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Facts
The assessee, CES ONYX Pvt. Ltd., filed four appeals for Assessment Years 2004-05 to 2007-08, arising from orders of the CIT(A) confirming disallowances made by the Assessing Officer (AO). The assessee was engaged in the business of collection and disposal of municipal solid waste under a concession agreement with the Corporation of Chennai. The AO disallowed the claim for deduction under Section 80IA(4) of the Income Tax Act, holding that the assessee was not operating an infrastructure facility but merely acting as a contractor for collection and transportation of waste.
Held
The Tribunal held that the assessee's activity of collecting and transporting municipal solid waste, as per the concession agreement, did not amount to operating and maintaining an infrastructure facility for solid waste management as contemplated under Section 80IA(4) of the Income Tax Act. The Municipal Solid Waste (Management & Handling) Rules, 2000, define solid waste management to include collection, segregation, storage, transportation, processing, and disposal, and the assessee was only involved in the collection and transportation part.
Key Issues
Whether the assessee's business of collecting and transporting municipal solid waste constitutes operating and maintaining an infrastructure facility eligible for deduction under Section 80IA(4) of the Income Tax Act, 1961.
Sections Cited
80IA(4), 143(3), 263
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Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI JAGADISH
आदेश / O R D E R
PER JAGADISH, A.M : Aforesaid four appeals filed by the assessee for Assessment Years (AYs) 2004-05 to 2007-08 arises out of the orders of Learned Commissioner of Income Tax, Chennai-1 [hereinafter “CIT(A)”] dated 27.03.2009 & Ld. CIT(A)-4, Chennai dated 30.01.2020.
to 568/Chny/2020 :- 2 -: 2. The facts in all the four appeals of the assessee are identical and issues are common hence, we proceed to pass a common order. For brevity, we shall take up the appeal in for A.Y 2004-05 as lead case. The grounds of appeal raised by the assessee for A.Y 2004-05 are as under:
“1. The order of Commissioner of Income Tax(Appeals) is against law, facts and probabilities of this case.
2. The Commissioner of Income Tax (Appeals) had failed to consider the fact that the order by the Assessing officer u/s 143(3) r.w.s 263 of the Income Tax Act dated 24/12/2009 is not valid in law, being a mere change of opinion. The issue relating to deduction u/s 80IA(4) was already considered and adjudicated in the original assessment order dated 24/11/2006 3. The activity carried on by the appellant is not defined under Income Tax act. The Municipal solid waste (management & handing) rules 2000, was applicable to appellant and collection storage disposal are necessary preliminary requirements of any solid waste management. The other conditions like recycling of waste, land filling, composting, palletization are advanced part of Solid waste management which are required to be done by the Municipalities, under the guidelines issued by the Government of India. The Commissioner Of Income Tax (Appeals)ought to have seen that the fundamentals of waste management as described in the scheme was carried by appellant which was provided for in the concessionaire agreement with Chennai corporation.”
3. The effective ground of appeal in these appeals of assessee is against confirming the disallowance of the claim u/s. 80IA(4) of the Income Tax Act, 1961 (hereinafter “the Act”) in respect of infrastructure facility in the form of solid waste management made by the Assessing Officer in the assessment order. to 568/Chny/2020 :- 3 -:
The brief facts of the case are that the assessee is engaged in the business of collection and disposal of municipal solid waste from the concession area (Zone 6, 8 & 10) in Chennai city vide concession agreement dated 26.11.1999 entered into by and between the Corporation of Chennai (CoC) and its parent company M/s. CGEA Asia Holdings Pvt. Ltd. incorporated in Singapore. The contract for collection and disposal of municipal solid waste from the concession area was awarded to M/s. CGEA Asia Holdings (P.) Ltd. for a period of seven years and three months from the commencement date.
Although the agreement was entered between CoC and /s. CGEA Asia Holdings Pvt. Ltd. for collection and disposal of municipal waste, the assessee has claimed the business of collection and disposal of municipal solid waste as infrastructure facility and claimed deduction u/s. 80IA(4) of the Act as under:
Sl. A.Y Disallowance u/s. 80IA(4) No. (in Rs.) 1. 2004-05 28,06.680 2. 2005-06 3,88,34,318 3 2006-07 11,09,21,620 4. 2007-08 12,57,60,253
5. The A.O in the assessment order passed u/s. 143(3) r.w.s 263 of the Act for A.Y 2004-05 and for order passed u/s. 143(3) 2005-06, 2006-07 and 2007-08 has disallowed the claim u/s. 80IA(4) of the Act. to 568/Chny/2020 :- 4 -: The A.O has held that the assessee is not operating and maintaining infrastructure facility of solid waste management system and therefore not eligible to claim deduction u/s 80iA(4). The AO has held that assessee is merely collecting and transporting the municipal solid waste and therefore acts as corporate scavenger under contract with corporation of Chennai and cannot be called enterprise carrying on the business of developing or operating and maintaining infrastructure facility of solid waste management system . The AO referring to Municipal Solid Waste (Management & Handling) Rules 2002 has held that assessee has not undertaken activities like recycling of waste, incineration etc which is part of solid waste management system . The AO held the assessee just a contractor simplicitor to collect municipal solid waste and transport the same to dump yard in terms of provisions contained in agreement dated 26.11.1999 .The AO has also observed that on completion of the project operation the infrastructure gets added to the nations’ wealth but in assessee’s case, the assets in the form of machinery in the form of rear end loader, containers, vehicles etc. have been deployed in execution of contract have been disposed and appropriated by the assessee itself.
Thus, the assessee has not left behind any tangible asset to be added to the nation’s wealth that the assessee has not carried out any of the process of disposal of municipal solid waste. to 568/Chny/2020 :- 5 -:
6. On appeal, the Ld. CIT(A) has confirmed the disallowances made by A.O u/s. 80IA(4) of the Act.
The Ld. AR before us has submitted that the agreement entered into with CoC, the municipal authority with M/s. CGEA Asia Holdings Pvt. Ltd. On the 26th November 1999 is a concession agreement and not a contract for executing any work therefore, the work cannot be treated as work contract. The Ld. AR has submitted that the concessionaire is a company selected through international committee bidding and the participation of the concessionaire in the said concession agreement is with the approval of Department of Industrial Policy and Promotion, Secretariat for Industrial assistance, Foreign collaboration of Government of India. The Ld AR submitted that the services rendered by the assessee is for the benefit of society/public, mandated by the constitution of India and Chennai Municipal Corporation and related to solid waste management. The Ld AR has relied upon various case laws.
The Ld. Departmental Representative (DR) supporting the order of A.O and Ld. CIT(A) has submitted that the assessee is not engaged in the activity of operating and maintaining solid waste to 568/Chny/2020 :- 6 -: management systems and the assessee is only a contractor and therefore not eligible for deduction under section 80IA(4). The Ld. DR has relied on the order of ITAT, Ahmedabad in the case of Modern Construction Co. (P.) Ltd. v. DCIT [2014] 42 taxmann.com 172 (Ahmedabad–Trib.) that the assessee is a work contractor and not eligible for deduction u/s. 80IA(4) of the Act.
We have heard the rival submissions, and perused the materials available on record. The only issue to adjudicate is whether the assessee-company is eligible for deduction u/s. 80IA(4) of the Act as enterprise carrying on the business of operating and maintaining infrastructure facility of solid waste management system as provided in Section 80IA(4) of the Act.
The solid waste management system has been included as an infrastructure facility to claim benefit u/s. 80IA(1) of the Income Tax Act by Finance Act, 2000 w.e.f A.Y 2001-02. The relevant extracts of the sections is reproduced for ready 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 profit and gains derived by an undertaking or enterprises from any business referred to in sub section (4) ( such business herein after referred to as the eligible business) , there shall , in accordance with to 568/Chny/2020 :- 7 -: the 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 percent of the profits and gains derived from such business for ten consecutive assessment years. (2)……………………………… (3)……………………………… (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] or (iii) developing, maintaining any infrastructure facility which fulfills all the following conditions, namely:- a) it is owned by a company registered in Indian or by a consortium of such companies [or by an authority or a board or a corporation or any 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………… Provided further…………
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. ………………………………………………. ……………………………………………….
(13)…… Explanation. - For the removal of doubts, it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in sub-section (4) which is in the nature of a works contract to 568/Chny/2020 :- 8 -: awarded by any person (including the Central or State Government) and executed by the undertaking or enterprise referred to in sub-section (1).”
The solid waste management system has not been defined in the Income Tax Act. However, the Municipal Solid Waste (Management and Handling ) Rule 2000 as notified by Ministry of Environment and Forests dated 25th September 2000 has described Management of Municipal Solid waste in Schedule –II as :
1. Collection of municipal solid wastes
Segregation of municipal solid wastes
Storage of municipal solid wastes
4. Transportation of municipal solid wastes
Processing of municipal solid wastes
Disposal of municipal solid wastes municipal solid wastes
12. The Municipal Solid Waste ( Management and Handling ) Rule 2000 has defined “operator of facility” as a person who owns or operates a facility for collection , segregation, storage, transportation, processing and disposal of municipal solid waste and also include any other agency as such by the municipal authority for management and handling of municipal waste the respective area. to 568/Chny/2020 :- 9 -: 13. As per the concession agreement, the project scope of the assessee is as under:
“2.1 Project Scope 2.1.1 The Project shall include the Sweeping and collection of MSW from the entire Concession Area, transportation, to the Disposal Area and unloading of MSW at the Disposal, Area. The scope may be divided into the following a) Primary Collection: Sweeping and collection of MSW from the entire Concession Area and transportation of the same to the Receptacles, vehicles and/or Transfer Stations b) Secondary Collection: Collection and transportation of the MSW from Receptacles and Transfer Stations to the Disposal Area and unloading of the same at the Disposal area.”
The assessee admittedly is engaged in only collection and transportation of solid wastes . The Solid Waste Management refers to the systematic collection, segregation, storage, transportation, processing and disposal of municipal solid wastes. The scope of work clearly stipulates that the assessee is not operating and maintaining solid waste management system but engaged only for part of activities of solid waste management system as work contract.
We, therefore of the opinion that the assessee is not engaged in the business of carried out infrastructure facility in the form of solid waste management system. The assessee has relied on various case laws which are not relevant to decide whether the activities of assessee falls under solid waste management system. In the case of Saniplast to 568/Chny/2020 :- 10 -: (P.) Ltd. v. ITO in (Delhi) of 2007 dated 28.11.2008, of ITAT, Delhi the issue involved was the A.O has not examined whether the condition enumerated in sub section (3) of Section 80IA are satisfied and the A.O has not examined the issue whether the toilet system connected to sewerage system will fall in the category of infrastructure facility. In the case of ACIT v. Pratibha Industries Ltd.
[2012] 28 taxmann.com 246 (Mumbai-Trib.), the assessee was engaged in civil project, not in solid waste management system . As regards to reliance of Hon’ble Gujarat High Court in the case of Gujarat Enviro Protection & Infrastructure Ltd. v. DCIT [2017] 83 taxmann.com 113 (Guj.), the issue involved was on reopening of the assessment which was already allowed in earlier years. In the case of Antony Waste Handling Cell (P) Ltd. v. ACIT [2021] 124 taxmann.com 76 (Mumbai-Trib.), the assessee has been allowed the claim of deduction u/s. 80IA(4) for all earlier A.Ys and the AO tried to disallow the deduction in the last two years. In the case of Agarwal Joint Venture v. CIT [2023] 157 taxmann.com 582 (Ahmd-Trib.), the assessee was engaged in the civil construction work and therefore not relevant to facts of the case. Similarly in the case of ACIT v. Ho Hup Simplex JV* [2018] 92 taxmann.com 106 (Kolkata-Trib.), the assessee was involved in a construction of road and therefore, the case is to 568/Chny/2020 :- 11 -: factually different. We, therefore do not find any infirmity in the order of Ld CIT(A) and uphold the same .
, 567 & 568/Chny/2020 for A.Ys 2005-06, 2006-07 & 2007-08: 15. We find that the identical issue is involved in assessee’s appeals for A.Ys 2005-06, 2006-07 & 2007-08 also and accordingly, our adjudication above in A.Y 2004-05 is mutatis mutandis applies therein also. Therefore, for the similar reasons, the appeals of assessee for A.Ys 2005-06, 2006-07 & 2007-08 are also dismissed as well.
In the result, all the four appeals of the assessee are dismissed.
Order pronounced on 04th December, 2024.