TMI Blog2011 (7) TMI 513X X X X Extracts X X X X X X X X Extracts X X X X ..... road side facility - find that income derived from operating and maintaining of road qualifies for deduction under section 80-IA of the Act - Thus, income derived by assessee from any operation of road is eligible for deduction under section 80-IA of the Act and the contention of the Revenue that only toll charges will qualify for deduction under section 80-IA cannot be accepted - Therefore, set aside the issue relating to fee from lying down optical fibre cable and fee from film shooting back to the file of the Learned Assessing Officer and direct him to verify the facts and allow deduction under section 80-IA in respect of those income which relates to road. Regarding to scrap sales - find that sale of scrap represents the sale of left over materials which were acquired for developing road - No material has been brought on record by the lower authorities to controvert the above submission of the assessee - Thus the sale of scrap was intimately connected with the business of developing operating and maintaining infrastructure facility and income from such sale goes on to reduce the expenditure of developing the infrastructure facility and truly speaking the same is not an indepe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e construction of a bypass road near Coimbatore and a bridge on NH-47, across river Nayal pursuant of concession agreement entered into by L T Transportation Infrastructure Ltd. (L T TIL) and Government of India Government of Tamilnadu to develop the project on "Build, Operate and Transfer "BOT" model. The operation and maintenance of the project is also undertaken by the company. 4. During the year under consideration, assessee had claimed deduction under section 80-IA of the Act on the following income : Brief description of Income Brief description of Income Amount (in Rs.) Income from use of way-side amenities (toilets, service stations etc.) as per clause 7.4 of the concession agreement 298,476 Income from putting up advertisements on the road (Hoardings) as per clause 15.12 of the concession agreement 1,902,523 Fee for laying optical fiber cable 500,000 Others (revenues from sale of scrap, film shooting etc.) 99,238 Assessing Officer denied the above said incomes as he treated the receipts as "Income from Other Sources". 5. On appeal before the Commissioner of Income-tax (A), assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e beyond first degree nexus between profit and industrial undertaking, the same would not qualify for deduction. It is found that the appellant has included income by way of wayside amenities and miscellaneous income in the profit of eligible business and claimed deduction thereon. By their very nature, the sources of these income are a step removed from the eligible business. There is no direct nexus between other income and profits and gains of the eligible business. The connection between the two is beyond first degree and is only incidental and hence it is not entitled for deduction as claimed by the appellant. Accordingly this ground is dismissed." 7. The Learned Authorized Representative of the assessee has filed written submission which is as follows : "In this appeal against the order of the Commissioner of Income-tax (Appeals) ['CIT (A)'], L T Transport Infrastructure Limited ('L T TIL' or 'the Appellant' or 'the Company' or 'the assessee') wishes to submit as under : 1. Background about the company L T TIL has been incorporated to undertake the development of a bypass road near Coimbatore and a bridge on NH-47, across river Noyyal, pursuant to a concession agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e chargeable to income-tax under the head "Profits and gains of business or profession", (i) the profits and gains of any business or profession which was carried on by the assessee at any time during the previous year." The term "business" is not defined under the Act. The meaning assigned to the said term by various judicial precedents is provided below : l The expression 'business' in ordinary parlance means any trading activity accompanied by regularity of transactions intended for the purpose of making profit. In general, a single transaction is not taken as business [Eclat Construction (P.) Ltd. v. CIT [1988] 172 ITR 84 (Pat.)]. l The expression 'business' is a well-known expression in income-tax law. It means some real, substantial and systematic or organised course of activity or conduct with a set purpose [CIT v. Distributors (Baroda) (P.) Ltd. [1972] 83 ITR 377 (SC)/Narain Swadeshi Wvg. Mills v. CEPT [1954] 26 ITR 765 (SC)/CIT v. Admiralty Flats Motel [1982] 133 ITR 895 (Mad.)]. l The expression 'business' does not necessarily mean trade or manufacture only : it is being used as including within its scope professions, vocations and callings for a fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... main head of income and not under the residual head of "other income" signifies the intent of the assessee to earn such income as part of its main "business" and the same should be subject to tax as business income. Based on discussion above, the appellant wishes to submit that the incomes referred in points (2) to (5) of paragraph 2 should be subjected to tax as its business income. 4. Eligibility for deduction under section 80-IA As discussed in paragraph 3, the Appellant wishes to subject income in the nature referred in clauses (2) to (5) should be subject to tax as PGBP and not IFOS. Further, the appellant also submits that the said income should be eligible for deduction under section 80-IA of the Act, for reasons mentioned below : 4.1 Relevant provisions of the Act and position in law As per section 80-IA of the Act, "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tcome of the manufacturing process itself. 4.2 Applicability in the instant case 4.2.1 License fee from use of way-side amenities Way-side amenities represent infrastructure facilities linked to the project developed by the appellant (toll road and bridge) such as parking facilities, service stations and other facilities for users of the infrastructure facility. Operation and maintenance of toll roads/by-pass roads include inter alia provision of wayside amenities to users of infrastructure facilities. The requirement to provide way-side amenities stems from the concession agreement entered into by the appellant with the Government as part of clause 7 which deals with the "Scope of the project". The relevant extract is reproduced below: 7.4.4 Passenger oriented wayside amenities like toilets, parking facilities, service station shall be provided at suitable location in the acquired right of way as per relevant standards and guidelines of M.O.S.R./I.R.C. Also, the Appellant intends to draw attention of your goodself to the provisions of clause 7.5.9 which pertains to "Maintenance and operations: 7.5.9 The road user oriented wayside amenities shall be kept clean and wel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Pandian Chemicals (supra) are significantly different from the facts in the instant case. (b) The difference in language employed and scope of deduction in case of section 80HH (subject-matter of deduction in the case of Pandian Chemicals) and section 80-IA (subject-matter of deduction in the instant case) Particulars Pandian Chemicals Ltd. Current case Deduction claimed under Section 80HH Section 80-IA Deduction can be claimed in respect any profits and gains derived from an industrial undertaking profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) Note - L T TIL is covered within the scope of sub-section (4) of section 80-IA Scope of the section Tax holiday is restricted to income arising from the activity of the industrial undertaking. Any incidental income arising in the course of such activity may not be eligible for deduction The words "any business referred to in sub-section (4)" widens the scope of income eligible for tax holiday to all incomes that arise from the business in sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Income Amount (in Rs.) Income from use of way-side amenities (toilets, service stations etc.) as per clause 7.4 of the concession agreement 298,476 Income from putting up advertisements on the road (Hoardings) as per clause 15.12 of the concession agreement 1,902,523 Fee for laying optical fiber cable 500,000 Others (revenues from sale of scrap, film shooting etc.) 99,238 10. According to the Learned Assessing Officer, the above income were not derived from the developing, operating and maintaining any infrastructure facility and therefore, he excluded the same while computing deduction allowable under section 80-IA of the Act. 11. On appeal, the Learned Commissioner of Income-tax(A) confirmed the action of the Learned Assessing Officer. 12. Before us, the main contention of the assessee is that wayside amenities were built and maintained and operated by the assessee in pursuance to the tripartite agreement for developing, operating and maintaining infrastructure facility entered into by it with Central and State Governments. In other words, to build maintain and operate road side amenities was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even when the road side amenities were required to be built operated and maintained by the assessee under the same agreement under which it was authorized to build operate and maintain road, such roadside amenities cannot be called infrastructure facilities as envisaged in section 80-IA(4) of the Act. Further, we find that sub-section (1) and sub-section (4) of section 80-IA read as under : "(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. (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 fulfils all the following conditions, namely : (a) it is owned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian company for providing telecommunication service. (iii) any undertaking which develops, develops and operates or maintains and operates an industrial park [or special economic zone] notified by the Central Government in accordance with the scheme framed and notified by that Government for the period beginning on the 1st day of April, 1997, and ending on [the 31st day of March, 2006 : Provided that in a case where an undertaking develops an industrial park on or after the 1st day of April, 1999 or a special economic zone on or after the 1st day of April, 2001 and transfers the operation and maintenance of such industrial park or such special economic zone, as the case may be, to another undertaking (hereafter in this section referred to as the transferee undertaking), the deduction under sub-section (1) shall be allowed to such transferee undertaking for the remaining period in the ten consecutive assessment years as if the operation and maintenance were not so transferred to the transferee undertaking: Provided further that in the case of any undertaking which develops, develops and operates or maintains and operates an industrial park, the provisions of this clause sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the eligible business has been defined in sub-section (4) of section 80-IA. In relation to the facts of the present case, the eligible business means business of developing, operating and maintaining any infrastructure facility i.e., road. Thus, the income derived from business of developing, operating and maintaining road only qualifies for deduction under section 80-IA of the Act. On facts of the instant case, the business of developing, operating and maintaining road in our considered opinion does not include the activity of business of developing, operating and maintaining road side amenities though such activity may be incidental to or facilitate the business of developing and maintaining roads. Therefore, in our view, simply because the word 'business' has been used in section 80-IA(4), the same cannot be read so as to mean that income derived from operating and maintaining roadside amenities will form part of business of developing, operating and maintaining road because the business of developing, operating and maintaining road can be carried out without undertaking any activity of developing, operating and maintaining roadside amenities also. Though we agree with the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the assessee. Thus we agree that the above sale of scrap was intimately connected with the business of developing operating and maintaining infrastructure facility and income from such sale goes on to reduce the expenditure of developing the infrastructure facility and truly speaking the same is not an independent income to the assessee. We therefore, delete the disallowance of deduction under section 80-IA in respect of the sale of scrap and allow this part of the ground of the assessee. 19. In the result the appeal of the assessee is disposed of as above. 20. In the Revenue's appeal, the sole issue involved is that the Commissioner of Income-tax (A) erred in allowing depreciation claim of the assessee on project assets at the rate of 10 per cent applicable to building. 21. The Ld. AR of the assessee filed before us a copy of the order of the Tribunal in assessee's own case for assessment years 2002-03 to 2004-05 and 2006-07, wherein the Tribunal vide order dated 30-11-2010 confirmed the order of the Commissioner of Income-tax (Appeals) allowing depreciation at the rate of 10 per cent on project assets to the assessee and dismissed the appeal of the Revenue. The Learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement with the Government of India and Government of Tamil Nadu to develop the project on Build-Operate-Transfer (BOT) basis. I have perused the concession agreement and the relevant clauses contained therein. I find that the facts of the appellant are similar to the case of Tamil Nadu Road Development Co. Ltd. (supra) for assessment years 2003-04 and 2004-05. The ld. AR has relied on the decision of the jurisdictional ITAT, Chennai in the above case. The Assessing Officer in his remand report for assessment year 2006-07 has not accepted the contention of the ld. AR by stating that "the assessee has also objected stating that the Tribunal in the case of Tamil Nadu Road Development Company Ltd., has allowed the assessee's claim of depreciation. However, an appeal has been filed in the High Court against the Tribunal order". It is clear from the above that the only reason for non-acceptance of the decision is that the Department has not accepted the above decision and appeal has been filed against the order in the High Court. The Hon'ble ITAT in the above case in ITA No. 2082/Mds./2008 817/Mds./2007 for assessment years 2003-04 and 2004-05 respectively has held as under : 'a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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