Madras High Court
M/S.L&T Chennai-Tada Tollway ... vs The Income Tax Officer on 2 February, 2021
TCA.No.654 of 2019
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 02.02.2021
CORAM :
The Honourable Mr.Justice T.S.SIVAGNANAM
and
The Honourable Ms.Justice R.N.MANJULA
Tax Case Appeal No.654 of 2019
and
C.M.P.No.24830 of 2019
M/s.L&T Chennai-Tada Tollway Limited,
Post Box No.979, TCTC Building,
1st Floor, Mount Poonamallee Road,
Manapakkam,
Chennai - 600089. ...Appellant
Vs
The Income Tax Officer,
Corporate Ward 4(4),
Chennai. ...Respondent
APPEAL under Section 260A of the Income Tax Act, 1961 against the
order dated 29.03.2019 made in ITA.No.1790/Chny/2017 on the file of the
Income Tax Appellate Tribunal, 'D' Bench, Chennai for the assessment year
2014-15.
1/12
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TCA.No.654 of 2019
For Appellant: Mr.Srinath Sridevan
For Respondent: Mr.Karthik Ranganathan, SSC
assisted by
Mr.S.Rajesh, JSC
JUDGMENT
(Delivered by T.S.Sivagnanam,J)
This appeal, filed by the assessee under Section 260A of the
Income Tax Act, 1961 ('the Act' for brevity) is directed against the order
dated 29.03.2019 made in ITA.No.1790/Chny/2017 on the file of the
Income Tax Appellate Tribunal, 'D' Bench, Chennai ('the Tribunal' for
brevity) for the assessment year 2014-15.
2. The appeal was admitted on 27.11.2019 on the following
substantial questions of law:
"(i) Whether on facts and circumstances
of the case, the Tribunal is correct in rejecting the
claim under Section 80IA of the Act on the ground
never urged or argued before the authorities
below?
(ii) Without prejudice, based on the
material available on record, has the Tribunal
erred in stating that the Appellant has not carried
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TCA.No.654 of 2019
on operation and maintenance activities?
(iii) Whether the Audit Report in Form
10 CCB cannot be filed at the time of the
Assessment Proceedings?
(iv) Whether on a correct construction
of Clause 12.2 of the Concession Agreement dt 3
June 2008 between NHAI and the Appellant, the
tolls collected during 'under construction' phase
and deployed in accordance thereafter are not
monies expended on construction of
infrastructural facilities as envisaged in Section
80IA of the Act?"
3. Before we proceed to consider the matter on merits, after
hearing the learned counsel for the parties for a considerable length of time,
we find that the substantial question of law (iii), as framed above, does not
arise for consideration in this appeal, as the Tribunal, in the impugned order,
has not dealt with the issue nor raised by the Revenue before the Tribunal.
Therefore, we delete the same from the array of questions for consideration
and accordingly re-frame the questions on the following terms:
"(i) Whether on facts and circumstances
of the case, the Tribunal is correct in rejecting the
claim under Section 80IA of the Act on the ground
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TCA.No.654 of 2019
never urged or argued before the authorities
below?
(ii) Without prejudice, based on the
material available on record, has the Tribunal
erred in stating that the Appellant has not carried
on operation and maintenance activities?
(iii) Whether on a correct construction
of Clause 12.2 of the Concession Agreement dt 3
June 2008 between NHAI and the Appellant, the
tolls collected during 'under construction' phase
and deployed in accordance thereafter are not
monies expended on construction of
infrastructural facilities as envisaged in Section
80IA of the Act?"
4. We have heard Mr.Srinath Sridevan, learned counsel for the
appellant and Mr.Karthik Ranganathan, learned Senior Standing Counsel,
assisted by Mr.S.Rajesh, learned Junior Standing Counsel appearing for the
respondent/Department.
5. The appellant-assessee is a subsidiary of L&T Infrastructure
Development Projects Limited incorporated in 2008. The assessee was
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TCA.No.654 of 2019
awarded the contract, which is termed as a Concession Contract in respect
of Six-laning of Chennai-Tada Section on NH-5 from KM 11.00 to KM
54.40 (Length of 43.40 KM) in the State of Tamil Nadu to be executed as
Build, Operate and Transfer-BOT (TOLL) on DBFO Pattern under NHDP
Phase-V.
6. The National Highways Authority of India (NHAI) entered into
an agreement with the assessee dated 03.06.2008 titled as Concession
Agreement. This agreement contains various clauses under various chapters
and we may refer to a few of the clauses under Part-2 of the agreement, 'The
Concession', Construction of the Project Highway, etc. The assessee filed its
return of income admitting the total income as 'NIL'.
7. In this appeal, we are concerned with the claim of deduction
made by the assessee under Section 80IA of the Act. The Assessing Officer
rejected the claim made by the assessee on the ground that Form
No.10CCB, which is an audit report duly signed and verified by the
Chartered Accountant, was not filed along with the return of income.
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TCA.No.654 of 2019
8. It is not in dispute that the said form was filed during the course
of the assessment proceedings i.e., before the assessment was finalized.
Aggrieved by the same and as well as by other findings rendered by the
Assessing Officer, the assessee was on appeal before the Commissioner of
Income Tax (Appeals)-8, Chennai [CIT(A)].
9. The contentions advanced by the assessee as well as the
Revenue was considered and the CIT(A) opined that it is an undisputed fact
that the assessee had filed Form No.10CCB in the course of assessment
proceedings and by applying the decision of the Hon'ble Supreme Court in
G.M.Knitting Industries (P.) Ltd. [reported in 376 ITR 476 (SC)], allowed
the assessee's appeal. The Revenue raised a plea by placing reliance on the
CBDT Notification No. S.O.1513(E) dated 11.6.2013, where under the
Income Tax Rules was amended with effect from 01.04.2013 and the filing
of the statutory form was made mandatory. The CIT(A) considered the said
argument of the Revenue and held that though the rule has been amended
and filing of such form along with the return of income was made
mandatory, held that violation of the said rule would not take away the
substantive right of the assessee in claiming a deduction under Section
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TCA.No.654 of 2019
80IA. Ultimately, the appeal stood allowed on the above ground in favour of
the assessee. The CIT(A) also opined that, at best, it can be only a
procedural formality and cannot deny the substantive right of the assessee.
The Revenue was on appeal before the Tribunal.
10. From the impugned order, more particularly in paragraph 3,
wherein the Tribunal has extracted the grounds of appeal raised by the
Revenue having set out, the Revenue was largely aggrieved on account of
non-fulfillment of the mandate under Rule 12(2) of the amended Income
Tax Rules.
11. We find from the impugned order that the Tribunal did not go
into the said issue, but though fit to proceed on the basis that the assessee
Company has not derived any profits from the activities of developing or
operating and maintaining any infrastructure facilities. The correctness of
this question is called in before us.
12. Firstly, we may note that though the Revenue had raised the
issue regarding the mandate under Rule 12(2) of the Income Tax Rules
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TCA.No.654 of 2019
before the Tribunal, the Tribunal did not take a decision on the same.
Nevertheless, there are long line of decisions which hold that a substantive
right cannot be denied or taken away by virtue of a rule which is only a
machinery provision. In any event, the benefit granted under Section 80IA is
a special benefit bearing in mind that industrial undertakings would
undertake infrastructural projects. In the case on hand, the claim made by
the assessee was under Section 80IA(4), by executing a project with the
Government of India Organization. Therefore, we are of the view that the
CIT(A) was right in rejecting such a plea raised by the Revenue.
13. As mentioned above, the Tribunal did not go into the question
as to the effect of the mandate under Rule 12(2), but proceeded to hold that
the assessee Company has not derived any profits from the activities of
developing or operating and maintaining any infrastructure facilities.
14. Firstly, we need to mention that there are absolutely no
examination of the factual position in the case on hand. The Tribunal did not
go through the Concession Agreement based on which the assessee
Company had been granted the development work.
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TCA.No.654 of 2019
15. Furthermore, Section 80IA(4) would apply to any enterprise
carrying on business of (i) developing or (ii) operating and maintaining or
(iii) developing, operating and maintaining any infrastructure facility which
fulfills all the conditions, which are set out in clause (a), (b) and (c), to be
read along with the provisos thereunder.
16. The important aspect to be taken note of is the use of the
expression 'or'. Therefore, an enterprise, carrying on the business of
developing or operating and maintaining or developing, operating and
maintaining any infrastructure facility, which fulfills the conditions set out
under Sub-section 4, will be entitled to claim deduction. Therefore, the
Tribunal, failed to make any endeavour as to whether the assessee was
entitled to claim deduction under any one of the these heads, made a
sweeping observation that the assessee has not derived any profits from the
activities of developing or operating and maintaining any infrastructure
facilities.
17. It is the submission of the learned Senior Standing Counsel
appearing for the Revenue that the Concession Agreement pertain to
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TCA.No.654 of 2019
formation of the fifth and sixth lane adjoining the existing four lane road,
which was developed and was hither to maintain by NHAI and the assessee
at no point of time made any development to the four lane road, which was
already in existence. Therefore, her submission that whatever was the
income earned by the assessee, for the purpose of developing and
maintaining the fifth and sixth lane, probably the assessee may be entitled to
make a claim for deduction and not for the entire toll road.
18. In our considered view, this was never the case of the Revenue
at any point of time i.e., before the Assessing Officer or before the CIT(A)
or before the Tribunal. That apart, we also find that the scope of the
Concession Agreement as set out in Article 12 of the Concession Agreement
would be very relevant, more particularly Clause 12.2, which mandates that
the assessee shall maintain, at its cost, the existing lanes of the project.
Therefore, to state that the existing four lanes would not fall within any one
of the clauses under Sub-section 4 of 80IA is factually incorrect, as the
assessee develops the fifth and sixth lane and would also operate and
maintain the same and so far as the existing lanes, namely 1 to 4, in terms of
the Concession Agreement, the assessee has to operate and maintain the
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TCA.No.654 of 2019
same, so that the traffic worthiness and safety are at no time materially
inferior as compared to its existing condition prior to the execution of the
agreement. Therefore, we are of the clear view that the finding rendered by
the Tribunal is utterly perverse and calls for interference.
19. For all the above reasons, which we have assigned, the
assessee is entitled to succeed. In the result, the Tax Case Appeal is allowed
and the substantial questions of law are answered in favour of the assessee.
No costs. Consequently, connected miscellaneous petition is closed.
(T.S.S.,J.) (R.N.M.,J.)
02.02.2021
Index: Yes/No
Internet:Yes/No
Speaking judgment/Non speaking judgment
hvk
To
1. The Income Tax Appellate Tribunal,
'D' Bench, Chennai.
2. The Income Tax Officer,
Corporate Ward 4(4),
Chennai.
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TCA.No.654 of 2019
T.S.SIVAGNANAM,J
AND
R.N.MANJULA,J
hvk
T.C.A.No.654 of 2019
and
C.M.P.No.24830 of 2019
02.02.2021
https://www.mhc.tn.gov.in/judis/
