TaxTMI 
TaxTMI 
2017 (1) TMI 1586
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.... has erred both on facts and in law in confirming the disallowance of claim of deduction of Rs. 812083246/- u/s 80IA of the Act on ICDs/ CFS which are inland ports. 3. That on the facts and in the circumstances of the case and in law the ld CIT(A) has erred both on facts and in law in partly confirming the disallowance by the AO and restricting the allowance of deduction at 1/20th of the amount of Rs. 50 crores being registration fee paid to the Ministry of Railways for approval of movement of container trains on Indian Railways. 4. That on the facts and in the circumstances of the case and in law the ld CIT(A) has erred both on facts and in law in denying the claim of deduction of Rs. 8,20,31,250/- being 20% of the amount of Rs. 50 crores which is allowable in full as per the law/ Rules." 3. The revenue has raised the following grounds of appeal in ITA No. 2167/Del/2012 for Assessment Year 2008-09:- "1. The l.d. CIT(A) has erred on facts and in law in deleting addition of Rs. 6,36,287/- on assets retired from active use on account of obsolescence and condemnation. 2. The l.d. CIT(A) has erred on facts and in law in deleting addition of Rs. 43....
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....nch in appellant‟s own case for AY 2003-04 to 2005-06. Therefore, in appeal before us this ground is raised. 6. The ld AR of the assessee submitted that now this issue is squarely covered in favour of the assessee in view of the decision of the Hon'ble Delhi High Court in its own case therefore submitted claim of the assessee is allowable. 7. The ld Departmental Representative fairly conceded that the issue is now squarely covered in favour of the assessee in views of the decision of Hon'ble Delhi High Court in its own case but the matter is pending before honourable supreme court. 8. We have carefully considered the rival contentions and we are of the view that Hon'ble Delhi High Court in assessee‟s own case in Container Corporation of India Ltd Vs. ACIT 346 ITR 140 covers the issue in favour of the assessee wherein, Hon'ble High Court has held as under:- "5. We may now notice the relevance of section 80-IA of the Act. The Finance Act, 1995, with effect from April 1, 1996, for the first time brought in a provision under which a percentage of the profits derived from the operation of any "infrastructure facility" was allowed a deduction....
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.... sanitation and sewerage system. The Income-tax (Amendment) Act, 1998, made several changes all of which are not relevant for our purpose. It may only be noted that again the definition of "infrastructure facility" was expanded to include a highway project including housing or other activities being integral part of the highway project. 8. The Finance (No. 2) Act, 1998, for the first time included the words "inland water ways and inland ports" in the definition of "infrastructure facility" in sub-section (12), clause (ca), with effect from April 1, 1999. Thus, the relevant clause, after the amendment, read as under : "infrastructure facility"-means (i) a 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 Gazette." 9. In paragraph 43 of Circular No. 772, dated December 23, 1995, reported in [1999] 235 ITR (St.) 35, 67, the Board explained the inclusion of "inland waterways and inland ports" in the definition of "infrastructure facility" as follows : "43. Inland port and waterways regarded as infrastructure facili....
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..... S. O. 744(E) issued on September 1, 1998, for the purpose of section 80-IA(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 (St.) 126 and is reproduced below : "Notification No. S. O. 744(E), September 1, 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 80-IA of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby notifies inland container depot (ICD) and Central freight station (CFS) as infrastructure facility : Provided that such places are notified as inland container depot and Central freight station under section 7(aa) of the Customs Act, 1962." 12. The power to notify infrastructure facilities for the purpose of the section was taken away from the Central Board of Direct Taxes with effect from April 1, 2002. The first argument of the learned counsel for the assessee is that once t....
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....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 Amership Management P. Ltd. v. Union of India [1996] 86 ELT 15 (Bom). The Bombay High Court has explained the word "port" as under : "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. Amership Management P. Ltd. v. Union of India [1996] 86 ELT 15 (Bom)." 15. It is interesting to note that the word "port approaches" is defined as those ports of the navigable channels leading to the port in which the Indian Ports Act is in force. There are several other definitions su....
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..... Subject : Clarification regarding 'inland port'-Regarding Kindly refer to your letter CON/FA/128/Vol-2/80-IA/2003-04, dated April 18, 2007, seeking clarification regarding 'inland port'. 2. It is stated that as per the Customs Act, 1962, section 2(12) defines 'customs port' as any port appointed under clause (a) of sec tion 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 inland container depots/Container freight stations. Accordingly, inland container depots and Container freight stations (i.e., customs area of port) are 'inland ports". (M. M. Parthiban) Director (Customs) Ph-23093908 Copy to, Shri Jagdeep Goel, Director ITA-I, Central Board of Direct Taxes." 17. On May 25, 2009, an office memorandum was issued by the Infrastructural Division, Department of Commerce, Ministry of Commerce and Industry of the Government of India which is as follows : "No. 16/9/2009-Infra-I Government of India, Minis....
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....lternatively also known as 'inland customs depot' (see also dry port). It further goes on to give a more elaborate definition under the heading "dry ports defined" as under : An early definition of dry port which appeared in a United Nations text in 1982 was : 'An inland terminal to which shipping companies issue their own import bills of lading for import cargoes assuming full responsibility of costs and conditions and from which shipping companies issue their own bills of lading for export cargoes'. It further goes to add as under : Recently a dry port or inland clearance depot (ICD) was defined as : 'A common user inland facility with public authority status, equipped with fixed installations and offering services of handling and temporary storage of any kinds of goods (including containers) carried under customs transit by any applicable mode of inland surface transport, placed under customs control and with customs and other agencies competent to clear goods for home use, ware housing, temporary admissions, re-export, temporary storage for onward transit and outright exports.' (ECE/UNCTAD/CCC)." ....
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....een specifically notified by the Customs Department as inland container depot. The Assessing Officer will compute the deduction in accordance with the relevant notification." 9. We are also aware that revenue has filed a Special Leave petition against the above decision of the Hon'ble High Court which has been admitted and now pending for disposal. Despite pending SLP before the Hon'ble Supreme Court , we are duty bound to follow the decision of the Hon'ble High Court. Therefore, respectfully following the decision of the Hon'ble High Court we hold that assessee is eligible for deduction u/s 80IA of the Act on income derived from ICDs and CFS as they are held to be "inland port" which is classified as an infrastructure facility u/s 80IA(4) of the Income Tax Act. 10. After holding that the assessee is eligible for deduction u/s 80IA(4)of the act , we direct the ld Assessing Officer to compute profits in accordance with the applicable laws and circulars. In the result ground No. 2 of the appeal of the assessee is allowed accordingly. 11. Ground No. 3 and 4 of the appeal of the assessee are against confirmation of the disallowance of a sum of Rs. 50 crores bei....
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.... of the business and therefore depreciation is allowable to the assessee. For this proposition he relied upon the decision of Hon'ble High Court in 331 ITR 192 and 345 ITR 421. For the claim of the depreciation he relied upon the decision of Hon'ble Supreme Court in 327 ITR 323. He further relied on the decision of Hon‟ble Bombay High Court in 323 ITR 69 and Allahabad High Court in 213 Taxmann.com 333. 13. The ld Departmental Representative submitted that as the assessee has not incurred any capital expenditure but only paid non refundable fee and therefore there is no capital assets coming in to existence and depreciation on this has rightly been disallowed by lower authorities. 14. We have carefully considered the rival contentions. In the present case undisputedly the assessee has paid Rs. 50 crores to the Ministry of Railway as non refundable registration fee for 20 years towards license for running container trains on Indian Railways facilities in terms of policy statement dated 09.01.2006. According to that policy it was permitted to move various operators container trains on Indian Railways. The registration fee of applicants who are not eligible would be....
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....al rights, clearly defined in the slump sale agreement, compendiously termed as "goodwill" in the books of account, which comprised, inter alia, the following : (i) business claims, (ii) business information, (iii) business records, (iv) contracts, (v) skilled employees, (vi) know-how. It is also observed that the Assessing Officer accepted the allocation of the slump consideration of Rs. 44.7 crores paid by the transferee, between tangible assets and intangible assets (described as goodwill) acquired as part of the running business. The Assessing Officer, however, held that depreciation in terms of section 32(1)(ii) of the Act was not, in law, available on goodwill. The Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal approved the reasoning of the Assessing Officer thereby holding disallowance of depreciation on the amount described as goodwill. It was thus argued on behalf of the assessee-company that section 32(1)(ii) would mean rights similar in nature as the specified assets, viz., intangible, valuable and capable of being transferred and that such assets were eligible for depreciation. On behalf of the respondent it was argued that applying the doctr....
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....business claims ; business information ; business records ; contracts ; employees ; and know-how, are all assets, which are invaluable and result in carrying on the transmission and distribution business by the assessee, which was hitherto being carried out by the transferor, without any interruption. The aforesaid intangible assets are, therefore, comparable to a licence to carry out the existing transmission and distribution business of the transferor. In the absence of the aforesaid intangible assets, the assessee would have had to commence business from scratch and go through the gestation period whereas by acquiring the aforesaid business rights along with the tangible assets, the assessee got an up and running business. This view is fortified by the ratio of the decision of the Supreme Court in Techno Shares and Stocks Ltd. [2010] 327 ITR 323 (SC) wherein it was held that intangible assets owned by the assessee and used for the business purpose which enables the assessee to access the market and has an economic and money value is a "licence" or "akin to a licence" which is one of the items falling in section 32(1)(ii) of the Act. 14. In view of the above discussion, we are....
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....he decision of the Hon'ble Delhi High Court. The Hon'ble Delhi High Court in case of CIT Vs. Yamaha Motor India Pvt. Ltd has considered an identical issue in 328 ITR 297 as under:- 6. The relevant and related provisions, in this regard, for decision of the issue are section 32(1) (which requires that the assets are used for the purposes of the business), section 32(1)(iii) (lays down the details and requirements with respect to claim of depreciation inter alia of discarded machinery), section 43(6)(c)(i)(B) (defines written down value with respect to block of assets), section 50(2) (under the head of profits chargeable to tax on the aspect of discarded machinery). 7. On the aspect of passive user, there are two decisions of two Division Benches of this court in the cases reported as CIT v. Refrigeration and Allied Industries Ltd. [2001] 247 ITR 12 (Delhi) and Capital Bus Services P. Ltd. v. CIT [1980] 123 ITR 404 (Delhi). In this view of the matter, we need not refer to the judgments of any other court as we are bound by the earlier judgments of this court. In fact, we also agree with the ratio of both the decisions which hold that as long as the machinery....
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....e of the assets which have been discarded and written off in the books of account for the year under consideration from the written down value of the block of assets. Actual user of the machinery is not required with respect to discarded machinery and the condition for eligibility for depreciation that the machinery being used for the purpose of the business would mean that the discarded machinery is used for the purpose of the business in the earlier years for which depreciation has been allowed." 21. The ld DR could not point about any infirmity in the order of the ld CIT(A) wherein he has followed the order of the Hon'ble High Court and further, could not controvert the decision cited by the ld AR covering the issue in favour of the assessee. In view of this ground No. 1 of the appeal of the revenue is dismissed. 22. Ground No. 2 of the appeal of the revenue is pertaining to deletion of the addition of 43.78 crores on termination of contracts. 23. The brief facts of the issue are that the company has entered into contract for supply of wagons which were terminated for non fulfillment of obligation on part of the suppliers. Therefore, the company invoked bank guarant....
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....of computation of deprecation it has been claimed as per IT Rules, 1962. Therefore the ld Assessing Officer disallowed a sum of Rs. 5096729/- as depreciation on the assets not owned by the company and used for the purposes of the business. The ld CIT(A) allowed the claim of the assessee as it was stated before him that this sum is related to buildings which were owned and also put to use by the company but were not registered in the name of the company. Therefore, based on the decision of the Hon'ble Supreme Court in case of Mysore Minerals Ltd Vs. CIT 239 ITR 775 he deleted the disallowance. 27. The ld DR relied upon the order of the ld Assessing Officer and ld AR relied upon the order of the ld CIT(A). 28. We have carefully considered the rival contentions and the order of the ld CIT(A) wherein relying upon the decision of the Hon'ble Supreme Court in case of Mysore Minerals vs CIT (supra) the claim of the assessee is allowed. It was further noted by him that the ld Assessing Officer has not disputed the fact that the assessee has taken possession of the building used it for the purpose of business and full consideration has been paid by the company. Even before us ....
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....ile of the ld Assessing Officer with a direction to the assessee to provide complete details of the total sum of Rs. 17.84 cores received from auction of undelivered containers and then AO is directed to decide the issue afresh. In the result ground No. 5 of the appeal of the revenue is allowed with above direction. 35. In the result appeal of the revenue is partly allowed. ITA No.6377/Del/2012 & ITA No.214/Del/2013 Assessment Year: 2009-10 36. Now we come to the appeal of assessee for the AY 2009-10. 37. The assessee has raised the following grounds of appeal in ITA No. 6377/Del/2012 for Assessment Year 2009-10. "1. That on the facts and in the circumstances of the case, the order passed by the ld Assessing Officer is bad both in eyes of law and on facts. 2. That on the facts and in the circumstances of the case and in law the ld CIT(A) has erred both on facts and in law in partly confirming the disallowance by the AO,, and restricting the allowance of deduction at 1/20th of the amount of Rs. 50 crores being registration fee paid to the Ministry of Railways for approval of movement of container trains on India Railways. 3. That on the fact....
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....ting to Rs. 84,84,10,427/-made on account of disallowance of deduction claimed u/s 80IA on rolling stock ignoring that the same cannot be included within the meaning of "infrastructure facility" as per explanation under subsection (4)(c) of section 80IA of the Act as the rolling stock does not form part of rail system. 3. The Ld. CIT(A) has erred in law and on facts in deleting the addition amounting to Rs. 5,67,216/-made on account of disallowance of assets retired from active use ignoring the fact that once the individual asset is not put to use, which is pre-quisite condition for availing depreciation u/s 32 of the l.T. Act, the same becomes ineligible/disqualified for block of assets on which depreciation is allowed as per Rule-5 and appendix IA of the Income Tax Rules 1962 but shall continue to remain the part of the block of assets for all other purpose except for the purpose of claiming depreciation unless put to use. 4. The Ld. CIT(A) has erred in law and on facts in deleting the addition amounting to Rs. 16.00,030/-made on account of disallowance of assets retired from active use ignoring the fact that once the individual asset is not put to use, which is....
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....follow that decision in ITA No. 2851 and 3680/Del/2007 wherein in para No. 31 it has been held that rolling stock is part and parcel of rail system and accordingly, it is eligible for claim of deduction u/s 80IA of the Income Tax Act. in views of this we respectfully following the decision of the coordinate bench filed no infirmity in the order of the ld CIT(A) and dismiss ground No. 2 of the appeal of the revenue. 45. Ground No. 3 and 4 of the appeal of the revenue are against deletion of disallowance of assets retired from active use. 46. The parties have stated that these grounds are identical to ground No. 1 of the appeal of the revenue for AY 2008-09. We have relying on the decision of the Hon'ble Delhi High Court in CIT Vs. Yamaha Motor Co. Ltd has held that depreciation on assets retired from active use cannot be disallowed. Therefore, following our own decision for AY 2008-09 we dismiss ground No. 3 and 4 of the appeal of the revenue. 47. Ground No. 5 of the appeal of the revenue is against disallowance of depreciation on registration fees of Rs. 61523438/-. 48. The parties submitted that above issue is with respect to intangible assets on registration fees ....