AI Drafter 
TaxTMI 
TaxTMI 
2022 (2) TMI 1294
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....security component) managed in Fiduciary Capacity. 2010-2011 2011-2012 2012-2013 2013-2014 620/B/2017 633/B/2017 603/B/2017 604/B/2017 General 1 1 1 (8,91,85,072) 1,68,27,618 6,03,86,989 86,19,312 2. Disallowance u/s 40(a)(ia) towards amount retained by airlines while remitting the amount of Passenger Service Fees (PSF) and User Development Fees (UDF) 2010-2011 2011-2012 2012-2013 2013-2014 620/B/2017 633/B/2017 603/B/2017 604/B/2017 2 2 2 2 2,47,49,095 2,86,47,227 2,02,73,034 2,33,86,903 3. Disallowance under section 14A 2010-2011 2011-2012 2012-2013 2013-2014 620/B/2017 633/B/2017 603/B/2017 604/B/2017 4 & 5 4 4 & 5 3 & 4 12,43,695 43,12,242 89,01,493 1,21,37,900 4. Addition / deduction by treating the duty credit entitlement under SFIS accrued as grant related to revenue. 2010-2011 2011-2012 2012-2013 620/B/2017 633/B/2017 603/B/2017 3 3 3 9,98,09,744 5,70,98,820 2,79,56,389 5. Addition by including the revenue from NACIL on accrual basis. 2012-2013 603/B/2017 7 ....
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....n. The assessee made detailed submission on 08/02/2016 and salient points from the assessee's submissions are reproduced below: "Ministry of Civil Aviation (MOCA) has issued an order dated January 19th, 2009 laying down there the standard accounting / audit procedure in respect of PSF. Clause 2.1 & 2.2 of the said order provides that the PSF (SC) is held by the assessee company in fiduciary capacity only and the assessee company has to maintain its accounts separately subject to the audit of Comptroller & Auditor General of India (CAG). 2.4 Accordingly, the assessee company is maintaining the PSF (SC) accounts separately in accordance with the procedure laid down in Standard Operating Procedure (SOP) dated January 19th 2009, and accordingly the financial statement of the assessee company does not include the balances of PSF(SC). The copy of audited accounts of PSF (SC) is placed in the Paper Book. 2.5 However, the proceeds of PSF(FC) is included in the books of account of the company and the same is considered as the revenue of the company. 2.2. Tax Treatment of PSF-(SC) in the return of Income. i. The assessee co....
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.... the scheme of the Income tax Act, as a first step, the whole of the amount collected as "tee' constitutes income and thereafter deduction is permissible only in respect of amounts actually paid. Since PSF is o fee, the same would constitute income. 8. In view of the above, the entire amount of passenger service Fee (PSF) including the facilitation and security component is income within the meaning of the Income tax Act and accordingly liable to tax in the hands of the airport operator" The Ministry of Civil Aviation on 19/0112009 has issued a standard operating procedure for account/audit of passenger service fee (security component) by jvc / private airports As Per para 4.8. of the SOP. `In terms of clarification dated 30. 6.2008 issued by the Central Hoard of Direct Taxes (CBDT), the receipts on account of PSF (SC) are taxable as income in the hands of the airport operator. As such a consolidated return would have to be filled before the tax authorities.' Therefore the SOP issued by Ministry of Civil Aviation itself has decreed that the revenue received in form of PSF-SC is chargeable in the hands of the assessee company based on OM issue....
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....pronouncements:- (i) ITAT Mumbai in the case of Addl.CIT v. Mumbai International Airport P. Ltd. in ITA No.3232/Mum/2012 for assessment year 2008- 2009. (ii) ITAT Delhi in the case of Delhi International Airport Pvt. Ltd. v. Addl.CIT in ITA Nos.2636, 4213/Del/ 3012 & 3707/Del/2013 for A.Y. 2008-09 to 2010- 2011. (iii) ITAT Delhi in the case of Delhi International Airport Pvt. Ltd. v. CIT in ITA No.137/Del/2012 for A.Y. 2007-2008. (iv) Bangalore ITAT in assessee's own case in ITA No.2189/Bang/2016 for A.Y. 2009-2010. 4.4 It was submitted that in light of the Bangalore Bench decision in the case of assessee's own case for assessment year 2009-2010 (supra), the above said issue may be restored to the files of the A.O. for de novo consideration. 4.5 The learned Departmental Representative supported the orders of the Income Tax Authorities. 4.6 We have heard rival submissions and perused the material on record. The Tribunal in assessee's own case for assessment year 2009-2010 (supra) had restored an identical issue to the files of the A.O. The relevant finding of the Bangalore Bench of the Tribunal in assessee's own case for assessment year 2....
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....e the Tribunal for all the assessment years, namely, A.Ys 2010-2011 to 2013-2014. The submission of the assessee before the ITAT are summarized as follows:- • Airline acts as an agent when they provide the services to the passengers who fly with such airline by booking the ticket directly through airlines, online or through travel agent by cash or through use of Credit/Debit card, or any other mode of payment, etc. • Airlines acts as Principal and the assessee acts as an agent in providing Aeronautical and non-aeronautical services to them pursuant to the Concession Agreement which were hitherto provided by AAI to the airlines. • Thus the Airlines is not the agent of the assessee but act as a Principal in availing the services at the airport and sells its tickets directly, through online, travel agent, etc for whom it acts as an agent. • The airlines act only as a facilitator for collection of payments to be received in respect of PSF and UDF on tickets booked through airlines by above means for and on behalf of airport operator as per the directive of MoCA/AERA. • The facilitation provided by the airlines cannot be t....
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....94-H will be attracted when a Principal agent relationship between the payer and payee exists. • Therefore, in terms of the statutory provisions, the responsibility for paying PSF and UDF is on the passenger and not the airline as the airline is only collecting the PSF and UDF from the passenger(s) and remitting the same to the airport developer in accordance with the directions of the Government of India (i.e. MoCA/AERA). • Hence, the provisions of section 194-H would not be applicable to collection charges retained by the airlines on PSF and UDF amount as per the directive of MoCA/ AERA and company policy in as much as they are in the nature of cash discount/incentives and not for rendering any services. WITHOUT PREJUDICE TO THE ABOVE • No disallowance with respect to collection charges pertaining to PSF(SC) can be made since it is not includible/taxable in the hands of the assessee. • The assessee has not been treated as an assessee in default u/s. 201(1) and the recipient have filed their respective returns and hence in view of Proviso 1 and 2 of section 40(a)(ia) added by the Finance Act 2010 and 2012 which are curat....
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....me to tax. In order to verify this factual aspect, the matter has been restored to the file of the assessing officer, which cannot be faulted with." 5.5 Respectfully following the Hon'ble High Court judgment in the case of Delhi International Airport (P) Ltd. (supra), we restore this issue to the files of the A.O. The A.O. is directed to re-adjudicate the issue in light of proviso to section 40(a)(ia) of the Act. The A.O. shall afford a reasonable opportunity of hearing to the assessee. If it is established that the Airline Operators have offered receipt of commission as income in the respective assessment years in their returns of income and paid tax on the same, then the assessee shall not be held "as an assessee in default". In such a scenario, the provisions of section 40(a)(ia) does not have any application. It is ordered accordingly. DISALLOWANCE U/S 14A OF THE ACT : (ASST.YEAR 2010-2011 TO 2013-2014) 6. For the assessment years 2010-2011 to 2013-2014, the assessee had earned exempt income on investment made with its subsidiaries. The assessee while filing the returns of income for assessment years 2010-2011 to 2013-2014, had made suo moto disallowance u/s 14A of ....
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....those investments, which have yielded exempt income has to be considered for the purpose of computing average value of investments for computing disallowance under Rule 8D(2)(iii). Hence, the issue of disallowance u/s 14A r.w.r.8D(2)(iii) is restored to the files of the A.O. The A.O. is directed to follow the dictum laid down by the Special Bench order of the Tribunal in the case of Veerat Investments (supra) and compute the disallowance accordingly. ADDITION / DEDUCTION BY TREATING DUTY CREDIT ENTITLEMENT UNDER SFIS ACCRUED AS GRANT RELATED TO REVENUE : (ASST.YEAR 2010-2011 TO 2012-2013) 7. The assessee is a company engaged in the business of development, operation and management of Airport at Hyderabad. It is entitled to custom duty credit scrip under `Served From India Scheme' (SFIS) of Foreign Trade Policy issued by the Government of India. In terms of SFIS, service providers are entitled to custom duty credit scrip as a percentage of foreign exchange earned which can be utilized against the payment of import duty on capital goods imported from outside India. The Assessing Officer treated the duty the duty credit entitlement under SFIS accrued as grant related to revenue ....
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....the claim of the assessee after placing heavy reliance upon the Expert Advisory Committee report whereas the issue should have been examined in the light of the judgment of the Apex Court in the case of Ponni Sugars Ltd., (supra). Therefore, we are of the view that CIT(A) has not properly adjudicated the character of receipts and the year of taxability. If it is held to be the capital receipt, it may reduce the value of the capital assets but it cannot be taxed as a revenue receipt. In any case, this issue was not properly examined by the CIT(A). We therefore set aside his order and restore the matter to his file with a direction to readjudicate this issue afresh in the light of assessee's contentions and also in the light of the judgment of the Apex Court in the case of Ponni Sugars Ltd., (supra)." 7.4 In the light of the aforesaid order of the Tribunal in assessee's own group case, we restore this issue to the files of the A.O. The A.O. is directed to follow the directions of the Tribunal given in the case of group company, namely, M/s.Delhi International Airport (P) Ltd. (supra) for assessment years 2007-2008, 2011-2012 to 2013-2014, while deciding the issue. It is ordere....
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....trust. The assessee in its returns of income for assessment years 2011-2012 to 2013-2014, had suo moto disallowed donation. The details of the amount incurred directly by the assessee, the donation given, the nature of community services are given in the chart below:- Sl. No. Asst. Year Amount incurred directly Donation Community services Development Education Health Empowerment 1. 2010-11 1,11,03,544 -- 9,86,475 5,41,228 86,86,721 8,89,120 2. 2011-12 1,12,22,971 12,82,500 18,75,629 17,56,802 62,30,218 77,822 3. 2012-13 1,46,62,162 3,55,116 21,07,541 18,58,251 96,58,058 6,83,196 4. 2013-14 1,35,08,087 30,000 26,95,078 21,16,648 86,15,905 50,456 9.1 According to the assessee, it had incurred the aforesaid expenditure on community development in and around the Airport. It was submitted that the said expenses were incurred wholly and exclusively in order to facilitate the business of the assessee to run in a smooth manner and to assist the employees of the assessee and hence the same ....
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....e appears to be some obscurity with regard to the payment made to GMR Varalakshmi Foundation and this difference needs to be reconciled. However, the details of expenditure incurred by the above said charitable organization were not furnished. We have noticed that the tax authorities have taken the view that the amount paid to this organization is in the nature of donation, while the assessee claims the same to be reimbursement. Before us, the Ld A.R placed reliance on the resolution passed by Board of directors. However, in our view, the financial statements of MIs GMR Varalakshmi Foundation may be helpful to determine the character of amount paid to it by the assessee. Hence the financial statements of GMR Varalakshmi Foundation also require examination. There is no dispute that this expenditure has been incurred under the head 'corporate social responsibility'. However, we noticed from the decisions relied on by the assessee to support its claim that the Hon'ble High Court has appreciated the connection between the expenditure and the business use, i.e., those assessees were able to demonstrate the connection between the expenditure incurred and its use for the busin....