TaxTMI 
TaxTMI 
2017 (12) TMI 1214
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....rred in deleting the addition made by the AO on account of upfront fee. 2. On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition made by the AO of Rs. 24.00 crore which was proved to be capital expenditure in nature against assessee's claim on account of repair & maintenance of building, plants and others. 3. On the fads and circumstances of the case and in law, the Ld. CIT (A) has erred in restricting the disallowance u/ s 14A of the Act read with rule 8D of the Rules to the tune of 5% of dividend income. 4. On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in allowing the assessee to claim deduction u/s 80IA of the Act, for statistical purpose, if the assessed income would be positive." 3. In ground No. 1, the revenue has challenged the finding of the Ld. CIT (A) in treating the "Upfront fees" of Rs. 150,00,00,000/- as revenue expenditure instead of capital expenditure treated by the AO. The brief facts and background qua the issue raised in ground No. 1 are that, 'Delhi International Airport Limited' (hereinafter referred to as 'assessee' or 'DIAL' or JVC) was inc....
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....eement (OMDA) under the OMDA, dial has been granted concession by AAI to carry out the function of operating, maintaining developing, designing and constructing, upgrading financing and managing the Airport for this purpose AAI has lease the premises constituting the Airport site to the DIAL. Thus in terms of OMDA, DIAL is required to perform various functions including construction of various structure on the airport site within prescribed period on the premises leased by AAI. DIAL is entitled to use and occupy the property with the building, structure therefore for a period of 30 years and further renewal for a period of another 30 years upon payment of Rs. 100 per annum, after the expiry of lease period the airport site with the building, therefore, had to be handed over to the AAI. Both the aforesaid amounts have been shown in a fixed assets schedule under head intangible assets in the books of a/c to be amortized spread over the concession period. However the income tax purpose both the aforesaid amounts are claimed as revenue expenditure. Based upon decision of the High Court wherein they have categorically held that the lump sum payment made to get leasehold rights ....
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....ominal sum of Rs. 100 per annum. Since, it was treated as an advance rent/ upfront payment for lease hold rights, therefore, the assessee has deducted TDS u/s 194I (i.e., by treating it as rent). In support of such a claim that it is in the nature of rent and allowable as revenue expenditure in the year in which it is claimed, the assessee relied upon the following decisions:- i. Decision of Hon'ble Supreme Court in the case of Empire Jute's case (124 ITR 1). ii. CIT v Madras Auto Services P. Ltd. (1998) 233 ITR 468. iii. Assam Bengal Cement Co. Ltd. v. CIT (1955) 27 ITR 34. iv. CIT V HMT Ltd. 203 ITR 820. v. CIT v. Gemini Arts P Ltd. (2002) 254 ITR 201 (Mad.) vi. CIT vs. Madras Auto Service P. Ltd. (1998) 233 ITR 468. vii. CIT vs. Ucal Fuel Systems Ltd. 296 ITR 702. viii. Amway India Enterprises v DCIT 111 ITD 112 (Del) (SB) 5. Regarding payment of sum of Rs. 45.5 crores to AAI in respect of capital work-in-progress (CWIP) under clause 5.4 of OMDA, the assessee submitted that under the terms of OMDA, assessee was liable for performance of all work-in-progress at the airport for which the assessee need to ma....
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....es of 30 years paid in advance as the capital asset will not remain assets of the assessee but certainly it will be assets of capital nature. Therefore for 1/30th of this amount can be allowable to the assessee as an expense of the year and balance 29/30th has to be disallowed. Thus, expenses to the tune of Rs. 188,98,34,000/- is disallowed and added to the total income of the assessee." 7. Before the Ld. CIT (A) the assessee highlighted the following important facts on this issue:- * For being awarded the contract under OMDA, the 'Request for Proposal' (RFP) was the basis. Para 3 of the RFP provided that:- "Over the tenure of the OMDA, the Joint Venture Company will pay both a nominal lease rental and a fee (consisting of an upfront fee of Rs. 1,500 million and an annual fee expressed as a percentage of gross revenue of the Airport... " * Pursuant to the above award, OMDA was entered into on April 4, 2006 which, inter-alia, provided for entering into a lease agreement. Accordingly, a Lease agreement was entered into on April 24, 2006. * Para 4.1 of the Lease Agreement reads as under: "4.1 In consideration of the Lessor leasing the De....
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....9. After calling for the rejoinder from the assessee, Ld. CIT (A) first of all, after giving detailed reasoning admitted the additional evidence; firstly, on the ground that under section 250(4), the CIT (Appeals) has power to make such further inquiry as he deems fit and can ask the AO to make further inquiry and to report the matter to him; and secondly, these documents are quite essential to decide the controversy. Therefore, there is no question of non admission of additional evidence as the same has been called by the CIT (A) in the course of making inquiry. Thereafter, he has incorporated and dealt with the detailed written submissions filed by the assessee which is appearing from pages 5 to 13 of the appellate order. In sum and substance the assessee's submission before the Ld. CIT (A) can be summarised as under:- i) The 'upfront fees' in substance was paid for grant of lease hold rights in the property leased by AAI for the term of OMDA and was in the nature of lump-sum rent paid and because of this lump-sum payment, the assessee was required to pay a nominal rent of Rs. 100 per annum over the lease period of 30 years. In terms of para 3 of "Request For Proposal" (....
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....rom the assessee by him regarding treatment of 'upfront fee' receipt by AAI, Ld. CIT (A) noted that AAI has offered this income as revenue receipt and therefore, same treatment should be followed in the case of the assessee. After taking note of the principle laid down by the Hon'ble Supreme Court in the case of CIT vs. Madras Auto Service P. Ltd. (supra) and other decisions relied upon by the assessee, he held that the 'upfront fee' is allowable as revenue expenditure. While coming to his conclusion that upfront fees is nothing but onetime payment of lease rent and therefore is allowable, he relied upon the judgment of Hon'ble Gujarat High Court in the case of DCIT vs. Sun Pharmaceuticals Limited (supra). 11. Before us, the Ld. CIT (DR) after referring to the various observations of the AO, she submitted that the assessee has claimed deduction of Rs. 195.50 crore from its taxable income on account payment to AAI for taking over Airport, which includes:- * Non-refundable upfront fee of Rs l50 crore and amount of Rs. 45,50,4000/- in relation to WIP reimbursed to AAI as per terms of OMDA (Operation, management & development Agreement) incurred prior to taking over of Airp....
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....s on lease from AAI. It paid certain amount to AAI towards renovation and alterations carried out in premises on its behalf. The expenditure being capital in nature not allowable. The AAI has offered the said amount as income is immaterial consideration for the assessee; ITO vs. Pritam Juice 124 ITD 237. * Rent paid by Lessee for acquiring leasehold right to extract minerals as one fixed amount for entire lease is Capital Expenditure, and proportionate amount of Rent not allowable as deduction; Enterprising Enterprises vs. DCIT 293 ITR 437 (SC). * Treatment in Books of Accounts vs. Nature of Expense: The treatment of particular expense or a provision in the Books of Accounts can never be conclusively determinative of the nature of expense. An assessee cannot be denied claim for deduction which is otherwise tenable in law, on the ground that the Assessee had treated it differently in the books. The opposite is also true; CIT vs. Asahi India Safety Glass Ltd (Del.) * Book Entries are not decisive or conclusive in determining the allowbility or taxability of a particular item of expenditure or income; Bharat Carbon and Ribbon Mfg. Co. Pvt. Ltd. 239 ITR 505; ....
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....ea on lease lump-sum payment of Rs. 150 crores was made, which though has been classified as 'upfront fee', but in fact, it was in the nature of advance rent or as the AO himself has stated in the assessment order that it was a kind of 'licence fee'. Once it is reckoned as 'licence fee' even though it has been paid up-front, then same cannot be treated as capital in nature. In support of the proposition that advance licence fee or advance rent can be allowed as revenue expenditure in the year in which it is claimed, he strongly relied upon the decision of Gujarat High Court in the case of DCIT vs. Sun Pharmaceuticals Limited (supra) and CIT vs. HMT Ltd. (supra). 15. Mr Dastur further submitted that, under the terms of OMDA there is no transfer of any right to the assessee, in fact all the rights and licences required for running of the airport including the fees/ tax collected from the passengers and airline etc., was to be obtained or to be collected by the assessee and it was not transferred by AAI to assessee. He stressed very heavily upon the point that, the AO himself has treated that the 1/30th of the said payment is to be regarded as revenue expenditure and only the balan....
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....ions on this point for the sake of ready reference the judgements and ratio-decendi is as under:- * CIT vs. Jai Parabolic Springs Ltd - 306 ITR 42 (Del HC) - The assessee made payment towards customer introduction charges, which was amortised in the books and claimed before CIT(A) as revenue expenditure for the first time. It was held by the HC that the deduction is to be allowed in the year in which it is incurred. Unlike in the instant case, where the claim for deduction has been made in the return of income, in that case, the claim was made for the first time before the appellate authorities. * CIT vs. Citi Financial Consumer Fin Ltd - 335 ITR 29 (Del HC) - Payment of advertisement expenses was claimed as revenue in nature. According to the AO, benefit accrued from the advertisement campaign over a period of several years, and therefore, he allowed the claim of the assessee on a spread over basis. It was held that under the Income-tax Act, the concept of 'deferred revenue expenditure did not exist and the expenditure had to be allowed in the year in which it was incurred. * CIT vs. Vodafone Essar South Ltd - 55 taxmann.com 289 (Del HC) - The AO hel....
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....anisation. The ITO disallowed the admission fee and treated it as capital in nature for the reason that it resulted in an asset of enduring nature. It was held by the HC that no asset of an enduring nature was obtained by the assessee by paying the admission fee as, if the annual subscription was not paid, the assessee would not have received any technical information from the said organisation and in the event of such default, the supply of further information may be stopped to the assessee even though it continues to be a member of the organisation. It was held that by the payment of initial membership fee, the assessee did not acquire an asset of enduring nature. The payment of Rs. 150 crore in the instant case takes the same colour as the membership fee for the same reason. ii. Neset Holdings Pvt Ltd - 282 ITR 601 (Del HC):- One-time non-refundable expenditure of Rs. 3 lakh was incurred for obtaining OTCEI membership which gave a right to the assessee to access facilities. The assessee was also liable to pay different types of fees annually. It was held that the payment of Rs. 3 lakh was revenue in nature as, unless the annual fees were paid, the assessee would have be....
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....he assessee to run the airport under OMDA as the assessee was required independently to obtain all clearances to discharge the function of operation and management of in terms of OMDA. Further, he submitted that the assessee does not have the prerogative to fix the tariffs in respect of services on its own as it is to be determined as per the provisions of 'State Support Agreement' to be entered into with the State Government. Thus, it cannot be said that the assessee has obtained any license to carry out the operation and management of the airport and collect charges for the services as it deems fit in as much as the same are govern by the provisions of SSA and the applicable law. 21. During the course of hearing, Ld. CIT (DR) has also brought to our notice, the decision of ITAT Mumbai Bench in the case of Mumbai International Airport in ITA No. 7507/M/2011 (order dated 14.2.2014) to point out that Tribunal has taken a view that depreciation is to be allowed on the payment of one time 'upfront fee' which goes to show that, in that case also the 'upfront fee' has been treated as capital expenditure by the assessee. Countering this judgement, Mr Dastur submitted that in said case....
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.... of 7 persons and Joint Venture Company was incorporated on 1.4.2005 accepting the RFP. With a view to implement the said proposal, a company was formed, named as "Delhi International Airport Pvt. Ltd." which was incorporated on 1.3.2006 and was initially owned 100% by AAI. An agreement termed as "Operation, Management and Development Agreement", (OMDA) was entered into between the DIAL and AAI on 4.4.2006. Later on, in terms of said OMDA, its equity share capital was infused by the consortium in proposition to their share holding which for the sake of ready reference is reproduced herein below:- S. No. Shareholder Percentage shareholding 1. AAI 100% As of the Effective Date: S.No. Shareholder Percentage of shareholding 1. GMR Infrastructure Ltd. 31.1% 2. GMR Energy Ltd. 10.0% 3. Fraport AG Frankfurt Airport Services Worldwide 10.0% 4. Malaysia Airports (Mauritius Private Limited) 10.0% 5. GVL Investments Pvt. Ltd. 09.0% 6. India Development Fund 03.9% 7. AAI 26.0% 23. Pursuant to OMDA, a lease deed was simultaneously entered into between AAI and DIAL for the lease of 'Ai....
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....: "AAI is offering a long term Operations, Management and Development Agreement to suitably qualified, experienced and resourced parties to design, construct, operate, maintain, upgrade, modernise, finance, manage and develop the Airport. The Successful Bidder will participate in a Joint Venture Company with the AAI (and other GOI public sector entities) and such JVC shall be awarded the right to operate, manage and develop the Airport." One of the key features of the OMDA was that, it would be for an initial period of 30 years with the JVC having the right to extend this by further period of 30 years in accordance with terms and conditions of the transaction document. The successful bidder was to have 74% equity interest and AAI along with the GOI and public sector entities will have 26% equity interest in the JVC. Already the ratios of equity interest of various entities have been highlighted above. Another key feature was that under the 'State Support Agreement' the JVC will have "right of first refusal" (ROFR) with regard to the second airport in the vicinity on the basis of competitive bidding process in which JVC can also participate and in the event JVC is not th....
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....some of its functions, being the functions of operating, maintaining, developing, designing, construction, upgrading, modernising, financing and managing the Airport to the JVC and for this purpose to lease the premises constituting the Airport Site (as defined herein), in accordance with the terms and conditions set forth herein." Under the definition clause the 'Airport site' was meant as the underline land forming part of the demised premises (as defined in the lease deed) agreed to be demised by AAI in pursuance of OMDA. Under the lease deed all the land and airport was leased to the JVC during the tenure of the agreement, that is, the entire airport site was leased to the assessee. The lease deed was defined as "lease deed to be entered into between the parties for the demised premises". The ground of function and the sole purpose of the JVC was stipulated as under:- "AAI hereby grants to the JVC, the exclusive right and authority during the term to undertake some of the functions of the AAI being the functions of operation, maintenance, development, design, construction, upgradation, modernization, finance and management of the Airport and to perform services and ....
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....and conditions set forth herein, hereby, agrees to demise to the JVC under the Lease Deed, commencing from the Effective Date, all the land (along with any buildings, constructions or immovable assets, if any, thereon) which is described, delineated and shown in the Schedule 25 hereto, other than (i) any lands (along with any buildings, constructions or immovable assets, if any, thereon) granted to any third party under any Existing Lease(s) constituting the Airport on the date hereof; and (ii) any and all of the Carved Out Assets and the underlying land together with any buildings, constructions or immovable assets thereon, on an "as is where is basis" together with all Encumbrances thereto, (hereinafter "Demised Premises") to hold the said Demised Premises, together with all and singular rights, liberties, privileges, casements and appurtenances whatsoever to the said Demised Premises, hereditaments or premises or any part thereof belonging to or in any way appurtenant thereto or enjoyed therewith, for the duration of the term hereof for the purposes permitted under this Agreement. In the event at any time during the Term, the JVC requires the hundred (100) hectares of land (or a....
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.... been enshrined in clauses 3.1.1, 3.1.2 to 3.3, provided that in the event that any of the conditions set forth in article 3.1.1, 3.1.2 or 3.1.3 have not been fulfilled within three months from the date of the agreement, or such later date as may be mutually agreed by the parties, may terminate this agreement. The relevant clause reads as under:- "3.3 Non-fulfilment of Conditions Precedent In the event that any of the conditions set forth in Articles 3.1.1, 3.1.2 or 3.1.3 have not been fulfilled within 3 months from the date of this Agreement, or such later date as may be mutually agreed by the Parties, the JVC (in case of non-fulfilment of any of the AAI Conditions Precedent), the AAI (in case of non-fulfilment of any of the JVC Conditions Precedent) and any of the Parties (in case of non-fulfilment of Common Conditions Precedent) may terminate this Agreement. Provided however that in the event this Agreement is terminated by AAI for non-fulfilment of the JVC Conditions Precedent, the AAI shall be entitled to encash the Bid Bond/Performance Bond (as the case may be) Provided further that upon any such termination, each Party shall return to the ....
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....AI would run the Delhi Airport and JVC will not have any function to perform or ascertain any right to operate and manage the airport. 28. The nature of dispute before us is, whether the lump-sum payment which was payable only once during the term of the agreement of Rs. 150 crores was; for the lease of the airport for 30 years; or was in lieu of transfer of any kind of rights to develop, operate and manage the airport. As can be deduced from the OMDA as well as the intention of the parties given in RFP, the parties have agreed for distinctly two kinds of payment, one for the lease of 'Airport Site' which leased on a nominal lease rent of Rs. 100 per annum and 'upfront fee' of Rs. 150 crores; and second payment was for the rights given to the assessee for development, operation and management of the airport. Nowhere in the OMDA agreement, is it borne out that the 'upfront fee' was for acquiring any tangible or intangible assets. The rights as envisaged has been granted by the AAI to the assessee to undertake some of the functions of AAI in connection with the operation, management and development of the airport for which the consideration paid is by way of 'annual fees'. The ent....
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....e business on another footing altogether. iii. Whether for the purpose of the expenditure, any capital was withdrawn, or, in other words, whether the object of incurring the expenditure was to employ what was taken in as capital of the business. Again, it is to be seen whether the expenditure incurred was part of the fixed capital of the business or part of its circulating capital." If we apply the aforesaid tests on the facts of the present case, then the payment of Rs. 150 crores is neither for initiation nor for extension of a business or for substantial replacement of equipment and nor it brings any capital asset. The expenditure can be neither be held to have been incurred which has brought any fixed capital of business or is part of circulating capital. Albeit the payment here is for securing a lease period of 30 years of the airport for carrying out the operation and development of Airport and is part of the lease consideration. As regard the test of 'enduring benefit' or the expenditure being of enduring nature as canvassed by the Ld. CIT DR before us, it would be relevant to refer to the judgment of Hon'ble Supreme Court in the case of Empire Jute Company (1980....
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....treatment as it partakes the same character. There could not be two different classification of same nature of expenditure. That apart, such onetime payment cannot be classified as creating any capital asset or any kind of profit making apparatus or giving any enduring advantage of a benefit of a trade. At the most the said payment can be reckoned as lease premium or licence fee for the Airport site taken on lease for a period of 30 years. In this case, such a payment cannot be reckoned for the purpose of acquisition of business also, because both the parties have agreed to transfer the right of operating, development and maintenance of the airport on revenue sharing basis which has been termed an 'annual fee' which is recurring in nature. Now if such a lump sum payment for the lease of the Airport Site for a period of 30 years can be reckoned as revenue or not, appears to be quite settled proposition in wake of the following judgements which has been highlighted and stressed upon by the Ld. Sr. Counsel for the assessee before us:- i. DCIT vs. Sun Pharmaceutical Ind. Ltd. - 329 ITR 479 (Guj HC) - In this case, the assessee was the lessee of land. The period of lease was 99....
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....t the case of AO that it is capital expenditure in which case no part could be allowed in terms of section 37(1) of the Act. This action of the AO itself exonerates the case of the assessee. 32. Another important contention which has been raised by the revenue which is also culled out from the order of the AO is that, even though the said payment is classified as revenue expenditure, then same has to be deferred and spread over the period of 30 years, i.e., for the term of the lease agreement and only 1/30th would be allowed in this year. In support of this proposition, the parties have strongly relied upon the judgement of Hon'ble Supreme Court in the case of CIT vs. Madras Auto Industries (Supra), wherein the Hon'ble Supreme Court has upheld the treatment given by the assessee in its account spreading over the expenditure for a period of 39 years. The relevant facts in that case were as under:- The assessee-company had obtained premises on lease for a period of 39 years. Under the terms and conditions of the lease, the lessee (the assessee-company) had demolished the existing construction and constructed a new building thereon to suit the purposes of their business as....
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....ture appears to be revenue expenditure." Thereafter, the Hon'ble Supreme Court after discussing the various propositions on the issue of capital and revenue expenditure, concluded in the following manner:- "13. All these cases have looked upon expenditure which did bring about some kind of an enduring benefit to the company as a revenue expenditure when the expenditure did not bring into existence any capital asset for the company. The asset which was created belonged to somebody else and the company derived an enduring business advantage by expending the amount. In all these cases, the expense has been looked upon as having been made for the purpose of conducting the business of the assessee more profitably or more successfully. In the present case also, since the asset created by spending the said amounts did not belong to the assessee but the assessee got the business advantage of using modern premises at a low rent, thus, saving considerable revenue expenditure for the next 39 years, both the Tribunal as well as the High Court have rightly come to the conclusion that the expenditure should be looked upon as revenue expenditure. 33. The aforesaid judgment first of....
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.... herself: "15. The Tribunal, however, held that since the entire liability to pay the discount had been incurred in the accounting year in question, the assessee was entitled to deduct the entire amount of Rs. 3,00,000 in that accounting year. This conclusion does not appear to be justified looking to the nature of the liability. It is true that the liability has been incurred in the accounting year. But the liability is a continuing liability which stretches over a period of 12 years. It is, therefore, a liability spread over a period of 12 years. Ordinarily, revenue expenditure which is incurred wholly and exclusively for the purpose of business must be allowed in its entirety in the year in which it is incurred. It cannot be spread over a number of years even if the assessee has written it off in his books over a period of years. However, the facts may justify an assessee who has incurred expenditure in a particular year to spread and claim it over a period of ensuing years. In fact, allowing the entire expenditure in one year might give a very distorted picture of the profits of a particular year. Thus in the case of Hindustan Aluminium Corporation Ltd. vs. CIT, ( 1982....
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....cordingly, the contention of the Revenue is rejected. 34. So far as the contention of the Ld. CIT (DR) that, once the assessee itself has capitalised the amount of Rs. 150 crores in its account and has claimed depreciation being intangible assets, then assessee cannot change its stand and claim it as a revenue expenditure. In this regard, we agree with the contention of the Ld. Sr. Counsel Shri Dastur that, entries in the books of accounts are not determinative or conclusive and the matter has to be examined on the touchstone of provisions contained in the Act and this proposition is well settled by the decisions of Hon'ble Supreme Court in the case of Kedarnath Jute Manufacturing Co. Ltd. (supra); Sutlej Cotton Mills Ltd. vs. CIT (supra); and Tuticorin Alkali Chemicals & Fertilizers Ltd. (supra). In view of our finding given above, we hold that mere entry in the books of accounts and classifying the said payment as capital, i.e., it has been capitalised in the books will not at all be determinative as it has to be seen on the facts whether such a payment or expenditure falls in the capital filed or revenue field. 35. One more important aspect in this case is that, if the ass....
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....97 Interior work: 225483.00 Dismantling of old bldg., behind J block: 491217.00 SS cladding to columns & doorways: 836890.00 Installation of ACP at TIB: 823714.00 Renovation of TIB facade upgradation: 4099618.00 Purchase of road studs safety product at Delhi Airport: 182280.00 Installation road studs safety product at Delhi Airport: 77000.00 Interior work: 39510.00 Purchase of decorative poles for street light: 88268.00 Purchase of magnetic white board & pin up: 50100.00 Do 15488.00 Light fixture for udaan Bhawan: 1247162.00 Carpet setting up at Airport office: 302473.00 Development of landscape pockets at terminal: 331981.00 Interior work: 215250.00 Renovation work of external area of terminal 1B: 1467440.01 Video conferencing shifting from office to Udaan Bhawan: 223313.00 Supply installation and transportation: 413697.00 Supply of Aluminium doors and shifting of: 113516.00 Renovation of Toilets at TIA: 6913999.69 Renovation of Toilets at TIA: 432276.79 Renovation of Toilets at TIA: 944121.04 Renovation of Toilets at TIA: 723051.41 Renovatio....
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....r and maintenance of expenditure. 40. Before us the Ld. CIT (DR), first of all pointed out that, nowhere the Ld. CIT (A) has properly addressed the finding of the AO and secondly, there is an expenditure on account of advertisement in newspaper amounting to Rs. 1,54,61,755/- which cannot be allowed under the head repair and maintenance. In support of the contention she relied upon following judgements: i) Arvind Mills Ltd. vs. Commissioner of Income-Tax 197 ITR 422 (SC). ii) Balimal Naval Kishore vs. CIT. 41. On the other hand, the Ld. Sr. Counsel Mr Dastur submitted that, here it is not a case that it is a capital expenditure or revenue expenditure, albeit the AO has allowed it on a deferred basis over a period of 30 years. He submitted that the case of the assessee before the revenue authorities were that:- a. The assessee was under an obligation to keep the Airport in operating and good condition and in order to ensure that it met the requirements of an international world class airport, the assessee was to manage the airport in accordance with good industrial practice and in accordance with development standards and requirements and operation an....
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....enue and that is why he has allowed it in a deferred manner, that is, as deferred revenue expenditure. If AO himself has accepted that expenditure is revenue and has held to be allowable on a deferred basis spread over 30 years, then there cannot be case that it is capital in nature. As submitted by the Ld. Sr. Counsel in light of various judgment as cited above, that there is no concept of deferred revenue expenditure under the Income Tax Law and the expenditure has to be allowed in the year in which it is incurred. Since, AO has himself has not classified or distinguished as to which repairs is for new infrastructure or for construction of new structure, therefore, we are unable to give any finding that any of the expenditure as noted above pertains to new construction. As he himself has treated to be revenue, then in that case, we hold that the entire expenditure under the head repair and maintenance is allowable as revenue expenditure in the year in which it is claimed. The judgements relied upon by the Ld. CIT DR would not apply under such facts and circumstances of the case. However, we agree with one of the contentions of the Ld. CIT DR that an amount of Rs. 1,54,61,755/- de....
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....(2010) -TIOL-616- ITAT-Mum), wherein disallowance of 5% to 2% of the dividend income were held to be reasonable. Accordingly, he made the disallowance of 5% of the dividend income for the purpose of section 14A. 45. Before us the Ld. CIT(DR), in her detailed written submission first of all, submitted that Rule 8D is to be treated as retrospective and it applies to pending proceedings also for which she relied upon certain judicial pronouncements which was prior to the judgment of the Bombay High Court in the case of Godrej & Boyce vs. DCIT (supra). Secondly, she submitted that Rule 8D only provides the mechanism for determination of expenditure and sub section (2) has been inserted in section 14A which enables the AO to determine the amount of expenditure in relation to the exempt income. This sub section was brought under the statute w.e.f. 1.4.2007; and thus, AO has rightly computing the disallowance u/s 14A. 46. On the other hand Ld. Senior Counsel, Mr. Dastur submitted that now this issue is no longer res integra that Rule 8D is applicable from the assessment year 2008-09. The judgment of Hon'ble Bombay High Court in the case of Godrej & Boyce (supra) has now stands affir....
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....e in such a finding and same is affirmed accordingly ground No. 3 as raised by the revenue is dismissed. 48. Lastly, with regard to the ground No. 4 that Ld. CIT (A) has erred in allowing the assessee's claim u/s 80-IA in case the assessed income is positive, we find that here in this case, it is an undisputed fact that assessee is engaged in the business of operating and maintaining of airport and the profits and gains derived by an undertaking from such business which has been referred to as eligible business in section 80-IA. The assessee before the Ld. CIT (A) has submitted that, since the return of income has filed at a huge loss of Rs. 150.55 crores, therefore, no claim for deduction u/s 80IA was made. It is only when the AO has made the assessment at a positive figure Rs. 62.70 crores, the assessee has made a claim for deduction u/s 80-IA. In support of such a claim, audit report was also filed in the prescribed form, a copy of which has also been placed in the paper book before us. Ld. CIT (A) after examining the entire facts and submissions of the assessee observed and held as under:- "11.5 It is undisputed that the Appellant is carrying on the business of oper....
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....evenue and therefore, in view of our finding given therein, the ground nos. 1, 3 & 4 have become partly academic. 53. Now so far as the issue raised in cross objection no. 2, i.e., disallowance of payment made by AAI in respect of CWIP amounting to Rs. 45.50 crores which was claimed as revenue expenditure by the assessee; the facts in brief are that, in pursuant to OMDA the assessee was required to make all the payments in respect of work-inprogress at the airport from August 30, 2005 till the effective date i.e. the date of taking over the airport. Accordingly, as per the terms of OMDA the assessee had paid an amount of Rs. 45.50 crores being expenditure incurred by AAI on said WIP. The assessee has claimed this expenditure as revenue in its return of income. The AO has disallowed the said amount and allowed the 1/30th of the said amount by holding that, firstly, the payment was done by the assessee for the capital work done by the AAI; secondly, though the ownership of the asset did not vest in the assessee but the payment was not in the nature of repairs but for the initial capital work; and lastly, the benefit of the said payment would be available to the assessee over a per....
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....expenditure incurred by the JVC from the effective date will continue to be shown by the JVC in its books as capital-work-in-progress till such time the JVC completes the relevant CWIP. The amount shown in the books of accounts of JVC will be restricted to the expenditure incurred by the JVC on such works till the time of the completion. On the completion of capital work in progress, the JVC should transfer the same to the concerned completed work assets. Further JVC should also provide depreciation on those portions of the completed assets. In light of the categorical stipulation with regard to the treatment of capital work in progress, it is ostensibly clear that it was the CWIP which was taken over by the assessee by making such payment of Rs. 45.50 crores and assessee itself has capitalised the said amount under the head capital-work-inprogress in the subsequent year also. On the completion of CWIP the same was stipulated to be transferred to the concerned completed work assets and depreciation was to be allowed on such assets. Thus, in light of these documents and facts, we hold that Ld. CIT (A) has rightly held that payment of Rs. 45.50 crores to AAI in respect of work in pro....
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....ronouncements relied on by the Appellant in support of its claim were also submitted and based upon which the learned Assessing Officer took a different view that since the OMDA period is of 30 years and consequently this amount should be allowed as deduction by amortizing the same over 30 years instead of claim of the Appellant as revenue expenditure. f. In the course of the Appellate proceedings on merits before the CIT (A), the Ld. CIT (A) called for a remand report from the Assessing Officer. The remand report by the Assessing Officer dated December 2, 2010 was filed. The report clearly states that the show cause notice was issued by the Assessing Officer in view of the disclosure made in the return of income, audited accounts and the tax audit report. 59. After considering the assessee's detailed submission/explanation and various decisions, Ld. CIT (A) deleted the penalty on the ground that, assessee has disclosed all the material facts necessary for assessee and there is no filing of inaccurate particulars of income. Merely making an incorrect claim does not tantamount to inaccurate particulars of income and for coming this conclusion he relied upon judgement of ....