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Income Tax Appellate Tribunal, MUMBAI BENCH “J”, MUMBAI
Before: SHRI C.N. PRASAD, HONBLE & SHRI MANOJ KUMAR AGGARWAL, HONBLE
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “J”, MUMBAI
BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, HON'BLE ACCOUNTANT MEMBER
ITA NO.4062, 4063, 4064 & 4086/MUM/2017 (A.Ys: 2008-09 TO 2011-12)
M/s. JSW Steel Ltd., v. Principal Commissioner of Income Tax, JSW Centre, Central – 4, 6th Floor, Bandra Kurla Complex Aayakar Bhavan, M.K.Road, Bandra (East) Mumbai-400 020 Mumbai – 400 051
PAN NO: AAACJ 4323 N
(Appellant) (Respondent)
Assessee by : Shri Rakesh Joshi Department by : Shri S.K. Saikja
Date of Hearing : 11.09.2017 Date of pronouncement : 30.11.2017 O R D E R PER C.N. PRASAD (JM) 1. All these appeals are filed by the assessee against the common order of the Principal Commissioner of Income Tax (Central)-4, Mumbai dated 29.03.2017 passed u/s. 263 of the Act for the Assessment Years 2008-09 to 2011-12.
2 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. 2. Briefly stated facts are that M/s JSW Steel Ltd ("The Assessee") is a listed Public Limited Company and is engaged in the business of manufacturing of steel products. The Assessee Company filed its original return of income for AY 08-09 on 30.09.2008. The DCIT, Circle 11(5), Bangalore vide communication dated 14.05.2009 sought various document/ details in connection with ROI. The assesse vide letter dated 25.5.2009 furnished all documents including Audit Report u/s.80IA (7) in respect of Captive Power Plant 1 & 2, Rail System, Water Supply and Treatment system along with audited accounts of respective undertakings. The case was selected for scrutiny and during the assessment proceedings further details were sought by Ld Addl. CIT, Range-11, Bangalore. Vide submission dated 24.8.2010, the assessee submitted explanation with regards to eligibility and computation of eligible profits attributable for various undertakings in respect of deduction u/s.80IA as claimed supported with relevant documents.
The original returns for AY 2009-10 and AY 2010-11 were also filed by the assesse company on 25.09.09 and 28.09.2010 respectively.
Subsequently, a search & seizure action u/s.132 of the Act was carried out in assessee’s case on 16.03.2011 and therefore the pending assessment of AY 2008-09 was abated. The case was centralized with
3 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. DCIT, CC-46, Mumbai and all the case records were transferred from Bangalore to Mumbai Central Range. Assessee was issued notices u/s 153A in response to which fresh returns u/s.153A for AY 2005-06 to AY 2010-11 were filed on 29.12.2011. The assessee also filed ROI for AY 2011-12 on 30.11.2011.
The cases were taken up for scrutiny for all the years and various details, documents, explanations were called from time to time. The claim of assessee for deduction u/s 80IA in respect of various undertakings was examined by calling various details/ documents, explanations regarding eligibility and quantum of deduction. For AY 2008-09 to AY 2011-12 the cases were referred to TPO for examination of various international transactions entered by assessee and for that reason additional period of one year was availed by the AO for investigation/enquiries and completion of assessments. The assessments in the case of assessee for AY 2008-09 to AY 2011-12 were completed u/s.153A r.w.s. 143(3) & 144C of the Act on 31.05.2014 by the LD. DCIT CC-44, Mumbai. The aforesaid assessment orders have been passed with the prior approval of Ld.Addl.CIT Central Range-10, Mumbai u/s.153D of Income Tax Act, 1961.
4 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. 6. Subsequently Ld. Principal Commissioner of Income Tax (PCIT) issued Show cause notice U/s 263 of Income Tax Act, 1961 (the Act) dated 19.01.2016, wherein he pointed out that Assessing Officer has not verified claim of deduction U/s 80IA on account of income from Railway Siding, Water project and captive power consumption and committed an error in passing the Assessment Orders.
The assessee in response to the said notice U/s.263, filed detailed reply which is reproduced by the Ld PCIT in his order. It was submitted that the assessment orders were passed u/s.153A of the Income Tax Act' 1961 after due scrutiny. The Ld. AO had called for all details related to claim u/s.80IA of the Act in respect of Railway Siding, Water Supply Treatment system and captive power plants and after examining all relevant facts and in fact disallowing part of the claim made for deduction has allowed the other claim of the Assessee Company. It was submitted that except the issues contested by assessee in appeal, the order passed by the Ld. AO is in accordance with law, judicial pronouncements and after considering relevant replies furnished by the Assessee is duly supported by evidence. Copy of submissions filed before Ld. PCIT is placed at Page Nos.54 to 123 of paper book. Ld PCIT accepted plea of the assessee on account of claim made for income from captive power plant, however claim on income from Railway siding and water plant was not accepted
5 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. and passed order U/s 263 dated 29.03.2017 disallowing deduction U/s.80IA on income from Railway siding and water supply system.
The assessee being aggrieved by the order of the Ld PCIT and accordingly the following issues were arised for adjudication before us in the present appeals: (i) Whether learned PCIT has erred in invoking jurisdiction U/s 263 of the Act and holding that the assessment orders passed by the AO are erroneous and prejudicial to the interests of the revenue.
(ii)(a) Whether the learned PCIT erred in passing order under Section 263 of the Act in violation of the principle of natural justice. (b) Whether the learned PCIT erred in not sharing with Appellant the copies of relevant correspondences and documents, which form the basis of initiation of proceedings and passing of order under Section 263 of the Act, and in not allowing the Appellant to cross- examine the persons whose views were relied upon by him in the impugned procedure, and offer its comments on the same. (iii) Whether the learned PCIT has erred in disallowing the deduction under Section 80IA of the Act claimed by the Appellant in respect of income derived from its 'Rail System' and ‘Water Supply System’. 9. Learned Counsel for the assessee on initiating action u/s. 263 submits that, Ld. AO has investigated the issue of allowability of deduction u/s.80IA(4)of the Act thoroughly and after obtaining all the details from the assessee company, denied this deduction in respect of Certified Emission
6 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. Reduction (CER) and allowed the said deduction in respect of CPP(Captive Power Plant), Rail System and Water Supply & Treatment Plant. Therefore, he submitted that this case falls in the category of those cases, where the Ld. AO has made requisite enquiries, applied its mind and allowed the deduction u/s.80IA(4)of the Act partly in accordance with provisions of Act and settled legal position. He submits that in all such cases, where Ld. AO has obtained details and applied his mind, assessments have attained finality they cannot be subject matter of proceedings u/s.263 of the Act merely on the ground that there is another view possible and any further enquiry could be made. He relies on the following case laws to support the contention: (i) CIT vs. Fine Jewellery (I) Ltd. (2015) 372 ITR 303 (Bom) (ii) Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) (iii) CIT vs. Ashish Rajpal (2010) 320 ITR 674 (Delhi) (iv) CIT vs. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Delhi) (v) CIT vs. Gabriel India (1993) 203 ITR 108 (Bom) (vi) Grasim Ind. Ltd. vs. CIT (2010) 321 ITR 92 (Bom) (vii) CIT vs. Malabar Industries (1993) 203 ITR 108 (Bom) (viii) CIT vs. Vikas Polymers (2010) 194 taxman 57 (Delhi) (ix) CiT vs. Goetz (I) Ltd. 2014 361 ITR 505 (Delhi)
It is submitted that, assessee was specifically asked by the Ld. AO to submit details inter-alia, regarding deduction u/s.80IA of the Act and in response to these queries, the assessee company did furnish all such details to the assessing officer. The investigation carried out by Ld AO
7 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. during the assessment proceeding in respect of each eligible undertaking is; (a) Initially vide submission dated 25.5.2009, the assessee submitted audit report u/s 80IA(7) in form 1OCCB alongwith audited profit and loss account and Balance sheet for each eligible undertaking for AY 2008-09. (b) The assessee vide submission dated 24.8.2010 furnished detailed explanation for allowability and profit computation of deduction u/s 80IA(4) in respect of each eligible undertaking for AY 2008-09 alongwith relevant supporting documents. (c) Ld. AO vide notice dated 14.03.2013, asked the assessee company "to furnish computation of profit eligible for deduction u/s.80IA in respect of each undertaking" for AY 2005-06 to AY 2011-12. In response to this query raised u/.142(1) of the Act, the assessee company vide letter dated 21.03.2013 submitted the required documents and information including computation of profits, audit reports in Form 1OCCB and other supporting documents in respect of each undertaking for each assessment year. (d) After examining the eligibility and computation of allowable deduction on the basis of details and documents
8 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. available on record and produced during the assessment proceedings, assessing officer vide notice dated 20.01.2014, further asked the assessee to "Segregate all the related party transactions with respect of transactions qualified for section 80IA deduction and those not qualified for the same." In response to this query u/s.142(1), assessee vide Letter dated 28.02.2014 submitted details and documents pertaining to: (i) Captive Power Undertaking viz production, external sale and internal consumption, documents in support of rate of electrical, power, clarification on issue of CER and note on CER justifying the claim for deduction u/s.80IA, allocation of operating and maintenance expenses, depreciation, electricity consumption per ton of steel etc. (ii) Rail System viz clarification regarding charges leviable for railway siding, deprecation, details of outward and inward movement of goods. Assessee also submitted Railway Board circular dated 10.05.2006, to show the basis on which the profitability of Rail System has been computed.
9 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. (e) During the hearing on 1.3.2014, the Ld AO raised queries with regards to each undertaking as follows: (i) Power Undertaking: Party wise details of external sates and rate charged, basis of working of rate for inter unit sale, certificates of CER, basis of allocation of various expenses and depreciation etc. (ii) Rail System: Depreciation, explanation regarding comparative instance for revenue recognition, note on actual functioning of the unit, allocation of expenses etc. (iii) Water Infrastructure System: Depreciation, note on actual functioning of unit, allocation of expenses, details of secured loans etc. (f) In response to above queries, the Assessee submitted specific details alongwith supporting evidences regarding the Captive power plants, rail system and water supply and treatment infrastructure system unit vide letter dated 04.03.2014. (g) In all the assessment orders, deduction u/s.80IA of the Act has been denied by the assessing officer, in respect of income derived
10 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. from sale of CER, while the balance deduction has been allowed after due verification of facts and legal position.
Therefore, the Learned Counsel for the assessee submits that above sequence of events and details show that the Ld AO has made necessary enquiries over a period of more than one year with regards to claim of deduction u/s 80IA(4) by repeatedly raising queries. Not only the assessee has submitted all the details asked by the Ld.AO from time to time in support of the claim of deduction u/s.80IA(4)of the Act but the Ld. AO has also applied its mind on the issue of deduction u/s.80IA(4) of the Act, while denying part of deduction and allowing the balance as per law.
The Ld. Counsel on disallowing deduction U/s 80IA(4) of the Act, on income earned from Railway System, water Supply and treatment Plant and the violation of principles of natural justice, submitted that as regards the claim for the deduction on the Railway System assessee has developed a Rail System for which it has entered into agreement with South Western Railway vide letter dated 29.01.2007. Therefore, assessee was eligible for deduction u/s.80IA of the Act and the then Ld. AO has rightly allowed the same after making elaborate enquiries and in consonance with a binding precedent of jurisdictional ITAT decision in
11 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. case of Ultra Tech Cement Ltd for A Y 2004-05 to 2005-06 on identical facts and law.
Learned Counsel for the assessee submitted that Ld PCIT has pointed out that to claim deduction U/s 80IA(4) of the Act, assessee should have an agreement with the Govt. to develop, Operate and maintain any infrastructure facility and in the case of assessee there is no operation and maintenance of the Railway sidings. In this regard, Learned Counsel for the assessee submitted that finding of the Ld. PCIT is not correct as the assessee has developed and also maintaining the Railway sidings as mentioned in clause 8(b) of the agreement, which is reads as under: -
"Clause No. 8(b) Wherein it is mentioned that, Maintenance and other Charges for the portion of the sidings - The applicant will at their own cost and expenses in all things and to the satisfaction of the administration and if required by the railway administration under its supervision maintains in good order and repair the said portion of the siding. Such charges as may be fixed by the railway for the supervision rendered shall be paid by the applicant." 14. Therefore, Learned Counsel for the assessee submitted that, it is very clear from the above clause that the assessee is bearing the expenses of maintenance of the sidings. Even otherwise he submits that the Hon'ble Bombay High Court in case of CIT v. ABG Heavy Industries Limited 322 ITR 323(Bom) has held that: -
12 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. "Deduction under section 80-IA is available to an enterprise which (I) develops; or (ii) operates and maintains; or (iii) develops, maintains and operates that infrastructure facility inasmuch as subsequent amendment to section 80-IA(4) has made it clear that three conditions of development, operation and maintenance were not intended to be cumulative in nature." Referring to above decision of Hon'ble Bombay High Court he submits that, it is very clearly held that deduction is available to assessee who fulfills any one or more activity of any infrastructure facility. Hence this proposition of Ld. PCIT is not sustainable.
The Learned Counsel for the assessee further submits before us that the entire proceedings by the Ld PCIT has been initiated based on the order passed by CIT(A) -5 in case of Ultratech Cement Ltd for A Y 2009-10 & 2010-11, wherein the CIT(A) has carried out investigation by making correspondence with Railway authorities and based on the same he disallowed deduction u/s.80IA(4) of the Act in these years on the plea that the railway sidings are for private use and it's not an infrastructure facility for public use. Though Ld.PCIT has formed an opinion based on order of CIT(A) -5 in case of Ultratech Cement Ltd and various correspondence with railway authorities, however he has not provided copy of such order and correspondence to the assessee despite of the specific request by it. Therefore he submitted that since the material based on which Ld.PCIT has decided against the assessee, has not been
13 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. made available to the assessee, such disallowance cannot be sustained as held by the Apex Court in case of Kishinchand Chellaram (125 ITR 713)(SC). He submits that this proposition also accepted by the Jurisdictional High Court in the case of H R Mehta v. ACIT (387 ITR 561).
With respect to the Rail System, Learned Counsel for the assessee further submits that, as apparent from the show cause notice issued u/s.263 by Ld. PCIT, the Ld CIT(A)-5 has concluded that: a. As per para 2.3(i) of the show cause notice, Rail System developed by the assessee company is simply "Private facility". b. As per para 2,3(ii) of the show cause notice, agreement were not for developing, operating and maintaining any Rail System. c. As per para. 2.3(v) of the show cause notice, shunting of wagons cannot be termed as operation or (of) any Rail System.
Dealing specifically with the reasons mentioned by the learned CIT(A) in the case of Ultratech Cements the Learned Counsel for the assessee submitted that, the word "Private Facility" does not find mention in the statue. He submits that it is trite law that law has to be read as such and no import or deletion is permissible. Therefore, to treat the "Rail System" developed by the assessee company as a private facility detrimental for determination of its status as infrastructure facility is unjustified and impermissible in law. He further submits that Ipso Facto
14 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. section 80IA(4) of the Act does not use the word private or public facility but used the word infrastructure facility. He submits that even the alleged communication from CCM South Western Railway dated 24.09.2014 does not deny the fact that railway siding is an infrastructure facility and Learned CIT(A) has not quoted any part of section 80IA of the Act to substantiate his opinion.
He further submits that the, second observation of the Ld. CIT(A) in the case of Ultratech Cement is that assessee did not have any agreement as mentioned in the clause (i)(b) of sub section 80IA(4) of the Act for developing, operating and maintaining any Rail System is also not correct. He submits that the requirement of law is agreement between assessee and a Government Authority for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility. Referring to CBDT circular No.10/2014 dated 06.05.2014 counsel submits that CBDT has also clarified that deduction u/s.80IA(4) is available to an "Enterprise carrying on the business of developing or operating and maintaining or developing, operating and maintaining infrastructure facilities." He submits that in fact assessee company did enter into an agreement with South Western Railway vide agreement dated 29.01.2007 for developing railway system a copy of the
15 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. same was furnished to the Ld. AO at the time of the assessment proceedings.
With regard to the objection of the Ld. PCIT regarding usage of the siding by the Railway he submits that its usage for shunting or otherwise is not a condition precedent as per the provisions of section 80IA(4) of the Act. He submits that nowhere this section says anything about the usage of rail system developed by the assessee company. Learned Counsel for the assessee referred to clause 19 of the agreement made by the assessee company with South Western railway which state as under: -
“Railway administration's rights regarding use of the siding: In addition to any other rights, powers and liberties herein provided for, the Railway Administration shall have the following rights, powers and liberties, over and in connection with the siding or any extension part thereof, namely -(a)To use the siding or any extension part thereof for any purposes of the Railway Administration free of charge or any remuneration to the Applicant in respect of such use” 20. Referring to the above clause he submits that the above mentioned clause clearly provides unhindered right to the Railway administration to use the siding i.e. Rail System developed by the assessee company for any purpose free of charge. Thus, it is submitted that assessee company has fulfilled all the requirements of law to claim the deduction u/s.80IA(4) of the Act and the then Ld. AO had allowed the same after verification of facts, judicial pronouncements and application of mind.
16 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. 21. Without prejudice to above the Learned Counsel for the assessee submits that the main basis i.e. CIT(A) order of Ultratech Cement Ltd, for AY 2009-10 & 2010-11 based on which Ld PCIT has initiated proceedings U/s 263 on this issue, has already dealt with by The Hon'ble Mumbai Tribunal vide order Vide order ITA No. 5065/Mum/2014 dated 05/04/2017, copy of which is submitted. Referring to the said order of the Hon'ble Tribunal he submits that ITAT has considered agreement of the company with Southern railway and after discussing various clauses of the agreement held that assessee is eligible for deduction U/s 80IA(4) of the Act . He further submits that it is pertinent to note that agreement entered by the assessee company with Southern Western Railway is identical to that of Ultratech Cement Ltd. Copy of agreement is placed at Page Nos.74 to 91 of the Paper book. Therefore he submits that, since the facts are identical and Ld PCIT has disallowed the deduction U/s 80IA(4) of the Act on the basis of order passed in case of Ultratech Cement Ltd., and in view of the decision of Tribunal in Ultratech Cement allowing the claim for deduction u/s. 80IA on Railway sidings, the said action of the Ld PCIT u/s.263 does not survive. Therefore, he submits that considering the facts of the case and decision of coordinating Bench on the similar issue deduction U/s 80IA(4) claimed on Railway Sidings, disallowed by the Ld PCIT is not sustainable.
17 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. 22. As regards the claim for the said deduction on Water Supply & Treatment Plant, Learned Counsel for the assessee submits that, the Ld.PCIT has disallowed deduction U/s 80IA(4) on the plea that the assessee has developed a water supply system for private use and not for public utility. Learned Counsel for the assessee submits that Ld. PCIT relied upon the assessment order of the assessee for AY 2012-13 wherein AO has disallowed this deduction on the plea that the infrastructure facility developed by the assessee is not for public utility. Based on this finding of the AO Ld.PCIT has also disallowed the deduction U/s 80IA(4) on water supply system in these years.
The Learned Counsel for the assessee submits that as far as the issue of eligibility of assessee company regarding the deduction u/s 80IA(4) is concerned, Explanation appended to this section as per clause (c) clearly mentions "a water supply project" as an infrastructure facility. He submits that, the assessee company has laid water pipe line covering an area of 42 Kms, for supply of water from Tungbhadra dam located at Hospet to its factory located at Sandur Taluk, Bellary, Karnataka. Therefore, it is apparent that Govt. Of Karnataka has allowed the assessee company to lay the water pipeline and draw water from Tungbhadra dam. This permission was granted by Secretary to Government, water resources Department vide order dated
18 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. 21/23.07.2004. Copies of these agreement are placed at Page Nos. 92 to 107 of the paper book.
Learned Counsel for the assessee submits that, in the show cause notice issued u/s.263 of the Act, it is stated that as far as the issue of Water Pipe Line is concerned, no investigation has been made by the Ld. AO, whether assessee company has entered into any agreement with Central or State Government or any of its body for the development of infrastructural facility and whether it is a public facility. In this regard, he submits that assessee company has signed an agreement with Govt. of Karnataka. The said agreement has been signed by Executive Engineer, No, 1, T. R. Division, Munirabad on behalf of Governor of Karnataka on 01.06.2006. In normal course or in ideal conditions, it was the obligation of the state Government to provide water to any factory established in a state but as the state could not provide the same, owing to the lack of infrastructure i.e. water supply at the place, where factory is located, assessee company undertook this job. He submits that incentive mentioned in the provisions of section 80IA have been precisely provided for such a situation, where private parties are permitted to develop infrastructure facility and in the instant case, assessee company has developed a water supply and treatment project. Therefore, he submits that the query regarding "why Govt. should enter" stands explained in the
19 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. light of Bombay High Court Judgement in case of ABC Heavy Ind. Ltd (Supra). In its judgement, the Their Lordships have mentioned as under:
"The object of section 80-IA was to provide an impetus to the growth of infrastructure in the nation. A sound infrastructure is a sine qua non for economic development. Absence of infrastructure poses significant barriers to growth and development. A model which relied exclusively on the provision of basic infrastructure by the State was found to be deficient. Section 80-lA was an instrument of legislative policy, conceived with a view to provide an impetus to private sector participation in infrastructural projects. Consistent with the legislative object of encouraging private sector participation in the development of infrastructure, section 80- IA was enacted." 25. He further submits that, it is also matter of record that this facility is being operated and maintained by the assessee company, as can be seen from the letter dated 04.03.2014, submitted to the assessing officer. He submits that the very fact that it has been developed infrastructure facility for its own use does not bar the assessee from availing benefit granted by statue u/s. 80IA(4) of the Act, as this section nowhere says that development of infrastructure facility should be for public. He submits that Artificially Inserting the word "Public Facility" in the provisions of section 80IA(4) of the Act is impermissible in law. Provisions of law speak of infrastructural facility and does not mention it to be either public or private, then nothing more can be read into the statue except what the plain reading of the provision states.
20 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. 26. He further, submits that the Ld AO has made extensive enquiries regarding eligibility, functioning, revenues, allocation of expenses, depreciation etc in respect of the said infrastructure facility before allowing deduction under the Act. Hence, there is no error committed by the Ld AO to hold the assessment order erroneous and prejudicial to the interest of revenue on this account.
Learned Counsel for the assessee submits that, it is pertinent to note that in the show cause notice, Ld PCIT has raised three issues about irregular disallowance of deduction U/s 80IA, wherein in addition to Railway & Water system, he also show caused that deduction claimed on captive consumption power plant should not be disallowed as the same is set up for own use. However after considering the reply of assessee Ld.PCIT did not disallowed deduction U/s 80IA(4) on captive power plant. The same ratio applies in case of water system also and when he has allowed deduction on captive power plant he should have also allowed deduction on water system as the basis of show cause was same in both the issues.
Learned Counsel for the assessee further submitted that, the reliance of Ld PCIT on the order of AO for subsequent year cannot be basis for disallowance of deduction U/s 80IA in these years. In the said
21 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. order Ld AO failed to consider the fact that in explanation (a) to section 80IA(4) wherein the word infrastructure facility is being defined, the later part of it i.e." or any other public facility of a similar nature as may be notified by the Board in this behalf in the official gazette" have been removed with effect from 1.4.2001. Therefore he submitted that the revised definition of infrastructure facility in explanation to section 80IA(4) does not require the said facility to be public utility in nature.
Thus, he submitted that assessee has rightfully claimed the said deduction U/s 80IA on account of Railway System and water supply system. The said claim was duty examined by the AO during the course of assessment and the order was passed with prior approval of Additional CIT U/s 153D of the Act. Therefore, assuming jurisdiction U/s 263 by the Ld PCIT is not in consonance of law and needs to be rejected.
Without prejudice to above, Learned Counsel for the assessee submitted that for AY 2009-10, the assessed gross total income as per order dated 30.5.2014 passed u/s 153A rws 143(3) & 144C has been assessed at a loss of Rs 179,40,16,135/-. As there being no positive gross total income for the relevant assessment year, no deduction under chapter VIA has been allowed at all by the Ld AO. As there is no allowance of any deduction u/s 80IA in the relevant assessment year for Rail System, Water
22 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. Supply System and Captive Power Plants, the order for whatever reason, cannot be considered as erroneous and prejudicial to the interest of revenue for invoking jurisdiction u/s 263 in so far as reasons quoted in the show cause notice are concerned. Learned Counsel for the assessee therefore submits that in view of the above discussions and decisions, the Appellant humbly submits action of Ld.PCIT of invoking provisions of section 263 needs to be dropped and deduction claimed in the return of income for A Y 2008-09 to 2011-12 may be allowed on Railway System and Water Supply System.
The Ld.DR has vehemently supported the order of the Ld.PCIT in revising the orders passed by the Assessing Officer u/s. 153A for the Assessment Years 2008-09 to 2011-12. Ld.DR submits that no proper enquiries were conducted by the Assessing Officer in allowing the claim for deduction u/s. 80IA of the Act in respect of the Railway System, water supply system and captive power generation. Therefore, the Ld. PCIT had rightly revised the Assessment Order u/s. 263 as these Assessments were erroneous and prejudicial to the interest of Revenue. Ld.DR submits that in so far as captive power generation is concerned Ld. PCIT allowed the claim of the assessee and in respect of Railway System and Water Supply System claim was rightly disallowed by the Ld. PCIT. He strongly supported the order of the Ld. PCIT passed u/s. 263 of the Act.
23 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. 32. We have heard the rival submissions, perused the orders of the authorities below and the materials placed before us. In this case, order u/s. 263 was passed by the Ld. PCIT holding that assessee is not entitled for deduction u/s. 80IA in respect of the Railway System and water supply system holding that they are not infrastructure projects. In coming to such conclusion Ld. PCIT basically relied on the proceedings in the case of M/s.Ultratech Cements Limited for the Assessment Year 2009-10 and 2010-11 by the CIT -5, Mumbai wherein a view has been taken that the claim for deduction u/s. 80IA on profit of Railway System was denied. The Ld.PCIT relying on the findings given in M/s.Ultratech Cements Limited for the Assessment Year 2009-10 and 2010-11 and by stating that the CIT in that case had passed detailed order after making enquiries from the Railway Department confirming the disallowance. Therefore, Ld. PCIT is of the view that in view of the investigations made in the case of M/s.Ultratech Cements Limited and since it was held that Railway System is not entitled for the deduction u/s. 80IA of the Act as it is not an infrastructure facility, he directed the Assessing Officer to disallow the deduction u/s. 80IA of the Act in respect of the Railway System and water supply system. We also find that the Ld.PCIT did not provide the information to the assessee which was gathered from the Railway Department to rebut the information gathered from the Department.
24 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. Apparently principle of natural justice has not been adhered to. We also find that the Assessing Officer called for various details in the course of Assessment Proceedings. Assessee has furnished various details as has referred to in the above paras including the order of the ITAT in the case of M/s.Ultratech Cements Limited for the Assessment Years 2004-05 & 2005-06 in ITA.No. 7735 & 7736/Mum/2007 dated 20.08.20009 where the similar claim was allowed i.e. deduction u/s. 80IA in respect of Railway siding was allowed and the Revenue even took up the matter before the Hon'ble Bombay High Court and the Hon'ble Bombay High Court by order dated 02.04.2014 in ITR 6070 of 2010 refused to answer the question of law. The assessee furnished this copy to the Assessing Officer in the course of Assessment Proceedings and the Assessing Officer after examining the details furnished by the assessee as well as the order of the ITAT in the case of M/s.Ultratech Cements Limited (supra) for the Assessment Years 2004-05 and 2005-06 took a view that assessee is entitled for deduction u/s. 80IA of the Act in respect of Railway sidings and water supply system. In our view, this is one of the view possible and therefore the Ld. PCIT should not have hold that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue, in view of the decision of the Hon'ble Supreme Court in the case of CIT
25 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. v.Max India Limited [295 ITR 287] and Malbar Industries Co Ltd. v. CIT [243 ITR 83].
Hon’ble Bombay High Court in the case of Idea Cellular Ltd. v. DCIT & Ors., (2008) 301 ITR 407 (Bom.)] has held that if a query is raised during assessment proceedings and responded to by the assessee, the mere fact that it is not dealt with in the assessment Order would not lead to a conclusion that no mind had been applied to it. In the present case, not only various details and documents have been called for by AO on all the three issues, but the deductions have been allowed after investigation and making disallowance u/s. 80IA.
As can be seen in respect of income on sale of CER that Ld AO has made requisite enquiries on all the issues, there cannot be an occasion to invoke jurisdiction u/s 263 for lack of enquiry by AO. It has been held by Hon'ble ITAT Delhi Bench in the case of Salora International Ltd vs Addl CIT [2 SOT 705] that merely because from a perfectionist point of view, it is felt that some more enquiries and verifications could have been made by assessing officer while making assessment/ assessment order cannot be declared be erroneous and prejudicial to the interest of Revenue.
Moreover, there are various judgements wherein it has been held that the setting aside for reassessment u/s.263 of the Act of any order
26 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. merely on account of a difference of opinion is not permissible. What has already been examined and decided cannot be revisited in these proceedings. When the Ld. AO has taken one of the two views permissible in law and which the Commissioner does not agree with and which results in a loss of revenue, it cannot be treated as erroneous order prejudicial to the interest of revenue, unless the view taken by the Assessing Officer is completely unsustainable in law. The same has been held in a number of cases including the jurisdictional courts. A few of the said judgements on which strong reliance is being placed are being mentioned hereunder: i. CIT v. Max India Limited [2007] 295 ITR 282 (SC) ii. Malbar Industries Co Ltd v. C1T [2000] 243 ITR 83 (SC) iii. Grasim Ind. Ltd. vs. C1T (HC, Bom.) (1TA No.113/1990) (Order dt. 01.02.10) CIT vs. Bank of Maharashtra (HC, Bom.) (ITA No.2027&2102/2013) (Order dt. 07.12.15) 36. In view of the above mentioned fact and circumstance of the case as well as the case laws cited above, it may be seen that the assessee company had claimed the deduction u/s. 80IA(4) of the Act in accordance of the provisions of the Act and the assessing officer has rightly allowed the same after making elaborate enquiry regarding the eligibility of assessee's claim, before specifically denying this deduction in respect of CER and allowing the same in respect of CPP, Water Supply and Treatment Plant and Rail System. The order of the Assessing Officer may not have dealt specifically on all these issues in the assessment order but
27 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. that by itself is not sufficient reason to hold that the assessment order is erroneous and prejudicial to the interest of revenue. It is for the Ld.PCIT to point out as to what error was committed by the Ld. AO in taking a particular view.
In any case on merits this Tribunal in the case of M/s.Ultratech Cements Limited v. ACIT in ITA.No.5066/mum/2014 and 7614/Mum/2014 dated 05.04.2015 for the Assessment Years 2009-10 and 2010-11 which the Ld. PCIT had relied on heavily in revising the orders of the Assessing Officer for disallowing u/s. 80IA of the Act on Railway sidings and Water project scheme, this Tribunal held that Railway siding operating by the assessee in its business premises is infrastructural facility within the meaning of the provisions of section 80IA of the Act and is eligible for deduction, observing as under:-
“33. We have considered rival contentions, carefully gone through the orders of the authorities below and materials placed before us. We had also deliberated on the judicial pronouncements referred by lower authorities in their respective orders as cited by learned AR and DR during the course of hearing before us in the context of factual matrix of the case. 34. Grievance of both the assessee and revenue revolves around assessee’s eligibility for claim of deduction u/s.80IA (4) of the Income Tax Act. From the record we found that assessee UltraTech Cement Ltd (‘UTCL') has acquired the cement business of Larsen & Toubro Limited (L&T') along with the Rail systems at Hirmi, Tadipatri, Arrokonam and Durgapur in the FY 2003-04. These Railway systems were developed on or after 01/04/1995 by the L&T. year wise details of the aforesaid rail systems are as follows:
28 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. Initial Year of year Commencement Unit I Rail system Undertakings of of claim operations (A. Y.) (A.Y.) Rail system at Hirmi in the state of 2000-01 2004-05 Chhattisgarh Rail system at Tadipatri in the state 1999-00 2007-08 of Andhra Pradesh Rail system at Arakkonam in the 2001-02 2007-08 state of Tamil Nadu Rail System at Durgapur in the 2002-03 2008-09 state of West Bengal 35. M/s. L&T had entered into agreements with the Railway authorities to develop, operate and Maintain the Rail systems which infact the company has done from initial day. This agreement with the Railway Authorities was not under the BOLT Scheme but infact the assessee was permitted to setup and even operate and maintain the rail system so developed in accordance with terms and conditions of the agreements under the supervision and as per guidelines of Indian Railways. Prior to putting up the rail systems, the assessee used to transfer the material from its plant to the nearest Indian Railways station and vice versa through Road and used to incur road freight and loading & unloading charges at multiple stages. To save these costs and other incidental costs, the assessee decided to develop the rail infrastructure from its manufacturing setup till the nearest Indian Railway station. It is Indian Railways who either have the power to develop any railways in India or it can enter into any arrangement with any person for developing and for operating rail systems subject to prior approvals and conditions. Therefore, the assessee accordingly entered into agreement with the Rail authorities to develop, operate and maintain its rail systems. The agreement lays down various conditions to be complied with, before and during the development, maintaining and operating the rail systems. Such rail system can also be made available to any third party with the permission of the Indian Railway. For this purpose, the assessee approached to the Indian Railways for development of Rail systems which Indian railways has agreed to provide permission for laying down the railway sidings (including the rail line upto the nearest rail head) and accordingly the assessee had awarded the contract to the private parties for construction and to the Indian Railway approved agency for supervision and consultancy of the Rail system and had borne the entire cost of development including for
29 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. incidental expenses paid to all the agencies. The clause in the agreement saying that railway administration is willing to lay the said sidings / construct the siding is meant for Railway administration's permission for allowing the assessee for developing the Rail system as per the norms and supervision of Indian Railways. The revenue authorities alleged that the Railway system have been developed to facilitate the transportation of goods for the assessee from and upto the factory premises, and therefore the Agreements entered into by the assessee with the Indian Railways cannot be regarded as required agreements between the Govt and the assessee. In this respect the assessee submitted as under before the lower authorities.
a) as per section 80- IA( 4 )(i)(b) the agreement has to be entered with the Central Govt or a State Govt or a Local Authority or any other statutory body for (i) developing or (ii) Operating and Maintaining or (iii) Developing, Operating and Maintaining the infrastructure facility. Indian Railways is the statutory body under the Indian Railways Act.
b) The provision of Sec.80-IA (8) contemplates a situation where goods or services are transferred by an eligible undertaking and vice versa. Undoubtedly therefore, the section itself envisages situations of captive consumption.
c) Further as mentioned in clause 15 of the agreement, the rail systems developed by the appellant can be made available to any third party with the prior approval of the Indian Railways.
It was therefore contended that the agreements as entered into by the assessee with Indian Railways are as envisaged u/s 80IA(4)(i) and in no case it can be inferred that they are not the required agreements under section 80-IA.
The Govt can also enter into any arrangement with any person for developing and for operating rail systems subject to prior approvals and conditions of the Indian Railways. M/s L& T has accordingly entered into agreement with the appropriate rail authorities to Develop, Operate and Maintain its rail systems. M/s. L& T had awarded contract to the private parties for construction of rail sidings (including upto the nearest rail head) under the supervision of Indian Railways approved agency, and the entire cost for construction / development paid to the aforesaid agency and supervision charges paid to Indian Railways approved agency have
30 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. been borne by the assessee, apart from all costs incurred for all the materials and incidental expenses. It was further explained in terms of clause 14, Wagons are hauled by the Railway Administration from the point marked 'X' or such other points as may be fixed upon by mutual consent of the applicants and railway administration in such manner as shall be determined in each case by the Railway administration. The assessee undertakes to shunt the wagons from such point to his premises and back with his own labour. However", no siding charges are charged by Indian Railways, since it is a private siding. The Clause 16 reads to mean that, charges such as Siding Charges are to be paid 'wherever leviable'. In assessee’s case siding charges are not leviable.
The rail systems were developed by assessee under the agreements entered into with Indian Railways and assessee operates and maintains the same in accordance with terms and conditions of the Agreements, under the supervision and as per guidelines of Indian Railways. Relevant clauses of the agreements substantiating the same are as under:-
a) Clause No. 2, Agreement to Construct Siding - Wherein it is mentioned that "the Railway administration will at the cost and the expenses of the applicant, in all respect, construct the railway sidings " Further kindly be informed that, for construction of the siding under the supervision of the Railways, the contract for construction and supervision has been awarded by the applicant and the entire cost has been borne by the applicant.
b) Clause no. 6 - Payment by Applicant against the total estimated cost - wherein it is mentioned that, "The applicant will pay in advance to the railway administration the total estimated cost of the work consisting of the estimated costs of work done by the party and those by the railway administration .... "
c) Clause no. 7(a) - Permanent way materials - "The applicant will provide and deliver at site the permanent way and other materials (which includes Girders, Rails, Sleepers, fastenings, points, crossings, fencings, signals and overhead structures and any other things connected therewith for electric tractions and other machinery and
31 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. equipments necessary for working of the sidings) in accordance with the Railway administration's standards and specifications. All charges incurred in laying and fitting the permanent way materials and all other equipments which may be provided shall entirely be borne by the applicant."
d) Clause No. 17 - Working of the Siding - wherein it is mentioned that " ... the applicant shall provide labour for and bear the cost of all Operations on the siding. The applicant shall be responsible for the strict compliance by himself and his employees and agents of all rules, regulations and standing orders made by the railway administration from time to time for the working of sidings and for all accidents, loss or damage that may be ensured or be caused by reasons of negligence or non-observance of such rules, regulations and orders.
e) Clause No. 8(b) - Wherein it is mentioned that, Maintenance and other Charges for the portion of the sidings - The applicant will at their own cost and expenses in all things and to the satisfaction of the railway administration and if required by the railway administration under its supervision maintains in good order and repair the said portion of the siding. Such charges as may be fixed by the railway for the supervision rendered shall be paid by the applicant.
These are other various clauses wherein it is evident that the Development, Operation and Maintenance is done by the assessee and the entire cost for the same is borne by the assessee.
From the record we also found that the assessee has duly submitted for all the rail systems, Form 10CCB, duly certified and audited by M/s. G.P Kapadia & Co., Chartered Accountants along with Balance Sheet, P&L account, Schedules forming part of Balance sheet and P&L Account.
However, the AO did not agree with assessee’s contention and held that Rail systems developed by assessee is not eligible for claim of deduction u/s.80IA (4). Now, we deal precisely with the observation made by CIT(A) for declining Assessee’s claim of deduction u/s.80IA.
32 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. 42. With regard to CIT(A)’s observation as to whether rail systems developed by M/s. L& T were in accordance with the Build-Own- Lease-& Transfer (BOLT) scheme of the Indian Railways, we observe that L& T had entered into agreements with the railway authorities to develop, operate & maintain the rail systems, which in fact the company has done from the initial day. The assessee was permitted to setup and even operate & maintain the rail systems so developed. Further, regarding' Circular No. 733 dated 03-01-1996, we found that the Circular clarifies that tax holiday benefit u/s. 80-IA of the Act was also available to private enterprises which only built and leased out the rail system to the Indian Railways. In spite the absence of activities- 'operate and maintain' the rail systems, such 'infrastructure facilities' were also declared as eligible to claim deduction under the said section. Further, the circular also states that rail systems developed other than under the BOLT scheme were also eligible for benefit u/s 80-IA. In case of the assessee, the clarification of benefits u/s. 80-IA being available to those rail systems who do not 'operate and maintain' the systems clearly establishes that, enterprises who in fact operate and maintain the rail systems were certainly eligible for tax holiday benefits. As the assessee has entered into agreements with the railway authorities to develop, operate & maintain the rail systems, which in fact the company has done from the initial day. There was indeed an 'infrastructure' facility eligible for deduction u/s 80lA. We also found that the Hon'ble ITAT in assessee's own case for AY 2006-07, has categorically allowed the deduction u/s. 80-IA for its rail system after dealing with the Circular No. 733 dtd 3.1.1996.
The Rail systems of assessee at Hirmi, Tadipatri, Arakkonam and at Durgapur were developed under the Agreements entered into with Indian Railways and the assessee is allowed to Operate and Maintain in accordance with terms and conditions of the Agreements, under the supervision and as per guidelines of Indian Railways only. The copies of agreements between M/s L& T and Indian Railways for other rail systems i.e. at Tadipatri, Arakkonam and Durgapur are placed on record and we have carefully perused the relevant terms and conditions. The Indian Railways plays role in operations and maintenance of the Rail systems, traffic Management, etc. as mentioned under the various clauses of the Agreements entered into, and the entire cost of such operation and maintenance is borne by the assessee including for the Railway staff being deputed for the purpose.
33 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. 44. From the record we found that M/s. L&T had entered into agreements with the Railway authorities to develop, Operate and Maintain the Rail systems which infact the company has done from initial day. This agreement with the Railway Authorities was not under the BOLT Scheme but infact the assessee was permitted to setup and even operate and maintain the rail system so developed in accordance with terms and conditions of the agreements under the supervision and as per guidelines of Indian Railways. As per the relevant provisions of law during relevant period there is no requirement for Rail Infrastructure to be In BOLT scheme, to be eligible for claiming deduction under Section SO-lA (4 )(i). Section 80-lA (4 )(i) provides the following conditions to be complied with for claiming deductions; (i) ..... (a) it is owned by a company registered in India ..... (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:
With regard to objection of revenue authorities on applicability of CBDT circular No.733 on BOLT schemes, systems developed under BOLT scheme are also eligible for 80-IA benefit, and in no way restricts the deduction u/s.80-IA to other rail systems. We found that the Hon'ble ITAT in assessee's own case for AY 2006-07, has categorically allowed the deduction u/s. 80-IA for its rail system after dealing with the Circular No. 733 dtd 3.1.1996.
Therefore the agreements as entered into by the assessee with Indian Railways are as envisaged u/s 80- IA( 4 )(i) and in no case it can be inferred that they are not the required agreements under section 80-IA.
We also found that no siding charges are levied by Indian Railways for the rail systems developed by the assessee. The assessee has developed, operates and maintains the rail systems. The systems are being operated by the assessee as permitted under the agreements entered into with Indian Railways and under the rules and regulations of Indian Railways from time to time. The entire cost was borne by the assessee and is appearing in the balance
34 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. sheet of the assessee as placed on record. We have also verified the same and found it correct.
Contention of revenue authorities that Railways had constructed the rail system is not factually correct. In fact, M/s L& T had entered into agreement with the appropriate rail authorities to Develop its rail systems. M/s. L&T had constructed the rail system by awarding contract to the private parties for construction of rail sidings (including upto the nearest rail head) under the supervision of Indian Railways approved agency, and the entire cost for construction/ development paid to the aforesaid agency and supervision charges paid to Indian Railways approved agency have been borne by the assessee, apart from all costs incurred for all the materials and incidental expenses.
From the record we found that the rail systems were developed under the agreements entered into with Indian Railways and assessee operates and maintains the same in accordance with terms and conditions of the Agreements, under the supervision and as per guidelines of Indian Railways. We have carefully gone through the relevant clauses of the agreements substantiating the same which reads as under:
a) Clause No. 2, Agreement to Construct Siding - Wherein it is mentioned that "the Railway administration will at the cost and the expenses of the applicant, in all respect, construct the railway sidings " Further kindly be informed that, for construction of the siding under the supervision of the Railways, the contract for construction and supervision has been awarded by the applicant and the entire cost has been borne by the applicant.
b) Clause no. 6 - Payment by Applicant against the total estimated cost - wherein it is mentioned that, "The applicant will pay in advance to the railway administration the total estimated cost of the work consisting of the estimated costs of work done by the party and those by the railway administration .... "
c) Clause no. 7(a) - Permanent way materials - "The applicant will provide and deliver at site the permanent way and other materials (which includes Girders, Rails, Sleepers, fastenings, points, crossings, fencings, signals and overhead structures and any other things connected
35 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. therewith for electric tractions and other machinery and equipments necessary for working of the sidings) in accordance with the Railway administration's standards and specifications. All charges incurred in laying and fitting the permanent way materials and all other equipments which may be provided shall entirely be borne by the applicant."
d) Clause No. 17 - Working of the Siding - wherein it is mentioned that " ... the applicant shall provide labour for and bear the cost of all Operations on the siding. The applicant shall be responsible for the strict compliance by himself and his employees and agents of all rules, regulations and standing orders made by the railway administration from time to time for the working of sidings and for all accidents, loss or damage that may be ensured or be caused by reasons of negligence or non- observance of such rules, regulations and orders .... " Further, the appellant carries out all the operations for smooth movement of its goods, viz. Shunting of the Wagons, placing of the wagons at appropriate locations, Loading / Unloading of Wagons within the stipulated time and stipulated methods of Indian Railways through Wagon Loading Machines and Wagon Tipplers, Weighing of Wagons on Motion Weigh Bridges, Maintaining signaling systems, Wagons, Couplings, Rake formation for dispatch, hauling of Wagons through its own locomotives, etc.
Further, in Clause No. 14 - Traffic on Siding - it is mentioned that " .... applicant undertakes to shunt the wagons from such point to his premises and back with his own labour and the railway administration would not be responsible for any delay, loss and damages caused in consequence of the failure of the applicant to arrange for such shunting.”
Thus, the rail system is being operated by the appellant and the cost of above operations is borne by appellant.
e) Clause No. 8(b) - Wherein it is mentioned that, Maintenance and other Charges for the portion of the sidings - The applicant will at their own cost and
36 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. expenses in all things and to the satisfaction of the railway administration and if required by the railway administration under its supervision maintains in good order and repair the said portion of the siding. Such charges as may be fixed by the railway for the supervision rendered shall be paid by the applicant.
There are other various clauses wherein it is evident that the Development, Operation and Maintenance is done by the appellant and the entire cost for the same is borne by the appellant.
The question of allowability of the deduction u/s. 80IA in respect of rail systems has been settled in earlier years by the Hon'ble ITAT in assessee’s own case. The facts and the agreements were also placed before authorities in those years. Therefore, the claim based on same facts needs to be allowed following the principle of Consistency in assessment proceedings. Even though the 'principles of res judicata' do not apply to income tax proceedings and each assessment year being a separate unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be appropriate to allow the position to be changed in a subsequent year.
The above principles have been accepted in the undernoted case:
• Shah & Co (HA) v. CIT (1956) (30 ITR 618) (Bom) • Amalgamated Coalfields vs. Janapada Sabha AIR 1964 SC 1013 • South India Trust Association vs. Telugu Church Council (1996) 2 SCC 520 • Radhasoami Satsang vs. CIT (1992) 193 ITR 321 (SC)
…. 52. …. 53. …. 54. ….
We also found that the loading and unloading of goods is being done by the integrated Rail system set up by the assessee and expenses which were incurred earlier for loading and unloading of materials at the plant as well as the nearest Indian Railway station have been avoided and saved and are considered as income of the
37 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. rail system arising due to setting up of such integrated rail system. The assessee has already submitted for all the Rail Systems form 10CCB duly certified and audited by M/s. GP Kapadia & Co. Chartered Accountants, alongwith Balance Sheet, P&L Account, Schedules forming part of Balance sheet and P&L Account. We have also checked the amount eligible for deduction as furnished in form 10 CCB and found the same as correct.
With regard to CIT(A)’s observation in the A.Y.2010-11 at page 42 to the effect that the so called 'Rail System' of the assessee company are simply a private siding and not any infrastructure facility of Public Utility therefore the infrastructure of such private sidings should be treated as "Private Facility”, we observe that Section 801A(4) of the Income Tax Act, 1961 does not require the infrastructure facility to be a public facility for allowing deduction under section 801A. The explanation to section 801A(4) defines the term 'infrastructure facility' to mean a road including toll road, a bridge or a rail system without anything further. We observe that the CIT(A) has been referring to the pre-amended definition of the term 'infrastructure facility' which was applicable till AY 2001-02. The assessee company began its claim of deduction from AY 2004-05 when the definition was simplified with no indication about 'public facility'. Thus CIT(A) was not correct while declining claim of deduction u/s.80IA(4) on this reasoning.
As per our considered view, even assuming that the requirement of public facility is to be fulfilled, it is worth noting that a section of public is also considered to be public. This principle has been laid down by the Hon'ble Supreme Court in the context of a Chamber of Commerce [CIT vs. Andhra Chamber of Commerce (1965)] (55 ITR 722) wherein it was ruled that even though the Andhra Chamber of Commerce was established only to serve the traders and businessmen in the State of Andhra Pradesh, such traders and businessmen constituted a section of public and therefore the Chamber existed for a public charitable purpose. In the ultimate analysis of the facts in the case of assessee Company, the benefits of such siding does ensure to the public in general - to the consumers of cement. Any benefit to the business even though it is first enjoyed by the particular trade or establishment eventually is for the general public good. It has to be noted that several industries may come up on both the sides of sidings from the interchange point till factory gate, if anyone of them wants to make use of railway sidings, it is permissible for the Railway Administration to entertain
38 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. such request and by making use of the exiting siding, can extend or branch off and lay railway tracks to the industry which makes the request and lay siding accordingly. Thus, the railway siding from the point of interchange till factory gate of the assessee has immense potential, with enabling powers to the Railway Administration (which itself is a public department), to be developed into a facility that will ensure to the public at large. The railway sidings are always constructed for captive consumption. Thus, the provisions of section 80IA(4) cannot be read in the manner to make it redundant, when the legislature in all its wisdom intended to give benefit of tax holiday for construction of infrastructure facility in the form of railway which is meant for captive consumption.
We have carefully gone through the terms and conditions of the agreement entered by the assessee with the railway authority, a perusal of clause 19 of the Railway Siding agreement entered into by the assessee with the Railway authorities, clarifies that construction and operation of the railway siding was not merely for the purpose of the business of the assessee, but was with a long term perspective to create an infrastructure facility which could, at a future point of time and in case a need arise, potentially confer benefit to the public at large. The agreement with the Railway authorities, provided that the facility so created could be made available to others with the discretion and prior permission of the railway authorities thereby rendering the facility open for general public at large. Hence, such a facility is in fact a public utility.
With regard to CIT(A)s conclusion for the A.Y 2010-11 at page 42, to the effect that the agreements entered between the assessee Company & Railway Department, contained the terms & conditions for construction of Private Sidings and that cannot be treated as any agreement for development, operation & maintenance of any Rail system, we observe that as per section 80-IA(4)(i)(b), an assessee has to enter 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 the infrastructure facility. The Indian Railways, with whom the assessee has entered into an agreement, is the statutory body designated under the Indian Railways with whom the assessee has entered into an agreement, is the statutory body designated under the Indian Railways Act. We found that the agreement does not merely contain the terms and conditions of the construction of railway siding i.e. development of siding (laying of
39 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. tracks, signal system and all the essential components of Rail Systems) but it also contains the terms and conditions relating to its operation and maintenance as well.
Our attention was also invited to letter No. 99/TC(FM)26/1/Pt- II (Sub Liberalisation of siding 'Rules) of the Railway Boar clarifying that the capital cost of new siding, maintenance cost, cost of Railway staff etc. will be borne by the enterprise only, which also supports our view.
As far as operations is concerned, we found that the assessee carries out all the following operations for smooth movement of its goods, viz. shunting of the wagons, placing of the wagons at appropriate locations, loading/unloading of wagons within the stipulated time and stipulated methods of Indian Railways through Wagon Loading Machines and Wagon Tipplers, weighing of wagons on Motion Weigh Bridges, wagon couplings and de-couplings, rake formation for dispatch, hauling of wagons through its own locomotives within the factory premises, etc. Thus, the rail system is being operated by the assessee and the cost of above operations is borne by assessee.
With regard to CIT(A)’s conclusion at page 42 of A.Y. 2010- 11 to the effect that various conditions given in Section were not met with, we observe as under:-
a. Section 80-IA (4)(i) provides the following conditions to be complied with for claiming deductions;
(i) any enterprise carrying on the business of (i) developing, (ii) maintaining and operating or (iii) developing, maintaining and operating any infrastructure facility which fulfils all the following conditions, namely :-
(a) it is owned by a company registered in India ..... (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:
40 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. 63. As per materials placed on record, all the railway systems are established and owned by the assessee which is a Company as defined under the Income tax Act. This is an undisputed fact and there is no adverse remark by the AO or CIT(A) in this regard.
As per clause (b)of Section 80IA (4)(i) an agreement has to be entered 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 the infrastructure facility. The Indian Railways, with whom the assessee has entered into an agreement, is the statutory body designated under the Indian Railways Act.
We also observe that the agreements entered into by the assessee are for the development, operation and maintenance of the Railway siding. Thus this fulfills the requirement in clause (b).
…. 67. ….
With regard to CIT(A)’s observation that the actual operation of Rail System [i.e. running of goods train] onto the private sidings between the serving railway station and plant premises [upto interchange point! exchange yard], was being done by the Indian Railways and not by the assessee Company.
We found that the CIT(A) has equated "running of goods train" with the "operation of Rail System". This is the sole basis on which he has arrived at his conclusion that since the assessee is not running the goods train it is not operation of Rail System and hence not eligible for claiming deduction under section 80IA(4).
As per our considered view, the operation of Rail System is not simply running of goods train. Operation of Railway Systems comprises of various activities viz. shunting of the wagons, placing of the wagons at appropriate locations, loading/unloading of wagons within the stipulated time and stipulated methods of Indian Railways through Wagon Loading Machines and Wagon Tipplers, weighing of wagons on Motion Weigh Bridges, wagon couplings and de- couplings, rake formation for dispatch, hauling of wagons through its own locomotives within the factory premises, etc. Thus, the rail system is being operated by the assessee and the cost of above operations is borne by assessee.
41 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. 71. With regard to allegation of the CIT(A) that the assessee has never claimed that it is hauling the wagons on the entire siding, we found that hauling of wagons is only one of the activity in the entire operation of the rail system. Under the Railways Act, 1989 nobody other than railway administration is allowed to haul wagons of the railway tracks. As per materials placed on record, all the activities relating to the operation of rail system except hauling of wagons till the interchange point, is done by the assessee and the entire cost for the same is borne by it.
From the record we also found that even the maintenance of the Rail system such as alignment of track & gauge maintenance, patching of ballast, maintenance of railway track sleepers, signalling points and railway gate crossing from private siding to connecting point of nearest railway station is done by the assessee.
Thus the operation of rail is not merely hauling of wagons but comprises of various activities all of which is carried on by the assessee Company.
…. 75. …. 76. …. 77. ….
In this regard, we observe that the railway systems of the assessee has been rendering following services to the cement division: • shunting of the wagons, • placing of the wagons at appropriate locations, • loading/unloading of wagons within the stipulated time and stipulated methods of Indian Railways through Wagon Loading Machines and Wagon Tipplers, • weighing of wagons on Motion Weigh Bridges, • wagon couplings and de-couplings, • rake formation for dispatch, • hauling of wagons through its own locomotives within the factory premises
All the aforesaid services are carried out by the railway system inside the factory premises. Further even the maintenance of the Rail system such as alignment of track & gauge maintenance, patching of ballast, maintenance of railway track sleepers, signaling points
42 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. and railway gate crossing from private siding to connecting point of nearest railway station is done by the railway system. Thus, the revenue of the railway undertaking is the sum aggregate of the above services rendered by it to the cement division. For the purpose of computation, the railway undertaking has adopted the minimum freight rate (further discounted at 50%) which the Indian railways charges for the transportation of these materials. Since this is the easiest available comparable, it has been adopted by assessee for calculating one of the component of its "revenue".
…. 81. …. 82. ….
The CIT(A) has also raised a query as to whether the L& T Ltd, which had developed said rail system was eligible for deduction u/s 80lA in respect of profit, if any, otherwise on operation & maintaining that system under the provisions that existed at the relevant time [prior to 01.04.2002] when such infrastructure facility is said to have become operational. As per our considered view one of condition for claiming deduction under the pre-amended section 80IA(4) (i.e. prior to AY 2002-03) stipulated that the assessee should enter into an agreement with the Government (Central or State) or other authorities mentioned therein for (i) developing, (ii) maintaining and operating or (iii) developing, maintaining and operating a new infrastructure facility. Further, the agreement should also provide for transfer of such infrastructure facility to such authorities within the period stipulated in the agreement. The Central Government realizing the need to encourage investment particularly in the area of surface transport, water supply, water treatment system, irrigation project, sanitation and sewerage system or solid waste management systems made certain amendments to the conditions for eligibility of claim u/s. 80lA through Finance Act, 2001. Amongst others amendments, the Central Govt. removed the abovementioned condition and accordingly, the amended section 80IA(4) clause (b) stood as under from AY 2002-03 onwards: "(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;"
43 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. 84. Thus, the Finance Act, 2001 amongst other conditions, particularly deleted the requirement for an assessee to transfer the infrastructure facility to the concerned government authorities with prescribed time.
In this regard reliance can be placed on the decision of Gujarat High Court in case of Katira Construction Limited v. UOI (352 ITR 513), wherein Court held as under:-
"32. It is true that with effect from 1-4-2002 some significant changes were made in the said provisions. Three of these changes which are material were: (i) that sub-section (4) of section 80-IA now required the enterprise to carry on the business of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility. This was in contrast to the previous requirement of all three conditions being cumulatively satisfied; (ii) that the explanation of the term 'infrastructure facility' was changed to besides others, a road including toll road instead of hitherto existing expression 'road', and (iii) that the requirement of transferring the infrastructural facilities developed by the enterprise to the Central or the State Government or the local authority within the time stipulated in the agreement was done away with.
These changes, however, would not alter the situation vis-a-vis the impugned amendment. These legislative changes did enlarge the scope of the deduction and in a sense, made it available to certain assessees who would not have been, but for the changes eligible for such deduction "
In terms of the above averments, after acquiring the cement business from L&T, the assessee started claiming deduction for Rail system u/s. 80-IA from Assessment year 2004-05 onwards since it satisfied all the conditions as prescribed u/s 80IA(4) as it stood during AY 2004-05, viz: a) It is owned by a company registered in India. b) It has entered into an agreement with the Government for developing / operating / maintaining the infrastructure facility, and
44 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. c) It has started operating and maintaining the infrastructure facility on or after April,1995.
Thus, under the amended conditions of the section 80-IA(4) i.e. post AY 2002-03, L&T as well as UTCL were eligible for claiming deduction u/s 801A. As per section 80IA(2), the deduction is available at the option of the assessee, for any ten consecutive assessment years out of twenty years beginning from the year in which the undertaking or enterprise develop and operate any infrastructure facility. The assessee has started claiming deduction post AY 2004-05 and is within the period of available twenty years. Under section 80IB, u/s 80lC, 80ID and 80lE, the first year in which the production is started is taken as initial previous year whereas, after the amendment in provisions of section 80lA w.e.f. 01.04.2000 the initial assessment year is at the option of the assessee to avail the benefit.
In view of the amended provisions of Section 80-IA, the year in which the claim is first made i.e. initial assessment year, must apply for determination of eligibility of the claim. In respect of AY 2004-05 onwards including assessment year 2009-10 and 2010-11, since the condition relating to transfer of such facility to Central Govt. was no longer a pre-requisite for eligibility of claim u/s 80-IA(4)(b), the assessee has correctly made the claim.
In view of the above, we can safely conclude that even if an assessee does not fulfill all the requisite conditions for availing the tax holiday benefit in the year in which the new infrastructure facility is set up or has commenced operation, but in a subsequent year, all the requisite conditions for availing such benefit are fulfilled, the assessee would be entitled to avail the tax holiday benefit in respect of such subsequent assessment year(s). For this purpose reliance is placed on the decision of the Hon'ble ITAT of Jaipur in the case of ACIT v. Shiv Agrevo Limited (34 SOT 1). In this case, the assessee- company, whose main object was extraction of seeds for obtaining edible oils and refining thereof, set up a new industrial undertaking for the extraction and refining of edible oil. It claimed to have temporarily commenced the activity on and from 1-1-1997 on a trial run; however, the systematic activity of refining commenced only in the previous year relating to the assessment year 1998-99. After the final completion of the project, the assessee-company applied directly for a permanent registration certificate of its status as a small scale industry (SSI) under section 11-B of the Industrial
45 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. Development Regulation Act, 1951 (IRDA) to the prescribed authority, who granted the certificate dated 30-3-1998, which was a conclusive and final proof of such a status under the provisions of IRDA. The return of income filed earlier by the assessee for the assessment year 1999-2000 as subsequently revised, wherein a claim of deduction under section 80-IA was made. The Assessing Officer disallowed the claim of the assessee, on the ground that the assessee started production from the assessment year 1997-98 itself, the year in which the assessee was not a small scale industry, and, therefore, the assessee did not fulfill the condition of section 80- IA in the initial year. On appeal, the Commissioner (Appeals), allowed the assessee's claim under section 80-1A. On Revenues appeal, the ITAT held that for claiming deduction under section 80- IA, it has to be determined at end of relevant previous year that as to whether assessee is registered as SSI and there is no condition in Act that an industrial undertaking should fulfill all conditions as laid down under section 80-IA in very initial year itself and not thereafter.
Even as per fiction created by section 80IA(5), the eligible business is the only source of income and the deduction would be allowed from the initial assessment year or any subsequent assessment year. It nowhere defines as to what is the "initial assessment year". Prior to 1-4-2000, section 80IA(12) defined the "initial assessment year" for various types of eligible assessees. However, after the amendment by the Finance Act, 1999, the definition of "initial assessment year" has been specifically taken away. Now, when the assessee exercises the option of choosing the initial assessment year as culled out in section 80IA(2) from which it chooses its' 10 years of deduction out of 20 years, then only deduction u/s 80lA can be determined.
ITAT Chennai Bench have dealt with similar issue in case of Mohan Breweries 116 ITTD 241 which pertains to AY 2004-05 (i.e., after the amendment of S. 80-IA by the Finance Act 1999), the Chennai Tribunal has held that the initial assessment year is the first year of claim and S. 80-IA itself becomes applicable only when the assessee makes the claim for the first time and not before that. Hon'ble Madras High Court has upheld the judgment of Chennai Tribunal and concurred with the view that Section does not mandate that first year of 10 consecutive assessment years should be always first year of set-up of enterprise. The High Court has held that as initial year is not defined in Section 80lA as compared to Section 80IB where it is specifically provided that the year of commencement of
46 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. business will be the initial year for the purpose of claiming the deduction, the year of option has to be treated as initial assessment year for the purpose of Section 80IA.
It is pertinent to mention here that once the deduction for the very first is allowed then in subsequent year the deduction cannot be disallowed on the same ground. Hon'ble High Court decision in the case of Saurashtra Cement & Chemical Industries Ltd. v. CIT [1980] 123 ITR 669 (Guj), has pointed out that once deduction is allowed in the first year, revenue has no power to deny the deduction in subsequent assessment years as provided under the Act.
Even the Supreme Court in case of Bajaj Tempo's case (196 ITR 188) held that a provision in the taxing statute for promoting growth and development is to be construed liberally and hence, even the restriction contained in such a provision has to be construed so as to advance the objective of the provision and not to frustrate it.
The CIT(A) has also raised an objection to the effect that since L & T was not eligible for deduction u/s.80IA on operation of those rail system, then whether the assessee company, which inherited the cement business [i.e. cement plants together with said rail system] of the L& T Ltd in the FY 2003-04 on account of demerger, could be treated as eligible to the deduction under the aforesaid section in respect of profit, if any, of those rail system for the later years. In this regard we observe that assessee has inherited the cement business from L&T Ltd., in FY 2003-04 on account of merger. Post merger it started claiming deduction for Rail system u/s. 80-IA from Assessment year 2004-05 onwards as it satisfied all the conditions as prescribed u/s 80IA(4). Section 80IA(12) provided that in the scheme of amalgamation or merger, the deduction is available to the amalgamated / resulting company. The relevant provision of sec. 80IA(12) reproduced hereunder:-
"Where any undertaking of an Indian company which is entitled to the deduction under this section is transferred, before the expiry of the period specified in this section, to another Indian company in a scheme of amalgamation or demerger.
(a) no deduction shall be admissible under this section to the amalgamating or the demerged company for the
47 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. previous year in which the amalgamation or the demerger takes place; and (b) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or demerger had not taken place.
Section 80IA(2) further provides that the deduction is available at the option of the assessee for any ten consecutive assessment years out of twenty years beginning from the year in which the undertaking or enterprise develop and operate any infrastructure facility. UTCL has started to claim deduction within the prescribed period of twenty years. The claim is thus legitimately made by assessee complying the requirements mentioned under section 801A.”
Learned Counsel for the assessee also took us through the agreement entered into by the assessee in respect of the Railway System operated by it and pointed out that the clauses in the agreement are exactly identical and it is a standard agreement and since the facts and circumstances being similar the issue of deduction u/s. 80IA in respect of Railway system should be allowed in favour of the assessee. On a perusal of the agreement dated 16.01.2007 entered with South Western Railway, Hubli division for railway system we find clauses in the agreement are exactly identical to the agreement entered into by M/s.Ultratech Cements Limited for the railway siding in its premises. On analyzing the agreement and clauses thereon and the provisions of the Act it has been held by the Coordinate Bench in the case of M/s.Ultratech
48 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. Cements Limited (supra) that the Railway System operated by the assessee is an infrastructure facility and entitled for the deduction u/s. 80IA of the Act.
We further find that revenue’s appeal against the decision of Hon'ble ITAT in the case of M/s. Ultratech Cement Ltd. for A.Y. 2006-07 in ITA.No.6070 of 2010, has been admitted by Hon'ble Bombay High Court vide order dated 02.04.2014 on limited issue of as to whether railway siding can be treated as profit Centre or cost Centre for the purpose of determination of eligible profit. As regards revenue’s ground of appeal against very availability of deduction u/s. 80IA in respect of railway siding the Hon'ble High Court rejected the same holding as under: “After hearing the counsel at some length and perusing with their assistance the order passed by the Commissioner of Income Tax (Appeals) and the income Tax Appellate Tribunal, we are of the opinion that though the appeal deserves admission but it should not be on the question of law as framed at Page 5 of the paper book. That questions the very applicability of the provision. From the findings of the Commissioner of Income Tax (Appeals), the only question which can be raised as substantial question of law and arising from the discussion on this point is whether the respondent assessee is eligible for deduction u/s. 80IA of the Income Tax Act by urging that the Rail system is not a profit Centre but a cost saving Exercise undertaken in terms of subsection (4) of section 80IA?.........” 40. Thus as regards the very claim for the deduction u/s. 80IA of the Act Per se, the ITAT order can be treated as final in favour of the assessee
49 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. as the Hon'ble High Court refused to admit the question raised by the Revenue on the very applicability of the provisions of section 80IA of the Act for the Rail System. Therefore, respectively following the said decision we hold that the assessee entitled for the deduction u/s. 80IA of the Act in respect of the railway system.
Similarly, in the case of water supply system assessee entered into agreement dated 01.06.2006 with the Government of Karnataka for laying and operating water supply system from Tungbhadra dam located at Hospet to its factory located at Sandur Taluk, Bellary, Karnataka which is around 42 km this goes to show that apparently Government of Karnataka has allowed the assessee company to lay the water pipe line and draw water from Tungabhadra dam. Permission was granted by Secretary of Government of Karnataka of Water Resources Department vide order dated 21-23.07.2004. The question is whether this water supply project is an infrastructure project within the meaning of the provisions of section 80IA of the Act as far as issue of eligibility of assessee company regarding the deduction u/s. 80IA (4) of the Act as per Explanation 2 clause (c) deduction can be allowed in respect of “a water supply project” as an infrastructure facility. In the case of CIT v. ABG heavy industries limited the Hon'ble Bombay High Court held as under:
50 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. "The object of section 80-IA was to provide an impetus to the growth of infrastructure in the nation. A sound infrastructure is a sine qua non for economic development. Absence of infrastructure poses significant barriers to growth and development. A model which relied exclusively on the provision of basic infrastructure by the State was found to be deficient. Section 80-lA was an instrument of legislative policy, conceived with a view to provide an impetus to private sector participation in infrastructural projects. Consistent with the legislative object of encouraging private sector participation in the development of infrastructure, section 80-IA was enacted." 42. As could be observed from the decision of the Hon'ble Bombay High Court Section 80-lA was an instrument of legislative policy, conceived with a view to provide an impetus to private sector participation in infrastructural projects. We also find from the letter dated 04.03.2014 submitted to the Assessing Officer it was clearly stated that this facility is being operated and maintained by the assessee company. Therefore, it can be said that the assessee is operating and maintaining the infrastructure facility in the form of water supply project. Therefore, applying the same principles as was held in the case of Railway system we hold that the Water Supply Project operated and maintained by the assessee is an infrastructural facility and is eligible for deduction u/s. 80IA of the Act.
Thus, in view of what is discussed above, we hold that the assessee is entitled for deduction u/s. 80IA in respect of the Railway System and
51 ITA NO.4062, 4063, 4064 & 4086/MUM/2017 M/s. JSW Steel Ltd. water Supply project and therefore we set-aside the orders of the Ld.PCIT passed u/s. 263 of the Act for the Assessment Years 2008-09 to 2011-12.
In the result, appeals of the assessee are allowed.
Order pronounced in the open court on the 30th November, 2017.
Sd/- Sd/- (MANOJ KUMAR AGGARWAL) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai / Dated 30/11/2017 VSSGB, SPS
Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file.
//True Copy// BY ORDER,
(Asst. Registrar) ITAT, Mum