2011 (9) TMI 633 - AT - Income Tax

Airport Authority wins appeal, tax exemption granted for warehouse income, depreciation allowed for terminal building as plant.

The Tribunal allowed the appeals filed by the Airport Authority, setting aside the CIT's orders and upholding the AO's decisions to grant exemption under ... Validity of revisionary powers exercised u/s 263- Airport Authority of India- exemption u/s 10(29) of the Act-depreciation on terminal building.- terminal building treated as plant- Held that:- For an order under Section 263 of the Act to be sustainable, the twin conditions of error in the assessment order and causing of prejudice to the interests of the Revenue must be evincible to co-exist in the assessment order. Every loss of revenue as a consequence of an order of the AO cannot be treated to be prejudicial to the interests of the Revenue; and that where the AO has adopted one of the courses permissible in law and which has resulted in loss of revenue, the assessment order cannot be called prejudicial to the interest of the Revenue, unless the AO's view is unsustainable in law. In present case since none of the conditions are satisfied hence, the order of the learned CIT on this issue is set aside and that of the AO, granting exemption to the assessee u/s 10(29) of the Act on its income derived from the letting out of the warehouses and cargo complexes at the airports, and depreciation on its terminal and ancillary building at the airport, stating it to be a plant is revived. Decided in favor of assessee. Issues Involved:1. Exemption under Section 10(29) of the Income-tax Act, 1961.2. Depreciation on terminal building of the assessee.Issue 1: Exemption under Section 10(29) of the Income-tax Act, 1961The primary contention was whether the assessee, an Airport Authority, was entitled to exemption under Section 10(29) of the Income-tax Act, 1961, for its income derived from letting out warehouses for storage, processing, or facilitating the marketing of commodities. The Assessing Officer (AO) had initially disallowed this exemption, reasoning that the assessee was not an authority constituted for marketing commodities. However, the CIT(A) had allowed the exemption for most years except AY 1998-99.The Tribunal had previously remanded the matter to the AO to re-examine whether the assessee was running or establishing warehouses or cargo complexes, emphasizing the distinction between 'warehouses' and 'cargo complexes' as per the Airports Authority of India Act, 1994. The AO, upon remand, allowed the exemption, accepting that the assessee fulfilled all conditions under Section 10(29).The CIT, invoking Section 263, contended that the AO had not re-examined the matter as directed by the Tribunal and had not determined whether the assessee was running warehouses or cargo complexes. The CIT also noted that the AO had not considered certain documents, including minutes from a Cabinet Secretariat meeting.The Tribunal, upon review, found that the AO had indeed considered all relevant facts and documents, including the technical report and the minutes of the Cabinet Secretariat meeting. The Tribunal held that the AO had properly applied the law and had not merely relied on the power given under Section 12(3)(g) of the Airports Authority of India Act, 1994. The Tribunal concluded that the AO's order was neither erroneous nor prejudicial to the interests of the Revenue and set aside the CIT's order.Issue 2: Depreciation on Terminal BuildingThe second issue was whether the terminal building of the assessee should be treated as a 'plant' for the purpose of depreciation. The CIT(A) had allowed depreciation at the rate of 25%, treating the terminal building as a plant. The Tribunal had remanded the matter to the AO to examine whether the terminal building, as a whole or in parts, could be considered a plant by applying the functionality test.The AO, upon remand, allowed the depreciation, considering the technical report and the assessee's explanation that the terminal building was used for regulation of air traffic and communicational and navigational control. The CIT, invoking Section 263, argued that the AO had not conducted a fresh enquiry as directed by the Tribunal and had relied on the same technical report previously considered by the CIT(A).The Tribunal found that the AO had duly considered the technical report and other relevant materials, including the detailed list of assets and their functions. The Tribunal concluded that the AO had applied the functionality test and had properly determined that the terminal building was a plant. The Tribunal held that the AO's order was neither erroneous nor prejudicial to the interests of the Revenue and set aside the CIT's order.Conclusion:The Tribunal allowed all the appeals filed by the assessee, setting aside the CIT's orders under Section 263 and reviving the AO's orders granting exemption under Section 10(29) and allowing depreciation on the terminal building. The Tribunal found that the AO had properly applied the law and considered all relevant facts and documents in both issues.