9911796707
TMI Blog2015 (5) TMI 669X X X X Extracts X X X X X X X X Extracts X X X X ..... ent-assessee is a Private Limited Company engaged in the business of Outdoor Advertisement, Media Advertising and Development of Infrastructure. The assessee filed the return of income claiming deduction under Section 80-IA(4) of the Act, contending that the assessee-Company is involved in infrastructure development. The Assessing Authority issued notice under Section 142(2) of the Act calling upon the assessee to substantiate their claim of deduction under Section 80-IA(4) of the Act. The authorized representative of the assessee made available the records and also contended that the respondent-assessee entered into an agreement with local self-Government i.e. Bruhath Bangalore Mahanagara Palike (for short 'the BBMF') for construction of bus-shelter, erection of lamp posts, beautification of road medians, construction of the footbridge near ISCKON temple and maintenance of the same. The expenditure incurred for the same has to be recouped by utilizing these bus shelters, lamp posts, road medians and footbridge, for their advertisement business. Since the assessee-Company is involved in the development of infrastructure, it is entitled for deduction under Section 80-IA(4) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, but also to maintain the same for a particular period. Therefore, the assessee not only build, but also operate and maintain the said facilities for the stipulated period. Relying upon an unreported judgment of Kolkata Bench in the case of M/S. Vantage Advertisement Private Limited the Tribunal allowed the appeal and held that the assessee is entitled for deduction under Section 80-IA of the Act. 2.4 Being aggrieved by the order passed by the Appellate Tribunal, the Revenue has preferred these three appeals. With the consent of the learned counsel for the parties, these appeals are taken up for final disposal at the stage of admission itself to consider the following substantial questions of law: '(i) Whether the respondent-assessee is entitled to the benefit of deduction under Section 80-IA of the' Income-tax Act, 1961? (ii) Whether the business activity of the respondent-assessee would fall within the ambit of the expression "Infrastructure Facility" as occurred in Section 80-IA of the Income-tax Act, in particular the Explanation appended to sub-Section (4) thereof?' 3. Sri. E.I. Sanmathi, learned counsel appearing for the appellants submitted that the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2009) 317 ITR 218 Liberty India V/s. Commissione r of Income Tax; (3) Unreported decision of this Hon'ble High Court in ITA No.3253/2005 Disposed of on 11.8.2011; (4) (1995) 211 ITR 646 Commissioner of Income Tax V/s. Mayur Laminators; (5) (2005) 139 STC 74 State of Jharkhand and others V/s. Ambay Cements and another; (6) (1996) 101 STC Page 1 State Level Committee and another V/s. Morgardshammar India Ltd.; (7) (1978) 41 STC 409 Polestar Electronic (Pvt.) Ltd., V/s. Additional Commissioner, Sales Tax, and another. (8) (2006) 147 STC 466 Falcon Tyres Ltd., V/s. State of Karnataka and others. 4. On the other hand, Sri Nageshwara Rao, learned counsel appearing for the respondent-assessee argued in support of the order passed by the Tribunal and contended that the assessee is a Private Limited Company incorporated under the Companies Act. It has entered into an agreement with the local authority for infrastructure development such as construction of bus shelters, putting up of footbridge, beautify the road medians and erecting street lights. The infrastructure facility referred to in the Explanation to sub-section (4) of Section 80-IA is inclusive definition. A road includes toll ro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. The records clearly disclose that the assessee is a Private Limited Company mainly engaged in the business of Outdoor Advertisement and Media Advertising. The assessee has entered into an agreement with BBMP on 31-03-2004, 11-07-2004 and 30-11-2004 agreeing to beautify the road median from Dairy Circle to Central Silk Board and the assessee is allowed to put up advertisement boards to recoup the expenditure incurred for beautifying the road median. Further, an agreement was also entered into for construction of 11 bus-shelters in different locations. The bus-shelter shall be constructed as per the specifications and the design supplied by the BBMP. The expenditure incurred for construction of the bus-shelter has to be recovered by the assessee by putting up advertisement hoardings. Further, as per the agreement dated 11-07-2004, the assessee is permitted to install and erect 199 poles providing street light in four roads and permitted to install 199 lit kiosks of 4 ft. x2 ft. (double sided) at the height of 18 feet from the road, so as to recover the expenditure incurred for putting up 199 poles. This agreement is for a limited period and the assessee has to pay the ground rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce with Annexure-C for adherence to design material, equipment, structure specifications. (4) The licensee will be at liberty to utilize the advertisement space model-wise as specified below and more fully described in the drawings: Bus Shelter Model 'A' & 'C: The Advertisement right of the licensee shall be limited to the space available on front side of the back panel, not exceeding an extent of 4' x 15' (as shown in the drawing) as also on both inside and outside faces of one side panel measuring a maximum of 6' in height and 4' in width (as shown in the drawing). The maximum advertisement space considering both back and side panel together shall not exceed 108 sqfeet at any time. Bus Shelter Model B: The advertisement right of the licensee will be confined to the space available on front portion of the back panel of the Bus Shelter measuring a maximum of 4' x 15' (as shown in the drawing). The maximum advertisement space shall not exceed 86 sq. feet at any time. 5. In addition to the License fee the Licensee shall pay all statutory taxes cesses as applicable for in relation to the advertisement and or advertisement space allotted in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifications and subject to limitations terms and conditions specified in the Agreement. 2. Licensee shall maintain the street lights on the 4 roads against commercial advertisement rights. Maintenance will include the following. (i) The lamp posts will be painted at least once in a year including numberings intimated by the First party. (ii) Replacement of fused bulbs will have to be done. (iii) Repair works will be undertaken in case of any damage. (iv) Repair/Replacement of fixtures including chokes, switches etc., whenever required. 3. The Licensee shall provide new 250 watt mental halide bulb whenever the lights get 'Fused' on the above 4 roads mentioned. However, Licensor will provide a vehicle to change the fused lights, whenever such a demand is made. 4. The Licensee shall provide electrical 'Cut-outs' at his cost on all the poles in order to isolate the problem, without disturbing bulbs on other poles. 5. The Licensee shall return all the existing fixtures available on the permitted 4 roads to the Licensor after executing the project. However, the licensee will be permitted to utilize the existing cables if in a usable condition in consultation with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s indicated below. * Mexican grass, Bermuda grass and Shade grass, Shade grass is generally planted under flyovers. * In some places flowering shrubs should be planted to make median more colourful and attractive. * Waterfalls fountains and cascades with illumination shall be installed. * 2 inch gauge ornamental grills of suitable height shall be installed both sides of the medians. 7. The assessee filed return of income claiming deduction under Section 80-IA(4) of the Act contending that it has constructed bus shelters, beautified the road median, put up the street lights and constructed footbridge which is the part of the infrastructure development and is entitled for deduction under Section 80-IA(4) of the Act. Section 80-IA was enacted by the Government in order to give encouragement to the private industries who are involved in infrastructural development. The CBDT circular No.717 dated 14.08.1995, reads as under: 34.2 Industrial modernization requires a massive expansion of, and qualitative improvement in infrastructure. Our country is very deficient in infrastructure such as expressways, highways, airports, ports and rapid urban rail transport systems. Additional resou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995: Provided that where an infrastructure facility is transferred on or after the 1st day of April, 1999 by an enterprise which developed such infrastructure facility (hereafter referred to in this section as the transferor enterprise) to another enterprise (hereafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with agreement with Central Government, State Government local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as fit were the enterprise to which this clause applied and. the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the arrangement is only for a temporary period. The income is derived only from the advertisement and not from the income from infrastructure development. The Assessing Officer after looking into the agreement entered into between the parties and taking into consideration the provision of Section 80-IA came to a conclusion that the work carried on by the assessee will not come under the "Infrastructure Development" and accordingly, denied the benefit under Section 80-IA(4) of the Act. The said order was confirmed by the First Appellate Authority. However, The Appellate Tribunal set aside the order passed by the First Appellate Authority and held that the assessee not only built bus shelters, road medians, street lights, but also maintained the same for a specified period as per the agreement. Hence, the infrastructure work carried out by the assessee falls under the definition of Section 80-IA(4) and entitled for deduction. The said order was questioned by the Revenue. 11. Sri. E.I. Sanmathi, learned counsel appearing for the appellants contended that the word income' derived from eligible business referred to in Section 80-IA is the income derived by developing, operating a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act is to be done in a particular manner and also lays down that failure to comply with the said requirement leads to severe consequences, such requirement would be mandatory. It is the cardinal rule of the interpretation that where a statute provides that a particular thing should be done, it should be done in the manner prescribed and not in any other way. It also well-settled rule of interpretation that where a statute is penal in character, it must be strictly construed and followed". 13. In the instant case, the exemption under Section 80-IA is subject to fulfilment of Section 80-IA(4). The infrastructure facility' has been explained in the explanation. It applies to a road including the toll road or a bridge. That infrastructure facility is of permanent in nature and not temporary construction of bus-shelters, beautification of road median and erection of light poles and temporary construction of footbridge. 14. The Guahati High Court in a judgment reported in (1978) 41 STC 408 (THE ASSISTANT COMMISSIONER OF TAXES AND ANOTHER v/s RANGLAL RAMESWAR SARAUGI) while interpreting the sales tax statute held that when the court is construing a statutory enactment, the intention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to, in the instant case, between the assessee and the BBMP, it is very clear that the assessee has to beautify the road medians of existing roads and put up hi-tech bus-shelters using the modern techniques and material for construction of bus-shelters which in any case cannot be treated as erection/development of permanent infrastructure. At the most, it can be treated as a temporary structure which can be either removed or shifted without any difficulty and hassle. Development of such temporary structure cannot be termed or treated as permanent infrastructure development as contemplated by Section 80-IA of the Act. The Explanation of Section 80-IA make it clear, what infrastructure facility means. In the present case the assessee for erecting bus-shelters has to deposit EMD amount with the BBMP and only after expiry of term of lease, EMD amount will be refunded. One of the requirements of the infrastructure facility is that income has to be derived from the infrastructure developed by the developer. In the instant case, the BBMP imposed a condition that the assessee shall not collect any money from the user of the bus-shelters as well as the footbridge. There is no income from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Income-tax Act, 1961 if the following conditions are fulfilled: (a) The concerned Port Authority has issued a certificate to that the said structure form part of the Port and (b) Such structure have been built under BOT and BOLT scheme and there is an agreement that the same would be transferred to the said authority on the expiry of the time stipulated in the agreement. Hence, the judgments relied upon by the learned counsel for the assessee referred to above is not applicable to the facts of the present case.' 19. It was further contended on behalf of the assessee that a provision in taxing statute granting incentives for promoting growth and development should be construed liberally, relying upon the judgment reported in (1992) 196 ITR 188 (SC) (BAJAJ TEMPO LIMITED v/s COMMISSIONER OF INCOME-TAX).The relevant paragraph read thus: "Denying benefit to such undertaking could not have been intended when the very purpose of Section 15C was to encourage industrialization. It was for this reason that various High Courts evolved the test of commercial expediency or substantial involvement valued in terms of money etc., to interpret this clause. Adopting a literal const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly from the advertisement hoardings erected on the bus-shelters, road medians and the street light poles. Hence, the said income cannot be treated as income derived from the "infrastructure facility. The income earned by the assessee do not fall under Section 80-IA(4). We find that the order passed by the Tribunal is contrary to the intendment of the Act. The benefit under Section 80-IA can be extended only to those assessees who have developed infrastructure facility as defined under sub-Section (4) of Section 80-IA. In the instant case, the assessee has not developed road or a toll road, bridge, highway or a rail system. However, it has developed the existing road median, erected bus-shelters and light poles for its advertisement business, which, in any case cannot be treated as infrastructure development. The order passed by the Tribunal cannot be sustainable. The judgment relied upon by the assessee is not applicable to the facts of the present case. Accordingly, the questions of law in these appeals are held in favour of the Revenue and against the assessee. Hence, we pass the following: ORDER All the three appeals are allowed. The order passed by the Tribunal is set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
