M/S.a.s.shipping Agencies Pvt. Ltd., Chennai-1 v. The Deputy Commissioner Of Income Tax, Company Circle 1(1), Chennai-34

IN THE HIGH COURT OF JUDICATURE AT MADRASDated : 09.8.2019 The Honourable Mr.Justice T.S.SIVAGNANAMandThe Honourable Mrs.Justice V.BHAVANI SUBBAROYAN Tax Case Appeal Nos.596 to 600 of 2019& CMP.Nos.17556, 17563, 17564 & 17566 of 2019 M/s.A.S.Shipping Agencies Pvt.Ltd., Chennai-1...Appellant in All CasesVs The Deputy Commissioner of Income Tax, Company Circle 1(1), Chennai-34. ...Respondent in All Cases Appeals under Section 260A of the Income Tax Act, 1961against the common order dated 13.11.2015 made in ITA.Nos.2763to 2767/Mds/2014 on the file of the Income Tax AppellateTribunal, Chennai 'D' Bench respectively for the assessmentyears from 2006-07 to 2008-09, 2010-11 and 2011-12 against theorder dated 12.09.2014 in PAN.No. for the assessmentyear 2006-2007, 2007-2008, 2008-2009, 2010-2011, 2011-2012 onthe file of the Deputy Commissioner of Income Tax CompanyCircle(I),Chennai, against the order dated 28.07.2014 inITA.No.48/14-15/A-1, ITA.No.607/09-10/A1, ITA.No.46/14-15/A-1,ITA.No.47/14-15/A-1, ITA.No.340/13-14/A-1 for the assessmentyear, 2006-2007, 2007-2008, 2008-2009, 2010-2011, 2011-2012 onthe file of the Deputy Commissioner of Income Tax (Appeals)-I,Chennai -34, against the order dated 28.03.2014, 21.12.2009, inPAN.No.AAACA2906N for the assessment year 2006-2007, 2007-2008,2008-2009, 2010-2011, 2011-2012 on the file of the DeputyCommissioner of Income Tax Circle 1(1), Chennai. COMMON JUDGMENT (Judgment was delivered by T.S.Sivagnanam,J) We have elaborately heard Mr.A.S.Sriraman, learned counselfor the appellant – assessee and Mrs.R.Hemalatha, learned SeniorStanding Counsel accepting notice for the respondent – Revenue. 2. These appeals, filed by the assessee under Section 260A ofthe Income Tax Act, 1961 (for short, the Act), are directedagainst the common order dated 13.11.2015 made in ITA.Nos.2763to 2767/Mds/2014 on the file of the Income Tax AppellateTribunal, Chennai 'D' Bench respectively for the assessmentyears from 2006-07 to 2008-09, 2010-11 and 2011-12. 3. The assessee has filed these appeals by raising thefollowing substantial questions of law :“i. Whether the Appellate Tribunal isright in remanding the matter pertaining tothe claim of deduction under Section 80IA(4)of the Act to the file of therespondent/Assessing Officer despite thecompliance of the conditions prescribed inrelation thereto, availability of theirorder for the earlier assessment yearsapproving such claim of deduction and thecompliance of the law laid down by thisCourt in the case of M/s.A.L.LogisticsPrivate Limited?ii. Whether the Appellate Tribunal iscorrect in remanding the matter to the fileof the respondent/Assessing Officer in spiteoftheavailabilityoftheapproval/agreement as contemplated by thisCourt to make eligible for the claim ofdeduction under Section 80IA(4) of the Act,which fact was not disputed by the Revenueproving perversity in recording the findingsof fact in relation thereto? Andiii. Whether the Appellate Tribunal iscorrect in not following the earlierdecisions rendered by them in granting suchdeduction for the very same infrastructurefacility namely container freight stationreckoned as port/inland port within thescope of Section 80IA(4) of the Act, whichcompletely defied the principles of judicialdiscipline and rule of consistency?” 4. On a perusal of the common order passed by the Tribunal,we find that the Tribunal remanded the matter to the Assessing Officer to re-examine the issue and find out as to whether theassessee obtained any approval or entered into any agreementwith Government or Government agency as in the case of CIT. Vs.A.L.Logistics Private Limited [TCA.No.1031 of 2014 dated23.12.2014]. 4. On a perusal of the common order passed by the Tribunal,we find that the Tribunal remanded the matter to the Assessing Officer to re-examine the issue and find out as to whether theassessee obtained any approval or entered into any agreementwith Government or Government agency as in the case of CIT. Vs.A.L.Logistics Private Limited [TCA.No.1031 of 2014 dated23.12.2014]. 5. We are at a loss to understand as to how the Tribunalremanded the matter to the Assessing Officer for consideringthis factual issue, since, in the assessee's own case for theearlier assessment years i.e. 2002-03 and 2003-04, the Tribunalaccepted the stand of the assessee in ITA.Nos.825 & 826/Mds/2010 dated 14.6.2011. The Tribunal, in the said order dated14.6.2011, had followed its earlier order in the assessee's owncase for the assessment years 2002-03 to 2005-06. For betterappreciation, the operative portion of the order dated 14.6.2011is quoted as hereunder : “7. We find that the Tribunal, whiledeciding this issue in Assessment Year 2002-03 to 2005-06 has held as under : “We have considered the rival submissionsand the material available on record. Firstof all, we would like to make an observationthat by not following the directions of theIncome-tax Appellate Tribunal which were verywell available before the Assessing Officerat the time when he was giving effect to theCommissioner of Income-tax’s direction, is aserious procedural lapse on his part. Whenthe order of the Commissioner of Income-taxhad already merged with that of the Income-tax Appellate Tribunal, the directions givenby the Commissioner of Income-tax no longersurvived and the Assessing Officer has simplytried to flog a dead horse. His remarks aresimplistic and didactic, which carry nomeaningful result. It was argued by thelearned authorised representative that aftermaking deep investigation, the learnedCommissioner of Income-tax (Appeals) hasfound, similar claim made by the assessee inother years, as a valid claim against whichfinding the Revenue is in appeal againstallowance of travelling expenditure asapportioned to CFS activity. We have seen thecommon order passed by the same learnedCommissioner of Income- tax (Appeals) for theassessment years 2004-05 and 2005-06 datedFebruary 26, 2009, which is also a subjectmatter of appeal before us. In fact, in theseyears, investigation of facts with regard to warehousing charges have been made asdirected by the Hon’ble Income-tax AppellateTribunal in earlier years. The same officerhas found in this regard thus: “3.7 The contentions of the AssessingOfficer and the submission of the appellantwere carefully considered by me. I have alsoconsidered the additional submission of theAssessing Officer sent to me vide his letterdated December 13, 2007 enclosing the ordersof the Commissioner of Income-tax-I, Chennai,passed for the assessment years 2002-03 and2003-04 wherein agreeing with the AssessingOfficer’s action of excluding warehousingincome from CFS income he set aside theassessment of assessment years 2002-03 and2003-04 for excluding the warehousing incomefrom CFS receipts and considering the incomeand expenditure on Numbal plot and director’stravelling expenses after due verification ofthe facts. I have also considered the countersubmission of the authorized representativethereon. Now I proceed to decide the issue asunder. The approving guidelines expect thatadequate warehousing facilities should beprovided by the CFS operator. In fact, thedefinition of CFS means : The approving guidelines expect thatadequate warehousing facilities should beprovided by the CFS operator. In fact, thedefinition of CFS means : ‘Inland container depot (ICD)/containerfreight station (CFS) has been defined as “Acommon user facility with public authoritystatus equipped with fixed installations andoffering services for handling and temporarystorage of import/export laden and emptycontainers carried under customs transit byany applicable mode of transport placed undercustoms control. All the activities relatedto clearance of goods for home use,warehousing temporary admissions, re-export,temporary storage for onward transit andoutright export, trans-shipment, take placefrom such stations”.’ 3.8ThereforetheCFSactivitypresupposes adequate infrastructure towardswarehousing and the income therefrom cannotbe contended as non CFS income. 3.9 The fact that warehousing activityoutside CFS does not qualify for deductionunder section 80-IA by no stretch can be aconsideration for treating the activity inside a notified CFS alike. The activitiesof CFS are completely different from whathappens outside. 3.10 The Government of India, further tothe issuance of its policy guidelinesregarding setting up of inland containerdepot (ICD) and CFS in India has released aset of specific guidelines containing threeparts, viz., part A, part B and part C forthe above purpose. The guidelines essentiallylays down basic conditions one has to complywith in order to set up a CFS and operate thesame. 3.11 Part C of the above guidelinesgoverns the procedure for approval of CFS andits implementation. In terms of the saidpolicy guidelines issued by the Ministry ofCommerce, Government of India the appellant-company made an application and after dueexamination of the application, the Ministryof Commerce, Government of India through itsNotification No. 16/4/95- Infra 1 datedFebruary 23, 1995 has notified the setting upof a container freight station at Numbal bythe appellant-company. The notificationreferred to above clearly stipulates that theconditions given in part A and part B of theguidelines referred to above shall besatisfied and in addition the Notificationhas laid down certain minimum facilitieswhich are required at the CFS. The saidminimum level of facilities required underclause ‘C’ reads as follows: ‘The warehousing facility separately forexports and imports and long-term storage ofbonded cargo.’ Here it is also worthwhile toreproduce the abovementioned notification andminimum level of facilities required forready reference: No. 16/4/95-Infra-1 Government of India, Ministry of Commerce Infra-I Section New Delhi, 23rd February 1995 M/s. A. S. Shipping Agencies Pvt. Ltd.,55, Armenian Street, Madras 600 001. Subject: Application for setting up acontainer freight station at Numbal village,Madras. I am directed to refer to yourapplication dated 9th June, 1994 on the abovesubject and to say that the Government hasapproved your proposal for setting up acontainer freight Station at Numbal village,Madras for handling export cargo only. Theapproval is subject to the following termsand conditions: (i) Proper infrastructure would becreated by you keeping in view the normsgiven in parts A and B of the Guidelines forsetting up inland container depots/containerfreight stations (ICDs/CFSs) and to hesatisfaction of the concerned Collector ofCustoms and Central Excise within a period ofsix months from the date of issue of thisletter. (ii) Necessary bond and guarantees wouldbe executed by you with the concernedCollector of Customs and Central Excise; (iii) The approval would be subject tocancellation in the event of violation of thecustoms and other laws of the land andRules. Yours faithfully, (Sd.) (N. D. Agnihotri), Joint Director. Minimum level of facilities required atICDs/CFSs ‘The following minimum level of (i) Proper infrastructure would becreated by you keeping in view the normsgiven in parts A and B of the Guidelines forsetting up inland container depots/containerfreight stations (ICDs/CFSs) and to hesatisfaction of the concerned Collector ofCustoms and Central Excise within a period ofsix months from the date of issue of thisletter. (ii) Necessary bond and guarantees wouldbe executed by you with the concernedCollector of Customs and Central Excise; (iii) The approval would be subject tocancellation in the event of violation of thecustoms and other laws of the land andRules. Yours faithfully, (Sd.) (N. D. Agnihotri), Joint Director. Minimum level of facilities required atICDs/CFSs ‘The following minimum level of facilities are required to be provided atICDs/CFSs- (a) Provision of standard pavement forheavy duty equipment for use in theoperational and stacking area of theterminal, in case where only chassisoperation is to be performed, the pavementstandard could be limited to that of ahighway. A minimum of 35 per cent of the landarea (provided as per the guidelines - 1 acrefor the Port CFS and 3 acres for ICDs in thehinterland) would be paved. (b) Office building for ICD, customsoffice and a separate block for user agenciesequipped with basic facilities. (c) Warehousing facility, separately forexports and imports and long-term storage ofbonded cargo. (d) Gate complex with separate entry and exit. (e) Adequate parking space for vehiclesawaiting entry to the terminal . . .’3.12 Therefore, if one has to qualify asan eligible container freight stationoperator, one has to provide the minimumlevel of infrastructure as provided in thenotification and as such having adequatewarehousing facility is an essential part ofthe minimum level of infrastructurerequirements. 3.13 Here it may be mentioned that as perpart B of the guidelines for setting upinland container depot (ICD) and containerfreight station (CFS) in India the followinginfrastructure should be available at theICDs/CFS. Provision of standard pavement forheavy duty equipment for use in theoperational and stacking area of theterminal. In cases where only chassisoperation is to be performed, the pavementstandard could be limited to that of ahighway. Office holding for ICD, customsoffice and a separate block for user agenciesequipped with basic facilities. Ware housingfacility, separately for exports and importsand long-term storage of bonded cargo. Gate complex with separate entry andexit. 3.14 Now as can be seen fromthe above notification of Ministry ofCommerce and the Guidelines the approval issubject to the creation of minimum level ofinfrastructure facilities. Hence it is anessential part of the CFS operation businessof the appellant. Further, the Commissionerof Customs has also notified the stipulatedarea as public bonded warehouse vide hisletter dated September 26, 2000. Furthermore,vide Public Notice 173 of 2001 and severalother public notices the warehouse has beenincluded in the customs area. 3.15 Therefore, after a carefulconsideration of the facts and circumstancesof the case, various statutory requirementsand conditional approval of the Ministry ofCommerce I find that the claim of theappellant is allowable. The Assessing Officerhas been wrongly influenced by the fact thatwarehousing facilities may be situatedoutside CFS area also and such warehousing 3.15 Therefore, after a carefulconsideration of the facts and circumstancesof the case, various statutory requirementsand conditional approval of the Ministry ofCommerce I find that the claim of theappellant is allowable. The Assessing Officerhas been wrongly influenced by the fact thatwarehousing facilities may be situatedoutside CFS area also and such warehousing facilities do not get any deduction. TheAssessing Officer is very correct thatwarehousing facilities alone may not get anydeduction but when they are part of CFS as anecessary infrastructure as discussed aboveand such CFSs can come into existence andoperate only if it provides minimuminfrastructure facility as only then sanctionfor the CFS status is granted then suchwarehousing facility is different from thestand alone warehousing facility operatedoutside CFS. In fact, situation is like thatthere can be a warehouse without CFS but nota CFS without warehousing as can be seen fromthe notification pertaining to the appellantwhere it is part of minimum level ofinfrastructure. Hence, in such a situationwarehousing income, in my opinion, has to betreated as part of CFS income and eligiblefor the deduction under Section 80-IA.Therefore, the appellant succeeds on thisground in both the years.”The facts in all the years remained sameand static. The reasons given by the learnedCommissioner of Income-tax (Appeals) in theabove paragraphs to allow this claim of theassessee are sufficient to drive us also tocome to a similar conclusion. Therefore, weallow warehousing income to be a part of CFSincome and hold it eligible for deductionunder section 80-IA. It is found for a factthat warehousing facilities in this case area part of CFS being a necessaryinfrastructure. The notification of theMinistry is very clearly worded in thisrespect. In all these years, this commonissue is allowed in favour of the assesseeand against the Revenue. In the result, boththe appeals of the assessee are allowed.” 6. On a reading of the above order, we find that the Tribunalallowed the warehousing income to be a part of CFS income andheld that the assessee would be eligible for deduction underSection 80IA of the Act. It further observed that thewarehousing facilities in the assessee's case are a part of CFSbeing a necessary infrastructure and that the Notificationissued by the Ministry, Government of India was very clearlyworded in this aspect. 7. It is submitted by the learned counsel for the appellant –that the common order passed by the Tribunal for the assessmentyears namely 2002-03 and 2003-04 dated 14.6.2011 was placedbefore the Tribunal. But, the Tribunal had not adverted to thesame. 8. However, we find that the Tribunal referred to the orderpassed in the assessee's own case for the assessment years 2008-09 and 2009-10 in ITA. Nos.1032 and 1033 of 2013 dated21.11.2013. This observation is found in paragraph 3 of theimpugned common order wherein the Tribunal recorded thesubmissions of the learned counsel for the assessee. However, inthe discussion portion of the impugned common order, we findthat the said decision was not applied by the Tribunal whileremanding the matter to the Assessing Officer. 9. The learned counsel for the appellant – assessee hasrelied upon the decision in the case of A.L.Logistics PrivateLimited. 8. However, we find that the Tribunal referred to the orderpassed in the assessee's own case for the assessment years 2008-09 and 2009-10 in ITA. Nos.1032 and 1033 of 2013 dated21.11.2013. This observation is found in paragraph 3 of theimpugned common order wherein the Tribunal recorded thesubmissions of the learned counsel for the assessee. However, inthe discussion portion of the impugned common order, we findthat the said decision was not applied by the Tribunal whileremanding the matter to the Assessing Officer. 9. The learned counsel for the appellant – assessee hasrelied upon the decision in the case of A.L.Logistics PrivateLimited. 10. In the said decision, it has been held that the containerfreight station was a part of inland port and therefore, theassessee therein was entitled to the infrastructure facility asdefined in the Explanation to Section 80IA(4)(i) of the Act. TheRevenue contended that there was no specific agreement enteredinto by the assessee therein with the Central Government or theState Government or a local authority or any statutory body forbeing entitled to claim the benefit of Section 80IA(4)(i) of theAct. After taking note of the Notification issued by theGovernment of India, Ministry of Commerce and Industry,Department of Commerce Infrastructure Division vide NotificationNo.16/6/2003-Infra-I dated 27.5.2003 and the letter received bythe assessee therein from the Director, it was pointed out thatthe proposal of the assessee therein was accepted by theGovernment on certain conditions, which were duly complied withby the assessee therein and that there may not be any specificagreement, but the sequence of events showed that the assesseewas providing CFS facility in accordance with the conditionslaid down by the Government. Therefore, it was held that therewas no need to insist for specific execution of agreements. TheCourt also referred to the decision of the Tribunal in the caseof United Liner Agencies of India Private Limited Vs. JCIT (OSD)[I.T.A.Nos.273 and 275/Mum/2013 dated 28.6.2013]. 11. In our considered view, the Tribunal ought to haveapplied the decision in the assessee's own case. In any event,since the matter had been sent back to the Assessing Officer, weare not inclined to interfere with the order passed by theTribunal. But, we would like to clarify the following : If the identical issue had arisen in the assessee's own casefor the earlier assessment years and the matter traveled uptothe Tribunal and the assessee had succeeded before the Tribunal(the appeal of the Department was dismissed), then the decisionof the Tribunal is binding on the authorities, which areanterior to that of the Tribunal and obviously, would bind theAssessing Officer. Furthermore, the Tribunal cannot ignore thedecision of a Coordinate Bench unless it distinguishes thedecision on merits or if it disagrees with the view taken by theTribunal and the only option would be to refer the same forconsideration to a Larger Bench. The Tribunal did not do eitherof the options available to it. Furthermore, the Tribunalreferred to the decision in the case of A.L.Logistics PrivateLimited while remanding the matter for a fresh consideration. 12. As pointed out earlier, in the decision in the case ofA.L.Logistics Private Limited, it had been clearly held thatthere was no necessity for specific execution of agreement. 12. As pointed out earlier, in the decision in the case ofA.L.Logistics Private Limited, it had been clearly held thatthere was no necessity for specific execution of agreement. 13. For the above reasons, the above tax case appeals aredisposed of and the matters are remanded to the AssessingOfficer with a direction to the Assessing Officer to apply thedecision of the Tribunal in ITA.Nos.825 & 826/ Mds/2010 dated14.6.2011 and pass fresh orders on merits and in accordance withlaw. In addition, the assessee shall also place before theAssessing Officer, the communications received from theGovernment of India to establish that they are container freightstation as approved by the Government of India. The substantialquestions of law are left open. Consequently, the connected CMPsare closed. No costs. //True Copy// To 1.The Income Tax Appellate Tribunal, Madras 'D' Bench.2.The Deputy Commissioner of Income Tax, Company Circle 1(1),Chennai-34.3.The Deputy Commissioner of Income Tax(Appeals) -I, Chennai -34. +1 cc to M/s.T.Ravikumar, Senior Standing Counsel for Income Tax, Department, Sr.No. 68762 +1 cc to Mr.S.Sridhar, Advocate Sr.No.68785