The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) rejected the claim for deduction under Section 80IA of the Income Tax Act, 1961, stating that it is not available for individuals engaged in performing work contracts.
In all cases where taxpayers sought to claim deduction under Section 80IA, the eligibility of the taxpayer was the central issue. Both tax authorities ruled that the taxpayer did not qualify for the deduction under Section 80IA.
The majority of the work had been completed in earlier years, and the taxpayer failed to provide evidence to demonstrate that the works undertaken fell within the scope required for deduction under Section 80IA. Therefore, it was ruled that the taxpayer did not qualify for deduction under Section 80IA for all the years under consideration.
The taxpayer’s counsels argued that the taxpayer, along with its consortium members, was awarded the work of developing an infrastructure facility. They contended that a Special Purpose Vehicle (SPV) was formed to execute the Concession Agreement with NHAI.
The argument presented was that the SPV constituted the only enterprise or undertaking of the taxpayer, and income derived from this undertaking should qualify for deduction under Section 80IA.
However, the tribunal observed that Section 80IA(4) stipulates certain conditions for an enterprise to qualify for deduction, including that the enterprise must be owned by an Indian company or other specified entities, must have entered into an agreement with the government or other legal bodies, and must have commenced its operation on or after April 1, 1995.
The tribunal concluded that the Assessing Officer (AO) was correct in holding that the taxpayer had only executed a works contract allotted to it by the SPVs. Since deduction under Section 80IA is not available to persons executing works contracts, the claim was rejected.
Therefore, the ITAT upheld the decision of the Commissioner of Income Tax (Appeals) in affirming the AO’s decision to reject the claim for deduction under Section 80IA of the Income Tax Act, and all appeals filed by the taxpayer were dismissed.
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