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2019 (4) TMI 684 - HC - Income TaxBenefit of deduction u/s 80IA to transferee or assignee - assessee undertaken the work of developing the railway sidings and was operating and maintaining the same - As alleged assessee does not satisfy the proviso to sub-section 4 of Section 80IA - Assessee himself did not enter into any such contract with the Railways or with the Central Government - Tribunal allowed claim as 80IA(4) of the Act, especially, the Provisos thereto, permits even the transferee of an infrastructure facility to avail such deduction - HELD THAT - Tribunal in our opinion, rightly applied the Proviso to Section 80IA(4) of the Act and held that since the Assessee was recognised as contractor for these railway sidings, which undoubtedly fell under the definition of infrastructure facility , it was entitled to the said benefit under Section 80IA of the Act. The grounds on which the Assessing Authority denied the said benefit to the Assessee ignoring the effect of Provisos to Section 80IA(4), therefore, could not be sustained. Tribunal, in our opinion, has rightly held that the Proviso does not require that there should be a direct agreement between the transferee enterprise and the specified authority for availing the benefit under Section 80IA of the Act. There is no dispute before us that the Assessee was duly recognised as transferee or assignee of the principal contractor M/s.ST-CMS Company Private Limited and was duly so recognised by the Railways to operate and maintain the said railway sidings at Vadalur and Uthangalmangalam Railway Stations. The findings of fact with regard to the said position recorded by the learned Tribunal are, therefore, unassailable and that clearly attracted the first Proviso to Section 80IA(4) of the Act. - Decided in favour of assessee.
Issues Involved:
1. Eligibility of the Assessee for deduction under Section 80IA of the Income Tax Act, 1961. 2. Applicability of Explanation 13 to Section 80IA introduced by the Finance Act, 2007, with retrospective effect from 1.4.2000, to a sub-contractor. Issue-wise Detailed Analysis: 1. Eligibility of the Assessee for deduction under Section 80IA of the Income Tax Act, 1961: The Revenue filed an appeal challenging the Tribunal's decision that allowed the Assessee to claim a deduction under Section 80IA of the Income Tax Act for the Assessment Year 2006-2007. The Revenue argued that the Assessee, being a sub-contractor, did not satisfy the conditions stipulated under Section 80IA(4) of the Act, which requires a direct agreement with the specified authority (Central Government, State Government, or Local Authority). The Assessee countered that the Provisos to Section 80IA(4) permit even a transferee of an infrastructure facility to avail of the deduction. The Tribunal, after examining the facts and submissions, found that the Assessee was recognized as a contractor by the Railways and had provided an "infrastructure facility" under an agreement with M/s.ST-CMS Electric Company Private Limited. The Tribunal concluded that the Proviso to Section 80IA(4) does not necessitate a direct agreement between the transferee enterprise and the specified authority, thus entitling the Assessee to the deduction. The High Court upheld the Tribunal's decision, stating that the Proviso to Section 80IA(4) extends the benefit to a transferee or contractor recognized by the concerned authority, provided the conditions are met. The Court noted that the Assessee was duly recognized by the Railways to operate and maintain the railway sidings, which fell under the definition of "infrastructure facility." Therefore, the Tribunal rightly applied the Proviso, allowing the deduction under Section 80IA. 2. Applicability of Explanation 13 to Section 80IA introduced by the Finance Act, 2007, with retrospective effect from 1.4.2000, to a sub-contractor: The Revenue argued that Explanation 13 to Section 80IA, introduced by the Finance Act, 2007, with retrospective effect from 1.4.2000, disallows deductions to a sub-contractor. The Tribunal, however, did not address this specific argument in its findings. The High Court, while analyzing the Proviso to Section 80IA(4), concluded that the Proviso does not require a direct agreement between the transferee enterprise and the specified authority. The Court emphasized that the Assessee was recognized as a transferee or assignee of the principal contractor and was duly recognized by the Railways. The Court found no merit in the Revenue's argument, as the Proviso clearly applied to the Assessee's situation, allowing the deduction under Section 80IA. The High Court also distinguished the present case from the case of M/s.Covanta Samalpatti Operating Private Limited, where the Assessee was only a contractor for maintenance work and not entitled to the deduction. The Court noted that the facts of the present case were different, as the Assessee was involved in developing, operating, and maintaining infrastructure facilities, thus qualifying for the deduction under Section 80IA. Conclusion: The High Court dismissed the Revenue's appeal, affirming the Tribunal's decision to allow the Assessee's claim for deduction under Section 80IA. The Court held that the Assessee met the conditions stipulated under the Proviso to Section 80IA(4) and was entitled to the deduction, answering the questions of law in favor of the Assessee and against the Revenue.
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