TMI Blog2011 (12) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... ce these departments have their offices to facilitate the functioning of the assessee and they do not agree to pay any licence fee of the space occupied by them. The matter is restored back to A.O. determine the taxability of proforma invoices in respect of those parties who have been remitting part payments and have accepted their liability and not in respect of those Government Agencies who have never paid any amount.-Decided partly in favor of assessee. - ITA 792/2008,ITA 1250/2008,ITA 1251/2008, ITA 432 OF 2008 ITA 433 OF 2008 ITA 437 OF 2008 ITA 517 OF 2008 ITA 792 OF 2008 ITA 1250 OF 2008 ITA 1251 OF 2008 - - - Dated:- 16-12-2011 - MR. JUSTICE RAJIV SHAKDHER, MR. JUSTICE R.V. EASWAR, A.K. SIKRI, JJ. For Appellant :. Mr. O.S. Bajpai, Sr. Advocate with Ms. Manasvini Bajpai and Mr. V.N. Jha, Advocates. For Respondent: Mr. Kamal Sawhney, Sr. Standing Counsel. 1. In all these appeals, preferred by the singular assessee namely Airport Authority of India, two additions made by the Assessing Officer and sustained by the Tribunal are questioned. Vide orders dated 14th July, 2011 the Division Bench of this Court referred these two additions/issues for a decision by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has also given space in the airports to various government agencies like the Police Department, Post and Telegraph, Metrological Department etc. According to the assessee, no payment is made by these government agencies to the assessee, however, on the advice of CAG the assessee has been raising proforma invoices/bills. Even when no money was received in respect of those proforma bills ever since the assessee Authority came into existence, the Assessing Officer treated the amount of those invoices/bills as income of the assessee in all these assessment years on the ground that the assessee was following mercantile system of accounting and, therefore, the income has accrued by the very fact that spaces were given to these agencies and against those spaces proforma invoices/bills were raised. These additions have also been sustained till the stage of the Tribunal. QUESTION OF LAW NO. (i): 5. The case setup by the assessee before the authorities below was that due to influx and increase in population in metropolitan cities, the land around the airport area was illegally encroached and hutments were constructed thereon, thus, endangering the safety of aircraft while taking of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or development of an alternate site for the residents of that area who were vacated as their lands were acquired for expanding of International Airport of Delhi. The Assessing Officer and the Tribunal held that the expenditure was capital in nature. Reference was made to the High Court on the following question:- Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the expenditure of Rs. 19.89 crores was a capital expenditure as it gave the assessee addition of enduring nature? 8. This Court answered the aforesaid question in the affirmative i.e. in favour of the Revenue and against the assessee. It had referred to the judgment of Supreme Court in V. Jaganmohan Rao Vs. Commissioner of Income Tax, 751 ITR 373 where money was paid to perfect a title or as consideration for getting rid of a defect in the title or a threat of litigation the payment would be a capital payment. Two more decisions of Supreme Court in Sitalur Sugar Works Ltd. Vs. Commissioner of Income Tax 491 ITR 160 and Bombay High Court in Hardiallia Chemicals Ltd. Vs. CIT, 218 ITR 598 were noted wherein the Court had held that where expenditure was incurred by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Bikaner Gypsum Vs. Commissioner of Income-Tax (1991) 187 ITR 39 and the Supreme Court had held such an expenditure to be the revenue in nature. It would, therefore, be necessary to find out the ratio of Bikaner (supra). In that case the assessee company had taken over a lease of 4.27 square miles for mining gypsum for a period of 20 years with provision for renewal for a further period of 20 years and carried on the business of mining gypsum in accordance with the terms and conditions of the lease. One of the clauses in the lease deed provided that no mining operation shall be carried on in or under the lands within a distance of 100 yards from any railway, reservoir, canal or other public works or any buildings, etc., except with previous permission. The railway authorities extended the railway area on the leased land by laying down fresh track, providing railway siding and also constructing quarters. The suit of the appellant for ejecting the railway was dismissed. Thereafter, under an agreement with the Government, the Railway Board and the Sindri Fertilisers to whom the appellant company supplied gypsum , the railway station, track, etc. were removed to another area offered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it had acquired full rights to carry on mining operations in the entire area including the railway area. The payment of Rs. 3 lacs was not made for grant of permission to carry on mining operation within the railway area, instead it was made towards the cost of removing the construction which obstructed the mining operation. In this premise, the expenditure was treated to have been made in relation to carrying on business in a profitable manner and was, therefore held to be on revenue account. A Division Bench of this Court, authored by one of us (Rajiv Shakdher,J.) has succinctly culled out the principle/factors which go into determining the nature of the expenditure in the case of Commissioner of Income-Tax Vs. J.K.Synthetics Limited, (2009) 309 ITR 0371, in the following manner:- Broad principles which emerge on reading of various authorities An overall view of the judgments of the Supreme Court, as well as, of the High Courts would show that the following broad principles have been forged over the years, which require, to be applied to the facts of each case: (i) the expenditure incurred towards initial outlay of business would be in the nature of capital expenditure, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant circumstances, such as: (a) the tenure of the Licence. (b) the right, if any, in the licensee to create further rights in favour of third parties, (c) the prohibition, if any, in parting with a confidential information received under the License to third parties without the consent of the licensor, (d) whether the Licence transfers the 'fruits of research' of the licensor, 'once for all', (e) whether on expiry of the Licence the licensee is required to return back the plans and designs obtained under the Licence to the licensor even though the licensee may continue to manufacture the product, in respect of, which 'access' to knowledge was obtained during the subsistence of the Licence. (f) whether any secret or process of manufacture was sold by the licensor to the licensee. Expenditure on obtaining access to such secret process would ordinarily be construed as capital in nature; (vi) the fact that assessee could use the technical knowledge obtained during the tenure of the License for the purposes of its business after the Agreement has expired, and in that sense, resulting in an enduring advantage, has been categorically rejected by the courts. The Courts have h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is clear from the following observations of the Tribunal:- We may also refer to the decision of Hon‟ble Supreme Court in the case of Bikaner Gypsum Ltd. in which it was held that any sum paid for removal of disability in carrying on the business will be of revenue nature. Obviously, removal of hutments is in the nature of removal of disability and, therefore, if any liability has been incurred in this year, it will constitute an admissible deduction. 16. However, the Tribunal stated that on the facts of that case, no such liability had been incurred or crystallized. It held that various meetings had taken place between the assessee and the Government, apart from making certain recommendations and estimating the likely expenditure, no agreement came into existence between the assessee and the hutment dwellers with or without the involvement of any third party and as no agreement between the assessee and hutment dwellers has been filed, we are of the view that no legally enforceable liability was fastened on the assessee in this year, and therefore, even under mercantile system of accounting, the assessee is not entitled to deduct the impugned amount simply because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make the provision. To that extent, therefore, the Tribunal is correct in its view. At the same time, following Bikaner Gyupsum (supra), this finding has become irrelevant as we are allowing the deductions on the basis of actual payment. QUESTION OF LAW NO.(ii) 19. It is a matter of record that certain Government Department like Customs, Immigration, Meteorological Department, Post Office, Police Agencies including BSF, CISF, Special Bureau of Govt., FRRO, Intelligence Bureau etc. have been provided accommodation in the terminal buildings and other technical areas by the assessee. It is the case of the assessee that these departments have their offices to facilitate the functioning of the assessee and they do not agree to pay any licence fee of the space occupied by them on the plea that they are regulatory bodies to provide special services in terms of the Government directions. Still the assessee had raised the proforma invoices in all these years and kept in memoranda account for example in the assessment year 1998-99. The proforma invoices were to the tune of Rs. 19.66 crores. According to the assessee these memoranda accounts are maintained by the assessee only bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a invoice of Rs. 5.33 crores, the payment receipt was of a meager sum of Rs. 10.30 lacs. The same is the position in respect of earlier assessment years. 20. We are of the opinion that the Tribunal is not correct that merely because a meager sum of Rs. 10.33 lacs is received, the entire amount of Rs. 5.33 crores is to be treated as income and same treatment is to be given in other assessment years. What was to be seen as to which Government Department is remitting the amount. From the details furnished, it is obvious that some of the Departments have never made any payment. 21. We thus restore this issue back to the Assessing Officer to examine the matter in the light of our aforesaid discussion. In respect of the Government Agencies, like Police, Customs who have never paid any amount to the assessee, on the application of real income‟ theory and taking a realistic view, it is held that no income has accrued merely because proforma advices were raised, that too, at the instance of the CAG of India. 22. This question of law is answered accordingly with the direction to the Assessing Officer to determine the taxability of proforma invoices in respect of those part ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
