2016 (6) TMI 1408 - AT - Income Tax

Tribunal affirms assessee's entitlement to deduction under section 80IA(4) for cargo-handling operations

The Deputy Commissioner of Income Tax Versus M/s. Menzies Aviation Bobba (B’lore) Private Ltd.

The Deputy Commissioner of Income Tax Versus M/s. Menzies Aviation Bobba (B’lore) Private Ltd. - TMI Issues Involved:1. Whether the assessee company is eligible for deduction under section 80IA(4)(i) of the Income-tax Act, 1961.2. Whether Bangalore International Airport Limited (BIAL) qualifies as a statutory body for the purpose of section 80IA(4)(i)(b).3. Whether the cargo handling facility constitutes an integral part of airport operations and qualifies as 'infrastructure facilities' under section 80IA(4).4. Whether the assessee is merely a contractor or a developer of the infrastructure facility.Issue-wise Detailed Analysis:1. Eligibility for Deduction under Section 80IA(4)(i):The assessee company, engaged in providing cargo facilities at Bangalore International Airport, claimed a deduction under section 80IA(4)(i) of the Income-tax Act, 1961. The conditions for claiming this deduction require the company to have an agreement with the Central Government, State Government, local authority, or any statutory body for developing, operating, and maintaining a new infrastructure facility, which includes an airport. The assessee argued that their agreement with BIAL fulfills this condition, as BIAL is authorized by the Government of India to grant such rights.2. BIAL as a Statutory Body:The CIT(Appeals) noted that BIAL, established by Karnataka State Industrial Infrastructure Development Corporation (KSIIDC), is a statutory body as per the definition of the Parliament (Prevention of Disqualification) Act. The CIT(A) found that BIAL was formed as a wholly-owned subsidiary of the State Government of Karnataka and obtained necessary clearances under central laws to build and operate an airport facility. The CIT(A) concluded that BIAL is a 'statutory body' for the purpose of section 80IA(4)(i)(b).3. Cargo Handling Facility as Part of Airport Operations:The CIT(A) addressed whether handling cargo constitutes an integral part of airport operations. The CIT(A) observed that commercial cargo handling is an integral part of air traffic operations and that the cargo-handling area is located within the airport, linked with critical infrastructure like security, customs, and X-rays. The CIT(A) concluded that the cargo handling facility is very much a part of the airport operations and thus qualifies as 'infrastructure facilities' under section 80IA(4).4. Contractor vs. Developer:The AO argued that the assessee is merely a contractor and not a developer of the infrastructure facility. However, the CIT(A) and the Tribunal found that the SPRH Agreement gives the assessee rights for the design, construction, financing, testing, commissioning, maintenance, management, and operation of the cargo facility on a BOT basis, with the facility to be transferred to BIAL at the end of the term. The Tribunal noted that the assessee is not just a contractor but is involved in developing, operating, and maintaining the cargo facility, thus fulfilling the conditions under section 80IA(4).Separate Judgments:The Tribunal referred to its previous decision for the AY 2009-10, where it was held that BIAL is not a statutory body. However, in a subsequent order, the Tribunal followed the High Court's decision, which accepted BIAL as a statutory body. The Tribunal also referred to the Hyderabad Tribunal's decision in GVPR Engineers Ltd Vs. ACIT, which distinguished between a contractor and a developer, supporting the assessee's case.Conclusion:The Tribunal dismissed the Revenue's appeal, affirming that the assessee is entitled to the deduction under section 80IA(4) as all conditions set out by the section are fulfilled in the cargo-handling operations under a BOT arrangement with BIAL. The Tribunal upheld the CIT(A)'s findings that BIAL is a statutory body, the cargo handling facility is an integral part of airport operations, and the assessee is a developer and not merely a contractor.