The Bangalore bench of Income Tax Appellate Tribunal (ITAT) in a recent ruling held that a Contractor who Carries out development, operation and maintenance of infrastructure facility u/s 80IA(4) of the Income-tax Act is entitled to claim for deduction u/s 80IA(4)(i) of the Income Tax Act, 1961. The highlights of the judgment are given below; The assessee company, Menzies Aviation Bobba (Bangalore) Private Limited (MABB) is engaged in the business of providing cargo facilities at Bangalore International Airport.
During the year under consideration, the assessee had claimed deduction u/s. 80IA(4)(i) of the Income-tax Act, 1961. As per the clauses of a Concession Agreement, the Government of India has granted the assessee the rights for development, construction, operation, and maintenance of the state of the art International Airport at Bangalore.
The concession agreement recognizes that BIAL subject to the concession agreement grant rights to any person for carrying out activities connected to development, construction, operation and maintenance of Cargo Terminal/Facility. One of the key requirement for the Airport is the provision of all necessary facilities for an efficient domestic and international cargo terminal and the provision of cargo services at standards compliant with good industry practice.
Another agreement, i.e, A Service Provider’s Right Holders agreement has been executed between the Assessee and BIAL. On the basis of this, the Assessee, basically handles all the domestic and international cargo at the New International Airport. The Cargo Handling operations basically consist of Handling Imports, Exports and Domestic Cargo. MABB has been appointed as custodian of cargo by the customs authorities in accordance with Customs Act and Rules. MABB has constructed the cargo terminal and installed machineries at the Cargo Terminal at Bangalore International Airport, Bangalore.
Conditions for claiming deduction u/s.80IA (4)(i)(b) of the Income Tax Act, 1961 are that the assessee company should have entered into an agreement with the Central Government or a State Government or a Local authority or anyother Statutory Body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility. Infrastructure facility includes a port, airport, inland waterway or inland port or navigational channel in the sea.
It was submitted on behalf of the Assessee that MABB, i e., assessee company, has signed an agreement with BIAL to develop, operate and maintain a cargo facility at airport, wherein BAIL is a statutory body as per the definition of Parliament (Prevention of Disqualification) Act (10 of 1959) since BIAL was established by KSIIDC Alternatively, BIAL has signed a concessional agreement with Government of India (GOI), wherein GOI authorises BIAL to enter into Service Provider Right Holders (SPRH) agreement for Cargo facility. Accordingly, the agreement between BIAL and MABB fulfils the condition of signing with Government or statutory body for the purpose of claiming deduction u/s. 80IA.
The Assessing Officer refused to accept the above claim and passed Order by disallowing the claim for deduction. On appeal, CIT(A) accepted the claim of the assessee by observing that BIAL is a statutory body for the purpose of section 80IA(4)(i)(b), being an entity established under the laws for the time being in force and the assessee fulfills the condition ofthe proviso as regards its transfer of infrastructural facilities from the transferor enterprise to transferee enterprise. Therefore the Revenue preferred an appeal before the Tribunal alleging that the Order of the CIT(A) was passed without considering the fact that ignoring the fact that the principal condition for allowing this deduction is that the agreement for development of any infrastructure facility must be entered into with the Central Government or State Government or any local authority/statutory body, while the assessee had entered into a Service Provider Rightholder Agreement with Bangalore International Airport Ltd., a private limited company, for running this facility. Further, it was alleged that The CIT(A) ought to have appreciated that every facility of this nature in the vicinity of the airport cannot fit into the definition of “Airport”. The definition of “Airport” as provided in other allied Acts does not bring into its ambit the cargo handling facility although situated within the airport area.They further submitted that the intention of the legislature is to provide this deduction only to the persons directly developing, maintaining and operating the facility but not to the contractors.
The Tribunal bench comprising of Judicial member Asha Vijayaraghavan and Accountant Member Inturi Rama Rao refused to accept the submission of the Revenue that the assessee does not comply with the conditions specified under s. 80 of the Act. Regarding the issue that the assessee, being a contractor is not entitled to claim deduction u/s 80, the Tribunal followed the decision passed by the coordinate Bench of the Tribunal in ITA No.1160/Bang/2012 dated 30.01.2014 for the AY 2009-10 in assessee’s own case, wherein it has been held that the agreement entered with BIAL is for development, operation, and maintenance of infrastructure facility u/s. 80IA(4) of the Income-tax Act. In this decision the Tribunal found that the agreement entered into by the assessee with BIAL is for development, operation and maintenance of infrastructure facility u/s 80IA(4) of the Income-tax Act. The Tribunal in the instant case also followed this decision.
Read the full text of the order below.
