2017 (4) TMI 1056 - AT - Income Tax

Eligibility of Container Freight Station for Tax Deduction Upheld

DCIT, Circle-3 (1), Visakhapatnam Versus M/s. Gateway East India Pvt. Ltd.

The Tribunal upheld the eligibility of a Container Freight Station (CFS) for deduction under section 80-IA(4) of the Income Tax Act. It determined that ... Deduction under section 80-IA(4) - assessee is engaged in the business of operation of Container Freight Station (CFS) - Held that:- In the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015 (5) TMI 656 - BOMBAY HIGH COURT ), the Hon'ble Bombay High Court has held that profits and gains from infrastructure undertakings (infrastructure facility), set up within precincts of port, then, having considered its proximity to sea-port and its activities, it can be safely concluded that deduction admissible under sub-section (4) of section 80-IA can be claimed by both ICDs and CFSs. Also in assessee's own case [2015 (12) TMI 365 - ITAT Visakhapatnam] having regard to the provisions of the Customs Act, the communication issued by the Central Board of Excise and Customs as well as the Ministry of Commerce and Industry, the object of including “inland port” as an infrastructure facility and also that customs clearance also takes place in the inland container depot, the assessee’s claim that the inland container depots were inland ports under Explanation (d) to sec. 80IA(4) required to be upheld - Decided in favour of assessee. Issues Involved:1. Eligibility for deduction under section 80-IA(4) of the Income Tax Act.2. Classification of Container Freight Station (CFS) as an infrastructure facility.3. Requirement of an agreement with the government for claiming deduction under section 80-IA(4).Issue-wise Detailed Analysis:1. Eligibility for Deduction Under Section 80-IA(4):The primary issue was whether the assessee, engaged in the operation of a Container Freight Station (CFS), was eligible for deduction under section 80-IA(4) of the Income Tax Act. The Assessing Officer denied the claim stating that Inland Container Depots (ICD) and CFS are not infrastructure facilities as per section 80-IA(4). However, the CIT(A) allowed the deduction by following the Tribunal's decision in the assessee's case for the previous assessment year (2011-12). The Tribunal upheld this view, referencing the Finance Act, 2000, and various circulars, including CBDT Circular No. 739 and CBEC Circular No. 18/2009, which clarified the definitions and distinctions between ICDs and CFSs. The Tribunal concluded that CFS qualifies as an infrastructure facility and is eligible for the deduction.2. Classification of Container Freight Station (CFS) as an Infrastructure Facility:The Tribunal examined the definitions provided in CBEC Circular No. 18/2009, which distinguished between ICDs and CFSs. The circular defined an ICD as a self-contained customs station with public authority status, handling various customs-related activities. In contrast, a CFS is a customs area linked to a customs station, primarily for decongesting ports. The Tribunal noted that despite these differences, both ICDs and CFSs serve as infrastructure facilities under section 80-IA. The Tribunal also referenced the Delhi High Court's decision in the case of Container Corporation Ltd., which upheld that inland container depots (ICDs) are considered inland ports and thus qualify as infrastructure facilities.3. Requirement of an Agreement with the Government:The Assessing Officer contended that the absence of a specific agreement with the government or statutory authority disqualified the assessee from claiming the deduction. However, the Tribunal found that the assessee had a letter of intent from the Ministry of Commerce and Industry, which approved the setting up of a CFS. The Tribunal cited the Chennai Bench's decision in A.L. Logistics P. Ltd., which held that a formal agreement is not necessary if the assessee complies with the conditions laid down by the government. The Tribunal concluded that the assessee met the requirements of section 80-IA(4) and was eligible for the deduction.Conclusion:The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order that allowed the deduction under section 80-IA(4) to the assessee. The Tribunal's decision was based on the interpretation of relevant circulars, judicial precedents, and the assessee's compliance with governmental conditions, thus confirming that CFS qualifies as an infrastructure facility eligible for tax deduction.