GMR HYDERABAD INTERNATIONAL AIRPORT LIMITED,BENGALURU vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(2), BANGALORE

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES “B”, BANGALORE Before Shri George George K, JM & Ms.Padmavathy S, AM ITA No.524/Bang/2022 : Asst.Year 2017-2018 M/s.GMR Hyderabad The Deputy Commissioner of International Airport Limited Income-tax, Central Circle 2(2) v. No.25/1, Skip House, Bengaluru. Museum Road Bangalore – 560 025. PAN : AABCH3448M. (Appellant) (Respondent) Appellant by : Sri.Sunil Jain, CA Respondent by : Sri.K.R.Narayana, Addl.CIT-DR Date of Pronouncement : 18.10.2022 Date of Hearing : 17.10.2022 O R D E R Per George George K, JM : This appeal at the instance of the assessee is directed against CIT(A)’s order dated 26.05.2022. The order of the CIT(A) arises out of the order of the Assessing Officer dated 18.06.2021 passed u/s 154 of the I.T.Act. The relevant assessment year is 2017-2018.

2 ITA No.524/Bang/2022 M/s.GMR Hyderabad International Airport Limited. wherein the book profit of the assessee were recomputed, as follows:-

Sl. Particulars Amount No. 1. Inclusion of surplus of PSF (SC) of 19,14,43,451 Rs.19,14,43,451 2. Disallowance u/s 14A at Rs.3,37,88,198 3,15,41,178 by applying Rule 8D as against the amount of disallowance u/s 14A made in the return of income at Rs.22,47,020 resulting in net addition of Rs.3,15,41,178

“Ground II: Disallowance U/s 14A at Rs.3.37.88.198/- by applying Rule 8D against the amount as per Return of Income at Rs.22.47.020/- in computing Book Profit u/s 115JB II. 1. On the facts and in the circumstances of the case and in law, the Learned CIT(A) has erred in uploading the action of Assessing Officer in adding an amount of Rs.3,15,41,178/- towards expenditure incurred in earning exempted income to the amount of net profit in arriving at the amount of Book Profit u/s 115JB in the rectification order which the Assessing Officer failed to consider in the computation of

3 ITA No.524/Bang/2022 M/s.GMR Hyderabad International Airport Limited. income as per section 115-JB in the computation sheet. 2.The Learned CIT(A) has further erred in not considering that the amount of disallowance worked out at Rs.3, 15,41,178/- based on formula prescribed as per Rule 8D cannot be considered as the amount incurred to earn exempt income for the purpose of computation of Book Profit as per section 115JB. 3.The Learned CIT(A) failed to appreciate and ought to have held that for the purpose of computation of total income u/s 115JB the actual amount incurred for earning exempted income having regard to the books of account is to be considered and not the amount worked out based on formula prescribed in Rule 8D. 4.The Appellant therefore prays that the AO be directed to consider the amount for add back to the amount of net profit as is being incurred to earn exempted income having regard to books of account while arriving at the amount of Book Profit as per section 115JB.

Ground III: Inclusion of surplus amount of Rs.19,14,43,451/- pertaining to Passenger Service Fees (Security Component) in the Computation of Book profit u/s 115JB of the IT Act. 1961 III. 1. On the facts and in the circumstances of the case and in law, the Learned CIT(A) has erred upholding the action of Assessing Officer in charging / including the surplus amount of Rs.19,14,43,451/- pertaining to Passenger Services Fees (Security Component) managed in fiduciary capacity by the Appellant pursuant to SOP issued by MOCA in this regard to the amount of net profit in arriving at the amount of Book Profit u/s 115JB in the rectification order which the Assessing Officer failed to consider in the computation of income as per section 115-JB in the computation sheet. 2.The Learned CIT(A) failed to appreciate and ought to have held that the amount of surplus in PSF(SC) is held in fiduciary capacity, not credited to the Profit & Loss account nor falls under any of the clauses of Explanation to section 115-JB and hence the same cannot be included and made as an adjustment while arriving at the amount of Book Profit as per section 115JB. 3.The Appellant therefore prays that the AO be directed not to include the surplus amount of Rs.19,14,43,451/- in Passenger Service Fee (Service Component) which is not credited to the Profit & Loss account nor falls under any of the clauses of

4 ITA No.524/Bang/2022 M/s.GMR Hyderabad International Airport Limited. explanation to section 115JB while computing the amount of Book Profit u/s 115JB.”

We shall adjudicate the above grounds as under:

Ground II 5. During the relevant assessment year, the assessee had earned dividend income of Rs.11,31,50,006 on investments made in joint venture companies. The assessee in the return of income filed had claimed exemption of the above said dividend income as per the provisions of section 10(34) of the I.T.Act. The A.O. while completing the assessment u/s 143(3) of the I.T.Act vide order dated 31.03.2021, had made disallowance u/s 14A of the I.T.Act of Rs.3,37,88,198 as against suo moto disallowance made by the assessee in the return of income amounting to Rs.22,47,020. The disallowance was made by the A.O. based on the formula prescribed under rule 8D of the I.T.Rules, 1962. Subsequently, in rectification u/s 154 of the I.T.Act, the A.O. made disallowance u/s 14A of Rs.3,15,41,178 in computing the book profit u/s 115JB of the I.T.Act. The view taken by the A.O. was confirmed by the CIT(A).

5 ITA No.524/Bang/2022 M/s.GMR Hyderabad International Airport Limited. J.J.Glastronics (P.) Ltd. reported in (2022) 139 taxmann.com 375.

“9. Having regard to this decision, the decision cited by the revenue in the case of Sobha Developers (supra) has been considered. At this juncture, it would be beneficial to refer to the co-ordinate bench decision of this Court in the case of Karnataka State Industrial and Infrastructure Development Corporation Ltd. v. Dy. CIT [2021] 125 taxmann.com 221/278 Taxman 126/431 ITR 255 (Kar.), wherein the computation of book profit with reference to sections 14A and 115JB has been considered and it is held that Explanation 1 in section 115JB(2) has been inserted so as to provide that if any provision for diminution in the value of any asset has been debited to the profit and loss account, it shall be added to the net profit as shown in the profit and loss account for the purpose of computation of book profit. Any disallowance computed under section 14A pertains to computation of income under the normal provisions of the Act and cannot be read into the provisions of section 115JB of the Act pertaining to computation of book profits for levy of minimum alternate tax. Amounts disallowed under section 14A cannot be added to the book profits computed under section 115JB.

6 ITA No.524/Bang/2022 M/s.GMR Hyderabad International Airport Limited. 10. Similarly, in the case of CIT v. Gokaldas Images (P.) Ltd. [2020] 122 taxmann.com 160/276 Taxman 420/429 ITR 526 (Kar.), having regard to clause (f) of Explanation 1 to section 115JB(2) of the Act, it has been observed that additions made by the assessing officer determining book profit under section 115JB of the Act cannot be sustained. Any disallowance computed under section 14A of the Act pertains to computation of income under the normal provisions of the Act and cannot be read into the provisions of section 115JB of the Act pertaining to levy of minimum alternate tax and there is no express provision in clause (f) of Explanation 1 to section 115JB of the Act to that extent. 11. The Co-ordinate bench of this Court in Pr. CIT v. Mphasis Software and Services (India) (P.) Ltd. [IT Appeal No. 244 of 2021, dated 25-10- 2021] where one of us Hon'ble SSJ was member, while considering the applicability of section 154 of the Act has held that invoking of section 154 would be untenable when there is no mistake apparent on the face of the record i.e., when the matter requires adjudication upon the issue which is a debatable issue. 12. In the light of these judgments, the finding given by the Tribunal on the points inasmuch as invoking of section 154 and Explanation 1 (f) to section 115JB being squarely covered, the same cannot be found fault with. We are of the considered view that the Miscellaneous Petition filed by the revenue under section 254(2) of the Act was wholly misconstrued. The Tribunal has distinguished the case of Sobha Developers (supra) relied upon by the revenue with Vireet Investment (P.) Ltd. (supra) and has rightly come to the conclusion that the judgment of the Vireet Investment (P.) Ltd. (supra) rendered by the Special Bench consisting of three Hon'ble Members prevail over the Regular Bench consisting of two Hon'ble Members. Moreover, this view considered in the Vireet Investment (P.) Ltd. (supra) was the subject matter before this Court in the judgments referred to supra. Hence, no exception can be found with the orders impugned.”

7 ITA No.524/Bang/2022 M/s.GMR Hyderabad International Airport Limited. Ground III 11. The assessee had collected Passenger Service Fees (Security Component) [PSF(SC)]. The assessee held the same in a fiduciary capacity for and on behalf of Government of India. For this purpose, the assessee was required to maintain separate books of account of PSF(SC). Before the Tribunal, it was submitted that accounts of the assessee are prepared in accordance with the provisions of Schedule III to Companies Act, 2013 (18 of 2013). It was stated that there is no qualification from the Statutory Auditor, Director or the Registrar of Companies in regard to non-inclusion of amount of surplus in PSF(SC). Therefore, it was contended that the inclusion of surplus in PSF(SC) does not qualify in any of the clauses (a) to (k) to Explanation 1 to section 115JB of the I.T.Act. Hence, it was contended that the adjustment so made is contrary to the provisions of Income-tax Act and settled legal position. In this context, the learned AR relied on the following judicial pronouncements:- (i) Appollot Tyres Limited v. CIT reported in (2022) 255 ITR 273 (SC) (ii) M/s.Batliboi Limited v. DCIT in ITA No.5248/Mum/2015 (order dated 17.02.2021) (iii) Assessee’s own case in ITA Nos.620/Bang/2017, 633/Bang/2017, ITA No.603/Bang/2017 and ITA No.604/Bang/2017 for A.Y. 2010-11 to 2013-14. (order dated 11.02.2022) (iv) Assessee’s own case in ITA No.2189/Bang/2016 for A.Y. 2009-2010 (order dated 09.07.2019)

8 ITA No.524/Bang/2022 M/s.GMR Hyderabad International Airport Limited. (v) Addl.CIT v. Mumbai International Airport Pvt. Ltd. in ITA Nos.2760 & 3232/Mum/2012 (order dated 30.11.2016) (vi) Mumbai International Airport Pvt. Ltd. v. DCIT in ITA No.4382/Mum/2015 for A.Y. 2012-2013 (order dated 27.11.2017) (vii) Mumbai International Airport Pvt. Ltd. v. DCIT in ITA No.2018/Mum/2018 for A.Y. 2013-2014 (order dated 10.01.2020) (viii) Delhi International Airport Pvt. Ltd. v. Addl.CIT in ITA No.2636, 4213/Del/2012 & Ors. (order dated 31.01.2018) (ix) Delhi International Airport Pvt. Ltd. v. CIT reported in (2018) 96 taxmann.com 229 (Delhi –Trib) 12. The learned DR supported the orders of the AO and the CIT(A).

9 ITA No.524/Bang/2022 M/s.GMR Hyderabad International Airport Limited. Statutory Auditor, Director or the Registrar of Companies in regard to the non-inclusion of the amount of surplus in PSF(SC). Hence, the inclusion of surplus in PSF(SC) does not fall in any of the clauses (a) to (k) of Explanation to section 115JB of the I.T.Act. Hence, the adjustment so made by the A.O. in section 154 proceedings is contrary to the provisions and the settled legal position. In this context, we rely on the judicial pronouncements cited by the assessee in support of his case. It is ordered accordingly.