructure developed would ultimately vest in the Government. The Court noted that a rigid interpretation of the provision requiring agreements with the State Government or its agencies would hinder genuine infrastructure development projects intended for the Government's benefit.

4. Conclusion: Considering the statutory provisions, the Court concluded that the GSRDC, as a Government agency under the Act of 1999, fulfilled the conditions of section 80IA(4) of the Income Tax Act. The Court dismissed all Tax Appeals, upholding the decision in favor of the assessee regarding the deduction claimed under section 80IA(4).