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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI R.S. SYAL & SHRI K.N. CHARY&
ORDER PER K. NARSIMHA CHARY, J.M.
Aggrieved by the order dated 31/10/2011 passed by the Ld. Commissioner of income tax, Delhi-IV, New Delhi (“Ld. CIT”) under section 263 of the income tax act, 1961 the assessee preferred this appeal.
Brief facts of the case are that the assessee company is engaged in developing, operating and maintaining airport and related infrastructure at the New Delhi airport. For the AY 2007-08, the assessee filed the return of income declaring a total loss of Rs. 150,55,30,337/- and revised its return of income on 30/03/2009 declaring a total loss of Rs. 1 149,48,78,939/-. During the scrutiny of the return of income, Learned assessing officer (“Ld. AO”) made certain additions and determined the income of the assessee at Rs. 62,69,55,060/-.
However, subsequently, on examination of the income tax assessment records of the assessee, Learned CIT found that the assessee company had received Passenger Service Fee (PSF), but the same has not been disclosed as part of revenue receipt amounting to Rs. 77,06,88,000/-in the return of income by the assessee; that due to this omission on the part of the assessee the income declared for tax for assessment year 2007-08 fell short by Rs. 77,06,88,000/-; that consequently the assessment made by the AO also became erroneous resulting in under assessment of tax, and issued notice to the assessee. 4. It was submitted on behalf of the assessee that they had represented their case before the Ministry of Civil Aviation (MOCA) through Association of Private Airports Operators (APAO) regarding taxability of Passenger Service Fee (Security Component) and in turn MOCA has also represented their case before the Ministry of Finance, Department of Revenue regarding taxability of the passenger service fee (security component). It was represented by the assessee that since the matter was sub judice and it may take 2-3 months, for the disposal of application, they requested to keep the addition in this matter in abeyance. 5. Ld. CIT found that for assessment year 2008-09 the assessee company received PSF but did not disclose the same Ld. AO added Rs. 80.70 crores to the income of the assessee by considering the same as revenue receipt on account of PSF. However, the assessment year 2007-08 a sum of Rs. 77,06,88,000 was received as PSF and the said amount was not disclosed as part of revenue receipt in the return of income filed by the assessee. In these circumstances, Ld. CIT held that the assessing officer has failed to assess the revenue receipt of Rs. 77,06,88,000/-on account of passenger service fee for the assessment year 2007-08 in the regular assessment order, and therefore, such order is erroneous and prejudicial to the interest of revenue. Ld. CIT refused to keep the matter in abeyance since no decision of MOCA was communicated. Ld. CIT, accordingly set aside the issue and directed the Ld. AO to reframe the assessment by taking into account the revenue receipt on account of passenger service fee. Aggrieved by the order under section 263 of the Act, assessee preferred this appeal.
It is the argument of the Ld. AR that the passenger service fee is comprised of two components, namely, security component to the extent of 65% and facilitation component to the extent of 35%, collected by the respective airlines wherein the assessee is having control over the 35% only to meet the facilities that are provided to the passengers; whereas the assessee has no control whatsoever over the security component of 65%. It is further submitted that the passenger service fee for the time being in force is Rs. 200 per passenger out of which Rs. 130/-accounts for the security component. It is submitted that as per the Operation, Management and 3 Development Agreement (OMDA) between the Airports Authority of India and a Delhi International Airport Private Ltd”, security is a reserved activity. It is further submitted that the Standard Operating Procedure (SOP) for account/audit of passenger service fee prescribes the nature of security component of PSF and it requires the opening of an Escrow account wherein the airlines operators are required to deposit the PSF security component immediately after collection. He further draw our attention to this SOP clauses wherein it is stated that the escrow bank shall allow withdrawal by JVC/private operators of amounts deposited into the PSF (SC) account only towards certain specific purposes in the order of priority. He also referred to clause (h) of para 3.2 of the escrow Agreement dated 12 to June 2006 where under it is stated that the amount lying in the surplus account shall be paid by the escrow bank only towards certain purposes and it is stated in this Agreement vide para “E” of the preamble that any balance lying in the escrow bank account shall be transferred to the AAI for payment to CISF for CISF personnel deployed/services provided by CISF at other airports in and around India.
Basing on the recitals of the OMDA, SOP for account/audit of passenger service fee and the Escrow Agreement he submitted that the assessee has no control over the funds that are deposited in the escrow account for CISF PSF component inasmuch as it is for the exclusive purpose of purchasing the machinery required by the CISF, payments to be made to CISF and the balance to be transferred to AAI for payment to CISF for CISF personnel 4 CISF at other airports in and around India. According to the assessee such an amount never comes to the books of the assessee and that was required to be directly deposited in the escrow account for this specific purpose and it is to be spent for the purposes specified by the govERNMENT of India and the balance has to be transferred to the AAI for the specified purposes.
He brought to our notice the order dated 30/11/2016 in and ITA number 20/07/1960/mum/2012 for the assessment year 2008-09 in the case of the Mumbai International Airports Private Limited and submitted that the very similar issue was involved in that case also and it was held that the Escrow Account maintained by the assessee is simply a pool created by the MOCA through the assessee for permitting security expenses; that if any income can be computed, that would be possible only if any surplus arises, which is not possible to happen since entire amount collected by the assessee company has to be deposited in escrow account which is earmarked wholly and exclusively permitting security expenses; that there is no flexibility for using the funds elsewhere; that if it any amount is left unspent from this account, then the same has to be transferred to the account of Airport Authority of India permitting security expenses, as such there is no question of there being any income in this exercise much less any income which could be characterised as taxable income in the hands of the assessee company.
Basing on these facts and circumstances, it is argued by the Ld. AR that the security component of the PSF is not income in the hands of the assessee as is held by the Mumbai Tribunal in the above referred case. He further submitted that in any case it is a contentious issue not amenable to the jurisdiction of the Learned CIT under section 263 of the Act.
Para contra, it is the argument of the Ld. DR that in the Official Memorandum dated 30/06/2006 issued by the Central Board of Direct Taxes(CBDT), Department of Revenue, Ministry of Finance, Government of India it is clearly held that the statutory levies collected by an assessee in the course of its business to be eventually turned over to the Government is income within the meaning of the Income Tax Act (Chowringhee Sales Bureau Private Limited vs. CIT (87 ITR 542, 548; (SC)) and in view of this decision of the Hon’ble Supreme Court the PSF constitutes income within the meaning of the Income Tax Act. The CBDT by drawing analogy from section 43 B of the Act held that the whole of the amount of PSF shall be treated as income and thereafter the deductions are permissible only in respect of the expenses actually made. Basing on this Official Memorandum Ld. DR submitted that though the CBDT circular does not bind the Tribunal or Judicial Authorities, it would certainly bind the Ld. AO. Since the Ld. AO failed to follow this circular, it resulted in escapement of income within the meaning of this Official Memorandum and on the premise Ld. DR justified the impugned order.
Ld. DR brought to our notice the contents of the assessment order in this case to demonstrate that absolutely there is no reference to PSF or any enquiry conducted by the Ld. AO in that direction. She, therefore, submits that under explanation 2 to section 263 of the Act, this order passed without making enquiries are verification that was supposed to be done in view of the above CBDT circular, is erroneous insofar as it is prejudicial to the interest of the revenue.
Ld. DR further placed reliance on the decision of the Hon’ble apex court in Chowringhee Sales Bureau Private Limited vs. CIT (supra) and submitted that the PSF constitutes income within the meaning of income tax act and that for want of proper enquiry on the part of the Ld. AO, Learned CIT is justified in revising the same under section 263 of the Act.
She further brought to our notice the order dated 31/01/2018 in ITA numbers 2636, 4213/Del/2012 and 3707/Del/2013 for assessment years 2008-09 to 2010-11 in assessee’s own case wherein a coordinate bench of this Tribunal held that the facts relating to the Delhi International Airport Private Limited (supra) are slightly different from the facts involved in the case of Mumbai International Airport Ltd and that a coordinate bench of this daily tribunal remanded the matter to the Ld. Assessing Officer for verification as to the appropriation of the dividend amount and the treatment given to the surplus amount. She, therefore, submits that in view of the difference in facts as noted by the coordinate bench of this Tribunal in assessee’s own case, the decision in Mumbai International Airports Case (supra) cannot be followed.
The sum and substance of the argument of Ld. DR is that the proper course for the assessee was to declare the income relating to the PSF security component also as income and then to claim the deductions in consonance with the official memorandum dated 30/06/2008 issued by the CBDT in the light of the decision of the Hon’ble apex court in Chowringhee Sales Bureau Private Limited (supra). With this view of the matter Ld. DR prayed to dismiss the appeal and to uphold the exercise of jurisdiction under section 263 of the Act by the Learned CIT.
We have carefully gone through the record. The OMDA is clear that the security is a reserved activity and out of Rs. 200/-collected by the airliner, Rs. 130/-related to the PSF security component. Further the SOP for account/audit of passenger service fee stipulates that there shall be an escrow account and the escrow bank shall allow the withdrawal by the JVC/private operators of amounts deposited into the PSF (SC) account only towards certain purposes that too to in the order of priority by descending order. The escrow Agreement dated 12/06/2006 clearly establishes that the withdrawal from the surplus account are permissible only in seven cases for specified purposes and whatever the balance that remains in such escrow account shall be transferred to AAI for payment of CISF for CISF personnel deployed/services provided by CISF at other airports in and around India.
Having gone through the OMDA Agreement, SOP and the escrow Agreement in the light of other relevant papers furnished in the paper book we are convinced that prima facie there appears to be no control for the assessee over the security component of the PSF collected by the airliner and deposited into the escrow account meant to make the security purposes.
Further we have gone through the orders of the Mumbai Tribunal in the case of Mumbai International Airport Private Limited (supra) and a coordinate bench of the Delhi Tribunal in assessee’s own case (supra). In the former case the Tribunal returned a finding that the security component of the PSF amount does not constitute income in the hands of the assessee whereas such an issue has been remanded back to the Ld. AO by the Delhi tribunal. It is, therefore, clear that the question whether or not the security component of the PSF constitutes income in the hands of the assessees has not yet finally been decided authoritatively. It still remains a contentious issue and a debatable one.
In these circumstances, we are of the considered opinion that in view of the decision of the Hon’ble apex court in M/s Malabar Industries Co Ltd. Vs. CIT [2000] 243 ITR 83 (SC), such contentions or debatable issues are not available for revision under section 263 of the Act. With this view of the matter, we find that in this set of facts and circumstances, the exercise of jurisdiction under section 263 of the Act by the Learned CIT cannot be sustained. We therefore allow the 263 of the Act.
In the result appeal of the assessee is allowed.