Itxa/6457/2010 Of The Commissioner Of Income-Tax-3 v. M/S Reliance Ports And Terminal Ltd

itxa6457-10 IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.6457 OF 2010 The Commissioner of Income Tax-3, Mumbai ..Appellant. V/s. M/s. Reliance Ports & Terminals Ltd. ..Respondent. Mr. A.R. Malhotra for the appellant. Mr. J.D. Mistri, senior Advocate with Raj Darak with P.C. Tripathi for the respondent. CORAM : J.P. DEVADHAR AND M.S. SANKLECHA, JJ. DATED : 3RD DECEMBER, 2012 P.C. :- 1.Two questions of law are raised by the revenue in this appeal, which read thus:- (A)Whether on the facts and in the circumstances of the case and in law, the ITAT erred in confirming the order of CIT(A) in holding that Rs.47.91 crores incurred by assessee company for the construction of RO-RO jetty at Sikka, Jamnagar, is revenue expenditure and deductible in computation of total income of the assessee ?law, the ITAT erred in confirming the order of CIT(A) in holding that Rs.47.91 crores incurred by assessee company for the construction of RO-RO jetty at Sikka, Jamnagar, is revenue expenditure and deductible in computation of total income of the assessee ? (B)Whether on the facts and in the circumstances of the case and in law, the ITAT erred in confirming the order of CIT(A) in directing to allow depreciation on building used by assessee company for the whole year instead of six months as allowed by the assessing officer ?law, the ITAT erred in confirming the order of CIT(A) in directing to allow depreciation on building used by assessee company for the whole year instead of six months as allowed by the assessing officer ? 2.The appellant-assessee had constructed a jetty at Sikka, Jamnagar in Gujarat after entering into an agreement with the Gujarat Maritime Board. As per the agreement, the ownership of the said jetty vested with Gujarat Maritime Board and, therefore, the entire expenditure on construction of the jetty was claimed by the assessee as revenue expenditure. 3.According to the revenue, by constructing a jetty, the assessee starts its business and, therefore, in the absence of any existing business, the activity of building, erecting, installing, maintaining and operating infrastructural facility like port, jetty, etc. cannot be considered as business activity, because by constructing the jetty, the assessee is not facilitating its business operations at all and hence the expenditure incurred on the jetty cannot be considered as revenue expenditure. 4. The ITAT in para 4 of its order has recorded a finding of 3.According to the revenue, by constructing a jetty, the assessee starts its business and, therefore, in the absence of any existing business, the activity of building, erecting, installing, maintaining and operating infrastructural facility like port, jetty, etc. cannot be considered as business activity, because by constructing the jetty, the assessee is not facilitating its business operations at all and hence the expenditure incurred on the jetty cannot be considered as revenue expenditure. 4. The ITAT in para 4 of its order has recorded a finding of fact that as per the terms and conditions of the licence agreement entered into by and between the assessee company and the Gujarat Maritime Board, the assessee had a right to construct, operate and maintain the jetty for a specified period and the assessee was entitled to recover the handling charges from others using the facility in consideration thereof. The Tribunal has recorded a finding of fact that the activity of the constructing a jetty at Sikka, Jamnagar is very much a business activity of the assessee and was covered by the main object of the company. Relying upon a decision of the Apex Court in the case of CIT V/s. Associated Cement Companies Ltd. reported in (1988) 172 ITR 257 (SC), the Tribunal held that though the expenditure incurred by the assessee resulted in creation of a capital asset, since the said asset did not belong to the assessee, such expenditure has to be allowed as a revenue expenditure. The Tribunal has also held that in the subsequent assessment year, the assessee has incurred some other expenditure in providing further facility on the said jetty which has been allowed as revenue expenditure. Counsel for the revenue submitted that the decision of the Apex Court in the case of Associated Cement Co. Ltd. (supra) is distinguishable on facts. In our opinion, though the facts in that case were slightly different, the ratio laid down therein would squarely apply to the facts of the present case. It is an undisputed fact that the expenditure incurred on construction of jetty is wholly and exclusively for the purpose of the business of the assessee. Since the construction of infrastructure facility of jetty was a full fledged business acvitity of the assessee, no fault can be found with the decision of the Tribunal in allowing the claim of the assessee. Accordingly, we see no reason to entertain the first question. 5.As regards the second question is concerned, the Tribunal has allowed full depreciation by recording a finding that the business of construction of jetty commenced from the month of May, 1997 and, therefore, the assessee was entitled to depreciation for the full year. The decesion of the Tribunal is based on finding of fact. Hence we see no reason to entertain the second question. 6.The appeal is dismissed accordingly with no order as to costs. (M.S. SANKLECHA, J.) (J.P. DEVADHAR, J.)