2019 (6) TMI 921 - AT - Income Tax

Deduction u/s 80IA(4) - no income from the eligible business - as per revenue assessee basically engaged in the activities of sale of land and flats in the relevant period and all its receipts are from the sale of land and from other income - HELD THAT - We note that the assessee has no income from the activities of infrastructure development as contemplated in sub-section (4) which is pre-requisite qualification u/s 80IA. Therefore the assessee being involved in development operation and maintenance of infrastructural facilities and its income was earned almost entirely from such business activities i.e. development operation and maintenance of infrastructural facilities is contrary to record i.e. P L A/c. Therefore as rightly found by the AO that the assessee is not eligible to claim deduction u/s 80IA(4) as confirmed by the CIT(A) in his impugned order. On perusal of the balance sheet of the assessee the CIT(A) found that the balance sheet does not reflect any income earned from other developing operating and maintaining or developing operating and maintaining any infrastructural facilities. It is also clear that the assessee did not earn any income as laid down in sub-section (4) of section 80IA. Therefore the surplus income is eligible for deduction u/s 80IA(4) - No infirmity in the finding of CIT(A) in its impugned order that the assessee had no income from eligible business to claim deduction u/s 80IA The assessee failed to substantiate its claim before the two lower authorities. It is noted from the record that the Co-ordinate Bench of this Tribunal vide its order dated 02.12.2015 remanded the matter to the file of AO to examine all the requirements for allowing the aforesaid deduction with a direction to the assessee to provide all the details to substantiate its claim for the deduction u/s 80IA(4)(i). As rightly pointed out by the Ld.DR that there were no such details provided by the assessee before the AO in claiming the said project in New Town is an integral part of highway project. Therefore in our opinion the assessee is not entitled to claim deduction u/s 80IA - Decided against assessee.

Summary

Issues Involved:
1. Denial of deduction under section 80IA(4) of the Income Tax Act for the assessment years 2005-06, 2006-07, 2008-09, and 2009-10.

Issue-wise Detailed Analysis:

1. Denial of Deduction under Section 80IA(4) for AY 2005-06:
The core issue revolves around whether the assessee, a company formed by the State of West Bengal and engaged in infrastructure activities, qualifies for deduction under section 80IA(4) of the Income Tax Act. The assessee claimed that it was involved in developing, operating, and maintaining infrastructure facilities, thus eligible for the deduction. However, the Assessing Officer (AO) found that the assessee's primary income was from the sale of land and flats, not from the operation of infrastructure facilities. The AO held that since there was no revenue from the operation of infrastructure facilities, the assessee did not qualify for the deduction.

The CIT(A) upheld the AO’s decision, emphasizing that the benefit under section 80IA is intended to encourage private investment in infrastructure projects, not for entities merely executing civil construction work. The CIT(A) noted that the income from the sale of land and flats did not qualify as income derived from infrastructure facilities. The CIT(A) further highlighted that the term "derived from" is narrow and does not cover ancillary activities.

2. Similar Issues for AYs 2006-07, 2008-09, and 2009-10:
The issues for these assessment years were identical to those of AY 2005-06. The assessee reiterated similar arguments, claiming eligibility for deduction under section 80IA(4). However, the AO and CIT(A) consistently found that the assessee’s income was primarily from the sale of land and flats, not from the operation of infrastructure facilities. The CIT(A) maintained that the assessee did not meet the criteria for deduction under section 80IA(4), as its activities did not align with the legislative intent of encouraging private investment in infrastructure projects.

Tribunal's Findings and Conclusion:
The Tribunal examined the provisions of section 80IA and reiterated that for a deduction to be allowed, the income must be derived from the business of developing, operating, and maintaining infrastructure facilities. The Tribunal found that the assessee’s income from the sale of land and flats did not meet this criterion. The Tribunal also noted that the assessee failed to substantiate its claim that the New Town project was an integral part of a highway project, as required under the explanation to section 80IA(4).

The Tribunal agreed with the CIT(A) that the purpose of section 80IA is to encourage private investment in infrastructure projects and that the assessee’s activities did not align with this purpose. Consequently, the Tribunal upheld the denial of deduction under section 80IA(4) for all the assessment years in question.

Final Decision:
The appeals filed by the assessee for AYs 2005-06, 2006-07, 2008-09, and 2009-10 were dismissed, confirming the denial of deduction under section 80IA(4) of the Income Tax Act. The Tribunal pronounced the order in the open court on 17.06.2019.