TMI Blog2018 (1) TMI 1359X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances, we reject the contention of the Ld. CIT(DR) that once the assessee itself has offered the income from PSF(SC), it cannot be allowed to contest the issue in further appellate proceedings . Opinion of the CBDT on the issue in dispute is not binding on the Tribunal and issue in dispute has to be decided by the Tribunal in accordance with law. Whether the amount of PSF(SC) received was in ‘fiduciary capacity’ or ‘diversion of income by overriding title’ - Held that:- We feel appropriate to restore the matter of determining taxability of PSF(SC) income to the file of the assessing Officer , with the direction to the assessee to produce entire statement of the escrow account maintained for PSF(SC) along with narration of every entry so that utilization of the funds of PSF(SC) for any purposes by the assessee(including investment in mutual funds) other than designated purposes can be filtered out. The assessee shall be free to furnish any other documents to support its claim. The Assessing Officer is further directed to examine any other benefit of deduction like collection fee at the rate of 2.5 % charges by the airlines or benefit of depreciation on capital asset pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well reasoned and no further interference is required. Accordingly we uphold the same. Disallowance u/s 14A read with Rule 8D - Held that:- In view of above finding of the Tribunal special bench in Vireet Investment [2017 (6) TMI 1124 - ITAT DELHI] for considering investment yielding exempt income for computing average value of investment, we feel it appropriate to restore the issue of computation of disallowance in terms of rule 8D of the Income- tax Rules to the file of the Assessing Officer for deciding in accordance with law. The assessee shall be afforded adequate opportunity of being heard. Claim of depreciation on upfront fee paid to Airport Authority of India(AAI) - Held that:- Since the upfront fee has already been held as revenue expenditure in nature, the claim of the assessee for allowing depreciation on said upfront fee, cannot be allowed. Accordingly, the ground of the appeal is dismissed and the Assessing Officer is directed to withdraw depreciation on the upfront fee already allowed if any, by the lower authorities. Claim of depreciation on the amount of repair and maintenance - Held that:- The repair and maintenance expenses on building has already been he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure incurred wholly and exclusively for the purpose of business and not a capital expenditure . It has only facilitated smooth and efficient running of the business enterprises and did not add to profit earning apparatus of the business enterprise. Disallowance u/s 14A computation - Held that:- Expenses pertaining to earning of exempt income comes to ₹ 2,33,10,128/-. Therefore, the disallowance u/s 14A of expenses pertaining to earning exempt income is restricted to ₹ 2,33,10,128/-as against the amount of ₹ 8,06,74,000/- worked out by the Assessing Officer. As a result, the appellant gets a relief of ₹ 5,73,63,872/-. For amount of indirect interest expenditure to be apportioned towards the exempt income earned in the case of the assessee, the Ld. CIT-(A), has considered the interest expenses toward working capital loan of ₹ 1,07,98,051/- and segregated the interest expenses paid towards secured loans. In our opinion, the action of the Ld. CIT-(A), is justified and in accordance with law. We do not find any error in the said finding of the Ld. CIT-(A) on the issue in dispute As computation of disallowance under section 14A of the Act re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssenger Service Fee (Security Component) as income of the Appellant - ₹ 80,72,64,401/- 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of the Additional Commissioner of Income- tax, Range-10, New Delhi ( the A.O. ) in charging to tax the Passenger Service Fee (Security Component) managed by the Appellant in fiduciary capacity on behalf of the Government of India as income of the Appellant. 2. The Appellant prays that the action of AO in treating the Security Component of the Passenger Service Fee as income of the Appellant be deleted. Ground 2: Disallowance u/s.40a(ia) of the Act - ₹ 7,51,65,000/- 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the action of AO in disallowing a sum of ₹ 7,51,65,000/- being provision made at year end on best estimate basis, on account of nondeduction of tax on the said payment under section 40a(ia) of the Act. 2. The Appellant humbly prays that the AO be directed to delete the aforesaid disallowance. Ground 3: Disallowance under section 14A of the Act. 1. On the facts and circumstances of the case and in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re in AY 2007-08 Ground 6: Not granting Depreciation 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the alternate claim raised by the Appellant in regard to not granting depreciation under section 32 of the Act at appropriate rates on the repair and maintenance of the building, plant and other as the same treated as capital in nature but merely allowing the amortization over the term of the agreement is infructuous. 2. The Appellant prays that if department appeal on this issue is allowed for the Assessment year 2007-08 and it is held that expense on repair and maintenance of building, plant and others amounting to ₹ 24,00,00,000/- is capital in nature then depreciation be allowed under section 32 of the Act on the repairs and maintenance of the building, plant and others. Ground 7: Not granting Deduction under section 80-IA of the Act 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not deciding the Appellant Ground No. XI relating to not granting deduction under section 80-IA of the Act on the profits derived by the Appellant from the business of operation and maintenance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r were challenged by the assessee before the Ld. CIT-(A), who allowed part relief to the assessee. Aggrieved with the finding of the Ld. CIT-(A), both the assessee and the Revenue are in appeal before the Tribunal raising the grounds as reproduced above. 5. Before us, the Ld. counsel filed two paper books containing pages from 1 to 420 and 1 to 494 and made detailed arguments supporting the grounds raised. 5.1 The ground No. 1 of the appeal of the assessee relates to Passenger Service Fee (security component) amounting to ₹ 80,72,64,401/- which has been treated by the Assessing Officer as taxable income of the assessee and upheld by the Ld. CIT-(A). 5.2 The brief background of the issue in dispute involved as culled out from the order of the lower authorities is that: (i) the assessee entered into an agreement for Operation, Management and Development Agreement ( OMDA) with the Airport Authority of the India (AAI) on 04/04/2006. Under the said agreement the AAI granted certain exclusive rights and authority to the assessee to undertake some of the functions of the AAI , being the function of operation, maintenance and development, construction, modernizat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see agreed to offer the income from PSF(SC). The assessee submitted that after the decision of the Central Board of Direct Taxes (CBDT) as conveyed by the Ministry of civil aviation (MOCA) vide letter dated 15/11/2010, income arising out of PSF(SC) was considered as liable to tax and accordingly , it paid tax. (vi) The assessee vide letter dated 30/11/2010 filed a revised computation incorporating income from PSF(SC) before the Assessing Officer. The assessee declared receipt of aeronautical passenger service fee of ₹ 15044.74 lakhs and other income of ₹ 1198.71 lakhs aggregating to ₹ 16243.45 lakh under the head PSF(SC) and claimed following expenses of ₹ 7937.27 lakhs against the said receipt : Security Deployment cost Rs.7351.85 lakhs Administrative cost ₹ 539.90 lakhs Interest Finance charges ₹ 4.37 lakhs Depreciation Rs. 41.15 lakhs Total Rs.7937.27 (vii) In addition to the above expenses, the assessee claimed exemption of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. 6.1 Further, the Ld. counsel submitted that that the amount is received in fiduciary capacity on behalf of the Government of India and therefore the assessee being holder, said amount is not chargeable as income in the hands of the assessee. According to the assessee, the amount was held in the fiduciary capacity due to following reasons: (i) The security services formed part of the reserved activities and ,hence the assessee was barred under OMDA to carry out security services. (ii) The security component of the PSF was to be deposited in a separate Escrow account maintained with bank (iii) The SOP required the assessee to maintain separate bank account for PSF(SC) and cheques in respect of security component were credited directly to Escrow account . (iv) The assessee cannot use the said money for any purpose it desires. 6.2 In support of the contention that amount received in fiduciary capacity ,is not taxable in the hands of the assessee, the Ld. counsel cited following decisions in written submission filed: i. Kishanchand Lunidasing Bajaj vs. CIT (60 ITR 500) (SC) ii. CED v. Aloke Mitra (126 ITR 599)(SC) iii. CESC Ltd. Vs. CIT (23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue before the Assessing Officer was only regarding allowing of the expenditure claimed by the assessee against receipt of PSF(SC) only. 7.1 The Ld. CIT(DR) further referred to the standard operating procedure(SOP) for account/audit of PSF(SC) by the Private airport operator issued by the MOCA dated 19/01/2009, which is available on page 438 to 447 of the assessee s paper book. She particularly referred to para-4.6 and 4.8 of the said SOP and submitted that the assessee was allowed to adjust the tax deducted at source on payments related to security component by Airlines against the income tax liability on PSF(SC) ,which establish that PSF(SC) is in the nature of income in the hands of the assessee. 7.2 The Ld. CIT(DR) placed reliance on Para -8 of the CBDT Office Memorandum dated 30/06/2008, which is available on page 448 to 449 of the assessee s paper book 09.01.2018 and submitted that entire amount of PSF(SC) is taxable within the meaning of Act. She also referred to the CBDT OM No. 792414/2010, dated 07/06/2010, and submitted that said OM clarified that whole of the PSF is revenue receipt and taxable under income tax Act. 7.3 She further submitted that income fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, the assessee has impliedly accepted that PSF(SC) is an income in that year. According to her, once the assessee has accepted that position, then following the Rule of Consistency, the assessee should not dispute the position in the year under consideration. Rejoinder by the Assessee 8. In the rejoinder, the Ld. counsel of the assessee submitted that the assessee neither credited the PSF(SC) to the profit and loss account nor same was offered to tax and only subsequent to the standard operating procedure issued by MOCA on 19/01/2009, it offered the income from PSF(SC) in the revised computation of income and that too without prejudice to the main contention that this income was not taxable. 8.1 The Ld. counsel submitted that the Tribunal in the case of Mumbai International airport limited (supra) has considered all the order of the MOCA and the SOP and thus it cannot be said that the Tribunal has cherry picked the clauses. He further submitted that the Tribunal in the case of Mumbai International airport limited (supra) has clearly stated that OM issued by the CBDT to MOCA and the guidance provided by the MOCA on the accounting aspect of PSF(SC) has no authority in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised before the Tribunal in the case of Mumbai International Airport P. Ltd.(supra). The Tribunal in para-14.8 to para-14.17 of the order discussed the first issue, whether amount could be taxed in the hands of the assessee merely because it was offered to tax during the course of assessment proceeding. The Tribunal answered in negative. The relevant discussion and finding of the Tribunal is reproduced as under: 14.8 With regard to the first issue, the brief facts and background brought before us are that in pursuance to process of privatization of airports in India, the assessee company had entered into an agreement in the nature of OMDA with Airport Authority of India to operate, maintain, develop, design, construct, upgrade, modernize, finance and manage the Chhatrapati Shivaji International Airport at Mumbai (hereinafter called airport , in short). As per Rule 88 of the Aircraft Rules, 1937, the assessee was entitled to collect a fee termed as Passenger Services Fee (PSF) from all the passengers embarking at the airport. The said fee was initially collected by the concerned airline and then handed over to the assessee company for the sake of administrative convenience. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and MOCA, the said amount was offered for tax. But the assessment should be done strictly in accordance with law and mere acquiescence of the assessee expressed during the course of assessment proceedings would not alter the true position of law and would not make the aforesaid amount as liable to be taxed in the hands of the assessee, if the same is actually not liable to be taxed as per the provisions of the Income-tax Act. 14.10. We have analyzed this issue. It is well settled position of law that an amount can be brought to tax in the hands of an assessee only in accordance with the provisions of Income- tax Act. This fundamental position has been well explained and well settled in many judgments. It is well settled that there is no estoppel against law. No tax can be collected except with the authority of law as per clear mandate of Article 265 of Constitution of India. If the taxes are to be collected depending upon consent/concurrence of the taxpayers or otherwise, then it will lead to chaotic situation and administration of tax would become impossible. Therefore, if an amount is taxable under the law, assessee is bound to pay tax thereon and if an amount is not taxable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Board is concerned, that circular will be binding on all officers concerned with the execution of the Act and they must carry out their duties in the light of the circular. In view of this clear position regarding the effect of the circular, it was obvious that in the instant case it was incumbent on the Income-tax officer to advise the assessee to claim relief under section 2(5)(a) if the proceeding or any other particulars before him at the stage of the original assessment indicated that the assessee was entitled to such relief under the provisions of the relevant Finance Act, 1965, so far as the order under reference was concerned 14.12. Further reference is placed upon another judgment in the case of S.R, Koshti 276 ITR 165 (Guj) in which relief was granted to assessee with following observations: The authorities under the Act 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 on not being properly instructed, is overassessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected[Para 20] 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctually taxable in the hands of the assessee as per the provisions of Income-tax Act, 1961. 9.2 In the instant case also, the assessee has not filed any income from the PSF-(SC) in the return of income filed and it has been filed during assessment proceeding by way of a revised computation of income that too, without prejudice to the claim that it was not taxable in the hands of the assessee. Thus, respectfully, following the finding of the Tribunal that amount in question cannot be taxed in the hands of the assessee merely because the same was offered to tax during assessment proceedings under certain circumstances, we reject the contention of the Ld. CIT(DR) that once the assessee itself has offered the income from PSF(SC), it cannot be allowed to contest the issue in further appellate proceedings . 10. The second issue of binding legal force of the opinion expressed by the CBDT and MOCA has also been discussed by the Tribunal in para-14.18 to para-14.24. The Tribunal concluded that the CBDT or MOCA has no authority in the eyes of law to hold the amount of security component as taxable in the hands of the assessee. The relevant discussion in the order of the Tribunal (supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uctions dated 19-01-2009 issued by MOCA. With a view to clarify the situation, representation was made before the CBDT as well as MOCA. In response, MOCA issued a letter dated 15-11-2010 wherein it was stated that the matter was examined with the Ministry of Finance and accordingly it is clarified that the whole amount of PSF - SC including security component was revenue receipt, and thus it was taxable under the Income-tax Act. 14.19 The assessee challenged before us, the validity and binding force of the aforesaid Office Memorandum issued by the CBDT and clarification received by MOCA. It has been noted by us firstly that in none of these documents, there seems to have been made any application of mind by the concerned authorities while expressing their opinion. None of the authorities have considered the aspect that the impugned amount was collected in the fiduciary capacity by the assessee. None of the authorities have stated that under what provisions of law, the aforesaid amount can be brought to tax in the hands of the assessee. The CBDT in its Office Memorandum has made a reference to the judgment of the Hon ble Supreme Court in the case of Chowringhee Sales Bureau (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... binding effect of Office Memorandum issued by CBDT, clarification issued by MOCA is also under question. It has been argued that it has been held by Hon ble Supreme Court many times that circulars issued by the Board are binding upon the authorities working under it, viz. the AO, etc. but these are not binding upon the appellate authorities including Income Tax Appellate Tribunal. We have examined this aspect also carefully. It is noted that as per section 119 of the Act, the CBDT has been empowered by the legislature to issue orders, instructions or directions to all the Income-tax authorities working under it for proper administration of the I.T. Act. And it has also been provided that this shall be binding upon the Income-tax authorities. But it is further noted that a proviso has been added to sub section (1) of section 119 which says that no such orders, instructions or directions shall be issued:- (a) so as to require any incometax authority to make a particular assessment or to dispose a particular case in a particular manner; or (b) so as to interfere with the discretion of the Commissioner (Appeals) in exercise of his appellate functions . It is clear from the perusal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellate authority or the Tribunal or the Court or even the assessee. It is further noted that law in this regard was further analyzed by Hon ble Supreme Court in the case of UCO Bank (supra). It was observed by the Hon ble Supreme Court that CBDT has power to tone down the rigour of the law and ensure enforcement of its provisions of issuing circulars. The Board has been given for the purpose of just, proper and efficient management of work of assessment. However, these are not meant for contradicting or nullifying any provision of the statute. Relying upon its earlier judgment comprising of three judges in the case of Keshavji Ravji Co vs CIT 183 ITR 1 (SC), it was inter-alia observed that Board cannot pre-empt judicial interpretation and the scope and ambit of a provision of the Act. Also, a circular cannot impose on the taxpayer a burden higher than what the Act itself on a true interpretation, envisages. The task of interpretation of the law is exclusively the domain of the Courts. However, the Board has the statutory power u/s 119 to tone down the rigour of the law for the benefit of the assessee by issuing circulars to ensure proper administration of the fiscal statute and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SF would have been held taxable. Thus in our opinion, the assessee has not accepted that PSF(SC) was taxable in the hands of the assessee and accordingly ,the rule of consistency cited by the Ld. CIT(DR) cannot be applied in the instant case before us. 11.2 The argument of the Ld. CIT(DR) that in view of the decision of the Hon ble Supreme Court in the case of Chowrangi Sales Bureau (supra), the receipt is taxable in the hands of the assessee, has also been considered by the Tribunal (supra) in para 14.19 of the order. The Tribunal (supra) has distinguished the facts of the case of Chowangiee Sales Bureau (supra). The relevant finding of the Tribunal has already been reproduced by us in preceding paras and, therefore, we are not reproducing again. In the said case, amount of sales tax was received by the assessee and deposited in its bank account and the funds were mixed in assessee s account. Thus, in that case non-payment by the said assessee was held to be income of the seller (said assessee). In the instant case, taxability of the amount of PSF(SC) held to be examined on the ground of fiduciary capacity or income by way of overriding title. 11.3 The Ld. CIT(DR) contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... airports would he collected by the respective Airport Operator, which could be AM, JVC, or a private operator. iii. The amount of PSF to be collected will he fixed by the Ministry of Civil Aviation. The amount will continue to be ₹ 200/- per passenger till further orders. The airport operator would retain ₹ 70/- towards passenger facilitation. An Escrow account would be opened whenever the airport operator is a JVC or private operator. This account will be operated by the airport operator (not by AM). ₹ 130/- of the PSF collected per passenger by such airport operator would be deposited in the Escrow account by the Airport Operator for payments to be made to CISF. The Escrow account would be subject to Government 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 01.04.2006. 3. This issues with the a ..... 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 characterized as income u/s 2(24), section 5 or any other provisions of the Income-tax Act, 1961. (emphasis supplied externally) 11.10 Thus, in above cases the Tribunal observed that the assessee has no freedom to utilize the amount or even surplus was not at the disposal of the assessee. But in the instant case, we found that certain facts differ from the facts in the case of MIAL. In the instant case, during the year the assessee entered into agreement for operating of Escrow Account with the Bank. A copy of said agreement has been produced before the Bench by the Ld. Counsel. We find that on the directions of the assessee, the bank invested the funds (which were lying in Escrow Account), into Mutual funds and earned dividend income. A finding of dividend income of ₹ 233.53 Lakhs earned by the assessee on PSF(SC) amount has been given by the Assessing Officer in para-3.6 of the assessment order, which is reproduced as under: 3.6 In this way the assessee company added income of ₹ 7218.80 lakh out of the receipts of Passenger Services Fees of ₹ 15044.74 lakh and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ponent 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 the 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 collected by the license of the airports, i.e., the airport operator, through the airlines, the security component thereof, which constitutes 65% of the total amount, can be used only in terms of directions issued by the Government/ BCAS, from time to time. The amount collected by the airport operator, which is kept separately in an escrow account, is thus held in fiduciary capacity. 2.2. Since the amount is held by the airport operator in fiduciary capacity for the Government, the accounts thereof would have to be maintained separately in accordance with the procedure laid down by the Government and have to be offered for audit by the Comptroller Auditory General of India (CAG). 3. Escrow Account Operating Procedure: 3.1 For PSF (SC) a sepa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 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 jurisdiction and, therefore, these were not binding upon the assessee. The assessee was, of course, bound by remaining position of the guidelines as per concerned rules regulations. 11.15 Thus, the Tribunal concluded that the funds of PSF(SC) was held by the MIAL in fiduciary capacity on the premise that amount of surplus left in the said account could not have been utilized for any purpose other than security related expenses. Before, us the Ld. Counsel though cited many decisions in written submission, he confined himself mainly to the decision of the Tribunal in the case of Mumbai International Airports P. Ltd.(supra) and the decisions discussed in that, to support his claim of fiduciary capacity, and thus we are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly out of his income and. an amount which by the nature of the obligation cannot be said to be a part of the income of the assessee. Where by the obligation income is diverted before it reaches the assessee, it is deductible; but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow. It is the first kind of payment which can truly be excused and not the second. The second payment is merely an obligation to pay another a portion of one's own income, which has been received and is since applied. The first is a case in which the income never reaches the assessee, who even if he were to collect it does so, not as part of his income, 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, analyzed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me , which suggests that unless the income has been earned by a person in real sense, the same cannot be held as taxable income. There has to be first income and only then its taxability could be determined. It is noted by us that in the facts before us, no portion of the amount collected on behalf of AAI / MOCA is reported to have been retained by the assessee as its income in as much as nothing belonged to it. Thus, the impugned amount is clearly not taxable in the hands of the assessee. 14.41. It is further noted by us that in many cases, wherein under some requirement of law if the amounts were transferred to the designated fund, then in such cases the Courts have held it to be a case of diversion 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and was not taxable as business income. (emphasis supplied externally) 27. While concluding that PSF(SC) is an income by overriding of title , the Tribunal (supra) has noted that no income was retained by the assessee. But in present case, this fact is not getting ascertained from the orders of lower authorities as well as submission of the assessee and Ld. Counsel also could clear this fact as how the dividend income earned on investment made out of surplus fund has been utilized. Thus, the above finding of Tribunal (supra) also cannot be applied straightway in the instant case in view of inconsistent facts pointed out above by us. The tribunal in Mumbai International Airport P ltd (supra) held the income as not taxable in the hands of the assessee with finding as under: 14.44 Before parting with, we have also analyzed the facts / about utilization of the impugned amount. The Escrow Account maintained by the assessee is simply a pool created by the MOCA through assessee for meeting security expenses. Under these circumstances, if at all any income can be computed, that would be possible only if any surplus arises, which is not possible to happen since entire amount collec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he hearing, the Ld. Counsel was asked to produce a statement of Escrow Account with narration of entries to assertion whether; the assessee has invested the funds for purposes other than designated purpose of security. But the Ld. counsel provided copy of statement for a period of one month that too without any narration, thus it is not possible at our end to determine whether the assessee utilized the PSF(SC) funds for its own benefit or according to its choice. It is vey crucial to determine that how the assessee utilized the funds lying in Escrow Account and whether the Dividend income was enjoyed by the asssessee. This factual finding would determine whether the PSF(SC) amount was held in fiduciary capacity or it was diversion of income by overriding title. In view of above facts and circumstances, we feel it appropriate to restore the issue to the file of the Assessing Officer for deciding the taxability of income from PSF(SC) in the light of principles or test laid down by various courts in decisions discussed in the case of MIAL(supra) for determining existence of fiduciary capacity and diversion of income by overriding title. 12. Accordingly, we feel appropriate to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curity cargo(Rs. 2.73 Lakhs), audit fee (Rs. 27.00 Lakhs), advertisement (Rs. 87.59 Lakhs), recruitment employee verification fee (Rs. 8.31 Lakhs), sitting fee board meeting (Rs. 12.20 Lakhs) and found that no tax was deducted though same was liable for TDS according to him, thus, he disallowed the said sum of ₹ 759.75 Lakhs in terms of section 40(a)(ia) of the Act. 15.1 The Ld. CIT-(A) grouped the above expenses under four heads as under: Nature of Expenditure Amount (in Lakhs) Various Provisions 701.65 Sponsorship Fees 50.00 Recruitment Fees 8.31 Sitting fees 12.20 15.2 Regarding various provisions, the assessee submitted that same were created on best estimate basis following the accounting standards. Regarding board sitting fees, it was submitted that in assessee s own case, against the order under section 201(1) and 201(1A) of the Act , the concerned commissioner of Income-tax (appeals) held that no tax was deductible on payments made to directors as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Finance Act, 2012, which reads that any remuneration of fees or commission by whatever name called, other than those on which tax is deductible under section 192 of the Act, to a director of a company, shall be liable to deduct at the rate of 10%. According to her, this insertion is clarificatory in nature and therefore it would be retrospective in application. She submitted that even prior to the amendment, the sitting fee paid was in the nature of fee for technical services and thus it was liable for deduction at the rate of 10% under section 194J of the Act. In respect of recruitment verification fee, she referred to circular No. 715 dated 08/08/1995 and submitted that in terms of question No. 12, it is clearly specified that payment to a recruitment agency would be subject to TDS under section 194J of the Act. According to her, this was also applicable for advertisement expenses paid to advertisement agency, housekeeping, consultancy, audit fee etc as clarified by the Circular No. 715 dated 08/08/1995. In respect of year-end provisions, she submitted that respective party has already rendered the services and the same were identifiable and thus the assessee was required to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the books of account and to delete the impugned addition of ₹ 8.31 lakhs if/the appellant s contention is found to be correct. 21.2. In our opinion, the finding of the Ld. CIT-(A) on the issue in dispute is well reasoned as he has directed the Assessing Officer to verify the fact of deduction of tax at source already done by the assessee. We do not find any error in the said direction of the Ld. CIT-(A) and, accordingly, we uphold the same. 21.3 As regard to the year-end provisions, the Ld. CIT-(A) has observed as under: 6.2 I have carefully considered the assessment order and the submissions of the Ld. AR on the above issue. As regards the various provisions and sponsorship fees, considering their nature I am of the view that tax was deductible thereon. The appellant has also not disputed this. However, the point of time for deduction at source is only in dispute as per the primary contention of the appellant. The appellant referred to the decision of the Mumbai Tribunal in the case of IDBI Bank reported in 107 ITD 45 to support its argument that when the payee is not determinable the mechanism for deduction of tax at source fails and therefore the appellant can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee relates to disallowance of ₹ 2,36,70,000/-under section 14A read with Rule 8D of the Income-tax Rules, 1962. 24. The Ld. counsel further submitted that during the year under consideration investments were only in mutual funds-daily dividend scheme and there was no actual cost incurred since the dividend was directly reinvested in the mutual funds. 24.1 The Ld. counsel of the assessee submitted that the assessee had not incurred any expenditure in relation to earning exempt income and therefore in view of the Hon ble Supreme Court is in in the case of Godrej Boyce manufacturing Co Ltd versus DCIT (394 ITR 449) and Maxopp Investment Ltd. Vs. CIT (203 Taxman 364), no disallowance is warranted under section 14A of the Act. 24.2 The Ld. counsel further submitted that the assessee also submitted without prejudice working before the Assessing Officer stating that if at all disallowance had to be made, then same should be restricted to ₹ 4.64 lakh and the Assessing Officer had not recorded any satisfaction on the said working of disallowance submitted by the assessee and therefore relying on the decision of the Hon ble Delhi High Court in the case of HT Media Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0ITR 455(SC) coupled with the finding that expenditure has been incurred by the assessee Company on the earning of the dividend income and in absence of any better method the method suggested by Rule 8D of the Income Tax Rules is adopted in determining the expenditure incurred by the assessee company in relation to dividend income/ exempt income calculated as under which is not includible in total income. 8.3 The language of subsection (1) of section 14A clearly provides that no deduction shall be allowed n respect of expenditure incurred by the assessee in rotation to income which does not form part of the total income under this Act On going through the simple and plain language, it is abundantly clear that the relation has to be seen between the exempt income and the expenditure incurred in relation to it and not vice versa It is to work out the expenditure in relation to the exempt income and the expenditure incurred in relation to it and not vice versa What is relevant whether the expenditure incurred by the assessee has resulted into exempt income or taxable income From the three clauses of Rule 8D it clearly emerges that stipulation of section is to compute the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even to such a situation. . (v) Even in the absence of sub-section (2) of Section 14A the Assessing Officer would have to apportion the expenditure and to disallow the expenditure incurred by the assessee in relation to income which does not farm part of total income under the Act. 26.1 Thus, in our opinion, it cannot be said that the Assessing Officer was not dissatisfied with the claim of the assessee. We find that Hon ble Delhi High Court in the case of Indiabulls Financial Services Ltd. (supra) has held that where the Assessing Officer after carrying out elaborate analysis and following the steps enacted in the statute, had determined amount of expenditure incurred for earning tax exempt income, merely because he did not expressly recorded dissatisfaction about assessee s calculation, his conclusion could not be rejected. In the instant case, the assessee has claimed that no expenditure has been incurred, and thus in view of provisions of section 14A(3) of the Act as well as decision of the Hon ble Delhi High Court in the case of Indiabulls Financial Services Ltd (supra) , the Assessing Officer was justified in invoking section 14A(2) and Rule 8D of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the quality of certainty. That quality would totally disappear if judges of co-ordinate jurisdiction in a High Court start overruling one another's decisions. If one Division Bench of a High Court is unable to distinguish a previous decision of another Division Bench, and holding the view that the earlier decision is wrong, itself gives effect to that view, the result would be utter confusion. The position would be equally bad where a judge sitting singly in the High Court is of opinion that the previous decision of another single judge on a question of law is wrong and gives effect to that view instead of referring the matter to a larger Bench. The above decision was followed by the Supreme Court in Baradakanta Mishra v. Bhimsen Dixit, AIR 1972 SC 2466, wherein the legal position was reiterated in the following words (at page 2469) : It would be anomalous to suggest that a Tribunal over which the High Court has superintendence can ignore the law declared by that court and start proceedings in direct violation of it. If a Tribunal can do so, all the subordinate courts can equally do so, for there is no specific provision, just like in the case of Supreme Court, making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 230 ITR 839 (P H), observing as under: We have carefully examined the records and have heard Ld. counsel representing the parties. We are in respectful agreement with the view expressed by the Allahabad High Court in Omega Sports and Radio Works' case [1982] 134 ITR 28, as also the decision of this court in Mohan Lal Kansal's case [1978] 114 ITR 583. Following the decision in the two cases referred to above, we hold that it was not a case of divergence of opinion inasmuch as the opinion expressed by this court was binding upon the Tribunal. 11.16 Therefore, in our considered opinion, no contrary view can be taken under these circumstances. We, accordingly, hold that only those investments are to be considered for computing average value of investment which yielded exempt income during the year. 26.3 In view of above finding of the Tribunal special bench in Vireet Investment (supra) for considering investment yielding exempt income for computing average value of investment, we feel it appropriate to restore the issue of computation of disallowance in terms of rule 8D of the Income- tax Rules to the file of the Assessing Officer for deciding in accordance with l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A No. 4202/Del/2013 for assessment year 2007-08 in para-35 of the order has held the payment of upfront fee as revenue expenditure. The relevant para of the Tribunal(supra) is reproduced as under: 25. One more important aspect in this case is that, if the assessee had acquired any right by making payment of ₹ 150 crores, then under the terms of OMDA it is clearly stipulated that the payment of annual fee of 45.99% of gross revenue of the year is not made continuously then the OMDA agreement will come to an end. On this fact also the assessee has not acquired any licence or right by making the payment of ₹ 150 crores. Thus, on this count also it cannot held that the said sum is for acquiring any licence or right. In view the aforesaid discussion and analysis we are of the opinion that the payment of ₹ 150 crores is to be treated as revenue expenditure and order of the Ld. CIT(A) allowing such expenditure is affirmed and grounds taken by the revenue is dismissed. 29.1 Since the upfront fee has already been held as revenue expenditure in nature, the claim of the assessee for allowing depreciation on said upfront fee, cannot be allowed. Accordingly, the grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure is on account of renovation and repairs for improving the existing infrastructure. The Ld. AO has not pointed out as to which expenditure is for construction of new structure. In fact he has classified all the expenditure as revenue and that is why he has allowed it in a deferred manner, that is, as deferred revenue expenditure. If AO himself has accepted that expenditure is revenue and has held to be allowable on a deferred basis spread over 30 years, then there cannot be case that it is capital in nature. As submitted by the Ld. Sr. Counsel in light of various judgment as cited above, that there is no concept of deferred revenue expenditure under the Income Tax Law and the expenditure has to be allowed in the year in which it is incurred. Since, AO has himself has not classified or distinguished as to which repairs is for new infrastructure or for construction of new structure, therefore, we are unable to give any finding that any of the expenditure as noted above pertains to new construction. As he himself has treated to be revenue, then in that case, we hold that the entire expenditure under the head repair and maintenance is allowable as revenue expenditure in the ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and the profits and gains derived by an undertaking from such business which has been referred to as eligible business in section 80-IA. The assessee before the Ld. CIT (A) has submitted that, since the return of income has filed at a huge loss of ₹ 150.55 crores, therefore, no claim for deduction u/s 80IA was made. It is only when the AO has made the assessment at a positive figure ₹ 62.70 crores, the assessee has made a claim for deduction u/s 80-IA. In support of such a claim, audit report was also filed in the prescribed form, a copy of which has also been placed in the paper book before us. Ld. CIT (A) after examining the entire facts and submissions of the assessee observed and held as under:- 11.5 It is undisputed that the Appellant is carrying on the business of operating and maintaining an airport. The AO in his remand report has only contested that claim u/s 80IA cannot be entertained since it was not made in the return of income. 11.6 In view of the above discussion, the question of rejection of the claim merely on the basis that it has not been made in the return of income does not arise. However, the prayer of the Appellant is that the said dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Procurement of Trouplin for cargo terminal 29.98 Cargo Expenses Repair of covered Shed for motor transport workshop.... 9.60 Repair Maint. - Terminal Bldgs. Civil, Masonary repair work at the terminal in front of terminal 20.20 Repair Maint. - Terminal Bldgs. Internal painting repair work in Ceremonia Lounge at Igia at terminal-1 32.65 Repair Maint. - Terminal Bldgs Supply of spare part-replacement of sanitary fittings 8.29 Repair Maint. - Terminal Bldgs. Painting-P/F frameless Glass double doors Alumn. Composite panels 4.25 Repair Maint. - Terminal Bldgs. Renovation of ceremonial lounge in terminal 1B-flooring, civil work furniture 10.11 Repair Maint. - Terminal Bldgs. Renovation of Delta ladies toilets/baggage area toilet 7.16 Repair Maint. - Terminal Bldgs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dg. roof 4.55 Rep. Maint.- other Bldg Maint. Of fire Stn. Area by dismantling of structure, removing unwanted structure at airside 6.79 Rep. Maint.- other Bldg Repairs of toilets and Nsg Barracks-etc. 6.02 Rep. Maint.-of fencing security walls Installation of frangible fencing to prevent intrusion of animals 5.77 Rep. Maint.-of fencing security walls Providing and fixing of fencing Fuards at Blue Dart Cargo. 5.63 Rep. Maint.-of Sewage Drainage Boring development of tubewells for water requirements 7.34 Rep. Maint.-of Sewage Drainage Misc. civil, plumbing piping work related to water supply at terminal-li 3.46 Rep. Maint.-of Sewage Drainage Modification of rain water drainage system over the check in area of terminal 1B civil works for diversion 11.30 Rep. Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee with following observations: 5.2 I have carefully considered the assessment order and submissions made by d. AR along with documents placed on record and case laws on the above issue. Under the OMDA, the appellant as a part of its obligation to Operate, Maintain, Develop, Design, Construct, Upgrade, Modernize, and Manage the Airport had incurred an amount of ₹ 15,52,05,000/- towards repairs and maintenance. It was argued by the appellant before the AO that the expenditure incurred towards repairs and maintenance was in the nature of current repairs primarily for the maintenance and upkeep of the existing airport facilities. It was not an one time expenditure, but recurring operational expenditure necessary for efficient functioning of the existing assets. Further, such expenditure was incurred on leased premises riot owned by the appellant and did not result in any benefit of enduring nature. Therefore, it was allowable as revenue expenditure. However, the AO has disallowed the above amount of ₹ 11,53,73,000/- by considering it as capital in nature. 5.3 On careful examination of the matter, I find that similar expenditure has been claimed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciation of ₹ 1,11,37,300/- @ 10% on the above capitalized amount of ₹ 11,13,73,000/-. The above depreciation amount is required to be withdrawn in view of the above decision allowing the amount of ₹ 11,13,73,000/- as revenue expenditure. The AO is directed accordingly. 41. Before us the Ld. CIT(DR) submitted that the Ld. CIT-(A) has simply relied on the order of the Ld. CIT-(A) for assessment year 2007-08 and he has not applied mind to the facts of the year under consideration. According to her various expenses, claimed as repair and maintenance are toward the construction of the Delhi airport. She submitted that expenses of ₹ 49.56 lakh towards construction of Vehicle parking at old NH8-R M of existing vehicle parking to accommodate more vehicles, is clearly in the nature of capital expenditure and wrongly claimed as revenue expenditure. She further submitted that other expenses like renovation of ceremonial launge (Rs. 10.11 lakhs), renovation of ladies toilets (Rs. 7.16 Lakhs), replacement of false ceiling (Rs. 6.41 Lakhs), construction of payment for parking of vehicles air side(Rs. 42.16 Lakhs) etc. have contributed to a permanent structure of endu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure was incurred, it was in contemplation that Terminals 1A, IB and 2 will become non-operational after Terminals ID and 3 are developed. Therefore, there is no question of any enduring benefit to the assessee for the expenditure to be amortized since most of the expenses are incurred on Terminals 1A, IB and 2 and they are also comparable to the expenses incurred in AY 2007-08 which has been allowed to the Appellant by the Hon ble Tribunal vide order dated December 14, 2017. 43. We have heard the rival submission and perused the relevant material on record. In assessment year 2007-08, the Tribunal(supra) has allowed the expenditure on repair and maintenance as revenue expenditure on the premise that the Assessing Officer himself as accepted the expenditure as revenue and has held to be allowable on the deferred basis spread over 30 years. The relevant finding of the Tribunal has already been reproduced by us in earlier paras while adjudicating the claim of depreciation of the assessee on said repair and maintenance expenses. In our opinion, the finding of the assessment year 2007-08 of the Tribunal(supra) cannot be applied over the facts of the instant year as in the instant yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld determine the character of the expenditure whether it is a capital expenditure or a revenue expenditure. The source or the manner of the payment would then be of no consequence. It is only in those cases where this test is of no avail that one may go to the test of fixed or circulating capital and consider whether the expenditure incurred was part of the fixed capital of the business or part of its circulating capital. If it was part of the fixed capital of the business it would be of the nature of capital expenditure and if it was part of its circulating capital it would be of the nature of revenue expenditure. These tests are thus mutually exclusive and have to be applied to the facts of each particular case in the manner above indicated. It has been rightly observed that in the great diversity of human affairs and the complicated nature of business operations it is difficult to lay down a test which would apply to all situations. One has therefore got to apply these criteria one after the other from the business point of view and come to the conclusion whether on a fair appreciation of the whole situation the expenditure incurred in a particular case is of the nature of capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r all for procuring an enduring benefit to the business as distinguished from a recurring expenditure in the nature of operational expenses. The expression enduring benefit also has been judicially interpreted. Romer, L.J., in Anglo-Persian Oil Co. Ltd. vs. Dale (supra) agreed with Rowlatt, J., that by enduring benefit is meant enduring in the way that fixed capital endures. An expenditure on acquiring floating capital is not made with a view to acquiring an enduring asset. It is made with a view to acquiring an asset that may be turned over in the course of trade at a comparatively early date. Latham, C.J., observed in Sun Newspapers Ltd. Associated Newspapers Ltd. vs. Federal Commr. of Taxation (supra) : When the words permanent' or enduring' are used in this connection it is not meant that the advantage which will be obtained will last forever. The distinction which is drawn is that between more or less recurrent expenses involved in running a business and an expenditure for the benefit of the business as a whole ...e.g....- enlargement of the goodwill company - permanent improvement in the material or immaterial assets of the concern. To the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... competitors in the whole of the Khasi and Jaintia Hills District and the capital asset which the company acquired under the lease was thereby appreciated to a considerable extent. The sum of ₹ 35,000 agreed to be paid by the company to the lessor for the period of 5 years was not a revenue expenditure which was made by the company for working the capital asset which it had acquired. It was no part of the working or operational expenses of the company. It was an expenditure made for the purpose of acquiring an appreciated capital asset which would no doubt by reason of the undertaking given by the lessor make the capital asset more profit yielding. The period of 5 years over which the payments were spread did not make any difference to the nature of the acquisition. It was none the less an acquisition of an advantage of an enduring nature which enured for the benefit of the whole of the business for the full period of the lease unless terminated by the lessor by notice as prescribed in the last part of the clause. This again was the acquisition of an asset or advantage of an enduring nature for the whole of the business and was of the nature of capital expenditure and thus was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by an assessee that brings the case within the principle laid down in this test. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The test of enduring benefit is, therefore, not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case. But even if this test were applied in the present case, it does not yield a conclusion in favour of the Revenue. Here, by purchase of loom hours no new asset has been created. There is no addition to or expansion of the profit-making apparatus of the assessee. The income-earning machine remains what it was prior to the purchase of loo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tructure of which the income is to be the produce or fruit remains the same; it is not enlarged. We are not sure whether loom hours can be regarded as part of circulating capital like labour, raw material, power, etc., but it is clear beyond doubt that they are not part of fixed capital and hence even the application of this test does not compel the conclusion that the payment for purchase of loom hours was in the nature of capital expenditure. 7. The Revenue, however, contended that by purchase of loom hours the assessee acquired a right to produce more than what it otherwise would have been entitled to do and this right to produce additional quantity of goods constituted addition to or augmentation of its profit-making structure. The assessee acquired the right to produce a larger quantity of goods and to earn more income and this, according to the Revenue, amounted to acquisition of a source of profit or income which though intangible was nevertheless a source or spinner of income and the amount spent on purchase of this source of profit or income, therefore, represented expenditure of capital nature. Now it is true that if disbursement is made for acquisition of a source o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cquiring additional power would be to augment the productivity of the profitmaking structure. On the same analogy payment made for purchase of loom hours which would enable the assessee to operate the profit-making structure for a longer number of hours than those permitted under the working time agreement would also be part of the cost of performing the income earning operations and hence revenue in character. 8. When dealing with cases of this kind where the question is whether expenditure incurred by an assessee is capital or revenue expenditure, it is necessary to bear in mind what Dixon J. said in Hallstorm's Property Ltd. vs. Federal Commr. of Taxation 72 CLR 634. What is an outgoing of capital and what is an outgoing on account of revenue depends on what the expenditure is calculated to effect from a practical and business point of view rather than upon the juristic classification of the legal rights, if any, secured, employed or exhausted in the process . The question must be viewed in the larger context of business necessity or expediency. If the outgoing expenditure is so related to the carrying on or the conduct of the business that it may be regarded as an integ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is cut, company B should cease production for one year and that the assessee-company and company R should undertake between them the whole group programme for the year reduced by the overall cut of 27,000 tons and should pay compensation to company B for the abandonment of its production for the year. Pursuant to this agreement the assessee paid to company B, 1,384,569 by way of its proportionate share of the compensation and the question arose whether this payment was in the nature of capital expenditure or revenue expenditure. The Privy Council held that the compensation paid by the assessee to company B in consideration of the latter agreeing to cease production for one year was in the nature of revenue expenditure and was allowable as a deduction in computing the taxable income of the assessee. Lord Radcliffe, delivering the opinion of the Privy Council, observed that the assessee's arrangement with companies R and B out of which the expenditure arose, made it a cost incidental to the production and sale of the output of the mine and as such its true analogy was with an operating cost. The payment of compensation represented expenditure incurred by the assessee for enabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue expenditure. 45. The Issue of repairs and maintenance expenses whether as capital or revenue has been considered by the Tribunal in the case of Vardhaman Developers Ltd vs ITO in ITA No. 6820/Mum/2012 reported in 38 ITR(Trib) 512. In the said case the assessee had taken an office premise on rent for a period of five years. As the said premises were old and not in use for longtime it incurred the expenditure toward repair and innovation, which included expenditure on false ceiling, fixing tiles/floorings, replacing glasses; wooden partitions; replacement of electrical wiring; plumbing sanitation etc. The Tribunal observed that the advantage or asset, in terms of its functional utility and capacity for the business, needs to maintained, so that expenditure for retaining the same is essentially revenue expenditure, which again, by definition does not lead to result in enhancement or improvement. The Tribunal further observed that the premises in the said case was admittedly not in use for a long time, and thus, in a dysfunctional, if not dilapidated state prior to it being acquired by the assessee. The Tribunal accordingly held that expenditure restraints thus incurred on refu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue to the file of the Assessing Officer for examining each item of expenditure and decide the issue in dispute afresh in accordance with law. The Assessing Officer may examine the bills and vouchers etc in respect of the expenditure and may carry out enquiries as deemed fit in the case, maybe from the Airport Authority of India or from the relevant contractors etc. The assessee shall be afforded adequate opportunity of being heard. The ground No. 1 of the appeal of the Revenue is accordingly allowed for statistical purposes. 49. The ground No. 3 of the appeal of the Revenue relates to deletion of disallowance of ₹ 33,69,000/-made on account of club expenditure. According to the Assessing Officer the facilities of club are generally availed by very few top-ranked person and very occasionally availed for the guest related to the business and therefore the expenses were not incurred wholly and exclusively for the purpose of business. Before the Ld. CIT-(A) the assessee submitted that expenses incurred were to enable the employees, directors and executives to socialize and develop contacts with various persons for promoting the business of the assessee and the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business or profession shall be allowed in computing the income chargeable under the head profits and gains of business or profession . Accordingly, any expenditure that is incurred for personal purposes is not allowable as deduction. Sub-section (2) of section 115WB provides for a levy on fringe benefits estimated on a presumptive basis using certain expenses as a measure. To the extent the expenses incurred by the employer are personal in nature and have, therefore, been disallowed under section 37 of the Income-tax Act, such disallowance would not be liable to FBT. For example, let us assume a firm, being an employer, has incurred an expenditure of ₹ 100 towards tour and travel, of which ₹ 40, is personal in nature. Therefore, the amount of ₹ 40, being personal in nature, will be disallowed under section 37 of he Income-tax Act, and FBT will be levied on 20 per cent of the amount of ₹ 60 (Rs. 100 - ₹ 40). 54. In our opinion, the Assessing Officer cannot take two opposite stands. Once, he consider the club expenses for charging FBT, and then again disallow the same. He cannot be allowed to take opposite stand simultaneously that said expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as income of the Appellant, the same is transferred by over-riding title: 1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of AO in charging Passenger Service Fee (Security Component) collected and managed by the Appellant as income in the hands of the Appellant when the same was transferred by over-riding charge over the same to the Ministry of Civil Aviation, Government of India. 2. The Appellant prays that it be held that the said sum being transferable to the Government of India by an overriding title, the same could not be charged as income of the Appellant. Ground 3: Disallowance under section 14A of the Act 1. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of AO in disallowing a sum of ₹ 2,33,10,128/- on the ground that the Appellant had earned exempt income and therefore the said sum was disallowable u/s. 14A of the Act r.w.r. 8D of the Income Tax Rules, 1962. 2. The Appellant humbly prays that the AO be directed to delete the disallowance of ₹ 2,33,10,128/- made by invoking provisions of Section 14A and Rule 8D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as capital in nature but merely allowing the amortization over the term of the agreement is infructuous. 2. The Appellant prays that if department appeal on this issue is allowed for the Assessment year 2007-08 and 2008-09 and it is held that expense incurred on repair and maintenance of building, plant and others are capital in nature then depreciation be allowed under section 32 of the Act on the repairs and maintenance of the building, plant and others. Ground 7 The Appellant craves leave to add, alter and/or amend all or any of the foregoing grounds of appeal. 58.1 Grounds of appeal raised by the Revenue as under: i) Whether the Ld. CIT(A) under the facts and circumstances of the case and in law was correct in allowing the expenses of ₹ 14,15,80,482/- on account of repair Maintenance of building as revenue expenditure as against the capital expenditure assessed by the AO. ii) Whether the Ld. CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 10.80 made u/s 40(a)(ia) of the IT Act, 1961 by the AO. iii) Whether the Ld. CIT(A) under the facts and circumstances of the case and in law was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital in nature in assessment year 2007-08 and assessment year 2008-09. 62.1 We find that the repair and maintenance expenses in assessment year 2007-08 has already been held by the Tribunal(supra) as revenue expenditure and hence , the without prejudice claim of the assessee for granting depreciation cannot be allowed and accordingly rejected. 62.2 In assessment year 2008-09, the issue of repair and maintenance expenses, whether capital or revenue has been restored back to the file of the Assessing Officer for deciding afresh and thus the without prejudice claim of the assessee for granting depreciation on said repair and maintenance expenses, also cannot be allowed. 62.3 Accordingly, the ground No. 6 of the appeal of the assessee is dismissed. 64. The ground No. 1 of the appeal of the Revenue relates to expenses of ₹ 14,15,80,482/-on account of repair and maintenance of building. The said expenses were held by the Assessing Officer as capital in nature, whereas the Ld. CIT-(A) has allowed the same as revenue expenditure. 64.1 Before us both the parties agreed that issue in dispute is identical to the ground No. 1 of the appeal of the revenue in assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lacs as expenses attributable to earning exempt income u/s 14A. The appellant has claimed that no borrowed funds have been utilized for making investments in mutual funds and the loans taken as short term or long term investment have been kept separately and income arising from such funds was credited to capital work in progress. The appellant claims that it has taken working capital loans for meeting day to day expenses till the DIAL gets payment from airlines and other airport users. The moment money is received against monthly billing, the same were credited to working capital account and the surplus if arisen during the intervening period was kept in mutual funds. The appellant has also claimed that during the F.Y. 2006-07 and 2007-08 the company had earned profit before tax of ₹ 134 crore and after payment of MAT taxes of ₹ 14 crore, the appellant company had internal accruals of ₹ 120 crores. The appellant claims that a large part of the amount was available for making investments during F.Y. 2008-09. The appellant contended that Assessing Officer has applied Rule 8D read with section 14A of the IT Act 1961 for disallowance u/s 14A mechanically. The AR of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and development of assets which were put to use during the year. Therefore, for working out of disallowance under Rule 8D read with section 14A, the interest paid on working capital of ₹ 1,07,98,051/- is to be considered for disallowance u/s 14A. The revised working for disallowance is as under:- Particulars Amount (Rs.) Amount (Rs.) 1. Direct Expenses 455,000 2. Indirect Interest Cost Interest on working capital 10,798,051 A. Average Tax free Investment As on March, 31st, 2008 8,805,421,303 As on March, 31st, 2009 2,080,000 Average Value of Investment 4,403,750,652 B. Average Total Assets As on March, 31st, 2008 43,211,921, 511 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by us above. 72. In the result, appeal of the assessee as well as appeal of the Revenue, both are partly allowed for statistical purposes. ITA Nos. 3707/Del/2013 4203/Del/2013 for 2010-11 73. Now, we take up the appeal of the assessee in ITA No. 3707/Del/2013 and appeal of the Revenue in ITA No. 4203/Del/2013 for assessment year 2010-11. The respective grounds raised in the appeal of the assessee as well as appeal of the Revenue are reproduced as under: 74. Grounds of appeal raised by the assessee in ITA No. 3707/Del/2013 are as under: Ground 1: Disallowance under section 14A of the Act 1. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of AO in disallowing a sum of ₹ 5,48,790/- on the ground that the Appellant had earned exempt income and therefore the said sum was disallowable u/s. 14A of the Act r.w.r. 8D of the Income Tax Rules, 1962. 2. The Appellant humbly prays that the AO be directed to delete the disallowance of ₹ 5,48,790/- made by invoking provisions of Section 14A and Rule 8D. Without prejudice to Ground 1 above Ground 2: 1. On the facts and circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment year 2007-08 to 2009-10 and it is held that expense incurred on repair and maintenance of building, plant and others are capital in nature then depreciation be allowed under section 32 of the Act on the repairs and maintenance of the building, plant and others. Ground 5 The Appellant craves leave to add, alter and/or amend all or any of the foregoing grounds of appeal. 74.1 Grounds of appeal raised by the Revenue in ITA No. 4203/Del/2013 read as under: i) Whether the Ld. CIT(A) under the facts and circumstances of the case and in law was correct in allowing set off loss ₹ 1550.81 lacs which has never been claimed by the assessee in its return or revised return of income or during any stage of assessment proceedings? ii) Whether the Ld. CIT(A) under the facts and circumstances of the case and in law was correct in allowing the expenses of ₹ 794.93 lacs on account of repair Maintenance of building as revenue expenditure as against the capital expenditure assessed by the AO? iii) Whether the Ld. CIT(A) under the facts and circumstances of the case and in law was justified in deleting disallowance of ₹ 2,31,250/- made on account of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT 378 ITR 33, no disallowance could be made where no exempt income has been received by the assessee. 79. On the other hand, Ld. CIT(DR) relied on the order of the Assessing Officer and submitted that Assessing Officer has correctly made the disallowance in terms of section 14A of the Act read with rule 8D of the Income-tax Rules. 80. We have heard the rival submission and perused the relevant material on record. The Hon ble Delhi High Court in the case of Cheminvest Ltd (supra) has held as under: 23. In the context of the facts enumerated hereinbefore the Court answers the question framed by holding that the expression 'does not form part of the total income' in Section I4A of the envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. In other words, Section 14A will not apply if no exempt income is received or receivable during the relevant previous year. 81. Before us, there is no dispute on the fact that no dividend income was earned by the assessee during the relevant year and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim of the assessee for allowing depreciation in assessment year 2008-09 and 2009-10 is also rejected. The ground No. 4 of the appeal is accordingly dismissed. 87. Ground No. 5 of the appeal of the assessee is general in nature, accordingly dismissed as infructuous. 88. The ground No. 1 of the appeal of the Revenue relates to allowing setoff of losses of ₹ 1550.81 lakhs claimed in the revised computation of income filed before the Assessing Officer. 89. The facts qua the disallowance are that during the assessment year 2008-09 and 2009-10, the assessee considered the receipt of passenger service fee (security component) from airlines as held in fiduciary capacity for incurring expenses towards security and thus surplus of receipt over expenditure was held as non-taxable. During the year under consideration expenditure incurred towards security expenses was higher than the receipt from PSF(SC) and thus there was a deficit in the PSF(SC) account. In the books of accounts, the assessee recorded loss of ₹ 692.95 Lakhs. During the course of assessment proceeding, the assessee filed a revised computation of income and claimed business loss of ₹ 1550.81 lakhs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f loss is in keeping with the accounting procedure as laid down in the SOP. Consider the issue of allowability of loss in terms of Income Tax Act and the legal principles enunciated in this regard. 92. We have heard the rival submission and perused the relevant material on record. The issue of income from PSF(SC) is taxable in the hands of the assessee or not has been restored by us to the file of the Assessing Officer in assessment year 2008-09 and 2009-10. During the year under consideration there is a deficit in the account and assessee has claimed the same as loss in the revised computation of income. Thus the issues before us is that whether the receipts in the PSF (SC) are taxable in the hand of the assessee. In case same are found to be taxable , then only the question of allowing the loss will arise . But if same were found to be not taxable, then issue of loss will not arise . Since in assessment year 2008-09 and 2009-10 the issue of taxability of the receipt from the PSF(SC) has been restored by us to the file of the Assessing Officer, we feel it appropriate to restore this issue of taxability of receipts from PSF(SC) in the year under consideration also to the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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