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TMI Blog2020 (12) TMI 851X X X X Extracts X X X X X X X X Extracts X X X X ..... 1992 (10) TMI 5 - BOMBAY HIGH COURT] and PAUL BROTHERS [ 1992 (10) TMI 5 - BOMBAY HIGH COURT] The fact that the contract has been awarded by respective Municipal Authorities does not make the assessee ineligible for claim of deduction u/s 80IA of the Act, as substantial work of Solid Waste Management is carried out by the assessee and not the Municipal Authorities. Further section 80IA(4)(i)(b) of the Act requires the assessee to enter into an agreement with the Government for carrying out such an activity and, therefore, the assessee fulfils all the conditions of section 80IA of the Act to be eligible for deduction under the said section. The assessee has been claiming deduction u/s 80IA(4) of the Act on the income earned by it from the activity of solid waste management. There is no dispute that Solid Waste Management System is one of the infrastructure facilities as defined in Explanation to the section 80IA(4) of the Act, which entitles the assessee to claim deduction for the consecutive period of 10 years. In seeking the purpose of a contract, one should treat the contract as a whole. A contract is an integrative framework. Its different parts are entwined. Its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... During the course of assessment proceedings, it is observed by the Assessing Officer (AO) that the main issue involved is whether the assessee is eligible for claiming deduction u/s 80IA(4) of the Act or not. In response to query raised by the AO to explain the above claim, the assessee filed a reply which is extracted at para 4.3 (page 4-6) of the assessment order. The AO was not convinced with the said reply of the assessee on the ground that there is one major contract with Municipal Corporation of Greater Mumbai (MCGM) and this contract is for supply of vehicles for lifting the garbage at different points and paid as per weight lifted. Therefore, the AO arrived at a finding that it was purely hiring of vehicles for collection and transportation of municipal solid waste including common house gully materials and also materials removed from the slums of various zones. As per the AO, the management of the system is with MCGM ; even penalty clause also refers to the supply of vehicles and this is purely a works contract for supply of vehicle as per rate contract agreed upon and not a solid waste management system developed/operated/maintained by the assessee. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... back to its original location. The above contract work reveals that the appellant has to only collect / lift the container filled with the waste and upload to the processing / treatment sites. The work of processing / treatment, has been awarded to another contractor, who, in real sense, is entitled for deduction u/s. 80IA(4), as the processing / treatment of waste, is done after creating proper infrastructure, processing units and disposal of them, by generating various useful product such as compost, electricity, hygienic water, brick etc. 4) Bhiwandi Nizampur City Municipal Corporation The Contractor/appellant has to carry out door to door collection and transportation of solid waste to final disposal site. The contractor has also to set up compost plant at operation site and hand over to the corporation, as per their requirements. 5) Kalyan Dombivli Municipal Corporation - The Contractor /appellant has to do the work of lifting of sweeping of MSW from all roads, side lanes and the interior roads, slums, residential area, commercial area, door to door collection of MSW in the tender area, providing community. Collection / placer bins, as required in the residential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal disposal site, by deploying the necessary vehicles, specially designed for the work. 9) Navi Mumbai Municipal Corporation (MIDC) The Contractor /appellant has to carry out the work of cleaning, collection and transportation of waste from residential areas, debris / construction sites, lifting of waste bins / containers to the final disposal site. 10) Amritsar Municipal Corporation - The Contractor /appellant has to carry out the work of door to door collection / segregation, storage and transportation of solid waste to the final disposal site by deploying the necessary vehicles. 11) Poonamallee Municipal Corporation - The Contractor /appellant has to carry out the collection and transportation of garbage etc., as above, from residential area, commercial area etc. to the final disposal site. 12) Tambaram Municipal Council - The Contractor /appellant has to create awareness regarding solid waste management among the public and collection of solid waste, dead animals, cleaning of drainage, street, collecting waste and transporting the same to the final disposal site. 13) Delhi Cantonment Board / Area - The Contractor /appellant has to carry out the work of hiring of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue of claim of deduction u/s 80IA of the Act, held that the assessee is eligible for deduction being engaged in the activity of Solid Waste Management ; for AY 2003-04, the AO specifically raised the issue as to whether the assessee is engaged in Solid Waste Management activity or is merely a contractor who has been awarded a contract by the Government ; the AO gave a specific finding that the assessee is engaged in Solid Waste Management and hence, eligible for deduction u/s 80IA(4) of the Act ; similar findings have been given by the AO for AY 2004-05, 2005-06 and 2009-10. Thus it is stated by the Ld. counsel that neither the AO nor the CIT(A) has pointed out any change in facts in the present years as compared to earlier years. Relying on the decision by the Hon ble Bombay High Court in CIT v. Western Outer Interactive Pvt. Ltd., 349 ITR 309, Simple Products Food Pvt. Ltd. v. CIT 84 taxmann.com, 239 and CIT v. Paul Brothers, 216 ITR 548, it is argued that once a deduction has been allowed to an assessee in the initial assessment years, the deduction cannot be disallowed in the subsequent years unless the deduction is so withdrawn from the initial years. It is further e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets and public places within the area of Bhiwandi-Nizampur City covering all Kilometers roads and lanes in the entire area of the Corporation on Build / Own, Operate, Maintain and Transfer of immovable infrastructure basis, and b. Setting up compost plant for the Organic waste for the organic was collected from slaughterhouse, cow dung's, vegetable and fish market and solid waste which has 90% organic waste. Thus it is stated that the assessee is clearly engaged in development, operation and maintenance of Solid Waste Management as it is responsible for collection, segregation of dry and wet waste, transportation and disposal of the said waste at the disposal site; for carrying on the business, the assessee is required to utilize its own plant and machinery in the form of handcart, tricycle etc. for primary collection or waste ; the assessee is further required to use refuse compactors, hook containers / dump placers / slide loaders and hydraulic vehicles for collection of transportation of the dry and wet waste garbage ; the assessee is also required to deploy and position the dustbins at various locations for collection of garbage ; the assessee is further required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Government for carrying out such an activity and, therefore, the assessee fulfils all the conditions of section 80IA of the Act to be eligible for deduction under the said section. B 6. On the other hand, the Ld. Departmental Representative (DR) submits that deduction u/s 80IA was allowed in scrutiny assessment for the first time in AY 2003-04 ; AO erroneously accepted that assessee s work of collection and segregation and providing manpower and deploying specialized, mechanized vehicles to transport the municipal solid waste qualified for deduction u/s 80IA; subsequently, in the assessment years, deduction u/s 80IA was allowed u/s 143(3) merely by stating that it was allowed in the previous years. Explaining that collection, segregation and disposal of waste alone will not qualify for deduction u/s 80IA for solid waste management ; there must be an infrastructure facility to treat the waste or produce something out of the waste ; the assessee s contract ends with disposal alone, the Ld. DR draws our attention to the following paragraphs of the order of the Tribunal in Antony Motors (P.) Ltd. (supra), a sister concern of the assessee : The intention of the legis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osal activities; the assessee was not maintaining any infrastructure facility towards resource recovery and waste transformation; therefore, the action of the AO and Ld. CIT(A) in denying deduction u/s 80IA is in order. Finally, the Ld. DR relies on the decision in Hindustan Lever Ltd. v. JCIT 104 taxmann.com 215 (Calcutta) and Covanta Samalpatti Operating Ltd. v. ACIT 93 taxmann.com 38 (Madras). C 7. In the rejoinder, the Ld. counsel explains that Antony Motors Pvt. Ltd. (supra) is not applicable to the present case on the ground that (i) from paragraph 3 of the decision, it is clear that the Tribunal in that case was concerned with claim of deduction in first/initial assessment years and not the subsequent assessment years, as in the present case, (ii) the facts in that case are completely different from the instant case in the decision on Antony Motors (supra), from the last three lines of Para 3, it is clear that the assessee therein was merely engaged, assigned the task of collection of the waste on the beach and to dump it in notified sites on the beach which in turn would be collected by the Municipal Authorities ; therefore, in the said case, the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Waste Handling Cell. Pvt. Ltd., as the Contractor to collect dry and wet garbage from within the Municipal Area of the Municipal Corporation (excluding TTC MIDC area) and transporting the same up to Land Fill Site as specified by Municipal Corporation from time to time. The contract work includes collection of wet and dry garbage from individual household as well as cooperative housing society through primary collection method by use of handcart, tricycle/three wheelers and HDPE bins. The contract work also includes positioning / deployment of HDPE dustbins having capacity of 240 litres, 660 litres 1100 litres as specified in the tender. The said work also includes use of Refuse Compactors, Hook Container/Dumper Placer/Side Loader as well as use of Hydraulic vehicle of a compact body having capacity of 1 to 1.5 ton. 2. The contractor agrees and undertake to collect wet and dry municipal solid waste through door to door collection from the above mentioned area of the Municipal Corporation and the same to be transported from the premises where it is collected at the site of Land Fill Site as may be specified by Municipal Corporation. 3. The areas from where the garbage is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tender aims at providing the services in an integrated manner for all types of wastes -garbage recyclable , debris and construction waste, silt, green waste, carcass etc. The prime goal of Ulhasnagar Municipal Corporation in taking the steps forward and introducing state of art system and technology for the services are: Ensure health and hygiene for the entire population in Ulhasnagar, citizens, visitors, workers in solid waste management. Improve productivity, man, material and equipments (adapted proven efficient system and equipments) Promote economic operations of the services. Promote and protect quality and substantiality of the urban environment. 8.3 In the agreement dated 05.07.2004 entered between the assessee and Greater Noida Industrial Development Authority it is mentioned that the contractor (the present assessee) shall segregate the collected waste into biodegradable and non-bio-degradable waste and hand over the waste collected to the contractor appointed by GNIDA for collection of solid waste at places specified by GNIDA. 8.4 In the agreement dated 23.09.2004 entered between the assessee and Ahmedabad Municipal Corporation, it is state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al area, commercial area, door to door collection of MSW in the Tender Area, providing community, collection/placer bins as required in residential as well as commercial areas and transportation of the same to the collection points, if any. b) Secondary Collection: Collection and transportation of the MSW from the Collection Points to the Disposal Area and unloading of the same. 8.7 In the agreement dated 31.08.2006 entered between the assessee and Greater Noida Industrial Development Authority, we find similar nature of work. 8.8 In the work order dated 11.05.2006 given to the assessee by CIDCO of Maharashtra Ltd., the work specifications are stipulated as under : Collection, Transfer and Transportation of Municipal Solid Waste up to the site of processing and final disposal and operation maintenance of the system/process on build, own and operate (B-O-O) basis, for the entire area of CIDCO in Navi Mumbai. The work specifications outline work coverage, quantum of work, timing frequencies of work, method of word, vehicles, equipment, accessories, systems materials to be used, methodology of work plan its implementation, and process of measuring performance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f making the town ; garbage - free . (d) The IEC activities conducted by you should promote the awareness about waste management principles among citizens and other stake holders. (e) IEC activities should be insisted to your staff also to ensure minimizing the multiple and manual handling of waste. 8.11 In the agreement dated 11.05.2009 entered between the assessee and Delhi Cantonment Board, the nature of work was hiring of Conservancy Vehicles (4 refuse compactors) for transportation of solid waste from Delhi Cantonment Area. B 9. A perusal of the Manual on Municipal Solid Waste Management by Central Public Health Engineering Organization clearly indicates that an effective waste management system includes one or more of the following options : (a) Waste collection and transportation. (b) Resource recovery through sorting and recycling i.e. recovery of materials (such as paper, glass, metals) etc, through separation. (c) Resource recovery through waste processing i.e. recovery of materials (such as compost) or recovery of energy through biological, thermal or other processes. (d) Waste transformation (without recovery of resources) i.e. reducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties must be gathered from the language used in the contract by adopting harmonious construction of all the clauses contained therein. The cardinal principle is to ascertain the intention of the parties to the contract through the words they have used, which are key to open the mind of the makers. It is seldom that any technical or pedantic rule of construction can be brought to bear on their construction. The guiding rule really is to ascertain the natural and ordinary sensible meaning to the language through which the parties have expressed themselves, unless the meaning leads to absurdity. C 12. In ABG Heavy Industries Ltd. (supra), relied on by the Ld. counsel, the assessee was a company registered in India, which had started its operations after 1-4-1995. It had entered into two contracts on 2-9-1994 and 16-10-1995 with a local authority i.e., a port for supply, installation, testing, commissioning and maintenance of the cranes on lease for a period of ten years at the container terminal of said port. The assessee claimed that as it was operating infrastructure facility at port, it would be entitled to claim deduction under section 80-IA and, therefore, book prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee in order to be entitled to the claim deduction under section 80-1A had to fulfil the following conditions: (a ) whether it was an infrastructure facility falling within the definition provided in section 80-1A(12)(ca); (b)whether the operations had started on or after 1-4-1995; (c)whether the assessee had entered into an agreement with Central / State Govt., local authority for the development, maintenance and operation of any new infrastructure facility; In the facts of the instant case, the assessee was a company registered in India, which had started its operations after 1-4-1995. The assessee had entered into an agreement with a local authority, i.e., the port in question for the development, maintenance and operation of infrastructure facility being a Port. The definition of Port for the purpose of section 80-IA has been enlarged by the Circular No. 793 dated 23-6-2000 issued by the CBDT. As per said circular structures at ports for storage, loading and unloading etc. would fall under the definition of Port for the purposes of sections 10(23G) and 80-IA, if the following conditions are fulfilled: (a )the concerned port authority has issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of ten years contract period. One of the clause of the Agreement dated 2-9-1994 provided that the equipment would be operational round the clock and the staff shall be deployed by the assessee round the clock for the maintenance of the equipment. In the indemnity clause, it had been provided that in case any damage occurs to the existing structures due to assessee s operation, the same would be made good by the assessee at its risk and cost. The Insurance for maintenance and operation was to be provided by the assessee. One of the clause (xxix) of the agreement stipulated the assessee to comply with all the provisions of labour laws, with regard to the employees deployed for erection, testing, commissioning, operation and maintenance of the equipment. The assessee had also filed the list of personnel deployed at port for overall operation and maintenance of the infrastructure facilities during the assessment year 1997-98. The perusal of the said list provided that the assessed had employed the senior manager (operations), manager (operations), asstt. manager (operations) and five deputy manager (operations), in addition to the assistant engineers employed by the assessee and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racts to the assessee on 2nd September 1994 and 16th October 1995 for supply, installation, testing, commissioning and maintenance of Container Handling equipment on lease for a period of ten years for loading and unloading of containers at the Port and that the cranes that were to be supplied by the assessee form an integral part of the Port. JNPT clarified that the contracts have been executed under the BOLT Scheme and in accordance with its directions, the cranes would be transferred to the Port Trust at no cost on the expiry of a period of ten years of the commencement of the contract. 16. Now, it is in the background of the evolution of the law that the controversy in the present case would have to be considered. The contention of the Revenue is that the assessee was not engaged in developing the facility at all and that under the Contract that was entered into between the assessee and JNPT all that the assessee was required to carry out was to supply and install cranes at the Port. The submission cannot be accepted. The expression 'development' has not been artificially defined for the purposes of Section 80IA of the Act and must, therefore, receive its ordinary an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the cranes for a term of ten years after which the cranes were to vest in JNPT free of cost. An assessee did not have to develop the entire port in order to qualify for a deduction under Section 80IA. Parliament did not legislate a condition impossible of compliance. A port is defined to be an infrastructure facility and the circular of the Board clarified that a structure for loading, unloading, storage etc. at a port would qualify for deduction under Section 80IA. The condition of a certificate from the Port Authority was fulfilled and JNPT certified that the facility provided by the assessee was an integral part of the port. The assessee developed the facility on a BOLT basis under the contract with JNPT. On the fulfillment of the lease of ten years, there was a vesting in the JNPT free of cost. [Emphasis, by underlining, supplied by us] 12.1 In the light of the ratio laid down in the above decision, we are of the considered view that the assessee is entitled to claim of deduction u/s 80IA(4) of the Act. We may mention here that in view of the above decision of the Hon ble Bombay High Court, the instant case is distinguishable from the decision in Antony Motors (P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be disposed in an Engineered Sanitary Land Fill. B. Amritsar Municipal Corporation is responsible for providing municipal and civic services, which includes the collection, transportation and disposal of Municipal Solid Waste generated in the city. AMC is required to undertake the MSW management as per the MSW Rules 2000. The fact that the contract has been awarded by respective Municipal Authorities does not make the assessee ineligible for claim of deduction u/s 80IA of the Act, as substantial work of Solid Waste Management is carried out by the assessee and not the Municipal Authorities. Further section 80IA(4)(i)(b) of the Act requires the assessee to enter into an agreement with the Government for carrying out such an activity and, therefore, the assessee fulfils all the conditions of section 80IA of the Act to be eligible for deduction under the said section. The assessee has been claiming deduction u/s 80IA(4) of the Act on the income earned by it from the activity of solid waste management. There is no dispute that Solid Waste Management System is one of the infrastructure facilities as defined in Explanation to the section 80IA(4) of the Act, which entitles ..... X X X X Extracts X X X X X X X X Extracts X X X X
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