2010 (2) TMI 108 - HC - Income Tax

Deduction under section 80IA Infrastructure facility The assessee in terms of the policy of the Gov. of India to encourage private sector participation in the development of infrastructure bid for and was awarded a contract for leasing of container handling cranes at the Jawaharlal Nehru Port Trust (JNPT). The assessee claimed special deduction under section 80IA. The assessing officer rejected the claim but the commissioner (Appeals) Tribunal allowed it. Held that JNPT issued a certificate confirming the award of contracts to the assessee for supply installation testing commissioning and maintenance of container handling equipment on lease for a period of ten years for loading and unloading of containers at the port and that the cranes that were to be supplied by the assessee formed an integral part of the port. The condition of a certificate from the port authority was fulfilled and JNPT certified that the facility provided by the assessee was an integral part of the port. The findings that the assessee had developed the infrastructure facility and that it was engaged in operating the cranes was therefore based on the material on record. The fact that the assessee was also maintaining the cranes was not disputed. The assessee was entitled to the special deduction under section 80IA.

Issues Involved:
1. Entitlement to deduction under section 80-IA of the Income-tax Act, 1961.
2. Whether the assessee was engaged in developing, maintaining, and operating an infrastructural facility.
3. Interpretation and application of section 80-IA and related circulars issued by the Central Board of Direct Taxes (CBDT).
4. Applicability of the amendment to section 80-IA by the Finance Act of 2001.

Detailed Analysis:

1. Entitlement to Deduction under Section 80-IA:

The central issue was whether the assessee was entitled to the benefit of a deduction under section 80-IA of the Income-tax Act, 1961. The Tribunal had previously held that the assessee was entitled to this deduction, a decision which the Revenue disputed.

2. Developing, Maintaining, and Operating an Infrastructural Facility:

The assessee had entered into contracts with the Jawaharlal Nehru Port Trust (JNPT) for the supply, installation, testing, commissioning, and maintenance of container handling cranes. The Revenue argued that the assessee was not engaged in developing the facility but merely in supplying and installing cranes. However, the court found that the term "development" was not artificially defined in section 80-IA and should be given its ordinary meaning. The assessee's obligations under the contract included making the equipment operational and maintaining it, which constituted developing an infrastructural facility.

3. Interpretation and Application of Section 80-IA and CBDT Circulars:

The court examined the legislative history of section 80-IA and the explanatory circulars issued by the CBDT. Circulars issued in 1995, 1996, 2000, and 2005 clarified that structures at ports for storage, loading, and unloading would fall under the definition of a "port" for the purposes of section 80-IA. The circulars indicated a progressive liberalization of the legislative scheme to encourage private sector participation in infrastructure development. The court noted that the CBDT circulars were binding on the Revenue and that the assessee's activities fell within the scope of section 80-IA as interpreted by these circulars.

4. Applicability of the Amendment to Section 80-IA by the Finance Act of 2001:

The Finance Act of 2001 amended section 80-IA to clarify that the provision would apply to enterprises engaged in (i) developing; (ii) operating and maintaining; or (iii) developing, operating, and maintaining an infrastructure facility. The court held that this amendment was reflective of the position that had always been construed to hold the field. The consistent line of CBDT circulars had already postulated this interpretation. The court emphasized that the amendment was intended to clarify that the three conditions were not cumulative but alternative.

Conclusion:

The court concluded that the assessee was entitled to the benefit of a deduction under section 80-IA. The assessee's activities of supplying, installing, testing, commissioning, and maintaining cranes at JNPT constituted developing an infrastructural facility. The court found no merit in the Revenue's appeals and dismissed them, affirming the Tribunal's decision in favor of the assessee. The question of law was answered in favor of the assessee, and there was no order as to costs.

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