COMMISSIONER OF INCOME TAX, DELHI-1 versus M/S CONTAINER CORPORATION OF INDIA LTD. on 24 April 2018

COMMISSIONER OF INCOME TAX, DELHI-1

v.

M/S CONTAINER CORPORATION OF INDIA LTD.

(Civil Appeal No. 8900 of 2012)

APRIL 24, 2018

[R. K. AGRAWAL AND ABHAY MANOHAR SAPRE, JJ.]

Income Tax Act, 1961 – s.80-IA – Deduction under s.80-IAon the profits earned from the Inland Container Depots – Held:The ICDs are Inland Ports and are subject to the provisions ofs.80-IA – Deduction can be claimed for the income earned out ofthese Depots – Customs Act, 1962 – s.2(12), 7(1)(aa).

Disposing of the appeals, the Court

HELD: 1. The Inland Container Depots (ICDs) functionfor the benefit of exporters and importers located in industrialcenters which are situated at distance from sea ports. The purposeof introducing them was to promote the export and import in thecountry as these depots acts as a facilitator and reduceinconvenience to the person who wishes to export or import butplace of his business is situated in a land locked area i.e., awayfrom the sea. These depots reduce the inconvenience in importand export in the sense that it reduces the bottlenecks that arearising out of handling and customs formalities that are requiredto be done at the sea ports by allowing the same to be done atthese depots only that are situated near to them. The term ICDswas inserted in 1983 under Section 2(12) of the Customs Act,1962 which defines ‘customs port’ and by the provisions of Section7(1)(aa) of the Customs Act, 1962 power has been given to theCentral Board of Excise and Custom(CBEC) to notify which placealone to be considered as ICDs for the unloading of importedgoods and the loading of export goods. [Para 10][613-F-H;614-A-B]

2. With the purpose of boosting country’s infrastructureand specially the transport infrastructure, the Finance Act, 1995which came into effect from 01.04.1996 brought an amendmentto the provisions of Section 80-IA of the IT Act. Section 80-IA ofthe IT Act talks about deduction in respect of profits and gains

607

A

B

C

DEF

G

H

Afrom industrial undertaking or enterprises engaged in theinfrastructure development etc. The said amendment for the firsttime brought a provision under which a percentage of profitsderived from the operation of infrastructure facility was alloweda deduction while computing the income of the assessee. A tenyears tax concession allowed to the enterprises in accordanceBwith the provisions of the Section subject to fulfillment ofconditions given therein, which develops, maintains and operatesany new infrastructure facility such as roads, highways,expressways, bridges, airports, ports and rail system or any otherpublic facility of similar nature as notified. Section 80 IA (12) (a)Cgives the power to the Board to notify certain other enterpriseswhich can avail the benefit of Section 80-IA of the IT Act, whichdo not fall within any of the specified categories but carries outactivities of similar nature. Further, Central Board of Direct Taxes(CBDT), in exercise of its power under Section 80-IA(12)(ca),vide Notification No.S.O.744(E) dated 01.09.1998 notified ICDsDand CFSs as infrastructure facility. In addition to the above, theFinance Act, 1998, which came into effect on 01.04.1999, made achange in the definition of ‘Infrastructure facility’ as is relevantto the present case. The words ‘Inland water ways and inlandports’ were added in the definition of infrastructure facility. AEnoticeable change was further brought by the Finance Act, 2001,which came into effect from 01.04.2002, in the terms that thepower of the Board to extend the benefit of the said provisionsto any infrastructure facility of similar nature by issuing aNotification was taken away. The new explanation to Section 80-IA(4) of the IT Act as is substituted by the Finance Act, 2001.FThe said amendment is silent with regard to any effect it wouldhave upon the Notifications issued earlier by the Board in dueexercise of its power. Had it been the intention of the legislaturethat the Notifications issued by the Board earlier are of no effectafter 2002-03, it would have had found a place in the saidGamendment. In the absence of the same, the Notifications whichwere issued in legitimate exercise of the power conferred on theBoard would not cease to have effect after the Assessment Year2002-03. [Paras 11, 13, 15, 16, 18] [614-B-D; 615-A-C, D-E;616-A-C]

H

3. The Respondent has been held entitled for the benefitof Section 80IA of the IT Act much before the Finance Act, 2001which came into force on 01.04.2002 and exemption for the periodof 10 years cannot be curtailed or denied by any subsequentamendment regarding the eligibility conditions under the periodis modified or specific provision is made that the benefit from01.04.2002 onwards shall only be claimed by the existing eligibleunits if they fulfill the new conditions. [Para 20] [616-F-G]

4. Now the issue is whether the ICDs can be termed asInland Ports so as to entitle deduction under Section 80-IA ofthe IT Act. The term port, in commercial terms, is a place wherevessels are in a habit of loading and unloading goods. The term‘Port’ as is used in the Explanation attached to Section 80-IA(4)seems to have maritime connotation perhaps that is the reasonwhy the word airport is found separately in the Explanation.Considering the nature of work that is performed at ICDs, theycannot be termed as Ports. However, taking into considerationthe fact that a part of activities that are carried out at ports suchas custom clearance are also carried out at these ICDs, the claimof the respondent can be considered within the term ‘Inland port’as is used in the Explanation. The word ‘Inland Container Depots’was first introduced in the definition of ‘Customs Port’ as is givenin Section 2(12) of the Customs Act, 1962, through amendmentmade by the Finance Act, 1983 with effect from 13.05.1983.[Para 21] [617-A-C]

5. The term ‘Inland Port’ has been defined nowhere. Butthe Notification that has been issued by the Central Board ofExcise & Customs (CBEC) dated 24.04.2007 in terms holds thatconsidering the nature of work carried out at these ICDs theycan be termed as Inland Ports. Further, the communication dated25.05.2009 issued on behalf of the Ministry of Commerce andIndustry confirming that the ICDs are Inland Ports, fortifies theclaim of the respondent. Though both the Notification andcommunication are not binding on CBDT to decide whether ICDscan be termed as Inland Ports within the meaning of Section 80-IAof the IT Act, the appellant is unable to put forward any reasonableexplanation as to why these notifications and communication AB

C

D

E

F

G

H

Ashould not be relied to hold ICDs as Inland Ports. Unless shownotherwise, it cannot be held that the term ‘Inland Ports’ is useddifferently under Section 80-IA of the IT Act. The ICDs are InlandPorts and subject to the provisions of the Section and deductioncan be claimed for the income earned out of these Depots.However, the actual computation is to be made in accordanceBwith the different Notifications issued by the Customs departmentwith regard to different ICDs located at different places.[Para 22] [617-D-G]CIVIL APPELLATE JURISDICTION: Civil Appeal No. 8900of 2012.CFrom the Judgment and Order dated 11.05.2012 of the High Courtof Delhi in ITA Nos. 1411 of 2009, ITA Nos. 967 and 968 of 2011

WITH

C. A. No. 8901 of 2012, C. A. No. 4409 of 2014, C. A. Nos. 4983Dand 8546 of 2015, C. A. Nos. 66, 6411, 8034, 6982, 6635, 9651, 7211,7210, 7209, 8033, 8032, 10336, 8755, 9158, 9157, 8352, 9159, 10307,9744, 9743, 10308, 10662, 11709 of 2017, C.A. Nos. 1441, 4458, 4459,5571, 5573, 6800, 11075, 9364, 9487, 9277, 10236, 14900, 16162, 11202,15028, 11117, 15033, 11160, 15494, 15497, 17315, 17534, 17317, 17318,E18272, 19491, 19535, 19935 of 2017, C. A. Nos. 4487, 4543, 4484,4493-4494, 4499, 4548, 4547, 4655 and 4645 of 2018.

K. Radhakrishnan, Rakesh Dwivedi, S. K. Bagaria, PercyPardiwala, Jehagir Mistry, Sr. Advs., Sanjai Kumar Pathak, Arijit Prasad,Zoheb Hossain, Tara Chandra Sharma, Rupesh Kumar, D.L. Chidananda,Ms. Sadhna Sandhu, Ms. Gargi Khanna, Ms. Niranjana Singh, Mrs. AnilFKatiyar, Kaushik Poddar, Ms. Isha Singh, Ms. Snehil Sonam, PreeteshKapur, Sanjay Kapur, Ms. Megha Karnwal, Ms. Shubhra Kapur, I. P.Bansal, Vivek Bansal, Aneesh Mittal, Siddarth Bhatnagar, DebmalyaBanerjee, Kartik Bhatnagar, Manish Sharma, A.S. Aman,M/s. Karanjawala & Co., Praveen Swarup, Dr. Rakesh Gupta,GMs. Monika Ghai, Mrs. Shyamalima Borah, Ambhoj Kumar Sinha, SalilAgarwal, Bhargava V. Desai, Akshat Malpani, Rameshwar Prasad Goyal,V. Ramasubramanian, A. Lakshminarayanan, Sunny Choudhary,Dr. Shashwat Bajpai, Sharad Agarwal, Nipun Sharma, S. Krishnan,Bikash Chandra, Inder Mohan Singh, Mrs. Rani Chhabra, K. Gandhi, H

Ms. Srishti Singh, Rajeev, Vijay Kumar, Farman Ali, Ravi Prakash, RaheelKohli, M/s D.S.K. Legal, Ranjit B. Raut, Ms. Surbhi Kapoor,Mrs. Bina Gupta, Ninad Laud, Karan Mathur, Anjuman Tripathy, IvoD’Costa, Jayant Mohan, S. Vasudevan, Mahendra Singh, Saurabh Sood,Aditya Bhattacharya, Victor Das, Punit Dutt Tyagi, S. Vasudevan, DhruvMehta, Ms. Nupur Maheshwari, M. P. Devanath, Ms. Kavita Jha, VaibhavKulkarni, Praveen Swarup, Ms. Archana Pathak Dave, Ms. AnkitaChaudhary, Advs. for the appearing parties.

The Judgment of the Court was delivered by

R. K. AGRAWAL, J. 1. Leave granted.

2. The present appeal has been filed against the judgment andorder dated 11.05.2012 passed by the High Court of Delhi in ITANos.1411 of 2009, ITA Nos. 967 and 968 of 2011 wherein the DivisionBench of the High Court while allowing the above appeals filed by therespondent herein set aside the order dated 27.02.2009 passed by theIncome Tax Appellate Tribunal (in short ‘the Tribunal’) holding that therespondent herein is entitled to claim the benefit of Section 80-IA of theIncome Tax Act,1961(in short ‘the IT Act’).

3. Brief facts:

(a) M/s Container Corporation of India Ltd. (CONCOR)-therespondent herein is a government Company and is engaged in thebusiness of handling and transportation of containerized cargo and isunder the direct administrative control of Ministry of Railways. Itsoperating activities are mainly carried out at its Inland Container Depots(ICDs), Container Freight Stations (CFSs) and Port Side ContainerTerminals (PSCTs) spread all over the country.

(b) The issue in the present case pertains to the assessment year2003-04 to 2005-06. The respondent herein filed the returns on the incomefor all these years and claimed deduction under various heads includingdeduction under Section 80-IA of the IT Act. This issue is with regard tothe deduction claimed under Section 80-IA on the profits earned fromthe Inland Container Depots (ICDs) and on rolling stocks. The claim fordeduction on the profits earned from the ICDs and further the deductionon account of rolling stocks has been rejected by the Assessing Officervide Assessment Order dated 28.02.2006.

AB

CD

E

F

G

H

A

A(c) The respondent herein, being aggrieved with the aforesaidorder, filed an appeal being No. 325/05-06 to the Commissioner of IncomeTax (Appeals)-VI, New Delhi. Learned CIT (Appeals), vide order dated29.05.2007, partly allowed the appeal while rejecting the deductionclaimed under Section 80-IA of the IT Act. Being aggrieved, therespondent herein further preferred ITA Nos. 2851 & 3680/DEL./2007,B2753 & 4477/DEL/2007 before the Tribunal. The Tribunal, vide orderdated 27.02.2009, partly allowed the appeal and held that the deductionunder Section 80-IA can be claimed with regard to the rolling stocks ofthe company but not with regard to the ICDs.

(d) Being aggrieved by the order dated 27.02.2009, the respondentCherein challenged the same before the High Court by filing three IncomeTax Appeals being Nos. 967 of 2011, 1411 of 2009 and 968 of 2011. TheDivision Bench of the High Court, vide judgment and order dated11.05.2012, allowed the appeals and held that the Respondent herein isentitled to claim deduction on the income earned from the ICDs for theDrelevant period under consideration under Section 80-IA of the IT Act.Being aggrieved by the judgment and order dated 11.05.2012, the Revenuehas preferred this appeal before this Court.

4. Heard learned senior counsel for the parties and perused thefactual matrix of the case.

E

Points for consideration:-

5. The only point for consideration before this Court is whether inthe facts and circumstances of the case the Inland Container Depots(ICDs) under the control of the Respondent, during the relevant period,qualified for deduction under Section 80-IA(4) of the IT Act or not.

F

Rival contentions:-

6. Learned senior counsel appearing for the appellant contendedthat the High Court was not right in holding that the Respondent is entitledto deduction under Section 80-IA of the IT Act as the activities undertakenby the assessee cannot be said to fall within Explanation (d) of SectionG80-IA(4) defining the term infrastructure facility.

7. Learned senior counsel further contended that the High Courtwas wrong in placing reliance on the Notification dated 01.09.1998 issuedby the Central Board of Direct Taxes (CBDT) to hold that the Respondent H

is allowed to claim deduction under Section 80-IA of the IT Act as thepower of the said Board was taken away by the Finance Act, 2001 witheffect from 01.04.2002. Learned senior counsel further contended thatin view of the aforesaid amendment, the Notifications issued by theCBDT with regard to treating the ICDs as infrastructure facility wereapplicable only upto the Assessment Year 2002-03.

8. Learned senior counsel finally contended that the ICDs cannotbe termed as ports or inland ports within the meaning of Section 80-IA(4) so as to allow them to claim deduction under the said Section andthe judgment rendered by the High Court is erroneous in the eyes of thelaw and is liable to be set aside.

9. Per contra, learned senior counsel appearing for the Respondentcontended that the High Court has rightly set aside the judgment andorder dated 27.02.2009 passed by the Tribunal. Learned senior counselfurther contended that once the ICDs have been notified validly by theCBDT, by virtue of the powers conferred upon them, the fact that at alater point of time the power was taken away does not put an end to thevalidity or effect of the notification and as per the relevant Section as itstood at the time when the notification was issued, the Respondent waseligible for deduction for a period of 10 successive assessment yearswhich covers the Assessment Years 2003-04 to 2005-06 which are theyears under appeal. Learned senior counsel finally contended that thejudgment and order passed by the High Court does not call for anyinterference.

Discussion:

10. As the whole point in dispute revolves around the ICDs, itwould be appropriate to have an understanding about the same. TheICDs function for the benefit of exporters and importers located inindustrial centers which are situated at distance from sea ports. Thepurpose of introducing them was to promote the export and import in thecountry as these depots acts as a facilitator and reduce inconvenienceto the person who wishes to export or import but place of his business issituated in a land locked area i.e., away from the sea. These depotsreduce the inconvenience in import and export in the sense that it reducesthe bottlenecks that are arising out of handling and customs formalitiesthat are required to be done at the sea ports by allowing the same to be A

B

C

D

E

FG

H

A

B

C

D

E

FG

H

Adone at these depots only that are situated near to them. The term ICDswas inserted in 1983 under Section 2(12) of the Customs Act, 1962which defines ‘customs port’ and by the provisions of Section 7(1)(aa)of the Customs Act,1962 power has been given to the Central Board ofExcise and Custom(CBEC) to notify which place alone to be consideredas Inland Container Depots for the unloading of imported goods and theBloading of export goods by Notification in the official Gazette.

11. With the purpose of boosting country’s infrastructure andspecially the transport infrastructure, the Finance Act, 1995 which cameinto effect from 01.04.1996 brought an amendment to the provisions ofSection 80-IA of the IT Act. Section 80-IA of the IT Act talks aboutCdeduction in respect of profits and gains from industrial undertaking orenterprises engaged in the infrastructure development etc. The saidamendment for the first time brought a provision under which a percentageof profits derived from the operation of infrastructure facility was alloweda deduction while computing the income of the assessee. A ten yearsDtax concession allowed to the enterprises in accordance with theprovisions of the Section subject to fulfillment of conditions given therein,which develops, maintains and operates any new infrastructure facilitysuch as roads, highways, expressways, bridges, airports, ports and railsystem or any other public facility of similar nature as notified.

E12. The relevant portion of Section 80IA (as it stood then) readsas under:

“Section 80-IA(4A):This section applies to:—

any enterprise carrying on the business of developing, maintainingand operating any infrastructure facility which fulfills the followingconditions, viz.,FSection 80-IA(5) clause(ia): in the case of enterprise referred toin sub-section (4A) hundred percent of profits and gains derivedfrom such business for the initial five assessment years andthereafter thirty per cent of such profits and gains.”

13. The term infrastructure facility had also been defined whichGat the relevant time stood as follows:- “Section 80-IA(12)(ca): Infrastructure facility means:- a road, highway, bridge, airport, port or rail system or any otherpublic facility of similar nature as may be notified by the Board inthis behalf in Official Gazette;”H

The said provision gives the power to the Board to notify certainother enterprises which can avail the benefit of Section 80-IA of the ITAct, which do not fall within any of the specified categories but carriesout activities of similar nature.

14. Further, Central Board of Direct Taxes (CBDT), in exerciseof its power under Section 80-IA(12)(ca), vide NotificationNo.S.O.744(E) dated 01.09.1998 notified ICDs and CFSs as infrastructurefacility.

15. In addition to the above, the Finance Act, 1998, which cameinto effect on 01.04.1999, made a change in the definition of‘Infrastructure facility’ as is relevant to the present case. The words‘Inland water ways and inland ports’ were added in the definition ofinfrastructure facility. Now, the definition reads as under:

“Infrastructure Facility means road, bridge, airport, port, inlandwaterways and inland ports, rail system by any other public facilityof similar nature as may be notified by the Board in this behalf inofficial Gazette.”

16. A noticeable change was further brought by the Finance Act,2001, which came into effect from 01.04.2002, in the terms that thepower of the Board to extend the benefit of the said provisions to anyinfrastructure facility of similar nature by issuing a Notification was takenaway. The new explanation to Section 80-IA(4) of the IT Act as issubstituted by the Finance Act, 2001 reads as under:

For the purpose of this clause “infrastructure facility” means- (a) a road including toll road, a bridge or a rail system; (b) a highway project including housing or other activities beingan integral part of the highway project;

(c) a water supply project, water treatment system, irrigationproject, sanitation and sewerage system or solid wastemanagement system;

(d) a port, airport, inland waterways or inland port;

17. It was contended on behalf of the appellant that the HighCourt erred in relying on the Notification issued by CBDT to hold thatthe enterprises holding ICDs are allowed to claim deductions under Section80-IA of the IT Act. As the said power of the Board was specificallytaken away by the amendment made by Finance Act, 2001, in light of A

B

C

D

E

F

G

H

Athe said amendment, the Notifications which were issued by the CBDTwould cease to operate after the Assessment Year 2002-03.

18. The argument put forward by learned senior counsel for theappellant does not have much force as the said amendment is silent withregard to any effect it would have upon the Notifications issued earlierBby the Board in due exercise of its power. Had it been the intention ofthe legislature that the Notifications issued by the Board earlier are ofno effect after 2002-03, it would have had found a place in the saidamendment. In the absence of the same, we are unable to concur withlearned senior counsel that the Notifications which were issued inlegitimate exercise of the power conferred on the Board would cease toChave effect after the Assessment Year 2002-03.

19. Learned senior counsel for the appellant contended that theHigh Court committed a grave error in holding ICDs as Inland Ports. Itwas further contended that the ICDs are never understood to fall in thecategory of ‘Inland Port’ under the scheme of the IT Act. The argumentDin support of this contention is that if the word ‘Inland Port’, as used inthe Explanation attached to Section 80-IA(4) of the IT Act defining‘infrastructure facility’ includes ICDs, there would have been no needfor the CBDT to separately exercise its power given under the saidSection, as it stood then, to notify it as infrastructure facility. However,Ethe argument does not hold much weight behind it as the Notificationwhich was issued by the CBDT came into effect on 01.09.1998 i.e., thetime when the term ‘Inland Port’ was not in itself inserted in the provisionsof Explanation attached to Section 80-IA(4) of the IT Act defining theterm ‘infrastructure facility’. It was inserted through Finance Act, 1998which came into effect from 01.04.1999. So there seems to be no conflictFwithin the Notification issued by the Board and the fact that the ICDsare Inland Ports or not.

20. Moreover, we find that the Respondent has been held entitledfor the benefit of Section 80IA of the IT Act much before the FinanceAct, 2001 which came into force on 01.04.2002 and exemption for theGperiod of 10 years cannot be curtailed or denied by any subsequentamendment regarding the eligibility conditions under the period is modifiedor specific provision is made that the benefit from 01.04.2002 onwardsshall only be claimed by the existing eligible units if they fulfill the newconditions.

H

21. Moving further to the issue whether the ICDs can be termedas Inland Ports so as to entitle deduction under Section 80-IA of the ITAct. The term port, in commercial terms, is a place where vessels are ina habit of loading and unloading goods. The term ‘Port’ as is used in theExplanation attached to Section 80-IA(4) seems to have maritimeconnotation perhaps that is the reason why the word airport is foundseparately in the Explanation. Considering the nature of work that isperformed at ICDs, they cannot be termed as Ports. However, takinginto consideration the fact that a part of activities that are carried out atports such as custom clearance are also carried out at these ICDs, theclaim of the respondent herein can be considered within the term ‘Inlandport’ as is used in the Explanation. It is significant to note that the word‘Inland Container Depots’ was first introduced in the definition of‘Customs Port’ as is given in Section 2(12) of the Customs Act, 1962,through amendment made by the Finance Act, 1983 with effect from13.05.1983.

22. The term ‘Inland Port’ has been defined nowhere. But theNotification that has been issued by the Central Board of Excise &Customs (CBEC) dated 24.04.2007 in terms holds that considering thenature of work carried out at these ICDs they can be termed as InlandPorts. Further, the communication dated 25.05.2009 issued on behalf ofthe Ministry of Commerce and Industry confirming that the ICDs areInland Ports, fortifies the claim of the respondent herein. Though boththe Notification and communication are not binding on CBDT to decidewhether ICDs can be termed as Inland Ports within the meaning ofSection 80-IA of the IT Act, the appellant herein is unable to put forwardany reasonable explanation as to why these notifications andcommunication should not be relied to hold ICDs as Inland Ports. Unlessshown otherwise, it cannot be held that the term ‘Inland Ports’ is useddifferently under Section 80-IA of the IT Act. All these facts takentogether clear the position beyond any doubt that the ICDs are InlandPorts and subject to the provisions of the Section and deduction can beclaimed for the income earned out of these Depots. However, the actualcomputation is to be made in accordance with the different Notificationsissued by the Customs department with regard to different ICDs locatedat different places.

AB

C

DE

F

G

A23. In light of the forgoing discussion, we are of the view thatjudgment of the High Court does not call for any interference and, hence,the appeal is accordingly dismissed. All the connected appeals aredisposed of accordingly. The parties to bear cost on their own.

B

Devika Gujral

Appeals disposed of.

C

D

E

F

G

H