2017 (10) TMI 1314 - AT - Income Tax

Disallowance of deduction u/s 80IA(4) - company has entered into an agreement with GSRDC - transfer the project in agreement with the constitutional body i.e. an agency as defined under section 2(e) of the Gujarat Infrastructure Development Act - Held that - All kinds of infrastructure facilities referred in section 80IA(4)(i) of the Act like Railways ports dams bridges roads etc. are always owned by the Government and cannot be owned by private owners. So however for an efficient execution and handling of such infrastructure facilities the governments form a Special Purpose Vehicle (SPV) in the form of separate entity registered under the Companies Act 1956. Hon ble Supreme Court in the case of Som Prakash Rekhi (1980 (11) TMI 113 - SUPREME COURT OF INDIA) and Pradeep Kumar Biswas & Ors. (2002 (4) TMI 890 - SUPREME COURT) are fulfilled and SSNNL is liable to be considered as a statutory body falling within the meaning of section 80IA(4)(i(b) of the Act. Similarly in this case the entire project was clearly not only executed in agreement with GSRDC but the Gujarat Government directly was involved in the agreements for the project. Assessee has developed operated and was to transfer the project in agreement with the constitutional body i.e. an agency as defined under section 2(e) of the Gujarat Infrastructure Development Act 1999 under the Gujarat Government Act and also in direct and explicit agreement and approval of Gujarat government which has given land and allowed to collect toll fee. Assessee company fulfills the conditions as required under section 80IA(4) including Section 80IA(4)(i)(b) and has developed operated and was to transfer the infrastructure facility and therefore is eligible for the deduction claimed under the section. GSRDC is an extended arms of the Gujarat State and is entitle to eligible for deduction. - decided in favour of assessee.

Summary

Issues Involved:
1. Disallowance of deduction claimed under Section 80IA(4) of the Income Tax Act.
2. Whether the agreement with Gujarat State Road Development Corporation (GSRDC) qualifies for deduction under Section 80IA(4).

Issue-wise Detailed Analysis:

1. Disallowance of Deduction Claimed under Section 80IA(4):

The appellant company filed its return of income claiming a deduction under Section 80IA(4) of the Income Tax Act. The Assessing Officer (AO) disallowed the deduction of Rs. 3,76,68,740/- on the grounds that the agreement was with GSRDC, a corporation incorporated under the Companies Act, and not directly with the State Government or a statutory body as required by the Act. The AO held that the appellant did not meet the conditions specified under Section 80IA(4), which mandates an agreement with the Central or State Government, a local authority, or a statutory body.

2. Agreement with GSRDC and Eligibility for Deduction under Section 80IA(4):

The appellant argued that GSRDC is a government agency fully controlled by the Government of Gujarat. The appellant presented evidence showing that GSRDC was established by a government resolution and is 100% owned by the Government of Gujarat. The appellant also provided documents indicating that the project was executed with the approval and involvement of the Gujarat Government, including land allotment and toll fee collection permissions.

The Commissioner of Income Tax (Appeals) [CIT(A)] found that the project was executed in agreement with GSRDC, which operates under the jurisdiction and control of the Gujarat Government. The CIT(A) noted that the Gujarat Government was directly involved in the project, as evidenced by various resolutions and approvals. Consequently, the CIT(A) held that the appellant fulfilled the conditions under Section 80IA(4) and was eligible for the deduction claimed.

Tribunal's Decision:

The Tribunal upheld the CIT(A)'s decision, emphasizing that GSRDC is an extended arm of the Gujarat Government. The Tribunal referred to the Supreme Court's judgment in the case of Som Prakash Rekhi, which laid down tests to determine whether an entity is an instrumentality of the State. The Tribunal concluded that GSRDC meets these tests, including government ownership, control, and involvement in public functions. Therefore, the agreement with GSRDC qualifies for the deduction under Section 80IA(4).

The Tribunal dismissed the department's appeals and affirmed that the appellant company is eligible for the deduction under Section 80IA(4) for the Assessment Years 2009-10, 2010-11, and 2011-12.

Conclusion:

The Tribunal's judgment confirms that the appellant's agreement with GSRDC, a government-controlled corporation, satisfies the requirements of Section 80IA(4). The appellant is entitled to the claimed deduction, and the department's appeals are dismissed.