Contractor Ineligible for Deduction u/s 80IA(4) for Management of Solid Waste Management Systems: ITAT upholds CIT(A) Order [Read Order]

In a recent ruling, the Chennai bench of the Income Tax Appellate Tribunal ( ITAT ) upheld the order passed by the Commissioner of Income Tax ( Appeals ) [CIT(A)], that a contractor engaged in solid waste management systems is not eligible for the deduction under Section 80IA(4) of the Income Tax Act, 1961.

The appellant was involved in the business of collection and disposal of municipal solid waste.

During the assessment proceedings, the assessing officer was of the opinion that the assessee was not eligible to claim deduction under Section 80iA(4) of the Income Tax Act, 1961, as the assessee is not operating and maintaining infrastructure facilities for a solid waste management system.

Get a Handbook on TDS Including TCS as Amended up to Finance Act 2024, Click Here

The AO held the assessee just a contractor to collect municipal solid waste and transport the same to the dump yard.

It was contended by the counsel on behalf of the assessee that they were eligible for deduction under Section 80IA(4) of the Income Tax Act as the role played by them in operating and maintaining solid waste management systems qualified as an infrastructure project. The assessee contended that their involvement in these projects was essential and integral to the infrastructure development process.

The CIT( A ) held that the role played by the appellant was limited rather than developing, operating, and maintaining an infrastructure facility independently. The CIT( A ) further held that contractors who merely perform services on behalf of a third party do not qualify as developers within the meaning of Section 80IA(4) and disallowed the claim made by the assessee.

Get a Handbook on TDS Including TCS as Amended up to Finance Act 2024, Click Here

The assessee, who was aggrieved by the order of CIT (A), appealed before the ITAT.

The ITAT observed that the assessee was engaged only for part of activities of the solid waste management system as a work contract.

The bench, comprising Aby T. Varkey ( Judicial Member) and Jagadish (Accountant Member ) upheld the decision of the CIT ( A ) and held that the appellant did not bear the risks generally associated with infrastructure development and, thus, could not be classified as a developer eligible for the tax benefit under Section 80IA(4) of the Income Tax statute.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates