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TMI Blog2012 (12) TMI 1240X X X X Extracts X X X X X X X X Extracts X X X X ..... incorporated on 18-61998. The equity capital of the company is subscribed by another three companies by name M/s. PSA Corporation Ltd., M/s. South India Corporation(Agencies) Ltd. and M/s. Nur Investment and trading Pvt. Ltd. M/s. PSA Corporation Ltd. and M/s. Nur Investment and Trading Pvt. Ltd. are Singapore based companies. They hold equity share capital of the assessee company at 57.5% and 5% respectively. M/s. South India Corporation(Agencies) Ltd. is an Indian company holding the remaining 37.5% equity in the assessee company. 4. The assessee is engaged in the business of operating container terminals in Tuticorin Port. Earlier the Tuticorin Port Trust had invited bids from interested parties for issue of licence to construct and operate 7th Berth at Tuticorin Port on Build, Operate and Transfer (BOT) Scheme. In response to the invitation made by the Tuticorin Port Trust, the above mentioned three companies jointly made an application to the Tuticorin Port Trust to consider them for the award of licence. The Tuticorin Port Trust, after examining all technical and financial details and other eligibility criteria, issued a letter of intent to the consortium of these three comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 80IA was initially granted to the assessee company for the assessment years 2004-05, 2005-06 and 2006-07. 9. Thereafter, the assessing authority issued a notice under section 148 for the above three assessment years, stating the reason that income chargeable to tax had escaped assessments, inasmuch as the assessee was given the relief under section 80IA, for which the assessee is not entitled to. In reply to the notices issued under section 148, the assessee submitted its explanation in detail and contended that the deduction under section 80IA was granted to the assessee rightly and in accordance with law. But, the Assessing Officer declined to accept the explanations offered by the assessee and completed the income-escaping assessments under section 147 through his orders dated 26-12-2011. The Assessing Officer has withdrawn the deduction given to the assessee under section 80IA of the Act. 10. Following the above finding, the Assessing Officer completed the regular assessment under section 143(3) for the assessment year 2009-10 on 30-12-2011. In this regular assessment, the assessing authority has denied the assessee the benefit of deduction under section 80IA of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e part of the assessee to disclose fully and truly all material facts and the assessments were reopened after a period of four years and in such circumstances the reopening of the assessments under section 147 is bad in law. It is also the ground of the assessee that the claim under section 80IA made by the assessee in its returns was fully explained and further the claim was supported by the audit report furnished in Form 10CCB. 15. Shri S.Sridhar, the learned counsel appearing for the assessee, relied on the decision of the Hon'ble Supreme Court rendered in the case of CIT vs. Kelvinator of India Ltd., 320 ITR 561 and argued that it is necessary on the part of the Assessing Officer to have a reasonable belief that income has escaped assessment and the reason should be supported by tangible materials and the reasons must have a live link with the formation of belief, so as to reopen an assessment under section 147 of the Act. It is also necessary that there should be failure on the part of the assessee. This is because the reassessments in these cases have been made after a period of four years. The learned counsel submitted that none of the above conditions, highlighted by the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of CIT vs. Hindustan Tools & Forgings (P) Ltd., 306 ITR 209, in which case the Hon'ble Court has upheld the reassessment under section 147 to withdraw the excessive relief granted to the assessee under section 80HHC in the course of regular assessment. 17. We heard both sides in detail and considered the jurisdictional question whether the reopening of assessments under section 147 is justified in these cases relating to the assessment years 2004-05, 2005-06 and 2006-07. 18. Section 147 of the Income-tax Act, 1961 deals with the topic of income-escaping assessments. The law states that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned. But the above law relating to reopening of assessment is subject to a provision tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or not, which is evident from the expression that "it is believed that income chargeable to tax has escaped assessment". The assessing authority has no case that there was failure on the part of the assessee to disclose fully and truly all material facts necessary to examine the claim of deduction made under section 80IA(4). 22. In these circumstances we find that the belief of escapement of income relied on by the Assessing Officer is not supported by any tangible material. There is no failure on the part of the assessee to disclose fully and truly all material facts necessary to examine its claim of deduction under section 80IA(4). No fresh materials were available to the assessing authority to reopen the assessments under section 147. In these circumstances, we are of the considered opinion that the case of the assessee is supported by the decision of the Hon'ble Supreme Court rendered in the case of CIT vs. Kelvinator of India Ltd., 320 ITR 561. We feel that the reason stated to be relied on by the Assessing Officer to come to the belief that income chargeable to tax has escaped assessment is nothing but a change of opinion. 23. In the facts and circumstances of the case we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are being carried out without any corresponding investment. 27. When these reasons were put to the assessee company, explanations were offered by the assessee to substantiate its claim for deduction under section 80IA(4) in the following manner: (i) The assessee is a company registered in India. It is an Indian company. The assessee company was registered on 18-6-1998. The assessee company is the owner of the enterprise carrying on infrastructure development activities at Tuticorin Port. Accordingly, the enterprise is owned by a company registered in India and, therefore, satisfied the condition laid down in section 80IA(4)(i)(a) of the Act. The enterprise is owned by the assessee company and not by a consortium of foreign companies. (ii) Tuticorin Port Trust had invited applications from interested parties for award of licence to develop, operate and transfer 7th Berth at Tuticorin Port on Build, Operate and Transfer (BOT) Scheme. The operational period is thirty years, after which the 7th Berth will be fully transferred to the Tuticorin Port Trust. (iii) The three companies, namely, M/s. PSA Corporation Ltd., M/s. Nut Investment and Trading Pvt. Ltd and M/s. South India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 900 to 1800. New lighting masts have been provided. One existing mast has been modified. Developments are still going on. 28. After considering the reply filed by the assessee company, it seems that the assessing authority has not further pursued his objection that the assessee had not made any investment in its BOT project at Tuticorin Port. He has not explicitly stated so, but the said objection has not been pursued by the assessing authority. On the other hand, the assessing authority reiterated the other objection that the enterprise is not owned by a company registered in India. The assessing authority observed that the assessee company is formed by a consortium of two Singapore-based companies and one Indian company and they are the shareholders of the assessee company. The Singapore-based companies M/s. PSA Corporation Ltd. and M/s. Nur Investment and Trading Pvt. Ltd. hold 57.5% and 5% shares respectively in the assessee company. The balance of 37.5% shares only is held by the Indian company M/s. South India Corporation(Agencies) Ltd. Therefore, it is not a consortium of companies registered in India. 29. The Assessing Officer concluded that the enterprise is owned by a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity should be a company registered in India and this condition is fully satisfied by the assessee tobe eligible to claim deduction under section 80IA." 34. In order to consider the question of eligibility of the assessee company to claim deduction under section 80IA(4), it is necessary to extract the relevant provisions of law, edited for our limited purpose, as under: "Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. 80-IA(1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section(4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years. …… ……. (4) This section applies to- (i) any enterprise carrying on the business of …… developing, operating and mai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal presumption that it is owned by the shareholders of that company. The corporate status of a company is distinct and different from the shareholders constituting the company. Therefore it is not possible to hold that the property of a company is the property of the shareholders of that company. Therefore, in the present case, it is not possible in law to hold that the three shareholder companies are owning the BOT project operated by the assessee company at Tuticorin Port. 36. Section 80IA does not ignore the corporate juridical personality of a company registered under the Companies Act, 1956. The assessee company and the other three companies are in fact four different companies. All those four companies cannot be treated as one entity for the purpose of section 80IA(4)(i)(a). 37. The assessee is a company registered in India and is different from the three companies of the earlier consortium. The assessee company was incorporated in India on 18-6-1998. The licence was awarded by Tuticorin Port Trust only thereafter, i.e. on 15-7-1998. The licence was awarded to the assessee company in its own corporate status and not in the status of a progeny of the three companies earl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as the company are one and the same. In that sense the assessee has entered into a BOT agreement with Tuticorin Port Trust, which means the assessee as an enterprise carrying on the infrastructure development business has entered into such an agreement. Thus it satisfies sub-clause(b) of clause(i) of sub-section(4) of section 80IA. 42. As the assessee company and the enterprise are one and the same, it has also satisfied sub-clause(c) of clause(i) of sub-section(4) of section 80IA by starting its operations after the first day of April, 1995. 43. Therefore, we find that the assessee has satisfied all the three conditions as prescribed under sub-clauses(a), (b) and (c) of clause(i) of section 80IA(4). 44. There is another factor to be considered very seriously. Before shifting the benefit available to infrastructure development companies to Chapter VIA, the income as such was exempt under Chapter III as provided in section 10(23G). As per the provisions of law contained in section 10(23G), such profits and gains arising out of the business of infrastructure development would not form part of total income of the assessee. The said provision was omitted from the statute book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary of another company incorporated in India and the holding company alone will be entitled for the benefit under section 80IA. These are all far-fetched imaginations. The law is very simple as provided in section 80IA that the enterprise must be owned by a company incorporated in India and when that company incorporated in India is having only a single business of infrastructure development, the enterprise vis-à-vis the company remain one and the same. 47. There is no need for two corporate personalities; a company after another company, as contemplated by the Revenue. There is no revenue implication in the mechanism suggested by the Revenue. The assessee company itself is liable for taxation on its income arising from the enterprise of infrastructure development but for the deduction available under section80IA. If no such deduction is available, the assessee company itself is liable for taxation on its income arising out of the project at Tuticorin Port. There cannot be a levy of tax on the same income in the hands of another company who should own the assessee company. Once the income is taxed in the hands of the assessee as the subsidiary company, the same cannot be ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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