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2019 (5) TMI 1646 - HC - Income TaxBenefit of deduction u/s 80IA to sub-contractor or transferee or assignee - Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. - Assessing Authority denied the said benefit was that the Assessee himself did not enter into any such contract with the Railways or with the Central Government - Tribunal allowed claim - HELD THAT - Present Appeals is covered by the Judgment of this court in the case of the same Assessee in 2019 (4) TMI 683 - MADRAS HIGH COURT wherein this court has has held that Tribunal, however, in our opinion, rightly applied the Proviso to Section 80IA(4) and held that since the Assessee was recognised as contractor for these railway sidings, which undoubtedly fell under the definition of infrastructure facility , it was entitled to the said benefit u/s 80IA. The grounds on which the Assessing Authority denied the said benefit to the Assessee ignoring the effect of Provisos to Section 80IA(4), therefore, could not be sustained - Decided in favour of the Assessee and against the Revenue.
Issues:
1. Eligibility for deduction under Section 80IA as a sub-contractor 2. Effect of explanation inserted by Finance Act 2007 3. Fulfillment of conditions under Section 80IA(4) 4. Transfer of infrastructure facility for deduction under Section 80IA Analysis: Issue 1: Eligibility for deduction under Section 80IA as a sub-contractor The Revenue appealed the Tribunal's decision allowing the Assessee's deduction under Section 80IA of the Income Tax Act. The main contention was whether a sub-contractor could be eligible for such deduction. The High Court referred to a previous judgment where it was held that the Proviso to Section 80IA(4) extends the benefit of deduction to enterprises involved in developing, operating, or maintaining infrastructure facilities, even if they are contractors approved by the concerned authority. In this case, the Assessee was recognized as a contractor for railway sidings and was operating and maintaining them, falling under the definition of an "infrastructure facility." The High Court upheld the Tribunal's decision, stating that direct agreement with the specified authority was not necessary for availing the benefit under Section 80IA. Issue 2: Effect of explanation inserted by Finance Act 2007 The Revenue questioned the Tribunal's decision without considering the effect of the explanation inserted by the Finance Act 2007, which had retrospective effect from 1.4.2000. However, the High Court clarified that the Proviso to Section 80IA(4) allows for the benefit of deduction to transferees or contractors recognized by the concerned authority, irrespective of direct agreements with the government bodies. The Court emphasized that the Assessee, being recognized as a transferee, was entitled to the deduction under Section 80IA. Issue 3: Fulfillment of conditions under Section 80IA(4) The Tribunal's decision was also challenged regarding the Assessee's fulfillment of conditions laid down in Section 80IA(4), specifically having a contract with a government/authority as required. The High Court reiterated that the Proviso to Section 80IA(4) extends the deduction benefit to approved contractors or transferees undertaking infrastructure development or maintenance, without mandating direct agreements with the government bodies. As the Assessee was recognized as a contractor for the railway sidings, the Court found the Tribunal's decision appropriate. Issue 4: Transfer of infrastructure facility for deduction under Section 80IA The final issue raised was whether the Assessee satisfied the proviso to Section 80IA(4) concerning the transfer of infrastructure facilities. The High Court emphasized that the Assessee, recognized as a transferee of the principal contractor, was duly approved by the Railways to operate and maintain the railway sidings. The Court concluded that the Assessee met the conditions under the Proviso to Section 80IA(4) and was entitled to the deduction benefit, dismissing the Revenue's appeals. In conclusion, the High Court upheld the Tribunal's decision, emphasizing that the Assessee, recognized as a contractor for infrastructure facilities, was entitled to the deduction under Section 80IA, even without direct agreements with government bodies. The Court dismissed the Revenue's appeals, ruling in favor of the Assessee and highlighting the importance of recognizing approved contractors or transferees for availing tax benefits under the Income Tax Act.
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