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DCIT Versus M/s. Belair Logistics Ltd.

2015 (5) TMI 387 - ITAT HYDERABAD

Deduction under section 80IA - assessee is a company which is engaged in the business of providing storage facilities and handling of cargo at Kakinada Sea Port - CIT(A) allowing the claim of the assessee for deduction - Held that:- Keeping in view the certificate dated 08.04.2005 issued by the Kakinada Deep Water Port in the light of CBDT Circular Nos. 793 dated 23.06.2000 and 10/2005 dated 16.12.2005, we are of the view that the issue involved in the present case relating to the claim of the a .....

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the assessee had developed the infrastructure facility and that it was engaged in operating the cranes was, therefore, based on the material on record. The fact that the assessee was also maintaining the cranes was not disputed. The assessee was entitled to the special deduction under section 80IA. and this position is not disputed even by the learned D.R. - Decided in favour of assessee.

Disallowance of expenditure incurred towards loan processing charges and rates and taxes for loa .....

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re of interest as per the definition given in section 2(28A) and the Ld. CIT(A) in our opinion, was fully justified in allowing the same as deduction as claimed by the assessee. We, therefore, uphold the impugned order of the Ld. CIT(A) on this issue - Decided in favour of assessee. - Decided in favour of assessee. - ITA.No.1377, 1378, 1379, 1380 & 1381/Hyd/2014 - Dated:- 24-4-2015 - Shri P.M. Jagtap And Smt. P. Madhavi Devi JJ. For the Appellant : Mr. Rajat Mitra For the Respondent : Mr. S. Ram .....

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As per the Concession Agreement entered into with the Government of Andhra Pradesh on 19th March, 1999, M/s. International Sea Ports P. ltd., had agreed originally to develop, operate and maintain the Kakinada Deep Water Port. This concession was subsequently assigned by the said company in favour of Kakinada Port Company P. Ltd., which changed its name to Kakinada Sea Ports Ltd., on 18th September, 2001. Thereafter, Kakinada Sea Port Ltd., on 01.12.2001 entered into sub-lease agreement with th .....

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years under consideration, the assessee company claimed deduction under section 80IA in respect of profit derived from the business of providing storage facilities and handling on cargo as under : A.Y. Amount of deduction 2006-07 Rs.22,52,369 2007-08 Rs.1,04,18,618 2008-09 Rs.96,83,107 2009-10 Rs.1,74,89,995 2010-11 Rs.1,64,69,823 3.1. During the course of assessment proceedings the claim of the assessee for deduction under section 80IA was examined by the A.O. and on such examination, he found .....

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tral Government or State Government or Local Authority or any e. That such an agreement should be entered by the company availing deduction u/s.80IA whereas in the instant case, it is the KSPL which entered into agreement with the Government of Andhra Pradesh and not the assessee. f. As per the proviso to section 80IA(4) the infrastructure is first to be developed by the transferor company and the same should be transferred to transferee company. Whereas in the instant case, M/s. KSPL entered in .....

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eals filed before the Ld. CIT(A) and various submissions were made on behalf of the assessee to meet the objections raised by the A.O. while denying the deduction claimed by it under section 80IA. The said submissions, as summarized by the Ld. CIT(A) in his impugned order, were as under : (a) Storage of goods can be in covered godown or in the open yard as per the requirement of the customer. Certain goods like granite, iron-ore etc. can be kept in open place. (b) As per the circular no.793 23.0 .....

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relied on the decision of Ocean Sparkle Ltd. Vs. DCIT (2006) 155 Taxmann 133 (Hyd). (f) The A.R. also submitted agreement between Government of A.P. & KSPL, lease deed between KSPL and the appellant and the judicial precedents on issues raised in grounds of appeal etc. 3.3. The Ld. CIT(A) found merit in the above submissions made by the assessee and directed the A.O. to allow the claim of the assessee for deduction under section 80IA for all the five years under consideration for the follow .....

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nment / local authority has to be entered by the transferor because as per the explanation of the same section, 80IA(4), "infrastructure facility" means road, rail, bridge, highway projects, water supply projects, irrigation projects, sewerage system, airport, seaport etc., all these facilities are owned by sovereign states not by private parties. In order to develop any infrastructure of these types, the person has to first enter into an agreement or an understanding with the state. T .....

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ne of the companies is the appellant company - M/s. Belair Logistics Ltd. Such sub-lease to the appellant had the approval of Government of Andhra Pradesh vide its letter No.11694/B-1/2001 dated 15.12.2001, m effect, the condition that there should be agreement with government is complied with though indirectly. 4.8.4. It is evident from the information on record that the entire land leased out to M/s. KSPL, including the land sub-leased to the appellant will go back to the Government of Andhra .....

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subcontractors, sub-lessees and assignees free from all encumbrances and liabilities shall automatically become the property of GOAP without any obligation to reimburse therefor. 4.8.5 It was explained by the Authorised Representative that M/s. KSPL is claiming 80IA benefit on lease rentals received by it from lessees including the appellant. Whereas, the appellant is claiming 80IA deduction on the lease rentals received by it from various parties who availed godowns and open yard developed by i .....

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der the definition of 'port' for the purpose of 80lA, if a certificate is issued by Port Authority stating that such structures form part of the Port and are operated under BOT or BOLT Schemes. If there is an agreement that the said structure is transferred to such an authority after expiry of time stipulated in the agreement. Therefore, all the conditions laid down in section 80IA(4) mentioned at para 4.3 are fulfilled. The only issue is, the proviso to section 80lA(4) reads that, in ca .....

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tructure. Whether transferor develops infrastructure or the transferee: develops the infrastructure is not a materially important. Moreover, it is the settled principle that the sections which are beneficial to the assessees have to be interpreted liberally to serve the purpose for which the section is intended to. The Hon'ble Supreme Court in the case of Bajaj Tempo Ltd. Vs. CIT 196 ITR 188 held that the a provision in taxing statute granting incentives for promoting growth and development .....

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h in the case of Ocean Sparkle Ltd. V. DCIT (2006) 155 Taxmann 133 (Hyd.) (Mag.) where the facts of the case were identical, where the Ocean Park had entered into an agreement with Kakinada Seaports for operation and maintenance of infrastructure facility, after in depth analysis, the Hon'ble Hyderabad Tribunal had allowed 80IA deduction. Having considered all the relevant factors and going by the judicial precedents section 80IA(4) is allowable to the appellant. Therefore, the grounds of ap .....

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peals of the Revenue relating to the assessee s claim of deduction under section 80IA is squarely covered in favour of the assessee inter alia by the decision of Hon ble Bombay High Court in the case of CIT vs. ABG Heavy Industries Ltd., 322 ITR 323 wherein a similar claim of assessee for deduction under section 80IA was allowed by the Hon ble Bombay High Court relying inter alia on Circular Nos. 793 dated 23.06.2000 and 10/2005 dated 16.12.2005 issued by the CBDT. The said circulars, copies of .....

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thority has issued a certificate that the said structures form part of the port, and (b) Such structure have been built under the BOT or BOLT schemes and there is an agreement that the same would be transferred to the said authority on the expiry of the time stipulated in the agreement. This definition is applicable to assessment year 2001-02 and any earlier assessment year. 3. However, for and from assessment year 2002-03 onwards, structures at the ports for storage, loading and unloading etc. .....

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ortance of the circular, insofar as the subject-matter of these proceedings is concerned, lies in the fact that the Board noted that it was in receipt of representations seeking a clarification on whether structures at ports for storage, loading and unloading etc. would fall within the definition of a port inter alia for the purposes of s. 80-IA of the Act. The Board clarified that such structures would be included in the definition of 'port' for the purposes of s. 80-IA of the Act, subj .....

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ing. 16. On 16th Dec., 2005, Circular No. 10 of 2005 [(2005) 199 CTR (St) 97] was issued by the CBDT. The circular made a reference to the earlier circular dt. 23rd June, 2000 and clarified that the definition of the expression 'port' for the purposes of s. 80-IA of the Act so as to include structures at ports for storage, loading and unloading etc., subject to the fulfillment of the conditions already noted earlier, would apply to the asst. yr. 2001- 02 and any earlier assessment year. .....

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nditions that were spelt out in the earlier circular dt. 23rd June, 2000 would continue to operate in respect of assessment years prior to and culminating with asst. yr. 2001-02. With effect from asst. yr. 2002-03 all that was necessary was a certificate issued by the port authority that the structure in question forms a part of the port. Hence, the evolution of s. 80-IA would show a progressive liberalisation of the legislative scheme, in the interests of aiding the growth of infrastructure. Th .....

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confirming the award of contracts to the assessee on 2nd Sept., 1994 and 16th Oct., 1995 for supply, installation, testing, commissioning and maintenance of container handling equipment on lease for a period of ten years for loading and unloading of containers at the port and that the cranes that were to be supplied by the assessee form an integral part of the port. JNPT clarified that the contracts have been executed under the BOLT Scheme and in accordance with its directions, the cranes would .....

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ed within the purview of the expression infrastructure facility . The obligations which the assessee assumed under the terms of the contract were not merely for supply and installation of the cranes, but involved a continuous obligation right from the supply of the cranes to the installation, testing, commissioning, operation and maintenance of the cranes for a term of ten years after which the cranes were to vest in JNPT free of cost. An assessee did not have to develop the entire port in order .....

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es was, therefore, based on the material on record. The fact that the assessee was also maintaining the cranes was not disputed. The facility was commenced after April 1, 1995. The assessee was entitled to the special deduction under section 80-IA. 4.3. In the present case, the concerned port namely Kakinada Deep Water Port has also issued a certificate to the assessee (copy placed at page 28 of the paper book) which reads as under : GOVERNMENTOFANDHRAPRADESH PORT DEPARTMENT **** 0/0. the Port O .....

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the Kakinada Deep Water Port in the light of CBDT Circular Nos. 793 dated 23.06.2000 and 10/2005 dated 16.12.2005, we are of the view that the issue involved in the present case relating to the claim of the assessee for deduction under section 80IA is squarely covered by the decision of Hon ble Bombay High Court in the case of ABG Heavy Industries Ltd., (supra) and this position is not disputed even by the learned D.R. We therefore respectfully follow the decision of Hon ble Bombay High Court in .....

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e made by the A.O. on account of expenditure incurred by the assessee towards loan processing charges and rates and taxes for loan documentation is involved only in A.Y. 2010-2011 as agreed even by the learned D.R. The issue involved in ground No.3 of the Revenue s appeal thus is not arising from the impugned order of the Ld. CIT(A) for A.Y. 2006-07 to 2009-2010 and accordingly ground No.3 raised by the Revenue in its appeal for the said years is liable to be dismissed as not arising from the im .....

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oan, whether for operational requirement or otherwise, were liable to be capitalized since the same were incurred for raising the loan, a capital item. He therefore disallowed the expenses claimed by the assessee on account of loan processing charges as well as rates and taxes for loan documents. On appeal, the Ld. CIT(A) deleted the said disallowance made by the A.O. after discussing the relevant case laws cited on behalf of the assessee in para 5.1 of his impugned order as under : 5.1. The app .....

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oan, both are allowable. The object for which the loan is obtained was considered as irrelevant by the Hon'ble Supreme Court. Further, the Hon ble Supreme Court in the case of DCIT vs. Gujarat Alkali Chemicals (2008) 299 ITR 85 held that finance charges paid by assessee in connection with the loan taken for expansion of business was allowable. Similarly, the Hon'ble Supreme Court in the case of Akkamamba Textiles Ltd. (1997) 227 ITR 464 held that the guarantee commission paid to the bank .....

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