ita 455-13-28-02-2014

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IN THE HIGH COURT OF KARNATAKA AT BANGALORE

DATED THIS THE 28 TH

DAY OF FEBRUARY 2014

PRESENT

THE HON'BLE MR.JUSTICE DILIP B.BHOSALE

AND

THE HON'BLE MR.JUSTICE B.MANOHAR

ITA NO.455/2013C/W.ITA.NO.454/2013 & ITA.NO.453/2013

ITA.NO.455/2013

BETWEEN:

1. COMMISSIONER OF INCOME TAX-IIIREVENUE BUILDINGS,

QUEENS ROAD,BANGALORE – 560 001.

2. THE DEPUTY COMMISSIONER OFINCOME TAX, CIRCLE 12(3),BANGALORE. ... APPELLANTS

(BY SRI.SANMATHI.E.I, ADVOCATE)

AND:

M/S SKYLINE ADVERTISING PVT. LTD,BANGALORE. ... RESPONDENT

®

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(BY SRI.NAGESHWAR RAO, FOR PDS LEGAL, ADV)

THIS ITA IS FILED UNDER SEC.260-A OFINCOME TAX ACT 1961, ARISING OUT OF ORDERDATED 30/04/2013 PASSED IN ITANO.931/BANG/2012, FOR THE ASSESSMENT YEAR2008-09, PRAYING THIS HON'BLE COURT TO:

I. FORMULATE THE SUBSTANTIALQUESTIONS OF LAW STATED THEREIN,

II. SET ASIDE THE ORDER PASSED BY THE

ITAT, 'A' BENCH, BANGALORE IN ITANO.931/BANG/2012 DATED 30/04/2013,AS SOUGHT FOR IN THIS APPEAL.

ITA NO.454/2013

BETWEEN

1. COMMISSIONER OF INCOME TAX-III

REVENUE BUILDINGSQUEENS ROAD,BANGALORE – 560 001.

2. THE DEPUTY COMMISSIONER OFINCOME TAX,CIRCLE 12 (3)BANGALORE. ... APPELLANTS


AND

M/S SKYLINE ADVERTISING PVT. LTDBANGALORE. ... RESPONDENT

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THIS ITA IS FILED UNDER SEC.260-A OF I.T.ACT, 1961, ARISING OUT OF ORDER DATED30/04/2013 PASSED IN ITA NO.930/BANG/2012, FOR

THE ASSESSMENT YEAR 2007-08, PRAYING THISHON'BLE COURT TO:

I FORMULATE THE SUBSTANTIALQUESTIONS OF LAW STATED THEREIN,

II. SET ASIDE THE APPELLATE ORDERDATED 30/04/2013 PASSED BY THE ITAT,'A' BENCH, BANGALORE, IN APPEALPROCEEDINGS ITA NO.930/BANG/2012,AS SOUGHT FOR IN THIS APPEAL.

ITA NO.453/2013

BETWEEN

1. COMMISSIONER OF INCOME TAX-IIIREVENUE BUILDINGS,QUEENS ROAD,BANGALORE

2. THE DEPUTY COMMISSIONER OFINCOME TAX, CIRCLE 12(3),

BANGALORE ... APPELLANTS


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AND

M/S SKYLINE ADVERTISINGPVT. LTD,BANGALORE. ... RESPONDENT


THIS ITA IS FILED UNDER SEC.260-A OFINCOME TAX ACT 1961, ARISING OUT OF ORDERDATED 30/04/2013 PASSED IN ITANO.263/BANG/2012, FOR THE ASSESSMENT YEAR

2006-07, PRAYING THIS HON'BLE COURT TO:

I. FORMULATE THE SUBSTANTIALQUESTIONS OF LAW STATED THEREIN,

II. ALLOW THE APPEAL AND SET ASIDE THEORDER PASSED BY THE ITAT, 'A' BENCH,BANGALORE IN ITA NO.263/BANG/2012DATED 30/04/2013, AS SOUGHT FOR IN

THIS APPEAL.

THESE APPEALS ARE HAVING BEEN HEARDAND RESERVED FOR PRONOUNCEMENT OF

JUDGMENT THIS DAY, B.MANOHAR J., DELIVERED THE FOLLOWING:-

J U D G M E N T

These appeals are filed by the Revenue under

Section 260A of the Income Tax Act, 1961 (for short ‘the

Act’ ) against the order dated 30th April 2013 made in

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ITA Nos.263, 930 and 931/Bang/2012 passed by the

Income Tax Appellate Tribunal, Bangalore Bench ‘A’ (for

short ‘the Tribunal’ ) for the assessment years 2006-07,

2007-08 & 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 held 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

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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 Mahanagara Palike

(for short ‘the BBMP’) for construction of bus shelter,

erection of lamp posts, 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.

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2.1 The Assessing Officer after examining the matter

in detail and verifying the clauses of agreement entered

into between the assessee and the BBMP 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

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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

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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 lighting. 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.

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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 isentitled to the benefit of deductionunder Section 80-IA of the Income TaxAct, 1961?

(ii) Whether the business activity of therespondent-assessee would fall withinthe ambit of the expression“Infrastructure Facility” as occurred inSection 80-IA of the Income Tax Act, in

particular the explanation appended tosub-Section (4) thereof?

3. Sri.E.I.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,

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erection of light poles and beautification of the road

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 arail system;

(b)

a highway project including housing orother activities being an integral part ofhighway project;

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(c) a water supply project, water treatmentsystem, irrigation project, sanitation and

sewerage system or solid wastemanagement 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

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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 his contention: ( 1) (1999) 237

ITR 579 Commissioner of Income Tax V/s. Sterling Foods;

( 2) (2009) 317 ITR 218 Liberty India V/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.

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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

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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-III 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.

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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

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four roads and permitted to install 199 lit kiosks of 4 ft.

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 absoluteowner of all the footpaths and roadwithin its jurisdiction, has inconsultation with the Bangalore CityPolice and Bangalore Metropolitan

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Transport Corporation identified acritical need to erect bus shelters.

Keeping in view the aesthetic values,beautification of the city in general andcommuter benefits and interest in

particular and for that purpose has formulated a scheme under which evena bus shelter could be constructed by

private parties on the terms andconditions specified therein. The partyof the second part has approached witha 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 busshelters to be constructed in locationsidentified by it as detailed in Annexure- A. And whereas the licensee hadoffered to participate in the third phaseand has constructed bus shelters ateach of the location specified in

Annexure-B in accordance with thedesign specifications detailed inAnnexure-C.

Some of the clauses of the agreement read thus:

(1) The Licensee shall construct/erect the BusShelters in accordance with the specificationsand design detailed in Annexure-C any deviation

shall be deemed to be a material breach of thisagreement.

(2) The period of license and permission grantedhereunder will be for a period of 11 months

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drawing). The maximum advertisementspace shall not exceed 86sq. feet at any

time

5. In addition to the License fee the Licenseeshall pay all statutory taxes cesses asapplicable for in relation to the advertisementand or advertisement space allotted in the BusShelter as detailed in clause 6.

6. The Licensee shall-

(a) Maintain the bus shelters floor, roof,walls, etc., during the period of thislicense, in a clean, hygienic and

presentable manner.

(b) Forthwith replace/repair the BusShelter/s or any part thereof upon anydamage, loss breakage being noticed orreported or occurring.

(c) Construct and at all times maintainthe Bus Shelter/s in accordance withAnnexure ‘C’

(d) Maintain in a clean, hygienic andusable condition the dustbins, spittoonsand other equipments, facilities providedby it at the Bus Shelters.

(f) Provide adequate lighting at the Bus

Shelters so as to ensure public safety atall times.

(i) Initiate remedial action forthwith inrespect of defects, deficiencies brought to

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its notice by Bangalore MahanagaraPalike or its authorized officials.

m) Not to use the Bus Shelters or permittheir use for any purpose other than as aBus Shelters.

r) Ensure that all costs of constructionand maintenance of the Bus Sheltersincluding costs of raw material,consumables, salaries, expenses,electricity statutory deposits/advances,

equipment installation and replacementcosts are paid and borne exclusively byit.

s) Not to collect from the public and/orusers of Bus Shelters any fee, charge,and amount for use of the Bus Shelters.

7. On expiry or termination of the license asnever before stated the Bus shelter shall stand

vested in Bangalore Mahanagara palike.

8. The EMD will be refunded after thesatisfactory completion of the license period andhanding over the Bus Shelters in good and

presentable conditions to BangaloreMahanagara Palike by the licensee.

Street Lights

1. And whereas the First Party has intended tocause street lights on 4 roads to be erected andmaintained as identified by it and as detailed inAnnexure-A and whereas the Licensee has

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submitted his proposal on 29.3.2004 forinstallation and erection of 199 poles of 10 meter

high M.S.Tubular Poles with under groundcabling and maintenance of street lights againstadvertisement rights at the roads specified inAnnexure-A in accordance with the design specificationsdetailed in this Agreement.

Clauses:

1.

The Licensor has granted permission tothe Licensee to erect and maintain the streetlights against commercial advertisement atallotted locations specified in Annexure-A inaccordance with the design, specifications andsubject to limitations terms and conditionsspecified in the Agreement.

2. Licensee shall maintain the street lightson the 4 roads against commercial

advertisement rights. Maintenance will includethe following.

i) The lamp posts will be painted at leastonce in a year including numberingsintimated by the First party.

ii) Replacement of fused bulbs will have tobe done.

iii) Repair works will be undertaken in caseof any damage.

iv) Repair/Replacement of fixtures includingchokes, switches etc., whenever required.

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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 fusedlights, 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 theLicensor after executing the project. However, thelicensee will be permitted to utilize the existingcables if in a usable condition in consultation withthe First party.

6. The Licensee shall pay the electricity bills forelectricity consumed for advertisement boxeswhile the Licensor shall pay the electricity bill for

electricity consumed for the street lights.

7. The Licensor shall provide a NOC to enable theLicensor to obtain electrical power from BESCOMto illuminate the advertisement boxes.

8. The Licensee shall pay the prescribed roadcutting charges to the concerned officer of BMP.The licensee shall restore footpaths to the existingcondition after erection of the street poles.

9. The Licensee shall be exclusively entitled to therevenue generated by the display of commercialadvertisement of the Kiosks installed in the lamp

posts.

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be deemed to be a material breach of thisagreement.

3. The Licensee has designed the medianwith the following specification more fullydescribed in agreement.

4. The Licensee is allowed to install doubleside, illuminated glow sign boxes of size 4’X2’ atintervals of 100 feet in the median, for displayingcommercial advertisements of their clients. Therevenue so generated will accrue exclusively to

the Licensee.5. Licensee shall beautify the medians inconsultation with the concerned HorticulturalSuperintendent (South) as indicated below.

* Mexican grass, Bermuda grass andShade grass, Shade grass is generally

planted under fly overs.

* In some places flowering shrubs should

be planted to make median more colourfuland attractive.

* Water falls fountains and cascades withillumination shall be installed.

* 2 inch gauge ornamental grills of suitableheight shall be installed both sides of themedians.

7. The assessee filed return of income claiming

deduction under Section 80-IA(4) of the Act contending

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that it has constructed bus shelters, beautified the road

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 amassive expansion of, and qualitativeimprovement in infrastructure. Our country isvery deficient in infrastructure such as

expressways, highways, airports, ports andrapid urban rail transport systems.Additional resources are needed to fulfill therequirements of the country within areasonable time frame. In many countries theBOT (build-operate-transfer) or the BOOT(build-own-operate-transfer) concepts havebeen utilized for developing newinfrastructure.

34.3 Applying commercial principles in theoperation of infrastructure facilities can provide both managerial and financialefficiency. In view of this, a ten-yearconcession including a five-year tax holiday

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provisions of this section, be allowed, in computingthe 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(iii) developing, operating and maintaining] any

infrastructure facility which fulfils all the following conditions, namely:-

(a) it is owned by a company registeredin India or by a consortium of such companies[or by an authority or a board or a corporationor any other body established or constitutedunder any Centre or State Act;]

(b) it has entered into an agreement

with the Central Government or a StateGovernment or a local authority or any otherstatutory body for (i) developing or (ii)operating and maintaining or (iii) developing,operating and maintaining a newinfrastructure facility;]

(c) it has started or starts operating andmaintaining the infrastructure facility on orafter the 1st day of April, 1995:

Provided that where an infrastructure facilityis transferred on or after the 1st day of April,1999 by an enterprise which developed suchinfrastructure facility (hereafter referred to in

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this section as the transferor enterprise) toanother enterprise (hereafter in this section

referred to as the transferee enterprise) forthe purpose of operating and maintaining theinfrastructure facility on its behalf inaccordance with agreement with CentralGovernment, State Government, localauthority or statutory body, the provisions ofthis section shall apply to the transfereeenterprise as if it were the enterprise to whichthis clause applied and the deduction from

profits and gains would be available to such

transferee enterprise for the unexpired periodduring which the transferor enterprise wouldhave been entitled to the deduction, if thetransfer had not taken place.

[Explanation – For the purpose of this clause,‘infrastructure facility ‘means-

(a) a road including toll road, a bridge ora rail system;

(b) a highway project including housingor other activities being an integral

part of the highway project;

(c) a water supply project, water treatmentsystem, irrigation project, sanitationand sewerage system or solid wastemanagement system;

(d) a port, airport, inland waterway [inland port or navigational channel in the sea];

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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

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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 only 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.

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11. Sri.E.I.Sanmathi, learned counsel appearing for

the appellants contended that the word ‘ income’

derived from eligible business referred to in Section 80-

IA is the income derived by 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

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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

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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 anexempting provision in a taxing statute should

be construed strictly and it is not open to thecourt to ignore the conditions prescribed in theindustrial policy and the exemptionnotifications.

In our view, the failure to comply withthe requirements renders the writ petition

filed by the respondent liable to be dismissed.While mandatory rule must be strictlyobserved, substantial compliance mightsuffice in the case of a directory rule.

Whenever statute prescribes that a particular act is to be done in a particularmanner and also lays down that failure tocomply with the said requirement leads tosevere consequences, such requirementwould be mandatory. It is the cardinal rule ofthe interpretation that where a statute

provides that a particular thing should bedone, it should be done in the manner

prescribed and not in any other way. It alsowell settled rule of interpretation that wherea statute is penal in character, it must bestrictly construed and followed”.

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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

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explicit effect must be given to it. The relevant

paragraph of the judgment reads as under:

“A statutory enactment must ordinarilybe construed according to the plain naturalmeaning of its language and no words shouldbe added, altered or modified unless it is

plainly necessary to do so in order to preventa provision from being unintelligible, absurd,unreasonable, unworkable or totallyirreconcilable with the rest of the statutes.This rule of literal construction is firmlyestablished and it has received judicialrecognition in numerous cases.

Where there are two expressions which

might have used to convey a certain intention,but one of those expressions will convey thatintention more clearly than other, it is properto conclude that, if the legislature use that oneof the two expressions which would convey

the intention less clearly, it does not intend toconvey that intention at all. If the language ofa statute is clear and explicit, court must giveeffect to that.”

15. In a judgment reported in (1995) 211 ITR 646

(Rajasthan) in the case of COMMISSIONER OF

INCOME-TAX v/s MAYUR LAMINATORS, the Rajasthan

High Court held as under:

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“The burden is on the assessee when adeduction is claimed by him to prove that he

is entitled to the said deduction. The object ofSection 80J of the Income Tax Act may be forthe industrial growth, but the relief can begiven only when the assessee falls within the

four corners of law. On an interpretationwhich is not supported by law, the scope ofthis Section cannot be enlarged. Theassessee cannot be entitled to the relief inaccordance with this Section and if theassessee does not fall within the purview of

the exemption, then for the purpose ofbeneficent legislation, the extended meaningcannot 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

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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 bonafidely involved in development,

operation and maintenance of structures like bus

shelters, which would not fall 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

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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 ithas decided that such structure will be includedin the definition of the “Port” for the purpose ofSection 10(23(Guarantor) and 80-IA for theIncome Tax Act, 1961 if the following conditionsare fulfilled:

(a) The concerned Port Authority has issueda certificate to that the said structure form

part of the Port and

(b) Such structure have been built underBOT and BOLT scheme and there is anagreement that the same would betransferred to the said authority on the expiryof 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.

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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 undertakingcould not have been intended when the very

purpose of Section 15C was to encourageindustrialization. It was for this reason thatvarious High Courts evolved the test ofcommercial expediency or substantialinvolvement valued in terms of money etc., to

interpret this clause. Adopting a literalconstruction in such cases would haveresulted in defeating the very purpose ofSection 15C. Therefore, it becomes necessaryto resort to a construction which is reasonableand purposive to make such provisionmeaningful.

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

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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-IA(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

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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

CBDT 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

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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 cannot 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

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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.

Sd/-

JUDGE

Sd/-JUDGE

mpk/-*

ita 455-13-28-02-2014

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