2012 (5) TMI 260 - HC - Income Tax

Deduction u/s 80IA - ICD - Inland port - infrastructure facilities - effect of amendment to section 80IA - held that - In these circumstances, the real question was not whether the CBDT notified the ICD as an Inland Port but whether the ICD can be considered to be an Inland Port. - having regard to the provisions of the Customs Act, the communications issued by the CBEC as well as the Ministry of Commerce and Industry, the object of including inland port as an infrastructure facility and also having regard to the fact that customs clearance also takes place in the ICD, the assessee s claim that the ICDs are Inland Ports under Explanation (d) of Section 80IA(4) requires to be upheld. - Decided in favor of assessee.

Summary

Issues Involved:
1. Entitlement to deduction under Section 80-IA of the Income Tax Act, 1961.
2. Definition and classification of Inland Container Depots (ICDs) as "inland ports".
3. Validity and effect of notifications by the Central Board of Direct Taxes (CBDT) post-amendment.

Detailed Analysis of the Judgment:

1. Entitlement to Deduction under Section 80-IA:
The primary issue in these appeals was whether the assessee was entitled to a deduction under Section 80-IA(4) of the Income Tax Act, 1961, for the assessment years 2003-04 to 2005-06. The assessee, a public sector undertaking under the Ministry of Railways, engaged in handling and transporting containerized cargo through its Inland Container Depots (ICDs), Central Freight Stations (CFSs), and Port Container Terminals (PCTs), claimed this deduction. The court examined whether these activities fell within the definition of "infrastructure facilities" under Clause (d) of the Explanation to Section 80-IA.

2. Definition and Classification of Inland Container Depots (ICDs) as "Inland Ports":
The court delved into the nature of ICDs and their role in the logistics chain, highlighting their function in customs clearance and cargo handling away from sea ports. The term "inland port" was scrutinized, noting its absence in the Income Tax Act's definitions, but its inclusion in the Customs Act, 1962, and various other legal and commercial definitions. The court referenced definitions from the Indian Ports Act, 1908, T. Ramanatha Aiyar's Law Lexicon, and international sources like the UNCTAD handbook and the Inland Port Authority Act of Nevada, USA, to establish that ICDs could be considered inland ports due to their role in customs clearance and cargo handling.

3. Validity and Effect of Notifications by the Central Board of Direct Taxes (CBDT) Post-Amendment:
The court addressed the impact of the Finance Act, 2001, which removed the CBDT's power to notify infrastructure facilities for Section 80-IA purposes from 1st April 2002. It was argued that the prior notifications by the CBDT, which included ICDs and CFSs as infrastructure facilities, should still hold validity. The court agreed, citing Circular No. 7/2002, which clarified that projects notified before 31st March 2001 would continue to be eligible for deductions. This reinforced the assessee's claim for deductions for the relevant assessment years.

Conclusion:
The court concluded that ICDs qualify as "inland ports" under Section 80-IA(4) of the Income Tax Act, 1961, due to their role in customs clearance and cargo handling. It upheld the validity of prior CBDT notifications even after the amendment removing the notification power. The appeals were allowed, directing the Assessing Officer to compute the deductions based on the specific notifications by the Customs Department for different ICDs. The judgment emphasized the importance of ICDs in the logistics chain and their recognition as infrastructure facilities, providing significant relief to the assessee.