2019 (2) TMI 760 - HC - Service Tax

Port services or not - operation and management including necessary modification and augmentation of facilities at Cochin Port - renting out jetties owned by them within the Port area to various agencies and individuals and received rent from the same - Held that - The amounts paid by IGTPL to CPT is only in respect of the right conferred on the IGTPL to carry out the port services; for provision of which the users of the port would pay a fee. In such circumstances, definitely the revenue earned by IGTPL will be taxed under the Finance Act, 1994 specifically under sub-clause (lxxxii) of Section 65. It is a percentage of that, which the IGTPL pays to CPT, in lieu of surrendering their rights to carry out and provide port services in the subject terminals. There is no port service by the CPT to IGTPL. Rental amounts collected for various depots - Held that - License fees were found to be not classifiable under port service or taxable under the Finance Act. As to rent from immovable property the Tribunal found that the same is appropriately classified only from 01.06.2007 - appeal rejected. The relationship between IGTPL and CPT continued in the relevant year as in the prior years. The amended provision also does not bring the subject transaction between the CPT and IGTPL, within the tax net work of Finance Act 1994. We see from the order of the Tribunal that the Tribunal in the later year has followed the earlier order and the question of rental income being assessed under the Finance Act 1994 never arose in the second case. Appeal dismissed.

Summary

Issues:
1. Interpretation of agreements between Cochin Port Trust (CPT) and M/s. India Gateway Terminal Private Limited (IGTPL) for port services.
2. Taxability of royalty payments and license fees received by CPT.
3. Classification of rental income from jetties and immovable property.

Analysis:
1. The judgment addressed two appeals concerning the same parties for different years. The agreements between CPT and IGTPL involved operation and management of facilities at Cochin Port and the development of a terminal within the port area. The Tribunal found that the royalty received by CPT and the agreements for equipment transfer did not constitute port services.

2. The agreements did not entail CPT providing port services to IGTPL, as defined in the Finance Act, 1994. The ownership and operation of terminals were transferred to IGTPL, which collected fees from users for port services. Payments made by IGTPL to CPT were for the right to provide port services, making them taxable under the Finance Act, 1994.

3. Rental income from jetties was considered as licensee fees and not taxable under the Finance Act. The classification of rent from immovable property was applicable from a specific date. The Tribunal's decision on these matters was upheld, with no legal issues identified in the orders.

4. In the subsequent appeal, the amended definition of "Port Service" did not impact the taxability of transactions between CPT and IGTPL. The Tribunal's decision from the previous year was maintained, and the tax assessment on rental income did not arise in this case. Both appeals were dismissed without costs.