Income Tax Appellate Tribunal - Rajkot
Friends O8Il & Chemicals Terminals Pvt. ... vs The Assistant Commissioner Of Income ... on 7 December, 2018
Friends Oil & Chemical Terminal Pvt. Ltd. v. ACIT-Gandhidham/I.T.A. No.936/RJT/2010/A.Y.06-07 & 279/RJT/2013 /A.Y. 08-09 & Friends Salt Works & Allied industries v. ACIT- Gandhidham /I.T.A.No. 278/RJT/2013/A.Y. 08-09 Page 1 of 23 आयकर अपीलीय अिधकरण, राजकोट यायपीठ,राजकोट IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT ीसी.एम.गग, याियकसद यतथा ीओ.पी.मीना, लेखासद यके सम BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER आ.अ.सं ./I.T.A. No.936/RJT/2010 िनधारणवष/Assessment Year : 2006-07 Appellant V. Respondent M/s. Friends Oil & Chemical Assistant Commissioner of Terminals Pvt. Ltd. Income Tax, Circle-
Plot No.18 Sector No. 8 Gandhidham.
Gandhidham- Kutch.
PAN: AAACF 3177 A]
आ.अ.सं./I.T.A. No.279/RJT/2013
िनधारणवष/Assessment Year : 2008-09
Appellant V. Respondent
M/s. Friends Oil & Chemical Assistant Commissioner of
Terminals Pvt. Ltd. Income Tax, Circle-
Plot No.18 Sector No. 8 Gandhidham.
Gandhidham- Kutch.
[PAN: AAACF 3177 A]
आ.अ.सं./I.T.A. No.278/RJT/2013
िनधारणवष/Assessment Year : 2008-09
Appellant V. Respondent
M/s. Friends Salt Works & Allied Assistant Commissioner of
Industries, Income Tax, Circle-
Plot No.18, Sector No. 8, Gandhidham.
Gandhidham- Kutch.
[PAN: AAACF 2067 N]
िनधा रतीक ओरसे /Assessee by: Shri K. C. Thakkar and
Shri Manish Vora AR`s
राज वक ओरसे /Revenue by Shri Praveen Verma - Sr.DR
सुनवाईक तारीख/ Date of hearing: 28.11.2018
उ ोषणाक तारीख/Pronouncement on 07.12.2018
Friends Oil & Chemical Terminal Pvt. Ltd. v. ACIT-Gandhidham/I.T.A. No.936/RJT/2010/A.Y.06-07 & 279/RJT/2013 /A.Y. 08-09 & Friends Salt Works & Allied industries v. ACIT- Gandhidham /I.T.A.No. 278/RJT/2013/A.Y. 08-09 Page 2 of 23 आदेश /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER:
1. Two appeals are filed by M/s. Friends Oil & Chemical Terminals Pvt. Ltd. which are directed against the separate orders of learned Commissioner of Income tax (Appeals)-II Rajkot [in short CIT(A)] dated 26.02.2010 and 25.03.2013 for the Assessment Year 2006-07 and 2008-09 respectively.
2. Third appeal is filed by M/s. Friends Salts Works & Allied Industries against the order of Ld. CIT (A)-II Rajkot dtd 25.03.2013 for the assessment year 2008-09.
3. Since the issue involved in these three appeals are identical hence, these were heard together and being disposed-off by this common order for the sake of brevity and convenience.
I.T.A.No. 936/RJT/2010/A.Y. 2006-07: By M/s. Friends Oil & Chemical Terminals Pvt. Ltd.:
4. Ground no. 1 states that the Ld. CIT (A) and the AO has erred in law and on facts in treating storage tanks as building and restricting depreciation allowable thereon @10% instead of 15% as Friends Oil & Chemical Terminal Pvt. Ltd. v. ACIT-Gandhidham/I.T.A. No.936/RJT/2010/A.Y.06-07 & 279/RJT/2013 /A.Y. 08-09 & Friends Salt Works & Allied industries v. ACIT- Gandhidham /I.T.A.No. 278/RJT/2013/A.Y. 08-09 Page 3 of 23 claimed by the Appellant by treating the storage tank as Plant and Machinery.
5. Succinctly, facts as culled out from the orders of lower authorities are that the assessee is engaged in the business of storage of edible oil, petroleum products, chemicals etc. of various imported and their liquid storage tank terminals situated at Kandla Port. The AO disallowed depreciation claim on liquid storage tank to the extent of Rs.4,05,541/- by restricting the allowance @ 10% as against claim @15%. The AO discussed this at Page No. 1 to 10 of his order. Briefly, the AO has observed that the storage tank is simple structure on land and only in manufacturing unit, storage tank could be considered as part of plants and machinery. There is no definition in Income Tax Act, 1961 about storage tank and warehouse and there is no difference in storage tank and warehouse and in their object.
6. Being aggrieved, the assessee filed an appeal before the ld.
CIT(A). It was contended that storage tanks are not RCC structure flattened to the earth. They were only made of specific quality of iron and steel and fitted with specific equipments and facilities for Friends Oil & Chemical Terminal Pvt. Ltd. v. ACIT-Gandhidham/I.T.A. No.936/RJT/2010/A.Y.06-07 & 279/RJT/2013 /A.Y. 08-09 & Friends Salt Works & Allied industries v. ACIT- Gandhidham /I.T.A.No. 278/RJT/2013/A.Y. 08-09 Page 4 of 23 handling of liquid cargo and chemicals. Therefore, they cannot be said to be land or building but were essentially plants and machinery, which could be bodily, lifted and placed/ fitted anywhere. The assessee has also placed reliance on some case laws as reported by the CIT (A) in his order at Page No. 3 and 4. However, the CIT (A) observed that the assessee has heavily relied on the Rajkot Tribunal decision in its own case for the assessment year 2002-03 and 2003-04 in I.T.A.No. 1690/RJT/2005 dtd. 18.05.2007 and 1691/RJT/2005 dtd. 28.04.2008 wherein it was held that storage tank was plants, machinery, and not a building after placing reliance on the decisions of Karnataka High Court in the case of CIT v. Mahant Oil Industries Pvt. Ltd. 193 ITR 620 (Karnataka), Bombay High Court in the case of CIT v. Metallurgical Works Pvt. Ltd. 207 ITR494 , Mumbai tribunal in the case of Gulf Oil Industries v. ITO 75 ITD 172 and Rajkot Tribunal in the case of Ganesh Alu Bhandar v. ITO 87 ITD 588 . However, the CIT (A) has disagree with the finding of Tribunal on the ground that the ITAT did not give a finding how a simple storage tank could be called as plants and machinery, when it firmly stood on the soil that too independent and without having any connection with other Friends Oil & Chemical Terminal Pvt. Ltd. v. ACIT-Gandhidham/I.T.A. No.936/RJT/2010/A.Y.06-07 & 279/RJT/2013 /A.Y. 08-09 & Friends Salt Works & Allied industries v. ACIT- Gandhidham /I.T.A.No. 278/RJT/2013/A.Y. 08-09 Page 5 of 23 structures employed normally in a manufacturing proceedings. In the instant case, the storage tank used to store some oil or chemicals, which arrived at the port in bulk in the ship. From the ship, the oil and chemical was brought through pipes to the storage tanks. The view point of ITAT would be acceptable, had the appellant been in manufacturing activity, say for example, manufacture of an acid. The manufacturing of an acid consists of mixing of various raw materials in a specified tank for chemicals process by pipes. In that tank, some additional chemicals will be added. In the case of the assessee the storage tank is mere reservoir for storage of oil and chemical for some point of time until they are delivered to the buyers. The ITAT`s reliance on CIT v. Mahant Oil Industries Pvt. Ltd.193 ITR 620 (Kar) was misplaced as that assessee was engaged in the business of producing oil, not storing oil. The ld. CIT (A) further, relied on some case laws as per discussion in his appellate order and arrived at conclusion that liquid storage tank are not plants and machinery for depreciation claim.
7. Being, aggrieved the assessee filed this appeal before the Tribunal. The learned counsel for the assessee submitted that liquid Friends Oil & Chemical Terminal Pvt. Ltd. v. ACIT-Gandhidham/I.T.A. No.936/RJT/2010/A.Y.06-07 & 279/RJT/2013 /A.Y. 08-09 & Friends Salt Works & Allied industries v. ACIT- Gandhidham /I.T.A.No. 278/RJT/2013/A.Y. 08-09 Page 6 of 23 cargo could be unloaded from high seas, hence, not required a platform. Liquid cargo is unloaded through storage tank. The AO treated it as simple building and CIT (A) upheld the same. However, the issue is covered in favour of the assessee by decision of Tribunal in assessee`s own case for the assessment year 2002-03 and 2003-04 in I.T.A.No. 690/RJT/2005 dtd. 18.05.2007 A.Y. 2002-03 and I.T.A.No. 1691/RJT/2005 dtd. 28.04.2008 A.Y. 2003-04. The learned counsel for the assessee submitted that the storage tanks are not RCC structure flattened to the earth. They were only made of specific quality of iron and steel and fitted with specific equipments and facilities for handling of liquid cargo and chemicals. Therefore, they cannot be said to be land or building but were essentially plants and machinery, which could be bodily, lifted and placed/ fitted anywhere. The definition of plant has been given in section 43(3) by way of inclusive definition and expression of plant would include whatever apparatus is used by a business man for carrying out his business and not as stock-in trade which he buys or makes for sale but all goods and chattels fixed or movable, live or dead which he keeps for permanent employment. The learned counsel for the Friends Oil & Chemical Terminal Pvt. Ltd. v. ACIT-Gandhidham/I.T.A. No.936/RJT/2010/A.Y.06-07 & 279/RJT/2013 /A.Y. 08-09 & Friends Salt Works & Allied industries v. ACIT- Gandhidham /I.T.A.No. 278/RJT/2013/A.Y. 08-09 Page 7 of 23 assessee further, supported his view by placing reliance in the case of Bharat Petroleum Corporation Ltd. v. Municipal Corporation Greater Mumbai AIR 1985 Bombay 242, Gulf Oil India v. ITO [2000] 87 ITD 588 (Mum) , CIT v. Gujarat State Fertilizers Corporation 219 ITR 550 (Gujarat) CIT V. Modi Industries 197 ITR 517 (Delhi).
8. Per contra, learned CIT(D.R.) supported the order of lower authorities and further referring to the order of the A.O. submitted that the storage tank is used for storing goods and storage tank cannot be treated as plant and machinery. Further, Tribunal decision has not been accepted by the Department and an appeal to High Court has been filed.
9. We have heard the rival submissions and perused the relevant material on record. We find that the assessee has constructed a storage tank for storage of liquid cargo at KPT. The KPT authorities have permitted the assessee to construct the tank. The assessee has ha also got license for the same from Chief Controller of Explosives. Thus, the tank is not mere tank but it can store a highly explosive material. The Hon`ble Karnataka High Court in the case of CIT V. Friends Oil & Chemical Terminal Pvt. Ltd. v. ACIT-Gandhidham/I.T.A. No.936/RJT/2010/A.Y.06-07 & 279/RJT/2013 /A.Y. 08-09 & Friends Salt Works & Allied industries v. ACIT- Gandhidham /I.T.A.No. 278/RJT/2013/A.Y. 08-09 Page 8 of 23 Mahant Oil Industries Pvt. Ltd. 193 ITR 620 (Karnataka) has held that an object or thing which is used in the carrying on business by the assessee to earn the taxable income could be treated as plant. It is held that tank is necessary for the activities of the assessee. Similarly Bombay High Court in the case of Associated Bearings Co. Ltd. v. CIT 286 ITR 41 (Bombay) held that canteen equipment and water coolers which were for the benefit of workers formed part of the production Department of the assessee manufacture are part of plants and machinery entitled to investment allowance. Further, the Hon`ble Bombay High Court in the case of Electro Metallurgical Works (P)Ltd. 207 ITR 494 (Bombay) held that tanks and reservoirs concrete structure forming part of filtration plant are part of plants and machinery , eligible for depreciation @10% of the general rate applicable to plants and machinery as per Appendix-I. The issue is covered by decision Rajkot Tribunal decision in its own case for the assessment year 2002-03 and 2003-04 in I.T.A.No.690/RJT/2005 dtd. 18.05.2007 and 1691/ RJT/ 2005 dtd. 28.04.2008 wherein it was held that the storage tank was plants and machinery and not a building after placing reliance on the decisions of Karnataka High Court in the Friends Oil & Chemical Terminal Pvt. Ltd. v. ACIT-Gandhidham/I.T.A. No.936/RJT/2010/A.Y.06-07 & 279/RJT/2013 /A.Y. 08-09 & Friends Salt Works & Allied industries v. ACIT- Gandhidham /I.T.A.No. 278/RJT/2013/A.Y. 08-09 Page 9 of 23 case of CIT v. Mahant Oil Industries Pvt. Ltd. 193 ITR 620 (Karnataka), Bombay High Court in the case of CIT v. Electro Metallurgical Works Pvt. Ltd. 207 ITR 494 (Bombay) , and Mumbai tribunal in the case of Gulf Oil Industries v. ITO 75 ITD 172 and Rajkot Tribunal in the case of Ganesh Alu Bhandar v. ITO 87 ITD 588. The Tribunal has observed :- "10. In the instant case, the assessee has constructed oil storage tank at Kandla Port Trust on the land provided by the Kandla Port Trust. The storage tank has been constructed as per prescribed specification and licensee for the storage of petroleum products has been granted by the Chief Controller of Explosives after inspection of these storage tanks. Thus, the oil storage tank has been constructed as per required specification for storing petroleum product. Therefore, the same falls within definition of a "plants" which has been used by the assessee in the business of hiring them for storage petroleum products. Our view is finds support from the decisions of various High Courts and Tribunal cited above. Therefore, we are in agreement with the order of CIT (A) in allowing depreciation on the oil storage tank to the assessee at the rate prescribed for "plant" in the Act. Friends Oil & Chemical Terminal Pvt. Ltd. v. ACIT-Gandhidham/I.T.A. No.936/RJT/2010/A.Y.06-07 & 279/RJT/2013 /A.Y. 08-09 & Friends Salt Works & Allied industries v. ACIT- Gandhidham /I.T.A.No. 278/RJT/2013/A.Y. 08-09 Page 10 of 23 Hence, the ground of appeal of Revenue is rejected." In the light of above facts, decision of Co-ordinate Bench in the case of the assessee and High Court respectfully following the same, we direct the AO to allow depreciation @ 15% as claimed by the assessee on storage tank. This grounds of appeal of the assessee is therefore, allowed.
10. Ground No. 2 States that CIT (A) erred in law and facts in rejecting claim of the appellant of Rs. 1,49,36,396 under section 80IA of the Act in respect of income derived from operation and maintenance of storage tank by considering the same as integral part of Port.
11. Succinctly, facts as culled out from the orders of lower authorities are that the assessee has claimed deduction under section 80IA the assessee for building, storage tank, shore pipelines and other Infrastructure on the port of land leased to them by Kandla Port Trust (KPT). It was contended that the assessee has entered in to an agreement with KPT for the purpose of erection operation and maintenance of storage tanks along with pipelines and other Friends Oil & Chemical Terminal Pvt. Ltd. v. ACIT-Gandhidham/I.T.A. No.936/RJT/2010/A.Y.06-07 & 279/RJT/2013 /A.Y. 08-09 & Friends Salt Works & Allied industries v. ACIT- Gandhidham /I.T.A.No. 278/RJT/2013/A.Y. 08-09 Page 11 of 23 infrastructure facilities on the leasehold land, which was allotted by them by KPT. The assessee has filed copies of agreement entered in to with KPT. However, the AO did not agree with the assessee and observed that construction of storage tank is the part of asset of the assessee. There is agreement between the assessee and KPT for development such facilities. Therefore, as per provision of section 80IA (4) (i) (b), there is no such agreement and construction made as storage is in own business, which in fact is being used by the assessee himself. Therefore, the ownership of Infrastructure facilities with the assessee himself. The assessee is engaged in the very work of storage and such storage is on its own tank. The assessee has himself sought permission from KPT for construction of storage tank, as it was required for the purpose of business of the assessee. The KPT has merely given permission to the assessee on his express request to construct the storage tanks. Therefore, the contention of the assessee that it had entered in to an agreement, in compliance to provisions of section 80IA(4)(i)(b) is not true and needs to be rejected. The assessee has relied on Circular No.10/2005 dtd. 16.12.2005 which seeks to clarify the definition of Port for the Friends Oil & Chemical Terminal Pvt. Ltd. v. ACIT-Gandhidham/I.T.A. No.936/RJT/2010/A.Y.06-07 & 279/RJT/2013 /A.Y. 08-09 & Friends Salt Works & Allied industries v. ACIT- Gandhidham /I.T.A.No. 278/RJT/2013/A.Y. 08-09 Page 12 of 23 purpose of infrastructure facility, but it does not take away the essential character of section 80IA(4)(i)(b), which requires the existence of an agreement with government. In view of above, the AO disallowed the claim of Rs. 1,49,36,396 under section 80IA(4)(i)(b) of the Act.
12. Being aggrieved, the assessee filed an appeal before the ld.CIT(A). The CIT(A) observed that the assessee has entered into general agreement for 30 years could not be taken as an agreement town KPT and the appellant authorizing that loading and unloading of liquid cargo that would form part of the port operations for import and export. It also did not say that the said infrastructure and facilities developed built/ maintained/operated by the Appellant rested with government. Prima-facie the ownership of the said infrastructure facility was with the appellant. The appellant has produce a certificate from KPT which reads: This is to certify that M/s. Friends Oil & chemical Terminals Pvt. Ltd. built storage tank erected, shore pipelines and other infrastructure facilities on the plot of land leased to them by Kandla Port Trust at old Kandla (oil jetties) for loading and unloading of liquid cargo, which forms part of the Friends Oil & Chemical Terminal Pvt. Ltd. v. ACIT-Gandhidham/I.T.A. No.936/RJT/2010/A.Y.06-07 & 279/RJT/2013 /A.Y. 08-09 & Friends Salt Works & Allied industries v. ACIT- Gandhidham /I.T.A.No. 278/RJT/2013/A.Y. 08-09 Page 13 of 23 Port operations for import and export." However, the CIT (A) has written a letter to KPT which was clarified by the KPT authority vide letter dated 01.02.2010 that storage tanks, shore pipelines and other infrastructure facilities developed by M/s. Friends Oil and Chemical Terminals Private limited to KPT are not deemed part of KPT nor deemed as asset of the KPT. Thus, CIT (A) opined that this clarification shows that first certificate dtd. 20.10.2005 obtained by the Appellant from KPT in such a way that it serve the purpose of the appellant. However, the reply dtd. 01.02.2010 makes that the claim of the assessee is false. The CBDT Circular No.10/2005 dtd. 16.12.2005 says that from A.Y. 2002-03 onwards, structure at the ports for storage / loading / unloading etc. would be included in the definition of port for the purpose of section10(23G) and section 80IA. However, the non-presence of agreement loses its value as the said agreement simply allowed the appellant to use its land for building storage facilities and other allied facilities. The appellant`s reliance on Cochin ITAT in the case of M/s.HHA Tank Terminal Pvt. Ltd. I.T.A.No. 18/Coch/2006 did not include any clause for the ultimate transfer of facility due to amendment by Finance Act, 2001 Friends Oil & Chemical Terminal Pvt. Ltd. v. ACIT-Gandhidham/I.T.A. No.936/RJT/2010/A.Y.06-07 & 279/RJT/2013 /A.Y. 08-09 & Friends Salt Works & Allied industries v. ACIT- Gandhidham /I.T.A.No. 278/RJT/2013/A.Y. 08-09 Page 14 of 23 with effect from that condition was no longer required. In the decision of Rajkot bench, the certificate from concerned authority was produced before the ITAT hence, ITAT has allowed deduction. In view of above, the CIT (A) was of the view that condition of agreement with KPT to construction storage tank, shore pipelines and infrastructure facilities at the site allotted to the appellant and on the strength of revised certificate of KPT as notified in Circular No. 10/2005 that the appellant structure did not form part of infrastructure facilities within the meaning of section 80IA, hence, disallowance, so made by the AO were confirmed.
13. Being aggrieved, the assessee filed this appeal before the Tribunal. The learned counsel for the assessee submitted that as per lease agreement, the KPT has allotted 250000 Sq. Ft. land to the assessee on which the assessee constructed building storage tanks with permission of KPT, and developed infrastructure facilities hence, claim under section 80IA(4)(i)(b) is allowable to the assessee. The learned counsel for the assessee referred CBDT Circular No. 10 of 2005 dtd. 16.12.2005 (PB-27) in which clause "3. However, for and from assessment year 2002-03 onwards, structure at the Friends Oil & Chemical Terminal Pvt. Ltd. v. ACIT-Gandhidham/I.T.A. No.936/RJT/2010/A.Y.06-07 & 279/RJT/2013 /A.Y. 08-09 & Friends Salt Works & Allied industries v. ACIT- Gandhidham /I.T.A.No. 278/RJT/2013/A.Y. 08-09 Page 15 of 23 ports for storage, loading and unloading the company will be included in the definition of "port" for the purpose of section 10 (23G) and 80IA of Income Tax Act,1961, if the following conditions fulfilled:- the concerned port authority has issued a certificate that the said structure form part of the port." The learned counsel for the assessee further referred certificate dtd. 20.10.2005 issued by the KPT wherein it is mentioned that the assessee has erected storage tanks and other infrastructure facilities on the plot of land leased to them by KPT for loading and unloading of liquid cargo which form part of port operations for import and export. The learned counsel for the assessee further, placed reliance in the case of Pr. CIT v. Seabird Marine Services Pvt. Ltd. [2017] 398 ITR 436 (Gujarat) and CIT v. A. L. Logistic Pvt. Ltd. 214] 374 ITR 609 (Mad) 230 Taxman 195 (Mad) , CIT v. HHA Tanks Terminals Ltd. I.T.A.No. 1279 of 2009 dtd. 19.03.2010 of Hon`ble Kerala High Court. In addition, HHA Tanks Pvt. Ltd. I.T.A.No.18/Coch/2006 dtd. 8.01.2008 of Cochin Tribunal in support of his contentions.
14. Per contra, the ld. Sr. D.R. submitted that there is no agreement with KPT entered in to by the assessee. The AO has Friends Oil & Chemical Terminal Pvt. Ltd. v. ACIT-Gandhidham/I.T.A. No.936/RJT/2010/A.Y.06-07 & 279/RJT/2013 /A.Y. 08-09 & Friends Salt Works & Allied industries v. ACIT- Gandhidham /I.T.A.No. 278/RJT/2013/A.Y. 08-09 Page 16 of 23 brought in assessment order that the construction of building, storage tanks has been constructed of which ownership lies with the assessee and not with the KPT therefore, the lower authorities are justified in disallowing the claim made under section 80IA(4)(i)(b) of the Act.
15. We have heard the rival submissions and perused the relevant material on record. We find that the assessee has claimed deduction under section 80IA of the Act on account of building, storage tank, shore pipelines and other Infrastructure development on the port of land leased to them by Kandla Port Trust (KPT). It was contended that the assessee has entered in to an agreement with KPT for the purpose of erection operation and maintenance of storage tanks along with pipelines and other infrastructure facilities on the leasehold land, which was allotted by them by KPT. We notice that the assessee is engaged in the very work of storage and such storage is on its own tank. The assessee has himself sought permission from KPT for construction of storage tank, as it was required for the purpose of business of the assessee. The KPT has given permission to the assessee to construct the storage tanks. The learned counsel for the assessee referred CBDT Circular No. 10 of 2005 dtd. 16.12.2005 Friends Oil & Chemical Terminal Pvt. Ltd. v. ACIT-Gandhidham/I.T.A. No.936/RJT/2010/A.Y.06-07 & 279/RJT/2013 /A.Y. 08-09 & Friends Salt Works & Allied industries v. ACIT- Gandhidham /I.T.A.No. 278/RJT/2013/A.Y. 08-09 Page 17 of 23 (PB-27) in which clause is as follows ?:- "3. However, for and from assessment year 2002-03 onwards, structure at the ports for storage , loading and unloading the company will be included in the definition of "port" for the purpose of section 10 (23G) and 80IA of Income Tax Act,1961, if the following conditions fulfilled:- the concerned port authority has issued a certificate that the said structure form part of the port." The assessee has furnished a certificate dtd. 20.10.2015 from Kandla Port Trust wherein "This is to certify that M/s. Friends Oil Chemical and Chemical Terminals Pvt. Ltd. has built storage tank erected, shore pipelines and other infrastructure facilities on the plot of land leased to them by Kandla Port Trust at Old Kandla (Oil Jetties) for loading and unloading of liquid cargos which for part of the Port operations for import and export." The above infrastructure facilities have been developed, built maintained and operated by M/s. Friends Oil and Chemical Terminals Pvt. Ltd... Therefore, the assessee is not required to entered in to an agreement, in the light of CBDT Circular No.10 of 2005. Therefore, the assessee has made sufficient in compliance of provisions of Friends Oil & Chemical Terminal Pvt. Ltd. v. ACIT-Gandhidham/I.T.A. No.936/RJT/2010/A.Y.06-07 & 279/RJT/2013 /A.Y. 08-09 & Friends Salt Works & Allied industries v. ACIT- Gandhidham /I.T.A.No. 278/RJT/2013/A.Y. 08-09 Page 18 of 23 section 80IA(4)(i)(b). If we examined whether in the absence of specific agreement with the Central/State Government, local authority or Statutory Body, the assessee is entitled to claim the benefit of section 80IA(4)(i). The assessee had made an application for setting up of infrastructure facilities at Kandla Port. In response to the application of the assessee, the KPT has given permission for construction loading, storage tanks with infrastructure facilities at Kandla for loading and unloading liquid cargo. The ld. Counsel for the assessee has placed on record a letter dtd. 12.09.1995 issued by KPT .The contents of the letter are reproduced as follows:- I am to refer to letter on the subject cited above and to inform you that change in name of your firm M/s. Friends Group of Industries to M/s. Friends Oil and Chemical Terminals Pvt. Ltd. in respect of land allotted admg. 25,000 sq. meters at Kandla has been noted in the records of this office. Further, you are advised to execute the lease deed in respect of the aforesaid plot between Kandla Port Trust and Friends Oil Chemical Terminals Pvt. Ltd. The other terms and condition prescribed at the time of allotment and other terms indicated in this office letter No. Friends Oil & Chemical Terminal Pvt. Ltd. v. ACIT-Gandhidham/I.T.A. No.936/RJT/2010/A.Y.06-07 & 279/RJT/2013 /A.Y. 08-09 & Friends Salt Works & Allied industries v. ACIT- Gandhidham /I.T.A.No. 278/RJT/2013/A.Y. 08-09 Page 19 of 23 LAW/PL/2152_II/637 dated 1-12-94 will remain unaltered" (PB-7). In view of these facts, we are of the considered view that the assessee has developed infrastructure facilities, built maintained and operated within the meaning of provisions of section 80IA (4) (i) (b) of the Act. Therefore, the assessee is deemed to have made due compliance of provisions of section 80IA (4) (i) (b). The learned counsel for the assessee relied in the case of CIT v. A. L. Logistic Pvt. Ltd. [2015] 374 ITR 609 (Mad) held that it is evident that the proposal of the assessee was accepted by the Government on certain conditions which were duly complied with by the assessee. There may not be any specific agreement, but the sequences of events clearly show that the assessee is providing CFS facility in accordance with the conditions laid down by the Government. In such circumstances, there is no need to insist for the specific execution of agreements.
16. Further, the Co-ordinate Bench of Tribunal of Chennai in the case of A. L. Logistic Pvt. Ltd. v. ITO [2014] 49 taxmann.com 251( Chennai-Trib) held that the co-ordinate bench of the Tribunal in the case of United Liner Agencies of India (Private) Ltd., v. Joint CIT (OSD) in ITA Nos.273&275/Mum/2013 (supra), has taken a similar Friends Oil & Chemical Terminal Pvt. Ltd. v. ACIT-Gandhidham/I.T.A. No.936/RJT/2010/A.Y.06-07 & 279/RJT/2013 /A.Y. 08-09 & Friends Salt Works & Allied industries v. ACIT- Gandhidham /I.T.A.No. 278/RJT/2013/A.Y. 08-09 Page 20 of 23 view. Where no specific agreement with the State Government was entered into but from the approvals granted to the assessee it was inferred that assessee should be deemed to have entered into an agreement with the State Government. Similarly, the issue of the assessee is also supported by the decision in the case of Pr. CIT Seabird Marine Services Pvt. Ltd. [2017] 398 ITR 436 (Gujarat) . Thus, we are of the considered view that the assessee has complied with all the provisions of section 80IA(4)(i) and is eligible to claim deduction under the said section. The impugned order is set aside. In view of the above, this ground is allowed.
17. Ground No. 3 & 4 states that CIT (A) erred in not offering an opportunity to cross examination Secretary, Kandla Port Trust based on whose reply the appellate order passed denying deduction under section 80IA of the Act and not allowing sufficient time to submit reply. These grounds of appeal has not been raised before us hence, same are treated as dismissed as not pressed.
18. In the result, appeal for A.Y.2006-07 is partly allowed. Friends Oil & Chemical Terminal Pvt. Ltd. v. ACIT-Gandhidham/I.T.A. No.936/RJT/2010/A.Y.06-07 & 279/RJT/2013 /A.Y. 08-09 & Friends Salt Works & Allied industries v. ACIT- Gandhidham /I.T.A.No. 278/RJT/2013/A.Y. 08-09 Page 21 of 23 I.T.A.No. 279/RJT/2013 /A.Y. 2008-09 by M/s. Friends Oil & Chemical Terminals Pvt. Ltd.:
19. Ground no. 1 & 3 and 4 states that the Ld. CIT (A) and the AO has erred in law and on facts in treating storage tanks as building and restricting depreciation allowable thereon @10% instead of 15% as claimed by the Appellant by treating the storage tank as Plant and Machinery.
20. We have heard the parties. Both parties have agreed that the facts are identical as in 2006-07. As we have allowed depreciation on storage tank @ 15% in ground no. 1 for the assessment year 2006-07. Therefore, based on findings given thereunder, these grounds of appeal of the assessee is accordingly, allowed.
21. Ground No. 2 & 5 States that Ld. CIT (A) erred in law and upholding action of the AO in disallowing the claim of deduction under section 80IA (4)of the Act.
22. We have heard the parties. Both parties have agreed that the facts are identical as in 2006-07. As we have allowed the claim of the assessee under section 80IA (4)(i)(b) of the Act in respect of Ground Friends Oil & Chemical Terminal Pvt. Ltd. v. ACIT-Gandhidham/I.T.A. No.936/RJT/2010/A.Y.06-07 & 279/RJT/2013 /A.Y. 08-09 & Friends Salt Works & Allied industries v. ACIT- Gandhidham /I.T.A.No. 278/RJT/2013/A.Y. 08-09 Page 22 of 23 No. 2 for assessment year 2006-07. Therefore, based on the findings given thereunder, this grounds of appeal of the assessee is accordingly, allowed.
23. In the result, the appeal of the assessee is allowed for the assessment year 2008-09 in I.T.A.No. 279/RJT/2013.
I.T.A.No. 278/RJT/2013/ A.Y.2008-09/M/s. Friends Salt Works & Allied Industries:
24. Ground no. 1 & 3 and 4 relates to confirming the action of the AO in restricting the depreciation on oil liquid storage tanks at KPT to 10% as against claimed @ 15%.
25. We have heard the parties. Both parties have agreed the facts are identical as in 2006-07 in I.T.A.No. 936/RJT/2010 in the case of Friends Oil & Chemicals Terminals Pvt. Ltd. As we have allowed depreciation on storage tank @ 15% in ground no. 1 for the assessment year 2006-07 in the case of Friends Oil & Chemical Terminals Pvt. Ltd., in earlier part of this order a sister concern of the assessee company. Therefore, based on findings given thereunder, these grounds of appeal of the assessee is accordingly, allowed. Friends Oil & Chemical Terminal Pvt. Ltd. v. ACIT-Gandhidham/I.T.A. No.936/RJT/2010/A.Y.06-07 & 279/RJT/2013 /A.Y. 08-09 & Friends Salt Works & Allied industries v. ACIT- Gandhidham /I.T.A.No. 278/RJT/2013/A.Y. 08-09 Page 23 of 23
26. Ground No. 2 and 5 states that Ld. CIT (A) has erred in confirming disallowance of Rs.3,65,650/- being 5% of miscellaneous labour expenses.
27. These grounds are not pressed before us during the course of hearing of appeal; hence, it is treated as dismissed as not pressed.
28. In the result, the appeal of the assessee is partly allowed for assessment year 2008-09 in I.T.A.No. 278/RJT/2013 in the case of M/s. Friends Salt Works & Allied Industries.
29. The order pronounced in the open Court on 07.12.2018.
Sd/- Sd/-
(सी.एम.गग/C.M. GARG) (ओ.पी.मीना/O.P.MEENA)
याियकसद यतथा/JUDICIAL MEMBER लेखासद यके सम /ACCOUNTANT MEMBER
राजकोट/ Rajkot, दनांक Dated: 7th December, 2018/S.Gangadhara Rao, Sr.PS
Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT.
By order / / TRUE COPY / / Assistant Registrar, Rajkot