2023 (5) TMI 111 - AT - Income Tax

Deduction u/s 80IA(4) - non fulfillment of prescribed conditions by the assessee to claim deduction u/s 80IA(4) which is a profit-linked incentive - certificate from concerned Authority that the infrastructural facility forms part of the Port - HELD THAT - The assessee (BSSPL) and KSPL entered into an agreement for the establishment of '8 MMTPA Mechanised Coal Handling System for Unloading and Rail Despatch in Kakinada Deep Water Port at Berth No. 5 and its backup area . KSPL is acting as a nodal agency under the primary agreement between GoAP and ISPL. In this respect, the argument canvassed by the Revenue that the agreement is between assessee and KSPL does not satisfy the condition prescribed in sub-clause (b) of section 80IA(4)(i) is too rigid interpretation and frustrates both, the purpose of creating such nodal agencies and the legislative intent of granting deduction to the assessee engaged in infrastructure development projects. Similar view was taken in the case of DCIT vs. Belair Logistics 2015 (5) TMI 387 - ITAT HYDERABAD wherein the assessee had entered in an agreement with Kakinada Seaport Ltd. ie the same company with whom assessee had an agreement and the deduction claimed under section 80IA(4) was allowed on the basis of port certificate issued to it. Assessee had obtained the permission from Custom Authorities for construction and operation of Mechanised Coal Handling System for which the Commissioner of Central Excise, Customs and Service Tax, Visakhapatnam - II Commissionerate, Visakhapatnam has accorded the permission vide letter dated 01.02.2013. The said permission is deemed to be an approval granted by the competent authority of the Central Government. Documents placed on record, position of law and CBDT circulars, submissions made by both the parties and judicial precedents, as discussed above, we are of considered view to allow the claim of deduction made by the assessee under section 80IA(4) of the Act. Accordingly, ground nos. 01 to 09 taken by the assessee in this respect are allowed.

Summary

Issues Involved:
1. Disallowance of deduction claimed under Section 80IA(4) of the Income-tax Act, 1961.
2. Disallowance of interest on late payments of TDS under Section 40 of the Act.
3. Reference to Transfer Pricing Officer (TPO) and related proceedings.

Summary of Judgment:

Issue 1: Disallowance of Deduction under Section 80IA(4)
The assessee claimed deductions under Section 80IA(4) for the Assessment Years (AY) 2015-16 and 2016-17, which were disallowed by the Assessing Officer (AO) and the Dispute Resolution Panel (DRP) on the grounds that the assessee did not have a direct agreement with the Central or State Government, local authority, or any other statutory body, as required by sub-clause (b) of Section 80IA(4)(i).

The Tribunal observed that the assessee had an agreement with Kakinada Sea Port Limited (KSPL), which was a Special Project Company (SPC) formed under a concession agreement between the Government of Andhra Pradesh (GoAP) and International Sea Ports PTE, Ltd. Singapore (ISPL). The Tribunal noted that KSPL acted as a nodal agency for GoAP, and the agreement between the assessee and KSPL should be considered as satisfying the requirement of an agreement with a statutory body.

The Tribunal also referred to CBDT Circular No. 10/2005, which relaxed the condition of having a direct agreement with the government, provided the infrastructure facility is certified by the concerned port authority. The assessee had obtained such a certificate from the Port Officer, Port Department, GoAP, certifying that the infrastructure facility developed by the assessee was part of the Kakinada Deep Water Port.

Additionally, the Tribunal cited various judicial precedents, including the decision of the Hon'ble High Court of Gujarat in CIT vs. Ranjit Projects Pvt. Ltd. and the ITAT Mumbai decision in United Liner Agencies of India (Private) Ltd. vs. JCIT (OSD), which supported the view that agreements with nodal agencies like KSPL fulfill the requirements of Section 80IA(4).

Based on these observations, the Tribunal allowed the assessee's claim for deduction under Section 80IA(4) for both AY 2015-16 and 2016-17.

Issue 2: Disallowance of Interest on Late Payments of TDS
The Tribunal noted that the assessee did not press the grounds related to the disallowance of interest on late payments of TDS for both assessment years. Accordingly, these grounds were dismissed as not pressed.

Issue 3: Reference to Transfer Pricing Officer (TPO)
For AY 2016-17, the assessee raised an issue regarding the reference to the TPO by the AO. The Tribunal noted that this ground was not pressed by the assessee and thus dismissed it as not pressed.

Conclusion:
The Tribunal allowed the appeals partly, granting the deduction under Section 80IA(4) for both AY 2015-16 and 2016-17, while dismissing the other grounds as not pressed. The judgment was pronounced on 25 April 2023 in Kolkata.