Development fee collected for funding capital expenditure for airport development not taxable as revenue income

Mumbai International Airport Pvt. Ltd. Vs DCIT (ITAT Mumbai)

ITAT Mumbai held that development fees collected from passengers was earmarked for capital expenditure towards modernisation and development of airport infrastructure and therefore the same could not be treated as revenue income of the assessee.

Facts- The issues raised by the Revenue, vide the present appeal, pertain to allowability of depreciation on upfront concession fee paid to Airports Authority of India, deduction of payment made towards retrenchment/compensation to employees of AAI, taxability of development fee collected from passengers, deletion of disallowance under section 14A read with Rule 8D, treatment of short-term capital gains on temporary investment of surplus funds, taxability of Passenger Service Fee ­Security Component (PSF-SC), and the rate of depreciation on runway, taxiway, apron and allied structures. Since each of the above issues involves separate factual and legal considerations.

Conclusion- Held that the upfront fee paid to AAI confers a business or commercial right in the nature of a license, which qualifies as an intangible asset eligible for depreciation. The Revenue has not brought on record any change either in the facts or in the legal position warranting a different view. Respectfully following the decision of the co-ordinate Bench in the assessee’s own case, we find no infirmity in the order of CIT(A) in allowing depreciation on the upfront concession fee paid to AAI.