TaxTMI 
TaxTMI 
2011 (9) TMI 633
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....acts, for convenience, are being taken from ITA No.1574/Del/2001, for AY 1998-99. 3. The following are the grounds of appeal taken therein:- "1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (CIT) under Section 263 of the Act is bad, both in the eye of law and on facts. 2. On the facts and circumstances of the case, the learned CIT has erred in ignoring the contention of the appellant that for invoking the powers under Section 263 both the conditions, i.e., that the assessment order being erroneous as well as prejudicial to the interest of Revenue, need to be fulfilled and in the absence of the same in the present case, the powers vested under Section 263 cannot be exercised. 3. On the facts and circumstances of the case, the learned CIT has erred, both on facts and in law, in rejecting the contention that the issue of exemption under section 10(29) of the Act, referred to by the CIT in his notice has been examined by the A.O. and order has been passed by the A.O. after examination of the reply and evidences submitted by the assessee and due application of mind. 4. On the facts and circumstances of the case, th....
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.... However, the claim of the assessee under Section 10(29) of the Act was being disallowed by the AO. This disallowance was being made on the basis of the reasoning adopted by the AO in the earlier years, wherein, it had been held that the assessee Authority was not an Authority for the purpose of marketing of commodities. While making the disallowance for the year under consideration, the AO noted that for AY 1995-96, while rejecting the assessee's claim, the AO had observed that he did not agree with the assessee's contention that it was an Authority constituted for marketing of commodities; that in the case of CIT v. Gujarat State Warehousing Corporation [1980] 124 ITR 282 (Guj.), relied on by the assessee, the Gujarat State Warehousing Corporation was constituted by the Warehousing Act, 1962 and the functions laid down under Section 24 thereof were as follows:- "(a) acquire and build godowns and warehouses at such places within the state as it may, with the previous approval of the Central Warehousing Corporation, determine; (b) run warehouses in the state for storage of agricultural produce, seeds, manures, fertilizers, agricultural implements and notified commodities to a....
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....g activity was only a subsidiary activity of the assessee; that the intent of the legislature was all the more evident from the fact that the banks performed activities akin to letting out of godowns or warehouses, in the nature of lockers facility, which they provided to the customers and the same was not exempt from tax under Section 10(29), for the activities so performed; and that if the Airport Authority of India was created by the Statute primarily or specifically for the purpose of marketing of commodities, it would have been covered by Section 10(29) of the Act. 7. Aggrieved, the assessee has been carrying the matter in appeal before the learned CIT(A). 8. The CIT(A) has all along allowed the exemption under Section 10(29) to the assessee Authority, except for AY 1998-99. For AYs 1999-2000 to 2001-02, however, the CIT(A) cancelled the disallowance and upheld the claim of exemption under Section 10(29). 9. The Revenue and the assessee both took the matter further, in appeal before the ITAT. 10. The ITAT, vide its order dated 27.7.2007 (copy at pages 141-174 of the assessee's Paper Book, 'APB' for short), relevant portion at paragraph 2 (APB 142), passed in ITA No....
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....e Act; that the assessee was an Authority constituted under the Airports Authority of India Act, 1994, satisfying the first condition; that as per the provisions of Section 12(3)(g) of the Airports Authority of India Act, 1994, one of the functions of the assessee was to establish warehouses and cargo complexes at the airports for the storage or processing of goods; that the assessee Authority played a vital role in facilitating the transportation of exports and imports of various commodities through its airports; that the airport warehouses provided facilities to various exporters and importers and international air transport carriers to store, process, and transport goods and commodities all over the world; that the assessee had established warehouses and storage facilities in the international air cargo complexes at various airports and earned revenue from the letting of such warehouses; that warehousing or storage was an essential step in the whole process of marketing, enhancing the utility of the commodities by making them more valuable, thus having a direct impact on the trading activities; that the same was also true of the other activities of processing of commodities and ....
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....sessee Authority, as correctly appreciated by the AO, totally fulfils all the said requisite conditions of Section 10(29) of the Act; that it is an Authority constituted under the Airports Authority of India Act, 1994; that as per Section 12(3)(g) of the said Act, one of the functions of the assessee Authority is to establish warehouses and cargo complexes at the airports, for the storage or processing of goods; that in these warehouses, established by the assessee Authority, facilities are provided to exporters, importers and international air transport carriers to store, process or transport goods and commodities throughout the world; that the income sought to be exempted u/s 10(29) of the Act is derived by the assessee by letting out the warehouses and cargo complexes at various airports; that the other activities of the assessee, of processing of commodities and facilitating their distribution and their preservation from natural disasters, fall well within the ambit of Section 10(29) of the Act; that the assessee Authority has all along been claiming exemption u/s 10(29) of the Act, with regard to its income from letting out of warehouses; that the same was being allowed in fir....
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....e Act with regard to the income earned from letting out of warehouses, that in CIT v. Central Warehousing Corporation [1985] 156 ITR 407 (Delhi), it was held that the Central Warehousing Corporation was an Authority constituted under law for marketing of commodities and its income derived from letting of godowns or warehouses for storage, processing or facilitating marketing of commodities was exempt from tax u/s 10(29) of the Act, that since the work of the Central Warehousing Corporation had been ultimately taken over by the assessee Authority and there was no change in the nature of its income, all the conditions of Section 10(29) of the Act stood satisfied, and that the matter stood covered by Gujarat State Warehousing Corporation (supra) and Union of India v. U.P. State Warehousing Corporation [1991]187 ITR 54(SC); that the Tribunal, for AY 2000-01, noted that the AO, while disallowing the exemption, had referred to Section 16(3)(d) of the International Airports Authority Act, 1971, whereas the AY 2000-01 was covered by the provisions of Section 12(3)(g) of the Airports Authority of India Act, 1994, that there was a slight difference in the two Sections of the two Acts inasmuc....
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....by the assessee; that the AO, in the assessment order, made mention of the reply filed by the assessee; that the operative part of the Tribunal order was also extracted in the assessment order; that the provisions of Section 12(3)(g) of the Airports Authority of India Act, 1994 were referred to; that the mandate of Section 12(3)(g) of the 1994 Act was specifically recorded to have been brought to the AO's notice; that the AO had also observed that the assessee had shown income from warehouses separately and that it being a statutory Authority, in view of the provisions of Section 12(3)(g) of the Airports Authority of India Act, 1994, it deserved the exemption claimed u/s 10(29) of the Act; that while allowing the exemption, the AO was fully seized of the issue and he went through the entire record and the assessee's explanation, before doing so; that the reason stated for the invocation of the jurisdiction u/s 263 of the Act by the learned CIT, as available from the show-cause notice issued to the assessee, was that in the absence of determination qua running or establishing warehouses or cargo complexes and in the absence of the determination of the nature of the cargo income, the....
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....it was prejudicial to the interests of the Revenue since the directions of the Tribunal had not been followed; that while holding so, the learned CIT has merely substituted his own thinking for that of the AO, inspite of the fact that the assessment order was passed by the AO after duly applying his mind to all the voluminous evidence and details filed by the assessee, as required; that the learned CIT has failed to point out as to on which issues the AO has not applied his mind; that in the assessment order, reference has been made to the provisions of Section 12(3)(g) of the Airports Authority of India Act, 1994; that the relevant provisions of Section 10(29) of the Act were also referred to; that besides, the directions of the Tribunal as well as the quantum of income earned by the assessee from the letting out of the warehouses, have also been mentioned; that the learned CIT, on the other hand, has not been able to state as to why the income of the assessee from letting out of the warehouses and cargo complexes would not be entitled to exemption u/s 10(29) of the Act; that it has nowhere been denied that the assessee Authority is an Authority constituted under the Airports Auth....
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....s, which were wholly necessary to be determined so as to arrive at a conclusion as to whether the income of the assessee was entitled to exemption u/s 10(29) of the Act; that the AO is also silent about the difference between "warehouse" and "cargo complex", despite the direction of the Tribunal being specific in this regard; that further, by the passing of the order under Section 263 of the Act, no prejudice whatsoever has been caused to the assessee, since the learned CIT has not directed the AO to disallow the exemption u/s 10(29) of the Act to the assessee and he has merely directed the AO to re-examine the matter so as to pass a reasoned and speaking order on the issue; that by issuance of such direction by the CIT, no prejudice whatsoever has been caused to the assessee, since the matter has only been directed to be decided afresh on complying with the directions of the Tribunal; that the Department, on the other hand, had been visited with total prejudice to its interests, by the passing of the erroneous assessment order; and that therefore, the order under appeal be maintained while dismissing the appeal filed by the assessee on this issue. Reliance has been placed on CIT v....
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...., it would be appropriate to reproduce hereunder, the directions issued by the Tribunal in its order dated 27.07.2007, for AY 1998-99 (copy at APB 141 to 174), in ITA No.3572/Del/2003:- "2. Ground no.1 is against the finding of the learned CIT(Appeals) that the assessee was not entitled to exemption u/s 10(29) of the Act in respect of net income earned on cargo warehousing activity. It was the common ground of both the parties that the issue stands covered by the order of ITAT, Delhi Bench "E", New Delhi, in the case of assessee in ITA No.2398(Del)/2004 for assessment year 2000-01 dated 8.12.2006. According to paragraph 10 of that order, the matter was restored to the file of the Assessing Officer to re-examine the matter regarding the application of the appropriate law and to determine whether the assessee is running or establishing warehouses or cargo complexes. Respectfully following that decision, this matter is restored to the file of the Assessing Officer to re-examine the matter in the light of the directions of the Tribunal and make fresh assessment on this issue after hearing the assessee. Thus, this ground is treated as allowed for statistical purposes." 20. A perus....
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....at the airport authority is not an authority constituted for marketing of commodities. He referred to the provisions of section 16(1) of the International Airport Authority Act, 1971 which lays down the function of the authority, compared the functions of the airport authority with the functions of the State Warehousing Corporations and observed that the State warehousing Corporations act as an agent of Central Warehousing Corporation of the government for the purposes of purchase, sale, storage and distribution of agricultural produce, seeds etc., whereas, in respect of International Airport Authority of India, no such functions are vested in it. In the case of State Warehousing Corporation, the warehouses are established with the sole object of marketing of various commodities and it is open to the public at large for these purposes only. However, in the case of assessee, the basic function is to manage airports efficiently. The maintenance of warehouses at the airports is an ancillary facility for the efficient operation of the air transport services. The warehouses are established to achieve the main objective i.e. to manage the airports efficiently and cannot be considered for....
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....the Hon'ble Gujarat High Court in the case of CIT v. Gujarat State Warehousing Corporation 124 ITR 282 and other cases relied upon by the assessee and came to the conclusion that the assessee is entitled to exemption u/s 10(29) of the Act, the view that was taken by CIT(Appeals) for the assessment year 1997-98 and also for the assessment year 1999-2000. However, the learned CIT(Appeals), further observed that in view of the fact that the whole income is not "income from the letting of godowns or warehouses for storage, processing of facilitating marketing of commodities", the exemption would be available only for storage-cum-demurrage charges of Rs. 154,30,68,472/- and not for the income from terminal charges, pallitisation charges, de-stuffing charges, trans-shipment charges, handling charges and misc. charges which, according to learned CIT(Appeals) is not income from the letting out of godowns or warehouses. He therefore, directed the Assessing Officer to verify the correctness of the amount and exclude the amount from the exemptible income. 6. Learned departmental representative strongly supported the orders passed by the Assessing Officer. He has also drawn our attention to....
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....a laid down by law. Marketing includes all business activities directed towards the flow of goods and services from producer to consumer. The Parliament has used the expression "authority for marketing of commodities". The authority must promote marketing by its services in the mandated area of its functioning. Warehousing or storage is an essential step in the whole process of marketing. In the case of Gujarat State Warehousing Corporation, the Hon'ble Gujarat High Court held that the Gujarat State Warehousing Corporation to be covered with in the provisions of section 10(29) of the Act. However, in the case of assessee, the warehousing or storaging is not an essential step in the process of marketing but, it a function by way of service and facility for the efficient operation of air transport services. The purpose is not to earn profit from the activity of warehousing but to provide warehousing facility for smooth running air transport services. 7. On the other hand, learned AR for the assessee supported the order of the learned CIT(Appeals) and further submitted that the assessee authority was constituted under an Act of Parliament. Initially, it was constituted as two diffe....
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....he Apex Court in the case of Union of India v. U.P. State Warehousing Corporation 187 ITR 54. Learned counsel for the assessee also relied on the decision of the Allahabad High Court in the case of U.P. State Warehousing Corporation v. ITO 94 ITR 129, as confirmed by the Supreme Court in the case of Union of India v. U.P. State Warehousing Corporation 187 ITR 54. While interpreting provisions of section 10(29) of the Act, it has been held in these decisions that the section applies when the authority is constituted for marketing of commodities. Evidently, such authority will specifically be a business enterprises. Ex-hypothesy, the term "authority" as occurring in section 10(29) cannot be possibly constituted as referring to an authority having quasi-governmental functions. Any legal entity or personality constituted by law for the purpose of marketing commodities would be an authority within the meaning of section 10(29) of the Act. Learned counsel for the assessee pointed out that in the case of U.P. State Warehousing Corporation, while interpreting section 10(29), the court has specifically held that the use of the word "facilitating" seems to refer to functions like gradation o....
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....e storage and processing of goods". Learned DR submitted that exemption u/s 10(29) is available only in respect of warehouses and not in respect of cargo complexes. It is not clear from the records available or with reference to the orders of the lower authorities whether the assessee authority is maintaining cargo complexes or warehouses in accordance with the provisions of Act of 1994. This goes to the root of the matter and therefore, the authorities below should be given an opportunity to examine the issue with reference to the provisions of the AAI Act, 1994. 10. After hearing both the parties, we are of the considered view, that the authorities below have taken decision on the basis of enactment which already stands repealed. Under the IAA Act, 1971, the authority was empowered to establish warehouses alone, whereas under the AAI Act, 1994, the authority is empowered to establish warehouses and cargo complexes. Admittedly, the exemption u/s 10(29) is available on the income from the letting out of godowns or warehouses for storage, processing or facilitating the marketing of commodities. The term "cargo complexes" is not used in section 10(29) of the Act. We further find t....
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.... 3 of the assessment order that the assessee had filed letter dated 30.12.2008 on the issue of exemption u/s 10(29) of the Act. The contents of the said letter have been reproduced by the AO in italics at pages 3 to 6 of the assessment order. For facility, these submissions of the assessee are being reproduced hereunder:- "To fully appreciate the justification for the claim, the provisions of section 10(29) for the relevant assessment year are reproduced as under:- In the case of an authority constituted under any law for the time being in force for the marketing of commodities any income derived from the letting of godowns or ware houses for storage, processing or facilitating the marketing of commodities. (3.2.2) On perusal of the above it is seen that the following conditions are to be fulfilled by an assessee for claiming exemption u/s 10(29) of the Act. (a) It is an authority constituted under any law. (b) It is an authority constituted for marketing of commodities. (c) The exemptible income must be one derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities. (3.2.3) The assessee fulfils all th....
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....odowns and warehouses for storage, processing or facilitating the marketing of commodities the reference to which income has also been made in the Assessment Order. (3.3) Therefore, the assessee fulfills all the conditions set out in Section 10(29) of the Income-tax Act entitling it for the exemption of the income earned by it from letting of warehousing for storage & processing of goods." 24. The factum of the assessee having filed the aforesaid letter dated 30.12.2008 (copy at APB 360 to 367 relevant portion at APB 365 to 367), before the AO stands nowhere disputed by the Department. 25. Paragraph (3.1) of the aforestated letter dated 30.12.2008 filed by the assessee before the AO states as follows:- "(3.1) The exemption of Rs.135,14,65,400/- claimed by the assessee was denied by the assessing officer and addition was confirmed by the CIT(Appeals). The ITAT vide Para 2 of Page 2 of its order has restored the issue to your honour's file to determine whether the assessee is running or establishing the warehouses or cargo complexes." Paragraph (3.3) of the said reply runs as under:- "(3.3)Therefore, the assessee fulfills all the conditions set out in Section 10(29)....
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....d storage facilities in the international air cargo complexes at the airports and it earns revenue from the letting out of such warehouses; (e) (i) Paragraph (3.2.3)(b)(ii) of the assessee's reply expresses this. (f) That the factum of the assessee letting out godowns and warehouses at the airports for the storage, processing or facilitating the marketing of commodities, stood referred to in the assessment order also; (f) (i) Paragraph (3.2.3)(c) of the reply contends so. (g) That the assessee, therefore, fulfilled all the conditions contained in Section 10(29) of the Act and that so, its income from letting of warehouses for storage and processing of goods, was entitled to exemption under the said Section; (g) (i) Paragraph (3.3) of the reply asserts this. (h) That the mandate of Section 12(3)(g) of the Airports Authority of India Act, 1994, had been brought to the AO's notice by the assessee; (h) (i) Observation of the AO. (i) That the assessee had shown income from warehousing separately and that in the original assessment order, the AO had made reference thereto; (i) (i) The AO's finding. (j) That the assessee Authority is a statutory Authority, de....
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....ndustrial Co. Ltd. (supra), that the jurisdiction u/s 263 of the Act cannot be invoked to go into the process of assessment again, merely to find something more. 33. In CIT v. Green World Corporation [2009] 314 ITR 81(SC), it has been held that the AO is an independent authority entitled to pass an order which cannot be interfered with merely because CIT has a different view. In Greenworld Corporation (supra), the Hon'ble Supreme Court has reiterated Malabar Industrial Co. Ltd. (supra). 34. In CIT v. Gabriel India Ltd. [1993] 203 ITR 108 (Mum.), it was held that the Commissioner cannot initiate proceedings under Section 263 of the Act with a view to start fishing and roving enquiries in matters already concluded; that the power under Section 263 of the Act can be exercised only when the assessment order is erroneous and due to this, prejudice has been caused to the interests of the Revenue; that the assessment order cannot be branded as erroneous by the Commissioner because, according to him, the assessment order should have been written more elaborately; and that when the AO has exercised the quasi-judicial powers vested in him in accordance with law and has arrived at a con....
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....over, pertinently, this is not a case of an assessment order bring passed in a scrutiny regular assessment. Rather, the order was passed under Section 254 of the Act, under the specific directions of the Tribunal, which have not been shown to be not carried out by the AO. It cannot be gainsaid that under Section 263 of the Act, the wisdom of the CIT cannot replace that of the AO. It is nowhere the case of the Department that the exemption allowed is wrong or that it is not allowable under the Act. We have observed above, that the AO has duly examined the facts and the record and it is only thereafter that the claim of the assessee has been allowed. As to how the assessment order is written is beyond the control of the assessee. Just because the assessment order is a terse order, this by itself cannot form the basis of invocation of powers under Section 263 of the Act. Reference in this regard may be made to Hari Iron Trading Co. v. CIT [2003] 263 ITR 437 (Punj. & Har.). 38. That apart, even otherwise, it is seen from the material brought on record, that the assessee is entitled to exemption u/s 10(29) of the Act. To reiterate, Section 10(29) of the Act requires that for an incom....
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....ority had established warehouses at the airports. On their coming into existence, the State Warehouses Corporations took over the warehouses. These warehouses were taken over by the International Airports Authority. The International Airports Authority had, as one of its functions, u/s 16(3)(d) of the International Airports Authority Act, 1971, the function of establishing warehouses at airports for the storage or processing of goods. In 1985, the National Airports Authority Act, 1985, came along, establishing the National Airports Authority of India. Section 12(3)(g) of that Act laid down establishment of warehouses and cargo complexes at the aerodromes for storage and processing of goods, as one of the functions of the National Airports Authority of India. The International Airports Authority of India, under the International Airports Authority Act, 1971, and the National Airports Authority of India, under the National Airports Authority Act, 1985, claimed and were granted exemption u/s 10(29) of the Act qua income derived from letting out of warehouses established by them at the airports. In 1987, the airport warehouses of the Central Warehousing Corporation were taken over by t....
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....ional Airport, New Delhi - 110 037. Sub : Vacation of IAAI premises by CWC and settlement of dues of the CWC - Regarding. Sir, Your attention is invited to the correspondence resting with this Office letter of even number (4401) dated 20.9.93 on the above mentioned subject (copy enclosed for ready reference). In this connection, I am also enclosing a photocopy of D.O. letter No. CWC/Ad-Comp/RO Delhi (IAAI) dated 10.1.92 of our Managing Director addressed to Sh. V.K. Mathur, Chairman, IAAI regarding finalization/settlement of account relating to the transport of assets by Central Warehousing Corporation to the International Airport Authority of India and other related issues. Central Warehouse IAC Palam was transferred to the IAAI on 31.3.87 but despite series of correspondence, the issues involved have not been settled. After discussions with Sh. K.J. Ramtani, Sr. Cargo Manager (Disp.), it was felt that issues can be sorted out threadbare in a meeting and accordingly, he was requested to come over for a meeting with other officers with the Commercial Manager of this Office at a time and date convenient to IAAI. However, so far, there has been no response in this r....
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....of three employees who have been posted at CW, IAC Palam from 1.4.88 and the total payment made to these employees works out to Rs. 4,70,784/- upto 30.9.91. Against this expenditure IAAI has released a sum of Rs. 2,72,414.16 leaving a balance of Rs.1,98,370/-. (v) IAAI has deducted a sum of Rs. 22,798/- on account of electricity charges for 6102 units without assigning any reasons which requires elucidation and reimbursement. 3. I shall be thankful if the matter is looked into personally by you and the amounts due is remitted to us at a very early date. Yours sincerely, Sd (R.N. Das) Sh. V.K. Mathur Chairman IAAI New Delhi. Copy to : 1. The Regional Manager, Central Warehousing Corporation, Regional Officer, Delhi, with a request to pursue the matter with the IAAI for settlement of the pending issues. 2. The Manager (Business), CWC, HO, New Delhi." (Emphasis Supplied) 43. From the above letters, it stands clearly confirmed that the airport warehouses of the Central Warehousing Corporation (particularly the one at the Delhi Airport) were transferred to the International Airports Authority of India. 44. By the enactment of the Ai....
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....ts. 48. The contentions of the assessee having been accepted by the AO in the light of the material brought before him, the AO rightly granted the exemption to the assessee u/s 10(29) of the Act. In view of the preceding discussion, it cannot be said that the AO was oblivious of the fact that the assessee was indeed actually running warehouses and cargo complexes at the airports, while so granting the exemption. 49. Apropos the last objection of the learned CIT, i.e., that the AO did not consider the Minutes of the Meeting of the Cabinet Secretariat, held on 25.5.1982, it is not so, as seen above. The Minutes of the said Meeting and the correspondence between the Central Warehousing Corporation and the International Airports Authority of India were filed by the assessee before the AO and it was only on taking these documents into consideration that the assessment order was passed. 50. Insofar as regards the learned DR's contention that no prejudice has been caused to the assessee by the passing of the order under appeal, we do not find any force in this submission. For an order under Section 263 of the Act to be sustainable, the twin conditions of error in the assessment o....
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....ansit and other assets, or tools of the trade, or some assets were 'buildings', or some were 'plant'. The assessee was directed to furnish a detailed list of various assets claimed to be plant and their functions, so that an informed decision could be taken in the matter. 56. In the order dated 27.3.2009, giving effect to the Tribunal's order, the AO observed, inter alia, that the assessee had stated that the technical report had been on the record of the CIT(A), who had made it a part of the appeal order, which was placed on record before the AO; that it had been stated that however, the said report had not been brought to the notice of the Tribunal; that he (the AO) had examined the technical report and the stand of the assessee that the terminal building was being used for regulation of air traffic and communicational and navigational control; that the assessee had explained that the use of the terminal building for passengers was incidental; and that this alone could not be the basis for disallowing part of the depreciation on the terminal building. In this manner, the AO allowed the depreciation on the terminal building, by treating it as a plant and holding the assessee el....
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.... had issued order F.No.202/31/83/ITA II dated 15.2.1984, as per which, the International Airports Authority of India was a Government of India undertaking and was being assessed to income tax by the IAC (Assessment), Range-V, the assessee approached the CBDT stating that the terminal buildings situated at the international airports should be treated as factory buildings entitled for higher rate of depreciation, since they underwent heavy depreciation by virtue of constant varied use for all 24 hours of each day, that they were buildings akin to factory buildings and contained mostly false roofing and were fitted with glass panels and contained sophisticated fixtures, that they were subject to vibrations caused by the jet blast of the jet aircraft and they suffered physically and were entitled to a much higher rate of depreciation; and it had been observed by the Member (IT) of the Board that in view of the special nature of the terminal buildings, depreciation at the rate of 10% may be allowed, treating the terminal building as a factory building and the demarcation of the building into factory and non-factory had to be done carefully after discussing the matter with the assessee's....
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.... technical report formed a part; that the AO observed that the assessee had stated before him that this report had, however, not been brought to the notice of the Tribunal; that he (the AO), had examined the contention of the assessee that the terminal building of the assessee was a tool of business; that it was in this regard that the technical report had been filed; that the assessee had also explained that the terminal building was being used for regulation of air traffic and communicational and navigational control; that it was noted by the AO that the assessee had explained the use of the terminal building to be identical; and that the AO had observed that this alone could not be the basis for disallowing a part of the depreciation on the terminal building. 59. The learned counsel for the assessee has submitted that therefore, a bare perusal of the assessment order shows that the AO has duly applied his mind to the matter; that however, the view of the learned CIT was otherwise, which is not legally tenable; that in response to the show-cause notice issued to the assessee u/s 263 of the Act, the assessee had filed its reply dated 21.12.2010 (copy at APB 345 to 348); that ho....
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....d report comprises of a detailed list of the items included in the terminal building and an explanation as to how they specifically function as a 'plant'; that the assessment order had its basis in this technical report also; that in the order under appeal, the learned CIT has not pointed out any defect in the said report; that still, the learned CIT has directed for another expert report to be filed; that this is not the purport of Section 263 of the Act; that in directing so, the learned CIT is, in fact, sitting in judgment over the order of the Tribunal, which is impermissible in law; that the AO, on the other hand, had duly carried out the directions issued by the Tribunal; that exercising the powers u/s 263 of the Act, a re-examination of an issue already examined has been ordered, which cannot be allowed to be done; that the AO went through the technical report and examined the role of each of the assets of the terminal building, claimed as 'plant'; that the AO's observation that the terminal building is a tool of business of the assessee and it is being used for regulation of air traffic and communicational and navigational control amply shows that the functionality test has....
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....her the assets were for housing the passengers in transit, or tools of the trade, or whether some assets were 'building' and some were 'plant'; that the assessee had been directed by the Tribunal to furnish a detailed list of the various assets, to facilitate the passing of an informed order; that however, as is evident from a bare perusal of the assessment order, and as has been rightly observed by the learned CIT, the assessment order was passed merely relying on the material placed before the CIT(A) in the first round; that on remand, the AO had to seek a fresh technical report, which was not done; that the assessment order contained no finding as to what really constituted the terminal building, i.e., as to whether the escalators and conveyor belts, etc., had been shown as a part of 'building', or separately, as machinery or a 'plant'; that in relying on the technical report which was before the learned CIT(A),the AO had arrived at a conclusion which was contrary to that reached by the CIT(A), making the assessment order bad for this reason alone, since a lower authority cannot sit in judgment over the conclusion of an higher authority; that further, the assessment order did no....
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....ard thereto. It is seen that the matter was remitted by the ITAT to the file of the AO, to examine the various assets of the assessee at the airport, termed as 'terminal building', and to examine as to whether as a whole, they were plant or building, by applying the functionality test, by saying as to whether the assets were for housing the passengers in transit and other assets or tools of the trade, or if some assets were 'building', whereas some were 'plant'. The assessee was directed to furnish a detailed list of various assets claimed to be 'plant' and their functions. 62. On the above directions, the AO called for a reply from the assessee. The assessee duly submitted a reply, as noted in the assessment order also. The AO allowed the assessee's claim on considering the material brought before him. 63. First of all, it remains as a fact that the technical report which was filed by the assessee before the CIT(A), was never before the ITAT. It was, therefore, that the Tribunal observed :- "No technical report has been placed on record to describe the building, its specification or it is specifically designed". It was in this situation, that the Tribunal directed the ....
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....ed while granting the claim of the assessee. 67. Moreover, it remains undisputed that alongwith its return of income, the assessee had filed a detailed chart for claiming depreciation. This chart gave a detailed list of the various assets claimed to be 'plant'. This chart was also before the AO. So far as regards the functions of the assets claimed to be 'plant', the technical report, a copy whereof is at APB 360 to 372, explains the functions of each of the parts of the assets of the assessee. The first part of this report contains a description of the functions of the terminal building, whereas the second part of the report contains a detailed list of the items included in the terminal building, alongwith an explanation as to how they specifically function as a 'plant'. The AO has made specific mention of this technical report in his order. 68. It would be appropriate to reproduce hereunder the technical report placed on record by the assessee, to demonstrate that this report does contain all the details and functions of the assets, as required by the directions of the Tribunal :- "SPECIAL TECHNICAL FEATURES OF AIRPORT TERMINAL BUILDING An Airport Terminal Building ca....
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....as well as in the sky, certain hi-tech equipments are required. These equipments include sophisticated radars, computers and other sensors/electronics gadgets. Some of these gadgets are required to be placed at certain height which is essential for their functioning for which high rise control towers are required to be constructed. The other gadgets are housed in lower height structures depending upon their size and shape. All provisions for elevators, taking heavy cables to the top floor for control tower, overhead radar etc. are made in the structure itself. The Control Towers facilitate the Air Traffic Controller to have an unobstructed view of almost all the areas of an Airport. Such structures need special care during their designing and execution process. These hi-tech control towers equipment with extraordinary sophisticated equipment's is a unique structure made only at the Airports. The Control Towers are used for the day-to-day operation from were ground to aircraft and ground to ground communications are undertaken by the Air Traffic with the help of highly sophisticated equipment's such as Radar, electronic panels etc. The control towers monitors the constant move....
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....e Structure which supports the escalators has to be designed for heavier loads ............. (illegible). (iii) Baggage Conveyor Belts : Baggage Conveyor Belts start from check-in counters and run through .........(illegible) baggage............... (illegible). These belts carry heavy load of baggage and the belts roll over rollers supported on a specially designed structure. As the departure lounge is generally on first or second floor of the building, extra load for this service is also to be accounted for while designing the structure. Wherever the conveyor belts are required to be carried through necessary spacings are made in the walls and where conveyor is moving over sloping portion, a specially designed ramp is constructed with adequate security arrangements to prevent damage/pilferage of the baggage. When the baggage is to be loaded the same is brought down to a level where a group of trolleys of various Airlines are parked for lifting the baggage and taking the same to different Aircrafts and this area is known as Baggage Make-up Area (BMA). When baggage is brought from an arriving Aircraft, the baggage is unloaded and transferred to the conveyor belts and ....
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....stallations has also to be planned and made at various strategic locations. (vii) Air conditioning & Cable Ducts : Air-conditioning and cable ducts also run between the roof slab and false ceiling. These ducts are also suspended from the building's ceiling. In ordinary buildings, these ducts normally run along walls but in Airport Terminal Buildings, because of very large open spaces between walls, it is not possible to run the ducts along walls and therefore, entire load of these ducts has to be borne by the RCC slab in turn to the beams, columns and footings. Air Handling Units (AHUs) are required to be provided at designed locations in order to maintain air pressure and temperature of the Air-conditioning system. These AHUs are quite heavy and therefore, the structure with supports the AHUs is designed for higher static load of upto 100 kg/sqm. There is a provision of water proofing at the floors so that water is not able to seep through the floor and cause damage/rusting of reinforcement. (viii) Aerobridge Shaft and Rotunda : These are the structures constructed only at Airport Terminal Building and nowhere else. The Shaft facilitates passengers to reach th....
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....ns of each and every asset. 70. Besides, undisputedly, the chart for claiming depreciation, filed alongwith the return of income, contains the detailed list of the assessee's various assets claimed to be 'plant'. These documents alongwith other material referred to hereinabove, were before the AO and the assessee offered a detailed explanation. 71. No defect in the technical report has been pointed out by the learned CIT. It is just that he had required another report from an expert to be filed. Now, this, to our mind, is not sustainable in law. In the presence of the technical report placed on record by the assessee, the action of the learned CIT in directing another report to be filed and considered by the AO, amounts to nothing other than substituting such report for that of the assessee. This cannot be allowed to be done under Section 263 of the Act. It was the direction of the Tribunal, which the AO was to carry out and which he did carry out, and the learned CIT cannot sit in judgement over the order of the Tribunal. No-reexamination of an issue already examined can be done in the manner directed by the learned CIT. Then, when the AO observes that the terminal building ....