TaxTMI 
TaxTMI 
2026 (7) TMI 1144
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd brevity. 2. The Revenue has raised the following grounds of appeal in ITA No. 7035/MUM/2025: 1. Whether, on the facts and in the circumstances of the case, and in law, the Ld. CIT(A) was justified in allowing depreciation on the upfront concession fee of Rs. 31,03,450/- paid to Airports Authority of India by merely relying on the ITAT'S order for earlier years, without appreciating that the right to operate the airport under a 30-year concession is, not an 'intangible asset' owned by the assessee but a deferred capital outlay to be amortised over the concession tenure? 2. Whether, on the facts and in the circumstances of the case, and in law, the Ld. CIT(A) erred in allowing deduction of the lump-sum payment made to AAI of Rs. 16,62,33,600/- towards retirement/compensation of employees solely following earlier ITAT orders, without appreciating the factual matrix and the applicability of section 35DDA, which mandates amortisation over five years for such expenditure? 3. Whether, on the facts and in the circumstances of the case, and in law, the Ld. CIT(A) is justified in treating the Development Fee of Rs. 348,95,74,100/- collected from passengers as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....T in the assessee's own case for earlier years, without examining the merits, facts, evidences, or legal developments specific to the assessment year under appeal, and thereby failing to discharge the appellate duty of independent adjudication as mandated under section 250(6) of the Income-tax Act, 1961? 9. The appellant craves the leave to add, amend, alter and/or delete any of the grounds of appeal as above. 3. The assessee has raised the following grounds of appeal in ITA No. 6922/MUM/2025: 1. In law and in the facts and circumstances of the case of the appellant, the Ld. CIT(A) has erred in not adjudicating the additional grounds raised by the appellant during the course of Appellate Proceedings thereby violating the principles of natural justice. 2. In law and in the facts and circumstances of the case of the appellant, the Ld. CIT(A) has erred in not allowing the additional ground of the appellant in relation to the disallowance of alleged bogus accommodation entry for Rs. 1,25,90,278/- under normal provisions of the Act even when such disallowance was not called for. 3. In law and in the facts and circumstances of the case of the appell....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e heard the rival submissions and perused the material available on record. From a careful perusal of the appellate order passed by the Ld. CIT(A), we find merit in the contention of the assessee. The record shows that the assessee had indeed raised specific additional grounds before the first appellate authority, which were also placed in the paper book before us. However, ongoing through the impugned order, it is evident that the Ld. CIT(A) has not rendered any finding on these additional grounds. The appellate order is completely silent on the issues relating to the disallowance of alleged bogus accommodation entries amounting to Rs. 1,25,90,278/- and the disallowance of Rs. 3,00,000/- being investment written off. 8. It is well settled that the CIT(A), being the first appellate authority, is under a statutory obligation under section 250(6) of the Act to dispose of the appeal by passing a speaking order stating the points for determination, the decision thereon and the reasons for the decision. Once the assessee has raised specific grounds before the appellate authority, the same are required to be adjudicated on merits. Failure to adjudicate such grounds amounts to violatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....grants a concession right for operating the airport for a fixed tenure of 30 years and does not result in acquisition of an intangible asset owned by the assessee. It was therefore contended that the payment represents a capital outlay which ought to be amortised over the concession period and cannot be treated as an intangible asset eligible for depreciation under section 32(1)(ii) of the Act. The DR further submitted that the Ld. CIT(A) has allowed the claim of the assessee merely by following the decisions of the Tribunal in earlier years without independently examining the facts of the present assessment year. 13. Per contra, the Ld. AR for the assessee submitted that the issue is squarely covered in favour of the assessee by the decision of the co-ordinate bench in the assessee's own case for A.Y. 2007-08 in ITA No.7507 and 7111/MUM/2011. The Ld. AR submitted that the Co-ordinate Bench, after examining the OMDA agreement and the nature of rights acquired by the assessee, has consistently held that the upfront concession fee paid to AAI confers commercial rights of similar nature, which qualify as an intangible asset within the meaning of section 32(1)(ii) of the Act and the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....herefore it is an 'intangible assets' as per section 32(1)(ii) of the Act... In view of above decisions and the facts of the case, we hold that the ld. CIT(A) has rightly held that the payment of upfront fee of Rs.150 crores paid by assessee to 'AAI' has created capital assets in the form of license to develop and modernize the Airport and collect charges as per terms and conditions as prescribed under the agreement entered into which is an 'intangible assets' to the assessee. Thus, assessee is entitled for depreciation." (para 10.2) 17. In the present case, the Ld. CIT(A) has granted relief to the assessee by following the aforesaid binding decision of the Co-ordinate Bench in the assessee's own case. The Revenue has not brought on record any change either in the facts or in the legal position warranting a different view. 18. Respectfully following the decision of the co-ordinate Bench in the assessee's own case, we find no infirmity in the order of the Ld. CIT(A) in allowing depreciation on the upfront concession fee paid to AAI. Accordingly, Ground No. 1 raised by the Revenue is dismissed. Ground No. 2 - Payment made towards Compensation / Retrenchment of Employees of A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e has been considered by the co-ordinate Bench in the assessee's own case. The Tribunal, after examining the nature of payment and the provisions of section 35DDA, held that the payment made by the assessee to AAI towards retirement / retrenchment compensation of employees was made pursuant to contractual obligations under the OMDA agreement and was not a payment made under any voluntary retirement scheme framed by the assessee for its own employees. Therefore, the provisions of section 35DDA were held to be not applicable. 24. The relevant findings of the co-ordinate Bench are reproduced below: 33. We have heard the rival submissions and have carefully considered the same along with the orders of the authorities below. We noted from the facts on record for A Y 2010-11 that the assessee, under an agreement of OMDA with Airports Authority of India, is developing and maintaining Chhatrapati Shivaji International Airport. The assessee has to carry out operations, maintenance and development of the airport with certain terms and conditions. As per clause 6.14 in Chapter 6 of the OMDA, the assessee is obliged to make an offer of employment to a minimum of 60% General Employe....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... India to its employees. It is not an amount which the assessee is paying to its employees on their retrenchment. Therefore, the provisions of section35DDA will not apply. It is not denied that the expenditure incurred by the assessee is revenue expenditure. We noted that the CIT(A) while dealing with the issue deleted the said disallowance by observing as under: 8.8 In the backdrop of the above facts, the moot question for decision is whether the expenditure of Rs.154,23,19,088/- which has been paid by the appellant in terms of 6.1.4 of the OMDA to AAI is a revenue expenditure and requires to be allowed in one go instead of allowing the same in five equal instalments u/s.35DDA of the Act. 8.9 It is noticed that an obligation to pay retrenchment compensation was fastened on appellant in terms of clause 6.1.4 of OMDA as soon as the period mentioned therein is expired and the year happened to be the previous year relevant to AY 2010-11. I further find that the obligation to pay the sum of money to AAI on account of retrenchment compensation in terms of OMDA is a definite obligation and the appellant is bound by the terms of OMDA and has thus to discharge the said ob....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Tvs. Madras Auto Service Pvt. Lid (1998) 233 1TR 468 - The Supreme Court has held that to decide whether expenditure is revenue or capital one has to look at the expenditure from a commercial point of view. The court has observed "Whatever substitutes for revenue expenditure should normally be considered as revenue expenditure." Had the Appellant chosen to pay rent annually for each and every year of lease such expenditure certainly would have to be regarded as revenue expenditure. The fact that the payment was made in lump sum for the entire duration of the lease does not alter the character of it being revenue expenditure. 8.13 The appellant has also brought to my notice the decision in the case of CIT vs. Gemini Arts Private Ltd (2002) 254 ITR 201. The Madras High Court relying on the above judgment of the Supreme Court has allowed the claim of a lump sum payment of lease as revenue expenditure. I find from these two decisions that the principle which emerges is that " whatever substitutes for revenue expenditure should normally be considered as revenue expenditure". 8.14 Looking to these facts as well as various court decisions relied upon by the appellant, I ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....made under an agreement to AAI. Thus, the provisions of section 35DDA of the Act are not applicable. It is not a voluntary retirement scheme, but the payment is contractual and cannot be amortized. The AO is accepting the contents of the Agreement and no fault has been found in the same. The AO has also not doubted the genuineness of the agreement and the payment made on this issue. 8.16 Considering the facts in its entirety and the various court decisions cited and relied upon by the appellant, I find that the expenditure of Rs.260,86,03,400/- is an allowable expenditure as revenue. Accordingly, the disallowance of Rs.123,38,55,270/- is deleted and the ground of appeal of the appellant is allowed. 35. The learned DR even though vehemently relied on the order of the Assessing Officer, could not bring to our knowledge any decision which has taken a contrary view as has been taken by the learned CIT(A). We, do not find any infirmity in the order of the CIT(A) deleting the disallowance. It is accordingly upheld. Ground nos. 6 to 9 in A.Y. 2010-11 and ground no.4 in A.Y. 2011-12 stands dismissed. 25. Since the Ld. CIT(A) in the year under consideration has merely f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ue has been considered by the Co-ordinate Bench in the assessee's own case. The Co-ordinate Bench, after examining the statutory framework governing levy and utilisation of development fee and the purpose for which the fee was collected, held that the amount collected from passengers was earmarked for capital expenditure towards modernisation and development of airport infrastructure and therefore the same could not be treated as revenue income of the assessee. 31. The relevant findings of the co-ordinate Bench are reproduced below: 38. We find that the CIT(A) has elaborately discussed the provisions of section 22A of Airports Authority of India Act 1994, under which the assessee has collected the development fees and also the terms and conditions attached to the said collection as well as its utilization. Not only this, the CIT(A) has also referred to the decision of Hon'ble Supreme Court in the case of Consumer Online Foundation vs. Union of India & Others [2011] 5 SCC350 (SC), where the apex court has categorically made the distinction between section 22 and section 22A of Airports Authority of India Act. In the said judgment, the Hon'ble Supreme Court has also held ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....undertaken substantial investment activity, no expenditure had been attributed towards such activity. The assessee was therefore called upon to furnish details of expenditure incurred for making investments which could result in exempt income and was show caused as to why the expenditure attributable to investments yielding exempt income should not be disallowed under section 14A read with Rule 8D. 35. In response, the assessee submitted that section 14A was not applicable to its case since no expenditure had been incurred in relation to income which does not form part of the total income. It was further submitted that during the relevant year the assessee had earned short-term capital gains of Rs. 19,63,13,871/- on sale of investments in debt mutual funds, out of which Rs. 8,75,88,808/- had been reduced from project cost and the balance Rs. 10,87,25,062/- had been offered to tax under the head "Capital Gains". The assessee thus contended that no tax-free income had been earned during the year and therefore the provisions of section 14A were not attracted. The assessee also submitted that investments in shares of wholly owned subsidiaries were made as part of business strategy a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessee from investments in debt mutual funds have been duly offered to tax and therefore do not constitute exempt income. In such circumstances, the very foundation for invoking the provisions of section 14A fails. 42. We further note that the co-ordinate Bench in the assessee's own case for Assessment Years 2009-10 to 2011-12 has already considered an identical issue and has held that in absence of exempt income, no disallowance under section 14A can be made. The Co-ordinate Bench while deciding the issue, in ITA No. 4911/Mum/2013, has categorically observed as under: 39. So far as ground no.6 in A.Y. 2011-12 is concerned, it is similar to ground no.1 in the assessee's appeal for A.Y. 2009-10 and 2010-11, which relates to disallowance made u/s. 14A. After hearing the rival submissions we noted that the assessee has not earned any exempt income during the impugned assessment year and therefore, the CIT(A) has rightly deleted the disallowance made by the Assessing Officer u/s.14A. Our view is duly supported by the decision of the Hon'ble Delhi High Court in the case of Cheminvest Ltd. 378 ITR 33 (Del) and that of Hon'ble Bombay High Court (Nagpur Bench) in the case of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gaigaon Refinery & Petrochemicals Ltd. vs. CIT (251 ITR 329) to contend that income earned during the construction stage having direct nexus with the project should go to reduce the project cost. 47. The Assessing Officer, however, did not accept the explanation furnished by the assessee. According to the Assessing Officer, the gain arising on redemption of mutual fund units represented an independent income taxable under the head "Capital Gains" and could not be reduced from CWIP. The Assessing Officer also held that the judicial precedents relied upon by the assessee mainly dealt with interest income earned on surplus funds and not with gains arising from investments in mutual funds. The Assessing Officer therefore concluded that the said income had separate taxability irrespective of its connection with the project funds and accordingly brought the Short Term Capital Gain of Rs. 8,75,88,808/- to tax. 48. During the appellate proceedings, the assessee contended that the said gain was earned during the construction phase of the airport project and arose from temporary investment of surplus project funds. The assessee submitted that such funds were part of the borrowed funds ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....quarely covered by the decisions of the Tribunal in the assessee's own case for A.Y. 2013-14 in ITA No. 2018 and 2385/Mum/2018. 51. We have carefully considered the rival submissions and perused the material placed on record including the orders of the authorities below and the judicial precedents relied upon by the parties. We find that the Co-ordinate Bench of the Tribunal in the assessee's own case for A.Y. 2013-14, while dealing with an identical issue relating to income earned from temporary deployment of project funds, had examined the financing arrangement and the nature of the funds and held as under: 28. From the above, it is amply clear that in order to consider whether the income earned is of revenue or capital in nature, it is important to take into account whether the funds were inextricably linked to setting up of the project. If the assessee is under obligation to use interest income in prescribed manner, then such income should be reduced from the cost of the project. If the income earned from the investment can be utilized for any purpose as per the total discretion of the assessee, as it was in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed from the project cost and cannot be brought to tax separately.In view of the above, the Ground No. 5 raised by the Revenue is dismissed. Ground No. 6 - Taxability of Passenger Service Fee (Security Component) [PSF-SC] 55. During the course of the assessment proceedings, the Assessing Officer examined the revised computation of income furnished by the assessee vide letter dated 15.09.2017 and observed that the assessee had debited an amount of Rs. 12,13,24,531/- in the computation of income on account of negative surplus from the Passenger Service Fee (Security Component) [PSF-SC] fund offered under the head "Income from Business". On examination of the working of PSF-SC furnished by the assessee, the Assessing Officer noted that while computing the surplus available under the PSF-SC fund, the assessee had reduced an amount of Rs. 24,25,65,152/- representing amounts included in Capital Work-in-Progress (CWIP) and had claimed the same as revenue expenditure under the provisions of the Act. Accordingly, the assessee was called upon to justify the claim of loss from the PSF-SC fund. In response, the assessee submitted that PSF-SC was collected from passengers embarking at the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ble in its hands as the amount is collected in a fiduciary capacity and is diverted at source by an overriding title in favour of the Government of India. Reliance was placed on the decision of the Co-ordinate Bench in the assessee's own case for A.Y. 2008-09 in ITA No. 3232/Mum/2012and subsequent decision for A.Y. 2013-14 in ITA Nos. 2018 & 2385/Mum/2018, wherein the Tribunal had examined the nature of PSF-SC and held that the said collection does not constitute income of the assessee. 57. The Ld. CIT(A), after considering the submissions of the assessee and examining the judicial precedents relied upon, observed that the Co-ordinate Bench in the assessee's own case had already analysed the nature and mechanism of PSF-SC collection and utilisation. The Co-ordinate Bench had noted that the PSF-SC amount collected by the assessee is deposited in an escrow account maintained under the directions of MoCA and the funds are earmarked exclusively for meeting security expenses at the airport. It was further observed that the assessee does not have any discretion in utilisation of these funds and any surplus remaining unspent is required to be transferred to the account of the Airports ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion 5 of the Act. 60. Since the facts of the present year are identical and the Revenue has not brought any distinguishing feature on record, we respectfully follow the decisions of the Co-ordinate Bench in the assessee's own case for the earlier years. Accordingly, we find no infirmity in the order of the Ld. CIT(A) in holding that the Passenger Service Fee (Security Component) collected by the assessee is not taxable in its hands. Therefore, the Ground No. 6 raised by the Revenue stands dismissed. Ground No. 7 - Depreciation on Runway, Taxiway, Apron and Allied Structures 61. During the appellate proceedings, the assessee submitted before the Ld. CIT(A) that the claim of enhanced depreciation had in fact been raised before the Assessing Officer during the assessment proceedings vide letters dated 13.10.2017 and 28.12.2017, though the same was not adjudicated in the assessment order. The assessee explained that the runway, taxiway and apron, though initially grouped under the "building" block and depreciation at 10% was claimed, are in fact integral operational infrastructure of the airport and function as essential tools for aircraft landing, movement and parking. Accord....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the assessee by the decisions of the Co-ordinate Bench in the assessee's own case for earlier assessment years wherein, under identical facts, depreciation on taxiways, aprons, bridges and parking bays was directed to be allowed at the rate applicable to plant and machinery. The Ld. DR fairly accepted. 65. We find that an identical issue had come up for consideration before the co-ordinate Bench of the Co-ordinate Bench in the assessee's own case. The Co-ordinate Bench, after examining the nature of the assets and the functional role performed by such infrastructure in the operation of the airport, held that taxiways, aprons, parking bays and similar airport structures cannot be regarded as mere civil constructions forming part of a building but constitute essential operational tools of the airport business. In this regard, the Co-ordinate Bench in ITA No. 7507 & 7111/Mum/2011 observed as under: 35. We have carefully considered the orders of authorities below and submissions of ld. Representatives of the parties. There is no dispute to the facts that runway, taxiway are necessary part of Airport operation and are specific part of infrastructure for use of aircrafts. T....