{"id":183690,"date":"2010-02-15T00:00:00","date_gmt":"2010-02-14T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/the-commissioner-of-income-tax-vs-ms-abg-heavy-industries-limited-on-15-february-2010-2"},"modified":"2016-03-13T07:06:21","modified_gmt":"2016-03-13T01:36:21","slug":"the-commissioner-of-income-tax-vs-ms-abg-heavy-industries-limited-on-15-february-2010-2","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/the-commissioner-of-income-tax-vs-ms-abg-heavy-industries-limited-on-15-february-2010-2","title":{"rendered":"The Commissioner Of Income Tax vs M\/S.Abg Heavy Industries Limited on 15 February, 2010"},"content":{"rendered":"
Bombay High Court<\/div>\n
The Commissioner Of Income Tax vs M\/S.Abg Heavy Industries Limited on 15 February, 2010<\/div>\n
Bench: Dr. D.Y. Chandrachud, J.P. Devadhar<\/div>\n
                                                    1\n\n                      IN THE HIGH COURT OF JUDICATURE AT BOMBAY\n\n\n\n\n                                                                                           \n                           ORDINARY ORIGINAL CIVIL JURISDICTION\n\n\n\n\n                                                                   \n                             INCOME TAX APPEAL NO.1687 OF 2009\n                                                  WITH\n                             INCOME TAX APPEAL NO.2121 OF 2009\n\n\n\n\n                                                                  \n                                                  WITH\n                             INCOME TAX APPEAL NO.2291 OF 2009\n                                                  WITH\n\n\n\n\n                                                    \n                             INCOME TAX APPEAL NO.2663 OF 2009\n                                  ig              WITH\n                              INCOME TAX APPEAL NO.416 OF 2010\n                                \n    The Commissioner of Income Tax,\n\n    Central - III, Aaykar Bhavan,\n        \n\n\n    M.K. Road, Mumbai - 400 020                                    ..Appellant.\n     \n\n\n\n           Versus\n\n\n\n\n\n    M\/s.ABG Heavy Industries Limited,\n\n    5th Floor, Bhupati Chambers,\n\n    13, Mathew Road, Opera House,\n\n\n\n\n\n    Mumbai - 400 004                                               ..Respondents.\n\n\n    Mr.Suresh Kumar for the appellant in ITXA Nos.1687, 2291 & 2663\/2009.\n\n    Mr.D.A. Athavale for the appellant in ITXA No.2121\/2009.\n\n    Ms.Padma Divakar for the appellant in ITXA 416\/2010.\n\n    Mr.S.E.   Dastur,   Senior   Advocate   with   Ms.A.   Vissanji   and   Mr.S.P.   Mehta   for   the \n    respondent in all the matters.\n\n\n                                                                   ::: Downloaded on - 09\/06\/2013 15:36:38 :::\n                                                       2\n\n                                                             CORAM : Dr.D.Y. Chandrachud &\n                                                                      J.P. Devadhar, JJ.   \n<\/pre>\n
                                                             DATE     : 15th Ferbuary, 2010.\n\n\n\n\n                                                                     \n    ORAL JUDGMENT  (Per Dr.D.Y. Chandrachud, J.)\n\n\n    1.              Admit.\n\n\n\n\n                                                                    \n<\/pre>\n
    2.              The following substantial question of law arises in the batch of appeals <\/p>\n
    filed by the Revenue under Section 260 A of the Income Tax Act, 1961 (`Act’) :-\n<\/p>\n
           “Whether the assessee is entitled to the benefit of a deduction under
\n           Section   80IA   of   the   Act   and   whether   the   Tribunal   was   justified   in
\n           holding that the assessee had carried on the business of developing,
\n           maintaining and operating an infrastructural facility so as to entitle it <\/p>\n
           to a deduction under Section 80IA ?”\n<\/p><\/blockquote>\n
    3.              The appeal arises out of an order of the Income Tax Appellate Tribunal <\/p>\n
    for   Assessment   Years   (A.Ys)   1997-98,   1998-99,   1999-2000,   2000-2001   and <\/p>\n
    2005-2006.\n<\/p>\n
    4.              The assessee, in terms of the policy of the Government of India to <\/p>\n
    encourage private sector participation in the development of infrastructure, bid for <\/p>\n
    and   was   awarded   a   contract   for   leasing   of   Container   Handling   Cranes   at   the <\/p>\n
    Jawaharlal Nehru Port Trust (`JNPT’).   In pursuance of the contract, the assessee <\/p>\n
    deployed Rail Mounted Quay Side cranes, Rail Mounted Gantry cranes and Rubber <\/p>\n
    Tyred Gantry Cranes (‘the cranes’) at the Container Handling Terminal of the JNPT.\n<\/p>\n
    JNPT has a dedicated Container Handling Terminal.  According to the assessee the <\/p>\n
    only   activities   of   the   Terminal   consist   of   loading,   unloading   and   storage   of <\/p>\n
    containers.\n<\/p>\n
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\n                                                    3<\/span><\/p>\n
    5.             Under contracts dated 2 September 1994 and 16 October 1995, JNPT <\/p>\n
    accepted   the   bid   submitted   by   the   assessee   for   supply,   installation,   testing, <\/p>\n
    commissioning  and  maintenance  of the cranes.   By the  terms of the agreement, <\/p>\n
    JNPT agreed to pay lease charges in a total sum of Rs.215.50 crores over a period of <\/p>\n
    ten years. The contract envisaged two options.   Under the first option, operation <\/p>\n
    and maintenance was to be carried out by the assessee.  Under the second option, <\/p>\n
    only   maintenance was to be carried out by the assessee.   In the event that the <\/p>\n
    assessee was not to carry out operation of the cranes, the lease charges were to be <\/p>\n
    less to the extent of Rs.40,00,000\/-.  For instance, in the first year of operation the <\/p>\n
    lease charges payable to the assessee for operation and maintenance were to be Rs.\n<\/p>\n
    16.35 crores, whereas if any maintenance was to be carried out by the assessee, the <\/p>\n
    lease charges were to be Rs.15.95 crores.  Under the contracts, JNPT reserved the <\/p>\n
    right to exercise the option to request the assessee to carry out both operation and <\/p>\n
    maintenance   during   the   lease   period   or   to   carry   out   only   maintenance   while <\/p>\n
    operation was done by JNPT.  The contracts stipulated inter alia the submission of a <\/p>\n
    Performance   Guarantee   Bond   representing   10%   of   the   average   annual   contract <\/p>\n
    value computed with reference both to maintenance and operation.   The assessee <\/p>\n
    assumed the responsibility of making the equipment available for operation for a <\/p>\n
    minimum number of days as stipulated in the contract and became liable to pay <\/p>\n
    liquidated   damages   for   non-availability   of   the   equipment   after   commissioning.\n<\/p>\n
    After the expiry of the lease period of ten years, the assessee was liable to hand over <\/p>\n
    the equipment to JNPT free of cost.  Under the contract, the assessee furnished an <\/p>\n
    indemnity to JNPT towards damages that may be sustained to the equipment or to <\/p>\n
    any property of the Port Trust or to the lives, persons or properties of others.  The <\/p>\n
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\n                                                        4<\/span><\/p>\n
    assessee   assumed   other   contractual   obligations   including   amongst   them,   the <\/p>\n
    liability to insure the equipment, to indemnify JNPT towards the claims of workers’ <\/p>\n
    compensation and for compliance with labour legislation.\n<\/p>\n
    6.              By a letter dated 27 March 2000, JNPT clarified that the amount of <\/p>\n
    Rs.40,00,000\/- per annum comprised of salaries, wages and other emoluments of <\/p>\n
    operators   provided   by   JNPT;   that   it   was   the   responsibility   of   the   assessee   to <\/p>\n
    guarantee the availability of the equipment, to ensure that it is in operation on a <\/p>\n
    “round   the   clock   basis”   and   to   meet   the   cost   of   repair;   and   that   the   overall <\/p>\n
    responsibility for ensuring the operation of the equipment, and for guaranteeing the <\/p>\n
    availability of the equipment would be that of the assessee.\n<\/p>\n
    7.              The assessee claimed the benefit of a deduction under Section 80IA of <\/p>\n
    the Act, upon which the dispute in the appeals centers.  The Assessing Officer was <\/p>\n
    of  the   view  that the  assessee  was merely engaged  in the  business  of  supplying, <\/p>\n
    installing, testing, commissioning and maintaining cranes at the Port and was not in <\/p>\n
    the business of developing, maintaining and operating a Port.   Consequently the <\/p>\n
    assessee was held not to be in the business of developing an infrastructural facility.\n<\/p>\n
    The   Commissioner   of   Income   Tax   (Appeals)   allowed   the   benefit   of   a   deduction <\/p>\n
    under Section 80IA of the Act to the assessee on appeal.  The Tribunal in a further <\/p>\n
    appeal   held   that   the   assessee   was   entitled   to   the   benefit   of   a   deduction   under <\/p>\n
    Section 80IA of the Act and confirmed the order of the Commissioner of Income Tax <\/p>\n
    (Appeals).\n<\/p>\n
    8.              On behalf of the Revenue, it has been submitted that: (i) Section 80IA <\/p>\n
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\n                                                       5<\/span><\/p>\n
    of the Act requires the assessee to have developed, operated and maintained an <\/p>\n
    infrastructural   facility   in  order   to   qualify  for   a  deduction.  The  assessee   is   not  a <\/p>\n
    developer   of   the   facility   but   had   only   supplied     and     installed   the   Container <\/p>\n
    Handling Cranes at JNPT;  (ii) The assessee is not operating the equipment and is, <\/p>\n
    therefore, not eligible for a deduction under Section 80IA of the Act; and (iii) The <\/p>\n
    equipment which has been installed is not a structure for loading and unloading at <\/p>\n
    a port.\n<\/p>\n
    9.<\/p>\n
                    In   order   to   appreciate   the   submissions   which   have   been   urged   on <\/p>\n
    behalf  of  the  Revenue  and  before we  refer  to  the  submissions  which have  been <\/p>\n
    urged on behalf of the assessee, it would at the outset be necessary to advert to the <\/p>\n
    provisions of Section 80IA of the Act and the underlying purpose and object of the <\/p>\n
    provision made by Parliament.  Section 80IA of the Act as it was originally enacted, <\/p>\n
    provided that where the gross total income of an assessee includes any profits and <\/p>\n
    gains derived from any business of an industrial undertaking or a hotel or operation <\/p>\n
    of   a   ship   or  developing,   maintaining   and   operating   any   infrastructure   facility, <\/p>\n
    amongst others, there shall, in accordance with and subject to the provisions of the <\/p>\n
    Section, be allowed, in computing the total income of the assessee, a deduction <\/p>\n
    from such profits and gains of an amount equal to the percentage specified in sub-\n<\/p>\n
    section (5) and for such number of assessment years as specified in sub-section (6).\n<\/p>\n
    Sub-section   (4A)   was  introduced   and   inserted   by  the   Finance   Act  of   1995   with <\/p>\n
    effect 1st  April 1996.   Sub-section (4A) stipulated that the Section would apply to <\/p>\n
    any enterprise carrying on the business of developing, maintaining and operating <\/p>\n
    any infrastructure facility which fulfils all the following conditions, namely :- (i) <\/p>\n
    The enterprise must be owned by a company registered in India or by a consortium <\/p>\n
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\n                                                        6<\/span><\/p>\n
    of companies; (ii) The enterprise must have entered into an agreement with the <\/p>\n
    Central or a State Government or a local authority or any other statutory body for <\/p>\n
    developing, maintaining and operating a new infrastructure facility subject to the <\/p>\n
    condition   that   such   infrastructure   facility   shall   be   transferred   to   the   Central <\/p>\n
    Government, State Government, local Authority or such other statutory body, as the <\/p>\n
    case may be, within the period stipulated in the agreement; and (iii) The enterprise <\/p>\n
    must start operating and maintaining the infrastructure facility on or after 1 st April <\/p>\n
    1995. Sub-section (12) of Section 80IA of the Act contains a statutory dictionary <\/p>\n
    defining   the   terms   used   in   the   provision.     Clause   (ca)   was   substituted   by   the <\/p>\n
    Finance Act of 1996, with effect from 1st  April 1997 to define an infrastructural <\/p>\n
    facility to mean (i) A road, highway, bridge, airport, port, rail system or any other <\/p>\n
    public facility of a similar nature as may be notified by the Board in the Official <\/p>\n
    Gazette; and (ii) A water supply project, irrigation project, sanitation and sewerage <\/p>\n
    system.\n<\/p>\n
    10.             As   noted   earlier,   sub-clause   (4A)   of   Section   80IA   of   the   Act   as   it <\/p>\n
    originally stood, stated that the Section applied to an enterprise carrying on the <\/p>\n
    business of developing, maintaining and operating any infrastructure facility, which <\/p>\n
    fulfils certain conditions.  With effect from 1 April 2000, by the Finance Act of 1999, <\/p>\n
    certain   changes   were   brought   about.     Section   80IA   and   Section   80IB   were <\/p>\n
    substituted for Section 80IA.   Sub-section (4) of Section 80IA of the Act provided <\/p>\n
    that   the   Section   shall   apply   to   any   enterprise   carrying   on   the   business   of   (i) <\/p>\n
    developing,   (ii)   maintaining   and   operating,   or   (iii)   developing,   maintaining   and <\/p>\n
    operating an infrastructure facility which fulfils certain conditions.  The conditions <\/p>\n
    provided for the ownership of the enterprise by a Company or by a consortium of <\/p>\n
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\n                                                      7<\/span><\/p>\n
    Companies, registered in India and stipulated a requirement of an agreement with <\/p>\n
    the Central and State Governments, a local authority or any other statutory body;\n<\/p>\n
    the agreement being required to envisage the transfer of the facility after the period <\/p>\n
    stipulated in the agreement.  Subsequently, the requirement for the transfer of the <\/p>\n
    facility to the Central or State Governments, or as the case may be to the local <\/p>\n
    authority or a statutory body came to be deleted.   Sub-clause (c) of Clause (i) of <\/p>\n
    sub-section   (4)   stipulated   that   the   enterprise   must   have   started   operating   and <\/p>\n
    maintaining the infrastructural facility on or after 1st April 1995. By the Finance Act <\/p>\n
    of 2001, the word ‘or’ came to be introduced after the word developing, to clarify in <\/p>\n
    effect that the agreement between the enterprise and the authority of the Central or <\/p>\n
    State Government or, as the case may be a local authority or a statutory body may <\/p>\n
    provide for (i) developing,  or  (ii) maintaining and operating,  or  (iii) developing, <\/p>\n
    maintaining and operating a new infrastructure facility.\n<\/p>\n
    11.             The object of Section 80IA was to provide an impetus to the growth of <\/p>\n
    infrastructure in the nation.  A sound infrastructure is a sine qua non for economic <\/p>\n
    development.   Absence of infrastructure poses significant barriers to growth and <\/p>\n
    development.     A   model   which   relied   exclusively   on   the   provision   of   basic <\/p>\n
    infrastructure   by   the   State   was   found   to   be   deficient.     Section   80IA   was   an <\/p>\n
    instrument of legislative  policy, conceived  with  a  view  to  provide  an impetus  to <\/p>\n
    private sector participation in infrastructural projects. Consistent with the legislative <\/p>\n
    object   of   encouraging   private   sector   participation   in   the   development   of <\/p>\n
    infrastructure, Section 80IA was enacted.  Contemporaneously, with the provisions <\/p>\n
    which were made by Parliament in Section 80IA of the Act, explanatory circulars <\/p>\n
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\n                                                     8<\/span><\/p>\n
    issued in an administrative capacity by the CBDT held the field.   These circulars <\/p>\n
    gave  expression to the scope  and ambit of the concession that was provided  by <\/p>\n
    Section  80IA  of  the  Act.   On 14th  August 1995, Circular 717  was  issued  by the <\/p>\n
    Central Board of Direct Taxes.  The circular, insofar as is material provided thus :\n<\/p>\n
           “Five-year tax holiday for infrastructure development :\n<\/p><\/blockquote>\n
           34.1    —–\n<\/p><\/blockquote>\n
           34.2 Industrial modernization requires a massive expansion of, and <\/p>\n
           qualitative   improvement   is   infrastructure.     Our   country   is   very
\n           deficient   in   infrastructure   such   as   expressways,   highways,   airports, <\/p>\n
           ports and rapid urban rail transport systems.  Additional resources are
\n           needed to fulfill the requirements of the country within a reasonable
\n           time frame.   In many countries the BOT (build-operate-transfer) or
\n           the   BOOT   (build-own-operate-transfer)  concepts  have  been  utilised <\/p>\n
           for developing new infrastructure.\n<\/p><\/blockquote>\n
           34.3 Applying   commercial   principles   in   the   operation   of
\n           infrastructure   facilities   can   provide   both   managerial   and   financial <\/p>\n
           efficiency.  In view of this, a ten-year concession including a five-year
\n           tax   holiday   has   been   allowed   for   any   enterprise   which   develops, <\/p>\n
           maintains and operates any new infrastructure facility such as roads,
\n           highways,   expressways,   bridges,   airports,   ports  and   rail   systems   or
\n           any other public facility of similar nature as may be notified by the
\n           Board   on   BOT   or   BOOT  or   similar   other   basis  (where   there   is   an
\n           ultimate transfer of the facility to a Government or public authority).\n<\/p><\/blockquote>\n
           The  enterprise has to enter into an agreement with  the  Central or
\n           State Government or a local authority or any other statutory authority
\n           for this purpose.   The period within which the infrastructure facility
\n           has to be transferred needs to be stipulated in the agreement between
\n           the undertaking and the Government concerned.  The enterprise has <\/p>\n
           to be owned by a company registered in India or a consortium of such
\n           companies.  The tax holiday will be in respect of income derived from
\n           the use of the infrastructure facilities developed by them.\n<\/p><\/blockquote>\n
           34.4 It   will   apply   in   respect   of   infrastructure   facilities   becoming
\n           operational on or after 1-4-1995.”\n<\/p><\/blockquote>\n
    The circular thus amplified both the rationale for the introduction of Section 80IA <\/p>\n
    of the Act and the nature and ambit of the concession that was provided by the <\/p>\n
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\n                                                      9<\/span><\/p>\n
    provision.  At this stage, it would be necessary to note that the circular clarified that <\/p>\n
    the   benefit   of   a   deduction   was   available   to   an   enterprise,   which   developed, <\/p>\n
    maintained and operated any new infrastructure facility, such as inter alia a Port on <\/p>\n
    a Build, Operate and Transfer (BOT) basis, or a Build, Own, Operate and Transfer <\/p>\n
    (BOOT) ‘or similar other basis’, where there was an ultimate transfer of the  facility <\/p>\n
    to a Government or a Public Authority.   The circular also clarified the view of the <\/p>\n
    CBDT that the tax holiday would be in respect of the income derived from the use <\/p>\n
    of   the   infrastructure   facilities   developed   by   such   enterprise.     The   infrastructure <\/p>\n
    facility had to become operational on or after 1st April 1995.\n<\/p>\n
    12.             On   3rd  January   1996,   Circular   733   was   issued   by   the   CBDT.     The <\/p>\n
    circular dealt with the question as to whether Section 80IA of the Act would be <\/p>\n
    applicable   to   the   Build,   Own,   Lease   and   Transfer   (BOLT)   Scheme   of   the   Indian <\/p>\n
    Railways for the development of the railway system.   Answering the issue in the <\/p>\n
    affirmative, the circular clarified that the concession would be applicable only to an <\/p>\n
    infrastructure facility meant for development of the railway system and not to any <\/p>\n
    other infrastructure facility including rolling stocks.  Clearly, therefore, as far back <\/p>\n
    as in January 1996, the application of Section 80IA of the Act to the development of <\/p>\n
    infrastructural facilities in a BOLT project for the Indian Railways was within the <\/p>\n
    contemplation of the CBDT, as a permissible source for deduction.\n<\/p>\n
    13.             Subsequently,   on   23rd  June   2000,   Circular   793   was   issued   by   the <\/p>\n
    CBDT, which postulated as follows :\n<\/p>\n
            “The Board has received various representations seeking clarification
\n            whether structures at ports for storage, loading and unloading, etc.,
\n            will  fall  under the definition of “port” for the purposes of sections <\/p>\n
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\n                                                        10<\/span><\/p>\n
            10(23G) and 80-IA of the Income-tax Act, 1961.\n<\/p><\/blockquote>\n
            2.      The Board has considered the matter and it has been decided
\n            that such structures will be included in the definition of “port” for the
\n            purposes of sections 10(23G) and 80-IA of the Income-tax Act, 1961, <\/p>\n
            if the following conditions are fulfilled :\n<\/p><\/blockquote>\n
                   (a)    the concerned port authority has issued a certificate that
\n            the said structures form part of the port, and<\/p>\n<\/blockquote>\n
                   (b)    such  structures have  been built under  BOT  and  BOLT
\n            schemes   and   there   is   an   agreement   that   the   same   would   be
\n            transferred to the said authority on the expiry of the time stipulated
\n            in the agreement.”\n<\/p><\/blockquote>\n
    The importance of the circular, insofar as the subject matter of these proceedings is <\/p>\n
    concerned,   lies   in   the   fact   that   the   Board   noted   that   it   was   in   receipt   of <\/p>\n
    representations seeking a clarification on whether structures at Ports for storage, <\/p>\n
    loading and unloading etc. would fall within the definition of a Port inter alia for <\/p>\n
    the purposes of Section 80IA of the Act.   The Board clarified that such structures <\/p>\n
    would be included in the definition of ‘Port’ for the purposes of Section 80IA of the <\/p>\n
    Act, subject to the fulfillment of the condition that the Port Authority must issue a <\/p>\n
    certificate that the structures form a part of the Port; that such structures had been <\/p>\n
    built either  under  a BOT  or BOLT Scheme  and  there  was an agreement for  the <\/p>\n
    transfer   of   the   structure   to   the   authority   after   the   fulfillment   of   the   stipulated <\/p>\n
    period.     The   circular,   therefore,   clearly   postulated   a   concession   being   given   in <\/p>\n
    respect of a particular facility at a Port namely a facility involving storage, loading <\/p>\n
    and unloading.\n<\/p>\n
    14.              On 16th December 2005, Circular 10 of 2005 was issued by the CBDT.\n<\/p>\n
    The   circular   made   a   reference   to   the   earlier   circular   dated   23rd  June   2000   and <\/p>\n
    clarified that the definition of the expression ‘Port’ for the purposes of Section 80IA <\/p>\n
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\n                                                        11<\/span><\/p>\n
    of the Act so as to include structures at Ports for storage, loading and unloading etc, <\/p>\n
    subject to the fulfillment of the conditions already noted earlier, would apply to the <\/p>\n
    A.Y. 2001-2002 and  any earlier assessment year.   However, from A.Y. 2002-2003 <\/p>\n
    onwards, the condition requiring that the structure should have been completed <\/p>\n
    under a BOT or BOLT Scheme and that there should be an agreement for transfer of <\/p>\n
    the facility to the Competent Authority on the expiry of the stipulated period was <\/p>\n
    deleted.  In other words, the conditions which were prescribed by CBDT’s Circular <\/p>\n
    dated   23rd  June   2000   were   liberalized   by   the   subsequent   circular   dated   16 th <\/p>\n
    December 2005.  By the subsequent circular it was clarified that the conditions that <\/p>\n
    were   spelt   out   in   the   earlier   circular   dated   23rd  June   2000   would   continue   to <\/p>\n
    operate   in   respect   of   assessment   years   prior   to   and   culminating   with   A.Y.\n<\/p>\n
    2001-2002.     With   effect   from   A.Y.   2002-2003   all   that   was   necessary   was   a <\/p>\n
    certificate issued by the Port Authority that the structure in question forms a part of <\/p>\n
    the   Port.     Hence,   the   evolution   of   Section   80IA   would   show   a   progressive <\/p>\n
    liberalisation   of   the   legislative   scheme,   in   the   interests   of   aiding   the   growth   of <\/p>\n
    infrastructure.   The administrative circulars issued by CBDT in implementation of <\/p>\n
    Section 80IA similarly liberalised the Scheme, consistent with the Act.\n<\/p>\n
    15.              At this stage, it would be necessary to note that on 31st  May 2004, <\/p>\n
    JNPT issued a certificate confirming the award of contracts to the assessee on 2nd <\/p>\n
    September   1994   and   16th  October   1995   for   supply,   installation,   testing, <\/p>\n
    commissioning and maintenance of Container Handling equipment on lease for a <\/p>\n
    period of ten years for loading and unloading of containers at the Port and that the <\/p>\n
    cranes that were to be supplied by the assessee form an integral part of the Port.\n<\/p>\n
    JNPT clarified that the contracts have been executed under the BOLT Scheme and <\/p>\n
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\n                                                         12<\/span><\/p>\n
    in accordance with its directions, the cranes would be transferred to the Port Trust <\/p>\n
    at   no   cost  on  the   expiry   of   a   period   of   ten   years   of   the   commencement   of   the <\/p>\n
    contract.\n<\/p>\n
    16.              Now,   it   is   in   the   background   of   the   evolution   of   the   law   that   the <\/p>\n
    controversy in the present case would have to be considered.  The contention of the <\/p>\n
    Revenue is that the assessee was not engaged in developing the facility at all and <\/p>\n
    that under the Contract that was entered into between the assessee and JNPT all <\/p>\n
    that the assessee was required to carry out was to supply and install cranes at the <\/p>\n
    Port.   The submission cannot be accepted.   The expression ‘development’ has not <\/p>\n
    been   artificially   defined   for   the   purposes   of   Section   80IA   of   the   Act   and   must, <\/p>\n
    therefore,   receive   its   ordinary   and   natural   meaning.     Under   the   terms   of   the <\/p>\n
    contract between the assessee and JNPT, the assessee undertook an obligation for <\/p>\n
    supplying,   installing,   testing,   commissioning   and   maintenance   of   Container <\/p>\n
    Handling   equipment   namely,   the   cranes   in   question.   JNPT   has   a   dedicated <\/p>\n
    Container Handling Terminal.  The case of the assessee is that the only activity at <\/p>\n
    the Terminal consists of the loading, unloading and storage of containers.   Under <\/p>\n
    the contract, the assessee was obligated to provide the equipment in question in an <\/p>\n
    operable condition.   The contract envisaged two different options; the first being <\/p>\n
    one under which the assessee would carry out operation and maintenance of the <\/p>\n
    equipment while the second consisted of an option to JNPT to carry out operations.\n<\/p>\n
    The terms of the contract however made it clear that it was the obligation of the <\/p>\n
    assessee to make the equipment available for operation for a stipulated minimum <\/p>\n
    number of days during the year and made the assessee liable to liquidated damages <\/p>\n
    in the event that this was not possible.   JNPT by its letter dated 27th March 2000 <\/p>\n
                                                                        ::: Downloaded on – 09\/06\/2013 15:36:38 :::<\/span>
\n                                                        13<\/span><\/p>\n
    clarified that the difference between the two options that had been given to the <\/p>\n
    assessee  consisted  of  a  payment  of  Rs.40,00,000\/-  which  was to   be  retained  by <\/p>\n
    JNPT in the event that the operators were provided by the Port for operating the <\/p>\n
    cranes.     At   the   same   time,   JNPT   clarified   that   it   was   the   responsibility   of   the <\/p>\n
    assessee   to   guarantee   the   availability   of   the   equipment;   to   ensure   that   the <\/p>\n
    equipment is in operation on a round the clock basis; to provide for repairs and to <\/p>\n
    ensure the operation and availability of the equipment in accordance with the terms <\/p>\n
    of the contract.\n<\/p>\n
    17.              The obligations which have been assumed by the assessee under the <\/p>\n
    terms of the contract are obligations involving the development of an infrastructure <\/p>\n
    facility.  Section 80IA of the Act essentially contemplated a deduction in a situation <\/p>\n
    where   an   enterprise   carried   on   the   business   of   developing,   maintaining   and <\/p>\n
    operating an infrastructure facility.   A Port was defined to be included within the <\/p>\n
    purview of the expression infrastructure facility.  The obligations which the assessee <\/p>\n
    assumed under the terms of the contract were not merely for supply and installation <\/p>\n
    of the cranes, but involved a continuous obligation right from the supply of the <\/p>\n
    cranes to the installation, testing, commissioning, operation and maintenance of the <\/p>\n
    cranes for a term of ten years after which the cranes were to vest in JNPT free of <\/p>\n
    cost.  An assessee did not have to develop the entire port in order to qualify for a <\/p>\n
    deduction under Section 80IA.  Parliament did not legislate a condition impossible <\/p>\n
    of compliance.  A port is defined to be an infrastructure facility and the circular of <\/p>\n
    the Board clarified that a structure for loading, unloading, storage etc. at a port <\/p>\n
    would qualify for deduction under Section 80IA.  The condition of a certificate from <\/p>\n
    the Port Authority was fulfilled and JNPT certified that the facility provided by the <\/p>\n
                                                                       ::: Downloaded on – 09\/06\/2013 15:36:38 :::<\/span>
\n                                                       14<\/span><\/p>\n
    assessee was an integral part of the port.  The assessee developed the facility on a <\/p>\n
    BOLT basis under the contract with JNPT.   On the fulfillment of the lease of ten <\/p>\n
    years, there was a vesting in the JNPT free of cost.\n<\/p>\n
    18.             Before the Tribunal, material was placed on record by the assessee to <\/p>\n
    indicate the nature and extent of the activities undertaken by it in ensuring that the <\/p>\n
    equipment   which   was   supplied   was   fully   operational.     The   assessee   had   in   its <\/p>\n
    employment diverse employees, including a Senior Manager, a Manager, Assistant <\/p>\n
    Manager and five Deputy Managers (Operations) in addition to Assistant Engineers, <\/p>\n
    Technical Officers and Operators-cum-Technicians.  On considering the material on <\/p>\n
    record including letters of the Port Authority, the Tribunal came to the conclusion <\/p>\n
    that as a matter of fact the assessee was also engaged in activities of operating the <\/p>\n
    equipment.  The finding that the assessee had developed the infrastructure facility <\/p>\n
    and that it was engaged in operating the cranes is, therefore, based on the material <\/p>\n
    on   record.     The   fact   that   the   assessee   was   also   maintaining   the   cranes   is   not <\/p>\n
    disputed.     There   is   also   no   merit   in   the   submission   that   what   the   assessee <\/p>\n
    constructed  was not a  structure  for  loading,  unloading, storage  etc.  at the  port.\n<\/p>\n
    Plainly, the assessee did so.\n<\/p>\n
    19.             On   behalf   of   the   Revenue   it   was   sought   to   be   urged   that   at   the <\/p>\n
    material time for A.Ys 1997-98 and 1998-99, it was necessary for the assessee to <\/p>\n
    cumulatively fulfill the requirement of developing, operating and maintaining the <\/p>\n
    infrastructure facility.   It was urged that the assessee, even if it be held to have <\/p>\n
    developed the facility, cannot be regarded as operating the facility.  For the reasons <\/p>\n
    already indicated, it is not possible to accept the submission.  As we have already <\/p>\n
                                                                      ::: Downloaded on – 09\/06\/2013 15:36:38 :::<\/span>
\n                                                         15<\/span><\/p>\n
    noted the assessee had as a matter of fact developed the facility.  The Tribunal has <\/p>\n
    also arrived at a finding of fact that the assessee was under the contract required to <\/p>\n
    operate the facility. Merely because the operators of the cranes were provided by <\/p>\n
    the   Port   Authority   did   not   absolve   the   assessee   of   the   overall   responsibility   of <\/p>\n
    operating the cranes, under the terms of the contract.\n<\/p>\n
    20.              Counsel   appearing   on   behalf   of   the   assessee   urged   that   the <\/p>\n
    requirement that the assessee ought to have developed, maintained and operated <\/p>\n
    the facility is not a condition which is to be read in the cumulative.   The learned <\/p>\n
    counsel submitted that the scheme under Section 80IA of the Act was to provide a <\/p>\n
    concession   in   order   to   attract   private   investment   in   infrastructure.     It   is   in   this <\/p>\n
    background that the CBDT issued a clarificatory circular on 14th August 1995 stating <\/p>\n
    that infrastructure facilities developed on a BOT, BOOT or other similar basis were <\/p>\n
    within the contemplation of the provision.   Reliance was placed on the circulars <\/p>\n
    dated 23rd  June 2000 and 16th  December 2005 as being indicative of the fact that <\/p>\n
    the requirement of developing, maintaining and operating an infrastructure facility <\/p>\n
    were never regarded to be cumulative. The learned counsel urged that it was in line <\/p>\n
    with the Board’s understanding of the provisions of Section 80IA of the Act  that the <\/p>\n
    Parliament eventually stepped in by amending the provisions of Section 80IA of the <\/p>\n
    Act   so as to clarify that in order to avail of a deduction, the assessee could (i) <\/p>\n
    develop; or (ii) operate and maintain; or (iii) develop, operate and maintain the <\/p>\n
    facility.\n<\/p>\n
    21.              While dealing with this submission, we note that neither in the memo <\/p>\n
    of appeal nor in the submissions before us has any effort been made to suggest on <\/p>\n
                                                                        ::: Downloaded on – 09\/06\/2013 15:36:38 :::<\/span>
\n                                                       16<\/span><\/p>\n
    the   part  of   the   Revenue   that   the   circulars  of   the   Board   are   not  binding   on  the <\/p>\n
    Revenue.     Nor   for   that   matter   was   it   the   submission   of   the   Revenue   that   the <\/p>\n
    circulars issued by the Board from time to time were in violation of or contrary to <\/p>\n
    legal provisions.  Plainly, right from 1996 CBDT was seized with the question, as to <\/p>\n
    whether infrastructure facilities developed under a BOLT project would qualify for <\/p>\n
    exemption under Section 80IA of the Act.  The first circular in that regard that was <\/p>\n
    issued on 23rd  January 1996 specifically dealt with whether Section 80IA (4A) of <\/p>\n
    the Act would be applicable to a BOLT Scheme involving an infrastructure facility <\/p>\n
    for the Indian Railways.  The circular clarified that an infrastructure facility set up <\/p>\n
    on a BOLT basis for Railways would qualify for a deduction.  That was followed by <\/p>\n
    the two circulars of the Board dated 23rd June 2000 and 16th December 2005.  The <\/p>\n
    first of those circulars recognizes that structures for storage, loading and unloading <\/p>\n
    etc. at a port built under a BOT and BOLT Scheme would qualify for a deduction.\n<\/p>\n
    Now, there is no question of an enterprise operating a facility in a BOLT Scheme <\/p>\n
    because such a Scheme contemplates that the enterprise would build, own, lease <\/p>\n
    and   eventually   transfer   the   facility   to   the   Authority   for   whom   the   facility   is <\/p>\n
    constructed.     The   subsequent   circular   dated   16th  December   2005   once   again <\/p>\n
    clarified the position of CBDT that structures which have been built inter alia under <\/p>\n
    a BOLT Scheme upto A.Y. 2001-2002 would qualify for a deduction under Section <\/p>\n
    80IA of the Act.   In fact from A.Y. 2002-2003, the process was further liberalized, <\/p>\n
    consistent with the basic purpose and object of granting the concession.   In this <\/p>\n
    background, particularly in the context of the objective sought to be achieved and in <\/p>\n
    the absence of any challenge on the part of the Revenue on the applicability of the <\/p>\n
    binding   circulars   of   CBDT,   we   are   of   the   view   that   the   condition   as   regards <\/p>\n
    development,   operation   and   maintenance   of   an   infrastructure   facility   was <\/p>\n
                                                                      ::: Downloaded on – 09\/06\/2013 15:36:38 :::<\/span>
\n                                                      17<\/span><\/p>\n
    contemporaneously   construed   by   the   Authorities   at   all   material   times,   to   cover <\/p>\n
    within its purview the development of an infrastructure facility under a Scheme by <\/p>\n
    which  an enterprise  would build, own, lease  and  eventually transfer the facility.\n<\/p>\n
    This was perhaps a practical realisation of the fact a developer may not possess the <\/p>\n
    wherewithal,   expertise   or   resources   to   operate   a   facility,   once   constructed.\n<\/p>\n
    Parliament eventually stepped in to clarify that it was not invariably necessary for a <\/p>\n
    developer to operate and maintain the facility.  Parliament when it amended the law <\/p>\n
    was   obviously   aware   of   the   administrative   practice   resulting   in   the   circulars   of <\/p>\n
    CBDT.  The fact that in such a Scheme, an enterprise would not operate the facility <\/p>\n
    itself was not regarded as being a statutory bar to the entitlement to a deduction <\/p>\n
    under Section 80IA of the Act .  The Court cannot be unmindful in the present case <\/p>\n
    of  the   underlying  objects  and   reasons  for   a  grant  of   deduction  to   an  enterprise <\/p>\n
    engaged   in   the   development   of   an   infrastructure   facility.     The   provision   was <\/p>\n
    intended   to   give   an   incentive   to   investment   for   infrastructural   growth   in   the <\/p>\n
    country.   In  Bajaj Tempo V\/s. Commissioner of Income Tax,1  the Supreme Court <\/p>\n
    emphasized that a provision in a taxing statute granting incentives for promoting <\/p>\n
    growth and development should be construed liberally.   In the present case, the <\/p>\n
    administrative circulars issued by the CBDT proceeded on that basis by adopting a <\/p>\n
    liberal view of the scope and ambit of the provisions of Section 80IA of the Act.\n<\/p>\n
    Parliamentary   intervention   endorsed   the   administrative   practice.     A   provision <\/p>\n
    inserted by the legislature to supply an obvious omission and to make a section <\/p>\n
    workable has in certain circumstances been regarded as retrospective particularly <\/p>\n
    when it was intended to remedy unintended consequences.  Allied Motors P. Limited <\/p>\n
    1 196 ITR 188 (S.C.)<\/p>\n
                                                                     ::: Downloaded on – 09\/06\/2013 15:36:38 :::<\/span>
\n                                                       18<\/span><\/p>\n
     V\/s.   C.I.T.  2  and  C.I.T.   V\/s.   Alom   Extrusions   Limited.3  The   Tribunal   having   only <\/p>\n
    followed   these   provisions,   we   do   not   find   any   just   reason   to   interfere   in   our <\/p>\n
    appellate jurisdiction.\n<\/p>\n
    22.             Another submission which was urged on behalf of the Revenue is that <\/p>\n
    under clause (iii) of sub-section (4A) of Section 80IA, one of the conditions imposed <\/p>\n
    was   that   the   enterprise   must   start   operating   and   maintaining   the   infrastructure <\/p>\n
    facility on or after 1st April 1995.  The same requirement is embodied in sub-clause <\/p>\n
    (c) of clause (i) of sub-section (4) of the amended provisions of Section 80IA.  On <\/p>\n
    this basis, it was urged that since the assessee was not operating and maintaining <\/p>\n
    the facility, he did not fulfill the condition.  This submission is fallacious both in fact <\/p>\n
    and in law.  As a matter of fact, the Tribunal has entered a finding that the assessee <\/p>\n
    was   operating   the   facility   and   this   finding   has   been   confirmed   earlier   in   this <\/p>\n
    judgment.   That the assessee was maintaining the facility is not in dispute.   The <\/p>\n
    facility was commenced after 1st April 1995.  Therefore, the requirement was met in <\/p>\n
    fact.  Moreover, as a matter of law, what the condition essentially means is that the <\/p>\n
    infrastructure   facility   should   have   been   operational   after   1st  April   1995.     After <\/p>\n
    Section 80IA was amended by the Finance Act of 2001, the section applies to an <\/p>\n
    enterprise   carrying   on   the   business   of   (i)   developing;   or   (ii)   operating   and <\/p>\n
    maintaining;   or   (iii)   developing,   operating   and   maintaining   any   infrastructure <\/p>\n
    facility which fulfills certain conditions.  Those conditions are : (i) Ownership of the <\/p>\n
    enterprise by a Company registered in India or by a consortium; (ii) An agreement <\/p>\n
    with the Central or State Government, local authority or statutory body; and (iii) <\/p>\n
    2 (1997) 224 ITR 677 (S.C.)
\n    3 (2009) 319 ITR 306 (S.C.)<\/p>\n
                                                                     ::: Downloaded on – 09\/06\/2013 15:36:38 :::<\/span>
\n                                                        19<\/span><\/p>\n
    The start of operation and maintenance of the infrastructure facility on or after 1st <\/p>\n
    April   1995.     The   requirement   that   the   operation   and   maintenance   of   the <\/p>\n
    infrastructure facility should commence after 1st April 1995 has to be harmoniously <\/p>\n
    construed   with   the   main   provision   under   which   a   deduction   is   available   to   an <\/p>\n
    assessee   who   develops;   or   operates   and   maintains;   or   develops,   operates   and <\/p>\n
    maintains an infrastructure facility.   Unless both the provisions are harmoniously <\/p>\n
    construed, the object and intent underlying the amendment of the provision by the <\/p>\n
    Finance Act of 2001 would be defeated.  A harmonious reading of the provision in <\/p>\n
    its   entirety   would   lead   to   the   conclusion   that   the   deduction   is   available   to   an <\/p>\n
    enterprise   which   (i)   develops;   or   (ii)   operates   and   maintains;   or   (iii)   develops, <\/p>\n
    maintains and operates that infrastructure facility.  However, the commencement of <\/p>\n
    the operation and maintenance of the infrastructure facility should be after 1st April <\/p>\n
    1995.  In the present case, the assessee clearly fulfilled this condition.\n<\/p>\n
    23.             In the view which we have taken, all the assessment years in question <\/p>\n
    to which this batch of appeals relates would be governed by the same principle. The <\/p>\n
    subsequent amendment of Section 80IA (4A) of the Act to clarify that the provision <\/p>\n
    would   apply   to   an   enterprise   engaged   in   (i)   developing;   or   (ii)   operating   and <\/p>\n
    maintaining; or (iii) developing, operating and maintaining an infrastructure facility <\/p>\n
    was reflective of a position which was always construed to hold the field.   Before <\/p>\n
    the amendment that was brought about by Parliament by Finance Act of 2001, we <\/p>\n
    have already noted that the consistent line of circulars of the Board postulated the <\/p>\n
    same position.  The amendment made by Parliament to Section 80IA (4) of the Act <\/p>\n
    set the matter beyond any controversy by stipulating that the three conditions for <\/p>\n
    development, operation and maintenance were not intended to be cumulative in <\/p>\n
                                                                      ::: Downloaded on – 09\/06\/2013 15:36:38 :::<\/span>
\n                                                  20<\/span><\/p>\n
    nature.\n<\/p>\n
    23.          In   view   of   the   aforesaid   observations,   the   question   of   law   shall <\/p>\n
    accordingly stand answered in favour of the assessee and against the Revenue.\n<\/p>\n
    24.          For all these reasons, we are of the view that there is no merit in the <\/p>\n
    appeals.  The appeals shall accordingly stand dismissed.  There shall be no order as <\/p>\n
    to costs.\n<\/p>\n
                 (J.P. Devadhar, J.)                             (Dr.D.Y. Chandrachud, J.)\n                              \n        \n     \n\n\n\n\n\n\n                                                                ::: Downloaded on - 09\/06\/2013 15:36:38 :::<\/span>\n <\/pre>\n","protected":false},"excerpt":{"rendered":"
Bombay High Court The Commissioner Of Income Tax vs M\/S.Abg Heavy Industries Limited on 15 February, 2010 Bench: Dr. D.Y. Chandrachud, J.P. Devadhar 1 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 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[11,8],"tags":[],"class_list":["post-183690","post","type-post","status-publish","format-standard","hentry","category-bombay-high-court","category-high-court"],"yoast_head":"\nThe Commissioner Of Income Tax vs M\/S.Abg Heavy Industries Limited on 15 February, 2010 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/the-commissioner-of-income-tax-vs-ms-abg-heavy-industries-limited-on-15-february-2010-2\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Commissioner Of Income Tax vs M\/S.Abg Heavy Industries Limited on 15 February, 2010 - 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