TaxTMI 
TaxTMI 
2013 (6) TMI 351
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....hat the Ld. Commissioner of Income Tax (Appeals) has failed to appreciated that the Ld. Assessing Officer has disallowed the claim on wrong interpretation of the provisions of law. 3. That the Assessee fulfills all the conditions as required under law with regard to deduction u/s 80IA of the Act. 4. That the Ld. Commissioner of Income Tax (Appeals) has failed to appreciate that developing, operating and maintenance are distinct and if the Assessee is doing business in any of these areas, is entitled to the deductions. 5. That the assessee prays that addition of Rs. 56,61,450/- be deleted and claim u/s 80IA allowed. 6. The Assessee craves leave to add or amend the Grounds of Appeal." 3. In ITA No.434(Asr)/2009 for the A.Y. 2004-05, the assessee has raised following grounds of appeal: "1. That that the Ld. Commissioner of Income Tax (Appeals) has crossly erred in law and on facts of the case in confirming the order of the Assessing Officer with regard to the calm u/s 80IA of the Act. 2. That the Ld. Commissioner of Income Tax (Appeals) has failed to appreciated that the Ld. Assessing Of....
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....ax (Appeals) has grossly erred both in law and on facts in confirming the addition of Rs. 1,40,44,096/- made by the learned Income Tax Officer, in an order of assessment framed u/s 143(3) of the Act. 1.2. That the learned Commissioner of Income Tax (Appeals) has erred in law and on facts of the case in not accepting the claim of the assessee u/s 80IA of the Income Tax Act. 1.3. That the assessee complies with all the provisions of section 80IA and therefore was entitled to be deduction claimed. 1.4. It is prayed that the claim of Rs. 1,40,44,096/- u/s 80IA be allowed. 2. The assessee craves leave to add or amend the grounds of appeal." 6. Since the issue involved in all the appeals is identical and therefore, all the appeals are being decided by this consolidated order, except ground Nos. 2 & 3 in ITA No.416(Asr)/2012 for the assessment year 2005-06 on account of 'Quota written off' and 'amount written off' by assessee, being a disallowance confirmed by the ld. CIT(A), which grounds shall be decided separately in this order itself. 7. First of all, we take up appeal in ITA No.433(Asr)/2009 for the A.Y. 2003-04. T....
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....acility for day and night and all weather landing and taking off facility, it provides for the parking bay for boarding and alighting from the aircraft. It provides for the entrance and exist of the passenger's vehicle, it provides for the security check for passenger and aircrafts, it provides for the sitting and waiting bays for passengers, it provides for the counters to different airlines for checking in the passengers, it provides for repair and maintenance of all the above mentioned facilities. The only agency which provides all these facilities is Airport Authority of India. Thus the deduction u/s 80IA(4) is admissible to Airport Authority of India only. Above mentioned facilities are only a few mentioned facilities which are required to develop, operate and maintain an airport. Deduction u/s 80IA can be admissible only when assessee is capable of providing all the facilities as discussed above. Hence a person who extends the runway by a few yards cannot be eligible for deduction u/s 80IA(4). Therefore, taking into consideration all these facts of the case, the claim of the assessee company is not justified and hence cannot be allowed. Accordingly same is rejected. Penalty p....
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....ucture facility and not in operating and maintaining the said facility is also entitled to benefit of deduction u/s 80IA(4) of the Act. The reliance was also placed on the decision of ITAT Mumbai Bench in the case of Bharat Udyog Ltd (supra) and ITAT, Jaipur Bench in the case of Om Metals Infraprojects Ltd. vs. CIT reported in 26 DTR 359, copy of order available at PB 53 to 64. 11. It was also argued that section 80IA(4) does not require that there should be a direct agreement between the transferee enterprises and the specified authority. The reliance was placed on the decision of ITAT Indore Bench in the case of Ayush Ajay Construction Ltd. vs. ITO reported in 79 ITD 213, available at PB 42 to 52, ITAT Jodhpur Bench in the case of Chetak Enterprises (P) Ltd. vs. ACIT reported in 95 ITD 1, copy of order available at PB 65 to 74 and decision of ITAT Hyderabad Bench, in the case of Ocean Sparkle Ltd. vs. DCIT reported in (2006) 99 TTJ (Hyd) 582, copy of order available at PB 101 to 118. 12. It was also argued by the Ld. counsel for the assessee in connection with Assessment Year 2004-2005, that there were two projects undertaken by the assessee, one was construction of runway ....
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....n of runway of the Airport at Agartala. In view of these circumstances, the assessee company is clearly entitled for deduction in toto as claimed under section 80IA(4) of the Income-Tax Act, 1961. 13. Accordingly, the ld. counsel for the assessee, Mr. P.N. Arora, Advocate argued that the assessee company being a developer of an infrastructure facility, is a company which has entered into an agreement with the statutory body and has developed infrastructure which became operational after 01.04.1995, is entitled to the deduction claimed having satisfied of conditions envisaged u/s 80IA(4) of the Act. 14. The Ld. DR, on the other hand, relied upon the orders of both the authorities below. 15. We have heard the rival contentions and perused the facts of the case. The facts in the present case are that the assessee company was allotted a contract for execution of the work by the Airport Authority of India vide letter dated 22.06.2001. The assessee was required to undertake the work of extension of runway with shoulders, turning paid, stop way, construction of isolation bay, box culvert, perimeter road and allied works in Agartala Airport. The assessee claims that it has maintai....
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....curity check for passenger and aircrafts, it provides for the sitting and waiting bays for passengers, it provides for the counters to different airlines for checking in the passengers, it provides for repair and maintenance of all the above mentioned facilities. 15.2. Above mentioned facilities are only a few mentioned facilities which are required to develop, operate and maintain an airport. Deduction u/s 80IA can be admissible only when an assessee is capable of providing all the facilities. Hence a person who extends the runway by a few yards cannot be eligible for deduction u/s 80IA(4) of the Income Tax Act, The only agency which provides all these facilities is Airport Authority of India. Thus, the deduction u/s 80IA(4) is admissible to Airport Authority of India only. Since the mandatory conditions as required under the provision of S. 80IA(4) of the I.T. Act, 1961, cannot be said to have been fulfilled in the case of the appellant company. The Ld. CIT(A) was in agreement with the observations of the AO, as contained in his assessment order dated 14.03.2006 and his remand report dated 13.07.2009 and accordingly upheld the action of the AO in disallowing the appellant comp....
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....h cranes at the container handling terminal of JNPT- Under the contact, assessee was obligated to provide the equipment in question in operable condition- Contract envisaged two different options, the first being one under which the assessee would carry out operation and maintenance of the equipment while the second option was that JNPT would carry out operations- Further, it is the obligation of the assessee to make the equipment available for operation for a stipulated minimum number of days during the year and it is liable to liquidated damages in case this was not possible- Obligations which have been assumed by the assessee under the terms of the contract are obligations involving the development of an infrastructure facility- Said cranes are to vest in JNPT free of cost after the term of ten years- JNPT has certified that the facility provided by the assessee was an integral part of the port-Assessee has developed the facility on 'BOLT' basis under the contract with JNPT- Finding of the Tribunal that the assessee has developed the infrastructural facility and that it was engaged in operating the cranes is based on the material on record- Fact that the assessee was also mainta....
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....as brought about by Finance Act, 1995 w.e.f. 1st April, 1996. By virtue of this amendment, exemption under Section 80-IA was provided to any enterprise carrying on the business of developing, maintaining and operating any infrastructure facility. Thus to be eligible for this deduction, an assessee was required to carry out all the three activities, i.e., (i) to develop, (ii) to maintain, and (iii) to operate. After the modification effected by Finance Act, 1999 w.e.f. 1st April, 2000, deduction under Section 80- IA(4) has become available to any enterprise carrying on the business of (i) developing, or (ii) maintaining and operating, or (iii) developing, maintaining and operating any infrastructure facility. Therefore, from asst. yr. 2000-01, deduction is available if the assessee carries on the business of any one of the abovementioned three types of activities, and accordingly also when the assessee is carrying on the activity of only developing. When an assessee is only developing an infrastructure facility/project and is not maintaining nor operating it, obviously, such an assessee will be paid for the cost incurred by it; otherwise, how will the person, who develops the infras....
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....ent with the Government of Maharashtra and also with APSEB for development of the infrastructure projects, is obviously a contractor but that does not derogate the assessee from being a developer as well. The term "contractor" is not essentially contradictory to the term "developer", On the other hand, rather Section 80-IA(4) itself provides that assessee should develop the infrastructure facility as per agreement with the Central Government, State Government or a local authority. So, entering into a lawful agreement and thereby becoming a contractor should, in no way, be a bar to the one being a developer. The assessee, presently under consideration before us, has developed infrastructure facility as per agreement with Maharashtra State Government/APSEB, Therefore, merely because, in the agreement for development of infrastructure facility, assessee is referred to as contractor or because some basic specifications are laid down, it does not detract the assessee from the position of being a developer; nor will it debar the assessee from claiming deduction under Section 80-IA(4)." 15.7. The reliance is also placed on the decision of ITAT, Delhi Bench, in the case of Intercontinet....
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.... there can be income to the developer- Obviously a developer would have income only if he is paid for development of infrastructure facility for the simple reason that he would not have the right/authorization to operate the infrastructure facility-Thus, business activity of the nature of 'build and transfer" also falls within the activity eligible for deduction under s. 80-IATherefore, merely because the assessee was paid by the Government for development work, it cannot be denied deduction under s. 80-IA- Assessee having entered into an agreement with the Government agencies for development of infrastructure projects is obviously a contractor but that does not derogate the assessee from being a developer as well- Term "contractor" is not essentially contradictory to the term "developer"- Therefore, merely because assessee is referred to as 'contractor' in the agreement for development of infrastructure facility or some basic specifications are laid down, would not debar the assessee from claiming deduction under s. 80-IA(4)- Hence, assessee is entitled to deduction under s. 80-IA." 15.9. The reliance is also placed by the ld. counsel for the assessee on the decision of ITAT, H....
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....d on the decision of ITAT, Jaipur Bench, by the Ld. counsel for the assessee, in the case of Om Metals Infraprojects Ltd. (supra) available at PB 53 to 60, the head notes of which are reproduced for the sake of clarity as under: "Project was executed pursuant to an agreement between VIDC, a State Government undertaking and the assessee for supply, erection, installation of dam gates in functional condition- Contention of the Revenue that the assessee is a mere contractor and not the developer of the infrastructure project cannot be accepted- It was the assessee who was mobilizing people, plans, technical expertise, etc. to develop and create the infrastructure facility while VIDC was merely the sponsor of the project- Term 'contractor' is not essentially contradictory to the term 'developer'- Sec. 80-IA(4) itself provides that the assessee should develop the infrastructure facility as per the agreement with the Government- Even the insertion of Expln. 2 to s. 80-IA vide Finance Act, 2007, has not altered this situation- Said amendment does not apply to works contract entered into by the government with an enterprise- This amendment merely aims at denying deduction t....
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....on was sent to them regarding the conversion. 15.13. Reliance is also placed on the decision of ITAT, Hyderabad Bench in the case of Ocean Sparkle Ltd. vs. DCIT (supra), available at PB 101 to 118 wherein it has been held as under: "Where an infrastructure facility is transferred, by an enterprise (developer) to another enterprise for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Government and/or specified authorities the provisions of s. 80-IA equally apply to the transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to deduction if the transfer had not taken place- Proviso to s. 80-IA(4) does not require that there should be a direct agreement between the transferee enterprise and the specified authority- Ownership or ports do not vest even with the developers of the port since waterfront is the sovereign right of the Government only and thus there is no question of transfer of ownership to the specified authority-Although the assessee-transferee may not have undertaken the entire operation and maintenance of the port infrastr....
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....5, 2005-06 & 2006-07. Accordingly, all the grounds of the assessee raised before us in these appeals are allowed, except ground Nos. 2 & 3 for the assessment year 2005-06, in ITA No.416(Asr)/2012, which are decided as under: 17. As regard ground No.2 for the A.Y. 2005-06, relating to confirmation of addition of Rs.7,85,590/- being the amount of 'Quota written off, the brief facts as emanating from AO's order at pages 18 to 20 are reproduced as under for the sake of clarity: "The assessee has debited an amount of Rs. 7,85,590/- on account of quota written off. During the course of hearing on 04/12/2007, the assessee was requested to give details about the quota as submitted in the letter of the counsel dated 26/11/2007 and also to explain as to why it should be allowed as revenue expenditure. On 07/12/2007, Sh. Omesh Gupta filed the explanation through his letter dated 07/12/2007. In the said letter the following submissions have been made :- "The assessee purchased Kota in the financial year 2000-01 for manufacture and export of the readymade Garments. It may be submitted that Quota Licence is tradable. The assessee exported Garments against this ....
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....rtfall in the imports in a particular financial year were forfeited as per the terms and conditions. These were claimed as expenditure in the relevant Assessment years. In the case of the assessee, however, the quotas were purchased in the Financial Year 2000-01 for Manufacture and export of garments and were for a period upto the Financial year 2004-05. Hence, it is clear that the quotas were for a number of years and was for the enduring benefit of the assessee. The purchase of quota was an capital account and not revenue account. The purchase of quota represents capital invested. In the case of Commissioner of Income Tax Vs. Mysore Sugar Co. Ltd. , the Hon'ble Supreme Court has observed thus; "To find out whether an expenditure is on the capital account or on revenue, one must considered the expenditure in relation to the business......................................................The question to be considered in this connection are: For what was the money laid out?, Was it to acquire an assets of an enduring nature for the benefit of the business, or was it an outgoing for doing of the business? If money be lost in the first cir....
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....arguments made by the ld. counsel for the assessee Mr. P.N. Arora that the assessee had purchased Quota during the financial year 2000-01 for manufacture and export of ready made garments. The said quota, in fact, is a license quota which is a tradable commodity and which has to be utilized within a period of three years and third year was ending in 2004 falling in the impugned year, since the assessee's export business is of ready made garments and the balance lying in the Quota account has been written off. Now, the question arises whether it is written off on account of capital account or revenue account. In this regard, we are of the view that the assessee had purchased Quota which was for a limited period of three years and without purchasing this quota, it was not possible for the assessee to do business and make trading. Even if, we agree to the findings of the authorities below, the assessee had obtained enduring benefit for three years, the same cannot be a conclusive test to be applied blindly and mechanically. Since the assessee had incurred expenditure, which advantage consists facilitation of trading operations of the assessee for enabling the assessee to make the expo....
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....ts profitability. The expenditure incurred by the appellant for the purpose of removing a restriction on the number of working hours for which it could operate its looms with a view to increasing its profits was revenue in nature and allowable as a deduction under section 10(2)(xv). By the purchase of loom hours no new asset was created and there was no addition to or expansion of the profitmaking apparatus of the appellant. The acquisition of additional loom hours did not add to the fixed capital of the appellant, the permanent infrastructure of which the income was the product or fruit remained the same' it was not enlarged nor did the appellant acquire a source of profit or income when it purchased the loom hours. The expenditure incurred for the purpose of operating the looms for longer working hours was primarily and essentially related to the operation or working of the looms which constituted the profit-making apparatus of the appellant and was expenditure laid out as part of the process of profit earning. It was an outlay of a business in order to carry it on and to earn a profit out of this expense as an expense of carrying it on; it was part of the cost of operating the p....
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.... the assessee is allowed. 19. As regards ground No.3 of the assessee for the assessment year 2005- 06, relating to confirmation of the addition of Rs.2,53,077/- made by the AO, being the amounts written off, the brief facts as emanating from AO's order at page 21 are reproduced for the sake of clarity as under: "Under the head Misc. expenses, the assessee has debited an amount of Rs. 2,53,077/- under the head 'Written off'. In the submission dated 26.11.2007 it has been submitted by the Counsel that these represent advances Written off. Vide order sheet noting dated 04.12.2007, assessee was requested to explain why these advances should be allowed as revenue expenditure since granting of loans and advances is not the business of the assessee and the assessee is also not in the business of banking. The assessee was also requested to explain the section under which such advances are being written off. Vide letter dated 07.12.2007 the assessee has submitted that the said loss is deductible u/s 37 and u/s 28 of the I.T. Act, 1961. It has been submitted that during his business the assessee is obliged to give advances to labour and supplier of materials. A part of the....