2014 (7) TMI 1036 - AT - Income Tax

Claim of exemption u/s 80IA Infrastructure development of port Held that - So far the income from sale of water is concerned, it had been earned by the assessee for supply of water to cargo ships for their engine cleaning and other miscellaneous purposes and the same in our view was a part of the activity of operation of the jetty - the miscellaneous income had been earned by the assessee from the non-regular cargo of other nearby jetty which had been handled at the assessee's jetty for which the assessee had charged them for use of its jetty - the claim of deduction on account of income from sale of water and miscellaneous income was justified as the same was part of operation and maintenance activity of the assessee at the jetty. So far the income on account of storage facility is concerned, in the earlier assessment year also, CIT(A) had put a specific query to the assessee as to whether the storage facility was owned by the assessee and whether the same was part of the infrastructure facility of the jetty assessee submitted that the storage facility was adjacent to the jetty and the assessee was paying ₹ 5000/- per month to M/s. Hindalco Industries Ltd as license fee for the said storage facility thus, the storage facility was not part of the infrastructure facility of the jetty and even the assessee was not owner of the said storage facility but it belonged to M/s. Hindalco Industries Ltd. - thus, the assessee was not entitled to claim any deduction in respect of income earned on account of storage facility. So far so, the transportation charges are concerned, the income had been earned by the assessee for arranging the transportation from the jetty to party's place it cannot be said to be a part of infrastructure facility development at the jetty - the claim of the assessee in respect of miscellaneous income and income from sale of water is allowed whereas, the claim of deduction on account of income from storage facility and transportation charges is hereby disallowed Decided partly in favour of Assessee.

Summary

Issues:
1. Disallowance of claimed exemption under section 80IA.
2. Eligibility of income from various sources for deduction under section 80IA.

Analysis:
1. The appellant contested the disallowance of Rs. 18,93,887 claimed as exempt under section 80IA. The Assessing Officer (AO) disallowed the deduction as the income did not relate to the business activity of providing infrastructure facility. The AO observed that only income from landing and shipping activity qualified for deduction under section 80IA. The Commissioner of Income Tax (Appeals) (CIT(A)) confirmed the disallowance based on similar grounds from a previous assessment year. The appellant argued that the income was directly linked to the infrastructure facility operation. The Tribunal noted that income from sale of water and miscellaneous sources was justified as part of the operation and maintenance activity at the jetty. However, income from storage facility and transportation charges was deemed ineligible for deduction under section 80IA.

2. Regarding the income sources, the Tribunal found that income from sale of water and miscellaneous sources was integral to the operation of the jetty, justifying the claim for deduction under section 80IA. However, income from storage facility was not considered part of the infrastructure facility developed by the appellant, leading to the disallowance of deduction. Similarly, transportation charges were deemed unrelated to the infrastructure facility development at the jetty, resulting in their disallowance. The Tribunal partially allowed the appeal, permitting deduction for income from sale of water and miscellaneous sources but disallowing it for storage facility and transportation charges.

In conclusion, the Tribunal upheld the disallowance of claimed exemption under section 80IA for income from storage facility and transportation charges while allowing it for income from sale of water and miscellaneous sources. The judgment provided a detailed analysis of each income source's eligibility for deduction under section 80IA, emphasizing the direct connection between the income and the operation of the infrastructure facility at the jetty.