TaxTMI 
TaxTMI 
2025 (6) TMI 382
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....the fact that revenue appeals are pending adjudication before the Hon'ble High Court of Telangana in the assessee's own case for the AY 2005-06 in ITTA No.86/2013(against ITA No.523/H/2010), for the AY 2006-07 in ITTA No.530/2013(arising out of ITA No.899/H/2010), for the AY 2008-09 in ITTA No.448/2013(arising out of ITA No.301/H/2012) and that the issue has not attained judicial finality. 4. Any other ground(s) that may be urged at the time of appeal hearing. 3. The learned DR has submitted that the assessee claimed deduction u/s 80IA of the I.T. Act, 1961 in respect of the income earned from maintaining and operating the Port infrastructure under the agreement from the company and not under the agreement with the Central Govt./State Govt./local body or any other statutory bodies for developing or operating & maintaining the port facility. He has pointed out that the assessee is only a work contractor as the company who had an agreement with the Govt. of Andhra Pradesh outsourced the operation & maintenance of the port to another company and the other company has then further outsourced to the assessee. Therefore, the assessee does not satisfy the condition prescribed u....
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....The assessee company is engaged in the business of operating ships and port services and filed the return of income for the year under consideration on 27/11/2017 declaring total income of Rs. 13,73,10,110/- after claiming deduction u/s 80IA of Rs. 1,82,07,416/-. The assessee claimed that the income was derived from maintaining and operating port infrastructure and hence eligible for 100% deduction u/s 80IA of the I.T. Act, 1961. During the course of assessement proceedings, the Assessing Officer issued show cause notice and asked the assessee to furnish the necessary and sufficient details of the basis for claim of deduction u/s 80IA of the Act and also show cause as to why the claim of deduction u/s 80IA should not be disallowed as it was disallowed in the earlier A.Ys. In response to the show cause notice, the assessee filed the reply dated 02/12/2019 reproduced by the Assessing Officer in para 3.2 as under: " The company is engaged in maintenance and operation of the various ports in India. In fact the Hon'ble Tribunal in our own case for the A.Y.2000-01 and 2001-02, has also after examining the various agreements entered into by us has categorically held that the Company....
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....the services rendered by the assessee under the agreement with developer as well as with sub-contractor of the developer would satisfy the conditions for claiming the deduction u/s 80IA of the I.T. Act, 1961. For ready reference, the provisions of section 80IA(4) of the Act are reproduced as under: "80IA(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. (2)...... (3.).... (4) This section applies to- (i)any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining] any infrastructure facility which fulfills all the following conditions, namely:- (a)it is owned by a company registered in Indian or by a consortium of such companies ....
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.... operating and maintaining any infrastructure facility and such enterprise is owned by a company registered in India or by a consortium of such company or by an authority or a Board or a Corporation or any other body established/constituted under the Central or State Acts has entered into an agreement with the Central Govt/State Govt./local authorities or any other statutory body. The term infrastructure facility has been defined in Explanation to section 80IA(4) and as per clause (d) of the Explanation, this includes a Port/Airport/Inland Waterway, Inland Port or navigational channels in sea as part of infrastructure facility. Thus, it is clear from the plain reading of section 80IA(4)(i) of the Act that for claiming deduction u/s 80IA, an enterprise owned by a company or consortium of companies etc., shall be carrying on the business of either developing or operating and maintaining any infrastructural facility (Port) or developing, operating and maintaining any infrastructure facility (Port). Thus, such an enterprise shall either carrying only one business of developing or operating and maintaining the Port or carrying both the activities of developing as well as operating and m....
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....ere is no such agreement. The agreements entered into by the assessee with private companies which do not fall under the definition of Central/State/Local Authority/Statutory Body. Hence, the assessee failed to satisfy one of the essential requirements of Sec. 80IA. 4.11 As per the agreement entered into by the assessee with M/s. Cocanada Port Company Pvt. Ltd. dated 16.5.2000, the Government of Andhra Pradesh has entered into an agreement with International Sea Ports (India) Pvt. Ltd., for the development and operation of Kakinada Deep Water Port on operate and maintain, share and transfer (OMST/BOMST) terms. Further the International Sea Ports (India) Pvt. Ltd., executed the agreement with Cocanada Port Company Pvt. Ltd. (CPCL) on 02.04.1999 for development, operation and maintenance of Kakinada Deep Water Port. Further, CPCL gave the contract to the assessee in respect of certain marine operation services as discussed above. Similar type of agreements was entered into with Gujarat Chemical Port Terminal Company Ltd., Chemplast Sanmar Ltd., Karaikal Port Private Limited & Chennai Petroleum Corporation Ltd., Nagapatnam. As seen from the above, the assessee has no direct agreemen....
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....such companies. (b) it has entered into an agreement with the Central Government or a State Government or a Local Authority or any other Statutory Body for 1. developing, or 2. operating and maintaining or ( 3. developing, operating and maintaining a new infrastructure facility (emphasis supplied) I it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April 1995." Provided that where an infrastructure facility is transferred on or after the 1st day of April 1999 by an enterprise which developed such infrastructure facility (hereafter referred to in this section as the transferor enterprise to another enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the....
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....derives commercial profit for running such infrastructure facility. 1. Various professional/technical services rendered at the infrastructure facility under a contractual obligation with the person who runs the PORT commercially. In this case, the person offers specific services for predetermined charges thereby facilitating the person who is operating and maintaining the infrastructure facility. 4.6 In the instant case, the assessee falls under the category (ii) as above. However, a person who falls under category (i) above is eligible to claim deduction u/s. 80IA. The assessee has entered into agreements with the following companies for rendering specified Port services for which they have claimed deduction u/s 80IA for this Asst. Year: 1. Chennai Petroleum Corporation Ltd., agreement dated 05.03.2008. 4.7 As per the agreement with the above company, the assessee was rendering certain specific port related professional services such as: 1. Pilotage 2. Towage 3. Lighterage / cargo handling IV. Mooring Services V. Radio Operator Service VI. Cleaning of hold, etc. VII. Watch and Ward duties for tugs 4.8 The assessee has received payments for the specific serv....
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.... as extracted from the agreement. "Sub: Technical Management of 8 Tugs at Port Facilities at Jamnagar Refinery Complex. This refers to your offer and discussions you had with us during your visit to our office on above subject. We have pleasure in informing you that our management intends to entrust you the subject works as per following terms and conditions. 1. Contractors scope of work: Scope of work includes providing technical management of 8 Tugs of owner by providing manpower as specified by the owner and also spares having value less than Rs. 5,000 each. The scope of work mainly includes: - The operation and maintenance of Tugs - Up keep of Hull, machinery and equipment - Cost of recruiting of staff and housekeeping of tugs - Up keeping of relevant records and certificates - Consumables (Excluding paints, mooring ropes, lube oil, greases) - Organizing, supervising and assisting in all the classification services - Maintenance of required shore staff - Maintenance of records as per ISO requirements" 4.13 The above agreement also includes several functions which are to be performed by the owner i.e., the Reliance Ports and Terminals Ltd. As per the above ....
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.... 1961 on the income earned from the said infrastructure facilities". 4.18 As seen from the above, Reliance Ports and Terminals Ltd. stated that they are entitled for deduction u/s.80IA for developing, maintaining and operating the infrastructure facilities at Jamnagar. Hence, the assessee is clearly not eligible for such deduction. 4.19 The above agreements have been obtained during the course of assessment for the Asst. Years 2000-01, 2001-02 and 2002-03 and discussed in detail in those years. The assessee's Authorised Representative admits that the facts in the year under consideration are same as in the previous years and like-wise their objections are also same as in the earlier years. 5.1 Based on the above discussion and other submissions made by the assessee, the issue is summarized hereunder along with other salient points: 5.2 The, companies who had given the works to the assessee are developers-cum- operatorscum-maintainers. The developer who invests substantial sums in the development of an infrastructure invariably goes to maintain and operate to enjoy the fruits of the development before such infrastructure facility is handed over back to the Government/Aut....
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....terprise which developed such infrastructure facility (hereafter referred to in this section as the transferor enterprise) to another enterprise (hereafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, Local Authority or Statutory Body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place." 5.5 As seen from this provision the intention of the legislature is very clear and obvious. A situation was envisaged wherein a developer may come forward under the agreement with the Government/Authority and after development and initial operation for some period may for various reasons desire to quit the work so as to confer the same on some other enterprise, who will continue to operate and maintain under the s....
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....a Pre-Requisite: 6.1 An enterprise can enter into agreement for development or operation and maintenance or development, operation and maintenance of the new infrastructure facility 1. With Central Government 2. With State Government 3. With a Local Authority or 4. With any Other Statutory body. The expression used in the section 80IA(4)(b) is a new infrastructure facility. This expression is used because while introducing the legislation the following situations were envisaged: The Authorities mentioned at (a) to (d) may enter into agreement for developing, operating and maintaining a new infrastructure facility with one enterprise and in succession, when a developer leaves the maintenance of the infrastructure facility, another enterprise may take up the operating and maintaining the facility. 6.2 Thus, the operation and maintenance of a new infrastructure facility directly emanates from the agreements with the above entities. Any contract received from other than the above entities for operating and maintaining such infrastructure facility is like any other normal contract for maintenance of the infrastructure facility. Even the interpretation of provisions by th....
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....n that such infrastructure facility shall be transferred to the Central Government, State Government or local authority has also been removed. However, the agreement with such authorities for creation of such infrastructure will have to be entered into. 6.5 Thus agreement with the specified entities is an indispensable condition for availing the benefit u/s. 80IA. None of the companies with whom the assessee has entered into agreement can even be called statutory bodies or local authorities. It is needless to make an elaborate discussion about what is a statutory body or local authority which is well settled position now. All the persons from whom the assessee is deriving revenue under the name of O & M contracts are companies registered under Company's Act, 1956. They were neither created by any statute nor entrusted with administration of any local fund. Hence, assessee is not having the valid agreement with the specified entities for claiming benefit under section 80IA. 7. Amendment made by the Finance Act, 1999: 7.1 The object of the amendment made by Finance Act, 1999 was explained by CBDT circular No. 779 dated 14.09.1999. The relevant portion which clearly dispels ....
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....rs in the case of the assessee for the Asst. Years 2000-01 and 2007-08 have not been accepted by the Department and further appeals have been filed which are pending. 10. As per amendment made in the Finance Bill, 2009, with a view to preventing the misuse of Tax Holiday under section 80IA, it has been provided to clarify with retrospective effect that the benefit under section 80IA(4) will not be available in the case of a Works Contract awarded by any person and executed by an Undertaking or Enterprise referred to in section 80IA(1). As the assessee's nature of activity is execution of contract works, assessee is not eligible for claiming deduction under section 80IA of the I.T. Act. 11. With the above discussion, the claim of the assessee u/s 80IA of the I.T. Act of Rs. 1,82,07,416/- is not allowed in the assessment. [Addition: Rs. 1,82,07,416/-] Thus, the Assessing Officer has given the finding that the case of the assessee does not fall in the ambit of proviso to section 80IA(4) and consequently the assessee is not entitled for deduction u/s 80IA of the I.T. Act, 1961. 10. The learned CIT (A) has allowed the claim of the assessee in para 6 to 6.1.2 as under: 6. De....
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.....1.2 I have perused facts of the case and submissions of the appellant. It is seen that, as has been noted by the AO also in the impugned order, the facts of the present assessment year on this issue are identical to AY 2016-17 and other years. 11. It is manifest from the above order that the learned CIT (A) has allowed the deduction u/s 80IA by following the orders of this Tribunal in assessee's own case. This Tribunal in assessee's own case for the A.Ys 2005-06 to 2007-08 vide order dated 25/01/2012 in ITA Nos.523/Hyd/2010, 1457/Hyd/2010, 899/Hyd/2010 and 1336/Hyd/2010 has held in paras 7 to 14 as under: "7. We have heard both the parties and perused the material available on record. We have also gone through the earlier order of this Tribunal in the assessee's own case cited supra. It was held by the Tribunal in that order that: 1. It is not necessary that the assessee should have undertaken the entire O & M by the port infrastructure and 2. An agreement with the authority specified in section 80IA (4)(i)(b) is not mandatory in view of the provisions of section 80IA(4). 8. This is clear from Para 13 at page 18 of its Tribunal order cited supra wherein it was held....
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....e required to be transferred or handed over to the specified authorities after the expiry of the period stipulated in the agreements with the respective authorities. The counter parties to the agreements have also confirmed that the services rendered by the assessee company are essential part of the operation and maintenance of the port facilities. Further, under the original agreement between the specified authorities and the developers of the port, the developers had the power to sub contract the operation and maintenance of the port infrastructure as and where necessary. Accordingly, the operation and maintenance services were sub contracted to the assessee company in accordance with the original agreement with the specified authorities. As such, the assessee company's case being fully covered by the proviso to section 80IA(4)(i, it is righteously entitled to deduction u/s 80IA of the Act. " 11.1. In view of the above decision of the Tribunal, we are of the opinion that for these assessment years also the assessee claim u/s 80IA has to be allowed on the same reasons. 12. With regard to the deduction claimed in respect of Dhej Port, the Tribunal in its order dated 25.11....
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...., there is no justification for the AO to deny the claim of the assessee for deduction under s. 80IB. The implication of the earlier assessment made for the initial assessment year under s. 143(3) is that the assessee has fulfilled the conditions prescribed in the said section. Thereafter, it is not open for the AO to re-examine the issue all over again and come to a different conclusion in a subsequent year without justifying such departure. In the assessment order, there is no discussion by the assessing officer on this aspect in spite of the fact that the assessee had taken a specific position based on the relief allowed in the past. Further, the claim accepted by the AO in the asst. yr. 2001-02 and thereafter in 2002-03 has not been disturbed. Clearly, in a such a situation, the onus which was on the Revenue has not been discharged. Ln so far as the justification for the claims of exemption/tax reliefs are concerned the onus is on the assessee to establish and justify the claims. So, however, in a situation like the present situation, the AO ought to have justified this departure from the earlier accepted position whereby similar claim has been accepted in the past. It is in th....
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....e bench has held as under: "8. As far as AY 2010-11 is concerned, the issue is more or less identical, except, the fact that assessee has claimed deduction u/s 80IA for the first time in respect of Karaikal port being operated by Karaikal Port company Pvt. Ltd. In this regard, assessee has submitted a certificate from the port authority certifying that they have entered into an agreement with assessee for O&M of the port. That being the case, the decision rendered in respect of AY 2009-10 equally applies to the facts of the present case. Accordingly, we do not find any reason to interfere with the order of ld. CIT(A) in allowing assessee's claim of deduction u/s 80IA. Therefore, upholding the order of ld. CIT(A), we dismiss the grounds raised by department." Since the assessee has submitted a certificate from the port authority certifying that they have entered into an agreement with the assessee for O&M of the port in AY 2009-10 itself, we set aside the order of CIT(A) and direct the AO to allow deduction u/s 80IA to Karaikal port also. " 13. Thus, the Tribunal has just followed the orders for the A.Y 2010-11 wherein a peculiar fact was taken into consideration about the c....