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2018 (3) TMI 1834 - AT - Income TaxDeduction u/s 80IA and 80IB - profits derived from stand alone warehouse - As per revenue definition of infrastructural facilities provided in Explanation to Section 80IA does not include maintenance of stand alone warehouses - CIT-A allowed deduction - HELD THAT - The said definition of infrastructure facility , however, includes Port and as clarified by the CBDT in its Circular No. 10 of 2005 issued on 16.12.2005, structures at the Port for storage, loading and unloading, etc. will be included in the definition of Port for the purpose of section 80IA, if the concerned Port Authority has issued a certificate that the said structures formed part of the Port. In the assessee s case, such certificate has been issued by the Visakhapatnam Port Trust on 09.12.2011 certifying that this storage sheds constructed by the assessee-company on the lease land were part and parcel of the Port for the infrastructure facility at Visakhapatnam. Keeping in view the said certificate as well as the Circular No. 10 of 2005 issued by the CBDT, we are of the view that the profit derived by the assessee-company from its stand alone warehouses was entitled for deduction under section 80IA and the ld. CIT(Appeals) was fully justified in directing the Assessing Officer to allow the claim of the assessee for the said deduction. We, therefore, uphold the impugned order of the ld. CIT(Appeals) on this issue and dismiss Ground No. 1 of the Revenue s appeal. Deduction u/s 80IB in respect of profit derived from the business of handling, storage and transportation of foodgrains - HELD THAT - As rightly contended by the ld. Counsel for the assessee, this issue is squarely covered in favour of the assessee by the decision of the Hon ble Calcutta High Court in the case of ITC Limited 2015 (7) TMI 450 - CALCUTTA HIGH COURT , wherein it was held that the claim made by the assessee for deduction under section 80IA in respect of profit derived from the business of generation of power could not be denied merely because power generated by the assessee was in its entirety consumed by other business of the assessee and was not sold to outsiders. Respectfully following the said decision of the Hon ble jurisdictional High Court, we uphold the impugned order of the ld. CIT(Appeals) allowing the claim of the assessee for deduction under section 80IB and dismiss Ground No. 2 of the Revenue s appeal. TDS u/s 194C - Addition u/s 40(a)(ia) - non deduction of TDS on payment made by the assessee-company of ocean freight to subagents and Indian beneficiaries - reliance was placed on behalf of the assessee on the CBDT Circular No. 723 dated 19.09.1995 to contend that the said payments on account of ocean freight having been made to the shipping agents of non-resident ship owners, tax was not required to be deducted - HELD THAT - The said amount still cannot be disallowed under section 40(a)(ia) in view of the decision of the Hon ble Delhi High Court in the case of Continental Carriers (Pvt.) Limited 2006 (9) TMI 546 - DELHI HIGH COURT wherein it was held that payments made to resident agents or sub-agents of the foreign shipping companies do not attract TDS under section 194C of the Act. We, therefore, find no infirmity in the impugned order of the ld. CIT(Appeals) deleting the disallowance made by the Assessing Officer under section 40(a)(a) on account of ocean freight to the extent of ₹ 28.24 crores. The deletion of disallowance by the ld. CIT(Appeals) to the extent of balance amount of ₹ 1.40 crores going to Indian beneficiaries by relying on the decision of the Special Bench of ITAT in the case of Merlin Shipping Transporters (supra), however, is not justified as the said decision of this Special Bench of ITAT has been subsequently overruled by the Hon ble Calcutta High Court. As contended by the ld. Counsel for the assessee in this regard, the assessee could not raise its alternative contention on this issue keeping in view that the issue was covered by the Special Bench of ITAT in the case of Merlin Shipping Transporters 2012 (4) TMI 290 - ITAT VISAKHAPATNAM . In order to give such opportunity to the assessee as sought by its ld. Counsel, we restore this matter to the file of the Assessing Officer for deciding the same afresh after giving the assessee an opportunity of being heard. Ground No. 3 of the revenue s appeal is thus treated as partly allowed for statistical purposes.
Issues Involved:
1. Deduction under Section 80IA for profits derived from standalone warehouses. 2. Deduction under Section 80IB for profits derived from handling, storage, and transportation of food grains. 3. Disallowance under Section 40(a)(ia) on account of payment of ocean freight. 4. Disallowance of provision for loan redemption reserve while computing book profit under Section 115JB. 5. Disallowance of freight payment to suppliers. 6. Disallowance of commission expenses under Section 40(a)(ia). 7. Addition on account of sale of DEPB license. 8. Reimbursement of freight charges. Issue-wise Detailed Analysis: 1. Deduction under Section 80IA for Profits Derived from Standalone Warehouses: The Revenue contested the CIT(A)'s decision to allow the assessee's deduction under Section 80IA for profits derived from standalone warehouses, arguing that standalone warehouses do not fall under the definition of "infrastructure facility" in the Explanation to Section 80IA. The Tribunal upheld the CIT(A)'s decision, referencing CBDT Circular No. 10 of 2005, which includes structures at ports for storage, loading, and unloading as part of port infrastructure if certified by the Port Authority. The Visakhapatnam Port Trust had issued such a certificate for the assessee's warehouses. 2. Deduction under Section 80IB for Profits Derived from Handling, Storage, and Transportation of Food Grains: The Revenue argued that the assessee was not eligible for deduction under Section 80IB as the business was not conducted with third parties, but rather involved notional profits. The Tribunal upheld the CIT(A)'s decision, citing the Calcutta High Court's ruling in the case of ITC Limited, which held that deduction under Section 80IA cannot be denied merely because the generated power was consumed internally and not sold to outsiders. 3. Disallowance under Section 40(a)(ia) on Account of Payment of Ocean Freight: The Assessing Officer disallowed the ocean freight payments due to the assessee's failure to deduct tax at source. The CIT(A) deleted the disallowance for payments made to NRI shipping owners or their resident sub-agents, based on CBDT Circular No. 723. For payments to Indian beneficiaries, the CIT(A) relied on the Special Bench decision in Merlin Shipping & Transporters, which was later overruled. The Tribunal upheld the deletion for payments to NRI ship owners but restored the matter to the Assessing Officer for payments to Indian beneficiaries, allowing the assessee to present alternative contentions. 4. Disallowance of Provision for Loan Redemption Reserve while Computing Book Profit under Section 115JB: The Assessing Officer disallowed the deduction for the loan redemption reserve as it was shown in the appropriation account, not debited to the profit & loss account. The CIT(A) deleted the disallowance, reasoning that the reserve was for an ascertained liability and citing the ITAT Kolkata Bench decision in IOL Ltd. The Tribunal upheld the CIT(A)'s decision, referencing the Mumbai and Hyderabad Bench decisions that the profit & loss appropriation account should be considered for computing book profit under Section 115JB. 5. Disallowance of Freight Payment to Suppliers: The assessee did not press this ground during the hearing, leading to its dismissal. 6. Disallowance of Commission Expenses under Section 40(a)(ia): The Assessing Officer disallowed commission expenses due to non-deduction of tax at source. The CIT(A) directed the Assessing Officer to verify payments made before 31st March 2009. The Tribunal restored the matter to the Assessing Officer for fresh consideration, allowing the assessee to present alternative contentions. 7. Addition on Account of Sale of DEPB License: The assessee did not press this ground during the hearing, leading to its dismissal. 8. Reimbursement of Freight Charges: The Tribunal noted that the CIT(A) did not decide on this issue despite specific submissions from the assessee. The matter was restored to the Assessing Officer for fresh consideration. Conclusion: The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's appeal for statistical purposes, directing the Assessing Officer to reconsider certain issues after providing the assessee an opportunity to present its case.
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