TaxTMI 
TaxTMI 
2011 (7) TMI 513
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.... to undertake the construction of a bypass road near Coimbatore and a bridge on NH-47, across river Nayal pursuant of concession agreement entered into by L&T Transportation Infrastructure Ltd. (L&T TIL) and Government of India & Government of Tamilnadu to develop the project on "Build, Operate and Transfer "BOT" model. The operation and maintenance of the project is also undertaken by the company. 4. During the year under consideration, assessee had claimed deduction under section 80-IA of the Act on the following income : Brief description of Income Brief description of Income Amount (in Rs.) Income from use of way-side amenities (toilets, service stations etc.) as per clause 7.4 of the concession agreement 298,476 Income from putting up advertisements on the road (Hoardings) as per clause 15.12 of the concession agreement 1,902,523 Fee for laying optical fiber cable 500,000 Others (revenues from sale of scrap, film shooting etc.) 99,238 Assessing Officer denied the above said incomes as he treated the receipts as "Income from Other Sources". 5. On appeal before the Commissioner of Income-tax (A), assessee argued that the way-side ameniti....
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....tween profit and industrial undertaking, the same would not qualify for deduction. It is found that the appellant has included income by way of wayside amenities and miscellaneous income in the profit of eligible business and claimed deduction thereon. By their very nature, the sources of these income are a step removed from the eligible business. There is no direct nexus between other income and profits and gains of the eligible business. The connection between the two is beyond first degree and is only incidental and hence it is not entitled for deduction as claimed by the appellant. Accordingly this ground is dismissed." 7. The Learned Authorized Representative of the assessee has filed written submission which is as follows :- "In this appeal against the order of the Commissioner of Income-tax (Appeals) ['CIT (A)'], L&T Transport Infrastructure Limited ('L&T TIL' or 'the Appellant' or 'the Company' or 'the assessee') wishes to submit as under : 1. Background about the company L&T TIL has been incorporated to undertake the development of a bypass road near Coimbatore and a bridge on NH-47, across river Noyyal, pursuant to a concession agreement entered into by L&T Li....
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.... (i) the profits and gains of any business or profession which was carried on by the assessee at any time during the previous year." The term "business" is not defined under the Act. The meaning assigned to the said term by various judicial precedents is provided below : l The expression 'business' in ordinary parlance means any trading activity accompanied by regularity of transactions intended for the purpose of making profit. In general, a single transaction is not taken as business [Eclat Construction (P.) Ltd. v. CIT [1988] 172 ITR 84 (Pat.)]. l The expression 'business' is a well-known expression in income-tax law. It means some real, substantial and systematic or organised course of activity or conduct with a set purpose [CIT v. Distributors (Baroda) (P.) Ltd. [1972] 83 ITR 377 (SC)/Narain Swadeshi Wvg. Mills v. CEPT [1954] 26 ITR 765 (SC)/CIT v. Admiralty Flats Motel [1982] 133 ITR 895 (Mad.)]. l The expression 'business' does not necessarily mean trade or manufacture only : it is being used as including within its scope professions, vocations and callings for a fairly long time. The word 'business' is on....
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.... of income and not under the residual head of "other income" signifies the intent of the assessee to earn such income as part of its main "business" and the same should be subject to tax as business income. Based on discussion above, the appellant wishes to submit that the incomes referred in points (2) to (5) of paragraph 2 should be subjected to tax as its business income. 4. Eligibility for deduction under section 80-IA As discussed in paragraph 3, the Appellant wishes to subject income in the nature referred in clauses (2) to (5) should be subject to tax as PGBP and not IFOS. Further, the appellant also submits that the said income should be eligible for deduction under section 80-IA of the Act, for reasons mentioned below : 4.1 Relevant provisions of the Act and position in law As per section 80-IA of the Act, "Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total inco....
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....iness of industrial undertaking it is not possible to ignore sale of empty drums/containers, sale of useless materials which is closely and directly connected with and outcome of the manufacturing process itself. 4.2 Applicability in the instant case 4.2.1 License fee from use of way-side amenities Way-side amenities represent infrastructure facilities linked to the project developed by the appellant (toll road and bridge) such as parking facilities, service stations and other facilities for users of the infrastructure facility. Operation and maintenance of toll roads/by-pass roads include inter alia provision of wayside amenities to users of infrastructure facilities. The requirement to provide way-side amenities stems from the concession agreement entered into by the appellant with the Government as part of clause 7 which deals with the "Scope of the project". The relevant extract is reproduced below: 7.4.4 Passenger oriented wayside amenities like toilets, parking facilities, service station ... shall be provided at suitable location in the acquired right of way as per relevant standards and guidelines of M.O.S.R./I.R.C. Also, the Appellant intends to draw attenti....
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....tion under section 80-IA (in the instant case infrastructure development). The learned CIT(A) has erred in making the said comparison for the following reasons : (a) Facts in the case of Pandian Chemicals (supra) are significantly different from the facts in the instant case. (b) The difference in language employed and scope of deduction in case of section 80HH (subject-matter of deduction in the case of Pandian Chemicals) and section 80-IA (subject-matter of deduction in the instant case) Particulars Pandian Chemicals Ltd. Current case Deduction claimed under Section 80HH Section 80-IA Deduction can be claimed in respect any profits and gains derived from an industrial undertaking profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) Note - L&T TIL is covered within the scope of sub-section (4) of section 80-IA Scope of the section Tax holiday is restricted to income arising from the activity of the industrial undertaking. Any incidental income arising in the course of such activity may not be eligible for deduction Th....
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....ructure facilities i.e., road including toll road. The Learned Assessing Officer observed that the assessee has also derived the following income during the year under consideration :- Brief description of Income Amount (in Rs.) Income from use of way-side amenities (toilets, service stations etc.) as per clause 7.4 of the concession agreement 298,476 Income from putting up advertisements on the road (Hoardings) as per clause 15.12 of the concession agreement 1,902,523 Fee for laying optical fiber cable 500,000 Others (revenues from sale of scrap, film shooting etc.) 99,238 10. According to the Learned Assessing Officer, the above income were not derived from the developing, operating and maintaining any infrastructure facility and therefore, he excluded the same while computing deduction allowable under section 80-IA of the Act. 11. On appeal, the Learned Commissioner of Income-tax(A) confirmed the action of the Learned Assessing Officer. 12. Before us, the main contention of the assessee is that wayside amenities were built and maintained and operated by the assessee in pursuance to the tripartite agreement for developing, operating and main....
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....oad side amenities are not included within the meaning of infrastructure facility for the purposes of section 80-IA(4) of the Act. Road side amenities cannot be called road. Therefore, in the instant case, even when the road side amenities were required to be built operated and maintained by the assessee under the same agreement under which it was authorized to build operate and maintain road, such roadside amenities cannot be called infrastructure facilities as envisaged in section 80-IA(4) of the Act. Further, we find that sub-section (1) and sub-section (4) of section 80-IA read as under :- "(1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), 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 of an amount equal to hundred per cent of profits and gains derived from such business for ten consecutive assessment years. (4) This section applies to- (i) any enterprise carrying o....
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....ing, domestic satellite service, network of trunking, broadband network and internet services on or after the 1st day of April, 1995, but on or before the [31st day of March, 2005; Explanation : For the purposes of this clause, "domestic satellite" means a satellite owned and operated by an Indian company for providing telecommunication service. (iii) any undertaking which develops, develops and operates or maintains and operates an industrial park [or special economic zone] notified by the Central Government in accordance with the scheme framed and notified by that Government for the period beginning on the 1st day of April, 1997, and ending on [the 31st day of March, 2006 : Provided that in a case where an undertaking develops an industrial park on or after the 1st day of April, 1999 or a special economic zone on or after the 1st day of April, 2001 and transfers the operation and maintenance of such industrial park or such special economic zone, as the case may be, to another undertaking (hereafter in this section referred to as the transferee undertaking), the deduction under sub-section (1) shall be allowed to such transferee undertaking for the remaining period in the....
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.... the business income of an assessee who is engaged in the business of developing operating and maintaining any infrastructure facility does not qualify for deduction under section 80-IA of the Act. Only those business income, which are derived by an undertaking or an enterprise from an eligible business is only eligible for deduction under section 80-IA of the Act. Further, the eligible business has been defined in sub-section (4) of section 80-IA. In relation to the facts of the present case, the eligible business means business of developing, operating and maintaining any infrastructure facility i.e., road. Thus, the income derived from business of developing, operating and maintaining road only qualifies for deduction under section 80-IA of the Act. On facts of the instant case, the business of developing, operating and maintaining road in our considered opinion does not include the activity of business of developing, operating and maintaining road side amenities though such activity may be incidental to or facilitate the business of developing and maintaining roads. Therefore, in our view, simply because the word 'business' has been used in section 80-IA(4), the same cannot be ....
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....those income which relates to road. 18. The last issue relates to scrap sales. We find force in the submissions of the ld. Authorized Representative in this respect. We find that sale of scrap represents the sale of left over materials which were acquired for developing road. No material has been brought on record by the lower authorities to controvert the above submission of the assessee. Thus we agree that the above sale of scrap was intimately connected with the business of developing operating and maintaining infrastructure facility and income from such sale goes on to reduce the expenditure of developing the infrastructure facility and truly speaking the same is not an independent income to the assessee. We therefore, delete the disallowance of deduction under section 80-IA in respect of the sale of scrap and allow this part of the ground of the assessee. 19. In the result the appeal of the assessee is disposed of as above. 20. In the Revenue's appeal, the sole issue involved is that the Commissioner of Income-tax (A) erred in allowing depreciation claim of the assessee on project assets at the rate of 10 per cent applicable to building. 21. The Ld. AR of the asses....
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....I have carefully considered the facts of the case and the submissions of the ld. AR. I have also gone through the decisions relied on by the Assessing Officer and AR. The appellant company has been incorporated to undertake development of infrastructural facilities and has developed a by-pass road and a bridge on NH 47 near Coimbatore. The appellant has entered into a concession agreement with the Government of India and Government of Tamil Nadu to develop the project on Build-Operate-Transfer (BOT) basis. I have perused the concession agreement and the relevant clauses contained therein. I find that the facts of the appellant are similar to the case of Tamil Nadu Road Development Co. Ltd. (supra) for assessment years 2003-04 and 2004-05. The ld. AR has relied on the decision of the jurisdictional ITAT, Chennai in the above case. The Assessing Officer in his remand report for assessment year 2006-07 has not accepted the contention of the ld. AR by stating that "the assessee has also objected stating that the Tribunal in the case of Tamil Nadu Road Development Company Ltd., has allowed the assessee's claim of depreciation. However, an appeal has been filed in the High Court against ....