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TMI Blog2019 (12) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... airport and not from incidental activities of providing amenities to passengers. - Held that:- The Assessing Officer had considered this issue in AYs 2005-06 to 2007-08 and granted deduction u/s. 80IA of the I.T. Act in respect of above income and denied deduction u/s. 80IA in respect of income from surcharge from pre paid taxi, income from sale of scrap, notice pay, interest on delayed payment, income from film shooting and bond from staff. Hence, in these assessment years also, the assessee is not entitled for deduction u/s. 80IA in respect of these items only. Being so, the CIT(A) is justified in granting deduction u/s. 80IA of the Act in respect of royalty income, treating it as business income. Accordingly, this ground of appeals of the Revenue is dismissed. Revision u/s 263 - Held that:- the CIT passed order u/s. 263 of the I.T. Act dated 30/03/2015 for re-considering the issue related to deduction u/s. 80IA(4)(i)(b) of the I.T. Act.. This issue has already been decided by us in favour of the assessee in paras 3.3 and 3.4 of this order. In view of this, we hold that the CIT is not justified in exercising power u/s. 263 of the I.T. Act. - ITA No.190/Coch/2017, ITA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nos. 08-10/Coch/2013 dt 28.03.2013 directed the AO to consider all records including the submissions made by the assessee and decide the issue afresh, as under:- 6. We have heard the rival contentions on this issue. The agreement contemplated in clause (b) of Sec. 80IA (4) is the agreement entered with Government/Government bodies for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility. Before the AO, the assessee has filed Aerodrome Licence-Public Use and the MOU on provision of Facilities in the Airport, The question is whether these two documents constitute 'Agreement for developing or operating and maintaining or developing, operating and maintaining a new infrastructure facility, in our view, both the agreements do not constitute the agreements specified in clause (b), because the first one is just a license and the second one relates to the provision of facilities inside the airport. What is contemplated in clause (b) is the agreement for developing and/or operation of the infrastructure facility entered with the Government/Government body. Before us also, the assessee has fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment years 2005-06, 2006-07 and 2007-08 wherein it was held as under: 12. From the provisions of Annexure-C and Annexure-K, which contain the obligations of the Airports Authority of India, it is clear that the Airport Authority of India was only undertaking to discharge its functions as provided under Section 12 of the Airports Authority of India Act, 1994 for the operation and maintenance of the airport which was developed by the Cochin International Airport Limited. Such an agreement between the Airports Authority of India and the assesses would qualify to be an agreement entered into with a statutory body for operating and maintaining the infrastructure facility , viz. the airport. 13. It was argued by the Senior Counsel for the Revenue that they qualify for the benefit of deduction under Section 80-IA of the IT Act, the agreement with the statutory body should have been entered into by an airport which is already operational. According to him, the provisions of Annexure-C and Annexure-K would show that the obligations undertaken by the airport were, for making the airport operational, which according to the counsel, was a part of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count of non compliance of agreement and commencement u/s. 80IA(4)(i)(c) of the I.T. Act. 4.1 The dispute is regarding compliance of section 80IA(i)(c) i.e., whether it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995. According to the Assessing Officer, the assessee had commenced business before 01/04/10995 and relied on the order of the Tribunal for A.Y.s 1995-96 and 1996-97 in ITA No. 45/Coch/2000 dated 17/03/2004. It was submitted that the High Court of Kerala had vide their order in ITA No. 256/2009 dated 01st November, 2018 reversed the finding of the ITAT for the AYs 1995-96 and 1996-97 that the assessee had commenced their business before 01.04.1995. In view of the same, it was submitted that the basis of Assessing Officer s presumption that the assessee had commenced business had been rendered null and void. 4.2 We have heard rival submissions and perused the material on record. Section 80IA(4)(i)(c) provide that (c) It has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995. We find that a similar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f High Court on 31.12.2018 and allowed deduction u/s. 80IA(4)(i)(c) of the I.T. Act. Accordingly, the Ld CIT(A) has rightly allowed the claim of the assessee regarding 80IA of the Act that assessee has complied with the requirements of Section 80IA (4)(i)(b) (c) of the Income Tax Act. Hence, this ground of appeal of the Revenue is dismissed. 5. The next common ground in Revenue s appeals in ITA Nos. 190 to 192/Coch/2017 for the assessment years 2005-06 to 2007-08 is with regard to surcharge from prepaid taxi, sale of scrap, notice pay, interest on delayed payment and bond from staff as income from other sources and not as income from business for claiming deduction u/s. 80IA of the Act. 5.1 The facts of the case are that in the appeal by the department to Tribunal, the Tribunal held that all the income referred to by the AO except miscellaneous income is to be assessed under the head income from business. In respect of the items included under the head Miscellaneous income, the Tribunal had directed the AO to examine the nature of income included under the said head and take a decision in the light of the directions given by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is whether the rent and services and royalty received by the assessee are profits and gains derived by the assessee from its business. The term 'profit and gains derived', used in Section 801A, is also used in other provisions of the Income Tax Act. The Apex Court in Cambay Electric Supply Industrial Co.Ltd. v CIT ([1978] 113 ITR 84), referring to section 80J (since omitted by Finance Act (No.2, 1996), inter alia held thus: In this connection it may be pointed out that whenever the legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor-General it has used the expression derived from , as for instance in Section 80-J. In our view, since the expression of wider import, namely, 'attributable to' has been used, the legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity . 11. The Privy Council in its judgment in CIT v Raja Bhadur Kamakhaya Narayan Singh (16 ITR 325) had also construed the term 'derived' in the following manner: The word 'derived' is not a term of art. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer, appellate authority and the Tribunal, in so far as it is decided that the income derived by the assessee from royalty, rent and services are assessable under the head 'income from business' are set aside. The matter will stand remitted to the assessing officer, who will issue notice to the assessee and decide the matter afresh in the manner as indicated above. The questions of law framed are answered in the above manner and the appeals are accordingly disposed of. 5.6 The Assessing Officer had already given effect to the above order of the High Court vide order dated 31/12/2008 by allowing the claim of the assessee u/s. 80IA of the Act. Hence, the department cannot contest this issue once again before the Tribunal. Thus, this ground of appeals of the Revenue is dismissed as infructuous for the assessment years 2005-06, 2006-07 and 2007-08. 5.7 In the result, the appeals of the Revenue in ITA Nos.190 to 192/Coch/2017 are dismissed. ITA Nos. 360/Coch/2014 464/Coch/2014 : Revenue s Appeal : AYs. 2008-09 2009-10 6. The first common ground in ITA Nos. 360/Coch/2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty from Fuel/BPCL for aircraft fuelling 4,530,104.14 Royalty Terminal Handling Services Valet Services 3,016.631.56 Total 204,306,040.92 7.3 However, it was observed that the following heads of royalty income are incidental and related to providing better passenger services, but they cannot be treated as derived from airport operations. These include- Royalty Mobile Phone Counters 4,713,263.10 Royalty on Mobile Charger box 2,226,219.00 Royalty/Restaurants 5,039,404.53 Royalty/foreign Exchange/Thomas Cook 879,494.70 Royalty/Vending Machines 2,018,552.94 Royalty-Others(Video Walls/Conferencing etc.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction with the core business activities and hence should be assessed under the head 'Income from Other Sources'. Since the details of the other items included under the head Miscellaneous income were not available, the Tribunal set aside the order of the CIT(A) to the AO with a direction to examine the nature of other items of 'Miscellaneous income' and decide the head of income under which it is assessable in the light of the directions of the Tribunal (ie. whether income is connected with the core business activity of the Airport or not) as above and also in accordance with law. 8.1 The revenue accepted the Hon ITAT direction regarding the Miscellaneous income but filed an appeal against the issue of Income from Royalty, Rent and Services, which was decided by the Hon High Court vide its order dated 17.08.2017 (ITA 194 Of 2012). The High Court held in Para 13 of its order that what qualifies to be the business income of the assessee would be the income derived by the assessee from its core and essential activities of the airport and not from its incidental activities providing amenities to passengers in the airport. The High Court remitted the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port should statutorily as per the Airport Authority of India Act perform two main duties, one of which is providing passenger facilities, as stated earlier. Hence, providing passenger facilities is one of the statutory responsibility of the airport and hence, providing passenger facility. Each of these incomes has direct and immediate nexus with operation of the airport, and hence are income derived from operation of the airport. Royalty from ground handling ₹ 19.52 crores 8.5 These services are provided to the airlines operating in the airport. Such services include passenger handling, ramp handling, cargo, flight handling on ramp (loading off cargo to the aircraft), off loading of cargo from aircraft to pre-customs space for customs clearance, customs clearing of export of cargo, movement of cargo within the airport, facilities for check in, security screening and handling passenger baggage , arrival /departure information etc., The assessee had engaged Air India as its associate for operation of ground handling, where assessee provides necessary space, water and electricity, security, telephone, fixed installation a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). In this regard, it was submitted that while giving effect to the order of the High Court as above for the AYs 2005-06,2006-07 2007-08, the AO had accepted the contentions of the assessee and allowed the Royalty Income from Ground handling and aircraft refueling as income eligible for deduction u/s 80IA. In view of the above submissions, it was submitted that the CIT(A) had rightly held the Royalty Income of ₹ 20.43 crores as income from operation of the airport and therefore eligible for deduction u/s 80IA (4)of the I.T. Act. 9. We have heard rival submissions and perused the material on record. The High Court vide judgment in assessee s own case in ITA No. 163, 169 176/2012 dated 07/08/2017 for the AYs 2005-06, 2006-07 2007-08, held that as per Section 2(b) of The Airports Authority of India Act 1994 an Airport means a landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome as defined in clause (2) of section 2 of the Aircraft Act, 1934 . Thus, the operations and maintenance of the airport mainly consist of are: a. Ensuring safe landing / taking off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of the airport mainly consist of are: a. Ensuring safe landing / taking off of aircrafts in/from the airport. b. Providing passenger facilities within the airport as required and expected at an international airport. 10.3 Being so, the income related to above two activities, i.e., (a) and (b) only is to be considered as income entitled for deduction u/s. 80IA(4) of the Act. The assessee has to prove that the impugned income is directly derived from the above two activities. With this observation, this ground of appeals of the assessee is partly allowed for both the assessment years. Thus, the appeals of the assessee in ITA Nos. 344/Coch/2014 and 396/Coch/2014 are partly allowed for statistical purposes. 11. The next common ground of the assessee in ITA Nos. 344/Coch/2014 and 396/Coch/2014 for the assessment years 2008-09 and 2009-10 is with regard to depreciation of runway. 11.1 The facts of the case are that in the original assessment, the assessing officer treated certain assets of the assessee i.e. runway, isolation parking bay and roads, culverts and drains as buildings and allowed deprecia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 11.6 It was submitted that the isolation parking bay was for parking aircrafts(Aprons) and roads, culverts drains are for operating/managing the transport service for passengers and goods at the airport and the assets under reference are the same as the assets referred to in the National Airport Authority of India case, which the Tribunal had directed the AO to follow. It was submitted that the Assessing Officer has not stated any reason for his deviating from the direction of the ITAT, nor why the isolation parking bay, roads, culverts and drains do not form part of the assets which were found to be plant, as per directions of the Tribunal. 11.7 We have heard the rival submissions and perused the record. The Tribunal vide their order in ITA Nos. 807/Coch/2008, 375/Coch/2009, and 392/Coch/2010 dt 04.05.2012 for the assessment years 2005-06 to 2007-08 remitted the issue to the file of the Assessing Officer by observing as follows: 8. The next common issue relates to the allowance of depreciation on certain assets, viz., Runway, Isolation Parking Bay and Roads, Culverts Drains. According to the assessee, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision towards unascertained liability. Thus, it was submitted that provisions made towards gratuity and leave encashment on the basis of independent actuarial valuation as per the mandatory requirements of Accounting Standards cannot be considered as unascertained liability and hence, cannot be added back to the computation of book profit u/s. 115JB of the I.T. Act. 12.2 We have heard the rival contentions and perused the record. The contention of the ld. AR is that this issue was considered by the Delhi High Court in the case of CIT vs. Ilpea Paramount Pvt. Ltd. (192 taxman 65) and Punjab Haryana High Court in the case of CIT vs. National Hydroelectric Power Corporation (45 DTR 117) wherein it was held that if the provisions towards gratuity and leave encashment were made with reasonable certainty on the basis of independent actuarial valuation, the same is to be allowed. In view of this, we are inclined to remit this issue to the file of the Assessing Officer to consider the basis of making provisions towards gratuity and leave encashment and decide accordingly. Thus, this ground of appeal of the assessee for the assessment year 2009-10 is allowed for statis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee by the consolidated order of the Hon. High Court of Kerala in assessee' s own case for the AYs. 2005-06, 2006-07 2007-08. In the said order the High Court held that the assessee had complied with the conditions specific u/s.80IA(4)(i)(b). The SLP filed by the revenue was rejected by the Supreme Court. Accordingly, it was submitted that there was no error prejudicial to the interest of the revenue in the order passed by the AO u/s. 143(3) requiring revision u/s.263 of the IT Act. Therefore, it was prayed the Tribunal set aside the order passed u/s.263 of the IT Act by the Commissioner of Income tax, as the High Court had held that the agreement filed with the ITAT which the CIT had found that is the same that was filed with the AO, is an agreement entered into in accordance with Sec. 144(i)(b). So the order of the AO is not erroneous and prejudicial to the interest of the revenue and hence, the finding of the CIT is not correct on facts and law. 13.5 We have heard the rival submissions and perused the record. In this case, the CIT passed order u/s. 263 of the I.T. Act dated 30/03/2015 for re-considering the issue related to deduction u/s. 80IA(4)(i) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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