2024 (1) TMI 1224 - AT - Income Tax

Eligibility for deduction u/s 80IA - contracts entered with Airports Authority of India (AAI) - constitute as a Central / State Government or not? - HELD THAT - The Government of India constituted the International Airports Authority of India (IAAI) in 1972 to manage the nation's international airports while the National Airports Authority of India (NAAI) was constituted in 1986 to look after domestic airports. Both the above organizations were merged in April 1995 by an Act of Parliament, namely, the Airports Authority of India Act, 1994 and has been constituted as a Statutory Body and was named as Airports Authority of India (AAI). Therefore, AAI is a statutory body and in terms of the plain language of Section 80-IA(4) and if other conditions of eligibility are satisfied by the assessee, it would be eligible for claim of deduction u/s 80-IA(4) of the Act, if the assessee has entered into an agreement with any statutory body for carrying out development work. Therefore, in our considered view, claim of deduction u/s 80-IA(4) cannot be denied to the assessee only on the ground that since the assessee has entered into a contract with AAI, which does not constitute as a Central / State Government, the assessee is not eligible for claim of deduction under Section 80-IA(4) of the Act. Satisfaction of other conditions for eligibility of claim - qualifying as a developer - whether the assessee qualifies as a developer or the assessee is a works contractor within the meaning of Explanation to Section 80-IA of the Act? - Evidently the contract has not been awarded to the assessee for carrying out any repairs, maintenance or upkeep etc. of existing airport facility, but the assessee has been awarded contract for bringing into existence a new infrastructural facility in place being new domestic arrival block at Sardar Vallabhbhai Patel International Airport. Accordingly, the assessee in our view is has been entrusted the responsibility of bringing into existence and new infrastructure facility being a new domestic arrival block at Sardar Vallabhbhai Patel International Airport. Assessee has undertaken to bring into existence a new infrastructure facility being new domestic arrival block at Sardar Vallabhbhai Patel International Airport, Ahmedabad and further the assessee is also undertaken various financial and entrepreneurial risks required to be borne by a Developer of a project viz. providing bank guarantee to AAI, procurement of certain materials by the assessee at it s own cost during the construction phase, preparation of various architectural designs relating to the project for approval of AAI etc. which all support the fact that the assessee is in the instant facts is a developer within the meaning of Section 80-IA of the Act and is eligible for claim of deduction u/s 80-IA(4). We observe that Ld. CIT(A) undertook a detailed analysis of the scope of work undertaken by the assessee and the various risks and responsibilities undertaken by the assessee and then came to conclusion that assessee qualifies as a developer and is eligible to claim of deduction u/s 80-IA(4), thus confirmed. Assessee appeal allowed.

Summary

Issues Involved:
1. Eligibility for deduction under Section 80-IA(4) for contracts with Airports Authority of India (AAI).
2. Determination of the assessee as a "developer" or a "works contractor" under Section 80-IA(4).

Summary:

Issue 1: Eligibility for deduction under Section 80-IA(4) for contracts with Airports Authority of India (AAI)

9. The Ld. CIT(A) initially denied the deduction under Section 80-IA(4) for A.Y. 2007-08, stating the assessee did not enter into a contract with the Government of India. The key question was whether contracts with AAI qualify for this deduction.

10-11. Section 80-IA(4)(i)(b) allows agreements with the Central Government, State Government, Local Authority, or any Statutory Body for developing new infrastructure facilities. AAI, formed by merging IAAI and NAAI under the Airports Authority of India Act, 1994, is a statutory body. Therefore, contracts with AAI meet the criteria for deduction under Section 80-IA(4).

11. The Tribunal concluded that the deduction cannot be denied solely because the contract was with AAI, a statutory body, and not directly with the Central or State Government.

Issue 2: Determination of the assessee as a "developer" or a "works contractor" under Section 80-IA(4)

14. The Tribunal examined whether the assessee qualifies as a "developer" or merely a "works contractor." The case of PCIT vs. Montecarlo Construction Ltd. was referenced, where the Gujarat High Court held that if eligibility conditions are met, the assessee engaged in development work qualifies for the deduction.

16-17. The assessee was awarded a contract for constructing a new domestic arrival block at Sardar Vallabhbhai Patel International Airport, including full-fledged development with all facilities. This was not a mere repair or maintenance contract but involved creating a new infrastructure facility.

18. The Tribunal assessed whether the assessee undertook financial and entrepreneurial risks. The assessee provided bank guarantees, prepared designs, procured materials, and indemnified AAI employees, indicating significant risk and responsibility. Thus, the assessee qualifies as a "developer."

19-20. For A.Y. 2007-08, the appeal of the assessee was allowed, recognizing the contract with AAI and the role as a "developer" eligible for deduction under Section 80-IA(4).

21-22. For A.Y. 2008-09, the Department's appeal was dismissed, upholding the Ld. CIT(A)'s conclusion that the assessee qualifies as a "developer" eligible for the deduction.

23. In conclusion, the assessee's appeal for A.Y. 2007-08 was allowed, and the Department's appeal for A.Y. 2008-09 was dismissed.

This Order pronounced in Open Court on 29/01/2024