DEPUTY COMMISSIONER OF INCOME TAX Vs. ABG HEAVY INDUSTRIES LTD
LAWS(IT)-2008-1-21
INCOME TAX APPELLATE TRIBUNAL
Decided on January 08,2008

Appellant
VERSUS
Respondents

JUDGEMENT

Sushma Chowla, J.M. - (1.) THE present appeal was heard by the Bombay Bench of Tribunal on 8th Sept., 2006. THE assessee moved a miscellaneous application and vide order dt. 22nd Nov., 2006 the grounds Nos. 1 to 4 had been recalled by the Tribunal to be decided de novo.
(2.) The only issue to be decided by us is relevant to the ground Nos. 1 to 4 raised by the assessee for both the assessment years i.e., asst. yrs. 1997- 98 and 1998-99, which are as under: ITA No. 4482/Mum/2000--Asst. yr. 1997-98: On the facts and in the circumstances of the case and in law the learned C1T(A) has erred in: 1. directing the AO to deduct a sum of Rs 9,72,01,578 being deduction under Section 80-IA by holding that the assessee has carried on the business of developing, maintaining and operating any infrastructural facility while calculating the book profits under Section 115JA of the Act; 2. ignoring the statement recorded under Section 132(4) of Shri Saket Agarwal, managing director, wherein he admitted that no operation of infrastructural facility was carried on by the assessee for the purpose of deduction under Section 80-IA of the Act; Holding that the business of leasing of assets of the assessee tantamounts to carrying on business of developing, maintaining and operating any infrastructural facility and thereby eligible for the purpose of deduction under Section 80-IA of the Act;
(3.) FAILING to appreciate the terms of the tender whereby JNPT was to operate the equipment while the assessee was to maintain them and in holding that the assessee has carried on business of developing, maintaining and operating any infrastructural facility for the purpose of deduction under Section 80-IA. ITA No. 672/Mum/2002--Asst. yr. 1998-99 : 1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in directing the AO to deduct a sum of Rs. 13,15,01,864 being deduction under Section 80-IA by holding that the assessee has carried on the business of developing, maintaining and operating any infrastructural facility while calculating the book profits under Section 115JA of the Act; 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in ignoring the statement recorded under Section 132(4) of Shri Saket Agarwal, managing director, wherein he admitted that no operation of infrastructural facility was carried on by the assessee for the purpose of deduction under Section 80-IA of the Act; 3. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in holding that the business of leasing of assets of the assessee tantamounts to carrying on business of developing, maintaining and operating any infrastructural facility and thereby eligible for the purpose of deduction under Section 80-IA of the Act. 4. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in FAILING to appreciate the terms of the tender whereby JNPT was to operate the equipment while the assessee was to maintain them and in holding that the assessee was carrying on business of developing, maintaining and operating any infrastructural facility for the purpose of deduction under Section 80-IA. 3. The learned Departmental Representative for the Revenue moved an application for adjournment of hearing in the matter, which was refused and we proceeded to decide the matter after hearing the learned Counsel for the assessee and on merit of the case. Since the issue involved in both the said appeals is same, these appeals are decided by this consolidated order for the sake of convenience. 4. The facts enumerated in the order of the Tribunal dt. 8th Sept., 2006 are as under: 3. The assessee, a public limited company, has reported, in its annual accounts, its operational income from three sources. Its main source of operational income is charter hire of plant and machinery. Other two comparatively much smaller sources of operational income are (i) erection/construction contract receipts; and (ii) service charges including crane mobilisation charges. Return of income for the year under consideration was filed on 28th Nov., 1997 declaring loss of Rs. 9,71,24,731. However, book profit of Rs. 1,94,00,996 was declared under Section 115JA. In the computation of income for the purpose of determining book profit under Section 115JA, the assessee reduced Rs. 9,72,01,758 from the net profit to arrive at the book profit on the ground that the aforesaid amount represented profits derived from the business of developing, maintaining and operating infrastructure facility as defined under Section 80-IA(12) of the IT Act. According to the assessee, all the conditions for availing the deduction under Section 80-IA stood satisfied and therefore book profits were required to be reduced by the profit derived from the aforesaid industrial undertaking in terms of the provisions of Clause. (vi) of the Explanation to Section 115JA. Therefore, the short issue before us is wheth6r the assessee is engaged in the business of developing, maintaining and operating infrastructure facility under Section 80-IA(12) of the IT Act ? 4. The assessee has entered into two contracts with Jawaharlal Nehru Port Trust ("JNPT" in short), a statutory body constituted under the Major Port Trusts Act, 1963. First contract, which is for Stream-1 of the container terminal, is contained in letter bearing Ref. No. JNP/SM(CT)/CHE/AUG 94/2114 dt. 2nd/3rd Sept., 1994 issued by the JNPT for 'supply, installation, testing, commissioning and maintenance of 1 No. Rail Mounted Gantry Crane on lease for a period of 10 years at the container terminal of Jawaharlal Nehru Port Trust' on the terms and conditions mentioned therein. A copy of the said letter has been placed at pp. 6-21 of the paper book submitted by the assessee. Lease charges have been quantified at pp. 2 and 3 of the said letter for each item under two options, namely, Option 'A detailing lease charges inclusive of operation and maintenance; and, Option 'B' detailing lease charges inclusive of maintenance only (operation to be carried out by JNPT. JNPT has reserved the right to exercise the option to request the assessee to carry out both operation and maintenance of the cranes during the lease period or to carry out maintenance only while the operation is done by JNPT at the lease rates specified in the said letter. The actual option required by JNPT at the lease rates specified in the said letter. The actual option required by JNPT was required to be intimated within 90 days prior to the arrival of equipments in port. Supply, installation, testing and commissioning of all the five equipments were required to be completed on or before 16th June, 1995. The said letter also contained terms and conditions regarding certification by an inspection agency, performance guarantee, minimum availability of equipments in terms of number of days per annum, liquidated damages, power supply for the equipments, time frame for payment of lease charges to the assessee, retention of equipment of expiry of insurance, insurance of equipment during lease period, workmen's employer, labour laws, transfer of contract, termination of contract, force majeure, etc. The role of the assessee, as per the said letter, is that of a contractor while the role of the JNPT is that of an employer. Second contract, which is in respect of second stream of the container terminal, is contained in letter bearing Ref. No. JNP/SM(CT)/CHE/AUG/S. stream/95/2415 dt. 16th Oct., 1995 issued by the JNPT for supply, installation, testing, commissioning, operation and maintenance of 1 No. Rail Mounted Gantry Crane on lease for a period of 10 years on terms and conditions mentioned therein which are broadly similar to those in the first contract.;


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