Airport Authority of India, New Delhi v. CIT-I, New Delhi

ITA 1577/DEL/2011 | 2001-2002
Pronouncement Date: 09-09-2011 | Result: Allowed

Appeal Details

RSA Number 157720114 RSA 2011
Assessee PAN AAACA6412D
Bench Delhi
Appeal Number ITA 1577/DEL/2011
Duration Of Justice 5 month(s) 7 day(s)
Appellant Airport Authority of India, New Delhi
Respondent CIT-I, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 09-09-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 09-09-2011
Date Of Final Hearing 09-06-2011
Next Hearing Date 09-06-2011
Assessment Year 2001-2002
Appeal Filed On 01-04-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH A BENCH A BENCH A BENCH A : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G.E.VEERABHADRAPPA VICE PRESIDENT AND BEFORE SHRI G.E.VEERABHADRAPPA VICE PRESIDENT AND BEFORE SHRI G.E.VEERABHADRAPPA VICE PRESIDENT AND BEFORE SHRI G.E.VEERABHADRAPPA VICE PRESIDENT AND SHRI A.D.JAIN JUDICIAL MEMBER SHRI A.D.JAIN JUDICIAL MEMBER SHRI A.D.JAIN JUDICIAL MEMBER SHRI A.D.JAIN JUDICIAL MEMBER ITA NO ITA NO ITA NO ITA NOS SS S. .. .1572/DEL/2011 TO 1577/DEL/2011 1572/DEL/2011 TO 1577/DEL/2011 1572/DEL/2011 TO 1577/DEL/2011 1572/DEL/2011 TO 1577/DEL/2011 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEARS SS S : : : : 1995 1995 1995 1995- -- -96 & 1997 96 & 1997 96 & 1997 96 & 1997- -- -98 TO 2001 98 TO 2001 98 TO 2001 98 TO 2001- -- -02 0202 02 M/S AIRPORTS AU M/S AIRPORTS AU M/S AIRPORTS AU M/S AIRPORTS AUTHORITY OF THORITY OF THORITY OF THORITY OF INDIA INDIA INDIA INDIA RAJIV GANDHI BHAWAN RAJIV GANDHI BHAWAN RAJIV GANDHI BHAWAN RAJIV GANDHI BHAWAN SAFDARJUNG AIRPORT SAFDARJUNG AIRPORT SAFDARJUNG AIRPORT SAFDARJUNG AIRPORT NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. PAN NO. PAN NO. PAN NO. PAN NO.AAACA6412D. AAACA6412D. AAACA6412D. AAACA6412D. VS. VS. VS. VS. COMMISSIONER OF INCOME TAX COMMISSIONER OF INCOME TAX COMMISSIONER OF INCOME TAX COMMISSIONER OF INCOME TAX- -- -I I I I NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VED JAIN MRS.RANO JAIN AND SHRI V.MOHAN CAS. RESPONDENT BY : MRS.GEETMALA MOHNANI CIT-DR. ORDER ORDER ORDER ORDER PER A.D.JAIN JM PER A.D.JAIN JM PER A.D.JAIN JM PER A.D.JAIN JM : : : : THESE ARE SIX APPEALS FILED BY THE ASSESSEE FOR AY S 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 DEPRE CIATION 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 ITA NOS.1572 TO 1577/D/2011 2 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 TH EREIN:- 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 SECTIO N 263 BOTH THE CONDITIONS I.E. THAT THE ASSESSMENT ORDE R 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 C ANNOT 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 SE CTION 10(29) OF THE ACT REFERRED TO BY THE CIT IN HIS NO TICE HAS BEEN EXAMINED BY THE A.O. AND ORDER HAS BEEN PASSED BY THE A.O. AFTER EXAMINATION OF THE REPLY AND EVIDENC ES SUBMITTED BY THE ASSESSEE AND DUE APPLICATION OF MI ND. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ORDER PASSED BY THE LEARNED CIT IS BAD IN LAW AND O N FACTS AS THE CIT WHILE SETTING ASIDE THE MATTER HAS NOT B EEN ABLE ITA NOS.1572 TO 1577/D/2011 3 TO POINT OUT ANY JUSTIFICATION ON THE BASIS OF WHIC H IT COULD BE SAID THAT THE ASSESSEE IS NOT ELIGIBLE FOR EXEMP TION 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 T HE AO AND ORDER HAS BEEN PASSED AFTER EXAMINING THE REPLY AND EVIDENCES SUBMITTED BY THE APPELLANT AND DUE APPLIC ATION 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 MA TTER HAS NOT BEEN ABLE TO POINT OUT ANY JUSTIFICATION ON THE BASIS OF WHICH IT COULD BE SAID THAT THE ASSESSEE IS NOT ELI GIBLE 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 WITHOU T 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 CAN NOT 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 ITA NOS.1572 TO 1577/D/2011 4 REVISIONARY POWER UNDER SECTION 263 OF THE ACT DESP ITE THE FACT THAT EVEN AFTER THOROUGH EXAMINATION NO SPECI FIC FINDINGS HAVE BEEN GIVEN ON THE ISSUE OF HOW THE OR DER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. 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 O R ALTER ANY OF THE GROUNDS OF APPEAL. 4. GROUND NOS.1 TO 4 RELATE TO THE ISSUE OF EXEMPTI ON UNDER SECTION 10(29) OF THE ACT. THE FACTS ARE AS FOLLOWS. 5. IN THE ORIGINAL ASSESSMENT PROCEEDINGS THE ASSE SSEE AUTHORITY HAS ALL ALONG BEEN CLAIMING EXEMPTION UNDER SECTION 10(29) OF THE IT ACT WITH REGARD TO ITS INCOME FROM LETTING OUT OF W AREHOUSES. HOWEVER THE CLAIM OF THE ASSESSEE UNDER SECTION 10(29) OF T HE 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 Y EARS WHEREIN IT HAD BEEN HELD THAT THE ASSESSEE AUTHORITY WAS NOT AN AU THORITY 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 ASSESSEES CLAIM THE AO HAD OB SERVED THAT HE DID NOT AGREE WITH THE ASSESSEES CONTENTION THAT IT WA S AN AUTHORITY CONSTITUTED FOR MARKETING OF COMMODITIES; THAT IN T HE CASE OF CIT ITA NOS.1572 TO 1577/D/2011 5 GUJARAT VS. GUJARAT STATE WAREHOUSING CORPORATION 124 ITR 282 (GUJ.) RELIED ON BY THE ASSESSEE THE GUJARAT STAT E WAREHOUSING CORPORATION WAS CONSTITUTED BY THE WAREHOUSING ACT 1962 AND THE FUNCTIONS LAID DOWN UNDER SECTION 24 THEREOF WERE A S FOLLOWS:- (A) ACQUIRE AND BUILD GODOWNS AND WAREHOUSES AT SU CH PLACES WITHIN THE STATE AS IT MAY WITH THE PREVIOU S 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 T HE PURCHASE SALE STORAGE AND DISTRIBUTION OF AGRICUL TURAL 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-CLA USE (C) IT WAS APPRECIABLE THAT THE STATE WAREHOUSING CORPORATION ACTED AS AN AGENT OF THE CENTRAL WAREHOUSING CORPORATION OF THE GOVER NMENT FOR THE PURPOSE OF PURCHASE SALE STORAGE AND DISTRIBUTION OF AGRICULTURAL PRODUCE SEEDS ETC. WHEREAS IN THE CASE OF THE I NTERNATIONAL AIRPORT ITA NOS.1572 TO 1577/D/2011 6 AUTHORITY NO SUCH FUNCTIONS WERE VESTED IN THEM; T HAT IN THE CASE OF STATE WAREHOUSING CORPORATIONS THE WAREHOUSES HAD BEEN ESTABLISHED WITH THE SOLE PURPOSE OF MARKETING OF THE VARIOUS C OMMODITIES AND THEY WERE OPEN TO THE PUBLIC AT LARGE FOR THIS PURP OSE ONLY WHEREAS IN THE CASE OF THE ASSESSEE AUTHORITY THE BASIC FUNCT ION WAS TO MANAGE THE AIRPORT EFFICIENTLY AND MAINTENANCE OF WAREHOUS ES AT THE AIRPORTS WAS AN ANCILLARY FACILITY FOR THE EFFICIENT OPERATI ON OF THE AIRPORT TRANSPORT SERVICES; THAT THE WAREHOUSES AT THE AIRP ORTS WERE ESTABLISHED TO ACHIEVE THE MAIN OBJECT I.E. TO MA NAGE THE AIRPORT EFFICIENTLY AND COULD NOT BE CONSIDERED FOR THE PUR POSES OF MARKETING OF COMMODITIES AS STIPULATED UNDER THE WAREHOUSES C ORPORATIONS 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 IMP ETUS TO SMALL FARMERS TO STORE THEIR PERISHABLE COMMODITIES IN WA REHOUSES CONSTRUCTED SPECIFICALLY FOR THIS PURPOSE BY THE AU THORITY CONSTITUTED BY THE GOVERNMENT OR BY SPECIFIC NOTIFICATION; THAT IN SINGHAL BROS.P.LTD. VS. CIT 124 ITR 147 (CAL.) THE HONBLE CALCUTTA HIGH COURT HAD EXPRESSED ITS DISSENT WITH THE TOO BROAD PROPOSITIO NS LAID DOWN BY THE HONBLE ALLAHABAD HIGH COURT IN UP STATE WAREHOUSI NG CORPORATION 94 ITR 129 (ALL.) TO THE EFFECT THAT IF AN ENTITY IS CREATED BY A STATUTE PRIMARILY OR SPECIFICALLY FOR THE PURPOSE OF MARKET ING OF COMMODITIES IT WILL BE AN AUTHORITY WITHIN THE MEANING OF THESE PR OVISIONS; THAT IN THE ASSESSEES CASE AS WAS EVIDENT FROM THE PREAMBLE O F THE INTERNATIONAL ITA NOS.1572 TO 1577/D/2011 7 AIRPORT AUTHORITY ACT 1971 WAREHOUSING ACTIVITY W AS ONLY A SUBSIDIARY ACTIVITY OF THE ASSESSEE; THAT THE INTENT OF THE LE GISLATURE 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 W AS NOT EXEMPT FROM TAX UNDER SECTION 10(29) FOR THE ACTIVITIES S O PERFORMED; AND THAT IF THE AIRPORT AUTHORITY OF INDIA WAS CREATED BY TH E STATUTE PRIMARILY OR SPECIFICALLY FOR THE PURPOSE OF MARKETING OF COMMOD ITIES IT WOULD HAVE BEEN COVERED BY SECTION 10(29) OF THE ACT. 7. AGGRIEVED THE ASSESSEE HAS BEEN CARRYING THE MA TTER IN APPEAL BEFORE THE LEARNED CIT(A). 8. THE CIT(A) HAS ALL ALONG ALLOWED THE EXEMPTION U NDER SECTION 10(29) TO THE ASSESSEE AUTHORITY EXCEPT FOR AY 199 8-99. 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 MATTE R FURTHER IN APPEAL BEFORE THE ITAT. 10. THE ITAT VIDE ITS ORDER DATED 27.7.2007 (COPY AT PAGES 141-174 OF THE ASSESSEES PAPER BOOK APB FOR SHORT) REL EVANT PORTION AT PARAGRAPH 2 (APB 142) PASSED IN ITA NO.3572/DEL/20 03-04 RESTORED ITA NOS.1572 TO 1577/D/2011 8 THE MATTER TO THE FILE OF THE AO TO BE EXAMINED AN D DECIDED AFRESH IN THE LIGHT OF THE DIRECTIONS OF THE TRIBUNAL AS GIV EN IN ITS ORDER DATED 8.12.2006 IN THE ASSESSEES CASE IN ITA NO.2378/DE L/2004 FOR AY 2000-01 BY WHICH ORDER THE CASE HAD BEEN STATED B Y 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 T HE APPROPRIATE LAW AND TO DETERMINE WHETHER THE ASSESSEE WAS RUNNING O R ESTABLISHING WAREHOUSES OR CARGO COMPLEXES. 11. THE TRIBUNAL IN ITS AFORESAID ORDER DATED 8.12 .2006 IN THE ASSESSEES CASE FOR AY 2000-01 HAD OBSERVED THAT T HE TAXING AUTHORITIES HAD DECIDED THE ISSUE OF EXEMPTION U/S 10(29) OF THE ACT ON THE BASIS OF AN ENACTMENT (THE INTERNATIONAL AIRPOR TS AUTHORITY ACT 1971) WHEREUNDER THE AUTHORITY WAS EMPOWERED TO ES TABLISH WAREHOUSES ALONE WHEREAS UNDER THE AIRPORTS AUTHOR ITY OF INDIA ACT 1994 THE AUTHORITY WAS EMPOWERED TO ESTABLISH WARE HOUSES AND CARGO COMPLEXES; THAT ADMITTEDLY EXEMPTION U/S 10( 29) IS AVAILABLE ON THE INCOME FROM LETTING OUT OF GODOWNS OR WAREHOUSE S FOR STORAGE PROCESSING OR FACILITATING THE MARKETING OF COMMODI TIES; 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 WAREHOU SES 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 ITA NOS.1572 TO 1577/D/2011 9 NECESSARY THAT THE AO GOT AN OPPORTUNITY TO RE-EXAM INE THE MATTER APPLYING THE APPROPRIATE LAW AND TO SEE WHETHER THE ASSESSEE WAS RUNNING OR ESTABLISHING WAREHOUSES OR CARGO COMP LEXES. 12. UPON REMAND BY THE TRIBUNAL BY VIRTUE OF ITS OR DER DATED 27.7.2007 THE AO VIDE ORDER DATED 27.3.2009 PASS ED UNDER SECTIONS 254/143(3) OF THE ACT ALLOWED EXEMPTION U/S 10(29) OF THE ACT TO THE ASSESSEE ACCEPTING THE ASSESSEES 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 AUT HORITY CONSTITUTED FOR MARKETING OF COMMODITIES AND (C) THE EXEMPTIBLE INCOME MUST BE DERIVED FROM THE LETTING OF GODOWNS OR WAREHOUSES F OR STORAGE PROCESSING OR FACILITATING THE MARKETING OF THE COM MODITIES; THAT THE ASSESSEE DID FULFILL ALL THESE CONDITIONS U/S 10(29) OF THE AC T; THAT THE ASSESSEE WAS AN AUTHORITY CONSTITUTED UNDER THE AIR PORTS AUTHORITY OF INDIA ACT 1994 SATISFYING THE FIRST CONDITION; TH AT AS PER THE PROVISIONS OF SECTION 12(3)(G) OF THE AIRPORTS AUTHORITY OF IN DIA ACT 1994 ONE OF THE FUNCTIONS OF THE ASSESSEE WAS TO ESTABLISH WARE HOUSES AND CARGO COMPLEXES AT THE AIRPORTS FOR THE STORAGE OR PROCES SING OF GOODS; THAT THE ASSESSEE AUTHORITY PLAYED A VITAL ROLE IN FACIL ITATING THE TRANSPORTATION OF EXPORTS AND IMPORTS OF VARIOUS CO MMODITIES THROUGH ITS AIRPORTS; THAT THE AIRPORT WAREHOUSES PROVIDED FACILITIES TO VARIOUS EXPORTERS AND IMPORTERS AND INTERNATIONAL AIR TRANS PORT CARRIERS TO STORE PROCESS AND TRANSPORT GOODS AND COMMODITIES ALL OVER THE ITA NOS.1572 TO 1577/D/2011 10 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 WAREHOU SES; 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 T RADING 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 T OO; AND THAT SINCE THE ASSESSEE WAS CLAIMING EXEMPTION ONLY IN RESPECT OF LETTING OF GODOWNS AND WAREHOUSES FOR STORAGE PROCESSING OR F ACILITATING 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 LEAR NED 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 ASSES SEE AUTHORITY U/S 12(3)(G) OF THE AIRPORTS AUTHORITY OF INDIA ACT 19 94 TO ESTABLISH WAREHOUSES AND CARGO COMPLEXES; THAT THE AO HAD NO T GIVEN ANY CLEAR FINDING AS TO WHETHER THE ASSESSEE WAS ACTUAL LY RUNNING A WAREHOUSE OR CARGO COMPLEX OR BOTH; THAT THE AO HA D NOT CONSIDERED THE DOCUMENTS INCLUDING THE MINUTES OF THE MEETING HELD IN THE ITA NOS.1572 TO 1577/D/2011 11 CABINET SECRETARIAT ON 25.5.1982 WHEREIN CONSEQUE NT 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 DETERMINAT ION QUA RUNNING OR ESTABLISHING OF WAREHOUSES OR CARGO COMPLEXES BY TH E ASSESSEE AUTHORITY AND BECAUSE OF THE AO NOT HAVING DETERMIN ED THE NATURE OF THE ASSESSEES CARGO INCOME THE ASSESSMENT ORDER W AS ERRONEOUS; AND THAT THE AOS 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 REVEN UE. 14. IT IS IN THIS FACTUAL BACKDROP THAT THE ASSESSE E 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 PASSE D 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 T HE ACT PROVIDE FOR EXEMPTION TO AN AUTHORITY WHICH HAS BEEN CONSTITUTE D UNDER THE LAW FOR MARKETING OF COMMODITIES WITH REGARD TO ITS IN COME FROM LETTING OUT OF WAREHOUSES FOR STORAGE AND PROCESSING OF COM MODITIES; 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 ITA NOS.1572 TO 1577/D/2011 12 AUTHORITY CONSTITUTED UNDER THE AIRPORTS AUTHORITY OF INDIA ACT 1994; THAT AS PER SECTION 12(3)(G) OF THE SAID ACT ONE O F THE FUNCTIONS OF THE ASSESSEE AUTHORITY IS TO ESTABLISH WAREHOUSES AND C ARGO COMPLEXES AT THE AIRPORTS FOR THE STORAGE OR PROCESSING OF GOOD S; 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 COMMODITIE S 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 WAREHOUS ES AND CARGO COMPLEXES AT VARIOUS AIRPORTS; THAT THE OTHER ACTIV ITIES OF THE ASSESSEE OF PROCESSING OF COMMODITIES AND FACILITATING THEIR DISTRIBUTION AND THEIR PRESERVATION FROM NATURAL DISASTERS FALL WEL L WITHIN THE AMBIT OF SECTION 10(29) OF THE ACT; THAT THE ASSESSEE AUTHOR ITY 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 SAM E WAS BEING ALLOWED IN FIRST APPEAL BY THE LEARNED CIT(A) WHIC H POSITION CONTINUED TILL AY 1996-97; THAT HOWEVER FOR AY 1998-99 WHE REAS THE AO DISALLOWED THE EXEMPTION FOLLOWING THE ASSESSMENT O RDERS 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 DEPARTMENTA L APPEAL FOR AY 2000-01 CAME UP FIRST BEFORE THE TRIBUNAL; THAT THE REIN IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT AS PER TH E PROVISIONS OF SECTION 16(3)(D) OF THE INTERNATIONAL AIRPORTS AUTH ORITY ACT 1971 ONE ITA NOS.1572 TO 1577/D/2011 13 OF THE ACTIVITIES OF THE ASSESSEE AUTHORITY WAS TO ESTABLISH WAREHOUSES AT AIRPORTS FOR STORAGE AND PROCESSING OF GOODS TH AT EARLIER THE CENTRAL WAREHOUSING CORPORATION HAD BEEN PROVIDING FACILITI ES AT VARIOUS PLACES IN VARIOUS STATES AT THE NATIONAL AS WELL A S THE INTERNATIONAL AIRPORTS TO FACILITATE MARKETING OF COMMODITIES T HAT WHEN STATE WAREHOUSING CORPORATIONS CAME INTO EXISTENCE THE W ORK OF WAREHOUSING IN STATES WAS ASSIGNED TO SUCH STATE WA REHOUSING CORPORATIONS THAT WHEN THE NATIONAL AIRPORTS AUTHO RITY OF INDIA CAME INTO BEING THE WAREHOUSING FACILITIES AT NATIONAL AIRPORTS WERE ASSIGNED TO THE NATIONAL AIRPORTS AUTHORITY OF INDIA THAT O N THE ENACTMENT OF THE INTERNATIONAL AIRPORTS AUTHORITY OF INDIA ACT 1971 THE GOVERNMENT OF INDIA DECIDED THAT THE WORK OF WAREHOUSING AT AIRPO RTS 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 WAREHO USING CORPORATION AT THE AIRPORTS WERE TRANSFERRED TO THE INTERNATION AL AIRPORTS AUTHORITY OF INDIA THAT BY VIRTUE OF THE PASSING OF THE AIRP ORTS AUTHORITY OF INDIA ACT 1994 THE NATIONAL AIRPORTS AUTHORITY OF INDIA AND THE INTERNATIONAL AIRPORTS AUTHORITY OF INDIA WERE MERGED INTO ONE AU THORITY I.E. THE ASSESSEE AIRPORTS AUTHORITY OF INDIA THAT FROM THE N ONWARDS IT IS THE ASSESSEE AUTHORITY WHICH HAS SOLELY BEEN CARRYING ON THE FUNCTIONS OF WAREHOUSING AT THE AIRPORTS IN INDIA THAT BEFORE T HEIR MERGER BOTH THE ITA NOS.1572 TO 1577/D/2011 14 NATIONAL AIRPORTS AUTHORITY AS WELL AS THE INTERNAT IONAL AIRPORTS AUTHORITY HAD BEEN GETTING EXEMPTION UNDER SECTION 10(29) OF THE ACT WITH REGARD TO THE INCOME EARNED FROM LETTING OUT O F WAREHOUSES THAT IN CIT DELHI-II VS. CENTRAL WAREHOUSING CORPORATI ON - 156 ITR 407 (DEL.) IT WAS HELD THAT THE CENTRAL WAREHOUSING CO RPORATION WAS AN AUTHORITY CONSTITUTED UNDER LAW FOR MARKETING OF CO MMODITIES AND ITS INCOME DERIVED FROM LETTING OF GODOWNS OR WAREHOUSE S FOR STORAGE PROCESSING OR FACILITATING MARKETING OF COMMODITIES WAS EXEMPT FROM TAX U/S 10(29) OF THE ACT THAT SINCE THE WORK OF T HE CENTRAL WAREHOUSING CORPORATION HAD BEEN ULTIMATELY TAKEN O VER BY THE ASSESSEE AUTHORITY AND THERE WAS NO CHANGE IN THE N ATURE 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 WH ILE DISALLOWING THE EXEMPTION HAD REFERRED TO SECTION 16(3)(D) OF THE INTERNATIONAL AIRPORTS AUTHORITY ACT 1971 WHEREAS THE AY 2000-0 1 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 AI RPORTS AUTHORITY OF INDIA ACT 1971 TALKED OF AN ESTABLISHMENT OF WARE HOUSE SECTION 12(3)(G) OF THE AIRPORTS AUTHORITY OF INDIA ACT 19 94 CONSIDERED ESTABLISHMENT OF WAREHOUSE AND CARGO COMPLEX; THA T IT WAS DUE TO ITA NOS.1572 TO 1577/D/2011 15 THESE DIFFERENCES IN THE TWO SECTIONS OF THE TWO AC TS THAT THE TRIBUNAL REMANDED THE MATTER TO THE AO THE TAXING AUTHORITI ES HAVING USED THE TERMS WAREHOUSE AND CARGO COMPLEX INTERCHANGEAB LY WHICH AS PER THE TRIBUNAL COULD NOT BE THE CASE UNDER THE A CT OF 1994 AS WAREHOUSE AND CARGO COMPLEX STOOD DIFFERENTIATE D BY THE SAID ACT ITSELF; THAT BEFORE THE TRIBUNAL IN THAT CASE A R EFERENCE HAD ALSO BEEN MADE TO THE MINUTES OF THE MEETING HELD IN THE CABI NET SECRETARIAT ON 25.5.1982 WHEREIN THE WAREHOUSES AT THE INTERNATI ONAL AIRPORTS HAD BEEN ASSIGNED TO THE ASSESSEE AUTHORITY FOR STORAGE OR PROCESSING OF GOODS CONSEQUENT TO THE ESTABLISHMENT OF THE INTER NATIONAL 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 R EQUISITE DETAILS; THAT THIS WAS EVIDENT FROM THE ASSESSEES REPLY (CO PY 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 T HE 1994 ACT ONE OF THE FUNCTIONS OF THE ASSESSEE AUTHORITY IS TO ESTAB LISH 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 CL ARIFIED THAT THE AIRPORTS AUTHORITY OF INDIA PLAYS A VITAL ROLE IN F ACILITATING THE TRANSPORTATION OF IMPORTS AND EXPORTS OF VARIOUS CO MMODITIES THROUGH ITS AIRPORTS AND THE AIRPORT WAREHOUSES PROVIDE FA CILITIES TO VARIOUS EXPORTERS IMPORTERS AND NATIONAL AND INTERNATIONAL AIR TRANSPORT CARRIERS TO STORE PROCESS AND TRANSPORT GOODS AND COMMODITIES OVER ITA NOS.1572 TO 1577/D/2011 16 THE WHOLE WORLD BELONGING TO VARIOUS EXPORTERS AND IMPORTERS; THAT IT WAS FURTHER CLARIFIED THAT THE ASSESSEE HAD ESTABLI SHED WAREHOUSES AND STORAGE FACILITIES IN THE INTERNATIONAL AIR CARGO C OMPLEXES AT VARIOUS AIRPORTS AND THAT THE ASSESSEE EARNS REVENUE FROM T HE LETTING OF SUCH WAREHOUSES; THAT IN SUB-PARA 3(I) IT WAS STATED TH AT WAREHOUSING OR STORAGE IS AN ESSENTIAL STEP IN THE WHOLE PROCESS O F MARKETING; THAT THE AO DULY CONSIDERED ALL THE EVIDENCE FILED BEFORE HI M 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 TRI BUNAL ORDER WAS ALSO EXTRACTED IN THE ASSESSMENT ORDER; THAT THE PROVISI ONS OF SECTION 12(3)(G) OF THE AIRPORTS AUTHORITY OF INDIA ACT 19 94 WERE REFERRED TO; THAT THE MANDATE OF SECTION 12(3)(G) OF THE 1994 AC T WAS SPECIFICALLY RECORDED TO HAVE BEEN BROUGHT TO THE AOS NOTICE; T HAT THE AO HAD ALSO OBSERVED THAT THE ASSESSEE HAD SHOWN INCOME FROM WA REHOUSES SEPARATELY AND THAT IT BEING A STATUTORY AUTHORITY IN VIEW OF THE PROVISIONS OF SECTION 12(3)(G) OF THE AIRPORTS AUTH ORITY 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 SEIZ ED OF THE ISSUE AND HE WENT THROUGH THE ENTIRE RECORD AND THE ASSESSEE S EXPLANATION BEFORE DOING SO; THAT THE REASON STATED FOR THE INV OCATION 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 WAREHOUSE S OR CARGO COMPLEXES AND IN THE ABSENCE OF THE DETERMINATION O F THE NATURE OF ITA NOS.1572 TO 1577/D/2011 17 THE CARGO INCOME THE ASSESSMENT ORDER OUGHT TO BE CONSIDERED ERRONEOUS AS IT MAY HAVE RESULTED IN THE WRONG GRAN TING OF EXEMPTION AND THAT IT OUGHT TO BE CONSIDERED AS PREJUDICIAL T O THE INTERESTS OF THE REVENUE; THAT IN RESPONSE TO THE SAID SHOW CAUSE NO TICE THE ASSESSEE AUTHORITY HAD SUBMITTED A DETAILED REPLY (COPY AT A PB 325 TO 359); THAT IN THE SAID REPLY BESIDES THE ABOVE IT WAS POINTE D 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 THER EIN I.E. TO ESTABLISH WAREHOUSES AND CARGO COMPLEXES AT THE AIR PORTS FOR THE STORAGE OR PROCESSING OF GOODS AND THAT THE EXEMPTI ON OF INCOME CLAIMED U/S 10(29) OF THE ACT WAS LIMITED TO THE EX TENT OF THE INCOME EARNED FROM THE LETTING OUT OF THE GODOWNS/WAREHOUS ES FOR STORAGE AND PROCESSING OF COMMODITIES; THAT IT HAD BEEN SUB MITTED THAT THERE WAS A SPECIFIC MENTION IN THE ASSESSMENT ORDER TO T HE EFFECT THAT THE EXEMPTION CLAIMED WAS ONLY FOR INCOME EARNED FROM L ETTING 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 MERCHANDIS E ARE STORED WHEREAS IN COMMON PARLANCE A CARGO COMPLEX IS A GROUP OF WAREHOUSES LIKE IMPORT WAREHOUSES EXPORT WAREHOUS ES ETC.; THAT THE AO HAD DULY EXAMINED THE PROVISIONS OF SECTION 12(3 )(G) OF THE AIRPORTS AUTHORITY OF INDIA ACT 1994 BESIDES HAVI NG EXAMINED ALSO THE ENTIRE ASSESSMENT RECORD OF THE ASSESSEE RIGHT FROM THE VERY BEGINNING; THAT THE ASSESSEE HAD BEEN ALL THROUGH T AKING THE STAND ITA NOS.1572 TO 1577/D/2011 18 THAT IT HAD TAKEN OVER THE FUNCTIONING OF THE CENTR AL WAREHOUSING CORPORATION IN TERMS OF THE DECISION OF THE CENTRAL CABINET AS RECORDED IN THE MINUTES OF ITS MEETING DATED 25.5.1 982 AND HENCE THE DECISION IN THE CASE OF CENTRAL WAREHOUSING CORPOR ATION (SUPRA) RENDERED BY THE HONBLE JURISDICTIONAL HIGH COURT WAS SQUARELY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE THE RE HAVING COME ABOUT NO CHANGE IN THE NATURE OF THE ACTIVITIES OF THE AS SESSEE WITH REGARD TO WHICH THE EXEMPTION U/S 10(29) OF THE ACT WAS BEIN G 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 TR IBUNAL COMPLETELY; THAT IN THE IMPUGNED ORDER HOWEVER THE LEARNED CI T HAS ERRED IN HOLDING THAT THE AOS ORDER WAS ERRONEOUS INSOFAR A S IT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE SINCE THE DIRECTION S OF THE TRIBUNAL HAD NOT BEEN FOLLOWED; THAT WHILE HOLDING SO THE LEARN ED CIT HAS MERELY SUBSTITUTED HIS OWN THINKING FOR THAT OF THE AO IN SPITE OF THE FACT THAT THE ASSESSMENT ORDER WAS PASSED BY THE AO AFTER DUL Y APPLYING HIS MIND TO ALL THE VOLUMINOUS EVIDENCE AND DETAILS FIL ED BY THE ASSESSEE AS REQUIRED; THAT THE LEARNED CIT HAS FAILED TO POI NT 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 SECTIO N 12(3)(G) OF THE AIRPORTS AUTHORITY OF INDIA ACT 1994; THAT THE REL EVANT PROVISIONS OF SECTION 10(29) OF THE ACT WERE ALSO REFERRED TO; TH AT BESIDES THE DIRECTIONS OF THE TRIBUNAL AS WELL AS THE QUANTUM O F INCOME EARNED BY THE ASSESSEE FROM THE LETTING OUT OF THE WAREHOUSES HAVE ALSO BEEN ITA NOS.1572 TO 1577/D/2011 19 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 ENTITLE D TO EXEMPTION U/S 10(29) OF THE ACT; THAT IT HAS NOWHERE BEEN DEN IED THAT THE ASSESSEE AUTHORITY IS AN AUTHORITY CONSTITUTED UNDE R THE AIRPORTS AUTHORITY OF INDIA ACT 1994 OR THAT IT HAS BEEN A SSIGNED 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 GIVE N BY THE AO ONLY IN RESPECT OF THE ASSESSEES INCOME FROM LETTING OUT O F THE WAREHOUSES; AND THAT IN THIS VIEW OF THE MATTER THE ORDER PASS ED 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 O N BEHALF OF THE ASSESSEE. IT HAS BEEN CONTENDED THAT THE ORDER PAS SED BY THE LEARNED CIT IS WELL VERSED; THAT A BARE PERUSAL OF THE ASSE SSMENT ORDER MAKES IT CLEAR THAT THERE WAS NO APPLICATION OF MIND BY T HE AO TO THE ISSUE AT HAND; THAT THE SPECIFIC DIRECTIONS ISSUED BY THE TR IBUNAL WERE NOT AT ALL CARRIED OUT; THAT THE AO MERELY ACCEPTED THE CONTEN TIONS AS MADE BY THE ASSESSEE WITHOUT CARRYING OUT THE SAID DIRECTI ONS OF THE TRIBUNAL AND WITHOUT MAKING ANY SORT OF INQUIRY INTO THE MAT TER; THAT THE AO DID NOT EVEN PRIMA FACIE RE-EXAMINE THE MATTER ON THE LINES OF THE ORDER OF ITA NOS.1572 TO 1577/D/2011 20 THE TRIBUNAL AND AS RIGHTLY NOTED BY THE LEARNED C IT 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; THA T FROM THE DIRECTIONS ISSUED BY THE TRIBUNAL IT IS AMPLY CLEA R 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 FA ILED TO TAKE ANY ACTION IN THIS REGARD; THAT FURTHER THE AO ALSO DI D NOT CONSIDER THE DOCUMENTS INCLUDING THE MINUTES OF THE MEETING OF THE CENTRAL CABINET HELD ON 25.5.1982 WHERE CONSEQUENT TO TH E ESTABLISHMENT OF THE ASSESSEE AUTHORITY THE WAREHOUSES FOR STORAGE OR PROCESSING OF GOODS AT THE INTERNATIONAL AIRPORTS WERE ASSIGNED T O IT; THAT THEREFORE THE ASSESSMENT ORDER WAS PASSED IN COMPLETE OBLIVIO N OF ALL THESE MATERIAL FACTS WHICH WERE WHOLLY NECESSARY TO BE D ETERMINED 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 T HE AO IS ALSO SILENT ABOUT THE DIFFERENCE BETWEEN WAREHOUSE AND CARGO COMPLEX DESPITE THE DIRECTION OF THE TRIBUNAL BEING SPECIFI C 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 ASSESSE E SINCE THE ITA NOS.1572 TO 1577/D/2011 21 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 TH E CIT NO PREJUDICE WHATSOEVER HAS BEEN CAUSED TO THE ASSESSEE SINCE T HE MATTER HAS ONLY BEEN DIRECTED TO BE DECIDED AFRESH ON COMPLYIN G 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 FI LED BY THE ASSESSEE ON THIS ISSUE. RELIANCE HAS BEEN PLACED ON CIT VS NALWA INVESTMENTS LTD. 11 TAXMANN.COM 98(DEL) AND RAJALAKSHMI MILL S 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(2 9) OF THE ACT. IN THE IMPUGNED ORDER THE LEARNED CIT HAS OBSERVED TH E ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERE STS OF THE REVENUE. FOR HOLDING SO THE LEARNED CIT HAS OBSERVED AS FOL LOWS:- 1. AO HAS NOT RE-EXAMINED THE MATTER ALONG THE LIN ES THAT WERE DIRECTED BY THE HONBLE ITAT. THE AO HAS ALLOWED THE EXEMPTION U/S 10(29) MERELY ON THE BASI S 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 ITA NOS.1572 TO 1577/D/2011 22 WAREHOUSES OR CARGO COMPLEXES. IT IS TO BE NOT ED THAT HONBLE ITAT NOTED THE POWER OF THE AAI TO ESTABLI SH WAREHOUSE AND CARGO COMPLEX. IT DIRECTED THE AO T O DETERMINE WHETHER THE ASSESSEE WAS ACTUALLY RUNNING A WAREHOUSE OR CARGO COMPLEX OR BOTH WHICH THE AO FA ILED TO DETERMINE IN HIS ORDER. 3. AO HAS NOT CONSIDERED THE DOCUMENTS INCLUDING TH E MINUTES OF THE MEETING HELD IN THE CABINET SECRETAR IAT 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 INC OME THE ORDER IS ERRONEOUS IN NATURE. THE ORDER HAS NO T FOLLOWED THE DIRECTIONS OF THE ITAT AND IS THUS ER RONEOUS. AS THE DIRECTIONS WERE NOT FOLLOWED THIS RESULTED I NTO IN WRONG GRANTING OF EXEMPTION. ON THIS ISSUE TO THI S EXTENT ORDER DATED 27.03.2009 PASSED U/S 254/143(3) IS ERR ONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF T HE 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 MATTE R AS PER THE DIRECTIONS OF THE TRIBUNAL AND AS TO WHETHER THE EX EMPTION CLAIMED U/S 10(29) OF THE ACT HAS BEEN GRANTED SOLELY ON THE BA SIS 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 REPRO DUCE 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:- ITA NOS.1572 TO 1577/D/2011 23 2. GROUND NO.1 IS AGAINST THE FINDING OF THE LEARN ED CIT(APPEALS) THAT THE ASSESSEE WAS NOT ENTITLED TO EXEMPTION U/S 10(29) OF THE ACT IN RESPECT OF NET I NCOME EARNED ON CARGO WAREHOUSING ACTIVITY. IT WAS THE C OMMON GROUND OF BOTH THE PARTIES THAT THE ISSUE STANDS CO VERED BY THE ORDER OF ITAT DELHI BENCH E NEW DELHI IN T HE 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 REGARDIN G THE APPLICATION OF THE APPROPRIATE LAW AND TO DETERMINE WHETHER THE ASSESSEE IS RUNNING OR ESTABLISHING WAREHOUSES OR CARGO COMPLEXES. RESPECTFULLY FOLLOW ING THAT DECISION THIS MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER TO RE-EXAMINE THE MATTER IN THE L IGHT OF THE DIRECTIONS OF THE TRIBUNAL AND MAKE FRESH ASSES SMENT ON THIS ISSUE AFTER HEARING THE ASSESSEE. THUS TH IS 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 O F THE REMAND OF THE MATTER TO THE AO FOR THE YEARS UNDER CONSIDERAT ION IT WOULD BE APPOSITE TO HEREUNDER REPRODUCE THE OBSERVATIONS MA DE BY THE TRIBUNAL THEREIN:- ITA NOS.1572 TO 1577/D/2011 24 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 LETTIN G OUT OF ITS WAREHOUSES FOR STORAGE PROCESSING OR FACILI TATING THE MARKETING OF COMMODITIES. IT WAS NOTED BY THE ASSE SSING 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 AUTH ORITY OF INDIA (AAI) WAS NOT AN AUTHORITY FOR THE PURPOSES O F MARKETING OF COMMODITIES. IN REPLY TO A QUESTION R AISED BY THE ASSESSING OFFICER AS TO WHY ITS CLAIM FOR EXEMP TION U/S 10(29) OF THE ACT SHOULD NOT BE DISALLOWED FOR THE REASONS GIVEN IN THE ORDERS OF PRECEDING YEARS THE ASSESSE E SUBMITTED THAT UNDER SECTION 16(3)(D) OF THE INTERN ATIONAL AIRPORT AUTHORITY ACT 1971 IT IS ONE OF THE ACTIV ITIES OF THE AUTHORITY TO ESTABLISH WAREHOUSES AT THE AIRPORT FO R STORAGE AND PROCESSING OF GOODS. IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT THE AIRPORT PLAYS A VITAL ROLE IN FAC ILITATING TRANSPORTATION IMPORTS AND EXPORTS OF VARIOUS COMMODITIES. THE AIRPORT WAREHOUSES PROVIDE THE FA CILITY TO VARIOUS EXPORTERS IMPORTERS NATIONAL AND INTER NATIONAL AIR TRANSPORT CARRIERS TO STORE PROCESS AND TRANSP ORT THEIR GOODS AND COMMODITIES. THE ASSESSEE HAD ESTABLISHE D AIR CARGO COMPLEXES AT VARIOUS AIRPORTS AND EARNED REVE NUE 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 F ACTS AND LEGAL PROVISIONS AND IN THE SUBMISSIONS MADE BY THE ASSESSEE WITH REGARD TO ITS CLAIM. LEARNED ASSESSI NG ITA NOS.1572 TO 1577/D/2011 25 OFFICER ALSO PLACED RELIANCE ON THE DECISIONS OF TH E APEX COURT IN THE CASE OF RAJASTHAN WAREHOUSING CORPORAT ION VS. CIT (150 TAXMANN 104). WHILE REJECTING THE CLAIM THE ASSESSING OFFICER OBSERVED THAT THE AIRPORT AUTHORI TY IS NOT AN AUTHORITY CONSTITUTED FOR MARKETING OF COMMODITI ES. HE REFERRED TO THE PROVISIONS OF SECTION 16(1) OF THE INTERNATIONAL AIRPORT AUTHORITY ACT 1971 WHICH LAY S DOWN THE FUNCTION OF THE AUTHORITY COMPARED THE FUNCTIO NS OF THE AIRPORT AUTHORITY WITH THE FUNCTIONS OF THE STATE WAREHOUSING CORPORATION S AND OBSERVED THAT THE STA TE WAREHOUSING CORPORATIONS ACT AS AN AGENT OF CENTRAL WAREHOUSING CORPORATION OF THE GOVERNMENT FOR THE PURPOSES OF PURCHASE SALE STORAGE AND DISTRIBUTIO N OF AGRICULTURAL PRODUCE SEEDS ETC. WHEREAS IN RESPE CT OF INTERNATIONAL AIRPORT AUTHORITY OF INDIA NO SUCH F UNCTIONS ARE VESTED IN IT. IN THE CASE OF STATE WAREHOUSING CORPORATION THE WAREHOUSES ARE ESTABLISHED WITH TH E SOLE OBJECT OF MARKETING OF VARIOUS COMMODITIES AND IT I S OPEN TO THE PUBLIC AT LARGE FOR THESE PURPOSES ONLY. HO WEVER IN THE CASE OF ASSESSEE THE BASIC FUNCTION IS TO MANA GE AIRPORTS EFFICIENTLY. THE MAINTENANCE OF WAREHOUSE S AT THE AIRPORTS IS AN ANCILLARY FACILITY FOR THE EFFICIENT OPERATION OF THE AIR TRANSPORT SERVICES. THE WAREHOUSES ARE EST ABLISHED TO ACHIEVE THE MAIN OBJECTIVE I.E. TO MANAGE THE AI RPORTS EFFICIENTLY AND CANNOT BE CONSIDERED FOR THE PURPOS E 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 ONL Y A SUBSIDIARY ACTIVITY. SUCH ACTIVITY IS NOT EXEMPT F ROM TAX U/S 10(29) OF THE ACT. ITA NOS.1572 TO 1577/D/2011 26 4. IN APPEAL LEARNED CIT(APPEALS) DECIDED THE ISSU E 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 ENTITL ED TO EXEMPTION IF IT FULFILS THE FOLLOWING THREE CONDITI ONS: I) IT IS AN AUTHORITY CONSTITUTED UNDER LAW; II) IT IS AN AUTHORITY CONSTITUTED FOR THE MARKETIN G OF COMMODITIES; AND (III) THE EXEMPTABLE INCOME MUST BE ONE DERIVED FRO M LETTING OUT OF ITS GODOWNS OR WAREHOUSES FOR STORAG E PROCESSING OR FACILITATING THE MARKETING OF COMMODI TIES. THE ISSUE WAS UNDER CONSIDERATION BEFORE THE LEARN ED CIT(APPEALS) IN THE PAST ALSO AND WAS DECIDED THE I SSUE 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(APPEAL S) 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(APPEA LS) DECIDED THAT THE APPELLANT IS NOT ENTITLED TO EXEMP TION U/S ITA NOS.1572 TO 1577/D/2011 27 10(29) AS IT IS NOT AN AUTHORITY CONSTITUTED PRIMAR ILY OR SPECIFICALLY FOR THE PURPOSE OF THE MARKETING OF COMMODITIES. THE WAREHOUSING ACTIVITY IS ONLY A SU BSIDIARY ACTIVITY OF THE ASSESSEE. THE ASSESSEE IS NOT A MA RKETING AUTHORITY CONSTITUTED UNDER A WAREHOUSING ACT. TH E ASSESSEE HAS SET UP CARGO WAREHOUSES WHICH ARE MEAN T ONLY FOR PERSONAL ASSETS OF THE PASSENGERS AND OTHE RS AND ARE NOT MEANT FOR THE PURPOSES OF MARKETING AND PROCESSING OF COMMODITIES. THE WAREHOUSES ARE BEIN G USED FOR FACILITATING THE STORAGE OF GOODS AND BAGG AGE ONLY TILL SUCH TIME THESE ARE BUNDLED INTO THE DESIGNATE D 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 HONBLE GUJARAT HIGH COUR T IN THE CASE OF CIT VS. GUJARAT STATE WAREHOUSING CORPORATI ON 124 ITR 282 AND OTHER CASES RELIED UPON BY THE ASSESSEE AND CAME TO THE CONCLUSION THAT THE ASSESSEE IS ENTITLE D 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 LE ARNED 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 EXEMPTI ON WOULD BE AVAILABLE ONLY FOR STORAGE CUM DEMURRAGE CHARGES OF RS.154 30 68 472/- AND NOT FOR THE INCOM E FROM TERMINAL CHARGES PALLITISATION CHARGES DE-STUFFIN G 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 WAREHOUSE S. HE ITA NOS.1572 TO 1577/D/2011 28 THEREFORE DIRECTED THE ASSESSING OFFICER TO VERIFY THE CORRECTNESS OF THE AMOUNT AND EXCLUDE THE AMOUNT FR OM THE EXEMPTIBLE INCOME. 6. LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE ORDERS PASSED BY THE ASSESSING OFFICE R. HE HAS ALSO DRAWN OUR ATTENTION TO THE PROVISION OF SE CTION 10(29) OF THE ACT AS IT STOOD PRIOR TO 01-04-2003 AND SUBMITTED THAT THE THREE ESSENTIAL REQUIREMENTS ENT ITLED THE ASSESSEE TO EXEMPTION AS MENTIONED BY THE LEAR NED CIT(APPEALS) AND REPRODUCED ABOVE ARE NOT FULFILL ED IN THE CASE OF THE ASSESSEE. THE MAIN FUNCTIONS OF THE AS SESSEE AUTHORITY U/S 16 OF THE IAAI ACT IS TO MANAGE AIRP ORTS EFFICIENTLY AND PROVIDE AT THE AIRPORT SUCH SERVICE S AND FACILITIES AS ARE NECESSARY OR DESIRABLE FOR THE EF FICIENT OPERATION OF AIR TRANSPORT SERVICES. UNDER SUB-SEC TION (3) OF SECTION 16 OF THE ACT IT IS ONE OF THE FUNCTION OF THE AUTHORITY TO ESTABLISH WAREHOUSES AT THE AIRPORTS F OR THE STORAGE OR PROCESSING OF GOODS. HOWEVER UNDERTAKI NG SUCH AN ACTIVITY IS NOT AN ESSENTIAL FUNCTION OF TH E AUTHORITY AS SUB-SECTION (3) ITSELF PROVIDE THAT THE AUTHORI TY 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 AN Y CASE EVEN WHEN THE WAREHOUSES ARE ESTABLISHED AT THE AIR PORT 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 AIRPO RTS TO CATER TO THE NEEDS OF A SPECIFIED CATEGORY OF CLIEN TS AND NOT USED FOR GENERAL WAREHOUSING PURPOSES. WHILE REITE RATING ITA NOS.1572 TO 1577/D/2011 29 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 C IT (APPEALS) VS. CENTRAL WAREHOUSING CORPORATION 124 I TR 282 AND SUBMITTED THAT AIRPORT AUTHORITY IS NOT AN AUTHORITY WHICH HAS BEEN CONSTITUTED FOR THE PURPOSE OF MARKE TING OF COMMODITIES AND THEREFORE IT IS NOT ENTITLED TO EX EMPTION U/S 10(29) OF THE IT ACT. RELYING ON THE AFORESAID DECISION IT WAS ARGUED BY LEARNED DR THAT THE COMPELLING CON TEXT IN SECTION 10(29) IS A LIMITED CONTEXT OF THE STATUTOR Y AUTHORITY WHICH IS CONSTITUTED UNDER LAW IN A LIMIT ED SPHERE VIZ. FOR MARKETING. IF THE AUTHORITY SO CONSTITUT ED HAS ITS JURISDICTION AND FUNCTIONS CHARGED UPON IT BY THE L AW CREATING IT IN THIS LIMITED SPHERE THE AUTHORITY S O FAR AS SUCH LIMITED SPHERE IS CONCERNED WOULD BE THE AUTH ORITY 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 CON SUMER. THE PARLIAMENT HAS USED THE EXPRESSION AUTHORITY F OR MARKETING OF COMMODITIES. THE AUTHORITY MUST PROM OTE MARKETING BY ITS SERVICES IN THE MANDATED AREA OF I TS FUNCTIONING. WAREHOUSING OR STORAGE IS AN ESSENTIA L STEP IN THE WHOLE PROCESS OF MARKETING. IN THE CASE OF GUJ ARAT STATE WAREHOUSING CORPORATION THE HONBLE GUJARAT HIGH COURT HELD THAT THE GUJARAT STATE WAREHOUSING CORPO RATION 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 I N THE PROCESS OF MARKETING BUT IT A FUNCTION BY WAY OF S ERVICE AND FACILITY FOR THE EFFICIENT OPERATION OF AIR TRA NSPORT SERVICES. THE PURPOSE IS NOT TO EARN PROFIT FROM T HE ACTIVITY ITA NOS.1572 TO 1577/D/2011 30 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 TH E INTERNATIONAL AIRPORTS AUTHORITY OF INDIA AND NATIO NAL AIRPORTS AUTHORITY OF INDIA. BOTH THESE AUTHORITIE S WERE MERGED BY A NEW ACT OF PARLIAMENT NAMELY THE AIRPOR TS AUTHORITY OF INDIA ACT 1994. THE CENTRAL WAREHOUS ING CORPORATION WAS PROVIDING FACILITIES AT VARIOUS PLA CES IN VARIOUS STATES AT THE AIRPORTS BOTH THE INTERNATIO NAL AND NATIONAL TO FACILITATE MARKETING. WITH THE COMING INTO EXISTENCE OF THE STATE WAREHOUSING CORPORATIONS TH E 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 WARE HOUSING FACILITIES AT THE INTERNATIONAL AIRPORTS WERE ASSIG NED TO THE INTERNATIONAL AIRPORT AUTHORITY OF INDIA. CONSEQUE NTLY 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 THA T THE INTERNATIONAL AIRPORTS AUTHORITY OF INDIA SHOULD SE T UP NEW CARGO COMPLEXES AT VARIOUS AIRPORTS AND UNTIL SUCH TIME THE NEW WAREHOUSES ARE CONSTRUCTED THE CENTRAL WAREHOUSING CORPORATIONS CAN CONTINUE WITH THE PRES ENT ITA NOS.1572 TO 1577/D/2011 31 WAREHOUSING WORK. ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE THE INTERNATIONAL AIRPORTS AUTHORITY TOOK OVER COMPLETE WAREHOUSING WORK FROM THE CENTRAL WAREHOUS ING CORPORATION ON 31-03-1987 AND ALL ITS WAREHOUSES WE RE 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 A ND THERE WAS A MANDATE TO THE EFFECT THAT THE INTERNAT IONAL AIRPORTS AUTHORITY OF INDIA IS AN AUTHORITY CONST ITUTED FOR THE PURPOSES OF ESTABLISHING WAREHOUSES AND CARGO COMPLEXES AT THE AIRPORTS FOR THE STORAGE AND PROCE SSING OF GOODS AT THE DESIGNATED AIRPORTS WHICH WERE IN THE JURISDICTION OF INTERNATIONAL AIRPORTS AUTHORITY OF INDIA. THEREFORE THE ASSESSEES CASE IS COVERED FOR EXEMP TION U/S 10(29) OF THE ACT. LEARNED COUNSEL FOR THE ASS ESSEE RELIED ON THE DECISION OF THE JURISDICTIONAL HIGH C OURT IN THE CASE OF CIT VS. CENTRAL WAREHOUSING CORPORATION 156 ITR 407. IT WAS FURTHER SUBMITTED BY HIM THAT THE DECI SION WAS IMPLIEDLY CONFIRMED BY THE APEX COURT IN THE CASE O F UNION OF INDIA VS. U.P. STATE WAREHOUSING CORPORATION 187 ITR 54. LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIED O N THE DECISION OF THE ALLAHABAD HIGH COURT IN THE CASE OF U.P. STATE WAREHOUSING CORPORATION VS. ITO 94 ITR 129 A S CONFIRMED BY THE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. U.P. STATE WAREHOUSING CORPORATION 187 IT R 54. WHILE INTERPRETING PROVISIONS OF SECTION 10(29) OF THE ACT IT HAS BEEN HELD IN THESE DECISIONS THAT THE SECTION A PPLIES WHEN THE AUTHORITY IS CONSTITUTED FOR MARKETING OF COMMODITIES. EVIDENTLY SUCH AUTHORITY WILL SPECIF ICALLY BE A BUSINESS ENTERPRISES. EX-HYPOTHESY THE TERM AU THORITY AS OCCURRING IN SECTION 10(29) CANNOT BE POSSIBLY CONSTITUTED AS REFERRING TO AN AUTHORITY HAVING QUA SI- ITA NOS.1572 TO 1577/D/2011 32 GOVERNMENTAL FUNCTIONS. ANY LEGAL ENTITY OR PERSON ALITY CONSTITUTED BY LAW FOR THE PURPOSE OF MARKETING COMMODITIES WOULD BE AN AUTHORITY WITHIN THE MEANIN G 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 US E OF THE WORD FACILITATING SEEMS TO REFER TO FUNCTIONS LIK E GRADATION OR STANDARDS IN THE WAREHOUSES OR GIVING FACILITIES BY WAY OF DISTRIBUTION BY THE AUTHORITIE S RUNNING THE WAREHOUSES OF GOODS FOR COMMODITIES BELONGING T O OTHERS. THE TERM MARKETING HAS BEEN USED IN WIDE R SENSE TO INCLUDE THE VARIOUS ACTIVITIES WHICH GENER ALLY GO TO FORM THE TRADE OF MARKETING. THEREFORE THE LEA RNED COUNSEL SUBMITTED THAT THE WAREHOUSING FUNCTION OF THE AIRPORTS AUTHORITY QUALIFIES FOR EXEMPTION U/S 10(2 9) OF THE ACT. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD AND SUBMIT TED BEFORE US AT THE TIME OF HEARING. AFTER THE CONCLU SION OF HEARING ON 28-09-2006 AND WHILE GOING THROUGH THE C ASE FILE IT WAS NOTED THAT THE AUTHORITIES BELOW HAVE CONSIDERED THE CASE FOR EXEMPTION OF THE ASSESSEE AUTHORITY WITH REFERENCE TO FUNCTIONS ASSIGNED TO I T U/S 16 OF THE IAAI ACT 1971. THE ARGUMENTS WERE ALSO ADV ANCED 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 199 4). WE ARE DEALING WITH A CASE FOR THE ASSESSMENT YEAR 200 0-01. DURING THAT ASSESSMENT YEAR THE IAAI ACT 1971 WAS NOT IN FORCE. THEREFORE WE FELT THAT THE AUTHORITIES BEL OW HAVE ITA NOS.1572 TO 1577/D/2011 33 ERRED IN DECIDING A CASE WITH REFERENCE TO THE PROV ISIONS OF AN ACT WHICH ALREADY STANDS REPEALED. THE CASE WA S THEREFORE FIXED FOR CLARIFICATION ON 03-11-2006. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT S INCE THE PROVISIONS OF SECTION 12 OF THE AAI ACT 1994 WHICH DEFINES THE FUNCTIONS OF THE AUTHORITY ARE IDENTICA L TO THE PROVISIONS OF SECTION 16 OF THE IAAI ACT 1971 THE TRIBUNAL CAN DECIDE THE LEGAL ISSUE WITH REFERENCE TO THE PR OVISIONS OF AAI ACT 1994 AND THERE IS NO NECESSITY TO REMAN D THE MATTER BACK TO THE ASSESSING OFFICER FOR EXAMINING THE ISSUE AFRESH WITH REFERENCE TO THE PROVISIONS OF AA I ACT 1994. 9. LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND SUBMITTED THAT THERE APPEARS TO BE A VARIATIO N IN THE FUNCTIONS OF THE AUTHORITY AS PRESCRIBED UNDER THE IAAI ACT 1971 AND AS PRESCRIBED UNDER THE AAI ACT 1994. UN DER SECTION 16(3)(D) OF THE IAAI ACT 1971 THE AUTHORIT Y WAS EMPOWERED TO ESTABLISH WAREHOUSES AT THE AIRPORTS FOR THE STORAGE AND PROCESSING OF GOODS. HOWEVER UNDE R SECTION 12(3)(G) OF THE AAI ACT 1994 THE AUTHORIT Y IS EMPOWERED TO ESTABLISH WAREHOUSES AND CARGO COMPLEXES AT THE AIRPORTS FOR THE STORAGE AND PROC ESSING OF GOODS. LEARNED DR SUBMITTED THAT EXEMPTION U/S 10(29) IS AVAILABLE ONLY IN RESPECT OF WAREHOUSES A ND NOT IN RESPECT OF CARGO COMPLEXES. IT IS NOT CLEAR FROM T HE RECORDS AVAILABLE OR WITH REFERENCE TO THE ORDERS O F THE LOWER AUTHORITIES WHETHER THE ASSESSEE AUTHORITY IS MAINTAINING CARGO COMPLEXES OR WAREHOUSES IN ACCORD ANCE WITH THE PROVISIONS OF ACT OF 1994. THIS GOES TO T HE ROOT OF THE MATTER AND THEREFORE THE AUTHORITIES BELOW SHO ULD BE ITA NOS.1572 TO 1577/D/2011 34 GIVEN AN OPPORTUNITY TO EXAMINE THE ISSUE WITH REFE RENCE 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 TA KEN DECISION ON THE BASIS OF ENACTMENT WHICH ALREADY ST ANDS REPEALED. UNDER THE IAA ACT 1971 THE AUTHORITY W AS EMPOWERED TO ESTABLISH WAREHOUSES ALONE WHEREAS UN DER THE AAI ACT 1994 THE AUTHORITY IS EMPOWERED TO ES TABLISH WAREHOUSES AND CARGO COMPLEXES. ADMITTEDLY THE EXEMPTION U/S 10(29) IS AVAILABLE ON THE INCOME FRO M THE LETTING OUT OF GODOWNS OR WAREHOUSES FOR STORAGE PROCESSING OR FACILITATING THE MARKETING OF COMMODI TIES. THE TERM CARGO COMPLEXES IS NOT USED IN SECTION 1 0(29) OF THE ACT. WE FURTHER FIND THAT THE ASSESSING OFF ICER AND THE LEARNED CIT(APPEALS) HAVE USED THE TERM WAREHOU SES AND CARGO COMPLEX INTERCHANGEABLY. THIS CANNOT BE THE CASE UNDER THE ACT OF 1994 AS THE WAREHOUSE AND CA RGO COMPLEXES HAVE BEEN DIFFERENTIATED BY THE ACT ITSEL F. IT IS THEREFORE NECESSARY THAT THE ASSESSING OFFICER MUS T 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 INCLUDIN G THE MINUTES OF THE MEETING HELD IN THE CABINET SECRETAR IAT ON 25-05-1982 WHERE CONSEQUENT TO THE ESTABLISHMENT OF THE IAAI THE WAREHOUSES FOR STORAGE OR PROCESSING OF G OODS AT THE INTERNATIONAL AIRPORTS WERE ASSIGNED TO THE AUT HORITY. THESE DOCUMENTS WERE NOT BEFORE THE ASSESSING OFFIC ER ITA NOS.1572 TO 1577/D/2011 35 WHILE PASSING THE ORDER. THE DOCUMENTS NOW PRODUCE D BY THE LEARNED COUNSEL FOR THE ASSESSEE MAY HAVE BEARI NG IN ARRIVING AT A DECISION. WE THEREFORE RESTORE THE MATTER BACK TO FILE OF THE ASSESSING OFFICER FOR PASSING A N 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 ASSESSME NT 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 TRIBUNALS 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 AIRPOR TS AUTHORITY OF INDIA ACT 1994; (III) NO CLEAR FINDING REGARDING THE ASSESSEE ACTUALLY RU NNING 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 ITA NOS.1572 TO 1577/D/2011 36 AVAILABLE FROM THE ASSESSMENT ORDER THAT A NOTICE U /S 143(2) OF THE ACT WAS ISSUED TO THE ASSESSEE IN RESPONSE TO WHICH T HE AUTHORISED REPRESENTATIVE OF THE ASSESSEE APPEARED BEFORE THE AO FROM TIME TO TIME AND THAT THE CASE WAS DISCUSSED WITH HIM (ASSE SSMENT ORDER PAGE 2). FURTHER THE AO NOTES AT PAGE 3 OF THE ASSESSM ENT ORDER THAT THE ASSESSEE HAD FILED LETTER DATED 30.12.2008 ON THE I SSUE OF EXEMPTION U/S 10(29) OF THE ACT. THE CONTENTS OF THE SAID LE TTER HAVE BEEN REPRODUCED BY THE AO IN ITALICS AT PAGES 3 TO 6 OF THE ASSESSMENT ORDER. FOR FACILITY THESE SUBMISSIONS OF THE ASSE SSEE ARE BEING REPRODUCED HEREUNDER:- TO FULLY APPRECIATE THE JUSTIFICATION FOR THE CLAI M THE PROVISIONS OF SECTION 10(29) FOR THE RELEVANT ASSES SMENT YEAR ARE REPRODUCED AS UNDER:- IN THE CASE OF AN AUTHORITY CONSTITUTED UNDER ANY L AW FOR THE TIME BEING IN FORCE FOR THE MARKETING OF COMMOD ITIES ANY INCOME DERIVED FROM THE LETTING OF GODOWNS OR W ARE 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 ASSE SSEE 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. ITA NOS.1572 TO 1577/D/2011 37 (C) THE EXEMPTIBLE INCOME MUST BE ONE DERIVED FROM THE LETTING OF GODOWNS OR WARE HOUSES FOR STORAGE PROCESSING OR FACILITATING THE MARKETING OF COMMODI TIES. (3.2.3) THE ASSESSEE FULFILLS ALL THE CONDITIONS WH ICH ARE LAID DOWN IN SECTION 10(29) FOR CLAIMING EXEMPT ION. (A) REG:- FIRST CONDITION THAT THE ASSESSEE IS AN AUTHORITY CONSTITUTED UNDER ANY LAW. THE AIRPORTS AUTHORITY OF INDIA IS CONSTITUTED BY S PECIAL 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 AI RPORTS AUTHORITY OF INDIA ACT ONE OF THE FUNCTIONS OF THE AUTHORITY IS TO ESTABLISH WAREHOUSES AND CARGO COMPLEXES AT THE AIR PORTS FOR THE STORAGE OR PROCESSING OF GOODS. (II) AIRPORT AUTHORITY OF INDIA PLAYS A VITAL ROLE IN FACILITATING THE TRANSPORTATION OF IMPORTS AND EXPO RTS OF VARIOUS COMMODITIES THROUGH ITS AIRPORTS. THE AIRP ORTS WAREHOUSES PROVIDE FACILITIES TO VARIOUS EXPORTERS IMPORTERS AND NATIONAL & INTERNATIONAL AIR TRANSPOR T CARRIERS TO STORE PROCESS AND TRANSPORT GOODS & COMMODITIES OVER THE WHOLE WORLD BELONGING TO VARIO US EXPORTERS AND IMPORTERS. FURTHER IT IS MENTIONED THAT THE ASSESSEE HAS ESTABLISHED WAREHOUSES AND STORAGE FAC ILITIES ITA NOS.1572 TO 1577/D/2011 38 IN THE INTERNATIONAL AIR CARGO COMPLEXES AT VARIOUS AIRPORTS AND EARNS REVENUE FROM THE LETTING OF SUCH WAREHOUS ES. (III) WE WOULD LIKE TO STATE THAT WAREHOUSING OR ST ORAGE 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 DIR ECT IMPACT ON THE TRADING ACTIVITIES BY ENHANCING THEIR VALUE. THE SAME IS TRUE OF THE OTHER ACTIVITIES OF PROCESS ING OF THE COMMODITIES AND FACILITATING THE DISTRIBUTION BY TR ANSPORT 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 AUTHORIT Y CONSTITUTED FOR FACILITATING IN THE MARKETING OF CO MMODITIES PARTICULARLY IN VIEW OF THE FACT THAT IT HAD BEEN C ONSTITUTED TO PLAY A MAJOR ROLE IN STORAGE PROCESSING AND TRANSPORTATION OF EXPORT/IMPORT CARGO. (C) REG:- THIRD CONDITION THAT THE EXEMPTIBLE INCOM E 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 INGRED IENT BECAUSE THE ASSESSEE IS CLAIMING EXEMPTION ONLY IN RESPECT OF THAT PART OF INCOME WHICH HAS BEEN EARNE D IN RESPECT OF LETTING OF GODOWNS AND WAREHOUSES FOR ST ORAGE PROCESSING OR FACILITATING THE MARKETING OF COMMODI TIES THE REFERENCE TO WHICH INCOME HAS ALSO BEEN MADE IN THE ASSESSMENT ORDER. ITA NOS.1572 TO 1577/D/2011 39 (3.3) THEREFORE THE ASSESSEE FULFILLS ALL THE COND ITIONS SET OUT IN SECTION 10(29) OF THE INCOME-TAX ACT ENTITLI NG IT FOR THE EXEMPTION OF THE INCOME EARNED BY IT FROM LETTI NG OF WAREHOUSING FOR STORAGE & PROCESSING OF GOODS. 24. THE FACTUM OF THE ASSESSEE HAVING FILED THE AFO RESAID LETTER DATED 30.12.2008 (COPY AT APB 360 TO 367 RELEVANT P ORTION AT APB 365 TO 367) BEFORE THE AO STANDS NOWHERE DISPUTED BY T HE 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 IT AT VIDE PARA 2 OF PAGE 2 OF ITS ORDER HAS RESTORED THE ISSU E TO YOUR HONOURS 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 & PROCESSIN G OF GOODS. ITA NOS.1572 TO 1577/D/2011 40 26. FROM THE ABOVE REPLY OF THE ASSESSEE IT IS ELO QUENTLY 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) O F 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 AUTHORIT Y AND IN VIEW OF SECTION 12(3)(G) OF THE AAI ACT 1994 IT DE SERVES THE DEDUCTION U/S 10(29) WHICH IS ALLOWED. 28. THEREFORE AT THE TIME OF THE PASSING OF THE AS SESSMENT 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 WA REHOUSES OR CARGO COMPLEXES; (A)(I) THE ASSESSEE HAS STATED THIS FACT IN PARAGRA PH (3.1) OF ITS REPLY AS NOTED ABOVE. ITA NOS.1572 TO 1577/D/2011 41 (B) THAT SECTION 10(29) OF THE ACT PROVIDES FOR EXE MPTION OF INCOME DERIVED FROM THE LETTING OF GODOWNS OR WAREHOUSES F OR STORAGE PROCESSING OR FACILITATING THE MARKETING OF COMMODI TIES BY AN AUTHORITY CONSTITUTED UNDER ANY LAW FOR THE MARKETING OF COMM ODITIES; (B)(I) SECTION 10(29) OF THE ACT HAS BEEN REPRODUCE D BY THE ASSESSEE IN PARAGRAPH (3.2.1) OF ITS REPLY. (C) THAT THE ASSESSEE AUTHORITY IS CONSTITUTED UNDE R THE AIRPORTS AUTHORITY OF INDIA ACT 1994; (C)(I) THIS HAS BEEN STATED BY THE ASSESSEE IN PARA GRAPH (3.2.3) OF THE REPLY. (D) THAT THE ASSESSEE AUTHORITY HAS AS ONE OF ITS FUNCTIONS THE FUNCTION OF ESTABLISHING WAREHOUSES AND CARGO COMPL EXES AT THE AIRPORTS FOR STORAGE OR PROCESSING OF GOODS; (D)(I) PARAGRAPH (3.2.3)(B)(I) OF THE ASSESSEES RE PLY STATES SO. (E) THAT THE ASSESSEE AUTHORITY FACILITATES THE TRA NSPORTATION OF IMPORTS AND EXPORTS OF VARIOUS COMMODITIES THROUGH THE AIRPORTS BY PROVIDING FACILITIES TO EXPORTERS IMPORTERS AND NA TIONAL AND INTERNATIONAL AIR TRANSPORT CARRIERS TO STORE PROC ESS AND TRANSPORT ITA NOS.1572 TO 1577/D/2011 42 GOODS AND COMMODITIES THROUGHOUT THE WORLD FOR WHI CH PURPOSE THE ASSESSEE HAS ESTABLISHED WAREHOUSES AND STORAGE FAC ILITIES IN THE INTERNATIONAL AIR CARGO COMPLEXES AT THE AIRPORTS A ND IT EARNS REVENUE FROM THE LETTING OUT OF SUCH WAREHOUSES; (E)(I) PARAGRAPH (3.2.3)(B)(II) OF THE ASSESSEES R EPLY EXPRESSES THIS. (F) THAT THE FACTUM OF THE ASSESSEE LETTING OUT GOD OWNS AND WAREHOUSES AT THE AIRPORTS FOR THE STORAGE PROCESS ING 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 S O. (G) THAT THE ASSESSEE THEREFORE FULFILLED ALL THE CONDITIONS CONTAINED IN SECTION 10(29) OF THE ACT AND THAT SO ITS INCOM E 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 AIR PORTS AUTHORITY OF INDIA ACT 1994 HAD BEEN BROUGHT TO THE AOS NOTIC E BY THE ASSESSEE; ITA NOS.1572 TO 1577/D/2011 43 (H)(I) OBSERVATION OF THE AO. (I) THAT THE ASSESSEE HAD SHOWN INCOME FROM WAREHOU SING SEPARATELY AND THAT IN THE ORIGINAL ASSESSMENT ORDE R THE AO HAD MADE REFERENCE THERETO; (I)(I) THE AOS FINDING. (J) THAT THE ASSESSEE AUTHORITY IS A STATUTORY AUTH ORITY DESERVING THE EXEMPTION U/S 10(29) OF THE ACT IN VIEW OF SEC TION 12(3)(G) OF THE AIRPORTS AUTHORITY OF INDIA ACT 1994; (J)(I) THE AOS 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 S CENARIO. 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 H AVE CONVEYED TO THE LEARNED CIT THAT THE MATTER WAS NOT RE-EXAMINED BY THE AO. HOWEVER THE FACTS AS BROUGHT BEFORE US AS DISCUSS ED INDICATE OTHERWISE. ITA NOS.1572 TO 1577/D/2011 44 30. IT IS SEEN THAT THE LEARNED COMMISSIONER HAS NO T POINTED OUT ANY ERROR IN THE ASSESSMENT ORDER NOR CAN ONE BE INFER RED THEREFROM. IN CIT VS. GOYAL FAMILY SPECIFIC TRUST (SUPRA) IT H AS BEEN HELD TO THE EFFECT THAT WHERE THE ASSESSMENT ORDER IS NOT A DET AILED ONE AND THE COMMISSIONER FAILS TO POINT OUT ANY ERROR THE ASSE SSMENT ORDER BEING BRIEF BY ITSELF CANNOT BE A SUFFICIENT REASON TO BR AND 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 ASS ESSMENT ORDER IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE IS NOT A MATTER OF SUBJECTIVE SATISFACTION OF THE COMMISSIONER AND THAT SUCH CONC LUSION 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 IT R 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 ERRO NEOUS ORDER PASSED BY THE AO; THAT EVERY LOSS OF REVENUE AS A C ONSEQUENCE 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 O F REVENUE THE ASSESSMENT ORDER CANNOT BE CALLED PREJUDICIAL TO TH E INTEREST OF THE ITA NOS.1572 TO 1577/D/2011 45 REVENUE UNLESS THE AOS VIEW IS UNSUSTAINABLE IN L AW. IN THE PRESENT CASE IT CANNOT BE SAID NOR HAS IT BEEN SHOWN BEFO RE US TO THE CONTRARY THAT THE AOS ORDER CONTAINS A VIEW WHICH IS UNSUSTAINABLE IN LAW. IT CANNOT BE GAINSAID AS PER MALABAR INDUST RIAL 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 SOMETHI NG MORE. 33. IN CIT VS. GREEN WORLD CORPORATION VS. ITO 3 14 ITR 81 (SC) IT HAS BEEN HELD THAT THE AO IS AN INDEPENDENT AUTHORI TY ENTITLED TO PASS AN ORDER WHICH CANNOT BE INTERFERED WITH MERELY BEC AUSE CIT HAS A DIFFERENT VIEW. IN GREEN WORLD CORPORATION (SUPR A) THE HON'BLE SUPREME COURT HAS REITERATED MALABAR INDUSTRIAL CO .LTD. (SUPRA). 34. IN CIT VS. GABRIEL INDIA LTD. 203 ITR 108 (M UM.) IT WAS HELD THAT THE COMMISSIONER CANNOT INITIATE PROCEEDINGS U NDER 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 ERRONEO US 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 ASSESSM ENT ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY; AND THAT WHEN T HE AO HAS EXERCISED THE QUASI-JUDICIAL POWERS VESTED IN HIM I N ACCORDANCE WITH LAW AND HAS ARRIVED AT A CONCLUSION SUCH CONCLUSIO N CANNOT BE TERMED ITA NOS.1572 TO 1577/D/2011 46 TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOE S 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.L TD. (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. THERE IN THE ISSUE BEFORE THE HONBLE HIGH COURT WAS AS TO WHETHER DIVIDEND I NCOME COULD BE ALLOWED TO BE SET OFF AGAINST BUSINESS LOSSES OF EA RLIER 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 WI THOUT ANY APPLICATION OF MIND AND THAT AS SUCH THE VIEW OF T HE AO COULD NOT BE SAID TO BE A PLAUSIBLE VIEW SINCE THE ACTION OF TH E AO WAS CONTRARY TO THE SPECIFIC PROVISIONS OF THE ACT WHICH PROVIDE F OR BROUGHT FORWARD BUSINESS LOSSES BEING CAPABLE OF BEING SET OFF AGAI NST BUSINESS INCOME ONLY AND NOT INCOME FROM OTHER SOURCES. IN THE PRE SENT CASE IT HAS NOT BEEN SHOWN THAT THE VIEW TAKEN BY THE AO IS CON TRARY TO ANY SPECIFIC PROVISION OF THE ACT. 37. RELIANCE BY THE DEPARTMENT ON RAJALAKSHMI MILL S VS. ITO (SUPRA) IS ALSO OF NO BENEFIT TO THE DEPARTMENT. T HERE IS NO DENYING ITA NOS.1572 TO 1577/D/2011 47 THE PROPOSITION THAT THE COMMISSIONER CAN REGARD AN ASSESSMENT ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCE S 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 CONDITI ONS OF SECTION 40A(7)(B) OF THE ACT SO AS TO CLAIM EXEMPTION IN T HE 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 COMMISSIONERS ORDER WAS UPHELD IT BEING A CASE OF NO ENQUIRY BY THE IT BEING A CASE OF NO ENQUIRY BY THE IT BEING A CASE OF NO ENQUIRY BY THE IT BEING A CASE OF NO ENQUIRY BY THE AO AOAO AO . THESE AGAIN ARE NOT THE FACTS BEFORE US. HERE THE ASSESSEE HAS DULY PLACED ALL THE FACTS AND MATERIAL ON RECORD I T WAS ON CONSIDERATION OF WHICH ONLY THAT THE AO PASSED THE ASSESSMENT ORDER ALLOWING THE ASSESSEES CLAIM. ON THE OTHER HAND NOTHING HAS BEEN BROUGHT BEFORE US TO SHOW AS TO HOW THE CLAIM OF TH E 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 NO T CARRIED OUT BY THE AO. IT CANNOT BE GAINSAID THAT UNDER SECTION 2 63 OF THE ACT THE WISDOM OF THE CIT CANNOT REPLACE THAT OF THE AO. I T IS NOWHERE THE CASE OF THE DEPARTMENT THAT THE EXEMPTION ALLOWED I S WRONG OR THAT IT IS NOT ALLOWABLE UNDER THE ACT. WE HAVE OBSERVED A BOVE THAT THE AO HAS DULY EXAMINED THE FACTS AND THE RECORD AND IT I S ONLY THEREAFTER ITA NOS.1572 TO 1577/D/2011 48 THAT THE CLAIM OF THE ASSESSEE HAS BEEN ALLOWED. A S TO HOW THE ASSESSMENT ORDER IS WRITTEN IS BEYOND THE CONTROL O F THE ASSESSEE. JUST BECAUSE THE ASSESSMENT ORDER IS A TERSE ORDER THIS BY ITSELF CANNOT FORM THE BASIS OF INVOCATION OF POWERS UNDER SECTIO N 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 REQUI RES THAT FOR AN INCOME TO BE ELIGIBLE FOR EXEMPTION IT SHOULD BE AN INCOM E DERIVED BY AN AUTHORITY CONSTITUTED UNDER ANY LAW FOR THE TIME BE ING IN FORCE FOR THE MARKETING OF COMMODITIES FROM THE LETTING OF GODOW NS OR WAREHOUSES FOR STORAGE PROCESSING OR FACILITATING THE MARKETI NG 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 AUTHO RITY CONSTITUTED UNDER A LAW FOR THE TIME BEING IN FORCE HAVING BEE N 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 O F ITS FUNCTIONS IS TO ESTABLISH WAREHOUSES AND CARGO COMPLEXES AT THE AIR PORTS FOR THE ITA NOS.1572 TO 1577/D/2011 49 STORAGE OR PROCESSING OF GOODS. SECTIONS 12(1) (2 ) AND (3)(G) OF THE AIRPORTS AUTHORITY OF INDIA ACT 1994 READ AS FOLLO WS:- 12. 12. 12. 12. (1) (1)(1) (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 EFFICIE NTLY. (2) (2)(2) (2) IT SHALL BE THE DUTY OF THE AUTHORITY TO PROVID E AIR TRAFFIC SERVICE AND AIR TRANSPORT SERVICE AT ANY AI RPORT AND CIVIL ENCLAVES. (3) (3)(3) (3) WITHOUT PREJUDICE TO THE GENERALITY OF THE PROV ISIONS CONTAINED IN SUB-SECTIONS (1) AND (2) THE AUTHORIT Y MAY - (G) (G)(G) (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 EXEM PTION 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 TH E ASSESSEE HAS SHOWN INCOME FROM WAREHOUSES SEPARATELY AS NOTED B Y THE AO IN THE ITA NOS.1572 TO 1577/D/2011 50 ORIGINAL ASSESSMENT PROCEEDINGS. THEN IT WAS SPEC IFICALLY 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 CEN TRAL WAREHOUSING CORPORATION WHICH AUTHORITY HAD ESTABLISHED WAREHO USES AT THE AIRPORTS. ON THEIR COMING INTO EXISTENCE THE STAT E WAREHOUSES CORPORATIONS TOOK OVER THE WAREHOUSES. THESE WAREH OUSES WERE TAKEN OVER BY THE INTERNATIONAL AIRPORTS AUTHORITY. THE I NTERNATIONAL AIRPORTS AUTHORITY HAD AS ONE OF ITS FUNCTIONS U/S 16(3)(D ) OF THE INTERNATIONAL AIRPORTS AUTHORITY ACT 1971 THE FUNCTION OF ESTAB LISHING WAREHOUSES AT AIRPORTS FOR THE STORAGE OR PROCESSING OF GOODS. I N 1985 THE NATIONAL AIRPORTS AUTHORITY ACT 1985 CAME ALONG ESTABLISH ING THE NATIONAL AIRPORTS AUTHORITY OF INDIA. SECTION 12(3)(G) OF T HAT 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 INTERNAT IONAL AIRPORTS AUTHORITY OF INDIA UNDER THE INTERNATIONAL AIRPORT S AUTHORITY ACT 1971 AND THE NATIONAL AIRPORTS AUTHORITY OF INDIA UNDER THE NATIONAL AIRPORTS AUTHORITY ACT 1985 CLAIMED AND WERE GRANTED EXEMP TION U/S 10(29) OF THE ACT QUA INCOME DERIVED FROM LETTING OUT OF WARE HOUSES ESTABLISHED BY THEM AT THE AIRPORTS. IN 1987 THE AIRPORT WARE HOUSES OF THE CENTRAL WAREHOUSING CORPORATION WERE TAKEN OVER BY THE INTE RNATIONAL 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 ITA NOS.1572 TO 1577/D/2011 51 THE EXTRACT OF THE MINUTES OF THE SAID MEETING DATE D 25.5.1982 IS AT APB 375. IT WOULD BE RELEVANT TO REPRODUCE THESE M INUTES HEREUNDER:- EXTRACT FROM MINUTES OF THE MEETING HELD ON 25 TH MAY 1982 IN THE CABINET SECRETARIAT TO CONSIDER THE ISS UES RELATED TO AUGMENTING THE STORAGE CAPACITY OF THE C WC AT DELHI AIRPORT. 6. AFTER DISCUSSION THE COMMITTEE CAME TO THE FOLLO WING 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 IN CLUDING PLACEMENT OF ADDITIONAL LAND TO ALLOW FOR FURTHER E XPANSION SHOULD BE GIVEN. II) EFFORTS MAY BE MADE TO WORK OUT NECESSARY ARRANGEMENT FOR RUNNING THE NEW AIR CARGO COMPLEX A T 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 OPERATIO N OF CARGO COMPLEX WITH THE UNDERSTANDING THAT NO PRIVATE AGE NCY WOULD BE SUBSEQUENTLY GIVEN THE TASK BY THE IAAI FO R HANDLING THIS WORK. CWC WOULD BE COMPENSATED FOR T HE EXPENDITURE INCURRED. IAAI WOULD ABSORB THE STAFF EMPLOYED BY CWC AT THE WORK. ITA NOS.1572 TO 1577/D/2011 52 7. SECRETARY TOURISM & CIVIL AVIATION SUGGESTED TH AT CWC MAY EXTEND/EXPAND ITS ACTIVITIES AT THE AIRPORT AT BANGALORE HYDERABAD GAUHATI TRIVANDRUM ETC. OTH ER WHICH WERE NOT COVERED BY THE CHARTER OF IAAI OR AN Y OTHER PUBLIC SECTOR CORPORATION. IT WAS AGREED THAT DEPA RTMENT 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 HA NDLING 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 T HE CENTRAL WAREHOUSING CORPORATION TO THE INTERNATIONAL AIRPOR TS 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 SETTLEME NT OF DUES OF THE CWC REGARDING. SIR YOUR ATTENTION IS INVITED TO THE CORRESPONDENCE RE STING WITH THIS OFFICE LETTER OF EVEN NUMBER (4401) DATED 20.9 .93 ON THE ABOVE MENTIONED SUBJECT (COPY ENCLOSED FOR READY RE FERENCE). IN THIS CONNECTION I AM ALSO ENCLOSING A PHOTO CO PY 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 CHAIR MAN IAAI REGARDING FINALIZATION/SETTLEMENT OF ACCOUNT R ELATING TO THE TRANSPORT OF ASSETS BY CENTRAL WAREHOUSING CORP ORATION TO ITA NOS.1572 TO 1577/D/2011 53 THE INTERNATIONAL AIRPORT AUTHORITY OF INDIA AND OT HER 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 M ANAGER (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 COMMERCI AL MANAGER OF THIS OFFICE AT A TIME AND DATE CONVENIEN T 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 AS SETS BY CWC TO THE IAAI THE EXPENSES INCURRED BY THE CORPORATI ON 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 PREDECESSORS DO LETTER OF EVEN NUMBER DATED 17.4.90 AND SUBSEQUENT REMINDER OF EVEN NUMBE R DATED 18.6.90 REGARDING FINALIZATION/SETTLEMENT OF ACCOUNT RELATING TO THE TRANSFER OF ASSETS BY CENTRAL WAREH OUSING CORPORATION TO IAAI AND OTHER RELATED ISSUES. REGI ONAL MANAGER CWC DELHI HAS ALSO TAKEN UP THESE MATTERS ON ITA NOS.1572 TO 1577/D/2011 54 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 IN VOLVED HAVE NOT BEEN SETTLED. 2. THE MAIN ISSUES PENDING SETTLEMENT BETWEEN CWC AND IAAI ARE INDICATED HEREUNDER FOR READY REFERENC E. (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 THOUG H THE IAAI MUST HAVE COLLECTED FULL AMOUNT FROM THE USERS. (III) VARIOUS EXPENSES INCURRED ON BEHALF OF IAAI S UCH 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 EMPL OYEES WHO HAVE BEEN POSTED AT CW IAC PALAM FROM 1.4.88 A ND THE TOTAL PAYMENT MADE TO THESE EMPLOYEES WORKS OUT TO RS.4 70 784/- UPTO 30.9.91. AGAINST THIS EXPENDITU RE 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 ACCOU NT OF ELECTRICITY CHARGES FOR 6102 UNITS WITHOUT ASSIGNIN G ANY REASONS WHICH REQUIRES ILLUCIDATION AND REIMBURSEME NT. 3. I SHALL BE THANKFUL IF THE MATTER IS LOOKED INTO PERSONALLY BY YOU AND THE AMOUNTS DUE IS REMITTED T O US AT A VERY EARLY DATE. YOURS SINCERELY SD/- (R.N.DAS) SH.V.K.MATHUR CHAIRMAN ITA NOS.1572 TO 1577/D/2011 55 IAAI NEW DELHI. COPY TO : 1. THE REGIONAL MANAGER CENTRAL WAREHOUSING CORPORATION REGIONAL OFFICER DELHI WITH A REQUEST TO PURSUE T HE 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 CONFI RMED THAT THE AIRPORT WAREHOUSES OF THE CENTRAL WAREHOUSING CORPO RATION (PARTICULARLY THE ONE AT THE DELHI AIRPORT) WERE TR ANSFERRED TO THE INTERNATIONAL AIRPORTS AUTHORITY OF INDIA. 44. BY THE ENACTMENT OF THE AIRPORTS AUTHORITY OF I NDIA ACT 1994 THE INTERNATIONAL AIRPORTS AUTHORITY AND THE NATIONAL A IRPORTS AUTHORITY GOT MERGED INTO THE PRESENT AUTHORITY I.E. THE AIRPOR TS AUTHORITY OF INDIA. PERTINENTLY SECTION 12(3)(G) OF THE AIRPORTS AUTHO RITY OF INDIA ACT 1994 AS DISCUSSED HEREINABOVE PROVIDES FOR THE AU THORITY 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 RE BUTTED. THE INCOME CLAIMED AS EXEMPT HAS UNDISPUTEDLY BEEN EARNED FROM LETTING OUT OF WAREHOUSES AND CARGO COMPLEXES. ITA NOS.1572 TO 1577/D/2011 56 45. THE AIRPORT WAREHOUSES OF THE CENTRAL WAREHOUSI NG 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 WARE HOUSES ORIGINALLY UNDER THE CONTROL OF THE CENTRAL WAREHOUSING CORPOR ATION CAME TO BE DEVOLVED ON THE AIRPORT AUTHORITY OF INDIA I.E. T HE ASSESSEE AUTHORITY CAN THUS BE DIAGRAMMATICALLY CRYSTALLIZED AND DEPIC TED THUS: CENTRAL WAREHOUSING CORPORATION UNDER THE CENTRAL WAREHOUSING ACT STATE WAREHOUSING CORPORATIONS UNDER THE STATE WAREHOUSING ACTS. AIRPORT AUTHORITY OF INDIA (THE ASSESSEE AUTHORITY) U/S 12(3)(G) OF THE AIRPORTS AUTHORITY OF INDIA ACT 1994 NATIONAL AIRPORTS AUTHORITY U/S 12(3)(G) OF THE NATIONAL AIRPORTS AUTHORITY ACT 1985. INTERNATIONAL AIRPORTS AUTHORITY U/S 16(3)(D) OF THE INTERNATIONAL AIRPORTS AUTHORITY ACT 1971 ITA NOS.1572 TO 1577/D/2011 57 46. IN THESE FACTS AS BROUGHT BEFORE THE AO BY THE ASSESSEE IT STANDS UNDISPUTEDLY ESTABLISHED THAT THE ASSESSEE I S RUNNING WAREHOUSES OR CARGO COMPLEXES AT THE AIRPORTS. 47. THUS THE LEARNED CIT HAS GONE WRONG IN OBSERVI NG 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 WAREHOUS ES AND CARGO COMPLEXES. THE ASSESSEE AUTHORITY AS ABOVE STAND S PROVED TO BE ACTUALLY RUNNING THE WAREHOUSES AND CARGO COMPLEXES AT THE AIRPORTS. 48. THE CONTENTIONS OF THE ASSESSEE HAVING BEEN ACC EPTED BY THE AO IN THE LIGHT OF THE MATERIAL BROUGHT BEFORE HIM TH E 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 CABI NET SECRETARIAT HELD ON 25.5.1982 IT IS NOT SO AS SEEN ABOVE. TH E MINUTES OF THE SAID MEETING AND THE CORRESPONDENCE BETWEEN THE CENTRAL WAREHOUSING CORPORATION AND THE INTERNATIONAL AIRPORTS AUTHORIT Y OF INDIA WERE FILED ITA NOS.1572 TO 1577/D/2011 58 BY THE ASSESSEE BEFORE THE AO AND IT WAS ONLY ON TA KING THESE DOCUMENTS INTO CONSIDERATION THAT THE ASSESSMENT OR DER WAS PASSED. 50. INSOFAR AS REGARDS THE LEARNED DRS CONTENTION THAT NO PREJUDICE HAS BEEN CAUSED TO THE ASSESSEE BY THE PASSING OF T HE 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 TH E INTERESTS OF THE REVENUE MUST BE EVINCIBLE TO CO-EXIST IN THE ASSESS MENT ORDER. AS A RESULT OF OUR DISCUSSION ON THE ISSUE WE HOLD THAT THE ASSESSMENT ORDER IS NOT ERRONEOUS MUCH LESS PREJUDICIAL TO AN Y 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 TH IS ISSUE IS SET ASIDE AND THAT OF THE AO GRANTING EXEMPTION TO THE ASSES SEE 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 INVOL VED IN GROUND NOS.5 TO 10 THE ASSESSEE CLAIMED DEPRECIATION ON I TS TERMINAL AND ANCILLARY BUILDING AT THE AIRPORT STATING IT TO BE A PLANT. THE CIT(A) ITA NOS.1572 TO 1577/D/2011 59 ALLOWED THE ASSESSEE AUTHORITY DEPRECIATION AT THE RATE OF 25% TREATING THE ASSESSEES TERMINAL AND ANCILLARY BUIL DING AS PLANT. HE BASED HIS ORDER ON HIS DECISION DATED 18.12.1997 FO R AY 1994-95 IN THE ASSESSEES CASE. 54. THE AO WAS DIRECTED TO ALLOW DEPRECIATION ACCOR DINGLY. 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 REPOR T HAD BEEN PLACED ON RECORD TO DESCRIBE THE TERMINAL BUILDING OF THE ASSESSEE ITS SPECIFICATION OR WHETHER IT WAS SPECIFICALLY DESIG NED; THAT THE CLAIM OF THE ASSESSEE COULD BE ACCEPTED ONLY IF IT WERE SHOW N ON RECORD THAT THE TEST OF FUNCTIONALITY WAS APPLICABLE TO THE TER MINAL BUILDING; THAT THE FACTS HAD NOT BEEN PROPERLY BROUGHT ON RECORD A ND 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 NAME LY WHETHER THE ESCALATORS AND CONVEYOR BELTS ETC. HAD BEEN SHOWN AS PART OF THE BUILDING OR SEPARATELY AS MACHINERY OR BUILDING; A ND THAT THE MATTER THEREFORE NEEDED TO BE RESTORED TO THE FILE OF THE AO TO EXAMINE THE ISSUE OF THE ASSESSEES VARIOUS ASSETS CALLED TERM INAL BUILDING I.E. AS TO WHETHER AS A WHOLE THEY WERE PLANT AND BUILDING BY APPLYING THE FUNCTIONALITY TEST I.E. WHETHER THESE BUILDINGS W ERE HOUSING ITA NOS.1572 TO 1577/D/2011 60 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 ASSE TS CLAIMED TO BE PLANT AND THEIR FUNCTIONS SO THAT AN INFORMED DECISION C OULD BE TAKEN IN THE MATTER. 56. IN THE ORDER DATED 27.3.2009 GIVING EFFECT TO THE TRIBUNALS 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 PLACE D ON RECORD BEFORE THE AO; THAT IT HAD BEEN STATED THAT HOWEVER THE S AID 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 BA SIS FOR DISALLOWING PART OF THE DEPRECIATION ON THE TERMINAL BUILDING. IN THIS MANNER THE AO ALLOWED THE DEPRECIATION ON THE TERMINAL BUILDIN G BY TREATING IT AS A PLANT AND HOLDING THE ASSESSEE ELIGIBLE FOR DEDUC TION 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 A O TO EXAMINE THE ITA NOS.1572 TO 1577/D/2011 61 VARIOUS ASSETS OF THE ASSESSEE AT THE AIRPORTS WHI CH WERE CALLED BY THE NAME OF TERMINAL BUILDING AND TO EXAMINE AS TO WH ETHER THEY WERE PLANT OR BUILDING AS A WHOLE BY APPLYING THE FUNCT IONALITY 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 DIRECTE D THE ASSESSEE TO FURNISH A DETAILED LIST OF ITS VARIOUS ASSETS CLAIM ED TO BE PLANT AND THEIR FUNCTIONS; THAT HOWEVER THE AO HAD PASSED THE APPE AL EFFECT ORDER RELYING ON MATERIALS THAT WERE PLACED BEFORE THE CI T(A) WHEN HE HAD PASSED HIS ORDER DATED 5.3.2003; THAT THE SAID ORDE R 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 FU NCTIONALITY TO DETERMINE AS TO WHETHER IT WAS A PLANT OR A BUI LDING; 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 RELI ED ON THE SAME REPORT AS HAD BEEN SUBMITTED BEFORE THE CIT(A); THA T THE CIT(A) ON CONSIDERING THE SAID REPORT HAD UPHELD THE OBSERVA TION OF THE AO THAT THE TERMINAL BUILDING OF THE ASSESSEE FOR THE PURP OSE OF DEPRECIATION SHOULD BE TREATED AS A BUILDING AND NOT AS A PLA NT; THAT BY RELYING ITA NOS.1572 TO 1577/D/2011 62 ON THE SAME REPORT IN THE SECOND ROUND THE AO ARRI VED AT A CONCLUSION DIFFERENT FROM THAT OF THE CIT(A) AND THAT TOO WIT HOUT PASSING A REASONED OR SPEAKING ORDER AS DIRECTED BY THE TRIB UNAL; THAT THE AO HAD NOT PASSED AN ORDER DETAILING THE LIST OF VARIO US ASSETS CLAIMED BY THE ASSESSEE AS PLANT AND THEIR FUNCTIONS; THAT T HERE WAS NO SUCH LIST ON THE RECORD; THAT THE DIRECTIONS OF THE TRIBUNAL HAD NOT BEEN COMPLIED WITH AND NO REASONED SPEAKING ORDER HAD BE EN PASSED; THAT IN THE CASE OF THE ASSESSEE ON A SIMILAR ISSUE TH E 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 GOV ERNMENT 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 INTERNA TIONAL AIRPORTS SHOULD BE TREATED AS FACTORY BUILDINGS ENTITLED FOR HIGHER RATE OF DEPRECIATION SINCE THEY UNDERWENT HEAVY DEPRECIATION BY VIRTUE O F CONSTANT VARIED USE FOR ALL 24 HOURS OF EACH DAY THAT THEY WERE BU ILDINGS AKIN TO FACTORY BUILDINGS AND CONTAINED MOSTLY FALSE ROOFIN G AND WERE FITTED WITH GLASS PANELS AND CONTAINED SOPHISTICATED FIXTU RES THAT THEY WERE SUBJECT TO VIBRATIONS CAUSED BY THE JET BLAST OF TH E JET AIRCRAFT AND THEY SUFFERED PHYSICALLY AND WERE ENTITLED TO A MUCH HIG HER RATE OF DEPRECIATION; AND IT HAD BEEN OBSERVED BY THE MEMBE R (IT) OF THE BOARD THAT IN VIEW OF THE SPECIAL NATURE OF THE TER MINAL BUILDINGS DEPRECIATION AT THE RATE OF 10% MAY BE ALLOWED TRE ATING THE TERMINAL BUILDING AS A FACTORY BUILDING AND THE DEMARCATION OF THE BUILDING INTO ITA NOS.1572 TO 1577/D/2011 63 FACTORY AND NON-FACTORY HAD TO BE DONE CAREFULLY AF TER DISCUSSING THE MATTER WITH THE ASSESSEES REPRESENTATIVES; THAT IN THE ASSESSMENT ORDER THE AO HAD FAILED TO EXAMINE THE APPLICABILI TY OF THE SAID ORDER OF THE CBDT; THAT THEREFORE THE ASSESSMENT ORDER W AS ERRONEOUS; THAT SINCE THE DIRECTIONS OF THE TRIBUNAL WERE NOT FOLLO WED AND THE TECHNICAL REPORT WAS NOT EXAMINED AS PER THE DIRECTIONS OF TH E TRIBUNAL THE INTEREST OF THE REVENUE WAS NOT DULY REPRESENTED OR MET WITH WHICH MIGHT HAVE RESULTED INTO WRONG ALLOWANCE OF DEPRECI ATION ON TERMINAL BUILDING THAT TO THIS EXTENT THE ASSESSMENT ORDER WAS ERRONEOUS INSOFAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF T HE REVENUE; THAT IN FACT THE AO HAD RELIED ON EARLIER MATERIAL ALREADY CONSIDERED WHEN THE ORDER OF THE TRIBUNAL WAS BEING PASSED AND HAD FAIL ED TO CONDUCT ANY NEW ENQUIRY; AND THAT IT HAS BEEN JUDICIALLY HELD T HAT WHEN ORDERS/DIRECTIONS OF A HIGHER AUTHORITY HAVE NOT BE EN FOLLOWED THE ORDER OF THE LOWER AUTHORITY IS TO BE CONSIDERED ER RONEOUS 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 RE FERRING TO NUMEROUS CASE LAWS WHICH WILL BE DEALT WITH IN THE SUCCEEDI NG PORTION OF THIS ORDER THE LEARNED CIT CANCELLED THE ASSESSMENT ORD ER DIRECTING THE AO TO FRAME A FRESH ASSESSMENT ORDER BY TAKING INTO ACCOUNT THE SPECIFIC DIRECTIONS ISSUED BY THE TRIBUNAL FOR DETE RMINING THE RATE OF DEPRECIATION APPLICABLE ON THE TERMINAL BUILDING OF THE ASSESSEE. IT WAS OBSERVED THAT FOR DETERMINING THE RATE OF DEPRE CIATION THE AO MAY CALL FOR A TECHNICAL REPORT FROM EXPERTS AND TH E ROLE OF VARIOUS ITA NOS.1572 TO 1577/D/2011 64 ASSETS INSTALLED IN THE TERMINAL BUILDING MAY BE EX AMINED AND THE TEST OF FUNCTIONALITY BE APPLIED WHILE EXAMINING THE NAT URE 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 L EARNED CIT ON THE ISSUE OF GRANT OF DEPRECIATION ON TERMINAL BUILDING THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT CONSEQUENT TO T HE DIRECTIONS OF THE TRIBUNAL THE AO HAD CALLED FOR A REPLY FROM TH E ASSESSEE AUTHORITY; THAT THE ASSESSEE HAD DULY COMPLIED WITH THIS REQUI REMENT AND A REPLY WAS FILED AS ALSO NOTED IN THE ASSESSMENT ORDER IT SELF; THAT THE AO HAD ALSO OBSERVED THAT THE ASSESSEE HAD PLACED BEFORE H IM A COPY OF THE CIT(A)S ORDER OF WHICH THE TECHNICAL REPORT FORM ED A PART; THAT THE AO OBSERVED THAT THE ASSESSEE HAD STATED BEFORE HIM TH AT THIS REPORT HAD HOWEVER NOT BEEN BROUGHT TO THE NOTICE OF THE TRIB UNAL; THAT HE (THE AO) HAD EXAMINED THE CONTENTION OF THE ASSESSEE TH AT THE TERMINAL BUILDING OF THE ASSESSEE WAS A TOOL OF BUSINESS; TH AT IT WAS IN THIS REGARD THAT THE TECHNICAL REPORT HAD BEEN FILED; TH AT 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 ITA NOS.1572 TO 1577/D/2011 65 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 SUBMIT TED THAT THEREFORE A BARE PERUSAL OF THE ASSESSMENT ORDER S HOWS THAT THE AO HAS DULY APPLIED HIS MIND TO THE MATTER; THAT HOWEV ER THE VIEW OF THE LEARNED CIT WAS OTHERWISE WHICH IS NOT LEGALLY TEN ABLE; THAT IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED TO THE ASS ESSEE 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 ASSESSEES DETAILED SUBMISSIONS CONTAINED THEREIN THE LEARNED CIT PROC EEDED 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 CONSIDE R THAT THE DUE APPLICATION OF MIND BY THE AO WHILE PASSING THE ASS ESSMENT ORDER WAS EVIDENT FROM THE ASSESSMENT ORDER ITSELF; THAT THE AO HAD TAKEN INTO ACCOUNT THE TECHNICAL REPORT FILED BEFORE HIM BY TH E ASSESSEE; THAT IT WAS ONLY ON HAVING EXAMINED THE ASSESSEES SUBMISSI ON TO THE EFFECT THAT THE TERMINAL BUILDING WAS A TOOL OF THE BUSINE SS OF THE ASSESSEE THAT THE DEPRECIATION WAS ALLOWED AT THE HIGHER RAT E; THAT WHILE DOING SO THE AO HAD BESIDES THE TECHNICAL REPORT ALSO CONSIDERED THE EXPLANATION OFFERED BY THE ASSESSEE THAT THE TERMI NAL BUILDING WAS USED FOR REGULATION OF AIR TRAFFIC WITH COMMUNICATI ONAL AND NAVIGATIONAL CONTROL; THAT THE AO HAD ALSO OBSERVED THAT THE USE OF THE TERMINAL ITA NOS.1572 TO 1577/D/2011 66 BUILDING FOR THE PASSENGERS WAS INCIDENTAL AND IT C OULD NOT BE THE BASIS FOR DISALLOWING A PART OF THE DEPRECIATION ON THE T ERMINAL BUILDING; THAT IN THIS MANNER THE AO HAD ACTUALLY ADDRESSED ALL A SPECTS OF THE ISSUE BEFORE HIM; THAT THE AO HAD ALSO EXAMINED THE CBDT ORDER DATED 15.2.1984 IN THE ASSESSEES CASE; THAT RATHER THE CLAIM OF THE ASSESSEE REGARDING THE TERMINAL BUILDING BEING A PL ANT HAD BEEN ALLOWED FOR AY 1994-95 AFTER MAKING REFERENCE THER ETO; 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 PLAN T AND THEIR FUNCTIONS SINCE IT WAS A MATTER OF RECORD THAT ALONGWITH ITS RETURN OF INCOME THE ASSESSEE HAD SUBMITTED A DETAILED CHART CLAIMING DE PRECIATION; THAT THE SAID CHART WAS BEFORE THE AO AT THE TIME OF PASSING OF THE ASSESSMENT ORDER GIVING EFFECT TO THE ORDERS OF TH E 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 TERMIN AL BUILDING (COPY AT APB 368 TO 372); THAT THE FIRST PART THEREOF CONTAI NS 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 IN CLUDED IN THE TERMINAL BUILDING AND AN EXPLANATION AS TO HOW THEY SPECIFIC ALLY FUNCTION AS A PLANT; THAT THE ASSESSMENT ORDER HAD ITS BASIS IN THIS TECHNICAL REPORT ALSO; THAT IN THE ORDER UNDER APPEAL THE LEARNED C IT HAS NOT POINTED ITA NOS.1572 TO 1577/D/2011 67 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 L EARNED CIT IS IN FACT SITTING IN JUDGEMENT OVER THE ORDER OF THE TRIBUNAL WHICH IS IMPERMISSIBLE IN LAW; THAT THE AO ON THE OTHER HAN D HAD DULY CARRIED OUT THE DIRECTIONS ISSUED BY THE TRIBUNAL; THAT EXE RCISING THE POWERS U/S 263 OF THE ACT A RE-EXAMINATION OF AN ISSUE AL READY EXAMINED HAS BEEN ORDERED WHICH CANNOT BE ALLOWED TO BE DONE; T HAT 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 AOS 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 SHOW S 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 INCLUD ED 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.; THA T 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 ITA NOS.1572 TO 1577/D/2011 68 DETAILED ONE AND IT MIGHT BE A BRIEF ORDER; THAT HO WEVER SUCH BRIEF NATURE OF AN ASSESSMENT ORDER DOES NOT BY ITSELF LE AD TO THE CONCLUSION THAT IT IS ERRONEOUS AND PREJUDICIAL TO THE INTERES TS OF THE REVENUE ENABLING THE PROVISIONS OF SECTION 263 OF THE ACT T O BE INVOKED; THAT IN THE INSTANT CASE THE LEARNED CIT HAS FAILED TO POI NT OUT ANY ERROR IN THE ASSESSMENT ORDER; THAT CIT VS. GOYAL FAMILY SPECIF IC TRUST 171 ITR 695 (ALL.) IS ELOQUENT IN THIS REGARD HOLDING THAT THE CONCLUSION OF THE COMMISSIONER THAT AN ASSESSMENT ORDER IS PREJUDICIA L TO THE INTERESTS OF THE REVENUE IS NOT A MATTER OF THE SUBJECTIVE SA TISFACTION OF THE COMMISSIONER AND THAT SUCH A CONCLUSION HAS TO BE F OUNDED ON OBJECTIVE MATERIAL; THAT IN THE PRESENT CASE THERE IS NO MATERIAL MUCH LESS OBJECTIVE MATERIAL TO UPHOLD THE INVOCATION O F THE POWER U/S 263 OF THE ACT; AND THAT IN THIS VIEW OF THE MATTER TH E CITS ORDER ON THE ISSUE AT HAND IS ALSO NOT SUSTAINABLE IN LAW AND TH E SAME BE CANCELLED REVIVING THE ASSESSMENT ORDER BY ALLOWING THE ASSE SSEES 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 CON TENDED THAT THERE IS NOTHING WRONG WITH THE CITS ORDER ON THIS ISSUE; T HAT THE DIRECTIONS ISSUED BY THE TRIBUNAL TO THE AO WERE SPECIFIC; THA T AS PER THESE DIRECTIONS THE AO WAS TO EXAMINE THE VARIOUS ASPEC TS OF THE ASSESSEES ASSETS CONSTITUTING THE TERMINAL BUILDIN G AT THE AIRPORT; THAT THE AO WAS TO DETERMINE AS TO WHETHER THESE ASSETS AS A WHOLE WERE ITA NOS.1572 TO 1577/D/2011 69 PLANT OR BUILDING; THAT WHILE DOING SO THE FUN CTIONALITY TEST WAS TO BE APPLIED AND IT WAS TO BE SEEN AS TO WHETHER THE ASS ETS 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 DETA ILED LIST OF THE VARIOUS ASSETS TO FACILITATE THE PASSING OF AN INF ORMED ORDER; THAT HOWEVER AS IS EVIDENT FROM A BARE PERUSAL OF THE A SSESSMENT ORDER AND AS HAS BEEN RIGHTLY OBSERVED BY THE LEARNED CIT THE ASSESSMENT ORDER WAS PASSED MERELY RELYING ON THE MATERIAL PLA CED BEFORE THE CIT(A) IN THE FIRST ROUND; THAT ON REMAND THE AO H AD TO SEEK A FRESH TECHNICAL REPORT WHICH WAS NOT DONE; THAT THE ASSE SSMENT ORDER CONTAINED NO FINDING AS TO WHAT REALLY CONSTITUTED THE TERMINAL BUILDING I.E. AS TO WHETHER THE ESCALATORS AND CO NVEYOR BELTS ETC. HAD BEEN SHOWN AS A PART OF BUILDING OR SEPARATE LY 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 W HICH WAS CONTRARY TO THAT REACHED BY THE CIT(A) MAKING THE ASSESSMEN T ORDER BAD FOR THIS REASON ALONE SINCE A LOWER AUTHORITY CANNOT S IT IN JUDGEMENT OVER THE CONCLUSION OF AN HIGHER AUTHORITY; THAT FURTHER THE ASSESSMENT ORDER DID NOT CONTAIN ANY DETAIL OF THE VARIOUS ASS ETS CLAIMED BY THE ASSESSEE TO BE PLANT MUCH LESS WERE THE FUNCTION S OF SUCH ASSETS EXAMINED BY THE AO; THAT IN FACT THOUGH THE ASSESS EE WAS REQUIRED TO DO SO IT NEVER FILED ANY LIST OF ITS ASSETS ON REC ORD; THAT IN THE ABSENCE THEREOF COUPLED WITH THE ABSENCE OF A FRESH TECHNI CAL REPORT THE AO ITA NOS.1572 TO 1577/D/2011 70 WAS NOT IN A POSITION TO AS HAS NOT INDEED BEEN DO NE PASS A REASONED DETAILED ORDER AS TO WHAT REALLY CONSTITUTES A TERM INAL BUILDING; THAT IN FACT THE AO HAD NO OCCASION TO EXAMINE AS TO WHETH ER THE ESCALATORS AND CONVEYOR BELTS ETC. HAD BEEN SHOWN AS PART OF THE BUILDING OR SEPARATELY AS MACHINERY OF THE PLANT; THAT FURTHE R 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 B Y THE LEARNED CIT THE MATERIAL TAKEN INTO CONSIDERATION BY THE AO WHI LE PASSING THE ORDER GIVING EFFECT TO THE DIRECTIONS OF THE TRIBUNAL WA S THE VERY SAME MATERIAL WHICH HAD ALREADY BEEN CONSIDERED WHEN THE ORDER OF THE TRIBUNAL WAS BEING PASSED; THAT ACTUALLY NO ENQUIR Y 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 TE RMINAL BUILDING; THAT THIS DOCUMENT WAS AVAILABLE WITH THE TRIBUNAL AT TH E TIME OF THE PASSING OF ITS ORDER; THAT THE TRIBUNAL HOWEVER W AS NOT SATISFIED WITH IT; AND THAT IN PARAGRAPH 5.8 (APB 162) OF ITS ORDE R THE TRIBUNAL HAS OBSERVED THAT NO TECHNICAL REPORT HAS BEEN PLACED ON RECORD TO DESCRIBE THE BUILDING ITS SPECIFICATION OR (SIC-WH ETHER) IT IS SPECIFICALLY DESIGNED.. THE LEARNED DR HAS SOUGHT TO PLACE REL IANCE LIKE FOR THE FIRST ISSUE ON CIT VS. NALWA INVESTMENTS LTD. 1 1 TAXMANN.COM 98 (DEL) AND RAJALAKSHMI MILLS VS. ITO 31 SOT 353 ( CHENNAI)(SB) WHEREIN AS PER THE DEPARTMENT IT HAS BEEN HELD I NTER ALIA THAT THE ITA NOS.1572 TO 1577/D/2011 71 COMMISSIONER UNDER SECTION 263 OF THE ACT CAN REG ARD 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 H IS RETURN. IN THIS MANNER THE LEARNED DR HAS SOUGHT THE ASSESSEES AP PEALS ON THIS ISSUE TO BE DISMISSED. 61. WE HAVE HEARD THE PARTIES ON THIS ISSUE AND HAV E 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 EXAM INE THE VARIOUS ASSETS OF THE ASSESSEE AT THE AIRPORT TERMED AS T ERMINAL BUILDING AND TO EXAMINE AS TO WHETHER AS A WHOLE THEY WERE PLAN T OR BUILDING BY APPLYING THE FUNCTIONALITY TEST BY SAYING AS TO WH ETHER THE ASSETS WERE FOR HOUSING THE PASSENGERS IN TRANSIT AND OTHER ASS ETS OR TOOLS OF THE TRADE OR IF SOME ASSETS WERE BUILDING WHEREAS S OME WERE PLANT. THE ASSESSEE WAS DIRECTED TO FURNISH A DETAILED LIS T OF VARIOUS ASSETS CLAIMED TO BE PLANT AND THEIR FUNCTIONS. 62. ON THE ABOVE DIRECTIONS THE AO CALLED FOR A RE PLY 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. ITA NOS.1572 TO 1577/D/2011 72 63. FIRST OF ALL IT REMAINS AS A FACT THAT THE TEC HNICAL REPORT WHICH WAS FILED BY THE ASSESSEE BEFORE THE CIT(A) WAS NE VER 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 SITUA TION THAT THE TRIBUNAL DIRECTED THE ASSESSEE TO FURNISH THE DETAILS AS NO TED ABOVE. 64. AS PER THE ASSESSEE THESE DETAILS ALREADY CONS TITUTED 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 T HAT 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 FACTUA LLY INCORRECT. THE CIT HAVING PROCEEDED ON THIS WRONG ASSUMPTION RENDERS T HE ORDER BAD ON THIS VERY SCORE. 65. IN THE SHOW CAUSE NOTICE ISSUED UNDER SECTION 2 63 OF THE ACT THE CIT OBJECTED THAT THE AO HAD NOT GIVEN ANY CLEAR FI NDING 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 REPL Y FURNISHED BY THE ASSESSEE IT WAS POINTED OUT THAT THE AO HAD DULY A PPLIED 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 ASS ESSEES CONTENTION ITA NOS.1572 TO 1577/D/2011 73 HAD BEEN THAT THE TERMINAL BUILDING WAS A TOOL OF B USINESS; THAT THIS CONTENTION HAD BEEN EXAMINED BY THE AO; THAT THE FACTUM OF THE ASSESSEE HAVING FILED A TECHNICAL REPORT WAS RECORD ED IN THE ASSESSMENT ORDER; THAT IT WAS ALSO RECORDED THAT TH E 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 DISALLO WING A PART OF THE DEPRECIATION ON THE TERMINAL BUILDING. THESE FACTS ARE PATENT ON RECORD. IN THE LIGHT THEREOF IT CANNOT BE SAID TH AT THE AO HAD NOT APPLIED HIS MIND TO ALL THE ISSUES RAISED BEFORE HI M OR THAT NO FINDING HAD BEEN RECORDED BY THE AO IN THIS REGARD. 66. THE NEXT OBJECTION OF THE CIT(A) WAS THAT THE C BDT 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 ASSESSEES CLAIM OF TER MINAL 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 BE EN 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 ITA NOS.1572 TO 1577/D/2011 74 DEPRECIATION. THIS CHART GAVE A DETAILED LIST OF T HE 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 EXPLAI NS THE FUNCTIONS OF EACH OF THE PARTS OF THE ASSETS OF THE ASSESSEE. T HE FIRST PART OF THIS REPORT CONTAINS A DESCRIPTION OF THE FUNCTIONS OF T HE TERMINAL BUILDING WHEREAS THE SECOND PART OF THE REPORT CONTAINS A DE TAILED LIST OF THE ITEMS INCLUDED IN THE TERMINAL BUILDING ALONGWITH AN EXPLANATION AS TO HOW THEY SPECIFICALLY FUNCTION AS A PLANT. THE A O 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 DEMONST RATE THAT THIS REPORT DOES CONTAIN ALL THE DETAILS AND FUNCTIONS OF THE ASSET S 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 AGENC IES 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 WHI CH IT HAS BEEN DESIGNED. THE SPECIALIZED FEATURES OF THE TER MINAL BUILDING VIS-A-VIS A NORMAL BUILDING IS TECHNICALLY JUSTIFIED BELOW: ITA NOS.1572 TO 1577/D/2011 75 1. THE TERMINAL BUILDINGS ARE DESIGNED TO HANDLE CE RTAIN NUMBER OF PASSENGERS AND THEIR BAGGAGE WITHIN A SPE CIFIED TIME. THEREFORE THE FACILITIES/DEVICES ARE ACCORD INGLY PROVIDED IN THE QUANTITY AND VOLUME AS CALCULATED W ITH THE HELP OF RELEVANT STANDARDS/CODES. ALL INFRASTRUCTU RE INCLUDING WATER SUPPLY SANITATION AIR CONDITIONIN G CHECK- IN COUNTERS CONVEYOR BELTS RESTAURANT & CANTEEN F ACILITIES SHOPS AND STALLS ETC. HAVE TO BE PROVIDED CONSIDERI NG THE MAXIMUM PASSENGER LOAD AT ANY GIVEN TIME. STANDBY ARRANGEMENTS FOR ALL THE FACILITIES INCLUDING WATER SUPPLY DRAINAGE SYSTEM AIR-CONDITIONING AND ELECTRICITY A RE ALSO NECESSARY AS THE AIRPORT RUNS 24 HOURS A DAY 365 D AYS IN A YEAR. 2. THE TERMINAL BUILDING IS DESIGNED FOR HAVING LIV E LOADS OF 500 KG/SQM. TO WITHSTAND THE OVERLOADING O F PASSENGERS AND VISITORS WHEREAS ORDINARY BUILDING I S DESIGNED FOR A LIVE LOAD OF 200-250 KG./SQM. IN AD DITION WHERE HEAVIER LOADING DUE TO EQUIPMENTS ARE TO BE SUPPORTED THE RELEVANT AREAS ARE DESIGNED TO WITHS TAND 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 O F THIS STIPULATION THE SLAB THICKNESS AND BEAM DIMENSIONS GET INCREASED TREMENDOUSLY. COLUMNS ARE ALSO TO BE PRO VIDED WITH LARGER SIZE AND HEAVY REINFORCEMENT. IN ORDIN ARY BUILDINGS THE BEAM SPAN IS NORMALLY 3 TO 5 METRE W HEREAS IN AIRPORT TERMINAL BUILDING IT VARIES FROM 10 TO 3 0 METRE. ITA NOS.1572 TO 1577/D/2011 76 AS THE TERMINAL BUILDING IS SUPPOSED TO CATER FOR L ONGER LIFE ADEQUATE PROVISION FOR RESISTANCE TO CORROSIO N ARE MADE. IN ADDITION THE TERMINAL BUILDING IS DESIGN ED FOR MAXIMUM WIND VELOCITY IN THE ZONE AND ALSO DESIGNED TO CATER FOR EARTHQUAKE CRITERIA. THE IMPORTANCE FACT OR OF 1.5 IS TAKEN WHILE DESIGNING THE TERMINAL BUILDING AS A GAINST 1.0 USED FOR ORDINARY BUILDINGS. 4. TO CONTROL THE MOVEMENT OF AIRCRAFTS ON GROUND A S WELL AS IN THE SKY CERTAIN HI-TECH EQUIPMENTS ARE REQUIRED. THESE EQUIPMENTS INCLUDE SOPHISTICATED RADARS COMP UTERS AND OTHER SENSORS/ELECTRONICS GADGETS. SOME OF THE SE GADGETS ARE REQUIRED TO BE PLACED AT CERTAIN HEIGHT WHICH IS ESSENTIAL FOR THEIR FUNCTIONING FOR WHICH HIGH R ISE CONTROL TOWERS ARE REQUIRED TO BE CONSTRUCTED. THE OTHER G ADGETS ARE HOUSED IN LOWER HEIGHT STRUCTURES DEPENDING UPO N THEIR SIZE AND SHAPE. ALL PROVISIONS FOR ELEVATORS TAKING HEAVY CABLES T O THE TOP FLOOR FOR CONTROL TOWER OVERHEAD RADAR ETC. ARE MA DE IN THE STRUCTURE ITSELF. THE CONTROL TOWERS FACILITATE TH E AIR TRAFFIC CONTROLLER TO HAVE AN UNOBSTRUCTED VIEW OF ALMOST A LL THE AREAS OF AN AIRPORT. SUCH STRUCTURES NEED SPECIAL CARE DURING THEIR DESIGNING AND EXECUTION PROCESS. THES E 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 OPER ATION FROM WERE GROUND TO AIRCRAFT AND GROUND TO GROUND COMMUNICATIONS ARE UNDERTAKEN BY THE AIR TRAFFIC WI TH THE HELP OF HIGHLY SOPHISTICATED EQUIPMENTS SUCH AS RAD AR ITA NOS.1572 TO 1577/D/2011 77 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 POW ER DISTANCE MEASURING EQUIPMENT (DME) INSTRUMENT LAND ING SYSTEM (ILS) PRIMARY AND SECONDARY RADARS AUTOMAT IC DEPENDENT SURVEILLANCE SYSTEM ETC. THESE EQUIPMENT S ARE SUBJECT TO HIGH RISK OF OBSOLESCENCE ON ACCOUNT OF TECHNOLOGICAL ADVANCEMENT AND DUE TO ADVERSE CONDIT IONS UNDER WHICH THEY ARE OPERATED. 5. THE AIRPORT TERMINAL BUILDINGS REMAIN VERY CLOSE TO THE AIRCRAFTS. THESE BUILDINGS ARE EXPOSED TO SEVE RE VIBRATIONS OF THE RUNNING JET ENGINE OF THE AIRCRAF TS. TO WITHSTAND THE VIBRATIONS AND NOISE OF THE ENGINES THE BUILDINGS ARE CONSTRUCTED WITH SUPER MATERIAL AND CONSTRUCTION SPECIFICATIONS WITH A HIGH DEGREE OF A CCURACY. THE GLAZING IS HERMETICALLY SEALED DOUBLE GLASS WHI CH PREVENTS HEAT AND SOUND ENTERING THE BUILDING. MEZ ZANINE FLOORS ARE ALSO CONSTRUCTED TO HAVE BETTER UTILIZAT ION OF SPACE WHERE HIGH ROOF IS NOT REQUIRED. MEZZANINE F LOORS ARE NOT COMMON IN ORDINARY BUILDINGS. SINCE THE BA SIC STRUCTURE OF THE BUILDINGS ARE SUBJECT TO PRESSURE OF REPETITIVE VIBRATIONS OF HEAVY BODIED AIRCRAFTS TH E NORMAL LIFE OF THE STRUCTURE ITSELF GETS REDUCED INVOLVIN G HIGH MAINTENANCE COST. THE REPETITIVE VIBRATIONS ALSO D AMAGE THE EXTERIOR FINISHES TO THE STRUCTURE DUE TO EXHAU ST THRUST OF AIRCRAFTS WHICH IS RELEASED AT A HIGH SPEED NEC ESSITATING FREQUENT REPLACEMENT. ITA NOS.1572 TO 1577/D/2011 78 APART FROM THE ABOVE GENERAL DESCRIPTION ABOUT A TE RMINAL 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 BUILD ING. PROVISION FOR MACHINE ROOM TO CATER FOR MOTORS CHA INS FOR RAISING AND LOWERING OF THE ELEVATOR CAGE AND THE S HAFT IS MADE WHILE PLANNING THE TERMINAL BUILDING. WHILE DESIGNING ATTENTION IS PAID TO ENSURE THE SAFETY AN D COMFORTS OF PASSENGERS/VISITORS WHO USE THE ELEVATO RS. II) ESCALATORS : THE TERMINAL BUILDING IS ALSO DES IGNED STRUCTURALLY TO WITHSTAND LOADS OF ESCALATORS WEIGH ING APPROX. 7.5 TONNES AND AS THIS EQUIPMENT IS GENERAL LY TAKEN TO THE BUILDING AFTER ITS COMPLETION IN ALMOS T ALL RESPECTS AND ACCORDINGLY THE PORTIONS IN WHICH ESCA LATORS ARE TAKEN THE WINDOWS/DOORS ARE DISMANTLED AND RED ONE AFTER THE ESCALATOR HAS BEEN TAKEN TO REQUIRED LOCA TIONS. THE STRUCTURE WHICH SUPPORTS THE ESCALATORS HAS TO BE DESIGNED FOR HEAVIER LOADS . (ILLEGIBLE). III) BAGGAGE CONVEYOR BELTS : BAGGAGE CONVEYOR BE LTS START FROM CHECK-IN COUNTERS AND RUN THROUGH (ILLEGIBLE) BAGGAGE (ILLEGIBLE). THESE BEL TS CARRY HEAVY LOAD OF BAGGAGE AND THE BELTS ROLL OVER ROLLERS SUPPORTED ON A SPECIALLY DESIGNED STRUCTURE. AS TH E DEPARTURE LOUNGE IS GENERALLY ON FIRST OR SECOND FL OOR OF THE BUILDING EXTRA LOAD FOR THIS SERVICE IS ALSO TO BE ACCOUNTED FOR WHILE DESIGNING THE STRUCTURE. WHEREVER THE CO NVEYOR BELTS ARE REQUIRED TO BE CARRIED THROUGH NECESSARY ITA NOS.1572 TO 1577/D/2011 79 SPACINGS ARE MADE IN THE WALLS AND WHERE CONVEYOR I S MOVING OVER SLOPING PORTION A SPECIALLY DESIGNED R AMP 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 O F VARIOUS AIRLINES ARE PARKED FOR LIFTING THE BAGGAGE AND TAKING THE SAME TO DIFFERENCE AIRCRAFTS AND THIS AR EA IS KNOWN AS BAGGAGE MAKE-UP AREA (BMA). WHEN BAGGAGE IS BROUGHT FROM AN ARRIVING AIRCRAFT THE BAGGAGE IS UNLOADED AND TRANSFERRED TO THE CONV EYOR BELTS AND THIS AREA IS KNOWN AS BAGGAGE BREAK-UP AR EA (BBA). HERE ALSO PROVISION IS KEPT TO ENSURE THAT A LEAST 2 TO 4 DOLLIES CAN BE KEPT AT A TIME. PROVISION IS A LSO MADE TO AVOID ANY MISHAP DUE TO MALFUNCTIONING OF THE CONV EYOR BELTS. IN THE TROLLEYS/DOLLIES MOVEMENT AREA SPEC IAL PROTECTION HAS TO BE PROVIDED TO THE STRUCTURAL MEM BERS 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 REQ UIRED TO CATER TO INDIVIDUAL NEEDS OF AIRLINES. THESE COUNT ERS ARE EQUIPPED WITH AUTOMATIC WEIGHING FACILITY FOR CHECK -IN BAGGAGE AND COMPUTERS FOR ISSUING BOARDING CARDS TO PASSENGERS. THESE COUNTERS ARE ALSO TERMED AS COMM ON USER TERMINAL EQUIPMENT (CUTE). ALL ARRANGEMENTS F OR POWER CABLES AND COMPUTER NETWORK ARE PLANNED AND DESIGNED BEFORE HAND. ITA NOS.1572 TO 1577/D/2011 80 V) FIRE ALARM & FIRE FIGHTING SYSTEMS : THESE ARE SPECIALLY SAFETY MEASURES FOR AN AIRPORT TERMINAL B UILDING. THE FIRE SENSOR DEVICES AND FIRE FIGHTING PIPES WIT H 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 LO CATIONS. THESE HYDRANTS ARE DESIGNED FOR SPECIFIC NEED OF FI RE FIGHTING WITHIN THE BUILDING IN ACCORDANCE WITH FIR E DEPARTMENTS GUIDELINES. AT ANY (ILLEGIBLE) HI GHEST 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 INSTA LLED IN THE TERMINAL BUILDING AT MANY LOCATIONS IN DEPAR TURE AS WELL AS ARRIVAL AREA. ADDITIONAL LOAD OF THESE SYS TEMS (ILLEGIBLE) IS ALSO CONSIDERED WHILE DESIGNING VARIOUS FLOORS OF THE TERMINAL BUILDING. THE LOCAT IONS 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 FR OM 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 INST ALLED. PROVISION FOR CABLES AND OTHER SUPPORT FACILITIES F OR THESE INSTALLATIONS HAS ALSO TO BE PLANNED AND MADE AT VA RIOUS STRATEGIC LOCATIONS. ITA NOS.1572 TO 1577/D/2011 81 VII) AIR CONDITIONING & CABLE DUCTS : AIR-CONDITIO NING AND CABLE DUCTS ALSO RUN BETWEEN THE ROOF SLAB AND FALS E CEILING. THESE DUCTS ARE ALSO SUSPENDED FROM THE BUILDINGS CEILING. IN ORDINARY BUILDINGS THESE D UCTS NORMALLY RUN ALONG WALLS BUT IN AIRPORT TERMINAL BU ILDINGS 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 PROVI DED AT DESIGNED LOCATIONS IN ORDER TO MAINTAIN AIR PRES SURE AND TEMPERATURE OF THE AIR-CONDITIONING SYSTEM. THESE AHUS ARE QUITE HEAVY AND THEREFORE THE STRUCTURE WITH S UPPORTS 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 BUI LDING AND NOWHERE ELSE. THE SHAFT FACILITATES PASSENGERS TO REACH THE AEROBRIDGE WHICH OPERATES AT A CERTAIN DI STANCE FROM THE TERMINAL BUILDING AND THE ROTUNDA PROVIDES SUFFICIENT SPACE FOR THE PASSENGERS TO WAIT FOR THE IR TURN BEFORE ENTERING THE AEROBRIDGE. FROM ROTUNDA THRO UGH AEROBRIDGE THE PASSENGERS ENTER INTO THE AIRCRAFT D IRECTLY. THE AEROBRIDGE SHAFT ROTUNDA AND THE AEROBRIDGE AR E CLOSE STRUCTURES AND PROVIDE PROTECTION TO THE PASS ENGERS AGAINST RAIN SUN & COLD. ITA NOS.1572 TO 1577/D/2011 82 EACH OF THE ABOVE DEVICE NEEDS SPECIAL CONSIDERATIO NS WHILE PLANNING AND DESIGNING THE STRUCTURE WITHIN W HICH THE DEVICE IS TO BE HOUSED. THE STRUCTURE OF THE B UILDING SHOULD HAVE THE STRENGTH TO BEAR THE LOAD OF ALL TH E 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 F ALSE CEILING IS A COSTLY AFFAIR. X) FLOORING : THE FLOORING IN THE TERMINAL BUILDIN GS ARE EXHAUSTIVELY USED BY THE PASSENGERS AND VISITORS IN THE BUILDING AT ALL TIMES APART FROM (ILLEGIBLE) NECESSITATING FREQUENT REPLACEMENT OF SPECIAL MEZZA NINE FLOORING. AT AN AIRPORT HUNDREDS AND THOUSANDS OF SUCH PASSE NGERS 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 PER FORM THOSE ACTIVITIES CONTINUE TO WORK ALL THE TIMES. 69. A PERUSAL OF THE ABOVE REPORT SHOWS THAT IT IND EED CONTAINS ALL THE REQUISITE DETAILS AND FUNCTIONS OF THE ASSESSEE S ASSETS. IT CONTAINS VERY MANY DETAILS ABOUT ALL THE ASSETS OF THE ASSES SEE AT THE AIRPORT LIKE ELEVATORS ESCALATORS BAGGAGE CONVEYER BELTS CHECK-IN COUNTERS FIRE ALARM & FIRE FIGHTING SYSTEMS PASSENGERS SCRE ENING SYSTEM AIR ITA NOS.1572 TO 1577/D/2011 83 CONDITIONING & CABLE DUCTS AEROBRIDGE SHAFT AND RO TUNDA FALSE CEILING AND FLOORING ETC. IT GIVES THE SPECIFICATIONS AND THE USAGE THEREOF. IT CANNOT THEREFORE IN ANY MANNER BE SAID TO BE MERE LY A TECHNICAL REPORT AS TRIED TO BE MADE OUT ON BEHALF OF THE DE PARTMENT. IT IS AN ELABORATE REPORT CONTAINING ALL THE REQUISITE DETA ILS WHICH WERE DULY TAKEN INTO CONSIDERATION BY THE AO WHILE PASSING TH E ASSESSMENT ORDER. IT HAS NOT BEEN SHOWN OTHERWISE. THESE DET AILS 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 DETAIL ED LIST OF THE ASSESSEES VARIOUS ASSETS CLAIMED TO BE PLANT. T HESE DOCUMENTS ALONGWITH OTHER MATERIAL REFERRED TO HEREINABOVE W ERE BEFORE THE AO AND THE ASSESSEE OFFERED A DETAILED EXPLANATION. 71. NO DEFECT IN THE TECHNICAL REPORT HAS BEEN POIN TED OUT BY THE LEARNED CIT. IT IS JUST THAT HE HAD REQUIRED ANOTH ER 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 RECO RD 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 AL LOWED 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 CARR Y OUT AND THE ITA NOS.1572 TO 1577/D/2011 84 LEARNED CIT CANNOT SIT IN JUDGEMENT OVER THE ORDER OF THE TRIBUNAL. NO REEXAMINATION OF AN ISSUE ALREADY EXAMINED CAN BE D ONE 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 N AVIGATIONAL CONTROL AND THAT THE FUNCTION OF THE BUILDING FOR THE PASSE NGERS IS ONLY INCIDENTAL HE DOES SO ON EXAMINATION OF THE TECHNI CAL REPORT FILED BY THE ASSESSEE. FURTHER THE TECHNICAL REPORT SHOWS THAT THE TERMINAL BUILDING INCLUDES ELEVATORS ESCALATORS BAGGAGE CO NVEYORS ELECTRONIC COUNTERS FIREFIGHTING AND ALARM SYSTEMS AEROBRIDG E SHAFT ROTUNDA ETC. THE TECHNICAL REPORT FILED BY THE ASSESSEE TH US CONTAINS ALL THE REQUISITE DETAILS AS PER THE REQUIREMENTS OF THE DI RECTIONS 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 JUD ICIALLY BY THE VARIOUS COURTS HAS BEEN DISCUSSED IN PARAGRAPH NOS.30 TO 3 7 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 LEARNE D CIT NONE OF THESE CASES ARE APPLICABLE IN VIEW OF OUR ABOVE FI NDINGS. ITA NOS.1572 TO 1577/D/2011 85 74. IN VIEW OF THE ABOVE THE GRIEVANCE OF THE ASSE SSEE IN THIS REGARD ALSO IS FOUND TO BE JUSTIFIED AND IS ACCEPTED AS SU CH. THE ORDER OF THE LEARNED CIT IN THIS REGARD IS ALSO CANCELLED AND TH AT OF THE ASSESSING OFFICER IS REVIVED ACCEPTING GROUND NOS.5 TO 10. 75. TO SUM UP THE CITS ORDER IS HELD TO BE UNSUST AINABLE 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 F ACTS ARE MUTATIS MUTANDIS COMMON IN ALL THESE APPEALS. OUR FOREGOING OBSER VATIONS ARE THEREFORE RESPECTIVELY APPLICABLE TO ALL THE APPEALS. 78. IN THE RESULT ALL THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 9 TH SEPTEMBER 2011. SD/- SD/- (G.E.VEERABHADRAPPA (G.E.VEERABHADRAPPA (G.E.VEERABHADRAPPA (G.E.VEERABHADRAPPA) )) ) (A.D.JAIN (A.D.JAIN (A.D.JAIN (A.D.JAIN) )) ) VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATED : 09.09.2011 VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT ASSISTANT REGISTRAR