2015 (11) TMI 401 - AT - Income Tax

Eligibility for deduction under section 80IA - whether the Bangalore International Airport Ltd. BIAL is a statutory body u/s 80IA(4)(i) of the Act? - Held that - As considering the constitution of BIAL, the shares of different parties in the said company and it is a statutory body as it is discharging statutory functions of the Government. - Decided in favour of assessee.

Issues Involved:
1. Whether Bangalore International Airport Ltd. (BIAL) is a statutory body under Section 80IA(4)(i) of the Income Tax Act.
2. Whether BIAL is a "State" under Article 12 of the Constitution of India.
3. Whether BIAL is amenable to writ jurisdiction under Article 226 of the Constitution of India.
4. Whether the short-listing of tenders by BIAL without guidelines is legal and valid.
5. Whether the denial of opportunity to offer financial bids to certain parties by BIAL requires judicial interference.

Detailed Analysis:

Issue 1: Statutory Body Status Under Section 80IA(4)(i)
The Tribunal initially held that BIAL is not a statutory body, as it is a company incorporated under the Companies Act and not created by any statutory body or law. The major shareholders in BIAL are private partners, and it was not considered a statutory authority as required under Section 80IA(4) of the Income Tax Act. However, this conclusion was reconsidered in light of the Karnataka High Court's judgment in the case of M/s. Flemingo Duty Free Shops Pvt. Ltd., which held that BIAL is a statutory body as it discharges statutory functions/public functions for the convenience of the traveling public and is therefore a State under Article 12 of the Constitution of India.

Issue 2: BIAL as a "State" Under Article 12
The Karnataka High Court examined the shareholding and functions of BIAL and concluded that BIAL performs statutory/public duties and is thus a State under Article 12 of the Constitution. The functions and duties performed by BIAL, such as managing the airport, providing air traffic services, and other related activities, are statutory in nature and fall under the purview of the Airports Authority of India Act, 1994. The Court noted that the establishment and maintenance of the airport by BIAL involve significant public interest and governmental functions, making BIAL an instrumentality of the State.

Issue 3: Amenability to Writ Jurisdiction
The High Court held that BIAL is amenable to writ jurisdiction under Article 226 of the Constitution of India. The Court reasoned that the functions performed by BIAL are public duties, and the nature of these duties imposes an obligation to act fairly and in the public interest. This makes BIAL subject to judicial review, and any arbitrary or unfair actions by BIAL can be challenged through writ petitions.

Issue 4: Legality of Tender Short-Listing
The Tribunal did not specifically address the legality of the tender short-listing process by BIAL. However, the High Court's judgment in the Flemingo Duty Free Shops case highlighted that BIAL's actions in issuing tender documents and short-listing parties must be transparent and reasonable. Any exclusion or arbitrary decision in the tender process could be subject to judicial scrutiny.

Issue 5: Denial of Opportunity to Offer Financial Bids
The High Court in the Flemingo Duty Free Shops case considered whether BIAL's denial of the opportunity to certain parties to offer financial bids was justified. The Court emphasized that BIAL must act transparently and fairly in its tender processes. Any denial of opportunity without valid reasons or guidelines could be challenged as arbitrary and unfair.

Conclusion:
The Tribunal, respecting the High Court's judgment, concluded that BIAL is a statutory body performing public functions and is thus a State under Article 12. Consequently, the Tribunal upheld the CIT(A)'s order allowing deductions under Section 80IA(4) of the Income Tax Act. The Tribunal dismissed the Revenue's appeal and the associated Miscellaneous Application, declaring it infructuous.

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