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Income Tax Appellate Tribunal, MUMBAI BENCHES “G”, MUMBAI
Before: Shri Joginder Singh & Shri Rajendra
आदेश / O R D E R Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order dated 27/05/2013 of the ld. First Appellate Authority, Mumbai. Grounds No.1, 3 and 4 raised in this appeal pertains to allowing deduction by the Commissioner of Income Tax (Appeal) u/s 80IA(4) of the Income Tax Act, 1961 (hereinafter the Act) without appreciating the facts.
During hearing, the ld. counsel for the assessee, Shri Madhur Agarwal, claimed that the impugned issue is covered in the case of assessee itself by the decision of the Tribunal dated 20/11/2015 (ITA No.5371 and 3654/Mum/2012), Assessment year 2008-09. This factual matrix was not controverted by the ld. DR, Ms. Amrita Misra.
2.1. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion from the aforesaid order dated 20/11/2015 (ITA No.3654/Mum2012) for ready reference and analysis:-
“The only issue involved in this appeal relates to the direction of the learned Commissioner (Appeals) in allowing assessee’s claim under section 80IA(4) of the Income Tax Act, 1961 (for short "the Act").
Briefly stated the facts are, the assessee, a company, is engaged in the business of developing
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operating and maintaining a container freight station (CFS) at Nhava Sheva, Mumbai, which is also approved by the Ministries of Revenue, Commerce and Shipping, as well as Customs Department, Government of India. As stated by the assessee, it has set–up the CFS in the financial year 1998–99 after duly entering into an agreement with CIDCO. As per the terms of agreement, CIDCO allowed the assessee to set–up and operate the CFS for a period of 60 years. For the assessment year 2008–09, the assessee filed its return of income on 29th September 2008, ` declaring total income of 17,23,16,060. Subsequently, revised return was filed by the assessee on 13th June 2009, declaring total income of ` 17,23,16,060. During the assessment proceedings, the Assessing Officer, on examining the audited financial statements submitted by the assessee, found that it has claimed deduction under section 80IA(4) for an amount of ` 66,11,00,325. The Assessing Officer, after considering the submissions of the assessee and perusing the agreement with CIDCO was of the view that the said agreement is not a BOT / BOLT agreement. He, therefore, issued a show cause notice to the assessee for explaining why the deduction claimed under section 80IA(4) should not be disallowed as the conditions of the said provision are not fulfilled. In response to the show cause notice, the assessee submitted that the CFS set–up by the assessee is an inland port, hence, is an infrastructure facility as per section 80IA(4). In this context, the assessee relied upon circulars issued by the Finance Ministry and Ministry of Shipping, Ministry of Commerce and Industry. It was also submitted that the assessee has entered into an agreement with the CIDCO which is a statutory body for construction and
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operation of CFS facility. Thus, it was submitted by the assessee that it fulfilled all the conditions of section 80IA(4). The Assessing Officer, after considering the submissions of the assessee, observed that as per the provisions of section 80IA(12)(ca), CFS is not an infrastructure facility and not such even within the meaning of section 80IA(4). He also observed that circular no.793 dated 23rd June 2000 issued by the CBDT does not mention CFS to be an infrastructure facility. He further observed that as per the said circular, the assessee has to obtain a certificate from the competent authority if it seeks to claim deduction under section 80IA(4). However, the assessee has not obtained any such certificate for assessment year 1998–99. Therefore, the assessee does not qualify for the definition of “Port” as amended by the Finance Act, 1998. He further observed that section 80IA(4) is further amended by Finance Act, 2007, w.e.f. 1st April 2008 as per which “inland port” was included as infrastructure facility. However, such amendment being effective from 1st April 2008, “inland port” which commenced operation on / or after 1st April 2008, will qualify for deduction under section 80IA(4). Further, it was observed by the Assessing Officer, in response to a letter written by him to CIDCO, it was informed by the said authority that permission given to the assessee was for construction of warehouse and not for CFS. Hence, the assessee is not eligible for deduction under section 80IA(4). Finally, the Assessing Officer opined that the agreement entered into with CIDCO by the assessee is a lease deed under which the assessee was allowed a piece of land for commercial purpose. However, it cannot be considered to be an agreement with the Government as prescribed under section 80IA(4). He also observed that as per information obtained from CIDCO, the assessee has not entered into BOT / BOLT agreement,
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therefore, the conditions of section 80IA(4) are not complied. On the aforesaid premise, the Assessing Officer finally disallowed assessee’s claim of deduction under section 80IA(4). Being aggrieved of such disallowance, the assessee preferred appeal before the first appellate authority.
In the course of hearing of appeal before the first appellate authority, the assessee made detail submissions contesting each of the findings of the Assessing Officer while disallowing assessee’s claim of deduction. The learned Commissioner (Appeals), after considering the submissions of the assessee in the light of facts and material onrecord as well as the decisions relied upon by the assessee, found that the assessee has commenced its business of CFS in the assessment year 1999–2000. He also found that the assessee has entered into a contract with CIDCO on BOT / BOLT basis for construction of CFS vide agreement dated 28th June 1997. He observed that the assessee had claimed deduction under section 80IA(4) for the CFS for the first time in the assessment year 2002–03 and the same was allowed by the Department vide assessment order passed under section 143(3) and the impugned assessment year is the 7th year of claim of deduction by the assessee. He, therefore, was of the view that when the deduction is allowed to the assessee continuously in the preceding assessment years, the Assessing Officer cannot withdraw the deduction when the facts and circumstances remained the same. In this context, he relied upon the decision of the Hon'ble Supreme Court in Bharat Sanchar Nigam Ltd. v/s Union of India, [2006] 282 ITR 273 (SC) and the decision of the Hon'ble Jurisdictional High Court in CIT v/s Paul Brothers, [1995] 216 ITR 548 (Bom.). He, therefore, held that disallowance of deduction by the
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Assessing Officer in the impugned assessment year cannot be sustained. Having held so, he noticed that as per the definition of infrastructure facilities under section 80IA(4), it includes any public facility as notified by the Board in the official gazette. He further observed, Government of India, vide notification S.O. 744E dated 1st September 1998, as amended by S.O. 391E dated 28th May 1999, has clarified that inland container depot or CFS are infrastructure facility in terms with section 80IA(12)(ca) of the Act. The learned Commissioner (Appeals), after analysing the agreement with CIDCO, found that it is a valid agreement between the assessee and the Government which has also been approved by CBDT as well as Commerce Ministry. He also found that the Ministry of Shipping has allowed the facility to be used as port for all practical purposes. He also noticed that as per the terms of agreement, after expiry of 60 years, the area allotted along with all facilities will revert back to the local authority. He, therefore, was of the opinion that all conditions of section 80IA(4) was satisfied. Thus, on the aforesaid basis, the learned Commissioner (Appeals) directed the Assessing Officer to allow assessee’s claim of deduction under section 80IA(4).
The learned Departmental Representative, Smt. Anupama Shukla, though agreed that assessee had been claiming the deduction under section 80IA(4), from the assessment year 2002–03 and it has also been allowed to the assessee by the Department but she submitted that in the impugned assessment year, certain additional facts / information came to the possession of the Assessing Officer which revealed that assessee has not fulfilled the condition of section 80IA(4). The learned Departmental Representative submitted, each assessment year being an independent unit, irrespective of fact whether
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deduction was allowed in the earlier assessment year still the Assessing Officer can form an independent opinion on the basis of information obtained in a subsequent assessment year with regard to the deduction claimed by the assessee. She, therefore, submitted, the Assessing Officer having found that assessee has not fulfilled all the conditions of section 80IA(4) was competent to disallow assessee’s claim of deduction. Further, the learned Departmental Representative submitted on the basis of the assessment made for the assessment year 2008–09, assessments for preceding years have been re–opened under section 147. She, therefore, submitted that the learned Commissioner (Appeals) was not justified in allowing assessee’s claim.
The learned Senior Counsel for the assessee, Shri S.E. Dastur, submitted before us, in the assessment year 2002–03, the assessee for the first time claimed deduction under section 80IA(4) in respect of CFS. It was submitted, the Department also accepted assessee’s claim in an assessment order passed under section 143(3). It was submitted up to the assessment year 2007–08, deduction under section 80IA(4) was allowed in assessments completed under section 143(3). He submitted, when a particular deduction is for a specific period, if such deduction is allowed in the initial / first year of claim, the same cannot be withdrawn in any subsequent assessment year. It was submitted by the learned Counsel, where the provisions relating to deduction is general in nature without specifying the period, then the Assessing Officer can decide allowability of deduction independently in a particular assessment year which is not the case when the deduction is for specific period. In this context, he relied upon the following decisions:–
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i) CIT v/s Western Outdoor Interactive Pvt. Ltd., [2012] 349 ITR 309;
ii) CIT v/s Paul Bros., [1995] 79 Taxman 378.
The learned Counsel submitted, the fact that the assessments for some of previous years have been re–opened on the basis of assessment order passed for the assessment year 2008–09 cannot have any impact on assessee’s claim of deduction as the facts existing on the date of assessment for the assessment year 2008–09 has to be considered. It was submitted, even the re–opening of assessment was up to the assessment years 2004–05. Therefore, the deduction allowed to the assessee for the initial two assessment years 2002–03 and 2003–04 remain unaltered. Therefore, deduction having already allowed to the assessee in the first two assessment years, it cannot be withdrawn in the subsequent assessment year. The learned counsel submitted, the Assessing Officer also totally misread the provisions of the Act while inferring that assessee is not a infrastructure facility by referring to the amendment brought by Finance Act, 2007, w.e.f. 1st April 2008. The learned counsel submitted, “inland port” was already included as an infrastructure facility under Explanation to section 80IA(4) since 1st April 2002, and in Finance Act, 2007, for the expression “or inland port” the following words were substituted – “Inland port or navigational channel in the sea”. Thus, it was submitted by the learned Counsel on merits also, CFS being an “inland port” is an infrastructure facility in terms with section 80IA(4), hence, is eligible for deduction. For such proposition, he relied upon the decision of the Tribunal in another group company i.e., Gateway East India
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Pvt. Ltd. v/s ACIT, ITA no.15/ Vizag./2015, order dated 29th April 2015. As far as the contention of the learned Departmental Representative that each assessment year being separate and independent unit, the Assessing Officer can form an independent opinion on a particular issue if additional information come to his possession, the learned counsel strongly contesting such submissions submitted, only in a case where there is change in facts which existed in earlier assessment year, the Assessing Officer can take an independent view. However, when the facts are identical, the Assessing Officer on the basis of information obtained as a result of enquiry conducted by him, cannot take an independent view, more so, when the deduction provided under the statute is for a specific period and such deduction is allowed to the assessee in the initial assessment year. He submitted, the agreement with CICDO and all other relevant materials were already before the Assessing Officer in the initial assessment year and there is no change in these facts. He submitted, even the enquiry conducted and information obtained is wholly irrelevant as the condition requiring transfer of infrastructure facility to the Central Government, State Government, local authority or statutory body was removed from statute by Finance Act, 2001 w.e.f. 1st April 2002. In this context, he drew the attention to the provisions contained in section 80IA(4)(i)(b). Thus, it was submitted by the learned counsel, the inference drawn by the Assessing Officer cannot be accepted. Finally, the learned counsel inviting the attention of the Bench to the grounds raised by the Department submitted, in none of the grounds the Department has challenged the finding of the first appellate authority that the assessee is an infrastructure facility. He, therefore, submitted, there is no reason to disturb the findings of the first appellate authority.
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We have considered the submissions of the parties and perused the orders of the authorities below as well as the material available on record. Undisputedly, the assessee entered into an agreement with a statutory body i.e., CIDCO for development, operation and maintenance of CFS. It is also not disputed that the same is also approved and notified by CBDT. Therefore, the first issue which arises for consideration is whether CFS is an infrastructure facility under section 80IA(4). The Assessing Officer has held that CFS is not an infrastructure facility and further since the agreement with CIDCO is not BOT / BOLT, the assessee is not entitled for deduction under section 80IA. At the outset, it needs to be observed that as per Explanation to section 80IA(4), as it existed prior to its substitution by Finance Act, 2007 w.e.f. 1st April 2008, read as under:–
“Explanation – For the purpose of this clause, infrastructure facilities means –
a) xxx b) xxx c) xxx d) A port, airport, inland water way or inland port.
By Finance Act 2007 in place of “inland port”, the following words were substituted.
“Inland port or navigational channel in the sea”
Thus, as can be seen from the aforesaid reading of the provisions, “inland port” was a infrastructure facility from the assessment year 2002–03 onwards. The Hon'ble Jurisdictional High Court in CIT v/s Continental Warehousing Corporation Ltd., ITA
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no.523/2013 and ITA no.1969/2013, has held that CFS for the purpose of section 80IA(4) is to be considered as an inland port. In fact, the Tribunal, Vizag Bench, in Gateway East India Pvt. Ltd. (supra), following the decision of the Hon'ble Delhi High Court in Container Corporation of India Ltd. v/s CIT, held that CFS being an inland port is an infrastructure facility for the purpose of section 80IA(4). In view of the aforesaid, we have no hesitation in holding that assessee having developed, operated and maintained a CFS is eligible for deduction under section 80IA(4).
The second argument of the Department is the agreement with CIDCO is not BOT / BOLT by virtue of which infrastructure facility developed by the assessee would revert back to the Government after a specified period, it is not eligible for deduction. However, on a reading of the provisions of section 80IA(4)(i)(b), as it existed from 1st April 2002, it is clear that the condition that such infrastructure facility shall be transferred to the Government, local authority or statutory body has been done away with by Finance Act, 2001 w.e.f. 1st April 2002. Therefore, the reasoning of the Assessing Officer that the assessee would not get deduction under section 80IA(4) agreement BOT / BOLT stipulating handing over the infrastructure facility to the Government is wholly without basis. Even assuming for the argument sake that such condition is applicable for the impugned assessment year, still in our view, the stand of the Department is wholly misconceived as the first appellate authority after perusing the agreement with CIDCO has given a categorical finding that CFS developed, operated and maintained by the assessee would revert back to the statutory body after expiry of lease period of 60 years. This finding of fact recorded by the first appellate authority has not at all been
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controverted by the Department. Thus, both the arguments of the Assessing Officer for denying assessee’s claim of deduction would fail.
Having held so, we proceed to examine the issue, deduction under section 80IA(4) having already been allowed to the assessee in the initial assessment years, whether the same can be disallowed in any subsequent assessment year. As can be seen from the material placed before us, the first year of claim of deduction by assessee under section 80IA(4) in respect of CFS was assessment year 2002-03. The Assessing Officer, while completing the assessment under section 143(3) of the Act accepted assessee’s claim. Thereafter, from the assessment year 2003–04 to 2007–08, claim of deduction under section 80IA(4) in respect of CFS was continuously allowed by the Assessing Officer in orders passed under section 143(3). On a reading of sub–section (2) of section 80IA, it is very much clear that an assessee would be eligible to claim deduction under section 80IA, at his own option, for any 10 consecutive assessment years out of 15 years beginning from the year in which the undertaking develops and operates the infrastructure facility. As is apparent from the facts on record, in case of the present assessee, it has opted for availing deduction under section 80IA(4) from the assessment year 2002–03. Thus, once the claim of deduction has been allowed by the Department by examining relevant facts and materials in the first assessment years, it cannot be withdrawn in any subsequent years when there is no material change in the relevant facts. In the present case, it is patent and obvious that there is no material difference in the facts involved in the assessment year 2002–03 and the impugned assessment year, as the agreement with CIDCO and all other related facts remain same. That being the
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case, in our view, when deduction is allowed to the assessee in the first year of claim it cannot be withdrawn in any subsequent year. The argument by the Department that the assessment in the case of some of the preceding assessment years has been re– opened under section 147 cannot improve the situation of the Department as the position on the date of assessment for the assessment year 2008–09 has to be taken into account. If that is the case, it is very much clear that on the date, the Assessing Officer completed the assessment for assessment year 2008–09 the uncontroverted position was assessee’s claim of deduction under section 80IA(4) in respect of CFS was allowed from the assessment year 2002–03 to 2007–08, that too, in assessments completed under section 143(3) of the Act. Therefore, the Department having allowed assessee’s claim of deduction in the first assessment year it cannot withdraw such claim in the impugned assessment year. In this context, we refer to the decisions of the Hon'ble Jurisdictional High Court in CIT v/s Western Outdoor Interactive Pvt. Ltd., [2012] 349 ITR 309 (Bom.) and CIT v/s Paul Brothers, [1995] 79 Taxman 378 (Bom.). Thus, there being no change in facts between the earlier and the impugned assessment year, the Assessing Officer cannot withdraw assessee’s claim of deduction under section 80IA(4). Moreover, reopening of assessment for preceding years is not an issue before us. On the basis of facts obtaining in the impugned assessment year, we have to decide assessee’s eligibility under section 80IA(4). Even otherwise also, we have already negated Assessing Officer’s argument in respect of CFS not being an infrastructure facility and non fulfillment of BOT / BOLT condition. Before concluding, we must observe that the learned Senior Counsel for the assessee has rightly pointed out at the time of hearing that the Department has not raised any
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ground challenging factual findings of the first appellate authority that the assessee is an infrastructure facility. Even in the course of hearing, the learned Departmental Representative has not brought any material before us to dispel the factual findings of the first appellate authority either with regard to the issue that CFS is an infrastructure facility under section 80IA(4) or the fact that the assessee has fulfilled all conditions of section 80IA(4) including the fact that it has developed, operated and maintained an infrastructure facility which is supposed to revert back to Government after specified period. In view of the aforesaid, we do not find any reason to disturb the findings of the first appellate authority on the issue. Accordingly, we dismiss the ground raised by the Revenue.”
2.2. We find that in the aforesaid order for Assessment year 2008-09, an elaborate discussion has been made on the issue in hand as the assessee is engaged in the business of developing, operating and maintenance of container freight station (CFS) at Nhava Sheva, Mumbai, which is also approved by the concerned ministry of Government of India and duly entered into an agreement with CIDCO. As per the terms of the agreement, CIDCO allowed the assessee to set up and operate the CFS for a period of 60 years. Since, the issue has been discussed in detail after analyzing the facts and after placing reliance upon certain decisions like fro Hon’ble Apex Court in Bharat Sanchar Nigam Ltd. vs UOI (2006) 282 ITR 273 (SC) and Hon’ble jurisdictional High Court in CIT vs Paul
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Brothers (1995) 216 ITR 548 (Bom.), notification S.O. 744E, dated 01/09/1998, as amended by SO 391E dated 28/05/1999, decision in CIT vs Western Outdoor interactive Pvt. Ltd. 249 ITR 309 and then affirmed the decision of the CIT(A), in favour of the assessee. Following the aforesaid decision and the reasoning contained therein, the ground raised by the Revenue is having no merit, therefore, dismissed.
The next ground pertains to deleting the disallowance made u/s 14A of the Act ignoring the ratio of the Tribunal in Cheminvest Ltd. (121 ITD 318)(Del.). The crux of argument on behalf of the assessee is that no income was earned by the assessee and merely hypothetical disallowance has been made. Reliance was placed 378 ITR 33 (Del.) order dated 02/09/2015. Considering the totality of facts and the arguments from both sides, we find that the Hon’ble Delhi High Court in the aforesaid order dated 02/09/2015 held that where no exempt income was earned by the assessee in the relevant assessment years and since the genuineness of expenditure is not in doubt, there is no question of disallowance u/s 14A of the Act. While coming to this conclusion, the Hon’ble High Court relief upon following decisions:-
i. Cheminvest Ltd. v. CIT [2009] 317 ITR (AT) 86 (Delhi) [SB] (para 15) ii. CIT v. Chugandas and Co. [1964] 55 ITR 17 (SC) (para 14)
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iii. CIT v. Cocanada Radhaswami Bank Ltd. [1965] 57 ITR 306 (SC) (para 14) iv. CIT v. Corrtech Energy (P.) Ltd. [2015] 372 ITR 97 (Guj) (para 15) v. CIT v. Holcim India (P.) Ltd. (I. T. A. No. 486 of 2014 decided on 5- 9-2014) (para 15) vi. CIT v. Hero Cycles Ltd. [2010] 323 ITR 518 (P&H) (para 15) vii. CIT v. Lakhani Marketing Incl. [2015] 4 ITR-OL 246 (P&H) (para 15) viii. CIT v. Rajendra Prasad Moody [1978] 115 ITR 519 (SC) (para 10) ix. CIT v. Shivam Motors (P.) Ltd. (ITA No. 88 of 2014 decided on 5-5-2014) (para 15) x. IT v. Winsome Textile Industries Ltd. [2009] 319 ITR 204 (P&H) (para 15) , xi. Eicher Goodearth Ltd. vs. CIT [2015] 378 ITR 28 (Delhi) (para 14) xii. Harish Krishnakant Bhatt v. ITA [2005] 278 ITR (AT) 1 (Ahd) (para 10) " xiii. Maxopp Investment Ltd. v. CIT [2012] 347 ITR 272 (Delhi) (para 12) I. T. A. No. 749 of 2014. 3.1. In view of the factual matrix and following the aforesaid decision from Hon’ble Delhi High Court and in the absence of any contrary decision brought to our notice by either side, we find no infirmity in the conclusion of the
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Commissioner of Income Tax (Appeal) and affirmed the same, thus, this ground of the Revenue is also having no merit, consequently, dismissed.
The last ground pertains to deleting the disallowance u/s 14A of the Act from the book profit u/s 115JB of the Act without appreciating that the expenditure relatable to u/s 14A is covered under clause (f) of explanation 1 to section 115JB of the Act. The crux of argument on behalf of the assessee is that it is consequential to ground no.2. This factual matrix was not controverted by ld. DR.
4.1. Considering the totality of facts and since we have affirmed the stand of the Commissioner of Income Tax (Appeal), following the decision from Hon’ble Delhi High Court in 378 ITR 333 (supra), the impugned ground is consequential in nature and therefore, dismissed.
Finally, the appeal of the Revenue is dismissed.
This order was pronounced in the open in the presence of ld. representatives from both sides at the conclusion of the hearing on 06/04/2016.
Sd/- Sd/- (Rajendra) (Joginder Singh) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य / JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated : 07/04/2016
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f{x~{tÜ? P.S/.�न.स.
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to :
अपीलाथ� / The Appellant (Respective assessee) 2. ��यथ� / The Respondent. 3. आयकर आयु�त(अपील) / The CIT, Mumbai. 4. आयकर आयु�त / CIT(A)- , Mumbai, 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard file.
आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील�य अ�धकरण, मुंबई / ITAT, Mumbai