M/s. Naba Diganta Water Management Ltd., , Kolkata V. ACIT, Circle - 2(2), Kolkata, Kolkata

CO 22/KOL/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5875 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 20 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 09-08-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 19-01-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Cost of acquisition
• Section: 143(3); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B, KOLKATA BEFORE SH. S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 2173/KOL/2017 [ASSESSMENT YEAR: 2012-13] NABA DIGANTA WATER MANAGEMENT LIMITED GN 11-19, SECTOR-V, SALT LAKE, KOLKATA-700091. PAN-AACCN6958P VS DC IT, CIRCLE-2(2), AAYAKAR BHAWAN, 7 TH FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA-700069. (APPELLANT) (RESPONDENT) ITA NO. 2301/KOL/2017 [ASSESSMENT YEAR: 2012-13] AC IT, CIRCLE-2(2), AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700069. VS NABA DIGANTA WATER MANAGEMENT LIMITED GN 11-19, SECTOR-V, SALT LAKE, KOLKATA-700091. PAN-AACCN6958P (APPELLANT) (RESPONDENT) CO NO. 22/KOL/2018 [ASSESSMENT YEAR: 2012-13] NABA DIGANTA WATER MANAGEMENT LIMITED GN 11-19, SECTOR-V, SALT LAKE, KOLKATA-700091. PAN-AACCN6958P VS AC IT, CIRCLE-2(2), AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700069. (APPELLANT) (RESPONDENT) APPELLANT BY SH. KIRIT KAMDAR , A R RESPONDENT BY SH. A.K. SINGH, CIT ( DR ) DATE OF HEARING 09 .0 8 .201 9 DATE OF PRONOUNCEMENT 09 .08.2019 ORDER PER SH. S.S.GODARA, JUDICIAL MEMBER THESE ASSESSEES AND REVENUES CROSS APPEALS ALONG WITH FORMERS CROSS OBJECTION; ARISE AGAINST THE CIT(A)-1, KOLKATAS ORDER DATED 03.08.2017 PASSED IN CASE NO. 1182/CIT(A)-1/CIRCLE-2(2)/2015-16 INVOLVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT ACT). HEARD BOTH THE PARTIES. CASE FILE PERUSED. ITA NOS. 2173 & 2301/KOL/2017 CO NO. 22/KOL/2018 [ASSESSMENT YEAR: 2012-13] NABA DIGANTA WATER MANAGEMENT LIMITED PAGE | 2 2. WE COME TO THE RIVAL PLEADINGS FIRST. THE ASSESSEES APPEAL ITA NO. 2173/KOL/2017 RAISES ITS SOLE SUBSTANTIVE GRIEVANCE IS THAT BOTH THE ASSESSING OFFICER AS WELL AS THE CIT(A) HAVE ERRED IN LAW AND ON FACTS IN TREATING ONE TIME CONNECTION CHARGES RECEIVED/RECEIVABLE FROM CUSTOMERS OF RS. 12,20,23,425/- CREDITED TO CAPITAL RESERVES TO BE IN THE NATURE OF REVENUE RECEIPT TAXABLE AS BUSINESS INCOME. THE REVENUES CROSS APPEAL IN ITA NO. 2301/KOL/2017 RAISES SOLITARY GROUND THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE TAXPAYERS UNSUBSTANTIVE DEPRECIATION CLAIM OF RS. 15,12,34,168/- IN THE NATURE OF A MERE PROVISION ON ASSETS; NEITHER OWNED WHOLLY NOR IN PART, WHICH WAS DISALLOWED BY THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER DATED 21.03.2015. 3. THE ASSESSEES CO NO. 22/KOL/2018 RAISES THE FOLLOWING SUBSTANTIVE GROUNDS: 1. IN CASE THE GROUNDS RAISED IN THE DEPARTMENTAL APPEAL (ITA NO. 2301/KOLKATA/2017) ARE DECIDED IN FAVOUR OF THE DEPARTMENT, THE RESPONDENT PRAYS THAT DEPRECIATION UNDER SECTION 32(1)(II) OF THE INCOME-TAX ACT,1961 (THE ACT) BE ALLOWED TO THE RESPONDENT BY CONSIDERING THE RIGHT OF THE RESPONDENT TO COLLECT ONE TIME CONNECTION CHARGES AND USER CHARGES FROM THE USERS FOR A PERIOD OF 30 YEARS AS AN ASSET. 2. IN CASE THE GROUNDS RAISED IN THE DEPARTMENTAL APPEAL (ITA NO. 2301/KOLKATA/2017) ARE DECIDED IN FAVOUR OF THE DEPARTMENT, THE RESPONDENT PRAYS THAT EXPENDITURE INCURRED ON SETTING UP INFRASTRUCTURE FACILITY UNDER BOT ARRANGEMENT MAY BE AMORTIZED EVENLY OVER THE PERIOD OF THE AGREEMENT I.E. 30 YEARS FOLLOWING CBDT CIRCULAR NO. 9 OF 2014 DATED 23 APRIL 2014. 3. IN CASE THE GROUND RAISED IN THE DEPARTMENTAL APPEAL (ITA NO. 2301/KOLKATA/2017) ARE DECIDED IN FAVOUR OF THE DEPARTMENT, THE RESPONDENT PRAYS THAT IN RESPECT OF NON-BUILD OPERATE TRANSFER (BOT) ASSETS I.E. ASSETS WHICH WERE ALREADY OWNED BY THE RESPONDENT AS ON 1 APRIL 2012 INCLUDING ADDITIONS ON THE SAME IN THE CAPTIONED AY THERE WAS NO QUESTION OF DENYING DEPRECIATION UNDER SECTION 32 AS THE RESPONDENT WAS CLEARLY THE OWNER OF THOSE ASSETS. 4. WE ADVERT TO THE ABOVE ISSUE OF ASSESSEES DEPRECIATION CLAIM RAISED IN THE REVENUES APPEAL IN ITA NO. 2301/KOL/2017 FIRST OF ALL. THERE IS NO DISPUTE THAT THIS ASSESSEE IS ASSESSED AS A COMPANY. IT WAS AWARDED CONTRACT TO BUILD UP THE ENTIRE INFRASTRUCTURE OF WATER SUPPLY AND SEWERAGE NETWORK FOR THE NABADIGANTA INDUSTRIAL TOWNSHIP AUTHORITY NDITA COMMAND AREA IN SECTOR-V, SALT LAKE ON BUILD-OPERATE-TRANSFER BOT BASIS IN PRIVATE-PUBLIC-PARTNERSHIP MODEL. IT WOULD OPERATE AND MAINTAIN THE ENTIRE NETWORK FOR THIRTY YEARS. THE TAXPAYER WOULD ITA NOS. 2173 & 2301/KOL/2017 CO NO. 22/KOL/2018 [ASSESSMENT YEAR: 2012-13] NABA DIGANTA WATER MANAGEMENT LIMITED PAGE | 3 FURTHER GET ALL THE CORRESPONDING ASSETS AFTER THIS OPERATIONAL PERIOD OF THREE DECADES FREE OF COST. THERE IS FURTHER NO DISPUTE THAT THE GOVERNMENT OF INDIA THROUGH NATIONAL URBAN RENEWAL MISSION PROGRAMME WOULD BEAR 35% OF THE ABOVE PURCHASE COST. 5. WE NOW ADVERT TO THE IMPUGNED DEPRECIATION ISSUE. THE ASSESSEES TAX AUDIT REPORT RAISED THIS DEPRECIATION CLAIM OF RS. 15,12,34,168/- IN APPENDIXES- IIA & IIB. THE ASSESSING OFFICER SOUGHT TO DISALLOW THE SAME DURING THE COURSE OF SCRUTINY FOR THE SOLE REASON THAT THE TAXPAYER HAD NOT REQUIRED OWNERSHIP OF THE CORRESPONDING BLOCK OF ASSETS. WE ARE TAKEN TO THE CIT(A)S DETAILED FINDINGS IN HIS LOWER APPELLATE ORDER UNDER CHALLENGE AT THIS STAGE ALLOWING THE ASSESSEES CLAIM AS UNDER: ITA NOS. 2173 & 2301/KOL/2017 CO NO. 22/KOL/2018 [ASSESSMENT YEAR: 2012-13] NABA DIGANTA WATER MANAGEMENT LIMITED PAGE | 4 ITA NOS. 2173 & 2301/KOL/2017 CO NO. 22/KOL/2018 [ASSESSMENT YEAR: 2012-13] NABA DIGANTA WATER MANAGEMENT LIMITED PAGE | 5 ITA NOS. 2173 & 2301/KOL/2017 CO NO. 22/KOL/2018 [ASSESSMENT YEAR: 2012-13] NABA DIGANTA WATER MANAGEMENT LIMITED PAGE | 6 ITA NOS. 2173 & 2301/KOL/2017 CO NO. 22/KOL/2018 [ASSESSMENT YEAR: 2012-13] NABA DIGANTA WATER MANAGEMENT LIMITED PAGE | 7 ITA NOS. 2173 & 2301/KOL/2017 CO NO. 22/KOL/2018 [ASSESSMENT YEAR: 2012-13] NABA DIGANTA WATER MANAGEMENT LIMITED PAGE | 8 ITA NOS. 2173 & 2301/KOL/2017 CO NO. 22/KOL/2018 [ASSESSMENT YEAR: 2012-13] NABA DIGANTA WATER MANAGEMENT LIMITED PAGE | 9 ITA NOS. 2173 & 2301/KOL/2017 CO NO. 22/KOL/2018 [ASSESSMENT YEAR: 2012-13] NABA DIGANTA WATER MANAGEMENT LIMITED PAGE | 10 ITA NOS. 2173 & 2301/KOL/2017 CO NO. 22/KOL/2018 [ASSESSMENT YEAR: 2012-13] NABA DIGANTA WATER MANAGEMENT LIMITED PAGE | 11 6. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE INSTANT ISSUE OF CORRECTNESS OF ASSESSEES DEPRECIATION CLAIM. THE ASSESSEES DETAILED PAPER BOOK COMPRISING OF THE FOLLOWING DOCUMENTS ALSO STANDS PERUSED: 7. LD. CIT(DR) VEHEMENTLY SUBMITS DURING THE COURSE OF HEARING THAT THE ASSESSING OFFICER HAD RIGHTLY DISALLOWED THE ASSESSEES IMPUGNED DEPRECIATION ITA NOS. 2173 & 2301/KOL/2017 CO NO. 22/KOL/2018 [ASSESSMENT YEAR: 2012-13] NABA DIGANTA WATER MANAGEMENT LIMITED PAGE | 12 CLAIM SINCE IT WAS A MERE PROVISION WITHOUT ANY OWNERSHIP OF THE CORRESPONDING ASSETS FORMING PART OF THE SCHEDULE. WE FIND NO MERIT IN REVENUES INSTANT ARGUMENTS SEEKING TO REVIVE THE IMPUGNED DEPRECIATION DISALLOWANCE ON ACCOUNT OF THE FACT THAT THE ASSESSEE DOES NOT ENJOY OWNERSHIP OR TITLE OVER THE RELEVANT BLOCK OF ASSETS. HONBLE APEX COURTS LANDMARK DECISION IN MYSORE MINERALS V CIT [1999] 239 ITR 755 (SC) SETTLED THE LAW LONG BACK THAT THE LEGISLATIVE INTENTION BEHIND ENACTMENT OF SECTION32 IN THE ACT WOULD BE BEST FULFILLED BY ALLOWING DEPRECIATION TO THE PERSON IN WHOM; FOR THE TIME BEING, VESTS THE DOMINION OR WHO IS ENTITLED TO USE THE RELEVANT ASSETS IN HIS OWN RIGHT AND IS USING THE SAME FOR THE PURPOSE OF THE BUSINESS OR PROFESSION. WHEN WE EXAMINE THE FACTS OF THE INSTANT CASE, IT IS SUFFICIENTLY EVIDENT THAT THE REVENUE ITSELF IS VERY VERY FAIR IN ACCEPTING THE CLINCHING FACT THAT THE ASSESSEE ONLY ENJOYS ITS CONTROL OVER THE RELEVANT ASSETS WHICH ARE USED FOR THE PURPOSE OF CARRYING OUT ITS BUSINESS ACTIVITY. 8. COUPLED WITH THIS, THE ASSESSEES DETAILED PAPER BOOK IN PAGES 19-54 REVEALS THAT THE CORRESPONDENCE DETAILS OF THE PROJECT AUTHORIZING IT TO DEVELOP, DESIGN, FINANCE, MANAGE, ADMINISTER, OPERATE AND MAINTENANCE THE PROJECT IN QUESTION, DEFINITION OF PROJECTS ASSETS INCLUDING BOTH TANGIBLE AND INTANGIBLE CATEGORIES AS PART OF THE PROJECT, THE ASSESSEES ROLE ASSUMING THE ENTIRE RISK AND RESPONSIBILITY, CONSTRUCTION/OBLIGATIONS, OPERATIONS, MAINTENANCE, INVOLVING RIGHT TO CARRY OUT THE PROJECT AT ITS OWN COST WITH INNOVATIONS, MODIFICATIONS AND TECHNICAL UPGRADATION FOR THIRTY YEARS (SUPRA), ITS STATUS AS A SPECIAL PURPOSE VEHICLE, ITS OBLIGATION TO BEAR THE COST OF INSURANCE, DENIAL AND TERMINATION STIPULATIONS, INSERTION OF THE TRANSFER OF THE WATER MANAGEMENT FACILITY AFTER EXPIRY OF THIRTY YEARS AS WELL AS THE MOST CRUCIAL DEPRECIATION CLAUSE FOR THE PURPOSE OF THE IMPUGNED CLAIM, RELEVANT CONDITIONS THAT THE SELECTED BIDDER/PERSON WOULD BE DEEMED TO HAVE ACQUIRED AND OWNED THE ASSETS IN QUESTION; RESPECTIVELY. ALL THESE FACTUAL DETAILS LEAVE NO SCOPE OF DOUBT THAT IT IS THE ASSESSEE ONLY WHO EXERCISES CONTROL AND DOMINION OVER THE PROJECT ASSETS FOR THE PURPOSE OF RUNNING THE WATER MANAGEMENT FACILITY. THE REVENUE HAS NOT CHALLENGED CORRECTNESS OF ANY OF THESE DETAILS BEFORE US. WE THEREFORE CONCLUDE IN VIEW OF THE FOREGOING FACTUAL AND LEGAL POSITION THAT THE CIT(A) HAS RIGHTLY DELETED DEPRECIATION DISALLOWANCE OF RS. 15,12,34,168/- MADE BY THE ASSESSING OFFICER. THE REVENUE FAILS IN ITS SOLE SUBSTANTIVE GRIEVANCE AS WELL AS THE MAIN APPEAL ITA 2301/KOL/2017 THEREFORE. ITA NOS. 2173 & 2301/KOL/2017 CO NO. 22/KOL/2018 [ASSESSMENT YEAR: 2012-13] NABA DIGANTA WATER MANAGEMENT LIMITED PAGE | 13 9. COMING TO THE ASSESSEES MAIN APPEAL IN ITA NO. 2173/KOL/2017 AND CO NO. 22/KOL/2018, LEARNED COUNSEL SUBMITS VERY FAIRLY THAT IT NO MORE WISHES TO PRESS FOR THE SAME IN VIEW OF OUR FINDINGS ON FOREGOING DEPRECIATION ISSUE IN REVENUES APPEAL. WE THEREFORE DECLINE BOTH THESE CASES AS NOT PRESSED. 10. TO SUM UP, THE ASSESSEES APPEAL ITA NO. 2173/KOL/2017 IS DISMISSED AS NOT PRESSED. THE REVENUES CROSS APPEAL IN ITA NO. 2301/KOL/2017 IS DISMISSED AND THE FORMERS CO NO. 22/KOL/2018 IS ALSO DISMISSED AS NOT PRESSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.08.2019. SD/- SD/- (A.L. SAINI) (S.S.GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE:- 09.08.2019 BIDHAN COPY FORWARDED TO: 1. APPELLANT- NABA DIGANTA WATER MANAGEMENT LIMITED, GN 11-19, SECTOR-V, SALT LAKE, KOLKATA-700091. 2. RESPONDENT- DCIT, CIRCLE-2(2), AAYAKAR BHAWAN, 7TH FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA-700069. 3. ACIT, CIRCLE-2(2), AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700069. 4. CIT-KOLKATA 5. CIT(APPEALS)-1, KOLKATA (SENT THROUGH MAIL) 6. DR: ITAT-KOLKATA BENCHES (SENT THROUGH MAIL) SR.P.S./H.O.O ITAT, KOLKATA