2016 (8) TMI 1623 - AT - Income Tax

Infrastructure facility classification: hangar development and operation for exclusive aircraft maintenance qualifies for tax deduction under infrastructure rules.

Whether income from development, operation and maintenance of aircraft hangars constitutes income from an infrastructure facility is resolved by ... Deduction u/s. 80-IB - income from business of repair and maintenance of aircraft derived from infrastructural facility build by the assessee - Whether Development of part of an infrastructural facility qualifies for deduction u/s 80-IA(4)? -definition of the ‘airport’ - whether hangar is an infrastructural facility falling under the definition of airport? AO declined the assessee’s claim on the plea that there are many hangars at the airport and if the assessee's claim that the development of hangar is covered under definition of 'infrastructural facility' is accepted then every structure such as shopping malls, hotels, restaurants which have utility purpose of airport or forming part of airport would be eligible for deduction u/s 80IA - Whether Hangar forms part of 'airport' within the definition of infrastructural facility? - HELD THAT: - Hon’ble Bombay High Court in the case of ABG Heavy Industries [2010 (2) TMI 108 - BOMBAY HIGH COURT] held that the assessee developing cranes for providing loading and unloading services at the port amounts to developing a port which is a infrastructural facility as per section 80IA(4), therefore, the assessee is eligible for deduction u/s. 80IA(4) even if the assessee has developed only a part of the port and not whole port. The legislative intent of the section was to give incentive to investment for infrastructural growth in the country. The CBDT had issued a circular that structures for storage, loading and unloading, etc. will fall within the definition of port for purpose of s. 80-IA of the Act. Under these circumstances the Hon’ble Bombay High Court held that the assessee is eligible for deduction u/s. 80-IA of the Act even if the assessee has not developed the entire port but only developed a part of it. If it is held that hangar is an infrastructural facility falling under the definition of airport then every structure such as shopping malls, hotels, restaurants which have utility purpose of airport or forming part of airport would be eligible for deduction u/s 80IA -We found that the assessee has derived its income from the development of infrastructural facility. The hangar is defined as a shelter to repair and maintain the aircraft. It is evident from the bid document of AAI that bids are invited for constructing hangars for repairing and maintaining the aircraft we found that hangar is the place for repair and maintenance of aircraft and is an essential part of airport. It performs one of the crucial function at Airport. However shopping malls, hotels and restaurants are incidental facilities provided to the customers and it is not that the airport would not function without it. Hangar built by the assessee is an integral part of the airport for the functions it provides and hence would be covered under 'Airport' which is one of the defined infrastructural facility u/s 80IA(4) of the Act. Proper and timely repair, maintenance and overhauling of aircraft is sine qua non of safe operations at airport. The need for security in aerial transportation in present day cannot be over emphasized. Certainly, therefore, this cannot be compared with shopping mall and restaurant which are rather optional facilities. [Paras 8, 11, 12, 13] Final Conclusion: The assessee's appeal was allowed - No merit in the action of the A.O. for decline of claim of deduction u/s. 80-IA(4) with respect to the income derived by the assessee from repair and maintenance of aircraft through hangars. Thus hangar constructed by assessee is not a place merely to park the aircraft. This is a full-fledged repair and maintenance centre for aircraft and hence revenue received on account of repairs and maintenance service is by operation of maintenance of hangar which is an infrastructural facility, eligible for deduction u/s. 80-IA(4). Issues: Whether income derived from development, operation and maintenance of hangars for repair and maintenance of aircraft at an airport amounts to income from an 'infrastructure facility' and therefore qualifies for deduction under Section 80-IA(4) of the Income-tax Act, 1961.Analysis: Section 80-IA(4) expressly includes 'airport' within the definition of 'infrastructure facility.' The agreement and tender documents show the assessee developed, operated and maintained hangars on a BOT basis, obliged to use them exclusively for aircraft maintenance, repair and servicing for the specified concession period. The Aircraft Act definition of 'aerodrome' includes buildings and sheds appertaining to landing and departure areas, establishing that hangars are structures forming part of an airport. Precedents relied upon recognise that developing part of an infrastructural facility (e.g., cranes at a port, runway extension, cargo terminal) satisfies the statute when the structure performs an essential airport function. Policy and judicial authorities support a liberal construction of tax incentive provisions to promote infrastructure investment. Distinguishing incidental commercial amenities (shopping malls, hotels, restaurants) from integral airport infrastructure, the hangar's exclusive maintenance function demonstrates an essential, not optional, role.Conclusion: Income derived from development, operation and maintenance of the hangars for aircraft repair and maintenance qualifies as income from an 'infrastructure facility' under Section 80-IA(4) of the Income-tax Act, 1961, and the deduction claimed under that section is allowable; the assessee's appeal is allowed.