Port Rent Merits Deduction U/S 80Ia Since It Has Direct Nexus With Running &Amp; Maintaining Port

While hearing a matter pertaining to the Assessee’s eligibility to claim deduction of ‘Port Rental Charges’ under Section 80IA of the Income Tax Act 1961, the Mumbai ITAT observed that legislative intent behind the provisions of Section 80IA was that they were to be construed liberally, since the rationale behind these provisions was to promote industrial growth and development. (Para 12)

A Division Bench of Ms. Kavitha Rajagopal, Judicial Member, and Mr. Prashant Maharishi, Accountant Member, observed that – “…There is no iota of doubt that the assessee is carrying on the business of developing or operating and maintaining of infrastructure facility for the purpose of storage, loading and unloading etc. It is also pertinent to note that the CBDT Circular No. 10/2005 dated 16.2.2005 has defined “Port” as infrastructural facility for the purpose of section 10(23G) and 80IA of the Act which includes structure at the ports for storage, loading and unloading, etc. subject to fulfillment of certain conditions which were duly complied with by the assessee. The port rental charges nevertheless pertain to the storage, loading and unloading activities which comes under the preview of the eligibility to claim deduction u/s. 80IA…”. (Para 12)

The Respondent-Assessee was represented by Ms. Neha Patel whereas the Appellant-Department was represented by Mr. HM Bhatt.

The Assessee-company is engaged in operation and maintenance of a Port developed by the Assessee, named Dharmatar PNP Jetty. The Assessee was subjected to re-assessment proceedings for the relevant period, with the Assessing Officer (AO) being of the view that income of about Rs 4.81 Crores had escaped assessment.

The AO determined the Assessee’s income at about Rs 6.53 Crores. In computing the same, the AO disallowed Port Rent charges of about Rs 4.81 Crores on grounds that the Assessee had no direct nexus with the activity of running and maintaining a Port.

On appeal, the Commissioner of Income Tax (Appeals) deleted the additions framed.

On hearing the arguments of both sides, the Bench placed reliance on the judgment of the High Court of Bombay in the case of CIT vs. M/s. ABG Heavy Industries Ltd. in ITA No. 416 of 2010 wherein a liberal view in granting deduction under Section 80IA even in case where the assessee therein was engaged in the contract for leasing of Container Handling Cranes at the Jawaharlal Nehru Port Trust.

In the present case, the Bench further observed that the Assessee had itself developed the Port at Alibaug and had been directly engaged in infrastructure development.

Therefore, finding the Assessee eligible for deduction under Section 80IA with regard to Port Rental Charges, the Bench found no reason to interfere with the order passed by the Commissioner of Income Tax (Appeals).

Cause Title: DCIT 3(2)(2) Mumbai Vs M/s. PNP Maritime Services Pvt. Ltd. [ITA No.667/Mum/2020 / 2023-Enterslice-5-ITAT-Mum]

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