Dy.CIT, Hyderabad V. M/s. Malaxmi Highway Pvt. Ltd., Hyderabad

ITA 1403/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74597 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 25-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: P RAVI SESHAGIRI RAO
• Keywords: Depreciation; Revenue expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1403/HYD/2013 ASSESSMENT YEAR 2010-11 THE DEPUTY CIT CIRCLE-16(2) HYDERABAD VS. M/S. MALAXMI HIGHWAY PVT. LTD., HYDERABAD PAN: AAECM6897N [APPELLANT] [RESPONDENT] APPELLANT BY: SRI D. SUDHAKAR RAO RESPONDENT BY: SRI P. RAVI SESHAGIRI RAO DATE OF HEARING: 27.02.2014 DATE OF PRONOUNCEMENT: 27.02.2014 ORDER PER CHANDRA POOJARI, AM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-V, HYDERABAD DATED 26.7.2013 FOR ASSESSMENT YEAR 2010-11. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS: (1) THE ORDER OF THE CIT(A) IS ERRONEOUS IN LAW AND ON FACTS OF THE CASE. (2) THE CIT(A) OUGHT TO HAVE APPRECIATED THE ADDITION TOWARDS DEPRECIATION AS THE ASSESSEE-COMPANY IS NOT THE OWNER OF THE ASSET. (3) THE CIT(A) OUGHT TO HAVE CONSIDERED THAT ASSESSEE-COMPANY IS IN AGREEMENT WITH NATIONAL HIGHWAY AUTHORITY OF INDIA FOR MAINTENANCE TO UPKEEP THE ASSET HENCE NOT ELIGIBLE TO CLAIM DEPRECIATION. ITA NO. 1403/HYD/2013 M/S. MALAXMI HIGHWAY PVT. LTD. ============================== 2 3. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OPINI ON THAT THE ISSUE IS SQUARELY COVERED BY THE ORDER OF THE CO- ORDINATE BENCH IN ITA NO. 1171/HYD/07 & ORS. IN CASE OF PVR INDUSTRIES LTD., VIDE ORDER DATED 8.6.2011 WHEREIN THE TRIBUNAL HELD AS FOLLOWS: '11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF TH E PARTIES AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECO RD. IT IS UNDISPUTED FACT THAT THE DEPARTMENT ALLOWED THE SIM ILAR AMORTIZATION OF BOT PROJECT EXPENDITURE IN THE EARL IER ASSESSMENT YEAR UNDER SCRUTINY ASSESSMENT UNDER SEC TION 143(3) OF THE ACT. THERE IS NO DISPUTE ABOUT THE QU ANTUM OF EXPENDITURE INCURRED BY THE ASSESSEE. IT IS THE CAS E OF THE ASSESSEE THAT THE EXPENDITURE INCURRED ON BOT PROJE CT IS ALLOWABLE AS AMORTIZATION AND NOT AS DEPRECIATION W HEREAS IT IS THE CASE OF THE DEPARTMENT THAT NEITHER THE AMORTIZ ATION NOR THE DEPRECIATION IS ALLOWABLE AS DEDUCTION. THE MAIN AR GUMENT OF THE DEPARTMENT IS THAT THE ASSESSEE SHOULD HAVE CLA IMED DEDUCTION UNDER SECTION 80IA AND NOT AS DEDUCTION T OWARDS REVENUE EXPENDITURE. IN OUR CONSIDERED OPINION, THE ASSESSEE CAN CLAIM DEDUCTION UNDER SECTION 80IA ONLY IF THE ASSESSEE CARRIES ON ELIGIBLE BUSINESS AS SPECIFIED IN SECTIO N 80IA OF THE ACT. HOWEVER, THE ISSUE BEFORE US IS RELATING TO AL LOWABILITY OF THE EXPENDITURE INCURRED ON BOT PROJECT ON ITS AMOR TIZATION AND NOT ABOUT THE ELIGIBILITY OF DEDUCTION UNDER SE CTION 80IA OF THE ACT. ON SIMILAR AND IDENTICAL ISSUE, THE CO-ORD INATE BENCH OF THE TRIBUNAL IN THE CASE OF NYSE INFRASTRUCTURE (SUPRA) HELD THAT THE ASSESSEE HAS TO BE GIVEN DEDUCTION EITHER OF DEPRECIATION, OR COST OF CONSTRUCTION AS REVENUE EX PENDITURE OR IN THE FORM OF AMORTIZATION OF EXPENDITURE BY FOLLO WING THE JUDGMENT IN THE CASE OF MADRAS INDUSTRIAL INVESTMEN T CORPORATION (SUPRA). IT IS WELL SETTLED THAT THE CO -ORDINATE BENCHS DECISION IS BINDING AND THE SAME HAS TO BE FOLLOWED IN DECIDING THE SIMILAR ISSUES. IN THE CASE OF NYSE IN FRASTRUCTURE (SUPRA) THE TRIBUNAL ALLOWED THE DEDUCTION AS DEPRE CIATION AS IN THAT CASE, THE ASSESSEE ITSELF CLAIMED DEPRECIAT ION. IN THE CASE UNDER CONSIDERATION, THE ASSESSEE COMPANY CLAI MED AMORTIZATION OF THE BOT PROJECT EXPENDITURE AS REVE NUE EXPENDITURE AND AS PER THE RATIO OF DECISION RENDER ED BY THE TRIBUNAL IN THE CASE OF NYSE INFRASTRUCTURE (SUPRA) THE AMORTIZATION OF EXPENDITURE IS ALSO ONE OF THE OPTI ONS AND IS BEING ALLOWABLE AS DEDUCTION. HENCE, BY FOLLOWING T HE DECISION OF COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF NYSE INFRASTRUCTURE (SUPRA), AMORTIZATION OF BOT PROJECT ITA NO. 1403/HYD/2013 M/S. MALAXMI HIGHWAY PVT. LTD. ============================== 3 EXPENDITURE CLAIMED BY THE ASSESSEE IS TO BE ALLOWE D. MOREOVER, WE DO NOT SEE ANY MERIT IN THE ARGUMENTS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE AMORTI ZATION OF EXPENDITURE CAN BE ALLOWED UNDER SECTION 35D OF THE ACT AND NOT UNDER ANY OTHER PROVISIONS OF THE ACT. IN THE C ASE UNDER CONSIDERATION, THE ASSESSEE NEVER CLAIMED ANY DEDUC TION UNDER SECTION 35D OF THE ACT. WE ALSO DO NOT SEE ANY MERI T IN THE ARGUMENTS OF THE LEARNED DEPARTMENTAL REPRESENTATIV E THAT THE ASSESSEE COMPANY ITSELF CLASSIFIED THE ASSETS AS CA PITAL ASSETS IN ITS BALANCE-SHEET. IT IS WELL SETTLED LAW THAT THE ENTRIES IN THE BOOKS OF ACCOUNT AND ITS TREATMENT WOULD NOT DISENT ITLE THE ASSESSEE, IN ANY WAY, TO CLAIM THE EXPENDITURE TO A RRIVE ITS ACTUAL INCOME FOR THE PURPOSE OF TAXATION. IT IS CA SE OF THE ASSESSEE THAT THE EXPENDITURE INCURRED IS IN REVENU E NATURE AND THE SAME HAS TO BE ALLOWED OVER A PERIOD 17/7 YEARS AS THE CASE MAY BE. IN THE CASE UNDER CONSIDERATION, THE EXPEND ITURE INCURRED BY THE ASSESSEE ON BOT PROJECT DID BRING S OME KIND OF AN ENDURING BENEFIT TO THE ASSESSEE; HOWEVER, THE S AID EXPENDITURE DID NOT BRING INTO EXISTENCE ANY CAPITA L ASSET FOR THE ASSESSEE. THE ASSET WHICH WAS CREATED BELONGS T O THE GOVERNMENT AND THE ASSESSEE DERIVED ONLY AN ENDURIN G BUSINESS ADVANTAGE BY SPENDING THE AMOUNT. THE EXPE NDITURE INCURRED BY THE ASSESSEE HAS TO BE LOOKED UPON AS H AVING BEEN MADE FOR THE PURPOSE OF CONDUCTING THE BUSINESS OF THE ASSESSEE. SINCE THE ASSET CREATED BY THE ASSESSEE B Y SPENDING THE SAID AMOUNTS DID NOT BELONG TO THE ASSESSEE BUT THE ASSESSEE GOT THE BUSINESS ADVANTAGE BY COLLECTING THE TOLL C HARGES AS REVENUE. THUS, THE ASSESSEE GOT THE BENEFIT OF REVE NUE COLLECTION FOR THE PERIOD OF 17/7 YEARS AND HENCE, THE EXPENDI TURE INCURRED BY THE ASSESSEE TOWARDS BOT PROJECT SHOULD BE LOOKED UPON AS REVENUE EXPENDITURE. OUR VIEW IS FORTIFIED BY THE DECISION OF THE APEX COURT IN THE CASE OF CIT VS. M ADRAS AUTO SERVICES LIMITED (SUPRA) RELIED ON BY THE LEARNED C OUNSEL FOR THE ASSESSEE. ONCE WE HELD THAT THE SAID EXPENDITUR E IS TO BE TREATED AS REVENUE EXPENDITURE, CONSEQUENTLY, THE A SSESSEE IS ELIGIBLE TO AMORTIZE THE EXPENDITURE RELATING TO BO T PROJECT FOR THE PERIOD OF 17/7 YEARS. IN VIEW OF THE ABOVE, AFT ER CONSIDERING THE TOTALITY OF FACTS AND THE CIRCUMSTANCES OF THE CASE, WE ALLOW THE CLAIM OF THE ASSESSEE WITH REGARD TO THE AMORTI ZATION EXPENDITURE INCURRED ON BOT PROJECTS AS REVENUE EXP ENDITURE SINCE WE ALLOWED THE GROUND OF THE ASSESSEE WITH RE GARD TO THE ALLOWABILITY OF AMORTIZATION OF THE EXPENDITURE, TH E GROUND RAISED BY THE REVENUE IN CHALLENGING THE FINDINGS O F THE CIT (A) IN ALLOWING THE DEPRECIATION ON THE INFRASTRUCTURE FACILITIES, STANDS REJECTED.' ITA NO. 1403/HYD/2013 M/S. MALAXMI HIGHWAY PVT. LTD. ============================== 4 4. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE CO- ORDINATE BENCH, WE ARE INCLINED TO HOLD THAT THE IM PUGNED EXPENDITURE IS TO BE AMORTIZED OVER THE PERIOD OF C ONTRACT AS DEFERRED REVENUE EXPENDITURE (I.E., 17 YEARS AND 18 4 DAYS). THIS GROUND IS PARTLY ALLOWED. 5. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH FEBRUARY, 2014. SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 27 TH FEBRUARY, 2014 TPRAO COPY FORWARDED TO: 1. THE DEPUTY CIT, CIRCLE-16(2), ROOM NO. 611, 6 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2. M/S. MALAXMI HIGHWAY PVT. LTD., # 119, ROAD NO. 1 0, JUBILEE HILLS, HYDERABAD-500 033. 3. THE CIT(A)-V, HYDERABAD. 4. THE CIT-IV, HYDERABAD. 4. THE DR BENCH 'B', ITAT, HYDERABAD