DCIT, Circle - 2(2), Kolkata V. Naba Diganta Water Management Limited, Kolkata

ITA 1794/KOL/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4543 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-10-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 29-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DHRUBA JYOTI RAY JCITSRDR
• Assessee Lawyers: KIRIT KAMADAR
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH VIRTUAL COURT A KOLKATA BEFORE SHRI P.M.JAGTAP, VICE-PRESIDENT AND SHRI S.S.GODARA, JUDICIAL MEMBER ITA NO.1794/KOL/2019 ASSESSMENT YEAR:2013-14 DCIT, CIRCLE-2(2) AAYAKAR BHAWAN, ROOM NO. 24, 7 TH FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 / VS . M/S NABA DIGANTA WATER MANAGEMENT LTD., GN-11- 19, SALT LAKE, SECTOR-V, KOLKATA-700 091 [ PAN NO.AACCN 6958 P ] /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI DHRUBAJYOTI RAY, JCIT-SR-DR /BY RESPONDENT SHRI KIRIT KAMADAR, FCA /DATE OF HEARING 07-10-2020 /DATE OF PRONOUNCEMENT 21-10-2020 /O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2013-14 A RISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-1, KOLKATA DAT ED 02.05.2019, PASSED IN CASE NO. 10167/CIT(A)-1/KOL/CIRCLE-2(2)/2016-17 U/S 143( 3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THE REVENUES SOLE SUBSTANTIVE GRIEVANCE CANVASS ED IN THE INSTANT APPEAL PLEADS THAT CIT(A) HAS ERRED IN LAW AND ON FACTS IN REVERSING THE ASSESSING OFFICERS FINDINGS DISALLOWING ASSESSEES DEPRECIATION CLAIM OF 2,67,26,848/- AFTER ALLEGEDLY IGNORING THE CLINCHING ASPECT THAT THE ASSET OR BLO CK OF ASSETS RELEVANT THERETO WAS NEITHER WHOLLY NOR PARTLY WAS UNDER ITS OWNERSHIP I N VIEW OF THE BOT ITA NO.1794/KOL/2019 ASSESSMENT YEAR:2013-1 4 DCIT, CIR-2(2), KOL. VS. M/S NABA DIGANTA WATER MANAGEMENT LTD. PAGE 2 CONCESSIONAIRE AGREEMENT. AND THAT THE SAME ALSO IS CONTRAVENTION OF THE CBDTS CIRCULAR DATED 23.04.2014 BEARING NO.9/2014[ F.NO.225/182/2013/ITA.II ] DATED 23.04.2014. OUR ATTENTION INVITED TO THE CIT(A)S A PPEAL DETAILED DISCUSSION TO THIS EFFECT READING AS UNDER:- 4. I AM ADJUDICATING GROUND OF APPEAL NO. 1 AT THE VERY OUTSET WHEN MR. KIRIT KAMDAR, F.C.A., APPEARED. THE ISSUE PERTAINS TO DEP RECIATION ON INTANGIBLE ASSET. THE ID. A.O. STATED THAT THE ASSESSEE DID NOT OWN THE A SSETS AND, THEREFORE, WAS NOT ELIGIBLE FOR CLAIM OF ANY DEPRECIATION. AN ADDITION OF RS.2, 67,26,848/- WAS MADE BY THE ID. A.O. 5. THE ID. A.R. OF THE ASSESSEE APPEARED BEFORE ME. HE HAS RELIED ON THE DECISION ISSUED BY MY LD. PREDECESSOR VIDE ORDER DATED 03.08 .2017 FOR THE ASSESSMENT YEAR 2012-13. 6. I HAVE GONE THROUGH THE BINDING ORDER OF MY LD. PREDECESSOR. THE SAME STATES AS FOLLOWS AT PAGE NO. 27 TO 29 OF THE APPELLATE ORDER FOR THE ASSESSMENT YEAR 2012-13 ( PAGE NO. 146 TO 148 OF THE PAPER BOOK FILED BY THE APPELLANT) : 'IN VIEW OF THE ABOVE DISCUSSION AND BASED UPON INF ERENCE DRAWN FROM MATERIAL ON RECORD, IT IS FOUND THAT THERE IS SUBST ANCE IN THE CONTENTIONS OF THE APPELLANT. FIRSTLY, ITS OBSERVED THAT ADMITTEDLY TH E APPELLANT COMPANY HAS CLAIMED DEPRECIATION ON TANGIBLE ASSETS UNDER SECTI ON 32(1)(II) OF THE ACT, AND NOT IN RESPECT OF INTANGIBLE ASSETS AS HELD BY THE A.O. THE APPELLANT IS FOUND TO BE ' OWNER ' JOINTLY AND PARTLY OF THE FIXED AND ' TANGIBLE ' ASSETS, ON ACCOUNT OF THE FACT OF INVESTMENT IN THE DEVELOPMENT AND BRINI NG INTO EXISTENCE OF THE ' FIXED ASSETS ', THE WDV ( WRITTEN DOWN VALUE ) OF THE ASSETS WAS RS.35,10,61,555/ - AND ON ADDITIONS MADE DURING THE YEAR AGGREGATING TO RS.28,98,312/- SHOWN IN THE BLOCK OF ASSETS I.E. IN FRASTRUCTURE FACILITIES COMPRISING OF WATER AND SEWERAGE NETWORK IN NABA DI GANTA INDUSTRIAL TOWNSHIP AUTHORITY ( NBIDTA ) IN SECTOR- V, SALT LAKE CITY, KOLKATA. THESE ASSETS ARE FOUND TO BE DULY ACCOUNTED FOR IN THE CO MPANY'S BOOKS OF ACCOUNTS AND ALSO DEPICTED IN THE BLOCK OF ASSETS IN THE TAX AUDIT REPORT FILED WITH THE RETURN OF INCOME FOR THE RELEVANT AY. 2012-13 UNDER CONSIDERATION. FROM PERUSAL OF MATERIAL ON RECORD ITS OBSERVED THAT THE APPELLANT COMPANY WAS REQUIRED TO ' A . TRANSFER, ASSIGN AND DELIVER TO NDITA OR ITS NOMI NATED AGENCY, FREE AND CLEAR OF ANY ENCUMBRANCES, THE VACANT AND PEACEFUL POSSESSION OF THE PROJECT ASSETS, THE LEASE LAND ALONG WITH THE BUILD INGS, FACILITIES AND STRUCTURES CONSTRUCTED ON, OVER, AT OR UNDER IT AND ITS RIGHT, TITLE AND INTEREST IN AND TO THE PROJECT AND THE PROJECT ASSETS; B . TRANSFER ALL ITS RIGHT, TITLES AND INTEREST IN OR OVER THE PROJECT ASSETS (INCLUDING M OVABLE ASSETS WHICH NDIT A AGREES TO TAKE OVER) TO NDITA OR ITS NOMINATED AGEN CY AND EXECUTE SUCH DEEDS AND DOCUMENTS AS MAY BE NECESSARY FOR THE PUR POSE AND COMPLETE ALL LEGAL OR OTHER FORMALITIES REQUIRED IN THIS REGARD. ' THUS, OWNERSHIP OF THE ASSETS VESTS WITH THE APPELL ANT FOR THE PERIOD OF 30 YEARS.' THUS, IT IS FOUND THAT THE APPELLANT COMPAN Y WAS VESTED WITH THE OWNERSHIP OF THE TANGIBLE ASSETS COMPRISING OF INFR ASTRUCTURAL FACILITIES, AND WAS ASSIGNED THE RIGHT AS PER CONTRACTUAL AGREEMENT TO TRANSFER THE SAID PROJECT ITA NO.1794/KOL/2019 ASSESSMENT YEAR:2013-1 4 DCIT, CIR-2(2), KOL. VS. M/S NABA DIGANTA WATER MANAGEMENT LTD. PAGE 3 AND THE PROJECT ASSETS IN QUESTION TO NDITA OR ITS NOMINATED AGENCY, AND THUS EXERCISED THE RIGHT OF OWNERSHIP TO THE EXCLUSION O F OTHERS INCLUDING THE RIGHT TO TRANSFER THE SAID PROJECT ASSETS. IT IS ALSO OBSERVED THAT THE A.O. HAD ERRED IN TREA TING THE ASSETS AS INTANGIBLE ASSETS IN HIS FINDING, WITHOUT ANY BASIS, REGARDING THE APPELLANT'S CLAIM FOR DEPRECIATION, WHICH IS CONTRARY TO THE INFERENCE DR AWN FROM FACTS ON RECORD. THE APPELLANT'S AR. HAS CONTENDED THAT ' OWNERSHIP ' IS DEFINED AS 'THE COLLECTION OF RIGHT TO USE AND ENJOY PROPERTY, INCL UDING RIGHT TO TRANSMIT IT TO OTHERS .... THE RIGHT OF ONE OR MORE PERSONS OR USE A THING TO THE EXCLUSION OF OTHERS.' THE AR. HAS RELIED UPON THE DECISION OF TH E HON'BLE SUPREME COURT IN CASE OF ICDS LTD VS. CIT (2013) 350 ITR 527 (SC) AN D IN MYSORE MINERALS V CIT [1999] 239 ITR 755, WHEREIN THE TERM ' OWNER ' IN THE CONTEXT OF DEPRECIATION BELONGS TO A PERSON, WHO HAS INVESTED IN THE ASSETS; IS UTILIZING THE ASSET; THEREBY GRADUALLY LOSING THE VALUE OF IN VESTMENT ON ACCOUNT OF WEAR AND TEAR OF THE ASSET. FURTHER, RELIANCE WRITTEN SU BMISSION ALSO PLACED ON DECISION OF THE HYDERABAD TRIBUNAL IN CASE OF DCIT VS. SWARNA TOLLWAY PVT. LTD. ( 30 ITR 625 ), WHEREIN IT WAS HELD THAT, THOUGH THE NHAI REMAI NS LEGAL OWNER OF THEE SITE WITH FULL POWERS TO HOLD, DISPOS E OF AND DEAL WITH THE SITE CONSISTENT WITH THE PROVISIONS OF THE AGREEMENT, TH E ASSESSEE HAD BEEN GRANTED NO MERELY THE RIGHT TO POSSESSION BUT ALSO THE RIGH T TO ENJOYMENT FOR THE SITE AND NHAI WAS OBLIGED TO DEFEND THIS RIGHT AND THE A SSESSEE HAS THE POWER TO EXCLUDE OTHERS.... THE TERM ' OWNED ' AS OCCURRING IN SECTION 32(1) OF THE ACT MUST BE ASSIGNED A WIDER MEANING. 'THEREFORE, AS RE GARDS THE ISSUE OF LEGAL ' OWNERSHIP ' OF THE IMPUGNED ASSETS, IT IS HELD THAT IN VIEW O F THE ABOVE FACTS AND RATIO OF THE CITED CASE LAWS, THE APPELLANT IS TO BE TREATED AS THE OWNER OF THE TANGIBLE ASSETS BROUGHT INTO EXISTENCE BY INVES TMENT AND DEVELOPED BY THE APPELLATE COMPANY. THIS POSITION IS FORTIFIED BY TH E DECISION OF THE HON'BLE SUPREME COURT IN THE CASE IF CIT VS. PODDAR CEMENT PVT. LTD . (1997) 226 ITR 625 (SC), BECAUSE THE ASSESSEE IS ENTITLED TO RECEI VE INCOME FROM THE ' INFRASTRUCTURE FACILITY ' I.E. TANGIBLE ASSETS IN ITS OWN RIGHT TO THE EXCL USION OF OTHERS. HENCE, IT IS HELD THAT THE AO WAS NOT JUSTI FIED IN DENIAL OF DEPRECIATION ON THE FIXED ASSETS DURING THE AY. 2012-13 UNDER CO NSIDERATION. THE AO IS DIRECTED TO ALLOW THE APPELLANT'S CLAIM OF DEPRECIA TION' AMOUNTING TO RS.15,12,44,334/- . THIS GROUND IS ALLOWED . ' 3. IT IS CRYSTAL CLEAR FROM A PERUSAL OF THE ABOVE EXTRACTED LOWER APPELLATE DISCUSSION THAT THE CIT(A) HAS FOLLOWED HIS ORDER P ERTAINING TO THE PRECEDING ASSESSMENT YEAR 2012-13 QUA THE VERY ISSUE. LEARNED AUTHORIZED REPRESENTATIVE QUOTED THIS TRIBUNALS CO-ORDINATE BENCHS ORDER IN REVENU ES APPEAL ITA NO.2301/KOL/2017 DECIDED ON 09.08.2019 UPHOLDING THE CIT(A)S IDENTI CAL FINDINGS DELETING THE IMPUGNED DEPRECIATION DISALLOWANCE. THE SAID CO-ORD INATE BENCH QUOTED HON'BLE APEX COURT DISCUSSION MYSORE MINERAL LTD. VS. COMMISSIONER OF INCOME TAX (1999) 239 ITR 755 (SC) THAT THE LEGISLATIVE INTENTION BEHIND ENACTMENT OF SEC.32 IN THE ACT WAS BEST FULFILLED BY ALLOWING DEPRECIATION TO THE PERS ON; WHO FOR THE TIME BEING, WAS ITA NO.1794/KOL/2019 ASSESSMENT YEAR:2013-1 4 DCIT, CIR-2(2), KOL. VS. M/S NABA DIGANTA WATER MANAGEMENT LTD. PAGE 4 HAVING DOMINANCE OR CONTROL AND ENTITLED TO USE THE RELEVANT ASSETS IN HIS OWN RIGHT AND HAD BEEN USING THE SAME FOR THE PURPOSE OF CARR YING OUT THE BUSINESS OR PROFESSION. THE TRIBUNALS SAID ORDER EXAMINED THE CORRESPONDING DETAILS OF THE PROJECT IN QUESTION AS WELL TO CONCLUDE THAT THE ASSESSEE ONLY EXERCISED CONTROL AND DOMINANCE OVER THE PROJECT ASSETS FOR THE PURPOSE R UNNING / MANAGING THE WATER MANAGEMENT FACILITIES. CASE RECORDS AT PAGE 19 INDI CATE THAT THE RELEVANT BLOCK(S) OF ASSETS HAVE REMAINED THE SAME SINCE THE ASSESSEE HA S MADE ADDITION OF 71,281/- ONLY IN THE RELEVANT PREVIOUS YEAR. WE THUS ADOPT JUDICI AL CONSISTENCY TO UPHOLD THE CIT(A)S ACTION DELETING THE IMPUGNED DEPRECIATION DISALLOWANCE. THE REVENUE FAILS IN ITS SOLE SUBSTANTIVE GRIEVANCE. 4. THIS REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 21/10/2020 SD/- SD/- (P.M.JAGTAP) (S.S.GODARA) ( !) (#$ ') VICE PRESIDENT JUDICIAL MEMBER *DKP-SR.PS ( - 21/10/2020 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DCIT, CIR-2(2), ROOM NO.24, 7 TH FLOOR, AAYAKAR BHAWAN, P-7, CHOWRINGH EE SQUARE, KOLKATA-69 2. /RESPONDENT-M/S NABA DIGANTA WATER MANAGEMENT LTD., GN-11-19, SALT LAKE, SEC TOR-V, KOLKATA-91 3. + . / CONCERNED CIT 4. . - / CIT (A) 5. / $$+ , + / DR, ITAT, KOLKATA 6. 3 / GUARD FILE. BY ORD ER/ , /TRUE COPY/ +,