2024 (11) TMI 91 - HC - Income Tax

Contractor qualifies as developer for Section 80IA(4) deduction on airport infrastructure development project

Gujarat HC upheld ITAT's decision allowing Section 80IA(4) deduction to assessee-contractor. Revenue challenged assessee's eligibility as developer under ... Deduction u/s. 80IA (4) - assessee worked as a contractor OR developer - AO disallowed claim as asessee was not eligible in view of the explanation inserted in the Act by Finance Act, 2009 with retrospective effect from 01.04.2000 and the assessee is not the owner of the property as a developer - ITAT held that the respondent-assessee is a developer withing the meaning of Section 80-IA and is eligible to claim the deduction under Sub-section (4) of the said provisions - HELD THAT:- In view of the above concurrent findings of fact arrived at by the CIT (Appeals) and the Tribunal, it cannot be said that the respondent-assessee is not a developer as it is found that the assessee was awarded a contract for full-fledged development of an Airport which is evidently not for any repairs or maintenance or upkeep or revamp of the existing Airport facilities but the assessee was entrusted with the work contract of developing a new infrastructure facility at Sardar Vallabhbhai Patel International Airport and the assesse was supposed to undertake necessary financial and entrepreneurial risk so as to qualify as a developer. Issues Involved:1. Eligibility for deduction under Section 80-IA (4) of the Income Tax Act, 1961.2. Classification of the respondent-assessee as a 'developer' versus a 'contractor.'3. Interpretation of the contract agreement with the Airports Authority of India (AAI).4. Applicability of the precedent set by the Bombay High Court in the case of ABG Heavy Industries Limited.Issue-wise Detailed Analysis:1. Eligibility for Deduction under Section 80-IA (4):The primary issue was whether the respondent-assessee was eligible for a deduction under Section 80-IA (4) of the Income Tax Act, 1961. The Assessing Officer had disallowed the deduction claimed by the assessee on the grounds that the assessee was not the owner of the property as a developer, citing the explanation inserted by the Finance Act, 2009. However, both the CIT (Appeals) and the Tribunal upheld that the respondent-assessee was indeed a developer within the meaning of Section 80-IA (4) and thus eligible for the deduction. The Tribunal emphasized that the assessee was engaged in the development of a new infrastructure facility, not merely in repairs or maintenance, thereby satisfying the conditions for deduction under the Act.2. Classification as a 'Developer' versus a 'Contractor':A significant point of contention was whether the respondent-assessee should be classified as a 'developer' or merely a 'contractor.' The CIT (Appeals) and the Tribunal both concluded that the assessee undertook obligations that amounted to developing an infrastructure facility. The Tribunal noted that the assessee was responsible for the full-fledged development of a new domestic arrival block at Sardar Vallabhbhai Patel International Airport, Ahmedabad, which included comprehensive facilities like air conditioning, electrification, and more. This scope of work extended beyond a simple works contract, indicating the role of a developer rather than a contractor.3. Interpretation of the Contract Agreement with AAI:The interpretation of the contract agreement with the Airports Authority of India was crucial. The CIT (Appeals) and the Tribunal found that the contract could not be interpreted as a simple works contract due to the extensive responsibilities undertaken by the assessee. The contract involved not just construction but also the development of a fully functional airport block, which included designing, preparing drawings, and providing training to airport staff. The Tribunal highlighted that the assessee bore financial and entrepreneurial risks, further supporting its classification as a developer.4. Applicability of the Precedent Set by ABG Heavy Industries Limited:The Tribunal relied on the precedent set by the Bombay High Court in the case of ABG Heavy Industries Limited, where the court allowed a deduction under Section 80-IA (4) for a company involved in developing infrastructure facilities at a port. The Tribunal found parallels between the two cases, noting that the obligations assumed by the respondent-assessee were similar in nature to those in the ABG Heavy Industries case. The decision emphasized that the conditions for development, operation, and maintenance were not intended to be cumulative, thereby supporting the assessee's claim for deduction.Conclusion:The High Court concluded that the concurrent findings of fact by the CIT (Appeals) and the Tribunal were correct. The respondent-assessee was awarded a contract for the full-fledged development of an airport, not merely for repairs or maintenance. The assessee undertook necessary financial and entrepreneurial risks, qualifying it as a developer. Consequently, no substantial question of law arose from the Tribunal's order, and the appeal was dismissed for lack of merit.