ACIT, Circle- 26(2), New Delhi V. Vishakhapatnam Port Road Company Ltd., New Delhi

ITA 3187/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6608 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2012-2013
• Appeal Filed On: 03-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGAINST DATED PASSED
• Keywords: Depreciation
• Section: 32

Judgement Text

1 ITA NO. 3187/DEL/2018 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI R. K. PANDA ACCOUNTANT MEM BER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A. NO. 3187/DEL/2018 (A.Y 2012-13) (THROUGH VIDEO CONFER ENCING) ACIT ROOM NO. 192, C. R. BUILDING, I. P. ESTATE, NEW DELHI (APPELLANT) VS VISHAKHAPATNAM PORT ROAD COMPANY LTD. G-5 &6, SECOR-10, DWARKA, NEW DELHI AABCV3781F (RESPONDENT) ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE REVENUE AGAINST ORDER D ATED 29/1/2018 PASSED BY CIT(A)-9, NEW DELHI FOR ASSESSMENT YEAR 2012-13. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. THAT LD, ASSISTANT COMMISSIONER OF INCOME TAX LD. A CIT') HAS ERRED ON DISALLOWING THE DEPREDATION OF RS3,35,75,114 (RS. 7,24,75,114 CLAIMED BY ASSESSEE MINUS RS. 3,89,00,000/- ALLOWED BY THE ID. ACIT) CONSIDERING THAT THE DEDUCTION SHALL BE ALLOW ED ON THE BASIS OF AMORTIZATION OVER THE CONCESSIONAIRE PERIOD, 2. THE LD, ACIT HAS ERRED IN APPLYING THE CIRCULAR NO 09/2014 IN ASSESSEE'S CASE FOR THE AY 2012-13 IN SPITE OF FACT THAT CIRCULAR IS APPELLANT BY SH. SHIV SWAROOP SINGH, SR. DR RESPONDENT BY SH. NITESH GOEL, CA DATE OF HEARING 27.07.2021 DATE OF PRONOUNCEMENT 09.09.2021 2 ITA NO. 3187/DEL/2018 EFFECTIVE FROM 23.04.201.4. 3. THAT LD. ACIT HAS ERRED IN INITIATING PENALTY PROC EEDINGS U/S 271(L)(C) OF THE INCOME TAX ACT, 1961. 3. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION T HE ASSESSEE IS CARRYING ON THE BUSINESS OF CONSTRUCTING, OPERATING AND MAIN TAINING OF TOLL ROADS FOR ADEQUATE CONNECTIVITY TO VISHAKHAPATNAM PORT TRUST. THE ASSESSEE COMPANY IS A PUBLIC SECTOR UNDERTAKING (PSU) SUBSIDIARY COMPAN Y OF NATIONAL HIGHWAYS AUTHORITIES OF INDIA. THE ASSESSEE COMPANY HAS ENT ERED INTO A CONCESSION AGREEMENT WITH NATIONAL HIGHWAYS AUTHORITIES OF IND IA UNDER WHICH THE ASSESSEE COMPANY WAS GIVEN GRANTING OF CONCESSION T O UNDERTAKE, DESIGN, ENGINEERING, PROCUREMENT, CONSTRUCTION, OPERATING A ND MAINTENANCE IF THE SOLE AND EXCLUSIVE RIGHT TO DEMAND, COLLECT AND APPROPRI ATE FEE TOLL FROM THE USER OF THE PROJECT FOR A PERIOD OF 30 YEARS FOR IMPLEMENTI NG THE ACTIVITY UNDER BOT MODEL. FOR A.Y 2012-13, IT FILED ITS RETURN OF INCO ME ON 27.09.2012 DECLARING A LOSS OF RS. 4,80,44,786 /-. THE ASSESSING OFFICER MADE DISALLOWANCE OF RS. 3,35,75,114/- ON ACCOUNT OF EXCESS DEPRECIATION BY OBSERVING THAT THE AMOUNT CLAIMED BY THE ASSESSEE IS EXCESS DEPRECIATION. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) ALLOWED THE APPEAL OF THE AS SESSEE. 5. THE LD. DR FILED THE WRITTEN SUBMISSIONS AS UNDE R:- 1. IN THIS CASE LD.CIT(A) AO HAS DISALLOWED THE DEPREC IATION ON THE BASIS THAT ASSESSEE IS NOT THE OWNER OF THE ASSET A ND IT IS THE PRIMARY AND FOREMOST CONDITION FOR ALLOWING THE DEPRECIATION. II. IT IS SUBMITTED AS PER SECTION 32 OF THE ACT IN RESPECT OF THE DEPRECIATION OF BUILDINGS, MACHINERY, PLANT OR FURN ITURE BEING TANGIBLE ASSETS, THE DEDUCTIONS IN SUB-SECTION(1) OF SECTION 32 SHALL BE ALLOWED 3 ITA NO. 3187/DEL/2018 PROVIDED THESE ASSETS ARE OWNED WHOLLY OR PARTLY BY THE ASSESSEE AND USED FOR THE PURPOSE OF HIS BUSINESS OR PROFESSION. III. IN THIS CASE, LAND DOES NOT BELONG TO THE ASSE SSEE. THE ASSESSEE IS MERELY PERMITTED TO ENTER UPON IT FOR THE PURPOSE O F CONSTRUCTION AND LAYING OF A ROAD. AT BEST, THE ASSESSEE COULD BE SAID TO B E AN AGENT AND FOR A LIMITED PURPOSE, NAMELY, TO BUILD, OPERATE AND LATER ON TRA NSFER THE ROAD. THERE IS NO QUESTION OF THE ASSESSEE CLAIMING ANY OWNERSHIP RIGHTS. THEREFORE, THE ASSESSEE IS NOT ELIGIBLE TO CLAIM AND DEPRECIATION ON THE ASSET AND DEPRECIATION WAS RIGHTLY DISALLOWED BY THE AO. RELI ANCE IS PLACED ON THE DECISION OF THE HONBLE MUMBAI HIGH COURT IN THE CA SE OF NORTH KARNATAKA EXPRESSWAY LTD ITA NO 499 OF 2012 (DATE OF ORDER 14 .10.2014) AND IN THE CASE OF WEST GUJRAT EXPRESSWAY LTD ITA NO 2357 OF 2 016 DELIVERED ON APRIL 5, 2016. (COPY ENCLOSED). IV IT IS ALSO SUBMITTED THAT LD CIT (A) RELIED UPON THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF NOIDA T OLL BRIDGE LTD. HONBLE MUMBAI HIGH COURT ANALYSED THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN PARA 50 OF THE DECISION AND HELD THAT WHERE ASSE SSEE, INFRASTRUCTURE DEVELOPMENT COMPANY CONSTRUCTED A ROAD ON BUILD, OP ERATE AND TRANSFER (BOT) BASIS ON LAND OWNED BY GOVERNMENT, ASSESSEE C OULD NOT CLAIM DEPRECIATION ON TOLL ROAD SO CONSTRUCTED OPERATED. V. IT IS ALSO SUBMITTED THAT IT IS RIGHTLY OBSERVED BY THE AO THAT CIRCULAR NO 9 OF 2014 IS CLARIFICATORY IN NATURE AS IT CANNO T OVERRIDE THE EXPRESS PROVISIONS OF THE ACT AND IT PROVIDES THE CLARIFICA TION TO THE EXISTING PROVISIONS OF THE ACT. BEING CLARIFICATORY IN NATUR E, IT HAS RETROSPECTIVE APPLICABILITY. 4 ITA NO. 3187/DEL/2018 VI. IN VIEW OF THE ABOVE IT IS HUMBLY REQUESTED THA T APPEAL OF THE REVENUE MAY BE ALLOWED. 5. THE LD. DR SUBMITTED THAT THE CIT(A) WAS NOT RIG HT IN ALLOWING THE CLAIM OF EXCESS DEPRECATION TO THE ASSESSEE AS THE CIRCUL AR NO. 9/2014 IS EFFECTIVE FROM 23/4/2014 AS IT IS RETROSPECTIVE AND WILL BE APPLICABLE FOR ASSESSMENT YEAR 2012-13. THUS, THE LD. DR RELIED UPON THE ASS ESSMENT ORDER AND SUBMITTED THAT THE DISALLOWANCE MAY BE CONFIRMED. 6. THE LD. AR SUBMITTED THAT THE CIRCULAR NO. 9/201 4 ISSUED BY THE CBDT ON 23/4/2014 IN PARA 7 CATEGORICALLY MENTIONED THAT IN CASE WHERE THE ASSESSEE HAS CLAIMED ANY DEDUCTION WITHIN THE INITI AL COST OF DEVELOPMENT OF INFRASTRUCTURE FACILITY OF ROADS/HIGHWAYS IN EARLIE R YEARS, THE TOTAL DEDUCTION SO CLAIMED FOR THE ASSESSMENT YEARS PRIOR TO THE ASSE SSMENT YEAR UNDER CONSIDERATION MAY BE DEDUCTED FROM THE INITIAL COST OF INFRASTRUCTURE FACILITY OF ROADS/HIGH WAYS AND THE COST SO REDUCED SHALL BE AM ORTIZED EQUALLY OVER THE REMAINING PERIOD OF TOLL CONCESSION AGREEMENT. THU S, THE CIRCULAR ITSELF EXPLAINS THAT IT IS APPLICABLE FROM THE DATE OF CIR CULAR OR FOR SUBSEQUENT ASSESSMENT YEARS , ASSESSEE HAS TO AMORTIZE THE WDV OF THE ASSET OVER THE REMAINING LIFE OF THE ASSET AS CIRCULAR HAS TO BE E FFECTIVE FROM THE DATE IT IS NOTIFIED. THE CIRCULAR CLEARLY MENTIONED THAT AMOR TIZED OVER REMAINING PERIOD WHICH MEANS FOR BALANCE PERIOD AND NOT FROM THE BEG INNING OF THE TOLL CONCESSIONAIRE AGREEMENT. THEREFORE, THE CIRCULAR WAS INTRODUCED PROSPECTIVELY. THE INTENTION OF THE CIRCULAR WAS NOT THAT IT SHOULD BE APPLIED ON RETROSPECTIVE BASIS OTHERWISE IT WOULD HAVE BEEN SPECIFICALLY MENTIONED IN THE CIRCULAR. HOWEVER, ON SIMPLE READING OF THE CI RCULAR IT IS NOWHERE MENTIONED THAT SUCH AMENDMENT TAKES PLACE RETROSPEC TIVELY. THE LD. AR RELIED UPON THE DECISION OF THE TRIBUNAL IN CASE OF ASSOCI ATE COMPANY OF ASSESSEE M/S PARADIP PORT ROAD COMPANY LTD. SUBSIDIARY COMPA NY OF NHAI FOR THE ASSESSMENT YEAR 2012-13 ORDER DATED 4/9/2018 ON SAM E FACTS AND GROUNDS 5 ITA NO. 3187/DEL/2018 WHEREIN THE TRIBUNAL DISMISSED THE APPEAL OF THE RE VENUE. THE LD. AR ALSO RELIED UPON THE FOLLOWING DECISIONS:- MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD. VS. C IT 91 TAXMAN 340 (S.C) MOADABAD TOLL ROAD CORPORATION LTD. VS. ACIT 52 TAX MANN.COM 21(DEL) INDORE MUNICIPAL CORPORATION VS. CIT 124 TAXMAN 128 (S.C) NOIDA TOLL BRIDGE CORPORATION LTD. VS. REVENUE. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT THE CIT(A) HEL D AS UNDER:- 4.3 I HAVE CAREFULLY CONSIDERED THE IMPUGNED ORD ER AND THE SUBMISSION FURNISHED BY THE APPELLANT INCLUDING CAS E LAWS RELIED ON AND ALSO THE CBDT CIRCULAR NO. 09/2014 DATED 23/04/ 2014. THE UNDISPUTED FACT IS THAT DEPRECIATION IS ALLOWABLE T O THE APPELLANT COMPANY ON THE TOLL ROAD EITHER BY WAY OF REGULAR D EPRECIATION OR AMORTIZATION AS THE CASE MAY BE. 4.4. THE JURISDICTIONAL HIGH COURT IN THE CASE OF MORADABAD TOLL COMPANY LTD. I/S ACIT HAS HELD THAT DEPRECIATION IS ALLOWABLE ON THE TOLL ROAD/BRIDGES UNDER BUILD-OPERATE-TRANSFER (BOT ) ARRANGEMENT @10%. THE HONBLE HIGH COURT OF ALLAHABAD IN THE OF NOI DA TOLL BRIDGE CO. LTD. HAS ALSO HELD THAT DEPRECIATION IS ALLOWABLE O N ROAD CONSTRUCTED BY RESPONDENT ASSESSEE UNDER THE CONCESSION AGREEME NT 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 ALLOWED THE SAME ON THE BASIS OF AMORTIZATION OVER THE BALANCE PERIOD OF THE CONCESSIONAL AGREEMENT RELYING ON BOARDS CIRCULAR REFERRED ABOVE. THE CRITICAL QUESTION, THEREFORE, IS WHETHER THE BOARDS CIRCULAR 6 ITA NO. 3187/DEL/2018 WHICH IS DATED 23.04.2014 COULD HAVE BEEN APPLIED R ETROSPECTIVELY IN THE CASE OF THE APPELLANT. 4.5 PER FACT OF THE CASE, RETURN OF INCOME WAS FIL ED BY THE APPELLANT ON 28.09.2012 WHEN THE SUBJECT CIRCULAR W AS NOT AVAILABLE. THE AR HAS STATED THAT FOLLOWING THE CIRCULAR, THE APPELLANT COMPANY HAS AMORTIZED WDV ON 01.04.2014 OVER THE REMAINING LIFE OF THE ASSET. A CLOSE READING OF THE CIRCULAR ALSO SHOWS THAT DED UCTION CLAIMED OUT OF INITIAL COST OF DEVELOPMENT OF INFRASTRUCTURE, F ACILITY OF ROAD /HIGHWAY UNDER BOT PROJECTS IN EARLIER YEAR MAY BE DEDUCTED FROM THE INITIAL COST OF INFRASTRUCTURE FACILITY OF ROAD S/BRIDGE AND THE COST SO REDUCED SHALL BE AMORTIZED EQUALLY OVER REMAINING P ERIOD OF TOLL CONCESSIONAIRE AGREEMENT (REFER PARA 7 OF THE CBDT CIRCULAR NO. 09/2014 DATED 23.04.2014). THIS EFFECTIVELY MEANS T HAT THE REDUCED COST IS TO BE AMORTIZED EQUALLY OVER THE REMAINING PERIOD. THERE IS NOTHING IN THE CIRCULAR TO SUGGEST AND THE SAME SHA LL BE APPLICABLE ON RETROSPECTIVE BASIS. IN VIEW OF ABOVE, THE ACTION OF THE LD. AO IN APP LYING THE CIRCULAR RETROSPECTIVELY IS NOT IN ORDER. ACCORDINGLY, THE D ISALLOWANCE OF RS. 3,35,75,114/- MADE BY THE LD. AO ON ACCOUNT OF DIFF ERENCE BETWEEN THE DEPRECIATION CLAIMED AT RS. 7,24,75,114 AND THE DEPRECIATION ALLOWED ON THE BASIS OF AMORTIZATION FOR THE REMAIN ING PART OF THE CONCESSIONAIRE AGREEMENT OF RS. 3,89,00,000/- IS DI RECTED TO BE DELETED. THE APPELLANT SUCCEEDS ON THESE GROUNDS OF APPEAL. THUS, THE CIT(A) HAS GIVEN A DETAILED FINDING AND T HERE IS NO NEED TO INTERFERE WITH THE SAME. IN-FACT, THE ASSESSEE HAS RIGHTLY C LAIMED THE DEPRECIATION. THE APPEAL OF THE REVENUE IS DISMISSED. 7 ITA NO. 3187/DEL/2018 8. IN RESULT, THE APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 09TH DA Y OF SEPTEMBER, 2021. SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED : 09/09/2021 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 8 ITA NO. 3187/DEL/2018