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Income Tax Appellate Tribunal, “D”, BENCH
Before: SHRI M.BALAGANESH, AM & SHRI RAM LAL NEGI, JM
आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in 1099/Mum/2018 & 1100/Mum/2018 for A.Yrs.2012-13, 2013-14 & 2014-15 respectively arise out of the order by the ld. Commissioner of Income Tax (Appeals)-10, Mumbai in appeal No.CIT(A)-10/DCIT/5(1)(2)/8/15-16, CIT(A)- 10/DCIT/5(1)(2)/516/15-16 & CIT(A)-10/ACIT/5(1)(2)/340/15-16 r dated 06/03/2015, 17/02/2016 & 06/12/2016 respectively (ld. CIT(A) in short)
M/s. Dahej Harbour & Infrastructure Ltd., against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 06/03/2015 by the ld. Dy. Commissioner of Income Tax-5(1)(2), Mumbai (hereinafter referred to as ld. AO). Since identical issues are involved in these appeals, they were heard together and are being disposed off by this consolidate order, for the sake of convenience.
The appeal of the assessee in A.Y.2012-13 is taken as lead case and the decision rendered thereon would apply with equal force for A.Y.2013-14 and 2014-15 also except with variance in figures.
2. The only issue to be decided is as to whether the revenue derived by the assessee from ship chandling charges and bunker supply charges would be eligible for deduction u/s.80IA of the Act.
We have heard rival submissions and perused the material available on record. The brief facts of this issue are that the assessee is a company engaged in business of development, maintenance, administration and operation of Jetty. In the case of the assessee, the Gujarat Maritime Board, the concerned Government Agency, has granted License to the assessee to administer, develop use and maintain the captive jetty at Port Dahej. The assessee has thus constructed, maintained and operated the said infrastructure facility (i.e. the Jetty), which is in the nature of a navigational channel in the sea. The assessee is entitled to deduction under section 80IA so far as the income derived from the business of developing, operating and maintaining the said Jetty for loading, unloading and handling of cargo at Port Dahej, is concerned. There is no dispute that with regard to the regular activity carried out by the M/s. Dahej Harbour & Infrastructure Ltd., assessee, it is eligible for deduction u/s.80IA of the Act and the same has been granted by the ld. AO except with regard to the following incomes derived by the assessee for the three years in dispute:- Amount (Rs.) Sr. No. AY2012-13 AY 201 3-14 AY 2014-15 Particulars 1 9,61.284/- 5,13.013/- 4,06,213/- Sale of water 2 84,559/- 4,03,139/- 3,19,193/- Ship Chandling Charges 3 69,248/- 1.26.278/- 2,01,065/- Bunker Supply Charges (Fuel) 60,000/- 60,000/- 64,180/- Misc Income (use of crane) 11,75,091/- 10,42,430/- 9,90,651/- Total 3.1. Out of the aforesaid items, the issue in dispute before us is only with regard to ship chandling charges and bunker supply charges. The assessee claimed before the lower authorities that the said income derived relates to business profit from infrastructure facility carried out by the assessee and are inextricably linked with its main business and accordingly, it is eligible for deduction u/s.80IA of the Act. The ld. AO held that these items are not profits derived from an activity eligible for deduction u/s.80IA of the Act as the said income were derived from the activities other than landing and shipping which does not fall under infrastructure activity carried out by the assessee. The assessee before the ld. CIT(A) had contended that these incomes were derived in the normal course of its business and had a direct first degree nexus with its infrastructure facility. The ld. CIT(A) by placing reliance on the order of his predecessor for A.Y.2010-11 upheld the action of the ld. AO in not granting deduction u/s.80IA of the Act in respect of aforesaid two receipts that are in dispute before us.
M/s. Dahej Harbour & Infrastructure Ltd., 3.2. At the outset, we find that the dispute in A.Y.2010-11 was with regard to eligibility of deduction u/s.80IA of the Act in respect of storage and warehousing facility income derived by the assessee and not ship chandling charges and bunker supply charges. Hence, the reliance placed by the ld. CIT(A) on the order of the A.Y.2010-11 is completely misconceived and contrary to facts in dispute before us. The ld. AR before us placed on record the details of activities carried out under ship chandling activity and bunker supply charges which are reproduced as under:-
NOTE FOR SHIP CHANDLING ACTIVITY SHIP CHANDLING ACTIVITY A. For Sailing Ships Various Items are Required on the Board of the Ship Like • provisions, bond, medicine • cabin stores - cloth and linen • deck, engine & electrical store • supply &. repair of Isa/ffa & solas items • charts & publications • container lashing materials (class approved) • supply / installation of radar / gyro compass • supply/Installation of auto pilot/ a. S. S & all other navigational equipment's B. CREW on Board of Ships (Seafarers) Seafarers at sea work, in tough environmental conditions, often require good amount of physical strength. The food for seafarer thus needs to be of the best quality with all the necessary ingredients required to support a healthy body and mind. The quality and the quantity of the meals onboard are dependent on a myriad of factors, some of which are controllable, whereas and others are not. Thus the supply of various provisions to the Ship and Seafarer( Crew of the Ship) is known as ship Chandling. SHIP CHANDLING PROCEDURE 1. Ship gives requirement /indents ( store items/consumables /ship spares/provisions etc) to ship owners or to their company.
M/s. Dahej Harbour & Infrastructure Ltd.,
2. Ship owners or shipping company engages a Registered local agency (ship chandler) as per ships arrivals in next port, for supplying ship store/supply requirements on their behalf on chargeable basis.
3. Ship Chandler arranges all the items of supply and completes all regulatory (custom) permissions for ship store supply. 4. Ship chandler or supplier approaches the terminal (DHIL) requesting permission allowing him to enter and use the terminal facility for supplying the ship stores. 5. DHIL Terrninal collects charges/fee from ship chandler against the supply for using DHIL terminal facility. If the Port/Jetty Does not have the Chandling Facilities, the Ship generally Does not arrive on those port/Jetties and therefore the activity of the Chandting is inextricably linked to the Business Port/Jetty.
NOTE FOR BUNKER SUPPLY SHIP BUNKER SUPPLY (FUEL/OIL ) ACTIVITY/PROCEDURE Bunkering is the supplying of fuel for use by ships. The ship owner or ship operator is required to ensure that the ship is "seaworthy". Seaworthiness requires not only that the ship is sound and properly crewed, but also that it is fully fuelled (or "bunkered") at the start of the voyage. SHIP BUNKER SUPPLY (FUEL/Oil) PROCEDURE 1. Ship gives requirement /indents ( HSD/FUELOIL) for running the ship engines generators etc , to ship owners or to their company.
Ship owners or shipping company engages a Registered local agency (ship bunker supplier) as per ships arrivals in next port, for supplying ship (BSD/ Fuels/Oils) requirements on their behalf on chargeable basis .
3. Supplier arranges bunkers/fuel oils for supply and completes all regulatory (custom) permissions for ship bunker supply.
Supplier approaches the terminal (DH1L) requesting permission allowing him to enter and use the terminal facility for supplying the ship bunker(HSD/Fuels/Oils).
DHIL terminal collects charges/fee from ship bunker supplier against the supply for using DHIL terminal facility .
M/s. Dahej Harbour & Infrastructure Ltd.,
Thus for smooth running of ships it is necessary for Ports/Jetty to facilitate the Bunker supply facility. Without Bunker Facility being available at the Jetty's, the ships will not come to Jetty as the Ship losses its Soundness and health the activity of the Chandling is in-extricably linked to the Business of Port/ Jetty.
3.3. From the perusal of the above detailed note given by the ld. AR which are also supported by invoices raised thereon after suffering due service tax thereon, we find that income derived from ship chandling activity and bunker supply charges are inextricably linked with the main activity of development, maintenance, administration and operation of jetty by the assessee. We find that the above note clearly describes the first degree nexus with the main infrastructure facility carried out by the assessee. Hence, we hold that the same would also be eligible for deduction u/s.80IA of the Act. Accordingly, the grounds raised by the assessee are allowed.
4. In the result, appeals of the assessee are allowed.
Order pronounced in the open court on this 04/09/2019