TaxTMI 
TaxTMI 
2015 (11) TMI 401
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....at this Tribunal had held that the activity carried on by the assessee is infrastructure development under section 80IA(4), but as far as its agreement with BIAL is concerned, it was held that the status of the BIAL is not that of statutory authority and therefore, disallowed the deduction under section 80IA of the Act. According to the department, this finding of the Tribunal is ambiguous and hence is a mistake apparent from record which needs rectification. Thus, the revenue has sought recall of the order and rectification of the alleged mistake apparent from record. The MP of the revenue was posted along with the appeal for hearing. 3. At the time of hearing, the learned counsel for the assessee submitted that after going through the details furnished by the assessee, this Tribunal held that the activity carried on by the assessee is infrastructure development, but since the major shareholders in BIAL are not Government authorities, it is not a statutory authority and therefore the deduction u/s 80IA(4) is not allowable. He submitted that the Hon'ble High Court of Karnataka in the case of M/s. Flemingo Duty Free Shops Pvt. Ltd. in WP No.14215 of 2006 dated 19.12.2008, had a....
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....ty but is a company incorporated under the Companies Act and is not created by any statutory body or law. It was held that though it is constituted as per the policy of the Central Government, it cannot be said to be statutory body as required under section 80IA(4) of the Act with its public-private partnership. We find that the Hon'ble High Court of Karnataka in the case of M/s. Flemingo Duty Free Shops Pvt. Ltd., cited (supra) has also considered the constitution of BIAL, the shares of different parties in the said company and has come to the conclusion that it is a statutory body as it is discharging statutory functions of the Government. The relevant portion of the judgment are reproduced hereunder. "12. The first respondent has not filed its counter. 13. The A.A.I represented by Sri B.R. Sena. s/0 Sri Bhabadeb Sena, Airport Director in A.A.I, Bangalore has filed an affidavit on behalf of the second respondent and stated in the affidavit that it is a formal party to the petition, no relief whatsoever has been claimed by the petitioner against the second respondent, at para-6 it is stated that it is responsible for installations and maintenance of operations of Air Track se....
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.... have no locus standi to file this writ petition and further it is stated that AERI-partner of the consortium is not a petitioner in this petition, for this reason also the petitioner alone has no locus standi to question the action of the BIAL. Further it is stated that the writ petition is also liable to be dismissed on the ground of suppression of material facts in non-disclosure of material documents. It is further stated that on perusal of the provisions of the 'Shareholders Agreement' (hereinafter in short referred to as "S.H.A.") with G.O.K. dated 23.01.2002 entered between the BIAL and State promoters which makes abundantly clear that BIAL is not a Government company as defined u/s 617 of the Companies Act, 1956, as it has been either established or constituted or created by any law enacted by either the Parliament or the State Legislature. Under clause 9.1(ii) of the S.H.A., the Directors representing the promoters constitutes the majority, as per clause 9.2(vii) of the agreement all decisions are to be taken by a simple majority of the Board of Directors and as per sub-clause (iii) and (iv) of Clause-9.1 of the said agreement the Managing Director of BIAL is incharge of t....
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....it that, it does not exercise any government or sovereign functions as per the C.A. in its favour under the agreement. As per Clause 18.13.1 and 18.13.2 of Article 18 of the C.A., it stipulates that execution of the agreement constitutes private and commercial acts rather than public or governmental acts and no sovereign immunity will be claimed by the GOI in respect of proceedings that may be brought against it in relation to C.A. Therefore, it is evident that the agreement does not either confer or contemplate in any manner the entrustment of sovereign functions of the State on BIAL. The work of designing, financing, constructing and functioning of the airport has been entrusted to it by inviting global tenders which clearly indicates the activity that would be carried on is in the nature of commercial nature in association with the State promoters namely A.A.I. and KSIIDC both together holding only 26% of the share holding of the BIAL. As per clause 3.3 of Article 3 of C.A. regarding payment of concessional fee by the BIAL to GOI which clearly indicates the fact that it is not carrying on or exercising any governmental function and further it is stated that there is no master an....
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....aximum five (5) parties would be short-listed after receiving EOIs. It is its case that petitioner was one of the parties who submitted its EOI in relation to retail package-1 which consisted of duty free in the international departure and arrival zones, all retail outlets in the international departure zone. At the time of submitting EOI, petitioner did not raise an objection about clause 3.2 of EOI with regard to short listing of maximum five parties. Therefore, it is not open for it to turn round and object for the same in this writ petition. 20. The BIAL further submits that pursuant to the invitation for EOIs., totally seven companies submitted their EOIs. on fair and just evaluation being done by it, the EOI of petitioner among others was rejected and other remaining five companies were shortlisted for submission of tenders. The contention of the petitioner that it was not aware of the decision of the BIAL of short-listing the persons to whom tender documents would be issued as no communication was made to it and said decision was known from the internet is clearly incorrect and false statement. It has deliberately suppressed the material fact while making such an averment....
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....d it never had any major equity ownership in Zurich Airport. The 5th respondent since 2001 is fully owned and controlled by two Italian public listed companies, therefore the 5th respondent is not even a sister company. further the 4th respondent submits that there are no extraneous considerations involved in the tender process as alleged, he being Chief Commercial Officer of the BIAL, his only aim and goal is to set up airport of international standard by getting in the best players in respective sectors. Therefore, it is stated that the allegations made against the respondents 3 and 4 are unfounded, baseless and deserve to be rejected. 21. Further they submit that under Article 3 of the C.A., Union of India under sub-clause 3.2.2 of Clause 3.2 has conferred upon BIAL right to grant service providers on such terms and conditions that it may determine as reasonable and appropriate. Therefore, it thought fit to adopt two phase methods in granting major concessions. The evaluation of the EOI was done by BIAL in fair, just and balanced manner and there has been no arbitrariness in the decision making process of the list as alleged in the writ petition. Five companies have been shor....
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....ted after stage of EOI, only two parties i.e., the 5th respondent and the answering respondent submitted final bids, after submission of bids, contract was finally awarded to 5th respondent by BIAL by rejecting the bid of 9th respondent. It is further stated that it is given to understand that the bid submitted by the said respondent was rated next after the bid submitted by the 5th respondent which was declared successful. Further it has also found fault with the criteria followed with regard to evaluation of EOI, as it does not prescribe intelligible criteria. With regard to the transparency in the bidding process it has supported the case of the petitioner on the same line as has been stated by it in the writ petition. It is obligatory on the part of the second respondent not only to spell out in detail the criteria to be followed for evaluation of bids submitted by various parties but also to disclose whether such criteria were actually implemented while evaluating the respective bids submitted by the bidders. Further it is stated that the respondents No.6, 7 & 8 despite having been selected in the pre-qualification round, did not opt to participate in the tender process for re....
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....erefore they are considered together. Learned Senior Counsel Mr. Vinod Bobade, for the petitioner submitted that the functions and duties entrusted to BIAL to establish the airport under section 12(3)(aa) of the Airports Authority of India Act, 1994 (in short referred to as 'A.A.I.A.' Act) to regulate air traffic service and transport service as defined under section 2(d) and (e) of the A.A.I.A. Act are statutory functions of 2nd respondent. He placed reliance upon the Constitutional Bench decision of the Apex Court reported in 1975(1) SCC 421 in the case of SUKHDEV SINGH vs. BHAGATRAM, three Judge Bench decision of the Apex Court reported in 1981 (1) SCC 449 in the case of SOM PRAKASH REKHI vs. UNION OF INDIA & ANR. And the seven Judges Constitutional Bench decision in PRADEEP KUMAR BISWAS vs. INDIAN INSTITUTE OF CHEMICAL BIOLOGY & ORS. Reported in (2002) 5 SCC 111 and other decisions of the Apex Court reported in 1952 SC 1621 @ 1678 para 152 (1963) 1 SCR 773 UJJAM BAI vs. STATE OF UTTAR PRADESH, 1967 (3) SCR 377 in the case of RAJASTHAN STATE ELECTRICITY BOAD vs. MOHAN LAL 1979 (3) SCC 489 in the case of RAMANA DAYARAM SHETTY vs. INTERNATIONAL AIRPORT AUTHORITY OF INDIA & ORS. In....
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....rt at Devanahalli to assist the 2nd respondent to render technical, financial and other assistance in terms of the lease deed and the concession agreement. The object of establishing BIAL and the nature of the project are explicitly mentioned. Though it is an airport in terms of section 2(b) of the A.A.I.A. Act, lease of land is permissible under section 12-A(1) of the A.A.I.A. Act by the KSIIDC in favour of BIAL to establish international airport with a view to provide facilities and render assistance to the airport authority for operating the airport. Having regard to the nature of functions required to be carried on by the airport at Bangalore on the basis of the agreements referred to supra, providing a duty free shop to the customers by the BIAL in the Airport cannot be termed that it is discharging public functions/duties, which are statutory in nature as it is discharging the enumerated functions of the Airport Authority as provided under section 12 of the A.A.I.A. Act. Therefore, the learned Sr. Counsel submitted that the decision in PRADEEP KUMAR BISWAS paras 40, 43, 45 and 47 would with all force apply in support of BIAL, management and control of the airport absolutely v....
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....dia. 30. Sri V. Lakshminarayana, learned Counsel for 9th respondent supported the submissions made on behalf of the petitioner, he has justified the maintainability of the writ petition by inviting our attention to paragraphs 162 to 169 of Unnikrishnan's case (1993) 1 SCC 645 @ 693, 697 paras 77, 79 and contended that the agreements entered into between the State of Karnataka - BIAL, KSIIDC - BIAL and Union of India - BIAL are for rendering statutory fundamental duties by establishing the international airport at Bangalore. The functions that are carried on by BIAL in the international airport on the basis of those agreements are supplementary to the fundamental statutory duties required to be discharged both by first and second respondent. Therefore, BIAL is a State amenable to writ jurisdiction of this Court under Article 226 of the Constitution of India. 31. With reference to the above rival legal contentions urged by the both the learned Sr. Counsel for the parties and learned counsel on behalf of the parties, on careful examination and consideration of the same by us, Points 1 and 2 have to be answered in favour of the petitioner for the following reasons. (i) As per ....
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.... (ii) Any person or agency jointly with the Authority or any State Government or both where the share of such person or agency as the case may be in the assets of the private airport is more than fifty percent." "12. Functions of the Authority : (1) Subject to the Rules, if any, made by the Central Government in this behalf, it shall be the function of the Authority to manage the airports, the civil enclaves and the aeronautical communication stations efficiently. (2) It shall be the duty of the Authority to provide air traffic service and air transport service at any airport and civil enclaves. (3) Without prejudice to the generality of the provisions contained in sub-sections (1) and (2) the Authority may - (3-aa) establish airports, or against in the establishment of private airports by rendering such technical, financial or other assistance which the Central Government may consider necessary for such purpose." (b) plan, procure, install and maintain navigational aids, communication equipment, beacons and ground aids at the airports and at such locations as may be considered necessary for safe navigation and operation of aircrafts; (c) provide air safety se....
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....my and safety of such service. (5) Nothing contained in this Section shall be constructed as - (a) Authorizing the disregard by the Authority of any law for the time being in force; or (b) Authorizing any person to institute any proceeding in respect of duty or liability to which the Authority or its Officers or other employees would not otherwise be subject. (iii) As per Section 4 of the Air Craft Act, 1934 (in short referred to as 'A.C' Act) the first respondent has got power to make Rules as per the 1944 Convention dated 07.12.1944 in relation to International Civil Aviation signed at Chikago. Section 5.A of A.C. Act confers powers upon the Director General of Civil Aviation or other Officer specially empowered in accordance with the provisions of the Act to any person/s engaged in air craft operations or using any aerodrome in the interest of security of India or for securing the safety of air craft operations. Section 11-A of the A.C. Act provides for penalty for failure to comply with the directions issued by him under section 5-A of the Act. (iv) In view of the aforementioned provisions of the Airports Authority Act and Air Craft Act, on the basis of the agree....
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....erring to its various decisions and Halsbury's Laws of England has held thus, the relevant paras reads as hereunder: "39. A public authority is a body which has public or statutory duties to perform and which performs those duties and carries out its transactions for the benefit of the public and not for private profit. Such an authority is not precluded from making a profit for the public benefit. (See Halsbury's Laws of England 3rd Vol.30 paragraph 1317 at 682)." 82. Part-IV of the Constitution gives a picture of the services which the State is expected to undertake and render for the welfare of the people. Article 298 provides that the executive power of the Union and State extends to the carrying on of any business or trade. As I said, the question for consideration is whether a public corporation set up under a special statute to carry on a business or service which Parliament thinks necessary to be carried on in the interest of the Nation is an agency or instrumentality of the State and would be subject to the limitations expressed in Article 13(2) of the Constitution. A State is an abstract entity. It can only act through the instrumentality or agency of natural or jur....
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....r agency of the Government is not limited to a corporation created by a statute but is equally applicable to a company or society and in a given case it would have to be decided, on a consideration of the relevant factors, whether the company or society is an instrumentality or agency of the Government so as to come within the meaning of expression 'authority in Article 12." (viii) The Seven Judge Bench decision of the Apex Court in PRADEEP KUMAR BISWAS vs. INDIAN INSTITUTE OF CHEMICAL TECHNOLOGY case reported in (2002) 5 SCC 111 after considering its various decisions has held that the functions/duties to be performed by the authority come within the purview of 'State' under Article 12 of the Constitution and has also laid down the Law on Article 12 on 'Centres of Power' and the cause for expansion of 'State' at paras 6, 10, 15, 16, 40, 41 and finally it has summed-up at para 98 which relevant paragraphs reads as follows : '6. That an 'inclusive' definition is generally not exhaustive is a statement of the obvious and as far as Article 12 is concerned, has been so held by this Court in Ujjani Bai vs. State of U.P. (AIR 1962 SC 1621). The words 'State' and ....
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....rmed government agencies. See the decisions in Terry Vs. Adama, 273 US 536 and Nixon vs. Condon, 268 US 73. Activities which are too fundamental to the society are by definition too important not to be considered government function." 23. From this perspective, the logical sequitur is that it really does not matter what guise the State adopts for this purpose, whether by a Corporation established by statute or incorporated under a law such as the Companies Act or formed under the Societies Registration Act, 1860. Neither the form of the Corporation, nor its ostensible autonomy would take away from its character as 'State' and its constitutional accountability under Part III vis-a-vis the individual if it were in fact acting as an instrumentality or agency of Government. 40. The picture that ultimately emerges is that the tests formulated in Ajay Hasia vs. Khalid (1981) 1 SCC 722 at 736 para 9 are not a rigid set of principles so that if a body falls within any one of them it must, exhypothesi, be considered to be a State within the meaning of Article-12. The question in each case would be whether in the light of the cumulative facts as established, the body is financi....
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....uch control must be particular to the Body in question and must be pervasive. No doubt, in that case after referring to some tests from Ajay Hasia case, it is held that BCCI is not 'State' and it is not created by statute and no part of its capital is held by the Government. Practically no financial assistance is given by the Government to meet the whole or entire expenditure of the Board." The Board does enjoy a monopoly status in the field of cricket but such status is not State conferred or State protected. There is no existence of a deep and pervasive State control. The control if any is only regulatory in nature as applicable to other similar bodies. This control is not specifically exercised under any special statute applicable to the Board. All functions of the Board are not public functions. The Board is not created by transfer of a government-owned corporation. It is an autonomous body. (x) The decision of Ujambai referred to supra having regard to changing socio-economic policies in India and variety of methods by which Governmental functions are performed by which the Government carries on trade or business by a society, corporation etc., the functions that would be c....
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....(1966) 15 L.Ed.2d. @ 373, 379 regarding bequeathing of private land by a will to the Mayor and Council of Macom, Georgia after the death of the testator's wife and daughters, for use as 'a park and pleasure ground' for while people only, was held to be usable by all - whites and blacks - and that no 'segregation' could be permitted in view of the 14th amendment as it was a 'public park', the relevant portion reads thus :- "What is 'private' and what is 'State' action is not always easy to determine. Conduct that is formally private may become so entwined with governmental policies or so impregnated with a governmental character as to become subject to constitutional limitations placed upon State action." "Under the circumstances of this case, we cannot but conclude that the public character of the park requires it to be treated as a public institution subject to the command of the Fourteenth Amendment, regardless of who now has titled under State law." (xiii) In another case reported in (1974) 49 L.Ed.2d.477 in the case of JACKSON Vs. METROPOLITAN EDISON CO. which decision has been referred to in the International Airport Authority of India's case, it is laid down as hereu....
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.... operation and maintenance of the Airport and shall maintain, keep in good operating repair and condition, the Airport, in accordance with the Operation and Maintenance Plan, an indicative outline of which is as set out in Schedule-6 attached hereto. BIAL shall submit the Operation and Maintenance Plan to GOK no later than one (1) year from Financial Close. BIAL shall also renew, replace and upgrade to the extent reasonably necessary, the Airport which for these purposes shall exclude any systems or equipment to be operated by AAI in accordance with the terms of the CNS/ATM agreement. All operation, maintenance, repair and other works shall be carried out in such a way as to minimize inconvenience to users of the Airport. If any operation, maintenance, repair or other works necessitate interrupting or suspending the landing or taking-off of any aircraft, or the closure of the Airport, for any period of time, BIAL shall, except in case of an emergency, give to the DGCA and to all affected users of the Airport such prior written notice thereof as the DGCA may from time to time reasonably require." (xv) Section 22-A of the A.A.I.A. Act empowers the 2nd respondent to levy and ....
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....protected as the concession agreement provides exclusively of private concession to the existing airport and prohibits any airport being set-up within 150 kms from BIAL. (xviii) Even if it is not an entity and 'State' under Article 12 of the Constitution of India, the actions of BIAL are subject to judicial review under Article 226 of the Constitution of India. In this regard, learned Sr. Counsel for petitioner has rightly placed reliance upon the decisions reported in 1976(2) SCC 82 @ para 9 in the case of ROHTAS INDUSTRIES vs. ROHTAS INDUSTRIES STAFF, 1991 (1) SCC 171, 1995 (5) SCC 1811, 2003(4) SCC 225 @ 237 in the case of G. BASI REDDY vs. INTERNATIONAL CROPS RESEARCH INSTT. The principles laid down in those decisions with all force applicable to the case on hand and therefore BIAL is amenable to writ jurisdiction of this Court under Article 226 of the Constitution of India as it has been discharging statutory functions/duties in establishing International Airport at Devahanalli as it has undertaken to discharge the statutory functions of the Airport Authority in establishing private Airport and its maintenance. (xix) The word "person" is with avowed object deliberately u....
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....y discharge a public duty. If a student desires to acquire a degree, for example, in medicine, he will have to route through a medical college. These medical colleges are the instruments to attain the qualification. If, therefore, what is charged by the educational institution is a public duty that requires to act fairly." "83. The emphasis in this case is as to the nature of duty imposed on the body. It requires to be observed that the meaning of authority under Article 226 came to be laid down distinguishing the same term from Article 12. In spite of it, if the emphasis is on the nature of duty on the same principle it has to be held that these educational institutions discharge public duties. Irrespective of the institutions receiving aid it should be held that it is a public duty. The absence of aid does not detract from the nature of duty." (xxii) The learned Sr. Counsel for the petitioner has placed reliance upon the following decisions of the Apex Court wherein the scope of Article 226 is laid down by the Apex Court in BASI REDDY vs. INTERNATIONAL CROPS RESEARCH INSTT. Reported in (2003) 4 SCC 225 @ 237 the Apex Court has laid down the law that "A Writ under Article 22....