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TMI Blog2011 (9) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... complexes at the airports, and depreciation on its terminal and ancillary building at the airport, stating it to be a plant is revived. Decided in favor of assessee. - ITA NOS.1572 to 1577 (DELHI) of 2011 - - - Dated:- 9-9-2011 - SHRI G.E. VEERABHADRAPPA, AND SHRI A.D. JAIN, JJ. Represented by: Shri Ved Jain, Mrs. Rano Jain and Shri V. Mohan for the Appellant. Mrs. Geetmala Mohnani for the Respondent. ORDER A.D. Jain, Judicial Member - These are six appeals filed by the assessee for AYs 1995-96 and 1997-98 to 2001-02 against the orders passed under Section 263 of the Income-tax Act, 1961 ('the Act', for short), by the CIT-I, Delhi. 2. In ITA Nos.1574/Del/2001 to 1577/Del/2001, i.e., for AYs 1998-99 to 2001-02, two common issues are involved. These issues are exemption under Section 10(29) of the Act and depreciation on terminal building of the assessee Airport Authority of India. In ITA No.1573/Del/2001, for AY 1997-98, the sole issue is that of exemption under Section 10(29) of the Act and in ITA No.1572/Del/2001, for AY 1995-96, the only grievance is against non-grant of depreciation on terminal building. The facts, for convenience, are being taken fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and circumstances of the case, the learned CIT has erred in ignoring the contention of the appellant that the proceeding under Section 263 cannot be used for substituting opinion of the AO by that of the CIT. 9. On the facts and circumstances of the case, the learned CIT has erred, both on facts and in law, in invoking revisionary power under Section 263 of the Act despite the fact that even after thorough examination, no specific findings have been given on the issue of how the order is erroneous and prejudicial to the interest of Revenue. 10. On the facts and circumstances of the case, the learned CIT has erred both on facts and in law, in directing the AO to pass a fresh assessment order. 11. That the appellant craves leave to add, amend or alter any of the grounds of appeal." 4. Ground Nos.1 to 4 relate to the issue of exemption under Section 10(29) of the Act. The facts are as follows: 5. In the original assessment proceedings, the assessee Authority has all along been claiming exemption under Section 10(29) of the IT Act with regard to its income from letting out of warehouses. However, the claim of the assessee under Section 10(29) of the Act was being disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t efficiently and could not be considered for the purposes of marketing of commodities as stipulated under the Warehouses Corporations Act, 1962, for the Gujarat Warehousing Corporation; that the intent of the legislature for including the income of warehousing under Section 10, i.e., as an exempt income was primarily to give impetus to small farmers to store their perishable commodities in warehouses constructed specifically for this purpose by the Authority constituted by the Government or by specific notification; that in 'Singhal Bros.(P.) Ltd. v. CIT [1980] 124 ITR 147 (Cal.), the Hon'ble Calcutta High Court had expressed its dissent with the too broad propositions laid down by the Hon'ble Allahabad High Court in U.P. State Warehousing Corporation v. ITO [1974] 94 ITR 129 (All.), to the effect that if an entity is created by a Statute, primarily or specifically for the purpose of marketing of commodities, it will be an Authority within the meaning of these provisions; that in the assessee's case, as was evident from the Preamble of the International Airport Authority Act, 1971, warehousing activity was only a subsidiary activity of the assessee; that the intent of the legislat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the CIT(A) had used the terms "warehouses" and "cargo complexes" interchangeably; that this cannot be the case under the Act of 1994, as warehouses and cargo complexes have been differentiated by the said Act itself; and that it was, therefore, necessary that the AO got an opportunity to re-examine the matter applying the appropriate law and to see whether the assessee was running or establishing "warehouses" or "cargo complexes". 12. Upon remand by the Tribunal by virtue of its order dated 27.7.2007, the AO, vide order dated 27.3.2009, passed under Sections 254/143(3) of the Act, allowed exemption u/s 10(29) of the Act to the assessee, accepting the assessee's contentions that for claiming exemption u/s 10(29) of the Act, (a) the Authority must be an Authority constituted under some law, (b) it should be an authority constituted for marketing of commodities and (c) the exemptible income must be derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of the commodities; that the assessee did fulfil all these conditions u/s 10(29) of the Act; that the assessee was an Authority constituted under the Airports Authority of India Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning or establishing of warehouses or cargo complexes by the assessee Authority and because of the AO not having determined the nature of the assessee's cargo income, the assessment order was erroneous; and that the AO's action of not having followed the directions issued by the Tribunal resulted in the assessment order to be erroneous insofar as it was prejudicial to the interests of the Revenue. 14. It is in this factual backdrop that the assessee is in appeal before us regarding the issue of grant of exemption u/s 10(29) of the Act. 15. Before us, challenging the impugned order, the learned Counsel for the assessee has contended that the order passed by the learned CIT is not sustainable in the eye of the law, since the order passed by the AO is neither erroneous, nor prejudicial to the interests of the Revenue; that the provisions of Section 10(29) of the Act provide for exemption to an Authority which has been constituted under the law, for marketing of commodities, with regard to its income from letting out of warehouses for storage and processing of commodities; that the assessee Authority, as correctly appreciated by the AO, totally fulfils all the said requisite condit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rports Authority of India Act, 1971, the Government of India decided that the work of warehousing at airports should be assigned to the International Airports Authority of India, that the National Airports Authority of India took over the function of the Central Warehousing Corporation at various airports, on 31.3.1987, consequent to a decision of the Central Cabinet in this regard, that on 31.3.1987, all the warehouses of the Central Warehousing Corporation at the airports were transferred to the International Airports Authority of India, that by virtue of the passing of the Airports Authority of India Act, 1994, the National Airports Authority of India and the International Airports Authority of India were merged into one Authority, i.e., the assessee Airports Authority of India, that from then onwards, it is the assessee Authority, which has solely been carrying on the functions of warehousing at the airports in India, that before their merger, both, the National Airports Authority as well as the International Airports Authority had been getting exemption under Section 10(29) of the Act with regard to the income earned from letting out of warehouses, that in CIT v. Central Wareh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that as per the provisions of Section 12(3)(g) of the 1994 Act, one of the functions of the assessee Authority is to establish "warehouse and cargo complex" at the airports, for the storage or processing of goods; that in sub-para 2(i) of the reply, the assessee clarified that the Airports Authority of India plays a vital role in facilitating the transportation of imports and exports of various commodities through its airports, and the airport warehouses provide facilities to various exporters, importers and national and international air transport carriers to store, process and transport goods and commodities over the whole world, belonging to various exporters and importers; that it was further clarified that the assessee had established warehouses and storage facilities in the international air cargo complexes at various airports and that the assessee earns revenue from the letting of such warehouses; that in sub-para 3(i), it was stated that warehousing or storage is an essential step in the whole process of marketing; that the AO duly considered all the evidence filed before him by the assessee; that the AO, in the assessment order, made mention of the reply filed by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt warehouses, etc.; that the AO had duly examined the provisions of Section 12(3)(g) of the Airports Authority of India Act, 1994, besides having examined, also, the entire assessment record of the assessee, right from the very beginning; that the assessee had been all through taking the stand that it had taken over the functioning of the Central Warehousing Corporation in terms of the decision of the Central Cabinet, as recorded in the Minutes of its Meeting dated 25.5.1982 and hence, the decision in the case of "Central Warehousing Corporation" (supra), rendered by the Hon'ble Jurisdictional High Court, was squarely applicable to the facts of the assessee's case, there having come about no change in the nature of the activities of the assessee, with regard to which, the exemption u/s 10(29) of the Act was being claimed; that therefore, it could not at all be said that the AO had not examined the issue and had not followed the directions of the Tribunal completely; that in the impugned order, however, the learned CIT has erred in holding that the AO's order was erroneous insofar as it was prejudicial to the interests of the Revenue since the directions of the Tribunal had not bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to allow to the assessee, exemption u/s 10(29) of the Act, merely on the basis of the power given to the assessee u/s 12(3)(g) of the Airports Authority of India Act, 1994, for establishment of warehouses and cargo complexes; that the assessment order, in its entirety, is bereft of any findings whatsoever as to whether the assessee was running or establishing "warehouses" or "cargo complexes"; that from the directions issued by the Tribunal, it is amply clear that the job of the AO, on remand, was to specifically determine as to whether the assessee Authority was actually running warehouses or cargo complexes, or both; that however, the AO utterly failed to take any action in this regard; that further, the AO also did not consider the documents, including the Minutes of the Meeting of the Central Cabinet, held on 25.5.1982, where, consequent to the establishment of the assessee Authority, the warehouses for storage or processing of goods at the international airports were assigned to it; that therefore, the assessment order was passed in complete oblivion of all these material facts, which were wholly necessary to be determined so as to arrive at a conclusion as to whether the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... storage or processing of goods at the international airports were assigned to the Authority. In absence of any determination qua running or establishing warehouses or cargo complexes and in absence of determination of the nature of cargo income the order is erroneous in nature. The order has not followed the directions of the ITAT, and is thus erroneous. As the directions were not followed this resulted into in wrong granting of exemption. On this issue, to this extent, order dated 27.03.2009 passed u/s 254/143(3) is erroneous insofar as it is prejudicial to the interest of the revenue." 18. Going by the above observations of the learned CIT, the first point to be considered is as to whether indeed the AO, while passing the assessment order, has not re-examined the matter as per the directions of the Tribunal and as to whether the exemption claimed u/s 10(29) of the Act has been granted solely on the basis of the power given to the assessee Authority u/s 12(3)(g) of the Airports Authority of India Act, 1994, to establish warehouses and cargo complexes. 19. At this stage, it would be appropriate to reproduce hereunder, the directions issued by the Tribunal in its order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ternational Airport Authority Act, 1971, it is one of the activities of the authority to establish warehouses at the airport for storage and processing of goods. It was further submitted by the assessee that the airport plays a vital role in facilitating transportation, imports and exports of various commodities. The airport warehouses provide the facility to various exporters, importers, national and international air transport carriers to store, process and transport their goods and commodities. The assessee had established air cargo complexes at various airports and earned revenue from the letting out of such warehouses for storage and processing of cargo. 3. Learned Assessing Officer rejected the claim of the assessee observing that there is no change in the facts and legal provisions and in the submissions made by the assessee with regard to its claim. Learned Assessing Officer also placed reliance on the decisions of the Apex Court in the case of Rajasthan Warehousing Corporation v. CIT (150 Taxmann 104). While rejecting the claim, the Assessing Officer observed that the airport authority is not an authority constituted for marketing of commodities. He referred to the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is entitled to exemption on the net cargo income, except the income in the form of terminal charges, pallitisation charges, destuffing charges, trans-shipment charges, handling charges and misc. charges. (iii) For the assessment year 1998-99, the CIT(Appeals) decided that the appellant is not entitled to exemption u/s 10(29) as it is not an authority constituted primarily or specifically for the purpose of the marketing of commodities. The warehousing activity is only a subsidiary activity of the assessee. The assessee is not a marketing authority, constituted under a warehousing Act. The assessee has set up cargo warehouses which are meant only for personal assets of the passengers and others and are not meant for the purposes of marketing and processing of commodities. The warehouses are being used for facilitating the storage of goods and baggage only till such time these are bundled into the designated aircrafts. 5. With the above background, learned CIT(Appeals) also discussed the provisions of section 16 of the IAAI Act, 1971, the decision of the Hon'ble Gujarat High Court in the case of CIT v. Gujarat State Warehousing Corporation 124 ITR 282 and other cases r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed at the airports to cater to the needs of a specified category of clients and not used for general warehousing purposes. While reiterating the arguments advanced by the Assessing Officer in disallowing exemption to the assessee, learned Departmental Representative strongly relied on the decision of the Gujarat High Court in the case of CIT (Appeals) v. Central Warehousing Corporation 124 ITR 282 and submitted that airport authority is not an authority which has been constituted for the purpose of marketing of commodities and therefore, it is not entitled to exemption u/s 10(29) of the IT Act. Relying on the aforesaid decision, it was argued by learned DR that the compelling context in section 10(29) is a limited context of the Statutory authority which is constituted under law in a limited sphere viz., for marketing. If the authority so constituted has its jurisdiction and functions charged upon it by the law creating it in this limited sphere, the authority so far as such limited sphere is concerned, would be the authority functioning within that mandated area laid down by law. Marketing includes all business activities directed towards the flow of goods and services from produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continue with the present warehousing work. According to the learned counsel for the assessee, the International Airports Authority took over complete warehousing work from the Central Warehousing Corporation on 31-03-1987 and all its warehouses were transferred to the International Airports Authority of India on that date. The various issues regarding payment of cost of warehouses etc., were discussed in the meeting and there was a mandate to the effect that the International Airports Authority of India, is an authority, constituted for the purposes of establishing warehouses and cargo complexes at the airports for the storage and processing of goods at the designated airports which were in the jurisdiction of International Airports Authority of India. Therefore, the assessee's case is covered for exemption u/s 10(29) of the Act. Learned counsel for the assessee relied on the decision of the jurisdictional High Court in the case of CIT v. Central Warehousing Corporation 156 ITR 407. It was further submitted by him that the decision was impliedly confirmed by the Apex Court in the case of Union of India v. U.P. State Warehousing Corporation 187 ITR 54. Learned counsel for the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aled. The case was therefore, fixed for clarification on 03-11-2006. Learned counsel for the assessee submitted before us that since the provisions of section 12 of the AAI Act, 1994, which defines the functions of the authority are identical to the provisions of section 16 of the IAAI Act, 1971, the Tribunal can decide the legal issue with reference to the provisions of AAI Act, 1994 and there is no necessity to remand the matter back to the Assessing Officer for examining the issue afresh with reference to the provisions of AAI Act, 1994. 9. Learned Departmental Representative on the other hand, submitted that there appears to be a variation in the functions of the authority, as prescribed under the IAAI Act, 1971 and as prescribed under the AAI Act, 1994. Under Section 16(3)(d) of the IAAI Act, 1971 the authority was empowered to establish "warehouses" at the airports for the storage and processing of goods. However, under section 12(3)(g), of the AAI Act, 1994 the authority is empowered to establish "warehouses and cargo complexes" at the airports for the storage and processing of goods". Learned DR submitted that exemption u/s 10(29) is available only in respect of warehouse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l order for AY 2000-01. 22. It is now to be seen as to whether the assessment order meets the following four points raised by the learned CIT while exercising jurisdiction under Section 263 of the Act:- (i) No re-examination as per the Tribunal's directions; (ii) Allowing of exemption u/s 10(29) of the Act merely on the basis of the power given u/s 12(3)(g) of the Airports Authority of India Act, 1994; (iii) No clear finding regarding the assessee actually running or establishing warehouses or, cargo complexes; and (iv) Non-consideration of Minutes of the Meeting of the Central Cabinet, held on 25.5.1982. 23. So far as regards the question of the AO having allegedly not re-examined the matter on the lines prescribed by the Tribunal, it is available from the assessment order that a notice u/s 143(2) of the Act was issued to the assessee, in response to which, the Authorised Representative of the assessee appeared before the AO from time to time and that the case was discussed with him (assessment order page 2). Further, the AO notes at page 3 of the assessment order that the assessee had filed letter dated 30.12.2008 on the issue of exemption u/s 10(29) of the Act. The c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arketing. It enhances the utility of the commodities in question by making them more valuable. Therefore, it has a direct impact on the trading activities by enhancing their value. The same is true of the other activities of processing of the commodities and facilitating the distribution by transport to and preservation from ravages by natural causes. (iv) In view of above, the assessee cannot be said to be not satisfying the second test of being an Authority constituted for facilitating in the marketing of commodities particularly in view of the fact that it had been constituted to play a major role in storage, processing and transportation of export/import cargo. (c) Reg:- Third condition that the exemptible income must be one derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities. There is no controversy as regards the third ingredient because the assessee is claiming exemption only in respect of that part of income which has been earned in respect of letting of godowns and warehouses for storage, processing or facilitating the marketing of commodities the reference to which income has also been made in the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessing or facilitating the marketing of commodities by an Authority constituted under any law for the marketing of commodities; (b) (i) Section 10(29) of the Act has been reproduced by the assessee in paragraph (3.2.1) of its reply. (c) That the assessee Authority is constituted under the Airports Authority of India Act, 1994; (c) (i) This has been stated by the assessee in paragraph (3.2.3) of the reply. (d) That the assessee Authority has, as one of its functions, the function of establishing warehouses and cargo complexes at the airports for storage or processing of goods; (d) (i) Paragraph (3.2.3)(b)(i) of the assessee's reply states so (e) That the assessee Authority facilitates the transportation of imports and exports of various commodities through the airports by providing facilities to exporters, importers and national and international air transport carriers to store, process and transport goods and commodities throughout the world, for which purpose, the assessee has established warehouses and storage facilities in the international air cargo complexes at the airports and it earns revenue from the letting out of such warehouses; (e) (i) Paragraph (3.2.3)(b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... needs to be founded on objective material. In the present case, there is no such objective material available to the learned CIT to hold that the assessment order is prejudicial to the interests of the Revenue. 32. In Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC), it has been held, inter alia, that the phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the AO; that every loss of revenue as a consequence of an order of the AO cannot be treated to be prejudicial to the interests of the Revenue; and that where the AO has adopted one of the courses permissible in law and which has resulted in loss of revenue, the assessment order cannot be called prejudicial to the interest of the Revenue, unless the AO's view is unsustainable in law. In the present case, it cannot be said, nor has it been shown before us to the contrary, that the AO's order contains a view which is unsustainable in law. It cannot be gainsaid, as per Malabar Industrial Co. Ltd. (supra), that the jurisdiction u/s 263 of the Act cannot be invoked to go into the process of assessment again, merely to find something more. 33. In CIT v. Green ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can regard an assessment order as erroneous on the ground that in the circumstances of the case, the AO should have made enquiries before accepting the statement made by the assessee in his return. In that case, there was a specific finding recorded that the assessee did not meet the conditions of Section 40A(7)(b) of the Act, so as to claim exemption in the form of provision for gratuity. There was nothing, as recorded as a fact, placed on record to demonstrate the nature of the liability, much less to show that the liability was an ascertained one. It was in these facts, that the Commissioner's order was upheld, it being a case of no enquiry by the AO. These, again, are not the facts before us. Here, the assessee has duly placed all the facts and material on record, it was on consideration of which only that the AO passed the assessment order allowing the assessee's claim. On the other hand, nothing has been brought before us to show as to how the claim of the assessee is not sustainable. Moreover, pertinently, this is not a case of an assessment order bring passed in a scrutiny regular assessment. Rather, the order was passed under Section 254 of the Act, under the specific dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Authority may - (g) establish warehouses and cargo complexes at the airports for the storage or processing of goods;" 40. The objection of the learned CIT has been that the AO did not examine, as per the directions of the Tribunal, as to whether the assessee had actually established warehouses or cargo complexes in keeping with the provisions of Section 12(3)(g) of the Airports Authority of India Act, 1994 and that he had granted the exemption u/s 10(29) of the Act merely on the basis of the power given u/s 12(3)(g) of the Airports Authority of India Act, 1994. 41. The undisputed facts in this regard are that the assessee has shown income from warehouses separately, as noted by the AO in the original assessment proceedings. Then, it was specifically stated before the AO, as has also remained the consistent stand of the assessee for all these years, that the function of warehousing at the airports was initially being carried out by the Central Warehousing Corporation, which Authority had established warehouses at the airports. On their coming into existence, the State Warehouses Corporations took over the warehouses. These warehouses were taken over by the International A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecretary, Tourism Civil Aviation suggested that CWC may extend/expand its activities at the Airport at Bangalore, Hyderabad, Gauhati, Trivandrum etc., other which were not covered by the charter of IAAI or any other public sector corporation. It was agreed that department of food would with the advice of the department of Commerce take necessary early steps to extend coverage by the CWC to airports presently not serviced for cargo handling work." 42. The fact that the warehouses at the airports were indeed transferred to the International Airports Authority of India stands established from the copies of the letters dated 25.11.1993 (APB 377) and letter dated 10.1.1992 (APB 378 to 379), from the Central Warehousing Corporation to the International Airports Authority of India. Reference may here be made to the contents of these letters:- "Shri Sudhir Kumar, Executive Director (Commercial), International Airport Authority of India, Cargo Terminal, I.G. International Airport, New Delhi - 110 037. Sub : Vacation of IAAI premises by CWC and settlement of dues of the CWC - Regarding. Sir, Your attention is invited to the correspondence resting with this Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racted correspondence, the issues involved have not been settled. 2. The main issues pending settlement between CWC and IAAI are indicated hereunder for ready reference. (i) Fixed Assets lying at CW, IAC Palam aggregating to Rs. 1,00,816,119/- were transferred to IAAI against which an ad hoc payment of Rs. 88,65,000/- was received by CWC leaving a balance of Rs. 12,21,119/-. (ii) Warehousing charges accrued on consignments transferred to IAAI works out to Rs. 3,91,30,128/-. The IAAI has remitted only Rs. 7,50,000/- against this, though the IAAI must have collected full amount from the users. (iii) Various expenses incurred on behalf of IAAI such as medial reimbursement, conveyance, newspaper and periodicals, printing and stationery, entertainment charges, telephone, water and electricity, liveries postage and telegram etc. work out to Rs. 99,874/- upto 30.9.91. The reimbursement of this expenditure is yet to be made by the IAAI. (iv) The Pay and Allowance in respect of three employees who have been posted at CW, IAC Palam from 1.4.88 and the total payment made to these employees works out to Rs. 4,70,784/- upto 30.9.91. Against this expenditure IAAI has released a sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Airports Authority ACT, 1971 National Airports Authority u/s 12(3)(g) of the National Airports Authority Act, 1985. Airport Authority of India (the assessee Authority) u/s 12(3)(g) of the Airports Authority of India Act, 1994 46. In these facts, as brought before the AO by the assessee, it stands undisputedly established that the assessee is running "warehouses" or "cargo complexes" at the airports. 47. Thus, the learned CIT has gone wrong in observing that the AO granted the exemption u/s 10(29) of the Act merely on the basis of the power given to the assessee Authority u/s 12(3)(g) of the Airports Authority of India Act, 1994, to establish warehouses and cargo complexes. The assessee Authority, as above, stands proved to be actually running the warehouses and cargo complexes at the airports. 48. The contentions of the assessee having been accepted by the AO in the light of the material brought before him, the AO rightly granted the exemption to the assessee u/s 10(29) of the Act. In view of the preceding discussion, it cannot be said that the AO was oblivious of the fact that the assessee was indeed actually running warehou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of the assessee could be accepted only if it were shown on record that the test of functionality was applicable to the terminal building; that the facts had not been properly brought on record and examined by the Authorities below with reference to the nature of the construction and functions of the building; that it had also not been stated as to what really constituted the terminal building, namely, whether the escalators and conveyor belts, etc. had been shown as part of the building, or separately as machinery or building; and that the matter, therefore, needed to be restored to the file of the AO to examine the issue of the assessee's various assets, called terminal building, i.e., as to whether as a whole they were plant and building, by applying the functionality test, i.e., whether these buildings were housing passengers in transit and other assets, or tools of the trade, or some assets were 'buildings', or some were 'plant'. The assessee was directed to furnish a detailed list of various assets claimed to be plant and their functions, so that an informed decision could be taken in the matter. 56. In the order dated 27.3.2009, giving effect to the Tribunal's order, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only relied on the same report as had been submitted before the CIT(A); that the CIT(A), on considering the said report, had upheld the observation of the AO that the terminal building of the assessee, for the purpose of depreciation, should be treated as a "building" and not as a "plant"; that by relying on the same report in the second round, the AO arrived at a conclusion different from that of the CIT(A) and that too, without passing a reasoned or speaking order, as directed by the Tribunal; that the AO had not passed an order detailing the list of various assets claimed by the assessee as "plant" and their functions; that there was no such list on the record; that the directions of the Tribunal had not been complied with and no reasoned speaking order had been passed; that in the case of the assessee, on a similar issue, the CBDT had issued order F.No.202/31/83/ITA II dated 15.2.1984, as per which, the International Airports Authority of India was a Government of India undertaking and was being assessed to income tax by the IAC (Assessment), Range-V, the assessee approached the CBDT stating that the terminal buildings situated at the international airports should be treated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us assets installed in the terminal building may be examined and the test of functionality be applied while examining the nature of construction and functions of the terminal building, apart from following the other directions of the Tribunal in letter and spirit and to pass a reasoned and speaking order on the issue. 58. Challenging the aforesaid observations of the learned CIT on the issue of grant of depreciation on terminal building, the learned counsel for the assessee has contended that consequent to the directions of the Tribunal, the AO had called for a reply from the assessee Authority; that the assessee had duly complied with this requirement and a reply was filed, as also noted in the assessment order itself; that the AO had also observed that the assessee had placed before him a copy of the CIT(A)'s order, of which, the technical report formed a part; that the AO observed that the assessee had stated before him that this report had, however, not been brought to the notice of the Tribunal; that he (the AO), had examined the contention of the assessee that the terminal building of the assessee was a tool of business; that it was in this regard that the technical report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pirit; that it is wrong to state that the assessee had not furnished a detailed list of various assets claimed to be 'plant' and their functions, since it was a matter of record that alongwith its return of income, the assessee had submitted a detailed chart claiming depreciation; that the said chart was before the AO at the time of passing of the assessment order, giving effect to the orders of the Tribunal; that the said chart contains a detailed list of the various assets claimed by the assessee to be 'plant'; that the functions of these assets were elaborately explained by the assessee by way of the technical report, i.e., "Special Technical Features of Airport Terminal Building" (copy at APB 368 to 372); that the first part thereof contains a description of the functions of the terminal building; that the second part of the said report comprises of a detailed list of the items included in the terminal building and an explanation as to how they specifically function as a 'plant'; that the assessment order had its basis in this technical report also; that in the order under appeal, the learned CIT has not pointed out any defect in the said report; that still, the learned CIT has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the power u/s 263 of the Act; and that in this view of the matter, the CIT's order on the issue at hand is also not sustainable in law and the same be cancelled, reviving the assessment order, by allowing the assessee's appeal in this regard too. 60. The learned DR, per contra, has strongly relied on the order under appeal on the issue at hand. It has been contended that there is nothing wrong with the CIT's order on this issue; that the directions issued by the Tribunal to the AO were specific; that as per these directions, the AO was to examine the various aspects of the assessee's assets constituting the terminal building at the airport; that the AO was to determine as to whether these assets, as a whole, were 'plant' or 'building'; that while doing so, the functionality test was to be applied and it was to be seen as to whether the assets were for housing the passengers in transit, or tools of the trade, or whether some assets were 'building' and some were 'plant'; that the assessee had been directed by the Tribunal to furnish a detailed list of the various assets, to facilitate the passing of an informed order; that however, as is evident from a bare perusal of the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... APB 162) of its order, the Tribunal has observed that "No technical report has been placed on record to describe the building, its specification or (sic-whether) it is specifically designed.". The learned DR has sought to place reliance like for the first issue, on 'Nalwa Investments Ltd.' (supra) and 'Rajalakshmi Mills Ltd. (supra), wherein, as per the Department, it has been held, inter alia, that the Commissioner, under Section 263 of the Act, can regard an assessment order as erroneous on the ground that in the circumstances of the case, the AO should have made further enquiries before accepting the statement of the assessee in his return. In this manner, the learned DR has sought the assessee's appeals on this issue to be dismissed. 61. We have heard the parties on this issue and have perused the material on record with regard thereto. It is seen that the matter was remitted by the ITAT to the file of the AO, to examine the various assets of the assessee at the airport, termed as 'terminal building', and to examine as to whether as a whole, they were plant or building, by applying the functionality test, by saying as to whether the assets were for housing the passengers in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... building for the passengers was incidental, which could not be a ground for disallowing a part of the depreciation on the terminal building. These facts are patent on record. In the light thereof, it cannot be said that the AO had not applied his mind to all the issues raised before him or that no finding had been recorded by the AO in this regard. 66. The next objection of the CIT(A) was that the CBDT order/circular dated 15.2.1984 had not been considered by the AO. In this regard, the assessee maintained that the AO had examined the same; that rather, for AY 1994-95, the assessee's claim of terminal building as plant had been allowed by the AO after specifically referring to the said order/circular. This, again, remains undenied. In the assessment order for AY 1994-95, the said CBDT circular/order had been duly considered while granting the claim of the assessee. 67. Moreover, it remains undisputed that alongwith its return of income, the assessee had filed a detailed chart for claiming depreciation. This chart gave a detailed list of the various assets claimed to be 'plant'. This chart was also before the AO. So far as regards the functions of the assets claimed to be 'plant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. In terminal building, the spans are kept larger so as to have maximum column free space and as a result of this stipulation, the slab thickness and beam dimensions get increased tremendously. Columns are also to be provided with larger size and heavy reinforcement. In ordinary buildings, the beam span is normally 3 to 5 metre whereas in Airport Terminal Building it varies from 10 to 30 metre. As the Terminal Building is supposed to cater for longer life, adequate provision for resistance to corrosion are made. In addition, the Terminal Building is designed for maximum wind velocity in the Zone and also designed to cater for earthquake criteria. The importance factor of 1.5 is taken while designing the Terminal Building as against 1.0 used for ordinary buildings. 4. To control the movement of aircrafts on ground as well as in the sky, certain hi-tech equipments are required. These equipments include sophisticated radars, computers and other sensors/electronics gadgets. Some of these gadgets are required to be placed at certain height which is essential for their functioning for which high rise control towers are required to be constructed. The other gadgets are housed in lower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o an ordinary buildings: (i) Elevators : Shafts of big size for high capacity elevators have to be provided in the Terminal Building. Provision for machine room to cater for motors, chains for raising and lowering of the elevator cage and the shaft is made while planning the Terminal Building. While designing attention is paid to ensure the safety and comforts of passengers/visitors who use the elevators. (ii) Escalators : The Terminal Building is also designed structurally to withstand loads of escalators weighing approx. 7.5 tonnes and as this equipment is generally taken to the building after its completion in almost all respects and accordingly the portions in which escalators are taken, the windows/doors are dismantled and redone after the escalator has been taken to required locations. The Structure which supports the escalators has to be designed for heavier loads . (illegible). (iii) Baggage Conveyor Belts : Baggage Conveyor Belts start from check-in counters and run through (illegible) baggage (illegible). These belts carry heavy load of baggage and the belts roll over rollers supported on a specially designed structure. As the departure lounge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than ..(illegible). (vi) Passengers screening Systems : Heavy duty X-ray machines and Passengers Screening Systems are installed in the Terminal Building at many locations in departure as well as arrival area. Additional load of these systems (illegible) is also considered while designing various floors of the Terminal Building. The locations for these systems cannot be fixed for all the times and depending upon the necessity and convenience of the user agencies and passengers, the location may change from time to time. Therefore, additional load has to be considered for larger areas and not limited to the area where the system was originally proposed to be installed. Provision for cables and other support facilities for these installations has also to be planned and made at various strategic locations. (vii) Air conditioning Cable Ducts : Air-conditioning and cable ducts also run between the roof slab and false ceiling. These ducts are also suspended from the building's ceiling. In ordinary buildings, these ducts normally run along walls but in Airport Terminal Buildings, because of very large open spaces between walls, it is not possible to run the ducts alon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details about all the assets of the assessee at the airport, like elevators, escalators, baggage conveyer belts, check-in counters, fire alarm firefighting systems, passengers screening system, air-conditioning cable ducts, aerobridge shaft and rotunda, false ceiling and flooring, etc. It gives the specifications and the usage thereof. It cannot, therefore, in any manner be said to be merely a technical report, as tried to be made out on behalf of the Department. It is an elaborate report, containing all the requisite details which were duly taken into consideration by the AO while passing the assessment order. It has not been shown otherwise. These details include the list of the various assets and the functions of each and every asset. 70. Besides, undisputedly, the chart for claiming depreciation, filed alongwith the return of income, contains the detailed list of the assessee's various assets claimed to be 'plant'. These documents alongwith other material referred to hereinabove, were before the AO and the assessee offered a detailed explanation. 71. No defect in the technical report has been pointed out by the learned CIT. It is just that he had required another repor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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