MAHARASHTRA AIRPORT DEVELOPMENT COMPANY LIMITED,MUMBAI V. ACIT, CIRCLE-3(2)(1), MUMBAI

ITA 37/MUM/2024

AI Insights

The case involves the Maharashtra Airport Development Company Limited (MADC), which appealed against the orders of the Assistant Commissioner of Income Tax concerning the assessment year 2016-17. The primary issues revolved around the taxability of interest income on fixed deposits, grant-in-aid received from the State Government, and the characterization of certain receipts as business income or income from other sources. The Tribunal considered previous rulings and the constitutional status of MADC as an instrumentality of the State, leading to the conclusion that the income in question was not taxable under the Income Tax Act.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 775320 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2016-2017
• Appeal Filed On: 03-01-2024
• Other Referred Cases: National Thermal Power Co. Ltd. v. CIT, Jute Corporation of India v. CIT, Som Prakash Rekhi vs. Union of India, City and Industrial Development Corporation of Maharashtra Ltd. vs. PCIT, Maharashtra Labour Welfare Board vs. DCIT
• Laws Referred To: Income-tax Act, 1961, Constitution of India
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RITESH MISRA
• Assessee Lawyers: RUSHABH MEHTA; STATING
• Keywords: Set aside; Business income; Opportunity of being heard; Depreciation; Capital receipt; Capital expenditure; Principle of natural justice; Earning of tax free income; Unabsorbed depreciation; Rule 8D
• Section: 143(3); 14A; 115JB; 37(1)

Judgement Text

"IN THE INCOME-TAX APPELLATE TRIBUNAL“E” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT & SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No. 37/MUM/2024 (A.Y. 2016-17) Maharashtra Airport Development Company Limited 8, World Trade Centre, Tower 1, 8th Floor, Cuffe Parade, Mumbai – 400005, Maharashtra v/s. बनाम Assistant Commissioner of Income Tax, Circle – 3(2)(1), Room No. 608, Aayakar Bhavan, Maharishi Karve Road, Mumbai – 400020, Maharashtra स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AADCM9623M Appellant/अपीलार्थी .. Respondent/प्रतिवादी ITA No. 87/MUM/2024 (A.Y. 2016-17) Deputy Commissioner of Income Tax, Circle – 3(2)(1), Room No. 608, 6th Floor, Aayakar Bhavan, Maharishi Karve Road, Mumbai – 400 020, Maharashtra v/s. बनाम Maharashtra Airport Development Company Limited, 8, World Trade Centre, Tower 1, 8th Floor, Cuffe Parade, Colaba S.O. Mumbai–400005, Maharashtra स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AADCM9623M Appellant/अपीलाथी .. Respondent/प्रतिवादी Assessee by : Shri Rushabh Mehta, AR Revenue by : Shri Ritesh Misra, (CIT DR) Date of Hearing 15.07.2025 Date of Pronouncement 09.09.2025 Printed from counselvise.com P a g e | 2 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :- The above captioned appeal has been filed by the assessee and Cross appeal by the Revenue against the orders of even date as passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to assessment order passed u/s. 143(3) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated24.12.2018 for the Assessment Year [A.Y.] 2016-17.Since some of the issues are common and also the fact that appeals were heard together, they are being taken up together for adjudication vide this composite order for the sake of brevity. We take up assessee’s appeal first. 2. The grounds of appeal are as under:- ITA No. 37/MUM/2024 (AY 2016-17)(Assessee) 1. The order passed u/s 143(3) of the I.T. Act by the Ld. Asst. Commissioner of Income Tax, Circle-3(2)(1), Mumbai (“the Ld. Assessing Officer”) is without jurisdiction, invalid and bad in law and against the principles of natural justice. This ground is general in nature. Hence, no adjudication is needed. 2. a) The Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (hereinafter referred to as “the Ld. CIT(A)”) has, on facts and circumstances of the case, erred in sustaining the re-characterization of interest income of Rs. 23,55,68,319/- on Fixed Deposits as ‘income from Printed from counselvise.com P a g e | 3 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai other sources’ instead of ‘business income’ to be reduced from the cost of the project without appreciating the explanations/submissions placed on record and also in not providing adequate opportunity of being heard. b) Without prejudice to the Ground no. 2(a), the Ld. CIT(A) erred in facts and law in not allowing deduction of interest expense u/s. 57 against the above interest income on Fixed Deposits of Rs. 23,55,68,319/- assessed under ‘income from other sources’. c) Without prejudice to Ground no. 2(a) & 2(b), on facts and circumstances of the case, the Ld. Assessing Officer erred in law in not increasing/restating the “Capital Work in Progress” / “Cost of the Project” to the extent of addition of interest income on Fixed Deposits of Rs. 23,55,68,319/-upheld by the Ld. CIT(A) under the head ‘Income From Other Sources’ which is reduced by the assessee from “Capital Work in Progress” in its Balance Sheet. ADDITIONAL GROUND OF APPEAL On facts and circumstances of the case, the addition of interest income of Rs. 23,55,68,319/- earned on Fixed Deposit ought to have not been made as the assessee is a State by itself or a surrogate of the State or an agent, performing the functions of the State and/or on behalf of the State of Maharashtra within the meaning of Article 12 r.w. clause (1) of Article 289 of the Constitution of India and that the said interest income is not derived from any trade or business carried on by the assessee. 3. The assessee has raised the above additional ground of appeal under Rule 11 of the ITAT Rules whereby the taxability of the interest income of Rs 23.55 cr. has been contested. This ground raised by the assessee is against the re-characterization of interest income of Rs. 23,55,68,319/- on Fixed Deposits by the Assessing Officer to tax it as Printed from counselvise.com P a g e | 4 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai ‘Income from other sources’ as against ‘Business income’ claimed by the assessee and reduced it from the cost of the project. 4. In this regard, it has been pointed out by the ld.AR that in recent orders for AY 2010-11, 2012-13, 2014-15 & 2015-16 in its own case on the same issue as above, the Hon’ble ITAT, Mumbai held that the appellant is a State by itself or a surrogate of the State or an agent, performing the functions of the State and/or on behalf of the State of Maharashtra within the meaning of Article 12 of the Constitution of India read with clause (1) of Article 289 of the Constitution of India. Besides, in the recent order for A.Y. 2007-08 in its own case from the hon’ble ITAT wherein it is affirmed that the assessee is a State within the meaning of Article 289 of the Constitution of India, being an instrumentality/agent of the State and consequently, the interest earned on the Fixed Deposits, being not in the nature of business income, has been held to be exempt. 4.1 Therefore, it is claimed that the interest income of Rs. 23,55,68,319/- earned on Fixed Deposits, not being derived from any trade or business carried on by the assessee, ought to have not been taxed and added under the head ‘income from other sources’. However, Printed from counselvise.com P a g e | 5 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai as no specific ground in this regard had been taken by the assessee, it accordingly filed the additional ground of appeal which is a legal. Further, all facts pertaining to the said additional ground are on record. Accordingly, no investigation would be required in respect of the additional ground of appeal. The assessee therefore prayed that additional ground of appeal may be admitted and decided as per law. The appellant in this regard relies on the decisions of the hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. (1998) 229 ITR 383 (SC) and Jute Corporation of India v. CIT (1991) 187 ITR 688 (SC) wherein it has been held that legal ground can be taken up at any point of time. 4.2 On due consideration of above stated facts we are inclined to admit the above additional ground which to our mind is a pure legal ground requiring no need to go beyond the facts on record. Since, the ground is intrinsically linked to the very taxability of interest income on FDRs, we consider it appropriate to adjudicate the same at the outset. 5. Facts in brief are that the assessee which is Maharashtra Government undertaking has been consistently disclosing interest income on certain FDRs kept with banks. The said interest is shown as part of capital work in progress and not offered for tax while the Printed from counselvise.com P a g e | 6 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai Revenue has been taxing the same as Income from other sources. In the AY 2008-09, the coordinate bench directed the department to examine the cash flow so as to ascertain where the said deposits were made out of surplus amount available with the assessee or not.It submitted that during the year, Interest on fixed deposits with various Banks was Rs.23,55,68,319/-.It had earned interest on Fixed Deposits with Banks and these fixed deposits were not placed out of surplus funds. As impugned interest on Fixed Deposits was inextricably linked to the main business activity of the Company, the same was treated as Business Income and was reduced from cost of the project by it as per Accounting Standards issued by the Institute of Chartered Accountants of India. Accordingly, the interest was in the nature of business receipt and not Income from Other Sources. Reliance was placed on various case laws. Further, attention was drawn to the observation recorded by Hon’ble ITAT, G Bench, Mumbai in the assessee’s own case at Para 6 of the Appellate Order for A.Y. 2008-09 wherein the ITAT directed the AO to re-adjudicate the issue to determine whether the Fixed Deposits are placed out of surplus funds or out of loans and borrowings to determine whether Interest earned thereon is in the nature of Income from Business or Income from Other Sources. In the year under Printed from counselvise.com P a g e | 7 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai consideration, the AO made the addition on the same lines as in previous assessment years and the ld.CIT(A) upheld the addition. 5.1 The ld.AR has claimed that the issue is squarely covered in favour of the assessee. Attention is drawn to the order in assessee’s own case, the coordinate bench in its order dated 27.09.2024 in ITA No.7497 and 5202/Mum/2018 AY 2007-08 has dealt with similar additional ground and the question of taxability of interest income on FDRs etc. It was concluded that in view of the provisions of Article 289(1) of the Constitution, the impugned sum was not liable to income tax at all. Relevant parts of the order are extracted as below for the sake of brevity and clarity, “In view of the above, being a set aside matter, scope before us in the present appeals is limited to the direction so given, whereby we have to ascertain whether the said direction has been complied or not. However, at this stage before us, for the first time, assessee has raised a legal issue vide additional ground no.4, under Rule 11 of the ITAT Rules. While raising this additional ground, assessee has submitted that it has received orders for various years in its own case, passed by the Co-ordinate Bench wherein it is affirmed that assessee is a State by itself or a surrogate of the State or an agent, performing the functions of the State and/or on behalf of the State of Maharashtra within the meaning of Article 12 of the Constitution of India read with clause(1) of Article 289. Therefore, the assessee contends that the interest income earned by it on fixed deposits which has been added under the head \"income from other sources\" and not derived from any trade or business carried out by the assessee, cannot be added in the hands of the assessee. It is contended by the assessee that it is a legal ground which goes to the root of the matter and no fresh investigation is required in respect of the same. Assessee relies on the decision of the Hon'ble Supreme Court in the case of National Thermal Power Company Ltd. (1998) 229 ITR 383(SC) and Jute Corporation of India (1991) 187 ITR 688(SC), wherein it is held that legal grounds can be raised at any stage of the proceedings. Before we take up the matter for admissibility of this additional ground, brief history and facts of the case are noted as under: Printed from counselvise.com P a g e | 8 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai 4.1. Assessee is a company registered under the Companies Act, 1956 and carries on the activity of development of \"Multi-modal International Hub Airport at Nagpur\" as a Special Planning Authority appointed under section 40(1)(b) of the Maharashtra Regional and Town Planning Act, 1966. It also carries on the activity of maintenance and development of various airports in the State of Maharashtra situated at Shirdi, Solapur, Amaravati, Pune, Karad, Phaltan, Dhule and Chandrapur. Assessee is also appointed as SEZ Developer in accordance with provisions of SEZ Act, 2005. 4.2. Assessee filed its return of income on 20.10.2007 reporting total income at Rs. Nil. During the course of scrutiny assessment u/s 143 Maharashtra Airport Development Company Ltd., AY 2007-08 (2), ld. Assessing Officer rejected the assessee's claim of commencement of business and accordingly disallowed all the expenditure and taxed receipts amounting to Rs. 13,56,67,377/- under the head \"Income from other sources\". Aggrieved, assessee went in appeal before the ld. CIT(A). 4.3. Ld. CIT(A) partly allowed the appeal of the assessee and directed the ld. Assessing Officer to ascertain those expenses which are directly related to earning of this income from other sources and the same should be allowed as expense for earning such income u/s 57 of Act. Ld. Assessing Officer, passed an order on 03.02.2012, giving effect to directions of ld. CIT(A), in respect of allowing expenditure u/s 57 of the Act, related to earning of income from other sources, but did not allow the aforesaid expenses. Aggrieved, assessee once again went in appeal before the ld. CIT(A) who vide order dated 21.12.2012, allowed only 10% of expenditure which is debited to Profit and Loss account as expenditure u/s 57 against income from other sources. Aggrieved, assessee went in appeal before the Tribunal. Co-ordinate Bench of ITAT heard the case on 16.12.2015 and the matter was set aside to the file of ld. Assessing Officer for deciding afresh the quantum of interest expenses to be allowed against interest income. However, while giving effect to the directions of ITAT, ld. Assessing officer denied assessee's claim of deduction in respect of interest on borrowings to the tune of Rs. 8,87,83,570/- against interest income on fixed deposits. Aggrieved, assessee is in appeal before the Tribunal. 5. In the back drop of the above stated facts and contesting on the additional ground no.4 referred above, claim of the assessee for its non- taxability is on the strength of the Article 289 of the Constitution of India, since its activities are akin to that of the State or any agent of the State. It was submitted that this ground was not raised before authorities below, but the plea of the assessee can be appreciated on the strength of the statute under which it has been set up by the State legislature which does not require any long-drawn investigation of fresh facts. By this ground, assessee has made a point that it must be considered as State or an agent of the State so as to fall within the prescription of Article 289(1) of the Constitution of India, for which examination of the statute under which it is constituted is to be examined along with the objective and the activities undertaken by it. Printed from counselvise.com P a g e | 9 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai 5.1. In the course of hearing, reliance was placed on the decision of Co- ordinate Bench of ITAT, Mumbai in assessee's own case in ITA No.3682/Mum/2017 for AY 2012-13, dated 15.03.2024 which in turn placed reliance on another decision in assessee's own case in ITA No.3072/Mum/2014 for AY 2010-11, dated 19.06.2019, wherein assessee has been held as an agent of the State. Assessee further placed reliance on the decision of Co-ordinate Bench in the case of City and Industrial Development Corporation of Maharashtra Ltd. vs. PCIT (2012) 25 taxmann.com 333 (Mum), wherein similar issue was considered. Reliance was also placed on the decision of PCIT vs. Maharashtra Labour Welfare Board in ITA No.137/Mum/2023, dated 25.09.2023 which also held that the assessee therein is a State within the meaning of Article 289(1) of the Constitution of India being an instrumentality of State. 5.2. Considering the findings in the above judicial precedents, in our considered opinion a plea of the assessee goes to the root of the jurisdiction of the ld. Assessing Officer to levy tax on the income of the assessee. In the year under consideration, this issue has not been taken before the authorities below and is raised for the first time before us as a pure point of law which is relevant to determine the tax liability of the assessee. 5.3. In the present case, only a fresh appraisal of the facts in the context of the legal issue raised by the assessee is required to be undertaken and no new facts are to be investigated. The bonafide of the additional ground so raised by the assessee are not contested and therefore, in the given set of facts and circumstances, the additional ground so raised is admitted for adjudication. While doing so, the ratio of the judgment of Hon'ble Supreme Court in the case of National Thermal Power Company Ltd. (supra) fortifies the admission of the said ground for adjudication. Since this additional ground goes to the root of the matter, we are inclined to take it up first before dealing with all other grounds taken by the assessee as well as by the Revenue, in their respective appeals. 6. To deal with this additional ground, we appraise ourselves with Article 289 of the Constitution of India which is reproduced as under: \"(1) The property and income of a State shall be exempt from Union taxation. (2) Nothing in clause (1) shall prevent the Union from imposing, or authorizing the imposition of, any tax to such extent, if any, as Parliament may by law provide in respect of a trade or business of any kind carried on by, or on behalf of, the Government of a State, or any operations connected therewith, or any property used or occupied for the purposes of such trade or business, or any income accruing or arising in connection therewith. (3) Nothing in clause (2) shall apply to any trade or business, or to any class of trade or business, which Parliament may by law declare to be incidental to the ordinary functions of Government.\" Printed from counselvise.com P a g e | 10 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai 6.1. From the above, we note that Article 289 exempts state income or property from taxation. On plain reading of above article, it is clear that Union can (i) itself impose or authorize to impose (ii) any tax to such extent, as parliament may by law provide (iii) in respect of a trade or business of any kind carried on or on behalf of Government of a state. Further, Article 289 (2), which is the exception to 289(1), it is important to note that parliament by law provide to tax the property or income in relation to only trade or business of any kind carried on by, or on behalf of, the Government of a State, or any operations connected therewith, or any property used or occupied for the purposes of such trade or business, or any income accruing or arising in connection therewith. 7. Further, a bare perusal of Article 12 of the Constitution of India shows that the definition of \"the State\" given in this article is inclusive and not exhaustive. \"The State\" includes: (a) the Government and Parliament of India, (b) the Government and the Legislature of each of the States, (c) all local and other authorities within the territory of India, and (d) all local and other authorities under the control of the Government of India. 7.1. The expression \"other authorities\" used in Article 12 is neither defined in the Constitution of India nor in any other statute. Therefore, the Hon'ble Supreme Court of India and the Hon'ble High Courts have interpreted this expression in various judgements. The Hon'ble Supreme Court of India while interpreting the expression \"other authorities\" in the case of Som Prakash Rekhi vs. Union of India reported at AIR 1981 SC 212 culled out certain tests to determine as to when a Corporation should be said to be an instrumentality or agency of the State. The tests laid down by the Hon'ble Apex Court are summarized as under: \"1. If the entire share capital of the corporation is held by the Government, it would go a long way towards indicating that the corporation is an instrumentality or agency of the Government. 2. Existence of deep and pervasive State control may afford an indication that the corporation is a State agency or instrumentality. 3. Whether the Corporation enjoys monopoly status which is State conferred or State protected. 4. If the functions of the corporation are of public importance and closely related to governmental functions. It would be a relevant factor in classifying the corporation as an instrumentality or agency of the Government 5. If a department of a Government is transferred to a corporation, it would be a strong factor supporting this inference of the corporation being an instrumentality or agency of the Government.\" 7.2. After applying the cumulative effect of all the relevant factors mentioned above, if the body is found to be an instrumentality of the agency of the Government, it would be an authority included in term \"State\" under Article Printed from counselvise.com P a g e | 11 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai 12 of the Constitution of India. However, the tests indicated by the Hon'ble Apex Court in the case of Som Prakash Rekhi are merely indicative and not absolute and thus, have to be applied discretely. If any body or organisation falls within the criteria as laid down by the Hon'ble Apex Court, it can be considered that it falls within the term \"State\". 8. With the above understanding, we look at the status and structure/set up of the assessee. The assessee, Maharashtra Airport Development Company Limited ('MADC') was constituted as a company under the Companies Act, 1956 in the year 2002 by the Government of Maharashtra ('GoM') as a special purpose company to develop Multi-modal International Hub Airport at Nagpur ('MIHAN') and aviation infrastructure in the State of Maharashtra to provide the regional air connectivity and operationalizing certain government schemes. MADC is governed under the Maharashtra Regional and Town Planning Act, (for short, \"MRTP Act\") and as per section 160 of MRTP Act, assessee shall be dissolved once the purpose of the GoM is achieved and from such date, all properties, funds and dues vested in MADC shall vest in or be realisable by the State Government. 8.1. The main objects of MADC as per clause III (A) of the Memorandum of Association is to design, plan. construct, erect, build, remodel, repair, execute, develop, operate, sale, lease, rent, improve, administer, manage control, maintain and demolish airport, air-traffic equipment, traffic terminals, roads, railways, highways, expressways, bridges, tunnels, railroads, urban transport systems, alleys, township schemes, industrial, docks, shipyards, canal, wells, ports, reservoirs, embankments, dams, r-cation works. reclamations, improvements, sanitary systems, water works, water gas or any other structural or architectural work and Special Economic Zones. 8.2. Pursuant to the above stated objectives, assessee has carried out Development of Nagpur airport as world class Multi-modal International Hub Airport, adjacent multi product Special Economic Zone and supporting infrastructure. It is also carrying out activities to Build and Operate airports in the State, to facilitate Intra-state and Inter-state Connectivity, to encourage overall growth of aviation sector in the State and to ensure planned development around airports. 9. On the above stated factual status/setup of the assessee, we note that identical additional ground was raised by the assessee before the Co-ordinate Bench of ITAT in its appeal for Assessment Year 2012-13 and 2015-16 in ITA No. 3682/Mum/2017 and ITA No.522/Mum/2019, respectively, which was admitted and adjudicated upon to hold that assessee is an arm of the State, thus an instrumentality of the State. The relevant observations and findings of the Co-ordinate Bench in this respect are reproduced below for ready reference. Printed from counselvise.com P a g e | 12 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai 22. In order to decide the issue in controversy we would decide if the assessee company is a state while executing the work of development of airports, repair and maintenance of airports as an arm of the state, 23. Undisputedly the assessee company was incorporated as a company under the Companies Act, 1956 by the Government of Maharashtra as a special purpose company to develop multi model international hub airport at Nagpur and aviation infrastructure in the State of Maharashtra in order to provide regional air connectivity and operationalising certain government schemes. It is also not in dispute that the assessee company was formed with equity participation from various government companies namely CIDCO, MIDC, NIT, MSRDC, SICOM & NMC which are owned and controlled by Government of Maharashtra; that the entire management and functional control of the assessee company is that of Chief Minister of Government of Maharashtra and all other board persons are senior officers of the State Government of Maharashtra; that grant-in-aid was received by the assessee company from Government of Maharashtra in order to carry out statutory functions and its activities are for the development of the state in general and for the benefit and welfare of the general public in particular; that it is also not in dispute that the assessee company is appointed by the State Government as a special planning authority under section 40(IB) of the Maharashtra Regional Town Planning (MRTP) Act, 1966; that it is also not in dispute that the assessee company being a special planning authority is required to carry out the work of development and disposing of land in the notified area as an agent of the state. 24. In the backdrop of the aforesaid undisputed facts, we are of the considered view that the assessee company being a wholly owned company of the State of Maharashtra to carry out/execute the work of development of land acquisition, development of airports, repair and maintenance of airports etc. as an arm of the state, thus an instrumentality of the state for the following reasons: i) that the assessee company being a special planning authority is carrying out its activities as an agent of the Government of Maharashtra as per section 113 of the MRTP Act. ii) that the assessee company as a special planning authority is constituted to carry out the work of developing and disposing of land in the notified area as an agent of the State Government. iii) that under section 114(2) of the MRTP Act the assessee company is empowered to exercise its power only after obtaining consent and only in the manner as directed by the Statement Government independently. and cannot function iv) that all the development proposals of the assessee company are sent to the state government for approval as required under section 115 of the MRTP Act. Printed from counselvise.com P a g e | 13 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai (v) that the assessee company is required to submit the timely reports/returns etc. to the state government from time to time as required under section 155 of the MRTP Act. vi) that under section 160 of the MRTP Act a state government can dissolve the special planning authorities and upon dissolution its properties, the liabilities, undischarged functions shall get transferred to the state government. vii) that as per sub-section 3A of section 113 of MRTP Act any corporation/company or subsidiary company which is into the work of developing and disposing of land in the area of a new town is an agent of the state government. Sub section 3A of section 113 of the Act reads as under: \"(3A) Having regard to the complexity and magnitude of the work involved in developing any area as a site for the new town, the time required for setting up new machinery for undertaking and completing such work of development, and the comparative speed with which such work can be undertaken and completed in the public interest, if the work is done through the agency. of a corporation including a company owned or controlled by the State or a subsidiary company thereof, set up with the object of developing an area as a new town, the State Government may, notwithstanding anything contained in sub-section (2) require the work of developing and disposing of land in the area of a new town to be done by any such-corporation, company or subsidiary company aforesaid as an agent of the State Government, and thereupon, such corporation or company shall, in relation to such area, be declared by the State Government by notification in the Official Gazette, to be the New Town Development Authority for that area.\" viii) that the co-ordinate Bench of the Tribunal in case of City and Industrial Development Corporation of Maharashtra Ltd. vs. ACIT (2012) 25 taxmann.com 333 (Mum.) while deciding the identical issue in case of City and Industrial Development Corporation (CIDCO) which is also a subsidiary company under the control and supervision of State Government into business of construction of residential and commercial structures as well as development of infrastructure in towns and any development project completed by the CIDCO was held to be an agent of the state government. And as such its income cannot be assessed as business income in the hands of the CIDCO. ix) that like CIDCO the assessee company is also wholly owned company of State of Maharashtra which is into land acquisition, development of airports, repair and maintenance of airports and as such receiving of grant-in-aid from Government of Maharashtra by the assessee company being an agent of the state is not assessable to tax. x) that Hon'ble Bombay High Court in Writ Petition No.1211 of 2009 (supra) vide its order dated 07.11.2009 held that \"acquisition of land on behalf of the Printed from counselvise.com P a g e | 14 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai state government at the cost of state government by CIDCO appointed as new town development authority under sub section 3A of section 113 is doing the work of developing and disposing of the land in the area as an agent of the state government. So the appointment of CIDCO being under section 3A of section 113 of the MRTP Act the CIDCO acts as an agent of the state government\". xi) that when we apply the ratio of the decision rendered by Hon'ble Bombay High Court in case of Percival Joseph Pareira (supra) to the case at hand the assessee company is also appointed as a town planning authority under sub section 3A of section 113 of MRTP Act for acquisition of land for development of airports, repair and maintenance of airports and for rehabilitation of the project affected persons (POP), for infrastructure development of airports in the notified area as an agent of the state. The assessee company carries out all the activities for and on behalf of the state government and after development and completion of the project the entire property vests in the state government. The entire control over the assessee company is of state government being exercised through the officer of the state government. In these circumstances the assessee company is an agent of the state not assessable to tax. As such grant-in-aid received by the assessee company from the Government of Maharashtra for land acquisition, development of airports, repair and maintenance of airports etc. is not a capital receipt as has been held by the Ld. CIT(A) rather the assessee company has performed these functions as an agent of the state and as such not assessable to income tax xii) that the assessee company has been formulated with a specific purpose i.e. to acquire the land for development of airports, repair and maintenance of airports etc, for which it receives grant-in-aid from the state of Maharashtra which is not taxable under Income Tax Act. xiii) that it is however brought on record and candidly admitted by the Ld. A.R. for the assessee that other income derived by the assessee company from its project is not claimed as exempt. xiv) that the contention of the Ld. D.R. for the Revenue that when the assessee company itself is paying taxes on its business income the grant-in-aid received by the assessee on which profit is to be earned is also business income is not sustainable in view of what has been discussed in the preceding paras. xv) that even Article 289(1) of the Constitution of India itself says about the income from trade etc. but the grant-in- aid received by the assessee company from State of Maharashtra for the purpose of land acquisition, development of airports, repair and maintenance of airports is not a trade activity, hence not taxable to the income tax. 9.1. Thus, from the perusal of the above, we note that it has been held that the assessee is an agent of the State of Maharashtra, amenable to immunity as per Article 289(1) of the Constitution of India. Printed from counselvise.com P a g e | 15 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai 9.2. We also take note of the decision of Co-ordinate Bench of ITAT in the case of Maharashtra Labour Welfare Board vs. DCIT in ITA No.137/Mum/2023 dated 25.09.2023, wherein the assessee was held as a State, within the meaning of Article 289 of the Constitution of India, being an instrumentality or an agency of the State and thereby the interest earned on the FDRs was held to be exempt. While holding so, the Co- ordinate Bench relied on the decision of the Hon'ble Supreme Court in the case of Som Prakash Rekhi vs. Union of India (supra). Support was also drawn from the decision of the Hon'ble High Court of Karnataka in the case of CIT vs. Karnataka Urban Infrastructure Development and Finance Corporation (2006) 155 taxmann.com 228 (Kar), wherein the Hon'ble High Court held that assessee acted as a nodal agency of the Government for implementing the scheme of the Government and therefore the interest income earned on the bank deposits cannot be treated as the income of the assessee, as the interest is earned out of the money given by the Government for the purpose of implementing the scheme. 10. Having considered the above findings of the Co-ordinate Bench of ITAT in assessee's own case as well as in other decisions referred above, we are in agreement with the same to hold the assessee to be a State, being an instrumentality / agent of the State, thereby resulting in its interest income earned on fixed deposits not chargeable to tax. Further, we note that clause (2) of Article 289 provides an exception and authorises the Union to impose a tax in respect of the income derived by the Government of a State from trade or business carried out by it or on its behalf. In this respect, it is undisputed fact that ld. Assessing Officer has himself assessed the interest income on fixed deposits under the head \"income from other sources\". The said interest income thus,cannot be said to be derived from trade or business carried out by the assessee. Accordingly, clause(2) of the Article 289 is inapplicable. Since the assessee is held to be a State, or a surrogate of the State or an agent, performing the functions of the State and /or on behalf of the State of Maharashtra, whereby its income is not chargeable to tax within the meaning of clause(1) of the Article 289.” 5.2 We find that the additional ground(supra) filed by the assessee in the instant assessment year is squarely covered by the above decision by the coordinate bench of ITAT, Mumbai dated 27.09.2024(supra).Respectfully following the above coordinate bench decision, we hold that the impugned interest income of Rs 23.55 cr. is not liable to tax. Thus, allowing the additional ground(supra),we direct Printed from counselvise.com P a g e | 16 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai the AO to delete the addition made. Ground no.2(a)/(b) and(c) being in consequential, do not need any adjudication. 6. In ground no.3 it is stated that a) The Ld. CIT(A), in view of the facts and circumstances of the case, erred in upholding the disallowance u/s. 14A r.w.r. 8D amounting to Rs. 12,01,617/- made in a mechanical manner without appreciating the explanations provided by the appellant and without assigning any reason of dissatisfaction as envisaged u/s 14A(2) of the Act. b) The Ld. CIT(A), in view of the facts and circumstances of the case, erred in upholding the disallowance u/s. 14A r.w.r. 8D amounting to Rs.12,01,617/- without appreciating that it is well settled that once there is no exempt income earned during the year, no such disallowance could have been made. c) On facts and circumstances of the case, the Ld. Assessing Officer ought to have not added the amount of disallowance Rs. 12,01,617/- u/s. 14A of the Act arrived as per Rule 8D to the Book Profits computed u/s 115JB of the Act. 7. As per the balance sheet the assessee had made several investments but had not disallowed any such expenses suo-motu interms of section 14A of the Act. The AO was satisfied that disallowance u/s. 14A r.w.r. 8D was to be made in respect of investments which were capable of generating exempt income. In view of the above the disallowance u/s.14A r.w.r. 8D was computed at Rs.12,01,617/-was Printed from counselvise.com P a g e | 17 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai added to the income which was also upheld by the ld.CIT(A).He also made adjustments under MAT. 7.1 It appears that facts involved and the disallowance made are identical in previous assessment years and have already been adjudicated in favour of the assessee on the ground that the AO has mechanically applied the provisions contained under rule 8D without noticing the fact that there was no exempt income and own funds of the assessee were far more than the investment made by it during the years under consideration. It is admitted fact on record that during the year under consideration no exempt income has been earned by the assessee. Identical issue has already been decided in favour of the assessee in its own case for A.Y. 2010-11 and 2011-12. By now, it is a settled principle of law that when there is no exempt income earned by the assessee during the year under consideration no disallowance can be made under section 14A read with rule 8D. Reliance in this case is placed on decisions rendered by Hon'ble Delhi High Court in case of PCIT vs. Era Infrastructure (India) Ltd. (2022) 141 taxmann.com 289 (Delhi). Similarly, when there is no disallowance under the normal provisions no disallowance under section 14A readwith rule 8D under MAT provisions is sustainable as has been held by Hon'ble Bombay High Printed from counselvise.com P a g e | 18 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai Court in case of CIT vs. M/s. Bengal Finance & Investments Pvt. Ltd. in Income Tax Appeal No.337 of 2013 order dated 10th February 2015.Accordingly,the AO is directed to delete the disallowance made by invoking the provisions of Rule 8d r.w. Section 14A of the Act as also the consequential addition u/s 115JB of the Act. The ground no.3(a)/(b) and (c) are therefore allowed. 8. In ground no.4,it is stated that a) On facts and circumstances of the case, the Ld. CIT(A) ought to appreciate that the grant received during the year from the State Government is a capital receipt, not liable to tax, as the assessee is a State by itself or a surrogate of the State or an agent, performing the functions of the State and/or on behalf of the State of Maharashtra. b) The Ld. CIT (A) erred in facts and law in upholding the addition of Grant-in-aid received from the Government of Maharashtra towards the various ongoing/pending projects amounting to Rs. 184,66,84,704/- (comprising of Grant towards MIHAN Rehabilitation of Rs. 140,00,00,000/- + Grant towards Shirdi Airport of Rs. 42,14,00,000/- + Grant towards Other Airports (Repairs & Maintenance) of Rs. 2,52,84,704/-) by invoking provisions of Section 2(24)(xviii) of the Act without appreciating the explanations and documents placed on record by the appellant. c) The Ld. CIT(A) failed to appreciate that the Grant in Aid given by the State Government is for specific purpose and same has been spent by the appellant for that specific purpose and that the appellant is not the beneficiary of such grants. Printed from counselvise.com P a g e | 19 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai d) Without prejudice to ground no. 7(a), (b) and (c), the subsidy received by the assessee can be treated as income only in the year in which the expenses are incurred or utilisation thereof is made based on the principle of matching concept and only the resultant net income be taxed. e) The Ld. Assessing Officer in facts and law ought not to have added the Grant-in-aid received from the Government of Maharashtra towards the various ongoing/pending projects amounting to Rs. 184,66,84,704/- to the book profit u/s. 115JB of the Act. 9. According to the assessment order, the assessee company is a 100% Govt. holding Company wherein the Govt. of Maharashtra is a 100% shareholder and is providing various grants to the assessee company for carrying out its functions. On verification of the balance sheet of the assessee for the current year, it was noticed that during the year the assessee had received grant in aid from government of Maharashtra as detailed below to the tune of Rs.189,73,29,496/-which was directly credited to the Reserves and Surplus and then allocated to various ongoing/pending projects. 1. MIHAN Rehabilitation … Rs.140,00,00,000/- 2. Shirdi Airport Rs. 42,14,00,000/- 3. Mihan Development Fund Rs. 5,06,44,792/- 4. Other Airports (Repairs &Maintenance) Rs. 2,52,84,704/- Printed from counselvise.com P a g e | 20 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai 9.1 The AO observed that in view of the fact that the said grant in aid received from the Govt. of Maharashtra was not towards equity or share capital or otherwise and also since the same had not been claimed as a capital receipt in the books of account, it was liable to be taxed as revenue receipt. In view of this the assessee was show cause, the assessee submitted that aforesaid Governments grants had been shown under the Capital Reserves, being in the nature of Capital Receipts. It was contented that the assessee company MADC is a Government Company incorporated on August 26, 2002. It is engaged in the business of development of airports in the State of Maharashtra and development of SEZ at Nagpur. The Registrar of Companies had given Certificate for Commencement of Business on March 25, 2003. The main objects of the Assessee Company as per the Memorandum of Association are to design, plan, construct, erect, build, remodel, repair, execute, develop, operate, sell, lease, rent, improve, administer, manage, control, maintain and/or demolish airports, air traffic equipment, traffic terminals, roads, railways, highways, expressways, bridges, tunnels, railroads, urban transport systems, alleys, township schemes, industrial parks, docks, shipyards, canal, wells, ports, reservoirs, embankments, dams, irrigation works, reclamations, improvements, sanitary system, water works, water supply, gas or any other structural or architectural Printed from counselvise.com P a g e | 21 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai work and Special Economic Zones. The Government of Maharashtra vide Resolution dated February 4, 2003 appointed the Assessee Company as the Special Planning Authority for development of ‘Multimodal International Hub Airport at Nagpur (MIHAN)’. The said Grant-in-Aid is held by it on behalf of the Government of Maharashtra for disbursement to District Collector / other Govt. authorities/for payment of consideration for the purchase of land to land owners, rehabilitation of the project affected persons and development of airports. As per accounting policy, Government grants were credited to capital reserves and treated as part of shareholders' Funds. By considering the purpose for which the assessee company was formed and Government Resolution sanctioning the Grantthe intention behind sanctioning the grant for acquisition of Land / rehabilitation was to set-up and develop the MIHAN Project and other Airport projects. Hence, the nature of grant in aid received by the Company is definitely in the nature of Capital receipt. The character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the grant is given. In other words, in such cases, one has to apply the purpose test. Moreover, it is important to note that the point of receipt of the grant is not relevant to decide the taxability. If the object of the assistance under the Printed from counselvise.com P a g e | 22 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai grant scheme was to enable the assessee to set up a new unit or to expand the existing unit, then the receipt of the grant was on capital account. Therefore, it is the object for which the subsidy/assistance/grant is given which determines the nature of the grant. 9.2 The AO proceeded to tax the above sums as revenue receipts and added to the income. The ld.CIT(A) upheld the addition concurring with the AO. He also observed that the impugned sum was also taxable in view of the provisions of section 2(24) (xviii)of the Act. 10. The ld.AR before us has argued that the grants received for maintenance of other airports was towards repairs and maintenance of runway and other infrastructure of these airports to ensure safety of passengers. It is very much clear that aforesaid expenditure incurred is on behalf of Government of Maharashtra for which grants are received and expenditure incurred has separately been booked under the head “Grant from Govt. of Maharashtra – Other Airports (Repairs & Maintenance)” Further, in case if total amount of Governments grants received could not be spent in the year of its receipt, then the same ought to be utilized in subsequent years. In this context, it is pertinent to note that Government of Maharashtra has complete authority to call Printed from counselvise.com P a g e | 23 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai back unspent amount of grant. Hence, aforesaid unspent amount of grant which MADC is holding as custodian on behalf of Government of Maharashtra cannot be treated as its income. 10.1 It is also submitted that the issue stands covered in favour of the assessee as in its case for AY 2012-13 to 2015-16 in ITA No.3682/M/2017,it has been held by the coordinate bench of ITAT, Mumbai that such grants are exempt under Income tax as per article 289(1) of the Constitution. Besides, it is contented that section 2(24) is also not applicable as the same can be applied only to those assessees who get such grants for their commercial advantage. 11. On careful perusal of the ITAT order (supra) we find that the issue in hand has been adjudicated in favour of the assessee in the light of the provisions of Article 289(1) of the Constitution. Relevant parts of the decision are reproduced as below: “23. Undisputedly the assessee company was incorporated as a company under the Companies Act, 1956 by the Government of Maharashtra as a special purpose company to develop multi model international hub airport at Nagpur and aviation infrastructure in the State of Maharashtra in order to provide regional air connectivity and operationalising certain government schemes. It is also not in dispute that the assessee company was formed with equity participation from various government companies namely CIDCO, MIDC, NIT, MSRDC, SICOM & NMC which are owned and controlled by Government of Maharashtra; that the entire management and functional control of the assessee company is that of Chief Minister of Government of Maharashtra and all other board persons are senior officers of the State Government of Printed from counselvise.com P a g e | 24 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai Maharashtra; that grant-in-aid was received by the assessee company from Government of Maharashtra in order to carry out statutory functions and its activities are for the development of the state in general and for the benefit and welfare of the general public in particular; that it is also not in dispute that the assessee company is appointed by the State Government as a special planning authority under section 40(IB) of the Maharashtra Regional Town Planning (MRTP) Act, 1966; that it is also not in dispute that the assessee company being a special planning authority is required to carry out the work of development and disposing of land in the notified area as an agent of the state. 24. In the backdrop of the aforesaid undisputed facts, we are of the considered view that the assessee company being a wholly owned company of the State of Maharashtra to carry out/execute the work of development of land acquisition, development of airports, repair and maintenance of airports etc. as an arm of the state, viii) that the co-ordinate Bench of the Tribunal in case of City and Industrial Development Corporation of Maharashtra Ltd. vs. ACIT (2012) 25 taxmann.com 333 (Mum.) while deciding the identical issue in case of City and Industrial Development Corporation (CIDCO) which is also a subsidiary company under the control and supervision of State Government into business of construction of residential and commercial structures as well as development of infrastructure in towns and any development project completed by the CIDCO was held to be an agent of the state government. And as such its income cannot be assessed as business income in the hands of the CIDCO. x) that Hon'ble Bombay High Court in Writ Petition No.1211 of 2009 (supra) vide its order dated 07.11.2009 held that \"acquisition of land on behalf of the state government at the cost of state government by CIDCO appointed as new town development authority under sub section 3A of section 113 is doing the work of developing and disposing of the land in the area as an agent of the state government. So the appointment of CIDCO being under section 3A of section 113 of the MRTP Act the CIDCO acts as an agent of the state government\". xi) that when we apply the ratio of the decision rendered by Hon'ble Bombay High Court in case of Percival Joseph Pareira (supra) to the case at hand the assessee company is also appointed as a town planning authority under sub section 3A of section 113 of MRTP Act for acquisition of land for development of airports, repair and maintenance of airports and for rehabilitation of the project affected persons (POP), for infrastructure development of airports in the notified area as an agent of the state. The assessee company carries out all the activities for and on behalf of the state government and Printed from counselvise.com P a g e | 25 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai after development and completion of the project the entire property vests in the state government. The entire control over the assessee company is of state government being exercised through the officer of the state government. In these circumstances the assessee company is an agent of the state not assessable to tax. As such grant-in-aid received by the assessee company from the Government of Maharashtra for land acquisition, development of airports, repair and maintenance of airports etc. is not a capital receipt as has been held by the Ld. CIT(A) rather the assessee company has performed these functions as an agent of the state and as such not assessable to income tax. xii) that the assessee company has been formulated with a specific purpose i.e. to acquire the land for development of airports, repair and maintenance of airports etc. for which it receives grant-in-aid from the state of Maharashtra which is not taxable under Income Tax Act. xv) that even Article 289(1) of the Constitution of India itself says about the income from trade etc. but the grant-in- aid received by the assessee company from State of Maharashtra for the purpose of land acquisition, development of airports, repair and maintenance of airports is not a trade activity, hence not taxable to the income tax. 25. In view of what has been discussed above, we are of the considered view that the Ld. CIT(A) has erred in treating the grant- in-aid received by the assessee company from State of Maharashtra as capital receipt rather utilization of the grant-in-aid by the assessee company for acquisition of land, development of airports, repair and maintenance of airports is the statutory functions of the assessee company as an agent of the State of Maharashtra, hence, not assessable to tax under Income Tax Act.” 12. Respectfully following the above coordinate bench decision, we hold that the impugned Grant -in-Aid is not liable to tax. Thus, allowing the ground no.4(a) to(c),we direct the AO to delete the addition made. Ground no.4(d) and (e) being inconsequential, do not need any adjudication. Printed from counselvise.com P a g e | 26 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai 13. In ground no.5, it is stated that a) The Ld. CIT (A) erred in facts and law in upholding the addition of Rs. 4,84,36,287/-collected towards Development charges from various lessees / unit holders in MIHAN area at Nagpur on the ground that the receipt is a revenue receipt without appreciating the explanations and documents placed on record by the appellant. b) The Ld. CIT(A) failed to appreciate that the appellant is a Special Planning Authority appointed under section 40(1)(b) of The Maharashtra Regional and Town Planning Act, 1966 (MRTP Act) and the development charges is collected by virtue of section 124A of MRTP Act, 1966 and the same shall be utilized for specific purpose as per the provisions of Section 124J of MRTP Act, 1966 and that the appellant is not a beneficiary of these receipts. c) The Ld. Assessing Officer erred in facts and law in adding the development charges from various lessees / unit holders in MIHAN area at Nagpur amounting to Rs. 4,84,36,287/- to the book profit u/s. 115JB of the Act. 14.According to the order, in respect of Development charges received of Rs. 4,84,36,287/-,received from various lessees/unit holder in MIHAN was treated as revenue receipt. The amount was also added to the income u/ 115JB of the Act. The ld.CIT(A) upheld the addition following his own order in earlier years. 15. In this regard, the ld.AR contented that a Special Planning Authority appointed under section 40(1)(b) of the Maharashtra Regional and Town Planning Act, 1966. In this regard, section 124A of MRTP Act Printed from counselvise.com P a g e | 27 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai which empowers the assessee “The Planning Authority” to levy within the area of its jurisdiction, development charge on the institution of use or change of use of any land or building, or development of any land or building, for which permission is required under MRTP Act, at the rates specified by or under the provisions of this Chapter. Further, by virtue of section 124J of MRTP Act, Development charges collected by the assessee shall be utilized only for the purposes of acquisition and development of any land reserved for any of the public purposes specified in any plan or scheme under this Act and for providing public amenities in the area under the jurisdiction of the said Authority and maintenance and improvement thereof. During the year, the assessee had collected development charges to the tune of Rs.4,84,36,287/- under the MRTP Act which has been credited under the head MIHAN Development Fund under “Capital Reserves”. Since the said development charges shall be utilized as per the provisions of 124(J) of MRTP Act, as stated in forgoing para, the said receipts are not taxable under the Act. It was also submitted that similar addition made is deleted by the ITAT in its own appeal in AYs 2012-13 to 2015-16 (supra) wherein it has been held that such expenditure was inextricably linked to the development project and the Printed from counselvise.com P a g e | 28 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai assessee is not a beneficiary of the same. Relevant paras of the above order are reproduced as below: “26. The assessee company received an amount of Rs.4,38,97,624/- and Rs.3,48,60,686/- on account of development charges levied by the assessee company under section 124J of Maharashtra Regional Town Planning (MRTP) Act, 1966. The Ld. CIT(A) by passing impugned order held the receipt on account of development charges as business receipt and liable to be taxed by returning following (of A.Y. 2012-13) findings: \"5.9.9 Now coming to amount of Rs. 4,38,97,624/- shown at Sr. No. c) in the table above, as stated, these are development charges levied by the appellant u / s 124J of Maharashtra Regional and Town Planning Act. It is noted that once again this amount has not been given in the form of a grant for capital outlay by Government of Maharashtra. One of the stated business objectives of the appellant is to develop and maintain townships schemes, industrial parks etc., and any earning from engaging in such activity is relatable to business and, therefore, is business receipt. The fact that MRTPA empowers the appellant company to levy charges at prescribed rates from users of infrastructure facilities in its jurisdiction does not change the nature of such receipt. These charges are similar to lease rentals/usage charges that owner of any infrastructure would collect from its clients. Even the fact that charges collected should be used only for acquisition and development of any land in any plan or scheme under MRTPA does not alter the nature of the receipt.\" 27. As discussed in the preceding paras the assessee company is a special planning authority appointed by the Government of Maharashtra under MRTP Act. We have perused section 124A of MRTP Act, which empowers the assessee company to levy development charges for use of land/building or development of land/building, which shall be utilized only for the purpose of acquisition or development of land reserved for any of the public purposes specially for any plan or scheme under the Act and for providing public amenities and maintenance/improvement thereof. It is also an admitted fact on record that the assessee company is maintaining a separate development fund account shown in capital reserves to hold these funds and is not a beneficiary of these funds. Periodic reports as required by the state government are being sent by the assessee company as required under section 155(1) of MRTP Act. Printed from counselvise.com P a g e | 29 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai 28. We are of the considered view that as discussed in the preceding paras 21 to 24 the assessee company is held to be a state only for the purpose of receiving grant-in-aid from the state government as a special planning authority and collecting the development charges from various lessees/unit holders in 'Multi- Model International Passenger and Cargo Hub Airport at Nagpur' (MIHAN) area are to be used for development of the land acquired by the assessee company with the grants-in-aid provided by the state government and as such is also a statutory function. Because without developing the land purchases with grant-in-aid received from the state government, which ultimately vests in the state government the purpose of providing public amenities as prescribed under the scheme of the Act cannot be fulfilled. In these circumstances, the Ld. CIT(A) has erred in treating these development charges which are inextricably linked to the development of the project under the scheme, akin to the lease rental/usage charges. So the findings returned by the Ld. CIT(A) are hereby set aside and the AO is directed to delete the addition made by the AO and confirmed by the Ld. CIT(A). Hence, Ground Nos.2 & 4 and Additional ground No.1 in ITA No.3682/M/2017 & Ground Nos.1, 2 & 4 and additional ground No.1 in ITA No.522/M/2019 (both assessee's appeals) for A.Y. 2012-13 & 2015-16 respectively are hereby allowed. 16. We find that the above ground is squarely covered by the above decision of the coordinate bench of ITAT (supra). Respectfully following the above decision, we hold that the impugned amount is not liable to tax. Regarding adjustment under MAT, it is stated that such adjustment is not permissible under the Act. Allowing the ground no.5(a) and(b), we direct the AO to delete the additions made. 17. In ground no.6, it is stated that a) The Ld. CIT (A) erred in facts and law in upholding the addition of Rs. 22,08,505/- in respect of Fire service fee received from unit holders on the ground that the receipt is a revenue receipt without appreciating the explanations and documents placed on record by the appellant. Printed from counselvise.com P a g e | 30 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai b) The Ld. Assessing Officer erred in facts and law in adding the fire service fee received from unit holders amounting to Rs. 22,08,505/- to the book profit u/s. 115JB of the Act. 17. In respect of Fire service fees of Rs.22,08,505/-it was contented that subsection 1 of section 11 of Maharashtra Fire Prevention and Life Safety measures Act, 2006 which empowers the assessee “The Planning Authority” to levy Fire service fee on all owners of various type of buildings within the area of its jurisdiction. In this regard, provisions of section 25 of Chapter VII of Maharashtra Fire Prevention and Life Safety measures Act,2006, are as under : There shall be constituted a special fund called the “Fire Protection Fund” to which shall be credited the fees imposed and collected under this Act. The special fund shall be reflected into the budget estimate of the respective Authority and the Accounts in respect thereto shall be maintained and audited in accordance with the procedure prescribed for the purpose of maintenance of accounts in the relevant law or the rules and orders made thereunder and are applicable to the respective Authority. The amounts in the fund shall subject to the provisions of this Act and subject to the general or special order of the State Government, be applied for the purpose of maintaining Fire Brigade in general (which shall also include the expenditure on salaries, allowances and other incidental expenses on the Fire Officers and Staff) and for providing Printed from counselvise.com P a g e | 31 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai sophisticated equipments and appliances, in particular, for the purpose preventing and extinguishing fire on any land or in any building within or without the limits of the Authority and to no purpose other than the purposes mentioned in this Act. During the year, the assessee has collected Fire Service fee to the tune of Rs.22,08,505/- under the Maharashtra Fire Prevention and Life Safety measures Act, 2006 which has been credited under the head MIHAN Development Fund under ‘Capital Reserves”. Since the said Fire service fee shall be utilized as per the provisions of section 25 of Chapter VII of Maharashtra Fire Prevention and Life Safety measures Act, 2006, as stated in forgoing para, the said receipts are not taxable under the Act. 18. The AO rejected the explanation of the assessee by stating that contentions of the assessee were not tenable. Since, the grant in aid received by the assessee from Govt. of Maharashtra was not towards equity or share capital and also the assessee had directly credited such grant to the Reserves and Surplus without routing the same through the P&L A/c. and also it had not utilized such grant in aid for the purpose for which it was given by the govt. of Maharashtra. He concluded that the basic nature of assessee’s business was that of a developer wherein it acquired land, developed it in the form of SEZ/Non SEZ/Airports and then sells/gives it on long term lease in lieu of revenue. The revenue Printed from counselvise.com P a g e | 32 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai earned out of such long term lease/sale is recognized on a percentage completion basis. To acquire such land and to rehabilitate people, the assessee receives grant in aid from Government of Maharashtra. Placing reliance is placed on the landmark judgment of Hon’ble SupremeCourt in the case of Sahney Steel & Press Works Ltd v CIT (1997)228 ITR 253/94 Taxmann 366he held these grants as revenue receipts. The ld.CIT(A) upheld the addition. 19. Before us, it is submitted that similar addition has been deleted by ITAT in its own appeal for AY 2015-16 inter alia holding that the fee was not revenue in nature and had been levied as per the State laws on behalf of the government and not received in the ordinary course of business and was strictly applied for maintaining fire brigades etc. No adjustment was permissible under MAT also. In respect of Fire services charges ITAT deleted the addition with the observations that, “during the year under consideration the assessee company has received fire service fee to be applied for the purpose of maintaining fire brigade to comply with the provisions of section 25 of chapter VII of the Maharashtra Fire Prevention & Life Safety Measures (MFPLSM) Act, 2006. The AO as well as the Ld. CIT(A) by declining the contentions raised by the assessee company that the assessee company is to manage a property by taking various measures as per section 114 of the MRTP Act and section 11 of MFPLSM Act, 2006 empower MADC to levy fire service fees on various unit holders within the area of its jurisdiction and the said amount is credited separately to the Printed from counselvise.com P a g e | 33 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai MIHAN development fund account, the AO as well as the Ld. CIT(A) has treated the same as revenue in nature. 37. We are of the considered view that when the fire services fee is to be applied for the purpose of maintaining fire brigade which is also mandatory for the assessee company to maintain in compliance to section 25 of chapter VII of MFPLSM Act, 2006, section 11 of the MFPLSM Act, 2006 also empowers the assessee company to levy fire services fee on all owners of various buildings within the area of its jurisdiction, the same cannot be treated as receipt of revenue in nature. Since the entire project was being executed by the assessee as a stated owned company fire services fees which was not received in the ordinary course of business and was strictly applied for the purpose of maintaining fire brigade is like development charges collected by the assessee company and as such is inextricably linked with the success of airport project being executed by the assessee company on behalf of the state government and as such it cannot be treated as income. So the same is ordered to be treated as revenue in nature as claimed by the assessee. So ground No.3 in ITA No.522/M/2019 for A.Y. 2015-16 of assessee's appeal is allowed.” 20. We find that the above ground is squarely covered by the above decision by the coordinate bench of ITAT (supra). Respectfully following the above decision, we hold that the impugned amount is not liable to tax. Thus, allowing the ground no. 6(a) and(b), we direct the AO to delete the additions made. 21. In ground no.7,it is stated that the Ld. CIT(A) ought to have deleted the addition of Rs. 2,97,58,174/- made on account of loss claimed in respect of water supply and should not have mechanically referred the issue back to the Ld. Assessing Officer despite the fact that same issue was allowed in earlier years. Printed from counselvise.com P a g e | 34 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai 22. According to the assessment order, in the P&L A/c.,the assessee credited Revenue from Supply of Water at Rs.1,67,09,286/- against which it has claimed expenses of Rs.4,64,67,460/- resulting in loss of Rs. 2,97,58,174/-. In view of the same, the assessee was asked show cause to explain whether any subsidy has been received from the Government of Maharashtra/ India was for business of supply of water and if so, furnish relevant details in connection with the same. In response, the assessee stated that no subsidy from Government of Maharashtra had been received during the year under consideration. Further, in respect of deficit amounting to Rs.2,97,58,174/- on account of supply of water, Maharashtra Airport Development Company Ltd (MADC) was established in 2002 by Government of Maharashtra to build and operate airports in the State. It is also the nodal agency to implement one of the most prestigious projects in Maharashtra, MIHAN, Multimodal International Hub Airport at Nagpur along with a state of the art multi-product Special Economic Zone (SEZ) Thus, the Multi- Modal International Hub Airport at Nagpur (MIHAN) has promoted by MADC has assured unit holders in MIHAN world class infrastructure which inter alia includes uninterrupted power supply at very reasonable rates and dual water supply system where the water is retreated and supplied for domestic and non-domestic consumption. Printed from counselvise.com P a g e | 35 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai Further, in respect of power distribution activity, it is to be noted that there is a surplus of Rs. 2,11,58,729 /- and the deficit of Rs. 2,97,58,174/- is actually from the activity of water supply. As a matter of fact, MADC’S assurance of uninterrupted power supply at reasonable rates and dual water supply system for domestic consumption has attracted large number of business / export houses to the MIHAN project. In this regard, copy of lease agreement with the unit holders in MIHAN area and other documentary evidence were enclosed. Hence, expenditure incurred for supply of water is part of the revenue model of MIHAN project. Hence, deficit from these activities should not be disallowed. 23. The AO opined that the assessee failed to provide any supporting documentary evidence like copy of any agreements with the unit holders in MIHAN. Further, the possibility of existence of any such agreement with the unit holders will only be regarding the supply of power and water supply at reasonable rates but that does not give the assessee the liberty or leverage to purchase the power & water at exorbitant/ higher rates and supply it at a loss. Similar issue was involved in the case of the assessee for A.Y 2015-16 wherein the loss claimed on supply of water was disallowed and added to the income of the assessee though the disallowance of loss on account of supply of water was deleted by the Ld.CIT(A). On perusal of the order of the Printed from counselvise.com P a g e | 36 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai CIT(A), it is seen that the assessee has filed a detailed submission before the Ld.CIT(A) in A.Y 2015-16 on the facts of business of water supply undertaken by it and the loss incurred thereon. These details were never submitted by the assessee before the AO in the assessment proceedings but were filed before the CIT(A) based on which the Ld.CIT(A) has held that the loss claimed is justified and thereby deleting the disallowance of loss on supply of water made by the AO. The assessee did not file any submission. Therefore the claim of loss of Rs. 2,97,58,174/- on supply of water was disallowed and added to the income of the assessee for the year under consideration. 24. In the appellate order for AY 2015-16,the ITAT has duly considered the above issue and decided the issue in favour of the assessee as per relevant parts of the order reproduced below: “40. The AO made disallowance of Rs.76,32,135/- and Rs.3,55,42,101/- pertaining to loss in respect of power distribution and water supply activities respectively. However, the Ld. CIT(A) has deleted the disallowance made by the AO by returning following findings: \"3.10.4 As per the appellant's submission, the Multi- Modal International Hub Airport at Nagpur (MIHAN) promoted by MADC, has assured unit holders in MIHAN world class infrastructure which inter alia includes uninterrupted power supply at very reasonable rates & dual water supply system where the water is retreated and supplied for domestic and non- domestic consumption. Hence, expenditure incurred for distribution of Power & supply of water is part of the revenue modal of MIHAN project. 3.10.5With a view to provide an efficient, uninterrupted supply of power in the MIHAN area, appellant selected Abhijeet Group as a venture partner for the development of a coal based power plant. AMNEPL was created as a joint venture with the Abhijeet group, wherein the appellant holds 26% of the Printed from counselvise.com P a g e | 37 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai Issued Equity Capital in AMNEPL. A concession agreement (\"The Agreement\") was executed between MADC and AMNEPL on 07.11.2007 pursuant to the competitive bidding process. 37 3.10.6 Further, for some reason as given in the submission filed by the appellant, there arose a dispute between MADC and AMNEPL which resulted in AMNEPL stopping supplying power to MIHAN SEZ area. Therefore, in response to the petition filed by appellant dated 11.03.2014 before MERC, MERC directed the MSEDCL to start supply power to consumers. 3.10.7 Further, MADC has obtained deemed distributors license from Maharashtra Electricity Regulatory Commission (MERC) which is mandated to promote competition, efficiency and economy in the power sector and to regulate traffic of power generation, transmission and distribution and to protect the interests of the consumers and other shareholders. MADC after getting the license, started purchasing power through IEX from 22.11.2014 on a day-ahead basis and supplied power to the consumers in MIHAN SEZ area. Since, traffic determination for electric supply is done by MERC, MERC ruled that the traffic approved for the respective consumer categories of MSEDCL would be the ceiling traffic for the MIHAN SEZ area. MADC purchased electricity IEX & LLyods during 2014-15. However, while distributing powers to consumers, there are transmission, distribution & scheduling losses. As per the appellant and the details filed, the energy received is 9.62 Million unit (MU) and energy supplied is 6.90 MU, therefore nearly 2.72 MU loss of energy on account of transmission, distribution & Scheduling loss is there. 3.10.7 I find that the appellant has submitted the copy of lease agreement along with other documentary evidence placed on record in support of the claim that the expenditure incurred is a part of revenue model of MIHAN project and has also submitted very detailed explanation in respect of power distribution loss factually as well as logically which has also been discussed by me in the above paras. Determining tariff for the units of electricity is not at the sole discretion of the appellant. Therefore, practically speaking, the selling cost cannot be controlled by the appellant. Further, due to emergency situation, there was no option other than to purchase of electricity at the cost sold by the respective suppliers. Also, the energy loss such as transmission, distribution & scheduling losses cannot be ruled out which will further reduce the revenue from selling electricity. Therefore, I am of the view that addition on account deficit of Rs.76,32,135/- in respect of power distribution activity has no merits and has to be deleted. 3.10.8 With respect to deficit in water supply activity, the appellant has submitted that the MADC has developed infrastructure of dual water supply system of 91 MLD capacity (per day) where the water is retreated & supplied for domestic &Non domestic consumption. Total water demand considering evaporation losses is 71MLD. MADC has reserved water quota at Wadgaon Dam situated at 40 Km (approx.) from MIHAN area. Also, MADC has appointed M/s Veolia Water (1) 38 M/s. Maharashtra Airport Development Company Ltd. & ors.Pvt Ltd for operation & comprehensive maintenance & management of water supply & sewage system, for which a fixed cost irrespective of utilized capacity, of Rs.2,92,74,100/- for the maintenance contract has been incurred. Also, cost of Rs.71,79,513/- for the annual Printed from counselvise.com P a g e | 38 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai maintenance contracted awarded to M/s Veolia Water(1) Pvt Ltd. has been incurred. 3.10.9 As per the submissions, actual water utilized is 4.41 MLD which is 6.15% of the reserved quota of 71.67 MLD. At Wadgaon reservoir, water pumped in from reservoir is 3.88 MLD, out of which 3.70 MLD received at treatment plant in MIHAN and out of which 1.64 MLD is billed since there islosses of water in transit besides unmetered supply to village Khapri & project affected rehabilitated area at Khapri, Chinchbhavan. Summarising the above, I agree with the contentions of the appellant and I find that merely because the appellant has the deficit in respect of water supply, it does not mean that it is an income on the hand of the appellant. First of all, the appellant has not fully utilized the installation capacity of water supply which has become the main cause of losses. If the sales are low, then, automatically your profit decreases/ losses increase as the raw material purchases have been under utilized. However, certainly cost has been incurred to procure the same. It is the simplest concept in term of any business or accounting. Further, there are other expenses which further lower the profit. It is not the intention on the part of the any prudent businessman to sell less product deliberately or anything like that so as to decrease its own profit. Also, in the instant case, the appellant is a Government of Maharashtra Company. So, the credibility of accounting cannot be doubted. Therefore, I am of the view that addition on account of deficit of Rs.3.55,42,101/-in respect of water supply activity has no merits at all and deserves to be deleted. It is felt that as far as these two additions are concerned, the AO has tried to step into the shoes of the appellant company, that too, a Government of Maharashtra one, the credibility of whose accounts are one notch above the private ones. 3.10.9 In view of the above discussion, additions on account of deficit of Rs.76,32,135/- and Rs.3,55,42,101/- in respect of Power distribution and Water supply activity respectively are deleted. These grounds of appeal are allowed.\" 41. We have perused the order passed by the Ld. CIT(A) who has duly thrashed the facts in the light of the copy of lease agreement along with other documentary evidence placed on record by the assessee and reached the conclusion that the expenditure incurred by the assessee on providing power distribution and water supply activities is a part of the Revenue model of MIHAN project and has also perused the record and explanation in respect of power distribution loss and water supply activities. The Ld. CIT(A) has also considered the losses due to water evaporation. 42. It is also not in dispute that no company will deliberately decrease its profit. Main cause as brought on record by the assessee has been duly perused by the Ld. CIT(A) for loss on account of distribution of water is underutilization of water supply which led to low sale and it has increased the losses. It is also not in dispute that sometimes a purchaser has no option except to purchase the electricity at the higher cost and there has to be energy loss due to transmission distribution and scheduling losses. Similarly so far as water losses are concerned it is a proved fact on record that the assessee has Printed from counselvise.com P a g e | 39 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai not fully utilized the installation capacity of water supply which has become the main cause of losses for which cost has to be incurred to procure the same. Moreover, when the AO has not disputed the books of account disallowance merely on the basis of surmises is not sustainable. So we find no illegality or perversity in the impugned findings returned by the Ld. CIT(A), hence ground No.14a, 14b & 14c in ITA No.798/M/2019 for A.Y. 2015-16 of Revenue's appeal are decided against the Revenue. 25. Respectfully following the order by ITAT in AY 2015-16,the addition made is hereby deleted. 26.In ground no.8,it is stated thata) The Ld. CIT(A) erred in facts and law in upholding the ad-hoc addition to the tune of Rs. 57,79,349/- (being 50% of the additions of Rs. 1,15,58,698/- made by the Ld. Assessing Officer) in respect of Provision for expenses incurred by the appellant for business purpose on mere surmises and conjectures without appreciating the explanations and documents placed on record by the appellant. b) The Ld. Assessing Officer ought to have not added the Provision for expenses incurred by the appellant amounting to Rs. 1,15,58,698/- to the book profit u/s. 115JB of the Act. 27. According to the assessment order, on perusal of the expenses claimed under various heads of expenses in the P&L A/c., it is seen that there provisions made as detailed below which had not been added back to the income while computing taxable income i.e i) Office Expenses Other Expenses Others (Provisions) 3,41,704/- ii) Office Expenses Office Expenses – MADC (Other Provisions 1,20,871/- iii) Other Provisions 48,500/-iii) Other Provisions 48,500/- iv) Professional & Legal Charges Net Effect Provision for Expenses 24,82,107/- v) Printed from counselvise.com P a g e | 40 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai Provision for Maintenance Charges 38,99,147/- vi) Provision for Expenses 3,184/- vii) Painting of Karbs & Medians of Internal Road (Provisions towards Cargo PBBSSS Ltd.) viiii) Repairs & Maintenance - Chillers (Provisions towards Gentech Engineering Services) 25,85,000/- ix) Provisions for Expenses (Nagpur) 45,647/- x) Travelling Expenses Provisions for Expenses (Mumbai) 2,09,798/-. 28. In view of the above, the assessee was asked to explain why the aforesaid provisions have not been added back to the income along with documentary evidences and to show cause why it should not be added back to the income for the year under consideration. In response, the assessee stated that the said expenditure accrued and pertained to F.Y:2015-16. Accordingly, impugned expenditure have been booked as per the accrual method of accounting. The submission of the was not found acceptable since the assessee had not furnished any documentary evidence in support of its claim. Hence the genuineness and correctness of the provisions claimed remained unexplained and unverified. Therefore, the amount of Rs.1,15,58,698/- being provision for expenses made under various heads of expenses was disallowed. 29. The ld.CIT(A) taking note of non furnishing of relevant detail by the assessee before the AO restricted the disallowance to 50%.The Printed from counselvise.com P a g e | 41 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai ld.AR on the other hand has claimed that entire amount is allowable as the provision has been made following mercantile system of accounting being followed by it. Moreover, the books of account are duly audited. 30. On careful consideration of above facts it is evident that the issue has not been examined by the authorities below due to non furnishing of relevant details before them by the assessee. We do not find any justification for the ld.CIT(A) to restrict the disallowance to 50% which lacks any basis. Accordingly, the entire issue is set aside to the AO for examining the relevant details which the assessee would furnish before him. He would take decision as per law. The ground is therefore, allowed for statistical purposes. 31.In ground no.9, it is stated that The Ld. CIT(A) erred in facts and law in upholding the ad-hoc addition to the tune of Rs. 12,52,340/- (being 50% of the additions of Rs. 25,04,680/- made by the Ld. Assessing Officer) in respect of reimbursement of salary of the MSEDCL employees for handling day to day routine activities pertaining to power supply, without appreciating the explanations and documents placed on record by the appellant. 32. In respect of Expenses incurred for supply of Power – Mihan SEZ, the assessee had claimed expenses of Rs.25,04,680/- as reimbursement of expenses to MSEDCL. In this regard, on being queried by the AO, the assessee sated that MADC has reimbursed salary Printed from counselvise.com P a g e | 42 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai of MSEDCL employees for handling day to day routine activities pertaining to power supply i.e. billing, meter reading etc. and hence the said expenditure has not been capitalized in the books. However, the AO rejected the reply on the ground that the submission of the assessee was without any supporting documentary evidences since it was not clear why it has to reimburse the salary of employees of MSEDCL. It had failed to furnish any copy of agreement entered in to with MSEDCL justifying such reimbursement made to it. In view of the same, the amount of Rs.25,04,680/- being reimbursement of expenses to MSEDCL was disallowed. However, the ld.CIT(A) restricted the disallowance to 50% thereof only and deleted the rest. 33. Before us, the ld.AR has contented that the assessee had submitted copy of office order received from MSDECL according to which there employees were sent on deputation to the assessee and such expenses are revenue in nature and allowable u/s 37(1) of the Act. 33.1 On due consideration of above facts we find that the issue could not be examined in correct perspective on account of failure of the assessee to furnish relevant details before the lower authorities. Accordingly, the entire issue is set aside to the AO for examining the relevant details which the assesse would furnish before him. He would Printed from counselvise.com P a g e | 43 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai take decision as per law. The ground is therefore, allowed for statistical purposes 34. In ground no.10 a) The Ld. CIT(A) has, in view of the facts and circumstances of the case, erred in disallowing the amount of Rs. 14,79,479/- incurred for supply and laying of 33KV Power cable u/s. 37 of the Act by treating it as capital expenditure without appreciating the explanations and documents placed on record by the appellant. b) Without prejudice to Ground no. 9(a), the Ld. CIT(A) erred in not allowing depreciation u/s. 32 of the Act in respect of the above expense of Rs. 14,79,479/- incurred for supply and laying of 33KV Power cable despite the fact that the Ld. Assessing Officer has himself treated it as capital expenditure. 35. In respect of the expenses incurred in connection with Power Supply, the AO noted that an amount of Rs.14,79,479/- had been paid to TCS for Supply & Laying of 33 KV Power Cable. In this regard, it is stated that despite specific query made, the assessee failed to file any submissions in this regard. Therefore, the amount was held as capital in nature and accordingly disallowed and added to the income of the assessee. No depreciation was allowed on the same in the absence of any details in respect of the same to verify whether the same is eligible for depreciation or not. The ld.CIT(A) taking note of lack of necessary submission of relevant details before the AO upheld the addition. Printed from counselvise.com P a g e | 44 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai 36. The ld.AR has claimed that the expenditure has been incurred for uninterrupted supply of power which is allowable u/s 37(1) of the Act. 37. On due consideration of above facts we find that the issue could not be examined in correct perspective on account of failure of the assessee to furnish relevant details before the lower authorities. Accordingly, the entire issue is set aside to the AO for examining the relevant details which the assesse would furnish before him. He would take decision as per law. The ground is therefore, allowed for statistical purposes. 38. In ground no.11 it is submitted that the Ld. CIT(A) erred in sustaining the re-characterization of miscellaneous income of Rs. 3,07,43,643/- credited to Profit & Loss account under the head ‘Other income’ as ‘income from other sources instead of ‘business income’ on mere surmises and conjectures without appreciating the explanations / submissions placed on record. 39. As per the assessment order, the assessee did not furnish relevant details of Miscellaneous expenses which was therefore taxed as Income from other sources. The ld.CIT(A) upheld the addition. 40. Before us,it is contented that the issue stands covered by ITAT order for AY 2007-08 dated 27.9.2024 wherein it has been affirmed that the assessee being a State within the Article 289(1) of the Printed from counselvise.com P a g e | 45 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai Constitution ,interest earned on Fixed deposits not in the nature of business income is exempt. Respectfully following the above order, we direct the AO to accept the book entries as disclosed by the assessee. 41. In ground no.12 it is stated that a) Without prejudice, on facts and circumstances of the case, the Ld. CIT(A) ought to have allowed deduction under section 80-IAB of the Income Tax Act, 1961 in respect of all the income assessed under the head ‘Profits & Gains from Business & Profession’ by the Ld. Assessing Officer. b) The Ld. CIT(A) erred in denying the deduction u/s. 80-IAB of the Act for the reason that the assessee has failed to file Form 10CCB with the Return of income without appreciating the fact that, in the return filed by the assessee, the assessee had shown loss and therefore, there was no question of claiming deduction u/s. 80-1AB as a result of which Form 10CCB was not filed by the assessee at the time of filing of Return. 42. According to the AO, for the year under consideration, the assessee had not made any claim of deduction u/s.80IAB of the Act and no Form 10CCB had been filed while filing the return of income. In view of the same, the claim of the assessee to allow deduction u/s.80IAB on Interest on Fixed Deposits and Advances to Contractors/ Developers was not acceptable and hence rejected. As regards the additions/ disallowances made to the business income of the assessee for the year under consideration, there is no claim for deduction u/s.80IAB of the Act and therefore even these incomes are not considered as eligible for the said deduction in the absence of any claim for such deduction and Printed from counselvise.com P a g e | 46 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai for its failure to file Form 10CCB, which is a prerequisite to claim deduction U/s 80IAB. 43. According to the ld.CIT(A),the any claim of deduction for any year as per the provisions of the Act could not be allowed unless the respective return of income is filed statutorily. It is significant that the appellant did not file the form 10CCB mandatorily to lay a claim u/s 80IAB. Any claim of deduction for any year as per the provisions of the Act has to be made under the respective provisions and by way of filing statutory forms / report in respect of such claims while filing the return of income. The assessee has failed to adhere to such procedures and therefore the claim to allow deduction u/s.80IAB of the Act was rejected by the ld.CIT(A). 44. Before us, it is contented by the ld.AR that since there was loss during the year no claim was made by it. However, it was eligible foe deduction on account of addition made by the AO. On due consideration, we find that the ground is consequential in nature. The AO would examine the claim subsequent to final quantification of total income of the assessee in the light of decisions rendered in preceding paras. Printed from counselvise.com P a g e | 47 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai 45. In ground no.13 it is contented that on the facts and circumstances of the case, the Ld. Assessing Officer erred in law in not allowing set-off of unabsorbed depreciation against the assessed income. 46. On due consideration, we find that the ground is consequential in nature. The AO would examine the claim subsequent to final quantification of total income of the assessee in the light of decisions rendered in preceding paras.This ground is consequential in nature. 46.1 In the result, appeal of the assessee is allowed. 47. ITA No. 87/MUM/2024 (A.Y. 2016-17)Revenue (i) Whether on the facts and circumstance of the case and in law, the Ld. CIT(A) is correct in directing to consider the assessee's submission and decide the issue on merit with regard to the loss of Rs. 2,97,58,174/- on account of water supply? 48. Since the issue has been allowed by ITAT in earlier years and the addition made during the year has already been directed to be deleted, we do not find any merit in the revenue’s ground which is therefore dismissed. 49.(ü) Whether, on the facts and circumstance of the case and in law, the Ld. CIT(A) is correct for directing the assessing officer to consider the submission of the assessee and decide the issue of loss on account of water supply on merit without following the due procedure of asking for a remand report on the issue from the Assessing officer? 50. Since the issue has been allowed by ITAT in earlier years and the addition made during the year has already been directed to be deleted, Printed from counselvise.com P a g e | 48 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai we do not find any merit in the revenue’s ground which is therefore dismissed. 51.(iii) Whether, on the facts and circumstances of the case in law, the Ld. CIT(A) is correct in deleting the 50% of disallowance of Rs. 1,15,58,698 on account of provisions for expenses without appreciating the fact that the assessee did not furnish any details to substantiate its claim? 52. This ground is already restored to the AO for fresh examination of the entire matter after allowing adequate opportunity of hearing to the assessee who would ensure submission of necessary details for proper adjudication of the ground which is accordingly allowed for statistical purposes. 53.(iv) Whether, on the facts and circumstances of the case in law, the Ld. CIT(A) is correct in deleting the 50% of disallowance of Rs. 25,04,680 on account of reimbursement of expenses with regard to salary of employees of MSEDCL without appreciating the fact that assessee did not furnish any documentary evidence to substantiate its claim? 54. This ground is already restored to the AO for fresh examination of the entire matter after allowing adequate opportunity of hearing to the assessee who would ensure submission of necessary details for proper adjudication of the ground which is accordingly allowed for statistical purposes. 55.(v) Whether on the facts under circumstance on the case and in Law the Ld. CIT(A) justified in holding the interest of Rs. 2,55,77,947/- on Printed from counselvise.com P a g e | 49 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai advances to developers, contractors as business income ignoring the decision of the AO wherein this income is adopted as income from other sources? 56. As regards, the Interest on Advances to Contractors / Developers, the Hon’ble ITAT in A.Y 2008-09 in the case of the assessee, observed that the same construes business income and therefore is to be taxed as Business Income upon which deduction u/s.80IAB is to be allowed. This decision of the hon’ble ITAT has also not been accepted and the same is contested by the Revenue before the Hon’ble Bombay High Court. The said appeal of the Revenue is yet to be decided by the Hon’ble Court. 57. The ld.CIT(A) has observed that the Hon’ble ITAT Mumbai Bench in its own case for Assessment year 2008-09 had held that such interest should be considered as business income, eligible for deduction u/s 80-IAB. Apart from the ITAT order, the Ld. CIT(A) also decided the same issue in favour of the appellant for A.Y.s 2011-12 and 2012-13. Accordingly, he held that said interest income to be considered as business income. 58. The above addition has been deleted by the ld.CIT(A) as in the past and his action has already been affirmed by the ITAT. Accordingly, ground of the Revenue is dismissed. Printed from counselvise.com P a g e | 50 ITA No. 37, 87/Mum/2024 A.Y. 2016-17 Maharashtra Airport Development Company Limited, Mumbai 59. In the result, appeal of the Revenue is partly allowed. Order pronounced in the open court on 09/09/2025. Sd/- Sd/- SAKTIJIT DEY PRABHASH SHANKAR (उपाध्यक्ष/VICE PRESIDENT) (लेखाकार सदस्य/ACCOUNTANT MEMBER) Place: म ुंबई/Mumbai ददनाुंक /Date 09.09.2025 Lubhna Shaikh / Steno आदेश की प्रतितलतप अग्रेतिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविवनवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अतिकरण/ ITAT, Bench, Mumbai. Printed from counselvise.com "