Section 80IA Deduction Allowable On Port Infrastructure Development: Calcutta High Court

The Calcutta High Court while upholding the order of Income Tax Appellate Tribunal (ITAT) held that section 80IA Deduction under of the Income Tax Act is allowable on port infrastructure development.

The bench of Chief Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya has observed that the benefit of deduction provided for under Section 80IA(4) of the Act is for a beneficial purpose, the purpose being to promote industrial undertakings or enterprises engaged in infrastructural developments etc. Therefore, the interpretation to be given to the said provision should advance the object for which the provision was introduced and not to frustrate it. 

Background

The appellant/department has challenged the order passed by the tribunal setting aside the disallowance of deduction claimed under Section 80IA(4) of the Income Tax Act, 1961.

The Government of Andhra Pradesh entered into an agreement with Kakinada Sea Port Limited (KSPL) by concession agreement for operation of existing berths, develop and operate one more berth and operation, maintenance and management of common facilities of the entire port through private participation. KSPL was appointed as a nodal agency by AP to take over the existing port and also develop, operate and maintain further infrastructural facilities including new berths. 

The government entered into a supplementary agreement giving permission to KSPL to develop a new berth, accordingly the berth was developed by KSPL. KSPL entered into an agreement with the assessee for the development of Mechanised Port Handling System for unloading and rail dispatch in Kakinada Deep Water Port at berth and its backup area.

On an application made by the assessee to the customs authorities, the Commissioner of Central Excise, Customs and Service Tax, Visakhapatnam granted permission for construction and operation of Mechanised Port Handling System. After receiving the due permission, the assessee developed the aforementioned infrastructural facilities. 

A certificate was issued by the port officer, Port Department, Government of AP stating that the 8 MMTPA Mechanised Port Handling System is an infrastructural facility and a part of Kakinada Deep Water Port, Kakinada. 

The assessee having developed the new infrastructural facility, maintained and operated it, claimed deduction under Section 80IA(iv) of the Income Tax Act for both the assessment years. To be noted that in terms of Clause 9 of the concession agreement between AP and KSPL, the coal terminal will be taken over by Andhra Pradesh at the expiry of the concession period. To the effect a letter was given by the KSPL which was signed and acknowledged by the assessee.

The assessing officer by order passed under Section 92CD(3) of the Income Tax Act, disallowed the deduction claimed under Section 80IA(4) of the Act. The assessee moved the Dispute Resolution Panel (DRP) contending that the assessing officer erred in not considering that the assessee had produced the Port certificate granted by the specified authority which certified that the infrastructural facility developed by the assessee is an integral part of the port and the port certificate in itself would amount to agreement with Government by satisfying the condition prescribed in clause (b) of Section 80IA(4)(1). 

The assessee contended that the assessing officer erred in denying the benefit under Section 80IA(4) by observing that the assessee does not have any agreement which specified authority without appreciating the facts that the agreement entered into by the assessee with KSPL was as per the parent concession agreement between KSPL and AP and with the knowledge of the Government of AP. Therefore the assessee cannot be denied deduction under Section 80IA(4).

The issue raised was whether the assessee satisfies the conditions prescribed in clause (b) of Section 80IA(4) of the Income Tax Act.

The benefit of deduction provided for under Section 80IA(4) of the Act is for a beneficial purpose, the purpose being to promote industrial undertakings or enterprises engaged in infrastructural developments etc. Therefore, the interpretation to be given to the said provision should advance the object for which the provision was introduced and not to frustrate it. 

The tribunal allowed the appeal filed by the assessee.

Read More: NO ADDITION IS PERMISSIBLE UNABATED ASSESSMENTS UNLESS BASED ON INCRIMINATING MATERIAL: ITAT

Relevant Provisions – Section 80IA Deduction

Clause (b) of Section 80IA(4) would apply to any enterprise carrying on the business of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility which fulfils all the following conditions namely, it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for developing or operating and maintaining or developing, operating and maintaining a new infrastructure facility.

In the explanation under the said provision, the “infrastructural facility” would cannote a port, airport, inland water base, inland port or navigational channel in the sea as per clause (d) in the explanation. It is not in dispute that the assessee fulfils the condition in clause (a) of Section 80IA(4)(i) as it is a company registered in India.

Arguments

The department contended that the court is to see the words of the statute and not the spirit and no inference and no analogy can be drawn. The court cannot import anything while interpreting the revenue statute. There is no presumption of tax; nothing is to be read in; nothing is to be implied in; and one can only look at the language used. Equitable considerations are wholly out of place while dealing with taxing statute and the words are to be taken as it stands. There is no equity in fiscal statute. The intentions of the legislature are to be primarily gathered from the words used in the statute. Tax and equity is a stranger. 

The department stated that there is no scope of equity in the fiscal legislature. Taxing statute should be interpreted in accordance with its ordinary and natural being and so called equitable construction is not permissible. Fiscal legislature should be interpreted in accordance with the strict rules of interpretation.

Conclusion

The court held that the tribunal was fully justified in allowing the assessee’s appeal and the impugned order does not call for any interference.

FAQs

Case Details

Case Title: Principal Commissioner Of Income Tax – 1, Kolkata Versus Bothra Shipping Services Private Limited

Case No.: ITAT/85/2024

Date: 25.09.2024

Counsel For Petitioner: Tilak Mitra

Counsel For Respondent: J.P. Khaitan

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