Commissioner of Income Tax, Delhi-1 vs M/s Container Corporation of India Ltd.

2. 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. Section 80 IA (12) (a) 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. 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. 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. 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 80IA(4) of the IT Act as is substituted by the Finance Act, 2001. 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, the Notifications which were issued in legitimate exercise of the power conferred on the Board would not cease to have effect after the Assessment Year 2002-03. [Paras 11, 13, 15, 16, 18] [614-B-D; 615-A-C, D-E; 616-A-C]

3. 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 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. [Para 20] [616-F-G]

4. Now the issue is 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 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 given in Section 2(12) of the Customs Act, 1962, through amendment made 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. 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. 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 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. 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. [Para 22] [617-D-G]