TMI Blog2015 (5) TMI 656X X X X Extracts X X X X X X X X Extracts X X X X ..... n by this Court is binding on the Revenue. If that is binding then the questions of law and with regard to applicability of section 153A need to be answered against the Revenue and in favour of the assessee. Income from ICDs - whether qualify for the deduction under Section 80IA(4)(i) of the Act read with the Explanation (d)? - Held that:- When the proposal to set up a CFS has been accepted by the Government, there is no requirement of either a specific agreement as contended by Mr. Suresh Kumar. Nor can it be said that by virtue of any certification of the JNPT and its subsequent withdrawal the position undergoes any change. Once the facility is nothing but a infrastructural facility set up and within the precincts of the port, then, considering and even otherwise having considered its proximity to the sea port and its activities that we have no doubt and it can be safely concluded that the deduction admissible under sub-section (4) of section 80-IA can be claimed by both the ICDs and CFSs. We do not think that the view taken by the Tribunal is in any way perverse or runs contrary to the language of sub-section (4) of section 80-IA or the object of the Income Tax Act, 1961, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red as an extended arm of port related services. However, on enquiry under section 133(6) of the IT Act, it was revealed that this certificate was withdrawn by JNPT on 5th October, 2007. That is how the deduction claimed came to be disallowed. Being aggrieved by this order of the Assessing Officer, the assessee preferred an appeal before the First Appellate Authority, namely, Commissioner of Income-tax (Appeals), Thane. He dismissed the assessee's appeal on 29th July, 2010, and confirmed the view of the Assessing Officer. 5. Being aggrieved by the order passed by the Assessing Officer and the First Appellate Authority, the assessee approached the Tribunal and by the impugned order, the Tribunal allowed its appeal. 6. The appeal by the Revenue raises the following substantial question of law : Whether, on the facts and in the circumstances of the case, and in law the Hon'ble ITAT is right in holding that the assessee is entitled to deduction under Section 80-IA of the Income Tax Act, 1961 even though activities undertaken by the assessee do not fall within Clause (d) of the Explanation to 80- IA(4) defining the term infrastructure facilities? 7. The other appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80-IA(4) of the IT Act. The special Bench decision to the extent relevant reads as under : 58. Thus, question No.1 before us is answered as under : a) In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment years separately; b) In other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means - (i) books of account, other documents found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search. 66. We find that the solitary decision in this case by any High Court is in the case of Container Corporation of India Ltd. In this case it has been held that an ICD is not a port but it is an inland port. The case of CFS is similar situated in the sense that both carry out similar functions, i.e. ware housing, customs clearance, and transport of goods from its location to the seaports and vice-versa by railw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the triggering point may be the search, but the notice that is contemplated by section 153A and which is mandatory requires the Assessing Officer to assess the income of six years. That is independent of the search. The mandate is to issue the notice for six assessment years. The assessment or reassessment is of the total income of the assessee disclosed or undisclosed and pertaining to these six years. Therefore, the Tribunal's view that the search will throw light on the interpretation of the legal provisions, namely, section 153A restricts its ambit and scope. That view is perverse and contrary to the plain language of the section. The assessment then is not restricted to the incriminating material and found during the search. The Tribunal has read into the provisions something which is expressly not there. There is nothing in the language of the provisions which would indicate that the assessment is restricted to incriminating material or the basis of the assessment would be that which is discovered during the search or during the process contemplated by section 132A of the IT Act. In the circumstances, it is not proper to hold that the Special Bench decision would govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within such six assessment years. The second proviso, according to Mr. Dastur, is important because the assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in sub-section (1) pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. Equally, sub-section (2) of section 153A deals with a situation where any proceeding initiated or any order of assessment or reassessment is made under sub-section (1) but that has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Further, proviso to this sub-section says that such revival shall cease to have effect if the order of annulment is set aside. 18. Mr. Dastur would submit that the Revenue is protected completely in this case. The power is of drastic nature and has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax Appeal No.1031 of 2014 dated 23rd December, 2014. It is in these circumstances that it is submitted by Mr. Dastur, learned senior counsel and Mr. Gandhi that the Revenue appeals on both counts deserve to be dismissed. 20. Mr. Pinto in rejoinder has submitted that the judgment of the Division Bench of this Court would not bind us simply because that was rendered in the case of exercise of powers under section 263 of the Income Tax Act, 1961, by the Commissioner. The essential controversy revolved around the exercise of that power and the validity thereof. The question as to whether section 153A can be interpreted in the manner suggested by Mr. Dastur was decided in passing and the observations, therefore, would not bind us. Similarly, where section 80-IA(4) deduction is claimed, it is apparent that the certificates having been withdrawn that deduction could not be claimed. Mr. Suresh Kumar, while adopting the arguments of Mr. Pinto and noted above, submitted that the amendments and which have been brought into section 80-IA(4) are not noted either by the special Bench or by the Delhi High Court. Similarly, the arguments presuppose that all conditions which enable claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Provided that such revival shall cease to have effect, if such order of annulment is set aside. Explanation.- For the removal of doubts, it is hereby declared that,- (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section. (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closed for the purpose of the Indian Income Tax Act, 1922 or the Income Tax Act of 1961 by any person from whose possession or control they have been taken into custody. This is when the authorities have reason to believe that such powers need to be exercised. Therefore, the fetters and which are to be found in other provisions are removed and a notice of assessment in such cases is then issued. That is mandated by sub-section (1) of section 153A. It is not only the issuance of the notice but assessment or reassessment of total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition has to be made. 23. We are of the view that there is much substance in the contentions of Mr. Dastur that the provisions such as section 153A enabling assessment in case of search or requisition making specific reference to the provisions which enable carrying out of search or exercise of power of requisition that the assessment in furtherance thereof is contemplated. 24. His reliance upon the Division Bench judgment of this Court in that context is, therefore, well placed. 25. In the Division Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment years. Thus, earlier assessment orders abate as the proceedings in which they are passed have no legal consequence was the argument. Once the notice under section 153A was issued and an assessment order passed pursuant thereto, it is that order which was erroneous and prejudicial to the interest of the Revenue. 28. In dealing with those arguments, the Division Bench outlined the ambit and scope of the powers conferred by section 153A and observed thus : 8) We find it difficult to accept the above contention raised on behalf of the revenue. The object of inserting Sections 153A, 153B and 153C by Finance Act, 2003 by discarding the existing provisions relating to search cases contained in Chapter XIV B of the Income-tax Act, as stated in the Memorandum explaining the provisions in the Finance Bill 2003 (see 260 ITR (St) 191 at 219) was that under the existing provisions relating to search cases, often disputes were raised on the question, as to whether a particular income could be treated as `undisclosed income' or whether a particular income could be said to be relatable to the material found during the course of search, etc. which led to prolonged litigation. To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment proceedings which stood abated as per section 153A(1). 11) In the present case, as contended by Shri Mani, learned counsel for the assessee, the assessment for assessment year 1998-99 was finalised on the 29-12- 2000 and search was conducted thereafter on 3-12- 2003. Therefore, in the facts of the present case, initiation of proceedings under Section 153A would not affect the assessment finalised on 29-12-2000. 12) Once it is held that the assessment finalised on 29.12.2000 has attained finality, then the deduction allowed under section 80 HHC of the Income-tax Act as well as the loss computed under the assessment dated 29-12-2000 would attain finality. In such a case, the A.O. while passing the independent assessment order under Section 153A read with Section 143 (3) of the I.T. Act could not have disturbed the assessment /reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Income-tax Act establish that the reliefs granted under the finalised assessment/ reassessment were contrary to the facts unearthed during the course of 153 A proceedings. 13) In the present case, there is noth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcise of power under section 153A is permissible still the provision cannot be read in the manner suggested by Mr. Pinto. Not only the finalised assessment cannot be touched by resorting to those provisions, but even while exercising the power can be exercised where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after 31st March, 2003. There is a mandate to issue notices under section 153(1)(a) and assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Thus, the crucial words search and requisition appear in the substantive provision and the provisos. That would throw light on the issue of applicability of the provision. It being enacted to a search or requisition that its construction would have to be accordingly. That is the conclusion reached by the Division Bench in Murli Agro (supra) with which we respectfully agree. These are the conclusions which can be reached and upon reading of the legal provisions in question. 31. We, therefore, hold that the Special B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed before the date of initiation of search. This is hardly of any relevance in view of clear and unambiguous words used by the legislature. This interpretation does not cause any absurd etc. results. There is no casus omissus and supplying any would be against the legislative intent and against the very rule in this behalf that it should be supplied for the purpose of achieving legislative intent. The submissions of the Ld. Counsels are manifold, the foremost being that the provision u/s 153A should be read in conjunction with the provision contained in section 132(1), the reason being that the latter deals with search and seizure and the former deals with assessment in case of search etc, thus, the two are inextricably linked with each other. 49. Before proceeding further, we may now examine the provision contained in sub-section (2) of section 153, which has been dealt with by Ld. Counsel. It provides that if any assessment made under subsection (1) is annulled in appeal etc., then the abated assessment revives. However, if such annulment is further nullified, the assessment again abates. The case of the Ld. Counsel is that this provision further shows that completed assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and read it alongside the provision contained in section 132(1). 52. The provision comes into operation if a search or requisition is initiated after 31.5.2003. On satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used is shall and, thus, there is no option but to issue such a notice. Thereafter he has to assess or reassess total income of these six years. In this respect also, the word used is shall and, therefore, the AO has no option but to assess or reassess the total income of these six years. The pending proceedings shall abate. This means that out of six years, if any assessment or reassessment is pending on the date of initiation of the search, it shall abate. In other words pending proceedings will not be proceeded with thereafter. The assessment has now to be made u/s 153A (1)(b) and the first proviso. It also means that only one assessment will be made under the aforesaid provisions as the two proceedings i.e. assessment or reassessment proceedings and proceedings under this provision merge into one. If assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so wanted the additional ground to be retained in case of any future contingency. 32. We would be failing in our duty if we do not note the reliance placed by Mr. Pinto on the judgments rendered by the High Court of Delhi at New Delhi and the High Court of Karnataka. Mr. Pinto would submit that the above observations and conclusions of the Special Bench and reproduced by us are specifically disapproved in Commissioner of Income Tax vs. Anil Kumar Bhatia by the Delhi High Court. We do not find this argument to be accurate. In Anil Kumar Bhatia as well the assessment involved the years 2000-01, 2002-03 and 2005-06. One of the questions and which was termed as substantial question of law was the correctness of the Tribunal's order holding that the Assessing Officer wrongly invoked section 153A of the IT Act. The facts as noted were that in the case of an individual assessee and who was carrying on business in the name and style of M/s. A.K. Traders, there was a search of his residence and business premises on 13th December, 2005 under section 132 of the Act. Pursuant to the search, the Assessing Officer issued notice under section 153A of the IT Act and called upon the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Special Bench decision has not been approved by the High Court of Delhi. 35. The Delhi High Court's judgment must be seen in the context of the essential controversy before it. Pertinently, that controversy arose because of a search being conducted at the residence and business premises of the assessee. Foundation of the action under section 153A being the search that the High Court of Delhi was required to consider the ambit and scope of the powers. Further, pertinently the Delhi High Court did not ignore any of the provisions. Those are correctly understood by the Delhi High Court. We do not see how and where the Delhi High Court disapproves the view taken by the Tribunal that its observations can be read torn from the context. Once these observations and noted by us from the paragraphs cited by Mr. Pinto are read as a whole and in entirety, it is not possible to agree with Mr. Pinto that the High Court of Delhi reached a conclusion different than the view taken by our Division Bench. 36. Similar is the case with the Division Bench judgment of the High Court of Karnataka at Bangalore. There as well a real estate firm was the assessee. A return of income was filed and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. Therefore, it is clear even if an assessment order is passed under Section 143(1) or 143(3) of the Act, the Assessing Officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during the search. After such reopening of the assessment, the Assessing Officer is empowered to assess or reassess the total income of the aforesaid years. The condition precedent for application of Section 153A is there should be a search u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act gets no jurisdiction to initiate proceedings under the said provision because the condition precedent for initiating proceedings under Section 263 is any order passed under the Act by the Assessing Officer is erroneous insofar as it is prejudicial to the interest of the revenue. Once the order passed by the Assessing Officer gets reopened, there is no order which can be said to be erroneous insofar as it is prejudicial to the interest of the revenue which confers jurisdiction on the Commissioner to exercise the power of the jurisdiction. 11. The Tribunal has proceeded on the assumption by virtue of the judgment of the special bench of the Mumbai, the scope of enquiry under Section 153A is to be confined only to the undisclosed income unearthed during search and if there is any other income which is not the subject matter of search, the same cannot be taken into consideration. Therefore, the revisional authority can exercise the power under Section 263. In the entire scheme of 153A of the Act, there is no prohibition for the assessing authority to take note of such income. On the contrary, it is expressly provided under Section 153A of the Act the Assessing Officer shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mely:- (a) it is owned by a company registered in India or by a consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act; (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; (c) It has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995. Provided that where an infrastructure facility is transferred on or after the 1st day of April, 1999 by an enterprise which developed such infrastructure facility (hereafter referred to in this section as the transferor enterprise) to another enterprise (hereafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, local authority or statutory body, the provisions of this section shall apply to the transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this clause shall have effect as if for the figures, letters and words 31st day of March, 2006 , the figures, letters and words 31st day of March, 2011 had been substituted; (iv) an undertaking which,- (a) is set up in any part of India for the generation or generation and distribution of power it begins to generate power at any time during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, 2013; (b) starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the period beginning on 1st day of April, 1999 and ending on the 31st day of March, 2013. Provided that the deduction under this section to an undertaking under sub-clause (b) shall be allowed only in relation to the profits derived from laying of such network of new lines for transmission or distribution; (c) undertakes substantial renovation and modernisation of the existing network of transmission or distribution lines at any time during the period beginning on the 1st day of April, 2004 and ending on the 31st day of March, 2013. Explanation.- For the purposes of this sub-clause, substantial renovation and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d specifically as a infrastructural facility. Therefore, to that extent Mr. Dastur is right in his submission. 40. Mr. Suresh Kumar would urge that when there is an agreement contemplated with the Central Government, then, a specific writing to this effect is necessary which means a document and a mere consent or approval in writing would not suffice. 41. In the present case, what the Tribunal and in Special Bench decision has held is that there may be a reference made to a Board clarification dated 6th January, 2011, and prior circulars dated 16th December, 2005 and 23rd June, 2006 were considered and which clarify that inland container depots and container freight stations are not ports located on any inland water way river or canal and, therefore, they cannot be classified as inland ports for the purpose of section 80-IA(4). Equally, the certificate issued by the JNPT having been been withdrawn, the deduction will not be permissible. 42. However, after considering these contentions, what the Special Bench observes is that the Delhi High Court's view in the case of Container Corporation of India Ltd. would enable it to conclude that ICD may not be a port but it is an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings, but relied upon the Special Bench decision in the case of All Cargo Global Logistics Ltd. The conclusion is that CFS is an inland port as it carries out functions of warehousing, customs clearance and transport of goods from its location to sea-port and vice versa by rail or by trucks in containers and, therefore, its income is eligible to deduction under section 80-IA(4). We have before us a communication from the Government of India, Ministry of Commerce and Industry dated 28th December, 2011, which is addressed to the President of the CFS Association of India. It takes note of their grievance and states that the matter was examined in the light of the guidelines and its norms for setting up of inland container depot / container freight station in India. As per the present norms, operators of these depots and stations who were issued a letter of intent for setting up the same do not require to execute an agreement with the Central Government. 45. Even with regard to this issue we find that the circular dated 16th December, 2005, firstly clarifies that there are certain conditions, including the agreement but pertinently on and from the assessment year 2002-03 structures ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s provision, the Board had the power to notify an infrastructure facility for the purpose of the Section. The notification is reported in (1999) 233 ITR 126 and is reproduced below:- Notification No. S.O.744(E), September Ist, 1998 - Income-tax Act, 1961: Notification under section 80 - IA(12) (ca) : Inland Container Depot and Central Freight Station notified as infrastructure facility. In exercise of the powers conferred by clause (ca) of sub-section (12) of section 80IA of the Incometax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby notifies Inland Container Depot (ICD) and Central Freight Station (CFS) as infrastructure facility : Provided that such places are notified as Inland Container Depot and Central Freight Station under section 7(aa) of the Customs Act, 1962. 12. The power to notify infrastructure facilities for the purpose of the Section was taken 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of Amarship Management Pvt. Ltd. v. UOI, (1996) 86 ELT 15 (Bom). Port is a place for loading and unloading of cargoes of vessels. The word port must be construed in its usual and limited popular or commercial sense as a place where ships are in the habit of coming for the purpose of loading or unloading, embarking or disembarking. It does not mean the physical port. On this basis, it has been held that an oil rig stationed outside territorial waters is a port where ships call for loading or unloading the goods. Amarship Management Pvt. Ltd. v. UOI, (1996) 86 ELT 15 (Bom). 15. It is interesting to note that the word port approaches is defined as those ports of the navigable channels leading to the port in which the Indian Ports Act is in force. There are several other definitions such as port call, port charges, 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attached to a port . The work related to Customs is performed at these ICDs/CFSs. Accordingly, ICDs and CFSs (i.e. Customs area of port) are Inland Ports . (M.M. Parthiban) Director (Customs) Ph-23093908 Copy to, Shri Jagdeep Goel, Director ITA-I, CBDT. 46. We have found that there is a specific reference made by the Delhi High Court to the communication dated 24th April, 2007, from the Government of India, Ministry of Finance, Department of Revenue. These are then classified as inland ports and categorised accordingly. There is a further communication from the Ministry of Commerce and Industry as well. We do not find that a view different than the one taken by the Delhi High Court is possible. Bearing in mind the facilities that are extended and for purposes of loading, unloading, storage and warehousing of the goods that the facility is a infrastructure facility. That it has easy accessibility to the port and particularly the sea-port gives it certain advantages and benefits and which clearly accrue to those using the port for import and export of cargo. Further, the location thereof is also a relevant factor as noted. In such circumstances, the reliance by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
