Tuesday, July 1, 2014

Erecting road, bus shelters and so forth as part of advertisement business couldn’t be termed as infra-development

Where assessee-company had developed road medians, erected bus-shelters and light poles for its advertisement business, activities indulged by it were part of its normal activities of advertising and publicity rather than one of infrastructure development and, therefore, were not eligible for deduction under section 80-IA(4).


a)Assessee, an advertisement company, had entered into an agreement with the local authority for construction of bus shelters, putting up of footbridge, beautifying the road medians and erecting streetlights.

b)The assessee was allowed to utilize these bus-shelters, lampposts, road medians and footbridges for its advertisement business to recoup the expenditure incurred on them. The assessee claimed deduction under section 80-IA(4) after considering such activities as infrastructural activity.

c)The Assessing Officer (‘AO’) denied the benefit under section 80-IA(4). On appeal, the CIT(A) confirmed the order of AO. However, the ITAT set aside the order of CIT(A). The aggrieved-revenue filed the instant appeal.

The High Court held in favour of revenue as under:

1)Assessee was not an engineering or construction company that puts up public-infrastructure. It was only an advertising company which was interested only to find out the best space at the best locations for advertisements.

2)CBDT vide its Circular No. 777, dated 14/08/1995 made it clear that to avail deduction, income should arise from the use of infrastructural facility. But, in the instant case, the assessee derived income only from the advertisement hoardings erected on the bus-shelters, road medians and the street light poles. Hence, the said income could not be treated as income derived from the 'infrastructure facility'.

3)The benefit under section 80-IA could be extended only to those assessees who had developed infrastructural facility as defined under sub-section (4) of section 80-IA, i.e., road or a toll road, bridge, highway or a rail system. But, in the instant case, the assessee had developed the existing road median, erected bus shelters and light poles for its advertisement business, which, in any case could not be treated as infrastructure development.

4)Thus, the assessee was not eligible for Section 80-IA benefit and the order passed by Tribunal could not be sustained – CIT V. SKYLINE ADVERTISING (P.) LTD [2014] 45 taxmann.com 532 (Karnataka)