Container Corporation of India Limited (SC): Inland Customer Depots qualify as 'Inland Port", eligible for Sec 80IA deduction

ISSUE

Whether profits derived from inland container depots can be treated as an infrastructure facility eligible for deduction under section 80-IA.?

FACTS:

1.M/s. Container Corporation of India Ltd. (CONCOR) is a Government company engaged in the business of handling and transportation of containerized cargo.

2.Its operating activities are mainly carried out at its Inland Container Depots (ICDs), Container Freight Stations and Port Side Container Terminals.

3.CONCOR filed its income-tax returns for the relevant assessment years and claimed deduction under various heads including deduction under section 80-IA for profits derived from inland container depots.

4.The claim for deduction on the profits earned from inland container depots was, however, rejected by the AO on the ground that ICDs cannot be said to fall within Explanation (d) of Sec.80-IA(4) defining the term

PROVISION APPLICABLE

1. Section 80-IA provides for a deduction of profits derived from operation of an infrastructure facility.

2. The Finance Act, 2001 substituted section 80-IA(4), consequent to which the definition of “infrastructure facility” in Explanation to section 80-IA(4)(i) included an inland port.

ANALYSIS:

ICDs act as facilitators for custom clearances SC stated that the term port in commercial terms, is a place where vessels are in a habit of loading and unloading goods and the term as also used in the Explanation attached to Sec.80-IA(4) seemed to have maritime connotation. SC stated that the purpose of introducing ICDs was to promote the export and import in the country as these depots acts as a facilitator for person having place of business situated in a land locked area i.e., away from the sea. SC noted that ICDs reduced 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. SC stated that though the nature of work that is performed at ICDs disentitled them to be termed as Ports , the fact that a part of activities that are carried out at ICDs such as custom clearance, the claim of the assessee herein can be considered within the term ‘Inland port’ as is used in the Explanation.

2) Inland Port defined by CBEC Notification includes ICDs SC stated that the term ‘Inland Port’ has not been defined anywhere but the Notification issued by CBEC on April 24, 2007 held that considering the nature of work carried out at these ICDs they can be termed as Inland Ports. Further SC held that the communication dated May 25, 2009 issued on behalf of the Ministry of Commerce and Industry confirm that the ICDs are Inland Ports fortified the claim of the assessee. SC thus remarked that, “Unless shown otherwise, it cannot be held that the term ‘Inland Ports’ is used differently under Section 80-IA of the IT Act.”

3) Considering the nature of work such as custom clearance carried out at inland container depots, it can be considered as an inland port within the meaning of section 80- IA(4). Thus, deduction under section 80-IA can be claimed in respect of income earned therefrom.

CONCLUSION: CONCOR can claim for deduction under Section 80-IA in respect of profits derived from Inland Container Depots