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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INCOME TAX APPEAL NO.1687 OF 2009
WITH
INCOME TAX APPEAL NO.2121 OF 2009
WITH
INCOME TAX APPEAL NO.2291 OF 2009
WITH
INCOME TAX APPEAL NO.2663 OF 2009
ig WITH
INCOME TAX APPEAL NO.416 OF 2010
The Commissioner of Income Tax,
Central - III, Aaykar Bhavan,
M.K. Road, Mumbai - 400 020 ..Appellant.
Versus
M/s.ABG Heavy Industries Limited,
5th Floor, Bhupati Chambers,
13, Mathew Road, Opera House,
Mumbai - 400 004 ..Respondents.
Mr.Suresh Kumar for the appellant in ITXA Nos.1687, 2291 & 2663/2009.
Mr.D.A. Athavale for the appellant in ITXA No.2121/2009.
Ms.Padma Divakar for the appellant in ITXA 416/2010.
Mr.S.E. Dastur, Senior Advocate with Ms.A. Vissanji and Mr.S.P. Mehta for the
respondent in all the matters.
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CORAM : Dr.D.Y. Chandrachud &
J.P. Devadhar, JJ.
DATE : 15th Ferbuary, 2010.
ORAL JUDGMENT (Per Dr.D.Y. Chandrachud, J.)
1. Admit.
2. The following substantial question of law arises in the batch of appeals
filed by the Revenue under Section 260 A of the Income Tax Act, 1961 (`Act’) :-
“Whether the assessee is entitled to the benefit of a deduction under
Section 80IA of the Act and whether the Tribunal was justified in
holding that the assessee had carried on the business of developing,
maintaining and operating an infrastructural facility so as to entitle itto a deduction under Section 80IA ?”
3. The appeal arises out of an order of the Income Tax Appellate Tribunal
for Assessment Years (A.Ys) 1997-98, 1998-99, 1999-2000, 2000-2001 and
2005-2006.
4. The assessee, in terms of the policy of the Government of India to
encourage private sector participation in the development of infrastructure, bid for
and was awarded a contract for leasing of Container Handling Cranes at the
Jawaharlal Nehru Port Trust (`JNPT’). In pursuance of the contract, the assessee
deployed Rail Mounted Quay Side cranes, Rail Mounted Gantry cranes and Rubber
Tyred Gantry Cranes (‘the cranes’) at the Container Handling Terminal of the JNPT.
JNPT has a dedicated Container Handling Terminal. According to the assessee the
only activities of the Terminal consist of loading, unloading and storage of
containers.
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5. Under contracts dated 2 September 1994 and 16 October 1995, JNPT
accepted the bid submitted by the assessee for supply, installation, testing,
commissioning and maintenance of the cranes. By the terms of the agreement,
JNPT agreed to pay lease charges in a total sum of Rs.215.50 crores over a period of
ten years. The contract envisaged two options. Under the first option, operation
and maintenance was to be carried out by the assessee. Under the second option,
only maintenance was to be carried out by the assessee. In the event that the
assessee was not to carry out operation of the cranes, the lease charges were to be
less to the extent of Rs.40,00,000/-. For instance, in the first year of operation the
lease charges payable to the assessee for operation and maintenance were to be Rs.
16.35 crores, whereas if any maintenance was to be carried out by the assessee, the
lease charges were to be Rs.15.95 crores. Under the contracts, JNPT reserved the
right to exercise the option to request the assessee to carry out both operation and
maintenance during the lease period or to carry out only maintenance while
operation was done by JNPT. The contracts stipulated inter alia the submission of a
Performance Guarantee Bond representing 10% of the average annual contract
value computed with reference both to maintenance and operation. The assessee
assumed the responsibility of making the equipment available for operation for a
minimum number of days as stipulated in the contract and became liable to pay
liquidated damages for non-availability of the equipment after commissioning.
After the expiry of the lease period of ten years, the assessee was liable to hand over
the equipment to JNPT free of cost. Under the contract, the assessee furnished an
indemnity to JNPT towards damages that may be sustained to the equipment or to
any property of the Port Trust or to the lives, persons or properties of others. The
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assessee assumed other contractual obligations including amongst them, the
liability to insure the equipment, to indemnify JNPT towards the claims of workers’
compensation and for compliance with labour legislation.
6. By a letter dated 27 March 2000, JNPT clarified that the amount of
Rs.40,00,000/- per annum comprised of salaries, wages and other emoluments of
operators provided by JNPT; that it was the responsibility of the assessee to
guarantee the availability of the equipment, to ensure that it is in operation on a
“round the clock basis” and to meet the cost of repair; and that the overall
responsibility for ensuring the operation of the equipment, and for guaranteeing the
availability of the equipment would be that of the assessee.
7. The assessee claimed the benefit of a deduction under Section 80IA of
the Act, upon which the dispute in the appeals centers. The Assessing Officer was
of the view that the assessee was merely engaged in the business of supplying,
installing, testing, commissioning and maintaining cranes at the Port and was not in
the business of developing, maintaining and operating a Port. Consequently the
assessee was held not to be in the business of developing an infrastructural facility.
The Commissioner of Income Tax (Appeals) allowed the benefit of a deduction
under Section 80IA of the Act to the assessee on appeal. The Tribunal in a further
appeal held that the assessee was entitled to the benefit of a deduction under
Section 80IA of the Act and confirmed the order of the Commissioner of Income Tax
(Appeals).
8. On behalf of the Revenue, it has been submitted that: (i) Section 80IA
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of the Act requires the assessee to have developed, operated and maintained an
infrastructural facility in order to qualify for a deduction. The assessee is not a
developer of the facility but had only supplied and installed the Container
Handling Cranes at JNPT; (ii) The assessee is not operating the equipment and is,
therefore, not eligible for a deduction under Section 80IA of the Act; and (iii) The
equipment which has been installed is not a structure for loading and unloading at
a port.
9.
In order to appreciate the submissions which have been urged on
behalf of the Revenue and before we refer to the submissions which have been
urged on behalf of the assessee, it would at the outset be necessary to advert to the
provisions of Section 80IA of the Act and the underlying purpose and object of the
provision made by Parliament. Section 80IA of the Act as it was originally enacted,
provided that where the gross total income of an assessee includes any profits and
gains derived from any business of an industrial undertaking or a hotel or operation
of a ship or developing, maintaining and operating any infrastructure facility,
amongst others, there shall, in accordance with and subject to the provisions of the
Section, be allowed, in computing the total income of the assessee, a deduction
from such profits and gains of an amount equal to the percentage specified in sub-
section (5) and for such number of assessment years as specified in sub-section (6).
Sub-section (4A) was introduced and inserted by the Finance Act of 1995 with
effect 1st April 1996. Sub-section (4A) stipulated that the Section would apply to
any enterprise carrying on the business of developing, maintaining and operating
any infrastructure facility which fulfils all the following conditions, namely :- (i)
The enterprise must be owned by a company registered in India or by a consortium
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of companies; (ii) The enterprise must have entered into an agreement with the
Central or a State Government or a local authority or any other statutory body for
developing, maintaining and operating a new infrastructure facility subject to the
condition that such infrastructure facility shall be transferred to the Central
Government, State Government, local Authority or such other statutory body, as the
case may be, within the period stipulated in the agreement; and (iii) The enterprise
must start operating and maintaining the infrastructure facility on or after 1 st April
1995. Sub-section (12) of Section 80IA of the Act contains a statutory dictionary
defining the terms used in the provision. Clause (ca) was substituted by the
Finance Act of 1996, with effect from 1st April 1997 to define an infrastructural
facility to mean (i) A road, highway, bridge, airport, port, rail system or any other
public facility of a similar nature as may be notified by the Board in the Official
Gazette; and (ii) A water supply project, irrigation project, sanitation and sewerage
system.
10. As noted earlier, sub-clause (4A) of Section 80IA of the Act as it
originally stood, stated that the Section applied to an enterprise carrying on the
business of developing, maintaining and operating any infrastructure facility, which
fulfils certain conditions. With effect from 1 April 2000, by the Finance Act of 1999,
certain changes were brought about. Section 80IA and Section 80IB were
substituted for Section 80IA. Sub-section (4) of Section 80IA of the Act provided
that the Section shall apply to any enterprise carrying on the business of (i)
developing, (ii) maintaining and operating, or (iii) developing, maintaining and
operating an infrastructure facility which fulfils certain conditions. The conditions
provided for the ownership of the enterprise by a Company or by a consortium of
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Companies, registered in India and stipulated a requirement of an agreement with
the Central and State Governments, a local authority or any other statutory body;
the agreement being required to envisage the transfer of the facility after the period
stipulated in the agreement. Subsequently, the requirement for the transfer of the
facility to the Central or State Governments, or as the case may be to the local
authority or a statutory body came to be deleted. Sub-clause (c) of Clause (i) of
sub-section (4) stipulated that the enterprise must have started operating and
maintaining the infrastructural facility on or after 1st April 1995. By the Finance Act
of 2001, the word ‘or’ came to be introduced after the word developing, to clarify in
effect that the agreement between the enterprise and the authority of the Central or
State Government or, as the case may be a local authority or a statutory body may
provide for (i) developing, or (ii) maintaining and operating, or (iii) developing,
maintaining and operating a new infrastructure facility.
11. The object of Section 80IA was to provide an impetus to the growth of
infrastructure in the nation. A sound infrastructure is a sine qua non for economic
development. Absence of infrastructure poses significant barriers to growth and
development. A model which relied exclusively on the provision of basic
infrastructure by the State was found to be deficient. Section 80IA was an
instrument of legislative policy, conceived with a view to provide an impetus to
private sector participation in infrastructural projects. Consistent with the legislative
object of encouraging private sector participation in the development of
infrastructure, Section 80IA was enacted. Contemporaneously, with the provisions
which were made by Parliament in Section 80IA of the Act, explanatory circulars
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issued in an administrative capacity by the CBDT held the field. These circulars
gave expression to the scope and ambit of the concession that was provided by
Section 80IA of the Act. On 14th August 1995, Circular 717 was issued by the
Central Board of Direct Taxes. The circular, insofar as is material provided thus :
“Five-year tax holiday for infrastructure development :
34.1 —–
34.2 Industrial modernization requires a massive expansion of, and
qualitative improvement is infrastructure. Our country is very
deficient in infrastructure such as expressways, highways, airports,ports and rapid urban rail transport systems. Additional resources are
needed to fulfill the requirements of the country within a reasonable
time frame. In many countries the BOT (build-operate-transfer) or
the BOOT (build-own-operate-transfer) concepts have been utilisedfor developing new infrastructure.
34.3 Applying commercial principles in the operation of
infrastructure facilities can provide both managerial and financialefficiency. In view of this, a ten-year concession including a five-year
tax holiday has been allowed for any enterprise which develops,maintains and operates any new infrastructure facility such as roads,
highways, expressways, bridges, airports, ports and rail systems or
any other public facility of similar nature as may be notified by the
Board on BOT or BOOT or similar other basis (where there is an
ultimate transfer of the facility to a Government or public authority).
The enterprise has to enter into an agreement with the Central or
State Government or a local authority or any other statutory authority
for this purpose. The period within which the infrastructure facility
has to be transferred needs to be stipulated in the agreement between
the undertaking and the Government concerned. The enterprise hasto be owned by a company registered in India or a consortium of such
companies. The tax holiday will be in respect of income derived from
the use of the infrastructure facilities developed by them.
34.4 It will apply in respect of infrastructure facilities becoming
operational on or after 1-4-1995.”
The circular thus amplified both the rationale for the introduction of Section 80IA
of the Act and the nature and ambit of the concession that was provided by the
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provision. At this stage, it would be necessary to note that the circular clarified that
the benefit of a deduction was available to an enterprise, which developed,
maintained and operated any new infrastructure facility, such as inter alia a Port on
a Build, Operate and Transfer (BOT) basis, or a Build, Own, Operate and Transfer
(BOOT) ‘or similar other basis’, where there was an ultimate transfer of the facility
to a Government or a Public Authority. The circular also clarified the view of the
CBDT that the tax holiday would be in respect of the income derived from the use
of the infrastructure facilities developed by such enterprise. The infrastructure
facility had to become operational on or after 1st April 1995.
12. On 3rd January 1996, Circular 733 was issued by the CBDT. The
circular dealt with the question as to whether Section 80IA of the Act would be
applicable to the Build, Own, Lease and Transfer (BOLT) Scheme of the Indian
Railways for the development of the railway system. Answering the issue in the
affirmative, the circular clarified that the concession would be applicable only to an
infrastructure facility meant for development of the railway system and not to any
other infrastructure facility including rolling stocks. Clearly, therefore, as far back
as in January 1996, the application of Section 80IA of the Act to the development of
infrastructural facilities in a BOLT project for the Indian Railways was within the
contemplation of the CBDT, as a permissible source for deduction.
13. Subsequently, on 23rd June 2000, Circular 793 was issued by the
CBDT, which postulated as follows :
“The Board has received various representations seeking clarification
whether structures at ports for storage, loading and unloading, etc.,
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1010(23G) and 80-IA of the Income-tax Act, 1961.
2. The Board has considered the matter and it has been decided
that such structures will be included in the definition of “port” for the
purposes of sections 10(23G) and 80-IA of the Income-tax Act, 1961,if the following conditions are fulfilled :
(a) the concerned port authority has issued a certificate that
the said structures form part of the port, and
(b) such structures have been built under BOT and BOLT
schemes and there is an agreement that the same would be
transferred to the said authority on the expiry of the time stipulated
in the agreement.”
The importance of the circular, insofar as the subject matter of these proceedings is
concerned, lies in the fact that the Board noted that it was in receipt of
representations seeking a clarification on whether structures at Ports for storage,
loading and unloading etc. would fall within the definition of a Port inter alia for
the purposes of Section 80IA of the Act. The Board clarified that such structures
would be included in the definition of ‘Port’ for the purposes of Section 80IA of the
Act, subject to the fulfillment of the condition that the Port Authority must issue a
certificate that the structures form a part of the Port; that such structures had been
built either under a BOT or BOLT Scheme and there was an agreement for the
transfer of the structure to the authority after the fulfillment of the stipulated
period. The circular, therefore, clearly postulated a concession being given in
respect of a particular facility at a Port namely a facility involving storage, loading
and unloading.
14. On 16th December 2005, Circular 10 of 2005 was issued by the CBDT.
The circular made a reference to the earlier circular dated 23rd June 2000 and
clarified that the definition of the expression ‘Port’ for the purposes of Section 80IA
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of the Act so as to include structures at Ports for storage, loading and unloading etc,
subject to the fulfillment of the conditions already noted earlier, would apply to the
A.Y. 2001-2002 and any earlier assessment year. However, from A.Y. 2002-2003
onwards, the condition requiring that the structure should have been completed
under a BOT or BOLT Scheme and that there should be an agreement for transfer of
the facility to the Competent Authority on the expiry of the stipulated period was
deleted. In other words, the conditions which were prescribed by CBDT’s Circular
dated 23rd June 2000 were liberalized by the subsequent circular dated 16 th
December 2005. By the subsequent circular it was clarified that the conditions that
were spelt out in the earlier circular dated 23rd June 2000 would continue to
operate in respect of assessment years prior to and culminating with A.Y.
2001-2002. With effect from A.Y. 2002-2003 all that was necessary was a
certificate issued by the Port Authority that the structure in question forms a part of
the Port. Hence, the evolution of Section 80IA would show a progressive
liberalisation of the legislative scheme, in the interests of aiding the growth of
infrastructure. The administrative circulars issued by CBDT in implementation of
Section 80IA similarly liberalised the Scheme, consistent with the Act.
15. At this stage, it would be necessary to note that on 31st May 2004,
JNPT issued a certificate confirming the award of contracts to the assessee on 2nd
September 1994 and 16th October 1995 for supply, installation, testing,
commissioning and maintenance of Container Handling equipment on lease for a
period of ten years for loading and unloading of containers at the Port and that the
cranes that were to be supplied by the assessee form an integral part of the Port.
JNPT clarified that the contracts have been executed under the BOLT Scheme and
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in accordance with its directions, the cranes would be transferred to the Port Trust
at no cost on the expiry of a period of ten years of the commencement of the
contract.
16. Now, it is in the background of the evolution of the law that the
controversy in the present case would have to be considered. The contention of the
Revenue is that the assessee was not engaged in developing the facility at all and
that under the Contract that was entered into between the assessee and JNPT all
that the assessee was required to carry out was to supply and install cranes at the
Port. The submission cannot be accepted. The expression ‘development’ has not
been artificially defined for the purposes of Section 80IA of the Act and must,
therefore, receive its ordinary and natural meaning. Under the terms of the
contract between the assessee and JNPT, the assessee undertook an obligation for
supplying, installing, testing, commissioning and maintenance of Container
Handling equipment namely, the cranes in question. JNPT has a dedicated
Container Handling Terminal. The case of the assessee is that the only activity at
the Terminal consists of the loading, unloading and storage of containers. Under
the contract, the assessee was obligated to provide the equipment in question in an
operable condition. The contract envisaged two different options; the first being
one under which the assessee would carry out operation and maintenance of the
equipment while the second consisted of an option to JNPT to carry out operations.
The terms of the contract however made it clear that it was the obligation of the
assessee to make the equipment available for operation for a stipulated minimum
number of days during the year and made the assessee liable to liquidated damages
in the event that this was not possible. JNPT by its letter dated 27th March 2000
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clarified that the difference between the two options that had been given to the
assessee consisted of a payment of Rs.40,00,000/- which was to be retained by
JNPT in the event that the operators were provided by the Port for operating the
cranes. At the same time, JNPT clarified that it was the responsibility of the
assessee to guarantee the availability of the equipment; to ensure that the
equipment is in operation on a round the clock basis; to provide for repairs and to
ensure the operation and availability of the equipment in accordance with the terms
of the contract.
17. The obligations which have been assumed by the assessee under the
terms of the contract are obligations involving the development of an infrastructure
facility. Section 80IA of the Act essentially contemplated a deduction in a situation
where an enterprise carried on the business of developing, maintaining and
operating an infrastructure facility. A Port was defined to be included within the
purview of the expression infrastructure facility. The obligations which the assessee
assumed under the terms of the contract were not merely for supply and installation
of the cranes, but involved a continuous obligation right from the supply of the
cranes to the installation, testing, commissioning, operation and maintenance of the
cranes for a term of ten years after which the cranes were to vest in JNPT free of
cost. An assessee did not have to develop the entire port in order to qualify for a
deduction under Section 80IA. Parliament did not legislate a condition impossible
of compliance. A port is defined to be an infrastructure facility and the circular of
the Board clarified that a structure for loading, unloading, storage etc. at a port
would qualify for deduction under Section 80IA. The condition of a certificate from
the Port Authority was fulfilled and JNPT certified that the facility provided by the
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assessee was an integral part of the port. The assessee developed the facility on a
BOLT basis under the contract with JNPT. On the fulfillment of the lease of ten
years, there was a vesting in the JNPT free of cost.
18. Before the Tribunal, material was placed on record by the assessee to
indicate the nature and extent of the activities undertaken by it in ensuring that the
equipment which was supplied was fully operational. The assessee had in its
employment diverse employees, including a Senior Manager, a Manager, Assistant
Manager and five Deputy Managers (Operations) in addition to Assistant Engineers,
Technical Officers and Operators-cum-Technicians. On considering the material on
record including letters of the Port Authority, the Tribunal came to the conclusion
that as a matter of fact the assessee was also engaged in activities of operating the
equipment. The finding that the assessee had developed the infrastructure facility
and that it was engaged in operating the cranes is, therefore, based on the material
on record. The fact that the assessee was also maintaining the cranes is not
disputed. There is also no merit in the submission that what the assessee
constructed was not a structure for loading, unloading, storage etc. at the port.
Plainly, the assessee did so.
19. On behalf of the Revenue it was sought to be urged that at the
material time for A.Ys 1997-98 and 1998-99, it was necessary for the assessee to
cumulatively fulfill the requirement of developing, operating and maintaining the
infrastructure facility. It was urged that the assessee, even if it be held to have
developed the facility, cannot be regarded as operating the facility. For the reasons
already indicated, it is not possible to accept the submission. As we have already
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noted the assessee had as a matter of fact developed the facility. The Tribunal has
also arrived at a finding of fact that the assessee was under the contract required to
operate the facility. Merely because the operators of the cranes were provided by
the Port Authority did not absolve the assessee of the overall responsibility of
operating the cranes, under the terms of the contract.
20. Counsel appearing on behalf of the assessee urged that the
requirement that the assessee ought to have developed, maintained and operated
the facility is not a condition which is to be read in the cumulative. The learned
counsel submitted that the scheme under Section 80IA of the Act was to provide a
concession in order to attract private investment in infrastructure. It is in this
background that the CBDT issued a clarificatory circular on 14th August 1995 stating
that infrastructure facilities developed on a BOT, BOOT or other similar basis were
within the contemplation of the provision. Reliance was placed on the circulars
dated 23rd June 2000 and 16th December 2005 as being indicative of the fact that
the requirement of developing, maintaining and operating an infrastructure facility
were never regarded to be cumulative. The learned counsel urged that it was in line
with the Board’s understanding of the provisions of Section 80IA of the Act that the
Parliament eventually stepped in by amending the provisions of Section 80IA of the
Act so as to clarify that in order to avail of a deduction, the assessee could (i)
develop; or (ii) operate and maintain; or (iii) develop, operate and maintain the
facility.
21. While dealing with this submission, we note that neither in the memo
of appeal nor in the submissions before us has any effort been made to suggest on
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the part of the Revenue that the circulars of the Board are not binding on the
Revenue. Nor for that matter was it the submission of the Revenue that the
circulars issued by the Board from time to time were in violation of or contrary to
legal provisions. Plainly, right from 1996 CBDT was seized with the question, as to
whether infrastructure facilities developed under a BOLT project would qualify for
exemption under Section 80IA of the Act. The first circular in that regard that was
issued on 23rd January 1996 specifically dealt with whether Section 80IA (4A) of
the Act would be applicable to a BOLT Scheme involving an infrastructure facility
for the Indian Railways. The circular clarified that an infrastructure facility set up
on a BOLT basis for Railways would qualify for a deduction. That was followed by
the two circulars of the Board dated 23rd June 2000 and 16th December 2005. The
first of those circulars recognizes that structures for storage, loading and unloading
etc. at a port built under a BOT and BOLT Scheme would qualify for a deduction.
Now, there is no question of an enterprise operating a facility in a BOLT Scheme
because such a Scheme contemplates that the enterprise would build, own, lease
and eventually transfer the facility to the Authority for whom the facility is
constructed. The subsequent circular dated 16th December 2005 once again
clarified the position of CBDT that structures which have been built inter alia under
a BOLT Scheme upto A.Y. 2001-2002 would qualify for a deduction under Section
80IA of the Act. In fact from A.Y. 2002-2003, the process was further liberalized,
consistent with the basic purpose and object of granting the concession. In this
background, particularly in the context of the objective sought to be achieved and in
the absence of any challenge on the part of the Revenue on the applicability of the
binding circulars of CBDT, we are of the view that the condition as regards
development, operation and maintenance of an infrastructure facility was
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contemporaneously construed by the Authorities at all material times, to cover
within its purview the development of an infrastructure facility under a Scheme by
which an enterprise would build, own, lease and eventually transfer the facility.
This was perhaps a practical realisation of the fact a developer may not possess the
wherewithal, expertise or resources to operate a facility, once constructed.
Parliament eventually stepped in to clarify that it was not invariably necessary for a
developer to operate and maintain the facility. Parliament when it amended the law
was obviously aware of the administrative practice resulting in the circulars of
CBDT. The fact that in such a Scheme, an enterprise would not operate the facility
itself was not regarded as being a statutory bar to the entitlement to a deduction
under Section 80IA of the Act . The Court cannot be unmindful in the present case
of the underlying objects and reasons for a grant of deduction to an enterprise
engaged in the development of an infrastructure facility. The provision was
intended to give an incentive to investment for infrastructural growth in the
country. In Bajaj Tempo V/s. Commissioner of Income Tax,1 the Supreme Court
emphasized that a provision in a taxing statute granting incentives for promoting
growth and development should be construed liberally. In the present case, the
administrative circulars issued by the CBDT proceeded on that basis by adopting a
liberal view of the scope and ambit of the provisions of Section 80IA of the Act.
Parliamentary intervention endorsed the administrative practice. A provision
inserted by the legislature to supply an obvious omission and to make a section
workable has in certain circumstances been regarded as retrospective particularly
when it was intended to remedy unintended consequences. Allied Motors P. Limited
1 196 ITR 188 (S.C.)
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V/s. C.I.T. 2 and C.I.T. V/s. Alom Extrusions Limited.3 The Tribunal having only
followed these provisions, we do not find any just reason to interfere in our
appellate jurisdiction.
22. Another submission which was urged on behalf of the Revenue is that
under clause (iii) of sub-section (4A) of Section 80IA, one of the conditions imposed
was that the enterprise must start operating and maintaining the infrastructure
facility on or after 1st April 1995. The same requirement is embodied in sub-clause
(c) of clause (i) of sub-section (4) of the amended provisions of Section 80IA. On
this basis, it was urged that since the assessee was not operating and maintaining
the facility, he did not fulfill the condition. This submission is fallacious both in fact
and in law. As a matter of fact, the Tribunal has entered a finding that the assessee
was operating the facility and this finding has been confirmed earlier in this
judgment. That the assessee was maintaining the facility is not in dispute. The
facility was commenced after 1st April 1995. Therefore, the requirement was met in
fact. Moreover, as a matter of law, what the condition essentially means is that the
infrastructure facility should have been operational after 1st April 1995. After
Section 80IA was amended by the Finance Act of 2001, the section applies to an
enterprise carrying on the business of (i) developing; or (ii) operating and
maintaining; or (iii) developing, operating and maintaining any infrastructure
facility which fulfills certain conditions. Those conditions are : (i) Ownership of the
enterprise by a Company registered in India or by a consortium; (ii) An agreement
with the Central or State Government, local authority or statutory body; and (iii)
2 (1997) 224 ITR 677 (S.C.)
3 (2009) 319 ITR 306 (S.C.)
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The start of operation and maintenance of the infrastructure facility on or after 1st
April 1995. The requirement that the operation and maintenance of the
infrastructure facility should commence after 1st April 1995 has to be harmoniously
construed with the main provision under which a deduction is available to an
assessee who develops; or operates and maintains; or develops, operates and
maintains an infrastructure facility. Unless both the provisions are harmoniously
construed, the object and intent underlying the amendment of the provision by the
Finance Act of 2001 would be defeated. A harmonious reading of the provision in
its entirety would lead to the conclusion that the deduction is available to an
enterprise which (i) develops; or (ii) operates and maintains; or (iii) develops,
maintains and operates that infrastructure facility. However, the commencement of
the operation and maintenance of the infrastructure facility should be after 1st April
1995. In the present case, the assessee clearly fulfilled this condition.
23. In the view which we have taken, all the assessment years in question
to which this batch of appeals relates would be governed by the same principle. The
subsequent amendment of Section 80IA (4A) of the Act to clarify that the provision
would apply to an enterprise engaged in (i) developing; or (ii) operating and
maintaining; or (iii) developing, operating and maintaining an infrastructure facility
was reflective of a position which was always construed to hold the field. Before
the amendment that was brought about by Parliament by Finance Act of 2001, we
have already noted that the consistent line of circulars of the Board postulated the
same position. The amendment made by Parliament to Section 80IA (4) of the Act
set the matter beyond any controversy by stipulating that the three conditions for
development, operation and maintenance were not intended to be cumulative in
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nature.
23. In view of the aforesaid observations, the question of law shall
accordingly stand answered in favour of the assessee and against the Revenue.
24. For all these reasons, we are of the view that there is no merit in the
appeals. The appeals shall accordingly stand dismissed. There shall be no order as
to costs.
(J.P. Devadhar, J.) (Dr.D.Y. Chandrachud, J.)
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