Mundra International Container Terminal Pvt. Ltd., Kutch V. The Pr. CIT-2, Ahmedabad

ITA 1253/AHD/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9488 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 25-11-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 12-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAGDISH
• Assessee Lawyers: S N SOPARKAR
• Keywords: Gift; Revision of order; Depreciation; Transfer pricing; Rectification of order; Opportunity of being heard; Principle of natural justice; International transaction; Period of limitation; Difference of opinion; Change of opinion; Revenue expenditure
• Section: 143(3); 32; 147; 27; 148; 263; 154

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD . . , , BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.1253/AHD/2016 ( / ASSESSMENT YEAR :2009-10 ) MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD., NAVINAL NEW PORT, P.O. BOX NO.8, MUNDRA, KUTCH-370421 / VS. THE PR. COMMISSIONER OF INCOME-TAX-2 1 ST FLOOR, NAVJEEVAN TRUST BUILDING, B/H. GUJARAT VIDYAPITH, AHMEDABAD - 380014 ./ ./ PAN/GIR NO. : AADCA 0917 C ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI S.N. SOPARKAR, A.R. / RESPONDENT BY : SHRI JAGDISH, CIT D.R. / DATE OF HEARING 25/11/2016 / DATE OF PRONOUNCEMENT 23/01/2017 / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX, AHMEDABAD, DATED 21/03/2016 FOR THE ASSESSMENT YEAR (AY) 2009-10 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: (I) THE LD. PR. CIT HAS GROSSLY ERRED IN LAW AND ON FACTS IN ASSUMING JURISDICTION U/S. 263 OF THE ACT ON THE ERRONEOUS GROUND THAT THE IMPUGNED ASSESSMENT ORDER IS ERRONEOUS IS SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. (II) LD. PR. CIT GROSSLY ERRED IN NOT APPRECIATING THAT IN ORDER TO INVOKE SECTION 263, TWO CONDITIONS MUST BE FULFILLED VIZ. THE IMPUGNED ASSESSMENT ORDER MUST BE ERRONEOUS AND THAT ERROR MUST BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 2 - (III) IN THE PRESENT CASE, LD. AO DURING THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS HAD CALLED FOR THE JUSTIFICATION FROM THE APPELLANT AS TO WHY DEPRECIATION CLAIMED ON INFRASTRUCTURE USAGE FACILITY SHOULD BE ALLOWED TO THE APPELLANT AND IN CONSIDERATION THERETO THE APPELLANT HAD DULY MADE SUBMISSION TO THE LD. A.O. IN THE ORIGINAL ASSESSMENT PROCEEDINGS. THEREFORE, DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE LD.AO HAD RAISED THE QUERY AND RECEIVED THE REPLY FROM THE APPELLANT AND HE HAD EXAMINED THE CLAIM OF DEPRECIATION ON INFRASTRUCTURE USAGE FACILITY AND ACCORDINGLY THE LD. AO ACCEPTED THE CLAIM OF SUCH DEPRECIATION AFTER APPLYING HIS MIND AND NO DISALLOWANCE OF THE SAME WAS MADE IN THE ORIGINAL ASSESSMENT ORDER. THEREFORE, THE LD. PR. CIT HAS GROSSLY ERRED IN LAW IN HOLDING THAT THE ORDER PASSED BY THE LD. A.O. WAS ERRONEOUS WITHOUT APPRECIATING THE FACTS THAT THE LD. A.O. HAD FRAMED HIS OPINION BY APPLYING HIS MIND AND THEREFORE REVISIONS PROCEEDINGS OUGHT NOT TO HAVE INVOKED BY THE PR. CIT TO REVIEW THE ASSESSMENT ORDER. (IV) THE LD. PR. CIT HAS ERRED IN LAW AND ON FACTS OF THE CASE IN NOT APPRECIATING THE FACTS THAT SINCE THE INCEPTION OF THE APPELLANT COMPANY I.E. A.Y. 2004-05 THE DEPRECIATION HAD BEEN CLAIMED ON THE VERY SAME INFRASTRUCTURE USAGE FACILITY AND THE SAME HAS BEEN ALLOWED BY THE DEPARTMENT FROM A.Y. 2004-05 ONWARDS, AND THEREFORE, THE ORIGINAL ASSESSMENT ORDER PASSED BY THE LD. A.O. IN ALLOWING THE DEPRECIATION ON SUCH INFRASTRUCTURE USAGE FACILITY WAS NOT ERRONEOUS. (V) THE LD. PR.CIT HAS FURTHER ERRED IN LAW AND ON FACTS OF THE CASE IN NOT APPRECIATING THE FACTS THAT THE ASSESSING OFFICER HAD ISSUED REOPENING NOTICE U/S. 148 OF THE ACT TO DISALLOW THE DEPRECIATION ON INFRASTRUCTURE USAGE FACILITY, HOWEVER, THE HONBLE GUJARAT HIGH COURT HELD THAT THE A.O. IN THE ORIGINAL ASSESSMENT PROCEEDINGS HAD ALREADY FORMED AN OPINION IN ALLOWING DEPRECIATION ON INFRASTRUCTURE USAGE FACILITY AND ACCORDINGLY NOTICE ISSUED U/S 148 OF THE ACT TO RE-APPRECIATE OR TO CHANGE AN OPINION WAS FOUND TO BE INVALID AND BAD IN THE EYES OF LAW BY THE HONBLE GUJARAT HIGH COURT. (VI) THE LD. PR. CIT HAS FAILED TO APPRECIATE THAT WHEN ID. AO HAS RAISED THE ISSUE, WHICH WAS DULY CLARIFIED AND EXPLAINED BY THE APPELLANT IN THE ORIGINAL ASSESSMENT PROCEEDINGS AND WHEN THE LD.AO HAS ADOPTED ONE OF PLAUSIBLE VIEW, WHICH IS RATIONAL AND LOGICAL, THE SAME CANNOT BE REVISED U/S 263 OF THE ACT. (VII) UNDER THE CIRCUMSTANCES, THE VERY ASSUMPTION OF POWER U/S. 263 OF THE ACT IS UNJUSTIFIED AND BAD IN LAW AND THEREFORE, ORDER U/S. 263 OF THE ACT DESERVED TO BE QUASHED. (VIII) THE LD. PR. CIT HAS FURTHER FAILED TO APPRECIATE THAT THERE IS DISTINCTION BETWEEN LACK OF INQUIRY AND INADEQUATE INQUIRY AND IF THERE WAS ANY INQUIRY, EVEN INADEQUATE THAT WOULD NOT BY ITSELF OCCASION TO THE LD. PR. CIT TO PASS ORDER U/S 263 OF THE ACT, MERELY BECAUSE HE HAS A DIFFERENT VIEW IN THE MATTER. (IX) THE LD. PR. CIT HAS FURTHER FAILED TO APPRECIATE THAT EVEN AFTER THE INSERTION OF EXPLANATION 2 TO S.263 W.E.F. 01/06/2015 WHERE THE ORDER HAS BEEN PASSED BY THE AO AFTER MAKING INQUIRIES AND VERIFICATION OF A PARTICULAR CLAIM SUCH ORDER ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 3 - CANNOT BE TREATED AS ERRONEOUS AND PREJUDICIAL AND THEREFORE, LD. PR. CIT HAS ACCORDINGLY ERRED IN PASSING THE IMPUGNED REVISION ORDER U/S. 263 OF THE ACT. (X) THE LD.PR. CIT HAS FURTHER FAILED TO APPRECIATE THAT THE APPELLANT HAS RIGHTLY CLAIMED DEPRECIATION ON INFRASTRUCTURE USAGE FACILITY CONSIDERING IT AS INTANGIBLE ASSETS, AND THEREFORE, THE REVISIONS PROCEEDINGS WERE UNWARRANTED IN THE PRESENT CASE. (XI) ALTERNATIVELY AND WITHOUT PREJUDICE TO THE GROUNDS RAISED HERE, LD. PR. CIT HAS GROSSLY ERRED IN SETTING ASIDE THE ORDER OF ASSESSING OFFICER BY DIRECTING TO THE ASSESSING OFFICER TO REFRAME THE ASSESSMENT AFTER CONDUCTING NECESSARY INQUIRY, INSTEAD OF MERELY ISSUING A DIRECTION LIMITED TO REFRAME ONLY THE APPELLANTS CLAIM OF DEPRECIATION ON INFRASTRUCTURE USAGE FACILITY AS INTANGIBLE ASSET MADE AND ALLOWED IN ORIGINAL ASSESSMENT. (XII) LD. PR. CIT HAS ERRED IN NOT CONSIDERING VARIOUS FACTS, SUBMISSIONS, EXPLANATIONS AND CLARIFICATIONS AS GIVEN BY THE APPELLANT AND FURTHER ERRED IN NOT APPRECIATING THE FACTS AND LAW IN THEIR PROPER PERSPECTIVE. 2. THE FACTS OF THE CASE ARE THE ASSESSEE IS ENGAGED IN THE BUSINESS OF OPERATING CONTAINER HANDLING TERMINAL AND CONTAINER FREIGHT STATION OPERATIONS. THE VARIOUS ARISING OUT OF THE SCRUTINY OF ACCOUNTS OF THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS ARE DISCUSSED IN THE SUBSEQUENT PARAS. 3. THEREAFTER, ASSESSING OFFICER ISSUED A NOTICE U/S.142(1) OF THE INCOME- TAX ACT WAS SERVED TO THE ASSESSEE WITH FOLLOWING QUARRIES: 1. PLEASE SHOW CAUSE AS TO WHY THE DEPRECIATION AMOUNT TO RS.24,0174,149/- CLAIMED ON INFRASTRUCTURE USAGE FACILITY @25% SHOULD NOT BE DISALLOWED SINCE IT IS NOT AN INTANGIBLE ASSETS AS PER THE PROVISIONS OF SECTION 32 OF THE INCOME TAX ACT, 1961. YOUR JUSTIFICATION IN THIS REGARD SHOULD BE SUPPORTED BY THE DOCUMENTARY EVIDENCES. 2. PLEASE FURNISH THE DETAILS OF SUNDRY CREDITORS OUTSTANDING FOR MORE THAN THREE YEARS ALONGWITH THE COPIES OF THEIR LEDGER ACCOUNTS FOR THE LAST THREE YEARS. 3. PLEASE FURNISH THE COPY OF AGREEMENT WITH GAPL IN RESPECT OF PAYMENT OF ROYALTY. ALSO FURNISH THE EVIDENCES FOR TDS MADE THEREON AND DEPOSITED IN THE GOVT. A/C. ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 4 - 4. PLEASE FURNISH THE COPY OF LEDGER ACCOUNT OF FOREIGN EXCHANGE LOSS ALONGWITH COPIES OF SUPPORTING DOCUMENTS. 5. ON PERUSAL OF THE AUDIT REPORT IN FORM NO.3CD, IT IS FOUND THAT THE AUDITOR HAS POINTED OUT THAT DEPRECIATION AMOUNTING TO RS.33,10,469/- OF PRIOR PERIOD HAS BEEN DEBITED IN THE PROFIT AND LOSS ACCOUNT. IN THIS REGARD, PLEASE SHOW CAUSE AS TO WHY THE SAME SHOULD NOT BE DISALLOWED BEING NOT PERTAINING TO THE PERIOD UNDER CONSIDERATION. YOUR JUSTIFICATION IN THIS REGARD SHOULD BE SUPPORTED BY THE DOCUMENTARY EVIDENCES. 6. ON PERUSAL OF THE STATEMENT OF INCOME, IT IS NOTICES THAT PROVISIONS OF DOUBFUL DEBTS AMOUNTING TO RS.16,27,017/- OF PREVIOUS YEAR HAS BEEN CLAIMED. IN THIS REGARD, PLEASE SHOW CAUSE AS TO WHY THE SAME SHOULD NOT BE DISALLOWED SINCE IT IS NOT ACTUALLY WRITTEN OFF DURING THE YEAR CONSIDERATION. YOUR JURISDICTION IN THIS REGARD SHOULD BE SUPPORTED BY THE DOCUMENTARY EVIDENCES. 7. ON PERUSAL OF THE STATEMENT OF INCOME, IT IS NOTICED THAT DEPRECIATION ON FOREX LOSS AMOUNTING TO RS.8,00,582/- HAS BEEN CLAIMED. IN THIS REGARD, YOU ARE REQUESTED TO JUSTIFY YOUR CLAIM IN ACCORDANCE OF THE PROVISIONS OF INCOME-TAX ACT 1961. YOUR JUSTIFICATION IN THIS REGARD SHOULD BE SUPPORTED BY THE DOCUMENTARY EVIDENCES. 8. ON PERUSAL OF THE STATEMENT OF INCOME, IT IS NOTICED THAT UNPAID INTEREST ON LOAN DISALLOWED IN PREVIOUS YEAR AMOUNTING TO RS.7,78,926/- HAS BEEN CLAIMED. IN THIS REGARD, YOU ARE REQUESTED TO FURNISH THE EVIDENCE OF DISALLOWANCE OF THE INTEREST IN THE PREVIOUS YEAR AND PAYMENT OF THE SAME DURING THE YEAR UNDER CONSIDERATION. 9. ON PERUSAL OF THE BREAKUP OF ADMINISTRATIVE EXP. IT IS FOUND THAT GIFT EXP. OF RS.284775/- HAS BEEN DEBITED IN THE PROFIT AND LOSS ACCOUNT. PLEASE JUSTIFY THE ALLOWABILITY OF THE EXPENSES IN RELATION TO YOUR BUSINESS IN ACCORDANCE OF THE PROVISIONS OF THE INCOME-TAX ACT, 1961 ALONGWITH EVIDENCES. 10. ON PERUSAL OF THE BREAKUP OF INTEREST AND FINANCE CHARGES, IT IS FOUND THAT LOAN AGENCY CHARGES OF RS.2,83,46,695/- HAS BEEN DEBITED IN THE PROFIT AND LOSS ACCOUNT. PLEASE JUSTIFY THE ALLOWABILITY OF THE EXPENSES ALONGWITH DOCUMENTARY EVIDENCES. ALSO FURNISH THE EVIDENCE IN RESPECT OF TDS MADE THEREON AND DEPOSITED IN THE GOVT. A/C. ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 5 - 11. PLEASE FURNISH THE DETAILS OF THE RENT, ADVERTISEMENT, AUDIT FEE, INTEREST AND LEGAL & PROFESSIONAL, CONSULTANCY EXPENSES STRICTLY IN THE FOLLOWING FORMAT: NAM E OF THE PARTY NATURE OF PAYME NT AMOU NT PAID DATE OF PAYME NT AMOU NT OF TDS MADE, IF ANY. CHALLAN NO.& DATE ON WHICH TDS DEPOSITE D IN TO GOVT. A/C. REASONS FOR NON- DEDUCTIO N OF TAX AT SOURCE ALONGWIT H EVIDENCE S. PLEASE ENSURE THAT YOUR SUBMISSION IS SUPPORTED BY PROPER EVIDENCES. HEARING OF YOUR CASE IS FIXED ON 08/02/2013 AT 12:00 PM. IN THE EVENT OF FAILURE TO FURNISH THE AFORESAID DETAILS, THE CASE WILL BE PROCEEDED WITH AS PER THE DETAILS AVAILABLE ON RECORD AND NO FURTHER OPPORTUNITY OF BEING HEARD WOULD BE PROVIDED. 4. IN RESPONSE TO ABOVE SAID NOTICE ASSESSEE FURNISHED REPLY AND SAME IS REPRODUCED HEREUNDER: YOUR GOODSELF HAS ASKED DETAILS REGARDING WHY DEPRECIATION CLAIMED ON 'INFRASTRUCTURE USAGE FACILITY' @ 25% SHOULD NOT BE DISALLOWED. AT THE OUTSET WE SUBMIT THAT THE INFRASTRUCTURE USAGE FACILITY IS SORT OF LICENSE GIVEN BY MUNDRA PORT TO THE ASSESSEE COMPANY TO OPERATE ITS CONTAINE OPERATION IN MUNDRA PORT AREA. THE EXCLUSIVE RIGHT HAS BEEN GIVEN TO THE ASSESSEE COMPANY, WHICH IS A SORT OF EASEMENT RIGHT. THE EASEMENT RIGHT IS NOTHING BUT LICENSE GIVEN TO THE LICENSEE TO ENTER ON ANOTHER PERSON'S LAND WITH USAGE OF INFRASTRUCTURE FACILITY TO CARRY OUT BUSINESS ACTIVITIES. THE ASSESSEE COMPANY HAS BEEN GIVEN THE RIGHT CARRY OUT ITS TERMINAL OPERATION WORK. THE VIEW EXPRESSED IS THAT SUCH RIGHT IS NOT SIMILAR TO KNOW HOW... FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE. IT IS ALSO OBSERVED THAT LEASE OF PREMISES ARE NOT COVERED. IT IS NOT DENIED THAT THE ASSESSEE COMPANY IS NOT THE OWNER OF INFRASTRUCTURE FACILITY. IN FACT IT IS NOT THE LESSEE ALSO. IT IS THE LICENSEE. IT HAS GOT THE RIGHT TO USE AND MAINTENANCE SERVICE OF CERTAIN ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 6 - INFRASTRUCTURE FACILITY AS SET OUT IN THE INFRASTRUCTURE USAGE AGREEMENT MORE PARTICULARLY SCHEDULE I OF THE SAID AGREEMENT WHICH INCLUDES: I. USE OF DREDGED CHANNEL I.E. WATER FRONT AND THE ENTRANCE CHANNEL AND TURNING CIRCLE OF THE CONTAINER TERMINAL AND ALONGSIDE THE BERTH AT THE CONTAINER TERMINAL AS DEPICTED IN ANNEXURE - A. II. USE OF RAILS AND ROAD CONNECTIVITY. III. USE OF WATER, ELECTRICITY AND TELECOMMUNICATION. IV. MARINE AND PORT FACILITIES. V. MEDICAL AND EDUCATIONAL FACILITIES. THE TERM LICENSE, EASEMENT AND LEASE ARE WENT WELL DEFINED UNDER TRANSFER OF PROPERTY ACT. THE VIEW EXPRESSED THAT RESTRICTIVE MEANING OR JUSDEM GENERIES MEANING IS TO BE GIVEN TO THE WORD 'ANY OTHER COMMERCIAL RIGHT OF SIMILAR NATURE' IS NOT CORRECT. IN THIS CONNECTION, IT MAY BE NOTED THAT IN TECHNO SHARES & STOCKS LTD VS. CIT 327 ITR 323 (SC) IT HAS BEEN HELD THAT SUCH RIGHT WAS AKIN TO LICENSE. IT GAVE THE RIGHT TO MEMBER TO ACCESS THE EXCHANGE IS CONSIDERED TO BE AN INTANGIBLE ASSET. SIMILARLY THE RIGHT GIVEN TO THE ASSESSEE TO ACCESS THE PORT TO CARRY OUT THE TERMINAL OPERATIONS. IT MAY BE NOTED THAT RIGHT FROM INCEPTION OF THE COMPANY, I.E. A.Y. 2004-05 THE DEPRECIATION CLAIMED ON THE VERY SAME INFRASTRUCTURE FACILITY HAS BEEN VERIFIED AND ALLOWED. IT IS NOT OUT OF PLACE TO MENTION HERE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2004- 05, THE THEN DCIT, CIRCLE-1, AHMEDABAD ON THE BASIS OF THE MATERIAL SUBMITTED ALONG WITH ALL THE EVIDENCES INCLUDING THE COPY OF AGREEMENT DTD.05/06/2003 WITH DETAILED SUBMISSION AND THE CASE LAWS ON THE SUBJECT HAS BEEN CITED BEFORE THE A.O. AND ON THE BASIS OF THE MATERIAL ON RECORD, THE THEN ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT U/S. 143(3) OF THE I.T. ACT FOR THE A.Y. 2004-05 AND ONWARDS AND ALLOWED THE CLAIM OF DEPRECIATION ON INFRASTRUCTURE USAGE FACILITY. FURTHER WE SUBMIT THAT THE SAID WRITTEN DOWN VALUE OF INFRASTRUCTURE USAGE FACILITY IS SHOWN SINCE A.Y.2005-06 ON WHICH THE DEPRECIATION HAS BEEN CLAIMED. TO SIMPLIFY THE MATTER, WE ARE PRODUCING THE DEFINITION OF LEASE AND, EASEMENT AS DEFINED UNDER TRANSFER OF PROPERTY ACT. ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 7 - LESSEE A LESSEE OF A PROPERTY HAS A RIGHT TO POSSESSION AND ENJOYMENT OF THE DEVISE TO THE EXCLUSION OF THE LESSOR WHEREAS A LICENSEE DOES NOT HAVE SUCH A RIGHT. SINCE THE APPELLANT HAD THE RIGHT TO EXCLUSIVE POSSESSION AND ENJOYMENT OF THE DISPUTED PROPERTY, HE WAS A LESSEE AND NOT A LICENSEE; AJAB SINGH VS. SHITAL PURI, AIR 1993 ALL 138. LEASE (I) IF THE AGREEMENT BETWEEN THE PARTIES SHOWS AN INTENTION TO CREATE AN INTEREST IN THE PROPERTY IN FAVOUR OF THE GRANTEE WHAT RESULTS IS SAID TO BE A LEASE. A LICENSEE ON THE OTHER HAND DOES NOT CREATE AN INTEREST IN PROPERTY; MRS. KARUNA MANOHARLAL OHRI V. VIPINBHAI U. SANGHANI, AIR 1993 BOM 177. (II) THE FURNITURE AND FITTINGS AND THE TOOLS AND IMPLEMENTS WHICH HAVE BEEN GIVEN ALONG WITH THE SHOP WERE NOT MEANT FOR THE BENEFICIAL USE OF THE SHOP BUT WERE MEANT EXCLUSIVELY FOR RUNNING OF THE HAIR DRESSING SALOON, THUS CREATING A LEASE OF THE BUSINESS AND NOT A LEASE OF THE SHOP; VIDYA WATI V. HANSRAJ, AIR 1993 DEL 187. LICENSE THE CORPORATION HAD ALL THE SUPERVISORY POWERS TO REGULATE THE RUNNING OF THE REFRESHMENT STALL. NO EXCLUSIVE RIGHT WAS CREATED IN FAVOUR OF THE CATERER TO RUN THE REFRESHMENT STALL IN THE MANNER THE CATERER CHOOSE TO DO SO. SINCE THERE IS NO TRANSFER OF INTEREST IN THE STALL AND AS PER THE TERMS OF AGREEMENT, THE DOCUMENT CAN BE TERMED AS LICENSE ONLY AND NOT A LEASE; UDAI PRATAP SINGH V. COLLECTOR VARANASI, AIR 1991 ALL 104. LEASE DEFINED - A LEASE OF IMMOVEABLE PROPERTY IS A TRANSFER OF A RIGHT TO ENJOY SUCH PROPERTY, MADE FOR A CERTAIN TIME, EXPRESS OR IMPLIED, OR IN PERPETUITY, IN CONSIDERATION OF A PRICE PAID OR PROMISED, OR OF MONEY, A SHARE OF CROPS, SERVICE OR ANY OTHER THING OF VALUE, TO BE RENDERED PERIODICALLY OR ON SPECIFIED OCCASIONS TO THE TRANSFEROR BY TRANSFEREE, WHO ACCEPTS THE TRANSFER ON SUCH TERMS. 'EASEMENT' DEFINED. 'EASEMENT' DEFINED.-AN EASEMENT IS A RIGHT WHICH THE OWNER OR OCCUPIER, OF CERTAIN LAND POSSESSES, AS SUCH, FOR THE BENEFICIAL ENJOYMENT OF THAT LAND, TO DO AND CONTINUE TO DO SOMETHING, OR TO ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 8 - PREVENT AND CONTINUE TO PREVENT SOMETHING BEING DONE, IN OR UPON, OR IN RESPECT OF, CERTAIN OTHER LAND NOT HIS OWN. DOMINANT AND SERVIENT HERITAGES AND OWNERS. THE LAND FOR THE BENEFICIAL ENJOYMENT OF WHICH THE RIGHT EXISTS IS CALLED THE DOMINANT HERITAGE, AND THE OWNER OR OCCUPIER THEREOF THE DOMINANT OWNER; THE LAND ON WHICH THE LIABILITY IS IMPOSED IS CALLED THE SERVIENT HERITAGE, AND THE OWNER OR OCCUPIER THEREOF THE SERVIENT OWNER. EXPLANATION.-IN THE FIRST AND SECOND CLAUSES OF THIS SECTION, EXPRESSION 'LAND' INCLUDES ALSO THINGS PERMANENTLY ATTACHED TO EARTH: THE EXPRESSION 'BENEFICIAL ENJOYMENT' INCLUDES ALSO POSSIBLE CONVENIENCE, REMOTE ADVANTAGE, AND EVEN A MERE AMENITY; AND THE EXPRESSION 'TO DO SOMETHING' INCLUDES REMOVAL AND APPROPRIATION BY THE DOMINANT OWNER, FOR THE BENEFICIAL ENJOYMENT OF THE DOMINANT HERITAGE, OF ANY PART OF THE SOIL OF THE SERVIENT HERITAGE OR ANYTHING GROWING OR SUBSISTING THEREON. ILLUSTRATIONS (A) A, AS THE OWNER OF A CERTAIN HOUSE, HAS A RIGHT OF WAY THITHER OVER HIS NEIGHBOUR BS LAND FOR PURPOSES CONNECTED WITH THE BENEFICIAL ENJOYMENT OF THE HOUSE. THIS IS AN EASEMENT. (B) A, AS THE OWNER OF A CERTAIN HOUSE, HAS THE RIGHT TO GO ON HIS NEIGHBOUR BS LAND, AND TO TAKE WATER FOR THE PURPOSES OF HIS HOUSEHOLD OUT OF A SPRING THEREIN. THIS IS AN EASEMENT. (C) A, AS THE OWNER OF A CERTAIN HOUSE, HAS THE RIGHT TO CONDUCT WATER FROM BS STREAM TO SUPPLY THE FOUNTAINS IN THE GARDEN ATTACHED TO THE HOUSE. THIS IS AN EASEMENT. (D) A, AS THE OWNER OF A CERTAIN HOUSE AND FARM, HAS THE RIGHT TO GRAZE A CERTAIN NUMBER OF HIS OWN CATTLE ON BS FIELD, OR TO TAKE, FOR THE PURPOSE OF BEING USED IN THE HOUSE, BY HIMSELF, HIS FAMILY, GUESTS, LODGERS AND SERVANTS, WATER OR FISH OUT OF CS TANK, OR TIMBER OUT OF DS WOOD, OR TO USE, FOR THE PURPOSE OF MANURING HIS LAND, THE LEAVES WHICH HAVE FALLEN FROM THE TREES ON ES LAND. THESE ARE EASEMENTS. ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 9 - (E) A DEDICATES TO THE PUBLIC THE RIGHT TO OCCUPY THE SURFACE OF CERTAIN LAND FOR THE PURPOSE OF PASSING AND RE-PASSING. THIS RIGHT IS NOT AN EASEMENT. (F) A IS BOUND TO CLEANSE A WATERCOURSE RUNNING THROUGH HIS LAND AND KEEP IT FREE FROM OBSTRUCTION FOR THE BENEFIT OF B, A LOWER RIPARIAN OWNER. THIS IS NOT AN EASEMENT. THUS, IT WILL BE SEEN THAT THE ASSESSEE IS NOT THE LESSOR OF THE PREMISES. IT IS ONLY A LICENSE BY WAY OF EASEMENT GIVEN TO IT TO CARRY ON BUSINESS OF CONTAINER TERMINAL SERVICES AND ALSO OTHER ALLIED SERVICES. IT IS REQUIRED TO PAY REGULAR ROYALTY OF REVENUE NATURE ALSO. THUS, IT IS NOTHING BUT A LICENSE WHICH IS IN THE NATURE OF COMMERCIAL RIGHT. THE DEPRECIATION IS CLAIMED ON THE LICENSE I.E. RIGHT TO USE THE INFRASTRUCTURE FACILITY. IT MAY BE NOTED THAT LICENSES, FRANCHISEES, ETC. ARE CATEGORIZED AS INTANGIBLE ASSETS UNDER THE BLOCK OF ASSETS. IT GOES WITHOUT SAYING THAT WHEN LICENSES GRANTED, IT IS IN RESPECT OF SOME PROPERTY, I.E. OWNER OF PROPERTY GRANTS THE LICENSE TO ANOTHER. THUS, THE PROPERTY ITSELF AND THE LICENSE ARE REGARDED AS SEPARATE ASSETS. IT MAY BE NOTED THAT THE ASSESSEE HIMSELF IS OWNER OF THE LICENSE AND AS SUCH IS CLAIMING DEPRECIATION; THIS IS NOT A CASE OF LEASE BUT A CASE OF LICENSE. WE HAVE ALREADY SHOWN THE DIFFERENCE BETWEEN LEASE AND LICENSES. IT IS NOWHERE STATED WHILE FINALIZING EARLIER ASSESSMENT THAT ASSETS ARE TAKEN ON LEASE. FURTHER WE SUBMIT THAT THE ASSESSEE COMPANY IS NOT CLAIMING DEPRECIATION ON INFRASTRUCTURE FACILITIES AS SUCH. THE DEPRECIATION IS BEING CLAIMED ON LICENSE. THE CATEGORY OF LICENSE IS BROUGHT IN THE RULES AS SEPARATE ASSETS. EARLIER NO DEPRECIATION WAS ALLOWED ON SUCH PAYMENTS. HOWEVER, AFTER CATEGORY OF INTANGIBLE ASSETS IS BROUGHT: IN RULES, THE DEPRECIATION IS ALLOWABLE. THE ASSESSEE COMPANY CANNOT TRANSFER THIS FACILITY TO OTHERS. IT MAY BE NOTED THAT THE ASSESSEE COMPANY IS NOT THE OWNER OF TANGIBLE AND VISIBLE ASSETS. HOWEVER, THERE IS NO BAR ON IT IF IT WANTS TO TRANSFER THE LICENSES GRANTED BY THIS. AGAIN, FOR ALLOWING DEPRECIATION PERFECT TITLE AND LEGAL OWNERSHIP IS NOT REQUIRED. IF THE ASSET IS USED AND PAYMENT IS MADE DEPRECIATION IS ALLOWABLE. ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 10 - 5. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAD ENTERED INTO INTERNATIONAL TRANSACTION WITH ITS ASSOCIATED ENTERPRISES. THE ASSESSEE HAD FURNISHED THE DETAILS OF TRANSACTIONS AS PER ANNEXURE-2 OF FORM NO.3CEB. THE ASSESSEE HAS SHOWN THE DETAILS REIMBURSEMENT OF EXPENSES MADE, PAYMENT OF INTEREST ON LOAN AND GUARANTEE PROVIDED BY ITS ONE OF THE ASSOCIATED ENTERPRISES. 6. ON PERUSAL OF THE AUDIT REPORT IN FORM NO.3CEB SUBMITTED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS FOUND THAT THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTIONS OF RS.96,87,18,312/-. THEREFORE, A REFERENCE WAS MADE TO THE DIRECTOR OF INCOME-TAX (TRANSFER PRICING), AHMEDABAD VIDE LETTER DATED 29.12.2011 FOR COMPUTATION OF ARMS LENGTH PRICE IN RELATION TO INTERNATIONAL TRANSACTION, DETAILED IN AUDIT REPORT IN FORM NO.3CEB. THE TRANSFER PRICING OFFICER (TPO) AFTER EXAMINING THE SUBMISSIONS, DETAILS/INFORMATION AND EVIDENCES PROVIDED BY THE ASSESSEE DURING THE COURSE OF PROCEEDINGS BEFORE HIM, PASSED AN ORDER UNDER SECTION 92CA(3) OF THE INCOME-TAX ACT, 1961 DATED 09.01.2013 AFTER GIVING ADEQUATE OPPORTUNITIES OF BEING HEARD TO THE ASSESSEE (COPY ENCLOSED WITH THIS ORDER AS ANNEXURE-A) THE TPO VIDE HIS ORDER DATED 09- 01-2013 HAS WORKED OUT AN UPWARD ADJUSTMENTS OF RS.3,93,98,016/- ON ACCOUNT OF PAYMENT OF INTEREST TO ITS ONE OF THE ASSOCIATE ENTERPRISES. 7. THEREAFTER, A DRAFT ASSESSMENT ORDER U/S. 143(3) R.W.S. 144(C) OF THE ACT WAS PASSED ON 19.03.2013 COMPUTING THE TOTAL LOSS AT RS.(-)10,88,22,942/- AFTER INCORPORATING THE ADDITION OF RS.3,93,98,016/- IN RESPECT OF ARMS ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 11 - LENGTH PRICE OF INTERNATIONAL TRANSACTION, AS STATED ABOVE. THE SAID DRAFT ASSESSMENT ORDER WAS DULY SERVED UPON THE ASSESSEE ON 20.03.2013 REQUIRING THE ASSESSEE TO SUBMIT THE ACCEPTANCE AND/OR OBJECTIONS, IF ANY, TO THE DRAFT ASSESSMENT ORDER. MEANWHILE, RECTIFICATION ORDER UNDER SECTION 154 OF THE INCOME-TAX ACT, 1961 WAS PASSED ON 07.05.2013 BY THE DY. COMMISSIONER OF INCOME-TAX, TPO-II, AHMEDABAD REDUCING THE UPWARD ADJUSTMENT TO RS.82,56,027/-. IN RESPONSE TO THE DRAFT ASSESSMENT ORDER, THE ASSESSEE VIDE LETTER DATED 25.04.2013 HAS SUBMITTED THAT THE COMPANY HAS DECIDED TO PREFER AN APPEAL BEFORE THE CIT AGAINST THE PROPOSED DISALLOWANCE AS OUTLINED UNDER THE DRAFT ASSESSMENT ORDER INSTEAD OF FILING AN OBJECTION TO THE DISPUTE RESOLUTION PANEL AS PROVIDED IN THE SECTION 144C AS WELL AS THE INCOME-TAX NOTIFICATION DATED 20.11.2009. ACCORDINGLY, THE ASSESSEE HAS REQUESTED TO PASS THE FINAL ASSESSMENT ORDER U/S.143(3) OF THE ACT TO ENABLE THE COMPANY TO FILE APPEAL BEFORE THE HONBLE CIT. 8. IN VIEW OF THE ABOVE FINAL ASSESSMENT ORDER WAS PASSED BY MAKING THE ADDITION DISALLOWANCE IN THE DRAFT ASSESSMENT ORDER AND TOTAL INCOME WAS ASSESSED (-)RS.13,99,64,931/-. 9. THEREAFTER, ON VERIFICATION OF THE CASE RECORDS AND DETAILS FILED AT THE TIME OF ASSESSMENT, IT WAS NOTICED BY THE LD.CIT THAT ASSESSING OFFICER HAD NOT PROPERLY INVESTIGATED/SCRUTINIZED THE CASE WITH REFERENCE TO THE FOLLOWING ISSUE AND THEREFORE SHOW-CAUSE NOTICE U/S.263 WAS ISSUED TO THE ASSESSEE. ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 12 - IN THE SUBMISSION FILED, THE ASSESSEE VIDE REPLY DATED 22/02/2013 FURNISHED A DETAILED JUSTIFICATION AS TO WHY THE DEPRECIATION OF RS.24,01,74,149/- CLAIMED ON INFRASTRUCTURE USAGE FACILITY @ 25% SHOULD BE ALLOWED TO THE ASSESSEE. FOR READY REFERENCE, THE REPLY FURNISHED TO THE LD.AO VIDE LETTER DATED 22.02.2013 IS REPRODUCED HEREUNDER: YOUR GOOD SELF HAS ASKED DETAILS REGARDING WHY DEPRECIATION CLAIMED ON INFRASTRUCTURE USAGE FACILITY@25% SHOULD NOT BE DISALLOWED. AT THE OUTSET WE SUBMIT THAT THE INFRASTRUCTURE USAGE FACILITY IS SORT OF LICENSE GIVEN BY MUNDRA PORT TO THE ASSESSEE COMPANY TO OPERATE ITS CONTAINER OPERATION IN MUNDRA PORT AREA. THE EXCLUSIVE RIGHT HAS BEEN GIVEN TO THE ASSESSEE COMPANY, WHICH IS A SORT OF EASEMENT RIGHT. THE EASEMENT RIGHT IS NOTHING BUT LICENSE GIVEN TO THE LICENSEE TO ENTER ON ANOTHER PERSONS LAND WITH USAGE OF INFRASTRUCTURE FACILITY TO CARRY OUT BUSINESS ACTIVITIES. THE ASSESSEE COMPANY HAS BEEN GIVEN THE RIGHT TO CARRY OUT ITS TERMINAL OPERATION WORK. THE VIEW EXPRESSED IS THAT SUCH RIGHT IS NOT SIMILAR TO KNOW HOW FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE. IT IS ALSO OBSERVED THAT LEASE OF PREMISES ARE NOT COVERED. IT IS NOT DENIED THAT THE ASSESSEE COMPANY IS NOT THE OWNER OF INFRASTRUCTURE FACILITY. IN FACT IT IS NOT THE LESSEE ALSO. IT IS THE LICENSEE. IT HAS GOT THE RIGHT TO USE AND MAINTENANCE SERVICE OF CERTAIN INFRASTRUCTURE FACILITY AS SET OUT IN THE INFRASTRUCTURE USAGE AGREEMENT MORE PARTICULARLY SCHEDULE I OF THE SAID AGREEMENT WHICH INCLUDES: I. USE OF DREDGED CHANNEL I.E. WATER FRONT AND THE ENTRANCE CHANNEL AND TURNING CIRCLE OF THE CONTAINER TERMINAL AND ALONGSIDE THE BERTH AT THE CONTAINER TERMINAL AS DEPICTED IN ANNEXURE - A. II, USE OF RAILS AND ROAD CONNECTIVITY. III. USE OF WATER, ELECTRICITY AND TELECOMMUNICATION. IV. MARINE AND PORT FACILITIES. V. MEDICAL AND EDUCATIONAL FACILITIES. THE TERM LICENSE, EASEMENT AND LEASE ARE WENT WELL DEFINED UNDER TRANSFER OF PROPERTY ACT. THE VIEW EXPRESSED THAT RESTRICTIVE MEANING OR EJUSDEM GENERIES MEANING IS TO BE GIVEN TO THE WORD 'ANY OTHER COMMERCIAL RIGHT OF SIMILAR NATURE' IS NOT CORRECT. IN THIS CONNECTION, IT MAY BE NOTED THAT IN TECHNO SHARES & STOCKS LTD VS. C1T 327 ITR 323 (SC) IT HAS BEEN HELD THAT SUCH RIGHT WAS AKIN TO LICENSE. IT GAVE THE RIGHT TO MEMBER TO ACCESS THE EXCHANGE IS CONSIDERED TO BE AN INTANGIBLE ASSET. SIMILARLY THE RIGHT GIVEN TO THE ASSESSEE TO ACCESS THE PORT TO CARRY OUT THE TERMINAL OPERATIONS. IT MAY BE NOTED THAT RIGHT FROM INCEPTION OF THE COMPANY, I.E. A.Y, 2004-05 THE DEPRECIATION CLAIMED ON THE VERY SAME INFRASTRUCTURE FACILITY HAS BEEN VERIFIED AND ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 13 - ALLOWED. IT IS NOT OUT OF PLACE TO MENTION HERE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2004-05, THE THEN DCIT, CIRCLE-1, AHMEDABAD ON THE BASIS OF THE MATERIAL SUBMITTED ALONGWITH ALL THE EVIDENCES INCLUDING THE COPY OF AGREEMENT DTD.05/06/2003 WITH DETAILED SUBMISSION AND THE CASE LAWS ON THE SUBJECT HAS BEEN CITED BEFORE THE A.O. AND ON THE BASIS OF THE MATERIAL ON RECORD, THE THEN ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT U/S.143(3) OF THE I.T. ACT FOR THE A.Y, 2004-05 AND ONWARDS AND ALLOWED THE CLAIM OF DEPRECIATION ON INFRASTRUCTURE USAGE FACILITY. FURTHER WE SUBMIT THAT THE SAID WRITTEN DOWN VALUE OF INFRASTRUCTURE USAGE FACILITY IS SHOWN SINCE A.Y.2005-06 ON WHICH THE DEPRECIATION HAS BEEN CLAIMED. TO SIMPLIFY THE MATTER, WE ARE PRODUCING THE DEFINITION OF LEASE AND EASEMENT AS DEFINED UNDER TRANSFER OF PROPERTY ACT. LESSEE A LESSEE OF A PROPERTY HAS A RIGHT TO POSSESSION AND ENJOYMENT OF THE DEVISE TO THE EXCLUSION OF THE LESSOR WHEREAS A LICENSEE DOES NOT HAVE SUCH A RIGHT. SINCE THE APPELLANT HAD THE RIGHT TO EXCLUSIVE POSSESSION AND ENJOYMENT OF THE DISPUTED PROPERTY, HE WAS A LESSEE AND NOT A LICENSEE; AJAB SINGH VS. SHITAL PURI, AIR 1993 ALL 138. LEASE (I) IF THE AGREEMENT BETWEEN THE PARTIES SHOWS AN INTENTION TO CREATE AN INTEREST IN THE PROPERTY IN FAVOUR OF THE GRANTEE WHAT RESULTS IS SAID TO BE A LEASE. A LICENSEE ON THE OTHER HAND DOES NOT CREATE AN INTEREST IN PROPERTY; MRS, KARUNA MANOHARLAL OHRI V. VIPINBHAI U. SANGHANI, AIR 1993 BOM 177. (II) THE FURNITURE AND FITTINGS AND THE TOOLS AND IMPLEMENTS WHICH HAVE BEEN GIVEN ALONGWITH THE SHOP WERE NOT MEANT FOR THE BENEFICIAL USE OF THE SHOP BUT WERE MEANT EXCLUSIVELY FOR RUNNING OF THE HAIR DRESSING SALOON, THUS CREATING A LEASE OF THE BUSINESS AND NOT A LEASE OF THE SHOP; VIDYA WATI V. HANSRAJ, AIR 1993 DEL 187. LICENCE THE CORPORATION HAD ALL THE SUPERVISORY POWERS TO REGULATE THE RUNNING OF THE REFRESHMENT STALL. NO EXCLUSIVE RIGHT WAS CREATED IN FAVOUR OF THE CATERER TO RUN THE REFRESHMENT STALL IN THE MANNER THE CATERER CHOOSE TO DO SO. SINCE THERE IS NO TRANSFER OF INTEREST IN THE STALL AND AS PER THE TERMS OF AGREEMENT, THE DOCUMENT CAN BE TERMED AS LICENCE ONLY AND NOT A LEASE, UDAI PRATAP SINGH V. COLLECTOR VARANASI, AIR 1991 ALL 104. LEASE DEFINED - A LEASE OF IMMOVEABLE PROPERTY IS A TRANSFER OF A RIGHT TO ENJOY SUCH PROPERTY, MADE FOR A CERTAIN TIME, EXPRESS OR IMPLIED, OR IN PERPETUITY, IN CONSIDERATION OF A PRICE PAID OR PROMISED, OR OF MONEY, A SHARE OF CROPS, SERVICE OR ANY OTHER THING OF VALUE, TO BE RENDERED PERIODICALLY OR ON SPECIFIED OCCASIONS TO THE TRANSFEROR BY THE TRANSFEREE, WHO ACCEPTS THE TRANSFER ON SUCH TERMS. 'EASEMENT' DEFINED. ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 14 - 'EASEMENT' DEFINED-AN EASEMENT IS A RIGHT WHICH THE OWNER OR OCCUPIER OF CERTAIN LAND POSSESSES, AS SUCH, FOR THE BENEFICIAL ENJOYMENT OF THAT LAND, TO DO AND CONTINUE TO DO SOMETHING, OR TO PREVENT AND CONTINUE TO PREVENT SOMETHING BEING DONE, IN OR UPON, OR IN RESPECT OF, CERTAIN OTHER LAND NOT HIS OWN. DOMINANT AND SERVIENT HERITAGES AND OWNERS. THE LAND FOR THE BENEFICIAL ENJOYMENT OF WHICH THE RIGHT EXISTS IS CALLED THE DOMINANT HERITAGE, AND THE OWNER OR OCCUPIER THEREOF THE DOMINANT OWNER; THE LAND ON WHICH THE LIABILITY IS IMPOSED IS CALLED THE SERVIENT HERITAGE, AND THE OWNER OR OCCUPIER THEREOF THE SERVIENT OWNER. EXPLANATION - IN THE FIRST AND SECOND CLAUSES OF THIS SECTION, THE EXPRESSION 'LAND' INCLUDES ALSO THINGS PERMANENTLY ATTACHED TO THE EARTH: THE EXPRESSION 'BENEFICIAL ENJOYMENT' INCLUDES ALSO POSSIBLE CONVENIENCE, REMOTE ADVANTAGE, AND EVEN A MERE AMENITY; AND THE EXPRESSION 'TO DO SOMETHING' INCLUDES REMOVAL AND APPROPRIATION BY THE DOMINANT OWNER, FOR THE BENEFICIAL ENJOYMENT OF THE DOMINANT HERITAGE, OF ANY PART OF THE SOIL OF THE SERVIENT HERITAGE OR ANYTHING GROWING OR SUBSISTING THEREON. ILLUSTRATIONS (A) A, AS THE OWNER OF A CERTAIN HOUSE, HAS A RIGHT OF WAY THITHER OVER HIS NEIGHBOUR BS LAND FOR PURPOSES CONNECTED WITH THE BENEFICIAL ENJOYMENT OF THE HOUSE, THIS IS AN EASEMENT. (B) A, AS THE OWNER OF A CERTAIN HOUSE, HAS THE RIGHT TO GO ON HIS NEIGHBOUR BS LAND, AND TO TAKE WATER FOR THE PURPOSES OF HIS HOUSEHOLD OUT OF A SPRING THEREIN. THIS IS AN EASEMENT. (C) A, AS THE OWNER OF A CERTAIN HOUSE, HAS THE RIGHT TO CONDUCT WATER FROM BS STREAM TO SUPPLY THE FOUNTAINS IN THE GARDEN ATTACHED TO THE HOUSE. THIS IS AN EASEMENT. (D) A, AS THE OWNER OF A CERTAIN HOUSE AND FARM, HAS THE RIGHT TO GRAZE A CERTAIN NUMBER OF HIS OWN CATTLE ON BS FIELD, OR TO TAKE, FOR THE PURPOSE OF BEING USED IN THE HOUSE, BY HIMSELF, HIS FAMILY, GUESTS, LODGERS AND SERVANTS, WATER OR FISH OUT OF CS TANK, OR TIMBER OUT OF DS WOOD, OR TO USE, FOR THE PURPOSE OF MANURING HIS LAND, THE LEAVES WHICH HAVE FALLEN FROM THE TREES ON ES LAND. THESE ARE EASEMENTS. (E) A DEDICATES TO THE PUBLIC THE RIGHT TO OCCUPY THE SURFACE OF CERTAIN LAND FOR THE PURPOSE OF PASSING AND RE-PASSING. THIS RIGHT IS NOT AN EASEMENT. (F) A IS BOUND TO CLEANSE A WATERCOURSE RUNNING THROUGH HIS LAND AND KEEP IT FREE FROM OBSTRUCTION FOR THE BENEFIT OF B, A LOWER RIPARIAN OWNER. THIS IS NOT AN EASEMENT. THUS, IT WILL BE SEEN THAT THE ASSESSEE IS NOT THE LESSOR OF THE PREMISES. IT IS ONLY A LICENSE BY WAY OF EASEMENT GIVEN TO IT TO CARRY ON BUSINESS OF CONTAINER TERMINAL ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 15 - SERVICES AND ALSO OTHER ALLIED SERVICES, IT IS REQUIRED TO PAY REGULAR ROYALTY OF REVENUE NATURE ALSO. THUS, IT IS NOTHING BUT A LICENSE WHICH IS IN THE NATURE OF COMMERCIAL RIGHT. THE DEPRECIATION IS CLAIMED ON THE LICENSE I.E. RIGHT TO USE THE INFRASTRUCTURE FACILITY. IT MAY BE NOTED THAT LICENSES, FRANCHISEES, ETC. ARE CATEGORIZED AS INTANGIBLE ASSETS UNDER THE BLOCK OF ASSETS. IT GOES WITHOUT SAYING THAT WHEN LICENSES GRANTED, IT IS IN RESPECT OF SOME PROPERTY, I.E. OWNER OF PROPERTY GRANTS THE LICENSE TO ANOTHER. THUS, THE PROPERTY ITSELF AND THE LICENSE ARE REGARDED AS SEPARATE ASSETS. IT MAY BE NOTED THAT THE ASSESSEE HIMSELF IS OWNER OF THE LICENSE AND AS SUCH IS CLAIMING DEPRECIATION. THIS IS NOT A CASE OF LEASE BUT A CASE OF LICENSE. WE HAVE ALREADY SHOWN THE DIFFERENCE BETWEEN LEASE AND LICENSES. IT IS NOWHERE STATED WHILE FINALIZING EARLIER ASSESSMENT THAT ASSETS ARE TAKEN ON LEASE. FURTHER WE SUBMIT THAT THE ASSESSEE COMPANY IS NOT CLAIMING DEPRECIATION ON INFRASTRUCTURE FACILITIES AS SUCH. THE DEPRECIATION BEING CLAIMED ON LICENSE. THE CATEGORY OF LICENSE IS BROUGHT IN THE RULES AS SEPARATE ASSETS. EARLIER NO DEPRECIATION WAS ALLOWED ON SUCH PAYMENTS. HOWEVER, AFTER CATEGORY OF INTANGIBLE ASSETS IS BROUGHT IN RULES, THE DEPRECIATION IS ALLOWABLE. THE ASSESSEE COMPANY CANNOT TRANSFER THIS FACILITY TO OTHERS, IT MAY BE NOTED THAT THE ASSESSEE COMPANY IS NOT THE OWNER OF TANGIBLE AND VISIBLE ASSETS. HOWEVER, THERE IS NO BAR ON IT IF IT WANTS TO TRANSFER THE LICENSES GRANTED BY THIS. AGAIN, FOR ALLOWING DEPRECIATION PERFECT TITLE AND LEGAL OWNERSHIP IS NOT REQUIRED. IF THE ASSETS IS USED AND PAYMENT IS MADE DEPRECIATION IS ALLOWABLE. KINDLY REFER TO THE DECISION OF: I. S. AMIKA VS. DCIT 15 TAXMANN.COM 28 (KER). IT HAS BEEN MADE CLEAR THAT APKARI LICENSE IS TRANSFERABLE EVEN IF IT IS TRANSFERABLE WITH SOME APPROVAL OF SOME AUTHORITY IT CANNOT BE SAID THAT IT IS NOT TRANSFERABLE. IT CANNOT BE THE CASE WHERE THE LICENSE IS A RIGHT IN PERSONEM BUT IT IS A RIGHT IN REM I.E. THE TRANSFEREE IN SUCH CASE STEPS IN THE SHOES OF THE ASSESSEE. IN THE ABOVE DECISION THE HIGH COURT HAS ALLOWED THE CLAIM OF THE DEPRECIATION IN THE HANDS OF THE TRANSFEREE. II. THE RELIANCE CAN BE PLACED ALSO ON PIEM HOTELS LTD. VS. DCIT 128 ITD 272 (MUM) THE ASSESSEE HAS BEEN SHOWING THIS RIGHTS ON THE ASSETS SIDE OF THE BALANCE SHEET AND THERE IS NO ADVERSE REMARK ON THIS ASPECT IN THE AUDITOR'S REPORT. IN SHORT, IT IS NOT A CASE OF MISCELLANEOUS EXPENDITURE WHICH HAS GONE OUT OF THE HANDS OF THE ASSESSEE BUT CLEAR-CUT CASE OF RIGHT OF ACQUIRING INTANGIBLE ASSET. WE ARE BRINGING TO YOU KIND NOTICE THE FOLLOWING DECISIONS: I. THE DELHI HIGH COURT IN CIT VS. HINDUSTAN COCA-COLA BEVERAGES PVT. LTD. - 331 ITR 192 HAS HELD THAT GOODWILL ALSO A COMMERCIAL RIGHT ENTITLED FOR DEPRECIATION. IT HAS BEEN HELD THAT IT IS SIMILAR TO PATENT COPYRIGHTS, ETC. GOODWILL IS ALSO AN INTANGIBLE ASSET ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 16 - II. ITO VS. MEDICORP TECHNOLOGIES INDIA LTD. 122 TTJ 394 (CHENNAI): HELD THAT NON COMPETE RIGHT ACQUIRED BY THE ASSESSEE COMPANY IS ELIGIBLE FOR DEPRECIATION UNDER CLAUSE {II} OF SECTION 32(1) AS INTANGIBLE ASSET BEING OF THE SAME NATURE AS BUSINESS/COMMERCIAL RIGHT OF PATENT ETC. III. ONGC VIDESH BUSINESS LTD. VS. DY.CIT -127 TTJ 497 (DEL.) LICENSE FOR CARRYING ON HYDROCARBONS OPERATIONS - COMMERCIAL RIGHTS OF EXPLORATION OF MINERAL OILS ACQUIRED BY ASSESSEE ENTERING INTO PRODUCTION SHARING AGREEMENT WITH THE RUSSIAN GOVERNMENT FALL UNDER THE EXPRESSION 'ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' SAME BEING AKIN TO 'LICENSE' AS STIPULATED IN S. 32(L)(II) AND THEREFORE, THEY ARE IN THE NATURE OF INTANGIBLE ASSETS ELIGIBLE FOR DEPRECIATION AT THE PRESCRIBED RATE. - HELD -HYDROCARBONS IN THEIR NATURAL HABITAT EMBEDDED IN A PARTICULAR TERRITORY ARE THE PROPERTY OF THE STATE GOVERNMENT, JURISDICTION OVER SUCH HYDROCARBONS DOES NOT LIE WITH ANY PRIVATE PERSON OTHER THAN STATE GOVERNMENT AND A PERSON CANNOT CARRY OUT HYDROCARBONS OPERATIONS UNLESS THE PERSON HAD ENTERED INTO PRODUCTION SHARING AGREEMENT WITH THE GOVERNMENT. IN THE INSTANT CASE, BY ENTERING INTO AN AGREEMENT CALLED PCA, THE GOVERNMENT OWNING THE HYDROCARBONS, GRANTED RIGHTS TO THE ASSESSEE COMPANY ALONGWITH LICENSE FOR CARRYING ON HYDROCARBONS OPERATIONS. THE BUSINESS RIGHTS IN LICENSE ARE OWNED BY THE ASSESSEE ENTERING INTO PCA AND SUCH RIGHT AND LICENSE CAN BE ASSIGNED AND TRANSFERRED TO OTHER PARTIES SUBJECT TO THE TERMS AND CONDITIONS OF 20 PER CENT PARTICIPATING INTEREST BECAME THE MEMBER OF THE CONSORTIUM AND ACQUIRED PROPORTIONATE SHARE IN RIGHTS AND LICENSE GRANTED BY THE RUSSIAN STATE FOR SAKHALIN BLOCK. BY ACQUIRING THESE BUSINESS RIGHTS AND PRODUCTION LICENSES, THE ASSESSEE BECAME ENTITLED TO CARRY ON HYDROCARBONS OPERATIONS IN THE SAKHALIN PROJECT. THE LAW HAS SPECIFIED ITEMS OF INTANGIBLE ASSETS ELIGIBLE FOR DEPRECIATION IN THE FOLLOWING CATEGORIES : (I) KNOW-HOW (II) PATENTS (III) COPYRIGHTS (IV) TRADEMARKS (V) LICENSES (VI) FRANCHISES (VII) ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE. SO FAR AS CLAIM OF DEPRECIATION IN CASE OF INTANGIBLE ASSETS FALLING IN THE CATEGORY OF 'ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' IS CONCERNED, ALL THE BUSINESS OR COMMERCIAL RIGHTS ARE NOT BY THEMSELVES ASSETS ELIGIBLE FOR DEPRECIATION, AND THAT ONLY THOSE RIGHTS WHICH ARE SIMILAR IN NATURE WITH THE KNOW-HOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENSES, ETC. ARE ELIGIBLE FOR CLAIM OF DEPRECIATION. IN VIEW OF PRINCIPLES OF EJUSDEM GENERIS, THE EXPRESSION 'ANY OTHER BUSINESS OR COMMERCIAL RIGHTS' HAS TO BE READ IN THE COMPANY OF THE PRECEDING WORDS. THIS RULE OF INTERPRETATION MAKES AN ATTEMPT TO RECONCILE INCOMPATIBILITY BETWEEN THE SPECIFIC AND ELUCIDATED RIGHTS OF BUSINESS OR COMMERCIAL NATURE. IN SUCH CIRCUMSTANCES, THE EXPRESSION 'ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' ALSO MUST BE IN THE SAME GENESIS OR CATEGORY WITH SPECIFIC AND ELUCIDATED IDENTITY OF COMMERCIAL OR BUSINESS NATURE. THEREFORE, IN THE LIGHT OF THE STATUTORY PROVISIONS CONTAINED IN S. 32(L)(II), THE COMMERCIAL RIGHTS OF EXPLORATION OF MINERAL OILS, AS ACQUIRED BY THE ASSESSEE FALL UNDER THE EXPRESSION OF ANY OTHER ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 17 - BUSINESS OR COMMERCIAL RIGHTS OF THE NATURE SIMILAR TO ONE OF THE CATEGORIES I.E., LICENSE AS THE ASSESSEE BEING IN THE NATURE OF INTANGIBLE ASSETS ARE ELIGIBLE FOR THE CLAIM OF DEPRECIATION AT THE RATE PRESCRIBED UNDER S. 32(L)(II). THE AO HIMSELF IN HIS ORDER HAD OBSERVED THAT AS A RESULT OF ENTERING INTO SUCH AN AGREEMENT I.E. PCA, THE ASSESSEE COMPANY HAS BEEN GRANTED LICENSES BY RUSSIAN GOVERNMENT TO EXPLORE AND PRODUCE HYDROCARBONS IN THE AGREEMENT AREA. THERE IS NO DISPUTE TO THE FACT THAT ASSESSEE HAS INCURRED EXPENDITURE OF RS.1,599.09 CRORES FOR OBTAINING THE RIGHT AND LICENSE FOR EXPLORATION OF OIL. IT IS NOT POSSIBLE TO SAY THAT SUCH EXPENDITURE WAS NEITHER CAPITAL NOR REVENUE IN NATURE. IF IT IS HELD TO BE CAPITAL, THEN IT IS OBVIOUS THAT WHAT THE ASSESSEE HAS ACQUIRED WAS A PARTICIPATING RIGHT WHICH IS IN THE NATURE OF COMMERCIAL RIGHT OF CARRYING ON OF BUSINESS OF EXPLORATION AND PRODUCTION OF MINERAL OIL. IT ALSO CANNOT BE SAID THAT THE RIGHT SO ACQUIRED WAS NOT AN ASSET. IF IT IS AN ASSET BEING THE RIGHT THEN IT IS OBVIOUS THAT SAME IS COMMERCIAL RIGHT, THEREFORE, IN THE NATURE OF ASSET IN THE FORM OF LICENSE. THIS RIGHT HAD BEEN GRANTED TO THE ASSESSEE BY WAY OF LICENSE AND THE ASSESSEE BECAME OWNER OF SUCH RIGHT I.E. LICENSE TO HAVE AN ACCESS AND TO CARRY ON OF BUSINESS OF EXPLORATION AND DEVELOPMENT OF MINERAL OIL. ACCORDINGLY, SUCH AN ASSET FALLS WITHIN THE CATEGORY OF ASSET FALLING UNDER S. 32(L)(II), THE ASSESSEE HAD ACQUIRED BUSINESS AND COMMERCIAL RIGHT AND LICENSE BY MAKING PAYMENT OF RS.1,559.10 CRORES, WHICH IS IN THE NATURE OF INTANGIBLE ASSETS ENTITLED TO CLAIM OF DEPRECIATION UNDER S. 32(L)(II), IN VIEW OF THE ABOVE DISCUSSION ASSESSEE'S CLAIM FOR ALLOWING DEDUCTION OF ENTIRE EXPENDITURE OF RS.1,559.10 CRORES IS DECLINED. THE STAND OF CIT IN TREATING THE ALLEGED EXPENDITURE AS DEFERRED REVENUE EXPENDITURE AND DIRECTING THE AO TO ALLOW L/19TH OF THE EXPENDITURE DURING THE YEAR IS ALSO DECLINED, SINCE THERE IS NO CONCEPT OF DEFERRED REVENUE EXPENDITURE UNDER I.T. ACT. IV. TECHNO SHARES & STOCKS LTD. VS. CIT - 327 1TR 323 (SC), WHEREIN THE APEX COURT HAS HELD THAT MEMBERSHIP CARD IS ENTITLED TO DEPRECIATION. HERA IT IS NOTEWORTHY THAT EVENTHOUGH FLOOR OF EXCHANGE WAS OWNED BY THE STOCK EXCHANGE ON THE BASIS OF RIGHT TO USE THE FLOOR OF EXCHANGE, THE DEPRECIATION WAS GRANTED TP THE MEMBER, IT WAS HELD THAT RIGHT OF MEMBERSHIP WAS LICENSE OR AKIN TO IICENSE AND HAD A COMMERCIAL VALUE. THE COURT ALSO CLARIFIED THAT EVEN THOUGH THERE WAS A CLAUSE THAT IN CASE OF DEFAULT, THE RIGHT WOULD VEST WITH THE EXCHANGE, THE SAME WOULD NOT MAKE NO DIFFERENCE, BECAUSE TILL THE TIME THE MEMBER WAS NOT DEFAULTING, HE WAS ENTITLED TO USE THE FLOOR OF EXCHANGE UND JR THE LICENSE. V. ASHOKA INFO (P) LTD. VS. ASSTT. CIT [2009] 123 TTJ (PUNE) 77 THE ASSESSEE-COMPANY HAD CARRIED OUT, UNDER A LICENSE, CONSTRUCTION AND DEVELOPMENT OF A HIGHWAY ON BUILD, OPERATE AND TRANSFER (BOT) BASIS WITH TOLL COLLECTION RIGHTS. THE SAID LICENSE WAS CLAIMED TO BE IN THE NATURE OF 'INTANGIBLE ASSET' AS DEFINED IN SECTION 32{L)(II). HELD THAT THE PERIOD OF LICENSE DOES NOT DETERMINE THE NATURE OF THE ASSETS BUT IF THE NATURE OF THE ASSETS IS INTANGIBLE THEN THE PROVISIONS OF SECTION 32(L)(II) COME INTO PLAY. THE ASSESSEE WAS UNDISPUTEDLY HAVING THE RIGHT TO COLLECT THE TOLL. THAT RIGHT ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 18 - WAS CONNECTED WITH THE INVESTMENT MADE BY THE ASSESSES TOWARDS CONSTRUCTION OF THE ROAD, UNDISPUTEDLY, THE INVESTMENT WAS EARLIER AND THEREAFTER AN INDEPENDENT RIGHT IN THE FORM OF LICENSE OF TOLL COLLECTION WAS GRANTED, IT WAS IMMATERIAL WHETHER THE LICENSE OF TOLL COLLECTION WAS GRANTED. IT WAS IMMATERIAL WHETHER THE LICENSE WAS GRANTED FAR A SPECIFIED TIME OR FOREVER. VI. RELIANCE PORTS & TERMINALS LTD. [IT APPEAL NOS.1743, 1744 & 1745 (MUM.) OF 2007, DTD. 26/11/2007], IT WAS HELD THAT IN A CASE WHERE THE ASSESSEE HAS A RIGHT TO USE THE JETTY AND A CONCESSION WAS AVAILED, THEN SUCH COMMERCIAL RIGHTS IS AN INTANGIBLE ASSET. FOLLOWING THE SAID DECISION, IT WAS TO BE HELD THAT THE ASSESSEE'S RIGHT IN QUESTION WAS AN INTANGIBLE ASSET ON WHICH DEPRECIATION WAS ALLOWABLE UNDER SECTION 32(L)(II). VII. RECENTLY THE BOMBAY HIGH COURT IN THE CASE OF BIRLA GLOBAL ASSETS FINANCE CO. LTD, IN ITA NO, 6835 OF 2010 HELD THAT BUSINESS AND COMMERCIAL BRAND EQUITY IS AN INTANGIBLE ASSETS AND THEREFORE, THE DEPRECIATION CLAIM ON THE SAME IS ALLOWABLE UNDER SECTION 32 OF THE I.T. ACT, 1961. THE CONTENTION OF THE DEPARTMENT WAS THAT INTANGIBLE ASSETS LIKE BUSINESS AND COMMERCIAL BRAND EQUITY ARE GOODWILL ON WHICH DEPRECIATION IS NOT ALLOWABLE. THE BOMBAY HIGH COURT HAS FOLLOWED THE SUPREME COURT'S RULING IN THE CASE OF CIT, KOLKATA VS. SMIFS SECURITIES LTD. (2012) 24 TAXMANN.COM 222 (SC) WHEREIN IT HAS BEEN HELD AS UNDER: I. SECTION 32 OF THE INCOME-TAX ACT, 1961 - DEPRECIATION - ALLOWANCE/RATE OF - ASSESSMENT YEAR 2003-04 - WHETHER 'GOODWILL IS AN ASSET UNDER EXPLANATION 3(B) TO SECTION 32(1) - HELD, YES II. SECTION 32 OF THE INCOME-TAX ACT, 1961 - DEPRECIATION - ALLOWANCE /RATE OF - WHETHER STOCK EXCHANGE MEMBERSHIP CARD IS AN ASSET ELIGIBLE FOR DEPRECIATION UNDER SECTION 32 - HELD, YES IV. THE HON'BLE ITAT, MUMBAI IN THE CASE OF KOTAK FOREX BROKERAGE LTD VS. ACIT, RANGE 3(2), MUMBAI (2009) 33 SOT 237 HAS HELD AS UNDER: 'SECTION 32 OF THE INCOME-TAX ACT, 1961 - DEPRECIATION - ALLOWANCE/RATE OF ASSESSMENT YEAR 2001-02 - WHETHER SECTION 32 ALLOWS DEPRECIATION ON BOTH TANGIBLE AND INTANGIBLE ASSETS - HELD, YES - WHETHER ANY RIGHT WHICH IS OBTAINED BY PERSON/COMPANY FOR CARRYING ON BUSINESS EFFECTIVELY AND PROFITABLY FALLS WITHIN MEANING OF INTANGIBLE ASSET AS PROVIDED IN SECTION 32(L)(II) AND DEPRECIATION IS ALLOWABLE ON SAME - HELD, YES - WHETHER GOODWILL IS A BUNDLE OF RIGHTS WHICH INCLUDE, INTER ALIA, PATENTS, TRADEMARKS, LICENSES, FRANCHISES, ETC., AND THEY ASSUME IMPORTANCE IN COMMERCIAL WORLD AS THEY REPRESENT A PARTICULAR BENEFIT OR ADVANTAGE OR REPUTATION BUILT BY A PERSON/COMPANY/BUSINESS-HOUSE OVER A PERIOD OF TIME AND CUSTOMERS ASSOCIATE THEMSELVES WITH SUCH ASSETS - HELD, YES - WHETHER IN VIEW OF ABOVE POSITION GOODWILL IS ALSO TO BE TREATED AS AN INTANGIBLE ASSET OF SIMILAR NATURE REFERRED TO IN CLAUSE (II) OF SECTION 32(1) AND, CONSEQUENTLY, ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 19 - DEPRECIATION WOULD BE ALLOWABLE ON SAME - HELD, YES' INTERPRETATION OF STATUTES : RULE OF EJUSDEM GENERIS IX. FURTHER, THE HON'BLE MUMBAI ITAT IN THE CASE OF DCIT, 1(1), OSD MUMBAI VS. WEIZMANN FOREX LTD, (2012) 21 TAXMANN.COM 99 HAS HELD AS UNDER: 'SECTION 32 OF THE INCOME TAX ACT, 1961 - DEPRECIATION - ALLOWANCE /RATE OF - ASSESSMENT YEAR 2007-08 - WHETHER IN CASE OF INTANGIBLE ASSET BEING COMMERCIAL/BUSINESS RIGHTS, DIMINUTION IN VALUE OR PHYSICAL WEAR AND TEAR IS NOT AN ESSENTIAL CONDITION FOR ADMISSIBILITY FOR DEPRECIATION, IF ASSET IS USED AS A BUSINESS TOOL FOR EARNING INCOME - HELD, YES - ASSESSEE PAID CERTAIN AMOUNT TO A COMPANY 'AFL' FOR ACQUIRING LICENCE OF DOING BUSINESS OF MONEY TRANSFER SERVICES AS REPRESENTATIVE OF WESTERN UNION NETWORK - BY VIRTUE OF AGREEMENT OF TRANSFER, ASSESSEE ACQUIRED, LICENCES, FRANCHISES, DISTRIBUTION NETWORK, CUSTOMER LISTS, MARKETING STRATEGIES AND SOFTWARE, ETC., RELATING TO WESTERN UNION BUSINESS - WHETHER SINCE ASSESSEE PAID CONSIDERATION FOR PURPOSE OF ENHANCING ITS NETWORK IN FIELD OF MONEY TRANSFER BUSINESS BY ACQUIRING RIGHTS OVER INFRASTRUCTURE AND OTHER ADVANTAGES ATTACHED TO MARKETING NETWORK, SAME FELL UNDER CATEGORY OF INTANGIBLE ASSET' AS CONTEMPLATED UNDER SECTION 32(L)(II) AND, THUS, ASSESSEE WAS ENTITLED TO CLAIM DEPRECIATION IN RESPECT OF SAID EXPENDITURE - HELD, YES [IN FAVOUR OF ASSESSEE]' THUS, THE NARROW VIEW CANNOT BE TAKEN IN RESPECT OF 'COMMERCIAL RIGHT OF SIMILAR NATURE'. IN FACT, THE ASSESSEE HAS OBTAINED RIGHTS OF LICENSE TO OPERATE CONTAINER TERMINAL SERVICES IN THE PORT AREA AND THIS LICENSE IS VITAL FOR CARRYING OUT ITS BUSINESS AND WITHOUT THIS LICENSE THE ASSESSEE IS NOT IN A POSITION TO RUN AND OPERATE THEIR BUSINESS, COMMERCIAL ACTIVITIES.(ANNEXURE-L)' IT IS MOST RESPECTFULLY SUBMITTED THAT THE ID. AO DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS CALLED FOR THE JUSTIFICATION FROM THE ASSESSEE REGARDING ALLOWABILITY OF DEPRECIATION OF RS,24,01,74,149/- ON 'INFRASTRUCTURE USAGE FACILITY' @ 25 % VIDE HIS SCN DATED 01/02/2013, WHICH WERE FURNISHED BY THE ASSESSEE VIDE LETTER DATED 22/02/2013 AND ONCE THE ID. AO WAS SATISFIED WITH THE CLAIM OF THE ASSESSEE, THE ID, AO DID NOT DISALLOW THE SAME. THE HON'BLE GUJARAT HIGH COURT ALONGWITH VARIOUS OTHER HIGH COURTS, TIME AND AGAIN, IN VARIOUS CASES, HAS HELD THAT ONCE THE ASSESSING OFFICER EXAMINES A CERTAIN CLAIM OF THE ASSESSEE IN THE ASSESSMENT PROCEEDINGS, RAISES QUERIES, RECEIVES REPLIES, BUT THEREAFTER MAKES NO ADDITION OR DISALLOWANCES, WITHOUT GIVING REASONS, IT WOULD NOT BE PERMISSIBLE TO REVISE / REOPEN THE ASSESSMENT, MERELY ON THE GROUND THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND / FRAMED HIS OPINION REGARDING THE EXAMINATION / VERIFICATION CARRIED OUT BY HIM IN THE ASSESSMENT PROCEEDINGS. FURTHER THE ASSESSEE IN ITS SUBMISSION HAS RELIED UPON THE FOLLOWING DECISIONS: I) CIT V. NIRMA CHEMICALS WORKS (P.) LTD. [2009] 309 ITR 67 /182 TAXMAN 183; II) GUJARAT POWER CORPORATION LTD. VS. ACIT 350 ITR 266 @ PARAS 37, 42-43; ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 20 - III) GANESH HOUSING CORPORATION LTD. VS. DCIT 214 TAXMANN 18; IV) RAYON SILK MILLS V. CIT [1996] 221 ITR 155; V) CIT V. EICHER LTD. [2007] 294 ITR 310 / 163 TAXMAN 259; VI) (1) CIT V. KELVINATOR OF INDIA LTD. [2010] 320 ITR 561 / 187 TAXMAN 312 {SC) & (2) EICHER LTD., ( SUPRA); VII) HARI IRON TRADING CO. V. CIT [2003] 263 ITR 437 /131 TAXMAN 535; VIII) ASIAN PAINTS LTD. V. DY. CIT [2009] 308 ITR 195; IX) CITV. GABRIEL INDIA LTD. [1993] 203 ITR 108; X) CIT VS. VIKAS POLYMERS' CASE 341 ITR 537; XI) CIT VS. HONDA SIEL POWER PRODUCTS LTD. IN 333 ITR 547 @ 557-558; XII) JET ELECTRONICS VS. ACIT 116 TTJ 225 @ 235, 236; XIII) CIT VS. SUNBEAM AUTO LTD. REPORTED IN 332 ITR 167, ADMITTEDLY IN THE PRESENT CASE BEFORE YOUR HONOUR, THE ID. AO DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS CALLED FOR THE JUSTIFICATION FROM THE ASSESSEE REGARDING ALLOWABILITY OF DEPRECIATION OF RS.24,01,74,149/- ON 'INFRASTRUCTURE USAGE FACILITY' @ 25 % VIDE HIS SCN DATED 01/02/2013, WHICH WERE FURNISHED BY THE ASSESSEE VIDE LETTER DATED 22/02/2013. VIDE SUCH LETTER DATED 22/02/2013, THE ASSESSEE I ALSO SUBMITTED TO THE ID. AO THAT FROM THE INCEPTION OF THE ASSESSEE COMPANY I.E A.Y.2004-05 THE DEPRECIATION HAD BEEN CLAIMED ON THE VERY SAME INFRASTRUCTURE FACILITY AND THE SAME HAD ALWAYS BEEN ALLOWED TO THE ASSESSEE. IT WAS ALSO SUBMITTED THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS FOR A.Y.2004-05, THE THEN DCIT, CIRCLE - 1, AHMEDABAD ON THE BASIS OF MATERIAL SUBMITTED ALONG WITH ALL THE EVIDENCES INCLUDING THE COPY OF THE AGREEMENT DATED 05/06/2003 WITH DETAILED SUBMISSION AND THE CASE LAWS ON THE SUBJECT CITED BEFORE THE THEN AO AND ON THE BASIS OF MATERIALS ON RECORD, THE THEN AO HAS COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT FOR THE AY 2004-05 AND ONWARDS AND ALLOWED THE CLAIM OF DEPRECIATION ON INFRASTRUCTURE USAGE FACILITY. THE ID. AO AFTER CONSIDERING THE FACTUAL AND LEGAL SUBMISSION AS FURNISHED BY THE ASSESSEE, HE DID NOT MAKE ANY DISALLOWANCE. HAVING REGARD TO THE SAID FACTS OF THE CASE, THE ENTIRE ISSUE IS COVERED BY THE VARIOUS DECISIONS OF THE GUJARAT HIGH COURT AND OTHER HIGH COURTS WHICH HOLDS THAT ONCE THE ASSESSING OFFICER EXAMINES A CERTAIN CLAIM OF THE ASSESSEE IN THE ASSESSMENT PROCEEDINGS, RAISES QUERIES, RECEIVES REPLIES, BUT THEREAFTER MAKES NO ADDITION OR DISALLOWANCES, WITHOUT GIVING REASONS, IT WOULD NOT BE PERMISSIBLE TO ASSUME JURISDICTION U/S 263 OF THE ACT TO REVISE THE ASSESSMENT, MERELY ON THE GROUND THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND / FRAMED HIS OPINION REGARDING THE EXAMINATION / VERIFICATION CARRIED OUT BY HIM IN THE ASSESSMENT PROCEEDINGS. THEREFORE, IN VIEW OF BINDING DECISIONS OF THE GUJARAT HIGH COURT, IT IS REQUESTED YOUR HONOUR TO DROP THE REVISION PROCEEDINGS. IT IS FURTHER SUBMITTED THAT SINCE A.Y.2004-05 TILL A.Y.2011-12, THE ASSESSING OFFICER IN THE RESPECTIVE ASSESSMENT YEAR HAS BEEN ALLOWING DEPRECIATION ON 'INFRASTRUCTURE USAGE FACILITY' CONSCIOUSLY. ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 21 - AT THIS JUNCTURE, THE ASSESSEE WOULD LIKE TO SUBMIT THAT THE NOTICE U/S 148 OF THE ACT WAS ISSUED TO REOPEN THE ASSESSMENT FOR A.Y.2007-08 ON THE GROUND THAT THE RIGHT TO USE THE INFRASTRUCTURE FACILITY WOULD NOT BE THE SAME AS 'INTANGIBLE ASSETS' AS ENUMERATED IN S.32 OF THE ACT AND HENCE NOT ELIGIBLE FOR DEPRECIATION. THE SAID NOTICE WAS CHALLENGED IN WRIT PETITION BEFORE THE GUJARAT HIGH COURT ON ONE OF THE AMONGST THE GROUNDS THAT ON PERUSAL OF THE ASSESSMENT ORDER, IT COULD BE SEEN THAT THE THEN ID. AO HAD ALLOWED DEPRECIATION ON INFRASTRUCTURE USAGE FACILITY AFTER CONSIDERING ALL THE MATERIALS ON RECORD AND THEREFORE NOW IT WAS NOT OPEN FOR THE AO TO REOPEN THE ASSESSMENT MERELY ON THE BASIS OF CHANGE OF OPINION AND FOR THE PURPOSE OF RE-APPRECIATING THE MATERIALS ON RECORD, WHICH WAS IMPRESSIBLE IN THE EYES OF LAW. THE HON'BLE GUJARAT HIGH COURT AFTER CONSIDERING THE FACTS OF THE CASE AND LAWS OF THE LAND HELD THE NOTICE ISSUED U/S 148 AS INVALID, ERRONEOUS AND BAD IN THE EYES OF LAW. HAVING REFERRED TO THE ORDER OF THE HON'BLE GUJARAT HIGH COURT, THE ASSESSEE MOST RESPECTFULLY SUBMITTED THAT EVEN IN A.Y.2007-08, IT WAS FOUND THAT THE THEN ID. AO HAD FORMED AN OPINION DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS WHILE ALLOWING DEPRECIATION ON INFRASTRUCTURE USAGE FACILITY, AND THEREFORE, NOTICE ISSUED U/S 148 OF THE ACT TO RE-APPRECIATE OR TO CHANGE AN OPINION WAS FOUND TO BE INVALID AND BAD IN THE EYES OF LAW BY THE HON'BLE GUJARAT HIGH COURT. THE ASSESSEE MOST RESPECTFULLY SUBMITS THAT WHEN LEARNED ASSESSING OFFICER HAS RAISED THESE ISSUES, WHICH WERE DULY CLARIFIED AND EXPLAINED BY AN ASSESSEE AND WHEN THE ASSESSING OFFICER ADOPTS ONE OF THE POSSIBLE VIEWS, WHICH IS RATIONAL AND LOGICAL, THE SAME CANNOT BE REVISED UNDER SECTION 263 OF THE ACT. IT IS FURTHER SUBMITTED THAT THE INFRASTRUCTURE USAGE FACILITY IS A KIND OF LICENSE GIVEN BY THE MUNDRA PORT TO THE ASSESSEE COMPANY TO OPERATE ITS CONTAINER OPERATIONS IN MUNDRA PORT AREA. THE EXCLUSIVE RIGHT HAS BEEN GIVEN TO THE ASSESSEE COMPANY IS NOTHING BUT THE EASEMENT RIGHT WHEREBY THE LICENSE IS GIVEN TO THE LICENSEE TO ENTER INTO ANOTHER PERSON'S LAND WITH USAGE OF INFRASTRUCTURE FACILITY TO CARRY OUT BUSINESS ACTIVITIES. SUCH RIGHTS ARE COMMERCIAL RIGHTS, WHICH IS INTANGIBLE ASSETS AS PER S.32(L)(II) OF THE ACT ON WHICH THE ASSESSEE IS ELIGIBLE TO CLAIM DEPRECIATION. RELIANCE IS FURTHER PLACED ON THE DELHI HIGH COURT DECISION IN THE CASE OF CIT VS. HINDUSTAN COCO COLA BEVERAGES PVT. LTD. 331ITR 192. WHEN THE ASSESSING OFFICER IS ALLOWING SUCH DEPRECIATION CONSCIOUSLY SINCE A.Y.2004-05 TILL A.Y.2011-12, AND WHEN THE VIEW ADOPTED BY THE AO IS ONE OF THE PLAUSIBLE VIEWS , IT CANNOT BE SAID THAT THE VIEW TAKEN BY THE ID. AO IS ERRONEOUS. IT IS FURTHER SUBMITTED THAT HE RETURN OF INCOME WAS FILED ON 17/09/2009 DECLARING TOTAL LOSS AT RS,14,82,20,958/- AND THE ASSESSMENT WAS ALSO FINALIZED AT LOSS. IT IS ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 22 - THEREFORE SUBMITTED THAT IN ANY CASE THERE IS NO LOSS OF REVENUE TO THE DEPARTMENT AND THEREFORE THE ASSESSMENT ORDER PASSED IS NOT THE PREJUDICIAL TO THE INTEREST OF REVENUE. A BARE READING OF SEC.263(1) MAKES IT CLEAR THAT THE PREREQUISITE TO EXERCISE OF JURISDICTION OF THE COMMISSIONER UNDER IT IS THAT THE ORDER OF THE AO MUST BE FOUND TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE COMMISSIONER HAS TO BE SATISFIED WITH TWO CONDITIONS VIZ. (I) THAT THE ORDER OF THE AO SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. IF ONE OF THEM IS ABSENT - THE ORDER OF THE AO IS ERRONEOUS/ BUT IS PREJUDICIAL TO THE REVENUE OR IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO REVENUE - RECOURSE CANNOT BE HAD TO SEC.263 OF THE ACT. IN THIS CONNECTION THE OBSERVATIONS OF THE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. V/S.CIT (243 ITR 83) ARE EXTREMELY RELEVANT. IN ANY CASE, IT IS MOST RESPECTFULLY SUBMITTED THAT ON MERITS ALSO THE OPENING WDV CANNOT BE DISTURBED TO DISALLOW THE IMPUGNED DEPRECIATION. IT IS FURTHER SUBMITTED THAT IT IS ADMITTED FACTS THAT THE ASSESSEE HAD ACQUIRED SUCH ASSETS IN THE A.Y.2004- 05 AND ACCORDINGLY, THE ASSESSEE HAD TRANSFERRED SUCH ASSET INTO THE BLOCK OF INTANGIBLE ASSETS AND CLAIMED DEPRECIATION THEREON FOR THE FIRST TIME IN A.Y.2004- 05. IT IS ALSO ADMITTED FACTS THAT THE ID. AO IN EARLIER ASSESSMENT YEARS HAS ACCEPTED THE CLAIM OF DEPRECIATION MADE BY THE ASSESSEE. THE ASSESSEE SUBMITS THAT NOW THE LAW IS SETTLED THAT THE DEPRECIATION CAN BE CLAIMED ON THE BLOCK OF ASSET AND NOT ON INDIVIDUAL OR SEPARATE ASSETS. UNDER THE CIRCUMSTANCES WHEN THE ID. AO HAS ACCEPTED ALL THE WHILE CLOSING WDV AS ON 31/03/2004, THE SAME CANNOT BE IGNORED TO DISALLOW THE DEPRECIATION THEREON MERELY ON THE GROUND THAT NOW IT IS REALIZED THAT THE YEAR NO. 1 IN WHICH THE ASSET WAS ACQUIRED, NOW IT IS NOT AN ELIGIBLE ASSET TO CLAIM DEPRECIATION. THE ASSESSEE STRONGLY SUBMITS THAT ONCE THE ASSET BECOMES PART OF THE BLOCK OF ASSETS, IT LOSES ITS CHARACTER AND THEREFORE UNDER NO CIRCUMSTANCES, IN THE SUBSEQUENT YEAR, THE SAME BLOCK OF ASSETS CAN BE DISTURBED TO DISALLOW THE DEPRECATION THEREON. RELIANCE IS PLACED ON DELHI HIGH COURT DECISION IN THE CASE OF CIT VS. BHARAT ALUMINIUM CO. LTD. 187 TAXMAN 111 (DEL). AFTER GOING THROUGH THESE DECISIONS OF THE VARIOUS BENCHES OF THE TRIBUNAL AND THE SCHEMATIC INTENTION BEHIND THE PROVISIONS RELATING TO DEPRECIATION CONTAINED IN THE AFORESAID PROVISIONS, WE ARE INCLINED TO AFFIRM THE VIEW TAKEN BY THE TRIBUNAL IN THE INSTANT CASE. WHILE DOING SO, WE HAVE IN MIND THE RATIONALE AND PURPOSE FOR WHICH THE CONCEPT OF BLOCK ASSET WAS INTRODUCED BY THE AMENDMENT IN THE PROVISIONS OF THE ACT, AS REFLECTED IN THE CIRCULAR DATED 23-9-1988 OF THE CBDT, INTENTION BEHIND THESE PROVISIONS IS APPARENT. ONCE THE VARIOUS ASSETS ARE CLUBBED TOGETHER AND BECOME BLOCK ASSET WITHIN THE MEANING OF SECTION 2(11) OF THE ACT, FOR THE PURPOSE OF DEPRECIATION, IT IS ONE ASSET. EVERY TIME, A NEW ASSET IS ACQUIRED, IT IS TO BE THROWN INTO THE COMMON HOTCHPOTCH, I.E., BLOCK ASSET ON MEETING THE REQUIREMENT OF DEPRECIATION ALLOWABLE AT THE SAME RATE. THE VALUE OF THE BLOCK ASSET ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 23 - INCREASES AND THE DEPRECIATION IS TO BE GIVEN ON THE AFORESAID VALUE, WHICH IS TO BE TREATED AS WRITTEN DOWN VALUE. INDIVIDUAL ASSETS LOSE THEIR IDENTITY FROM THAT VERY MOMENT IT BECOMES INSEPARABLE PART OF BLOCK ASSET INSOFAR AS CALCULATION OF DEPRECIATION IS CONCERNED. FUSION OF VARIOUS ASSETS INTO THE BLOCK ASSET GETS DISTURBED ONLY WHEN EVENTUALITY CONTAINED IN CLAUSE (III) OF SECTION 32 TAKES PLACE, VIZ., WHEN A PARTICULAR ASSET IS SOLD, DISCARDED OR DESTROYED IN THE PREVIOUS YEAR (OTHER THAN THE PREVIOUS YEAR IN WHICH FIRST BROUGHT IN USE). EVEN IN THAT EVENT, THE AMOUNT BY WHICH THE MONEYS PAYABLE IN RESPECT OF THAT PARTICULAR BUILDING, MACHINERY, ETC., TOGETHER WITH THE AMOUNT OF SCRAP VALUE IS TO BE DEDUCTED FROM TOTAL WRITTEN DOWN VALUE OF THE 'BLOCK ASSET'. ONCE WE UNDERSTAND AND APPRECIATE THIS SCHEME CONTAINED IN THE AFORESAID PROVISIONS, IT IS NOT POSSIBLE TO ACCEPT THE CONTENTION OF THE LEARNED COUNSEL FOR THE REVENUE THAT UNLESS A PARTICULAR ASSET IS USED FOR THE PURPOSE OF BUSINESS OR PROVISION, DEPRECIATION IS NOT ALLOWED. NO DOUBT, AS PER SECTION 32(1) OF THE ACT, IN ORDER TO BE ENTITLED TO CLAIM DEPRECIATION, THE ASSET IS TO BE OWNED BY THE ASSESSEE AND IT IS ALSO TO BE USED FOR THE PURPOSE OF BUSINESS OR PROFESSION. HOWEVER, THE EXPRESSION 'USED FOR THE PURPOSE OF BUSINESS', WHEN APPLIED TO BLOCK ASSET, WOULD MEAN USE OF BLOCK ASSET AND NOT ANY SPECIFIC BUILDING, MACHINERY, PLANT OR FURNITURE IN THE SAID BLOCK ASSET AS INDIVIDUAL ASSETS HAVE LOST THEIR IDENTITY AFTER BECOMING INSEPARABLE PART OF THE BLOCK ASSET. THAT IS THE ONLY MANNER IN WHICH VARIOUS PROVISIONS CAN BE HARMONIZED. ONCE WE LOOK INTO THE PROVISIONS OF THIS ANGLE, ANSWER TO THE ARGUMENT OF THE LEARNED COUNSEL FOR THE REVENUE PREDICATED ON SECOND PROVISO TO SECTION 32 SHALL ALSO BE PROVIDED. IT WAS HER SUBMISSION THAT IF A PARTICULAR ASSET IS ACQUIRED AFTER 30TH SEPTEMBER DURING THE PREVIOUS YEAR AND IS PUT TO USE FOR A PERIOD OF LESS THAN 180 DAYS IN THE PREVIOUS YEAR, THE DEDUCTION UNDER SUB-SECTION (1) OF SECTION 32 IS RESTRICTED TO 50 PER CENT OF AMOUNT ADMISSIBLE. ON THAT BASIS, SHE HAD ARGUED THAT REQUIREMENT OF USER OF INDIVIDUAL ASSET REMAINS INTACT. ANSWER TO THIS ARGUMENT IS THAT THIS WOULD BE THE POSITION IN THE FIRST YEAR WHEN THE PARTICULAR ASSET IS ACQUIRED. WITH THE USER, IT WOULD MEET THE REQUIREMENT OF SECTION 32, IN THE SUBSEQUENT YEARS, IT IS THE USE OF BLOCK ASSET, WHICH BECOMES THE YARDSTICK AND NOT THE INDIVIDUAL ASSET ALREADY ACQUIRED IN THE EARLIER YEARS, OTHER THAN THE PREVIOUS YEAR IN WHICH IT IS FIRST BROUGHT INTO USE. IN THE INSTANT CASE, THE PSL EQUIPMENT WAS PURCHASED AND PUT TO USE BY THE ASSESSEE IN PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1990-91 AND THE SAME HAD ENTERED INTO THE BLOCK ASSET IN THAT YEAR. IT, THUS, LOST INDIVIDUAL IDENTITY FOR THE ALLOWANCE OF DEPRECIATION IN THAT YEAR. SINCE IT IS NOT IN DISPUTE FOR THE YEAR IN QUESTION AND BLOCK OF ASSETS WAS USED, THE ASSESSEE WAS RIGHTLY GIVEN THE BENEFIT OF DEPRECIATION IN THE YEARS IN QUESTION. THE QUESTION STANDS ANSWERED AGAINST THE REVENUE. ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 24 - 10. THE EXPLANATION GIVEN BY THE ASSESSEE DID NOT MEET ANY OF THE DEFECTS POINTED OUT WITH REGARD TO THE WRONG DEPRECIATION CLAIMED ANY ALLOWED BY THE A.O. AT ANY RATE, THE RECORDS DO NOT SHOW THAT THE A.O. HAS LOOKED INTO THESE ASPECTS ON ARRIVING JUDICIOUSLY AT THE DECISION DURING THE COURSE OF ASSESSMENT PROCEEDINGS. DEPRECIATION IS ALLOWED TO AN ASSESSEE MAINLY AS PER PROVISIONS OF SECTION 32 OF THE INCOME TAX ACT, THE RELEVANT PORTION READS AS UNDER: 32 (1) IN RESPECT OF DEPRECIATION OF------------- (II) KNOW HOW, PATENTS, COPY RIGHTS, TRADE MARKS, LICENSES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE----------- OWNED, WHOLLY OR PARTLY, BY THE ASSESSEE AND USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION ---------. FROM THE ABOVE IT CAN BE SEEN THAT THE DEPRECIATION IS AVAILABLE TO INTANGIBLE ASSETS BUT OF THE TYPE SPECIFIED IN SECTION 32(1)(II) AND SUCH ASSETS SHOULD BE OWNED, WHOLLY OR PARTLY BY THE ASSESSEE AND IT SHOULD BE USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION. THE ASSETS IN QUESTION HERE ON WHICH DEPRECIATION IS CLAIMED IS 'INFRASTRUCTURE USAGE FACILITY' ON WHICH THE ASSESSEE HAS CLAIMED DEPRECIATION AT 25%. THE INFRASTRUCTURE BELONGS TO MUNDRA PORT AND SPECIAL ECONOMIC ZONE WHO HAS SEPARATELY CLAIMED DEPRECIATION ON THE INFRASTRUCTURE. THE INFRASTRUCTURE INCLUDES MARINE STRUCTURES, DREDGING - CT, PLANT AND MACHINERY ETC. IT IS THE ASSESSEE'S CLAIM THAT THE DEPRECIATION IS NOT ON THE INFRASTRUCTURE BUT ON THE RIGHT TO USE THE INFRASTRUCTURE, WHICH ACCORDING TO IT IS AN INTANGIBLE ASSET. FROM THE WORDINGS OF SECTION 32 WHICH GUIDES THE ALLOWANCE OF DEPRECIATION, IT IS CLEAR THAT THOUGH INTANGIBLES ARE ENTITLED TO DEPRECIATION, IT IS ONLY SPECIFIC INTANGIBLES LIKE KNOW-HOW PATENTS, LICENSES ETC. WHICH ARE ENTITLED TO DEPRECIATION AND THEY HAVE TO BE OWNED BY THE ASSESSEE AND ALSO USED BY IT. THE ASSESSEE IS ON RECORD THAT IT DOES NOT OWN THE INFRASTRUCTURE. THE QUESTION THEN IS WHETHER THE RIGHT TO USE THE INFRASTRUCTURE CONSTITUTES INTANGIBLE ASSETS LIKE KNOW-HOW, PATENTS, LICENSES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE. IT IS THE ASSESSEE'S CLAIM THAT INFRASTRUCTURE USAGE FACILITY CONSTITUTES A LICENSE WHICH IS OWNED BY IT AND ALSO USED BY IT AND HENCE IT SATISFIES ALL THE CONDITIONS FOR GRANT OF DEPRECIATION. HOWEVER, IT IS FURTHER CONTENDED VIDE ITS LETTER DATED 22.02.2013 ADDRESSED TO THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT AS UNDER: ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 25 - AT THE OUTSET WE SUBMIT THAT THE INFRASTRUCTURE USAGE FACILITY IS SORT OF LICENSE GIVEN BY MUNDRA PORT TO THE ASSESSEE COMPANY TO OPERATE ITS CONTAINER OPERATION IN MUNDRA PORT AREA. THE EXCLUSIVE RIGHT HAS BEEN GIVEN TO THE ASSESSEE COMPANY, WHICH IS A SORT OF EASEMENT RIGHT. THE EASEMENT RIGHT IS NOTHING BUT LICENSE GIVEN TO THE LICENSEE TO ENTER ON ANOTHER PERSON'S LAND WITH USAGE OF INFRASTRUCTURE FACILITY TO CARRY OUT BUSINESS ACTIVITIES. THE ASSESSEE COMPANY HAS BEEN GIVEN THE RIGHT TO CARRY OUT ITS TERMINAL OPERATION WORK. THE VIEW EXPRESSED IS THAT SUCH RIGHT IS NOT SIMILAR TO KNOW HOW............FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE. IT IS ALSO OBSERVED THAT LEASE OF PREMISES ARE NOT COVERED. IT IS NOT DENIED THAT THE ASSESSEE COMPANY IS NOT THE OWNER OF INFRASTRUCTURE FACILITY. IN FACT IT IS NOT THE LESSEE ALSO. IT IS THE LICENSEE. IT HAS GOT THE RIGHT TO USE AND MAINTENANCE SERVICE OF CERTAIN INFRASTRUCTURE FACILITY AS SET OUT IN THE INFRASTRUCTURE USAGE AGREEMENT......., (EMPHASIS ADDED) FROM THE ABOVE WE CAN SEE THAT THE ASSESSEE HAS INITIALLY MADE OUT A CASE THAT THE ASSET IN QUESTION IS A SORT OF LICENSE. IT CAN BE SEEN FROM THE WORDINGS ITSELF THAT THE ASSESSEE IS NOT SURE WHETHER IT IS A LICENSE. THEREAFTER IT MAKES A CLAIM THAT THE ASSET IN QUESTION IS AN EASEMENT RIGHT - IN THE WORDS OF THE ASSESSEE, AGAIN, 'A SORT OF EASEMENT RIGHT,' APPARENTLY THIS IS BECAUSE EVEN AS PER THE ASSESSEE'S SUBMISSIONS 'INFRASTRUCTURE USAGE FACILITY' CANNOT PARTAKE THE CHARACTER OF A LICENSE BECAUSE A LICENSE DOES NOT CREATE AN INTEREST IN PROPERTY [MRS. KARUNA MANOHARLAL OHRI V. VIPINBHAI U. SANGHANI, AIR 1993 BOM77] AND HENCE CLAIMING SUCH FACILITY TO BE A LICENSE WOULD HAVE RESULTED IN THE ASSESSEE BEING DENIED OF DEPRECIATION AS NOT HAVING AN INTEREST, IT WOULD ALSO NOT BE OWNER OF SUCH FACILITY AS REQUIRED U/S. 32. THEN COMES THE QUESTION AS TO WHETHER IT IS AN EASEMENT RIGHT AS IS NOW BEING CLAIMED. EASEMENT RIGHTS ARE RELATED TO LAND AND IT IS NOT TRANSFERABLE PER SE AND HENCE WOULD LACK THE ELEMENT OF OWNERSHIP. IT CAN BE SEEN THAT EASEMENT IN ANY CASE IS NOT COVERED AMONGST THE INTANGIBLE ASSETS MENTIONED IN SECTION 32(1)(II) NOT EVEN IN LATTER PART OF 32(1)(II) - 'OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE.' EASEMENT IS NOT FITTING INTO THIS COMPONENT ALSO SINCE IT WOULD HAVE TO BE OF THE SAME TYPE AS THE EARLIER INTANGIBLE, IF IT IS TO QUALIFY AS PER SECTION 32. THUS, IT CAN BE SEEN THAT THE ASSESSEE'S CLAIM FOR DEPRECIATION IS RELATED TO AN EXPENDITURE WHICH DID NOT LEAD TO THE OWNERSHIP OF ANY ASSET OR LED TO THE OWNERSHIP OF AN ASSET WHICH DID NOT QUALIFY FOR DEPRECIATION AS PER THE PROVISIONS OF SECTION 32 OF THE INCOME TAX ACT. 11. AND IT WAS ALSO OBSERVED BY THE LD. PR.CIT THAT THE CLAIM OF DEPRECIATION ON INFRASTRUCTURE USAGE FACILITY HAS BEEN MADE FROM THE VERY FIRST ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 26 - ASSESSMENT YEAR 2004-05 OF THE ASSESSEE EXISTENCE AND HENCE SHOULD NOT BE DISTRIBUTED NOW. IT WAS SEEN THAT FOR ASSESSMENT YEAR 2013-14 THE CLAIM HAS NOT BEEN ALLOWED IN THE ORDER PASSED REGULARLY. 12. ON THE OTHER HAND ASSESSEE HIGHLIGHTED SEVERAL JUDGMENTS CIT VS. NIRMA CHEMICALS WORKS PVT. LTD. [2009] 309 ITR 67/182 TAXMANN 183; GUJARAT POWER CORPORATION LTD. VS. ACIT 350 ITR 266; AND GANESH HOUSING CORPORATION LTD. VS. DCIT 214 TAXMANN 18 ETC. 13. FINALLY LD. PR. CIT HAS HELD THAT ORDER PASSED BY THE AO WITHOUT MAKING ENQUIRIES IS HELD TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE AND ORDER PASSED BY THE AO UNDER SECTION 143(3) R.W.S. 144C OF THE ACT DATED 23.05.2013 WAS SET ASIDE AND AO WAS DIRECTED TO REFRAME THE ASSESSMENT AFTER CONDUCTING NECESSARY INQUIRY AND AFTER GRANTING SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSEE. 14. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGNED ORDER AND WRITTEN SUBMISSION FILED BY THE ASSESSEE UNDER SECTION 263 OF THE ITA ACT, CIT/PR. CIT HAS POWER TO CALL FOR AND EXAMINE THE RECORDS OF ANY PROCEEDING AND HE DOES NOT NEED TO SHOW ANY REASON. IT IS A PART OF HIS ADMINISTRATIVE CONTROL AND EXAMINE THEM. 15. THE SECOND CONDITION IS THAT HE MAY CONSIDER THAT ANY ORDER PASSED UNDER THE ACT BY THE AO IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THIS CONSIDERATION, HAVING REGARD TO THE LANGUAGE OF ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 27 - SECTION 263, APPARENTLY IS A CONSIDERATION WHICH HE EXERCISES BY CALLING FOR AND EXAMINING THE RECORDS AS INDICATED ABOVE. DURING THIS PARTICULAR STAGE OF CONSIDERATION, THERE IS NO QUESTION OF THE ASSESSEE APPEARING OR MAKING ANY SUBMISSION. IF AFTER CALLING FOR AND EXAMINING THE RECORDS THE PR./COMMISSIONER CONSIDERS THAT THE ORDER OF THE AO IS ERRONEOUS, IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 16. THE THIRD CONDITION OF SECTION 263 COMES INTO OPERATION, AFTER THESE TWO STAGES, WHICH ARE PURELY ADMINISTRATIVE. THE PROCEEDING IN THE NEXT STAGE, WHICH IS THE THIRD STAGE, ACQUIRES QUASI-JUDICIAL CHARACTER. THE THIRD STAGE REQUIRES HIM TO DO WHAT IS STATED IN THE STATUE: HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. THIS REQUIRES THAT PR/COMMISSIONER MUST GIVE THE ASSESSEE AN OPPORTUNITY OF BEING HEARD. IT ALSO CONFERS ON THE COMMISSIONER THE POWER TO CAUSE OR MAKE SUCH INQUIRY AS HE DEEMS NECESSARY. 17. THE FOURTH CONDITION UNDER SECTION 263 IS THE POWER OF THE PR./COMMISSIONER UNDER THAT SECTION. THE PR./COMMISSIONER CAN ENHANCE OR MODIFY THE ASSESSMENT. HE HAS ALSO THE POWER TO CANCEL THE ASSESSMENT AND DIRECT FRESH ASSESSMENT. ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 28 - 18. IN CASE OF CIT VS. NIRMA CHEMICALS WORKS (P.) LTD. [2009] 309 ITR 67/182 TAXMANN 183, THE GUJARAT HIGH COURT, IN CONTEXT OF THE COMMISSIONERS POWER TO REVISE THE DECISION OF THE ASSESSING OFFICER UNDER SECTION 263 OF THE ACT, HAS REJECTED THE CONTENTION OF THE REVENUE THAT SIMPLY BECAUSE THE ASSESSMENT ORDER WAS SILENT ON A PARTICULAR CLAIM MADE BY THE ASSESSEE, IT WOULD MEAN THAT SUCH ORDER DOES NOT REFLECT ANY APPLICATION OF MIND. IT WAS OBSERVED THAT AN ASSESSMENT ORDER CANNOT INCORPORATE REASONS FOR MAKING OR GRANTING CLAIM OF DEDUCTION. RELEVANT EXTRACT OF WHICH IS REPRODUCED HEREUNDER: THE CONTENTION ON BEHALF OF THE REVENUE THAT THE ASSESSMENT ORDER DOES NOT REFLECT ANY APPLICATION OF MIND AS TO ELIGIBILITY OR OTHERWISE UNDER SECTION 80-I OF THE ACT REQUIRES TO BE NOTED TO BE REJECTED. AN ASSESSMENT ORDER CANNOT INCORPORATE REASONS FOR MAKING/GRANTING A CLAIM OF DEDUCTION. IF IT DOES SO, AN ASSESSMENT ORDER WOULD CEASE TO BE AN ORDER AND BECOME AN EPIC TOME. THE REASONS ARE NOT FAR TO SEEK. FIRSTLY, IT WOULD CAST AN ALMOST IMPOSSIBLE BURDEN ON THE ASSESSING OFFICER, CONSIDERING THE WORKLOAD THAT THE CARRIES AND THE PERIOD OF LIMITATION WITHIN WHICH AN ORDER IS REQUIRED TO BE MADE; AND, SECONDLY, THE ORDER IS AN APPEALABLE ORDER. AN APPEAL LIES, WOULD BE FILED, ONLY AGAINST DISALLOWANCE WHICH AN ASSESSEE FEELS AGGRIEVED WITH, 19. IT IS SUBMITTED BY THE LD.DR, THAT IN THE CASE OF CROMPTON GREAVES LTD. ITA NO.1994/MUM/2013 VIDE ITS ORDER DATED 01.02.2016 WHEREBY IT HELD AS UNDER: THE HONBLE SUPREME COURT IN THE CASE OF SUNDARAM PILLAI VS. PATTABIRAM REPORTED IN (1985)1 SCC 591, WHEREBY FAZAL ALI, J CULLED OUT FROM EARLIER CASES THE FOLLOWING AS OBJECTS OF AN EXPLANATION TO A STATUTORY PROVISION (EMPHASIS ADDED):- (A) TO EXPLAIN THE MEANING AND INTENDMENT OF THE ACT ITSELF, (B) WHERE THERE IS ANY OBSCURITY OR VAGUENESS IN THE MAIN ENACTMENT TO CLARIFY THE SAME SO AS TO MAKE IT CONSISTENT WITH THE DOMINANT OBJECT WHICH IT SEEMS TO SUBSERVE, (C) TO PROVIDE AN ADDITIONAL SUPPORT TO DOMINANT OBJECT OF THE ACT IN ORDER TO MAKE IT MEANINGFUL AND PURPOSEFUL, (D) AND EXPLANATION CANNOT IN ANY WAY INTERFERE WITH OR CHANGE THE ENACTMENT OR ANY PART THEREOF BUT WHERE SOME GAP IS LEFT WHICH IS RELEVANT FOR THE PURPOSE OF THE EXPLANATION, IN ORDER TO SUPPRESS THE MISCHIEF AND ADVANCE THE OBJECT OF THE ACT IF IT CAN HELP OR ASSIST THE COURT IN INTERPRETING THE TRUE PURPORT ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 29 - AND INTENDMENT OF THE ENACTMENT, AND (E) IT CANNOT, HOWEVER, TAKE AWAY A STATUTORY RIGHT WITH WHICH ANY PERSON UNDER A STATUTE HAS BEEN CLOTHED OR SET AT NAUGHT THE WORKING OF AN ACT BY BECOMING AN HINDRANCE IN THE INTERPRETATION OF THE SAME. 20. IN THE RECENT DECISION OF THE APEX COURT IN THE CASE OF CIT VS. AMITABH BACHCHAN, THE SUPREME COURT HELD ON THE ISSUE OF SHOW CAUSE BY CIT IN THE CASE OF 263 PROCEEDINGS AS UNDER: UNDER THE ACT DIFFERENT SHADES OF POWER HAVE BEEN CONFERRED ON DIFFERENT AUTHORITIES TO DEAL WITH ORDERS OF ASSESSMENT PASSED BY THE PRIMARY AUTHORITY. WHILE SECTION 147 CONFERS POWER ON THE ASSESSING AUTHORITY ITSELF TO PROCEED AGAINST INCOME ESCAPING ASSESSMENT, SECTION 154 OF THE ACT EMPOWERS SUCH AUTHORITY TO CORRECT A MISTAKE APPARENT ON THE FACE OF THE RECORD. THE POWER OF APPEAL AND REVISION IS CONTAINED IN CHAPTER XX OF THE ACT WHICH INCLUDES SECTION 263 THAT CONFER SUO MOTU POWER OF REVISION IN THE LEARNED C.I.T(A). THE DIFFERENT SHADES OF POWER CONFERRED ON DIFFERENT AUTHORITIES UNDER THE ACT HAS TO BE EXERCISED WITHIN THE AREAS SPECIFICALLY DELINEATED BY THE ACT AND THE EXERCISE OF POWER UNDER ONE PROVISION CANNOT TRENCH UPON THE POWERS AVAILABLE UNDER ANOTHER PROVISION OF THE ACT. IN THIS REGARD, IT MUST BE SPECIFICALLY NOTICED THAT AGAINST AN ORDER OF ASSESSMENT, SO FAR AS THE REVENUE IS CONCERNED, THE POWER CONFERRED UNDER THE ACT IS TO REOPEN THE CONCLUDED ASSESSMENT UNDER SECTION 147 AND/OR TO REVISE THE ASSESSMENT ORDER UNDER SECTION 263 OF THE ACT. THE SCOPE OF THE POWER/JURISDICTION UNDER THE DIFFERENT PROVISIONS OF THE ACT WOULD NATURALLY BE DIFFERENT. THE POWER AND JURISDICTION OF THE REVENUE TO DEAL WITH A CONCLUDED ASSESSMENT, THEREFORE, MUST BE UNDERSTOOD IN THE CONTEXT OF THE PROVISIONS OF THE RELEVANT SECTIONS NOTICED ABOVE. WHILE DOING SO IT MUST ALSO BE BORNE IN MIND THAT THE LEGISLATURE HAD NOT VESTED IN THE REVENUE ANY SPECIFIC POWER TO QUESTION AN ORDER OF ASSESSMENT BY MEANS OF AN APPEAL. REVERTING TO THE SPECIFIC PROVISIONS OF SECTION 263 OF THE ACT WHAT HAS TO BE SEEN IS THAT A SATISFACTION THAT AN ORDER PASSED BY THE AUTHORITY UNDER THE ACT IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE IS THE BASIC PRE-CONDITION FOR EXERCISE OF JURISDICTION UNDER SECTION 263 OF THE ACT. BOTH ARE TWIN CONDITIONS THAT HAVE TO BE CONJOINTLY PRESENT. ONCE SUCH SATISFACTION IS REACHED, JURISDICTION TO EXERCISE THE POWER WOULD BE AVAILABLE SUBJECT TO OBSERVANCE OF THE PRINCIPLES OF NATURAL JUSTICE WHICH IS IMPLICIT IN THE REQUIREMENT CAST BY THE SECTION TO GIVE THE ASSESSEE AN OPPORTUNITY OF BEING HEARD. IT IS IN THE CONTEXT OF THE ABOVE POSITION THAT THIS COURT HAS REPEATEDLY HELD THAT UNLIKE THE POWER OF REOPENING AN ASSESSMENT UNDER SECTION 147 OF THE ACT, THE POWER OF REVISION UNDER SECTION 263 IS NOT CONTINGENT ON THE GIVING OF A NOTICE TO SHOW CAUSE. IN FACT, SECTION 263 HAS BEEN UNDERSTOOD NOT TO REQUIRE ANY SPECIFIC SHOW CAUSE NOTICE TO BE SERVED ON THE ASSESSEE. RATHER, WHAT IS REQUIRED UNDER THE SAID PROVISION IS AN OPPORTUNITY OF HEARING TO THE ASSESSEE. THE TWO ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 30 - REQUIREMENTS ARE DIFFERENT; THE FIRST WOULD COMPREHEND A PRIOR NOTICE DETAILING THE SPECIFIC GROUNDS ON WHICH REVISION OF THE ASSESSMENT ORDER IS TENTATIVELY BEING PROPOSED. SUCH A NOTICE IS NOT REQUIRED. WHAT IS CONTEMPLATED BY SECTION 263, IS AN OPPORTUNITY OF HEARING TO BE AFFORDED TO THE ASSESSEE. (EMPHASIS ADDED) FAILURE TO GIVE SUCH AN OPPORTUNITY WOULD RENDER THE REVISIONAL ORDER LEGALLY FRAGILE NOT ON THE GROUND OF LACK OF JURISDICTION BUT ON THE GROUND OF VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. REFERENCE IN THIS REGARD MAY BE ILLUSTRATIVELY MADE TO THE DECISIONS OF THIS COURT IN GITA DEVI AGGARWAL VS. COMMISSIONER OF INCOME TAX, WEST BENGAL AND OTHERS 1 AND 1(1970) 76 ITR 496 IN THE C.I.T., WEST BENGAL, II, CALCUTTA VS. M/S ELECTRO HOUSE2. PARAGRAPH 4 OF THE DECISION IN THE C.I.T., WEST BENGAL, II, CALCUTTA VS. M/S ELECTRO HOUSE (SUPRA) BEING ILLUMINATION OF THE ISSUE INDICATED ABOVE MAY BE USEFULLY REPRODUCED HEREUNDER: 'THIS SECTION UNLIKE SECTION 34 DOES NOT PRESCRIBE ANY NOTICE TO BE GIVEN. IT ONLY REQUIRES THE COMMISSIONER TO GIVE AN OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. THE SECTION DOES NOT SPEAK OF ANY NOTICE. IT IS UNFORTUNATE THAT THE HIGH COURT FAILED TO NOTICE THE DIFFERENCE IN LANGUAGE BETWEEN SECTIONS 33-B AND 34. FOR THE ASSUMPTION OF JURISDICTION TO PROCEED UNDER SECTION 34, THE NOTICE AS PRESCRIBED IN THAT SECTION IS A CONDITION PRECEDENT. BUT NO SUCH NOTICE IS CONTEMPLATED BY SECTION 33-B. THE JURISDICTION OF THE COMMISSIONER TO PROCEED UNDER SECTION 33-B IS NOT DEPENDENT ON THE FULFILLMENT OF ANY CONDITION PRECEDENT. ALL THAT HE IS REQUIRED TO DO BEFORE REACHING HIS DECISION AND NOT BEFORE COMMENCING THE ENQUIRY, HE MUST GIVE THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND MAKE OR CAUSE TO MAKE SUCH ENQUIRY AS HE DEEMS NECESSARY. THOSE REQUIREMENTS HAVE NOTHING TO DO WITH THE JURISDICTION OF THE COMMISSIONER. THEY PERTAIN TO THE REGION OF NATURAL JUSTICE. BREACH OF THE PRINCIPLES OF NATURAL JUSTICE MAY AFFECT THE LEGALITY OF THE ORDER MADE BUT THAT DOES NOT AFFECT THE JURISDICTION OF THE COMMISSIONER. AT PRESENT WE ARE NOT CALLED UPON TO CONSIDER WHETHER THE ORDER MADE BY THE COMMISSIONER IS VITIATED BECAUSE OF THE CONTRAVENTION OF ANY OF THE PRINCIPLES OF 2(1971) 82 ITR 824 NATURAL JUSTICE. THE SCOPE OF THESE APPEALS IS VERY NARROW. ALL THAT WE HAVE TO SEE IS WHETHER BEFORE ASSUMING JURISDICTION THE COMMISSIONER WAS REQUIRED TO ISSUE A NOTICE AND IF HE WAS SO REQUIRED WHAT THAT NOTICE SHOULD HAVE CONTAINED? OUR ANSWER TO THAT QUESTION HAS ALREADY BEEN MADE DEAR. IN OUR JUDGMENT NO NOTICE WAS REQUIRED TO BE ISSUED BY THE COMMISSIONER BEFORE ASSUMING JURISDICTION TO PROCEED UNDER SECTION 33-B. THEREFORE THE QUESTION WHAT THAT NOTICE SHOULD CONTAIN DOES NOT ARISE FOR CONSIDERATION. IT IS NOT NECESSARY NOT PROPER FOR US IN THIS CASE TO CONSIDER AS TO THE NATURE OF THE ENQUIRY TO BE HELD UNDER SECTION 33-B. THEREFORE, WE REFRAIN FROM SPELLING OUT WHAT PRINCIPLES OF NATURAL JUSTICE SHOULD BE OBSERVED IN AN ENQUIRY UNDER SECTION 33-B. THIS COURT IN GITA DEVI AGGARWAL V. CIT, WEST BENGAL RULED THAT SECTION 33-B DOES NOT IN EXPRESS TERMS REQUIRE A NOTICE TO BE SERVED ON THE ASSESSEE AS IN THE CASE OF SECTION 34. SECTION 33-B MERELY REQUIRES THAT AN OPPORTUNITY OF BEING HEARD SHOULD BE GIVEN TO THE ASSESSEE AND THE STRINGENT REQUIREMENT OF SERVICE OF NOTICE UNDER SECTION 34 CANNOT, THEREFORE, BE APPLIED TO A PROCEEDING UNDER SECTION 33-B, '(PAGE 827-828). ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 31 - [NOTE: SECTION 33-B AND SECTION 34 OF THE INCOME TAX ACT, 1922 CORRESPONDS TO SECTION 263 AND SECTION 147 OF THE INCOME TAX ACT, 1961] IT MAY BE THAT IN A GIVEN CASE AND IN MOST CASES IT IS SO DONE A NOTICE PROPOSING THE REVISIONAL EXERCISE IS GIVEN TO THE ASSESSEE INDICATING THEREIN BROADLY OR EVEN SPECIFICALLY THE GROUNDS ON WHICH THE EXERCISE IS FELT NECESSARY. BUT THERE IS NOTHING IN THE SECTION (SECTION 263) TO RAISE THE SAID NOTICE TO THE STATUS OF A MANDATORY SHOW CAUSE NOTICE AFFECTING THE INITIATION OF THE EXERCISE IN THE ABSENCE THEREOF OR TO REQUIRE THE C.I.T. TO CONFINE HIMSELF TO THE TERMS OF THE NOTICE AND FORECLOSING CONSIDERATION OF ANY OTHER ISSUE OR QUESTION OF FACT. THIS IS NOT THE PURPORT OF SECTION 263, OF COURSE, THERE CAN BE NO DISPUTE THAT WHILE THE C.I.T. IS FREE TO EXERCISE HIS JURISDICTION ON CONSIDERATION OF ALL RELEVANT FACTS, A FULL OPPORTUNITY TO CONTROVERT THE SAME AND TO EXPLAIN THE CIRCUMSTANCES SURROUNDING SUCH FACTS, AS MAY BE CONSIDERED RELEVANT BY THE ASSESSEE, MUST BE AFFORDED TO HIM BY THE C. I. T. PRIOR TO THE FINALIZATION OF THE DECISION.' THE APEX COURT HELD IN THE AFORESAID JUDGMENT THAT THE ISSUANCE OF SHOW CAUSE NOTICE IS NOT MANDATORY AND ONLY THE PRINCIPLES OF NATURAL JUSTICE IS REQUIRED TO BE FOLLOWED. THE APEX COURT ALSO HELD THAT ENQUIRY SHOULD ALSO BE COMPLETED ON THE ISSUE WHICH REQUIRES INVESTIGATION AND INCOMPLETE INVESTIGATIONS IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 16. ON THE OTHER HAND WITH REGARD TO DEPRECIATION AMOUNTING TO RS.24,01,74,149/- CLAIMED ON INFRASTRUCTURE USAGE FACILITY @ 25% , THE ASSESSEE COMPANY TO OPERATE ITS CONTAINER OPERATION IN MUNDRA PORT AREA. THE EXCLUSIVE RIGHT HAS BEEN GIVEN TO THE ASSESSEE COMPANY, WHICH IS A SORT OF EASEMENT RIGHT. THE EASEMENT RIGHT IS NOTHING BUT LICENSE GIVEN TO THE LICENSE TO ENTER ON ANOTHER PERSONS LAND WITH USAGE OF INFRASTRUCTURE FACILITY TO CARRY OUT BUSINESS ACTIVITIES. THE ASSESSEE COMPANY HAS BEEN GIVEN THE RIGHT TO CARRY OUT ITS TERMINAL OPERATION WORK. THE VIEW EXPRESSED IS THAT SUCH RIGHT IS NOT SIMILAR TO KNOW HOW . FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE. IT IS ALSO OBSERVED THAT LEASE OF PREMISES ARE NOT COVERED. IT IS NOT DENIED THAT THE ASSESSEE COMPANY IS NOT THE OWNER OF INFRASTRUCTURE FACILITY. IN FACT IT IS NOT THE LESSEE ALSO. IT IS THE LICENSEE. IT HAS GOT THE RIGHT TO USE AND MAINTENANCE SERVICE OF CERTAIN INFRASTRUCTURE FACILITY AS SET OUT IN THE INFRASTRUCTURE USAGE AGREEMENT MORE PARTICULARLY SCHEDULE I OF THE SAID AGREEMENT WHICH INCLUDES. I. USE OF DREDGED CHANNEL I.E. WATER FRONT AND THE ENTRANCE CHANNEL AND TURNING CIRCLE OF THE CONTAINER TERMINAL AND ALONGSIDE THE BERTH AT THE CONTAINER TERMINAL AS DEPICTED IN ANNEXURE A. II. USE OF RAILS AND ROAD CONNECTIVITY. III. USE OF WATER, ELECTRICITY AND TELECOMMUNICATION. ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 32 - IV. MARINE AND PORT FACILITIES. V. MEDICAL AND EDUCATIONAL FACILITIES. THE TERM LICENSE, EASEMENT AND LEASE ARE WENT WELL DEFINED UNDER TRANSFER OF PROPERTY ACT. THE VIEW EXPRESSED THAT RESTRICTIVE MEANING OR EJUSDEM GENERIES MEANING IS TO BE GIVEN TO THE WORD ANY OTHER COMMERCIAL RIGHT OF SIMILAR NATURE IS NOT CORRECT. IN THIS CONNECTION, IT MAY BE NOTED THAT IN TECHNO SHARES & STOCKS LTD VS. CIT 327 ITR 323 (SC) IT HAS BEEN HELD THE SUCH RIGHT WAS AKIN TO LICENSE. IT GAVE THE RIGHT TO MEMBER TO ACCESS THE EXCHANGES IS CONSIDERED TO BE AN INTANGIBLE ASSET. SIMILARLY THE RIGHT GIVEN TO THE ASSESSEE TO ACCESS THE PORT TO CARRY OUT THE TERMINAL OPERATIONS. IT MAY BE NOTED THAT RIGHT FROM INCEPTION OF THE COMPANY, I.E. A.Y. 2004-05 THE DEPRECIATION CLAIMED ON THE VERY SAME INFRASTRUCTURE FACILITY HAS BEEN VERIFIED AND ALLOWED. IT IS NOT OUT OF PLACE TO MENTION HERE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y.2004-05, THE THEN DCIT, CIRCLE-1, AHMEDABAD ON THE BASIS OF THE MATERIAL SUBMITTED ALONGWITH ALL THE EVIDENCES INCLUDING THE COPY OF AGREEMENT DTD.05/06/2003 WITH DETAILED SUBMISSION AND THE CASE LAWS ON THE SUBJECT HAS BEEN CITED BEFORE THE AO AND ON THE BASIS OF THE MATERIAL ON RECORD, THE THEN ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT U/S.143(3) OF THE IT ACT FOR THE A.Y. 2004-05 AND ONWARDS AND ALLOWED THE CLAIM OF DEPRECIATION ON INFRASTRUCTURE USAGE FACILITY. FURTHER WE SUBMIT THAT THE SAID WRITTEN DOWN VALUE OF INFRASTRUCTURE USAGE FACILITY IS SHOWN SINCE A.Y.2005-06 ON WHICH THE DEPRECIATION HAS BEEN CLAIMED. TO SIMPLIFY THE MATTER, WE ARE PRODUCING THE DEFINITION OF LEASE AND EASEMENT AS DEFINED UNDER TRANSFER OF PROPERTY ACT. 21. IN THE CASE OF TECHNO SHARES & STOCKS LTD. VS. CIT 327 ITR 323 (SC), WHEREIN THE APEX COURT HAS HELD THAT MEMBERSHIP CARD IS ENTITLED TO DEPRECIATION. HERE IT IS NOTEWORTHY THAT EVEN THOUGH FLOOR OF EXCHANGE WAS OWNED BY THE STOCK EXCHANGE ON THE BASIS OF RIGHT TO USE THE FLOOR OF EXCHANGE, THE DEPRECIATION WAS GRANTED TO THE MEMBER. IT WAS HELD THAT RIGHT OF MEMBERSHIP WAS LICENSE OR AKIN TO LICENSE AND HAD A COMMERCIAL VALUE. THE COURT ALSO CLARIFIED THAT EVEN THOUGH THERE WAS A CLAUSE THAT IN CASE OF DEFAULT, THE RIGHT WOULD VEST WITH THE EXCHANGE, THE SAME WOULD NOT MAKE NO DIFFERENCE, BECAUSE TILL THE TIME THE MEMBER WAS NOT DEFAULTING, HE WAS ENTITLED TO USE THE FLOOR OF EXCHANGE UNDER THE LICENSE. ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 33 - 22. RECENTLY THE BOMBAY HIGH COURT IN THE CASE OF BIRLA GLOBAL ASSETS FINANCE CO. LTD. IN ITA NO. 6835 OF 2010 HELD THAT BUSINESS AND COMMERCIAL BRAND EQUITY IS AN INTANGIBLE ASSETS AND THEREFORE, THE DEPRECIATION CLAIM ON THE SAME IS ALLOWABLE UNDER SECTION 32 OF THE I.T. ACT, 1961. THE CONTENTION OF THE DEPARTMENT WAS THAT INTANGIBLE ASSETS LIKE BUSINESS AND COMMERCIAL BRAND EQUITY ARE GOODWILL ON WHICH DEPRECIATION IS NOT ALLOWABLE. THE BOMBAY HIGH COURT HAS FOLLOWED THE SUPREME COURTS RULING IN THE CASE OF CIT, KOLKATA VS. SMIFS SECURITIES LTD. (2012) 24 TAXMANN.COM 222(SC) WHEREIN IT HAS BEEN HELD AS UNDER:- SECTION 32 OF THE INCOME-TAX ACT, 1961 DEPRECIATION ALLOWANCE/RATE OF- ASSESSMENT YEAR 2003-04- WHETHER GOODWILL IS AN ASSET UNDER EXPLANATION 3(B) TO SECTION 32(1)- HELD, YES 23. THE CLAIM OF THE ASSESSEE, DEPRECIATION ON INFRASTRUCTURE USAGE FACILITY HAS BEEN MADE FROM THE ASSESSMENT YEAR 2004-05 OF THE ASSESSEES EXISTENCE AND IN OUR CONSIDERED OPINION SAME SHOULD NOT BE DISTRIBUTED IN VIEW OF THE FOREGOING OBSERVATION AND RESPECTFULLY FOLLOWING THE DECISION OF THE HIGHER COURTS, WE ALLOW THE APPEAL OF THE ASSESSEE. 24. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 23/01/2017 SD/- SD/- . . ( ) ( ) ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 23/01/2017 ITA NO. 1253/AHD/2016 MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT. LTD. VS. THE PR. CIT ASST.YEAR 2009-10 - 34 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT-II, AHMEDABAD. 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY 1. DATE OF DICTATION 06/01/2017 (DICTATION-PAD 16 PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 19/01/2017 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P.S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER