TMI Blog2017 (11) TMI 905X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on this component, i.e. on PSF-SC, the same shall also be deposited by the assessee in the Escrow account, failing which it would be treated as income of the assessee to that extent only. Thus, this ground is allowed subject to these directions in each of the A.Ys 2009-10, 2010-11 and 2011-12. Disallowance of refurbishment expenses - Held that:- Held that:- The said expenditure has been incurred only for resurfacing the layer of the runway and to put new tiles to replace floors. Therefore, it cannot be said that expenditure is in the nature of capital as it does not bring into existence any new asset, leaving aside the fact that the said runway /premises is not owned by assessee. No doubt, 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. Hence, we are of the considered view that the said 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 Airp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is case, we noted that the assessee has not incurred any expenditure by way of payment made to employees but the payment has been made by the assessee to Airports Authority of India in accordance with clause 6.14 of the OMDA on account of retrenchment compensation to be paid by Airports Authority of India to its employees. It is not an amount which the assessee is paying to its employees on their retrenchment. Therefore, the provisions of section 35DDA will not apply. It is not denied that the expenditure incurred by the assessee is revenue expenditure. Treatment of development fees as capital receipt - Held that:- It is not denied that the development fees so collected are utilized only for the purpose of aeronautical assets as per the provisions of section 22A of the Airports Authority of India Act. In view of this fact, we do not find any illegality or infirmity in the order of the CIT(A), which warrant our interference, while holding that the development fees so received by the assessee is a capital receipt. Disallowance made u/s. 14A - Held that:- After hearing the rival submissions we noted that the assessee has not earned any exempt income during the impugned assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) erred in deleting the disallowance of 25% depreciation on upfront fees of ₹ 150 Crores, without considering the fact that the assesses has not acquired any absolute rights over the Airport, so as to equate it with a license, but instead the AAI has granted the assessee the right to perform certain functions during the contract period of 30 years and hence, the assessee is entitled for deduction of only the proportionate amount i.e. 1130th of ₹ 150 Crores. 3) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in directing the Assessing Officer to treat the expenditure of ₹ 20,35,73,477/- incurred towards contribution to MMRDA for construction of Sahar Elevated Road from Western Express Highway, horticulture expenses and other civil works as revenue expenditure without appreciating that these expenses gives enduring benefit to the assessee and hence is capital expenditure. 4) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in directing the Assessing Officer to treat the expenditure of ₹ 20,35,73,477/- incurred towards contribution to MMRDA for construction of Sahar Eleva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the circumstances of the case and in law, the learned CIT(A) erred in directing the Assessing Officer to treat the expenditure of ₹ 70,25,31,658/- incurred towards contribution to MMRDA for construction of Sahar Elevated Road from Western Express Highway, horticulture expenses and other civil works as revenue expenditure without appreciating that these expenses result in enduring benefit to the assessee and hence is capital expenditure. 3 . On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in directing the Assessing Officer to treat the expenditure of ₹ 70,25,31,658/- incurred towards contribution to MMRDA for construction of Sahar Elevated Road from Western Express Highway, horticulture expenses and other civil works as revenue expenditure ignoring the ratio of the decision of the Hon'ble Supreme Court in the case of CIT Vs. Mangayarkarasi Mills (315 ITR 114) wherein it was held that replacement expenditure is neither current repairs nor revenue in nature which is squarely applicable to the assessee's case. 4. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deletin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) erred in holding that Development Fee collected by the assessee company is a capital receipt based on its application for acquisition of capital assets without appreciating the fact that application of receipts does not determine the nature and taxability of the receipts. 12. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in relying on the decision of the Hon'ble Supreme Court in the case of Consumer Online Foundation Vs Union of India Others (2011 5 SCC 360) without appreciating that in that case the issue before the Hon'ble Apex Court was whether the assessee company, as a lessee of AAI, can collect development fee from the embarking passengers at the Chhatrapati Shivaji International Airport, Mumbai and the Apex Court did not give any finding regarding the nature of receipt in the hands of lessees of the Airports, including the assessee company. 13. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that once an amount is held to be in the nature of tax, it cannot be subjected to further tax without appreciating that such amount constitutes constructive receipt in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und for A.Y. 2009-10 read as under: On the facts and in the circumstances of the case and in law, the learned CIT(A) ought to have held that the Passenger Service Fee Security Component [PSF (SC)] of ₹ 88,57,17,812/- is not the income of the appellant and he ought to have directed the assessing officer to exclude the same from the total income of the appellant. The amount of ₹ 88,57,17,812/- be read as ₹ 82,75,79,038/- for A.Y 2010-11 and ₹ 66,62,27,686/- for A.Y. 2011-12. 6. The learned AR before us vehemently contended that the additional ground taken by the assessee is legal ground and it goes to the root of the matter. It does not require any further investigation of the facts therefore, the same may be admitted. In this regard, reliance was placed on the decisions of Hon ble Supreme Court in the case of National Thermal Power Corporation v. CIT [229 ITR 383 (SC)]; Jute Corporation of India vs. CIT [187 ITR 688(SC)] and that of the Full Bench order in the case of Ahmedabad Electricity Co. Ltd. vs. CIT [199 ITR 351(Bom) (FB)] 7. The learned DR, on the other hand, objected to the admission of the additional ground and contended that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pra), has observed that the basic purpose of an appeal in income tax matter is to ascertain correct tax liability of the assessee in accordance with the law. Therefore, the Appellate Tribunal being the appellate authority is bound to consider the proceedings before it and the matter on record, for determining the correct tax liability of the assessee. It is not disputed that the facts relating to passenger service fees security component are on record for each of the assessment years. Therefore, it cannot be said that this is a case where further facts have to be investigated. The only question raised by the assessee in its grounds of appeal is whether the impugned receipt is an income chargeable to tax or not. The learned DR, although vehemently contended that additional ground should not be admitted, has not given any justifiable reason for not admitting the same. It is a settled law that the additional ground if it is a legal ground can be taken for the first time before the appellate authority. Therefore, the submissions made by the learned DR that the assessee has not raised this issue before the Assessing Officer or the CIT(A) does not have any legs to stand. We, therefore, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e which does not form part of total income - - (ii) Proportionate of interest expenditure computed in accordance with the formula given n Rule 8D(2)(ii) (A x B/C) - - (iii) Amount equal to one-half percent of the average of the value of investment, income from which does not or shall not form part of the total income as appearing in the Balance Sheet of the assessee, on the first day and the last day of the previous year. 0.5%of ₹ 121.70 Cr. 60,85,217 Total Expenditure disallowed U/S.14A 60,85,217 (i) A = Interest debited in the Profit - Loss Account Nil (ii) B = Average of investments = [ 200.81 + 42.60 Cr. /2 ]= ₹ 121.70 Cr. (iii) C = Average of total assets appearing in the Balance Sheet on the first and last day of the previous year [1686.34 Cr. + 2705.70 Cr./2] = 2196.52 Cr. 10. After hearing both the parties and on perusal of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O has to indicate cogent reasons for the same. From the facts of the present case it is noticed that the AO has not considered the claim of the assessee and straight away embarked upon computing disallowance under Rule 8D of the Rules on presuming the average value of investment at % of the total value. In view of the above and respectfully following the coordinate bench decision in the case of J. K. Investors (Bombay) Ltd., supra, we uphold the order of CIT(A). This appeal of revenue is dismissed. 12.5. Subsequently, aforesaid judgment has been approved by the Hon ble Calcutta High Court in these very words by passing a detailed order which has been mentioned above. In addition to that it is noted by us that similar view has been taken in the other judgements cited by the Ld. Counsel as mentioned by us in earlier part of our order. No contrary judgment was brought to our notice. Thus, we find that this issue is covered in favour of the assessee by these judgments and, therefore, respectfully following the same, disallowance made by the AO without assuming jurisdiction as per law for invoking provisions of Rule 8D(2)(iii) is directed to be deleted. We noted that in bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In our view, this issue needs to go back for proper verification of facts, and therefore, we send this issue back to the file of the AO for proper adjudication after considering all the facts and the judgments in this regard for which the AO shall give adequate opportunity of hearing to the assessee. The assessee shall submit requisite details and documentary evidences to bring complete facts on record and place all the judgements as may be considered appropriate as per law and facts. The AO shall decide this issue afresh after taking into account all the material held on record and all the judgements as available at that time on this issue. This ground may be treated as allowed for statistical purpose. Respectfully following he said decision, we restore the issue to the file of the Assessing Officer with a direction to re-decide the issue afresh after taking into account all the material held on record and all the judgments as available at that time on this issue. Thus, this ground is treated as allowed for statistical purposes. 12. Ground no.3 in A.Ys. 2009-10 2010-11 and Ground no.7 in revenue s appeal for A.Y. 2011-12 relates to the restriction of the claim of depre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic purposes which can be considered as tools for the purpose of business of the assessee. Ld AR referred the decision of the Mumbai Bench of Tribunal in the case of National Airports Authority of India V/s CIT [2011] 134 ITD 34 (Delhi), wherein it was held that the terminal place used for regulation of air traffic and communicational and navigational control are part of tool of business of the assessee and therefore they constitute part of the plant. Thus the assessee is accordingly entitled for depreciation as applicable on plant and machinery. The ld. AR referred the decision of the Hon ble Apex Court in the case of CIT V/s Dr. B. Venkata Rao (2000) 243 ITR 81(SC) and submitted that in the case of an operation theatre in the hospital, it has been held to be a part of plant and not a part of building. Ld. AR referred the decision of the Hon ble Apex Court in the case of CIT V/s Karnataka Power Corpn. (2000) 247 ITR 268 (SC) and submitted that the power generating station building is held to be a plant. He submitted that such structures are specific for the purpose of business of the assessee and the assessee is entitled for depreciation at rate as applicable to plant and machinery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... @15%. Thus, ground no.3 in A.Ys. 2009-10 2010-11 in assessee s appeal are allowed and ground no.7 in Revenue s appeal for A.Y. 2011-12 is dismissed. 13. The additional ground taken by the assessee in all these three years read as under: On the facts and in the circumstances of the case and in law, the learned CIT(A) ought to have held that the Passenger Service Fee Security Component [PSF (SC)] of ₹ 88,57,17,812/- is not the income of the appellant and he ought to have directed the assessing officer to exclude the same from the total income of the appellant. The amount of ₹ 88,57,17,812/- be read as ₹ 82,75,79,038/- for A.Y 2010-11 and ₹ 66,62,27,686/- for A.Y. 2011-12. 14. We have already admitted the additional ground taken by the assessee in all the three years. After hearing the rival submissions and going through the orders of the tax authorities below, we noted that similar issue has been decided by this Tribunal, vide order dated 30.11.2016, in the assessee s own case for A.Y. 2008-09, in ITA No. 3232/Mum/2012, wherein the issue has been dealt exhaustively with the submissions made by both the parties and, ultimately, framed thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance amount of ₹ 130/- (i.e. 65% of PSF) was to be utilised for payment to security agency designated by the central government for providing security services at airport and the said component was called as Passenger Service Fee-Security Component (in short referred to as PSF-SC). The said portion i.e. ₹ 130/- (65% of PSF) was deposited in an Escrow Account pending utilisation. 14.9. During the year under consideration, the assessee included passenger facilitation component of PSF (i.e. ₹ 70/- being 35% of PSF) as income of the assessee company. But the balance amount of ₹ 130/- (i.e. 65%) portion was kept in separate Escrow Account for which separate books of account were maintained in accordance with the Standard Operating Procedure (SOP) formulated by MOCA and, therefore, the same was not included in the income of the assessee company. The assessee company did not include revenue pertaining to PSFSC as well as the corresponding expenses in the financial statements of the assessee company. During the course of assessment proceedings, the AO confronted to the assessee, an Office Memorandum issued by CBDT to MOCA and clarification from MOCA wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings. Law in this regard is well settled now, and to begin with, reference is made on the landmark judgment of Hon ble Delhi High Court in the case of CIT vs Bharat General Reinsurance Co Ltd 81 ITR 303 (Del.) Relevant portion from it is reproduced below: It was true that the assessee itself had included that dividend income in its return for the year in question, but there was no estoppel in the Income-tax Act and the assessee having itself challenged the validity of taxing the dividend during the year of assessment in question, it must be taken that it had resiled from the position which it had wrongly taken while filing the return. Quite apart from it, it was incumbent on the income-tax department to find out whether a particular income was assessable in the particular year or not. Merely because the assessee wrongly included the income in its return for a particular year, it could not confer jurisdiction on the department to tax that income in that year even though legally such income did not pertain to that year. Therefore the income from dividend was not assessable during the assessment year 1958-59, but it was assessable in the assessment year 1953- 54. It c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not take undue advantage of the ignorance of the assessee in view of Board s Circular No. 14(XL-35)/1955, dated 11-4-1955. 14.14. In the case of Nirmala L Mehta vs CIT 269 ITR 1, Hon ble Bombay High Court, relying upon Article 265 of Constitution of India held that acquiescence cannot take away from the taxpayer, the relief he is entitled where tax is levied or collected without authority of law and, therefore, merely because the taxpayer offered a receipt to tax, that cannot take away its right in contending that the said amount was not chargeable to tax. 14.15. In the case of Balmukund Acharya vs DCIT 310 ITR 310 (Bom), Hon ble Bombay High Court observed that the Apex Court and various High Courts have ruled that authorities under the Income-tax law are under an obligation to act in accordance with law. Tax can be collected only as provided under the Act. If an assessee, under a mistake, misconception or not being properly instructed is over assessed, the authorities under the Act are required to assist him and ensure that only legitimate tax dues are collected. If any item of receipt is not taxable under the Act, then tax cannot be levied applying the doctrine of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 547 (SC) with a view to fortify its opinion. Subsequently, Ministry of Civil Aviation s office issued an order dated 19-01-2009 laying down accounting / audit procedure in respect of PSF SC. It was intended to act as Standard Operating Procedure (SOP) for accounting / audit of PSF SC by the airport operator. In the aforesaid document, the whole procedure was duly explained how the amount has to be collected and to be kept in escrow account and to be disbursed for the purpose of security. Relying upon the Office Memorandum issued by the CBDT dated 30-06-2008, it was mentioned therein that the tax component may be charged to the PSF SC account in proportion to its liability on standalone basis. The assessee was of the opinion that the aforesaid amount was not taxable in the hands of the assessee company, and therefore, while filing the return the same was not included in the taxable income by the assessee. But during the course of assessment proceedings, the AO was of the opinion that the said amount was taxable in the hands of the assessee in view of Office Memorandum of CBDT dated 30-06-2008 and instructions dated 19-01-2009 issued by MOCA. With a view to clarify the situation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich he made from the sellers of agricultural produce in terms of Krishi Utpadan Mandi Rules framed under the U.P. Krishi Utpadan Mandi Adhiniyam, 1964. The Revenue treated the amount so collected by the agent as part of its taxable income being a trading receipt in view of judgment of Hon ble Supreme Court in the case of Chowringhee Sales Bureau vs CIT 87 ITR 547 (SC), supra. After analysing the facts of the case, it was held by the Hon ble Court that the market fee realised by the commission agent does not form part of his trading receipt as he (the commission agent) held this amount only as a trustee for and on behalf of the Market Committee. Hon ble Court applied the judgment of Hon ble Supreme Court in the case of CIT vs. Sitaldas Tirathdas 41 ITR 367 (SC) and distinguished that of Chowringhee Sales Bureau P. Ltd. vs. CIT, supra. 14.20. Thus, at the outset, it is clearly visible that both the authorities expressed their opinions without proper application of mind and without examining the nature of impugned receipt within the framework of provisions of Income-tax Act, 1961. 14.21. Apart from that, the binding effect of Office Memorandum issued by CBDT, clarification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n section 116 of the Act. Thus, these orders, instructions and directions shall not be binding upon the Income-tax Appellate Tribunal. Further it is noted that these have been held to be not binding upon the CIT(A) as stated above. Therefore, there is no question of there being any binding effect upon the Income-tax Appellate Tribunal of any such communication issued by the Board. 14.23. It is noted by us that this issue is not res integra, as it has been settled by Hon ble jurisdictional High Court and Hon ble Supreme Court in many cases. It was held by Hon ble Bombay High Court in the case of Banque Nationale De Paris vs CIT (supra) that circulars cannot override or detract from the provisions of the Act in as much as section 119 of the Act has empowered the CBDT to issue orders, instructions or directions for the proper administration of the Act. Hon ble High Court has taken into consideration various earlier judgments of Hon ble Supreme Court on this issue. Similarly, the Hon ble Supreme Court in the case of CIT vs Hero Cycles Pvt Ltd (supra) held that circulars can bind the Income-tax Officer but will not bind the appellate authority or the Tribunal or the Court or even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been called upon to decide whether the impugned amount of PSF-SC collected by the assessee company on behalf of MOCA as per the relevant regulations for the purposes of meeting security expenses can be characterised as income in the hands of the assessee company and made liable to tax in its hands. 14.26. The brief facts related to the issue have already been narrated by us in earlier part of our order and just to recapitulate the relevant part of it, the licensee of an airport in terms of provisions of Rule 88 of Aircraft Rule, 1937, is responsible for collecting a fee from embarking passengers referred to as Passenger Service Fee (PSF) @ ₹ 200/- per ticket. Portion of PSF being 35% was on account of providing passenger facilitation and was to be retained by the airport operator for providing passenger related services and the balance 65% of PSF represents security component to be utilised for payment of security agency, i.e. CISF, who is designated by the Ministry of Home Affairs for providing security services. The assessee had included aforesaid 35% portion in its income but did not include PSF-Security Component in its income while filing the return of income. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mandatory instructions issued by the Ministry of Civil Aviation from time to time under which, the assessee functions as an Airport Operator make it taxable. When confronted by the second reconfirmation by the Ministry of Civil Aviation on 15.11.2010, the appellant had no other option, but to offer the receipts to tax for A.Y. 2008- 09. Thus, as stated by the appellant on merits and in law that although the receipts of PSF (SC) in the hands of the appellant do not partake the character of income and by the 'Doctrine of Overriding Title' as they are to be utilized for security purposes-the issue being highly debatable and a legal difference of opinion being there the same has been offered for taxation. Hence I confirm this addition by the A.O. and thus, this ground of appeal is dismissed. 14.28. It is noted by us that both of the authorities got influenced and swayed away with the opinion expressed by the CBDT/MOCA and admission made by the assessee under certain circumstances emerged during the course of assessment proceedings. Thus, both the authorities abstained from effectively and independently adjudicating the taxability of this amount as per of law in the hands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernment Audit of CAG. iv. In case any amount remains, this will be transferred to AAI by the airport operator through a process of mutual consultation for payment to CISF deployed for security purposes at other airports. In case of a dispute, the matter may be referred to the Ministry, of Civil Aviation whose decision will be treated as final and binding on both parties. 2. The new procedure will be effective from 01.042006. 3. This issues with the approval of the Minister of State for Civil Aviation (Independent charge). 14.31. Subsequently another order was passed by MOCA dated 20th June, 2007 wherein it was inter alia clarified that security component of PSF was not regular revenue of the airport operator and the aforesaid amount will be utilised at the airport concerned only to meet security related expenses of that airport. Relevant part of the order is reproduced below:- ORDER Sub: Collection of Passenger Service Fee (PSF) at Greenfield / Private airports regarding. In this Ministry's Order of even no. dated 09.05.2006 on the subject noted above, the following modifications may be made- ( a) Clause (iii) is modified as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned amount of PSF-SC. Under these circumstances, the aforesaid amount could not have been characterised as income u/s 2(24), section 5 or any other provisions of the Income-tax Act, 1961. 14.33. It is noted that subsequently MOCA issued another order dated 19-01-2009 containing Standard Operating Procedures for accounting / audit of Passenger Service Fee (Security Component) by the airport operators. The aforesaid order contained whole procedure in detail for collection and disbursement of the said amount. Relevant portion of the same is reproduced hereunder, for the sake of better clarity on facts related to conditions attached with regard to collection and disbursement of the aforesaid amount: 2. Nature of Security component of PSF: 2.1 Aviation security is an activity reserved for the Government of India. Force deployment at the airports, security requirements including the requirement of capital items and specifications thereof are laid down by t he Government/Bureau of Civil Aviation Security (BCAS). As stated above, PSF is levied under Rule 88 of the Aircraft Rules, 1937 and covers security component as well as facilitation. While the fee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 or any other decision of MOCA/BCAS or any other Government agency, from time to time. iii) Deployment of Surplus: Any surplus standing at the credit of the Escrow Account should be deployed by the Escrow Bank in its own Deposit Account. On maturity or otherwise, the proceeds, shall be credited in Escrow Account. 14.34. The perusal of the above order containing SOP makes it clear that the amount collected by the airport operator is to be kept separately in Escrow Account and the same is held by the airport operator in fiduciary capacity. It becomes further clear that the amount of any surplus left in the said account could not have been utilised for any purpose other than security related expenses. Under these circumstances, it was clearly not having any characteristics of income in the hands of the assessee company. The said SOP also contained certain guidelines with respect to taxability of the impugned amount. In our view, MOCA is not the designated authority to determine the taxability of the said amount as has also been discussed by us in detail in earlier part of our order and, therefore, to that extent, the observations or guidelines issued by MOCA exceed its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me, but for and on behalf of the person to whom it is payable. 14.38.Subsequently, in many judgments, various courts have, from time to time, analysed the law in this regard and suggested various tests to find out whether in a give facts it was a case of diversion or application of income. We find that the Hon ble Allahabad High Court in the case of U.P. Bhumi Sudhar Nigam vs CIT 280 ITR 197 (All)formulated a set of four tests to find out whether in a given situation, it would be a case of diversion of income by overriding title or not. The Hon ble Court, after analysing various other judgments suggested following principles:- ( i) If a third person becomes entitled to receive an amount under an obligation of an assessee even before he could claim to receive it as his income, there would be a diversion of income by overriding title but when after receipt of the income by the assessee, the same is passed on to a third person in discharge of the obligation of the assessee, it will be a case of application of income by the assessee and not of diversion of income by overriding title. ( ii) If income does not result at all, there cannot be a tax, even though in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of income by overriding title. In a matter before Hon ble Bombay High Court in the case of Somaiya Organo Chemicals Ltd vs CIT 216 ITR 291 (Bom),the facts were that a portion of the sales price was transferred to a separate fund for building up adequate storage facilities under a statutory obligation, it was held to be diverted at source by overriding title could not form part of assessee s income. 14.42. Ld. Counsel had also relied upon before us the judgment of Hon ble Madras High Court in the case of CIT vs Salem Co-operative Sugar Mills Ltd (supra). The facts in this case were that the said assessee was a cooperative society, carrying on business of manufacturing and sale of sugar and in terms of Molasses Control (Amendment) Order dated 06-02- 1972, transferred a sum in conformity with the statutory obligation cast by the above order and claimed it as deduction in the computation of its total income for the assessment year 1975-76, which was disputed by the Revenue but allowed by the Tribunal. Hon ble High Court affirmed Tribunal s order and observed that even before collection of the amount as directed by the Central Government under the Molasses Control ('Amendm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me is to be transferred to the account of Airport Authority of India for meeting security expenses. We had directed the assessee as well as the Ld. CIT-DR to examine requisite facts and inform us whether there was surplus or deficit in the escrow account finally. The information provided by the Assessing Officer, through Ld. CIT-DR, vide his letter dated 06-09-2016 reveals that upto the assessment year 2013-14 though there was surplus in the said account, but from A.Y. 2014-15 onwards, there was huge deficit, meaning thereby, the expenditure was more than the amount of collection. As per the terms of SOP issued by MOCA, if ultimately there was some deficit, then it was required to be funded by Government of India, and if there was ever any surplus (i.e. unspent amount), it was to be transferred to the account of Airport Authority of India (AAI). Thus, viewed from this angle also, there was no question of there being any income in this exercise, much less, any income, which could be characterised as taxable income in the hands of the assessee company. Thus, we have no hesitation in holding that the aforesaid amount is not taxable as income in the hands of the assessee company. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized any amount of PSF-SC for its own purposes or for any purposes which are not permitted by MOCA/other competent authorities, we, therefore, respectfully following the decision of this Tribunal for A.Y. 2008-09, hold that the said amount is not taxable in the hands of the assessee and direct the Assessing Officer to re-compute the income of the assessee. We also direct the Assessing Officer to see that no portion of the amount calculated by the assessee on account of PSF-SC is utilized by the assessee for its own purposes or for any purpose which are not permitted by MOCA/other competent authorities. The Assessing Officer is further directed that in case he finds that any violation is done by the assessee in this regard, he will be at his liberty to treat the amount so misappropriated as income of the assessee but to that extent only. Further, if any refund is received by the assessee on account of TDS deducted on this component, i.e. on PSF-SC, the same shall also be deposited by the assessee in the Escrow account, failing which it would be treated as income of the assessee to that extent only. Thus, this ground is allowed subject to these directions in each of the A.Ys 2009-10, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of carrying out its one of the object to renovate and/or repair existing runway. The Hon ble Bombay High Court in the case of New Shorrock Spg. Mfg. Co. Ltd. V/s CIT (1956) 30 ITR 338 (BOM.) has held that the the expression current repairs means expenditure on building, machinery, plant or furniture which is not for the purpose of renewal or restoration but which is only for the purpose of preserving and maintaining an already existing asset which does not bring new asset into existence or does not give the assessee new or different advantage. We observe that the said expenditure has been incurred only for resurfacing the layer of the runway and to put new tiles to replace floors. Therefore, it cannot be said that expenditure is in the nature of capital as it does not bring into existence any new asset, leaving aside the fact that the said runway /premises is not owned by assessee. No doubt, 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. Hence, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of the Airport premises which is similar to grant of a license to the assessee. This case is similar to the case of Technoshares and Stocks Ltd and others (supra), wherein the Hon ble Apex Court has held that a right given to member of Stock-Exchange to carry on the business at the premises of the Stock-Exchange is a business or commercial right which is akin to license in terms of section 32(1)(ii) of the Act, therefore, eligible for depreciation. Their Lordships have held that right to participate in the market is an economic and money value, itself satisfies the test of being a license. There is no dispute to the fact that the said payment of ₹ 150 crores paid to AAI has not resulted to the assessee in the acquisition of any tangible assets like building, machinery, plants or furniture. Therefore the said payment of ₹ 150 crores has not resulted into acquisition of tangible assets . Thus, the assessee has only acquired right to collect charges from the users of the Airport preemies, which is a business or commercial right in the form of license and therefore it is an intangible assets as per section 32(1)(ii) of the Act. The Hon ble Delhi High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntical. Therefore this ground be decided on the basis of the facts for A.Y. 2009-10 and whatever view this Tribunal may take in A.Y. 2009-10 the same shall be applicable for A.Ys 2010-11 and 2011-12. 20. The learned DR before us contended that the assessee has incurred expenditure by way of contribution to MMRDA for construction of Sahar Elevated Road from Western Express Highway, horticulture expenses and other civil works. This expenditure should be considered as integral part of overall capital expenditure incurred by the assessee for renovation, expansion, modernization of the airport. This expenditure enabled the assessee to enjoy enduring benefit from the said asset, in respect of which the assessee has made contribution to MMRDA and had resulted enhanced profitability of the assessee. Thus, the said expenditure has to be capitalized and the assessee s claim of considering the expenditure as revenue expenditure should not be accepted. The CIT(A) has committed an error in treating the said expenditure as revenue expenditure. 21. The learned AR on the other hand, vehemently contended that the assessee during the course of business incurred the said expenditure by way of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the capital field that the expenditure would be disallowable on an application of this test. ..... The Test of enduring benefit is, therefore, no certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particulars facts and circumstances of a given case. ( Emphasis Supplied) The undisputed facts placed before us are that the assessee under the OMDA agreement with Airport Authority of India is operating, maintaining, managing developing the Mumbai Airport as per the international standard. Other obligations relate to overall management, development etc. As per the terms of OMDA, the assessee has to discharge various obligations in maintaining and operating the airport so as to bring it to the international standard. Thus, the assessee has to incur various expenses for such development and maintenance of the airport. During the year, the assessee has incurred the expenditure on various activities. The assessee has incurred the expenditure in maintaining existing assets which has either been repaired or renovated. Out of the expenditure of ₹ 20,35,73,477/- of sum of ₹ 16, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er supporting work for supply of power. When the said expenditure was held as capital expenditure by the Assessing Officer, the Hon ble High Court held as under: that the power transmission lines which were laid by the assessee were, upon erection, to constitute the exclusive property of the UPPCL. The UPPCL was the only consumer of the electricity generated by the assessee. The assessee incurred the expenditure to facilitate its own business. The fixed capital of the assessee was untouched and there was no capital accretion for the assessee. The expenditure which was incurred by the assessee in the laying of transmission lines was clearly on revenue account. Upon the erection of transmission lines, they were to vest absolutely in the UPPCL. The expenditure which was incurred by the assessee was for facilitating the efficient conduct of its business since the assessee had to supply electricity to its sole consumer the UPPCL. This was not an advantage of a capital nature. 24. Further, we noted that Hon ble Bombay High Court in the case of National Organic Chemicals Ltd. vs. CIT [1993] 203 ITR 410 (Bom) took a view that the assessee incurred expenditure for the purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bridge was built by the Government and the assessee did not acquire any ownership over the bridge by paying contribution towards construction of the bridge. The assessee received no addition to the value of any of the assets owned by it for the payment. The bridge merely facilitated the movement of the workmen to gain access to the assessee s factory and for the movement of the goods over the bridge. The payment of contribution was made to the Government for construction of a new bridge in place of the old one which became unserviceable. The expenditure incurred was revenue expenditure in respect of the assessment year 1991-92. 27. In view of the aforesaid discussion, we do not find any infirmity in the order of the CIT(A) treating the said expenditure to be a revenue expenditure. It is accordingly upheld. Ground nos. 3 4 for A.Y. 2009-10, ground nos. 2 3 for A.Y. 2010-11 and ground no.2 for A.Y. 2011-12 are dismissed. 28. Ground nos.5 6 for A.Y. 2009-10, ground nos. 4 5 for A.Y. 2010-11 and ground no.3 for A.Y. 2011-12 relates to deletion of disallowance made u/s. 40(a)(ia) of the Act. Both the parties agreed that this issue is covered in the assessee s own case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A) shall provide adequate opportunity of hearing to the assessee. The assessee shall also extend requisite cooperation to the Ld. CIT(A) by filing necessary details / evidences so as to bring complete facts on record. With these directions, this ground may be treated as allowed for statistical purposes. Respectfully following the said decision, we restore the issue to the file of the CIT(A) in all the assessment years with a direction to re-decide the issue afresh after giving sufficient opportunity to the assessee on the basis of the directions given in A.Y. 2008-09. Thus, ground nos.5 6 for A.Y. 2009-10, ground nos. 4 5 for A.Y. 2010-11 and ground no.3 for A.Y. 2011-12 are treated as allowed for statistical purposes. 29. Ground no.7 in A.Y 2009-10 relates to the disallowance of ₹ 39,35,444/- out of total expenditure. The Assessing Officer found that the assessee has debited a sum of ₹ 4,37,27,160/- as legal fees and claimed it as an expenditure by debiting it to the profit and loss account. From the bifurcation of these expenditure, the Assessing Officer was of the view that the expenditure details should have been considered for capitalization to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coming to the remaining grounds of the Revenue s appeal for A.Ys. 2010-11 and 2011-12. Ground nos. 6 to 9 in A.Y. 2010-11 and ground no.4 in A.Y. 2011-12 relates to the issue regarding deletion of the disallowance of retrenchment compensation. Both the parties agreed that the issue be decided on the basis of the facts involved in A.Y. 2010-11 and whatever view is taken by this Tribunal shall be applicable for A.Y. 2011-12 also. The learned DR before us contended that the assessee has claimed retrenchment compensation payable to Airport Authority of India as per the terms of OMDA as revenue expenditure. It was submitted that as per clause 6.14 of OMDA, the assessee is obliged to make an offer of employment to a minimum of 60% General Employees at any time during the Operation support period but not later than three months prior to the expiry of the operation support period, that it wants to employ, an option to accept or reject the offer by employees. This clause further provides that if less than 60% of the general employees accept the offer of employment made by the assessee, then assessee shall pay to the Airports Authority of India retrenchment compensation for such number o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent compensation for such number of general employees as represented by the difference between 60% of the general employees accepting the offer of employment made by the assessee. Thus, this clause specifically deals with the treatment of the retrenchment compensation to be paid to the Airports Authority of India at the occurrence of the events maintained in the said clause. The operational support period of three years has expired during the impugned assessment years under consideration and, accordingly, Airports Authority of India issued invoice dated 08.03.2010 for its claim towards retrenchment compensation amounting to ₹ 260,86,03,400/- The assessee has accordingly capitalized an amount of ₹ 260,86,03,400/- under the head intangible assets in its books of account but for the purpose of income tax he has claim said expenditure in the computation of income but disallowed itself a sum of ₹ 106,62,84,312/- as no tax has been deducted at source during the impugned assessment year but claimed remaining sum of ₹ 154,23,19,088/- as revenue expenditure. The Assessing Officer was of the view that the assessee is eligible only for one fifth of ₹ 154,23,19,08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat deduction claimed towards Retrenchment Compensation would be in the nature of revenue expenditure incurred wholly and exclusively for the purpose of business. The decision further states that where the Appellant-company took over another company along with its employees, and later paid Retrenchment Compensation to those employees by taking into account the services rendered by them under the former company such Retrenchment Compensation is allowable as revenue expenditure. 8.10 The appellant has further placed a reliance on the decision of Karnataka High court in the case of CIT v. Margarine Refined Oils Co. Ltd [154 Taxman 95] wherein the expenditure incurred by the management in paying retrenchment compensation for termination of service was held to be expenditure expended wholly and exclusively for the purpose of business and the said expenditure was allowed to be deducted in computing the business income chargeable under the head 'Profits and gains of business or profession' under section 37(1). 8.11 I also find force in the argument of the appellant that retrenchment compensation is nothing but lump sum amount paid to get rid of recurring payment. A r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for paying those employees of AAI who has sought voluntary retrenchment and this payment is part of the OMDA. Had this lump sum payment not been made then the appellant would have made the payment on account of salary as well as other benefits to the employees on annual basis which would have been claimed by the appellant as revenue expenditure. The appellant instead of retaining the number of general employees represented by the difference between 60% of general employees and the number of general employees accepting the offer of employment, is required to pay retirement compensation in respect of those general employees who have not accepted the offer of employment with the appellant. Thus, the expenditure incurred by the appellant on account of retrenchment compensation paid to AAI is in lieu of salary and other benefits which the employees not accepting the employment are eligible under OMDA. The nature of this expenditure is revenue expenditure as it represents salary and wages etc. The principle which had emerged from the said two decisions cited supra, that whatever substitutes for revenue expenditure should normally be considered as revenue expenditure is applicable to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned assessment year, the assessee has collected a sum of ₹ 287,83,48,538/- . An amount of ₹ 19,85,99,146/- has been reduced from the block of building and ₹ 7,00,70,264 has been reduced from the block of machinery and plant while computing depreciation. Depreciation has been claimed on the reduced amount of the block of assets. The Assessing Officer asked the assessee why the said amount should not be treated as revenue receipt. The Assessing Officer did not agree with the submissions of the assessee and treated the said amount as revenue receipt. The assessee went in appeal before the CIT(A), who, after going through the agreement entered into between the assessee and the Airports Authority of India, took the view that the said receipt was capital receipt and not revenue receipt. 37. We have heard the rival submissions and have carefully considered the same along with the orders of the authorities below. The learned DR relied on the order of the Assessing Officer while the learned AR vehemently contended that the said development fees has been collected with the permission of the Ministry of Civil Aviation pursuant to the provisions of Rule 22A of the Airp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is subject to supervision and audit from the Central Government. The appellant has been permitted to collect amount only for 48 months and the same cannot be exceeded funding gap of ₹ 1,543/- crores. The Ministry of Civil Aviation has vide F.No. AV.24011/001/2009-AD dated February 27, 2009 had in para (g) to (j) has stated as under: ( g) The amount collected through DF would under no circumstances exceed the ceiling of ₹ 1543 cores and in case of any cost escalation beyond ₹ 9802 crores, the amount representing the escalation would have to be brought in by MIAL, through other sources. The ceiling amount would be exclusive of taxes, if any. ( h)Rate and tenure of levy are premised upon the traffic projections and other estimates. In case due to actual figures being different than those estimated, the 'collections during levy period exceed the amount of Rs, 1543 crores, or any other amount, which the Regulator/Government may determine, the excess amount so collected shall not be utilized, for any purpose whatsoever, without the prior approval of the Regulator/Central Government. ( i) An independent Auditor appointed by AAI would audit t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. For convenience, such Development Fee would be collected by various Airlines at the time they sell the tickets to the passengers and would be paid to appellant. Accordingly, the airlines are collecting the Development Fee levied u/s 22A of AAI Act from the passengers and paying the same to the appellant towards meeting the funding gap for development of Aeronautical Assets which are transfer assets as per OMDA. In support of the contention that the Development fee so collected has been utilized only for the developing the capital assets i.e. Aeronautical Assets, a copy of the certificate from a chartered accountant has been placed on record certifying the utilisation of Development fee for construction of Aeronautical Assets as per provisions prescribed u/s 22 A of the AAI Act. 9.9 The appellant has placed strong reliance on the judgment of Hon'ble Supreme Court in the case of Consumer Online Foundation Vs Union of India others (2011 5 SCC 360) where Hon'ble Supreme Court bus categorically made the distinction between Section 22 and Section 22A of AAI Act. In the said judgment, Hon'ble Supreme Court has also held that Development Fee is in the nature of Cess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion vs. UOI Ors (supra). So far as the collection of Toll Charges is concerned, the same is collected to recover the capital cost, operating and maintaining cost along with profit. The Toll Charges are determined as per the policy of the Government of India and are not in the nature of tax or cess. The Toll Charges are treated as revenue receipts in the hands of Developer. Letter dated 27.02.2009 received from the Ministry of Civil Aviation which is on record indicates that Development Fee is a capital receipt. 9.11 I further notice that Airport Regulator has clearly mentioned in its order that for the purpose of allowing return to Airport Operator, it will consider Asset Base (RAB) net off Development Fee amount and no depreciation will be allowed on such assets. I further find from the letter dated 18.12.2012 of Airport Authority of India addressed to the Director, Ministry of Civil Aviation which was placed on record, wherein it is mentioned that the treatment of Development Fee should be as per the guidelines given in AS-12 - Accounting for Government Grants issued by the Institute of Chartered Accountants regarding grant against the assets. The another important and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ronautical Assets. Accordingly, the collection of Development fee is therefore, meant only for specific purpose of acquisition / construction of capital assets and therefore, it is on capital account and not on revenue account. Thus, the nature of the receipt is capital and not revenue. Accordingly, I hold that the receipts of ₹ 2,87,83,48,538/- on account of Development Fee being in the nature of tax or cess is a capital receipt and therefore the same cannot be brought to tax. Accordingly, the addition of ₹ 286,30,14,565/- is deleted. The AO is also directed to reduce an amount of ₹ 19,85,99,146/- from the block of building and ₹ 700,70,264 from the block of plant machinery and recomputed the depreciation after the said reduction as claimed by the appellant in the return of income. Accordingly, Ground Nos. 11 and 12 are allowed. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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