MUMBAI INTERNATIONAL AIRPORT P.LTD, MUMBAI V. DCIT 10(2)(2), MUMBAI

ITA 2018/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8010 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 03-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H N SINGH
• Keywords: Capital asset; Business income; Depreciation; Business expenditure; Charitable institution; Maximum Marginal Rate; Diversion of income; Earning of tax free income; Cost of acquisition; Difference of opinion; Capital receipt; Revised return; Revenue expenditure; Capital expenditure; TDS; Rule 8D; Set aside; Capital Gains
• Section: 43B; 143(3); 14A; 115JB; 40(a)(ia); 37(1); 80G; 194C; 191; 192; 64; 43; 48; 73; 72; 13; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENCH MUMBAI BEFORE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER & SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.2018/MUM/2018 ( ASSESSMENT YEAR: 2013-14 ) MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED FINANCE DEPARTMENT 1 ST FLOOR, TERMINAL 1B CHHATRAPATI SHIVAJI INTERNAITONAL AIRPORT SANTACRUZ (E) MUMBAI-400 099 VS. DCIT,CIRCLE-10(2)(2) ROOM NO.209,AAYKAR BHAWAN M.K.ROAD MUMBAI-400 020 PAN/GIR NO. AA ECM6285C ( APPELLANT ) .. ( RESPONDENT ) & ITA NO.2385/MUM/2018 ( ASSESSMENT YEAR: 2013-14 ) DCIT-10(2)(2) ROOM NO.216-A,AAYKAR BHAWAN M.K.ROAD MUMBAI-400 020 VS. MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED FINANCE DEPARTMENT, 1 ST FLOOR, TERMINAL 1B CHHATRAPATI SHIVAJI INTERNAITONAL AIRPORT SANTACRUZ (E) MUMBAI-400 099 PAN/GIR NO. AAECM6285C ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY SHRI VIJAY MEHTA, AR REVENUE BY SHRI H.N.SINGH, CIT, DR DATE OF HEARING 09/12 /2019 DATE OF PRONOUNCEME NT 10 / 01/2020 / O R D E R PER G.MANJUNATHA (A.M) : ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 2 THESE CROSS APPEALS FILED BY THE ASSESSEE, AS WELL AS THE REVENUE ARE DIRECTED AGAINST ORDER OF THE LD. COMMI SSIONER OF INCOME TAX (APPEALS)-18, MUMBAI, DATED 16/01/2018 A ND IT PERTAINS TO AY 2013-14. SINCE, THE FACTS ARE IDENTICAL AND ISSUES ARE COMMON, FOR THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED-OFF, BY THIS CONSOLIDATED ORDER. ITA. NO. 2018/MUM/2018:- 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- GROUND NO.1: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND THE LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF LEAV E ENCASHMENT PROVISION MADE IN BOOKS OF RS.1,90,19,660/- BASED O N THE ACTUARIAL VALUATION AND IN RELIANCE OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LTD. V UNION OF INDIA (292 ITR 470). THE APPELLANT PRAYS THAT THE SAME MAY BE ALLOWED. GROUND NO. 2: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND THE LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE MADE U/ S. 40(A)(IA) OF THE ACT, PERTAINING TO PROVISION FOR EXPENSE OF RS.17,5 7,71,673/- MADE ON 'BEST ESTIMATE' BASIS AND IN RELIANCE OF THE DECISION OF ITAT AHMEDABAD IN THE CASE OF BANK OF MAHARASHTRA VS ITO (TDS), AN AND (38 SOT 432). THE APPELLANT PRAYS THAT THE SAME MAY BE ALLOWED. GROUND NO.3: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND THE LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITIONS MADE BY A. O OF THE SHORT-TERM CAPITAL GAINS OF RS 1,71,55,197/- WHICH WAS EARNED FROM SALE OF UNITS OF 'MUTUAL FUND 1 INVESTED OUT OF IDLE FUNDS OF BORROWINGS OF THE PR OJECT DIVISION. THE APPELLANT PRAYS THAT NOTHING IS TAXABLE AS SHOR T TERM CAPITAL GAIN IN VIEW OF THE CIRCUMSTANCES, FACTS AND THE LAW. GROUND NO. 4: ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND THE LAW, THE LD. CIT(A) ERRED BY ORDERING SUO-MOTO ENHANCEMENT OF TH E INTEREST INCOME OF RS 4,68,46,632/- UNDER THE HEAD 'INCOME FROM OTH ER SOURCES' EARNED FROM INVESTMENTS MADE IN TERM DEPOSITS OUT OF IDLE FUNDS OF BORROWINGS OF THE PROJECT DIVISION. THE APPELLANT PRAYS THAT THE SAME MAY BE DELETED. GROUND NO. 5: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED BY HOLDING THE PASSENGER SERVICE FEE - SECURITY COMPONENT [PSF (5C)] OF RS. 51,03,65,280/- AS THE T AXABLE INCOME OF THE APPELLANT. THE APPELLANT PRAYS THAT THE PSF (SC) IS NOT THE IN COME OF THE APPELLANT AND HENCE BE DELETED. THE APPELLANT CRAVES LEAVE TO ADD, OMIT OR ALTER GR OUNDS OF APPEAL BEFORE OR DURING THE HEARING OF THE APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE WAS INCORPORATED ON 27/02/2006 AS A JOINT VENTURE BETWE EN THE GVK GROUP COMPANIES AND AIRPORT AUTHORITY OF INDIA, TO TAKE OVER THE EXISTING CHATRAPATI SHIVAJI AIRPORT [CSA] ( DOMESTI C, INTERNATIONAL AND CARGO TERMINAL) TO OPERATE, MAINTAINING AND DEVELOP THE AIRPORT AND ITS RELATED FUNCTIONS. DURING THE PREVI OUS YEAR RELEVANT TO THE YEAR UNDER APPEAL, THE ASSESEE HAS FILED ITS RE TURN OF INCOME ON 29/11/2013, DECLARING TOTAL INCOME OF RS. 158,70,27 ,370/- AND THE SAME WAS REVISED TO RS. 152,59,15,230/- BY FILING R ETURN ON 30/03/2015. THE REDUCTION IN INCOME DECLARED IN THE REVISED RETURN AS COMPARED TO ORIGINAL RETURN OF INCOME IS ON ACCO UNT OF REDUCTION IN PASSENGER SERVICE FEES (PSF) FROM RS.57,14,77,42 0/-, DECLARED IN THE ORIGINAL RETURN TO RS.51,03,65,280/- IN THE REVISED RETURN OF INCOME. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) OF THE I.T.ACT, 1961, VID E ORDER DATED 04/03/2016 AND DETERMINED TOTAL INCOME OF THE ASSES SEE AT ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 4 RS.484,05,59,660/-. THE DETAILS OF TOTAL INCOME COM PUTED BY THE LD. AO IS AS UNDER:- SR.NO. PARTICULARS AMOUNT (RS.) INCOME FROM BUSINESS 1 AS PER RETURN OF INCOME 81,43,35,673 2 ADDITIONS/DISALLOWANCES AS UNDER: A) INTANGIBLE ASSETS B) TREATMENT OF CWIP CLAIMED AS REVENUE C) DISALLOWANCE U/S 40(A)(IA) D) LEAVE ENCASHMENT E) RETRENCHMENT COMPENSATION F) DEVELOPMENT FEE G) DISALLOWANCE U/S 14A R.W.R8D H) DELAYED PAYMENT OF EMPLOYEES CONTRIBUTION OF PF &ESIC INCOME FROM OTHER SOURCES 3 AS PER RETURN OF INCOME 19,11,27,544 CAPITAL GAIN 4. SHORT TERM CAPITAL GAIN AS PER RETURN 1,98,46,728 ADD: STCG ADJUSTED AGAINST PROJECT COST 1,71,55,197 3,70,01,925 5 GROSS TOTAL INCOME 433,99,54,336 6 LESS: DEDUCTION U/S 80G 97,60,000 7 INCOME AFTER DEDUCTION UNDER CHAPTER VI-A 433,01,94,336 8 ADD: SURPLUS FROM PSF FUNDS OFFERED AS PER ASSESSEES RETURN OF INCOME 51,03,65,280 9 TOTAL INCOME 484,05,59,616 ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 5 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE A SSESSEE HAS FILED AN APPEAL BEFORE THE LD.CIT(A). THE LD.CIT(A) HAS DISPOSED OF APPEAL FILED BY THE ASSESSEE VIDE, ITS ORDER DATED 16/01/2018, WHERE HE HAS ALLOWED PARTIAL RELIEF, IN RESPECT OF VARIOU S ADDITIONS MADE BY THE LD. AO, HOWEVER CONFIRMED ADDITIONS MADE BY THE LD. AO TOWARDS DISALLOWANCES OF PROVISION FOR ENCASHMENT O F LEAVES, DISALLOWANCES OF YEAR END PROVISION, U/S. 40(A)(IA ), FOR NON DEDUCTION OF TAX AT SOURCE, ADDITIONS MADE BY THE L D. AO TOWARDS SHORT TERM CAPITAL GAINS ON SALE OF UNITS OF MUTUAL FUNDS INVESTED OUT OF IDLE FUNDS OF BORROWING OF THE PROJECT DIVISION AND ADDITIONS TOWARDS PASSENGER SERVICE FEES - SECURITY COMPONENT (PSF-SC) OF RS. 51,03,65,280/-. THE LD.CIT(A) HAS ALSO ENHANCED THE INCOME OF THE ASSESEE BY ADDING RS. 4,68,46,632/-, ON ACCOUNT OF INTEREST INCOME EARNED ON BANK DEPOSITS BY RELYING ON THE DE CISION OF THE HONBLE SUPREME COURT IN THE CASE OF TUTICORIN ALKA LI CHEMICALS AND FERTILIZERS LTD. 227 ITR 172. BEING AGGRIEVED BY TH E ORDER OF THE LD.CIT(A), THE ASSESSEE, AS WELL AS THE REVENUE HAV E FILED THE CAPTIONED APPEALS BEFORE THE TRIBUNAL. 5. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM GROUND NO.1 OF ASSESSEE APPEAL IS CONFIRMATION OF DISALLOW ANCES OF LEAVE ENCASHMENT OF RS.1,90,19,660/-. THE LD. AO HAD MADE DISALLOWANCES OF RS.2,23,70,223/- BY REJECTING THE CONTENTION OF THE ASSESSEE THAT PROVISION OF SECTION 43B(F) HAD BEEN HELD TO BE CONSTITUTIONALLY INVALID BY THE HONBLE KOLKATA HIG H COURT, IN THE CASE OF EXIDE INDUSTRIES LTD. 292 ITR 470. THE LD. AO HA D ALSO NOTED THAT SIMILAR DISALLOWANCES WERE MADE IN AY 2008-09 TO 20 12-13. THE LD.CIT(A) UPHELD THE ADDITIONS AFTER REFERRING TO T HE DECISION OF ITAT, IN THE CASE OF THE ASSESSEE FOR AY 2012-13 AND ALSO IN THE CASE OF ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 6 PEMBRIL ENGINEERING PVT.LTD.155 ITD 72 (MUM) AND MY SORE SALES INTERNATIONAL LTD. 138 ITD 422 (BANG). 6. THE LD. AR FOR THE ASSESSEE, AT THE TIME OF HEARING SUBMITTED THAT ALTHOUGH, THE ASSESEE HAS CLAIMED DEDUCTIONS T OWARDS PROVISION FOR LEAVE ENCASHMENT ON THE BASIS OF DECI SION OF HONBLE KOLKATA HIGH COURT, IN THE CASE OF EXIDE INDUSTRIES LTD. (SUPRA). BUT SUBSEQUENTLY, THE HONBLE SUPREME COURT, VIDE ITS O RDER DATED 08/09/2018 HAS STAYED THE JUDGMENT OF THE HONBLE K OLKATA HIGH COURT. FURTHER, THE FINAL DECISION OF THE HONBLE S UPREME COURT IN THIS CASE IS STILL AWAITED. THE LD. AR, FURTHER SUBMITTE D THAT SINCE, THE MATTER IS SUB-JUDICED BEFORE THE HONBLE SUPREME CO URT AND ALSO, THE HONBLE COURT, IN ITS SUBSEQUENT INTERIM ORDER HAS LAID DOWN CONDITIONS FOR CLAIMING DEDUCTION FOR PROVISION FOR LEAVE ENCASHMENT, AS PER WHICH, THE ASSESSEE CAN CLAIM DEDUCTION BY P AYING TAX ON THE PORTION OF AMOUNT CLAIMED, AS IF SECTION 43B(F) IS ON STATUTE BOOK. BUT, AT THE SAME TIME, IT WOULD NOT BE ENTITLED TO MAKE A CLAIM IN ITS RETURN OF INCOME. THE LD. AR, FURTHER SUBMITTED THA T SINCE, THE MATTER IS STILL PENDING BEFORE THE HONBLE SUPREME COURT, THE MATTER MAY BE SET ASIDE TO THE FILE OF THE LD. AO AND TO D ECIDE THE ISSUE AFTER FINAL OUTCOME OF THE DECISION OF HONBLE SUPR EME COURT, IN THE CASE OF EXIDE INDUSTRIES LTD. (SUPRA). IN THIS REGA RD, HE RELIED UPON THE DECISION OF ITAT, MUMBAI, IN THE CASE OF BIRLA SUNLIFE ASSET MANAGEMENT COMPANY LTD. IN ITA NO. 5457/MUM/2013, D ATED 30/06/2015. 7. THE LD. DR, ON THE OTHER HAND STRONGLY SUPPORTED ORDER OF THE LD. AO, AS WELL AS THE LD.CIT(A), HOWEVER HE FAIRLY ACCEPTED THE ISSUE MAY BE SET ASIDE TO THE FILE OF THE LD. AO TO DECIDE IN ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 7 ACCORDANCE WITH THE FINAL OUTCOME OF THE FINAL ORDE R OF THE HONBLE SUPREME COURT IN THE CASE OF EXIDE INDUSTRIES LTD. CASE. 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. IT IS AN ADMITTED FACT THAT THE PROVISION OF SECTION 43B(F) HAD BEEN HELD TO BE CONSTITUTIONALLY INVALID BY THE HONBLE KOLKATA HIG H COURT IN THE CASE OF EXIDE INDUSTRIES LTD (SUPRA). ON THE BASIS OF SA ID DECISION, THE ASSESSEE HAS CLAIMED DEDUCTION FOR PROVISION FOR LE AVE ENCASHMENT, AS IF PROVISION OF SECTION 43B(F) IS NOT IN THE STA TUTE. BUT, FACT REMAINS THAT SUBSEQUENTLY, THE HONBLE SUPREME COURT HAS ST AYED OPERATION OF THE DECISION OF HONBLE KOLKATA HIGH COURT IN TH E CASE OF EXCIDE INDUSTRIES LIMITED (SUPRA), VIDE ITS ORDER DATED 08 /09/2008. HOWEVER, IT HAS LAID DOWN CERTAIN CONDITIONS FOR CLAIMING D EDUCTION FOR PROVISION FOR LEAVE ENCASHMENT. THUS, AS PER THE IN TERIM ORDER OF THE HONBLE SUPREME COURT, THE INITIAL STAY GRANTED BY THE HONBLE SUPREME COURT GETS VACATED. FURTHER, IN THE SAID IN TERIM ORDER THE HONBLE SUPREME COURT HELD THAT THE ASSESSEE CAN CL AIM DEDUCTION BY PAYING TAX ON THE AMOUNT CLAIMED AS DEDUCTION, A S IF SECTION 43B(F) IS ON STATUTE BOOK. HOWEVER, TILL FINAL OUTC OME OF THE DECISION OF THE HONBLE SUPREME COURT, THE REVENUE WILL NOT RECOVER INTEREST AND PENALTY WHICH MAY ACCRUE. FROM THE ABOVE, IT IS VERY CLEAR THAT THE ISSUE IS NOT ATTAINED FINALITY AND HENCE, WE AR E OF THE CONSIDERED VIEW THAT UNLESS, THE HONBLE SUPREME COURT SETTLED THE DISPUTES ON THE MATTER THE ISSUE CANNOT BE DECIDED EITHER IN FA VOUR OF THE ASSESSEE OR IN FAVOUR OF THE REVENUE. HENCE, WE SET ASIDE THE ISSUE TO THE FILE OF THE LD. AO AND DIRECT HIM TO ADJUDIC ATE THE ISSUE AFRESH, AS PER THE FINAL DECISION OF THE HONBLE SUPREME CO URT, IN THE CASE OF EXIDE INDUSTRIES LTD (SUPRA). ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 8 9. THE NEXT ISSUE THAT CAME UP FOR OUR CONSID ERATION FROM GROUND NO. 2 OF ASSESEE APPEAL IS CONFIRMATION OF DISALLO WANCES U/S 40(A)(IA) OF THE ACT OF RS. 17,57,71,673/-. THE FAC TS WITH REGARD TO THE IMPUGNED DISPUTES ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE LD. AO NOTED THAT IN THE TAX AUDIT REPORT, THE TAX AUDITOR HAD IDENTIFIED GROSS AMOUNT OF RS. 17,57,7 1,673/-, AS AMOUNT INADMISSIBLE U/S 40(A)(IA) OF THE ACT, FOR N ON DEDUCTION OF TDS. HOWEVER, IN THE COMPUTATION OF TOTAL INCOME, T HE ASSESSEE HAS NOT MADE ANY DISALLOWANCES U/S 40(A)(IA) OF THE ACT . THEREFORE, AFTER TAKING NOTE OF SUBMISSIONS OF THE ASSESSE MADE DIS ALLOWANCES OF RS. 17,57,71,673/- U/S 40(A)(IA) OF THE ACT, FOR NO N DEDUCTION OF TAX AT SOURCE. THE LD.CIT(A) AFTER GOING THROUGH THE DE TAILS SUBMITTED BY THE ASSESSE NOTED THAT PROVISION MADE BY THE ASSESE E HAD NO SCIENTIFIC BASIS AND MORE THAN 50% OF THE LIABILITY WAS NON-EXISTENT. THEREFORE, HE HAS UPHELD THE DISALLOWANCES, ON THE GROUND THAT, THE PROVISION WAS WITHOUT ANY SCIENTIFIC BASIS AND THE LIABILITY HAD NOT ACCRUED AS ON 31/03/2013. 10. THE LD. AR, FOR THE ASSESSEE SUBMITTED THAT T HE LD. AO AND THE LD.CIT(A) DID NOT TRULY APPRECIATE THE BASIS OF PR OVISION MADE TOWARDS VARIOUS EXPENDITURE, ON THE BASIS OF ESTIMA TES PROVIDED BY THE DEPARTMENTS HEADS AND THE EXCESS PROVISION, IF ANY HAS BEEN REVERSED SUBSEQUENTLY, AS AND WHEN, THE FINAL PAYME NT IS MADE TO THE SERVICE PROVIDERS. THE LD. AR, FURTHER SUBMITTE D THAT THE ASSESSEE HAS BEEN FOLLOWING CONSISTENT METHOD OF MA KING PROVISION FOR EXPENDITURE AT THE END OF THE FINANCIAL YEARS, ON THE BASIS OF ESTIMATES PROVIDED BY THE DEPARTMENT HEADS. HE, FUR THER SUBMITTED THAT THE ASSESSEE, NEITHER CLAIMS ANY DOUBLE DEDUCT ION, NOR THERE IS ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 9 ANY TAX IMPACT ON THE INCOME OF THE ASSESSEE FOR TH E MAIN REASON THAT THE ASSESSEE HAS HUGE LOSSES AND THE ENTIRE EX ERCISE IS TAX NEUTRAL. HE, FURTHER SUBMITTED THAT OUT OF THE TOTA L PROVISION OF RS. 17,57,71,673/-, THE ASSESEE HAS SUBSEQUENTLY DEDUCT ED TAX AT SOURCE, IN RESPECT OF EXPENDITURE OF RS. 7,73,42,02 7/-. HOWEVER, AT THE TIME OF PAYMENT OF THIS PROVISION, THE ASSESSEE HAD NOT CLAIMED ANY DEDUCTION. HE, FURTHER SUBMITTED THAT THE ASSES EE HAD INADVERTENTLY INCLUDED A SUM OF RS. 2.25 CRORES TOW ARDS UNBILLED REVENUE AND THIS AMOUNT REPRESENTS DISCOUNT GIVEN T O THE PARTY, BUT WRONGLY CREDITED TO PROVISION ACCOUNT, INSTEAD OF P ARTY ACCOUNT AND THIS ERROR HAS BEEN RECTIFIED SUBSEQUENTLY. SIMILAR LY, THE BALANCE PROVISION OF RS. 7,59,29,646/- HAS BEEN REVERSED IN SUBSEQUENT YEARS, BECAUSE SAID PROVISION IS NO LONGER REQUIRED . THEREFORE, IF ADDITION IS MADE FOR NON DEDUCTION OF TAX ON THE SA ID AMOUNT, THEN IT AMOUNTS TO PAYMENT OF TAX ON NON EXISTING LIABILITY . THE LD.CIT(A) WITHOUT APPRECIATING THESE FACTS HAD SIMPLY CONFIRM ED ADDITIONS MADE BY THE LD. AO. 11. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPO RTING ORDER OF THE LD. AO, AS WELL AS THE LD.CIT(A) SUBMITTED THAT THE ASSESSE HAS MADE AN ADHOC PROVISION FOR VARIOUS EXPENSES, EVEN THOUGH, THE LIABILITY IS NOT CRYSTALLIZED OR ACCRUED, AT THE EN D OF THE FINANCIAL YEAR, WHICH IS EVIDENT FROM THE FACT THAT IN SUBSEQUENT Y EARS, THE SAID PROVISION HAS BEEN REVERSED. THE LD. DR, FURTHER SU BMITTED THAT IF YOU GO THROUGH PROVISIONS OF SECTION 194C AND OTHE R TDS PROVISIONS, IT IS VERY CLEAR THAT THE LIABILITY TO DEDUCT TDS IS ARISES, EVEN IF, THE AMOUNT IS CREDITED TO A SUSPENSE ACCOU NT. THEREFORE, ONCE AMOUNT IS PROVIDED IN BOOKS OF ACCOUNT, IT IS THE OBLIGATION OF THE ASSESSEE TO DEDUCT APPLICABLE TDS. SINCE, THE A SSESSE HAS NOT ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 10 DEDUCTED TDS ON VARIOUS EXPENDITURE. THE LD. AO WAS RIGHT IN DISALLOWANCES OF SAID EXPENDITURE U/S 40(A)(IA) OF THE ACT. THE LD.CIT(A) AFTER CONSIDERING RELEVANT FACTS HAS RIGH TLY CONFIRMED ADDITIONS MADE BY THE LD. AO AND HIS ORDER SHOULD B E UPHELD. 12. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE M ATERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. THE ASSESSE HAS MADE CERTAIN PROVISIONS AT THE END OF T HE YEAR FOR EXPENSES BASED ON RELIABLE ESTIMATES PROVIDED BY TH E DEPARTMENT HEADS AMOUNTING TO RS. 17,57,71,673/- AND SAID PROV ISION HAD BEEN MADE ON THE BASIS OF PENDING INVOICES/DEBIT NOTES/C LAIMS FROM THE PARTIES. THE ASSESSEE HAS BEEN FOLLOWING CONSISTENT METHOD MAKING PROVISION FOR EXPENDITURE AT THE END OF THE FINANC IAL YEAR, IN RESPECT OF SERVICE PROVIDED BY VARIOUS PARTIES AND SUCH EST IMATE HAD BEEN MADE ON THE BASIS OF ESTIMATES PROVIDED BY THE DEPA RTMENT HEADS. FURTHER, AS AND WHEN, THE AMOUNT HAS BEEN PAID TO T HE SERVICE PROVIDERS ON RECEIPT OF PROPER INVOICES/CLAIMS, THE ASSESSEE HAS DEDCUTED APPLICABLE TDS ON SAID PAYMENT. WE, FURTHE R NOTED THAT THE EXCESS PROVISION, IF ANY IS MADE, IN RESPECT OF CERTAIN EXPENDITURE HAS BEEN REVERSED, SUBSEQUENTLY ON PAYM ENT OF PENDING BILLS TO THE SERVICE PROVIDERS. THIS PRACTI CE HAS BEEN FOLLOWED RIGHT FROM LAST SO MANY FINANCIAL YEARS. I N THE LIGHT OF THE ABOVE FACTUAL BACK GROUND, IF YOU EXAMINE THE CLAIM OF THE ASSESSEE TOWARDS PROVISION FOR YEAR UNDER EXPENSES, WE FOUND THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESEE HAS MADE PROV ISION OF TOTAL EXPENDITURE OF RS. 59,40,33,948/-. THIS PROVISION C OMPRISED EXPENDITURE OF RS. 16,54,10,394/-, ON WHICH THE ASS ESSEE WAS NOT REQUIRED TO DEDUCT ANY TAX AT SOURCE. FURTHER, IT A LSO INCLUDED EXPENDITURE OF RS. 25,28,51,881/-, ON WHICH TDS HAS BEEN DEDUCTED ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 11 AND PAID BEFORE THE DUE DATE OF FILING THE RETURN O F INCOME. THIS FACT HAS NOT BEEN DISPUTED BY THE LD. AO. THE RESULTANT BALANCE AMOUNT OF RS. 17,57,71,673/- WAS DISALLOWED BY THE LD. AO VERIFYING ONLY COUPLE OF INSTANCES, WHICH HAVE BEEN REFERRED IN TH E APPELLATE ORDER. IT IS THE CLAIM OF THE ASSESSEE BEFORE US THAT, OUT OF TOTAL PROVISION OF RS. 17,57,71,673/-, THE ASSESSEE HAD SUBSEQUENTLY D EDUCTED TAX AT SOURCE, IN RESPECT OF EXPENDITURE OF RS. 7,73,42,0 27/-. HOWEVER, AT THE TIME OF PAYMENT OF THIS PROVISION, THE ASSESSEE HAD NOT CLAIMED ANY DEDUCTION. SIMILARLY, IT WAS THE CLAIM OF THE ASSESSEE THAT IT HAD INADVERTENTLY INCLUDED THEREIN PROVISION FOR REDUCT ION IN UNBILLED REVENUE OF RS. 2.25 CRORES AND THIS AMOUNT REPRESEN TS DISCOUNT GIVEN TO THE PARTY, BUT WRONGLY CREDITED TO PROVISI ON ACCOUNT INSTEAD OF PARTY ACCOUNT AND THIS ERROR HAS BEEN RECTIFIED SUBSEQUENTLY. FURTHER, BALANCE PROVISION OF RS. 7,59,29,646/- HAS BEEN REVERSED IN SUBSEQUENT YEARS, BECAUSE SAID PROVISION IS NO LONG ER. FROM THE ABOVE, IT IS ABUNDANTLY CLEAR THAT THE ASSESSEE IS FOLLOWING A CONSISTENT METHOD OF MAKING PROVISION FOR EXPENSES AT THE END OF THE YEAR, ON THE BASIS OF ESTIMATES PROVIDED BY THE DEPARTMENT HEADS BY TAKING NOTE OF VARIOUS FACTORS, INCLUDING SERVICES RENDERED BY SERVICE PROVIDER, BUT BILLS AND CLAIMS ARE NOT R ECEIVED FROM THE SAID SERVICE PROVIDE. THE EXCESS PROVISION IF ANY I S REVERSED, SUBSEQUENTLY, AS AND WHEN, THE PAYMENT HAS BEEN MAD E TO SERVICE PROVIDERS ON RECEIPT OF CLAIMS/BILLS FROM THEM AFTE R DEDUCTING APPLICABLE TDS AS PER LAW. FURTHER, WHEN THE PAYMEN TS HAS BEEN MADE TO THE PARTIES, THE ASSESEE HAS NOT CLAIMED AN Y DEDUCTION FOR SAID EXPENDITURE. THUS, FROM THE ABOVE, IT IS VERY CLEAR THAT THE PROVISION MADE BY THE ASSESEE AT THE END OF THE YEA R IS ON SCIENTIFIC BASIS, BASED ON ESTIMATES GIVEN BY THE DEPARTMENT H EADS, WHICH IS IN TURN BASED ON SERVICES RENDERED BY THE SERVICE P ROVIDERS. ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 12 THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE L D. AO AS WELL AS THE LD.CIT(A) WERE ERRED IN, COMING TO THE CONCLUSI ON THAT THE PROVISION MADE FOR YEAR END IN EXPENDITURE IS NOT B ASED ON ANY SCIENTIFIC METHOD AND SUCH LIABILITY IS NOT ACCRUED TO THE ASSESSE. WE, FURTHER NOTED THAT, THE ASSESSEE NEITHER CLAIME D ANY DOUBLE DEDUCTION, NOR THERE IS ANY TAX IMPACT ON THE INCOM E OF THE ASSESSEE, BECAUSE THE ASSESEE HAS HUGE LOSSES AND T HAT THE ENTIRE EXERCISE IS TAX NEUTRAL. FURTHER, THE LD.CIT(A) HAD COME TO THE CONCLUSION THAT THE LIABILITY IS NOT ACCRUED AND AL SO, THERE IS NO SCIENTIFIC BASIS FOR MAKING PROVISION, ONLY ON THE BASIS OF VERIFICATION OF SELECTIVE ENTRIES. THEREFORE, WE ARE OF THE CONS IDERED VIEW THAT THIS MATTER NEEDS TO BE EXAMINED BY THE LD. AO, IN LIGHT OF VARIOUS AVERMENTS MADE BY THE ASSESEE, INCLUDING REVERSAL O F EXCESS PROVISION IN SUBSEQUENT FINANCIAL YEAR AND DEDUCTIO N OF TDS ON SAID AMOUNTS, AS AND WHEN, PAYMENT IS MADE TO THE PARTIE S. HENCE, WE RESTORED THE ISSUE TO THE FILE OF THE LD. AO WITH A DIRECTION THAT IF ANY DISALLOWANCES IS MADE IN THE YEAR UNDER CONSIDERATI ON, THE LD. AO SHALL CONSEQUENTLY ALLOW DEDUCTIONS TO THE ASSESSEE IN THE YEAR OF ACTUAL PAYMENT OR REVERSAL, AS A CASE MAY BE. 13. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDER ATION FROM GROUND NO.3 AND 4 OF ASSESSEE APPEAL IS CONFIRMATION OF A DDITION OF RS. 1,71,55,197/-, ON ACCOUNT OF SHORT TERM CAPITAL GAI N FROM TRANSFER OF UNITS OF MUTUAL FUNDS INVESTED OUT OF IDLE FUNDS OF BORROWINGS OF THE PROJECT DIVISION AND CONSEQUENT ENHANCEMENT OF INTE REST INCOME FROM FIXED DEPOSITS OF RS. 4,68,46,632/- UNDER THE HEAD INCOME FROM OTHER SOURCES. THE FACTS WITH REGARD TO THE IMPUGNE D DISPUTES ARE THAT THE ASSESSEE HAD TEMPORARILY INVESTED PROJECTS FUNDS IN MAKING INVESTMENTS IN MUTUAL FUNDS UNITS AND EARNED INCO ME OF ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 13 RS.1,71,55,197/- ON ITS SALES AND ALSO, EARNED INTE REST INCOME FROM FIXED DEPOSITS AMOUNTING TO RS. 4,68,46,632/-. THE ASSESSEE HAS CREDITED SHORT TERM CAPITAL GAIN EARNED FROM SALE O F UNITS OF MUTUAL FUNDS AND INTEREST INCOME EARNED FROM FIXED DEPOSIT S TO THE CAPITAL WORK-IN-PROGRESS OF THE PROJECT, BECAUSE THE GAIN W AS INEXTRICABLY LINKED WITH THE PROJECT FUNDS. THE LD. AO REJECTED THE CONTENTIONS OF THE ASSESSEE AND ADDED RS. 1,71,55,197/- TO THE INC OME OF THE ASSESSEE AS SHORT TERM CAPITAL GAIN. SIMILARLY, THE ASSESEE HAS EARNED INTEREST FROM FIXED DEPOSITS KEPT IN BANKS F OR SHORT PERIOD AND CREDITED INTEREST INCOME INTO CAPITAL WORK-IN-PROGR ESS ACCOUNT OF THE PROJECT. THE LD.CIT(A) HAS ENHANCED THE INCOME TO T HE EXTENT OF RS. 4,68,46,632/- TOWARDS INTEREST EARNED FROM BANKS, O N THE INVESTMENTS MADE IN DEPOSITS OUT OF FUNDS INEXTRICA BLY LINKED WITH THE PROJECT BY FOLLOWING THE DECISION OF HONBLE S UPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZ ERS LTD. VS CIT (SUPRA). 14. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT TH E LD.CIT(A) WAS ERRED IN CONFIRMING ADDITIONS MADE BY THE LD. AO TO WARDS SHORT TERM CAPITAL GAIN DERIVED FROM SALE OF UNITS OF MUTUAL F UNDS, INVESTED OUT OF PROJECT FUNDS FOR SHORT PERIOD WITHOUT APPRECIA TING THE FACT THAT THE ASSESSEE HAS INVESTED EARMARKED FUNDS IN MUTUAL FUN DS, WHEN THE FUNDS ARE NOT IMMEDIATELY REQUIRED FOR THE PROJECTS IN TERMS OF AGREEMENT BETWEEN THE CONSORTIUM BANKS AND THE ASSE SSEE, DATED 26/09/2007, AS PER WHICH, AS AND WHEN, THE FUNDS A RE RELEASED BY THE CONSORTIUM BANKS, THE SAME NEEDS TO BE UTILIZED FOR THE PROJECTS WITHOUT ANY OTHER PURPOSE. THE LD. AR FOR THE ASSES SEE, FURTHER REFERRING TO AGREEMENT DATED 26/09/2007 AND MORE PA RTICULARLY CLAUSES (E) & (F) SUBMITTED THAT THE ASSESEE WAS UN DER OBLIGATION TO ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 14 UTILIZE THE PROJECT FUNDS, AS PER THE TERMS SPECIFI ED IN THE AGREEMENT. HE, FURTHER SUBMITTED THAT UTILIZATION OF FUNDS HA S BEEN SPECIFIED UNDER CLAUSE (VII) OF THE AGREEMENT, AS PER WHICH T HE ASSESSEE HAD NOT LIBERTY TO UTILIZE THE FUNDS BORROWED. BUT, IT WAS OBLIGED TO UTILIZE FUNDS ONLY IN ACCORDANCE WITH THE AGREEMENT. HE FUR THER SUBMITTED THAT AS PER THE TERMS OF AGREEMENT, ANY INCOME EARN ED FROM THE AUTHORIZED INVESTMENTS HAD TO BE CREDITED TO THE TR A MAIN ACCOUNT. FROM THE ABOVE, IT IS VERY CLEAR THAT EVEN THE CONS ORTIUM BANKS HAVE ALLOWED THE ASSESSEE TO PARK THE FUNDS IN SHORT TER M INVESTMENTS, BUT ANY INCOME EARNED OUT OF SUCH INVESTMENTS NEEDS TO BE UTILIZED FOR THE PURPOSE OF THE PROJECT. THE LD. AR, FURTHER REFERRING TO PAPER BOOK FILED BY THE ASSESSEE, SUBMITTED THAT IF YOU G O THROUGH THE INVESTMENTS IN MUTUAL FUNDS AND FIXED DEPOSITS MADE BY THE ASSESSEE, THE SAID INVESTMENTS HAVE BEEN MADE FOR A PERIOD WHICH VARIES FROM 03 DAYS TO 45 DAYS. FROM THE ABOVE, IT IS VERY CLEAR THAT THERE IS A DIRECT NEXUS BETWEEN THE FUNDS BORROWED AND FUNDS INVESTED AND ACCORDINGLY, WHERE FUNDS ARE INEXTRICA BLY LINKED WITH THE PROJECT, THEN ANY INCOME ARISED OUT OF SAID INV ESTMENTS NEEDS TO BE SET OFF WITH CAPITAL WORK IN PROGRESS OF THE PR OJECT TILL, SUCH TIME, THE PROJECT WAS UNDER IMPLEMENTATION. THE LD. AR, F URTHER SUBMITTED THAT ALTHOUGH, THE LD. AO, AS WELL AS THE LD.CIT(A) HAVE HEAVILY RELIED UPON THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD. (SU PRA), BUT, IF YOU GO THROUGH THE FACTS OF THE PRESENT CASE, THE DECISION OF HONBLE SUPREME COURT HAS NO APPLICATION, BECAUSE IN THAT C ASE THERE WAS NO DISCUSSION ABOUT LINKING OF FUNDS OF THE PROJECT TO THE INVESTMENTS. HE, FURTHER SUBMITTED THAT WHEREAS THE HONBLE SUPREME COURT IN THE CASE OF CIT VS BOKARO STEEL LT D. 236 ITR 215 HAD CONSIDERED AN IDENTICAL ISSUE AND AFTER CONSIDE RING JUDGMENT OF ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 15 TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD. (SU PRA) HELD THAT WHEN, FUNDS ARE INEXTRICABLY LINKED WITH THE PROJECT, THE N ANY INCOME EARNED OUT OF SAID FUNDS NEEDS TO BE SET OFF WITH C APITAL WORK-IN- PROGRESS. IN THIS REGARD, HE RELIED UPON VARIOUS JU DICIAL PRECEDENTS, INCLUDING THE DECISION OF ITAT, MUMBAI BENCH, IN TH E CASE OF ICELAND STAR MALL DEVELOPERS PVT.LTD. VS ACIT IN ITA NO. 5 078/MUM/2014. 15. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPO RTING ORDER OF THE LD.CIT(A) SUBMITTED THAT THE LD.CIT(A) HAS BROUGHT OUT CLEAR FACTS TO THE EFFECT THAT INTEREST INCOME EARNED FROM DEPOSIT S KEPT IN BANKS OUT OF PROJECT FUNDS AND SHORT TERM CAPITAL GAIN EA RNED FROM TRANSFER OF UNITS OF MUTUAL FUNDS NEEDS TO BE ASSESSED SEPAR ATELY UNDER THE INCOME FROM OTHER SOURCES, WHETHER OR NOT, THE FUND S ARE INEXTRICABLY LINKED WITH THE PROJECT. THE LD. DR, FURTHER SUBMIT TED THAT THE HONBLE SUPREME COURT HAS CONSIDERED THE ISSUE IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD.(SUP RA), WHERE IT WAS CATEGORICALLY HELD THAT TO DECIDE THE NATURE AND H EAD OF INCOME, THE NATURE OF INCOME EARNED IS RELEVANT, BUT NOT THE FU NDS. HE, FURTHER SUBMITTED THAT EVEN IN CASE OF TUTICORIN ALKALI CHE MICALS AND FERTILIZERS LTD., THE FACTS BEFORE THE HONBLE SUPR EME COURT WAS THAT DURING IMPLEMENTATION PERIOD OF THE PROJECT THE ASS ESSEE HAS EARNED INTEREST INCOME AND THE SAME HAS BEEN CREDITED TO C APITAL WORK-IN- PROGRESS ACCOUNT. UNDER THOSE FACTS, THE HONBLE SU PREME COURT CLEARLY HELD THAT TO DECIDE THE HEAD OF INCOME, THE NATURE OF INCOME IS MORE RELEVANT, BUT NOT THE FUNDS, WHICH EARNED INCOME. THE LD.CIT(A) AFTER CONSIDERING RELEVANT FACTS HAS RIGH TLY HELD THAT SHORT TERM CAPITAL GAIN FROM SALE OF UNITS OF MUTUAL FUND S AND INTEREST INCOME FROM FIXED DEPOSITS KEPT IN BANKS OUT OF ID LE FUNDS OF PROJECT ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 16 IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOUR CES AND HIS ORDER SHOULD BE UPHELD. 16 WE HAVE HEARD BOTH THE PARTIES, PERUSED THE M ATERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. THE BACKGROUND FACTS IN RESPECT OF BOTH THE GROUNDS ARE AS FOLLOWS. THE ASSESSEE HAD ENTERED INTO AN ARRANGEMENT WITH IDBI AS LEAD BANKER AND OTHER BANKS IN THE CONSORTIUM TO AVAIL FUNDS OF RS. 4,231/- CRORES FOR ITS CAPITAL PROJECT. THESE FUNDS WERE RE LEASED FROM TIME TO TIME AS PER THE REQUIREMENTS OF THE PROJECT. HOWEVE R, THE BANK RELEASED FUNDS AS PER ITS SCHEDULE WHICH VARIED LIT TLE WITH THE TIMING OF REQUIREMENTS AND ON OCCASIONS., THE ASSESSEE HAD AT ITS DISPOSAL MORE FUNDS DISBURSED THAN CURRENT REQUIREMENT. THER EFORE, IN ORDER TO REDUCE THE COST OF INTEREST AND TO MEET THE STIP ULATIONS OF SANCTIONED LOAN, THE ASSESSEE HAD INVESTED SUCH FUN DS IN THE MEANTIME IN LIQUID INVESTMENTS LIKE BANK FD AND MUT UAL FUND AND EARNED INCOME BY WAY OF INTEREST ON DEPOSITS AND SH ORT TERM CAPITAL GAIN. IT IS THE CASE OF THE ASSESSEE THAT SINCE THE INTEREST ON BORROWED PROJECT FUND IS BEING ADDED TO CAPITAL WOR K-IN-PROGRESS AND THAT PROJECT IS NOT COMPLETED,, THE INCOME EARNED F ROM INVESTMENT SHOULD BE REDUCED FROM THE CAPITAL WORK-IN-PROGRESS AS FUND UTILIZED FOR INVESTMENT IS RAISED FOR THE PROJECT AND IT IS INEXTRICABLY LINKED WITH THE SETTING UP OF THE PROJECT. 17. IN ORDER TO ASCERTAIN THE NATURE OF INVESTME NT, IT IS PERTINENT TO NOTE THE TERMS AND CONDITIONS IN RESPECT OF FUND S BORROWED AND ITS UTILIZATION. THE AGREEMENT DATED 26.09.2007 WA S ENTERED INTO BETWEEN THE ASSESSEE AND IDBI LED CONSORTIUM, PURSU ANT TO WHICH THE ASSESSEE HAD ARRANGED TO BORROW RS. 4,231 CRORE S. A COPY OF ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 17 THE SAID AGREEMENT IS FILED AT PAGES 193 - 241 OF T HE PB. FURTHER, OUR ATTENTION IS INVITED TO THE CLAUSES (E), (E) AN D (F) OF THE RECITAL PORTIONS AT PAGE 199 OF THE PB, WHICH READ AS UNDER : '(E) TO ENABLE THE BORROWER TO MEET THE PROJECT COS TS, THE LENDERS AT THE REQUEST OF THE BORROWER HAVE AGREED TO LEND AND ADVANCE TO THE BORROWER AND THE BORROWER HAS AGREED TO BORROW FROM EACH OF THEM THEIR RESPECTIVE RUPEE LOANS IN A GGREGATE NOT EXCEEDING INR 4231 CRORES (RUPEES FOUR THOUSAND TWO HUNDRED THIRTY ONE CRORES ONLY) ON THE TERMS AND CO NDITIONS STIPULATED IN THE COMMON LOAN AGREEMENT (DEFINED HE REINAFTER). (E) ALL MONIES DISBURSED UNDER THE COMMON LOAN AGRE EMENT ARE TO BE APPLIED FOR OR IN CONNECTION WITH THE FINANCI NG FOR THE PROJECT. (F) IT IS ONE OF THE CONDITIONS PRECEDENT FOR THE L ENDERS MAKING AVAILABLE THE LOANS TO THE BORROWER FOR THE PROJECT THAT THE RETENTION ACCOUNTS (AS HEREINAFTER DEFINED) SHALL H AVE BEEN OPENED/ESTABLISHED WITH THE ACCOUNT BANK AND SHALL BE OPERATED IN THE MANNER SPECIFIED IN THIS AGREEMENT'. 18. THUS, THE ASSESSEE WAS UNDER OBLIGATION TO UTILIZE THE PROJECT FUNDS AS PER THE TERMS SPECIFIED IN THE AGR EEMENT. THE UTILIZATION OF FUNDS HAS BEEN DEALT UNDER CLAUSE 7 OF THE AGREEMENT AND THE RELEVANT PORTION (PAGES 216 AND 217 OF THE PB) READS AS UNDER : '7. WITHDRAWALS 7.1 PERMITTED WITHDRAWALS - GENERAL': EACH OF THE PARTIES AGREE THAT (A) NO PAYMENTS TO, OR WITHDRAWALS FROM, A RETENTIO N ACCOUNT SHALL BE MADE EXCEPT AS EXPRESSLY PERMITTED BY THIS AGREEMENT; (B) ALL AMOUNTS WITHDRAWN FROM ANY OF THE RETENTION ACCOUNTS BY THE BORROWER FOR APPLICATION IN OR TOWARDS A SPECIF IC PAYMENT OR MEETING A SPECIFIC LIABILITY SHALL BE APPLIED IN OR TOWARDS MAKING THAT PAYMENT OR MEETING THAT LIABILITY AND FOR NO OTHER PURPOSE; AND (C) ...... ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 18 7.2 WITHDRAWAL PROCEDURES (A) ALL REQUESTS FOR WITHDRAWALS FROM ANY RETENTION ACCOUNTS [SAVE IN THE CASE OF A WITHDRAWAL FOR THE PURPOSES OF MAKING AN AUTHORISED INVESTMENT MADE IN ACCORDANCE WITH CLAUS E 13 HEREIN AND SAVE AS OTHERWISE EXPRESSLY SET OUT IN THIS AGR EEMENT] SHALL BE MADE IN ACCORDANCE WITH SUB-CLAUSE (B) SET OUT B ELOW: (B).... (C)..' 19. THE UNDERTAKINGS OF THE ASSESSEE HAVE BEEN SPEL T OUT IN CLAUSE 8 OF THE AGREEMENT AND THE RELEVANT PORTION (PAGE 220 AND 221 OF THE PB) IS EXTRACTED BELOW '8 UNDERTAKINGS OF THE BORROWER: THE BORROWER UNDERTAKES TO EACH OF THE LENDERS THAT THROUGHOUT THE CURRENCY OF THE FACILITIES AND SO LONG AS ANY S UM IS OR MAY BECOME PAYABLE UNDER ANY FINANCE DOCUMENT THE BORRO WER SHALL, UNLESS THE LENDER/LENDERS AGENT OTHERWISE AGREE IN WRIGING: (A)... (B)... (G) ENSURE THAT ALL AMOUNTS STANDING TO THE CREDIT OF ANY OF THE RETENTION ACCOUNTS ARE UTILIZED/APPLIED ONLY IN ACC ORDANCE WITH THIS AGREEMENT: (H)....' 20. THUS, THE ASSESSEE HAD NO LIBERTY TO UTILIZ E THE FUNDS BORROWED BUT IT WAS OBLIGED TO UTILIZE THE FUNDS ON LY IN ACCORDANCE WITH THE AGREEMENT. FURTHER, THE ASSESSEE WAS OBLI GED TO INVEST THE IDLE FUNDS AS PER CLAUSE 13 OF THE AGREEMENT AN D THE RELEVANT PORTION (PAGES 223 TO 225 OF THE PB) IS EXTRACTED B ELOW '13 A UTHORISED INVESTMENTS 13.1 POWER TO INVEST ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 19 THE BORROWER MAY REQUIRE, SUBJECT TO AS PROVIDED IN THIS AGREEMENT, THAT SUCH PART OF THE AMOUNTS STANDING T O THE CREDIT OF RETENTION ACCOUNTS AS IT CONSIDERS PRUDENT SHALL BE INVESTED FROM TIME TO TIME IN ATHORISED INVESTMENTS IN ACCORDANCE WITH THIS CLAUSE. 13.2 PROCEDURE FOR INVESTMENT (A) POWER TO INVEST SO LONG AS THE ACCOUNT BANK IS NOT NOTIFIED OF AN E VEN OF DEFAULT BY THE LENDER AGENTS, THE ACCOUNT BANK SHALL INVEST IN AUTHORISED INVESTMENTS ON THE INSTRUCTIONS OF THE BORROWER, AS PROVIDED IN THIS AGREEMENT FROM SUCH PART OF THE AMOUNTS STANDI NG TO THE CREDIT OF ANY OF THE RETENTION ACCOUNTS, IN EACH CA SE WITH RESPECT TO THOSE AMOUNTS NEXT ANTICIPATED TO BE TRANSFERRED OR WITHDRAWN, HAVING A SCHEDULED MATURITY NO LATER THAN SUCH NEXT ANTICIPATED CASH WITHDRAWAL OR TRANSFER FROM SUCH ACCOUNT IN AC CORDANCE WITH THIS AGREEMENT. . .. (D) MATURITY THE BORROWER SHALL AT ALL TIMES PROCURE THAT THERE ARE MAINTAINED A SPREAD OF AUTHORISED INVESTMENTS AND SHALL MATCH TH E MATURITIES OF THE AUTHORISED INVESTMENTS WITH THE PAYMENT OR T RANSFER OBLIGATIONS UNDER THIS AGREEMENT, HAVING REGARD TO THE AVAIL ABILITY OF AUTHORISED INVESTMENTS WHICH ARE READILY MARKETA BLE. (E) REALISATIONS UPON THE REALIZATION OF ANY INVESTMENT MADE UNDER T HIS CLAUSE, THE PROCEEDS OF REALIZATION SHALL BE IMMEDIATELY CR EDITED TO THE RELEVANT RETENTION ACCOUNT BY THE ACCOUNT BANK OR I MMEDIATELY INVESTED IN ANOTHER AUTHORISED INVESTMENT IN ACCORD ANCE WITH THE BORROWER'S INSTRUCTIONS AND THIS AGREEMENT (H) INTEREST ON AUTHORISED INVESTMENTS ANY INVESTMENT INCOME IN RESPECT OF AUTHORISED INVE STMENTS SHALL BE CREDITED TO THE TRA MAIN ACCOUNT' 21. THUS, IT IS EVIDENT THAT THE INCOME EARNED FROM THE AUTHORIZED INVESTMENTS HAD TO BE CREDITED TO THE TR A MAIN ACCOUNT. IN OTHER WORDS, THE ASSESSEE HAD NO LIBERT Y TO UTILIZE THE FUNDS AS WELL AS INCOME EARNED OUT OF THE INVESTMEN TS MADE FROM THE BORROWED FUNDS EXCEPT FOR THE PURPOSE OF PROJEC T. IT IS ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 20 SUBMITTED THAT THIS VITAL FACTOR HAS BEEN OVERLOOKE D BY THE CIT(A) WHILE DECIDING THE ISSUE. IT IS SUBMITTED THAT AS PER THE AGREEMENT, THE ASSESSEE WAS PROVIDED THE FUNDS BY T HE CONSORTIUM IN ADVANCE, BUT ITS ACTUAL UTILIZATION W OULD DEPEND UPON THE TERMS OF PAYMENTS THAT WOULD BECOME DUE. T HEREFORE, THE ASSESSEE WAS REQUIRED TO MAKE INVESTMENT IN AUT HORISED INVESTMENTS IN SUCH A MANNER THAT THE FUNDS BORROWE D WOULD REMAIN AVAILABLE TO DISCHARGE THE LIABILITIES ON DU E DATES. THE PARTICULARS OF INVESTMENT MADE IN MUTUAL FUNDS GIVI NG RISE TO THE SHORT-TERM CAPITAL GAIN ARE FILED AT PAGE 184 OF TH E PB. ON ITS PERUSAL, IT CAN BE SEEN THAT THE ASSESSEE HAD INVES TED IN MUTUAL FUNDS ON 26 OCCASIONS FOR SHORT PERIOD WHICH VARIED FROM 3 DAYS TO 42 DAYS. THE PARTICULARS OF INVESTMENT MADE IN FIXE D DEPOSIT OF THE BANK ARE FILED AT PAGE 192 OF THE PB. ON ITS PERUSA L IT CAN BE SEEN THAT THE ASSESSEE HAD INVESTED IN FIXED DEPOSIT ON 65 OCCASIONS FOR SHORT PERIOD WHICH VARIED FROM 8 DAYS TO 46 DAY S. IT IS FURTHER SUBMITTED THAT THERE IS DIRECT NEXUS BETWEEN THE FU ND BORROWED AND FUND INVESTED. THEREFORE, THE INTEREST PAID ON BORROWED AMOUNT NEEDS TO BE TAKEN INTO ACCOUNT WHILE COMPUTI NG INCOME FROM THE INVESTMENT. IT IS SUBMITTED THAT IT IS WE LL SETTLED IS LAW THAT IF THE FUNDS INEXTRICABLY LINKED WITH THE PROJECT A RE UTILIZED IN MAKING INCOME YIELDING INVESTMENT, THEN SUCH INCOME EARNED WOULD GO TO REDUCE THE COST OF THE PROJECT AND HENC E, SUCH INCOME SHOULD BE REDUCED FROM THE CAPITAL WORK-IN-PROGRESS . 22. IN THIS RESPECT, OUR ATTENTION IS INVITED TO THE ORDER OF THE HON'BLE TRIBUNAL, MUMBAI BENCH, IN THE CASE OF ISLA ND STAR MALL DEVELOPERS P. LTD. V ACT (ITA NO. 5078/MUM/2014) WH ICH IS FILED AT PAGES 248 TO 257 OF THE PB. IN THAT CASE, THE AS SESSEE HAD ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 21 BORROWED FUNDS FROM THE BANK AND IT WAS UTILIZED IN INVESTING IN ULTRA-SHORT TERM FIXED DEPOSITS. THE INTEREST INCOM E EARNED THEREON OF RS. 7,35,674/- WAS CREDITED TO CAPITAL W ORK-IN-PROGRESS BY THE ASSESSEE. THE ASSESSING OFFICER TREATED THIS INCOME AS 'INCOME FROM OTHER SOURCES' U/S. 56 OF THE ACT AND TH E CIT(A) UPHELD THE ORDER OF THE ASSESSING OFFICER. ON FURTH ER APPEAL, THE ASSESSEE RELIED ON JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF INDIAN OIL PANIPAT POWER CONSORTIUM LTD. (315 ITR 2 38) AND CLAIMED THAT THE INTEREST EARNED SHOULD BE REDUCED FROM THE WORK- IN-PROGRESS AS THE FDRS WERE INEXTRICABLY LINKED TO SETTING-UP OF THE PROJECT. THE DR RELIED ON THE RATIO OF THE SUPR EME COURT IN THIS CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILISERS LTD. (227 ITR 172). ACCEPTING THE CONTENTIONS OF THE ASSESSEE, TH E TRIBUNAL HELD THAT THE INCOME ON FDRS WAS REQUIRED TO BE CAPITALI ZED TO BE REDUCED FROM THE CAPITA WORK-IN-PROGRESS AND IT WAS FULLY COVERED BY THE RATIO OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT V BOKARO STEEL LTD. (236 ITR 315} AND N OT BY JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F TUTICORIN ALKALI CHEMICALS AND FERTILISERS LTD (SUPRA). THE R ELEVANT OBSERVATIONS OF THE TRIBUNAL ARE EXTRACTED BELOW: '7. FIRST OF ALL, IT IS FACTUALLY EVIDENT THAT THE INTEREST HAS BEEN EARNED ON FDRS KEPT WITH BANKS FOR A VERY SHOR T PERIOD OF TIME. THE DETAILS ARE PLACED IN THE PAPER BOOK AT PAGES-23 TO 25, WHICH SHOW THAT THE FDRS ARE PLACED FOR PERIODS RANGING FROM 10 TO 30 DAYS. THE LEARNED REPRESENTATIVE EXPLAINS 'HAT THE TERM LOAN WAS BORR OWED FOR THE PURPOSE OF THE PROJECT AND IN THE INTERREGN UM I.E., BETWEEN THE DATE OF RECEIPT OF LOAN FUNDS FROM BANK AND ITS DISBURSAL TOWARDS THE PROJECT ASSESSEE USED TO PLAC E IT TEMPORARILY FOR AN ULTRA SHORT PERIOD IN FDRS, WHIC H HAVE YIELDED INCOME. THE AFORESAID FACT / SITUATION IS N OT IN DISPUTE. THUS, IT IS QUITE APPARENT THAT THE FUNDS DEPLOYED IN FDRS ARE TIED UP FUNDS AND NOT SURPLUS FUNDS. RA THER IN MY CONSIDERED OPINION, THE IMPUGNED FUNDS ARE ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 22 INEXTRICABLY LINKED TO THE DEVELOPMENT AND CONSTRUC TION OF ASSESSEE'S PROJECT OF INTEGRATED MARKET COMPLEX AT WHITE FIELD, BANGALORE. IN THE BACKGROUND OF THE AFORESAI D FACTUAL POSITION, IN MY VIEW, THE INCOME ON FDRS IS REQUIRE D TO BE CAPITALIZED TO BE REDUCED FROM THE CAPITAL WORK-IN- PROGRESS, AND IS FULLY COVERED BY THE RATIO OF THE JUDGMENT O F THE HON'BLE SUPREME COURT IN THE CASE OF CIT V/S BOKARO STEEL LTD., [1999] 236 ITR 315 (SC), AND NOT BY THE JUDGM ENT OF HON'BLE SUPREME COURT IN TUTICORIN ALKALI CHEMICALS & FERTILISERS LTD. (SUPRA), AS CONTENDED BY THE REVEN UE. THE DISTINCTION IN THE APPLICATION OF THE TWO AFORESAID JUDGMENTS OF THE HON'BLE SUPREME COURT HAS BEEN APTLY BROUGHT OUT BY THE HONBLE DELHI HIGH COURT IN THE CASE OF INDI AN OIL PANIPAT POWER CONSORTIUM LTD. (SUPRA) IN THE FOLLOW ING WORDS:- 'IN OUR OPINION, THE TRIBUNAL HAS MISCONSTRUED THE RATIO OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CA SE OF TUTICORIN ALKALI CHEMICALS [1997] 227ITR 172 AND TH AT OF BOKARO STEEL LTD, [1999] 236 ITR 315. THE TEST WHIC H PERMEATES THROUGH THE JUDGMENT OF THE SUPREME COURT IN TUTICORIN ALKALI CHEMICAL [1997] 227 ITR 172 IS THA T IF FUNDS HAVE BEEN BORROWED FOR SETTING UP OF A PLANT AND IF THE FUNDS ARE 'SURPLUS' AND THEN BY VIRTUE OF THAT CIRC UMSTANCE THEY ARE INVESTED IN FIXED DEPOSITS THE INCOME EARN ED IN THE FORM OF INTEREST WILL BE TAXABLE UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. ON THE OTHER HAND, THE RATIO O F THE SUPREME COURT JUDGMENT IN BOKARO STEEL LTD., [1999] 236 ITR 315 TO OUR MIND IS THAT IF INCOME IS EARNED, WH ETHER BY WAY OF INTEREST OR IN ANY OTHER MANNER ON FUNDS WHI CH ARE OTHERWISE 'INEXTRICABLY LINKED' TO THE SETTING UP O F THE PLANT, SUCH INCOME IS REQUIRED TO BE CAPITALIZED TO BE SET OFF AGAINST PRE-OPERATIVE EXPENSES.' 8. IN THE CASE BEFORE THE HON'BLE DELHI HIGH COURT, ISSUE RELATED TO THE TREATMENT TO BE ACCORDED TO THE INTEREST EARNED THE MONIES RECEIVED AS SHARE CAPITAL BY THE ASSESSEE WHICH WER E TEMPORARILY PUT IN A FIXED DEPOSIT AWAITING ACQUISITION OF LAND WHICH HAD RUN INTO LEGAL ENTANGLEMENTS. THE REVENUE TREATED SUCH INCOME AS INCOME UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. AS PER THE HON'BLE HIGH COURT, SINCE THE FUNDS INFUSED IN THE ASSESSEE WERE INEXTRICABLY LINKED WITH THE SETTING UP OF THE PLAN T, THE INTEREST INCOME COULD NOT BE TREATED AS INCOME FROM OTHER SO URCES. SINCE IT HAS FOUND TO HAVE BEEN EARNED IN A PERIOD PRIOR TO COMMENCEMENT OF BUSINESS, IT WAS HELD TO BE IN THE NATURE OF A CAPITAL RECEIPT AND WAS LIABLE TO BE SET-OFF AGAINS T THE PRE- OPERATIVE EXPENSES. ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 23 9. IN MY VIEW, THE JUDGMENT OF THE HON'BLE SUPREME COURT FULLY COVERS THE CONTROVERSY BEFORE ME. ON FACTS, IT IS Q UITE CLEAR THAT THE FUNDS AVAILABLE WITH THE ASSESSEE FOR DEPLOYING THE ULTRA SHORT PERIOD FDRS WERE NOT SURPLUS FUNDS AND, THEREFORE, THE RATIO OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CA SE OF TUTICORIN ALKALI CHEMICALS & FERTILISERS LTD. (SUPR A) WOULD NOT GOVERN THE PRESENT SITUATION. 10. I CONCLUDE BY HOLDING THAT THE ASSESSEE HAS RIG HTLY REDUCED THE SAID INTEREST INCOME FROM THE CAPITAL WORK-IN-P ROGRESS, BECAUSE THE FUNDS DEPLOYED ARE ONLY FOR AN ULTRA SH ORT PERIOD WHICH IN INEXTRICABLY LINKED WITH THE PROJECT. HENC E, I SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER ( APPEALS) AND HOLD THAT THE ADDITION OF RS. 7,35,675, NEEDS T O BE DELETED. I ORDER ACCORDINGLY. THE GROUND OF APPEAL NO.L, RAISE D BY THE ASSESSEE IS ALLOWED.' 23. THE ASSESSEE HAS RAISED UPON THE JUDGMENT O F THE SUPREME COURT IN THE CASE OF CIT V SHREE RAMA MULTI TECH LTD. [403 ITR 426 (SCJ]. IN THAT CASE, THE ASSESSEE HAD INVESTED SHARE APPLICATION MONEY IN BANK DEPOSITS AND EARNED INTER EST OF RS. 1,71,30,202/- WHICH WAS INITIALLY SHOWN AS 'INCOME F ROM OTHER SOURCES' BUT LATER THE ASSESSEE CLAIMED THAT THE SAM E SHOULD BE SET OFF AGAINST 'PUBLIC ISSUE EXPENSES'. SINCE THE AS SESSEE WAS UNABLE TO GIVE SPECIFIC WORKING OF INTEREST FOR PRE -ALLOTMENT AND POST ALLOTMENT PERIOD, THE CLAIM OF THE ASSESSEE WA S NOT ALLOWED AND INTEREST INCOME WAS ADDED TO TOTAL INCOME OF TH E ASSESSEE UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. THE CIT (A) UPHELD THE ORDER OF THE ASSESSING OFFICER. HOWEVER, THE TR IBUNAL, AND LATER HIGH COURT, ALLOWED THE CLAIM OF THE ASSESSEE . ON FURTHER APPEAL BY THE REVENUE, THE SUPREME COURT UPHELD THE ORDER OF THE HIGH COURT AND HELD THAT THE RATIONALE LAID DOW N IN THE CASE OF BOKARO STEEL LTD. WOULD APPLY. THE RELEVANT OBSERVA TIONS OF THE SUPREME COURT ARE EXTRACTED BELOW FOR THE SAKE OF R EADY REFERENCE; ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 24 '11. FURTHER, THE RATIONALE OF JUDGMENT OF BOKARO S TEEL LTD. (SUPRA) WAS FOLLOWED IN CIT VS. KARNAL CO-OPERATIVE SUGAR M ILLS LID. (2000) 161 CTR (SC) 241 : (2000) 243 ITR 2 (SC) . I N THIS CASE,- THE COMPANY HAD DEPOSITED CERTAIN AMOUNT WITH THE B ANK TO OPEN LETTER OF CREDIT FOR PURCHASE OF MACHINERY FOR SETT ING UP PLANT. ON THE MONEY SO DEPOSITED, IT EARNED INTEREST. IN THAT BACKGROUND, THIS COURT OBSERVED THAT THIS IS NOT A CASE WHERE A NY SURPLUS SHARES CAPITAL MONEY WHICH WAS LYING IDLE HAD BEEN DEPOSITED IN THE BANK FOR THE PURPOSE OF EARNING INTEREST. THE D EPOSIT OF MONEY IS DIRECTLY LINKED WITH THE PURCHASE OF PLANT AND M ACHINERY. 12. THE COMMON RATIONALE THAT IS FOLLOWED IN ALL THESE JUDGMENT IF, THAT IF THERE IS ANY SURPLUS MONEY WHI CH IS LYING IDLE AND IT HAS BEEN DEPOSITED IN THE BANK FOR THE PURPOSE OF EARNING INTEREST THEN IT IS LIABLE TO BE TAXED AS I NCOME FROM OTHER SOURCES BUT IF THE INCOME ACCRUED IS MERELY I NCIDENTAL AND NOT THE PRIME PURPOSE OF DOING THE ACT IN QUEST ION WHICH RESULTED INTO ACCRUAL OF SOME ADDITIONAL INCOME THE N THE INCOME IS NOT LIABLE TO BE ASSESSED AND IS ELIGIBLE TO BE CLAIMED AS DEDUCTION. PUTTING THE ABOVE RATIONALE IN TERMS OF THE PRESENT CASE, IF THE SHARE APPLICATION MONEY THAT I S RECEIVED IS DEPOSITED IN THE BANK IN LIGHT OF THE STATUTORY MAN DATORY REQUIREMENT THEN THE ACCRUED INTEREST IS NOT LIABLE TO BE TAXED AND IS ELIGIBLE FOR DEDUCTION AGAINST THE -PUBLIC ISSUE EXPENSES. THE ISSUE OF SHARE RELATES TO CAPITAL STRUCTURE OF THE COMPANY AND HENCE EXPENSES INCURRED IN CONNECT/ON WITH THE ISSU E OF SHARES ARE TO BS CAPITALIZED BECAUSE THE PURPOSE OF SUCH DEPOSIT IS NOT TO MAKE SOME ADDITIONAL INCOME BUT T O COMPLY WITH THE STATUTORY REQUIREMENT AND INTEREST ACCRUED ON SUCH DEPOSIT IS MERELY INCIDENTAL. IN THE PRESENT CASE, THE RESPONDENT WAS STATUTOR/LY REQUIRED TO KEEP THE SHA RE APPLICATION MONEY IN THE BANK TILL THE ALLOTMENT OF SHARES WAS COMPLETE. IN THAT SENSE, WE ARE OF THE VIEW THAT THE HIGH COURT WAS RIGHT IN HO/DING THAT THE INTEREST ACCRUED TO SUCH DEPOSIT O F MONEY IN THE BANK IS LIABLE TO BE SET OFF AGAINST THE PUBLIC ISS UE EXPENSES THAT THE COMPANY HAS INCURRED AS THE INTEREST EARNED II/ JY INEXTRICABLY LINKED WITH REQUIREMENT OF THE COMPANY TO RAISE SHA RE CAPITAL AND WAS THUS ADJUSTABLE TOWARDS THE EXPENDITURE INVOLVE D FOR THE SHARE ISSUE.' (EMPHASIS SUPPLIED). 24. THE ASSESSEE HAS RELIED UPON THE SUPREME C OURT IN THE CASE OF CIT V KARNAL CO-OPERATIVE SUGAR MILLS LTD. (243 ITR 2). IN THIS CASE, THE ASSESSEE HAD DEPOSITED MONEY TO OPEN LETTER OF ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 25 CREDIT FOR PURCHASE OF MACHINERY TO SET UP ITS PLAN T IN TERMS OF AGREEMENT WITH THE SUPPLIER. THE ASSESSING OFFICER TAXED SUCH INTEREST AS 'INCOME FROM OTHER SOURCES'. THE APPEALS FILED BY THE ASSESSEE BEFORE CIT(A) AND THE TRIBUNAL WERE DISMIS SED. HOWEVER, ON FURTHER APPEAL, THE HIGH COURT HELD THA T THERE WAS A DIRECT NEXUS BETWEEN THE PURCHASE OF THE MACHINERY AND THE DEPOSIT OF MONEY IN THE BANK. THIS NEXUS BROUGHT OU T A PRESUMPTION IN ASSESSEE'S FAVOUR THAT MONEY WAS DEPO SITED NOT WITHOUT A PURPOSE BUT WITH THE OBJECT OF ACQUIRING MACHINE FROM THE SUPPLIER. SUCH INTEREST INCOME BEING DIRECTLY R ELATABLE TO THE TERMS OF THE CONTRACT FOR ACQUIRING A BUSINESS ASSE T SHOULD GO TO REDUCE THE COST OF THE ASSET ACQUIRED OUT OF THE TR ANSACTION. HENCE, THE INTEREST COULD NOT BE TAXED AS INCOME FR OM OTHER SOURCES, BUT SHOULD REDUCE THE COST OF ASSETS ACQUI RED OUT OF THE TRANSACTION. THE REVENUE FILED APPEAL BEFORE THE HO N'BLE SUPREME COURT AND THE SAME WAS DISMISSED WITH FOLLO WING OBSERVATIONS: 'IN THE PRESENT CASE, THE ASSESSEE HAD DEPOSITED MO NEY TO OPEN A LETTER OF CREDIT FOR THE PURCHASE OF THE MACHINER Y REQUIRED FOR SETTING UP ITS PLANT IN TERMS OF THE ASSESSEE'S AGR EEMENT WITH THE SUPPLIER. IT WAS ON THE MONEY SO DEPOSITED THAT SOM E INTEREST HAS BEEN EARNED. THIS IS, THEREFORE, NOT A CASE WHERE A NY SURPLUS SHARE CAPITAL MONEY WHICH IS LYING IDLE HAS BEEN DE POSITED IN THE BANK FOR THE PURPOSE OF EARNING INTEREST THE DEPOSI T OF MONEY IN THE PRESENT CASE IS DIRECTLY LINKED WITH THE PURCHA SE OF PLANT AND MACHINERY. HENCE, ANY INCOME EARNED ON SUCH DEPOSIT IS INCIDENTAL TO THE ACQUISITION OF ASSETS FOR THE SET TING UP OF THE PLANT AND MACHINERY. IN THIS VIEW OF THE MATTER THE RATIO LAID DOWN BY THIS COURT IN TUTICORIN ALKALI CHEMICALS & FERTILIZ ERS LTD. V, CIT[1997] 227ITR 172, WILL NOT BE ATTRACTED. THE MO RE APPROPRIATE DECISION IN THE FACTUAL SITUATION IN THE PRESENT CA SE IS IN CIT V. BOKARO STEEL LTD. [1999] 236 ITR 315 (SC). THE APPE AL IS DISMISSED. THERE WILL BE NO ORDER AS TO COSTS-' ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 26 25. THE ASSESSEE HAS RELIED UPON ALSO TO ANOTHER JU DGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. KARN ATAKA POWER CORPORATION (247 ITR 268). IN THIS CASE, THE REVENU E HAD FILED APPEAL BEFORE THE SUPREME COURT AGAINST THE ORDER O F THE HIGH COURT WHEREIN IT WAS HELD THAT INTEREST RECEIPTS AN D HIRE CHARGES RECEIVED FROM CONTRACTOR WERE CAPITAL IN NATURE AND WOULD GO TO REDUCE CAPITAL COST. THE REVENUE FILED APPEAL BEFOR E THE SUPREME COURT AND RAISED THE FOLLOWING QUESTION : '1. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL IS RIGHT IN LAW IN UPHOLDING THE ORDER OF THE COMMISSIONER (APPEALS) WHO DELETED THE ADDITION OF RS. 1,30,44,518 BEING INTEREST RECEIPTS AND HIRE CHARGE S FROM CONTRACTORS BY HOLDING THAT THE SAME ARE IN THE NAT URE OF CAPITAL RECEIPTS WHICH WOULD GO TO REDUCE CAPITAL COST ?' THE SUPREME COURT REPLIED TO THE SAID QUESTION AS U NDER: 'IT IS NOT IN DISPUTE THAT THE FIRST TWO QUESTIONS MUST BE ANSWERED IN THE AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE HA VING REGARD TO THE JUDGMENTS OF THIS COURT IN CITV, BOKARO STEEL L TD. [1999] 102 TAXMAN 94 AND CIT V. ALCOCK ASHDOWN & CO. LTD. [199 7] 224ITR 3S3/90 TAXMAN 521, RESPECTIVELY.' 26. THE ASSESSEE HAS RELIED UPON THE ORDER OF T HE TRIBUNAL, HYDERABAD BENCH, IN THE CASE OF ITO V. KSK WIND ENE RGY IN ITA NO, 1098/HYD/2017 DATED 30.11.2017. IN THIS ORDER, THE JUDGMENT OF THE ANDHRA PRADESH HIGH COURT IN THE CASE OF RAA SI CEMENT LTD. (232 ITR 554), WHICH HAS BEEN RELIED UPON BY T HE CIT(A), IS DULY CONSIDERED AND THE TRIBUNAL HELD INCOME EARNED BY THE ASSESSEE OUT OF INVESTMENT MADE IN THE BANK DEPOSIT DURING PENDENCY OF THE PROJECT CANNOT BE TREATED AS INCOME FROM OTHER SOURCES. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE EXTRACTED HEREUNDER: ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 27 '........IN THE CASE BEFORE US, THE FUNDS DEPOSITED BY THE ASSESSES WITH THE BANKS ARE OUT OF THE EQUITY CAPITAL OF THE ASSESSEE AND NOT SURPLUS FUNDS AND THEY WERE DEPOSITED IN THE BANK BECAUSE, THE ASSESSEE WAS NOT IN A POSITION TO PROCEED WITH THE IMPLEMENT ATION OF THE PROJECT DUE TO VARIOUS BOTTLENECKS BEYOND THE CONTR OL OF THE ASSESSEE. IT IS ALSO TO BE NOTICED THAT THE ASSESSE E WAS NOT PAYING ANY INTEREST ON SUCH FUNDS AS IT IS ITS SHAR E CAPITAL WHICH IS MEANT WERE SETTING UP OF THE PROJECT ONLY. SUCH DEP OSITS ARE, IN OUR OPINION, INEXTRICABLY LINKED WITH THE PROJECT A ND ARE PART OF CAPITAL WORK-IN-PROGRESS. THE HON'BLE DELHI HIGH CO URT IN THE CASE OF INDIAN OIL PANIPAT POWER CONSORTIUM LTD., REPORT ED IN (2009) 181 TAXMANN 249 (DEL) AND IN THE CASE OF CIT VS. FA COR POWER LTD,, REPORTED IN (2016) 66 TAXMANN.COM HAVE REITER ATED THE PRINCIPLE LAID DOWN IN THE CASE OF BOKARO STEEL LTD ., (SUPRA) TO HOLD THAT 'THE INTEREST' EARNED ON FUNDS PRIMARILY BOUGHT FOR INFUSION IN THE BUSINESS COULD NOT BE CLASSIFIED AS 'INCOME FROM OTHER SOURCES'. WE FIND THAT CIT(A) HAS FOLLOWED TH ESE DECISIONS FOR GRANTING RELIEF TO THE ASSESSEE. THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS ISSU E.' 27. COMING TO JUDGMENT RELIED UPON BY THE LD.CIT (A) IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD. V CIT ( 227 ITR 172) WHEREIN IT WAS HELD THAT INTEREST EARNED ON TH E SURPLUS FUNDS KEPT IN SHORT TERM DEPOSITS WILL BE CHARGEABLE U/S. 56 OF THE ACT. IN THAT CASE, THE ASSESSEE HAD CHOSEN NOT TO KEEP ITS SURPLUS CAPITAL IDLE BUT DECIDED TO INVEST IT FRUITFULLY. IT IS SUB MITTED THAT THE CIT(A) HAS OVERLOOKED THE FOLLOWING VITAL OBSERVATIONS OF THE SUPREME COURT; ' THERE IS ANOTHER ASPECT OF THIS MATTER. THE COMPA NY, IN THIS CASE, IS AT LIBERTY TO USE THE INTEREST INCOME AS I T LIKES. IT IS UNDER NO OBLIGATION TO UTILIZE THIS INTEREST INCOME TO RE DUCE ITS LIABILITY TO PAY INTEREST TO ITS CREDITORS. IT CAN REINVEST THE INTEREST INCOME IN LAND OR SHARES, IT CAN PURCHASE SECURITIES, IT CAN BUY HOUSE PROPERTY, IT CAN ALSO SET UP ANOTHER LINE OF BUSINE SS, IT MAY EVEN PAY DIVIDENDS OUT OF THIS INCOME TO ITS SHAREHOLDER S.....' ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 28 28. FROM THE ABOVE, IT IS AMPLY CLEAR THAT IN OR DER TO CONSIDER WHETHER THE INCOME EARNED IS OF REVENUE OR CAPITAL IN NATURE, IT IS IMPORTANT TO TAKE INTO ACCOUNT WHETHER THE FUNDS WE RE INEXTRICABLY LINKED TO SETTING UP OF THE PROJECT. IF THE ASSESSE E IS UNDER OBLIGATION TO USE INTEREST INCOME IN PRESCRIBED MAN NER, THEN SUCH INCOME SHOULD BE REDUCED FROM THE COST OF THE PROJE CT. IF THE INCOME EARNED FROM THE INVESTMENT CAN BE UTILIZED F OR ANY PURPOSE AS PER THE TOTAL DISCRETION OF THE ASSESSEE , AS IT WAS IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD. (SUPRA), THEN SUCH INCOME WOULD BE CONSIDERED AS REVENUE IN NATUR E LIABLE TO BE TAXED U/S. 56 OF THE ACT. AS POINTED OUT HEREINA BOVE, FUNDS OF THE ASSESSEE WERE INEXTRICABLY CONNECTED WITH THE P ROJECT AND THE ASSESSEE HAD TO CREDIT ANY INVESTMENT INCOME TO THE TRA MAIN INCOME. THEREFORE, ANY INCOME ARISING FROM INVESTME NT MADE FROM BORROWED FUNDS SHOULD BE REDUCED FROM WORK-IN-PROGR ESS AS HAS BEEN HELD IN THE VARIOUS JUDICIAL PRONOUNCEMENTS RE FERRED ABOVE. WE FURTHER SUBMITTED THAT THE DECISIONS RELIED UPO N BY THE CIT(A), SUCH AS TUTICORIN ALKALI (SUPRA), HAVE BEEN DULY CO NSIDERED AND COVERED BY THE AFORESAID VARIOUS JUDGMENTS RELIED U PON BY THE ASSESSEE. THEREFORE, THE INCOME EARNED BY THE ASSES SEE FROM INVESTMENTS MADE OUT OF FUNDS THAT ARE INEXTRICABLY CONNECTED WITH THE PROJECT SHOULD BE REDUCED FROM WORK-IN-PROGRESS . 29. COMING TO ALTERNATE ARGUMENT OF THE ASSESSEE . WITHOUT PREJUDICE TO ABOVE, IT IS SUBMITTED THAT IF INCOME ARISING FROM THE INVESTMENT IS CONSIDERED AS TAXABLE INCOME OF THE A SSESSEE UNDER THE ACT, THEN THE ASSESSEE SHOULD BE GRANTED DEDUCT ION IN RESPECT OF INTEREST PAID ON BORROWED FUNDS WHICH HAD BEEN U TILIZED IN MAKING INVESTMENTS GIVING RISE TO IMPUGNED INCOME. THE ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 29 ASSESSING OFFICER HAS DECLINED TO CONSIDER THE INTE REST PAID ON THE BORROWED FUNDS, WHICH WERE UTILIZED FOR MAKING INVE STMENT IN MUTUAL FUND, FOR THE REASON THAT THERE IS NO PROVIS ION FOR ALLOWING INTEREST EXPENSES FOR COMPUTING, INCOME UNDER CHAPT ER VII OF THE ACT. THE CIT(A) HAS UPHELD THE ORDER THE ASSESSING OFFICER. FURTHER, THE CIT(A) HAS ADDED INTEREST EARNED ON FI XED DEPOSIT WITHOUT GRANTING ANY DEDUCTION FOR INTEREST PAID ON BORROWED FUNDS UTILIZED FOR MAKING INVESTMENT IN FIXED DEPOSITS. 30. IT IS SUBMITTED THAT INTEREST PAID ON BORRO WED FUNDS IS REQUIRED TO BE TAKEN INTO ACCOUNT WHILE COMPUTING T HE INCOME OF THE ASSESSEE ARISING OUT OF INVESTMENTS WHICH WERE MADE BY USING BORROWED FUNDS. IN THIS RESPECT, OUR ATTENT ION IS INVITED TO THE ORDER OF THE TRIBUNAL, MUMBAI BENCH, IN THE CAS E OF DCIT V. SHRI FRITZ D, SILVA IN ITA NO. 236/MUM/2010 DATED 0 8.05.2015. IN THIS CASE, THE INTEREST COST INCURRED FOR ACQUISITI ON OF SHARES WAS CONSIDERED AS COST OF SHARES BY THE ASSESSEE WHILE COMPUTING INCOME UNDER THE HEAD 'CAPITAL GAINS'. THE ASSESSING OFFICER HELD THAT SUCH INTEREST PAID BY THE ASSESSEE CANNOT BE C ONSIDERED AS EXPENDITURE WHILE COMPUTING INCOME UNDER THE HEAD ' CAPITAL GAIN'. ACCORDINGLY, THE ASSESSING OFFICER RE-COMPUTE D CAPITAL GAIN AT RS. 1,98,58,1017- AS AGAINST CAPITAL GAIN COMPUT ED BY THE ASSESSEE AT RS. 62,469/-. THE CIT(A), BY RELYING ON THE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF MITHILESH KU MAR (92 ITR 9), ACCEPTED THE CONTENTION OF THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER FILED APPEAL BEFORE THE TRIBUNAL. AFTER CONSIDERING RIVAL CONTENTIONS AND JUDGMENT OF THE M ADRAS HIGH COURT IN THE CASE OF TRISHUL INVESTMENTS LTD. (305 ITR 434), THE ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 30 TRIBUNAL AFFIRMED THE ORDER PASSED BY THE CIT(A). T HE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE EXTRACTED BELOW: '3. WE HAVE CONSIDERED THE RIVAL STANDS. THE CONTRO VERSY BEFORE US IS AS TO WHETHER THE INTEREST PAID BY THE ASSESS EE ON LOANS TAKEN FOR ACQUIRING THE SHARES IN THE PAST CAN BE A LLOWED AS A DEDUCTION U/S 48 AS COST OF ACQUISITION WHILE COMPU TING CAPITAL GAIN ON SALE OF SUCH SHARES. ON THIS ASPECT, THE LD . REPRESENTATIVE FOR THE RESPONDENT ASSESSEE RELIED U PON THE JUDGMENT OF HON'BLE MADRAS HIGH COURT IN THE CASE O F TRISHUL INVESTMENTS LTD. 305 ITR 434(MADRAS) WHICH IS DIREC TLY ON THE POINT. IN THE CASE BEFORE THE HON'BLE MADRAS HIGH C OURT, THE ASSESSEE WAS CARRYING ON THE BUSINESS OF INVESTMENT IN SHARES/SECURITIES AND THE PROFIT DERIVED FROM SALE OF SHARES WAS HELD SUBJECT TO CAPITAL GAINS. APART FROM OTHER ISS UES, THE REVENUE HAD CONTESTED THE ORDER OF THE TRIBUNAL WHE REIN THE ASSESSEE WAS ALLOWED THE INTEREST LIABILITY INCURRE D ON BORROWINGS UTILIZED TO ACQUIRE THE SHARES, WHILE DETERMINING T HE COST OF ACQUISITION OF SHARES FOR THE PURPOSE OF COMPUTING CAPITAL GAIN. AS PER THE HON'BLE HIGH COURT, THE TRIBUNAL WAS CORREC T IN HOLDING THAT THE INTEREST PAID FOR ACQUISITION OF SHARES WO ULD PARTAKE OF THE CHARACTER OF COST OF SHARES AND, THEREFORE, THE SAM E WAS RIGHTLY CAPITALIZED ALONG WITH THE COST OF ACQUISITION OF S HARES. THE HON'BLE HIGH COURT AFFIRMED THE DECISION OF THIS TR IBUNAL THAT THE INTEREST PAYABLE ON MONEYS BORROWED FOR ACQUISITION OF SHARES SHOULD BE ADDED TO THE COST OF ACQUISITION OF SHARE S FOR THE PURPOSE OF COMPUTING CAPITAL GAINS. THE AFORESAID L EGAL POSITION PROPOUNDED BY THE HON'BLE MADRAS HIGH COURT FULLY C OVERS THE CONCLUSION DRAWN BY THE CIT(A) IN THE PRESENT CASE. NOTABLY, IT IS NOT DISPUTED BY THE REVENUE THAT THE INTEREST COSTS IN QUESTION WERE INCURRED ON THE FUNDS UTILIZED FOR ACQUISITION OF SHARES IN THE PAST IN FACT AS PER THE STATEMENT OF FACTS FILED BE FORE THE CIT(A), THE ASSESSEE HAD TABULATED THE AMOUNT OF INTEREST C APITALIZED ALONG WITH THE COST OF SHARES, WHICH WERE PURCHASED IN THE PAST. THE ASSESSEE HAD ALSO ASSERTED BEFORE THE CIT(A) WI THOUT REBUTTAL, THAT THE INTEREST COST SO INCURRED IN THE PAST WAS NOT CLAIMED AS A DEDUCTION AGAINST ANY OTHER INCOME. BE THAT AS IT MAY, IN SO FAR AS THE FACTUAL POSITION IS CONCERNED , THERE IS NO DENIAL BY THE REVENUE THAT MONIES BORROWED HAVE BEE N UTILIZED FOR ACQUISITION OF SHARES IN QUESTION. THEREFORE, H AVING REGARD TO THE FACTUAL FINDINGS OF THE CIT(A), IN OUR VIEW, TH E LEGAL POSITION AS PROPOUNDED BY THE HON'BLE MADRAS HIGH COURT IN THE CASE OF TN'SHUL INVESTMENTS LTD (SUPRA) SUPPORTS THE PLEA O F THE ASSESSEE THAT INTEREST PAID FOR ACQUISITION OF THE SHARES WO ULD PARTAKE THE CHARACTER OF COST OF SHARES AND, THEREFORE, ASSESSE E HAD RIGHTLY CAPITALIZED THE INTEREST ALONG WITH THE COST OF ACQ UISITION FOR THE ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 31 PURPOSE OF COMPUTING CAPITAL GAINS. THE CONCLUSION OF THE CIT(A) THUS DESERVES TO BE AFFIRMED. ' 31. FURTHER, THE CO-ORDINATE TRIBUNAL MUMBAI BE NCH, IN THE CASE OF J. F. LABORATORIES LTD. V ITO (96 ITD 448) HAS B EEN RELIED UPON, IN THIS CASE, THE ASSESSEE UTILIZED BORROWED FUNDS FOR INVESTING IN TERM DEPOSITS FOR EARNING INTEREST. THE ASSESSEE CL AIMED THAT THE INTEREST EARNED ON TERM DEPOSITS WAS DEDUCTIBLE FRO M PROJECT COST. HOWEVER, THE ASSESSING OFFICER HELD THAT GROSS INTE REST RECEIPTS OUGHT TO BE BROUGHT TO TAX AS 'INCOME FROM OTHER SOU RCES'. THE CIT(A) UPHELD THE ASSESSMENT ORDER. ON FURTHER APPE AL, IT WAS PLEADED BEFORE THE TRIBUNAL THAT GROSS INTEREST COU LD NOT BE BROUGHT TO TAX WITHOUT CONSIDERING THE QUESTION OF DEDUCTIBILITY OF EXPENDITURE INCURRED BY THE ASSESSEE INCLUDING INTE REST ON BORROWED FUNDS FROM THE GROSS INTEREST. THE TRIBUNA L ACCEPTED THE SAID PLEA AND SINCE NO MATERIAL WAS AVAILABLE TO SH OW THE EXTENT OF DEDUCTIBLE EXPENDITURE, THE ASSESSING OFFICER WA S DIRECTED TO VERIFY SUCH EXPENDITURE AND CONSIDER THE CLAIM IN A CCORDANCE WITH LAW AFTER GIVING ADEQUATE OPPORTUNITY TO THE ASSESS EE. THEREAFTER, THE ASSESSING OFFICER, BY REFERRING TO THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FETILIZERS LTD. (SUPRA), REJECTED THE CLAIM OF THE ASSESSEE WITHOUT VERIFYING OR RECORDING ANY FINDING AS TO WHETHER FUNDS ORIGINALL Y BORROWED FOR BUSINESS WERE ACTUALLY DIVERTED FOR MAKING INVESTME NT IN TERM DEPOSIT WITH A VIEW TO EARN INTEREST INCOME. THE CI T(A) UPHELD THE ORDER OF THE ASSESSING OFFICER, HENCE, THE ASSESSEE FILED APPEAL BEFORE THE TRIBUNAL. THE ASSESSEE BROUGHT TO THE NO TICE OF THE TRIBUNAL THAT THE OWN FUNDS AND BORROWED FUNDS WERE MIXED AND AVAILABLE WITH THE ASSESSEE AND THE PRO-RATA EXPENS ES DETAILS WERE FURNISHED TO THE ASSESSING OFFICER. FURTHER, I T WAS SUBMITTED ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 32 THAT THE REVENUE HAD NOT RAISED ANY DOUBT ABOUT DEP LOYMENT OF BORROWED FUNDS IN TERM DEPOSITS FOR EARNING INTERES T. THE ASSESSEE ALSO ARGUED THAT ACTUAL USE OF THE BORROWE D FUND WAS IMPORTANT FOR THE PURPOSES OF THE ACT AND NOT THE M OTIVE AT THE TIME WHEN THE FUNDS WERE BORROWED. THE DR CONTENDED THAT BORROWED FUNDS INTENDED TO BE USED ONLY FOR BUSINES S PURPOSES AND THE SAME NEEDED TO BE CAPITALIZED IN VIEW OF DE CISION OF THE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMI CALS AND FERTILIZERS LTD. (SUPRA). REFERRING TO SEVERAL OTHE R DECISIONS AND PROVISIONS OF SECTION 57, THE DR ARGUED THAT IT IS DIFFICULT TO ENTERTAIN ASSESSEE'S CLAIM OF DEDUCTION OF INTEREST U/S.57(III) OF THE ACT. AFTER TAKING INTO ACCOUNT RIVAL SUBMISSIONS, T HE TRIBUNAL HELD THAT THE DIRECTIONS WERE ISSUED TO THE ASSESSING OF FICER AFTER TAKING INTO ACCOUNT THAT THE PRINCIPLE OF APPORTION MENT OF EXPENDITURE ALLOWABLE U/S. 57(III) WAS INHERENT. HO WEVER, THE ASSESSING OFFICER PROCEEDED WITH ASSUMPTION THAT TH E ASSESSEE'S CLAIM WAS NOT ALLOWABLE AT ALL U/S.57(III) OF THE A CT. THE TRIBUNAL REJECTED THE CONTENTIONS OF THE DR IN RESPECT OF AL IENABILITY OF DEDUCTION AND APPORTIONMENT AND DIRECTED THE ASSESS ING OFFICER TO WORK OUT QUANTUM OF INTEREST EXPENDITURE WHICH IS ALLOWABLE U/S. 57(III) OF THE ACT. THE RELEVANT OBSERVAT IONS OF THE TRIBUNAL ARE EXTRACTED BELOW: '8. THE ID. DR HAS LAID GREAT EMPHASIS ON THE PHRAS EOLOGY OF SECTION 57(III) AND HAS RELIED UPON THE BOMBAY HIGH COURT DECISION IN THE CASE OF GLOBE THEATRES PVT LTD. (SU PRA) AND THE DELHI HIGH COURT DECISION IN THE CASE OF SIDDHO MAL & SONS (SUPRA). IN THESE CASES, THE HON'BLE COURTS WERE CA LLED UPON TO ADJUDICATE THE DEDUCIBILITY OF CERTAIN EXPENSES UND ER SECTION 10(2)(XV) OF THE INDIAN INCOME-TAX ACT, 1922, WHICH CORRESPONDS TO SECTION 37(1) OF THE INCOME-TAX ACT, 1961. IN TH ESE CASES, IT WAS OBSERVED THAT WHILE DECIDING AS TO WHETHER A PA RTICULAR AMOUNT IS LAID OUT OR EXPENDED WHOLLY OR EXCLUSIVEL Y FOR THE ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 33 PURPOSES OF BUSINESS, IT MUST BE CONSIDERED AS TO W HETHER THE EXPENSE HAS BEEN INCURRED WITH THE SOLE OBJECT OF F URTHERING THE TRADE OR BUSINESS INTEREST OF THE ASSESSEE, UNALLOY ED OR UNMIXED WITH ANY OTHER PRIVATE OR NON-BUSINESS CONSIDERATIO N. IF THE EXPENDITURE IS PARTLY ATTRIBUTABLE FOR NON-BUSINESS PURPOSES, THE SAME CANNOT BE ALLOWED AS A LEGITIMATE BUSINESS EXP ENSES. IN OUR VIEW, THE RATIO OF THESE CASES PRESCRIBES THAT BEFORE ALLOWING ANY EXPENDITURE OR PART THEREOF UNDER SECTION 37(1) , IT MUST BE ENSURED THAT THE EXPENDITURE HAS BEEN INCURRED WHOL LY AND EXCLUSIVELY FOR BUSINESS PURPOSES AND THAT ANY PART THEREOF IS NOT REFERABLE TO NON-BUSINESS OR PERSONAL PURPOSES. DIF FICULTY ARISES WHERE A CONSOLIDATED ACCOUNT IS MAINTAINED FOR THE EXPENDITURE, PART OF WHICH IS DEDUCTIBLE UNDER SECTION 37(1) [OR FOR THAT MATTER UNDER SECTION 57(III)J. IN SUCH CASES, WOULD IT BE REASONABLE TO DISALLOW THE ENTIRE EXPENDITURE ON THE GROUND THAT A FRACTION OF THE EXPENDITURE DOES NOT PERTAIN TO BUSINESS PURPOSES. IN OUR VIEW, SUCH A STRICT INTERPRETATION WOULD DEFEAT THE VERY PURPOSE OF SECTION 37(1) OR SECTION 57(111). IN SUCH A SITUATI ON, IN OUR VIEW, THE EXPENDITURE HAS TO BE APPORTIONED AND IT IS WEL L KNOWN THAT THE PRINCIPLE OF APPORTIONMENT IS NORMALLY APPLIED BY T HE INCOME-TAX DEPARTMENT IN SUCH CASES. FOR EXAMPLE, IF EXPENSES LIKE TELEPHONE EXPENSES, MOTOR CAR EXPENSES, TRAVELLING EXPENSES ETC. ARE FOUND TO CONTAIN PERSONAL ELEMENT ALSO, THE DIS ALLOWANCE IS MADE ON ESTIMATE BASIS TO COVER SUCH PERSONAL ELEME NT. IN OTHER WORDS, THE EXPENDITURE IS APPORTIONED BETWEEN LEGIT IMATE BUSINESS EXPENDITURE AND PERSONAL EXPENSES. IT IS T RUE THAT THE ITAT, INDORE BENCH, IN THE CASE OF MANDIDEEP ENGINE ERING & PACKAGING INDUSTRIES P. LTD. (SUPRA) HAS TAKEN A DI FFERENT VIEW AND THEY HAVE HELD THAT THE EXPENDITURE CANNOT BE A PPORTIONED FOR THE PURPOSES OF SECTION 57(III). HOWEVER, WE FIND T HAT THE CASES WHICH HAVE BEEN CITED BEFORE US ON BEHALF OF THE AS SESSEE APPELLANT WERE NOT CONSIDERED BY THE INDORE BENCH. THE PRINCIPLE OF APPORTIONMENT HAS BEEN ACCEPTED BY THE SUPREME C OURT IN THE CASE OF CONTINENTAL CONSTRUCTION LTD. (SUPRA) AND B Y THE GUJARAT HIGH COURT IN THE CASE OF H.K. INVESTMENT CO. PVT L TD, (SUPRA). THE ID. OR HAS RELIED ON THE SUPREME COURT IN THE C ASE OF SMT. PADMAVATHI JAIKRISHNA (SUPRA). IN THIS CASE, THE AS SESSEE DERIVED INCOME FROM OTHER SOURCES IN THE SHAPE OF INTEREST DIVIDEND ETC. OUT OF THE INTEREST OF RS. 26,986 PAID BY THE ASSES SEE ON MONIES BORROWED, THE ITO DISALLOWED A SUM OF RS. 10,239 ON PROPORTIONATE BASIS ON THE GROUND THAT TO THAT EXTE NT THE LOAN WAS USED TO DISCHARGE THE ASSESSEE'S LIABILITY FOR PAYM ENT OF INCOME- TAX, WEALTH-TAX AND ANNUITY DEPOSITS. IN THESE CIRC UMSTANCES, IT WAS HELD BY THE SUPREME COURT THAT THE DEPARTMENT W AS JUSTIFIED IN DISALLOWING THE INTEREST ON THE LOAN, WHICH WAS NOT INCURRED FOR THE PURPOSE OF MAKING INVESTMENT YIELDING INTEREST AND DIVIDEND INCOME. SIMILARLY, IN THE CASE OF MS. ILA R. AMBANI , THE ITAT, ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 34 MUMBAI BENCH OBSERVED THAT THE INTEREST PAID ON LOA N USED FOR ACQUIRING JEWELLERY CANNOT BE SAID TO HAVE BEEN INC URRED FOR MAKING OR EARNING INCOME CHARGEABLE TO TAX UNDER SE CTION 56. IN OUR VIEW, THE ASSESSEE'S CLAIM FOR APPORTIONMENT IS CLEARLY SUPPORTED FROM THE VARIOUS JUDICIAL PRONOUNCEMENTS AND WE FEEL THAT THE VIEW EXPRESSED BY THE ITA T, INDORE BENCH, WITH DUE RESPECT, CANNOT BE ACCEPTED HAVING REGARD TO THE SU PREME COURT AND GUJARAT HIGH COURT DECISIONS RELIED UPON BY THE ID. COUNSEL FOR THE ASSESSEE. FURTHER, AS ALREADY MENTIONED ABO VE, THE PRINCIPLE OF APPORTIONMENT WAS ALREADY ACCEPTED BY THE TRIBUNAL WHEN THE MATTER WAS RESTORED BACK TO THE ASSESSING OFFICER AND IN OUR VIEW, THE ASSESSING OFFICER WAS DUTY BOUND T O VERIFY THE DETAILS FILED BEFORE HIM TO FIND OUT WHAT PORTION O F THE EXPENDITURE IS REFERABLE TO THE LOAN ON WHICH INTEREST INCOME I S EARNED, WHICH IS CHARGEABLE TO TAX UNDER SECTION 56. THESE DETAIL S HAVE BEEN REPRODUCED BY THE ID. C1T(A) AT PAGES 2 TO 4 OF HIS ORDER AND FOR PROPER UNDERSTANDING OF THE FACTUAL POSITION, IT WO ULD BE WORTHWHILE TO REPRODUCE BELOW THE STATEMENT OF AVER AGE/AD-HOC ALLOCATIONS OF COST OF BORROWING AND ADMINISTRATIVE EXPENSES FOR THE RELEVANT ASSESSMENT YEARS AS UNDER:..... . FROM THE ABOVE DETAILS, IT APPEARS THAT, SINCE CONS OLIDATED DETAILS OF EXPENSES HAVE BEEN MAINTAINED, APPORTIONMENT HAS BEEN DONE BY THE ASSESSEE ON PRO-RATA BASIS. IT IS SEEN THAT THE ASSESSEE- COMPANY HAS ALSO TAKEN INTO ACCOUNT THE VARIOUS ADM INISTRATIVE EXPENSES. ON ESTIMATE BASIS, THE ASSESSEE-COMPANY H AS APPORTIONED THESE ADMINISTRATIVE EXPENSES AS PERTAI NING TO EARNING OF INTEREST INCOME. IN OUR VIEW, ALL ADMINI STRATIVE EXPENSES HAVE BEEN PRIMARILY INCURRED FOR THE PURPO SE OF THE ASSESSEE'S BUSINESS AND THE ASSESSEE-COMPANY IS NOT REQUIRED TO INCUR SUCH ADMINISTRATIVE EXPENSES FOR EARNING INTE REST INCOME, WHICH FLOWS FROM THE TERM DEPOSITS MADE WITH THE BA NKS. THEREFORE, IN OUR VIEW, THE ADMINISTRATIVE EXPENSES OR PART THEREOF CANNOT BE ALLOWED UNDER SECTION 57(III). ONLY INTER EST EXPENDITURE IS REQUIRED TO BE APPORTIONED TO THE INVESTMENT WHI CH ARE YIELDING INTEREST INCOME TO THE ASSESSEE. THE ASSESSING OFFI CER IS, THEREFORE, DIRECTED TO WORK OUT THE QUANTUM OF INTE REST EXPENDITURE, WHICH IS ALLOWABLE UNDER SECTION 57(II I) ON PRO-RATA BASIS AS PER THE DETAILS ALREADY MADE AVAILABLE BY THE ASSESSEE AND REPRODUCED BY THE ID. CIT(A) IN HIS ORDER, IN R ESPECT OF ALL THE THREE ASSESSMENT YEARS. OPPORTUNITY SHALL BE ALLOWE D TO THE ASSESSEE.' ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 35 32. IT IS UNDISPUTED THAT THE ASSESSEE HAS INCU RRED INTEREST COST ON THE BORROWED FUNDS THAT HAVE BEEN UTILIZED IN MA KING INVESTMENT IN MUTUAL FUND AND BANK DEPOSITS. THE DE TAILS THEREOF HAVE ALSO BEEN PLACED ON RECORD AT PAGES 184 AND 19 2 OF THE PB. THEREFORE, IN VIEW OF THE ORDERS RELIED ABOVE, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION OF INTEREST COST FROM THE CO RRESPONDING INCOME ARISING OUT OF INVESTMENTS MADE OUT OF BORRO WED FUNDS. HENCE, WE DIRECT THE ASSESSING OFFICER TO GRANT SUC H DEDUCTION WHILE ARRIVING AT TAXABLE INCOME ARISING FROM SUCH INVESTMENT. HOWEVER, THIS IS WITHOUT PREJUDICE TO THE MAIN FIND ING THAT THE INCOME ITSELF IS NOT TAXABLE AND SHOULD GO TO REDUC E THE COST OF THE PROJECT. 33. IN THIS VIEW OF THE MATTER AND CONSIDERING THE RATIO OF CASE LAWS DISCUSSED HEREINABOVE, WE ARE OF THE CONSIDERED VIE W THAT SHORT TERM CAPITAL GAIN DERIVED FROM SALE OF UNITS OF MUT UAL FUNDS AND INTEREST EARNED FROM FIXED DEPOSITS KEPT IN BANKS O UT OF IDLE FUNDS OF PROJECT IS RIGHTLY CREDITED TO CAPITAL WORKING PROG RESS ACCOUNT, DURING THE IMPLEMENTATION PERIOD OF THE PROJECT. HENCE, WE DIRECT THE LD.AO TO DELETE ADDITIONS MADE TOWARDS SHORT TERM CAPITAL GAIN DERIVED FROM SALE OF UNITS OF MUTUAL FUNDS. WE, FURTHER DIR ECT THE LD. AO TO DELETE ENHANCEMENT MADE BY THE LD. CIT(A) TOWARDS I NTEREST INCOME EARNED FROM FIXED DEPOSITS WITH BANKS INVESTED OUT OF IDLE FUNDS OF PROJECT. 34. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERAT ION FROM GROUND NO.5 OF ASSESSEE APPEAL IS DISMISSAL OF ADDITIONAL GROUND TAKEN BY THE ASSESEE CLAIMING PASSENGER SERVICE FEES SECURI TY COMPONENT OF RS.51,03,65,280/- NOT TO BE IN THE NATURE OF INC OME AND THE SAME ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 36 OUGHT TO HAVE BEEN EXCLUDED FROM THE TOTAL INCOME O F THE ASSESEE. THE ASSESSEE HAS FILED AN ADDITIONAL GROUND BEFORE THE LD.CIT(A) CLAIMING EXCLUSION OF PASSENGER SERVICE FEE- SECUR ITY COMPONENT OF RS.51,03,65,280/- FROM THE TOTAL INCOME. THE LD.CIT (A) HAS ADMITTED ADDITIONAL GROUND FILED BY THE ASSESSEE, BUT REJECT ED THE CONTENTION OF THE ASSESSEE, ON THE GROUND THAT SAID INCOME BEI NG PASSENGER SERVICE FEE-SECURITY COMPONENT IS INCOME OF THE ASS ESSEE ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES . 35. THE LD. AR FOR THE ASSESSEE, AT THE TIME OF HE ARING SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESE E BY THE DECISION OF ITAT, MUMBAI B BENCH IN ASSESSEES OWN CASE FOR A Y 2008-09 IN ITA NO.2760/MUM/2012, VIDE ORDER DATED 06/09/2016, WHERE UNDER IDENTICAL SET OF FACTS, THE TRIBUNAL HELD THAT PASS ENGER SERVICE FEE- SECURITY COMPONENT IS NOT IN THE NATURE OF INCOME L IABLE TO BE TAXED IN THE HANDS OF THE ASSESSEE. HE, FURTHER SUBMITTED THAT ALTHOUGH, THE TRIBUNAL HAS HELD THAT SAID AMOUNT COULD NOT BE CHARACTERIZED UNDER THE DEFINITION OF INCOME U/S 2(24) R.W.S. 5 OF THE I.T.ACT, 1961, BUT, FURTHER WENT ON TO OBSERVE THAT IN CASE ANY VI OLATION IN UTILIZING THE AMOUNT AS PER NORMS, THEN THE LD. AO WOULD BE A T LIBERTY TO TREAT SUCH MISAPPROPRIATION AS INCOME OF THE ASSESSEE. HE , FURTHER SUBMITTED THAT THIS OBSERVATION HAS BEEN EXPUNGED B Y THE TRIBUNAL, WHEN THE ASSESSEE HAS FILED MISCELLANEOUS APPLICATI ON AGAINST THE ORDER OF THE TRIBUNAL IN M.A.NO.239/MUM/2017, WHERE IT WAS CATEGORICALLY HELD THAT WHEN, THE ASSESSEE IS HAVIN G NO CONTROL OVER THE FUNDS AND ALSO, SAID FUNDS NEEDS TO BE UTILIZED FOR THE PURPOSE OF SECURITY OF THE AIRPORT, AS PER THE STANDARD OPERAT ING PROCEDURES, THE QUESTION OF TAXATION OF SAID INCOME AS INCOME OF TH E ASSESSE IS INCORRECT AND ACCORDINGLY, EXPUNGED, THE OBSERVATIO N GIVEN IN PARA ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 37 14.44 OF THE TRIBUNAL ORDER. THE LD. AR, FURTHER SU BMITTED THAT SINCE, THE ORDER PASSED IN M.A FILED FOR AY 2008-09 HAS BE EN PASSED SUBSEQUENT TO THE ORDER OF THE LD.CIT(A) AND THAT V ERY OBSERVATIONS, WHICH FORMED THE BASIS OF DISMISSAL OF ADDITIONAL G ROUND BY THE LD.CIT(A) HAVE NOW BEEN EXPUNGED BY THE TRIBUNAL. T HEREFORE, THE LD. AO MAY BE DIRECTED TO EXCLUDE PASSENGER SERVICE FEES-SECURITY COMPONENT FROM THE INCOME OF THE ASSESSEE. 36. THE LD. DR ON THE OTHER HAND STRONGLY SUPPORT ING ORDER OF THE LD.CIT(A) SUBMITTED THAT ALTHOUGH, THE ISSUE IS DEC IDED IN FAVOUR OF THE ASSESSEE FOR EARLIER ASSESSMENT YEAR 2008-09, B UT, THERE IS A SPECIFIC OBSERVATIONS IN THE ORDER OF THE TRIBUNAL TO THE EFFECT THAT IN CASE ANY VIOLATIONS IN UTILIZATION OF FUNDS, THEN T HE LD. AO IS AT LIBERTY TO TREAT SUCH MISAPPROPRIATION AS INCOME OF THE ASS ESSE. THE LD.CIT(A) BASED ON SAID OBSERVATIONS OF THE TRIBUNA L HAS BROUGHT OUT VARIOUS MISAPPROPRIATIONS, IN RESPECT OF UTILIZ ATION OF FUNDS AS PER AUDIT REPORT OF CAG. THEREFORE, IT IS INCORRECT ON THE PART OF THE ASSESEE TO SAY THAT THE ISSUE HAS BEEN FULLY COVERE D IN FAVOUR OF THE ASSESSES BY THE DECISION OF ITAT FOR AY 2008-09 37. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE M ATERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. IT IS AN ADMITTED FACT THAT THE TRIBUNAL HAD CONSIDERED AN I DENTICAL ISSUE FOR AY 2008-09 IN ITA NO.2760/MUM/2012 AND AFTER CONSID ERING RELEVANT FACTS, INCLUDING AGREEMENT BETWEEN THE ASS ESEE AND THE AAI AND ALSO INSTRUCTIONS, DATED 19/01/2019 ISSUED BY MOCA HELD THAT PSF-SC COLLECTED BY THE ASSESSEE COULD NOT BE CHARACTERIZED AS INCOME U/S 2(24) R.W.S 5 OF THE I.T.ACT, 1961, O N THE GROUND THAT THE ASSESSEE HAS COLLECTED PSF EXCLUSIVELY FOR THE PURPOSE OF ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 38 SECURITY OF THE AIRPORT AND ALSO THE ASSESSEE DOES NOT HAVE ANY CONTROL OVER UTILIZATION OF FUNDS EXCEPT FOR THE S TATED PURPOSE, AS PER AGREEMENT BETWEEN THE PARTIES. WE, FURTHER NOTED TH AT ALTHOUGH, THE TRIBUNAL, FURTHER OBSERVED THAT IN CASE, THERE WAS ANY VIOLATION IN UTILIZATION OF THE FUNDS, AS PER THE AGREED TERMS, THEN THE LD. AO WOULD BE AT LIBERTY TO TREAT SUCH MISAPPROPRIATION AS INCOME OF THE ASSESSEE. BUT, SAID OBSERVATIONS HAS BEEN EXPUNGED IN MA.239/MUM/2017 BY THE TRIBUNAL. FORM THE ABOVE, IT IS VERY CLEAR THAT THE ISSUE IS FULLY COVERED IN FAVOUR OF THE AS SESSEE BY THE DECISION OF TRIBUNAL FOR AY 2008-09 AND AS PER WHIC H PSF-SC COULD NOT BE CHARACTERIZED AS INCOME WITHIN THE DEFINITIO N OF INCOME AS DEFINED U/S 2(24) AND CONSEQUENTLY, NEEDS TO BE EXC LUDED FROM TOTAL INCOME OF THE ASSESEE. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER;- 14.6. WE HAVE GONE THROUGH THE ORDERS PASSED BY LOW ER AUTHORITIES, SUBMISSIONS MADE AND DOCUMENTARY EVIDENCES PRODUCED BEFORE US BY BOTH THE SIDES AS WELL AS JUDGMENTS RELIED UPON BY BOTH SIDES. IN OUR CONSIDERED OPINION, WE HAVE BEEN CALLED UPON TO DEC IDE THE FOLLOWING THREE ISSUES TO DECIDE THIS GROUND: (1)WHETHER, THE AMOUNT OF PSF-SC COLLECTED BY THE A SSESSEE 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 ISSU ED BY THE CBDT OR MOCA OBSERVING THAT THE AFORESAID AMOUNT IS TAXABLE IN THE HANDS OF THE ASSESSEE HAVE BEEN ISSUED AFTER CONSIDERING PROVISI ONS OF INCOME-TAX ACT AND WHETHER THE OPINION EXPRESSED THEREIN IS BI NDING UPON THE APPELLATE AUTHORITIES INCLUDING THE INCOME-TAX APPE LLATE TRIBUNAL? (3)WHETHER, THE IMPUGNED AMOUNT OF PSF-SC COLLECTED BY THE ASSESSEE COMPANY ON BEHALF OF MOCA AS PER THE RELEVANT REGUL ATIONS FOR THE PURPOSES OF MEETING SECURITY EXPENSES CAN BE CHARAC TERISED AS INCOME IN THE HANDS OF THE ASSESSEE COMPANY AND MADE LIABL E TO TAX IN ITS HANDS AS PER PROVISIONS OF INCOME TAX ACT, 1961? 14.7. HAVING HEARD BOTH THE PARTIES, WE HAVE PONDER ED OVER ALL THE THREE ISSUES AND FEW OTHER ALLIED ISSUES WHICH WERE GERMA NE TO THE ISSUES BEFORE US AND NECESSARY FOR DECIDING THESE GROUNDS, AND ALL THESE ISSUES ARE DECIDED HEREUNDER ONE BY ONE. ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 39 14.8. WITH REGARD TO THE FIRST ISSUE, THE BRIEF FAC TS AND BACKGROUND BROUGHT BEFORE US ARE THAT IN PURSUANCE TO PROCESS OF PRIVATISATION OF AIRPORTS IN INDIA, THE ASSESSEE COMPANY HAD ENTERED INTO AN AGREEMENT IN THE NATURE OF OMDA WITH AIRPORT AUTHORITY OF IND IA TO OPERATE, MAINTAIN, DEVELOP, DESIGN, CONSTRUCT, UPGRADE, MODERNISE, FIN ANCE AND MANAGE THE CHHATRAPATI SHIVAJI INTERNATIONAL AIRPORT AT MUMBAI (HEREINAFTER CALLED AIRPORT, IN SHORT). AS PER RULE 88 OF THE AIRCRAF T RULES, 1937, THE ASSESSEE WAS ENTITLED TO COLLECT A FEE TERMED AS P ASSENGER SERVICES FEE (PSF) FROM ALL THE PASSENGERS EMBARKING AT THE AIRPORT. THE SAID FEE WAS INITIALLY COLLECTED BY THE CONCERNED AIRLINE AN D THEN HANDED OVER TO THE ASSESSEE COMPANY FOR THE SAKE OF ADMINISTRATIVE CONVENIENCE. AS PER TERMS, THE PSF WAS CHARGEABLE @ RS.200 PER PASS ENGER, OUT OF WHICH RS.70/- (I.E. 35% OF PSF) WAS FOR USE OF ASSE SSEE COMPANY FOR PASSENGER FACILITATION SERVICES AND THE BALANCE AMO UNT OF RS.130/- (I.E. 65% OF PSF) WAS TO BE UTILISED FOR PAYMENT TO SECUR ITY AGENCY DESIGNATED BY THE CENTRAL GOVERNMENT FOR PROVIDING SECURITY SERVICES AT AIRPORT AND THE SAID COMPONENT WAS CALLED AS PASSEN GER SERVICE FEE- SECURITY COMPONENT (IN SHORT REFERRED TO AS PSF-SC) . THE SAID PORTION I.E. RS.130/- (65% OF PSF) WAS DEPOSITED IN AN ESC ROW ACCOUNT PENDING UTILISATION. 14.9. DURING THE YEAR UNDER CONSIDERATION, THE ASSE SSEE INCLUDED PASSENGER FACILITATION COMPONENT OF PSF (I.E. RS.70 /- BEING 35% OF PSF) AS INCOME OF THE ASSESSEE COMPANY. BUT THE BALANCE AMOUNT OF RS.130/- (I.E. 65%) PORTION WAS KEPT IN SEPARATE ESCROW ACC OUNT FOR WHICH SEPARATE BOOKS OF ACCOUNT WERE MAINTAINED IN ACCORD ANCE WITH THE STANDARD OPERATING PROCEDURE (SOP) FORMULATED BY MO CA AND, THEREFORE, THE SAME WAS NOT INCLUDED IN THE INCOME OF THE ASSESSEE COMPANY. THE ASSESSEE COMPANY DID NOT INCLUDE REVEN UE PERTAINING TO PSFSC AS WELL AS THE CORRESPONDING EXPENSES IN THE FINANCIAL STATEMENTS OF THE ASSESSEE COMPANY. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, THE AO CONFRONTED TO THE ASSESSEE, AN OFFICE MEMORANDUM ISSUED BY CBDT TO MOCA AND CLARIFICATION FROM MOCA WHEREIN IT WAS STATED THAT PSF SC WAS ALSO TAXABLE IN THE HANDS OF ASSESSEE AND TAX WAS TO BE RECOVERED FROM THE SAID FUNDS. UNDER THES E CIRCUMSTANCES, THE ASSESSEE FINALLY 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 APPEA L BEFORE THE LD. CIT(A) WHEREIN ADDITION WAS CONFIRMED. STILL AGGRIE VED, THE ASSESSEE FILED APPEAL BEFORE THE TRIBUNAL. DURING THE COURSE OF HEARING BEFORE US, THE PRELIMINARY OBJECTION OF THE LD. CIT-DR WAS THA T THE ASSESSEE ONCE HAVING TAKEN A STAND DURING THE COURSE OF ASSESSMEN T PROCEEDINGS THAT THE AFORESAID AMOUNT WAS TAXABLE, CANNOT NOW TURN B ACK AND CANNOT CLAIM IT TO BE NOT TAXABLE. ON THE OTHER HAND, THE ASSESSEES COUNSEL MAINTAINS THAT THE SAID AMOUNT WAS NOT INCLUDED AS PART OF ITS INCOME IN THE RETURN FILED ORIGINALLY AND ONLY DURING THE COU RSE OF ASSESSMENT PROCEEDINGS, BECAUSE OF THE PRESSURE MADE BY THE AS SESSING OFFICER BY SHOWING LETTERS OF CBDT AND MOCA, THE SAID AMOUNT W AS OFFERED FOR TAX. BUT THE ASSESSMENT SHOULD BE DONE STRICTLY IN ACCOR DANCE WITH LAW AND MERE ACQUIESCENCE OF THE ASSESSEE EXPRESSED DURING THE COURSE OF ASSESSMENT PROCEEDINGS WOULD NOT ALTER THE TRUE POS ITION OF LAW AND WOULD NOT MAKE THE AFORESAID AMOUNT AS LIABLE TO BE TAXED IN THE HANDS ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 40 OF THE ASSESSEE, IF THE SAME IS ACTUALLY NOT LIABLE TO BE TAXED AS PER THE PROVISIONS OF THE INCOME-TAX ACT. 14.10. WE HAVE ANALYSED THIS ISSUE. IT IS WELL SETT LED POSITION OF LAW THAT AN AMOUNT CAN BE BROUGHT TO TAX IN THE HANDS OF AN ASSESSEE ONLY IN ACCORDANCE WITH THE PROVISIONS OF INCOME TAX ACT. T HIS FUNDAMENTAL POSITION HAS BEEN WELL EXPLAINED AND WELL SETTLED I N MANY JUDGMENTS. IT IS WELL SETTLED THAT THERE IS NO ESTOPPELS AGAINST LAW . NO TAX CAN BE COLLECTED EXCEPT WITH THE AUTHORITY OF LAW AS PER C LEAR MANDATE OF ARTICLE 265 OF CONSTITUTION OF INDIA. IF THE TAXES ARE TO B E COLLECTED DEPENDING UPON CONSENT/CONCURRENCE OF THE TAXPAYERS OR OTHERW ISE, THEN IT WILL LEAD TO CHAOTIC SITUATION AND ADMINISTRATION OF TAX WOUL D BECOME IMPOSSIBLE. THEREFORE, IF AN AMOUNT IS TAXABLE UNDER THE LAW, A SSESSEE IS BOUND TO PAY TAX THEREON AND IF AN AMOUNT IS NOT TAXABLE UND ER THE INCOMETAX LAW, THEN THE TAX CANNOT BE RECOVERED FROM THE ASSESSEE WITHOUT AUTHORITY OF LAW MERELY BECAUSE ASSESSEE OFFERED THE SAME TO TAX DURING THE COURSE OF ASSESSMENT PROCEEDINGS. LAW IN THIS REGARD IS WE LL SETTLED NOW, AND TO BEGIN WITH, REFERENCE IS MADE ON THE LANDMARK JUDGM ENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS BHARAT GENERAL REI NSURANCE CO LTD 81 ITR 303 (DEL.) RELEVANT PORTION FROM IT IS REPRODUC ED BELOW: IT WAS TRUE THAT THE ASSESSEE ITSELF HAD INCLUDED THAT DIVIDEND INCOME IN ITS RETURN FOR THE YEAR IN QUESTION, BUT THERE WAS NO ESTOPPEL IN THE INCOME-TAX ACT AND THE ASSESSEE HAV ING ITSELF CHALLENGED THE VALIDITY OF TAXING THE DIVIDEND DURI NG THE YEAR OF ASSESSMENT IN QUESTION, IT MUST BE TAKEN THAT IT HA D RESILED FROM THE POSITION WHICH IT HAD WRONGLY TAKEN WHILE FILIN G THE RETURN. QUITE APART FROM IT, IT WAS INCUMBENT ON THE INCOME-TAX D EPARTMENT TO FIND OUT WHETHER A PARTICULAR INCOME WAS ASSESSABLE IN THE PARTICULAR YEAR OR NOT. MERELY BECAUSE THE ASSESSEE WRONGLY INCLUDED THE INCOME IN ITS RETURN FOR A PARTICULAR YEAR, IT COULD NOT CONFER JURISDICTION ON THE DEPARTMENT TO TAX THAT I NCOME IN THAT YEAR EVEN THOUGH LEGALLY SUCH INCOME DID NOT PERTAIN TO THAT YEAR. THEREFORE THE INCOME FROM DIVIDEND WAS NOT ASSESSAB LE DURING THE ASSESSMENT YEAR 1958-59, BUT IT WAS ASSESSABLE IN T HE ASSESSMENT YEAR 1953-54. IT COULD NOT, THEREFORE, B E TAXED IN THE ASSESSMENT YEAR 1958-59. 14.11. OUR VIEW IS FURTHER FORTIFIED IN VIEW OF JUD GMENT OF HONBLE GUJRAT HIGH COURT IN THE CASE OF CIT VS KEISER-EHIND MILLS CO. LTD 128 ITR 486 (GUJ.) IN WHICH THEIR LORDSHIPS HAVE RELIED UPON CI RCULAR OF THE BOARD WHEREIN A DUTY HAS BEEN CAST UPON THE REVENUE OFFIC IALS 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 DATE D 11-4- 1955, IT WAS CLEAR THAT FOR THE PURPOSE OF THE CIRCULAR, WHA T SHOULD BE THE GUIDING FACTOR WAS WHETHER THE PROCEEDINGS OR OTHER PARTICULARS BEFORE THE INCOME-TAX OFFICER AT THE STAGE OF ORIGI NAL 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 T HE STAGE OF THOSE PROCEEDINGS BEFORE HIM. ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 41 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 BI NDING ON ALL OFFICERS CONCERNED WITH THE EXECUTION OF THE ACT AN D 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 W AS OBVIOUS THAT IN THE INSTANT CASE IT WAS INCUMBENT ON THE INCOME-TAX OFFICER TO ADVISE THE ASSESSEE TO CLAIM RELIEF UNDER SECTION 2 (5)(A )(III) IF THE PROCEEDING OR ANY OTHER PARTICULARS BEFORE HIM AT T HE STAGE OF THE ORIGINAL ASSESSMENT INDICATED THAT THE ASSESSEE WAS ENTITLED TO SUCH RELIEF UNDER THE PROVISIONS OF THE RELEVANT FI NANCE ACT, 1965, SO FAR AS THE ORDER UNDER REFERENCE WAS CONCERNED.. .... 14.12. FURTHER REFERENCE IS PLACED UPON ANOTHER JUD GMENT IN THE CASE OF S.R. KOSHTI 276 ITR 165 (GUJ) IN WHICH RELIEF WAS G RANTED TO ASSESSEE WITH FOLLOWING OBSERVATIONS: THE AUTHORITIES UNDER THE ACT ARE UNDER AN OBLIGAT ION TO ACT IN ACCORDANCE WITH LAW. TAX CAN BE COLLECTED ONLY AS P ROVIDED UNDER THE ACT. IF AN ASSESSEE, UNDER A MISTAKE, MISCONCEPTION OR ON NOT BEING PROPERLY INSTRUCTED, IS OVERASSESSED, THE AUTHORITI ES UNDER THE ACT ARE REQUIRED TO ASSIST HIM AND ENSURE THAT ONLY LEGITIM ATE TAXES DUE ARE COLLECTED. [PARA 20] 14.13. IN THE CASE OF CIT VS LUCKNOW PUBLIC EDUCATI ONAL SOCIETY 318 ITR 223, IT WAS OBSERVED BY HONBLE ALLAHABAD HIGH COUR T THAT THE INCOME TAX DEPARTMENT SHOULD NOT TAKE UNDUE ADVANTAGE OF T HE IGNORANCE OF THE ASSESSEE IN VIEW OF BOARDS CIRCULAR NO. 14(XL-35)/ 1955, DATED 11-4- 1955. 14.14. IN THE CASE OF NIRMALA L MEHTA VS CIT 269 IT R 1, HONBLE BOMBAY HIGH COURT, RELYING UPON ARTICLE 265 OF CONSTITUTIO N OF INDIA HELD THAT ACQUIESCENCE CANNOT TAKE AWAY FROM THE TAXPAYER, TH E RELIEF HE IS ENTITLED WHERE TAX IS LEVIED OR COLLECTED WITHOUT AUTHORITY OF LAW AND, THEREFORE, MERELY BECAUSE THE TAXPAYER OFFERED A RECEIPT TO TA X, THAT CANNOT TAKE AWAY ITS RIGHT IN CONTENDING THAT THE SAID AMOUNT W AS NOT CHARGEABLE TO TAX. 14.15. IN THE CASE OF BALMUKUND ACHARYA VS DCIT 310 ITR 310 (BOM), HONBLE BOMBAY HIGH COURT OBSERVED THAT THE APEX CO URT AND VARIOUS HIGH COURTS HAVE RULED THAT AUTHORITIES UNDER THE I NCOME-TAX LAW ARE UNDER AN OBLIGATION TO ACT IN ACCORDANCE WITH LAW. TAX CAN BE COLLECTED ONLY AS PROVIDED UNDER THE ACT. IF AN ASSESSEE, UND ER A MISTAKE, MISCONCEPTION OR NOT BEING PROPERLY INSTRUCTED IS O VER ASSESSED, THE AUTHORITIES UNDER THE ACT ARE REQUIRED TO ASSIST HI M AND ENSURE THAT ONLY LEGITIMATE TAX DUES ARE COLLECTED. IF ANY ITEM OF R ECEIPT IS NOT TAXABLE UNDER THE ACT, THEN TAX CANNOT BE LEVIED APPLYING T HE DOCTRINE OF ESTOPPEL. THE HONBLE HIGH COURT CONSIDERED THE AFORESAID JUD GEMENTS WHILE EXPRESSING ITS OPINION. 14.16. IN THE CASE OF MAYANK PODDAR (HUF) VS WTO 26 2 ITR 633 (CAL), IT WAS OBSERVED BY THE HONBLE HIGH COURT THAT THERE IS NO ESTOPPEL AGAINST STATUTE. THUS, IF AN ASSESSEE UNDER MISUNDERSTANDING, ADMISS ION OR MISS-APPRECIATION OFFERED AN AMOUNT TO TAX, THEN THE SAME WOULD NOT B E TAXABLE MERELY BECAUSE OF WRONG UNDERSTANDING OF LAW BY THE ASSESSEE OR BE CAUSE OF HIS ADMISSION OR MISS-APPRECIATION OF LAW AND FACTS. IT WAS ALSO OBS ERVED THAT THERE CAN ALSO NOT BE ANY WAIVER OF LEGAL RIGHT BY THE ASSESSEE. ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 42 14.17. THUS, IN VIEW OF THE AFORESAID LEGAL DISCUSS ION AND FACTS OF THIS CASE AS DISCUSSED ABOVE, IT IS HELD THAT THE AMOUNT IN QUES TION CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE MERELY BECAUSE THE SAME WAS O FFERED TO TAX DURING THE COURSE OF ASSESSMENT PROCEEDINGS UNDER CERTAIN CIRC UMSTANCES. UNDER THESE CIRCUMSTANCES, WE NEED TO EXAMINE AND DETERMINE WHE THER THE IMPUGNED AMOUNT OF PSFSC COLLECTED BY THE ASSESSEE COMPANY I S ACTUALLY TAXABLE IN THE HANDS OF THE ASSESSEE AS PER THE PROVISIONS OF INCO ME-TAX ACT, 1961. 14.18. THE AFORESAID DISCUSSION TAKES US TO THE SEC OND 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 MEMORA NDUM/ INSTRUCTIONS FOR DETERMINING TAXABILITY OF THE IMPUGNED AMOUNT. IT I S ADMITTED FACT ON RECORD THAT THE ASSESSEE COMPANY COLLECTED PSF-SC IN VIEW OF TH E ORDER ISSUED BY MOCA VIDE ITS ORDER DATED 09TH MAY, 2006. THE TERMS OF T HE ORDER HAVE BEEN MODIFIED / AMENDED FROM TIME TO TIME AS PER THE REQUIREMENTS . ONE SUCH ORDER ISSUED BY MOCA WAS ISSUED ON 20TH JUNE, 2007. SUBSEQUENTLY, C BDT ISSUED AN OFFICE MEMORANDUM DATED 30/06/2008 IN PURSUANCE TO THE REQ UEST MADE BY THE CONCERNED OFFICIALS OF MOCA REGARDING TAXABILITY OF PSFSC, WHEREIN IT HAS BEEN OBSERVED THAT SINCE THE ASSESSEE COMPANY WAS C OLLECTING THIS AMOUNT IN THE COURSE OF BUSINESS AND ASSESSEE WAS RENDERING F ACILITATION AND SECURITIES SERVICES WHETHER IN-HOUSE OR OUTSOURCED, THEREFORE, THE AMOUNT COLLECTED BY THE ASSESSEE IN THE FORM OF PSF-SC WAS IN THE NATURE OF INCOME OF THE ASSESSEE AND LIABLE TO BE TAXED IN ITS HANDS. IN SUPPORT OF ITS VIEW, RELIANCE HAS BEEN PLACED BY THE BOARD ON THE JUDGEMENT OF HONBLE SUP REME COURT IN THE CASE OF CHOWRINGHEE SALES BUREAU VS CIT 87 ITR 547 (SC) WIT H A VIEW TO FORTIFY ITS OPINION. SUBSEQUENTLY, MINISTRY OF CIVIL AVIATIONS OFFICE ISSUED AN ORDER DATED 19-01-2009 LAYING DOWN ACCOUNTING AUDIT PROCEDURE I N RESPECT OF PSFSC. IT WAS INTENDED TO ACT AS STANDARD OPERATING PROCEDURE (SOP) FOR ACCOUNTING / AUDIT OF PSFSC BY THE AIRPORT OPERATOR. IN THE AFO RESAID DOCUMENT, THE WHOLE PROCEDURE WAS DULY EXPLAINED HOW THE AMOUNT HAS TO BE COLLECTED AND TO BE KEPT IN ESCROW ACCOUNT AND TO BE DISBURSED FOR THE PURPOSE OF SECURITY. RELYING UPON THE OFFICE MEMORANDUM ISSUED BY THE CBDT DATED 30-06-2008, IT WAS MENTIONED THEREIN THAT THE TAX COMPONENT MAY BE CHA RGED TO THE PSFSC ACCOUNT IN PROPORTION TO ITS LIABILITY ON STANDALON E BASIS. THE ASSESSEE WAS OF THE OPINION THAT THE AFORESAID AMOUNT WAS NOT TAXAB LE IN THE HANDS OF THE ASSESSEE COMPANY, AND THEREFORE, WHILE FILING THE R ETURN THE SAME WAS NOT INCLUDED IN THE TAXABLE INCOME BY THE ASSESSEE. BUT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO WAS OF THE OPINION T HAT THE SAID AMOUNT WAS TAXABLE IN THE HANDS OF THE ASSESSEE IN VIEW OF OFF ICE MEMORANDUM OF CBDT DATED 30- 06-2008 AND INSTRUCTIONS DATED 19-01-2009 ISSUED BY MOCA. WITH A VIEW TO CLARIFY THE SITUATION, REPRESENTATION WAS M ADE BEFORE THE CBDT AS WELL AS MOCA. IN RESPONSE, MOCA ISSUED A LETTER DATED 15 -11-2010 WHEREIN IT WAS STATED THAT THE MATTER WAS EXAMINED WITH THE MINIST RY OF FINANCE AND ACCORDINGLY IT IS CLARIFIED THAT THE WHOLE AMOUNT O F PSF SC INCLUDING SECURITY COMPONENT WAS REVENUE RECEIPT, AND THUS IT WAS TAXA BLE UNDER THE INCOME-TAX ACT. 14.19. THE ASSESSEE CHALLENGED BEFORE US, THE VALID ITY 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 AUTHORI TIES HAVE CONSIDERED THE ASPECT THAT THE IMPUGNED AMOUNT WAS COLLECTED IN TH E FIDUCIARY CAPACITY BY THE ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 43 ASSESSEE. NONE OF THE AUTHORITIES HAVE STATED THAT UNDER WHAT PROVISIONS OF LAW, THE AFORESAID AMOUNT CAN BE BROUGHT TO TAX IN THE H ANDS OF THE ASSESSEE. THE CBDT IN ITS OFFICE MEMORANDUM HAS MADE A REFERENCE TO THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CHOWRINGHEE SA LES BUREAU (SUPRA). BUT FACTS OF THAT CASE HAVE NOT BEEN DISCUSSED. THE AFO RESAID JUDGMENT HAS DIFFERENT FACTS, WHEREIN, THE AMOUNT OF SALES-TAX W AS RECEIVED BY THE SAID ASSESSEE AND DEPOSITED IN ITS BANK ACCOUNT. THE FUN DS GOT MIXED IN ASSESSEES ACCOUNTS. THUS, IN CASE OF NON PAYMENT BY THE SAID ASSESSEE, THE SAME BECAME INCOME OF THE SELLER (THE SAID ASSESSEE), WH EREAS THE FACTS ARE TOTALLY DIFFERENT IN THE CASE BEFORE US. THE AMOUNT HERE WA S COLLECTED PURELY IN FIDUCIARY CAPACITY AND THE SAME WAS DEPOSITED IN ES CROW ACCOUNT ON WHICH ASSESSEE HAD NO CONTROL AT ALL; THE ASSESSEE HAD NO DISCRETION AT ALL UPON ITS USAGE. NO REASONING HAS BEEN MADE OUT BY THE CBDT W HILE ISSUING ITS OPINION AS TO HOW THE SAID JUDGMENT WAS APPLICABLE ON THE F ACTS OF THIS CASE. IT IS NOTED BY US THAT AFORESAID JUDGMENT CAME UP FOR CONSIDERA TION BEFORE MANY COURTS WHEREIN ITS TRUE MEANING AND SCOPE OF ITS APPLICABI LITY WAS EXPLAINED TIME TO TIME. IN ONE SUCH MATTER HAVING SIMILAR FACTS AS TO THE ASSESSEE BEFORE US, HONBLE ALLAHABAD HIGH COURT EXPLAINED CORRECT APPL ICATION OF AFORESAID JUDGMENT IN THE CASE OF CIT VS. SITA RAM SRI KISHAN DAS 141 ITR 685 (ALL). IN THIS CASE, THE FACTS WERE THAT SAID ASSESSEE WAS A COMMISSION AGENT AND WAS ACCOUNTABLE FOR THE RECOVERY (CALLED AS MARKET FEE) WHICH HE MADE FROM THE SELLERS OF AGRICULTURAL PRODUCE IN TERMS OF KRISHI UTPADAN MANDI RULES FRAMED UNDER THE U.P. KRISHI UTPADAN MANDI ADHINIYAM, 1964 . THE REVENUE TREATED THE AMOUNT SO COLLECTED BY THE AGENT AS PART OF ITS TAXABLE INCOME BEING A TRADING RECEIPT IN VIEW OF JUDGMENT OF HONBLE SUPR EME COURT IN THE CASE OF CHOWRINGHEE SALES BUREAU VS CIT 87 ITR 547 (SC), SU PRA. AFTER ANALYSING THE FACTS OF THE CASE, IT WAS HELD BY THE HONBLE COURT THAT THE MARKET FEE REALISED BY THE COMMISSION AGENT DOES NOT FORM PART OF HIS T RADING RECEIPT AS HE (THE COMMISSION AGENT) HELD THIS AMOUNT ONLY AS A TRUSTE E FOR AND ON BEHALF OF THE MARKET COMMITTEE. HONBLE COURT APPLIED THE JUDGMEN T OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. SITALDAS TIRATHDAS 41 ITR 367 (SC) AND DISTINGUISHED THAT OF CHOWRINGHEE SALES BUREAU P. L TD. VS. CIT, SUPRA. 14.20. THUS, AT THE OUTSET, IT IS CLEARLY VISIBLE T HAT BOTH THE AUTHORITIES EXPRESSED THEIR OPINIONS WITHOUT PROPER APPLICATION OF MIND A ND WITHOUT EXAMINING THE NATURE OF IMPUGNED RECEIPT WITHIN THE FRAMEWORK OF PROVISIONS OF INCOME-TAX ACT, 1961. 14.21. APART FROM THAT, THE BINDING EFFECT OF OFFICE MEMORANDUM ISSUED BY CBDT, CLARIFICATION ISSUED BY MOCA IS ALSO UNDER QU ESTION. IT HAS BEEN ARGUED THAT IT HAS BEEN HELD BY HONBLE SUPREME COURT MANY TIMES THAT CIRCULARS ISSUED BY THE BOARD ARE BINDING UPON THE AUTHORITIES WORKI NG UNDER IT, VIZ. THE AO, ETC. BUT THESE ARE NOT BINDING UPON THE APPELLATE AUTHOR ITIES INCLUDING INCOME TAX APPELLATE TRIBUNAL. WE HAVE EXAMINED THIS ASPECT AL SO CAREFULLY. IT IS NOTED THAT AS PER SECTION 119 OF THE ACT, THE CBDT HAS BEEN EM POWERED 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 DIR ECTIONS SHALL BE ISSUED:- (A) SO AS TO REQUIRE ANY INCOME-TAX AUTHORITY TO MAKE A PA RTICULAR ASSESSMENT OR TO DISPOSE A PARTICULAR CASE IN A PARTICULAR MANNER; O R (B) SO AS TO INTERFERE WITH THE DISCRETION OF THE COMMISSIONER (APPEALS) IN EXERCIS E OF HIS APPELLATE FUNCTIONS . IT IS CLEAR FROM THE PERUSAL OF AFORESAID PROVISO T HAT NEITHER THE BOARD HAS POWER ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 44 TO DECIDE THE TAXABILITY OF A PARTICULAR RECEIPT NO R HAS IT GOT ANY POWER TO INTERFERE WITH THE APPELLATE FUNCTIONS OF COMMISSIONER (APPEA LS), WHICH IS JUDICIAL IN NATURE. THUS, IN VIEW OF THE AFORESAID LEGAL SCENAR IO COUPLED WITH FACTS OF THIS CASE AS DISCUSSED ABOVE, WE HAVE STRONG DOUBTS IF A T ALL THE BOARD COULD HAVE ISSUED ANY INSTRUCTIONS TO DECIDE THE TAXABILITY OF AMOUNT COLLECTED BY THE ASSESSEE COMPANY ON ACCOUNT OF PSF SC IN A PURELY FIDUCIARY CAPACITY. THIS TASK OF DETERMINATION OF TAXABILITY HAS BEEN LEFT B Y THE LEGISLATURE UPON THE SHOULDERS OF THE DESIGNATED AO, WHO IS OBLIGED UNDE R THE LAW TO DETERMINE THE SAME STRICTLY IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME-TAX ACT, 1961. 14.22. FURTHER, AFORESAID CLARIFICATION ISSUED BY T HE BOARD IN THIS CASE IS ACTUALLY AN OFFICE MEMORANDUM. IT IS AN INTERDEPARTMENTAL COMMUNICATION. IN OUR VIEW, OFFICE MEMORANDUM WOULD NOT CARRY THE LEGAL FORCE O F BINDING EFFECT. FURTHER, IT HAS BEEN PROVIDED IN SECTION 119 THAT ORDERS, INSTR UCTIONS AND DIRECTIONS SHALL BE BINDING UPON THE INCOMETAX AUTHORITIES. IT IS NOTED THAT INCOME-TAX APPELLATE TRIBUNAL DOES NOT FALL UNDER THE LIST OF INCOME-TAX AUTHORITIES AS HAS BEEN PROVIDED IN SECTION 116 OF THE ACT. THUS, THESE ORD ERS, INSTRUCTIONS AND DIRECTIONS SHALL NOT BE BINDING UPON THE INCOME-TAX APPELLATE TRIBUNAL. FURTHER IT IS NOTED THAT THESE HAVE BEEN HELD TO BE NOT BINDIN G UPON THE CIT(A) AS STATED ABOVE. THEREFORE, THERE IS NO QUESTION OF THERE BEI NG ANY BINDING EFFECT UPON THE INCOME-TAX APPELLATE TRIBUNAL OF ANY SUCH COMMUNICA TION ISSUED BY THE BOARD. 14.23. IT IS NOTED BY US THAT THIS ISSUE IS NOT RES INTEGRA, AS IT HAS BEEN SETTLED BY HONBLE JURISDICTIONAL HIGH COURT AND HONBLE SUPRE ME COURT IN MANY CASES. IT WAS HELD BY HONBLE BOMBAY HIGH COURT IN THE CASE O F BANQUE NATIONALE DE PARIS VS CIT (SUPRA) THAT CIRCULARS CANNOT OVERRIDE OR DETRACT FROM THE PROVISIONS OF THE ACT IN AS MUCH AS SECTION 119 OF THE ACT HAS EMPOWERED THE CBDT TO ISSUE ORDERS, INSTRUCTIONS OR DIRECTIONS FOR THE PR OPER ADMINISTRATION OF THE ACT. HONBLE HIGH COURT HAS TAKEN INTO CONSIDERATION VAR IOUS EARLIER JUDGMENTS OF HONBLE SUPREME COURT ON THIS ISSUE. SIMILARLY, THE HONBLE SUPREME COURT IN THE CASE OF CIT VS HERO CYCLES PVT LTD (SUPRA) HELD THAT CIRCULARS CAN BIND THE INCOME-TAX OFFICER BUT WILL NOT BIND THE APPELLATE AUTHORITY OR THE TRIBUNAL OR THE COURT OR EVEN THE ASSESSEE. IT IS FURTHER NOTED THA T LAW IN THIS REGARD WAS FURTHER ANALYSED BY HONBLE SUPREME COURT IN THE CASE OF UC O BANK (SUPRA). IT WAS OBSERVED BY THE HONBLE SUPREME COURT THAT CBDT HAS POWER TO TONE DOWN THE RIGOUR OF THE LAW AND ENSURE ENFORCEMENT OF ITS PRO VISIONS OF ISSUING CIRCULARS. THE BOARD HAS BEEN GIVEN FOR THE PURPOSE OF JUST, P ROPER AND EFFICIENT MANAGEMENT OF WORK OF ASSESSMENT. HOWEVER, THESE AR E NOT MEANT FOR CONTRADICTING OR NULLIFYING ANY PROVISION OF THE ST ATUTE. RELYING UPON ITS EARLIER JUDGMENT COMPRISING OF THREE JUDGES IN THE CASE OF KESHAVJI RAVJI & CO VS CIT 183 ITR 1 (SC), IT WAS INTER-ALIA OBSERVED THAT BOA RD CANNOT PRE-EMPT JUDICIAL INTERPRETATION AND THE SCOPE AND AMBIT OF A PROVISI ON 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 INTERPRETATI ON OF THE LAW IS EXCLUSIVELY THE DOMAIN OF THE COURTS. HOWEVER, THE BOARD HAS THE ST ATUTORY 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 FI SCAL STATUTE AND SUCH CIRCULARS WOULD BE BINDING ON THE AUTHORITIES ENSHRINED IN TH E ACT. 14.24. THUS, TAKING GUIDANCE FROM THE AFORESAID LE GAL DISCUSSION AS HAS BEEN CLARIFIED BY THE HONBLE JURISDICTIONAL HIGH COURT AS WELL AS BY HONBLE SUPREME COURT, IT IS CLEAR THAT THE OFFICE MEMORANDUM ISSUE D BY CBDT TO MOCA CANNOT HOLD AN AMOUNT AS TAXABLE, IF THE SAME IS OTHERWISE NOT TAXABLE AS PER THE PROVISIONS OF THE INCOME-TAX ACT, 1961. FURTHER, AS FAR AS THE CLARIFICATION ISSUED ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 45 BY MOCA IS CONCERNED, IT IS NOTED THAT THE ROLE OF MOCA WAS CONFINED TO ISSUING STANDARD OPERATING PROCEDURES AND OTHER GUI DELINES TO THE AIRPORT OPERATORS TO ENSURE THAT FUNDS COLLECTED BY THE ASS ESSEE COMPANY IN THE FIDUCIARY CAPACITY ON BEHALF OF MOCA ARE PROPERLY K EPT AND DISBURSED FOR THE DESIGNATED PURPOSES ONLY. IT HAS NO JURISDICTION TO DETERMINE THE TAXABILITY OF THE IMPUGNED AMOUNT. IT CLEARLY HAD NO JURISDICTION IN HOLDING THE SAME AS TAXABLE AND, THEREFORE, TO THAT EXTENT ITS ORDER / CLARIFIC ATION HAS NO AUTHORITY IN THE EYES OF LAW AND THE SAME HAS BEEN RIGHTLY IGNORED BY THE ASSESSEE AS WELL AS BY THE APPELLATE COURTS WHILE DETERMINING THE TAXABILITY O F THE IMPUGNED AMOUNT. 14.25. THUS, THE AFORESAID DISCUSSION TAKE US TO TH E THIRD ISSUE WHEREIN WE HAVE BEEN CALLED UPON TO DECIDE WHETHER THE IMPUGNED AMO UNT OF PSF-SC COLLECTED BY THE ASSESSEE COMPANY ON BEHALF OF MOCA AS PER TH E RELEVANT REGULATIONS FOR THE PURPOSES OF MEETING SECURITY EXPENSES CAN BE CH ARACTERISED AS INCOME IN THE HANDS OF THE ASSESSEE COMPANY AND MADE LIABLE T O TAX IN ITS HANDS. 14.26. THE BRIEF FACTS RELATED TO THE ISSUE HAVE AL READY BEEN NARRATED BY US IN EARLIER PART OF OUR ORDER AND JUST TO RECAPITULATE THE RELEVANT PART OF IT, THE LICENSEE OF AN AIRPORT IN TERMS OF PROVISIONS OF RU LE 88 OF AIRCRAFT RULE, 1937, IS RESPONSIBLE FOR COLLECTING A FEE FROM EMBARKING PAS SENGERS REFERRED TO AS PASSENGER SERVICE FEE (PSF) @ RS.200/- PER TICKET. PORTION OF PSF BEING 35% WAS ON ACCOUNT OF PROVIDING PASSENGER FACILITATION AND WAS TO BE RETAINED BY THE AIRPORT OPERATOR FOR PROVIDING PASSENGER RELATED SE RVICES AND THE BALANCE 65% OF PSF REPRESENTS SECURITY COMPONENT TO BE UTILISED FOR PAYMENT OF SECURITY AGENCY, I.E. CISF, WHO IS DESIGNATED BY THE MINISTR Y OF HOME AFFAIRS FOR PROVIDING SECURITY SERVICES. THE ASSESSEE HAD INCLU DED AFORESAID 35% PORTION IN ITS INCOME BUT DID NOT INCLUDE PSF-SECURITY COMPONE NT IN ITS INCOME WHILE FILING THE RETURN OF INCOME. THE DISPUTE BEFORE US IS WITH REGARD TO THIS PSF SC. FURTHER FACTS BROUGHT OUT BEFORE US ARE THAT THE AS SESSEE HAD COLLECTED DURING THE YEAR, TOTAL AMOUNT OF RS.180.27 CRORES ON ACCOU NT OF PSF SC FROM THE PASSENGERS EMBARKING AT CHHATRAPATI SHIVAJI INTERNA TIONAL AIRPORT, MUMBAI. AFTER METING OUT SECURITY DEPLOYMENT COST AND VARIO US OTHER RELATED (ALLIED) EXPENSES, THE NET SURPLUS WORKED OUT AT RS.133,13,4 7,580 AND AFTER ADJUSTMENT OF DEPRECIATION AS PER COMPANIES ACT AND INCOME-TA X ACT, IT WAS COMPUTED AT RS.132,58,59,023. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, THE AO CONCLUDED THAT THE AFORESAID AMOUNT IS PART OF TAXA BLE 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 NO T LIABLE TO BE INCLUDED IN THE INCOME OF THE ASSESSEE. DETAILED ARGUMENTS MADE BY THE LD. COUNSEL OF THE ASSESSEE HAVE ALREADY BEEN NARRATED BY US IN EARLIE R PART OF OUR ORDER AND THESE ARE NOT BEING DISCUSSED HERE AGAIN FOR THE SA KE OF BREVITY. 14.27. WE HAVE GONE THROUGH THE ASSESSMENT ORDER A S 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 O F MIND TO INDEPENDENTLY DETERMINE WHETHER THE IMPUGNED AMOUNT COULD HAVE BE EN CHARACTERISED AS INCOME IN THE HANDS OF THE ASSESSEE. RELEVANT PART OF ORDER OF LD. CIT(A) IS REPRODUCED HEREUNDER, FOR THE SAKE OF READY REFEREN CE:- I HAVE CONSIDERED THE SUBMISSIONS AND ARGUMENTS OF THE APPELLANT. IT IS UNDISPUTED THAT THE MINISTRY OF CIVIL AVIATION HAD ALREADY ISSUED ITS GUIDELINES AND INSTRUCTIONS TO THE ASSESSEE ON 19.0 1.2009, THEREBY CLARIFYING THE TAXABILITY ASPECT OF PSF(SC) IN THE HANDS OF THE ASSESSEE NOTWITHSTANDING THE ASSESSEE'S RESISTANCE AND BELIE F THAT SUCH RECEIPTS ARE FIDUCIARY IN NATURE AND NOT TAXABLE. FURTHER, T HE MINISTRY OF CIVIL ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 46 AVIATION REAFFIRMED ITS DECISION ONCE AGAIN VIDE IN STRUCTION DATED 15.11.2010. THEREFORE, THE APPELLANT HAD ERRONEOUSL Y RESISTED FROM OFFERING THE RECEIPTS ON ACCOUNT OF PSF(SC) TO TAX PURELY ON THE BASIS OF ITS OWN BELIEF THAT PSF(SC) RECEIPTS ARE FIDUCIARY IN NATURE, THEREBY IGNORING THE MANDATORY INSTRUCTIONS ISSUED BY THE M INISTRY OF CIVIL AVIATION FROM TIME TO TIME UNDER WHICH, THE ASSESSEE FUNCTIO NS AS AN AIRPORT OPERATOR-THE RECEIPTS BEING FIDUCIARY IN NATURE, AN D THE MANDATORY INSTRUCTIONS ISSUED BY THE MINISTRY OF CIVIL AVIATI ON FROM TIME TO TIME UNDER WHICH, THE ASSESSEE FUNCTIONS AS AN AIRPORT O PERATOR MAKE IT TAXABLE. WHEN CONFRONTED BY THE SECOND RECONFIRMATI ON BY THE MINISTRY OF CIVIL AVIATION ON 15.11.2010, THE APPELLANT HAD NO OTHER OPTION, BUT TO OFFER THE RECEIPTS TO TAX FOR A.Y. 2008-09. THUS, A S STATED BY THE APPELLANT ON MERITS AND IN LAW THAT ALTHOUGH THE RECEIPTS OF PSF (SC) IN THE HANDS OF THE APPELLANT DO NOT PARTAKE THE CHARACTER OF IN COME AND BY THE 'DOCTRINE OF OVERRIDING TITLE' AS THEY ARE TO BE UT ILIZED FOR SECURITY PURPOSES-THE ISSUE BEING HIGHLY DEBATABLE AND A LEG AL DIFFERENCE OF OPINION BEING THERE THE SAME HAS BEEN OFFERED FOR T AXATION. HENCE I CONFIRM THIS ADDITION BY THE A.O. AND THUS, THIS GR OUND OF APPEAL IS DISMISSED. 14.28. IT IS NOTED BY US THAT BOTH OF THE AUTHORITI ES GOT INFLUENCED AND SWAYED AWAY WITH THE OPINION EXPRESSED BY THE CBDT/MOCA AN D ADMISSION MADE BY THE ASSESSEE UNDER CERTAIN CIRCUMSTANCES EMERGED DU RING THE COURSE OF ASSESSMENT PROCEEDINGS. THUS, BOTH THE AUTHORITIES ABSTAINED FROM EFFECTIVELY AND INDEPENDENTLY ADJUDICATING THE TAXABILITY OF TH IS AMOUNT AS PER OF LAW IN THE HANDS OF THE ASSESSEE. SINCE RELATED MATERIAL AND A LL THE FACTS ARE BEFORE US, WE SHALL DETERMINE CHARACTERIZATION AND TAXABILITY OF THE IMPUGNED AMOUNT IN THE HANDS OF ASSESSEE-COMPANY PURELY AS PER LAW APPLICA BLE ON THE FACTS OF THIS CASE. 14.29. IT IS NOTED BY US THAT RULE 88 OF AIRCRAFT R ULE, 1937 PROVIDES AS UNDER: 88. PASSENGER SERVICE FEETHE LICENSEE IS ENTITLED TO COLLECT FEES TO BE CALLED AS PASSENGER SERVICE FEE FROM THE EMBARKING PASSENG ERS AT SUCH RATE AS THE CENTRAL GOVERNMENT MAY SPECIFY AND IS ALSO LIABLE T O PAY FOR SECURITY COMPONENT TO ANY SECURITY AGENCY DESIGNATED BY THE CENTRAL GOVERNMENT FOR PROVIDING THE SECURITY SERVICE. PROVIDED THAT IN RE SPECT 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 AIRPORT S IN THE COUNTRY, THE MANNER AND MODE OF COLLECTION OF PASSENGER SERVICE FEE (PSF) AT AIRPORTS HAVE BEEN ENGAGING THE ATTENTION OF THE GO VERNMENT FOR SOME TIME. THE MATTER HAS BEEN DELIBERATED WITH AIRPORTS AUTHORITY OF INDIA AND OTHER AIRPORT OPERATORS AND IT HAS NOW BEEN DECIDED THAT: - I. CISF WILL BE DEPLOYED AS PER THE ASSESSMENT OF BCAS AT AIRPORTS OPERATED BY JVCS OR PRIVATE OPERATORS ALSO. II. PASSENGER SERVICE FEE (PSF) AT AIRPORTS WOULD H E COLLECTED BY THE RESPECTIVE AIRPORT OPERATOR, WHICH COULD BE AM, JVC , OR A PRIVATE OPERATOR. ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 47 III. THE AMOUNT OF PSF TO BE COLLECTED WILL HE FIX ED BY THE MINISTRY OF CIVIL AVIATION. THE AMOUNT WILL CONTINUE TO BE RS.200/- P ER PASSENGER TILL FURTHER ORDERS. THE AIRPORT OPERATOR WOULD RETAIN R S.70/- TOWARDS PASSENGER FACILITATION. AN ESCROW ACCOUNT WOULD BE OPENED WHENEVER THE AIRPORT OPERATOR IS A JVC OR PRIVATE OPERATOR. THIS ACCOUNT WILL BE OPERATED BY THE AIRPORT OPERATOR (NOT BY AM). RS.13 0/- OF THE PSF COLLECTED PER PASSENGER BY SUCH AIRPORT OPERATOR WO ULD BE DEPOSITED IN THE ESCROW ACCOUNT BY THE AIRPORT OPERATOR FOR PAYM ENTS TO BE MADE TO CISF. THE ESCROW ACCOUNT WOULD BE SUBJECT TO GOVERN MENT AUDIT OF CAG. IV. IN CASE ANY AMOUNT REMAINS, THIS WILL BE TRANS FERRED TO AAI BY THE AIRPORT OPERATOR THROUGH A PROCESS OF MUTUAL CONSUL TATION FOR PAYMENT TO CISF DEPLOYED FOR SECURITY PURPOSES AT OTHER AIRPOR TS. IN CASE OF A DISPUTE, THE MATTER MAY BE REFERRED TO THE MINISTRY , OF CIVIL AVIATION WHOSE DECISION WILL BE TREATED AS FINAL AND BINDING ON BOTH PARTIES. 2. THE NEW PROCEDURE WILL BE EFFECTIVE FROM 01.042 006. 3. THIS ISSUES WITH THE APPROVAL OF THE MINISTER OF STATE FOR CIVIL AVIATION (INDEPENDENT CHARGE). 14.31. SUBSEQUENTLY ANOTHER ORDER WAS PASSED BY MOC A DATED 20TH JUNE, 2007 WHEREIN IT WAS INTER ALIA CLARIFIED THAT SECUR ITY COMPONENT OF PSF WAS NOT REGULAR REVENUE OF THE AIRPORT OPERATOR AND THE AFO RESAID AMOUNT WILL BE UTILISED AT THE AIRPORT CONCERNED ONLY TO MEET SECURITY RELA TED EXPENSES OF THAT AIRPORT. RELEVANT PART OF THE ORDER IS REPRODUCED BELOW:- ORDER SUB: COLLECTION OF PASSENGER SERVICE FEE (PSF) AT G REENFIELD / PRIVATE AIRPORTS REGARDING. IN THIS MINISTRY'S ORDER OF EVEN NO. DATED 09.05.20 06 ON THE SUBJECT NOTED ABOVE, THE FOLLOWING MODIFICATIONS MAY BE MADE- (A)CLAUSE (III) IS MODIFIED AS UNDER- THE AMOUNT OF PSF TO BE COLLECTED WILL BE FIXED BY THE MINISTRY OF CIVIL AVIATION. HOWEVER, AFTER AIRPORTS ECONOMIC REGULATORY AUTHORI TY (AERA) BECOMES FUNCTIONAL, PSF WILL BE FIXED BY AERA. THE AMOUNT WILL CONTINUE TO BE RS.200/-. PER EMBARK ING PASSENGER TILL FURTHER ORDERS'. (B) CLAUSE (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 AI RPORT-OPERATOR BY A JVC OR A PRIVATEOPERATOR WILL BE UTILIZED AT AIRPORT CONCERN ED ONLY TO MEET THE SECURITY RELATED EXPENSES OF THAT AIRPORT. HOWEVER, AAI WI LL BE CONSIDERED AS A SINGLE LICENSEE IN RESPECT OF ITS AIRPORTS FOR THIS PURPOS E 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'. T HIS ISSUES WITH THE APPROVAL OF THE MINISTER OF STATE FOR CIVIL AVIATION (INDEPENDE NT CHARGE). 14.32. THUS, AFORESAID RULES AND ORDERS ISSUED BY MOCA CLEARLY STIPULATES THAT SECURITY COMPONENT OF PASSENGER SERVICE FEE WAS MEA NT EXCLUSIVELY TO BE UTILISED AT THE AIRPORT CONCERNED, ONLY TO MEET SEC URITY RELATED EXPENSES OF THAT AIRPORT. THE SECURITY AGENCY DESIGNATED IN THIS REG ARD WAS CISF. IT IS FURTHER NOTED THAT THE FUNDS SO COLLECTED WERE TO BE DEPOSI TED IN AN ESCROW ACCOUNT WHICH WAS SUBJECT TO THE GOVERNMENT AUDIT OF CAG. F URTHER, IN CASE OF ANY AMOUNT WAS LEFT IN THE SAID ACCOUNT, IT WAS TO BE M ANDATORILY TRANSFERRED TO AIRPORT AUTHORITY OF INDIA BY THE AIRPORT OPERATOR. THUS, FROM THE ABOVE SAID FACTS ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 48 AND CIRCUMSTANCES OF THE CASE AND TERMS AND CONDITI ONS IT IS CLEAR THAT THE SAID AMOUNT WAS COLLECTED BY THE ASSESSEE ON BEHALF OF M OCA TO BE DISBURSED FOR SECURITY PURPOSES TO CISF DEPLOYED BY THE MINISTRY OF HOME AFFAIRS. THE AMOUNT WAS COLLECTED AND RETAINED PURELY IN FIDUCIA RY CAPACITY. THE ASSESSEE HAD NO DISCRETION OR FREEDOM AT ALL TO UTILISE THE AFORESAID AMOUNT FOR ANY OTHER PURPOSES OTHER THAN THE DESIGNATED PURPOSE OF MEETI NG SECURITY EXPENSES. SO MUCH SO, EVEN THE SURPLUS LEFT IF ANY, WAS NOT AT T HE DISPOSAL OF THE ASSESSEE COMPANY BUT WAS TO BE MANDATORILY TRANSFERRED TO TH E ACCOUNT OF AIRPORT AUTHORITY OF INDIA AS PER THE PRESCRIBED PROCEDURE. UNDER THESE CIRCUMSTANCES, IT IS CLEAR THAT ASSESSEE MERELY ACTED AS A CONDUIT OR A TRUSTEE FOR COLLECTION AND DISPOSAL OF THE IMPUGNED AMOUNT OF PSF-SC. UNDER TH ESE CIRCUMSTANCES, THE AFORESAID AMOUNT COULD NOT HAVE BEEN CHARACTERISED AS INCOME U/S 2(24), SECTION 5 OR ANY OTHER PROVISIONS OF THE INCOME-TAX ACT, 1961. 14.33. IT IS NOTED THAT SUBSEQUENTLY MOCA ISSUED AN OTHER ORDER DATED 19-01- 2009 CONTAINING STANDARD OPERATING PROCEDURES FOR A CCOUNTING / AUDIT OF PASSENGER SERVICE FEE (SECURITY COMPONENT) BY THE A IRPORT OPERATORS. THE AFORESAID ORDER CONTAINED WHOLE PROCEDURE IN DETAIL FOR COLLECTION AND DISBURSEMENT OF THE SAID AMOUNT. RELEVANT PORTION O F THE SAME IS REPRODUCED HEREUNDER, FOR THE SAKE OF BETTER CLARITY ON FACTS RELATED TO CONDITIONS ATTACHED WITH REGARD TO COLLECTION AND DISBURSEMENT OF THE A FORESAID AMOUNT: 2. NATURE OF SECURITY COMPONENT OF PSF: 2.1 AVIATION SECURITY IS AN ACTIVITY RESERVED FOR T HE GOVERNMENT OF INDIA. FORCE DEPLOYMENT AT THE AIRPORTS, SECURITY REQUIREMENTS I NCLUDING THE REQUIREMENT OF CAPITAL ITEMS AND SPECIFICATIONS THEREOF ARE LAID D OWN BY THE GOVERNMENT/BUREAU OF CIVIL AVIATION SECURITY (BCAS) . AS STATED ABOVE, PSF IS LEVIED UNDER RULE 88 OF THE AIRCRAFT RULES, 1937 AN D COVERS SECURITY COMPONENT AS WELL AS FACILITATION. WHILE THE FEE IS COLLECTED BY THE LICENSE OF THE AIRPORTS, I.E., THE AIRPORT OPERATOR, THROUGH THE AIRLINES, T HE SECURITY COMPONENT THEREOF, WHICH CONSTITUTES 65% OF THE TOTAL AMOUNT, CAN BE U SED ONLY IN TERMS OF DIRECTIONS ISSUED BY THE GOVERNMENT/ BCAS, FROM TIM E TO TIME. THE AMOUNT COLLECTED BY THE AIRPORT OPERATOR, WHICH IS KEPT SE PARATELY IN AN ESCROW ACCOUNT, IS THUS HELD IN FIDUCIARY CAPACITY. 2.2. SINCE THE AMOUNT IS HELD BY THE AIRPORT OPERAT OR IN FIDUCIARY CAPACITY FOR THE GOVERNMENT, THE ACCOUNTS THEREOF WOULD HAVE TO BE M AINTAINED SEPARATELY IN ACCORDANCE WITH THE PROCEDURE LAID DOWN BY THE GOVE RNMENT AND HAVE TO BE OFFERED FOR AUDIT BY THE COMPTROLLER & AUDITORY GEN ERAL 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 WI TH THE ESCROW BANKER BY THE JVC/PRIVATE OPERATOR. 3.3 THE FORMAT OF ESCROW AGREEMENT WILL INCLUDE DET AILS SUCH AS, DEFINITIONS FOR ESTABLISHMENT OF ESCROW ACCOUNT AND DECLARATION OF TRUST, THE ESCROW ACCOUNT PROVISIONS, TERM AND TERMINATION, REPRESENTATIONS A ND WARRANTIES OF ESCROW BANK AND JVC/PRIVATE OPERATOR AND MISCELLANEOUS PRO VISIONS. 3.4 PARTIES TO THE ESCROW AGREEMENT WOULD CONSIST O F JVC/PRIVATE OPERATOR AND ESCROW BANK. HOWEVER, THE ESCROW ACCOUNT AGREEMENT WILL HAVE A CLAUSE BY WHICH THE MOCA WILL HAVE SUPERVENING POWER TO DIREC T THE ESCROW BANK ON THE ISSUES REGARDING OPERATION AS WELL AS WITHDRAWALS F ROM ESCROW ACCOUNT. 3.5 ESCROW ACCOUNT SHALL BE MAINTAINED, CONTROLLED AND OPERATED BY ESCROW BANK UNDER THE ESCROW AGREEMENT AS UNDER: ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 49 I) PSF (SC) ACCOUNT: JVC/PRIVATE OPERATOR SHALL DEP OSIT IMMEDIATELY ALL PSF (SC) COLLECTIONS INTO THE PSF (SC) ACCOUNT. II) WITHDRAWAL FROM PSF (SC) ACCOUNT: THE ESCROW BA NK SHALL ALLOW WITHDRAWAL BY JVC/PRIVATE OPERATORS OF AMOUNTS DEPOSITED INTO THE PSF (SC) ACCOUNT ONLY TOWARDS THE FOLLOWING PURPOSES, IN THE ORDER OF PRI ORITY BY DESCENDING UNDER: A. TO PAY AMOUNTS TOWARDS TAXES, INCLUDING INCOME TAX ON PSF(SC) INCOME AS PER PROVISIONS OF INCOME TAX ACT, 1961, SERVICE TAX OR ANY OTHER STATUTORY DOES. B. TO PAY FOR SECURITY RELATED EXPENSES TO CENTRAL INDUSTRIAL SECURITY FORCE (CISF). C. TO PAY OTHER SECURITY RELATED EXPENSES IN TERMS OF MOCA ORDER DATED 20.6.2007 OR ANY OTHER DECISION OF MOCA/BCAS OR ANY OTHER GOVERNMENT AGENCY, FROM TIME TO TIME. III) DEPLOYMENT OF SURPLUS: ANY SURPLUS STANDING A T THE CREDIT OF THE ESCROW ACCOUNT SHOULD BE DEPLOYED BY THE ESCROW BANK IN IT S OWN DEPOSIT ACCOUNT. ON MATURITY OR OTHERWISE, THE PROCEEDS, SHALL BE CREDI TED IN ESCROW ACCOUNT. 14.34. THE PERUSAL OF THE ABOVE ORDER CONTAINING SO P MAKES IT CLEAR THAT THE AMOUNT COLLECTED BY THE AIRPORT OPERATOR IS TO BE K EPT SEPARATELY IN ESCROW ACCOUNT AND THE SAME IS HELD BY THE AIRPORT OPERAT OR IN FIDUCIARY CAPACITY. IT BECOMES FURTHER CLEAR THAT THE AMOUNT OF ANY SURPLU S LEFT IN THE SAID ACCOUNT COULD NOT HAVE BEEN UTILISED FOR ANY PURPOSE OTHER THAN SECURITY RELATED EXPENSES. UNDER THESE CIRCUMSTANCES, IT WAS CLEARLY NOT HAVING ANY CHARACTERISTICS OF INCOME IN THE HANDS OF THE ASSES SEE COMPANY. THE SAID SOP ALSO CONTAINED CERTAIN GUIDELINES WITH RESPECT TO T AXABILITY OF THE IMPUGNED AMOUNT. IN OUR VIEW, MOCA IS NOT THE DESIGNATED AUT HORITY TO DETERMINE THE TAXABILITY OF THE SAID AMOUNT AS HAS ALSO BEEN DISC USSED BY US IN DETAIL IN EARLIER PART OF OUR ORDER AND, THEREFORE, TO THAT EXTENT, T HE OBSERVATIONS OR GUIDELINES ISSUED BY MOCA EXCEED ITS JURISDICTION AND, THEREFO RE, THESE WERE NOT BINDING UPON THE ASSESSEE. THE ASSESSEE WAS, OF COURSE, BOU ND BY REMAINING POSITION OF THE GUIDELINES AS PER CONCERNED RULES & REGULATI ONS. 14.35. IT HAS FURTHER BEEN ARGUED BEFORE US THAT TH E IMPUGNED AMOUNT WOULD NOT BE INCOME IN THE HANDS OF THE ASSESSEE COMPANY IN V IEW OF THE DOCTRINE OF DIVERSION OF INCOME BY OVERRIDING TITLE. FEW JUDG MENTS 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 BROUGH T TO TAX IN VIEW OF DIVERSION OF INCOME AT THE SOURCE. 14.36. PER CONTRA, THE STAND OF THE REVENUE HAS BEE N THAT THE AMOUNT HAS BEEN DISBURSED ON ACCOUNT OF SECURITY ARRANGEMENTS, AND THEREFORE IT AMOUNTS TO APPLICATION OF INCOME AND NOT DIVERSION OF INCO ME. 14.37. WE HAVE CAREFULLY ANALYSED LEGAL INTRICACIES AND NUANCES INVOLVED HERE IN THIS CASE. LAW IN THIS REGARD WAS CLARIFIED AND HONBLE 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 JUDG MENTS 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 AMOUN T SOUGHT TO BE DEDUCTED, IN TRUTH, NEVER REACHED THE ASSESSEE AS H IS INCOME. OBLIGATIONS, NO DOUBT, THERE ARE IN EVERY CASE, BUT IT IS THE NATURE OF THE OBLIGATION WHICH IS THE DECISIVE FACT. THERE IS A D IFFERENCE BETWEEN AN AMOUNT WHICH A PERSON IS OBLIGED TO APPLY OUT OF HI S INCOME AND AN ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 50 AMOUNT WHICH BY THE NATURE OF THE OBLIGATION CANNOT BE SAID TO BE A PART OF THE INCOME OF THE ASSESSEE. WHERE BY THE OBLIGAT ION INCOME IS DIVERTED BEFORE IT REACHES THE ASSESSEE, IT IS DEDU CTIBLE; BUT WHERE THE INCOME IS REQUIRED TO BE APPLIED TO DISCHARGE AN OB LIGATION AFTER SUCH INCOME REACHES THE ASSESSEE, THE SAME CONSEQUENCE, IN LAW, DOES NOT FOLLOW. IT IS THE FIRST KIND OF PAYMENT WHICH CAN T RULY BE EXCUSED AND NOT THE SECOND. THE SECOND PAYMENT IS MERELY AN OBLIGAT ION TO PAY ANOTHER A PORTION OF ONE'S OWN INCOME, WHICH HAS BEEN RECEIVE D AND IS SINCE APPLIED. THE FIRST IS A CASE IN WHICH THE INCOME NE VER REACHES THE ASSESSEE, WHO EVEN IF HE WERE TO COLLECT IT DOES SO , NOT AS PART OF HIS INCOME, BUT FOR AND ON BEHALF OF THE PERSON TO WHOM IT IS PAYABLE. 14.38. SUBSEQUENTLY, IN MANY JUDGMENTS, VARIOUS COU RTS HAVE, FROM TIME TO TIME, ANALYSED THE LAW IN THIS REGARD AND SUGGESTED VARIO US TESTS TO FIND OUT WHETHER IN A GIVE FACTS IT WAS A CASE OF DIVERSION OR AP PLICATION OF INCOME. WE FIND THAT THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF U.P . BHUMI SUDHAR NIGAM VS CIT 280 ITR 197 (ALL) FORMULATED A SET OF FOUR TEST S TO FIND OUT WHETHER IN A GIVEN SITUATION, IT WOULD BE A CASE OF DIVERSION OF INCOM E BY OVERRIDING TITLE OR NOT. THE HONBLE COURT, AFTER ANALYSING VARIOUS OTHER JUDGME NTS SUGGESTED FOLLOWING PRINCIPLES:- (I) IF A THIRD PERSON BECOMES ENTITLED TO RECEIVE A N AMOUNT UNDER AN OBLIGATION OF AN ASSESSEE EVEN BEFORE HE COULD CLAI M TO RECEIVE IT AS HIS INCOME, THERE WOULD BE A DIVERSION OF INCOME BY OVE RRIDING TITLE BUT WHEN AFTER RECEIPT OF THE INCOME BY THE ASSESSEE, THE SA ME IS PASSED ON TO A THIRD PERSON IN DISCHARGE OF THE OBLIGATION OF THE ASSESSEE, IT WILL BE A CASE OF APPLICATION OF INCOME BY THE ASSESSEE AND N OT OF DIVERSION OF INCOME BY OVERRIDING TITLE. IF INCOME DOES NOT RESU LT AT ALL, THERE CANNOT BE A TAX, EVEN THOUGH IN BOOK-KEEPING, AN ENTRY IS MAD E ABOUT THE HYPOTHETICAL INCOME WHICH DOES NOT MATERIALISE. (III) THE EXISTENCE OR ABSENCE OF ENTRIES IN HIS BO OKS OF ACCOUNT CANNOT BE DECISIVE OR CONCLUSIVE IN THE MATTER. (IV) THE CONCEPT OF REAL INCOME MUST BE APPLIED IN APPROPRIATE CASES BUT WITH CIRCUMSPECTION AND MUST NOT BE CALLED IN AID T O DEFEAT THE FUNDAMENTAL PRINCIPLE OF LAW OF INCOME-TAX AS DEVEL OPED. 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 C ANNOT BE TREATED AS TAXABLE INCOME IN THE HANDS OF THE ASSESSEE. IF WE APPLY TH E FIRST PRINCIPLE, WE FIND THAT AS SOON AS THE AMOUNT WAS COLLECTED FROM THE PASSEN GERS @ RS.200/- PER TICKET, A PORTION OF IT, I.E. RS.130/- PER TICKET B ECAME PAYABLE TO CISF AND/OR ANY OTHER AGENCY DESIGNATED FOR THE PURPOSES OF SECURIT Y AT THE AIRPORT. THE SAME WAS LIABLE TO BE DEPOSITED IN A SEPARATE ESCROW AC COUNT AND THE ASSESSEE HAD NO RIGHT, WHATSOEVER, IN THE SAME ACCOUNT. THE AFOR ESAID 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 A ND PRIOR STIPULATION THAT 65% OF THE SAME IS MEANT FOR SECURITY AGENCIES. THUS, T HE ASSESSEE MERELY ACTED AS A COLLECTION AGENT. THUS, APPLYING THE FIRST PRINCI PLE, THE IMPUGNED AMOUNT WOULD FALL IN THE CATEGORY OF DIVERSION OF INCOME. 14.40. AS FAR AS THE OTHER THREE PRINCIPLES ARE CON CERNED, THE CRUX OF THESE THREE PRINCIPLES IS TO FIND OUT WHETHER THE ASSESSEE HAD, IN SUBSTANCE, EARNED ANY INCOME. IN OTHER WORDS, THESE THREE PRINCIPLES SUGG EST APPLICATION OF THE CONCEPT OF REAL INCOME, WHICH SUGGESTS THAT UNLESS THE IN COME HAS BEEN EARNED BY A PERSON IN REAL SENSE, THE SAME CANNOT BE HELD AS TA XABLE INCOME. THERE HAS TO ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 51 BE FIRST INCOME AND ONLY THEN ITS TAXABILITY COULD BE DETERMINED. IT IS NOTED BY US THAT IN THE FACTS BEFORE US, NO PORTION OF THE AMOU NT COLLECTED ON BEHALF OF AAI / MOCA IS REPORTED TO HAVE BEEN RETAINED BY THE ASSES SEE AS ITS INCOME IN AS MUCH AS NOTHING BELONGED TO IT. THUS, THE IMPUGNED AMOUNT IS CLEARLY NOT TAXABLE IN THE HANDS OF THE ASSESSEE. 14.41. IT IS FURTHER NOTED BY US THAT IN MANY CASES , WHEREIN UNDER SOME REQUIREMENT OF LAW IF THE AMOUNTS WERE TRANSFERRED TO THE DESIGNATED FUND, THEN IN SUCH CASES THE COURTS HAVE HELD IT TO BE A CASE OF DIVERSION OF INCOME BY OVERRIDING TITLE. IN A MATTER BEFORE HONBLE BOMBAY HIGH COURT IN THE CASE OF SOMAIYA ORGANO CHEMICALS LTD VS CIT 216 ITR 291 (BO M), THE FACTS WERE THAT A PORTION OF THE SALES PRICE WAS TRANSFERRED TO A S EPARATE FUND FOR BUILDING UP ADEQUATE STORAGE FACILITIES UNDER A STATUTORY OBLIG ATION, IT WAS HELD TO BE DIVERTED AT SOURCE BY OVERRIDING TITLE COULD NOT FORM PART O F ASSESSEES INCOME. 14.42. LD. COUNSEL HAD ALSO RELIED UPON BEFORE US T HE JUDGMENT OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS SALEM CO-OP ERATIVE SUGAR MILLS LTD (SUPRA). THE FACTS IN THIS CASE WERE THAT THE SAID ASSESSEE WAS A COOPERATIVE SOCIETY, CARRYING ON BUSINESS OF MANUFACTURING AND SALE OF SUGAR AND IN TERMS OF MOLASSES CONTROL (AMENDMENT) ORDER DATED 06-02-1972 , TRANSFERRED A SUM IN CONFORMITY WITH THE STATUTORY OBLIGATION CAST BY TH E ABOVE ORDER AND CLAIMED IT AS DEDUCTION IN THE COMPUTATION OF ITS TOTAL INCOME FO R THE ASSESSMENT YEAR 1975- 76, WHICH WAS DISPUTED BY THE REVENUE BUT ALLOWED B Y THE TRIBUNAL. HONBLE HIGH COURT AFFIRMED TRIBUNALS ORDER AND OBSERVED T HAT EVEN BEFORE COLLECTION OF THE AMOUNT AS DIRECTED BY THE CENTRAL GOVERNMENT UN DER THE MOLASSES CONTROL ('AMENDMENT) ORDER, THE ASSESSEE WAS DIRECTED TO KE EP THIS AMOUNT UNDER A SEPARATE ACCOUNT UNDER THE HEAD MOLASSES STORAGE F UND'. THOUGH, THE ASSESSEE COLLECTED THIS AMOUNT UNDER THE STATUTORY OBLIGATION, IT DID NOT BELONG TO THE ASSESSEE, BUT TO THE MOLASSES STORAGE FUND. THE ASSESSEE COULD NOT UTILISE THE AMOUNT LYING IN THE SAID FUND FOR ANY O THER PURPOSE. THE AMOUNT WAS TO BE UTILISED FOR THE PURPOSE OF CONSTRUCTING A ST ORAGE 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 S TORAGE 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 UNDE R THE DIRECTIONS GIVEN UNDER THE MOLASSES CONTROL (AMENDMENT) ORDER. THE SUM IN QUES TION WAS HELD TO BE NOT INCLUDIBLE IN THE ASSESSEES TOTAL INCOME. 14.43. SIMILAR VIEW WAS ULTIMATELY UPHELD BY THE HO NBLE SUPREME COURT IN THE CASE OF CIT VS NEW MORRISSON SUGAR MILLS LTD 269 IT R 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 H ELD TO BE EXCLUDIBLE FROM ASSESSEES TOTAL INCOME. SIMILARLY, IN THE CASE OF CIT VS BIJLI COTTON MILLS PVT LTD 116 ITR 60 (SC), THE HONBLE SUPREME COURT HELD THA T WHEN RIGHT FROM THE INCEPTION, AMOUNT OF DHARMADA WAS COLLECTED AND H ELD BY THE ASSESSEE COMPANY UNDER AN OBLIGATION TO SPEND FOR CHARITABLE PURPOSES ONLY, THEN THOSE AMOUNTS WERE NOT ITS TRADING RECEIPTS AND WAS NOT T AXABLE AS BUSINESS INCOME. 14.44. BEFORE PARTING WITH, WE HAVE ALSO ANALYSED T HE FACTS ABOUT UTILIZATION OF THE IMPUGNED AMOUNT. THE ESCROW ACCOUNT MAINTAINED BY THE ASSESSEE IS SIMPLY A POOL CREATED BY THE MOCA THROUGH ASSESSEE FOR MEETING SECURITY EXPENSES. UNDER THESE CIRCUMSTANCES, IF AT ALL ANY INCOME CAN BE COMPUTED, THAT WOULD BE POSSIBLE ONLY IF ANY SURPLUS ARISES, WHICH IS NOT POSSIBLE TO HAPPEN ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 52 SINCE ENTIRE AMOUNT COLLECTED BY ASSESSEE COMPANY I S DEPOSITED IN ESCROW ACCOUNT WHICH IS EARMARKED WHOLLY AND EXCLUSIVELY F OR MEETING SECURITY EXPENSES. THERE IS NO FLEXIBILITY FOR USING THE FUN DS ELSEWHERE. IF AT ALL ANY AMOUNT IS LEFT UNSPENT FROM THIS ACCOUNT, THEN, THE SAME IS TO BE TRANSFERRED TO THE ACCOUNT OF AIRPORT AUTHORITY OF INDIA FOR MEETI NG SECURITY EXPENSES. WE HAD DIRECTED THE ASSESSEE AS WELL AS THE LD. CIT-DR TO EXAMINE REQUISITE FACTS AND INFORM US WHETHER THERE WAS SURPLUS OR DEFICIT IN T HE ESCROW ACCOUNT FINALLY. THE INFORMATION PROVIDED BY THE ASSESSING OFFICER, THRO UGH LD. CIT-DR, VIDE HIS LETTER DATED 06-09-2016 REVEALS THAT UPTO THE ASSES SMENT YEAR 2013-14 THOUGH THERE WAS SURPLUS IN THE SAID ACCOUNT, BUT FROM A.Y . 2014-15 ONWARDS, THERE WAS HUGE DEFICIT, MEANING THEREBY, THE EXPENDITURE WAS MORE THAN THE AMOUNT OF COLLECTION. AS PER THE TERMS OF SOP ISSUED BY MO CA, IF ULTIMATELY THERE WAS SOME DEFICIT, THEN IT WAS REQUIRED TO BE FUNDED BY GOVERNMENT OF INDIA, AND IF THERE WAS EVER ANY SURPLUS (I.E. UNSPENT AMOUNT), I T WAS TO BE TRANSFERRED TO THE ACCOUNT OF AIRPORT AUTHORITY OF INDIA (AAI). THUS, VIEWED FROM THIS ANGLE ALSO, THERE WAS NO QUESTION OF THERE BEING ANY INCOME IN THIS EXERCISE, MUCH LESS, ANY INCOME, WHICH COULD BE CHARACTERISED AS TAXABLE INCOME IN THE HANDS OF THE ASSESSEE COMPANY. THUS, WE HAVE NO HESITATION IN HO LDING THAT THE AFORESAID AMOUNT IS NOT TAXABLE AS INCOME IN THE HANDS OF THE ASSESSEE COMPANY. THE AO IS DIRECTED TO RECOMPUTE THE INCOME OF THE ASSES SEE ACCORDINGLY. THE AO HAS ALSO THE LIBERTY TO EXAMINE THAT NO PORTION OF AMOUNT COLLECTED BY THE ASSESSEE ON ACCOUNT OF PSF-SC IS UTILISED BY THE AS SESSEE 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 A SSESSEE IN THIS REGARD, THEN THE AO WILL BE AT HIS LIBERTY TO TREAT THE AMOUNT SO MI SAPPROPRIATED AS INCOME OF THE ASSESSEE BUT TO THAT EXTENT ONLY. FURTHER, IF ANY R EFUND IS RECEIVED BY THE ASSESSEE ON ACCOUNT OF TDS DEDUCTED ON THIS COMPONE NT, 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 COU RSE 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 SUBJE CT TO DIRECTIONS GIVEN ABOVE. 38. IN THIS VIEW OF THE MATTER AND CONSISTENT WIT H VIEW TAKEN BY THE CO-ORDINATE BENCH, WE ARE OF THE CONSIDERED VIEW TH AT PSF-SC COLLECTED BY THE ASSESSEE TOWARDS SECURITY OF AIRPO RT AND TO BE UTILIZED AS PER TERMS OF AGREEMENT BETWEEN THE PART IES COULD NOT BE REGARDED AS INCOME OF THE ASSESSEE AND HENCE, NEEDS TO BE EXCLUDED FROM TOTAL INCOME. THEREFORE, WE DIRECT TH E LD. AO TO EXCLUDE PSF-SC OF RS.51,03,65,280/- FROM TOTAL INCO ME OF THE ASSESEE. ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 53 39. IN THE RESULT, APPEAL FILED BY THE ASSESSEE I S ALLOWED FOR STATISTICAL PURPOSES. ITA NO.2385/MUM/2018:- 40. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) ERRED N DELETING THE DISALLOWANCE OF 25% DEPRECIATION ON UPFRONT FEES OF RS. 150 CRORE WITHOUT CONSIDERING T HE FACT THAT THE ASSESSES HAS NOT ACQUIRED ANY ABSOLUTE RIGHTS ON TH E AIRPORT, SO AS TO EQUATE IT WITH A LICENSE, BUT INVESTED THE AAI HAS GRANTED THE ASSESSEE THE RIGHT TO PERFORM CERTAIN FUNCTIONS DURING THE C ONTRACT PERIOD OF 30 YEARS AND HENCE THE ASSESSES IS ENTITLED FOR DEDUC TION ONLY THE PROPORTIONATE AMOUNT I.E. L/30 LH OF RS. 150 CRORE.' 2(A)'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFF ICER TO TREAT THE EXPENDITURE INCURRED TOWARDS VARIOUS EXPENDITURE SU CH AS REALIGNMENT OF NALLAH'S IN FORECOURT OF PROPOSED INTEGRATED TERMIN AL, REALLOCATION OF CPWD STAFF AND OTHER OPERATIONAL EXPENDITURE AS REVENUE EXPENDITURE WITHOUT APPRECIATING THAT THESE EXPENSES RESULT IN. ENDURING BENEFIT TO THE ASSESSEE AND HENCE IS CAPITAL EXPENDITURE,' 2(B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFF ICER TO TREAT THE EXPENDITURE INCURRED TOWARDS VARIOUS EXPENDITURE SU CH AS REALIGNMENT OF NALLAHS IN FORECOURT OF PROPOSED INTEGRATED TERMIN AL, REALLOCATION OF CPWD STAFF AND OTHER OPERATIONAL EXPENDITURE AS REV ENUE EXPENDITURE IGNORING THE RATIO OF THE DECISION OF THE HON'BLE S UPREME COURT IN THE CASE OF CIT VS. MANGAYARKARASI MILLS (315ITR1H) WHE REIN IT WAS HELD THAT REPLACEMENT EXPENDITURE IS NEITHER CURRENT REP AIRS NOR REVENUE IN NATURE WHICH IS SQUARELY APPLICABLE TO THE ASSESSEE 'S CASE.' 3(A) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) ERRED IN DELETING THE DISALLOWANCE PAID AS RETRENCHMENT COMPENSATION TO AAI FOR THE RELEVANT ASSESSMENT YEA R 2013-14.' 3(B) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT RETRENCHMENT C OMPENSATION IS ALLOWABLE AS A DEDUCTION U/S 37(1) OF THE INCOME T AX ACT, 1961. 3(C) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT SECTION 35DDA IS NOT APPLICABLE WITHOUT APPRECIATING THAT SUCH RETRENCHMENT COMPENS ATION PAID BY THE ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 54 ASSESSEE COMPANY IS IN CONNECTION WITH THE VOLUNTAR Y RETIREMENT OF EMPLOYEES.' 3(D) '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 BOMBAY HIGH COURT IN THE CASE OF CIT VS. SINNAR BIDI UDYOG LTD [2002 123 TAXMAN 59 (BOM)] AND CIT VS, MARAGARINE & REFINED O ILS CO, LTD. [2006 282 ITR 576 (KAR)] WITHOUT APPRECIATING THAT THE SA ID DECISION WERE RENDERED FOR THE A.Y. 1989-90 AND A.Y.1981-82 RESPE CTIVELY I.E. PRIOR TO INSERTION OF SECTION 35DDA WHICH IS APPLICABLE FOR A.Y. 2002-03 ONWARDS AS THE SAME WAS INSERTED BY THE FINANCE ACT, 2001 W ,E,F, 01.04.2002 AND THEREFORE THE RATIO OF THE DECISIONS CITED SUPRA AR E NOT APPLICABLE TO THE ASSESSMENT YEAR UNDER CONSIDERATION.' 4(A) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT DEVELOPMENT FE E COLLECTED BY THE ASSESSEE FROM THE EMBARKING PASSENGERS AT THE CHHAT RAPATI SHIVAJI INTERNATIONAL AIRPORT, MUMBAI DURING THE FINANCIAL YEAR 2012-13, RELEVANT FOR THE ASSESSMENT YEAR 2013-14, IS A CAPITAL RECEI PT AND NOT A REVENUE RECEIPT.' 4(B) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT DEVELOPMENT FE E COLLECTED BY THE ASSESSEE COMPANY IS A CAPITAL RECEIPT BASED ON ITS APPLICATION FOR ACQUISITION OF CAPITAL ASSETS WITHOUT APPRECIATING THE FACT THAT APPLICATION OF RECEIPTS DOES NOT DETERMINE THE NATURE AND TAXAB ILITY OF THE RECEIPTS,' 4(C) '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. R UNION OF INDIA & OTHERS WITHOUT APPRECIATING THAT IN THAT CASE THE I SSUE BEFORE THE HONBLE APEX COURT WAS WHETHER THE ASSESSE COMPANY AS A LES SEE OF AAI, CAN COLLECT DEVELOPMENT FEE FROM THE EMBARKING PASSENGE RS AT THE CHHATRAPATI SHIAVAJI INTERNATIONAL AIRPORT, MUMBAI AND THE APEX COURT DID NOT GIVE A FINDING REGADING THE NATURE OF RECEIPT I N THE HANDS OF LESSESS OF THE AIRPORTS, INCLUDING THE ASSESSEE COMPANY. 4(D) '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 TA X WITHOUT APPRECIATING THAT SUCH AMOUNT CONSTITUTES CONSTRUCTION RECEIPT I N THE ASSESSEE'S HANDS AND HENCE LIABLE TO BE TAXED.' 5(A) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE U /S. 14 A, WITHOUT APPRECIATING THE FACT THAT THE AO. HAS PROPERLY REC ORDED HIS SATISFACTION FOR INVOKING THE PROVISIONS OF RULE 8D AND THEREFOR E SINCE RULE 8D IS INVOKED, THE DISALLOWANCE HAS TO BE WORKED OUT AS P ER THE FORMULA PRESCRIBED THEREIN AND THERE IS NO SCOPE FOR ANY DE VIATION THEREFROM. ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 55 5(B)'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE U /S, 14A OBSERVING THAT SINCE THERE IS NO EXEMPT INCOME, NO DISALLOWANCE CA N BE MADE U/S. 14A WITHOUT APPRECIATING THAT AS HELD IN THIS DECISION OF SPECIAL BENCH OF 1TAT, DELHI IN THE CASE OF CHEMIINVEST 121 ITD 318 (DELHI) (513), PROVISIONS OF SECTION 14A ARE APPLICABLE EVEN THROU GH NO EXEMPT INCOME HAS BEEN EARNED DURING THE YEAR,' 6. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, WHETHER THE LD..CIT(A) IS CORRECT IN LAW TO DELETE THE DISA LLOWANCE ON ACCOUNT OF DELAYED DEPOSIT OF EMPLOYEE'S CONTRIBUTION TO ES1C INTO GOVT, TREASURY IN LIGHT OF THE CBDT CIRCULAR NO. 22/2015, DATED 1712. 2015,' 7. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED C1T(A) ERRED IN UPHOLDING THE ASSESSEE'S CL AIM THAT CAPITAL EXPENDITURE INCURRED BY THE ASSESSEE ON TAXIWAYS, A PRONS, PARKING BAYS AND BRIDGES IS ENTITLED TO DEPRECIATION @ 25% TREAT ING DIE SAME AS PLANT & MACHINERY IGNORING THAT THE TAXIWAYS, APRONS, PAR KING BAYS AS AKIN TO ROADS AND BUILDINGS AND THEREFORE, ENTITLED TO DEPR ECIATION @ 10%. 8. THE APPELLANT PRAYS THAT THE ORDER OF THE CJ T(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED . 41. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDER ATION FROM GROUND NO.1 OF REVENUE APPEAL IS DISALLOWANCES OF DEPRECIA TION @25% ON UPFRONT FEES OF RS.150 CRORES PAID BY THE ASSESEE. THE ASSESSE HAD PAID RS.153.85 CRORES TO AAI, AS PER THE TERMS OF OMBA. THE LD. AO NOTED THAT THIS ISSUE HAS BEEN EXAMINED AT L ENGTH IN AY 2007-08 AND DEPRECIATION CLAIMED THEREON WAS DISALL OWED. ACCORDING TO THE LD. AO, THE ASSESEE IS ENTITLED TO CLAIM DEPRECIATION @1/30 TH OF ENTIRE EXPENDITURE AND ACCORDINGLY, ALLOWED DEPRECIATION OF RS.5 CRORES AS AGAINST DEPRECIATION CLAIMED BY THE ASSESEE @25% ON UPFRONT FEES PAID TO AAI. 42. THE LD. AR FOR THE ASSESEE SUBMITTED THAT TH IS ISSUE IS SQUARELY COVERED IN FAVOUR THE ASSESSEE BY THE ORD ERS OF THE ITAT, MUMBAI B BENCH IN ASSESSEE OWN CASE FOR AY 2008 -09 ITA NO.3232/MUM/2012, WHERE UNDER IDENTICAL SET OF FACT S, THE TRIBUNAL HELD THAT THE ASSESEE IS ENTITLED FOR DEPRECIATION @25% AS ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 56 APPLICABLE TO INTANGIBLE ASSETS. THE LD. DR, ON THE OTHER HAND, FAIRLY ACCEPTED THAT THIS ISSUE IS COVERED IN FAVOUR OF TH E ASSESSEE FOR AY 2008-09 ONWARDS. 43. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE M ATERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. WE FIND THAT THE CO-ORDINATE BENCH OF ITAT, MUMBAI B BENC H HAD CONSIDERED AN IDENTICAL ISSUE FOR AY 2007-08 ONWARD S AND AFTER CONSIDERING RELEVANT FACTS HELD THAT AMOUNT PAID ON ACCOUNT OF UPFRONT FEES IS IN THE NATURE OF AN INTANGIBLE ASSE T ELIGIBLE FOR DEPRECIATION @25% AS APPLICABLE TO INTANGIBLE ASSET S. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER;- 7.4. WE HAVE GONE THROUGH THE ORDERS OF THE LOWER A UTHORITIES AS WELL AS THE ORDER OF THE TRIBUNAL FOR A.Y. 2007-08 AND FIND THAT THE TRIBUNAL HAS ALREADY DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSE E VIDE ITS ORDER DATED 14-02-2014 WITH THE FOLLOWING OBSERVATIONS: WE HAVE CAREFULLY CONSIDERED THE ORDERS OF AUTHORI TIES BELOW AND SUBMISSIONS MADE BY LD. REPRESENTATIVES OF THE PART IES. WE HAVE ALSO CONSIDERED THE RELEVANT ARTICLES OF 'OMDA' AND THE CASES RELIED UPON BY THE PARTIES BEFORE THE AUTHORITIES-B ELOW (SUPRA) AS WELL AS THE CASES REFERRED BEFORE US. 10.1 THE ASSESSEE IS A JOINT VENTURE COMPANY. IT HA S ENTERED INTO AN AGREEMENT WITH 'AAI' AND UNDER THE AGREEMENT I.E . 'OMDA', THE ASSESSEE HAS BEEN GRANTED EXCLUSIVE RIGHT, AND AUTHORITY TO UNDERTAKE SOME OF THE FUNCTIONS OF 'AAI' BEING FUNC TIONS OF OPERATION, MAINTENANCE; DEVELOPMENT, DESIGN, CONSTR UCTION, UP GRADATION, MODERNIZATION, FINANCE AND MANAGEMENT OF AIRPORT FOR AN INITIAL TERM OF 30 YEARS, WHICH IS EXTENDABLE FO R A FURTHER PERIOD OF 30 YEARS ON THE SAME TERMS AND CONDITIONS AS APP LICABLE FOR THE INITIAL PERIOD, AS PER ARTICLE 18.1 OF 'OMDA'. UNDE R THE TERMS AND CONDITIONS OF OMDA', THE ASSESSEE PAID A SUM OF RS. 150 CRORES TO 'AAI' AS UPFRONT FEE M DESCRIBED UNDER ARTICLE 1 1.1.1 OF CHAPTER-XI OF 'OMDA' WHICH IS REPRODUCED AS UNDER: '11.1.1 UPFRONT FEE THE JVC SHALL PAY TO THE AAI AN UPFRO NT FEE (THE 'UPFRONT FEE') OF RS150 CRORES (RUPEES ONE HUNDRED AND FIFTY CRORES ONLY) ON OR BEFORE THE EFFECTIVE DATE. IT IS MUTUALLY AGREED THAT THIS UPFRONT FEE IS NON-REFUNDABLE (EXCEPT ON ACCOUNT OF TERMINATION OF THIS AGREEMENT IN ACCORDANCE WITH AR TICLE 3.3 HEREOF AND PAYABLE ONLY ONCE DURING THE TERM OF THIS AGREE MENT' BESIDES, ABOVE PAYMENT, THE ASSESSEE IS ALSO TO PAY ANNUAL FEES ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 57 AS PER ARTICLE 21.1.2.1 FOR EACH YEAR DURING THE TE RMS OF THE AGREEMENT. BY VIRTUE OF ABOVE ONE-TIME PAYMENT OF U PFRONT FEE OF RS.150 CRORES, THE ASSESSEE HAS BEEN GIVEN EXCLUSIV E RIGHT AND AUTHORITY TO COLLECT PAYMENT OF VARIOUS NATURE FROM THE USERS OF AIRPORT PREMISES AS PER ARTICLE 2.1.2(III) OF CHAPT ER-II, SUBJECT TO THE REGULATIONS PRESCRIBED UNDER CHAPTER XII. THE QUES TION ARISES AS TO WHETHER THE ASSESSEE HAS GOT THE LEASE RIGHT OR LICENSE BY MAKING THIS ONE-TIME PAYMENT OF RS.150 CRORES TO 'A AI' AS UPFRONT FEE. 10.2 THAT THE AO HAS STATED THAT THE ASSESSEE HAS G OT LEASE HOLD RIGHTS FOR A PERIOD OF 30 YEARS AND WHEREAS THE ASS ESSEE HAS CONTENDED THAT THE ASSESSEE HAS GOT A LICENSE FOR A PERIOD OF 30 YEARS AND AS SUCH IT IS AN INTANGIBLE ASSETS' . THU S, THE ASSESSEE IS ENTITLED FOR DEPRECIATION AS PER SECTION 32(1)(I I) OF THE ACT. WE OBSERVE THAT THE SAID AMOUNT OF RS.150 CRORES PAID BY ASSESSEE IS NON-REFUNDABLE. THE ASSESSEE HAS GOT THE PRIVILEGE UNDER OMDA' TO COLLECT CHARGES OF THE NATURE AS MENTIONED IN TH E AGREEMENT ENTERED INTO I.E. 'OMDA' FROM THE USERS OF AIRPORT PREMISES. WE OBSERVE THAT IT IS NOT A CASE WHERE THE ASSESSEE HA S GOT THE TRANSFER OF A RIGHT TO ENJOY THE AIRPORT PREMISES. THE ASSESSEE ONLY GOT A LICENSE OR RIGHT TO DO SOMETHING AT THE AIRPO RT PREMISES. THE HON'BLE APEX COURT HAS HELD IN THE CASE OF B. M. LA L (SUPRA) THAT THE TRANSACTION IS A LEASE, IF IT GRANTS THE INTERE ST IN THE LAND AND WHEREAS IT IS A LICENSE IF IT GIVES A PERSONAL PRIV ILEGE WITH NO INTEREST IN THE LAND. WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS GOT THE ECONOMIC /COMMERCIAL RIGHT UND ER THE SAID AGREEMENT TO COLLECT CHARGES FROM THE USERS OF THE AIRPORT PREMISES WHICH IS SIMILAR TO GRANT OF A LICENSE TO THE ASSESSEE. THIS CASE IS SIMILAR TO THE CASE OF TECHNOSHARES AN D STOCKS LTD AND OTHERS (SUPRA), WHEREIN THE HON'BLE APEX COURT HAS HELD THAT A RIGHT GIVEN TO MEMBER OF STOCK-EXCHANGE TO CARRY ON THE BUSINESS AT THE PREMISES OF THE STOCK-EXCHANGE IS A BUSINESS OR COMMERCIAL RIGHT WHICH IS AKIN TO LICENSE IN TERMS OF SECTION 32(1)(II) OF THE ACT, THEREFORE, ELIGIBLE FOR DEPRE CIATION. THEIR LORDSHIPS HAVE HELD THAT RIGHT TO PARTICIPATE IN TH E MARKET IS AN ECONOMIC AND MONEY VALUE, ITSELF SATISFIES THE TEST OF BEING A LICENSE. THERE IS NO DISPUTE TO THE FACT THAT THE S AID PAYMENT OF RS.150 CRORES PAID TO 'AAI' HAS NOT RESULTED TO THE ASSESSEE IN THE ACQUISITION OF ANY 'TANGIBLE ASSETS' LIKE BUILDING, MACHINERY, PLANTS OR FURNITURE, THEREFORE THE SAID PAYMENT OF RS.150 CRORES HAS NOT RESULTED INTO ACQUISITION OF TANGIBLE ASSETS'. THUS , THE ASSESSEE HAS ONLY ACQUIRED RIGHT TO COLLECT CHARGES FROM THE USERS OF THE AIRPORT PREEMIES, WHICH IS A BUSINESS OR COMMERCIAL RIGHT IN THE FORM OF LICENSE AND THEREFORE IT IS AN INTANGIBLE A SSETS' AS PER SECTION 32(1)(II) OF THE ACT. THE HON'BLE DELHI HIG H COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES PVT LTD (SUPR A) HAS ALSO HELD THAT THE ASSETS WHICH ARE INCLUDED IN THE DEFI NITION OF 'INTANGIBLE ASSETS' INCLUDE, ALONG WITH OTHER THING S, ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE. IN THIS REGARD, IT IS RELEVANT TO STATE THAT THE DECISION OF DELHI HIGH C OURT IN THE CASE OF ONGC VIDESH LTD (SUPRA) HAS HELD THAT THE ASSESS EE WHO WAS ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 58 ASSIGNED THE RIGHTS TO PARTICIPATE IN OIL EXPLORATI ON IN RUSSIA THROUGH A CONSORTIUM FOR A PERIOD OF 25 YEARS AND P AID THE TOTAL CONSIDERATION FOR OBTAINING 20% MEMBERSHIP IN THE C ONSORTIUM, AMOUNTING TO RS. 155.9 CRORES, WAS TREATED TO ACQUI RE A LICENSE, BEING INTANGIBLE ASSETS, AND THUS ASSESSEE WAS ENTI TLED TO CLAIM DEPRECIATION U/S 32(1)(II) OF THE ACT. THE PUNE BEN CH OF THE TRIBUNAL IN THE CASE OF ASHOKA INFO (P) LTD (SUPRA) HAS ALSO HELD THAT THE EXPENDITURE INCURRED ON CONSTRUCTION OF HI GHWAY IS ELIGIBLE FOR DEPRECIATION @25%, AS THIS EXPENDITURE HAS GIVE N RISE TO AN 'INTANGIBLE ASSETS' IN THE HANDS OF THE ASSESSEE. I N VIEW OF ABOVE DECISIONS AND THE FACTS OF THE CASE, WE HOLD THAT T HE LD. CIT(A) HAS RIGHTLY HELD THAT THE PAYMENT OF UPFRONT FEE OF RS.150 CRORES PAID BY ASSESSEE TO 'AAI' HAS CREATED CAPITAL ASSET S IN THE FORM OF LICENSE TO DEVELOP AND MODERNIZE THE AIRPORT AND CO LLECT 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 RS.22.50 CRORES MADE BY AO HAS RIGHTLY BEEN DELE TED BY LD. CIT(A) BY DIRECTING THE AO TO ALLOW DEPRECIATION AT THE RATE OF 25% ON THE SAID PAYMENT OF UPFRONT FEE OF RS.150 CRORES . THUS, GROUND NO.1 TAKEN BY DEPARTMENT IS REJECTED. 7.5. THUS, IT IS NOTED FROM THE ABOVE THAT THE TRIB UNAL HAS HELD THAT THE AMOUNT PAID ON ACCOUNT OF UPFRONT FEE IS IN THE NATURE OF AN INTANGIBLE ASSET ELIGIBLE FOR DEPRECIATION AND ACCORDINGLY ALLOWED THE CLAIM OF D EPRECIATION UPON THE SAME. THE ASSESSEE HAS CLAIMED DEPRECIATION IN THE IMPUGN ED YEAR ON THE WDV OF THE SAME ASSET. THEREFORE, WE FIND THAT NO DIFFEREN T DECISION CAN BE TAKEN IN THE YEAR UNDER CONSIDERATION, MORE SO, WHEN NO DISTINCT ION HAS BEEN MADE ON FACTS OR LAW, THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL, THE CLAIM OF DEPRECIATION ON THE UPFRONT FEE IS ALLOWED. THIS GR OUND IS REJECTED. 44. IN THIS VIEW OF THE MATTER AND CONSISTENT WIT H VIEW TAKEN BY THE CO-ORDINATE BENCH, WE ARE OF THE CONSIDERED VIEW TH AT THE LD.CIT(A) WAS RIGHT IN DELETING ADDITIONS MADE BY THE LD. AO TOWARDS EXCESS DEPRECIATION AND HENCE, WE ARE INCLINED TO UPHOLD T HE FINDINGS OF THE LD.CIT(A) AND REJECT GROUND TAKEN BY THE REVENUE. 45. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERA TION FROM GROUND NO.2(A) AND 2(B) OF REVENUE APPEAL IS DISALLOWANCES OF VARIOUS EXPENDITURE SUCH AS REALIGNMENT OF NALLAH, REALLOCA TION OF CPWD STAFF, ETC., AS REVENUE EXPENDITURE THE LD. AO HAD CONSIDERED SUCH EXPENDITURE AS CAPITAL IN NATURE. HOWEVER, THE LD.C IT(A) ALLOWED SUCH EXPENDITURE BY FOLLOWING THE ORDERS OF HIS PRE DECESSORS AND ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 59 ORDERS OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR E ARLIER ASSESSMENT YEARS. 46. THE LD. AR FOR THE ASSESSEE, AT THE TIME OF HE ARING SUBMITTED THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE AS SESSEE BY THE DECISION OF ITAT, B BENCH FOR AY 2012-13 IN ITA NO.4382/MUM/2015, WHERE IT WAS HELD THAT EXPENDITUR E INCURRED FOR REALIGNMENT OF NALLAH AND REALLOCATION OF CPWD STAF F ETC., ARE REVENUE IN NATURE. 47. THE LD. DR, ON THE OTHER HAND, FAIRLY ACCEPTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF T HE TRIBUNAL FOR EARLIER YEARS. 48. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE M ATERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. WE FIND THAT AN IDENTICAL ISSUE HAD BEEN CONSIDERED BY CO-O RDINATE BENCH OF ITAT, MUMBAI, IN ASSESSEES OWN CASE FOR AY 2012-13 , WHERE THE TRIBUNAL BY FOLLOWING ITS EARLIER ORDER FOR AY 2011 -12, HELD THAT EXPENDITURE INCURRED FOR REALIGNMENT OF NALLAH IN F ORECOURT OF PROPOSED INTEGRATED TERMINAL, REALLOCATION OF CPWD STAFF AND OTHER OPERATIONAL EXPENDITURE ARE REVENUE EXPENDITURE. TH E RELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER: 4. GROUND NO.2 RELATES TO THE TREATMENT OF VARIOUS EXPENSES INCURRED TOWARDS REALIGNMENT OF NALLAH'S IN FORECOURT OF PRO POSED INTEGRATED TERMINAL, REALLOCATION OF CPWD STAFF AND OTHER OPER ATIONAL EXPENDITURE AS REVENUE EXPENDITURE. THE LEARNED DR CONTENDED TH AT THE ASSESSEE HAS INCURRED A SUM OF ` 13,83,37,443,/- TOWARDS CIV IL WORKS/OPERATIONAL EXPENSES AS REVENUE EXPENDITURE. BOTH THE PARTIES A GREED THAT IDENTICAL ISSUE HAD ARISEN IN THE CASE OF THE ASSESSEE FOR A. YS. 2009-10, 2010-11 AND 2011-12 AND WHATEVER VIEW IS TAKEN THEREIN SHAL L BE APPLICABLE TO THIS YEAR ALSO. WE FIND THAT THE TRIBUNAL VIDE ITS ORDER DATED 13.11.2017, ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 60 IN THE A.YS 2009-10, 2010-11 AND 2011-12 HAS DECIDE D THE ISSUE IN FAVOUR OF THE ASSESSEE, BY OBSERVING AS UNDER: 22. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY CONSIDERED THE SAME ALONG WITH THE ORDERS OF THE AUTHORITIES BELOW . WE HAVE ALSO GONE THROUGH VARIOUS JUDGMENTS AS HAS BEEN TO BEFORE US AS WELL AS THE CIT(A). IT IS A SETTLED LAW, IN VIEW OF THE DECISIO N OF KEDARNATH JUTE MANUFACTURING CO. LTD. VS. CIT (82 ITR 363), THAT A SSESSEES ENTITLEMENT TO A PARTICULAR DEDUCTION OR NOT, WILL DEPEND ON TH E PROVISION OF LAW RELATING THERETO AND NOT ON THE VIEW WHICH THE ASSE SSEE MIGHT TAKE OF HIS RIGHTS NOR CAN EXISTENCE OR ABSENCE OF ENTRIES IN T HE BOOKS OF ACCOUNTS BE DECISIVE OR CONCLUSIVE IN THE MATTER. WE HAVE AL SO GONE THROUGH THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF EM PIRE JUTE CO. LTD. VS CIT (124 ITR 1) WHEREIN THE DEDUCTIBILITY OR OTHERW ISE OF AN EXPENDITURE INCURRED DURING THE COURSE OF BUSINESS ACTIVITIES W AS DECIDED BY OBSERVING AS UNDER: THERE MAY BE CASES WHERE EXPENDITURE, EVEN IF INCUR RED FOR OBTAINING AN ADVANTAGE OF ENDURING BENEFIT, MAY, NO NE THE LESS, BE ON REVENUE ACCOUNT AND THE TEST OF ENDURING BENEFIT MA Y BREAK DOWN. IT IS NOT EVERY ADVANTAGE OF ENDURING NATURE ACQUIRED BY AN ASSESSEE THAT BRINGS THE CASE WITHIN THE PRINCIPLE LAID DOWN IN T HIS TEST. WHAT IS MATERIAL TO CONSIDER IS THE NATURE OF THE ADVANTAGE IN A COM MERCIAL SENSE AND IT IS ONLY WHERE THE ADVANTAGE IS IN THE CAPITAL FIELD THAT THE EXPENDITURE WOULD BE DISALLOWABLE ON AN APPLICATION OF THIS TES T. ..... THE TEST OF ENDURING BENEFIT IS, THEREFORE, NO CER TAIN OR CONCLUSIVE TEST AND IT CANNOT BE APPLIED BLINDLY AND MECHANICA LLY WITHOUT REGARD TO THE PARTICULARS FACTS AND CIRCUMSTANCES OF A GIVEN CASE. (EMPHASIS SUPPLIED) THE UNDISPUTED FACTS PLACED BEFORE US ARE THAT THE ASSESSEE UNDER THE OMDA AGREEMENT WITH AIRPORT AUTHORITY OF INDIA IS OPERATING, MAINTAINING, MANAGING DEVELOPING THE MUMBAI AIRPORT AS PER THE INTERNATIONAL STANDARD. OTHER OBLIGATIONS RELATE TO OVERALL MANAGEMENT, DEVELOPMENT ETC. AS PER THE TERMS OF OMDA, THE ASSE SSEE HAS TO DISCHARGE VARIOUS OBLIGATIONS IN MAINTAINING AND OP ERATING THE AIRPORT SO AS TO BRING IT TO THE INTERNATIONAL STANDARD. THUS, THE ASSESSEE HAS TO INCUR VARIOUS EXPENSES FOR SUCH DEVELOPMENT AND MAI NTENANCE OF THE AIRPORT. DURING THE YEAR, THE ASSESSEE HAS INCURRED THE EXPENDITURE ON VARIOUS ACTIVITIES. THE ASSESSEE HAS INCURRED THE E XPENDITURE IN MAINTAINING EXISTING ASSETS WHICH HAS EITHER BEEN R EPAIRED OR RENOVATED. OUT OF THE EXPENDITURE OF ` 20,35,73,477/- OF SUM O F ` 16,07,30,868/- HAS BEEN CONTRIBUTED BY THE ASSESSEE TO MMRDA FOR THE C ONSTRUCTION OF SAHAR ELEVATED ACCESS ROAD FROM WESTERN EXPRESS HIG HWAY TO CHHATRAPATI SHIVAJI INTERNATIONAL AIRPORT. THE OWNE RSHIP OF THIS ROAD WOULD REMAIN WITH THE MMRDA AND WOULD NOT BE TRANSF ERRED TO THE ASSESSEE. THE ASSESSEES INTEREST, IN OUR VIEW, IN THIS ROAD WAS THAT THE PASSENGERS WOULD HAVE A SMOOTH ACCESS TO CHHATRAPAT I SHIVAJI INTERNATIONAL AIRPORT AND PROVIDE A LOOK AS PER INT ERNATIONAL STANDARD. THE REST OF THE EXPENDITURE RELATE TO THE MAINTENAN CE AND UPKEEP OF THE EXISTING ASSETS. THE ASSESSING OFFICER TREATED THE WHOLE OF THE EXPENSES TO BE CAPITAL EXPENDITURE AS THE ASSESSEE ITSELF HA S TREATED THE SAID EXPENDITURE IN THE BOOKS OF ACCOUNT AS CAPITAL EXPE NDITURE. THE ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 61 ALLOWABILITY OF EXPENSES FOR THE PURPOSE OF INCOME TAX, AS HAS BEEN HELD BY US IN THE PREVIOUS PARAGRAPHS, FOLLOWING THE DEC ISION OF HONBLE SUPREME COURT IN THE CASE OF KEDARNATH JUTE MANUFAC TURING 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 RIGHT S NOR CAN EXISTENCE OR ABSENCE OF ENTRIES IN THE BOOKS OF ACCOUNTS BE DECI SIVE OR CONCLUSIVE IN THE MATTER. SINCE THE OWNERSHIP OF THE ROAD VEST WI TH MMRDA, THE ASSESSEE IN OUR OPINION DOES NOT GET ANY DIRECT BEN EFIT OF ENDURING NATURE. NO DOUBT THE PASSENGERS TRAVELLING TO THE I NTERNATIONAL AIRPORT WERE BENEFITED BY WAY OF SMOOTH ACCESS TO THE AIRPO RT. THE ASSESSEE MADE ONE TIME CONTRIBUTION FOR THE CONSTRUCTION OF THE SAID ROAD. BY THIS CONTRIBUTION NO ASSET IS CREATED BY THE ASSESSEE BU T IN COMMERCIAL SENSE, IN OUR OPINION, THE INCURRENCE OF SUCH EXPEN DITURE CERTAINLY FACILITATES THE BUSINESS OF THE ASSESSEE. THIS EXPE NDITURE CANNOT BE HELD TO BE CAPITAL EXPENDITURE MERELY BECAUSE THE BUSINE SS OF THE ASSESSEE IS GETTING ENDURING BENEFIT. IN OUR VIEW, THE BUSIN ESS EXIGENCIES DEMAND THE ASSESSEE TO INCUR THIS EXPENDITURE BY MAKING TH E CONTRIBUTION TO MMRDA. 23. WE HAVE GONE THROUGH THE JUDGMENT OF THE HONBL E ALLAHABAD HIGH COURT IN THE CASE OF ADDITIONAL CIT VS. DHAMPUR SUG AR MILL P. LTD. [2015] 370 ITR 194 (ALL). WE NOTED THAT THE ASSESSEE WAS E NGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF SUGAR, CHEMICAL S AND POWER AND HAD A DISTILLERY. THE ASSESSEE MADE PAYMENT OF RS. 8.48 CRORES TO THE UPPCL, WHICH WAS THE ONLY CUSTOMER, FOR CONSTRUCTIO N OF A TRANSMISSION LINE AND OTHER SUPPORTING WORK FOR SUPPLY OF POWER. WHEN THE SAID EXPENDITURE WAS HELD AS CAPITAL EXPENDITURE BY THE ASSESSING OFFICER, THE HONBLE HIGH COURT HELD AS UNDER: THAT THE POWER TRANSMISSION LINES WHICH WERE LAID BY THE ASSESSEE WERE, UPON ERECTION, TO CONSTITUTE THE EXCLUSIVE PR OPERTY OF THE UPPCL. THE UPPCL WAS THE MUMBAI INTERNATIONAL AIRPO RT P LTD. 14 ONLY CONSUMER OF THE ELECTRICITY GENERATED BY TH E ASSESSEE. THE ASSESSEE INCURRED THE EXPENDITURE TO FACILITATE ITS OWN BUSINESS. THE FIXED CAPITAL OF THE ASSESSEE WAS UNT OUCHED AND THERE WAS NO CAPITAL ACCRETION FOR THE ASSESSEE. TH E EXPENDITURE WHICH WAS INCURRED BY THE ASSESSEE IN THE LAYING OF TRANSMISSION LINES WAS CLEARLY ON REVENUE ACCOUNT. UPON THE EREC TION OF TRANSMISSION LINES, THEY WERE TO VEST ABSOLUTELY IN THE UPPCL. THE EXPENDITURE WHICH WAS INCURRED BY THE ASSESSEE WAS FOR FACILITATING THE EFFICIENT CONDUCT OF ITS BUSINESS SINCE THE ASSESSEE HAD TO SUPPLY ELECTRICITY TO ITS SOLE CONSUMER THE UPPCL. THIS WAS NOT AN ADVANTAGE OF A CAPITAL NATURE. 24. FURTHER, WE NOTED THAT HONBLE BOMBAY HIGH COUR T IN THE CASE OF NATIONAL ORGANIC CHEMICALS LTD. VS. CIT [1993] 2 03 ITR 410 (BOM) TOOK A VIEW THAT THE ASSESSEE INCURRED EXPEND ITURE FOR THE PURPOSE OF CONSTRUCTION OF JETTY FOR HANDLING, STOR AGE AND TRANSPORTATION OF MATERIALS MANUFACTURED OR HANDLED BY THE ASSESSEE. THE ASSESSEE WAS GRANTED LICENSE BY THE S TATE GOVERNMENT. UNDER THE TERMS OF LICENSE, THE ASSESSE E WAS GIVEN THE RIGHT TO USE THE JETTY WITHOUT PAYMENT OF ANY C HARGES FOR A PERIOD OF THREE YEARS FROM ITS COMPLETION. HOWEVER, THE OWNERSHIP WOULD REMAIN WITH THE STATE GOVERNMENT. IT WAS HELD THAT SUCH ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 62 EXPENDITURE WAS INCURRED WITH A VIEW TO OBTAIN COMM ERCIAL ADVANTAGE AND, THEREFORE, IT WAS REVENUE EXPENDITUR E. 25. FURTHER, WE NOTED THAT HONBLE RAJASTHAN HIGH C OURT IN THE CASE OF CIT VS. RAJ SPINNING & WEAVING MILLS LTD. [ 2005] 272 ITR 487 (RAJ), FOLLOWING THE DECISION OF HONBLE SUPREM E 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 ENDU RING BENEFIT IS NOT A CERTAIN OR CONCLUSIVE TEST AND IT CANNOT BE A PPLIED BLINDLY AND MECHANICALLY WITHOUT REGARD TO THE PARTICULAR FACTS AND CIRCUMSTANCES OF A GIVEN CASE. THE MERE FACT THAT T HE AMOUNT SPENT HAS BEEN USED FOR CONSTRUCTION OF A BUILDING OR STRUCTURE OF PERMANENT NATURE IS NOT THE DECISIVE TEST FOR HOLDI NG THE EXPENSES TO BE CAPITAL OUTLAY OR REVENUE OUTLAY. WHERE SUCH CONSTRUCTION DOES NOT RESULT IN ACQUISITION OF ANY CAPITAL ASSET S TO THE TRADE OF THE ASSESSEE OR THE PROPERTY DOES NOT BECOME THE PR OPERTY OF THE ASSESSEE, IT DOES NOT RESULT IN ACQUISITION OF AN A SSET ENDURING NATURE BY THE ASSESSEE. SECONDLY, IT IS ALSO CLEARL Y DISCERNIBLE THAT IF SUCH EXPENSES ARE INCURRED FOR THE PURPOSE OF TH E BUSINESS FOR DERIVING ANY BENEFIT WHETHER TO PRESERVE THE BUSINE SS OR TO FACILITATE THE RUNNING OF THE BUSINESS MORE SMOOTHL Y OR TO MAKE THE BUSINESS MORE PROFITABLE OR TO SECURE ANY OTHER ADV ANTAGE FOR THE ASSESSEES BUSINESS SUCH EXPENSES ARE TO BE TREATED AS HAVING BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINE SS OF THE ASSESSEE AND ARE REVENUE EXPENDITURE. 26. WE HAVE ALSO GONE THROUGH THE DECISION OF HON BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. COATS VIYELLA IND IA LTD. [2002] 253 ITR 667 (MAD). WE NOTED THAT IN THIS CASE, THE HONBLE HIGH COURT FOLLOWING THE DECISION OF HONBLE SUPREME COU RT IN THE CASE OF L H SUGAR FACTORY AND OIL MILLS (P.) LTD. VS. CI T [1980] 125 ITR 293 (SC), HELD AS UNDER: HELD, THAT, IN THE PRESENT CASE, THE BRIDGE WAS BU ILT BY THE GOVERNMENT AND THE ASSESSEE DID NOT ACQUIRE ANY OWNERSHIP OVER THE BRIDGE BY PAYING CONTRIBUTION TO WARDS CONSTRUCTION OF THE BRIDGE. THE ASSESSEE RECEIVED N O ADDITION TO THE VALUE OF ANY OF THE ASSETS OWNED BY IT FOR THE PAYMENT. THE BRIDGE MERELY FACILITATED THE MOVEMENT OF THE WORKMEN TO GAIN ACCESS TO THE ASSESSEES FACTORY AN D FOR THE MOVEMENT OF THE GOODS OVER THE BRIDGE. THE PAYM ENT OF CONTRIBUTION WAS MADE TO THE GOVERNMENT FOR CONSTRU CTION OF A NEW BRIDGE IN PLACE OF THE OLD ONE WHICH BECAM E UNSERVICEABLE. THE EXPENDITURE INCURRED WAS REVENUE EXPENDITURE IN RESPECT OF THE ASSESSMENT YEAR 1991- 92. 27. IN VIEW OF THE AFORESAID DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) TREATING THE S AID EXPENDITURE TO BE A REVENUE EXPENDITURE. IT IS ACCO RDINGLY UPHELD. GROUND NOS. 3 & 4 FOR A.Y. 2009-10, GROUND NOS. 2 & 3 FOR A.Y. 2010-11 AND GROUND NO.2 FOR A.Y. 2011- 12 ARE DISMISSED. RESPECTFULLY FOLLOWING THE SAID ORDER OF THE TRIBUN AL, WE CONFIRM THE ORDER OF THE CIT(A) AND DISMISS THE GROUND TAKEN BY THE REVENUE. ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 63 49. IN THIS VIEW OF THE MATTER AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH, WE ARE INCLINED TO UPHOLD THE FI NDINGS OF THE LD.CIT(A) AND REJECT GROUND TAKEN BY THE REVENUE. 50. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERAT ION FROM GROUND NO. 3(A) AND 3(B) OF REVENUE APPEAL IS DISALLOWANCE S OF AMOUNT PAID TO AAI FOR RETRENCHMENT COMPENSATION U/S 37(1) OF THE I.T.ACT, 1961. THE LD. AO HAS ALLOWED RS.4,22,56,320/- OUT O F RS.21,12,81,600/- CLAIMED BY THE ASSESSEE, IN ACCOR DANCE WITH PROVISION OF SECTION 35DDA OF THE I.T.ACT, 1961 AND MADE ADDITIONS OF RS16,90,25,280/- TO THE INCOME OF THE ASSESSEE. 51. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT TH IS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F ITAT, MUMBAI B BENCH FOR AY 2012-13, WHERE UNDER IDENTICAL SET OF FACTS, THE TRIBUNAL HELD THAT AMOUNT PAID TO AAI TOWARDS RETRE NCHMENT COMPENSATION IS ALLOWABLE AS DEDUCTION U/S 37(1) OF THE I.T.ACT, 1961. 52. THE LD. DR, ON THE OTHER HAND, FAIRLY ACCEP TED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE 53. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE M ATERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. WE FIND THAT CO-ORDINATE BENCH OF ITAT, MUMBAI, CONSIDERED AN IDENTICAL ISSUE IN ASSESSEES OWN CASE FOR AY 2012-13 AND BY FOLLOWING ITS EARLIER ORDER FOR AY 2011-12 DECIDED THE ISSUE IN F AVOUR OF THE ASSESSEE. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER:- ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 64 6. GROUND NO.4 RELATES TO DELETION OF THE DISALLOWA NCE OF ` 17,22,24,000/- PAID AS RETRENCHMENT COMPENSATION TO AAI. BOTH THE PARTIES AGREED THAT IDENTICAL ISSUE HAD ARISEN IN THE CASE OF THE ASSES SEE FOR A.YS. 2010-11 AND 2011-12 AND WHATEVER VIEW IS TAKEN THEREIN SHAL L BE APPLICABLE TO THIS YEAR ALSO. WE FIND THAT THE TRIBUNAL VIDE ITS ORDER DATED 13.11.2017, IN THE A.YS 2009-10, 2010-11 AND 2011-12 HAS DECIDE D THE ISSUE IN FAVOUR OF THE ASSESSEE, BY OBSERVING AS UNDER: 33. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE C AREFULLY CONSIDERED THE SAME ALONG WITH THE ORDERS OF THE AUTHORITIES B ELOW. WE NOTED FROM THE FACTS ON RECORD FOR A Y 2010-11 THAT THE ASSESS EE, UNDER AN AGREEMENT OF OMDA WITH AIRPORTS AUTHORITY OF INDIA, IS DEVELOPING AND MAINTAINING CHHATRAPATI SHIVAJI INTERNATIONAL AIRPO RT. THE ASSESSEE HAS TO CARRY OUT OPERATIONS, MAINTENANCE AND DEVELOPMENT O F THE AIRPORT WITH CERTAIN TERMS CONDITIONS. AS PER CLAUSE 6.14 IN CHA PTER 6 OF THE OMDA, THE ASSESSEE IS OBLIGED TO MAKE AN OFFER OF EMPLOYM ENT TO A MINIMUM OF 60% GENERAL EMPLOYEES AT ANY TIME DURING THE OPERAT ION SUPPORT PERIOD BUT NOT LATER THAN THREE MONTHS PRIOR TO THE EXPIRY OF THE OPERATION SUPPORT PERIOD, THAT IT WANTS TO EMPLOY, AN OPTION TO ACCEP T OR REJECT THE OFFER BY EMPLOYEES. THIS CLAUSE FURTHER PROVIDES THAT IF LES S THAN 60% OF THE GENERAL EMPLOYEES ACCEPT THE OFFER OF EMPLOYMENT MA DE BY THE ASSESSEE, THEN ASSESSEE SHALL PAY TO THE AIRPORTS A UTHORITY OF INDIA RETRENCHMENT COMPENSATION FOR SUCH NUMBER OF GENERA L EMPLOYEES AS REPRESENTED BY THE DIFFERENCE BETWEEN 60% OF THE GE NERAL EMPLOYEES ACCEPTING THE OFFER OF EMPLOYMENT MADE BY THE ASSES SEE. THUS, THIS CLAUSE SPECIFICALLY DEALS WITH THE TREATMENT OF THE RETRENCHMENT COMPENSATION TO BE PAID TO THE AIRPORTS AUTHORITY O F INDIA AT THE OCCURRENCE OF THE EVENTS MAINTAINED IN THE SAID CLA USE. THE OPERATIONAL SUPPORT PERIOD OF THREE YEARS HAS EXPIRED DURING TH E IMPUGNED ASSESSMENT YEARS UNDER CONSIDERATION AND, ACCORDING LY, AIRPORTS AUTHORITY OF INDIA ISSUED INVOICE DATED 08.03.2010 FOR ITS CLAIM TOWARDS RETRENCHMENT COMPENSATION AMOUNTING TO ` 260,86,03, 400/- THE ASSESSEE HAS ACCORDINGLY CAPITALIZED AN AMOUNT OF ` 260,86,03,400/- UNDER THE HEAD INTANGIBLE ASSETS IN ITS BOOKS OF AC COUNT BUT FOR THE PURPOSE OF INCOME TAX HE HAS CLAIM SAID EXPENDITURE IN THE COMPUTATION OF INCOME BUT DISALLOWED ITSELF A SUM OF ` 106,62,8 4,312/- AS NO TAX HAS BEEN DEDUCTED AT SOURCE DURING THE IMPUGNED ASSESSM ENT YEAR BUT CLAIMED REMAINING SUM OF ` 154,23,19,088/- AS REVEN UE EXPENDITURE. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE IS ELIGIBLE ONLY FOR ONE FIFTH OF ` 154,23,19,088/- AS PER THE PROVISION S OF SECTION 35DDA AMOUNTING TO ` 30,84,63,818/- IN THE YEAR UNDER CON SIDERATION AND THE REMAINING AMOUNT IS TO BE ALLOWED IN EQUAL INSTALLM ENTS OVER THE PERIOD OF FOUR IMMEDIATELY SUCCEEDING ASSESSMENT YEARS. 34. WE HAVE GONE THROUGH THE PROVISIONS OF SECTION 35DDA. WE NOTED THAT THE SAID PROVISION IS APPLICABLE ONLY IF THE A SSESSEE HAS INCURRED ANY EXPENDITURE IN ANY PREVIOUS YEAR BY WAY OF PAYMENT OF ANY SUM TO A EMPLOYEE IN CONNECTION WITH VOLUNTARY RETIREMENT. I N 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 CLAU SE 6.14 OF THE OMDA ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 65 ON ACCOUNT OF RETRENCHMENT COMPENSATION TO BE PAID BY AIRPORTS AUTHORITY OF INDIA TO ITS EMPLOYEES. IT IS NOT AN A MOUNT WHICH THE ASSESSEE IS PAYING TO ITS EMPLOYEES ON THEIR RETREN CHMENT. THEREFORE, THE PROVISIONS OF SECTION 35DDA WILL NOT APPLY. IT IS N OT DENIED THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IS REVENUE EXP ENDITURE. WE NOTED THAT THE CIT(A) WHILE DEALING WITH THE ISS UE, FOLLOWING THE ORDER OF HIS PREDECESSOR IN THE ASSESSEES OWN CASE FOR A .YS. 2010-11 AND 2011-12 DELETED THE SAID DISALLOWANCE . 54. IN THIS VIEW OF THE MATTER AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH, WE ARE INCLINED TO UPHOLD THE FI NDINGS OF THE LD.CIT(A) AND REJECT GROUND TAKEN BY THE REVENUE. 55. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERA TION FROM GROUND NO.4(A) TO 4(D) OF REVENUE APPEAL IS DEVELOPMENT FE E COLLECTED BY THE ASSESSEE BEING TREATED AS CAPITAL RECEIPTS BY T HE LD.CIT(A) INSTEAD OF HOLDING IT HAS REVENUE RECEIPTS. THE LD . AO HAS MADE ADDITIONS TO THE TOTAL INCOME OF THE ASSESEE, IN RE SPECT OF DEVELOPMENT FEES COLLECTED FROM PASSENGERS. THE SAI D FEES WAS DEDUCTED BY THE ASSESSEE FROM THE BLOCK OF PLANT A ND MACHINERY AND DEPRECIATION HAD BEEN CLAIMED ON REDUCED AMOUNT OF BLOCK OF ASSETS. HOWEVER, THE LD. AO HAS TREATED DEVELOPMENT FEES SO COLLECTED AS BUSINESS INCOME, SINCE, IT WAS COLLECT ED AND UTILIZED FOR THE PURPOSE OF BUSINESS OF THE ASSESEE. 56. THE LD. AR FOR THE ASSESEE SUBMITTED THAT THI S ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT, MUMBAI, B BENCH IN ASSESSEE OWN CASE FOR AY 2012-13, WHERE UNDER ID ENTICAL SET OF FACTS, THE TRIBUNAL HELD THAT DEVELOPMENT FEE COLLE CTED FROM THE PASSENGERS IS IN THE NATURE OF CAPITAL RECEIPT AND NOT EXIGIBLE FOR TAX. ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 66 57. THE LD. DR, ON THE OTHER HAND, FAIRLY ACCEPTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDERS OF TRIBUNAL FOR EARLIER YEARS. 58. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. WE FIND THAT A SIMILAR ISSUE HAD BEEN CONSIDERED BY THE CO- ORDINATE BENCH IN ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEARS AN D AFTER CONSIDERING RELEVANT FACTS, IT WAS HELD THAT DEVELO PMENT FEES COLLECTED FROM PASSENGERS COULD NOT BE REGARDED AS INCOME OF THE ASSESEE WITHIN THE MEANING OF SECTION 2(24) OF THE I.T.ACT, 1961. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER: - 8. GROUND NO.5 RELATES TO THE TREATMENT OF DEVELOPM ENT AMOUNTING TO ` 25,98,50,335/- AS CAPITAL RECEIPT. BOTH THE PARTIES AGREED THAT IDENTICAL ISSUE HAD ARISEN IN THE CASE OF THE ASSESSEE FOR A. YS. 2010-11 AND 2011- 12 AND WHATEVER VIEW IS TAKEN THEREIN SHALL BE APPL ICABLE TO THIS YEAR ALSO. WE FIND THAT THE TRIBUNAL VIDE ITS CONSOLIDAT ED ORDER DATED 13.11.2017, FOR A.YS 2009- 10, 2010-11 AND 2011-12 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE, BY OBSERVING AS UN DER: 37. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE C AREFULLY CONSIDERED THE SAME ALONG WITH THE ORDERS OF THE AU THORITIES BELOW. THE LEARNED DR RELIED ON THE ORDER OF THE AS SESSING OFFICER WHILE THE LEARNED AR VEHEMENTLY CONTENDED THAT THE SAID DEVELOPMENT FEES HAS BEEN COLLECTED WITH THE PERMIS SION OF THE MINISTRY OF CIVIL AVIATION PURSUANT TO THE PROVISIO NS OF RULE 22A OF THE AIRPORTS AUTHORITY OF INDIA ACT, 1994 AND ARE I N THE NATURE OF CESS OR TAX TO MET THE SHORTFALL THAT ARISE IN THE DEVELOPMENT OF AERONAUTICAL ASSETS. THE DEVELOPMENT FEES SO COLLEC TED ARE UTILIZED ONLY FOR PURPOSE OF DEVELOPMENT OF CAPITAL ASSETS AND THE SAME IS CERTIFIED BY THE CHARTERED ACCOUNTANT. THER EFORE, THE SAID INCOME IS A CAPITAL RECEIPT. WE NOTED THAT THE CIT( A) HAS ELABORATELY DISCUSSED THE PROVISIONS OF THE AGREEME NT ENTERED BETWEEN BOTH THE PARTIES AND HAS HELD AS UNDER: 9.5 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT AND THE ORDER OF THE AO. THE APPELLANT IS ENGAGED IN OPERATING, MANA GING, DEVELOPING, DESIGNING, CONSTRUCTING, UPGRADING, MODERNIZING AND FINANCING THE CHHATRAPATI SHIVAJI INTERNATIONAL (CSI) AIRPORT O F MUMBAI UNDER AN AGREEMENT KNOWN AS 'OMDA'' WITH AIRPORT AUTHORITY O F INDIA ('AAI'). THE ESTIMATED COST FOR MODERNIZING AND DEVELOPMENT OF C SI AIRPORT OF MUMBAI WAS RS.9,802/- CRORES. AGAINST THIS ESTIMATE D EXPENDITURE WHICH ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 67 INCLUDES THE SUBSTANTIAL EXPENDITURE ON ACCOUNT OF CAPITAL EXPENDITURE FOR MODERNIZING AND DEVELOPMENT OF THE AIRPORT, THE AVA ILABILITY OF FINANCE FROM VARIOUS MEANS WITH THE APPELLANT WAS LESS BY R S.2,3507- CRORES. THUS, THERE WAS A SHORT FALL OF RS.2,350 CRORES. 9.6 IN VIEW OF THE SHORTFALL OF FINANCE REQUIRED F OR THE DEVELOPMENT OF THE AIRPORT WHICH INCLUDES SUBSTANTIAL CAPITAL EXPENDIT URE, THE APPELLANT APPROACHED THE MINISTRY OF CIVIL AVIATION; GOVERNME NT OF INDIA FOR LEVY OF DEVELOPMENT FEE FOR MEETING OUT THE SAID SHORTFALL AT SUCH RATES AS MAY BE APPROVED BY THE MINISTRY. PURSUANT TO SECTION 22 A OF THE AAI ACT, 1994, THE MINISTRY HAS CONVEYED THE APPROVAL OF THE CENTRAL GOVERNMENT U/S.22A OF AAI ACT AUTHORIZING THE APPELLANT TO COL LECT THE DEVELOPMENT FEE VIDE LETTER DATED 27.02.2009, A COPY OF WHICH H AS BEEN FILED BY THE APPELLANT DURING THE APPELLATE PROCEEDINGS. THE APP ELLANT HAS BEEN PERMITTED BY THE MINISTRY OF CIVIL AVIATION. GOVERN MENT OF INDIA TO CHARGE FEE OF RS.100 FROM DEPARTING DOMESTIC PASSENGERS AN D RS.600 FROM DEPARTING INTERNATIONAL PASSENGERS. THERE ARE CERTA IN CONDITIONS ATTACHED WITH THE COLLECTION OF DEVELOPMENT FEE. THE FEE SO COLLECTED HAS TO BE SPENT MAINLY FOR DEVELOPMENT OF 'AERONAUTICAL ASSET S' ONLY. THE APPELLANT CANNOT SPEND ANY AMOUNT FROM THE COLLECTED DEVELOPM ENT FEE AT WILL AND HAS TO MAINTAIN AN ACCOUNT OF THE SAME WHICH IS SUB JECT TO SUPERVISION AND AUDIT FROM THE CENTRAL GOVERNMENT. THE APPELLAN T HAS BEEN PERMITTED TO COLLECT AMOUNT ONLY FOR 48 MONTHS AND THE SAME CANNOT BE EXCEEDED FUNDING GAP OF RS.1,543/- CRORES. THE MINI STRY OF CIVIL AVIATION HAS VIDE F.NO. AV.24011/001/2009-AD DATED FEBRUARY 27, 2009 HAD IN PARA (G) TO (J) HAS STATED AS UNDER: '(G) THE AMOUNT COLLECTED THROUGH DF WOULD UNDER NO CIRCUMSTANCES EXCEED THE CEILING OF RS.1543 CORES AND IN CASE OF ANY COST ESCALATION BEYOND RS.9802 CRORES, THE AMOUNT REPRESENTING THE ESCALATION WOULD HAVE TO BE BROUGHT IN BY MIAL, THROUGH OTHER SOURCE S. THE CEILING AMOUNT WOULD BE EXCLUSIVE OF TAXES, IF ANY. (H)RATE AND TENURE OF LEVY ARE PREMISED UPON THE T RAFFIC PROJECTIONS AND OTHER ESTIMATES. IN CASE DUE TO ACTUAL FIGURES BEIN G DIFFERENT THAN THOSE ESTIMATED, THE 'COLLECTIONS DURING LEVY PERIOD EXCE ED THE AMOUNT OF RS, 1543 CRORES, OR ANY OTHER AMOUNT, WHICH THE REGULAT OR/GOVERNMENT MAY DETERMINE, THE EXCESS AMOUNT SO COLLECTED SHALL NOT BE UTILIZED, FOR ANY PURPOSE WHATSOEVER, WITHOUT THE PRIOR APPROVAL OF T HE REGULATOR/CENTRAL GOVERNMENT. (I)AN INDEPENDENT AUDITOR APPOINTED BY AAI WOULD AU DIT THE RECEIPTS/ACCRUALS OF MIAL ON PERIODIC BASIS. PERIOD ICITY OF THE AUDIT WOULD BE DECIDED BY AAI IN CONSULTATION WITH MIAL. AAI WO ULD REPORT THE RESULTS OF AUDIT TO GOVERNMENT/ REGULATOR FOR NECESSARY DIR ECTIONS. (J)MIAL WOULD UNDERTAKE REAL ESTATE DEVELOPMENT PRO GRAMME ON A TIME BOUND BASIS THROUGH COMPETITIVE BIDDING AT THE EARL IEST. IN CASE, THE AMOUNT ACTUALLY RECEIVED/RECEIVABLES AS A RESULT OF COMPETITIVE BIDDING IS MORE THAN THE PRESENTLY ESTIMATED AMOUNT OF RS.1,00 0/- CRORES, THE FUNDING GAP OF RS. 1543 CRORES WOULD BE REVISED DOW NWARDS AT THE TIME OF REVIEW.' THE ABOVE CLEARLY INDICATES THAT THE GO VERNMENT HAD WORKED OUT THE COLLECTION OF RS. 1543 CRORES IN THE TOTAL GAP OF RS.2,350 CRORES BY FACTORING THAT MIAL CAN EARN AROUND RS.1,000 CRORES THROUGH THE REAL ESTATE DEVELOPMENT PROGRAM. ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 68 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 PROPERL Y ACCOUNTED FOR AND ARE UTILIZED ONLY FOR PERMITTED PURPOSES. CLAUSE (C) OF THE SAID LETTER PROVIDES THE ENTIRE DEVELOPMENT FEE RECEIPTS WOULD BE UTILIZ ED ONLY FOR THE PURPOSE OF DEVELOPMENT OF 'AERONAUTICAL ASSETS', WH ICH ARE 'TRANSFER ASSETS' AS DEFINED UNDER THE OMDA AND THEREFORE WOU LD GO TO REDUCE THE ACTUAL COST OF AERONAUTICAL ASSETS TO THAT EXTE NT. I ALSO NOTICE THAT CLAUSES (B) (III) OF THE SAID LETTER DATED 27.02.20 09 SPECIFICALLY PROVIDES THAT DF WOULD BE SUBJECT TO AAI'S SUPERVISION FROM TIME TO TIME. FURTHER, CLAUSE (G) OF THIS LETTER STIPULATES THAT THE AMOUN TS COLLECTED THROUGH DEVELOPMENT FEE WOULD UNDER NO CIRCUMSTANCES EXCEED THE CEILING OF RS. 1,543 CRORES AND IN CASE OF COST ESCALATION BEY OND RS. 9,802 CRORES THE ESCALATION WOULD HAVE TO BE BROUGHT IN BY THE A PPELLANT THROUGH OTHER SOURCES. CLAUSE (H) OF THE SAID LETTER PROVIDES THA T IN CASE OF EXCESS COLLECTION, THE SAME CANNOT BE UTILIZED BY THE APPE LLANT FOR ANY PURPOSE WHATSOEVER WITHOUT THE PRIOR APPROVAL OF REGULATOR OR THE GOVERNMENT. FURTHER, CLAUSE (H) OF THE SAID LETTER ALSO STIPULA TES FOR DOWNWARD REVISION OF THE AMOUNT OF DEVELOPMENT FEE TO BE CALCULATED I N CERTAIN CASE. 9.8 BASED ON THE ABOVE, IT IS EVIDENT THAT THE LEV Y OF DEVELOPMENT FEE IS SOLELY FOR THE PURPOSE OF BRIDGING THE FUNDING GAP IN CONNECTION WITH THE DEVELOPMENT OF AERONAUTICAL ASSETS. FOR CONVENIENCE , SUCH DEVELOPMENT FEE WOULD BE COLLECTED BY VARIOUS AIRLI NES AT THE TIME THEY SELL THE TICKETS TO THE PASSENGERS AND WOULD BE PAI D TO APPELLANT. ACCORDINGLY, THE AIRLINES ARE COLLECTING THE DEVELO PMENT FEE LEVIED U/S 22A OF AAI ACT FROM THE PASSENGERS AND PAYING THE S AME TO THE APPELLANT TOWARDS MEETING THE FUNDING GAP FOR DEVELOPMENT OF AERONAUTICAL ASSETS WHICH ARE TRANSFER ASSETS AS PER OMDA. IN SUPPORT O F THE CONTENTION THAT THE DEVELOPMENT FEE SO COLLECTED HAS BEEN UTILIZED ONLY FOR THE DEVELOPING THE CAPITAL ASSETS I.E. AERONAUTICAL ASS ETS, A COPY OF THE CERTIFICATE FROM A CHARTERED ACCOUNTANT HAS BEEN PL ACED ON RECORD CERTIFYING THE UTILISATION OF DEVELOPMENT FEE FOR C ONSTRUCTION OF AERONAUTICAL ASSETS AS PER PROVISIONS PRESCRIBED U/ S 22 A OF THE AAI ACT. 9.9 THE APPELLANT HAS PLACED STRONG RELIANCE ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CONSUMER ONLINE FOUNDA TION VS UNION OF INDIA & OTHERS (2011 5 SCC 360) WHERE HON'BLE SUPRE ME COURT BUS CATEGORICALLY MADE THE DISTINCTION BETWEEN SECTION 22 AND SECTION 22A OF AAI ACT. IN THE SAID JUDGMENT, HON'BLE SUPREME COUR T HAS ALSO HELD THAT DEVELOPMENT FEE IS IN THE NATURE OF CESS OR TAX FOR GENERATING REVENUE FOR THE SPECIFIC PURPOSES MENTIONED IN CLAUSE (A), (B) AND (C) OF SECTION 22A OF AAI ACT. THE HON'BLE SUPREME COURT IN THE SA ID DECISION HELD THAT THE NATURE OF LEVY U/S.22A OF 2004 ACT IS NOT CHARG ES OR ANY OTHER CONSIDERATION FOR SERVICES FOR THE FACILITIES PROVI DED BY THE AIRPORTS AUTHORITY. THE SUPREME COURT IN THIS JUDGMENT ALSO QUOTED FROM THE DECISION IN THE CASE OF VIJAYALASHMI RICE MILLS & O RS. V. COMMERCIAL TUX OFFICERS, PALAKOT & ORS. (SUPRA) THAT A CESS IS A T AX WHICH GENERATES REVENUE WHICH IS UTILIZED FOR A SPECIFIC PURPOSE. T HE LEVY UNDER SECTION 22A OF AAI ACT THOUGH DESCRIBED AS FEES IS REALLY I N THE NATURE OF A CESS OR A TAX FOR GENERATING REVENUE FOR THE SPECIFIC PU RPOSES 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 DEVELO PMENT FEE IS IN THE ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 69 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 REL IANCE OF THE APPELLANT ON THE SAID SUPREME COURT DECISION IS A GOOD RELIAN CE AND THE SAME IS SQUARELY APPLICABLE TO THE FACTS OF THE APPELLANT'S CASE AND THEREFORE, DEVELOPMENT FEE COLLECTED BY THE APPELLANT IS IN TH E 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, T HE APPELLANT WAS ASKED TO CLARIFY AS TO HOW DEVELOPMENT FEE AND TOLL CHARGES ARE NOT SIMILAR IN NATURE. THE APPELLANT MADE A DETAILED SU BMISSION IN THE MATTER, CLEARLY BRINGING OUT THE DISTINGUISHING FACTORS BET WEEN DEVELOPMENT FEE AND TOLL CHARGES. AFTER A CAREFUL PERUSAL OF THE DI STINGUISHING FACTORS BETWEEN THE TWO, I FIND THAT THE DEVELOPMENT FEE AN D TOLL CHARGES ARE BEING LEVIED AND COLLECTED ENTIRELY ON DIFFERENT FO OTINGS AND CONTEXT. THE ORIGIN OF THE DEVELOPMENT FEE IS FROM THE PROVISION OF SECTION 22A OF THE AAI, 1994 AND THE SAME IS HELD TO BE CESS OR TAX AN D TO BE USED STRICTLY FOR THE PURPOSE OF SUBSECTION (A), (B) & (C) OF SEC TION 22A OF AAI ACT. THUS, 1 NOTICE THAT THE COLLECTION OF DEVELOPMENT F EE HAS A LEGAL BACKING AND IN THE NATURE OF CESS OR TAX BEING COLLECTED WI TH THE APPROVAL OF MINISTRY OF CIVIL AVIATION, GOVERNMENT OF INDIA/ RE GULATORY AUTHORITY AS PRESCRIBED U/S.22A OF THE ACT. THIS VIEW HAS BEEN C ONFIRMED BY THE HON'BLE SUPREME COURT IN THE CASE OF CONSUMER ONLIN E FOUNDATION VS. UOI & ORS (SUPRA). SO FAR AS THE COLLECTION OF TOLL CHARGES IS CONCERNED, THE SAME IS COLLECTED TO RECOVER THE CAPITAL COST, OPERATING AND MAINTAINING COST ALONG WITH PROFIT. THE TOLL CHARGE S ARE DETERMINED AS PER THE POLICY OF THE GOVERNMENT OF INDIA AND ARE N OT IN THE NATURE OF TAX OR CESS. THE TOLL CHARGES ARE TREATED AS REVENUE RE CEIPTS IN THE HANDS OF DEVELOPER. LETTER DATED 27.02.2009 RECEIVED FROM TH E MINISTRY OF CIVIL AVIATION WHICH IS ON RECORD INDICATES THAT DEVELOPM ENT FEE IS A CAPITAL RECEIPT. 9.11 I FURTHER NOTICE THAT AIRPORT REGULATOR HAS CL EARLY MENTIONED IN ITS ORDER THAT FOR THE PURPOSE OF ALLOWING RETURN TO AI RPORT OPERATOR, IT WILL CONSIDER ASSET BASE (RAB) NET OFF DEVELOPMENT FEE A MOUNT AND NO DEPRECIATION WILL BE ALLOWED ON SUCH ASSETS. I FURT HER FIND FROM THE LETTER DATED 18.12.2012 OF AIRPORT AUTHORITY OF INDIA ADDR ESSED TO THE DIRECTOR, MINISTRY OF CIVIL AVIATION WHICH WAS PLACED ON RECO RD, WHEREIN IT IS MENTIONED THAT THE TREATMENT OF DEVELOPMENT FEE SHO ULD BE AS PER THE GUIDELINES GIVEN IN AS-12 - ACCOUNTING FOR GOVERNME NT GRANTS ISSUED BY THE INSTITUTE OF 'CHARTERED ACCOUNTANTS REGARDING G RANT AGAINST THE ASSETS. THE ANOTHER IMPORTANT AND DISTINGUISHING FA CTOR IS THAT THE COLLECTION OF DEVELOPMENT FEE IS REQUIRED TO BE KEP T IN A SEPARATE ESCROW ACCOUNT AND SUBJECT TO SEVERAL RESTRICTIONS WHEREAS THERE IS NO SUCH STIPULATION IN THE CASE OF TOLL CHARGES. THE T OLL CHARGES COVER OPERATING AND MAINTENANCE COST OF A PARTICULAR FACI LITY AND THE QUANTUM OF THE SAME IS FIXED AS PER THE POLICY OF THE GOVERNME NT OF INDIA. 9.12 LOOKING TO THE DISTINGUISHING FACTORS BETWEEN THE DEVELOPMENT FEE AND TOLL CHARGES, I FIND THAT THERE IS NO SIMILARIT Y AT ALL. THE TOLL CHARGES BY ITSELF IS A REVENUE RECEIPT EMBEDDED WITH THE RE COVERY 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 APPEL LANT'S HANDS ARE ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 70 COMPLETELY TIED IN UTILIZING THE DEVELOPMENT FEE WH EREAS THE SAME IS NOT THE CASE OF TOLL CHARGES. THUS, THE DISTINGUISHING FACTORS CLEARLY PLACE THE DEVELOPMENT FEE IN THE CATEGORY OF CAPITAL RECE IPTS AND NOT REVENUE RECEIPTS. 9.13 LOOKING TO THE FACTS OF THE CASE IN ITS ENTIRE TY, I FIND THAT DEVELOPMENT FEE COLLECTED BY THE APPELLANT WITH THE PERMISSION FROM THE MINISTRY OF CIVIL AVIATION, GOVERNMENT OF INDIA UND ER THE PROVISIONS OF 22A OF AAI ACT 2004 IS A RECEIPT IN THE NATURE OF C ESS OR TAX AND IN THE NATURE OF CAPITA! RECEIPT. FURTHER, THE SAME HAS BE EN ALREADY CONSIDERED BY THE HON'BLE SUPREME COURT IN THE CASE OF CONSUME R ONLINE FOUNDATION VS UNION OF INDIA & OTHERS, CITED SUPRA, WHEREIN IT HAS BEEN HELD THE DEVELOPMENT FEE IS A RECEIPT IN THE NATURE OF CESS OR TAX FOR GENERATING REVENUE FOR THE SPECIFIC 'PURPOSES MENTI ONED IN CLAUSE (A),(B) & (C) OF SECTION 22A OF THE AAI ACT. FURTHER, IT IS PERTINENT TO NOTE ONCE AMOUNT HELD TO BE IN THE NATURE OF TAX, IT CANNOT B E SUBJECT TO FURTHER TAX. IT IS ALSO SEEN THAT VARIOUS RESTRICTIONS HAVE ALSO BEEN IMPOSED BY THE CENTRAL GOVERNMENT TO ENSURE THAT THE DEVELOPMENT F EE SO COLLECTED IS UTILIZED ONLY FOR THE PURPOSE OF DEVELOPMENT OF 'AE RONAUTICAL ASSETS' AS PER PROVISIONS OF SECTION 22A OF THE AAI ACT. FURTH ER, A CERTIFICATE FROM A CHARTERED ACCOUNTANT HAS ALSO BEEN PLACED ON RECORD CERTIFYING THE UTILIZATION OF THE DEVELOPMENT FEE SO COLLECTED ONL Y FOR THE PURPOSES OF ACQUIRING /CONSTRUCTING THE AERONAUTICAL ASSETS. AC CORDINGLY, THE COLLECTION OF DEVELOPMENT FEE IS THEREFORE, MEANT O NLY FOR SPECIFIC PURPOSE OF ACQUISITION / CONSTRUCTION OF CAPITAL AS SETS AND THEREFORE, IT IS ON CAPITAL ACCOUNT AND NOT ON REVENUE ACCOUNT. THUS , THE NATURE OF THE RECEIPT IS CAPITAL AND NOT REVENUE. ACCORDINGLY, I HOLD THAT THE RECEIPTS OF RS.2,87,83,48,538/- ON ACCOUNT OF DEVELOPMENT FEE B EING IN THE NATURE OF TAX OR CESS IS A CAPITAL RECEIPT AND THEREFORE T HE SAME CANNOT BE BROUGHT TO TAX. ACCORDINGLY, THE ADDITION OF RS.286 ,30,14,565/- IS DELETED. THE AO IS ALSO DIRECTED TO REDUCE AN AMOUNT OF RS.1 9,85,99,146/- FROM THE BLOCK OF BUILDING AND RS.700,70,264 FROM THE BL OCK OF PLANT & MACHINERY AND RECOMPUTED THE DEPRECIATION AFTER THE SAID REDUCTION AS CLAIMED BY THE APPELLANT IN THE RETURN OF INCOME. A CCORDINGLY, GROUND NOS. 11 AND 12 ARE ALLOWED. 38. WE FIND THAT THE CIT(A) HAS ELABORATELY DISCUSS ED THE PROVISIONS OF SECTION 22A OF AIRPORTS AUTHORITY OF INDIA ACT 1994 , UNDER WHICH THE ASSESSEE HAS COLLECTED THE DEVELOPMENT FEES AND ALS O THE TERMS AND CONDITIONS ATTACHED TO THE SAID COLLECTION AS WELL AS ITS UTILIZATION. NOT ONLY THIS, THE CIT(A) HAS ALSO REFERRED TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CONSUMER ONLINE FOUNDATION VS. UNION OF INDIA & OTHERS [2011] 5 SCC 350 (SC), WHERE THE APEX COURT HAS CATEGORICALLY MADE THE DISTINCTION BETWEEN SECTION 22 AND SECTION 22A OF AIRPORTS AUTHORITY OF INDIA ACT. IN THE SAID JUDGMENT, THE H ONBLE SUPREME COURT HAS ALSO HELD THAT DEVELOPMENT FEES IS IN THE NATUR E OF CESS OR TAX FOR GENERATING REVENUE FOR SPECIFIC PURPOSES AS MENTION ED IN SECTION 22A(A) TO SECTION 22A(C) OF THE AIRPORTS AUTHORITY OF INDI A ACT. IN THE SAID JUDGMENT IT WAS HELD THAT THE NATURE OF LEVY U/S. 2 2A OF 2004 ACT IS NOT CHARGES OR ANY OTHER CONSIDERATION FOR SERVICES FOR THE FACILITIES PROVIDED BY THE AIRPORTS AUTHORITY. THE LEARNED DR, EVEN THO UGH RELIED ON THE ORDER OF THE ASSESSING OFFICER, HE DID NOT DENY THE INTERPRETATION GIVEN BY THE HONBLE SUPREME COURT IN RESPECT OF SECTION 22A OF THE AIRPORTS ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 71 AUTHORITY OF INDIA ACT. IT IS NOT DENIED THAT THE D EVELOPMENT FEES SO COLLECTED ARE UTILIZED ONLY FOR THE PURPOSE OF AERO NAUTICAL ASSETS AS PER THE PROVISIONS OF SECTION 22A OF THE AIRPORTS AUTHO RITY OF INDIA ACT. IN VIEW OF THIS FACT, WE DO NOT FIND ANY ILLEGALITY OR INFI RMITY IN THE ORDER OF THE CIT(A), WHICH WARRANT OUR INTERFERENCE, WHILE HOLDI NG THAT THE DEVELOPMENT FEES SO RECEIVED BY THE ASSESSEE IS A C APITAL RECEIPT. WE ACCORDINGLY, CONFIRM THE ORDER OF THE CIT(A) AND DI SMISS 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 REVENUES APPEAL FOR A.Y. 2010-1 1. WE NOTED THAT THE CIT(A) WHILE DEALING WITH THE IS SUE, FOLLOWING THE ORDER OF HIS PREDECESSOR IN THE ASSESSEES OWN CASE FOR A.YS. 20 10-11 AND 2011-12, DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 59. IN THIS VIEW OF THE MATTER AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH, WE ARE INCLINED TO UPHOLD, THE F INDINGS OF THE LD.CIT(A) AND REJECT GROUND TAKEN BY THE REVENUE. 60. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERA TION FROM GROUND NO. 5(A) AND 5(B) OF REVENUE APPEAL IS DELETION OF DISALLOWANCES U/S.14A OF THE ACT, R.W.S RULE 8D OF I.T.RULES, 196 2. THE FACTS WITH REGARD TO THE IMPUGNED DISPUTES ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD NOT EARNED ANY EXEM PT INCOME. HOWEVER, SINCE THE ASSESEE HAD MADE INVESTMENTS IN EQUITY SHARES OF FULLY OWN SUBSIDIARY, THE LD. AO SOUGHT TO INVOK E PROVISION OF SECTION 14A R.W.RULE 8D OF I.T.RULES, 1962 AND ACCO RDINGLY, MADE DISALLOWANCES OF RS.5,500 TO THE TOTAL INCOME OF TH E ASSESSEE AS WELL AS ADDED THE SAME, WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE I.T.ACT,1961 61. THE LD. AR FOR THE ASSESSEE, AT THE TIME OF HE ARING SUBMITTED THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE AS SESSEE BY THE DECISION OF ITAT B BENCH FOR AY 2012-13, WHERE UN DER IDENTICAL SET OF FACTS, THE TRIBUNAL DELETED ADDITIONS MADE BY TH E LD. AO TOWARDS DISALLOWANCES U/S 14A OF THE I.T.ACT, 1961. THE LD. DR, ON THE OTHER ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 72 HAND, FAIRLY ACCEPTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESEE. 62. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE M ATERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. ADMITTEDLY, THE ASSESSEE HAD NOT EARNED ANY EXEMPT INCOME FOR THE YEAR UNDER CONSIDERATION. ONCE, THERE IS NO EXEMPT INCOME, THEN THE QUESTION OF DISALLOWANCES OF EXPENDITURE INCURRED I N RELATION TO SAID EXEMPT INCOME DOES NOT ARISE. WE, FURTHER NOTED THA T THE CO- ORDINATE BENCH HAD CONSIDERED AN IDENTICAL ISSUE FO R AY 2012-13 AND BY FOLLOWING THE DECISION OF HONBLE BOMBAY HIG H COURT DECISION, IN THE CASE OF PR.CIT VS .BALLARPUR INDUS TRIES LIMITED IN ITA NO.51/2016, DATED 13/10/2016 HAS DELETED ADDITIONS MADE BY THE LD. AO TOWARDS DISALLOWANCES MADE U/S 14A R.W.RULE 8D OF I.T.RULES, 1962. THE FACTS ARE BEING PARI MATERIA WITH FACTS, WHICH HAVE BEEN ALREADY CONSIDERED BY THE TRIBUNAL FOR EA RLIER YEARS. THEREFORE, BY RESPECTFULLY FOLLOWING THE DECISION O F CO-ORDINATE BENCH, WHICH IN TURN REFERRED THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS BALLARPUR INDUSTRIES LT D. (SUPRA). WE ARE INCLINED TO UPHOLD THE FINDINGS OF THE LD.CIT(A) AN D REJECT GROUND TAKEN BY THE REVENUE. 63. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERAT ION FROM GROUND NO.6 OF REVENUE APPEAL IS DISALLOWANCES OF EMPLOYEE S CONTRIBUTION OF ESIC U/S 36(1)(VA) R.W.S. 43B OF THE I.T.ACT, 19 61. THE LD. AO HAD DISALLOWED BELATED REMITTANCES OF EMPLOYEES CONTRIB UTION TO ESIC, ON THE BASIS OF INPUTS GIVEN IN TAX AUDIT REPORT BY RELYING ON THE PROVISION OF SECTION 2(24) (X) R.W.S. 36(1)(VA) FO THE ACT. THE ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 73 LD.CIT(A), BY FOLLOWING THE DECISION OF JURISDICTIO NAL HIGH COURT OF IN THE CASE OF HINDUSTAN ORGANICS LTD. 48 TAXMANN.COM 42 AND GHATGE PATIL TRANSPORTS LTD. 368 ITR 749, DELETED THE ADDI TIONS MADE BY THE LD. AO. 64. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F HONBLE JURISDICTIONAL HIGH COURT, IN THE CASE OF GHATGE PA TIL TRANSPORTS LTD.(SUPRA), WHERE IT WAS HELD THAT IF, PAYMENTS HA VE BEEN MADE ON OR BEFORE DUE DATE OF FILING RETURN OF INCOME, THEN THE SAME CANNOT BE DISALLOWED U/S 36(1) (VA) R.W.S. 43B OF THE I.T. ACT, 1961. 65. THE LD. DR, ON THE OTHER HAND FAIRLY ACCEPTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. 66. WE HAVE HEAD BOTH THE PARTIES, PERUSED THE MA TERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. IT IS AN ADMITTED FACT THAT THE ASSESEE HAD REMITTED EMPLOYE ES CONTRIBUTION TO ESIC BEFORE FILING THE RETURN OF INCOME. IN FACT , THE PAYMENTS HAVE BEEN MADE WITHIN DUE DATE AS PER RESPECTIVE STATUTE AND DELAY IS ONLY ON THE PART OF BANKS IN REALIZING THE CHEQUES. ONCE, THE PAYMENTS HAVE BEEN MADE ON OR BEFORE DUE DATE OF FI LING RETURN OF INCOME, THEN THEY SAME CANNOT BE DISALLOWED U/S 36( 1)(VA) R.W.S.43B OF THE I.T.ACT, 1961. THIS LEGAL PROPOSIT ION IS SUPPORTED BY THE DECISION OF HONBLE BOMBAY HIGH COURT, IN THE C ASE OF HINDUSTAN ORGANICS CHEMICALS LTD. (SUPRA) AND GHATGE PATIL TR ASNPORTS LTD. (SUPRA). THEREFORE, BY RESPECTFULLY FOLLOWING THE A BOVE TWO DECISIONS, WE ARE INCLINED TO UPHOLD THE FINDINGS OF THE LD.CI T(A) AND REJECT GROUND TAKEN BY THE REVENUE. ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 74 67. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERA TION FROM GROUND NO.7 OF REVENUE APPEAL IS DISALLOWANCES OF EXCESS D EPRECIATION ON TAXIWAYS AND APRONS AS PLANT AND MACHINERY AS AGAIN ST DEPRECIATION BY TREATING THE SAME AS BUILDING. THE LD. AO HAS N OTED THAT THE ASSESEE HAD CLAIMED DEPRECIATION @15% ON TAXIWAYS, APRONS, PARKING BAYS AND BRIDGES, AS A PART OF PLANT AND MA CHINERY. THE LD. AO, FURTHER NOTED THAT SUCH HIGHER CLAIM OF DEPRECI ATION WAS MADE BY WAY OF REVISED STATEMENT OF TOTAL INCOME, BUT NO T BY FILING REVISED RETURN OF INCOME AND ACCORDINGLY, REJECTED THE CLAI M OF THE ASSESEE BY FOLLOWING THE DECISION OF HONBLE SUPREME COURT, IN THE CASE OF GOETZ INDIA LTD.(284) ITR 323 68. THE LD. AR FOR THE ASSESSEE, AT THE TIME OF HEARING SUBMITTED THAT THIS ISSUE IS ALSO COVERED IN FAVOR OF THE ASS ESSEE BY THE DECISION ITAT, MUMBAI B BENCH IN ASSESSEES OWN C ASE FOR AY 2012-13, WHERE UNDER IDENTICAL SET OF FACTS, THE TR IBUNAL HAS DIRECTED THE LD. AO TO ALLOW DEPRECIATION @15% ON TAXIWAYS, APRONS, BRIDGES AND PARKING BAYS AS PLANT AND MACHINERY AS CLAIMED BY THE ASSESSEE. 69. THE LD. DR, ON THE OTHER HAND, FAIRLY ACCEPTE D THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSE BY THE DECISION OF ITAT, FOR EARLIER YEARS. 70. WE HAVE HEAD BOTH THE PARTIES, PERUSED THE M ATERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. WE FIND THAT AN IDENTICAL ISSUE HAD BEEN CONSIDERED BY THE CO-ORDINATE BENCH OF ITAT, MUMBAI, IN ASSESSEES OWN CASE FOR A Y 2012-13, ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 75 WHERE THE TRIBUNAL BY FOLLOWING ITS EARLIER ORDER F OR AY 2007-08 HELD THAT THE ASSESSEE IS ENTITLED FOR DEPRECIATION @15% ON TAXI WAYS, APRONS, BRIDGES AND PARKING BOYS AS PLANT AND MACHI NERY. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER:- 9. GROUND NO.7 IN REVENUES APPEAL RELATES TO THE R ATE OF DEPRECIATION ALLOWED ON TAXIWAYS, APRONS, PARKING BAYS AND BRIDG ES @15% INSTEAD OF 10%. WE FIND THAT THE CIT(A), WHILE ALLOWING DEPREC IATION @15% ON TAXIWAYS, APRONS, PARKING BAYS AND BRIDGES, HAS FOL LOWED THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2007-0 8 IN ITA NO. 7111/MUM/2011, WHEREIN IT HAS OBSERVED AS UNDER: 35. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF AUTH ORITIES BELOW AND SUBMISSIONS OF LD. REPRESENTATIVES OF THE PARTI ES. THERE IS NO DISPUTE TO THE FACTS THAT RUNWAY, TAXIWAY ARE NECES SARY PART OF AIRPORT OPERATION AND ARE SPECIFIC PART OF INFRASTR UCTURE FOR USE OF AIRCRAFTS. THESE ARE NOT MERELY CONCRETE STRUCTURES . THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V/S MAZAGAON D OCK LTD (1991) 191 ITR 460(BOM) HAS HELD THAT DRY DOCK AND WET DOCK CREATED FOR SHIPS ARE TO BE TREATED AS PLANT AND NO T BUILDING. THE HONBLE APEX COURT HAS HELD IN THE CASE OF KARNATAK A POWER CORPN. (SUPRA) THAT POWER GENERATING STATION BUILDI NG 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 SI MPLY A CONCRETE STRUCTURE BUT 30 NECESSARILY A PART FOR RUNNING OF THE HOSPITAL AND THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION AS A PPLICABLE TO PLANT AND MACHINERY. IF WE APPLY THE ABOVE, DECISIONS TO THE FACTS OF THE CASE BEFORE US, WE ARE OF THE CONSIDERED VIEW THAT TAXIWAYS AND APRONS, PARKING BAYS CANNOT BE SAID TO BE MERELY CO NCRETE STRUCTURES BUT ARE NECESSARY TOOLS FOR OPERATING/US ING THE AIRPORT. HENCE, THE SAME ARE TO BE CONSIDERED AS PART OF PLA NT AND MACHINERY. THEREFORE, WE HOLD THAT ASSESSEE IS ENTI TLED FOR DEPRECIATION AT THE RATE AS APPLICABLE ON PLANT AND MACHINERY IN RESPECT OF TAXIWAYS, APRONS, PARKING BAYS ETC. HENC E, GROUND NO.2 OF THE APPEAL TAKEN BY ASSESSEE IS ALLOWED. FOLLOWING THE SAID ORDER OF THE TRIBUNAL WE HAVE AL LOWED THE ASSESSEE DEPRECIATION @15% FOR A.YS. 2009-10, 2010-11 AND 20 11-12 ALSO. FACTS AND CIRCUMSTANCES BEING SIMILAR AND RESPECTFULLY FO LLOWING THE ORDER OF THE TRIBUNAL IN THE ASESSEES OWN CASE, WHICH HAS B EEN RELIED UPON BY THE MUMBAI INTERNATIONAL AIRPORT P LTD. 29 CIT(A), WE SEE NO REASON TO INTERFERE WITH THE IMPUGNED ORDER. WE UPHOLD THE SA ME AND DISMISS THE GROUND RAISED BY THE REVENUE. ITA NOS.2018 & 2385/MUM/2018 MUMBAI INTERNATIONAL AIRPORT PRIVATE LIMITED 76 71. IN THIS VIEW OF THE MATTER AND CONSISTENT WI TH VIEW TAKEN BY THE CO-ORDINATE BENCH, WE ARE INCLINED TO UPHOLD THE FI NDINGS OF THE LD.CIT(A) AND REJECT GROUND TAKEN BY THE REVENUE. 72. IN THE RESULT, APPEAL FILED BY THE REVENUE I S DISMISSED. 73. AS A RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE AND APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10/01/ 2020 SD/- (RAVISH SOOD) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 10/01//2020 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//