Income Tax Appellate Tribunal - Chennai
Psa Sical Terminals Limited, Chennai vs Assessee on 20 November, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
'B' BENCH, CHENNAI
BEFORE Dr. O.K.NARAYANAN, VICE-PRESIDENT
AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER
ITA Nos.1604 to 1607(Mds)/2012
Assessment Years : 2004-05, 2005-06, 2006-07 & 2009-10
M/s.PSA Sical Terminals The Assistant Commissioner
Ltd., 73-Armenian Street, Vs. of Income-tax,
Chennai-600 001. Company Circle V(2),
PAN AABCP2897G. Chennai.
(Appellant) (Respondent)
Appellant by : Shri S.Sridhar, Advocate
Respondent by : Dr. S.Moharana, IRS, CIT
Date of Hearing : 20th November, 2012
Date of Pronouncement : 6th December, 2012
ORDER
PER Dr.O.K.NARAYANAN, VICE-PRESIDENT There are four appeals. The appeals are filed by the assessee. The relevant assessment years are 2004-05, 2005-06, 2006-07 and 2009-10.
2. These appeals are directed against the orders passed by the Commissioner of Income-tax(Appeals)-V at Chennai, dated 29-6-2012. The appeals for the assessment
-2- ITA 1604 to 1607 of 2012 years 2004-05, 2005-06 and 2006-07 arise out of the assessments completed under section 143(3), read with section 147 of the Income-tax Act, 1961. The appeal for the assessment year 2009-10 arises out of the assessment completed under section 143(3) of the Act.
3. The assessee is an Indian company, as defined in section 2(26) of the Income-tax Act, 1961. The assessee company is incorporated in India. It was incorporated on 18-6- 1998. The equity capital of the company is subscribed by another three companies by name M/s. PSA Corporation Ltd., M/s. South India Corporation(Agencies) Ltd. and M/s. Nur Investment and trading Pvt. Ltd. M/s. PSA Corporation Ltd. and M/s. Nur Investment and Trading Pvt. Ltd. are Singapore based companies. They hold equity share capital of the assessee company at 57.5% and 5% respectively. M/s. South India Corporation(Agencies) Ltd. is an Indian company holding the remaining 37.5% equity in the assessee company.
4. The assessee is engaged in the business of operating container terminals in Tuticorin Port. Earlier the Tuticorin Port Trust had invited bids from interested parties for
-3- ITA 1604 to 1607 of 2012 issue of licence to construct and operate 7th Berth at Tuticorin Port on Build, Operate and Transfer (BOT) Scheme. In response to the invitation made by the Tuticorin Port Trust, the above mentioned three companies jointly made an application to the Tuticorin Port Trust to consider them for the award of licence. The Tuticorin Port Trust, after examining all technical and financial details and other eligibility criteria, issued a letter of intent to the consortium of these three companies, expressing its intent to award the licence to those companies. It was a condition in the agreement that the licence be granted only to a company registered in India. Therefore, the above mentioned three companies, who jointly applied for the award of licence, promoted and incorporated the assessee company in India on 18-6-1998. Once the assessee was incorporated as an Indian company, the Tuticorin Port Trust granted the licence in favour of the assessee company and entered into a BOT Agreement on 15-7-1998. Thereafter, the assessee company proceeded to develop and thereafter to operate the7th Berth at Tuticorin Port.
5. The BOT agreement is for a period of 30 years. The assessee company completed the construction/development
-4- ITA 1604 to 1607 of 2012 and commenced the container handling operations from December 21, 1999 onwards.
6. The activity of constructing/developing, operating and maintaining the berth in a port area for container handling operations is recognized by the Income-tax Act as developing, operating and maintaining an infrastructure facility. Subject to certain conditions, assessees engaged in developing, operating and maintaining infrastructure facilities are entitled for deductions in respect of profits and gains from such enterprises engaged in infrastructure development. The deduction is hundred per cent, as provided in section 80IA(1) of the Income-tax Act, 1961. The deduction is granted subject to certain conditions provided in sub-section(4) of section 80IA.
7. As the assessee company is developing and operating port facilities, which amounts to developing of infrastructure facilities, the assessee claimed deduction in respect of its profits arising out of the BOT project with the Tuticorin Port Trust. The claim was under section 80IA of the Income-tax Act, 1961. The assessee has commenced its business operations from December 21, 1999 and, therefore, the
-5- ITA 1604 to 1607 of 2012 first year of assessment was 2000-01. But the assessee has exercised its option to claim the deduction under section 80IA for the first time in the assessment year 2004-05. Thereafter the assessee continued to claim the deduction in the subsequent assessment years.
8. In the case of assessment years 2004-05, 2005-06 and 2007-07, the assessments were originally completed under section 143(3) accepting the claim of the assessee for deduction under section 80IA of the Act. Accordingly, the deduction under section 80IA was initially granted to the assessee company for the assessment years 2004-05, 2005-06 and 2006-07.
9. Thereafter, the assessing authority issued a notice under section 148 for the above three assessment years, stating the reason that income chargeable to tax had escaped assessments, inasmuch as the assessee was given the relief under section 80IA, for which the assessee is not entitled to. In reply to the notices issued under section 148, the assessee submitted its explanation in detail and contended that the deduction under section 80IA was granted to the assessee rightly and in accordance with law. But, the Assessing Officer
-6- ITA 1604 to 1607 of 2012 declined to accept the explanations offered by the assessee and completed the income-escaping assessments under section 147 through his orders dated 26-12-2011. The Assessing Officer has withdrawn the deduction given to the assessee under section 80IA of the Act.
10. Following the above finding, the Assessing Officer completed the regular assessment under section 143(3) for the assessment year 2009-10 on 30-12-2011. In this regular assessment, the assessing authority has denied the assessee the benefit of deduction under section 80IA of the Act.
11. The assessee-company has filed appeals before the Commissioner of Income-tax(Appeals), challenging the validity of reopening of assessments under section 147 for the assessment years 2004-05, 2005-06 and 2006-07 and also against the denial of deduction provided under section 80IA for the above three assessment years as well as for the assessment year 2009-10. The Commissioner of Income-tax(Appeals) dismissed all the four appeals filed by the assessee. The Commissioner of Income-tax(Appeals) held that the assessing authority was justified in completing the income-escaping
-7- ITA 1604 to 1607 of 2012 assessments under section 147 for the three assessmentyears 2004-05, 2005-06 and 2006-07. He also upheld the finding of the assessing authority that the assessee company is not entitled for the deduction provided under section 80IA for the impugned four assessment years, in respect of the profits and gains arising from the BOT project executed by the assessee at Tuticorin Port.
12. The assessee is aggrieved and, therefore, these second appeals before us.
13. As far as the first three assessment years 2004-05, 2005-06 and 2006-07 are concerned, there are two issues raised by the assessee company through the grounds raised in its appeals. The first issue relates to the validity of reopening of the assessments under section 147. The second issue is regarding the eligibility of the assessee company to claim the deduction available under section 80IA. As the assessment for the assessment year 2009-10 is a regular assessment, there is no question of challenging the reopening of assessment under section 147. The only issue raised for the said assessment year 2009-10 is the eligibility of the assessee company to claim the
-8- ITA 1604 to 1607 of 2012 deduction under section 80IA of the Act. The issue on merit regarding the eligibility of the assessee company to claim the deduction under section 80IA is thus common for all the four impugned assessment years, whereas the issue regarding the validity of reopening of assessments under section 147 is raised only in respect of the three assessment years 2004-05, 2005-06 and 2006-07.
14. First we will consider the common ground of reopening of the assessments relevant to the first three assessment years 2004-05, 2005-06 and 2006-07. The main ground raised by the assessee is that the original assessments were completed under section 143(3) and there was no failure on the part of the assessee to disclose fully and truly all material facts and the assessments were reopened after a period of four years and in such circumstances the reopening of the assessments under section 147 is bad in law. It is also the ground of the assessee that the claim under section 80IA made by the assessee in its returns was fully explained and further the claim was supported by the audit report furnished in Form 10CCB.
-9- ITA 1604 to 1607 of 2012
15. Shri S.Sridhar, the learned counsel appearing for the assessee, relied on the decision of the Hon'ble Supreme Court rendered in the case of CIT vs. Kelvinator of India Ltd., 320 ITR 561 and argued that it is necessary on the part of the Assessing Officer to have a reasonable belief that income has escaped assessment and the reason should be supported by tangible materials and the reasons must have a live link with the formation of belief, so as to reopen an assessment under section 147 of the Act. It is also necessary that there should be failure on the part of the assessee. This is because the reassessments in these cases have been made after a period of four years. The learned counsel submitted that none of the above conditions, highlighted by the Hon'ble Supreme Court, has been satisfied in the present case. There is no failure on the part of the assessee to disclose the necessary details fully and truly. No fresh materials have come for the consideration of the assessing authority. He has arrived at the belief that income has escaped assessments on the very same materials which were exhaustively examined in the course of the regular assessments completed under section 143(3). He, therefore, submitted that
-10- ITA 1604 to 1607 of 2012 the income-escaping assessments completed for the first three assessment years 2004-05, 2005-06 and 2006-07 may be declared as bad in law.
16. Dr. S.Moharana, the learned Commissioner of Income-tax appearing for the Revenue, on the other hand, relied on the judgment of the Hon'ble Allahabad High Court rendered in the case of Pannalal Mahesh Chandra Jewellers vs. DCIT, 188 Taxman 95, where the Hon'ble Court has upheld the reopening of the assessment made by the Assessing Officer on the basis of the reasons relied on by him to believe that income had escaped assessment and the reason being excessive deduction granted under section 80HHC of the Act. In that case the Court has held that there is no illegality in the initiation of reassessment proceedings by invoking sections 147 and 148 of the Act. The learned Commissioner of Income-tax explained that, similarly, in the present case also the Assessing Officer has granted the deduction available under section 80IA(4) of the Act, for which the assessee is not entitled and, therefore, the reassessments need to be justified as they were made for making a legitimate withdrawal of the deduction already granted to the assessee.
-11- ITA 1604 to 1607 of 2012 The learned Commissioner of Income-tax again relied on another judgment of the Hon'ble Allahabad High Court rendered in the case of Shyam Bansal vs. ACIT, 296 ITR 25, where the Hon'ble Court held that the contention that the petitioner had made disclosure of income from the sale of shares in the assessment proceedings is of little consequence, as the Assessing Officer failed to examine the same and so also sufficiency of material to form reason to believe cannot be subject matter of writ jurisdiction. The learned Commissioner pointed out that in the present case also the issue is granting of relief to the assessee for which it is not entitled. He also relied on the judgment of the Hon'ble Punjab and Haryana High Court rendered in the case of CIT vs. Hindustan Tools & Forgings (P) Ltd., 306 ITR 209, in which case the Hon'ble Court has upheld the reassessment under section 147 to withdraw the excessive relief granted to the assessee under section 80HHC in the course of regular assessment.
17. We heard both sides in detail and considered the jurisdictional question whether the reopening of assessments
-12- ITA 1604 to 1607 of 2012 under section 147 is justified in these cases relating to the assessment years 2004-05, 2005-06 and 2006-07.
18. Section 147 of the Income-tax Act, 1961 deals with the topic of income-escaping assessments. The law states that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned. But the above law relating to reopening of assessment is subject to a provision that where an assessment under sub-section(3) of section 143 or under section 147 has been made for the concerned assessment year, no action shall be taken under section 147 after the expiry of four years from the end of the concerned assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of
-13- ITA 1604 to 1607 of 2012 the assessee to make a return under section 139 or in response to a notice issued under sub-section(1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for making the assessments.
19. The law stated above stipulates certain conditions to be satisfied for reopening an assessment under section 147. The first condition is that the Assessing Officer has a reason to believe that any income chargeable to tax has escaped assessment. The second condition is that if the reopening of assessment is made under section 147 after a period of four years from the end of the relevant assessment year, it is necessary to show that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment or it should have been a case where the assessee had failed to make a return under section 139 or in response to a notice under section 142(1) or under section 148 of the Act.
20. In the present case, the assessee has filed returns of income voluntarily within the time allowed under section 139. It has complied with the notices issued under section 143(2).
-14- ITA 1604 to 1607 of 2012 The assessments have been completed under section 143(3). It means that the assessments were completed after making due enquiries, as required by law. The assessee has furnished all the necessary details in support of its claim towards the deduction available under section 80IA(4) of the Act. The particulars are further certified, as required by the statute, through an audit report furnished in Form 10CCB. The reason stated by the Assessing Officer in the reassessment orders is that after the scrutiny assessments completed under section 143(3), it was noticed that even though the assessee was not eligible to claim the deduction under section 80IA(4), it has been allowed in the scrutiny assessment orders and therefore "it is believed that income chargeable to tax has escaped assessment".
21. The Assessing Officer himself is uncertain whether income has escaped assessment or not, which is evident from the expression that "it is believed that income chargeable to tax has escaped assessment". The assessing authority has no case that there was failure on the part of the assessee to disclose fully
-15- ITA 1604 to 1607 of 2012 and truly all material facts necessary to examine the claim of deduction made under section 80IA(4).
22. In these circumstances we find that the belief of escapement of income relied on by the Assessing Officer is not supported by any tangible material. There is no failure on the part of the assessee to disclose fully and truly all material facts necessary to examine its claim of deduction under section 80IA(4). No fresh materials were available to the assessing authority to reopen the assessments under section 147. In these circumstances, we are of the considered opinion that the case of the assessee is supported by the decision of the Hon'ble Supreme Court rendered in the case of CIT vs. Kelvinator of India Ltd., 320 ITR 561. We feel that the reason stated to be relied on by the Assessing Officer to come to the belief that income chargeable to tax has escaped assessment is nothing but a change of opinion.
23. In the facts and circumstances of the case we hold that the income escaping assessments completed under section 147 for the three assessment years 2004-05, 2005-06 and
-16- ITA 1604 to 1607 of 2012 2006-07 are bad in law and therefore those assessments are liable to be set aside.
24. The first issue regarding the jurisdiction for reopening the assessments under section 147 raised for the three assessment years 2004-05, 2005-06 and 2006-07 is decided in favour of the assessee and those grounds are accordingly allowed.
25. Next we will consider the issue raised by the assessee for all the four assessment years under appeal as to whether the assessee is entitled for deduction in respect of profits and gains from the BOT project executed at Tuticorin port, under section 80IA(4) of the Income-tax Act, 1961.
26. Initially the reasons pointed out by the assessing authority to deny the exemption under section 80IA(4) were two- fold:
(i) The shareholders of the assessee-company are M/s. PSA Corporation Ltd., M/s. Nur Investment and Trading Pvt. Ltd. and M/s. South India Corporation(Agencies) Ltd. The first two companies are Singapore based companies, who held major
-17- ITA 1604 to 1607 of 2012 shares in the assessee-company. Only the third company is the Indian company. Therefore, the assessee cannot be considered as a consortium of Indian companies. Accordingly, the assessee does not satisfy the requirement of law prescribed in section 80IA(4)(i)(a). The said requirement prescribes that the eligible undertaking or enterprise is owned by a company registered in India or by a consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act.
(ii) As per the BOT agreement entered into between the assessee company and the Tuticorin Port Trust, the assessee had to provide various infrastructure facilities like Berth, Draft, Container Yard, Reefer Points, Equipment, Computer System and full range of Container Freight Station Services(CFS) at Tuticorin Port. But the Berth construction was made by the Tuticorin Port Trust itself alongwith
-18- ITA 1604 to 1607 of 2012 undertaking the work of Draft. Regarding Equipments, the assessee has procured all of them on lease and no investments were made by the assessee company for acquiring those equipments, cranes, etc. The assessee is collecting wharfage charges, container handling charges, out of which lease charges, etc. are paid to Tuticorin Port Trust and the activities are being carried out without any corresponding investment.
27. When these reasons were put to the assessee company, explanations were offered by the assessee to substantiate its claim for deduction under section 80IA(4) in the following manner:
(i) The assessee is a company registered in India. It is an Indian company. The assessee company was registered on 18-6-1998. The assessee company is the owner of the enterprise carrying on infrastructure development activities at Tuticorin Port.
Accordingly, the enterprise is owned by a company registered in India and, therefore, satisfied the
-19- ITA 1604 to 1607 of 2012 condition laid down in section 80IA(4)(i)(a) of the Act. The enterprise is owned by the assessee company and not by a consortium of foreign companies.
(ii) Tuticorin Port Trust had invited applications from interested parties for award of licence to develop, operate and transfer 7th Berth at Tuticorin Port on Build, Operate and Transfer (BOT) Scheme. The operational period is thirty years, after which the 7th Berth will be fully transferred to the Tuticorin Port Trust.
(iii) The three companies, namely, M/s. PSA Corporation Ltd., M/s. Nut Investment and Trading Pvt. Ltd and M/s. South India Corporation (Agencies) Ltd. formed into a consortium and applied for the award of licence. The first two companies are Singapore/foreign companies and the third one is Indian company. Tuticorin Port Trust accepted the bid offered by the consortium. The consortium was formed only for the purpose of
-20- ITA 1604 to 1607 of 2012 participating in the bid and not for moving further any more.
(iv) Once the bid offered by the consortium was accepted by the Tuticorin Port Trust and the letter of intent for award of licence was issued by the Tuticorin Port Trust, the consortium companies incorporated a company in India by name M/s. PSA Sical Terminals Ltd., that is, the assessee company. The company was incorporated on 18-6-1998. The Indian company was incorporated, as the licence had to be issued to an Indian company and also the benefit of deduction under section 80IA(4) has to be claimed.
(v) On incorporation in India on 18-6-1998, the assessee company entered into the BOT agreement with the Tuticorin Port Trust on 15-7-1998 and the Tuticorin Port Trust granted the licence to the assessee company. Thereafter, the assessee company applied to the Central Board of Direct Taxes for approval under section 10(23G), so as to
-21- ITA 1604 to 1607 of 2012 claim exemption of income from the business of infrastructure development. The assessee company having satisfied the necessary conditions, approval was granted by the Central Board of Direct Taxes for the purpose of exemption under section 10(23G) of the Act.
(vi) It is not correct to say that the assessee company has not made investments for the BOT project. In terms of the agreement, the assessee has developed the 7th Berth at Tuticorin Port. The assessee has provided infrastructure assets such as Quay Side Cranes, Gantry Cranes, Terminal Operating System and Administrative Blocks. The total cost of investments in fixed assets accounted for ` 88,56,552/- as on 1-4-2003. The investment made in other assets accounted for ` 37,13,37,665/- by March 31, 2007.
(vii) The assessee has also made investments in terminal tractors, container handling equipment, etc. Because of these investments, the earlier capacity
-22- ITA 1604 to 1607 of 2012 of licence at 3,00,000 teu has been increased to 4,50,000 teu. Five of the existing yard blocks have been developed to fully utilise 10 ha of licensed premises with wharf space, terminal building and technical workshop. The ground slots were increased from 900 to 1800. New lighting masts have been provided. One existing mast has been modified. Developments are still going on.
28. After considering the reply filed by the assessee company, it seems that the assessing authority has not further pursued his objection that the assessee had not made any investment in its BOT project at Tuticorin Port. He has not explicitly stated so, but the said objection has not been pursued by the assessing authority. On the other hand, the assessing authority reiterated the other objection that the enterprise is not owned by a company registered in India. The assessing authority observed that the assessee company is formed by a consortium of two Singapore-based companies and one Indian company and they are the shareholders of the assessee company. The Singapore-based companies M/s. PSA
-23- ITA 1604 to 1607 of 2012 Corporation Ltd. and M/s. Nur Investment and Trading Pvt. Ltd. hold 57.5% and 5% shares respectively in the assessee company. The balance of 37.5% shares only is held by the Indian company M/s. South India Corporation(Agencies) Ltd. Therefore, it is not a consortium of companies registered in India.
29. The Assessing Officer concluded that the enterprise is owned by a consortium of companies, not all of them registered in India, and, therefore, the assessee is not entitled for the deduction under section 80IA(4) of the Act.
30. Finally the Assessing Officer withdrew the deduction earlier given under section 80IA(4) in respect of the three assessment years 2004-05, 2005-06 and 2006-07 and denied the deduction for the assessment year 2009-10 in the course of regular assessment.
31. In first appeals, the assessee raised both the issues of reopening as well as the eligibility for deduction under section 80IA(4). The Commissioner of Income-tax(Appeals) considered the facts of the case, the explanations offered by the assessee and the materials placed before him and the relevant statutory provisions. He came to the conclusion that the assessee has not
-24- ITA 1604 to 1607 of 2012 satisfied the condition laid down in section 80IA(4)(i)(a) for the reason that the BOT enterprise at Tuticorin Port operated by the assessee is owned by a consortium of three companies, not all the companies registered in India. Accordingly, he held that the assessee is not entitled for the benefit of deduction provided under section 80IA(4) of the Act. The Commissioner of Income- tax(Appeals) also upheld the reopening of assessments on the ground that the assessee had not furnished all the necessary details to the Assessing Officer at the time of the original assessments made under section 143(3) of the Income-tax Act, 1961. The appeals were accordingly dismissed on both grounds.
32. The assessee company has raised its grounds on the very same issues agitated before the Commissioner of Income-tax(Appeals), that relating to reopening of assessments and denial of deduction under section 80IA(4) of the Act.
33. On the issue of denial of deduction under section 80IA, the assessee has raised the following grounds:
"1. The Commissioner of Income-tax(Appeals) ought to have appreciated that the assessee has built and
-25- ITA 1604 to 1607 of 2012 is operating a port infrastructure facility and that the assessee has complied with all the conditions under section 80IA.
2. The assessee is a company incorporated in India under the Companies Act, 1956.
3. The licence agreement for BOT of the project was signed by the assessee company with the Tuticorin Port Trust.
4. According to section 80IA(4)(i)(a), the company/enterprise carrying on the business of developing, operating and maintaining the infrastructure facility should be a company registered in India and this condition is fully satisfied by the assessee tobe eligible to claim deduction under section 80IA."
34. In order to consider the question of eligibility of the assessee company to claim deduction under section 80IA(4), it is necessary to extract the relevant provisions of law, edited for our limited purpose, as under:
-26- ITA 1604 to 1607 of 2012 "Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. 80-IA(1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section(4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years.
...... .......
(4) This section applies to-
(i) any enterprise carrying on the business of ...... developing, operating and maintaining any infrastructure facility which fulfils all the following conditions, namely:-
-27- ITA 1604 to 1607 of 2012
(a) it is owned by a company registered in India or by a consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act;
(b) it has entered into an agreement with the central Government or a State Government or a local authority or any other statutory body for developing, operating and maintaining a new infrastructure facility;
(c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995.
....... .......
Explanation.- For the purposes of this clause, 'infrastructure facility' means-
........ .......
(d) a port, airport, inland waterway, inland port or navigational channel in the sea."
-28- ITA 1604 to 1607 of 2012 35. The undertaking/project of constructing
infrastructure facility in the nature of 7th Berth at Tuticorin Port is owned by the assessee. The assessee itself is the enterprise mentioned in section 80IA(4)(i)(a) of the Act. The enterprise is owned by a company registered in India, as the assessee company is incorporated in India. The law provides that the enterprise is owned by a company registered in India or by a consortium of such companies. Therefore, it is necessary that the enterprise is either owned by a single company registered in India or by a consortium of companies registered in India. In the present case, the enterprise of BOT project at Tuticorin Port is owned by the assessee, which a company incorporated in India. Therefore, it is seen that the assessee has satisfied the condition laid down in sub-clause(a) of clause(i) of sub-section(4) of section 80IA of the Act. It is not possible to hold that the BOT project developed by the assessee company at Tuticorin Port is owned by a consortium of companies consisting of two Singapore companies and one Indian company. Those three companies are only shareholders of the assessee-company. We should see that the shareholders are different from the company
-29- ITA 1604 to 1607 of 2012 in which they are holding the shares. The BOT enterprise at Tuticorin Port, which is owned by the assessee company, cannot be construed as held by the shareholders of the assessee company. When a company holds an asset, the said asset is owned by the company by itself and there is no legal presumption that it is owned by the shareholders of that company. The corporate status of a company is distinct and different from the shareholders constituting the company. Therefore it is not possible to hold that the property of a company is the property of the shareholders of that company. Therefore, in the present case, it is not possible in law to hold that the three shareholder companies are owning the BOT project operated by the assessee company at Tuticorin Port.
36. Section 80IA does not ignore the corporate juridical personality of a company registered under the Companies Act, 1956. The assessee company and the other three companies are in fact four different companies. All those four companies cannot be treated as one entity for the purpose of section 80IA(4)(i)(a).
-30- ITA 1604 to 1607 of 2012
37. The assessee is a company registered in India and is different from the three companies of the earlier consortium. The assessee company was incorporated in India on 18-6-1998. The licence was awarded by Tuticorin Port Trust only thereafter, i.e. on 15-7-1998. The licence was awarded to the assessee company in its own corporate status and not in the status of a progeny of the three companies earlier submitted the bid for the consideration of Tuticorin Port Trust. The BOT agreement was executed between the assessee company and the Tuticorin Port Trust. The privity of BOT contract exists between the assessee company and the Tuticorin Port Trust. There is no such privity between the three companies and theTuticorin Port Trust. Therefore, there is no reason to ignore the assessee company and adopt an outdated consortium of three companies to impress thereon, the ownership of the enterprise qualified for the purpose of section 80IA.
38. The enterprise is not owned by the consortium of the earlier three companies. It is owned by the assessee as a single corporate entity. The assessee company has carried on the business of developing, operating and maintaining
-31- ITA 1604 to 1607 of 2012 infrastructure facility in India at Tuticorin Port. The business/the undertaking/the enterprise is owned by the assessee.
39. It is to be seen that in the context of section 80IA, different terms of 'enterprise', 'undertaking', 'business' all are used synonymously and not distinctly. An enterprise means a business carried on by an assessee. The assessee and the enterprise are the same. It is more apparent when we consider the fact that the assessee company does not have any other business in India other than running the infrastructural project at Tuticorin Port.
40. In Concise Oxford English Dictionary, 'enterprise' is a noun, explained as a project or undertaking, especially a bold one. It is also understood as a business or company and in pith and substance, something undertaken. In the same dictionary, the word 'undertaking' is explained as an enterprise or a company or business. The word 'company' is explained as commercial business and the word 'business' is explained as a commercial activity or commercial organization. In the light of the mutually complimentary meaning of these different words provided in the dictionary, it is safe to hold that in the provision of
-32- ITA 1604 to 1607 of 2012 law also, as there is no other indication, all these terms and expressions are used synonymously.
41. In the facts and circumstances of the case it is directly clear that the enterprise is the BOT project developed and operated by the assessee at Tuticorin Port and the assessee company is the owner of the project and that project is the only adventure of the assessee company. Literally speaking the undertaking or the enterprise as well as the company are one and the same. In that sense the assessee has entered into a BOT agreement with Tuticorin Port Trust, which means the assessee as an enterprise carrying on the infrastructure development business has entered into such an agreement. Thus it satisfies sub-clause(b) of clause(i) of sub-section(4) of section 80IA.
42. As the assessee company and the enterprise are one and the same, it has also satisfied sub-clause(c) of clause(i) of sub-section(4) of section 80IA by starting its operations after the first day of April, 1995.
-33- ITA 1604 to 1607 of 2012
43. Therefore, we find that the assessee has satisfied all the three conditions as prescribed under sub-clauses(a), (b) and (c) of clause(i) of section 80IA(4).
44. There is another factor to be considered very seriously. Before shifting the benefit available to infrastructure development companies to Chapter VIA, the income as such was exempt under Chapter III as provided in section 10(23G). As per the provisions of law contained in section 10(23G), such profits and gains arising out of the business of infrastructure development would not form part of total income of the assessee. The said provision was omitted from the statute book with effect from 1-4-2007 by the Finance Act, 2006. The omission was made as the exemption has been made into a deduction under section 80IA under Chapter VIA. When section 10(23G) was in operation, it was necessary for an assessee to claim the deduction to obtain the approval of the competent authority prescribed by the Central Government. The Central Board of Direct Taxes(CBDT) was the competent authority for this purpose. As soon as the assessee has entered into the BOT agreement with the Tuticorin Port Trust, the assessee
-34- ITA 1604 to 1607 of 2012 company had applied for approval under section 10(23G) and the CBDT has granted such approval to the assessee company enabling the assessee to claim the benefit provided under section 10(23G). That approval has become now redundant because of the transplantation of the benefit from section 10(23G) to section 80IA. But, the facts and circumstances upon which the CBDT had given approval to the assessee company under section 10(23G) still prevail. It is not possible to take a view that the CBDT has given the approval to the assessee company under section 10(23G) without examining the satisfaction of various statutory conditions prescribed by the Act. The spirit of the approval granted by the CBDT supports the claim of the assessee made under section 80IA of the Act.
45. When the assessee company is a company incorporated in India and the assessee company itself carries on the activity of developing the infrastructure project, the expression "it" as provided in sub-clauses(a), (b) and (c) of clause(i) of sub-section(4) of section 80IA means the enterprise
-35- ITA 1604 to 1607 of 2012 and the assessee company are the same. There is no need to differentiate them.
46. If the contention of the Revenue is accepted, there should be one more company to be incorporated in India to own the assessee company, which is already incorporated in India. This is because the Revenue has treated the assessee company as an enterprise and not as the owner of the BOT project. According to the Revenue the assessee company incorporated in India is the enterprise mentioned in clause(i) of sub-section(4) of section 80IA and there should be another company incorporated in India to own the assessee company, which alone can claim the deduction available under section 80IA. This interpretation is too artificial. If this proposition is accepted, the assessee company should be a fully owned subsidiary of another company incorporated in India and the holding company alone will be entitled for the benefit under section 80IA. These are all far-fetched imaginations. The law is very simple as provided in section 80IA that the enterprise must be owned by a company incorporated in India and when that company
-36- ITA 1604 to 1607 of 2012 incorporated in India is having only a single business of infrastructure development, the enterprise vis-à-vis the company remain one and the same.
47. There is no need for two corporate personalities; a company after another company, as contemplated by the Revenue. There is no revenue implication in the mechanism suggested by the Revenue. The assessee company itself is liable for taxation on its income arising from the enterprise of infrastructure development but for the deduction available under section80IA. If no such deduction is available, the assessee company itself is liable for taxation on its income arising out of the project at Tuticorin Port. There cannot be a levy of tax on the same income in the hands of another company who should own the assessee company. Once the income is taxed in the hands of the assessee as the subsidiary company, the same cannot be taxed again in the hands of the owner as the holding company. An income is liable for taxation only at one point. Therefore, whether it is exempt or taxable, the benefit or liability is confined to one point alone. Therefore, contemplating two corporate
-37- ITA 1604 to 1607 of 2012 entities does not serve the interests of either the Revenue or the assessee. Therefore, we find that the argument of the Revenue that the assessee is the enterprise and it is owned by the consortium of other three companies, in which two companies are not Indian companies, is far-fetched and devoid of any merit.
48. In the facts and circumstances, we find that the assessee has satisfied all the conditions laid down in sub- section(4) of section 80IA and accordingly it is entitled for the deduction provided under section 80IA of the Income-tax Act, 1961.
49. The assessing authority is therefore directed to redo the assessments after giving the assessee the deduction in respect of the profits and gains arising from its infrastructure project developed at Tuticorin Port.
50. In result, these appeals filed by the assessee are allowed both on the question of reopening as well as on the question of eligibility for deduction under section 80IA of the Act.
-38- ITA 1604 to 1607 of 2012 Orders pronounced on Thursday, the 6th of December, 2012 at Chennai.
Sd/- Sd/-
(Vikas Awasthy) (Dr. O.K.Narayanan)
Judicial Member Vice-President
Chennai,
Dated, the 6th December, 2012.
V.A.P.
Copy to: 1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
6. GF.