Gujarat Road & Infrastructure Co. Ltd, Ahmedabad V. The ACIT-Gandhinagar Circle, Gandhinagar

CO 105/AHD/2012

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7550 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 24-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 06-08-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 11-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation
• Section: 43B; 143(3); 32; 147; 148; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE SHRI G. C. GUPTA, VP AND SHRI A. MOHAN ALAN KAMONY, AM) ITA NO.1169 & 1730/AHD/2010 AND 892/AHD/2012 A. Y.: 2002-03 AND 2005-06 THE D. C. I. T., GANDHINAGAR CIRCLE BLOCK NO.14, 4 TH FLOOR, UDHYOG BHAVAN, SECTOR 11, GANDHINAGAR GUJARAT ROAD & INFRASTRUCTURE CO. LTD. (FORMERLY KNOWN AS GUJARAT TOLL ROAD INVESTMENT CO. LTD.) SUCCESSOR OF VADODARA HALOL TOLL ROAD CO., ROAD & 301, SHAPATH 1, OPP. RAJPATH CLUB, SHARKHEJ GANDHINAGAR HIGHWAY, BODAKDEV, AHMEDABAD 380 015 P. A. NO. AABCG 2093 H THE A. C. I. T., GANDHINAGAR CIRCLE, BLOCK NO.14, 4 TH FLOOR, YDHYOG BHAVAN, SECTOR 11, GANDHINAGAR 382 011 VS GUJARAT ROAD & INFRASTRUCTURE CO. LTD. (SUCCESSOR OF VADODARA HALOL TOLL ROAD CO.), ROAD & BUILDING DEPARTMENT, BLOCK NO.14, SACHIVALAYA, GANDHINAGAR, P. A. NO. AABCG 2093 H THE A. C. I. T., GANDHINAGAR CIRCLE , GANDHINAGAR GUJARAT ROAD & INFRASTRUCTURE CO. LTD. (GUJARAT TOLL ROAD INVESTMENT CO. LTD.), 301, SHAPATH 1, OPP. RAJPATH CLUB, SHARKHEJ GANDHINAGAR HIGHWAY, BODAKDEV, AHMEDABAD 380 015 P. A. NO. AABCG 9747 N (APPELLANT) (RESPONDENT) C.O. NO.105/AHD/2012 ( IN ITA NO.892/AHD/2012) GUJARAT ROAD & INFRASTRUCTURE CO. LTD. (FORMERLY GUJARAT TOLL ROAD INVESTMENT CO. LTD.), 301, SHAPATH 1, OPP. RAJPATH CLUB, VS THE A. C. I. T., GANDHINAGAR CIRCLE, BLOCK NO.14, 4 TH FLOOR, YDHYOG BHAVAN, SECTOR 11, GANDHINAGAR 382 011 ITA NO.1169 & 1730/AHD/2010, 892/AHD/2012 & CO 105/ AHD/2012 (AY2002-03 & 2005- 06) GUJARAT ROADS & INFRASTRUCTURE CO. LTD. 2 SHARKHEJ GANDHINAGAR HIGHWAY, BODAKDEV, AHMEDABAD 380 015 P. A. NO. AABCG 9747 N (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY SHRI B. K. SPANDYA, CIT DR ASSESSEE/CROSS OBJECTOR BY SHRI DILIP V. LAKHANI, A R DATE OF HEARING: 06-08-2012 DATE OF PRONOUNCEMENT: 24-09-2012 O R D E R PER A. MOHAN ALANKAMONY: THESE CROSS APPEALS AND THE CROSS OBJECTION ARE FILED BY THE REVENUE AND TH E ASSESSEE AGGRIEVED BY DIFFERENT ORDERS OF THE LEARNED CIT(A) , GANDHINAGAR IN APPEAL NO. CIT(A)GNR/260/2008-09 DATED 12-01-2010 FOR AY 2002- 03 AND NO CIT(A)/GNR/203/2010-11 DATED 09-01-2012 FOR AY 2005- 06 AND PASSED U/S 250 AND 143(3) READ WITH SECTION 147 OF THE IT ACT. ALL THESE CROSS APPEALS ALONG WITH THE CROSS OBJECTIONS WERE HEARD TOGETHER AND THE SAME ARE BEING DISPOSED OF B Y THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE:- ITA NO.1169/AHD/2010 (REVENUES APPEAL FOR AY 2002-03) 2. THE REVENUE HAS RAISED TWO EFFECTIVE GROUNDS OF APPEAL WHICH ARE REPRODUCED HEREIN BELOW: ITA NO.1169 & 1730/AHD/2010, 892/AHD/2012 & CO 105/ AHD/2012 (AY2002-03 & 2005- 06) GUJARAT ROADS & INFRASTRUCTURE CO. LTD. 3 1. THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.5,26,43,488/- MADE O N ACCOUNT OF INTEREST ON DEEP DISCOUNT BOND. 2. THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.14,67,03,030/- MADE ON ACCOUNT OF DEPRECIATION. 3. THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF DEVELOPMENT, OPERATION AND MAINTENANCE OF TOLL R OADS FILED ITS RETURN OF INCOME ON 31-10-2002 DECLARING TOTAL LOSS AT RS.29,52,46,692/-. THE CASE WAS INITIALLY PROCESS ED U/S 143(1) OF THE ACT AND SUBSEQUENTLY ASSESSMENT U/S 143(3) WAS COMPLETED ON 23-12-2008. IT WAS OBSERVED BY THE LEARNED AO THAT THE ASSESSEE HAD CLAIMED DEPRECIATION ON ROAD @ 10% AS APPLICA BLE TO NON RESIDENTIAL BUILDING AMOUNTING TO RS.14,67,03,030/- WHICH APPEARED TO BE AGAINST THE DECISION OF THE HONBLE SUPREME C OURT IN THE CASE OF INDORE MUNICIPAL CORPORATION VS CIT REPORTED IN (2001) 247 ITR 403. FURTHER, THE ASSESSEE CLAIMED DEDUCTION FOR AC CRUED INTEREST PAYABLE OF RS.5,26,43,488/- FOR ISSUE OF DEBENTURE S NAMED DEEP DISCOUNT BOND. THESE DEBENTURES WERE REDEEMABLE WI TH INTEREST OVER A PERIOD OF SIXTEEN YEARS ACCORDING TO THE TER MS OF AGREEMENT. THE LEARNED AO AFTER RECORDING THE REASONS AND OBTA INING APPROVAL FROM THE ADDL. CIT ISSUED NOTICE U/S 148 ON 01-02-2 008 REQUIRING THE ASSESSEE TO EXPLAIN AS TO WHY DEPRECIATION CLAIMED ON ROAD @ 10% SHOULD NOT BE DISALLOWED. AFTER CONSIDERING THE EX PLANATIONS OF THE ASSESSEE, THE LEARNED AO HELD THAT THE TOLL ROAD CA N NOT BE CONSIDERED AS AN ASSET AS SPECIFIED IN APPENDIX I TO THE INCOME TAX RULES, 1962 AND THEREBY REJECTED THE CLAIM OF D EPRECIATION TO THE ITA NO.1169 & 1730/AHD/2010, 892/AHD/2012 & CO 105/ AHD/2012 (AY2002-03 & 2005- 06) GUJARAT ROADS & INFRASTRUCTURE CO. LTD. 4 ASSESSEE. THE LEARNED AO ALSO RELIED ON THE DECISIO N OF THE HONBLE SUPREME COURT IN THE CASE OF INDORE MUNICIPAL CORPO RATION VS CIT REPORTED IN (2001) 247 ITR 403 WHEREIN IT HAS BEEN HELD THAT ROAD CANNOT BE SAID TO CONSTITUTE AS A BUILDING. ACCORDI NGLY, THE LEARNED AO DISALLOWED THE ASSESSEES CLAIM OF DEPRECIATION FOR RS.14,67,03,030/- AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. WITH REGARD TO THE ASSESSEES CLAIM OF RS .5,26,43,488/- BEING INTEREST PAYABLE ON DEEP DISCOUNT BOND, THE L EARNED AO OBSERVED THAT AS PER THE SCHEME OF DEEP DISCOUNT B ONDS, INTEREST WAS DUE AND PAYABLE ONLY ON MATURITY. SINCE THE LIA BILITY WAS NOT ACCRUED AND THE AMOUNT WAS NOT PAID, THE LEARNED AO DISALLOWED THE CLAIM OF THE ASSESSEE U/S 43B OF THE ACT AND ADDED THE SUM OF RS.5,26,43,488/- TO THE INCOME OF THE ASSESSEE. THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT(A) ON BOT H THESE ISSUES. THE LEARNED CIT(A) CONSIDERING THE FACTS OF THE CAS E AND THE SUBMISSIONS OF THE ASSESSEE ALLOWED BOTH THE ISSUES IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER IN PARA 3.2 , 4.4 A ND 4.5 OF HIS ORDER: DELETING THE ADDITION OF RS.5,26,43,488/- MADE ON A CCOUNT OF INTEREST ON DEEP DISCOUNT BOND. 3.2 THIS ISSUE HAS COME UP IN OTHER YEARS AS WELL, WHEN THE ADDITIONS MADE BY THE ASSESSING OFFICER HAS BEEN CO NFIRMED BY CIT(A). HOWEVER, ITAT AHMEDABAD HAS MEANWHILE DELIV ERED ITS DECISION FOR ASSESSMENT YEAR 2003-04. THE APPEL LANT HAS FILED A COPY OF THE DECISION DATED 15/05/2009 IN IT A NO.2901/AHD/2006, WHEREIN IT HAS BEEN HELD THAT THE DISALLOWANCE IS NOT CORRECT. SINCE THE FACTS OF THE CASE ARE ITA NO.1169 & 1730/AHD/2010, 892/AHD/2012 & CO 105/ AHD/2012 (AY2002-03 & 2005- 06) GUJARAT ROADS & INFRASTRUCTURE CO. LTD. 5 EXACTLY SIMILAR, THEREFORE, THE DISALLOWANCE OF RS. 5,26,43,488/- MADE BY THE ASSESSING OFFICER IS DELETED. DELETING THE ADDITION OF RS.14,67,03,030/- MADE ON ACCOUNT OF DEPRECIATION. 4.4 THE MATTER HAS BEEN CONSIDERED. THE ITATS DEC ISION IN THE CASE OF M/S. NOIDA TOLL BRIDGE COMPANY LTD. (SU PRA) (COPY OF WHICH HAS BEEN FILED IN THE PAPER BOOK), HAS BEE N PURSUED. THE FACTS OF THE CASE ARE IDENTICAL. IN THAT CASE A LSO THE CONCERNED ASSESSING OFFICER HAD RELIED ON THE HONB LE SUPREME COURTS DECISION IN THE CASE OF INDORE MUNI CIPAL CORPORATION (SUPRA), REJECTING THE CLAIM OF ROADS B EING BUILDINGS. THE TRIBUNAL, HOWEVER, HELD THAT ASSESSI NG OFFICERS ACTION IN FOLLOWING THE DEPRECIATION WAS NOT JUSTIF IED. THE OPERATIVE PORTION OF THE DECISION READS AS FOLLOWS: 7. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND GONE THROUGH THE RECORDS CAREFULLY. THE ONLY OBJECT ION OF THE ASSESSING OFFICER FOR DENYING THE DEPRECIATION TO THE ASSESSEE IS THAT ROAD IN ISOLATION DOES NOT CONSTIT UTE BUILDING. THIS ROAD IS NOT WITHIN THE FACTORY PREMI SES WHICH CAN BE CONSIDERED AS A PART OF THE PLANT OR O F BUILDING. WE FIND THAT EXPRESSION BUILDING HAS BE EN GIVEN AN EXTENDED MEANING IN THE APPENDIX I OF IT RULES. NOW THE BUILDING INCLUDES ROADS, BRIDGES, CU LVERTS, WELL AND TUBE WELLS. THUS, THE JUDGMENT RELIED UPON BY THE ASSESSING OFFICER IS NOT APPLICABLE ON THE FACT S OF THE PRESENT CASE. THERE IS A CHANGE IN THE POSITION OF LAW. THE LEARNED 1 ST APPELLATE AUTHORITY HAS CONSIDERED THIS ISSUE ELABORATELY IN THE FINDINGS EXTRACTED SUPRA, AND WE DO NOT FIND ANY ERROR IN THIS FINDING. THEREFORE, B OTH THE APPEALS ARE DISMISSED. 4.5 FOLLOWING THE SAME, FOR THE APPELLANT ALSO IT I S HELD THAT THE TOLL ROAD IS ENTITLED TO DEDUCTION AT THE RATES APPLICABLE TO BUILDING. THE APPELLANTS THIS GROUND OF APPEAL IS ACCEPTED. ITA NO.1169 & 1730/AHD/2010, 892/AHD/2012 & CO 105/ AHD/2012 (AY2002-03 & 2005- 06) GUJARAT ROADS & INFRASTRUCTURE CO. LTD. 6 4. THE LEARNED DR SUPPORTED THE ORDER OF THE LEARNE D AO AND PRAYED THAT THE SAME MAY BE CONFIRMED. ON THE OTHER HAND, THE LEARNED AR SUPPORTED THE ORDER OF THE LEARNED CIT(A ). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS ON RECORD. ON BOTH THESE ISSUES, THE LEAR NED CIT(A) HAS FOLLOWED THE DECISION OF ITAT BASED ON WHICH HE DEL ETED THE ADDITION MADE BY THE LEARNED AO AND THEREBY ALLOWED THE ASSE SSEES APPEAL. IN ITA NO.2901/AHD/2006 IN THE CASE GUJARAT TOLL RO AD INVESTMENT CO. LTD. V/S THE ACIT FOR ASSESSMENT YEAR 2003-04 THE TRIBUNAL VIDE ITS ORDER DATED 15-05-2009 HAD EXAMINED THE MATTER WITH REGARD TO DEEP DISCOUNT BONDS AND ARRIVED AT THE FOLLOWING CO NCLUSION IN PAGE 16 OF THE ORDER. IN THE INSTANT CASE, THE INTEREST IS PAYABLE IN RE SPECT OF AMOUNTS DEPOSITED BY FINANCIAL INSTITUTIONS WITH TH E ASSESSEE BY SUBSCRIBING TO THE BONDS ISSUED BY THE ASSESSEE. THE INTEREST IS PAYABLE IN RESPECT OF CERTAIN DEPOSITS RECEIVED BY THE ASSESSEE AND NOT IN RESPECT OF ANY LOANS, ADVANCES OR BORROWINGS MADE BY THE ASSESSEE. FOR THE SAME REASO N, CLAUSE (E) OF SECTION 43B RELATING TO LOANS AND ADV ANCES FROM A SCHEDULED BANK IS ALSO NOT APPLICABLE IN THE INSTAN CE CASE. IN THE ABOVE CIRCUMSTANCES, IN OUR CONSIDERED VIEW, NE ITHER THE ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING THE DEDUCTION CLAIMED FOR PROVISION MADE IN RESPECT OF INTEREST A CCRUED, BUT NOT DUE ON THE DEEP DISCOUNT BONDS ISSUED BY THE AS SESSEE NOR THE LD. CIT(APPEALS) WAS JUSTIFIED IN CONFIRMIN G SUCH DISALLOWANCE. IT IS OBSERVED THAT THE AMOUNT OF PRO VISION MADE BY THE ASSESSEE IN RESPECT OF INTEREST ACCRUED ON B ONDS IS NOT IN DISPUTE AS EXCESSIVE OR NOT RELATING TO THE YEAR UNDER CONSIDERATION. WE, THEREFORE, DELETE THE DISALLOWAN CE OF RS.6,08,03,230/- IN RESPECT OF PROVISIONS MADE FOR INTEREST IN ITA NO.1169 & 1730/AHD/2010, 892/AHD/2012 & CO 105/ AHD/2012 (AY2002-03 & 2005- 06) GUJARAT ROADS & INFRASTRUCTURE CO. LTD. 7 RESPECT OF DEEP DISCOUNT BONDS. HENCE, THESE GROUND S OF APPEAL OF THE ASSESSEE ARE ALLOWED. 6. ON THE ISSUE WITH REGARD TO ALLOWABILITY OF DEPR ECIATION ON TOLL ROADS, THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA N O.1453/AHD/2008 FOR ASSESSMENT YEAR 2004-05 VIDE ORDER DATED 12-02- 2010 HELD AS UNDER ON PAGE 13 PARA 11 OF THE ORDER: 11. WE FIND THAT THE ASSESSEE IS ENGAGED IN THE BU SINESS OF SETTING UP OF INFRASTRUCTURE FACILITY BY WAY OF CON STRUCTION OF TOLL- ROADS AND PARTICULARLY THIS ROAD KNOWN AS VADODARA HALOL TOLL - ROAD, AS PER THE POLICY OF THE GOVT. OF IND IA IN A PUBLIC PRIVATE PARTNERSHIP. THE GOVT. OF GUJARAT HAS FORME D A SPV IN JOINT VENTURE WITH THE ASSESSEE I.E. BETWEEN GUJARA T GOVT. AND IL & FS GROUP. AS PER THE CHANGED BUSINESS SCENARIO AFTER ECONOMIC LIBERALIZATION AS PER THE POLICY OF THE GO VT. OF INDIA, THE ASSESSEE HAS CONSTRUCTED THIS TOLL-ROAD ON BOOT BASIS. THE ASSESSEE RAISED FUNDS FOR THE CONSTRUCTION, MAI NTAIN AND TO OPERATE THIS TOLL-ROAD AND IS ENTITLED TO COLLECT T OLL FROM THE VEHICLES PASSING THROUGH THIS ROAD. THIS ROAD IS CO NSTRUCTED BY THE ASSESSEE IN THE COURSE OF CARRYING OUT ITS BUSI NESS ACTIVITY AND THEREFORE THE TOLL-ROAD IS AN ASSET OWNED BY TH E ASSESSEE ON BOOT BASIS, WITH WHICH BUSINESS IS CARRIED ON AN D EXPLOITED THIS ASSET FOR GENERATING INCOME, WHICH IS OFFERED AS REVENUE RECEIPT FOR THE PURPOSE OF TAXATION. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALLOWED THE CLAIM OF DEPRECIATION AFTER CONSIDERING THE REVISED RETUR N FILED BY THE ASSESSEE. THE AO HAS ALLOWED THE CLAIM OF DEPRECIAT ION IN THE COMPUTATION OF INCOME AFTER CONSIDERING THAT THE AS SESSEE HAS CONSTRUCTED THE TOLL-ROAD AND IT IS OPERATED AND MA NAGED BY THE ASSESSEE. WE FIND THE TOLL-ROAD IS AN INTEGRAL PART OF THE BUSINESS ACTIVITY OF THE ASSESSEE AND WITHOUT WHICH THE ASSESSEE COULD NOT CARRY ON ITS BUSINESS ACTIVITY. WE FURTHER FIND THAT THE ASSESSEE IS OWNED A CAPITAL ASSET AND THE SAME IS USED FOR THE PURPOSES OF BUSINESS. IT IS ALSO A FAC T THAT IN THE COURSE OF CONSTRUCTION OF TOLL-ROAD, THE ASSESSEE H AS CONSTRUCTED BUILDINGS, WHICH ARE ADMINISTRATIVE BUI LDING. TOLL ITA NO.1169 & 1730/AHD/2010, 892/AHD/2012 & CO 105/ AHD/2012 (AY2002-03 & 2005- 06) GUJARAT ROADS & INFRASTRUCTURE CO. LTD. 8 PLAZAS ON BOTH ENDS OF ROAD, FROM WHEREBY THE TOLL IS COLLECTED BY THE STAFF FROM THE PASSING VEHICLES. WE FURTHER FIND FROM THE FACTS THAT THE ROAD CONSTRUCTED BY THE ASSESSEE FOR MS MOST IMPORTANT SOURCE OF ITS REVENUE AND THE BASIC OBJEC TIVE IS TO CONSTRUCT THE TOLL-ROAD UNDER BOOT SCHEME. THUS, TH E ASSESSEE HAS FULFILLED THE BASIC CRITERIA FOR CLAIM ING DEPRECIATION I.E. EXISTENCE OF A CAPITAL ASSETS, OWNERSHIP OF SU CH ASSET AND MOST IMPORTANT THAT THE ASSESSEE WERE PUT TO USE FO R ITS BUSINESS PURPOSE. WE FIND THAT THE LD. COUNSEL FOR THE ASSESSEE HAS MADE A FINE DISTINCTION IN THE FACTS O F THE PRESENT CASE WITH THAT OF INDORE MUNICIPAL CORPORATION (SUP RA) BY STATING THE FACT THAT IMC WAS A LOCAL BODY WHICH DE RIVED INCOME FROM SALE OF MANURE PREPARED OUT OF WASTE AND NIGHT OIL DUMPED IN THE TRENCHING GROUNDS OUTSIDE THE MUNICIP AL LIMITS AND IT CONSTRUCTED A METAL ROAD OVER THE TRENCHING GROUND AND CLAIMED THAT THE SAID EXPENDITURE SHOULD BE TREATED AS ROAD AND CLAIMED DEPRECIATION. THE HONBLE MADHYA PRADESH HI GH COURT HELD THAT THE METAL ROAD FOR HAULING COMPOSED COULD NOT BE CONSIDERED AS EXPENDITURE AND THE ASSESSEE WAS NOT ENTITLED TO DEPRECIATION. THE HONBLE SUPREME COURT ALSO HELD T HAT THE SAID METAL ROADS CANNOT BE TREATED AS BUILDING AS T HERE WAS NO OTHER CONSTRUCTION ON THE OPEN GROUND EXCEPT ROADS AND ROADS BY THEMSELVES CANNOT CONSTITUTE BUILDING. WE FIND T HAT THE FACTS BEFORE US, THE TOLL ROAD IS CONSTRUCTED AND THERE A RE TOLL PLAZAS AND ADMINISTRATIVE BUILDINGS AND THE ROADS ARE CONN ECTED TO THESE BUILDINGS ON THE BOTH ENDS HAVING TOLL PLAZAS AS WELL AS BUILDINGS. 12. ANOTHER FACT IN THE PRESENT CASE IS THAT THE DE FINITION OF BUILDING AS APPLICABLE TO SECTION 32 OF THE ACT HAS BEEN SUBSTITUTED IN RULE -5 OF I. T. RULES, 1962 BY THE I. T. (THIRD AMENDMENT) RULES 1987, W. E. F. 1987, WHEREBY NOTE 1 BELOW THE TABLE OF RATS AT WHICH DEPRECIATION IS ADMISSIB LE, CONSTITUTION PART OF APPENDIX I TO I. T. RULES, 196 2 OPERATIVE FOR AND FROM ASSESSMENT YEAR 1988-89, BY VIRTUE OF WHIC H BUILDINGS INCLUDES ROADS, BUILDING CULVERTS, WELLS AND TUBE W ELLS. WE FIND THAT NOTE 1 IN THE DEPRECIATION SCHEDULE CLARIFIES THAT BUILDINGS INCLUDE ROADS, BRIDGES, CULVERTS, WELLS AND TUBE WE LLS. THE HONBLE SUPREME COURT IN THE CASE OF GWALIOR RAYAON SILK MFG. ITA NO.1169 & 1730/AHD/2010, 892/AHD/2012 & CO 105/ AHD/2012 (AY2002-03 & 2005- 06) GUJARAT ROADS & INFRASTRUCTURE CO. LTD. 9 CO. LTD. (SUPRA) HAS ALSO HELD THAT ROADS LAID WITH IN THE FACTORY PREMISES AS LINKS OR WHICH PROVIDES APPROACH TO THE BUILDINGS ARE NECESSARY ADJUNCTS TO THE FACTORY BUILDINGS TO CARRY ON THE BUSINESS ACTIVITIES OF THE ASSESSEE, AND WOULD BE BUILDING WITHIN THE MEANING OF SECTION 32 OF THE ACT. SIMILA RLY, DELHI BENCH OF THIS TRIBUNAL IN ITA NO.3211 AND 1983/DEL/ 2006 IN THE CASE OF DCIT V. M/S. NOIDA TOLL BRIDGE CO. LTD. HAS ALSO ALLOWED THE CLAIM OF THE ASSESSEE ON TOLL-ROAD. 13. ANOTHER ARGUMENT MADE BY LD. CIT-DR WAS THAT TH E ASSESSEE IS NOT THE OWNER OF THE ASSET, I.E. TOLL-R OAD. NOW THE QUESTION ARISES WHETHER LEGAL TITLE IS NECESSARY OR NOT, AND THIS HAS BEEN ANSWERED BY THE HONBLE APEX COURT IN THE CASE OF MYSORE MINERALS LTD. V. CIT (1999) 239 ITR 775 (SC) , WHEREIN IT WAS HELD THAT THE TERM OWN, OWNERSHIP, OWNE D ARE GENERIC AND RELATIVE TERMS. THEY HAVE A WIDE AND ALSO A NAR ROW CONNOTATION. THE MEANING WOULD DEPEND ON THE CONTEX T IN WHICH THE TERMS ARE USED. THE TERM OWNED AS OCCUR RING IN SECTION 32(1) MUST BE ASSIGNED A WIDER MEANING. ANY ONE IN POSSESSION OF PROPERTY IN HIS OWN TITLE EXERCISING SUCH DOMINATION OVER THE PROPERTY AS WOULD ENABLE OTHERS BEING EXCLUDED THEREFROM AND HAVING RIGHT TO USE AND OCCU PY THE PROPERTY AND /OR TO ENJOY ITS USUFRUCT IN HIS OWN R IGHT WOULD BE THE OWNER OF THE BUILDING THOUGH A FORMAL DEDUCTION OF TITLE MAY NOT HAVE BEEN EXECUTED AND REGISTERED AS CONTEMPLAT ED TO THE TRANSFER OF PROPERTY ACT, 1882 REGISTRATION ACT ETC . IN THE PRESENT CASE NEITHER THE CIT IN THE REVISION ORDER U/S 263 OF THE ACT OR BY THE ASSESSING OFFICER WHILE FRAMING ORIGI NAL ASSESSMENT HAS RAISED THIS ISSUE, BUT THE LD. COUNS EL FOR THE ASSESSEE CATEGORICALLY STATED THAT THIS TOLL-ROAD W AS CONSTRUCTED ON BOOT BASIS, I.E. MEANS BUILD, OWN , OPERATE AND TRANSFER. ACCORDING TO HIM, THE ENTIRE RESPON SIBILITY FOR MAINTAINING AND OPERATING THIS ROLL-ROAD FOR 31 YEA RS IS ON ASSESSEE AS HE HAS TO COLLECT TOLL-FEE. ONCE THIS C ONCEPT OF BOOT HAS BEEN ACCEPTED BY GOVT. OF INDIA UNDER INFR ASTRUCTURE POLICY AND THE GOVT. OF GUJARAT ALSO ENTERED IN A J OINT VENTURE WITH THE ASSESSEE AND FORMED AN SVP THE QUESTION OF OWNERSHIP REST WITH THE ASSESSEE FOR THE PURPOSES O F CLAIM OF ITA NO.1169 & 1730/AHD/2010, 892/AHD/2012 & CO 105/ AHD/2012 (AY2002-03 & 2005- 06) GUJARAT ROADS & INFRASTRUCTURE CO. LTD. 10 DEPRECIATION. ACCORDINGLY, THIS ISSUE ON MERITS IS ALLOWED IN FAVOUR OF THE ASSESSEE. 7. CONSIDERING THE ABOVE DECISION OF THE TRIBUNAL, THE LEARNED CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE IN IT S FAVOUR. IN THESE CIRCUMSTANCES, WE DO NOT FIND IT NECESSARY TO INTER FERE WITH HIS ORDER. THEREFORE, WE CONFIRM THE ORDER OF THE LEARNED CIT( A) FOR BOTH THE ISSUES I.E. (A) ALLOWABILITY OF INTEREST ON DEEP DI SCOUNT BONDS AS DEDUCTION AND (B) ALLOWABILITY OF DEPRECIATION ON T OLL ROAD. ACCORDINGLY, THE APPEAL OF THE REVENUE ON BOTH THES E ISSUES IS DISMISSED. ITA NO.1730/AHD/2010 (ASSESSEES APPEAL FOR AY 2002-03) 8. THE ASSESSEE HAS RAISED FOUR GROUNDS IN ITS APPE AL WHEREIN GROUND NO.4 IS GENERAL IN NATURE AND DOES NOT SURVI VE FOR ADJUDICATION. IN GROUNDS NO.1 AND 2 OF THE APPEAL, THE ASSESSEE HAS CHALLENGED THE VALIDITY OF REASSESSMENT ORDER PASSE D BY THE LEARNED AO AND IN GROUND NO.3, THE ASSESSEE STATES THAT THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,61 ,37,960/- BEING THE EXPENDITURE INCURRED IN ROAD OVER LAY AND RENEW AL EXPENSES. 9. AT THE OUTSET OF THE HEARING THE LEARNED AR POIN TED OUT THAT WITH REGARD TO GROUNDS NO.1 AND 2 OF THE APPEAL THE ISSU E REMAINS TO BE ADJUDICATED BY THE LEARNED CIT(A) AND THEREFORE THE MATTER SHOULD BE REMITTED BACK TO THE FILE OF THE LEARNED CIT(A) FOR ADJUDICATION. THE LEARNED DR CONCEDED THAT THIS MATTER WITH RESPECT T O REOPENING OF THE ITA NO.1169 & 1730/AHD/2010, 892/AHD/2012 & CO 105/ AHD/2012 (AY2002-03 & 2005- 06) GUJARAT ROADS & INFRASTRUCTURE CO. LTD. 11 ASSESSMENT U/S 147 OF THE IT ACT WAS NOT ADJUDICATE D BY THE LEARNED CIT(A) AS HE HAD OPINED, THE ISSUE TO BE ACADEMIC. ON PERUSING THE FACTS OF THE CASE, WE ARE OF THE CONSIDERED VIEW TH AT THIS ISSUE OUGHT TO HAVE BEEN CONSIDERED BY THE LEARNED CIT(A) AND D ISPOSED OFF BY PASSING A SPEAKING ORDER. THEREFORE, IN THE INTERES T OF JUSTICE WE HEREBY REMIT THE MATTER BACK TO THE FILE OF THE LEA RNED CIT(A) WITH DIRECTION TO PASS APPROPRIATE ORDER AS PER MERIT AN D LAW AFTER AFFORDING BOTH THE PARTIES OF BEING HEARD. ACCORDIN GLY, GROUNDS NO.1 AND 2 RAISED BY THE ASSESSEE ARE ALLOWED FOR STATIS TICAL PURPOSES. 10. GROUND NO.3: DISALLOWANCE OF RS.1,61,37,960/- B EING EXPENDITURE ON ROAD OVERLAY/RENEWAL:- IT WAS OBSERV ED BY THE LEARNED AO THAT A SUM OF RS.1,61,37,960/- WAS DEBITED TO TH E PROFIT & LOSS ACCOUNT. WHEN THE DETAILS WERE CALLED FOR THE ASSES SEE EXPLAINED IT TO BE PROVISION MADE ON A SCIENTIFIC BASIS FOR EXPE NDITURE TO BE INCURRED IN DUE COURSE. THEREFORE, THE LEARNED AO D ISALLOWED THIS CLAIM OF PROVISION FOR EXPENDITURE MADE BY THE ASSE SSEE. THE LEARNED CIT(A) ALSO ARRIVED AT FAIR CONCLUSION THAT THE ENT IRE EXPENSE OF RS.1,61,37,960/- CLAIMED BY THE ASSESSEE IS NOT AN EXPENDITURE INCURRED BY THE ASSESSEE BUT A PROVISION MADE IN T HE BOOKS OF ACCOUNT AND ACCORDINGLY CONFIRMED THE ORDER OF THE LEARNED AO. AFTER HEARING BOTH THE SIDES AND PERUSING THE MATERIALS O N RECORD, IT IS EVIDENT THAT THE ENTIRE EXPENSES OF RS.1,61,37,960/ - CLAIMED BY THE ASSESSEE IS ONLY A PROVISION MADE IN THE BOOKS OF A CCOUNT AND DO NOT PERTAIN TO ACTUAL EXPENSES INCURRED BY THE ASSESSEE DURING THE YEAR. THEREFORE, WE ALSO DO NOT HAVE ANY HESITATION TO CO NFIRM THE ORDERS OF ITA NO.1169 & 1730/AHD/2010, 892/AHD/2012 & CO 105/ AHD/2012 (AY2002-03 & 2005- 06) GUJARAT ROADS & INFRASTRUCTURE CO. LTD. 12 THE REVENUE AUTHORITIES. THIS GROUND OF APPEAL OF T HE ASSESSEE IS ACCORDINGLY DISMISSED. ITA NO.892/AHD/2012 (REVENUES APPEAL FOR AY: 2005-06) 11. THE ONLY EFFECTIVE GROUND OF APPEAL RAISED BY T HE REVENUE IN ITS APPEAL READ AS UNDER: 1. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE CLAIM OF DEPRECIATION AMOUNTING TO RS.37,36,34,380/- ON TOLL ROADS EVEN THOUGH TOLL RO AD IS NOT COVERED UNDER ASSETS, AS ENUMERATED IN APPENDIX I TO I. T. RULES AND ALSO OWNERSHIP OF THE SAME DOES NOT VEST WITH THE ASSESSEE, HENCE NOT ELIGIBLE FOR DEPRECIATION. 12. WE HAVE DECIDED THIS ISSUE AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE WHILE DISPOSING OF GROUND NO.2 RAIS ED BY THE REVENUE IN ITS APPEAL IN ITA NO.1169/AHD/2010 FOR AY 2002-0 3 SUPRA. FOLLOWING THE SAME DECISION ON THE IDENTICAL ISSUE, WE HEREBY DISMISS GROUND NO.1 OF THE APPEAL RAISED BY THE REV ENUE IN AY 2005- 06. C.O. NO.105/AHD/2012 (IN ITA NO.892/AHD/2012) (ASSESSEES CROSS OBJECTION FOR AY: 2005-06) 13. IN THIS CROSS OBJECTION THE ASSESSEE HAS RAISED THREE GROUNDS WHEREIN GROUNDS NO.2 AND 3 ARE GENERAL IN NATURE AN D THE ONLY SURVIVING GROUND IS RELATING TO CHALLENGING THE INI TIATION OF PROCEEDINGS ITA NO.1169 & 1730/AHD/2010, 892/AHD/2012 & CO 105/ AHD/2012 (AY2002-03 & 2005- 06) GUJARAT ROADS & INFRASTRUCTURE CO. LTD. 13 U/S 147 AND 148 OF THE IT ACT. ON PERUSING THE APPE AL OF THE ASSESSEE BEFORE THE LEARNED CIT(A) IN CIT(A)/GNR/2 03/2010-11 FOR THE AY 2005-06, WE FIND THAT THE ASSESSEE HAS NOT C HALLENGED THIS ISSUE BEFORE THE LEARNED CIT(A). HOWEVER, IN THE IN TEREST OF JUSTICE WE REMIT THIS ISSUE BACK TO THE LEARNED CIT(A) TO CONS IDER THE SAME ON MERIT. ACCORDINGLY, THE CROSS OBJECTION FILED BY TH E ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 14. IN THE RESULT, BOTH THE REVENUES APPEAL FOR TH E AY 2002-03 IN ITA NO.1169/AHD/2010 AND ITA NO.892/AHD/2012 FOR AS SESSMENT YEAR 2005-06 ARE DISMISSED. ASSESSEES APPEAL FOR A Y 2002-03 IN ITA NO.1730/AHD/2010 IS PARTLY ALLOWED FOR STATISTI CAL PURPOSE AND THE ASSESSEES C. O. FOR AY 2005-06 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24-09-2012 SD/- SD/- (G. C. GUPTA) VICE PRESIDENT (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/- -- - COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD ITA NO.1169 & 1730/AHD/2010, 892/AHD/2012 & CO 105/ AHD/2012 (AY2002-03 & 2005- 06) GUJARAT ROADS & INFRASTRUCTURE CO. LTD. 14 1. DATE OF DICTATION: 06-09-2012/19-09-2012 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 19-09-2012 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: