Deduction U/S 80-IA Is Eligible For Industrial Undertakings Even If Infrastructural Development Is Performed With State's Nodal Agency: Calcutta HC

The Division Bench comprising Chief Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya observed that deduction u/s 80IA(4) is legislated to promote industrial undertaking engaged in the infrastructural development, and therefore, its interpretation should advance the object of its introduction and should not frustrate it.

Referring to the certificate issued by the State Government that the infrastructural facility developed by the assessee is part of Kakinada Deep Water Port which was also approved by the customs authorities, the Bench granted deduction u/s 80IA to the Respondent/ assessee.

The observation came in light of the fact that the assessee entered into an agreement with KSPL for development of a Mechanised Port Handling System (MPHS) for unloading and rail dispatch in Kakinada Deep Water Port and its backup area.

The KSPL was appointed as nodal agency for operations of the port by the Andhra Pradesh Government in pursuance of the concession agreement. Consequently, a certificate was issued by the State Government stating that MPHS is an infrastructural facility and part of Kakinada Deep Water.

When the assessee claimed deduction u/s 80IA(4), the same was denied by the AO on the premise that conditions stipulated under said provision were not fulfilled as there was no direct agreement between the assessee and the Central/ State Government/ local authority/ statutory body. However, when the matter reached the Tribunal, the assessee was granted relief. Challenging the same, the Revenue Department approached the High Court.

The Bench observed that Section 80IA(4)(b) applies to any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility in pursuance to an agreement with a Central, State Government or a local authority.

Explanation to Section 80IA(4) clearly connotes 'infrastructural facility' as a port, airport, inland water base, inland port or navigational channel in the sea as per clause (d) in the said Explanation, added the Bench.

The Bench clarified that the assessee fulfils the condition u/s 80IA(4)(i) as the primary agreement was entered into between the State Government and International Sea Port, Singapore (ISPL), which provides for subrogation of rights and obligations to a body corporate with the consent of the State Government.

Further, the Bench noted that pursuant to the primary agreement, KSPL was formed, which is recognized by the Government of Andhra Pradesh for all legal and operational purposes.

Thus, highlighting that KSPL is acting as a nodal agency under the primary agreement, the Bench rejected the AO's argument that KSPL being an unlisted non-government company, the agreement with KSPL cannot be said to be with Central/ State Government/ local authority, which is violative of condition prescribed u/s 80IA(4)(i)(b).

Therefore, pointing out that the Tribunal had rightly considered the permission obtained from the custom authority as deemed approval of the Government, the High Court granted deduction u/s 80IA and dismissed the Revenue's appeal.

Counsel for Appellant/ Revenue: Advocates Tilak Mitra and Soumen Bhattacharjee

Counsel for Respondent/ Revenue: Senior Advocate J.P. Khaitan along with Advocates Arati Agarwal and Rosy Banerjee

Case Title: PCIT vs. Bothra Shipping Services Private Limited

Case Number: ITAT/85/2024

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