Income Tax Appellate Tribunal - Delhi
Airport Authority Of India, New Delhi vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'A'
'A' : NEW DELHI
BEFORE SHRI G.E.VEERABHADRAPPA, VICE PRESIDENT AND
SHRI A.D.JAIN, JUDICIAL MEMBER
ITA Nos
Nos.1572/Del/2011 to 1577/Del/2011
Assessment Years
Years : 1995-
1995-96 & 1997-
1997-98 to 2001-
2001-02
M/s Airports Authority
Authority of Vs. Commissioner of Income Tax-
Tax-I,
India, New Delhi.
Rajiv Gandhi Bhawan,
Safdarjung Airport,
New Delhi.
PAN No.AAACA6412D.
No.AAACA6412D.
(Appellant) (Respondent)
Appellant by : Shri Ved Jain, Mrs.Rano Jain and
Shri V.Mohan, CAs.
Respondent by : Mrs.Geetmala Mohnani, CIT-DR.
ORDER
PER A.D.JAIN, JM :
These are six appeals filed by the assessee for AYs 1995-96 and 1997-98 to 2001-02 against the orders passed under Section 263 of the Income-tax Act, 1961 ('the Act', for short), by the CIT-I, Delhi.
2. In ITA Nos.1574/Del/2001 to 1577/Del/2001, i.e., for AYs 1998-99 to 2001-02, two common issues are involved. These issues are exemption under Section 10(29) of the Act and depreciation on terminal building of the assessee Airport Authority of India. In ITA No.1573/Del/2001, for AY 1997-98, the sole issue is that of exemption under Section 10(29) of the Act and in ITA No.1572/Del/2001, for AY 1995-96, the only grievance is against non-grant of depreciation on 2 ITA Nos.1572 to 1577/D/2011 terminal building. The facts, for convenience, are being taken from ITA No.1574/Del/2001, for AY 1998-99.
3. The following are the grounds of appeal taken therein:-
"1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (CIT) under Section 263 of the Act is bad, both in the eye of law and on facts.
2. On the facts and circumstances of the case, the learned CIT has erred in ignoring the contention of the appellant that for invoking the powers under Section 263 both the conditions, i.e., that the assessment order being erroneous as well as prejudicial to the interest of Revenue, need to be fulfilled and in the absence of the same in the present case, the powers vested under Section 263 cannot be exercised.
3. On the facts and circumstances of the case, the learned CIT has erred, both on facts and in law, in rejecting the contention that the issue of exemption under section 10(29) of the Act, referred to by the CIT in his notice has been examined by the A.O. and order has been passed by the A.O. after examination of the reply and evidences submitted by the assessee and due application of mind.
4. On the facts and circumstances of the case, the order passed by the learned CIT is bad in law and on facts, as the CIT while setting aside the matter has not been able 3 ITA Nos.1572 to 1577/D/2011 to point out any justification on the basis of which it could be said that the assessee is not eligible for exemption under section 10(29) of the Act.
5. On the facts and circumstances of the case, the learned CIT has erred, both on facts and in law, in rejecting the contention of the appellant that the issue of depreciation on terminal building was examined by the AO and order has been passed after examining the reply and evidences submitted by the appellant and due application of mind.
6. On the facts and circumstances of the case, the order passed by learned CIT is bad both in the eye of law and on facts, as the CIT while setting aside the matter has not been able to point out any justification on the basis of which it could be said that the assessee is not eligible for depreciation on terminal building being a plant.
7. On the facts and circumstances of the case, the learned CIT has erred, both on facts and in law, in setting aside the order under section 263 of the Act without there being any adverse material either at the stage of assessment or in the revisionary proceedings.
8. On the facts and circumstances of the case, the learned CIT has erred in ignoring the contention of the appellant that the proceeding under Section 263 cannot be used for substituting opinion of the AO by that of the CIT.
9. On the facts and circumstances of the case, the learned CIT has erred, both on facts and in law, in invoking 4 ITA Nos.1572 to 1577/D/2011 revisionary power under Section 263 of the Act despite the fact that even after thorough examination, no specific findings have been given on the issue of how the order is erroneous and prejudicial to the interest of Revenue.
10. On the facts and circumstances of the case, the learned CIT has erred both on facts and in law, in directing the AO to pass a fresh assessment order.
11. That the appellant craves leave to add, amend or alter any of the grounds of appeal."
4. Ground Nos.1 to 4 relate to the issue of exemption under Section 10(29) of the Act. The facts are as follows.
5. In the original assessment proceedings, the assessee Authority has all along been claiming exemption under Section 10(29) of the IT Act with regard to its income from letting out of warehouses. However, the claim of the assessee under Section 10(29) of the Act was being disallowed by the AO. This disallowance was being made on the basis of the reasoning adopted by the AO in the earlier years, wherein, it had been held that the assessee Authority was not an Authority for the purpose of marketing of commodities. While making the disallowance for the year under consideration, the AO noted that for AY 1995-96, while rejecting the assessee's claim, the AO had observed that he did not agree with the assessee's contention that it was an Authority constituted for marketing of commodities; that in the case of 'CIT, 5 ITA Nos.1572 to 1577/D/2011 Gujarat Vs. Gujarat State Warehousing Corporation', 124 ITR 282 (Guj.), relied on by the assessee, the Gujarat State Warehousing Corporation was constituted by the Warehousing Act, 1962 and the functions laid down under Section 24 thereof were as follows:-
"(a) acquire and build godowns and warehouses at such places within the state as it may, with the previous approval of the Central Warehousing Corporation, determine;
(b) run warehouses in the state for storage of
agricultural produce, seeds, manures, fertilizers,
agricultural implement and notified commodities to and from warehouses;
(c) act as an agent of the Central Warehousing Corporation of the Government for the purposes of the purchase, sale, storage and distribution of agricultural produce, seeds, manures, fertilizers, agricultural implements and notified commodities; and
(d) carry out such other functions as may be prescribed."
6. The Assessing Officer observed that from sub-clause (c), it was appreciable that the State Warehousing Corporation acted as an agent of the Central Warehousing Corporation of the Government for the purpose of purchase, sale, storage and distribution of agricultural produce, seeds, etc., whereas, in the case of the International Airport 6 ITA Nos.1572 to 1577/D/2011 Authority, no such functions were vested in them; that in the case of State Warehousing Corporations, the warehouses had been established with the sole purpose of marketing of the various commodities and they were open to the public at large for this purpose only, whereas, in the case of the assessee Authority, the basic function was to manage the airport efficiently and maintenance of warehouses at the airports was an ancillary facility for the efficient operation of the airport transport services; that the warehouses at the airports were established to achieve the main object, i.e., to manage the airport efficiently and could not be considered for the purposes of marketing of commodities as stipulated under the Warehouses Corporations Act, 1962, for the Gujarat Warehousing Corporation; that the intent of the legislature for including the income of warehousing under Section 10, i.e., as an exempt income was primarily to give impetus to small farmers to store their perishable commodities in warehouses constructed specifically for this purpose by the Authority constituted by the Government or by specific notification; that in 'Singhal Bros.P.Ltd. Vs. CIT', 124 ITR 147 (Cal.), the Hon'ble Calcutta High Court had expressed its dissent with the too broad propositions laid down by the Hon'ble Allahabad High Court in 'UP State Warehousing Corporation', 94 ITR 129 (All.), to the effect that if an entity is created by a Statute, primarily or specifically for the purpose of marketing of commodities, it will be an Authority within the meaning of these provisions; that in the assessee's case, as was evident from the Preamble of the International 7 ITA Nos.1572 to 1577/D/2011 Airport Authority Act, 1971, warehousing activity was only a subsidiary activity of the assessee; that the intent of the legislature was all the more evident from the fact that the banks performed activities akin to letting out of godowns or warehouses, in the nature of lockers facility, which they provided to the customers and the same was not exempt from tax under Section 10(29), for the activities so performed; and that if the Airport Authority of India was created by the Statute primarily or specifically for the purpose of marketing of commodities, it would have been covered by Section 10(29) of the Act.
7. Aggrieved, the assessee has been carrying the matter in appeal before the learned CIT(A).
8. The CIT(A) has all along allowed the exemption under Section 10(29) to the assessee Authority, except for AY 1998-99. For AYs 1999-2000 to 2001-02, however, the CIT(A) cancelled the disallowance and upheld the claim of exemption under Section 10(29).
9. The Revenue and the assessee both took the matter further, in appeal before the ITAT.
10. The ITAT, vide its order dated 27.7.2007 (copy at pages 141-174 of the assessee's Paper Book, 'APB' for short), relevant portion at paragraph 2 (APB 142), passed in ITA No.3572/Del/2003-04, restored 8 ITA Nos.1572 to 1577/D/2011 the matter to the file of the AO, to be examined and decided afresh in the light of the directions of the Tribunal, as given in its order dated 8.12.2006, in the assessee's case in ITA No.2378/Del/2004, for AY 2000-01, by which order, the case had been stated by both the parties to be covered. In the said order, the Tribunal had restored the issue to the AO to re-examine the matter of application of the appropriate law and to determine whether the assessee was running or establishing warehouses or cargo complexes.
11. The Tribunal, in its aforesaid order dated 8.12.2006, in the assessee's case for AY 2000-01, had observed that the taxing authorities had decided the issue of exemption u/s 10(29) of the Act on the basis of an enactment (the International Airports Authority Act, 1971), whereunder the Authority was empowered to establish warehouses alone, whereas under the Airports Authority of India Act, 1994, the Authority was empowered to establish warehouses and cargo complexes; that admittedly, exemption u/s 10(29) is available on the income from letting out of godowns or warehouses for storage, processing or facilitating the marketing of commodities; that the term "cargo complexes" is not used in the Section 10(29) of the Act; that the A.O. and the CIT(A) had used the terms "warehouses" and "cargo complexes" interchangeably; that this cannot be the case under the Act of 1994, as warehouses and cargo complexes have been differentiated by the said Act itself; and that it was, therefore, 9 ITA Nos.1572 to 1577/D/2011 necessary that the AO got an opportunity to re-examine the matter applying the appropriate law and to see whether the assessee was running or establishing "warehouses" or "cargo complexes".
12. Upon remand by the Tribunal by virtue of its order dated 27.7.2007, the AO, vide order dated 27.3.2009, passed under Sections 254/143(3) of the Act, allowed exemption u/s 10(29) of the Act to the assessee, accepting the assessee's contentions that for claiming exemption u/s 10(29) of the Act, (a) the Authority must be an Authority constituted under some law, (b) it should be an authority constituted for marketing of commodities and (c) the exemptible income must be derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of the commodities; that the assessee did fulfill all these conditions u/s 10(29) of the Act; that the assessee was an Authority constituted under the Airports Authority of India Act, 1994, satisfying the first condition; that as per the provisions of Section 12(3)(g) of the Airports Authority of India Act, 1994, one of the functions of the assessee was to establish warehouses and cargo complexes at the airports for the storage or processing of goods; that the assessee Authority played a vital role in facilitating the transportation of exports and imports of various commodities through its airports; that the airport warehouses provided facilities to various exporters and importers and international air transport carriers to store, process, and transport goods and commodities all over the 10 ITA Nos.1572 to 1577/D/2011 world; that the assessee had established warehouses and storage facilities in the international air cargo complexes at various airports and earned revenue from the letting of such warehouses; that warehousing or storage was an essential step in the whole process of marketing, enhancing the utility of the commodities by making them more valuable, thus having a direct impact on the trading activities; that the same was also true of the other activities of processing of commodities and facilitating their distribution and their preservation from ravage by natural causes; that therefore, the assessee fulfilled the second condition of Section 10(29) of the Act too; and that since the assessee was claiming exemption only in respect of letting of godowns and warehouses for storage, processing or facilitating the marketing of commodities, it also complied with the third and final condition prescribed by Section 10(29) of the Act.
13. In the impugned order dated 24.2.2011, the learned CIT observed that the AO had not re-examined the matter as per the directions of the Tribunal, allowing exemption u/s 10(29) of the Act merely on the basis of the power given to the assessee Authority u/s 12(3)(g) of the Airports Authority of India Act, 1994, to "establish warehouses and cargo complexes"; that the AO had not given any clear finding as to whether the assessee was actually running a warehouse or cargo complex, or both; that the AO had not considered the documents including the Minutes of the Meeting held in the 11 ITA Nos.1572 to 1577/D/2011 Cabinet Secretariat on 25.5.1982, wherein, consequent to the establishment of the IAAI, the warehouses had been assigned to the Authority for storage or processing of the goods at the international airports; that due to the absence of any determination qua running or establishing of warehouses or cargo complexes by the assessee Authority and because of the AO not having determined the nature of the assessee's cargo income, the assessment order was erroneous; and that the AO's action of not having followed the directions issued by the Tribunal resulted in the assessment order to be erroneous insofar as it was prejudicial to the interests of the Revenue.
14. It is in this factual backdrop that the assessee is in appeal before us regarding the issue of grant of exemption u/s 10(29) of the Act.
15. Before us, challenging the impugned order, the learned Counsel for the assessee has contended that the order passed by the learned CIT is not sustainable in the eye of the law, since the order passed by the AO is neither erroneous, nor prejudicial to the interests of the Revenue; that the provisions of Section 10(29) of the Act provide for exemption to an Authority which has been constituted under the law, for marketing of commodities, with regard to its income from letting out of warehouses for storage and processing of commodities; that the assessee Authority, as correctly appreciated by the AO, totally fulfils all the said requisite conditions of Section 10(29) of the Act; that it is an 12 ITA Nos.1572 to 1577/D/2011 Authority constituted under the Airports Authority of India Act, 1994; that as per Section 12(3)(g) of the said Act, one of the functions of the assessee Authority is to establish warehouses and cargo complexes at the airports, for the storage or processing of goods; that in these warehouses, established by the assessee Authority, facilities are provided to exporters, importers and international air transport carriers to store, process or transport goods and commodities throughout the world; that the income sought to be exempted u/s 10(29) of the Act is derived by the assessee by letting out the warehouses and cargo complexes at various airports; that the other activities of the assessee, of processing of commodities and facilitating their distribution and their preservation from natural disasters, fall well within the ambit of Section 10(29) of the Act; that the assessee Authority has all along been claiming exemption u/s 10(29) of the Act, with regard to its income from letting out of warehouses; that the same was being allowed in first appeal by the learned CIT(A), which position continued till AY 1996-97; that, however, for AY 1998-99, whereas the AO disallowed the exemption following the assessment orders in the earlier years, the CIT(A) confirmed the disallowance; that for AYs 1999- 2000 to 2001-02, the disallowance was cancelled by the CIT(A) and the exemption claimed was allowed; that the departmental appeal for AY 2000-01 came up first before the Tribunal; that therein, it was contended on behalf of the assessee, that as per the provisions of Section 16(3)(d) of the International Airports Authority Act, 1971, one 13 ITA Nos.1572 to 1577/D/2011 of the activities of the assessee Authority was to establish warehouses at airports for storage and processing of goods, that earlier, the Central Warehousing Corporation had been providing facilities at various places in various states, at the national as well as the international airports, to facilitate marketing of commodities, that when State Warehousing Corporations came into existence, the work of warehousing in states was assigned to such State Warehousing Corporations, that when the National Airports Authority of India came into being, the warehousing facilities at national airports were assigned to the National Airports Authority of India, that on the enactment of the International Airports Authority of India Act, 1971, the Government of India decided that the work of warehousing at airports should be assigned to the International Airports Authority of India, that the National Airports Authority of India took over the function of the Central Warehousing Corporation at various airports, on 31.3.1987, consequent to a decision of the Central Cabinet in this regard, that on 31.3.1987, all the warehouses of the Central Warehousing Corporation at the airports were transferred to the International Airports Authority of India, that by virtue of the passing of the Airports Authority of India Act, 1994, the National Airports Authority of India and the International Airports Authority of India were merged into one Authority, i.e., the assessee Airports Authority of India, that from then onwards, it is the assessee Authority, which has solely been carrying on the functions of warehousing at the airports in India, that before their merger, both, the 14 ITA Nos.1572 to 1577/D/2011 National Airports Authority as well as the International Airports Authority had been getting exemption under Section 10(29) of the Act with regard to the income earned from letting out of warehouses, that in 'CIT, Delhi-II Vs. Central Warehousing Corporation', - 156 ITR 407 (Del.), it was held that the Central Warehousing Corporation was an Authority constituted under law for marketing of commodities and its income derived from letting of godowns or warehouses for storage, processing or facilitating marketing of commodities was exempt from tax u/s 10(29) of the Act, that since the work of the Central Warehousing Corporation had been ultimately taken over by the assessee Authority and there was no change in the nature of its income, all the conditions of Section 10(29) of the Act stood satisfied, and that the matter stood covered by 'CIT, Gujarat Vs. Gujarat State Warehousing Corporation', - 124 ITR 282 (Guj.) and 'Union of India & Others Vs. UP State Warehousing Corporation', - 187 ITR 54 (SC); that the Tribunal, for AY 2000-01, noted that the AO, while disallowing the exemption, had referred to Section 16(3)(d) of the International Airports Authority Act, 1971, whereas the AY 2000-01 was covered by the provisions of Section 12(3)(g) of the Airports Authority of India Act, 1994, that there was a slight difference in the two Sections of the two Acts inasmuch as whereas Section 16(3)(d) of the Airports Authority of India Act, 1971 talked of an establishment of "warehouse", Section 12(3)(g) of the Airports Authority of India Act, 1994, considered establishment of "warehouse and cargo complex"; that it was due to 15 ITA Nos.1572 to 1577/D/2011 these differences in the two Sections of the two Acts, that the Tribunal remanded the matter to the AO, the Taxing Authorities having used the terms "warehouse" and "cargo complex" interchangeably, which, as per the Tribunal, could not be the case under the Act of 1994, as "warehouse" and "cargo complex" stood differentiated by the said Act itself; that before the Tribunal, in that case, a reference had also been made to the Minutes of the Meeting held in the Cabinet Secretariat on 25.5.1982, wherein, the warehouses at the international airports had been assigned to the assessee Authority for storage or processing of goods, consequent to the establishment of the International Airports Authority; that this was how the matter for all the years presently under consideration got remanded to the AO; that in the second round before the AO, the assessee had submitted all the requisite details; that this was evident from the assessee's reply (copy at APB 345 to
372); that in paragraph 3.2.3(b)(i) thereof, it was specifically stated that as per the provisions of Section 12(3)(g) of the 1994 Act, one of the functions of the assessee Authority is to establish "warehouse and cargo complex" at the airports, for the storage or processing of goods; that in sub-para 2(i) of the reply, the assessee clarified that the Airports Authority of India plays a vital role in facilitating the transportation of imports and exports of various commodities through its airports, and the airport warehouses provide facilities to various exporters, importers and national and international air transport carriers to store, process and transport goods and commodities over 16 ITA Nos.1572 to 1577/D/2011 the whole world, belonging to various exporters and importers; that it was further clarified that the assessee had established warehouses and storage facilities in the international air cargo complexes at various airports and that the assessee earns revenue from the letting of such warehouses; that in sub-para 3(i), it was stated that warehousing or storage is an essential step in the whole process of marketing; that the AO duly considered all the evidence filed before him by the assessee; that the AO, in the assessment order, made mention of the reply filed by the assessee; that the operative part of the Tribunal order was also extracted in the assessment order; that the provisions of Section 12(3)(g) of the Airports Authority of India Act, 1994 were referred to; that the mandate of Section 12(3)(g) of the 1994 Act was specifically recorded to have been brought to the AO's notice; that the AO had also observed that the assessee had shown income from warehouses separately and that it being a statutory Authority, in view of the provisions of Section 12(3)(g) of the Airports Authority of India Act, 1994, it deserved the exemption claimed u/s 10(29) of the Act; that while allowing the exemption, the AO was fully seized of the issue and he went through the entire record and the assessee's explanation, before doing so; that the reason stated for the invocation of the jurisdiction u/s 263 of the Act by the learned CIT, as available from the show cause notice issued to the assessee, was that in the absence of determination qua running or establishing warehouses or cargo complexes and in the absence of the determination of the nature of 17 ITA Nos.1572 to 1577/D/2011 the cargo income, the assessment order ought to be considered erroneous as it may have resulted in the wrong granting of exemption and that it ought to be considered as prejudicial to the interests of the Revenue; that in response to the said show cause notice, the assessee Authority had submitted a detailed reply (copy at APB 325 to 359); that in the said reply, besides the above, it was pointed out that in terms of Section 12(3)(g) of the Airports Authority of India Act, 1994, the assessee had carried out the mandate laid down therein, i.e., to establish warehouses and cargo complexes at the airports, for the storage or processing of goods and that the exemption of income claimed u/s 10(29) of the Act was limited to the extent of the income earned from the letting out of the godowns/warehouses for storage and processing of commodities; that it had been submitted that there was a specific mention in the assessment order to the effect that the exemption claimed was only for income earned from letting of the warehouses; that therefore, there was no confusion about the nature of the income which was limited to the warehouses only; that a "warehouse" is a place in which goods or merchandise are stored, whereas, in common parlance, a "cargo complex" is a group of warehouses, like import warehouses, export warehouses, etc.; that the AO had duly examined the provisions of Section 12(3)(g) of the Airports Authority of India Act, 1994, besides having examined, also, the entire assessment record of the assessee, right from the very beginning; that the assessee had been all through taking the stand 18 ITA Nos.1572 to 1577/D/2011 that it had taken over the functioning of the Central Warehousing Corporation in terms of the decision of the Central Cabinet, as recorded in the Minutes of its Meeting dated 25.5.1982 and hence, the decision in the case of "Central Warehousing Corporation" (supra), rendered by the Hon'ble Jurisdictional High Court, was squarely applicable to the facts of the assessee's case, there having come about no change in the nature of the activities of the assessee, with regard to which, the exemption u/s 10(29) of the Act was being claimed; that therefore, it could not at all be said that the AO had not examined the issue and had not followed the directions of the Tribunal completely; that in the impugned order, however, the learned CIT has erred in holding that the AO's order was erroneous insofar as it was prejudicial to the interests of the Revenue since the directions of the Tribunal had not been followed; that while holding so, the learned CIT has merely substituted his own thinking for that of the AO, inspite of the fact that the assessment order was passed by the AO after duly applying his mind to all the voluminous evidence and details filed by the assessee, as required; that the learned CIT has failed to point out as to on which issues the AO has not applied his mind; that in the assessment order, reference has been made to the provisions of Section 12(3)(g) of the Airports Authority of India Act, 1994; that the relevant provisions of Section 10(29) of the Act were also referred to; that besides, the directions of the Tribunal as well as the quantum of income earned by the assessee from the letting out of the warehouses, have also been 19 ITA Nos.1572 to 1577/D/2011 mentioned; that the learned CIT, on the other hand, has not been able to state as to why the income of the assessee from letting out of the warehouses and cargo complexes would not be entitled to exemption u/s 10(29) of the Act; that it has nowhere been denied that the assessee Authority is an Authority constituted under the Airports Authority of India Act, 1994, or that it has been assigned the function of establishing warehouses, under Section 12(3)(g) of the Airports Authority of India Act, 1994; that it has also not been disputed that the exemption, like in the earlier years, has been given by the AO only in respect of the assessee's income from letting out of the warehouses; and that in this view of the matter, the order passed by the learned CIT(A) is entirely unsustainable in the eye of law and the same be set aside while reviving that passed by the AO.
16. The learned DR, on the other hand, has strongly supported the impugned order while refuting the assertions made on behalf of the assessee. It has been contended that the order passed by the learned CIT is well versed; that a bare perusal of the assessment order makes it clear that there was no application of mind by the AO to the issue at hand; that the specific directions issued by the Tribunal were not at all carried out; that the AO merely accepted the contentions as made by the assessee, without carrying out the said directions of the Tribunal and without making any sort of inquiry into the matter; that the AO did not even prima facie re-examine the matter on the lines of the order of 20 ITA Nos.1572 to 1577/D/2011 the Tribunal and, as rightly noted by the learned CIT, proceeded to allow to the assessee, exemption u/s 10(29) of the Act, merely on the basis of the power given to the assessee u/s 12(3)(g) of the Airports Authority of India Act, 1994, for establishment of warehouses and cargo complexes; that the assessment order, in its entirety, is bereft of any findings whatsoever as to whether the assessee was running or establishing "warehouses" or "cargo complexes"; that from the directions issued by the Tribunal, it is amply clear that the job of the AO, on remand, was to specifically determine as to whether the assessee Authority was actually running warehouses or cargo complexes, or both; that however, the AO utterly failed to take any action in this regard; that further, the AO also did not consider the documents, including the Minutes of the Meeting of the Central Cabinet, held on 25.5.1982, where, consequent to the establishment of the assessee Authority, the warehouses for storage or processing of goods at the international airports were assigned to it; that therefore, the assessment order was passed in complete oblivion of all these material facts, which were wholly necessary to be determined so as to arrive at a conclusion as to whether the income of the assessee was entitled to exemption u/s 10(29) of the Act; that the AO is also silent about the difference between "warehouse" and "cargo complex", despite the direction of the Tribunal being specific in this regard; that further, by the passing of the order under Section 263 of the Act, no prejudice whatsoever has been caused to the assessee, since the 21 ITA Nos.1572 to 1577/D/2011 learned CIT has not directed the AO to disallow the exemption u/s 10(29) of the Act to the assessee and he has merely directed the AO to re-examine the matter so as to pass a reasoned and speaking order on the issue; that by issuance of such direction by the CIT, no prejudice whatsoever has been caused to the assessee, since the matter has only been directed to be decided afresh on complying with the directions of the Tribunal; that the Department, on the other hand, had been visited with total prejudice to its interests, by the passing of the erroneous assessment order; and that therefore, the order under appeal be maintained while dismissing the appeal filed by the assessee on this issue. Reliance has been placed on 'CIT Vs Nalwa Investments Ltd.', 11 Taxmann.com 98(Del) and 'Rajalakshmi Mills Vs ITO', 31 SOT 353 (Chennai) (SB).
17. We have heard the parties and have perused the material with regard to the issue of exemption under Section 10(29) of the Act. In the impugned order, the learned CIT has observed the assessment order to be erroneous and prejudicial to the interests of the Revenue. For holding so, the learned CIT has observed as follows:-
"1. AO has not re-examined the matter along the lines that were directed by the Hon'ble ITAT. The AO has allowed the exemption u/s 10(29) merely on the basis of power given to AAI u/s 12(3)(g) the AAI Act 1994 to "establish warehouses and cargo complexes".
2. AO has not given any clear finding in the order that whether the assessee is running or establishing 22 ITA Nos.1572 to 1577/D/2011 "warehouses" or "cargo complexes". It is to be noted that Hon'ble ITAT noted the power of the AAI "to establish warehouse and cargo complex". It directed the AO to determine whether the assessee was actually running a warehouse or cargo complex or both, which the AO failed to determine in his order.
3. AO has not considered the documents including the Minutes of the meeting held in the Cabinet Secretariat on 25.05.1982. Where, consequent to the establishment of the IAAI, the warehouses for storage or processing of goods at the international airports were assigned to the Authority. In absence of any determination qua running or establishing warehouses or cargo complexes and in absence of determination of the nature of cargo income the order is erroneous in nature. The order has not followed the directions of the ITAT, and is thus erroneous. As the directions were not followed this resulted into in wrong granting of exemption. On this issue, to this extent, order dated 27.03.2009 passed u/s 254/143(3) is erroneous in so far as it is prejudicial to the interest of the revenue."
18. Going by the above observations of the learned CIT, the first point to be considered is as to whether indeed the AO, while passing the assessment order, has not re-examined the matter as per the directions of the Tribunal and as to whether the exemption claimed u/s 10(29) of the Act has been granted solely on the basis of the power given to the assessee Authority u/s 12(3)(g) of the Airports Authority of India Act, 1994, to establish warehouses and cargo complexes.
19. At this stage, it would be appropriate to reproduce hereunder, the directions issued by the Tribunal in its order dated 27.07.2007, for AY 1998-99 (copy at APB 141 to 174), in ITA No.3572/Del/2003:- 23 ITA Nos.1572 to 1577/D/2011
"2. Ground no.1 is against the finding of the learned CIT(Appeals) that the assessee was not entitled to exemption u/s 10(29) of the Act in respect of net income earned on cargo warehousing activity. It was the common ground of both the parties that the issue stands covered by the order of ITAT, Delhi Bench "E", New Delhi, in the case of assessee in ITA No.2398(Del)/2004 for assessment year 2000-01 dated 8.12.2006. According to paragraph 10 of that order, the matter was restored to the file of the Assessing Officer to re-examine the matter regarding the application of the appropriate law and to determine whether the assessee is running or establishing warehouses or cargo complexes. Respectfully following that decision, this matter is restored to the file of the Assessing Officer to re-examine the matter in the light of the directions of the Tribunal and make fresh assessment on this issue after hearing the assessee. Thus, this ground is treated as allowed for statistical purposes."
20. A perusal of the aforesaid observations of the Tribunal shows that the matter was remitted to the file of the AO, following the Tribunal decision dated 8.12.2006, rendered in ITA No.2378/Del/2004, for AY 2000-01 (copy at APB 230 to 237). Since it is this order of the Tribunal for AY 2000-01, which formed the genesis of the remand of the matter to the AO for the years under consideration, it would be apposite to hereunder reproduce the observations made by the Tribunal therein:-
24 ITA Nos.1572 to 1577/D/2011
"A perusal of the assessment order shows that the assessee had claimed deduction u/s 10(29) of the IT Act, 1961 as it stood prior to 01-04-2003 amounting to Rs.225,41,52,137/- on account of income from letting out of its warehouses for storage, processing or facilitating the marketing of commodities. It was noted by the Assessing Officer that in the preceding assessment years, the deduction claimed by the assessee u/s 10(29) of the Act was disallowed on the ground that the Airports Authority of India (AAI) was not an authority for the purposes of marketing of commodities. In reply to a question raised by the Assessing Officer as to why its claim for exemption u/s 10(29) of the Act should not be disallowed for the reasons given in the orders of preceding years, the assessee submitted that under section 16(3)(d) of the International Airport Authority Act, 1971, it is one of the activities of the authority to establish warehouses at the airport for storage and processing of goods. It was further submitted by the assessee that the airport plays a vital role in facilitating transportation, imports and exports of various commodities. The airport warehouses provide the facility to various exporters, importers, national and international air transport carriers to store, process and transport their goods and commodities. The assessee had established air cargo complexes at various airports and earned revenue from the letting out of such warehouses for storage and processing of cargo.
3. Learned Assessing Officer rejected the claim of the assessee observing that there is no change in the facts and legal provisions and in the submissions made by the assessee with regard to its claim. Learned Assessing 25 ITA Nos.1572 to 1577/D/2011 Officer also placed reliance on the decisions of the apex court in the case of Rajasthan Warehousing Corporation Vs. CIT (150 Taxmann 104). While rejecting the claim, the Assessing Officer observed that the airport authority is not an authority constituted for marketing of commodities. He referred to the provisions of section 16(1) of the International Airport Authority Act, 1971 which lays down the function of the authority, compared the functions of the airport authority with the functions of the State Warehousing Corporation s and observed that the State warehousing Corporations act as an agent of Central Warehousing Corporation of the government for the purposes of purchase, sale, storage and distribution of agricultural produce, seeds etc., whereas, in respect of International Airport Authority of India, no such functions are vested in it. In the case of State Warehousing Corporation, the warehouses are established with the sole object of marketing of various commodities and it is open to the public at large for these purposes only. However, in the case of assessee, the basic function is to manage airports efficiently. The maintenance of warehouses at the airports is an ancillary facility for the efficient operation of the air transport services. The warehouses are established to achieve the main objective i.e. to manage the airports efficiently and cannot be considered for the purpose of marketing of commodities as stipulated under the Warehousing Corporations Act, 1962. It was further observed by the learned Assessing Officer that the warehouse activity of the airports authority is only a subsidiary activity. Such activity is not exempt from tax u/s 10(29) of the Act.26 ITA Nos.1572 to 1577/D/2011
4. In appeal, learned CIT(Appeals) decided the issue in favour of the assessee holding that the assessee is entitled to exemption u/s 10(29) of the Act the learned CIT(Appeals) has discussed the provision of section 10(29) of the Act and observed that the assessee is entitled to exemption if it fulfils the following three conditions:
i) It is an authority constituted under law; ii) It is an authority constituted for the marketing of commodities; and (iii) The exemptable income must be one derived from
letting out of its godowns or warehouses for storage, processing or facilitating the marketing of commodities.
The issue was under consideration before the learned CIT(Appeals) in the past also and was decided the issue as under:
i) For the assessment years 1992-93 to 1996-97, the CIT(Appeals) decided that the assessee is entitled to exemption u/s 10(29) on the entire net cargo income declared by the assessee.
ii) For the assessment year 1997-98, the CIT(Appeals) decided that the assessee is entitled to exemption on the net cargo income, except the income in the form of terminal charges, pallitisation charges, destuffing charges, trans-shipment charges, handling charges and misc.
charges.
iii) For the assessment year 1998-99, the CIT(Appeals) decided that the appellant is not entitled to exemption u/s 27 ITA Nos.1572 to 1577/D/2011 10(29) as it is not an authority constituted primarily or specifically for the purpose of the marketing of commodities. The warehousing activity is only a subsidiary activity of the assessee. The assessee is not a marketing authority, constituted under a warehousing Act. The assessee has set up cargo warehouses which are meant only for personal assets of the passengers and others and are not meant for the purposes of marketing and processing of commodities. The warehouses are being used for facilitating the storage of goods and baggage only till such time these are bundled into the designated aircrafts.
5. With the above background, learned CIT(Appeals) also discussed the provisions of section 16 of the IAAI Act, 1971, the decision of the Hon'ble Gujarat High Court in the case of CIT Vs. Gujarat State Warehousing Corporation 124 ITR 282 and other cases relied upon by the assessee and came to the conclusion that the assessee is entitled to exemption u/s 10(29) of the Act, the view that was taken by CIT(Appeals) for the assessment year 1997-98 and also for the assessment year 1999-2000. However, the learned CIT(Appeals), further observed that in view of the fact that the whole income is not "income from the letting of godowns or warehouses for storage, processing of facilitating marketing of commodities", the exemption would be available only for storage cum demurrage charges of Rs.154,30,68,472/- and not for the income from terminal charges, pallitisation charges, de-stuffing charges, trans-shipment charges, handling charges and misc. charges which, according to learned CIT(Appeals) is not income from the letting out of godowns or warehouses. He 28 ITA Nos.1572 to 1577/D/2011 therefore, directed the Assessing Officer to verify the correctness of the amount and exclude the amount from the exemptible income.
6. Learned departmental representative strongly supported the orders passed by the Assessing Officer. He has also drawn our attention to the provision of section 10(29) of the Act, as it stood prior to 01-04-2003 and submitted that the three essential requirements entitled the assessee to exemption, as mentioned by the learned CIT(Appeals), and reproduced above, are not fulfilled in the case of the assessee. The main functions of the assessee authority u/s 16 of the IAAI Act, is to manage airports efficiently and provide at the airport such services and facilities as are necessary or desirable for the efficient operation of air transport services. Under sub-section (3) of section 16 of the Act, it is one of the function of the authority to establish warehouses at the airports for the storage or processing of goods. However, undertaking such an activity is not an essential function of the authority as sub-section (3), itself provide that the authority "may" establish the warehouses at airports. It is not an essential function as the term used is "may" and not "shall"
whereas, with regard to its essential functions, as listed in sub-section (1) & (2), it is specifically provided that the authority "shall" discharge these functions. In any case, even when the warehouses are established at the airport by the AAI, they are not warehouses in the sense as described in the Warehouses Corporations Act, 1962 because the warehouses are established at the airports to cater to the needs of a specified category of clients and not used for general warehousing purposes. While reiterating 29 ITA Nos.1572 to 1577/D/2011 the arguments advanced by the Assessing Officer in disallowing exemption to the assessee, learned Departmental Representative strongly relied on the decision of the Gujarat High Court in the case of CIT (Appeals) Vs. Central Warehousing Corporation 124 ITR 282 and submitted that airport authority is not an authority which has been constituted for the purpose of marketing of commodities and therefore, it is not entitled to exemption u/s 10(29) of the IT Act. Relying on the aforesaid decision, it was argued by learned DR that the compelling context in section 10(29) is a limited context of the Statutory authority which is constituted under law in a limited sphere viz., for marketing. If the authority so constituted has its jurisdiction and functions charged upon it by the law creating it in this limited sphere, the authority so far as such limited sphere is concerned, would be the authority functioning within that mandated area laid down by law. Marketing includes all business activities directed towards the flow of goods and services from producer to consumer. The Parliament has used the expression "authority for marketing of commodities". The authority must promote marketing by its services in the mandated area of its functioning. Warehousing or storage is an essential step in the whole process of marketing. In the case of Gujarat State Warehousing Corporation, the Hon'ble Gujarat High Court held that the Gujarat State Warehousing Corporation to be covered with in the provisions of section 10(29) of the Act. However, in the case of assessee, the warehousing or storaging is not an essential step in the process of marketing but, it a function by way of service and facility for the efficient operation of air transport services. The purpose is not to earn profit from the activity 30 ITA Nos.1572 to 1577/D/2011 of warehousing but to provide warehousing facility for smooth running air transport services.
7. On the other hand, learned AR for the assessee supported the order of the learned CIT(Appeals) and further submitted that the assessee authority was constituted under an Act of Parliament. Initially, it was constituted as two different authorities namely, the International Airports Authority of India and National Airports Authority of India. Both these authorities were merged by a new Act of Parliament namely the Airports Authority of India Act, 1994. The Central Warehousing Corporation was providing facilities at various places in various States at the airports, both the international and national to facilitate marketing. With the coming into existence of the State Warehousing Corporations, the work of warehousing in states were also assigned to warehousing corporations such as U.P. Warehousing Corporation, Rajasthan Warehousing Corporations etc. Similarly, with the coming into existence of the International Airports Authority of India, the warehousing facilities at the international airports were assigned to the International Airport Authority of India. Consequently, with the passing of International Airports Authority of India Act in the year 1972, the government decided that the warehousing at the airports should be with the International Airports Authority. Accordingly, it was decided in a meeting in the Cabinet Secretariat that the International Airports Authority of India should set up new cargo complexes at various airports and until such time, the new warehouses are constructed, the Central Warehousing Corporations can continue with the present 31 ITA Nos.1572 to 1577/D/2011 warehousing work. According to the learned counsel for the assessee, the International Airports Authority took over complete warehousing work from the Central Warehousing Corporation on 31-03-1987 and all its warehouses were transferred to the International Airports Authority of India on that date. The various issues regarding payment of cost of warehouses etc., were discussed in the meeting and there was a mandate to the effect that the International Airports Authority of India, is an authority, constituted for the purposes of establishing warehouses and cargo complexes at the airports for the storage and processing of goods at the designated airports which were in the jurisdiction of International Airports Authority of India. Therefore, the assessee's case is covered for exemption u/s 10(29) of the Act. Learned counsel for the assessee relied on the decision of the jurisdictional High Court in the case of CIT Vs. Central Warehousing Corporation 156 ITR
407. It was further submitted by him that the decision was impliedly confirmed by the Apex Court in the case of Union of India Vs. U.P. State Warehousing Corporation 187 ITR
54. Learned counsel for the assessee also relied on the decision of the Allahabad High Court in the case of U.P. State Warehousing Corporation Vs. ITO 94 ITR 129, as confirmed by the Supreme Court in the case of Union of India Vs. U.P. State Warehousing Corporation 187 ITR 54. While interpreting provisions of section 10(29) of the Act, it has been held in these decisions that the section applies when the authority is constituted for marketing of commodities. Evidently, such authority will specifically be a business enterprises. Ex-hypothesy, the term "authority" as occurring in section 10(29) cannot be possibly constituted as referring to an authority having quasi- 32 ITA Nos.1572 to 1577/D/2011 governmental functions. Any legal entity or personality constituted by law for the purpose of marketing commodities would be an authority within the meaning of section 10(29) of the Act. Learned counsel for the assessee pointed out that in the case of U.P. State Warehousing Corporation, while interpreting section 10(29), the court has specifically held that the use of the word "facilitating" seems to refer to functions like gradation or standards in the warehouses or giving facilities by way of distribution by the authorities running the warehouses of goods for commodities belonging to others. The term "marketing" has been used in wider sense to include the various activities which generally go to form the trade of marketing. Therefore, the learned counsel submitted that the warehousing function of the airports authority qualifies for exemption u/s 10(29) of the Act.
8. We have considered the rival submissions and also perused the material available on record and submitted before us at the time of hearing. After the conclusion of hearing on 28-09-2006 and while going through the case file, it was noted that the authorities below have considered the case for exemption of the assessee authority with reference to functions assigned to it u/s 16 of the IAAI Act, 1971. The arguments were also advanced with reference to the provisions of the said Act. However, we noted that the IAAI Act, 1971 stands repealed by the Airports Authority of India Act, 1994 (No.55 of 1994). We are dealing with a case for the assessment year 2000-01. During that assessment year, the IAAI Act, 1971 was not in force. Therefore, we felt that the authorities below have 33 ITA Nos.1572 to 1577/D/2011 erred in deciding a case with reference to the provisions of an Act, which already stands repealed. The case was therefore, fixed for clarification on 03-11-2006. Learned counsel for the assessee submitted before us that since the provisions of section 12 of the AAI Act, 1994, which defines the functions of the authority are identical to the provisions of section 16 of the IAAI Act, 1971, the Tribunal can decide the legal issue with reference to the provisions of AAI Act, 1994 and there is no necessity to remand the matter back to the Assessing Officer for examining the issue afresh with reference to the provisions of AAI Act, 1994.
9. Learned Departmental Representative on the other hand, submitted that there appears to be a variation in the functions of the authority, as prescribed under the IAAI Act, 1971 and as prescribed under the AAI Act, 1994. Under Section 16(3)(d) of the IAAI Act, 1971 the authority was empowered to establish "warehouses" at the airports for the storage and processing of goods. However, under section 12(3)(g), of the AAI Act, 1994 the authority is empowered to establish "warehouses and cargo complexes" at the airports for the storage and processing of goods". Learned DR submitted that exemption u/s 10(29) is available only in respect of warehouses and not in respect of cargo complexes. It is not clear from the records available or with reference to the orders of the lower authorities whether the assessee authority is maintaining cargo complexes or warehouses in accordance with the provisions of Act of 1994. This goes to the root of the matter and therefore, the authorities below should be 34 ITA Nos.1572 to 1577/D/2011 given an opportunity to examine the issue with reference to the provisions of the AAI Act, 1994.
10. After hearing both the parties, we are of the considered view, that the authorities below have taken decision on the basis of enactment which already stands repealed. Under the IAA Act, 1971, the authority was empowered to establish warehouses alone, whereas under
the AAI Act, 1994, the authority is empowered to establish warehouses and cargo complexes. Admittedly, the exemption u/s 10(29) is available on the income from the letting out of godowns or warehouses for storage, processing or facilitating the marketing of commodities. The term "cargo complexes" is not used in section 10(29) of the Act. We further find that the Assessing Officer and the learned CIT(Appeals) have used the term warehouses and cargo complex interchangeably. This cannot be the case under the Act of 1994, as the warehouse and cargo complexes have been differentiated by the Act itself. It is therefore, necessary that the Assessing Officer must get an opportunity to re-examine the matter applying the appropriate law and to see whether the assessee is running or establishing "warehouses" or "cargo complexes".
11. During the course of hearing learned AR for the assessee has referred to certain documents including the minutes of the meeting held in the Cabinet Secretariat on 25-05-1982, where, consequent to the establishment of the IAAI, the warehouses for storage or processing of goods at the international airports were assigned to the Authority. These documents were not before the Assessing Officer 35 ITA Nos.1572 to 1577/D/2011 while passing the order. The documents now produced by the learned counsel for the assessee may have bearing in arriving at a decision. We therefore, restore the matter back to file of the Assessing Officer for passing an order de-novo on this issue after taking into account the provisions of the AAI Act, 1994 and considering the documents referred to above."
21. The Tribunal order for AY 1998-99 (supra) was passed following the aforesaid Tribunal order for AY 2000-01.
22. It is now to be seen as to whether the assessment order meets the following four points raised by the learned CIT while exercising jurisdiction under Section 263 of the Act:-
(i) No re-examination as per the Tribunal's directions;
(ii) Allowing of exemption u/s 10(29) of the Act merely on the basis of the power given u/s 12(3)(g) of the Airports Authority of India Act, 1994;
(iii) No clear finding regarding the assessee actually running or establishing warehouses or, cargo complexes; and
(iv) Non-consideration of Minutes of the Meeting of the Central Cabinet, held on 25.5.1982.
23. So far as regards the question of the AO having allegedly not re- examined the matter on the lines prescribed by the Tribunal, it is 36 ITA Nos.1572 to 1577/D/2011 available from the assessment order that a notice u/s 143(2) of the Act was issued to the assessee, in response to which, the Authorised Representative of the assessee appeared before the AO from time to time and that the case was discussed with him (assessment order page
2). Further, the AO notes at page 3 of the assessment order that the assessee had filed letter dated 30.12.2008 on the issue of exemption u/s 10(29) of the Act. The contents of the said letter have been reproduced by the AO in italics at pages 3 to 6 of the assessment order. For facility, these submissions of the assessee are being reproduced hereunder:-
"To fully appreciate the justification for the claim, the provisions of section 10(29) for the relevant assessment year are reproduced as under:-
In the case of an authority constituted under any law for the time being in force for the marketing of commodities any income derived from the letting of godowns or ware houses for storage, processing or facilitating the marketing of commodities.
(3.2.2) On perusal of the above it is seen that the following conditions are to be fulfilled by an assessee for claiming exemption u/s 10(29) of the Act.
(a) It is an authority constituted under any law.
(b) It is an authority constituted for marketing of commodities.37 ITA Nos.1572 to 1577/D/2011
(c) The exemptible income must be one derived from the letting of godowns or ware houses for storage, processing or facilitating the marketing of commodities.
(3.2.3) The assessee fulfills all the conditions which are laid down in section 10(29) for claiming exemption.
(a) Reg:- First condition that the assessee is an authority constituted under any law.
The Airports Authority of India is constituted by special enactment of the Parliament i.e. Airport Authority of India Act, 1994.
(b) Reg:- Second condition that the assessee is an authority constituted for marketing of commodities.
(i) As per provisions of section 12(3)(g) of the Airports Authority of India Act one of the functions of the authority is to establish warehouses and cargo complexes at the airports for the storage or processing of goods.
(ii) Airport Authority of India plays a vital role in facilitating the transportation of imports and exports of various commodities through its Airports. The airports warehouses provide facilities to various Exporters, Importers and National & International Air Transport Carriers to Store, process and transport goods & commodities over the whole world belonging to various exporters and importers. Further, it is mentioned that the assessee has established warehouses and storage facilities 38 ITA Nos.1572 to 1577/D/2011 in the international air cargo complexes at various airports and earns revenue from the letting of such warehouses.
(iii) We would like to state that warehousing or storage is an essential step in the whole process of marketing. It enhances the utility of the commodities in question by making them more valuable. Therefore, it has a direct impact on the trading activities by enhancing their value. The same is true of the other activities of processing of the commodities and facilitating the distribution by transport to and preservation from ravages by natural causes.
(iv) In view of above, the assessee cannot be said to be not satisfying the second test of being an Authority constituted for facilitating in the marketing of commodities particularly in view of the fact that it had been constituted to play a major role in storage, processing and transportation of export/import cargo.
(c) Reg:- Third condition that the exemptible income must be one derived from the letting of godowns or ware houses for storage, processing or facilitating the marketing of commodities.
There is no controversy as regards the third ingredient because the assessee is claiming exemption only in respect of that part of income which has been earned in respect of letting of godowns and warehouses for storage, processing or facilitating the marketing of commodities the reference to which income has also been made in the Assessment Order.
39 ITA Nos.1572 to 1577/D/2011
(3.3) Therefore, the assessee fulfills all the conditions set out in Section 10(29) of the Income-tax Act entitling it for the exemption of the income earned by it from letting of warehousing for storage & processing of goods."
24. The factum of the assessee having filed the aforesaid letter dated 30.12.2008 (copy at APB 360 to 367 relevant portion at APB 365 to 367), before the AO stands nowhere disputed by the Department.
25. Paragraph (3.1) of the aforestated letter dated 30.12.2008 filed by the assessee before the AO states as follows:-
"(3.1) The exemption of Rs.135,14,65,400/- claimed by the assessee was denied by the assessing officer and addition was confirmed by the CIT(Appeals). The ITAT vide Para 2 of Page 2 of its order has restored the issue to your honour's file to determine whether the assessee is running or establishing the ware houses or cargo complexes."
Paragraph (3.3) of the said reply runs as under:-
"(3.3) Therefore, the assessee fulfills all the conditions set out in Section 10(29) of the Income-tax Act entitling it for the exemption of the income earned by it from letting of warehousing for storage & processing of goods."40 ITA Nos.1572 to 1577/D/2011
26. From the above reply of the assessee, it is eloquently evident that the AO, in view of such reply of the assessee, was consciously in seisin of the matter, from all its angles.
27. Not only this, in the concluding portion of the assessment order on this issue, the AO has observed as follows:-
"The assessee has brought to my notice the mandate to Airports Authority of India vide section 12(3)(g) of the AAI, Act, 1994 which reads as under.
The assessee has shown income from warehouses separately a reference to which has also been made by the assessing officer. The AAI is a statutory authority and in view of section 12(3)(g) of the AAI Act, 1994 it deserves the deduction u/s 10(29), which is allowed."
28. Therefore, at the time of the passing of the assessment order, the AO was alive to the following facts:-
(a) That the Tribunal had restored the issue to the AO to determine whether the assessee was running or establishing warehouses or cargo complexes;
(a)(i) The assessee has stated this fact in paragraph (3.1) of its reply, as noted above.41 ITA Nos.1572 to 1577/D/2011
(b) That Section 10(29) of the Act provides for exemption of income derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities by an Authority constituted under any law for the marketing of commodities;
(b)(i) Section 10(29) of the Act has been reproduced by the assessee in paragraph (3.2.1) of its reply.
(c) That the assessee Authority is constituted under the Airports Authority of India Act, 1994;
(c)(i) This has been stated by the assessee in paragraph (3.2.3) of the reply.
(d) That the assessee Authority has, as one of its functions, the function of establishing warehouses and cargo complexes at the airports for storage or processing of goods;
(d)(i) Paragraph (3.2.3)(b)(i) of the assessee's reply states so.
(e) That the assessee Authority facilitates the transportation of imports and exports of various commodities through the airports by providing facilities to exporters, importers and national and international air transport carriers to store, process and transport 42 ITA Nos.1572 to 1577/D/2011 goods and commodities throughout the world, for which purpose, the assessee has established warehouses and storage facilities in the international air cargo complexes at the airports and it earns revenue from the letting out of such warehouses;
(e)(i) Paragraph (3.2.3)(b)(ii) of the assessee's reply expresses this.
(f) That the factum of the assessee letting out godowns and warehouses at the airports for the storage, processing or facilitating the marketing of commodities, stood referred to in the assessment order also;
(f)(i) Paragraph (3.2.3)(c) of the reply contends so.
(g) That the assessee, therefore, fulfilled all the conditions contained in Section 10(29) of the Act and that so, its income from letting of warehouses for storage and processing of goods, was entitled to exemption under the said Section;
(g)(i) Paragraph (3.3) of the reply asserts this.
(h) That the mandate of Section 12(3)(g) of the Airports Authority of India Act, 1994, had been brought to the AO's notice by the assessee;43 ITA Nos.1572 to 1577/D/2011
(h)(i) Observation of the AO.
(i) That the assessee had shown income from warehousing separately and that in the original assessment order, the AO had made reference thereto;
(i)(i) The AO's finding.
(j) That the assessee Authority is a statutory Authority, deserving the exemption u/s 10(29) of the Act, in view of Section 12(3)(g) of the Airports Authority of India Act, 1994;
(j)(i) The AO's finding.
29. The exemption u/s 10(29) of the Act was granted to the assessee by the AO being fully aware of the above complete scenario. That being so, it cannot be said that the AO did not re-examine the matter as per the directions of the Tribunal. It is only that the allowance was made by the AO through a terse order, which might have conveyed to the learned CIT that the matter was not re-examined by the AO. However, the facts as brought before us, as discussed, indicate otherwise.
44 ITA Nos.1572 to 1577/D/2011
30. It is seen that the learned Commissioner has not pointed out any error in the assessment order, nor can one be inferred therefrom. In 'CIT Vs. Goyal Family Specific Trust' (supra), it has been held to the effect that where the assessment order is not a detailed one and the Commissioner fails to point out any error, the assessment order being brief by itself cannot be a sufficient reason to brand it as erroneous and prejudicial to the interests of the Revenue.
31. In 'CIT Vs. Kanda Rice Mills', 178 ITR 446 (P&H), it has been held that the conclusion of the Commissioner that an assessment order is prejudicial to the interests of the Revenue is not a matter of subjective satisfaction of the Commissioner and that such conclusion needs to be founded on objective material. In the present case, there is no such objective material available to the learned CIT to hold that the assessment order is prejudicial to the interests of the Revenue.
32. In 'Malabar Industrial Co.Ltd. Vs. CIT', 243 ITR 83 (SC), it has been held, inter alia, that the phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the AO; that every loss of revenue as a consequence of an order of the AO cannot be treated to be prejudicial to the interests of the Revenue; and that where the AO has adopted one of the courses permissible in law and which has resulted in loss of revenue, the assessment order cannot be called prejudicial to the interest of the 45 ITA Nos.1572 to 1577/D/2011 Revenue, unless the AO's view is unsustainable in law. In the present case, it cannot be said, nor has it been shown before us to the contrary, that the AO's order contains a view which is unsustainable in law. It cannot be gainsaid, as per 'Malabar Industrial Co.Ltd.' (supra), that the jurisdiction u/s 263 of the Act cannot be invoked to go into the process of assessment again, merely to find something more.
33. In 'CIT Vs. Green World Corporation Vs. ITO', 314 ITR 81 (SC), it has been held that the AO is an independent authority entitled to pass an order which cannot be interfered with merely because CIT has a different view. In 'Green World Corporation' (supra), the Hon'ble Supreme Court has reiterated 'Malabar Industrial Co.Ltd.' (supra).
34. In 'CIT Vs. Gabriel India Ltd.', 203 ITR 108 (Mum.), it was held that the Commissioner cannot initiate proceedings under Section 263 of the Act with a view to start fishing and roving enquiries in matters already concluded; that the power under Section 263 of the Act can be exercised only when the assessment order is erroneous and due to this, prejudice has been caused to the interests of the Revenue; that the assessment order cannot be branded as erroneous by the Commissioner because, according to him, the assessment order should have been written more elaborately; and that when the AO has exercised the quasi-judicial powers vested in him in accordance with law and has arrived at a conclusion, such conclusion cannot be termed 46 ITA Nos.1572 to 1577/D/2011 to be erroneous simply because the Commissioner does not feel satisfied with the said conclusion.
35. In 'CIT Vs. Arvind Jeweller', 259 ITR 502 (Guj), the assessment order was upheld, applying 'Malabar Industrial Co.Ltd.' (supra).
36. The learned DR has sought to place reliance on 'CIT Vs. Nalwa Investments Ltd.', [2011] 11 taxmann.com 98 (Delhi) (supra) (copy placed on record). The said decision, however, is not found to be applicable to the facts of the present case. Therein, the issue before the Hon'ble High Court was as to whether dividend income could be allowed to be set off against business losses of earlier years, on being treated as income from other sources. On facts, it was held that the AO had allowed the business losses to be set off without any application of mind and that as such, the view of the AO could not be said to be a plausible view, since the action of the AO was contrary to the specific provisions of the Act, which provide for brought forward business losses being capable of being set off against business income only and not income from other sources. In the present case, it has not been shown that the view taken by the AO is contrary to any specific provision of the Act.
37. Reliance by the Department on 'Rajalakshmi Mills Vs. ITO' (supra) is also of no benefit to the Department. There is no denying 47 ITA Nos.1572 to 1577/D/2011 the proposition that the Commissioner can regard an assessment order as erroneous on the ground that in the circumstances of the case, the AO should have made enquiries before accepting the statement made by the assessee in his return. In that case, there was a specific finding recorded that the assessee did not meet the conditions of Section 40A(7)(b) of the Act, so as to claim exemption in the form of provision for gratuity. There was nothing, as recorded as a fact, placed on record to demonstrate the nature of the liability, much less to show that the liability was an ascertained one. It was in these facts, that the Commissioner's order was upheld, it being a case of no enquiry by the AO.
AO These, again, are not the facts before us. Here, the assessee has duly placed all the facts and material on record, it was on consideration of which only that the AO passed the assessment order allowing the assessee's claim. On the other hand, nothing has been brought before us to show as to how the claim of the assessee is not sustainable. Moreover, pertinently, this is not a case of an assessment order bring passed in a scrutiny regular assessment. Rather, the order was passed under Section 254 of the Act, under the specific directions of the Tribunal, which have not been shown to be not carried out by the AO. It cannot be gainsaid that under Section 263 of the Act, the wisdom of the CIT cannot replace that of the AO. It is nowhere the case of the Department that the exemption allowed is wrong or that it is not allowable under the Act. We have observed above, that the AO has duly examined the facts and the record and it is only thereafter 48 ITA Nos.1572 to 1577/D/2011 that the claim of the assessee has been allowed. As to how the assessment order is written is beyond the control of the assessee. Just because the assessment order is a terse order, this by itself cannot form the basis of invocation of powers under Section 263 of the Act. Reference in this regard may be made to 'Hari Iron Trading Co. Vs. CIT', 263 ITR 437 (P&H).
38. That apart, even otherwise, it is seen from the material brought on record, that the assessee is entitled to exemption u/s 10(29) of the Act. To reiterate, Section 10(29) of the Act requires that for an income to be eligible for exemption, it should be an income derived by an authority constituted under any law for the time being in force, for the marketing of commodities, from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities. The question is as to whether the assessee does fulfill these conditions of Section 10(29) of the Act.
39. Undoubtedly, the assessee Authority is an Authority constituted under a law for the time being in force, having been formed under the Airports Authority of India Act, 1994. Further, it is an Authority constituted for marketing of commodities, since as per Section 12(3)(g) of the Airports Authority of India Act, 1994, one of its functions is to establish warehouses and cargo complexes at the airports for the 49 ITA Nos.1572 to 1577/D/2011 storage or processing of goods. Sections 12(1), (2) and (3)(g) of the Airports Authority of India Act, 1994 read as follows:-
"12.
12. (1) Subject to the rules, if any, made by the Central Government in this behalf, it shall be the function of the Authority to manage the airports, the civil enclaves and the aeronautical communication stations efficiently.
(2) It shall be the duty of the Authority to provide air traffic service and air transport service at any airport and civil enclaves.
(3) Without prejudice to the generality of the provisions contained in sub-sections (1) and (2), the Authority may -
(g) establish warehouses and cargo complexes at the airports for the storage or processing of goods;"
40. The objection of the learned CIT has been that the AO did not examine, as per the directions of the Tribunal, as to whether the assessee had actually established warehouses or cargo complexes in keeping with the provisions of Section 12(3)(g) of the Airports Authority of India Act, 1994 and that he had granted the exemption u/s 10(29) of the Act merely on the basis of the power given u/s 12(3)(g) of the Airports Authority of India Act, 1994.
41. The undisputed facts in this regard are that the assessee has shown income from warehouses separately, as noted by the AO in the 50 ITA Nos.1572 to 1577/D/2011 original assessment proceedings. Then, it was specifically stated before the AO, as has also remained the consistent stand of the assessee for all these years, that the function of warehousing at the airports was initially being carried out by the Central Warehousing Corporation, which Authority had established warehouses at the airports. On their coming into existence, the State Warehouses Corporations took over the warehouses. These warehouses were taken over by the International Airports Authority. The International Airports Authority had, as one of its functions, u/s 16(3)(d) of the International Airports Authority Act, 1971, the function of establishing warehouses at airports for the storage or processing of goods. In 1985, the National Airports Authority Act, 1985, came along, establishing the National Airports Authority of India. Section 12(3)(g) of that Act laid down establishment of warehouses and cargo complexes at the aerodromes for storage and processing of goods, as one of the functions of the National Airports Authority of India. The International Airports Authority of India, under the International Airports Authority Act, 1971, and the National Airports Authority of India, under the National Airports Authority Act, 1985, claimed and were granted exemption u/s 10(29) of the Act qua income derived from letting out of warehouses established by them at the airports. In 1987, the airport warehouses of the Central Warehousing Corporation were taken over by the International Airports Authority of India. This was done in pursuance of the decision of the Cabinet Secretariat, taken in its meeting dated 25.5.1982. A copy of 51 ITA Nos.1572 to 1577/D/2011 the extract of the Minutes of the said Meeting dated 25.5.1982 is at APB 375. It would be relevant to reproduce these Minutes hereunder:-
"Extract from Minutes of the Meeting held on 25th May 1982 in the Cabinet Secretariat to consider the issues related to augmenting the storage capacity of the CWC at Delhi Airport.
6. After discussion the Committee came to the following conclusion.
i) Till such time as the new cargo complex under construction at Delhi was commissioned the present Warehousing arrangements of Importing Cargo by the CWC at Delhi should continue. Necessary facilities, including placement of additional land to allow for further expansion should be given.
ii) Efforts may be made to work out necessary arrangement for running the new air cargo complex at Delhi by CWC as an agency of the ............. (illegible) terms would be offered by the IAAI.
iii) If for any reason an agency agreement with IAAI does not fructify IAAI will take over operation of Cargo complex, with the understanding that no private agency would be subsequently given the task by the IAAI for handling this work. CWC would be compensated for the expenditure incurred. IAAI would absorb the staff employed by CWC at the work.52 ITA Nos.1572 to 1577/D/2011
7. Secretary, Tourism & Civil Aviation suggested that CWC may extend/expand its activities at the Airport at Bangalore, Hyderabad, Gauhati, Trivandrum etc., other which were not covered by the charter of IAAI or any other public sector corporation. It was agreed that department of food would with the advice of the department of Commerce take necessary early to extend coverage by the CWC to airports presently not serviced for cargo handling work."
42. The fact that the warehouses at the airports were indeed transferred to the International Airports Authority of India stands established from the copies of the letters dated 25.11.1993 (APB 377) and letter dated 10.1.1992 (APB 378 to 379), from the Central Warehousing Corporation to the International Airports Authority of India. Reference may here be made to the contents of these letters:-
"Shri Sudhir Kumar, Executive Director (Commercial), International Airport Authority of India, Cargo Terminal, I.G. International Airport, New Delhi - 110 037.
Sub : Vacation of IAAI premises by CWC and settlement of dues of the CWC - Regarding.
Sir, Your attention is invited to the correspondence resting with this Office letter of even number (4401) dated 20.9.93 on the above mentioned subject (copy enclosed for ready reference).
In this connection, I am also enclosing a photo copy of D.O. letter No.CWC/Ad-Comp/RO Delhi (IAAI) dated 10.1.92 of our Managing Director addressed to Sh.V.K.Mathur, Chairman, IAAI regarding finalization/settlement of account relating to the transport of assets by Central Warehousing Corporation to 53 ITA Nos.1572 to 1577/D/2011 the International Airport Authority of India and other related issues. Central Warehouse IAC Palam was transferred to the IAAI on 31.3.87 but despite series of correspondence, the issues involved have not been settled.
After discussions with Sh.K.J.Ramtani, Sr. Cargo Manager (Disp.), it was felt that issues can be sorted out threadbare in a meeting and accordingly, he was requested to come over for a meeting with other officers with the Commercial Manager of this Office at a time and date convenient to IAAI. However, so far, there has been no response in this regard and the old issues still remain to be settled. Not only this, as agreed to by IAAI at the time of transfer of the assets by CWC to the IAAI, the expenses incurred by the Corporation for operation of the unaccompanies baggage at CW Palam which have accumulated for more than 8.75 lakhs upto 30.9.93, have not yet been released by IAAI.
I shall be thankful if you kindly intervene in the matter and have the issues sorted out at the earliest so that the premises under occupation of CWC are immediately handed over to the IAAI.
Yours faithfully, Sd/-
(Guru Bachan Singh) Regional Manager Copy to the CW, CWC, HO, New Delhi in continuation to endorsement of even umber 4410 dated 20.9.93 Sd/-
Regional Manager"
"R.N.Das Managing Director D.O.No.CWC/AD-Comp/RO Delhi (IAAI) January 10, 1992.
Dear Shri Please refer to my predecessor's DO letter of even number dated 17.4.90 and subsequent reminder of even number dated 18.6.90 regarding finalization/settlement of account relating to the transfer of assets by Central Warehousing Corporation to IAAI and other related issues. Regional Manager, CWC Delhi has also taken up these matters on 54 ITA Nos.1572 to 1577/D/2011 various occasions vide his letters dated 30.12.89, 21.3.90 and 28.5.90. Central Warehouse IAC Palam was transferred to IAAI on 31.3.87 but during the course of four and a half years inspite of protracted correspondence, the issues involved have not been settled.
2. The main issues pending settlement between CWC and IAAI are indicated hereunder for ready reference.
(i) Fixed Assets lying at CW, IAC Palam aggregating to Rs.1,00,816,119/- were transferred to IAAI against which an adhoc payment of Rs.88,65,000/- was received by CWC leaving a balance of Rs.12,21,119/-.
(ii) Warehousing charges accrued on consignments transferred to IAAI works out to Rs.3,91,30,128/-. The IAAI has remitted only Rs.7,50,000/- against this, though the IAAI must have collected full amount from the users.
(iii) Various expenses incurred on behalf of IAAI such as medial reimbursement, conveyance, newspaper and periodicals, printing and stationery, entertainment charges, telephone, water and electricity, liveries postage and telegram etc. work out to Rs.99,874/- upto 30.9.91. The reimbursement of this expenditure is yet to be made by the IAAI.
(iv) The Pay and Allowance in respect of three employees who have been posted at CW, IAC Palam from 1.4.88 and the total payment made to these employees works out to Rs.4,70,784/- upto 30.9.91. Against this expenditure IAAI has released a sum of Rs.2,72,414.16 leaving a balance of Rs.1,98,370/-.
(v) IAAI has deducted a sum of Rs.22,798/- on account of electricity charges for 6102 units without assigning any reasons which requires illucidation and reimbursement.
3. I shall be thankful if the matter is looked into personally by you and the amounts due is remitted to us at a very early date.
Yours sincerely, Sd/-
(R.N.Das) Sh.V.K.Mathur Chairman 55 ITA Nos.1572 to 1577/D/2011 IAAI New Delhi.
Copy to :
1. The Regional Manager, Central Warehousing Corporation, Regional Officer, Delhi, with a request to pursue the matter with the IAAI for settlement of the pending issues.
2. The Manager (Business), CWC, HO, New Delhi."
(emphasis supplied)
43. From the above letters, it stands clearly confirmed that the airport warehouses of the Central Warehousing Corporation (particularly the one at the Delhi Airport) were transferred to the International Airports Authority of India.
44. By the enactment of the Airports Authority of India Act, 1994, the International Airports Authority and the National Airports Authority got merged into the present Authority, i.e., the Airports Authority of India. Pertinently, Section 12(3)(g) of the Airports Authority of India Act, 1994, as discussed hereinabove, provides for the Authority to establish warehouses and cargo complexes at the airports for the storage or processing of goods. 'Cargo complexes' are stated to be clusters of warehouses. This fact, as alleged, has not been rebutted. The income claimed as exempt has undisputedly been earned from letting out of warehouses and cargo complexes.
56 ITA Nos.1572 to 1577/D/2011
45. The airport warehouses of the Central Warehousing Corporation thus came to vest in the assessee Authority, who is carrying on its functions, inter alia, under Section 12(3)(g) of the Airports Authority of India Act, 1994.
45(i) The chronology of as to how the airport warehouses originally under the control of the Central Warehousing Corporation came to be devolved on the Airport Authority of India, i.e., the assessee Authority can thus be diagrammatically crystallized and depicted thus:
Central Warehousing Corporation under the Central Warehousing Act State Warehousing Corporations under the State Warehousing Acts.
International Airports Authority u/s 16(3)(d) of the International Airports National Airports Authority u/s Authority ACT, 1971 12(3)(g) of the National Airports Authority Act, 1985.
Airport Authority of India (the assessee Authority) u/s 12(3)(g) of the Airports Authority of India Act, 1994 57 ITA Nos.1572 to 1577/D/2011
46. In these facts, as brought before the AO by the assessee, it stands undisputedly established that the assessee is running "warehouses" or "cargo complexes" at the airports.
47. Thus, the learned CIT has gone wrong in observing that the AO granted the exemption u/s 10(29) of the Act merely on the basis of the power given to the assessee Authority u/s 12(3)(g) of the Airports Authority of India Act, 1994, to establish warehouses and cargo complexes. The assessee Authority, as above, stands proved to be actually running the warehouses and cargo complexes at the airports.
48. The contentions of the assessee having been accepted by the AO in the light of the material brought before him, the AO rightly granted the exemption to the assessee u/s 10(29) of the Act. In view of the preceding discussion, it cannot be said that the AO was oblivious of the fact that the assessee was indeed actually running warehouses and cargo complexes at the airports, while so granting the exemption.
49. Apropos the last objection of the learned CIT, i.e., that the AO did not consider the Minutes of the Meeting of the Cabinet Secretariat, held on 25.5.1982, it is not so, as seen above. The Minutes of the said Meeting and the correspondence between the Central Warehousing Corporation and the International Airports Authority of India were filed 58 ITA Nos.1572 to 1577/D/2011 by the assessee before the AO and it was only on taking these documents into consideration that the assessment order was passed.
50. Insofar as regards the learned DR's contention that no prejudice has been caused to the assessee by the passing of the order under appeal, we do not find any force in this submission. For an order under Section 263 of the Act to be sustainable, the twin conditions of error in the assessment order and causing of prejudice to the interests of the Revenue must be evincible to co-exist in the assessment order. As a result of our discussion on the issue, we hold that the assessment order is not erroneous, much less prejudicial to any interest of the Revenue. It has been passed after duly considering the matter in the light of the evidence/material produced before the AO by the assessee.
51. Accordingly, the order of the learned CIT on this issue is set aside and that of the AO, granting exemption to the assessee u/s 10(29) of the Act on its income derived from the letting out of the warehouses and cargo complexes at the airports, is revived.
52. In this manner, ground Nos.1 to 4 are accepted.
53. Coming to the second issue, i.e., the one involved in ground Nos.5 to 10, the assessee claimed depreciation on its terminal and ancillary building at the airport, stating it to be a plant. The CIT(A) 59 ITA Nos.1572 to 1577/D/2011 allowed the assessee Authority depreciation at the rate of 25%, treating the assessee's terminal and ancillary building as plant. He based his order on his decision dated 18.12.1997 for AY 1994-95 in the assessee's case.
54. The AO was directed to allow depreciation accordingly.
55. The Tribunal, vide its aforesaid order dated 27.7.2007 for AY 1998-99, observed, inter alia, that the facts as mentioned in the order of the CIT(A) were sketchy; that no technical report had been placed on record to describe the terminal building of the assessee, its specification, or whether it was specifically designed; that the claim of the assessee could be accepted only if it were shown on record that the test of functionality was applicable to the terminal building; that the facts had not been properly brought on record and examined by the Authorities below with reference to the nature of the construction and functions of the building; that it had also not been stated as to what really constituted the terminal building, namely, whether the escalators and conveyor belts, etc. had been shown as part of the building, or separately as machinery or building; and that the matter, therefore, needed to be restored to the file of the AO to examine the issue of the assessee's various assets, called terminal building, i.e., as to whether as a whole they were plant and building, by applying the functionality test, i.e., whether these buildings were housing 60 ITA Nos.1572 to 1577/D/2011 passengers in transit and other assets, or tools of the trade, or some assets were 'buildings', or some were 'plant'. The assessee was directed to furnish a detailed list of various assets claimed to be plant and their functions, so that an informed decision could be taken in the matter.
56. In the order dated 27.3.2009, giving effect to the Tribunal's order, the AO observed, inter alia, that the assessee had stated that the technical report had been on the record of the CIT(A), who had made it a part of the appeal order, which was placed on record before the AO; that it had been stated that however, the said report had not been brought to the notice of the Tribunal; that he (the AO) had examined the technical report and the stand of the assessee that the terminal building was being used for regulation of air traffic and communicational and navigational control; that the assessee had explained that the use of the terminal building for passengers was incidental; and that this alone could not be the basis for disallowing part of the depreciation on the terminal building. In this manner, the AO allowed the depreciation on the terminal building, by treating it as a plant and holding the assessee eligible for deduction of `233,86,18,521/-.
57. In the impugned order, the learned CIT observed, inter alia, that the Tribunal had given specific directions to the AO to examine the 61 ITA Nos.1572 to 1577/D/2011 various assets of the assessee at the airports, which were called by the name of "terminal building" and to examine as to whether they were plant or building as a whole, by applying the functionality test, i.e., as to whether they were for housing the passengers in transit and other assets, or tools of the trade, or some assets were building, whereas some were plant; that the Tribunal had also directed the assessee to furnish a detailed list of its various assets claimed to be plant and their functions; that however, the AO had passed the appeal effect order relying on materials that were placed before the CIT(A) when he had passed his order dated 5.3.2003; that the said order of the CIT(A) had been set aside by the Tribunal while requiring the AO to conduct fresh enquiries into the nature of the terminal building; that he was to seek a fresh technical report, and to apply the test of functionality to determine as to whether it was a "plant", or a "building"; that the AO was required to pass a detailed order regarding the nature of construction and functions of the building; that he was to examine as to what really constituted the terminal building, i.e., as to whether escalators and conveyor belts etc., had been shown as part of the building or separately as machinery or plant; that the AO had not given any clear finding on these issues and had only relied on the same report as had been submitted before the CIT(A); that the CIT(A), on considering the said report, had upheld the observation of the AO that the terminal building of the assessee, for the purpose of depreciation, should be treated as a "building" and not as a "plant"; that by relying 62 ITA Nos.1572 to 1577/D/2011 on the same report in the second round, the AO arrived at a conclusion different from that of the CIT(A) and that too, without passing a reasoned or speaking order, as directed by the Tribunal; that the AO had not passed an order detailing the list of various assets claimed by the assessee as "plant" and their functions; that there was no such list on the record; that the directions of the Tribunal had not been complied with and no reasoned speaking order had been passed; that in the case of the assessee, on a similar issue, the CBDT had issued order F.No.202/31/83/ITA II dated 15.2.1984, as per which, the International Airports Authority of India was a Government of India undertaking and was being assessed to income tax by the IAC (Assessment), Range-V, the assessee approached the CBDT stating that the terminal buildings situated at the international airports should be treated as factory buildings entitled for higher rate of depreciation, since they underwent heavy depreciation by virtue of constant varied use for all 24 hours of each day, that they were buildings akin to factory buildings and contained mostly false roofing and were fitted with glass panels and contained sophisticated fixtures, that they were subject to vibrations caused by the jet blast of the jet aircraft and they suffered physically and were entitled to a much higher rate of depreciation; and it had been observed by the Member (IT) of the Board that in view of the special nature of the terminal buildings, depreciation at the rate of 10% may be allowed, treating the terminal building as a factory building and the demarcation of the building into 63 ITA Nos.1572 to 1577/D/2011 factory and non-factory had to be done carefully after discussing the matter with the assessee's representatives; that in the assessment order, the AO had failed to examine the applicability of the said order of the CBDT; that therefore, the assessment order was erroneous; that since the directions of the Tribunal were not followed and the technical report was not examined as per the directions of the Tribunal, the interest of the Revenue was not duly represented or met with, which might have resulted into wrong allowance of depreciation on terminal building, that to this extent, the assessment order was erroneous insofar as it was prejudicial to the interests of the Revenue; that in fact, the AO had relied on earlier material already considered when the order of the Tribunal was being passed and had failed to conduct any new enquiry; and that it has been judicially held that when orders/directions of a higher authority have not been followed, the order of the lower Authority is to be considered erroneous insofar as it is prejudicial to the interests of the Revenue and the provisions of Section 263 of the Act are to be applied. Then, referring to numerous case laws, which will be dealt with in the succeeding portion of this order, the learned CIT cancelled the assessment order, directing the AO to frame a fresh assessment order by taking into account the specific directions issued by the Tribunal for determining the rate of depreciation applicable on the terminal building of the assessee. It was observed that for determining the rate of depreciation, the AO may call for a technical report from experts and the role of various 64 ITA Nos.1572 to 1577/D/2011 assets installed in the terminal building may be examined and the test of functionality be applied while examining the nature of construction and functions of the terminal building, apart from following the other directions of the Tribunal in letter and spirit and to pass a reasoned and speaking order on the issue.
58. Challenging the aforesaid observations of the learned CIT on the issue of grant of depreciation on terminal building, the learned counsel for the assessee has contended that consequent to the directions of the Tribunal, the AO had called for a reply from the assessee Authority; that the assessee had duly complied with this requirement and a reply was filed, as also noted in the assessment order itself; that the AO had also observed that the assessee had placed before him a copy of the CIT(A)'s order, of which, the technical report formed a part; that the AO observed that the assessee had stated before him that this report had, however, not been brought to the notice of the Tribunal; that he (the AO), had examined the contention of the assessee that the terminal building of the assessee was a tool of business; that it was in this regard that the technical report had been filed; that the assessee had also explained that the terminal building was being used for regulation of air traffic and communicational and navigational control; that it was noted by the AO that the assessee had explained the use of the terminal building to be identical; and that the AO had observed that 65 ITA Nos.1572 to 1577/D/2011 this alone could not be the basis for disallowing a part of the depreciation on the terminal building.
59. The learned counsel for the assessee has submitted that therefore, a bare perusal of the assessment order shows that the AO has duly applied his mind to the matter; that however, the view of the learned CIT was otherwise, which is not legally tenable; that in response to the show cause notice issued to the assessee u/s 263 of the Act, the assessee had filed its reply dated 21.12.2010 (copy at APB 345 to 348); that however, rejecting the assessee's detailed submissions contained therein, the learned CIT proceeded to pass the impugned order, wrongly concluding therein that the assessment order was erroneous inasmuch as it was prejudicial to the interests of the Revenue; that the learned CIT has failed to consider that the due application of mind by the AO while passing the assessment order was evident from the assessment order itself; that the AO had taken into account the technical report filed before him by the assessee; that it was only on having examined the assessee's submission to the effect that the terminal building was a tool of the business of the assessee, that the depreciation was allowed at the higher rate; that while doing so, the AO had, besides the technical report, also considered the explanation offered by the assessee, that the terminal building was used for regulation of air traffic with communicational and navigational control; that the AO had also observed that the use of the terminal 66 ITA Nos.1572 to 1577/D/2011 building for the passengers was incidental and it could not be the basis for disallowing a part of the depreciation on the terminal building; that in this manner, the AO had actually addressed all aspects of the issue before him; that the AO had also examined the CBDT order dated 15.2.1984 in the assessee's case; that rather, the claim of the assessee regarding the terminal building being a plant, had been allowed for AY 1994-95, after making reference thereto; that the directions of the Tribunal had been carried out by the AO in letter and spirit; that it is wrong to state that the assessee had not furnished a detailed list of various assets claimed to be 'plant' and their functions, since it was a matter of record that alongwith its return of income, the assessee had submitted a detailed chart claiming depreciation; that the said chart was before the AO at the time of passing of the assessment order, giving effect to the orders of the Tribunal; that the said chart contains a detailed list of the various assets claimed by the assessee to be 'plant'; that the functions of these assets were elaborately explained by the assessee by way of the technical report, i.e., "Special Technical Features of Airport Terminal Building" (copy at APB 368 to 372); that the first part thereof contains a description of the functions of the terminal building; that the second part of the said report comprises of a detailed list of the items included in the terminal building and an explanation as to how they specifically function as a 'plant'; that the assessment order had its basis in this technical report also; that in the order under appeal, the learned CIT has not pointed 67 ITA Nos.1572 to 1577/D/2011 out any defect in the said report; that still, the learned CIT has directed for another expert report to be filed; that this is not the purport of Section 263 of the Act; that in directing so, the learned CIT is, in fact, sitting in judgement over the order of the Tribunal, which is impermissible in law; that the AO, on the other hand, had duly carried out the directions issued by the Tribunal; that exercising the powers u/s 263 of the Act, a re-examination of an issue already examined has been ordered, which cannot be allowed to be done; that the AO went through the technical report and examined the role of each of the assets of the terminal building, claimed as 'plant'; that the AO's observation that the terminal building is a tool of business of the assessee and it is being used for regulation of air traffic and communicational and navigational control amply shows that the functionality test has duly been applied by the AO; that the technical report and the depreciation chart are detailed and extensive, duly meeting the directions issued by the Tribunal; that the technical report gives specific details of the various assets included in the terminal building; that it shows that the terminal building includes elevators, escalators, baggage conveyors, electronic counters, firefighting and alarm system, aerobridge, shaft, rotunda, etc.; that the AO has gone into these details furnished by the assessee; that the scripting of an assessment order is entirely within the purview of the AO; that the manner in which an assessment order is to be framed has no cut and dry formula; that it is possible that an assessment order is not a 68 ITA Nos.1572 to 1577/D/2011 detailed one and it might be a brief order; that however, such brief nature of an assessment order does not by itself lead to the conclusion that it is erroneous and prejudicial to the interests of the Revenue, enabling the provisions of Section 263 of the Act to be invoked; that in the instant case, the learned CIT has failed to point out any error in the assessment order; that 'CIT Vs. Goyal Family Specific Trust', 171 ITR 695 (All.) is eloquent in this regard, holding that the conclusion of the Commissioner that an assessment order is prejudicial to the interests of the Revenue is not a matter of the subjective satisfaction of the Commissioner and that such a conclusion has to be founded on objective material; that in the present case, there is no material, much less objective material, to uphold the invocation of the power u/s 263 of the Act; and that in this view of the matter, the CIT's order on the issue at hand is also not sustainable in law and the same be cancelled, reviving the assessment order, by allowing the assessee's appeal in this regard too.
60. The learned DR, per contra, has strongly relied on the order under appeal on the issue at hand. It has been contended that there is nothing wrong with the CIT's order on this issue; that the directions issued by the Tribunal to the AO were specific; that as per these directions, the AO was to examine the various aspects of the assessee's assets constituting the terminal building at the airport; that the AO was to determine as to whether these assets, as a whole, were 69 ITA Nos.1572 to 1577/D/2011 'plant' or 'building'; that while doing so, the functionality test was to be applied and it was to be seen as to whether the assets were for housing the passengers in transit, or tools of the trade, or whether some assets were 'building' and some were 'plant'; that the assessee had been directed by the Tribunal to furnish a detailed list of the various assets, to facilitate the passing of an informed order; that however, as is evident from a bare perusal of the assessment order, and as has been rightly observed by the learned CIT, the assessment order was passed merely relying on the material placed before the CIT(A) in the first round; that on remand, the AO had to seek a fresh technical report, which was not done; that the assessment order contained no finding as to what really constituted the terminal building, i.e., as to whether the escalators and conveyor belts, etc., had been shown as a part of 'building', or separately, as machinery or a 'plant'; that in relying on the technical report which was before the learned CIT(A),the AO had arrived at a conclusion which was contrary to that reached by the CIT(A), making the assessment order bad for this reason alone, since a lower authority cannot sit in judgement over the conclusion of an higher authority; that further, the assessment order did not contain any detail of the various assets claimed by the assessee to be 'plant', much less were the functions of such assets examined by the AO; that in fact, though the assessee was required to do so, it never filed any list of its assets on record; that in the absence thereof, coupled with the absence of a fresh technical report, the AO 70 ITA Nos.1572 to 1577/D/2011 was not in a position to, as has not indeed been done, pass a reasoned detailed order as to what really constitutes a terminal building; that in fact, the AO had no occasion to examine as to whether the escalators and conveyor belts, etc., had been shown as part of the building, or separately as machinery of the 'plant'; that further, the CBDT order dated 15.2.1984 has not even been mentioned by the AO, what to talk of the AO having examined the same; that as noted by the learned CIT, the material taken into consideration by the AO while passing the order giving effect to the directions of the Tribunal, was the very same material which had already been considered when the order of the Tribunal was being passed; that actually, no enquiry whatsoever was conducted by the AO, despite specific directions of the Tribunal in this regard; that even the technical report (copy at APB 368 to 372) referred to by the assessee is not a report, as its name itself suggests and it is "Special Technical Features of Airport Terminal Building"; that this document was available with the Tribunal at the time of the passing of its order; that the Tribunal, however, was not satisfied with it; and that in paragraph 5.8 (APB 162) of its order, the Tribunal has observed that "No technical report has been placed on record to describe the building, its specification or (sic-whether) it is specifically designed.". The learned DR has sought to place reliance like for the first issue, on 'CIT Vs. Nalwa Investments Ltd.', 11 Taxmann.com 98 (Del) and 'Rajalakshmi Mills Vs. ITO', 31 SOT 353 (Chennai)(SB), wherein, as per the Department, it has been held, inter alia, that the 71 ITA Nos.1572 to 1577/D/2011 Commissioner, under Section 263 of the Act, can regard an assessment order as erroneous on the ground that in the circumstances of the case, the AO should have made further enquiries before accepting the statement of the assessee in his return. In this manner, the learned DR has sought the assessee's appeals on this issue to be dismissed.
61. We have heard the parties on this issue and have perused the material on record with regard thereto. It is seen that the matter was remitted by the ITAT to the file of the AO, to examine the various assets of the assessee at the airport, termed as 'terminal building', and to examine as to whether as a whole, they were plant or building, by applying the functionality test, by saying as to whether the assets were for housing the passengers in transit and other assets or tools of the trade, or if some assets were 'building', whereas some were 'plant'. The assessee was directed to furnish a detailed list of various assets claimed to be 'plant' and their functions.
62. On the above directions, the AO called for a reply from the assessee. The assessee duly submitted a reply, as noted in the assessment order also. The AO allowed the assessee's claim on considering the material brought before him.
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63. First of all, it remains as a fact that the technical report which was filed by the assessee before the CIT(A), was never before the ITAT. It was, therefore, that the Tribunal observed :- "No technical report has been placed on record to describe the building, its specification or it is specifically designed". It was in this situation, that the Tribunal directed the assessee to furnish the details, as noted above.
64. As per the assessee, these details already constituted part of the record, in the shape of the technical report, which was before the CIT(A). In these facts, it is incorrect to state that the technical report was already before the Tribunal at the time of the passing of its order. The observation of the CIT to this effect is factually incorrect. The CIT having proceeded on this wrong assumption renders the order bad on this very score.
65. In the show cause notice issued under Section 263 of the Act, the CIT objected that the AO had not given any clear finding as to whether the terminal building was a 'plant' or a 'building', by employing the functionality test, i.e., as to whether the assets were for housing passengers in transit and other assets, or tools of the trade, or assets, or building, or plant. It is seen that in the reply furnished by the assessee, it was pointed out that the AO had duly applied his mind to the fact that the technical report had been placed on record; that note thereof had duly been taken by the AO; that the assessee's contention 73 ITA Nos.1572 to 1577/D/2011 had been that the terminal building was a tool of business; that this contention had been examined by the AO; that the factum of the assessee having filed a technical report was recorded in the assessment order; that it was also recorded that the assessee had explained that the building was used for regulation of air traffic and communicational and navigational control; and that the AO had observed that the use of the terminal building for the passengers was incidental, which could not be a ground for disallowing a part of the depreciation on the terminal building. These facts are patent on record. In the light thereof, it cannot be said that the AO had not applied his mind to all the issues raised before him or that no finding had been recorded by the AO in this regard.
66. The next objection of the CIT(A) was that the CBDT order/circular dated 15.2.1984 had not been considered by the AO. In this regard, the assessee maintained that the AO had examined the same; that rather, for AY 1994-95, the assessee's claim of terminal building as plant had been allowed by the AO after specifically referring to the said order/circular. This, again, remains undenied. In the assessment order for AY 1994-95, the said CBDT circular/order had been duly considered while granting the claim of the assessee.
67. Moreover, it remains undisputed that alongwith its return of income, the assessee had filed a detailed chart for claiming 74 ITA Nos.1572 to 1577/D/2011 depreciation. This chart gave a detailed list of the various assets claimed to be 'plant'. This chart was also before the AO. So far as regards the functions of the assets claimed to be 'plant', the technical report, a copy whereof is at APB 360 to 372, explains the functions of each of the parts of the assets of the assessee. The first part of this report contains a description of the functions of the terminal building, whereas the second part of the report contains a detailed list of the items included in the terminal building, alongwith an explanation as to how they specifically function as a 'plant'. The AO has made specific mention of this technical report in his order.
68. It would be appropriate to reproduce hereunder the technical report placed on record by the assessee, to demonstrate that this report does contain all the details and functions of the assets, as required by the directions of the Tribunal :-
"SPECIAL TECHNICAL FEATURES OF AIRPORT TERMINAL BUILDING An Airport Terminal Building caters for the Passengers, Airlines, Regulatory and Security agencies and house air traffic control towers etc. The building is meant for specific purposes and are equipped with mechanical/electrical/electronics/other plants and equipments in order to perform its function for which it has been designed. The specialized features of the Terminal Building vis-a-vis a normal building is technically justified below:75 ITA Nos.1572 to 1577/D/2011
1. The terminal buildings are designed to handle certain number of passengers and their baggage within a specified time. Therefore, the facilities/devices are accordingly provided in the quantity and volume as calculated with the help of relevant standards/codes. All infrastructure including water supply, sanitation, air conditioning, check-
in counters, conveyor belts, restaurant & canteen facilities, shops and stalls etc. have to be provided considering the maximum passenger load at any given time. Standby arrangements for all the facilities including water supply, drainage system, air-conditioning and electricity are also necessary as the airport runs 24 hours a day, 365 days in a year.
2. The terminal building is designed for having live loads of 500 kg/sqm. to withstand the overloading of passengers and visitors whereas ordinary building is designed for a live load of 200-250 kg./sqm. In addition, where heavier loading due to equipments are to be supported, the relevant areas are designed to withstand the required loads. For example, where a telephone exchange is to be housed, the load is considered as 1000 Kg./sqm. and so on.
3. In terminal building, the spans are kept larger so as to have maximum column free space and as a result of this stipulation, the slab thickness and beam dimensions get increased tremendously. Columns are also to be provided with larger size and heavy reinforcement. In ordinary buildings, the beam span is normally 3 to 5 metre whereas in Airport Terminal Building it varies from 10 to 30 metre. 76 ITA Nos.1572 to 1577/D/2011 As the Terminal Building is supposed to cater for longer life, adequate provision for resistance to corrosion are made. In addition, the Terminal Building is designed for maximum wind velocity in the Zone and also designed to cater for earthquake criteria. The importance factor of 1.5 is taken while designing the Terminal Building as against 1.0 used for ordinary buildings.
4. To control the movement of aircrafts on ground as well as in the sky, certain hi-tech equipments are required. These equipments include sophisticated radars, computers and other sensors/electronics gadgets. Some of these gadgets are required to be placed at certain height which is essential for their functioning for which high rise control towers are required to be constructed. The other gadgets are housed in lower height structures depending upon their size and shape.
All provisions for elevators, taking heavy cables to the top floor for control tower, overhead radar etc. are made in the structure itself. The Control Towers facilitate the Air Traffic Controller to have an unobstructed view of almost all the areas of an Airport. Such structures need special care during their designing and execution process. These hi- tech control towers equipment with extraordinary sophisticated equipments is a unique structure made only at the Airports.
The Control Towers are used for the day to day operation from were ground to aircraft and ground to ground communications are undertaken by the Air Traffic with the help of highly sophisticated equipments such as Radar, 77 ITA Nos.1572 to 1577/D/2011 electronic panels etc. The control towers monitors the constant movement of the Aircrafts with the help of equipments and monitors like Very High Omni Range (VOR)/Doppler Very High Omni Range (DVOR), High Power Distance Measuring Equipment (DME), Instrument Landing System (ILS), Primary and Secondary Radars, Automatic Dependent Surveillance System etc. These equipments are subject to high risk of obsolescence on account of technological advancement and due to adverse conditions under which they are operated.
5. The Airport Terminal Buildings remain very close to the aircrafts. These buildings are exposed to severe vibrations of the running jet engine of the aircrafts. To withstand the vibrations and noise of the engines, the buildings are constructed with super material and construction specifications with a high degree of accuracy. The glazing is hermetically sealed double glass which prevents heat and sound entering the building. Mezzanine floors are also constructed to have better utilization of space where high roof is not required. Mezzanine floors are not common in ordinary buildings. Since the basic structure of the buildings are subject to pressure of repetitive vibrations of heavy bodied aircrafts, the normal life of the structure itself gets reduced, involving high maintenance cost. The repetitive vibrations also damage the exterior finishes to the structure due to exhaust thrust of aircrafts, which is released at a high speed necessitating frequent replacement.
78 ITA Nos.1572 to 1577/D/2011Apart from the above general description about a Terminal Building, following devices also make this building a special one as compared to an ordinary buildings:
i) Elevators : Shafts of big size for high capacity elevators have to be provided in the Terminal Building.
Provision for machine room to cater for motors, chains for raising and lowering of the elevator cage and the shaft is made while planning the Terminal Building. While designing attention is paid to ensure the safety and comforts of passengers/visitors who use the elevators.
ii) Escalators : The Terminal Building is also designed structurally to withstand loads of escalators weighing approx. 7.5 tonnes and as this equipment is generally taken to the building after its completion in almost all respects and accordingly the portions in which escalators are taken, the windows/doors are dismantled and redone after the escalator has been taken to required locations. The Structure which supports the escalators has to be designed for heavier loads ............. (illegible).
iii) Baggage Conveyor Belts : Baggage Conveyor Belts start from check-in counters and run through .........(illegible) baggage............... (illegible). These belts
carry heavy load of baggage and the belts roll over rollers supported on a specially designed structure. As the departure lounge is generally on first or second floor of the building, extra load for this service is also to be accounted for while designing the structure. Wherever the conveyor belts are required to be carried through necessary 79 ITA Nos.1572 to 1577/D/2011 spacings are made in the walls and where conveyor is moving over sloping portion, a specially designed ramp is constructed with adequate security arrangements to prevent damage/pilferage of the baggage.
When the baggage is to be loaded the same is brought down to a level where a group of trolleys of various Airlines are parked for lifting the baggage and taking the same to difference Aircrafts and this area is known as Baggage Make-up Area (BMA).
When baggage is brought from an arriving Aircraft, the baggage is unloaded and transferred to the conveyor belts and this area is known as Baggage Break-up Area (BBA). Here also provision is kept to ensure that a least 2 to 4 dollies can be kept at a time. Provision is also made to avoid any mishap, due to malfunctioning of the conveyor belts. In the trolleys/dollies movement area, special protection has to be provided to the structural members of the Terminal Building against damages on account of the movement of large size trolleys/dollies.
iv) Check-in Counters : The Terminal Building is designed to cater for load of check-in counters for individuals Airlines. A number of counters are required to cater to individual needs of Airlines. These counters are equipped with automatic weighing facility for check-in baggage and computers for issuing boarding cards to passengers. These counters are also termed as Common User Terminal Equipment (CUTE). All arrangements for power cables and computer network are planned and designed before hand.
80 ITA Nos.1572 to 1577/D/2011
v) Fire Alarm & Fire Fighting Systems : These are specially safety measures for an Airport Terminal Building. The fire sensor devices and fire fighting pipes with sprinkles are suspended from the RCC roof and roof slab is required to be designed to sustain their loads and as a result of the same, the thickness of the slab gets increased. In addition to the above, fire hydrants of suitable capacity are also provided at strategic locations. These hydrants are designed for specific need of fire fighting within the Building in accordance with Fire Department's Guidelines. At any ............(illegible) highest hydrant water should be ably come out at a pressure of not less than ..............(illegible).
vi) Passengers screening Systems : Heavy duty X-ray machines and Passengers Screening Systems are installed in the Terminal Building at many locations in departure as well as arrival area. Additional load of these systems ...............(illegible) is also considered while designing various floors of the Terminal Building. The locations for these systems cannot be fixed for all the times and depending upon the necessity and convenience of the user agencies and passengers, the location may change from time to time. Therefore, additional load has to be considered for larger areas and not limited to the area where the system was originally proposed to be installed. Provision for cables and other support facilities for these installations has also to be planned and made at various strategic locations.
81 ITA Nos.1572 to 1577/D/2011
vii) Air conditioning & Cable Ducts : Air-conditioning and cable ducts also run between the roof slab and false ceiling. These ducts are also suspended from the building's ceiling. In ordinary buildings, these ducts normally run along walls but in Airport Terminal Buildings, because of very large open spaces between walls, it is not possible to run the ducts along walls and therefore, entire load of these ducts has to be borne by the RCC slab in turn to the beams, columns and footings.
Air Handling Units (AHUs) are required to be provided at designed locations in order to maintain air pressure and temperature of the Air-conditioning system. These AHUs are quite heavy and therefore, the structure with supports the AHUs is designed for higher static load of upto 100 kg/sqm. There is a provision of water proofing at the floors so that water is not able to seep through the floor and cause damage/rusting of reinforcement.
viii) Aerobridge Shaft and Rotunda : These are the structures constructed only at Airport Terminal Building and nowhere else. The Shaft facilitates passengers to reach the Aerobridge which operates at a certain distance from the Terminal Building and the Rotunda provides sufficient space for the passengers to wait for their turn before entering the Aerobridge. From Rotunda, through Aerobridge the passengers enter into the Aircraft directly. The Aerobridge shaft, Rotunda and the Aerobridge are close structures and provide protection to the passengers against rain, sun & cold.
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Each of the above device needs special considerations while planning and designing the structure within which the device is to be housed. The structure of the building should have the strength to bear the load of all the above devices in peak hours.
ix) False Ceiling : The False Ceiling provided in the buildings are of a special design and specification requires only charged completely in a period of 3 to 4 years even after exhaustive maintenance. The replacement of false ceiling is a costly affair.
x) Flooring : The Flooring in the Terminal Buildings are exhaustively used by the passengers and visitors in the building at all times apart from ............(illegible) necessitating frequent replacement of special mezzanine flooring.
At an Airport, hundreds and thousands of such passengers make use of this system and all other facilities on 24 hours basis for different flight schedules for different times. To make and Airport Terminal Building functional on 24 hours basis many activities and man power required to perform those activities continue to work all the times."
69. A perusal of the above report shows that it indeed contains all the requisite details and functions of the assessee's assets. It contains very many details about all the assets of the assessee at the airport, like elevators, escalators, baggage conveyer belts, check-in counters, fire alarm & fire fighting systems, passengers screening system, air 83 ITA Nos.1572 to 1577/D/2011 conditioning & cable ducts, aerobridge shaft and rotunda, false ceiling and flooring, etc. It gives the specifications and the usage thereof. It cannot, therefore, in any manner be said to be merely a technical report, as tried to be made out on behalf of the Department. It is an elaborate report, containing all the requisite details which were duly taken into consideration by the AO while passing the assessment order. It has not been shown otherwise. These details include the list of the various assets and the functions of each and every asset.
70. Besides, undisputedly, the chart for claiming depreciation, filed alongwith the return of income, contains the detailed list of the assessee's various assets claimed to be 'plant'. These documents alongwith other material referred to hereinabove, were before the AO and the assessee offered a detailed explanation.
71. No defect in the technical report has been pointed out by the learned CIT. It is just that he had required another report from an expert to be filed. Now, this, to our mind, is not sustainable in law. In the presence of the technical report placed on record by the assessee, the action of the learned CIT in directing another report to be filed and considered by the AO, amounts to nothing other than substituting such report for that of the assessee. This cannot be allowed to be done under Section 263 of the Act. It was the direction of the Tribunal, which the AO was to carry out and which he did carry out, and the 84 ITA Nos.1572 to 1577/D/2011 learned CIT cannot sit in judgement over the order of the Tribunal. No reexamination of an issue already examined can be done in the manner directed by the learned CIT. Then, when the AO observes that the terminal building is a tool of business and is being used for regulation of air traffic and communicational and navigational control and that the function of the building for the passengers is only incidental, he does so on examination of the technical report filed by the assessee. Further, the technical report shows that the terminal building includes elevators, escalators, baggage conveyors, electronic counters, firefighting and alarm systems, aerobridge, shaft, rotunda, etc. The technical report filed by the assessee thus contains all the requisite details as per the requirements of the directions of the Tribunal.
72. The aspect of jurisdictional competence of the learned CIT to invoke the provisions of Section 263 of the Act in the aforementioned circumstances on this issue also, as dealt with judicially by the various Courts, has been discussed in paragraph Nos.30 to 37 of this order. These case laws are equally applicable to the issue of depreciation on terminal building also.
73. Apropos the case laws referred to by the learned CIT, none of these cases are applicable, in view of our above findings. 85 ITA Nos.1572 to 1577/D/2011
74. In view of the above, the grievance of the assessee in this regard also is found to be justified and is accepted as such. The order of the learned CIT in this regard is also cancelled and that of the Assessing Officer is revived, accepting ground Nos.5 to 10.
75. To sum up, the CIT's order is held to be unsustainable in law as well as on facts on both the issues i.e., exemption u/s 10(29) of the Act and depreciation on terminal building.
76. Ground No.11 is general.
77. As stated at the beginning of this order, the facts are, mutatis mutandis, common in all these appeals. Our foregoing observations are, therefore, respectively applicable to all the appeals.
78. In the result, all the appeals filed by the assessee are allowed.
Decision pronounced in the open Court on 9th September, 2011.
Sd/- Sd/-
(G.E.VEERABHADRAPPA)
(G.E.VEERABHADRAPPA) (A.D.JAIN)
(A.D.JAIN)
VICE PRESIDENT JUDICIAL MEMBER
Dated : 09.09.2011
VK.
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
Assistant Registrar