DCIT Corporate Circle 2(2) , CHENNAI V. Indian Corporate Business Centre Limited , CHENNAI

ITA 1724/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5551 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 12-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M PALANICHAMY
• Assessee Lawyers: AS SRIRAMAN V RAVICHANDRAN
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . , , BEFORE SHRI DUVVURU RL REDDY , JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ I.T.A. NO. 1724/MDS/2017 / ASSESSMENT YEAR : 2013-14 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -2(2), ROOM NO. 512, 5 TH FLOOR, WANAPARTHY BLOCK, 121 M.G. ROAD, CHENNAI 600 034. VS. M/S. INDIAN CORPORATE BUSINESS CENTRE LIMITED, 126/21, VAIKADU VILLAGE MANALI, CHENNAI 600 103. [PAN: AAACI 2755B] ( / APPELLANT) ( / RESPONDENT) ( ) / APPELLANT BY : SHRI. M. PALANICHAMY, JCIT ,-( ) / RESPONDENT BY : SHRI. AS. SRIRAMAN, ADVOCATE FOR V. RAVICHANDRAN, CA ) /DATE OF HEARING : 06.10.2017 ) /DATE OF PRONOUNCEMENT : 27.12.2017 /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 ITA NO. 48/CIT(A)- 6/2016-17 DATED 26.04.2017 FOR ASSESSMENT YEAR 2013 -14. :-2-: ITA NO. 1724/MDS/2017 2. M/S. INDIAN CORPORATE BUSINESS CENTRE LIMITED, T HE ASSESSEE, IS ENGAGED IN THE BUSINESS OF WAREHOUSING AND CLEARING AND FORWARDING STATION. WHILE MAKING THE ASSESSMENT FOR ASSESSMEN T YEAR 2013-14, THE AO NOTICED THAT THE ASSESSEE COMPANY MADE AN INVEST MENT OF RS. 1,33,01,973/- IN ITS FINANCIAL STATEMENTS. SINCE, THIS INVESTMENT IS CAPABLE OF EARNING DIVIDEND INCOME, THE AO INVOKED THE PROV ISIONS OF SECTION 14A R.W.R. 8D AND DISALLOWED RS. 66,510/-. ON AN APPEA L, THE ASSESSEE SUBMITTED THAT IT HAS NOT MADE ANY FRESH INVESTMENT S DURING THE YEAR, THE OPENING AND THE CLOSING BALANCE OF THE INVESTMENT R EMAINS 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 TH E RATIO OF THE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF R EDINGTON INDIA LIMITED VS ADDL. CIT REPORTED IN [2017], 77 TAXMANN.COM 257, W HEREIN 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. 3. FURTHER, THE AO HELD THAT THE ASSESSEE IS ENGAGE D IN THE BUSINESS OF CONTAINER FREIGHT STATION (CFS) AND WARE HOUSING AN D 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 OT HER INCOME CONSIST OF INTEREST INCOME AND OTHERS. THE AO HELD THAT INSUR ANCE AND NOC CHARGES DO NOT FORM THE CORE BUSINESS OF THE ASSESSEE AND A S SUCH ARE NOT ELIGIBLE FOR DEDUCTION U/S. 80IA. FURTHER, THE AO DENIED DE DUCTION U/S. 80IA FOR THE REASONS THAT CFS CANNOT BE TERMED AS THE INFRAS TRUCTURE FACILITY UNDER THE PROVISIONS OF SECTION 80IA. SINCE, CFS WAS SPE CIFICALLY CATEGORIZED AS ANY OTHER PUBLIC FACILITY VIDE CBDTS NOTIFICATIO N NO. 10682 DATED 01.09.1998, AFTER THE AMENDMENT TO SECTION 80IA, WI TH EFFECT FROM 01.04.2002, THIS NOTIFICATION IS NO LONGER OPERATIV E. THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CONTAINER C ORPORATION OF INDIA REPORTED IN [2012] 21 TAXMANN.COM 317 (DELHI) HOLDI NG INLAND CONTAINER DEPOTS (ICDS) TO BE PORTS HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND AN SLP HAS BEEN FILED. THE ASSESSEE HAS NOT ENTERE D INTO AN AGREEMENT WITH GOVERNMENT IN TERMS OF SECTION 80IA(A)(I). OB TAINING 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 HONBLE MADRAS HIGH COURT IN THE CA SE 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 FILE D AN APPEAL BEFORE THE CIT(A). :-4-: ITA NO. 1724/MDS/2017 4. BEFORE THE CIT(A), THE ASSESSEE, INTER ALIA, EXP LAINED THAT IN THE CFS BUSINESS, THE ASSESSEE RECEIVES TWO TYPES OF CHARGE S : (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 U PON 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 CHARG ES AND INSURANCE CHARGES PERTAIN TO THE CUSTOMS BONDED WAREHOUSING B USINESS 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 A SSESSING OFFICER HAS RELIED ON THE DECISION OF THE HONBLE ITAT IN CONTA INER CORPORATION OF INDIA LIMITED WHICH HAD BEEN REVERSED BY THE DELHI HIGH C OURT REPORTED IN [2012] 21 TAXMANN.COM 317 (DELHI) AND THAT THE DEDU CTION U/S. 80IA BY :-5-: ITA NO. 1724/MDS/2017 CFS HAS BEEN UPHELD BY THE JURISDICTIONAL MADRAS HI GH 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 TH E DEPARTMENT HAS NOT ACCEPTED THESE DECISIONS AND SLPS HAD BEEN FILED. 4.2 WITH REGARD TO THE AOS OBSERVATION THAT AN AGR EEMENT HAD NOT BEEN ENTERED INTO WITH THE GOVERNMENT, THE ASSESSEE RELI ED ON THE MADRAS HIGH COURT DECISION IN PARA 7 AND 8 THAT: THUS IT IS EV IDENT THAT THE PROPOSAL OF THE ASSESSEE WAS ACCEPTED BY THE GOVERNMENT ON CERT AIN 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 CONDI TIONS LAID DOWN BY THE GOVERNMENT. IN SUCH CIRCUMSTANCES THERE IS NO NEED TO INSIST FOR SPECIFIC EXECUTION OF AGREEMENT. THE ASSESSEE, THEREFORE SU BMITTED BEFORE THE CIT(A) THAT THE DEDUCTION CLAIMED U/S. 80IA RELATES ENTIRELY TO THE INCOME DERIVED ENTIRELY FROM THE CFS BUSINESS, DULY SUPPOR TED BY THE AUDIT REPORT IN FORM 10CCB WHICH CANNOT BE DISREGARDED AND THE A SSESSEES CLAIM FOR DEDUCTION U/S. 80IA IS FULLY SUPPORTED BY THE DECIS ION OF THE HONBLE MADRAS HIGH COURT. :-6-: ITA NO. 1724/MDS/2017 5. ON DUE CONSIDERATION, THE CIT(A) HELD AS UNDER: I. THE HONBLE MADRAS HIGH COURT IN ITS DECISION IN THE CASE OF AL LOGISTICS P LTD. (SUPRA) HAS CATEGORICALLY HELD THA T ICD/CFS IS AN INFRASTRUCTURE FACILITY FOR THE PURPOSE OF SECTION 80IA OF THE ACT . THE JUDICIAL DECISION OF HONBLE JURISDICTIONAL HIGH COURT IS RESPECTFULLY F OLLOWED. II. THE HONBLE MADRAS HIGH COURT HAS FURTHER HELD THAT ONCE A CFS FACILITY IS SET UP IN ACCORDANCE WITH THE CONDITION S LAID DOWN BY THE GOVERNMENT, THERE IS NO NEED TO INSIST FOR THE SPE CIFIC EXECUTION OF AGREEMENTS WITH THE GOVERNMENT. III. THE AUDITOR IN FORM 10CCB HAS CERTIFIED THE C ORRECTNESS OF THE CLAIM MADE U/S. 80IA OF THE ACT, AND WAREHOUSING CH ARGES AND INSURANCE CHARGES PERTAINING TO CUSTOM BONDED WAREHOUSING BUS INESS HAVE NOT BEEN INCLUDED FOR THE PURPOSE OF CLAIM U/S. 80IA OF THE ACT. IV. THERE ARE TWO DECISIONS OF HONBLE DELHI HIGH COURT IN THE CASE OF M/S. CONTAINER CORPORATION OF INDIA (SUPRA) AND OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF AC LOGISTICS (P) LTD (SUPRA) I N THE FAVOUR OF THE APPELLANT AS ON DATE, THERE IS NO CONTRARY DECISION ON THE IS SUE AVAILABLE FROM ANY OTHER HIGH COURT, AND THESE DECISIONS HAVE NOT BEEN REVER SED BY THE HONBLE 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 ASS ESSMENT ORDER STANDS DELETED. THIS GROUND IS ALLOWED. 6. AGGRIEVED, THE REVENUE FILED THIS APPEAL CONTEND ING PRIMARILY, THAT THE DECISION OF THE HONBLE MADRAS HIGH COURT IN T HE 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 HONBLE ITAT :-7-: ITA NO. 1724/MDS/2017 ON THE SIMILAR ISSUE IN THE CASE OF M/S. EIH ASSOCI ATED 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 HONBLE HIGH COURT. THE CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE U/S. 80IA OF THE ACT RELYING ON T HE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF M/S. CONTAINER CORP ORATION OF INDIA AND HONBE MADRAS HIGH COURT IN THE CASE OF M/S. AC LOG ISTICS (P) LTD. THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF M/S. CONTAINER CORPORATION OF INDIA HAS NOT BEEN ACCEPTED BY THE D EPARTMENT AND FURTHER SLP HAS BEEN FILED BEFORE THE HONBLE SUPREME COURT . 7. THE DR CANVASSED THE CASE ON THE LINES OF GROUND S OF APPEAL. PER CONTRA, THE AR SUPPORTED THE ORDER OF THE CIT(A) AN D RELIED ON THE JUDGMENTS ON WHICH THE CIT(A) RELIED ON HIS DECISIO N. 8. WE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE RELEVANT MATERIALS. WE FIND THAT ON THE DISALLOWANCE U/S. 1 4A R.W.R. 8D, ON THE UNDISPUTED FACTS, THE CIT(A) HAS APPLIED THE RATIOS OF THE JURISDICTIONAL HIGH COURTS DECISION IN THE CASES OF REDINGTION (I NDIA) 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 FAC TS, APPLIED THE RATIOS OF THE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF AL LOGISTICS PVT LTD AND THE HONBLE DELHI HIGH COURT DECISION IN THE CASE O F CONTAINER CORPORATION OF INDIA LTD. FURTHER, THE CIT(A) ALSO HELD THAT A S 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 HONB LE SUPREME COURT. THE REVENUE HAS NOT DISPUTED THE FACTUAL FINDINGS A ND 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 REVENU E IS DISMISSED. 9. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED ON WEDNESDAY, THE 27 TH DAY OF DECEMBER, 2017 AT CHENNAI. SD/ - ( . ' ) (DUVVURU RL REDDY) $ % /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) % /ACCOUNTANT MEMBER /CHENNAI, 2 /DATED: 27 TH DECEMBER, 2017 JPV ) ,45 65 /COPY TO: 1. (/ APPELLANT 2. ,-( /RESPONDENT 3. 7 ( )/CIT(A) 4. 7 /CIT 5. 5 , /DR 6. : /GF