The Dy. Commr. Of Income Tax, Cir.-1, JAMNAGAR V. M/s Seabird Marine Services P. Ltd., JAMNAGAR

ITA 282/RJT/2016

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0731 (ITAT-RAJKOT)
• Duration Of Justice: 6 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2022
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 05-09-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 04-08-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Earning of tax free income; Set aside
• Section: 14A; 80IA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER & SHRI WASEEM AHMED, ACCOUNTANT MEMBER I.T . A . N o . 2 8 2/ R j t/ 2 0 16 ( A s s e s s me nt Y ea r : 20 1 3- 14 ) D C I T C ir cl e - 1, J a m na ga r Vs . M / s. S e a b ir d Ma r i n e S er vi c e s Pvt . Ltd ., 2 1 5 -2 18 V en u s A p p tt ., O pp . C r i c k et B a n ga lo w , J a m na ga r [ P A N N o . AA C C S 9 8 6 9C ] (Appellant) .. (Respondent) Appellant by : Shri Shramdeep Sinha, CIT D.R. Respondent by : Shri Kapil Sanghavi, A.R. D a t e of H ea r i ng 06.09.2022 D a t e of P r o no u n ce me nt 14.10.2022 O R D E R PER Ms. SUCHITRA KAMBLE - JM: This appeal is filed by the Revenue against the order dated 24.05.2016 passed by the Ld. CIT-(Appeals), Jamnagar for A.Y. 2013- 14. 2. The grounds of appeal raised by the Revenue read as under: “1. The Ld. CIT(A) erred on facts and in law in deleting the addition made by the AO amounting to Rs.64,43,00,313/- on account of disallowance of the claim for deduction u/s 80IA of the Act. 2. The Ld. CIT(A) erred on facts and in law in holding that the assessee was eligible for deduction u/s 80IA of the Act. 3. The Ld. CIT(A) erred on facts and in law in deleting the addition made by the AO amounting to Rs.76,80,274/- on account of disallowance u/s 14A. 4. Ld. CIT(A) erred on facts and in law in holding that while resorting to provisions of section 14A of the Act and computing disallowable amount under Rule 8D, recording the satisfaction by the AO that the working of ITA No.282/Rjt/2016 DCIT vs. M/s. Seabird Marine Services P. Ltd. Asst.Year –2013-14 - 2 - disallowable made by the assessee was incorrect is mandatory and in absence of such satisfaction, no disallowance can be made. 5. The Ld. CIT(A) erred on facts and in law in deleting the addition made by the AO amounting to Rs.43,95,000/- on account of disallowance of the claim for deduction in respect of payment of EX & SHEC u/s. 40 of the Act. 6. The Ld. CIT(A) erred on facts in law in holding that the rental income earned by the assessee amounting to Rs.57,72,567/- was business income and as such was eligible for deduction 80IA of the Act. 7. On the basis of the facts and circumstances of the case, the learned CIT(A) ought to have upheld the order of the Assessing Officer. 8. That the revenue craves leaves to add, amend, alter or withdraw any ground of appeal. 9. It is therefore prayed that the order of the CIT(A), Jamnagar may kindly be set aside and that of Assessing Officer be restored.” 3. The assessee is a private limited company having two Container Freight Station (CFS) at JNPT & Mundra. The assessee claimed deduction under Section 80IA(4) for both the CFS. The return of income was filed on 29.11.2013 declaring total income of Rs. 6,73,02,740/-. The Assessing Officer assessed the total income at Rs. 72,61,35,710/- thereby disallowing the deduction of Rs. 64,43,00,313/- under Section 80IA(4) of the Act. The Assessing Officer further disallowed claim of the assessee under Section 14A at Rs. 76,80,274/-. The Assessing Officer also disallowed education cess and SHEC at Rs. 43,95,000/-. 4. Being aggrieved by the Assessment Order the assessee filed before the CIT(A). The CIT(A) allowed the appeal of the assessee. 5. The Ld. D.R. submitted that the CIT(A) was not right in deleting the addition made by the AO amounting to Rs. 64,43,00,313/- on account of ITA No.282/Rjt/2016 DCIT vs. M/s. Seabird Marine Services P. Ltd. Asst.Year –2013-14 - 3 - disallowance of claim for deduction under Section 80IA of the Act as the assessee is claiming the deduction without fulfilling the conditions set out under Section 80IA(4) of the Act. The Ld. D.R. submitted that the enterprise which claims the deduction should carry on the business of developing or operating or maintain or developing, operating and maintaining any infrastructure facility. As per Clause (d) of the Explanation to Section 80IA(4), infrastructure facility means a port, airport, inland waterway. The CBDT Circular No. 10 of 2005 dated 16.12.2005 clarified the definition of “port” for the purpose of deduction under Section 80IA from A.Y. 2002-03 onwards to include structures at the ports for storage, loading and unloading etc. only if the concerned port authority issued a certificate that the said structures form part of the port. The assessee company submitted before the AO that initially a certificate was issued to M/s. Sea-Bird Marine Services Pvt. Ltd. clearly indicating that such Container Pvt. Ltd. (CFS) is situated on land that does not belong to port. Subsequently, such certificate was withdrawn by JNP/Fin/2007 dated 24.10.2007. Thus, the Ld. D.R. submitted that the assessee is not eligible for claiming deduction under Section 80IA(4) as the assessee has not fulfilled the condition of port in respect of infrastructure facility to that of Container Freight Services(CFS). 6. As regards Ground No. 3 and 4, the Ld. D.R. submitted that in assessee’s case the AO has recorded the satisfaction and thereafter has made the working in respect of disallowance under Section 14A r.w.r. 8D. ITA No.282/Rjt/2016 DCIT vs. M/s. Seabird Marine Services P. Ltd. Asst.Year –2013-14 - 4 - 7. As regards Ground No. 5 the Ld. D.R. relied upon the assessment order relating to disallowance of claim for deduction in respect of payment of education cess and SHEC under Section 40 of the Act. 8. As regards Ground No. 6 related to rental income earned by the assessee amounting to Rs. 57,72,567/- being held as business income and was eligible for deduction under Section 80IA of the Act the Ld. D.R. submitted that the CIT(A) was not correct in allowing the said income. The Ld. D.R. relied upon assessment order. 9. The Ld. A.R. submitted that regarding Ground No. 1 & 2 of Revenue’s appeal the Hon’ble Supreme Court in assessee’s own case in Civil Appeal No. 4484 of 2018 has given a clear finding that assessee is eligible for claiming deduction under Section 80IA for operating and maintaining CFS facility. The Ld. A.R. further submitted that the assessment order contested by the assessee is that of 2013-14 and JNPT authority has clearly granted the certificate to the assessee in the year 2007 thereby withdrawing the earlier remarks. The Ld. A.R. further submitted that in respect of disallowance under Section 14A has not given any satisfaction in the assessment order. The Ld. A.R. submitted that as per Section 14A(2) of the Act, Rule 8D is to be invoked by Assessing Officer only if he is not satisfied with the correctness of the claim of the assessee, but the assessee company has suo moto disallowed Rs. 1,44,331/- under Section 14A in its return of income being demat charges of Rs. 4,131/- and salary expenses of Rs. 1,40,150/- i.e. 10% of the salary. Hence, the disallowance under Section 14A made by the Assessing Officer is not valid. As regards Ground No. 5 the Ld. A.R. relied upon the decision of Hon’ble ITA No.282/Rjt/2016 DCIT vs. M/s. Seabird Marine Services P. Ltd. Asst.Year –2013-14 - 5 - Bombay High Court in case of Sesa Goa Ltd. vs. JCIT 117 taxmann.com 96 where the claim of deduction of education cess and SHEC has been allowed. As regards Ground No. 6 the Ld. A.R. submitted that the CFS facility of the company is approved by the Ministry of Commerce on certain terms and conditions in respect of minimum level of facilities required at CFS wherein condition at Serial No. (b) requires separate block for user agencies equipped with basic facilities and Serial No. (j) provides for accommodation for bank. Therefore, the said activities are necessarily form the part of the business carried on by the assessee. The CBDT Circular No. 16 of 2017 dated 25.04.2017 clarified that Lease Rent From Letting Out Buildings / Developed space along with other amenities in an Industrial Park/SEZ to be treated as business income. The A.R. relied upon the decision of Hon’ble Apex Court in case of Chennai Properties & Investments Ltd. (2015) 56 taxmann.com 456 wherein it is held that the income from letting out property should be treated as business income in specific circumstances which are set out in the said decision. 10. We have heard both the parties and perused all the relevant material available on record. As regards Ground No. 1 & 2 related to deduction under Section 80IA (4) the assessee’s case is squarely covered by the Hon’ble Supreme Court decision in assessee’s own case in Civil Appeal 4484 of 2018 wherein the assessee has been allowed to claim deduction under Section 80IA as the assessee is developing, operating and maintaining infrastructure facilities in the port area and is Container Freight Station which comes within the definition of port as per subsequent clarification ITA No.282/Rjt/2016 DCIT vs. M/s. Seabird Marine Services P. Ltd. Asst.Year –2013-14 - 6 - issued by the JNPT on 24.10.2007. Thus, the Ground No. 1 & 2 of Revenue’s appeal are dismissed. 11. As regards disallowance under Section 14A the assessee has made suo moto disallowance of Rs. 1,40,150/- on the dividend income on at Rs. 6,52,761/-, therefore, the AO was not correct in making the disallowance as no satisfaction was recorded by the assessee as per the contentions of the Ld. A.R. But the AO has made the disallowance on expenditure at 0.5% with the specific disallowance that total interest expenditure incurred by the assessee was Rs. 20,09,451/- and assessee has not disallowed interest and expenses as provided under Rule 8D as prescribed under Section 14A. There was a clear satisfaction that assessee has not made any disallowance on expenditure. Thus, the CIT(A) was not correct in holding that no satisfaction was recorded by the AO. But the contention of the assessee that the AO should have taken only those shares of Mutual Fund and equity shares which resulted in earning tax from dividend income appears to be just and proper and the working of disallowance under Rule 8D(2)(iii) determined by AO should be restricted to Rs. 2,30,935/- as the assessee has earned exempt income of Rs. 6,52,761/-. Thus, we direct the AO to restrict the disallowance as per Rule 8D(2)(iii) to the extent of Rs. 2,30,935/-. Ground Nos. 3 & 4 of Revenue’s appeal are partly allowed. 12. As regards Ground No. 5 the issue related to education cess & SHEC under Section 40 of the Income Tax Act is squarely covered by the decision of Hon’ble Bombay High Court in case of Sesa Goa Ltd. (Supra). Thus Ground No. 5 is dismissed. ITA No.282/Rjt/2016 DCIT vs. M/s. Seabird Marine Services P. Ltd. Asst.Year –2013-14 - 7 - 13. As regards Ground No. 6, the CIT(A) has given a detail finding and it is the requirement of the business that the separate block for user agencies quipped with basic facilities and for accommodation for bank are mandatory for the assessee as per the Ministry of Commerce guidelines. Thus, claiming deduction under Section 80IA on the rental income is just and proper. There is no need to interfere with the finding of the CIT(A) Ground No. 6 is dismissed. 14. In the result, appeal of the Revenue is partly allowed. This Order pronounced in Open Court on 14/10/2022 Sd/- Sd/- (WASEEM AHMED) (Ms. SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 14/10/2022 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, राजोकट / ITAT, Rajkot 1. Date of dictation 11.10.2022 2. Date on which the typed draft is placed before the Dictating Member 11 .10.2022 3. Other Member..................... 4. Date on which the approved draft comes to the Sr.P.S./P.S 11.10.2022 5. Date on which the fair order is placed before the Dictating Member for pronouncement .10.2022 6. Date on which the fair order comes back to the Sr.P.S./P.S 14 .10.2022 7. Date on which the file goes to the Bench Clerk 14 .10.2022 8. Date on which the file goes to the Head Clerk.......................................... 9. The date on which the file goes to the Assistant Registrar for signature on the order.......................... 10. Date of Despatch of the Order..........................................