TMI Blog2020 (10) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... ELD THAT:- As in the case of Vireet Investment Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI ] A.O while computing the book profit under Sec.115JB of the Act shall not resort to the computation as contemplated under Sec.14A r.w. Rule 8D. As regards the claim of the ld. A.R that as the investment in the exempt yielding investments were made by the assessee out of its self-owned funds and no part of the interest bearing funds were therein utilised, therefore, no disallowance of any part of the interest expenditure was called for u/s 14A r.w Rule 8D(2)(iii), we find ourselves principally to be in agreement with the same proposition so canvassed by the ld. A.R. before us. But then, the said claim of the assessee would require verification of the factual position. If the aforesaid claim of the assessee that it had sufficient self-owned funds for making the investments in the exempt income yielding investments is found to be in order, then no disallowance u/s 14A of any part of the interest expenditure would be called for in its hands. Our aforesaid view is fortified by the order in the case of CIT Vs. HDFC Bank Ltd. [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] - Decided in favour of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ashtra, had e-filed its return of income for A.Y. 2015-16, declaring its total income at ₹ 4,23,84,760/- under the normal provisions of the Act and book profit of ₹ 92,66,11,382/- under Sec.115JB of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act. 3. During the course of the assessment proceedings, it was inter alia observed by the A.O, that the assessee had claimed deduction of ₹ 87,96,80,010/- under Sec.80IA(4) of the Act. It was noticed by the A.O that it was the sixth assessment year for claim of deduction under Sec.80IA of the Act, the first year being A.Y. 2010-11. It was further observed by the A.O that his predecessor while framing the assessment for A.Y. 2010-11 had disallowed the assessee s claim for deduction under Sec. 80IA, for the reason, that the assessee s Container Freight Stations (CFS) was neither a port nor an Inland Port, and thus, not an eligible infrastructural facility as provided in the Explanation to Sec.80IA(4) of the Act. Further, it was observed by the A.O that his predecessor while rejecting the assessee s claim for deduction under Sec.80IA for A.Y. 2010-11 had a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid deliberations the A.O disallowed the assessee s claim for deduction under Sec.80IA(4) amounting to ₹ 87,96,80,010/-. 4. It was further observed by the A.O that the assessee during the year under consideration had in its return of income shown the following exempt income: Dividend income from Mutual Funds ₹ 8,64,053/- Dividend income from Subsidiary ₹ 6,83,02,067/- Total Dividend Income ₹ 6,91,66,120/- It was observed by the A.O that the assessee had disallowed an amount of ₹ 1,00,055/- by attributing the same as having been incurred for earning of the aforesaid exempt income. Holding a conviction that the disallowance was liable to be worked out under Sec.14A r.w Rule 8D, the A.O called upon the assessee to put forth an explanation as regards the same. In reply, the assessee submitted details about the investments made in mutual funds and computation of disallowance under Sec.14A r.w. Rule 8D(2)(iii). Alternatively, it was submitted by the assessee, that as the investment in the exempt income yielding assets were made from the self-owned funds and internal accruals and not from borrowed funds, therefore, no part of the inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rving, that the issue involved in the case of the assessee remained the same as was there in the preceding years, the CIT(A) relying on the order passed by the Tribunal in the assessee s own case for A.Y. 2012-13, and further drawing support from the judgment of the Hon ble Supreme Court in the case of CIT Vs. Container Corporation of India Ltd. (supra), vacated the disallowance made by the A.O under Sec.80IA(4) of the Act. As regard the addition of the disallowance worked out under Sec.14A r.w. Rule 8D, as was carried out by the A.O for the purpose of calculating the assessee s book profit under Sec.115JB of the Act, it was observed by the CIT(A) that the issue was squarely covered by the order of the Special bench of the ITAT, Delhi in the case of ACIT Vs. Vireet Investment Pvt. Ltd. (2017) 165 ITD 0027 (Delhi) (SB). Further, relying on the aforesaid order of the Special bench of the ITAT in the case of Vireet Investment Pvt. Ltd.(supra), the CIT(A) directed the A.O to re-compute the disallowance under Sec.14A after considering the annual average value of investment which had yielded exempt income during the year under consideration. 6. Both the assessee and the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucture development etc. We are concerned with sub-section (4) and as it read at the relevant time. It says that this section applies to any enterprise carrying on the business of developing or operating and maintaining any infrastructure facility which fulfills all the conditions, namely, 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, it has entered into an agreement with the Central Government or a local authority or any other statutory body for developing or operating and maintaining or developing, operating and maintaining a new infrastructure facility and it has started or starts operating and maintaining the infrastructure facility on or after 1st day of April, 1995. The explanation defines the infrastructure facility to mean, inter alia, a port, airport, inland waterway, inland port or navigational channel in the sea. The word inland port was always there in clause (d). What was there prior to its substitution by Finance Act of 2007 with effect from 1st April, 2008, were the words or inland port . Now the word or i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condly, the assessee company has not entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body. Therefore, the condition was not fulfilled. The Commissioner in the appellate order had before him the ground and while dealing with the same, he found that the approval granted by the Ministry of Commerce, Government of India would not constitute an agreement with the Central Government. Further, the Department of Revenue, Ministry of Finance, issued a Notification dated 1st January, 2006, notifying the assessee as custodian of imported and exported goods received at the container freight station. The various contentions raised in this regard have been referred to by the Commissioner, including that the Ministry of Commerce and Industries granted approval for setting up CFS facility for handling import and export cargo and that the acceptance of the terms and conditions constitute an agreement with the Central Government and all documents in relation thereto have been referred. The Commissioner in dealing with these conditions held that CFS facility of the assessee is not an infrastructure facility within the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inals spread all over the country. The assessee has a total 45 Inland Container Depots. The Division Bench of the Delhi High Court then concluded as under: 10. Thus it was for the first time from the assessment year 1999-2000 that inland ports started enjoying the deduction under Section 80IA as an infrastructure facility . The object of the Government was to strengthen and improve the country's infrastructure in general and the transport infrastructure in particular. Inland ports facilitate the transport infrastructure by taking care of the transport of the customs- cleared goods meant for export from the ICD to the sea-port and the imported goods directly from the sea-port to the ICD where they can be customs-cleared. When the entire Section was recast by the Finance Act, 1999 with effect from 1.4.2000 and even after several amendments were thereafter made to the Section, inland ports continued to enjoy the deduction as infrastructure facility. 11. The question before us is whether the income from ICDs qualify for the deduction under Section 80IA(4)(i) of the Act read with the Explanation (d). We may first notice that out of the total of 45 ICDs operated by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as under: Such projects, for which agreements have been entered into on or after April 1, 1995, but on or before March 31, 2001, and which have been notified by the Board on or before March 31, 2001, would continue to be exempt, subject to the fulfilment of the conditions prescribed in section 80-IA(4)(i)(b), as it existed prior to its substitution by the Finance Act, 2001. This circular fortifies the assessee's claim. 14. The next question that arises is whether the ICDs can be considered to be inland ports. There is no definition of an inland port in the Act. However, a port , which also qualifies for the deduction is defined in Section 3(4) of the Indian Ports Act, 1908 (Act 15 of 1908) to include also any part of a river or channel in which the said Act is for the time being in force. The word port is defined in T. Ramanatha Aiyar's Law Lexicon, 4th Edition (2010) in a number of ways. The most general meaning which is given is that it denotes a harbour or shelter to the vessels from a storm or as a place with a harbour where ships load or unload. It has also been defined in the commercial sense as an enclosed place where vessels load and unload ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stoms Act, 1962, which defines customs port . This was by way of an amendment made by the Finance Act, 1983 with effect from 13th May, 1983. Simultaneously clause (aa) was inserted in Section 7(1) of the said Act under which the CBEC was empowered to issue notification appointing the places which alone shall be considered as inland container depots for the unloading of imported goods and the loading of exported goods. On 24th April, 2007 the following clarification was issued by the Central Board of Excise and Customs apparently in response to a query raised by the assessee. F. No. 450/24/2007-Cus.IV Government of India Ministry of Finance Department of Revenue Central Board of Excise Customs New Delhi, April 24th, 2007 To, Ms P. Alli Rani, Executive Director (Finance), Container Corporation of India Limited, CONCOR Bhawan, C-3, Mathura Road, Opp. Appolo Hospital, New Delhi-110076. Subject : Clarification regarding 'Inland Port' regarding Kindly refer to your letter CON/FA/128/Vol2/80IA/2003- 04 dated 18.04.2007 seeking clarification regarding Inland Port . 2. It is stated that as per Customs Act, 1962 secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incts 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. 48. We do not think that the view taken by the Tribunal is in any way perverse or runs contrary to the language of subsection (4) of section 80-IA or the object of the Income Tax Act, 1961, as a whole. Once such a conclusion is reached, then, it is not necessary to refer to any other material, particularly any circulars of the Board or otherwise or the certificates issued by the authorities. Even their contents need not be referred to. We are of the view that the extensive reasoning in the judgment of the Division Bench of the Delhi High Court and which finds approval even of the High Court of Madras and with which we broadly agree that the substantial questions of law on both counts need to be answered in favour of the assessee and against the Revenue . The aforesaid decision and ratio of the Hon ble jurisdictional High Court as well as that of Delhi High Court is squarely applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c.115JB of the Act. As is discernible from the order of the CIT(A), we find, that relying on the order of the Special bench of the ITAT, Delhi in the case of ACIT Vs. Vireet Investment Pvt. Ltd. 82 (2017) 165 ITD 0027 (Delhi) (SB), he had observed that the computation of the book profit under Clause (f) of Explanation 1 to Sec.115JB(2) was to be made without resorting to the computation as contemplated under Sec.14A r.w. Rule 8D of the Income Tax Rules, 1962. Insofar, the aforesaid reliance placed by the CIT(A) on the order of the Special bench of the ITAT, Delhi in the case of Vireet Investment Pvt. ltd. (supra) is concerned, we find no infirmity in the same. Apart from that, the observation of the CIT(A) that for the purpose of computing the average value of investments while calculating the disallowance under Sec.14A r.w. Rule 8D, only those investments were to be considered which had yielded exempt income during the year under consideration, the same also find favour with us. Insofar the grievance of the assessee is concerned, wherein it had assailed the order of the CIT(A) on the ground that he had erred in making addition in the book profit u/s 115JB on account of d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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