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TMI Blog2017 (10) TMI 1314X X X X Extracts X X X X X X X X Extracts X X X X ..... ase the ld. CIT(A) ought to have upheld the order of the Assessing Officer. 3. The relevant facts as culled out from the materials on record are as under:- Appellant company has filed its return of income on 26/09/2009 after claiming deduction u/s.80IA(iv) of the Act. The AO held that the company has entered into an agreement with GSRDC, which is neither any Central/State Government nor statutory body and denied the deduction claimed. But main Ground before the impugned authority was in respect of disallowance of deduction claimed u/s.80IA(4)(i)(a) of the Act at Rs. 3,76,68,739/-. The claim of deduction u/s.80IA(4) was denied by the AO after holding that the appellant company has not entered in to agreement with the State Government/Statutory body and has entered into an agreement with GSRDC only. 3.2 Thereafter, a notice was given to the assessee and assessee has made detailed submissions which are reproduced as under: "i. The 1st ground of appeal is in respect of disallowance of Rs. 3,76,68,739/- deduction claimed u/s.80IA(4) of the I.T. Act. The facts are as under:- 1. The appellant is a Company assessed to tax. The appellant Company has undertaken a BOT contract f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions will be sought by the Corporation. iii. The proposed objects of the Corporation will be restricted to works undertaken, under the jurisdiction of the Roads and Building Department and also as directed by the Government of Gujarat. iv. The Registered Office of the Corporation will be in Gandhinagar and its address will be as under:- Nirman Bhavan, Sector No. 10A, . Gandhinagar-382010 v. The constitution of the Board of Directors of the Corporation will be as under:- a) Hon. Minister (Roads & Buildings): Ex-officio Chairman Chief Secretary : Ex. Office Vice Chairman b) Four experts appointed by The Government: Directors c) Secretary, Road & Building Department: Director d) Special Secretary & Chief Engineer (CP): Director e) An Officer from the Roads & building department in the category of Chief engineer and additional secretary: Managing Director A copy of the Resolution is submitted herewith. 2. Government of Gujarat, R & O.B. Department by its Resolution dated 04-08-1999 entrusted the work of various projects to Gujarat State Road Development Corporation and one of such projects was Chhayapuri ROB, near GSFC Junction, Vadodara. A copy of Resoluti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 80IA(4) of the Act that the profits and gains of an enterprise carrying on business of developing, operating or maintaining any infrastructure facility shall be allowed as deduction, provided that it should have entered Into an agreement for the same with the Central Government or State Government, a local authority or any other statutory body. 7. In the instant case it is seen that the assessee had not entered into any assignment as such with central/state government local authority or a statutory body. The assessee had entered into a concession agreement with GSRDC, a corporation incorporated under the Companies Act. As such the assessee could not fulfill important conditions as provided u/s.80IA(4) that the agreement for developing, operating or maintaining any infrastructure facility should have been entered with central/state government, local authority or a statutory body. Therefore, it is held that deduction claimed u/s.80IA(4) of the Act is in violation of the provision of that section. Accordingly, the deduction claimed u/s.80IA(4) of the I.T. Act disallowed and added back to the total income of the assessee. 2. The appellant submits as under:- i. The Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agency means, GSRDC, R & BD (GOG) or any State Government or Government Department, Commission, Board, Body, Bureau, Agency, Authority, Instrumentality, or other Judicial or Administrative Body, Central, State or local having jurisdiction over the concessional, the project assets or any portion thereof or the performance of all or any of the services or obligations of the concessional under or pursuant to this agreement." Further "GSRDC" is defined as under:- "GSRDC means Gujarat State Road Development Corporation Ltd." 7. The appellant under the concessional agreement dated 30-10-2011 completed the work of ROB, near Chhayapuri, near GSFC Junction, Vadodara (construction of Chhayapuri ROB in lieu of existing underpass No.6 across Mumbai-Delhi Railway line near GSFC Junction on BOT basis by the end of February, 2003 and therefore, Government of Gujarat, R & B Department issued an order No.Toll/102001-(29)-part-1 Pvt. Cell dated 07-03-2003 permitting the appellant to collect Toll fee as indicated therein. A copy of this order is compiled in the paper book. 8. In view of the above facts, the appellant respectfully submits that this concession agreement is with the Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on BOT basis. (c) The Concession Agreement was entered into by GSRDS with the appellant which was approved by the Government of Gujarat in its meeting held on 24/10/2000. (d) Government of Gujarat, R&B Department issued an order No. Toll/102001-(29)-part-1 Pvt. Cell dated. 07/03/2003 permitting the appellant to collect Toll fee as indicated therein. In view of the above, it is held that the appellant 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. In view of the above, it is held that the appellant fulfills the conditions as required under section 80IA(4)including 80IA(4)(i)(b) and has developed, operated and was to transfer the infrastructure facility and therefore, was eligible for the deduction claimed under the section. The grounds of appeal are decided accordingly. 7. In the judgment of the Hon'ble Supreme Court in the case of Som Prakash Rekhi (supra) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid to determine whether a body is a State within meaning of Article 12 of the Constitution of India, Emphasizing the import of the aforesaid tests, the Hon'ble Supreme Court noted that true test is not how the legal entity in Question was created but why it was created. The Hon'ble Supreme Court also observed that all the tests may not be applicable or satisfied in a given case, but one will have to arrive at a conclusion based on the cumulative effect of the said tests. 19. The claim of the assessee before us is that SSNNL complies with all the tests laid down by the Hon'ble Supreme Court in the case of Som Prakash Rekhi (supra) First test is whether the share capital of the corporation is held by the government. In the present case, the entire share capital of SSNNL is admittedly owned and held , by the Government of Gujarat. The second test is as to whether the State exercises unusual degree of control over the management and policies and financial support is received from the State. In our considered opinion, the said test is fulfilled in case of SSNNL as per the detailed discussion made by the Ahmedabad Bench of the Tribunal in the case of Sardar Sarovar Narmada Nigam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble Supreme Court in the case of Som Prakash Rekhi (supra) are fulfilled in the present case and it would be appropriate to deduce that SSNNL is an instrumentality or an agency of the state. Therefore, SSNNL is to be understood as an entity akin to those specified in sub-clause (b) of clause (i) to sub-section (4) of section 80IA of the Act. Therefore, the objection of the Revenue that SSNNL was a company incorporated under the provisions of the Companies Act, 1956 and is therefore outside the purview of section 80IA(4)(i) of the Act is unfounded. In-fact, the Hon'ble Supreme Court in the case of Som Prakash Rekhi (supra) specifically observed that merely because an entity is created under a statute and not created by a statue is not an important criteria. The test relating to the purpose, State control and functions performed are more important and determinative of the issue. Such control and functions performed are more important and determined of the issue. Such tests, in our view, are clearly applicable in the case of SSNNL, and it is to be understood as an entity specified in section 80IA (4) (i) (b) of the Act." 8. Learned AR cited an order of Co-ordinate Bench in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ekhi vs. Union of India & AIR 1981 SC 212; and, (ii) Pradeep Kumar Biswas & Ors. vs. Indian Institute of Chemical [Appeal (Civil No.992 of 2002, dated 06/04/2002], In this judgements, it is canvassed that an entity, like SSNNL, is liable to be considered as an instrumentality or an agency of the Government, and thus, it qualifies to an entity specified in section 80IA(4)(i) of the Act. Secondly, it is sought to be made out that having regard to the background and peculiar features of SSNNL, the said concern is executing Governmental functions and is not engaged in any commercial activities. 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. It was, therefore, contended that even if such like entities are incorporated under the provisions of the Companies Act, 1956 still having regard to the functions performed, they have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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