1

IN THE HIGH COURT OF KARNATAKA AT BANGALORE

DATED THIS THE 28TH DAY OF FEBRUARY 2014
PRESENT
THE HON'BLE MR.JUSTICE DILIP B.BHOSALE
AND
THE HON'BLE MR.JUSTICE B.MANOHAR
ITA NO.455/2013
C/W.
ITA.NO.454/2013 & ITA.NO.453/2013

ITA.NO.455/2013
BETWEEN:
1. COMMISSIONER OF INCOME TAX-III
REVENUE BUILDINGS,
QUEENS ROAD,
BANGALORE 560 001.
2. THE DEPUTY COMMISSIONER OF
INCOME TAX, CIRCLE 12(3),
BANGALORE.
... APPELLANTS
(BY SRI.SANMATHI.E.I, ADVOCATE)
AND:
M/S SKYLINE ADVERTISING PVT. LTD,
BANGALORE.
... RESPONDENT

(BY SRI.NAGESHWAR RAO, FOR PDS LEGAL, ADV)

THIS ITA IS FILED UNDER SEC.260-A OF
INCOME TAX ACT 1961, ARISING OUT OF ORDER
DATED
30/04/2013
PASSED
IN
ITA
NO.931/BANG/2012, FOR THE ASSESSMENT YEAR
2008-09, PRAYING THIS HON'BLE COURT TO:
I.

FORMULATE
THE
SUBSTANTIAL
QUESTIONS OF LAW STATED THEREIN,

II.

SET ASIDE THE ORDER PASSED BY THE

ITAT, 'A' BENCH, BANGALORE IN ITA
NO.931/BANG/2012 DATED 30/04/2013,
AS SOUGHT FOR IN THIS APPEAL.

ITA NO.454/2013
BETWEEN
1. COMMISSIONER OF INCOME TAX-III
REVENUE BUILDINGS
QUEENS ROAD,
BANGALORE 560 001.
2. THE DEPUTY COMMISSIONER OF
INCOME TAX,
CIRCLE 12 (3)
BANGALORE.
... APPELLANTS
(BY SRI.SANMATHI.E.I, ADVOCATE)
AND
M/S SKYLINE ADVERTISING PVT. LTD
BANGALORE.
... RESPONDENT

(BY SRI.NAGESHWAR RAO, FOR PDS LEGAL, ADV)

THIS ITA IS FILED UNDER SEC.260-A OF I.T.
ACT, 1961, ARISING OUT OF ORDER DATED
30/04/2013 PASSED IN ITA NO.930/BANG/2012, FOR
THE ASSESSMENT YEAR 2007-08, PRAYING THIS
HON'BLE COURT TO:
I

FORMULATE
THE
SUBSTANTIAL
QUESTIONS OF LAW STATED THEREIN,

II.

SET ASIDE THE APPELLATE ORDER

DATED 30/04/2013 PASSED BY THE ITAT,
'A' BENCH, BANGALORE, IN APPEAL
PROCEEDINGS ITA NO.930/BANG/2012,
AS SOUGHT FOR IN THIS APPEAL.

ITA NO.453/2013
BETWEEN
1. COMMISSIONER OF INCOME TAX-III
REVENUE BUILDINGS,
QUEENS ROAD,
BANGALORE
2. THE DEPUTY COMMISSIONER OF
INCOME TAX, CIRCLE 12(3),
BANGALORE
... APPELLANTS
(BY SRI.SANMATHI.E.I, ADVOCATE)

AND
M/S SKYLINE ADVERTISING
PVT. LTD,
BANGALORE.

... RESPONDENT

(BY SRI.NAGESHWAR RAO, FOR PDS LEGAL, ADV)

THIS ITA IS FILED UNDER SEC.260-A OF
INCOME TAX ACT 1961, ARISING OUT OF ORDER
DATED
30/04/2013
PASSED
IN
ITA
NO.263/BANG/2012, FOR THE ASSESSMENT YEAR
2006-07, PRAYING THIS HON'BLE COURT TO:
I.

FORMULATE
THE
SUBSTANTIAL
QUESTIONS OF LAW STATED THEREIN,

II.

ALLOW THE APPEAL AND SET ASIDE THE

ORDER PASSED BY THE ITAT, 'A' BENCH,
BANGALORE IN ITA NO.263/BANG/2012
DATED 30/04/2013, AS SOUGHT FOR IN
THIS APPEAL.

THESE APPEALS ARE HAVING BEEN HEARD

AND
RESERVED
FOR
PRONOUNCEMENT
OF
JUDGMENT THIS DAY, B.MANOHAR J., DELIVERED
THE FOLLOWING:-

JUDGMENT
These appeals are filed by the Revenue under
Section 260A of the Income Tax Act, 1961 (for short the
Act) against the order dated 30th April 2013 made in

ITA Nos.263, 930 and 931/Bang/2012 passed by the

Income Tax Appellate Tribunal, Bangalore Bench A (for
short the Tribunal) for the assessment years 2006-07,
2007-08 & 2008-09, whereby the Tribunal has set aside
the order passed by the Commissioner of Income Tax,
(Appeals)-III, Bangalore (for short the First Appellate
Authority), wherein the Appellate Authority by its
order dated 16-12-2011 upheld the order of Assessing
Officer and held that the respondent-assessee is not
eligible for deduction under Section 80-IA(4) of the Act.
2.

The brief facts of the case are as follows:

The respondent-assessee is a Private Limited

Company

engaged

in

the

business

of

Outdoor

Advertisement, Media Advertising and Development of

Infrastructure. The assessee filed the return of income
claiming deduction under Section 80-IA(4) of the Act,
contending that the assessee-Company is involved in
infrastructure development.

The Assessing Authority

issued notice under Section 142(2) of the Act calling

upon the assessee to substantiate their claim of
deduction under Section 80-IA(4) of the Act.

The

authorized representative of the assessee made available

the records and also contended that the respondentassessee entered into an agreement with local selfGovernment i.e. Bruhath Bangalore Mahanagara Palike
(for short the BBMP) for construction of bus shelter,
erection of lamp posts, beautification of road medians,
construction of the foot bridge near ISCKON temple and
maintenance of the same. The expenditure incurred for
the same has to be recouped by utilizing these bus
shelters, lamp posts, road medians and foot bridge, for
their advertisement business.
Company

is

involved

in

Since the assesseethe

development

of

infrastructure, it is entitled for deduction under Section

80-IA(4) of the Act.

2.1

The Assessing Officer after examining the matter

in detail and verifying the clauses of agreement entered

into between the assessee and the BBMP was of the
view that construction of bus shelters, installation and
maintenance of street lights and beautification of the
center road medians is for earning income by putting up
the advertisement boards on the same which would not
amount to infrastructure development.

The work

carried on by the assessee is in the nature of work

contract.

The

income

is

derived

by

displaying

advertisement hoardings on the road medians, bus

shelters and light poles. Hence, the Assessing Authority
by its order dated 31-12-2000 held that the assessee is
not eligible to claim deduction under Section 80-IA of
the Act and by its order dated 13-12-2010 and
disallowed the claim of deduction of income tax.

2.2

Being aggrieved by the order passed by the

Assessing Authority, the respondent-assessee preferred

an

appeal

before

the

First

Appellate

Authority

challenging the denial of deduction on various grounds.

The First Appellate Authority on verification of the
contentions raised by the respondent-assessee found
that though the Memorandum of Association of the
respondent-assessee contains provision for undertaking
infrastructure development, the assessee is essentially
an advertisement company and has not invested huge
funds on long term construction activities.

The work

carried out by the respondent-assessee is not in the

nature

of

construction

work

referred

to

explanation to Section 80-IA (13) of the Act.

in

the

Hence,

confirmed the order passed by the Assessing Authority

and

dismissed

the

appeal

by

its

order

dated

16-12-2011.

2.3 The assessee being aggrieved by the order passed

by the First Appellate Authority preferred an appeal
before the Tribunal.

The Appellate Tribunal by its

order dated 30-04-2013, allowed the appeal filed by the

assessee holding that the assessee is eligible to claim
deduction under Section 80-IA(4) of the Act.

The

Tribunal was of the view that a bus shelter without a

road would be of no use and similarly a road cannot be
useful without a bus shelter and road medians in
between and safe for the commuters at night without
proper lighting.

As per the clauses of the agreement,

the assessee has the obligation not only to provide the

facilities by constructing bus shelters, road medians,
erecting light poles, but also to maintain the same for a
particular period.

Therefore, the assessee not only

build, but also operate and maintain the said facilities

for the stipulated period. Relying upon an unreported
judgment

of

Kolkata

Bench

in

the

case

of

M/S.VANTAGE ADVERTISEMENT PRIVATE LIMITED

the Tribunal allowed the appeal and held that the
assessee is entitled for deduction under Section 80-IA
of the Act.

10

2.4 Being aggrieved by the order passed by the

Appellate Tribunal, the Revenue has preferred these
three appeals.

With

the

consent

of

the

learned

counsel for the parties, these appeals are taken up for

final disposal at the stage of admission itself to consider
the following substantial questions of law:

3.

(i)

Whether the respondent-assessee is

entitled to the benefit of deduction
under Section 80-IA of the Income Tax
Act, 1961?

(ii)

Whether the business activity of the

respondent-assessee would fall within
the
ambit
of
the
expression
Infrastructure Facility as occurred in
Section 80-IA of the Income Tax Act, in
particular the explanation appended to
sub-Section (4) thereof?

Sri.E.I.Sanmathi, learned counsel appearing for

the appellants submitted that the order passed by the

Appellate Tribunal is contrary to law.

The assessee-

company entered into an agreement with the local

authorities for the purpose of its business of advertising
and taken up the work of construction of bus shelter,

11

erection of light poles and beautification of the road

median only for the purpose of putting up of their
advertisement hoardings or to lease the space for
advertisement.

The income derived from the said

advertisement business cannot be treated as income

from the infrastructure development. Reading of some
of the clauses of agreement makes it very clear that the
business of the assessee will not fulfill the conditions
prescribed under Section 80-IA(4) of the Act and also
explanation there under. The agreement for developing,
maintaining and operating is only with regard to the
infrastructure facility.

The infrastructure facility was

defined under Section 80-IA(4) of the Act.

explanation

to

the

said

Section,

As per the

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
highway project;

12

(c) a water supply project, water treatment

system, irrigation project, sanitation and
sewerage
system
or
solid
waste
management system;
(d) a port, airport, inland waterway.
The agreement entered into between the assessee with
the local authority will not fall under any of the
infrastructure facility enumerated under the Section. In
the

instant

case,

the

assessee

entered

into

an

agreement for construction of the bus shelters, street

lights, road medians and foot bridge in order to create
ambience and the brand of being IT hub. The assessee
has to construct the bus-shelters; beautify the roan
medians and erect street lights as per the specifications
for the limited period.

The Corporation will not spend

any money for the same.

The assessee is permitted to

use the said portion for the purpose of its advertising

business and they can lease the said portion for
advertisement.

The advertisement hoardings must be

as per the specifications for the period prescribed by the

13

local authorities.

The income earned from the said

business cannot

be

infrastructure.

treated

as the

income

from

He also relied upon the following

judgments in support of his contention: (1) (1999) 237

ITR 579 Commissioner of Income Tax V/s. Sterling Foods;
(2) (2009) 317 ITR 218 Liberty India V/s. Commissioner
of Income Tax; (3) Unreported decision of this Honble
High Court in ITA No.3253/2005 Disposed of on
11.8.2011; (4)

(1995) 211 ITR 646 Commissioner of

Income Tax V/s. Mayur Laminators; (5) (2005) 139 STC

74 State of Jharkhand and others V/s. Ambay Cements
and another;

(6) (1996) 101 STC Page 1 State Level

Committee and another V/s. Morgardshammar India

Ltd.; (7) (1978) 41 STC 409 Polestar Electronic (Pvt.) Ltd.,
V/s. Additional Commissioner, Sales Tax, and another.
(8) (2006) 147 STC 466 Falcon Tyres Ltd., V/s. State of
Karnataka and others.

14

4.

On the other hand, Sri.Nageshwara Rao, learned

counsel appearing for the respondent-assessee argued

in support of the order passed by the Tribunal and
contended that the assessee is a Private Limited
Company incorporated under the Companies Act.

It

has entered into an agreement with the local authority

for infrastructure development such as construction of
bus shelters, putting up of foot bridge, beautify the road
medians and erecting street lights. The infrastructure
facility referred to in the explanation to sub-Section (4)
of Section 80-IA is inclusive definition. A road includes
toll road itself suggests that the definition is inclusive
definition and include everything with regard to the
road, bridges or railway system.

Clause (b) of the

aforesaid definition wherein a highway project has been

defined to mean a project including housing or other
activities being an integral part of highway project.
Therefore, it is important to note the words used
including or other activities which itself bring out

15

the intent of the legislature not to restrict the activities

to the few specified field. The infrastructure facility as
used in the explanation to Section 80-IA(4) of the Act is
wide enough to cover entire activities of the road. The
road without bus shelter is of no use. Further, without
the road median, the commuter cannot use the said
road safely.

Without lighting facility, road cannot be

used properly. Due to the heavy traffic, construction of

foot bridge is very much necessary.

Hence, the

construction of the bus shelter, road median, street

lights and construction of the foot bridges are the part
of infrastructure facility. The intention of the legislature
is very clear and wide enough to cover other activities
with regard to road also fall under the definition of
infrastructure facilities. Hence, the assessee is entitled
for deduction of its income earned under Section
80-IA(4) of the Act.

In support of his contention, he

relied upon the following judgments: (1) (2010) 322 ITR

323 (Bombay) Commissioner of Income Tax V/s. ABG

16

Heavy Industries Limited; (2) (1982) 196 ITR 149 (SC) CIT
V/s.

Gwalior

Rayon

Silk

Manufacturing

Co.

Ltd.;

(3)(1983) 150 ITR 23 (KAR) Commissioner of Income-Tax,

Karnataka V/s Bangalore Turf Club Limited; (4) (1997)
227

ITR

414

(SC) Gujarat

Industrial

Development

Corporation and others V/s. CIT: (5). (1980) 126 ITR 347
(Chennai)CIT Tamil Nadu-III V/s. Engine Valves Ltd.;
(6)(2011) 338 ITR 643 (Madras) Tamil Nadu Petro
Products Ltd., V/s. Assistant Commissioner of Income
Tax; (7) (1992) 196 ITR 188 (SC) Bajaj Tempo Ltd., V/s.
Commissioner of Income-Tax; (8) (1989) 177 ITR 431 (SC)
CIT, Amritsar V/s. Strawboard Manufacturing Co. Ltd.;
(9) (1993) 206 ITR 260 (Bombay) CIT V/s. Mazagaon
Dock Ltd.; (10) 237 ITR 889 (SC) UCO Bank V/s. CIT and
Another Case.
5.

We have carefully considered the arguments

addressed by the learned counsel for the parties and

perused the order impugned and the relevant records.

17

6.

The records clearly disclose that the assessee is a

Private
business

Limited
of

Advertising.

Company

Outdoor
The

mainly

engaged

Advertisement

assessee

has

in

and

entered

the

Media

into

an

agreement with BBMP on 31-03-2004, 11-07-2004 and

30-11-2004 agreeing to beautify the road median from
Dairy Circle to Central Silk Board and the assessee is
allowed to put up advertisement boards to recoup the
expenditure incurred for beautifying the road median.
Further, an agreement was also entered into for
construction of 11 bus shelters in different locations.
The bus shelter shall be constructed as per the
specifications and the design supplied by the BBMP.
The expenditure incurred for construction of the bus
shelter has to be recovered by the assessee by putting
up advertisement hoardings.

Further, as per the

agreement dated 11-07-2004, the assessee is permitted

to install and erect 199 poles providing street light in

18

four roads and permitted to install 199 lit kiosks of 4 ft.

x 2 ft. (double sided) at the height of 18 feet from the
road, so as to recover the expenditure incurred for
putting up 199 poles. This agreement is for a limited
period and the assessee has to pay the ground rent and
other local taxes.

Further,

the assessee was also

permitted to install foot bridge near ISCKON temple and

to erect advertisement hoardings in order to recoup the
expenditure for putting up of the said foot bridge. As
per the terms and conditions imposed by the BBMP, the
assessee had put up the bus shelter, beautifies the road
median from Diary Circle to Central Silk Board Circle
and also put up the street lights in four roads;
constructed the foot bridge and erected the hoardings
for its business.

The agreement entered between the

assessee and the BBMP, read as under:

(i)

Whereas BBMP who is the absolute

owner of all the footpaths and road
within
its
jurisdiction,
has
in
consultation with the Bangalore City
Police and Bangalore Metropolitan

19

Transport Corporation identified a

critical need to erect bus shelters.
Keeping in view the aesthetic values,
beautification of the city in general and
commuter benefits and interest in
particular and for that purpose has
formulated a scheme under which even
a bus shelter could be constructed by
private parties on the terms and
conditions specified therein. The party
of the second part has approached with
a proposal to erect bus shelters of the
design specified by the first party.
(ii)

And whereas under a third phase the

first party had intended to cause 11 bus
shelters to be constructed in locations
identified by it as detailed in AnnexureA.
And whereas the licensee had
offered to participate in the third phase
and has constructed bus shelters at
each of the location specified in
Annexure-B in accordance with the
design
specifications
detailed
in
Annexure-C.

Some of the clauses of the agreement read thus:

(1) The Licensee shall construct/erect the Bus
Shelters in accordance with the specifications
and design detailed in Annexure-C any deviation
shall be deemed to be a material breach of this
agreement.
(2) The period of license and permission granted
hereunder will be for a period of 11 months

20

starting from the date specified for completion as

detailed at Clause-4.
(3) The period of completion for all the Bus
Shelters in accordance with Annexure C was 60
(sixty) days from the date of this agreement. The
completion certificate for each shelter is to be
issued to the Licensee from an engineer/team
authorized by the Commissioner, Bangalore
Mahanagara Palike to do so provided the
construction has been in accordance with
Annexure-C for adherence to design material,
equipment, structure specifications.
(4) The licensee will be at liberty to utilize the
advertisement space model wise as specified
below and more fully described in the drawings:
Bus Shelter Model A & C: The
Advertisement right of the licensee shall
be limited to the space available on front
side of the back panel, not exceeding an
extent of 4 x 15 (as shown in the
drawing) as also on both inside and
outside faces of one side panel
measuring a maximum of 6 in height and
4 in width (as shown in the drawing).
The maximum advertisement space
considering both back and side panel
together shall not exceed 108 sq.feet at
any time.
Bus Shelter Model B: The advertisement
right of the licensee will be confined to
the space available on front portion of the
back panel of the Bus Shelter measuring
a maximum of 4 x 15 (as shown in the

21

drawing). The maximum advertisement

space shall not exceed 86sq. feet at any
time
5.
In addition to the License fee the Licensee
shall pay all statutory taxes cesses as
applicable for in relation to the advertisement
and or advertisement space allotted in the Bus
Shelter as detailed in clause 6.
6. The Licensee shall(a) Maintain the bus shelters floor, roof,
walls, etc., during the period of this
license, in a clean, hygienic and
presentable manner.
(b) Forthwith replace/repair the Bus
Shelter/s or any part thereof upon any
damage, loss breakage being noticed or
reported or occurring.
(c) Construct and at all times maintain
the Bus Shelter/s in accordance with
Annexure C
(d) Maintain in a clean, hygienic and
usable condition the dustbins, spittoons
and other equipments, facilities provided
by it at the Bus Shelters.
(f) Provide adequate lighting at the Bus
Shelters so as to ensure public safety at
all times.
(i) Initiate remedial action forthwith in
respect of defects, deficiencies brought to

22

its notice by Bangalore Mahanagara

Palike or its authorized officials.
m) Not to use the Bus Shelters or permit
their use for any purpose other than as a
Bus Shelters.
r) Ensure that all costs of construction
and maintenance of the Bus Shelters
including
costs
of
raw
material,
consumables,
salaries,
expenses,
electricity statutory deposits/advances,
equipment installation and replacement
costs are paid and borne exclusively by
it.
s) Not to collect from the public and/or
users of Bus Shelters any fee, charge,
and amount for use of the Bus Shelters.
7. On expiry or termination of the license as
never before stated the Bus shelter shall stand
vested in Bangalore Mahanagara palike.

8. The EMD will be refunded

satisfactory completion of the license
handing over the Bus Shelters in
presentable
conditions
to
Mahanagara Palike by the licensee.

after the
period and
good and
Bangalore

Street Lights
1. And whereas the First Party has intended to
cause street lights on 4 roads to be erected and
maintained as identified by it and as detailed in
Annexure-A and whereas the Licensee has

23

submitted his proposal on 29.3.2004 for

installation and erection of 199 poles of 10 meter
high M.S.Tubular Poles with under ground
cabling and maintenance of street lights against
advertisement rights at the roads specified in
AnnexureA in accordance with the design specifications
detailed in this Agreement.

Clauses:
1.
The Licensor has granted permission to
the Licensee to erect and maintain the street
lights against commercial advertisement at
allotted locations specified in Annexure-A in
accordance with the design, specifications and
subject to limitations terms and conditions
specified in the Agreement.
2.
Licensee shall maintain the street lights
on
the
4
roads
against
commercial
advertisement rights. Maintenance will include
the following.
i) The lamp posts will be painted at least
once in a year including numberings
intimated by the First party.
ii) Replacement of fused bulbs will have to
be done.
iii) Repair works will be undertaken in case
of any damage.
iv) Repair/Replacement of fixtures including
chokes, switches etc., whenever required.

24

3.
The Licensee shall provide new 250 watt
mental halide bulb whenever the lights get Fused
on the above 4 roads mentioned. However,
Licensor will provide a vehicle to change the fused
lights, whenever such a demand is made.
4. The Licensee shall provide electrical Cutouts
at his cost on all the poles in order to isolate the
problem, without disturbing bulbs on other poles.

5. The Licensee shall return all the existing

fixtures available on the permitted 4 roads to the
Licensor after executing the project. However, the
licensee will be permitted to utilize the existing
cables if in a usable condition in consultation with
the First party.
6. The Licensee shall pay the electricity bills for
electricity consumed for advertisement boxes
while the Licensor shall pay the electricity bill for
electricity consumed for the street lights.
7. The Licensor shall provide a NOC to enable the
Licensor to obtain electrical power from BESCOM
to illuminate the advertisement boxes.
8. The Licensee shall pay the prescribed road
cutting charges to the concerned officer of BMP.
The licensee shall restore footpaths to the existing
condition after erection of the street poles.
9. The Licensee shall be exclusively entitled to the
revenue generated by the display of commercial
advertisement of the Kiosks installed in the lamp
posts.

25

10. The completion certificate for the maintenance

of street lights will be issued to the Licensee by
the concerned Executive Engineer (Electrical)
authorized by the Commissioner, Bangalore
Mahanagara Palike.
11. On expiry of the contract the Licensee shall
handover
the
lamp
poles
to
Bangalore
Mahanagara Palike with all fixtures including lit
kiosks, etc.,

MEDIANS:
1. Whereas the Bangalore Mahanagara Palike is
the absolute owner of all the medians and road
within its jurisdiction. Keeping in view aesthetic
values, beautification of the city in general and
commuters benefits and interest in particular a
scheme has been formulated under which the
even medians could be beautified by private
parties on Terms and Conditions specified therein:

Clauses:
1.
The Licensor has granted permission to the
licensee to beautify the median at allotted
locations specified in Annexure B in accordance
with the designs, specifications and subject to
limitations, terms and conditions specified in the
agreement.
2.
The Licensee shall beautify the median in
accordance with the specifications and design
detailed in the agreement and any deviation shall

26

be deemed to be a material breach of this

agreement.
3.
The Licensee has designed the median
with the following specification more fully
described in agreement.
4.
The Licensee is allowed to install double
side, illuminated glow sign boxes of size 4X2 at
intervals of 100 feet in the median, for displaying
commercial advertisements of their clients. The
revenue so generated will accrue exclusively to
the Licensee.
5.
Licensee shall beautify the medians in
consultation with the concerned Horticultural
Superintendent (South) as indicated below.

* Mexican grass, Bermuda grass and

Shade grass, Shade grass is generally
planted under fly overs.

* In some places flowering shrubs should

be planted to make median more colourful
and attractive.

* Water falls fountains and cascades with

illumination shall be installed.

* 2 inch gauge ornamental grills of suitable

height shall be installed both sides of the
medians.
7.

The assessee filed return of income claiming

deduction under Section 80-IA(4) of the Act contending

27

that it has constructed bus shelters, beautified the road

median, put up the street lights and constructed foot
bridge

which

is

the

part

of

the

infrastructure

development and is entitled for deduction under Section

80-IA(4) of the Act. Section 80-IA was enacted by the
Government in order to give encouragement to the
private industries who are involved in infrastructural
development.

The

CBDT

circular

No.717

14.08.1995, reads as under:

34.2 Industrial modernization requires a
massive expansion of, and qualitative
improvement in infrastructure. Our country is
very deficient in infrastructure such as
expressways, highways, airports, ports and
rapid
urban
rail
transport
systems.
Additional resources are needed to fulfill the
requirements of the country within a
reasonable time frame. In many countries the
BOT (build-operate-transfer) or the BOOT
(build-own-operate-transfer) concepts have
been
utilized
for
developing
new
infrastructure.
34.3 Applying commercial principles in the
operation of infrastructure facilities can
provide both managerial and financial
efficiency.
In view of this, a ten-year
concession including a five-year tax holiday

dated

28

has been allowed for any enterprise which

develops, maintains and operates any new
infrastructure facility such
as
roads,
highways, expressways, bridges, airports,
ports and rail systems or any other public
facility of similar nature as may be notified by
the Board on BOT or BOOT or similar other
basis (where there is an ultimate transfer of
the facility to a Government or public
authority). The enterprise has to enter into an
agreement with the Central or the State
Government or a local authority or any other
statutory authority for this purpose. The
period within which the infrastructure facility
has to be transferred needs to be stipulated
in the agreement between the undertaking
and the Government concerned.
The
enterprise has to be owned by a company
registered in India or a consortium of such
companies. The tax holiday will be in respect
of income derived from the use of the
infrastructure facilities developed by them.

8.

Section 80 IA reads as under for the better

understanding of the provision:

Section 80-IA:
(I) Where the gross total income of an assessee
includes any profits and gains derived by an
undertaking or an enterprise from any business
referred to in sub-sec. (4) (such business being
hereinafter referred to as the eligible business),
there shall, in accordance with and subject to the

29

provisions of this section, be allowed, in computing

the total income of the assessee.
(2) -----------------------------(3)-----------------------------(4) This section applied 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 Centre 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:
Provided that where an infrastructure facility
is transferred on or after the 1st day of April,
1999 by an enterprise which developed such
infrastructure facility (hereafter referred to in

30

this section as the transferor enterprise) to

another enterprise (hereafter in this section
referred to as the transferee enterprise) for
the purpose of operating and maintaining the
infrastructure facility on its behalf in
accordance with agreement with Central
Government,
State
Government,
local
authority or statutory body, the provisions of
this section shall apply to the transferee
enterprise as if it were the enterprise to which
this clause applied and the deduction from
profits and gains would be available to such
transferee enterprise for the unexpired period
during which the transferor enterprise would
have been entitled to the deduction, if the
transfer had not taken place.
[Explanation For the purpose 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
management system;
(d) a port, airport, inland waterway [inland
port or navigational channel in the sea];

31

To avail the benefit under Section 80-IA(4), the assessee

has to fulfill the following conditions:
(a)
the assessee must be running an
eligible business of developing, operating and
maintaining or operating and maintaining any
infrastructure facility as defined by the
Section and clarified by the circular;
(b)
The assessee must have ability to
transfer the facility to the Government at a
future date in terms of the agreement;
(c)
The facility should
modernization by serving
infrastructure i.e. major
highway, express highway,
railway system;

help industrial
to expand the
items, such as
airports, port and

(d)
The deduction shall be of the incomes,
derived from the use of the infrastructure
facilities developed.
9.

Further, the Infrastructure Facility is defined

under explanation to Section 80-IA(4) of the Act.

The

infrastructure facility means, a road including a toll

road, a bridge or a railway system. Thus, in order to
claim benefit under Section 80-IA(4) of the Act the
business of the respondent-assessee is required to be

32

that of developing an infrastructure facility and derive

income from use of the said infrastructure facility
developed by them.
10.

In the instant case, reading of the agreement

entered into by the assessee with BBMP clearly reveals

that the assessee was only a licensee for putting up 11
bus shelters at various places, beautifying the road
medians at Diary Circle, putting up 199 light poles in
four roads; construction of the foot bridge near ISCKON
temple and maintaining the same for the specified
period.

The

assessee

was

permitted

to

erect

advertisement hoardings to recoup the expenditure for

putting of the same.

No ownership or other right

accrued to it apart from the license to earn revenue

from the advertisements placed on these structures.
Duration of the agreement shows that the arrangement
is only for a temporary period. The income is derived
only from the advertisement and not from the income

33

from infrastructure development. The Assessing Officer

after looking into the agreement entered into between
the parties and taking into consideration the provision
of Section 80-IA came to a conclusion that the work
carried on by the assessee will not come under the
Infrastructure Development and accordingly, denied
the benefit under Section 80-IA(4) of the Act. The said
order was confirmed by the First Appellate Authority.
However, The Appellate Tribunal set aside the order
passed by the First Appellate Authority and held that
the assessee not only built bus shelters, road medians,
street lights, but also maintained the same for a
specified period as per the agreement.

Hence, the

infrastructure work carried out by the assessee falls

under the definition of Section 80-IA(4) and entitled for
deduction.
Revenue.

The said order was questioned by the

34

11.

Sri.E.I.Sanmathi, learned counsel appearing for

the appellants contended that the word income

derived from eligible business referred to in Section 80IA is the income derived by developing, operating and
maintaining a road including toll road, bridge or rail
system. However, the assessee has only beautified the
existing road and put up the bus shelter as per the
permission granted by the BBMP for its advertisement
business.

The main income derived is not from

construction of bus shelters it has developed, but from

the advertisement. The work carried on by the assessee
do not fall under the definition of infrastructure
development.

In other words, to claim deduction

under Section 80-IA, the assessee has to earn from the

activities which amount to infrastructure development
which are prescribed specifically in the explanation to
the aforesaid provision. Basically, the assessee is only
an advertising company involved in outdoor and media
advertising

and

it

has

no

experience

of

civil

35

construction.

As per the agreement entered into

between the assessee and BBMP, the said work was

entrusted to the assessee in order to enhance the
aesthetic beauty of the road divider, and expenditure
incurred for the said work has to be recouped by
erecting advertisement hoardings.

By no stretch of

imagination, the income derived from the advertisement

hoardings can be treated as income earned from the
infrastructure

development.

In

support

of

his

contention, he relied upon the judgments reported in

(1999) 237 ITR 579 in the case of CIT v/s STERLING
FOODS; (2009) 317 ITR 218 in the case of LIBERTY
INDIA v/s CIT; and (2003) 263 ITR 378 in the case of
PANDIAN

CHEMICALS

v/s

COMMISSIONER

OF

INCOME TAX.
12.

The

reported

Honble
in

Supreme

(2005)139

Court

STC

in

74

judgment

(STATE

OF

JHARKHAND AND OTHERS v/s AMBAY CEMENTS

36

AND ANOTHER) held that the exemption clause should

be strictly construed and if the conditions under which
the exemption granted is violated or changed on
account of any subsequent event, the exemption would
not operate. Para 24 of the judgment reads as under:
In our view, an exception or an
exempting provision in a taxing statute should
be construed strictly and it is not open to the
court to ignore the conditions prescribed in the
industrial
policy
and
the
exemption
notifications.
In our view, the failure to comply with
the requirements renders the writ petition
filed by the respondent liable to be dismissed.
While mandatory rule must be strictly
observed, substantial compliance might
suffice in the case of a directory rule.
Whenever statute prescribes that a
particular act is to be done in a particular
manner and also lays down that failure to
comply with the said requirement leads to
severe consequences, such requirement
would be mandatory. It is the cardinal rule of
the interpretation that where a statute
provides that a particular thing should be
done, it should be done in the manner
prescribed and not in any other way. It also
well settled rule of interpretation that where
a statute is penal in character, it must be
strictly construed and followed.

37

13.

In the instant case, the exemption under Section

80-IA is subject to fulfillment of Section 80-IA(4). The

infrastructure facility has been explained in the
explanation. It applies to a road including the toll road
or a bridge. That infrastructure facility is of permanent
in nature and not temporary construction of busshelters, beautification of road median and erection of
light poles and temporary construction of foot bridge.

14.

The Guahati High Court in a judgment reported in

(1978) 41 STC 408 (THE ASSISTANT COMMISSIONER

OF TAXES AND ANOTHER v/s RANGLAL RAMESWAR
SARAUGI) while interpreting the sales tax statute held
that

when

the

court

is

construing

statutory

enactment, the intention of the legislature should be

gathered from the language used by it and it is not
permissible for the court to speculate about the
legislature intent. If the language of statue is clear and

38

explicit effect must be given to it.

The relevant

paragraph of the judgment reads as under:

A statutory enactment must ordinarily
be construed according to the plain natural
meaning of its language and no words should
be added, altered or modified unless it is
plainly necessary to do so in order to prevent
a provision from being unintelligible, absurd,
unreasonable,
unworkable
or
totally
irreconcilable with the rest of the statutes.
This rule of literal construction is firmly
established and it has received judicial
recognition in numerous cases.
Where there are two expressions which
might have used to convey a certain intention,
but one of those expressions will convey that
intention more clearly than other, it is proper
to conclude that, if the legislature use that one
of the two expressions which would convey
the intention less clearly, it does not intend to
convey that intention at all. If the language of
a statute is clear and explicit, court must give
effect to that.

15.

In a judgment reported in (1995) 211 ITR 646

(Rajasthan)

in

the

case

of

COMMISSIONER

OF

INCOME-TAX v/s MAYUR LAMINATORS, the Rajasthan

High Court held as under:

39

The burden is on the assessee when a

deduction is claimed by him to prove that he
is entitled to the said deduction. The object of
Section 80J of the Income Tax Act may be for
the industrial growth, but the relief can be
given only when the assessee falls within the
four corners of law. On an interpretation
which is not supported by law, the scope of
this Section cannot be enlarged.
The
assessee cannot be entitled to the relief in
accordance with this Section and if the
assessee does not fall within the purview of
the exemption, then for the purpose of
beneficent legislation, the extended meaning
cannot be given.
16.

To avail the benefit under Section 80-IA i.e.

infrastructure facility under which the enterprises

shall carry on the business of (i) developing or (ii)
operating and maintaining or (iii) developing, operating
and maintaining any infrastructure facility which fulfill
the conditions enumerated under sub-Section 4 of
Section 80-IA of the Act. From the reading of some of
the clauses of the agreement entered into, in the instant
case, between the assessee and the BBMP, it is very
clear that the assessee has to beautify the road medians
of existing roads and put up hi-tech bus-shelters using

40

the modern techniques and material for construction of

bus-shelters which in any case cannot be treated as
erection/development of permanent infrastructure. At
the most, it can be treated as a temporary structure
which can be either removed or shifted without any
difficulty and hassle.

Development of such temporary

structure cannot be termed or treated as permanent

infrastructure development as contemplated by Section
80-IA of the Act. The explanation of Section 80-IA make
it clear, what infrastructure facility means.

In the

present case the assessee for erecting bus shelters has

to deposit EMD amount with the BBMP and only after
expiry of term of lease, EMD amount will be refunded.
One of the requirements of the infrastructure facility is
that income has to be derived from the infrastructure
developed by the developer.

In the instant case, the

BBMP imposed a condition that the assessee shall not

collect any money from the user of the bus shelters as
well as the foot bridge.

There is no income from the

41

development of infrastructure apart from income from

the advertisement business.
17.

On the other hand, Sri.Nageshwar Rao,

learned

counsel appearing for the assessee contended that the

explanation clause of Section 80-IA of the Act is that a
road including toll road which itself suggests that the
definition is inclusive and not exclusive definition. The
word used is including or other activities itself brings
out the intention of the legislation to not to restrict the
activities to a few specified field. The legislature do not
intend to narrow down the meaning of infrastructure
facility as used in the explanation to Section 80-IA(4)
of the Act. The legislature has intended to give benefit
under Section 80-IA to the activities carried on in
relation to road including toll road, bridge or railway
system. The road shall not be treated as toll road alone,
it may be

a road within the

city of Municipal

Corporation. The intention of the legislature while

42

defining the term infrastructure facility is not to

narrow down the scope of benefit granted under the
Section and to grant it even to a developer, like the
assessee who is bonafidely involved in development,
operation and maintenance of structures like bus
shelters, which would not fall in the category of
infrastructure facility as contemplated by Section
80-IA of the Act. The assessee, in the present cases, has
developed bus shelters on the road, beautified the road
divider, put up street lights and maintained the same as
per the agreement entered into between the parties.
Thereafter, handed over the same to BBMP. Hence, the
activities carried on by the assessee has to be treated as
development

and

not

infrastructure

facility

as

contemplated by the explanation of Section 80-IA of the

Act. In (2010) 322 ITR 323 (THE COMMISSIONER OF
INCOME TAX v/s ABG HEAVY INDUSTRIES LIMITED),
the supply and installation of Crane in a Port was

43

included

within

the

purview

of

expression

infrastructure facility.

18.

It is relevant to note that Central Board of Direct

Taxes in its Circular No.793 dated 23-06-2000, on the

representation received with regard to the definition of
Port as infrastructure facility clarified as under:
The Board has considered the matter and it
has decided that such structure will be included
in the definition of the Port for the purpose of
Section 10(23(Guarantor) and 80-IA for the
Income Tax Act, 1961 if the following conditions
are fulfilled:
(a) The concerned Port Authority has issued
a certificate to that the said structure form
part of the Port and
(b) Such structure have been built under
BOT and BOLT scheme and there is an
agreement that the same would be
transferred to the said authority on the expiry
of the time stipulated in the agreement.

Hence, the judgments relied upon by the learned

counsel for the assessee referred to above is not
applicable to the facts of the present case.

44

19.

It was further contended on behalf of the assessee

that a provision in taxing statute granting incentives for

promoting growth and development should be construed
liberally, relying upon the judgment reported in (1992)
196 ITR 188 (SC) (BAJAJ TEMPO LIMITED v/s
COMMISSIONER

OF

INCOME-TAX).

The

relevant

paragraph read thus:

Denying benefit to such undertaking
could not have been intended when the very
purpose of Section 15C was to encourage
industrialization. It was for this reason that
various High Courts evolved the test of
commercial
expediency
or
substantial
involvement valued in terms of money etc., to
interpret this clause.
Adopting a literal
construction in such cases would have
resulted in defeating the very purpose of
Section 15C. Therefore, it becomes necessary
to resort to a construction which is reasonable
and purposive to make such provision
meaningful.

This contention of the respondent-assessee cannot be

acceptable.

The benefit under Section 15C of the Act

cannot be compared with the benefit under Section

45

80-IA(4) of the Act.

Under Section 80-IA(4), the

Government of India in order to encourage the Private

Sectors

to

participate

in

the

development

of

infrastructure has given benefit under the said scheme,

the private entrepreneur has to develop, operate and
maintain the said infrastructure.

The income derived

from the said infrastructure is only exempted under

Section 80-IA(4) of the Act. The judgment relied upon
by the assessee is not applicable to the present case.

20.

On careful examination of facts before us, we find

that the assessee in the present cases though has

erected bus shelters, beautified the road median,
erected street lights and foot bridge in the specified
place

as

per

the

specifications

and

erected

advertisement hoardings for earning income from the

said advertising business, it cannot be treated as
infrastructure facility as explained in the explanation of
Section 80-IA of the Act. It was not an engineering or

46

construction

company

that

puts

up

public-

infrastructure. The assessee, which, eventually is an

advertising company, is interested only to find out the
best space at the best locations for advertisements. The
assessee does not claim that he has any experience of
raising/erecting infrastructure facility as contemplated
by the explanation of Section 80-IA of the Act. Thus the
activities indulged by the assessee are part of its normal
activities of advertising and publicity rather than one of
infrastructure development.
the

assessee

do

not

The business activities of

involve

(a)

Development

(b)

Operating; and (c) Maintenance. For the purpose of its

business,

the

assessee

erection/construction
advertisement business.

of

bus

has

taken

shelter

for

up
its

The circular issued by the

CBDT makes it clear that the income eligible for

deduction has to be arisen from the use of facility, for
example, collection of toll from the road users. The said
income has to be treated as income derived from the

47

infrastructure facility. In the instant case, the assessee

derives income only from the advertisement hoardings
erected on the bus shelters, road medians and the
street light poles.

Hence, the said income cannot be

treated as income derived from the infrastructure

facility. The income earned by the assessee do not fall
under Section 80-IA(4). We find that the order passed
by the Tribunal is contrary to the intendment of the Act.
The benefit under Section 80-IA can be extended only to
those assessees who have developed infrastructure
facility as defined under sub-Section (4) of Section 80IA. In the instant case, the assessee has not developed
road or a toll road, bridge, highway or a rail system.
However, it has developed the existing road median,
erected

bus

shelters

and

light

poles

for

its

advertisement business, which, in any case cannot be

treated as infrastructure development.

The order

passed by the Tribunal cannot be sustainable.

The

judgment relied upon by the assessee is not applicable

48

to the facts of the present case.

Accordingly, the

questions of law in these appeals are held in favour of

the Revenue and against the assessee. Hence, we pass
the following:
ORDER
All the three appeals are allowed.

The order

passed by the Tribunal is set aside and the order passed

by the authorities below are up held.

Sd/JUDGE

Sd/JUDGE

mpk/-*