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TMI Blog2019 (6) TMI 921X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. X X X X Extracts X X X X X X X X Extracts X X X X ..... w Town in Rajarhaat Area. All the above-mentioned activities were carried out by the assessee in accordance with the notification and order issued by the Government of West Bengal. 6. As submitted by the Ld.AR, in the first instance, the Co-ordinate Bench of Kolkata Tribunal vide its order dated 02.12.2015 directed the AO to examine the issue of claim of allowability of deduction u/s 80IA as under:- "Infrastructure facility has been defined under explanation to section 80IA(4)(i) of the Act and the same includes housing or other activities: But that should be integral part of the highway project. The deduction has been claimed by the assessee presumably in respect of project developed at New Town, Rajarhat, Kolkata. Whether it forms part of highway project or not is not clear. Apart from the above the A/R harped on the point that there was a notification by the State Govt. empowering the assessee to develop or operate and maintain infrastructure facility which can be equated to agreement between the assessee and the State Govt. Further observation of the ITAT is that the condition for grant of deduction u/s.80IA(4)(i) of the Act is that the assessee should start operating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sl.No. 3 above. 5) GOVERNMENT OF WEST BENGAL, DEPARTMENT OF HOUSING,NOTIFICATION Dated 12.06.2002 - By the Notification, the assessee was transferred lands acquired by L & L.R. DEPARTMENT with terms and conditions. 6) Deed of agreement dated 25.02.2009 between Housing Department, Government of West Bengal and the assessee company." 8. It is noted from the record and submissions of assessee, it was contended that the assessee had always being involved in development, operation and maintenance of infrastructure facilities and its income earned almost entirely from such business activities i.e. development, operation and maintenance of infrastructure facilities and contended that it is entitled for 100% deduction u/s 80IA(4) of the Act. 9. The AO, on an examination of Profit & Loss A/c found the assessee earned receipts under sale of flats and sale of land and other income to the extent of ₹ 45,10,36,135/- for AY 2005-06 and opined that the 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. The assessee has no income from the activities of infrastructure and dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... infrastructure facility is only to sale the plot of land and housing complexes and does not qualify for the eligible business activity for the purpose of section 801A and hence the claim of the assessee for deduction under section 80IA is hereby disallowed." 12. A perusal of the above finding by the AO, it is noted that the assessee could not fulfil certain criteria. We note that it is in the business of development of infrastructure facility only to sale plots of land and housing complexes which is not qualifying criteria in terms of eligible business activity to claim deduction u/s 80IA of the Act and denied the claim of allowance u/s 80IA of the Act. 13. As aggrieved before the AO, the assessee challenged the order of AO before the CIT(A) in the first appellate proceedings. It is noted from the record that the assessee reiterated the similar submissions as made before the AO. Considering the same, along with the assessment order, the CIT(A) observed that section 80IA provides ten (10) years tax benefit to an entrepreneur or undertaking engaged in development of infrastructure facilities, industrial park and Special Economic Zone. The tax benefit was introduced for the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and gain from any business refer to in sub-section (4) shall be eligible for deduction under this section. The word derived is narrow in definition and does not cover any other ancillary activities. As discussed, only the profits derived from the enterprise carrying on business of developing, operating and maintaining or developing, operating and maintaining any infrastructure facility are eligible for deduction. As held by the Apex Court in the case of Cambay Electric Supply Industrial Co. Ltd. vs. CIT (113 ITR 84) "In this connection it may be pointed out that whenever the Legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor General it has used the expression "derived from". This view was reiterated by the Apex Court in the case of CIT v. Sterling Foods [1999] 237 ITR 579/104 Taxman 204 where it ruled "For that purpose, it relied upon the decision of this Court in Cambay Electric Supply Industrial Co. Ltd. vs. CIT (113 ITR 84). It was there held that the expression "attributable to" was wider in import than the expression "derived from". The expression of wider import, namely, attributable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tax benefit has all along been for encouraging private section participation by way of investment in development of the infrastructure sector and not for the persons who merely execute the civil construction work or any other works contract." The spirit behind the introduction of Section BmA was to encourage private investment in infrastructure projects. The claim of deduction under section 80lA by the appellant, was not only technically not tenable, but was also against the spirit of the section 80IA of the Income tax Act 1961. 5. After careful consideration of the facts of the case, the submission of the AIR, and the relevant assessment records including binding judgements of Apex Court, the claim of deduction of ₹ 3,76,060/- u/s 80IA of the Act is confirmed. This ground of appeal fails and is therefore dismissed. The A.O. is directed accordingly." 14. Before us, in the second appellate proceedings, the Ld.AR submits that all the expenses incurred towards development activities and come under the connotation the definition of 'business'. He referred to agreement which is at page No.1 of Paper Book and particularly at page No.72 and submitted that whole infrastru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of Hon'ble Supreme Court in the case of Meghalaya Steels reported in 383 ITR 217(SC), Merinoply and Chemicals Ltd. reported in 209 ITR 508 and in the case of Cement Manufacturing Co.Ltd. reported in 6 ITR OL 350. 16. In reply, the Ld. DR submits that the assessee did not submit previous order in appeal and referred to page 44 in respect of whether it is a part of highways project or not. The onus is on the assessee to provide details in support of its contentions and to substantiate its claim 80IA of the Act. The sub-section (4) of section 80IA of the Act is meant for only highway project and sub-section (10) of section 80IB is for housing project. In order to claim deduction u/s 80IA(4) of the Act, the housing project should be part of the road i.e. National Highway. It is only a new Town project which is a township and the mandate of the assessee is to develop a township project. The assessee does not deserve to get deduction u/s 80IA(4) as no condition contemplated under sub-section (4) is fulfilled. 17. In counter-claim, the Ld.AR referred to clause (5) & (6) of agreement at page 6 and balance sheet and reiterated the submissions as made before us which are reflected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrying on the business 35[of (i) developing or ( ii) operating and maintaining or (iii) developing, operating and maintaining] any infrastructure facility which fulfils all the following conditions, namely :- (a) it is owned by a company registered in India or by a consortium of such companies; [( b) it 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 the agreement with the Central Government, State Government, local authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any part of India for the generation or generation and distribution of power if it begins to generate power at any time during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, 47[2006]; (b) starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the period beginning on the 1st day of April, 1999 and ending on the 31st day of March, 47[2006] : Provided that the deduction under this section to an 48 [undertaking] under sub-clause (b) shall be allowed only in relation to the profits derived from laying of such network of new lines for transmission or distribution. The following sub-clause (c) shall be inserted after sub-clause (b) of clause (iv) of sub-section (4) of section 80-IA by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005 : (c ) undertakes substantial renovation and modernisation of the existing network of transmission or distribution lines at any time during the period beginning on the 1st day of April, 2004 and ending on the 31st day of March, 2006. Explanation. -For the purposes of this sub-clause, "substantial renovation and modernisation" means an incr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 80IA of the Act. Therefore, the surplus income is eligible for deduction u/s 80IA(4) of the Act. Further, we find 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 of the Act. 22. As pointed out by the Ld.AR, the definition of infrastructure facility is found under explanation to section 80IA(4)(i) of the Act. We note that under explanation (b) to clause infrastructure facility means a highway project including housing or other activities being an integral part of the highway project. But in our opinion, the housing or other activities should be integral part of highway project in order to claim deduction u/s 80IA(4) of the Act. Thus, in our opinion the definition of "housing or other activities" should not be read isolated from an integral part of the highway project. 23. As discussed above, the claim all along by the assessee in respect of project developed at New Town, Kolkata. Admittedly the said project is not an integral part of any highway project in terms of (b) of explanation appended to clause (i) of sub section (4) of section 80IA of the Act. No such material eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X
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