COMMISSIONER OF INCOME TAX-III vs M/S MENZIES AVIATION BOBBA (B'LORE) PVT LTD.,

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 25TH DAY OF JANUARY 2021 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE NATARAJ RANGASWAMY I.T.A. NO.186 OF 2016 C/W I.T.A. NO.262 OF 2014 I.T.A. NO.186 OF 2016 BETWEEN: 1. PR. COMMISSIONER OF INCOME TAX-III

CENTRAL REVENUE BUILDINGS

QUEENS ROAD

BANGALORE-560001. 2. THE ASSISTANT COMMISSIONER OF INCOME TAX

CIRCLE-12(1), BANGALORE. .... APPELLANTS (BY MR. E.R. INDRAKUMAR, SR. COUNSEL FOR MR. E.I. SANMATHI, ADV.,) AND: M/S. MENZIES AVIATION BOBBA (B'LORE) PVT. LTD., PLOT NO.C-041, BANGALORE INTERNATIONAL AIRPORT DEVANAHALLI BANGALORE-560300. ... RESPONDENT (BY MR. A. SHANKAR, SR. COUNSEL FOR MR. M. LAVA, ADV.,)

2 - - - THIS I.T.A. IS FILED UNDER SEC. 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 05.10.2015 PASSED IN M.P. NO.19/BANG/2014 IN ITA NO.1160/BANG/2012 FOR THE ASSESSMENT YEAR 2009-10, PRAYING TO DECIDE THE FOREGOING QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON'BLE COURT AS DEEMED FIT AND SET ASIDE THE COMMON APPEAL ORDER DATED 05-10-2015 PASSED BY THE ITAT, 'B' BENCH, BENGALURU, IN APPEAL PROCEEDINGS IN M.P. NO.19/BANG/2014 IN ITA NO.1160/BANG/2012 FOR ASSESSMENT YEAR 2009-10, AS SOUGHT FOR IN THIS APPEAL AND TO GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE. I.T.A. NO.262 OF 2014 BETWEEN: 1. COMMISSIONER OF INCOME TAX-III

CENTRAL REVENUE BUILDINGS

QUEENS ROAD

BANGALORE-560001. 2. THE ASSISTANT COMMISSIONER OF INCOME TAX

3 IN ITA NO.1160/BANG/2012 FOR THE ASSESSMENT YEAR 2009- 10, PRAYING TO DECIDE THE FOREGOING QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON'BLE COURT AS DEEMED FIT AND SET ASIDE THE APPELLATE ORDER DATED 30-01-2014 PASSED BY THE ITAT, 'B' BENCH, BENGALURU, IN APPEAL PROCEEDINGS NO. ITA NO.1160/BANG/2012 FOR ASSESSMENT YEAR 2009-10. THESE I.T.As. COMING ON FOR FINAL HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: COMMON JUDGMENT These appeals under Section 260A have been filed by the revenue against the order dated 05.10.2015 and 30.01.2014, respectively, passed by the Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal' for short). Both the appeals pertain to the Assessment Year 2009-10. ITA No.186/2016 was admitted vide order dated 24.01.2018 on the following substantial questions of law: "Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that the cargo handling contract entered into with BIAL by assessee is with statutory body satisfying condition set forth in section 80IA(4) when BIAL is only a Company whose motive only making profit and is only a instrument of State?".

4 Whereas, ITA No.162/2014 was admitted by the same order on the following substantial questions of law: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the assessee is eligible for deduction under section 80IA(4) despite holding that it has not entered into an agreement with a "statutory body" as required in the provisions of section 80IA(4)? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that the cargo handling on contract by the assessee is equivalent to development, operation and maintenance of infrastructure facility as defined in section 80IA(4)?" 2. For the facility of reference, facts from ITA No.262/2014 are being mentioned, which are that the assessee is a company engaged in the business of cargo handling at Bengaluru International Airport Limited, Devanahalli, Bengaluru (hereinafter referred to as 'the BIAL' for short). The assessee provides cargo handling services to Airlines and clearing / forwarding at BIAL. The assessee filed

5 return of income for the Assessment Year 2009-10 on 26.09.2009 declaring the total income of Rs.1,90,19,629/- after claiming deduction under Section 80IA(4)(i) of the Act to the extent of Rs.8,34,79,077/-. The case of the assessee was selected for scrutiny and notice under Section 143(2) of the Act was issued on 20.08.2010. The Assessing Officer sought details regarding eligibility of the assessee to claim deduction under Section 80IA(4)(i) of the Act. The assessee thereupon furnished the details. The Assessing Officer, by an order dated 20.12.2011 passed under Section 143(3) of the Act, held that the assessee has entered into an agreement with BIAL which is not a statutory body and the cargo handling facility does not form part of the airport and do not fall within the meaning of the expression 'infrastructure facility' as the assessee is a contractor and not a developer and therefore, denied the deduction claimed by the assessee under Section 80IA(4) of the Act. The assessee thereupon filed an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals), by an order dated 11.06.2012, inter alia held that the BIAL is a statutory body and the cargo handling facility forms part of

6 airport and is covered within the expression 'infrastructure facility'. Thereupon, the revenue filed an appeal before the Tribunal. The Tribunal, by an order dated 30.01.2014, inter alia held that though the cargo handling facility falls within the expression 'infrastructure facility', yet the BIAL is not a statutory body and allowed the appeal preferred by the revenue. 3. The assessee thereupon filed a miscellaneous petition under Section 254(2) of the Act seeking rectification of the mistakes in the order dated 30.01.2014 passed by the Tribunal. The application filed inter alia on the ground that the issue whether BIAL is a statutory body has already been adjudicated by this Court in M/s. FLAMINGO DUTYFREE SHOPS PVT. LTD. IN W.P.NO.14215/2006 DATED 19.12.2008 and this Court has held that BIAL is a statutory body under Article 12 of the Constitution of India. The Tribunal, by placing reliance on the aforesaid decision of this Court, recalled the order dated 30.01.2014 for reconsideration of the issue. Thereafter, the Tribunal passed a fresh order on 18.09.2014 by which it followed the decision

7 rendered by this Court in M/s. FLAMINGO DUTYFREE SHOPS PVT. LTD. IN W.P.NO.14215/2006 DATED 19.12.2008 and held that BIAL is a statutory body and allowed the appeal preferred by the assessee. Being aggrieved by the order of the Tribunal, the revenue has filed the appeal namely ITA No.186/2016 whereas ITA No.262/2014 has been filed against the order of the Tribunal dated 30.01.2014 wherein it has been held that the cargo handling facility falls within the expression 'infrastructure facility'. In the aforesaid factual background, these appeals have been filed. 4. Learned counsel for the revenue, while inviting the attention of this Court to Section 80IA(4) of the Act, submitted that the aforesaid provision is available to an undertaking which is engaged in infrastructure development and is engaged in the business of developing, operating and maintenance of any infrastructure facility and fulfills all the conditions mentioned in Section 80IA(4)(i) of the Act. It is also submitted that in order to comply with the requirement as contemplated under Section 80IA(4)(i)(b) of the Act, the

8 assessee has to enter into an agreement with the Central Government or a State Government or a local authority or any statutory body for developing or operating and maintaining or developing, operating and maintaining a new infrastructure facility but in the instant case, the assessee has entered into an agreement with BIAL which is not a statutory body. It is further submitted that the judgment rendered by this Court in M/s. FLAMINGO DUTYFREE SHOPS PVT. LTD. does not apply to the present case as the aforesaid judgment was not rendered in the context of the Act. 5. It is also pointed out that the BIAL is a corporate body in which KSIIDC is holding nearly 13% share and therefore, the BIAL is a company whose motive is to make profit and same cannot be termed as an authority. Our attention has also been invited to the agreement entered into by the assessee with BIAL and in particular, clause 3.2 and it has been contended that the assessee is operating the cargo handling services only on contract basis and he does not have any right over the building / structure occupied by it

9 and BIAL has not actually transferred the cargo handling facility to the assessee and has only engaged the assessee to run cargo handling facility. Our attention has also been invited to cargo services as defined in the agreement to mean services to be provided to the users as detailed in Schedule A thereto. Section 2(b) of the Airports' Authority of India Act, 1994 has also been brought to our notice and it has been contended that airport means a landing off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome as defined in clause (2) of Section 2 of the Aircraft Act, 1934. Reference has also been made to Section 2(2) of the Aircraft Act, which defines the expression 'aerodrome' as any definite or limited ground or water area intended to be used, either wholly or in part for the landing or departure of aircraft, and includes all buildings, sheds, vessels, piers and other structures thereon or appertaining thereto. On the basis of the aforesaid definitions, it is submitted that providing of cargo facility in airport does not fall within the expression of operation or building of airport in order to make the assessee eligible for the benefit under Section 80IA of the Act. Reference has

10 also been made to the Circular No.1 of 2006 dated 12.01.2006 and Circular Nos.733 and 7/2002 issued by the Central Board of Direct Taxes. In support of the contention that the aforesaid circulars clarify that the cargo handling facility is not included under Section 80IA of the Act, our attention has also been invited to the definition of 'infrastructure facility' as defined in explanation appended to Section 80IA(4)(i)(b) of the Act. In support of aforesaid submission, reliance has been placed on the Constitution Bench decision of the Supreme Court in 'COMMISSIONER OF CUSTOMS (IMPORT) MUMBAI Vs. DILIP KUMAR & CO' (2018) 68 GST 239. 6. On the other hand, learned Senior counsel for the assessee submitted that in order to avail off the benefit of Section 80IA(4)(i) of the Act, the assessee is required to satisfy two conditions, firstly that the assessee should enter into an agreement with the statutory body and consequently, the assessee should be engaged in development of an infrastructure facility within the meaning of Section 80IA(4) of the Act. It is submitted that sofar as first issue is

11 concerned, the same is no longer res integra as it has already been decided by this Court in M/s. FLAMINGO DUTYFREE SHOPS PVT. LTD. and the aforesaid decision has rightly been followed by the Tribunal which was binding on it. It is also pointed out that the decision rendered by this Court in 'BANGALORE INTERNATIONAL AIRPORT LTD. Vs. FLEMINGO DUTYFREE SHOPS P. LTD.' was subject matter of challenge before the Supreme Court in Civil Appeal No.2148/2009. However, since the parties had settled the dispute, therefore, the civil appeal was disposed of. However, the question of law is left open. Therefore, it is submitted that as on today, the decision rendered by this Court in M/s. FLAMINGO DUTYFREE SHOPS PVT. LTD. holds the field and therefore, it has to be held that BIAL is a statutory body. 7. With regard to the second issue whether the assessee is engaged in providing infrastructure development services within the meaning of Section 80IA(4) of the Act, it is submitted that cargo facilities are an integral part of airport. In this connection, reliance has been placed on

12 Circular No.793 dated 23.06.2000 which was issued to clarify whether structures at ports for storage, loading and unloading etc. will fall within the definition of Section 10(23G) and 80IA of the Act. It is also urged that the assessee has developed cargo handling services under the built, operate and transfer scheme entered into with BIAL under Service Provider Right Holder (SPRH) agreement. Learned Senior counsel for the assessee has also placed reliance on the findings recorded by the Commissioner of Income Tax (Appeals) and has held that SPRH agreement gives the assessee right to design, construction, financing, testing, commissioning, maintenance, management and operation of the facility for the period of 20 years and it is specifically mentioned in the agreement that assessee is on built, operate and transfer basis and the facility has to be transferred to BAIL at the end of the term. It is further submitted that by placing reliance on the decision of the Hyderabad Bench of the Tribunal, Commissioner of Income Tax (Appeals) has held that the assessee is not merely a contractor. The Tribunal has upheld the view of the Commissioner of Income Tax (Appeals) that the agreement

13 entered into by the assessee with BIAL is for development, operation and maintenance of infrastructure facility as per provision of Section 80IA(4) of the Act. It is further submitted that the aforesaid finding which are concurrent in nature, have been arrived at by the Commissioner of Income Tax (Appeals) as well as the Tribunal on the basis of meticulous appreciation of the evidence on record which are not to be demonstrated to be perverse by the revenue. In support of aforesaid submission, reliance has been placed on the decision of the High Court of Madras in 'COMMISSIONER OF INCOME TAX, COIMBATORE Vs. CHETTINAD LIGNITE TRANSPORT SERVICES (P) LTD.' (2019) 107 TAXMANN.COM 12 (MADRAS) AND 'COMMISSIONER OF INCOME-TAX, COIMBATORE Vs. CHETTINAD LIGNITE TRANSPORT SERVICES (P) LTD.' (2019) 107 TAXMANN.COM 362 (MADRAS). 8. We have considered the submissions made on both sides and have perused the record. Before proceeding further, it is apposite to take note of Section 80IA of the Act,

14 the relevant extract of which is reproduced below for the facility of reference: "80IA. Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. 80-IA. (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years. XXX (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 fulfils 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 or a board or a corporation or any

15 other body established or constituted under any Central or State Act; (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; (c) it has started or starts operating and maintaining the infrastructure facility on or after the 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 rail system; (b) a highway project including housing or other activities 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."

16 Thus, from close scrutiny of Section 80IA(4)(i)(b) of the Act, it is evident that the assessee must be engaged in the business of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility which fulfills the following conditions, namely (a) it is owned by a Company, (b) it has entered into an agreement with Central Government or a State Government or a local authority or any other statutory body for developing or operating and maintaining or developing, operating and maintaining a new infrastructure facility. 9. Sofar as the requirement of entering into a statutory body is concerned, the same is no longer res integra as a Bench of this Court in M/s. FLAMINGO DUTYFREE SHOPS PVT. LTD. has already held that BIAL is a statutory body. Thus, the assessee has complied with the aforesaid condition. It is pertinent to mention here that the Special Leave Petition against the aforesaid decision has been disposed of by order dated 16.09.2016. Thus, the view taken by this Court in M/s. FLAMINGO DUTYFREE SHOPS PVT. LTD. holds the field. In view of aforesaid enunciation of law, it is evident

17 that the assessee has complied with the condition of entering into an agreement with the statutory body. 10. Now, we may deal with the issue whether the activity of the assessee in providing cargo handling services is covered under the expression 'infrastructure development'. The Commissioner of Income Tax (Appeals), vide order dated 11.06.2012, inter alia has held that from perusal of the layout map of the airport, it is evident that the cargo complex is connected to other infrastructure facilities by airside service road running parallel to the main runway. The aforesaid road serves the isolation bay, fire station, cargo complex, fuel farm and maintenance area as per Clause 4 of the concession agreement between the BIAL and Government of India. It has further been held that cargo handling services have been classified as material but competitive by AERA by an order dated 16.08.2011 in the assessee's own case. It has also been held that the expression 'aerodrome' as defined in Section 2(2) of the Aircraft Act is an inclusive definition and uses the expression 'includes'. It has further been held that large amount of non-

18 passenger cargo is being uploaded to the commercial aircraft in addition to passenger's luggage and therefore, location of cargo handling area is linked with critical airside service road and partaking of statutory infrastructure relating to security, customs, x-rays, etc. within its own operations, indicates that this service is part of commercial operations undertaken by air cargo operators and other air transporters whose equipment and machinery are also integrated in to the definition of aerodrome as per Section 2(22) of the Aircraft Act, 1934. Thus, it has been held by the Commissioner of Income Tax (Appeals) that cargo handling services are located within the airport and are critical infrastructure facilities and are deemed to be part of the airport. 11. The Appellate Authority has also taken note of the fact that SPRH agreement gives rights for design, construction, financing, testing, commissioning, management and operation of the facility for a total period of 20 years to the assessee and the concession is on built, operate and transfer basis. Therefore, it has been held that every contractor may not be a developer but every developer

19 developing infrastructure facility on behalf of the Government is a contractor. In CHETTINAD LIGNITE TRANSPORT SERVICES P. LTD., supra, it has been held that proviso intends to extend the benefit of deduction under Section 80IA of the Act even to a transferee or a contractor who is approved and recognized by the concerned authority and undertakes the work of development of infrastructure facility or only operates or maintains the same. Thus, in view of aforesaid enunciation of law, it has rightly been concluded by the Appellate Authority that the assessee is engaged in development operation and maintenance of an infrastructure facility in the light of provisions of SPRH agreement. The aforesaid finding has been affirmed in appeal by the Tribunal. The aforesaid findings are concurrent findings of fact which do not suffer from any perversity. Learned counsel for the revenue was unable to point out any perversity in the findings of fact recorded by the Commissioner of Income Tax (Appeals) as well as by the Tribunal. It is well settled in law that the concurrent findings of fact do not suffer from any perversity warranting interference of this court in exercise of powers under Section 260A of the Act. [SEE: SYEDA

20 RAHIMUNNISA VS. MALAN BI BY L.RS. AND ORS. (2016)10 SCC 315 and PRINCIPAL COMMISSIONER OF INCOME TAX, BANGALORE & ORS. VS. SOFTBRANDS INDIA P. LTD., (2018) 406 ITR 513]. 12. In view of preceding analysis, the substantial questions of law are answered against the revenue and in favour of the assessee. In the result, the appeals fail and are hereby dismissed. Sd/- JUDGE Sd/- JUDGE RV

COMMISSIONER OF INCOME TAX-III vs. M/S MENZIES AVIATION BOBBA (B'LORE) PVT LTD.,