Deputy Commissioner of Income-tax, V. I.S. Infrastructure & Buildcon Pvt. Ltd., Nashik

ITA 1444/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1786 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 14-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Reasonable cause; Wrong claim

Judgement Text

] IQ.KS ] IQ.KS ] IQ.KS ] IQ.KS IQ.KS IQ.KSIQ.KS IQ.KS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , . . , # BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM . / ITA NO.1444/PN/2014 % % / ASSESSMENT YEAR : 2007-08 DY.CIT, CIRCLE-1, NASHIK . / APPELLANT V/S I.S. INFRASTRUCTURE & BUILDCON PVT. LTD., SPACE TOWER, MICRO CIRCLE, NASHIK 422002 PAN NO.AABCI0380F . / RESPONDENT / ASSESSEE BY : NONE (WRITTEN SUBMISSION) / REVENUE BY : SHRI UMA SHANKAR PRASAD, JCIT / ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE OR DER DATED 07-05-2014 OF THE CIT(A)-I, NASHIK RELATING TO ASSE SSMENT YEAR 2007-08. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE. HOWEVER, A W RITTEN SUBMISSIONS HAS BEEN FILED. THEREFORE, THE CASE IS BEING DEC IDED ON THE BASIS OF THE WRITTEN SUBMISSION FILED BY THE ASSESSEE AND A FTER HEARING THE LD. DEPARTMENTAL REPRESENTATIVE. / DATE OF HEARING :18.05.2016 / DATE OF PRONOUNCEMENT:20.05.2016 2 ITA NO.1444/PN/2014 3. DELETION OF PENALTY OF RS.16,81,250/- BY THE CIT(A) IS THE ONLY ISSUE RAISED BY THE REVENUE IN THE GROUNDS OF APPEAL. 4. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE COMP ANY IS ENGAGED IN THE BUSINESS OF CONSTRUCTION, OPERATION AND M AINTENANCE OF INFRASTRUCTURE FACILITIES. THE ASSESSEE HAS UNDERTAKEN THE WORK OF IMPROVEMENT TO NASHIK-NIPHAD ROAD (SS30) INCLUDING CONSTRUC TION OF RAILWAY OVER BRIDGE. THE PROJECT WAS ALLOTTED BY THE GO VERNMENT OF MAHARASHTRA (PWD). THE ASSESSEE FILED ITS RETURN OF INCOME ON 15-10- 2007 SHOWING TOTAL INCOME OF NIL. DURING THE COURSE OF AS SESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS.2,85,86,743/-, I.E. @25% OF THE SO CALLED ASSET UNDER THE N AME LICENSE TO COLLECT TOLL. ON BEING QUESTIONED BY THE AO, IT W AS SUBMITTED THAT LICENSE TO COLLECT TOLL IS A CAPITAL ASSET FOR WHICH THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION AS RIGHT TO RECEIVE TOLL IS AN INTANGIBLE ASSET. 5. HOWEVER, THE AO REJECTED THE CLAIM OF DEPRECIATION MA DE BY THE ASSESSEE U/S.32 OF THE I.T. ACT BUT ALLOWED THE AMORTIZAT ION OF EXPENSES AND APPORTIONED FOR THE DAYS OF TOLL COLLECTION. HE ACCORD INGLY COMPUTED THE ALLOWABLE EXPENSES FOR THE IMPUGNED ASSESSM ENT YEAR AT RS.2,35,91,945/- WHICH IS AS UNDER : 1. TOTAL CONCESSION PERIOD : 3567 DAYS 2. PROJECT START DATE : 22-07-2002 3. TOLL COMMENCEMENT ON : 06-03-2004 4. CONSTRUCTION PERIOD : 592 DAYS 5. BALANCE TOLL COLLECTION PERIOD : 2975 DAYS 6. DAYS OF TOLL COLLECTION IN A YEAR : 365 DAYS AMORTIZATION FOR F.Y. 2006-07 (RS.19,22,90,514/2975 X 365 DAYS) : RS.2,35,91,945/- 3 ITA NO.1444/PN/2014 THE AO ACCORDINGLY MADE ADDITION OF RS.49,94,797/- TO THE TOTAL INCOME OF THE ASSESSEE. 6. THE ASSESSEE PREFERRED AN APPEAL AND THE APPEAL OF T HE ASSESSEE WAS DISMISSED BY THE CIT(A) DUE TO NON APPEARANCE BY TH E ASSESSEE. SUBSEQUENTLY, THE AO INITIATED PENALTY PROCEEDINGS U/S.271 (1)(C) OF THE I.T ACT. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY TH E ASSESSEE AND DISTINGUISHING THE DECISIONS CITED BEFORE HIM THE AO LEVIED PE NALTY OF RS.16,81,250/- U/S.271(1)(C) OF THE I.T. ACT, 1961 BEING 100% O F TAX SOUGHT TO BE EVADED. 7. IN APPEAL THE LD.CIT(A) DELETED THE PENALTY LEVIED BY TH E AO BY OBSERVING AS UNDER : 6. I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER, PENALTY ORDER AND THE MATERIAL AVAILABLE ON RECORD. A PERUSAL OF THE PENALTY ORDER AND THE ASSESSMENT ORDER REVEALS THAT THE AO HAD TAKEN A FIGURE OF RS.2,85,86,742/- ON ACCOUNT OF DEPRECIATION @ 25% ON LICENSE TO COLL ECT TOLL AS AGAINST RS.2,35,91,945/- CLAIMED BY THE APPELLANT IN THE SCHE DULE OF FIXED ASSETS AND THE PROFIT AND LOSS ACCOUNT. A PERUSAL OF THE PR OFIT AND LOSS ACCOUNT REVEALS THAT THE APPELLANT HAS CLAIMED DEPRECIATION O F RS.2,37,47,509/- FOR A.Y. 2007-08 WHICH INTERALIA INCLUDES DEPRECIATION O F RS.2,35,91,945/- ON ACCOUNT OF LICENSE TO COLLECT TOLL. THE AO IN THE ASSESSMENT ORDER DATED 16- 10-2010 ALLOWED AMORTIZATION OF RS.2,35,91,945/- FOR A.Y. 2007-08 AND DISALLOWED RS.49,94,797/-, I.E. THE DIFFERENCE BETWEE N RS.2,85,86,742/- (ERRONEOUSLY TAKEN BY THE AO IN THE ASSESSMENT ORDER) AN D RS.2,35,91,945/- (ALLOWED BY HIM FOR AMORTIZATION FO R A.Y. 2007-08). THE AO THEREAFTER, LEVIED A PENALTY OF RS.16,81,250/- U /S.271(1)(C) ON THE ABOVE REFERRED DIFFERENCE OF RS.49,94,797/-. FROM T HE ABOVE IT IS CLEAR THAT THE AO HAD TAKEN WRONG FIGURE OF DEPRECIATION IN TH E ASSESSMENT ORDER AND CONTINUED TO ADOPT THE SAME FOR THE PURPOSE OF LEVY O F PENALTY ALSO. NOTWITHSTANDING THE ABOVE, THE HONBLE ITAT PUNE IN THE CASE OF ASHOK INFRASTRUCTURE PVT. LTD. (129 TTJ 77) (PUNE) (TRIBUN AL) HAS ALLOWED DEPRECIATION ON LICENSE TO COLLECT TOLL CONSIDERING THE SAME AS AN INTANGIBLE ASSET. THE APPELLANT HAS ALSO RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. 322 ITR 158 WHEREIN IT HAS BEEN HELD THAT MERE REJECTION OF LEGA L CLAIM WOULD NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME . TAKING INTO CONSIDERATION THE ERRONEOUS FIGURE TAKEN BY THE AO AN D THE FACTUAL AND LEGAL POSITION IN THIS REGARD, IMPOSITION OF PENALTY OF RS.16,81,250/- U/S.271(1)(C) ON RS.49,94,797/- CANNOT SURVIVE. THE A O WAS, THEREFORE, NOT JUSTIFIED IN LEVYING THE SAID PENALTY. THE PENA LTY ORDER DATED 20-03- 2013 U/S.271(1)(C) IMPOSING PENALTY OF RS.16,81,250/- IS CANCELLED. 4 ITA NO.1444/PN/2014 8. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 9. THE LD. DEPARTMENTAL REPRESENTATIVE WHILE OPPOSING THE ORDER OF THE CIT(A) SUBMITTED THAT THE ASSESSEE HAS WRONGLY CLA IMED THE DEPRECIATION OF RS.2,85,86,742/- ON LICENSE TO COLLECT TOLL WHICH WAS REJECTED BY THE AO AND HE ALLOWED AMORTIZATION OF EXPENS ES OF RS.2,35,91,975/- AND THUS THE DIFFERENCE OF RS.49,94,797/- WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. HE SUBMITTED THAT FOR GRANT OF DEPRECIATION IN RESPECT OF ANY CAPITAL ASSET THE ASSESSE E HAS TO FULFIL THE TWO CONDITIONS AS PER PROVISIONS OF SECTION 32(1), I.E. (A) THE A SSET SHOULD BE OWNED WHOLLY OR PARTLY BY THE ASSESSEE AND (B) SHALL BE USED BY THE ASSESSEE FOR THE PURPOSE OF THE BUSINESS. HOWEV ER, THE ASSESSEE DOES NOT SATISFY EITHER OF THE TWO CONDITIONS IN THE INSTA NT CASE. THE ROAD WAS NEITHER OWNED WHOLLY OR PARTLY BY THE ASSESS EE NOR IT WAS BEING USED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINE SS. WHAT THE ASSESSEE IS CLAIMING IS THE DEPRECIATION ON THE COST OF TH E ROAD WHICH WAS RIGHTLY REJECTED BY THE AO AND UPHELD BY THE CIT(A ). HE SUBMITTED THAT THE EXPRESSION LICENSE IN SECTION 32(1)(II) OF THE ACT CANNOT BE CONSTRUED WIDELY BECAUSE THE EXPRESSION ANY OTHER BU SINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE IN SECTION 32(1)(II) OF THE ACT MAKES IT ABUNDANTLY CLEAR THAT THE LEGISLATURE INTENDED TO GIVE NARROWER OR RESTRICTED MEANING TO THE EXPRESSIONS USED IN THE S ECTION. HE SUBMITTED THAT THE AO HAS ESTABLISHED IN THE PENALTY ORD ER THAT THERE WAS NO REASONABLE CAUSE FOR FURNISHING THE INACCURATE PAR TICULARS OF INCOME. REFERRING TO THE DECISION OF HONBLE ALLAHABAD HIGH C OURT IN THE CASE OF NAGINCHAND SHIV SAHAI VS. CIT REPORTED IN 6 I TR 534 AND THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS. GATES FOAM AND RUBBER COMPANY REPORTED IN 91 ITR 467 HE SUBMITTED 5 ITA NO.1444/PN/2014 THAT THE PENALTY LEVIED BY THE AO IS JUSTIFIED. HE ACCOR DINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) BE REVERSED AND THAT OF THE AO BE RESTOR ED. 10. THE ASSESSEE IN HIS WRITTEN SUBMISSION HAS FILED A COPY OF THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF M /S. ASHOKA INFO PVT. LTD. VS. ACIT VIDE ITA NO.44/PN/2007 ORDER DA TED 31-12- 2008 FOR A.Y. 2003-04 WHERE THE TRIBUNAL HAS HELD THAT TH E ASSESSEE IS ENTITLED TO CLAIM DEPRECATION IN THE CASE OF PROJECTS CARR YING ON BOT BASIS AND HAS HELD THAT THE LICENSE TO COLLECT TOLL IS CAPIT AL ASSET ELIGIBLE FOR DEPRECIATION. THEREFORE, IT CANNOT BE SAID THAT THERE IS ANY CONCEALMENT SINCE THE ASSESSEE HAS TAKEN A POSSIBLE VIE W. THE ASSESSEE HAS ALSO RELIED UPON THE DECISION OF HONBLE SUP REME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. REP ORTED IN 322 ITR 158 AND THE DECISION IN THE CASE OF PRICE WATER HOU SE COOPERS PVT. LTD. VS. CIT VIDE CIVIL APPEAL NO.9124/2012 ORDER DATED 25-09-2014. 11. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE AND PERUSED THE WRITTEN SUBMISSION FILED BY THE ASSESSEE. WE HAVE ALS O CONSIDERED THE VARIOUS DECISIONS RELIED ON BY BOTH THE SIDES. WE FIND THE ASSESSEE IN THE INSTANT CASE IS ENGAGED IN THE BUSINESS OF CONSTRU CTION, OPERATION AND MAINTENANCE OF INFRASTRUCTURE FACILITIES. DURING THE IMPUGNED ASSESSMENT YEAR THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF IMPROVEMENT TO NASHIK-NIPHAD ROAD (SS30) INCLUDING THE CONSTRUCTION OF RAILWAY OVER BRIDGE. THE ASSESSEE CLAIMED DEPRECIATION OF RS.2,85,86,743/- BEING 20% OF THE EXPENDITURE INCURRED BY THE ASSESSEE ON THE CONSTRUCTION OF THE BR IDGE ON THE GROUND THAT THE LICENSE TO COLLECT TOLL IS A CAPITAL ASS ET BEING AN INTANGIBLE ASSET AND THEREFORE THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION. WE FIND THE AO REJECTED THE CLAIM OF DEPRE CIATION AS 6 ITA NO.1444/PN/2014 MADE BY THE ASSESSEE BUT ALLOWED AMORTIZATION OF THE EX PENSES THEREBY MAKING ADDITION OF RS.49,94,797/- TO THE TOTAL INCOME OF THE ASSESSEE. SINCE THE ASSESSEE DID NOT APPEAR BEFORE THE CIT(A) THE ADDITION MADE BY THE AO WAS UPHELD. SUBSEQUENTLY, THE AO LEVIED PENALT Y U/S.271(1)(C) OF THE I.T ACT ON THE GROUND THAT ASSESSEE HAS MADE A WRONG CLAIM BY FURNISHING INACCURATE PARTICULARS OF INCOME. T HE LD.CIT(A) DELETED THE PENALTY FOR WHICH THE REVENUE IS IN A PPEAL BEFORE US. IT IS THE SUBMISSION OF THE ASSESSEE IN THE WRITTEN S UBMISSION THAT IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE COORDINATE BENCH OF THE TRIBUNAL AND THEREFORE, THE ASSES SEE HAS TAKEN A POSSIBLE VIEW. 12. WE FIND THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF M/S ASHOKA INFO PVT. LTD. (SUPRA) HAS HELD THAT THE LICENSE GRA NTED BY THE MAHARASHTRA GOVERNMENT FOR COLLECTION OF TOLL ON AHMEDNAGA R KARMALA ROAD (SS141), WHICH WAS CONSTRUCTED AND MAINTAINED BY TH E ASSESSEE AS BUILD, OPERATE AND TRANSFER (IN SHORT BOT) BASIS IN TERM S OF AN AGREEMENT WITH THE MAHARASHTRA STATE GOVERNMENT FOR T HE PERIOD OF 16 YEARS AND 9 MONTHS IS A TANGIBLE ASSET AND THEREFORE TH E ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION U/S.32(1)(II) OF THE I.T. ACT. 13. FROM THE ABOVE, IT IS SEEN THAT ALTHOUGH THE ASSESS EE HAS NOT CONTESTED THE ORDER OF THE CIT(A) CONFIRMING THE DISALLOWANC E MADE BY THE AO, HOWEVER, THERE IS A DECISION IN FAVOUR OF THE ASSES SEE BY THE COORDINATE BENCH OF THE TRIBUNAL UNDER IDENTICAL CIRCUMSTA NCES. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PET RO PRODUCTS PVT. LTD. (SUPRA) HAS HELD THAT A MERE MAKING OF A CLAIM WHIC H IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCU RATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH C LAIM MADE IN 7 ITA NO.1444/PN/2014 THE RETURN CANNOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS. 14. THE HONBLE SUPREME COURT IN THE CASE OF PRICE WAT ER HOUSE COOPERS PVT. LTD. (SUPRA) HAS HELD THAT CONCEALMENT PENA LTY IS NOT LEVIABLE WHEN THE CLAIM WAS UNDER BONAFIDE AND INADVERTENT ERROR. IN THE INSTANT CASE, AS MENTIONED EARLIER, THERE IS ALREADY A DECISION OF TH E COORDINATE BENCH OF THE TRIBUNAL THAT THE ASSESSEE IS E NTITLED TO CLAIM DEPRECIATION ON THE LICENSE TO COLLECT TOLL BEING A CAPITAL AS SET. THEREFORE, MERELY BECAUSE ASSESSEE HAS NOT CONTESTED IN FURTHER APPEAL CHALLENGING THE DISALLOWANCE UPHELD BY THE CIT(A), THE SAME IN OUR OPINION CANNOT BE A BASIS FOR LEVY OF PENALTY U/S.271(1)(C) OF THE I.T. ACT. THE CIT(A) IN THE INSTANT CASE HAS CONSIDERED THE D ECISION OF THE TRIBUNAL UNDER IDENTICAL FACTS AND CIRCUMSTANCES APART FROM THE DECISION OF HONBLE APEX COURT IN THE CASE OF RELIANCE PETR O PRODUCTS PRIVATE LIMITED (SUPRA). THE VARIOUS DECISIONS RELIED ON BY T HE LD. DEPARTMENTAL REPRESENTATIVE ARE DISTINGUISHABLE AND NOT A PPLICABLE TO THE FACTS OF THE PRESENT CASE. IN VIEW OF THE ABOVE DIS CUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE PENALTY LEVIED BY THE AO U/S.271(1)(C) OF THE I.T. ACT. ACCORDINGLY, THE ORDER OF THE CIT(A) IS UPHELD AND THE GROUND RAISED BY THE REVENU E IS DISMISSED. 15. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20-05-2016. SD/- SD/- ( SUSHMA CHOWLA ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER IQ.KS PUNE ; DATED : 20 TH MAY , 2016. LRH'K 8 ITA NO.1444/PN/2014 ' (*+ ,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. % ( ) - THE CIT(A)-I, NASHIK 4. % S / THE CIT-I, NASHIK 5. ( ++, , , , IQ.KS / DR, ITAT, A PUNE; 6. 0 / GUARD FILE. / BY ORDER , // ( + //TRUE COPY //// 23 + , / SR. PRIVATE SECRETARY ,, IQ.KS / ITAT, PUNE