TMI Blog2024 (4) TMI 191X X X X Extracts X X X X X X X X Extracts X X X X ..... le Supreme Court of India [ 2018 (5) TMI 359 - SUPREME COURT] upheld the judgement of Container Corporation of India Ltd [ 2012 (5) TMI 260 - DELHI HIGH COURT] Other High Courts namely Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd [ 2018 (1) TMI 1666 - BOMBAY HIGH COURT] and Madras High Court in the case of CIT -Vs- A.L. Logistic Pvt. Ltd. [ 2015 (1) TMI 401 - MADRAS HIGH COURT] held that looking to the facilities provided by the Container Freight Stations, the CFS is an Inland Port as it carries out the 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 the eligible to claim deduction u/s. 80IA[4] of the Act. Respectfully following the above judicial precedents, we are of the considered view that the assessee herein has complied with all the provisions of section 80IA(4)(i) of the Act and is eligible to claim deduction on storage Tank MDI and storage Tank EDA - Decided in favour of assessee. Amortization of share issue expenses u/s. 35D - A.O. disallowed the same on the ground that assessee company is a Private Limited company and has made ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt Judgement in the case of Parry Engineering Electronics Pvt Ltd [ 2014 (12) TMI 752 - GUJARAT HIGH COURT] the Co-ordinate Bench in assessee s own case [ 2019 (1) TMI 2043 - ITAT RAJKOT] held that the installation of windmill and the civil structure and the electric fittings are so closely interconnected and linked as to form the common plant. As already noted, the legislature has provided for higher rate of depreciation of 80 per cent on renewable energy devises including windmill and any specially designed devise, which runs on windmill. The civil structure and the electric fitting, equipment are part and parcel of the windmill and cannot be separated from the same. The assessee s claim for higher depreciation on such investment was, therefore, rightly allowed. Addition u/s. 41(1)(a) - cessation of liabilities - HELD THAT:- This issue is held against the assessee by the Co-ordinate Bench in assessee s own case in [ 2019 (1) TMI 2043 - ITAT RAJKOT] wherein as held assessee could not submit any explanation that why these amounts had been shown outstanding for such a long period and what steps have been taken by the assessee to recover these amounts and even before us assessee coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus, the AO alleged that assessee routed the transactions from SPIPL at arbitrary hypothetical rates and saved its tax on Rs. 51,76,800/- and saved dividend distribution tax. In total disregards to the submissions of the assessee, the AO alleged that the payment made by appellant to SPIPL in excess of what SPIPL has paid to owners and warehouse is unreasonable and disallowed the same. (v) Alleged that expenses for providing free access to land and keeping area vacant surrounding to the land on which windmill is erected is not necessary for function of windmill and therefore not qualify for depreciation and thereby disallowed depreciation at Rs. 24,16,316/- and added the same to the returned income. (vi) Cessation of Liability Rs. 6,68,703/-. 3. Aggrieved against the same, the assessee filed an appeal before Ld. CIT(A) who partly confirmed the additions and partly deleted the additions/disallowances made by the assessing officer. 4. Aggrieved against the same, both the Assessee and Revenue are in appeal before us. Grounds of Appeal filed by the Assessee in ITA No.131/RJT/2018 are as follows: 1.0 The grounds of appeal mentioned hereunder are without prejudice to one another. 2.0 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that that there is difference in the nature of business in case of MDI storage tank and other tanks at the Tank Farm. The full nomenclature of MDI means DiphenylMethane Disocyanate chemical product. This chemical MDI needs to be stored in a separate tank built at the Port with insulation cover to maintain temperature and pressure and Nitrogen gas for 24 hrs X 7 days to ensure the Tank is free from moisture as the chemical if comes into contact with moisture may react adversely producing hazardous gases. Not only the Tank, the supply and delivery pipelines are also insulated. As per MOU with DOW Chemical International Pvt. Ltd. the MDI Tank is fully dedicated to that party only which is used by them for storage of a specific cargo at a specific temperature as required to be maintained for that particular tank and the cargo of DOW Chemical is only stored as per the agreement with the party and assessee has filed copy of the agreement dated 22.10.2007 before the lower authorities. 6.1. The assessee explained that the storage facility is for loading and unloading of chemical, a copy of storage and terminal agreement with M/s Dow Chemical is also filed. Further the storage Tanks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re constructed on the same land leased out by the KPT in the year 1987. There are around 15 other storage tanks in the same facility. The only conclusion the Ld AO reached from physical verification is that the MDI and EDA storage Tanks are part of the tank farm of the group, if not an expansion of the existing facilities much less a new infrastructure facility and by no stretch of imagination an independent structure. However, as mentioned in para 4.14, during the assessment proceedings the assessee took strong objection of the findings of the AO in AY 2012-13 and demanded fresh inspection by the present AO. Accordingly, as mentioned in para 4.16 4.17 on fresh inspection the MDI and EDA storage tanks are found to be an independent and new infrastructure facility. Therefore, the assessee qualifies the condition of new infrastructure facility of having structures as part for storage, loading and unloading etc. and allowed the claim of the assessee. 7. During the pendency of the appeal, the Ld. CIT-DR Sri Shramdeep Sinha issued a letter dated 21.07.2023 to the Chairman, Kandla Port Trust (now known as Deendayal Port Authority) seeking further clarification in the case of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see stated that storage facility is for loading and unloading of chemical, a copy of storage and terminal agreement with M/s Dow Chemical International Pvt. Ltd, dated 22.10.2007 is also filed. And the storage tanks are connected with associated pumps, pipelines, connecting hoses, valves, metering and control devices and auxiliary equipment to carry out the loading and unloading functions. Thus, the MDI tanks are special tanks for specific liquid cargo hence has separate dedicated pipeline and pump for the same has been installed. The tanker vessels carrying on the specific chemicals come to Kandla Port for discharge of the cargo. The vessels are berthed at Oil Cargo Jetty and after necessary customs formalities; the cargo is unloaded in the storage tank through pipelines as per permission of Kandla Port Trust. 14. As we can see, that case of the assessee case is squarely falls under the clarification provided in Circular No. 10 of 2005. It is fact that storage tanks are an integral part of Port operations and it can't be utilized for any other non-port operations, Moreover, in A.Y. 2013-14, the AO in his order u/s. 143(3) dated 28.03.2016, after physical verification of; the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the part of asset of the assessee. There is agreement between the assessee and KPT for development such facilities. Therefore, as per provision of section 80IA (4) (i) (b), there is no such agreement and construction made as storage is in own business, which in fact is being used by the assessee himself. Therefore, the ownership of Infrastructure facilities with the assessee himself. The assessee is engaged in the very work of storage and such storage is on its own tank. The assessee has himself sought permission from KPT for construction of storage tank, as it was required for the purpose of business of the assessee. The KPT has merely given permission to the assessee on his express request to construct the storage tanks. Therefore, the contention of the assessee that it had entered in to an agreement, in compliance to provisions of section 80IA(4)(i)(b) is not true and needs to be rejected. The assessee has relied on Circular No.10/2005 dtd. 16.12.2005 which seeks to clarify the definition of Port for the purpose of infrastructure facility, but it does not take away the essential character of section 80IA(4)(i)(b), which requires the existence of an agreement with government. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtificate from concerned authority was produced before the ITAT hence, ITAT has allowed deduction. In view of above, the CIT (A) was of the view that condition of agreement with KPT to construction storage tank, shore pipelines and infrastructure facilities at the site allotted to the appellant and on the strength of revised certificate of KPT as notified in Circular No. 10/2005 that the appellant structure did not form part of infrastructure facilities within the meaning of section 80IA, hence, disallowance, so made by the AO were confirmed. 13. Being aggrieved, the assessee filed this appeal before the Tribunal. The learned counsel for the assessee submitted that as per lease agreement, the KPT has allotted 250000 Sq. Ft. land to the assessee on which the assessee constructed building storage tanks with permission of KPT, and developed infrastructure facilities hence, claim under section 80IA(4)(i)(b) is allowable to the assessee. The learned counsel for the assessee referred CBDT Circular No. 10 of 2005 dtd. 16.12.2005 (PB-27) in which clause 3. However, for and from assessment year 2002-03 onwards, structure at the ports for storage, loading and unloading the company will be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Circular No. 10 of 2005 dtd. 16.12.2005 (PB-27) in which clause is as follows ?:- 3. However, for and from assessment year 2002-03 onwards, structure at the ports for storage , loading and unloading the company will be included in the definition of port for the purpose of section 10 (23G) and 80IA of Income Tax Act, 1961, if the following conditions fulfilled:- the concerned port authority has issued a certificate that the said structure form part of the port. The assessee has furnished a certificate dtd. 20.10.2015 from Kandla Port Trust wherein This is to certify that M/s. Friends Oil Chemical and Chemical Terminals Pvt. Ltd. has built storage tank erected, shore pipelines and other infrastructure facilities on the plot of land leased to them by Kandla Port Trust at Old Kandla (Oil Jetties) for loading and unloading of liquid cargos which for part of the Port operations for import and export. The above infrastructure facilities have been developed, built maintained and operated by M/s. Friends Oil and Chemical Terminals Pvt. Ltd... Therefore, the assessee is not required to entered in to an agreement, in the light of CBDT Circular No.10 of 2005. Therefore, the assessee has made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal in the case of United Liner Agencies of India (Private) Ltd., v. Joint CIT (OSD) in ITA Nos.273 275/Mum/2013 (supra), has taken a similar view. Where no specific agreement with the State Government was entered into but from the approvals granted to the assessee it was inferred that assessee should be deemed to have entered into an agreement with the State Government. Similarly, the issue of the assessee is also supported by the decision in the case of Pr. CIT Seabird Marine Services Pvt. Ltd. [2017] 398 ITR 436 (Gujarat) . Thus, we are of the considered view that the assessee has complied with all the provisions of section 80IA(4)(i) and is eligible to claim deduction under the said section. The impugned order is set aside. In view of the above, this ground is allowed. 7.4. Further jurisdictional High Court in the case of Pr. CIT -Vs- Seabird Marine Services Pvt. Ltd. [2017] 398 ITR 436 (Gujarat) wherein also the AO inspected the Port premises in-person and after verification of the plant held as follows: 8. At the outset, it is required to be noted that in the present case, the assessment for A.Y 2005-06 and 2006-07 are sought to be reopened beyond the period of four y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as High Court in the case of CIT -Vs- A.L. Logistic Pvt. Ltd. 374 ITR 609 (Mad) held that looking to the facilities provided by the Container Freight Stations, the CFS is an Inland Port as it carries out the 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 the eligible to claim deduction u/s. 80IA[4] of the Act. Respectfully following the above judicial precedents, we are of the considered view that the assessee herein has complied with all the provisions of section 80IA(4)(i) of the Act and is eligible to claim deduction on storage Tank MDI of Rs. 91,93,380/- and storage Tank EDA of Rs. 1,13,24,514/- under the Act. Thus the Ground No.1 raised by the Revenue is hereby dismissed. 8. The next issue is disallowance of Rs. 2,61,000/= on account of amortization of share issue expenses u/s. 35D of the Act which was debited by the assessee its Profit and Loss account. But ld.A.O. disallowed the same on the ground that assessee company is a Private Limited company and has made expenses in relation to normal issue of shares not for public issue and expenses has been done after startup of bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) has rightly confirmed the addition of Rs. 2,23,639/-. 9.2. Ld CIT DR submitted that the addition of Rs. 2,23,639/= is to be upheld in favour of the department following Co-ordinate Bench decision of this Tribunal. Thus there is no change in facts and following assessee s own case in Co-ordinate Bench decision this ground no.2 raised by the assessee and Revenue are hereby dismissed. 10. The next issue is sustaining disallowance of warehousing charges of Rs. 51,76,800/- paid to the M/s.Shreeji Power and Insulators Pvt. Ltd. on the alleged ground that the same is excessive in nature as compared to payment made other parties. 10.1. Ld Counsel for the assessee submitted that this issue is also held in favour of the assessee by deleting the addition made u/s. 14A of Rs. 22,05,405/- by the Co-ordinate Bench in assessee s own case in ITA No.160/Rjt/2015 vide order dated 31.01.2019 wherein it was held as follows: 22. On the other hand, assessee s contention is that excessive would mean something more than what is being considered as normal having regard to the general market policy. In the given case, the respondent has paid to the unrelated third parties at the same rate at which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approach of both the authorities is perfectly justified. Windmill would require a scientifically designed machinery in order to harness the wind energy to the maximum potential. Such device has to be fitted and mounted on a civil construction, equipped with electric fittings in order to transmit the electricity so generated. Such civil structure and electric fittings, therefore, it can be well imagined, would be highly specialized. Thus, such civil construction and electric fitting would have no use other than for the purpose of functioning of the windmill. On the other hand, it can be easily imagined that windmill cannot function without appropriate installation and electrification. In other words, the installation of windmill and the civil structure and the electric fittings are so closely interconnected and linked as to form the common plant. As already noted, the legislature has provided for higher rate of depreciation of 80 per cent on renewable energy devises including windmill and any specially designed devise, which runs on windmill. The civil structure and the electric fitting, equipment are part and parcel of the windmill and cannot be separated from the same. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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