M/s Ahmedabad Vadodara Express Co. Ltd., New Delhi V. ITO, New Delhi

ITA 3217/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3441 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-07-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 15-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Opportunity of being heard; Wholly owned subsidiary; Revised return; Revenue expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `A : NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER I.T.A.NO.3217/DEL/2009 ASSESSMENT YEAR : 2004-05 M/S. AHMEDABAD VADODARA EXPRESS CO. LTD., INCOME-T AX OFFICER, (A SUBSIDIARY OF NHAI), PLOT NO.G-5 & 6, VS. WARD 1(4), NEW DELHI. SECTOR-10, DWARKA, NEW DELHI. PAN: AADCA3349L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUMANT CHADHA, CA. RESPONDENT BY : SHRI ASH OK PANDEY, CIT-DR. O R D E R PER C.L. SETHI, JUDICIAL MEMBER. THIS APPEAL, FILED BY THE ASSESSEE, IS DIRECTED AGA INST THE ORDER, DATED 29.04.2009 PASSED BY THE LEARNED COMMISSIONER OF IN COME-TAX (APPEALS) PERTAINING TO THE ASSESSMENT YEAR 2004-05. 2. THE VARIOUS GROUNDS RAISED BY THE ASSESSEE IN TH IS APPEAL ARE SET OUT AS UNDER:- 1. CIT(A) HAS ERRED IN HIS FINDINGS THAT BUSINESS OF THE APPELLANT WAS SET UP ONLY ON 14.1.2004. IN FACT BU SINESS WAS SET UP ON 15.1.2003. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE C IT(A) HAS ERRED IN CONSIDERING THE SETTING UP OF BUSINESS AS ON 14.1.2004 AND ALLOWING THE DEPRECIATION ACCORDINGLY. IN FACT THE ASSETS 2 WERE OWNED AND PUT TO USE ON 28.1.2003 IN THE FINAN CIAL YEAR 2002-03 AND DEPRECIATION WAS REQUIRED TO BE ALLOWED FOR THE FULL YEAR IN FINANCIAL YEAR 2003-04 (ASSESSMENT YEA R 2004-05). 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE C IT(A) HAS ERRED IN CONSIDERING THE SETTING UP OF BUSINESS AS ON 14.1.2004 AND ALLOWING THE REVENUE EXPENDITURE ONLY FOR THE P ERIOD 15.1.2004 TO 31.3.2004 RELYING ON THE ORDER OF HIS PREDECESSOR. IN FACT THE BUSINESS WAS SET UP ON 15.1.2003 AND EX PRESSWAY WAS DULY OPENED FOR THE PUBLIC ON 28.1.2003. ACCOR DINGLY ALL THE REVENUE EXPENSES INCURRED DURING THE PERIOD FRO M 1.4.2003 TO 31.3.2004 DESERVE TO BE ALLOWED IN FULL. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE C IT(A) HAS ERRED IN NOT ALLOWING THE ADDITIONAL GROUND RAISED REGARDING (A) INTEREST EXPENSE OF RS.1,00,85,036/- AND (B) INTERE ST INCOME ON FIXED DEPOSIT RS.60,48,699/- AS CLAIMED IN THE REVI SED RETURN FILED ON 25.10.2005. THE FACT THAT RETURN WAS REVI SED ON 25.10.2005 WAS ALSO MENTIONED IN THE ORDER OF THE A O DATED 29.12.2006 PASSED U/S 143(3) FOR THE ASSESSMENT YEA R 2004-05. HOWEVER, THE AO HAS NOT CONSIDERED THESE AMOUNTS WH ILE COMPUTING THE ASSESSED INCOME. 3. IN THE COURSE OF HEARING OF THIS APPEAL, THE LEA RNED COUNSEL FOR THE ASSESSEE HAS FURNISHED A COPY OF MINUTES OF MEETING OF THE COMMITTEE ON DISPUTES HELD ON 17.12.2009, WHEREBY THE ASSESSEE H AS BEEN PERMITTED TO PURSUE THE APPEAL BEFORE THE TRIBUNAL ON THE FOLLOW ING POINTS PERTAINING TO THE ASSESSMENT YEAR 2004-05:- WHETHER THE CIT(A) HAS ERRED IN HOLDING THAT (I) THE BUSINESS WAS SET UP ON 14.01.2004 AS AGAINST 15 .01.2003; (II) THE ASSET HAS BEEN PUT TO USE ON 14.01.2004 AND ALL OWED DEPRECIATION ACCORDINGLY; 3 (III) THE REVENUE EXPENDITURES ARE ALLOWABLE ONLY FOR THE PERIOD 15.01.2004 TO 31.03.2004; & (IV) THE ADDITIONAL GROUND RAISED REGARDING (I) INTEREST EXPENSES; & (II) INTEREST INCOME ON FIXED DEPOSIT. 4. FROM THE PERUSAL OF THE AFORESAID APPROVAL GRANT ED BY THE COMMITTEE ON DISPUTES TO PURSUE THIS APPEAL BEFORE THE TRIBUN AL, IT IS CLEAR THAT THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE, HAVE BEEN PERMITTED TO BE PURSUED BEFORE THE TRIBUNAL. 5. FROM THE AFORESAID POINTS RAISED, THE FIRST QUES TION THAT ARISES FOR OUR CONSIDERATION IS AS TO WHETHER THE BUSINESS OF THE ASSESSEE WAS SET UP ON 15.01.2003 AND, ACCORDINGLY, THE ASSESSEE IS ENTITL ED TO DEPRECIATION FOR THE FULL YEAR DURING THE PERIOD OF FINANCIAL YEAR 2003- 04 AND WHETHER THE ASSESSEE IS ENTITLED TO GET DEDUCTION OF REVENUE EX PENDITURE FOR THE FULL PERIOD IN F.Y.2003-04. 6. WE HAVE HEARD BOTH THE PARTIES, AND HAVE CAREFUL LY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IN THE RETURN OF INCOME, THE ASSESSEE HAS CLAIMED DEPRECIATION FOR THE FULL YEAR, AND ALSO CLAIMED RE VENUE EXPENDITURE INCURRED DURING THE WHOLE OF THE YEAR. HOWEVER, THE ASSESSI NG OFFICER HAD TAKEN A VIEW THAT THE ASSESSEES BUSINESS WAS SET UP ONLY O N 14.01.2004 AND THEREFORE, THE ASSESSEE WOULD BE ENTITLED TO DEPREC IATION FOR SIX MONTHS ONLY, AND THE REVENUE EXPENDITURE SHALL BE ALLOWED ONLY F ROM THAT DATE. IN TAKING 4 THIS VIEW, THE AO HAS RELIED UPON HIS FINDINGS TAKE N IN THE ASSESSMENT YEAR 2003-04. 7. ON AN APPEAL, THE CIT(A) CONFIRMED THE AOS ORDE R AFTER FOLLOWING THE ORDER OF HIS PREDECESSOR FOR THE ASSESSMENT YEA R 2003-04 TREATING THE BUSINESS OF THE ASSESSEE BEING COMMENCED ONLY ON 14 .01.2004. THE LEARNED CIT(A) THEREFORE, DIRECTED THE AO TO ALLOW DEPRECIA TION AS WELL AS REVENUE EXPENDITURE ACCORDINGLY. 8. IN THE COURSE OF HEARING OF THIS APPEAL, THE LEA RNED COUNSEL FOR THE ASSESSEE HAS POINTED OUT THAT THE ISSUE INVOLVED IN THE ASSESSMENT YEAR 2003-04 HAD COME UP FOR CONSIDERATION BEFORE THE TR IBUNAL, WHERE THE TRIBUNAL HAS TAKEN A VIEW THAT THE BUSINESS OF THE ASSESSEE HAD BEEN SET UP ON 15.01.2003 AND IN THE LIGHT OF THIS FINDING, THE AO WAS DIRECTED TO ACCEPT THE ASSESSEES CLAIM AND ALLOW THE DEPRECIATION IN ACCORDANCE WITH THE LAW AND TO ALLOW THE REVENUE EXPENSES ACCORDINGLY. 9. WE HAVE GONE THROUGH THE ORDER DATED 31.08.2009 OF THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH `A, NEW DELHI IN I TA NO.2110/DEL/07 FILED BY THE ASSESSEE AND FOUND THAT THE TRIBUNAL H AS TAKEN A VIEW THAT THE BUSINESS OF THE ASSESSEE HAS ACTUALLY BEEN SET UP O N 15.01.2003 I.E. WITHIN F.Y. 2002-03 RELEVANT TO THE ASSESSMENT YEAR 2003-0 4, AND HAS DIRECTED THE AO TO ALLOW DEPRECIATION IN ACCORDANCE WITH LAW AND TO ALLOW REVENUE 5 EXPENSES ACCORDINGLY. IT IS THUS CLEAR THAT THE IS SUE WHETHER THE ASSESSEES BUSINESS HAS BEEN SET UP ON 15.01.2003 AS CLAIMED B Y THE ASSESSEE OR ON 14.01.2004 AS ALLEGED BY THE ASSESSING OFFICER, IS SETTLED BY THE DECISION OF TRIBUNAL IN THE ASSESSMENT YEAR 2003-04. RESPECTFU LLY FOLLOWING THE AFORESAID ORDER OF THE TRIBUNAL, WE HOLD THAT THE A SSESSEES BUSINESS IS TO BE CONSIDERED TO HAVE BEEN SET UP ON 15.01.2003. IN T HE LIGHT OF THE VIEW TAKEN THAT THE ASSESSEES BUSINESS HAS BEEN SET UP ON 15. 01.2003, THE ASSESSEES CLAIM OF DEPRECIATION AS WELL AS OF REVENUE EXPENDI TURE ARE TO BE CONSIDERED AND ALLOWED ACCORDINGLY. WE THEREFORE, RESTORE THE ISSUE REGARDING ALLOWABILITY OF DEPRECIATION AND REVENUE EXPENDITUR E TO THE FILE OF THE AO FOR HIS FRESH CONSIDERATION AFTER TREATING THE BUSI NESS OF THE ASSESSEE BEING SET UP ON 15.01.2003. IN OTHER WORDS, THE AO SHALL ALLOW THE DEPRECIATION AS WELL AS REVENUE EXPENSES FOR THE WHOLE PERIOD OF TH E F.Y. FROM 01.04.2003 TO 31.03.2004 RELEVANT TO THE ASSESSMENT YEAR 2004- 05 UNDER CONSIDERATION. THE AO SHALL EXAMINE THE QUANTUM OF DEPRECIATION AS WELL AS THE QUANTUM OF REVENUE EXPENSES, WHICH ARE ALLOWABLE AS PER LAW . HOWEVER, THE AO SHALL BE AT LIBERTY TO EXAMINE THE NATURE OF REVENU E EXPENSES FOR THE PURPOSE OF DECIDING THEIR ADMISSIBILITY OR OTHERWISE ON MER IT AS PER LAW AND IN THE LIGHT OF FACTS AND CIRCUMSTANCES OF THE PRESENT CAS E. WE ORDER ACCORDINGLY. 6 10. THE NEXT ISSUE IS WITH REGARD TO THE CONTROVERS Y WHETHER THE CIT(A) HAS ERRED IN NOT ALLOWING THE ASSESSEE TO RAISE GRO UND REGARDING CLAIM OF INTEREST EXPENSES OF RS.1,00,85,036/- AND INTEREST INCOME ON FIXED DEPOSIT OF RS.60,48,699/- AS CLAIMED BY THE ASSESSEE IN THE RE VISED RETURN FILED ON 25.10.2005. 11. THE ASSESSEE COMPANY IS A PUBLIC SECTOR UNDERTA KING AND IS A 100% SUBSIDIARY OF A NHAI. IT FILED ITS ORIGINAL RETURN OF INCOME ON 1.11.2004. THE ORIGINAL RETURN WAS SUBSEQUENTLY REVISED ON 25. 10.2005 CLAIMING A LOSS OF RS.23,55,10,720/-. THE FACT THAT THE ASSESSEE F ILED REVISED RETURN ON 25.10.2005 IS CLEARLY MENTIONED IN THE BODY OF THE ASSESSMENT ORDER. IN THE REVISED RETURN, THE ASSESSEE CLAIMED INTEREST EXPEN SES OF RS.1,00,85,036/- AND INTEREST ON FIXED DEPOSIT OF RS.60,48,699/- WAS OFFERED FOR TAX UNDER THE HEAD INCOME FROM OTHER SOURCES INSTEAD OF REDUCIN G THE SAME FROM THE COST OF CAPITAL WORK IN PROGRESS AS SHOWN IN THE BO OKS OF ACCOUNT AND SHOWN IN THE ORIGINAL RETURN OF INCOME. THESE ISSUES WER E NOT DELIBERATED UPON BY THE AO WHILE MAKING THE ASSESSMENT UNDER SEC. 143(3 ) OF THE ACT. THESE GROUNDS WERE RAISED BEFORE THE LEARNED CIT(A) BY TH E ASSESSEE BY WAY OF ADDITIONAL GROUND. HOWEVER, THE LEARNED CIT(A) REF USED TO ENTERTAIN THIS ADDITIONAL GROUND BY OBSERVING THAT THIS GROUND REL ATES TO THE FACTS AND NO 7 POINT OF LAW WAS INVOLVED. THE CIT(A) THEREFORE, R EFUSED TO ADMIT THE ADDITIONAL GROUND AND REJECT THE SAME. 12. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFUL LY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT IN DISP UTE THAT THE ASSESSEE HAS MADE ITS CLAIM BY WAY OF FILING REVISED RETURN ON 2 5.10.2005, WHICH WAS FILED BEFORE THE EXPIRY OF ONE YEAR FROM THE END OF THE ASSESSMENT YEAR OR THE ASSESSMENT WAS COMPLETED. THEREFORE, THE LEARNED C IT(A) SHOULD HAVE ENTERTAINED THIS GROUND FOR HIS CONSIDERATION. IT IS ALSO NOTICED BY US THAT THIS POINT HAS NOT BEEN LOOKED INTO EVEN BY THE AO, WHIL E FRAMING THE ASSESSMENT. IT IS THUS, CLEAR THAT THE ISSUES INVO LVED IN THESE TWO GROUNDS WERE NOT LOOKED INTO, AND DELIBERATED UPON BY BOTH THE AUTHORITIES BELOW. WE THEREFORE, RESTORE THESE TWO ISSUES BACK TO THE FILE OF THE AO FOR HIS CONSIDERATION AND ADJUDICATION AFTER PROVIDING THE ASSESSEE OPPORTUNITY OF BEING HEARD AND THEN TO DECIDE THE MATTER AS PER LA W. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED IN THE MANNER AS INDICATED ABOVE. 14. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 30 TH JULY, 2010. SD/- SD/- (K.D. RANJAN) (C.L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30 TH JULY, 2010. 8 ITA NO.3217/DEL/2009 COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.