2015 (6) TMI 635 - AT - Income Tax

Disallowance of deduction claimed u/s 80IA(4) - CIT(A) deleted addition - Held that - As dedcided in assessee s own case 2012 (4) TMI 563 - ITAT AHMEDABAD the obligations which the assessee assumed under the terms of the contract were not merely for supply and installation of the cranes, but involved a continuous obligation right from the supply of the cranes to the installation, testing, commissioning, operation and maintenance of the cranes for a term of ten years after which the cranes were to vest in JNPT free of cost. An assessee did not have to develop the entire port in order to qualify for a deduction under section 80IA. The condition of a certificate from the port authority was fulfilled and JNPT certified that the facility provided by the assessee was an integral part of the port. The aa developed the facility on a BOLT basis under the contract with JNPT. On the fulfilment of the lease of ten years, there was a vesting in the JNPT free of cost. The finding that the assessee had developed the infrastructure facility and that it was engaged in operating the cranes was, therefore, based on the material on record. The fact that the assessee was also maintaining the cranes was not disputed. The facility was commenced after April, 1995. The assessee was entitled to the special deduction under section 80-IA - Decided in favour of assessee.

Summary

Issues Involved:
1. Eligibility for deduction under Section 80IA(4) of the Income Tax Act, 1961.
2. Ownership and development of infrastructure facilities.
3. Interpretation of the term "developer" in the context of Section 80IA(4).

Detailed Analysis:

Issue 1: Eligibility for Deduction under Section 80IA(4)
The primary issue is whether the assessee is eligible for a deduction of Rs. 66,53,384 under Section 80IA(4) of the Income Tax Act, 1961. The Revenue argued that the assessee did not fulfill the prime condition of owning the infrastructure facilities, which is essential for claiming the deduction. The assessee, engaged in consulting pollution control and environmental-related works, filed its return showing a total income of Rs. 24,32,420. The Assessing Officer (AO) disallowed the deduction, stating that the income derived was from a 'work contract' awarded by another entity, and the assessee did not own any infrastructure facilities.

Issue 2: Ownership and Development of Infrastructure Facilities
The AO contended that the assessee did not own the infrastructure facilities, a prime condition for the deduction under Section 80IA(4). The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who deleted the addition made by the AO. The Revenue, dissatisfied with this decision, appealed to the Tribunal.

Issue 3: Interpretation of the Term "Developer"
The Tribunal examined whether the assessee acted as a "developer" or merely as a "contractor." The Tribunal referenced its previous decision in the assessee's own case for AY 2005-06 and others, where it was determined that a contractor could also be a developer. The Tribunal cited the case of Patel Engineering Ltd., where it was held that the term "developer" has a broader connotation and can include contractors.

The Tribunal noted that the assessee had entered into agreements with the Municipal Council Udaipur and Surat Municipal Corporation for developing infrastructure meant for "solid waste management systems." Despite being referred to as a "Contractor" in one agreement, the nature of the work executed indicated that the assessee acted as a "developer." The Tribunal also referenced the Gujarat High Court decision in CIT vs. Radhe Developers, which supported the broader interpretation of "developer."

The Tribunal further analyzed the terms of the agreements, noting that the assessee bore the cost of setting up the biomedical waste treatment facility and operated it for a specified period. The Tribunal concluded that the assessee fulfilled the conditions for being considered a developer under Section 80IA(4).

Conclusion:
After considering the rival submissions and material on record, the Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 66,53,384. The Tribunal found that the assessee met the conditions for deduction under Section 80IA(4) and acted as a developer, not merely as a contractor. The appeal filed by the Revenue was dismissed.

Judgment:
The appeal filed by the Revenue is dismissed. The Tribunal confirmed the findings of the CIT(A) and upheld the deletion of the addition made on account of disallowance of deduction claimed under Section 80IA(4). The judgment was pronounced in the open court on June 10, 2015.