ITO, CHENNAI v. M/s. L & T Transportation Infrastructure Limited, CHENNAI

ITA 1696/CHNY/2010 | 2007-2008
Pronouncement Date: 22-07-2011 | Result: Dismissed

Appeal Details

RSA Number 169621714 RSA 2010
Assessee PAN AAACL1912F
Bench Chennai
Appeal Number ITA 1696/CHNY/2010
Duration Of Justice 9 month(s) 11 day(s)
Appellant ITO, CHENNAI
Respondent M/s. L & T Transportation Infrastructure Limited, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 22-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 22-07-2011
Date Of Final Hearing 14-07-2011
Next Hearing Date 14-07-2011
Assessment Year 2007-2008
Appeal Filed On 11-10-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A CHENNAI BEFORE SHRI N.S.SAINI ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN JUDICIAL MEMBER .. ITA NO.1680/MDS./10 ASSESSMENT YEAR:2007-08 M/S.L&T TRANSPORTATION INFRASTRUCTURE LIMITED. POST BOX NO.979 MOUNT POONAMALE ROAD MANAPAKKAM CHENNAI 600 089. VS. INCOME TAX OFFICER COMPANY CIRCLE II(4) CHENNAI 600 034. PAN AAACL 1912 F (APPELLANT) (RESPONDENT) ITA NO.1696/MDS./10 ASSESSMENT YEAR:2007-08 INCOME TAX OFFICER COMPANY CIRCLE II(4) CHENNAI 600 034. VS. M/S.L&T TRANSPORTATION INFRASTRUCTURE LIMITED. POST BOX NO.979 MOUNT POONAMALE ROAD MANAPAKKAM CHENNAI 600 089. PAN AAACL 1912 F (APPELLANT) (RESPONDENT) ASSESSEE BY : SMT. ANITA SUMANTH DEPARTMENT BY : SHRI SHAJI P JACOB PAGE 2 OF 26 ITA.1680 & 1696 /MDS/10 L&T TRANSPORTATION INFRASTRUCTURE LTD. O R D E R PER N.S.SAINI ACCOUNTANT MEMBER : THESE ARE CROSS APPEALS FILED BY THE ASSESSEE A ND THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF IN COME TAX(A) DATED 30.07.10. 2. IN THE ASSESSEES APPEAL THE SOLE ISSUE INVOLV ED IS THAT THE COMMISSIONER OF INCOME TAX(A) ERRED IN STATING THAT THE LICENSE FEE FOR WAYSIDE AMENITIES AND MISCELLANEOUS INCOME DO NOT HAVE DIRECT NEXUS WITH THE PROFITS AND GAINS OF THE BUSI NESS ELIGIBLE FOR DEDUCTION U/S.80-IA AND IS INCIDENTAL THERETO AND T HEREBY DENYING DEDUCTION U/S.80-IA IN RESPECT OF INCOME FROM LICEN SE FEE FOR WAYSIDE AMENITIES AND MISCELLANEOUS INCOME EARNED B Y THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER CONSIDERA TION. 3. THE BRIEF FACTS OF THE CASE ARE THAT L&T TRANSP ORTATION INFRASTRUCTURE LTD. HAS BEEN INCORPORATED TO UNDERT AKE THE CONSTRUCTION OF A BYPASS ROAD NEAR COIMBATORE AND A BRIDGE ON NH-47 ACROSS RIVER NAYAL PURSUANT OF CONCESSION AG REEMENT ENTERED INTO BY L&T TRANSPORTATION INFRASTRUCTURE LTD. ( L&T TIL) AND GOVERNMENT OF INDIA & GOVERNMENT OF TAMILNADU TO DEVELOP THE PROJECT ON BUILD OPERATE AND TRANSFER BOT M ODEL. THE OPERATION AND MAINTENANCE OF THE PROJECT IS ALSO UN DERTAKEN BY THE COMPANY. 4. DURING THE YEAR UNDER CONSIDERATION ASSESSEE H AD CLAIMED DEDUCTION U/S.80-IA OF THE ACT ON THE FOLLOWING INC OME:- PAGE 3 OF 26 ITA.1680 & 1696 /MDS/10 L&T TRANSPORTATION INFRASTRUCTURE LTD. BRIEF DESCRIPTION OF INCOME AMOUNT (IN RS.) INCOME FROM USE OF WAY-SIDE AMENITIES (TOILETS SERVICE STATIONS ETC) AS PER CLAUSE 7.4 OF THE CONCESSION AGREEMENT 298 476 INCOME FROM PUTTING UP ADVERTISEMENTS ON THE ROAD(HOARDINGS) AS PER CLAUSE 15.12 OF THE CONCESSION AGREEMENT 1 902 523 FEE FOR LAYING OPTICAL FIBER CABLE 500 000 OTHERS (REVENUES FROM SALE OF SCRAP FILM SHOOTING ETC.) 99 238 ASSESSING OFFICER DENIED THE ABOVE SAID INCOMES AS HE TREATED THE RECEIPTS AS INCOME FROM OTHER SOURCES. 5. ON APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (A) ASSESSEE ARGUED THAT THE WAY-SIDE AMENITIES AND OTH ER ANCILLARY FACILITIES ARE A PART OF THE PROJECTS SET UP BY THE APPELLANT. CONSEQUENTLY THE REVENUES THAT THE COMPANY DERIVES FROM COLLECTION OF USER CHARGES OF THE WAY-SIDE AMENITIE S AND OTHER INFRASTRUCTURE FACILITIES SPRINGS DIRECTLY FROM THE INFRASTRUCTURE FACILITY THAT ARE SET UP AND ARE DERIVED FROM THE B USINESS OF SETTING UP OF THE INFRASTRUCTURE FACILITY. HENCE INCOME F ROM LICENSE FEE FOR WAY-SIDE AMENITIES AND MISCELLANEOUS INCOME EAR NED BY L&T TIL DURING THE YEAR SHOULD BE ASSESSED AS ITS BUSIN ESS INCOME ELIGIBLE FOR DEDUCTION U/S.80-IA OF THE ACT. PAGE 4 OF 26 ITA.1680 & 1696 /MDS/10 L&T TRANSPORTATION INFRASTRUCTURE LTD. 6. LD. COMMISSIONER OF INCOME TAX(A) AFTER CONSIDE RING THE SUBMISSIONS OF THE ASSESSEE DISMISSED THE APPEAL OF THE ASSESSEE OBSERVING AS UNDER:- 6.1. I HAVE CAREFULLY CONSIDERED THEFACTS OF THE C ASE AND THE SUBMISSIONS MADE BY THE LD. AR. THE LD. AR HAS ARGUED THAT THE INCOME FROM THE WAYSIDE AMENITIES AND MISCELLANEOUS INCOME OF THE APPELLANT SHOULD BE CONSIDERED AS BUSINESS INCOME OF THE APPELLANT ELIGIBLE FOR DEDUCTION U/S.80-IA. THE KE Y WORDS USED IN THIS SECTION IS DERIVED FROM . WH AT THE APPELLANT IS ELIGIBLE FOR DEDUCTION IS THE PROFITS AND GAINS DERIVED FROM THE ELIGIBLE BUSINESS OF INFRASTRUCTURAL UNDERTAKING AS SPECIFIED IN SECTION 80 IA(4)(I). THE DEDUCTION IS ALLOWED AT THE RATE OF 100% OF THE PROFITS AND GAINSDERIVED FROM SUCH BUSINESS. THE COURTS HAVE GENERALLY INTERPRETED THE WORDS DERIVED FROM NARROWLY TO MEAN TO TRACE FROM A SOURCE ARISE FROM AND ORIGINATE IN. THE APEX COUR T IN CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD VS. COMMISSIONER OF INCOME TAX [113 ITR 84 (SC)] HELD THAT THE SCOPE OF THEWORDS DERIVED FROM IS NARROW ER THAN THEWORDS ATTRIBUTABLE TO. THE APEX COURT IN ITS SUBSEQUENT DECISION IN COMMISSIONER OF INCOME TAX V. STERLING FOODS [237 ITR 579 (SC)] HELD THAT WHER E THE NEXUS BETWEEN THE PROFITS AND GAINS AND THE INDUSTRIAL UNDERTAKING IS NOT DIRECT BUT INCIDENTA L SUCH INCOME CANNOT BE REGARDED AS HAVING BEEN DERIVED FROM THE INDUSTRIAL UNDERTAKING. EVEN INTEREST EAR NED PAGE 5 OF 26 ITA.1680 & 1696 /MDS/10 L&T TRANSPORTATION INFRASTRUCTURE LTD. FROM DEPOSIT MADE WITH THE ELECTRICITY BOARD FOR OBTAINING ELECTRICITY IS NOT ELIGIBLE FOR DEDUCTION AS HELD BY THE SUMMIT COURT IN PANDIAN CHEMICALS LTD. [262 ITR 278 (SC)]. THE HONBLE SUPREME COURT IN ITS RECENT DECISION IN THE CASE OF LIBERTY SHOE V. COMMISSIONER OF INCOME TAX [317 ITR 218 (SC)] HELD THAT IF THE NATURE OF INCOME IS SUCH THT IT CONSTIT UTES INDEPENDENT SOURCE OF INCOME BEYOND FIRST DEGREE NEXUS BETWEEN PROFIT AND INDUSTRIAL UNDERTAKING TH E SAME WOULD NOT QUALIFY FOR DEDUCTION. IT IS FOUND T HAT THE APPELLANT HAS INCLUDED INCOME BYWAY OF WAYSIDE AMENITIES AND MISCELLANEOUS INCOME IN THE PROFIT OF ELIGIBLE BUSINESS AND CLAIMED DEDUCTION THEREON. B Y THEIR VERY NATURE THE SOURCES OF THESE INCOME ARE A STEP REMOVED FROM THE ELIGIBLE BUSINESS. THERE IS NO DIRECT NEXUS BETWEEN OTHER INCOME AND PROFITS AND GAINS OF THE ELIGIBLE BUSINESS. THE CONNECTION BETW EEN THE TWO IS BEYOND FIRST DEGREE AND IS ONLY INCIDENT AL AND HENCE IT IS NOT ENTITLED FOR DEDUCTION AS CLAIM ED BY THE APPELLANT. ACCORDINGLY THIS GROUND IS DISMISSE D. 7. THE LEARNED AUTHORIZED REPRESENTATIVE OF THE AS SESSEE HAS FILED WRITTEN SUBMISSION WHICH IS AS FOLLOWS:- IN THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONE R OF INCOME TAX (APPEALS) [CIT (A)] L&T TRANSPORT INFRASTRUCTURE LIMITED (L&T TIL OR THE APPELLANT OR THE COMPANY OR THE ASSESSEE) WISHES TO SUBMIT AS UNDER: 1. BACKGROUND ABOUT THE COMPANY L&T TIL HAS BEEN INCORPORATED TO UNDERTAKE THE DEVE LOPMENT OF A BYPASS ROAD NEAR COIMBATORE AND A BRIDGE ON NH-47 ACROSS RIVER NOYY AL PURSUANT TO A CONCESSION PAGE 6 OF 26 ITA.1680 & 1696 /MDS/10 L&T TRANSPORTATION INFRASTRUCTURE LTD. AGREEMENT ENTERED INTO BY L&T LIMITED AND THE GOVER NMENT OF INDIA (GOI) AND GOVERNMENT OF TAMIL NADU (GOTN) TO DEVELOP THE PR OJECT ON BUILD-OPERATE-TRANSFER (BOT) MODEL. THE OPERATION & MAINTENANCE OF THE P ROJECT IS ALSO UNDERTAKEN BY THE COMPANY. THE APPELLANT COMPANY WAS SET-UP SIGNIFIC ANTLY TO CARRY ON THE DEVELOPMENT OPERATION AND MAINTENANCE OF THE ABOVE PROJECT AND THIS IS THE ONLY BUSINESS WHICH IS UNDERTAKEN BY THE APPELLANT AND ALL ITS OPERATING R EVENUES SPRING DIRECTLY FROM THE PROJECT. 2. FACTS OF THE CASE L&T TIL HAS CLAIMED DEDUCTION UNDER SECTION 80-IA O F THE INCOME-TAX ACT 1961 IN RESPECT OF THE FOLLOWING STREAMS OF INCOME FROM THE ABOVE-M ENTIONED PROJECT: S NO BRIEF DESCRIPTION OF INCOME AMOUNT (IN RS) 1 INCOME FROM TOLL COLLECTIONS 172 900 492 2 INCOME FROM USE OF WAY-SIDE AMENITIES (TOILETS SERVICE STATIONS ETC) AS PER CLAUSE 7.4 OF THE CONCESSION AGREEMENT 298 476 3 INCOME FROM PUTTING UP ADVERTISEMENTS ON THE ROAD (HOARDINGS) AS PER CLAUSE 15.12 OF THE CONCESSION AGREEMENT 1 902 523 4 FEE FOR LAYING OPTICAL FIBER CABLE 500 000 5 OTHERS (REVENUES FROM SALE OF SCRAP FILM SHOOTING ETC) 99 238 WHILE DEDUCTION UNDER SECTION 80-IA IN RESPECT OF I TEM 1 HAD BEEN ALLOWED BY THE AO DEDUCTION IN RESPECT OF ITEMS (2) TO (5) HAD BEEN D ISALLOWED BY THE ASSESSING OFFICER. ON APPEAL THE COMMISSIONER OF INCOME-TAX (APPEALS) WA S OF THE VIEW THAT INCOMES REFERRED IN (2) TO (5) ABOVE ARE NOT DERIVED FROM THE BUSINES S OF DEVELOPING OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY (BEING THE ROAD / BRIDGE IN THE INSTANT CASE) AND HENCE INELIGIBLE FOR DEDUCTION UNDER SECTION 80-IA OF THE ACT. THE CIT(A) HAS STATED IN HIS ORDER THAT THE INCOME REFERRED TO IN (2) TO (5) ABOVE HAS NO NEXUS WITH THE PROFITS AND GAINS OF ELIGIBLE BUSINESS AND ITS CONNECTION WITH THE BUSIN ESS OF INFRASTRUCTURE DEVELOPMENT IS ONLY INCIDENTAL. OUR SUBMISSION 3. CLASSIFICATION OF INCOME IS THE INCOME PROFIT S AND GAINS OF BUSINESS OR PROFESSION (PGBP) OR IS IT INCOME FROM OTHER SO URCES (IFOS) 3.1 RELEVANT PROVISIONS OF ACT AND POSITION IN LAW PAGE 7 OF 26 ITA.1680 & 1696 /MDS/10 L&T TRANSPORTATION INFRASTRUCTURE LTD. PGBP IS SUBJECT TO TAX UNDER SECTION 28 OF THE ACT. AS PER SECTION 28: THE FOLLOWING INCOME SHALL BE CHARGEABLE TO INCOME -TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION (I) THE PROFITS AND GAINS OF ANY BUSINESS OR PROF ESSION WHICH WAS CARRIED ON BY THE ASSESSEE AT ANY TIME DURING THE PREVIOUS YEAR .. THE TERM BUSINESS IS NOT DEFINED UNDER THE ACT. THE MEANING ASSIGNED TO THE SAID TERM BY VARIOUS JUDICIAL PRECEDENTS IS PROVIDED BELOW: THE EXPRESSION BUSINESS IN ORDINARY PARLANCE MEA NS ANY TRADING ACTIVITY ACCOMPANIED BY REGULARITY OF TRANSACTIONS INTENDED FOR THE PURPOSE OF MAKING PROFIT. IN GENERAL A SINGLE TRANSACTION IS NOT TAKEN AS BU SINESS [ECLAT CONSTRUCTION (P.) LTD. V. CIT [1988] 172 ITR 84 (PAT.)] . THE EXPRESSION BUSINESS IS A WELL-KNOWN EXPRESSI ON IN INCOME-TAX LAW. IT MEANS SOME REAL SUBSTANTIAL AND SYSTEMATIC OR ORGANISED COURSE OF ACTIVITY OR CONDUCT WITH A SET PURPOSE [CIT V. DISTRIBUTORS (BARODA) (P.) LTD. [1972] 83 I TR 377 (SC) / NARAIN SWADESHI WVG. MILLS V. CEPT [1954] 26 ITR 76 5 (SC) / CIT V. ADMIRALTY FLATS MOTEL [1982] 133 ITR 895 (MAD)] . THE EXPRESSION BUSINESS DOES NOT NECESSARILY MEA N TRADE OR MANUFACTURE ONLY: IT IS BEING USED AS INCLUDING WITHIN ITS SCOPE PROFESS IONS VOCATIONS AND CALLINGS FOR A FAIRLY LONG TIME. THE WORD BUSINESS IS ONE OF WID E IMPORT AND IT MEANS AN ACTIVITY CARRIED ON CONTINUOUSLY AND SYSTEMATICALLY BY A PER SON BY THE APPLICATION HIS LABOUR AND SKILL WITH A VIEW TO EARN INCOME [BARENDRA PRASAD RAY V. ITO [1981] 129 ITR 295 (SC)] . WHERE AN ACTIVITY FORMS PART OF THE MAIN OBJECTS O F THE COMPANY UNDER ITS MEMORANDUM OF ASSOCIATION IT SHOULD BE TAXABLE UND ER THE HEAD PGBP [CIT V RAJASTHAN LAND DEVELOPMENT CORPORATION [1995] 211 I TR 597 (RAJ) / CIT V MONARCH TOOLS PVT LTD 260 ITR 258]. 3.2 APPLICABILITY IN THE INSTANT CASE (A) COLLECTION OF ADVERTISEMENT REVENUES AND INCOME FROM WAY-SIDE AMENITIES ARE REGULAR INCOME-STREAMS OF THE COMPANY IN ADDITION TO INCOME FROM TOLL COLLECTIONS FROM USERS OF INFRASTRUCTURE FACILITY HENCE SATISF YING THE TEST OF BEING A BUSINESS INCOME PER JUDICIAL PRECEDENTS REFERRED ABOVE. PAGE 8 OF 26 ITA.1680 & 1696 /MDS/10 L&T TRANSPORTATION INFRASTRUCTURE LTD. (B) AS PER THE MAIN OBJECTS CLAUSE OF THE MEMORANDU M OF ASSOCIATION OF THE APPELLANT: THE MAIN OBJECTS TO BE PURSUED BY THE COMPANY ON I TS INCORPORATION ARE: 1. TO NEGOTIATE AND OBTAIN CONCESSIONS FROM THE APPROP RIATE GOVERNMENT/S FOR THE RIGHTS TO BUILD OPERATE AND OWN OR TRANSFER HI GHWAYS BY-PASSES RAIL OVER BRIDGES AND UPON SUCH TERMS AND FOR SUCH BENEFITS AS MAY BE SET- FORTH IN THE CONCESSIONS OR NEGOTIATED FROM TIME-TO-TIME AND GENERALLY CARRY ON THE BUSINESS OF OWNERS OPERATORS OF HIGHWAYS B RIDGES PUBLIC UTILITIES TELECOMMUNICATION FACILITIES AND ANY SUC H OTHER RIGHTS PROPERTIES UTILITIES AND SERVICES WHEREVER SITUATED. AS IS EVIDENT FROM THE ABOVE THE APPELLANT IS AUTH ORISED TO CARRY ON THE BUSINESS OF OWNER AND OPERATOR OF THE FACILITY AND IS AUTHORISE D TO OPERATE THE PROJECT ASSET AS PER TERMS OF THE CONCESSION AGREEMENT. IT IS SUBMI TTED THAT THE CONCESSION AGREEMENTS ENTERED INTO BETWEEN THE APPELLANT AND T HE GOVERNMENTS CLEARLY STATE THAT THE APPELLANT IS AUTHORISED TO PROVIDE WAY-SID E AMENITIES AND PUT UP HOARDINGS ETC AND EARN INCOME FROM THE SAID SOURCES. [RELEVA NT EXTRACTS PROVIDED IN PARAGRAPH 4.2 AND 4.3] (C) WITHOUT PREJUDICE TO THE ABOVE WE ALSO WISH TO SUBMIT THAT THE ABOVE-MENTIONED SOURCES OF INCOME ITEMS (2) AND (3) SHOWN SEPARATEL Y AS LICENSE FEE FOR WAYSIDE AMENITIES HAVE BEEN REPORTED UNDER THE HEAD INCO ME IN THE FINANCIAL STATEMENTS ALONGSIDE FEE COLLECTION FROM USERS OF INFRASTRUCT URE FACILITY. THE FACT THAT INCOME HAS BEEN REPORTED UNDER THE MAIN HEAD OF INCOME AND NOT UNDER THE RESIDUAL HEAD OF OTHER INCOME SIGNIFIES THE INTENT OF THE ASSES SEE TO EARN SUCH INCOME AS PART OF ITS MAIN BUSINESS AND THE SAME SHOULD BE SUBJECT TO TAX AS BUSINESS INCOME. BASED ON DISCUSSION ABOVE THE APPELLANT WISHES TO SUBMIT THAT THE INCOMES REFERRED IN POINTS (2) TO (5) OF PARAGRAPH 2 SHOULD BE SUBJE CTED TO TAX AS ITS BUSINESS INCOME. 4. ELIGIBILITY FOR DEDUCTION UNDER SECTION 80-IA AS DISCUSSED IN PARAGRAPH 3 THE APPELLANT WISHES T O SUBJECT INCOME IN THE NATURE REFERRED IN CLAUSES (2) TO (5) SHOULD BE SUBJECT TO TAX AS P GBP AND NOT IFOS. FURTHER THE APPELLANT ALSO SUBMITS THAT THE SAID INCOME SHOULD BE ELIGIBL E FOR DEDUCTION UNDER SECTION 80-IA OF THE ACT FOR REASONS MENTIONED BELOW: 4.1 RELEVANT PROVISIONS OF THE ACT AND POSITION IN LAW PAGE 9 OF 26 ITA.1680 & 1696 /MDS/10 L&T TRANSPORTATION INFRASTRUCTURE LTD. AS PER SECTION 80IA OF THE ACT 'WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUD ES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN E NTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-SECTION (4) (SUCH BUSINESS BEING HEREINAFTER RE FERRED TO AS THE ELIGIBLE BUSINESS) THERE SHALL IN ACCORDANCE WITH AND SUBJECT TO THE PROVIS IONS OF THIS SECTION BE ALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE A DEDUC TION...' . THE EXPRESSION 'DERIVED FROM' HAS NOT BEEN DEFINED IN THE ACT. IT IS TYPICALLY UNDERSTOOD TO MEAN PROFITS HAVING CLOSE NEXUS WITH THE BUSINESS E LIGIBLE FOR DEDUCTION UNDER SECTION 80-IA OF THE ACT (IN THE INSTANT CASE DEVELOPMENT OF INF RASTRUCTURE FACILITY BEING TOLL ROAD AND BRIDGE). THE FOLLOWING JUDICIAL PRECEDENTS CAN BE RELIED ON FOR THE MEANING OF THE TERM DERIVED FROM: CIT V VISWANATHAN AND CO. (261 ITR 737) (MAD) THE WORD DERIVED IS USUALLY FOLLOWED BY THE WORD FROM AND IT MEANS: GET OR TRACE FROM A SOURCE; ARISE FROM ORIGINATE IN; SHOW THE O RIGIN OF FORMATION OF. IN THE CASE OF L&T TIL THE IMPUGNED ITEMS OF INCOM E HAVE ORIGINATED AND ARISEN FROM THE INFRASTRUCTURE WHICH WAS DEVELOPED OPERAT ED AND MAINTAINED BY THE COMPANY. HENCE WE WISH TO SUBMIT THAT SUCH INCOME I S DERIVED FROM THE BUSINESS OF INFRASTRUCTURE DEVELOPMENT. CIT V. SPORTKING INDIA LIMITED [2010] 324 ITR 283 ( DEL) THERE IS NO REASON WHY KEEPING IN ACCOUNT THE INTE NT OF THE PROVISION OF SECTION 80- IA AND THE FACT THAT AN INDUSTRIAL UNDERTAKING HAS ALREADY BEEN ESTABLISHED AND IS RUNNING (I.E. INVESTMENT DONE MACHINERY PURCHASED EMPLOYMENT AND REVENUE GENERATED ETC.) A RESTRICTED INTERPRETATION BE GIVE N TO THE EXPRESSION 'DERIVED FROM ANY BUSINESS OF AN INDUSTRIAL UNDERTAKING'. . ACIT V. MAXCARE LABORATORIES LTD. [2005] 273 ITR (A .T.) 1 EVEN FOR DETERMINING THE PROFITS AND GAINS DERI VED FROM ANY BUSINESS OF INDUSTRIAL UNDERTAKING MANUFACTURING OR PRODUCING ANY ARTICLE OR THING INCLUDE SALE PROCEEDS OF SUCH ARTICLE OR THING OF SCRAP GENERATE D DURING THE COURSE OF SUCH MANUFACTURING ACTIVITY. IT IS NOT POSSIBLE TO CLOSE EYES TO THE EVENT WHICH AMOUNTS TO INCREASE IN THE SALE CONSIDERATION. AFTER ALL WHAT IS TO BE DETERMINED IS THE PROFITS AND GAINS OF BUSINESS OF INDUSTRIAL UNDERTAKING AND THERE IS NO WARRANT TO STOP FOR THE ABOVE PURPOSE AT SALES OF MAIN PRODUCTS ONLY. T HE CONTROVERSY HERE IS NOT WHEN MANUFACTURING ACTIVITY OF THE ASSESSEE WAS OVER BU T WHAT WAS THE PROFIT AND GAINS PAGE 10 OF 26 ITA.1680 & 1696 /MDS/10 L&T TRANSPORTATION INFRASTRUCTURE LTD. OF THE BUSINESS OF THE INDUSTRIAL UNDERTAKING AND H OW WAS IT TO BE DETERMINED. FOR DETERMINING THE ABOVE PROFITS OF BUSINESS OF INDUST RIAL UNDERTAKING IT IS NOT POSSIBLE TO IGNORE SALE OF EMPTY DRUMS/CONTAINERS SALE OF U SELESS MATERIALS WHICH IS CLOSELY AND DIRECTLY CONNECTED WITH AND OUTCOME OF THE MANU FACTURING PROCESS ITSELF. 4.2 APPLICABILITY IN THE INSTANT CASE 4.2.1 LICENSE FEE FROM USE OF WAY-SIDE AMENITIES WAY-SIDE AMENITIES REPRESENT INFRASTRUCTURE FACILIT IES LINKED TO THE PROJECT DEVELOPED BY THE APPELLANT (TOLL ROAD AND BRIDGE) SUCH AS PARKING FA CILITIES SERVICE STATIONS AND OTHER FACILITIES FOR USERS OF THE INFRASTRUCTURE FACILITY. OPERATIO N AND MAINTENANCE OF TOLL ROADS / BY-PASS ROADS INCLUDE INTER ALIA PROVISION OF WAYSIDE AMENI TIES TO USERS OF INFRASTRUCTURE FACILITIES. THE REQUIREMENT TO PROVIDE WAY-SIDE AMENITIES STEMS FROM THE CONCESSION AGREEMENT ENTERED INTO BY THE APPELLANT WITH THE GOVERNMENT A S PART OF CLAUSE 7 WHICH DEALS WITH THE SCOPE OF THE PROJECT. THE RELEVANT EXTRACT IS RE [PRODUCED BELOW: 7.4.4 PASSENGER ORIENTED WAYSIDE AMENITIES LIKE TO ILETS PARKING FACILITIES SERVICE STATION SHALL BE PROVIDED AT SUITABLE LOCATION IN THE ACQUI RED RIGHT OF WAY AS PER RELEVANT STANDARDS AND GUIDELINES OF M.O.S.R./I.R.C ALSO THE APPELLANT INTENDS TO DRAW ATTENTION OF YO UR GOODSELF TO THE PROVISIONS OF CLAUSE 7.5.9 WHICH PERTAINS TO MAINTENANCE AND OPERATIONS : 7.5.9 THE ROAD USER ORIENTED WAYSIDE AMENITIES SHA LL BE KEPT CLEAN AND WELL MAINTAINED CONDITION WITH THE TARIFF RATES CONSPICUOUSLY DISP LAYED FOR THE INFORMATION OF THE USERS. FROM THE ABOVE IT IS APPARENT THAT PROVISION OF WA Y-SIDE AMENITIES AND EARNING RELATED INCOME IS AN INTEGRAL PART OF THE INFRASTRUCTURE FA CILITY. ACCORDINGLY THE APPELLANT REITERATES THAT SUCH INCOME IS ESSENTIALLY DERIVED FROM THE BUSINESS OF INFRASTRUCTURE DEVELOPMENT AND HAS A CLOSE NEXUS WITH THE INFRASTRUCTURE FACIL ITY. 4.2.2 REVENUES FROM ADVERTISEMENT MISCELLANEOUS INCOME INCLUDES INCOME FROM ADVERTISE MENTS AND HOARDINGS; INCLUDING ADVERTISEMENTS ON TOLL TICKETS. THE AUTHORITY TO PU T UP HOARDINGS/ ADVERTISEMENTS IS ANY FORM SPRINGS DIRECTLY FROM THE CONCESSION AGREEMENT IN T HIS REGARD CLAUSE 15.12 HAS BEEN REPRODUCED BELOW. PAGE 11 OF 26 ITA.1680 & 1696 /MDS/10 L&T TRANSPORTATION INFRASTRUCTURE LTD. 15.12 DURING THE CONCESSION PERIOD THE COMPANY SHA LL BE ENTITLED TO PUT UP HOARDINGS OR OTHER FORMS OF ADVERTISEMENT AS PER IRC STANDARDS I N THIS REGARD ON THE PROJECT FACILITY WITHIN THE RIGHT OF WAY AND BE SOLELY ENTITLED TO ALL THE REVENUES ARISING THEREFROM FROM THE ABOVE CLAUSE IT IS CLEAR THAT THE RECEIPT S UNDER THE ADVERTISEMENT/ HOARDINGS WERE ENVISAGED TO BE AN IMPORTANT FORM OF PAYMENT OVER A ND ABOVE THE TOLL COLLECTION AND THAT THE INCOME IS OF A NATURE SIMILAR TO THE TOLL COLLECTIO N I.E. INCOME FROM THE OPERATION OF THE INFRASTRUCTURE FACILITY. 4.2.3 REVENUES FROM SALE OF SCRAP INCOME FROM SALE OF SCRAP SHOULD BE ELIGIBLE FOR DE DUCTION UNDER SECTION 80-IA. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF THE CUTTAC K ITAT IN THE CASE OF ACIT V. MAXCARE LABORATORIES LTD. 4.3 REBUTTALS TO THE ARGUMENT OF THE CIT(A)/ APPLIC ABILITY OF PANDIAN CHEMICALS LTD. VS CIT (262 ITR 278) (SC) THE LEARNED CIT(A) HAS WITHOUT DISTINGUISHING THE F ACTS AND CIRCUMSTANCES OF THE CASE HAS RELIED ON JUDICIAL PRECEDENTS [PANDIAN CHEMICALS ( SUPRA)] NOT APPLICABLE TO THE APPELLANT IN DECIDING ON THE MATTER. THE LEARNED CIT(A) HAS COMPARED INCOME ARISING FROM SUCH WAYSIDE AMENITIES TO DEPOSIT MADE WITH THE ELECTRICITY BOARD; AS IN THE CASE OF PANDIAN CHEMICALS LTD. [262 ITR 278 (SC)] IN HOLDING THAT BY THEIR VERY NATURE THE SAID INCOME ARE A STEP REMOVED FROM THE ELIGIBLE BUSINESS AND NOT DERIVED FROM THE BUSINESS ELIGIBLE FOR DEDUCTION UNDER SECTION 80- IA (IN THE INSTANT CASE INFRASTRUCTURE DEVELOPMENT) . THE LEARNED CIT(A) HAS ERRED IN MAKING THE SAID COMPARISON FOR THE FOLLOWING REASONS: (A) FACTS IN THE CASE OF PANDIAN CHEMICALS (SUPRA) ARE SIGNIFICANTLY DIFFERENT FROM THE FACTS IN THE INSTANT CASE. (B) THE DIFFERENCE IN LANGUAGE EMPLOYED AND SCOPE O F DEDUCTION IN CASE OF SECTION 80HH (SUBJECT MATTER OF DEDUCTION IN THE CASE OF PA NDIAN CHEMICALS) AND SECTION 80-IA (SUBJECT MATTER OF DEDUCTION IN THE INSTANT C ASE) PARTICULARS PANDIAN CHEMICALS LTD. CURRENT CASE DEDUCTION CLAIMED UNDER SECTION 80HH SECTION 80-IA DEDUCTION CAN BE CLAIMED ANY PROFITS AND GAINS DERI VED PROFITS AND GAINS DERIVED BY PAGE 12 OF 26 ITA.1680 & 1696 /MDS/10 L&T TRANSPORTATION INFRASTRUCTURE LTD. IN RESPECT FROM AN INDUSTRIAL UNDERTAKING AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB- SECTION (4) NOTE L&T TIL IS COVERED WITHIN THE SCOPE OF SUB- SECTION (4) OF SECTION 80-IA SCOPE OF THE SECTION TAX HOLIDAY IS RESTRICTED TO INCOME ARISING FROM THE ACTIVITY OF THE INDUSTRIAL UNDERTAKING. ANY INCIDENTAL INCOME ARISING IN THE COURSE OF SUCH ACTIVITY MAY NOT BE ELIGIBLE FOR DEDUCTION THE WORDS ANY BUSINESS REFERRED TO IN SUB-SECTION (4) WIDENS THE SCOPE OF INCOME ELIGIBLE FOR TAX HOLIDAY TO ALL INCOMES THAT ARISE FROM THE BUSINESS IN SUB-SECTION (4) IE ALL INCOME FROM THE BUSINESS OF INFRASTRUCTURE DEVELOPMENT. IN OTHER WORDS THE BENEFIT OF DEDUCTION IS AVAILABLE NOT ONLY TO THE INCOME DERIVED FROM THE UNDERTAKING BUT TO ALL SORT OF INCOME WHICH IS DERIVED FROM THE BUSINESS OF THE UNDERTAKING. BASED ON THE ABOVE IT IS SUBMITTED THAT THE INTENT ION OF THE LEGISLATURE WAS TO GIVE THE BENEFIT OF THE DEDUCTION NOT ONLY TO THE INCOME DER IVED FROM THE UNDERTAKING BUT TO INCOME WHICH IS DERIVED FROM THE BUSINESS OF INFRASTRUCTUR E DEVELOPMENT. IN THE CASE OF L&T TIL REVENUES FROM PROVISION OF WAY-SIDE AMENITIES ON THE PROJECT FACILITY REVENUES FROM HOARDINGS / ADVERTISEMENT SALE OF SC RAP ETC HAVE A DIRECT NEXUS WITH THE BUSINESS OF INFRASTRUCTURE DEVELOPMENT. HENCE THE SAID INCOME SHOULD BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IA BEING INCOME DERIVED FROM THE BUSINESS OF DEVELOPMENT OF INFRASTRUCTURE FACILITY. 5. OUR PRAYER ON THE BASIS OF THE ABOVE SUBMISSIONS THE COMPANY PRAYS THAT: PAGE 13 OF 26 ITA.1680 & 1696 /MDS/10 L&T TRANSPORTATION INFRASTRUCTURE LTD. THE INCOME EARNED BY THE COMPANY CLASSIFIED AS LI CENSE FEE FOR WAYSIDE AMENITIES AND MISCELLANEOUS INCOME ARE BUSINESS INCOME BY NATURE. THE SAID INCOMES ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA BECAUSE THEY RELATE DIRECTLY TO THE BUSINESS OF PROVIDING INFRASTRUCTUR E FACILITY. THE ORDER OF THE CIT (A) BE SET ASIDE CONSIDERING THE MERITS OF THE CASE AND THE COMPANY BE ALLOWED THE DEDUCTION UNDER SECTION 80IA ON THE SAID INCOMES. 8. ON THE OTHER HAND THE LD. DR VEHEMENTLY ARGUED AND SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND THE MATERIALS AVAIL ABLE ON RECORD. IN THE INSTANT CASE THE ASSESSEE ENTERED INTO A TR IPARTITE AGREEMENT WITH CENTRAL GOVERNMENT AND GOVERNMENT OF TAMILNADU TO BUILD OPERATE AND MAINTAIN TOLL ROAD AND BY PASS ROAD. ACCORDING TO THE SAID AGREEMENT THE ASSESSEE WAS ALSO REQUIRED TO BUILD MAINTAIN AND OPERATE WAY SIDE AME NITIES TO USERS OF INFRASTRUCTURE FACILITY. FURTHER IT IS N OT IN DISPUTE THAT HE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S.80-IA IN RES PECT OF INCOME DERIVED FROM THE BUSINESS OF DEVELOPING OPERATING A ND MAINTAINING INFRASTRUCTURE FACILITIES I.E. ROAD INC LUDING TOLL ROAD. THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ASS ESSEE HAS ALSO DERIVED THE FOLLOWING INCOME DURING THE YEAR U NDER CONSIDERATION:- PAGE 14 OF 26 ITA.1680 & 1696 /MDS/10 L&T TRANSPORTATION INFRASTRUCTURE LTD. BRIEF DESCRIPTION OF INCOME AMOUNT (IN RS.) INCOME FROM USE OF WAY-SIDE AMENITIES (TOILETS SERVICE STATIONS ETC) AS PER CLAUSE 7.4 OF THE CONCESSION AGREEMENT 298 476 INCOME FROM PUTTING UP ADVERTISEMENTS ON THE ROAD(HOARDINGS) AS PER CLAUSE 15.12 OF THE CONCESSION AGREEMENT 1 902 523 FEE FOR LAYING OPTICAL FIBER CABLE 500 000 OTHERS (REVENUES FROM SALE OF SCRAP FILM SHOOTING ETC.) 99 238 10. ACCORDING TO THE LEARNED ASSESSING OFFICER TH E ABOVE INCOME WERE NOT DERIVED FROM THE DEVELOPING OPERATI NG AND MAINTAINING ANY INFRASTRUCTURE FACILITY AND THEREFO RE HE EXCLUDED THE SAME WHILE COMPUTING DEDUCTION ALLOWABLE U/S.80 -IA OF THE ACT. 11. ON APPEAL THE LEARNED COMMISSIONER OF INCOME TAX(A) CONFIRMED THE ACTION OF THE LEARNED ASSESSING OFFIC ER . 12. BEFORE US THE MAIN CONTENTION OF THE ASSESSEE IS THAT WAYSIDE AMENITIES WERE BUILT AND MAINTAINED AND OPE RATED BY THE ASSESSEE IN PURSUANCE TO THE TRIPARTITE AGREEME NT FOR DEVELOPING OPERATING AND MAINTAINING INFRASTRUCTUR E FACILITY ENTERED INTO BY IT WITH CENTRAL AND STATE GOVERNMEN TS. IN OTHER WORDS TO BUILD MAINTAIN AND OPERATE ROAD SIDE AMEN ITIES WAS THE CONDITION PRECEDENT OR PART OF THE AGREEMENT TO DEV ELOP OPERATE AND MAINTAIN ROAD. THEREFORE ACCORDING TO THE ASS ESSEE THE INCOME DERIVED FROM ROAD SIDE AMENITIES WERE PART O F THE PAGE 15 OF 26 ITA.1680 & 1696 /MDS/10 L&T TRANSPORTATION INFRASTRUCTURE LTD. BUSINESS OF DEVELOPING OPERATING AND MAINTAINING OF INFRASTRUCTURE FACILITY AND THEREFORE ELIGIBLE FOR DEDUCTION U/S.80-IA OF THE ACT. THE ASSESSEE ALSO CONTENDED THAT THE USE OF WORD BUSINESS IN SECTION 80-IA WHICH IS OF A W IDER CONNOTATIONS MAKES IT DISTINGUISHABLE FROM THE PROV ISIONS OF SECTION 80-HH WHEREIN THE WORD BUSINESS WAS NOT T HERE AND THEREFORE THE DECISIONS IN RESPECT OF SECTION 80-H H ARE NOT APPLICABLE. THE ASSESSEE ALSO SUBMITTED THAT SCRAP SALE WAS WITH RESPECT TO THE SALE OF LEFT OVER MATERIAL WHI CH WAS PURCHASED FOR CONSTRUCTION OF INFRASTRUCTURE FACILI TY AND THEREFORE THE ENTIRE RECEIPT OF SALE PROCEEDS WAS NOT THE INC OME OF THE ASSESSEE AND THE SAME WAS ALSO INTIMATELY CONNECTED WITH THE DEVELOPING OPERATING AND MAINTAINING OF INFRASTRUCT URE FACILITY. IN VIEW OF THE ABOVE THE ASSESSEE CONTENDED THAT THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN NOT ALLOWING DEDU CTION U/S.80-IA IN RESPECT OF THE ABOVE INCOME. 13. ON THE OTHER HAND THE LD. LEARNED DEPARTMENTA L REPRESENTATIVE SUPPORTED THE ORDER OF THE LOWER AUT HORITIES. 14. WE FIND THAT THE FIRST ISSUE WHICH REQUIRES OU R ADJUDICATION IS WHETHER THE OPERATION AND MAINTENANCE OF ROAD SI DE AMENITIES FORMS PART OF THE ASSESSEES BUSINESS OF BUILDING O PERATING AND MAINTAINING OF INFRASTRUCTURE FACILITY AS ENVISAGED IN SUB-SECTION (4) OF SECTION 80-IA OR NOT. WE FIND THAT INFRASTR UCTURE FACILITY HAS BEEN DEFINED IN EXPLANATION TO SECTION 80-IA (4) AS UNDER:- FOR THE PURPOSES OF THIS CLAUSE INFRASTRUCTURE FAC ILITY MEANS- PAGE 16 OF 26 ITA.1680 & 1696 /MDS/10 L&T TRANSPORTATION INFRASTRUCTURE LTD. (A) A ROAD INCLUDING TOLL ROAD A BRIDGE OR A RAIL SYSTEM; (B) A HIGHWAY PROJECT INCLUDING HOUSING OR OTHER AC TIVITIES BEING AN INTEGRAL PART OF THE HIGHWAY PROJECT; (C) A WATER SUPPLY PROJECT WATER TREATMENT SYSTEM IRRIGATION PROJECT SANITATION AND SEWERAGE SYSTEM OR SOLID WASTE MANAGEMENT SYSTEM; (D) A PORT AIRPORT INLAND WATERWAY [INLAND PORT OR NAVIGATIONAL CHANNEL IN THE SEA] 15. A READING OF THE ABOVE PROVISION SHOWS THAT TH E ROAD SIDE AMENITIES ARE NOT INCLUDED WITHIN THE MEANING OF IN FRASTRUCTURE FACILITY FOR THE PURPOSES OF SECTION 80-IA(4) OF TH E ACT. ROAD SIDE AMENITIES CANNOT BE CALLED ROAD. THEREFORE IN THE INSTANT CASE EVEN WHEN THE ROAD SIDE AMENITIES WERE REQUIRED TO BE BUILT OPERATED AND MAINTAINED BY THE ASSESSEE UNDER THE S AME AGREEMENT UNDER WHICH IT WAS AUTHORIZED TO BUILD OP ERATE AND MAINTAIN ROAD SUCH ROADSIDE AMENITIES CANNOT BE CA LLED INFRASTRUCTURE FACILITIES AS ENVISAGED IN SECTION 8 0-IA(4) OF THE ACT. FURTHER WE FIND THAT SUB-SECTION(1) AND SUB- SECTION (4) OF SECTION 80-IA READ AS UNDER:- (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE IN CLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN E NTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-SECTION (4) (SUCH B USINESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS) THERE SHALL IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH IS SECTION BE ALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASSES SEE A DEDUCTION OF AN AMOUNT EQUAL TO HUNDRED PER CENT OF PROFITS AND PAGE 17 OF 26 ITA.1680 & 1696 /MDS/10 L&T TRANSPORTATION INFRASTRUCTURE LTD. GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIV E ASSESSMENT YEARS.] (4) THIS SECTION APPLIES TO (I) ANY ENTERPRISE CARRYING ON THE BUSINESS [OF (I ) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING OPERATING AND MAINTAINING] ANY INFRASTRUCTURE FACILITY WHICH FULF ILS ALL THE FOLLOWING CONDITIONS NAMELY : (A) IT IS OWNED BY A COMPANY REGISTERED IN INDIA OR BY A CONSORTIUM OF SUCH COMPANIES [OR BY AN AUTHORITY O R A BOARD OR A CORPORATION OR ANY OTHER BODY ESTABLISHED OR CONSTI TUTED UNDER ANY CENTRAL OR STATE ACT]; [(B) IT HAS ENTERED INTO AN AGREEMENT WITH THE CENT RAL GOVERNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORI TY OR ANY OTHER STATUTORY BODY FOR (I) DEVELOPING OR (II) OPE RATING AND MAINTAINING OR (III) DEVELOPING OPERATING AND MAIN TAINING A NEW INFRASTRUCTURE FACILITY;] (C) IT HAS STARTED OR STARTS OPERATING AND MAINTAIN ING THE INFRASTRUCTURE FACILITY ON OR AFTER THE 1ST DAY OF APRIL 1995: PROVIDED THAT WHERE AN INFRASTRUCTURE FACILITY IS T RANSFERRED ON OR AFTER THE 1ST DAY OF APRIL 1999 BY AN ENTERPRISE WHICH DEVELOPED SUCH INFRASTRUCTURE FACILITY (HEREAFTER REFERRED TO IN THIS SECTION AS THE TRANSFEROR ENTERPRISE) TO ANOTHER ENTERPRISE (H EREAFTER IN THIS SECTION REFERRED TO AS THE TRANSFEREE ENTERPRISE) F OR THE PURPOSE OF OPERATING AND MAINTAINING THE INFRASTRUCTURE FAC ILITY ON ITS BEHALF IN ACCORDANCE WITH THE AGREEMENT WITH THE CE NTRAL GOVERNMENT STATE GOVERNMENT LOCAL AUTHORITY OR ST ATUTORY BODY THE PROVISIONS OF THIS SECTION SHALL APPLY TO THE T RANSFEREE ENTERPRISE AS IF IT WERE THE ENTERPRISE TO WHICH TH IS CLAUSE APPLIES PAGE 18 OF 26 ITA.1680 & 1696 /MDS/10 L&T TRANSPORTATION INFRASTRUCTURE LTD. AND THE DEDUCTION FROM PROFITS AND GAINS WOULD BE A VAILABLE TO SUCH TRANSFEREE ENTERPRISE FOR THE UNEXPIRED PERIOD DURING WHICH THE TRANSFEROR ENTERPRISE WOULD HAVE BEEN ENTITLED TO THE DEDUCTION IF THE TRANSFER HAD NOT TAKEN PLACE. [ EXPLANATION : FOR THE PURPOSES OF THIS CLAUSE 'INFRASTRUCTURE FACILITY MEANS (A) A ROAD INCLUDING TOLL ROAD A BRIDGE OR A RAIL SYSTEM; (B) A HIGHWAY PROJECT INCLUDING HOUSING OR OTHER AC TIVITIES BEING AN INTEGRAL PART OF THE HIGHWAY PROJECT; (C) A WATER SUPPLY PROJECT WATER TREATMENT SYSTEM IRRIGATION PROJECT SANITATION AND SEWERAGE SYSTEM OR SOLID WA STE MANAGEMENT SYSTEM; (D) A PORT AIRPORT INLAND WATERWAY [ INLAND PORT OR NAVIGATIONAL CHANNEL IN THE SEA.] [(II) ANY UNDERTAKING WHICH HAS STARTED OR STARTS P ROVIDING TELECOMMUNICATION SERVICES WHETHER BASIC OR CELLULA R INCLUDING RADIO PAGING DOMESTIC SATELLITE SERVICE NETWORK O F TRUNKING BROADBAND NETWORK AND INTERNET SERVICES ON OR AFTER THE 1ST DAY OF APRIL 1995 BUT ON OR BEFORE THE [31ST DAY OF MARCH 2005;] EXPLANATION : FOR THE PURPOSES OF THIS CLAUSE 'DOMESTIC SATELLITE' MEANS A SATELLITE OWNED AND OPERATED BY AN INDIAN COMPANY FOR PROVIDING TELECOMMUNICATION SERVICE. (III) ANY UNDERTAKING WHICH DEVELOPS DEVELOPS AND OPERATES OR MAINTAINS AND OPERATES AN INDUSTRIAL PARK [OR SPEC IAL ECONOMIC ZONE] NOTIFIED BY THE CENTRAL GOVERNMENT IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THAT GOVERNMENT FOR THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL 1997 AND ENDING ON [THE 31ST DAY OF MARCH 2006]: [PROVIDED THAT IN A CASE WHERE AN UNDERTAKING DEVE LOPS AN INDUSTRIAL PARK ON OR AFTER THE 1ST DAY OF APRIL 1 999 OR A SPECIAL ECONOMIC ZONE ON OR AFTER THE 1ST DAY OF APRIL 200 1 AND TRANSFERS THE OPERATION AND MAINTENANCE OF SUCH IND USTRIAL PARK OR SUCH SPECIAL ECONOMIC ZONE AS THE CASE MAY BE TO ANOTHER UNDERTAKING (HEREAFTER IN THIS SECTION REFE RRED TO AS THE TRANSFEREE UNDERTAKING) THE DEDUCTION UNDER SUB-SE CTION (1) SHALL BE ALLOWED TO SUCH TRANSFEREE UNDERTAKING FOR THE PAGE 19 OF 26 ITA.1680 & 1696 /MDS/10 L&T TRANSPORTATION INFRASTRUCTURE LTD. REMAINING PERIOD IN THE TEN CONSECUTIVE ASSESSMENT YEARS AS IF THE OPERATION AND MAINTENANCE WERE NOT SO TRANSFERR ED TO THE TRANSFEREE UNDERTAKING:] [PROVIDED FURTHER THAT IN THE CASE OF ANY UNDERTAKI NG WHICH DEVELOPS DEVELOPS AND OPERATES OR MAINTAINS AND OP ERATES AN INDUSTRIAL PARK THE PROVISIONS OF THIS CLAUSE SHAL L HAVE EFFECT AS IF FOR THE FIGURES LETTERS AND WORDS '31ST DAY OF MARCH 2006' THE FIGURES LETTERS AND WORDS ['THE 31ST DAY OF M ARCH 2011'] HAD BEEN SUBSTITUTED;] (IV) AN [UNDERTAKING] WHICH (A) IS SET UP IN ANY PART OF INDIA FOR THE GENERATI ON OR GENERATION AND DISTRIBUTION OF POWER IF IT BEGINS TO GENERATE POWER AT ANY TIME DURING THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL 1993 AND [ENDING ON [THE 31ST DAY OF MARCH 2011] ; (B) STARTS TRANSMISSION OR DISTRIBUTION BY LAYING A NETWORK OF NEW TRANSMISSION OR DISTRIBUTION LINES AT ANY TIME DURING THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL 1999 AND [ENDING ON [THE 31ST DAY OF MARCH 2011]: PROVIDED THAT THE DEDUCTION UNDER THIS SECTION TO A N [UNDERTAKING] UNDER SUB-CLAUSE (B) SHALL BE ALLOWED ONLY IN RELATION TO THE PROFITS DERIVED FROM LAYING OF SUCH NETWORK OF NEW LINES FOR TRANSMISSION OR DISTRIBUTION. [(C) UNDERTAKES SUBSTANTIAL RENOVATION AND MODERNIS ATION OF THE EXISTING NETWORK OF TRANSMISSION OR DISTRIBUTIO N LINES AT ANY TIME DURING THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL 2004 AND ENDING ON [THE 31ST DAY OF MARCH 2011]. EXPLANATION : FOR THE PURPOSES OF THIS SUB-CLAUSE 'SUBSTANTIAL RENOVATION AND MODERNISATION' MEANS AN INCREASE IN THE PLANT AND MACHINERY IN THE NETWORK OF TRANSMISSION OR DISTRIBUTION LINES BY AT LEAST FIFT Y PER CENT OF THE BOOK VALUE OF SUCH PLANT AND MACHINERY AS ON TH E 1ST DAY OF APRIL 2004.] (A) SUCH INDIAN COMPANY IS FORMED BEFORE THE 30TH D AY OF NOVEMBER 2005 WITH MAJORITY EQUITY PARTICIPATION B Y PUBLIC SECTOR COMPANIES FOR THE PURPOSES OF ENFORCI NG THE SECURITY INTEREST OFTHE LENDERS TO THE COMPANY OWNING THE POWER GENERATING PLANT AND SUCH INDIAN COMPANY IS PAGE 20 OF 26 ITA.1680 & 1696 /MDS/10 L&T TRANSPORTATION INFRASTRUCTURE LTD. NOTIFIED BEFORE THE 31ST DAY OF DECEMBER 2005 BY T HE CENTRAL GOVERNMENT FOR THE PURPOSES OF THIS CLAUSE; (B) SUCH UNDERTAKING BEGINS TO GENERATE OR TRANSMIT OR DISTRIBUTE POWER BEFORE THE [31ST DAY OF MARCH 20 11.] (C) [(VI) * * * * *] 16. READING OF THE ABOVE PROVISIONS SHOWS THAT AL L THE BUSINESS INCOME OF AN ASSESSEE WHO IS ENGAGED IN TH E BUSINESS OF DEVELOPING OPERATING AND MAINTAINING ANY INFRAST RUCTURE FACILITY DOES NOT QUALIFY FOR DEDUCTION U/S.80-IA OF THE ACT . ONLY THOSE BUSINESS INCOME WHICH ARE DERIVED BY AN UNDERTAKIN G OR AN ENTERPRISE FROM AN ELIGIBLE BUSINESS IS ONLY ELIGIB LE FOR DEDUCTION U/S.80-IA OF THE ACT. FURTHER THE ELIGIBLE BUSINE SS HAS BEEN DEFINED IN SUB-SECTION (4) OF THE SECTION 80-IA. I N RELATION TO THE FACTS OF THE PRESENT CASE THE ELIGIBLE BUSINESS ME ANS BUSINESS OF DEVELOPING OPERATING AND MAINTAINING ANY INFRAST RUCTURE FACILITY I.E. ROAD. THUS THE INCOME DERIVED FROM BUSINESS OF DEVELOPING OPERATING AND MAINTAINING ROAD ONLY QUALIFIES FOR D EDUCTION U/S.80-IA OF THE ACT. ON FACTS OF THE INSTANT CASE THE BUSINESS OF DEVELOPING OPERATING AND MAINTAINING ROAD IN OUR C ONSIDERED OPINION DOES NOT INCLUDE THE ACTIVITY OF BUSINESS O F DEVELOPING OPERATING AND MAINTAINING ROAD SIDE AMENITIES THOUG H SUCH ACTIVITY MAY BE INCIDENTAL TO OR FACILITATE THE BUS INESS OF DEVELOPING AND MAINTAINING ROADS. THEREFORE IN OU R VIEW SIMPLY BECAUSE THE WORD BUSINESS HAS BEEN USED IN SECT ION 80-IA(4) THE SAME CANNOT BE READ SO AS TO MEAN THAT INCOME D ERIVED FROM OPERATING AND MAINTAINING ROADSIDE AMENITIES WILL F ORM PART OF BUSINESS OF DEVELOPING OPERATING AND MAINTAINING RO AD BECAUSE THE BUSINESS OF DEVELOPING OPERATING AND MAINTAININ G ROAD CAN BE CARRIED OUT WITHOUT UNDERTAKING ANY ACTIVITY OF DEVELOPING OPERATING AND MAINTAINING ROADSIDE AMENITIES ALSO. THOUGH WE PAGE 21 OF 26 ITA.1680 & 1696 /MDS/10 L&T TRANSPORTATION INFRASTRUCTURE LTD. AGREE WITH THE CONTENTION OF THE LD. LEARNED AUTHOR IZED REPRESENTATIVE THAT IN THE INSTANT CASE THE ASSESSE E WAS REQUIRED TO DEVELOP OPERATE AND MAINTAIN ROADSIDE A MENITIES SUCH A CONDITION OF THE AGREEMENT UNDER WHICH IT WA S ALLOWED TO BUILD OPERATE AND MAINTAIN ROAD BUT THAT BY ITSELF DOES NOT MAKE THE ROAD AND AMENITIES A PART OF THE ROAD OR INFRAS TRUCTURE FACILITY. THEREFORE IN OUR CONSIDERED OPINION THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S.80-IA ONLY IN RESPECT OF ROAD BUSINES S INCOME WHICH ARE DERIVED FROM DEVELOPING OPERATING AND MAI NTAINING ROAD AND INCOME WHICH WERE DERIVED BY THE ASSESSEE FROM ROADSIDE AMENITIES ARE NOT ALLOWABLE AS DEDUCTION U /S.80-IA OF THE ACT. IT IS NOT IN DISPUTE THAT THE ASSESSEE DER IVED INCOME OF RS.21 91 999/- FROM ROADSIDE AMENITIES. WE THEREFOR E CONFIRM THE ORDER OF THE LOWER AUTHORITIES TO THE EXTENT OF EXCLUSION OF ABOVE INCOME FOR CALCULATING DEDUCTION ALLOWABLE U/ S.80-IA OF THE ACT. 17. REGARDING FEE FOR LYING OPTICAL FIBRE CABLE OF RS.5 LAKHS AND FEE FROM FILM SHOOTING WE FIND THAT THE FULL FACTS ARE NOT AVAILABLE BEFORE US. FROM THE RECORDS BEFORE US IT IS NOT C LEAR WHETHER THE SAME RELATES TO ROAD OR THE SAME RELATES TO ROAD SI DE FACILITY. WE FIND THAT INCOME DERIVED FROM OPERATING AND MAINTAI NING OF ROAD QUALIFIES FOR DEDUCTION U/S.80-IA OF THE ACT. NOWH ERE THE SAID SECTION PROVIDES ANY MANNER OF OPERATION OF INFRAST RUCTURE FACILITY OR PROHIBITS ANY MANNER OF OPERATION OF ROAD OR INF RASTRUCTURE FACILITY. THUS INCOME DERIVED BY ASSESSEE FROM AN Y OPERATION OF ROAD IS ELIGIBLE FOR DEDUCTION U/S.8-IA OF THE ACT AND THE CONTENTION OF THE REVENUE THAT ONLY TOLL CHARGES WI LL QUALIFY FOR DEDUCTION U/S.80-IA CANNOT BE ACCEPTED. WE THEREFO RE SET ASIDE PAGE 22 OF 26 ITA.1680 & 1696 /MDS/10 L&T TRANSPORTATION INFRASTRUCTURE LTD. THE ISSUE RELATING TO FEE FROM LYING DOWN OPTICAL F IBRE CABLE AND FEE FROM FILM SHOOTING BACK TO THE FILE OF THE LEAR NED ASSESSING OFFICER AND DIRECT HIM TO VERIFY THE FACTS IN LINE OF THE DISCUSSION MADE ABOVE AND ALLOW DEDUCTION U/S.80-IA IN RESPECT OF THOSE INCOME WHICH RELATES TO ROAD. 18. THE LAST ISSUE RELATES TO SCRAP SALES. WE FIN D FORCE IN THE SUBMISSIONS OF THE LD. LEARNED AUTHORIZED REPRESENT ATIVE IN THIS RESPECT. WE FIND THAT SALE OF SCRAP REPRESENTS THE SALE OF LEFT OVER MATERIALS WHICH WERE ACQUIRED FOR DEVELOPING R OAD. NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE LOWER AU THORITIES TO CONTROVERT THE ABOVE SUBMISSION OF THE ASSESSEE THU S WE AGREE THAT THE ABOVE SALE OF SCRAP WAS INTIMATELY CONNECT ED WITH THE BUSINESS OF DEVELOPING OPERATING AND MAINTAINING IN FRASTRUCTURE FACILITY AND INCOME FROM SUCH SALE GOES ON TO REDUC E THE EXPENDITURE OF DEVELOPING THE INFRASTRUCTURE FACILI TY AND TRULY SPEAKING THE SAME IS NOT AN INDEPENDENT INCOME TO T HE ASSESSEE. WE THEREFORE DELETE THE DISALLOWANCE OF DEDUCTION U/S.80-IA IN RESPECT OF THE SALE OF SCRAP AND ALLOW THIS PART OF THE GROUND OF THE ASSESSEE. 19. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DI SPOSED OF AS ABOVE. 20. IN THE REVENUES APPEAL THE SOLE ISSUE INVOLV ED IS THAT THE COMMISSIONER OF INCOME TAX(A) ERRED IN ALLOWING DEP RECIATION CLAIM OF THE ASSESSEE ON PROJECT ASSETS AT THE RATE OF 10% APPLICABLE TO BUILDING. PAGE 23 OF 26 ITA.1680 & 1696 /MDS/10 L&T TRANSPORTATION INFRASTRUCTURE LTD. 21. THE LD. AR OF THE ASSESSEE FILED BEFORE US A C OPY OF THE ORDER OF THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR AS SESSMENT YEARS 2002-03 TO 2004-05 & 2006-07 WHEREIN THE TRI BUNAL VIDE ORDER DT.30.11.10CONFIRMED THE ORDER OF THE COMMISS IONER OF INCOME TAX(A) ALLOWING DEPRECIATION @ 10% ON PROJEC T ASSETS TO THE ASSESSEE AND DISMISSED THE APPEAL OF THE REVENU E. THE LEARNED DEPARTMENTAL REPRESENTATIVE VERY FAIRLY C ONCEDED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT BY THE ABOVE QUOTED ORDER OF THE TRIBUNA L. 22. AFTER HEARING RIVAL SUBMISSIONS AND PERUSING T HE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RE CORD WE FIND THAT TRIBUNAL IN ASSESSMENT YEARS 2002-03 TO 2004- 05 & 2006- 07 VIDE CONSOLIDATED ORDER DT.30.11.10 IN ITA NOS.1 692 TO 1695/MDS/10 HELD AS UNDER:- 4. THE ISSUE PERTAINS TO DISALLOWANCE OF DEPRECIAT ION ON PROJECT ASSETS BEING ROAD AND BRIDGE IN THE ASSESSM ENT YEARS 2002-03 03-04 AND 04-05 THE ASSESSING OFFIC ER HAS DISALLOWED THE CLAIM OF DEPRECIATION ON THE BAS IS OF ELABORATE DISCUSSION MADE BY HIM IN THE ORDER FOR T HE ASSESSMENT YEAR 2006-07. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE ASSESSMENT YEAR 2006- 07 AFTER ANALYZING VARIOUS FACTORS AND ALSO TAKING INTO ACCOUNT ALL TH OBJECTIONS RAISED BY THE ASSESSEE I T WAS HELD BY THE ASSESSING OFFICER THAT THE ASSESSEE IS NOT THE OWNER OF THE PROJECT ASSETS AS SUCH IS NOT ELIGIBL E FOR CLAIMING DEPRECIATION OF SUCH ASSETS. HOWEVER TAK ING INTO ACCOUNT THE FACT THAT THE ENTIRE COST OF THE P ROJECT HAS PAGE 24 OF 26 ITA.1680 & 1696 /MDS/10 L&T TRANSPORTATION INFRASTRUCTURE LTD. TO BE BORNE BY THE ASSESSEE AND SUCH COST HAS TO BE RECOVERED FROM THE USERS OF THE PROJECT BY WAY OF T OLL FEES PRESCRIBED BY THE GOVERNMENT THE ENTIRE COST WAS AMORTIZED OVER THE PERIOD OF CONCESSION. SO AS THE ASSESSEE HAS CLAIMED HUGE DEPRECIATION MORE THAN TH E AMORTIZATION VALUE OF THE ASSESSMENT YEARS 2002-03 03-04 AND 04-05 NOTICES U/S.148 WERE ISSUED FOR TH E REASONS THAT DEPRECIATION CLAIM WAS FAR IN EXCESS T HAN THE AMORTIZATION TO BE ALLOWED AS PER THE DECISION TAKE N IN THE ASSESSMENT YEAR 2006-07. ACCORDINGLY RETURNS FOR THESE THREE YEARS WERE FILED AND AFTER HEARING THE ASSESSEE ASSESSMENTS WERE FINALIZED WHICH WERE CHALLENGED IN APPEALS AND THE LD. COMMISSIONER OF INCOME TAX(A) CONCLUDED TO ALLOW THE APPEALS OF THE ASSESSEE AS PER PARA 5.4. & 6 OF HIS ORDER WHICH RE AD ASUNDER:- 5.4. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE LD. AR. I HAVE ALSO GONE TH ROUGH THE DECISIONS RELIED ON BY THE ASSESSING OFFICER AN D AR. THE APPELLANT COMPANY HAS BEEN INCORPORATED TO UNDERTAKE DEVELOPMENT OF INFRASTRUCTURAL FACILITIES AND HAS DEVELOPED A BY-PASS ROAD AND A BRIDGE ON NH 47 NEAR COIMBATORE. THE APPELLANT HAS ENTERED INTO A CONCE SSION AGREEMENT WITH THE GOVERNMENT OF INDIA AND GOVERNME NT OF TAMIL NADU TO DEVELOP THE PROJECT ON BUILD-OPERA TE- TRANSFER (BOT) BASIS. I HAVE PERUSED THE CONCESSIO N AGREEMENT AND THE RELEVANT CLAUSES CONTAINED THEREI N. I FIND THAT THE FACTS OF THE APPELLANT ARE SIMILAR TO THE CASE OF TAMIL NADU ROAD DEVELOPMENT COMPANY LTD. (SUPRA ) PAGE 25 OF 26 ITA.1680 & 1696 /MDS/10 L&T TRANSPORTATION INFRASTRUCTURE LTD. FOR A.Y.S 2003-04 AND 2004-05. THE LD. AR HAS RELI ED ON THE DECISION OF THE JURISDICTIONAL ITAT CHENNAI IN THE ABOVE CASE. THE ASSESSING OFFICER IN HIS REMAND RE PORT FOR A.Y.2006-07 HAS NOT ACCEPTED THE CONTENTION OF THE LD. AR BY STATING THAT THE ASSESSEE HAS ALSO OBJECTED STATING THAT THE TRIBUNAL IN THE CASE OF TAMIL NADU ROAD DEVELOPMENT COMPANY LTD. HAS ALLOWED THE ASSESSEE S CLAIM OF DEPRECIATION. HOWEVER AN APPEAL HAS BEEN FILED IN THE HIGH COURT AGAINST THE TRIBUNAL ORDER. IT I SW CLEAR FROM THE ABOVE THAT THE ONLY REASON FOR NON-ACCEPTA NCE OF THE DECISION IS THAT THE DEPARTMENT HAS NOT ACCEPTE D THE ABOVE DECISION AND APPEAL HAS BEEN FILED AGAINST TH E ORDER IN THE HIGH COURT. THE HONBLE ITAT IN THE A BOVE CASE IN ITA NO.2082/MDS./2008 & 817/MDS./2007 FOR A.Y.S 2003-04 AND 2004-05 RESPECTIVELY HAS HELD AS UNDER: AFTER THE ASST. YEAR 1988-89 ALL THE APPENDICES HAVE THE NOTE THAT BUILDING WOULD INCLUDE ROADS. THEREFORE IN OUR VIEW THE ASSESSEE WOULD BECOME ENTITLED TO DEPRECIATION ON THE ROAD IN THE CATEGORY OF BUILDING. IN THESE CIRCUMSTANCES WE SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME TAX(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO ALLOW DEPRECIATION ON THE ROAD AT THE RA TE APPLICABLE TO THE BUILDING. SINCE THE FACTS ARE SIMILAR RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HONBLE JURISDICTIONAL ITAT THE AS SESSING OFFICER IS DIRECTED TO ALLOW DEPRECIATION ON THE RO AD AT THE PAGE 26 OF 26 ITA.1680 & 1696 /MDS/10 L&T TRANSPORTATION INFRASTRUCTURE LTD. RATE APPLICABLE TO BUILDING. THE APPELLANT SUCCEED S ON THIS GROUND. 23. IN THE ABSENCE OF ANY DISTINGUISHING FEATURES P OINTED OUT BY THE LEARNED DEPARTMENTAL REPRESENTATIVE AND ALSO AS NO MATERIAL WAS BROUGHT ON RECORD BY THE REVENUE TO SH OW THAT THE ABOVE QUOTED ORDER OF THE TRIBUNAL WAS REVERSED IN AN APPEAL BY AN HIGHER AUTHORITY WE RESPECTFULLY FOLLOWING THE ABOVE QUOTED ORDER OF THE TRIBUNAL CONFIRM THE ORDER OF THE LEAR NED COMMISSIONER OF INCOME TAX(A) AND DISMISS THE GROUN D OF APPEAL OF THE REVENUE. 24. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON 22 ND JULY 2011. ( GEORGE MATHAN ) ( N.SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI DATED THE 22 ND JULY 2011. K S SUNDARAM COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE