TaxTMI 
TaxTMI 
2010 (4) TMI 909
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....e assessee-company derives income as a steamer agent for shipping companies besides running a container freight station (CFS) at Numbal. Initially, assessment orders for these years were passed under section 143 on March 28, 2005 and July 15, 2005, respectively. Subsequently, the Commissioner of Income-tax revised the assessment orders when he found them erroneous and prejudicial to the interests of the Revenue on following points: "(a) That the profits claimed as exempt under section 80-IA(4) from container freight station (CFS) included income from letting of bonded warehouses not entitled for such deduction. (b) The expenses of Numbal plot maintenance which falls within the customs area have not been deducted from the profits of CFS. (c) Certain common expenditure like directors' travel expenditure have not been apportioned to the CFS operations." As per law, he revised the assessment orders vide his order dated March 30, 2007, by setting them aside with the following directions: (a) To exclude the warehousing income from CFS receipts and recomputed deduction claimed under section 80-IA. (b) To consider the income and expenditure on Numbal plot and directors' travel expens....
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....es." One additional ground of appeal was raised before the learned Commissioner of Income-tax (Appeals) regarding treating the warehousing charges collected to the tune of Rs. 40,48,148 as its income derived from the activities of CFS after obtaining the Assessing Officer's comments on this ground. The Assessing Officer has simply followed the direction of the learned Commissioner of Income-tax and has ignored that of the Incometax Appellate Tribunal. The learned Commissioner of Income-tax (Appeals) has, in circumstances, simply shown his helplessness and has fallen in line with the Assessing Officer. In relation to Numbal plot also same treatment has been meted out. But he has allowed the assessee's ground pertaining to travelling expenditure in both the years. The assessee is further aggrieved and has raised the following grounds: Assessment year 2002-03 "1. The order of the Commissioner of Income-tax (Appeals)-III. Chennai 600 034 in I. T. A. No. 302 of 2007-08 dated March 25, 2009 is contrary to law, facts and in the circumstances of the case. 2. The Commissioner of Income-tax (Appeals) erred in dismissing the ground challenging the exclusion of warehousing income from the p....
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.... earning of warehousing income was inextricably connected and derived from the activity of CFS and in such a situation the findings given ignoring ground Nos. 1-b to 1-d of the additional grounds of appeal filed before him was wrong, incorrect, erroneous, unjustified and not sustainable both on facts and in law. 5. The Commissioner of Income-tax (Appeals) failed to appreciate that the decision rendered by him for the assessment years 2004-05 and 2005-06 vide his order dated February 26, 2009 directing the Assessing Officer to include the warehousing charges forming part of the profits of eligible business in paragraph 3.15 was totally overlooked and brushed aside in passing the impugned order." We have considered the rival submissions and the material available on record. First of all, we would like to make an observation that by not following the directions of the Income-tax Appellate Tribunal which were very well available before the Assessing Officer at the time when he was giving effect to the Commissioner of Income-tax's direction, is a serious procedural lapse on his part. When the order of the Commissioner of Income-tax had already merged with that of the Income-tax Appell....
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.... clearance of goods for home use, warehousing temporary admissions, re-export, temporary storage for onward transit and outright export, trans-shipment, take place from such stations".' 3.8 Therefore the CFS activity presupposes adequate infrastructure towards warehousing and the income therefrom cannot be contended as non CFS income. 3.9 The fact that warehousing activity outside CFS does not qualify for deduction under section 80-IA by no stretch can be a consideration for treating the activity inside a notified CFS alike. The activities of CFS are completely different from what happens outside. 3.10 The Government of India, further to the issuance of its policy guidelines regarding setting up of inland container depot (ICD) and CFS in India has released a set of specific guidelines containing three parts, viz., part A, part B and part C for the above purpose. The guidelines essentially lays down basic conditions one has to comply with in order to set up a CFS and operate the same. 3.11 Part C of the above guidelines governs the procedure for approval of CFS and its implementation. In terms of the said policy guidelines issued by the Ministry of Commerce, Government of India ....
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....n case where only chassis operation is to be performed, the pavement standard could be limited to that of a highway. A minimum of 35 percent of the land area (provided as per the guidelines 1 acre for the Port CFS and 3 acres for ICDs in the hinterland) would be paved. (b) Office building for ICD, customs office and a separate block for user agencies equipped with basic facilities. (c) Warehousing facility, separately for exports and imports and long-term storage of bonded cargo. (d) Gate complex with separate entry and exit. (e) Adequate parking space for vehicles awaiting entry to the terminal . . . 3.12 Therefore, if one has to qualify as an eligible container freight station operator, one has to provide the minimum level of infrastructure as provided in the notification and as such having adequate warehousing facility is an essential part of the minimum level of infrastructure requirements. 3.13 Here it may be mentioned that as per part B of the guidelines for setting up inland container depot (ICD) and container freight station (CFS) in India the following infrastructure should be available at the ICDs/CFS. Provision of standard pavement for heavy duty equipment for use....
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....raphs to allow this claim of the assessee are sufficient to drive us also to come to a similar conclusion. Therefore, we allow warehousing income to be a part of CFS income and hold it eligible for deduction under section 80-IA. It is found for a fact that warehousing facilities in this case are a part of CFS being a necessary infrastructure. The notification of the Ministry is very clearly worded in this respect. In all these years, this common issue is allowed in favour of the assessee and against the Revenue. In the result, both the appeals of the assessee are allowed. I. T. A. Nos. 991 and 992/Mds/09 (assessment years 2002-03 and 200304) The only common issue raised in these Revenue's appeals is regarding allowance of travelling expenditure incurred on travelling of directors which include both domestic as well as foreign travel. The Assessing Officer has apportioned them because directors are common for both CFS and non-CFS activities. But the learned Commissioner of Income-tax (Appeals) has reversed the Assessing Officer's finding on this issue, which according to him does not have any valid basis. After hearing both sides, we are of the considered opinion that the apport....
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....confirming the exclusion of income earned from auction of containers not taken by the consignees/importers as per the customs regulations and the corresponding expenses incurred thereon without assigning proper reasons and justification. 8. The Commissioner of Income-tax (Appeals) failed to appreciate that the findings recorded in paragraph 9.3 of the impugned order were wrong, incorrect, erroneous, unjustified and not sustainable both on facts and in law. 9. The Commissioner of Income-tax (Appeals) failed to appreciate that there was no proper opportunity given before passing the assessment order as well as before passing the impugned order and any order passed in violation of the principles of natural justice is nullity in law. 10. The appellant craves leave to file additional grounds/arguments at the time of hearing." Ground No. 1 is general in nature and does not require any adjudication. Grounds Nos. 2 to 4 relate to maintenance charges claimed for the Numbal plot, which is the place where the assessee-company carries out its activities including CFS activity in the same complex such as shipping agency, clearing and forwarding. The assessee has treated the maintenanc....
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....ical purposes. I. T. A. No. 893/Mds/09 In this appeal, the following grounds have been raised. "1. The order of the Commissioner of Income-tax (Appeals)-III, Chennai-600 034 in I. T. A. No. 327/07-08 dated February 26, 2009 is contrary to law, facts and in the circumstances of the case. 2. The Commissioner of Income-tax (Appeals) erred in dismissing the grounds challenging the disallowance of maintenance expenses of Numbal plot without assigning proper reasons and justification. 3. The Commissioner of Income-tax (Appeals) failed to appreciate that the grounds raised before him in ground Nos. 2-b to 2-e forming part of Form No. 35 filed before him were not taken into consideration while passing the impugned order on the said issue. 4. The Commissioner of Income-tax (Appeals) failed to appreciate that the findings recorded in paragraph 5.2 of the impugned order were wrong, incorrect, erroneous, unjustified and not sustainable both on facts and in law. 5. The Commissioner of Income-tax (Appeals) erred in confirming the exclusion of income earned from auction of containers not taken by the consignees/importers as per the customs regulations and the corresponding expenses incurre....
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....oth sides, we find that in the return of income filed by the assessee for the subsequent assessment year 2006-07, the assesseecompany has claimed the whole of this expenditure amounting to Rs.4,84,70,202 under section 40(a)(ia) on the ground that the TDS has been deducted and remitted during the financial year relevant to the assessment year 2006-07. As per the Assessing Officer, whatever has been disallowed in the assessment year 2005-06 has been claimed in full in the assessment year 2006-07. This disallowance amounts to Rs. 20,58,163 which represents claim of expenditure without subjecting to TDS as per section 40(a)(ia). It seems that the Assessing Officer has not properly examined this issue. This amount was payable, therefore, the Assessing Officer has to examine whether expression "paid" used in this section includes "payable" or not. If so, to what extent. Therefore, we restore this issue to the file of the Assessing Officer to decide the same afresh, as per law. In the result, this appeal is partly allowed and partly allowed for statistical purposes. I. T. A. Nos. 993 and 994/Mds/09 (assessment years 2004-05 and 200506) These are the Revenue's appeals for the assessment....