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2014 (2) TMI 1027 - AT - Income TaxRevenue or capital expenditure - Operate, Maintain, Develop, Design, Construct, Develop, Modernize and Maintain the Airport - nature upfront fees and various other expenses – Held that:- the 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 – Decided against revenue. Deletion of Operating and Administrative expenses – Expenses treated as capital expenditure – Held that:- the CIT(A) examined the chart and the details of the expenses item-wise and after considering the same he has held that no disallowance is called for – Revenue has not been able to point out any infirmity in the findings of CIT(A), the order is upheld – Decided against Revenue. Deletion of disallowance of payments – Payment made to group concerns and sister concern – Held that:- CIT(A) after considering the said details has stated that over all expenditures were reimbursed to GVK and/or the assessee filed the copies of invoices and the details of the transactions with sister concern of the payment made by assessee to substantiate the expenditure – the contention of the assessee is allowed that the disallowance have been made by AO merely on assumptions and without controverting the facts furnished by assessee before the authorities – thus, there is no reason to interfere in the findings of the CIT(A) – Decided against Revenue. Nature of expenses – Disallowance on expenses incurred on resurfacing of runway, replacement of floors tiles and regularizing storm water drains – Held that:- the assessee is to redesign, upgrade, modernize and also to operate and maintain Airport but the expenditure under consideration has been incurred only to ensure that the existing assets continued to be used for use safely and as per norms to enable assessee to run its activity - the expenditure is incurred to facilitate of carrying on by the assessee its main business for which the assessee has been engaged and pending the expansion of the Airport etc. – thus, expenditure is a revenue in nature and cannot be said to be capital in nature irrespective of the fact that the assessee in its books of account has given treatment of it as capital in nature - the assessee will not be entitled for depreciation as it is held to be revenue in nature – Decided in favour of Assessee. Restriction of depreciation allowance – Held that:- The decision in The Hon’ble Bombay High Court in the case of CIT V/s Mazagaon Dock Ltd [1991 (3) TMI 114 - BOMBAY High Court] and Commissioner Of Income-Tax Versus Karnataka Power Corporation [2000 (7) TMI 72 - SUPREME Court] followed - dry dock and wet dock created for ships are to be treated as plant and not building - power generating station building is not a simply concrete structure but a specially designed building and is to be treated as part of plant – thus, taxiways and aprons, parking bays cannot be said to be merely concrete structures but are necessary tools for operating/using the Airport –the same are to be considered as part of plant and machinery – thus, assessee is entitled for depreciation at the rate as applicable on plant and machinery in respect of taxiways, aprons, parking bays etc. – Decided in favour of Assessee. Reduction in amount debited to capital work in progress – Confirmation from the vendor not furnished – Held that:- The CIT(A) itself has mentioned that the assessee filed during the course of appellate proceedings before him forwarding note of running bill for reduced amount and also interalia submitted account for the period 1.4.2006 to 31.3.2007 - the execution of the work by L&T has not been accepted merely because M/s L&T had not sent its reply to the notice issued u/s 133(6) of the Act by AO – thus, the execution of work by L&T for an amount cannot be considered as not genuine merely because there was no reply from M/s L&T in response to notice issued u/s 133(6) of the Act - in the absence of any other evidence on record, the enhancement of the CWIP is directed in respect of the work executed by M/s L&T – Decided in favour of Assessee.
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