Chennai Container Terminal Pvt.Ltd Vs ACIT (Bombay High Court)
The Bombay High Court considered a writ petition challenging a notice issued under Section 148 of the Income Tax Act, 1961, an order rejecting objections to reassessment, and a subsequent show cause notice with a draft assessment order relating to Assessment Year (AY) 2014-15.
The petitioner, an Indian company incorporated in 2000, was established to develop and manage the Chennai Container Terminal pursuant to a successful bid accepted by the Ministry of Surface Transport. It entered into a License Agreement with the Chennai Port Trust in 2001 for designing, financing, constructing, operating, and maintaining the terminal. Besides obtaining the right to use existing port assets, the petitioner invested substantially in infrastructure, including seven quay gantry cranes and twenty-two rubber-tyred gantry cranes, incurring expenditure of approximately ₹35,210 lakhs.
The petitioner began earning income from operating and maintaining the infrastructure facility and claimed deduction under Section 80-IA from AY 2008-09 onwards after becoming profitable. The claim was examined during scrutiny assessments and allowed from AY 2008-09 through AY 2014-15. For AY 2014-15, the petitioner disclosed in its annual report that it managed, developed, and maintained the container terminal under a 30-year licence agreement with the Chennai Port Trust. It also disclosed that it was a wholly owned subsidiary of P & O Ports (Chennai) Ltd., Mauritius, which was in turn wholly owned by D.P. World Ltd., Dubai. These details were also reflected in the Tax Audit Report, Form 3CEB relating to international transactions, and the income tax return. During scrutiny assessment proceedings, the Assessing Officer sought further information, including details regarding royalty payments under the licence agreement. After considering the submissions, the assessment order dated 27 December 2016 accepted the petitioner’s claim for deduction under Section 80-IA.
