The Income Tax Appellate Tribunal (ITAT) Kolkata, recently ordered that infrastructure companies who have earned the tender to Civil Construction projects are eligible to tax holidays provided under section 80-IA of the Income Tax Act.
The assessee in the instant case is a consortium of companies which, pursuant to agreements with Government, engaged itself in development of infrastructure. The main issue before the bench was whether the assessee, a joint venture between M/s Simplex Infrastructure Ltd. And M/s Ho Hup Construction Company (India) Pvt. Ltd., is to be treated as a developer or contractor.
The Revenue pleaded that this consortium of companies cannot be treated as a developer as it is merely involved in contracting of labors and providing technical assistance and equipment.
However, the Judicial Member A.T. Varkey and Accountant Member M. Balaganesh were convinced by the findings and circumstances of the case that “the assessee was not merely providing labour but was providing a complete infrastructure required to support the development of infrastructure facility. It deployed its various resources like material, manpower, machinery etc. In addition, it exposed itself to various risks.”
The bench after analyzing the provisions of section 80-IA of the Act clarified that the deduction under the provision does not apply to works contracts.
The bench, looking into the legislative history, pointed out that “in order to encourage private sector participation, tax holiday u/s 80-IA was extended to infrastructure industry and consequently sub-section (4A) was introduced and inserted by the Finance Act of 1995 with effect April 1, 1996. Since then the legislative scheme has been liberalized progressively, in the interests of aiding the growth of infrastructure.”
The bench, therefore based on various other judicial precedents held that assessee satisfies all conditions necessary to be eligible for benefits provided under section 80IA of the Income Tax Act.
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