International Airports ... vs Commissioner Of Income-Tax
2001 Latest Caselaw 1675 Del

JUDGMENT

Arijit Pasayat C.J.

1. At the instance of the assessed, the following question has been referred for the opinion of this court by the Income-tax Appellate Tribunal, Delhi Bench-E (for short "the Tribunal"), under Section 256(1) of the Income-tax Act, 1961 (in short "the Act"):

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the expenditure of Rs. 19.89 lakhs was a capital expenditure as it gave the assessed an advantage of enduring nature ?"

2. The dispute relates to the assessment year 1977-78.

3. The factual background in a nutshell is as follows.

4. The assessed, a Government Corporation, was formed on April 1, 1972, under an Act of Parliament to take over the airports in metropolitan towns, including Palam Airport at Delhi. During the relevant assessment year the assessed paid Rs. 19.89 lakhs to the Delhi Development Authority (in short "the DDA") for development of an alternative site for the residence of Mangolpuri villagers who were to be evicted as their lands were acquired for extension of the International Airport at Delhi. As the said villagers were not vacating the land, a scheme was finalised for developing an alternative site for the said villagers. The Assessing Officer held that the dispute regarding vacation of land had been continuing even before the Delhi International Airport was vested in the assessed-Corporation and since the time when the said airport was under the authority of the Ministry of Tourism and Civil Aviation. It was held that the expenditure in question was incurred to facilitate physical control of the assessed over the land and for the purpose of providing alternate accommodation to the residents of the village by the Delhi Development Authority by constructing small houses for them on the alternate site and the expenditure was thus in connection with the acquisition and physical control. It was concluded that the assessed was to have an enduring benefit from the land acquired for the purpose of extension of the International Airport at Delhi. The matter was carried in appeal by the assessed before the Commissioner of Income-tax (Appeals) (in short "the CIT(A)"), who held that the Assessing Officer's action was justified. In further appeal, the Tribunal upheld the orders of the authorities below and observed that there was no evidence to show that the assessed or its predecessor had already acquired the village site. On the contrary, circumstantial evidence like the underground tunnel for use of the villagers as passage would clearly go to show that the villagers were legally entitled to stay in the village site and had easementary right of passage over the runway owned by the assessed-Corporation. Further the villagers claimed title by adverse possession. Accordingly, it was held that the expenditure incurred for removal of the villagers and resettling them at another site was a capital expenditure. On being moved by the assessed for reference, the question as set out above has been referred for the opinion of this court.

5. We have heard learned counsel for the Revenue. There is no appearance on behalf of the assessed in spite of notice. Learned counsel for the Revenue submitted that the Tribunal has analysed the factual position and has come to hold that the expenditure incurred resulted in bringing into existence an enduring benefit and, therefore, was rightly held to be capital in nature.

6. In V. Jaganmohan Rao v. CIT/EPT , it was held that where money is paid to perfect a title or as consideration for getting rid of a defect in the title or a threat of litigation the payment would be a capital payment and not a revenue payment. In Sitalpur Sugar Works Ltd. v. CIT [1963] 49 ITR (SC) 160, it was held that where expenditure was incurred by the assessed for shifting the factory from one place to another to improve the business, the same was capital expenditure in nature. Similar view was also expressed by the Bombay High Court in Hardiallia Chemicals Ltd. v. CIT [1996] 218 ITR 598.

7. The above being the position, the conclusions of the authorities below and the Tribunal are in order. We answer the question referred in the affirmative, in favor of the Revenue and against the assessed.

8. The reference stands disposed of.