DCIT, NEW DELHI vs. M/S. CONTAINER CORPORATION OF INDIA LTD., NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B”, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER

I.T.A. No.748/DEL/2017 A.Y.: 2012-13 M/S CONTAINER CORPORATION DCIT, CIRCLE 4(1), OF INDIA LTD. VS NEW DELHI CONCOR BHAWA, C-3, MATHURA ROAD, OPP. APOLLO HOSPITAL, NEW DELHI – 110 076 (PAN: AAACC1205A) (ASSESSEE) (RESPONDENT) AND ITA NO. 2332/DEL/2017 A.Y. : 2012-13 DCIT, CIRLCE 6(2), M/S CONTAINER CORPORATION ROOM NO. 390, C.R. VS. OF INDIA LTD. BUILDING, CONCOR BHAWA, NEW DELHI C-3, MATHURA ROAD, OPP. APOLLO HOSPITAL, NEW DELHI – 110 076 (PAN: AAACC1205A) (ASSESSEE) (RESPONDENT)

Revenue by : Sh. S. Krishnan, Adv. Assessee by : Ms. Nidhi Srivastava, CIT(DR)

ORDER PER H.S. SIDHU : JM The Assessee has filed the Appeal and Revenue has filed the Cross Appeal, as aforesaid, against the impugned Order of the Ld. CIT(A)-2, New Delhi relevant to assessment year 2012-13. Since the issues are inter-connected in these cross appeals, hence, the

same were heard together and are being disposed of by this common order for the sake of convenience, by first dealing with Assessee’s appeal.

time before or during the hearing of this appeal.

6.1 As regards ground no. 1 raised in assessee’s appeal is concerned, we note that this issue is squarely covered by the decision of the Hon’ble Supreme Court of India in the case of CIT vs. Container Corporation of India Ltd. (2018) 404 ITR 297 (SC) in which the Hon’ble Supreme Court of India has adjudicated the similar issue against the Revenue vide para nos. 10 to 22, which are reproduced as under:-

“10. As the whole point in dispute revolves around the ICDs, it would be appropriate to have an understanding about the same. The ICDs function for the benefit of exporters and importers located in industrial centers which are situated at distance from sea ports. The purpose of introducing them was to promote the export and import in the country as these depots acts as a facilitator and reduce inconvenience to the person who wishes to export or import but place of his business is situated in a land locked area i.e., away from the sea. These depots reduce the inconvenience in import and export in the sense that it reduces the bottlenecks that are arising out of handling and customs formalities that are required to be done at the sea ports by allowing the same to be done at these depots only that are situated near to them. The term ICDs was inserted in 1983 under Section 2(12) of the Customs Act, 1962 which defines 'customs port' and by the provisions of Section 7(1)(aa) of the Customs Act,1962 power has been given to the Central Board of Excise and Custom(CBEC) to notify which place alone to be considered as Inland Container Depots for the unloading of imported goods and the loading of export goods by Notification in the official Gazette. 11. With the purpose of boosting country's infrastructure and specially the transport infrastructure, the Finance Act, 1995 which came into effect from 01.04.1996 brought an amendment to the provisions of Section 80-IA ofthe IT Act. Section 80-IA of the IT Act talks about deduction in respect of profits and gains from industrial undertaking or enterprises engaged in the infrastructure development etc. The said amendment for the first time brought a provision under which a percentage of profits derived from the operation of infrastructure facility was allowed a deduction while computing the income of the assessee.

A ten years tax concession allowed to the enterprises in accordance with the provisions of the Section subject to fulfillment of conditions given therein, which develops, maintains and operates any new infrastructure facility such as roads, highways, expressways, bridges, airports, ports and rail system or any other public facility of similar nature as notified. 12. The relevant portion of Section 80lA (as it stood then) reads as under: "Section 80-IA( 4A):This section applies to:--any enterprise carrying on the business of developing, maintaining and operating any infrastructure facility which fulfills the following conditions, viz., Section 80-IA(5) clause(ia): in the case of enterprise referred to in sub- section (4A) hundred percent of profits and gains derived from such business for the initial five assessment years and thereafter thirty per cent of such profits and gains." 13. The term infrastructure facility had also been defined which at the relevant time stood as follows:- "Section80-IA(l2)(ca): Infrastructure facility means:-a road, highway, bridge, airport, port or rail system or any other public facility of similar nature as may be notified by the Board in this behalf in Official Gazette;" The said provision gives the power to the Board to notify certain other enterprises which can avail the benefit of Section 80-IA of the IT Act, which do not fall within any of the specified categories but carries out activities of similar nature.

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 waterways or inland port; 17. It was contended on behalf of the appellant that the High Court erred in relying on the Notification issued by CBDT to hold that the enterprises holding ICDs are allowed to claim deductions under Section 80-IA of the IT Act. As the said power of the Board was specifically taken away by the amendment made by Finance Act, 2001, in light of the said amendment, the Notifications which were issued by the CBDT would cease to operate after the Assessment Year 2002-03. 18. The argument put forward by learned senior counsel for the appellant does not have much force as the said amendment is silent with regard to any effect it would have upon the Notifications issued earlier by the Board in due exercise of its power. Had it been the intention of the legislature that the Notifications issued by the Board earlier are of no effect after 2002-03, it would have had found a place in the said amendment. In the absence of the same, we are unable to concur with learned senior counsel that the Notifications which were issued in legitimate exercise of the power conferred on the Board would cease to have effect after the Assessment Year 2002-03.

existing eligible units if they fulfill the new conditions. 21. Moving further to the issue whether the ICDs can be termed as Inland Ports so as to entitle deduction under Section 80-IA of the IT Act. The term port, in commercial terms, is a place where vessels are in a habit of loading and unloading goods. The term 'Port' as is used in the Explanation attached to Section 80-IA(4) seems to have maritime connotation perhaps that is the reason why the word airport is found separately in the Explanation. Considering the nature of work that is performed at ICDs, they cannot be termed as Ports. However, taking into consideration the fact that a part of activities that are carried out at ports such as custom clearance are also carried out at these ICDs, the claim of the respondent herein can be considered within the term 'Inland port' as is used in the Explanation. It is significant to note that the word 'Inland Container Depots' was first introduced in the definition of ' Customs Port' as is given in Section 2(12) of the Customs Act, 1962, through amendment made by the Finance Act, 1983 with effect from 13.05.1983. 22. The term 'Inland Port' has been defined nowhere. But the Notification that has been issued by the Central Board of Excise & Customs (CBEC) dated 24.04.2007 in terms holds that considering the nature of work carried out at these ICDs they can be termed as Inland Ports. Further, the communication dated 25.05.2009 issued on behalf of the Ministry of Commerce and Industry confirming that the ICDs are Inland Ports, fortifies the claim of the

respondent herein. Though both the Notification and communication are not binding on CBDT to decide whether ICDs can be termed as Inland Ports within the meaning of Section 80-IA of the IT Act, the appellant herein is unable to put forward any reasonable explanation as to why these notifications and communication should not be relied to hold ICDs as Inland Ports. Unless shown otherwise, it cannot be held that the term 'Inland Ports' is used differently under Section 80-IA of the IT Act. All these facts taken together clear the position beyond any doubt that the ICDs are Inland Ports and subject to the provisions of the Section and deduction can be claimed for the income earned out of these Depots. However, the actual computation is to be made in accordance with the different Notifications issued by the Customs department with regard to different ICDs located at different places.”

6.1.1 We further note that the ground no. 1 is also covered by the decision of the Hon’ble Delhi High Court in assesse’s own case passed in ITA No. 917-918/2017, CM Appl. 39179-39180/2017 & 3916-39107/2017 vide order dated 31.10.2017 and the decision dated 07.05.2018 of the Hon’ble Supreme Court of India in the case of Pr. CIT vs. Container Corporation vide SLP (Civil) Diary No. 13966/2018 arising out of impugned final judgment and order dated 31.01.2017 in ITA No. 917/2017 passed by the Hon’ble High Court of Delhi at New Delhi of India, as aforesaid, wherein the Hon’ble Supreme Court of India has dismissed the Special Leave

Petition filed by the Department. The relevant portion of the Hon’ble Delhi High Court decision are reproduced hereunder:-

“4. The third question relates to the exemption under Section 80IA. The exemption claimed for the Inland Container Depot (ICD), Container Freight Stations (CFS) and rolling stock. Here again the Revenue’s contentions were rejected for previous years in Container Corporation of India Ltd. v. ACIT, 346 ITR 140. So far as the rolling stock is concerned, ITAT has relied upon its previous ruling.”

6.1.2 Respectfully following the above precedents, the addition confirmed by the Ld. CIT(A) is hereby deleted and accordingly ground no. 1 raised by the Assessee is allowed.

6.2 As regards ground no. 2 raised in assessee’s appeal is concerned, we note that this issue is squarely covered by the decision of the ITAT for the assessment year 2010-11 in assessee’s own case decided in ITA No. 186/Del/15 & 77/Del/15 vide para no. 10 to 11.2, which are reproduced as under:-

“10. Ground no. 3 raised by assessee is in respect of disallowance of depreciation on intangible assets being license acquired from Indian Railway for running container trains on Indian Railways.

10.1 It was submitted that an identical issue arose fro AY 2008-09 in ITA No. 1876/2012 wherein the issue was decided as under:-

non-refundable registration fee for 20 years towards license for running container trains on Indian Railways facilities in terms of policy statement dated 09.01.2006. According to that policy it was permitted to move various operators container trains on Indian Railways. The registration fee of applicants who are not eligible would be refundable without interest. No such refund has been received by the assessee and therefore, it is apparent that appellant has been granted that new license. According to that license,it is flexible permission to run trains between any pairs of trains to any points in the entire country and there will be no limit on number of trains on any of the routes. The above permission was valid for a period of 20 years and further extendable by 10 years. Such permission is transferable from one operator to another operator subject to rules and conditions. On reading of the above policy documents it is apparent that assessee has acquired a commercial right to operate trains on the Indian Railway Track for 20 years by payment of Rs. 50 crores and which is transferable. The Hon'ble Delhi High Court in case of Areva T&D India Ltd Vs. DCIT 345 ITR 421 has held that intangible assets includes business claims, business information, business records and assets which are invaluable for carrying on the business of the assessee. It was further held that the intangible assets were comparable to a license to carry on the existing business and in Page 12 of 21 absence of such intangible assets it would have been difficult for the assessee to carry on its business. Therefore, it was held that such intangible assets are eligiblefor 13

depreciation in terms of section 32(1)(ii) of the Act as under:-

“12. In the present case, it is seen that the assessee, vide slump sale agreement dated June 30, 2004, acquired, as a going concern, the transmission and distribution business of the transferor company with effect from April 1, 2004. As a result thereof, the running business of transmission and distribution was acquired by the transferee lock, stock and barrel minus the trade mark of the transferor which was retained by the transferor, for lump sum consideration of Rs. 44.7 crores. It is further seen that the book value of the net tangible assets (assets minus liabilities) acquired was recorded in the balance-sheet of the transferor as on the date of transfer as Rs. 28.11 crores. The saidassets and liabilities were recorded in the books of transferee at the same value as appeared in the books of the transferor. The balance payment of Rs. 16,58,76,000 over and above the book value of net tangible assets, was allocated by the transferee towards acquisition of bundle of business and commercial rights, clearly defined in the slump sale agreement, compendiously termed as "goodwill" in the books of account, which comprised, inter alia, the following : (i) business claims, (ii) business information, (iii) business records, (iv) contracts, (v) skilled employees, (vi) know-how. It is also observed that the Assessing Officer accepted the allocation of the slump consideration of Rs. 44.7 crores paid by the transferee, between tangible assets and intangible assets (described as goodwill) acquired as part of the running business. The Assessing Officer, 14

however, held that depreciation in terms of section 32(1)(ii) of the Act was not, in law, available on goodwill. The Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal approved the reasoning of the Assessing Officer thereby holding disallowance of depreciation on the amount described as goodwill. It was thus argued on behalf of the assessee-company that section 32(1)(ii) would mean rights similar in nature as the specified assets, viz., intangible, valuable and capable of being transferred and that such assets were eligible for depreciation. On behalf of the respondent it was argued that applying the doctrine of noscitur sociis the expression "any other business or commercial rights of similar nature" used in Explanation 3(b) to section 32(1) has to take colour from the preceding words "know-how, patents, copyrights, trade marks, licences, franchises". It was urged that the Supreme Court had clearly held in Techno Shares and Stocks Ltd. [2010] 327 ITR 323 (SC) that "Our judgment should not be understood to mean that every business or commercial right would constitute a "licence" or a "franchise" in terms of section 32(1)(ii) of the 1961Act".

marks, licences or franchises" but must be of similar nature as the specified assets. On a perusal of the meaning of the categories of specific intangible assets referred to in section 32(1)(ii) of the Act preceding the term "business or commercial rights of similar nature", it is seen that the aforesaid intangible assets are not of the same kind and are clearly distinct from one another. The fact that after the specified intangible assets the words "business or commercial rights of similar nature" have been additionally used, clearly demonstrates that the Legislature did not intend to provide for depreciation only in respect of specified intangible assets but also to other categories of intangible assets, Page 13 of 21 which were neither feasible nor possible to exhaustively enumerate. In the circumstances, the nature of "business or commercial rights" cannot be restricted to only the aforesaid six categories of assets, viz., know-how, patents, trade marks, copyrights, licences or franchises. The nature of "business or commercial rights" can be ofthe same genus in which all the aforesaid six assets fall. All the above fall in the genus of intangible assets that form part of the tool of trade of an assessee facilitating smooth carrying on of the business. In the circumstances, it is observed that in the case of the assessee, intangible assets, viz., business claims ; business information ; business records ; contracts ; employees ; and know-how, are all assets, which are invaluable and result in carrying on the transmission and distribution businessby the assessee, which was hitherto being carried out by the transferor, without any interruption. The aforesaid intangible assets are, 16

therefore, comparable to a licence to carry out the existing transmission and distribution business of the transferor. In the absence of the aforesaid intangible assets, the assessee would have had to commence business from scratch and go through the gestation period whereas by acquiring the aforesaid business rights along with the tangible assets, the assessee got an up and running business. This view is fortified by the ratio of the decision of the Supreme Court in Techno Shares and Stocks Ltd. [2010] 327 ITR 323 (SC) wherein it was held that intangible assets owned by the assessee and used for the business purpose which enables the access the market and has an economic and money value is a "licence" or "akin to a licence" which is one of the items falling in section 32(1)(ii) of the Act.

Tax Act. Therefore, ground No. 3 and 4 of the appeal of the assessee is allowed holding that the assessee has acquired intangible assets which is a valuable commercial right for Rs. 50 croresand same is eligible for depreciation u/s 32(1)(ii) of the Act. In view of this ground No. 3 and 4 of the appeal of the assessee are allowed with above direction.”

10.2. Ld.Counsel thus submitted that the issue is squarely covered in favour of assessee by an order passed by this Tribunal in assessee’s own case for Assessment Year 2008-09 and 2009-10 in ITA No.1876/Del/2012 and 6377/Del/2012, vide order dt. 18.01.2017.

10.3.On the contrary, Ld.CIT, D.R. (by way of written submissions) submitted that theA.O. rightly treated non-refundable registration fee of Rs.50 crores as deferred revenue expenditure whereas assessee has reflected it as an intangible asset, terming it as ‘License Fee’ and has claimed depreciation under the Act. 11.We have perused the submissions advanced by both the sides in the light of the records placed before us.This Tribunal for A.Y. 2008-09 in assessee’s own case vide order dated 18/01/2017 held that, commercial right acquired by assessee by way of this license for earningenduring benefit for a period of 20 years would amount to capital asset. It is also observed that this view of Tribunal derives support from decision of Hon’ble Delhi High Court in the case of Areva T&D India Ltd. vs. DCIT reported in 345 ITR 421.

11.1.Under such circumstances respectfully following the same view, we hold intangible asset acquired by assessee is eligible for depreciation @ 25% u/s 32(1)(ii) of the Act. 18

11.2.Accordingly ground raised by assessee stand allowed.” 6.2.1 Respectfully following the above precedent, we hold that assessee is eligible for depreciation @ 25% on the intangible asset acquired by it, hence, the same is allowed and accordingly, the ground no. 2 raised by the assessee is allowed.

6.3 As regards ground no. 3 raised in assessee’s appeal is concerned, we note that this issue is squarely covered by the decision of the ITAT for the assessment year 2010-11 in assessee’s own case decided in ITA No. 186/Del/15 & 77/Del/15 vide para no. 12 to 13.1, which are reproduced as under:-

“12.Ground No. 4 is in respect of disallowance of deduction on account of lease rent paid in advance against the land taken on long-term lease for business purposes on pro rata basis.

12.1.Ld.Counsel submitted that this issue is also covered by order of this Tribunal in assessee’s own case for Assessment Year 2008-09 and 2009-10 wherein following view has been taken:

“52.We have carefully considered the rival contentions and also noted the para extracted by Ld CIT(A) in para No. 7.1 of his order of AY 2004-05. The ld Assessing Officer has followed the decision of Hon’ble Bombay High Court in case CIT Vs. Indian Oil Corporation wherein premium paid on leasehold land is disallowed and also it was held that such premium said cannot be included in the cost of the building constructed thereon. The Ld.CIT(A) followed his own decision for AY 2004-05 which was in respect of amortization of leasehold land and it is not the issue of deprecation on leasehold land. The decision of Hon’ble Delhi High Court

relied upon by the Ld AR also do not apply to the facts of the ease because that decision also do not apply to the leasehold land. We are conscious about the difference between amortization of leasehold premium paid and equalization of lease charges and therefore both cannot be compared. It is also not ascertained by the lower authority whether the claim of the assessee on depreciation can be considered u/s 32(1) (ii) of the Income Tax Act or not and this fact is not available on record we set aside this ground of appeal of the revenue back to the file of Assessing Officer with a direction to the assessee to furnish the complete details of the claim of the assessee clearly bringing out the facts whether it is a claim of the depreciation or whether it is a claim of the allowability of expenditure.”

12.2.Ld. CIT DR did not object for the issue being set aside with a direction clearly bringing on the facts whether it is the claim of depreciation or whether the claim of allowability of expenditure.

13.We have perused the submissions advanced by both the sides in the light of the records placed before us. As there is no change in the factual circumstances, respectfully following the aforestated view taken by this Tribunal in assessee’s own case for Assessment Year 2008-09 and 2009-10, we set aside this issue to the file of Ld. AO with the direction to assessee to furnish all requisite details in respect of the claim of depreciation. Ld. AO shall then verify the details to determine whether the claim of assessee is allowable or not as per law.

13.1.Accordingly this ground raised by assessee stands allowed for statistical purposes.”

6.3.1 Respectfully following the above precedent, the issue in dispute is set aside to the file of the AO with the direction to assessee to furnish all requisite details in respect of the claim of depreciation. The AO shall then verify the details to determine whether the claim of the assessee is allowable or not as per law.

6.4 In the result, the Assessee’s appeal is allowed for statistical purposes.

REVENUE’S APPEAL

…“3. The second question urged is with respect to depreciation of claim in respect of assets not registered in the name of the assessee. Here the ITAT factually found that the assessee had paid all amounts to the transferor and had obtained possession. The assessee was also using the premises for its business 21

purposes. The determination of this question is, therefore, essentially factual. No question of law arises.

7.1 Respectfully following the above precedents, we uphold the order of the Ld. CIT(A) on the issues in dispute and reject the ground no.1, 2 & 3 raised by the Revenue.

7.2 In the result, the Revenue’s appeal is dismissed.

Sd/- Sd/-

[DR. B.R.R. KUMAR] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER

Date:16/12/2019

“SRB”