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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA & SHRI RAMLAL NEGI
स िवाई की तारीख/Date of Hearing : 05.03.2019 घोर्णा की तारीख /Date of Pronouncement :17.05.2019 आदेश / O R D E R CO. No.51/Mum/2019 PER RAMLAL NEGI,JM These are the appeal and cross objection filed by the revenue and the assessee respectively against the order dated 15.12.2017 passed by the Commissioner of Income Tax(Appeals)- 4, Mumbai whereby the Ld. CIT(A) has partly allowed the appeal filed by the assessee against the assessment order passed u/s. 143(3) of the Income Tax Act (the Act).
Brief facts of the case are that the assessee company engaged in the business of providing warehousing services for goods and containers, container storage, packing and unpacking of all types of goods/material, transportation and related services, filed its return of income for the assessment year under consideration declaring total income of Rs. 2,65,29,490/- after claiming deduction u/s. 80IA amounting to Rs. 59,26,95,222/-.
3. Since, the case was selected for scrutiny AO issued notice u/s. 143(2) and 142(1) of the Act. In response to the said notices Authorised Representative (AR) of the assessee appeared before the AO and filed the details called for. Since the assessee had claimed deduction u/s. 80IA (4) of the Act, AO asked the assessee to justify the claim of deduction and also asked to show cause as to why the claim under section 80IAdisallowed. In fact this was the 5th assessment year of claim of deduction the first year being AY 2010-11 and the deduction was disallowed in the first year holding that the assessee’s container freights station (CFS) is not eligible infrastructure facility as provided in explanation 2 section 80IA(4) of the Act. On the same line the AO rejected the claim of deduction u/s. 80IA of the Act. Accordingly, the assessment order was passed u/s. 143(3) of the Act, inter alia making disallowance of deduction claimed aforesaid and determined the total income of the assessee at Rs. 62,11,14,870/- under the normal provisions of Act and Rs. 62,33,47,707/- u/s. 115JB of the Act. The assessee challenged the assessment order inter alia on the ground that the AO has wrongly rejected the claim of the 2 | P a g e CO. No.51/Mum/2019 assessee made u/s. 80IA of the Act. The Ld. CIT(A) after hearing the assessee allowed this ground of assessee and directed the AO to allow the claim. The revenue is in appeal against the said findings of the Ld. CIT(A).
4. The revenue has challenge the impugned order passed by the Ld. CIT(A) on the following effective ground:- 1. "Whether on the facts and in the circumstances of the case and in law, the Ld, CIT(A) was right in holding that the assessee is entitled for deduction u/s 80IA of the IT Act, 1961 even though activities undertaken by the assessee do not fall within clause (d) of the Explanation to section 80IA(4) defining the term Infrastructure facility?"
At the outset the Ld. Counsel for the assessee submitted that this ground of appeal
is covered in favour of the assessee by the order of the ‘A’ Bench of the Mumbai Tribunal rendered in assessee’s own case AY 2013-14. Since this issue is covered in favour of the assessee there is no infirmity in the order passed by the Ld. CIT(A). Hence there is no any merit in the appeal of the revenue.
6. On the other hand the Ld. DR did not controvert the submission made by the Ld. Counsel that the Tribunal has decided the identical issue in favour of the assessee in assessees own case for the assessment year 2013-14. However, the Ld. DR supported the assessment order.
7. We have gone through the material on record including the orders relied by the authorities below and the order of the Tribunal. The only grievance of the revenue is that the Ld. CIT(A) has wrongly allowed the claim of assessee u/s. 80IA of the Act. As pointed out by the Ld. Counsel for the assessee, the coordinate Bench has decided identical issue in the assessee’s own case for the AY 2013-14 holding as under:-
CO. No.51/Mum/2019 6. We have heard the rival submissions and perused the relevant materials on record. In the case of M/s Container Corporation of India Ltd. (supra), the operating activities of the assessee were mainly carried out at its Inland Container Depots (ICDs), Container Freight Stations (CFSs) and Port Side Container Terminals (PSCTs) spread all over the country. The issue in the above appeal was with regard to the deduction claimed u/s 80IA on the profits earned from ICDs and on rolling stocks. Their Lordships of the Hon'ble Supreme Court, dismissing the appeal filed by the revenue, held as under: "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.
The term 'Inland Port' has been defined nowhere. But the Notification that has been issued by the CentralBoard 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 CO. No.51/Mum/2019 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.
In light of the forgoing discussion, we are of the view that judgment of the High Court does not call for any interference and, hence, the appeal is accordingly dismissed." 6.1 Facts being identical, we follow the above decision and dismiss the 1st ground of appeal
8. The coordinate Bench has decided the identical issue in favour of the assessee in assessee’s own case for the AY 2013-14 and the decision of the Ld. CIT(A) is in accordance with the decision of the coordinate Bench. Since there is no material change in the facts of the present appeal, we do not find any infirmity in the order passed by the Ld. CIT(A). We accordingly uphold the findings of the Ld. CIT(A) has dismiss the sole ground of appeal of the revenue. CO No. 51/Mum/2019 The assessee has filed the present cross objection on the following grounds as under:-
1. On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the disallowance made by Assessing Officer under section 14A of the Act r.w.r 8D of Income Tax Rules amounting to Rs. 18,90,160/-.
2. On the facts and circumstances of the case and in law, the learned CIT(A) erred in making addition in Book Profit u/s 115JB of the Act of Rs. 18,90,160/- on account of disallowance under section 14A of the Act.
3. On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the disallowance made by Assessing Officer of facility usage charges of Rs. 53,28,302/- while computing deduction under section 80IA and thus reducing the Assessee's claim under section 80IA by Rs. 53,28,302/-.
CO. No.51/Mum/2019 2. Vide ground No 1 the assessee has challenged the action of the Ld. CIT(A) in confirming the disallowance made by the AO u/s 14A read with rule 8D. The Ld. Counsel submitted before us thatthe ITAT has dealt with the identical issue in assessee’s own case for the AY 2013-14 and the Tribunal has set aside the findings of the Ld. CIT(A) confirming the addition u/s 14A r.w.r. 8Dand sent the issue back to the AO with the direction to pass the order afresh in accordance with the decision of the ITAT Mumbai rendered in the assessee own case for the AY 2012-13.
On the other hand the Ld. DR relied upon the order passed by the authorities below.
We have gone through the record in the light of the submissions of the parties. As pointed out by the Ld. Counsel for the assessee the coordinate Bench of the Tribunal has dealt with this ground of appeal
and set aside the order of the Ld. CIT(A) confirmingdisallowance made u/s. 14A r.w.r. 8Dand sent the issue relating to addition u/s. 14A r.w.r. 8Dback to the AO for deciding the issue afresh. The finding of the coordinate Bench is reproduced here under:-
11. We have heard the rival submissions and perused the relevant material on record. In respect of the disallowance under Rule 8D(2)(ii), we find from audited accounts that the assessee had more own funds than investments. Therefore, following the decision in HDFC Banks Ltd. (supra) and Reliance Utilities & Power Ltd. (supra) the disallowance of Rs.18,05,184/- made by the AO under Rule 8D(2)(ii) is deleted. 11.1 Regarding the disallowance of Rs.16,17,152/- made by the AO under Rule 8D(2)(iii), we may refer here to the latest decision of the ITAT 'D' Bench, Mumbai in assessee's own case for AY 2012-13 (ITA No. 5606/Mum/2016) which reads as under: "
15. As regards the disallowance u/s. 8D(2)(iii), it is noted that earlier the assessee has not pressed this issue and, hence, the addition @ 0.5% of the average value of the investment was confirmed by the ITAT in the earlier year. Now, CO. No.51/Mum/2019 the Id. Counsel of the assessee has prayed that the assessee needs to be granted relief in this regard with reference to the decision of the ITAT Special Bench in the case of ACIT vs. Vireet Investment P. Ltd. vide order dated 16.06.2017, wherein it was expounded that the investment which did not yield exempt income should not enter into the computation while arriving at the average value of investment The inference hence is that the disallowance u/s. 8D(2)(iii) should be made only with reference to the investment which earned exempt income. Hence, the Id. Counsel of the assessee pleaded that while making the disallowance in this regard, the ratio from the Special Bench decision should be followed.
Upon careful consideration, we find ourselves in agreement with the submissions of the Id. Counsel of the assessee. We direct the Assessing Officer to make the computation of disallowance u/s. 8D(2)(iii) of the Act by excluding the investment which have not earned any exempt income during the year in the computation in accordance with the afore-said Special Bench decision." Facts being identical, we direct the AO pass a fresh order by following the above order of the Tribunal, after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevant documents/evidence and the above working of disallowance before the AO. Thus the 2nd ground of appeal
is allowed for statistical purposes.
5. The coordinate Bench has dealt with the identical issue in assessee’s own case for the assessment year 2013-14 and the Bench has set aside the order passed by the Ld. CIT (A) confirming disallowance u/s 14A read with rule 8D and send the issue back to the AO for deciding the same afresh as per the directions of the coordinate Bench issued in the assessee’s own case A.Y. 2012-13. The Ld. DR did not point out any change in the material facts pertaining to this issue in the present appeal. Hence, we respectfully following the decision of the coordinate Bench set aside the findings of the Ld. CIT (A) and send the issue back CO. No.51/Mum/2019 to the AO for deciding the same as per the directions given by the coordinate Bench in the assessee’s own case for the A.Y. 2012-13 referred above. We accordingly allow this ground of cross objection for statistical purposes.
6. Vide Ground No. 2, the assessee has challenged the action of the Ld. CIT(A) in making addition ofRs. 18,90,160/- on account of disallowance u/s. 14A of the Act in book profit u/s. 115JB of the Act. The Ld. Counsel submitted before us that this ground of cross objection is covered by the decision of the special bench of the Delhi Tribunal in the case of ACIT vs. Vireet Investment Pvt. Ltd. 82 taxmann.com 415(Delhi), therefore the order of the Ld. CIT(A) is liable to be set aside.
The Ld. DR on the other hand supported the findings of the Ld. CIT(A).
We have perused the material on record in the light of the submissions of the parties. In the case of ACIT vs. Vireet Investment Pvt. Ltd. (supra), the Special Bench of the ITAT has held that the computation under Clause (f) of Explanation (1) to section 115JB is to be made without resorting to computation as contemplated u/s 14A read with rule 8D. In the said case, the Assessing Officer while computing the book profit u/s 115JB made addition of the amount of disallowance made u/s 14A. The CIT (A) held that as per Clause (f) of Explanation (1) to section 115JB the only expenditure relating to income other than income assessable u/s 10(38) could be added while calculating book profit u/s 115JB. On cross appeal the contention of the revenue was that the disallowance calculated u/s 14A read with rule 8D should be incorporated in Clause (f) of Explanation (1) to section 115JB on the ground that the scope of both the provisions are similar.
On the other hand the contention of the assesseewas that while considering the average value of investment, only those investments CO. No.51/Mum/2019 were to be taken into consideration which had yielded exempt income and not those investments, which did not yield any exempt income during the year.
The question before the Bench was that whether the amount of expenditure relatable to exempt income as contemplated in Clause (f) to Explanation (1) to section 115JB should be arrived at by resorting to the provisions of section 14A or not. The Special Bench after hearing the rival contention held that the computation under Clause (f) of Explanation (1) to section 115JB is to be made without resorting to the computation as contemplated u/s 14A read with rule 8D of the Income Tax Rules.
Since this issue is covered by the order passed by the special Bench of the Delhi Tribunal, we set aside the findings of the Ld. CIT(A) and direct the AO to compute the book profit of the assessee in accordance with the decision of the Special Bench of the Tribunal in the case of Vireet Investment Pvt. Ltd. (supra).
Vide Ground No. 3, the assessee has challenged the action of the Ld. CIT(A) in confirm the disallowance made by AO in confirming the disallowance made by AO of facility usage charges of Rs. 53,28,302/- while computing u/s. 80IA and thereby reducing the assessee’s claim u/s. 80IA by Rs. 53,28,302/- The Ld. Counsel submitted that this ground of cross objection is coveredby the order of Tribunal rendered in assessee’s own case for the AY 2013-14 (supra). The coordinate Benchhas restored the identical issue to the file of the AO for passing order afresh after giving opportunity of being heard to the assessee observing that the assessee has not filed the relevant documents and related data with regard to the rent received from Vodaphone India P. Ltd., on account of usage of its CFS area for setting up mobile tower.
As pointed out by the Ld. Counsel for the assessee the coordinate Bench has set aside the identical issue to the file of the CO. No.51/Mum/2019 AOto deciding the issue afresh. The relevant paras of the order passed by the coordinate bench read as under:- 21. We have heard the rival submissions and perused the relevant materials on record. In the case of Meghalaya Steel Ltd. (supra), the assessee was engaged in the business of manufacture of steel and Ferro silicon. For the year 2004-05, it claimed deduction u/s 80IB on the profits and gains of its industrial undertaking which included transport subsidy, interest subsidy and power subsidy received from the Government. The AO held that the amounts received by the assessee as subsidies did not qualify for deduction u/s 80IB(4) of the Act. The Hon’ble Supreme Court, dismissing the appeal filed by the Revenue, held that as all the four subsidies were revenue receipts, which were reimbursed to the assessee for elements of cost relating to manufacture or sale of their products, there could certainly be said to be a direct nexus between profits and gains of the industrial undertaking or business, and reimbursement of such subsidies. It held that the subsidies were only in order to reimburse, wholly or partially, costs actually incurred by the assessee in the manufacturing and selling of its products. In the instant case, the assessee has received Rs.2,00,000/- as rent from Vodafone India Pvt. Ltd on account of usage of its CFS area for setting up mobile tower. It also received Rs. 6,93,000/- as service charges for providing office space area, furniture & utility facility to customers in CFS area. In the instant case, we find that the assessee has not filed before the AO the relevant contracts and connected data with regard to the above claim. Therefore, we restore the matter to the file of the AO for making an order afresh after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the connected documents/evidence before the AO.
The coordinate Bench has restored the identical issue to the file of AO in assessee’s appeal for the assessment year 2013-14 for passing order afresh after giving a reasonable opportunity of being heard to the assessee on the ground that the assessee has not filed the relevant documents and data with regard to the claim of the assessee before the AO. Since, there is no change in the facts of the present case, we respectfully following the decision of the coordinate Bench, set aside the order passed by the Ld.CIT