Taxability of grant by the govt. for improvisation of air connectivity

The Assessing Officer had noticed that grant of Rs. 35 crores was sanctioned by the Government in the said year to improve air connectivity in North-Eastern Region. The respondent- assessee had taken on lease four ATR-42-320 air crafts for five years from Ms/ Aviande Transport Regional (ATR).3 The respondent- assessee had authorized and had spread this grant over a period of five years as the lease period of the air crafts was sixty months. The Assessing Officer disagreed and held that once the respondent- assessee had received the grant of Rs. 35 crores from the Ministry of Finance and Company Affairs, the same could not have been spread over five years, i.e., the lease period, and the entire amount should be brought to tax in one year, i.e., year of receipt itself. The assessee was following mercantile system of accounting and the grant had accrued to the respondent- assessee in the period relevant to the present assessment year. Thus, addition of Rs. 27.71 crores was made.

The findings recorded by the two appellate authorities is that the standard followed by the respondent was as per accounting standard AS-12 prescribed by the Institute of Chartered Accountants. The said method of accounting cannot be faulted or ignored. It is further recorded that there was no dispute that the grant given to the respondent was based upon operations from which net profit/income had to be arrived at after deducting the expenditure. The grant had to be utilize over five years. They accordingly accepted that amount of Rs. 7.29 crores declared by the respondent, out of grant of Rs.35 crores should be treated as income of the year in question. Before us, the counsel for the Revenue has not been able to point out and state, how and why the reasoning can be faulted as the assessee had followed AS-12. Revenue has not disputed before us that the accounting standard, as prescribed by the institute, has been followed. On the first question, therefore, no substantial question of law arises.

HIGH COURT OF DELHI AT NEW DELHI

 INCOME TAX APPEAL NO. 13/2013

Date of decision: 8^th August, 2013

COMMISSIONER OF INCOME TAX-I

versus

AIRLINE ALLIED SERVICES LTD.

CORAM:

HONORABLE MR. JUSTICE SANJIV KHANNA

HONORABLE MR. JUSTICE SANJEEV SACHDEVA

ORDER

SANJIV KHANNA, J.  (ORAL):

This appeal by the Revenue pertains to Assessment Year 2003- 04 and arises out of order passed by the Income Tax Appellate Tribunal dated 15^th June, 2012.

2. Revenue in this appeal has only raised two issues. First issue relates to deletion of addition of Rs. 27,71,00,000/- made by the Assessing Officer, by Commissioner of Income Tax (Appeals), which have been affirmed by the tribunal. The Assessing Officer had noticed that grant of Rs.35 crores was sanctioned by the Government in the said year to improve air connectivity in North-Eastern Region. The respondent- assessee had taken on lease four ATR-42-320 aircrafts for five years from Ms/ Aviande Transport Regional (ATR).