High Court allows infrastructural development deduction under section 80-IA(4)

The Bombay High Court quashed the Tribunal's decision denying the deduction under section 80-IA(4) to the assessee for income from infrastructural development. The Court held that even if the assessee acted as a contractor for a government agency, they were still eligible for the deduction. The Tribunal subsequently ruled in favor of the assessee, allowing the deduction and directing the Assessing Officer to grant it.

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Issues:
- Denial of deduction u/s 80-IA(4) to the assessee for income derived from infrastructural facilities development.

Analysis:
1. The Assessing Officer (AO) denied the deduction claiming the assessee was a contractor employed by the Government, which was considered the main developer of the project. The AO referred to CBDT Circulars and amendments to support the disallowance. The CIT (A) upheld the AO's decision.

2. The Tribunal, following a previous decision, held that the assessee was not entitled to the deduction. The assessee appealed to the Bombay High Court, which quashed the Tribunal's order and remanded the matter for a fresh decision.

3. During the fresh hearing, the assessee's representative highlighted a relevant decision by the Bombay High Court and similar cases decided in favor of the assessee by the Pune Bench of the Tribunal. The Departmental Representative relied on the lower authorities' orders and a retrospective amendment to the Act.

4. The High Court observed that the Tribunal's previous decision had been recalled, leading to the quashing of the Tribunal's order and the matter being remanded for a fresh decision.

5. The High Court's decision in the case of CIT vs. ABG Heavy Industries Ltd was cited, emphasizing that even if the assessee acts as a contractor for a government agency, they are eligible for deduction u/s 80-IA(4). The condition in the Act was to be harmoniously construed with the main provision for the deduction, allowing the assessee to claim the deduction.

6. Following the High Court's interpretation, the Tribunal decided in favor of the assessee, allowing the claimed deduction u/s 80-IA(4). The appeal was consequently allowed, and the Assessing Officer was directed to grant the deduction to the assessee.

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