INCOME TAX ACT, 1961

--Deduction under section 80-IAAllowability Repair of river bank/canal wall--Assessee-company was a marine works contractor and supplier of machinery and equipment on hire. In both the assessment years under consideration, the assessee claimed deduction under section 80-IA (herein after referred to as 'the Act') on the ground that it had undertaken the construction operation and maintenance of an infrastructure facility in pursuance of an agreement with the Inland Waterways Authority of India which consisted of bank protection work in the Champakara and Udyogamandal Canals in Kerala and protection of Tapi river bank under the authority of Surat Municipal Corporation, Gujarat. Assessing officer after examining the agreements for these works, undertaken by assessee came to the conclusion that the agreement represented only a works contract granted to assessee for refurbishment of a portion of the protection wall of the canals and the river bank respectively and that the work orders issued by IWAI and Surat Municipal Corporation carried out by assessee did not have any element of developing, operating and maintaining any infrastructural facility as claimed by the assessee and therefore disallowed the assessee's claim for deduction under section 80-IA. Commissioner (Appeals) upheld the order of assessing officer. Held: It was held that the description of the work executed by assessee in the relevant period was certainly not the development of any infrastructure as the Champakara and Udyogmandal canals in Kerala were constructed/developed decades ago. What work assessee executed in respect of these two canals and the Tapi riverbank viz. rip-rap masonary for protection of the canal bank and river bank could at best be work which was a sub-activity in the category of repairs and maintenance thereof rather than development of an infrastructure facility namely, inland waterways which has been done by IWAI. Thus, assessee executed works contracts on behalf of the concerned Government bodies and there was certainly no element of developing or operating and maintaining or developing, operating and maintaining of any infrastructure facility as envisaged in clause (c) to the Explanation to sub-section (4) of section 80-IA. The Explanation to section 80-IA inserted in the Act was clarificatory in nature and clearly spells out the legislative intent that the benefit of deduction under section 80-IA of the Act was not to be granted or extended to work contractors as in the present case of assessee. therefore, it was held that for an infrastructure undertaking enterprise and was therefore, not eligible to be allowed deduction under section 80-IA.

Income Tax Act, 1961 Section 80-IA

In The Itat, Bangalore B Bench

N. V. Vasudevan, J.m. & Jason P. Baoz, A.m.