Ita/224/2021 Of Pr.commissioner Of Income Tax-2 v. M/S Menzies Aviation

] IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 9 DAY OF AUGUST, 2021 PRESENT THE HON'BLE MR. JUSTICE SATISH CHANDRA SHARMA. AND THE HON‘'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM LT.ANO.224 OF JZO2Z1 BETWEEN 1. PR. COMMISSIONER OF INCOME TAX-2|CENTRAL REVENUE BUILDINGS,QUEENS ROAD, BANGALORE-560 001 2. THE DEPUTY COMMISSIONER OF INCOME TAXCIRCLE-4(1)(2), BANGALORE _. APPELLANTS (BY SRILSANMATHI E I, ADVOCATE) AND: M/S.MENZIES AVIATION|BOBBA (BANGALORE) PVT LTDPLOT NO.C-O041BANGALORE INTERNATIONAL AIRPORTDEVANAHALLI, BANGALORE -560 300PAN-AAECM6862D . RESPONDENT (BY SRIL.ANNAMALAI.S, ADVOCATE) THIS ITA IS FILED UNDER SEC.260-A OF INCOME TAX ACT|1961, ARISING OUT OF ORDER DATED 27/01/2021 PASSED IN ITA|NO.616/BANG/2019, FOR THE ASSESSMENT YEAR 2014-2015)PRAYING THIS HONBLE COURT TO 1. DECIDE THE FOREGOING|QUESTION OF LAW AND / OR SUCH OTHER QUESTIONS OF LAW ASMAY BE FORMULATED BY THE HON BLE COURT AS DEEMED FIT|AND 2. SET ASIDE THE APPELLATE ORDER DATED 27/01/2021|PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, A BENCH,|BENGALURU, IN APPEAL PROCEEDINGS IN ITA NO. 616/BANG/2019FOR ASSESSMENT YEAR 2014-2015, AS SOUGHT FOR IN THIS.APPEAL, AND TO GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN|THE INTEREST OF JUSTICE. THIS APPEAL COMING ON FOR ADMISSION THIS DAY,|SATISH CHANDRA SHARMA J., DELIVERED THE FOLLOWING: JUDGMENT Shri S.Annamalai, learned counsel accepts notice on'benailf of the respondent. 2.|Tne present Income Tax appeal Is arising out of theOrder passed in respect of assessment year 2014-15 in|ITA.No.616/Bang/2019. 3.The department has raised the following substantialquestions of law in the present appeal and they are detailed as.under:| “12Whonetneontnefactsand.inthe.circumstances of the case, the Tribunal was justified inlaw in holding that the BIAL is a Statutory Body whenit cannot be considered as it is a corporate body inwhich KSIIDC is holding a mere 13% share in BIALregistered under Companies Act and it fails to satisfythe requirements of section 40IA(4) of the I.T. Act? 2D.WhoetnerOn|the.factsandIn,the.circumstances of the case, the Tribunal is justified inlaw in nolding that the cargo nandling contractentered into with BIAL by assessee is with statutorybody satisfying condition set forth in section 8O0IA(4)wnen BIAL is only a Company whose motive onlymaking profit and is only a instrument of State? ‘3.WhoetnerOn|the.factsandIn,the.circumstances of the case, Tribunal’s order is perversefor claiming deduction under section 80IA(4)(ib) of the|Act even when the assessee nas not satisfied tne|conditions set out in the said provision to make such aclaim as the assessee nas not entered into agreementwith Government nor is involved in development ofinfrastructure activity as defined in the Act?" 4It is noteworthy to mention that in respect ofearller assessment year i.e., 2009-10, similar substantial questions of law were framed in I.T.A.Nos.186/2016 c/w262/2014 and they nave been decided against the revenue|and in favour of the assessee. 5.In the light of the aforesaid, the order passed bythis Court in I.T.A.Nos.186/2016 c/w 262/2014 is reproduced.as under: “These appeals under Section 260A have beenfiled by the revenue against the order dated05.10.2015 and 30.01.2014, respectively, passed by.the.Income.TaxAppellateTribunal|(hereinafter|referred to as ‘the Tribunal’ for short). Both theappeals pertain to the Assessment Year 2009-10. ITANo.186/2016.WaS|admittedvideorder|dated24.01.2018 on the following substantial questions oflaw: "Whether, on the facts and in the circumstancesof the case, the Tribunal ts Justified in law inholding that the cargo handling contract enteredinto with BIAL by assessee is with statutory bodysatisfying condition set fortn in section 80IA(4)|when BIAL is only a Company wnose motive onlymaking profit and ts only a instrument of State?". “These appeals under Section 260A have beenfiled by the revenue against the order dated05.10.2015 and 30.01.2014, respectively, passed by.the.Income.TaxAppellateTribunal|(hereinafter|referred to as ‘the Tribunal’ for short). Both theappeals pertain to the Assessment Year 2009-10. ITANo.186/2016.WaS|admittedvideorder|dated24.01.2018 on the following substantial questions oflaw: "Whether, on the facts and in the circumstancesof the case, the Tribunal ts Justified in law inholding that the cargo handling contract enteredinto with BIAL by assessee is with statutory bodysatisfying condition set fortn in section 80IA(4)|when BIAL is only a Company wnose motive onlymaking profit and ts only a instrument of State?". Whereas, ITA No.162/2014 was admitted by thesame order on the following substantial questions oflaw: “I.Whetner, Of)thefactsandInthecircumstances of the case, the Tribunal wasjustified in law in holding that the assessee Is eligible for deduction under section S80IA(4)despite noilding that it has not entered into anagreement with a ‘statutory body as required intne provisions of section 80IA(4)? ?.Whether,OP)thefactsandInthecircumstances of the case, the Tribunal is Justifiedin law in holding that tne cargo handling oncontractbytheadSSCSSCE1S|eguivalenttodevelopment, operation andmaintenance’ ofInfrastructurefacilityds|definedInsection8SOIA(4)?° 2. For the facility of reference, facts from ITA)No.262/2014 are being mentioned, which are that theassessee IS a company engaged in the business of.cargo handling at Bengaluru International AirportLimited, Devanahalli, Bengaluru (hereinafter referredto as ‘the BIAL' for short). The assessee providescargo nandling services to Airlines and clearing /forwarding at BIAL. The assessee filed return ofincome.for.the|AssessmentYear.2009-10On| 26.09.7009declaringtnetotalincomeof|Rs.1,90,19,629/-.afterclaiming|qaeductionunderSection 80Q0IA(4)(i) of the Act to the extent oRs.8,34,/9,0/7/7/-. The case of the assessee wasselected for scrutiny and notice under Section 143(2)of the Act was issued on 20.08.2010. The AssessingOfficer sought details regarding eligibility of theassessee to claim deduction under Section 80IA(4)(i)of the Act. The assessee thereupon furnished thedetails. The Assessing Officer, by an order dated20.12.2011 passed under Section 143(3) of the Act,neid that the assessee has entered into an agreementwith BIAL wnich is not a statutory body and the cargohandling facility does not form part of the airport anddo not fall within the meaning of the expression‘Infrastructure facility’ as the assessee is a contractorand not a developer and therefore, denied thededuction claimed py the assessee under SectionSOIA(4) of the Act. Tne assessee thereupon filed anappeal before the Commissioner of Income Tax(Appeals). Tne|Commissioner|of|Income.Tax(Appeals), by an order dated 11.06.2012,Inter allaheld that the BIAL is a statutory body and the cargonNandling facility forms part of airport and is coveredWItNINtheexpression‘Infrastructurefacility.Thereupon, the revenue filed an appeal before the Tribunal. The Tribunal, Dy an order dated 30.01.2014,inter allaheld that though the cargo handling facility|falls within the expression ‘infrastructure facility’, yetthe BIAL is not a statutory body and allowed theappeal preferred by the revenue. 3. Tne assessee thereupon filed a miscellaneous.petition under Section 254(2) of the Act seekingrectification of the mistakes in the order dated30.01.2014 passed by the Tribunal. The applicationfiledInter allaon the ground that the issue wnetnerBIAL is a statutory body has already been adjudicatedby this Court in|M/s. FLAMINGO DUTYFREE SHOPS Tribunal. The Tribunal, Dy an order dated 30.01.2014,inter allaheld that though the cargo handling facility|falls within the expression ‘infrastructure facility’, yetthe BIAL is not a statutory body and allowed theappeal preferred by the revenue. 3. Tne assessee thereupon filed a miscellaneous.petition under Section 254(2) of the Act seekingrectification of the mistakes in the order dated30.01.2014 passed by the Tribunal. The applicationfiledInter allaon the ground that the issue wnetnerBIAL is a statutory body has already been adjudicatedby this Court in|M/s. FLAMINGO DUTYFREE SHOPS PVT.LTD.IN|W.P.NO.14215/2006DATED19.17.2008and tnis Court nas held tnat BIAL Is astatutory body under Article 12 of the Constitution ofIndia. Tne Tribunal, by placing reliance on theaforesaid decision of this Court, recalled the orderdated 30.01.2014 for reconsideration of the issue.Thereafter, the Tribunal passed a fresh order on18.09.2014 by which it followed the decision renderedby this Court tnM/s. FLAMINGO DUTYFREE SHOPS| PVT.LTD.IN|W.P.NO.14215/2006DATED19.17.2008and held that BIAL is a statutory bodyand allowed the appeal preferred by the assessee. |Being aggrieved by the order of the Tribunal, therevenue Nas filed the appeal namely ITA No.186/2016 whereas ITA No.262/2014 has been filed against theorder of the Tribunal dated 30.01.2014 wherein it hasbeen held that the cargo handling facility falls withintneexpression‘Infrastructurefacility.In.theaforesaid factual background, these appeals navepeen filed. 4. Learned counsel for the revenue, wnile|inviting the attention of this Court to Section 80IA(4)of the Act, submitted tnat the aforesaid provision isavailable to an undertaking whicn is engaged in.infrastructure development and is engaged in thebusiness of developing, operating and maintenance ofany infrastructure facility and fulfills all the conditionsmentioned in Section 80IA(4)(i) of the Act. It is alsosubmitted|thatinorderCOcomply|WIT?tne|requirementas|contemplatedunderSection8OIA(4)(i)(b) of the Act, the assessee has to enter intoan agreement with the Central Government or a StateGovernment or a local authority or any statutory bodyfor developing or operating and maintaining ordeveloping,operatingandmaintaining anew|infrastructure facility but in the instant case, theassessee Nas entered into an agreement witn BIAL|which is not a statutory body. It is further submittedthat the judgment rendered by this Court in.M/s.FLAMINGO DUTYFREE SHOPS PVT. LTD.does not| apply to the present case as the aforesaid judgmentwas not rendered in the context of the Act. 5. It is also pointed out that the BIAL is a)corporate body in wnich KSIIDC is nolding nearly 13%Share and therefore, the BIAL is a company whose|motive is to make profit and same cannot be termed.as an autnority. Our attention nas also been invitedto the agreement entered into by tne assessee with.BIAL and in particular, clause 3.2 and it nas been.contended that tne assessee is operating the cargonandling services only on contract basis and he doesnot have any right over the building / structureoccupied by it and BIAL has not actually transferredthe cargo handling facility to the assessee and hasonly engaged the assessee to run cargo handlingfacility. Our attention has also been invited to cargoservices as defined in the agreement to mean servicesto be provided to the users as detailed in Schedule Athereto. Section 2(b) of the Airports’ Authority ofIndia Act, 1994 has also been brought to our noticeand it has been contended that airport means alanding off area for aircrafts, usually with runways andaircraft maintenance and passenger facilities andincludes aerodrome as defined in clause (2) of Section2 of the Aircraft Act, 1934. Reference has also beenmade to Section 2(2) of the Aircraft Act, wnich defines the expression ‘aerodrome’ as any definite or limitedground or water area intended to be used, either.wholly or in part for the landing or departure ofaircraft, and includes all buildings, sneds, vessels,piers and other structures thereon or appertainingtnereto. On the basis of the aforesaid definitions, it issubmitted that providing of cargo facility in airportdoes not fall within the expression of operation orbuilding of airport in order to make the assesseeeligible for the benefit under Section 8OIA of tne Act. ©Reference has also been made to the Circular No.1 of2006 dated 12.01.2006 and Circular Nos./33 and7/2002 issued by the Central Board of Direct Taxes. |In support of the contention that the aforesaidcirculars clarify that the cargo handling facility is notincluded under Section 80IA of the Act, our attentionhas also been invited to the definition of ‘infrastructurefacility as defined in explanation appended to SectionSOIA(4)(i)(D) of the Act. In Support of aforesaidSUDMISSION,rellance|nas|peen|placedOn|tneConstitution Bench decision of the Supreme Court in"COMMISSIONEROF|CUSTOMS(IMPORT)MUMBAI Vs. DILIP KUMAR & CO (2018) 68 GST239, 6. On the other hand, learned Senior counsel for.tne assessee submitted tnat in order to avall off tne benefit of Section 80IA(4)(i) of the Act, the assesseeis required to satisfy two conditions, firstly that theassessee should enter into an agreement with theStatutory body and consequently, the assessee shouldbe engaged in development of an infrastructure facilitywithin the meaning of Section 80IA(4) of the Act. It issubmitted that sofar as first issue is concerned, theSame is no longerres integraas it has already been.decided by this Court inM/s. FLAMINGO DUTYFREESHOPS PVT, LID.and the aforesaid decision has|rightly been followed by the Tribunal which wasbinding on it. It is also pointed out that the decisionrenderedDY.tnis|Courtin"BANGALORE|INTERNATIONAL AIRPORT LTD. Vs. FLEMINGODUTYFREE SHOPS P, LTD.’was subject matter of |challenge before the Supreme Court in Civil AppealNo.2148/2009. However, since the parties had settiedtne dispute, therefore, the civil appeal was disposedof. However, the question of law is left open. |Therefore, it is submitted that as on today, thedecision rendered by this Court in|M/s. FLAMINGODUTYFREE SHOPS PVT. LTD.holds the field and.therefore, it has to be held that BIAL is a statutorybody. 7. With regard to the second issue whether tne.assessee |S.engaged in- providing’ infrastructur development services within the meaning of Section|SOIA(4) of the Act, it is submitted that cargo facilitiesare an integral part of airport. In this connection,rellance has been placed on Circular No./793 dated23.06.2000 which was issued to clarify whetherstructures at ports for storage, loading and unloadingetc. will fall within the definition of Section 10(23G)and 80IJA of the Act. It is also urged that the assesseenas developed cargo nandling services under the built,operate and transfer scheme entered into with BIALunder.Service.ProviderRight|Holder|(SPRH)agreement. Learned Senior counsel for the assesseehas also placed reliance on the findings recorded bythe Commissioner of Income Tax (Appeals) and hasneid that SPRH agreement gives the assessee right todesign,construction,financing, testing,commissioning,maintenance,management|anaoperation of the facility for the period of 20 years andit is specifically mentioned in the agreement thatassessee is on built, operate and transfer basis andthe facility has to be transferred to BAIL at the end ofthe term. It is further submitted that by placingreliance on the decision of the Hyderabad Bench of theTribunal, Commissioner of Income Tax (Appeals) nasneid that the assessee is not merely a contractor. TheTribunal Nas upneld the view of the Commissioner of Income Tax (Appeals) that the agreement entered intoby the assessee with BIAL is for development,operation and maintenance of infrastructure facility asper provision of Section 8O0IA(4) of the Act. It isfurther submitted that the aforesaid finding which areconcurrent in nature, Nave been arrived at by theCommissioner of Income Tax (Appeals) as well as theTribunal on the basis of meticulous appreciation of theevidence on record whicn are not to pe demonstratedto be perverse py the revenue. In support ofaforesaid submission, reliance has been placed on thedecisionof|tneHignCourtof.Madras.in‘COMMISSIONER OF INCOME TAX, COIMBATOREVWs, CHETTINAD LIGNITE TRANSPORT SERVICES(P)LTD.°(2019)10/7TAXMANN.COM1)|(MADRAS) AND ‘COMMISSIONER OF INCOME-TAX, COIMBATORE Vs. CHETTINAD LIGNITETRANSPORT SERVICES (P) LTD." (2019) 107TAXMANN.COM 362 (MADRAS). 8. We have considered the submissions made on.both sides and have perused the record. Beforeproceeding further, it is apposite to take note ofSection 8O0IA of the Act, the relevant extract of whichis reproduced below for the facility of reference: "80IA. Deductions in respect of profits and gains frominaustrial undertakings or enterprises engaged ininfrastructure development, etc. SO-IA. (1) Where the gross total income of an|assessee includes any profits and gains derived byan undertaking or an enterprise from any|business referred to in sub-section (4) (suchbusiness being hereinafter referred to as theeligible Dusiness), there shall, in accordance withanda subject to the provisions of tnis section, beallowed, in computing tne total income of theassessee, a deduction of an amount equal tohundred per cent of the profits and gains derivedfromSUCN|businessfor.ten consecutiveassessment years. XXX (4) Tnis section applies to— (1) any enterprise carrying on the business of (1)developing or (ii) operating and maintaining or(iif) developing, operating and maintaining anyinfrastructure facility which fulfils all the followingconditions, namely :— (a) it is owned by a company registered in Indiaor by a consortium of such companies or by anautnority or a board or a corporation or any otner boay established or constituted under any Centralor State Act; (b) it has entered into an agreement with theCentral Government or a State Government or alocal authority or any otner statutory boay for (i)developing or (li) operating and maintaining or(if) developing, operating and maintaining a newinfrastructure facility; (c) it nas started or starts operating andmaintaining the infrastructure facility on or aftertne 1st day of April, 1995:|Provided xxxx Explanation.—For the purposes of this clause,“Infrastructure facility" means— (a) a road including toll road, a bridge or a railsystem, (D) a Nignway project inciuding nousing or otneractivities being an integral part of the nignwayproject; (c) a water supply project, water treatmentsystem,Irrigationproject,Sanitation|and.sewerage system or solid waste managementSystem; (a) a port, airport, inland waterway, iniand portor navigational channel in the sea. | Tnus,fromclosescrutinyof|Section80IA(4)(i)(b) of the Act, it is evident that the assesseemust be engaged in the business of developing oroperating and maintaining or developing, operatingand maintaining any infrastructure facility wnicn fulfillsthe following conditions, namely (a) it is owned by aCompany, (Db) it has entered into an agreement withCentral Government ora State Government or a localauthority or any other statutory body for developing oroperating and maintaining or developing, operatingand maintaining a new infrastructure facility. 9. Sofar as the requirement of entering into a.Statutory body is concerned, the same is no longer|fes|integraas a Bench of this Court in.M/s. FLAMINGO (a) a port, airport, inland waterway, iniand portor navigational channel in the sea. | Tnus,fromclosescrutinyof|Section80IA(4)(i)(b) of the Act, it is evident that the assesseemust be engaged in the business of developing oroperating and maintaining or developing, operatingand maintaining any infrastructure facility wnicn fulfillsthe following conditions, namely (a) it is owned by aCompany, (Db) it has entered into an agreement withCentral Government ora State Government or a localauthority or any other statutory body for developing oroperating and maintaining or developing, operatingand maintaining a new infrastructure facility. 9. Sofar as the requirement of entering into a.Statutory body is concerned, the same is no longer|fes|integraas a Bench of this Court in.M/s. FLAMINGO DUTYFREE SHOPS PVT, LID.Nas already held thatBIAL is a statutory body. Thus, the assessee nascomplied with the aforesaid condition. It is pertinentto mention here tnat the Special Leave Petitionagainst the aforesaid decision has been disposed of byorder dated 16.09.2016. Thus, the view taken by thisCourt InM/s. FLAMINGO DUTYFREE SHOPS PVT.|LID.nolds the field. In view of aforesaid enunciation|of law, it is evident that the assessee has compliedwith the condition of entering into an agreement withtne statutory body. | 10. Now, we may deal with the issue whether|the activity of the assessee in providing cargohandling services is covered under the expressioninfrastructure development. Tne Commissioner ofIncome Tax (Appeals), vide order dated 11.06.2012,inter alianas held that from perusal of the layout mapof the airport, it is evident that the cargo complex isconnected to other infrastructure facilities by airsideservice road running paraliel to the main runway. Theaforesaid road serves the isolation bay, fire station,cargo complex, fuel farm and maintenance area as perClause 4 of the concession agreement between theBIAL and Government of India. It has further beenheld that cargo handling services have been classifiedas material but competitive by AERA by an orderdated 16.08.2011 in the assessees own case. It nasalso been held that the expression aerodrome asdefined in Section 2(2) of the Ajrcraft Act is aninclusive definition and uses the expression inciudes. |It has further been held that large amount of non-passenger cargo is being uploaded to the commercialaircraft in addition to passenger's luggage andtnerefore, location of cargo handling area is linkedwith critical airside service road and partaking ofStatutory infrastructure relating to security, customs,x-rays, etc. within its own operations, indicates that thisServiceISDart|Of|commercial operationsundertaken by air cargo operators and other airtransporters whose equipment and machinery are also|integrated in to the definition of aerodrome as perSection 2(22) of the Aircraft Act, 1934. Thus, it hasbeen hnelid by tne Commissioner of Income Ta(Appeals) that cargo handling services are locatedwithin the airport and are _ critical infrastructurfacilities and are deemed to be part of the airport. 11. The Appellate Authority nas also taken note|of the fact that SPRH agreement gives rights fordesign,construction,financing, testing,commissioning, management and operation of thefacility for a total period of 20 years to the assesseeand the concession is on built, operate and transferDasis. Therefore, it Nas been held that every.contractor may not be a developer put everydeveloper developing infrastructure facility on behalfof the Government is a contractor. In)CHETTINADLIGNITE TRANSPORT SERVICES P. LTD.,SUPTId,Itnas been held that proviso intends to extend thebenefit of deduction under Section 8O0IA of the Acteven to a transferee or a contractor who is approvedand recognized py tne concerned authority andundertakes the work of development of infrastructure|facility or only operates or maintains the same. Thus, in view of aforesaid enunciation of law, it has rightlybeen conciuded by the Appellate Authority tnat theassessee iS engaged in development operation andmaintenance of an infrastructure facility in the light ofprovisions of SPRH agreement. The aforesaid findingnas been affirmed in appeal by the Tribunal. Theaforesaid findings are concurrent findings of fact whichdo not suffer from any perversity. Learned counsel for|the revenue was unable to point out any perversity inthe findings of fact recorded by the Commissioner ofIncome Tax (Appeals) as well as by the Tribunal. It iswell settied in law tnat the concurrent findings of factdonotsufferfromanyperversitywarrantinginterference of this court in exercise of powers underSection>260Aof|tneAct.[SEE:;SYEDARAHIMUNNISA VS. MALAN BI BY L.RS. AND ORS.(2016)10SCC|SI5andPRINCIPAL|COMMISSIONER OF INCOME TAX, BANGALORE &ORS. VS. SOFTBRANDS INDIA P. LTD., (2018)|406 ITR 513]. 17.InVIEWOf|precedinganalysis, thesubstantial questions of law are answered against therevenue and in favour of the assessee.In the result, the appeals fail and are hereby.aismissed.| 6.|In the light of the aforesaid, as the questions of lawarising out of the present appeal have already been answeredin favour of the assessee and against the revenue, the appealstands disposed of and the substantial questions of law are.answered in favour of the assessee and against the revenue. Sd/- JUDGE Sd/-_ JUDGE| CA