The DCIT, Gandhinagar Circle, Gandhinagar V. Gujarat Road & Infrastructure Company Ltd., Ahmedabad

ITA 2902/AHD/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9850 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 21-11-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 15-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS VIBHA BHALLA
• Assessee Lawyers: DILIP LAKHANI A
• Keywords: Depreciation
• Section: 32; 263

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA.NO.2902/AHD/2015 / ASSTT. YEAR: 2012-13 DCIT, GANDHINAGAR CIRCLE GANDHINAGAR. VS. GUJARAT ROAD & INFRASTRUCTURE COMPANY LTD. 301-306, SHAPATHA-1, OPP: RAJPATH CLUB SARKHEJ GANDHINAGAR HIGHWAY BODAKDEV, AHMEDABAD 380 015. ( APPLICANT ) ( RESPONENT ) REVENUE BY : MRS. VIBHA BHALLA, CIT-DR ASSESSEE BY : MR. DILIP LAKHANI, A / DATE OF HEARING : 21/11/2016 / DATE OF PRONOUNCEMENT: 22/11/2016 +,/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST TH E ORDER OF LD.CIT(A), GANDHINAGAR, AHMEDABAD DATED 30.7.2015 P ASSED FOR THE ASSTT.YEAR 2012-13. 2. THOUGH THE REVENUE HAS TAKEN THREE GROUNDS OF AP PEAL, BUT ITS GRIEVANCE REVOLVES AROUND A SINGLE ISSUE VIZ. THE L D.CIT(A) HAS ERRED IN LAW AND ON FACTS IN ACCEPTING THE CLAIM OF THE ASSESSEE WITH REGARD TO THE DEPRECIATION ON ROADS. ITA NO.2902/AHD/2015 2 3. AT THE VERY OUTSET, THE L D.COUNSEL FOR THE ASSE SSEE HAS SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SETTING UP OF INFRASTRUCTURE FACILITIES BY CONSTRUCTING ROADS. IT HAS CLAIMED DEPRECIATION OF RS.18,97,82,405/- IN THE RETURN FILED ON 29.9.2012. THE LD.AO HAS SOUGHT TO DISALLOW THIS CLAIM OF DEPRECIATION AND ISSUED SHOW CAUSE NOTICE TO THE AS SESSEE. IN RESPONSE TO THE SHOW CAUSE NOTICE, IT WAS CONTENDED BY THE ASSESSEE THAT RIGHT FROM ASSTT.YEAR 2003-04, ASSESSEE HAS BEEN CLAIMING DEPRECIATION WH ICH WAS SOUGHT TO BE WITHDRAWN IN PROCEEDINGS UNDER SECTION 263 OF THE A CT. THE TRIBUNAL HAS QUASHED 263-ORDER AND UPHELD DISALLOWANCE OF DEPREC IATION TO THE ASSESSEE. THE LD.COUNSEL FOR THE ASSESSEE HAS FURTHER PLACED ON RECORD COPY OF THE ORDER OF THE TRIBUNAL PASSED IN ITA NO.1169 & 1730/AHD/20 12 FOR THE ASSTT.YEARS 2002-03 AND 2005-06. THE ASSESSEE HAS ALSO PLACED ON RECORD ORDER OF THE TRIBUNAL IN OTHER ASSESSMENT YEARS. THE LD.AO DID NOT ACCEPT CONTENTIONS OF THE ASSESSEE ON THE GROUND THAT ORDER OF THE ITAT W AS NOT ACCEPTED BY THE DEPARTMENT AND AN APPEAL HAS BEEN PREFERRED BEFORE THE HONBLE HIGH COURT. ACCORDINGLY, THE AO HAS DISALLOWED THE CLAIM OF THE ASSESSEE. ON APPEAL, THE LD.CIT(A) HAS DELETED THE DISALLOWANCE BY OBSERVING AS UNDER: 5. THE FACTS OF THE CASE IS THAT APPELLANT IS ENGAG ED IN THE BUSINESS OF SETTING UP OF INFRASTRUCTURE FACILITIES BY CONST RUCTING ROADS. AO ON VERIFICATION OF THE COMPUTATION OF INCOME OBSERVED THAT THE APPELLANT HAD CLAIMED TOTAL DEPRECIATION TO THE TUNE OF RS.18 ,97,82,405/-. ON FURTHER VERIFICATION IT WAS OBSERVED THAT OUT OF TH E TOTAL CLAIM OF DEPRECIATION, APPELLANT HAD CLAIMED DEPRECIATION ON VADODRA HALOL ROAD AND AHMEDABAD MEHSANA ROAD AMOUNTING TO RS.5,5 8,08,889/- AND RS.12,78,86,204/-RESPECTIVELY - @ 10% AS APPLIC ABLE TO BUILDING- NON RESIDENTIAL TOTAL AMOUNTING TO RS.18,36,95,183/ -. AQ HAS CONTENDED THAT APPELLANT IS ENGAGED IN DEVELOPMENT, OPERATION AND MAINTENANCE OF ROADS AND THE QUESTION OF ALLOWABILI TY OF DEPRECIATION ON: ROADS HAS BEEN ANSWERED BY HON'BLE SUPREME COUR T IN THE CASE OF INDORE MUNICIPAL CORPORATION VS. CIT CITED IN [2 001] 247 ITR 403, THAT A ROAD IS NOT TO BE .TREATED AS BUILDING. A SP ECIFIC QUERY WAS RAISED IN THIS REGARD AND AR OF THE APPELLANT WAS S HOW CAUSED VIDE ITA NO.2902/AHD/2015 3 ORDER SHEET DATED 0270172015 TO EXPLAIN AS TO WHY T HE DEPRECIATION CLAIMED ON ROAD @10% IN THE RETURN OF-INCOME SHOULD NOT BE DISALLOWED. AFTER: CONSIDERING .THE REPLY OF THE AP PELLANT, AO IN THE ASSESSMENT ORDER CONTENDED AS UNDER: 5. THE SUBMISSION OF THE ASSESSEE HAVE BEEN PERUSED CAREFULLY AND CONSIDERED. THE CONTENTIONS OF THE ASSESSEE IS THAT THE VADODARA HALOL ROAD AND AHMEDABAD MEHSANA ROAD ARE A CAPITAL -ASSETS AND ARE ENTITLED FOR DEPRECIATION. THE CONTENTIONS OF T HE ASSESSEE ARE NOT ACCEPTABLE AS IN ORDER TO BE ENTITLED FOR DEPRECIAT ION, THE ASSETS SHOULD BE WITHIN THE CATEGORIES OF ASSETS .ENUMERAT ED IN APPENDIX-I TO THE INCOME TAX RULES, 1962. SINCE THE TOLL ROAD IS NOT COVERED BY THE ASSETS AS ENUMERATED IN APPENDIX-I TO THE RULES , DEPRECIATION IS HOT ALLOWABLE. DEPRECIATION IS ALSO NOT ALLOWABLE I N VIEW OF THE RATIO LAID DOWN BY HON'BLE SUPREME COURT IN THE CASE OF I NDORE MUNICIPAL CORPORATION VS CIT [2001] 247 ITR 803 (SC). THE ASS ESSEE HOWEVER FURTHER CONTENDED THAT THE HON'BLE ITAT HAS DECIDED THE ISSUE OF DEPRECIATION FOR THE AYS 2003-04 AND 2004-05 IN FAV OUR OF THE ASSESSEE BY REVERSING THE ORDER U/S 263 OF THE CIT. THE SUBMISSION OF THE ASSESSEE HAS BEEN EXAMINED AND CONSIDERED. I T MAY BE POINTED OUT THAT THESE ORDERS OF THE HON'BLE ITAT H AVE NOT BECOME FINAL AND DEPARTMENT HAS PREFERRED FURTHER APPEALS BEFORE THE HON'BLE GUJARAT HIGH COURT. FURTHER, THE DEPRECIATION HAS B EEN DISALLOWED IN ALL EARLIER ASSESSMENT YEARS AND THE ISSUE HAS NOT REACHED TO ITS FINALITY. CONSIDERING ABOVE FACTS OF THE CASE DEPRE CIATION CLAIMED ON ROAD IS DISALLOWED. 6. APPELLANT DURING THE COURSE OF APPELLATE P ROCEEDINGS, CONTENDED AS UNDER: WITH REFERENCE TO ABOVE APPEAL PROCEEDINGS, WE ENCLOSED HEREWITH FOLLOWING DETAILS AND SUBMISSI ONS; 1. PAPERBOOK CONTAINING PAGES I TO 11 IS ENCLOSE D 2. GROUNDS NO. 1 TO 4 IS RELATING TO THE-DISALLOWAN CE OF DEPRECIATION ON THE TOLL ROAD AMOUNTING TO RS.183,6 95,183. WE HAVE CONSTRUCTED TOLL ROAD IN EARLIER ASSESSMENT YE ARS AND HAVE BEEN CLAIMING DEPRECIATION ON THE SAID TOLL RO AD. IN AY 2012-13 THE DEPRECIATION IS CLAIMED ON THE OPENING WDV OF THE TOLL ROAD AND THE ADDITION (IF ANY) MADE DURING THE AY 2012-13. THE TOTAL AMOUNT ON WHICH THE DEPRECIATION IS CLAIM ED IS RS.1,836,951,829. THE ASSESSING OFFICER HAS DISALLO WED THE ITA NO.2902/AHD/2015 4 CLAIM OF THE DEPRECIATION ON THE GROUND THAT DEPART MENT HAS FILED AN APPEAL TO THE HON'BLE GUJARAT HIGH COURT A GAINST ORDER'S PASSED IN FAVOUR OF THE ASSESSEE BY THE TRI BUNAL. THE ASSESSING OFFICER HAS DEALT WITH THIS ISSUE IN PARA 5 OF THE ASSESSMENT ORDER. 3. WE SUBMIT THAT BASED ON THE FACTS OF THE CASE, W E ARE ENTITLED FOR DEPRECIATION ON THE TOLL ROAD .AMOUNTI NG TO RS. 183,695,183. PLEASE NOTE THAT THE TOLL ROAD IS CA PITALISED IN EARLIER ASSESSMENT YEARS AND THE HON'BLE, AHMEDABA D ITAT WHILE DEALING WITH THE SUBJECT MATTER OF 'REVISION U/S 263, FOR A.Y. 2003-04 AND 2004--05 IN THE CASE OF VADODARA H ALOL TOLL ROAD CO. LTD. AND AHMEDABAD MEHSANA TOLL ROAD CO. L TD. HAVE HELD THAT THE DEPRECIATION ON TOLL ROAD IS TO BE ALLOWED TO BOTH THE COMPANIES. BOTH THESE COMPANIES HAVE MERGE D, WITH GUJARAT ROAD AND INFRASTRUCTURE -COMPANY LIMI TED ('THE COMPANY'). U/S 32 OF INCOME TAX ACT, 1961, THE COMP ANY IS ENTITLED TO DEPRECIATION ON THE ACTUAL COST OF ASSE T OR IN CASE OF BLOCK OF ASSETS, SUCH PERCENTAGE ON THE WRITTEN DOW N VALUE THEREOF AS MAY BE PRESCRIBED. THE HON'BLE TRIBUNAL HAS ALSO ACCEPTED THE CLAIM FOR 'AY'2008-09, AY 2009-10, AY 2010-11 & AY 2011-12, COPIES OF THE ORDER PASSED BY THE TRIBU NAL ARE ENCLOSED. THE CIT(A), GANDHINAGAR HAS ALSO ACCEPTED THE CLAIM OF THE ASSESSEE FOR AY . 2010-11 & 2011-12, WHICH ARE ENCL OSED IN PAPERBOOK. 4. WE SUBMIT THAT WE ARE ENTITLED TO CLAIM DEPRECIA TION ON THE TOLL ROAD @ 10% AMOUNT TO RS. 183,695,183, AS THE S AID ISSUE IS ALREADY DECIDED BY THE HON'BLE TRIBUNAL & THE CI T(A). THE FACTS ARE IDENTICAL AND WE REQUEST YOU TO KINDLY AC CEPT THE CLAIM. ' 5. I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESSM ENT ORDER AND SUBMISSION MADE BY THE APPELLANT. FROM THE SUBMISSI ON MADE BY THE APPELLANT, I FIND THAT SIMILAR ISSUE WAS DISCUSSED ON MERITS IN APPEAL AGAINST 263 ORDER IN APPELLANT'S CASE BY ITAT VIDE ORDER DATED 12/02/2010 FOR AY 2004-05. THE TRIBUNAL HAS HELD TH AT (A) AS ROAD IS INTEGRAL PART OF BUSINESS ACTIVITY OF THE ASSESSEE (B) IT OWNS THE ASSET ON BOOT BASIS (C) USED THE ASSET FOR ITS BUSINESS A ND (D) AS THE ROADS ARE CONNECTED TO TOLL PLAZAS AND ADMINISTRATI VE BUILDINGS AND AS PER NOTE 1 BELOW THE TABLE OF RATES AT WHICH DEPREC IATION IS ADMISSIBLE ITA NO.2902/AHD/2015 5 MENTIONS THAT BUILDING INCLUDE ROAD', THEREFORE THE TOLL ROAD IS BUILDING ON WHICH DEPRECIATION WAS AVAILABLE. FOLLOWING THE ITAT'S ORDER, THE DEPRECIATION ON TOL L ROAD IS ALLOWED AS BUILDING FOR THE YEAR IN QUESTION. THE GROUNDS ARE DECIDED IN FAVOUR OF THE APPELLANT FOLLOWING THE DECISION RENDERED BY TH E HON'BLE ITAT, AS ABOVE, AS WELL AS' DECIDED BY MY PREDECESSORS IN AY 2008-09 & 2009-10 AND BY THE UNDERSIGNED IN AYS 2010-11 AND 2 011-12, THE RELEVANT GROUNDS OF APPEAL ARE ALLOWED IN FAVOUR OF THE APPELLANT. 4. ON DUE CONSIDERATION OF THE ABOVE FINDINGS, WE A RE OF THE VIEW THAT LD.CIT(A) HAS APPRECIATED THE FACTS AND CIRCUMSTANC ES IN RIGHT PERSPECTIVE. ALL ALONG IN THE PAST, DEPRECIATION HAS BEEN ALLOWE D TO THE ASSESSEE. THEREFORE, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD.CIT(A). THE APPEAL OF THE REVENUE IS DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 22 ND NOVEMBER, 2016 AT AHMEDABAD. SD/- SD/- ( MANISH BORAD ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER