DCIT, New Delhi V. M/s Paradip Port Road Co. Ltd., New Delhi

ITA 2689/DEL/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2113 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 11-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: KHUSHBOO GARG
• Keywords: Depreciation

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH G, NEW DELHI BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 2689/DEL/2016 ASSESSMENT YEAR: 2012-13 DCIT, CIRCLE 19(2), NEW DELHI. (APPELLANT) VS. PARADIP PORT ROAD CO. LTD., G-5&6, SECTOR-10, DWARKA, NEW DELHI PAN-AADCP2458F (RESPONDENT) APPELLANT BY SH. S.S. RANA, CIT/DR RESPONDENT BY MS KHUSHBOO GARG, CA ORDER PER L.P. SAHU, A.M.: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)- 7, NEW DELHI DATED 17.02.2016 FOR THE ASSESSMENT YE AR 2012-13 ON THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 23,85,71, 095/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DIFFERENCE BETWEEN THE DEPRECIATION CLAIMED AT RS 42,48,04,025/- AND DEPRECIATION ALLOW ED ON THE BASIS OF AMORTIZATION FOR THE REMAINING PART OF THE CONCESSI ONAIRE AGREEMENT I.E FROM 01.04.2011 TO 24.03.20M AT RS 18,62,32,930 /-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN IGNORING THE BOARDS CIRCULAR NO 9/2014 DA TED 23.04.2014 DATE OF HEARING 27.08.2018 DATE OF PRONOUNCEMENT 04 .09.2018 ITA NO. 2689/DEL/2016 2 WHEREIN IT HAS CLARIFIED DISPUTES ARISEN BY REFERRI NG THE CASE LAW OF HONBLE SUPREME COURT IN THE CASE OF MADRAS INDUSTR IAL INVESTMENT CORPORATION LTD. VS CIT IN 225 ITR 802 WHEREIN IT HAS ALLOWED SPREADING OVER OF LIABILITY OVER A NUMBER OF YEARS ON THE GROUND THAT THERE WAS CONTAINING BENEFIT TO THE COMPANY OVER A PERIOD. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED RETURN ON 28.09.2012 DECLARING LOSS OF RS.60,87,73,453/-. SUB SEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES WERE IS SUED TO THE ASSESSEE. THE ASSESSEE COMPANY HAS BEEN SET UP TO DEVELOP, ESTABL ISH, CONSTRUCT, OPERATE AND MAINTAIN A PROJECT RELATING TO CONSTRUCTION OPE RATION AND MAINTENANCE OF PARADIP PORT CONNECTIVITY PROJECT UNDER THE BUILD O PERATE TRANSFER (BOT) BASIS. FOR THIS PURPOSE A CONCESSION AGREEMENT WAS ENTERED INTO BETWEEN THE ASSESSEE COMPANY AND NATIONAL HIGHWAYS AUTHORITY OF INDIA (NHAI) ON 24.02.2004. BY THIS AGREEMENT, NHAI CONFERRED THE R IGHT TO THE ASSESSEE COMPANY TO IMPLEMENT THE PROJECT AND LEVY TOLL/USER CHARGES OVER THE LONG CONCESSION PERIOD AFTER COMPLETION OF CONSTRUCTION. THE PROJECT WAS COMPLETED ON 15.06.2009. THE TOLL COLLECTION STARTE D W.E.F. 04.07.2009. SUBSEQUENTLY, THE ASSESSEE COMPANY ENTERED INTO ANO THER AGREEMENT WITH M/S. AJ TOLLS PVT. LTD. ON 15.04.2011 FOR COLLECTIO N OF USER FEE AT SRIRAMPUR TOLL PLAZA LOCATED AT KILOMETER 4 FOR THE SECTION F ROM KM 0.000 TO KM 76.588 OF NATIONAL HIGHWAY NO. 5A IN THE STATE OF ORISSA. THE CONTRACT WAS FOR A PERIOD OF 1 YEAR FROM 27.01.2011 TO 26.01.2012. THE ASSESSEE COMPANY HAS SHOWN REVENUE FROM OPERATION IN THE FORM OF TOLL RE VENUE AT RS.20,42,35,715/-. AGAINST THE SAID REVENUE, THE AS SESSEE HAS DEBITED EXPENSES OF RS.60,91,76,754/- IN THE PROFIT AND LOS S ACCOUNT. THE HUGE AMOUNT DEBITED TO PROFIT AND LOSS ACCOUNT RELATE TO FINANC E COST OF RS.37.35 CRORES AND ITA NO. 2689/DEL/2016 3 DEPRECIATION OFRS.21.73 CRORES INCLUDING DEPRECIATI ON TOWARDS TOLL ROAD WHICH ALONE WAS RS.21.47 CRORES. IN THE COMPUTATION OF IN COME, TOTAL DEPRECIATION WAS CLAIMED OF RS.42,49,01,720/- WHICH CONTAINED RS .4,24,84,205 BEING THE DEPRECIATION IN RESPECT OF TOLL ROAD. REGARDING CHA RGING OF DEPRECIATION ON TOLL ROAD, THE ASSESSEE SUBMITTED THE DETAILS. THE AO FO LLOWED THE CIRCULAR NO. 09/2014 DATED 23.04.2014 OF CBDT, WHEREIN THE BOARD OBSERVED AS UNDER : '6. THE AMORTIZATION ALLOWABLE MAY BE COMPUTED AT TH E RATE WHICH ENSURES THAT THE WHOLE OF THE COST INCURRED IN CREA TION OF INFRASTRUCTURAL FACILITY OF ROAD/HIGHWAY IS AMORTIZED EVENLY OVER T HE PERIOD OF CONCESSIONAIRE AGREEMENT AFTER EXCLUDING THE LIME T AKE FOR CREATION OF SUCH FACILITY. 7. IN THE CASE WHERE AN ASSESSEE HAS CLAIMED ANY DE DUCTION OUT OF INITIAL COST OF DEVELOPMENT OF INFRASTRUCTURE FACILITY OF R OADS HIGHWAYS UNDER BOT PROJECTS IN EARLIER YEAR, THE TOTAL DEDUCTION SO CLAIMED FOR THE ASSESSMENT YEARS PRIOR TO THE ASSESSMENT YEAR UNDER CONSIDERATION MAYBE DEDUCTED FROM THE INITIAL COST OF INFRASTRUCT URE FACILITY OF ROADS /HIGHWAYS AND THE COST SO REDUCED' SHALL BE AMORTI ZED EQUALLY OVER THE REMAINING PERIOD OF TOLL CONCESSIONAIRE AGREEMENT. ACCORDINGLY, THE AO DISALLOWED THE DEPRECIATION CLA IMED OF RS.23,85,71,095/-. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE APPE ALED BEFORE THE LD. CIT(A) AND MADE WRITTEN SUBMISSIONS ALSO AND RELIED ON SOM E CASE LAWS. THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE AS SESSEE ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED FROM THE ORDER OF THE LD . CIT(A), THE REVENUE IS IN APPEAL BEFORE ITAT. 3. THE LEARNED DR SUBMITTED A WRITTEN SYNOPSIS, WHI CH IS AS UNDER : ITA NO. 2689/DEL/2016 4 1. IN THE ARRANGEMENT ENTERED INTO BY THE ASSESSE E COMPANY WITH NHAI FOR DEVELOPMENT OF ROAD/ HIGHWAYS, THE POSITION OF LAND IS HANDED OVER TO THE ASSESSEE COMPANY BY GOVERNMENT AUTHORITIES FOR THE PURPOSE O F CONSTRUCTION OF THE PROJECT WITHOUT ANY ACTUAL TRANSFER OF OWNERSHIP AND THEREF ORE, THE ASSESSEE COMPANY HAS ONLY A RIGHT TO DEVELOP AND MAINTAIN SUCH ASSETS. I N SUCH CIRCUMSTANCES, THE ASSESSEE COMPANY CANNOT BE TREATED AS OWNER OF THE PROPERTY EITHER WHOLLY OR PARTLY FOR THE PURPOSE OF ALLOWING DEPRECIATION U/S 32(1) OF IT AC T. 2. RELIANCE IS PLACED UPON CIRCULAR NO. 09/2014 DA TED 23.04.2014 IN WHICH CBDT CLARIFIED AS UNDER: 6. THE AMORTIZATION ALLOWABLE MAY BE COMPUTED AT THE RATE WHICH ENSURES THAT THE WHOLE OF THE COST INCURRED IN CREATION OF INFRASTRU CTURAL FACILITY OF ROAD/HIGHWAY IS AMORTIZED EVENLY OVER THE PERIOD OF CONCESSIONAIRE AGREEMENT AFTER EXCLUDING THE TIME TAKEN FOR CREATION OF SUCH FACILITY. 7. IN THE CASE WHERE AN ASSESSEE HAS CLAIMED ANY DE DUCTION OUT OJ INITIAL COST OF DEVELOPMENT OF INFRASTRUCTURE FACILITY OF ROADS/HIG HWAYS UNDER BOT PROJECTS IN EARLIER YEAR, THE TOTAL DEDUCTION SO CLAIMED FOR THE ASSESS MENT YEARS PRIOR TO THE ASSESSMENT YEAR UNDER CONSIDERATION MAY BE DEDUCTED FROM THE IN ITIAL COST OF INFRASTRUCTURE FACILITY OF ROADS/HIGHWAYS AND THE COST 'SO REDUCED ' SHALL BE AMORTIZED EQUALLY OVER THE REMAINING PERIOD OF TOLL CONCESSIONAIRE AGREEMENT. 3. THE CASE LAWS RELIED UPON BY THE ASSESSEE AND CI T(A) ARE NOT APPLICABLE TO FACTS OF THE CASE RELIANCE IS PLACED ON THE FOLLOWING DECISIONS : (I). MADRAS INDUSTRIAL INVESTMENT CORPN. LTD. VS. C IT, 91 TAXMAN 340 (SC). (II). MORADABAD TOLL ROAD CO. LTD. VS. ACIT, 52 TAX MANN.COM 21 (DELHI) (III). INDORE MUNICIPAL CORPN VS. CIT, 124 TAXMAN 1 28 (SC) 4. ON THE OTHER HAND, THE LD. AR RELIED ON THE ORDE R OF THE LD. CIT(A) AND SHE ALSO REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A). SHE HAS ALSO RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. M/S. GEMNI DISTILLERIES & OTHERS AND SUBMITTED THAT THE CASE LAWS RELIED BY THE LD. CIT/DR ARE NOT APPLICABLE TO THE PRESENT CASE. ITA NO. 2689/DEL/2016 5 5. AFTER HEARING BOTH THE SIDES AND PERUSING THE EN TIRE MATERIAL AVAILABLE ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW, WE OBSERVE THAT THE LD. CIT(A) HAS DONE GOOD REASONED ORDER, WHICH IS AS UN DER : 2.3. I HAVE CAREFULLY CONSIDERED THE ORDER PASSED BY THE AO AND THE SUBMISSIONS FURNISHED BY THE LD. AR. THE AO HAS RELI ED ON CBDT CIRCULAR NO. 09/2014 DATED 23.04.2014 AND ALLOWED DEPRECIATI ON ON THE BASIS OF AMORTIZATION OVER THE PERIOD OF THE CONCESSIONAIRE AGREEMENT. THE UNDISPUTED FACT IS THAT DEPRECIATION IS ALLOWABLE T O THE APPELLANT COMPANY ON THE TOLL ROAD. THE JURISDICTIONAL HIGH COURT IN T HE CASE OF MORADABAD TOLL COMPANY LTD. VS. ACIT HAS HELD THAT DEPRECIATION IS ALLOWABLE ON TOLL ROAD/BRIDGES UNDER BUILD-OPERATE-TRANSFER (BOT) ARRA NGEMENT @10%. THE HON'BLE HIGH COURT OF ALLAHABAD IN THE CASE OF N OIDA TOLL BRIDGE CO. LTD. HAD ALSO HELD THAT DEPRECIATION IS ALLOWABLE O N ROAD CONSTRUCTED BY RESPONDENT ASSESSEE UNDER THE CONCESSION AGREEMENT AT THE SAME RATE I.E. 10%. IN ANY CASE, THE ELIGIBILITY OF THE APPELLANT COMPANY FOR CLAIM OF DEPRECIATION IS NOT DISPUTED BY THE AO. HE HAS ALLO WED THE SAME ON THE BASIS OF AMORTIZATION OVER THE BALANCE PERIOD OF TH E CONCESSIONAL AGREEMENT RELYING ON BOARDS CIRCULAR REFERRED ABOV E. THE CRITICAL QUESTION, THEREFORE, IS WHETHER THE BOARDS CIRCULA R WHICH IS DATED 23.04.2014 COULD HAVE BEEN APPLIED RETROSPECTIVELY IN THE CASE OF THE APPELLANT. RETURN OF INCOME WAS FILED BY THE APPELL ANT ON 28.09.2012 WHEN THE SUBJECT CIRCULAR WAS NOT AVAILABLE. THE LD. AR HAS STATED THAT FOLLOWING THE CIRCULAR, THE APPELLANT COMPANY HAS A MORTIZED WDV ON 01.04.2014 OVER THE REMAINING LIFE OF ASSET. A CLOS E READING OF THE CIRCULAR ALSO SHOWS THAT DEDUCTION CLAIMED OUT OF INITIAL CO ST OF DEVELOPMENT OF INFRASTRUCTURE, FACILITY OF ROADS/HIGHWAY UNDER BOT PROJECTS IN EARLIER YEAR MAY BE DEDUCTED FROM THE INITIAL COST OF INFRA STRUCTURE FACILITY OF ROADS/HIGHWAY AND THE COST SO REDUCED SHALL BE AMOR TIZED EQUALLY OVER THE REMAINING PERIOD OF THE TOLL CONCESSIONAIRE AGR EEMENT. THIS EFFECTIVELY MEANS THAT THE REDUCED COST IS TO BE AMORTIZED EQUA LLY OVER THE REMAINING PERIOD. THERE IS NOTHING IN THE CIRCULAR TO SUGGEST AND THE SAME SHALL BE APPLICABLE ON RETROSPECTIVE BASIS. IN VIEW THEREOF, THE ACTION OF THE AO IN APPLYING THE CIRCULAR RETROSPECTIVELY IS NOT IN ORD ER. THE DISALLOWANCE OF RS.23,85,71,095/- MADE BY THE AO ON ACCOUNT OF DIFF ERENCE BETWEEN THE DEPRECIATION CLAIMED AT RS.42.48.04.025/- AND DEPRE CIATION ALLOWED ON ITA NO. 2689/DEL/2016 6 THE BASIS OF AMORTIZATION FOR THE REMAINING PART OF THE CONCESSIONAIRE AGREEMENT I.E. FROM 01.04.2011 TO 24.03.2034 AT RS. 18,62,32,930/- IS DIRECTED TO BE DELETED. THESE GROUNDS OF APPEAL ARE RULED IN FAVOUR OF THE APPELLANT. THE ASSESSEE HAS ALSO SUBMITTED A PAPER BOOK CONTAI NING 172 PAGES. IT IS CLEAR FROM THE ABOVE ORDER THAT THE ASSESSEE HAS RIGHTLY CLAIMED DEPRECIATION AND CONSIDERED THE CIRCULARS AS QUOTED ABOVE WHICH ARE APPLICABLE FROM THEIR DATE. THE LD. AR HAS RELIED ON THE JUDGMENT OF HONBLE SU PREME COURT (SUPRA), WHEREIN IT HAS BEEN HELD AS UNDER : LEAVE GRANTED. THE QUESTION RAISED IN THIS BATCH OF APPEALS IS AS T O WHETHER THE INSTRUCTIONS/CIRCULAR ISSUED BY THE CENTRAL BOARD O F DIRECT TAXES ON 9.2.2011 WILL HAVE RETROSPECTIVE OPERATION OR NOT. THIS COURT IN COMMISSIONER OF INCOME TAX-VIII, NEW DE LHI V. SUMAN DHAMIJA (CIVIL APPEAL NOS.4919-4920/2015) HAS HELD THAT INSTRUCTIONS/CIRCULAR DATED 9.2.11 IS NOT RETROSPEC TIVE IN NATURE AND THEY SHALL NOT GOVERN CASES WHICH HAVE BEEN FILED BEFORE 2011, AND THAT, THE SAME WILL GOVERN ONLY SUCH CASES WHICH ARE FILED AF TER THE ISSUANCE OF THE AFORESAID INSTRUCTIONS DATED 9.2.2011. LEARNED COUNSEL FOR THE RESPONDENTS RELIED UPON CIR CULAR DATED 10THDECEMBER, 2015 AND SPECIFICALLY RELIED UPON PAR AGRAPH 10. WE ARE OF THE CONSIDERED OPINION THAT THE CENTRAL BOARD OF DI RECT TAXES CANNOT ISSUE ANY CIRCULAR HAVING RETROSPECTIVE OPERATION. RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE ALLOW THE INSTANT APPEALS. THE IMPUGNED ORDER PASSED BY THE HIGH COURT DATED 2. 11.2011 IN ITA NO.887/2006 IS SET ASIDE. THE MATTER(S) IS/ARE REMIT TED BACK TO THE HIGH COURT FOR RE-ADJUDICATION ON MERITS AND IN ACCORDAN CE WITH LAW. THE CIVIL APPEALS ARE ALLOWED IN THE ABOVE TERMS. ITA NO. 2689/DEL/2016 7 FROM THE ABOVE ORDER, IT IS CLEAR THAT THE CIRCULAR ISSUED BY THE CBDT CANNOT BE APPLIED RETROSPECTIVELY. IN VIEW OF THE ABOVE, T HE ASSESSEE HAS RIGHTLY CLAIMED DEPRECIATION AND THE LD. CIT(A) HAS RIGHTLY ALLOWED THE APPEAL OF THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH SEPTEMBER, 2017. SD/- SD/- (BHAVNESH SAINI) (L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 4 TH SEPTEMBER, 2018 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI