2024 (10) TMI 36 - HC - Income Tax

Assessee's Section 80IA(4) deduction claim for Mechanised Coal Handling System at port upheld after meeting infrastructure conditions

Principal Commissioner Of Income Tax – 1, Kolkata Versus Bothra Shipping Services Private Limited

The HC upheld the Tribunal's decision allowing the assessee's claim for deduction under Section 80IA(4). The assessee developed a Mechanised Coal Handling ... Deduction u/s 80IA (4) - Whether the assessee satisfies the conditions prescribed in clause (b) of Section 80IA (4)? - HELD THAT:- Assessee has developed the Mechanised Coal Handling System in terms of the agreement entered into by it with KSPL and KSPL is none other than a Special Purpose Company of ISPL, who had entered into an agreement with the Government of Andhra Pradesh. HELD THAT:- Assessee has obtained a certificate dated 11.08.2015 issued by the port authority of the Government of Andhra Pradesh certifying that the infrastructural facility developed for handling of coal through Mechanised Coal Handling System constructed and owned by the assessee are part of the infrastructural facility of the Kakinada deep water port which has been put to use from 13.10.2013. Though the second condition was relaxed by the CBDT Circular, the assessee had placed on record, a letter issued by KSPL which is to the effect that on expiry of the concession period, the structures, building constructed by or belonging to KSPL or their subcontractors, sub lessees, assignees free from all encumbrances and liability shall automatically become property of Government of Andhra Pradesh without any obligation to reimburse therefrom. In terms of the said condition, the Mechanised Coal Handling Terminal Installation of the assessee are to be taken over by the Government of Andhra Pradesh at the expiry of the concession period. Tribunal was also right in coming to the conclusion that the permission obtained from the customs authority by the assessee vide a letter dated 01.02.2013 is deemed to be the approval granted by the competent authority of the Central Government and in this regard, the learned tribunal rightly took note of the decision in the case of A.L. Logistics Private Limited [2015 (1) TMI 401 - MADRAS HIGH COURT] which was affirmed by the Hon’ble Supreme Court in Container Corporation of India Limited [2018 (5) TMI 359 - SUPREME COURT] As under clause 13 power has been granted to appoint its own labour, agents, pilots etc. to carry out all port related activities at deep water port, Kakinada including amongst others handling, storing, marine operations, security etc. Further in terms of the clause 17, the nominee of ISPL among other powers the other authorities to discharge the obligations of the concession agreements. We have no hesitation to hold that the learned tribunal was fully justified in allowing the assessee’s appeal and the impugned order does not call for any interference. Decided in favour of the assessee. Issues Involved:1. Eligibility for deduction under Section 80IA (4) of the Income Tax Act, 1961.2. Applicability of the Gujarat High Court's decision in CIT vs. Ranjit Projects Private Limited.3. Interpretation of fiscal statutes and the application of equitable considerations.4. Compliance with conditions prescribed under Section 80IA (4) (i) (b).Detailed Analysis:1. Eligibility for Deduction under Section 80IA (4):The primary issue was whether the assessee was eligible for deduction under Section 80IA (4) of the Income Tax Act, 1961. The assessee had developed an 8 MMTPA Mechanised Port Handling System at Kakinada Deep Water Port under an agreement with Kakinada Sea Ports Limited (KSPL), which had a concession agreement with the Government of Andhra Pradesh (AP). The assessing officer disallowed the deduction, arguing that the assessee did not have a direct agreement with the government or a statutory body. The tribunal, however, set aside this disallowance, recognizing the agreement between KSPL and the assessee as compliant with Section 80IA (4).2. Applicability of Gujarat High Court's Decision:The revenue contended that the tribunal erroneously applied the Gujarat High Court's decision in CIT vs. Ranjit Projects Private Limited, where the assessee had a direct agreement with a government-owned company. The tribunal noted that the assessee's arrangement, though indirect, was in line with the legislative intent of Section 80IA (4), which aims to promote infrastructure development. The court upheld this view, emphasizing that rigid interpretation would frustrate the purpose of the provision.3. Interpretation of Fiscal Statutes and Equitable Considerations:The revenue argued for a strict interpretation of the statute, citing various precedents that emphasize the literal interpretation of fiscal statutes. The court acknowledged these precedents but also highlighted the beneficial purpose of Section 80IA (4), which aims to incentivize infrastructure development. The court referred to the Supreme Court's decision in Government of Kerala vs. Mother Superior Adoration Convent, which supports a liberal interpretation of exemption provisions with beneficial purposes.4. Compliance with Conditions under Section 80IA (4) (i) (b):The court examined whether the assessee met the conditions prescribed in Section 80IA (4) (i) (b), which requires an agreement with the government or a statutory body. The tribunal found that KSPL, as a nodal agency appointed by the Government of AP, fulfilled this requirement. The court agreed, noting that the assessee had obtained necessary approvals from customs authorities and a certificate from the port authorities, confirming the infrastructural facility as part of Kakinada Deep Water Port. The court also referenced the CBDT Circular No. 10 of 2005, which relaxed the condition of having a direct agreement with the government, further supporting the assessee's eligibility for deduction.Conclusion:The court dismissed the appeals, affirming the tribunal's decision to allow the deduction under Section 80IA (4) to the assessee. The court held that the assessee satisfied the conditions prescribed under the provision, and the interpretation should advance the legislative intent of promoting infrastructure development. The substantial questions of law were answered against the revenue and in favor of the assessee.