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Income Tax Appellate Tribunal, “B” BENCH, CHENNAI
Before: SHRI DUVVURU RL REDDY & SHRI S. JAYARAMAN
आदेश /O R D E R
PER S. JAYARAMAN, ACCOUNTANT MEMBER:
The Revenue filed this appeal against the order of Commissioner of Income Tax (Appeals)-6, Chennai in 6/2016-17 dated 26.04.2017 for assessment year 2013-14.
:-2-: ITA No. 1724/Mds/2017
M/s. Indian Corporate Business Centre Limited, the assessee, is engaged in the business of warehousing and clearing and forwarding station. While making the assessment for assessment year 2013-14, the AO noticed that the assessee company made an investment of Rs. 1,33,01,973/- in its financial statements. Since, this investment is capable of earning dividend income, the AO invoked the provisions of section 14A r.w.r. 8D and disallowed Rs. 66,510/-. On an appeal, the assessee submitted that it has not made any fresh investments during the year, the opening and the closing balance of the investment remains same, it has not earned any exempt income and in the absence of any exempt income, there cannot be any disallowance u/s. 14A as per the ratio of the jurisdictional High Court decision in the case of Redington India Limited vs Addl. CIT reported in [2017], 77 Taxmann.com 257, wherein it has been held that the disallowance u/s. 14A cannot be made then the assessee has not received any exempt income etc. Following the jurisdictional High Court decision, supra, and the decision in the case of CIT vs Chettinad Logistics reported in [2017] 98 CCH 151, the CIT(A) allowed the appeal.
Further, the AO held that the assessee is engaged in the business of Container Freight Station (CFS) and ware housing and its operating income consist of Container Freight Station (CFS) handling charges, warehousing
:-3-: ITA No. 1724/Mds/2017 charges, insurance charges and NOC charges. The other income consist of interest income and others. The AO held that insurance and NOC charges do not form the core business of the assessee and as such are not eligible for deduction u/s. 80IA. Further, the AO denied deduction u/s. 80IA for the reasons that CFS cannot be termed as the infrastructure facility under the provisions of section 80IA. Since, CFS was specifically categorized as ‘any other public facility’ vide CBDT’s notification no. 10682 dated 01.09.1998, after the amendment to section 80IA, with effect from 01.04.2002, this notification is no longer operative. The decision of Hon’ble Delhi High Court in the case of Container Corporation of India reported in [2012] 21 taxmann.com 317 (Delhi) holding Inland Container Depots (ICDs) to be Ports has not been accepted by the Department and an SLP has been filed. The assessee has not entered into an agreement with Government in terms of section 80IA(a)(i). Obtaining a certificate from the Chennai Port Trust does not mean agreement with the Government and compliance with the stipulations of section 80IA(4)(i).
The decision of Hon’ble Madras High Court in the case of Commissioner of Income Tax vs. AL Logistics (P) Limited reported in [2015] 55 taxmann.com 283 (Mad.) has not been accepted by the Department and an SLP has been filed. Aggrieved, the assessee filed an appeal before the CIT(A).
:-4-: ITA No. 1724/Mds/2017
Before the CIT(A), the assessee, inter alia, explained that in the CFS business, the assessee receives two types of charges : (i) handling charges which are one time for each freight consignment and includes container sealing charges and container stuffing charges and (ii) NOC charges which are nothing but storage charges and are dependent upon the period for which the container is stored in the CFS facility. Therefore, the entire NOC charges relate to storage at the CFS facility. Out of the handling charges Rs. 3,07,22,523 related to CFS. This has been duly taken into account in the computation of the deduction under section 80IA as well as in the Auditors certificate in Form 10CCB.
4.1 It further submitted that the warehousing charges and insurance charges pertain to the customs bonded warehousing business of the assessee and the assessee has not claimed deduction under section 80IA in respect of them. The deduction u/s. 80IA has been claimed on the basis that the CFS is an extended arm of the port. The Assessing Officer has relied on the decision of the Hon’ble ITAT in Container Corporation of India Limited which had been reversed by the Delhi High Court reported in [2012] 21 taxmann.com 317 (Delhi) and that the deduction u/s. 80IA by :-5-: ITA No. 1724/Mds/2017 CFS has been upheld by the jurisdictional Madras High Court in CIT vs A.L.
Logistics P Ltd. reported in [2015] 55 taxmann.com 283 (Mad). The learned Assessing Officer has merely stated that the department has not accepted these decisions and SLPs had been filed.
4.2 With regard to the AO’s observation that an agreement had not been entered into with the government, the assessee relied on the Madras High Court decision in para 7 and 8 that: “Thus it is evident that the proposal of the assessee was accepted by the government on certain conditions which were duly complied with by the assessee. There may not be any specific agreement but the sequence of events clearly shows that the assessee was providing CFS facility in accordance with the conditions laid down by the government. In such circumstances there is no need to insist for specific execution of agreement.” The assessee, therefore submitted before the CIT(A) that the deduction claimed u/s. 80IA relates entirely to the income derived entirely from the CFS business, duly supported by the Audit Report in Form 10CCB which cannot be disregarded and the assessee’s claim for deduction u/s. 80IA is fully supported by the decision of the Hon’ble Madras High Court.
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On due consideration, the CIT(A) held as under:
“i. The Hon’ble Madras High Court in its decision in the case of AL Logistics P Ltd. (Supra) has categorically held that ICD/CFS is an infrastructure facility for the purpose of section 80IA of the Act. The judicial decision of Hon’ble Jurisdictional High Court is respectfully followed. ii. The Hon’ble Madras High Court has further held that once a CFS facility is set up in accordance with the conditions laid down by the Government, there is “no need to insist for the specific execution of agreements” with the Government. iii. The Auditor in Form 10CCB has certified the correctness of the claim made u/s. 80IA of the Act, and warehousing charges and insurance charges pertaining to custom bonded warehousing business have not been included for the purpose of claim u/s. 80IA of the Act. iv. There are two decisions of Hon’ble Delhi High Court in the case of M/s. Container Corporation of India (supra) and of the Hon’ble Madras High Court in the case of AC Logistics (P) Ltd (supra) in the favour of the appellant As on date, there is no contrary decision on the issue available from any other High Court, and these decisions have not been reversed by the Hon’ble Supreme Court.
In view of the facts and circumstances as discussed above, the disallowance of the claim of section 80IA made by the AO in the assessment order stands deleted. This ground is allowed.”
Aggrieved, the Revenue filed this appeal contending primarily, that the decision of the Hon’ble Madras High Court in the case of Redington (India) Limited vs Addl. CIT in TCA No. 520 of 2013 dated 23.12.2016, has not been accepted by the Department. The decision of the Hon’ble ITAT
:-7-: ITA No. 1724/Mds/2017 on the similar issue in the case of M/s. EIH Associated Hotels Limited (2013-TOIL-796-ITAT-MAD, dated 17.07.2013) has not been accepted by the Department and further appeal in ICA No. 227 of 2014 is pending before the Hon’ble High Court. The CIT(A) erred in deleting the disallowance made u/s. 80IA of the Act relying on the decision of Hon’ble Delhi High Court in the case of M/s. Container Corporation of India and Hon’be Madras High Court in the case of M/s. AC Logistics (P) Ltd. The decision of the Hon’ble Delhi High Court in the case of M/s. Container Corporation of India has not been accepted by the department and further SLP has been filed before the Hon’ble Supreme Court.
The DR canvassed the case on the lines of grounds of appeal. Per contra, the AR supported the order of the CIT(A) and relied on the judgments on which the CIT(A) relied on his decision.
8. We heard the rival contentions and gone through the relevant materials. We find that on the disallowance u/s. 14A r.w.r. 8D, on the undisputed facts, the CIT(A) has applied the ratios of the Jurisdictional High Court’s decision in the cases of Redingtion (India) Ltd vs ACIT and CIT vs Chettinad Logistics Private Limited. On the issue of the deduction
:-8-: ITA No. 1724/Mds/2017 claimed u/s. 80IA, the CIT(A) on the indisputed facts, applied the ratios of the jurisdictional High Court decision in the case of AL Logistics Pvt Ltd and the Hon’ble Delhi High Court decision in the case of Container Corporation of India Ltd. Further, the CIT(A) also held that as on date there is no controversial decision on the issue available from any other High Court and these decisions have not been reversed by the Hon’ble Supreme Court.
The Revenue has not disputed the factual findings and the application of ratios recorded by the CIT(A). Hence, the order of the CIT(A) does not require any interference. The appeal of the Revenue is dismissed.
In the result, the Revenue’s appeal is dismissed.
Order pronounced on Wednesday, the 27th day of December, 2017 at Chennai.