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2017 (11) TMI 905
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....d in law, the Ld. CIT(A) erred in confirming the disallowance of the provision for leave encashment of Rs. 2,14,68,986/-- 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 restricting the depreciation allowance to 10% as applicable to Buildings instead of 15% as applicable to Plant and Machinery, on the expenditure incurred by the appellant on taxiways, taxi track and parking bays." The Revenue in ITA NO. 4675/Mum/2013 for A.Y. 2009-10 has raised the following effective grounds of appeal: 1) "On the facts and in the circumstances 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. 40,54,97,763/-- treated by the Assessing Officer as capital expenditure, without considering the fact that the entire - expenditure has been incurred for renovation, expansion and modernization of the Airport.". 2) "On the ....
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....s. 39,35,444/-(Rs. 43,72,716 - 10% depreciation thereon = Rs. 4,37,272/-), without considering the fact that the Assessing Officer was justified in allocating / apportioning 10% of the said total expenditure of Rs. 4,37,27,160/-." 3. Subsequently, the assessee for A.Y. 2010-11 has taken similar grounds of appeal as taken in A.Y. 2009-10 except for the change in figures in ground nos. 1 & 2. In ground no.1 the figure of Rs. 60,85,217/- be read as Rs. 30,85,000/- and in ground no.2 the figure of Rs. 2,14,68,986/- be read as 3,19,60,734/- The Revenue for A.Y. 2010-11 has taken the following effective ground of appeal: 1. "On the facts and in the circumstances of the case and in law the learned CIT(A) erred in deleting the disallowance of 25% depreciation on upfront fees of Rs. 150 Crores, without considering the fact that the assessee has not acquired any absolute rights over the Airport, so as to equate it with a license, but instead the AAI has granted the assessee the right to perform certain functions during the contract period of 30 years and hence, the assessee is entitled for deduction of only the proportionate amount i.e. 1/30th of Rs. 150 Crores." 2. "....
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....nection with the voluntary retirement of employees" 9. "On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in relying on the decision of the Hon'ble Bombay High Court in the case of CIT Vs Sinnar Bidi Udyog Ltd (2002 123 Taxman 559 Bom) and CIT Vs Margarine & Refined Oils Co. Ltd (2006 282 ITR 576 (Kar)) without appreciating that the said decisions were rendered for the AY 1989-90 and AY 1981-82 respectively i.e. prior to insertion of Section 35DDA which is applicable for AY 2002-03 onwards as the same was inserted by the Finance Act, 2001 w.e.f. 01-04-2002, and therefore the ratio of the decisions cited supra is not applicable to the Assessment Year under consideration." 10. "On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that Development Fee of Rs. 286,30,14,565/- collected by the assessee from the embarking passengers at the Chhatrapati Shivaji International Airport, Mumbai during the Financial Year 2009-10, relevant for the assessment year 2010-11, is a capital receipt and not a revenue receipt." 11. "On the facts and in the circumstances of the case and in law, the learned CIT(A....
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....re since Rule 8D is invoked, the disallowance has to be worked out as per the form prescribed therein and there is no scope for any deviation therefrom"?. 6(b)"Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the disallowance u/s 14A observing that since there is no exempt income no disallowance can be made u/s 14A without appreciating that as held in the decision SB-ITAT, Delhi in the case of Cheminvest 121 ITD 318 (Delhi) (SB), provisions of S 14A t applicable even though no exempt income has been earned during the year."? 7."Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the assessee's claim that capital expenditure incurred by the assess on taxiways, aprons, parking bays and bridges is entitled to depreciation @ 25 % treating the same as Plant & Machinery ignoring that the taxiways, aprons, parking be as akin to Roads and Buildings and therefore, entitled to depreciation @ 10 %.?" 5. At the outset the learned AR before us pointed out that he has taken additional ground of appeal in each of the assessment years except with the change in ....
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....onal Thermal Power Corporation v. CIT (supra), the question of law arising from the facts, which are on record, can be raised before the Tribunal for the first time and the Tribunal is bound to consider the said ground to assess the correct tax liability. In the case of Jute Corporation of India vs. CIT (supra), the Hon'ble Supreme Court has held as under: "An appellate authority has all the powers which the original may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provision. In the absence of any statutory provisions, the appellate authority is vested with all the plenary powers, which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income-tax Officer." In view of this decision there is no curtailment of the power of the appellate authority in entertaining the additional ground. Not only this, we noted that the Bombay High Court (FB) in the case of Ahmedabad Electricity Co....
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....ts are app. 75,000 Total B 3,25,000 The Assessing Officer was not satisfied with the working of the assessee and he was of the opinion that in view of the decision of Hon'ble Bombay High Court in the case of Godrej and Boyce Mgf. Co. Ltd. vs. DCIT & Anr. (234 CTR 1), it was obligatory from A Y 2008-09 on the part of the Assessing Officer to compute the disallowance of expenditure by following the method prescribed in Rule 8D in the event the Assessing Officer is not satisfied with the correctness of the amount of expenditure disallowed by the assessee attributing the same to the earning of exempt income. The Assessing Officer since noted that the assessee made huge investment in various shares and mutual funds, therefore, he computed the disallowance as per Rule 8D as under: (i) The amount of expenditure directly relating to income which does not form part of total income - - (ii) Proportionate of interest expenditure computed in accordance with the formula given n Rule 8D(2)(ii) (A x B/C) - - (iii) Amount equal to one-half percent of the average of the value of investmen....
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.... case that the AO has not examined the accounts of the assessee and there is no satisfaction recorded by the AO about the correctness of the claim of the assessee and without the same he invoked Rule 8D of the Rules. While rejecting the claim of the assessee with regard to expenditure or no expenditure, as the case may be, in relation to exempted income, the AO has to indicate cogent reasons for the same. From the facts of the present case it is noticed that the AO has not considered the claim of the assessee and straight away embarked upon computing disallowance under Rule 8D of the Rules on presuming the average value of investment at ½% of the total value. In view of the above and respectfully following the coordinate bench decision in the case of J. K. Investors (Bombay) Ltd., supra, we uphold the order of CIT(A). This appeal of revenue is dismissed." 12.5. Subsequently, aforesaid judgment has been approved by the Hon'ble Calcutta High Court in these very words by passing a detailed order which has been mentioned above. In addition to that it is noted by us that similar view has been taken in the other judgements cited by the Ld. Counsel as mentioned by us in ea....
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.... 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 judgements as may be considered appropriate as per law and facts. The AO shall decide this issue afresh after taking into account all the material held on record and all the judgements as available at that time on this issue. This ground may be treated as allowed for statistical purpose. Respectfully following he said decision, we restore the issue to the file of the Assessing Offi....
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....ture of places which are used by Aircrafts for taxing, parking. Accordingly they are not in the nature of plant. Hence, assessee is in appeal before the Tribunal. 33. During the course of hearing, ld. AR reiterated the submissions as made before the First Appellate Authority and stated that aprons, taxiways and runway are not only the structures but they are structures for specific purposes which can be considered as tools for the purpose of business of the assessee. Ld AR referred the decision of the Mumbai Bench of Tribunal in the case of National Airports Authority of India V/s CIT [2011] 134 ITD 34 (Delhi), wherein it was held that the terminal place used for regulation of air traffic and communicational and navigational control are part of tool of business of the assessee and therefore they constitute part of the plant. Thus the assessee is accordingly entitled for depreciation as applicable on plant and machinery. The ld. AR referred the decision of the Hon'ble Apex Court in the case of CIT V/s Dr. B. Venkata Rao (2000) 243 ITR 81(SC) and submitted that in the case of an operation theatre in the hospital, it has been held to be a part of plant and not a part of build....
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....ts or on legal position. Therefore, respectfully following the order of the Tribunal for A.Y. 2007-08, this issue is decided in favour of the assessee, and therefore, the claim of depreciation @15% is directed to be allowed. This ground may be treated as allowed." Respectfully, following the said decision of this Tribunal, we direct the Assessing Officer to allow depreciation to the assessee @15%. Thus, ground no.3 in A.Ys. 2009-10 & 2010-11 in assessee's appeal are allowed and ground no.7 in Revenue's appeal for A.Y. 2011-12 is dismissed. 13. The additional ground taken by the assessee in all these three years read as under: "On the facts and in the circumstances of the case and in law, the learned CIT(A) ought to have held that the Passenger Service Fee - Security Component [PSF (SC)] of Rs. 88,57,17,812/- is not the income of the appellant and he ought to have directed the assessing officer to exclude the same from the total income of the appellant." The amount of Rs. 88,57,17,812/- be read as Rs. 82,75,79,038/- for A.Y 2010-11 and Rs. 66,62,27,686/- for A.Y. 2011-12. 14. We have already admitted the additional ground taken by the assessee in all the three y....
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....ee (PSF) from all the passengers embarking at the airport. The said fee was initially collected by the concerned 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, t....
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....lead to chaotic situation and administration of tax would become impossible. Therefore, if an amount is taxable under the law, assessee is bound to pay tax thereon and if an amount is not taxable under the Income tax 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 be....
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.... assessee, under a mistake, misconception or on not being properly instructed, is overassessed, the authorities under the Act are required to assist him 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 ....
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....ess and assessee was rendering facilitation and securities services whether in-house or outsourced, therefore, the amount collected by the assessee in the form of PSF-SC was in the nature 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....
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....d scope of its applicability was explained time to time. In one such matter having similar facts as to the assessee before us, Hon'ble Allahabad High Court explained correct application of 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....
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....s actually an "Office Memorandum". It is an interdepartmental communication. In our view, Office Memorandum would not carry the legal force of binding effect. Further, it has been provided in section 119 that orders, instructions and directions shall be binding upon the income tax 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 C....
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....the taxability of the impugned amount. It clearly had no jurisdiction in holding the same as taxable and, therefore, to that extent its order / clarification has no authority in the eyes of law and the same has been rightly ignored 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 r....
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....dated 15.11.2010. Therefore, the appellant had erroneously resisted from offering the receipts on account of PSF(SC) to tax purely on the basis of its own belief that PSF(SC) receipts are fiduciary in nature, thereby ignoring the mandatory instructions 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 groun....
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....operator would retain Rs. 70/- towards passenger facilitation. An Escrow account would be opened whenever the airport operator is a JVC or private operator. This account will be operated by the airport operator (not by AM). Rs. 130/- of the PSF collected per passenger by such airport operator would be deposited 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 afo....
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.... all to utilise the aforesaid amount for any other purposes other than the designated purpose of meeting security expenses. So much so, even the surplus left if any, was not at the disposal of the assessee company but was to be mandatorily transferred to the account of Airport Authority of India as per the prescribed procedure. Under these circumstances, it is clear that assessee 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. ....
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.... by JVC/Private Operators of amounts deposited into the PSF (SC) account only towards the following purposes, in the order of priority by descending under: a. To pay amounts towards taxes, including Income Tax on PSF(SC) income as per provisions of Income Tax Act, 1961, Service Tax or any other statutory does. b. To pay for security related expenses to Central Industrial Security Force (CISF). c. To pay other security related expenses in terms of MOCA 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 ....
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....ible; but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow. It is the first kind of payment which can truly be excused and not the second. The second payment is merely an obligation to pay another a portion of one's own income, which has been received and is since applied. The first is a case in which the income never reaches the assessee, who even if he were to collect it does so, not as part of his 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 b....
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....uld be determined. It is noted by us that in the facts before us, no portion of the amount collected on behalf of AAI / MOCA is reported to have been retained by the assessee as its income in as much as nothing belonged to it. Thus, the impugned amount is clearly not taxable in the hands of the assessee. 14.41. It is further noted by us that in many cases, wherein under some requirement of law if the amounts were transferred to the designated fund, then in such cases the Courts have held it to be a case of diversion of income by overriding title. 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 o....
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....aintained by the assessee is simply a pool created by the MOCA through assessee for meeting security expenses. Under these circumstances, if at all any income can be computed, that would be possible only if any surplus arises, which is not possible to happen since entire amount collected by Assessee Company is deposited in Escrow Account which is earmarked wholly and exclusively for meeting security expenses. There is no flexibility for using the funds elsewhere. If at all any amount is left unspent from this account, then, the same is to be transferred to the account of 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....
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....f hearing 15. We have noted that while giving effect to this order, the Assessing Officer, after examination as per the directions given by the Tribunal and ultimately vide his order dated 04.07.2017, deleted the whole addition made in respect of PSF-SC amounting to Rs. 1,32,58,59,023/- for AY.2008-09. Since the facts involved in the impugned years under consideration are not disputed with the facts involved in A.Y.2008-09 wherein the AO while giving effect to the order of the Tribunal found that the assessee has not utilized any amount of PSF-SC for its own purposes or for any purposes which are not permitted by MOCA/other competent authorities, we, therefore, respectfully following the decision of this Tribunal for A.Y. 2008-09, hold that the said amount is not taxable in the hands of the assessee and direct the Assessing Officer to re-compute the income of the assessee. We also direct the Assessing Officer to see that no portion of the amount calculated by the assessee on account of PSF-SC is utilized by the assessee for its own purposes or for any purpose which are not permitted by MOCA/other competent authorities. The Assessing Officer is further directed that in case he fi....
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....nce 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 the fact that the said runway /Airport premises does not belong to assessee but belong to "AAI" and the assessee is required to maintain the same under "OMDA". We are of the considered view that the said expenditure has been incurred by assessee only for the purpose of carrying out its one of the object to renovate and/or repair existing runway. The Hon'ble Bombay High Court in the case of New Shorrock Spg. & Mfg. Co. Ltd. V/s CIT (1956) 30 ITR 338 (BOM.) has held that the "the expression "current repairs' means expenditure on building, machinery, plant or furniture which is not for the purpose of renewal or restoration but which is only for the purpose of preserving and maintaining an already existing asset which does not bring new asset into existence or does not give the assessee new or different advantage. We observe that the said expenditure has been incurred only for resurfacing the layer of the runway and to put ne....
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....assessee has got the transfer of a right to enjoy the Airport premises. The assessee only got a license or right to do something at the Airport premises. The Hon'ble Apex Court has held in the case of B. M. Lal (supra) that the transaction is a lease, if it grants the interest in the land and whereas it is a license if it gives a personal privilege with no interest in the land. We are of the considered view that the assessee has got the economic /commercial right under the said agreement to collect charges from the users of the Airport premises which is similar to grant of a license to the assessee. This case is similar to the case of Technoshares and Stocks Ltd and others (supra), wherein the Hon'ble Apex Court has held that a right given to member of Stock-Exchange to carry on the business at the premises of the Stock-Exchange is a business or commercial right which is akin to license in terms of section 32(1)(ii) of the Act, therefore, eligible for depreciation. Their Lordships have held that right to participate in the market is an economic and money value, itself satisfies the test of being a license. There is no dispute to the fact that the said payment of Rs. 150 crores paid....
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....or each of the assessment years under consideration. 19. Ground nos.3 & 4 for A.Y. 2009-10, ground nos.2 & 3 for A.Y. 2010-11 and ground no.2 for A.Y. 2011-12 relate to the treatment of the contribution made by the assessee to MMRDA for construction of Sahar Elevated Road from Western Express Highway, horticulture expenses and other civil works as revenue expenditure. Both the parties agreed that this issue is common in all the years (except for the figures) and the facts involved are also identical. Therefore this ground be decided on the basis of the facts for A.Y. 2009-10 and whatever view this Tribunal may take in A.Y. 2009-10 the same shall be applicable for A.Ys 2010-11 and 2011-12. 20. The learned DR before us contended that the assessee has incurred expenditure by way of contribution to MMRDA for construction of Sahar Elevated Road from Western Express Highway, horticulture expenses and other civil works. This expenditure should be considered as integral part of overall capital expenditure incurred by the assessee for renovation, expansion, modernization of the airport. This expenditure enabled the assessee to enjoy enduring benefit from the said asset, in respect of ....
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....ctivities was decided by observing as under: There may be cases where expenditure, even if incurred for obtaining an advantage of enduring benefit, may, none the less, be on revenue account and the test of enduring benefit may break down. It is not every advantage of enduring nature acquired by an assessee that brings the case within the principle laid down in this test. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. .............................................................................................................. The Test of enduring benefit is, therefore, no certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particulars facts and circumstances of a given case." (Emphasis Supplied) The undisputed facts placed before us are that the assessee under the OMDA agreement with Airport Authority of India is operating, maintaining, managing developing the Mumbai Airport as per the international standard. Other obligations rela....
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.... enduring benefit. In our view, the business exigencies demand the assessee to incur this expenditure by making the contribution to MMRDA. 23. We have gone through the judgment of the Hon'ble Allahabad High Court in the case of Additional CIT vs. Dhampur Sugar Mill P. Ltd. [2015] 370 ITR 194 (All). We noted that the assessee was engaged in the business of manufacture and sale of sugar, chemicals and power and had a distillery. The assessee made payment of Rs. 8.48 crores to the UPPCL, which was the only customer, for construction of a transmission line and other supporting work for supply of power. When the said expenditure was held as capital expenditure by the Assessing Officer, the Hon'ble High Court held as under: "that the power transmission lines which were laid by the assessee were, upon erection, to constitute the exclusive property of the UPPCL. The UPPCL was the only consumer of the electricity generated by the assessee. The assessee incurred the expenditure to facilitate its own business. The fixed capital of the assessee was untouched and there was no capital accretion for the assessee. The expenditure which was incurred by the assessee in the laying of tran....
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....antage for the assessee's business such expenses are to be treated as having been incurred wholly and exclusively for the business of the assessee and are revenue expenditure." 26. We have also gone through the decision of Hon'ble Madras High Court in the case of CIT vs. Coats Viyella India Ltd. [2002] 253 ITR 667 (Mad). We noted that in this case, the Hon'ble High Court following the decision of Hon'ble Supreme Court in the case of L H Sugar Factory And Oil Mills (P.) Ltd. vs. CIT [1980] 125 ITR 293 (SC), held as under: "Held, that, in the present case, the bridge was built by the Government and the assessee did not acquire any ownership over the bridge by paying contribution towards construction of the bridge. The assessee received no addition to the value of any of the assets owned by it for the payment. The bridge merely facilitated the movement of the workmen to gain access to the assessee's factory and for the movement of the goods over the bridge. The payment of contribution was made to the Government for construction of a new bridge in place of the old one which became unserviceable. The expenditure incurred was revenue expenditure in respect of the assessment y....
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....urred, 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 assessee shall also extend requisite cooperation to the Ld. CIT(A) by filing necessary details / evidences so as to bring complete facts on record. With these directions, this ground may be treated as allowed for statistical purposes. Respectfully following the said decision, we restore the issue to the file of the CIT(A) in all the assessment years with a direction to re-decide the issue afresh after giving sufficient opportunity to the assessee on the basis of the directions given in A.Y. 2008-09. Thus, ground nos.5 & 6 for A.Y. ....
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....hese have been incurred on account of revenue or capital field. Therefore, under these circumstances, we send this issue back to the file of the Ld. CIT(A) with the same directions as have been given with regard to ground 6 above. This ground may be treated as allowed for statistical purposes." Respectfully following the said order of the Tribunal, we send this issue back to the file of CIT(A) with the same directions as are given in A.Y. 2008-09. Thus, this ground is allowed for statistical purposes. This disposes of Revenue's appeal for A.Y. 2009-10. 31. Now coming to the remaining grounds of the Revenue's appeal for A.Ys. 2010-11 and 2011-12. Ground nos. 6 to 9 in A.Y. 2010-11 and ground no.4 in A.Y. 2011-12 relates to the issue regarding deletion of the disallowance of retrenchment compensation. Both the parties agreed that the issue be decided on the basis of the facts involved in A.Y. 2010-11 and whatever view is taken by this Tribunal shall be applicable for A.Y. 2011-12 also. The learned DR before us contended that the assessee has claimed retrenchment compensation payable to Airport Authority of India as per the terms of OMDA as revenue expenditure. It was submitt....
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....in terms and conditions. As per clause 6.14 in Chapter 6 of the OMDA, the assessee is obliged to make an offer of employment to a minimum of 60% General Employees at any time during the Operation support period but not later than three months prior to the expiry of the operation support period, that it wants to employ, an option to accept or reject the offer by employees. This clause further provides that if less than 60% of the general employees accept the offer of employment made by the assessee, then assessee shall pay to the Airports Authority of India retrenchment compensation for such number of general employees as represented by the difference between 60% of the general employees accepting the offer of employment made by the assessee. Thus, this clause specifically deals with the treatment of the retrenchment compensation to be paid to the Airports Authority of India at the occurrence of the events maintained in the said clause. The operational support period of three years has expired during the impugned assessment years under consideration and, accordingly, Airports Authority of India issued invoice dated 08.03.2010 for its claim towards retrenchment compensation amounting....
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....unt of retrenchment compensation in terms of OMDA is a definite obligation and the appellant is bound by the terms of OMDA and has thus to discharge the said obligation within the time stipulated in the OMDA. Further, I find that the retrenchment compensation paid by the appellant is definitely a contractual obligation with the AAI and has been incurred solely and exclusively for the purpose of the business. The appellant has placed reliance on the decision in the case of C1T v Sinnar Bidi Udyog Ltd. [118 Taxman 106], wherein it has been held that deduction claimed towards Retrenchment Compensation would be in the nature of revenue expenditure incurred wholly and exclusively for the purpose of business. The decision further states that where the Appellant-company took over another company along with its employees, and later paid Retrenchment Compensation to those employees by taking into account the services rendered by them under the former company such Retrenchment Compensation is allowable as revenue expenditure. 8.10 The appellant has further placed a reliance on the decision of Karnataka High court in the case of CIT v. Margarine & Refined Oils Co. Ltd [154 Taxman 95]....
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....should normally be considered as revenue expenditure". 8.14 Looking to these facts as well as various court decisions relied upon by the appellant, I find that that the payment of retrenchment compensation is an obligation fastened upon the appellant under OMDA and the liability is a contractual obligation with AAI. The appellant has made the payment in lump sum of Rs. 260,86,03,400 as retirement compensation to AAI. The appellant has not made this payment directly to the its own employees as retrenchment compensation, but has made this payment to AAI for paying those employees of AAI who has sought voluntary retrenchment and this payment is part of the OMDA. Had this lump sum payment not been made then the appellant would have made the payment on account of salary as well as other benefits to the employees on annual basis which would have been claimed by the appellant as revenue expenditure. The appellant instead of retaining the number of general employees represented by the difference between 60% of general employees and the number of general employees accepting the offer of employment, is required to pay retirement compensation in respect of those general employees who have not....
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.... nos. 6 to 9 in A.Y. 2010-11 and ground no.4 in A.Y. 2011-12 stands dismissed. 36. Ground no.10 & 11 in A.Y. 2010-11 and ground no.5 in A.Y. 2011-12 relate to the treatment of development fees as capital receipt by the CIT(A). Both the parties agreed that the issue be decided on the basis of the facts involved in A.Y. 2010-11 and whatever view is taken by this Tribunal shall be applicable for A.Y. 2011-12 also. The facts relating to the said issue are that the assessee claimed development fees collected by it as capital receipt. During the impugned assessment year, the assessee has collected a sum of Rs. 287,83,48,538/- . An amount of Rs. 19,85,99,146/- has been reduced from the block of building and Rs. 7,00,70,264 has been reduced from the block of machinery and plant while computing depreciation. Depreciation has been claimed on the reduced amount of the block of assets. The Assessing Officer asked the assessee why the said amount should not be treated as revenue receipt. The Assessing Officer did not agree with the submissions of the assessee and treated the said amount as revenue receipt. The assessee went in appeal before the CIT(A), who, after going through the agreement ....
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....ellate proceedings. The appellant has been permitted by the Ministry of Civil Aviation. Government of India to charge fee of Rs. 100 from departing domestic passengers and Rs. 600 from departing international passengers. There are certain conditions attached with the collection of Development Fee. The fee so collected has to be spent mainly for development of 'Aeronautical Assets' only. The appellant cannot spend any amount from the collected Development Fee at will and has to maintain an account of the same which is subject to supervision and audit from the Central Government. The appellant has been permitted to collect amount only for 48 months and the same cannot be exceeded funding gap of Rs. 1,543/- crores. The Ministry of Civil Aviation has vide F.No. AV.24011/001/2009-AD dated February 27, 2009 had in para (g) to (j) has stated as under: "(g) The amount collected through DF would under no circumstances exceed the ceiling of Rs. 1543 cores and in case of any cost escalation beyond Rs. 9802 crores, the amount representing the escalation would have to be brought in by MIAL, through other sources. The ceiling amount would be exclusive of taxes, if any. ....
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....at in case of excess collection, the same cannot be utilized by the appellant for any purpose whatsoever without the prior approval of Regulator or the Government. Further, Clause (h) of the said letter also stipulates for downward revision of the amount of Development fee to be calculated in certain case. 9.8 Based on the above, it is evident that the levy of Development Fee is solely for the purpose of bridging the funding gap in connection with the development of Aeronautical Assets. For convenience, such Development Fee would be collected by various Airlines at the time they sell the tickets to the passengers and would be paid to appellant. Accordingly, the airlines are collecting the Development Fee levied u/s 22A of AAI Act from the passengers and paying the same to the appellant towards meeting the funding gap for development of Aeronautical Assets which are transfer assets as per OMDA. In support of the contention that the Development fee so collected has been utilized only for the developing the capital assets i.e. Aeronautical Assets, a copy of the certificate from a chartered accountant has been placed on record certifying the utilisation of Development fee for ....
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....A of the AAI, 1994 and the same is held to be cess or tax and to be used strictly for the purpose of sub-section (a), (b) & (c) of section 22A of AAI Act. Thus, 1 notice that the collection of Development Fee has a legal backing and in the nature of cess or tax being collected with the approval of Ministry of Civil Aviation, Government of India/ Regulatory Authority as prescribed U/s.22A of the Act. This view has been confirmed by the Hon'ble Supreme Court in the case of Consumer Online Foundation vs. UOI & Ors (supra). So far as the collection of Toll Charges is concerned, the same is collected to recover the capital cost, operating and maintaining cost along with profit. The Toll Charges are determined as per the policy of the Government of India and are not in the nature of tax or cess. The Toll Charges are treated as revenue receipts in the hands of Developer. Letter dated 27.02.2009 received from the Ministry of Civil Aviation which is on record indicates that Development Fee is a capital receipt. 9.11 I further notice that Airport Regulator has clearly mentioned in its order that for the purpose of allowing return to Airport Operator, it will consider Asset Base ....
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.... tax, it cannot be subject to further tax. It is also seen that various restrictions have also been imposed by the Central Government to ensure that the Development fee so collected is utilized only for the purpose of development of 'Aeronautical Assets' as per provisions of section 22A of the AAI Act. Further, a certificate from a Chartered Accountant has also been placed on record certifying the utilization of the Development fee so collected only for the purposes of acquiring /constructing the Aeronautical Assets. Accordingly, the collection of Development fee is therefore, meant only for specific purpose of acquisition / construction of capital assets and therefore, it is on capital account and not on revenue account. Thus, the nature of the receipt is capital and not revenue. Accordingly, I hold that the receipts of Rs. 2,87,83,48,538/- on account of Development Fee being in the nature of tax or cess is a capital receipt and therefore the same cannot be brought to tax. Accordingly, the addition of Rs. 286,30,14,565/- is deleted. The AO is also directed to reduce an amount of Rs. 19,85,99,146/- from the block of building and Rs. 700,70,264 from the block of plant & mach....