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2017 (11) TMI 905 - AT - Income TaxPassenger Service Fee whether Security Component PSF (SC) is not the income of the appellant - Held that - The assessee has not utilized 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, 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 Airport etc. Hence, we hold that the said expenditure is revenue in nature and cannot be said to be capital in nature irrespective of the fact that the assessee in its books of account has given treatment of it as capital in nature. We may state that the assessee will not be entitled for depreciation thereon as it is held to be revenue in nature. Disallowance of 25% depreciation of upfront fees - Held that - The assessee who was assigned the rights to participate in oil exploration in Russia through a consortium for a period of 25 years and paid the total consideration for obtaining 20% membership in the consortium, amounting to ₹ 155.9 crores, was treated to acquire a license, being intangible assets, and thus assessee was entitled to claim depreciation u/s. 32(1)(ii) of the Act. Pune Bench of the Tribunal in the case of Ashoka Info (P) Ltd (2008 (12) TMI 271 - ITAT PUNE-B) has also held that the expenditure incurred on construction of highway is eligible for depreciation @25%, as this expenditure has given rise to an intangible assets in the hands of the assessee. In view of above decisions and the facts of the case, we hold that the ld. CIT(A) has rightly held that the payment of upfront fee of ₹ 150 crores paid by assessee to AAI has created capital assets in the form of license to develop and modernize the Airport and collect charges as per terms and conditions as prescribed under the agreement entered into which is an intangible assets to the assessee. Thus assessee is entitled for depreciation. Treatment of the contribution made by the assessee to MMRDA for construction of Sahar Elevated Road from Western Express Highway, horticulture expenses and other civil works as revenue expenditure - Held that - No infirmity in the order of the CIT(A) treating the said expenditure to be a revenue expenditure Disallowance made u/s. 40(a)(ia) - Held that - 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. Disallowance of retrenchment compensation - Held that - We noted that the said provision is applicable only if the assessee has incurred any expenditure in any previous year by way of payment of any sum to a employee in connection with voluntary retirement. In this 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 assessment year and therefore, the CIT(A) has rightly deleted the disallowance made by the Assessing Officer u/s.14A.
Issues Involved:
1. Disallowance under Section 14A read with Rule 8D. 2. Disallowance of provision for leave encashment. 3. Depreciation allowance on taxiways, taxi track, and parking bays. 4. Treatment of refurbishment expenses. 5. Depreciation on upfront fees. 6. Treatment of contribution to MMRDA. 7. Disallowance under Section 40(a)(ia). 8. Treatment of retrenchment compensation. 9. Treatment of development fees. 10. Additional ground on Passenger Service Fee - Security Component (PSF-SC). Issue-wise Analysis: 1. Disallowance under Section 14A read with Rule 8D: The Tribunal deleted the disallowance made under Section 14A read with Rule 8D, noting that the Assessing Officer did not record any satisfaction about the correctness of the claim. The Tribunal followed its earlier decision in the assessee’s case for AY 2008-09, which held that disallowance without assuming jurisdiction as per law for invoking provisions of Rule 8D(2)(iii) is not valid. 2. Disallowance of provision for leave encashment: The Tribunal restored the issue to the Assessing Officer for fresh adjudication, following its earlier decision for AY 2008-09. The Tribunal directed the Assessing Officer to verify the facts and decide the issue based on the Supreme Court’s judgment in the case of Excel Industries Ltd. 3. Depreciation allowance on taxiways, taxi track, and parking bays: The Tribunal allowed depreciation at 15%, treating taxiways, aprons, and parking bays as plant and machinery, following its earlier decision for AY 2007-08 and AY 2008-09. The Tribunal noted that these structures are necessary tools for operating the airport and not merely concrete structures. 4. Treatment of refurbishment expenses: The Tribunal confirmed the CIT(A)’s order deleting the disallowance of refurbishment expenses, following its earlier decision for AY 2007-08. The Tribunal held that the expenditure incurred for resurfacing the runway and replacing floors did not bring new assets into existence and was revenue in nature. 5. Depreciation on upfront fees: The Tribunal confirmed the CIT(A)’s order allowing depreciation on upfront fees of ?150 crores, treating it as an intangible asset. The Tribunal followed its earlier decision for AY 2007-08, which held that the payment created a commercial right akin to a license, eligible for depreciation under Section 32(1)(ii). 6. Treatment of contribution to MMRDA: The Tribunal upheld the CIT(A)’s order treating the contribution to MMRDA for the construction of Sahar Elevated Road as revenue expenditure. The Tribunal noted that the ownership of the road remained with MMRDA, and the expenditure was incurred for commercial expediency, facilitating the assessee’s business. 7. Disallowance under Section 40(a)(ia): The Tribunal restored the issue to the CIT(A) for fresh adjudication, following its earlier decision for AY 2008-09. The Tribunal directed the CIT(A) to ensure that the assessee complied with TDS provisions and that there was no revenue leakage. 8. Treatment of retrenchment compensation: The Tribunal upheld the CIT(A)’s order allowing retrenchment compensation as revenue expenditure. The Tribunal noted that the payment was made to AAI under OMDA and not to the assessee’s employees, and the provisions of Section 35DDA did not apply. 9. Treatment of development fees: The Tribunal upheld the CIT(A)’s order treating development fees as a capital receipt. The Tribunal noted that the fees were collected under Section 22A of the Airports Authority of India Act and were in the nature of cess or tax for generating revenue for specific purposes, as held by the Supreme Court in the case of Consumer Online Foundation vs. Union of India. 10. Additional ground on Passenger Service Fee - Security Component (PSF-SC): The Tribunal admitted the additional ground and held that PSF-SC was not taxable in the hands of the assessee, following its earlier decision for AY 2008-09. The Tribunal directed the Assessing Officer to ensure that no portion of PSF-SC was utilized for the assessee’s own purposes and to treat any misappropriated amount as income. Conclusion: The Tribunal’s decisions were largely based on its earlier rulings in the assessee’s own case for previous assessment years, ensuring consistency and adherence to legal precedents. The Tribunal emphasized the importance of proper factual analysis and adherence to legal provisions in determining the taxability of various receipts and expenditures.
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