Jaypee Infratech Ltd. v. CIT - Taxpublishers.in

SUBSCRIBE FOR FULL CONTENT


The Tax PublishersIT Appeal No. 3339 (Delhi) of 2014 2015 TaxPub(DT) 2380 (Del-Trib) : (2015) 173 TTJ 0137 : (2015) 125 DTR 0055 Jaypee Infratech Ltd. v. CIT INCOME TAX ACT, 1961 --Statute--InterpretationTaxing provisions--Main controversy revolves around the fact that the assessee claimed deduction under section 80-IA(4) on the basis that as per concession agreement between the TEA and the assessee company, the assessee developed 'infrastructural facility' as per clause (a) of Explanation to section 80-IA(4)(i), which was granted by the AO. Subsequently, the CIT, Noida issued notice under section 263 on the contention that the claim of the assessee does not fall in clause (a) of Explanation to section 80-IA(4)(i) and the AO passed an assessment order which was not only erroneous but also prejudicial to the interest of the revenue and he rejected the objections and submissions of the assessee company and directed the AO to frame afresh de novo assessment by passing the impugned order. *Held:* In view of foregoing discussion, the court is of the considered view that the beneficial taxation provisions deserve a liberal interpretation which actually subserve the very purpose and object of the legislation and does not defeat or frustrate the same as has been held in several decisions and orders of Supreme Court and High Court including decision in the case of Apex Court in the case of CIT v. Vatika Township Ltd. 367 ITR 466 (SC). Statutory provision should be interpreted in the light of intention of legislation, heading given to the provision, language used therein and the context in which the particular proviso of the Act requires interpretation. [Para 71] The provisions of section 80-IA is related to the deduction in respect of profits and gains from enterprises engaged in infrastructure development, etc. Further, it is noted that as per language used therein sub-section (1) grants deduction in respect of any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) thereof, under sub-section (2) the admissible deduction is 100% of the profits and gains of eligible business for ten (10) consecutive assessment years (AY) out of twenty (20) assessment years, beginning with the assessment year in which such undertaking or enterprise develops and begins to operate any infrastructure facility referred in clause (iii) of sub-section (4). [Para 72] If this court considers the object of legislation, then as this court has noted earlier that as per the heading given to the provision of section 80-IA of the Act, the object of legislation is to provide deduction to the enterprises which are engaged in infrastructure development etc. It means that the infrastructure development is the main object of this provision to encourage entrepreneurs to put their resources and endeavours towards infrastructure development. In sub-section (2), the words “develops and begins to operate any infrastructure facility” have been used. It is also noted that explaining the first and second condition or eligibility of deduction is prescribed in clauses (a) and (b) to sub-section (4)(i). [Para 74] Noticeably, sub-section (4)(i) mandates that any Enterprise carrying on the business of (i) development or (ii) operating and maintaining or (iii) developing, operating and maintaining any new infrastructure facility will be entitled for deduction explaining the third condition for eligibility of deduction, whereas in clause (c) to sub-section (4)(i) it has been prescribed that the enterprise would be eligible for deduction when it started or starts operating and maintaining the infrastructure facility on or after 1st day of April 1995. [Para 75] The development is a continuous process which starts from the date of commencement of business and beginning of the development activities and comes to an end when development work concludes and thereafter operation and maintenance thereto is started. When the intention of legislation is that the entrepreneurs should be encouraged and promoted towards infrastructure development, etc., then it is a positive inference that the legislation intended to grant deduction for the enterprises which only develops or which operates and maintains or which develops, operate and maintain infrastructure facility. Tribunal's aforesaid view also finds support from proviso to sub clause (c) to section 80-IA(4)(i) of the Act, wherein it is also provided that if developer of an infrastructure facility transfers the same, then the transferee enterprise would also be eligible for deduction as if it were the enterprise to which this clause (c) applies, i.e., transferor enterprise, meaning thereby the enterprise which only develops infrastructure facility is eligible for deduction and in case developer transfers the facility for operation or maintenance to another enterprise then the transferee would also be eligible to deduction for the remaining or unexpired period as per sub section (2) or other relevant provisions of the Act. Hence, in view of above discussion. [Para 76] If the intention of legislation was the deduction would be allowed only to the enterprise who develops and begins to operate and maintain infrastructure facility then it was not required to segregate or mandate the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining as stipulated in sub section (4)(i) and condition (a) and (b) thereto. This interpretation also finds support from proviso to sub-clause, (c) i.e., third condition wherein the transferee of infrastructure facility is also held to be eligible in the same manner in which the transferor which developed such infrastructure facility, is eli-gible for the remaining or unexpired period of deduction. In this situation, we may safely infer or draw a conclusion that the intention of the legislation is to grant deduction not only to an enterprise which de-velops, operates and maintains but also to an enterprise which only develop infrastructure facility. Therefore, decline to acceptance interpretation of section 80-IA as given by CIT-DR in her written submissions placed during arguments. [Para 77] Tribunal further consider the contention of the AR that the company started and began to operate its business activities from 5-4-2007 and irrespective of the fact that the infrastructure facility was formally inaugurated by the Chief Minister of UP Government on 9-8-2012, the assessee is eligible for deduction with effect from assessment year 2009-10 (relevant to Financial Year 2008-09) and onwards as and when business activities of developing infrastructure has begun, then income derived from business would be certainly eligible for deduction. AR has also contended that the activity of sub lease or sale of land for development, which was received by the assessee as a major part of consideration of project, is an integral and inseparable part of main business activity of development of infrastructure facility, therefore, income/profits derived during assessment year 2009-10 from sub-lease of land are the first degree operational profits of the business which is eligible for deduction under section 80-IA(4)(i) read with Explanation (a) thereto. [Para 78] The assessee company is in the business of development of 'road including toll road' infrastructure facility and the enterprises which only develops infrastructure facility are eligible for deduction under section 80-IA(4)(i) of the Act from the date when it begins to operate its business activity of development of infrastructure facility. CIT-DR could not demolish these contentions of the assessee including the contention that the business operations of eligible enterprises visualises the development of infrastructure facility. When development activities come to an end or completed and such activity begins to facilitate the intended users, the act of operation and maintenance starts only after creation of entire or part development of infrastructure facility as per requirement. Further, the development work may spread over years which falls under several assessment period/years and if the beneficiary is expected to complete the project or completion of project is considered to be a pre-condition for deduction, then the eligible developing enterprise will have to wait till completion of the entire project during whole development period, which may have spread over several years, for want of this im-practical condition. In this situation, the eligible enterprise would become eligible only in the last year of development wherein development work ends and infrastructure facility begins to operate, this certainly cannot be an intention of the beneficial taxation legislation. [Para 79] SUBSCRIBE FOR FULL CONTENT

The Tax PublishersIT Appeal No. 3339 (Delhi) of 2014
2015 TaxPub(DT) 2380 (Del-Trib) : (2015) 173 TTJ 0137 : (2015) 125 DTR 0055

Jaypee Infratech Ltd. v. CIT

INCOME TAX ACT, 1961

--Statute--InterpretationTaxing provisions--Main controversy revolves around the fact that the assessee claimed deduction under section 80-IA(4) on the basis that as per concession agreement between the TEA and the assessee company, the assessee developed 'infrastructural facility' as per clause (a) of Explanation to section 80-IA(4)(i), which was granted by the AO. Subsequently, the CIT, Noida issued notice under section 263 on the contention that the claim of the assessee does not fall in clause (a) of Explanation to section 80-IA(4)(i) and the AO passed an assessment order which was not only erroneous but also prejudicial to the interest of the revenue and he rejected the objections and submissions of the assessee company and directed the AO to frame afresh de novo assessment by passing the impugned order. Held: In view of foregoing discussion, the court is of the considered view that the beneficial taxation provisions deserve a liberal interpretation which actually subserve the very purpose and object of the legislation and does not defeat or frustrate the same as has been held in several decisions and orders of Supreme Court and High Court including decision in the case of Apex Court in the case of CIT v. Vatika Township Ltd. 367 ITR 466 (SC).

Statutory provision should be interpreted in the light of intention of legislation, heading given to the provision, language used therein and the context in which the particular proviso of the Act requires interpretation. [Para 71] The provisions of section 80-IA is related to the deduction in respect of profits and gains from enterprises engaged in infrastructure development, etc. Further, it is noted that as per language used therein sub-section (1) grants deduction in respect of any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) thereof, under sub-section (2) the admissible deduction is 100% of the profits and gains of eligible business for ten (10) consecutive assessment years (AY) out of twenty (20) assessment years, beginning with the assessment year in which such undertaking or enterprise develops and begins to operate any infrastructure facility referred in clause (iii) of sub-section (4). [Para 72] If this court considers the object of legislation, then as this court has noted earlier that as per the heading given to the provision of section 80-IA of the Act, the object of legislation is to provide deduction to the enterprises which are engaged in infrastructure development etc. It means that the infrastructure development is the main object of this provision to encourage entrepreneurs to put their resources and endeavours towards infrastructure development. In sub-section (2), the words “develops and begins to operate any infrastructure facility” have been used. It is also noted that explaining the first and second condition or eligibility of deduction is prescribed in clauses (a) and (b) to sub-section (4)(i). [Para 74] Noticeably, sub-section (4)(i) mandates that any Enterprise carrying on the business of (i) development or (ii) operating and maintaining or (iii) developing, operating and maintaining any new infrastructure facility will be entitled for deduction explaining the third condition for eligibility of deduction, whereas in clause (c) to sub-section (4)(i) it has been prescribed that the enterprise would be eligible for deduction when it started or starts operating and maintaining the infrastructure facility on or after 1st day of April 1995. [Para 75] The development is a continuous process which starts from the date of commencement of business and beginning of the development activities and comes to an end when development work concludes and thereafter operation and maintenance thereto is started. When the intention of legislation is that the entrepreneurs should be encouraged and promoted towards infrastructure development, etc., then it is a positive inference that the legislation intended to grant deduction for the enterprises which only develops or which operates and maintains or which develops, operate and maintain infrastructure facility. Tribunal's aforesaid view also finds support from proviso to sub clause (c) to section 80-IA(4)(i) of the Act, wherein it is also provided that if developer of an infrastructure facility transfers the same, then the transferee enterprise would also be eligible for deduction as if it were the enterprise to which this clause (c) applies, i.e., transferor enterprise, meaning thereby the enterprise which only develops infrastructure facility is eligible for deduction and in case developer transfers the facility for operation or maintenance to another enterprise then the transferee would also be eligible to deduction for the remaining or unexpired period as per sub section (2) or other relevant provisions of the Act. Hence, in view of above discussion. [Para 76] If the intention of legislation was the deduction would be allowed only to the enterprise who develops and begins to operate and maintain infrastructure facility then it was not required to segregate or mandate the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining as stipulated in sub section (4)(i) and condition (a) and (b) thereto. This interpretation also finds support from proviso to sub-clause, (c) i.e., third condition wherein the transferee of infrastructure facility is also held to be eligible in the same manner in which the transferor which developed such infrastructure facility, is eli-gible for the remaining or unexpired period of deduction. In this situation, we may safely infer or draw a conclusion that the intention of the legislation is to grant deduction not only to an enterprise which de-velops, operates and maintains but also to an enterprise which only develop infrastructure facility. Therefore, decline to acceptance interpretation of section 80-IA as given by CIT-DR in her written submissions placed during arguments. [Para 77] Tribunal further consider the contention of the AR that the company started and began to operate its business activities from 5-4-2007 and irrespective of the fact that the infrastructure facility was formally inaugurated by the Chief Minister of UP Government on 9-8-2012, the assessee is eligible for deduction with effect from assessment year 2009-10 (relevant to Financial Year 2008-09) and onwards as and when business activities of developing infrastructure has begun, then income derived from business would be certainly eligible for deduction. AR has also contended that the activity of sub lease or sale of land for development, which was received by the assessee as a major part of consideration of project, is an integral and inseparable part of main business activity of development of infrastructure facility, therefore, income/profits derived during assessment year 2009-10 from sub-lease of land are the first degree operational profits of the business which is eligible for deduction under section 80-IA(4)(i) read with Explanation (a) thereto. [Para 78] The assessee company is in the business of development of 'road including toll road' infrastructure facility and the enterprises which only develops infrastructure facility are eligible for deduction under section 80-IA(4)(i) of the Act from the date when it begins to operate its business activity of development of infrastructure facility. CIT-DR could not demolish these contentions of the assessee including the contention that the business operations of eligible enterprises visualises the development of infrastructure facility. When development activities come to an end or completed and such activity begins to facilitate the intended users, the act of operation and maintenance starts only after creation of entire or part development of infrastructure facility as per requirement. Further, the development work may spread over years which falls under several assessment period/years and if the beneficiary is expected to complete the project or completion of project is considered to be a pre-condition for deduction, then the eligible developing enterprise will have to wait till completion of the entire project during whole development period, which may have spread over several years, for want of this im-practical condition. In this situation, the eligible enterprise would become eligible only in the last year of development wherein development work ends and infrastructure facility begins to operate, this certainly cannot be an intention of the beneficial taxation legislation. [Para 79]