Supreme Court Dismisses Revenue’s SLP: Eligibility for Section 80-IA Deduction Confirmed for Road Developers
1. The Legal Dispute: Developer vs. Works Contractor
The core issue centered on the interpretation of Section 80-IA(4) of the Income-tax Act. This section provides a deduction for profits derived from “developing, operating, and maintaining” infrastructure facilities like roads and bridges.
The Revenue’s Argument: The Department contended that the assessee was merely a “works contractor” executing a project for the government and, therefore, ineligible for the deduction.
The Assessee’s Argument: The assessee maintained they were a “developer” who assumed the risks and responsibilities of an infrastructure agreement, distinguishing them from a simple contractor.
2. The High Court’s Finding
The High Court ruled in favor of the assessee based on concurrent findings of fact from the lower appellate authorities (CIT(A) and ITAT).
Substance Over Form: The court found that the nature of the agreement and the risks undertaken by the assessee proved it was an “Infrastructure Development Agreement” and not a “Works Contract.”
Finality of Precedent: The High Court relied on a previous judgment that had already attained finality (i.e., the Department had not challenged the earlier ruling in similar cases).
3. The Supreme Court’s Decision
The Revenue filed a Special Leave Petition (SLP) to challenge the High Court’s order, but the Supreme Court dismissed it on two significant grounds:
I. Condonation of Delay
There was a gross delay of 358 days in filing the SLP. The Supreme Court noted that the Department failed to provide a satisfactory or “sufficient cause” for this delay.
II. Merits of the Case
Beyond the procedural delay, the Court noted that the underlying legal principle had already been settled. Since the Department allowed the previous relied-upon judgment to reach finality without an appeal, it could not selectively challenge the same logic in this instance.
Key Takeaways for Infrastructure Companies
Risk Documentation: To claim 80-IA, companies must demonstrate they have taken on financial and execution risks characteristic of a “developer,” not just a service provider.
Consistency in Litigation: If the Revenue accepts a legal position in one year or for one assessee, they face a higher legal hurdle when trying to challenge that same position later (the Principle of Consistency).
Strict Limitation Periods: This case serves as a warning to the Tax Department that “gross delays” in filing appeals will not be entertained by the Supreme Court without extraordinary justification.