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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI R. C. SHARMA & SHRI SANDEEP GOSAIN
सुनवाई की तायीख / : 20.7.2016 Date of Hearing घोषणा की तायीख / : 24.8.2016 Date of Pronouncement आदेश / O R D E R Per R. C. Sharma, A. M.: This is an appeal filed by the assessee against the order by the ld. CIT(A)-17, Mumbai dated 07.10.2013 for the assessment year (A.Y.) 2009-10, in the matter of order passed u/s.143(3) of the Income Tax Act, 1961.
2. The grievance of the assessee revolves around decline of claim of deduction u/s. 80-IB in respect of income from business of repair and maintenance of aircraft derived from infrastructural facility build by the assessee, i.e., A I Hangar and Hangar.
(A.Y. 2009-10) Max Aerospace and Aviation Ltd. vs. Jt. CIT(OSD) 3. Rival contentions having been heard and record perused. Facts in brief are that the assessee is engaged in business of repair and maintenance of aircraft at Juhu airport. However till 2006 the assessee had no facility in airport premises to provide these services and assessee was operating from outside the airport. As a result only limited kind of repair and maintenance activity was performed by assessee. The Airport Authority of India (AAI) which is engaged in development and operation of airport throughout India, came out with tender for developing hangar for repair and maintenance of aircraft at Juhu Airport on 07.06.2001. The assessee undertook the development of hangar and entered into a concession agreement for the said purpose with AAI on 19.12.2002. As per the terms of the agreement the assessee was to construct the hangar on BOT basis and was to operate the same for 15 years. The assessee developed the said hangar and claimed deduction u/s. 80IA(4) of the Act on the income received from repairs and maintenance of aircrafts. However, A.O. declined the assessee’s claim on the plea that there are many hangars at the airport and if the assessee's claim that the development of hangar is covered under definition of 'infrastructural facility' is accepted then every structure such as shopping malls, hotels, restaurants which have utility purpose of airport or forming part of airport would be eligible for deduction u/s 80IA of the Act. In view of the above, the Assessing Officer denied deduction u/s 80IA(4) of the Act.
By the impugned order the CIT(A) confirmed the action of the A.O. by observing that developing, operating and maintenance of airport is very vast (A.Y. 2009-10) Max Aerospace and Aviation Ltd. vs. Jt. CIT(OSD) infrastructural facility having numerous operations. He was of the view that deduction u/s 80IA(4) of the Act can be admissible only when an assessee is capable of providing all the operations at the airport. He held that the assessee has developed only a part of infrastructural facility and would not be eligible for deduction u/s 80 IA(4) of the Act and confirmed the disallowance made by the Assessing Officer.
Against the order of the CIT(A), the assessee is in further appeal before us.
It was argued by the ld. AR that even though the assessee has not developed the entire airport but only part of the airport for which the assessee is eligible for deduction u/s 80IA(4) of the Act even it amounts to developing part of the infrastructural facility. In order to support the said contention reliance was placed on the order of the Hon’ble Tribunal, Pune bench; in the case of B T Patil & Sons Belgaum Constructions P Ltd being ITA No: 1408 and 1406/PN/2003 dated 28.02.2013 wherein it has been held that even if the assessee is developing part of the infrastructural facility, he is eligible for deduction u/s. 80IA(4) of the Act. While arriving at the said conclusion the Hon’ble Tribunal has placed reliance on the decision of the Hon'ble Bombay High Court in the case of ABG Heavy Industries (322 ITR 323). 6.1 Reliance was also placed on the order of the Hon’ble Tribunal, Amritsar bench, in the case of TRG Industries v. DCIT dated 19.03.2013 wherein it has been held that assessee engaged in the activity of extension of runway at airport is said to be a (A.Y. 2009-10) Max Aerospace and Aviation Ltd. vs. Jt. CIT(OSD) developer of infrastructural facility and hence eligible for deduction u/s. 80IA(4) of the Act. 6.2 Reliance was also placed on the order of the Hon’ble Tribunal, Bangalore bench, in the case of Dy. CIT v. M/s Menzies Aviation Bobba Pvt. Ltd. being ITA No: 22/Bang/2014 dated 24.06.2016 wherein it was held that construction of cargo terminal for handling of cargo constitutes an integral part of the airport and deduction is admissible on such income u/s 80IA(4) of the Act 6.3 Reliance was also placed on the decision of the Hon'ble Bombay High Court in the case of ABG Heavy Industries (322 ITR 323). In the said case, the assessee was providing service of supply, installation, testing, commissioning and maintenance of cranes and it claimed deduction u/s.80IA(4) of the Act on the income received from operation and maintenance of crane at port. It was held that assessee had developed cranes for providing loading and unloading service at the port and which amounts to development of port which is an infrastructure facility as per S. 80IA(4) of the Act. It was held that the assessee is eligible for deduction u/s 80IA(4) of the Act even if the assessee has developed a part of the port and not the whole of it.
On the other hand, the ld. DR relied on the order of the lower authority and contended that income generated through repair and maintenance of aircraft through hanger does not qualify for deduction u/s. 80-IB, since same is not in the nature of infrastructure.
(A.Y. 2009-10) Max Aerospace and Aviation Ltd. vs. Jt. CIT(OSD)
We have considered the rival contentions and carefully gone through the orders of the authorities below. We had also deliberated on the judicial pronouncements referred by the lower authorities in their respective orders as well as cited by the ld. AR and ld. DR during the course of hearing before us, in the context of factual matrix of the instant case. From the record, we found that the assessee undertook the development of hangar and entered into the agreement for the said purpose with Airport Authority of India dated 19.12.2002. As per the terms of the agreement, the assessee was to construct the hanger on BOT basis and was under obligation to operate the same for 15 years. Further, upon completion of development of hangar assessee was to operate and maintain the hangar and use the same exclusively for aircraft maintenance works including servicing and repairs to the aircraft. As per the terms and conditions of agreement the said hangar could not be used for any other purpose except for repairing, servicing and maintenance of aircraft. AO was of the view that since the assessee is engaged in service and repair of aircraft parts, the same is covered under the definition of infrastructure facility as provided u/s. 80-IA(4). As per A.O., there are many hangars at the airport and if the assessee claims that the development of hangar is covered under the definition of ‘infrastructural facility’ is accepted, then every structure such as shipping mall, hotels, restaurant which have utility purpose of airport or forming part of airport would be eligible for deduction u/s. 80-IA of the Act. For better understanding as to whether development of hangar at (A.Y. 2009-10) Max Aerospace and Aviation Ltd. vs. Jt. CIT(OSD) airport and rendering services of repair and maintenance of aircraft, constitute infrastructure facility, the provision of section 80-IA of the Act is reproduced as under: [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……. (4) This section applies to- (i) any enterprise carrying on the business [of (i) developing or (ii) operating and maintaining or (iii) developing operating and maintaining] any infrastructure facility which fulfils all the following conditions, namely:- (a) it is owned by a company registered in India or by a consortium of such companies [or by an authority or a board or a corporation or any 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: [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 (A.Y. 2009-10) Max Aerospace and Aviation Ltd. vs. Jt. CIT(OSD) management system,' (d) a port airport, inland waterway [inland port, navigational channel in the sea]} It is evident from the above definition that ‘airport’ is one of the defined infrastructural facility, development of which is eligible for deduction u/s 80IA(4) of the Act. Hangar is very much an essential part of the airport which provides for maintenance of aircraft. As per AAI Act, 1994 airport is defined as under:
"airport" means a landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome as defined in clause (2) of Section 2 of the Aircraft Act 1934 (22 of 1934). It is clear from the above definition that airport includes aircraft maintenance and also includes aerodrome as defined in S, 2(2) of the Aircraft Act, 1934, Further as per Aircraft Act, 1934 aerodrome is defined as under:
"aerodrome" means any definite or limited ground or water area intended to be used, either wholly or in part for the landing or departure of aircraft and includes all buildings, sheds, vessels, piers and other structures thereon or appertaining thereto. It is clear from above that Hangar is a structure built for aircraft maintenance and hence would be forming part of the airport. It is not in dispute that the assessee has not developed entire airport but has developed only hangars which constitute a part of airport. Even if the assessee is developing part of infrastructural facility, eligibility of deduction u/s. 80-IB(4) cannot be declined. Pune Bench in the case of B T Patil & Sons Belgaum Constructions P Ltd (supra) held that even if the assessee is developing (A.Y. 2009-10) Max Aerospace and Aviation Ltd. vs. Jt. CIT(OSD) part of the infrastructural facility, he is eligible for deduction u/s. 80-IA(4). The Hon’ble Bombay High Court in the case of ABG Heavy Industries (supra) held that the assessee developing cranes for providing loading and unloading services at the port amounts to developing a port which is a infrastructural facility as per section 80- IA(4), therefore, the assessee is eligible for deduction u/s. 80-IA(4) even if the assessee has developed only a part of the port and not whole port. The legislative intent of the section was to give incentive to investment for infrastructural growth in the country. The CBDT had issued a circular that structures for storage, loading and unloading, etc. will fall within the definition of port for purpose of s. 80-IA of the Act. Under these circumstances the Hon’ble Bombay High Court held that the assessee is eligible for deduction u/s. 80-IA of the Act even if the assessee has not developed the entire port but only developed a part of it.
Now coming to the objection of the CIT(A) who have distinguished the above decision of Bombay High Court on the ground that in case of port the department had issued a circular that the said structures built for providing storage, loading and unloading services will fall within the definition of port whereas in the case of assessee there is no such circular hence, the facts of that case will not apply to the assessee. In this regard, we are of the view that the legislative intent behind s. 80IA(4) of the Act was to give incentive to investment for infrastructural growth in the country. This intent has also been considered by the Hon'ble High Court in ABG (A.Y. 2009-10) Max Aerospace and Aviation Ltd. vs. Jt. CIT(OSD) Heavy Industries (supra) and held that one has to consider the intention of the department while issuing the said circular. The circular issued by department stating that structures built for providing storage, loading and unloading services will fall within the definition of port clearly manifest the legislative intent that the whole facility is not to be developed in order to be eligible to claim deduction u/s 80IA(4) of the Act. For this purpose reliance can be placed on the decision of the Hon'ble Supreme Court in the case of Bajaj Tempo v. CIT (196 ITR 188) wherein it has been emphasized that a provision in taxing statue granting incentives for promoting growth and development should be construed liberally. All the decisions stated hereinabove have relied on the decision of the Hon'ble Bombay High Court and held that the assessee is eligible for deduction u/s. 80IA(4) of the Act even if it has developed part of the infrastructural facility as defined in S. 80IA(4) of the Act.
It is pertinent to mention here that in the case of TRG Industries v. DCIT dated 19.03.2013 exemption was granted by the Hon'ble Amritsar bench on extension of runway and in case of Dy. CIT v. M/s Menzies Aviation Bobba Pvt. Ltd. being ITA No: 22/Bang/2014 dated 24.06.2016 exemption was allowed on cargo handling facility.
Now coming to the allegation of the A.O. to the effect that if it is held that hangar is an infrastructural facility falling under the definition of airport then every structure such as shopping malls, hotels, restaurants which have utility purpose of (A.Y. 2009-10) Max Aerospace and Aviation Ltd. vs. Jt. CIT(OSD) airport or forming part of airport would be eligible for deduction u/s 80IA of the Act. In this regard, we found that hangar is the place for repair and maintenance of aircraft and is an essential part of airport. It performs one of the crucial function at Airport. However shopping malls, hotels and restaurants are incidental facilities provided to the customers and it is not that the airport would not function without it. Hangar built by the assessee is an integral part of the airport for the functions it provides and hence would be covered under 'Airport' which is one of the defined infrastructural facility u/s 80IA(4) of the Act. Proper and timely repair, maintenance and overhauling of aircraft is sine qua non of safe operations at airport. The need for security in aerial transportation in present day cannot be over emphasized. Certainly, therefore, this cannot be compared with shopping mall and restaurant which are rather optional facilities.
After considering the entire material based on record, we found that the assessee has derived its income from the development of infrastructural facility. The hangar is defined as a shelter to repair and maintain the aircraft. It is evident from the bid document of AAI that bids are invited for constructing hangars for repairing and maintaining the aircraft, the relevant part of the same is reproduced as under: "Airports Authority of India (AAI) invites Expression of interest for construction of aircraft maintenance hangars on 'BUILD, OPERA TE AND TRANSFER (BOT)" basis at Lucknow, Jeipur. Nagpur. Bhubeneswsr; Hyderebed, Vijaywada, Bhopal. Ahmedebed. Guwahati and Juhu airport for which AAI land will be allotted to the successful bidders on lease for a period of 15 years.
(A.Y. 2009-10) Max Aerospace and Aviation Ltd. vs. Jt. CIT(OSD)
Eligibility for qualification a) The bidders shall be either operators who undertake major maintenance of their aircretts/beticopters themselves or maintenance agencies holding approval of competent authority for aircraft repairs and major maintenance. Documentary evidence in this regard shall be submitted by the bidder. It is also evident from the tender document as placed at P.B. that the said hangar could not be used for any other purpose except for repairing, servicing and maintenance of aircraft. The relevant clause reads as under:
2.3 Without prejudice to the generality of the foregoing Clause 2.2 and subject to and in accordance………. (a) to develop, design, engineer; procure…. (b) upon completion of hangar and during the Operations Period to manage, and maintain the hangar and to use the same exclusively for Aircraft Maintenance works including servicing and repairs to the aircraft (c) not to permit the use of hangar for any purpose other than for repairs/ servicing/ maintenance of aircrafts and for related support facilities and infrastructure including office facilities~' (d) bear and pay …………..
In view of the above discussion, we do not find any merit in the action of the A.O. for decline of claim of deduction u/s. 80-IA(4) with respect to the income derived by the assessee from repair and maintenance of aircraft through hangars. Thus hangar constructed by assessee is not a place merely to park the aircraft. This is a full fledged repair and maintenance centre for aircraft and hence revenue received on account of repairs and maintenance service is by operation of maintenance of hangar which is an infrastructural facility, eligible for deduction u/s. 80-IA(4) of I.T. Act.