Judgment:
(Prayer: This Ita Is Filed Under Sec.260-A Of Income Tax Act 1961, Arising Out Of Order Dated 30/04/2013 Passed In Ita N0.931/Bang/2012, For The Assessment Year 2008-09, Praying This Hon'ble Court To: I. Formulate The Substantial Questions Of Law Stated Therein, Ii. Set Aside The Order Passed By The Itat, A' Bench, Bangalore In Ita N0.931/E5ang/2012 Dated 30/04/2013, As Sought For In This Appeal.)
(Prayer: This Ita Is Filed Under Sec.260-A Of I.T. Act, 1961, Arising Out Of Order. Dated 30/04/2013 Passed In Ita N0.930/Bang/2012, For The Assessment Year 2007-08, Praying This Hon'ble Court To: I Formulate The Substantial Questions Of' Law Stated Therein, Ii. Set Aside The Appellate Order Dated 30/04/2013 Passed By The Itat, 'A Bench, Bangalore, In Appeal Proceedings Ita N0.930/Bang/2012, As Sought For In This Appeal.)
(Prayer: This Ita Is Filed Under Sec.260-A Of Income Tax Act 1961, Arising Out Of Order Dated 30/04/20 J 3 Passed In Ita No.263/Bang/2012, For The Assessment Year 2006-07, Praying This Hon'ble Court To: I. Formulate The Substantial Questions Of Law Stated Therein, Ii. Allow The Appeal And Set Aside The Order Passed By The Itat, A' Bench, Bangalore In Ita N0.263/Bang/2012 Dated 30/04/2013, As Sought For In This Appeal.)
1. These appeals are filed by the Revenue under Section 260A of the Income Tax Act, 1961 (for short 'the Act3) against the order dated 30th April 2013 made in ITA Nos.263, 930 and 931/Bang/2012 passed by the. Income Tax Appellate Tribunal, Bangalore Bench A' (for short 'the Tribunalfor the assessment years 2006-07, 2007-08 and 2008-09, whereby the Tribunal has set aside the order passed by the Commissioner of Income Tax, (Appeals)-III, Bangalore (for short 'the First Appellate Authority*), wherein the Appellate Authority by its order dated 16-12 -2011 upheld the order of Assessing Officer and hold that the respondent-assessee is not eligible for deduction under Section 80-IA(4) of the Act.
2. The brief facts of the case are as follows:
The respondent-assessee is a Private Limited Company engaged in the business of Outdoor Advertisement, Media Advertising and Development of Infrastructure. The assessee filed the return of income claiming deduction under Section 80-IA(4) of the Act, contending that the assessee-Company is involved in infrastructure development. The Assessing Authority issued notice under Section 142(2) of the Act calling upon the assessee to substantiate their claim of deduction under Section 80-IA(4) of the Act. The authorized representative of the assessee made available the records and also contended that the respondent- assessee entered into an agreement with local self- Government i.e. Bruhath Bangalore M ah an agar a Palike (for short 'the BBMF') for construction of bus shelter, erection of lamp pests, beautification of road medians, construction of the foot bridge near ISCKON temple and maintenance of the same. The expenditure incurred for the same has to be recouped by utilizing these bus shelters, lamp posts, road medians and foot bridge, for their advertisement business. Since the assessee- Company is involved in the development of infrastructure, it is entitled for deduction under Section 80-IA(4) of the Act.
2.1 The Assessing Officer after examining the matter in detail and verifying the clauses of agreement entered into between the assessee and the 6BMP was of the view that construction of bus shelters, installation and maintenance of street lights and beautification of the center road medians is for earning income by putting up the advertisement boards on the same which would not amount to infrastructure development. The work carried on by the assessee is in the nature of work contract. The income is derived by displaying advertisement hoardings on the road medians, bus shelters and light poles. Hence, the Assessing Authority by its order dated 31-12-2000 held that the assessee is not eligible to claim deduction under Section 80-IA of the Act and by its order dated 13-12-2010 and disallowed the claim of deduction of income tax.
2.2 Being aggrieved by the order passed by the Assessing Authority, the respondent-assessee preferred an appeal before the First Appellate Authority challenging the denial of deduction on various grounds. The First Appellate Authority on verification of the contentions raised by the respondent-assessee found that though the Memorandum of Association of the respondent-assessee contains provision for undertaking infrastructure development, the assessee is essentially an advertisement company and has not invested huge funds on long term construction activities. The work carried out by the respondent-assessee is not in the nature of construction work referred to in the explanation to Section 80-IA (13) of the Act. Hence, confirmed the order passed by the Assessing Authority and dismissed the appeal by its order dated 16-12-2011.
2.3 The assessee being aggrieved by the order passed by the First Appellate Authority preferred an appeal before the Tribunal. The Appellate Tribunal by its order dated 30-04-2013, allowed the appeal filed by the assessee holding that the assessee is eligible to claim deduction under Section 80-IA(4) of the Act. The Tribunal was of the view that a bus shelter without a road would be of no use and similarly a road cannot be useful without a bus shelter and road medians in between and safe for the commuters at night without proper lightmg. As per the clauses of the agreement, the assessee has the obligation not only to provide the facilities by constructing bus shelters, road medians, erecting light poles, but also to maintain the same for a particular period. Therefore, the assessee not only build, but also operate and maintain the said facilities for the stipulated period. Relying upon an unreported judgment of Kolkata Bench in the case of M/S. VANTAGE ADVERTISEMENT PRIVATE LIMITED the Tribunal allowed the appeal and held that the assessee is entitled for deduction under Section 80-IA of the Act.
2.4 Being aggrieved by the order passed by the Appellate Tribunal, the Revenue has preferred these three appeals. With the consent of the learned counsel for the parties, these appeals are taken up for final disposal at the stage of admission itself to consider the following substantial questions of law:
(i) Whether the respondent-assessee is entitled io the benefit of deduction under Section 80-JA of the Income Tax Act, 1961?
(ii) Whether the business activity of the respondent-assessee would fall within the ambit of the expression "Infrastructure Facility" as occurred in Section SO-IA of the Income Tax Act, in particular the explanation appended to sub-Section (4) thereof?
3. Sri. F. 1. Sanmathi, learned counsel appearing for the appellants submitted that the order passed by the Appellate Tribunal is contrary to law. The assessee- company entered into an agreement with the local authorities for the purpose of its business of advertising and taken up the work of construction of bus shelter, erection of light poles and beautification of the read median only for the purpose of putting up of their advertisement hoardings or to lease the space for advertisement. The income derived from the said advertisement business cannot be treated as income from the infrastructure development. Reading of some of the clauses of agreement makes it very clear that the business of the assessee will not fulfill the conditions prescribed under Section 80-IA(4) of the Act and also explanation there under. The agreement for developing, maintaining and operating is only with regard to the infrastructure facility. The infrastructure facility was defined under Section 80-IA(4) of the Act. As per the explanation to the said Section, "infrastructure facility" means:-
(a) a road including toll road, a bridge or a rail system;
(b) a highway project including housing or other activities being an integral part of highway project;
(c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system;
(d) a port, airport, inland waterway.
The agreement entered into between the assessee with the local authority will not fall Under any of the infrastructure facility enumerated under the Section. In the instant case, the assessee entered into an agreement for construction of the bus shelters, street lights, road medians and foot bridge in order to create ambience and the brand of being IT hub. The assessee has to construct the bus-shelters; beautify the roan medians and erect street lights as per the specifications for the limited period. The Corporation will not spend any money for the same. The assessee is permitted to use the said portion for the purpose of its advertising business and they can lease the said portion for advertisement. The advertisement hoardings must be as per the specifications for the period prescribed by the local authorities. The income earned from the said business cannot be treated as the income from infrastructure. He also relied upon the following judgments in support of bis contention: (1) (1999) 237 ITR 579 Commissioner of Income Tax V/s. Sterling Foods; (2) (2009) 317 ITR 218 Liberty India T//s. Commissioner of Income Tax; (3) Unreported decision of this Hon'ble High Court in ITA No.3253/2005 Disposed of on 11.8.2011; (4) (1995) 211 ITR 646 Commissioner of Income Tax V/s. Mayur Laminators; (5) (2005) 139 STC 74 State of Jharkhand and others V/s. Ambay Cements and. another; (6) (1996) 101 STC Page 1 State Level Committee and another V/s. Morgardshammar India Ltd.; (7) (1978) 41 STC 409 Polestar Electronic (Pvt.) Ltd., V/s. Additional Commissioner; Sales Tax, and another. (8) (2006) 147 STC 466 Falcon Tyres Ltd., V/s. State of Karnataka and others.
4. On the other hand, Sri.Nageshwara Rao? learned counsel appearing for the respondent-assessee argued in support of the order passed by the Tribunal and contended that the assessee is a Private Limited Company incorporated under the Companies Act. It has entered into an agreement with the local authority for infrastructure development such as construction of bus shelters, putting up of foot bridge, beautify the road medians and erecting street lights. The infrastructure facility referred to in the explanation to sub-Section (4) of Section 80-IA is inclusive definition. A road includes toll road itself suggests that the definition is inclusive definition and include everything with regard to the road, bridges or railway system. Clause (b) of the aforesaid definition wherein a highway project has been defined to mean a project including housing or other activities being an integral part of highway project. Therefore, it is important to note the words used 'including' or 'other activities' which itself bring out the intent of the legislature not to restrict the activities to the few specified field. The infrastructure facility as used in the explanation to Section 80-IA(4) of the Act is wide enough to cover entire activities of the road. The road without bus shelter is of no use. Further, without the road median, the commuter cannot use the said road safely. Without lighting facility, road cannot be used properJy. Due to the heavy traffic, construction of foot bridge is very much necessary. Hence, the construction of the bus shelter, road median, street lights and construction of the foot bridges are the part of infrastructure facility. The intention of the legislature rs very clear and wide enough to cover other activities with regard to road also fall under the definition of 'infrastructure facilities'. Hence, the assessee is entitled for deduction of its income earned under Section 80-IA(4) of the Act. In support of his contention, he relied upon the following judgments: (1) (2010) 322 ITR 323 (Bombay) Commissioner of Income Tax V/s. ABG Heavy Industries Limited; (2) (1982) 196 ITR 149 (SC) CIT V/s. Gwalior Rayon Silk Manufacturing Co. Ltd.; (3)(1983) 150 ITR 23 (KAR) Commissioner of Income-Tax, Karnataka V/s Bangalore Turf Club Limited; (4) (1997) 227 ITR 414 (SC) Gujarat Industrial Development Corporation and others V/s. CIT: (5). (1980) 126 ITR 347 (Chennai)CIT Tamil Nadu-Ill V/s. Engine Valves Ltd.; (6)(2011) 338 ITR 643 (Madras) Tamil Nadu Petro Products Ltd., V/s. Assistant Commissioner of Income Tax; (7) (1992) 196 ITR 188 (SC) Bajaj Tempo Ltd., V/s. Commissioner of Income-Tax; (8) (1989) 177 ITR 431 (SC) CIT] Amritsar V/s. Strawboard Manufacturing Co. Ltd.; (9) (1993) 206 ITR 260 (Bombay) CIT V/s. Mazagaon Dock Ltd.; (10) 237 ITR 889 (SC) UCO Bank V/s. CIT and Another Case.
5. We have carefully considered the arguments addressed by the learned counsel for the parties and perused the order impugned and the relevant records.
6. The records clearly disclose that the assessee is a Private Limited Company mainly engaged in the business of Outdoor Advertisement and Media Advertising. The assessee has entered into an agreement with BBMP on 31-03-2004, 11-07-2004 and 30-11-2004 agreeing to beautify the road median from Dairy Circle to Central Silk Board and the assessee is allowed to put up advertisement boards to recoup the expenditure incurred for beautifying the road median. Further, an agreement, was also entered into for construction of 11 bus shelters in different locations. The bus shelter shall be constructed as per the specifications and the design supplied by the BBMP. The expenditure incurred for construction of the bus shelter has to be recovered by the assessee by putting up advertisement hoardings. Further, as per the agreement dated 11-07-2004, the assessee is permitted to install and erect 199 poles providing street light in four roads and permitted to install 199 lit kiosks of 4 fL x 2 ft. (double sided) at the height of 18 feet from the road, so as to recover the expenditure incurred for putting up 199 poles. This agreement is for a limited period and the assessee has to pay the ground rent and other local taxes. Further, the assessee was also permitted to install foot bridge near ISCKON temple and to erect advertisement hoardings in order to recoup the expenditure for putting up of the said foot bridge. As per the terms and conditions imposed by the BBMP, the assessee had put up the bus shelter, beautifies the road median from Diary Circle to Central Silk Board Circle and also put up the street lights in four roads; constructed the foot bridge and erected the hoardings for its business. The agreement entered between the assessee and the BBMP, read as under:
(i) Whereas BBMP who is the absolute owner of all the footpaths and road within its jurisdiction, has in consultation with the Bangalore City Police and Bangalore Metropolitan
Transport Corporation identified a critical need to erect bus shelters. Keeping in view the aesthetic values, beautification of the city in general and commuter benefits and interest in particular and for thai purpose has formulated a scheme under which even a bus shelter could, be constructed by private parties on the terms and conditions specified therein. The party of the seconds part has approached with a proposal to erect bus shelters of the design specified, by the first party.
(ii) And whereas under a third phase the first party had intended to cause 11 bus shelters to be constructed in locations identified by it as detailed in Annexure- A. And whereas the licensee had offered to participate in the third phase and has constructed bus shelters at each of the location specified in Annexure-B in accordance with the design specifications detailed in Annexure-C.
Some of the clauses of the agreement read thus:
(1) The Licensee shall construct/erect the Bus Shelters in accordance with the specifications and design detailed in Annexure-C any deviation shall be deemed to be a material breach of this agreement.
(2) The period of license and permission granted hereunder will be for a period of 11 months starting from the date specified for completion as detailed at Clause-4.
(3) The period of completion for all the Bus Shelters in accordance with Annexure C was 60 (sixty) days from the date of this agreem ent. The completion certificate for each shelter is to be issued to the Licensee from an engineer/ team authorized by the Commissioner; Bangalore Mahanagara Palike to do so provided the construction has been in accordance with Annexure-C for adherence to design material, equipment, structure specifications.
(4) The licensee will be at liberty to utilize the advertisement space model wise as specified below and more fully described in the drawings:
Bus Shelter Mod,el A' and 'C': The Advertisement light of the licensee shall be limited to the space available on front side of the back panel, not exceeding an extent of 4' x 15' (as shown in the drawing) as also on both inside and outside faces of one side panel measuring a maximum of 6' in height and 4' in width (as shown in the drawing). The maximum advertisement space considering both back and side panel together shall not exceed 108 sqfeet at any time.
Bus Shelter Model B: The advertisement right of the licensee will be confined to the space available on front portion of the back panel of the Bus Shelter measuring a maximum of 4' x 15' (as shown in the drawing). The maximum advertisement space shall not exceed 86sq. feet ax any time
5. In addition to the License fee the Licensee shall pay all statutory tares cesses as applicable for in relation to the advertisement and or advertisement space allotted, in the Bus Shelter as detailed in clause 6.
6. The Licensee shall-
fa) Maintain the bus shelters floor; roof walls, etc., during the period of this license. in a clean, hygienic and presentable manner.
(b) Forthwith replace/ repair the Bus Shelter/s or any part thereof upon any damage, loss breakage being noticed or reported or occurring.
(c) Construct and at all times maintain the Bus Shelter/s in accordance with Annexure 'C'
(d) Maintain in a clean, hygienic and usable condition the dustbins, spittoons and other equipments, facilities provided by it at the Bus Shelters.
(f) Provide adequate lighting at the Bus Shelters so as to ensure public safety at all times.
(i) Initiate remedial action forthwith in respect of defects, deficiencies brought to its notice by Bangalore Mahanagara Palike or its authorized officials.
m) Not to use the Bus Shelters or pen nit their use for any purpose other than as a Bus Shelters.
r) Ensure that all costs of construction and maintenance of the Bus Shelters including costs of raw material, consumables salaries, expenses, electricity statutory deposits/advances, equipment installation and. replacement costs are paid and home exclusively by it.
s) Not to collect from the public and/or users of Bus Shelters any fee, charge, and amoun t for use of the Bus Shelters.
7. On expiry or termination of the license as never before stated the Bus shelter shall stand vested in Bangalore Mahanagara palike.
S. The EMD will be refunded after the satisfactory completion of the license period and handing over the Bus Shelters in good and presentable conditions to Bangalore Mahanagara Palike by the licensee.
Street Lights
1. And whereas the First Party has intended to cause street lights on 4 roads to be erected and maintained as identified by it and as detailed in Annexure-A and whereas the Licensee has submitted his proposal on 29.3.2004 for installation and erection of 199 poles of 10 meter high M.S.Tubular Poles with under ground cabling and maintenance of street lights against advertisement rights at the roads specified in Annexure-
A in accordance with the design, specifications detailed in this Agreement.
Clauses:
1. The Licensor has granted permission to the Licensee to erect and maintain the street lights against commercial advertisement at allotted locations specified in Annexure-A in accordance with the design, specifications and subject to limitations terms and conditions specified in the Agreement.
2. Licensee shall maintain the street lights on the 4 roads against commercial advertisement rights. Maintenance will include the following.
i) The lamp posts will be painted at least once in a year including numberings intimated by the First party.
ii) Replacement of fused bulbs will have to be done.
iii) Repair works will be undertaken in case of any damage.
iv) Repair/ Replacement of fixtures including chokes, switches etc., whenever required.
3. The Licensee shall provide new 250 watt mental halide bulb whenever the lights get 'Fused' on the above 4 roads mentioned. However, Licensor will provide a vehicle to change the fused lights, whenever such a demand is made.
4. The Licensee shall provide electrical 'Cutouts' at his cost on all the poles in order to isolate the problem, without disturbing bulbs on other poles.
5. The Licensee shall return all the existing fixtures available on the permitted 4 roads to the Licensor after executing the project. However, the licensee will be permitted to utilize the existing cables if in a usable condition in consultation with the First party.
6. The Licensee shall pay the electricity bills for electricity consumed for advertisement boxes while the Licensor shall pay the electricity bill for electricity consumed for the street lights.
7. The Licensor shall provide a NOC to enable the Licensor to obtain electrical power from BESCOM to illuminate the advertisement boxes.
8. The Licensee shall pay the prescribed road cutting charges to the concerned officer of BMP. The licensee shall restore footpaths to the existing condition after erection of the street poles.
9. The Licensee shall be exclusively entitled to the revenue generated by the display of commercial advertisement of the Kiosks installed in the lamp posts.
10. The completion certificate for the maintenance of street lights will be issued to the Licensee by the concerned Executive Engineer (Electrical) authorized by the Commissioner, Bangalore Mahanagara Palike.
11. On expiry of the contract the Licensee shall handover the lamp poles io Bangalore Mahanagara Palike with all fixtures including lit kiosks, etc.,
MEDIANS:
1. Whereas the Bangalore Mahanagara Palike is the absolute owner of all the medians and road within its jurisdiction. Keeping in view aesthetic values, beautification of the city in general and commuters benefits and interest in particular a scheme has been formulated under which the even medians could be beautified by private parties on Terms and Conditions specified therein:
Clauses:
1. The Licensor has granted permission to the licensee to beautify the median at allotted locations specified in Annexure - B in accordance with the designs, specifications and subject to limitations, terms and conditions specified in the agreement.
2. The Licensee shall beautify the median in accordance with the specifications and design detailed in the agreement and any deviation shall be deemed to be a material breach of this agreement.
3. The Licensee has designed the median with the following specification more fully described in agreement.
4. The Licensee is allowed to install double side, illuminated glow sign boxes of size 4'X2' at intervals of 100 feet in the median, for displaying commercial advertisements of their clients. The revenue so generated will accrue exclusively to the Licensee.
5. Licensee shall beautify the medians in consultation with the concerned Horticultural Superintendent (South) as indicated below.
Mexican grass, Bermuda grass and Shade grass, Shade grass is generally planted under fly overs.
In some places flowering shrubs should be planted to make median more colourful and attractive.
Water falls fountains and cascades with illumination shall be installed.
2 inch gauge ornamental grills of suitable height shall be installed both sides of the medians.
7. The assessee filed return of income claiming deduction under Section 80-IA(4) of the Act contending that it has constructed bus shelters, beautified the read median, put up the street lights and constructed foot bridge which is the part of the infrastructure development and is entitled for deduction under Section 80-IA(4) of the Act. Section 80-IA was enacted by the Government in order to give encouragement to the private industries who are involved in infrastructural development. The CBDT circular No.717 dated 14.08.1995, reads as under:
34.2 Industrial modernization requires a massive expansion of, and qualitative improvement in 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 utilized for developing new infrastructure.
34.3 Applying commercial principles in the operation of infrastructure facilities can provide both managerial and financial efficiency. 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 the State Government or a local authority or any other statutory authority for this pwpose. 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 has to 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."
8. Section 80 IA reads as under for the better understanding of the provision:
Section 80-IA:
(I) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-sec. (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee.
(2) ---------------(3) --------------
(4) This section applied to -
(i) any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (Hi) developing, operating and maintaining] any infrastructure facility which fulfils all the following conditions, namely:-
(a) it Is owned by a company registered in India or by a consortium of such companies [or by c.n authority or a board or a corporation or any other body established or constituted under any Centre or State Act;]
(b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (Hi) developing, operating and maintaining a new infrastructure facility;]
(c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995:
Provided that where an infrastructure facility is transferred on or after the 1st day of April, 1999 by an enterprise which developed such infrastructure facility (hereafter referred to in this section as the transferor enterprise) to another enterprise (hereafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with agreement with Central Government, State Government. local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applied and. the deduction from profits and gains luould, be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place.
[Explanation - For the purpose of this clause, 'infrastructure facility 'means-
(a) a road, including toll road, a bridge or a rail system;
(b) a highway project including housing or other activities being an integral part of the highway project;
(c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system;
(d) a port, airport, inland waterway [inland port or navigational channel in the sea];
To avail the benefit under Section 80-IA(4), the assessee has to fulfill the following conditions:
(a) the assessee must be running an eligible business of developing, operating and maintaining or operating and maintaining any infrastructure facility as defined by the Section and clarified by the circular;
(b) The assessee must have ability to transfer the facility to the Government at a future da.ie in terms of the agreement;
(c) The facility should help industrial modernization by serving to expand the infrastructure i.e. major items, such as highway, express highway, airports, port and railway system;
(d) The deduction shall be of the incomes, derived from the use of the infrastructure facilities developed.
9. Further, the "Infrastructure Facility" is defined under explanation to Section 80-IA(4) of the Act. The infrastructure facility means, a road including a toll road, a bridge or a railway system. Thus, in order to claim benefit under Section 80-IA(4) of the Act the business of the respondent-assessee is required to be that of developing an infrastructure facility and derive income from use of the said infrastructure facility developed by them.
10. In the instant case, reading of the agreement entered into by the assessee with BBMP clearly reveals that the assessee was only a licensee for putting up 11 bus shelters at various places, beautifying the road medians at Diary Circle, putting up 199 light poles in four roads; construction of the foot bridge near ISCKON temple and maintaining the same for the specified period. The assessee was permitted to erect advertisement hoardings to recoup the expenditure for putting of the same. No ownership or other right accrued to it apart from the license to earn revenue from the advertisements placed on these structures. Duration of the agreement shows that the arrangement is only for a temporary period. The income is derived only from the advertisement and not from the income from infrastructure development. The Assessing Officer after looking into the agreement entered into between the parties and taking into consideration the provision of Section 80-IA came to a conclusion that the work carried on by the assessee will not come under the "Infrastructure Development" and accordingly, denied the benefit under Section 80-IA(4) of the Act. The said order was confirmed by the First Appellate Authority. However, The Appellate Tribunal set aside the order passed by the First Appellate Authority and held that the assessee not oniy built bus shelters, road medians, street lights, but also maintained the same for a specified period as per the agreement. Hence, the infrastructure work carried out by the assessee falls under the definition of Section 80-IA(4) and entitled for deduction. The said order was questioned by the Revenue.
11. Sri.E.I.Sanmathi, learned counsel appearing for the appellants contended that the word 4income9 derived from eligible business referred to in Section 80- IA is the income derived b}^ developing, operating and maintaining a road including toll road, bridge or rail system. However, the assessee has only beautified the existing road and put up the bus shelter as per the permission granted by the BBMP for its advertisement business. The main income derived is not from construction of bus shelters it has developed, but from the advertisement. The work carried on by the assessee do not fall under the definition of infrastructure development. In other words, to claim deduction under Section 80-IA, the assessee has to earn from the activities which amount to infrastructure development which are prescribed specifically in the explanation to the aforesaid provision. Basically, the assessee is only an advertising company involved in outdoor and media advertising and it has no experience of civil construction. As per the agreement entered into between the assessee and BBMP, the said work was entrusted to the assessee in order to enhance the aesthetic beauty of the road divider, and expenditure incurred for the said work has to be recouped by erecting advertisement hoardings. By no stretch of imagination, the income derived from the advertisement hoardings can be treated as income earned from the infrastructure development. In support of his contention, he relied upon the judgments reported in (1999) 237 ITR 579 in the case of CIT v/s STERLING FOODS; (2009) 317 ITR 218 in the case of LIBERTY INDIA v/s CIT; and (2003) 263 ITR 378 in the case of PANDIAN CHEMICALS v/s COMMISSIONER OF INCOME TAX.
12. The Hon'ble Supreme Court in a judgment reported in (2005)139 STC 74 (STATE OF JHARKHAND AND OTHERS v/s AMBAY CEMENTS AND ANOTHER) held that the exemption clause should be strictly construed and if the conditions under which the exemption granted is violated or changed on account of any subsequent event, the exemption would not operate. Para 24 of the judgment reads as under:
"In our view, an. exception or an exempting provision in a taxing statute should be construed strictly and it is not open to the court to ignore the conditions prescribed in the industrial policy and tne exemption notifications.
In our view, the failure to comply with the requirements renders the writ petition filedI by the respondent liable to be dismissed.
While mandatory rule must be strictly observed, substantial compliance might suffice in the case of a directory rule.
Whenever statute prescribes that a particular act is to be done in a particular manner and also lays down that failure to comply with the said requirement leads to severe consequences, such requirement would be mandatory. It is the cardinal rule of the interpretation that where a statute provides that a particular thing should be done, it should be done in the manner prescribed and not in any other way. It also well settled rule of interpretation that where a statute is penal in character, it must be strictly construed and followed".
13. In the instant case, the exemption under Section 80-IA is subject to fulfillment of Section 80-IA(4). The 'infrastructure facility' has been explained in the explanation. It applies to a road including the toll road or a bridge. That infrastructure facility is of permanent in nature and not temporary construction of bus- shelters, beautification of road median and erection of light poles and temporary construction of foot bridge.
14. The Guahati High Court in a judgment reported in (1978) 41 STC 408 (THE ASSISTANT COMMISSIONER OF TAXES AND ANOTHER v/s RANGLAL RAMESWAR SARAUGI) while interpreting the sales tax statute held that when the court is construing a statutory enactment, the intention of the legislature should be gathered from the language used by it and it is not permissible for the court to speculate about the legislature intent. If the language of statue is clear and
explicit effect must be given to it. The relevant paragraph of the judgment reads as under:
"A statutory enactment must ordinarily be construed according to the plain natural meaning of its language a.nd no words should be added, altered or modified unless it is plainly necessary to do so in order to prevent a provision from being unintelligible, absurd, unreasonable, unworkable or totally irreconcilable with the rest of the statutes. This rule of literal construction is firmly established and it has received judicial recognition in. numerous cases.
Where there are two expressions which might have used to convey a certain intention, but one of those expressions will convey that intention more clearly than other, it is proper to conclude that, if the legislature use that one of the two expressions which would convey the intention less clearly, it does not intend to convey that intention at all. If the language of a statute is clear and explicit, court must give effect to that."
15. In a judgment reported in (1995) 211 ITR 646 (Rajasthan) in the case of COMMISSIONER OF INCOME-TAX v/s MAYUR LAMINA TORS, the Rajasthan High Court held as under:
"The burden is on the assessee when a deduction is claimed by him to prove that he is entitled to the said deduction. The object of Section 80J of the Income Tax Act may be for the industrial growth, but the relief can be given only when the assessee falls within the four corners of law. On an interpretation which is not supported by law, the scope of this Section cannot be enlarged. The assessee cannot be entitled to the relief in accordance with ths Section and if the assessee does not fall within the purview of the exemption, then for the purpose of beneficent legislation, the extended meaning cannot be given.
16. To avail the benefit under Section 80-IA i.e. infrastructure facility under which the enterprises shall carry on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfill the conditions enumerated under sub-Section 4 of Section 80-IA of the Act. From the reading of some of the clauses of the agreement entered into, in the instant case, between the assessee and the BBMP, it is very clear that the assessee has to beautify the road medians of existing roads and put up hi-tech bus-shelters using the modern techniques and material for construction of bus-shelters which in any case cannot be treated as erection/development of permanent infrastructure. At the most, it can be treated as a temporary structure which can be either removed or shifted without any difficulty and hassle. Development of such temporary structure cannot be termed or treated as permanent infrastructure development as contemplated by Section 80-IA of the Act. The explanation of Section 80-IA make it clear, what infrastructure facility means. In the present case the assessee for erecting bus shelters has to deposit EMD amount with the BBMP and only after expiry ot term of lease, EMD amount will be refunded. One of the requirements of the infrastructure facility is that income has to be derived from the infrastructure developed by the developer. In the instant case, the BBMP imposed a condition that the assessee shall not collect any money from the user of the bus shelters as well as the foot bridge. There is no income from the development of infrastructure apart from income from the advertisement business.
17. On the other hand, Sri.Nageshwar Rao, learned counsel appearing for the assessee contended that the explanation clause of Section 80-IA of the Act is that "a road including toll road" which itself suggests that the definition is inclusive and not exclusive definition. The word used is "including" or "other activities" itself brings out the intention of the legislation to not to restrict the activities to a few specified field. The legislature do not intend to narrow down the meaning of "infrastructure facilitt/' as used in the explanation to Section 80-IA(4) of the Act, The legislature has intended to give benefit under Section 80-IA to the activities carried on in relation to road including toll road, bridge or railway system. The road shall not be treated as toll road alone, it may be a road within the city of Municipal Corporation. The intention of the legislature while defining the term "infrastructure facility' is not to narrow down the scope of benefit granted under the Section and to grant it even to a developer, like the assessee who is bonafidefy involved in development, operation and maintenance of structures like bus shelters, which would not fail in the category of 'infrastructure facility as contemplated by Section 80-IA of the Act. The assessee. in the present cases, has developed bus shelters on the road, beautified the road divider, put up street lights and maintained the same as per the agreement entered into between the parties. Thereafter, handed over the same to BBMP. Hence, the activities carried on by the assessee has to be treated as development and not infrastructure facility as contemplated by the explanation of Section 80-IA of the Act. In (2010) 322 ITR 323 (THE COMMISSIONER OF INCOME TAX v/s ABG HEAVY INDUSTRIES LIMITED), the supply and installation of Crane in a Port was included within the purview of expression "infrastructure facility.
18. It is relevant to note that Central Board of Direct Taxes in its Circular No.793 dated 23-06-2000, on the representation received with regard to the definition of "Port' as infrastructure facility clarified as under:
"The Board has considered the matter and it has decided that such structure ivill he included in the de finition of the "Port" for the purpose of Section 10!23(Guarantor) and 80-IA for the Incorrte Tax Act, 196J if the following conditions are fulfilled:
(a) The concerned Port Authority has issued a certificate to. that the said structure form port of the Port and
(b) Such structure have been built under BOT and BOLT scheme 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.
Hence, the judgments relied upon by the learned counsel for the assessee referred to above is not applicable to the facts of the present case.
19. It was further contended on behalf of the assessee that a provision in taxing statute granting incentives for promoting growth and development should be construed liberally, relying upon the judgment reported in (1992) 196 ITR 188 (SC) (BAJAJ TEMPO LIMITED v/s COMMISSIONER OF INCOME-TAX) The relevant paragraph read thus:
"Denying benefit to such undertaking could not have been intended when the very purpose of Section 15C was to encourage industrialization. It was for this reason that various High Courts evolved the test of commercial expediency or substantial involvement valued in terms of money etc., to interpret this clause. Adopting a literal construction in such cases would have resulted in defeating the very purpose of Seciion 15C. Therefore, it becomes necessary to resort to a construction which is reasonable and purposive to make such provision meaningful.
This contention of the respondent-assessee cannot be acceptable. The benefit under Section 15C of the Act cannot be compared with the benefit under Section 80-IA(4) of the Act. Under Section 80 IA(4), the Government of India in order to encourage the Private Sectors to participate in the development of infrastructure has given benefit under the said scheme, the private entrepreneur has to develop, operate and maintain the said infrastructure. The income derived from the said infrastructure is only exempted under Section 80-lA(4) of the Act. The judgment relied upon by the assessee is not applicable to the present case.
20. On careful examination of facts before us, we find that the assessee in the present cases though has erected bus shelters, beautified the road median, erected street lights and foot bridge in the specified place as per the specifications and erected advertisement hoardings for earning income from the said advertising business, it cannot be treated as infrastructure facility as explained in the explanation of Section 80-IA of the Act. It was not an engineering or construction company that puts up public infrastructure. The assessee, which, eventually is an advertising company, is interested only to find out the best space at the best locations for advertisements. The assessee does not claim that he has any experience of raising/erecting infrastructure facility as contemplated by the explanation of Section 80-IA of the Act. Thus the activities indulged by the assessee are part of its normal activities of advertising and publicity rather than one of infrastructure development. The business activities of the assessee do not involve (a) Development (b) Operating; and (c) Maintenance. For the purpose of its business, the assessee has taken up erection,/construction of bus shelter for its advertisement business. The circular issued by the CDDT makes it clear that the income eligible for deduction has to be arisen from the use of facility, for example, collection of toll from the road users. The said income has to be treated as income derived from the infrastructure facility. In the instant case, the assessee derives income only from the advertisement hoardings erected on the bus shelters, road medians and the street light poles. Hence, the said income cannct be treated as income derived from the "infrastructure facility. The income earned by the assessee do not fall under Section 80-IA(4). We find that the order passed by the Tribunal is contrary to the intendment of the Act. The benefit under Section 80-IA can be extended only to those assessees who have developed infrastructure facility as defined under sub-Section (4) of Section 80- IA. In the instant case, the assessee has not developed road or a toll road, bridge, highway or a rail system. However, it has developed the existing road median, erected bus shelters and light poles for its advertisement business, which, in any case cannot be treated as infrastructure development. The order passed by the Tribunal cannot be sustainable. The judgment relied upon by the assessee is not applicable to the facts of the present case. Accordingly, the questions of law in these appeals are held in favour of the Revenue and against the assessee. Hence, we pass the following:
ORDER
All the three appeals are allowed. The order passed by the Tribunal is set aside and the order passed by the authorities below are up held.