Friends Oil & Chemical Terminals Pvt. Ltd., Gandhidham V. The Dy. Commissioner of Income Tax, Central Circle-2(3), Ahmedabad

CO 152/AHD/2016

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3225 (ITAT-RAJKOT)
• Duration Of Justice: 5 year(s) 10 month(s) 6 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 11-08-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 04-07-2022
• Assessment Year: 2010-2011
• Appeal Filed On: 05-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Tax effect; Set aside
• Section: 80IA; 251; 142(2A)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT Before: Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Friend s Oil & Chemical Ter min als P vt. Ltd . Maitri Bhavan, Plot No. 18, Sector No . 8, Gnadh idham- Kutch-37020 1 PAN: A AA CF3 177A (Ap pellan t) Vs The DCIT, Central Circle-2(3), Ah med abad (Resp ondent) Asses see by : Shri K. C. Thaker, A. R. Revenue by : Shri Aarsi Pra sad, Sr. D. R. Date of hearing : 05-07 -2 022 Date of pronouncement : 12-08 -2 022 आदेश /ORDER PER BENCH:- These three cross objections have been filed by the assessee against the order of the Ld. CIT(Appeals) dated 04-04-2016 in appeal numbers IT(SS)A Nos. 210, 211 & 212/Ahd/2016. Since, Ld. CIT(Appeals) has C.O. Nos. 151,52 & 153/Ahd/2016 (In IT(SS)A Nos. 210, 211 & 212/Ahd/2016 ) A. Y. 2009-10, 2010-11 & 2011-12 C.O. Nos. 151, 152 & 153/Ahd/2016 A.Y. 2009-10 to 2011-12 Page No Friends Oil & Chemicals Terminals Pvt. Ltd. vs. DCIT 2 passed a common order for all the years under consideration before us, we shall be passing a common order in respect of the cross objections raised by the assessee. It has been brought to our notice that the Department’s appeal for the above years has been dismissed due to low tax effect 2. The assessee has raised the following grounds in cross-objections: A.Y. 2009-10 “1. The learned CIT (A) has erred in law and on facts in disregarding the material placed before him and holding that the action u/s. 142(2A) of the Act for assigning the case for special audit at the fag end of limitation for completion of assessment was not to lawfully extend the limitation and that the assessment was not barred by limitation due illegal exercise of invoking S. 142(2A) of the Act. 2. The learned CIT (A) has further erred in law and on facts in confirming the disallowance made u/s. 80 IA(4) of the Act to the extent of Rs.2,33,79,743/-. 3. The learned CIT (A) has also erred in law and on facts in refusing to expunge the AO's unwarranted observation in the assessment order imputing "non-cooperative attitude" on the part of the appellant holding that there is no positive evidence on record justifying expungement thereof and in holding that no prejudice is caused to the appellant on account of the same, disregarding the material placed on record in the appellate proceedings. 4. The learned CIT (A) ought to have held the assessment as barred by limitation, ought to have deleted the disallowance made u/s. 80IA (4) of the Act and ought to have expunged the unwarranted observation imputing "non-cooperative attitude" on the part of the appellant. 5. It is therefore prayed that the assessment may be held to be time barred, the disallowance of Rs.2,33,79,743/- made u/s. 80IA(4) C.O. Nos. 151, 152 & 153/Ahd/2016 A.Y. 2009-10 to 2011-12 Page No Friends Oil & Chemicals Terminals Pvt. Ltd. vs. DCIT 3 of the Act may be deleted, and the unwarranted observation may be expunged.” A.Y. 2010-11 “1. The learned CIT (A) has erred in law and on facts in disregarding the material placed before him and holding that the action u/s. 142(2 A) of the Act for assigning the case for special audit at the fag end of limitation for completion of assessment was not to unlawfully extend the limitation and that the assessment was not barred by limitation due to illegal exercise of invoking S. 142(2 A) of the Act. 2. The learned CIT (A) has further erred in law and on facts in confirming the disallowance made u/s. 80 IA(4) of the Act to the extent of Rs. 3,58,29,664/-. 3. The learned CIT (A) has also erred in law and on facts in refusing to expunge the AO's unwarranted observation in the assessment order imputing "non-cooperative attitude" on the part of the appellant holding that there is no positive evidence on record justifying expungement thereof and in holding that no prejudice is caused to the appellant on account of the same, disregarding the material placed on record in the appellate proceedings. 4. The learned CIT (A) ought to have held the assessment as barred by limitation, ought to have deleted the disallowance made u/s. 80IA (4) of the Act and ought to have expunged the unwarranted observation imputing "non-cooperative attitude" on the part of the appellant. It is therefore prayed that the assessment may be held to be time barred, the disallowance of Rs. 3,58,29,664/- made u/s. 80IA(4) of the Act may be deleted, and the unwarranted observation may be expunged.” A.Y. 2011-12 C.O. Nos. 151, 152 & 153/Ahd/2016 A.Y. 2009-10 to 2011-12 Page No Friends Oil & Chemicals Terminals Pvt. Ltd. vs. DCIT 4 “1. The learned CIT (A) has erred in law and on facts in disregarding the material placed before him and holding that the action u/s. 142(2A) of the Act for assigning the case for special audit at the fag end of limitation for completion of assessment was not to unlawfully extend the limitation and that the assessment was not barred by limitation due to illegal exercise of invoking S. 142(2 A) of the Act. 2. The learned CIT (A) has further erred in law and on facts in confirming the disallowance made u/s. 80 IA(4) of the Act to the extent of Rs. 3,58,48,773/-. 3. The learned CIT (A) has also erred in law and on facts in refusing to expunge the AO's unwarranted observation in the assessment order imputing "non-cooperative attitude" on the part of the appellant holding that there is no positive evidence on record justifying expungement thereof and in holding that no prejudice is caused to the appellant on account of the same, disregarding the material placed on record in the appellate proceedings. 4. The learned CIT (A) ought to have held the assessment as barred by limitation, ought to have deleted the disallowance made u/s. 80IA (4) of the Act and ought to have expunged the unwarranted observation imputing "non-cooperative attitude" on the part of the appellant. 5. It is therefore prayed that the assessment may be held to be time barred, the disallowance of Rs. 3,58,48,773/- made u/s. 80IA(4) of the Act may be deleted, and the unwarranted observation may be expunged.” 3. We shall first deal with assessment year 2009-10. The counsel for the assessee has submitted that he shall not be pressing Ground Numbers 1,3, 4 and 5 of the cross objections for the impugned year. Accordingly, Ground C.O. Nos. 151, 152 & 153/Ahd/2016 A.Y. 2009-10 to 2011-12 Page No Friends Oil & Chemicals Terminals Pvt. Ltd. vs. DCIT 5 Numbers 1, 3, 4 and 5 of assessee’s cross objections are being dismissed as not pressed. Ground number 2 of assessee’s Cross objection: disallowance made under section 80 IA(4) of the Act to the extent of 2,33,79,743/-: 4. The brief facts in relation to this cross objection are that the assessee claim deduction under section 80-IA(4) of the Act which has been earlier rejected by the assessing officer while passing the assessment order u/s 143(3) of the Act for assessment order for assessment year 2006-07 and for assessment year 2008-09, considering the fact that a tank terminal is not a port infrastructure facility. The said the disallowance for the above assessment years has also been confirmed by Ld. CIT(Appeals), Rajkot. Accordingly, the AO disallowed assessee’s claim for deduction under section 80-IA(4) of the Act to the extent of 2,33,79,743/- with the following observations: “In the present case, the ownership of the infrastructure facility lies with the assessee himself. The assessee company is engaged in the very work of oil storage and as such, storage tanks are its own plant and machinery. Further, in this case, the assessee has himself sought the permission from the KPT, for construction of storage thanks, as it was required for the business of the assessee. The KPT has merely given the permission to the assessee, on his express request, to construct the storage tanks. This is not the case where the KPT, for the purpose of development of port/infrastructure facility, has entered into an agreement with the assessee. Therefore, the contention of the assessee that it has entered into an agreement, in compliance to the provisions of section 80IA(4), is not true and needs to be rejected. The Circular No. 10/2005 dated 16.12.2005 issued central Board of Direct Taxes, which seeks the clarify the definition of port. C.O. Nos. 151, 152 & 153/Ahd/2016 A.Y. 2009-10 to 2011-12 Page No Friends Oil & Chemicals Terminals Pvt. Ltd. vs. DCIT 6 This circular defines PORT, for the purpose of infrastructure facility, but it does not take away the essential characteristic of section 80IA(4)(i)(b) which requires the existence of an agreement with government. This is what is exactly missing in the present case. Hence this circular also will not be helpful to the assessee. In view of the above discussion and the facts discussed by the Assessing Officer in the assessment orders for the A.Y. 2006-07 and A.Y. 2008-09 and the finding of the Ld. CIT(A) for 'the A.Y. 2006-07 & 2008-09 in the case of the assessee, it is held that the assessee company is not entitled to deduction u/s. 80IA and hence the entire claim of Rs. 2,33,79,743/~ is disallowed and added back to the total income. (ADDITION : 2,33,79,743/-)” 5. In appeal, Ld. CIT(Appeals) dismissed the appeal of the assessee the following observations: “12. Disallowance u/s 80IA(4) - Rs. 2,33,79,743/-: The Ld. AO discusses the disallowance in para 7 on page no.25 to 27 of the assessment order. The appellant is engaged in letting out the storage tank for liquid cargo. The appellant claimed deduction u/s 80IA(4), maintaining that it is engaged into developing, operating and maintaining infrastructure facility. The AO however, is of the opinion that the condition (b) of clause (i) of section 80IA(4) mandating that the eligible unit should enter into an agreement with the Central Government or State" Government or Local Authority or any other Statutory Body, is not satisfied by the appellant and therefore, the deduction has been denied by him. The Ld. AO also observes that such a view has been upheld by C!T(A)-II, Rajkot in para 3 of his appellate order No, CIT(A)-H/0221/08-09 and in para 4 of his order No.CIT(A)-H/RJT/0076/10-11 dated 26/10/2010 and 25/3/2013 respectively in appellant's own case for A.Yrs.2006-07 and 2008-09. The Ld. AO also relied on ITAT Mumbai Bench in Patel Engineering Vs. DCIT. Before me, the Ld. AR has objected to the disallowance made by the Ld. AO and made detailed written submissions. It has been argued firstly that the fact that the C.O. Nos. 151, 152 & 153/Ahd/2016 A.Y. 2009-10 to 2011-12 Page No Friends Oil & Chemicals Terminals Pvt. Ltd. vs. DCIT 7 infrastructure facility has been leased out to a group concern is not relevant in wholly rejecting the claim made u/s 80IA(4). The Ld. AR in addition thereto, relied on Kerala High Court decision, approving the Cochin ITAT judgement rendered in the case of H, H, A. Tank Terminal Put. Ltd. in ITA No.18/COCH/2006 (page no.23 of the paper book). However, after considering the totality of facts and circumstances and after considering the fact that the appellant has not brought to my notice whether the decision of Ld. CIT(A) in appellant's own case for A.Y.2006-07 and 2008-09 has been reversed by the Hon. ITAT, I am of the considered opinion that maintaining strict standard of judicial discipline, I must follow the order of CIT(A) in appellant's own case in preceding years till such decision in earlier years is shown to have been reversed by Higher Authorities. Thus and therefore, the disallowance made u/s 80IA(4) by the Ld. AO amounting to Rs.2,33,79,743/- is upheld and the related ground is dismissed. 12.1 It is seen that similar disallowance u/s 80IA(4) has been made for A.Yrs.2010-11 and 2011-12 also. The disallowance made on the facts similar-to those discussed above would therefore, following the decisions of my Ld. Predecessor, need to be upheld for these two assessment years .also. In view of this, the following disallowances for A.Yrs.2010-11 and 2011-12 would also stand confirmed, dismissing the related ground: A.Y. Amount of disallowance confirmed 2009-10 Rs. 2, 33,79,743/- 2010-11 Rs.3,58,29,664/- 2011-12 Rs.3,58,48,773/- C.O. Nos. 151, 152 & 153/Ahd/2016 A.Y. 2009-10 to 2011-12 Page No Friends Oil & Chemicals Terminals Pvt. Ltd. vs. DCIT 8 6. Before us, the counsel for the assessee submitted that the issue in the above assessment years (AY 2006-07 and AY 2008-09) has been decided in favour of the assessee by the ITAT Rajkot, and copy of the judgement is an at pages 84 -206 of the paper book. We observe that the issue for claim for deduction under section 80 IA (4) of the Act has been decided in favour of the assessee for assessment years 2006-07 and 2008-09 by the ITAT Rajkot Bench in assessee’s own case in ITA Nos. 936/Rjt/2010 & 279/Rjt/2013 for assessment years 2006-07 and 2008-09 with the following observations: “15. We have heard the rival submissions and perused the relevant al on record. We find that the assessee has claimed deduction section 80IA of the Act on account of building, storage tank, shore pipelines and other Infrastructure development on the port of leased to them by Kandla Port Trust (KPT). It was contended that the assessee has entered in to an agreement with KPT for the purpose of erection operation and maintenance of storage tanks along with pipelines and other infrastructure facilities on the leasehold land, which was allotted by them by KPT. We notice that the assessee is engaged in the very work of storage and such storage is on its own tank. The assessee has himself sought permission from KPT for construction of storage tank, as it was required for the purpose of business of the assessee. The KPT has given permission to the assessee to construct the storage tanks. The learned counsel for the assessee referred CBDT Circular No. 10 of 2005 dtd. 16.12.2005 (PB-27) in which clause is as follows ?:- "3. However, for and from assessment year 2002-03 onwards, structure at the ports for storage , loading and unloading the company will be included in the definition of "port" for the purpose of section 10 (23G) and 80IA of Income Tax Act, 1961, if the following conditions fulfilled:- the concerned port authority has issued a certificate that the said structure form part of the port." The assessee has furnished a certificate dtd. 20.10.2015 from Kandla Port Trust wherein "This is to certify that M/s. Friends Oil Chemical and Chemical Terminals Pvt. Ltd. has built storage tank erected, shore pipelines and other infrastructure facilities on the plot of land leased C.O. Nos. 151, 152 & 153/Ahd/2016 A.Y. 2009-10 to 2011-12 Page No Friends Oil & Chemicals Terminals Pvt. Ltd. vs. DCIT 9 to them by Kandla Port Trust at Old Kandla (Oil Jetties) for loading and unloading, of liquid cargos which for part of the Port operations for import and export." The above infrastructure facilities have been developed, built maintained and operated by M/s. Friends Oil and Chemical Terminals Pvt. Ltd... Therefore, the assessee is not required to entered in to an agreement, in the light of CBDT Circular No. 10 of 2005. Therefore, the assessee has made sufficient in compliance of provisions of section 80IA(4)(i)(b). If we examined whether in the absence of specific agreement with the Central/State Government, local authority or Statutory Body, the assessee is entitled to claim the benefit of section 80IA(4)(i). The assessee had made an application for setting up of infrastructure facilities at Kandla Port. In response to the application of the assessee, the KPT has given permission for construction loading, storage tanks with infrastructure facilities at Kandla for loading and unloading liquid cargo. The ld. Counsel for the assessee has placed on record a letter dtd. 12.09.1995 issued by KPT The contents of the letter are reproduced as follows:- / am to refer to letter on the subject cited above and to inform you that change in name of your firm M/s. Friends Group of Industries to M/s. Friends Oil and Chemical Terminals Pvt. Ltd. in respect of land allotted admg. 25,000 sq. meters at Kandla has been noted in the records of this office. Further, you are advised to execute the lease deed in respect of the aforesaid plot between Kandla Port Trust and Friends Oil Chemical Terminals Pvt. Ltd. The other terms and condition prescribed at the time of allotment and other terms indicated in this office letter No. AW/PL/2152JI/637 dated 1-12-94 will remain unaltered" (PB-7). In view of these facts, we are of the considered view that the assessee has developed infrastructure facilities, built maintained and operated within the meaning of provisions of section 80IA (4) (i) (b) of the Act. Therefore, the assessee is deemed to have made due omph'ance of provisions of section 80IA (4) (i) (b). The learned for the assessee relied in the case of CIT v. A. L. Logistic Pvt. [2005] 374 ITR 609 (Mad) held that it is evident that the proposal 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 sequences of events clearly show that the assessee is providing CFS facility in accordance with the conditions laid down by the C.O. Nos. 151, 152 & 153/Ahd/2016 A.Y. 2009-10 to 2011-12 Page No Friends Oil & Chemicals Terminals Pvt. Ltd. vs. DCIT 10 Government. In such circumstances, there is no need to insist for the specific execution of agreements. 16. Further, the Co-ordinate Bench of Tribunal of Chennai in the case of A. L. Logistic Pvt. Ltd. v. ITO [2014] 49 taxmann.com 251 ( Chennai-Trib) held that the co-ordinate bench of the Tribunal in the case of United Liner Agencies of India (Private) Ltd., v. Joint CIT (OSD)m ITA Nos.273&275/Mum/2013 (supra), has taken a similar view. Where no specific agreement with the State Government was entered into but from the approvals granted to the assessee. it was inferred that assessee should be deemed to have entered into an agreement with the State Government. Similarly, the issue of the assessee is also supported by the decision in the case of Pr. CIT Seabird Marine Services Pvt. Ltd. [2017] 398 ITR436 (Gujarat) . Thus, we are of the considered view that the assessee has complied with all the provisions of section 80IA(4)(i) and is eligible to claim deduction under the said section. The impugned order is set aside. In of the above, this ground is allowed.” 7. In our view, the issue for consideration has been directly decided in favour of the assessee by the ITAT, Rajkot Bench in the assessee’s own case for assessment years 2006-07 and 2008-09, which was the basis on which disallowance under section 80 IA(4) of the Act was made in the case of the assessee for assessment year 2009-10, which is for consideration before us. Respectfully following the above ruling in the assessee’s own case, ground number 2 of the assessee’s Cross objection is decided in favour of the assessee. 8. In the result, ground number 2 of assessee’s cross objection is allowed. Assessment year 2010-11 C.O. Nos. 151, 152 & 153/Ahd/2016 A.Y. 2009-10 to 2011-12 Page No Friends Oil & Chemicals Terminals Pvt. Ltd. vs. DCIT 11 9. For assessment year 2010-11, the counsel for the assessee has submitted that he shall not be pressing Ground Numbers 1, 3, 4 and 5 of the cross objections for the impugned year. Accordingly, Ground Numbers 1, 3, 4 and 5 of assessee’s cross objections are being dismissed as not pressed. 10. Ground number 2 of assessee’s Cross objection relates to disallowance under section 80 IA(4) of the Act to the tune of 3,58,09,664/-. 11. Since this issue has been decided in favour of the assessee for assessment year 2009-10, ground number 2 of the assessee’s Cross objection is decided in favour of the assessee for assessment year 2010-11 as well. 12. In the result, ground number 2 of assessee’s cross objection is allowed. Assessment year 2011-12: 13. For assessment year 2011-12, the counsel for the assessee has submitted that he shall not be pressing Ground Numbers 1, 3, 4 and 5 of the cross objections for the impugned year. Accordingly, Ground Numbers 1, 3, 4 and 5 of assessee’s cross objections are being dismissed as not pressed. 14. Ground number 2 of assessee’s Cross objection relates to disallowance under section 80 IA(4) of the Act to the tune of 3,58,48,773/- C.O. Nos. 151, 152 & 153/Ahd/2016 A.Y. 2009-10 to 2011-12 Page No Friends Oil & Chemicals Terminals Pvt. Ltd. vs. DCIT 12 15. Since this issue has been decided in favour of the assessee for assessment years 2009-10 and assessment year 2010-11, ground number 2 of the assessee’s Cross objection is decided in favour of the assessee for assessment year 2011-12 as well. 16. In the result, ground number 2 of assessee’s cross objection is allowed. 17. In the combined result, the three cross objections of the assessee are partly allowed. Order pronounced in the open court on 12-08-2022 Sd/- Sd/- (WASEEM AHMED) (SIDHHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 12/08/2022 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order, Assistant Registrar, Income Tax Appellate Tribunal, Rajkot