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2019 (6) TMI 477

..... port - allegation that the assessee has not entered into an agreement with Govt. of India or State or local authority for the purpose of developing the infrastructure - HELD THAT:- Respectfully following the view taken by this Tribunal and the decision of Hon’ble Madras High Court in CIT Vs. AL Logistics (P) Ltd. [2015 (1) TMI 401 - MADRAS HIGH COURT] and CIT Vs. Continental Warehousing Corporation [2015 (5) TMI 656 - BOMBAY HIGH COURT] we hold that the assessee is entitled for deduction u/s 80IA(4). - I.T.A.Nos.430-433/VIZ/2018, Cross Objection Nos.113-116/Viz/2018 (Arising out of I.T.A.Nos.430-433/VIZ/2018) - 7-6-2019 - Shri V. Durga Rao, Judicial Member And Shri D.S. Sunder Singh, Accountant Member For the Assessee : Shri G.V.N.Hari, AR For the Revenue : Shri D.K.Sonowal, DR ORDER PER BENCH: These appeals are filed by the revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]-3, Visakhapatnam dated 17.05.2018 and cross objections are filed by the assessee for the A.Y.2011- 12 to 2014-15. Since the facts involved in all these appeals are identical, the appeals are clubbed, heard together and disposed off in a common order for the sake of convenience .....

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..... /2004 dated 12.06.2004. The assessee submitted all the necessary evidences, copies of the letters with regard to eligibility for deduction u/s 80IA and argued that the CFS is treated as infrastructure and entitled for deduction/s 80IA(4) of the Income Tax Act. The assessee also relied on the decision of Hon ble Income Tax Settlement Commission in the assessee s own case. The AO, not being convinced with the explanation of the assessee disallowed the deduction u/s 80IA for the reason that the assessee has not entered into an agreement with Govt. of India or State or local authority for the purpose of developing the infrastructure. The AO further held that the assessee does not fall under the purview of Inland Port and also made observation that CFS is not an extension of Port. The Ld.AO did not follow the decision of Income Tax Settlement Commission (ITSC) on the ground that the Department has not accepted the decision of ITSC and filed writ petition before the Hon ble High Court, Chennai, challenging the decision of Settlement Commission. Accordingly, disallowed the deduction claimed u/s.80IA(4) and made the addition of ₹ 3,68,28,209/- for the A.Y. 2011-12. Identical addition .....

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..... of cargo, imported and exported through its Container Freight Station. A public notice was also issued to that effect vide notice No.29/2004 dated 12.06.2004, Hence the observation of the AO that the CFS is outside the purview of the inland port and the CFS is not extension of port has no legs to stand. Once the Commissioner customs issues notification declaring the CFS area as customs area, the dispute stands addressed as held in various judgments of Hon'ble High Courts. 6.1. Hon ble Supreme Court in the case of Container Corporation of India Ltd., in civil appeal No.8900 of 2012 dated 24.04.2018 held that the ICDs are inland port for the purpose of deduction u/s 80IA(4). For the sake of clarity we reproduce the relevant part of the order of the Apex court which reads as under: 21. Moving further to the issue whether the ICDs can be termed as Inland Ports so as to entitle deduction under Section 80-IA of the IT Act. The term port, in commercial terms, is a place where vessels are in a habit of loading and unloading goods. The term 'Port' as is used in the Explanation attached to Section 80-IA(4) seems to have maritime connotation perhaps that is the reason why the wor .....

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..... of CFS in it s own land and extension of inland port have been elaborately discussed by this Tribunal in the case of Gateway East India (P) Ltd. in it s order dated 29.04.2015 vide I.T.A. No.15/Viz/2015. The facts in Gateway East India (P) Ltd. are identical to the facts of the assessee s case. The Coordinate Bench of ITAT has considered the issue with regard to agreement, definition of inland port and whether CFS falls under inland port or not? and allowed the appeal of the assessee. The Ld.CIT(A) followed the decision of this Tribunal and allowed the appeal of the assessee. For the sake of clarity and convenience, we extract relevant part of the order of the ld.CIT(A) which is made available in page No.3 to 8 in para No.6.1 to 6.5 which reads as under : 6.1) There are (4) grounds raised in the appeal. Ground Nos.(1) & (4) are general in nature, hence, no separate adjudication is required. The only effective ground in this appeal is Ground No.(2) which is with regard to the addition made by the Assessing Officer by disallowing the deduction claimed u/s 80IA of the Act. On a careful consideration of the submissions made by the appellant, I find that this issue is squarely cove .....

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..... ted to clearance of 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, Bills of Entrys, Shipping Bills and other declarations, assessment and all the activities related to clearance of goods for home use, warehousing, temporary admissions, re-export, temporary storage for onward transit and outright export, transshipment, etc., take place. An ICD would have its own automated system with a separate station code [such as INTKD 6, INSNF6 etc.] being allotted by Directorate General of Systems and with in-built capacity to enter examination reports and enable assessment of documents, processing of manifest, amendments, etc. • Container Freight Stations are specified as customs area under Clause (b) of the said Section 8 .....

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..... isting CFSs. Such an ICD should be capable of providing full-fledged Customs services, independent EDI system, and all procedures meant for transhipment of cargo have to be followed for movement of goods from the port of import to the ICD. Further, such an ICD would function as an independent Customs Station in all respects and would not be attached to any other port or airport. Thus, in respect of proposals for setting up of ICD/Container 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 Customs area of the same station, covered by local procedure evolved by the Commissioner of Customs and covered by bonds, bank guarantee, etc. Further, the person undertaking the transshipment would be required to follow the prescribed procedure. As rightl .....

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..... (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 Commerce. (e) The working of the CFS will be open to review by the Inter Ministerial Committee. (f) Formalities in respect of acquisition/possession of the land shall be completed within 60 days and intimated to the Mlo Commerce, failing which the approval granted would be automatically cancelled. 2. The facility to be set up shall be full computerized, with EDI compatibility and a minimum complement of equipment and accessories as necessary shall be made available at the facility. The indicative 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 c .....

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..... ure facility in sub-section (12), clause (ca), with effect from April 1, 1999. When the entire section was recast and even after several amendments were thereafter made to the section, inland ports continued to enjoy the deduction as infrastructure 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 the unloading of imported goods and loading of exported goods. The Central Board of Excise and Customs issued a clarification that inland container depots were inland ports. The power to notify infrastructure facilities for the purpose of the section was taken away from the Central Board of Direct Taxes w.e.f. April 1,2002. However, there was no provision made in the Act saying that notifications issued earlier would cease to have from April 1, 2002.The .....

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..... the Hon ble Settlement Commission will hold good. 6.3) More than anything else, the Hon ble Supreme Court in their order dt.24.4.2018 in the case of Container Corporation of India Limited (supra) approved the view taken by the Hon ble Delhi High Court. While dealing with the issue, the Hon ble Supreme Court has examined the Finance Act, 1995 & 1998 and also the Notification issued by the CBDT in No.744(E), dated 01.09.1998 has come to the conclusion that ICD as well as CFS is an infrastructure facility and they can be categorized as inland port. The Hon ble Supreme Court agreed with the view expressed by the Hon ble Delhi High Court in the same case reported in 346 ITR 140 (Del.). The Jurisdictional Bench of ITAT (Vizag) followed this High Court order while rendering their decision. Thus, the issue stands settled in view of the decision of the Hon ble Supreme Court. 6.5) In the light of the above discussion, the Assessing Officer is directed to delete the addition of ₹ 3,68,28,209/- made towards disallowance of deduction claimed u/s. 80(IA) of the Act. Thus, the order of this Tribunal in the case supra answered both the objections of the Assessing Officer with regard to a .....

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..... rly, the assessee relied on the decision of CIT Vs. Continental Warehousing Corporation (2015) 374 ITR 0645, Hon ble Bombay High Court has discussed the issue with regard to the agreement and decided the issue in favour of the assessee. We extract relevant part of the order of the Hon'ble Bombay High Court which reads as under : 47. We do not find that anything other and further than this material is relied. However, - even the High Court of Judicature at Madras has referred in its Division Bench decision to the view taken by the Delhi High Court. The Division Bench in paragraphs 10 and 12 of it judgment extensively referred to the Tribunals conclusions; It also referred to the Special Bench decision of the Tribunal. Thus, 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 infrastructure facility set up and within the precincts of the port, then, considering and even otherwise having considered its proximi .....

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