By TIOL News Service

ERNAKULAM, SEPT 18, 2017: THE issue is - Whether, for the purpose of Sec 80IA(4) benefits, it is necessary that the airport should already be operational and the agreement should be entered into thereafter. NO is the answer.

Facts of the case

The assessee- company had established an airport and claimed benefit of deduction u/s 80-IA of the I-T Act. The AO took the view that the assessee did not satisfy all the conditions specified in sub-section (4) of 80-IA and accordingly rejected the claim of the assessee. On appeal, the first appellate authority held that the MOU entered into by the assessee with the Airport Authority of India could be taken as an agreement as contemplated in clause (b) of Section 80-IA(4) of the IT Act. It was also agreed that the assessee satisfied clause (c) of subsection (4). Accordingly, the CIT(A) allowed the appeals and directed the AO to allow deduction.

On appeal, the Tribunal held that the agreements entered into between the assessee and the Airport Authority of India did not constitute agreements specified in clause (b) of sub-section (4) of Section 80-IA of the IT Act. Similarly, with respect to clause (c) of Section 80-IA(4), the Tribunal took the view that the basic particulars were not borne out of the assessment order, nor was there any occasion for the assessing officer to verify those vital details. On that basis, the Tribunal set aside the order of the CIT(A) and restored the matter to the file of the assessing officer for fresh examination.

On appeal, the HC held that,

++ the MoU entered into between the assessee and the Airport Authority of India and the subsequent agreement between the parties, would show that the assessee had entered into an agreement as contemplated in clause (b) of sub-section (4) of Section 80-IA of the IT Act entitling the assessee for deduction u/s 80-IA of the Act. From the provisions of the agreement with the Airports Authority of India, it is clear that the Airport Authority of India was only undertaking to discharge its functions as provided under Section 12 of the Airports Authority of India Act, 1994 for the operation and maintenance of the airport which was developed by the Cochin International Airport Limited. Such an agreement between the Airports Authority of India and the assessee would qualify to be an agreement entered into with a statutory body for “operating and maintaining the infrastructure facility”, viz the airport;

++ having read clause-(b) of sub-section (4) of Section 80-IA, we are not persuaded to think that to satisfy the requirement of clause-(b), the agreement should be one entered into by an airport which is already functional. An airport to be operational requires the facilities that are agreed to be provided by the Airport Authority. It is only on installation and operation of such equipments can the airport be operated and maintained. Such an agreement would be an agreement for operating and maintaining the infrastructure facility viz the airport and for the purpose of Section 80- IA, the statute does not contemplate that the airport should already be on stream and that the agreement should be entered into thereafter;

++ the statutory provision and the agreement as discussed, we cannot uphold the conclusion of the Tribunal that both the agreements could not constitute agreements specified in clause-(b. Accordingly, the findings of the Tribunal with reference to clause-(b) of sub-section (4) of Section 80-IA are set aside.

(See 2017-TIOL-1924-HC-KERALA-IT)