2015 (5) TMI 656 - HC - Income Tax

Search-founded s.153A notice cannot be extended without incriminating material; ICDs and CFSs qualify as infrastructure under s.80-IA(4)(d)/(i)

HC held that the notice under s.153A, being search-founded, could not be validly extended when no incriminating material was found, and therefore the ... Assessment u/s 153A - Eligibility of deduction u/s 80-IA - activities undertaken by the assessee do not fall within Clause (d) of the Explanation to 80- IA(4) defining the term infrastructure facilities - notice under section 153A challenged - Held that:- In the present case, the notice under section 153A is founded on search. If there is no incriminating material found during the search, then, the Special Bench was right in holding that the power under section 153A being not expected to be exercised routinely, should be exercised if the search reveals any incriminating material. If that is not found, then, in relation to the second phase of three years, there is no warrant for making an order within the meaning of this provision. In any event, the issue stands concluded by a Division Bench judgment of this Court rendered in the case of Commissioner of Income Tax (Central) Nagpur vs. M/s. Murli Agro Products Limited [2010 (10) TMI 1052 - BOMBAY HIGH COURT]. It is, therefore, apparent that the law laid down by this Court is binding on the Revenue. If that is binding then the questions of law and with regard to applicability of section 153A need to be answered against the Revenue and in favour of the assessee. Income from ICDs - whether qualify for the deduction under Section 80IA(4)(i) of the Act read with the Explanation (d)? - Held that:- When the proposal to set up a CFS has been accepted by the Government, there is no requirement of either a specific agreement as contended by Mr. Suresh Kumar. Nor can it be said that by virtue of any certification of the JNPT and its subsequent withdrawal the position undergoes any change. Once the facility is nothing but a infrastructural facility set up and within the precincts of the port, then, considering and even otherwise having considered its proximity to the sea port and its activities that we have no doubt and it can be safely concluded that the deduction admissible under sub-section (4) of section 80-IA can be claimed by both the ICDs and CFSs. We do not think that the view taken by the Tribunal is in any way perverse or runs contrary to the language of sub-section (4) of section 80-IA or the object of the Income Tax Act, 1961, as a whole. Once such a conclusion is reached, then, it is not necessary to refer to any other material, particularly any circulars of the Board or otherwise or the certificates issued by the authorities. Even their contents need not be referred to. We are of the view that the extensive reasoning in the judgment of the Division Bench of the Delhi High Court and which finds approval even of the High Court of Madras and with which we broadly agree that the substantial questions of law on both counts need to be answered in favour of the assessee and against the Revenue. Issues Involved:1. Applicability of Section 153A of the Income Tax Act.2. Entitlement to deduction under Section 80-IA(4) of the Income Tax Act.Issue-wise Detailed Analysis:1. Applicability of Section 153A of the Income Tax Act:Facts and Arguments:- The Revenue challenged the Tribunal's interpretation of Section 153A, arguing that the Tribunal misread the scope of the assessment under this section.- The Tribunal held that assessments under Section 153A should be based on incriminating materials found during the search.- The Revenue contended that the Tribunal's view restricts the scope of Section 153A, which should encompass the total income of six years, including disclosed and undisclosed income.Legal Provisions:- Section 153A mandates the issuance of notice for six assessment years and allows for assessment/reassessment of total income, including both disclosed and undisclosed income.- The second proviso to Section 153A states that pending assessments abate upon initiation of search proceedings.Court's Analysis and Conclusion:- The Court referred to the Division Bench judgment in *Murli Agro Products Limited*, which clarified that completed assessments do not abate, and only pending assessments do.- The Court agreed with the Tribunal's interpretation that the scope of Section 153A should consider the findings from the search and any other material on record.- The Court upheld the Tribunal's decision, stating that the Special Bench's understanding of Section 153A was not perverse and aligned with the legislative intent.2. Entitlement to Deduction under Section 80-IA(4) of the Income Tax Act:Facts and Arguments:- The assessee claimed deductions under Section 80-IA(4) for operating a Container Freight Station (CFS), arguing it qualifies as an inland port.- The Revenue opposed, citing the withdrawal of certification by JNPT and the lack of a formal agreement with the Central Government.Legal Provisions:- Section 80-IA(4) allows deductions for enterprises developing, operating, and maintaining infrastructure facilities, including 'inland ports.'- The term 'inland port' is not explicitly defined in the Act but includes facilities like Container Freight Stations (CFS) and Inland Container Depots (ICD).Court's Analysis and Conclusion:- The Court referred to the Delhi High Court's judgment in *Container Corporation of India Limited*, which recognized ICDs as inland ports.- The Court noted that CFSs perform similar functions to ICDs, such as warehousing, customs clearance, and transportation of goods to and from seaports.- The Court found that the Tribunal correctly relied on the Special Bench decision and the Delhi High Court's ruling, concluding that CFSs qualify as inland ports eligible for deductions under Section 80-IA(4).- The Court dismissed the Revenue's appeals, affirming that the deduction under Section 80-IA(4) is applicable to both ICDs and CFSs.Final Judgment:The High Court dismissed the Revenue's appeals, holding that:1. The Tribunal's interpretation of Section 153A was correct, and the scope of assessment under this section includes considering incriminating materials found during the search.2. Container Freight Stations (CFS) qualify as inland ports, and their income is entitled to deductions under Section 80-IA(4) of the Income Tax Act.