DCIT 10(2)(2), MUMBAI vs. MUMBAI INTERNATIONAL AIRPORT P.LTD, MUMBAI

O R D E R Per P K Bansal, Vice-President:

These cross-appeals have been filed against the order of the CIT(A) dated 12.06.2015 for A.Y. 2012-13. following grounds of appeal:

2 Mumbai International Airport P Ltd.

“On the facts and in the circumstances of the case and the law, the Ld.CIT(A) erred in confirming the disallowance of the provision of Rs.5,84,70,574/- made towards leave encashment on the basis of an actuarial valuation by relying on the decision of Calcutta High Court in the case of Exide Industries Ltd. v. Union of India (292 ITR 470). The appellant prays that the same may be allowed.”

The assessee has also moved an application, dated 12.09.2017, for admission of the additional ground, which reads as under:

“On the facts and in the circumstances of the case and in law, the appellant has erred by offering the Passenger Service Fee – Security Component [PSF(SC)] of `.93,49,42,199/- as taxable income during the year under consideration. The appellant prays that the PSF(SC) is not the income of the appellant. Hence, the suo moto addition on this account made by the appellant may please be deleted.”

4. We find that this Tribunal vide its order dated 13.11.2017 in A.Ys.

2009-10 to 2011-12, it has been held as under:

“8. We have considered the rival submissions and have gone through the case laws as were referred to before us. We noted the facts relating to the said ground taken by the assessee as additional ground before us. The question before us whether the ground taken by the assessee is a legal ground or not. The issue whether

3 Mumbai International Airport P Ltd. the disclosed Passenger Service Fee – Security Component [PSF (SC)] is a income or not? In our opinion, it is a legal issue and as per the decision of Hon’ble Supreme Court in the case of National Thermal Power Corporation v. CIT (supra), the question of law arising from the facts, which are on record, can be raised before the Tribunal for the first time and the Tribunal is bound to consider the said ground to assess the correct tax liability. In the case of Jute Corporation of India vs. CIT (supra), the Hon’ble Supreme Court has held as under: “An appellate authority has all the powers which the original may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provision. In the absence of any statutory provisions, the appellate authority is vested with all the plenary powers, which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income-tax Officer.” In view of this decision there is no curtailment of the power of the appellate authority in entertaining the additional ground. Not only this, we noted that the Bombay High Court (FB) in the case of Ahmedabad Electricity Co. Ltd. vs. CIT (supra), has observed that the basic purpose of an appeal in income tax matter is to ascertain correct tax liability of the assessee in accordance with the law. Therefore, the Appellate Tribunal being the appellate authority is bound to consider the proceedings before it and the matter on record, for determining the correct tax liability of the assessee. It is not disputed that the facts relating to passenger service fees security component are on record for each of the assessment years. Therefore, it cannot be said that this is a case where further facts have to be investigated. The only question raised by the assessee in its grounds of appeal is whether the impugned receipt is an income chargeable to tax or not. The learned DR, although vehemently contended that additional ground should not be admitted, has not given any justifiable reason for not admitting the same. It is a settled law that the additional ground if it is a legal ground can be taken for the first time before the appellate authority. Therefore, the submissions made by the learned DR that the assessee has not raised this issue before the Assessing Officer or the CIT(A) does not have any legs to stand. We, therefore, admit the additional ground taken by the assessee.

4 Mumbai International Airport P Ltd. Thus, the Tribunal admitted the additional ground and further held as under:

“14 … … From the findings of the Tribunal, it is apparent that the said amount is not taxable in the hands of the assessee and, thereby directed the Assessing Officer to re-compute the income of the assessee while holding so this Tribunal also gave liberty to the Assessing Officer that no portion of amount collected by the assessee on account of PSF-SC is utilized by the assessee for its own purposes or for any purposes which are not permitted by MOCA/other competent authorities. In case any violation is done by the assessee in this regard, then the Assessing Officer will be at his liberty to treat the amount so misappropriated as income of the assessee but to that extent only. Further, if any refund is received by the assessee on account of TDS deducted on this component, i.e. on PSF-SC, then the same shall also be deposited by the assessee in the Escrow Account, as was fairly agreed by the learned Counsel during the course of hearing 15. We have noted that while giving effect to this order, the Assessing Officer, after examination as per the directions given by the Tribunal and ultimately vide his order dated 04.07.2017, deleted the whole addition made in respect of PSF-SC amounting to `1,32,58,59,023/- for AY.2008-09. Since the facts involved in the impugned years under consideration are not disputed with the facts involved in A.Y.2008-09 wherein the AO while giving effect to the order of the Tribunal found that the assessee has not utilized any amount of PSF-SC for its own purposes or for any purposes which are not permitted by MOCA/other competent authorities, we, therefore, respectfully following the decision of this Tribunal for A.Y. 2008-09, hold that the said amount is not taxable in the hands of the assessee and direct the Assessing Officer to re-compute the income of the assessee. We also direct the Assessing Officer to see that no portion of the amount calculated by the assessee on account of PSF-SC is utilized by the assessee for its own purposes or for any purpose which are not permitted by MOCA/other competent authorities. The Assessing Officer is further directed that in case he finds that any violation is done by the assessee in this regard, he will be at his liberty to treat the amount so misappropriated as income of the assessee but to that extent only. Further, if any refund is received by the assessee on account of 5 Mumbai International Airport P Ltd.

TDS deducted on this component, i.e. on PSF-SC, the same shall also be deposited by the assessee in the Escrow account, failing which it would be treated as income of the assessee to that extent only. Thus, this ground is allowed subject to these directions in each of the A.Ys 2009-10, 2010-11 and 2011-12.

Facts and circumstances being the same, on the same reasoning and directions, we allow the additional ground taken by the assessee.

The Tribunal while dealing with identical ground has held as under:

13.1. The brief facts of the case are that in the assessment order, the AO made addition of the aforesaid amount on account of provision for leave encashment debited to the Profit & Loss Account on the ground that the decision of Calcutta High Court in the case of Excel Industries vs UOI 292 ITR 470 (Cal) has been stayed by the Hon’ble Supreme Court and, therefore, as on that date, the expenses were not allowable. 13.2. Before the Ld. CIT(A), the assessee challenged this disallowance. But Ld. CIT(A) decided the issue against the assessee. 13.3. During the course of hearing, the Ld. Counsel of the assessee fairly submitted that this issue should go back and it should be decided on the basis of judgement of the Hon’ble Supreme Court in the case of Excel Industries Ltd (supra). It

6 Mumbai International Airport P Ltd. was also submitted that the amount actually paid should be allowed. 13.4. Per contra, the Ld. CIT-DR did not raise any objection and submitted that proper appreciation of facts have not been done in this case and he would have no objection if this issue is sent back to the file of the AO. 13.5. We have gone through the orders passed by lower authorities on this issue. It is noted that none of the authorities have narrated proper facts as to whether the total amount debited under this head was on account of provision or some part of it was paid also. Further, it is also not coming out whether provision for leave encashment has been made on the basis of actuarial basis or not. In our view, this issue needs to go back for proper verification of facts, and therefore, we send this issue back to the file of the AO for proper adjudication after considering all the facts and the judgments in this regard for which the AO shall give adequate opportunity of hearing to the assessee. The assessee shall submit requisite details and documentary evidences to bring complete facts on record and place all the judgements as may be considered appropriate as per law and facts. The AO shall decide this issue afresh after taking into account all the material held on record and all the judgements as available at that time on this issue. This ground may be treated as allowed for statistical purpose.

Respectfully following he said decision, we restore the issue to the file of the Assessing Officer with a direction to re-decide the issue afresh after taking into account all the material held on record and all the judgments as available at that time on this issue. Thus, this ground is treated as allowed for statistical purposes.

Coming to the Revenue’s appeal in 6. wherein it has raised the following effective grounds of appeal:

1. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the disallowance of 25% depreciation on upfront fees of Rs.150 crore without considering the fact

7 Mumbai International Airport P Ltd. that the assessee has not acquired any absolute rights on the Airport, so as to equate it with a license, but instead the AAI has granted the assessee the right to perform certain functions during the contract period of 30 years and hence the assessee is entitled for deduction only the proportionate amount i.e. l/30th of Rs.150 crore?

2(a) Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in directing the Assessing Officer to treat the expenditure of Rs. 13,83,37,443/- incurred towards various expenditure such as realignment of nallah's in forecourt of proposed integrated Terminal, reallocation of CPWD staff and other operational expenditure as revenue expenditure without appreciating that these expenses result in enduring benefit to the assessee and hence is capital expenditure?

2(b) Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in directing the Assessing Officer to treat the expenditure of Rs.13,83,37,443/- incurred towards various expenditure such as realignment of nallah's in forecourt of proposed integrated Terminal, reallocation of CPWD staff and other operational expenditure as revenue expenditure ignoring the ratio of the decision of the Hon'ble Supreme Court in the case of CIT vs. Mangayarkarasi Mills (315 ITR 114) wherein it was held that replacement expenditure is neither current repairs nor revenue in nature which is squarely applicable to the assessee's case?

3(a) Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the disallowance of Rs.3,00,51,959/- made by the Assessing Officer u/s.40(a)(ia), without appreciating that the assessee was liable to deduct tax under various section i.e. 1941, 194J and 194C but failed to do so?

3(b) Whether on the facts and in the circumstances of the case and in law, the learned QJ(A) erred in deleting the disallowance of Rs.3,00,51,959/- made by the Assessing Officer u/s.40(a)(ia), without appreciating that the assessee's tax auditors had pointed out that the said amount is disallowable?

4(a) Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the disallowance of Rs.17,22,24,000/- paid as retrenchment compensation to AAI for the relevant assessment year 2011-12?

4(b) Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that retrenchment compensation is allowable as a deduction u/s.37(l) of the Income-tax Act, 1961?

8 Mumbai International Airport P Ltd.

4(c) Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that section 35DDA is not applicable without appreciating that such retrenchment compensation paid by the assessee company is in connection with the voluntary retirement of employees?

4(d) Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in relying on the decision of the Hon'ble Bombay High Court in the case of CIT vs. Sinnar Bidi Udyog Ltd. [2002 123 Taxman 559 (Bom)] and CIT vs. Maragarine & Refined Oils Co. Ltd. [2006 282 ITR 576 (Kar)] without appreciating that the said decision were rendered for the A.Y. 1989-90 and A.Y. 1981-82 respectively i.e. prior to insertion of section 35DDA which is applicable for A.Y.2002-03 onwards as the same was inserted by the Finance Act, 2001 w.e.f. 01.04.2002 and therefore the ratio of the decisions cited supra are not applicable to the assessment year under consideration.

5(a) Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that Development Fee of Rs.25,98,50,335/- collected by the assessee from the embarking passengers at the Chhatrapati Shivaji International Airport, Mumbai during the Financial Year 2010-11, relevant for the assessment year 2011-12, is a capital receipt and not a revenue receipt?

5(b) Whether on the facts and in the circumstances of the case and in law, the learned CTT(A) erred in holding that Development Fee collected by the assessee company is a capital receipt based on its application for acquisition of capital assets without appreciating the fact that application of receipts does not determine the nature and taxability of the receipts?

5(c) Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in relying on the decision of the Hon'ble Supreme Court in the case of Consumer Online Foundation vs. Union of India & Others (2011 5 SCC 360) without appreciating that in that case the issue before the Hon'ble Apex Court was whether the assessee company as a lessee of AAI, can collect development fee from the embarking passengers at the Chhatrapati Shivaji International Airport, Mumbai and the Apex Court did not give a finding regarding the nature of receipt in the hands of lessees of the Airports, including the assessee company?

5(d) Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that once an amount is held to be in the nature of tax, it cannot be subjected to further tax without appreciating that such amount constitutes construction receipt in the assessee's hands and hence liable to be taxed?

9 Mumbai International Airport P Ltd.

6(a) Whether on the facts and in the circumstances of the case and in law, the learned CTT(A) erred in deleting the disallowance U/S.14A, without appreciating the fact that the A,O has properly recorded his satisfaction for invoking the provisions of Rule 8D and therefore since Rule 8D is invoked, the disallowance has to be worked out as per the formula prescribed therein and there is no scope for any deviation therefrom?

6(b) Whether on the facts and in the circumstances of the case and in law, the learned QT(A) erred in deleting the disallowance U/S.14A observing that since there is no exempt income, no disallowance can be made u/s.14A without appreciating that as held r the decision of Special Bench of ITAT, Delhi in the case of Chemiinvest 121 ITD 318 (Delhi) (SB), provisions of section 14A are applicable even through no exempt income has been earned during the year? 7. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the assessee's claim that capital expenditure incurred by the assessee on taxiways, aprons, parking bays and bridges is entitled to depreciation @25% treating the same as Plant & Machinery ignoring that the taxiways, aprons, parking bays as akin to Roads and Buildings and therefore, entitled to depreciation @10%."

3. Ground no.1 relates to the deletion of disallowance of 25% of depreciation on upfront fees of ` 150 crores. Both the parties agreed that the issue is covered in favour of the assessee by this Tribunal, vide its order dated 14.02.2014, for A.Y. 2007-08 in & 7111/Mum/2011, which decision was followed for A.Y. 2008-09. The Tribunal for A.Y. 2007-08 has observed as under:

“10.2 That the AO has stated that the assessee has got lease hold rights for a period of 30 years and whereas the assessee has contended that the assessee has got a license for a period of 30 years and as such it is an “intangible assets”. Thus, the assessee is entitled for depreciation as per section 32(1)(ii) of the Act. We observe that the said amount of Rs.150 crores paid by assessee is non-refundable. The assessee has got the privilege under “OMDA” to collect charges of the nature as mentioned in the agreement

10 Mumbai International Airport P Ltd. entered into i.e. “OMDA” from the users of Airport premises. We observe that it is not a case where the assessee has got the transfer of a right to enjoy the Airport premises. The assessee only got a license or right to do something at the Airport premises. The Hon’ble Apex Court has held in the case of B. M. Lal (supra) that the transaction is a lease, if it grants the interest in the land and whereas it is a license if it gives a personal privilege with no interest in the land. We are of the considered view that the assessee has got the economic /commercial right under the said agreement to collect charges from the users of the Airport premises which is similar to grant of a license to the assessee. This case is similar to the case of Technoshares and Stocks Ltd and others (supra), wherein the Hon’ble Apex Court has held that a right given to member of Stock-Exchange to carry on the business at the premises of the Stock-Exchange is a business or commercial right which is akin to license in terms of section 32(1)(ii) of the Act, therefore, eligible for depreciation. Their Lordships have held that right to participate in the market is an economic and money value, itself satisfies the test of being a license. 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 preemies, 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. The Hon’ble Delhi High Court in the case of Hindustan Coca Cola Beverages Pvt Ltd (supra) has also held that the assets which are included in the definition of “intangible assets” include, along with other things, any other business or commercial rights of similar nature. In this regard, it is relevant to state that the decision of Delhi High Court in the case of ONGC Videsh Ltd (supra) has held that the assessee who was assigned the rights to participate in oil exploration in Russia through a consortium for a period of 25 years and paid the total consideration for obtaining 20% membership in the consortium, amounting to Rs. 155.9 crores, was treated to acquire a license, being intangible assets, and thus assessee was entitled to claim depreciation u/s. 32(1)(ii) of the Act. Pune Bench of the Tribunal in the case of Ashoka Info (P) Ltd (supra) has also held that the expenditure incurred on construction of highway is eligible for depreciation @25%, as this expenditure has given rise to an ‘intangible assets’ in the hands of the assessee. 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

11 Mumbai International Airport P Ltd. 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 prescribed under the agreement entered into which is an “intangible assets” to the assessee. Thus assessee is entitled for depreciation.

10.3 Hence, the disallowance of Rs.22.50 crores made by AO has rightly been deleted by ld. CIT(A) by directing the AO to allow depreciation at the rate of 25% on the said payment of upfront fee of Rs.150 crores. Thus, Ground No.1 taken by department is rejected.”

Respectfully following the order of the Tribunal in the assessee’s own case, we confirm the order of the CIT(A) deleting the disallowance for the year under consideration. This ground taken by the revenue is dismissed.

civil works/operational expenses as revenue 13,83,37,443,/- towards expenditure. Both the parties agreed that identical issue had arisen in the case of the assessee for A.Ys. 2009-10, 2010-11 and 2011-12 and whatever view is taken therein shall be applicable to this year also. We find that the Tribunal vide its order dated 13.11.2017, in the A.Ys 2009-10, 2010-11 and 2011-12 has decided the issue in favour of the assessee, by observing as under:

12 Mumbai International Airport P Ltd. to before us as well as the CIT(A). It is a settled law, in view of the decision of Kedarnath Jute Manufacturing Co. Ltd. vs. CIT (82 ITR 363), that assessee’s entitlement to a particular deduction or not, will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights nor can existence or absence of entries in the books of accounts be decisive or conclusive in the matter. We have also gone through the decision of Hon’ble Supreme court in the case of Empire Jute Co. Ltd. vs CIT (124 ITR 1) wherein the deductibility or otherwise of an expenditure incurred during the course of business activities was decided by observing as under:

There may be cases where expenditure, even if incurred for obtaining an advantage of enduring benefit, may, none the less, be on revenue account and the test of enduring benefit may break down. It is not every advantage of enduring nature acquired by an assessee that brings the case within the principle laid down in this test. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. …………………………………………………………………………………… ………..... The Test of enduring benefit is, therefore, no certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particulars facts and circumstances of a given case.” (Emphasis Supplied)

The undisputed facts placed before us are that the assessee under the OMDA agreement with Airport Authority of India is operating, maintaining, managing developing the Mumbai Airport as per the international standard. Other obligations relate to overall management, development etc. As per the terms of OMDA, the assessee has to discharge various obligations in maintaining and operating the airport so as to bring it to the international standard. Thus, the assessee has to incur various expenses for such development and maintenance of the airport. During the year, the assessee has incurred the expenditure on various activities. The assessee has incurred the expenditure in maintaining existing assets which has either been repaired or renovated. Out of the expenditure of ` 20,35,73,477/- of sum of ` 16,07,30,868/- has been contributed by the assessee to MMRDA for the construction of 13 Mumbai International Airport P Ltd. Sahar Elevated access road from Western Express Highway to Chhatrapati Shivaji International Airport. The ownership of this road would remain with the MMRDA and would not be transferred to the assessee. The assessee’s interest, in our view, in this road was that the passengers would have a smooth access to Chhatrapati Shivaji International Airport and provide a look as per international standard. The rest of the expenditure relate to the maintenance and upkeep of the existing assets. The Assessing Officer treated the whole of the expenses to be capital expenditure as the assessee itself has treated the said expenditure in the books of account as capital expenditure. The allowability of expenses for the purpose of Income tax, as has been held by us in the previous paragraphs, following the decision of Hon’ble Supreme Court in the case of Kedarnath Jute Manufacturing Co. Ltd. vs. CIT (supra), will depend on the provision of income tax Act and not on the view which the assessee might take of his rights nor can existence or absence of entries in the books of accounts be decisive or conclusive in the matter. Since the ownership of the road vest with MMRDA, the assessee in our opinion does not get any direct benefit of enduring nature. No doubt the passengers travelling to the international airport were benefited by way of smooth access to the airport. The assessee made one time contribution for the construction of the said road. By this contribution no asset is created by the assessee but in commercial sense, in our opinion, the incurrence of such expenditure certainly facilitates the business of the assessee. This expenditure cannot be held to be capital expenditure merely because the business of the assessee is getting enduring benefit. In our view, the business exigencies demand the assessee to incur this expenditure by making the contribution to MMRDA.

an asset enduring nature by the assessee. Secondly, it is also clearly discernible that if such expenses are incurred for the purpose of the business for deriving any benefit whether to preserve the business or to facilitate the running of the business more smoothly or to make the business more profitable or to secure any other advantage for the assessee’s business such expenses are to be treated as having been incurred wholly and exclusively for the business of the assessee and are revenue expenditure.”

5. Ground no.3 in Revenue’s appeal relates to the deletion of the disallowance of ` 3,00,51,959/- u/s. 40(a)(ia) of the Act. Both the parties

16 Mumbai International Airport P Ltd. agreed that this issue is covered in the assessee’s own case for A.Y. 2008-09, vide its order dated 30.11.2016, in wherein the Tribunal on identical facts restored the issue to the file of the CIT(A) with specific directions. We have gone through the said order of the Tribunal and have noted that vide para 6.5 and 6.6, the Tribunal has held as under:

6.5. We have gone through the submissions made by both the sides. The case of the assessee is that the impugned amounts represented mere provisions and, therefore, these could not have been properly quantified and further, even names of the payees were not clear. Therefore, no TDS could be deducted in the year under consideration.

6.6. It is noted from the perusal of the order of the Ld. CIT(A) that he has simply accepted the claim of the assessee by stating that the assessee had made only provision and the Ld. Counsel of the assessee had submitted that in the next year when payments were made against the provisions, TDS was deducted and thus disallowance made by the AO was also deleted. We find that, unfortunately, the order of the Ld. CIT(A) on this issue is devoid of factual analysis or proper reasoning. Ld. CIT(A) has not even discussed the details of the expenses for which provision was made by the assessee which has been disallowed by the AO. Nothing has been discussed about the nature of the expenses, position of crystallisation of these expenses, availability of particulars of the payees, etc. It has been observed in the order by Ld. CIT(A) that whenever payments are actually made against these provisions, TDS is deducted as was stated by the Ld. Counsel. But, what are the precise facts in this regard has not been discussed in the order. No details are available or discussed by the Ld.CIT(A) regarding various aspects, e.g. when these expenses were actually incurred, in whose name these are finally credited, who are the actual payees, when the payments were made actually and whether the TDS was deducted at the time of making of payments or not? Nothing has been brought out on record to ensure that finally there was no revenue leakage and full compliance of the TDS provisions was made ultimately. We find that order of Ld. CIT(A) is devoid of any factual narration and, therefore, we find it appropriate to send this issue back to the file of the 17 Mumbai International Airport P Ltd.

CIT(A) for complete factual analysis and thereafter applying the correct position of law. Ld. CIT(A) shall provide adequate opportunity of hearing to the assessee. The assessee shall also extend requisite cooperation to the Ld. CIT(A) by filing necessary details / evidences so as to bring complete facts on record. With these directions, this ground may be treated as allowed for statistical purposes.

We have also followed the said decision in the case of the assessee for A.Ys.

2009-10, 2010-11 and 2011-12. Facts and circumstances being the same, respectfully following the said decisions, we restore the issue to the file of the CIT(A) for the year under consideration also with a direction to re-decide the issue afresh after giving sufficient opportunity to the assessee on the basis of the directions given in A.Y. 2008-09. Thus, ground no.3 is treated as allowed for statistical purposes.

“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 18 Mumbai International Airport P Ltd. 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 under consideration and, accordingly, Airports Authority of India issued invoice dated 08.03.2010 for its claim towards retrenchment compensation amounting to ` 260,86,03,400/- The assessee has accordingly capitalized an amount of ` 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 ` 106,62,84,312/- as no tax has been deducted at source during the impugned assessment year but claimed remaining sum of ` 154,23,19,088/- as revenue expenditure. The Assessing Officer was of the view that the assessee is eligible only for one fifth of ` 154,23,19,088/- as per the provisions of section 35DDA amounting to ` 30,84,63,818/- in the year under consideration and the remaining amount is to be allowed in equal installments over the period of four immediately succeeding assessment years.

denied that the expenditure incurred by the assessee is revenue expenditure.

We noted that the CIT(A) while dealing with the issue, following the order of his predecessor in the assessee’s own case for A.Ys. 2010-11 and 2011-12 deleted the said disallowance.

7. Facts and circumstances being identical and being consistent with the view taken by us in the assessee’s own case for A.Ys. 2010-11 and 2011-12 we, do not find any infirmity in the order of the CIT(A) deleting the disallowance. It is accordingly upheld. The ground taken by the revenue stands dismissed.

“37. We have heard the rival submissions and have carefully considered the same along with the orders of the authorities below. The learned DR relied on the order of the Assessing Officer while the learned AR vehemently contended that the said development fees has been collected with the permission of the Ministry of Civil Aviation pursuant to the provisions of Rule 22A of the Airports Authority of India Act, 1994 and are in the nature of cess or tax to met the shortfall that arise in the development of aeronautical

20 Mumbai International Airport P Ltd. assets. The development fees so collected are utilized only for purpose of development of capital assets and the same is certified by the chartered accountant. Therefore, the said income is a capital receipt. We noted that the CIT(A) has elaborately discussed the provisions of the agreement entered between both the parties and has held as under: “9.5 I have considered the submissions of the appellant and the order of the AO. The appellant is engaged in operating, managing, developing, designing, constructing, upgrading, modernizing and financing the Chhatrapati Shivaji International (“CSI”) Airport of Mumbai under an agreement known as "OMDA"' with Airport Authority of India ("AAI"). The estimated cost for modernizing and development of CSI Airport of Mumbai was Rs.9,802/- crores. Against this estimated expenditure which includes the substantial expenditure on account of capital expenditure for modernizing and development of the Airport, the availability of finance from various means with the appellant was less by Rs.2,3507- crores. Thus, there was a short fall of Rs.2,350 crores.

9.6 In view of the shortfall of finance required for the development of the Airport which includes substantial capital expenditure, the appellant approached the Ministry of Civil Aviation; Government of India for levy of Development Fee for meeting out the said shortfall at such rates as may be approved by the Ministry. Pursuant to section 22A of the AAI Act, 1994, the Ministry has conveyed the approval of the Central Government u/s.22A of AAI Act authorizing the appellant to collect the Development Fee vide letter dated 27.02.2009, a copy of which has been filed by the appellant during the appellate proceedings. The appellant has been permitted by the Ministry of Civil Aviation. Government of India to charge fee of Rs.100 from departing domestic passengers and Rs.600 from departing international passengers. There are certain conditions attached with the collection of Development Fee. The fee so collected has to be spent mainly for development of 'Aeronautical Assets' only. The appellant cannot spend any amount from the collected Development Fee at will and has to maintain an account of the same which is subject to supervision and audit from the Central Government. The appellant has been permitted to collect amount only for 48

21 Mumbai International Airport P Ltd. months and the same cannot be exceeded funding gap of Rs.1,543/- crores. The Ministry of Civil Aviation has vide F.No. AV.24011/001/2009-AD dated February 27, 2009 had in para (g) to (j) has stated as under:

"(g) The amount collected through DF would under no circumstances exceed the ceiling of Rs.1543 cores and in case of any cost escalation beyond Rs.9802 crores, the amount representing the escalation would have to be brought in by MIAL, through other sources. The ceiling amount would be exclusive of taxes, if any.

(h)Rate and tenure of levy are premised upon the traffic projections and other estimates. In case due to actual figures being different than those estimated, the 'collections during levy period exceed the amount of Rs, 1543 crores, or any other amount, which the Regulator/Government may determine, the excess amount so collected shall not be utilized, for any purpose whatsoever, without the prior approval of the Regulator/Central Government.

(i)An independent Auditor appointed by AAI would audit the receipts/accruals of MIAL on periodic basis. Periodicity of the audit would be decided by AAI in consultation with MIAL. AAI would report the results of audit to Government/ Regulator for necessary directions.

(j)MIAL would undertake real estate development programme on a time bound basis through competitive bidding at the earliest. In case, the amount actually received/receivables as a result of competitive bidding is more than the presently estimated amount of Rs.1,000/- crores, the funding gap of Rs. 1543 crores would be revised downwards at the time of review."

22 Mumbai International Airport P Ltd. The above clearly indicates that the government had worked out the collection of Rs. 1543 crores in the total gap of Rs.2,350 crores by factoring that MIAL can earn around Rs.1,000 crores through the real estate development program.

9.7 As per clause (b) (ii) of the said letter, the AAI and Central Government would have supervision powers in respect of escrow account to ensure that all the receipts are properly accounted for and are utilized only for permitted purposes. Clause (c) of the said letter provides the entire Development Fee receipts would be utilized only for the purpose of development of "Aeronautical Assets", which are "Transfer Assets" as defined under the OMDA and therefore would go to reduce the actual cost of Aeronautical Assets to that extent. I also notice that Clauses (b) (iii) of the said letter dated 27.02.2009 specifically provides that DF would be subject to AAI's supervision from time to time. Further, Clause (g) of this letter stipulates that the amounts collected through Development Fee would under no circumstances exceed the ceiling of Rs. 1,543 crores and in case of cost escalation beyond Rs. 9,802 crores the escalation would have to be brought in by the appellant through other sources. Clause (h) of the said letter provides that in case of excess collection, the same cannot be utilized by the appellant for any purpose whatsoever without the prior approval of Regulator or the Government. Further, Clause (h) of the said letter also stipulates for downward revision of the amount of Development fee to be calculated in certain case. 9.8 Based on the above, it is evident that the levy of Development Fee is solely for the purpose of bridging the funding gap in connection with the development of Aeronautical Assets. For convenience, such Development Fee would be collected by various Airlines at the time they sell the tickets to the passengers and would be paid to appellant. Accordingly, the airlines are collecting the Development Fee levied u/s 22A of AAI Act from the passengers and paying the same to the appellant towards meeting the funding gap for development of Aeronautical Assets which are transfer assets as per OMDA. In support of the contention that the Development fee so collected has been utilized only for the developing the capital assets i.e. Aeronautical Assets, a copy of the certificate from a 23 Mumbai International Airport P Ltd. chartered accountant has been placed on record certifying the utilisation of Development fee for construction of Aeronautical Assets as per provisions prescribed u/s 22 A of the AAI Act.

9.9 The appellant has placed strong reliance on the judgment of Hon'ble Supreme Court in the case of Consumer Online Foundation Vs Union of India & others (2011 5 SCC 360) where Hon'ble Supreme Court bus categorically made the distinction between Section 22 and Section 22A of AAI Act. In the said judgment, Hon'ble Supreme Court has also held that Development Fee is in the nature of Cess or Tax for generating revenue for the specific purposes mentioned in Clause (a), (b) and (c) of Section 22A of AAI Act. The Hon'ble Supreme Court in the said decision held that the nature of levy u/s.22A of 2004 Act is not charges or any other consideration for services for the facilities provided by the Airports Authority. The Supreme Court in this judgment also quoted from the decision in the case of Vijayalashmi Rice Mills & Ors. v. Commercial Tux Officers, Palakot & Ors. (Supra) that a cess is a tax which generates revenue which is utilized for a specific purpose. The levy under Section 22A of AAI Act though described as fees is really in the nature of a cess or a tax for generating revenue for the specific purposes mentioned in clauses (a), (b) and (c) of Section 22A of AAI Act. Further, the appellant also contended once the SC has held that the Development fee is in the nature of tax or cess, no further tax can be levied on the same treating the same as income of the appellant. I find the reliance of the appellant on the said Supreme Court decision is a good reliance and the same is squarely applicable to the facts of the appellant's case and therefore, Development Fee collected by the appellant is in the nature of cess or tax and a capital receipt and it cannot be subjected to further tax.

9.10 During the appellate proceedings before me, the appellant was asked to clarify as to how Development Fee and Toll Charges are not similar in nature. The appellant made a detailed submission in the matter, clearly bringing out the distinguishing factors between Development Fee and Toll Charges. After a careful perusal of the distinguishing factors between the two, I find that the Development Fee and Toll Charges are being levied and collected entirely on different footings and context. The 24 Mumbai International Airport P Ltd. origin of the Development Fee is from the provision of section 22A of the AAI, 1994 and the same is held to be cess or tax and to be used strictly for the purpose of sub- section (a), (b) & (c) of section 22A of AAI Act. Thus, 1 notice that the collection of Development Fee has a legal backing and in the nature of cess or tax being collected with the approval of Ministry of Civil Aviation, Government of India/ Regulatory Authority as prescribed U/s.22A of the Act. This view has been confirmed by the Hon'ble Supreme Court in the case of Consumer Online Foundation vs. UOI & Ors (supra). So far as the collection of Toll Charges is concerned, the same is collected to recover the capital cost, operating and maintaining cost along with profit. The Toll Charges are determined as per the policy of the Government of India and are not in the nature of tax or cess. The Toll Charges are treated as revenue receipts in the hands of Developer. Letter dated 27.02.2009 received from the Ministry of Civil Aviation which is on record indicates that Development Fee is a capital receipt.

9.11 I further notice that Airport Regulator has clearly mentioned in its order that for the purpose of allowing return to Airport Operator, it will consider Asset Base (RAB) net off Development Fee amount and no depreciation will be allowed on such assets. I further find from the letter dated 18.12.2012 of Airport Authority of India addressed to the Director, Ministry of Civil Aviation which was placed on record, wherein it is mentioned that the treatment of Development Fee should be as per the guidelines given in AS-12 - Accounting for Government Grants issued by the Institute of "Chartered Accountants regarding grant against the assets. The another important and distinguishing factor is that the collection of Development Fee is required to be kept in a separate Escrow Account and subject to several restrictions whereas there is no such stipulation in the case of Toll Charges. The Toll Charges cover operating and maintenance cost of a particular facility and the quantum of the same is fixed as per the policy of the Government of India. 9.12 Looking to the distinguishing factors between the Development Fee and Toll Charges, I find that there is no similarity at all. The Toll Charges by itself is a revenue receipt embedded with the recovery of the cost of the 25 Mumbai International Airport P Ltd. assets, administrative expenses as well as the profits and the same is collected after the asset is created and put to use. The Development Fee is collected under the authority of a law meant for utilization of specific purposes and prior to creation of assets. The appellant's hands are completely tied in utilizing the Development Fee whereas the same is not the case of Toll Charges. Thus, the distinguishing factors clearly place the Development Fee in the category of capital receipts and not revenue receipts.

9.13 Looking to the facts of the case in its entirety, I find that Development Fee collected by the appellant with the permission from the Ministry of Civil Aviation, Government of India under the provisions of 22A of AAI Act 2004 is a receipt in the nature of cess or tax and in the nature of capita! receipt. Further, the same has been already considered by the Hon'ble Supreme Court in the case of Consumer Online Foundation Vs Union of India & others, cited supra, wherein it has been held the Development Fee is a receipt in the nature of cess or tax for generating revenue for the specific 'purposes mentioned in clause (a),(b) & (c) of section 22A of the AAI Act. Further, it is pertinent to note once amount held to be in the nature of tax, it cannot be subject to further tax. It is also seen that various restrictions have also been imposed by the Central Government to ensure that the Development fee so collected is utilized only for the purpose of development of 'Aeronautical Assets' as per provisions of section 22A of the AAI Act. Further, a certificate from a Chartered Accountant has also been placed on record certifying the utilization of the Development fee so collected only for the purposes of acquiring /constructing the Aeronautical Assets. Accordingly, the collection of Development fee is therefore, meant only for specific purpose of acquisition / construction of capital assets and therefore, it is on capital account and not on revenue account. Thus, the nature of the receipt is capital and not revenue. Accordingly, I hold that the receipts of Rs.2,87,83,48,538/- on account of Development Fee being in the nature of tax or cess is a capital receipt and therefore the same cannot be brought to tax. Accordingly, the addition of Rs.286,30,14,565/- is deleted. The AO is also directed to reduce an amount of Rs.19,85,99,146/- from the block of building and Rs.700,70,264 from the block of plant & machinery and recomputed the depreciation after the said

26 Mumbai International Airport P Ltd. reduction as claimed by the appellant in the return of income. Accordingly, Ground Nos. 11 and 12 are allowed.”

We noted that the CIT(A) while dealing with the issue, following the order of his predecessor in the assessee’s own case for A.Ys. 2010-11 and 2011-12, decided the issue in favour of the assessee.

27 Mumbai International Airport P Ltd. we, do not find any infirmity in the order of the CIT(A) in holding the receipt as capital receipt. It is accordingly upheld. The ground taken by the revenue stands dismissed.

8. Ground no.6 relates to the deletion of the disallowance u/s. 14A read with Rule 8D. We have heard the rival submissions and carefully considered the same along with the orders of the authorities below. We noted that the assessee has not derived any exempt income during the impugned assessment year. Both the parties agreed that identical issue had arisen in the case of the assessee for A.Ys. 2010-11 and 2011-12 and whatever view is taken therein shall be applicable to this year also. We find that the Tribunal vide its order of dated 13.11.2017, in the A.Ys 2009-10, 2010-11 and 2011- 12 relying on the decision of the Hon’ble Delhi High Court in the case of Cheminvest Ltd. 378 ITR 33 (Del) and that of Hon’ble Bombay High Court (Nagpur Bench) in the case of Principal CIT vs. Ballarpur Industries Limited in dated 13.10.2016 has confirmed the deletion of the disallowance made u/s. 14A read with Rule 8D by the learned CIT(A). Facts and circumstances being similar, we find no reason to interfere with the order of the CIT(A). It is accordingly, upheld and the ground is dismissed.

Tribunal in assessee’s own case for A.Y. 2007-08 in wherein it has observed as under:

CIT(A), we see no reason to interfere with the impugned order. We uphold the same and dismiss the ground raised by the Revenue.

Order pronounced in the open court on 27th day of November, 2017.