International Airports ... vs Commissioner Of Income Tax
2006 Latest Caselaw 1749 Del

JUDGMENT

Arijit Pasayat, C.J.

1. At the instance of assessed following question has been referred for 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?

Dispute relates to assessment year 1977-78.

2. Factual background in nutshell is as follows.

assessed, a Government Corporation was formed on 1.4.1972 under the Act of Parliament to take over the airports in Metropolitan towns, including Palam Airport at Delhi during the relevant assessment year assessed paid Rs. 19.89 lakhs to 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 acquired for extension of International Airport at Delhi. As the said villagers were not vacating the land, a scheme was finalised for developing alternative site for the said villagers. The Assessing Officer held that the dispute regarding vacation of land had been continuing even before Delhi International Airport was vested in the assessed Corporation and since the time when the said airport was under the authority of 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 DDA 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 international Airport at Delhi. 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, 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 underground tunnel for use of 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, question as set out above has been referred for opinion of this Court.

3. We have heard learned Counsel for the Revenue. There is no appearance on behalf of 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.

4. In V. Jaganmohan Rao v. Commissioner of Income-tax 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. Commissioner of Income-tax it was held that where expenditure was incurred by the assessed for shifting the factory from one place to another to improve the business, 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.

5. Above being the position, the conclusion 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.

The reference stands disposed of.

Thereafter IAAI moved an application for recalling the Reference which had been answered ex parte by the said Order dated 15th October, 2001. The Division Bench, now presided over by Hon'ble Mr. Justice S.B. Sinha, Chief Justice, as His Lordship then was opined that the case was a fit one for the exercise of the inherent jurisdiction vested in the Court, and recalled the judgment.

2. We have heard Ms. Anjana Gosain, learned Counsel for the Petitioner. She endeavored to persuade us to remand the matter to the ITAT since certain documents had not been filed by the IAAI which would have the effect of altering the factual matrix. It is well settled that in answering a Reference the High Court must take into consideration the facts as settled before the Income-Tax Appellate Tribunal. The effort of learned Counsel for the IAAI was to establish that the land in village Mangolpuri did not vest in the ownership of IAAI but with the Government of India. She further contended that the land had been trespassed upon after the acquisition of the contiguous land by the IAAI. The Order dated 30.10.1980 of the CIT (Appeals) records the submission of the counsel for the Petitioner herein that "the entire area of land had already been acquired sometime in the past by the Civil Aviation Department and the ownership and possession thereof came into the hand of the appellant some time in 1972 when it was set up and entrusted with the functions of managing or operating the International Airports in India including the Airport of Delhi." This being the factual position, recorded in the Order of CIT (Appeals). We do not see how fresh evidence can now be permitted to be led by the Petitioner to the contrary. Even if what is contended now is taken as correct in our view, it would make no appreciable difference in answering the question whether the sum of Rs. 19.89 lakhs paid by the IAAI to the DDA for the removal and rehabilitation of the squatters in village Mangolpuri was in fact a capital expenditure.

3. Learned Counsel for the Petitioner relied on Commissioner of Income-Tax v. Auto Distributors Ltd. in support of her contention that the said sum of Rs. 19.89 lakhs was in the nature of a revenue expenditure as it was for the commercial expediency of the business of the appellant. The facts in Auto Distributors Ltd. are distinguishable in that the assessed there was in the business of taking properties on lease and thereafter sub-letting them for consideration. The sub-tenant was paid off so that a higher rental could be obtained by the assessed. It was held that this expenditure which was for improving the assessed's business prospects was a revenue expenditure. It was not a case where the capital asset of the assessed could not be put to the use for which they were acquired. The learned Counsel also placed reliance on the decision of the Bombay High Court in Commissioner of Income-Tax, Bombay City-IV v. Excel Industries Ltd. 122 ITR 995 and of the Gujarat High Court in Satyadev Chambers Pvt. Ltd. v. Commissioner of Income-Tax, Gujarat 117 ITR 86. In both those cases, the decision of the High Court turned on the facts. The fact situation here is not comparable with that obtaining in those decisions. On the other hand we are inclined to agree with the view taken by the Bombay High Court in Hardiallia Chemicals Ltd. v. Commissioner of Income-Tax 218 ITR 598 where the payment had been made "to perfect the interest of the assesse in the land or can be rid of the threat of litigation which might have delayed the handing over of vacant possession of the plot to the assessed and the establishment of the proposed factory by the assessed thereon." It was held, following the decision of the Hon'ble Supreme Court in Sitalpur Sugar Works Ltd. v. Commissioner of Income-tax (1963) 49 ITR (SC) 160, and V. Jaganmohan Rao v. Commissioner of Income-tax that such expenditure cannot be treated as revenue expenditure.

4. We have extracted the Order dated 15th October, 2001 verbatim since we are in complete and respectful agreement with the view expressed therein. The reference is answered in favor of the Revenue and against the assessed.

5. The reference stands disposed of accordingly. There shall be no order as to costs.