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2015 (12) TMI 461 - ITAT MUMBAI

2015 (12) TMI 461 - ITAT MUMBAI - TMI - Eligibility for deduction u/s 80IA(4) in respect of CFS - whether CFS is an infrastructure facility under section 80IA(4)? - Held that:- The Hon'ble Jurisdictional High Court in CIT v/s Continental Warehousing Corporation Ltd.[2015 (5) TMI 656 - BOMBAY HIGH COURT] has held that CFS for the purpose of section 80IA(4) is to be considered as an inland port In fact, the Tribunal, Vizag Bench, in Gateway East India Pvt. Ltd. (2015 (12) TMI 365 - ITAT Visakhapat .....

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that the condition that such infrastructure facility shall be transferred to the Government, local authority or statutory body has been done away with by Finance Act, 2001 w.e.f. 1st April 2002. Therefore, the reasoning of the Assessing Officer that the assessee would not get deduction under section 80IA(4) agreement BOT / BOLT stipulating handing over the infrastructure facility to the Government is wholly without basis. Even assuming for the argument sake that such condition is applicable for .....

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ing Officer for denying assessee's claim of deduction would fail. - Decided against revenue

Disallowance of interest expenditure claimed under section 36(1)(iii) - CIT(A) deleted the disallowance - Held that:- Assessing Officer has disallowed interest expenditure only on the allegation that assessee has failed to prove the fact that borrowed funds were not diverted for investing in share capital of the subsidiary. However, on a perusal of the facts and materials placed on record, it i .....

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wer Ltd. (2009 (1) TMI 4 - HIGH COURT BOMBAY), the presumption would be, investment in subsidiary is from own interest free funds. In that view of the matter, we do not find any reason to interfere with the order of the first appellate authority. Moreover, on a perusal of the loan agreement with the Bank, it is very much evident that there is stipulation in the agreement that from time-to-time the bank will make inspection for ensuring utilisation of funds for the purpose for which it was taken. .....

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ORDER Per Saktijit Dey, JM The aforesaid appeals by the Revenue are against separate orders passed by the learned Commissioner (Appeals)-7, Mumbai, for the assessment year 2008-09 and 2009-10. Since the issue raised in both the appeals are more or less common, they have been clubbed together and are being disposed of by way of this consolidated order for the sake of convenience. ITA no.3654/Mum./2012 2. The only issue involved in this appeal relates to the direction of the learned Commissioner .....

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al year 1998-99 after duly entering into an agreement with CIDCO. As per the terms of agreement, CIDCO allowed the assessee to set-up and operate the CFS for a period of 60 years. For the assessment year 2008-09, the assessee filed its return of income on 29th September 2008, declaring total income of ₹ 17,23,16,060. Subsequently, revised return was filed by the assessee on 13th June 2009, declaring total income of ₹ 17,23,16,060. During the assessment proceedings, the Assessing Offi .....

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ed as the conditions of the said provision are not fulfilled. In response to the show cause notice, the assessee submitted that the CFS set-up by the assessee is an inland port, hence, is an infrastructure facility as per section 80IA(4). In this context, the assessee relied upon circulars issued by the Finance Ministry and Ministry of Shipping, Ministry of Commerce and Industry. It was also submitted that the assessee has entered into an agreement with the CIDCO which is a statutory body for co .....

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He further observed that as per the said circular, the assessee has to obtain a certificate from the competent authority if it seeks to claim deduction under section 80IA(4). However, the assessee has not obtained any such certificate for assessment year 1998-99. Therefore, the assessee does not qualify for the definition of "Port" as amended by the Finance Act, 1998. He further observed that section 80IA(4) is further amended by Finance Act, 2007, w.e.f. 1st April 2008 as per which & .....

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e is not eligible for deduction under section 80IA(4). Finally, the Assessing Officer opined that the agreement entered into with CIDCO by the assessee is a lease deed under which the assessee was allowed a piece of land for commercial purpose. However, it cannot be considered to be an agreement with the Government as prescribed under section 80IA(4). He also observed that as per information obtained from CIDCO, the assessee has not entered into BOT / BOLT agreement, therefore, the conditions of .....

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Commissioner (Appeals), after considering the submissions of the assessee in the light of facts and material onrecord as well as the decisions relied upon by the assessee, found that the assessee has commenced its business of CFS in the assessment year 1999-2000. He also found that the assessee has entered into a contract with CIDCO on BOT / BOLT basis for construction of CFS vide agreement dated 28th June 1997. He observed that the assessee had claimed deduction under section 80IA(4) for the CF .....

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he decision of the Hon'ble Supreme Court in Bharat Sanchar Nigam Ltd. v/s Union of India, [2006] 282 ITR 273 (SC) and the decision of the Hon'ble Jurisdictional High Court in CIT v/s Paul Brothers, [1995] 216 ITR 548 (Bom.). He, therefore, held that disallowance of deduction by the Assessing Officer in the impugned assessment year cannot be sustained. Having held so, he noticed that as per the definition of infrastructure facilities under section 80IA(4), it includes any public facility .....

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CBDT as well as Commerce Ministry. He also found that the Ministry of Shipping has allowed the facility to be used as port for all practical purposes. He also noticed that as per the terms of agreement, after expiry of 60 years, the area allotted along with all facilities will revert back to the local authority. He, therefore, was of the opinion that all conditions of section 80IA(4) was satisfied. Thus, on the aforesaid basis, the learned Commissioner (Appeals) directed the Assessing Officer to .....

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e condition of section 80IA(4). The learned Departmental Representative submitted, each assessment year being an independent unit, irrespective of fact whether deduction was allowed in the earlier assessment year still the Assessing Officer can form an independent opinion on the basis of information obtained in a subsequent assessment year with regard to the deduction claimed by the assessee. She, therefore, submitted, the Assessing Officer having found that assessee has not fulfilled all the co .....

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assessment year 2002-03, the assessee for the first time claimed deduction under section 80IA(4) in respect of CFS. It was submitted, the Department also accepted assessee's claim in an assessment order passed under section 143(3). It was submitted up to the assessment year 2007-08, deduction under section 80IA(4) was allowed in assessments completed under section 143(3). He submitted, when a particular deduction is for a specific period, if such deduction is allowed in the initial / first y .....

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12] 349 ITR 309; ii) CIT v/s Paul Bros., [1995] 79 Taxman 378. 7. The learned Counsel submitted, the fact that the assessments for some of previous years have been re-opened on the basis of assessment order passed for the assessment year 2008-09 cannot have any impact on assessee's claim of deduction as the facts existing on the date of assessment for the assessment year 2008-09 has to be considered. It was submitted, even the re-opening of assessment was up to the assessment years 2004-05. .....

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w.e.f. 1st April 2008. The learned counsel submitted, "inland port" was already included as an infrastructure facility under Explanation to section 80IA(4) since 1st April 2002, and in Finance Act, 2007, for the expression "or inland port" the following words were substituted - "Inland port or navigational channel in the sea". Thus, it was submitted by the learned Counsel on merits also, CFS being an "inland port" is an infrastructure facility in terms wit .....

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he learned counsel strongly contesting such submissions submitted, only in a case where there is change in facts which existed in earlier assessment year, the Assessing Officer can take an independent view. However, when the facts are identical, the Assessing Officer on the basis of information obtained as a result of enquiry conducted by him, cannot take an independent view, more so, when the deduction provided under the statute is for a specific period and such deduction is allowed to the asse .....

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f. 1st April 2002. In this context, he drew the attention to the provisions contained in section 80IA(4)(i)(b). Thus, it was submitted by the learned counsel, the inference drawn by the Assessing Officer cannot be accepted. Finally, the learned counsel inviting the attention of the Bench to the grounds raised by the Department submitted, in none of the grounds the Department has challenged the finding of the first appellate authority that the assessee is an infrastructure facility. He, therefore .....

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deration is whether CFS is an infrastructure facility under section 80IA(4). The Assessing Officer has held that CFS is not an infrastructure facility and further since the agreement with CIDCO is not BOT / BOLT, the assessee is not entitled for deduction under section 80IA. At the outset, it needs to be observed that as per Explanation to section 80IA(4), as it existed prior to its substitution by Finance Act, 2007 w.e.f. 1st April 2008, read as under:- "Explanation - For the purpose of th .....

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tal Warehousing Corporation Ltd., ITA no.523/2013 and ITA no.1969/2013, has held that CFS for the purpose of section 80IA(4) is to be considered as an inland port. In fact, the Tribunal, Vizag Bench, in Gateway East India Pvt. Ltd. (supra), following the decision of the Hon'ble Delhi High Court in Container Corporation of India Ltd. v/s CIT, held that CFS being an inland port is an infrastructure facility for the purpose of section 80IA(4). In view of the aforesaid, we have no hesitation in .....

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ion that such infrastructure facility shall be transferred to the Government, local authority or statutory body has been done away with by Finance Act, 2001 w.e.f. 1st April 2002. Therefore, the reasoning of the Assessing Officer that the assessee would not get deduction under section 80IA(4) agreement BOT / BOLT stipulating handing over the infrastructure facility to the Government is wholly without basis. Even assuming for the argument sake that such condition is applicable for the impugned as .....

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denying assessee's claim of deduction would fail. 11. Having held so, we proceed to examine the issue, deduction under section 80IA(4) having already been allowed to the assessee in the initial assessment years, whether the same can be disallowed in any subsequent assessment year. As can be seen from the material placed before us, the first year of claim of deduction by assessee under section 80IA(4) in respect of CFS was assessment year 2002-03. The Assessing Officer, while completing the .....

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eginning from the year in which the undertaking develops and operates the infrastructure facility. As is apparent from the facts on record, in case of the present assessee, it has opted for availing deduction under section 80IA(4) from the assessment year 2002-03. Thus, once the claim of deduction has been allowed by the Department by examining relevant facts and materials in the first assessment years, it cannot be withdrawn in any subsequent years when there is no material change in the releva .....

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ars has been re-opened under section 147 cannot improve the situation of the Department as the position on the date of assessment for the assessment year 2008-09 has to be taken into account. If that is the case, it is very much clear that on the date, the Assessing Officer completed the assessment for assessment year 2008-09 the uncontroverted position was assessee's claim of deduction under section 80IA(4) in respect of CFS was allowed from the assessment year 2002-03 to 2007-08, that too, .....

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er and the impugned assessment year, the Assessing Officer cannot withdraw assessee's claim of deduction under section 80IA(4). Moreover, reopening of assessment for preceding years is not an issue before us. On the basis of facts obtaining in the impugned assessment year, we have to decide assessee's eligibility under section 80IA(4). Even otherwise also, we have already negated Assessing Officer's argument in respect of CFS not being an infrastructure facility and non fulfillment o .....

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gard to the issue that CFS is an infrastructure facility under section 80IA(4) or the fact that the assessee has fulfilled all conditions of section 80IA(4) including the fact that it has developed, operated and maintained an infrastructure facility which is supposed to revert back to Government after specified period. In view of the aforesaid, we do not find any reason to disturb the findings of the first appellate authority on the issue. Accordingly, we dismiss the ground raised by the Revenue .....

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ame was granted in earlier years? 2. Hon'ble Supreme court in the case of Bharat Sanchar Nigam Limited vs. Union of India (282 ITR 273), in as much as the said decision was in the context of whether mobile phone connection is in the nature of sale or service or both restricted to the power of CIT u/s 263 and no decision was rendered vis-a-vis withdrawal of deduction? 3. Whether the Ld.CIT (A) was justified in relying on the decision of the Hon'ble SC in the case of Radhasoami Satsang Vs. .....

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in holding that it is not open for the AO to disallow the deduction granted in earlier years, without appreciating that the provisions of 5.143(3) would become redundant for subsequent years, and which is not what is provided for in the law? 5. Whether the Ld.CIT(A) was justified in holding that it is not open for the AO to disallow the deduction granted in earlier years, without appreciating that the AO had already initiated remedial measures u/ s. 148 of the I-T Act, in respect of earlier yea .....

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exus between the interest free funds available and investments made. 7. Whether the Ld.CIT(A) was justified in deleting the addition of ₹ 70,32,644/- made on account of disallowance of interest expense claimed u/s.36(1)(iii) by following the decision of Hon'ble Bombay High Court in the case of Reliance Utilities and Power Ltd [20091 (313 ITR 340) wherein the Hon'ble court has held that it is for assessee to show by production of materials that shares were acquired from funds availa .....

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, we have upheld the decision of the learned Commissioner (Appeals), the aforesaid grounds no.1 to 5, raised by the Revenue are also dismissed. 15. The additional issue raised by the Revenue in grounds no.6 and 7 relates to the decision of the learned Commissioner (Appeals) in deleting the addition of ₹ 70,32,644, made on account of disallowance of interest expenditure claimed under section 36(1)(iii). 16. Briefly stated the facts are, during the assessment proceedings, the Assessing Offic .....

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such claim, the assessee also submitted loan agreement with the bank for obtaining term loan of ₹ 25 crore. The Assessing Officer not being convinced with the explanation of the assessee and further alleging that the assessee has not furnished any evidence for utilisation of loan fund observed that the assessee's investment in equity shares of subsidiary as on 31st March 2008, stood at ₹ 167.79 crore which increased to ₹ 253.65 crore as on 31st March 2009. Thus, the Assessi .....

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assessee challenged the same before the first appellate authority. 17. Before the first appellate authority, assessee reiterated the stand taken before the Assessing Officer. The learned Commissioner (Appeals) after considering the submissions of the assessee in the context of facts and material on record, finding the assessee's claim that there is no nexus between the borrowed funds and the investment made in the subsidiary to be correct deleted the addition. While doing so, he observed th .....

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e in the subsidiary addition made by the Assessing Officer was justified. 19. The learned Senior counsel for the assessee, on the other hand, strongly supporting the order of the first appellate authority submitted, the loan from bank was taken for a specific purpose and as per the terms of the loan agreement, the bank is empowered to make inspection for ensuring utilisation of loan for the purpose for which it was taken. Thus, it was submitted by the learned counsel under no circumstances, the .....

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