Calcutta High Court

Principal Commissioner Of Income Tax vs Bothra Shipping Services Private ... on 25 September, 2024

Author: T.S. Sivagnanam

Bench: T.S. Sivagnanam, Hiranmay Bhattacharyya

ITAT NOS. 85 OF 2024 AND 86 OF 2024
          REPORTABLE

           IN THE HIGH COURT OF JUDICATURE AT CALCUTTA

                    SPECIAL JURISDICTION (INCOME TAX)

                                      ORIGINAL SIDE



                            RESERVED ON: 13.09.2024
                            DELIVERED ON:25.09.2024


                                         CORAM:

           THE HON'BLE MR. CHIEF JUSTICE T.S. SIVAGNANAM
                                           AND
        THE HON'BLE MR. JUSTICE HIRANMAY BHATTACHARYYA

                                      ITAT/85/2024

                                 (IA NO: GA/2/2024)

       PRINCIPAL COMMISSIONER OF INCOME TAX - 1, KOLKATA

                                         VERSUS

              BOTHRA SHIPPING SERVICES PRIVATE LIMITED



                                      ITAT/86/2024

                                 (IA NO: GA/2/2024)


       PRINCIPAL COMMISSIONER OF INCOME TAX - 1, KOLKATA

                                         VERSUS

              BOTHRA SHIPPING SERVICES PRIVATE LIMITED



Appearance:-
Mr. Tilak Mitra, Adv.
Mr. Soumen Bhattacharjee, Adv.
                                                       .....For the Appellant.


                                        Page 1 of 21
      ITAT NOS. 85 OF 2024 AND 86 OF 2024
               REPORTABLE

     Mr. J.P. Khaitan, Sr. Adv.
     Ms. Arati Agarwal, Adv.
     Ms. Rosy Banerjee, Adv.
                                                            .....For the Respondent.



                                           JUDGMENT

(Judgment of the Court was delivered by T.S. Sivagnanam, CJ.)

1. These appeals have been preferred by the revenue challenging the

common order dated 25.04.2023 passed by the Income Tax Appellate

Tribunal "C" Bench, Kolkata (tribunal) in ITA Nos. 2324/Kol/2019 for the

assessment year 2015-2016 and ITA No. 175/Kol/2021 for the assessment

year 2016-2017. The following common substantial questions of law have

been raised by the revenue in these appeals:-

A. Whether the Learned Income Tax Appellate Tribunal has committed substantial error in law in allowing deduction u/s 80IA(4) of the Income Tax Act, 1961 for an entity which is not eligible for such deduction.

B. Whether the order of the Ld. ITAT, Kolkata Bench is perverse to the extent in observing that the instant case is covered under Hon'ble High Court of Gujarat's order in the case of CIT Vs. Ranjit Projects Private Limited [2018] 408 ITR 274 despite the fact that the circumstances of both the cases are entirely different as in the instant case the assesse never had an agreement either with the Government or even with the entity having such an agreement with the Government wherein in the case of Ranjit Projects Private Limited, the assesse had an agreement directly with a wholly Government owned company incorporated pursuant to State Government's resolution.

ITAT NOS. 85 OF 2024 AND 86 OF 2024 REPORTABLE

2. We have heard Mr. Tilak Mitra, assisted by Mr. Soumen Bhattacharjee,

learned advocates appearing for the appellant and Mr. J.P. Khaitan, learned

Senior Advocate assisted by Ms. Arati Agarwal and Ms. Rosy Banerjee,

learned advocates appearing for the respondent.

3. Since the facts are identical in both the appeals and the substantial

questions of law raised by the revenue is also identical, we refer to the facts

for the assessment year 2015-2016 which would cover the other assessment

year as well. The revenue is aggrieved by the impugned order passed by the

learned tribunal setting aside the disallowance of deduction claimed under

Section 80IA(4) of the Income Tax Act, 1961 (the Act). The facts which are

necessary for the disposal of the appeal are as hereunder:-

4. The Government of Andhra Pradesh (AP) entered into an agreement

with Kakinada Sea Port Limited (KSPL) vide concession agreement dated

19.03.1999 for operation of existing berth, develop and operate one more

berth and operation, maintenance and management of common facilities of

the entire port through private participation. KSPL was appointed as a nodal

agency by AP to take over the existing port and also develop, operate and

maintain further infrastructural facilities including new berth. AP entered

into a supplementary agreement dated 28.01.2009 giving permission to

KSPL to develop new berth, accordingly berth no 5 was developed by KSPL.

KSPL entered into an agreement with the assessee on 19.04.2012 for the

development of 8 MMTPA Mechanised Port Handling System for unloading

and rail dispatch in Kakinada Deep Water Port at berth no. 5 and its backup

area.

ITAT NOS. 85 OF 2024 AND 86 OF 2024 REPORTABLE

5. On an application made by the assessee to the customs authorities,

the Commissioner of Central Excise, Customs and Service Tax,

Visakhapatnam granted permission for construction and operation of

Mechanised Port Handling System vide permission letter dated 01.02.2013.

After receiving the due permission, the assessee developed the

aforementioned infrastructural facilities. On 11.08.2015, a certificate was

issued by the port officer, Port Department, Government of AP stating that

the 8 MMTPA Mechanised Port Handling System is an infrastructural facility

and a part of Kakinada Deep Water Port, Kakinada. The assessee having

developed the new infrastructural facility, maintained and operated it,

claimed deduction under Section 80IA(iv) of the Act for both the assessment

years. To be noted that in terms of the Clause 9 of the concession agreement

between AP and KSPL, the coal terminal will be taken over by the Andhra

Pradesh at the expiry of the concession period. To the said effect a letter was

given by the KSPL dated 02.02.2021 which was signed and acknowledged by

the assessee.

6. The assessing officer by order dated 30.10.2019 passed under Section

92CD(3) of the Act, disallowed the deduction claimed under Section 80IA(4)

of the Act. The assessee moved the Dispute Resolution Panel (DRP)

contending that the assessing officer erred in not considering that the

assessee had produced the Port certificate granted by the specified authority

which certified that the infrastructural facility developed by the assessee is

an integral part of the port and the port certificate in itself would amount to

agreement with Government thereby satisfying the condition prescribed in

clause (b) of Section 80IA(4)(1). Further it was contended that the assessing

ITAT NOS. 85 OF 2024 AND 86 OF 2024 REPORTABLE

officer erred in denying the benefit under Section 80IA(4) by observing that

the assessee does not have any agreement which specified authority without

appreciating the facts that the agreement entered into by the assessee with

KSPL was as per the parent concession agreement between KSPL and AP

and with the knowledge of the Government of AP and therefore the assessee

cannot be denied deduction under Section 80IA(4).

7. The assessee further contended that the assessing officer erred in

denying the benefit in terms of the proviso to Section 80IA(4)(i) on the

ground that there was no condition in the agreement for retransfer of the

assets back to the Government of Andhra Pradesh or the specified authority,

however such condition was deleted by the Finance Act, 2001 and therefore

it is no longer available in the statute. Without prejudice it was contended

that for the purposes of deduction under Section 80IA(4)(1). KSPL should be

considered to be statutory authority as it is performing statutory functions

on behalf of the Government of Andhra Pradesh. The Dispute Resolution

Panel (DRP) by order dated 05.08.2019 rejected the contention raised by the

assessee primarily on the ground that KSPL entered into an agreement with

AP on 16.04.2001 and 28.01.2009. As per the agreement between the KSPL

and the assessee, they were entrusted the work of development of the

infrastructural facilities, but KSPL has not developed the facility and the

assessee has not entered into any agreement with the Government or the

authority and therefore they do not fulfil the second condition and not

eligible for deduction under Section 80IA(4) of the Act. Further the DRP held

that in case, it is considered that KSPL has given the job work to the

assessee, then KSPL should be the owner of the infrastructural facility and

ITAT NOS. 85 OF 2024 AND 86 OF 2024 REPORTABLE

not the assessee and this being not the case as the agreement between KSPL

and the assessee provides for developing the facilities and they are not

supposed to handover the assets to the KSPL. Therefore, the DRP concluded

that the assessee is not operating and maintaining the infrastructural

facility on behalf of the KSPL in accordance with the agreement between

KSPL and the Government of AP. Aggrieved by such finding rendered by the

DRP, the assessee preferred appeals before the learned tribunal.

8. The assessee reiterated the stand taken by them before the assessing

officer as well as the DRP by contending that the agreement entered into by

the assessee with KSPL was as per the parent concession agreement

between the KSPL and Government of AP and with the knowledge and

consent of the Government and therefore they cannot be denied deduction.

The assessee also relied on the port certificate granted by the authority

which certified that the infrastructural facility developed by the assessee is

an integral part of the port and the port certificate itself would amount to

agreement with Government thereby satisfying the condition prescribed in

clause (b) of Section 80IA(4)(i). The assessee placed reliance on the decisions

rendered by the Coordinate bench of the tribunal.

9. Thus, the short question which will fall for consideration is whether the

assessee satisfies the conditions prescribed in clause (b) of Section 80IA(4).

10. Clause (b) of Section 80IA(4)(i) would apply to any enterprise carrying

on the business of (i) developing or (ii) operating and maintaining or (iii)

developing, operating and maintaining any infrastructure facility which

fulfils all the following conditions namely, it has entered into an agreement

with the Central Government or a State Government or a local authority or

ITAT NOS. 85 OF 2024 AND 86 OF 2024 REPORTABLE

any other statutory body for (i) developing or (ii) operating and maintaining

or (iii) developing, operating and maintaining a new infrastructure facility.

11. In the explanation under the said provision, the "infrastructural

facility" would cannote a port, airport, inland water base, inland port or

navigational channel in the sea as per clause (d) in the explanation. It is not

in dispute that the assessee fulfils the condition in clause (a) of Section

80IA(4)(i) as it is a company registered in India. Thus, we are required to

consider as to what are the terms and conditions in the agreements which

have been entered into between the contracting parties.

12. Before proceeding to do so, we take note of the submissions made by

the learned senior standing counsel for the revenue contending that the

court is to see the words of the statute and not the spirit and no inference

and no analogy can be drawn. That court cannot import anything while

interpreting the revenue statute. There is no presumption of tax; nothing is

to be read in; nothing is to be implied in; and one can only look at the

language used. Equitable considerations are wholly out of place while

dealing with taxing statute and the words are to be taken as it stands. There

is no equity in fiscal statute. The intentions of the legislature are to be

primarily gathered from the words used in the statute. Tax and equity is a

stranger. There is no scope of the equity in fiscal legislature. Taxing statute

should be interpreted in accordance with its ordinary and natural being and

so called equitable construction is not permissible. Fiscal legislature should

be interpreted in accordance with the strict rules of interpretation. The

hardship is not relevant in interpreting taxing statute. In support of the

above contention, the learned senior standing counsel referred to the

ITAT NOS. 85 OF 2024 AND 86 OF 2024 REPORTABLE

decision in Bank of Chettinad Limited Versus Commissioner of Income

Tax, Madras 1, A.V. Fernandez Versus The State of Kerala 2, Banarasi

Debi Versus Income Tax Officer, District IV, Calcutta 3, Commissioner

of Income Tax, Bombay Versus Maharashtra Sugar Mills Limited,

Bombay 4, The Controller of Estate Duty, Gujarat Versus Shri Kantilal

Trikamlal 5, Shrimati Tarulata Shyam and Others Versus

Commissioner of Income Tax, West Bengal 6, Kapil Mohan Versus

Commissioner of Income Tax, Delhi 7, Vikrant Tyres Limited Versus

First Income Tax Officer, Mysore 8, Hansraj and Sons Versus State of

Jammu and Kashmir and Others 9 and Government of Andhra Pradesh

and Others Versus P. Laxmi Devi 10.

13. We wish to point out that there can be no dispute to the above legal

proposition. But what is to be borne in mind is the object behind the

introduction of the said provision namely Section 80IA. While interpreting

the scope of the condition (b) of Subsection (4) of Section 80IA, in

Commissioner of Income Tax Versus Ranjit Projects Private Limited 11,

it was held that rigid interpretation of the provision as canvassed by the

revenue before the said court (as well as before us) would only result in the

assessee's involved in genuine infrastructure development projects for and

on behalf of the Government or local authorities would be denied the

1940 SCC Online PC 29

(1957) SCC Online SC 23

(1964) SCC Online SC 48

1971 (3) SCC 543

(1976) 4 SCC 643

(1977) 3 SCC 305

(1999) 1 SCC 430

(2001) 3 SCC 76

(2002) 6 SCC 227

(2008) 4 SCC 720

(2018) 408 ITR 274

ITAT NOS. 85 OF 2024 AND 86 OF 2024 REPORTABLE

deduction merely on the ground that the State Government had created a

nodal agency for working out of the finer details and nitty-gritty of such

infrastructure developments. That the purpose of creating such nodal

agencies as well as legislative intent of granting deduction to the assessee

engaged in developing maintaining, or operating any infrastructure projects

for Central Government or State Government or local statutory authority

would frustrate.

14. The Hon'ble Supreme Court in Commissioner of Income Tax Versus

Container Corporation of India Limited 12 explained the object and scope

of Section 80IA of the Act by observing that with the purpose of boosting the

country's infrastructure specially the transport infrastructure, Finance Act,

1995 which came into effect April 01, 1996 brought an amendment to the

provisions of Section 80IA of the Act. In the said decision, the Hon'ble

Supreme Court upheld the views taken in the case of Commissioner of

Income Tax Versus A.L. Logistics Private Limited 13. In the said decision,

the Hon'ble Division Bench has held that the specific issue as to whether in

the absence of a specific agreement with the Central/State Government,

local authority or statutory body the assessee is entitled to claim the benefit

under Section 80IA(4)(i) was considered and after analysing the terms and

conditions of the agreement as well as the orders passed by the Government

of India, it was held that the proposal of the said assessee was accepted by

the Government on certain conditions which were duly complied with by the

said assessee and therefore even if there may not be any specific agreement

(2018) 404 ITR 397 (SC)

(2015) 374 ITR 609 (Mad)

ITAT NOS. 85 OF 2024 AND 86 OF 2024 REPORTABLE

but the sequence of events clearly show that the assessee therein is

providing container freight station facility in accordance with the conditions

laid down by the Government and therefore there is no need to insists or the

specific execution of agreements. In fact, the above finding rendered by the

tribunal was affirmed by the court in the case of A.L. Logistics Private

Limited. We also note that the decision in the case of Ranjit Projects

Private Limited has attained finality as the appeal filed by department

before the Hon'ble Supreme Court in Special Leave Petition (Civil) Diary No.

8895 of 2019 was dismissed by order dated 08.04.2019.

15. In Commissioner of Income Tax Versus Continental Warehousing

Corporation and Another 14 one of the substantial question which was

considered was whether the tribunal erred in holding that the assessee

therein was entitled to deduction under Section 80IA(4) which was contrary

to the circular of the Central Board of Direct Taxes No. 10 of 2005. The said

question was decided against the revenue and in favour of the assessee on

the following lines:-

39. A perusal thereof would indicate as to how the Legislature had in mind deduction in respect of profits and gains from industrial undertakings or enterprises engaged in the infrastructure development etc. We are concerned with sub-section (4) and as it read at the relevant time. It says that this section applies to any enterprise carrying on the business of developing or operating and maintaining any infrastructure facility which fulfills all the conditions, namely, 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, it has entered into an agreement

(2015) 374 ITR 645 (Bom)

ITAT NOS. 85 OF 2024 AND 86 OF 2024 REPORTABLE

with the Central Government or a local authority or any other statutory body for developing or operating and maintaining or developing, operating and maintaining a new infrastructure facility and it has started or starts operating and maintaining the infrastructure facility on or after 1st day of April, 1995. The explanation defines the infrastructure facility to mean, inter alia, a port, airport, inland waterway, inland port or navigational channel in the sea. The word "inland port" was always there in clause (d). What was there prior to its substitution by Finance Act of 2007 with effect from 1st April, 2008, were the words "or inland port". Now the word "or" is deleted, but the words are "inland port or navigational channel in the sea". Thus, an "inland port"

was always within the contemplation of the Legislature and it is treated specifically as a infrastructural facility. Therefore, to that extent Mr. Dastur is right in his submission.

16. While considering the judgments relied on by the learned senior

standing counsel for the department with regard to how the words in fiscal

statute should be interpreted, we are obliged to take note of the decision of

the Hon'ble Supreme Court in Government of Kerala and Another Versus

Mother Superior Adoration Convent 15 wherein the Hon'ble Supreme

Court held that there is another line of authority which states that even in

tax statutes an exemption provision should be liberally construed in

accordance with the object sought to be achieved if such provision is to

grant incentive for promoting economic growth or otherwise has some

beneficial reason behind it and in such cases, the rationale of the judgments

following Union of India Versus Wood Papers Limited 16 does not apply. It

was pointed out that the legislative intent is not to burden the subject to tax

so that some specific public purpose is furthered. The Hon'ble Supreme

(2021) 5 SCC 602

(1990) 4 SCC 256

ITAT NOS. 85 OF 2024 AND 86 OF 2024 REPORTABLE

Court referred to the decision in Commissioner of Income Tax Versus

Straw Board Manufacturing Company Limited 17 wherein it was held

that in taxing statute, provision for concessional rate of tax should be

liberally construed. Decision in Bajaj Tempo Limited Versus

Commissioner of Income Tax 18 was referred to wherein it was held that

the provision granting incentive for promoting economic growth and

development in taxing statute should be liberally construed and restrictions

placed on it by way of exception should be construed in a reasonable and

purposive manner so as to advance the objective of the provision. The

decision in State of Jharkhand Versus Tata Cummins Limited 19 was

also referred which related to a matter dealing with a tax exemption for

setting up an industry in a backward area wherein it was held as follows:-

"16. Before analysing the above policy read with the notifications, it is important to bear in mind the connotation of the word "tax". A tax is a payment for raising general revenue. It is a burden. It is based on the principle of ability or capacity to pay. It is a manifestation of the taxing power of the State. An exemption from payment of tax under an enactment is an exemption from the tax liability. Therefore, every such exemption notification has to be read strictly. However, when an assessee is promised with a tax exemption for setting up an industry in the backward area as a term of the industrial policy, we have to read the implementing notifications in the context of the industrial policy. In such a case, the exemption notifications have to be read liberally keeping in mind the objects envisaged

(1989) Supp 2 SCC 523

(1992) 3 SCC 78

(2006) 4 SCC 57

ITAT NOS. 85 OF 2024 AND 86 OF 2024 REPORTABLE

by the industrial policy and not in a strict sense as in the case of exemptions from tax liability under the taxing statute."

17. The Hon'ble Supreme Court took note of the Hon'ble Five Judges

Bench of the Hon'ble Supreme Court in Commissioner of Customs Versus

Dilip Kumar and Company 20. The Hon'ble Supreme Court after taking

note of the ultimate conclusion arrived at in the case of Dilip Kumar and

Company held as follows:-

26. It may be noticed that the five-Judge Bench judgment did not refer to the line of authority which made a distinction between exemption provisions generally and exemption provisions which have a beneficial purpose. We cannot agree with Shri Gupta's contention that sub silentio the line of judgments qua beneficial exemptions has been done away with by this five- Judge Beach. It is well settled that a decision is only an authority for what it decides and not what may logically follow from it (see Quinn v. Leathem as followed in State of Orissa v. Sudhansu Sekhar Misra, SCR at pp. 162-63:

AIR at pp. 651-52. para 13).

27. This being the case, it is obvious that the beneficial purpose of the exemption contained in Section 3(1)(b) must be given full effect to, the line of authority being applicable to the facts of these cases being the line of authority which deals with beneficial exemptions as opposed to exemptions generally in tax statutes. This being the case, a literal formalistic interpretation of the statute at hand is to be eschewed. We must first ask ourselves what is the object sought to be achieved by the provision, and construe the statute in accord with such object. And on the

(2018) 9 SCC 1

ITAT NOS. 85 OF 2024 AND 86 OF 2024 REPORTABLE

assumption that if any ambiguity arises in such construction, such ambiguity must be in favour of that which is exempted. Consequently, for the reasons given by us, we agree with the conclusions reached by the impugned judgments 2 of the Division Bench and the Full Bench.

18. Undoubtedly the benefit of deduction provided for under Section

80IA(4) of the Act is for a beneficial purpose, the purpose being to promote

industrial undertakings or enterprises engaged in infrastructural

developments etc. Therefore, the interpretation to be given to the said

provision should advance the object for which the provision was introduced

and not to frustrate it. With the above legal principle in mind, we are now

required to examine the factual position which in our view has been

elaborately dealt with by the learned tribunal.

19. In terms of the concession agreement entered into by the

Government of Andhra Pradesh and International Sea Ports Limited,

Singapore (ISPL) dated 19.03.1999 and two supplementary agreements

entered between the Government of Andhra Pradesh and KSPL dated

25.08.2003 and 28.01.2009 would show that the parties recognised that

ISPL is in the process of promoting Special Project Company (SPC) which

will be a body corporate to be incorporated under the Indian Companies Act,

1956. The prior approval of the Government of the Andhra Pradesh will be

taken on the shareholding pattern of the promoters in the SPC and the

Government of Andhra Pradesh will communicate its approval within a time

frame. Under the agreement, the parties agreed that the concessionaire shall

be entitled to subrogate all its right and obligations under the agreement in

ITAT NOS. 85 OF 2024 AND 86 OF 2024 REPORTABLE

the form of an instrument and in favour of the said body corporate to which

the Government of Andhra Pradesh consented. Further before granting the

subrogation, the concessionaire was required to inform the Government of

Andhra Pradesh in respect thereof and all necessary steps to be carried out

by the parties to give effect to the subrogation within 30 days from the date

of such information.

20. The agreement further states that after the subrogation, the new

body corporate (SPC) shall be recognised by the Government of Andhra

Pradesh for all legal and operational purposes and it was further agreed that

ISPL shall cause to provide suitable required letter from the new body

corporate (SPC) consenting to the arrangement and for smooth

implementation and the SPC shall be successors to the rights, duties and

obligations under the agreement. Thus, in terms of the above condition the

SPC was created in the name of Cocinada Port Company Limited (CPCL)

incorporated by ISPL who assigned all its rights, title benefits in the

concession agreement to CPCL by assignment deed dated 02.04.1999.

Subsequently the name of CPCL was changed as Kakinada Sea Ports

Limited (KSPL) on 18.09.2001 and necessary fresh certificate of

incorporation was issued by the Registrar of Companies, Andhra Pradesh.

Thus, it is clear that in the primary concession agreement will include their

respective successors and assigns intending to be legally bound under the

agreement. Thus, KSPL as SPC is responsible for discharge of terms and

conditions stated in the primary concession agreement as an assignee of

ISPL.

ITAT NOS. 85 OF 2024 AND 86 OF 2024 REPORTABLE

21. Further it is seen that the subrogation which was granted to KSPL

as SPC was approved by the Government of Andhra Pradesh. Subsequently

an agreement was entered into between KSPL and the assessee for

establishment of 8 MMTPA Mechanised Coal Handling System for unloading

and rail despatch in the Kakinada Deep Water Port at berth no. 5 and its

backup area vide agreement dated 19.04.2012. For better clarity, the

arrangement between parties is explained in the flowchart as hereunder:-

Primary Concession Agreement (dt. 19/03/1999) Govt. of Andhra ISPL Pradesh

Dt. 02/04/1999

BSSPL Dt. 19/04/2012 (i.e., the assesse) CPCL (Now, KSPL) [SPC of ISPL]

22. Thus, it is clear that the assessee has developed the Mechanised

Coal Handling System in terms of the agreement entered into by it with

KSPL and KSPL is none other than a Special Purpose Company of ISPL, who

had entered into an agreement with the Government of Andhra Pradesh.

23. Furthermore, the assessee has obtained approval from the customs

authorities in the year 2013. The port authorities of the Government of

Andhra Pradesh have issued a certificate dated 11.08.2015 certifying that

the infrastructural facilities developed by the assessee is part of Kakinada

ITAT NOS. 85 OF 2024 AND 86 OF 2024 REPORTABLE

deep water port, Kakinada. Thus, a cumulative reading of all the terms and

conditions more particularly in the primary concession agreement, it is clear

that KSPL is the nodal agency formed for the purpose of carrying out the

rights, duties and obligations under the concession agreements. These

agreements provide for subrogation of rights to a body corporate with the

consent of the Government of Andhra Pradesh and also with the prior

approval of the shareholding pattern and in accordance with the said

condition the special project company namely KSPL was setup which was

recognised by the Government of Andhra Pradesh for all legal and

operational purposes as successors of ISPLs rights duties and obligations

under the agreements. In this sequence of events the assessee entered into

an agreement dated 19.04.2012 with KSPL for establishment of the said

infrastructural facility. The tribunal referred to the CBDT Circular No. 10 of

2005 dated 16.12.2005 whereby the CBDT relaxed the second condition

prescribed under Section 80IA (4) thus leading to the only condition that is

to obtain the certificate from the concerned authority that the

infrastructural facility forms part of the port. In terms of the said condition,

the assessee has obtained a certificate dated 11.08.2015 issued by the port

authority of the Government of Andhra Pradesh certifying that the

infrastructural facility developed for handling of coal through Mechanised

Coal Handling System constructed and owned by the assessee are part of

the infrastructural facility of the Kakinada deep water port which has been

put to use from 13.10.2013. Though the second condition was relaxed by

the CBDT Circular, the assessee had placed on record, a letter issued by

KSPL which is to the effect that on expiry of the concession period, the

ITAT NOS. 85 OF 2024 AND 86 OF 2024 REPORTABLE

structures, building constructed by or belonging to KSPL or their

subcontractors, sub lessees, assignees free from all encumbrances and

liability shall automatically become property of Government of Andhra

Pradesh without any obligation to reimburse therefrom.

24. In terms of the said condition, the Mechanised Coal Handling

Terminal Installation of the assessee are to be taken over by the Government

of Andhra Pradesh at the expiry of the concession period. The learned

tribunal was also right in coming to the conclusion that the permission

obtained from the customs authority by the assessee vide a letter dated

01.02.2013 is deemed to be the approval granted by the competent

authority of the Central Government and in this regard, the learned tribunal

rightly took note of the decision in the case of A.L. Logistics Private

Limited (supra) which was affirmed by the Hon'ble Supreme Court in

Container Corporation of India Limited (supra).

25. One more condition in the concession agreement dated 19.03.1999

would be of relevance namely condition no. 7.3 which deals with "Sharing of

Income to Concessionaire"; the said condition states that the concessionaire

(ISPL) shall share with Government of Andhra Pradesh, income to

concessioner on the basis of sharing percentage as given in the table 7.1.

This undoubtedly is a very relevant condition which would also buttress the

case of the assessee.

26. As mentioned above, clause 9 deals with the transfer of assets

which provides for all the lands leased, existing improvements etc. will

automatically become the property of the Government of Andhra Pradesh

ITAT NOS. 85 OF 2024 AND 86 OF 2024 REPORTABLE

free from all encumbrances without any obligation of the Government to

reimburse thereof. One more clause in the concession agreement which

would be relevant, is clause (3) which deals with covenants. Under which

clause 3.1 deals with permission to build and operate, whereunder the

Government of Andhra Pradesh nominated the concessioner (ISPL) as its

nominated agency for maintenance of harbour and common use facilities

and carrying out harbour improvement works etc. with the condition that

the Government of Andhra Pradesh will continue to be the port conservator

but delegate all powers related to operation and maintenance of channel and

harbour as given in Annexure B to the concessionaire and concessionaire

(ISPL) will be responsible for all such powers delegated to them. Under

Annexure B, the Government of Andhra Pradesh authorised concessionaire

(ISPL) to undertake the following in respect of deep water port of Kakinada

which includes the port premises as defined in the agreement and the

navigation channel and the navigation area etc. The Government of Andhra

Pradesh authorised ISPL to appoint its own nominee to discharge all

functions of the port conservator but limited to the deep water port at

Kakinada port and the nominee shall have among other powers the

following:-

1 Power to make port rules/general port administration rules.

2 Power to make rules regarding navigation and shipping.

3. Power to give and enforce directions for certain specified purposes.

4. Power to cut warps & ropes and Power to Removal of obstructions within limits of DWP.

ITAT NOS. 85 OF 2024 AND 86 OF 2024 REPORTABLE

5. Power to Recover of expenses of removals.

6 Power to make rules regarding non-payment of dues, fines and recovery procedures including distraint and sale on refusal, etc

7. Power to take necessary action in respect of Fouling of government moorings.

8. Power to take necessary action in respect of Raising or removal or wreck impeding navigation within limits of DWP.

9. Power to board vessels and enter buildings.

10. Power to require/appoint crews to prevent or extinguish fire, pollution prevention/mitigation- containment of damages due to pollution threats to damages etc.

11. Indemnity against act or default of port-officials or pilot.

12. Power to make Rules for the safety of shipping and port operations.

13 Power to appoint its own labour, agents, pilots, etc to carry out all port related activities at the DWP including amongst others, stevedoring, handling, storing, marine operations, security, etc

14. Power to issue port clearances

15. Authority to interact with all Govt / statutory agencies directly as the authorised licencee.

16. Powers to board, inspect and authorise inspection of vessels

17. Other authorities to discharge the obligations of this concession agreement

18. Power to enforce all the above rules / authorities

27. Among all powers conferred as mentioned above, it is relevant to

note that under clause 13 power has been granted to appoint its own

labour, agents, pilots etc. to carry out all port related activities at deep water

ITAT NOS. 85 OF 2024 AND 86 OF 2024 REPORTABLE

port, Kakinada including amongst others handling, storing, marine

operations, security etc. Further in terms of the clause 17, the nominee of

ISPL among other powers the other authorities to discharge the obligations