TaxTMI 
TaxTMI 
2019 (12) TMI 360
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....ls filed by the assessee in ITA Nos. 344/Coch/2014, 396/Coch/2014 and 310/Coch/2015, arising out of assessment orders passed u/s. 143(3) of the I.T. Act and 143(3) r.w.s. 263 of the I.T. Act respectively are directed against the different orders of the CIT(A)-II, Kochi and pertain to the assessment years 2008-09 to 2010-11. ITA Nos. 190 to 192/Coch/2017: Revenue's'Appeals: AYs 2005-06 to 2007-08 2. The first common ground in Revenue's appeals in ITA Nos. 190 to 192/Coch/2017 for the assessment years 2005-06 to 2007-08 is with regard to allowability of deduction u/s. 80IA on account of non compliance of agreement and commencement u/s. 80IA(4)(i)(b) of the I.T. Act and 80IA(4)(i)(c) of the Act. 3. The facts of the issue as narrated in ITA No. 190/Coch/2017 for the assessment year 2005-06 are that the assessee claimed deduction u/s. 80IA in their return of income for the assessment year 2005-06. The Assessing Officer disallowed the claim on the ground that no agreement had been entered into for operation of the airport and that the airport started operations before 01/04/1995, which resulted in the non-compliance of conditions specified in sec. 80IA(4)(i) - Clause (b) & (c). 3.1 T....
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....A) reversed the order of the Assessing Officer and allowed the claim of the assessee u/s. 80IA of the Act. This issue was the subject matter of appeals of both the assessee and the revenue before the Jurisdictional High Court against the original order of the Tribunal ITA Nos. 807/Coch/2008, 375/Coch/2009 and 392/Coch/2010 supra. In the meantime, on assessee's appeals, the High Court vide consolidated order in ITA Nos. 163,169 &176 of 2012 dated 07/08/2017 set aside the order of the Tribunal and held that the assessee had complied with section 80IA(4)(i)(b) of the Act. The order of the High Court was given effect to by the Assessing Officer vide order passed u/s. 143(3) r.w.s. 260 of the I.T. Act dated 31/12/2018 and allowed deduction u/s. 8IA(4)(i)(b) of the I.T. Act. Further, the SLP filed by the Department against the order of the High Court was rejected by the Supreme Court. Hence, the matter has attained finality and covered in favor of the assessee and against the Department. 3.2.1 Against this, the Revenue is in appeal before us. 3.3 We have heard the rival submissions and perused the record. In our opinion, this issue is covered in favour of the assessee by the judgment ....
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....he airport should precede the commencement of operation of the infrastructure facility to avail the benefit of deduction. The statutory provision and the agreement being as above, we cannot uphold the conclusion of the Tribunal that both the agreements could not constitute agreement! specified in clause-(b). Accordingly, the findings of the Tribunal with reference to clause(b) of sub-section (4) of Section 80-IA are set aside. 15. The matter will stand remitted to the Assessing Officer for fresh examination as ordered by the Tribunal in paragraph 7 of its order." In view of the above judgment of the High Court, the assessee is entitled for deduction u/s. 80IA(4)(i)(b) of the I.T. Act. Being so, we do not find any infirmity in the findings in para 15 of the judgment of the High Court in relation to section 80IA(i)(c) of the I.T. Act and not related to section 80IA(4)(i)(b) of the I.T. Act for these assessment years. Thus, this ground of appeals of the Revenue for these assessment years is rejected. 4. The next common ground in ITA Nos. 190 to 192/Coch/2017 for the assessment years 2005-06 to 2007-08 is with regard to allowability of deduction u/s. 80IA on account of non complian....
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....g and maintaining the airport after 1.4.1995 and complied with section 80 IA (4) (i) (c). The Ld. AR submitted that an airport would start operating and maintaining only when it is authorised to operate by the regulatory authority of the country and aircrafts are allowed to land /take off from the airport. Assessee airport was granted provisional authorization to operate by Government of India, Ministry of Civil Aviation as per the order dated 9th June 1999. The final authorization was issued on 10.06.1999. Subsequently, the Government of India notified by way of Notification dated 22nd June 1999, that all civil commercial flights will operate (to and from) the assessee airport with effect from 1st July 1999. Thus, it was clear that the assessee had started operating and maintaining the Airport only from 1st July 1999, and hence, the assessee has satisfied the condition under section 80 (IA)(4)(i)(c) of the I.T. Act. The High Court had confirmed the order remanding the ground to the AO for fresh adjudication and the Assessing Officer had given effect to the order of High Court on 31.12.2018 and allowed deduction u/s. 80IA(4)(i)(c) of the I.T. Act. Accordingly, the Ld CIT(A) has r....
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.... 'profits and gains' derived from the business of the assessee. We have referred to section 80 IA and indicated that what is permitted to be deducted in computing the total income of the assessee is an amount equal to 100% of profits and gains derived from such business, viz. the business of operating an airport. Therefore, the first issue to be considered is whether the rent and services and royalty received by the assessee are profits and gains derived by the assessee from its business. The term 'profit and gains derived', used in Section 801A, is also used in other provisions of the Income Tax Act. The Apex Court in Cambay Electric Supply Industrial Co.Ltd. v CIT ([1978] 113 ITR 84), referring to section 80J (since omitted by Finance Act (No.2, 1996), inter alia held thus: "In this connection it may be pointed out that whenever the legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor-General it has used the expression 'derived from', as for instance in Section 80-J. In our view, since the expression of wider import, namely, 'attributable to' has been used, the legislature intended to cover receipts from source....
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....h and every item of the income derived by the assessee towards rent and services and royalty and decide whether the income of the assessee was derived by it from its core business. 15. Therefore, the orders of the Assessing Officer, appellate authority and the Tribunal, in so far as it is decided that the income derived by the assessee from royalty, rent and services are assessable under the head 'income from business' are set aside. The matter will stand remitted to the assessing officer, who will issue notice to the assessee and decide the matter afresh in the manner as indicated above. The questions of law framed are answered in the above manner and the appeals are accordingly disposed of." 5.6 The Assessing Officer had already given effect to the above order of the High Court vide order dated 31/12/2008 by allowing the claim of the assessee u/s. 80IA of the Act. Hence, the department cannot contest this issue once again before the Tribunal. Thus, this ground of appeals of the Revenue is dismissed as infructuous for the assessment years 2005-06, 2006-07 and 2007-08. 5.7 In the result, the appeals of the Revenue in ITA Nos.190 to 192/Coch/2017 are dismissed. ITA No....
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....providing better passenger services, but they cannot be treated as derived from airport operations. These include- Royalty Mobile Phone Counters 4,713,263.10 Royalty on Mobile Charger box 2,226,219.00 Royalty/Restaurants 5,039,404.53 Royalty/foreign Exchange/Thomas Cook 879,494.70 Royalty/Vending Machines 2,018,552.94 Royalty-Others(Video Walls/Conferencing etc.) 6,059,681.46 Total 20,936,615.73 7.4 Thus, in view of the above, the CIT(A) held that the following heads of income are treated as not derived from the operation and maintenance of the airport/eligible business of running of infrastructure facility, and hence, would not be eligible for computation of deduction u/s. 80-IA: i) Income from rent and services at Rs. 13,74,34,981/- ii) Miscellaneous income at Rs. 14,786,972/- iii) Interest income at Rs. 1,09,056,410/- and iv) Royalty under various heads as listed Table II above. Total of (i) to (iv) above : Rs. 282,214,979/- 7.5 Accordingly, deduction u/s. 80IA(4)(i) was allowed to the assessee. However, income to the tune of Rs. 282,214,979/- was excluded from computation of such profits for the purposes of this deduction being not derived from ....
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....dental activities providing amenities to passengers in the airport. The High Court remitted the matter back to the assessing officer to reconsider each and every item of the income derived by the assessee and decide whether the income of the assessee was derived by it from its core business. 8.2 The question is whether the income referred above is from core and essential activities of airport and not from incidental activities of providing amenities to passengers. In this regard it was submitted that the term "airport" is not defined in the Act. Accordingly, the High court vide its order dated 07.08.2017 in assessee's own case for the AYs 2005-06, 2006-07 & 2007-08, held that as per Section 2(b) of "The Airports Authority of India Act 1994 an "Airport" means a landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome as defined in clause (2) of section 2 of the Aircraft Act, 1934". Thus, the operations and maintenance of the airport mainly consist of are: a. Ensuring safe landing / taking off of aircrafts in/from the airport. b. Providing passenger facilities within the airport as required and expec....
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....nd arrival information boards, baggage x-ray machines, weighing scales, owned and maintained by the assessee, as also electricity, water, security related infrastructure/facilities and Air India handles these works in the airport , and pay assessee a percentage of their gross turnover from airlines in this regard. The tariff for ground handling is fixed in consultation with assessee and assessee is also a party to the agreements entered with airlines for ground handling. Since, ground handling is an essential service and a core activity without which the airport cannot function, the income thereon has a direct and immediate nexus with the operation of the Airport and is not an incidental amenity. Royalty from Terminal Handling - Rs. 0.30 Crores 8.6 It is in respect of passenger services rendered by Airlines in the terminal and have direct and immediate nexus with the operation of the Airport and is not an incidental amenity. Royalty Baggage wrapping of Rs. 0.13 Crores 8.7 It is for security wrapping of passenger luggage in the international terminal as per industry practice, and have a direct and immediate nexus with the operation of the Airport and is not an incidental amenity....
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....e I.T. Act in respect of above income and denied deduction u/s. 80IA in respect of income from surcharge from pre paid taxi, income from sale of scrap, notice pay, interest on delayed payment, income from film shooting and bond from staff. Hence, in these assessment years also, the assessee is not entitled for deduction u/s. 80IA in respect of these items only. Being so, the CIT(A) is justified in granting deduction u/s. 80IA of the Act in respect of royalty income, treating it as business income. Accordingly, this ground of appeals of the Revenue is dismissed. Thus, the appeals of the Revenue in ITA Nos. 360/Coch/2014 and 464/Coch/2014 are dismissed. ITA No. 344/Coch/2014 : Assessee's Appeals: A.Y. 2008-09 ITA No. 396/Coch/2014 : Assessee's Appeals: A.Y. 2009-10 10. The assessee has filed appeals in ITA Nos. 344/Coch/2014 & 396/Coch/2014, arising out of assessment orders passed u/s. 143(3) against the different orders of the CIT(A)-II, Kochi for the assessment years 2008-09 and 2009-10. 10.1 The first common ground in ITA Nos. 344/Coch/2014 and 396/Coch/2014 for the assessment years 2008-09 and 2009-10 is with regard to assessment of income from rent and services, royalty from....
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....e appeals of the assessee in ITA Nos. 807/Coch/2008, 375/Coch/2009, and 392/Coch/2010 dt 04.05.2012 wherein it was stated that they are inclined to follow the decisions referred in those cases, but observed that the CIT(A) did not verify whether all the assets stated above were covered by the said decision. For the purpose of verifying this aspect, the ITAT restored the issue to the file of the assessing officer with a direction to follow decisions of the Tribunals referred above and decide the issue accordingly. 11.4 In the set aside proceedings, the AO stated that from the decisions referred as above, it is seen that only runway is covered, whereas, isolation parking bay and roads, culverts and drains are not covered. Accordingly, the CIT(A) granted depreciation on runways @ 25% as applicable to plant and did not allow the claim of the assesse in respect of isolation parking bay and roads, culverts and drains. 11.5. Against this, the assessee is in appeal before us. It was submitted that the AO had not appreciated or followed the directions of the ITAT to follow the decision of National Airport Authority of India' s case referred above and examine whether the assets on whic....
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....l, we are inclined to follow the decision rendered in those cases. However, we notice that the Ld CIT(A) did not verify whether all the assets stated above are covered by the above said decisions. Hence for the purpose of carrying on necessary verification, we set aside the order of Ld CIT(A) on this issue and restore the same to the file of AO with the direction to follow the decision of the Tribunals referred supra and decide the issue accordingly." 11.8 In view of the above order of the Tribunal, this issue is remitted to the file of the Assessing Officer on similar directions. Thus, this ground of appeals of the assessee in ITA Nos. 344/Coch/2014 and 396/Coch/2014 for the assessment years 2008-09 and 2009-10 are partly allowed for statistical purposes. 12. The next ground in the assessee's appeal in ITA No. 396/Coch/2014 is with regard to disallowance of provisions for gratuity ad leave encashment which was confirmed by the CIT(A). 12.1. The main contention of the Ld. AR is that the CIT(A) erred in confirming the addition made by the Assessing Officer towards provisions made for gratuity and leave encashment in the computation u/s. 115JB of the I.T. Act, treating them as una....
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....ditional Commissioner of Income tax, Range-1, Kochi and no fresh agreements or any composite agreement as envisaged u/s.80IA (4)(i)(b) have been filed." 3. From the above facts available on records, I am of the opinion that the order passed by the Additional Commissioner of Income tax, Range-1, Kochi, dt.27-3- 13 u/s.143(3) is erroneous and prejudicial to the interest of the revenue and accordingly, the Commissioner of Income tax, Kochi, set aside the order dt.27- 3-13, passed by the above AO and direct him/her to redo the assessment as indicated above". 13.1.1 Against this, the assessee is in appeal before us. 13.2. The Ld. AR submitted that the assessee Airport was an infrastructure facility as defined in CPD and Explanation to Sec. 80IA sub-sec.(4), eligible for benefit u/s.80IA and claimed the same in the total income filed by the assessee. While completing the assessment u/s.!43(3) on 27-03-2015, the AO examined the claim u/s. 80IA and allowed the same. The AO had dealt with the matter in Page No 12 of the order in assessment u/s.143(3) in detail. The claim was allowed after detailed examination. 13.3 The Ld.CIT issued a notice u/s.263 of the IT Act dt.23-03-2015 and afte....