THE COMMISSIONER OF INCOME TAX, COCHIN vs. HHA TANK TERMINAL (P) LTD., COCHIN

JUDGMENT Ramachandran Nair, J. 1.The question raised in the appeal filed by the Revenue is whether the Tribunal was justified in declaring the eligibility of the assessee for getting deduction under Section 80(1A)(4) in respect of infrastructure facility set up by the Cochin Port Trust for the assessment year 2003- 04. 2.We have heard the standing counsel appearing for the appellant

and Sr.counsel

Sr.Joseph Kodianthara appearing for the assessee. 3.The assessee entered into an agreement with the Cochin Port Trust for erecting, maintaining and running of storage tank and other facilities in the Cochin Port Trust area for pumping and storage of liquid cargo from ships and for dispensing the same for inland use. Admittedly, the infrastructure facility set up is qualified for deduction under Section 80(1A) of the Income Tax Act. Even though agreement was executed in 1998 and the plant was set up and became operational and assessee started earning income within two years, the assessee could not claim any deduction under Section 80(1A) by virtue of the proviso contained in Section 80(1A) 4(i)(b) of the I.T.Act, which prohibits grant of deduction, if the agreement with the Government or the authority concerned did not provide for transfer of facility to the Government or any local or statutory authority, as the case may be. However, this provision was amended with effect from 1.4.2002 deleting therefrom the condition of transfer for claiming the benefit of deduction under Section 80(1A) 4(i)(b) extracted hereunder prior to and after the amendment.

“(b)it has entered into an agreement with the Central Government or a State Government or a local authority or any other

statutory

body

for (i) developing, (ii) maintaining and operating, or (iii) developing, maintaining and operating a new infrastructure facility subject to the condition that such infrastructure facility shall be transferred to the Central Government, State Government, local authority or such other statutory body, as the case may be, within the period stipulated in the agreement.” “(b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other

statutory

body

for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility.” 4.The contention raised by the counsel for the Revenue is that, the benefit of exemption is available only for new infrastructure facility set up after the amendment. On the other hand, counsel for the Assessee contended that, the benefit of deduction is available from the year assessee becomes eligible by virtue of the amendment, which applies even for existing infrastructure facility. On going through the other provisions of the 80(1A), we find that the Department's contention is not tenable because, the tax payers benefit under Section 80(1A) is initially for a period of five years and from 1.4.2002 it was increased to ten years. However, it is made clear that in Clause 4(1)(c), in order to qualify for exemption, the assessee should have started

operating

and maintaining infrastructure facility on 1.4.1995. Admittedly, the assessee entered into an agreement in 1998 and set up the plant, which became operational within two years from the date of entry. Therefore, the assessee was entitled to exemption for the period covered by sub section (1), which may be five years or ten years. However, the contention of the Revenue that new infrastructure facility set up before the amendment in 2002 only are eligible for reduction is unacceptable because, the word “new” in sub clause 4(i)(b) is not a new introduction and was already there even prior to the amendment in 2002. The new infrastructure facility referred to therein is nothing but a facility, which was not available until the assessee sets up the same. The Department has no case that what assessee has set up in 1998 is not an infrastructure facility for being considered for the benefit of deduction. We therefore hold that, running infrastructure facilities set apart on 1.4.1995 will qualify for reduction, even if there is no provision for transfer of facility under the agreement to the Central Government or the State Government, local authority or concerned statutory body, as the case may be. We therefore uphold the order of the Tribunal and dismiss the Department appeal. C.N.Ramachandran Nair, Judge. sl. P.S.Gopinathan, Judge.