Tamilnadu Road Development Co. Ltd., CHENNAI V. ACIT, CHENNAI

ITA 2192/CHNY/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7792 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 22-12-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 27-08-2014
• Court: TRIBUNAL
• Department Lawyers: S JAYANTHI KRISHNAN
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Depreciation; Reasonable cause; Non compliance
• Section: 143(3); 263

Judgement Text

, ' ' , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , . , $ % BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ' ( / APPELLANT BY : SHRI A . S. SRIRAMAN, ADVOCATE +,' ( / RESPONDENT BY : MR S . JAYANTHI KRISHNAN ( /DATE OF HEARING : 22.12.2016 ( /DATE OF PRONOUNCEMENT : 23.12.2016 /O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER: THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX -3, CHENNAI IN C. NO. 3033(17)/CIT-II I/263/2013-14, DATED 18.11.2013 PASSED U/S. 263 OF THE INCOME TAX ACT. ./ I.T.A. NO. 2192/MDS/2014 / ASSESSMENT YEAR : 2009-10 M/S. TAMILNADU ROAD DEVELOPMENT CO. LTD 171, 2 ND FLOOR, TNMB BUILDING, SOUTH KESAVAPERUMAL ROAD, GREENWAYS ROAD, R.A. PURAM, CHENNAI 600 028. [PAN: AABCT 3389H] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE III(1), CHENNAI. ( / APPELLANT) ( /RESPONDENT) :-2-: I.T.A. NO. 2192/MDS/2014 2. THE ASSESSEE HAS RAISED THE GROUNDS CHALLENGING THE JURISDICTIONAL U/S. 263 OF THE ACT AND ALSO NON COMPLIANCE OF TWIN COND ITIONS. THE CIT FAILED TO APPRECIATE THAT THE DEPRECIATION ON DEVELOPING AND MAINTAINING THE ROADS DEALT BY THE ASSESSING OFFICER AND ALLOWED THE DEPRECIATION. FURTHER, CIT FAILED TO CONSIDER THAT THE DEPRECIATION ON LEASEHOLD RIGHTS INADVERTE NTLY MENTIONED AS LEASEHOLD LAND AND THE LD. AO CONSIDERED THE FACTS AND ALLOWED THE DEPRECIATION AND PRAYED FOR SET ASIDE THE REVISION ORDER OF CIT. 3. BEFORE WE PROCEEDED FOR HEARING THERE IS A DELAY OF 225 DAYS IN FILING THE APPEAL BY THE ASSESSEE. THE LD. AR FILED CONDONATION PETITION AND EXPLAINED THE CIRCUMSTANCES FOR DELAY, WHICH ARE NO T DELIBERATE. FURTHER, LD. DR OF THE ASSESSEE HAS NO SERIOUS OBJECTIONS FOR CO NDONATION OF DELAY. AFTER HEARING THE SUBMISSIONS, WE ARE SATISFIED WITH THE REASONABLE CAUSE EXPLAINED IN AFFIDAVIT FOR FILING THE APPEAL BELATE DLY. THEREFORE, THE DELAY IS CONDONED AND APPEALS ARE ADMITTED. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PUBLIC LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF IMPROVEMENT, DEVELOPMENT AND IMPLEMENTATION OF INFRASTRUCTURE ROAD PROJECTS AND JOINT VENTURE WITH TIDCO AND INFRASTRUCTURE LEASING AND FINANCIAL SERVICES L TD., AND FILED RETURN OF INCOME ON 26.09.2009 DECLARING NILL INCOME. SUBSEQ UENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S. 143(2) WAS IS SUED. THE LD. AR APPEARED FROM TIME TO TIME AND CASE WAS DISCUSSED. THE ASSE SSING OFFICER FOUND THAT :-3-: I.T.A. NO. 2192/MDS/2014 THE ASSESSEE HAS CLAIMED DEPRECIATION ON IMPROVEMEN T OF ROADS. WHEREAS, THE ASSESSEE HAS CLAIMED TOTAL DEPRECIATION OF RS. 2,42,99,403/-, AND THE ACTUAL DEPRECIATION AS PER COMPANIES ACT IS RS. 1,9 6,32,037/- AND ON PERUSAL OF FURTHER RECORDS, ASSESSING OFFICER FOUND THAT TH E DEPRECIATION OF RS. 2,07,43,371/- WAS IN RESPECT OF ROADS IMPROVEMENT A ND ELECTRICAL INSTALLATION AS PLANT AND MACHINERY. THE LD. AR SUBMITTED THAT IN THE ASSESSEE'S OWN CASE, IN EARLIER YEAR DEPRECIATION WAS ALLOWED BY T HE CO-ORDINATE BENCH OF THE TRIBUNAL AT 10% AS AGAINST 15% CLAIMED. WHEREAS, TH E LD. AO HAS RESTRICTED DEPRECIATION @ 10% AS APPLICABLE TO BUILDING AND DI SALLOWED EXCESS DEPRECIATION OF RS. 68,61,960/- AND PASSED ORDER U/ S. 143(3) DATED 28.10.2011. SUBSEQUENTLY, LD. CIT IN THE REVISION PROCEEDINGS ISSUED SHOW CAUSE NOTICE DATED 28.10.2013 ON THE TWO ISSUES, AS THE ASSESSMENT ORDER 143(3) OF THE ACT PASSED BY THE ASSESSING OFFICER I S ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. FURTHER, THE ASSES SING OFFICER HAS ALLOWED THE DEPRECIATION AT THE RATE OF 10% ON THE ROADS DEVELO PMENT MAINTAINED BY THE ASSESSEE, BUT ACTUALLY THE ASSESSEE IS NOT THE OWNE R OF THE ROADS AND SECONDLY THE ASSESSEE CLAIMED DEPRECIATION ON LEASE HOLD LAND AND THERE ARE NO FINDINGS BY THE LD. AO IN ORDER AND ALSO DEPRECI ATION CANNOT BE ALLOWED ON THE LAND. THE ASSESSEE FILED WRITTEN SUBMISSIONS O N 05.11.2013 EXPLAINING THAT THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION ON R OADS ON PAR WITH THE PLANT AND MACHINERY AND RELIED ON TRIBUNAL DECISION IN TH E ASSESSEE'S OWN CASE IN ITA NO. 2082/MDS/2008 & 817/MDS/2007 FOR THE ASSESS MENT YEARS 2003-04 & :-4-: I.T.A. NO. 2192/MDS/2014 2004-05 DATED 24.10.2008, WHERE THE DEPRECIATION ON ROADS SHALL BE ON PAR WITH RATE OF BUILDINGS. SIMILARLY, IT HAS CLAIMED THE DEPRECIATION ON LEASEHOLD RIGHTS WERE INADVERTENTLY MENTIONED AS LEASEHOLD LA ND AND THE SAID AMOUNT WAS AMORTISED IN THE BOOKS OF ACCOUNTS AND TREATED AS INTANGIBLE ASSET AND CLAIMED THE DEPRECIATION RATE @ 25%. THE LD. CIT C ONSIDERED THE SUBMISSIONS AND SET ASIDE THE ASSESSMENT ORDER PASS ED U/S. 143(3) OF THE ACT DATED 18.11.2013 AND DIRECTED THE ASSESSING OFF ICER TO MAKE FRESH ASSESSMENT. 5. AGGRIEVED BY THE ORDER, ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL. THE LD. AR ARGUED THAT THE ORDER PASSED BY THE CIT IS NOT IN ACCORDANCE WITH THE LAW AS TWIN CONDITIONS OF ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF THE JUSTICE WAS NOT SATISFIED. THE ASSE SSING OFFICER HAS RESTRICTED DEPRECIATION ON ROADS AT 10% BASED ON DECISION OF T RIBUNAL IN ASSESSEE'S OWN CASE FOR EARLIER YEARS. ON OTHER ISSUE, THE CL AIM OF DEPRECIATION ON LEASEHOLD LAND, THE ASSESSEE STATED THAT IT IS THE LEASEHOLD RIGHTS IN THE PROPERTY AND AMORTISED AND CLAIMED DEPRECIATION TRE ATING AS INTANGIBLE ASSET. CONTRA, THE LD. DR RELIED ON THE ORDERS OF THE CIT. 6. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATE RIAL ON RECORD AND JUDICIAL DECISIONS, THE LD. AR ARGUED THAT THE ASSE SSEE IS ELIGIBLE FOR DEPRECIATION ON ROAD ON PAR WITH THE RATE APPLICABL E TO THE BUILDING. WE FIND :-5-: I.T.A. NO. 2192/MDS/2014 THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE ASSESS EE'S OWN CASE TAMIL NADU ROAD DEVELOPMENT COMPANY LTS., VS ACIT IN ITA NO. 2 082/MDS/2006 & 817/MDS/2007, FOR THE ASSESSMENT YEARS 2003-04 & 20 04-05 DATED 24.10.2008 HAS HELD THAT THE 'ROAD IS NOT PLANT BUT AFTER ASSESSMENT YEAR 1988-89 IS INCLUDED IN THE CATEGORY OF BUILDING AND ELIGIBLE FOR DEPRECIATION AS SUCH.' WE RESPECTFULLY FOLLOWING THE CO-ORDINATE BENCH D ECISION ALLOW THE GROUND OF THE ASSESSEE ON DEPRECIATION ON ROAD. 7. ON THE SECOND ISSUE OF CLAIM OF DEPRECIATION ON LEASEHOLD RIGHTS IN THE PROPERTY, WE PERUSED THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS NOT MADE ANY FINDINGS OR REFERENCE OF SUBMISSIONS ON TH E DISPUTED ISSUE. FURTHER, THE ASSESSEE HAS TREATED LEASEHOLD RIGHT A S INTANGIBLE ASSET AND CLAIMED DEPRECIATION. THE LD. AR SUPPORTED HIS ARG UMENTS RELYING ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CI T VS. MAX INDIA LTD., 166TAXMAN 0188, HELD WHERE TWO VIEWS ARE POSSIBLE, AND THE ITO HAS TAKEN ONE VIEW, WHICH CIT DOES NOT AGREE, IT CANNOT BE TR EATED AS ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF REVENUE IN THE CONTE XT OF PROFITS IN REALTION TO PROVISIONS OF SECTION 80HHC(3) OF THE ACT. WHEREAS , IN THE PRESENT CASE, THE ASSESSING OFFICER HAS NOT ADOPTED ANY METHODOLOGY O R TAKEN VIEW ON CLAIM OF DEPRECIATION ON LEASEHOLD RIGHTS IN THE ASSESSMENT ORDER IN RESPECT OF INTANGIBLE ASSET. CONSIDERING APPARENT FACTS, MATE RIAL ON RECORD AND JUDICIAL DECISION, WE ARE OF THE OPINION THAT THIS MATTER HA S TO BE RE-EXAMINED BY THE :-6-: I.T.A. NO. 2192/MDS/2014 ASSESSING OFFICER AND WE REMIT THE DISPUTED ISSUE O F CLAIM OF DEPRECIATION ON LEASEHOLD RIGHTS TO THE FILE OF THE ASSESSING OFFIC ER TO EXAMINE AND VERIFY THE GENUINENESS OF FACTS AND ALLOW THE CLAIM AS PER THE PROVISION OF LAW AND ASSESSEE SHALL BE PROVIDED ADEQUATE OPPORTUNITY OF HEARING BEFORE PASSING THE ORDER. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 23 RD DAY OF DECEMBER, 2016 AT CHENNAI. SD/ - ( . ) (ABRAHAM P. GEORGE) ! / ACCOUNTANT MEMBER SD/ - ( . ) (G. PAVAN KUMAR) $ ! /JUDICIAL MEMBER /CHENNAI, 2 /DATED: 23 RD DECEMBER, 2016 JPV ( +$45 65 /COPY TO: 1. ' /APPELLANT 2. +,' /RESPONDENT 3. 7 ( )/CIT(A) 4. 7 /CIT 5. 5 +$$ /DR 6. /GF