By TIOL News Service

MUMBAI, JULY 26, 2014: THE issues before the Bench are - whether the assessee is also eligible for deduction u/s 80IA on income earned from storage facility taken on rent and transportation income earned from sale of water from jetty to party's place. And the answers go against the assessee.

Facts of the case

The assessee is a wholly owned subsidiary of Hindalco Industries Ltd. The assessee entered into an agreement with Gujarat Maritime Board for development, maintenance and operation of Jetty (Port) at Dahej, Gujarat. The assessee claimed deduction under section 80IA on account of infrastructure development of the port. The AO during the assessment proceedings observed that the assessee had claimed exempt income of Rs.17,97,712/- from sale of water, Rs.51,535/- from storage facility and Rs.44,640/- as transportation charges totaling Rs.18,93,887/-. He observed that the said income did not qualify for deduction under section 80IA because of the fact that the same was neither derived from nor had any connection with the business activity of the assessee of providing infrastructure facility. He further observed that the assessee under the agreement was entitled for doing the landing and shipping activity and only the income from landing and shipping activity was qualified for deduction under section 80IA.

On appeal, the CIT(A) observed that the similar disallowance was confirmed in the case of assessee for assessment year 2008-09 also, confirmed the above disallowance for this year. The CIT(A) held that the said storage facility was not part of the infrastructure facility of the jetty and even the assessee was not owner of the said storage facility but it belonged to M/s. Hindalco Industries Ltd., therefore, upheld the disallowance relating to income of assessee from storage facility. Hence, the present appeal.

On appeal, the Tribunal held that,

++ a perusal of the submissions reveals that so far the income from sale of water is concerned, the same had been earned by the assessee for supply of water to cargo ships for their engine cleaning and other miscellaneous purposes and the same in our view was a part of the activity of operation of the jetty. Similarly, as explained by the assessee, the miscellaneous income had been earned by the assessee from the non regular cargo of other nearby jetty which had been handled at the assessee's jetty for which the assessee had charged them for use of its jetty. Hence, in our view the claim of deduction on account of income from sale of water and miscellaneous income was justified as the same was part of operation and maintenance activity of the assessee at the said jetty;

++ since the storage facility was not a part of the infrastructure facility development by the assessee at the port at Dahej, hence in our view, the assessee was not entitled to claim any deduction in respect of income earned on account of storage facility;

++ so far so, the transportation charges are concerned, the said income had been earned by the assessee for arranging the transportation from the jetty to party's place. The same, in our view, cannot be said to be a part of infrastructure facility development at the jetty.

(See 2014-TIOL-477-ITAT-MUM)