Taxpayer engaged in Development Work with Statutory Bodies eligible for Deduction under Section 80-IA of Income Tax Act: ITAT [Read Order]

The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT) observed that the taxpayer engaged in development work with statutory bodies eligible for deduction under Section 80-IA of Income Tax Act, 1961

The brief facts of the case are that the assessee is a Joint Venture Undertaking constituted by two companies M/s. Nagarjuna Construction Company Ltd. and M/s. M.S. Khurana Engineering Ltd. under the name and style of NCC-KSKEL. The assessee submitted a bid for works relating to construction of New Domestic Arrival Block at Ahmedabad to the Airports Authority of India, New Delhi.

The Commissioner of Income Tax ( Appeals ) held that one of the reasons why the assessee was not eligible for claim of deduction under Section 80- IA(4) of the Act was  that the assessee has not entered into a contract with Government of India towards construction of new Domestic Arrival Terminal at Ahmedabad Airports. The issue for consideration therefore is whether contracts granted by Airports Authority of India would be eligible for claim of deduction under Section 80-IA (4) of the Income Tax Act.

The Government of India constituted the International Airports Authority of India (IAAI) in 1972 to manage the nation’s international airports while the National Airports Authority of India (NAAI) was constituted in 1986 to look after domestic airports. Both the above organizations were merged in April 1995 by an Act of Parliament, namely, the Airports Authority of India Act, 1994 and has been constituted as a Statutory Body and was named as Airports Authority of India ( AAI ).

Therefore, AAI was a statutory body and in terms of the plain language of Section 80-IA (4) of the Income Tax Act, and if other conditions of eligibility are satisfied by the assessee, it would be eligible for claim of deduction under Section 80-IA (4) of the Income Tax Act, if the assessee has entered into an agreement with any statutory body for carrying out development work.

 The bench observed that the claim of deduction under Section 80-IA (4) of the Act cannot be denied to the assessee only on the ground that since the assessee has entered into a contract with AAI, which does not constitute as a Central / State Government, the assessee is not eligible for claim of deduction under Section 80-IA (4) of the Income Tax Act.

Further observed that Section 80-IA (4)(i)(b) of the Income Tax Act stated that the assessee can enter into an agreement with Central Government or a State Government or a Local Authority or any Statutory Body for development of new infrastructure facility

The coram of Waseem Ahemad ( Accountant member ) and Siddhartha Nautical ( Judicial member ) observed that CIT (A) undertook a detailed analysis of the scope of work undertaken by the assessee and the various risks and responsibilities undertaken by the assessee and then came to conclusion that assessee qualifies as a “developer” and is eligible to claim of deduction under Section 80-IA (4) of the Income Tax Act. Accordingly, ITAT found no infirmity in the order of CIT ( Appeals ) so as to call for any interference.

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