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M/s Gateway East India Pvt. Ltd. Versus. ACIT,

2015 (12) TMI 365 - ITAT Visakhapatnam

Disallowance u/s 80IA(4) - Held that:- As far as the contention that there is no agreement with any Government or statutory authority, we find that the assessee has placed on record letter of intent. In fact the Ministry of Commerce and Industry, vide letter dated 10/02/2005, written to the Managing Director of the assessee company regarding setting up of a CFS at Visakhapatnam apropos the assessee’s case. Thus we hold that the contention of the AO that there is no agreement and hence the assess .....

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f Commerce and Industry, the object of including “inland port” as an infrastructure facility and also that customs clearance also takes place in the inland container depot, the assessee’s claim that the inland container depots were inland ports under Explanation (d) to sec. 80IA(4) required to be upheld - Decided in favour of assessee. - ITA No. 15/Vizag/2015 & SP No. 15/Vizag/2015 - Dated:- 29-4-2015 - SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER Appellant .....

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essee company claimed deduction u/s 80IA(4) of Income Tax Act, 1961 of ₹ 2,38,86,771/- and returned total income of ₹ 1,82,067/-. The appellant company is a subsidiary of Gateway Distriparks Ltd. and is doing operations of container Freight Station (CFS) at Sheela Nagar, Port Road, Visakhapatnam. The assessee company s business is to operate CFS, which facilitates for in transit containers handling, repair, storage, etc. The assessee claimed deduction amounting to ₹ 2,38,86,771 .....

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ned such certificate from Port Trust of Visakhapatnam. It was also submitted that the assessee-appellant got approval from Ministry of Commerce & Industry and that the assessee was classified as CFS by the Commissioner of Customs. It was further submitted that in view of the amended provision of section 80IA from A.Y. 2000-01, an Inland port falls within the definition of Infrastrcuture facility u/s 80IA(4), and that the Ministry of Shipping vide letter dtd. 16.09.2008 have classified CFS as .....

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ected to amendments from time to time. Vide Finance Act, 2007 with effect from 01.04.2008, the definition for Inland port have undergone changes by amendments from time to time by the Board Circular No. 793, dtd. 23.06.2000 is reproduced as under: The Board has received various representations seeking clarification whether structures at ports for storage, loading and unloading etc. will fall under the definition of port for the purposes of sec. 10(23G) and 80IA of the Income Tax Act, 1961. 2. Th .....

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expiry of the time stipulated in the agreement…. The above circular was superseded by circular No. 10/2005 dated 16.12.2005 which is reproduced as under: Reference is invited to Board circular No. 793 dated 23.06.2000 and amendment in section 80-IA by the Finance Act, 2001. 2. Port, for the purpose of section 10(23G) and 80IA of the Income-tax Act, 1961 includes structures at the ports for storage, loading and unloading etc., if the following conditions are fulfilled. (a) the concerned p .....

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n the definition of port for the purpose of section 10(23G) and 80IA of the Income Tax Act, 1961, if the following condition is fulfilled: the concerned port authority has issued a certificate that the said structures form part of the port. On perusal of the certificate issued by the Visakhapatnam Port Trust indicate that the structure on which the assessee has claimed deduction u/s 80IA(4) of the Income Tax Act, 1961 does not fulfill the conditions enumerated in circular no. 793, dtd. 23.06.200 .....

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circular no. 10/2005, the conditions laid down for such structure to be eligible for deduction is that the concerned port authority has issued a certificate, that the said structures form part of the port. In support of the above, the assessee submitted a certificate from the Visakhapatnam Port Trust which mentions that the Container Freight Station M/s Gateway East India Pvt. Ltd. may be considered as extended arm of the port in accordance with CBDT circular no. 793, dtd. 23.06.2000 r.w. clari .....

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is important to take a look at the certificate issued by the Visakhapatnam Port Trust stating that the structure is an extended arm of the port . This definition clearly reveals the fact that the infrastructure facility of the assessee is not located in the port but an extended arm of the port i.e., in a premises away from the port. Since it is an extended arm which means away from the port it is clear that it is not a part of the port as enjoined in the circular. During the course of assessmen .....

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salient features and facts of the case. The department has not accepted the decision of the Hon ble ITAT Special Bench, Mumbai on the above issue and has preferred appeals before the Hon ble High Court, Mumbai. After having carefully considered the various issues emerging from the above cited circulars of the Board and the decision of the Hon ble Special Bench, Mumbai, it is important to reproduce a clarification issued by the CBDT regarding infrastructure activities u/s 80IA(4)(i) of the Act wi .....

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whether the facilities of loading and unloading constitute a part of a port, the Board issued two circulars i.e., circular no. 793 dated 23.06.2000 and circular No. 10 dated 16.12.2005. In the first circular, it was clarified that structures at ports for storage, loading and unloading will be covered by the definition of port for the purpose of section 10(23G) and section 80IA subject to the condition that the concerned port authorities has issued a certificate that such structures form a part .....

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considered as infrastructure facility for the purpose of the said sub-section, especially in view of the aforesaid circular no. 10/2005, which states that structures for loading and unloading at the port area are a part of the port. The Board has considered the above issue and it is clarified that the aforesaid circular is applicable to the structure for loading, unloading and storage at the port. An ICD or a CFSs is usually not located at the port and, therefore, it is not a part of the port fo .....

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ructure facility u/s 80IA(4)(i) of the Income-tax Act, 1961. In this context, I am further directed to convey that the Board has considered the issue and it has been decided that as ICDs and CPSs are not ports located on any inland waterway, river or canal, and, therefore, they cannot be classified as inland ports for the purpose of section 80IA(4) of the Income-tax Act. From the above clarification, the following facts emerge that make the assessee company M/s Gateway East India Pvt. Ltd. ineli .....

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he circular for claiming deduction. Importantly both ICD & CFS are not infrastructure facilities as clarified by the clarification cited above and hence are not eligible for deduction u/s 80IA(4). The case of the assessee squarely falls under this clarification. An important criteria for the claim u/s 80IA(4) of the Income Tax Act, 1961 is the Indian Company should enter into an agreement with Central or State Government or a Government undertaking etc. for operating the said facility subjec .....

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de the impugned addition of ₹ 2,39,86,771/-. 3. Aggrieved the assessee carried out the matter in appeal. The first appellate authority upheld the order of the AO and dismissed the appeal of the assessee. 4. Aggrieved the assessee has filed this appeal on the following grounds: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in disallowing deduction of ₹ 2,38,86,771/- on the business of developing, operating and maintaining a Container Freight St .....

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se of A L Logistics P Ltd vis ITA; which the Ld.CIT (A) erred by not considering. 3. The Ld.CIT (A) failed to appreciate that once the Delhi High Court and the Special Bench of the Tribunal have taken the view that Container Freight Station is an "Inland Port" then a circular issued to the contrary by the CBDT is invalid and bad in law. 4. Further, the Ld.CIT (A) failed to appreciate that if the structure is already in the port, then the question of taking the certificate would not ari .....

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Counsel for the assessee Shri Madhu Agarwal submitted that the issue in question is no more res integra and that it is covered by the judgment of the Hon ble Delhi High Court in the case of Container Corporation of India vs. ACIT, reported in 346 ITR 140, wherein it is stated that CFS is an Inland Port . He also placed reliance on the judgment of the Special Bench of the Mumbai Tribunal in the case of All Cargo Global Logistics Ltd. specifically at para 66. It was further submitted that the cont .....

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t para at page 7 of the assessment order. He further argued that what the facility the assessee has is not part of the port and that it is located in a premises, which is situated far away from the port and hence the assessee becomes ineligible for deduction u/s 80IA of the Act. He referred to the CBDT circular no. 793 dated 23/06/2000 and submitted that the conditions laid down therein are: a) the concerned port authority has issued a certificate that the said structure forms part of the port a .....

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oes not fulfill the conditions enumerated in the circular. He contended that the assessee has not built the container freight station, either under BOT or BOLT scheme and there is no agreement stipulating that the structure would be transferred to Visakhapatnam Port Trust on expiry of the stipulated agreement period. On the order of the Special Bench in the case of All Cargo Global Logistics Ltd., the ld. DR submitted that the issue therein was different and what was said by way of passing remar .....

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He contended that his case is that they run a facility in the Inland Port. 7. Rival contentions heard. On careful consideration of the facts and circumstances of the case and also on perusal of the papers on record, orders of the authorities below and the case law cited, we hold as follows: 8. In circular no. 18/2009 dated 08/06/2009 issued by the Central Board of Excise and Customs in F.No. 434/17/2009-CUS.IV the difference between Inland Container Depots (ICD) and Container Freight Stations(C .....

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rd transit and outright export. Transshipment of cargo can also take place from such stations. (b) DEFINITION OF CFS: A Container Freight Station may be defined as: Container Freight Stations are specified as customs area under Clause (b) of the said Section 8 wherein imported goods or export goods are ordinarily kept before clearance by the customs. Firstly, CFS do not have "public authority status" whereas ICD is a place that acts as a "self contained Customs Station" as ca .....

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f goods for home use, warehousing, temporary admissions, re-export, temporary storage for onward transit and outright export, transshipment, etc., takes place." •"Container Freight Stations are specified as customs area under Clause (b) of the said Section 8 wherein imported goods or export goods are ordinarily kept before clearance by the customs". • An ICD is a 'self contained Customs station' like a port or air cargo unit where filing of Customs manifests, Bil .....

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documents, processing of manifest, amendments, etc. • Container Freight Stations are specified as customs area under Clause (b) of the said Section 8 wherein imported goods or export goods are ordinarily kept before clearance by the customs. A CFS is only a Customs area located in the jurisdiction of a Commissioner of Customs exercising control over a specified Customs port, airport, LCS/lCD. A CFS cannot have an independent existence and has to be linked to a Customs station within the ju .....

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House/Custom Office that exercises jurisdiction over the parent port/airportlICD/LCS to which the said CFS is attached. In the case of Customs Stations having facility of automated processing of documents, terminals are provided at such CFSs for recording the result of examination, etc. In some CFSs, extension Service Centers are available for filing documents, amendments etc. However, the assessment of the documents etc. is carried out centrally. • An ICD may also have a number of CFSs att .....

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dent Customs station with provision for filing and assessment of documents and examination of goods. A Customs clearance facility could be established as a CFS at a port city for examination of imported/export goods, since the CFS would fall under the jurisdiction of Commissioner of Customs, having jurisdiction over the Customs port with which the CFS would be attached. Further, in a port city such as Chennai or Mumbai, it may be possible to develop an ICD within the territorial jurisdiction of .....

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Freight Station from prospective operators it has to be examined whether the proposed facility is required to be approved as an ICD or CFS. • Movement of goods from a port/airport/LCS to an ICD is in the nature of movement from one Customs station to another, governed by Goods Imported (Condition of Transshipment) Regulations, 1995. On the other hand, movement of goods from a port/airport/LCS or an ICD to a CFS is akin to local movement from a Customs area of the Customs station to another .....

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utory authority, we find that the assessee has placed on record letter of intent. In fact the Ministry of Commerce and Industry, vide letter dated 10/02/2005, written to the Managing Director of the assessee company regarding setting up of a CFS at Visakhapatnam apropos the assessee s case. 10. In the case of A L Logistics P. Ltd. (supra) the Chennai Bench of the Tribunal at para 7 held as follows: 7. Now, we proceed to the next issue, whether in the absence of specific agreement with the Centra .....

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erms and conditions as stated in the letter. The Id. Counsel for the assessee has placed on record letter dt.27-05-2003 from the Ministry of Commerce and Industry permitting the assessee to set up CFS at Raldia. The contents of the letter are reproduced herein below: "No. 16/6/2003-lnfra-I Government of India Ministry of Commerce & Industry Deptt.of Commerce Infrastructure Division UdyogBhawan, New Delhi, Dated the 27th May,2003. To The Director, Mls A L Logistics Pvt. Ltd., Chennai. Su .....

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uidelines for setting up Inland container Depots I Container Freight Stations (ICDs/CFs) within a period of one year from the date of issue of this letter. (b) Necessary bond and guarantees, as required, would be executed with the concerned Commissioner of Customs and Central Excise. (c) The approval would be subject to cancellation in the event of violation of the Customs and other laws of the land and Rules. (d) A quarterly progress report of the implementation shall be sent to the Ministry of .....

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ve list of equipment/accessories considered necessary is annexed. The status regarding confirmation of the installation! availability of the items shall be furnished to the appropriate authorities to facilitate issue of requisite notification. 3. Please acknowledge receipt of this letter. Yours faithfully, Sd/- (N.G. Biswas) DIRECTOR" A perusal of clause 'b' of the above letter shows that the assessee was required to execute necessary bond and guarantees with the concerned Commissio .....

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ioner of Customs (Port) Kolkata. 8. Thus, it is evident that the proposal of the assessee was accepted by the Government on certain conditions which were duly complied with by the assessee. There may not be any specific agreement, but the sequences of events clearly show that the assessee is providing CFS facility in accordance with the conditions laid down by the Government. In such circumstances there is no need to insist for the specific execution of agreements. The coordinate bench of the Tr .....

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mpugned order is set aside. The appeal of the assessee is allowed. 11. Respectfully following the Coordinate Bench order, we hold that the contention of the AO that there is no agreement and hence the assessee is not eligible for exemption is not the correct position of law. 12. The Hon ble Delhi High Court in the case of Container Corporation Ltd. (supra) held as follows: The term infrastructure facility was defined in section 80-IA(12)(ca) of the Income Tax Act, 1961, to mean a road, highway, .....

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ucture facility. There is no definition of the words inland ports in any of the dictionaries. But the words inland container depot were introduced in sec. 2(12) of the Customs Act, 1962, which defines customs port . This was by way of an amendment made by the Finance Act, 1983, with effect from May 13, 1983. Simultaneously, clause (aa) was inserted in sec. 7(1) of the Act under which the CCHI issue notification appointing the places which alone shall be considered as inland container depots for .....

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