Itat/362/2017 Of Principal Comm Of Income Tax 3, Kolkata v. M/S T. M. International Logistics Ltd

Form No.(J2) IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (INCOME TAX)ORIGINAL SIDE P R E S E N T : THE HON’BLE JUSTICE T.S.SIVAGNANAM A N DTHE HON’BLE JUSTICE HIRANMAY BHATTACHARYYA ITAT/231/2017IA NO:GA/2/2017(Old No: GA/2128/2017) PRINCIPAL COMMISSIONER OF INCOME TAX 3, KOLKATAVS. M/S. T.M. INTERNATIONAL LOGISTIC LTD. ITAT/362/2017IA NO. GA/2/2017(OLD NO.GA/3628/2017)PRINCIPAL COMMISSIONER OF INCOME TAX 3, KOLKATAVS. M/S. T.M. INTERNATIONAL LOGISTICS LTD. Mr. Debashis Chowdhury, Adv. …for appellant in ITAT/231/2017Ms. Sucharita Biswas, Adv.Mr. Asok Bhowmick, Adv. ..for appellant in ITAT/362/2017Mr. J.P. Khaitan, Sr. Adv.Mr. Pratyush Jhunjhunwala, Adv.Ms. Swapna Das, Adv. …for the respondent Heard on : 03.01.2022 & 20.01.2022 Judgment on : 20.01.2022 T.S. SIVAGNANAM, J. :- These appeals have been filed by therevenue under Section 260A of the Income Tax Act, 1961 against thecommon order dated 4[th] October, 2016 passed by the Income TaxAppellate Tribunal “A” Bench, Kolkata (Tribunal) in ITA/1513/Kol./2008for the assessment year 2004-2005 and ITA/1914/Kol/2008 and C.O.No. 133/Kol/2008 for the assessment year 2005-2006. The revenue hasraised the following substantial questions of law for consideration:- 1.Whether on the facts and the circumstances of the case, theLearned Income Tax Appellate Tribunal, “A” Bench, Kolkata,erred in law in allowing deduction u/s 80-IA of the Income TaxAct, 1961 to the assessee, in respect of operating a multi-purpose berth and not developing and/or operating andmaintaining a port as required under the act ?Learned Income Tax Appellate Tribunal, “A” Bench, Kolkata,erred in law in allowing deduction u/s 80-IA of the Income TaxAct, 1961 to the assessee, in respect of operating a multi-purpose berth and not developing and/or operating andmaintaining a port as required under the act ? 2.Whether on the facts and circumstances of the case, theLearned Income Tax Appellate Tribunal, “A” Bench, Kolkata,erred in law in accepting the contention of the assessee in thematter of claim of deduction u/s 80-IA despite the assesseehaving failed to substantiate its claim by not maintainingseparate accounts for different units for the purpose ofclaiming deduction u/s 80-IA of the Income Tax Act, 1961 ?Learned Income Tax Appellate Tribunal, “A” Bench, Kolkata,erred in law in accepting the contention of the assessee in thematter of claim of deduction u/s 80-IA despite the assesseehaving failed to substantiate its claim by not maintainingseparate accounts for different units for the purpose ofclaiming deduction u/s 80-IA of the Income Tax Act, 1961 ? We have heard Mr. Debashis Chowdhury, learned Counsel and Ms.Sucharita Biswas, learned Counsel duly assisted by Mr. Asok Bhowmick,learned Advocate for the appellant/revenue today as well as on 3[rd]January, 2022 and Mr. J.P. Khaitan, Learned Senior Counsel dulyassisted by Mr. Pratyush Jhunjhunwala and Ms. Swapna Das, on behalfof respondent. We have heard Mr. Debashis Chowdhury, learned Counsel and Ms.Sucharita Biswas, learned Counsel duly assisted by Mr. Asok Bhowmick,learned Advocate for the appellant/revenue today as well as on 3[rd]January, 2022 and Mr. J.P. Khaitan, Learned Senior Counsel dulyassisted by Mr. Pratyush Jhunjhunwala and Ms. Swapna Das, on behalfof respondent. The facts which are to be noted are that assessee is a companyengaged in a business of terminal port operation including development,operation and maintenance thereof, logistic solutions provider andagency work. The head office of the assessee company is at Calcutta andthey are engaged in port activities at Haldia, Paradip and Mumbai. AtHaldia Port they have activities at Berth No. 12 and the question iswhether they are eligible for deduction under Section 80-IA of the Act.For the assessment year 2004-2005 the assessee filed the return ofincome and claimed deduction under Section 80-IA for expenses forrepairs and maintenance. Similar was the claim made by the assessee forthe assessment year 2005-2006. The assessing officer by two separateorders dated 29[th] December, 2006 and 31[st] December, 2007 for theassessment years 2003-2004 and 2004-2005 respectively rejected theclaim. Since the assessment order is verbatim the same and theassessing officer is also the same person suffice to refer to theassessment order dated 29[th] December, 2006 for the assessment year2004-2005. The assessing officer noted that the assessee company had claimed deduction under Section 80-IA for operating and maintainingmulti purpose Berth No. 12 at Haldia Dock Complex. They submitted aletter dated 20[th] November, 2006 issued by the port authorities statingthat Berth No. 12 at Haldia Dock Complex has been allotted to theassessee on leave and license basis for thirty years and it has exclusivelicense to equip, construct, finance, operate, manage, maintain andreplace the project facilities and services. The assessing officer uponnoting the letter observed that the letter nowhere indicates or mentionsor reveals the nature and extent of work done by the assessee during theyear under consideration as it only indicates that there is an agreementbetween port authorities and the assessee company for a specifiedpurpose and work and, therefore, was of the opinion that the letter canhave no significance with regard to the deduction claimed under Section80-IA of the Act. Further, the assessing officer opined that the assesseehas not been developing but only operating a multi purpose berth andnot a port. During the course of assessment proceedings the assesseeplaced reliance on a circular being Circular No. 793 dated 23[rd] June,2000, stating that they are entitled for deduction under Section 80-IA ofthe Act. The assessing officer came to the conclusion that the letterwhich was relied on by the assessee issued by the port authorities nowhere states that the Berth No. 12 is a part of the port. The assessingofficer further stated that Haldia Dock Complex is much larger area andonly a part within a port. The assessing officer further noted that in the said letter issued by the port authorities it was mentioned that assesseecompany was granted exclusive license for equipping, constructing,financing, operating, managing, maintaining, and replacing the projectfacilities at Berth No. 12. Though the assessing officer noted the saidfact he opined that no details were furnished in respect of thearrangement for construction of Berth No. 12 either on BOT or BOLTbasis and transfer of Berth No. 12 to the port authorities. With suchreasoning the assessing officer held that assessee company is not eligiblefor claiming deduction under Section 80-IA of the Act. The assessee filedappeal before the Commissioner of Income Tax (Appeals) –VIII Kolkata(CITA). Apart from factual details placed before the assessing officer theassessee contended that for the assessment year 2003-2004 which wasthe first year of the claim under Section 80-IA the same was not allowedby the assessing officer for the said assessment year against whichappeal was filed before the CITA wherein it was held that the assesseewas entitled for the deduction under Section 80-IA of the Act which orderhas been affirmed by the Tribunal by order dated 30[th] October, 2007.Therefore, the assessee contended that they are entitled for deduction forthe assessment year under consideration before us as for the first yearsuch benefit had been granted which stood concluded by the orderpassed by the Tribunal. The CIT(A) upon taking note of the said orderpassed by the Tribunal for the assessment year 2003-2004 accepted thecase of the assessee and directed the assessing officer to allow the deduction under Section 80-IA in respect of profits of the industrialundertaking styled as Berth No. 12, Haldia Dock Complex. The othergrounds were also discussed by the CIT(A) and relief was granted to theassessee on the quantum claimed by them. The revenue preferredappeal before the Tribunal contending that the CIT(A) ought not to haveallowed the claim of deduction as aforementioned, under Section 80-IAsince assessee is not operating a port but only operating Berth No. 12 atHaldia Dock. Further the revenue contended that assessee had notfurnished any evidence to support their claim that they have beenmaintaining the said facility. The Tribunal considered the submissionsmade by the revenue and after noting that the assessee has been grantedthe deduction under Section 80-IA for the first year namely 2003-2004and the said order passed by the Tribunal had been given effect to by theassessing officer, following the decision for the assessment year 2003-2004 the appeals filed by the revenue were dismissed. Challenging thoseorders revenue is before us by way of these appeals. The learned SeniorStanding Counsel appearing for the revenue, have in extenso taken usthrough the factual position and reiterated the submissions made by therevenue before the Tribunal stating that the assessee is not operatingand maintaining a port but they are engaged in activities of Berth No. 12alone, and therefore, assessing officer was right in not granting the relief.Furthermore, it is contended that no documents were produced by theassessee to establish their case before the assessing officer. Relying upon the Circular No. 10 of 2005 dated 16[th] December, 2005 issued bythe Central Board of Direct Taxes inviting the attention to theamendment made in Section 80-IA by Finance Act, 2001 it is submittedthat unless and until the concerned port authority has issued acertificate that the structures formed part of the port, deduction underSection 80-IA cannot be granted. Firstly, we need to point out that theassessing officer has not disputed the fact that the assessee produced aletter issued by the port authorities. Apart from that an agreement hasalso been produced for the consideration of the assessing officer. Thedocuments which were placed before the assessing officer in nouncertain terms states that assessee has been granted exclusive licensefor equiping, constructing, financing, operating, managing, maintainingand replacing the project/project facilities at the said Berth No. 12. Theassessing officer has noted these facts however states that the letter doesnot state whether the said Berth is part of the port. To say the least, thesaid finding is utterly perverse. Admittedly a Berth can be located onlyin a seaport and if unfortunately the assessing officer was not even awareof that he should have refrained from taking up the case of the assesseefor assessment. That apart, having noted the contents of the letter theassessing officer states that it is not clear whether exclusive license wasgranted to the assessee. This also, in our considered opinion a perversefinding. What is important is the substance of the letter and theagreement and not the form. It may be true that the port has issued Circular No. 10 of 2005 stating that the concerned port authorities haveto issue a certificate since the definition of port stood amended and itwas made as an inclusive definition to mean structures at the port forstorage, loading and unloading etc. If the assessing officer had appliedhis mind and read the letter and the agreement in conjunction he shouldhave arrived at a conclusion that the right granted to the assessee wasan exclusive right to maintain the facility and undoubtedly the facility ismeant for storage, loading and unloading and would fall within thedefinition “of port”. Fortunately for us the CIT(A) for the earlierassessment year 2003-2004 which is the first year when deductionunder Section 80-IA was claimed has done a thorough factualexamination and granted relief to the assessee. Thus the order passed bythe CIT(A) was challenged before the Tribunal and the Tribunal by orderdated 30[th] October, 2007 dismissed the appeal of the revenue and theassessing officer has also given effect to the order and allowed deductionunder Section 80-IA of the Act for which is the first year in the period often years. It goes without saying if the assessee has been granted thebenefit for the first year the assessing officer should take a consistentstand in the subsequent years unless there are any other change incircumstances warranting a different decision. In the case on hand, thereis nothing on record that there was any change in the situation.Therefore, we are of the considered view that the letter and theagreement which were produced by the assessee is undoubtedly a certificate issued by the port authorities and would satisfy therequirement in Circular No. 10 of 2005. The Tribunal on its part alsoreexamined the factual position and noted the decision in assessee’s owncase for the assessment year 2003-2004 while grating relief to theassessee. Furthermore, the Tribunal noted the finding of the assessingofficer while giving effect to the order of the CIT(A) for the assessmentyear 2003-2004 wherein he has stated as follows:- certificate issued by the port authorities and would satisfy therequirement in Circular No. 10 of 2005. The Tribunal on its part alsoreexamined the factual position and noted the decision in assessee’s owncase for the assessment year 2003-2004 while grating relief to theassessee. Furthermore, the Tribunal noted the finding of the assessingofficer while giving effect to the order of the CIT(A) for the assessmentyear 2003-2004 wherein he has stated as follows:- “It is found from the assessment records that a separate profit& loss account & balance sheet was prepared for Berth No. 12,Haldia Dock Complex. These documents were submitted alongwith return of income. Further, it is found that as per provision ofAct, there is no need for assessee to give evidence of acquisition ofnew plant and machinery for the eligible unit for claimingdeduction u/s.80IA of Income Tax Act, 1961 because the assesseemaintains port. As per Circular No. 10/2005 dated 16.12.2005,the business activity of assessee in relation to Berth No. 12.Haldia Dock Complex falls within the meaning of “Port” inExplanation below Section 80(IA)(i)(c) of the Income Tax Act,1961.” From the above factual position it is evidently clear that theTribunal rightly rejected the revenue’s appeal and confirmed the orderpassed by the CIT(A) granting relief to the assessee. Thus we find there is no grounds to take a different view in thematter. For the above reasons the appeals filed by the revenue aredismissed and the substantial questions of law are answered against therevenue. Consequently, the applications are also dismissed. (T.S.SIVAGNANAM, J.) I agree. (HIRANMAY BHATTACHARYYA, J.) pkd/GH.