2018 (5) TMI 359 - SC - Income Tax

Entitlement to claim the benefit of Section 80-IA - whether the Inland Container Depots (ICDs) under the control of the Respondent, during the relevant period, qualified for deduction under Section 80-IA(4)? - whether the activities undertaken by the assessee cannot be said to fall within Explanation (d) of Section 80-IA(4) defining the term infrastructure facility? - Held that - Considering the nature of work that is performed at ICDs, they cannot be termed as Ports. However, taking into consideration the fact that a part of activities that are carried out at ports such as custom clearance are also carried out at these ICDs, the claim of the respondent herein can be considered within the term Inland port as is used in the Explanation. It is significant to note that the word Inland Container Depots was first introduced in the definition of Customs Port as is given in Section 2(12) of the Customs Act, 1962, through amendment made by the Finance Act, 1983 with effect from 13.05.1983. The term Inland Port has been defined nowhere. But the Notification that has been issued by the Central Board of Excise & Customs (CBEC) dated 24.04.2007 in terms holds that considering the nature of work carried out at these ICDs they can be termed as Inland Ports- The communication dated 25.05.2009 issued on behalf of the Ministry of Commerce and Industry confirming that the ICDs are Inland Ports, fortifies the claim of the respondent herein. Though both the Notification and communication are not binding on CBDT to decide whether ICDs can be termed as Inland Ports within the meaning of Section 80-IA the appellant herein is unable to put forward any reasonable explanation as to why these notifications and communication should not be relied to hold ICDs as Inland Ports. Unless shown otherwise, it cannot be held that the term Inland Ports is used differently under Section 80-IA of the IT Act. All these facts taken together clear the position beyond any doubt that the ICDs are Inland Ports and subject to the provisions of the Section and deduction can be claimed for the income earned out of these Depots. The actual computation is to be made in accordance with the different Notifications issued by the Customs department with regard to different ICDs located at different places.

Summary

Issues Involved:
1. Eligibility for deduction under Section 80-IA of the Income Tax Act, 1961.
2. Definition and classification of Inland Container Depots (ICDs) as infrastructure facilities.
3. Validity and effect of CBDT notifications post-amendment by the Finance Act, 2001.

Issue-wise Detailed Analysis:

1. Eligibility for Deduction under Section 80-IA of the Income Tax Act, 1961:
The central issue was whether the Inland Container Depots (ICDs) managed by the respondent qualified for deduction under Section 80-IA(4) of the Income Tax Act. The respondent claimed deductions for the assessment years 2003-04 to 2005-06, which were initially rejected by the Assessing Officer and partially allowed by the Commissioner of Income Tax (Appeals). The Income Tax Appellate Tribunal allowed deductions for rolling stocks but not for ICDs. The High Court overturned this, allowing deductions for ICDs, prompting the Revenue's appeal to the Supreme Court.

2. Definition and Classification of Inland Container Depots (ICDs) as Infrastructure Facilities:
The Supreme Court examined whether ICDs could be classified as "infrastructure facilities" under Section 80-IA. The Finance Act, 1995, introduced Section 80-IA, allowing deductions for enterprises developing, maintaining, and operating infrastructure facilities. The definition of "infrastructure facility" initially included roads, highways, bridges, airports, ports, and rail systems, with the CBDT empowered to notify other facilities. In 1998, the CBDT notified ICDs as infrastructure facilities. The Finance Act, 1998, expanded the definition to include "inland waterways and inland ports." The Finance Act, 2001, removed the CBDT's power to notify additional facilities. The Court held that ICDs, performing similar functions to ports, could be considered "inland ports" under the amended definition, thus qualifying for deductions.

3. Validity and Effect of CBDT Notifications Post-Amendment by the Finance Act, 2001:
The appellant argued that post-amendment, the CBDT's notifications ceased to apply. The Court disagreed, noting that the amendment did not explicitly invalidate prior notifications. The Court emphasized that the legislative intent did not suggest nullifying existing notifications, and the respondent's entitlement to deductions for 10 years could not be curtailed by subsequent amendments. The Court also relied on notifications and communications from the Central Board of Excise & Customs and the Ministry of Commerce and Industry, which supported the classification of ICDs as "inland ports."

Conclusion:
The Supreme Court upheld the High Court's decision, affirming that ICDs qualify as "inland ports" under Section 80-IA(4) and are entitled to deductions for the relevant assessment years. The appeal was dismissed, and all connected appeals were disposed of accordingly. The parties were to bear their own costs.