2013 (9) TMI 302 - AT - Income Tax

Deduction u/s 080IA - Container Freight Station(CFS) not being structure situated at Port Held that - Relying upon the decision of Special Bench in the case of All Cargo Global Logistics Ltd. vs. DCIT 2012 (7) TMI 222 - ITAT MUMBAI(SB) , it was held that CFS owned by them are better placed as ICDs considered in the case of Container Corporation of India 2012 (5) TMI 260 - DELHI HIGH COURT were located far away at the places like Jameshedpur, Jodhpur,Jaipur etc. The CFS were situated nearly 5 Kms away from the Port. In the present case also CFS of the assessee is situated only 15 Kms away from the Port. So for the grant of deduction under section 80 IA(4), as per decision of Special Bench in the case of All Cargo and decision of Delhi High Court in Container Corporation of India, it is not a condition precedent that CFS of the assessee should be situated at port. So, non- situation of the CFS of the assessee at port does not disentitle it from claiming deduction u/s. 80 IA(4). In the present case also the assessee has been provided with a certificate by JNPT that the assessee s CFS is an extended arm of the Port - Such certificate issued by JNPT was also withdrawn in those cases dealt by Special Bench - Such withdrawal by the JNPT was not considered as material by the Special Bench for denial of deduction under section 80IA(4). Moreover, in the certificate dated 31/3/2006, JNPT has clearly stated that assessee s CFS may be considered as an extended arm of the Port related activities in accordance with Circular No.133/95 dated 22/12/95 issued by Central Board of Excise & Customs, New Delhi, whereas in the so called withdrawal letter, which is highly relied upon by the revenue, it has no where been stated that how and on what basis the CFS of the assessee has suddenly ceased to be an extended arm of the Port. Moreover, Co-ordinate Bench in the case of Ayush Ajay Construction Ltd. vs. ITO, 2000 (7) TMI 225 - ITAT INDORE while interpreting the provisions of section 80IA(4), even in the absence of agreement, on recognition of the work done has come to a conclusion that assessee was entitled to get deduction Also, following observation has been made in the case, the object of its insertion to the tax statute in the light of the budget speech of the Hon ble Finance Minister and the above said judicial pronouncements, we would find that the legislature has given a fillip of deductions to those enterprises who engage themselves in developing, maintaining and operating any infrastructure facilities for economic growth of the nation as it was felt by the legislature that inadequate infrastructure was a key constraint of our economic progress. As held by the apex Court in the case of Bajaj Tempo Ltd. vs. CIT 1992 (4) TMI 4 - SUPREME Court , the provisions of promoting economic growth should be interpreted liberally and the restriction on it too has to be construed so as to advance the objective of the provisions and not to frustrate it. Decided in favor of Assessee. Further, the deduction for the years under consideration cannot be denied to the assessee on the ground that there is no provision for withdrawal of this deduction for the subsequent year for breach of certain conditions unless the deduction granted in initial A.Y.2004-05 is withdrawn. Such proposition is supported by the decision of Jurisdictional High Court in the case of CIT vs. Paul Brothers (1992 (10) TMI 5 - BOMBAY High Court). No contrary decision was cited by the other side. - Decided in favor of assessee.

Issues Involved:
1. Validity of reopening of assessment.
2. Disallowance of deduction under section 80-IA(4) of the Income-tax Act, 1961.
3. Disallowance of repairs to building expenses.
4. Addition of Port Trust Liabilities.
5. Depreciation on UPS/Scanners/Projectors.
6. Penalty proceedings under section 271(1)(c).
7. Disallowance of Staff Welfare, Entertainment, and Miscellaneous expenses.

Detailed Analysis:

1. Validity of Reopening of Assessment:
The assessee argued that the reopening of the assessment was invalid as all particulars were disclosed with the original return, and the original assessment was completed under section 143(3) after thorough inquiry. However, the Tribunal noted that the grounds related to the reopening of the assessment were not pressed by the assessee, leading to their dismissal.

2. Disallowance of Deduction Under Section 80-IA(4):
The primary issue was whether the assessee's Container Freight Station (CFS) qualified as an "inland port" for the purposes of deduction under section 80-IA(4). The Tribunal referred to the Special Bench decision in All Cargo Global Logistics Ltd. and the Delhi High Court decision in Container Corporation of India, which held that a CFS is considered an inland port. Despite the Revenue's argument that the CFS was not situated at the port and the certificate from JNPT was withdrawn, the Tribunal found that the assessee's CFS fulfilled the necessary conditions and was eligible for the deduction. The Tribunal emphasized the principle of consistency, noting that the assessee had been granted the deduction in previous years and there was no provision for withdrawal of the deduction for subsequent years unless the initial year's deduction was withdrawn.

3. Disallowance of Repairs to Building Expenses:
The assessee claimed repairs to building expenses, which were disallowed by the Assessing Officer (AO) on the grounds that the appellant did not press the said ground of appeal before the CIT(A). The Tribunal did not address this issue in detail as it was not pressed by the assessee.

4. Addition of Port Trust Liabilities:
The AO added a sum of Rs. 6,30,000 on account of Port Trust Liabilities, stating that the liability had not crystallized. The Tribunal did not provide a detailed analysis on this issue as it was not pressed by the assessee.

5. Depreciation on UPS/Scanners/Projectors:
The assessee claimed depreciation at 60% on UPS, Scanners, and Projectors, which the AO allowed at only 10%, treating them as electrical fittings. The Tribunal referred to the Delhi High Court decision in Orient Ceramics and Industries Ltd., which allowed 60% depreciation on such items, and held that the assessee was entitled to 60% depreciation.

6. Penalty Proceedings Under Section 271(1)(c):
The Tribunal noted that the penalty proceedings under section 271(1)(c) were premature and dismissed the ground as such.

7. Disallowance of Staff Welfare, Entertainment, and Miscellaneous Expenses:
For the assessment year 2009-10, the AO disallowed expenses related to Staff Welfare, Entertainment, and Miscellaneous expenses without providing cogent reasons. The Tribunal did not address this issue in detail as it was not pressed by the assessee.

Conclusion:
The Tribunal allowed the appeals filed by the assessee partly, granting the deduction under section 80-IA(4) and allowing the depreciation on UPS, Scanners, and Projectors at 60%. The appeals filed by the Revenue were dismissed. The Tribunal emphasized the principle of consistency and the binding nature of beneficial circulars issued by the CBDT.

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