Section 80-IA Deduction Applies with Govt. Nodal Agency Agreement: ITAT

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Case Details: Bothra Shipping Services Pvt. Ltd. v. DCIT – [2023] 150 200 (Kolkata – Trib.)

Judiciary and Counsel Details

Rajpal Yadav, Vice-President and Girish Agarwal, Accountant Member. 
Naresh Jain, Adv. for the Appellant. 
G. Hukuga Sema, CIT, D/R for the Respondent.

Facts of the Case

Assessee entered into an agreement with an entity (KSPL) for the development of a Mechanised Coal Handling System in Kakinada Deep Water Port. KSPL was appointed as Nodal Agency by the Government of Andhra Pradesh (GoAP) for the development and maintenance of the infrastructure facilities of the entire Port.

The Government of Andhra Pradesh entered into a separate agreement with KSPL for the development of new infrastructure facility at the Port. Subsequently, the assessee derived permission from the appropriate authorities, developed the infrastructure as required and obtained certificate from the Port Authorities that it forms part of the infrastructural facility of the Port.

Since the assessee developed, maintained and operated the new infrastructure facility, it claimed deduction under section 80-IA(4). Assessing Officer (AO) denied the deduction because the agreement for such development was not directly with the Central Government, a State Government, a local authority, or any other statutory body.
The Dispute Resolution Panel (DRP) also upheld the findings of the AO, and the matter then reached the Kolkata Tribunal.


The Tribunal held that the agreement provides for subrogation of rights and obligations to a body corporate with the consent of GoAP and also with its prior approval on the shareholding pattern. Pursuant to such a provision in the agreement, a ‘Special Project Company’ (SPC) in the form of KSPL was set up. The GoAP recognizes this SPC (KSPL) for all legal and operational purposes and shall be a successor for the rights, duties, and obligations under the agreement.

Further, the Tribunal relied upon the CBDT Circular No. 10/2005 dated 16-12-2005, whereby it had relaxed the second condition prescribed u/s 80-IA(4) and, therefore, the only requirement which remained was to obtain the certificate from the concerned Authority that the infrastructural facility forms part of the Port.

The Tribunal also considered a letter issued by KSPL which confirms that on expiry of the concession period, the structures, buildings constructed by or belonging to KSPL or their sub-contractors, sub-lessees and assignees free from all encumbrances and liabilities shall automatically become the property of GoAP without any obligation to reimburse therefor.

Moreover, the argument canvassed by the AO that the agreement between the assessee and KSPL does not satisfy the condition prescribed in section 80-IA(4) is too rigid an interpretation. It frustrates both the purpose of creating such nodal agencies and the legislative intent of granting deduction to the assessee engaged in infrastructure development projects.

Therefore, after considering all the aspects, the deduction under section 80-IA(4) cannot be denied to the assessee.

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