TaxTMI 
TaxTMI 
2017 (2) TMI 640
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.... learned CIT(A) erred in deleting the disal lowance of Rs. 74,01,325/- incurred oil of perimeter road, treated by the A( ) as capital expenditure, without considering the fact that the entire expenditure has been incurred for complete renovation and replacement of old assets". 2."On the facts and in the circumstance of the case and in law, the learned CIT(A) erred in deleting the disallowance of refurbishment expenses in the nature of civil works amounting to Rs. 24,24,34,541/treated by the AO as capital expenditure, without considering the fact that the entire expenditure has been incurred for renovation, expansion and modernization of the Airport". 3."On facts and in the circumstance of the case and in law, the learned CIT(A) erred in deleting the addition of Rs. 4,43,32,547/- made by the AO u/s. 40(a)(ia), without appreciating that the assessee was liable to deduct tax tinder various sections i.e. 194J, 194C and 195 but had failed to do so". 4."On the facts and in the circumstance of the case and in law, the learned CIT(A) erred in deleting the addition of Rs. 4,43,32,547/- made by the AO u/s. 40(a)(ia), without appreciating that the assessee's tax auditors had poin....
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....ent of the Airport. It was submitted by the assessee that the said expenditure was incurred towards strengthening of the perimeter road of the Airport premises. The AO observed that impugned expenses were actually part of capital work in progress and that work done on perimeter road was meant for complete renovation of the old assets and therefore it cannot be treated as revenue expenditure. It was also observed that assessee should not have adopted different positions for the income tax purposes and for accounting purposes. In view of all these reasons, this amount was disallowed. 4.2. Being aggrieved, the assessee filed appeal before the Ld. CIT(A) wherein detailed submissions were filed. The submissions made by the assessee can be summarized as under: i. The expenditure of Rs. 74,01,325/- on strengthening of perimeter road was to maintain, preserve an existing asset, ii. No new asset has been created, iii. No advantage of enduring nature has been obtained, iv. The expenditure has been incurred to upkeep, preserve and maintain the existing assets, v. The asset was already in use earlier but because of its wear and tear with the passage of time needed repairs, ....
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....cts and nature of expenditure to decide whether it is made for the initiation of business or extension of business or substantially replacement of existing equipment and treatment given in books of accounts could not decide the nature of expenditure. The expenditure would be capital if the expenditure has been incurred to create new assets. However, it will be revenue in nature, if incurred merely in facilitating assessee's operation or enable assessee's business to be carried on effectively, while leaving capital untouched. The similar view is taken by the Hon'ble Apex Court in the case of CIT V/s Associated Cement Companies Ltd. (1988) 172 ITR 257 (SC). If the expenditure incurred does not bring into existence any new assets but only facilitate operation to ensure that the existing runway is maintained properly ensuring safety of the Aircraft or passenger and also Airport premises and no new asset has come into existence the expenditure is revenue in nature. We are of the considered view that it cannot be said that by incurring the expenditure details given hereinabove, a new asset has come into existence giving rise to the assessee of enduring benefits. There is no dispute to th....
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....he tribunal for A.Y. 2007-08, the impugned expenses are held to be allowable as revenue expenditure. Thus, no interference is called for in the decision of the Ld. CIT(A) and therefore, same is upheld in view of detailed and well reasoned findings of the Tribunal for A.Y. 2007-08. Thus, Ground No.1 is dismissed. 5. Ground 2 : In this ground, the Revenue has challenged the action of the Ld.CIT(A) in deleting the disallowance of refurbishment expenses in the nature of civil works amounting to Rs. 24,24,34,541/- which was treated by the AO as capital expenditure. 5.1. It was noted by the AO during the course of assessment proceedings that the assessee had claimed deduction of aforesaid expenses as revenue expenses on account of refurbishment expenses of Terminal 1A and 2C of the Airport. It was further noted that in the return of income it was stated by the assessee that though these expenses were capitalised in the company's books of account, however, in the return of income, these expenses have been claimed as revenue expenses. It was explained by the assessee that these expenses were in the nature of civil works undertaken to improve the aesthetics of these terminals. The ass....
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.... and submissions made by both the sides. It is noted that the primary reason given by the AO for disallowance was that since the assessee has made this claim by filing revised return of income, therefore, it shows that it was an afterthought claim on the part of the assessee. It was further objected to by the AO that the assessee should not have adopted different stands for income-tax purposes and for accounting purposes. It was also observed by the AO that since the assessee was responsible only for the development of new airport therefore, most of the expenses incurred under this head were capital in nature. 5.5. Per contra, the justification given by the assessee was that the expenditure was made to meet the aesthetics of the existing operating terminals. Further, the expenditure was to maintain and preserve an existing asset and no new asset was created. It has also been contended that no advantage of enduring nature has been obtained by the assessee and more so, when the premises in question did not belong to the assessee. The asset was already in use, but because of its wear and tear with paucity of time it needed repairs. It was also strongly contended that the issue of c....
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..../s 40(a)(ia) of the Act. One of the items identified for the disallowance was provision for expenditure of Rs. 4,43,32,547/- on which tax was not deducted at source by the assessee. The assessee was asked to furnish item-wise details of such provisions with actual date of payment. The assessee furnished list of such expenses as well as explanation for non deduction of tax at source. But the AO in the assessment order held that the entire expenditure was liable for deduction of tax at source under various sections, viz. 194C, 194J and 195, and since the assessee failed in deducting tax at source, the AO disallowed the provision for the expenditure. 6.2. Being aggrieved, the assessee filed appeal before the Ld. CIT(A). The assessee filed detailed written submissions before Ld. CIT(A) wherein it was inter-alia submitted that these expenses were provided for in the book of account on best estimate basis. No invoices were raised, quantum of expenditure was not definitely ascertained, and therefore amount of expenses was claimed on most conservative basis. Since invoices were not raised, neither any credits nor any payments were made in the name of any particular vendor, therefore, pr....
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.... by the AO. Nothing has been discussed about the nature of the expenses, position of crystallisation of these expenses, availability of particulars of the payees, etc. It has been observed in the order by Ld. CIT(A) that whenever payments are actually made against these provisions, TDS is deducted as was stated by the Ld. Counsel. But, what are the precise facts in this regard has not been discussed in the order. No details are available or discussed by the Ld.CIT(A) regarding various aspects, e.g. when these expenses were actually incurred, in whose name these are finally credited, who are the actual payees, when the payments were made actually and whether the TDS was deducted at the time of making of payments or not? Nothing has been brought out on record to ensure that finally there was no revenue leakage and full compliance of the TDS provisions was made ultimately. We find that order of Ld. CIT(A) is devoid of any factual narration and, therefore, we find it appropriate to send this issue back to the file of the CIT(A) for complete factual analysis and thereafter applying the correct position of law. Ld. CIT(A) shall provide adequate opportunity of hearing to the assessee. The....
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....ign, construction, up gradation, modernization, finance and management of Airport for an initial term of 30 years, which is extendable for a further period of 30 years on the same terms and conditions as applicable for the initial period, as per Article 18.1 of 'OMDA". Under the terms and conditions of OMDA", the assessee paid a sum of Rs. 150 crores to "AAI" as upfront fee m described under Article 11.1.1 of Chapter-XI of "OMDA" which is reproduced as under: "11.1.1 Upfront Fee The JVC shall pay to the "AAI" an upfront fee (the 'Upfront fee") of Rs. 150 crores (Rupees one hundred and fifty crores only) on or before the Effective date. It is mutually agreed that this Upfront fee is non-refundable (except on account of termination of this agreement in accordance with Article 3.3 hereof and payable only once during the term of this Agreement" Besides, above payment, the assessee is also to pay Annual Fees as per Article 21.1.2.1 for each year during the terms of the agreement. By virtue of above one-time payment of upfront fee of Rs. 150 crores, the assessee has been given exclusive right and authority to collect payment of various nature from the users of Airport pr....
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....e users of the Airport preemies, which is a business or commercial right in the form of license and therefore it is an Intangible assets" as per section 32(1)(ii) of the Act. The Hon'ble Delhi High Court In the case of Hindustan Coca Cola Beverages Pvt Ltd (supra) has also held that the assets which are included in the definition of "intangible assets" include, along with other things, any other business or commercial rights of similar nature. In this regard, it is relevant to state that the decision of Delhi High Court in the case of ONGC Videsh Ltd (supra) has held that the assessee who was assigned the rights to participate in oil exploration in Russia through a consortium for a period of 25 years and paid the total consideration for obtaining 20% membership in the consortium, amounting to Rs. 155.9 crores, was treated to acquire a license, being intangible assets, and thus assessee was entitled to claim depreciation u/s 32(1)(ii) of the Act. The Pune bench of the Tribunal in the case of Ashoka Info (P) Ltd (supra) has also held that the expenditure incurred on construction of highway is eligible for depreciation @25%, as this expenditure has given rise to an 'intangible....
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....of Rs. 3,90,000/- out of total interest of Rs. 39,00,0000/-. 8.2. Being aggrieved, the assessee filed appeal before the Ld. CIT(A) and also filed exhaustive submissions supported with various evidences for justifying the claim of interest and for disputing the disallowance made by the Assessing Officer. Ld. CIT(A) was satisfied with the submissions of the assessee and deleted the disallowance. Being aggrieved, Revenue is before us. 8.3. During the course of hearing before us, the Ld. CIT-DR vehemently contested the order of Ld. CIT(A) and submitted that Ld.CIT(A) has passed a very cryptic order on this issue. No proper reasoning has been given while allowing the relief and submissions made by the assessee have been blindly accepted while deciding this ground. 8.4. Per contra, the Ld. Counsel of the assessee submitted that exhaustive details were submitted but nothing wrong has been pointed out therein by the Ld.CIT(A) or by the Ld. CIT-DR and, therefore, the order of the Ld.CIT(A) on this issue should be upheld. Our attention was also drawn upon the details and evidences submitted before the Assessing Officer. 8.5. We have gone through the order of the lower authorities....
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....to the capital heads as it was first year of operation during which assessee had embarked upon massive investments in capital outlays for modernisation and development of the airport. During the year under consideration, the assessee furnished reply before the Assessing Officer vide letter dated 20-12-2010 furnishing a statement containing item-wise details of apportionment of indirect expenses after making analysis of the details furnished by the assessee. The Assessing Officer was of the opinion that the assessee had omitted to apportion expenses incurred on legal and professional charges amounting to Rs. 19.22 crores. As per the Assessing Officer, a portion of these expenses was prima facie allocable to capital work-inprogress. Thus, after deducting a sum of Rs. 19,22,000 (i.e. depreciation @10%, the Assessing Officer allocated balance amount of Rs. 1,72,98,000 towards capital expenses out of the total legal and professional charges claimed by the assessee. 9.2. Being aggrieved, the assessee filed appeal before Ld. CIT(A). The assessee made detailed submissions, and accepting the same, Ld. CIT(A) deleted the disallowance made by the Assessing Officer. 9.3. Being aggrieved,....
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....f the Income Tax Act, 1961. The Appellant prays that the same may please be deleted. Ground No. 2: On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the disallowance of the provision for leave encashment of Rs. 13,782,831/made on the basis of an actuarial valuation by relying on the decision of Calcutta High Court in the case of Exide industries Ltd. v Union of India (292 ITR 470). The appellant prays that the same may be allowed. Ground No. 3: On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in conf irming the stand of A.O. that the Passenger Service Fee - Security Component [PSF(SC)] of Rs. 1,32,58,59,023/- forms part of the taxable income of the appellant. The appellant prays that PSF (SC) is not the income of the appellant. Hence, the addition on this account may please be deleted. Ground No. 4: On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the depreciation al lowance to 10% as applicable to Buildings instead of 15% as appl icable to Plant and Machinery, on the expendi ture incurred by the appellant on taxiways , taxi track and p....
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....essee made voluntary disallowance of Rs. 1,62,500/-. In support of it, following working was submitted by the assessee before the lower authorities: 1. In case of investments done from Operations Surplus funds, interest cost is considered to be NIL. 2. Payroll costs are as follows: AVP Finance -5% of his CTC for 8 months, as investment activity done from August, 2008 1,00,000 Mgr.(Fin) - 5% of his CTC for 8 months as he has been appointed since January,2008 12,500 Total A 1,12,500 3. Other administrative costs are app. 50,000 Total B 1,62,500 AO did not record any satisfaction about the correctness of the claim or otherwise having regard to the accounts of the assessee. We find that this issue is no more res integra. In the case of Ashish Jhunjhunwalla (supra) authored by one of us, i.e. Hon'ble JM, Hon'ble Kolkatta Bench of the Tribunal after considering umpteen number of judgements available on this issue, held as under :- "6. We find from the facts of the above case that the AO has not examined the accounts of the assessee and there is no satisfaction recorded by the AO abo....
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....ent of the Hon'ble Supreme Court in the case of Excel Industries Ltd (supra). It was also submitted that the amount actually paid should be allowed. 13.4. Per contra, the Ld. CIT-DR did not raise any objection and submitted that proper appreciation of facts have not been done in this case and he would have no objection if this issue is sent back to the file of the AO. 13.5. We have gone through the orders passed by lower authorities on this issue. It is noted that none of the authorities have narrated proper facts as to whether the total amount debited under this head was on account of provision or some part of it was paid also. Further, it is also not coming out whether provision for leave encashment has been made on the basis of actuarial basis or not. In our view, this issue needs to go back for proper verification of facts, and therefore, we send this issue back to the file of the AO for proper adjudication after considering all the facts and the judgments in this regard for which the AO shall give adequate opportunity of hearing to the assessee. The assessee shall submit requisite details and documentary evidences to bring complete facts on record and place all the judge....
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....e of the assessee amounting to Rs. 132.59 crores. 14.2. However since the assessee was not satisfied with the assessment order, it contested the issue of taxability of the aforesaid amount before the Ld. CIT(A) and made exhaustive submissions challenging the taxability of the impugned amount as part of its taxable income mainly on the ground that the aforesaid amount had no attributes of income as far as taxability of the same was concerned in the hands of the assessee company. But Ld. CIT(A) did not agree with the submissions of the assessee mainly for the reason that MOCA (Government of India) had issued guidelines clarifying that PSF-SC was taxable in the hands of the assessee notwithstanding that the aforesaid receipt was fiduciary in nature in the hands of the assessee. 14.3. Being aggrieved with the order of the Ld. CIT(A), the assessee is before us. During the course of hearing before us, the Ld. Counsel of the assessee made exhaustive arguments to impress upon the point that the impugned amount collected by the assessee from the passengers on behalf of Ministry of Civil Aviation, Government of India (MOCA, for short) was not in the nature of income and thus not taxabl....
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....2 (SC) to hold the impugned amount as taxable receipt in the hands of the recipient. He submitted detailed analysis carving out the distinction between facts of aforesaid judgement and facts of assessee's case. He emphasised that reliance on the said judgement is out of context and misplaced. 14.4. Per contra, the Ld. CIT-DR submitted that after detailed discussion during the assessment proceedings, the assessee himself offered this amount for tax and also submitted that in this case the CBDT and MOCA have already expressed their opinion vide their notification that the impugned amount is taxable in the hands of the assessee company. He submitted that office memorandum issued by CBDT cannot be challenged in the court of law. 14.5. In the rejoinder, the Ld. Counsel reiterated his submissions and also relied upon the judgment of Hon'ble Supreme Court in the case of UCO Bank 237 ITR 889 (SC) and also submitted that assessee is not rendering any security services but only acting as a conduit by collecting the impugned amount on behalf of the government and disbursing it for security purposes strictly in accordance with the rules, regulations and guidelines of the concerned author....
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....airline and then handed over to the assessee company for the sake of administrative convenience. As per terms, the PSF was chargeable @ Rs. 200 per passenger, out of which Rs. 70/- (i.e. 35% of PSF) was for use of assessee company for passenger facilitation services and the balance amount of Rs. 130/- (i.e. 65% of PSF) was to be utilised for payment to security agency designated by the central government for providing security services at airport and the said component was called as Passenger Service Fee-Security Component (in short referred to as PSF-SC). The said portion i.e. Rs. 130/- (65% of PSF) was deposited in an 'Escrow Account' pending utilisation. 14.9. During the year under consideration, the assessee included passenger facilitation component of PSF (i.e. Rs. 70/- being 35% of PSF) as income of the assessee company. But the balance amount of Rs. 130/- (i.e. 65%) portion was kept in separate 'Escrow Account' for which separate books of account were maintained in accordance with the Standard Operating Procedure (SOP) formulated by MOCA and, therefore, the same was not included in the income of the assessee company. The assessee company did not include revenue pertaining....
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...., assessee is bound to pay tax thereon and if an amount is not taxable under the Incometax law, then the tax cannot be recovered from the assessee without authority of law merely because assessee offered the same to tax during the course of assessment proceedings. Law in this regard is well settled now, and to begin with, reference is made on the landmark judgment of Hon'ble Delhi High Court in the case of CIT vs Bharat General Reinsurance Co Ltd 81 ITR 303 (Del.) Relevant portion from it is reproduced below: "It was true that the assessee itself had included that dividend income in its return for the year in question, but there was no estoppel in the Income-tax Act and the assessee having itself challenged the validity of taxing the dividend during the year of assessment in question, it must be taken that it had resiled from the position which it had wrongly taken while filing the return. Quite apart from it, it was incumbent on the income-tax department to find out whether a particular income was assessable in the particular year or not. Merely because the assessee wrongly included the income in its return for a particular year, it could not confer jurisdiction on the departme....
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....im and ensure that only legitimate taxes due are collected." [Para 20] 14.13. In the case of CIT vs Lucknow Public Educational Society 318 ITR 223, it was observed by Hon'ble Allahabad High Court that the income tax department should not take undue advantage of the ignorance of the assessee in view of Board's Circular No. 14(XL-35)/1955, dated 11-4-1955. 14.14. In the case of Nirmala L Mehta vs CIT 269 ITR 1, Hon'ble Bombay High Court, relying upon Article 265 of Constitution of India held that acquiescence cannot take away from the taxpayer, the relief he is entitled where tax is levied or collected without authority of law and, therefore, merely because the taxpayer offered a receipt to tax, that cannot take away its right in contending that the said amount was not chargeable to tax. 14.15. In the case of Balmukund Acharya vs DCIT 310 ITR 310 (Bom), Hon'ble Bombay High Court observed that the Apex Court and various High Courts have ruled that authorities under the Income-tax law are under an obligation to act in accordance with law. Tax can be collected only as provided under the Act. If an assessee, under a mistake, misconception or not being properly instructed is over....
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....ure of income of the assessee and liable to be taxed in its hands. In support of its view, reliance has been placed by the Board on the judgement of Hon'ble Supreme Court in the case of Chowringhee Sales Bureau vs CIT 87 ITR 547 (SC) with a view to fortify its opinion. Subsequently, Ministry of Civil Aviation's office issued an order dated 19-01-2009 laying down accounting / audit procedure in respect of PSF-SC. It was intended to act as Standard Operating Procedure (SOP) for accounting / audit of PSF-SC by the airport operator. In the aforesaid document, the whole procedure was duly explained how the amount has to be collected and to be kept in escrow account and to be disbursed for the purpose of security. Relying upon the Office Memorandum issued by the CBDT dated 30-06-2008, it was mentioned therein that the tax component may be charged to the PSF-SC account in proportion to its liability on standalone basis. The assessee was of the opinion that the aforesaid amount was not taxable in the hands of the assessee company, and therefore, while filing the return the same was not included in the taxable income by the assessee. But during the course of assessment proceedings, the AO w....
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....aforesaid judgment in the case of CIT vs. Sita Ram Sri Kishan Das 141 ITR 685 (All). In this case, the facts were that said assessee was a commission agent and was accountable for the recovery (called as Market Fee) which he made from the sellers of agricultural produce in terms of Krishi Utpadan Mandi Rules framed under the U.P. Krishi Utpadan Mandi Adhiniyam, 1964. The Revenue treated the amount so collected by the agent as part of its taxable income being a trading receipt in view of judgment of Hon'ble Supreme Court in the case of Chowringhee Sales Bureau vs CIT 87 ITR 547 (SC), supra. After analysing the facts of the case, it was held by the Hon'ble Court that the market fee realised by the commission agent does not form part of his trading receipt as he (the commission agent) held this amount only as a trustee for and on behalf of the Market Committee. Hon'ble Court applied the judgment of Hon'ble Supreme Court in the case of CIT vs. Sitaldas Tirathdas 41 ITR 367 (SC) and distinguished that of Chowringhee Sales Bureau P. Ltd. vs. CIT, supra. 14.20. Thus, at the outset, it is clearly visible that both the authorities expressed their opinions without proper application of mi....
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....instructions and directions shall be binding upon the incometax authorities. It is noted that Income-tax Appellate Tribunal does not fall under the list of Income-tax Authorities as has been provided in section 116 of the Act. Thus, these orders, instructions and directions shall not be binding upon the Income-tax Appellate Tribunal. Further it is noted that these have been held to be not binding upon the CIT(A) as stated above. Therefore, there is no question of there being any binding effect upon the Income-tax Appellate Tribunal of any such communication issued by the Board. 14.23. It is noted by us that this issue is not res integra, as it has been settled by Hon'ble jurisdictional High Court and Hon'ble Supreme Court in many cases. It was held by Hon'ble Bombay High Court in the case of Banque Nationale De Paris vs CIT (supra) that circulars cannot override or detract from the provisions of the Act in as much as section 119 of the Act has empowered the CBDT to issue orders, instructions or directions for the proper administration of the Act. Hon'ble High Court has taken into consideration various earlier judgments of Hon'ble Supreme Court on this issue. Similarly, the Hon'b....
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....d by the assessee as well as by the appellate courts while determining the taxability of the impugned amount. 14.25. Thus, the aforesaid discussion take us to the third issue wherein we have been called upon to decide whether the impugned amount of PSF-SC collected by the assessee company on behalf of MOCA as per the relevant regulations for the purposes of meeting security expenses can be characterised as income in the hands of the assessee company and made liable to tax in its hands. 14.26. The brief facts related to the issue have already been narrated by us in earlier part of our order and just to recapitulate the relevant part of it, the licensee of an airport in terms of provisions of Rule 88 of Aircraft Rule, 1937, is responsible for collecting a fee from embarking passengers referred to as Passenger Service Fee (PSF) @ Rs. 200/- per ticket. Portion of PSF being 35% was on account of providing passenger facilitation and was to be retained by the airport operator for providing passenger related services and the balance 65% of PSF represents security component to be utilised for payment of security agency, i.e. CISF, who is designated by the Ministry of Home Affairs for ....
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....s issued by the Ministry of Civil Aviation from time to time under which, the assessee functions as an Airport Operator-the receipts being fiduciary in nature, and the mandatory instructions issued by the Ministry of Civil Aviation from time to time under which, the assessee functions as an Airport Operator make it taxable. When confronted by the second reconfirmation by the Ministry of Civil Aviation on 15.11.2010, the appellant had no other option, but to offer the receipts to tax for A.Y. 2008-09. Thus, as stated by the appellant on merits and in law that although the receipts of PSF (SC) in the hands of the appellant do not partake the character of income and by the 'Doctrine of Overriding Title' as they are to be utilized for security purposes-the issue being highly debatable and a legal difference of opinion being there the same has been offered for taxation. Hence I confirm this addition by the A.O. and thus, this ground of appeal is dismissed." 14.28. It is noted by us that both of the authorities got influenced and swayed away with the opinion expressed by the CBDT/MOCA and admission made by the assessee under certain circumstances emerged during the course of a....
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.... in the Escrow account by the Airport Operator for payments to be made to CISF. The Escrow account would be subject to Government Audit of CAG. iv. In case any amount remains, this will be transferred to AAI by the airport operator through a process of mutual consultation for payment to CISF deployed for security purposes at other airports. In case of a dispute, the matter may be referred to the Ministry, of Civil Aviation whose decision will be treated as final and binding on both parties. 2. The new procedure will be effective from 01.042006. 3. This issues with the approval of the Minister of State for Civil Aviation (Independent charge)." 14.31. Subsequently another order was passed by MOCA dated 20th June, 2007 wherein it was inter alia clarified that security component of PSF was not regular revenue of the airport operator and the aforesaid amount will be utilised at the airport concerned only to meet security related expenses of that airport. Relevant part of the order is reproduced below:- "ORDER Sub: Collection of Passenger Service Fee (PSF) at Greenfield / Private airports - regarding. In this Ministry's Order of even no. dated 09.05.2006 on the s....
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....ee merely acted as a conduit or a trustee for collection and disposal of the impugned amount of PSF-SC. Under these circumstances, the aforesaid amount could not have been characterised as 'income' u/s 2(24), section 5 or any other provisions of the Income-tax Act, 1961. 14.33. It is noted that subsequently MOCA issued another order dated 19-01-2009 containing Standard Operating Procedures for accounting / audit of Passenger Service Fee (Security Component) by the airport operators. The aforesaid order contained whole procedure in detail for collection and disbursement of the said amount. Relevant portion of the same is reproduced hereunder, for the sake of better clarity on facts related to conditions attached with regard to collection and disbursement of the aforesaid amount: "2. Nature of Security component of PSF: 2.1 Aviation security is an activity reserved for the Government of India. Force deployment at the airports, security requirements including the requirement of capital items and specifications thereof are laid down by the Government/Bureau of Civil Aviation Security (BCAS). As stated above, PSF is levied under Rule 88 of the Aircraft Rules, 1937 and covers se....
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....CA order dated 20.6.2007 or any other decision of MOCA/BCAS or any other Government agency, from time to time. iii) Deployment of Surplus: Any surplus standing at the credit of the Escrow Account should be deployed by the Escrow Bank in its own Deposit Account. On maturity or otherwise, the proceeds, shall be credited in Escrow Account. 14.34. The perusal of the above order containing SOP makes it clear that the amount collected by the airport operator is to be kept separately in 'Escrow Account' and the same is held by the airport operator in fiduciary capacity. It becomes further clear that the amount of any surplus left in the said account could not have been utilised for any purpose other than security related expenses. Under these circumstances, it was clearly not having any characteristics of income in the hands of the assessee company. The said SOP also contained certain guidelines with respect to taxability of the impugned amount. In our view, MOCA is not the designated authority to determine the taxability of the said amount as has also been discussed by us in detail in earlier part of our order and, therefore, to that extent, the observations or guidelines issued by....
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.... income, but for and on behalf of the person to whom it is payable." 14.38. Subsequently, in many judgments, various courts have, from time to time, analysed the law in this regard and suggested various tests to find out whether in a give facts it was a case of 'diversion' or 'application' of income. We find that the Hon'ble Allahabad High Court in the case of U.P. Bhumi Sudhar Nigam vs CIT 280 ITR 197 (All) formulated a set of four tests to find out whether in a given situation, it would be a case of diversion of income by overriding title or not. The Hon'ble Court, after analysing various other judgments suggested following principles:- (i) If a third person becomes entitled to receive an amount under an obligation of an assessee even before he could claim to receive it as his income, there would be a diversion of income by overriding title but when after receipt of the income by the assessee, the same is passed on to a third person in discharge of the obligation of the assessee, it will be a case of application of income by the assessee and not of diversion of income by overriding title. (ii) If income does not result at all, there cannot be a tax, even though in book-k....
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....le. In a matter before Hon'ble Bombay High Court in the case of Somaiya Organo Chemicals Ltd vs CIT 216 ITR 291 (Bom), the facts were that a portion of the sales price was transferred to a separate fund for building up adequate storage facilities under a statutory obligation, it was held to be diverted at source by overriding title could not form part of assessee's income. 14.42. Ld. Counsel had also relied upon before us the judgment of Hon'ble Madras High Court in the case of CIT vs Salem Co-operative Sugar Mills Ltd (supra). The facts in this case were that the said assessee was a cooperative society, carrying on business of manufacturing and sale of sugar and in terms of Molasses Control (Amendment) Order dated 06-02-1972, transferred a sum in conformity with the statutory obligation cast by the above order and claimed it as deduction in the computation of its total income for the assessment year 1975-76, which was disputed by the Revenue but allowed by the Tribunal. Hon'ble High Court affirmed Tribunal's order and observed that even before collection of the amount as directed by the Central Government under the Molasses Control ('Amendment) Order, the assessee was direc....
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....f Airport Authority of India for meeting security expenses. We had directed the assessee as well as the Ld. CIT-DR to examine requisite facts and inform us whether there was surplus or deficit in the escrow account finally. The information provided by the Assessing Officer, through Ld. CIT-DR, vide his letter dated 06-09-2016 reveals that upto the assessment year 2013-14 though there was surplus in the said account, but from A.Y. 2014-15 onwards, there was huge deficit, meaning thereby, the expenditure was more than the amount of collection. As per the terms of SOP issued by MOCA, if ultimately there was some deficit, then it was required to be funded by Government of India, and if there was ever any surplus (i.e. unspent amount), it was to be transferred to the account of Airport Authority of India (AAI). Thus, viewed from this angle also, there was no question of there being any income in this exercise, much less, any income, which could be characterised as taxable income in the hands of the assessee company. Thus, we have no hesitation in holding that the aforesaid amount is not taxable as income in the hands of the assessee company. The AO is directed to recompute the income of....
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....appeal before the Ld. CIT(A), the assessee made detailed submissions and provided detailed break-up of aggregate expenditure of Rs. 17.52 crores incurred on these structures. The assessee also placed reliance on many judgments in its favour. The CIT(A) was not satisfied with the submission of the assessee and rejected the claim of the assessee by relying upon his earlier order for A.Y. 2007-08. 15.3. During the course of hearing before us, it was pointed out by the Ld. Counsel that CIT(A)'s order for A.Y. 2007-08 had reached upto the Tribunal, wherein the Tribunal had allowed the claim of the assessee by holding that the assessee is eligible for depreciation @15% applicable to plant and machinery on these structures. 15.4. Per contra, the Ld. DR relied upon the orders of lower authorities and did not make any distinction in facts between the assessment years 2007-08 and 2008-09. 15.5. We have gone through the orders passed by lower authorities. From the details brought before us, it is noticed by us that the assessee had incurred an aggregate amount of Rs. 17.52 crores on taxi ways, aprons and runways. It is noted that similar expenditure was incurred by the assessee in A.....
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....of plant and not a part of building. Ld. AR referred the decision of the Hon'ble Apex Court in the case of CIT V/s Karnataka Power Corpn. (2000) 247 ITR 268 (SC) and submitted that the power generating station building is held to be a plant. He submitted that such structures are specific for the purpose of business of the assessee and the assessee is entitled for depreciation at rate as applicable to plant and machinery. 34. On the other hand, ld. DR supported the orders of authorities below. He submitted that assessee itself has claimed depreciation at the rate of 10% in the return as applicable to building. 35. We have carefully considered the orders of authorities below and submissions of ld. Representatives of the parties. There is no dispute to the facts that runway, taxiway are necessary part of Airport operation and are specific part of infrastructure for use of aircrafts. These are not merely concrete structures. The Hon'ble Bombay High Court in the case of CIT V/s Mazagaon Dock Ltd (1991) 191 ITR 460(Bom) has held that dry dock and wet dock created for ships are to be treated as plant and not building. The Hon'ble Apex Court has held in the case of Karnataka Power Co....