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TMI Blog2022 (2) TMI 1294X X X X Extracts X X X X X X X X Extracts X X X X ..... 011 2011-2012 2012-2013 2013-2014 620/B/2017 633/B/2017 603/B/2017 604/B/2017 General 1 1 1 (8,91,85,072) 1,68,27,618 6,03,86,989 86,19,312 2. Disallowance u/s 40(a)(ia) towards amount retained by airlines while remitting the amount of Passenger Service Fees (PSF) and User Development Fees (UDF) 2010-2011 2011-2012 2012-2013 2013-2014 620/B/2017 633/B/2017 603/B/2017 604/B/2017 2 2 2 2 2,47,49,095 2,86,47,227 2,02,73,034 2,33,86,903 3. Disallowance under section 14A 2010-2011 2011-2012 2012-2013 2013-2014 620/B/2017 633/B/2017 603/B/2017 604/B/2017 4 & 5 4 4 & 5 3 & 4 12,43,695 43,12,242 89,01,493 1,21,37,900 4. Addition / deduction by treating the duty credit entitlement under SFIS accrued as grant related to revenue. 2010-2011 2011-2012 2012-2013 620/B/2017 633/B/2017 603/B/2017 3 3 3 9,98,09,744 5,70,98,820 2,79,56,389 5. Addition by including the revenue from NACIL on accrual basis. 2012-2013 603/B/2017 7 33,88,84,480 6. Disallowance of Community Development expenditure. 2010-2011 2011-2012 2012-2013 2013-2014 620/B/2017 633/B/2017 603/B/2017 604/B/2017 6 5 6 5 1,25,05,983 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 2.1 & 2.2 of the said order provides that the PSF (SC) is held by the assessee company in fiduciary capacity only and the assessee company has to maintain its accounts separately subject to the audit of Comptroller & Auditor General of India (CAG). 2.4 Accordingly, the assessee company is maintaining the PSF (SC) accounts separately in accordance with the procedure laid down in Standard Operating Procedure (SOP) dated January 19th 2009, and accordingly the financial statement of the assessee company does not include the balances of PSF(SC). The copy of audited accounts of PSF (SC) is placed in the Paper Book. 2.5 However, the proceeds of PSF(FC) is included in the books of account of the company and the same is considered as the revenue of the company. 2.2. Tax Treatment of PSF-(SC) in the return of Income. i. The assessee company has offered the proceeds of PSF(FC) in its total income while filing the Income Tax return for the said assessment year. However, the assessee company has not offered the income (loss) of PSF(SC) as its own income as the assessee company held the proceeds of PSF(SC) in fiduciary capacity and considered it as a receipt which is diverted by over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is income within the meaning of the Income tax Act and accordingly liable to tax in the hands of the airport operator" The Ministry of Civil Aviation on 19/0112009 has issued a standard operating procedure for account/audit of passenger service fee (security component) by jvc / private airports As Per para 4.8. of the SOP. `In terms of clarification dated 30. 6.2008 issued by the Central Hoard of Direct Taxes (CBDT), the receipts on account of PSF (SC) are taxable as income in the hands of the airport operator. As such a consolidated return would have to be filled before the tax authorities.' Therefore the SOP issued by Ministry of Civil Aviation itself has decreed that the revenue received in form of PSF-SC is chargeable in the hands of the assessee company based on OM issued by the CBDT on 30/06/2008. Further, the assessee company had vide letter dated 30.10.2010 forwarded a joint representation to the Ministry of Civil Aviation for review of OM dated 30.06.2008 of the Board of Direct Taxes (CBD T) on taxability of security component (SC) of Passenger Service Fee (PSF) collected at airports. The extracts of the letter F No. AV20036/02/2010-AD dated 15 11.2010 of the Mini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv) Bangalore ITAT in assessee's own case in ITA No.2189/Bang/2016 for A.Y. 2009-2010. 4.4 It was submitted that in light of the Bangalore Bench decision in the case of assessee's own case for assessment year 2009-2010 (supra), the above said issue may be restored to the files of the A.O. for de novo consideration. 4.5 The learned Departmental Representative supported the orders of the Income Tax Authorities. 4.6 We have heard rival submissions and perused the material on record. The Tribunal in assessee's own case for assessment year 2009-2010 (supra) had restored an identical issue to the files of the A.O. The relevant finding of the Bangalore Bench of the Tribunal in assessee's own case for assessment year 2009-2010 (supra) reads as follows:- "9..............Before us, the ld AR furnished a copy of Order passed by Mumbai Bench of Tribunal in e case of Addl. CIT(A) Vs. Mumbai International Airport Ltd., in ITA No..3232/Mumb/ 2012, wherein it was held that the surplus arising in passenger service fee is not liable to be taxed. The Id AR submitted that, by applying the same a analogy, the assessee may not be entitled for deduction of loss suffered under this head, but soug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cession Agreement which were hitherto provided by AAI to the airlines. * Thus the Airlines is not the agent of the assessee but act as a Principal in availing the services at the airport and sells its tickets directly, through online, travel agent, etc for whom it acts as an agent. * The airlines act only as a facilitator for collection of payments to be received in respect of PSF and UDF on tickets booked through airlines by above means for and on behalf of airport operator as per the directive of MoCA/AERA. * The facilitation provided by the airlines cannot be termed as service provided by the airlines to the airport operator (i.e. assessee) in the course of purchase or sale of air tickets and any payment received or receivable directly or indirectly by airlines cannot be termed as of the nature of commission as per the directives of MoCA/ AERA and the company policy since according to such directives/policy the amount of collection charges depends upon fulfilment of twin conditions, namely (1) the early payment within 15 days and (2) further subject to the condition that there are no overdue on any other account to the GHIAL regardless of the fact whether the airlines have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ives and not for rendering any services. WITHOUT PREJUDICE TO THE ABOVE * No disallowance with respect to collection charges pertaining to PSF(SC) can be made since it is not includible/taxable in the hands of the assessee. * The assessee has not been treated as an assessee in default u/s. 201(1) and the recipient have filed their respective returns and hence in view of Proviso 1 and 2 of section 40(a)(ia) added by the Finance Act 2010 and 2012 which are curative in nature, no disallowance can be made u/s. 40(a)(ia). In this context of alternative plea, the learned AR relied on the order of the ITAT Bangalore Bench in group company case, namely, Delhi International Airport (P. )Limited v. DCIT reported in 93 taxmann.com 228 (Bangalore Tribunal). Further, it is submitted that on further appeal by the Revenue, u/s 260A of the I.T.Act, the Hon'ble High Court had affirmed the order of the ITAT (The High Court judgment dated 14th December, 2021in ITA No.513/2008 & Ors.). 5.2 The learned DR supported the orders of the Income Tax Authorities. 5.3 We have heard rival submissions and perused the material on record. The assessee has raised an alternate plea that in view of the seco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ario, the provisions of section 40(a)(ia) does not have any application. It is ordered accordingly. DISALLOWANCE U/S 14A OF THE ACT : (ASST.YEAR 2010-2011 TO 2013-2014) 6. For the assessment years 2010-2011 to 2013-2014, the assessee had earned exempt income on investment made with its subsidiaries. The assessee while filing the returns of income for assessment years 2010-2011 to 2013-2014, had made suo moto disallowance u/s 14A of the Act. However, the A.O. made further disallowance u/s 14A of the Act. On further appeal, the CIT(A) granted substantial relief to the assessee. The details of the suo moto disallowance u/s 14A of the Act made by the assessee in the returns of income, the additions made by the A.O. and the additions sustained by the CIT(A) for the respective assessment years are detailed below:- Sl No. Particulars Rule 8D(2)(i) Rule 8D(2)(ii) Rule 8D(2)(iii) Total A.Y. 2010-11 1. Appellant Nil 3,65,011 Nil 3,65,011 2. Assessing Officer Nil 1,50,29,526 10,07,784 1,60,37,310 3. CIT(Appeals) Nil 3,60,911 8,82,784 12,43,695 A.Y.2011-12 1. Appellant Nil 1,00,82,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e earned which can be utilized against the payment of import duty on capital goods imported from outside India. The Assessing Officer treated the duty the duty credit entitlement under SFIS accrued as grant related to revenue receipt and thus liable for tax. (whereas the assessee treated the grant by reducing the same from capital cost and claimed depreciation on the reduced amount). The view taken by the A.O. was affirmed by the CIT(A). 7.1 Aggrieved, the assessee has raised this issue before the Tribunal. The learned AR submitted that on identical facts in the case of group company, namely, M/s.Delhi International Airport (P) Ltd. (supra), the Bangalore Bench of the Tribunal had restored this issue to the files of the CIT(A) for de novo consideration. It was further submitted that the CIT(A) pursuant to the order of the ITAT, had allowed the claim of the assessee. It was submitted that the matter may be restored to the files of the A.O. as done by the ITAT in the case of group company. 7.2 The learned DR relied on the orders of the Income Tax Authorities. 7.3 We have heard rival submissions and perused the material on record. On identical facts, in the case of group company, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ections of the Tribunal given in the case of group company, namely, M/s.Delhi International Airport (P) Ltd. (supra) for assessment years 2007-2008, 2011-2012 to 2013-2014, while deciding the issue. It is ordered accordingly. ADDITION BY INCLUDING REVENUE FROM NAICL ON ACRUAL BASIS : (ASST.YEAR 2012-2013) 8. The assessee had recognized certain revenue from NAICL and its affiliates (Air India) on receipt / cash basis instead of accrual basis. The A.O. taxed the income on accrual basis. The view taken by the A.O. was affirmed by the CIT(A). 8.1 Aggrieved, the assessee has raised this issue before the ITAT for assessment year 2012-2013. The learned AR fairly submitted that the issue in question is covered against the assessee by the judgment of the Hon'ble jurisdictional High Court in the case of group company, namely, M/s.Delhi International Airport (Pvt.) Ltd. (judgment dated 14.12.2021 in ITA No.513/18 & Ors.). 8.2 The learned DR was duly heard. 8.3 We have heard rival submissions and perused the material on record. On identical facts, the Hon'ble jurisdictional High Court in the case of M/s.Delhi International Airport (Pvt.) Ltd. (supra) had decided the issue against the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee to run in a smooth manner and to assist the employees of the assessee and hence the same is allowable as deduction u/s 37(1) of the Act. The learned AR relied on the following case laws to contend that the community expenses are allowable deduction u/s 37 of the I.T.Act. (i) Karnataka High Court in the case of Infosys Technologies Ltd. (43 taxmann.com 251), (ii) Karnataka High Court in the case of Karnataka Financial Corporation (33 DTR 145) (iii) Mumbai ITAT in the case of Reliance Infrastructure Ltd. v. Addl.CIT (9 taxmann.com 186) (iv) Decision of the ITAT Mumbai in the case of Addl.CIT v. Nicholas Piramal India Ltd. (40 taxmann.com 538) (v) Bangalore ITAT in assessee's own case in ITA No.2189/Bang/2016 for A.Y. 2009-10. 9.2 It was further contended that the amendment in section 37 of the Act by Finance Act, 2015 with effect from 01.04.2015 to disallow the CSR expenses is not retrospective in nature but only prospective. In this context, the learned AR relied on the following case laws :- (i) Raipur ITAT in ACIT v. Jindal Power Limited (70 taxmann.com 389) (ii) Delhi ITAT in National Seeds Corporation Ltd. v. Addl.CIT in ITA No.6794/Del/2014 for A.Y. 2011- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its use for the business of the assessee. In the instant case, though the assessee has furnished details of expenditure, it has not demonstrated the connection between the expenditure and the business advantage to the assessee. Further, as stated earlier, the nature of payment as well as the nature of expenditure incurred by GMR Varalaskhmi Foundation require examination. Under these set of facts, we are of the view that, in the interest of natural justice, the assessee may be provided with one more opportunity to explain its case before the AO. Accordingly, we set aside the order passed by the ld CIT(A) on this issue and restore the same to the file of the AO for examining this issue afresh in the light of the decision rendered by Hon'ble Karnataka High Court referred (Supra)." 9.5 In the light of the order of the Tribunal, which has restored an identical issue to the files of the A.O., we restore the issue raised as regards the allowability of expenditure incurred on community development expenses to the files of the A.O. for de novo consideration. For these assessment years the only difference is that most of the CSR expenditure were incurred directly by the assessee as per ..... 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