TaxTMI 
TaxTMI 
2015 (5) TMI 656
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....The assessment year is 2008-09. 3. There, the assessee filed a return of income declaring total income at Rs. Nil. That was filed on 8th October, 2008. The gross total income is declared at Rs. 21,07,13,675/-/ Upon claiming deduction under section 80 IA(4) of the Income Tax Act, 1961 (hereinafter referred to as the "IT Act") in the said sum, total income is declared at Rs. Nil. 4. During the assessment proceedings, the Assessing Officer noted that the assessee company is engaged in the operation of a Container Freight Station (CFS) and claimed that the activities therein qualify as a port. That is one of the infrastructure facilities for the purpose of section 80-IA(4) of the IT Act. The assessee produced a certificate dated 13th July, 2006, from the Jawaharlal Nehru Port Trust (JNPT) Nhava Sheva declaring that the assessee is considered as an extended arm of port related services. However, on enquiry under section 133(6) of the IT Act, it was revealed that this certificate was withdrawn by JNPT on 5th October, 2007. That is how the deduction claimed came to be disallowed. Being aggrieved by this order of the Assessing Officer, the assessee preferred an appeal before the First Ap....
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....on 80-IA(4) of the IT Act, 1961. 10. After reviewing the entire case law, the special Bench held that by the clear language of section 153A together with its provisos, pending assessments abate. The other question was answered by upholding that the Assessing Officer is required to make one assessment for each of the six years on the basis of the search and any other material existing or brought on record by the Assessing Officer. In other cases assessments will be made on the basis of the books of account and other documents found during the search and not produced during assessment and also on any other undisclosed income or property found during the search. 11. On the issue of deduction under section 80-IA(4) it was concluded that the CFS is a inland port and its income is entitled to deduction under section 80-IA(4) of the IT Act. The special Bench decision to the extent relevant reads as under : "58. Thus, question No.1 before us is answered as under : a) In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment years separately; b) In other c....
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....A(4) which was contrary to the Circular of the CBDT No. 10/2005 as also contrary to the fact that JNPT Port had withdrawn its certification of the company ?" 14. In the light of the fact that there are questions and of law which have been considered by the authorities under the IT Act and we are required to interpret not only the legal provisions but consider the correctness of the view taken in the special Bench decision, we proceed to admit these appeals on the above questions. By consent of the parties we have taken up the appeals for hearing and final disposal. 15. Mr. Pinto, learned counsel appearing in support of these appeals submitted that the Tribunal has completely misread and misinterpreted section 153A of the IT Act. He would submit that the language of section 153A is clear. While the triggering point may be the search, but the notice that is contemplated by section 153A and which is mandatory requires the Assessing Officer to assess the income of six years. That is independent of the search. The mandate is to issue the notice for six assessment years. The assessment or reassessment is of the total income of the assessee disclosed or undisclosed and pertaining to the....
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....rch is initiated under section 132 or books of account or other documents or assets are requisitioned under section 132A of the Act after 31st May, 2003. Then the Assessing Officer shall issue notice to such person requiring him to furnish within such period as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b) of sub-section (1) of section 153A and clause (b) postulates assessment or reassessment of the total income of six years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. The first proviso mandates that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso, according to Mr. Dastur, is important because the assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in sub-section (1) pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. E....
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....y, applicability of section 80-IA(4), Mr. Dastur would submit that in the appeals in which he is appearing, the assessees have an infrastructural facility of Inland Container Depot (ICD) which qualifies for deduction under section 80-IA(4) of the IT Act, but even the CFS clearly falls within the provisions. It is held to be an inland port. In that regard, he relies upon a circular of the Central Board of Direct Taxes (Circular No.10 of 2005 dated 16th December, 2005). He also relies upon the judgment of the Hon'ble Delhi High Court in the case of Container Corporation of India Limited vs. Asstt. Commissioner of Income Tax and our attention is also invited to a judgment of the High Court of Judicature at Madras by Mr. Gandhi who adopts the arguments of Mr. Dastur. This judgment is in Income Tax Appeal No.1031 of 2014 dated 23rd December, 2014. It is in these circumstances that it is submitted by Mr. Dastur, learned senior counsel and Mr. Gandhi that the Revenue appeals on both counts deserve to be dismissed. 20. Mr. Pinto in rejoinder has submitted that the judgment of the Division Bench of this Court would not bind us simply because that was rendered in the case of exercise of....
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....evant to the previous year in which such search is conducted or requisition is made : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years; Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this subsection pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate : Provided also that the Central Government may by rules made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any oth....
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....d books of account, other documents, money, bullion, jewellery or other valuable article or thing is found as a result thereof that notwithstanding anything and within the meaning of the above provisions having been concluded, it is open for the Revenue to make an assessment. It is also open to the Revenue to make a reassessment in cases where it exercises the powers to requisition books of account etc. This is because it is of the view that the books of account are required to be summoned or taken into custody. It, therefore, issues a summons in that regard. It may also requisition the books of account or other documents for that might be useful and or any assets representing withholding or part income or property which has not been or would not have been disclosed for the purpose of the Indian Income Tax Act, 1922 or the Income Tax Act of 1961 by any person from whose possession or control they have been taken into custody. This is when the authorities have reason to believe that such powers need to be exercised. Therefore, the fetters and which are to be found in other provisions are removed and a notice of assessment in such cases is then issued. That is mandated by sub-section....
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....giving effect to the order of the Commissioner of Income Tax (Appeals). It is that order which was challenged before the Tribunal and the Tribunal set aside the same on the ground that there was no scope to take a different view on merits of the said order. The view taken by the Assessing Officer could not be said to be erroneous and prejudicial to the interest of the Revenue. 27. However, the Revenue's argument was that once proceedings under section 153A of the Act are initiated, then, the original assessment / reassessment order already passed in the assessment years covered under section 153A stand abated and the Assessing Officer is obliged to pass fresh assessment / reassessment orders and determine the total income afresh for those assessment years. Thus, earlier assessment orders abate as the proceedings in which they are passed have no legal consequence was the argument. Once the notice under section 153A was issued and an assessment order passed pursuant thereto, it is that order which was erroneous and prejudicial to the interest of the Revenue. 28. In dealing with those arguments, the Division Bench outlined the ambit and scope of the powers conferred by section 1....
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.... the CBDT has clarified that on initiation of proceedings under Section 153A, the proceedings pending in appeal, revision or rectification proceedings against finalised assessment/reassessment shall not abate. It is only because, the finalised assessments/reassessments do not abate, the appeal revision or rectification pending against finalised assessment/reassessments would not abate. Therefore, the argument of the revenue, that on initiation of proceedings under Section 153A, the assessments/reassessments finalised for the assessment years covered under Section 153A of the Income-tax Act stand abated cannot be accepted. Similarly on annulment of assessment made under Section 153A (1) what stands revived is the pending assessment / reassessment proceedings which stood abated as per section 153A(1). 11) In the present case, as contended by Shri Mani, learned counsel for the assessee, the assessment for assessment year 1998-99 was finalised on the 29-12- 2000 and search was conducted thereafter on 3-12- 2003. Therefore, in the facts of the present case, initiation of proceedings under Section 153A would not affect the assessment finalised on 29-12-2000. 12) Once it is held that th....
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....re are orders made of assessment or reassessment and which are in force on the date of initiation of the search or making of the requisition. As that specific argument was canvassed and dealt with by the Division Bench and that is how it was called upon to interpret section 153A of the IT Act, then, each of the above conclusions rendered by the Division Bench would bind us. 30. Even otherwise, we agree with the Division Bench when it observes as above with regard to the ambit and scope of the powers conferred under section 153A of the Act. Since we are not required to trace out the history and we can do nothing better than to reproduce the observations and conclusions as above that we are not repeating the same. Even if the exercise of power under section 153A is permissible still the provision cannot be read in the manner suggested by Mr. Pinto. Not only the finalised assessment cannot be touched by resorting to those provisions, but even while exercising the power can be exercised where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after 31st March, 2003. There is a mandate to issue notices under s....
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....ssment is only for the purpose of avoiding two assessments for the same year, one being regular assessment and the other being assessment u/s 153A. In other words these two assessments coalesce into one assessment. The second proviso does not contain any word or words to the effect that no reassessment shall be made in respect of a completed assessment. The language is clear in this behalf and therefore literal interpretation should be followed. Such interpretation does not produce manifestly absurd or unjust results as section 153A (i)(b) and the first proviso clearly provide for assessment or reassessment of all six years. It may cause hardship to some assesses where one or more of such assessments has or have been completed before the date of initiation of search. This is hardly of any relevance in view of clear and unambiguous words used by the legislature. This interpretation does not cause any absurd etc. results. There is no casus omissus and supplying any would be against the legislative intent and against the very rule in this behalf that it should be supplied for the purpose of achieving legislative intent. The submissions of the Ld. Counsels are manifold, the foremost be....
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....terpretation of this provision with provision contained in section 153A, all the three conditions on satisfaction of which a warrant of search can be issued will have to be taken into account. 51. Having held so, an assessment or reassessment u/s 153A arises only when a search has been initiated and conducted. Therefore, such an assessment has a vital link with the initiation and conduct of the search. We have mentioned that a search can be authorised on satisfaction of one of the three conditions enumerated earlier. Therefore, while interpreting the provision contained in section 153A, all these conditions will have to be taken into account. With this, we proceed to literally interpret to provision in 153A as it exists and read it alongside the provision contained in section 132(1). 52. The provision comes into operation if a search or requisition is initiated after 31.5.2003. On satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used is "shall" and, thus, there is no option but to issue such a notice. Thereafter he has to assess or ....
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....f search. 54. It may be mentioned here that Ld. Counsel for All Cargo Global Logistics Ltd. was questioned about the scope of pending assessments as it was his contention that all six assessments are to be made, if necessary, on the basis of undisclosed income discovered in the course of search. He was specifically questioned about the jurisdiction of the AO to make original assessment along with assessment u/s 153A, merging into one. However he took an evasive view submitting that this question need not be decided in his case although the question of jurisdiction u/s 153A was vehemently pressed on account of which ground No.1 in the appeal for assessment year 2004-05 was admitted as additional ground. He also wanted the additional ground to be retained in case of any future contingency." 32. We would be failing in our duty if we do not note the reliance placed by Mr. Pinto on the judgments rendered by the High Court of Delhi at New Delhi and the High Court of Karnataka. Mr. Pinto would submit that the above observations and conclusions of the Special Bench and reproduced by us are specifically disapproved in Commissioner of Income Tax vs. Anil Kumar Bhatia by the Delhi High Cour....
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....ini Sharma which addition he confirmed in his appellate order. These two orders of the Commissioner were carried in appeal to the Tribunal and thereafter the Delhi High Court noted the Tribunal's conclusions. It noted the arguments before the Tribunal and thereupon the Tribunal having deleted these additions and the notional interest, the matter was taken in appeal to the High Court of Delhi under section 260A of the IT Act by the Revenue. 33. The arguments, therefore, have been noted and from paragraphs 16, section 153A was analysed. 34. Mr. Pinto heavily relied on paragraphs 18, 19 and 20 of the judgment of the Hon'ble High Court of Delhi. He also relied on paragraph 21 to contend that the Special Bench decision has not been approved by the High Court of Delhi. 35. The Delhi High Court's judgment must be seen in the context of the essential controversy before it. Pertinently, that controversy arose because of a search being conducted at the residence and business premises of the assessee. Foundation of the action under section 153A being the search that the High Court of Delhi was required to consider the ambit and scope of the powers. Further, pertinently the Delh....
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....Karnataka have been made. In paragraphs 5 and 6, the arguments have been noted and thereafter the provision has been reproduced. In paragraph 9, extensive reference has been made to the judgment in Anil Kumar Bhatia of the High Court of Delhi (supra) and then the following observations in paragraphs 10 and 11 are made : "10. Section 153A of the Acts start with a non obstante clause. The fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Office....
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....ssessment order is passed it stands reopened. In the eye of law there is no order of assessment. Re-opened means to deal with or begin with again. It means the Assessing Officer shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any undisclosed income found during search or and also any other income which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the "total income" of each year and then pass the assessment order. Therefore, the Commissioner by virtue of the power conferred under Section 263 of the Act gets no jurisdiction to initiate proceedings under the said provision because the condition precedent for initiating proceedings under Section 263 is any order passed under the Act by the Assessing Officer is erroneous insofar as it is prejudicial to the interest of the revenue. Once the order passed by the Assessing Officer gets reopened, there is no order which can be said to be erroneous insofar as it is prejudicial to the interest of the revenue which confers jurisdiction on the ....
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....ced above which would enable us to conclude that the Division Bench judgment of this Court in the case of Murli Agro requires reconsideration or does not lay down a correct principle of law. We cannot, therefore, accede to the submissions of Mr. Pinto and revisit any of the conclusions rendered by the Division Bench of this Court. 38. Now what remains is the deduction under section 80 IA(4). The provision reads thus: "80-IA (1) ... ... ... (4) This section applies to - (i) any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfills all the following conditions, namely:- (a) it is owned by a company registered in India or by a consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act; (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; (c) It has starte....
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.... a special economic zone on or after 1st day of April, 2001 and transfers the operation and maintenance of such industrial park or such special economic zone, as the case may be, to another undertaking (hereafter in this section referred to as the transferee undertaking), the deduction under sub-section (1) shall be allowed to such transferee undertaking for the remaining period in the ten consecutive assessment years as if the operation and maintenance were not so transferred to the transferee undertaking : Provided further that in the case of any undertaking which develops, develops and operates or maintains and operates an industrial park, the provisions of this clause shall have effect as if for the figures, letters and words "31st day of March, 2006", the figures, letters and words "31st day of March, 2011" had been substituted; (iv) an undertaking which,- (a) is set up in any part of India for the generation or generation and distribution of power it begins to generate power at any time during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, 2013; (b) starts transmission or distribution by laying a network of new transmission or dist....
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....it has started or starts operating and maintaining the infrastructure facility on or after 1st day of April, 1995. The explanation defines the infrastructure facility to mean, inter alia, a port, airport, inland waterway, inland port or navigational channel in the sea. The word "inland port" was always there in clause (d). What was there prior to its substitution by Finance Act of 2007 with effect from 1st April, 2008, were the words "or inland port". Now the word "or" is deleted, but the words are "inland port or navigational channel in the sea". Thus, an "inland port" was always within the contemplation of the Legislature and it is treated specifically as a infrastructural facility. Therefore, to that extent Mr. Dastur is right in his submission. 40. Mr. Suresh Kumar would urge that when there is an agreement contemplated with the Central Government, then, a specific writing to this effect is necessary which means a document and a mere consent or approval in writing would not suffice. 41. In the present case, what the Tribunal and in Special Bench decision has held is that there may be a reference made to a Board clarification dated 6th January, 2011, and prior circulars dated ....
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....missioner, including that the Ministry of Commerce and Industries granted approval for setting up CFS facility for handling import and export cargo and that the acceptance of the terms and conditions constitute an agreement with the Central Government and all documents in relation thereto have been referred. The Commissioner in dealing with these conditions held that CFS facility of the assessee is not an infrastructure facility within the meaning of section 80-IA(4) as there is no agreement entered into with the Government and assessee. Therefore, this deduction cannot be claimed. The Tribunal noted these contentions and the findings, but relied upon the Special Bench decision in the case of All Cargo Global Logistics Ltd. The conclusion is that CFS is an inland port as it carries out functions of warehousing, customs clearance and transport of goods from its location to sea-port and vice versa by rail or by trucks in containers and, therefore, its income is eligible to deduction under section 80-IA(4). We have before us a communication from the Government of India, Ministry of Commerce and Industry dated 28th December, 2011, which is addressed to the President of the CFS Associat....
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....n was recast by the Finance Act, 1999 with effect from 1.4.2000 and even after several amendments were thereafter made to the Section, inland ports continued to enjoy the deduction as infrastructure facility. 11. The question before us is whether the income from ICDs qualify for the deduction under Section 80IA(4)(i) of the Act read with the Explanation (d). We may first notice that out of the total of 45 ICDs operated by the assessee, except two ICDs, all others were notified by the CBDT vide notification No. S.O.744(E) issued on 1st September, 1998 for the purpose of Section 80IA(12)(ca). It may be recalled that under this provision, the Board had the power to notify an infrastructure facility for the purpose of the Section. The notification is reported in (1999) 233 ITR 126 and is reproduced below:- "Notification No. S.O.744(E), September Ist, 1998 - Income-tax Act, 1961: Notification under section 80 - IA(12) (ca) : Inland Container Depot and Central Freight Station notified as infrastructure facility. In exercise of the powers conferred by clause (ca) of sub-section (12) of section 80IA of the Incometax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby notifi....
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....id Act is for the time being in force. The word "port" is defined in T. Ramanatha Aiyar's Law Lexicon, 4th Edition (2010) in a number of ways. The most general meaning which is given is that it denotes a harbour or shelter to the vessels from a storm or as a place with a harbour where ships load or unload. It has also been defined in the commercial sense as an enclosed place where vessels load and unload goods for export or import. Commercially considered, "a port is a place where vessels are in the habit of loading and unloading goods". The law lexicon also refers to a judgment of the Bombay High Court in the case of Amarship Management Pvt. Ltd. v. UOI, (1996) 86 ELT 15 (Bom). "Port is a place for loading and unloading of cargoes of vessels. The word "port" must be construed in its usual and limited popular or commercial sense as a place where ships are in the habit of coming for the purpose of loading or unloading, embarking or disembarking. It does not mean the physical port. On this basis, it has been held that an oil rig stationed outside territorial waters is a port where ships call for loading or unloading the goods. Amarship Management Pvt. Ltd. v. UOI, (1996) 86 ELT ....
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....India Limited, CONCOR Bhawan, C-3, Mathura Road, Opp. Appolo Hospital, New Delhi-110076. Subject : Clarification regarding 'Inland Port' - regarding Kindly refer to your letter CON/FA/128/Vol-2/80IA/2003- 04 dated 18.04.2007 seeking clarification regarding "Inland Port". 2. It is stated that as per Customs Act, 1962 section 2(12) defines "Customs port" as any port appointed under clause (a) of section 7 to be a customs port and includes Inland Container Depot (ICD) appointed under clause (aa) of section 7. Container Freight Stations (CFSs) are "Customs area" attached to a "port". The work related to Customs is performed at these ICDs/CFSs. Accordingly, ICDs and CFSs (i.e. Customs area of port) are "Inland Ports". (M.M. Parthiban) Director (Customs) Ph-23093908 Copy to, Shri Jagdeep Goel, Director ITA-I, CBDT." 46. We have found that there is a specific reference made by the Delhi High Court to the communication dated 24th April, 2007, from the Government of India, Ministry of Finance, Department of Revenue. These are then classified as inland ports and categorised accordingly. There is a further communication from the Ministry of Commerce and Industry as well.....