INTERNATIONAL CARGO TERMINALS & INFRASTRUCTURE P.LTD, MUMBAI V. DCIT CEN CIR 6(4), MUMBAI

ITA 7054/MUM/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6853 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 02-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SIMTI SAMANT
• Keywords: Earning of tax free income
• Section: 14A; 80IA; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI BEFORE SHRI PAWAN SINGH (JM) & SHRI S RIFAUR RAHMAN (A.M.) ITA NO. 7054/MUM/2016 -AY 2013-14 ITA NO. 3661/MUM/2017 -AY 2013-14 ITA NO. 5658/MUM/2017 -AY 2013-14 M/S INTERNATIONAL CARGO TERMINALS AND INFRASTRUCTURE P LTD (FORMERLY KNOWN AS UNITED LINER AGENCIES OF INDIA P. LTD), UNIT NO.801, GODREJ COLISEUM, C-WING, OFF. SOMAIYA HOSPITAL ROAD, SION, MUMBAI-400 022 PAN AAACU5182C VS DCIT, CENT.CIR.6(4), MUMBAI APPELLANT RESPONDEDNT ITA NO. 7358/MUM/2016 -AY 2013-14 ITA NO.5774/MUM/2017 -AY 2013-14 DCIT, CENT.CIR.6(4), MUMBAI VS M/S INTERNATIONAL CARGO TERMINALS AND INFRASTRUCTURE P LTD (FORMERLY KNOWN AS UNITED LINER AGENCIES OF INDIA P. LTD), UNIT NO.801, GODREJ COLISEUM, C-WING, OFF. SOMAIYA HOSPITAL ROAD, SION, MUMBAI-400 022 PAN AAACU5182C APPELLANT RESPONDEDNT ASSESSEE BY SHRI YP TRIVEDI SR ADVOCATE WITH SMT. USHA DALAL ADVOCATE RESPONDENT BY SIMTI SAMANT, CIT -DR DATE OF HEARING 22-01-2020 DATE OF PRONOUNCEMENT 22-01-2020 O R D E R PER BENCH : 2 INTERNATIONAL CARGO TERMINALS & INFRASTRUCTURE P LT D 1. THIS SET OF 5 APPEALS ARE DIRECTED AGAINST THE ORDE RS OF LD.CIT(A)-54, MUMBAI DATED 06-09-2016 AND 23-06-2017, ALL FOR THE ASSESSMENT YEAR 2013-14. 2. AT THE OUTSET OF HEARING, THE LD.AR OF THE ASSESSEE SUBMITS THAT APPEALS IN ITA NOS 7054, 7358/MUM/2016 & 3661/MUM/2 016 HAVE BECOME INFRUCTUOUS, IN VIEW OF FACT THE LD.CIT(A) P ASSED ANOTHER ORDER ON THE E-APPEAL FILED BY THE ASSESSEE, VIDE O RDER DATED 23-06- 2017 GRANTING PART RELIEF TO THE ASSESSEE AGAINST W HICH BOTH THE PARTIES HAVE FILED THEIR CROSS APPEAL. CONSIDERING THE CONT ENTIONS OF BOTH THE PARTIES, THESE THREE APPEALS ARE TREATED AS DISMISS ED BEING INFRUCTUOUS. THE LD.DR FOR THE REVENUE FAIRLY AGREED THAT APPEAL S IN ITA NOS 7054, 7358/MUM/2016 & 3661/MUM/2016 HAVE BECOME INFRUCTUO US. 3. THE ASSESSEE HAS FILED APPEAL VIDE ITA NO.5658/MUM /2017 AND THE REVENUE HAS FILED ITS APPEAL IN ITA NO.5774/MUM/201 7. 4. THE REVENUE, IN ITS APPEAL IN ITA NO.5774/MUM/2017 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- (I) 'WHETHER ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT T HE ASSESSEE WAS ENTITLED TO DEDUCTION U/S 80-IA(4) OF THE INCOME TAX ACT, 1961, WHICH WAS CONTRARY TO THE CIRCULAR OF THE CBDT NO. 10/2005 AS ALSO CONTRA RY TO THE FACT THAT JNPT HAD WITHDRAWN ITS CERTIFICATION OF THE COMPANY?' (II) 'WHETHER ON THE FACTS AND IN THE CIRCUMS TANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT T HE CONDITION PROVIDED IN SUB-CLAUSE(B) OF SECTION 80-IA(4)(I) OF THE ACT IS NOT MANDATORY AND 3 INTERNATIONAL CARGO TERMINALS & INFRASTRUCTURE P LT D THEREFORE, THE ASSESSEE IS ENTITLED TO GET DEDUCTIO N U/S 80-IA(4) OF THE INCOME TAX ACT, 1961?' (III) 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE CONTAINER FREIGHT STATION (CFS) IS AN EXTENSION OF PORT ACTIVITY AND THUS ELIGIBLE FOR DEDUCTION U/S 80IA (4)(I).' 5. AT THE OUTSET OF HEARING, THE LD.AR OF THE ASSESSEE SUBMITS THAT THE GROUNDS OF APPEAL RAISED BY REVENUE IS COVERED BY T HE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR AYS 2007-08, 20 08-09, 2010-11, 2011-12 AND 2012-13 WHEREIN ON IDENTICAL GROUNDS OF APPEAL, THE TRIBUNAL DISMISSED THE APPEALS OF THE REVENUE. THE LD.AR OF THE ASSESSEE FURNISHED THE COPY OF ORDER OF THE TRIBUNA L DATED 21-08-2019. 6. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE, AFTE R GOING THROUGH THE GROUNDS OF APPEAL AND THE DECISION OF TRIBUNAL FOR AYS 2007-08 TO 2012-13 ON IDENTICAL GROUNDS, AGREED THAT THE APPEA LS OF REVENUE ON IDENTICAL GROUNDS OF APPEAL WERE DISMISSED FOR THOS E ASSESSMENT YEARS. THE LD. DR, HOWEVER, RELIED UPON THE ORDER OF AO. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PART IES AND PERUSED THE ORDERS OF LOWER AUTHORITIES. WE HAVE SEEN THAT ON IDENTICAL GROUNDS OF APPEAL, SIMILAR ISSUE WAS DECIDED BY THE TRIBUNA L IN FAVOUR OF THE ASSESSEE BY RELYING UPON THE DECISION OF HONBLE SU PREME COURT IN CONTAINER CORPORATION OF INDIA REPORTED IN 404 ITR 397 (SC) WHEREIN FREIGHT STATION IS HELD AS ELIGIBLE FOR DEDUCTION U /S 80IA(4). FOR 4 INTERNATIONAL CARGO TERMINALS & INFRASTRUCTURE P LT D COMPLETENESS OF ORDER, THE RELEVANT PART OF FINDING OF TRIBUNAL IS REPRODUCED BELOW:- THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS WIT H REGARD TO DELETION OF DISALLOWANCE OF DEDUCTION U/S.80IA (4) OF THE ACT B Y THE ID. CIT(A). WE FIND THE ISSUE INVOLVED IS WHETHER THE INCOME OF CO NTAINER FREIGHT STATION IS ELIGIBLE FOR DEDUCTION U/S.80IA (4) OF THE ACT. BOT H THE PARTIES MUTUALLY AGREED AT THE TIME OF HEARING THAT THIS ISSUE IS CO VERED BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. CONTAI NER CORPORATION OF INDIA LTD., REPORTED IN 404 ITR 397 (SC) WHEREIN IT WAS HELD THAT CONTAINER FREIGHT STATION IS ELIGIBLE FOR DEDUCTION U/S. 80IA (4) OF THE ACT. SINCE THE FACTS RECORDED BY THE ID. CIT(A) IN HIS ORDER ARE N OT IN DISPUTE BEFORE US, RESPECTFULLY FOLLOWING THE AFORESAID SUPREME COURT DECISION WHICH IS ALSO NOT DISPUTED BY THE PARTIES BEFORE US, THE GROUNDS RAISED BY THE REVENUE FOR THE A.Y.2007-08 ARE DISMISSED. 8. IN VIEW OF THE AFORESAID DECISION OF TRIBUNAL ON ID ENTICAL SET OF FACTS, AND RESPECTFULLY FOLLOWING THE SAME THE GROUNDS OF APPEAL RAISED BY REVENUE IS DISMISSED. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. 10. THE ASSESSEE, IN ITS APPEAL IN ITA NO.5658/MUM/2017 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LEARNED CIT (A) ERRED IN CONFIRMING ACTION OF THE ASSESSING OFFICER FOR NOT GRANTING A SUM OF RS 37,86,600/- AS DEDUCTI ON UNDER SECTION 80 IA OF THE INCOME TAX ACT, 1961, THUS GRANTING ONLY PARTIA L RELIEF U/S.80IA. ABOVE SUM IS AGGREGATE OF INCOME SHOWN UNDER THE HEAD REN T OF RS. 27,95,9377- AND INTEREST ON FD OF RS. 9,90,663/-. 2. THE LEARNED CIT (A) ERRED IN CONFIRMING DISALLOW ANCE OF RS. 1,02,75,9257-BEING 0.5 % OF AVERAGE INVESTMENT OF R S.205,51,85,0007- WITHOUT APPRECIATING THE FACT THAT IT HAS BEEN HELD IN THE CASE OF M/S. MAGNA 5 INTERNATIONAL CARGO TERMINALS & INFRASTRUCTURE P LT D PUBLISHING CO. LTD. VS. ITO IN ITA NO. 5536 7 MUM / 2014 AND ALSO IN THE CASE OF ACIT VS. PUNJAB STATE COOP & MARKETING FED LTD. IN ITA NOS. 548/CHD/ 2011 THAT NO DISALLOWANCES UNDER SECTION 1 4 A OF THE ACT CAN BE MADE WHERE NO EXEMPT INCOME IS EARNED. 3. THE LEARNED CIT (A) ERRED IN CONFIRMING DISALLOW ANCE OF RS. 90,0007- BEING 30 % OF RS. 3,00,0007- DISALLOWED BY THE ASSE SSING OFFICER UNDER THE HEAD A S STAFF WELFARE EXPENSES ON AN AD HOC BASIS, ALLEGING THAT THE SAME WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE BU SINESS. 4. THE LEARNED CIT (A) ERRED IN CONFIRMING DISALLOW ANCE OF RS. 90,0007- BEING 30 % OF RS. 3,00,0007- DISALLOWED BY THE ASSE SSING OFFICER UNDER THE HEAD ' ENTERTAINMENT EXPENSES ON AN AD HOC BASIS BY ALLEGING THAT THE SAME WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE BU SINESS. 5. THE LEARNED CIT (A) ERRED IN CONFIRMING DISALLOW ANCE A SUM OF RS.1,05,000/- BEING 30 % OF RS. 3,50,0007- DISALLOW ED BY THE ASSESSING OFFICER OUT OF MISCELLANEOUS EXPENSES ON AN AD HOC BASIS, ALLEGING THAT THE SAME WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR T HE BUSINESS. 6. THE LEARNED CIT (A) ERRED IN ABRUPTLY ALLOWING O NLY PART RELIEF TO THE AFORESAID EXPENSES WITHOUT APPRECIATING THE FACT TH AT THE SAME WERE INCURRED FOR THE PURPOSE OF APPELLANT'S BUSINESS ONLY. MORE SO, MAJOR EXPENSES WERE ALLOWED BY THE HON'BLE IT AT IN EARLIER YEARS ON TH E BASIS OF THE SAME SET OF FACTS. 11. GROUND 1 OF THE APPEAL RELATES TO DEDUCTION FOR VAR IOUS COMPONENTS OF INCOME ON WHICH DEDUCTION U/S 80IA WAS CLAIMED CONS ISTING HEAD RENT AND INTEREST ON FIXED DEPOSITS. THE LD.AR OF THE AS SESSEE SUBMITS THAT ON SIMILAR GROUNDS OF APPEAL FOR AY 2009-10 IN ITA NO.4109/MUM/2016, THE ISSUE WAS RESTORED TO THE FIL E OF THE AO. 12. THE LD. DR FOR THE REVENUE, HOWEVER, RELIED UPON TH E ORDERS OF LOWER AUTHORITIES. 6 INTERNATIONAL CARGO TERMINALS & INFRASTRUCTURE P LT D 13. WE HAVE NOTED THAT INTEREST ON FD WAS HELD TO BE NO T INEXTRICABLY LINKED WITH THE BUSINESS OF THE ASSESSEE AND WAS DE CIDED AGAINST THE ASSESSEE. HOWEVER, THE OTHER COMPONENT OF INCOME, VIZ. RENTAL INCOME WAS RESTORED BACK TO THE FILE OF THE AO TO A DJUDICATE THE SAME DENOVO WITH THE FOLLOWING DIRECTIONS:- 8. THE GROUND NO.ILL RAISED BY THE ASSESSEE I S WITH REGARD TO ACTION OF THE ID. CIT(A) CONFIRMING THE DISALLOWANC E OF DEDUCTION U/S.80IA OF ACT BY HOLDING THAT THE RENTAL INCOME O F RS.22,11,070/- AND INTEREST ON FDR OF RS.23,56,455/ - AS NOT DERIVED FROM THE INDUSTRIAL UNDERTAKING. 8.1. WE HAVE HEARD RIVAL SUBMISSIONS. WE FIND THAT INTEREST INCOME OF FDR'S WERE NOT MADE WITH INEXTRICABLE LIN K WITH THE BUSINESS OF THE ASSESSEE AND THE ID. AR FAIRLY STAT ED THAT THE SAME IS NOT ELIGIBLE FOR DEDUCTION U/S.80IA OF THE ACT. ACCORDINGLY, WE UPHOLD THE ACTION OF THE ID. CIT(A) IN THIS REGARD. 8.2. WITH REGARD TO RENTAL INCOME OF RS.22,11,070, THE ID. AR ARGUED THAT THE SAME ONLY REPRESENTS DEMURRAGE CHAR GES AND WE FIND THAT THE ID. AR FILED A NOTE IN THIS RE GARD AS UNDER:- NOTE ON RENT INCOME. ASSESSMENT YEARS: 2008-09 TO 2 013-14. 'THE APPELLANT CARRIES THE BUSINESS OF PROVIDING CO NTAINERS FREIGHT SERVICES. THIS IS GIVEN RECOGNITION AS AN INLAND PO RT. THIS FACILITATES THE EXPORTERS AND IMPORTERS TO USE THE SERVICES OF THESE INLAND PORTS AND SAVE (HEM THE TROUBLES OF RUSHING TO EITHER MUM BAI OR TO ANY OTHER PORT NEAR THE SEA. 7 INTERNATIONAL CARGO TERMINALS & INFRASTRUCTURE P LT D WHEN THE EXPORTER OR IMPORTER BRINGS THE GOODS TO B E EXPORTED OR IMPORTED TO OUR INLAND PORT, THEIR RESPONSIBILITY E NDS AND OUR FACILITIES THEREAFTER SEND THE GOODS TO THE PORTS. SOMETIMES THE GOODS REMAIN IN OUR PORTS WHEN THE IM PORTER OR EXPORTER FINDS IT UNPROFITABLE TO REMOVE THE GOODS. IF THE GOODS WOULD HAVE REMAINED AT REGULAR PORTS THEN EITHER IMPORTER OR EXPORTER MIGHT HAVE TO PAY DEMURRAGE. OUR INLAND PORT CHARGES SUCH DEMURRAGE TO THE IMPOR TER OR EXPORTER AND IF THE GOODS ARE NOT REMOVED WITHIN REASONABLE TIME THEN THEY ARE AUCTIONED BY US. WE THEREFORE SUBMIT THAT THE RENT SO NAMED ARE ONLY DEMURRAGE CHARGES OR AUCTION CHARGES ARISING FROM OUR ACTIVIT IES OF CARRYING ON CONTAINER FREIGHT SERVICES AND THEREFORE THE SAME A RE DEDUCTIBLE UNDER SECTION 801 A OF INCOME TAX ACT, 1961. ' 8,3. THE ID. AR FAIRLY ADMITTED THAT LET THIS FAC T BE EXAMINED BY THE ID. AO AND THE ISSUE BE DECIDED ACCORDINGLY. PER CONTRA, THE ID. DR VEHEMENT!Y OBJE CTED TO SETTING ASIDE OF THIS ISSUE TO THE FILE OF THE ID. AO AS SSESSEE ITSELF HAD CLASSIFIED THE RECEIPT AS RENTAL INCOME. WE FIND THAT ASSESSEE HAD GIVEN A DETAILED NOTE SUP RA EXPLAINING THE NATURE OF TRANSACTION WHICH REQUIRES TO BE EXAMINED. IT IS WELL SETTLED THAT SUBSTANCE OF TH E TRANSACTION WOULD .ALWAYS PREVAIL OVER ITS FORM. ACCORDINGLY, WE DEEM IT FIT AND APPROPRIATE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, TO REMAND THIS ISSUE TO T HE FILE OF THE ID. AO FOR DENOVO ADJUDICATION. ACCORDINGLY, THE GROUND NO. ILL RAISED BY THE ASSESSEE IS PARTLY ALLOWED FO R STATISTICAL PURPOSES. 8 INTERNATIONAL CARGO TERMINALS & INFRASTRUCTURE P LT D 14. CONSIDERING THE FACT THAT ISSUE ON INTEREST INCOME ON FIXED DEPOSITS WAS HELD AGAINST THE ASSESSEE IN AY 2009-10; HOWEVER, T HE ISSUE RELATED TO RENTAL INCOME WAS RESTORED TO THE FILE OF THE AO FO R DENOVO ADJUDICATION. THEREFORE, FOLLOWING THE PRINCIPLE O F CONSISTENCY, THE ISSUE WITH REGARD TO THE INTEREST ON FDR WHICH IS A GAINST THE ASSESSEE IS UPHELD; HOWEVER, ON THE ISSUE WITH REGARD TO THE RE NTAL INCOME IS RESTORED BACK TO THE FILE OF THE AO WITH SIMILAR DI RECTION AS CONTAINED IN ORDER OF THE TRIBUNAL FOR AY 2009-10. THIS GROU ND OF APPEAL IS PARTLY ALLOWED. 15. GROUND 2 RELATES TO DISALLOWANCE U/S 14A. THE LD.A R OF THE ASSESSEE SUBMITS THAT DURING THE RELEVANT PERIOD UNDER CONSI DERATION, NO EXEMPT INCOME WAS EARNED BY ASSESSEE, THEREFORE, NO DISALL OWANCE U/S 14A IS WARRANTED. 16. ON THE OTHER HAND, THE LD.DR FOR THE REVENUE SUBMIT S THAT THE AO MAY BE DIRECTED TO VERIFY THE FACT, IF ANY EXEMPT INCOM E WAS EARNED BY THE ASSESSEE OR NOT. 17. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES, PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE NOTED THAT D URING THE PERIOD UNDER CONSIDERATION, THE ASSESSEE HAS NOT EARNED AN Y EXEMPT INCOME. THERE IS NO FINDING OF AO, WHETHER THE ASSESSEE HAS EARNED ANY EXEMPT INCOME. THEREFORE, WE DIRECT THE AO TO VERIFY THE FACT IF ANY EXEMPT 9 INTERNATIONAL CARGO TERMINALS & INFRASTRUCTURE P LT D INCOME HAS BEEN EARNED BY THE ASSESSEE AND IF NO EX EMPT INCOME HAS BEEN EARNED BY THE ASSESSEE, THEN NO DISALLOWANCE U /S 14A BE MADE. THIS GROUND OF APPEAL IS TREATED AS ALLOWED. 18. GROUND 3 TO 5 WAS NOT PRESSED BY LD. AR FOR THE ASS ESSEE, HENCE DISMISSED AS NOT PRESSES. GROUND NO.6 IS CONSEQUENT IAL IN NATURE, THEREFORE, DISMISSED, AS SUCH. 19. GROUND 7 IS GENERAL IN NATURE, WHICH DOES NOT NEED ANY ADJUDICATION. 20. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 -01-2020. SD/- SD/- (S RIFAUR RAHMAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIALMEMBER MUMBAI, DT : 22 ND JANUARY, 2020 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI