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TMI Blog2022 (6) TMI 1529X X X X Extracts X X X X X X X X Extracts X X X X ..... x effect: Nil 2. Deduction under section 80-IA of the Act 1. The CIT(A) has erred in law and on facts in treating other income from other deposits amounting to INR 113,389,608; 70% revenue share fee from food and beverage amounting to INR. 97,736,920 and 70% revenue share fee from retail outlets amounting to INR 237,416,659 as ineligible incomes while computing the deduction under section 80- IA of the Act 2. The CIT(A) have erred in law and on facts in holding that the interest income earned by the appellant from various deposits made are ineligible incomes while computing the deduction under section 80-IA of the Act. 3. The CIT(A) have erred in law and on facts in holding that the appellant has formed joint venture partnerships (JV) with the third parties and have earned revenue share from the entire JV activity, instead of letting out the space at reasonable rate and therefore considered the same as ineligible income under section 80IA of the Act. 4. The CIT(A) has erred in law and on facts in not giving cognizance that the Appellant is engaged in developing, operating and maintaining an infrastructure facility i.e., an airport and all such activities and revenue there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of airport. 3. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the Ld. CIT (A) be reversed and that of the Assessing Officer be restored. 4. The appellant craves leave to add, to alter, to amend or delete any of the grounds that may be urged at the time of hearing of appeal." 3. The main issues arising out of these cross appeals are as follows:- (1) Eligibility to claim deduction under Section 80IA of the Act by the Assessee in respect of the following income (Assessee's appeal Ground No.2 and Revenue's appeal ground Nos. 2.III to 2.V): - Other income: Rs. 16,47,89,608/-; - Revenue share fee from food and beverage: Rs. 13,96,24,171/and - Revenue share fee from retail outlets: Rs. 33,91,66,656/-.; and (2) Disallowance of concession fee under Section 43B of the Act (Revenue's appeal Ground No.2.I and 2.II) 5. The brief facts of the case are that the assessee company filed its return of income electronically for the AY 2013-14 on 28.11.2013 computing a total income of Rs 56,700,030 under the normal provisions of the Act and a book profit of Rs 1,065,483,802 under section 115JB of the Act. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar activity / source of income is material; while in the case of claim u/s. 10A/10B, the income from a unit operating from a particular location is material. 8. The assessee and the revenue are in appeal against the order of CIT(A) appeals as the other income is partially allowed to be included for the purpose of deduction u/s. 80IA as per the CIT(A)'s order. 9. The ld AR submitted that the other income pertaining to tender fee is intrinsically connected to the business of the Assessee, inasmuch as the tender fee pertains to the tenders awarded by the Assessee in respect of the airport infrastructure. Therefore the income is "derived" from the business of the airport facility. As regards interest earned on deposits, the ld AR submitted that the interest is earned on the deposits which are mandatorily required to be maintained with the banks in terms of the trust and retention agreements. The loans obtained from the banks are towards the business of the Assessee, and therefore the interest earned on the deposits required to be maintained mandatorily are inextricable linked to the airport business of the Assessee. Hence the ld AR contended that the other income being linked to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO, the CIT (A) and the ITAT were correct in disallowing the above sum as deduction under Section 80-IA of the IT Act under the head "other income". 9. The relevant portion of Section 80-IA (4)(iv)(a) of the IT Act reads as under: 80 IA (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in subsection (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years. (2) - (3) ..... (4) This section applies to- (i) xx xx xx (iv) an undertaking which, - (a) is set up in any part of India for the generation or generation and distribution of power if it begins to generate power at any time during the period beginning on the 1st day of April, 1993 and ending on the 31st March, 2017." 10. Thus Section 80-IA(1) states that where the gross total income of an assessee includes any profits and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest. This also therefore, has a direct nexus with the essential business activity of the Assessee. 13. In CIT v. Meghalaya Steels Ltd. (supra), the Respondent there was engaged in manufacturing steel and ferro silicon. The interest earned on the subsidies were treated as not income derived from business of the Assessee and therefore, not having a close and direct nexus with the business of the Assessee. The subsidies, according to the Department, did not qualify for deduction. The Assessee's argument on the other hand was that the subsidies were given only in order that the cost of manufacture would be reduced. These subsidies were reimbursement for either the entire or partial costs incurred towards transporting raw materials to the Assessee's factory or finished products to its dealers, who then sell the finished products. Further, power subsidy, interest subsidy and insurance subsidy were also reimbursed, either wholly or partially, power being a necessary element of the cost of manufacture of the Respondent's products. 14. Interpreting the similar expression contained in Section 80 IB, the Supreme Court in CIT v. Meghalaya Steel Ltd. (supra) referred to the decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits and gains after considering those incomes / expenses are 'derived from the business' of the assessee and therefore would be eligible for deduction u/s. 80IA. Therefore in the given case of the assessee, the important factor to be checked for determination 'Other Income' to be eligible for deduction u/s. 80IA is, whether the income is inextricably linked and is having direct and proximate connection/nexus with the Assessee's business of operation and management of the Bangalore International Airport. We therefore remand the issue to the AO for factually verifying the 'Other Income' earned by the assessee and its nexus with the business of the assessee in order to decide the eligibility for deduction u/s. 80IA of the Act as per law. The AO is directed accordingly, after giving reasonable opportunity of being heard to the assessee. This ground raised by the revenue is dismissed. Revenue share fee from food and beverage and retails outlets 7. The Assessee has entered into a concession agreement with the Ministry of Civil Aviation, Government of India, whereby the Government has granted the Assessee the exclusive right and privilege to carry out the development, design, cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income has been done by the AERA Act only for the purpose of computing and collecting the tariff. However, the AO has erroneously taken the non-aeronautical stream of income as income from non-airport income thereby disallowing the deduction under section 80IA of the Act on such income. * As per Concession agreement, BCAS, IATA and various other agreements/guidelines discussed above, BIAL is expected to develop, maintain and operate the airport to meet the international standards by undertaking various activities in relation to security, passenger convenience, operation and maintenance of the airport 8. In the light of the above submission, the assessee submitted that the non-aeronautical income (revenue from retail outlets, sale of food and beverages,) and other income are integral and part and parcel for developing, operating and maintaining of the airport and therefore such income are eligible for deduction under section 80-IA of the Act. 9. The CIT(A) acknowledged the contention of the assessee that the airport operators activities encompass much more function than the Aeronautical activities and that the classification of income is for the limited purpose of compliance wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime, pursuant to the ICAO guidelines, provided that any activities that are not materially similar to those contemplated in Schedule 3, Part 1 shall require the mutual agreement of the Parties." Article 1.1 (page 3 of the agreement): Definition of "airport" means "the greenfield international airport comprising of the initial Phase, to be constructed and operated by BIAL at Devanahalli, near Bangalore in the State of Karnataka and includes all its buildings, equipment, facilities and systems ........" Schedule 3 (pages 64 and 65 of the agreement): Airport activities include the following services, facilities and equipment: .....duty free sales, general retails shops, restaurants, bars and other refreshment facilities. Standards- IATA Global Airport Monitor Standards (page 86 of the agreement): The following criteria shall be measured on an annual basis in accordance with Article 9. The surveys shall be scored in accordance with the IATA Global Airport Monitor scoring mechanism: (viii) restaurant and eating facilities; (ix) shopping facilities. Article 9.2.5- Monitoring of performance standards (page 32 of the agreement): Should BIAL fail to produce such action plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me from revenue share of Food & Restaurants and Retail outlets being eligible for deduction u/s. 80IA viz., (i) Whether the Food & Restaurants and Retail outlets fall within the definition of 'infrastructure facility' under explanation to section 80IA(4); & (ii) Whether the income from revenue share of Food & Restaurants and Retail outlets is 'derived from the business' of airport operation to be eligible for deduction u/s. 80IA. 21. We notice that as per Article 1.1 of the Concession Agreement entered into by the assessee with Ministry of Civil Aviation, Government of India, ' Airport' and 'Airport Activities' are defined as under:- "Airport Activities" means the provision, at or In relation to the Airport, of the activities set out at Schedule 3, Part 1 as amended from time to time, pursuant to ICAO guidelines, provided that any activities that are not materially similar to those contemplated in Schedule 3, Part 1 shall require the mutual agreement of the Parties. "Airport" means the greenfield International airport comprising of the Initial Phase, to be constructed and operated by SIAL at Devanahalli, near Bangalore in the State of Karnataka and includes all Its buildin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rry out the development, design, financing, construction commissioning, maintenance operation and management of the Airport. The assessee in order to provide amenities and facilities to the users of the airport, had entered into various agreements for establishing and operating retail outlets and restaurants. The assessee invites tender for granting rights for utilization of the premises by these third parties and the premises is allotted to the lowest bidder. The fact that the assessee is allotting only the "right to utilize the premises" to the third party is evidenced by the sample agreements i.e. Agreement with Bread Basket Private Limited dated 12/07/2012 and Agreement with Shoppers Stop Limited dated 19th September 2013. The consideration for such utilization of premises is in the form of revenue share. Clause 4.2.1 which reads as under:- "4.2.1 The Operator shall pay BIAL, a monthly minimum guaranteed revenue share as per Schedule A (the "Minimum Guaranteed Revenue Share"); or, a fee payable every month during the Term, as per Schedule B (the "Revenue Share"), whichever is higher, based on actuals, within five (5) days after each month end, throughout the Term. The Operato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order passed by the CIT(A) in the Assessee's own case for the AY 2010-11 and by holding that the concession fee payable by the Assessee being in the nature of a profit sharing/recovery for foregoing the operation at the HAL airport by the Government of India, the same was not in the nature of tax or levy covered by the provisions of Section 43B of the Act (para 4.4 on page 5 of the CIT(A)'s order). Revenue is in appeal against the order of the CIT(A). 19. The ld AR submitted that the concession fee payable by the Assessee is in consideration of the grant by the Government of India of the exclusive right and privilege to carry out the development, design, financing, construction, commissioning, maintenance, operation and management of the airport. Accordingly, the said payment is not in the nature of "tax, duty, cess, fee...." as contemplated under Section 43B. The ld AR placed reliance in this regard is placed on the following: - Order dated 27.01.2014 passed by the CIT(A) in the Assessee's case for the assessment year 2010-11 paras 3.2 to 3.5 on pages 13-18. It is submitted that the Revenue did not challenge the relief granted in the said year before the Tribunal, and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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