2018 (6) TMI 1577 - HC - Income Tax

High Court Upholds Deduction for Government Road Development Agency

The High Court dismissed the Revenue's appeal regarding the disallowance of deduction under Section 80IA(4) of the Income Tax Act. The Court upheld the ... Disallowance u/s. 80IA(4) - infrastructure development projects for and on behalf of the Government or local authorities - assessee undertaken road development project, for which, it had entered into an agreement with Gujarat State Road Development Corporation which was incorporated by the Government for the special purpose - HELD THAT:- As in AYs 2009-10, 2010-11 and 2011-12 [2018 (5) TMI 1174 - GUJARAT HIGH COURT] confirmed the orders passed by ITAT deleting disallowance and deduction made by the AO u/s 80IA(4) stating condition( b) of subsection (4) of section 80IA requires the assessee to have entered into agreement with the Central Government or a State Government or a local authority or any other statutory authority. However, rigid interpretation of this provision as canvassed by the Revenue would only result into the assessee involved in genuine infrastructure development projects for and on behalf of the Government or local authorities would be denied the deduction merely on the ground that the State Government had created a nodal agency for working out the finer details and nittygritty of such infrastructure development. The purpose of creating such nodal agencies as well as the legislative intent of granting deduction to the assessee engaged in developing, maintaining or operating any infrastructure projects for Central or State Government or local or statutory authorities would frustrate. - Decided against revenue. Issues:1. Disallowance of deduction under Section 80IA(4) of the Income Tax Act.Analysis:The High Court addressed the issue of disallowance of deduction under Section 80IA(4) of the Income Tax Act in the context of an appeal filed by the Revenue against the decision of the Income Tax Appellate Tribunal. The Court noted that a Division Bench had previously ruled in favor of the assessee for earlier assessment years, emphasizing that the assessee, a nodal agency constituted by the State Government for road development projects, qualified as a Government agency under the Act. The Court highlighted significant factors, such as government approvals and involvement in the project, to support its conclusion. The Court rejected the Revenue's argument for a rigid interpretation of the provision, stating that it would hinder genuine infrastructure development projects carried out on behalf of the government or local authorities. Consequently, the Court found no substantial question of law in the present case, given the precedent set by the earlier judgment in favor of the assessee for similar issues in previous assessment years.In conclusion, the High Court dismissed the Revenue's appeal, citing the precedent established by the Division Bench's decision in favor of the assessee for earlier assessment years. The Court found that the assessee, as a nodal agency working on government-approved projects, qualified for the deduction under Section 80IA(4) of the Act. The Court emphasized the importance of not obstructing legitimate infrastructure development projects undertaken for the government or statutory authorities based on a narrow interpretation of the statutory provisions. As a result, the Court upheld the decision of the Income Tax Appellate Tribunal to delete the disallowance of deduction made by the Assessing Officer, in line with the earlier ruling in favor of the assessee for similar issues in previous assessment years.