TaxTMI 
TaxTMI 
2015 (5) TMI 656
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....Bench at Mumbai, dated 31st August, 2012, in Income Tax Appeal No.7055/Mum/2011. 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 However, on enquiry under section 133(6) of the IT Act, it was revealed that this certificate was withdrawn by JNPT on 5th October, 2007.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....
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....mmissioner of Income-tax (Appeals) was justified in upholding the disallowance of deduction under section 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 co....
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....essment years ? (iv) Whether on the facts and in the circumstances of the case, the Hon'ble Tribunal erred in holding that the assessee was entitled to deduction u/s 80 IA(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 th....
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....on-obstante clause so as to not to restrict the powers which are conferred by virtue of section 153A in the Assessing Officer. However, the exercise of power under that provision is where search 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 as....
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....n 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. 19. Insofar as the next issue is concerned, namely, 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 des....
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....as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant 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 precedi....
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.... preceding Chapter, namely, Chapter XIII within which the powers of search and seizure and powers to requisition books of account are spelt out enable the Revenue to take care of cases where it effects a search and seizure. That search and seizure is effected and after the same is effected 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 h....
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.... 26. The order of the Commissioner of Income Tax (Appeals) as above attained finality. However, power under section 263 of the IT Act came to be invoked in the circumstances noted by the Division Bench and that was in relation to the assessment order dated 30th March, 2006, as modified and after 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. Onc....
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....at are pending on the date of conducting search under Section 132 or making requisition under Section 132A of the Act stand abated and not the assessments/reassessments already finalised for those assessment years covered under Section 153A of the Act. By a circular No. 8 of 2003 dated 18-9-2003 (See 263 ITR (St) 61 at 107) 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, lea....
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....sessment years falling within the period of six assessment years referred to in sub-section (1) of section 153A were pending. If they were pending on the date of the initiation of the search under section 132 or making of requisition under section 132A, as the case may be, they abate. It is only pending proceedings that would abate and not where there 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 b....
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....e u/s 153A. The case of Ld. Counsel for the assessee is that necessary corollary to this provision is that completed assessment shall not abate. These assessments become final except in so far and to the extent as undisclosed income is found in the course of search. On the other hand, it has been argued by the Ld. Standing Counsel that abatement of pending assessment 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 unambi....
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....presents wholly or partly the income or property which has not been and which would not be disclosed for the purpose of assessment, called as undisclosed income or property. We find that the provision in section 132 (1) does not use the word "incriminating document". Clauses (a) and (b) of section 132(1) employ the words "books of account or other documents". For harmonious interpretation 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 ....
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....be made separately on the basis of the findings of the search and any other material existing or brought on the record of the AO, (b) in respect of non-abated assessments, the assessment will be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search, and undisclosed income or undisclosed property discovered in the course of 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 ....
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....missioner of Income Tax confirmed this addition in the Assessing Officer's order. In respect of assessment years 2004-05 and 2005-06 there were appeals before the Commissioner of Income Tax (Appeals) questioning the additions made in the assessment orders for those years. While disposing of these appeals, the Commissioner of Income Tax directed the Assessing Officer to assess the notional interest on the loan given to Mohini 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....
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....er section 153A of the Act, then, that was impermissible. That was impermissible for the assessments including for the assessment year 2008-09 stand reopened. Once they are reopened, then, there is no order of assessment in force and in regard to which any action under section 263 of the IT Act can be initiated. It is in dealing with this argument and which was negatived by the Tribunal that all the observations of the High Court of 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 inapplic....
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....e duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. When once the proceedings are initiated under Section 153A of the Act, the legal effect is even in case where the assessment 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 proceeding....
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.... in that regard. While making the order the income or the return of income filed for all these assessment years is to be taken into account. A reference will have to be made to the income disclosed therein. However, the scope of enquiry, though not confined as held by the High Court of Karnataka, it essentially revolves around the search or the requisition under section 132A as the case may be. We do not find anything in these observations and reproduced 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 ....
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.... "domestic satellite" means a satellite owned and operated by an Indian company for providing telecommunication service; (iii) any undertaking which develops, develops and operates or maintains and operates an industrial part or special economic zone notified by the Central Government in accordance with the scheme framed and notified by that Government for the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2006. Provided that in a case where an undertaking develops an industrial park on or after the 1st day of April, 1999 or 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 o....
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....(4) and as it read at the relevant time. It says that this section applies to any enterprise carrying on the business of developing or operating and maintaining any infrastructure facility which fulfills all the conditions, namely, 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, it has entered into an agreement with the Central Government or a local authority or any other statutory body for developing or operating and maintaining or developing, operating and maintaining a new infrastructure facility and 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 ....
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....entral Government or a State Government or a local authority or any other statutory body. Therefore, the condition was not fulfilled. The Commissioner in the appellate order had before him the ground and while dealing with the same, he found that the approval granted by the Ministry of Commerce, Government of India would not constitute an agreement with the Central Government. Further, the Department of Revenue, Ministry of Finance, issued a Notification dated 1st January, 2006, notifying the assessee as custodian of imported and exported goods received at the container freight station. The various contentions raised in this regard have been referred to by the Commissioner, 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 Governmen....
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....s. The Division Bench of the Delhi High Court then concluded as under : "10. Thus it was for the first time from the assessment year 1999-2000 that inland ports started enjoying the deduction under Section 80IA as an "infrastructure facility". The object of the Government was to strengthen and improve the country's infrastructure in general and the transport infrastructure in particular. Inland ports facilitate the transport infrastructure by taking care of the transport of the customs-cleared goods meant for export from the ICD to the sea-port and the imported goods directly from the sea-port to the ICD where they can be customs-cleared. When the entire Section 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 notificati....
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....h agreements have been entered into on or after April 1, 1995, but on or before March 31, 2001, and which have been notified by the Board on or before March 31, 2001, would continue to be exempt, subject to the fulfillment of the conditions prescribed in section 80-IA(4)(i)(b), as it existed prior to its substitution by the Finance Act, 2001." This circular fortifies the assessee's claim. 14. The next question that arises is whether the ICDs can be considered to be inland ports. There is no definition of an inland port in the Act. However, a "port", which also qualifies for the deduction is defined in Section 3(4) of the Indian Ports Act, 1908 (Act 15 of 1908) to include "also any part of a river or channel" in which the said 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. Comme....
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..... This was by way of an amendment made by the Finance Act, 1983 with effect from 13th May, 1983. Simultaneously clause (aa) was inserted in Section 7(1) of the said Act under which the CBEC was empowered to issue notification appointing the places which alone shall be considered as inland container depots for the unloading of imported goods and the loading of exported goods. On 24th April, 2007 the following clarification was issued by the Central Board of Excise and Customs apparently in response to a query raised by the assessee. "F. No. 450/24/2007-Cus.IV Government of India Ministry of Finance Department of Revenue Central Board of Excise & Customs New Delhi, April 24th, 2007 To, Ms P. Alli Rani, Executive Director (Finance), Container Corporation of 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, 196....