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2005 (11) TMI 204 - AT - Income TaxInterpretation of statute - Allowability of deduction u/s 33AC and 80-IA - income derived from the business of operation and maintenance of ports - private limited company - Agreements in respect of development, operation and maintenance of the infrastructure facilities, viz., ports, with the developers - HELD THAT:- As per s. 80-IA(4)(i), three conditions are required to be satisfied for claiming deduction under the said section. There is no dispute about the first condition that the assessee is a company registered in India. There is also no dispute about the third condition about the date of starting of operating and maintaining the infrastructure facility. However, the second condition is that it has to enter into an agreement with the Central or State Government or specified authority for (i) developing, (ii) maintaining and operating; or (iii) developing, maintaining and operating a new infrastructure facility subject to the condition that such infrastructure facility shall be transferred to the Government or specified authority within the stipulated period mentioned in the agreement. According to the Revenue authorities, this condition has not been fulfilled in the instant case. In the proviso it is said "provided that where an infrastructure facility is transferred". The proviso to s. 80-IA(4)(i) only provides for an intermediary phase between the development of the infrastructure facility by the developer and its ultimate transfer to the specified authority. It is during this period that an O&M contractor (assessee) may step in for the purpose of operation and maintenance of the infrastructure facility on behalf of the developer before the ultimate transfer of the infrastructure facility to the specified authority and claim deduction in respect of profit earned from such activity u/s 80-IA. Here, in our considered view, the term 'transfer' should not be construed in a conservative manner so as to mean the transfer of ownership of the infrastructure facility to the specified authority. As stated earlier, the ownership of ports do not even vest with the developers of the port since waterfront is the sovereign right of the Government only and as such, there is no question of transfer of ownership to the specified authority. Here, in this case, the developer is required to transfer the infrastructure facility to the specified authority within the period stipulated in the original agreement between the developer and the authority. As such, the learned CIT(A)'s contention that since the appellant-company is not required to transfer the infrastructure facility to the specified authority, it is not entitled to deduction u/s 80-IA(4) is, in our opinion, misunderstood. We further find that the AO in his order has alleged that the assessee is not operating and maintaining the entire infrastructure facility, but only rendering certain specific service under the contract. Against this our attention was drawn by the AR to the paper book wherein the confirmations from the counter-parties to the agreements admitting that the services rendered by the assessee-company are essentially in the nature of operation and maintenance of the port infrastructure. Sec. 80-IA(4), inter alia, qualifies an enterprise engaged in the business of operating and maintaining an infrastructure facility for deduction under the said section and this is exactly the nature of the assessee's business and hence, in our considered opinion, the assessee is eligible for deduction in terms of proviso to s. 80-IA(4)(i) of the Act. Hence, we direct the AO to compute the deduction allowable u/s 80-IA(4) in respect of the profits pertaining to Kakinada Port and Jamnagar Jetty Port. Admittedly similar claim was allowed in the previous year, but in the years under consideration the Revenue did not consider the alternative claim of the assessee for deduction u/s 33AC. Learned CIT(A) disallowed the claim mainly on the ground that the tugs are not ships and the assessee-enterprise is not a public company, overlooking the fact that the assessee is a public company under the Companies Act and, in the absence of the definition of 'ship' in the Act, the meaning assigned to the term 'ship' under r. 5 of the IT Rules should be considered. However other conditions such as creation of reserve etc., are required to be satisfied. We therefore, direct the assessee to submit the relevant details/records in respect of Dahej Port and to establish the creation of the reserve as stipulated u/s 33AC. Hence, we set aside this issue to the file of the AO to recompute the deduction eligible u/s 33AC in respect of Dahej Port. In the result, the appeals of the assessee are partly allowed.
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