2015 (3) TMI 668 - AT - Income Tax

Deduction u/s.80IA(4)(i) - Container Freight Station CFS - dis-allowance on ground that ICDs, and CFSs are not ports located on any inland water way, river or canal and therefore they cannot be classified as inland ports for the purpose of section 80(IA)(4) - Held that - CFS is an inland port whose income is entitled to deduction u/s.80IA(4) as relying on Container Corporation of India Ltd., Vs. ACIT 2012 (5) TMI 260 - DELHI HIGH COURT and All Cargo Global Logistics Ltd., Vs. DCIT 2012 (7) TMI 222 - ITAT MUMBAI(SB) - Decided in favour of assessee. Absence of specific agreement with the Central/State Government, local authority or Statutory Body - whether the assessee is entitled to claim the benefit of section 80IA(4)(i)? - Held that - It is evident that the proposal of the assessee was accepted by the Government on certain conditions which were duly complied with by the assessee. There may not be any specific agreement, but the sequences of events clearly show that the assessee is providing CFS facility in accordance with the conditions laid down by the Government. In such circumstances there is no need to insist for the specific execution of agreements. The co-ordinate bench of the Tribunal in the case of United Liner Agencies of India (Private) Ltd., Vs. Joint CIT (2013 (9) TMI 302 - ITAT MUMBAI), has taken a similar view, Where no specific agreement with the State Government was entered into but from the approvals granted to the assessee it was inferred that assessee should be deemed to have entered into an agreement with the State Government. Thus, we are of the considered view that the assessee has complied with all the provisions of section 80IA(4)(i) and is eligible to claim deduction under the said section. - Decided in favour of assessee.

Summary

Issues:
1. Eligibility of Container Freight Station (CFS) as an infrastructure facility for claiming deduction u/s.80IA(4)(i).
2. Requirement of a specific agreement with the Government for claiming benefit under section 80IA(4)(i).

Issue 1: Eligibility of CFS as an infrastructure facility:
The appellant, owning a CFS at Haldia, claimed deduction u/s.80IA(4)(i), which was disallowed by the Assessing Officer. The contention was that CFS does not constitute an infrastructure facility as defined in the Act. However, the appellant argued that CFS is part of an inland port, supported by the Delhi High Court's ruling and a Tribunal's decision. The High Court clarified that CFSs are inland ports, which was further upheld by the Tribunal. The Tribunal concurred, stating that CFS qualifies as an infrastructure facility, allowing the deduction claimed by the appellant.

Issue 2: Requirement of a specific agreement with the Government:
The appellant had not entered into a specific agreement with the Government as required under section 80IA(4)(i). However, the Ministry of Commerce and Industry approved the proposal for setting up the CFS at Haldia, subject to certain conditions. The appellant complied with these conditions, including executing necessary bonds and guarantees. Despite the absence of a formal agreement, the Tribunal inferred that the appellant had effectively entered into an agreement by complying with the government's conditions. Citing a similar precedent, the Tribunal held that the appellant met the requirements of section 80IA(4)(i) and was entitled to claim the deduction. Consequently, the appeal was allowed, setting aside the previous order.

In conclusion, the Tribunal ruled in favor of the appellant on both issues. Firstly, recognizing CFS as an infrastructure facility eligible for deduction under section 80IA(4)(i) based on legal precedents. Secondly, accepting the compliance with government conditions as equivalent to entering into an agreement, thus allowing the appellant to claim the benefit under the said section. The judgment was pronounced on July 14, 2014, in Chennai.