DCIT 8(2), MUMBAI V. MUMBAI INTERNATIONAL AIRPORT P.LTD, MUMBAI

ITA 5592/MUM/2013

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8645 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 28-04-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 02-09-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Depreciation; Charitable institution; Maximum Marginal Rate; Diversion of income; Earning of tax free income; Question of law; Difference of opinion; Capital receipt; Commercial expediency; Revenue expenditure; Capital expenditure
• Section: 14A; 37(1); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI P K BANSAL, VICE PRESIDENT & SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.1081/MUM/2013 ASSESSMENT YEAR : 2009-10 ITA NO.4911/MUM/2013 ASSESSMENT YEAR : 2010-11 ITA NO.4784/MUM/2014 ASSESSMENT YEAR : 2011-12 MUMBAI INTERNATIONAL AIRPORT P LTD. FINANCE DEPARTMENT, 1 ST FLOOR, TERMINAL 1B, CHATRAPATI SHIVAJI INTERNATIONAL AIRPORT, SANTACRUZ (E), MUMBAI 400 099 PAN : AAECM6285C VS. ADDL. CIT RANGE 8(2) MUMBAI (APPELLANT) (RESPONDENT) ITA NO.4675/MUM/2013 ASSESSMENT YEAR: 2009-10 ITA NO.5592/MUM/2013 ASSESSMENT YEAR: 2010-11 ITA NO.5655/MUM/2014 ASSESSMENT YEAR: 2011-12 DY CIT RANGE 8(2) MUMBAI VS. MUMBAI INTERNATIONAL AIRPORT P LTD. MUMBAI 400 099 PAN : AAECM6285C (APPELLANT) (RESPONDENT) FOR THE ASSESSEE : SHRI VIJAY MEHTA FOR THE REVENUE : SHRI ANAND MOHAN DATE OF HEARING : 13 . 0 9 .2017 DATE OF PRONOUNCEMENT : 13 . 1 1 .2017 O R D E R PER P K BANSAL, VICE-PRESIDENT: ALL THESE CROSS-APPEALS IN EACH OF THE ASSESSMENT Y EARS HAVE BEEN FILED AGAINST RESPECTIVE ORDERS OF THE CIT(A). MUMBAI INTERNATIONAL AIRPORT P LTD. 2 2. ITA NO.1081/MUM/2013 ASSESSMENT YEAR: 2009-10: THE ASSESSEE IN ITS APPEAL HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: GROUND NO. 1: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE LE ARNED ASSESSING OFFICER OF MAKING A DISALLOWANCE OF RS. 60,85,217/- U/S. 14A R.W.R. 8D OF THE INCOME TAX ACT, 1961. THE APPELLANT PRAYS THAT THE SAME MAY PLEASE BE DELETED. GROUND NO. 2 : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF THE PROVISION FOR LEAVE ENCASHMENT OF RS.2,14,68,986/-- MADE ON THE B ASIS OF AN ACTUARIAL VALUATION BY RELYING ON THE DECISION OF C ALCUTTA HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LTD. V UNION OF IND IA (292 ITR 470). THE APPELLANT PRAYS THAT THE SAME MAY BE ALLOWED. GROUND NO. 3 : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE DEPRECIATION AL LOWANCE TO 10% AS APPLICABLE TO BUILDINGS INSTEAD OF 15% AS APPLICABL E TO PLANT AND MACHINERY, ON THE EXPENDITURE INCURRED BY THE APPEL LANT ON TAXIWAYS, TAXI TRACK AND PARKING BAYS. THE REVENUE IN ITA NO. 4675/MUM/2013 FOR A.Y. 2009-10 HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: 1) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWAN CE OF REFURBISHMENT EXPENSES IN THE NATURE OF CIVIL WORKS AMOUNTING TO RS.40,54,97,763/-- TREATED BY THE ASSESSING OFFICER AS CAPITAL EXPENDITURE, WITHOUT CONSIDERING THE FACT THAT THE ENTIRE - EXPENDITURE HAS BEEN INCURRED FOR RENOVATION, EXPAN SION AND MODERNIZATION OF THE AIRPORT.'. 2) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWAN CE OF 25% DEPRECIATION ON UPFRONT FEES OF RS.150 CRORES, WITH OUT CONSIDERING THE FACT THAT THE ASSESSES HAS NOT ACQUIRED ANY ABSOLUTE RIGHTS OVER THE AIRPORT, SO AS TO EQUATE IT WITH A LICENSE, BUT INSTEAD THE AAI HAS GRANTED THE ASSESSEE THE RIGHT TO PERFORM CERTA IN FUNCTIONS MUMBAI INTERNATIONAL AIRPORT P LTD. 3 DURING THE CONTRACT PERIOD OF 30 YEARS AND HENCE, T HE ASSESSEE IS ENTITLED FOR DEDUCTION OF ONLY THE PROPORTIONATE AM OUNT I.E. 1130 TH OF RS. 150 CRORES.' 3) ' ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO TREAT THE EXPENDITURE OF RS.20,35,73,477/- INCURRED TOWAR DS CONTRIBUTION TO MMRDA FOR CONSTRUCTION OF SAHAR ELEVATED ROAD FR OM WESTERN EXPRESS HIGHWAY, HORTICULTURE EXPENSES AND OTHER CI VIL WORKS AS REVENUE EXPENDITURE WITHOUT APPRECIATING THAT THESE EXPENSES GIVES ENDURING BENEFIT TO THE ASSESSEE AND HENCE IS CAPIT AL EXPENDITURE. 4) ' ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO TREAT THE EXPENDITURE OF RS.20,35,73,477/- INCURRED TOWAR DS CONTRIBUTION TO MMRDA FOR CONSTRUCTION OF SAHAR ELEVATED ROAD FR OM WESTERN EXPRESS HIGHWAY, HORTICULTURE EXPENSES AND OTHER CI VIL WORKS AS REVENUE EXPENDITURE IGNORING THE RATIO OF THE DECIS ION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. MANGAY ARKARASI MILLS (315 ITR 114) WHEREIN IT WAS HELD THAT REPLACEMENT EXPENDITURE IS NEITHER CURRENT REPAIRS NOR REVENUE IN NATURE AND T HE SAME IS SQUARELY APPLICABLE TO THE ASSESSEE'S CASE.' 5) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE O F RS.37,21,91,736/-- MADE BY THE ASSESSING OFFICER U/ S 40(A)(IA), WITHOUT APPRECIATING THAT THE ASSESSEE WAS LIABLE T O DEDUCT TAX UNDER VARIOUS SECTIONS I.E. 1941, 194J AND 194C BUT FAILED TO DO SO.' 6) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWAN CE OF RS.37,21,91,736/- MADE BY THE ASSESSING OFFICER U/S 40(A)(IA), WITHOUT APPRECIATING THAT THE ASSESSEE'S TAX AUDITO RS HAD POINTED OUT THAT THE SAID AMOUNT IS DISALLOWABLE.' 7) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWAN CE OF RS.39,35,444/-(RS. 43,72,716 - 10% DEPRECIATION THE REON = RS.4,37,272/-), WITHOUT CONSIDERING THE FACT THAT T HE ASSESSING OFFICER WAS JUSTIFIED IN ALLOCATING / APPORTIONING 10% OF THE SAID TOTAL EXPENDITURE OF RS. 4,37,27,160/-.' MUMBAI INTERNATIONAL AIRPORT P LTD. 4 3. SUBSEQUENTLY, THE ASSESSEE FOR A.Y. 2010-11 HAS TAKEN SIMILAR GROUNDS OF APPEAL AS TAKEN IN A.Y. 2009-10 EXCEPT FOR THE C HANGE IN FIGURES IN GROUND NOS. 1 & 2. IN GROUND NO.1 THE FIGURE OF ` 60,85,217/- BE READ AS ` 30,85,000/- AND IN GROUND NO.2 THE FIGURE OF ` 2,14,68,986/- BE READ AS 3,19,60,734/- THE REVENUE FOR A.Y. 2010-11 HAS TAKEN THE FOLLOWI NG EFFECTIVE GROUND OF APPEAL: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE O F 25% DEPRECIATION ON UPFRONT FEES OF RS.150 CRORES, WITH OUT CONSIDERING THE FACT THAT THE ASSESSEE HAS NOT ACQUIRED ANY ABS OLUTE RIGHTS OVER THE AIRPORT, SO AS TO EQUATE IT WITH A LICENSE, BUT INSTEAD THE AAI HAS GRANTED THE ASSESSEE THE RIGHT TO PERFORM CERTA IN FUNCTIONS DURING THE CONTRACT PERIOD OF 30 YEARS AND HENCE, T HE ASSESSEE IS ENTITLED FOR DEDUCTION OF ONLY THE PROPORTIONATE AM OUNT I.E. 1/30 TH OF RS.150 CRORES.' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO TREAT THE EXPENDITURE OF RS. 70,25,31,658/- INCURRED TOWA RDS CONTRIBUTION TO MMRDA FOR CONSTRUCTION OF SAHAR ELEVATED ROAD FR OM WESTERN EXPRESS HIGHWAY, HORTICULTURE EXPENSES AND OTHER CI VIL WORKS AS REVENUE EXPENDITURE WITHOUT APPRECIATING THAT THESE EXPENSES RESULT IN ENDURING BENEFIT TO THE ASSESSEE AND HENC E IS CAPITAL EXPENDITURE. ' 3 . 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO TREAT THE EXPENDITURE OF RS. 70,25,31,658/- INCURRED TOWA RDS CONTRIBUTION TO MMRDA FOR CONSTRUCTION OF SAHAR ELEVATED ROAD FR OM WESTERN EXPRESS HIGHWAY, HORTICULTURE EXPENSES AND OTHER CI VIL WORKS AS REVENUE EXPENDITURE IGNORING THE RATIO OF THE DECIS ION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. MANGAY ARKARASI MILLS (315 ITR 114) WHEREIN IT WAS HELD THAT REPLACEMENT EXPENDITURE IS NEITHER CURRENT REPAIRS NOR REVENUE IN NATURE WHICH IS SQUARELY APPLICABLE TO THE ASSESSEE'S CASE.' MUMBAI INTERNATIONAL AIRPORT P LTD. 5 4. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWAN CE OF RS. 12,31,76,051/- MADE BY THE ASSESSING OFFICER U/S 40 (A)(IA), WITHOUT APPRECIATING THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX UNDER VARIOUS SECTIONS I.E. 1941, 194J AND 194C BUT FAILE D TO DO SO.' 5. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWAN CE OF RS. 12,31,76,051/- MADE BY THE ASSESSING OFFICER U/S 40 (A)(IA), WITHOUT APPRECIATING THAT THE ASSESSEES TAX AUDITORS HAD P OINTED OUT THAT THE SAID AMOUNT IS DISALLOWABLE.' 6. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWAN CE OF RS.123,38,55,270/- PAID AS RETRENCHMENT COMPENSATIO N TO AAI FOR THE RELEVANT ASSESSMENT YEAR 2010-11.' 7. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT RETRENCHME NT COMPENSATION IS ALLOWABLE AS A DEDUCTION U/S 37(1) OF THE INCOME TAX ACT, 1961.' 8. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A) ERRED IN HOLDING THAT SECTION 35 DDA IS NOT APPLICABLE WITHOUT APPRECIATING THAT SUCH RETRENCHM ENT COMPENSATION PAID BY THE ASSESSEE COMPANY IS IN CON NECTION WITH THE VOLUNTARY RETIREMENT OF EMPLOYEES 9. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN L AW, 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 559 BOM) AND CIT VS MARGARINE & REFINED OILS CO. LTD (2006 282 ITR 576 (KAR)) WITHOUT APPRECIATI NG THAT THE SAID DECISIONS WERE RENDERED FOR THE AY 1989-90 AND AY 1 981-82 RESPECTIVELY I.E. PRIOR TO INSERTION OF SECTION 35D DA WHICH IS APPLICABLE FOR AY 2002-03 ONWARDS AS THE SAME WAS I NSERTED BY THE FINANCE ACT, 2001 W.E.F. 01-04-2002, AND THEREFORE THE RATIO OF THE DECISIONS CITED SUPRA IS NOT APPLICABLE TO THE ASSE SSMENT YEAR UNDER CONSIDERATION.' 10. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT DEVELOPMEN T FEE OF RS. 286,30,14,565/- COLLECTED BY THE ASSESSEE FROM THE EMBARKING PASSENGERS AT THE CHHATRAPATI SHIVAJI INTERNATIONAL AIRPORT, MUMBAI MUMBAI INTERNATIONAL AIRPORT P LTD. 6 DURING THE FINANCIAL YEAR 2009-10, RELEVANT FOR THE ASSESSMENT YEAR 2010-11, IS A CAPITAL RECEIPT AND NOT A REVENUE REC EIPT.' 11. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT DEVEL OPMENT FEE COLLECTED BY THE ASSESSEE COMPANY IS A CAPITAL RECE IPT BASED ON ITS APPLICATION FOR ACQUISITION OF CAPITAL ASSETS WITHO UT APPRECIATING THE FACT THAT APPLICATION OF RECEIPTS DOES NOT DETERMINE THE NATU RE AND TAXABILITY OF THE RECEIPTS.' 12. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE 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 FOUNDA TION VS UNION OF INDIA & OTHERS (2011 5 SCC 360) WITHOUT APPRECIATING THAT IN THAT CASE THE ISSUE BEFORE THE HON'BLE APEX COUR T WAS WHETHER THE ASSESSEE COMPANY, AS A LESSEE OF AAI, CAN COLLE CT DEVELOPMENT FEE FROM THE EMBARKING PASSENGERS AT THE CHHATRAPAT I SHIVAJI INTERNATIONAL AIRPORT, MUMBAI AND THE APEX COURT DI D NOT GIVE ANY FINDING REGARDING THE NATURE OF RECEIPT IN THE HANDS OF LESSEES OF THE AIRPORTS, INCLUDING THE ASSESSEE COMPANY.' 13. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT ONCE AN AM OUNT IS HELD TO BE IN THE NATURE OF TAX, IT CANNOT BE SUBJECTED TO FURTHER TAX WITHOUT APPRECIATING THAT SUCH AMOUNT CONSTITUTES CONSTRUCT IVE RECEIPT IN THE ASSESSEE'S HANDS AND HENCE LIABLE TO BE TAXED . ' 4. FOR A.Y. 2011-12, THE ASSESSEE HAS TAKEN ONLY ON E GROUND OF APPEAL, WHICH IS SIMILAR TO GROUND NO.2 RAISED IN A.YS. 200 9-10 AND 2010-11, EXCEPT FOR THE CHANGE IN THE FIGURE, WHICH MAY BE READ AS ` 2,00,75,274/- IN PLACE OF ` 2,14,68,986/- FOR A.Y. 2009-10 IN THE CASE OF THE REVENUE, FOR A.Y. 2011-12, GROUND NO.1 IS SIMILAR TO GROUND NO.1 FOR A.Y. 2010 -11; GROUND NO.2 IS SIMILAR TO GROUND NOS. 2 & 3 FOR A.Y . 2010-11 EXCEPT FOR THE CHANGE IN THE FIGURE; MUMBAI INTERNATIONAL AIRPORT P LTD. 7 GROUND NO.3 IS SIMILAR TO GROUND 4 & 5 FOR A.Y. 201 0-11 EXCEPT FOR THE CHANGE IN FIGURE; GROUND NO.4 IS SIMILAR TO GROUND NOS. 6 TO 9 FOR A. Y. 2010-11 EXCEPT FOR CHANGE IN FIGURES; GROUND NO.5 IS SIMILAR TO GROUND NOS. 10 & 11 FOR A .Y. 2010-11 EXCEPT FOR CHANGE IN FIGURES; FURTHER THE REVENUE HAS ALSO RAISED THE FOLLOWING G ROUNDS OF APPEAL 6(A) 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE U/S 14A, WITHOUT APPRECIATING THE FACT THAT THE AO PROPERLY RECORDED HIS SATISFACTION FOR INVOKING THE PROVISIO NS OF RULE 8D AND THEREFORE SINCE RULE 8D IS INVOKED, THE DISALLOWANC E HAS TO BE WORKED OUT AS PER THE FORM PRESCRIBED THEREIN AND T HERE IS NO SCOPE FOR ANY DEVIATION THEREFROM'?. 6(B)'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE 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 CAN BE MADE U/S 14A WITHOUT APPRECIATI NG THAT AS HELD IN THE DECISION SB-ITAT, DELHI IN THE CASE OF CHEMI NVEST 121 ITD 318 (DELHI) (SB), PROVISIONS OF S 14A T APPLICABLE EVEN THOUGH NO EXEMPT INCOME HAS BEEN EARNED DURING THE YEAR.'? 7.'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN UPHOLDING THE ASSE SSEE'S CLAIM THAT CAPITAL EXPENDITURE INCURRED BY THE ASSESS ON TAXIW AYS, APRONS, PARKING BAYS AND BRIDGES IS ENTITLED TO DEPRECIATIO N @ 25 % TREATING THE SAME AS PLANT & MACHINERY IGNORING THAT THE TAXIWAYS, APRONS, PARKING BE AS AKIN TO ROADS AND BUILDINGS A ND THEREFORE, ENTITLED TO DEPRECIATION @ 10 %.?' 5. AT THE OUTSET THE LEARNED AR BEFORE US POINTED O UT THAT HE HAS TAKEN ADDITIONAL GROUND OF APPEAL IN EACH OF THE ASSESSME NT YEARS EXCEPT WITH THE CHANGE IN FIGURES. THE SAID ADDITIONAL GROUND FOR A.Y. 2009-10 READ AS UNDER: MUMBAI INTERNATIONAL AIRPORT P LTD. 8 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE PASSENGE R SERVICE FEE SECURITY COMPONENT [PSF (SC)] OF RS 88,57,17,812/- IS NOT THE INCOME OF THE APPELLANT AND HE OUGHT TO HAVE DIRECT ED THE ASSESSING OFFICER TO EXCLUDE THE SAME FROM THE TOTA L INCOME OF THE APPELLANT. THE AMOUNT OF ` 88,57,17,812/- BE READ AS ` 82,75,79,038/- FOR A.Y 2010-11 AND ` 66,62,27,686/- FOR A.Y. 2011-12. 6. THE LEARNED AR BEFORE US VEHEMENTLY CONTENDED TH AT THE ADDITIONAL GROUND TAKEN BY THE ASSESSEE IS LEGAL GROUND AND IT GOES TO THE ROOT OF THE MATTER. IT DOES NOT REQUIRE ANY FURTHER INVESTIGAT ION OF THE FACTS THEREFORE, THE SAME MAY BE ADMITTED. IN THIS REGARD, RELIANCE WAS PLACED ON THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF N ATIONAL THERMAL POWER CORPORATION V. CIT [229 ITR 383 (SC)]; JUTE CORPORA TION OF INDIA VS. CIT [187 ITR 688(SC)] AND THAT OF THE FULL BENCH ORDER IN TH E CASE OF AHMEDABAD ELECTRICITY CO. LTD. VS. CIT [199 ITR 351(BOM) (FB) ] 7. THE LEARNED DR, ON THE OTHER HAND, OBJECTED TO T HE ADMISSION OF THE ADDITIONAL GROUND AND CONTENDED THAT THIS ISSUE HAS BEEN DECIDED IN A.Y. 2008-09 AGAINST THE ASSESSEE. IN SUBSEQUENT YEARS I.E. A.YS 2009-10 AND 2010-11, THERE WERE NO ISSUE BEFORE THE ASSESSING O FFICER OR THE CIT(A). THIS GROUND IS TAKEN FOR THE FIRST TIME BEFORE THIS TRIB UNAL AND WITH SUCH A CONDUCT THE ASSESSEE HAS DISENTITLED ITSELF BY SUPPRESSING THE SAID CLAIM IN ASSESSMENT PROCEEDINGS FOR AYS 2009-10 AND 2010-11 TILL 19.05. 2016 AND SUDDENLY MUMBAI INTERNATIONAL AIRPORT P LTD. 9 RAISING THE SAME BY WAY OF ADDITIONAL GROUND AT A P OINT OF TIME WHEN ITS APPEAL ON IDENTICAL ISSUE FOR A.Y. 2008-09 WAS SUBS TANTIALLY HEARD AND THE ASSESSEE GOT A SENSE OF THE COURT THAT ITS CLAIM MA Y BE HELD TO BE ALLOWABLE, CONSTITUTES AN UNFAIR MEANS. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E GONE THROUGH THE CASE LAWS AS WERE REFERRED TO BEFORE US. WE NOTED THE FACTS RELATING TO THE SAID GROUND TAKEN BY THE ASSESSEE AS ADDITIONAL GRO UND BEFORE US. THE QUESTION BEFORE US WHETHER THE GROUND TAKEN BY THE ASSESSEE IS A LEGAL GROUND OR NOT. THE ISSUE WHETHER THE DISCLOSED PAS SENGER SERVICE FEE SECURITY COMPONENT [PSF (SC)] IS A INCOME OR NOT? IN OUR OPINION, IT IS A LEGAL ISSUE AND AS PER THE DECISION OF HONBLE SUPR EME COURT IN THE CASE OF NATIONAL THERMAL POWER CORPORATION V. CIT (SUPRA), THE QUESTION OF LAW ARISING FROM THE FACTS, WHICH ARE ON RECORD, CAN BE RAISED BEFORE THE TRIBUNAL FOR THE FIRST TIME AND THE TRIBUNAL IS BOUND TO CON SIDER THE SAID GROUND TO ASSESS THE CORRECT TAX LIABILITY. IN THE CASE OF J UTE CORPORATION OF INDIA VS. CIT (SUPRA), THE HONBLE SUPREME COURT HAS HELD AS UNDER: AN APPELLATE AUTHORITY HAS ALL THE POWERS WHICH TH E ORIGINAL MAY HAVE IN DECIDING THE QUESTION BEFORE IT SUBJECT TO THE RESTRICTIONS OR LIMITATIONS, IF ANY, PRESCRIBED BY THE STATUTORY PR OVISION. IN THE ABSENCE OF ANY STATUTORY PROVISIONS, THE APPELLATE AUTHORITY IS VESTED WITH ALL THE PLENARY POWERS, WHICH THE SUBOR DINATE AUTHORITY MAY HAVE IN THE MATTER. THERE IS NO GOOD REASON TO JUSTIFY CURTAILMENT OF THE POWER OF THE APPELLATE ASSISTANT COMMISSIONER IN ENTERTAINING AN ADDITIONAL GROUND RAISED BY THE ASS ESSEE IN SEEKING MODIFICATION OF THE ORDER OF ASSESSMENT PASSED BY T HE INCOME-TAX OFFICER. MUMBAI INTERNATIONAL AIRPORT P LTD. 10 IN VIEW OF THIS DECISION THERE IS NO CURTAILMENT OF THE POWER OF THE APPELLATE AUTHORITY IN ENTERTAINING THE ADDITIONAL GROUND. N OT ONLY THIS, WE NOTED THAT THE BOMBAY HIGH COURT (FB) IN THE CASE OF AHMEDABAD ELECTRICITY CO. LTD. VS. CIT (SUPRA), HAS OBSERVED THAT THE BASIC PURPOSE OF AN APPEAL IN INCOME TAX MATTER IS TO ASCERTAIN CORRECT TAX LIABILITY OF THE ASSESSEE IN ACCORDANCE WITH THE LAW. THEREFORE, THE APPELLATE TRIBUNAL BEING T HE APPELLATE AUTHORITY IS BOUND TO CONSIDER THE PROCEEDINGS BEFORE IT AND THE MATTER ON RECORD, FOR DETERMINING THE CORRECT TAX LIABILITY OF THE ASSESS EE. IT IS NOT DISPUTED THAT THE FACTS RELATING TO PASSENGER SERVICE FEES SECURI TY COMPONENT ARE ON RECORD FOR EACH OF THE ASSESSMENT YEARS. THEREFORE, IT CA NNOT BE SAID THAT THIS IS A CASE WHERE FURTHER FACTS HAVE TO BE INVESTIGATED. THE ONLY QUESTION RAISED BY THE ASSESSEE IN ITS GROUNDS OF APPEAL IS WHETHER TH E IMPUGNED RECEIPT IS AN INCOME CHARGEABLE TO TAX OR NOT. THE LEARNED DR, A LTHOUGH VEHEMENTLY CONTENDED THAT ADDITIONAL GROUND SHOULD NOT BE ADMI TTED, HAS NOT GIVEN ANY JUSTIFIABLE REASON FOR NOT ADMITTING THE SAME. IT IS A SETTLED LAW THAT THE ADDITIONAL GROUND IF IT IS A LEGAL GROUND CAN BE TA KEN FOR THE FIRST TIME BEFORE THE APPELLATE AUTHORITY. THEREFORE, THE SUBMISSION S MADE BY THE LEARNED DR THAT THE ASSESSEE HAS NOT RAISED THIS ISSUE BEFORE THE ASSESSING OFFICER OR THE CIT(A) DOES NOT HAVE ANY LEGS TO STAND. WE, THEREF ORE, ADMIT THE ADDITIONAL GROUND TAKEN BY THE ASSESSEE. MUMBAI INTERNATIONAL AIRPORT P LTD. 11 9. ASSESSEES APPEALS NOW COMING TO GROUND NO.1 FOR A.Y. 2009-10, TAKEN BY THE ASSESSEE, WHEREBY IT HAS CHALLENGED THE ACTION OF THE CIT(A) IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER MAKING DISALLOWANCE OF ` 60,85,217/- U/S. 14A READ WITH RULE 8D OF THE INCOME TAX ACT. THE FACTS RELATING TO THIS GROUND ARE THAT THE ASSESSING OFFICER NOTED FROM THE PROFIT & LOSS ACCO UNT THAT THE ASSESSEE HAS EARNED NIL DIVIDEND INCOME WHICH HAS BEEN CLAIMED AS EXEMPT U/S. 10(34) OF THE INCOME TAX ACT. APART FROM THIS, THE ASSESSEE HAS EARNED DIVIDEND INCOME OF ` 7,37,57,293, WHICH HAS BEEN CREDITED TO THE PROJEC T COST. THE ASSESSEE HAS VOLUNTARILY OFFERED DISALLOWANCE OF ` 3,25,000/- AS EXPENDITURE AGAINST EARNING SUCH EXEMPT INCOME IN THE COMPUTATI ON OF INCOME IN THE FOLLOWING MANNER: 1. IN CASE OF INVESTMENTS DONE FROM OPERATIONS SURPLUS FUNDS, INTEREST COST IS CONSIDERED TO BE NI L 2. PAYROLL COSTS ARE AS FOLLOWS: AVP FINANCE - 5% OF HIS CTC 2,00,000 MGR. (FIN) -5% OF HIS CTC 50,000 TOTAL A 2,50,000 3. OTHER ADMINISTRATIVE COSTS ARE APP. 75,000 TOTAL B 3,25,000 MUMBAI INTERNATIONAL AIRPORT P LTD. 12 THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE WO RKING OF THE ASSESSEE AND HE WAS OF THE OPINION THAT IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE MGF. CO. LTD. VS. DCIT & ANR. (234 CTR 1), IT WAS OBLIGATORY FROM A Y 2008-09 ON THE PART OF THE ASSESSING OFFICER TO COMPUTE THE DISALLOWANCE OF EXPENDITURE BY FOLLOWIN G THE METHOD PRESCRIBED IN RULE 8D IN THE EVENT THE ASSESSING OFFICER IS NO T SATISFIED WITH THE CORRECTNESS OF THE AMOUNT OF EXPENDITURE DISALLOWED BY THE ASSESSEE ATTRIBUTING THE SAME TO THE EARNING OF EXEMPT INCOM E. THE ASSESSING OFFICER SINCE NOTED THAT THE ASSESSEE MADE HUGE INVESTMENT IN VARIOUS SHARES AND MUTUAL FUNDS, THEREFORE, HE COMPUTED THE DISALLOWAN CE AS PER RULE 8D AS UNDER: (I) THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME - - (II) PROPORTIONATE OF INTEREST EXPENDITURE COMPUTED IN ACCORDANCE WITH THE FORMULA GIVEN N RULE 8D(2)(II) (A X B/C) - - (III) AMOUNT EQUAL TO ONE-HALF PERCENT OF THE AVERAGE OF THE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR. 0.5%OF ` 121.70 CR. 60,85,217 TOTAL EXPENDITURE DISALLOWED U/S.14A 60,85,217 (I) A = INTEREST DEBITED IN THE PROFIT -& LOSS ACCOUNT NIL (II) B = AVERAGE OF INVESTMENTS = [ 200.81 + 42.60 CR. / 2 ]= ` 121.70 CR. (III) C = AVERAGE OF TOTAL ASSETS APPEARING IN THE BALANC E SHEET ON THE FIRST AND LAST DAY OF THE PREVIOUS YEAR [1686.34 CR. + 2705.70 CR./2] = 2196.52 CR. MUMBAI INTERNATIONAL AIRPORT P LTD. 13 10. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL O F RECORD, WE FIND THAT THE TRIBUNAL, ON THE SAME SET OF FACTS, IN THE ASSE SSEES OWN CASE FOR A.Y. 2008-09, VIDE ITS ORDER DATED 30.11.2016, IN ITA NO . 3232/MUM/2012 DELETED THE DISALLOWANCE BY HOLDING AS UNDER: 12.4. WE HAVE GONE THROUGH THE FACTS AND CIRCUMSTA NCES OF THE CASE, SUBMISSIONS MADE BY BOTH THE PARTIES AS WELL AS THE JUDGEMENTS PLACED BEFORE US. WE HAVE NOTED AT THE O UTSET THAT THE ASSESSEE HAS MAINLY MADE INVESTMENTS IN THE MUTUAL FUNDS AND TOTAL NUMBER OF TRANSACTIONS DONE DURING THE YEAR WAS 19. IN VIEW OF THE SAME, ASSESSEE MADE VOL UNTARY DISALLOWANCE OF RS.1,62,500/-. IN SUPPORT OF IT, FOLLOWING WORKING WAS SUBMITTED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES: 1 IN CASE OF INVESTMENTS DONE FROM OPERATIONS SURPLUS FUNDS, INTEREST COST IS CONSIDERED TO BE NIL. 2 PAYROLL COSTS ARE AS FOLLOWS: AVP FINANCE -5% OF HIS CTC FOR 8 MONTHS, AS INVESTMENT ACTIVITY DONE FROM AUGUST,2008 1,00,000 MGR.(FIN) 5% OF HIS CTC FOR 8 MONTHS AS HE HAS BEEN APPOINTED SINCE JANUARY,2008 12,500 TOTAL A 1,12,500 3 OTHER ADMINISTRATIVE COSTS ARE APP. 50,000 TOTAL B 1,62,500 IT IS NOTED FROM THE PERUSAL OF THE ASSESSM ENT ORDER THAT THE AO DID NOT RECORD ANY SATISFACTION ABOUT THE C ORRECTNESS OF THE CLAIM OR OTHERWISE HAVING REGARD TO THE ACCO UNTS OF THE ASSESSEE. WE FIND THAT THIS ISSUE IS NO MORE RES IN TEGRA. IN THE CASE OF ASHISH JHUNJHUNWALLA (SUPRA) AUTHORED BY ON E OF US, I.E. HONBLE JM, HONBLE KOLKATTA BENCH OF THE TRIB UNAL AFTER CONSIDERING UMPTEEN NUMBER OF JUDGEMENTS AVAIL ABLE ON THIS ISSUE, HELD AS UNDER :- MUMBAI INTERNATIONAL AIRPORT P LTD. 14 6. WE FIND FROM THE FACTS OF THE ABOVE CA SE THAT THE AO HAS NOT EXAMINED THE ACCOUNTS OF THE ASSESSEE AND THERE IS NO SATISFACTION RECORDED BY THE AO AB OUT THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE AND WITHOUT THE SAME HE INVOKED RULE 8D OF THE RULES. W HILE REJECTING THE CLAIM OF THE ASSESSEE WITH REGARD TO EXPENDITURE OR NO EXPENDITURE, AS THE CASE MAY BE, IN RELATION TO EXEMPTED INCOME, THE AO HAS TO INDICATE COGENT REASONS FOR THE SAME. FROM THE FACTS OF THE PRESE NT CASE IT IS NOTICED THAT THE AO HAS NOT CONSIDERED THE CLAIM OF THE ASSESSEE AND STRAIGHT AWAY EMBARKED UP ON COMPUTING DISALLOWANCE UNDER RULE 8D OF THE RU LES ON PRESUMING THE AVERAGE VALUE OF INVESTMENT AT % OF THE TOTAL VALUE. IN VIEW OF THE ABOVE AND RESPECTFULLY FOLLOWING THE COORDINATE BENCH DECISION IN THE CASE OF J. K. INVESTORS (BOMBAY) LTD., SUPRA, WE UPHOLD THE ORDER OF CIT(A) . THIS APPEAL OF REVENUE IS DISMISSED. 12.5. SUBSEQUENTLY, AFORESAID JUDGMENT HAS BEEN APP ROVED BY THE HONBLE CALCUTTA HIGH COURT IN THESE VER Y WORDS BY PASSING A DETAILED ORDER WHICH HAS BEEN MENTIONED A BOVE. IN ADDITION TO THAT IT IS NOTED BY US THAT SI MILAR VIEW HAS BEEN TAKEN IN THE OTHER JUDGEMENTS CITED BY THE LD. COUNSEL AS MENTIONED BY US IN EARLIER PART OF OUR ORDER. NO CO NTRARY JUDGMENT WAS BROUGHT TO OUR NOTICE. THUS, WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THESE J UDGMENTS AND, THEREFORE, RESPECTFULLY FOLLOWING THE SAME, DI SALLOWANCE MADE BY THE AO WITHOUT ASSUMING JURISDICTION AS P ER LAW FOR INVOKING PROVISIONS OF RULE 8D(2)(III) IS DIRECTED TO BE DELETED. WE NOTED THAT IN BOTH THE A.YS. 2009-10 AND 2010-11 , THE FACTS INVOLVED ARE SAME, WHICH HAS NOT BEEN DISPUTED BY EITHER OF THE PARTIES. WE, THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THIS TRIBUNAL F OR A.Y. 2008-09 (SUPRA), DELETE THE DISALLOWANCE MADE U/S 14A IN EACH OF THE ASSESSMENT YEARS UNDER CONSIDERATION. THIS GROUND TAKEN BY THE ASSESSEE I S ALLOWED. 11. GROUND NO.2 IN A.YS. 2009-10 AND 2010-11 AND GR OUND NO.1 IN A.Y. 2011-12 ARE COMMON AND RELATES TO DISALLOWANCE OF T HE PROVISIONS FOR LEAVE MUMBAI INTERNATIONAL AIRPORT P LTD. 15 ENCASHMENT, WHICH WAS MADE ON THE BASIS OF ACTUARIA L VALUATION. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSIDERED THE SAME CAREFULLY ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE ORDER OF THIS TRIBUNAL, DATED 30.11.2016, IN THE ASSESSEES OWN CASE FOR A.Y. 2008-09, IN ITA NO. 3232/MUM/2012. WE NOTED THAT WHILE DEAL ING WITH IDENTICAL ISSUE THE TRIBUNAL HAS HELD AS UNDER: 13.1. THE BRIEF FACTS OF THE CASE ARE THAT IN THE ASSESSMENT ORDER, THE AO MADE ADDITION OF THE AFORESAID AMOUNT ON ACCOUNT OF PROVISION FOR LEAVE ENCASHMENT DEBITED T O THE PROFIT & LOSS ACCOUNT ON THE GROUND THAT THE DECISION OF CALCUTTA HIGH COURT IN THE CASE OF EXCEL INDUSTRIES VS UOI 2 92 ITR 470 (CAL) HAS BEEN STAYED BY THE HONBLE SUPREME COURT AND, THEREFORE, AS ON THAT DATE, THE EXPENSES WER E NOT ALLOWABLE. 13.2. BEFORE THE LD. CIT(A), THE ASSESSEE CHALLE NGED THIS DISALLOWANCE. BUT LD. CIT(A) DECIDED THE ISSUE AGAINST THE ASSESSEE. 13.3. DURING THE COURSE OF HEARING, THE LD. COUNSEL OF THE ASSESSEE FAIRLY SUBMITTED THAT THIS ISSUE SHOULD GO BACK AND IT SHOULD BE DECIDED ON THE BASIS OF JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF EXCEL INDUSTRIE S LTD (SUPRA). IT WAS ALSO SUBMITTED THAT THE AMOUNT ACTUALLY PAID SH OULD BE ALLOWED. 13.4. PER CONTRA, THE LD. CIT-DR DID NOT RAISE ANY OBJECTION AND SUBMITTED THAT PROPER APPRECIATION OF FACTS HAVE NO T BEEN DONE IN THIS CASE AND HE WOULD HAVE NO OBJECTION IF THIS IS SUE IS SENT BACK TO THE FILE OF THE AO. 13.5. WE HAVE GONE THROUGH THE ORDERS PASSED BY LOW ER AUTHORITIES ON THIS ISSUE. IT IS NOTED THAT NONE OF THE AUTHO RITIES HAVE NARRATED PROPER FACTS AS TO WHETHER THE TOTA L AMOUNT DEBITED UNDER THIS HEAD WAS ON ACCOUNT OF PROVISION OR SOME PART OF IT WAS PAID ALSO. FURTHER, IT IS ALSO NOT COMING OUT W HETHER PROVISION FOR LEAVE ENCASHMENT HAS BEEN MADE ON THE BASIS O F ACTUARIAL BASIS OR NOT. IN OUR VIEW, THIS ISSUE NEEDS TO GO BACK FOR PROPER VERIFICATION OF FACTS, AND THEREFORE, WE SEND THI S ISSUE BACK TO THE FILE OF THE AO FOR PROPER ADJUDICATION A FTER CONSIDERING ALL MUMBAI INTERNATIONAL AIRPORT P LTD. 16 THE FACTS AND THE JUDGMENTS IN THIS REGARD FOR WHICH THE AO SHALL GIVE ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSE E. THE ASSESSEE SHALL SUBMIT REQUISITE DETAILS AND DOCUMENTARY E VIDENCES TO BRING COMPLETE FACTS ON RECORD AND PLACE ALL THE JUDGEMENTS AS MAY BE CONSIDERED APPROPRIATE AS PER LAW AND FACTS. THE AO SHALL DECIDE THIS ISSUE AFRESH AFTER TAKIN G INTO ACCOUNT ALL THE MATERIAL HELD ON RECORD AND ALL THE JUDGEMEN TS AS AVAILABLE AT THAT TIME ON THIS ISSUE. THIS GROUND MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSE. RESPECTFULLY FOLLOWING HE SAID DECISION, WE RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO RE-DECIDE THE ISSUE AFRESH AFTER TAKING INTO ACCOUNT ALL THE MATERIAL HELD ON RECORD AND AL L THE JUDGMENTS AS AVAILABLE AT THAT TIME ON THIS ISSUE. THUS, THIS GROUND IS T REATED AS ALLOWED FOR STATISTICAL PURPOSES. 12. GROUND NO.3 IN A.YS. 2009-10 & 2010-11 AND GRO UND NO.7 IN REVENUES APPEAL FOR A.Y. 2011-12 RELATES TO THE RESTRICTION OF THE CLAIM OF DEPRECIATION @10% INSTEAD OF 15% IN RESPECT OF TAXIWAYS, TAXI TR ACK AND PARKING BAYS. BOTH THE PARTIES AGREED THAT THIS ISSUE IS ARISING IN THE CASE OF THE ASSESSEE IN A.YS 2007-08 AND 2008-09 BEFORE THIS TRIBUNAL AND T HE FACTS INVOLVED IN BOTH YEARS RELATING TO THIS ISSUE ARE THE SAME. WE HAVE GONE THROUGH THE ORDER OF THIS TRIBUNAL, DATED 30.11.2016, IN THE ASSESSEES OWN CASE FOR A.Y. 2008-09, IN ITA NO. 3232/MUM/2012, WHEREIN IT HAS BEEN HELD AS UNDER: 15.5. WE HAVE GONE THROUGH THE ORDERS PASSED BY LOWER AUTHORITIES. FROM THE DETAILS BROUGHT BEFORE US, IT IS NOTICED BY US THAT THE ASSESSEE HAD INCURRED AN AGG REGATE AMOUNT OF RS.17.52 CRORES ON TAXI WAYS, APRONS AND RUNWAYS . IT IS NOTED THAT SIMILAR EXPENDITURE WAS INCURRED BY THE ASSESSEE IN A.Y. 2007-08 AND DEPRECIATION AS APPLICABLE TO PLA NT & MACHINERY WAS CLAIMED BUT THE SAME WAS DENIED BY THE AO AS WE LL AS BY THE CIT(A). THE MATTER REACHED UPTO THE TRIBUNAL AND TRIBUNAL, MUMBAI INTERNATIONAL AIRPORT P LTD. 17 VIDE ITS ORDER DATED 14-03-3024 IN ITA NO.711 1/MUM/2011 HELD AS UNDER:- 31. WE OBSERVE THAT THE ASSESSEE IN THE RE TURN FILED HAS TREATED THE ASSET AS OF PART OF BUILDING AND CLAIMED DEPRECIATION AT THE RATE OF 10%. AO HAS ACC EPTED THE CLAIM OF ASSESSEE. HOWEVER, WHILE FILING T HE APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESS EE CONTENDED THAT THE SAID ASSET IS IN THE FORM OF PLANT AND MACHINERY AND THEREFORE, THE ASSESSEE IS ENTITLE FOR DEPRECIATION AT THE RATE OF 15%, THE RATE AS APPLICABLE TO PLANT AND MACHINERY AND NOT AT THE RATE OF 10%. THE LD. CIT(A) DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND HAS STATED THAT ASSESSEE, IN ITS COMPUTATION OF INCOME HAS ITSELF CONSIDERED TH E SAID ASSET TO BE A BUILDING AND IT HAS ONLY BY WAY OF NOTE AN ALTERNATIVE CLAIM HAS BEEN MADE STATING THAT TAXIW AYS, APRONS, HANGAR, PARKING BAYS AND BRIDGES ARE PART OF PLANT ON WHICH ASSESSEE IS ENTITLE FOR DEPREC IATION AT THE RATE OF 15%. 32. THE LD. CIT(A) HAS HELD THAT THE IMPUGN ED ASSETS WHICH ARE BASICALLY STRUCTURES AND ARE IN TH E NATURE OF PLACES WHICH ARE USED BY AIRCRAFTS FOR TAXIN G, PARKING. ACCORDINGLY THEY ARE NOT IN THE NATURE OF P LANT. HENCE, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 33. DURING THE COURSE OF HEARING, LD. AR RE ITERATED THE SUBMISSIONS AS MADE BEFORE THE FIRST APPELLAT E AUTHORITY AND STATED THAT APRONS, TAXIWAYS AND RUNW AY ARE NOT ONLY THE STRUCTURES BUT THEY ARE STRUCTURES FOR SPECIFIC PURPOSES WHICH CAN BE CONSIDERED AS TOOLS FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. LD AR R EFERRED THE DECISION OF THE MUMBAI BENCH OF TRIBUNAL IN THE CASE OF NATIONAL AIRPORTS AUTHORITY OF INDIA V/S CIT [2011] 134 ITD 34 (DELHI), WHEREIN IT WAS HE LD THAT THE TERMINAL PLACE USED FOR REGULATION OF AIR TRAFFIC AND COMMUNICATIONAL AND NAVIGATIONAL CONTROL ARE PA RT OF TOOL OF BUSINESS OF THE ASSESSEE AND THEREFORE THEY CONSTITUTE PART OF THE PLANT. THUS THE ASSESS EE IS ACCORDINGLY ENTITLED FOR DEPRECIATION AS APPLICA BLE ON PLANT AND MACHINERY. THE LD. AR REFERRED THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT V/S DR. B. VENKATA RAO (2000) 243 ITR 81(SC) AND SUBMITTE D THAT IN THE CASE OF AN OPERATION THEATRE IN THE HOSPITAL, IT HAS BEEN HELD TO BE A PART OF PLANT AND NO T A PART MUMBAI INTERNATIONAL AIRPORT P LTD. 18 OF BUILDING. LD. AR REFERRED THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT V/S KARNATAKA POWER CORPN. (2000) 247 ITR 268 (SC) AND SUBMITTED THAT THE POWER GENERATING STATION BUILDING IS HELD TO BE A PLANT. HE SUBMITTED THAT SUCH STRUCTURES ARE SPECIFIC FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AND THE ASSESSEE IS ENTITLED FOR DEPRECIATION AT RATE AS APPLICABLE TO PLANT AND MACHINERY. 34. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS OF AUTHORITIES BELOW. HE SUBMITTED THAT ASSESS EE ITSELF HAS CLAIMED DEPRECIATION AT THE RATE OF 10% IN THE RETURN AS APPLICABLE TO BUILDING. 35. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF AUTHORITIES BELOW AND SUBMISSIONS OF LD. REPRE SENTATIVES OF THE PARTIES. THERE IS NO DISPUTE TO THE FACTS THAT RUNWAY, TAXIWAY ARE NECESSARY PART OF AIRPORT OPERATION AND ARE SPECIFIC PART OF INFRASTRUCTURE FOR USE OF AIRCRAFTS. THESE ARE NOT MERELY CONCRETE STRUCTURES. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V/S MAZ AGAON DOCK LTD (1991) 191 ITR 460(BOM) HAS HELD TH AT DRY DOCK AND WET DOCK CREATED FOR SHIPS ARE TO BE TREATED AS PLANT AND NOT BUILDING. THE HONBLE APEX COURT HAS HELD IN THE CASE OF KARNATAKA POWER CORPN. ( SUPRA) THAT POWER GENERATING STATION BUILDING IS NOT A SIMPLY CONCRETE STRUCTURE BUT A SPECIALLY DESIGNED BUILD ING AND IS TO BE TREATED AS PART OF PLANT. SIMILARLY, THE HONBLE APEX COURT HAS HELD IN THE CASE OF DR. B. VENKATA RAO (SUPRA) THAT THE OPERATION THEATRE IN AN HOSPITAL BUILDING IS NOT SIMPLY A CONCRETE STRUCTURE B UT 30 NECESSARILY A PART FOR RUNNING OF THE HOSPITA L AND THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION AS APPLICABLE TO PLANT AND MACHINERY. IF WE APPLY THE ABOV E, 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 CONCRETE S TRUCTURES BUT ARE NECESSARY TOOLS FOR OPERATING/USING THE AIR PORT. HENCE, THE SAME ARE TO BE CONSIDERED AS PART OF PLANT AND MACHINERY. THEREFORE, WE HOLD THAT ASSESSEE IS ENTITLED FOR DEPRECIATION AT THE RATE AS APPLICABLE ON PLANT AND MACHINERY IN RESPECT OF TAXIWAYS, APRONS, PAR KING BAYS ETC. HENCE, GROUND NO.2 OF THE APPEAL TAKEN BY ASS ESSEE IS ALLOWED. MUMBAI INTERNATIONAL AIRPORT P LTD. 19 15.6.THUS, FROM THE PERUSAL OF THE ABOVE, IT IS NOT ED THAT THE TRIBUNAL HAS ALLOWED THE CLAIM OF DEPRECIATIO N @15% AS APPLICABLE TO PLANT & MACHINERY. NO DISTINCT ION HAS BEEN MADE BY THE LD. DR ON FACTS OR ON LEGAL POSITIO N. THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL FO R A.Y. 2007-08, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSE SSEE, AND THEREFORE, THE CLAIM OF DEPRECIATION @15% IS DIRECTED T O BE ALLOWED. THIS GROUND MAY BE TREATED AS ALLOWED. RESPECTFULLY, FOLLOWING THE SAID DECISION OF THIS T RIBUNAL, WE DIRECT THE ASSESSING OFFICER TO ALLOW DEPRECIATION TO THE ASSE SSEE @15%. THUS, GROUND NO.3 IN A.YS. 2009-10 & 2010-11 IN ASSESSEES APPEA L ARE ALLOWED AND GROUND NO.7 IN REVENUES APPEAL FOR A.Y. 2011-12 IS DISMIS SED. 13. THE ADDITIONAL GROUND TAKEN BY THE ASSESSEE IN ALL THESE THREE YEARS READ AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE PASSENGE R SERVICE FEE SECURITY COMPONENT [PSF (SC)] OF RS 88,57,17,812/- IS NOT THE INCOME OF THE APPELLANT AND HE OUGHT TO HAVE DIRECT ED THE ASSESSING OFFICER TO EXCLUDE THE SAME FROM THE TOTA L INCOME OF THE APPELLANT. THE AMOUNT OF ` 88,57,17,812/- BE READ AS ` 82,75,79,038/- FOR A.Y 2010-11 AND ` 66,62,27,686/- FOR A.Y. 2011-12. 14. WE HAVE ALREADY ADMITTED THE ADDITIONAL GROUND TAKEN BY THE ASSESSEE IN ALL THE THREE YEARS. AFTER HEARING THE RIVAL SU BMISSIONS AND GOING THROUGH THE ORDERS OF THE TAX AUTHORITIES BELOW, WE NOTED T HAT SIMILAR ISSUE HAS BEEN DECIDED BY THIS TRIBUNAL, VIDE ORDER DATED 30.11.20 16, IN THE ASSESSEES OWN CASE FOR A.Y. 2008-09, IN ITA NO. 3232/MUM/2012, WH EREIN THE ISSUE HAS BEEN DEALT EXHAUSTIVELY WITH THE SUBMISSIONS MADE B Y BOTH THE PARTIES AND, MUMBAI INTERNATIONAL AIRPORT P LTD. 20 ULTIMATELY, FRAMED THREE ISSUES TO BE DECIDED IN RE SPECT OF THIS GROUND AND IT HAS BEEN HELD AS UNDER: IN OUR CONSIDERED OPINION, WE HAVE BEEN CALLED UPO N TO DECIDE THE FOLLOWING THREE ISSUES TO DECIDE THIS GROUND: (1) WHETHER, THE AMOUNT OF PSF-SC COLLECTED BY THE ASSESSEE WILL BE TAXABLE IN THE HANDS OF THE ASSESSE E MERELY BECAUSE THE SAME HAS BEEN OFFERED TO TAX BY THE ASS ESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS IRRESPECTIVE O F CORRECT POSITION OF ITS TAXABILITY IN ACCORDANCE WITH LAW ? (2) WHETHER, OFFICE MEMORANDUM / CLARIFICATIONS IS SUED BY THE CBDT OR MOCA OBSERVING THAT THE AFORESAID AMO UNT IS TAXABLE IN THE HANDS OF THE ASSESSEE HAVE BEEN ISSUED AFTER CONSIDERING PROVISIONS OF INCOME-TAX ACT AND WHETHER THE OP INION EXPRESSED THEREIN IS BINDING UPON THE APPELLATE AUTHORIT IES INCLUDING THE INCOME-TAX APPELLATE TRIBUNAL? (3) WHETHER, THE IMPUGNED AMOUNT OF PSF-SC COLLECT ED BY THE ASSESSEE COMPANY ON BEHALF OF MOCA AS PER T HE RELEVANT REGULATIONS FOR THE PURPOSES OF MEETING SECURI TY EXPENSES CAN BE CHARACTERISED AS INCOME IN THE HANDS OF THE ASSESSEE COMPANY AND MADE LIABLE TO TAX IN ITS HANDS AS PER PROVISIONS OF INCOME TAX ACT, 1961? 14.7. HAVING HEARD BOTH THE PARTIES, WE HAVE PONDERED OVER ALL THE THREE ISSUES AND FEW OTHER ALLIED I SSUES WHICH WERE GERMANE TO THE ISSUES BEFORE US AND NECESSAR Y FOR DECIDING THESE GROUNDS, AND ALL THESE ISSUES ARE DECIDED HER EUNDER ONE BY ONE. 14.8. WITH REGARD TO THE FIRST ISSUE, THE BR IEF FACTS AND BACKGROUND BROUGHT BEFORE US ARE THAT IN PUR SUANCE 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 INDIA TO OPER ATE, MAINTAIN, DEVELOP, DESIGN, CONSTRUCT, UPGRADE, MODERNISE, FINANCE AND MANAGE THE CHHATRAPATI SHIVAJI INTERNATIONAL A IRPORT AT MUMBAI (HEREINAFTER CALLED AIRPORT, IN SHORT). AS PER RU LE 88 OF THE AIRCRAFT RULES, 1937, THE ASSESSEE WAS ENTITLED TO COLLECT A FEE TERMED AS PASSENGER SERVICES FEE (PSF) FROM ALL THE PA SSENGERS EMBARKING AT THE AIRPORT. THE SAID FEE WAS INITIALL Y COLLECTED BY THE CONCERNED AIRLINE AND THEN HANDED OVER TO THE ASSES SEE COMPANY FOR THE SAKE OF ADMINISTRATIVE CONVENIENCE. A S PER TERMS, THE MUMBAI INTERNATIONAL AIRPORT P LTD. 21 PSF WAS CHARGEABLE @ RS.200 PER PASSENGER, OUT OF W HICH RS.70/- (I.E. 35% OF PSF) WAS FOR USE OF ASSESSEE COMPANY FOR PASSENGER FACILITATION SERVICES AND THE BALANCE AMOUNT OF RS.130/- (I.E. 65% OF PSF) WAS TO BE UTILISED FOR PAYMENT TO SECURITY AGENCY DESIGNATED BY THE CENTRAL GOVERNMENT FO R PROVIDING SECURITY SERVICES AT AIRPORT AND THE SAID COM PONENT WAS CALLED AS PASSENGER 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 ESCROW ACCOUNT PENDING UTILISA TION. 14.9. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE INCLUDED PASSENGER FACILITATION COMPONENT OF PSF (I .E. RS.70/- BEING 35% OF PSF) AS INCOME OF THE ASSESSEE COMPA NY. BUT THE BALANCE AMOUNT OF RS.130/- (I.E. 65%) PORTION WAS K EPT IN SEPARATE ESCROW ACCOUNT FOR WHICH SEPARATE BOOKS OF ACCOUN T WERE MAINTAINED IN ACCORDANCE WITH THE STANDARD OP ERATING PROCEDURE (SOP) FORMULATED BY MOCA AND, THEREFORE, THE SAME WAS NOT INCLUDED IN THE INCOME OF THE ASSESSEE COMPANY. THE ASSESSEE COMPANY DID NOT INCLUDE REVENUE PERTAINING TO PSFSC AS WELL AS THE CORRESPONDING EXPENSES IN THE FINANCIA L STATEMENTS OF THE ASSESSEE COMPANY. DURING THE COURSE OF A SSESSMENT PROCEEDINGS, THE AO CONFRONTED TO THE ASSESSE E, AN OFFICE MEMORANDUM ISSUED BY CBDT TO MOCA AND CLARIFI CATION FROM MOCA WHEREIN IT WAS STATED THAT PSF SC WA S ALSO TAXABLE IN THE HANDS OF ASSESSEE AND TAX WAS TO BE RECOVERED FROM THE SAID FUNDS. UNDER THESE CIRCUMSTANCES, TH E ASSESSEE FINALLY STATED THAT THE SAID AMOUNT MAY BE I NCLUDED IN ITS TAXABLE INCOME. THE AO ACCORDINGLY MADE ADDITIO N IN THE INCOME OF THE ASSESSEE. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) WHEREIN ADDITION WAS CONFIRMED. STILL AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE T HE TRIBUNAL. DURING THE COURSE OF HEARING BEFORE US, THE PRELIMINARY OBJECTION OF THE LD. CIT-DR WAS THAT THE ASSESSEE O NCE HAVING TAKEN A STAND DURING THE COURSE OF ASSESSMEN T PROCEEDINGS THAT THE AFORESAID AMOUNT WAS TAXABLE, CANNOT NOW TURN BACK AND CANNOT CLAIM IT TO BE NOT TAXABLE. ON THE OTHER HAND, THE ASSESSEES COUNSEL MAINTAINS THAT THE SAI D AMOUNT WAS NOT INCLUDED AS PART OF ITS INCOME IN THE RETURN FILED ORIGINALLY AND ONLY DURING THE COURSE OF ASSESSMENT PROC EEDINGS, BECAUSE OF THE PRESSURE MADE BY THE ASSESSIN G OFFICER BY SHOWING LETTERS OF CBDT AND MOCA, THE SAID A MOUNT WAS OFFERED FOR TAX. BUT THE ASSESSMENT SHOULD BE DONE STRICTLY IN ACCORDANCE WITH LAW AND MERE ACQUIESCENCE OF THE AS SESSEE EXPRESSED DURING THE COURSE OF ASSESSMENT PROC EEDINGS WOULD NOT ALTER THE TRUE POSITION OF LAW AND WOULD NOT M AKE THE MUMBAI INTERNATIONAL AIRPORT P LTD. 22 AFORESAID AMOUNT AS LIABLE TO BE TAXED IN TH E HANDS 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 SETTL ED POSITION OF LAW THAT AN AMOUNT CAN BE BROUGHT TO TAX IN TH E HANDS OF AN ASSESSEE ONLY IN ACCORDANCE WITH THE PROVISIONS OF INCOME TAX ACT. THIS FUNDAMENTAL POSITION HAS BEEN WELL EXPLA INED AND WELL SETTLED IN MANY JUDGEMENTS. IT IS WELL SETT LED THAT THERE IS NO ESTOPPEL AGAINST LAW. NO TAX CAN BE COL LECTED EXCEPT WITH THE AUTHORITY OF LAW AS PER CLEAR MANDATE OF ARTICL E 265 OF CONSTITUTION OF INDIA. IF THE TAXES ARE TO BE COLLECTED DEPENDING UPON CONSENT/CONCURRENCE OF THE TAXP AYERS OR OTHERWISE, THEN IT WILL LEAD TO CHAOTIC SITU ATION AND ADMINISTRATION OF TAX WOULD BECOME IMPOSSIBLE. THEREFORE, IF AN AMOUNT IS TAXABLE UNDER THE LAW, ASSESSEE IS BOU ND TO PAY TAX THEREON AND IF AN AMOUNT IS NOT TAXABLE UNDER THE I NCOME TAX LAW, THEN THE TAX CANNOT BE RECOVERED FROM THE A SSESSEE WITHOUT AUTHORITY OF LAW MERELY BECAUSE ASSESSEE OFFE RED THE SAME TO TAX DURING THE COURSE OF ASSESSMENT PROCEEDINGS. LA W IN THIS REGARD IS WELL SETTLED NOW, AND TO BEGIN WITH, REFE RENCE IS MADE ON THE LANDMARK JUDGMENT OF HONBLE DELHI HIGH C OURT IN THE CASE OF CIT VS BHARAT GENERAL REINSURANCE CO LTD 81 ITR 303 (DEL.) RELEVANT PORTION FROM IT IS REPROD UCED 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 HAVING ITSELF CHALLENGED THE VALIDITY OF T AXING THE DIVIDEND DURING THE YEAR OF ASSESSMENT IN QUESTION, IT MUST BE TAKEN THAT IT HAD RESILED FROM THE POSITION WHICH IT HAD WRONGLY TAKEN WHILE FILING THE RETURN. QUITE APART FROM IT, IT WAS INCUMBENT ON THE INCOME-TAX DEPARTMENT TO FIND OUT WHETH ER 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 JURISD ICTION ON THE DEPARTMENT TO TAX THAT INCOME IN THAT YEAR EVEN THOUGH LEGALLY SUCH INCOME DID NOT PERTAIN TO THAT YEAR. THEREF ORE THE INCOME FROM DIVIDEND WAS NOT ASSESSABLE DURING THE ASSE SSMENT YEAR 1958-59, BUT IT WAS ASSESSABLE IN THE ASSESSM ENT YEAR 1953- 54. IT COULD NOT, THEREFORE, BE TAXED IN THE ASSESSMENT YEAR 1958-59. 14.11. OUR VIEW IS FURTHER FORTIFIED IN VIEW OF JUDGMENT OF HONBLE GUJRAT HIGH COURT IN THE CASE OF CI T VS KEISER-EHIND MILLS CO. LTD 128 ITR 486 (GUJ.) IN WHICH T HEIR LORDSHIPS HAVE MUMBAI INTERNATIONAL AIRPORT P LTD. 23 RELIED UPON CIRCULAR OF THE BOARD WHEREIN A DUTY HAS BEEN CAST UPON THE REVENUE OFFICIALS TO GUIDE THE ASSESSEE FOR MAKING CLAIMS AS PERMISSIBLE UNDER THE LAW. RE LEVANT PORTION IS REPRODUCED BELOW: IN VIEW OF THE CIRCULAR NO. 14(XI-35) OF 1 955 DATED 11-4- 1955, IT WAS CLEAR THAT FOR THE PURPOSE OF THE CIRC ULAR, WHAT SHOULD BE THE GUIDING FACTOR WAS WHETHER THE PROCEEDIN GS OR OTHER PARTICULARS BEFORE THE INCOME-TAX OFFICER AT THE STAGE OF ORIGINAL ASSESSMENT DISCLOSED ANY GROUNDS FOR RELIEF UNDER SECTION 2(5) (A) (III ) OF THE FINANCE ACT OF 1964 OR OF THE FINANCE ACT OF 1965, EVEN THOUGH NO CLAIM WAS MADE F OR THAT RELIEF BY THE ASSESSEE AT THE STAGE OF THOSE PROCEE DINGS BEFORE HIM. EVEN IF THERE IS A DEVIATION ON A POINT OF LAW, SO FAR AS THE CIRCULAR OF THE BOARD IS CONCERNED, THAT CIRCULAR WIL L BE BINDING ON ALL OFFICERS CONCERNED WITH THE EXECUTION OF THE ACT AND THEY MUST CARRY OUT THEIR DUTIES IN THE LIGHT OF T HE CIRCULAR. IN VIEW OF THIS CLEAR POSITION REGARDING THE EFFECT OF THE CIRCULAR, IT WAS OBVIOUS THAT IN THE INSTANT CASE IT WAS INCUMBENT ON THE INCOME-TAX OFFICER TO ADVISE THE ASSESSEE TO CLAIM RELIEF UNDER SECTION 2(5)(A)(III) IF THE PROCEEDING OR ANY OTHE R PARTICULARS BEFORE HIM AT THE STAGE OF THE ORIGINAL ASSESSMENT INDICA TED THAT THE ASSESSEE WAS ENTITLED TO SUCH RELIEF UNDER THE PROVISIONS OF THE RELEVANT FINANCE ACT, 1965, SO FAR AS TH E ORDER UNDER REFERENCE WAS CONCERNED...... 14.12. FURTHER REFERENCE IS PLACED UPON ANOTHE R JUDGMENT IN THE CASE OF S.R. KOSHTI 276 ITR 165 (GUJ) IN WHICH RELIEF WAS GRANTED TO ASSESSEE WITH FOLLOWING OBSERVATIONS: THE AUTHORITIES UNDER THE ACT ARE UNDER AN OBLIGATION TO ACT IN ACCORDANCE WITH LAW. TAX CAN BE COLLECTED ONLY AS PROVIDED UNDER THE ACT. IF AN ASSESSEE, UNDER A MIST AKE, MISCONCEPTION OR ON NOT BEING PROPERLY INSTRUCTED, IS OVER ASSESSED, THE AUTHORITIES UNDER THE ACT ARE REQUIRED TO ASS IST HIM AND ENSURE THAT ONLY LEGITIMATE TAXES DUE ARE COL LECTED. [PARA 20] 14.13. IN THE CASE OF CIT VS LUCKNOW PUBLIC EDUCATIONAL SOCIETY 318 ITR 223, IT WAS OBSERVED BY HON BLE ALLAHABAD HIGH COURT THAT THE INCOME TAX DEPARTMENT SH OULD NOT TAKE UNDUE ADVANTAGE OF THE IGNORANCE OF THE ASSE SSEE IN VIEW OF BOARDS CIRCULAR NO. 14(XL-35)/1955, DATED 11-4-195 5. 14.14. IN THE CASE OF NIRMALA L MEHTA VS CI T 269 ITR 1, HONBLE BOMBAY HIGH COURT, RELYING UPON ARTICL E 265 OF CONSTITUTION OF INDIA HELD THAT ACQUIESCENCE CANNOT TAKE AWAY FROM MUMBAI INTERNATIONAL AIRPORT P LTD. 24 THE TAXPAYER, THE RELIEF HE IS ENTITLED WHERE TAX I S LEVIED OR COLLECTED WITHOUT AUTHORITY OF LAW AND, THEREFORE, MERE LY BECAUSE THE TAXPAYER OFFERED A RECEIPT TO TAX, THAT CANNOT TAKE AWAY ITS RIGHT IN CONTENDING THAT THE SAID AMOUNT WAS NOT C HARGEABLE TO TAX. 14.15. IN THE CASE OF BALMUKUND ACHARYA VS DC IT 310 ITR 310 (BOM), HONBLE BOMBAY HIGH COURT OBSERVED THAT THE APEX COURT AND VARIOUS HIGH COURTS HAVE RULE D THAT AUTHORITIES UNDER THE INCOME-TAX LAW ARE UNDE R 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 OVER ASSESSED, THE AUTHORITIES UNDER THE ACT ARE REQUIRED TO ASSIST HIM AND ENSURE THAT ONLY LEGITIMATE TAX DUES ARE CO LLECTED. IF ANY ITEM OF RECEIPT IS NOT TAXABLE UNDER THE AC T, THEN TAX CANNOT BE LEVIED APPLYING THE DOCTRINE OF ESTOPPEL. THE HONBLE HIGH COURT CONSIDERED THE AFORESAID JUDGEMENTS WHILE EXP RESSING 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, ADMISSION OR MISS-APPRECIATION OFFERED AN AMOUNT TO TAX, THEN THE SAME WOULD NOT BE TAXABLE M ERELY BECAUSE OF WRONG UNDERSTANDING OF LAW BY THE ASSESSEE OR B ECAUSE OF HIS ADMISSION OR MISS-APPRECIATION OF LAW AND FACTS . IT WAS ALSO OBSERVED THAT THERE CAN ALSO NOT BE ANY WAIV ER OF LEGAL RIGHT BY THE ASSESSEE. 14.17. THUS, IN VIEW OF THE AFORESAID LEGAL DISCUSSION AND FACTS OF THIS CASE AS DISCUSSED ABOVE, IT I S HELD THAT THE AMOUNT IN QUESTION CANNOT BE TAXED IN THE H ANDS OF THE ASSESSEE MERELY BECAUSE THE SAME WAS OFFERED TO TAX DURING THE COURSE OF ASSESSMENT PROCEEDINGS UNDER CE RTAIN CIRCUMSTANCES. UNDER THESE CIRCUMSTANCES, WE NEED TO EXAMINE AND DETERMINE WHETHER THE IMPUGNED AMOUNT O F PSFSC COLLECTED BY THE ASSESSEE COMPANY IS ACTUALLY TAXABLE IN THE HANDS OF THE ASSESSEE AS PER THE PROVISIONS OF INCOME-TAX ACT, 1961. 14.18.THE AFORESAID DISCUSSION TAKES US TO THE SEC OND ISSUE WHEREIN WE HAVE BEEN CALLED UPON TO DECIDE ABOUT TH E BINDING LEGAL FORCE OF THE OPINION EXPRESSED BY CBDT AND MOCA VIDE THEIR OFFICE MEMORANDUM/ INSTRUCTIONS FOR DETE RMINING TAXABILITY OF THE IMPUGNED AMOUNT. IT IS ADMITTED FACT ON RECORD THAT THE ASSESSEE COMPANY COLLECTED PSF-SC IN VIEW OF THE ORDER MUMBAI INTERNATIONAL AIRPORT P LTD. 25 ISSUED BY MOCA VIDE ITS ORDER DATED 09 TH MAY, 2006. THE TERMS OF THE ORDER HAVE BEEN MODIFIED / AMENDED FROM TI ME TO TIME AS PER THE REQUIREMENTS. ONE SUCH ORDER ISSUED BY MOCA WAS ISSUED ON 20 TH JUNE, 2007. SUBSEQUENTLY, CBDT ISSUED AN OFFICE MEMORANDUM DATED 30/06/2008 IN PURSUANCE TO THE REQUEST MADE BY THE CONCERNED OFFICIALS OF MO CA REGARDING TAXABILITY OF PSFSC, WHEREIN IT HAS BEEN OBSE RVED THAT SINCE THE ASSESSEE COMPANY WAS COLLECTING THIS AMOUN T IN THE COURSE OF BUSINESS AND ASSESSEE WAS RENDERING FACILITATION AND SECURITIES SERVICES WHETHER IN-HOUSE OR OUTSOURCED, THEREFO RE, 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 PL ACED BY THE BOARD ON THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF CHOWRINGHEE SALES BUREAU VS CIT 87 ITR 547 ( SC) WITH A VIEW TO FORTIFY ITS OPINION. SUBSEQUENTLY, MI NISTRY OF CIVIL AVIATIONS OFFICE ISSUED AN ORDER DATED 19-01- 2009 LAYING DOWN ACCOUNTING / AUDIT PROCEDURE IN RESPECT OF PS FSC. IT WAS INTENDED TO ACT AS STANDARD OPERATING PROCEDURE ( SOP) FOR ACCOUNTING / AUDIT OF PSFSC BY THE AIRPORT OPERATO R. IN THE AFORESAID DOCUMENT, THE WHOLE PROCEDURE WAS DUL Y EXPLAINED HOW THE AMOUNT HAS TO BE COLLECTED AND TO B E KEPT IN ESCROW ACCOUNT AND TO BE DISBURSED FOR THE PURP OSE 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 CHARGED TO THE PSFSC ACCOUNT IN PROP ORTION TO ITS LIABILITY ON STANDALONE BASIS. THE ASSESSEE WAS OF THE OPINION THAT THE AFORESAID AMOUNT WAS NOT TAXABLE IN THE HANDS OF THE ASSESSEE COMPANY, AND THEREFORE, WHILE FILI NG THE RETURN THE SAME WAS NOT INCLUDED IN THE TAXABLE INCO ME BY THE ASSESSEE. BUT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO WAS OF THE OPINION THAT THE SAID AMOUNT WAS TAXABLE IN THE HANDS OF THE ASSESSEE IN VIEW OF OFFICE MEM ORANDUM OF CBDT DATED 30-06-2008 AND INSTRUCTIONS DATED 19-01- 2009 ISSUED BY MOCA. WITH A VIEW TO CLARIFY THE SITUATION , REPRESENTATION WAS MADE BEFORE THE CBDT AS WELL AS MOCA. IN RESPO NSE, MOCA ISSUED A LETTER DATED 15-11-2010 WHEREIN IT W AS STATED THAT THE MATTER WAS EXAMINED WITH THE MINISTRY OF FINANCE AND ACCORDINGLY IT IS CLARIFIED THAT THE WHOLE A MOUNT OF PSF SC INCLUDING SECURITY COMPONENT WAS REVENUE RECEIPT, A ND THUS IT WAS TAXABLE UNDER THE INCOME-TAX ACT. 14.19. THE ASSESSEE CHALLENGED BEFORE US, THE VALIDITY AND BINDING FORCE OF THE AFORESAID OFFICE MEMORAN DUM ISSUED BY THE CBDT AND CLARIFICATION RECEIVED BY MOCA. IT HAS BEEN MUMBAI INTERNATIONAL AIRPORT P LTD. 26 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 OPINIO N. NONE OF THE AUTHORITIES HAVE CONSIDERED THE ASPECT THAT T HE IMPUGNED AMOUNT WAS COLLECTED IN THE FIDUCIARY CAPACIT Y BY THE ASSESSEE. NONE OF THE AUTHORITIES HAVE STATED THAT UNDER WHAT PROVISIONS OF LAW, THE AFORESAID AMOUNT CAN BE BROU GHT TO TAX IN THE HANDS OF THE ASSESSEE. THE CBDT IN ITS OFFICE MEMORANDUM HAS MADE A REFERENCE TO THE JUDGM ENT OF THE HONBLE SUPREME COURT IN THE CASE OF CHOWRIN GHEE SALES BUREAU (SUPRA). BUT FACTS OF THAT CASE HAVE NOT BEEN DISCUSSED. THE AFORESAID JUDGMENT HAS DIFFERE NT FACTS, WHEREIN, THE AMOUNT OF SALES-TAX WAS RECEIVED BY THE SAID ASSESSEE AND DEPOSITED IN ITS BANK ACCOUNT. THE FUNDS 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), WHEREAS THE FACTS ARE T OTALLY DIFFERENT IN THE CASE BEFORE US. THE AMOUNT HERE WAS CO LLECTED PURELY IN FIDUCIARY CAPACITY AND THE SAME WAS DEPOSI TED IN ESCROW ACCOUNT ON WHICH ASSESSEE HAD NO CONTROL AT ALL; TH E ASSESSEE HAD NO DISCRETION AT ALL UPON ITS USAGE. NO RE ASONING HAS BEEN MADE OUT BY THE CBDT WHILE ISSUING ITS OPIN ION AS TO HOW THE SAID JUDGMENT WAS APPLICABLE ON THE FACTS OF THIS C ASE. IT IS NOTED BY US THAT AFORESAID JUDGMENT CAME UP FOR CO NSIDERATION BEFORE MANY COURTS WHEREIN ITS TRUE MEANING A ND SCOPE OF ITS APPLICABILITY WAS EXPLAINED TIME TO TIME. IN ONE SUCH MATTER HAVING SIMILAR FACTS AS TO THE ASSESSEE BEFORE US, HONBLE ALLAHABAD HIGH COURT EXPLAINED CORRECT APPLICAT ION 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 TH E RECOVERY (CALLED AS MARKET FEE) WHICH HE MADE FROM THE SELLERS OF AGRICULTURAL PRODUCE IN TERMS OF KRISHI UTPADA N MANDI RULES FRAMED UNDER THE U.P. KRISHI UTPADAN MANDI AD HINIYAM, 1964. THE REVENUE TREATED THE AMOUNT SO COLLECTED BY T HE AGENT AS PART OF ITS TAXABLE INCOME BEING A TRADING RECEIPT IN VIEW OF JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CH OWRINGHEE SALES BUREAU VS CIT 87 ITR 547 (SC), SUPRA. AFTE R ANALYSING THE FACTS OF THE CASE, IT WAS HELD BY THE HONB LE COURT THAT THE MARKET FEE REALISED BY THE COMMISSION AGENT DO ES NOT FORM PART OF HIS TRADING RECEIPT AS HE (THE COMMI SSION AGENT) HELD THIS AMOUNT ONLY AS A TRUSTEE FOR AND ON BE HALF OF THE MARKET COMMITTEE. HONBLE COURT APPLIED THE JUDG MENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. SITA LDAS TIRATHDAS MUMBAI INTERNATIONAL AIRPORT P LTD. 27 41 ITR 367 (SC) AND DISTINGUISHED THAT OF CHO WRINGHEE SALES BUREAU P. LTD. VS. CIT, SUPRA. 14.20. THUS, AT THE OUTSET, IT IS CLEARLY V ISIBLE THAT BOTH THE AUTHORITIES EXPRESSED THEIR OPINIONS WITHOUT P ROPER APPLICATION OF MIND AND 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 ISSUE D BY MOCA IS ALSO UNDER QUESTION. IT HAS BEEN ARGUED THA T IT HAS BEEN HELD BY HONBLE SUPREME COURT MANY TIMES THA T CIRCULARS ISSUED BY THE BOARD ARE BINDING UPON THE AUTHORITIE S WORKING UNDER IT, VIZ. THE AO, ETC. BUT THESE ARE NOT BI NDING UPON THE APPELLATE AUTHORITIES INCLUDING INCOME TAX APPELLAT E TRIBUNAL. WE HAVE EXAMINED THIS ASPECT ALSO CAREFULLY. IT IS NOTED THAT AS PER SECTION 119 OF THE ACT, THE CBDT HAS BE EN EMPOWERED BY THE LEGISLATURE TO ISSUE ORDERS, INSTRUCTIONS OR DIRECTIONS TO ALL THE INCOME-TAX AUTHORITIES WORKING UNDER IT F OR PROPER ADMINISTRATION OF THE I.T. ACT. AND IT HAS ALSO BEEN PROVIDED THAT THIS SHALL BE BINDING UPON THE INCOME-T AX AUTHORITIES. BUT IT IS FURTHER NOTED THAT A PROVISO HAS BEEN ADDED TO SUB SECTION (1) OF SECTION 119 WHICH SAYS THAT NO SUCH ORDERS, INSTRUCTIONS OR DIRECTIONS SHALL BE ISSUED:- (A) SO AS TO REQUIRE ANY INCOME-TAX AUTHORITY TO MAKE A PARTICULAR ASS ESSMENT OR TO DISPOSE A PARTICULAR CASE IN A PARTICULAR MA NNER; OR (B) SO AS TO INTERFERE WITH THE DISCRETION OF THE COMM ISSIONER (APPEALS) IN EXERCISE OF HIS APPELLATE FUNCTIONS . IT IS CLEAR FROM THE PERUSAL OF AFORESAID PROVISO THAT NEITHER THE BOARD HAS POWER TO DECIDE THE TAXABILITY OF A PARTICULAR REC EIPT NOR HAS IT GOT ANY POWER TO INTERFERE WITH THE APPELLATE FUNCTIONS OF COMMISSIONER (APPEALS), WHICH IS JUDICIAL IN NATURE. THUS, IN VI EW OF THE AFORESAID LEGAL SCENARIO COUPLED WITH FACTS O F THIS CASE AS DISCUSSED ABOVE, WE HAVE STRONG DOUBTS IF AT ALL THE BOARD COULD HAVE ISSUED ANY INSTRUCTIONS TO DECIDE THE TAXABILITY OF AMOUNT COLLECTED BY THE ASSESSEE COMPANY ON A CCOUNT OF PSF SC IN A PURELY FIDUCIARY CAPACITY. THIS TASK OF DET ERMINATION OF TAXABILITY HAS BEEN LEFT BY THE LEGISLATURE U PON THE SHOULDERS OF THE DESIGNATED AO, WHO IS OBLIGED UNDER THE LAW T O DETERMINE THE SAME STRICTLY IN ACCORDANCE WITH THE PROV ISIONS OF THE INCOME-TAX ACT, 1961. 14.22. FURTHER, AFORESAID CLARIFICATION ISSUED BY THE BOARD IN THIS CASE IS ACTUALLY AN OFFICE MEMORANDUM. IT IS AN MUMBAI INTERNATIONAL AIRPORT P LTD. 28 INTERDEPARTMENTAL COMMUNICATION. IN OUR VIEW, OFFICE MEMORANDUM WOULD NOT CARRY THE LEGAL FORCE OF BINDI NG EFFECT. FURTHER, IT HAS BEEN PROVIDED IN SECTION 119 THAT ORDERS, INSTRUCTIONS AND DIRECTIONS SHALL BE BINDING UPON T HE INCOME TAX 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 ORDERS, INSTRUCTIONS AND DIRECTIONS SHALL NOT BE BIND ING UPON THE INCOME-TAX APPELLATE TRIBUNAL. FURTHER IT IS NOTED THAT THESE HAVE BEEN HELD TO BE NOT BINDING UPON THE CIT(A) AS STATED ABOVE. THEREFORE, THERE IS NO QUESTION OF T HERE BEING ANY BINDING EFFECT UPON THE INCOME-TAX APPELLATE TRIBUNAL OF ANY SUCH COMMUNICATION ISSUED BY THE BOARD. 14.23. IT IS NOTED BY US THAT THIS ISSUE IS NOT RE S INTEGRA, AS IT HAS BEEN SETTLED BY HONBLE JURISDICTIONAL HIGH C OURT AND HONBLE SUPREME COURT IN MANY CASES. IT WAS HELD BY HONBLE BOMBAY HIGH COURT IN THE CASE OF BANQUE NATIONALE D E PARIS VS CIT (SUPRA) THAT CIRCULARS CANNOT OVERRIDE OR DET RACT FROM THE PROVISIONS OF THE ACT IN AS MUCH AS SECTION 119 OF THE ACT HAS EMPOWERED THE CBDT TO ISSUE ORDERS, INSTRUCTI ONS OR DIRECTIONS FOR THE PROPER ADMINISTRATION OF THE ACT. H ONBLE HIGH COURT HAS TAKEN INTO CONSIDERATION VARIOUS EARLIER J UDGMENTS OF HONBLE SUPREME COURT ON THIS ISSUE. SIMILARLY, TH E HONBLE SUPREME COURT IN THE CASE OF CIT VS HERO CYC LES PVT LTD (SUPRA) HELD THAT CIRCULARS CAN BIND THE INCO ME-TAX OFFICER BUT WILL NOT BIND THE APPELLATE AUTHORITY OR THE TRIB UNAL 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 UCO BANK (SUPRA). IT WAS OBSERVED BY THE HONB LE SUPREME COURT THAT CBDT HAS POWER TO TONE DOWN THE RIGO UR OF THE LAW AND ENSURE ENFORCEMENT OF ITS PROVISIONS OF ISS UING CIRCULARS. THE BOARD HAS BEEN GIVEN FOR THE PURPOSE OF JUST, PROPER AND EFFICIENT MANAGEMENT OF WORK OF ASSESSMENT. H OWEVER, THESE ARE NOT MEANT FOR CONTRADICTING OR NULLIFYING AN Y PROVISION OF THE STATUTE. RELYING UPON ITS EARLIER JUDGEMENT COM PRISING OF THREE JUDGES IN THE CASE OF KESHAVJI RAVJI & CO V S CIT 183 ITR 1 (SC), IT WAS INTER-ALIA OBSERVED THAT BOARD CA NNOT PRE-EMPT JUDICIAL INTERPRETATION AND THE SCOPE AND AMBI T OF A PROVISION OF THE ACT. ALSO, A CIRCULAR CANNOT IMPOSE ON THE TAXPAYER A BURDEN HIGHER THAN WHAT THE ACT ITSELF ON A TRUE INTERPRETATION, ENVISAGES. THE TASK OF INTERPRETATION OF THE LAW IS EXCLUSIVELY THE DOMAIN OF THE COURTS. HOWEVER, THE BOAR D HAS THE STATUTORY POWER U/S 119 TO TONE DOWN THE RIGOUR OF THE LAW FOR THE BENEFIT OF THE ASSESSEE BY ISSUING CIRCULARS TO ENSURE PROPER MUMBAI INTERNATIONAL AIRPORT P LTD. 29 ADMINISTRATION OF THE FISCAL STATUTE AND SUCH CIRCULARS WOULD BE BINDING ON THE AUTHORITIES ENSHRINED IN THE ACT. 14.24. THUS, TAKING GUIDANCE FROM THE AFORESAI D LEGAL DISCUSSION AS HAS BEEN CLARIFIED BY THE HON BLE JURISDICTIONAL HIGH COURT AS WELL AS BY HONBLE SUPREME CO URT, IT IS CLEAR THAT THE OFFICE MEMORANDUM ISSUED BY CBDT TO MOCA C ANNOT HOLD AN AMOUNT AS TAXABLE, IF THE SAME IS OTHERW ISE NOT TAXABLE AS PER THE PROVISIONS OF THE INCOME-TAX ACT, 19 61. FURTHER, AS FAR AS THE CLARIFICATION ISSUED BY MOCA IS CO NCERNED, IT IS NOTED THAT THE ROLE OF MOCA WAS CONFINED TO ISSUING STANDARD OPERATING PROCEDURES AND OTHER GUIDELINES TO T HE AIRPORT OPERATORS TO ENSURE THAT FUNDS COLLECTED BY THE ASSESSEE COMPANY IN THE FIDUCIARY CAPACITY ON BEHALF OF MOCA ARE PROPERLY KEPT AND DISBURSED FOR THE DESIGNATED PURPOSE S ONLY. IT HAS NO JURISDICTION TO DETERMINE THE TAXABILITY O F THE IMPUGNED AMOUNT. IT CLEARLY HAD NO JURISDICTION IN HO LDING THE SAME AS TAXABLE AND, THEREFORE, TO THAT EXTENT ITS O RDER / CLARIFICATION HAS NO AUTHORITY IN THE EYES OF LAW AND TH E SAME HAS BEEN RIGHTLY IGNORED BY THE ASSESSEE AS WELL AS B Y THE APPELLATE COURTS WHILE DETERMINING THE TAXABILITY OF TH E IMPUGNED AMOUNT. 14.25. THUS, THE AFORESAID DISCUSSION TAKE US TO THE THIRD ISSUE WHEREIN WE HAVE BEEN CALLED UPON TO DECIDE WH ETHER THE IMPUGNED AMOUNT OF PSF-SC COLLECTED BY THE A SSESSEE COMPANY ON BEHALF OF MOCA AS PER THE RELEVANT REGUL ATIONS FOR THE PURPOSES OF MEETING SECURITY EXPENSES CAN BE CHARACTERISED AS INCOME IN THE HANDS OF THE ASSESSEE COMPANY AND MAD E LIABLE TO TAX IN ITS HANDS. 14.26. THE BRIEF FACTS RELATED TO THE ISSUE HAVE ALREADY 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 RULE 88 OF AIRCRAFT RULE, 1937, IS RESPONSIBLE FOR COLLECTING A FEE FROM EMBARKI NG PASSENGERS 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 SERVI CES AND THE BALANCE 65% OF PSF REPRESENTS SECURITY COMPON ENT TO BE UTILISED FOR PAYMENT OF SECURITY AGENCY, I.E. CISF, WHO IS DESIGNATED BY THE MINISTRY OF HOME AFFAIRS F OR PROVIDING SECURITY SERVICES. THE ASSESSEE HAD INCLUDED AFORESAID 35% PORTION IN ITS INCOME BUT DID NOT INCLUDE P SF-SECURITY COMPONENT IN ITS INCOME WHILE FILING THE RET URN OF INCOME. MUMBAI INTERNATIONAL AIRPORT P LTD. 30 THE DISPUTE BEFORE US IS WITH REGARD TO THIS PSF SC. FURTHER FACTS BROUGHT OUT BEFORE US ARE THAT THE ASSESSEE HAD COL LECTED DURING THE YEAR, TOTAL AMOUNT OF RS.180.27 CRORES O N ACCOUNT OF PSF SC FROM THE PASSENGERS EMBARKING AT CHHAT RAPATI SHIVAJI INTERNATIONAL AIRPORT, MUMBAI. AFTER METING O UT SECURITY DEPLOYMENT COST AND VARIOUS OTHER RELATED (AL LIED) EXPENSES, THE NET SURPLUS WORKED OUT AT RS.133,13,47,58 0 AND AFTER ADJUSTMENT OF DEPRECIATION AS PER COMPANIES ACT AND INCOME- TAX ACT, IT WAS COMPUTED AT RS.132,58,59,023. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO CONCL UDED THAT THE AFORESAID AMOUNT IS PART OF TAXABLE INCOME OF THE A SSESSEE. THE LD. CIT(A) HAD CONFIRMED THE ACTION OF THE AO. THE A SSESSEE HAS CONTENDED BEFORE US THAT THE AFORESAID AMOUNT IS NOT LIABLE TO BE INCLUDED IN THE INCOME OF THE ASSESSEE. DE TAILED ARGUMENTS MADE BY THE LD. COUNSEL OF THEASSESSEE HAVE ALREA DY BEEN NARRATED BY US IN EARLIER PART OF OUR ORDER A ND THESE ARE NOT BEING DISCUSSED HERE AGAIN FOR THE SAKE OF BREVITY. 14.27.WE HAVE GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE ORDER OF LD. CIT(A). PERUSAL OF THE ORDERS OF AO A S WELL AS LD. CIT(A) REVEALS THAT NONE OF THE AUTHORITIES HAVE MADE INDEPENDENT APPLICATION OF MIND TO INDEPENDENT LY DETERMINE WHETHER THE IMPUGNED AMOUNT COULD HAVE BEEN C HARACTERISED AS INCOME IN THE HANDS OF THE ASSESSEE. RELEVANT PA RT OF ORDER OF LD. CIT(A) IS REPRODUCED HEREUNDER, FOR THE SAKE OF READY REFERENCE:- I HAVE CONSIDERED THE SUBMISSIONS AND ARGUME NTS OF THE APPELLANT. IT IS UNDISPUTED THAT THE MINISTRY OF CIVIL AVIATION HAD ALREADY ISSUED ITS GUIDELINES AND INSTRUCTIONS TO THE ASSESSEE ON 19.01.2009, THEREBY CLARIFYING THE TAXABILIT Y ASPECT OF PSF(SC) IN THE HANDS OF THE ASSESSEE NOTWITHS TANDING THE ASSESSEE'S RESISTANCE AND BELIEF THAT SUCH REC EIPTS ARE FIDUCIARY IN NATURE AND NOT TAXABLE. FURTHER, THE MINIS TRY OF CIVIL AVIATION REAFFIRMED ITS DECISION ONCE AGAIN VI DE INSTRUCTION DATED 15.11.2010. THEREFORE, THE APPELLANT HAD ERRONEOUSLY RESISTED FROM OFFERING THE RECEIPTS ON ACCOUNT OF PSF(SC) TO TAX PURELY ON THE BASIS OF ITS OWN BELIEF THAT P SF(SC) RECEIPTS ARE FIDUCIARY IN NATURE, THEREBY IGNORING THE MAN DATORY INSTRUCTIONS ISSUED BY THE MINISTRY OF CIVIL AVIATION FRO M TIME TO TIME UNDER WHICH, THE ASSESSEE FUNCTIONS AS AN AIRP ORT OPERATOR-THE RECEIPTS BEING FIDUCIARY IN NATURE, AND THE MANDATO RY INSTRUCTIONS ISSUED BY THE MINISTRY OF CIVIL AVIATION FROM TIME TO TIME UNDER WHICH, THE ASSESSEE FUNCTIONS AS AN AIR PORT OPERATOR MAKE IT TAXABLE. WHEN CONFRONTED BY THE SECOND R ECONFIRMATION MUMBAI INTERNATIONAL AIRPORT P LTD. 31 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, AS STATED BY THE APPELLANT ON MERITS AND IN LAW THAT ALTHOUGH THE RECEIPTS OF PSF (SC) IN THE HA NDS OF THE APPELLANT DO NOT PARTAKE THE CHARACTER OF IN COME AND BY THE 'DOCTRINE OF OVERRIDING TITLE' AS THEY ARE T O BE UTILIZED FOR SECURITY PURPOSES-THE ISSUE BEING HIGHLY DEBATABLE AND A LEGAL DIFFERENCE OF OPINION BEING THERE THE SAME HAS BEEN OFFERED FOR TAXATION. HENCE I CONFIRM THIS ADDITION BY TH E A.O. AND THUS, THIS GROUND OF APPEAL IS DISMISSED. 14.28. IT IS NOTED BY US THAT BOTH OF THE AUTHORITIES GOT INFLUENCED AND SWAYED AWAY WITH THE OPINION EXPRESS ED BY THE CBDT/MOCA AND ADMISSION MADE BY THE ASSESSEE UNDER CERTAIN CIRCUMSTANCES EMERGED DURING THE COURS E OF ASSESSMENT PROCEEDINGS. THUS, BOTH THE AUTHORITIES ABSTAINED FROM EFFECTIVELY AND INDEPENDENTLY ADJUDICATING THE TAXABILITY OF THIS AMOUNT AS PER OF LAW IN THE HANDS OF THE ASSESSEE. SINCE RELATED MATERIAL AND ALL THE FACTS ARE BEFORE US, W E SHALL DETERMINE CHARACTERISATION AND TAXABILITY OF THE IMPUGNE D AMOUNT IN THE HANDS OF ASSESSEE-COMPANY PURELY AS PER LAW A PPLICABLE ON THE FACTS OF THIS CASE. 14.29. IT IS NOTED BY US THAT RULE 88 OF A IRCRAFT RULE, 1937 PROVIDES AS UNDER: 88. PASSENGER SERVICE FEETHE LICENSEE IS EN TITLED TO COLLECT FEES TO BE CALLED AS PASSENGER SERVICE FEE FROM THE EMBARKING PASSENGERS AT SUCH RATE AS THE CENTRAL GOVERN MENT MAY SPECIFY AND IS ALSO LIABLE TO PAY FOR SECURI TY COMPONENT TO ANY SECURITY AGENCY DESIGNATED BY THE CENTRAL G OVERNMENT FOR PROVIDING THE SECURITY SERVICE. PROVIDED THAT IN RESPECT OF A MAJOR AIRPORT SUCH RATE SHALL BE AS DETERMINE D UNDER CLAUSE (C) OF SUB-SECTION (1) OF SECTION 13 OF THE AIR PORTS ECONOMIC REGULATORY AUTHORITY OF INDIA ACT, 2008 14.30.IN PURSUANCE TO THE AFORESAID RULE, AN ORDER DATED 09 TH MAY, 2006 WAS ISSUED BY CONCERNED OFFICIAL OF MOC A WHICH READS AS UNDER:- ORDER SUBJECT: COLLECTION OF PASSENGER SERVICE FEE (PSF) AT GREENFIELD / PRIVATE AIRPORTS - REGARDING CONSEQUENT TO ALLOWING PRIVATE COMPANIES, JOIN T VENTURE. COMPANIES TO OWN AND OPERATE AIRPORTS IN THE COUNTR Y, THE MANNER MUMBAI INTERNATIONAL AIRPORT P LTD. 32 AND MODE OF COLLECTION OF PASSENGER SERVICE FEE (PSF) AT AIRPORTS HAVE BEEN ENGAGING THE ATTENTION OF THE GOVERNMENT FOR SOME TIME. THE MATTER HAS BEEN DELIBERATE D 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 HE COLLECTED BY THE RESPECTIVE AIRPORT OPERATOR, WHICH COUL D BE AM, JVC, OR A PRIVATE OPERATOR. 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/- PER PASSENGER TILL FURTHER ORDERS. THE AIRPORT OPER ATOR WOULD RETAIN RS.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 TH E AIRPORT OPERATOR (NOT BY AM). RS.130/- OF THE PSF CO LLECTED PER PASSENGER BY SUCH AIRPORT OPERATOR WOULD BE D EPOSITED IN THE ESCROW ACCOUNT BY THE AIRPORT OPERATOR FOR PAY MENTS TO BE MADE TO CISF. THE ESCROW ACCOUNT WOULD BE SU BJECT TO GOVERNMENT AUDIT OF CAG. IV. IN CASE ANY AMOUNT REMAINS, THIS WILL B E TRANSFERRED TO AAI BY THE AIRPORT OPERATOR THROUGH A PROCESS O F MUTUAL CONSULTATION FOR PAYMENT TO CISF DEPLOYED FOR S ECURITY PURPOSES AT OTHER AIRPORTS. IN CASE OF A DISPUTE, THE MATTER MAY BE REFERRED TO THE MINISTRY, OF CIVIL AVIATION W HOSE DECISION WILL BE TREATED AS FINAL AND BINDING ON BOTH PART IES. 2. THE NEW PROCEDURE WILL BE EFFECTIVE FROM 01.0420 06. 3. THIS ISSUES WITH THE APPROVAL OF THE MINI STER OF STATE FOR CIVIL AVIATION (INDEPENDENT CHARGE). 14.31. SUBSEQUENTLY ANOTHER ORDER WAS PASSED B Y MOCA DATED 20 TH JUNE, 2007 WHEREIN IT WAS INTER ALIA CLARI FIED THAT SECURITY COMPONENT OF PSF WAS NOT REGULAR REVENUE OF THE AIRPORT OPERATOR AND THE AFORESAID AMOUNT WILL BE UT ILISED AT THE AIRPORT CONCERNED ONLY TO MEET SECURITY RELATED EXP ENSES OF THAT AIRPORT. RELEVANT PART OF THE ORDER IS REPRODUCED B ELOW:- ORDER SUB: COLLECTION OF PASSENGER SERVICE FEE (PSF ) AT GREENFIELD / PRIVATE AIRPORTS REGARDING. MUMBAI INTERNATIONAL AIRPORT P LTD. 33 IN THIS MINISTRY'S ORDER OF EVEN NO. DATED 09.05.2006 ON THE SUBJECT NOTED ABOVE, THE FOLLOWING MODIFICATIO NS 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 AI RPORTS ECONOMIC REGULATORY AUTHORITY (AERA) BECOMES FUNCTIONAL, PSF WILL BE FIXED BY AERA.THE AMOUNT WILL CONTINUE TO BE RS.200/-. PER EMBARKING 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 AIRPORT-OPERATOR BY A JVC OR A PRIVATE - OPERATOR WILL BE UTILIZED AT AIRPORT CONCERNED ONLY TO MEET THE SECURITY RELATED EXPENSES OF THAT AIRPORT. HOWEVER , AAI WILL BE CONSIDERED AS A SINGLE LICENSEE IN RESPECT OF ITS A IRPORTS FOR THIS PURPOSE WITH LIBERTY TO POOL THE PSF(SC) COL LECTIONS FROM SUCH AIRPORTS AND USE THE SAME FOR MEETING THE S ECURITY RELATED EXPENSES AT ANY OF ITS AIRPORT'. THIS ISSUES WITH THE APPROVAL OF THE MINISTER OF ST ATE FOR CIVIL AVIATION (INDEPENDENT CHARGE). 14.32. THUS, AFORESAID RULES AND ORDERS ISSUE D BY MOCA CLEARLY STIPULATES THAT SECURITY COMPONENT OF PASSE NGER SERVICE FEE WAS MEANT EXCLUSIVELY TO BE UTILISED AT THE AIRPORT CONCERNED, ONLY TO MEET SECURITY RELATED EXPENSES OF TH AT AIRPORT. THE SECURITY AGENCY DESIGNATED IN THIS REGARD 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 GOVERN MENT AUDIT OF CAG. FURTHER, IN CASE OF ANY AMOUNT WAS LEFT IN THE SAID ACCOUNT, IT WAS TO BE MANDATORILY TRANSFERRED TO AIRPORT AUTHOR ITY OF INDIA BY THE AIRPORT OPERATOR. THUS, FROM THE ABOVE SAID FAC TS AND CIRCUMSTANCES OF THE CASE AND TERMS AND CONDITION S IT IS CLEAR THAT THE SAID AMOUNT WAS COLLECTED BY THE ASSES SEE ON BEHALF OF MOCA TO BE DISBURSED FOR SECURITY PURPOSES TO CIS F DEPLOYED BY THE MINISTRY OF HOME AFFAIRS. THE AMOUNT WAS COLLECTED AND RETAINED PURELY IN FIDUCIARY CAPACITY. THE AS SESSEE HAD NO DISCRETION OR FREEDOM AT ALL TO UTILISE THE AF ORESAID AMOUNT FOR ANY OTHER PURPOSES OTHER THAN THE DESIGNATED PURP OSE OF MEETING SECURITY EXPENSES. SO MUCH SO, EVEN THE SURPLUS LEFT IF ANY, WAS NOT AT THE DISPOSAL OF THE ASSESSEE COM PANY BUT WAS TO BE MANDATORILY TRANSFERRED TO THE ACCOUNT OF AIRPORT MUMBAI INTERNATIONAL AIRPORT P LTD. 34 AUTHORITY OF INDIA AS PER THE PRESCRIBED PROCE DURE. UNDER THESE CIRCUMSTANCES, IT IS CLEAR THAT ASSESSEE MERELY ACTED AS A CONDUIT OR A TRUSTEE FOR COLLECTION AND DI SPOSAL OF THE IMPUGNED AMOUNT OF PSF-SC. UNDER THESE CIRCUMSTANCES, THE AFORESAID AMOUN T 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 ISS UED ANOTHER ORDER DATED 19-01-2009 CONTAINING STANDARD OPE RATING PROCEDURES FOR ACCOUNTING / AUDIT OF PASSENGE R SERVICE FEE (SECURITY COMPONENT) BY THE AIRPORT OPERATORS. THE AFORESAID ORDER CONTAINED WHOLE PROCEDURE IN DETAIL FOR COLLECTION AND DISBURSEMENT OF THE SAID AMOUNT. RELEVANT PO RTION OF THE SAME IS REPRODUCED HEREUNDER, FOR THE SAKE OF BETTE R CLARITY ON FACTS RELATED TO CONDITIONS ATTACHED WITH REG ARD TO COLLECTION AND DISBURSEMENT OF THE AFORESAID AMOUNT: 2. NATURE OF SECURITY COMPONENT OF PSF: 2.1 AVIATION SECURITY IS AN ACTIVITY RESERVED FOR THE GOVERNMENT OF INDIA. FORCE DEPLOYMENT AT THE AIRPORTS, SECURITY REQUIREMENTS INCLUDING THE REQUIREMENT OF CAPITAL ITEMS AND SPECIFICATIONS THEREOF ARE LAID DOWN BY T HE GOVERNMENT/BUREAU OF CIVIL AVIATION SECURITY ( BCAS). AS STATED ABOVE, PSF IS LEVIED UNDER RULE 88 OF THE AIRCRAFT RULES, 1937 AND COVERS SECURITY COMPONENT AS WELL A S FACILITATION. WHILE THE FEE IS COLLECTED BY THE LICENSE O F THE AIRPORTS, I.E., THE AIRPORT OPERATOR, THROUGH THE AIRLINES, T HE SECURITY COMPONENT THEREOF, WHICH CONSTITUTES 65% OF T HE TOTAL AMOUNT, CAN BE USED ONLY IN TERMS OF DIRECT IONS ISSUED BY THE GOVERNMENT/ BCAS, FROM TIME TO TIME. THE AMOUNT COLLECTED BY THE AIRPORT OPERATOR, WHICH IS KEPT SEPARATELY IN AN ESCROW ACCOUNT, IS THUS HELD IN FIDUCIARY CAPACITY. 2.2. SINCE THE AMOUNT IS HELD BY THE AIRPOR T OPERATOR IN FIDUCIARY CAPACITY FOR THE GOVERNMENT, THE ACCOUNTS THEREOF WOULD HAVE TO BE MAINTAINED SEPARATELY IN ACCORDANC E WITH THE PROCEDURE LAID DOWN BY THE GOVERNMENT AND HAVE TO BE OFFERED FOR AUDIT BY THE COMPTROLLER & AUDITORY GENER AL 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 NATIO NALIZED BANK. MUMBAI INTERNATIONAL AIRPORT P LTD. 35 3.2 AN ESCROW ACCOUNT AGREEMENT WILL BE ENTERED WIT H THE ESCROW BANKER BY THE JVC/PRIVATE OPERATOR. 3.3 THE FORMAT OF ESCROW AGREEMENT WILL INCL UDE DETAILS SUCH AS, DEFINITIONS FOR ESTABLISHMENT OF ESCROW A CCOUNT AND DECLARATION OF TRUST, THE ESCROW ACCOUNT PROV ISIONS, TERM AND TERMINATION, REPRESENTATIONS AND WARRANTIES OF ESCROW BANK AND JVC/PRIVATE OPERATOR AND MISCELLANEOUS PROVISIO NS. 3.4 PARTIES TO THE ESCROW AGREEMENT WOULD CO NSIST OF JVC/PRIVATE OPERATOR AND ESCROW BANK. HOWEVER, THE ESCROW ACCOUNT AGREEMENT WILL HAVE A CLAUSE BY WHIC H THE MOCA WILL HAVE SUPERVENING POWER TO DIRECT THE ESC ROW BANK ON THE ISSUES REGARDING OPERATION AS WELL AS WITHDRAWALS F ROM ESCROW ACCOUNT. 3.5 ESCROW ACCOUNT SHALL BE MAINTAINED, CONTR OLLED AND OPERATED BY ESCROW BANK UNDER THE ESCROW AGREEMENT AS UNDER: I) PSF (SC) ACCOUNT: JVC/PRIVATE OPERATOR SHA LL DEPOSIT IMMEDIATELY ALL PSF (SC) COLLECTIONS INTO THE PSF (SC) ACCOUNT. II) WITHDRAWAL FROM PSF (SC) ACCOUNT: THE ES CROW BANK SHALL ALLOW WITHDRAWAL BY JVC/PRIVATE OPERATORS OF A MOUNTS DEPOSITED INTO THE PSF (SC) ACCOUNT ONLY TOWARDS TH E FOLLOWING PURPOSES, IN THE ORDER OF PRIORITY BY DESCEND ING UNDER: A. TO PAY AMOUNTS TOWARDS TAXES, INCLUDING INCOME T AX ON PSF(SC) INCOME AS PER PROVISIONS OF INCOME TAX ACT, 1961, S ERVICE 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 STAND ING AT THE CREDIT OF THE ESCROW ACCOUNT SHOULD BE DEPLOYED BY THE ESCROW BANK IN ITS OWN DEPOSIT ACCOUNT. ON MATURITY OR OTHERWISE, THE PROCEEDS, SHALL BE CREDITED IN ESCROW ACC OUNT. 14.34. THE PERUSAL OF THE ABOVE ORDER CONTAIN ING SOP MAKES IT CLEAR THAT THE AMOUNT COLLECTED BY THE AIRPORT O PERATOR IS TO BE KEPT SEPARATELY IN ESCROW ACCOUNT AND THE SAME IS HELD BY THE AIRPORT OPERATOR IN FIDUCIARY CAPACITY. IT B ECOMES FURTHER CLEAR MUMBAI INTERNATIONAL AIRPORT P LTD. 36 THAT THE AMOUNT OF ANY SURPLUS 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 T HE HANDS OF THE ASSESSEE COMPANY. THE SAID SOP ALSO CONTAINED CERTA IN GUIDELINES WITH RESPECT TO TAXABILITY OF THE IMPUGNED A MOUNT. IN OUR VIEW, MOCA IS NOT THE DESIGNATED AUTHORITY T O DETERMINE THE TAXABILITY OF THE SAID AMOUNT AS HAS ALSO B EEN DISCUSSED BY US IN DETAIL IN EARLIER PART OF OUR ORDER AND, THEREFORE, TO THAT EXTENT, THE OBSERVATIONS OR GUIDELINES ISSUED BY MO CA EXCEED ITS JURISDICTION AND, THEREFORE, THESE WERE NOT BINDING UPON THE ASSESSEE. THE ASSESSEE WAS, OF COURSE, BOUND BY REMAINING POSITION OF THE GUIDELINES AS PER CONCERNED RU LES & REGULATIONS. 14.35.IT HAS FURTHER BEEN ARGUED BEFORE US THAT THE IMPUGNED AMOUNT WOULD NOT BE INCOME IN THE HANDS OF THE ASSESSEE COMPANY IN VIEW OF THE DOCTRINE OF DIVERSIO N OF INCOME BY OVERRIDING TITLE. FEW JUDGMENTS HAVE BEEN RE LIED UPON BEFORE US IN SUPPORT OF THIS ARGUMENT, AS MENTIONED ABOVE IN THE EARLIER PART OF OUR ORDER. IT HAS BEEN VEHEMENTLY A RGUED BY THE LD. COUNSEL OF THE ASSESSEE THAT THE IMPUGNED AM OUNT COULD NOT HAVE BEEN BROUGHT TO TAX IN VIEW OF DIVERSI ON OF INCOME AT THE SOURCE. 14.36.PER CONTRA, THE STAND OF THE REVENUE HAS BEEN THAT THE AMOUNT HAS BEEN DISBURSED ON ACCOUNT OF SECU RITY ARRANGEMENTS, AND THEREFORE IT AMOUNTS TO AP PLICATION OF INCOME AND NOT DIVERSION OF INCOME. 14.37. WE HAVE CAREFULLY ANALYSED LEGAL INTRIC ACIES AND NUANCES INVOLVED HERE IN THIS CASE. LAW IN THIS RE GARD WAS CLARIFIED AND HONBLE SUPREME COURT WAY BACK IN ITS LANDMARK JUDGMENT IN THE CASE OF CIT VS SITALDAS TIRATHDAS 41 IT R 367 (SC) WHICH IS STILL FOLLOWED IN MANY OTHER JUDGMENTS BY VARIOUS COURTS ALL OVER THE COUNTRY. THE RELEVANT PART OF THE JUDGMENT LAYING DOWN AN ACID TEST TO DECIDE SUCH ISSUES IS REPRODUCED HEREUNDER: IN OUR OPINION, THE TRUE TEST IS WHETHER T HE AMOUNT SOUGHT TO BE DEDUCTED, IN TRUTH, NEVER REACH ED THE ASSESSEE AS HIS INCOME. OBLIGATIONS, NO DOUBT, THERE ARE IN EVERY CASE, BUT IT IS THE NATURE OF THE OBLIGATION WHICH IS THE D ECISIVE FACT. THERE IS A DIFFERENCE BETWEEN AN AMOUNT WHICH A PERSON IS OBLIGED TO APPLY OUT OF HIS INCOME AND AN A MOUNT WHICH BY THE NATURE OF THE OBLIGATION CANNOT BE SAID TO BE A PART OF THE INCOME OF THE ASSESSEE. WHERE BY THE OBL IGATION INCOME MUMBAI INTERNATIONAL AIRPORT P LTD. 37 IS DIVERTED BEFORE IT REACHES THE ASSESSEE, IT IS DEDUCTIBLE; BUT WHERE THE INCOME IS REQUIRED TO BE APPLIED TO DISCHARGE AN OBLIGATION AFTER SUCH INCOME REACHES THE ASSES SEE, THE SAME CONSEQUENCE, IN LAW, DOES NOT FOLLOW. IT IS THE FIRST KIND OF PAYMENT WHICH CAN TRULY BE EXCUSED AND NOT THE SECOND. THE SECOND PAYMENT IS MERELY AN OBLIGATION TO PAY ANOTHER A PORTION OF ONE'S OWN INCOME, WHICH HAS BEEN RECEIVED AND IS SINCE APPLIED. THE FIRST IS A CASE IN WH ICH THE INCOME NEVER REACHES THE ASSESSEE, WHO EVEN IF HE W ERE 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 COUR TS HAVE, FROM TIME TO TIME, ANALYSED THE LAW IN THIS REGA RD AND SUGGESTED VARIOUS TESTS TO FIND OUT WHETHER IN A GIVE FACTS IT WAS A CASE OF DIVERSION OR APPLICATION OF INCOM E. 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 TESTS TO FIND OUT WHETHER IN A GIVEN SITUATION, IT WO ULD BE A CASE OF DIVERSION OF INCOME BY OVERRIDING TITLE OR NO T. THE HONBLE COURT, AFTER ANALYSING VARIOUS OTHER JUDGMENTS SUGGESTED FOLLOWING PRINCIPLES:- (I) IF A THIRD PERSON BECOMES ENTITLED TO RE CEIVE AN AMOUNT UNDER AN OBLIGATION OF AN ASSESSEE EVEN BEFORE HE C OULD CLAIM TO RECEIVE IT AS HIS INCOME, THERE WOULD BE A DIVERS ION OF INCOME BY OVERRIDING TITLE BUT WHEN AFTER RECEIPT OF T HE INCOME BY THE ASSESSEE, THE SAME IS PASSED ON TO A THIRD PER SON IN DISCHARGE OF THE OBLIGATION OF THE ASSESSEE, IT WILL B E A CASE OF APPLICATION OF INCOME BY THE ASSESSEE AND NO T OF DIVERSION OF INCOME BY OVERRIDING TITLE. (II) IF INCOME DOES NOT RESULT AT ALL, THER E 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 BOO KS OF ACCOUNT CANNOT BE DECISIVE OR CONCLUSIVE IN THE MATTER. (IV) THE CONCEPT OF REAL INCOME MUST BE APPL IED IN APPROPRIATE CASES BUT WITH CIRCUMSPECTION AND MUST NOT BE CALLED IN AID TO DEFEAT THE FUNDAMENTAL PRINCIPLE O F LAW OF INCOME- TAX AS DEVELOPED. 14.39. TURNING BACK TO THE FACTS OF THE CASE BEFORE US, IF WE APPLY THE AFORESAID PRINCIPLES, WE WILL FIND THAT THE IMPUGNED AMOUNT CANNOT BE TREATED AS TAXABLE INCOME I N THE HANDS OF MUMBAI INTERNATIONAL AIRPORT P LTD. 38 THE ASSESSEE. IF WE APPLY THE FIRST PRINCIP LE, WE FIND THAT AS SOON AS THE AMOUNT WAS COLLECTED FROM THE P ASSENGERS @ RS.200/- PER TICKET, A PORTION OF IT, I.E. RS.130/- PER TICKET BECAME PAYABLE TO CISF AND/OR ANY OTHER AGEN CY DESIGNATED FOR THE PURPOSES OF SECURITY AT THE AIRPORT. THE SA ME WAS LIABLE TO BE DEPOSITED IN A SEPARATE ESCROW ACCOUNT AND THE ASSESSEE HAD NO RIGHT, WHATSOEVER, IN THE SAME ACCOUN T. THE AFORESAID AMOUNT WAS AXED OR SLICED AT ITS VERY SOURC E. THE AMOUNT WAS PERMITTED OR DIRECTED TO BE COLLECTED FR OM THE PASSENGERS WITH THIS CLEAR UNDERSTANDING AND PRIOR STIPULATION THAT 65% OF THE SAME IS MEANT FOR SECURITY AGENCIES. THUS, THE ASSE SSEE MERELY ACTED AS A COLLECTION AGENT. THUS, APPLYING T HE FIRST PRINCIPLE, THE IMPUGNED AMOUNT WOULD FALL IN THE CATEGORY OF DIVERSION OF INCOME. 14.40. AS FAR AS THE OTHER THREE PRINCIPLES ARE CONCERNED, THE CRUX OF THESE THREE PRINCIPLES IS TO FIND O UT WHETHER THE ASSESSEE HAD, IN SUBSTANCE, EARNED ANY INCOME . IN OTHER WORDS, THESE THREE PRINCIPLES SUGGEST APPLICAT ION OF THE CONCEPT OF REAL INCOME, WHICH SUGGESTS THAT UNLES S THE INCOME HAS BEEN EARNED BY A PERSON IN REAL SENSE, THE SAME CAN NOT BE HELD AS TAXABLE INCOME. THERE HAS TO BE FIRST INCOME AND ON LY THEN ITS TAXABILITY COULD BE DETERMINED. IT IS NOTED BY US THAT IN THE FACTS BEFORE US, NO PORTION OF THE AMOUNT C OLLECTED ON BEHALF OF AAI / MOCA IS REPORTED TO HAVE BEEN RETAINED BY THE ASSESSEE AS ITS INCOME IN AS MUCH AS NOTHING BELONGE D 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 MA NY 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 DIVERS ION OF INCOME BY OVERRIDING TITLE. IN A MATTER BEFORE HONBLE BOMBAY HIGH COURT IN THE CASE OF SOMAIYA ORGANO CHEMICAL S LTD VS CIT 216 ITR 291 (BOM),THE FACTS WERE THAT A PORTION OF THE SALES PRICE WAS TRANSFERRED TO A SEPARATE FUND FOR BUILD ING UP ADEQUATE STORAGE FACILITIES UNDER A STATUTORY OBLIGATIO N, IT WAS HELD TO BE DIVERTED AT SOURCE BY OVERRIDING TITLE COULD NOT FO RM PART OF ASSESSEES INCOME. 14.42. LD. COUNSEL HAD ALSO RELIED UPON BEFOR E US THE JUDGMENT OF HONBLE MADRAS HIGH COURT IN THE CA SE OF CIT VS SALEM CO-OPERATIVE SUGAR MILLS LTD (SUPRA). THE FACTS IN THIS CASE WERE THAT THE SAID ASSESSEE WAS A COOP ERATIVE SOCIETY, CARRYING ON BUSINESS OF MANUFACTURING AND SAL E OF SUGAR AND MUMBAI INTERNATIONAL AIRPORT P LTD. 39 IN TERMS OF MOLASSES CONTROL (AMENDMENT) ORDE R DATED 06-02- 1972, TRANSFERRED A SUM IN CONFORMITY WITH T HE STATUTORY OBLIGATION CAST BY THE ABOVE ORDER AND CLAIM ED IT AS DEDUCTION IN THE COMPUTATION OF ITS TOTAL IN COME FOR THE ASSESSMENT YEAR 1975-76, WHICH WAS DISPUTED BY THE REVENUE BUT ALLOWED BY THE TRIBUNAL. HONBLE HIGH COURT AFFIRMED TRIBUNALS ORDER AND OBSERVED THAT EVEN BEFORE COLL ECTION OF THE AMOUNT AS DIRECTED BY THE CENTRAL GOVERNMENT UNDER THE MOLASSES CONTROL ('AMENDMENT) ORDER, THE ASSES SEE WAS DIRECTED TO KEEP THIS AMOUNT UNDER A SEPARATE ACCO UNT UNDER THE HEAD MOLASSES STORAGE FUND'. THOUGH, THE ASS ESSEE COLLECTED THIS AMOUNT UNDER THE STATUTORY OBLIGATION, IT DID NOT BELONG TO THE ASSESSEE, BUT TO THE MOLASSES STORAGE FUND. TH E ASSESSEE COULD NOT UTILISE THE AMOUNT LYING IN THE SAID FUND FOR A NY OTHER PURPOSE. THE AMOUNT WAS TO BE UTILISED FOR THE PURPOS E OF CONSTRUCTING A STORAGE TANK IN ACCORDANCE WITH THE SPECIFICATION S GIVEN BY THE CENTRAL GOVERNMENT. IF THE ASSESSEE HAD FAILED TO COLLECT SUCH AMOUNT AS DIRECTED BY THE MOLASSES CONTROL (AME NDMENT) ORDER, THE CENTRAL GOVERNMENT WOULD CONSTRUCT A MOLASSE S STORAGE TANK AND RECOUP THE CONSTRUCTION CHARGES FROM TH E ASSESSEE. IT WAS HELD THAT THERE WAS DIVERSION OF TITLE AT THE SOURCE OF THE INCOME COLLECTED UNDER THE DIRECTIONS GIVEN UN DER THE MOLASSES CONTROL (AMENDMENT) ORDER. THE SUM IN QUESTION WAS HELD TO BE NOT INCLUDIBLE IN THE ASSESSEES TOTAL INCOME. 14.43. SIMILAR VIEW WAS ULTIMATELY UPHELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS NEW MO RRISSON SUGAR MILLS LTD 269 ITR 397 (SC) AND CIT VS AMBUR COOPERATIVE SUGAR MILLS LTD 269 ITR 398 (SC) WHEREIN IT WAS HELD THAT THE AMOUNT SET APART TOWARDS MOLASSES RESERVE FUND CONSTITUTED DIVERSION OF INCOME BY OVERRIDING TITLE, AND THEREFORE, IT WAS HELD TO BE EXCLUDIBLE FROM ASSESSEES TOTAL INCOME. SIMILARLY, IN THE CASE OF CIT VS BIJLI COT TON MILLS PVT LTD 116 ITR 60 (SC), THE HONBLE SUPREME COURT H ELD THAT WHEN RIGHT FROM THE INCEPTION, AMOUNT OF DHARMADA WAS COLLECTED AND HELD BY THE ASSESSEE COMPANY UNDER AN OB LIGATION TO SPEND FOR CHARITABLE PURPOSES ONLY, THEN THOS E AMOUNTS WERE NOT ITS TRADING RECEIPTS AND WAS NOT TAXABLE AS BUSINESS INCOME. 14.44. BEFORE PARTING WITH, WE HAVE ALSO ANAL YSED THE 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 CA N BE COMPUTED, MUMBAI INTERNATIONAL AIRPORT P LTD. 40 THAT WOULD BE POSSIBLE ONLY IF ANY SURPLUS ARISES, WHICH IS NOT POSSIBLE TO HAPPEN SINCE ENTIRE AMOUNT COLLECTED BY ASSESSEE COMPANY IS DEPOSITED IN ESCROW ACCOUNT WHICH IS EAR MARKED WHOLLY AND EXCLUSIVELY FOR MEETING SECURITY EX PENSES. THERE IS NO FLEXIBILITY FOR USING THE FUNDS ELSEWHERE. IF A T ALL ANY AMOUNT IS LEFT UNSPENT FROM THIS ACCOUNT, THEN, THE SAME IS TO BE TRANSFERRED TO THE ACCOUNT OF AIRPORT AUTHORIT Y OF INDIA FOR MEETING SECURITY EXPENSES. WE HAD DIRECTED TH E ASSESSEE AS WELL AS THE LD. CIT-DR TO EXAMINE REQUISITE FACTS AND INFORM US WHETHER THERE WAS SURPLUS OR DEFICIT IN THE ESCROW ACCOUNT FINALLY. THE INFORMATION PROVIDED BY THE ASSESSIN G OFFICER, THROUGH LD. CIT-DR, VIDE HIS LETTER DATED 06- 09-2016 REVEALS THAT UPTO THE ASSESSMENT 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 MOCA, IF ULTIMATELY THERE WAS SOME DEFICIT, THEN IT WAS REQUIRED TO BE FUNDED BY GOVERNM ENT OF INDIA, AND IF THERE WAS EVER ANY SURPLUS (I.E. UNSP ENT AMOUNT), IT WAS TO BE TRANSFERRED TO THE ACCOUNT OF AIRPOR T AUTHORITY OF INDIA (AAI). THUS, VIEWED FROM THIS ANGLE ALSO, THERE WAS NO QUESTION OF THERE BEING ANY INCOME IN THIS E XERCISE, MUCH LESS, ANY INCOME, WHICH COULD BE CHARACTERISED AS TAXABLE INCOME IN THE HANDS OF THE ASSESSEE COMPANY. THUS, WE HAVE NO HESITATION IN HOLDING THAT THE AFORES AID AMOUNT IS NOT TAXABLE AS INCOME IN THE HANDS OF THE ASSESS EE COMPANY. THE AO IS DIRECTED TO RECOMPUTE THE INCOME O F THE ASSESSEE ACCORDINGLY. THE AO HAS ALSO THE LIBERTY TO EXAM INE THAT NO PORTION OF AMOUNT COLLECTED BY THE ASSESSEE ON ACCOUNT OF PSF- SC IS UTILISED BY THE ASSESSEE FOR ITS OWN P URPOSES OR FOR ANY PURPOSES WHICH ARE NOT PERMITTED BY MOCA/OTHER COMPETENT AUTHORITIES. IN CASE ANY VIOLATION IS DONE BY THE ASSESSEE IN THIS REGARD, THEN THE AO WILL BE AT HIS LIB ERTY TO TREAT THE AMOUNT SO MISAPPROPRIATED AS INCOME OF THE AS SESSEE BUT TO THAT EXTENT ONLY. FURTHER, IF ANY REFUND IS RECEIVED BY THE ASSESSEE ON ACCOUNT OF TDS DEDUCTED ON THIS COMPONENT, I.E. ON PSF-SC, THEN THE SAME SHALL ALSO BE DEPOS ITED BY THE ASSESSEE IN THE ESCROW ACCOUNT, AS WAS FAIRLY AGREED BY THE LD. COUNSEL DURING THE COURSE OF HEARING BEFO RE US, FAILING WHICH IT WOULD BE TREATED AS INCOME OF THE ASSESSEE, TO THAT EXTENT ONLY. WE DIRECT ACCORDINGLY. THIS GROU ND IS ALLOWED SUBJECT TO DIRECTIONS GIVEN ABOVE. MUMBAI INTERNATIONAL AIRPORT P LTD. 41 FROM THE FINDINGS OF THE TRIBUNAL, IT IS APPARENT T HAT THE SAID AMOUNT IS NOT TAXABLE IN THE HANDS OF THE ASSESSEE AND, THEREBY D IRECTED THE ASSESSING OFFICER TO RE-COMPUTE THE INCOME OF THE ASSESSEE WH ILE HOLDING SO THIS TRIBUNAL ALSO GAVE LIBERTY TO THE ASSESSING OFFICER THAT NO PORTION OF AMOUNT COLLECTED BY THE ASSESSEE ON ACCOUNT OF PSF-S C IS UTILIZED BY THE ASSESSEE FOR ITS OWN PURPOSES OR FOR ANY PU RPOSES WHICH ARE NOT PERMITTED BY MOCA/OTHER COMPETENT AUTHORITIES. IN CASE ANY VIOLATION IS DONE BY THE ASSESSEE IN THIS REGARD, THEN T HE ASSESSING OFFICER WILL BE AT HIS LIBERTY TO TREAT THE AMOUNT SO MISAPP ROPRIATED AS INCOME OF THE ASSESSEE BUT TO THAT EXTENT ONLY. FURTHER, IF ANY REFUND IS RECEIVED BY THE ASSESSEE ON ACCOUNT OF TDS DEDUCTED ON T HIS COMPONENT, I.E. ON PSF-SC, THEN THE SAME SHALL ALSO BE DEPOSITED BY THE ASSESSEE IN THE ESCROW ACCOUNT, AS WAS FAIRLY AGREED BY THE LEARNED COUNSEL DURING THE COURSE OF HEARING 15. WE HAVE NOTED THAT WHILE GIVING EFFECT TO THIS ORDER, THE ASSESSING OFFICER, AFTER EXAMINATION AS PER THE DIRECTIONS GI VEN BY THE TRIBUNAL AND ULTIMATELY VIDE HIS ORDER DATED 04.07.2017, DELETED THE WHOLE ADDITION MADE IN RESPECT OF PSF-SC AMOUNTING TO ` 1,32,58,59,023/- FOR AY.2008-09. SINCE THE FACTS INVOLVED IN THE IMPUGNED YEARS UNDER CONS IDERATION ARE NOT DISPUTED WITH THE FACTS INVOLVED IN A.Y.2008-09 WHE REIN THE AO WHILE GIVING EFFECT TO THE ORDER OF THE TRIBUNAL FOUND THAT THE ASSESSEE HAS NOT UTILIZED ANY AMOUNT OF PSF-SC FOR ITS OWN PURPOSES OR F OR ANY PURPOSES WHICH MUMBAI INTERNATIONAL AIRPORT P LTD. 42 ARE NOT PERMITTED BY MOCA/OTHER COMPETENT AUTH ORITIES , W E, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THIS TRIBUNA L FOR A.Y. 2008-09, HOLD THAT THE SAID AMOUNT IS NOT TAXABLE IN THE HANDS OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO RE-COMPUTE THE INCOME OF THE A SSESSEE. WE ALSO DIRECT THE ASSESSING OFFICER TO SEE THAT NO PORTION OF THE AMOUNT CALCULATED BY THE ASSESSEE ON ACCOUNT OF PSF-SC IS UTILIZED BY THE AS SESSEE FOR ITS OWN PURPOSES OR FOR ANY PURPOSE WHICH ARE NOT PERMITTED BY MOCA/OTHER COMPETENT AUTHORITIES. THE ASSESSING OFFICER IS FU RTHER DIRECTED THAT IN CASE HE FINDS THAT ANY VIOLATION IS DONE BY THE ASSESSEE IN THIS REGARD, HE WILL BE AT HIS LIBERTY TO TREAT THE AMOUNT SO MISAPPROPRIATED AS INCOME OF THE ASSESSEE BUT TO THAT EXTENT ONLY. FURTHER, IF ANY REFUND IS RECEIVED BY THE ASSESSEE ON ACCOUNT OF TDS DEDUCTED ON THIS COMPONENT, I.E. ON PSF-SC, THE SAME SHALL ALSO BE DEPOSITED BY THE ASSESSEE IN THE ESCROW ACC OUNT, FAILING WHICH IT WOULD BE TREATED AS INCOME OF THE ASSESSEE TO THAT EXTENT ONLY. THUS, THIS GROUND IS ALLOWED SUBJECT TO THESE DIRECTIONS IN EA CH OF THE A.YS 2009-10, 2010-11 AND 2011-12. 16. WE SHALL NOW DEAL WITH THE REVENUES APPEALS. GROUND NO.1 IN A.Y 2009-10 RELATES TO THE DELETION OF THE DISALLOWANCE OF REFURBISHMENT EXPENSES. BOTH THE PARTIES AGREED TH AT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THIS TRIBUNAL, VIDE ITS O RDER DATED 14.02.2014, FOR A.Y. 2007-08 IN ITA NO. 7507/MUM/2011 & 7111/MUM/20 11, WHICH DECISION MUMBAI INTERNATIONAL AIRPORT P LTD. 43 WAS FOLLOWED FOR A.Y. 2008-09 ALSO. THE TRIBUNAL F OR A.Y. 2007-08 HAS OBSERVED AS UNDER: WE HAVE CAREFULLY CONSIDERED THE ORDERS OF AUTHORITIES BELOW AND THE SUBMISSION OF LD. REPRESENTATIVES OF T HE PARTIES. WE OBSERVE THAT THE AUTHORITIES BELOW HAVE CONSID ERED THE SAID EXPENDITURE AS CAPITAL MAINLY FOR THE REASONS THAT THE ASSESSEE ITSELF HAS CATEGORIZED THAT EXPENDITUR E IN ITS BOOKS OF ACCOUNT AS CAPITAL IN NATURE. IN DETERMINING WHETH ER THE EXPENDITURE IS A CAPITAL EXPENDITURE OR REVENU E EXPENDITURE, ONE HAS TO TAKE INTO CONSIDERATION THE FACTS AND NATURE OF EXPENDITURE TO DECIDE WHETHER IT IS MADE FOR T HE INITIATION OF BUSINESS OR EXTENSION OF BUSINESS OR SUBSTANTI ALLY REPLACEMENT OF EXISTING EQUIPMENT AND TREATMENT GIVEN IN BOOKS OF ACCOUNTS COULD NOT DECIDE THE NATURE OF EXPE NDITURE. THE EXPENDITURE WOULD BE CAPITAL IF THE EXPENDITU RE HAS BEEN INCURRED TO CREATE NEW ASSETS. HOWEVER, IT WILL B E REVENUE IN NATURE, IF INCURRED MERELY IN FACILITATING AS SESSEES OPERATION OR ENABLE ASSESSEES BUSINESS TO BE CARRIED ON E FFECTIVELY, WHILE LEAVING CAPITAL UNTOUCHED. THE SIMILAR VIEW IS TAKEN BY THE HONBLE APEX COURT IN THE CASE OF CIT V/S ASSOCIAT ED CEMENT COMPANIES LTD. (1988) 172 ITR 257 (SC). IF T HE EXPENDITURE INCURRED DOES NOT BRING INTO EXISTENCE ANY NE W ASSETS BUT ONLY FACILITATE OPERATION TO ENSURE THAT THE EXISTING RUNWAY IS MAINTAINED PROPERLY ENSURING SAFETY OF THE AIR CRAFT OR PASSENGER AND ALSO AIRPORT PREMISES AND NO NE W ASSET HAS COME INTO EXISTENCE THE EXPENDITURE IS REVENUE IN NATURE. WE ARE OF THE CONSIDERED VIEW THAT IT CANNOT BE SAID THAT BY INCURRING THE EXPENDITURE DETAILS GIVEN HEREINABOVE , A NEW ASSET HAS COME INTO EXISTENCE GIVING RISE TO THE ASSESSEE OF ENDURING BENEFITS. THERE IS NO DISPUTE TO THE FACT T HAT THE SAID RUNWAY /AIRPORT PREMISES DOES NOT BELONG TO ASSESSEE BUT BELONG TO AAI AND THE ASSESSEE IS REQUIRED TO MAINTAIN TH E SAME UNDER OMDA. WE ARE OF THE CONSIDERED VIEW THAT T HE SAID EXPENDITURE HAS BEEN INCURRED BY ASSESSEE ONLY FOR THE PURPOSE OF CARRYING OUT ITS ONE OF THE OBJEC T TO RENOVATE AND/OR REPAIR EXISTING RUNWAY. THE HONBLE BOM BAY HIGH COURT IN THE CASE OF NEW SHORROCK SPG. & MFG. CO. LTD. V/S CIT (1956) 30 ITR 338 (BOM.) HAS HELD THAT THE T HE EXPRESSION CURRENT REPAIRS MEANS EXPENDITURE ON BUILDING , MACHINERY, PLANT OR FURNITURE WHICH IS NOT FOR THE PURP OSE OF RENEWAL OR RESTORATION BUT WHICH IS ONLY FOR THE PURPOSE OF PRESERVING AND MAINTAINING AN ALREADY EXISTING ASSET WHICH DOES N OT BRING NEW MUMBAI INTERNATIONAL AIRPORT P LTD. 44 ASSET INTO EXISTENCE OR DOES NOT GIVE THE AS SESSEE NEW OR DIFFERENT ADVANTAGE. WE OBSERVE THAT THE SAID EXPE NDITURE HAS BEEN INCURRED ONLY FOR RESURFACING THE LAYER OF THE RUNWAY AND TO PUT NEW TILES TO REPLACE FLOORS. THER EFORE, IT CANNOT BE SAID THAT EXPENDITURE IS IN THE NATURE OF CAPIT AL AS IT DOES NOT BRING INTO EXISTENCE ANY NEW ASSET, LEAVING ASID E THE FACT THAT THE SAID RUNWAY /PREMISES IS NOT OWNED BY AS SESSEE. NO DOUBT, THE ASSESSEE IS TO REDESIGN, UPGRADE, MODERNIZE AND ALSO TO OPERATE AND MAINTAIN AIRPORT BUT THE EXPENDITURE UNDER CONSIDERATION HAS BEEN INCURRED ONLY TO ENSURE THAT THE EXISTING ASSETS CONTINUED TO BE USED FOR USE SAFELY AND AS PER NORMS TO ENABLE ASSESSEE TO RUN ITS ACTIVITY. HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE SAID EXPENDITURE IS INCURRED TO FACILITATE OF CARRYING ON BY THE ASSESSEE IT S MAIN BUSINESS FOR WHICH THE ASSESSEE HAS BEEN ENGAGED AND PENDI NG THE EXPANSION OF THE AIRPORT ETC. HENCE, WE HOLD THAT THE SAID EXPENDITURE IS REVENUE IN NATURE AND CANNOT BE SAID TO BE CAPITAL IN NATURE IRRESPECTIVE OF THE FACT THA T THE ASSESSEE IN ITS BOOKS OF ACCOUNT HAS GIVEN TREATMENT OF I T AS CAPITAL IN NATURE. WE MAY STATE THAT THE ASSESSEE WILL NOT BE ENTITLED FOR DEPRECIATION THEREON AS IT IS HELD TO BE RE VENUE IN NATURE. HENCE, GROUND NO.1OF THE APPEAL TAKEN BY ASSESSEE I S ALLOWED. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE, WE CONFIRM THE ORDER OF THE CIT(A) DELETING THE DIS ALLOWANCE. 18. GROUND NO.2 IN A.Y. 2009-10 AND GROUND NO.1 IN A.Y. 2010-11 AND 2011-12 RELATE TO THE SAME ISSUE I.E. DELETION OF T HE DISALLOWANCE OF 25% DEPRECIATION OF UPFRONT FEES OF ` 150 CRORES. BOTH THE PARTIES AGREED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY T HIS TRIBUNAL, VIDE ITS ORDER DATED 14.02.2014, FOR A.Y. 2007-08 IN ITA NO. 7507/ MUM/2011 & 7111/MUM/2011, WHICH DECISION WAS FOLLOWED FOR A.Y. 2008-09. THE TRIBUNAL FOR A.Y. 2007-08 HAS OBSERVED AS UNDER: 10.2 THAT THE AO HAS STATED THAT THE ASSESSEE HAS GOT LEASE HOLD RIGHTS FOR A PERIOD OF 30 YEARS AND WHEREAS THE ASS ESSEE HAS CONTENDED THAT THE ASSESSEE HAS GOT A LICENSE FOR A PERIOD OF 30 MUMBAI INTERNATIONAL AIRPORT P LTD. 45 YEARS AND AS SUCH IT IS AN INTANGIBLE ASSETS. THU S, THE ASSESSEE IS ENTITLED FOR DEPRECIATION AS PER SECTION 32(1)(II) 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 HONBLE 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 UNDER THE SAID A GREEMENT TO COLLECT CHARGES FROM THE USERS OF THE AIRPORT PREMI SES WHICH IS SIMILAR TO GRANT OF A LICENSE TO THE ASSESSEE. THIS CASE IS SIMILAR TO THE CASE OF TECHNOSHARES AND STOCKS LTD AND OTHERS (SUPRA), WHEREIN THE HONBLE APEX COURT HAS HELD THAT A RIGH T GIVEN TO MEMBER OF STOCK-EXCHANGE TO CARRY ON THE BUSINESS A T THE PREMISES OF THE STOCK-EXCHANGE IS A BUSINESS OR COM MERCIAL RIGHT WHICH IS AKIN TO LICENSE IN TERMS OF SECTION 32(1)( II) OF THE ACT, THEREFORE, ELIGIBLE FOR DEPRECIATION. THEIR LORDSHI PS HAVE HELD THAT RIGHT TO PARTICIPATE IN THE MARKET IS AN ECONOMIC A ND MONEY VALUE, ITSELF SATISFIES THE TEST OF BEING A LICENSE. THERE IS NO DISPUTE TO THE FACT THAT THE SAID 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. THER EFORE THE SAID PAYMENT OF RS.150 CRORES HAS NOT RESULTED INTO ACQU ISITION OF TANGIBLE ASSETS. THUS, THE ASSESSEE HAS ONLY ACQU IRED RIGHT TO COLLECT CHARGES FROM THE USERS OF THE AIRPORT PREEM IES, WHICH IS A BUSINESS OR COMMERCIAL RIGHT IN THE FORM OF LICENSE AND THEREFORE IT IS AN INTANGIBLE ASSETS AS PER SECTION 32(1)(II) OF THE ACT. THE HONBLE DELHI HIGH COURT IN THE CASE OF HINDUSTAN C OCA COLA BEVERAGES PVT LTD (SUPRA) HAS ALSO HELD THAT THE AS SETS WHICH ARE INCLUDED IN THE DEFINITION OF INTANGIBLE ASSETS I NCLUDE, ALONG WITH OTHER THINGS, ANY OTHER BUSINESS OR COMMERCIAL RIGH TS OF SIMILAR NATURE. IN THIS REGARD, IT IS RELEVANT TO STATE THA T THE DECISION OF DELHI HIGH COURT IN THE CASE OF ONGC VIDESH LTD (SU PRA) HAS HELD THAT THE ASSESSEE WHO WAS ASSIGNED THE RIGHTS TO PA RTICIPATE IN OIL EXPLORATION IN RUSSIA THROUGH A CONSORTIUM FOR A PE RIOD OF 25 YEARS AND PAID THE TOTAL CONSIDERATION FOR OBTAINING 20% MEMBERSHIP IN THE CONSORTIUM, AMOUNTING TO RS. 155.9 CRORES, WAS TREATED TO ACQUIRE A LICENSE, BEING INTANGIBLE ASSETS, AND THU S ASSESSEE WAS ENTITLED TO CLAIM DEPRECIATION U/S. 32(1)(II) OF TH E ACT. PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ASHOKA INFO (P) LTD (SUPRA) HAS ALSO MUMBAI INTERNATIONAL AIRPORT P LTD. 46 HELD THAT THE EXPENDITURE INCURRED ON CONSTRUCTION OF HIGHWAY IS ELIGIBLE FOR DEPRECIATION @25%, AS THIS EXPENDITURE HAS GIVEN RISE TO AN INTANGIBLE ASSETS IN THE HANDS OF THE ASSES SEE. IN VIEW OF ABOVE DECISIONS AND THE FACTS OF THE CASE, WE HOLD THAT THE LD. CIT(A) HAS RIGHTLY HELD THAT THE PAYMENT OF UPFRONT FEE OF RS.150 CRORES PAID BY ASSESSEE TO AAI HAS CREATED CAPITA L ASSETS IN THE FORM OF LICENSE TO DEVELOP AND MODERNIZE THE AIRPOR T AND COLLECT CHARGES AS PER TERMS AND CONDITIONS AS PRESCRIBED U NDER THE AGREEMENT ENTERED INTO WHICH IS AN INTANGIBLE ASSE TS TO THE ASSESSEE. THUS ASSESSEE IS ENTITLED FOR DEPRECIATIO N. 10.3 HENCE, THE DISALLOWANCE OF RS.22.50 CRORES MAD E BY AO HAS RIGHTLY BEEN DELETED BY LD. CIT(A) BY DIRECTING THE AO TO ALLOW DEPRECIATION AT THE RATE OF 25% ON THE SAID PAYMENT OF UPFRONT FEE OF RS.150 CRORES. THUS, GROUND NO.1 TAKEN BY DEPART MENT IS REJECTED. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE, WE CONFIRM THE ORDER OF THE CIT(A) DELETING THE DIS ALLOWANCE FOR EACH OF THE ASSESSMENT YEARS UNDER CONSIDERATION. 19. 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 RELATE TO THE TREA TMENT OF THE CONTRIBUTION MADE BY THE ASSESSEE TO MMRDA FOR CONSTRUCTION OF S AHAR ELEVATED ROAD FROM WESTERN EXPRESS HIGHWAY, HORTICULTURE EXPENSES AND OTHER CIVIL WORKS AS REVENUE EXPENDITURE. BOTH THE PARTIES AGREED TH AT THIS ISSUE IS COMMON IN ALL THE YEARS (EXCEPT FOR THE FIGURES) AND THE FACT S INVOLVED ARE ALSO IDENTICAL. THEREFORE THIS GROUND BE DECIDED ON THE BASIS OF TH E FACTS FOR A.Y. 2009-10 AND WHATEVER VIEW THIS TRIBUNAL MAY TAKE IN A.Y. 20 09-10 THE SAME SHALL BE APPLICABLE FOR A.YS 2010-11 AND 2011-12. MUMBAI INTERNATIONAL AIRPORT P LTD. 47 20. THE LEARNED DR BEFORE US CONTENDED THAT THE ASS ESSEE HAS INCURRED EXPENDITURE BY WAY OF CONTRIBUTION TO MMRDA FOR CON STRUCTION OF SAHAR ELEVATED ROAD FROM WESTERN EXPRESS HIGHWAY, HORTICU LTURE EXPENSES AND OTHER CIVIL WORKS. THIS EXPENDITURE SHOULD BE CONS IDERED AS INTEGRAL PART OF OVERALL CAPITAL EXPENDITURE INCURRED BY THE ASSESSE E FOR RENOVATION, EXPANSION, MODERNIZATION OF THE AIRPORT. THIS EXPEN DITURE ENABLED THE ASSESSEE TO ENJOY ENDURING BENEFIT FROM THE SAID AS SET, IN RESPECT OF WHICH THE ASSESSEE HAS MADE CONTRIBUTION TO MMRDA AND HAD RESULTED ENHANCED PROFITABILITY OF THE ASSESSEE. THUS, THE SAID EXPE NDITURE HAS TO BE CAPITALIZED AND THE ASSESSEES CLAIM OF CONSIDERING THE EXPENDI TURE AS REVENUE EXPENDITURE SHOULD NOT BE ACCEPTED. THE CIT(A) HAS COMMITTED AN ERROR IN TREATING THE SAID EXPENDITURE AS REVENUE EXPENDITUR E. 21. THE LEARNED AR ON THE OTHER HAND, VEHEMENTLY CO NTENDED THAT THE ASSESSEE DURING THE COURSE OF BUSINESS INCURRED THE SAID EXPENDITURE BY WAY OF CONTRIBUTION TO MMRDA FOR THE CONSTRUCTION OF TH E OF SAHAR ELEVATED ROAD FROM WESTERN EXPRESS HIGHWAY, HORTICULTURE EXPENSES AND OTHER CIVIL WORKS. THE ASSET DOES NOT BELONG TO THE ASSESSEE EVEN AFTE R INCURRING THE EXPENDITURE. THE ASSESSEE DID NOT HAVE ANY RIGHT A S ALL THE ASSETS ARE USED NOT ONLY BY THE ASSESSEE BUT BY THE PUBLIC AT LARGE . THE EXPENDITURE HAS BEEN INCURRED AS A COMMERCIAL EXPEDIENCY DEMANDS SU CH EXPENDITURE TO BE INCURRED. RELIANCE WAS PLACED ON THE DECISION OF H ONBLE SUPREME COURT IN THE CASE OF EMPIRE JUTE CO LTD. VS. CIT (124 ITR 1) AND OTHER HIGH COURT MUMBAI INTERNATIONAL AIRPORT P LTD. 48 JUDGMENTS WHICH HAS BEEN PLACED BEFORE THE CIT(A), ON THAT BASIS, IT WAS CONTENDED THAT ALL EXPENDITURE EVEN IF RESULTING IN ENDURING BENEFIT CANNOT BE TERMED TO BE CAPITAL EXPENDITURE. BEFORE DECIDING THE ISSUE WHERE THE EXPENDITURE IS A CAPITAL EXPENDITURE OR REVENUE EXP ENDITURE, ALL OTHER FACTORS IN COMMERCIAL SENSE HAS TO BE CONSIDERED. RELIANCE WAS PLACED ON THE ORDER OF THE CIT(A) ESPECIALLY PARA 6.5 TO 6.7 AND REITER ATED THE SUBMISSIONS THAT WERE MADE BEFORE THE CIT(A). 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 REFERRED TO B EFORE US AS WELL AS THE CIT(A). IT IS A SETTLED LAW, IN VIEW OF THE DECISI ON OF KEDARNATH JUTE MANUFACTURING CO. LTD. VS. CIT (82 ITR 363), THAT A SSESSEES ENTITLEMENT TO A PARTICULAR DEDUCTION OR NOT, WILL DEPEND ON THE PRO VISION OF LAW RELATING THERETO AND NOT ON THE VIEW WHICH THE ASSESSEE MIGH T TAKE OF HIS RIGHTS NOR CAN EXISTENCE OR ABSENCE OF ENTRIES IN THE BOOKS OF ACCOUNTS BE DECISIVE OR CONCLUSIVE IN THE MATTER. WE HAVE ALSO GONE THROUG H THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF EMPIRE JUTE CO. LTD. V S CIT (124 ITR 1) WHEREIN THE DEDUCTIBILITY OR OTHERWISE OF AN EXPENDITURE IN CURRED DURING THE COURSE OF BUSINESS ACTIVITIES WAS DECIDED BY OBSERVING AS UND ER: 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 MAY BREAK DOWN. IT IS NOT EVERY ADVANTAGE OF ENDURING NATURE ACQUIRED BY AN ASSESSEE THAT BRINGS THE CASE WITHIN THE PRINCIPLE LAID DOWN IN THIS TEST. WHAT IS MATERIAL TO CONSIDER IS THE NATURE OF THE ADVANTAGE IN MUMBAI INTERNATIONAL AIRPORT P LTD. 49 A COMMERCIAL SENSE AND IT IS ONLY WHERE THE ADVANTA GE IS IN THE CAPITAL FIELD THAT THE EXPENDITURE WOULD BE DISALLO WABLE ON AN APPLICATION OF THIS TEST. ..... THE TEST OF ENDURING BENEFIT IS, THEREFORE, NO CERT AIN OR CONCLUSIVE TEST AND IT CANNOT BE APPLIED BLINDLY AND MECHANICA LLY WITHOUT REGARD TO THE PARTICULARS FACTS AND CIRCUMSTANCES O F 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 OPERAT ING, MAINTAINING, MANAGING DEVELOPING THE MUMBAI AIRPORT AS PER THE INTERNATIO NAL STANDARD. OTHER OBLIGATIONS RELATE TO OVERALL MANAGEMENT, DEVELOPME NT ETC. AS PER THE TERMS OF OMDA, THE ASSESSEE HAS TO DISCHARGE VARIOUS OBLI GATIONS IN MAINTAINING AND OPERATING THE AIRPORT SO AS TO BRING IT TO THE INTERNATIONAL STANDARD. THUS, THE ASSESSEE HAS TO INCUR VARIOUS EXPENSES FO R SUCH DEVELOPMENT AND MAINTENANCE OF THE AIRPORT. DURING THE YEAR, THE A SSESSEE HAS INCURRED THE EXPENDITURE ON VARIOUS ACTIVITIES. THE ASSESSEE HA S INCURRED THE EXPENDITURE IN MAINTAINING EXISTING ASSETS WHICH HAS EITHER BEE N REPAIRED OR RENOVATED. OUT OF THE EXPENDITURE OF ` 20,35,73,477/- OF SUM OF ` 16,07,30,868/- HAS BEEN CONTRIBUTED BY THE ASSESSEE TO MMRDA FOR THE C ONSTRUCTION OF SAHAR ELEVATED ACCESS ROAD FROM WESTERN EXPRESS HIGHWAY T O CHHATRAPATI SHIVAJI INTERNATIONAL AIRPORT. THE OWNERSHIP OF THIS ROAD WOULD REMAIN WITH THE MMRDA AND WOULD NOT BE TRANSFERRED TO THE ASSESSEE. THE ASSESSEES INTEREST, IN OUR VIEW, IN THIS ROAD WAS THAT THE PA SSENGERS WOULD HAVE A SMOOTH ACCESS TO CHHATRAPATI SHIVAJI INTERNATIONAL AIRPORT AND PROVIDE A LOOK MUMBAI INTERNATIONAL AIRPORT P LTD. 50 AS PER INTERNATIONAL STANDARD. THE REST OF THE EXP ENDITURE RELATE TO THE MAINTENANCE AND UPKEEP OF THE EXISTING ASSETS. THE ASSESSING OFFICER TREATED THE WHOLE OF THE EXPENSES TO BE CAPITAL EXP ENDITURE AS THE ASSESSEE ITSELF HAS TREATED THE SAID EXPENDITURE IN THE BOOK S OF ACCOUNT AS CAPITAL EXPENDITURE. THE ALLOWABILITY OF EXPENSES FOR THE PURPOSE OF INCOME TAX, AS HAS BEEN HELD BY US IN THE PREVIOUS PARAGRAPHS, FOL LOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KEDARNATH JUTE MANUFACTURING CO. LTD. VS. CIT (SUPRA), WILL DEPEND ON THE PROVISION OF IN COME 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 WITH MMRDA, THE ASSESSEE IN OUR OPINION DOES NOT GET ANY DIRECT BENEFIT OF ENDU RING NATURE. NO DOUBT THE PASSENGERS TRAVELLING TO THE INTERNATIONAL AIRPORT WERE BENEFITED BY WAY OF SMOOTH ACCESS TO THE AIRPORT. THE ASSESSEE MADE ON E TIME CONTRIBUTION FOR THE CONSTRUCTION OF THE SAID ROAD. BY THIS CONTRIB UTION NO ASSET IS CREATED BY THE ASSESSEE BUT IN COMMERCIAL SENSE, IN OUR OPINIO N, THE INCURRENCE OF SUCH EXPENDITURE CERTAINLY FACILITATES THE BUSINESS OF T HE ASSESSEE. THIS EXPENDITURE CANNOT BE HELD TO BE CAPITAL EXPENDITUR E MERELY BECAUSE THE BUSINESS OF THE ASSESSEE IS GETTING ENDURING BENEFI T. IN OUR VIEW, THE BUSINESS EXIGENCIES DEMAND THE ASSESSEE TO INCUR TH IS EXPENDITURE BY MAKING THE CONTRIBUTION TO MMRDA. MUMBAI INTERNATIONAL AIRPORT P LTD. 51 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 ENGA GED IN THE BUSINESS OF MANUFACTURE AND SALE OF SUGAR, CHEMICALS AND POWER AND HAD A DISTILLERY. THE ASSESSEE MADE PAYMENT OF RS. 8.48 CRORES TO THE UPP CL, WHICH WAS THE ONLY CUSTOMER, FOR CONSTRUCTION OF A TRANSMISSION LINE A ND OTHER SUPPORTING WORK FOR SUPPLY OF POWER. WHEN THE SAID EXPENDITURE WAS HELD AS CAPITAL EXPENDITURE BY THE ASSESSING OFFICER, THE HONBLE H IGH 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 ONLY CONSUMER OF THE ELECT RICITY GENERATED BY THE ASSESSEE. THE ASSESSEE INCURRED TH E EXPENDITURE TO FACILITATE ITS OWN BUSINESS. THE FIXED CAPITAL O F THE ASSESSEE WAS UNTOUCHED AND THERE WAS NO CAPITAL ACCRETION FOR TH E ASSESSEE. THE EXPENDITURE WHICH WAS INCURRED BY THE ASSESSEE IN T HE LAYING OF TRANSMISSION LINES WAS CLEARLY ON REVENUE ACCOUNT. UPON THE ERECTION OF TRANSMISSION LINES, THEY WERE TO VEST A BSOLUTELY IN THE UPPCL. THE EXPENDITURE WHICH WAS INCURRED BY THE AS SESSEE WAS FOR FACILITATING THE EFFICIENT CONDUCT OF ITS BUSIN ESS SINCE THE ASSESSEE HAD TO SUPPLY ELECTRICITY TO ITS SOLE CONS UMER 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] 203 ITR 410 (BOM) TOOK A VIEW THAT THE ASSESSEE INCURRED EXPENDITURE FOR THE PURPOSE OF CONSTRUCTION OF JETTY FOR HANDLING, STORAGE AND TRANSPORTATION O F MATERIALS MANUFACTURED OR HANDLED BY THE ASSESSEE. THE ASSESSEE WAS GRANTED LICENSE BY THE STATE GOVERNMENT. UNDER THE TERMS OF LICENSE, THE ASSESS EE WAS GIVEN THE RIGHT TO USE THE JETTY WITHOUT PAYMENT OF ANY CHARGES FOR A PERIOD OF THREE YEARS FROM MUMBAI INTERNATIONAL AIRPORT P LTD. 52 ITS COMPLETION. HOWEVER, THE OWNERSHIP WOULD REMAI N WITH THE STATE GOVERNMENT. IT WAS HELD THAT SUCH EXPENDITURE WAS INCURRED WITH A VIEW TO OBTAIN COMMERCIAL ADVANTAGE AND, THEREFORE, IT WAS REVENUE EXPENDITURE. 25. FURTHER, WE NOTED THAT 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 SUPREME COURT IN THE CASE OF EM PIRE 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 THE B USINESS 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 BUSINESS OF THE ASSESSEE AND ARE REVENUE EXPENDITURE. 26. WE HAVE ALSO GONE THROUGH THE DECISION OF HONB LE MADRAS HIGH COURT IN THE CASE OF CIT VS. COATS VIYELLA INDIA LTD. [2 002] 253 ITR 667 (MAD). WE NOTED THAT IN THIS CASE, THE HONBLE HIGH COURT FOL LOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF L H SUGAR FACT ORY AND OIL MILLS (P.) LTD. VS. CIT [1980] 125 ITR 293 (SC), HELD AS UNDER: MUMBAI INTERNATIONAL AIRPORT P LTD. 53 HELD, THAT, IN THE PRESENT CASE, THE BRIDGE WAS BU ILT BY THE GOVERNMENT AND THE ASSESSEE DID NOT ACQUIRE ANY OWN ERSHIP OVER THE BRIDGE BY PAYING CONTRIBUTION TOWARDS CONSTRUCT ION OF THE BRIDGE. THE ASSESSEE RECEIVED NO ADDITION TO THE VA LUE OF ANY OF THE ASSETS OWNED BY IT FOR THE PAYMENT. THE BRIDGE MERE LY FACILITATED THE MOVEMENT OF THE WORKMEN TO GAIN ACCESS TO THE A SSESSEES FACTORY AND FOR THE MOVEMENT OF THE GOODS OVER THE BRIDGE. THE PAYMENT OF CONTRIBUTION WAS MADE TO THE GOVERNMENT FOR CONSTRUCTION OF A NEW BRIDGE IN PLACE OF THE OLD ON E WHICH BECAME 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 SAID EXPENDITURE T O BE A REVENUE EXPENDITURE. IT IS ACCORDINGLY 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. 28. GROUND NOS.5 & 6 FOR A.Y. 2009-10, GROUND NOS. 4 & 5 FOR A.Y. 2010-11 AND GROUND NO.3 FOR A.Y. 2011-12 RELATES TO DELETIO N OF DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT. BOTH THE PARTIES AGREED THAT THIS ISSUE IS COVERED IN THE ASSESSEES OWN CASE FOR A.Y. 2008-09, VIDE ITS ORDER DATED 30.11.2016, IN ITA NO. 3232/MUM/2012, WHEREIN THE TRIBUNAL ON IDEN TICAL FACTS RESTORED THE ISSUED TO THE FILE OF THE CIT(A) WITH SPECIFIC DIRE CTIONS. WE HAVE GONE THROUGH THE SAID ORDER OF THE TRIBUNAL AND HAVE NOT ED THAT VIDE PARA 6.5 AND 6.6, THE TRIBUNAL HAS HELD AS UNDER: 6.5. WE HAVE GONE THROUGH THE SUBMISSIONS MADE BY B OTH THE SIDES. THE CASE OF THE ASSESSEE IS THAT THE IMPUGNE D AMOUNTS REPRESENTED MERE PROVISIONS AND, THEREFORE, TH ESE COULD NOT HAVE BEEN PROPERLY QUANTIFIED AND FURTHER, EV EN NAMES OF THE MUMBAI INTERNATIONAL AIRPORT P LTD. 54 PAYEES WERE NOT CLEAR. THEREFORE, NO TDS COULD BE D EDUCTED IN THE YEAR UNDER CONSIDERATION. 6.6. IT IS NOTED FROM THE PERUSAL OF THE ORDER OF T HE LD. CIT(A) THAT HE HAS SIMPLY ACCEPTED THE CLAIM OF TH E ASSESSEE BY STATING THAT THE ASSESSEE HAD MADE ONLY PROVISION A ND THE LD. COUNSEL OF THE ASSESSEE HAD SUBMITTED THAT I N THE NEXT YEAR WHEN PAYMENTS WERE MADE AGAINST THE PROVISION S, TDS WAS DEDUCTED AND THUS DISALLOWANCE MADE BY THE A O WAS ALSO DELETED. WE FIND THAT, UNFORTUNATELY, THE OR DER OF THE LD. CIT(A) ON THIS ISSUE IS DEVOID OF FACTUAL A NALYSIS OR PROPER REASONING. LD. CIT(A) HAS NOT EVEN DISCUSSED THE DE TAILS OF THE EXPENSES FOR WHICH PROVISION WAS MADE BY THE ASSESS EE WHICH HAS BEEN DISALLOWED BY THE AO. NOTHING HAS BEEN DISCUSSED ABOUT THE NATURE OF THE EXPENSES, POSITION OF CRYST ALLISATION OF THESE EXPENSES, AVAILABILITY OF PARTICULARS OF THE PAYEES , ETC. IT HAS BEEN OBSERVED IN THE ORDER BY LD. CIT(A) THAT WH ENEVER PAYMENTS ARE ACTUALLY MADE AGAINST THESE PROVISIONS, T DS IS DEDUCTED AS WAS STATED BY THE LD. COUNSEL. BUT, WHAT ARE THE PR ECISE FACTS IN THIS REGARD HAS NOT BEEN DISCUSSED IN THE ORD ER. NO DETAILS ARE AVAILABLE OR DISCUSSED BY THE LD.CIT(A) R EGARDING VARIOUS ASPECTS, E.G. WHEN THESE EXPENSES WERE ACTUALLY INCURRED, IN WHOSE NAME THESE ARE FINALLY CREDITED, WHO AR E THE ACTUAL PAYEES, WHEN THE PAYMENTS WERE MADE ACTUALLY AND WHETHER THE TDS WAS DEDUCTED AT THE TIME OF MAKING O F PAYMENTS OR NOT? NOTHING HAS BEEN BROUGHT OUT ON RECORD TO ENSU RE THAT FINALLY THERE WAS NO REVENUE LEAKAGE AND FULL COMPLIANCE OF THE TDS PROVISIONS WAS MADE ULTIMATELY. WE FIND THAT ORDER OF LD. CIT(A) IS DEVOID OF ANY FACTUAL NARRATION AND , THEREFORE, WE FIND IT APPROPRIATE TO SEND THIS ISSUE BACK TO THE FILE OF THE CIT(A) FOR COMPLETE FACTUAL ANALYSIS AND THEREAFTER APPLYING THE CORRECT POSITION OF LAW. LD. CIT(A) SHALL PROVIDE A DEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESSE E SHALL ALSO EXTEND REQUISITE COOPERATION TO THE LD. CIT(A) BY FILING NECESSARY DETAILS / EVIDENCES SO AS TO BRING COMPLETE FACTS ON RECORD. WITH THESE DIRECTIONS, THIS GROUND MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. RESPECTFULLY FOLLOWING THE SAID DECISION, WE RESTOR E THE ISSUE TO THE FILE OF THE CIT(A) IN ALL THE ASSESSMENT YEARS WITH A DIRECTION TO RE-DECIDE THE ISSUE AFRESH AFTER GIVING SUFFICIENT OPPORTUNITY TO THE A SSESSEE ON THE BASIS OF THE DIRECTIONS GIVEN IN A.Y. 2008-09. THUS, GROUND NOS .5 & 6 FOR A.Y. 2009-10, MUMBAI INTERNATIONAL AIRPORT P LTD. 55 GROUND NOS. 4 & 5 FOR A.Y. 2010-11 AND GROUND NO.3 FOR A.Y. 2011-12 ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 29. GROUND NO.7 IN A.Y 2009-10 RELATES TO THE DISA LLOWANCE OF ` 39,35,444/- OUT OF TOTAL EXPENDITURE. THE ASSESSIN G OFFICER FOUND THAT THE ASSESSEE HAS DEBITED A SUM OF ` 4,37,27,160/- AS LEGAL FEES AND CLAIMED IT AS AN EXPENDITURE BY DEBITING IT TO THE PROFIT AND LOS S ACCOUNT. FROM THE BIFURCATION OF THESE EXPENDITURE, THE ASSESSING OFF ICER WAS OF THE VIEW THAT THE EXPENDITURE DETAILS SHOULD HAVE BEEN CONSIDERED FOR CAPITALIZATION TO CWIO AS THE SAID EXPENDITURE HAS BEEN INCURRED RELA TING TO THE PROJECTS UNDERTAKEN FOR MODERNIZATION OF THE AIRPORT. THE A SSESSING OFFICER, THEREFORE, DEEMED IT FIT TO DISALLOW 10% OF THIS EX PENDITURE AND TREATED IT TO BE CAPITAL EXPENDITURE. HE FURTHER ALLOWED DEPRECI ATION ON THE SAID DISALLOWANCE OF ` 43,72,716/- @ 10% AND DISALLOWED THE BALANCE SUM O F ` 39,35,444/-. ON APPEAL, THE CIT(A) DELETED THE DIS ALLOWED. 30. WE NOTED THAT SIMILAR ISSUE HAS ARISEN IN THE C ASE OF THE ASSESSEE FOR A.Y. 2008-09 AND THE TRIBUNAL VIDE ITS ORDER DATED 30.11.2016, IN ITA NO. 3232/MUM/2012 SET ASIDE THE ISSUE TO THE FILE OF TH E CIT(A) OBSERVING AS UNDER: 9.5.WE HAVE GONE THROUGH THE SUBMISSIONS MADE BEFOR E US AS WELL AS BEFORE THE LOWER AUTHORITIES. IT IS NOTE D THAT ON THIS ISSUE ALSO, LD. CIT(A) HAS NOT GIVEN PROPER REASONING AND ORDER PASSED BY HIM IS CRYPTIC. HE ALLOWED THE RELIEF B Y MERELY OBSERVING AS UNDER:- MUMBAI INTERNATIONAL AIRPORT P LTD. 56 I HAVE CONSIDERED THE ABOVE SUBMISSIONS AND IN VIEW OF THE FACTS BROUGHT ON RECORD WHICH CLEARLY SHOW THAT THE LEGAL AND PROFESSIONAL CHARGES WHICH REFE R TO THE CURRENT YEAR ARE CLEARLY AN ALLOWABLE EXPENSES U/S 37(1) OF THE I.T ACT AND THEREFORE, THIS IS AN ALLOWABLE EXPENSE. HENCE, THIS GROUND OF APPEAL IS ALLOWED AND A.O. I S DIRECTED TO DELETE THIS DISALLOWANCE / ADDITION. 9.6.THUS, FROM THE ABOVE SAID PARAGRAPH OF LD. CIT( A)S ORDER, IT IS NOTED THAT HE HAS NOT GIVEN PROPER REASONING WHILE ALLOWING RELIEF TO THE ASSESSEE. THE DETAILS SUBMITTE D BY THE ASSESSEE HAVE NOT BEEN DISCUSSED BY THE LD. CIT(A). HE HAS MADE A SWEEPING AND GENERAL REMARK THAT THE DETAILS SUBMITTED BY THE ASSESSEE SHOW THAT LEGAL AND PROFESSIONAL CHARGES ARE CLEARLY ALLOWABLE EXPENSES U/S 37(1) OF THE A CT. HE HAS NOT DISCUSSED THE DETAILS OF THE LEGAL AND PROFE SSIONAL CHARGES AND WHETHER THESE HAVE BEEN INCURRED ON ACCOUNT OF REVENUE OR CAPITAL FIELD. THEREFORE, UNDER THESE CIRCUMST ANCES, WE SEND THIS ISSUE BACK TO THE FILE OF THE LD. CIT( A) WITH THE SAME DIRECTIONS AS HAVE BEEN GIVEN WITH REGARD TO GROUND 6 ABOVE. THIS GROUND MAY BE TREATED AS ALLOWED FOR STATISTICAL PU RPOSES. RESPECTFULLY FOLLOWING THE SAID ORDER OF THE TRIBUN AL, WE SEND THIS ISSUE BACK TO THE FILE OF CIT(A) WITH THE SAME DIRECTIONS AS A RE GIVEN IN A.Y. 2008-09. THUS, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOS ES. THIS DISPOSES OF REVENUES APPEAL FOR A.Y. 2009-10. 31. NOW COMING TO THE REMAINING GROUNDS OF THE REVE NUES APPEAL FOR A.YS. 2010-11 AND 2011-12. GROUND NOS. 6 TO 9 IN A.Y. 2010-11 AND GROUND NO.4 IN A.Y. 2011-12 RELATES TO THE ISSUE REGARDING DELETION OF THE DISA LLOWANCE OF RETRENCHMENT COMPENSATION. BOTH THE PARTIES AGREED THAT THE ISS UE BE DECIDED ON THE BASIS OF THE FACTS INVOLVED IN A.Y. 2010-11 AND WHA TEVER VIEW IS TAKEN BY THIS TRIBUNAL SHALL BE APPLICABLE FOR A.Y. 2011-12 ALSO. THE LEARNED DR BEFORE US MUMBAI INTERNATIONAL AIRPORT P LTD. 57 CONTENDED THAT THE ASSESSEE HAS CLAIMED RETRENCHMEN T COMPENSATION PAYABLE TO AIRPORT AUTHORITY OF INDIA AS PER THE TE RMS OF OMDA AS REVENUE EXPENDITURE. IT WAS SUBMITTED THAT AS PER CLAUSE 6 .14 OF OMDA, THE ASSESSEE IS OBLIGED TO MAKE AN OFFER OF EMPLOYMENT TO A MINI MUM OF 60% GENERAL EMPLOYEES AT ANY TIME DURING THE OPERATION SUPPORT PERIOD BUT NOT LATER THAN THREE MONTHS PRIOR TO THE EXPIRY OF THE OPERATION S UPPORT PERIOD, THAT IT WANTS TO EMPLOY, AN OPTION TO ACCEPT OR REJECT THE OFFER BY EMPLOYEES. THIS CLAUSE FURTHER PROVIDES THAT IF LESS THAN 60% OF THE GENER AL EMPLOYEES ACCEPT THE OFFER OF EMPLOYMENT MADE BY THE ASSESSEE, THEN ASSE SSEE SHALL PAY TO THE AIRPORTS AUTHORITY OF INDIA RETRENCHMENT COMPENSATI ON FOR SUCH NUMBER OF GENERAL EMPLOYEES AS REPRESENTED BY THE DIFFERENCE BETWEEN 60% OF THE GENERAL EMPLOYEES ACCEPTING THE OFFER OF EMPLOYMENT MADE BY THE ASSESSEE. THE LEARNED DR FURTHER STRESSED THAT THE SAID PAYME NT MADE BY THE ASSESSEE TO AIRPORTS AUTHORITY OF INDIA IS RETRENCHMENT COMP ENSATION AND, THEREFORE, THE PROVISIONS OF SECTION 35DDA OF THE I T ACT WILL APPLY AND ONLY 1/5 TH OF THE SAID EXPENDITURE SHOULD BE ALLOWED TO BE CLAIMED BY THE ASSESSEE IN EACH OF THE ASSESSMENT YEARS. 32. THE LEARNED AR, ON THE OTHER HAND, SUBMITTED TH AT THE PAYMENT MADE BY THE ASSESSEE TO THE AIRPORTS AUTHORITY OF INDIA IS NOT FOR THE EMPLOYEES OF THE ASSESSEE UNDER ANY VOLUNTARY RETIREMENT SCHEME OR ITS OWN EMPLOYEES AND, THEREFORE, THE PROVISIONS OF SECTION 35DDA OF THE I T ACT WOULD NOT APPLY. THE SAID LUMP SUM PAYMENT WAS MADE BY THE A SSESSEE TO AIRPORTS MUMBAI INTERNATIONAL AIRPORT P LTD. 58 AUTHORITY OF INDIA AND THIS ENABLE THE ASSESSEE TO AVOID ANNUAL PAYMENT THAT IT WOULD HAVE TO MAKE TO THESE EMPLOYEES BY WAY OF RETIREMENT BENEFITS ETC., HAD THEY JOINED THE COMPANY BY ACCEPTING THE EMPLOY MENT OFFER. IF THESE EMPLOYEES HAD ACCEPTED THE ASSESSEES EMPLOYMENT OF FER, THE EXPENDITURE INCURRED BY WAY OF SALARY WOULD HAVE BEEN ALLOWED A S REVENUE EXPENDITURE. THESE ANNUAL EXPENDITURE HAS BEEN SUBSTITUTED BY ON E TIME LUMP SUM PAYMENT TO AIRPORTS AUTHORITY OF INDIA AND, THEREFO RE, THE SAID EXPENDITURE SHOULD BE ALLOWED AS REVENUE EXPENDITURE. 33. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CA REFULLY CONSIDERED THE SAME ALONG WITH THE ORDERS OF THE AUTHORITIES BELOW . WE NOTED FROM THE FACTS ON RECORD FOR A Y 2010-11 THAT THE ASSESSEE, UNDER AN AGREEMENT OF OMDA WITH AIRPORTS AUTHORITY OF INDIA, IS DEVELOPIN G AND MAINTAINING CHHATRAPATI SHIVAJI INTERNATIONAL AIRPORT. THE ASS ESSEE HAS TO CARRY OUT OPERATIONS, MAINTENANCE AND DEVELOPMENT OF THE AIRP ORT WITH CERTAIN TERMS AND CONDITIONS. AS PER CLAUSE 6.14 IN CHAPTER 6 OF THE OMDA, THE ASSESSEE IS OBLIGED TO MAKE AN OFFER OF EMPLOYMENT TO A MINIMUM OF 60% GENERAL EMPLOYEES AT ANY TIME DURING THE OPERATION SUPPORT PERIOD BUT NOT LATER THAN THREE MONTHS PRIOR TO THE EXPIRY OF THE OPERATION S UPPORT PERIOD, THAT IT WANTS TO EMPLOY, AN OPTION TO ACCEPT OR REJECT THE OFFER BY EMPLOYEES. THIS CLAUSE FURTHER PROVIDES THAT IF LESS THAN 60% OF THE GENER AL EMPLOYEES ACCEPT THE OFFER OF EMPLOYMENT MADE BY THE ASSESSEE, THEN ASSE SSEE SHALL PAY TO THE AIRPORTS AUTHORITY OF INDIA RETRENCHMENT COMPENSATI ON FOR SUCH NUMBER OF MUMBAI INTERNATIONAL AIRPORT P LTD. 59 GENERAL EMPLOYEES AS REPRESENTED BY THE DIFFERENCE BETWEEN 60% OF THE GENERAL EMPLOYEES ACCEPTING THE OFFER OF EMPLOYMENT MADE BY THE ASSESSEE. THUS, THIS CLAUSE SPECIFICALLY DEALS WITH THE TREAT MENT OF THE RETRENCHMENT COMPENSATION TO BE PAID TO THE AIRPORTS AUTHORITY O F INDIA AT THE OCCURRENCE OF THE EVENTS MAINTAINED IN THE SAID CLAUSE. THE O PERATIONAL SUPPORT PERIOD OF THREE YEARS HAS EXPIRED DURING THE IMPUGNED ASSE SSMENT YEARS UNDER CONSIDERATION AND, ACCORDINGLY, 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 CAPI TALIZED AN AMOUNT OF ` 260,86,03,400/- UNDER THE HEAD INTANGIBLE ASSETS I N ITS BOOKS OF ACCOUNT BUT FOR THE PURPOSE OF INCOME TAX HE HAS CL AIM SAID EXPENDITURE IN THE COMPUTATION OF INCOME BUT DISALLOWED ITSELF A S UM OF ` 106,62,84,312/- AS NO TAX HAS BEEN DEDUCTED AT SOURCE DURING THE IM PUGNED ASSESSMENT YEAR BUT CLAIMED REMAINING SUM OF ` 154,23,19,088/- AS REVENUE EXPENDITURE. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSE SSEE IS ELIGIBLE ONLY FOR ONE FIFTH OF ` 154,23,19,088/- AS PER THE PROVISIONS OF SECTION 3 5DDA AMOUNTING TO ` 30,84,63,818/- IN THE YEAR UNDER CONSIDERATION 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 MUMBAI INTERNATIONAL AIRPORT P LTD. 60 EMPLOYEE IN CONNECTION WITH VOLUNTARY RETIREMENT. IN THIS CASE, WE NOTED THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE BY WAY OF PAYMENT MADE TO EMPLOYEES BUT THE PAYMENT HAS BEEN MADE BY THE A SSESSEE TO AIRPORTS AUTHORITY OF INDIA IN ACCORDANCE WITH CLAUSE 6.14 O F THE OMDA ON ACCOUNT OF RETRENCHMENT COMPENSATION TO BE PAID BY AIRPORTS AU THORITY OF INDIA TO ITS EMPLOYEES. IT IS NOT AN AMOUNT WHICH THE ASSESSEE IS PAYING TO ITS EMPLOYEES ON THEIR RETRENCHMENT. THEREFORE, THE PR OVISIONS OF SECTION 35DDA WILL NOT APPLY. IT IS NOT DENIED THAT THE EX PENDITURE INCURRED BY THE ASSESSEE IS REVENUE EXPENDITURE. WE NOTED THAT THE CIT(A) WHILE DEALING WITH THE ISSUE DELETED THE SAID DISALLOWANCE BY OBS ERVING AS UNDER: 8.8 IN THE BACKDROP OF THE ABOVE FACTS, THE MOOT Q UESTION FOR DECISION IS WHETHER THE EXPENDITURE OF RS.154,23,19 ,088/- WHICH HAS BEEN PAID BY THE APPELLANT IN TERMS OF 6.1.4 OF THE OMDA TO AAI IS A REVENUE EXPENDITURE AND REQUIRES TO BE ALL OWED IN ONE GO INSTEAD OF ALLOWING THE SAME IN FIVE EQUAL INSTALLM ENTS U/S.35DDA OF THE ACT. 8.9 IT IS NOTICED THAT AN OBLIGATION TO PAY RETRENC HMENT COMPENSATION WAS FASTENED ON APPELLANT IN TERMS OF CLAUSE 6.1.4 OF OMDA AS SOON AS THE PERIOD MENTIONED THEREIN IS EXP IRED AND THE YEAR HAPPENED TO BE THE PREVIOUS YEAR RELEVANT TO A Y 2010-11. I FURTHER FIND THAT THE OBLIGATION TO PAY THE SUM OF MONEY TO AAI ON ACCOUNT OF RETRENCHMENT COMPENSATION IN TERMS OF OM DA IS A DEFINITE OBLIGATION AND THE APPELLANT IS BOUND BY T HE TERMS OF OMDA AND HAS THUS TO DISCHARGE THE SAID OBLIGATION WITHI N THE TIME STIPULATED IN THE OMDA. FURTHER, I FIND THAT THE RE TRENCHMENT COMPENSATION PAID BY THE APPELLANT IS DEFINITELY A CONTRACTUAL OBLIGATION WITH THE AAI AND HAS BEEN INCURRED SOLEL Y AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. THE APPELLANT HAS PLACED RELIANCE ON THE DECISION IN THE CASE OF C1T V SINNAR BIDI UD YOG LTD. [118 TAXMAN 106], WHEREIN IT HAS BEEN HELD THAT DEDUCTIO N CLAIMED TOWARDS RETRENCHMENT COMPENSATION WOULD BE IN THE N ATURE OF REVENUE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE DECISION FURTHER STATES TH AT WHERE THE MUMBAI INTERNATIONAL AIRPORT P LTD. 61 APPELLANT-COMPANY TOOK OVER ANOTHER COMPANY ALONG W ITH ITS EMPLOYEES, AND LATER PAID RETRENCHMENT COMPENSATION TO THOSE EMPLOYEES BY TAKING INTO ACCOUNT THE SERVICES RENDE RED BY THEM UNDER THE FORMER COMPANY SUCH RETRENCHMENT COMPENSA TION IS ALLOWABLE AS REVENUE EXPENDITURE. 8.10 THE APPELLANT HAS FURTHER PLACED A RELIANCE ON THE DECISION OF KARNATAKA HIGH COURT IN THE CASE OF CIT V. MARGARIN E & REFINED OILS CO. LTD [154 TAXMAN 95] WHEREIN THE EXPENDITURE INC URRED BY THE MANAGEMENT IN PAYING RETRENCHMENT COMPENSATION FOR TERMINATION OF SERVICE WAS HELD TO BE EXPENDITURE EXPENDED WHOL LY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THE SAI D EXPENDITURE WAS ALLOWED TO BE DEDUCTED IN COMPUTING THE BUSINES S INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUS INESS OR PROFESSION' UNDER SECTION 37(1). 8.11 I ALSO FIND FORCE IN THE ARGUMENT OF THE APPEL LANT THAT RETRENCHMENT COMPENSATION IS NOTHING BUT LUMP SUM A MOUNT PAID TO GET RID OF RECURRING PAYMENT. A RETRENCHMENT PAY MENT MADE TO GET RID OF RECURRING REVENUE EXPENDITURE IN ITSELF IS REVENUE IN NATURE. THE PAYMENT MADE UNDER CLAUSE 6.1.4 OF THE OMDA AND THE INVOICE RAISED 'BY AAI IN THIS REGARD, IS NOTHI NG BUT A LUMP SUM PAYMENT TO GET RID OF RECURRING PAYMENT WHICH APPEL LANT WOULD HAVE BEEN OBLIGATED TO MAKE TO 60% OF THE GENERAL E MPLOYEES OF AAI FOR A PERIOD UPTO THE EFFECTIVE DATE OF THEIR R ETIREMENT. IN CASE THESE EMPLOYEES WOULD HAVE JOINED THE COMPANY ALL R ECURRING PAYMENTS WHICH WOULD OTHERWISE UNDOUBTEDLY BE ALLOW ABLE AS REVENUE EXPENDITURE WERE GOT RID OF BY MAKING THE L UMP SUM PAYMENT UNDER CLAUSE 6.1.4 OF THE OMDA. THE SAID LU MP SUM PAYMENT WAS THEREFORE CLEARLY A SUBSTITUTE FOR ANNU AL REVENUES PAYMENTS. 8.12 THE APPELLANT HAS ALSO RELIED ON THE DECISION IN THE CASE OF CIT VS. MADRAS AUTO SERVICE PVT. LID (1998) 233 1TR 468 - THE SUPREME COURT HAS HELD THAT TO DECIDE WHETHER EXPEN DITURE IS REVENUE OR CAPITAL ONE HAS TO LOOK AT THE EXPENDITU RE FROM A COMMERCIAL POINT OF VIEW. THE COURT HAS OBSERVED 'W HATEVER SUBSTITUTES FOR REVENUE EXPENDITURE SHOULD NORMALLY BE CONSIDERED AS REVENUE EXPENDITURE.' HAD THE APPELLANT CHOSEN T O PAY RENT ANNUALLY FOR EACH AND EVERY YEAR OF LEASE SUCH EXPE NDITURE CERTAINLY WOULD HAVE TO BE REGARDED AS REVENUE EXPENDITURE. T HE FACT THAT THE PAYMENT WAS MADE IN LUMP SUM FOR THE ENTIRE DUR ATION OF THE LEASE DOES NOT ALTER THE CHARACTER OF IT BEING REVE NUE EXPENDITURE. 8.13 THE APPELLANT HAS ALSO BROUGHT TO MY NOTICE TH E DECISION IN THE CASE OF CIT VS. GEMINI ARTS PRIVATE LTD (2002) 254 ITR 201. THE MUMBAI INTERNATIONAL AIRPORT P LTD. 62 MADRAS HIGH COURT RELYING ON THE ABOVE JUDGMENT OF THE SUPREME COURT HAS ALLOWED THE CLAIM OF A LUMP SUM PAYMENT O F LEASE AS REVENUE EXPENDITURE. I FIND FROM THESE TWO DECISION S THAT THE PRINCIPLE WHICH EMERGES IS THAT 'WHATEVER SUBSTITUT ES FOR REVENUE EXPENDITURE SHOULD NORMALLY BE CONSIDERED AS REVENU E EXPENDITURE'. 8 . 14 LOOKING TO THESE FACTS AS WELL AS VARIOUS COURT DECISIONS RELIED UPON BY THE APPELLANT, I FIND THAT THAT THE PAYMENT OF RETRENCHMENT COMPENSATION IS AN OBLIGATION FASTE NED UPON THE APPELLANT UNDER OMDA AND THE LIABILITY IS A CONTRAC TUAL OBLIGATION WITH AAI. THE APPELLANT HAS MADE THE PAYMENT IN LUM P SUM OF RS.260,86,03,400 AS RETIREMENT COMPENSATION TO AAI. THE APPELLANT HAS NOT MADE THIS PAYMENT DIRECTLY TO THE ITS OWN E MPLOYEES AS RETRENCHMENT COMPENSATION, BUT HAS MADE THIS PAYMEN T TO AAI FOR PAYING THOSE EMPLOYEES OF AAI WHO HAS SOUGHT VOLUNT ARY RETRENCHMENT AND THIS PAYMENT IS PART OF THE OMDA. HAD THIS LUMP SUM PAYMENT NOT BEEN MADE THEN THE APPELLANT WOULD HAVE MADE THE PAYMENT ON ACCOUNT OF SALARY AS WELL AS OTHER B ENEFITS TO THE EMPLOYEES ON ANNUAL BASIS WHICH WOULD HAVE BEEN CLA IMED BY THE APPELLANT AS REVENUE EXPENDITURE. THE APPELLANT INS TEAD OF RETAINING THE NUMBER OF GENERAL EMPLOYEES REPRESENT ED BY THE DIFFERENCE BETWEEN 60% OF GENERAL EMPLOYEES AND THE NUMBER OF GENERAL EMPLOYEES ACCEPTING THE OFFER OF EMPLOYMENT , IS REQUIRED TO PAY RETIREMENT COMPENSATION IN RESPECT OF THOSE GENERAL EMPLOYEES WHO HAVE NOT ACCEPTED THE OFFER OF EMPLOY MENT WITH THE APPELLANT. THUS, THE EXPENDITURE INCURRED BY TH E APPELLANT ON ACCOUNT OF RETRENCHMENT COMPENSATION PAID TO AAI IS IN LIEU OF SALARY AND OTHER BENEFITS WHICH THE EMPLOYEES NOT A CCEPTING THE EMPLOYMENT ARE ELIGIBLE UNDER OMDA. THE NATURE OF T HIS EXPENDITURE IS REVENUE EXPENDITURE AS IT REPRESENTS SALARY AND WAGES ETC. THE PRINCIPLE WHICH HAD EMERGED FROM THE SAID TWO DECISIONS CITED SUPRA, THAT WHATEVER SUBSTITUTES FO R REVENUE EXPENDITURE SHOULD NORMALLY BE CONSIDERED AS REVENU E EXPENDITURE IS APPLICABLE TO THE FACTS OF THE SAID EXPENDITURE. ACCORDINGLY, I FIND THAT THE LUMP SUM PAYMENT OF RS.260,86,03,400/-- IS NOTHING, BUT A LUMP SUM PAYMENT ON ACCOUNT OF SALARY AND WAGES OF CERTAIN EMPLOYEES WHO HAVE NOT ACCEPTED THE EMPLOYMENT WITH THE APPELLANT AS ENUMERATED IN CLAUSE 6.1.4 OF OMDA. TH E EXPENDITURE CERTAINLY IS THEREFORE REVENUE EXPENDITURE. 8.15 WITH REGARD TO THE APPLICABILITY OF PROVISIONS OF-SECTION 35DDA OF THE ACT, I FIND THAT THE SAID PROVISIONS ARE NOT APPLICABLE TO THE FACTS OF THE APPELLANT'S CASE AS THE PAYMENT HAS BE EN MADE BY THE APPELLANT TO AAI AND NOT TO ITS OWN EMPLOYEES. THE PAYMENT HAS BEEN MADE OUT OF COMMERCIAL EXPEDIENCY AND UNDER CO NTRACTUAL OBLIGATION. THE APPELLANT HAS NOT FLOATED ANY VOLUN TARY RETIREMENT MUMBAI INTERNATIONAL AIRPORT P LTD. 63 SCHEME OF ITS OWN, BUT THE PAYMENT HAS BEEN MADE UN DER AN AGREEMENT TO AAI. THUS, THE PROVISIONS OF SECTION 3 5DDA OF THE ACT ARE NOT APPLICABLE. IT IS NOT A VOLUNTARY RETIREMEN T SCHEME, BUT THE PAYMENT IS CONTRACTUAL AND CANNOT BE AMORTIZED. THE AO IS ACCEPTING THE CONTENTS OF THE AGREEMENT AND NO FAUL T HAS BEEN FOUND IN THE SAME. THE AO HAS ALSO NOT DOUBTED THE GENUINENESS OF THE AGREEMENT AND THE PAYMENT MADE ON THIS ISSUE . 8.16 CONSIDERING THE FACTS IN ITS ENTIRETY AND THE VARIOUS COURT DECISIONS CITED AND RELIED UPON BY THE APPELLANT, I FIND THAT THE EXPENDITURE OF RS.260,86,03,400/- IS AN ALLOWABLE E XPENDITURE AS REVENUE. ACCORDINGLY, THE DISALLOWANCE OF RS.123,38 ,55,270/- IS DELETED AND THE GROUND OF APPEAL OF THE APPELLANT I S ALLOWED. 35. THE LEARNED DR EVEN THOUGH VEHEMENTLY RELIED ON THE ORDER OF THE ASSESSING OFFICER, COULD NOT BRING TO OUR KNOWLEDGE ANY DECISION WHICH HAS TAKEN A CONTRARY VIEW AS HAS BEEN TAKEN BY THE LEAR NED CIT(A). WE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) DELET ING THE DISALLOWANCE. IT IS ACCORDINGLY UPHELD. GROUND NOS. 6 TO 9 IN A.Y. 201 0-11 AND GROUND NO.4 IN A.Y. 2011-12 STANDS DISMISSED. 36. GROUND NO.10 & 11 IN A.Y. 2010-11 AND GROUND NO .5 IN A.Y. 2011-12 RELATE TO THE TREATMENT OF DEVELOPMENT FEES AS CAPI TAL RECEIPT BY THE CIT(A). BOTH THE PARTIES AGREED THAT THE ISSUE BE DECIDED O N THE BASIS OF THE FACTS INVOLVED IN A.Y. 2010-11 AND WHATEVER VIEW IS TAKEN BY THIS TRIBUNAL SHALL BE APPLICABLE FOR A.Y. 2011-12 ALSO. THE FACTS RELATI NG TO THE SAID ISSUE ARE THAT THE ASSESSEE CLAIMED DEVELOPMENT FEES COLLECTED BY IT AS CAPITAL RECEIPT. DURING THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE H AS COLLECTED A SUM OF ` 287,83,48,538/- . AN AMOUNT OF ` 19,85,99,146/- HAS BEEN REDUCED FROM THE BLOCK OF BUILDING AND ` 7,00,70,264 HAS BEEN REDUCED FROM THE BLOCK OF MUMBAI INTERNATIONAL AIRPORT P LTD. 64 MACHINERY AND PLANT WHILE COMPUTING DEPRECIATION. DEPRECIATION HAS BEEN CLAIMED ON THE REDUCED AMOUNT OF THE BLOCK OF ASSET S. THE ASSESSING OFFICER ASKED THE ASSESSEE WHY THE SAID AMOUNT SHOULD NOT B E TREATED AS REVENUE RECEIPT. THE ASSESSING OFFICER DID NOT AGREE WITH THE SUBMISSIONS OF THE ASSESSEE AND TREATED THE SAID AMOUNT AS REVENUE REC EIPT. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A), WHO, AFTER GOING THROU GH THE AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND THE AIRPORTS AUTHORIT Y OF INDIA, TOOK THE VIEW THAT THE SAID RECEIPT WAS CAPITAL RECEIPT AND NOT R EVENUE RECEIPT. 37. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CA REFULLY CONSIDERED THE SAME ALONG WITH THE ORDERS OF THE AUTHORITIES BELOW . THE LEARNED DR RELIED ON THE ORDER OF THE ASSESSING OFFICER WHILE THE LEA RNED AR VEHEMENTLY CONTENDED THAT THE SAID DEVELOPMENT FEES HAS BEEN C OLLECTED WITH THE PERMISSION OF THE MINISTRY OF CIVIL AVIATION PURSUA NT TO THE PROVISIONS OF RULE 22A OF THE AIRPORTS AUTHORITY OF INDIA ACT, 1994 AN D ARE IN THE NATURE OF CESS OR TAX TO MET THE SHORTFALL THAT ARISE IN THE DEVEL OPMENT OF AERONAUTICAL ASSETS. THE DEVELOPMENT FEES SO COLLECTED ARE UTIL IZED ONLY FOR PURPOSE OF DEVELOPMENT OF CAPITAL ASSETS AND THE SAME IS CERTI FIED BY THE CHARTERED ACCOUNTANT. THEREFORE, THE SAID INCOME IS A CAPITA L RECEIPT. WE NOTED THAT THE CIT(A) HAS ELABORATELY DISCUSSED THE PROVISIONS OF THE AGREEMENT ENTERED BETWEEN BOTH THE PARTIES AND HAS HELD AS UNDER: 9.5 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT AND THE ORDER OF THE AO. THE APPELLANT IS ENGAGED IN OPERA TING, MANAGING, DEVELOPING, DESIGNING, CONSTRUCTING, UPGRADING, MOD ERNIZING AND MUMBAI INTERNATIONAL AIRPORT P LTD. 65 FINANCING THE CHHATRAPATI SHIVAJI INTERNATIONAL (C SI) AIRPORT OF MUMBAI UNDER AN AGREEMENT KNOWN AS 'OMDA'' WITH AIR PORT AUTHORITY OF INDIA ('AAI'). THE ESTIMATED COST FOR MODERNIZING AND DEVELOPMENT OF CSI AIRPORT OF MUMBAI WAS RS.9,802/- CRORES. AGAINST THIS ESTIMATED EXPENDITURE WHICH INCLUDES T HE SUBSTANTIAL EXPENDITURE ON ACCOUNT OF CAPITAL EXPENDITURE FOR M ODERNIZING AND DEVELOPMENT OF THE AIRPORT, THE AVAILABILITY OF FIN ANCE FROM VARIOUS MEANS WITH THE APPELLANT WAS LESS BY RS.2,3507- CRO RES. THUS, THERE WAS A SHORT FALL OF RS.2,350 CRORES. 9.6 IN VIEW OF THE SHORTFALL OF FINANCE REQUIRED FO R THE DEVELOPMENT OF THE AIRPORT WHICH INCLUDES SUBSTANTIAL CAPITAL E XPENDITURE, THE APPELLANT APPROACHED THE MINISTRY OF CIVIL AVIATION ; GOVERNMENT OF INDIA FOR LEVY OF DEVELOPMENT FEE FOR MEETING OUT T HE SAID SHORTFALL AT SUCH RATES AS MAY BE APPROVED BY THE MINISTRY. P URSUANT TO SECTION 22A OF THE AAI ACT, 1994, THE MINISTRY HAS CONVEYED THE APPROVAL OF THE CENTRAL GOVERNMENT U/S.22A OF AAI A CT AUTHORIZING THE APPELLANT TO COLLECT THE DEVELOPMENT FEE VIDE L ETTER DATED 27.02.2009, A COPY OF WHICH HAS BEEN FILED BY THE A PPELLANT DURING THE APPELLATE PROCEEDINGS. THE APPELLANT HAS BEEN P ERMITTED BY THE MINISTRY OF CIVIL AVIATION. GOVERNMENT OF INDIA TO CHARGE FEE OF RS.100 FROM DEPARTING DOMESTIC PASSENGERS AND RS.60 0 FROM DEPARTING INTERNATIONAL PASSENGERS. THERE ARE CERTA IN CONDITIONS ATTACHED WITH THE COLLECTION OF DEVELOPMENT FEE. TH E FEE SO COLLECTED HAS TO BE SPENT MAINLY FOR DEVELOPMENT OF 'AERONAUTICAL ASSETS' ONLY. THE APPELLANT CANNOT SPEND ANY AMOUNT FROM THE COLLECTED DEVELOPMENT FEE AT WILL AND HAS TO MAINTA IN AN ACCOUNT OF THE SAME WHICH IS SUBJECT TO SUPERVISION AND AUD IT FROM THE CENTRAL GOVERNMENT. THE APPELLANT HAS BEEN PERMITTE D TO COLLECT AMOUNT ONLY FOR 48 MONTHS AND THE SAME CANNOT BE EX CEEDED FUNDING GAP OF RS.1,543/- CRORES. THE MINISTRY OF C IVIL 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 CORE S AND IN CASE OF ANY COST ESCALATION BEYOND RS.9802 CRORES, THE AMOUNT REPRESENTING THE ESCALATION WOUL D HAVE TO BE BROUGHT IN BY MIAL, THROUGH OTHER SOURCES. THE CEILING AMOUNT WOULD BE EXCLUSIVE OF TAXES, IF ANY. (H)RATE AND TENURE OF LEVY ARE PREMISED UPON THE TRAFFIC PROJECTIONS AND OTHER ESTIMATES. IN CASE D UE MUMBAI INTERNATIONAL AIRPORT P LTD. 66 TO ACTUAL FIGURES BEING DIFFERENT THAN THOSE ESTIMATED, THE 'COLLECTIONS DURING LEVY PERIOD EXCE ED THE AMOUNT OF RS, 1543 CRORES, OR ANY OTHER AMOUNT, WHICH THE REGULATOR/GOVERNMENT MAY DETERMINE, THE EXCESS AMOUNT SO COLLECTED SHALL NOT BE UTILIZED, F OR ANY PURPOSE WHATSOEVER, WITHOUT THE PRIOR APPROVAL OF THE REGULATOR/CENTRAL GOVERNMENT. (I)AN INDEPENDENT AUDITOR APPOINTED BY AAI WOULD AUDIT THE RECEIPTS/ACCRUALS OF MIAL ON PERIODIC BAS IS. PERIODICITY OF THE AUDIT WOULD BE DECIDED BY AAI IN CONSULTATION WITH MIAL. AAI WOULD REPORT THE RESULT S OF AUDIT TO GOVERNMENT/ REGULATOR FOR NECESSARY DIRECTIONS. (J)MIAL WOULD UNDERTAKE REAL ESTATE DEVELOPMENT PROGRAMME ON A TIME BOUND BASIS THROUGH COMPETITIVE BIDDING AT THE EARLIEST. IN CASE , THE AMOUNT ACTUALLY RECEIVED/RECEIVABLES AS A RESULT O F COMPETITIVE BIDDING IS MORE THAN THE PRESENTLY ESTIMATED AMOUNT OF RS.1,000/- CRORES, THE FUNDING GAP OF RS. 1543 CRORES WOULD BE REVISED DOWNWARDS AT THE TIME OF REVIEW.' THE ABOVE CLEARLY INDICATES THAT THE GOVERNMENT 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 CRO RES THROUGH THE REAL ESTATE DEVELOPMENT PROGRAM. 9.7 AS PER CLAUSE (B) (II) OF THE SAID LETTER, THE AAI AND CENTRAL GOVERNMENT WOULD HAVE SUPERVISION POWERS IN RESPECT OF ESCROW ACCOUNT TO ENSURE THAT ALL THE RECEIPTS ARE PROPERL Y ACCOUNTED FOR AND ARE UTILIZED ONLY FOR PERMITTED PURPOSES. CLAUS E (C) OF THE SAID LETTER PROVIDES THE ENTIRE DEVELOPMENT FEE RECEIPTS WOULD BE UTILIZED ONLY FOR THE PURPOSE OF DEVELOPMENT OF 'AE RONAUTICAL ASSETS', WHICH ARE 'TRANSFER ASSETS' AS DEFINED UND ER THE OMDA AND THEREFORE WOULD GO TO REDUCE THE ACTUAL COST OF AERONAUTICAL ASSETS TO THAT EXTENT. I ALSO NOTICE THAT CLAUSES ( B) (III) OF THE SAID LETTER DATED 27.02.2009 SPECIFICALLY PROVIDES THAT DF WOULD BE SUBJECT TO AAI'S SUPERVISION FROM TIME TO TIME. FUR THER, CLAUSE (G) OF THIS LETTER STIPULATES THAT THE AMOUNTS COLLECTE D THROUGH DEVELOPMENT FEE WOULD UNDER NO CIRCUMSTANCES EXCEED THE CEILING OF RS. 1,543 CRORES AND IN CASE OF COST ESCALATION BEYOND RS. 9,802 CRORES THE ESCALATION WOULD HAVE TO BE BROUGHT IN B Y THE APPELLANT THROUGH OTHER SOURCES. CLAUSE (H) OF THE SAID LETTE R PROVIDES THAT IN MUMBAI INTERNATIONAL AIRPORT P LTD. 67 CASE OF EXCESS COLLECTION, THE SAME CANNOT BE UTILI ZED BY THE APPELLANT FOR ANY PURPOSE WHATSOEVER WITHOUT THE PR IOR APPROVAL OF REGULATOR OR THE GOVERNMENT. FURTHER, CLAUSE (H) OF THE SAID LETTER ALSO STIPULATES FOR DOWNWARD REVISION OF THE AMOUNT OF DEVELOPMENT FEE TO BE CALCULATED IN CERTAIN CASE. 9.8 BASED ON THE ABOVE, IT IS EVIDENT THAT THE LEVY OF DEVELOPMENT FEE IS SOLELY FOR THE PURPOSE OF BRIDGING THE FUNDI NG GAP IN CONNECTION WITH THE DEVELOPMENT OF AERONAUTICAL ASS ETS. FOR CONVENIENCE, SUCH DEVELOPMENT FEE WOULD BE COLLECTE D BY VARIOUS AIRLINES AT THE TIME THEY SELL THE TICKETS TO THE P ASSENGERS AND WOULD BE PAID TO APPELLANT. ACCORDINGLY, THE AIRLIN ES ARE COLLECTING THE DEVELOPMENT FEE LEVIED U/S 22A OF AAI ACT FROM THE PASSENGERS AND PAYING THE SAME TO THE APPELLANT TOWARDS MEETIN G THE FUNDING GAP FOR DEVELOPMENT OF AERONAUTICAL ASSETS WHICH AR E TRANSFER ASSETS AS PER OMDA. IN SUPPORT OF THE CONTENTION TH AT 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 FOUNDATION VS UNION OF INDIA & OTHERS (2011 5 SCC 3 60) WHERE HON'BLE SUPREME COURT BUS CATEGORICALLY MADE THE DISTINCTION BETWEEN SECTION 22 AND SECTION 22A OF A AI ACT. IN THE SAID JUDGMENT, HON'BLE SUPREME COURT HAS ALSO HELD THAT DEVELOPMENT FEE IS IN THE NATURE OF CESS OR TAX FOR GENERATING REVENUE FOR THE SPECIFIC PURPOSES MENTIONED IN CLAU SE (A), (B) AND (C) OF SECTION 22A OF AAI ACT. THE HON'BLE SUPREME COURT IN THE SAID DECISION HELD THAT THE NATURE OF LEVY U/S.22A OF 2004 ACT IS NOT CHARGES OR ANY OTHER CONSIDERATION FOR SERVICES FOR THE FACILITIES PROVIDED BY THE AIRPORTS AUTHORITY. THE SUPREME COU RT IN THIS JUDGMENT ALSO QUOTED FROM THE DECISION IN THE CASE OF VIJAYALASHMI RICE MILLS & ORS. V. COMMERCIAL TUX OFFICERS, PALAK OT & ORS. (SUPRA) THAT A CESS IS A TAX WHICH GENERATES REVENUE WHICH IS UTILIZED FOR A SPECIFIC PURPOSE. THE LEVY UNDER SECTION 22A OF AAI ACT THOUGH DESCRIBED AS FEES IS REALLY IN THE NATURE OF A CESS OR A TAX FOR GENERATING REVENUE FOR THE SPECIFIC PURPOSES MENTIO NED 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 NATURE OF TAX OR CESS, NO FURTHER TAX CAN BE LE VIED ON THE SAME TREATING THE SAME AS INCOME OF THE APPELLANT. I FIN D THE RELIANCE OF MUMBAI INTERNATIONAL AIRPORT P LTD. 68 THE APPELLANT ON THE SAID SUPREME COURT DECISION IS A GOOD RELIANCE AND THE SAME IS SQUARELY APPLICABLE TO THE FACTS OF THE APPELLANT'S CASE AND THEREFORE, DEVELOPMENT FEE COLLECTED BY TH E APPELLANT IS IN THE NATURE OF CESS OR TAX AND A CAPITAL RECEIPT AND IT CANNOT BE SUBJECTED TO FURTHER TAX. 9.10 DURING THE APPELLATE PROCEEDINGS BEFORE ME, TH E APPELLANT WAS ASKED TO CLARIFY AS TO HOW DEVELOPMENT FEE AND TOLL CHARGES ARE NOT SIMILAR IN NATURE. THE APPELLANT MADE A DETAILE D SUBMISSION IN THE MATTER, CLEARLY BRINGING OUT THE DISTINGUISHING FACTORS BETWEEN DEVELOPMENT FEE AND TOLL CHARGES. AFTER A CAREFUL P ERUSAL OF THE DISTINGUISHING FACTORS BETWEEN THE TWO, I FIND THAT THE DEVELOPMENT FEE AND TOLL CHARGES ARE BEING LEVIED AND COLLECTED ENTIRELY ON DIFFERENT FOOTINGS AND CONTEXT. THE ORIGIN OF THE D EVELOPMENT FEE IS FROM THE PROVISION OF SECTION 22A OF THE AAI, 1994 AND THE SAME IS HELD TO BE CESS OR TAX AND TO BE USED STRICTLY FOR THE PURPOSE OF SUB-SECTION (A), (B) & (C) OF SECTION 22A OF AAI AC T. THUS, 1 NOTICE THAT THE COLLECTION OF DEVELOPMENT FEE HAS A LEGAL BACKING AND IN THE NATURE OF CESS OR TAX BEING COLLECTED WITH THE APPROVAL OF MINISTRY OF CIVIL AVIATION, GOVERNMENT OF INDIA/ RE GULATORY AUTHORITY AS PRESCRIBED U/S.22A OF THE ACT. THIS VIEW HAS BEE N CONFIRMED BY THE HON'BLE SUPREME COURT IN THE CASE OF CONSUMER O NLINE FOUNDATION VS. UOI & ORS (SUPRA). SO FAR AS THE COL LECTION OF TOLL CHARGES IS CONCERNED, THE SAME IS COLLECTED TO RECO VER THE CAPITAL COST, OPERATING AND MAINTAINING COST ALONG WITH PRO FIT. THE TOLL CHARGES ARE DETERMINED AS PER THE POLICY OF THE GOV ERNMENT OF INDIA AND ARE NOT IN THE NATURE OF TAX OR CESS. THE TOLL CHARGES ARE TREATED AS REVENUE RECEIPTS IN THE HANDS OF DEVELOP ER. LETTER DATED 27.02.2009 RECEIVED FROM THE MINISTRY OF CIVIL AVIA TION WHICH IS ON RECORD INDICATES THAT DEVELOPMENT 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 T O AIRPORT OPERATOR, IT WILL CONSIDER ASSET BASE (RAB) NET OFF DEVELOPME NT FEE AMOUNT AND NO DEPRECIATION WILL BE ALLOWED ON SUCH ASSETS. I FURTHER FIND FROM THE LETTER DATED 18.12.2012 OF AIRPORT AUTHORI TY OF INDIA ADDRESSED TO THE DIRECTOR, MINISTRY OF CIVIL AVIATI ON WHICH WAS PLACED ON RECORD, WHEREIN IT IS MENTIONED THAT THE TREATMENT OF DEVELOPMENT FEE SHOULD BE AS PER THE GUIDELINES GIV EN IN AS-12 - ACCOUNTING FOR GOVERNMENT GRANTS ISSUED BY THE INST ITUTE OF 'CHARTERED ACCOUNTANTS REGARDING GRANT AGAINST THE ASSETS. THE ANOTHER IMPORTANT AND DISTINGUISHING FACTOR IS THAT THE COLLECTION OF DEVELOPMENT FEE IS REQUIRED TO BE KEPT IN A SEPARAT E ESCROW ACCOUNT AND SUBJECT TO SEVERAL RESTRICTIONS WHEREAS THERE IS NO SUCH MUMBAI INTERNATIONAL AIRPORT P LTD. 69 STIPULATION IN THE CASE OF TOLL CHARGES. THE TOLL C HARGES COVER OPERATING AND MAINTENANCE COST OF A PARTICULAR FACI LITY AND THE QUANTUM OF THE SAME IS FIXED AS PER THE POLICY OF T HE GOVERNMENT OF INDIA. 9.12 LOOKING TO THE DISTINGUISHING FACTORS BETWEEN THE DEVELOPMENT FEE AND TOLL CHARGES, I FIND THAT THERE IS NO SIMILARITY AT ALL. THE TOLL CHARGES BY ITSELF IS A REVENUE REC EIPT EMBEDDED WITH THE RECOVERY OF THE COST OF THE ASSETS, ADMINISTRAT IVE EXPENSES AS WELL AS THE PROFITS AND THE SAME IS COLLECTED AFTER THE ASSET IS CREATED AND PUT TO USE. THE DEVELOPMENT FEE IS COLL ECTED UNDER THE AUTHORITY OF A LAW MEANT FOR UTILIZATION OF SPECIFI C PURPOSES AND PRIOR TO CREATION OF ASSETS. THE APPELLANT'S HANDS ARE COMPLETELY TIED IN UTILIZING THE DEVELOPMENT FEE WHEREAS THE S AME IS NOT THE CASE OF TOLL CHARGES. THUS, THE DISTINGUISHING FACT ORS 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 UNDER THE PROVISIONS OF 22A OF AAI ACT 2004 IS A RECEIPT IN T HE NATURE OF CESS OR TAX AND IN THE NATURE OF CAPITA! RECEIPT. FURTHE R, THE SAME HAS BEEN ALREADY CONSIDERED BY THE HON'BLE SUPREME COUR T IN THE CASE OF CONSUMER ONLINE FOUNDATION VS UNION OF INDIA & O THERS, CITED SUPRA, WHEREIN IT HAS BEEN HELD THE DEVELOPMENT FEE IS A RECEIPT IN THE NATURE OF CESS OR TAX FOR GENERATING REVENUE FO R THE SPECIFIC 'PURPOSES MENTIONED IN CLAUSE (A),(B) & (C) OF SECT ION 22A OF THE AAI ACT. FURTHER, IT IS PERTINENT TO NOTE ONCE AMOU NT HELD TO BE IN THE NATURE OF TAX, IT CANNOT BE SUBJECT TO FURTHER TAX. IT IS ALSO SEEN THAT VARIOUS RESTRICTIONS HAVE ALSO BEEN IMPOSED BY THE CENTRAL GOVERNMENT TO ENSURE THAT THE DEVELOPMENT FEE SO CO LLECTED IS UTILIZED ONLY FOR THE PURPOSE OF DEVELOPMENT OF 'AE RONAUTICAL ASSETS' AS PER PROVISIONS OF SECTION 22A OF THE AAI ACT. FU RTHER, A CERTIFICATE FROM A CHARTERED ACCOUNTANT HAS ALSO BEEN PLACED ON RECORD CERTIFYING THE UTILIZATION OF THE DEVELOPMENT FEE S O COLLECTED ONLY FOR THE PURPOSES OF ACQUIRING /CONSTRUCTING THE AER ONAUTICAL ASSETS. ACCORDINGLY, THE COLLECTION OF DEVELOPMENT FEE IS T HEREFORE, MEANT ONLY FOR SPECIFIC PURPOSE OF ACQUISITION / CONSTRUC TION OF CAPITAL ASSETS 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 BEING IN THE NATURE OF T AX OR CESS IS A CAPITAL RECEIPT AND THEREFORE THE SAME CANNOT BE BR OUGHT TO TAX. ACCORDINGLY, THE ADDITION OF RS.286,30,14,565/- IS DELETED. THE AO MUMBAI INTERNATIONAL AIRPORT P LTD. 70 IS ALSO DIRECTED TO REDUCE AN AMOUNT OF RS.19,85,99 ,146/- FROM THE BLOCK OF BUILDING AND RS.700,70,264 FROM THE BLOCK OF PLANT & MACHINERY AND RECOMPUTED THE DEPRECIATION AFTER THE SAID REDUCTION AS CLAIMED BY THE APPELLANT IN THE RETURN OF INCOME . ACCORDINGLY, 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 ALSO THE TER MS AND CONDITIONS ATTACHED TO THE SAID COLLECTION AS WELL AS ITS UTIL IZATION. 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 MA DE THE DISTINCTION BETWEEN SECTION 22 AND SECTION 22A OF AIRPORTS AUTH ORITY OF INDIA ACT. IN THE SAID JUDGMENT, THE HONBLE SUPREME COURT HAS ALSO H ELD THAT DEVELOPMENT FEES IS IN THE NATURE OF CESS OR TAX FOR GENERATING REVENUE FOR SPECIFIC PURPOSES AS MENTIONED IN SECTION 22A(A) TO SECTION 22A(C) OF THE AIRPORTS AUTHORITY OF INDIA ACT. IN THE SAID JUDGMENT IT W AS HELD THAT THE NATURE OF LEVY U/S. 22A OF 2004 ACT IS NOT CHARGES OR ANY OTH ER CONSIDERATION FOR SERVICES FOR THE FACILITIES PROVIDED BY THE AIRPORT S AUTHORITY. THE LEARNED DR, EVEN THOUGH RELIED ON THE ORDER OF THE ASSESSING OF FICER, HE DID NOT DENY THE INTERPRETATION GIVEN BY THE HONBLE SUPREME COURT I N RESPECT OF SECTION 22A OF THE AIRPORTS AUTHORITY OF INDIA ACT. IT IS NOT DENIED THAT THE DEVELOPMENT FEES SO COLLECTED ARE UTILIZED ONLY FOR THE PURPOSE OF AERONAUTICAL ASSETS AS MUMBAI INTERNATIONAL AIRPORT P LTD. 71 PER THE PROVISIONS OF SECTION 22A OF THE AIRPORTS A UTHORITY OF INDIA ACT. IN VIEW OF THIS FACT, WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER OF THE CIT(A), WHICH WARRANT OUR INTERFERENCE, WHILE HOLDI NG THAT THE DEVELOPMENT FEES SO RECEIVED BY THE ASSESSEE IS A CAPITAL RECEI PT. WE ACCORDINGLY, CONFIRM THE ORDER OF THE CIT(A) AND DISMISS GROUND NOS.10 & 11 IN A.Y. 2010-11 AND GROUND NO.5 IN A.Y. 2011-12. THIS DISPOSES OF ALL THE GROUNDS IN THE REVENUES APPEAL FOR A.Y. 2010-11. 39. SO FAR AS GROUND NO.6 IN A.Y. 2011-12 IS CONCER NED, IT IS SIMILAR TO GROUND NO.1 IN THE ASSESSEES APPEAL FOR A.Y. 2009- 10 AND 2010-11, WHICH RELATES TO DISALLOWANCE MADE U/S. 14A. AFTER HEARI NG THE RIVAL SUBMISSIONS WE NOTED THAT THE ASSESSEE HAS NOT EARNED ANY EXEMP T INCOME DURING THE IMPUGNED ASSESSMENT YEAR AND THEREFORE, THE CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S.14A. OUR VIEW IS DULY SUPPORTED BY THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. 378 ITR 33 (DEL) AND THAT OF HONBL E BOMBAY HIGH COURT (NAGPUR BENCH) IN THE CASE OF PRINCIPAL CIT VS. BAL LARPUR INDUSTRIES LIMITED IN ITA NO. 51/2016 DATED 13.10.2016. RESPECTFULLY FOL LOWING THESE DECISIONS, WE DISMISS GROUND NO.6 TAKEN BY THE REVENUE FOR A.Y . 2011-12. 40. GROUND NO.7 RELATES TO THE RATE OF DEPRECIATION ALLOWANCE ALLOWED BY THE CIT(A) @15% INSTEAD OF 10% ON TAXIWAYS, APRONS, PARKING BAYS AND BRIDGES. WE HAVE ALREADY DISMISSED THIS GROUND WHI LE DEALING WITH GROUND NO.3 IN ASSESSEES APPEAL FOR A.Y. 2009-10-& 2010-1 1. MUMBAI INTERNATIONAL AIRPORT P LTD. 72 41. IN THE RESULT, ASSESSEES APPEALS ARE STATISTIC ALLY ALLOWED AND REVENUES APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH DAY OF NOVEMBER, 2017. SD/- SD/- (PAWAN SINGH) (P K BANSAL) JUDICIAL MEMBER VICE-PRESIDENT MUMBAI; DATED: 13 TH NOVEMBER, 2017 SA COPY OF THE ORDER FORWARDED TO : 1. THE APP ELL ANT. 2. THE RESPONDENT. 3. T HE CIT(A), MUMBAI 4. THE CIT 5. DR, B BENCH, ITAT, MUMBAI BY ORDER, #TRUE COPY # ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI