2018 (1) TMI 2 - AT - Income Tax

Deduction claimed by the assessee u/s 80IA(4) - assessee is engaged in the business of operation of Container Freight Station (CFS) - Held that - Keeping in view of the facts and circumstances of the case and by following the decision in assessee s own case for the Assessment Year 2011-12 2015 (12) TMI 365 - ITAT Visakhapatnam and Assessment Year 2012-13 2017 (4) TMI 1056 - ITAT VISAKHAPATNAM also case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015 (5) TMI 656 - BOMBAY HIGH COURT) held that profits and gains from infrastructure undertakings (infrastructure facility) set up within precincts of port then having considered its proximity to sea-port and its activities it can be safely concluded that deduction admissible under sub-section (4) of section 80-IA can be claimed by both ICDs and CFSs. Also in assessee s own case having regard to the provisions of the Customs Act the communication issued by the Central Board of Excise and Customs as well as the Ministry of Commerce and Industry the object of including inland port as an infrastructure facility and also that customs clearance also takes place in the inland container depot the assessee s claim that the inland container depots were inland ports under Explanation (d) to sec. 80IA(4) required to be upheld - Decided in favour of assessee.

Summary

Issues Involved:
1. Eligibility of the assessee for deduction under section 80IA(4) of the Income Tax Act, 1961.
2. Interpretation of the term "infrastructure facility" under section 80IA(4).
3. Compliance with conditions specified in CBDT circulars for claiming deduction under section 80IA(4).

Detailed Analysis:

Issue 1: Eligibility of the Assessee for Deduction under Section 80IA(4)
The primary issue is whether the assessee, engaged in operating a Container Freight Station (CFS), qualifies for deduction under section 80IA(4) of the Income Tax Act, 1961. The assessee claimed this deduction, which was disallowed by the Assessing Officer (AO) but later allowed by the Commissioner of Income Tax (Appeals) [CIT(A)] and upheld by the Income Tax Appellate Tribunal (ITAT).

Issue 2: Interpretation of the Term "Infrastructure Facility" under Section 80IA(4)
The term "infrastructure facility" includes a port, airport, inland waterway, inland port, or navigational channel in the sea. The assessee argued that their CFS qualifies as an "inland port" based on various circulars and approvals from authorities like the Visakhapatnam Port Trust and the Ministry of Commerce & Industry.

Issue 3: Compliance with Conditions Specified in CBDT Circulars
The AO argued that the assessee did not meet the conditions specified in CBDT Circular No. 793 (dated 23/06/2000) and Circular No. 10/2005 (dated 16/12/2005), which require:
- A certificate from the port authority stating that the structures form part of the port.
- The structures to be built under BOT (Build-Operate-Transfer) or BOLT (Build-Own-Lease-Transfer) schemes, with an agreement to transfer them to the port authority after a stipulated period.

The AO noted that the CFS was not located within the port premises and did not meet the BOT/BOLT criteria. However, the CIT(A) and ITAT found that the assessee had obtained necessary approvals and certifications, and the absence of a specific agreement with the government did not disqualify the assessee from claiming the deduction.

Tribunal's Findings:
1. Eligibility for Deduction: The ITAT upheld the CIT(A)'s decision, allowing the deduction under section 80IA(4), referencing previous decisions in the assessee's favor for earlier assessment years (2011-12 and 2012-13).

2. Definition of Infrastructure Facility: The ITAT referred to the decision of the Hon'ble Bombay High Court in the case of CIT-II vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. and the Hon'ble Madras High Court in the case of CIT vs. A.L. Logistics (P) Ltd., which supported the view that CFS can be considered an "infrastructure facility" under section 80IA(4).

3. Compliance with CBDT Circulars: The ITAT noted that the assessee had complied with the conditions laid down by the Ministry of Commerce and Industry and had obtained necessary certifications. The tribunal also highlighted that the absence of a specific agreement did not invalidate the claim, as the sequence of events and approvals indicated compliance with the required conditions.

Conclusion:
The ITAT dismissed the revenue's appeal and upheld the CIT(A)'s order, allowing the assessee's claim for deduction under section 80IA(4). The tribunal emphasized that the assessee's CFS qualifies as an "infrastructure facility" and that the necessary conditions for claiming the deduction were met, despite the AO's objections regarding the location and agreement requirements.