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

ORDER \n\nPER PRABHASH SHANKAR [A.M.] :-\n\nThe above captioned appeal has been filed by the assessee and\nCross appeal by the Revenue against the orders of even date as passed by\nthe Learned Commissioner of Income-tax (Appeals)/National Faceless\nAppeal Centre, Delhi [hereinafter referred to as “CIT(A)"] pertaining to\nassessment order passed u/s.143(3) of the Income-tax Act, 1961\n[hereinafter referred to as “Act”] dated24.12.2018 for the Assessment\nYear [A.Y.] 2016-17.Since some of the issues are common and also the\nfact that appeals were heard together, they are being taken up together\nfor adjudication vide this composite order for the sake of brevity. We\ntake up assessee's appeal first.\n\n2.\nThe grounds of appeal are as under:-\n\nITA No. 37/MUM/2024 (AY 2016-17)(Assessee)\n\n1.\nThe order passed u/s 143(3) of the I.T. Act by the Ld. Asst. Commissioner\nof Income Tax, Circle-3(2)(1), Mumbai (“the Ld. Assessing Officer”) is\nwithout jurisdiction, invalid and bad in law and against the principles of\nnatural justice.\n\nThis ground is general in nature. Hence, no adjudication is needed.\n\n2.\nα)\nThe Ld. Commissioner of Income Tax (Appeals), National Faceless\nAppeal Centre (hereinafter referred to as “the Ld. CIT(A)”) has, on facts\nand circumstances of the case, erred in sustaining the re-characterization\nof interest income of Rs.23,55,68,319/- on Fixed Deposits as ‘income from\n\nPage | 3\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nother sources' instead of ‘business income' to be reduced from the cost of\nthe project without appreciating the explanations/submissions placed on\nrecord and also in not providing adequate opportunity of being heard.\n\nb)\nWithout prejudice to the Ground no. 2(a), the Ld. CIT(A) erred in\nfacts and law in not allowing deduction of interest expense u/s.57\nagainst the above interest income on Fixed Deposits of Rs.23,55,68,319/-\nassessed under ‘income from other sources'.\n\nc)\nWithout prejudice to Ground no. 2(a) & 2(b), on facts and\ncircumstances of the case, the Ld. Assessing Officer erred in law in not\nincreasing/restating the “Capital Work in Progress” / “Cost of the Project”\nto the extent of addition of interest income on Fixed Deposits of Rs.\n23,55,68,319/-upheld by the Ld. CIT(A) under the head ‘Income From\nOther Sources' which is reduced by the assessee from “Capital Work in\nProgress” in its Balance Sheet.\n\nADDITIONAL GROUND OF APPEAL\n\nOn facts and circumstances of the case, the addition of interest income of\nRs.23,55,68,319/- earned on Fixed Deposit ought to have not been made\nas the assessee is a State by itself or a surrogate of the State or an agent,\nperforming the functions of the State and/or on behalf of the State of\nMaharashtra within the meaning of Article 12 r.w. clause (1) of Article\n289 of the Constitution of India and that the said interest income is not\nderived from any trade or business carried on by the assessee.\n\n3.\nThe assessee has raised the above additional ground of appeal\nunder Rule 11 of the ITAT Rules whereby the taxability of the interest\nincome of Rs 23.55 cr. has been contested. This ground raised by the\nassessee is against the re-characterization of interest income of Rs.\n23,55,68,319/- on Fixed Deposits by the Assessing Officer to tax it as\n\nPage | 4\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\n'Income from other sources' as against ‘Business income' claimed by the\nassessee and reduced it from the cost of the project.\n\n4.\nIn this regard, it has been pointed out by the ld.AR that in\nrecent orders for AY 2010-11, 2012-13, 2014-15 & 2015-16 in its own\ncase on the same issue as above, the Hon'ble ITAT, Mumbai held that\nthe appellant is a State by itself or a surrogate of the State or an agent,\nperforming the functions of the State and/or on behalf of the State of\nMaharashtra within the meaning of Article 12 of the Constitution of\nIndia read with clause (1) of Article 289 of the Constitution of India.\nBesides, in the recent order for A.Y. 2007-08 in its own case\nfrom the hon'ble ITAT wherein it is affirmed that the assessee\nis a State within the meaning of Article 289 of the Constitution\nof India, being an instrumentality/agent of the State and\nconsequently, the interest earned on the Fixed Deposits, being\nnot in the nature of business income, has been held to be\nexempt.\n\n4.1 Therefore, it is claimed that the interest income of Rs.\n23,55,68,319/- earned on Fixed Deposits, not being derived from any\ntrade or business carried on by the assessee, ought to have not been\ntaxed and added under the head ‘income from other sources'. However,\n\nPage | 5\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nas no specific ground in this regard had been taken by the assessee, it\naccordingly filed the additional ground of appeal which is a legal.\nFurther, all facts pertaining to the said additional ground are on record.\nAccordingly, no investigation would be required in respect of the\nadditional ground of appeal. The assessee therefore prayed that\nadditional ground of appeal may be admitted and decided as per law.\nThe appellant in this regard relies on the decisions of the hon'ble\nSupreme Court in the case of National Thermal Power Co. Ltd.\n(1998) 229 ITR 383 (SC) and Jute Corporation of India v. CIT\n(1991) 187 ITR 688 (SC) wherein it has been held that legal ground\ncan be taken up at any point of time.\n\n4.2 On due consideration of above stated facts we are inclined to\nadmit the above additional ground which to our mind is a pure legal\nground requiring no need to go beyond the facts on record. Since, the\nground is intrinsically linked to the very taxability of interest income on\nFDRs, we consider it appropriate to adjudicate the same at the outset.\n\n5.\nFacts in brief are that the assessee which is Maharashtra\nGovernment undertaking has been consistently disclosing interest\nincome on certain FDRs kept with banks. The said interest is shown as\npart of capital work in progress and not offered for tax while the\n\nPage | 6\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nRevenue has been taxing the same as Income from other sources. In the\nAY 2008-09, the coordinate bench directed the department to examine\nthe cash flow so as to ascertain where the said deposits were made out of\nsurplus amount available with the assessee or not.It submitted that\nduring the year, Interest on fixed deposits with various Banks was\nRs.23,55,68,319/-.It had earned interest on Fixed Deposits with Banks\nand these fixed deposits were not placed out of surplus funds. As\nimpugned interest on Fixed Deposits was inextricably linked to the main\nbusiness activity of the Company, the same was treated as Business\nIncome and was reduced from cost of the project by it as per Accounting\nStandards issued by the Institute of Chartered Accountants of India.\nAccordingly, the interest was in the nature of business receipt and not\nIncome from Other Sources. Reliance was placed on various case laws.\nFurther, attention was drawn to the observation recorded by Hon'ble\nITAT, G Bench, Mumbai in the assessee's own case at Para 6 of the\nAppellate Order for A.Y. 2008-09 wherein the ITAT directed the AO to\nre-adjudicate the issue to determine whether the Fixed Deposits are\nplaced out of surplus funds or out of loans and borrowings to determine\nwhether Interest earned thereon is in the nature of Income from\nBusiness or Income from Other Sources. In the year under\n\nPage | 7\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nconsideration, the AO made the addition on the same lines as in\nprevious assessment years and the ld.CIT(A) upheld the addition.\n\n5.1 The ld.AR has claimed that the issue is squarely covered in\nfavour of the assessee. Attention is drawn to the order in assessee's own\ncase, the coordinate bench in its order dated 27.09.2024 in ITA\nNo.7497 and 5202/Mum/2018 AY 2007-08 has dealt with similar\nadditional ground and the question of taxability of interest income on\nFDRs etc. It was concluded that in view of the provisions of Article\n289(1) of the Constitution, the impugned sum was not liable to income\ntax at all. Relevant parts of the order are extracted as below for the sake\nof brevity and clarity,\n\n“In view of the above, being a set aside matter, scope before us in the present\nappeals is limited to the direction so given, whereby we have to ascertain\nwhether the said direction has been complied or not. However, at this stage\nbefore us, for the first time, assessee has raised a legal issue vide additional\nground no.4, under Rule 11 of the ITAT Rules. While raising this additional\nground, assessee has submitted that it has received orders for various years in\nits own case, passed by the Co-ordinate Bench wherein it is affirmed that\nassessee is a State by itself or a surrogate of the State or an agent, performing\nthe functions of the State and/or on behalf of the State of Maharashtra within\nthe meaning of Article 12 of the Constitution of India read with clause(1)\nof Article 289. Therefore, the assessee contends that the interest income\nearned by it on fixed deposits which has been added under the head \"income\nfrom other sources\" and not derived from any trade or business carried out by\nthe assessee, cannot be added in the hands of the assessee. It is contended by\nthe assessee that it is a legal ground which goes to the root of the matter and\nno fresh investigation is required in respect of the same. Assessee relies on the\ndecision of the Hon'ble Supreme Court in the case of National Thermal Power\nCompany Ltd. (1998) 229 ITR 383(SC) and Jute Corporation of India (1991)\n187 ITR 688(SC), wherein it is held that legal grounds can be raised at any\nstage of the proceedings. Before we take up the matter for admissibility of this\nadditional ground, brief history and facts of the case are noted as under:\n\nPage | 8\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\n\n4.

2. Assessee filed its return of income on 20.10.2007 reporting total income\nat Rs. Nil. During the course of scrutiny assessment u/s 143 Maharashtra\nAirport Development Company Ltd., AY 2007-08 (2), ld. Assessing Officer\nrejected the assessee's claim of commencement of business and accordingly\ndisallowed all the expenditure and taxed receipts amounting to Rs.\n13,56,67,377/- under the head \"Income from other sources\". Aggrieved,\nassessee went in appeal before the ld. CIT(A).\n\n4.

3. Ld. CIT(A) partly allowed the appeal of the assessee and directed the ld.\nAssessing Officer to ascertain those expenses which are directly related to\nearning of this income from other sources and the same should be allowed as\nexpense for earning such income u/s 57 of Act. Ld. Assessing Officer, passed\nan order on 03.02.2012, giving effect to directions of ld. CIT(A), in respect of\nallowing expenditure u/s 57 of the Act, related to earning of income from\nother sources, but did not allow the aforesaid expenses. Aggrieved, assessee\nonce again went in appeal before the ld. CIT(A) who vide order dated\n21.12.2012, allowed only 10% of expenditure which is debited to Profit and\nLoss account as expenditure u/s 57 against income from other sources.\nAggrieved, assessee went in appeal before the Tribunal. Co-ordinate Bench of\nITAT heard the case on 16.12.2015 and the matter was set aside to the file of\nld. Assessing Officer for deciding afresh the quantum of interest expenses to\nbe allowed against interest income. However, while giving effect to the\ndirections of ITAT, ld. Assessing officer denied assessee's claim of deduction\nin respect of interest on borrowings to the tune of Rs.8,87,83,570/- against\ninterest income on fixed deposits. Aggrieved, assessee is in appeal before the\nTribunal.\n\n5.\nIn the back drop of the above stated facts and contesting on the additional\nground no.4 referred above, claim of the assessee for its non- taxability is on\nthe strength of the Article 289 of the Constitution of India, since its activities\nare akin to that of the State or any agent of the State. It was submitted that\nthis ground was not raised before authorities below, but the plea of the\nassessee can be appreciated on the strength of the statute under which it has\nbeen set up by the State legislature which does not require any long-drawn\ninvestigation of fresh facts. By this ground, assessee has made a point\nthat it must be considered as State or an agent of the State so as to\nfall within the prescription of Article 289(1) of the Constitution of\nIndia, for which examination of the statute under which it is\nconstituted is to be examined along with the objective and the\nactivities undertaken by it.\n\nPage | 9\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\n\n5.

1. In the course of hearing, reliance was placed on the decision of Co-\nordinate Bench of ITAT, Mumbai in assessee's own case in ITA\nNo.3682/Mum/2017 for AY 2012-13, dated 15.03.2024 which in turn\nplaced reliance on another decision in assessee's own case in ITA\nNo.3072/Mum/2014 for AY 2010-11, dated 19.06.2019, wherein\nassessee has been held as an agent of the State. Assessee further placed\nreliance on the decision of Co-ordinate Bench in the case of City and\nIndustrial Development Corporation of Maharashtra Ltd. vs. PCIT\n(2012) 25 taxmann.com 333 (Mum), wherein similar issue was\nconsidered. Reliance was also placed on the decision of PCIT vs.\nMaharashtra Labour Welfare Board in 25.09.2023 which also held that the assessee therein is a State within\nthe meaning of Article 289(1) of the Constitution of India being an\ninstrumentality of State.\n\n5.

2. Considering the findings in the above judicial precedents, in our\nconsidered opinion a plea of the assessee goes to the root of the jurisdiction of\nthe ld. Assessing Officer to levy tax on the income of the assessee. In the year\nunder consideration, this issue has not been taken before the authorities\nbelow and is raised for the first time before us as a pure point of law which is\nrelevant to determine the tax liability of the assessee.\n\n5.

1. From the above, we note that Article 289 exempts state income or\nproperty from taxation. On plain reading of above article, it is clear that Union\ncan (i) itself impose or authorize to impose (ii) any tax to such extent, as\nparliament may by law provide (iii) in respect of a trade or business of any\nkind carried on or on behalf of Government of a state. Further, Article 289 (2),\nwhich is the exception to 289(1), it is important to note that parliament by law\nprovide to tax the property or income in relation to only trade or business of\nany kind carried on by, or on behalf of, the Government of a State, or any\noperations connected therewith, or any property used or occupied for the\npurposes of such trade or business, or any income accruing or arising in\nconnection therewith.\n\n7.\nFurther, a bare perusal of Article 12 of the Constitution of India shows that\nthe definition of \"the State\" given in this article is inclusive and not exhaustive.\n\"The State\" includes:\n\n(a) the Government and Parliament of India,\n(b) the Government and the Legislature of each of the States,\n(c) all local and other authorities within the territory of India, and\n(d) all local and other authorities under the control of the Government of\nIndia.\n\n7.

1. The expression \"other authorities\" used in Article 12 is neither defined in\nthe Constitution of India nor in any other statute. Therefore, the Hon'ble\nSupreme Court of India and the Hon'ble High Courts have interpreted this\nexpression in various judgements. The Hon'ble Supreme Court of India while\ninterpreting the expression \"other authorities\" in the case of Som Prakash\nRekhi vs. Union of India reported at AIR 1981 SC 212 culled out certain tests\nto determine as to when a Corporation should be said to be an instrumentality\nor agency of the State. The tests laid down by the Hon'ble Apex Court are\nsummarized as under:\n\n\"1. If the entire share capital of the corporation is held by the Government, it\nwould go a long way towards indicating that the corporation is an\ninstrumentality or agency of the Government.\n2. Existence of deep and pervasive State control may afford an indication that\nthe corporation is a State agency or instrumentality.\n3. Whether the Corporation enjoys monopoly status which is State conferred\nor State protected.\n4. If the functions of the corporation are of public importance and closely\nrelated to governmental functions. It would be a relevant factor in classifying\nthe corporation as an instrumentality or agency of the Government\n5. If a department of a Government is transferred to a corporation, it would be\na strong factor supporting this inference of the corporation being an\ninstrumentality or agency of the Government.\"\n\n7.

1. The main objects of MADC as per clause III (A) of the Memorandum of\nAssociation is to design, plan. construct, erect, build, remodel, repair, execute, develop, sale, lease, rent, improve, administer, manage control,\nmaintain and demolish airport, air-traffic equipment, traffic terminals, roads,\nrailways, highways, expressways, bridges, tunnels, railroads, urban transport\nsystems, alleys, township schemes, industrial parks, docks, shipyards, canal, wells,\nports, reservoirs, embankments, dams, r-cation works. reclamations,\nimprovements, sanitary systems, water works, water gas or any other\nstructural or architectural work and Special Economic Zones.\n\n8.

2. Pursuant to the above stated objectives, assessee has carried out\nDevelopment of Nagpur airport as world class Multi-modal\nInternational Hub Airport, adjacent multi product Special\nEconomic Zone and supporting infrastructure. It is also carrying out\nactivities to Build and Operate airports in the State, to facilitate Intra-state\nand Inter-state Connectivity, to encourage overall growth of aviation sector in\nthe State and to ensure planned development around airports.\n\n9.\nOn the above stated factual status/setup of the assessee, we note\nthat identical additional ground was raised by the assessee before\nthe Co-ordinate Bench of ITAT in its appeal for Assessment Year\n2012-13 and 2015-16 in and ITA\nNo.522/Mum/2019, respectively, which was admitted and\nadjudicated upon to hold that assessee is an arm of the State, thus\nan instrumentality of the State. The relevant observations and findings of\nthe Co-ordinate Bench in this respect are reproduced below for ready\nreference.\n\nPage | 12\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\n\n22. In order to decide the issue in controversy we would decide if the assessee\ncompany is a state while executing the work of development of airports, repair\nand maintenance of airports as an arm of the state,\n\n23. Undisputedly the assessee company was incorporated as a company under\nthe Companies Act, 1956 by the Government of Maharashtra as a special\npurpose company to develop multi model international hub airport at Nagpur\nand aviation infrastructure in the State of Maharashtra in order to provide\nregional air connectivity and operationalising certain government schemes. It\nis also not in dispute that the assessee company was formed with equity\nparticipation from various government companies namely CIDCO, MIDC,\nNIT, MSRDC, SICOM & NMC which are owned and controlled by Government\nof Maharashtra; that the entire management and functional control of the\nassessee company is that of Chief Minister of Government of Maharashtra and\nall other board persons are senior officers of the State Government of\nMaharashtra; that grant-in-aid was received by the assessee company from\nGovernment of Maharashtra in order to carry out statutory functions and its\nactivities are for the development of the state in general and for the benefit\nand welfare of the general public in particular; that it is also not in dispute\nthat the assessee company is appointed by the State Government as a special\nplanning authority under section 40(1)(b) of the Maharashtra Regional Town\nPlanning (MRTP) Act, 1966; that it is also not in dispute that the assessee\ncompany being a special planning authority is required to carry out the work\nof development and disposing of land in the notified area as an agent of the\nstate.\n\n24. In the backdrop of the aforesaid undisputed facts, we are of the considered\nview that the assessee company being a wholly owned company of the State of\nMaharashtra to carry out/execute the work of development of land\nacquisition, development of airports, repair and maintenance of airports etc.\nas an arm of the state, thus an instrumentality of the state for the following\nreasons:\n\ni) that the assessee company being a special planning authority is carrying out\nits activities as an agent of the Government of Maharashtra as per section 113\nof the MRTP Act.\nii) that the assessee company as a special planning authority is constituted to\ncarry out the work of developing and disposing of land in the notified area as\nan agent of the State Government.\niii) that under section 114(2) of the MRTP Act the assessee company is\nempowered to exercise its power only after obtaining consent and only in the\nmanner as directed by the Statement Government independently. and cannot\nfunction\niv) that all the development proposals of the assessee company are sent to the\nstate government for approval as required under section 115 of the MRTP Act.\n\nPage | 13\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\n\n(v) that the assessee company is required to submit the timely reports/returns\netc. to the state government from time to time as required under section 155 of\nthe MRTP Act.\nvi) that under section 160 of the MRTP Act a state government can dissolve\nthe special planning authorities and upon dissolution its properties, the\nliabilities, undischarged functions shall get transferred to the state\ngovernment.\nvii) that as per sub-section 3A of section 113 of MRTP Act any\ncorporation/company or subsidiary company which is into the work of\ndeveloping and disposing of land in the area of a new town is an agent of the\nstate government. Sub section 3A of section 113 of the Act reads as under:\n\n“(3A) Having regard to the complexity and magnitude of the work involved in\ndeveloping any area as a site for the new town, the time required for setting up\nnew machinery for undertaking and completing such work of development,\nand the comparative speed with which such work can be undertaken and\ncompleted in the public interest, if the work is done through the agency. of a\ncorporation including a company owned or controlled by the State or a\nsubsidiary company thereof, set up with the object of developing an area as a\nnew town, the State Government may, notwithstanding anything contained in\nsub-section (2) require the work of developing and disposing of land in the\narea of a new town to be done by any such-corporation, company or subsidiary\ncompany aforesaid as an agent of the State Government, and thereupon, such\ncorporation or company shall, in relation to such area, be declared by the State\nGovernment by notification in the Official Gazette, to be the New Town\nDevelopment Authority for that area.\"\nviii) that the co-ordinate Bench of the Tribunal in case of City and Industrial\nDevelopment Corporation of Maharashtra Ltd. VS. ACIT (2012) 25\ntaxmann.com 333 (Mum.) while deciding the identical issue in case of City\nand Industrial Development Corporation (CIDCO) which is also a subsidiary\ncompany under the control and supervision of State Government into\nbusiness of construction of residential and commercial structures as well as\ndevelopment of infrastructure in towns and any development project\ncompleted by the CIDCO was held to be an agent of the state government. And\nas such its income cannot be assessed as business income in the hands of the\nCIDCO.\n\nix) that like CIDCO the assessee company is also wholly owned company of\nState of Maharashtra which is into land acquisition, development of airports,\nrepair and maintenance of airports and as such receiving of grant-in-aid from\nGovernment of Maharashtra by the assessee company being an agent of the\nstate is not assessable to tax.\n\nx) that Hon'ble Bombay High Court in Writ Petition No.1211 of 2009 (supra)\nvide its order dated 07.11.2009 held that \"acquisition of land on behalf of the\n\nPage | 14\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nstate government at the cost of state government by CIDCO appointed as new\ntown development authority under sub section 3A of section 113 is doing the\nwork of developing and disposing of the land in the area as an agent of the\nstate government. So the appointment of CIDCO being under section 3A of\nsection 113 of the MRTP Act the CIDCO acts as an agent of the state\ngovernment\".\n\nxi) that when we apply the ratio of the decision rendered by Hon'ble Bombay\nHigh Court in case of Percival Joseph Pareira (supra) to the case at hand the\nassessee company is also appointed as a town planning authority under sub\nsection 3A of section 113 of MRTP Act for acquisition of land for development\nof airports, repair and maintenance of airports and for rehabilitation of the\nproject affected persons (POP), for infrastructure development of airports in\nthe notified area as an agent of the state. The assessee company carries\nout all the activities for and on behalf of the state government and after development\nand completion of the project the entire property vests in the state\ngovernment. The entire control over the assessee company is of state\ngovernment being exercised through the officer of the state government. In\nthese circumstances the assessee company is an agent of the state not\nassessable to tax. As such grant-in-aid received by the assessee company from\nthe Government of Maharashtra for land acquisition, development of airports,\nrepair and maintenance of airports etc. is not a capital receipt as has been held\nby the Ld. CIT(A) rather the assessee company has performed these functions\nas an agent of the state and as such not assessable to income tax.\n\nxii) that the assessee company has been formulated with a specific purpose i.e.\nto acquire the land for development of airports, repair and maintenance of\nairports etc, for which it receives grant-in-aid from the state of\nMaharashtra which is not taxable under Income Tax Act.\n\nxiii) that it is however brought on record and candidly admitted by the Ld.\nA.R. for the assessee that other income derived by the assessee\ncompany from its project is not claimed as exempt.\n\nxiv) that the contention of the Ld. D.R. for the Revenue that when the assessee\ncompany itself is paying taxes on its business income the grant-in-aid received\nby the assessee on which profit is to be earned is also business income is not\nsustainable in view of what has been discussed in the preceding paras.\n\nxv) that even Article 289(1) of the Constitution of India itself says about the\nincome from trade etc. but the grant-in- aid received by the assessee company\nfrom State of Maharashtra for the purpose of land acquisition, development of\nairports, repair and maintenance of airports is not a trade activity, hence not\ntaxable to the income tax.\n\n9.

2. We also take note of the decision of Co-ordinate Bench of ITAT in the\ncase\nof Maharashtra Labour Welfare Board vs. DCIT in ITA\nNo.137/Mum/2023 dated 25.09.2023, wherein the assessee was held as\na State, within the meaning of Article 289 of the Constitution of India, being\nan instrumentality or an agency of the State and thereby the interest\nearned on the FDRs was held to be exempt. While holding so, the Co-\nordinate Bench relied on the decision of the Hon'ble Supreme Court in the\ncase of Som Prakash Rekhi vs. Union of India (supra). Support was also drawn\nfrom the decision of the Hon'ble High Court of Karnataka in the case of CIT\nvs. Karnataka Urban Infrastructure Development and Finance\nCorporation (2006) 155 taxmann.com 228 (Kar), wherein the Hon'ble\nHigh Court held that assessee acted as a nodal agency of the Government for\nimplementing the scheme of the Government and therefore the interest\nincome earned on the bank deposits cannot be treated as the income of the\nassessee, as the interest is earned out of the money given by the Government\nfor the purpose of implementing the scheme.\n\n10. Having considered the above findings of the Co-ordinate Bench of ITAT in\nassessee's own case as well as in other decisions referred above, we are in\nagreement with the same to hold the assessee to be a State, being an\ninstrumentality / agent of the State, thereby resulting in its interest\nincome earned on fixed deposits not chargeable to tax. Further, we\nnote that clause (2) of Article 289 provides an exception and authorises the\nUnion to impose a tax in respect of the income derived by the Government of a\nState from trade or business carried out by it or on its behalf. In this respect, it\nis undisputed fact that ld. Assessing Officer has himself assessed the interest\nincome on fixed deposits under the head \"income from other sources\". The\nsaid interest income thus,cannot be said to be derived from trade or business\ncarried out by the assessee. Accordingly, clause(2) of the Article 289 is\ninapplicable. Since the assessee is held to be a State, or a surrogate of the State\nor an agent, performing the functions of the State and /or on behalf of the\nState of Maharashtra, whereby its income is not chargeable to tax within the\nmeaning of clause(1) of the Article 289.\"\n\n5.2 We find that the additional ground(supra) filed by the\nassessee in the instant assessment year is squarely covered by the above\ndecision by the coordinate bench of ITAT, Mumbai dated\n27.09.2024(supra). Respectfully following the above coordinate bench\ndecision, we hold that the impugned interest income of Rs 23.55 cr. is\nnot liable to tax. Thus, allowing the additional ground(supra), we direct\n\nPage | 16\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nthe AO to delete the addition made. Ground no.2(a)/(b) and(c)\nbeing in consequential, do not need any adjudication.\n\n6.\nIn ground no.3 it is stated that a) The Ld. CIT(A), in view of the facts\nand circumstances of the case, erred in upholding the disallowance u/s.\n14A r.w.r. 8D amounting to Rs.12,01,617/- made in a mechanical manner\nwithout appreciating the explanations provided by the appellant and\nwithout assigning any reason of dissatisfaction as envisaged u/s 14A(2)\nof the Act.\n\nb) The Ld. CIT(A), in view of the facts and circumstances of the case,\nerred in upholding the disallowance u/s.14A r.w.r. 8D amounting to\nRs.12,01,617/- without appreciating that it is well settled that once there is\nno exempt income earned during the year, no such disallowance could\nhave been made.\n\nc) On facts and circumstances of the case, the Ld. Assessing Officer ought\nto have not added the amount of disallowance Rs.12,01,617/- u/s.14A of\nthe Act arrived as per Rule 8D to the Book Profits computed u/s 115JB of\nthe Act.\n\n7.\nAs per the balance sheet the assessee had made several\ninvestments but had not disallowed any such expenses suo-motu\ninterms of section 14A of the Act. The AO was satisfied that disallowance\nu/s.14A r.w.r. 8D was to be made in respect of investments which were\ncapable of generating exempt income. In view of the above the\ndisallowance u/s.14A r.w.r. 8D was computed at Rs.12,01,617/-was\n\nPage | 17\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nadded to the income which was also upheld by the ld.CIT(A).He also\nmade adjustments under MAT.\n\n7.1 It appears that facts involved and the disallowance made are\nidentical in previous assessment years and have already been\nadjudicated in favour of the assessee on the ground that the AO has\nmechanically applied the provisions contained under rule 8D without\nnoticing the fact that there was no exempt income and own funds of the\nassessee were far more than the investment made by it during the years\nunder consideration. It is admitted fact on record that during the year\nunder consideration no exempt income has been earned by the assessee.\nIdentical issue has already been decided in favour of the assessee in its\nown case for A.Y. 2010-11 and 2011-12. By now, it is a settled principle of\nlaw that when there is no exempt income earned by the assessee during\nthe year under consideration no disallowance can be made under section\n14A read with rule 8D. Reliance in this case is placed on decisions\nrendered by Hon'ble Delhi High Court in case of PCIT vs. Era\nInfrastructure (India) Ltd. (2022) 141 taxmann.com 289\n(Delhi). Similarly, when there is no disallowance under the normal\nprovisions no disallowance under section 14A readwith rule 8D under\nMAT provisions is sustainable as has been held by Hon'ble Bombay High\nCourt in case of CIT vs. M/s. Bengal Finance & Investments Pvt.\nLtd. in Income Tax Appeal No.337 of 2013 order dated 10th\nFebruary 2015.Accordingly,the AO is directed to delete the disallowance\nmade by invoking the provisions of Rule 8d r.w. Section 14A of the Act\nas also the consequential addition u/s 115JB of the Act. The ground\nno.3(a)/(b) and (c) are therefore allowed.\n\n8.\nIn ground no.4,it is stated that a) On\nfacts\nand\ncircumstances of the case, the Ld. CIT(A) ought to appreciate that the\ngrant received during the year from the State Government is a capital\nreceipt, not liable to tax, as the assessee is a State by itself or a\nsurrogate of the State or an agent, performing the functions of the\nState and/or on behalf of the State of Maharashtra.\n\nb)\nThe Ld. CIT (A) erred in facts and law in upholding the addition of\nGrant-in-aid received from the Government of Maharashtra towards the\nvarious ongoing/pending projects amounting to Rs.184,66,84,704/-\n(comprising of Grant towards MIHAN Rehabilitation of Rs.\n140,00,00,000/- + Grant towards Shirdi Airport of Rs.\n42,14,00,000/- + Grant towards Other Airports (Repairs &\nMaintenance) of Rs.2,52,84,704/-) by invoking provisions of\nSection 2(24)(xviii) of the Act without appreciating the explanations and\ndocuments placed on record by the appellant.\n\nc)\nThe Ld. CIT(A) failed to appreciate that the Grant in Aid given by\nthe State Government is for specific purpose and same has been spent by\nthe appellant for that specific purpose and that the appellant is not the\nbeneficiary of such grants.\n\nPage | 18\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\n\nd)\nWithout prejudice to ground no. 7(a), (b) and (c), the subsidy\nreceived by the assessee can be treated as income only in the year in\nwhich the expenses are incurred or utilisation thereof is made based on\nthe principle of matching concept and only the resultant net income be\ntaxed.\n\ne) The Ld. Assessing Officer in facts and law ought not to have added\nthe Grant-in-aid received from the Government of Maharashtra towards\nthe various ongoing/pending projects amounting to Rs.184,66,84,704/-\nto the book profit u/s.115JB of the Act.\n\n9.\nAccording to the assessment order, the assessee company is a\n100% Govt. holding Company wherein the Govt. of Maharashtra is a\n100% shareholder and is providing various grants to the assessee\ncompany for carrying out its functions. On verification of the balance\nsheet of the assessee for the current year, it was noticed that during the\nyear the assessee had received grant in aid from government of\nMaharashtra as detailed below to the tune of Rs.189,73,29,496/-which\nwas directly credited to the Reserves and Surplus and then allocated to\nvarious ongoing/pending projects.\n\n1. MIHAN Rehabilitation\n2. Shirdi Airport\n3. Mihan Development Fund\n4. Other Airports (Repairs &Maintenance)\nRs.140,00,00,000/-\nRs.42,14,00,000/-\nRs.5,06,44,792/-\nRs.2,52,84,704/-\n\nPage | 19\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\n\n9.1\nThe AO observed that in view of the fact that the said\ngrant in aid received from the Govt. of Maharashtra was not towards\nequity or share capital or otherwise and also since the same had not\nbeen claimed as a capital receipt in the books of account, it was liable to\nbe taxed as revenue receipt. In view of this the assessee was show cause,\nthe assessee submitted that aforesaid Governments grants had been\nshown under the Capital Reserves, being in the nature of Capital\nReceipts. It was contented that the assessee company MADC is a\nGovernment Company incorporated on August 26, 2002. It is engaged\nin the business of development of airports in the State of Maharashtra\nand development of SEZ at Nagpur. The Registrar of Companies had\ngiven Certificate for Commencement of Business on March 25, 2003.\nThe main objects of the Assessee Company as per the Memorandum of\nAssociation are to design, plan, construct, erect, build, remodel, repair,\nexecute, develop, operate, sell, lease, rent, improve, administer, manage,\ncontrol, maintain and/or demolish airports, air traffic equipment, traffic\nterminals, roads, railways, highways, expressways, bridges, tunnels,\nrailroads, urban transport systems, alleys, township schemes, industrial\nparks, docks, shipyards, canal, wells, ports, reservoirs, embankments,\ndams, irrigation works, reclamations, improvements, sanitary system,\nwater works, water supply, gas or any other structural or architectural\nwork and Special Economic Zones.\n\nPage | 20\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nwork and Special Economic Zones. The Government of Maharashtra\nvide Resolution dated February 4, 2003 appointed the Assessee\nCompany as the Special Planning Authority for development of\n'Multimodal International Hub Airport at Nagpur (MIHAN)'.\nThe said Grant-in-Aid is held by it on behalf of the Government of\nMaharashtra for disbursement to District Collector / other Govt.\nauthorities/for payment of consideration for the purchase of land to\nland owners, rehabilitation of the project affected persons and\ndevelopment of airports. As per accounting policy, Government grants\nwere credited to capital reserves and treated as part of shareholders'\nFunds. By considering the purpose for which the assessee company was\nformed and Government Resolution sanctioning the Grantthe\nintention behind sanctioning the grant for acquisition of Land\n/ rehabilitation was to set-up and develop the MIHAN Project\nand other Airport projects. Hence, the nature of grant in aid\nreceived by the Company is definitely in the nature of Capital receipt.\nThe character of the receipt in the hands of the assessee has to be\ndetermined with respect to the purpose for which the grant is given. In\nother words, in such cases, one has to apply the purpose test. Moreover,\nit is important to note that the point of receipt of the grant is not\nrelevant to decide the taxability. If the object of the assistance under the\n\nPage | 21\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\ngrant scheme was to enable the assessee to set up a new unit or to\nexpand the existing unit, then the receipt of the grant was on capital\naccount.\nTherefore, it is the object for which the\nsubsidy/assistance/grant is given which determines the nature of the\ngrant.\n\n9.2 The AO proceeded to tax the above sums as revenue receipts\nand added to the income. The ld.CIT(A) upheld the addition concurring\nwith the AO. He also observed that the impugned sum was also taxable\nin view of the provisions of section 2(24) (xviii)of the Act.\n\n10. The ld.AR before us has argued that the grants received for\nmaintenance of other airports was towards repairs and maintenance of\nrunway and other infrastructure of these airports to ensure safety of\npassengers. It is very much clear that aforesaid expenditure incurred is\non behalf of Government of Maharashtra for which grants are received\nand expenditure incurred has separately been booked under the head\n\"Grant from Govt. of Maharashtra – Other Airports (Repairs &\nMaintenance)\" Further, in case if total amount of Governments grants\nreceived could not be spent in the year of its receipt, then the same\nought to be utilized in subsequent years. In this context, it is pertinent to\nnote that Government of Maharashtra has complete authority to call\n\nPage | 22\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nback unspent amount of grant. Hence, aforesaid unspent amount of\ngrant which MADC is holding as custodian on behalf of Government of\nMaharashtra cannot be treated as its income.\n\n10.1 It is also submitted that the issue stands covered in favour of\nthe assessee as in its case for AY 2012-13 to 2015-16 in ITA\nNo.3682/M/2017,it has been held by the coordinate bench of ITAT,\nMumbai that such grants are exempt under Income tax as per article\n289(1) of the Constitution. Besides, it is contented that section 2(24) is\nalso not applicable as the same can be applied only to those assessees\nwho get such grants for their commercial advantage.\n\n11. On careful perusal of the ITAT order (supra) we find that the\nissue in hand has been adjudicated in favour of the assessee in the light\nof the provisions of Article 289(1) of the Constitution. Relevant parts of\nthe decision are reproduced as below:\n\n\"23. Undisputedly the assessee company was incorporated as a\ncompany under the Companies Act, 1956 by the Government of\nMaharashtra as a special purpose company to develop multi model\ninternational hub airport at Nagpur and aviation infrastructure in\nthe State of Maharashtra in order to provide regional air\nconnectivity and operationalising certain government schemes. It\nis also not in dispute that the assessee company was formed with\nequity participation from various government companies namely\nCIDCO, MIDC, NIT, MSRDC, SICOM & NMC which are owned and\ncontrolled by Government of Maharashtra; that the entire\nmanagement and functional control of the assessee company is\nthat of Chief Minister of Government of Maharashtra and all other\nboard persons are senior officers of the State Government of\nMaharashtra;\n\nPage | 23\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nMaharashtra;\nthat\ngrant-in-aid was received by the\nassessee company from Government of Maharashtra in order to\ncarry out statutory functions and its activities are for the\ndevelopment of the state in general and for the benefit and welfare\nof the general public in particular; that it is also not in dispute that\nthe assessee company is appointed by the State Government as a\nspecial planning authority under section 40(1)(b) of the\nMaharashtra Regional Town Planning (MRTP) Act, 1966; that it is\nalso not in dispute that the assessee company being a special\nplanning authority is required to carry out the work of\ndevelopment and disposing of land in the notified area as an agent\nof the state.\n\n24. In the backdrop of the aforesaid undisputed facts, we are of the\nconsidered view that the assessee company being a wholly owned\ncompany of the State of Maharashtra to carry out/execute the work\nof development of land acquisition, development of airports, repair\nand maintenance of airports etc. as an arm of the state,\nviii) that the co-ordinate Bench of the Tribunal in case of City and\nIndustrial Development Corporation of Maharashtra Ltd. vs.\nACIT (2012) 25 taxmann.com 333 (Mum.) while deciding the\nidentical issue in case of City and Industrial Development\nCorporation (CIDCO) which is also a subsidiary company under the\ncontrol and supervision of State Government into business of\nconstruction of residential and commercial structures as well as\ndevelopment of infrastructure in towns and any development\nproject completed by the CIDCO was held to be an agent of the state\ngovernment. And as such its income cannot be assessed as business\nincome in the hands of the CIDCO.\n\nx) that Hon'ble Bombay High Court in Writ Petition No.1211 of 2009 (supra)\nvide its order dated 07.11.2009 held that \"acquisition of land on behalf of the\n\nPage | 24\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nstate government at the cost of state government by CIDCO appointed as new\ntown development authority under sub section 3A of section 113 is doing the\nwork of developing and disposing of the land in the area as an agent of the\nstate government. So the appointment of CIDCO being under section 3A of\nsection 113 of the MRTP Act the CIDCO acts as an agent of the state\ngovernment\".\n\nxi) that when we apply the ratio of the decision rendered by Hon'ble Bombay\nHigh Court in case of Percival Joseph Pareira (supra) to the case at hand the\nassessee company is also appointed as a town planning authority under sub\nsection 3A of section 113 of MRTP Act for acquisition of land for development\nof airports, repair and maintenance of airports and for rehabilitation of the\nproject affected persons (POP), for infrastructure development of airports in\nthe notified area as an agent of the state. The assessee company carries\nout all the activities for and on behalf of the state government and\n\nPage | 25\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nafter development and completion of the project the entire\nproperty vests in the state government. The entire control over the\nassessee company is of state government being exercised through\nthe officer of the state government. In these circumstances the\nassessee company is an agent of the state not assessable to tax. As\nsuch grant-in-aid received by the assessee company from the\nGovernment of Maharashtra for land acquisition, development of\nairports, repair and maintenance of airports etc. is not a capital\nreceipt as has been held by the Ld. CIT(A) rather the assessee\ncompany has performed these functions as an agent of the state\nand as such not assessable to income tax.\n\nxii) that the assessee company has been formulated with a specific\npurpose i.e. to acquire the land for development of airports, repair\nand maintenance of airports etc. for which it receives grant-in-aid\nfrom the state of Maharashtra which is not taxable under Income\nTax Act.\n\nxv) that even Article 289(1) of the Constitution of India itself says\nabout the income from trade etc. but the grant-in- aid received by\nthe assessee company from State of Maharashtra for the purpose of\nland acquisition, development of airports, repair and maintenance\nof airports is not a trade activity, hence not taxable to the income\ntax.\n\n25. In view of what has been discussed above, we are of the\nconsidered view that the Ld. CIT(A) has erred in treating the grant-\nin-aid received by the assessee company from State of Maharashtra\nas capital receipt rather utilization of the grant-in-aid by the\nassessee company for acquisition of land, development of airports,\nrepair and maintenance of airports is the statutory functions of the\nassessee company as an agent of the State of Maharashtra,\nhence, not assessable to tax under Income Tax Act.\"\n\n12. Respectfully following the above coordinate bench decision,\nwe hold that the impugned Grant -in-Aid is not liable to tax. Thus,\nallowing the ground no.4(a) to(c),we direct the AO to delete the\naddition made. Ground no.4(d) and (e) being inconsequential, do\nnot need any adjudication.\n\nPage | 26\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\n\n13. In ground no.5, it is stated that a) The Ld. CIT (A) erred in facts\nand law in upholding the addition of Rs.4,84,36,287/-collected towards\nDevelopment charges from various lessees / unit holders in MIHAN\narea at Nagpur on the ground that the receipt is a revenue receipt\nwithout appreciating the explanations and documents placed on record\nby the appellant.\n\nb)\nThe Ld. CIT(A) failed to appreciate that the appellant is a Special\nPlanning Authority appointed under section 40(1)(b) of The Maharashtra\nRegional and Town Planning Act, 1966 (MRTP Act) and the development\ncharges is collected by virtue of section 124A of MRTP Act, 1966 and the\nsame shall be utilized for specific purpose as per the provisions of Section\n124J of MRTP Act, 1966 and that the appellant is not a beneficiary of\nthese receipts.\n\nc) The Ld. Assessing Officer erred in facts and law in adding the\ndevelopment charges from various lessees / unit holders in MIHAN area\nat Nagpur amounting to Rs.4,84,36,287/- to the book profit u/s.115JB of\nthe Act.\n\n14.According to the order, in respect of Development charges\nreceived of Rs.4,84,36,287/-,received from various lessees/unit holder\nin MIHAN was treated as revenue receipt. The amount was also added\nto the income u/ 115JB of the Act. The ld.CIT(A) upheld the addition\nfollowing his own order in earlier years.\n\n15. In this regard, the ld.AR contented that a Special Planning\nAuthority appointed under section 40(1)(b) of the Maharashtra Regional\nand Town Planning Act, 1966. In this regard, section 124A of MRTP Act\n\nPage | 27\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nwhich empowers the assessee “The Planning Authority\" to levy within\nthe area of its jurisdiction, development charge on the institution of use\nor change of use of any land or building, or development of any land or\nbuilding, for which permission is required under MRTP Act, at the rates\nspecified by or under the provisions of this Chapter. Further, by virtue of\nsection 124J of MRTP Act, Development charges collected by the\nassessee shall be utilized only for the purposes of acquisition and\ndevelopment of any land reserved for any of the public purposes\nspecified in any plan or scheme under this Act and for providing public\namenities in the area under the jurisdiction of the said Authority and\nmaintenance and improvement thereof. During the year, the\nassessee had collected development charges to the tune of\nRs.4,84,36,287/- under the MRTP Act which has been credited\nunder the head MIHAN Development Fund under \"Capital Reserves\".\nSince the said development charges shall be utilized as per the\nprovisions of 124(J) of MRTP Act, as stated in forgoing para, the said\nreceipts are not taxable under the Act. It was also submitted that similar\naddition made is deleted by the ITAT in its own appeal in AYs\n2012-13 to 2015-16 (supra) wherein it has been held that such\nexpenditure was inextricably linked to the development project and the\n\nPage | 28\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nassessee is not a beneficiary of the same. Relevant paras of the above\norder are reproduced as below:\n\n\"26. The assessee company received an amount of Rs.4,38,97,624/- and\nRs.3,48,60,686/- on account of development charges levied by the\nassessee company under section 124J of Maharashtra Regional Town Planning\n(MRTP) Act, 1966. The Ld. CIT(A) by passing impugned order held the receipt\non account of development charges as business receipt and liable to be taxed\nby returning following (of A.Y. 2012-13) findings:\n\n\"5.9.9 Now coming to amount of Rs.4,38,97,624/- shown at Sr. No. c) in the\ntable above, as stated, these are development charges levied by the appellant u\n/ s 124J of Maharashtra Regional and Town Planning Act. It is noted that once\nagain this amount has not been given in the form of a grant for capital outlay\nby Government of Maharashtra. One of the stated business objectives of the\nappellant is to develop and maintain townships schemes, industrial parks etc.,\nand any earning from engaging in such activity is relatable to business and,\ntherefore, is business receipt. The fact that MRTPA empowers the\nappellant company to levy charges at prescribed rates from users of\ninfrastructure facilities in its jurisdiction does not change the nature of such\nreceipt. These charges are similar to lease rentals/usage charges that owner of\nany infrastructure would collect from its clients. Even the fact that charges\ncollected should be used only for acquisition and development of any land in\nany plan or scheme under MRTPA does not alter the nature of the receipt.\"\n\n27. As discussed in the preceding paras the assessee company is a special\nplanning authority appointed by the Government of Maharashtra under\nMRTP Act. We have perused section 124A of MRTP Act, which empowers the\nassessee company to levy development charges for use of land/building or\ndevelopment of land/building, which shall be utilized only for the purpose of\nacquisition or development of land reserved for any of the public purposes\nspecially for any plan or scheme under the Act and for providing public\namenities and maintenance/improvement thereof. It is also an admitted fact\non record that the assessee company is maintaining a separate development\nfund account shown in capital reserves to hold these funds and is not a\nbeneficiary of these funds. Periodic reports as required by the state\ngovernment are being sent by the assessee company as required under section\n155(1) of MRTP Act.\n\nPage | 29\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\n\n28. We are of the considered view that as discussed in the\npreceding paras 21 to 24 the assessee company is held to be a state\nonly for the purpose of receiving grant-in-aid from the state\ngovernment as a special planning authority and collecting the\ndevelopment charges from various lessees/unit holders in 'Multi-\nModel International Passenger and Cargo Hub Airport at Nagpur'\n(MIHAN) area are to be used for development of the land acquired\nby the assessee company with the grants-in-aid provided by\nthe state government and as such is also a statutory function.\nBecause without developing the land purchases with grant-in-aid received\nfrom the state government, which ultimately vests in the state government the\npurpose of providing public amenities as prescribed under the scheme of the\nAct cannot be fulfilled. In these circumstances, the Ld. CIT(A) has\nerred in treating these development charges which are inextricably\nlinked to the development of the project under the scheme, akin to\nthe lease rental/usage charges. So the findings returned by the Ld.\nCIT(A) are hereby set aside and the AO is directed to delete the\naddition made by the AO and confirmed by the Ld. CIT(A). Hence,\nGround Nos.2 & 4 and Additional ground No.1 in &\nGround Nos.1, 2 & 4 and additional ground No.1 in ITA No.522/M/2019 (both\nassessee's appeals) for A.Y. 2012-13 & 2015-16 respectively are hereby allowed.\n\n16.\nWe find that the above ground is squarely covered by the\nabove decision of the coordinate bench of ITAT (supra). Respectfully\nfollowing the above decision, we hold that the impugned amount is not\nliable to tax. Regarding adjustment under MAT, it is stated that such\nadjustment is not permissible under the Act. Allowing the ground\nno.5(a) and(b), we direct the AO to delete the additions made.\n\n17. In ground no.6, it is stated that a) The Ld. CIT (A) erred in facts\nand law in upholding the addition of Rs.22,08,505/- in respect of Fire\nservice fee received from unit holders on the ground that the receipt is\na revenue receipt without appreciating the explanations and documents\nplaced on record by the appellant.\n\nPage | 30\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\n\nb)\nThe Ld. Assessing Officer erred in facts and law in adding the fire\nservice fee received from unit holders amounting to Rs.22,08,505/- to the\nbook profit u/s.115JB of the Act.\n\n17. In respect of Fire service fees of Rs.22,08,505/-it was\ncontented that subsection 1 of section 11 of Maharashtra Fire Prevention\nand Life Safety measures Act, 2006 which empowers the assessee “The\nPlanning Authority” to levy Fire service fee on all owners of various type\nof buildings within the area of its jurisdiction. In this regard, provisions\nof section 25 of Chapter VII of Maharashtra Fire Prevention and Life\nSafety measures Act,2006, are as under : There shall be constituted a\nspecial fund called the “Fire Protection Fund” to which shall be credited\nthe fees imposed and collected under this Act. The special fund shall be\nreflected into the budget estimate of the respective Authority and the\nAccounts in respect thereto shall be maintained and audited in\naccordance with the procedure prescribed for the purpose of\nmaintenance of accounts in the relevant law or the rules and orders\nmade thereunder and are applicable to the respective Authority. The\namounts in the fund shall subject to the provisions of this Act and\nsubject to the general or special order of the State Government, be\napplied for the purpose of maintaining Fire Brigade in general (which\nshall also include the expenditure on salaries, allowances and other\nincidental expenses on the Fire Officers and Staff) and for providing\n\nPage | 31\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nsophisticated equipments and appliances, in particular, for the purpose\npreventing and extinguishing fire on any land or in any building within\nor without the limits of the Authority and to no purpose other than the\npurposes mentioned in this Act. During the year, the assessee has\ncollected Fire Service fee to the tune of Rs.22,08,505/- under the\nMaharashtra Fire Prevention and Life Safety measures Act, 2006 which\nhas been credited under the head MIHAN Development Fund under\n'Capital Reserves”. Since the said Fire service fee shall be utilized as per\nthe provisions of section 25 of Chapter VII of Maharashtra Fire\nPrevention and Life Safety measures Act, 2006, as stated in forgoing\npara, the said receipts are not taxable under the Act.\n\n18.\nThe AO rejected the explanation of the assessee by stating\nthat contentions of the assessee were not tenable. Since, the grant in aid\nreceived by the assessee from Govt. of Maharashtra was not towards\nequity or share capital and also the assessee had directly credited such\ngrant to the Reserves and Surplus without routing the same through the\nP&L A/c. and also it had not utilized such grant in aid for the purpose\nfor which it was given by the govt. of Maharashtra. He concluded that\nthe basic nature of assessee's business was that of a developer wherein it\nacquired land, developed it in the form of SEZ/Non SEZ/Airports and\nthen sells/gives it on long term lease in lieu of revenue. The revenue\n\nPage | 32\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nearned out of such long term lease/sale is recognized on a percentage\ncompletion basis. To acquire such land and to rehabilitate people, the\nassessee receives grant in aid from Government of Maharashtra. Placing\nreliance is placed on the landmark judgment of Hon'ble SupremeCourt\nin the case of Sahney Steel & Press Works Ltd v CIT (1997)228\nITR 253/94 Taxmann 366he held these grants as revenue receipts.\nThe ld.CIT(A) upheld the addition.\n\n19. Before us, it is submitted that similar addition has been\ndeleted by ITAT in its own appeal for AY 2015-16 inter alia holding\nthat the fee was not revenue in nature and had been levied as per the\nState laws on behalf of the government and not received in the ordinary\ncourse of business and was strictly applied for maintaining fire brigades\netc. No adjustment was permissible under MAT also. In respect of Fire\nservices charges ITAT deleted the addition with the observations that,\n\n\"during the year under consideration the assessee company has received fire\nservice fee to be applied for the purpose of maintaining fire brigade to comply\nwith the provisions of section 25 of chapter VII of the Maharashtra Fire\nPrevention & Life Safety Measures (MFPLSM) Act, 2006. The AO as well as\nthe Ld. CIT(A) by declining the contentions raised by the assessee company\nthat the assessee company is to manage a property by taking various measures\nas per section 114 of the MRTP Act and section 11 of MFPLSM Act, 2006\nempower MADC to levy fire service fees on various unit holders within the\narea of its jurisdiction and the said amount is credited separately to the\n\nPage | 33\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nMIHAN development fund account, the AO as well as the Ld. CIT(A) has\ntreated the same as revenue in nature.\n\n37. We are of the considered view that when the fire services fee is to be\napplied for the purpose of maintaining fire brigade which is also mandatory\nfor the assessee company to maintain in compliance to section 25 of chapter\nVII of MFPLSM Act, 2006, section 11 of the MFPLSM Act, 2006 also\nempowers the assessee company to levy fire services fee on all owners of\nvarious buildings within the area of its jurisdiction, the same cannot be treated\nas receipt of revenue in nature. Since the entire project was being executed by\nthe assessee as a stated owned company fire services fees which was not\nreceived in the ordinary course of business and was strictly applied for the\npurpose of maintaining fire brigade is like development charges collected by\nthe assessee company and as such is inextricably linked with the success of\nairport project being executed by the assessee company on behalf of the state\ngovernment and as such it cannot be treated as income. So the same is ordered\nto be treated as revenue in nature as claimed by the assessee. So ground No.3\nin ITA No.522/M/2019 for A.Y. 2015-16 of assessee's appeal is allowed.”\n\n20. We find that the above ground is squarely covered by the\nabove decision by the coordinate bench of ITAT (supra). Respectfully\nfollowing the above decision, we hold that the impugned amount is not\nliable to tax. Thus, allowing the ground no. 6(a) and(b), we direct\nthe AO to delete the additions made.\n\n21. In ground no.7,it is stated that the Ld. CIT(A) ought to have deleted\nthe addition of Rs.2,97,58,174/- made on account of loss claimed in respect of\nwater supply and should not have mechanically referred the issue\nback to the Ld. Assessing Officer despite the fact that same issue was\nallowed in earlier years.\n\nPage | 34\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\n\n22. According to the assessment order, in the P&L A/c.,the\nassessee credited Revenue from Supply of Water at Rs.1,67,09,286/-\nagainst which it has claimed expenses of Rs.4,64,67,460/- resulting in\nloss of Rs.2,97,58,174/-. In view of the same, the assessee was asked\nshow cause to explain whether any subsidy has been received from the\nGovernment of Maharashtra/ India was for business of supply of water\nand if so, furnish relevant details in connection with the same. In\nresponse, the assessee stated that no subsidy from Government of\nMaharashtra had been received during the year under consideration.\nFurther, in respect of deficit amounting to Rs.2,97,58,174/- on account\nof supply of water, Maharashtra Airport Development Company Ltd\n(MADC) was established in 2002 by Government of Maharashtra to\nbuild and operate airports in the State. It is also the nodal agency to\nimplement one of the most prestigious projects in Maharashtra,\nMIHAN, Multimodal International Hub Airport at Nagpur along with a\nstate of the art multi-product Special Economic Zone (SEZ) Thus, the\nMulti- Modal International Hub Airport at Nagpur (MIHAN) has\npromoted by MADC has assured unit holders in MIHAN world class\ninfrastructure which inter alia includes uninterrupted power supply at\nvery reasonable rates and dual water supply system where the water is\nretreated and supplied for domestic and non-domestic consumption.\n\nPage | 35\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nFurther, in respect of power distribution activity, it is to be noted that\nthere is a surplus of Rs.2,11,58,729 /- and the deficit of Rs.2,97,58,174/-\nis actually from the activity of water supply. As a matter of fact, MADC'S\nassurance of uninterrupted power supply at reasonable rates and dual\nwater supply system for domestic consumption has attracted large\nnumber of business / export houses to the MIHAN project. In this\nregard, copy of lease agreement with the unit holders in MIHAN area\nand other documentary evidence were enclosed. Hence, expenditure\nincurred for supply of water is part of the revenue model of MIHAN\nproject. Hence, deficit from these activities should not be disallowed.\n\n23. The AO opined that the assessee failed to provide any\nsupporting documentary evidence like copy of any agreements with the\nunit holders in MIHAN. Further, the possibility of existence of any such\nagreement with the unit holders will only be regarding the supply of\npower and water supply at reasonable rates but that does not give the\nassessee the liberty or leverage to purchase the power & water at\nexorbitant/ higher rates and supply it at a loss. Similar issue was\ninvolved in the case of the assessee for A.Y 2015-16 wherein the loss\nclaimed on supply of water was disallowed and added to the income of\nthe assessee though the disallowance of loss on account of supply of\nwater was deleted by the Ld.CIT(A). On perusal of the order of the\n\nPage | 36\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nCIT(A), it is seen that the assessee has filed a detailed submission before\nthe Ld.CIT(A) in A.Y 2015-16 on the facts of business of water supply\nundertaken by it and the loss incurred thereon. These details were never\nsubmitted by the assessee before the AO in the assessment proceedings\nbut were filed before the CIT(A) based on which the Ld.CIT(A) has held\nthat the loss claimed is justified and thereby deleting the disallowance of\nloss on supply of water made by the AO. The assessee did not file any\nsubmission. Therefore the claim of loss of Rs.2,97,58,174/- on supply of\nwater was disallowed and added to the income of the assessee for the\nyear under consideration.\n\n24. In the appellate order for AY 2015-16,the ITAT has duly\nconsidered the above issue and decided the issue in favour of the\nassessee as per relevant parts of the order reproduced below:\n\n“40. The AO made disallowance of Rs.76,32,135/- and Rs.3,55,42,101/-\npertaining to loss in respect of power distribution and water supply activities\nrespectively. However, the Ld. CIT(A) has deleted the disallowance made by\nthe AO by returning following findings:\n\n\"3.10.4 As per the appellant's submission, the Multi- Modal International Hub\nAirport at Nagpur (MIHAN) promoted by MADC, has assured unit holders in\nMIHAN world class infrastructure which inter alia includes uninterrupted\npower supply at very reasonable rates & dual water supply system where the\nwater is retreated and supplied for domestic and non- domestic consumption.\nHence, expenditure incurred for distribution of Power & supply of water is\npart of the revenue modal of MIHAN project.\n\n3.10.5With a view to provide an efficient, uninterrupted supply of power in the\nMIHAN area, appellant selected Abhijeet Group as a venture partner for the\ndevelopment of a coal based power plant. AMNEPL was created as a joint\nventure with the Abhijeet group, wherein the appellant holds 26% of the\n\nPage | 37\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nIssued Equity Capital in AMNEPL. A concession agreement (\"The\nAgreement\") was executed between MADC and AMNEPL on 07.11.2007\npursuant to the competitive bidding process.\n\n37 3.10.6 Further, for some reason as given in the submission filed by the\nappellant, there arose a dispute between MADC and AMNEPL which resulted\nin AMNEPL stopping supplying power to MIHAN SEZ area. Therefore, in\nresponse to the petition filed by appellant dated 11.03.2014 before MERC,\nMERC directed the MSEDCL to start supply power to consumers.\n\n3.10.7 Further, MADC has obtained deemed distributors license from\nMaharashtra Electricity Regulatory Commission (MERC) which is mandated\nto promote competition, efficiency and economy in the power sector and to\nregulate traffic of power generation, transmission and distribution and to\nprotect the interests of the consumers and other shareholders. MADC after\ngetting the license, started purchasing power through IEX from 22.11.2014 on\na day-ahead basis and supplied power to the consumers in MIHAN SEZ area.\nSince, traffic determination for electric supply is done by MERC, MERC ruled\nthat the traffic approved for the respective consumer categories of MSEDCL\nwould be the ceiling traffic for the MIHAN SEZ area. MADC purchased\nelectricity IEX & LLyods during 2014-15. However, while distributing powers\nto consumers, there are transmission, distribution & scheduling losses. As per\nthe appellant and the details filed, the energy received is 9.62 Million unit\n(MU) and energy supplied is 6.90 MU, therefore nearly 2.72 MU loss of energy\non account of transmission, distribution & Scheduling loss is there.\n\n3.10.7 I find that the appellant has submitted the copy of lease agreement\nalong with other documentary evidence placed on record in support of the\nclaim that the expenditure incurred is a part of revenue model of MIHAN\nproject and has also submitted very detailed explanation in respect of power\ndistribution loss factually as well as logically which has also been discussed by\nme in the above paras. Determining tariff for the units of electricity is not at\nthe sole discretion of the appellant. Therefore, practically speaking, the selling\ncost cannot be controlled by the appellant. Further, due to emergency\nsituation, there was no option other than to purchase of electricity at the cost\nsold by the respective suppliers. Also, the energy loss such as transmission,\ndistribution & scheduling losses cannot be ruled out which will further reduce\nthe revenue from selling electricity. Therefore, I am of the view that addition\non account deficit of Rs.76,32,135/- in respect of power distribution activity\nhas no merits and has to be deleted.\n\n3.10.8 With respect to deficit in water supply activity, the appellant has\nsubmitted that the MADC has developed infrastructure of dual water supply\nsystem of 91 MLD capacity (per day) where the water is retreated & supplied\nfor domestic &Non domestic consumption. Total water demand considering\nevaporation losses is 71MLD. MADC has reserved water quota at Wadgaon\nDam situated at 40 Km (approx.) from MIHAN area. Also, MADC has\nappointed M/s Veolia Water (1) 38 M/s. Maharashtra Airport Development\nCompany Ltd. & ors.Pvt Ltd for operation & comprehensive maintenance &\nmanagement of water supply & sewage system, for which a fixed cost\nirrespective of utilized capacity, of Rs.2,92,74,100/- for the maintenance\ncontract has been incurred. Also, cost of Rs.71,79,513/- for the annual\n\nPage | 38\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nmaintenance contracted awarded to M/s Veolia Water(1) Pvt Ltd. has been\nincurred.\n\n3.10.9 As per the submissions, actual water utilized is 4.41 MLD which is\n6.15% of the reserved quota of 71.67 MLD. At Wadgaon reservoir, water\npumped in from reservoir is 3.88 MLD, out of which 3.70 MLD received at\ntreatment plant in MIHAN and out of which 1.64 MLD is billed since there\nislosses of water in transit besides unmetered supply to village Khapri &\nproject affected rehabilitated area at Khapri, Chinchbhavan. Summarising the\nabove, I agree with the contentions of the appellant and I find that merely\nbecause the appellant has the deficit in respect of water supply, it does not\nmean that it is an income on the hand of the appellant. First of all, the\nappellant has not fully utilized the installation capacity of water supply which\nhas become the main cause of losses. If the sales are low, then, automatically\nyour profit decreases/ losses increase as the raw material purchases have been\nunder utilized. However, certainly cost has been incurred to procure the same.\nIt is the simplest concept in term of any business or accounting. Further, there\nare other expenses which further lower the profit. It is not the intention on the\npart of the any prudent businessman to sell less product deliberately or\nanything like that so as to decrease its own profit. Also, in the instant case, the\nappellant is a Government of Maharashtra Company. So, the credibility of\naccounting cannot be doubted. Therefore, I am of the view that addition on\naccount of deficit of Rs.3.55,42,101/-in respect of water supply activity has no\nmerits at all and deserves to be deleted. It is felt that as far as these two\nadditions are concerned, the AO has tried to step into the shoes of the\nappellant company, that too, a Government of Maharashtra one, the\ncredibility of whose accounts are one notch above the private ones.\n\n3.10.9 In view of the above discussion, additions on account of deficit of\nRs.76,32,135/- and Rs.3,55,42,101/- in respect of Power distribution and\nWater supply activity respectively are deleted. These grounds of appeal

are\nallowed.\"\n\n41. We have perused the order passed by the Ld. CIT(A) who has duly\nthrashed the facts in the light of the copy of lease agreement along with other\ndocumentary evidence placed on record by the assessee and reached the\nconclusion that the expenditure incurred by the assessee on providing power\ndistribution and water supply activities is a part of the Revenue model of\nMIHAN project and has also perused the record and explanation in respect of\npower distribution loss and water supply activities. The Ld. CIT(A) has also\nconsidered the losses due to water evaporation.\n\n42. It is also not in dispute that no company will deliberately decrease its\nprofit. Main cause as brought on record by the assessee has been duly perused\nby the Ld. CIT(A) for loss on account of distribution of water is\nunderutilization of water supply which led to low sale and it has increased the\nlosses. It is also not in dispute that sometimes a purchaser has no option\nexcept to purchase the electricity at the higher cost and there has to be energy\nloss due to transmission distribution and scheduling losses. Similarly so far as\nwater losses are concerned it is a proved fact on record that the assessee has\n\nPage | 39\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nnot fully utilized the installation capacity of water supply which has become\nthe main cause of losses for which cost has to be incurred to procure the same.\nMoreover, when the AO has not disputed the books of account disallowance\nmerely on the basis of surmises is not sustainable. So we find no illegality\nor perversity in the impugned findings returned by the Ld. CIT(A),\nhence ground No.14a, 14b & 14c in ITA No.798/M/2019 for A.Y.\n2015-16 of Revenue's appeal are decided against the Revenue.\n\n25. Respectfully following the order by ITAT in AY 2015-16,the\naddition made is hereby deleted.\n\n26.In ground no.8,it is stated thata)\nThe Ld. CIT(A) erred in facts\nand law in upholding the ad-hoc addition to the tune of Rs.57,79,349/-\n(being 50% of the additions of Rs.1,15,58,698/- made by the Ld. Assessing\nOfficer) in respect of Provision for expenses incurred by the appellant\nfor business purpose on mere surmises and conjectures without\nappreciating the explanations and documents placed on record by the\nappellant.\n\nb) The Ld. Assessing Officer ought to have not added the Provision\nfor expenses incurred by the appellant amounting to Rs.1,15,58,698/- to\nthe book profit u/s.115JB of the Act.\n\n27.\nAccording to the assessment order, on perusal of the\nexpenses claimed under various heads of expenses in the P&L A/c., it is\nseen that there provisions made as detailed below which had not been\nadded back to the income while computing taxable income i.e i) Office\nExpenses Other Expenses Others (Provisions) 3,41,704/- ii) Office\nExpenses Office Expenses MADC (Other Provisions 1,20,871/- iii)\nOther Provisions 48,500/-iii) Other Provisions 48,500/- iv) Professional\n& Legal Charges Net Effect Provision for Expenses 24,82,107/- v)\n\nPage | 40\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nProvision for Maintenance Charges 38,99,147/- vi) Provision for\nExpenses 3,184/- vii) Painting of Karbs & Medians of Internal Road\n(Provisions towards Cargo PBBSSS Ltd.) viiii) Repairs & Maintenance\nChillers (Provisions towards Gentech Engineering Services) 25,85,000/-\nix) Provisions for Expenses (Nagpur) 45,647/- x) Travelling Expenses\nProvisions for Expenses (Mumbai) 2,09,798/-.\n\n28. In view of the above, the assessee was asked to explain why\nthe aforesaid provisions have not been added back to the income along\nwith documentary evidences and to show cause why it should not be\nadded back to the income for the year under consideration. In response,\nthe assessee stated that the said expenditure accrued and pertained to\nF.Y:2015-16. Accordingly, impugned expenditure have been booked\nas\nper the accrual method of accounting. The submission of the was not\nfound acceptable since the assessee had not furnished any documentary\nevidence in support of its claim. Hence the genuineness and correctness\nof the provisions claimed remained unexplained and unverified.\nTherefore, the amount of Rs.1,15,58,698/- being provision for expenses\nmade under various heads of expenses was disallowed.\n\n29. The ld.CIT(A) taking note of non furnishing of relevant detail\nby the assessee before the AO restricted the disallowance to 50%.The\n\nPage | 41\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nld.AR on the other hand has claimed that entire amount is allowable as\nthe provision has been made following mercantile system of accounting\nbeing followed by it. Moreover, the books of account are duly audited.\n\n30. On careful consideration of above facts it is evident that the\nissue has not been examined by the authorities below due to non\nfurnishing of relevant details before them by the assessee. We do not\nfind any justification for the ld.CIT(A) to restrict the disallowance to\n50% which lacks any basis. Accordingly, the entire issue is set aside to\nthe AO for examining the relevant details which the assessee would\nfurnish before him. He would take decision as per law. The ground is\ntherefore, allowed for statistical purposes.\n\n31.In ground no.9, it is stated that The Ld. CIT(A) erred in facts and\nlaw in upholding the ad-hoc addition to the tune of Rs.12,52,340/- (being\n50% of the additions of Rs.25,04,680/- made by the Ld. Assessing\nOfficer) in respect of reimbursement of salary of the MSEDCL\nemployees for handling day to day routine activities pertaining to power\nsupply, without appreciating the explanations and documents placed on\nrecord by the appellant.\n\n32. In respect of Expenses incurred for supply of Power\nMihan SEZ, the assessee had claimed expenses of Rs.25,04,680/- as\nreimbursement of expenses to MSEDCL. In this regard, on being\nqueried by the AO, the assessee sated that MADC has reimbursed salary\n\nPage | 42\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nof MSEDCL employees for handling day to day routine activities\npertaining to power supply i.e. billing, meter reading etc. and hence the\nsaid expenditure has not been capitalized in the books. However, the AO\nrejected the reply on the ground that the submission of the assessee was\nwithout any supporting documentary evidences since it was not clear\nwhy it has to reimburse the salary of employees of MSEDCL. It had\nfailed to furnish any copy of agreement entered in to with MSEDCL\njustifying such reimbursement made to it. In view of the same, the\namount of Rs.25,04,680/- being reimbursement of expenses to\nMSEDCL was disallowed. However, the ld.CIT(A) restricted the\ndisallowance to 50% thereof only and deleted the rest.\n\n33. Before us, the ld.AR has contented that the assessee had\nsubmitted copy of office order received from MSDECL according to\nwhich there employees were sent on deputation to the assessee and such\nexpenses are revenue in nature and allowable u/s 37(1) of the Act.\n\n33.1 On due consideration of above facts we find that the issue\ncould not be examined in correct perspective on account of failure of the\nassessee to furnish relevant details before the lower authorities.\nAccordingly, the entire issue is set aside to the AO for examining the\nrelevant details which the assessee would furnish before him. He would\n\nPage | 43\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\ntake decision as per law. The ground is therefore, allowed for\nstatistical purposes\n\n34. In ground no.10 a)\nThe Ld. CIT(A) has, in view of the facts and\ncircumstances of the case, erred in disallowing the amount of Rs.\n14,79,479/- incurred for supply and laying of 33KV Power cable u/s.37\nof the Act by treating it as capital expenditure without appreciating\nthe explanations and documents placed on record by the appellant.\n\nb)\nWithout prejudice to Ground no. 9(a), the Ld. CIT(A) erred in not\nallowing depreciation u/s.32 of the Act in respect of the above expense of\nRs.14,79,479/- incurred for supply and laying of 33KV Power cable\ndespite the fact that the Ld. Assessing Officer has himself treated it as\ncapital expenditure.\n\n35. In respect of the expenses incurred in connection with\nPower Supply, the AO noted that an amount of Rs.14,79,479/- had been\npaid to TCS for Supply & Laying of 33. KV Power Cable. In this regard, it\nis stated that despite specific query made, the assessee failed to file any\nsubmissions in this regard. Therefore, the amount was held as capital in\nnature and accordingly disallowed and added to the income of the\nassessee. No depreciation was allowed on the same in the absence of any\ndetails in respect of the same to verify whether the same is eligible for\ndepreciation or not. The ld.CIT(A) taking note of lack of necessary\nsubmission of relevant details before the AO upheld the addition.\n\nPage | 44\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\n\n36. The ld.AR has claimed that the expenditure has been incurred\nfor uninterrupted supply of power which is allowable u/s 37(1) of the\nAct.\n\n37. On due consideration of above facts we find that the issue\ncould not be examined in correct perspective on account of failure of the\nassessee to furnish relevant details before the lower authorities.\nAccordingly, the entire issue is set aside to the AO for examining the\nrelevant details which the assessee would furnish before him. He would\ntake decision as per law. The ground is therefore, allowed for\nstatistical purposes.\n\n38. In ground no.11 it is submitted that the Ld. CIT(A) erred in\nsustaining the re-characterization of miscellaneous income of Rs.\n3,07,43,643/- credited to Profit & Loss account under the head\n‘Other income' as ‘income from other sources instead of business\nincome' on mere surmises and conjectures without appreciating the\nexplanations / submissions placed on record.\n\n39. As per the assessment order, the assessee did not furnish\nrelevant details of Miscellaneous expenses which was therefore taxed as\nIncome from other sources. The ld.CIT(A) upheld the addition.\n\n40. Before us,it is contented that the issue stands covered by\nITAT order for AY 2007-08 dated 27.9.2024 wherein it has been\naffirmed that the assessee being a State within the Article 289(1) of the\n\nPage | 45\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nConstitution,interest earned on Fixed deposits not in the nature of\nbusiness income is exempt. Respectfully following the above order, we\ndirect the AO to accept the book entries as disclosed by the assessee.\n\n41. In ground no.12 it is stated that a) Without prejudice, on facts and\ncircumstances of the case, the Ld. CIT(A) ought to have allowed deduction\nunder section 80-IAB of the Income Tax Act, 1961 in respect of all the\nincome assessed under the head 'Profits & Gains from Business &\nProfession' by the Ld. Assessing Officer.\n\nb) The Ld. CIT(A) erred in denying the deduction u/s.80-IAB of the\nAct for the reason that the assessee has failed to file Form 10CCB with the\nReturn of income without appreciating the fact that, in the return filed by\nthe assessee, the assessee had shown loss and therefore, there was no\nquestion of claiming deduction u/s.80-1AB as a result of which Form\n10CCB was not filed by the assessee at the time of filing of Return.\n\n42. According to the AO, for the year under consideration, the\nassessee had not made any claim of deduction u/s.80IAB of the Act and\nno Form 10CCB had been filed while filing the return of income. In\nview of the same, the claim of the assessee to allow deduction u/s.80IAB\non Interest on Fixed Deposits and Advances to Contractors/ Developers\nwas not acceptable and hence rejected. As regards the additions/\ndisallowances made to the business income of the assessee for the year\nunder consideration, there is no claim for deduction u/s.80IAB of the\nAct and therefore even these incomes are not considered as eligible for\nthe said deduction in the absence of any claim for such deduction and\n\nPage | 46\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nfor its failure to file Form 10CCB, which is a prerequisite to claim\ndeduction U/s 80IAB.\n\n43. According to the ld.CIT(A),the any claim of deduction for any\nyear as per the provisions of the Act could not be allowed unless the\nrespective return of income is filed statutorily. It is significant that the\nappellant did not file the form 10CCB mandatorily to lay a claim u/s\n80IAB. Any claim of deduction for any year as per the provisions of the\nAct has to be made under the respective provisions and by way of filing\nstatutory forms / report in respect of such claims while filing the return\nof income. The assessee has failed to adhere to such procedures and\ntherefore the claim to allow deduction u/s.80IAB of the Act was rejected\nby the ld.CIT(A).\n\n44. Before us, it is contented by the ld.AR that since there was\nloss during the year no claim was made by it. However, it was eligible foe\ndeduction on account of addition made by the AO. On due\nconsideration, we find that the ground is consequential in nature. The\nAO would examine the claim subsequent to final quantification of total\nincome of the assessee in the light of decisions rendered in preceding\nparas.\n\nPage | 47\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\n\n45. In ground no.13 it is contented that on the facts and circumstances\nof the case, the Ld. Assessing Officer erred in law in not allowing set-off of\nunabsorbed depreciation against the assessed income.\n\n46. On due consideration, we find that the ground is\nconsequential in nature. The AO would examine the claim subsequent to\nfinal quantification of total income of the assessee in the light of\ndecisions rendered in preceding paras.This ground is consequential in\nnature.\n\n46.1 In the result, appeal of the assessee is allowed.\n\n47. ITA No. 87/MUM/2024 (A.Y. 2016-17)Revenue\n\n(i) Whether on the facts and circumstance of the case and in law, the\nLd. CIT(A) is correct in directing to consider the assessee's submission\nand decide the issue on merit with regard to the loss of Rs.2,97,58,174/-\non account of water supply?\n\n48. Since the issue has been allowed by ITAT in earlier years and\nthe addition made during the year has already been directed to be\ndeleted, we do not find any merit in the revenue's ground which is\ntherefore dismissed.\n\n49.(ü) Whether, on the facts and circumstance of the case and in law, the\nLd. CIT(A) is correct for directing the assessing officer to consider the\nsubmission of the assessee and decide the issue of loss on account of\nwater supply on merit without following the due procedure of asking\nfor a remand report on the issue from the Assessing officer?\n\n50. Since the issue has been allowed by ITAT in earlier years and the\naddition made during the year has already been directed to be deleted,\n\nPage | 48\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nwe do not find any merit in the revenue's ground which is therefore\ndismissed.\n\n51.(iii) Whether, on the facts and circumstances of the case in law, the Ld.\nCIT(A) is correct in deleting the 50% of disallowance of Rs.1,15,58,698 on\naccount of provisions for expenses without appreciating the fact\nthat the assessee did not furnish any details to substantiate its claim?\n\n52. This ground is already restored to the AO for fresh\nexamination of the entire matter after allowing adequate opportunity of\nhearing to the assessee who would ensure submission of necessary\ndetails for proper adjudication of the ground which is accordingly\nallowed for statistical purposes.\n\n53.(iv) Whether, on the facts and circumstances of the case in law, the Ld.\nCIT(A) is correct in deleting the 50% of disallowance of Rs.25,04,680 on\naccount of reimbursement of expenses with regard to salary of employees\nof MSEDCL without appreciating the fact that assessee did not furnish any\ndocumentary evidence to substantiate its claim?\n\n54. This ground is already restored to the AO for fresh\nexamination of the entire matter after allowing adequate opportunity of\nhearing to the assessee who would ensure submission of necessary\ndetails for proper adjudication of the ground which is accordingly\nallowed for statistical purposes.\n\n55.(v) Whether on the facts under circumstance on the case and in Law\nthe Ld. CIT(A) justified in holding the interest of Rs.2,55,77,947/- on\n\nPage | 49\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\nadvances to developers, contractors as business income\nignoring the decision of the AO wherein this income is adopted as income\nfrom other sources?\n\n56. As regards, the Interest on Advances to Contractors /\nDevelopers, the Hon'ble ITAT in A.Y 2008-09 in the case of the assessee,\nobserved that the same construes business income and therefore is to be\ntaxed as Business Income upon which deduction u/s.80IAB is to be\nallowed. This decision of the hon'ble ITAT has also not been accepted\nand the same is contested by the Revenue before the Hon'ble Bombay\nHigh Court. The said appeal of the Revenue is yet to be decided by the\nHon'ble Court.\n\n57. The ld.CIT(A) has observed that the Hon'ble ITAT Mumbai\nBench in its own case for Assessment year 2008-09 had held that such\ninterest should be considered as business income, eligible for deduction\nu/s 80-IAB. Apart from the ITAT order, the Ld. CIT(A) also decided the\nsame issue in favour of the appellant for A.Y.s 2011-12 and 2012-13.\nAccordingly, he held that said interest income to be considered as\nbusiness income.\n\n58. The above addition has been deleted by the ld.CIT(A) as in\nthe past and his action has already been affirmed by the ITAT.\nAccordingly, ground of the Revenue is dismissed.\n\nPage | 50\nITA No. 37, 87/Mum/2024\nA.Y. 2016-17\nMaharashtra Airport Development Company Limited, Mumbai\n\n59. In the result, appeal of the Revenue is partly allowed.\n\nOrder pronounced in the open court on 09/09/2025.\n\nSd/-\nSAKTIJIT DEY\n(उपाध्यक्ष/VICE PRESIDENT)\n\nPlace: मुंबई/Mumbai\nदिनांक / Date 09.09.2025\nLubhna Shaikh / Steno\n\nSd/-\nPRABHASH SHANKAR\n(लेखाकार सदस्य/ACCOUNTANT MEMBER)\n\nआदेश की प्रतिलिपि अग्रेषित/