D.C.I.T Cir - 8,kolkata., Kolkata V. M/s EIH Limited, Kolkata

ITA 353/KOL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1648 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 30-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 19-02-2013
• Court: TRIBUNAL
• Department Lawyers: IS AGAINST PASSED
• Keywords: Business income; Depreciation; Revised return
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH, KOLKATA (BENCH A) BEFORE SHRI N. V. VASUDEVAN, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER I.T.A. NO.353/KOL/2013 ASSESSMENT YEAR 2009-10 ORDER PER M. BALAGANESH, AM 1. THIS APPEAL PREFERRED BY THE REVENUE IS AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [IN SHORT LD CITA] VIDE APPEAL NO. 217/CIT(A)-VIII/KOL/11-12 DATED 29.11.2012 FOR THE ASST YEAR 2009-10 AGAINST THE ORDER OF FRINGE BENEFIT TAX (FBT) ASSESSMENT FRAMED U/S 115WE(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) DATED 26.12.2011. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN DELETING THE DISALLOWANCE MADE BY THE LD AO, ON ACCOUNT OF REPAIR, D.C.I.T, CIRCLE 3, KOLKATA -VS- M/S. EIH LIMITED [PAN : AAACE6898B] (APPELLANT) (RESPONDENT) FOR THE APPELLANT SRI SALLONG YADEN, ADDL. CIT FOR THE RESPONDENT SRI A. K. GUPTA, A.R DATE OF HEARING 30.05.2017 DATE OF PRONOUNCEMENT 02.06.2017 2 I.T.A. NO.353/KOL/2013 ASSESSMENT YEAR 2009-10 M/S. EIH LIMITED RUNNING & MAINTENANCE OF AIRCRAFTS AND DEPRECIATION ON AIRCRAFTS FROM THE AMBIT OF LEVY OF FBT, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE IS PRIMARILY ENGAGED IN HOTEL BUSINESS. IT OWNS AND OPERATES A NUMBER OF FIVE STAR DELUXE HOTELS IN INDIA. IT ALSO PROVIDES TECHNICAL SERVICES AGAINST FEES IN THE MATTER OF OPERATING LUXURY HOTELS OF INTERNATIONAL STANDARD OWNED BY OTHER COMPANIES. FURTHER, THE ASSESSEE ALSO PROVIDES CATERING SERVICES TO DIFFERENT AIRLINES AT DIFFERENT INTERNATIONAL AIRPORTS OF THE COUNTRY. IT ALSO HOLDS VALID LICENCE TO OPERATE NON-SCHEDULED AIR CHARTER SERVICES AND IS ENGAGED IN THE BUSINESS OF GIVING AIRCRAFTS ON CHARTER BASIS. THE ASSESSEE FILED ITS REVISED RETURN OF FBT U/S 115WD OF THE ACT FOR THE ASST YEAR 2009-10 ON 28.3.2011 DISCLOSING THE VALUE OF FBT AT RS 7,98,79,721/-. THE LD AO OBSERVED THAT THE ASSESSEE HAD MAINTAINED TWO AIRCRAFTS KING AIR C90A AND HAWKER 850XP AND DEBITED A SUM OF RS 1,86,35,677/- TOWARDS RUNNING, REPAIRS AND MAINTENANCE OF THE TWO AIRCRAFTS AND CLAIMED DEPRECIATION AMOUNTING TO RS 11,29,06,835/-. HE ALSO OBSERVED THAT THE ASSESSEE PAID INTEREST ON AIRCRAFT LOANS AMOUNTING TO RS 7,94,99,990/-. IN THE RETURN, THE ASSESSEE DID NOT CONSIDER THESE EXPENSES FOR THE PURPOSE OF VALUATION OF FBT U/S 115WB(2)(F). IN RESPONSE TO SHOW CAUSE NOTICE ISSUED BY THE LD AO IN THIS REGARD, THE ASSESSEE REPLIED THAT:- SECTION 115WB(2)(I) OF THE ACT PROVIDES THAT FRINGE BENEFITS SHALL BE DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES, IF THE EMPLOYER HAS, IN THE COURSE OF HIS BUSINESS, INCURRED ANY EXPENSES OR MADE ANY PAYMENT FOR REPAIR, RUNNING (INCLUDING FUEL) AND MAINTENANCE OF AIRCRAFTS AND THE DEPRECIATION THEREON. THUS, AS PER THE NOTICE, THE ASSESSEE AS AN EMPLOYER WOULD BE LIABLE TO PAY FRINGE BENEFIT TAX ON THE ABOVE SUM AS PER PROVISIONS OF THE ACT. AT THE OUTSET, IT IS HUMBLY SUBMITTED THAT, IN ANY EVENT, THE INTEREST ON LOAN TAKEN FOR THE PURCHASE OF AIRCRAFTS IS OUTSIDE THE SCOPE OF SECTION 115WB(2)(I) OF THE ACT WHICH, IN OUR VIEW, COVERS EXPENSES ONLY IN THE NATURE OF RUNNING AND MAINTENANCE. RUNNING EXPENSES RELATE TO THE EXPENSES TYPICALLY INCURRED FOR DAY TO DAY OPERATION OF THE AIRCRAFTS. ON THE OTHER HAND THE TERM MAINTENANCE REFERS TO THE ACT OF TAKING CARE OR ACT OF KEEPING IN GOOD REPAIR OR IN PERFECT CONDITION. YOUR KINDSELF SHOULD APPRECIATE THE FACT THAT THE INTEREST EXPENSES ARE INCURRED DUE TO THE OWNERSHIP OF THE AIRCRAFT. EVEN IF THE 3 I.T.A. NO.353/KOL/2013 ASSESSMENT YEAR 2009-10 M/S. EIH LIMITED AIRCRAFT IS NOT USED FOR A SINGLE DAY DURING THE YEAR THE COMPANY HAS TO INCUR EXPENDITURE ON ACCOUNT OF INTEREST. THUS, EXPENSES ON ACCOUNT OF INTEREST ON LOAN TAKEN FOR PURCHASE OF AIRCRAFT CANNOT BE CONSIDERED AS PART OF RUNNING AND MAINTENANCE EXPENSES OF AIRCRAFT AND SUBJECT TO FRINGE BENEFIT TAX. FURTHER, AS REGARDS TO QUERY TO SHOW CAUSE WHY FBT IS NOT APPLICABLE ON RUNNING AND MAINTENANCE EXPENSES OF AIRCRAFT IN THE CASE OF THE ASSESSEE IT IS HUMBLY SUBMITTED THAT AS PER PROVISIONS OF SECTION 115WC(2)(F) OF THE ACT : (F) IN THE CASE OF AN EMPLOYER ENGAGED IN THE BUSINESS OF CARRIAGE OF PASSENGERS OR GOODS BY AIRCRAFT, THE VALUE OF FRINGE BENEFITS FOR THE PURPOSES REFERRED TO IN CLAUSE (I) OF SUB-SECTION (2) OF SECTION 115WB SHALL BE TAKEN AS NIL. IN OTHER WORDS, IN TERMS OF CLAUSE (F) TO SECTION 115WC(2) OF THE ACT, AN ASSESSEE ENGAGED IN THE BUSINESS OF CARRIAGE OF PASSENGERS OR GOODS BY AIRCRAFT SHOULD NOT BE LIABLE TO PAY FRINGE BENEFIT TAX ON EXPENSES INCURRED ON ACCOUNT OF REPAIR, RUNNING , MAINTENANCE OF AIRCRAFT AND DEPRECIATION THEREON. IT IS HUMBLY SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CARRIAGE OF PASSENGERS BY AIRCRAFT. DURING THE RELEVANT PREVIOUS YEAR THE ASSESSEE OWNED TWO AIRCRAFTS. SUCH AIRCRAFTS WERE PRIMARILY USED BY THE COMPANY FOR CARRYING OF PASSENGERS FROM ONE PLACE TO ANOTHER AGAINST CHARGES. BY USING THE AIRCRAFTS FOR CARRIAGE OF PASSENGERS THE ASSESSEE HAS GENERATED SUBSTANTIAL INCOME DURING THE RELEVANT FINANCIAL YEAR AMOUNTING TO RS 98,68,649/- WHICH HAS BEEN DULY OFFERED TO TAX AS BUSINESS INCOME. YOUR KINDSELF MAY VERIFY THE INCOME EARNED BY THE ASSESSEE FROM THE BUSINESS OF CARRIAGE OF PASSENGERS FROM SCHEDULE 15 OF THE AUDITED ACCOUNT. THUS, YOUR KINDSELF WILL SURELY APPRECIATE THAT AS PER PROVISION OF CLAUSE (F) TO SECTION 115WC(2) OF THE ACT THE ASSESSEE, USING THE AIRCRAFT FOR THE PURPOSE OF GENERATING REVENUE, WAS NOT LIABLE TO ANY FRINGE BENEFIT TAX ON ACCOUNT OF EXPENSES INCURRED FOR RUNNING AND MAINTENANCE OF AIRCRAFTS AND DEPRECIATION THEREON. 3.1. THE LD AO OBSERVED THAT THE ASSESSEE HAD TOTALLY MISCONSTRUED THE PROVSIONS OF SECTION 115WC(2)(F) OF THE ACT EXEMPTING THE AIRLINES INDUSTRY FROM FBT. HE 4 I.T.A. NO.353/KOL/2013 ASSESSMENT YEAR 2009-10 M/S. EIH LIMITED OBSERVED THAT THE ASSESSEE IS NOT ENGAGED IN THE BUSINESS OF RUNNING AIRLINES. RATHER, THE ASSESSEE OWNS THE TWO AIRCRAFTS FOR USING THEM BY THE DIRECTORS FOR TRAVEL TO DIFFERENT LOCATIONS FOR THEIR BUSINESS MEETINGS. HE FURTHER OBSERVED THAT THE ASSESSEE HAS ALSO OCCASIONALLY CHARTERED THE AIRCRAFTS TO OTHERS FOR EARNING HIRE CHARGES. THE HIRE CHARGES PAYABLE TO THE ASSESSEE BY THE CHARTERERS CANNOT BE SAID TO HAVE BEEN PAID FOR CARRIAGE OF PASSENGERS OR GOODS. THEREFORE, MERELY GIVING OUT THE AIRCRAFTS ON HIRE BASIS TO CHARTERERS IS NOT A BUSINESS OF CARRIAGE OF PASSENGERS OR GOODS BY AIRCRAFT. ACCORDINGLY HE OBSERVED THAT THE PROVISIONS OF SECTION 115WC(2)(F) OF THE ACT ARE NOT APPLICABLE TO THE FACTS OF THE INSTANT CASE. WITH REGARD TO OBJECTION RAISED FOR INCLUSION OF INTEREST ON AIRCRAFT LOAN IN THE LEVY OF FBT, THE LD AO PLACED RELIANCE ON THE QUESTION NO. 84 OF CBDTS CIRCULAR NO. 8/2005 DATED 29.8.2005 WHEREIN IT WAS STATED THAT INTEREST ON LOANS FOR PURCHASE OF CARS IS LIABLE TO FRINGE BENEFIT TAX UNDER CLAUSE (H) OF SECTION 115WB(2). HENCE BY THE SAME ANALOGY, THE INTEREST ON LOAN TAKEN TO PURCHASE AIRCRAFT WOULD ALSO BE LIABLE TO FRINGE BENEFIT TAX UNDER CLAUSE (I) OF SECTION 115WB(2) OF THE ACT. BASED ON THESE OBSERVATIONS, HE BROUGHT ALL THE THREE ITEMS AS STATED ABOVE TO FRINGE BENEFIT TAX AND LEVIED FBT @ 20% OF THE SAME AND COMPLETED THE ASSESSMENT. 4. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD CITA AND APART FROM REITERATING THE SUBMISSIONS MADE BEFORE THE LD AO, ALSO PRODUCED THE PERMIT TO OPERATE NON- SCHEDULED AIR TRANSPORT SERVICES FROM THE DIRECTOR GENERAL OF CIVIL AVIATION (DGCA), NEW DELHI AND COPY OF SAMPLE AIRCRAFT CHARTER AGREEMENT, PASSENGER MANIFEST AND INVOICE FOR CHARTERING. THESE DOCUMENTS WERE DULY FURNISHED TO THE LD AO BY THE LD CITA IN THE REMAND PROCEEDINGS. THE LD AO IN THE REMAND REPORT STATED THAT THE KEY ISSUE INVOLVED HEREIN IS WHETHER THE ASSESSEE COMPANY IS ENGAGED IN AIRLINE BUSINESS OR NOT. THE LD AO STATED THAT ASSESSEE ITSELF ADMITTED THAT IT HAD OBTAINED THE PERMIT TO OPERATE NON-SCHEDULED AIR TRANSPORT SERVICES FROM 5 I.T.A. NO.353/KOL/2013 ASSESSMENT YEAR 2009-10 M/S. EIH LIMITED DGCA. HENCE IT IS CRYSTAL CLEAR THAT ASSESSEE HAS GOT THE PERMIT FOR NON- SCHEDULED AIR TRANSPORT SERVICES WHICH ITSELF SUGGEST THAT ASSESSEE COMPANY IS NOT IN AIRLINE BUSINESS RATHER IT MAKES OCCASIONAL OPERATIONS / SERVICES WHICH ARE EITHER PERSONAL TRIPS OR TO MEET THE REQUIREMENT OF HOTEL BUSINESS EXPEDIENCY. HE FURTHER OBSERVED THAT THE COPY OF SAMPLE AIRCRAFT CHARTER AGREEMENT , PASSENGER MANIFEST AND INVOICE FOR CHARTERING ETC AS PRODUCED BY ASSESSEE ARE ROUTINE REQUIREMENTS FOR OPERATING ANY AIRCRAFT WHETHER THE OPERATOR IS IN AIRLINE BUSINESS OR NOT. THEREFORE, IT IS IRRELEVANT. 4.1. THE ASSESSEE FURNISHED WRITTEN SUBMISSION BEFORE THE LD CITA COUNTERING THE FINDINGS GIVEN BY THE LD AO IN THE REMAND REPORT AS UNDER:- IN HIS REMAND REPORT, THE LD. DCIT HAD ACTUALLY ADMITTED THAT THE APPELLANT HAD ALL NECESSARY LEGAL REQUIREMENTS TO COMMERCIALLY OPERATE ITS AIRCRAFTS. THE APPELLANT HAD THE PERMISSION FROM THE DIRECTOR GENERAL OF CIVIL AVIATION TO OPERATE 'NON-SCHEDULED AIRCRAFTS'. HE HAD ALSO EXAMINED SAMPLE AIR CHARTER AGREEMENTS, PASSENGER MANIFESTS AND SAMPLE INVOICES FOR CHARTERING. IT IS NOT OUT OF CONTEXT TO MENTION THAT HE HAD ASSESSED SUBSTANTIAL REVENUE EARNED BY THE APPELLANT FROM THE AIRCRAFT CHARTER OPERATIONS AND TAXED THE SAME INCOME IN THE REGULAR ASSESSMENT. HAVING CONSIDERING THE DOCUMENTS, HE WAS WRONG IN HOLDING THAT THE APPELLANT WAS NOT IN 'AIRLINE BUSINESS', SINCE IT MAKES OCCASIONAL OPERATIONS/SERVICES, WHICH WERE EITHER PERSONAL TRIPS OR TO MEET THE REQUIREMENTS OF HOTEL EXPEDIENCY. YOUR KINDSELF WILL SURELY APPRECIATE THAT IT IS NOT A CORRECT STATEMENT, SINCE THE APPELLANT HAD EARNED SUBSTANTIAL REVENUE BY OPERATING ITS AIRCRAFTS. IN FACT, THE A.O. HIMSELF WHILE COMPLETING THE REGULAR ASSESSMENT FOR THE SAME ASSESSMENT YEAR, IN PARA 8 (PAGE L2) OF HIS ORDER, IT CONSIDERED THE 'AIRCRAFT CHARTERING BUSINESS' OF THE APPELLANT. NOW, THE QUESTION IS WHETHER THE AIRCRAFT CHARTERING BUSINESS OF THE APPELLANT CONSTITUTES 'BUSINESS OF CARRIAGE OF PASSENGER OR GOODS BY AIRCRAFT'. THERE IS NO DOUBT THAT BY PROVIDING THE AIRCRAFTS ON CHARTER, THE APPELLANT CARIES PASSENGERS BY AIRCRAFT. THE PASSENGER MANIFESTS FILED EARLIER MAY BE 6 I.T.A. NO.353/KOL/2013 ASSESSMENT YEAR 2009-10 M/S. EIH LIMITED CONSIDERED IN THIS RESPECT. SINCE THE APPELLANT WAS ACTUALLY CARRYING PASSENGERS AGAINST REVENUE AFTER FULFILLING ALL LEGAL AND REGULATORY FORMALITIES, THERE IS REASON WHY IT SHOULD NOT BE CONSIDERED AS AN ASSESSEE ENGAGED IN THE BUSINESS OF CARRYING PASSENGERS BY AIRCRAFTS AND BE DENIED THE BENEFITS PROVIDED BY CBDT. EVEN OTHERWISE, YOUR KINDSELF MAY PLEASE NOTE THAT WHILE COMPUTING THE FBT, THE LD. A.O. HAD CONSIDERED THE AGGREGATE REPAIRS, RUNNING AND MAINTENANCE, DEPRECIATION AND INTEREST ON AIRCRAFT LOAN. THE ACTUAL EXPENDITURE/DEPRECIATION ALLOWANCE/AIRCRAFT LOAN INTEREST BORNE BY THE APPELLANT FOR ITS TWO AIRCRAFTS USED FOR CHARTERING, UNDER NO CIRCUMSTANCES CAN BE TAXED AS FBT. IT IS ABSOLUTELY UNJUST TO CHARGE FBT ON THE AGGREGATE EXPENSES/ALLOWANCES RELATING TO AIRCRAFTS BY JUST IGNORING THAT SUBSTANTIAL EARNING WAS MADE THROUGH CHARTERING/HIRING OF THE SAME AIRCRAFTS. 4.2. THE LD CITA OBSERVED THAT IT IS AN ADMITTED FACT THAT THE ASSESSEE OWNS AND OPERATES TWO AIRCRAFTS. FROM THE RECORD, IT IS NOTED THAT THE SAID TWO AIRCRAFTS ARE USED PARTLY FOR THE OTHER BUSINESS OPERATIONS OF THE ASSESSEE WHEREBY ITS DIRECTORS ETC TRAVEL IN SUCH AIRCRAFTS FOR THE PURPOSE OF COMPANYS BUSINESS. AT THE SAME TIME, THE ASSESSEE GENERATES SUBSTANTIAL REVENUE BY PUTTING THOSE AIRCRAFTS ON HIRES / CHARTERS. THE AIRCRAFTS ARE HIRED BY THE AGENTS / HIRERS FOR TRANSPORTING TOURISTS AND OTHER PASSENGERS AGAINST AGREED HIRE CHARGES. THE LD AO WHILE COMPLETING THE FBT ASSESSMENT, HAD HELD THAT THE ASSESSEE IS NOT ENGAGED IN THE BUSINESS OF TRANSPORTING PASSENGERS BY AIRCRAFTS. HE OBSERVED THAT ACCORDING TO LD AO, THE ASSESSEE CANNOT BE CONSIDERED TO BE ENGAGED IN THE AIRLINE BUSINESS BECAUSE IT ONLY POSSESSES A LICENCE TO OPERATE NON-SCHEDULED AIR TRANSPORT SERVICES. THE LD CITA OBSERVED THAT POSSESSION OF NON-SCHEDULED OR SCHEDULED AIR TRANSPORT PERMIT CANNOT BE THE GUIDING FACTOR TO CONCLUDE WHETHER THE ASSESSEE IS IN AIRLINE BUSINESS. HE OBSERVED THAT THE LD AO WAS NOT CORRECT IN HOLDING THAT THE ASSESSEE WAS USING THE AIRCRAFTS OCCASIONALLY AND THAT TOO EITHER FOR PERSONAL TRIPS OR TO MEET THE REQUIREMENTS OF ITS HOTEL BUSINESS. FROM THE PERUSAL OF THE AIR CHARTER AGREEMENTS, PASSENGER MANIFEST AND INVOICES, IT CLEARLY ESTABLISHES THAT THE AIRCRAFTS WERE COMMERCIALLY EXPLOITED TO EARN REVENUE AS A SEPARATE AND DISTINCT 7 I.T.A. NO.353/KOL/2013 ASSESSMENT YEAR 2009-10 M/S. EIH LIMITED BUSINESS ACTIVITY. THE ASSESSEE HAD MAINTAINED A SEPARATE AVIATION DEPARTEMTN TO CARRY OUT THE AIRCRAFT OPERATION BUSINESS. THE ASSESSEE HAD OFFERED TO TAX THE REVENUE EARNED FROM THE AIRCRAFT OPERATIONS AND THE LD AO HAD CONSIDERED THE SAME WHILE DOING THE REGULAR ASSESSMENT FOR THE YEAR UNDER APPEAL U/S 143(3) OF THE ACT WHEREIN HE HAD AGREED TO THE AIR CHARTERING BUSINESS OF THE ASSESSEE. HE HELD THAT PROVIDING AIRCRAFTS ON CHARTER / HIRE AND EARNING SUBSTANTIAL REVENUE THEREFROM THROUGH AN ORGANIZED ACTIVITY SHOULD BE THE CRITERIA FOR DETERMINING WHETHER THE ASSESSEE IS IN THE AIRCRAFT BUSINESS OR NOT, RATHER THAN CONSIDERING THE ISSUE ONLY FROM THE PERSPECTIVE OF SCHEDULED VS NON-SCHEDULED OPERATIONS. THE LD CITA FURTHER OBSERVED THAT ON PERUSAL OF THE ASSESSMENT ORDER U/S 143(3) OF THE ACT, THE LD AO HAD ALREADY CONSIDERED A PART OF THE AIRCRAFT EXPENSES AS PERSONAL IN NATURE AND HAD DISALLOWED THE SAME IN COMPUTING THE TOTAL INCOME. THIS GOES TO PROVE THAT THE LD AO HAD ALREADY DETERMINED THE PERSONAL USAGE PORTION OF THE TOTAL EXPENSES INCURRED ON AIR TRANSPORT AND HENCE THE LD AO HAD CHARGED FBT ON THE EXPENSES INCURRED FOR COMMERCIAL AS WELL AS NON-COMMERCIAL USE. HE FURTHER OBSERVED THAT CHARGING FBT ON EXPENSES INCURRED FOR COMMERCIAL USAGE IS ABSURD. WITH REGARD TO THE APPLICABILITY OF PROVISIONS OF SECTION 115WC(2)(F) OF THE ACT, HE HELD THAT THE SAME IS APPLICABLE TO AN AIRLINE COMPANY I.E THE EMPLOYER ENGAGED IN THE BUSINESS OF CARRIAGE OF PASSENGERS OR GOODS BY AIRCRAFTS. THE LD AO CANNOT RESTRICT THE PROVISIONS OF THIS CLAUSE BY HOLDING THAT THIS PROVISION IS NOT APPLICABLE WHERE THE ASSESSEE OPERATES ITS AIRCRAFTS ON A CHARTER BASIS. HE HELD THAT THE CRITERIA IS WHETHER THE ASSESSEE IS EARNING REVENUE BY OPERATING THE AIRCRAFTS AS A SEPARATE ORGANIZED ACTIVITY. HE HELD THAT IN THE INSTANT CASE, THE ASSESSEE SHOULD BE CONSIDERED AS A COMPANY INTER ALIA ENGAGED IN THE BUSINESS OF CARRIAGE OF PASSENGERS OR GOODS BY AIRCRAFTS AND SHOULD BE ELIGIBLE FOR THE BENEFITS PROVIDED IN SECTION 115WC(2)(F) OF THE ACT AND CONSEQUENTLY THE ASSESSEE IS NOT LIABLE TO FBT 8 I.T.A. NO.353/KOL/2013 ASSESSMENT YEAR 2009-10 M/S. EIH LIMITED ON THE EXPENSES INCURRED TOWARDS REPAIRS, RUNNING & MAINTENANCE OF AIRCRAFTS, DEPRECIATION THEREON AND INTEREST ON AIRCRAFT LOAN. 5. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE BY AO U/S.115WC(2)(F) AND U/S.115WB(2)(I) OF THE ACT. 2. THAT THE APPELLANT RESERVES THE RIGHT TO AMEND, ALTER OR ADD TO ANY GROUND OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 6. THE LD DR STATED THAT THERE IS NO DOUBT THAT THE AIRCRAFTS WERE COMMERCIALLY EXPLOITED BY THE ASSESSEE FOR COMMERCIAL PURPOSES AND AT THE SAME TIME, IT CANNOT BE DENIED THAT THE SAME WAS ALSO USED FOR PERSONAL PURPOSES OF THE ASSESSEE. THATS WHY DISALLOWANCE OF EXPENSES ON PERSONAL ACCOUNT WERE MADE BY THE LD AO IN THE INCOME TAX PROCEEDINGS. HENCE IT COULD BE CONCLUDED THAT THE AIRCRAFTS WERE NOT FULLY UTILIZED FOR COMMERCIAL PURPOSES ALONE SO AS TO FALL OUTSIDE THE AMBIT OF LEVY OF FBT. HENCE THE LEVY OF FBT IS TO BE BIFURCATED TO THE EXTENT THE SAME IS USED FOR NON-COMMERCIAL PURPOSES. HE PLACED RELIANCE ON THE CO-ORDINATE BENCH DECISION OF DELHI TRIBUNAL IN THE CASE OF PUNJ LLOYD LTD VS ADDL CIT IN ITA NOS. 1009, 1010/DEL/2011 FOR ASST YEAR 2007-08 DATED 29.7.2015 IN SUPPORT OF HIS CONTENTIONS. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE IN THE INSTANT CASE ASSESSEE HAD EARNED SUBSTANTIAL REVENUE BY OPERATING THE AIRCRAFTS AS A SEPARATE ORGANIZED ACTIVITY. THE LD CITA HAD OBSERVED THAT THE ASSESSEE HAS A SEPARATE AVIATION DEPARTMENT TO CARRY OUT THE SAID OPERATIONS WHICH FACT HAS NOT BEEN CONTROVERTED BY THE REVENUE BEFORE US. HENCE IT COULD BE SAFELY CONCLUDED THAT THE SAME IS CARRIED OUT AS A SEPARATE AND DISTINCT ACTIVITY IN AN ORGANIZED MANNER. NOW THE NEXT QUESTION THAT 9 I.T.A. NO.353/KOL/2013 ASSESSMENT YEAR 2009-10 M/S. EIH LIMITED ARISES IS WHETHER THE SAME COULD BE CONSTRUED AS BUSINESS ACTIVITY OF THE ASSESSEE. IN THIS REGARD, WE FIND THAT THE LD AO HIMSELF HAD ACCEPTED THAT THE ASSESSEE IS ENGAGED IN AIR CHARTERING BUSINESS IN INCOME TAX PROCEEDINGS U/S 143(3) OF THE ACT. IT IS NOT IN DISPUTE THAT THE LD AO HAD ASSESSED THE CHARTERING INCOME AS INCOME FROM BUSINESS OF THE ASSESSEE. WITH REGARD TO THE DISALLOWANCE MADE ON ACCOUNT OF PERSONAL ELEMENT OF EXPENSES THEREON, WE FIND THAT THIS TRIBUNAL HAD DELETED THE SAME IN ITA NO. 352/KOL/2013 FOR ASST YEAR 2009-10 (I.E THE YEAR UNDER APPEAL BEFORE US FOR FBT PROCEEDINGS) DATED 5.4.2017. HENCE IT COULD BE SAFELY CONCLUDED THAT THE AIRCRAFTS WERE USED ONLY FOR COMMERCIAL PURPOSES AND WHOLLY AND EXCLUSIVELY ONLY FOR THE PURPOSE OF ITS AIR CHARTERING BUSINESS. WE ARE ALSO IN AGREEMENT WITH THE FINDINGS OF THE LD CITA THAT WHAT IS RELEVANT IS WHETHER THE ASSESSEE HAD EARNED SUBSTANTIAL REVENUE BY PROVIDING AIRCRAFTS ON CHARTER / HIRE. ONCE THAT IS PROVED, THAT ALONE SHOULD BE THE CRITERIA FOR DETERMINING WHETHER THE ASSESSEE IS IN THE AIRCRAFT BUSINESS OR NOT, RATHER THAN CONSIDERING THE ISSUE FROM THE PERSPECTIVE OF HAVING PERMIT TO OPERATE SCHEDULED VS NON-SCHEDULED TRANSPORT SERVICES. WITH REGARD TO THE RELIANCE PLACED BY THE LD DR ON THE DECISION OF DELHI TRIBUNAL IN THE CASE OF PUNJ LLOYD LTD SUPRA, THE FACTS IN THAT CASE WERE THAT THE LD AR IN THAT CASE HAD NOT PRESSED FOR THE RELEVANT GROUND BEFORE THE DELHI TRIBUNAL AND ACCORDINGLY THE SAME WAS DISMISSED. THEREAFTER THE DELHI TRIBUNAL HAD PROCEEDED TO GIVE THEIR FINDINGS ONLY ON THE PERSONAL USE OF THE EXPENDITURE AND WHETHER THE EMPLOYEES WERE INDEED BENEFITTED FROM THE USAGE OF AIRCRAFTS FOR THEIR PERSONAL PURPOSES OR NOT. HENCE WE HOLD THAT THE RELIANCE PLACED ON THE DECISION OF DELHI TRIBUNAL WHERE THE ASSESSEE HAD CONCEDED THE DISALLOWANCE, CANNOT BE USED AS A BINDING PRECEDENT AND HENCE WOULD NOT ADVANCE THE CASE OF THE REVENUE IN THE INSTANT CASE. HENCE WE HOLD THAT THE ASSESSEE SHOULD BE CONSIDERED AS ONE INTER ALIA ENGAGED IN THE BUSINESS OF CARRIAGE OF PASSENGERS OR GOODS BY AIRCRAFTS AND SHOULD BE ELIGIBLE FOR THE BENEFITS PROVIDED IN SECTION 115WC(2)(F) OF THE ACT AND CONSEQUENTLY THE ASSESSEE IS NOT LIABLE TO FBT ON THE EXPENSES INCURRED 10 I.T.A. NO.353/KOL/2013 ASSESSMENT YEAR 2009-10 M/S. EIH LIMITED TOWARDS REPAIRS, RUNNING & MAINTENANCE OF AIRCRAFTS, DEPRECIATION THEREON AND INTEREST ON AIRCRAFT LOAN. HENCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD CITA IN THIS REGARD. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 02.06.2017. SD/- SD/- [N. V. VASUDEVAN] [M. BALAGANESH] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 02.06.2017 {RS SPS} COPY OF THE ORDER FORWARDED TO: 1. APPELLANT/REVENUE D.C.I.T, CIRCLE-8, KOLKATA. 2. ASSESSEE/RESPONDENT- M/S. EIH LIMITED, 4, MANGOE LANE, KOLKATA 700 001. 3. CIT(A)- KOLKATA 4. CIT , KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE, DDO, KOLKATA BENCHES, KOLKATA.