2016 (10) TMI 497 - AT - Income Tax

Tribunal grants deduction for infrastructure facility under Section 80IA(4) of Income Tax Act

Hyderabad Menzies Air Cargo P. Ltd. Versus DCIT, Circle-2 (2), Hyderabad.

The Tribunal allowed the appeals, determining that the assessee is entitled to a deduction under section 80IA(4) of the Income Tax Act, 1961. The cargo ... Deduction under section 80IA(4) - eligibility - whether the Cargo facility being operated and maintained by the assessee is an ‘infrastructure facility’ within the meaning of section 80IA(4) of the Act? - Held that:- Under the Explanation to section 80IA(4), the definition of ‘infrastructure facility’ includes airport within its scope and the cargo facility is an integral part of the airport. The Coordinate Bench of this Tribunal at Bangalore in the case of Menzies Aviation Bobba (Bangalore) Pvt. Ltd (2015 (11) TMI 401 - ITAT BANGALORE ) has held the ‘cargo facility’ to be infrastructure facility eligible for deduction u/s 80IA(4) of the Act. Further, it is seen that GHIAL has constructed the Cargo building as per the specification of the Menzies and Menzies has provided the facilities at the cargo building and while GHIAL has leased out the cargo terminal to the assessee, Menzies has leased the facilities to the assessee and it is the responsibility of the assessee to operate and maintain the cargo facility in accordance with the obligation of GHIAL to operate and maintain the facility by virtue of the concession granted by the Govt. of India. Each assessee is eligible to claim deduction u/s 80IA(4)(i) of the Act only in relation to the activity carried on by it and there cannot be any duplication of the claim. Therefore, we are of the opinion that the ‘Cargo facility’ operated and maintained by the assessee is infrastructure facility eligible for deduction u/s 80IA(4) of the Act. Assessee has not entered into any agreement with the Central Govt., or State Govt. or local authority or a statutory body as provided u/s 80IA(4) - Held that:- The assessee has applied to the Government of India, Ministry of Civil Aviation for registration as a Regulated Agent for handling the Cargo facilities at Hyderabad International Airport and vide letter dated 24.11.2008, the assessee was granted the registration while GHIAL has granted the assessee the right to handle the Cargo facilities by virtue of the agreement. The assessee’s contention is that the assessee has been recognized also as a ‘Service Provider Right Holder’ as stipulated under the Concession Agreement itself and that further that the Government has recognized the assessee as ‘a Regulated Agent’ and therefore, the decision of the Hon’ble Madras High Court in the case of CIT, Chennai vs. AL Logistics (P) Ltd.[2015 (1) TMI 401 - MADRAS HIGH COURT] is applicable to the assessee and the assessee’s contention that since the assessee has been given approval by the Ministry of Civil Aviation, it is not necessary to enter into a specific and independent agreement with the Government for claiming deduction under section 80IA of the Act, has to be accepted. - Decided in favour of assessee Issues Involved:1. Eligibility for deduction under section 80IA(4) of the I.T. Act, 1961.2. Interpretation of agreements with statutory bodies and the Government.3. Definition and scope of 'infrastructure facility' under section 80IA(4).4. Requirements for specific agreements with the Government.Issue-wise Detailed Analysis:1. Eligibility for deduction under section 80IA(4) of the I.T. Act, 1961:The main question was whether the assessee was eligible for deduction under section 80IA(4). The Assessing Officer and CIT(A) disallowed the claim, arguing that the assessee did not create new infrastructure but only operated an existing leased facility. The Tribunal found that section 80IA(4) allows deductions for developing, operating, and maintaining infrastructure facilities. The cargo facility at the Hyderabad International Airport, operated and maintained by the assessee, falls under 'infrastructure facility' as per section 80IA(4).2. Interpretation of agreements with statutory bodies and the Government:The assessee argued that the agreement with GHIAL, authorized by the Government of India, suffices for compliance with section 80IA(4). The Tribunal noted that GHIAL had the right to assign activities to other service providers, and the assessee's agreement with GHIAL was in line with this authorization. The Tribunal referenced the case of Ocean Sparkles Ltd., where similar sub-contracting agreements were deemed sufficient for section 80IA(4) compliance.3. Definition and scope of 'infrastructure facility' under section 80IA(4):The Tribunal examined whether the cargo facility qualifies as an 'infrastructure facility.' It referenced the Hon'ble Madras High Court's decision in AL Logistics (P) Ltd., which recognized container freight stations as infrastructure facilities. The Tribunal concluded that the cargo handling facility at the airport, being integral to airport operations, qualifies as an infrastructure facility under section 80IA(4).4. Requirements for specific agreements with the Government:The Tribunal addressed whether a separate agreement with the Government was necessary. It cited the Hon'ble Madras High Court's decision in A.L. Logistics P. Ltd., which held that compliance with conditions set by the Government suffices without a specific agreement. The Tribunal found that the assessee's registration as a Regulated Agent and approval from the Ministry of Civil Aviation met the necessary conditions, thus negating the need for a separate agreement.Conclusion:The Tribunal allowed the appeals, concluding that the assessee is eligible for deduction under section 80IA(4). The cargo facility operated and maintained by the assessee qualifies as an infrastructure facility. The agreements with GHIAL, authorized by the Government, and the approvals from various government departments, fulfill the requirements of section 80IA(4). The Tribunal did not find it necessary to adjudicate whether GHIAL is a statutory body, as the assessee's compliance with section 80IA(4) was already established.