TaxTMI 
TaxTMI 
2024 (4) TMI 191
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.... of Income on 30.11.2013 declaring total income of Rs. 10,07,56,200/-. The Assessing Officer vide order dated 28.03.2016 assessed the total income of the assessee at Rs. 13,38,55,190/- by making the following disallowances: (i) Disallowed the claim of deduction of Rs. 2,05,17,894/- (Rs. 91,93,380/- from MDI storage tank plus Rs. 1,13,24,514/- from EDI storage tank) made u/s 80IA(4) of the Act from profit of developing/operating/maintaining MDI and EDI storage tanks at port by alleging that the appellant failed to fulfill necessary conditions for claiming such deductions u/s 80IA(4) of the Act. (ii) Alleged that the assessee had incurred share issue expenses of Rs. 2,61,000/- in normal course and the same is not fit into criteria laid down u/s. 35D of the Act and accordingly disallowed the same. (iii) Disallowed Rs. 24,29,044/- by invoking provisions of section 14A of the Act on the alleged ground that assessee failed to prove one-to-one nexus from bank account that investment has been done entirely from its own funds. (iv) Alleged that assessee (i) paid excessive terminal handling charges to Shreeji Power and Insulators Pvt. Ltd. [SPIPL] and (ii) paid for the quantities whi....
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....d. CIT(A) erred on facts as also in law in confirming addition of Rs. 5,38,145/- u/s. 41(1)(a) of the Act on the alleged ground of cessation of liabilities. The addition made and confirmed was based on conjectures and surmises and may kindly be deleted. 4.1. Grounds of Appeal filed by the Revenue in ITA No. 135/RJT/ 2018 are as follows: 1. The Ld.CIT(A) has erred in deleting the addition made by the AO on account of disallowing of deduction u/s. 801A(4)(i) on storage tank-MDI of Rs. 91,93,380/- and storage tank-EDA of Rs. 1,13,24,514/- 2. The Ld.CIT(A) has erred in law and on facts in deleting the addition made u/s. 14A of Rs 22,05,405/-even though the assessee was not able to show one to one relation from its bank account that the investment was made entirely from its own funds. 3. The Ld.CIT(A) has erred in deleting the addition of Rs. 24,16,316/- made by the AO on account of disallowance in connection with the windmill. It is therefore, prayed that the order of Ld. CIT(A) be set aside and that of AO be restored to the above extent. 5. Since the Grounds raised by both parties are interlinked with same issues, both the Assessee and Revenue appeals are disposed by dealing....
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....ssment order passed u/s. 143(3), categorically given his finding that the assessee qualified the condition of new infrastructural facility of having structures at the Port for storage, loading and unloading. However, AO's allegation is that storage tank is devoid of loading and unloading facility and same are not within the premises of Kandla Port Trust and held that MDI storage tank, for which assessee has claimed deduction is not an enterprise as held in the earlier asst. years namely (a) assessee is incapable of doing independent business in absence of loading & unloading facility (b) no separate accounts has been maintained, as most of expenses are allocated on pro-rate basis. 6.3. On appeal, the Ld CIT[A] held that there have to be structures at Port for storage, loading & unloading, etc. The assessee is in the business of operating & maintaining of storage tanks, and assessee own quite a few storage tanks, out of which assessee has claimed deduction u/s. 80IA for two tanks namely MDI & EDA Tanks. The assessee is using its storage terminal, for which no deduction u/s. 80IA has been claimed for all other 15 storage tanks. The AO had carried out physical inspection of the pipel....
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....Now we come to ground no. 1 related to deleting the addition made by the A.O. on account of disallowance of deduction u/s. 80IA(4)(i) on storage tank-MDI of Rs. 1,34,66,469/- and storage tank-EDA of Rs. 90,77,246/-. 11. In this case, AO's allegation is that storage tank is devoid of loading and unloading facility and same are not within the premises of Kandla Port Trust and held that MDI-storage tank, for which assessee has claimed deduction is not an enterprise as (a) it is incapable of doing independent business in absence of loading & unloading facility (b) no separate accounts has been maintained, as most of expenses are allocated on pro-rate basis. 12. In reply before the lower authorities, assessee stated that that there is difference in the nature of business in case of MDI storage tank and other tanks at the tank farm. The full nomenclature of MDI means "Diphenylmethane Diisocyanate chemical product. It is to submit that the chemical 'MDI" needs to be storage in a separate tanks built at the port as per MOU with DOW Chemical International Pvt. Ltd. and is fully dedicated to that party only which is used by them for storage of a specific cargo at a specific temperatu....
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...., this ground of appeal is dismissed. 7.3. Thus we hereby reject the fresh enquiry or reinvestigation carried out by the Revenue and also taken on record the strong objections filed by the assessee on this count. Since this issue is no more res-integra as identical cases were considered by the Coordinate Bench of this Tribunal in the case of M/s. Friends Oil & Chemical Terminals Pvt Ltd in ITA No.936/RJT/2010 & Others dated 07-12-2018 and after verification of facts held as follows: "... 10. Ground No. 2 States that CIT (A) erred in law and facts in rejecting claim of the appellant of Rs. 1,49,36,396 under section 80IA of the Act in respect of income derived from operation and maintenance of storage tank by considering the same as integral part of Port. 11. Succinctly, facts as culled out from the orders of lower authorities are that the assessee has claimed deduction under section 80IA the assessee for building, storage tank, shore pipelines and other Infrastructure on the port of land leased to them by Kandla Port Trust (KPT). It was contended that the assessee has entered in to an agreement with KPT for the purpose of erection operation and maintenance of storage tanks alon....
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....by Kandla Port Trust at old Kandla (oil jetties) for loading and unloading of liquid cargo, which forms part of the Port operations for import and export." However, the CIT (A) has written a letter to KPT which was clarified by the KPT authority vide letter dated 01.02.2010 that storage tanks, shore pipelines and other infrastructure facilities developed by M/s. Friends Oil and Chemical Terminals Private limited to KPT are not deemed part of KPT nor deemed as asset of the KPT. Thus, CIT (A) opined that this clarification shows that first certificate dtd. 20.10.2005 obtained by the Appellant from KPT in such a way that it serve the purpose of the appellant. However, the reply dtd. 01.02.2010 makes that the claim of the assessee is false. The CBDT Circular No.10/2005 dtd. 16.12.2005 says that from A.Y. 2002-03 onwards, structure at the ports for storage / loading / unloading etc. would be included in the definition of port for the purpose of section10(23G) and section 80IA. However, the non-presence of agreement loses its value as the said agreement simply allowed the appellant to use its land for building storage facilities and other allied facilities. The appellant`s reliance on Co....
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....Court. In addition, HHA Tanks Pvt. Ltd. I.T.A.No.18/Coch/2006 dtd. 8.01.2008 of Cochin Tribunal in support of his contentions. 14. Per contra, the ld. Sr. D.R. submitted that there is no agreement with KPT entered in to by the assessee. The AO has brought in assessment order that the construction of building, storage tanks has been constructed of which ownership lies with the assessee and not with the KPT therefore, the lower authorities are justified in disallowing the claim made under section 80IA(4)(i)(b) of the Act. 15. We have heard the rival submissions and perused the relevant material on record. We find that the assessee has claimed deduction under section 80IA of the Act on account of building, storage tank, shore pipelines and other Infrastructure development on the port of land leased to them by Kandla Port Trust (KPT). It was contended that the assessee has entered in to an agreement with KPT for the purpose of erection operation and maintenance of storage tanks along with pipelines and other infrastructure facilities on the leasehold land, which was allotted by them by KPT. We notice that the assessee is engaged in the very work of storage and such storage is on it....
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....t of land allotted admg. 25,000 sq. meters at Kandla has been noted in the records of this office. Further, you are advised to execute the lease deed in respect of the aforesaid plot between Kandla Port Trust and Friends Oil Chemical Terminals Pvt. Ltd. The other terms and condition prescribed at the time of allotment and other terms indicated in this office letter No. LAW/PL/2152_II/637 dated 1-12- 94 will remain unaltered" (PB-7). In view of these facts, we are of the considered view that the assessee has developed infrastructure facilities, built maintained and operated within the meaning of provisions of section 80IA (4) (i) (b) of the Act. Therefore, the assessee is deemed to have made due compliance of provisions of section 80IA (4) (i) (b). The learned counsel for the assessee relied in the case of CIT v. A. L. Logistic Pvt. Ltd. [2015] 374 ITR 609 (Mad) held that it is evident that the proposal of the assessee was accepted by the Government on certain conditions which were duly complied with by the assessee. There may not be any specific agreement, but the sequences of events clearly show that the assessee is providing CFS facility in accordance with the conditions laid dow....
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....erefore, even if communication dated 29th October 2005 by Jawaharlal Nehru Port Trust to the assessee would have no direct effect on the grant of benefit under Section 80IA of the Act, as on facts and considering the activities of CFS, the Assessing Officer has already held CFS as a Port itself. Under the circumstances and in the facts and circumstances of the case, it cannot be said that there was any suppression of material facts on the part of the assessee in not disclosing true and correct facts necessary for the assessment. Even whether CFS can be said to be an Inland Port or not is squarely covered by the decision of Delhi High Court in case of Container Corporation of India Ltd. (supra) and the Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra). After considering the very CBDT Circular No. 10 of 2005 dated 16th December 2005, the Delhi High Court and Bombay High Court have specifically observed and held that looking to the facilities provided by CFS, the 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 con....
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....The next issue is disallowance u/s. 14A of the Act. The assessee is in appeal on CIT[A] confirming the interest expenses of Rs. 2,23,639/- u/s. 14A r.w.s. 8D of the Act. The Revenue is in appeal on CIT[A] deleting the addition of Rs. 22,05,405/- made u/s. 14A, even though the assessee was not able to show one to one relation from its bank account that the investment was made entirely from its own funds. 9.1. Ld Counsel for the assessee submitted that this issue is also held in favour of the assessee by deleting the addition made u/s. 14A of Rs. 22,05,405/- by the Co-ordinate Bench in assessee's own case in ITA No.160/Rjt/2015 vide order dated 31.01.2019 wherein it was held as follows: "... 18. As we can see, assessee was having substantial interest free funds, it is fact that as per paper book interest free funds went into investment, which generated exempt income. Therefore, no disallowance can be made u/s. 14A as no interest bearing funds has been deployed to earn exempt income. And ld. A.O. had not demonstrated any nexus between the earning of exempt income for such income. Therefore, in our considered opinion, ld. CIT(A) has rightly granted relief to the assessee. 19. But ....
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....that assessee has not made excessive payment to the related party. 24. As we can see, that payment made to persons other than persons covered u/s. 40A(2)(b) were comparable and interalia payment to the persons covered u/s. 40A(2)(b) was not excessive either in comparison to the other independent parties as well as to the market rate which can assumed as to nearer to the rates at which the said third parties are being paid. Therefore, in our considered opinion, ld. CIT(A) has rightly granted part relief to the assessee. 10.2. Ld CIT DR could not produce before any contra decision therefore respectfully following Co-ordinate Bench decision of this Tribunal this ground no.3 raised by the assessee is allowed. 11. The next issue by Revenue is the Ld.CIT(A) erred in deleting the addition of Rs. 24,16,316/- made by the AO on account of disallowance in connection with the windmills. 11.1. Ld Counsel for the assessee submitted that this issue is also held in favour of the assessee by following Jurisdictional High Court Judgement in the case of Parry Engineering & Electronics Pvt Ltd, the Co-ordinate Bench in assessee's own case in ITA No.160/Rjt/2015 held as follows: "... 29. In supp....