Airport infrastructure deduction upheld for integrated fuel farm facility; hedge swap interest deduction also sustained under binding precedent.

Airport-linked fuel farm facilities can qualify as infrastructure facilities where they are integral and indispensable to airport operations and are developed under an authorised agreement with the airport entity; on that basis, deduction eligibility under the Income-tax Act was upheld and the objection that a direct government agreement was missing was rejected. Interest expenditure on hedge swap transactions was also allowed under the applicable interest deduction provision because the issue was covered by binding precedent. The court accordingly found no substantial question of law and affirmed the Tribunal's order in full.

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Issues: (i) Whether the assessee was entitled to deduction under Section 80-IA of the Income-tax Act, 1961 in respect of the fuel farm facility as an infrastructure facility forming part of the airport and whether the agreement with BIAL satisfied the statutory condition; (ii) Whether the interest expenditure on hedge swap transactions was allowable under Section 36(1)(iii) of the Income-tax Act, 1961.

Issue (i): Whether the assessee was entitled to deduction under Section 80-IA of the Income-tax Act, 1961 in respect of the fuel farm facility as an infrastructure facility forming part of the airport and whether the agreement with BIAL satisfied the statutory condition.

Analysis: The fuel farm facility was established at the Bangalore International Airport under an arrangement with BIAL, which had been granted the right to develop, operate and manage airport facilities and to confer service provider rights. The Court treated BIAL as a statutory body for the purposes of the provision and held that the agreement with BIAL met the requirement of an agreement with a statutory body. The Court further held that airport operations include facilities incidental and integral to the landing, departure and functioning of aircraft, and that supply of fuel is indispensable to airport activity. The reasoning applied the earlier view that airport-linked facilities forming part of the airport infrastructure qualify as infrastructure facilities.

Conclusion: The assessee was entitled to deduction under Section 80-IA of the Income-tax Act, 1961, and the Revenue's objection on the absence of a direct agreement with the Government or the alleged non-integral nature of the fuel farm was rejected.

Issue (ii): Whether the interest expenditure on hedge swap transactions was allowable under Section 36(1)(iii) of the Income-tax Act, 1961.

Analysis: The hedge swap interest issue was held to be covered by the Supreme Court's decision relied upon by the Tribunal, and there was no serious dispute on the applicability of that ruling to the facts. The Tribunal's allowance of the deduction was therefore upheld.

Conclusion: The interest expenditure on hedge swap transactions was allowable under Section 36(1)(iii) of the Income-tax Act, 1961.

Final Conclusion: No substantial question of law arose on either issue, and the Tribunal's order was affirmed in full.

Ratio Decidendi: Airport-linked facilities that are integral and indispensable to airport operations, and are developed under an authorised agreement with a statutory airport entity, qualify as infrastructure facilities for deduction under Section 80-IA of the Income-tax Act, 1961; a covered interest expenditure claim under Section 36(1)(iii) cannot be disturbed where it is governed by binding precedent.

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