2016 (6) TMI 552 - AT - Income Tax

Deduction u/s 80IA - whether Container Freight Station can be construed as Inland Port for the purpose of allowing deduction u/s 80IA of the Act? - Held that - This issue was considered by the Delhi High Court in M/s Container Corporation of India Ltd (2012 (5) TMI 260 - DELHI HIGH COURT ) after referring to the circular issued by the CBDT, the High Court found that Container Freight Station was notified by the Customs Authorities and also customs clearance took place in Container Freight Station. The Office Memorandum issued by the Ministry of Commerce clarified that Container Freight Stations are Inland Ports. Accordingly, the Delhi High Court found that the Container Freight Stations are infrastructure facility within the meaning of Inland Ports . The CIT(A), by following the judgment of the Delhi High Court in M/s Container Corporation of India Ltd(supra), directed the Assessing Officer to allow deduction u/s 80IA(4) of the Act. Since the Delhi High Court considered similar issue and found that Container Freight Station is an infrastructure facility and the same would fall within the definition of Inland Port , this Tribunal do not find any reason to interfere with the order of the lower authority - Decided in favour of assessee Deemed dividend addition u/s 2(22) - Held that - In case the advance/loan was advanced for the benefit of the registered shareholder or any other person, still the same has to be assessed as deemed dividend in the name of the registered shareholder for whose benefit the advance/loan was given. In the case before us, the assessee is not a shareholder in M/s Indev Logistics P. Ltd. The common shareholders are Shri Xavier Britto and Smt. Vimalarani Britto. Shri Xavier Britto is holding 50% of the shares in the assesseecompany and Smt. Vimalarani Britto is holding 50% of the shares in the assessee-company. In the case of M/s Indev Logistics P. Ltd. Shri Xavier Britto is holding 60% of the shares whereas Smt. Vimalarani Britto is holding 40% of the shares, therefore, as rightly submitted by the ld. DR there are common shareholders in both the companies. The advance received by the assessee-company may be for the benefit of the common shareholders who are holding the shares in the assessee-company. However, for the purpose of assessing the deemed dividend, it has to be assessed only in the hands of the registered shareholder for whose benefit the money was advanced. In the case before us, in fact, the money was advanced for the benefit of the shareholders, Shri Xavier Britto and Smt. Vimalarani Britto, therefore, the assessment, if any, has to be made only in the hands of Shri Xavier Britto and Smt. Vimalarani Britto and not definitely in the hands of the present assessee. - Decided in favour of assessee

Summary

Issues:
1. Deduction u/s 80IA of the Income-tax Act, 1961.
2. Addition made by the Assessing Officer u/s 2(22)(e) of the Act for assessment year 2007-08.

Issue 1: Deduction u/s 80IA of the Income-tax Act, 1961

The first issue pertains to the deduction u/s 80IA of the Income-tax Act, 1961. The Department argued that the Container Freight Station facility operated by the assessee does not qualify as an 'infrastructure facility' under sec. 80IA of the Act. The Departmental Representative contended that an inland port, as part of the definition of 'infrastructure facility,' does not require a waterway and is linked to a seaport for container transfer and international trade processing. However, the Counsel for the assessee argued that the Container Freight Station should be considered an inland port, supported by a judgment of the Delhi High Court. The Tribunal upheld the CIT(A)'s decision, citing the Delhi High Court's judgment, which classified Container Freight Stations as 'infrastructure facilities' falling under the definition of 'Inland Ports.' Consequently, the Tribunal confirmed the allowance of deduction u/s 80IA for the assessee.

Issue 2: Addition made by the Assessing Officer u/s 2(22)(e) of the Act

The second issue concerns the addition made by the Assessing Officer u/s 2(22)(e) of the Act for the assessment year 2007-08. The Department argued that a capital advance received by the assessee from a company with common shareholders should be treated as deemed dividend u/s 2(22)(e) of the Act. The CIT(A) had deleted this addition, considering the business relationship between the parties. The Department relied on judgments of the Delhi High Court to support its stance. Conversely, the Counsel for the assessee contended that since the assessee was not a shareholder in the company providing the advance, the deemed dividend should not apply to the assessee. The Tribunal analyzed the provisions of sec. 2(22)(e) and concluded that the advance, given for the benefit of common shareholders, should be assessed as deemed dividend in the hands of those shareholders, not the assessee. Therefore, the Tribunal upheld the CIT(A)'s decision to delete the addition made by the Assessing Officer. The cross objection filed by the assessee was dismissed as the order of the CIT(A) was upheld.

In conclusion, the Tribunal dismissed the appeals of the Revenue and the cross objection of the assessee, affirming the decisions made regarding the deduction u/s 80IA and the addition u/s 2(22)(e) of the Income-tax Act, 1961.