DEPUTY COMMISSIONER OF INCOME TAX-2(2)(1), MUMBAI, AAYAKAR BHAVAN, CHURCHGATE vs. MUMBAI INTERNATIONAL AIRPORT LIMITED, MUMBAI

The Ld. AR drew our attention to the relevant portion of the additional grounds placed in the paper book page No.11. The Ld. AR submitted that despite the fact that the above additional grounds were duly raised before the Ld. CIT(A), the same were not adjudicated in the appellate order passed under section 250 of the Act. It was therefore contended that the failure of the Ld. CIT(A) to adjudicate the additional grounds raised before him amounts to violation of the principles of natural justice as well as the statutory mandate contained in section 250(6) of the Act, which requires the appellate authority to dispose of the appeal by passing a speaking order dealing with each ground raised by the assessee. The Ld. AR accordingly submitted that the matter may be restored to the file of the Ld. CIT(A) with a direction to adjudicate the aforesaid additional grounds on merits after granting adequate opportunity of being heard to the assessee.

The Ld. Departmental Representative (DR), on the other hand, relied upon the orders of the lower authorities.

We have heard the rival submissions and perused the material available on record. From a careful perusal of the appellate order passed by the Ld. CIT(A), we find merit in the contention of the assessee. The record shows that the assessee had indeed raised specific additional grounds before the first appellate authority, which were also placed in the paper book before us. However,

It is well settled that the CIT(A), being the first appellate authority, is under a statutory obligation under section 250(6) of the Act to dispose of the appeal by passing a speaking order stating the points for determination, the decision thereon and the reasons for the decision. Once the assessee has raised specific grounds before the appellate authority, the same are required to be adjudicated on merits. Failure to adjudicate such grounds amounts to violation of the statutory mandate contained in section 250(6) of the Act as well as the principles of natural justice.

Considering the above facts and circumstances of the case, we are of the view that the issues raised by the assessee in the additional grounds require proper examination and adjudication at the level of the first appellate authority. Accordingly, in the interest of justice, we set aside the impugned order of the Ld. CIT(A) on these issues and restore the matter to the file of the Ld. CIT(A) with a direction to adjudicate the aforesaid additional grounds on merits in accordance with law after affording reasonable opportunity of being heard to the assessee.

Thus, the grounds raised by the assessee are allowed for statistical purposes.

Ground No. 1 of the Revenue’s appeal relates to the action of the Ld. CIT(A) in allowing depreciation on the upfront concession fee paid to Airports Authority of India (AAI).The Ld. DR relied upon the observations made by the Assessing Officer and submitted that the assessee had paid an upfront concession fee of Rs. 31,03,450/- to Airports Authority of India under the Operation, Management and Development Agreement (OMDA) for obtaining the right to operate and manage the Mumbai airport. According to the DR, such payment merely grants a concession right for operating the airport for a fixed tenure of 30 years and does not result in acquisition of an intangible asset owned by the assessee. It was therefore

Per contra, the Ld. AR for the assessee submitted that the issue is squarely covered in favour of the assessee by the decision of the co-ordinate bench in the assessee’s own case for A.Y. 2007- 08 in and 7111/MUM/2011. The Ld. AR submitted that the Co-ordinate Bench, after examining the OMDA agreement and the nature of rights acquired by the assessee, has consistently held that the upfront concession fee paid to AAI confers commercial rights of similar nature, which qualify as an intangible asset within the meaning of section 32(1)(ii) of the Act and therefore depreciation is allowable. It was further submitted that the Ld. CIT(A) has rightly followed the binding precedent in the assessee’s own case and therefore no interference is called for.

We find that the identical issue had come up for consideration before the co-ordinate Bench in the assessee’s own case for A.Y. 2007-08, wherein after examining the terms of the OMDA agreement, the nature of rights granted to the assessee and the provisions of section 32(1)(ii) of the Act, the Co-ordinate Bench held that the upfront fee paid to AAI confers a business or commercial right in the nature of a license, which qualifies as an intangible asset eligible for depreciation. In the said decision, the Tribunal noted that under the OMDA agreement, AAI had granted to the assessee exclusive rights for operating, maintaining, developing,

The Co-ordinate Bench also observed that the payment of upfront fee did not result in acquisition of any tangible asset such as land, building or machinery, but rather resulted in acquisition of a commercial right to operate and exploit the airport infrastructure, which constitutes a business or commercial right of similar nature within the meaning of section 32(1)(ii) of the Act.

After considering various judicial precedents including the decisions of the Hon’ble Supreme Court and High Courts dealing with the scope of the expression “business or commercial rights of similar nature”, the Tribunal concluded that the payment of upfront fee resulted in creation of an intangible asset in the nature of a license to develop and operate the airport. The operative part of the decision of the co-ordinate Bench reads as under: “There is no dispute to the fact that the said payment of Rs.150 crores paid to „AAI‟ has not resulted to the assessee in the acquisition of any „tangible assets‟ like building, machinery, plants or furniture. Therefore the said payment of Rs.150 crores has not resulted into acquisition of „tangible assets‟. Thus, the assessee has only acquired right to collect charges from the users of the Airport premises, which is a business or commercial right in the form of license and therefore it is an „intangible assets‟ as per section 32(1)(ii) of the Act… In view of above decisions and the facts of the case, we hold that the ld. CIT(A) has rightly held that the payment of upfront fee of Rs.150 crores paid by assessee to „AAI‟ has created capital assets in the form of license to develop and modernize the Airport and collect charges as per terms and conditions as Mumbai International Airport Ltd., Mumbai prescribed under the agreement entered into which is an „intangible assets‟ to the assessee. Thus, assessee is entitled for depreciation.” (para 10.2)

In the present case, the Ld. CIT(A) has granted relief to the assessee by following the aforesaid binding decision of the Co- ordinate Bench in the assessee’s own case. The Revenue has not brought on record any change either in the facts or in the legal position warranting a different view.

Respectfully following the decision of the co-ordinate Bench in the assessee’s own case, we find no infirmity in the order of the Ld. CIT(A) in allowing depreciation on the upfront concession fee paid to AAI. Accordingly, Ground No. 1 raised by the Revenue is dismissed.

Ground No. 2 of the Revenue’s appeal relates to the action of the Ld. CIT(A) in deleting the disallowance made by the Assessing Officer in respect of payment made by the assessee towards retrenchment / compensation to the employees of Airports Authority of India (AAI) pursuant to the Operation, Management and Development Agreement (OMDA).

The Assessing Officer, while framing the assessment order, observed that the assessee had claimed deduction of Rs. 16,62,33,600/- being payment made to Airports Authority of India (AAI) towards retirement / retrenchment compensation of employees as per the terms of the Operation, Management and Development Agreement (OMDA). According to the Assessing Officer, the said

Aggrieved by the said action, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A), after considering the submissions of the assessee and the judicial precedents relied upon, noted that the issue had already been examined by the Co- ordiate Bench in the assessee’s own case for earlier assessment years. Following the decisions of the Co-ordinate Bench in A.Ys. 2010–11 and 2011–12, the Ld. CIT(A) held that the payment made to AAI towards retirement compensation of employees was allowable as revenue expenditure and that the provisions of section 35DDA were not applicable, since the payment was made to AAI under contractual obligations and not under any voluntary retirement scheme floated by the assessee for its own employees. Accordingly, the Ld. CIT(A) deleted the disallowance made by the Assessing Officer.

Before us, the Ld. DR relied upon the order of the Assessing Officer, whereas the Ld. AR submitted that the issue is squarely covered in favour of the assessee by the decision of the co-ordinate Bench in the assessee’s own case in and 4784/Mum/2014, wherein identical issue was decided in favour of the assessee.

We have heard the rival submissions and perused the material available on record. We find that the identical issue has been Mumbai International Airport Ltd., Mumbai considered by the co-ordinate Bench in the assessee’s own case. The Tribunal, after examining the nature of payment and the provisions of section 35DDA, held that the payment made by the assessee to AAI towards retirement / retrenchment compensation of employees was made pursuant to contractual obligations under the OMDA agreement and was not a payment made under any voluntary retirement scheme framed by the assessee for its own employees. Therefore, the provisions of section 35DDA were held to be not applicable.

The relevant findings of the co-ordinate Bench are reproduced below: 33. We have heard the rival submissions and have carefully considered the same along with the orders of the authorities below. We noted from the facts on record for A Y 2010-11 that the assessee, under an agreement of OMDA with Airports Authority of India, is developing and maintaining Chhatrapati Shivaji International Airport. The assessee has to carry out operations, maintenance and development of the airport with certain terms and conditions. As per clause 6.14 in Chapter 6 of the OMDA, the assessee is obliged to make an offer of employment to a minimum of 60% General Employees at any time during the Operation support period but not later than three months prior to the expiry of the operation support period, that it wants to employ, an option to accept or reject the offer by employees. This clause further provides that if less than 60% of the general employees accept the offer of employment made by the assessee, then assessee shall pay to the Airports Authority of India retrenchment compensation for such number of general employees as represented by the difference between 60% of the general employees accepting the offer of employment made by the assessee. Thus, this clause specifically deals with the treatment of the retrenchment compensation to be paid to the Airports Authority of India at the occurrence of the events maintained in the said clause. The operational support period of three years has expired during the impugned assessment years Mumbai International Airport Ltd., Mumbai under consideration and, accordingly, Airports Authority of India issued invoice dated 08.03.2010 for its claim towards retrenchment compensation amounting to Rs. 260,86,03,400/- The assessee has accordingly capitalized an amount of Rs. 260,86,03,400/- under the head intangible assets in its books of account but for the purpose of income tax he has claim said expenditure in the computation of income but disallowed itself a sum of Rs. 106,62,84,312/-as no tax has been deducted at source during the impugned assessment year but claimed remaining sum of Rs. 154,23,19,088/- as revenue expenditure. The Assessing Officer was of the view that the assessee is eligible only for one fifth of Rs. 154,23,19,088/- as per the provisions of section 35DDAamounting to Rs. 30,84,63,818/- in the year under consideration and the remaining amount is to be allowed in equal installments over the period off our immediately succeeding assessment years.

We have gone through the provisions of section 35DDA. We noted that the said provision is applicable only if the assessee has incurred any expenditure in any previous year by way of payment of any sum to an employee in connection with voluntary retirement. In this case, we noted that the assessee has not incurred any expenditure by way of payment made to employees but the payment has been made by the assessee to Airports Authority of India in accordance with clause 6.14 of the OMDA on account of retrenchment compensation to be paid by Airports Authority of India to its employees. It is not an amount which the assessee is paying to its employees on their retrenchment. Therefore, the provisions of section35DDA will not apply. It is not denied that the expenditure incurred by the assessee is revenue expenditure. We noted that the CIT(A) while dealing with the issue deleted the said disallowance by observing as under: 8.8 In the backdrop of the above facts, the moot question for decision is whether the expenditure of Rs.154,23,19,088/- which has been paid by the appellant in terms of 6.1.4 of the OMDA to AAI is a revenue expenditure and requires to be allowed in one go instead of allowing the same in five equal instalments u/s.35DDA of the Act.

The Assessing Officer, however, held that the development fee collected from passengers constituted revenue receipt in the hands of the assessee, since the same was collected during the course of business operations. The Assessing Officer further observed that the assessee had control over the collection and utilisation of such fee and therefore the amount represented income chargeable to tax. Accordingly, the Assessing Officer treated the development fee as taxable revenue receipt.

Aggrieved by the said action, the assessee carried the matter in appeal before the Ld. CIT(A). The Ld. CIT(A), after considering the submissions of the assessee, observed that the issue had already been examined by the Co-ordinate Bench in the assessee’s own case for earlier assessment years. Following the decisions of the Co- ordinate Bench for A.Ys. 2010–11 and 2011–12 in and 4784/Mum/2014, the Ld. CIT(A) held that the development fee collected from passengers was in the nature of capital receipt meant for funding capital expenditure for airport development, and therefore the same was not taxable as revenue income. Accordingly, the Ld. CIT(A) deleted the addition made by the Assessing Officer.

Before us, the Ld. DR relied upon the order of the Assessing Officer, whereas the Ld. AR submitted that the issue is squarely covered by the decision of the Co-ordinate Bench in the assessee’s own case for A.Y. 2010-11 and 2011-12.

In the year under consideration also, the Ld. CIT(A) has merely followed the binding decision of the Co-ordinate Bench in the assessee’s own case, and the Revenue has not brought on record any change in facts or law warranting a different view.

Accordingly, respectfully following the decision of the Co- ordinate Bench in the assessee’s own case, we uphold the order of the Ld. CIT(A) on this issue. Ground No. 3 raised by the Revenue is therefore dismissed.

The Assessing Officer, during the course of assessment proceedings, noticed from the Profit and Loss Account and the Balance Sheet that the assessee had made investments in instruments capable of yielding exempt income. It was observed that as per the Balance Sheet, the assessee had investments of Rs. 0.13 crore as on 31.03.2013 and Rs. 0.11 crore as on 31.03.2015, and further an amount of Rs. 165.82 crores was reflected as current investments as on 31.03.2014. Accordingly, the total investment as on 31.03.2014 stood at Rs. 165.93 crores as against Rs. 0.13 crore as on 31.03.2013. The Assessing Officer observed that although the assessee had undertaken substantial investment activity, no expenditure had been attributed towards such activity. The Mumbai International Airport Ltd., Mumbai assessee was therefore called upon to furnish details of expenditure incurred for making investments which could result in exempt income and was show caused as to why the expenditure attributable to investments yielding exempt income should not be disallowed under section 14A read with Rule 8D.

In response, the assessee submitted that section 14A was not applicable to its case since no expenditure had been incurred in relation to income which does not form part of the total income. It was further submitted that during the relevant year the assessee had earned short-term capital gains of Rs. 19,63,13,871/- on sale of investments in debt mutual funds, out of which Rs. 8,75,88,808/- had been reduced from project cost and the balance Rs. 10,87,25,062/- had been offered to tax under the head “Capital Gains”. The assessee thus contended that no tax-free income had been earned during the year and therefore the provisions of section 14A were not attracted. The assessee also submitted that investments in shares of wholly owned subsidiaries were made as part of business strategy and therefore no disallowance was warranted.

The Assessing Officer, however, did not accept the explanation of the assessee. Placing reliance on CBDT Circular No. 5/2014 dated 11.02.2014 and the decision of the Special Bench of the Tribunal in the case of Cheminvest Ltd. (121 ITD 318), the Assessing Officer invoked the provisions of section 14A read with Rule 8D and computed disallowance under Rule 8D(2)(iii) at 0.5% of the average value of investments, resulting in disallowance of Rs. 41,51,500/-.

After considering the submissions of the assessee and the judicial precedents relied upon, the Ld. CIT(A) held that in the absence of any exempt income during the year, the provisions of section 14A were not attracted and accordingly deleted the disallowance of Rs. 41,51,500/- made by the Assessing Officer.

Before us, the Ld. DR relied upon the order of the Assessing Officer, whereas the Ld. AR reiterated that the assessee had not earned any exempt income during the year and therefore the issue was squarely covered by the decisions of the Tribunal in the assessee’s own case.

We have heard the rival submissions and perused the material available on record including the orders of the authorities below and the judicial precedents placed before us.

It is an undisputed position emerging from the record that no exempt income was earned by the assessee during the year under consideration. The short-term capital gains earned by the assessee from investments in debt mutual funds have been duly offered to tax and therefore do not constitute exempt income. In such circumstances, the very foundation for invoking the provisions of section 14A fails.

We further note that the co-ordinate Bench in the assessee’s own case for Assessment Years 2009-10 to 2011-12 has already considered an identical issue and has held that in absence of exempt income, no disallowance under section 14A can be made. The Co-ordinate Bench while deciding the issue, in has categorically observed as under:

The facts in the present year being identical, and in absence of any material brought on record by the Revenue to demonstrate any distinguishing feature, judicial discipline requires that the view taken in the assessee’s own case in earlier years be followed.

During the course of assessment proceedings, the Assessing Officer observed from the notes to the computation of total income that the assessee had earned Short Term Capital Gain of Rs. 8,75,88,808/-, which was reduced from the Capital Work-in- Progress (CWIP) and credited to the project cost. The assessee explained that the said gain arose from temporary investment of surplus funds which were borrowed for the purpose of the airport development project and remained unutilized for a short period.

The assessee submitted that it had entered into an Operation, Management and Development Agreement (OMDA) with the Airports Authority of India for operating and developing the Chhatrapati Shivaji International Airport, Mumbai. For the purpose of development of the infrastructure, the assessee had raised substantial borrowings from banks led by an IDBI consortium. Since payments to contractors and vendors engaged in development activities were to be released based on the progress of work, a portion of the borrowed funds remained temporarily idle pending utilization. Such funds were invested in short term growth mutual funds, resulting in Short Term Capital Gain of Rs. 8,75,88,808/-, which the assessee treated as income inextricably linked with the project funds and accordingly adjusted against the project cost.

The assessee further relied upon various judicial precedents including CIT vs. Bokaro Steel Ltd. (236 ITR 315), CIT vs. Karnal Co-operative Sugar Mills Ltd. (243 ITR 2), CIT vs. Karnataka Power Corporation (247 ITR 268) and Bongaigaon Refinery & Petrochemicals Ltd. vs. CIT (251 ITR 329) to contend that income earned during the construction stage having direct nexus with the project should go to reduce the project cost.

The Assessing Officer, however, did not accept the explanation furnished by the assessee. According to the Assessing Officer, the gain arising on redemption of mutual fund units represented an independent income taxable under the head “Capital Gains” and could not be reduced from CWIP. The Assessing Officer also held that the judicial precedents relied upon by the assessee mainly dealt with interest income earned on surplus funds and not with gains arising from investments in mutual funds. The Assessing Officer therefore concluded that the said income had separate taxability irrespective of its connection with the project funds and accordingly brought the Short Term Capital Gain of Rs. 8,75,88,808/- to tax.

During the appellate proceedings, the assessee contended that the said gain was earned during the construction phase of the airport project and arose from temporary investment of surplus project funds. The assessee submitted that such funds were part of the borrowed funds raised specifically for the development of the airport infrastructure and, pending utilization for the project, were invested for short durations in growth mutual funds. According to the assessee, the income so earned was inextricably linked with the project funds and therefore was rightly adjusted against the project

The Ld. CIT(A), after considering the submissions of the assessee and examining the order of the Tribunal for the earlier year, observed that the Tribunal had taken note of the fact that the funds were borrowed specifically for the airport development project under the terms of the financing arrangement with the lenders and the assessee had no liberty to deploy such funds except in accordance with the project agreements. The Tribunal had also considered various judicial precedents on the issue and had concluded that income arising from temporary investment of idle project funds during the implementation period had a direct nexus with the project and therefore was required to be credited to the capital work-in-progress .Following the aforesaid decision of the Tribunal in the assessee’s own case for the earlier assessment year and applying the same reasoning to the facts of the present year, the Ld. CIT(A) held that the Short Term Capital Gain earned from temporary investment of project funds was inextricably linked with the project and therefore was liable to be reduced from the project cost. Accordingly, the Ld. CIT(A) deleted the addition made by the Assessing Officer and allowed the grounds raised by the assessee on this issue.

Before us, the Ld. DR relied upon the order of the Assessing Officer, whereas the Ld. AR reiterated that the assessee had not earned any exempt income during the year and therefore the issue was squarely covered by the decisions of the Tribunal in the assessee’s own case for A.Y. 2013-14 in and 2385/Mum/2018.

We have carefully considered the rival submissions and perused the material placed on record including the orders of the authorities below and the judicial precedents relied upon by the parties.We find that the Co-ordinate Bench of the Tribunal in the assessee’s own case for A.Y. 2013-14, while dealing with an identical issue relating to income earned from temporary deployment of project funds, had examined the financing arrangement and the nature of the funds and held as under:

After considering the entire factual matrix and the judicial precedents, the Co-ordinate Bench finally concluded as under: 33. In this view of the matter and considering the ratio of case laws discussed hereinabove, we are of the considered view that short term capital gain derived from sale of units of mutual funds and interest earned from fixed deposits kept in banks out of idle funds of project is rightly credited to capital work-in- progress account during the implementation period of the project. Hence, we direct the Ld. Ld.AO to delete additions made towards short term capital gain derived from sale of units of mutual funds. We further direct the Ld. Ld.AO to delete enhancement made by the Ld. CIT(A) towards interest income earned from fixed deposits with banks invested out of idle funds of project.

Thus, the Co-ordinate Bench had categorically held that income arising from temporary deployment of idle project funds during the implementation stage of the project is inextricably linked with the project and is therefore required to be adjusted against the capital work-in-progress.

Since the facts of the present year are identical and the Revenue has not brought any distinguishing feature on record, we respectfully follow the decision of the Co-ordinate Bench in the assessee’s own case for the earlier year. Accordingly, we find no infirmity in the order of the Ld. CIT(A) in holding that the Short Term Capital Gain of Rs. 8,75,88,808/- earned from temporary investment of project funds is required to be reduced from the project cost and cannot be brought to tax separately.In view of the above, the Ground No. 5 raised by the Revenue is dismissed.

During the course of the assessment proceedings, the Assessing Officer examined the revised computation of income furnished by the assessee vide letter dated 15.09.2017 and observed that the assessee had debited an amount of Rs. 12,13,24,531/- in the computation of income on account of negative surplus from the Passenger Service Fee (Security Component) [PSF- SC] fund offered under the head “Income from Business”. On examination of the working of PSF-SC furnished by the assessee, the Assessing Officer noted that while computing the surplus available under the PSF-SC fund, the assessee had reduced an amount of Rs. 24,25,65,152/- representing amounts included in Capital Work-in-Progress (CWIP) and had claimed the same as revenue expenditure under the provisions of the Act. Accordingly, the assessee was called upon to justify the claim of loss from the PSF-SC fund. In response, the assessee submitted that PSF-SC was collected from passengers embarking at the airport and that the funds so collected were utilised for payment to the Central Industrial Security Force (CISF) towards airport security services. The assessee further explained that the surplus funds were required to be maintained in an escrow account and could be utilised only for security-related purposes.The Assessing Officer, however, observed that the PSF-SC amount collected from passengers was meant exclusively for payment of security charges to the CISF and that the assessee was not entitled to utilise such funds for any other expenditure. The Assessing Officer further noted that the assessee had reduced Rs. 24,25,65,152/- on account of expenditure included in CWIP and claimed the same as revenue expenditure while computing the surplus under PSF-SC. According to the Mumbai International Airport Ltd., Mumbai Assessing Officer, such capital expenditure could not be claimed as allowable deduction from the PSF-SC fund, particularly when the said fund was earmarked only for meeting CISF security expenses in terms of the Operation, Management and Development Agreement (OMDA). The Assessing Officer therefore held that the claim of the assessee for deduction of Rs. 24,25,65,152/- from the PSF-SC fund was not permissible and accordingly disallowed the same and added it back to the total income of the assessee.

During the appellate proceedings, the assessee contended that Passenger Service Fee collected from passengers comprises two components namely PSF-FC (Facilitation Component) and PSF-SC (Security Component). It was submitted that while the facilitation component forms part of the regular income of the airport operator, the security component is collected in a fiduciary capacity on behalf of the Government of India in terms of Rule 88 of the Aircraft Rules, 1937 and the directions issued by the Ministry of Civil Aviation (MoCA). The assessee submitted that the PSF-SC collected from passengers is deposited in a designated escrow account and can be utilised strictly in accordance with the directions issued by MoCA for payment of security expenses. The assessee further submitted that it has no beneficial ownership over the said amount and acts merely as a collecting agency for the Government. The assessee further submitted that identical issue had arisen in its own case in earlier assessment years, wherein the Hon’ble ITAT, Mumbai had held that PSF-SC collected by the assessee is not taxable in its hands as the amount is collected in a fiduciary capacity and is diverted at source by an overriding title in favour of the Government of India. Reliance was placed on the decision of the Co-ordinate Bench in the assessee’s own case for A.Y. 2008-09 in subsequent decision for A.Y. 2013-14 in ITA

The Ld. CIT(A), after considering the submissions of the assessee and examining the judicial precedents relied upon, observed that the Co-ordinate Bench in the assessee’s own case had already analysed the nature and mechanism of PSF-SC collection and utilisation. The Co-ordinate Bench had noted that the PSF-SC amount collected by the assessee is deposited in an escrow account maintained under the directions of MoCA and the funds are earmarked exclusively for meeting security expenses at the airport. It was further observed that the assessee does not have any discretion in utilisation of these funds and any surplus remaining unspent is required to be transferred to the account of the Airports Authority of India, while any deficit is to be funded by the Government. The Ld. CIT(A) also noted that the Co-ordinate Bench, after examining the factual position and the applicable legal principles including the doctrine of diversion of income by overriding title, had held that the PSF-SC collected by the assessee cannot be characterised as income within the meaning of section 2(24) read with section 5 of the Act. Following the decision of the Co-ordinate Bench in the assessee’s own case for earlier assessment years, the Ld. CIT(A) held that the PSF-SC component collected by the assessee is not taxable in its hands and accordingly deleted the addition made by the Assessing Officer.

Before us, the Ld. DR relied upon the order of the Assessing Officer, whereas the Ld. AR reiterated that the assessee had not earned any exempt income during the year and therefore the issue was squarely covered by the decisions of the Tribunal in the Mumbai International Airport Ltd., Mumbai assessee’s own case for A.Y. 2008-09 in and 2760/Mum/2012 and for A.Y. 2013-14 in ITA No. 2018/Mum/2018. We note that an identical issue had arisen in the assessee’s own case for earlier assessment years. The Co-ordinate Bench in the assessee’s own case for A.Y. 2008-09 in as well as for A.Y. 2013-14 in ITA Nos. 2018 & 2385/Mum/2018 has examined the entire mechanism governing the collection and utilisation of PSF-SC and has held that the said amount is collected by the assessee in a fiduciary capacity on behalf of the Government and does not constitute income in its hands. The Co-ordinate Bench, after considering the terms of the regulatory framework and the escrow mechanism, held that the funds are earmarked exclusively for meeting security expenses and the assessee has no beneficial ownership or control over the same.

The Co-ordinate Bench has categorically observed that the escrow account maintained for PSF-SC is merely a pool created through the assessee for meeting security expenses and the entire amount collected is deposited in the said account which is earmarked wholly and exclusively for such purpose. Under these circumstances, there is no possibility of any real income arising to the assessee from such collections. The Co-ordinate Bench accordingly held that PSF-SC collected by the assessee cannot be characterised as income within the meaning of section 2(24) read with section 5 of the Act.

Since the facts of the present year are identical and the Revenue has not brought any distinguishing feature on record, we respectfully follow the decisions of the Co-ordinate Bench in the assessee’s own case for the earlier years. Accordingly, we find no infirmity in the order of the Ld. CIT(A) in holding that the Passenger

During the appellate proceedings, the assessee submitted before the Ld. CIT(A) that the claim of enhanced depreciation had in fact been raised before the Assessing Officer during the assessment proceedings vide letters dated 13.10.2017 and 28.12.2017, though the same was not adjudicated in the assessment order. The assessee explained that the runway, taxiway and apron, though initially grouped under the “building” block and depreciation at 10% was claimed, are in fact integral operational infrastructure of the airport and function as essential tools for aircraft landing, movement and parking. Accordingly, the assessee contended that these assets satisfy the functional test and ought to be classified under the “plant and machinery” block, thereby eligible for depreciation at 15%. The additional depreciation claimed represented only the differential 5%, arising due to reclassification of the assets from building to plant and machinery.

The assessee further explained that the terminal building is specially designed infrastructure catering to passengers, airlines, regulatory agencies and air traffic control and is constructed with specifications significantly different from ordinary commercial buildings, including higher load-bearing capacity, large column-free spans and structural design capable of withstanding vibration and operational conditions arising from aircraft movement. Similarly, the sewage treatment plant (STP) installed within the terminal

After considering the submissions of the assessee, the Ld. CIT(A) observed that the assets in question are specially designed infrastructure forming an integral part of airport operations and cannot be equated with ordinary civil structures. Taking note of the nature and functionality of the assets and also following the decisions relied upon by the assessee including earlier orders of the Co-ordinate Bench in the assessee’s own case, the Ld. CIT(A) accepted the contention of the assessee that the said assets are eligible to be treated as plant and machinery and therefore depreciation at the rate of 15% is allowable.

Before us, the Ld. AR submitted that the issue stands covered in favour of the assessee by the decisions of the Co-ordinate Bench in the assessee’s own case for earlier assessment years wherein, under identical facts, depreciation on taxiways, aprons, bridges and parking bays was directed to be allowed at the rate applicable to plant and machinery. The Ld. DR fairly accepted.

Since the issue involved in the present appeal is identical and the Revenue has not brought any distinguishing facts on record, respectfully following the decision of the co-ordinate Bench in the assessee’s own case, we uphold the action of the Ld. CIT(A) in allowing depreciation treating taxiways, aprons, parking bays and allied airport infrastructure as plant and machinery. Accordingly, the ground raised by the Revenue on this issue is dismissed.

In the combined result, the appeal of the assessee is allowed for statistical purposes, whereas the appeal of the Revenue is dismissed.