TMI Blog2012 (5) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... e following common substantial question of law:- "Whether the Income Tax Appellate Tribunal is right in law in holding that the appellant-assessee is not entitled to deduction under Section 80-IA of the Income Tax Act, 1961 as the activities undertaken by the appellant do not fall within Clause (d) of the Explanation defining the term infrastructure facilities?" 2. The appeals involve a short question regarding the entitlement of the assessee to the deduction under Section 80-IA(4) of the Act. We are concerned with the assessment years 2003-04 to 2005-06. The assessee is a public sector undertaking, registered as a company under Section 617 of the Companies Act, 1956 and is functioning under the direct administrative control of the Ministry of Railways. It is engaged in the business of handling and transportation of containarised cargo. The activity of the assessee is carried out mainly on its Inland Container Depots (ICDs), Central Freight Stations (CFSs) and Port Container Terminals (PCTs) which are spread all over the country. It would appear that the assessee has a total of 45 ICDs. 3. Before we proceed further, it would be useful to appreciate the nature of the busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nters which are situated at a distance from sea ports. After the advent of the ICDs, the bottlenecks at the sea ports due to handling and customs formalities were reduced, so also the expenditure. 5. We may now notice the relevance of Section 80IA of the Act. The Finance Act, 1995, with effect from 1/4/1996, for the first time brought in a provision under which a percentage of the profits derived from the operation of any "infrastructure facility" was allowed a deduction in computing the income of the assessee. This was allowed for a period of ten consecutive assessment years. According to circular No.717 dated 14th August, 1995 reported in (1995) 215 ITR St.17, which explained the rationale behind the provision, the following was the objective:- "34.2 Industrial modernisation requires a massive expansion of, and qualitative improvement in infrastructure. Our country is very deficient in infrastructure such as expressways, highways, airports, ports and rapid urban rail transport systems. Additional resources are needed to fulfil the requirements of the country within a reasonable time frame. In many countries the BOT (build-operate-transfer) or the BOOT (build-own-operate-tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otified by the board in this behalf in the official gazette." In paragraph 43 of circular No.772 dated 23rd December, 1995 reported in (1999) 235 ITR St. 35, the Board explained the inclusion of "inland waterways and inland ports" in the definition of "infrastructure facility" as follows:- "43. Inland port and waterways regarded as infrastructure facility. - 43.1 Under the existing provisions of section 80-IA, roads, highways, bridge, airport, port and rail system are regarded as infrastructure facilities and the undertakings engaged in developing, maintaining or operating such infrastructure facility are entitled to a tax holiday for 5 years and a deduction of 30 per cent of profits for the next 5 years. These companies have the choice of availing of such benefits in any 10 consecutive years out of initial 12 years from the year in which they commence production. 43.2 The Government has identified national waterways, the fourth mode of transport, for improving the transport infrastructure in the country. Inland waterways and inland ports play a vital role in improving a country's infrastructure. With the objective of improving the transport infrastructure, the Act has includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken away from the CBDT with effect from 1.4.2002. The first argument of the learned counsel for the assessee is that once the ICDs have been notified validly by the CBDT by virtue of the powers conferred upon them, the fact that at a later point of time the power was taken away does not put an end to the validity or effect of the notification and as per the relevant Section as it stood at the time when the notification was issued, the assessee was eligible for the deduction for a period of 10 successive assessment years which covers the assessment years 2003-04 to 2005-06 which are the years under appeal. 11. We have examined the contention. Prior to the amendment made with effect from 1.4.2002 by the Finance Act, 2001, as noticed earlier, the Board was empowered to notify any public facility of a similar nature, other than what was mentioned as infrastructure facility. But an amendment was made and the power to notify was dropped. There was no provision made in the Act saying that the notification issued earlier would cease to have effect from 1.4.2002. Since the notification continued to have effect even beyond 1.4.2002, there is merit in the contention of the learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arges, port mark, port of arrival, port of entry, port of departure, port of call and so on and so forth. The whole emphasis however is that whenever the word "port" is used, it carries with it a maritime connection or connotation. That is perhaps why the Section refers separately to airport. An airport does not have a maritime connection. But an airport is also a place where customs clearance are made both for import and export. It would be difficult to put the assessee's case as falling within the word "port" having regard to the fact that the word carries with it a maritime connotation. The ICDs are land-locked and it is nobody's case that they are located in such a place where ships or vessels have direct access to them. The goods which are either removed from or brought into the ICDs are brought or taken away either by railway wagons or by container trucks, as the case may be. But it is common ground that customs clearances take place in the ICDs. 14. It is, therefore, for consideration as to whether the ICDs can be said to be "inland ports" for the purposes of the Explanation (d) below sub-section (4) of Section 80IA. We were not able to find a definition of the words "in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2008 on the above subject. In this regard, CONCOR and CFS Association of India have represented that in order to accord tax benefit under section 80IA of Income Tax Act, 1961 Ministry of Finance required a more specific reply clarifying the status of ICDs/CFSs in the country. A copy of the representation is enclosed. 3. The matter has been examined in this Department and it is clarified that ICDs/CFSs are inland ports. CBDT may accordingly take decision for the purpose of exemption of ICDs/CFSs of CONCOR or a private party u/s 80 IA of Income Tax Act. (S.G. Sood) Under Secretary to the Govt. of India Department of Revenue (Shri Padam Singh, Under Secretary (ITA-I) CBDT, North Block, New Delhi. Fax : 23095417" 16. It is significant to note that copies of both the aforesaid communications have been marked to the CBDT. The position therefore has been put beyond doubt by these communications. 17. The learned counsel for the assessee has drawn our attention to the definition of "dry port" as per "Handbook on the management and operations of dry ports" published by UNCTAD(Union Nations Conference on Trade and Development). In this handbook, an ICD has also bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat both before and after the above amendment, Inland Ports were specifically mentioned as an infrastructure facility in the statutory provision and in the understanding of the CBEC, which administers the Customs Act, an Inland Container Depot was actually an Inland Port. There is also no dispute that even in 1983 amendments had been made to the Customs Act by treating the Inland Container Depots as part of the customs port for purpose of customs formalities and clearances. In these circumstances, the real question was not whether the CBDT notified the ICD as an Inland Port but whether the ICD can be considered to be an Inland Port. In our opinion having regard to the provisions of the Customs Act, the communications issued by the CBEC as well as the Ministry of Commerce and Industry, the object of including "inland port" as an infrastructure facility and also having regard to the fact that customs clearance also takes place in the ICD, the assessee's claim that the ICDs are Inland Ports under Explanation (d) of Section 80IA(4) requires to be upheld. 20. The actual computation of the profits of the Inland Port have to be made in accordance with the notification issued by the Cu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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