DCIT 2(1), MUMBAI vs. AMEYA LOGISTICS P .LTD, MUMBAI

The brief facts of the case are that, the assessee company is engaged in the business of providing warehousing services for container, container repair, container storage, packaging and un-packaging of all types of goods and merchandise, etc. It has commenced the activity of “Container Freight Station” (CFS) from the month of January, 2009. Such an activity was duly approved by ‘Inland Port’ by the Ministry of Finance, Department of Revenue CBEC through its Circular. Accordingly, the assessee claimed that, income in respect of the same is eligible for deduction under section 80IA, because the said activity is in the nature of “infrastructure facility” as stipulated under Explanation to clause (4) of section 80IA. The assessment year 2009-10 was the first year of the claim which stood allowed in the assessment finalized under section 143(1)(a). During the year, the assessee had claimed the deduction of Rs.18,69,48,980/- under section 80IA(4) and such a claim was duly accompanied continued in Form 10CCB. The AO has rejected the claim of deduction on various grounds which has been summarized by the Ld. CIT(A) in the following manner:- (i) Container Freight Station (CFS) is not covered by definition of Infrastructure facility u/s 80IA(4).

Before the Ld. CIT(A), detailed submissions were made wherein it was stated that the said claim is also supported by the decision of Hon’ble Delhi High Court in the case of Container Corporation of India vs ACIT, reported in [2012] 346 ITR 140 and also the decision of ITAT Special Bench in the case of All-Cargo Global Logistic Ltd., [2012] 18 ITR (Trib) 106 Mumbai (SB).

The Ld. CIT(A) after analyzing the facts and nature of activities carried out by the assessee as well as the definition of Port Infrastructure Facility and relying upon decisions cited by the assessee, came to the conclusion that, assessee is entitled for deduction under section 80IA, because ‘CFS’ are ‘Inland Port’ which are one of the infrastructure facilities as covered under section 80IA. Thus, the claim under section 80IA(4) stood allowed by the Ld. CIT(A).

On the other hand, Ld. DR strongly relied upon the order of the AO.

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” (CFS) which has been duly approved as ‘Inland Port’ 7 ITA No. : 6110/Mum/2014 ITA No. : 6111/Mum/2014 CO No.:35/Mum/2016 CO No.:36/Mum/2016 अमेया लोजीइि�ट�स �ाइवेट �ल�मटेड Ameya Logistics P Ltd 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.

Mr. Suresh Kumar would urge that when there is an agreement contemplated with the Central Government, then, a specific writing to this effect is necessary which means a document and a mere consent or approval in writing would not suffice.

In the present case, what the Tribunal and in Special Bench decision has held is that there may be a reference made to a Board clarification dated 6th January, 2011, and prior circulars dated 16th December, 2005 and 23rd June, 2006 were considered and which clarify that inland container depots and container freight stations are not ports located on any inland water way river or canal and, therefore, they cannot be classified as inland ports for the purpose of section 80-IA(4). Equally, the certificate issued by the JNPT having been withdrawn, the deduction will not be permissible.

However, after considering these contentions, what the Special Bench observes is that the Delhi High Court's view in the case of Container Corporation of India Ltd. would enable it to conclude that ICD may not be a port but it is an inland port. The case of Container SRP 49/61ITXA523.13.doc Freight Station (CFS) is similarly situated in the sense that both carry out similar functions viz. warehousing, customs clearance and transport of goods from its location to the sea-ports and vice versa by rail or by trucks in containers. The issue is no longer res integra.

The Tribunal also in the judgment under appeal followed this view of the Special Bench and that of the Container Corporation of India (supra).

The findings to which our attention has been invited by Mr. Suresh Kumar in Appeal No.523 of 2013 arising out of the Tribunal's order dated 31st August, 2012, pertaining to assessment year 2008-09 in the case of Continental Warehousing Corporation indicate that the said assessee had informed the Assessing Officer that JNPT had issued a certificate dated 13th July, 2006, to it in accordance with Point No.3 of CBDT circular No.10 dated 16th December, 2005, However, this letter / certificate was withdrawn by the JNPT on 5 th October, 2007. Secondly, the assessee company has not entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body. Therefore, the condition was SRP 50/61 ITXA523.13.doc not fulfilled. The Commissioner in the appellate order had before him the ground and while dealing with the same, he found that the approval granted by the Ministry of Commerce, Government of India would not constitute an agreement with the Central Government. Further, the Department of Revenue, Ministry of Finance, issued a Notification dated 1st January, 2006, notifying the assessee as custodian of imported and exported goods received at the container freight station. The various contentions raised in this regard have been referred to by the Commissioner, including that the Ministry of Commerce and Industries granted approval for setting up CFS facility for handling import and export cargo and that the acceptance of the terms and conditions constitute an agreement with the Central Government and all documents in relation thereto have been referred. The Commissioner in dealing with these conditions held that CFS facility of the assessee is not an infrastructure facility within the meaning of section 80-IA(4) as there is no agreement entered into with the Government and assessee. Therefore, this deduction cannot be claimed. The Tribunal noted these contentions and the findings, but relied upon the Special Bench decision in the case of All Cargo Global SRP 51/61 ITXA523.13.doc Logistics Ltd. The conclusion is that CFS is an inland port as it carries out functions of warehousing, customs clearance and transport of goods from its location to sea-port and vice versa by rail or by trucks in containers and, therefore, its income is eligible to deduction under section 80-IA(4). We have before us a communication from the Government of India, Ministry of Commerce and Industry dated 28 th December, 2011, which is addressed to the President of the CFS Association of India. It takes note of 10 ITA No. : 6110/Mum/2014 ITA No. : 6111/Mum/2014 CO No.:35/Mum/2016 CO No.:36/Mum/2016 अमेया लोजीइि�ट�स �ाइवेट �ल�मटेड Ameya Logistics P Ltd their grievance and states that the matter was examined in the light of the guidelines and its norms for setting up of inland container depot / container freight station in India. As per the present norms, operators of these depots and stations who were issued a letter of intent for setting up the same do not require to execute an agreement with the Central Government.

Even with regard to this issue we find that the circular dated 16th December, 2005, firstly clarifies that there are certain conditions, including the agreement but pertinently on and from the assessment year 2002-03 structures at the ports for storage, loading and unloading etc. will be included in the definition of port for purposes of section SRP 52/61 ITXA523.13.doc 10(23G) and 80-IA of the Income Tax Act, 1961, if the condition that the concerned port authority has issued a certificate that these structures form part of the port is fulfilled. However, when the Delhi High Court was considering this question it referred not only to the factual position but the specific substantial question of law and the activity of the assessee before it carried out mainly on its ICD's (Inland Container Deports), Central Freight Stations and Port Terminals. The assessee had 45 container depots spread over the country. It is in the business of transporting containerised cargo. It may be concerned with the public sector undertaking and functioning directly under the administrative control of the Ministry of Railways, but the activity of the assessee is carried out mainly on the Inland Container Depot, Central Freight Stations and Port Container Terminals spread all over the country. The assessee has a total 45 Inland Container Depots. The Division Bench of the Delhi High Court then concluded as under : "10. Thus it was for the first time from the assessment year 1999-2000 that inland ports started enjoying the deduction under Section 80IA as an "infrastructure facility". The object of the Government was to strengthen and improve the country's infrastructure in general and the transport infrastructure in particular. Inland ports facilitate the transport infrastructure by taking care of the transport of the customs-cleared goods meant for export from the ICD to the sea-port and the imported goods directly from the sea-port to the ICD where they can be customs-cleared. When the entire Section was recast by the Finance Act, 1999 with effect from 1.4.2000 and even after several amendments were thereafter made to the Section, inland ports continued to enjoy the deduction as infrastructure facility.

The question before us is whether the income from ICDs qualify for the deduction under Section 80IA(4)(i) of the Act 11 ITA No. : 6110/Mum/2014 ITA No. : 6111/Mum/2014 CO No.:35/Mum/2016 CO No.:36/Mum/2016 अमेया लोजीइि�ट�स �ाइवेट �ल�मटेड Ameya Logistics P Ltd read with the Explanation (d). We may first notice that out of the total of 45 ICDs operated by the assessee, except two ICDs, all others were notified by the CBDT vide notification No. S.O.744(E) issued on 1st September, 1998 for the purpose of Section 80IA(12)(ca). It may be recalled that under this provision, the Board had the power to notify an infrastructure facility for the purpose of the Section. The notification is reported in (1999) 233 ITR 126 and is reproduced below:-

The power to notify infrastructure facilities for the purpose of the Section was taken away from the CBDT with effect from 1.4.2002. The first argument of the learned counsel for the assessee is that once the ICDs have been notified validly by the CBDT by virtue of the powers conferred upon them, the fact that at a later point of time the power was taken away does not put an end to the validity or effect of the notification and as per the relevant Section as it stood at the time when the notification was issued, the assessee was eligible for the deduction for a period of 10 successive assessment years which covers the assessment years 2003-04 to 2005-06 which are the years under appeal.

We have examined the contention. Prior to the amendment made with effect from 1.4.2002 by the Finance Act, 2001, as noticed earlier, the Board was empowered to notify any public facility of a similar nature, other than what was mentioned as infrastructure facility. But an amendment was made and the power to notify was dropped. There was no provision made in the Act saying that the notification issued earlier would cease to have effect from 1.4.2002. Since the notification continued to have effect even beyond 1.4.2002, there is merit in the contention of the learned counsel for the assessee. Circular No. 7/2002, dated 26th August, 2002, reported in (2002) 257 ITR 28 clarified as under:

The next question that arises is whether the SRP 55/61 ITXA523.13.doc ICDs can be considered to be inland ports. There is no definition of an inland port in the Act. However, a "port", which also qualifies for the deduction is defined in Section 3(4) of the Indian Ports Act, 1908 (Act 15 of 1908) to include "also any part of a river or channel" in which the said Act is for the time being in force. The word "port" is defined in T. Ramanatha Aiyar's Law Lexicon, 4th Edition (2010) in a number of ways. The most general meaning which is given is that it denotes a harbour or shelter to the vessels from a storm or as a place with a harbour where ships load or unload. It has also been defined in the commercial sense as an enclosed place where vessels load and unload goods for export or import. Commercially considered, "a port is a place where vessels are in the habit of loading and unloading goods". The law lexicon also refers to a judgment of the Bombay High Court in the case of Amarship Management Pvt. Ltd. v. UOI, (1996) 86 ELT 15 (Bom).

It is interesting to note that the word "port approaches" is defined as those ports of the navigable channels leading to the port in which the Indian Ports Act is in force. There are several other definitions such as port call, port charges, port mark, port of arrival, port of entry, port of departure, port of call and so on and so 13 ITA No. : 6110/Mum/2014 ITA No. : 6111/Mum/2014 CO No.:35/Mum/2016 CO No.:36/Mum/2016 अमेया लोजीइि�ट�स �ाइवेट �ल�मटेड Ameya Logistics P Ltd forth. The whole emphasis however is that whenever the word "port" is used, it carries with it a maritime connection or connotation. That is perhaps why the Section refers separately to airport. An airport does not have a maritime SRP 56/61ITXA523.13.doc connection. But an airport is also a place where customs clearance are made both for import and export. It would be difficult to put the assessee's case as falling within the word "port" having regard to the fact that the word carries with it a maritime connotation. The ICDs are land-locked and it is nobody's case that they are located in such a place where ships or vessels have direct access to them. The goods which are either removed from or brought into the ICDs are brought or taken away either by railway wagons or by container trucks, as the case may be. But it is common ground that customs clearances take place in the ICDs.

It is, therefore, for consideration as to whether the ICDs can be said to be "inland ports" for the purposes of the Explanation (d) below sub-section (4) of Section 80IA. We were not able to find a definition of the words "inland port" in any of the dictionaries. But the words "inland container depot" were introduced in Section 2(12) of the Customs Act, 1962, which defines "customs port". This was by way of an amendment made by the Finance Act, 1983 with effect from 13th May, 1983. Simultaneously clause (aa) was inserted in Section 7(1) of the said Act under which the CBEC was empowered to issue notification appointing the places which alone shall be considered as inland container depots for the unloading of imported goods and the loading of exported goods. On 24th April, 2007 the following clarification was issued by the Central Board of Excise and Customs apparently in response to a query raised by the assessee. "F. No. 450/24/2007-Cus.IV Government of India Ministry of Finance Department of Revenue Central Board of Excise & Customs New Delhi, 14 ITA No. : 6110/Mum/2014 ITA No. : 6111/Mum/2014 CO No.:35/Mum/2016 CO No.:36/Mum/2016 अमेया लोजीइि�ट�स �ाइवेट �ल�मटेड Ameya Logistics P Ltd April 24th, 2007 To, Ms P. Alli Rani, Executive Director (Finance), Container Corporation of India Limited, CONCOR Bhawan, C-3, Mathura Road, Opp. Appolo Hospital, New Delhi-110076. Subject : Clarification regarding 'Inland Port' – regarding Kindly refer to your letter CON/FA/128/Vol- 2/80IA/2003- 04 dated 18.04.2007 seeking clarification regarding "Inland Port". 2. It is stated that as per Customs Act, 1962 section 2(12) defines "Customs port" as any port appointed under clause (a) of section 7 to be a customs port and includes Inland Container Depot (ICD) appointed under clause (aa) of section 7. Container Freight Stations (CFSs) are "Customs area" attached to a "port". The work related to Customs is performed at these ICDs/CFSs. Accordingly, ICDs and CFSs (i.e. Customs area of port) are "Inland Ports". Sd/- (M.M. Parthiban) Director (Customs) Ph-23093908 Copy to, Shri Jagdeep Goel, Director ITA-I, CBDT."

We have found that there is a specific reference made by the Delhi High Court to the communication dated 24 th April, 2007, from the Government of India, Ministry of Finance, Department of SRP 58/61 ITXA523.13.doc Revenue. These are then classified as inland ports and categorised accordingly. There is a further communication from the Ministry of Commerce and Industry as well. We do not find that a view different than the one taken by the Delhi High Court is possible. Bearing in mind the facilities that are extended and for purposes of loading, unloading, storage and warehousing of the goods that the facility is a infrastructure facility. That it has easy accessibility to the port and particularly the sea-port gives it certain advantages and benefits and which clearly accrue to those using the port for import and export of cargo. Further, the location thereof is also a relevant factor as noted. In such circumstances, the reliance by the Special Bench and equally by the Bench of the Tribunal in the impugned orders on the Division Bench judgment of the Delhi High Court is thus well placed.

We do not think that the view taken by the Tribunal is in any way perverse or runs contrary to the language of sub- section (4) of section 80-IA or the object of the Income Tax Act, 1961, as a whole. Once such a conclusion is reached, then, it is not necessary to refer to any other material, particularly any circulars of the Board or otherwise or the certificates issued by the authorities. Even their contents need not be referred to. We are of the view that the extensive reasoning in SRP 60/61 ITXA523.13.doc the judgment of the Division Bench of the Delhi High Court and which finds approval even of the High Court of Madras and with which we broadly agree that the substantial questions of law on both counts need to be answered in favour of the assessee and against the Revenue”.

In AY 2011-12 also, since the revenue has raise similar issue in the impugned appeal therefore, in view of our aforesaid finding, the appeal of the revenue is dismissed.

In Cross Objections, the assessee has mainly challenged the disallowance under section 14A of Rs.3,60,484/- in AY 2010-11 and Rs, 5,67,056/- in AY 2011-12.