2016 (1) TMI 715 - AT - Income Tax

Allowability of deduction u/s.80IA(4) - Held that - It is mandatory for the assessee to first satisfy sub-section clause i(a), then (b) then (c), then proviso and so on. In case the concerned assessee fails in any one of the clauses, even if it satisfies the other part of the sub-section, the claim has to be rejected. Now we proceed to decide as to whether the assessee proprietorship concern satisfies sub-section 4(i) of the Act or not. For the said subsection, a reading of the provision makes it unambiguous that the concerned claimant has to be an enterprises carrying on the business of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility and it has to be owned by a consortium of such company or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act. Admittedly, the assessee is a proprietorship. As we notice from the relevant statutory provision, the enterprise in the nature of proprietorship nowhere finds mention in the mandate of the legislature. So far as catena of the judgments submitted by the AR of the assessee, we notice that they only pertain to section 80IA(4)(i)(b) i.e. regarding the issue of contractor viz-a-vis developer. Hence, we do not deem it appropriate to decide on the said issue since the assessee does not fulfill the condition enumerated in the first part of the statutory provision. - Decided against assessee

Summary

Issues Involved:
1. Allowability of deduction under Section 80IA(4) of the Income Tax Act.
2. Classification of the assessee as a 'developer' or 'contractor.'
3. Eligibility of a proprietorship concern for deduction under Section 80IA(4).

Issue-wise Detailed Analysis:

1. Allowability of Deduction under Section 80IA(4):
The primary issue in these appeals was whether the assessee was eligible for a deduction under Section 80IA(4) of the Income Tax Act. The assessee claimed a deduction for developing infrastructure facilities, which the Assessing Officer disallowed, leading to an appeal before the Commissioner of Income Tax (Appeals). The Commissioner observed that the assessee was not a works contractor but a developer as stipulated under Section 80IA(4). The section applies to any enterprise engaged in developing, operating, and maintaining infrastructure facilities. The Commissioner noted that an enterprise that develops an infrastructure facility and transfers it to the government for payment qualifies as a developer, not merely a contractor. The Commissioner cited various tribunal decisions supporting this interpretation and allowed the assessee's claim for deduction, directing the Assessing Officer to delete the disallowed amount.

2. Classification as a 'Developer' or 'Contractor':
The Departmental Representative argued that the assessee was a contractor, not a developer, as it executed work contracts awarded by clients and did not invest its own funds in developing infrastructure facilities. The assessee, on the other hand, contended that it was engaged in developing infrastructure facilities and satisfied all conditions mentioned in Section 80IA(4). The assessee's representative cited various tribunal and high court decisions, including the Bombay High Court's ruling in CIT v. ABG Heavy Industries Ltd., which clarified that the conditions of developing, operating, and maintaining infrastructure facilities are not cumulative. Therefore, an enterprise engaged in any one of these activities is eligible for deduction. The tribunal agreed with this interpretation, noting that the statutory provisions do not require an enterprise to engage in all three activities to qualify for deduction.

3. Eligibility of Proprietorship Concern:
The tribunal examined whether a proprietorship concern is eligible for deduction under Section 80IA(4). The statutory provision specifies that the enterprise must be owned by a company registered in India or a consortium, authority, board, corporation, or any other body established under any Central or State Act. The tribunal noted that the assessee was a proprietorship concern, which does not fit the definition of an eligible enterprise as per the statutory provision. The tribunal cited the Hyderabad bench's decision in M/s. Ramky Infrastructure Ltd vs. DCIT, which held that only companies or consortiums of companies are eligible for deduction under Section 80IA(4). Consequently, the tribunal concluded that the assessee, being a proprietorship concern, did not satisfy the applicability clause of the provision.

Conclusion:
The tribunal allowed the appeals of the Revenue, holding that the assessee did not qualify for deduction under Section 80IA(4) as it was a proprietorship concern and not an enterprise as defined by the statutory provision. The tribunal did not find it necessary to address the issue of whether the assessee was a developer or contractor, as the primary condition of being an eligible enterprise was not met. The order was pronounced on November 6, 2015, in Chennai.