TaxTMI 
TaxTMI 
2022 (6) TMI 1529
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....and is in violation of the principles of natural justice. Tax effect: Nil 2. Deduction under section 80-IA of the Act 1. The CIT(A) has erred in law and on facts in treating other income from other deposits amounting to INR 113,389,608; 70% revenue share fee from food and beverage amounting to INR. 97,736,920 and 70% revenue share fee from retail outlets amounting to INR 237,416,659 as ineligible incomes while computing the deduction under section 80- IA of the Act 2. The CIT(A) have erred in law and on facts in holding that the interest income earned by the appellant from various deposits made are ineligible incomes while computing the deduction under section 80-IA of the Act. 3. The CIT(A) have erred in law and on facts in holding that the appellant has formed joint venture partnerships (JV) with the third parties and have earned revenue share from the entire JV activity, instead of letting out the space at reasonable rate and therefore considered the same as ineligible income under section 80IA of the Act. 4. The CIT(A) has erred in law and on facts in not giving cognizance that the Appellant is engaged in developing, operati....
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....f deduction u/s 80IA on "Revenue share fee from rental outlets" by giving relief of 30% of revenue from rental outlets which is not sources from the business operation of assessee i.e. build, operate and maintenance of airport. 3. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the Ld. CIT (A) be reversed and that of the Assessing Officer be restored. 4. The appellant craves leave to add, to alter, to amend or delete any of the grounds that may be urged at the time of hearing of appeal." 3. The main issues arising out of these cross appeals are as follows:- (1) Eligibility to claim deduction under Section 80IA of the Act by the Assessee in respect of the following income (Assessee's appeal Ground No.2 and Revenue's appeal ground Nos. 2.III to 2.V): - Other income: Rs. 16,47,89,608/-; - Revenue share fee from food and beverage: Rs. 13,96,24,171/and - Revenue share fee from retail outlets: Rs. 33,91,66,656/-.; and (2) Disallowance of concession fee under Section 43B of the Act (Revenue's appeal Ground No.2.I and 2.II) 5. The brief facts of the case are....
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....from receipt of the order. The CIT(A) in his order has distinguished the decision of the Karnataka High Court in the case of CIT v. Hewlett Packard Global Soft Ltd. (2017) 87 taxmann.com 182 (Kar.) from assessee's case stating that in the present case income from a particular activity / source of income is material; while in the case of claim u/s. 10A/10B, the income from a unit operating from a particular location is material. 8. The assessee and the revenue are in appeal against the order of CIT(A) appeals as the other income is partially allowed to be included for the purpose of deduction u/s. 80IA as per the CIT(A)'s order. 9. The ld AR submitted that the other income pertaining to tender fee is intrinsically connected to the business of the Assessee, inasmuch as the tender fee pertains to the tenders awarded by the Assessee in respect of the airport infrastructure. Therefore the income is "derived" from the business of the airport facility. As regards interest earned on deposits, the ld AR submitted that the interest is earned on the deposits which are mandatorily required to be maintained with the banks in terms of the trust and retention agreements. The loans obtained ....
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....s contended that the income, profit or gain cannot be said to have been 'derived' from an activity merely because such activities may have helped the Assessee earn income or profit in an indirect manner. According to Mr. Satapathy, applying the test evolved in Pandian Chemicals Ltd. (supra), the AO, the CIT (A) and the ITAT were correct in disallowing the above sum as deduction under Section 80-IA of the IT Act under the head "other income". 9. The relevant portion of Section 80-IA (4)(iv)(a) of the IT Act reads as under: 80 IA (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in subsection (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years. (2) - (3) ..... (4) This section applies to- (i) xx xx xx (iv) an undertaking which, - ....
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....he Assessee that the interest received on advances and loans given to its employees are receipts in normal course of carrying its business and should be considered as income derived from its essential business activities. Likewise, the late payment by GRIDCO for the electricity supplied, is sought to be made up by GRIDCO by issuing bonds on which the Assessee earns interest. This also therefore, has a direct nexus with the essential business activity of the Assessee. 13. In CIT v. Meghalaya Steels Ltd. (supra), the Respondent there was engaged in manufacturing steel and ferro silicon. The interest earned on the subsidies were treated as not income derived from business of the Assessee and therefore, not having a close and direct nexus with the business of the Assessee. The subsidies, according to the Department, did not qualify for deduction. The Assessee's argument on the other hand was that the subsidies were given only in order that the cost of manufacture would be reduced. These subsidies were reimbursement for either the entire or partial costs incurred towards transporting raw materials to the Assessee's factory or finished products to its dealers, who then sell the ....
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....002-03, 2003-04, 2007-08 and 2008-09 are hereby set aside. 17. ITA Nos.24 and 25 of 2009 and ITA No.1 and 2 of 2015 are accordingly disposed of 6. The ratio emanating from the various judicial pronouncement discussed in the case of Odisha Power Generation Corporation Ltd (supra) is that if there is direct nexus between income earned / expenses incurred to the business of the assessee then the net profits and gains after considering those incomes / expenses are 'derived from the business' of the assessee and therefore would be eligible for deduction u/s. 80IA. Therefore in the given case of the assessee, the important factor to be checked for determination 'Other Income' to be eligible for deduction u/s. 80IA is, whether the income is inextricably linked and is having direct and proximate connection/nexus with the Assessee's business of operation and management of the Bangalore International Airport. We therefore remand the issue to the AO for factually verifying the 'Other Income' earned by the assessee and its nexus with the business of the assessee in order to decide the eligibility for deduction u/s. 80IA of the Act as per law. The AO is directed accordingly, after g....
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....ning thereto used for landing or departure of the aircraft. * The Concession agreement entered between the Company and GOI, recognises the different activities into airport and nonairport activities. The Company only performs activities mentioned under the Airport activities and therefore none of the revenue earned is through non-airport activities. * The bifurcation of aeronautical stream of income and nonaeronautical stream of income has been done by the AERA Act only for the purpose of computing and collecting the tariff. However, the AO has erroneously taken the non-aeronautical stream of income as income from non-airport income thereby disallowing the deduction under section 80IA of the Act on such income. * As per Concession agreement, BCAS, IATA and various other agreements/guidelines discussed above, BIAL is expected to develop, maintain and operate the airport to meet the international standards by undertaking various activities in relation to security, passenger convenience, operation and maintenance of the airport 8. In the light of the above submission, the assessee submitted that the non-aeronautical income (revenue from retail outlets, sa....
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.... by it and are therefore intrinsically linked to its business of development, design, construction, commissioning, maintenance, operation and management of the Bangalore International Airport. The relevant clauses in the agreement which demonstrate the above are as under: Article 1.1 (page 3 of the agreement): Definition of "airport activities" means the "provision, at or in relation to the Airport, of the activities set out in Schedule 3, Part 1 as amended from time to time, pursuant to the ICAO guidelines, provided that any activities that are not materially similar to those contemplated in Schedule 3, Part 1 shall require the mutual agreement of the Parties." Article 1.1 (page 3 of the agreement): Definition of "airport" means "the greenfield international airport comprising of the initial Phase, to be constructed and operated by BIAL at Devanahalli, near Bangalore in the State of Karnataka and includes all its buildings, equipment, facilities and systems ........" Schedule 3 (pages 64 and 65 of the agreement): Airport activities include the following services, facilities and equipment: .....duty free sales, general retails s....
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....w of the above, it is submitted that the income earned by the Assessee from retail outlets and food and beverages have a direct nexus with the eligible business, and therefore the deduction as claimed by the Assessee ought to be allowed." 12. The ld DR, on the other hand, vehemently argued that the income from revenue share is not derived from the business of airport operation and the entire amount should be disallowed for the purpose of deduction u/s. 80IA. 13. We have heard both the parties and perused material on record. Two issues arise for our consideration with regard to the income from revenue share of Food & Restaurants and Retail outlets being eligible for deduction u/s. 80IA viz., (i) Whether the Food & Restaurants and Retail outlets fall within the definition of 'infrastructure facility' under explanation to section 80IA(4); & (ii) Whether the income from revenue share of Food & Restaurants and Retail outlets is 'derived from the business' of airport operation to be eligible for deduction u/s. 80IA. 21. We notice that as per Article 1.1 of the Concession Agreement entered into by the assessee with Ministry of Civil Aviation, Government of India....
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....h are more relevant. Hence, we see no reason to interfere with the order of the CIT(Appeals) on this issue. 25. The next issue is whether the income from revenue share is 'derived from the business' of the assessee i.e., airport operation. The main contention of the revenue in this regard is that income from revenue share is not derived from the 'Airport Activities' which allows the assessee to make investment for providing basic infrastructure facilities only and that the income from revenue share is much more than what is derived from providing basic infrastructure facilities. As per the Concession Agreement, the assessee is granted the exclusive right and privilege to carry out the development, design, financing, construction commissioning, maintenance operation and management of the Airport. The assessee in order to provide amenities and facilities to the users of the airport, had entered into various agreements for establishing and operating retail outlets and restaurants. The assessee invites tender for granting rights for utilization of the premises by these third parties and the premises is allotted to the lowest bidder. The fact that the assessee is allotting only the "....
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....greement, the Assessee is to pay concession fee of 4% of the gross revenue to the Government of India, from the 11th year in certain instalments. During the year under consideration, the Assessee accrued the fee payable and created a provision of Rs. 25,42,00,000/- by debiting the profit and loss account. The Assessing Officer disallowed the amount under Section 43B(a) of the Act stating that the concession fee falls within the words 'any sum payable by way of tax, duty cess or fee by whatever name called' and that the same is allowable only on payment basis in the absence of any specific date mentioned in the said section. 28. The CIT(A) allowed the appeal on this issue, by relying on the order passed by the CIT(A) in the Assessee's own case for the AY 2010-11 and by holding that the concession fee payable by the Assessee being in the nature of a profit sharing/recovery for foregoing the operation at the HAL airport by the Government of India, the same was not in the nature of tax or levy covered by the provisions of Section 43B of the Act (para 4.4 on page 5 of the CIT(A)'s order). Revenue is in appeal against the order of the CIT(A). 19. The ld AR submitted that the conces....