TaxTMI 
TaxTMI 
2022 (5) TMI 1704
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.... section 143(3) of the Act is contrary to the facts and circumstances of the present case and is not in accordance with law. 2. Denial of claim of deduction under section 80IA of the Act 3. The CIT(A) erred in law and on facts in confirming the denial of claim of deduction under section 80IA of the Act. 4. The CIT(A) erred in law and on facts in holding that the fuel farm facility provided by the Assessee did not fall within the meaning of 'airport' and as such was not an "infrastructure facility" for the purposes of claiming deduction under section 80IA of the Act. 5. The CIT(A) erred in law and on facts in holding that the Assessee had not entered into an agreement with the Central Government/State Government/Local Authority/ Statutory Body as required under section 80IA(4)(i)(b) of the Act. 6. The CIT(A) erred in law and on facts in not appreciating that the provisions of section 80IA of the Act were introduced to encourage private participation for development of infrastructure and therefore the provisions had to be construed liberally. 7. The CIT(A) erred in law in not following the judicial precedents relied upon b....
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....iability. As per India - Germany DTAA, the rate of tax that India can charge (irrespective of whether it is tax on the shareholder receiving dividend or tax is payable by the company distributing dividends) cannot exceed 10%, as such, the assessee ought to have been correctly assessed to DDT @ 10%, since the non-resident shareholder is a tax resident of Germany. As per CBDT Circular No. 14 (XL-35), the AO cannot take advantage of ignorance of the assessee as to its rights. This claim was not made by the assessee either in the return of income or before the lower authorities and it is raised for the first time before the Tribunal. This additional ground is purely a legal ground on the facts already on record of the department and requires no fresh investigation into facts. Reliance is placed on the following case laws :- ● National Thermal Power Corporation Ltd. v. CIT, 229 ITR 383 (SC) ● Maruti Udyog Ltd. v. CIT, 252 ITR 482 (Del) 5. It is prayed that the additional ground ought to be admitted in light of the precedents cited above. 6. In this additional ground, the assessee has raised a legal issue contending that DDT liability on the dividend a....
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....id not advert to the point that the "denial of liability to tax" may not be a subject matter of the assessment proceedings u/s 143(3) and it did not put a bar on raising the said issue as an additional ground in the appeal filed against the assessment order passed u/s 143(3) of the Act. 4.5 The Ld A.R also submitted that the details of DDT are given in the Income tax return filed by the assessee and further there is no separate assessment procedure prescribed for assessing the correct amount of DDT liability u/s 115-O. He submitted that the assessment order did not discuss anything about DDT and hence it should be assumed that this amounts to deemed acceptance of DDT liability by the AO. He submitted that the same amounts to application of mind as held in the case of Kelvinator (2002)(256 ITR 1) by Hon'ble Delhi High Court. Accordingly he submitted that it cannot be said that the DDT liability is not part of assessment order passed u/s 143(3), if it is not specifically discussed in the assessment order, especially when there is no other section in the Act dealing with the assessment of DDT liability like the case of Fringe Benefit Tax assessment. He further submitted t....
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....) dealt with a writ petition filed before it by the assessee challenging the demand raised u/s 115QA of the Act, which relates to tax on distributed income by way of buy back of shares. The writ petition was filed on the reasoning that the Income tax Act does not provide appeal remedy for the additional tax demanded u/s 115QA of the Act. However, the revenue submitted that the assessee is having alternative remedy for filing appeal before Ld CIT(A) and accordingly prayed for rejection of Writ petition filed by the assessee. It is pertinent to note that the said assessment order passed by the AO included the demand raised u/s 115QA of the Act also besides the demand raised u/s 143(3) of the Act. The Hon'ble Delhi High Court rejected the writ petition and allowed the assessee to file separate appeal before Ld CIT(A) u/s 246A of the Act against the tax liability raised u/s 115QA of the Act. With regard to the contention of the assessee that the additional tax payable u/s 115QA should not be construed as forming part of assessment order, the Hon'ble Delhi High Court answered the same as under :- "16. At the outset, the Court would first like to deal with the submission....
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.... to be assessed under this Act and (b) any order of assessment under sub-section (3) of section 143. Thus the grievance of the assessee on DDT liability falls under different class of liabilities mentioned in sec. 246A of the Act. Further, Sec. 246A provides for appellate remedy for different types of tax demands raised upon the assessee and there should not be any dispute that the assessees have been filing separate appeals for the demand raised under different sections of the Act. 4.12 In the case of Genpact India P Ltd, the Hon'ble Delhi High Court noticed that the additional tax liability u/s 115QA was raised in the assessment order itself. Hence the Hon'ble Delhi High Court held that "it is not possible for this Court to read this part of the order separate from the rest of the assessment order". We also notice that M/s Genpact India P Ltd had filed appeal before Ld CIT(A) challenging various additions made by the AO while determining the total income of the assessee and by the time the writ petition was disposed of by Hon'ble Delhi High Court, the Ld CIT(A) had disposed of the appeal filed by the assessee and further the revenue had chal....
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....tion of all the three companies. IOT I & ESL made an offer to other two shareholders to sell its entire equity holdings in equal proportion. It was accepted by the other two shareholders and the transfer of shares was approved by the Board of Directors of the assessee on 16th Nov 2015 and from that date i.e. 16.11.2015 the assessee has become a Joint Venture Company with two shareholders Indian Oil Corporation Ltd and Skytanking Holding GmbH Germany with equal equity participation (50:50). The assessee is engaged in the operation of Fuel Farm ownership and operations in Bangalore (Bangalore Fuel Farm facility) through which the assessee earned a revenue of Rs. 80,25,96,360. Oil Marketing Companies (OMC) store oil in the fuel farm facility operated and maintained by the assessee and bill the airline companies directly for the oil supplied to the aircraft. Assessee charges the OMCs for the fuel farm operation and maintenance fee. The assessee had claimed tax holiday u/s 80-IA for this portion of its revenue for the first time in the year under consideration. 12. The Assessee for AY 2015-16 e-filed its return of income on 25.11.2015 declaring the taxable income of Rs 33,59,53,495 a....
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....es any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (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. (4) This section applies to - any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfils all the following conditions, namely :- a) it is owned by a company registered in India or by a consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act; b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a....
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.... into by the assessee with BIAL is not regarded as an agreement entered into with Central Government or State Government or a local authority or statutory body as in clause (b) of section 80IA(4). 21. The assessee is in appeal before the Tribunal aggrieved by the decision of the lower authorities. 22. Besides the above, the assessee is also contending the quantification of deduction u/s. 80IA which the assessee had inadvertently claimed at Rs. 2,10,19,853 after setting-off notionally brought forward losses of eligible business of earlier years although the profit eligible for deduction under section 80IA of the Act was Rs. 6,28,28,951.The assessee raised this claim before the CIT(A) which was rejected and hence this issue is raised before the Tribunal now for adjudication. 23. We will first consider the issue of whether the fuel farm facility falls within the meaning of 'airport' and is an 'infrastructure facility'. The AO observed that that fuel farm facility established by the assessee in the vicinity of airport to cater to the need of aircrafts for aviation fuel did not come under the definition of 'Airport' as in explanation to section 80IA of t....
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.... the rate of aircraft movement is not very high and the fuel requirement not very great, combination of fuel hydrant and fuel tanks for remote stands would be used to refuel the aircraft." 26. From the above, it was submitted that aviation fuel facility is part of the airport and therefore should qualify as infrastructure facility under Explanation to section 80-IA(4) of the Act. 27. Further reference is invited to SPRH agreement. Clause 1.1 defines the term "airport" and "facility" as under :- "Airport" means the greenfield international airport to be constructed and operated by BIAL at Devanahalli, near Bangalore in the State of Karnataka and includes all its land, buildings, equipment, facilities and systems." "Facility" or "Aviation Fuel Facility" means the Fuel Farm, the Feeder Lines and the Hydrant System required to be constructed, commissioned, operated and maintained in accordance with the Specification." 28. According to him, as per SPRH agreement also, the term "airport" includes facility which is nothing but aviation fuel facility constructed by the assessee. 29. The ld AR relied on the following decision to substantiate his contention that....
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.... to be used, either wholly or in part, for the landing or departure of aircraft, and includes all buildings, sheds, vessels, piers and 'other structures' thereon or appertaining thereto. The ld AR submitted that the term "other structures" in the definition of "aerodrome" includes the space or structure built for the purposes of fuel management, cargo, parking or maintenance, loading and unloading, etc. In this connection, reference is invited to "Civil Aviation Requirements" dated 26 August 2015 issued by the Government of India laying down guidelines for design and operation of Aerodrome. "Civil Aviation Requirements" defines the term "Apron" as "A defined area, on a land aerodrome intended to accommodate aircraft for purposes of loading or unloading passengers, mail or cargo, fueling, parking or maintenance." 33. Though there is no direct definition of 'Airport' to state that it includes the fuel farm facilities, the various interlinked definitions lead to the conclusion that the term "airport" includes "aerodrome" and the term "aerodrome" in turn includes the term "apron" which is nothing but a defined land for fueling of aircraft. 34. Further the relevant....
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....s the expression 'includes'. It has been further held that the large amount of non passenger cargo is being uploaded to the commercial aircraft in addition to passengers luggage and therefore, location of cargo handling area is linked with critical airside service road and parking of statutory infrastructure relating to security, customs, x-rays, etc within its operations, indicates that this service is part of commercial operations undertaken by the air cargo operators and other air transporters whose equipment and machinery are also integrated into the definition of "aerodrome" as per section 2(2) of the Aircraft Act, 1934. Thus it has been held by the CIT(A) that cargo handling services are located within the airport and are critical infrastructure facilities and are deemed to be part of the airport." 37. We have taken into consideration the fact that Part 1 of Schedule 3 of the concession agreement list down airport activities which includes Aircraft fuelling services and Cargo Handling Services. It is also noted that the definition of 'Airport' is an inclusive wide definition and will include within its ambit various structures developed at the airport like ....
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.... BIAL. (iv) The aspect of having 'contractual rights' under the SPRH is different from executing a works contract for and on behalf of a principal. (v) The assessee has made an investment of Rs 125 crores in the Infrastructure pertaining to the Fuel Farm (see page 19 of Paper book - Building and Plant & Machinery under "Fuel farm facility & Hydrant systems). This appears in the Balance Sheet on the assets side. The assessee is the owner of the entire fuel farm facility. 41. The ld AR, therefore, submitted that the assessee cannot be equated with a person who is engaged in a 'works contract', who does not own the asset and merely gets compensation for executing the contract. 42. The ld AR further submitted that the assessee is incorporated with the main object of designing, financing, constructing and operating an aviation fuel facility and providing into-plane refueling services at the airports. He invited our attention to the various clauses of SPRH and Operating agreement viz., Clause 4 (page 15 & 17), Clause 10 (page 26), Clause 19 (page 34&35) which show that the assessee has constructed the aviation fuel facility and is the owner of the ....
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.... of law, it has rightly been concluded by the Appellate Authority that the assessee is engaged in development operation and maintenance of an infrastructure facility in the light of provisions of SPRH agreement. The aforesaid finding has been affirmed in appeal by the Tribunal. The aforesaid findings are concurrent findings of fact which do not suffer from any perversity. Learned counsel for the revenue was unable to point out any perversity in the findings of fact recorded by the Commissioner of Income Tax (Appeals) as well as by the Tribunal. It is well settled in law that the concurrent findings of fact do not suffer from any perversity warranting interference of this court in exercise of powers under Section 260A of the Act. [SEE: SYEDA RAHIMUNNISA VS. MALAN BI BY L.RS. AND ORS. (2016)10 SCC 315 and PRINCIPAL COMMISSIONER OF INCOME TAX, BANGALORE & ORS. VS. SOFTBRANDS INDIA P. LTD., (2018) 406 ITR 513]." 45. In view of the aforesaid discussion, we are of the considered view that the fuel farm facility built, owned, and operated [BOT] by the assessee falls within the meaning of 'airport' and hence it is an 'infrastructure facility' as per Explanation to sectio....
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.... per Article 3.2.1 of the concession agreement (page 12 of the concession agreement and page 103 of the paper book), BIAL may carry out the following activities :- i. any activity or business related or ancillary to the activities referred to in Article 3.1 or which BIAL considers desirable or appropriate to be carried on or engaged in connection therewith (including any infrastructure service considered by BIAL to be reasonably necessary for the activities referred to in Article 3.1); ii ..... iii .... 51. As per Article 3.2.2 of the concession agreement (page 12 of the concession agreement and page 103 of the paper book), BIAL to exercise the above functions and activities grant Service Provider Rights (including the right of the Service Provider Right Holders to grant sub-rights) to any person for the purpose of carrying out the activities and businesses described above. 52. The recitals to SPRH agreement are reproduced below :- A. Pursuant to a Concession Agreement (defined later), the Government of India has granted BIAL the exclusive right and privilege to carry out the development, design, financing, construction, commissioning, main....
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....entering into an agreement with Government or statutory body. 55. Alternatively, the ld AR submitted that in order to support and foster rapid development of Bangalore, Government of Karnataka and the Airports Authority of India (in short referred to as "A.A.I") initiated a Green Field Project for the new BIAL, which is a Public Limited Company. BIAL is a consortium of Karnataka State Industrial Investment Development Corporation, A.A.I, Unique-Zurich Airport, Larsen & Toubro India Ltd. and Siemens Projects Ventures, GmbH. 56. BIAL is operating under the control of the State in particular under the control of A.A.I, the BIAL discharges duties of a public nature. 26% of the share is held by the Governmental Authorities, all important decisions has to be taken only with the approval of the Governmental Bodies and substantial representation on the Board of Directors from the Government nominees are there for effective functioning of BIAL. State Government has got comprehensive control over the functioning of BIAL. The BIAL has got financial aid from the State and its undertaking Companies, functionally and administratively dominated by and controlled by the Union of India. BIAL ....
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.... Government order produced by the BIAL would establish the fact that the said vast extent of land acquired by the State Government for the purpose of formation of an international Airport and the said land has been transferred in favour of K.S.I.I.D.C and in turn it is leased in favour of BIAL and the companion shareholders. The board of management of the BIAL, its administrative functions required to be performed by the board of directors, it decision and their activities are subject to regulations of the statutory provisions of the A.C and A.A.I. Act and Rules framed therein. Therefore, we have already held that BIAL is an Authority and State which comes as defined under Article 12 of the Constitution of India and as interpreted by the Supreme Court in the catena of decisions which are extracted in the preceding paragraphs of this judgement while answering the aforesaid contentious point." 60. Respectfully following the binding decision of the jurisdictional High Court, we hold that BIAL is a State under Article 12 of the Constitution of India carrying out statutory functions/public duties. Accordingly, BIAL is a statutory body and therefore, the above condition is satisfied a....
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....any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility, the quantum of deduction u/s. 80IA be computed as if such eligible business were the only source of income of the assessee. We, therefore, direct the AO to re-compute the deduction u/s. 80IA in accordance with the directions given in this order, after giving reasonable opportunity of being heard to the assessee. This ground for all the years under consideration being common on same facts, is allowed for statistical purposes. 67. The next issue for consideration is disallowance of interest on hedge swap. 68. The brief facts on this issue are that the assessee had taken a foreign currency term loan from Punjab National Bank (PNB), for setting up its fuel farm aviation fuel facility at Bangalore International Airport. Since it had foreign currency exposure, to mitigate the risk of foreign exchange fluctuation, it had entered into swap arrangement for principal and interest with ICICI Bank. 69. The assessee has entered into a swap arrangement to pay a fixed interest rate on outstanding principal....
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....uly 2012. 72. The CIT(A) confirmed the disallowance by observing that foreign currency loan was still outstanding and hence held that payment made to hedge against the fluctuation would be capital in nature. 73. The relevant provisions of section 36 of the Act under which the assessee has claimed the deduction reads as follows :- "Section 36(1) of the Act specifies certain items in respect of which deduction shall be allowed while computing profits and gains from business or profession. The sub-clause (iii) of section 36(1) and proviso to the sub-clause reads as under: '(iii) the amount of the interest paid in respect of capital borrowed for the purposes of the business or profession' Provided that any amount of the interest paid, in respect of capital borrowed for acquisition of an asset whether capitalised in the books of account or not; for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction." 74. The ld. AR submitted that in respect of capital borrowed for acquisition of capital asset, the proviso to ....
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....rest rate swap contract is typically a contract between the two parties which decide to pay interest on fixed rate, as agreed to between the parties, on a notional principal amount in consideration of receiving a floating rate of interest, or vice versa. In practice, these obligations are settled by making a net payment, i.e. difference between fixed and floating rate of interest. If fixed rate of interest is more than the floating rate of interest, the person under obligation to pay fixed rate of interest only pays the difference between fixed rate and floating rate, and when it is the other way round, the net payment is made by the person under obligation to pay the floating rate of interest. These contracts are entered into to hedge against variations in floating rate of interest from time to time. 79. The swap contract entered into by the assessee is for a period of ten years and the assessee has been paying total finance cost of 9.59%, which according to the ld AR is less than the normal lending rates by any bank for any business loan. The exchange rate of USD to INR for repayment of principal and interest was pegged at Rs. 40.2331. Thus, the assessee is protected against t....