IN INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA.No.421, 422 & 423/Hyd/2015 Assessment Years 2009-2010, 2010-2011 & 2011-2012 Hyderabad Menzies Air Cargo P. Ltd., Shamshabad -500409 vs., DCIT, Circle-2(2) Ranga Reddy District. Hyderabad. PAN AACCC9611N (Appellant) (Respondent) For Assessee : Mr. Yogesh A. Thar & Mr. Sunil Jain For Revenue : Smt. Nivedita Biswas Date of Hearing : 13.07.2016 Date of Pronouncement : 06.10.2016 ORDER PER SMT. P. MADHAVI DEVI, J.M. All appeals are filed by assessee for A.Ys. 2009-2010, 2010-2011 and 2011-2012 respectively. In all these appeals, assessee is aggrieved by denial of claim of deduction under section 80IA(4) of I.T. Act, 1961. 2. Brief facts of case are that assessee company, engaged in business of maintaining cargo terminal at Shamshabad Airport at Hyderabad, filed its return of income for respective assessment years admitting income after claiming deduction under section 80IA(4) of Act. returns were initially processed under section 143(1) of Act. Subsequently, assessments were taken-up for scrutiny through CASS and 2 accordingly, notices were issued and served on assessee. assessee appeared through its Authorised Representative and furnished information called for. 3. During course of hearing, Assessing Officer issued letter dated 28.11.2011 requiring assessee to explain as to why deduction claimed under section 80IA(4) should not be disallowed. In response thereto, assessee filed reply on 21.12.2011 stating that assessee is company registered in India and has entered into agreement with GHIAL ( GMR Hyderabad International Airport Limited ) for operating and maintaining cargo facilities at Hyderabad International Airport. It was submitted that though GHIAL is not Government body, Government of India has granted right to GHIAL to assign certain business activities to other service providers and therefore, GHIAL, has granted further concession to assessee along by sub-leasing part of infrastructure facility to assessee. It was submitted that assessee being company carrying on operation of airport be allowed claim of deduction under section 80IA(4) of Act. 4. Assessing Officer was, however, not convinced with assessee s contentions, and came to conclusion that assessee does not fulfill conditions laid down under section 80IA(4) of Act. He observed that one of condition is that assessee should have entered into agreement with Central Government or State Government or Local Authority or any other Statutory Body. He observed that agreement with GHIAL cannot be considered as agreement with Government of India as assessee company has not furnished any clinching evidence that Government of India 3 has accorded permission to GHIAL to assign work of cargo handling to assessee company. Further, he observed that under clauses (a) to (c) of sub-section (4) of section 80IA, reference is only to such entity which can justifiably claim deduction and further that proviso thereto also specifically refers to transfer that takes place between transferor enterprise and transferee enterprise which goes to imply that only that enterprise which transfers entire enterprise to transferee enterprise and that in such circumstances only transferee enterprise can claim deduction for unexpired period as if transfer had not taken place. He observed that assessee had not created any new infrastructure facility except operating existing infrastructure facility which has also only been leased out to assessee. 4.1. He observed that it is GHIAL which completed entire infrastructure facility and in case it is not in position to maintain and operate infrastructure, it can transfer facility in entirety, but not only piece of operation to enable assessee to claim deduction under section 80IA(4) of Act. According to Assessing Officer, Section 80IA(4) confers benefits only on one entity. Thus, he came to conclusion that assessee s claim of deduction under section 80IA(4) is not allowable. He accordingly, disallowed claim of deduction under section 80IA(4) for all three assessment years and brought it to tax. Aggrieved, assessee preferred appeal before CIT(A) who confirmed order of Assessing Officer and assessee is in second appeal before us. 5. Learned Counsel for assessee, while reiterating submissions made by assessee before authorities 4 below, has advanced following arguments in support of assessee s claim of deduction under section 80IA(4) of Act. (1) According to proviso to section 80IA(4)(b), agreement of GHIAL with Government of India is sufficient compliance of provision and separate and independent agreement by assessee with Governments is not necessary; (2) Without prejudice to above, GMR International Airport is statutory body; and (3) Without prejudice to above, approvals received from various other departments of Government itself constitutes agreement with Government of India. 5.1. In support of above propositions, Learned Counsel for assessee, drew our attention to concession agreement between Ministry of Civil Aviation, Government of India and Hyderabad International Airport, Hyderabad Ltd., ( HIAL ), wherein HIAL has been granted exclusive right and privilege to carry-out development, design, financing, construction, commissioning, maintenance, operation and management of Airport [ but excluding right to carry-out reserved activities and to provide communication and navigation surveillance/air traffic management services which are required to be provided by AAI ]. He has drawn our attention to Article 3.2.1 (b) which provides that Government of India recognizes that HIAL may carry-out any activity or business in connection with or related to arrival/departure and for handling of aircraft, passenger s baggage, cargo and/or mail at 5 airport. Thus, according to him, Cargo handling is also activity assigned to HIAL, by Government of India. Further, by virtue of Article 3.2.2. HIAL has further been granted right to grant Service Provider Rights (including right of Service Provider Right holders to grant sub-rights) to any person for purpose of carrying-out activities and businesses described in Article 3.2.1 on such terms and conditions as HIAL may determine are reasonably appropriate. 5.2. He has also drawn our attention to Tripartite Agreement between GHIAL, Menzies Aviation PLC and assessee placed at page-232 of paper book and more particularly page No.243 and Article 2.1 of agreement whereby assessee has been granted exclusive right to render and provide or arrange to provide O & M services for operation and maintenance of Cargo terminal and assessee shall also have exclusive right to levy and collect Cargo Charges and to Article 2.3 thereof, under which GHIAL warrants to company to build Cargo building as per specifications and design set out in Cargo Building Lease Agreement while assessee company warranted to GHIAL that Menzies shall build facilities/additional facilities in compliance with Cargo Agreements and that design, engineering, construction, testing and commission of Cargo terminal shall be free from defect and of correct design and workmanship, of good quality and internationally accepted standards. He has also drawn our attention to Cargo Building Lease Agreement dated 28.04.2006 between assessee and GHIAL, by virtue of which Cargo building was to be constructed by GHIAL as per specifications set-out therein and agreed to by Menzies which was provided to assessee on 6 lease for period of 15 years from Airport opening date along with right to sub-lease, license etc. 5.3. He submitted that GHIAL has not claimed any deduction under section 80IA(4) as it has not earned any profits during years. It was further submitted that assessee earned income from Cargo operations and operating expenditure includes concessionaire fee and concessionaire rent paid to GHIAL and has drawn our attention to relevant entries in its books i.e., P & L A/c and Schedule-L thereto. 5.4. In addition to above submissions on facts, Learned Counsel for assessee, has also placed reliance on decision of Coordinate Bench of this Tribunal in case of Ocean Sparkle Ltd., reported in (2006) 155 taxmann 133 (Hyd) (NAG) for proposition that since GHIAL has been authorised to assign certain functions and has accordingly entered into agreement with assessee for operation and maintenance of cargo facility at Hyderabad International Airport, under proviso to section 80IA(4)(i), assessee is entitled to claim deduction. Further, as regards meaning of term transfer used in said proviso also, Learned Counsel for assessee relied upon above decisions wherein it is held that term transfer should not be construed in conservative manner so as to mean transfer of ownership of infrastructure facility to specified authority but it only means handing over of infrastructure facility to specified authority at end of concession/license period. 5.5. In support of his contention that Cargo facility is part of airport and therefore, Infrastructure Facility under section 7 80IA(4), Learned Counsel for assessee, placed reliance upon decision of Coordinate Bench of Tribunal at Bangalore in case of M/s. Menzies Aviation Bobba (Bangalore) Pvt. Ltd., in ITA.No.1160/Bang/2012 dated 30.01.2014 and also decision of Hon ble Madras High Court in case of CIT, Chennai vs. AL Logistics (P) Ltd., reported in (2015) 55 taxmann.com 283 (Mad.). 5.5.1. In support of his contention that assessee is eligible for deduction under section 80IA(4) on profits and gains derived from undertaking established in building taken on lease also, Learned Counsel for assessee, placed reliance upon decision of Hon ble Supreme Court in case of Bajaj Tempo Ltd., reported in (1992) 62 taxmann 480 (SC) and also in case of Narang Diary Products reported in (1996) 85 taxman 375 (SC). 5.5.2. In support of his contention that cargo facility approved by Customs Authorities is Infrastructure Facility under section 80IA(4), Learned Counsel for assessee, placed reliance upon decisions of Hon ble Delhi High Court and Hon ble Bombay High Court in cases of Container Corporation of India Ltd., vs. ACIT reported in (2012) 21 taxmann.com 317 (Delhi) and CIT vs. Continental Warehousing Corporation (Nhava Shava) Ltd., reported in (2015) 58 taxmann.com 78 (Bom.) respectively. 5.6. Finally, Learned Counsel for assessee also relied upon decision of Coordinate Bench of Tribunal at Bangalore in case of M/s. Menzies Aviation Bobba (Bangalore) Pvt. Ltd., (cited supra) for proposition GHIAL 8 is also statutory authority like Bangalore International Airport Ltd., and therefore, agreement with GHIAL is agreement with statutory authority. 6. Ld. D.R., on other hand, supported orders of authorities below and submitted that assessee is not eligible to claim of deduction under section 80IA(4) as conditions set-out therein are not fulfilled by assessee. As regards applicability of decision of Coordinate Bench in case of Ocean Sparkle Ltd., (cited (supra) he submitted that said case is factually distinguishable from facts of case before us. Further, he submitted that sub-leased contractors cannot be regarded as eligible for deduction under section 80IA(4) of Act. 6.1. As regards contention of assessee that since assessee has received approval from various Government departments to operate and maintain Cargo facility, it should be considered as having entered into agreement with Government of India itself, Ld. D.R. submitted that approvals given by various departments of Government i.e., Customs Authorities etc., is only for carrying on functions effectively, but cannot be deemed to have given approval for purposes of deduction under section 80IA(4) of Act. Thus, according to him, orders of authorities below have to be confirmed. 7. Having regard to rival contentions and material on record, we find that main question before us for adjudication is whether assessee is eligible for deduction 9 under section 80IA(4) of Act. For proper appreciation of case relevant provision is reproduced hereunder : (4) This section applies to (i) any enterprise carrying on business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfils all following conditions, namely : (a) it is owned by company registered in India or by consortium of such companies or by authority or board or corporation or any other body established or constituted under any Central or State Act; (b) it has entered into agreement with Central Government or State Government or local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining new infrastructure facility; (c) it has started or starts operating and maintaining infrastructure facility on or after 1st day of April, 1995: Provided that where infrastructure facility is transferred on or after 1st day of April, 1999 by enterprise which developed such infrastructure facility (hereafter referred to in this section as transferor enterprise) to another enterprise (hereafter in this section referred to as transferee enterprise) for purpose of operating and maintaining infrastructure facility on its behalf in accordance with agreement with Central Government, State Government, local authority or statutory body, provisions of this section shall apply to transferee enterprise as if it were enterprise to which this clause applies and deduction from profits and gains would be available to such transferee enterprise for unexpired period during which transferor enterprise would have been entitled to deduction, if transfer had not taken place. Explanation. For purposes of this clause, "infrastructure facility" means (a) road including toll road, bridge or rail system; 10 (b) highway project including housing or other activities being integral part of highway project; (c) water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system; (d) port, airport, inland waterway, inland port or navigational channel in sea; 7.1. From literal reading of above provision, it is clear that deduction is allowable not only for development of infrastructure facility, but is also allowable in case of operating and maintaining or developing, operating and maintaining infrastructure facility. In case before us, Assessing Officer and CIT(A) have held that assessee has not created any new infrastructure facility but is only doing operation on existing leased infrastructure facility developed by GHIAL. Therefore, it is now necessary to see whether Cargo facility being operated and maintained by assessee is infrastructure facility within meaning of section 80IA(4) of Act. 7.2. GHIAL has developed Rajiv Gandhi International Airport at Hyderabad. Cargo handling facility is integral part of Airport. GHIAL has assigned operation and maintenance of Cargo facility to assessee. Vide Facility Lease Agreement, Menzies has agreed to own, procure, install and commission facilities and Additional Facilities (if any) at Cargo Building and to lease Facilities and Additional Facilities (if any) to assessee and vide operation and maintenance agreement, GHIAL has granted assessee right for operation and maintenance of cargo terminal. assessee had relied upon decision of Hon'ble Madras High Court in case of AL Logistics (P) Ltd (cited Supra) in 11 support of his contention that cargo facility is also infrastructure facility u/s 80IA(4) of Act. We find that in said case, Hon'ble High Court was considering whether assessee therein operating and maintaining Container Freight Station (CFS), is eligible for deduction u/s 80IA(4). Hon'ble High Court has upheld order of Tribunal that CFS are customs area attached to port and work related to customs is performed at these inland container depots/container freight stations and accordingly, inland container depots and CFS are inland ports as they carry out functions like ware housing, customs clearance and transport of goods from its location to seaports and vice versa by railway or by trucks in containers. 7.3. In case before us also, assessee is handling Cargo facility which is into similar activities. Further, Coordinate Bench of Tribunal in case of Ocean Sparkles Ltd has held that where assessee therein was required to fulfill developers obligation pertaining to operation and maintenance of ports as laid down under original agreement between developers and specified authorities, it is exactly situation which has been contemplated by proviso to section 80IA(4)(i) of Act. As regards objection of Revenue therein that two persons are not to get deduction u/s 80IA for maintenance of same facility, Tribunal held that assessee s claim therein was restricted to its performance of job and it was concerned with that activity only. 7.4. Under Explanation to section 80IA(4), definition of infrastructure facility includes airport within its scope and cargo facility is integral part of airport. Coordinate Bench of this Tribunal at Bangalore in case of 12 Menzies Aviation Bobba (Bangalore) Pvt. Ltd (cited Supra) has held cargo facility to be infrastructure facility eligible for deduction u/s 80IA(4) of Act. Further, it is seen that GHIAL has constructed Cargo building as per specification of Menzies and Menzies has provided facilities at cargo building and while GHIAL has leased out cargo terminal to assessee, Menzies has leased facilities to assessee and it is responsibility of assessee to operate and maintain cargo facility in accordance with obligation of GHIAL to operate and maintain facility by virtue of concession granted by Govt. of India. Each assessee is eligible to claim deduction u/s 80IA(4)(i) of Act only in relation to activity carried on by it and there cannot be any duplication of claim. Therefore, we are of opinion that Cargo facility operated and maintained by assessee is infrastructure facility eligible for deduction u/s 80IA(4) of Act. 7.5. second objection of Revenue is that assessee has not entered into any agreement with Central Govt., or State Govt. or local authority or statutory body as provided u/s 80IA(4) of Act. It is contention of assessee that Govt. of India has authorized GHIAL to grant further rights in respect of any of its activities, pursuant to which GHIAL has entered into agreement with assessee and therefore, there is no requirement of assessee to enter into separate agreement with Govt. In support of this contention, assessee has relied on decision of Coordinate Bench in case of Ocean Sparkles Ltd. In said case, assessee therein, engaged in business of operation and maintenance of ports, cargo services and other related services, had entered into 13 agreement for operation and maintenance of port, with developers who were engaged in development and operation of ports and had entered into agreement with specified authorities i.e. State Govt. for development and maintenance of certain ports. Hon'ble Tribunal observed that later on, under agreement, operation and maintenance services of said ports were sub-contracted by developer to assessee company in accordance with original agreement with specified authorities after 1-4-99 and held that as per proviso to section 80IA(4)(i), assessee therein was entitled to deduction u/s 80IA(4) of Act. For this purpose, Tribunal had taken into consideration proviso to section 80IA(4)(i) to hold that proviso aims at qualifying transferee enterprises, as enterprise eligible for deduction under this section provided, other conditions be satisfied and that proviso does not require any direct agreement between transferee enterprise and specified authority. 7.6. Further, Learned Counsel for assessee has also placed reliance upon decision of Hon ble Madras High Court in case of A.L. Logistics P. Ltd., wherein it has been held that where proposal of assessee was accepted by Government on certain conditions, which were duly complied with by assessee, there is no need to insist for specific execution of agreements. In said case, assessee therein had applied to Ministry of Commerce and Industry, Government of India, Infrastructure Division of Department of Commerce for setting-up of CFS at Haldia for handling, import and export of Cargo which has been approved by Ministry, subject to execution of certain documents of compliance of other terms and conditions as stated in letter. Taking 14 same into consideration, Hon ble Madras High Court held that since proposal of assessee was accepted by Government on certain conditions which were duly complied with by assessee, there is no need to insist for specific execution of agreements. Similarly, in case before us, assessee has applied to Government of India, Ministry of Civil Aviation for registration as Regulated Agent for handling Cargo facilities at Hyderabad International Airport and vide letter dated 24.11.2008, assessee was granted registration while GHIAL has granted assessee right to handle Cargo facilities by virtue of agreement. assessee s contention is that assessee has been recognized also as Service Provider Right Holder as stipulated under Concession Agreement itself and that further that Government has recognized assessee as Regulated Agent and therefore, decision of Hon ble Madras High Court is applicable to assessee and assessee s contention that since assessee has been given approval by Ministry of Civil Aviation, it is not necessary to enter into specific and independent agreement with Government for claiming deduction under section 80IA of Act, has to be accepted. 7.7. assessee has also placed reliance upon definition of Regulated Agent under clause (5) of Rule-2 of Aircraft (Security) Rules, 2011. Therefore, according to assessee, assessee being accepted as regulated agent under Aircraft (Security) Rules, 2011 needs no specific agreement with Government for carrying on work. However, we are unable to accept this contention of assessee because definition of Regulated Agent given in Aircraft (Security) Rules, 2011 is only to govern security measures for Aircraft 15 operators and it does not mean that assessee has been recognized as agent to operate and maintain Cargo facilities at Airport. In fact, it is other way round, i.e., person operating and maintaining Cargo facilities is recognized as Regulated Agent who can function in accordance with Aircraft (Security) Rules, 2011. 7.8. assessee has also placed reliance upon decision of this Tribunal in case of Menzies Aviation Bobba, Bangalore in M.P.No.19/Bang/2014 in ITA.No.1160/Bang/2012 dated 05.10.2015 wherein Tribunal has accepted Bangalore International Airport Limited as statutory body under section 80IA(4) of Act. We find that in said case, Tribunal had relied upon decision of jurisdictional High Court therein i.e., Hon ble Karnataka High Court in writ petition filed by M/s. Flemingo Duty-Free Shops P. Ltd., against Bangalore International Airport Ltd.,( BIAL ) wherein Hon ble Karnataka High Court has held BIAL to be statutory authority as it is discharging statutory functions of Government. There is no such decision in respect of Hyderabad International Airport Ltd., by jurisdictional High Court i.e., Hon ble High Court of Telangana and Andhra Pradesh. However, since we have already held that assessee does not require specific and independent agreement with Government for claiming deduction under section 80IA(4), we do not find it necessary to adjudicate this issue at this stage. In view of these facts, assessee s appeal is allowed. 8. In result, appeals of assessee are allowed. 16 Order pronounced in open Court on 06.10.2016. Sd/- Sd/- (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated 06th October, 2016 VBP/- Copy to 1. Hyderabad Menzies Air Cargo Pvt. Ltd., Air Cargo Terminal, Rajiv Gandhi International Airport, Shamshabad 500 409 Ranga Reddy District. 2. Dy. Commissioner of Income Tax, Circle-2(2), I.T. Towers, A.C. Guards, Hyderabad. 3. CIT(A)-2, Hyderabad. 4. Pr. CIT-2, Hyderabad. 5. D.R. ITAT B Bench, Hyderabad. 6. Guard File. Hyderabad Menzies Air Cargo P. Ltd. v. DCIT, Circle-2(2) Hyderabad