ACIT CC -I, Nashik V. Viva Highways Pvt Ltd, Nashik

ITA 187/PUN/2012

• Counselvise Citation: 18724514 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 01-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH VERMA; ANN KAPTHUAMA
• Assessee Lawyers: SHEETAL GADIYA
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER , AND SHRI G.S.PANNU, ACCOUNTANT MEMBER. ITA.NO.187/PN/2012 (ASSTT. YEAR : 2006-07) ACIT, CENTRAL CIRCLE-1, NASHIK. .. APPELLANT VS. VIVA HEIGHTS PVT. LTD., ASHOKA HOUSE, ASHOKA MARG, S.NO.861, WADALA, NASHIK. .. RESPONDENT PAN: AABCV3827E ASSESSEE BY : SHRI SHEETAL GADIYA DEPARTMENT BY : SHRI MUKESH VERMA AND MS.ANN KAPTHUAMA DATE OF HEARING : 22.04.2013 DATE OF PRONOUNCEMENT : 29.04.2013 ORDER PER SHAILENDRA KUMAR YADAV, JM : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) ON FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) NASHIK ERRED IN DELETING THE DISALLOWANCE OF 6,79,82,973/- ON ACCOUNT OF DEPRECIATION IN RESPECT OF 'INTANGIBLE ASSETS' IN THE FORM OF LICENSE FEE UNDER BOT SCHEME CLAIMED BY THE ASSESSEE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A)-I, NASHIK ERRED IN HOLDING THAT ASSE SSEE HAD ACQUIRED RIGHT TO COLLECT TOLL AND THIS RIGHT WAS A VALUABLE RIGHT HAVING COMMERCIAL VALUE WHEN IN FACT ASSESSEE WAS GETTING RECOUPMENT OF EXPENDITURE INCURRED ON CONSTRUCTION OF ROAD. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A)-I, NASHIK ERRED IN HOLDING THAT ASSESSEE WAS ENTITLED TO DEPRECIATION ON THE COST OF THE ROAD WHEN THE ASSES SEE HAD FAILED TO FULFILL CONDITIONS PRESCRIBED U/S. 32(L)(II)I.E. TH E ASSESSEE WAS NEITHER OWNER OF THE ROAD NOR HAD PUT THE ROAD FOR THE PURPOSE OF ITS BUSINESS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A)-I, NASHIK ERRED IN RELYING ON T HE RATIO OF THE DECISION RENDERED BY THE ITAT, D-BENCH, 2 MUMBAI IN THE CASE OF RELIANCE PORTS AND TERMINALS L IMITED WHICH IS DISTINGUISHABLE ON THE FACTS OF T HE PRESENT CASE. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A)-I, NASHIK ERRED IN RELYING ON THE DE CISION OF THE ITAT, D-BENCH, MUMBAI, EVEN THOUGH THE SAID DEC ISION CAN BE DISTINGUISHABLE ON FACT IN AS MUCH THE MATTE R INVOLVED IN THAT CASE IS RELATED TO LICENSE TO PAY LANDING/SHIFTING FEES WHEREAS IN THE ASSESSEE'S CAS E THE ISSUE INVOLVES LICENSE FEE ACQUIRED UNDER BOT SCHEME WHICH CAN NOT BE TERMED AS 'INTANGIBLE ASSETS'. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A)-I, NASHIK ERRED IN DELETING THE DI SALLOWANCE OF 33,21,000/- ON ACCOUNT OF SUPERVISION CHARGE PAID ON CASH BASIS WHEN THE ASSESSEE WAS FOLLOWING MERCANTI LE SYSTEM OF ACCOUNTING AND SUCH LIABILITY HAD NOT CRYST ALLIZED DURING THE YEAR. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF OPERATION AND MAINTENANCE OF INFRASTRUCTURE FACILITY (INDORE EDLABAD ROAD S.H.NO. 27) ON BUILD OPERATE & TRANSFER (BOT) BASIS AND THE BUSINESS OF F INANCING. THE ASSESSEE PAID MINIMUM ALTERNATE TAX U/S.115JB. THE ASSESSEE CLAIMED DEPRECIATION @ 25% ON LICENSE TO COLLECT TOLL AMOUNTING TO RS.16,79,82,973/-. THE ASSESSING OFFICER DISALLO WED THE CLAIM AND INSTEAD ALLOWED AMORTIZATION OF EXPENSES AT RS.8,2 5,13,228/-, THUS DISALLOWED THE DEPRECIATION AT RS.8,45,69,745/- AND RS.33,21,000/- ON ACCOUNT OF SUPERVISION FEES AS NOT ACCRUED IN THE PREVIOUS YEAR AND COMPUTED THE TOTAL INCOME ACCORDINGLY. AFTER ALLOWING CARRY FORWARD LOSSES OF RS.8,82,18,383/- (TH E ASSESSING OFFICER ALSO MADE DISALLOWANCE OF RS.33,00,000/-) THE INCOME WAS ASSESSED TO RS.NIL. MATTER WAS CARRIED BEFORE THE F IRST APPELLATE AUTHORITY ON VARIOUS GROUNDS INCLUDING ABOVE DISCUSSED TWO ISSUES. 3. THE FIRST ISSUE IS AGAINST ASSESSING OFFICER HOL DING THAT LICENCE TO COLLECT TOLL IS NOT AN INTANGIBLE ASSET EL IGIBLE FOR DEPRECIATION @ 25%. VARIOUS CONTENTIONS WERE RAISED BEFORE THE CIT(A) IN THIS REGARD WHO, HAVING CONSIDERED THE SAME , HAS ALLOWED THE CLAIM OF THE ASSESSEE. SAME HAS BEEN OPPOSED BEFOR E US BY THE 3 LD. DEPARTMENTAL REPRESENTATIVE, INTER ALIA, SUBMIT TED THAT THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE DISALLOWAN CE OF RS.16,79,82,973/- ON ACCOUNT OF DEPRECIATION IN RESPECT OF INTANGIBLE ASSETS IN THE FORM OF LICENSE FEE UNDER BO T SCHEME CLAIMED BY THE ASSESSEE. THE CIT(A) ERRED IN HOLDIN G THAT ASSESSEE HAS ACQUIRED RIGHT TO COLLECT TOLL AND THIS RIGHT WAS VALUABLE RIGHT HAVING COMMERCIAL VALUE WHEN IN FACT ASSESSEE WAS G ETTING RECOUPMENT OF EXPENDITURE INCURRED ON CONSTRUCTION OF ROA D. HE ALSO ERRED IN HOLDING THAT ASSESSEE WAS ENTITLED TO DE PRECIATION ON COST OF ROAD WHEN THE ASSESSEE HAS FAILED TO FULFIL C ONDITIONS PRESCRIBED U/S.32(1)(II), I.E., THE ASSESSEE WAS NE ITHER THE OWNER OF THE ROAD NOR IT HAD PUT ROAD FOR PURPOSES OF ITS BUSINESS . ON THE OTHER HAND, LD. AUTHORISED REPRESENTATIVE FOR THE ASSE SSEE RELIED ON THE DECISION OF THE CIT(A). 4. AFTER GOING THROUGH THE ABOVE SUBMISSIONS AND MATERI AL ON RECORD, WE FIND THAT THE ASSESSEE HAS GOT RIGHT TO COLL ECT TOLL FOR A SPECIFIED PERIOD WHICH WAS AUTHORISED BY MADHYA PRA DESH RAJYA SETU NIRMAN NIGAM LTD., A STATUTORY BODY OF GOVERNMEN T OF MADHYA PRADESH. THIS RIGHT TO COLLECT TOLL WAS CONSIDE RED AS ASSET BY THE ASSESSEE AS SAME WAS ACQUIRED AS PER LAW. T HIS RIGHT OF ASSESSEE WAS HAVING COMMERCIAL VALUE. THE ASSESSEE RAISED LOAN BY ASSIGNING THIS RIGHT TO COLLECT TOLL UNDER BOT SCHEME. IN THIS SITUATION, IT CAN BE INFERRED THAT RIGHT TO COLLECT TOL L IS AN INTANGIBLE ASSET COVERED BY THE INCOME TAX RULES, 1962. THE CIT (A) HAS RIGHTLY HELD THAT ASSESSEE IS ELIGIBLE FOR DEPRECIAT ION ON THIS ASSET. THIS VIEW IS FORTIFIED BY THE DECISION OF THE ITAT, PU NE BENCH, IN CASE OF SISTER-CONCERN OF THE ASSESSEE VIZ. ASHOKA INFOR MATION PVT. LTD. IN ITA.NO.44/PN/07 DATED 31.12.2008 AND OTHER DE CISIONS IN THE CSE OF RELIANCE PORTS AND TERMINALS LTD. IN ITA.N O.1743 TO 45/MUM/07 DATED 26.11.2007. IN THIS BACKGROUND, TH E CIT(A) WAS JUSTIFIED IN HOLDING THAT RIGHT TO COLLECT TOLL IS AN I NTANGIBLE ASSET ELIGIBLE FOR DEPRECIATION @ 25%. SAME IS UPHELD. 4 5. THE NEXT ISSUE IS WITH REGARD TO DISALLOWANCE OF SUPERVISION FEES OF RS.33,21,000/-. THE ASSESSING OFFICER HAS D ISCUSSED THIS ISSUE IN PARA 4 OF THE ASSESSMENT ORDER AS UNDER: FROM THE AUDIT REPORT IN FORM NO.3CD AT COLUMN NO.22 RE AD WITH ANNEXURE F, IT IS SEEN THAT THE ASSESSEE HAS D EBITED CERTAIN EXPENSES WHICH RELATE TO PRIOR PERIOD AS IS P OINTED OUT BY AUDITORS. THESE AMOUNT IN TOTAL TO RS.33,31,783/- OUT OF THESE RS.10,783/- HAVE BEEN DISALLOWED BY THE ASSES SEE IN THE COMPUTATION OF INCOME. BUT THE REST RS.33,21,000/- THE ASSESSEE HAS CLAIM THAT THESE EXPENSES WERE ASCERTA IN DURING THE CONCERNED FINANCIAL YEAR ON THIS ISSUE THE A.R. OF THE ASSESSEE WERE CONFRONTED AND WERE ASKED TO EXPLAIN TH E STAND OF THE ASSESSEE AND WHY SHOULD IT BE ALLOWED. IN RES PONSE TO THIS IN THE HEARING DATED 06/11/2008 THE A.R. OF THE ASSESSEE HAS CONTENDED THAT THE LIABILITY TOWARDS SUPERVISION FEES PAYABLE TO M.P.R.D.C. CRYSTALLIZED ON EVALUATION OF MAINTENANCE ISSUE, STAFF NEEDS, SCOPE OF SUPERVISION AND OTHER FACTORS AND SUCH EVALUATION WAS CARRIED OUT BY M.P.R. D.C. IN F.Y. 2005-06 AND ACCORDINGLY THE LIABILITY HAS ACCRU ED DURING THE CONCERNED FINANCIAL YEAR. THEREFORE THIS EXPENDI TURE CANNOT BE CALLED AS PRIOR PERIOD EXPENDITURE AS PER I NCOME TAX ACT. THE A.R. OF THE ASSESSEE HAS PLACED RELIANCE ON THE JUDGEMENT OF ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. ASHOK IRON & STEEL ROLLING MILL 199 ITR 819. THE CONTE NTIONS OF THE A.R. HAVE BEEN GIVEN DUE THOUGHT, THE A.R. HA S FILED ONE LETTER FROM M.P.R.D.C. IN WHICH THE ABOVE DISCUSSED A MOUNT OF SUPERVISION FEES HAS BEEN MENTIONED. FROM THE STUDY OF THE SAME ALONGWITH THE CONCESSION AGREEMENT WITH M.P.R.D.C . IT IS SEEN THAT THE ISSUE OF PAYMENT OF SUPERVISION FEES WAS THERE VERY MUCH AND IN CLEAR LANGUAGE MENTIONED IN THE CONC ESSION AGREEMENT AT MULTIPLE TIMES. FURTHER FROM THE STUDY OF BOTH IT CAN BE SEEN THAT THE DELIBERATIONS ON THE CONCERNED MA TTER WERE GOING ON IN CONTINUOUS MANNER. THE ABOVE MENTIONED LETTER FROM M.P.R.D.C. SPEAKS AT POINT 4 THAT THE DIV ISIONAL OFFICERS OF M.P.R.D.C. WILL ACT AS MAINTENANCE CONSULT ANT FOR THAT PURPOSE. THEREFORE FROM THE ABOVE DELIBERATION IT IS CLEAR THAT THE ASSESSEE NEEDED TO PAY THE SUPERVISION FEES. FOLLOWING THIS THE ASSESSEE COULD HAVE MADE THE PROVI SION FOR THESE EXPENSES AND COULD HAVE CLAIMED THE SAME IN TH OSE CONCERNED YEARS. FURTHER FROM THE RECORD SUBMITTED BY THE ASSESSEE IT IS NO WHERE SEEN THAT THE ASSESSEE IS H AVING A DISPUTE REGARDING THE QUANTUM OF THESE PAYMENTS. IN SUCH A SITUATION IT CANNOT BE SAID THAT THE LIABILITY TO PAY SUPERVISION FEES HAS ACCRUED IN THE CONCERNED FINANCIAL YEAR. T HEREFORE, CONTENTION OF THE ASSESSEE CANNOT BE ACCEPTED AND THE A MOUNT OF RS.33,21,000/- IS DISALLOWED AND ADDED BACK TO THE RETURNED INCOME OF THE ASSESSEE. 5 6. MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUT HORITY, WHO HAS GRANTED RELIEF TO THE ASSESSEE BY OBSERVING AS UN DER: 7.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE, THE ASSESSMENT ORDER AND THE RIVAL SUBMISSIONS. ON GOING THROUGH THE RELEVANT FACTS, IT IS EVIDENT THAT THE L IABILITY IN RESPECT OF THE SUPERVISION CHARGES FOR THE FINANCIAL Y EAR 2003- 04 AND 2004-05 GOT CRYSTALLIZED VIDE LETTER DATED 11 /10/2005 OF M.P.R.D.C. (MADHYA PRADESH RAJYA SETY NIRMAN NIGA M LTD., THE STATUTORY BODY OF GOVT. OF MADHYA PRADESH). THIS L ETTER WAS ALSO PLACED BEFORE THE ASSESSING OFFICER DURING T HE ASSESSMENT PROCEEDINGS, WHICH HAS CLEARLY STATED TH E FACT THAT THE CORPORATION HAS DEMANDED THE SUPERVISION CHARGES @ 16,60,500/- FOR THE YEAR 2003-04 AND HAS THE SUPERVI SION CONTINUED DURING F.Y. 2004-05, THEREFORE, THE LIABILI TY FOR PAYMENT OF RS.33,21,000/- HAD CRYSTALLIZED VIDE LETT ER DATED 11/10/2005 THAT WAS RECEIVED DURING THE PREVIOUS YEA R RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL. THER EFORE, THE CLAIM IS ALLOWABLE THIS YEAR AND THERE IS NO JUSTIFI CATION FOR ANY DISALLOWANCE ON THIS ACCOUNT. CONSEQUENTLY, THE IMPUG NED DISALLOWANCE OF RS.33,21,000/- IS UNWARRANTED AND TH E SAME IS DIRECTED TO BE DELETED. THIS GROUND OF APPEAL IS ALLOWED. 7. SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF THE REVE NUE INTER ALIA SUBMITTED THAT THE CIT(A) ERRED IN DELET ING THE DISALLOWANCE OF RS.33,21,000/- ON ACCOUNT OF SUPERVISI ON CHARGES PAID ON CASH BASIS WHEN THE ASSESSEE WAS FOLLOWING ME RCANTILE SYSTEM OF ACCOUNTING AND THAT LIABILITY HAD NOT CRYSTA LLIZED DURING THE YEAR. ON THE OTHER HAND THE LD. AUTHORISED REPRE SENTATIVE FOR ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER WAS N OT JUSTIFIED IN DISALLOWING SUPERVISION FEES OF RS.33,21,000/- ON THE GROUND THAT FEES ACCRUED IN EARLIER YEAR, AND THE CIT(A) WAS JU STIFIED IN ALLOWING THE SAME. IN SUM AND SUBSTANCE, THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A) ON THE ISSUE. 8. AFTER GOING THROUGH THE ABOVE SUBMISSIONS AND MATERI AL ON RECORD, WE FIND THAT THE LIABILITY IN RESPECT OF SUPE RVISION EXPENSES IN RESPECT OF F.Y. 2003-04 AND 2004-05 CRYSTALLISED VIDE LETTER DATED 11.10.2005 OF M.P.R.D.C. THOUGH THIS LETTER WAS PROD UCED BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEED INGS, INTER ALIA 6 STATED THAT THE CORPORATION HAS DEMANDED SUPERVISION CH ARGES @ RS.16,60,500/- FOR F.Y. 2003-04 AND AS SUPERVISION CONTINUED DURING F.Y. 2004-05, THEREFORE LIABILITY FOR PAYMENT OF RS.33,21,000/- IN FACT CRYSTALLISED VIDE LETTER DAT ED 11.10.2005 WHICH WAS RECEIVED DURING THE PREVIOUS YEAR RELEVAN T TO ASSESSMENT YEAR. THEREFORE, THE CIT(A) HELD THAT CLAIM WAS ALL OWABLE UNDER CONSIDERATION. THIS REASONED FINDING OF CIT(A) WHEREBY HE HAS HELD ALLOWABLE TO BE CRYSTALLISED IN THE YEAR UNDER CONSID ERATION ON THE BASIS OF LETTER DATED 11.10.2005 IS JUSTIFIED WHICH NEEDS NO INTERFERENCE FROM OUR SIDE. ACCORDINGLY SAME IS UPHEL D. 9. AS A RESULT, APPEAL FILED BY THE ASSESSEE REVENU E IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 29 TH DAY OF APRIL, 2013. SD/- SD/- ( G.S.PANNU ) ( SHAILENDRA KUMAR YAD AV ) ACCOUNTANT MEMBER JUDICIAL MEMBER GSPS PUNE, DATED THE 29 TH APRIL, 2013 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE ACIT, CIRCLE-1, NASHIK. 3. THE CIT(A)-I, PUNE. 4. THE CIT(CENTRAL), NAGPUR. 5. THE DR A BENCH, PUNE. 6. GUARD FILE. BY ORDER //TRUE COPY// PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE.