TaxTMI 
TaxTMI 
2025 (6) TMI 382
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....t satisfied. 3. The learned CIT(A) erred in appreciating 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 as....
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....nsidered the rival submissions as well as relevant material available on record. 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 exa....
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....the Central Govt./State Govt./local body or any other statutory bodies, then the question arises as to whether 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 w....
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....b section (4)(i) of section 80IA prescribes the condition for the eligible assessee to claim deduction u/s 80IA(1) that an enterprise is carrying on business of developing or operating and maintaining or developing, 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 infras....
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....eration & maintenance of ports. 4.10 As per the provisions of Sec.80IA(4)(i)(b), there shall be an agreement with the Central Government or State Government or Local Authority or a Statutory Body. In the present case, there 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 agre....
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....ess of (i) developing or (ii) operating and maintaining or 1. developing, operating and maintaining any infrastructure facility which fulfills all the following conditions, namely: 1. it is owned by a company registered in India or by a consortium of 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....
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....d into a contract for offering certain specialized services to other corporate entities, which are maintaining and operating the infrastructure facility. 4.5 The port operations can be divided into two parts: 1. Commercial Port operations where a person/enterprise utilizing the infrastructure developed by himself or by somebody else runs the same on commercial / professional lines and 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 Petrole....
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....mical 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 agreement with the Government of Andhra Pradesh, which is an essential requirement for claiming deduction u/s. 80IA. 4.12 In the same way, the assessee has entered into two agreements with the Reliance Ports and Terminals Ltd. i.e. on 24.06.1999 and 01.07.1999. As per the first agreement, the following work is allotted, 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 - U....
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.... terms, vide concession agreement dated 19 March, 1999 for four shore connected berths at the Kakinada Port, between Govt. of Andhra Pradesh T, R & B Department and M/s. International Sea Ports Pvt. Ltd., Singapore". 4.17 In the same way, Reliance Ports and Terminals Limited in its letter dated 18.09.2002 had stated as under: "This is to confirm that we have entered into an agreement with Gujarat Maritime Board, vide agreement dated 28.7.1999, to develop, maintain and operate the infrastructure post facilities located at Port Sikka, Jamnagar. We are entitled to get deduction under Sec.80IA of the Income tax Act, 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 ....
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.... the companies involved in the infrastructure development were received clearly stating that they were claiming 80IA on all the services towards port development, operation and maintenance. It is immaterial whether the O & M work is sub-contracted or not towards their claim. 5.4 The assessee has tried to explain the provisions in its submissions to say that the intention of the Legislature was to grant the benefit to O & M Operators even if they do not own any infrastructure. In this regard, the proviso to section 80IA(4) I may be relevant to be quoted: "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 (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 w....
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....rnment has extended the benefit of tax holiday to such private agencies who are involved in infrastructure development and maintenance. But the fact to be understood in this context and as observed from the genesis of Legislation incorporating section 80IA was that it was never the intention of the Government to transfer the ownership of the key infrastructure facility like ports, railway stations, airports etc. in the hands of private parties. The intention was only to utilize private funds for developing the infrastructure facility and to have ultimate ownership and control on such facilities due to strategic and security reasons. 6. Agreement with Specified Authorities is 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 follow....
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....rastructure facility in the nature of a road (including a toll road), bridge, rail system, highway project, water supply project, sanitation, sewerage and solid waste management system shall be allowed a ten year tax holiday in place of a two-tier tax holiday. Such an enterprise may avail of the tax holiday consecutively for any ten years out of twenty years beginning from the year in which the undertaking begins operating the infrastructure facility. 6.4 In the case of other infrastructure namely, for airport, port, inland port and inland waterways, section 80IA has been further amended to relax the existing two tier fiscal incentive. Instead, an identical ten year tax holiday may be availed of in a block of initial fifteen years. The condition 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....
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.... initial 15 years. 7.4 Thus, the various amendments brought in 80IA as explained in various Board Circulars evidence that the object of providing deduction u/s. 80IA was to bring in additional resources and to attract capital investment from the private sector. The operation and maintenance part is to recoup such huge investments. 8. From the above discussion, it is clear that --- 1. The assessee has no agreement with specified authorities. The actual developer is still in agreement with the specified authorities and hence the amendment made by Finance Act, 1999 is not attracted in the case of the assessee. 1. The activities of the assessee are in fact execution of contract/sub-contract works of the companies indulged in O & M Operation of Ports. 9. The Hon'ble Tribunal's orders 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 t....
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....02 ITA No. 1050/Hyd/2003 (Reported at 155 Taxmann 133) No further appeal filed by the Department 3 2005- 06 ITA No. 523/Hyd/2010 & 1457/Hyd/2010 ITTA MP (SR) NO. 86 of 2013 AND I.T.T.A. (SR) No. 4484 of 2006 Disposed on the basis of delay in filling appeal vide order dated 13/01/2013 4 2006- 07 ITA No. 899/Hyd/2010 ITTA No. 530 of 2013 Pending 5 2007- 08 ITA No. 1336/Hyd/2010 No further appeal filed by the Department 6 2008- 09 ITA No. 301/Hyd/2012 ITTA No. 448 of 2013 Pending 7 2009- 10 ITA No. 1615/Hyd/2014 ITTA No. 289 of 2016 Disposed due to lower tax effect 8 2010- 11 ITA No. 1624/Hyd/2014 ITTA No. 271 of 2017 Disposed due to lower tax effect 9 2014- 15 ITA No. 815/Hyd/2018 No further appeal filed by the Department The appellant also stated that in AY 2015-16 and 2016-17, appeals had been decided by CIT(A) in appellant's favour on this issue vide orders dated 30/05/2019. 6.1.2 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 ye....
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....introduced after the word developing', to clarify in effect that the agreement between the enterprise and the authority of the central or state govt. or, as the case may be a local authority or a statutory body may provide for (i) Developing or (ii) Maintaining and operating or (iii) Developing, maintaining and operating a new facility." 10. With these observations, the Court has clarified that the claim of the assessee even for O & M should be entered into with specified authorities, regardless of the proviso to section 80IA. 11. Further, at Para 5, it was observed by the Tribunal in assessee's own case which reads as follows: "5. On the above facts it was explained by the assessee to the assessing officer that the assessee company had entered into agreements for operation and maintenance of infrastructure facilities viz., ports with the developers thereof, who in turn had entered into agreements with specified authorities for the purpose of development, operation and maintenance of these ports. Further, these ports were required to be transferred or handed over to the specified authorities after the expiry of the perio....
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....laim for such deduction cannot be denied for subsequent years without any justification. The relevant observations of this Tribunal are extracted hereunder: "The assessee initially claimed deduction under s. 80IB for the impugned unit in the asst. yr. 2001-02 and the same was allowed. In this assessment year, i.e., 2003-04 the claim of the assessee was in continuation of the claims made in the earlier assessment years for the impugned assessment year falls within the number of assessment years as specified in the section in which the claim is eligible. It is also a pertinent fact position that the claim allowed to the assessee in the initial assessment year of 2001-02 and thereafter in the asst. yr. 2002-03 has not been withdrawn. There is no contravention from the Revenue either at the stage of the proceedings before the lower authorities or even before the Tribunal. Thus, factually speaking the claim of the assessee for deduction under s. 80IB Stands admitted in the initial assessment year and also thereafter up to the assessment year prior to the year under consideration. On the factual matrix, there is no justification for the AO to deny the claim of the assessee for d....
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....Court was only regarding the allowability of claim of deduction u/s 80IA for the business activity of developing or maintaining and operating or developing, maintaining and operating and the Hon'ble High Court has held that the assessee would be entitled for deduction even for the business activity of either developing, maintaining or operating the infrastructure facility. The Tribunal has not discussed the terms & conditions of the agreement entered into by the assessee with the main enterprises or with the sub-contractor as to whether it was in the nature of transfer of the infrastructure facility or not. In the subsequent decision, in assessee's own case, for the A.Y 2008-09, 2011-12 and 2013-13 vide order dated 8/6/2018 in ITA No.438 to 440/Hyd/2016, the Tribunal has given finding in Para 12 as under: "12. Considered the rival submissions and perused the material on record. This issue is squarely covered by the decision of the coordinate bench of ITAT in assessee's own case for AYs 2009-10 and 2010-11 (Revenue's appeals) in ITA Nos. 1615 & 1624/Hyd/2014 vide order dated 08/07/2015 wherein the coordinate bench has held as under: "8. As far as AY 2010-11 is ....