TaxTMI 
TaxTMI 
2017 (1) TMI 1586
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....owance 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. 43,78,00,000/-/- made by the AO on account of termination of contracts. 3. The l.d. CTT(A)....
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.... 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 in computing the income of the assessee. This was allowed for a period of ten consecutive assessment years. According to Circul....
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....ted 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 facility : 43.1 Under the existing provisions of section 80-IA, roads, high ways, bridge, airport, port and rail system are regarded as infrastructure facilities and the undertakings engag....
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....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 the inland container depots have been notified validly by the Central Board of Direct Taxes by virtue of the powers conferred upon them, the fact that at a later point of time the power was taken away does not put an end to the validity or e....
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.... 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 such as port call, port charges, port mark, port of arrival, port of entry, port of departure, port of call and so on and so forth. The whole emphasis, however, is that whenever the word "port" is used, it carries with it a maritime connection or connotation. That is perhaps why....
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....d 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, Ministry of Commerce and Industry, Department of Commerce, Infrastructure Division, New Delhi, The 21st May, 2009. Office memorandum Subject : Reference from Concor and CFS Association of India regarding confirming that inland container depots/container freight stations are inland ports regarding The undersigned is directed to refer to this Department....
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.... 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)." The above extracts from the hand book supports the claim of the assessee. 20. We have also been able to find that the words "inland port" are defined in Chapter 277B of the Inland Port Authority Act of the State of Nevada, U. S. A. as under : "an area located away from traditional borders but having direct access to highway, railway and air transport facilities and, if applicable, intermodal facilities." This definition also supports the assessee's claim. 21. The Tri....
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....e 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 being registration fees paid to the Ministry of Railways for movement of container trains on India Railways. The ld Assessing Officer allowed 1/20th of the amount as deduction. The ground No. 4 was against denying the claim of depreciation of Rs. 82031250/- being 20% of the amount of Rs. 50 crores. Brief facts of the case is that appellant company has paid Rs. 50 crores to Ministry of Railways as non refundable registration fees towards license for running container trains on India Railways. The appellant claimed depreciation ....
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.... 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 refundable without interest. No such refund has been received by the assessee and therefore, it is apparent that appellant has been granted that new license. According to that license , it is flexible permission to run trains between any pairs of trains to any points in the entire country and there will be no limit on number of trains on any of the routes. The above permission was valid for a period of 20 years and further extendable by 10 years. Such permission is transferable from one operator to another operator subject to ru....
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....e 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 doctrine of noscitur sociis the expression "any other business or commercial rights of similar nature" used in Explanation 3(b) to section 32(1) has to take colour from the preceding words "know-how, patents, copyrights, trade marks, licences, franchises". It was urged that the Supreme Court had clearly held in Techno Shares and Stocks Ltd. [2010] 327 ITR 323 (SC) that "Our judgment should not be understood to mean that every business or commercial right would constitute a "licence" or a "franchise" in terms of section 32(1)(ii) of the 1961 ....
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....iness 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 of the view that the specified intangible assets acquired under slump sale agreement were in the nature of "business or commercial rights of similar nature" specified in section 32(1)(ii) of the Act and were accordingly eligible for depreciation under that section." 15. As Assessee has earned a benefit of enduring nature of plying on Indian Railway tracks for a period of 20 years , we do not have any hesitation to hold that it is a capital asset in the form of right to operate. It is a valuable commercial right available to the assessee for a cons....
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....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 is available for use, though not actually used, it falls within the expression " used for the purposes of the business" and the assessee can claim the benefit of depreciation. 8. Looking at the facts from this point of view, an actual user is not required as has been contended by the Revenue. 9. The matter can be looked at from another angle also. No doubt, the expression used in section 32 is " used for the purposes of the business" . However, this expression has to be read harmoniously with the expression " discarded" as found in sub-clause (iii) of sub-section (1). O....
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....llowed 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 guarantee issued by the supplier. The matter was in dispute and referred to the Arbitration Tribunal and company paid the sum and which was reduced from the contingent liability. The assessee invoked the bank guarantee of Rs. 30.42 crores and Rs. 13.36 crores from the two parties and ld Assessing Officer treated the same as income of the assessee. The ld CIT(A) deleted the above addition holding that the amount realized from bank guarantee is in the nature of capital receipt and has to be kept as current liability until the settlement of the dispute. He further, held that as the advice received from CAG the ....
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....d 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 this could not be controverted by revenue. Therefore, we confirm the finding of the ld CIT(A) in deleting the disallowance of depreciation of Rs. 5096729/- and hence, ground No. 3 of the appeal of the revenue is dismissed. 29. Ground No. 4 of the appeal of the revenue is on the issue of deferred revenue expenditure on commercial rights granted by Ministry of Railway to the assessee. This issue is covered by our decision in ground No. 3 and 4 of the appeal of the assessee and therefore we dismiss ground No. 4 of the appeal of the revenue. 30. Ground No. 5 of the appeal of the revenue is against deletion of the....
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....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 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. 6,15,23,438/- being 25% of the amount of Rs. 50 crores which is allowable in full as per the law/ rules." 38. The first ground of the appeal of the assessee is general in nature and therefore same is dismissed. 39. Ground No. 2 and 3 of the appeal of the assessee are with respect to disallowance of depreciation on intangible assets being a sum of Rs. 50 cores as registration fees paid to the Ministry of Railways for approval of movement of container trains. The parties confirmed before us that the facts and circu....
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....lock 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 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. 5. The Ld. CIT(A) has erred in law and on facts in deleting the addition amounting to Rs. 6,15,23,438/-made on account of disallowance of depreciation on registration fee ignoring the fact that the assessee has itself declared the same as deferred revenue expenditure as per para 3(ii) of schedule 10(Significant Account....
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.... 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 paid to Ministry of Railways. The above issue has already been decided by us by deciding ground No. 3 and 4 of the appeal of the assessee wherein we have held that the assessee is eligible for depreciation on intangible assets of registration fees paid to Ministry of Railway u/s 32(1)(ii) of the Income Tax Act. Therefore, we hold the same for ground No. 5 of the appeal of the revenue and dismiss the ground of appeal. 49. Ground No. 6 of the appeal of the revenue is against the deletion of disallowance of depreciation on land amounting to Rs. 25912954/-. The ld AO stated that as deprecation on land is not allowable and same was disallowed. The ld CIT(A) allowed the claim of the assessee following his own order for AY 2004....