TaxTMI 
TaxTMI 
2013 (9) TMI 302
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....3 (3) of the Income-tax Act, 1961 after thorough enquiry. 3. Without prejudice to the above, the ld CIT (A) erred in stating that the appellant's counsel had not objected to reopening of the assessment, when in reality the appellant objected to reopening but confined its arguments to written submissions only. 4. Without prejudice to the above, the ld CIT (A) erred in upholding the Assessing Officer's action of disallowing the deduction of Rs. 13,64,11,381/- claimed under section 80-lA (4) of the Income-tax Act, 1961. 5. The Id CIT (A) grossly erred in facts and circumstances of the case in not fully relying on the decisions of: i). The Hon'ble Special Bench of Mumbai in the case of All Cargo Global Logistics Ltd. & Others v/s. DCIT (2012) 74 DTR 89. ii). Hon'ble Delhi High Court in the case of Container Corporation of India in their order in ITA Nos. 1411/2009, 967/2011 and 968/2011 dated 11.05.2012. iii). Continental Warehousing Corporation (Nhava Seva) Ltd. Raigad v/s. The ACIT, Panvel Circle, Panvel in ITA No. 7055/MUM / 2011 (A.Y.2008-09). since all the facts of the aforesaid cases are very identical....
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....ng Officer. Assessee's grounds for A.Y 2009-10 "1. The Id CIT (A) erred in upholding the Assessing Officer's action of disallowing the deduction of Rs. 35,32,60,682/- claimed under section 80- IA(4 ) of the Income-tax Act, 1961. 2. The ld CIT (A) grossly erred in facts and circumstances of the case in not fully relying on the decisions of: i). The Hon'ble Special Bench of Mumbai in the case of All Cargo Global Logistics Ltd. & Others v/s. DCIT ( 2012 ) 74 DTR 89. ii). Hon'ble Delhi High Court in the case of Container Corporation of India in their order in ITA Nos. 1411 / 2009,967/2011 and 968/2011 dated 11.05.2012. iii). Continental Warehousing Corporation (Nhava Seva ) Ltd. Raigad v/s. The ACIT, Panvel Circle, Panvel in ITA No. 7055/MUM/2011 (A.Y. 2008-09). since all the facts of the aforesaid cases are very identical and similar to the facts of the Appellant's case. 3. The ld CIT (A) grossly erred in facts and circumstances of the case in stating that the Appellant has not entered into any agreement with the Central Government or a State Government or a local authority or any other statuto....
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....f hearing". Revenues grounds for 2006-07 & 2009-10: 1. "Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in holding the Container Freight Station of the assessee is an inland port for the purposes of deduction u/s. 80IA (4) of the Income Tax Act, 1961 relying on the decision of the Mumbai ITAT in the cases of All Cargo Global Logistics Ltd. (SB) and M/s. Continental Warehousing Corporation, since in the same order, the Ld. CIT(A) has held the assessee has not fulfilled the necessary conditions to be recognized as an inland port and hence the assessee is not eligible for the deductions u/s. 80IA (4). Therefore, the order of the Ld. CIT(A) is contradictory." 2. "Whether, on facts and in the circumstances of the case and in law, the Ld.CIT(A) is justified in holding the Container Freight Station of the assessee is an inland port for the purposes of deduction u/s. 80IA (4) of the Income Tax Act, 1961 relying on the decision of the Mumbai ITAT in the cases of All Cargo Global Logistics Ltd. (SB) and M/s. Continental Warehousing Corporation, since the Ld.CIT(A) has failed to appreciate that the relied on orders ....
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.... disallowance of Rs. 1,470 was made. The issue now stands covered by the judgment of this Court in the case of CIT vs. BSES Yamuna Power Ltd. (in IT Appeal No.1267 decided on 31st Aug., 2010) wherein it was held that the depreciation @ 60 per cent on such items shall be allowed." Ld. D.R could not cite any contrary decision of any other High Court. Therefore, following the aforementioned decision we hold that assessee is entitled to get depreciation on these items @60%. This ground of the assessee is allowed. 6. Now only one issue is left which is regarding eligibility or otherwise of the assessee to claim deduction under section 80IA(4)(i) of the Act for its business activity carried on in the shape of Container Freight Station(CFS). 7. Before proceeding further it may be mentioned that assessee started claiming deduction under section 80 IA(4)(i) on CFS owned and operated by it w.e.f. A.Y.2004-05. It has been allowed such deduction for A.Y 2004-05 and 2005-06 and also for A.Y 2006-07. However, later on reassessment proceedings were initiated for A.Y 2006-07 and the impugned assessment order is result of such reassessment proceedings. During the course of these appeals it....
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....road, bridge, airport, port, inland waterways and inland ports, rail system or any other public facility of a similar nature as may be notified by the Board in this behalf in the Official Gazettee." 10. Board in its Circular No.772 dated 23/12/1995, 235 ITR St.35,67 in para 43.2 has explained the inclusion of "inland waterways and inland ports". The definition of "infrastructure facility" is as under:- 43.2 The Government has identified national waterways, the fourth mode of transport, for improving the transport infrastructure in the country. Inland waterways and inland ports play a vital role in improving a country's infrastructure. With the objective of improving the transport infrastructure, the Act has included inland waterways and inland ports in the definition of 'infrastructure facility' as given in section 80-IA. The undertakings engaged in the development of such infrastructure would be entitled to two-tier fiscal benefits as outlined above." (underlining ours) 11. In view of the aforementioned legislation for the first time from A.Y 1999-2000 inland ports started enjoying the deduction under section 80IA as an infrastructural facility. The obje....
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.... purpose of section 80 IA of the Act, subject to the fulfillment of the condition that the Port Authority must issue a certificate that the structure form a part of the Port; that such structures had been built under the BOT or BOLT scheme and there is an agreement for the transfer of the structure to the authority after fulfillment of the stipulated period. Such circular clearly postulated a concession being given in respect of a particular facility at Port, namely, a facility involved storage, loading and unloading. Subsequently Circular No.10 of 2005 dated 16/12/2005, 280 ITR (St) 1 was issued by CBDT which made a reference to the earlier circular dated 23/6/2000 and clarified that the definition of the expression "Port", for the purposes of section 80 IA of the Act, includes structures at Ports for storage , loading and unloading etc., subject to fulfillment of the conditions already noted earlier, would apply to assessment year 2001-02 and any earlier assessment year. However,. From assessment year 2003-03 onwards, the condition requiring that structure should have been completed under a BOT or BOLT scheme and that there should be an agreement for transfer of the facility to t....
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.... 8 of the paper book. (iii) On the same date the same authority has also issued notification No.5/2003 vide which Commissioner of Customs, under the provisions of section 8 of the Customs Act, has notified the container road linking JNPT/NSICT container gate, container freight station, United Linear Agencies of India (P) Ltd., Sector -8, Dronagiri Node, as "Customs Area" for the purpose of transport of import and export cargo. Copy of this notification has been placed at page 9 of the paper book. (iv) On the same date notification No.6/2006 has been issued by the same authority and it has been declared that assessee will be custodian of the goods till they are cleared for the home consumption or/ are warehoused or/ are transshipped under the provisions of Chapter 8 of the Customs Act, 1962. Copy of this notification is placed at page 10 of the paper book. (v) Vide letter dated 26/3/2003, Executive Engineer of Industrial Development Division has issued occupancy certificate to the assessee for its CFS. Copy of this certificate is placed at page 11 of the paper book. (vi) Vide leller dated 26/9/2005 the assessee submitted an application to the Chairman, Jawaharlal Nehru P....
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....under BOT or BOLT scheme and there is no agreement that the said CFS would be transferred to JNPT on the expiry of the time stipulated in the agreement as per the circular no.793 dated 23.06.2000 issued by the Income Tax Department. This certificate is issued at the request of M/s. United Agencies Pvt. Ltd. (ULA) vide their letter dated 26.09.2005. Sd/- (R.T.Revankar) Chief Manager (0perations)" (emphasis ours) 16. In aforesaid manner, the assessee has started claiming deduction under section 80IA(4) of the Act and as mentioned earlier the assessee has been granted such deduction for A.Y 2004-05 and 2005-06. For impugned assessment year 2006-07 reassessment proceedings were initiated mainly for disallowance of the deduction as in the opinion of revenue assessee is not entitled to such deduction and the reasons as stated in the assessment order for making disallowance of the deduction are as under: (1) Deduction under section 80 IA is available only to the structures situated at the ports and assessee's CFS being not situated "at Port" is not eligible for deduction. (2) Certificate issued by JNPT dated 31/12/2006 ....
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....of section 80 IA(4) : "An ICD or a CFS is usually not located at the port and therefore it is not a part of the Port for the purpose of section 80IA(4)(i) and not covered by the Circular No.10/2005 dated 16/12/2005 and Circular No.793 dated 23.06.2000 on the subject." "Reference have also been received as to whether Inland Container Depots (ICDs) and Container Freight Station (CFS) can be termed as Inland Ports and thereby classified as infrastructure facility under Section 80IA(4)(ii) of the Income Tax Act, 1961. In this context, I am further directed to convey that the Board has considered the same and it has been decided that and ICDs and CFS are not ports located on any inland waterway, river or cannal, and thereby they cannot be classified as inland ports for the purpose of Section 80IA (4)(i) of the Income Tax Act." 17. In the above manner A.O has discarded the claim of the assessee regarding deduction under section 80IA(4) of the Act. Aggrieved, assessee filed an appeal before Ld. CIT(A). The submissions made before A.O were reiterated before Ld. CIT(A). Reference was made to the following decisions: (a) All Cargo Global Logistics Ltd. vs. DCIT,....
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.... word "approve" is defined as " to give formal sanction; to confirm authoritatively". Thus it is the case of Ld. AR that approval means that there is an agreement. He in this regard referred to the letters issued by Finance Ministry, Commerce Ministry and JNPT, copies of which are placed at pages 6- 8,9,10,17 &18 of the paper book, which shows the approval was accorded by various authorities. By Finance Act (No.2) the necessity to have an agreement to transfer infrastructure facility under BOT/BOLT was removed. Reference was made to the memorandum of explaining Finance Bill, 248 ITR 166(St), wherein it was mentioned "it is also proposed to do away with the mandatory requirement that such infrastructure facility shall be transferred to the Central Government, State Government, Local Authority or any other Statutory Authority. The amendment was made applicable from assessment year 2002-03 onwards. It was further argued by Ld AR that as per section 2(b) of the Contract Act an agreement does not need to be in writing. As per provisions of section 164A oral trust are taxed at maximum marginal rate. Even according to section 194C tax is liable to be deducted even in a case where contract....
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....d and it should be allowed to the assessee. 24. The arguments of Ld. DR in reply to the Ld. AR's arguments as well as arguments with regard to the appeals filed by the revenue are as under: 24.1 Ld. D.R submitted that AO was right in holding that assessee's structure of CFS not being situated at Port is not eligible for deduction under section 80 IA(4) of the Act. He submitted that in the circulars the word used by CBDT are "at Port", therefore, even according to those circulars assessee's CFS being situated at a distance of 15 Kms from the main port cannot be considered to be eligible for deduction under section 80 IA(4). Ld. D.R submitted that certificate granted by JNPT was subsequently withdrawn and, therefore, the said certificate dated 31/3/2006 does not advance the case of the assessee in view of its withdrawal in the year 2007. Ld. D.R made reference to the clarification issued by CBDT dated 6/1/2011 vide which it was clarified that CFS structures which are not situated at Port are not entitled for deduction under section 80 IA(4). Thus, it was pleaded by Ld. DR that assessee's CFS does not come within the definition of "Port" or "Inland Port". 24.2....
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.... injustice to the assessee. In the present case, we have to bear in mind that the authority which changed its stand was not the Income-tax Appellate Tribunal but the Income-tax Officer. Quite apart from this, in the present case, the Tribunal took the view that the earlier view taken by the income-tax authorities appeared to be patently unwarranted on the facts. In fact, as the Tribunal has pointed out in paragraph 6 of its order, the facts established by the assessee were so scanty and so much against the assessee that the Tribunal was left with no option but to hold that the action of the income-tax authorities was correct." 24.3 Ld. D.R further referred to the decision of ITAT Mumbai Bench in the case of ACIT vs. Hitesh S. Bhagat order dated 15/5/2013 in ITA No.6586/Mum/2010, wherein following aforementioned decision of Hon'ble Supreme Court in the case of New Jahangir Vakil Mill Company Ltd. vs. CIT(supra) it was held that doctrine of res-judicata is not applicable. Ld. DR also referred to the decision of Hon'ble Andhra Pradesh High Court in the case of B.R. Construction, 73 Taxmann 473(AP)(FB) to contend that precedent ceases to be binding precedent in the following....
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....ll these issues were raised by the revenue before the Special Bench, we may refer to the following observations of the Special Bench: 63. The submission of the Ld. Counsel in the case of All Cargo Global Logistics Ltd. is that the Hon'ble Delhi High Court has held that ICDs are landlocked and situated far off from the sea port such. The ICDs of the Container Corporation of India are located at places such as Jamshedpur, Jodhpur, Jaipur, etc. These have been held to be inland ports for the purpose of deduction u/s 801A(4). The case of the assessee is better placed than the case of Container Corporation of India Ltd. in as much as it is situated 5 kms away from the port and it is a part of the port for carrying out activities mentioned earlier. Customs-clearance takes place from assessee's CFS. Therefore, it is argued that the assessee is entitled to deduction u/s 801A. 64. In reply, the Ld. Standing Counsel submitted that whenever the assessee claims an income to be exempt from tax or claims a deduction, the pre-conditions for exemption or deduction have to be strictly satisfied by him, as held in the case of M/s. Novopan India Ltd., Hyderabad vs. Collector....
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....bmissions made before us. It may be mentioned that one of the arguments advanced by the Ld. Counsel for the assessee is that the case of Container Corporation of India is not based on any of the circulars issued by the Port authorities, however, the CFS the assessee has been granted such certificate. The certificate mentions that the CFS carries on port related activities, and it may be considered as an extendable activity of the port related activities. It is clarified that the CFS has not been built on BOT or BOLT Scheme and that it is situated on land which does not belong to the port. The letters written by port trust to the assessee also state that the matter has been referred to the Income Tax Department. The department has clarified that an ICD/CFS does not constitute an inland port. in the case of CIT Vs. ABG Heavy Industries Ltd., 189 Taxman 54, the Hon'ble Court has held that the assessee is entitled to deduction u/s 801A. However there is a very salient difference in facts that structures were located at port and such structures had to be handed over to the Port Trust on expiry of the period of agreement. In the case at hand it is clear that the assets of the CFS are....
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....edent that CFS of the assessee should be situated at port. So, non- situation of the CFS of the assessee at port does not disentitle it from claiming deduction u/s. 80 IA(4). 25.2 In the present case also the assessee has been provided with a certificate by JNPT that the assessee's CFS is an extended arm of the Port and similar certificate was provided in the cases dealt with by Special Bench according to highlighted portion of the decision of Special Bench. Such certificate issued by JNPT was also withdrawn in those cases (para 64). Such withdrawal by the JNPT was not considered as material by the Special Bench for denial of deduction under section 80IA(4). Moreover, in the certificate dated 31/3/2006, JNPT has clearly stated that assessee's CFS may be considered as an extended arm of the Port related activities in accordance with Circular No.133/95 dated 22/12/95 issued by Central Board of Excise & Customs, New Delhi, whereas in the so called withdrawal letter, which is highly relied upon by the revenue, it has no where been stated that how and on what basis the CFS of the assessee has suddenly ceased to be an extended arm of the Port. Both the letters ( Dt. 31/3/2006 ....
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....on of Ld. AR on the issue of consistency has relied on the decision in the case of B.R. Construction (supra) in which it has been held that broadly principle of consistency will cease to be binding precedent in five circumstances which are listed in para 24.3 of this order. It is the case of Ld. DR that the order of Special Bench is sub-silentio, therefore, it ceases to be a binding precedent. We do not find any force in such argument of Ld. D.R as the order of Special Bench cannot be said to be sub-silentio as all the contentions of the Revenue are considered and the matter is decided in accordance with solitary decision of Hon'ble Delhi High Court available on the issue. Even till date revenue has not been able to cite any decision of any other High Court in which contrary decision is taken. The cases of CFS are better placed from the cases of ICD's considered by Hon'ble Delhi High Court and Hon'ble Delhi High Court even without referring to the circulars of CBDT dated 23/6/2002, 16/12/2005 has held that ICD being infrastructure facility is Inland Port and is eligible for deduction u/s. 80 IA(4) of the Act. Therefore, there is no breach of principle of consistency....
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....astructure facility;] 25.9 Both the parties have also argued on this issue at length. As mentioned earlier it is the case of the assessee that it is not necessary to have a written agreement. As against that it is the case of revenue that the agreement should be in writing and it should be in accordance with the provisions of Article 299(1). We have given careful thought to such arguments raised before us. The reply of the assessee dated 27/12/2011 submitted in response to show cause notice issued by AO has been reproduced in the assessment order in para 3.3 for A.Y 2006-07. In the reply reference has been made to both circulars issued by CBDT dated 23/6/2000 and dated 16/12/2005 and the relevant portion of those submissions are reproduced below: "The Central Board of Direct Taxes (CBDT) vide its circular no. 10 of 2005, dated 16th December. 2005 (Annexure 1) has relaxed the conditions to be fulfilled towards creation of structures at the ports for staring, loading and unloading to form part of the definition of "ports" and, thereby, become entitled far the tax concessions available for developing operating or maintaining infrastructure facilities such as ports. Accordi....
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.... CIT(A) has ignored such submissions of the assessee. According to well established law Board is empowered to issue beneficial circulars in favour of assessee which tone down the rigor of law and such power is vested in the Board under the provisions of section 119 of the Act and such circular is also binding on the authorities employed in the administration of the Act. The benefit of such Circular is permissible even though the circular might have departed from the strict tenor of the statutory provision and mitigated the rigor of the law. Reference in this regard can be made to the following observations of Hon'ble Supreme Court from the decision in the case of Keshavji Raoji & Company vs. CIT (supra) "However,--this is what Sri Ramachandran really has in mind --circulars beneficial to the assessees and which tone down the rigour of the law issued in exercise of the statutory power under s. 119 of the Act or under corresponding provisions of the predecessor Act are binding on the authorities in the administration of the Act. The Tribunal, much less the High Court, is an authority under the Act. The circulars do not bind them. But the benefits of such circulars to ass....
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....ertificate issued by the port authority that the structure in question forms a part of the port. Hence, the evolution of s. 80-IA would show a progressive liberalisation of the legislative scheme, in the interests of aiding the growth of infrastructure. The administrative circulars issued by CBDT in implementation of s. 80-IA similarly liberalised the scheme, consistent with the Act." (emphasis ours) 25.12 It may be mentioned here that Ld. CIT(A) has referred to the aforementioned decision of Hon'ble High court in the case of CIT vs. ABG Heavy Industries Ltd.,(supra) to hold that execution of an agreement between the assessee and public authority is mandatory but the position is otherwise. The condition which was required to be fulfilled in the case of a CFS was only limited to obtaining the certificate from the Port Authority that the said structure form part of the Port which is clear from the aforementioned observations and the said certificate has been obtained by the assessee. 25.13 The above discussion is de-hors to the arguments taken by Ld. AR that in the case of M/s. Continental Warehousing Corporation (supra) there is a specific reference of the fact that there ....
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....the claim of the assessee for the simple reason that the assessee had never entered into any contract with the State Government and the assessee-company is nothing but a colourable device to evade tax. It is a settled position of law that the company is a juristic entity and it should be considered independent from the shareholders or the directors. Admittedly, M/s Ajay Construction, the original tenderer, have assigned the remaining work of the contract/tender along with the expenditure incurred by it to Smt Usha Agrawal, the promoter of the assessee-company though an agreement dt. 1St April, 1995 and thereafter the construction work was undertaken by the promoter of the assessee-company till its incorporation. When the permission of the assignment was granted by the State Government, fresh agreement was executed between the assesseecompany and the main tenderer, M/s Ajay Constructions, in which the assessee-company has ratified all the deeds and acts of its promoter, Smt. Usha Agrawal, and owned/taken over all the assets and liabilities of its promoter. The action of assigning and the work of construction undertaken by the assessee was recognised by the State Government and a tri....