2021 (9) TMI 606 - HC - Income Tax

Deduction u/s 80IA - cargo handling contract entered into with BIAL by assessee - agreement with a statutory body - Whether contract is with statutory body satisfying condition set forth in section 80IA(4) when BIAL is only a Company whose motive only making profit and is only a instrument of State? - HELD THAT - As decided in own case 2021 (2) TMI 36 - KARNATAKA HIGH COURT Every contractor may not be a developer but every developer developing infrastructure facility on behalf of the Government is a contractor. In CHETTINAD LIGNITE TRANSPORT SERVICES P. LTD 2019 (4) TMI 684 - MADRAS HIGH COURT it has been held that proviso intends to extend the benefit of deduction under Section 80IA of the Act even to a transferee or a contractor who is approved and recognized by the concerned authority and undertakes the work of development of infrastructure facility or only operates or maintains the same. As rightly been concluded by the Appellate Authority that the assessee is engaged in development operation and maintenance of an infrastructure facility in the light of provisions of SPRH agreement. Revenue was unable to point out any perversity in the findings of fact recorded by the Commissioner of Income Tax (Appeals) as well as by the Tribunal. It is well settled in law that the concurrent findings of fact do not suffer from any perversity warranting interference of this court in exercise of powers under Section 260A of the Act. SEE SYEDA RAHIMUNNISA VS. MALAN BI BY L.RS. AND ORS. 2016 (10) TMI 1233 - SUPREME COURT and PRINCIPAL COMMISSIONER OF INCOME TAX, BANGALORE ORS. VS. SOFTBRANDS INDIA P. LTD. 2018 (6) TMI 1327 - KARNATAKA HIGH COURT - Decided in favour of the assessee.

Summary

Issues Involved:
1. Whether the Tribunal was justified in holding that BIAL is a Statutory Body under Section 40IA(4) of the I.T. Act.
2. Whether the Tribunal was justified in holding that the cargo handling contract with BIAL satisfies the conditions set forth in Section 80IA(4).
3. Whether the Tribunal’s order is perverse in allowing deduction under Section 80IA(4)(ib) when the assessee has not satisfied the conditions set out in the provision.

Detailed Analysis:

Issue 1: Whether BIAL is a Statutory Body
The primary question was whether BIAL (Bengaluru International Airport Limited) qualifies as a "statutory body" under Section 40IA(4) of the Income Tax Act. The Tribunal had previously ruled that BIAL is a statutory body, a decision that was contested by the revenue. The High Court referenced its earlier judgment in the case of M/s. Flamingo Dutyfree Shops Pvt. Ltd., which held that BIAL is a statutory body under Article 12 of the Constitution of India. This decision had been upheld by the Supreme Court, thereby establishing that BIAL is indeed a statutory body. Consequently, the High Court affirmed that the assessee had complied with the requisite condition of entering into an agreement with a statutory body.

Issue 2: Cargo Handling Contract and Section 80IA(4)
The second issue revolved around whether the cargo handling contract with BIAL met the requirements of Section 80IA(4). The Tribunal had ruled that the cargo handling services provided by the assessee were integral to the airport's infrastructure. The Commissioner of Income Tax (Appeals) had previously found that the cargo complex was connected to other critical infrastructure facilities and was part of the airport's operational framework. The High Court agreed with this assessment, noting that cargo handling services are essential to airport operations and fall within the definition of "infrastructure facility" under Section 80IA(4). The court also referenced Circular No.793, which clarified that such services are included under the definition of infrastructure facilities.

Issue 3: Conditions for Deduction under Section 80IA(4)(ib)
The revenue argued that the assessee did not meet the conditions for deduction under Section 80IA(4)(ib) because it had not entered into an agreement with the government nor was it involved in the development of infrastructure as defined in the Act. However, the Commissioner of Income Tax (Appeals) and the Tribunal had both found that the SPRH (Service Provider Right Holder) agreement between the assessee and BIAL was for the development, operation, and maintenance of infrastructure facilities. The High Court upheld this finding, emphasizing that the agreement was on a built, operate, and transfer basis, which aligns with the requirements of Section 80IA(4). The court also noted that the findings of the Commissioner of Income Tax (Appeals) and the Tribunal were concurrent and did not suffer from any perversity.

Conclusion:
The High Court concluded that all the substantial questions of law were answered in favor of the assessee and against the revenue. The appeal was disposed of, affirming the Tribunal's decision that BIAL is a statutory body, the cargo handling contract satisfies the conditions of Section 80IA(4), and the assessee is eligible for the deduction under Section 80IA(4)(ib). The court emphasized that the concurrent findings of fact by the lower authorities did not warrant interference.