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TMI Blog2017 (11) TMI 905X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciation on upfront fees of ₹ 150 Crores, without considering the fact that the assesses has not acquired any absolute rights over the Airport, so as to equate it with a license, but instead the AAI has granted the assessee the right to perform certain functions during the contract period of 30 years and hence, the assessee is entitled for deduction of only the proportionate amount i.e. 1130th of ₹ 150 Crores." 3) "On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in directing the Assessing Officer to treat the expenditure of ₹ 20,35,73,477/- incurred towards contribution to MMRDA for construction of Sahar Elevated Road from Western Express Highway, horticulture expenses and other civil works as revenue expenditure without appreciating that these expenses gives enduring benefit to the assessee and hence is capital expenditure. 4) "On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in directing the Assessing Officer to treat the expenditure of ₹ 20,35,73,477/- incurred towards contribution to MMRDA for construction of Sahar Elevated Road from Western Express Highway, horticulture expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irecting the Assessing Officer to treat the expenditure of ₹ 70,25,31,658/- incurred towards contribution to MMRDA for construction of Sahar Elevated Road from Western Express Highway, horticulture expenses and other civil works as revenue expenditure without appreciating that these expenses result in enduring benefit to the assessee and hence is capital expenditure. " 3 . "On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in directing the Assessing Officer to treat the expenditure of ₹ 70,25,31,658/- incurred towards contribution to MMRDA for construction of Sahar Elevated Road from Western Express Highway, horticulture expenses and other civil works as revenue expenditure ignoring the ratio of the decision of the Hon'ble Supreme Court in the case of CIT Vs. Mangayarkarasi Mills (315 ITR 114) wherein it was held that replacement expenditure is neither current repairs nor revenue in nature which is squarely applicable to the assessee's case." 4. "On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the disallowance of ₹ 12,31,76,051/- made by the Assessing Officer u/s 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceipt based on its application for acquisition of capital assets without appreciating the fact that application of receipts does not determine the nature and taxability of the receipts." 12. "On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in relying on the decision of the Hon'ble Supreme Court in the case of Consumer Online Foundation Vs Union of India & Others (2011 5 SCC 360) without appreciating that in that case the issue before the Hon'ble Apex Court was whether the assessee company, as a lessee of AAI, can collect development fee from the embarking passengers at the Chhatrapati Shivaji International Airport, Mumbai and the Apex Court did not give any finding regarding the nature of receipt in the hands of lessees of the Airports, including the assessee company." 13. "On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that once an amount is held to be in the nature of tax, it cannot be subjected to further tax without appreciating that such amount constitutes constructive receipt in the assessee's hands and hence liable to be taxed ." 4. For A.Y. 2011-12, the assessee has tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n law, the learned CIT(A) ought to have held that the Passenger Service Fee - Security Component [PSF (SC)] of ₹ 88,57,17,812/- is not the income of the appellant and he ought to have directed the assessing officer to exclude the same from the total income of the appellant." The amount of ₹ 88,57,17,812/- be read as ₹ 82,75,79,038/- for A.Y 2010-11 and ₹ 66,62,27,686/- for A.Y. 2011-12. 6. The learned AR before us vehemently contended that the additional ground taken by the assessee is legal ground and it goes to the root of the matter. It does not require any further investigation of the facts therefore, the same may be admitted. In this regard, reliance was placed on the decisions of Hon'ble Supreme Court in the case of National Thermal Power Corporation v. CIT [229 ITR 383 (SC)]; Jute Corporation of India vs. CIT [187 ITR 688(SC)] and that of the Full Bench order in the case of Ahmedabad Electricity Co. Ltd. vs. CIT [199 ITR 351(Bom) (FB)] 7. The learned DR, on the other hand, objected to the admission of the additional ground and contended that this issue has been decided in A.Y. 2008-09 against the assessee. In subsequent years i.e. A.Ys 2009-10 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee in accordance with the law. Therefore, the Appellate Tribunal being the appellate authority is bound to consider the proceedings before it and the matter on record, for determining the correct tax liability of the assessee. It is not disputed that the facts relating to passenger service fees security component are on record for each of the assessment years. Therefore, it cannot be said that this is a case where further facts have to be investigated. The only question raised by the assessee in its grounds of appeal is whether the impugned receipt is an income chargeable to tax or not. The learned DR, although vehemently contended that additional ground should not be admitted, has not given any justifiable reason for not admitting the same. It is a settled law that the additional ground if it is a legal ground can be taken for the first time before the appellate authority. Therefore, the submissions made by the learned DR that the assessee has not raised this issue before the Assessing Officer or the CIT(A) does not have any legs to stand. We, therefore, admit the additional ground taken by the assessee. 9. Assessee's appeals Now coming to ground no.1 for A.Y. 2009- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest debited in the Profit -& Loss Account - Nil (ii) B = Average of investments = [ 200.81 + 42.60 Cr. /2 ]= ₹ 121.70 Cr. (iii) C = Average of total assets appearing in the Balance Sheet on the first and last day of the previous year [1686.34 Cr. + 2705.70 Cr./2] = 2196.52 Cr. 10. After hearing both the parties and on perusal of record, we find that the Tribunal, on the same set of facts, in the assessee's own case for A.Y. 2008-09, vide its order dated 30.11.2016, in ITA No. 3232/Mum/2012 deleted the disallowance by holding as under: "12.4. We have gone through the facts and circumstances of the case, submissions made by both the parties as well as the judgements placed before us. We have noted at the outset that the assessee has mainly made investments in the mutual funds and total number of transactions done during the year was 19. In view of the same, assessee made voluntary disallowance of ₹ 1,62,500/-. In support of it, following working was submitted by the assessee before the lower authorities: 1 In case of investments done from Operations Surplus funds, interest cost is considered to be NIL. 2 Payroll costs are as follows: AVP Finance -5% o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en disputed by either of the parties. We, therefore, respectfully following the order of this Tribunal for A.Y. 2008-09 (supra), delete the disallowance made u/s 14A in each of the assessment years under consideration. This ground taken by the assessee is allowed. 11. Ground no.2 in A.Ys. 2009-10 and 2010-11 and ground no.1 in A.Y. 2011-12 are common and relates to disallowance of the provisions for leave encashment, which was made on the basis of actuarial valuation. We have heard the rival submissions and considered the same carefully along with the orders of the tax authorities below. We have also gone through the order of this Tribunal, dated 30.11.2016, in the assessee's own case for A.Y. 2008-09, in ITA No. 3232/Mum/2012. We noted that while dealing with identical issue the Tribunal has held as under: 13.1. The brief facts of the case are that in the assessment order, the AO made addition of the aforesaid amount on account of provision for leave encashment debited to the Profit & Loss Account on the ground that the decision of Calcutta High Court in the case of Excel Industries vs UOI 292 ITR 470 (Cal) has been stayed by the Hon'ble Supreme Court and, therefore, as on that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reed that this issue is arising in the case of the assessee in A.Ys 2007-08 and 2008-09 before this Tribunal and the facts involved in both years relating to this issue are the same. We have gone through the order of this Tribunal, dated 30.11.2016, in the assessee's own case for A.Y. 2008-09, in ITA No. 3232/Mum/2012, wherein it has been held as under: "15.5. We have gone through the orders passed by lower authorities. From the details brought before us, it is noticed by us that the assessee had incurred an aggregate amount of ₹ 17.52 crores on taxi ways, aprons and runways. It is noted that similar expenditure was incurred by the assessee in A.Y. 2007-08 and depreciation as applicable to plant & machinery was claimed but the same was denied by the AO as well as by the CIT(A). The matter reached upto the Tribunal and Tribunal, vide its order dated 14-03-3024 in ITA No.7111/Mum/2011 held as under:- "31. We observe that the assessee in the return filed has treated the asset as of part of building and claimed depreciation at the rate of 10%. AO has accepted the claim of assessee. However, while filing the appeal before the First Appellate Authority, the assessee contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed depreciation at the rate of 10% in the return as applicable to building. 35. We have carefully considered the orders of authorities below and submissions of ld. Representatives of the parties. There is no dispute to the facts that runway, taxiway are necessary part of Airport operation and are specific part of infrastructure for use of aircrafts. These are not merely concrete structures. The Hon'ble Bombay High Court in the case of CIT V/s Mazagaon Dock Ltd (1991) 191 ITR 460(Bom) has held that dry dock and wet dock created for ships are to be treated as plant and not building. The Hon'ble Apex Court has held in the case of Karnataka Power Corpn. (supra) that power generating station building is not a simply concrete structure but a specially designed building and is to be treated as part of plant. Similarly, the Hon'ble Apex Court has held in the case of Dr. B. Venkata Rao (supra) that the operation theatre in an hospital building is not simply a concrete structure but 30 necessarily a part for running of the hospital and the assessee is entitled to claim depreciation as applicable to plant and machinery. If we apply the above, decisions to the facts of the case before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decide the following three issues to decide this ground: (1) Whether, the amount of PSF-SC collected by the assessee will be taxable in the hands of the assessee merely because the same has been offered to tax by the assessee during the course of assessment proceedings irrespective of correct position of its taxability in accordance with law? (2) Whether, office memorandum / clarifications issued by the CBDT or MOCA observing that the aforesaid amount is taxable in the hands of the assessee have been issued after considering provisions of Income-tax Act and whether the opinion expressed therein is binding upon the appellate authorities including the Income-tax Appellate Tribunal? (3) Whether, the impugned amount of PSF-SC collected by the assessee company on behalf of MOCA as per the relevant regulations for the purposes of meeting security expenses can be characterised as income in the hands of the assessee company and made liable to tax in its hands as per provisions of Income Tax Act, 1961? 14.7. Having heard both the parties, we have pondered over all the three issues and few other allied issues which were germane to the issues before us and necessary for deciding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inally stated that the said amount may be included in its taxable income. The AO accordingly made addition in the income of the assessee. Being aggrieved, the assessee filed appeal before the Ld. CIT(A) wherein addition was confirmed. Still aggrieved, the assessee filed appeal before the Tribunal. During the course of hearing before us, the preliminary objection of the Ld. CIT-DR was that the assessee once having taken a stand during the course of assessment proceedings that the aforesaid amount was taxable, cannot now turn back and cannot claim it to be not taxable. On the other hand, the assessee's Counsel maintains that the said amount was not included as part of its income in the return filed originally and only during the course of assessment proceedings, because of the pressure made by the assessing officer by showing letters of CBDT and MOCA, the said amount was offered for tax. But the assessment should be done strictly in accordance with law and mere acquiescence of the assessee expressed during the course of assessment proceedings would not alter the true position of law and would not make the aforesaid amount as liable to be taxed in the hands of the assessee, if the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Keiser-EHind Mills Co. Ltd 128 ITR 486 (Guj.) in which their lordships have relied upon circular of the Board wherein a duty has been cast upon the Revenue officials to guide the assessee for making claims as permissible under the law. Relevant portion is reproduced below: "In view of the circular No. 14(XI-35) of 1955 dated 11-4- 1955, it was clear that for the purpose of the circular, what should be the guiding factor was whether the proceedings or other particulars before the Income-tax officer at the stage of original assessment disclosed any grounds for relief under section 2(5) (a) (iii ) of the Finance Act of 1964 or of the Finance Act of 1965, even though no claim was made for that relief by the assessee at the stage of those proceedings before him. Even if there is a deviation on a point of law, so far as the circular of the Board is concerned, that circular will be binding on all officers concerned with the execution of the Act and they must carry out their duties in the light of the circular. In view of this clear position regarding the effect of the circular, it was obvious that in the instant case it was incumbent on the Income-tax officer to advise the assessee to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e High Court that there is no estoppel against statute. Thus, if an assessee under misunderstanding, admission or miss-appreciation offered an amount to tax, then the same would not be taxable merely because of wrong understanding of law by the assessee or because of his admission or miss-appreciation of law and facts. It was also observed that there can also not be any waiver of legal right by the assessee. 14.17. Thus, in view of the aforesaid legal discussion and facts of this case as discussed above, it is held that the amount in question cannot be taxed in the hands of the assessee merely because the same was offered to tax during the course of assessment proceedings under certain circumstances. Under these circumstances, we need to examine and determine whether the impugned amount of PSFSC collected by the assessee company is actually taxable in the hands of the assessee as per the provisions of Income-tax Act, 1961. 14.18.The aforesaid discussion takes us to the second issue wherein we have been called upon to decide about the binding legal force of the opinion expressed by CBDT and MOCA vide their office memorandum/ instructions for determining taxability of the impug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clarified that the whole amount of PSF - SC including security component was revenue receipt, and thus it was taxable under the Income-tax Act. 14.19. The assessee challenged before us, the validity and binding force of the aforesaid Office Memorandum issued by the CBDT and clarification received by MOCA. It has been noted by us firstly that in none of these documents, there seems to have been made any application of mind by the concerned authorities while expressing their opinion. None of the authorities have considered the aspect that the impugned amount was collected in the fiduciary capacity by the assessee. None of the authorities have stated that under what provisions of law, the aforesaid amount can be brought to tax in the hands of the assessee. The CBDT in its Office Memorandum has made a reference to the judgment of the Hon'ble Supreme Court in the case of Chowringhee Sales Bureau (supra). But facts of that case have not been discussed. The aforesaid judgment has different facts, wherein, the amount of sales-tax was received by the said assessee and deposited in its bank account. The funds got mixed in assessee's accounts. Thus, in case of non payment by the said a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tc. but these are not binding upon the appellate authorities including Income Tax Appellate Tribunal. We have examined this aspect also carefully. It is noted that as per section 119 of the Act, the CBDT has been empowered by the legislature to issue orders, instructions or directions to all the Income-tax authorities working under it for proper administration of the I.T. Act. And it has also been provided that this shall be binding upon the Income-tax authorities. But it is further noted that a proviso has been added to sub section (1) of section 119 which says that no such orders, instructions or directions shall be issued:- (a) so as to require any income-tax authority to make a particular assessment or to dispose a particular case in a particular manner; or (b) so as to interfere with the discretion of the Commissioner (Appeals) in exercise of his appellate functions . It is clear from the perusal of aforesaid proviso that neither the Board has power to decide the taxability of a particular receipt nor has it got any power to interfere with the appellate functions of Commissioner (Appeals), which is judicial in nature. Thus, in view of the aforesaid legal scenario coupled wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the law and ensure enforcement of its provisions of issuing circulars. The Board has been given for the purpose of just, proper and efficient management of work of assessment. However, these are not meant for contradicting or nullifying any provision of the statute. Relying upon its earlier judgement comprising of three judges in the case of Keshavji Ravji & Co vs CIT 183 ITR 1 (SC), it was inter-alia observed that Board cannot pre-empt judicial interpretation and the scope and ambit of a provision of the Act. Also, a circular cannot impose on the taxpayer a burden higher than what the Act itself on a true interpretation, envisages. The task of interpretation of the law is exclusively the domain of the Courts. However, the Board has the statutory power u/s 119 to tone down the rigour of the law for the benefit of the assessee by issuing circulars to ensure proper administration of the fiscal statute and such circulars would be binding on the authorities enshrined in the Act. 14.24. Thus, taking guidance from the aforesaid legal discussion as has been clarified by the Hon'ble jurisdictional High Court as well as by Hon'ble Supreme Court, it is clear that the Office Memorandum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chhatrapati Shivaji International Airport, Mumbai. After meting out security deployment cost and various other related (allied) expenses, the net surplus worked out at ₹ 133,13,47,580 and after adjustment of depreciation as per Companies' Act and Incometax Act, it was computed at ₹ 132,58,59,023. During the course of assessment proceedings, the AO concluded that the aforesaid amount is part of taxable income of the assessee. The Ld. CIT(A) had confirmed the action of the AO. The assessee has contended before us that the aforesaid amount is not liable to be included in the income of the assessee. Detailed arguments made by the Ld. Counsel of theassessee have already been narrated by us in earlier part of our order and these are not being discussed here again for the sake of brevity. 14.27.We have gone through the assessment order as well as the order of Ld. CIT(A). Perusal of the orders of AO as well as Ld. CIT(A) reveals that none of the authorities have made independent application of mind to independently determine whether the impugned amount could have been characterised as income in the hands of the assessee. Relevant part of order of Ld. CIT(A) is reproduced he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is noted by us that Rule 88 of Aircraft Rule, 1937 provides as under: "88. Passenger Service Fee-The licensee is entitled to collect fees to be called as Passenger Service Fee from the embarking passengers at such rate as the Central Government may specify and is also liable to pay for security component to any security agency designated by the Central Government for providing the security service. Provided that in respect of a major airport such rate shall be as determined under clause (c) of sub-section (1) of section 13 of the Airports Economic Regulatory Authority of India Act, 2008" 14.30.In pursuance to the aforesaid rule, an order dated 09th May, 2006 was issued by concerned official of MOCA which reads as under:- " ORDER Subject: Collection of Passenger Service Fee (PSF) at Greenfield / Private airports - regarding Consequent to allowing private companies, Joint Venture. Companies to own and operate airports in the Country, the manner and mode of collection of Passenger Service Fee (PSF) at airports have been engaging the attention of the Government for some time. The matter has been deliberated with Airports Authority of India and other airport operators ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause (vi) is modified as under- Security Component of PSF, in short PSF (SC) is not a regular revenue income of an airport-operator. PSF (SC) collected at an airport-operator by a JVC or a private - operator will be utilized at airport concerned only to meet the security related expenses of that airport. However, 'AAI' will be considered as a single licensee in respect of its airports for this purpose with liberty to pool the PSF(SC) collections from such airports and use the same for meeting the security related expenses at any of its airport'. This issues with the approval of the Minister of State for Civil Aviation (Independent charge)." 14.32. Thus, aforesaid rules and orders issued by MOCA clearly stipulates that security component of passenger service fee was meant exclusively to be utilised at the airport concerned, only to meet security related expenses of that airport. The security agency designated in this regard was CISF. It is further noted that the funds so collected were to be deposited in an Escrow account which was subject to the government audit of CAG. Further, in case of any amount was left in the said account, it was to be mandatorily transferred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escrow account, is thus held in fiduciary capacity. 2.2. Since the amount is held by the airport operator in fiduciary capacity for the Government, the accounts thereof would have to be maintained separately in accordance with the procedure laid down by the Government and have to be offered for audit by the Comptroller & Auditory General of India (CAG). 3. Escrow Account Operating Procedure: 3.1 For PSF (SC) a separate Escrow Account shall be opened by JVC/Private operator, with a Schedule Nationalized Bank. 3.2 An Escrow Account agreement will be entered with the Escrow Banker by the JVC/Private Operator. 3.3 The format of Escrow Agreement will include details such as, definitions for establishment of Escrow Account and declaration of Trust, the Escrow Account provisions, term and Termination, Representations and Warranties of Escrow Bank and JVC/Private operator and Miscellaneous provisions. 3.4 Parties to the Escrow Agreement would consist of JVC/Private operator and Escrow Bank. However, the Escrow Account Agreement will have a clause by which the MOCA will have supervening power to direct the Escrow Bank on the issues regarding operation as well as withdrawal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le'. Few judgments have been relied upon before us in support of this argument, as mentioned above in the earlier part of our order. It has been vehemently argued by the Ld. Counsel of the assessee that the impugned amount could not have been brought to tax in view of diversion of income at the source. 14.36.Per contra, the stand of the Revenue has been that the amount has been disbursed on account of security arrangements, and therefore it amounts to 'application' of income and not 'diversion' of income. 14.37. We have carefully analysed legal intricacies and nuances involved here in this case. Law in this regard was clarified and Hon'ble Supreme Court way back in its landmark judgment in the case of CIT vs Sitaldas Tirathdas 41 ITR 367 (SC) which is still followed in many other judgments by various courts all over the country. The relevant part of the judgment laying down an acid test to decide such issues is reproduced hereunder: "In our opinion, the true test is whether the amount sought to be deducted, in truth, never reached the assessee as his income. Obligations, no doubt, there are in every case, but it is the nature of the obligation which is the decisive fact. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14.39. Turning back to the facts of the case before us, if we apply the aforesaid principles, we will find that the impugned amount cannot be treated as taxable income in the hands of the assessee. If we apply the first principle, we find that as soon as the amount was collected from the passengers @ ₹ 200/- per ticket, a portion of it, i.e. ₹ 130/- per ticket became payable to CISF and/or any other agency designated for the purposes of security at the airport. The same was liable to be deposited in a separate 'Escrow Account' and the assessee had no right, whatsoever, in the same account. The aforesaid amount was axed or sliced at its very source. The amount was permitted or directed to be collected from the passengers with this clear understanding and prior stipulation that 65% of the same is meant for security agencies. Thus, the assessee merely acted as a collection agent. Thus, applying the first principle, the impugned amount would fall in the category of diversion of income. 14.40. As far as the other three principles are concerned, the crux of these three principles is to find out whether the assessee had, in substance, earned any income. In other words, thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tank in accordance with the specifications given by the Central Government. If the assessee had failed to collect such amount as directed by the Molasses Control (Amendment) Order, the Central Government would construct a molasses storage tank and recoup the construction charges from the assessee. It was held that there was diversion of title at the source of the income collected under the directions given under the Molasses Control (Amendment) Order. The sum in question was held to be not includible in the assessee's total income. 14.43. Similar view was ultimately upheld by the Hon'ble Supreme Court in the case of CIT vs New Morrisson Sugar Mills Ltd 269 ITR 397 (SC) and CIT vs Ambur Cooperative Sugar Mills Ltd 269 ITR 398 (SC) wherein it was held that the amount set apart towards molasses reserve fund constituted diversion of income by overriding title, and therefore, it was held to be excludible from assessee's total income. Similarly, in the case of CIT vs Bijli Cotton Mills Pvt Ltd 116 ITR 60 (SC), the Hon'ble Supreme Court held that when right from the inception, amount of 'Dharmada' was collected and held by the assessee company under an obligation to spend for charitab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppropriated 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, then the same shall also be deposited by the assessee in the Escrow Account, as was fairly agreed by the Ld. Counsel during the course of hearing before us, failing which it would be treated as income of the assessee, to that extent only. We direct accordingly. This ground is allowed subject to directions given above." From the findings of the Tribunal, it is apparent that the said amount is not taxable in the hands of the assessee and, thereby directed the Assessing Officer to re-compute the income of the assessee while holding so this Tribunal also gave liberty to the Assessing Officer that no portion of amount collected by the assessee on account of PSF-SC is utilized by the assessee for its own purposes or for any purposes which are not permitted by MOCA/other competent authorities. In case any violation is done by the assessee in this regard, then the Assessing Officer 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 has observed as under: "We have carefully considered the orders of authorities below and the submission of ld. Representatives of the parties. We observe that the authorities below have considered the said expenditure as capital mainly for the reasons that the assessee itself has categorized that expenditure in its books of account as capital in nature. In determining whether the expenditure is a capital expenditure or revenue expenditure, one has to take into consideration the facts and nature of expenditure to decide whether it is made for the initiation of business or extension of business or substantially replacement of existing equipment and treatment given in books of accounts could not decide the nature of expenditure. The expenditure would be capital if the expenditure has been incurred to create new assets. However, it will be revenue in nature, if incurred merely in facilitating assessee's operation or enable assessee's business to be carried on effectively, while leaving capital untouched. The similar view is taken by the Hon'ble Apex Court in the case of CIT V/s Associated Cement Companies Ltd. (1988) 172 ITR 257 (SC). If the expenditure incurred does not bring into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee will not be entitled for depreciation thereon as it is held to be revenue in nature. Hence, Ground No.1of the appeal taken by assessee is allowed." Respectfully following the order of the Tribunal in the assessee's own case, we confirm the order of the CIT(A) deleting the disallowance. 18. Ground no.2 in A.Y. 2009-10 and Ground no.1 in A.Y. 2010-11 and 2011-12 relate to the same issue i.e. deletion of the disallowance of 25% depreciation of upfront fees of ₹ 150 crores. Both the parties agreed that the issue is covered in favour of the assessee by this Tribunal, vide its order dated 14.02.2014, for A.Y. 2007-08 in ITA No. 7507/Mum/2011 & 7111/Mum/2011, which decision was followed for A.Y. 2008-09. The Tribunal for A.Y. 2007-08 has observed as under: "10.2 That the AO has stated that the assessee has got lease hold rights for a period of 30 years and whereas the assessee has contended that the assessee has got a license for a period of 30 years and as such it is an "intangible assets". Thus, the assessee is entitled for depreciation as per section 32(1)(ii) of the Act. We observe that the said amount of ₹ 150 crores paid by assessee is non-refunda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough 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 (supra) 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. 10.3 Hence, the disallowance of ₹ 22.50 crores made by AO has rightly been deleted by ld. CIT(A) by directing the AO to allow depreciation at the rate of 25% on the said pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of Hon'ble Supreme Court in the case of Empire Jute Co Ltd. vs. CIT (124 ITR 1) and other High Court judgments which has been placed before the CIT(A), on that basis, it was contended that all expenditure even if resulting in enduring benefit cannot be termed to be capital expenditure. Before deciding the issue where the expenditure is a capital expenditure or revenue expenditure, all other factors in commercial sense has to be considered. Reliance was placed on the order of the CIT(A) especially para 6.5 to 6.7 and reiterated the submissions that were made before the CIT(A). 22. We have heard the rival submissions and carefully considered the same along with the orders of the authorities below. We have also gone through various judgments as has been referred to before us as well as the CIT(A). It is a settled law, in view of the decision of Kedarnath Jute Manufacturing Co. Ltd. vs. CIT (82 ITR 363), that assessee's entitlement to a particular deduction or not, will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights nor can existence or absence of entries in the books of accounts be decisive or conclusive in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d would not be transferred to the assessee. The assessee's interest, in our view, in this road was that the passengers would have a smooth access to Chhatrapati Shivaji International Airport and provide a look as per international standard. The rest of the expenditure relate to the maintenance and upkeep of the existing assets. The Assessing Officer treated the whole of the expenses to be capital expenditure as the assessee itself has treated the said expenditure in the books of account as capital expenditure. The allowability of expenses for the purpose of Income tax, as has been held by us in the previous paragraphs, following the decision of Hon'ble Supreme Court in the case of Kedarnath Jute Manufacturing Co. Ltd. vs. CIT (supra), will depend on the provision of income tax Act and not on the view which the assessee might take of his rights nor can existence or absence of entries in the books of accounts be decisive or conclusive in the matter. Since the ownership of the road vest with MMRDA, the assessee in our opinion does not get any direct benefit of enduring nature. No doubt the passengers travelling to the international airport were benefited by way of smooth access to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etty without payment of any charges for a period of three years from its completion. However, the ownership would remain with the state government. It was held that such expenditure was incurred with a view to obtain commercial advantage and, therefore, it was revenue expenditure. 25. Further, we noted that Hon'ble Rajasthan High Court in the case of CIT vs. Raj Spinning & Weaving Mills Ltd. [2005] 272 ITR 487 (Raj), following the decision of Hon'ble Supreme Court in the case of Empire Jute Co. Ltd. [1980] 124 ITR 1 (SC) held as under: "In determining whether a particular expenditure is capital expenditure or revenue expenditure the test of enduring benefit is not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case. The mere fact that the amount spent has been used for construction of a building or structure of permanent nature is not the decisive test for holding the expenses to be capital outlay or revenue outlay. Where such construction does not result in acquisition of any capital assets to the trade of the assessee or the property does not become the property of the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... para 6.5 and 6.6, the Tribunal has held as under: 6.5. We have gone through the submissions made by both the sides. The case of the assessee is that the impugned amounts represented mere provisions and, therefore, these could not have been properly quantified and further, even names of the payees were not clear. Therefore, no TDS could be deducted in the year under consideration. 6.6. It is noted from the perusal of the order of the Ld. CIT(A) that he has simply accepted the claim of the assessee by stating that the assessee had made only provision and the Ld. Counsel of the assessee had submitted that in the next year when payments were made against the provisions, TDS was deducted and thus disallowance made by the AO was also deleted. We find that, unfortunately, the order of the Ld. CIT(A) on this issue is devoid of factual analysis or proper reasoning. Ld. CIT(A) has not even discussed the details of the expenses for which provision was made by the assessee which has been disallowed by the AO. Nothing has been discussed about the nature of the expenses, position of crystallisation of these expenses, availability of particulars of the payees, etc. It has been observed in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the said disallowance of ₹ 43,72,716/- @ 10% and disallowed the balance sum of ₹ 39,35,444/-. On appeal, the CIT(A) deleted the disallowed. 30. We noted that similar issue has arisen in the case of the assessee for A.Y. 2008-09 and the Tribunal vide its order dated 30.11.2016, in ITA No. 3232/Mum/2012 set aside the issue to the file of the CIT(A) observing as under: 9.5.We have gone through the submissions made before us as well as before the lower authorities. It is noted that on this issue also, Ld. CIT(A) has not given proper reasoning and order passed by him is cryptic. He allowed the relief by merely observing as under:- "I have considered the above submissions and in view of the facts brought on record - which clearly show that the 'legal and professional' charges which refer to the current year are clearly an allowable expenses u/s 37(1) of the I.T Act and therefore, this is an allowable expense. Hence, this ground of appeal is allowed and A.O. is directed to delete this disallowance / addition." 9.6.Thus, from the above said paragraph of Ld. CIT(A)'s order, it is noted that he has not given proper reasoning while allowing relief to the assessee. The d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the provisions of section 35DDA of the I T Act will apply and only 1/5th of the said expenditure should be allowed to be claimed by the assessee in each of the assessment years. 32. The learned AR, on the other hand, submitted that the payment made by the assessee to the Airports Authority of India is not for the employees of the assessee under any voluntary retirement scheme or its own employees and, therefore, the provisions of section 35DDA of the I T Act would not apply. The said lump sum payment was made by the assessee to Airports Authority of India and this enable the assessee to avoid annual payment that it would have to make to these employees by way of retirement benefits etc., had they joined the company by accepting the employment offer. If these employees had accepted the assessee's employment offer, the expenditure incurred by way of salary would have been allowed as revenue expenditure. These annual expenditure has been substituted by one time lump sum payment to Airports Authority of India and, therefore, the said expenditure should be allowed as revenue expenditure. 33. We have heard the rival submissions and have carefully considered the same along with the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. We noted that the CIT(A) while dealing with the issue deleted the said disallowance by observing as under: "8.8 In the backdrop of the above facts, the moot question for decision is whether the expenditure of ₹ 154,23,19,088/- which has been paid by the appellant in terms of 6.1.4 of the OMDA to AAI is a revenue expenditure and requires to be allowed in one go instead of allowing the same in five equal installments u/s.35 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60% of the General Employees of AAI for a period upto the effective date of their retirement. In case these employees would have joined the company all recurring payments which would otherwise undoubtedly be allowable as revenue expenditure were got rid of by making the lump sum payment under clause 6.1.4 of the OMDA. The said lump sum payment was therefore clearly a substitute for annual revenues payments. 8.12 The appellant has also relied on the decision in the case of CIT vs. Madras Auto Service Pvt. Lid (1998) 233 1TR 468 - The Supreme Court has held that to decide whether expenditure is revenue or capital one has to look at the expenditure from a commercial point of view. The court has observed "Whatever substitutes for revenue expenditure should normally be considered as revenue expenditure." Had the Appellant chosen to pay rent annually for each and every year of lease such expenditure certainly would have to be regarded as revenue expenditure. The fact that the payment was made in lump sum for the entire duration of the lease does not alter the character of it being revenue expenditure. 8.13 The appellant has also brought to my notice the decision in the case of CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore revenue expenditure. 8.15 With regard to the applicability of provisions of-section 35DDA of the Act, I find that the said provisions are not applicable to the facts of the appellant's case as the payment has been made by the appellant to AAI and not to its own employees. The payment has been made out of commercial expediency and under contractual obligation. The appellant has not floated any voluntary retirement scheme of its own, but the payment has been made under an agreement to AAI. Thus, the provisions of section 35DDA of the Act are not applicable. It is not a voluntary retirement scheme, but the payment is contractual and cannot be amortized. The AO is accepting the contents of the Agreement and no fault has been found in the same. The AO has also not doubted the genuineness of the agreement and the payment made on this issue. 8.16 Considering the facts in its entirety and the various court decisions cited and relied upon by the appellant, I find that the expenditure of ₹ 260,86,03,400/- is an allowable expenditure as revenue. Accordingly, the disallowance of ₹ 123,38,55,270/- is deleted and the ground of appeal of the appellant is allowed." 35 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital receipt. We noted that the CIT(A) has elaborately discussed the provisions of the agreement entered between both the parties and has held as under: "9.5 I have considered the submissions of the appellant and the order of the AO. The appellant is engaged in operating, managing, developing, designing, constructing, upgrading, modernizing and financing the Chhatrapati Shivaji International ("CSI") Airport of Mumbai under an agreement known as "OMDA"' with Airport Authority of India ("AAI"). The estimated cost for modernizing and development of CSI Airport of Mumbai was ₹ 9,802/- crores. Against this estimated expenditure which includes the substantial expenditure on account of capital expenditure for modernizing and development of the Airport, the availability of finance from various means with the appellant was less by ₹ 2,3507- crores. Thus, there was a short fall of ₹ 2,350 crores. 9.6 In view of the shortfall of finance required for the development of the Airport which includes substantial capital expenditure, the appellant approached the Ministry of Civil Aviation; Government of India for levy of Development Fee for meeting out the said shortfall a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount actually received/receivables as a result of competitive bidding is more than the presently estimated amount of ₹ 1,000/- crores, the funding gap of ₹ 1543 crores would be revised downwards at the time of review." The above clearly indicates that the government had worked out the collection of ₹ 1543 crores in the total gap of ₹ 2,350 crores by factoring that MIAL can earn around ₹ 1,000 crores through the real estate development program. 9.7 As per clause (b) (ii) of the said letter, the AAI and Central Government would have supervision powers in respect of escrow account to ensure that all the receipts are properly accounted for and are utilized only for permitted purposes. Clause (c) of the said letter provides the entire Development Fee receipts would be utilized only for the purpose of development of "Aeronautical Assets", which are "Transfer Assets" as defined under the OMDA and therefore would go to reduce the actual cost of Aeronautical Assets to that extent. I also notice that Clauses (b) (iii) of the said letter dated 27.02.2009 specifically provides that DF would be subject to AAI's supervision from time to time. Further, Cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uoted from the decision in the case of Vijayalashmi Rice Mills & Ors. v. Commercial Tux Officers, Palakot & Ors. (Supra) that a cess is a tax which generates revenue which is utilized for a specific purpose. The levy under Section 22A of AAI Act though described as fees is really in the nature of a cess or a tax for generating revenue for the specific purposes mentioned in clauses (a), (b) and (c) of Section 22A of AAI Act. Further, the appellant also contended once the SC has held that the Development fee is in the nature of tax or cess, no further tax can be levied on the same treating the same as income of the appellant. I find the reliance of the appellant on the said Supreme Court decision is a good reliance and the same is squarely applicable to the facts of the appellant's case and therefore, Development Fee collected by the appellant is in the nature of cess or tax and a capital receipt and it cannot be subjected to further tax. 9.10 During the appellate proceedings before me, the appellant was asked to clarify as to how Development Fee and Toll Charges are not similar in nature. The appellant made a detailed submission in the matter, clearly bringing out the disting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.12 Looking to the distinguishing factors between the Development Fee and Toll Charges, I find that there is no similarity at all. The Toll Charges by itself is a revenue receipt embedded with the recovery of the cost of the assets, administrative expenses as well as the profits and the same is collected after the asset is created and put to use. The Development Fee is collected under the authority of a law meant for utilization of specific purposes and prior to creation of assets. The appellant's hands are completely tied in utilizing the Development Fee whereas the same is not the case of Toll Charges. Thus, the distinguishing factors clearly place the Development Fee in the category of capital receipts and not revenue receipts. 9.13 Looking to the facts of the case in its entirety, I find that Development Fee collected by the appellant with the permission from the Ministry of Civil Aviation, Government of India under the provisions of 22A of AAI Act 2004 is a receipt in the nature of cess or tax and in the nature of capita! receipt. Further, the same has been already considered by the Hon'ble Supreme Court in the case of Consumer Online Foundation Vs Union of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting revenue for specific purposes as mentioned in section 22A(a) to section 22A(c) of the Airports Authority of India Act. In the said judgment it was held that the nature of levy u/s. 22A of 2004 Act is not charges or any other consideration for services for the facilities provided by the Airports Authority. The learned DR, even though relied on the order of the Assessing Officer, he did not deny the interpretation given by the Hon'ble Supreme Court in respect of section 22A of the Airports Authority of India Act. 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. We accordingly, confirm the order of the CIT(A) and dismiss ground nos.10 & 11 in A.Y. 2010-11 and ground no.5 in A.Y. 2011-12. This disposes of all the grounds in the revenue's appeal for A.Y. 2010-11. 39. So far as ground no.6 in A.Y. 2011-12 is concerned, it is similar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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