2019 (4) TMI 544 - AT - Income Tax

Deduction u/s 80IA - profits earned from ICDs and on rolling stocks - whether activities undertaken by the assessee do not fall within Clause (d) of the Explanation to section 80IA(4) defining the term Infrastructure facility? - HELD THAT - In the case of M/s Container Corporation of India Ltd. 2018 (5) TMI 359 - SUPREME COURT OF INDIA , the operating activities of the assessee were mainly carried out at its Inland Container Depots (ICDs), Container Freight Stations (CFSs) and Port Side Container Terminals (PSCTs) spread all over the country. The issue in the above appeal was with regard to the deduction claimed u/s 80IA on the profits earned from ICDs and on rolling stocks. Their Lordships of the Hon ble Supreme Court, dismissing the appeal filed by the revenue (supra) stating that 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. Further, 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. 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. However, 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. Addition u/s 14A - HELD THAT - Assessing Officer to make the computation of disallowance u/s. 8D(2)(iii) of the Act by excluding the investment which have not earned any exempt income during the year in the computation in accordance. Disallowance u/s 14A r.w.r. 8D while calculating Book profit u/s 115JB - HELD THAT - In the case of ACIT v. Vireet Investment 2017 (6) TMI 1124 - ITAT DELHI , it is held that computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to computation as contemplated under section 14A read with rule 8D. Accordingly, we delete the disallowance made by the AO to the book profit shown by the assessee u/s 115JB of the Act. Claim of deduction u/s 80IA - facility usage charges - rental income from immovable property - HELD THAT - In the instant case, the assessee has received ₹ 2,00,000/- as rent from Vodafone India Pvt. Ltd on account of usage of its CFS area for setting up mobile tower. It also received ₹ 6,93,000/- as service charges for providing office space area, furniture & utility facility to customers in CFS area. In the instant case, we find that the assessee has not filed before the AO the relevant contracts and connected data with regard to the above claim. Therefore, we restore the matter to the file of the AO for making an order afresh after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the connected documents/evidence before the AO.

Summary

Issues Involved:

1. Deduction under Section 80IA of the Income Tax Act, 1961.
2. Disallowance of expenses attributable to exempt income under Section 14A read with Rule 8D.
3. Disallowance under Section 14A while calculating book profit under Section 115JB.
4. Disallowance of facility usage charges while computing deduction under Section 80IA.

Detailed Analysis:

1. Deduction under Section 80IA of the Income Tax Act, 1961:

The first issue was whether the assessee was entitled to deduction under Section 80IA despite the AO's contention that Container Freight Station (CFS) is not an eligible infrastructure facility as per the Explanation to Section 80IA(4). The AO disallowed the claim, but the CIT(A) allowed it, relying on a Tribunal order. The Tribunal reaffirmed the CIT(A)'s decision, referencing the Supreme Court's judgment in CIT v. M/s Container Corporation of India Ltd., which recognized ICDs as Inland Ports eligible for Section 80IA deduction. The Tribunal concluded that the facts were identical and dismissed the Revenue's appeal on this ground.

2. Disallowance of expenses attributable to exempt income under Section 14A read with Rule 8D:

The second issue concerned the disallowance of ?34,22,336/- under Section 14A read with Rule 8D. The AO made this disallowance, but the CIT(A) recalculated it, considering the assessee's suo motu disallowance of ?2,27,489/-. The Tribunal observed that the assessee had sufficient own funds, thus deleting the disallowance under Rule 8D(2)(ii) following precedents from HDFC Banks Ltd. and Reliance Utilities & Power Ltd. Regarding Rule 8D(2)(iii), the Tribunal directed the AO to recompute the disallowance, excluding investments that did not yield exempt income, in line with the ITAT Special Bench decision in ACIT vs. Vireet Investment P. Ltd. Consequently, the Tribunal allowed the Revenue's appeal for statistical purposes.

3. Disallowance under Section 14A while calculating book profit under Section 115JB:

The third issue in the cross-objection was the disallowance under Section 14A while calculating book profit under Section 115JB. The Tribunal relied on the Special Bench decision in ACIT v. Vireet Investment, which held that computation under clause (f) of Explanation 1 to Section 115JB(2) should be made without resorting to Section 14A read with Rule 8D. Therefore, the Tribunal deleted the disallowance of ?34,22,236/- made by the AO to the book profit.

4. Disallowance of facility usage charges while computing deduction under Section 80IA:

The fourth issue was the disallowance of ?8,93,000/- for facility usage charges while computing deduction under Section 80IA. The AO disallowed this amount, considering it rental income, which was upheld by the CIT(A). The Tribunal, referencing the Supreme Court's decision in CIT v. Meghalaya Steels Ltd., noted that the assessee had not provided relevant contracts and data. Therefore, the Tribunal remanded the matter to the AO for a fresh order after giving the assessee a reasonable opportunity to present evidence.

Conclusion:

The Tribunal partly allowed both the Revenue's appeal and the assessee's cross-objection, directing the AO to reassess certain disallowances and deductions per the Tribunal's guidelines and relevant judicial precedents.