Commissioner of Income Tax, Delhi-I vs M/S. Container Corporation of India Ltd.

Commissioner of Income Tax, Delhi-1 …..Appellant(s)

Versus

M/s Container Corporation of India Ltd. …..Respondent(s)

WITH

CIVIL APPEAL No. 8901 of 2012 CIVIL APPEAL No. 4409 of 2014 CIVIL APPEAL No. 4983 of 2015 CIVIL APPEAL No. 8546 of 2015 CIVIL APPEAL No. 66 of 2016 CIVIL APPEAL No. 6407 of 2016 CIVIL APPEAL No. 6411 of 2016 CIVIL APPEAL No. 8034 of 2016 CIVIL APPEAL No. 6982 of 2016 CIVIL APPEAL No. 6635 of 2016 CIVIL APPEAL No. 9651 of 2016 CIVIL APPEAL No. 7211 of 2016 CIVIL APPEAL No. 7210 of 2016 CIVIL APPEAL No. 7209 of 2016 CIVIL APPEAL No. 8033 of 2016 CIVIL APPEAL No. 8032 of 2016 CIVIL APPEAL No. 10336 of 2016 Signature Not Verified CIVIL APPEAL NO. 4487 OF 2018 Digitally signed by ASHA SUNDRIYAL Date: 2018.05.01 (Arising out of Special Leave Petition (C) No. 24512 OF 2016) 17:52:46 IST Reason:

CIVIL APPEAL No. 8755 of 2016 CIVIL APPEAL No. 9158 of 2016 1 CIVIL APPEAL No. 9157 of 2016 CIVIL APPEAL No. 8352 of 2016 CIVIL APPEAL No. 9159 of 2016 CIVIL APPEAL No. 10307 of 2016 CIVIL APPEAL No. 9744 of 2016 CIVIL APPEAL No. 9743 of 2016 CIVIL APPEAL No. 10308 of 2016 CIVIL APPEAL NO. 4543 OF 2018 (Arising out of Special Leave Petition (C) No. 30630 OF 2016)

CIVIL APPEAL No. 10662 of 2016 CIVIL APPEAL No. 11709 of 2016

CIVIL APPEAL (C) NO. 4484 OF 2018 (Arising out of Special Leave Petition (C) No.1106 OF 2018 @ SLP(C)... (CC) No. 3354 OF 2017)

CIVIL APPEAL No. 1441 of 2017 CIVIL APPEAL No. 4458 of 2017 CIVIL APPEAL NOs. 4493-4494 OF 2018 (Arising out of Special Leave Petition (C) Nos. 17056-17057 OF 2017)

CIVIL APPEAL No. 4459 of 2017 CIVIL APPEAL No. 5571 of 2017 CIVIL APPEAL No. 5573 of 2017 CIVIL APPEAL No. 6800 of 2017 CIVIL APPEAL No. 11075 of 2017 CIVIL APPEAL NO. 4499 OF 2018 (Arising out of Special Leave Petition (C) No. 18849 OF 2017)

CIVIL APPEAL No. 9364 of 2017 CIVIL APPEAL No. 9487 of 2017 CIVIL APPEAL No. 9277 of 2017 CIVIL APPEAL No. 10236 of 2017

2 CIVIL APPEAL No. 14900 of 2017 CIVIL APPEAL No. 16162 of 2017 CIVIL APPEAL No. 11202 of 2017 CIVIL APPEAL NO. 4548 OF 2018 (Arising out of Special Leave Petition (C) No. 23116 OF 2017)

CIVIL APPEAL No. 15028 of 2017 CIVIL APPEAL No. 11117 of 2017 CIVIL APPEAL No. 15033 of 2017 CIVIL APPEAL No. 11160 of 2017 CIVIL APPEAL NO. 4547 OF 2018 (Arising out of Special Leave Petition (C) No. 23115 OF 2017)

CIVIL APPEAL No. 15494 of 2017 CIVIL APPEAL No. 15497 of 2017 CIVIL APPEAL No. 17315 of 2017

CIVIL APPEAL NO. 4655 OF 2018 (Arising out of Special Leave Petition (C) No. 11535 OF 2018) (DIARY NO. (s) 26081 of 2017)

CIVIL APPEAL No. 17534 of 2017 CIVIL APPEAL No. 17317 of 2017 CIVIL APPEAL No. 17318 of 2017 CIVIL APPEAL No. 18272 of 2017 CIVIL APPEAL No. 17986 of 2017 CIVIL APPEAL No. 18011 of 2017 CIVIL APPEAL No. 19491 of 2017

3 CIVIL APPEAL No. 19535 of 2017 CIVIL APPEAL No. 19935 of 2017

CIVIL APPEAL NO. 4645 OF 2018 (Arising out of Special Leave Petition (C) No. 32825 OF 2017) WITH CIVIL APPEAL No. 20850 OF 2017 CIVIL APPEAL No. 20851 of 2017

JUDGMENT

R.K.Agrawal, J.

1) Leave granted.

2) The present appeal has been filed against the judgment

and order dated 11.05.2012 passed by the High Court of Delhi

in ITA Nos.1411 of 2009, ITA Nos. 967 and 968 of 2011

wherein the Division Bench of the High Court while allowing

the above appeals filed by the respondent herein set aside the

order dated 27.02.2009 passed by the Income Tax Appellate

Tribunal (in short ‘the Tribunal’) holding that the respondent

herein is entitled to claim the benefit of Section 80-IA of the

Income Tax Act,1961(in short ‘the IT Act’).

4

3) Brief facts:

(a) M/s Container Corporation of India Ltd. (CONCOR)-the

respondent herein is a government Company and is engaged

in the business of handling and transportation of

containerized cargo and is under the direct administrative

control of Ministry of Railways. Its operating activities are

mainly carried out at its Inland Container Depots (ICDs),

Container Freight Stations (CFSs) and Port Side Container

Terminals (PSCTs) spread all over the country.

(b) The issue in the present case pertains to the assessment

year 2003-04 to 2005-06. The respondent herein filed the

returns on the income for all these years and claimed

deduction under various heads including deduction under

Section 80-IA of the IT Act. This issue is with regard to the

deduction claimed under Section 80-IA on the profits earned

from the Inland Container Depots (ICDs) and on rolling stocks.

The claim for deduction on the profits earned from the ICDs

and further the deduction on account of rolling stocks has

been rejected by the Assessing Officer vide Assessment Order

dated 28.02.2006.

5

(c) The respondent herein, being aggrieved with the

aforesaid order, filed an appeal being No. 325/05-06 to the

Commissioner of Income Tax (Appeals)-VI, New Delhi. Learned

CIT (Appeals), vide order dated 29.05.2007, partly allowed the

appeal while rejecting the deduction claimed under Section

80-IA of the IT Act. Being aggrieved, the respondent herein

further preferred ITA Nos. 2851 & 3680/DEL./2007, 2753 &

4477/DEL/2007 before the Tribunal. The Tribunal, vide order

dated 27.02.2009, partly allowed the appeal and held that the

deduction under Section 80-IA can be claimed with regard to

the rolling stocks of the company but not with regard to the

ICDs.

(d) Being aggrieved by the order dated 27.02.2009, the

respondent herein challenged the same before the High Court

by filing three Income Tax Appeals being Nos. 967 of 2011,

1411 of 2009 and 968 of 2011. The Division Bench of the High

Court, vide judgment and order dated 11.05.2012, allowed the

appeals and held that the Respondent herein is entitled to

claim deduction on the income earned from the ICDs for the

relevant period under consideration under Section 80-IA of the

6 IT Act. Being aggrieved by the judgment and order dated

11.05.2012, the Revenue has preferred this appeal before this

Court.

4) Heard learned senior counsel for the parties and perused

the factual matrix of the case.

Points for consideration:-

5) The only point for consideration before this Court is

whether in the 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.

Rival contentions:-

6) Learned senior counsel appearing for the appellant

contended that the High Court was not right in holding that

the Respondent is entitled to deduction under Section 80-IA of

the IT Act as the activities undertaken by the assessee cannot

be said to fall within Explanation (d) of Section 80-IA(4)

defining the term infrastructure facility.

7) Learned senior counsel further contended that the High

Court was wrong in placing reliance on the Notification dated

7 01.09.1998 issued by the Central Board of Direct Taxes

(CBDT) to hold that the Respondent is allowed to claim

deduction under Section 80-IA of the IT Act as the power of

the said Board was taken away by the Finance Act, 2001 with

effect from 01.04.2002. Learned senior counsel further

contended that in view of the aforesaid amendment, the

Notifications issued by the CBDT with regard to treating the

ICDs as infrastructure facility were applicable only upto the

Assessment Year 2002-03.

8) Learned senior counsel finally contended that the ICDs

cannot be 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 and the judgment rendered by the High

Court is erroneous in the eyes of the law and is liable to be set

aside.

9) Per contra, learned senior counsel appearing for the

Respondent contended that the High Court has rightly set

aside the judgment and order dated 27.02.2009 passed by the

Tribunal. Learned senior counsel further contended that once

the ICDs have been notified validly by the CBDT, by virtue of

8 the powers conferred upon them, the fact that at a later point

of time the power was taken away does not put an end to the

validity or effect of the notification and as per the relevant

Section as it stood at the time when the notification was

issued, the Respondent was eligible for deduction for a period

of 10 successive assessment years which covers the

Assessment Years 2003-04 to 2005-06 which are the years

under appeal. Learned senior counsel finally contended that

the judgment and order passed by the High Court does not

call for any interference.

Discussion:

10) As the whole point in dispute revolves around the ICDs,

it would be appropriate to have an understanding about the

same. 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

9 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.

11) 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

10 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.

12) The relevant portion of Section 80IA (as it stood then)

reads as under:

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

any enterprise carrying on the business of developing, maintaining and operating any infrastructure facility which fulfills the following conditions, viz.,

Section 80-IA(5) clause(ia): in the case of enterprise referred to in sub-section (4A) hundred percent of profits and gains derived from such business for the initial five assessment years and thereafter thirty per cent of such profits and gains.”

11

13) The term infrastructure facility had also been defined

which at 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 other public facility of similar nature as may be notified by the Board in this behalf in Official Gazette;”

The said provision gives the power to the Board to notify

certain other enterprises which can avail the benefit of Section

80-IA of the IT Act, which do not fall within any of the specified

categories but carries out activities of similar nature.

14) 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 ICDs and

CFSs as infrastructure facility.

15) In addition to the above, the Finance Act, 1998, which

came into 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 of infrastructure facility. Now, the

definition reads as under:

12

“Infrastructure Facility means road, bridge, airport, port, inland waterways and inland ports, rail system by any other public facility of similar nature as may be notified by the Board in this behalf in official 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 the power of the Board to extend the benefit of the

said provisions to any infrastructure facility of similar nature

by issuing a Notification was taken away. The new explanation

to Section 80-IA(4) of the IT Act as is substituted 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 being an integral part of the highway project;

(c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system;

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

17) It was contended on behalf of the appellant that the High

Court erred in relying on the Notification issued by CBDT to

hold that the enterprises holding ICDs are allowed to claim

deductions under Section 80-IA of the IT Act. As the said

power of the Board was specifically taken away by the

amendment made by Finance Act, 2001, in light of the said

13 amendment, the Notifications which were issued by the CBDT

would cease to operate after the Assessment Year 2002-03.

18) The argument put forward by learned senior counsel for

the appellant does not have much force as the said

amendment is silent with regard to any effect it would have

upon the Notifications issued earlier by the Board in due

exercise of its power. Had it been the intention of the

legislature that the Notifications issued by the Board earlier

are of no effect after 2002-03, it would have had found a place

in the said amendment. In the absence of the same, we are

unable to concur with learned senior counsel that the

Notifications which were issued in legitimate exercise of the

power conferred on the Board would cease to have effect after

the Assessment Year 2002-03.

19) Learned senior counsel for the appellant contended that

the High Court committed a grave error in holding ICDs as

Inland Ports. It was further contended that the ICDs are never

understood to fall in the category of ‘Inland Port’ under the

scheme of the IT Act. The argument in support of this

contention is that if the word ‘Inland Port’, as used in the

14 Explanation attached to Section 80-IA(4) of the IT Act defining

‘infrastructure facility’ includes ICDs, there would have been

no need for the CBDT to separately exercise its power given

under the said Section, as it stood then, to notify it as

infrastructure facility. However, the argument does not hold

much weight behind it as the Notification which was issued by

the CBDT came into effect on 01.09.1998 i.e., the time when

the term ‘Inland Port’ was not in itself inserted in the

provisions of Explanation attached to Section 80-IA(4) of the IT

Act defining the term ‘infrastructure facility’. It was inserted

through Finance Act, 1998 which came into effect from

01.04.1999. So there seems to be no conflict within the

Notification issued by the Board and the fact that the ICDs are

Inland Ports or not.

20) Moreover, we find that the Respondent 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

15 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.

21) Moving further to the issue whether the ICDs can be

termed as Inland Ports so as to entitle deduction under

Section 80-IA of the IT Act. 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

respondent herein 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

16 Customs Act, 1962, through amendment made by the Finance

Act, 1983 with effect from 13.05.1983.

22) 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 respondent herein.

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 appellant herein 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

17 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.

23) In light of the forgoing discussion, we are of the view that

judgment of the High Court does not call for any interference

and, hence, the appeal is accordingly dismissed. All the

connected appeals are disposed of accordingly. The parties to

bear cost on their own.

…….....…………………………………J. (R.K. AGRAWAL)

…….…………….………………………J. (ABHAY MANOHAR SAPRE)

NEW DELHI;

APRIL 24, 2018.

18