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TMI Blog2010 (4) TMI 909X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and four by the Revenue. Almost identical issues are involved and the facts of all these are so intertwined that it would be convenient to decide them by a common order. I. T. A. Nos. 890 and 891/Mds/09 and I. T. A. Nos. 991 and 992/Mds/09 These cross-appeals have been filed by the assessee and the Revenue against a common order of the learned Commissioner of Income-tax (Appeals), Chennai, dated March 25, 2009, passed for the assessment years 2002-03 and 2003-04. These appeals arise from the separate orders of the Assistant Commissioner of Income-tax, Company Circle 1(1), Chennai, (the Assessing Officer) dated November 30, 2007 which have been passed in order to give effect to the order of the Commissioner of Income-tax passed under section 263 of the Income-tax Act, 1961 (hereinafter referred to as the Act for short). Briefly stated, the facts of the case are that the assessee-company derives income as a steamer agent for shipping companies besides running a container freight station (CFS) at Numbal. Initially, assessment orders for these years were passed under section 143 on March 28, 2005 and July 15, 2005, respectively. Subsequently, the Commissioner of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enses of Numbal plot, this appears to have been used as a clearing station and the expenses for Numbal village includes weighbridge expenses and lunch expenses for employees and customs officials. The Assessing Officer may include both income and expenses if it is found on verification that CFS activities are carried out in the plot to exclude there from CFS income if the activity at Numbal plot is limited to the clearing and forwarding activities of the assessee as an agent. (iii) Directors travel expenses : The Commissioner of Income-tax-I observed as under I find it difficult to accept that the directors did not undertake any travel in relation to CFS, but the travel expenses were only related to clearing agency business. However, a decision can be taken only on examination of the details of travel expenses. The Assessing Officer may decide this issue on verification of the travel expenses. One additional ground of appeal was raised before the learned Commissioner of Income-tax (Appeals) regarding treating the warehousing charges collected to the tune of Rs. 40,48,148 as its income derived from the activities of CFS after obtaining the Assessing Officer s comments on thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T. A. No. 303 of 2007-08 dated March 25, 2009 is contrary to law, facts and in the circumstances of the case. 2. The Commissioner of Income-tax (Appeals) erred in dismissing the ground challenging the exclusion of warehousing income from the profits of container freight station within the scope of provisions in section 80-IA(4) of the Act without assigning proper reasons and justification. 3. The Commissioner of Income-tax (Appeals) failed to appreciate that the revision order passed in terms of section 263 of the Act was modified by the order of the Appellate Tribunal, paragraph 10 dated July 17, 2008 and having noticed the said findings, the rejection of the ground based on the findings given in paragraph 7 of the impugned order was wrong, incorrect, erroneous, unjustified and not sustainable both on facts and in law. 4. The Commissioner of Income-tax (Appeals) failed to appreciate that the earning of warehousing income was inextricably connected and derived from the activity of CFS and in such a situation the findings given ignoring ground Nos. 1-b to 1-d of the additional grounds of appeal filed before him was wrong, incorrect, erroneous, unjustified and not sustainable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment of assessment years 2002-03 and 2003-04 for excluding the warehousing income from CFS receipts and considering the income and expenditure on Numbal plot and director s travelling expenses after due verification of the facts. I have also considered the counter submission of the authorised representative thereon. Now I proceed to decide the issue as under. The approving guidelines expects that adequate warehousing facilities should be provided by the CFS operator. In fact, the definition of CFS means : Inland container depot (ICD)/container freight station (CFS) has been defined as A common user facility with public authority status equipped with fixed installations and offering services for handling and temporary storage of import/export laden and empty containers carried under customs transit by any applicable mode of transport placed under customs control. All the activities related to clearance of goods for home use, warehousing temporary admissions, re-export, temporary storage for onward transit and outright export, trans-shipment, take place from such stations . 3.8 Therefore the CFS activity presupposes adequate infrastructure towards warehousing and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons: (i) Proper infrastructure would be created by you keeping in view the norms given in parts A and B of the Guidelines for setting up inland container depots/container freight stations (ICDs/CFSs) and to the satisfaction of the concerned Collector of Customs and Central Excise within a period of six months from the date of issue of this letter. (ii) Necessary bond and guarantees would be executed by you with the concerned Collector of Customs and Central Excise ; (iii) The approval would be subject to cancellation in the event of violation of the customs and other laws of the land and Rules. Yours faithfully, (Sd.) (N. D. Agnihotri), Joint Director. Minimum level of facilities required at ICDs/CFSs The following minimum level of facilities are required to be provided at ICDs/CFSs (a) Provision of standard pavement for heavy duty equipment for use in the operational and stacking area of the terminal, in case where only chassis operation is to be performed, the pavement standard could be limited to that of a highway. A minimum of 35 percent of the land area (provided as per the guidelines 1 acre for the Port CFS and 3 acres for ICDs in the hinterland) would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not get any deduction but when they are part of CFS as a necessary infrastructure as discussed above and such CFSs can come into existence and operate only if it provides minimum infrastructure facility as only then sanction for the CFS status is granted then such warehousing facility is different from the stand alone warehousing facility operated outside CFS. In fact, situation is like that there can be a warehouse without CFS but not a CFS without warehousing as can be seen from the notification pertaining to the appellant where it is part of minimum level of infrastructure. Hence, in such a situation warehousing income, in my opinion, has to be treated as part of CFS income and eligible for the deduction under section 80-IA. Therefore, the appellant succeeds on this ground in both the years. The facts in all the years remained same and static. The reasons given by the learned Commissioner of Income-tax (Appeals) in the above paragraphs to allow this claim of the assessee are sufficient to drive us also to come to a similar conclusion. Therefore, we allow warehousing income to be a part of CFS income and hold it eligible for deduction under section 80-IA. It is found for a fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x (Appeals) failed to appreciate that the grounds raised before him in ground Nos. 2-b to 2-e forming part of Form No. 35 filed before him were not taken into consideration while passing the impugned order on the said issue. 4. The Commissioner of Income-tax (Appeals) failed to appreciate that the findings recorded in paragraph 5.2 of the impugned order were wrong, incorrect, erroneous, unjustified and not sustainable both on facts and in law. 5. The Commissioner of Income-tax (Appeals) erred in confirming the exclusion of rent received from canteen building as part of eligible profits in terms of section 81(4) of the Act without assigning proper reasons and justification. 6. The Commissioner of Income-tax (Appeals) failed to appreciate that the findings recorded in paragraph 8 of the impugned order were wrong, incorrect, erroneous, unjustified and not sustainable both on facts and in law. 7. The Commissioner of Income-tax (Appeals) erred in confirming the exclusion of income earned from auction of containers not taken by the consignees/importers as per the customs regulations and the corresponding expenses incurred thereon without assigning proper reasons and justification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Nos. 5 and 6 relate to exclusion of rent received from canteen building as part of eligible profits in terms of section 80-IA(4) of the Act without assigning proper reasoning as per the assessee. The assessee has considered a sum of Rs. 1,80,000 towards rent from canteen building as CFS receipts for the assessment year 2004-05. The canteen building is admittedly situated in CFS complex. Again, the learned Commissioner of Income-tax (Appeals) has not given any valid reasoning for coming to a conclusion that this expenditure is not allowable. Paragraph 8 of his order is sketchy and not a speaking order. Consequently, we restore this issue to the file of the learned Commissioner of Income-tax (Appeals) to decide the same by way of a speaking order. Ground Nos. 7 and 8 are also on the same footing as the learned Commissioner of Income-tax (Appeals) has not decided the same by way of the speaking order. Consequently, we restore the issue to his file. In the result, this appeal is partly allowed for statistical purposes. I. T. A. No. 893/Mds/09 In this appeal, the following grounds have been raised. 1. The order of the Commissioner of Income-tax (Appeals)-III, Chennai-600 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oning, this issue is also restored to the file of the learned Commissioner of Income-tax (Appeals) to pass a speaking order. Ground Nos. 7 and 8 relate to disallowance of Rs. 20,58,163 under section 40(a)(ia) of the Act. The facts apropos this issue are that the assessee has claimed this amount as expenditure but has not deducted tax thereof. Therefore, tax not being remitted within the stipulated time as provided under section 40(a)(ia) of the Act, this addition was made. The learned Commissioner of Income-tax (Appeals) has also confirmed this addition. The Assessing Officer has voluntarily bifurcated the disallowance under sections 40A(3) and 40(a)(ia) of the Act. He has allowed the disallowance under section 40A(3) on account of payment in cash but this ground was not pressed. The assessee has disputed the disallowance under section 40(a)(ia). According to the assessee, these are the labour charges which were paid and TDS was not deducted because as per this section payable does not include paid . After hearing both sides, we find that in the return of income filed by the assessee for the subsequent assessment year 2006-07, the assesseecompany has claimed the whole of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of Income-tax (Appeals) ought to have upheld the action of the Assessing Officer in respect of travel expenses also which is on similar footing with Numbal plot maintenance charges. 3.3 The learned Commissioner of Income-tax (Appeals) failed to consider the fact that the expenditure on travelling of directors include both domestic as well as foreign travel and therefore the expenditure on directors who are common for both CFS and non-CFS activities should be obviously apportioned between them. 4.1. The learned Commissioner of Income-tax (Appeals) erred in holding that insurance receipts should be treated as part of CFS income (and accordingly eligible for deduction under section 80-IA). 4.2. Having regard to the narrow import of the term derived from recognised by the apex court itself in several decisions, the learned Commissioner of Income-tax (Appeals) ought to have upheld the action of the Assessing Officer. 5. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned Commissioner of Income-tax (Appeals) may be set aside and that of the Assessing Officer restored. Since we have already decided similar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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