Section 80IA Deduction Allowed Due to Developer Role in Rail Signalling Projects: ITAT Nagpur

ACIT Vs Bharat Rail Automations Pvt. Ltd. (ITAT Nagpur)

The appeal before the Income Tax Appellate Tribunal (ITAT), Nagpur, arose from an order passed by the Commissioner of Income Tax (Appeals) allowing deduction under Section 80IA(4) of the Income Tax Act, 1961 to the assessee for Assessment Year 2015–16. The assessee, engaged in design, development, installation, and commissioning of railway signalling systems, had claimed deduction of ₹2,17,21,362 under Section 80IA(4). The Assessing Officer (AO), during scrutiny assessment, disallowed the claim on the ground that the assessee was executing a “works contract” rather than acting as a developer of infrastructure facilities, and therefore was not eligible for the deduction.

The assessee challenged the disallowance before the CIT(A), who allowed the claim by relying on earlier decisions of the ITAT in the assessee’s own case for Assessment Years 2007–08, 2009–10, and 2010–11. These decisions had held that the assessee qualified as a developer of infrastructure facilities and was eligible for deduction under Section 80IA(4). The CIT(A)’s decision was also supported by a judgment of the Bombay High Court, which had upheld the Tribunal’s earlier orders in the assessee’s favour.

Before the Tribunal, the Revenue argued that the nature of work performed by the assessee, as per agreements with railway authorities, was in the nature of a works contract and not development of infrastructure. The assessee, however, contended that the issue was already settled in its favour in earlier years, where identical facts and contracts were involved.