2023 (11) TMI 859 - AT - Income Tax

Deduction u/s 80IA - cargo handling facility which includes storage, loading and unloading - Airport facility - claim denied as it is not a company registered in India or owned by consortium of such companies - whether the cargo handling facility which includes storage, loading and unloading is an infrastructure facility for the purpose of Section 80-IA? - HELD THAT - AO has fallen in error in considering Airport as a facility standing in isolation and giving a very restrictive interpretation to the scope of developing, operating and maintaining Airport. Airport is a facility for transportation of passengers or cargo or both at the same time. The passengers may also travel along with their baggage and cargo may be accompanied by people handling that cargo. Thus the facilities of Airport is not restrict to the fixed structure or equipment connected with the Aircrafts maintenance, their running, flying or landing alone. The functionality of the Airport arise from all the facilities which bring utility or add utility to the premises, convenience to passengers, crew, ground staff. Facilities like cargo handling, ground handling, announcement crew, security, check-in counter, baggage management facility, the Airport crew, airlines crew, aircraft crew facility etc. collectively and independently use the premises, the fixed structures, the equipments etc. The developing, operating and maintaining Airport, therefore, encompasses all these activities which are incidental or supplemental to the transportation of passengers or cargo or both together. These facilities of various kind may be provided by one company or different companies but in any way they operate in consortium and having interdependence. Learned AO has fallen in error in observing that different companies have developed the running of Bangalore Airport and the assessee is merely providing utility services beyond the scope of Airport for the purpose of Section 80-IA. Thus ground handling and cargo handling services provided by the assessee are covered within the meaning of Explanation referred to Section 80-IA and assessee is entitled to claim the benefit of same. There was no substance in the allegation of Ld. AO that the basic condition provided in Section 80IA(iv)(i)(b) is not fulfilled. This was also the view in the case of M/s. Menzies Aviation 2021 (2) TMI 36 - KARNATAKA HIGH COURT as duly appreciated by ld. CIT(A). CIT(A) has duly appreciated the fact that Ld. AO had fallen in error in applying provision of Section 80IA(iii) with regard to allegation of the assessee company being a mere reconstitution and reconstruction of unincorporated JV by taking into consideration that the said provision is not applicable to the assessee company claiming benefit by way of infrastructural facility of the nature of Airport. CIT(A) has also duly appreciated the fact that assessee is company incorporated India and owns the infrastructural facility and Ld. AO has fallen in error in alleging violation of the condition of Section 80IA(iv)(i)(a). As relied by Ld. Sr. Counsel in the case of M/s. PSA Sical Terminals ( 2012 (12) TMI 1240 - ITAT CHENNAI ), laying down that there is distinction between the company and the share holders, as in the case of that assessee also the company equity was subscribed by three companies and the Tribunal had considered the fact that being a registered company independently holding the assets was entitled to benefit u/s 80IA. This also takes care of the allegation of the ld. AO that earlier joint venture was not taking the benefit of Section 80IA as that was for the reason that the earlier joint venture was not company incorporated Indian and was merely an Association of person which was not entitled for reduction u/s 80IA. Decided against the appellant Revenue. TDS u/s 194C on concession fee - Addition u/s 40(a)(ia) in respect of the year end provisions - We are of the view that the credit contemplated in sub-section (2) of section 194C is one that enables the person who has carried out the work to make a claim for the sum. The provision as made by assessee did not as such create a debt in favour of BIAL as the concession fee did not arise out of any contract performed by BIAL but was more in the form of royalty with uncertainty of actual amount due and therefore no income can be said to have accrued or arisen to BIAL. Methodology adopted for estimation of turnover / profits and subsequently creating the year-end provision and reversing the same in next financial year, remains the same in all subsequent years. Thus, given the fact that in AY 2014-15 the Department has now accepted that the disallowance is not required to be made under section 40(a)(ia) in respect of the year end provisions for concession fee, same sustains the claim of assessee. The reliance as placed by Ld. Sr. Counsel on the decision of Toyota Kirloskar Motor (P.) Ltd. 2021 (4) TMI 276 - KARNATAKA HIGH COURT also supports the case of assessee as therein year end provisions were made for expenses on estimate basis in respect of which bills were yet to be submitted. The provisions were reversed upon receipt of invoice and expenses were booked as per the invoices and taxes were deducted there from. The Hon ble High Court referred to the principle laid down in CIT v. Shoorji Vallabhdas Co. 1962 (3) TMI 6 - SUPREME COURT that if income does not result at all, there cannot be a levy of tax even though a book entry is made. Thus ground is determined against the appellant Revenue.

Summary

Issues Involved:
1. Eligibility for deduction under Section 80IA of the Income Tax Act.
2. Disallowance under Section 40(a)(ia) of the Income Tax Act.

Summary:

Issue 1: Eligibility for Deduction under Section 80IA

The Revenue appealed against the order allowing the assessee's claim for deduction under Section 80IA, arguing that the assessee's business activities of ground handling and cargo handling services do not qualify as infrastructure facilities under Section 80IA. The AO contended that the agreement was not directly with the Government of India but with Bengaluru International Airport Limited (BIAL), and the assessee was a reconstitution of a previous joint venture between Air India Ltd. and SATS Ltd. Singapore.

The Tribunal held that the cargo handling facility is indeed an infrastructure facility as per Section 80IA, referencing previous judgments such as Menzies Aviation Bobba (Bangalore) Pvt. Ltd. and Celebi Delhi Cargo Terminal. It was determined that the functionality of an airport includes all activities incidental or supplemental to the transportation of passengers or cargo, thus encompassing ground and cargo handling services.

The Tribunal also noted that the assessee's incorporation was approved by the Government of India, evidenced by a letter from the Ministry of Aviation and the Cabinet's approval. The agreement with BIAL, which had the authority from the Government of India, was deemed sufficient for the purposes of Section 80IA. The Tribunal rejected the AO's argument that the assessee was merely a reconstitution of the previous joint venture and upheld the CIT(A)'s decision that the assessee met all conditions for the deduction under Section 80IA.

Issue 2: Disallowance under Section 40(a)(ia)

The AO disallowed Rs. 3.82 crores under Section 40(a)(ia) for non-deduction of tax at source on a provision made for concession fees. The assessee argued that the provision was based on best estimates and reversed when actual bills were received, at which point TDS was deducted. The CIT(A) deleted the disallowance, and the Revenue appealed.

The Tribunal agreed with the CIT(A), noting that the provision did not create a debt in favor of BIAL as the concession fee was uncertain and more akin to a royalty. The Tribunal referenced the CBDT circular no. 37/2016, which allows for deductions on enhanced business profits due to specific disallowances, making the issue academic. Additionally, the Tribunal cited the Karnataka High Court's decision in Toyota Kirloskar Motor (P.) Ltd., supporting the view that no tax is levied on income that does not result.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to allow the deduction under Section 80IA and delete the disallowance under Section 40(a)(ia). The order was pronounced in open court on 01.11.2023.