2010 (4) TMI 909 - AT - Income Tax

Deduction u/s 80IA - warehousing income - CFS (Container freight station) income - held that - we allow warehousing income to be a part of CFS income and hold it eligible for deduction under section 80-IA. It is found for a fact that warehousing facilities in this case are a part of CFS being a necessary infrastructure. The notification of the Ministry is very clearly worded in this respect. In all these years, this common issue is allowed in favour of the assessee and against the Revenue. Allowance of travelling expenditure incurred on travelling of directors which include both domestic as well as foreign travel. - held that - Any ad hoc disallowance would not be legal when it is simply ad hoc and having no basis. Therefore, the entire such expenditure has to be allowed particularly when, in principle, the Assessing Officer has accepted that a major portion of this expenditure is relatable to CFS activity of the assessee.

Summary

Issues Involved:
1. Exclusion of warehousing income from CFS receipts for deduction under section 80-IA(4).
2. Allocation of Numbal plot maintenance expenses to CFS operations.
3. Allocation of directors' travel expenses to CFS operations.
4. Exclusion of rent from canteen building from eligible profits under section 80-IA(4).
5. Exclusion of income from auction of containers from eligible profits under section 80-IA(4).
6. Disallowance under section 40(a)(ia) for non-deduction of TDS on certain expenses.

Detailed Analysis:

1. Exclusion of Warehousing Income from CFS Receipts for Deduction under Section 80-IA(4):
The Commissioner of Income-tax revised the assessment orders, excluding warehousing income from CFS receipts, and directed the Assessing Officer to recompute the deduction under section 80-IA. The Income-tax Appellate Tribunal (ITAT) found that warehousing facilities are an essential part of CFS operations as per government guidelines and notifications. The ITAT held that warehousing income should be treated as part of CFS income and eligible for deduction under section 80-IA, thus allowing the assessee's appeal on this issue.

2. Allocation of Numbal Plot Maintenance Expenses to CFS Operations:
The Assessing Officer allocated 50% of Numbal plot maintenance expenses to CFS operations. The Commissioner of Income-tax (Appeals) upheld this allocation. However, the ITAT found that the Commissioner of Income-tax (Appeals) did not provide a clear-cut finding and restored the issue to the Commissioner of Income-tax (Appeals) for a detailed and speaking order after hearing the assessee.

3. Allocation of Directors' Travel Expenses to CFS Operations:
The Assessing Officer allocated 30% of directors' travel expenses to CFS operations. The Commissioner of Income-tax (Appeals) reversed this allocation, finding no valid basis for it. The ITAT agreed with the Commissioner of Income-tax (Appeals) and held that the entire travel expenditure should be allowed as it pertained to CFS activities, dismissing the Revenue's appeal on this issue.

4. Exclusion of Rent from Canteen Building from Eligible Profits under Section 80-IA(4):
The Commissioner of Income-tax (Appeals) excluded rent received from the canteen building from eligible profits under section 80-IA(4). The ITAT found that the Commissioner of Income-tax (Appeals) did not provide valid reasoning and restored the issue for a detailed and speaking order.

5. Exclusion of Income from Auction of Containers from Eligible Profits under Section 80-IA(4):
The Commissioner of Income-tax (Appeals) excluded income from the auction of containers from eligible profits under section 80-IA(4). The ITAT found that the Commissioner of Income-tax (Appeals) did not decide the issue with proper reasoning and restored it for a detailed and speaking order.

6. Disallowance under Section 40(a)(ia) for Non-Deduction of TDS on Certain Expenses:
The assessee claimed certain expenses without deducting TDS, leading to disallowance under section 40(a)(ia). The Commissioner of Income-tax (Appeals) confirmed the disallowance. The ITAT restored the issue to the Assessing Officer to examine whether the expression "paid" includes "payable" and to decide the matter afresh as per law.

Summary of Judgments:
- Assessee's Appeals:
- I.T.A. Nos. 890 and 891/Mds/09: Allowed.
- I.T.A. No. 892/Mds/09: Partly allowed for statistical purposes.
- I.T.A. No. 893/Mds/09: Partly allowed and partly allowed for statistical purposes.
- Revenue's Appeals:
- I.T.A. Nos. 991, 992, 993, and 994/Mds/09: Dismissed.

Conclusion:
The ITAT ruled in favor of the assessee on the issue of warehousing income being part of CFS income eligible for deduction under section 80-IA. It restored issues related to Numbal plot maintenance expenses, rent from the canteen building, and income from auction of containers for further examination. The ITAT also upheld the full allowance of directors' travel expenses and directed the Assessing Officer to re-examine the disallowance under section 40(a)(ia).