2018 (7) TMI 577 - AT - Income Tax

Tribunal Rules in Favor of Assessee on Tax Assessment Issue

The Tribunal found in favor of the assessee on all issues. It held that the assessing officer's failure to assess the revenue receipt of Passenger Service ... Revision u/s 263 - income relating to the PSF security component not declared - debatable issues - Held that:- Having gone through the OMDA Agreement, SOP and the escrow Agreement in the light of other relevant papers furnished in the paper book we are convinced that prima facie there appears to be no control for the assessee over the security component of the PSF collected by the airliner and deposited into the escrow account meant to make the security purposes. The security component of the PSF amount does not constitute income in the hands of the assessee whereas such an issue has been remanded back to the Ld. AO by the Delhi tribunal. It is, therefore, clear that the question whether or not the security component of the PSF constitutes income in the hands of the assessee has not yet finally been decided authoritatively. It still remains a contentious issue and a debatable one. We are of the considered opinion that in view of the decision of the Hon’ble apex court in M/s Malabar Industries Co Ltd. Vs. CIT [2000 (2) TMI 10 - SUPREME COURT] such contentions or debatable issues are not available for revision under section 263 of the Act. With this view of the matter, we find that in this set of facts and circumstances, the exercise of jurisdiction under section 263 of the Act by the Learned CIT cannot be sustained - decided in favour of assessee. Issues:1. Whether the assessing officer's failure to assess the revenue receipt of Passenger Service Fee (PSF) for the assessment year 2007-08 resulted in under-assessment of tax.2. Whether the security component of the PSF constitutes income in the hands of the assessee.3. Whether the jurisdiction exercised by the Learned CIT under section 263 of the Income Tax Act can be sustained.Analysis:1. The first issue revolved around the failure of the assessing officer to assess the revenue receipt of PSF for the assessment year 2007-08, leading to under-assessment of tax. The Learned CIT found that the assessing officer had not considered the PSF amount of &8377; 77,06,88,000 received by the assessee, resulting in an erroneous assessment. The CIT directed the assessing officer to reframe the assessment, considering the PSF revenue receipt. However, the assessee argued that the matter was sub judice and requested to keep the addition in abeyance. The Tribunal held that the CIT's exercise of jurisdiction under section 263 could not be sustained, as the issue was debatable and not conclusively decided.2. The second issue centered on whether the security component of the PSF constituted income in the hands of the assessee. The assessee contended that they had no control over the security component, as it was earmarked for specific purposes like security expenses and CISF personnel payments. The Tribunal referred to the Operation, Management, and Development Agreement (OMDA) and the Escrow Agreement to establish that the assessee had no control over the security component funds. Citing a similar case involving Mumbai International Airports, the Tribunal concluded that the security component did not constitute income for the assessee.3. The third issue questioned the jurisdiction exercised by the Learned CIT under section 263 of the Income Tax Act. The CIT relied on an Official Memorandum and CBDT circular to argue that the PSF should be treated as income, leading to under-assessment by the assessing officer. However, the Tribunal found that the issue was contentious and debatable, as evidenced by differing decisions in similar cases. Referring to the decision in M/s Malabar Industries Co Ltd. Vs. CIT, the Tribunal ruled that such debatable issues were not suitable for revision under section 263. Consequently, the Tribunal allowed the appeal, quashing the CIT's order under section 263 of the Act.