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TMI Blog2016 (9) TMI 656X X X X Extracts X X X X X X X X Extracts X X X X ..... ’ Terminals, the Hon’ble Court held that the profit derived from such activity is eligible for deduction under section 80IA(4). Where assessee is carrying out CGS activities which is nothing but infrastructure facility as defined under section 80IA(4). Accordingly we confirm the order of the CIT(A) and direct the AO to allow the deduction under section 80IA(4). - Decided in favour of assessee Disallowance under section 14A - Held that:- We find that so far as the disallowance of interest expenditure is concerned under Rule 8D(2)(ii), the same is not sustainable, because admittedly, the surplus funds with the assessee far exceeds the investments made and, therefore, in view of the ratio laid down by the Hon’ble jurisdictional High Court in the aforesaid cases, no disallowance can be made. Accordingly, we direct the AO to delete the same. So far as disallowance of indirect expenditure is concerned under Rule 8D(2)(iii), the same stands admitted by the Ld. Counsel, therefore the disallowance under section 8D(2)(iii) is confirmed. As regards the disallowance under section 14A under MAT provision, that is, under section 115JB, the disallowance as sustained under normal provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1031 of 2014 dated 23.12.2014 Madras High Court 4. The brief facts of the case are that, the assessee company is engaged in the business of providing warehousing services for container, container repair, container storage, packaging and un-packaging of all types of goods and merchandise, etc. It has commenced the activity of Container Freight Station (CFS) from the month of January, 2009. Such an activity was duly approved by Inland Port by the Ministry of Finance, Department of Revenue CBEC through its Circular. Accordingly, the assessee claimed that, income in respect of the same is eligible for deduction under section 80IA, because the said activity is in the nature of infrastructure facility as stipulated under Explanation to clause (4) of section 80IA. The assessment year 2009-10 was the first year of the claim which stood allowed in the assessment finalized under section 143(1)(a). During the year, the assessee had claimed the deduction of ₹ 18,69,48,980/- under section 80IA(4) and such a claim was duly accompanied continued in Form 10CCB. The AO has rejected the claim of deduction on various grounds which has been summari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent with CMA CGM Agencies India Private Limited wherein assessee is working as a contractor and agree to provide Container Freight Station (CFS) service as Cargo Container to be used, located at Nhava Seva, Raigarh. As per agreement Assessee is representing CMA CGM from this it is very clear that Assessee is acting as Contractor in respect of Container Freight Station (CFS) and as per amendment in Finance Act w.e.f. 2009 the contractors are not allowed to claim deduction u/s 80IA(4) Assessee is merely contractor not developer . 5. Before the Ld. CIT(A), detailed submissions were made wherein it was stated that the said claim is also supported by the decision of Hon ble Delhi High Court in the case of Container Corporation of India vs ACIT, reported in [2012] 346 ITR 140 and also the decision of ITAT Special Bench in the case of All-Cargo Global Logistic Ltd., [2012] 18 ITR (Trib) 106 Mumbai (SB). 6. The Ld. CIT(A) after analyzing the facts and nature of activities carried out by the assessee as well as the definition of Port Infrastructure Facility and relying upon decisions cited by the assessee, came to the conclusion that, assessee is entitled for deduction under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any other body established or constituted under any Central or State Act, it has entered into an agreement with the Central Government or a local authority or any other statutory body for developing or operating and maintaining or developing, operating and maintaining a new infrastructure facility and it has started or starts operating and maintaining the infrastructure facility on or after 1st day of April, 1995. The explanation defines the infrastructure facility to mean, inter alia, a port, airport, inland waterway, inland port or navigational channel in the sea. The word inland port was always there in clause (d). What was there prior to its substitution by Finance Act of 2007 with effect from 1st April, 2008, were the words or inland port . Now the word or is deleted, but the words are inland port or navigational channel in the sea . Thus, an inland port was always within the contemplation of the Legislature and it is treated specifically as a infrastructural facility. Therefore, to that extent Mr. Dastur is right in his submission. 40. Mr. Suresh Kumar would urge that when there is an agreement contemplated with the Central Government, then, a specific wri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commerce, Government of India would not constitute an agreement with the Central Government. Further, the Department of Revenue, Ministry of Finance, issued a Notification dated 1st January, 2006, notifying the assessee as custodian of imported and exported goods received at the container freight station. The various contentions raised in this regard have been referred to by the Commissioner, including that the Ministry of Commerce and Industries granted approval for setting up CFS facility for handling import and export cargo and that the acceptance of the terms and conditions constitute an agreement with the Central Government and all documents in relation thereto have been referred. The Commissioner in dealing with these conditions held that CFS facility of the assessee is not an infrastructure facility within the meaning of section 80-IA(4) as there is no agreement entered into with the Government and assessee. Therefore, this deduction cannot be claimed. The Tribunal noted these contentions and the findings, but relied upon the Special Bench decision in the case of All Cargo Global SRP 51/61 ITXA523.13.doc Logistics Ltd. The conclusion is that CFS is an inland port ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n infrastructure facility . The object of the Government was to strengthen and improve the country's infrastructure in general and the transport infrastructure in particular. Inland ports facilitate the transport infrastructure by taking care of the transport of the customs-cleared goods meant for export from the ICD to the sea-port and the imported goods directly from the sea-port to the ICD where they can be customs-cleared. When the entire Section was recast by the Finance Act, 1999 with effect from 1.4.2000 and even after several amendments were thereafter made to the Section, inland ports continued to enjoy the deduction as infrastructure facility. 11. The question before us is whether the income from ICDs qualify for the deduction under Section 80IA(4)(i) of the Act read with the Explanation (d). We may first notice that out of the total of 45 ICDs operated by the assessee, except two ICDs, all others were notified by the CBDT vide notification No. S.O.744(E) issued on 1st September, 1998 for the purpose of Section 80IA(12)(ca). It may be recalled that under this provision, the Board had the power to notify an infrastructure facility for the purpose of the Section. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 80-IA(4)(i)(b), as it existed prior to its substitution by the Finance Act, 2001. This circular fortifies the assessee's claim. 14. The next question that arises is whether the SRP 55/61 ITXA523.13.doc ICDs can be considered to be inland ports. There is no definition of an inland port in the Act. However, a port , which also qualifies for the deduction is defined in Section 3(4) of the Indian Ports Act, 1908 (Act 15 of 1908) to include also any part of a river or channel in which the said Act is for the time being in force. The word port is defined in T. Ramanatha Aiyar's Law Lexicon, 4th Edition (2010) in a number of ways. The most general meaning which is given is that it denotes a harbour or shelter to the vessels from a storm or as a place with a harbour where ships load or unload. It has also been defined in the commercial sense as an enclosed place where vessels load and unload goods for export or import. Commercially considered, a port is a place where vessels are in the habit of loading and unloading goods . The law lexicon also refers to a judgment of the Bombay High Court in the case of Amarship Management Pvt. Ltd. v. UOI, (1996) 86 ELT 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointing the places which alone shall be considered as inland container depots for the unloading of imported goods and the loading of exported goods. On 24th April, 2007 the following clarification was issued by the Central Board of Excise and Customs apparently in response to a query raised by the assessee. F. No. 450/24/2007-Cus.IV Government of India Ministry of Finance Department of Revenue Central Board of Excise Customs New Delhi, April 24th, 2007 To, Ms P. Alli Rani, Executive Director (Finance), Container Corporation of India Limited, CONCOR Bhawan, C-3, Mathura Road, Opp. Appolo Hospital, New Delhi-110076. Subject : Clarification regarding 'Inland Port' regarding Kindly refer to your letter CON/FA/128/Vol- 2/80IA/2003- 04 dated 18.04.2007 seeking clarification regarding Inland Port . 2. It is stated that as per Customs Act, 1962 section 2(12) defines Customs port as any port appointed under clause (a) of section 7 to be a customs port and includes Inland Container Depot (ICD) appointed under clause (aa) of section 7. Container Freight Stations (CFS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be safely concluded that the deduction admissible under sub-section (4) of section 80-IA can be claimed by both the ICDs and CFSs. 48. We do not think that the view taken by the Tribunal is in any way perverse or runs contrary to the language of subsection (4) of section 80-IA or the object of the Income Tax Act, 1961, as a whole. Once such a conclusion is reached, then, it is not necessary to refer to any other material, particularly any circulars of the Board or otherwise or the certificates issued by the authorities. Even their contents need not be referred to. We are of the view that the extensive reasoning in SRP 60/61 ITXA523.13.doc the judgment of the Division Bench of the Delhi High Court and which finds approval even of the High Court of Madras and with which we broadly agree that the substantial questions of law on both counts need to be answered in favour of the assessee and against the Revenue . The aforesaid decision and ratio of the Hon ble jurisdictional High Court as well as that of Delhi High Court is squarely applicable here where assessee is carrying out CGS activities which is nothing but infrastructure facility as defined under section 80IA( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strongly relied upon the order of the CIT(A). 13. After considering the aforesaid submission and on perusal of relevant material on record, we find that so far as the disallowance of interest expenditure is concerned under Rule 8D(2)(ii), the same is not sustainable, because admittedly, the surplus funds with the assessee far exceeds the investments made and, therefore, in view of the ratio laid down by the Hon ble jurisdictional High Court in the aforesaid cases, no disallowance can be made. Accordingly, we direct the AO to delete the same. 14. So far as disallowance of indirect expenditure is concerned under Rule 8D(2)(iii), the same stands admitted by the Ld. Counsel, therefore the disallowance under section 8D(2)(iii) is confirmed. As regards the disallowance under section 14A under MAT provision, that is, under section 115JB, the disallowance as sustained under normal provision shall be added to the book profit, therefore grounds raised in Cross objections for both the impugned assessment years stands party allowed. 15. In the result, both the appeal of the revenue stands dismissed and Cross objections of the assessee stands partly allowed. Order pronounced in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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