2024 (4) TMI 495 - AT - Income Tax

Deduction u/s 80IA - handling and cargo handling services provided by the assessee - claim denied as assessee was incorporated in the manner that it is only an reorganized business set up and assessee company has not entered into direct agreement with the Government of India - HELD THAT - Perusal of the order of the Tribunal in assessee s own case for the AY 2011-12 2023 (11) TMI 859 - ITAT DELHI issue decided in favour of assessee as held 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 Banglore Airport and the assessee is merely providing utility services beyond the scope of Airport for the purpose of Section 80-IA. Thus on the basis of aforesaid decision the Bench is inclined to hold that 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. Decided in favour of assessee. TDS u/s 194C on concession fee - Disallowance of provision for concession fee for the AY 2011-12 invoking the provisions of section 40(a)(ia) however during the assessment years under consideration i.e. 2012-13 2013-14 the same was disallowed as contingent liability not allowable as deduction - CIT(A) considering the submissions of the averments of the AO in the assessment order deleted the disallowance - HELD THAT - CIT(A) in the order stated that the facts are identical with those of the AY 2011-12 2023 (11) TMI 859 - ITAT DELHI and the Tribunal allowed the claim of the assessee wherein held 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. As 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 and if income does not result at all there cannot be a levy of tax even though a book entry is made. Decided against revenue.

Summary

Issues Involved:
1. Disallowance of deduction claimed u/s 80IA of the Income-tax Act, 1961.
2. Disallowance of provision for contingent liability.

Summary:

Issue 1: Disallowance of Deduction Claimed u/s 80IA

The Revenue challenged the CIT(A)'s direction to allow a deduction of Rs. 27,76,94,183/- claimed by the assessee u/s 80IA. The Revenue contended that the assessee, a joint venture between Air India Ltd. and SATS Ltd., Singapore, did not meet the criteria of being a company registered in India as required by Section 80IA(4)(i) of the Income-tax Act. Additionally, the Revenue argued that the assessee's activities of providing ground handling and cargo handling services at Indian Airports did not qualify as 'basic infrastructure facilities' under Section 80IA.

The Tribunal, referencing its earlier decision in the assessee's case for AY 2011-12, upheld the CIT(A)'s order. It noted that ground handling and cargo handling services are covered within the meaning of 'maintenance of Airport' under Section 80IA, as supported by the Karnataka High Court's judgment in Menzies Aviation Bobba (Bangalore) Pvt. Ltd. The Tribunal also rejected the Revenue's argument regarding the ownership structure, citing the Chennai Tribunal's decision in PSA Sical Terminals Ltd. vs. ACIT, which clarified that the shareholders of an Indian company need not be Indian companies. Further, the Tribunal affirmed that the assessee's formation was approved by the Government of India, fulfilling the requirement of an agreement with the Central Government.

The Tribunal concluded that the assessee's activities and formation met the conditions of Section 80IA, thus allowing the deduction.

Issue 2: Disallowance of Provision for Contingent Liability

The Revenue also contested the deletion of a disallowance of Rs. 3,48,08,595/- made by the AO on account of contingent liability. The AO had disallowed the provision for concession fees, arguing it was unascertained and thus contingent. The CIT(A) deleted the disallowance, noting that the assessee followed the mercantile system of accounting and created provisions based on estimated turnover, which were later adjusted upon receipt of actual invoices.

The Tribunal upheld the CIT(A)'s decision, referencing the Supreme Court's ruling in Bharat Earth Movers, which allows deductions for business liabilities that have arisen in the accounting year, even if quantification occurs later. The Tribunal also noted that similar provisions in subsequent years were accepted by the Department without disallowance, reinforcing the assessee's position.

Consequently, the Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's appeal on this ground.

Conclusion:

The appeals by the Revenue for both assessment years 2012-13 and 2013-14 were dismissed, affirming the CIT(A)'s orders in favor of the assessee.

Order pronounced in the open court on 09.04.2024.