By TIOL News Service

NEW DELHI, MAY 02, 2018: THE ISSUE BEFORE THE BENCH IS - Whether the term 'Inland Port' which has not been defined in the I-T Act, can be disputed to exclude the expression Inland Container Depot. NO IS THE VERDICT.

Facts of the case

The Assessee-company is engaged in the business of handling and transportation of containerized cargo and is under the direct administrative control of Ministry of Railways. For the relevant AY the assessee filed its return and claimed deduction under various heads including deduction u/s 80-IA. However, the claim for deduction on the profits earned from the Inland Container Depots (ICDs) and further the deduction on account of rolling stocks was rejected by the AO. On being aggrieved, the assessee filed an appeal before the CIT(A), which partly allowed the appeal while rejecting the deduction claimed u/s 80-IA. The assessee further filed an appeal before the Tribunal, which again partly allowed the appeal and held that the deduction u/s 80-IA can be claimed with regard to the rolling stocks of the company but not with regard to the ICDs. On further appeal by the assessee, the High Court allowed the appeals and held that the assessee was entitled to claim deduction on the income earned from the ICDs for the relevant period under consideration u/s 80-IA.

On hearing the parties, the Apex Court held that,

++ the ICDs function for the benefit of exporters and importers located in industrial centers which are situated at distance from sea ports. The purpose of introducing them was to promote the export and import in the country as these depots acts as a facilitator and reduce inconvenience to the person who wishes to export or import but place of his business is situated in a land locked area i.e., away from the sea. These depots reduce the inconvenience in import and export in the sense that it reduces the bottlenecks that are arising out of handling and customs formalities that are required to be done at the sea ports by allowing the same to be done at these depots only that are situated near to them. The term ICDs was inserted in 1983 under Section 2(12) of the Customs Act, 1962 which 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 of Excise and Custom(CBEC) to notify which place alone to be considered as Inland Container Depots for the unloading of imported goods and the loading of export goods by Notification in the official Gazette;

++ with the purpose of boosting country's infrastructure and specially the transport infrastructure, the Finance Act, 1995 which came into effect from 01.04.1996 brought an amendment to the provisions of Section 80-IA of the IT Act. Section 80-IA of the IT Act talks about deduction in respect of profits and gains from industrial undertaking or enterprises engaged in the infrastructure development etc. The said amendment for the first time brought a provision under which a percentage of profits derived from the operation of infrastructure facility was allowed a deduction while computing the income of the assessee. A ten years tax concession allowed to the enterprises in accordance with the provisions of the Section subject to fulfillment of conditions given therein, which develops, maintains and operates any new infrastructure facility such as roads, highways, expressways, bridges, airports, ports and rail system or any other public facility of similar nature as notified. The assessee has been held entitled for the benefit of Section 80IA of the IT Act much before the Finance Act, 2001 which came into force on 01.04.2002 and exemption for the period of 10 years cannot be curtailed or denied by any subsequent amendment regarding the eligibility conditions under the period is modified or specific provision is made that the benefit from 01.04.2002 onwards shall only be claimed by the existing eligible units if they fulfill the new conditions;

++ the term port, in commercial terms, is a place where vessels 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 reason why the word airport is found separately in the Explanation. Considering the nature of work that is performed at ICDs, they cannot be termed as Ports. However, taking into consideration the fact that a part of activities that are carried out at ports such as custom clearance are also carried out at these ICDs, the claim of the assessee can be considered within the term 'Inland port' 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 from 13.05.1983;

++ the term 'Inland Port' has been defined nowhere. But the Notification that has been issued by the Central Board of Excise & Customs (CBEC) dated 24.04.2007 in terms holds that considering the nature of work carried out at these ICDs they can be termed as Inland Ports. Further, the communication dated 25.05.2009 issued on behalf of the Ministry of Commerce and Industry confirming that the ICDs are Inland Ports, fortifies the claim of the assessee. Though both the Notification and communication are not binding on CBDT to decide whether ICDs can be termed as Inland Ports within the meaning of Section 80-IA of the IT Act, the Revene is unable to put forward any reasonable explanation as to why these notifications and communication should not be relied to hold ICDs as Inland Ports. Unless shown otherwise, it cannot be held that the term 'Inland Ports' is used differently under Section 80-IA of the IT Act. All these facts taken together clear the position beyond any doubt that the ICDs are Inland Ports and subject to the provisions of the Section and deduction can be claimed for the income earned out of these Depots. However, the actual computation is to be made in accordance with the different Notifications issued by the Customs department with regard to different ICDs located at different places.

(See 2018-TIOL-170-SC-IT)