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TaxTMI 
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2018 (5) TMI 334
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....ed CIT(A) has erred in upholding the action of the Deputy Commissioner of Income-tax, Central Circle 2(2), Bangalore (hereinafter referred to as AO) in making the disallowance of collection charges of Rs. 5,22,04,677/- retained by the airlines under section 40(a)(ia) on completion of assessment U/s. 153A. 2. The CIT(A) failed to appreciate and ought to have held that the provisions of section 194H of the Income Tax Act,1961 are not applicable in as much as there is no principal and agent relationship between the appellant and the airlines. Further the appellant has made detailed submission in support of claim that the airlines has discharged its incometax liability on collection charges of Rs. 5,22,04,677/- retained by the airlines wherever applicable 3. The Appellant therefore prays that the Assessing officer be directed to allow the claim of collection charges of Rs. 5,22,04,677/-. Ground II: Addition of Rs. 13,21,44,035/- by treating the duty credit entitlement under SFIS accrued as grant related to revenue.: 1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of AO in adding an amoun....
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...., alter and/or amend all or any of the foregoing grounds of appeal. 3. With regard to ground No. 1, the facts in brief borne out from the orders of the authorities below are that the assessee has entered into Operation Management and Development Agreement (OMDA) vide agreement dated 04.04.2006 with the Airport Authority of India (AAI) pursuant to which assessee is required to undertake the function relating to operation, maintenance& development, design, construction, organization, finance and management of the Indira Gandhi International Airport, New Delhi (IGA) and to perform certain aeronautical and non-aeronautical services at the IGI Airport. The major source of revenue of the assessee/appellant is from providing aeronautical services at the IGI Airport which includes landing fees, parking and housing fees, passenger service fees (PSF), Common User Terminal Equipment counter charges (CUTE) and Common Infrastructure Charges (CIC) etc. All these aeronautical service charges are regulated by the Airports Economic Regulatory Authority of India (AERA) in terms of Concession Agreement. The income derived from providing non-aeronautical services, which is primarily from allowing t....
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....pany was offering the income to tax only on the net amount of collection charges/cash discount which was not acceptable to the AO. According to the AO, the company should have offered the entire passenger service fees collected to tax and thereafter should have debitedthe expenditure. The AO further observed that cash collection or the cash discount charges is nothing but a commission paid by the assessee company to Airlines operator towards collection of PSF. Assessee should have deducted TDS on collection charges as provided under section 194H of the Income Tax Act (hereinafter called as an "Act"). Since the assessee has not deducted the tax on such payment, the AO had disallowed collection charges or cash discount of Rs. 5,22,04,677/- in assessment year 2011- 12 paid by the assessee to the Airlines operator having invoked the provisions of section 40a(ia) of the Act and was added to the income of the assessee. 6. Assessee preferred an appeal before the CIT(A) with the submission that the AO failed to appreciate that the Airlines make payment to the assessee/appellant after retaining the amount of service fees/cash discount/prompt payment rebate. Firstly it is not liable to TD....
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.... section 194H of the Act,there is no shortfall for revenue for the reasons that Airlines operator should have discharged income tax on the service fees/cash discount/prompt payment rebate retained by them. The CIT(A) re- examined the claim of the assessee but was not convinced with the contentions of the assessee and confirmed the disallowance having relied upon the para 6 of the Circular No. 619 dated 04.12.1991. 9. Aggrieved, the assessee preferred an appeal before the Tribunal and reiterated its contentions as raised before the CIT(A). During the course of hearing, the learned counsel for the assessee invited our attention to the judgment of Hon'ble Delhi High Court in the case of CIT Vs. Ansal Landmark Township (P.) Ltd. (2015)(61 taxmann.com 45)(Del) in which it was held that proviso to section 40(a)(ia) inserted by the Finance Act, 2012 w.e.f. 01.04.2013 creates a legal fiction where an assessee fails to deduct tax in accordance with provisions of chapter XVIIB where such assessee is deemed not to be an assessee in default in terms of the first proviso to sub section (1) of section 201 of the Act, then in such event "it shall be deemed that assessee has deducted and paid t....
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....ute in these appeals is with regard to nature of deduction at the rate of 2.5% of the invoice value on account of prompt payment to the assessee by the Airlines Operators. The reliance was placed upon various pronouncements in which the dispute was with regard to nature of payments by the Airlines Operators to the airport authorities in the hands of Airlines operators. In the case of Jet Airways on which heavy reliance was placed the contention of the assessee was that it was collecting the PSF on behalf of the Airlines Operators and after collecting it, it was paid to them. Therefore, there is no liability of TDS under section 194I of the Act. In that case, the Tribunal has categorically observed that Airlines Operator i.e., Jet Airways only collect the PSF from the passengers for and on behalf of the of the Airport Authorities/Operators and passes them to the Airport Authorities/Operators. Therefore, provisions of section 194I are not attracted. The relevant observation of the Tribunal in the case of ACIT Vs. Jet Airways in ITA No.5264/Mum/2012 is extracted hereunder for the sake of reference: "12. We have carefully considered the rival submissions and perused the orders....
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.... essence the agreement for taking premises on rent, the tax will be deducted under section 194-I from payments thereof." The facts under consideration show that the PSF is a statutory liability without demarcating/earmarking the area taken on rent , nor it is a case of systematic use of land specified for consideration under an ITA No.5264/12 arrangement, which carries the characteristics of lease or tenancy. A mere use of the land and payment charged, which is not for the use of the land but for maintenance of the various services including technical services would not technically bring the transaction and the charges within the meaning of either lease or sub-lease or tenancy or any other agreement or arrangement or any nature of lease or tenancy and rent. For these observations, we draw support from the decision of the Hon‟ble Madras High Court in the case of CIT Vs. Singapore Airlines Ltd., reported in (2012) 252 CTR (Mad) 429. 14. It would not be out of place to consider the CBDT Circular No.1/2008, dated 10th January, 2008 relating to the clarification regarding the applicability of provisions of Section 194-I of the Act to payments made by the customer....
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....e is entitled to collect fees to be called as Passengers Services Fees(PSF) from the embarking passengers at such rate as the Central Government may specify and is also liable to pay for security component to any security agency designated by the Central Government for providing the security services" A perusal of the aforementioned rule clearly shows that it is a statutory liability for every licensee to collect PSF. Since it is a statutory liability and the meaning given by the statute has to be considered and in this case the Indian Aircraft Rules, 1937 has used the term "Fees", therefore, same meaning has to be given while considering the PSF. It is not in dispute that the assessee is only acting as a conduit between ITA No.5264/12 the embarking passengers and the Central Government agency. This view is also AIR INDIA LTD. fortified by the fact that out of Rs. 200/-, Rs. 130/- is the security component, which is deposited in a separate escrow account, which is operated and can be utilized by airport concerned only to meet the security related expenses of that airport. 13. Further it is pertinent to note that the CBDT in its Office Memorandum dated 30-....
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....lding, plant and machineries etc., without packages for reservation for a required period are kept in cold storage after paying cooling charges. The CBDT, thus, clarified that the customer is also not given any right to use any demarcated space/place or the machinery of the cold storage and thus does not become a tenant. Therefore, the provisions of 194-I is not applicable to the cooling charges paid by the customers of the cold storage. Applying the same analogy, the PSF charges paid by the assessee on behalf of its customers, do not attract the provisions of Section 194-I of the Act. 15. Considering all these judicial decisions in the light of the facts of the case, we do not find any error/omission in the findings of the CIT(A). Hence, the assessee succeeds and the revenue fails and the findings of the CIT(A) are confirmed. Accordingly, grounds No.1 & 2 are hereby dismissed. 16. In the result, the appeal of the revenue is dismissed." 11. On a perusal of the aforesaid decision of the co-ordinate bench, it is evident that the Bench, while deciding the issue has held that PSF collected by the Airline from the passengers for payment to Airport Authority of....
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....explained in the succeeding paragraphs." 14. In the judgments referred to by the assessee, this clarification by the Board was not at all examined. Therefore, we are of the view that the judgments would not render much assistance to the assessee. Once it has been held in the case of assessee that they were collecting the PSF on behalf of the Airport Authorities/Airlines Operators, the collection charges or the commission, whatever nomenclature is given, retained by them assumes the character of commission paid by the Principal to its agents and the Principal is required to deduct the TDS on such payments to its agent under section 194H of the IT Act. In the light of these facts, we are of the considered view that the assessee is required to deduct the TDS on the amount retained by the Airlines while making the payment to the assessee. Our attention was also invited to the proviso to section 40(a)(ia) of the Act, according to which if the respondent has paid the tax on the receipt and filed the return before the due date of filing the return, the assessee cannot be deemed to be in default. 15. The scope of proviso was examined at number of occasions by the Tribunal and various....
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....ertain contingencies. 12. Relevant to the case in hand, what is common to both the provisos to Section 40 (a) (ia) and Section 210 (1) of the Act is that the as long as the payee/resident (which in this case is ALIP) has filed its return of income disclosing the payment received by and in which the income earned by it is embedded and has also paid tax on such income, the Assessee would not be treated as a person in default. As far as the present case is concerned, it is not disputed by the Revenue that the payee has filed returns and offered the sum received to tax. 13. Turning to the decision of the Agra Bench of ITAT in Rajiv Kumar Agarwal v. ACIT (supra ) , the Court finds that it has undertaken a thorough analysis of the second proviso to Section 40 (a)(ia) of the Act and also sought to explain the rationale behind its insertion. In particular, the Court would like to refer to para 9 of the said order which reads as under: "On a conceptual note, primary justification for such a disallowance is that such a denial of deduction is to compensate for the loss of revenue by corresponding income not being taken into account in computation of taxable income i....
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....tate so specifically, the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was introduced. In view of these discussions, as also for the detailed reasons set out earlier, we cannot subscribe to the view that it could have been an "intended consequence" to punish the assessees for non deduction of tax at source by declining the deduction in respect of related payments, even when the corresponding income is duly brought to tax. That will be going much beyond the obvious intention of the section. Accordingly, we hold that the insertion of second proviso to Section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 1st April, 2005, being the date from which sub clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004." 14. The Court is of the view that the above reasoning of the Agra Bench of ITAT as regards the rationale behind the insertion of the second proviso to Section 40(a) (ia) of the Act and its conclusion that the said proviso is declaratory and curative and has retrospective effect from 1st April 2005, merits acceptance." 16. But this aspect w....
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....stem of accounting. The foreign exchange accrues to the assessee when the services are provided. Therefore, the duty credit scrip shall be accounted for when the foreign exchange earning exceeds Rs. 10,00,000/- during the year. But the assessee has not recognized income on account of duty credit scrips on accrual basis for assessment years 2008-09 to 2013-14. The AO, relying upon the Experts Advisory Committee of Institute of Chartered Accountants of India (ICAI) wherein it was held that duty credit should be recognized as other income and further the cost of fixed asset inclusive of duty payable is eligible for depreciation. The AO was of the view that assessee should have offered to tax the duty credit entitlement for the assessment year in which the assessee became entitled to the duty credit. The AO accordingly made an addition of Rs. 19,91,32,992/- in assessment year 2011-12 having observed that assessee has recognized the principle by offering to tax the duty credit entitlement to tax for assessment year 2014-15. 19. Assessee preferred an appeal before the CIT(A) with the submission that under the SFIS scheme, assessee became entitled to SFIS duty credit scrips amounting t....
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....cal, national or international 3.2 Government grants are assistance by government in cash or kind to an enterprise for past or future compliance with certain conditions. They exclude those forms of government assistance which cannot reasonably have a value placed upon them and transactions with government which cannot be distinguished from the normal trading transactions of the enterprise." Thus, the thrust of Government grant is that it is assistance in one form or the other and not necessarily in form of cash. It could be seen from the abovedefinition that any assistance from the Government whether in cash or kind given eitherfor past or future compliance with certain conditions would constitute a government grant. The featuresof the duty credit entitlement certificate reveals that it is in the form of assistance given by the government. Further, as per AS-12, there are two approaches for accounting of government grant i.e. capital approach under which the grant 'is treated as part of shareholder's fund and the' income approach under which the grant is taken to income- over one or more periods. As the Company has used the scrips for the paym....
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....ee, the actual cost of asset Shall be reduced by the amount of duty of excise or the additional duty leviable under section ,3 of the Customs Tariff Act, 1975 (51 of 1975) in respect of which a claim of credit has been made and allowed under the Central Excise Rules, 1944.] Explanation 10.-Where a portion of the cost of an asset acquired by the assessee has been met directly or indirectly by the Central Government or a State Government or any authority established under any law or by any other person, in the form of a subsidy or grant or reimbursement (by whatever name called), then, so much of the cost as is relatable to such subsidy or grant or reimbursement shall not be included in the actual cost of the asset to the assessee: Provided that where such subsidy or grant or reimbursement is of such nature that it cannot be directly relatable to the asset acquired, so much of the amount which bears to the total subsidy or reimbursement or grant the same proportion as such asset bears to all the assets in respect of or with reference to which the subsidy or grant or reimbursement is so received, shall not be included in the actual cost of the asset to the assessee. ....
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.... it would be reckoned as an income liable for taxation in so far as the provisions of sub clause (xviii) appended to section 2(24) provides so-, but to the excepting part concerning any award of subsidy (by whatever name called) made towards the cost of an asset, it will be dealt with by the Explanation 10 appended to section 43(1) and will be designated as merely a capital receipt and followed by consequent deduction from the cost of asset. 11. However, in so far as assessment years prior to AY 2016-17 are concerned that amount of subsidy needs to be taken as capital receipt. In the present case, e Duty Credit scrips granted is towards utilizing the same for payment of custom duty on capital goods imported from abroad and thus the same shall be in the nature of capital receipt to be reduced from the capital receipt for the purpose of claiming depreciation thereon. And in fact the appellant has accorded the same treatment in its tax return which is in accordance with accounting Standard 12 issued by ICAI, provisions of section 43(1) read with Explanation 9 and 10 and the settled legal position on the issue. 12. Further, it is relevant to note that in due furtheran....
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.... Where the actual cost of the asset is increased, depreciation on the revised actual cost or written down value shall be provided prospectively at the prescribed rate. In case of refunds attributable to non- depreciable assets, shall be applied first against any unamortised deferred credit remaining in respect of the Government grant. To the extent that the amount refundable exceeds any such deferred credit, or where no deferred credit exists, the amount shall be criarged to profit and loss statement. In case of any confliction between the provisions of the Income Tax Act, 1961 and. the Income Computation and Disclosure Standards, the provisions of the Act shall prevail to that extent. 13. It is respectfully submitted that the Hon'ble Supreme in the case of Commissioner of Income Tax, Madras vs. Ponni Sugars & Chemicals Limited, Civil Appeal No.5694 to 5715 of 2008, [2008] 174 Taxman 87 (SC) has settled that, it is the object for which subsidy/assistance is given, that truly which determines nature of subsidy. The character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words,....
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....ceipt of subsidy would be on capital account. 16. Therefore, the Appellant prays that the action of AO in treating the accrual of SFIS duty credit scrips as income of the Appellant is incorrect and is contrary to the provisions of laws, settled legal position on the issue and the AO be directed to delete the aforesaid amount in the hands of the Appellant and adopt the tax treatmentwhich is given by the appellant by reducing the amount of such duty credit scrips from the capital cost and claiming depreciation on the reduced amount." 20. It was further contended that the entire arguments of the assessee was not considered by the CIT(A) and in few lines he confirmed the order of the AO having relied upon the report of the Expert Advisory Committee of the ICAI wherein they have opined that such amount would be in the nature of revenue receipt whereas the Hon'ble Supreme Court in the case of CIT Vs. Ponni Sugars Ltd., (2008, 174 Taxman 87(SC) has held that it is the object for the subsidy given, that truly determines the nature of subsidy assistance. The character of subsidy received in the hands of the assessee has to be determined with respect to for the purpose for which ....
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....under section 14A of the Act. In this regard, it was contended on behalf of the assessee that in the impugned assessment years, the assessee has not earned any exempted income, therefore no disallowance under section 14A is to be made. In support of his contention,he placed reliance upon the order of the Tribunal in the case of DCIT Vs. M/s. MFar Holdings Pvt. Ltd., in ITA No.1443/Bang/2017 in which it was held that in the absence of exempted income, no disallowance u/s. 14A can be made. The learned DR placed reliance upon the order of the AO. 23. Having carefully examined the orders of authorities below we find that undisputedly the assessee did not earn any exempted income during the impugned assessment year. The aspect where disallowance can be made in the absence of exempted income was examined by the Tribunal and relying upon the order of the High Court and the Apex Court it was held that in the absence of any exempted income, no disallowance under section 14A can be made. The relevant observation of the Tribunal in the case of case of DCIT Vs. MFar Holdings Pvt. Ltd., is as under: "4. Having carefully examined the orders of authorities below, we find that undis....
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....axable income in the relevant assessment year in question "corresponding expenditure could not be worked out for disallowance." 16. In CIT v. Holcim India (P.) Ltd. (supra), the court further explained as under : "15. Income exempt under section 10 in a particular assessment year, may not have been exempt earlier and can become taxable in future years. Further, whether income earned in a subsequent year would or would not be taxable, may depend upon the nature of trans action entered into in the subsequent assessment year. For example, long-term capital gain on sale of shares is presently not taxable where security transaction tax has been paid, but a private sale of shares in an off market transaction attracts capital gains tax. It is an undisputed position that respondent assessee is an investment company and had invested by purchasing a substantial number of shares and thereby securing right to management. Possibility of sale of shares by private placement etc. cannot be ruled out and is not an improbability. Dividend may or may not be declared. Dividend is declared by the company and strictly in legal sense, a shareholder has no control and cannot insist on pa....
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....the purpose of the expenditure that is relevant in determining the applicability of section 57(iii) and that purpose must be making or earning of income. Section 57(iii) does not require that this purpose must be fulfilled in order to qualify the expenditure for deduction. It does not say that the expenditure shall be deductible only if any income is made or earned. There is in fact nothing in the language of section 57(iii) to suggest that the purpose for which the expenditure is made should fructify into any benefit by way of return in the shape of income. The plain natural construction of the language of section 57(iii) irresistibly leads to the conclusion that to bring a case within the section, it is not necessary that any income should in fact have been earned as a result of the expenditure." 21. There is merit in the contention of Mr. Vohra that the decision of the Supreme Court in Rajendra Prasad Moody (supra) was rendered in the context of allowability of deduction under section 57(iii) of the Act, where the expression used is "for the purpose of making or earning such income". Section 14A of the Act on the other hand contains the expression "in relation to income....
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....O but before the CIT(A), assessee has made the written submissions which is as under: "In the previous year relevant to assessment yeaer 2007-08, the Appellant had paid Upfront Fee which it claimed as revenue expenditure. However, the learned AO restricted the claim of the Appellant only to the extent of 1/30th of the expenditure incurred spreading the expenditure so incurred over the tenure of the OMDA and accordingly, allowed 1/30th of the said expenditure in the previous year relevant to captioned assessment year. In first appeal against the said order for AY 2007-08, the said Upfront expenditure has been held allowable as revenue expenditure by Your Honour's predecessor. However, the AO has not accepted the decision of ICT(Appeals) and the Revenue has filed further appeal against the relief allowed by CIT(Aappeals) before the ITAT which is pending for disposal. Considering, non- acceptance of order of CIT(Appeals), the AO based on the decision given in the assessment order of AY 2007-08 should have allowed deduction for 1/30th of upfront fees. - The Appellant prays that the AO be directed to allow the deduction for 1/30th for upfront fees. - ....
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....T(A) failed to appreciate and ought to have held that the provisions of section 194H of the Income Tax Act,1961 are not applicable in as much as there is no principal and agent relationship between the appellant and the airlines. Further the appellant has made detailed submission in support of claim that the airlines has discharged its income tax liability on collection charges of Rs. 5,33,45,596/- retained by the airlines wherever applicable 3. The Appellant therefore prays that the Assessing officer be directed to allow the claim of collection charges of Rs. 5,33,45,596/-. Ground II: Allowance of Rs. 8,64,31,498/- by treating the duty credit entitlement under SFIS accrued as grant related to revenue.: On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of the AO in allowing an amount of Rs. 8,64.31,498/- by treating the duty credit entitlement under SFIS accrued as grant related to revenue on completion of assessment U/s. 153A which was reduced from the capital cost for the purpose of allowing depreciation in the original assessment proceedings u/s 143(3) of the Income Tax Act. 2 The Appe....
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....11 completed u/s 143(3) of the Income Tax Act,1961 should have allowed deduction. 3. The Appellant therefore prays that the Assessing officer be directed to allow to allow the deduction for 1/30th of upfront fee and repair and maintenance for AY 2007-08 and depreciation u/s 32 on repairs and maintenance for AY 2008-09, AY 2009-10 and AY 2010- 11. Ground VI: The Appellant craves leave to add, alter and/or amend all or any of the foregoing grounds of appeal. 28. Ground Nos. 1, 2, 4 & 5 are already adjudicated by us in the foregoing paras in ITA No.636/Bang/2017 in which the matter was restored to the AO with respect to ground Nos. 1, 2 & 4 with certain directions. Following the same, the order of the CIT(A) is set aside in this regard and matter is restored to the AO for readjudication of the impugned issues in terms indicated in foregoing paras. So far as ground No. 5 is concerned, the addition was confirmed in foregoing para. Hence, following the same, we confirm the order of the CIT(A). 29. Ground No. 3 relate to addition on account of inclusion of revenue from National Aviation Company India Ltd., (NACIL) on accrual basis of Rs. 69,04,00,000/-. The facts in brie....
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....t stopped offering services to M/s. NACIL and its affiliates and has recognized the expenditure incurred for services provided to M/s. NACIL on mercantile basis. The assessee cannot recognized expenditure on mercantilemethod but the revenue recognition from the same party on cash method. The AO further observed that as per accounting standards and accepted principle of taxation the assessee has to follow consistent method of accounting. As per the matching concept of the accountancy, expenditure claimed is to be matched with the income offered. The AO further observed that assessee company has claimed the expenditure incurred for the provision of services to M/s. NACIL but has not offered the corresponding income which is not acceptable. The AO accordingly rejected the contention of the assessee and brought the revenue accrued from M/s. NACIL for the period of October 2011 to March 2012 amounting to Rs. 69.04 crores to tax as income from business. The assessee has preferred an appeal before the CIT(A) and furnished the detailed submissions explaining the reasons for the conversion of method of accounting to cash basis. For the sake of reference, we extract the detailed submissions ....
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....arges, Service Tax etc. - As would be evident from the above table that there was outstanding of Rs. 81.04 Crores (approx.) (including billing related to Development Fee, Utility Charges, Service Tax etc.) as on March 31" 2011. In this regard, it is submitted that the appellant was having opening outstanding dues of Rs. 40.29 Crores (approx.) (including amount outstanding relating to DF, utility charges, service tax) recoverable from Air India as on 31st March 2010. During the period from April 2010 to March 2011, the appellant has raised bills amounting to Rs. 245.05 Crores (including billing related to DF, utility charges and service tax) to Air India against which the Air India has paid only Rs. 204.30 Crores (approx.) due to which the amount of outstanding dues increased to Rs. 81.04 Crores (approx.). It is submitted further that the appellant during the period April 2011 to September 2011, has raised invoices (inclusive of DF charges, Utility charges, and service tax) to Air India and its Subsidiaries (collectively referred to as 'Air India') amounting to Rs. 132.61 Crores (approx.). However, against the above billing Air India has paid in aggregate a....
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.... a. Air India to be put on 'Cash & Carry basis' mode w.e.f. 00:01 hrs of June 1st 2011 without any further notice; b. Message would be displayed for point (a) above on FIDS for advance intimation to passengers w.e.f. 16:00 hrs of May 27th 2011; c. Air India would not be extended IT Services at T-3 by WAISL w.e.f. June 1st 2011. In view of failure of Air India to clear their outstanding, the Appellant Company requested the Regional Executive 'Director of AAI vide its letter no 379 dated May 27th 2011 to invoke Cash & Carry action on Air India effective from 00:01 hrs of June 1st 2011. The Appellant further mentioned that the outstanding Les from Air India have far exceeded the credit facility granted to them andalso they do not have any security deposits with the Company unlike the other Airline Operators where they have placed certain amount of security deposit. The Company further requested not to allow take off unless itsCA-12 certificate (for cash payment) for each flight is produced by Air. - However, in the meeting with C&MD - Air India, Joint Secretary, MoCA on 30th May, 2011 the following understanding was reached: ....
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.... take care of servicing of its debts, meeting its contractors liability and other statutory payments. - Decision of Board of Directors on revenue/ receivables from Air India The board of directors (including nominee directors of AAI and MoCA) in its board meeting held on October 25, 2011, took on record the minutes of meeting of the Committee of the Board for considering change in revenue recognition for NACIL (i.e, Air India and its subsidiaries) held on October 22, 2011. and approved the accounting of revenue/ receivables from Air India on cash basis. (Copy enclosed). In the meeting held on October 22, 2011, a detailed presentation is made by the Chief Financial Officer (CFO) of the Appellant mentioning the detailed reasons for recognizing the revenue from NACIL (i.e. Air India and- its subsidiaries) on cash basis. Some of the reasons are as follows: i. The amount recoverable from NACIL (Air India, Indian Airlines, Alliance Air, Air India Chartres and Centaur Hotel) as on September, 2011 had increased by Rs. 53.69 Crores over the last quarter to Rs. 272.30 Crore ii. The continuous increase in outstanding dues from NACIL creates working capital ....
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....the Accounting Standard 9 under the Companies (Accounting Standard) Rules, 2006, as amended and accordingly the Company has started the billing to Air India on receipt basis. It is submitted further that: i. The Appellant Company at Note 31 to the financial statements for the year ended on March 31st 2012, has disclosed the treatment given to the revenue/receivables from Air India. The same is reproduced as follows: "31. As at March31 2012, the Company has receivables from Air India Limited and its subsidiaries (collectively referred to as Air India) aggregating to Rs. 128.19 Crores (March 31, 2011 Rs. 59.25 Crores). Considering the delays in realization of dues from Air India and the uncertainty over the timing of ultimate collection involved, the company, as a measure of prudence, has decided to recognize the revenue from Air. India from October 1, 2011 only when such uncertainty is removed as required by para 9.2 of the Accounting Standard 9, Revenue Recognition. However, based on the internal assessment and various discussions that the company has had with Air India, the management is confident of recovery of such receivables as at March 31, 2012. As such no a....
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....mission that assesee was rendering services to M/s. NACIL which includes its affiliates like Air India, Indian Airlines, Alliance Air, Air India Charters and Centaur Hotel and the assessee is required to pay revenue share at the rate of 45.99% to Airports Authority of India of the projected per-tax Gross Revenue for each year in 12 monthly equal installments throughout the term of OMDA. During the financial year 2010-11 and 2011-12 Air India Ltd., and its affiliates had made substantial delay in making the payment for the use of Aeronautical or non-aeronautical services to the appellant. The aeronautical revenue derivedby the appellant from Air India and its affiliates are very significant . As on 31st March 2011, outstanding amount of Rs. 81.04 Crores is due from M/s. NACIL and its affiliates. The detail outstanding was also furnished before the CIT(A). The assessee has also repeatedly approached various senior officers of the Air India as well as the MoCA with regard to non payment of its dues on time against the services utilised by Air India but no concrete response was received. It was also told to authorities that in spite of non payment of outstanding dues to Air India Lt....
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....efore, since it was done as per the accounting standard 9 and other guidelines, no disallowance should be made. 33. The learned DR placed the reliance upon the order of the CIT(A). 34. Having carefully examined the orders of authorities below, in the light of rival submissions we find that assessee has furnished the detailed explanations for the conversion of revenue recognition with regard to the receipts from M/s. NACIL and its affiliates but the explanations furnished by the assessee were not accepted by the CIT(A) though he has recorded the same in his order. Undisputedly, assessee was dealing with the public sectors and that too with the essential services providers. Despite of non receipt from the NACIL and its affiliates, the assessee was contributing the revenue shares @ 45.99% to Airport Authority of India of the projected pre-tax Gross Revenuefor each year in 12 equal monthly instalments. He has explained as to what efforts he has made to get the recovery of the outstanding dues and after the meeting the Chairman and Managing Director and senior officers of the MOCA a decision was taken to change the mode of recognition of revenue. Since the assessee has satisfactor....
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.... facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of the Deputy Commissioner of Income-tax. Central Circle 2(2), Bangalore (hereinafter referred to as AO) in making the disallowance of collection charges of Rs. 2,74,32,632/- retained by the airlines under section 40(a)(ia) on completion of assessment U/s. 153A. 2. The CIT(A) failed to appreciate and ought to have held that the provisions of section 194H of the Income Tax Act,1961 are not applicable in as much as there is no principal and agent relationship between the appellant and the airlines. Further the appellant during the course of assessment proceedings has made detailed submission in support of claim that the airlines has discharged its income tax liability on collection charges of Rs. 2,74,32.632/-retained by the airlines wherever applicable. 3. The Appellant therefore prays that the Assessing officer be directed to allow the claim of collection charges of Rs. 2,74,32,632/- retained by the airlines. 4. Ground III: The Appellant craves leave to add, alter and/or amend all or any of the foregoing grounds of appeal. 36. During the course ofhear....