M/S.l&T Chennai-Tada Tollway Limited, Post Box v. The Income Tax Officer, Corporate Ward 4(4), Chennai

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 02.02.2021 CORAM : The Honourable Mr.Justice T.S.SIVAGNANAMandThe Honourable Ms.Justice R.N.MANJULA M/s.L&T Chennai-Tada Tollway Limited,Post Box No.979, TCTC Building,1st Floor, Mount Poonamallee Road,Manapakkam,Chennai - 600089....AppellantVs The Income Tax Officer,Corporate Ward 4(4),Chennai....Respondent APPEAL under Section 260A of the Income Tax Act, 1961 againstthe order dated 29.03.2019 made in ITA.No.1790/Chny/2017 on thefile of the Income Tax Appellate Tribunal, 'D' Bench, Chennaifor the assessment year 2014-15, and Appeal against O/o.Commissioner of Income Tax(Appeals)-8 Room No..222, AayakarBhavan, Main Building II Floor, Mahatma Gandhi Road,Nungambakkam, Chennai-34 and made in ITA.No.273/16-17 orderdated 23/5/2017, and against O/oIncome Tax Officer, Corporateward-4(4), Chennai Room No.428, 4[th] floor, Main Building, AayakarBhavan, No.121, Mahatma Gandhi Road, Nungambakkam, Chennai-34,and made in PAN/GIR No. order dated 30/12/2016 for theAssessment Year 2014-15. This appeal, filed by the assessee under Section 260A ofthe Income Tax Act, 1961 ('the Act' for brevity) is directed https://hcservices.ecourts.gov.in/hcservices/ against the order dated 29.03.2019 made in ITA.No.1790/Chny/2017on the file of the Income Tax Appellate Tribunal, 'D' Bench,Chennai ('the Tribunal' for brevity) for the assessment year2014-15. 2. The appeal was admitted on 27.11.2019 on the followingsubstantial questions of law:"(i)Whetheronfactsandcircumstances of the case, the Tribunal iscorrect in rejecting the claim under Section80IA of the Act on the ground never urged orargued before the authorities below? (ii) Without prejudice, based on thematerial available on record, has theTribunal erred in stating that the Appellanthas not carried on operation and maintenanceactivities?(iii) Whether the Audit Report inForm 10 CCB cannot be filed at the time ofthe Assessment Proceedings?(iv)Whetheronacorrectconstruction of Clause 12.2 of theConcession Agreement dt 3 June 2008 betweenNHAI and the Appellant, the tolls collectedduring 'under construction' phase anddeployed in accordance thereafter are notmoniesexpendedonconstructionofinfrastructural facilities as envisaged inSection 80IA of the Act?" 3. Before we proceed to consider the matter on merits,after hearing the learned counsel for the parties for aconsiderable length of time, we find that the substantialquestion of law (iii), as framed above, does not arise forconsideration in this appeal, as the Tribunal, in the impugnedorder, has not dealt with the issue nor raised by the Revenuebefore the Tribunal. Therefore, we delete the same from thearray of questions for consideration and accordingly re-framethe questions on the following terms: "(i)Whetheronfactsandcircumstances of the case, the Tribunal iscorrect in rejecting the claim under Section80IA of the Act on the ground never urged orargued before the authorities below?(ii) Without prejudice, based on thematerial available on record, has theTribunal erred in stating that the Appellanthas not carried on operation and maintenanceactivities?(iii)Whetheronacorrect construction of Clause 12.2 of the ConcessionAgreement dt 3 June 2008 between NHAI and theAppellant, the tolls collected during 'underconstruction' phase and deployed inaccordance thereafter are not monies expendedon construction of infrastructural facilitiesas envisaged in Section 80IA of the Act?" 4. We have heard Mr.Srinath Sridevan, learned counsel forthe appellant and Mr.Karthik Ranganathan, learned SeniorStanding Counsel, assisted by Mr.S.Rajesh, learned JuniorStanding Counsel appearing for the respondent/Department. construction of Clause 12.2 of the ConcessionAgreement dt 3 June 2008 between NHAI and theAppellant, the tolls collected during 'underconstruction' phase and deployed inaccordance thereafter are not monies expendedon construction of infrastructural facilitiesas envisaged in Section 80IA of the Act?" 4. We have heard Mr.Srinath Sridevan, learned counsel forthe appellant and Mr.Karthik Ranganathan, learned SeniorStanding Counsel, assisted by Mr.S.Rajesh, learned JuniorStanding Counsel appearing for the respondent/Department. 5. The appellant-assessee is a subsidiary of L&TInfrastructure Development Projects Limited incorporated in2008. The assessee was awarded the contract, which is termed asa Concession Contract in respect of Six-laning of Chennai-TadaSection 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 andTransfer-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 03.06.2008titled as Concession Agreement. This agreement contains variousclauses under various chapters and we may refer to a few of theclauses under Part-2 of the agreement, 'The Concession',Construction of the Project Highway, etc. The assessee filed itsreturn of income admitting the total income as 'NIL'. 7. In this appeal, we are concerned with the claim ofdeduction made by the assessee under Section 80IA of the Act.The Assessing Officer rejected the claim made by the assessee onthe ground that Form No.10CCB, which is an audit report dulysigned and verified by the Chartered Accountant, was not filedalong with the return of income. 8. It is not in dispute that the said form was filedduring the course of the assessment proceedings i.e., before theassessment was finalized. Aggrieved by the same and as well asby other findings rendered by the Assessing Officer, theassessee was on appeal before the Commissioner of Income Tax(Appeals)-8, Chennai [CIT(A)]. 9. The contentions advanced by the assessee as well asthe Revenue was considered and the CIT(A) opined that it is anundisputed fact that the assessee had filed Form No.10CCB in thecourse of assessment proceedings and by applying the decision ofthe 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 https://hcservices.ecourts.gov.in/hcservices/ Notification No. S.O.1513(E) dated 11.6.2013, where under theIncome Tax Rules was amended with effect from 01.04.2013 and thefiling of the statutory form was made mandatory. The CIT(A)considered the said argument of the Revenue and held that thoughthe rule has been amended and filing of such form along with thereturn of income was made mandatory, held that violation of thesaid rule would not take away the substantive right of theassessee in claiming a deduction under Section 80IA. Ultimately,the appeal stood allowed on the above ground in favour of theassessee. The CIT(A) also opined that, at best, it can be only aprocedural formality and cannot deny the substantive right ofthe assessee. The Revenue was on appeal before the Tribunal. 10. From the impugned order, more particularly inparagraph 3, wherein the Tribunal has extracted the grounds ofappeal raised by the Revenue having set out, the Revenue waslargely aggrieved on account of non-fulfillment of the mandateunder Rule 12(2) of the amended Income Tax Rules. 11. We find from the impugned order that the Tribunal didnot go into the said issue, but though fit to proceed on thebasis that the assessee Company has not derived any profits fromthe activities of developing or operating and maintaining anyinfrastructure facilities. The correctness of this question iscalled in before us. 10. From the impugned order, more particularly inparagraph 3, wherein the Tribunal has extracted the grounds ofappeal raised by the Revenue having set out, the Revenue waslargely aggrieved on account of non-fulfillment of the mandateunder Rule 12(2) of the amended Income Tax Rules. 11. We find from the impugned order that the Tribunal didnot go into the said issue, but though fit to proceed on thebasis that the assessee Company has not derived any profits fromthe activities of developing or operating and maintaining anyinfrastructure facilities. The correctness of this question iscalled in before us. 12. Firstly, we may note that though the Revenue hadraised the issue regarding the mandate under Rule 12(2) of theIncome Tax Rules before the Tribunal, the Tribunal did not takea decision on the same. Nevertheless, there are long line ofdecisions which hold that a substantive right cannot be deniedor taken away by virtue of a rule which is only a machineryprovision. In any event, the benefit granted under Section 80IAis a special benefit bearing in mind that industrialundertakings would undertake infrastructural projects. In thecase on hand, the claim made by the assessee was under Section80IA(4), by executing a project with the Government of IndiaOrganization. Therefore, we are of the view that the CIT(A) wasright in rejecting such a plea raised by the Revenue. 13. As mentioned above, the Tribunal did not go into thequestion as to the effect of the mandate under Rule 12(2), butproceeded to hold that the assessee Company has not derived anyprofits from the activities of developing or operating andmaintaining any infrastructure facilities. 14. Firstly, we need to mention that there are absolutelyno examination of the factual position in the case on hand. TheTribunal did not go through the Concession Agreement based onwhich the assessee Company had been granted the development work. https://hcservices.ecourts.gov.in/hcservices/ 15. Furthermore, Section 80IA(4) would apply to anyenterprise carrying on business of (i) developing or (ii)operating and maintaining or (iii) developing, operating andmaintaining any infrastructure facility which fulfills all theconditions, which are set out in clause (a), (b) and (c), to beread along with the provisos thereunder. 16. The important aspect to be taken note of is the useof the expression 'or'. Therefore, an enterprise, carrying onthe business of developing or operating and maintaining ordeveloping, operating and maintaining any infrastructurefacility, which fulfills the conditions set out under Sub-section 4, will be entitled to claim deduction. Therefore, theTribunal, failed to make any endeavour as to whether theassessee was entitled to claim deduction under any one of thethese heads, made a sweeping observation that the assessee hasnot derived any profits from the activities of developing oroperating and maintaining any infrastructure facilities. 17. It is the submission of the learned Senior StandingCounsel appearing for the Revenue that the Concession Agreementpertain to formation of the fifth and sixth lane adjoining theexisting four lane road, which was developed and was hither tomaintain by NHAI and the assessee at no point of time made anydevelopment to the four lane road, which was already inexistence. Therefore, her submission that whatever was theincome earned by the assessee, for the purpose of developing andmaintaining the fifth and sixth lane, probably the assessee maybe entitled to make a claim for deduction and not for the entiretoll road. 17. It is the submission of the learned Senior StandingCounsel appearing for the Revenue that the Concession Agreementpertain to formation of the fifth and sixth lane adjoining theexisting four lane road, which was developed and was hither tomaintain by NHAI and the assessee at no point of time made anydevelopment to the four lane road, which was already inexistence. Therefore, her submission that whatever was theincome earned by the assessee, for the purpose of developing andmaintaining the fifth and sixth lane, probably the assessee maybe entitled to make a claim for deduction and not for the entiretoll road. 18. In our considered view, this was never the case ofthe Revenue at any point of time i.e., before the AssessingOfficer or before the CIT(A) or before the Tribunal. That apart,we also find that the scope of the Concession Agreement as setout in Article 12 of the Concession Agreement would be veryrelevant, more particularly Clause 12.2, which mandates that theassessee shall maintain, at its cost, the existing lanes of theproject. Therefore, to state that the existing four lanes wouldnot fall within any one of the clauses under Sub-section 4 of80IA is factually incorrect, as the assessee develops the fifthand sixth lane and would also operate and maintain the same andso far as the existing lanes, namely 1 to 4, in terms of theConcession Agreement, the assessee has to operate and maintainthe same, so that the traffic worthiness and safety are at notime materially inferior as compared to its existing conditionprior to the execution of the agreement. Therefore, we are ofthe clear view that the finding rendered by the Tribunal isutterly 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 CaseAppeal is allowed and the substantial questions of law areanswered in favour of the assessee. No costs. Consequently,connected miscellaneous petition is closed. Sd/- Assistant Registrar //True Copy// Sub Assistant Registrar hvkTo1. The Income Tax Appellate Tribunal, 'D' Bench, Chennai.2. The Income Tax Officer, Corporate Ward 4(4), Chennai.3.The Commissioner of Income Tax Office, Room.222, Aayakar Bhavan, Main Building, II Floor, Mahatama Gandhi Road, Nungambakka, Chennai-34.+1cc to Mr.Srinath Sridevan, Advocate SR.5593T.C.A.No.654 of 2019andC.M.P.No.24830 of 2019RR(CO)CB(05/03/2021)