M/S BOTHRA SHIPPING SERVICES PVT. LTD.,KOLKATA vs. ADDL./JOINT/DY./ASSTT. COMMISSIONER/ITO, NATIONAL E-ASSESSMENT CENTRE, DELHI

Grounds of appeal raised for both the assessment years are reproduced as under:- AY 2015-16 AY 2016-17 Bothra Shipping Services Pvt. Ltd. 2 Grounds of appeal for Assessment Year 2015-16 “1. That on the facts and circumstances of the case and in law, the Ld. DRP erred in affirming the action of Ld. AO in disallowing deduction claimed u/s 801A (4) of the Act.

That on the facts and circumstances of the case and in law, the Ld. DRP erred in affirming the action of Ld. AO in denying the benefit u/s 80- IA(4) of the Act by observing that the assessee does not have any agreement with specified authority without appreciating the fact that the agreement entered into by assessee with KSPL was as per the terms of the parent Concession Agreement between KSPL & Government of AP, and with the knowledge of the Gov. of Andhra Pradesh, as such, the assessee could not be denied deduction u/s 80-IA(4).

That on the facts and circumstances of the case and in law, the Ld. DRP erred in affirming the action of Ld. AO in not considering the fact that the assessee had produced the Port Certificate granted by the specified authority which certified that the infrastructure facility developed by the assessee is an integral part of the Port and that the Port Certificate in itself would amount to agreement with government, thereby satisfying the condition prescribed in clause(b) of Section 801A(4) (i).

That on the facts and circumstances of the case and in law, the Ld. DRP erred in affirming the action of Ld. AO in denying the benefit u/s 80- IA(4) of the Act without appreciating the fact that the appellant's case is squarely covered by the order of the Hon'ble Hyderabad Tribunal in the case of DCIT vs. Belair Logistics [2015 (5) TMI 387-ITAT Hyderabad].

Without prejudice to the above, for the purposes of deduction under section 801A (4)(i), Kakinada Sea Port Limited should be considered to be a statutory authority as it is performing statutory functions on behalf of the Government of Andhra Pradesh, and as such, an agreement entered into by the Appellant with KSPL should be treated as sufficient compliance of the conditions of Section 801A (4).

Without prejudice to the above, on the facts and circumstances of the case and in law, the Ld. DRP erred in affirming the action of the Ld. Assessing Officer in denying the claim of deduction in terms of the first proviso to section 801A(4)(i) by observing that the conditions specified therein were not fulfilled.

That on the facts and circumstances of the case and in law, the Ld. DRP erred in affirming the action of Ld. AO in denying the benefit u/s 80- IA(4) of the Act, without appreciating the fact that the Appellant had duly produced a Port Certificate granted by the Concerned Port Authority that the infrastructural facility is a part of the port within the meaning of Section 80- IA(4) of the Act read with Circular No. 10/2005, and as such, is eligible for deduction.

Without prejudice to the above, that on the facts and circumstances of the case and in law, the Ld. DRP erred in affirming the action of Ld. AO in denying the benefit u/s 80-IA(4) of the Act, without appreciating that condition specified in clause (b) of 801A(4)(i) is not mandatory in nature, as held by the Hon'ble Bombay High Court in the case of United Liner Agencies AY 2015-16 AY 2016-17 Bothra Shipping Services Pvt. Ltd. 3 of India (P) Ltd [ITA No. 2462 of 2013], and as such, the appellant is eligible for deduction under Section 80-IA(4) of the Act read with the Agreement entered into with M/s. KSPL.

Without prejudice to the above, on the facts and circumstances of the case and in law, the Ld. DRP erred in denying claim of deduction in terms of the first proviso to section 801A(4)(i) by observing that there is no condition to transfer the infrastructural facility to the GoAP or Specified Authority without considering the fact that this condition has been deleted by the Finance Act, 2001. 10. That on the facts and circumstances of the case and in law, the Ld. DRP erred in affirming the action of Ld. AO in disallowing interest of Rs. 5,85,392/- on late payments of TDS u/s 40 of the Act.

Your appellant craves leave to add to, amend or alter or delete any of the above grounds of appeal.”

That on the facts and circumstances of the case and in law, the Ld. DRP erred in affirming the action of Ld. AO in denying the benefit u/s 80- IA(4) of the Act by observing that the assessee does not have any agreement with specified authority without appreciating the fact that the agreement entered into by assessee with KSPL was as per the terms of the parent Concession Agreement between KSPL & Government of AP, and with the knowledge of the Gov. of Andhra Pradesh, as such, the assessee could not be denied deduction u/s 80-IA(4).

That on the facts and circumstances of the case and in law, the Ld. DRP erred in affirming the action of Ld. AO in not considering the fact that the assessee had produced the Port Certificate granted by the specified authority which certified the infrastructure facility developed by the assessee is an integral part of the Port and that the Port Certificate in itself would amount to agreement with government, thereby satisfying the condition prescribed in clause(b) of Section 801A(4)(i).

That on the facts and circumstances of the case and in law, the Ld. DRP erred in affirming the action of Ld. AO in denying the benefit u/s 80- IA(4) of the Act without appreciating the fact that the appellant's case is squarely covered by the order of the Hon'ble Hyderabad Tribunal in the case of DCIT vs. Belair Logistics [2015 (5) TMI 387-ITAT Hyderabad].

Without prejudice to the above, for the purposes of deduction under section 80IA(4)(i), Kakinada Sea Port Limited should be considered to be a statutory authority as it is performing statutory functions on behalf of the Government of Andhra Pradesh, and as such, an agreement entered into by AY 2015-16 AY 2016-17 Bothra Shipping Services Pvt. Ltd. 4 the Appellant with KSPL should be treated as sufficient compliance of the conditions of Section 80IA(4).

Without prejudice to the above, on the facts and circumstances of the case and in law, the Ld. DRP erred in affirming the action of the Ld. AO in denying the claim of deduction in terms of the first proviso to section 80IA(4)(i) by observing that the conditions specified therein were not fulfilled.

That on the facts and circumstances of the case and in law, the Ld. DRP erred in affirming the action of Ld. AO in denying the benefit u/s 80- IA(4) of the Act, without appreciating the fact that the Appellant had duly produced a Port Certificate granted by the Concerned Port Authority that the infrastructural facility is a part of the port within the meaning of Section 80- IA(4) of the Act read with Circular No. 10/2005, and as such, is eligible for deduction.

Without prejudice to the above, that on the facts and circumstances of the case and in law, the Ld. DRP erred in affirming the action of Ld. AO in denying the benefit u/s 80-IA(4) of the Act, without appreciating that condition specified in clause (b) of 80IA(4)(i) is not mandatory in nature, as held by the Hon'ble Bombay High Court in the case of United Liner Agencies of India (P) Ltd [ITA No. 2462 of 2013], and as such, the appellant is eligible for deduction under Section 80-IA(4) of the Act read with the Agreement entered into with M/s. KSPL.

Without prejudice to the above, on the facts and circumstances of the case and in law, the Ld. DRP erred in denying claim of deduction in terms of the first proviso to section 801A(4)(i) by observing that there is no condition to transfer the infrastructural facility to the GoAP or Specified Authority without considering the fact that this condition has been deleted by the Finance Act, 2001. 10. That on the facts and circumstances of the case and in law, the Ld. DRP erred in affirming the action of Ld. AO in disallowing interest of Rs. 24,43,834/-on late payments of TDS u/s 40 of the Act.

Without prejudice to the above, on the facts and circumstances of the case and in law, the Ld. DRP erred in affirming the action of Ld. Assessing Officer without appreciating the facts that the interest on late payment of TDS is Rs. 1,96,354/- instead of Rs. 24,43,834/-. Therefore, if any, disallowance is made the same should be restricted to Rs. 1,96,354/-.

That on the facts and circumstances of the case and in law, the Ld. DRP erred in affirming the action of the Ld. AO in disallowing interest of Rs. 7,96,317/- on late payments of Income Tax u/s 40 of the Act.

That on the facts and circumstances of the case and in law, the Ld. DRP erred in affirming the action of the Ld. AO without appreciating the fact that the Ld. AO has grossly erred in making reference to TPO by invoking condition (b) of para 3.3 of Circular 3/2016 without considering the fact that the DRP is not appellate authority and thus condition is not satisfied for AY 2015-16 AY 2016-17 Bothra Shipping Services Pvt. Ltd. 5 making reference to TPO. Hence, the reference to TPO is bad in law and consequently, the entire consequential transfer pricing and assessment proceeding is bad-in-law, time-barred and liable to be quashed.

Your appellant craves leave to add to, amend or alter or delete any of the above grounds of appeal.”

In the two appeals, there are common grounds of appeal relating to disallowance of deduction claimed u/s 80IA(4) of the Act. For both the Assessment Years, grounds in this respect are from Ground Nos. 1 to 9. For disposing off these appeals, we will take the facts on the basis of Assessment Year 2015-16 and the findings will apply mutatis mutandis for the appeal for Assessment Year 2016-17. All other grounds for both the Assessment Years, are not pressed by assessee for which relevant documents is placed on record. Accordingly, Ground No. 10 for Assessment Year 2015-16 and Ground Nos. 10 to 13 for Assessment Year 2016-17, are dismissed as not pressed.

In respect of the issue relating to the claim of deduction u/s 80IA(4) of the Act, we observe that assessee has taken several grounds covering various dimensions on the disallowance made, all of which converge into giving rise to core issue of fulfillment of prescribed conditions by the assessee to claim deduction u/s 80IA(4) of the Act, which is a profit-linked incentive. We will thus, deal with the core issue as aforesaid.

Brief facts of the case as culled out from the records are that the Government of Andhra Pradesh ("GoAP") had entered into an agreement with Kakinada Sea Port Limited ("KSPL") vide Concession Agreement dated 19.03.1999 for the operation of three existing berths, develop and operate one more berth and operation, maintenance and management of common facilities of the entire port through private participation. The role of KSPL is more particularly defined in Para 3.1 of the concession agreement. KSPL has been appointed as a Nodal agency by the GoAP to take over the existing port and also develop, operate and maintain further infrastructure facilities including new berths. AY 2015-16 AY 2016-17 Bothra Shipping Services Pvt. Ltd. 6

Thereafter, GoAP had entered into Supplementary Agreement dated 28.01.2009 whereby it had given permission to KSPL to develop new berths. Accordingly, KSPL has developed Berth No 5. 5. 2. After that, KSPL had entered into an agreement with the assessee on 19.04.2012 for the development of the “8 MMTPA Mechanised Coal Handling System for Unloading and Rail Despatch” (in short, Mechanised Coal Handling System) in Kakinada Deep Water Port at Berth No. 5 and its backup area. Thereafter, assessee requested the Custom Authorities to give permission for construction and operation of Mechanised Coal Handling System. In response to the same, the Commissioner of Central Excise, Customs and Service Tax, Visakhapatnam - II Commissionerate, Visakhapatnam has accorded the permission vide letter dated 01.02.2013. 5. 3. After receiving permission, assessee developed the aforesaid infrastructure facility. Thereafter, a Certificate was issued by the Port Officer, Port Department, GOAP dated 11.08.2015 wherein it is stated that the '8 MMTPA Mechanised Coal Handling System' is an infrastructural facility and a part of the Kakinada Deep Water Port, Kakinada.

The new infrastructure facility was developed, maintained and operated by the assessee, therefore, it claimed deduction u/s 80IA(4) of the Act for AY 2015-16 and AY 2016-17. 5. 5. In accordance with clause 9 of the Concession Agreement between GOAP and KSPL, the coal terminal will be taken over by GOAP at the expiry of concession period. KSPL has issued letter in this regard dated 02.02.2021 which has been signed by the assessee as well.

However, ld. AO and ld. DRP has disallowed the claim under section 80IA(4) on the ground that the conditions prescribed under sub-clause (b) of section 80IA(4)(i) of the Act is not fulfilled because there is no direct AY 2015-16 AY 2016-17 Bothra Shipping Services Pvt. Ltd. 7 agreement between the assessee and the Central Government or a State Government or a local authority or any other statutory body. Hence, these appeals before the Tribunal.

Before adverting on the core issue, let us first apprise ourselves of the relevant provisions of the Act contained in Section 80IA(4), which is reproduced as under:- “[Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. 80-IA. (1) ******************** (2) **************************** (2A) ************************** (3) *************************** (4) This section applies to— (i) any enterprise carrying on the business [of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining] any infrastructure facility which fulfils all the following conditions, namely :— (a) it is owned by a company registered in India or by a consortium of such companies [or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act;] H:\My Drive\Orders - Dragon & Self\'javascript:void(0);' (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995: Provided that where an infrastructure facility is transferred on or after the 1st day of April, 1999 by an enterprise which developed such infrastructure facility (hereafter referred to in this section as the transferor enterprise) to another enterprise (hereafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise AY 2015-16 AY 2016-17 Bothra Shipping Services Pvt. Ltd. 8 would have been entitled to the deduction, if the transfer had not taken place. Provided further that nothing contained in this section shall apply to any enterprise which starts the development or operation and maintenance of the infrastructure facility on or after the 1st day of April, 2017. [Explanation.—For the purposes of this clause, H:\My Drive\Orders - Dragon & Self\'javascript:void(0);'"infrastructure facility" means— (a) a road including toll road, a bridge or a rail system; (b) a highway project including housing or other activities being an integral part of the highway project; (c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system; (d) a port, airport, inland waterway, inland port or navigational channel in the sea;”

From perusal of the above provision, it is noted that there are three substantive conditions required to be fulfilled in order to avail the benefit of deduction u/s 80IA(4) of the Act. The first one under sub-clause (a) being the undertaking should be owned by a registered Indian company or a consortium of Indian companies or any corporation or body corporate formed under any Indian statute. Meaning thereby any foreign entities or bodies corporate are not eligible to avail the benefit of this profit-linked deduction. In the facts of the present case, it is undisputed that assessee company is a registered Indian company who has developed the facility and is therefore fulfilling the first condition prescribed in Section 80IA(4) of the Act. Also, the third condition under sub-clause (c) which stipulates the date for commencement of the infrastructure facility is complied with. Assessee had put to use the impugned infrastructure facility from 13/10/2013 as certified by the Port Officer in its certificate.

The second condition vide sub-clause (b) is that the undertaking which is being developed, developed & operated or developed, operated & maintained has AY 2015-16 AY 2016-17 Bothra Shipping Services Pvt. Ltd. 9 to be pursuant to an agreement entered into with either (a) Central Government, (b) State Government, (e) local authority or (d) any other statutory body. The language employed in this condition is plain & unambiguous. Now the question which is required to be answered is whether the agreement between the assessee company (BSSPL) and Kakinada Sea Ports Ltd. (KSPL) satisfies the second condition prescribed under Section 80IA(4) of the Act.

Ld. CIT(DR) has placed on record a written submission dated 16.12.2021. It is stated by him that the undisputed factual position in the present case is that the agreement of assessee is with KSPL. From the RoC data available in the public domain, it is observed that KSPL is an unlisted public non-government company. Accordingly, the agreement with KSPL cannot be said to be either with Central Government or State Government or local authority or any other statutory body. According to him, it is undeniable that this second condition contained in Section 80IA(4) is a substantive one and cannot be said to be directory or procedural. Opposing the submission furnished by the assessee, according to him, the only case which has been made out is that the provisions of the Section 80IA is a deduction provision and therefore should be construed liberally.

With the aforesaid background, submissions and position of law, we look at the terms and conditions contained in the concession agreement entered into by the Government of Andhra Pradesh and International Sea Ports PTE, Ltd. Singapore (hereinafter ‘ISPL’), dt. 19/03/1999 along with two supplementary agreements entered by way of Government of Andhra Pradesh and Kakinada Sea Ports Ltd., (hereinafter ‘KSPL’), dt. 25/08/2003 and 28/01/2009, copies of all these agreements are placed in the paper book. The primary agreement is between Government of Andhra Pradesh and ISPL, wherein Clause 2.9. contains provision for formation of Special Project Company (SPC), which reads as under:-

By the provision of this Clause, a SPC was created in the name of Cocinada Port Company Ltd. (CPCL) incorporated by ISPL, who assigned all its rights, titles, benefits in the concession agreement to CPCL by assignment deed dt. 02/04/1999 executed by ISPL in favour of CPCL. Subsequently, CPCL changed its name to Kakinada Sea Ports Ltd. (KSPL) on 18/09/2001, for which fresh certificate of incorporation consequent to conversion u/s 31 and 44 of the Companies Act, 1956, was issued by the