TaxTMI 
TaxTMI 
2008 (1) TMI 650
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....n the business of developing, maintaining and operating any infrastructural facility while calculating the book profits under section 115JA of the Act; 2.ignoring the statement recorded under section 132(4) of Shri Saket Agarwal, Managing Director, wherein he admitted that no operation of infrastructural facility was carried on by the assessee for the purpose of deduction under section 80-IA of the Act; 3.holding that the business of leasing of assets of the assessee tantamount to carrying on business of developing, maintaining and operating any infrastructural facility and thereby eligible for the purpose of deduction under section 80-IA of the Act; 4.failing to appreciate the terms of the tender whereby JNPT was to operate the equipment while the assessee was to maintain them and in holding that the assessee has carried on business of developing, maintaining and operating any infrastructural facility for the purpose of deduction under section 80-IA." ITA No. 672/Mum/2004 - Assessment year 1998-99 "1.On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in directing the Assessing Officer to deduct a sum of Rs. 13,15,01,864 being deduction ....
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.... profit under section 115JA, the assessee reduced Rs. 9,72,01,758 from the net profit to arrive at the book profit on the ground that the aforesaid amount represented profits derived from the business of developing, maintaining and operating infrastructure facility as defined under section 80-IA(12) of the Income-tax Act. According to the assessee, all the conditions for availing the deduction under section 80-IA stood satisfied and therefore book profits were required to be reduced by the profit derived from the aforesaid industrial undertaking in terms of the provisions of clause (vi) of the Explanation to section 115JA. Therefore, the short issue before us is whether the assessee is engaged in the business of developing, maintaining and operating infrastructure facility under section 80-IA(12) of the Income-tax Act. 4. The assessee has entered into two contracts with Jawaharlal Nehru Port Trust ('JNPT' in short), a statutory body constituted under the Major Port Trusts Act, 1963. First contract, which is for Stream-1 of the Container Terminal, is contained in letter bearing Reference No. JNP/SM(CT)/CHE/AUG/94/2114 dated 2/3-9-1994 issued by the JNPT for 'supply, installation, t....
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....of tenders, noticed that the assessee had quoted one price for both the alternatives, namely, Option 'A' and Option 'B' whereas the tenderers were required to quote separately for lease/hire of equipments inclusive of both the operation and maintenance (Option 'A') as also for maintenance alone but exclusive of operation (Option 'B'). Therefore, JNPT, vide its letter dated 24-11-1993, called upon the assessee to indicate the reduction in the offer for lease charges with only maintenance being earned out by the assessee. In reply, the assessee, vide its letter dated 24-11-1983 and 25-11-1993 agreed to a reduction of Rs. 40 lakhs from the total hire charges of Rs. 16.35 crores for the first year with 8 per cent escalation for the consecutive years as per tender. The assessee has been paid at the rate of Rs. 15.95 crores (i.e., Rs. 16.35 crores - Rs. 40 lakhs) in the first year. In other words, the assessee has been paid for option 'B', i.e., maintenance only and not for maintenance and operation. 6. The Department carried out a search operation under section 132 of the Income-tax Act at the premises of various entities of the group of the assessee on 3-8-1998. During the course of s....
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....ome-tax Act, provided such structures have been built under BOT or BOLT Scheme and at the expiry of the lease agreement such equipment would be transferred to the port authorities. The CIT(A) thus held that supply, commissioning and operation of cranes/equipment by the assessee were done under the BOLT Scheme and the Assessing Officer was directed to allow the deduction under section 80-IA of the Act. Revenue is aggrieved and hence the present appeal. 6. The Learned AR for the assessee submitted that the assessee had entered into a contract with JNPT to set up cranes at the port, which were valued at Rs. 120 crores. The learned AR further submitted that the assessee entered into two different contracts dated 2-9-1994 and 16-10-1995 for the supply, installation, commissioning and maintenance of the said cranes. The learned AR stated that the assessee claimed deduction under section 80-IA of the Income-tax Act against lease charges received from JNPT. The learned AR drew our attention to the definition of 'Infrastructure Facility' defined in section 80-IA(12)(ca)( i) of the Act and further stressed that the claim of the assessee was that it is a port and the deduction is claimed as ....
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.... of agreement. The learned AR further pointed out that another Circular No. 10 dated 10-12-2005 was issued by the CBDT wherein it has been provided that with effect from assessment year 2002-03 only one condition is to be fulfilled by the person claiming a deduction under section 80-IA of the Act. The learned AR further clarified that as the claim of the assessee was in the pre-assessment year 2002-03 period it had to fulfil two conditions. 8. The Learned AR for the assessee brought to our notice that the Certificate issued by JNPT dated 30-5-2004, which clarified that (a) the cranes were an integral part of the port and (b) the said cranes/equipment were issued under the BOLT Scheme. For the meaning of term of 'BOLT', our attention was drawn to Circular No. 33 issued by CBDT. The learned AR clarified that the period of ten years have expired as on the date and the said cranes have been transferred to JNPT in compliance to the terms of BOLT Scheme. The learned AR further submitted that the term 'infrastructure facility' is a broader term than 'infrastructure' and the cranes being 'facility' the meaning is broader. It was claimed by the Learned AR that the assessee has to fulfil bo....
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.... of a ship or developing, maintaining and operating any infrastructure facility or scientific and industrial research and development or providing telecommunication services whether basis or cellular or operating an industrial part or commercial production of mineral oil in the North Eastern Region, such business being hereinafter referred to as the eligible business to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to the percentage specified in sub-section (5) and for such number of assessment year as is specified in sub-section (6)". 12. The provisions of the Act provides that where an assessee is developing, operating and maintaining any infrastructure facility in addition to other facilities enumerated in sub-section (1) to section 80-IA of the Act, such income derived from any business of an industrial undertaking shall be entitled to a deduction from its profits computed as per the Act. Sub-section (2) to section 80-IA provides the conditions which have to be fulfilled to be entitled to the claim of....
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....ions. 16. The term 'infrastructure facility' is defined under section 80-IA(12)(ca ) of the Income-tax Act, which is as under :-- '(i)a road, highway, bridge, airport, port, rail system or any other public facility of a similar nature as may be notified by the board in this behalf in the Official Gazette; (ii)a water supply project, irrigation project, sanitation and sewerage system'. 17. Applying the definition of 'infrastructure facility' to the facts of the present case, we find that 'PORT' and the facilities provided at Port are covered by the definition of infrastructure facility. Reading the section in harmony, it transpires that the assessee before us, in order to be entitled to the claim of deduction under section 80-IA of the Act has to fulfil the following conditions :-- (a)whether it is an infrastructure facility falling within the definition provided in section 80-1A(12)(ca); (b)whether the operations have started on or after 1-4-1995; (c)whether the assessee has entered into an agreement with Central/State Government, local authority for the development, maintenance and operation of any new infrastructure facility. 18. In the facts of the present case, the asse....
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....ferred to JNPT. The BOLT Scheme has been clarified by Circular No 733, dated 31-1-1996, which provided that one of the conditions to be fulfilled by the enterprises is that it should develop, maintain and operate a new infrastructure facility, which shall be transferred to the Central Government/State Government/local authority within the period stipulated in the Agreement. 22. Taking into consideration the definition of 'infrastructure facility' provided under section 80-IA of the Act and the conditions to be fulfilled under sub-section (4A) to section 80-IA of the Act, we find that the assessee is an 'infrastructure facility' and the operations carried out by the assessee fall within the extended definition of 'Port' as provided by the CBDT Circular No. 793. The assessee entered into an agreement with JNPT for the supply, installation, testing, commissioning and maintenance of the cranes under the BOLT Scheme, wherein it has been agreed upon by the parties that on the expiry of term of agreement i.e., period often years, the said cranes would be transferred to JNPT at no extra cost. 23. In the Certificate dated 31-5-2004, JNPT has admitted that the said cranes after its erectio....
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.... placed at pages 47 and 48 of the paper book. 26. In the facts and circumstances of the case before us, after the supply, installation, commissioning and maintenance of the container, the operations are being carried out by the assessee at a cost to the assessee i.e., the payment of Rs. 40 lakhs per annum to JNPT for providing the operators in-turn signifies that the operations being carried on by the assessee as long as the supervision and control is in its risk. The list of employees provided by the assessee clearly point out that the control and operations is under the supervision of the assessee though operators are provided by the JNPT at a cost. The provisions of the Act does not talk of the extent of operation and control required. In these circumstances, it is fair and reasonable to hold that the assessee is entitled to the relief in the light of the Circular No. 793 issued by the CBDT, which is binding on the Departmental authorities. Accordingly, we hold that the assessee is a 'infrastructure facility' entitled to the claim of deduction under sub-section (4A) of section 80-IA of the Income-tax Act. 27. The issue, in the present appeal raised by the revenue is for the pu....