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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI PAWAN SINGH, JM
O R D E R Per Shamim Yahya, A. M.: This appeal by the Revenue and cross objection by the assessee arises out of the order of the ld. Commissioner of Income Tax (Appeals) dated 28.07.2016 and pertains to the assessment year 2012-13.
CO No.33/Mum/2018 Revenue’s appeal:
The grounds of appeal read as under:
"On the facts and in the circumstanced of the case and in law, the Ld. CJT(A) erred in directing the AO to allow the claim of deduction u/s. 80IA(4) of the I.T. Act, 1961 amounting to Rs. 80,55,84,323/- relying on the decision of the Ld. CIT(A) and the decision of the Hon’ble Jurisdictional High Court in the case of CIT-II, Thane v/s. Continental Warehousing corporation alongwith other cases in & 1969/2013 dated 21.04.2015 and Hon. Jurisdictional ITAT decision in the case of All Cargo Global Logistics Ltd. v/s. DCIT, ITA No. 5018 to 5022 and 5059/M/10 dated 06.07.2012."
At the outset, in this case, the ld. Counsel of the assessee submitted that the issue involved is squarely covered in favour of the assessee by the decision of the ITAT in assessee’s own case in and ITA No. 611/Mum/2014 for the assessment year 2011-12 vide order dated 04.08.2016. The ld. Counsel of the assessee submitted that the short issue in dispute is the eligibility of the assessee for claiming deduction u/s. 80IA(4) of the Act. He submitted that the Tribunal has decided the issue in favour of the assessee following the Hon'ble jurisdictional High Court issue of identical issue.
Per contra, the ld. Departmental Representative did not dispute the proposition that the issue is squarely covered in favour of the assessee.
Upon careful consideration, we note that this tribunal in assessee’s own case in the afore-said order has observed as under:
8. After considering the relevant finding given in the impugned order as well as decisions relied upon by the Ld. Counsel, we find that it is an undisputed fact that assessee company is engaged in the providing "Container Freight Station"
CO No.33/Mum/2018 (CFS) which has been duly approved as Inland Port' by Ministry of Finance, Department of Revenue, CBEC in its Circular. CFS has been defined as a common user facility with public authority status equipped with fixed installations and offering services for handling and temporary storage of import/ export laden and empty containers carried under customs transit by any applicable mode of transport placed under customs control. All the activities related to clearance of goods for home use, warehousing temporary admissions, re-export, temporary storage for onward transit and outright export, trnas-shipment, take place from such stations.
Hon'ble Delhi High Court in the case of Container Corporation India Ltd. (supra) where the assessee carried out activities of Inland Container Depot; Central Freight Stations and port Containers' Terminals, the Hon'ble Court held that the profit derived from such activity is eligible for deduction under section 80IA(4). Our Hon'ble jurisdictional High Court following the aforesaid decision of Hon'ble Delhi High Court has reiterated the same view.
Thereafter, the tribunal referred to the observation of the All Cargo Global Logistics Ltd. Finally, the tribunal concluded as under:
The aforesaid decision and ratio of the Hon'ble jurisdictional High Court as well as that of Delhi High Court is squarely applicable here where assessee is carrying out CGS activities which is nothing but infrastructure facility as defined under section 80IA(4). Accordingly respectfully following the same, we confirm the order of the CIT(A) and direct the AO to allow the deduction under section 80IA(4). Thus, ground raised by the revenue does not stand and as such we dismiss the same. Resultantly, appeal of the revenue stands dismissed.
Since the facts are identical and it is not the case that the Hon'ble jurisdictional High Court has reversed the afore-said decision of the ITAT in the assessee’s own case.
We respectfully follow the same. Accordingly, we uphold the order of the ld. Commissioner of Income Tax (Appeals).
In the result, the appeal by the Revenue stands dismissed.
CO No.33/Mum/2018 Assessee’s Cross Objection:
The grounds of appeal read 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 of Rs. 22,32,147/- under section 14A of the Act r.w.r 8D of Income Tax Rules.
2. On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the disallowance of Rs. 22,32,147'/- as per section 14A of the Act r.w.r 8D of Income Tax Rules while calculating Book Profit u/s 115JBoftheAct.
10. On this issue, the Assessing Officer has noted that the assessee has earned exempt income and it has not made any disallowance u/s. 14A of the Act. The Assessing Officer was not convinced by the explanation of the assessee. He made the following disallowance:
1. Under Rule 8D(2)(ii) Rs.15,61,317/- 2. Under Rule 8D(2)(iii) Rs.6,70,830/- Total disallowance was made at Rs.22,32,147/-
This disallowance was also to be done while computing the book profit u/s. 115JB of the Act.
Upon the assessee’s appeal, the ld. Commissioner of Income Tax (Appeals) has confirmed the order.
Against the above order, the assessee has filed a cross objection.
We have heard both the counsel and perused the records. As regards the disallowance u/s. 8D(2)(ii), the ld. Counsel of the assessee submitted that the identical issue was decided in favour of the assessee in the above said ITAT order, by accepting
CO No.33/Mum/2018 that the assessee had huge surplus/interest free funds, which far exceeded the investments made. He submitted that the ITAT had followed the Hon'ble Bombay High Court decision in the case of Reliance Utilities and HDFC Bank. He further mentioned to the submissions before the ld. Commissioner of Income Tax (Appeals) in which it was mentioned that the interest free funds exceeded the investment made. Hence, the ld. Commissioner of Income Tax (Appeals) pleaded that the following the same ratio, the interest disallowance should be deleted.
In this regard, the ld. Departmental Representative submitted that in this case there is a clear finding by the ld. Commissioner of Income Tax (Appeals) that interest bearing funds have been utilised for earning exempt income.
In rejoinder, the ld. Counsel of the assessee submitted that this funding is qua activity resulting in exemption u/s. 80IA(4) and this is not qua earning of dividend income.
Upon careful consideration, we find that there is a considerable cogency in the submissions of the ld. Counsel of the assessee. It is not disputed that the assessee has interest free funds far exceeding the investment made. The issue involved is hence held to be covered in favour of the assessee by the afore-said decision of the Tribunal in assessee’s own case, which duly followed the ratio from the Hon'ble jurisdictional High Court decision as referred above.
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 CO No.33/Mum/2018 investment was confirmed by the ITAT in the earlier year. Now, the ld. 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 ld. 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 ld. 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.
As regards the computation of section 115JB, in this regard, we find that in the same decision, the Special Bench has expounded that the disallowance u/s. 14A cannot be made in computing the deduction u/s. 115JB of the Act. The ld. Counsel of the assessee accepted that the disallowance u/s.115JB in this case should also be made in accordance with the computation hereinabove and accepted the same. The Assessing Officer is directed accordingly.
CO No.33/Mum/2018 18. In the result, the cross objection filed by the assessee stands partly allowed.
In the result, the appeal by the Revenue (in ) stands dismissed and the cross objection filed by the assessee (in CO No.33/Mum/2018) stands partly allowed.
Order pronounced in the open court on 27.06.2018