DCIT (LTU), New Delhi V. M/s Indian Railway Finance Corportion Ltd., New Delhi

ITA 3503/DEL/2013

• Counselvise Citation: 350320114 RSA 2013
• Duration Of Justice: 1 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 07-04-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 31-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R S GILL
• Keywords: Capital asset; Depreciation; Revenue expenditure; Capital expenditure
• Section: 14A; 37(1); 32; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI T.S. KAPOOR ITA NOS. 3499, 3500, 3501, 3502 & 3503/DEL/2013 A.YRS: 2003-04, 06-07, 07-08, 08-09 & 09-10 DCIT (LTU), VS. INDIAN RAILWAY FINANCE CORPN. LT D., NEW DELHI. EAST TOWER, UG FLOOR, NBCC PLACE, BHISHAM PITAMAH MARG, LODI ROAD, NEW DELHI-110008. PAN: AAACI 0681 C AND ITA NO. 3380 &3381/DEL/2013 A.YRS: 20 07-08 & 09-10 INDIAN RAILWAY FINANCE CORPN. LTD., VS. DCIT (LTU) , EAST TOWER, UG FLOOR, NEW DELHI. NBCC PLACE, BHISHAM PITAMAH MARG, LODI ROAD, NEW DELHI-110008. ( APPELLANT ) ( RESPONDENT ) DEPARTMENT BY : SHRI R.S. GILL CIT (DR) RESPONDENT BY : SHRI K. SAMPATH ADV. & SHRI V. RAJA KUMAR ADV. O R D E R PER R.P. TOLANI, J.M: : THIS IS A SET OF REVENUES APPEALS FOR A.Y. 2003-04 & 2006-07 TO 2009-10 AND ASSESSEES APPEALS FOR A.Y. 2007-08 & 2 009-10. ALL THESE APPEALS ARE HEARD TOGETHER AND DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. IN ASSESSEES APPEALS THE SOLE GROUND RAISED REL ATES TO DISALLOWANCE OF EXPENSES U/S 14A OF THE I.T. ACT. 2 REVENUES APPEALS : 3. COMMON ISSUE RAISED IN GROUND NO. 1 FOR A.Y. 200 3-04 AND GROUND NO. 5 FOR A.Y. 2006-07 IS AS UNDER: ON THE FACTS AND THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) HAS ERRED IN HOLDING THAT BOND SE RVICING EXPENSES ARE REVENUE IN NATURE AND IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE BOND SERVICING EXPENSES OF RS. 1,20,11,000/ (A.Y. 2003-04) & RS. 1,09,10,876/- (A.Y. 2006-07)-. 3.1. IN A.Y. 2003-04 THE CIT(A) ALLOWED THE CLAIM O F THE ASSESSEE BY FOLLOWING OBSERVATIONS: THE GROUND NO. 1 OF APPEAL IS AGAINST THE DISALLOW ANCE OF BONDS SERVICING EXPENSES AMOUNTING TO RS. 1,20,11,0 00/- AS THE AO TREATED THEM AS AN ITEM OF CAPITAL EXPENDITURE. THE ASSESSING OFFICER HAS DISALLOWED THIS AMOUNT BY OBS ERVING THAT THE BONDS SERVICING EXPENSES WERE CAPITAL IN NATURE AND RELIED ON THE DECISION OF THE SUPREME COURT IN THE CASE OF BROOKE BOND INDIA LTD. 225 ITR 798. THE APPELLANT ON THE OTHER HAND HAS STATED THAT BON DS SERVICES EXPENSES WERE INCURRED ON ACCOUNT OF PAYMENTS MADE TO RATE AGENCIES LIKE ICRA, CRISIL ETC. THUS, THE SAME SHOU LD BE ALLOWED. THE DETAILS OF BOND SERVICING EXPENSES ALO NG WITH THEIR NATURE AND PURPOSES WERE GIVEN AS UNDER: EXPENSE AMOUNT LISTING FEES RS. 1,24,813 BOND HOLDER TRUSTEESHIP FEES 12,13,125 BOND SERVICING SURVEILLANCE 48,66,500 REGISTRAR FEES RS. 17,18,986 POSTAGE & TELEGRAM CHARGES RS. 5,27,122 ADVERTISEMENT RS. 33,91,747 PRINTING AND COPYING CHARGES RS. 1,68,396 3 IT WAS SUBMITTED THAT BOND SERVICING EXPENSES BEIN G INCURRED BY THE COMPANIES RELATE TO SERVICING THE BONDS AND LOANS AND THE SAME HAS NOTHING TO DO WITH THE RAISING OF RESO URCES DURING THE YEAR. IT WAS SUBMITTED THAT THESE EXPENSES ARE INCURRED EVERY YEAR BY THE ASSESSEE FOR SERVICING THE BONDS AND LOANS ISSUED AND OUTSTANDING AND ARE REVENUE EXPENDITURE ALLOWABLE U/S 37(1) AND NO ELEMENT OF CAPITAL EXPENDITURE IS INCLUDED IN ABOVE. I HAVE CONSIDERED THE FACT IN THE LIGHT OF THE SUBM ISSION GIVEN BY THE APPELLANT. IN VIEW OF THE SAME I HOLD THE BO NDS SERVICING EXPENSES AS REVENUE IN NATURE FOR BOND LIKE LOANS A RE LIABILITY OF THE COMPANY WHICH HAS TO BE RETURNED BACK TO THE BOND HOLDERS AND CANNOT BE EQUATED WITH THE SHARE CAPITA L, IN CONTEXT OF WHICH THE SUPREME COURT HAD RENDERED THE DECISIO N IN THE CASE OF BROOKE BOND INDIA LTD. (SUPRA). THE ASSESSI NG OFFICER IS DIRECTED TO ALLOW THE SAME AS REVENUE IN NATURE. 3.2. SAME COURSE HAS BEEN TAKEN BY CIT(A) IN A.Y. 2 006-07 IN DELETING THE ADDITION IN QUESTION. 4. LD. DR RELIED ON THE ORDER OF ASSESSING OFFICER. 5. LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND SUBMITTED THAT ALL THE EXPENSES WERE INCURRED FOR SERVICING THE BONDS AND IT HAD NO LINKAGE WITH THE RAISING OF THE RESOURCES FOR BONDS. THESE EXPENSES ARE INCURRED YEARLY BY THE ASSESSEE AND HAVE BEEN ALLOWED U/S 37 (1) WHICH IS EVIDENT FROM THE FACT THAT IN NO OTHER YEARS THIS DISALLOWA NCE HAS BEEN MADE BY ASSESSING OFFICER. 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE ENTIRE MATERIAL AVAILABLE ON RECORD. FROM THE FACTS IT CLEARLY EMER GES THAT NO SUCH DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER IN A NY OTHER YEAR. IT HAS NOT BEEN DISPUTED BY THE LD. DR THAT IT HAS NO LINKAGE WITH THE RESOURCES FOR RAISING OF THE BONDS. THUS, IN FACTUAL TERMS THE EX PENDITURE CLEARLY AMOUNTS 4 TO REVENUE IN NATURE. IN VIEW THEREOF, WE SEE NO IN FIRMITY IN THE ORDER OF CIT(A) WHICH IS UPHELD. REVENUES GROUND IS REJECTE D ACCORDINGLY. 7. NEXT COMMON GROUND RELATING TO CAPITAL RECOVERY ON LEASED ASSETS RAISED IN A.Y. 2006-07, 07-08,08-09 & 09-10 IS AS U NDER: ON THE FACTS AND THE CIRCUMSTANCE OF THE CASE AND I N LAW, THE LD. CIT(APPEALS) HAS ERRED IN ALLOWING APPEAL OF T HE ASSESSEE IN RESPECT OF ADDITION OF RS. 1446.73 CRORES (A.Y. 2006-07); 1576.89 CRORES (A.Y. 2007-08); RS. 1554.40 CRORES ( A.Y. 2008- 09) & RS. 1629.19 CRORES (A.Y. 2009-10) MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CAPITAL RECOVERY ON LEASED AS SETS. 8. LD. DR RELIED ON THE ORDER OF ASSESSING OFFICER. 9. LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE I SSUE IN QUESTION HAS BEEN RESTORED BACK TO THE FILE OF ASSESSING OFFICER BY THE ITAT DELHI C IN ITA NO. 5860/DEL/2012 VIDE ORDER DATED 11-10-2013 F OR A.Y. 2004-05 BY FOLLOWING OBSERVATIONS: 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND HAVE GONE THROUGH THE MATERIAL PLACED ON RECORD . WE FIND THAT FIRST GROUND OF APPEAL IS COVERED IN FAVOUR OF ASSESSEE BY TRIBUNALS ORDER IN ITA NOS. 699,359, 3357 AND 2109 FOR ASSESSMENT YEAR 1997-1998 TO 2000 -2001 VIDE ORDER OF TRIBUNAL DATED 08.08.2008. THE RELEVANT FINDINGS OF HONBLE TRIBUNAL IN THESE APPEALS ARE AS UNDER: THE CHART FOR 30 YEARS OF OPENING BALANCE IN THE PRESENT YEAR I.E. A. Y. 1997-98 IS SUBMITTED BY THE LD. AR OF THE ASSESSEE. AS PER THE SAME, OPENING BALANCE OF LEASED ASSETS IS RS.126,256.37 LACS, RAT E OF DEPRECIATION AS PER COMPANIES ACT IS 4.75%, AND RATE OF INTEREST IS 14.97%. THE TOTAL FOR 30 YEARS OF DEPRECIATION IS RS.126,256.42 LACS AND FINANCE INCOME IS RS.157,820.46 LACS. TOTAL OF CAPITAL RECOVERY IS RS.126,256.37 LAKHS AND TOTAL OF LEASE EQUALIZATION IS NIL. SINCE, IN THE PRESENT CASE ALSO, AS PER THIS CHART, EVEN AFTER DEDUCTION OF 5 FINANCE INCOME 14.97% PA., THE FULL VALUE OF THE COST OF ASSETS I.E., RS.162,256.37 LACS IS FULLY RECOVERED IN LEASE PERIOD OF 30 YEARS AND HENCE, IT IS A CASE OF FINANCE LEASE AS PER THE GUIDELINES ISSUED BY ICAI. IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS CITED BY LD. AR OF THE ASSESSEE, WE FIND NO REASON FOR NOT ACCEPTING THE BASIS AS SUGGESTED BY ICAI IN THESE GUIDELINES FOR DECIDING THE CHARACTER OF LEASE IN THE PRESENT CASE AS FINANCE LEASE. HOWEVER, THE ASSESSEE COMPANY HAS GIVEN THIS CHART FOR OPENING VALUE OF LEASE ASSETS IN THE ASSESSMENT YEAR 1997-98, WHICH IS EXAMINED BY US. SIMILAR CHARGE FOR ASSETS GIVEN ON LEASE DURING A. Y. 1997-98 AND IN SUBSEQUENT YEARS IS NOT FURNISHED TO US. HENCE, THE ASSESSING OFFICER SHOULD VERIFY THOSE CHARTS AND IF THIS CONDITION IS SATISFIED, ALL THOSE TRANSACTIONS SHOULD ALSO BE ACCEPTED AS FINANCE LEASE TRANSACTIONS. 7. THE ISSUE INVOLVED IN THE PRESENT APPEAL VIDE GR OUND NO.1 BEING SAME WE RESPECTFULLY FOLLOWING THE ABOVE ORDE R OF TRIBUNAL RESTORE GROUND NO.1 TO THE OFFICE OF ASSES SING OFFICER TO DO THE NEEDFUL AS PER DIRECTIONS OF EARLIER TRIB UNAL ORDER. 10. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE ENTIRE MATERIAL AVAILABLE ON RECORD. SINCE THE ISSUE IN QUESTION HA S BEEN SET ASIDE, RESTORED BACK TO THE FILE OF ASSESSING OFFICER, RESPECTFULLY FOLLOWING THE ITAT ORDER IN EARLIER YEARS WE SET ASIDE THE ISSUE BACK TO THE FI LE OF ASSESSING OFFICER WITH SIMILAR DIRECTIONS. 11. NEXT COMMON GROUND RELATING TO DISALLOWANCE OF BOND ISSUE EXPENSES RAISED IN A.Y. 2006-07, 07-08,08-09 & 09-10 IS AS U NDER: ON THE FACTS AND THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) HAS ERRED IN DELETING THE ADDITIO N OF RS. 6,54,94,000/-(A.Y. 2006-07); RS. 6,12,91,000/- (A.Y . 2007-08); RS. 1,77,71,271/- (A.U. 2008-09) & RS. 9,69,25,000/ - (A.Y. 6 2009-10) MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF BOND ISSUE EXPENSES 12. LD. COUNSEL FOR THE ASSESSEE AT THE OUT SET CON TENDS THAT THE ISSUE IN QUESTION IS COVERED IN FAVOUR OF THE ASSESSEE BY VA RIOUS ORDERS OF THE ITAT. FOR A.Y. 2001-02 RENDERED IN ITA NO. 2594/DEL/2005 THE ITAT DELHI BENCH B VIDE ORDER DATED 31-1-2011, CONSIDERING EAR LIER YEARS ORDERS OF THE ITAT ON THE SAME ISSUE FROM A.Y. 1997-98 TO 2000-01 ALLOWED THE CLAIM IN FAVOUR OF THE ASSESSEE BY FOLLOWING OBSERVATIONS: 15. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ISSU E IS COVERED BY THE DECISION OF THE ITAT FOR ASSESSMENT YEAR 199 7-98 TO 2000-01 WHEREIN IT HAS BEEN HELD AS UNDER:- WE HAVE HEARD THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE JUDGMENTS CITED BY THE LD. AR OF THE ASSESSEE. WE FIND THAT IN THE CASE OF M/S KHIRANI CHEMICALS LTD. (SUPRA) THE ISSUE BEFORE HONBLE DELHI HIGH COURT WAS REGARDING EXPENSES INCURRED ON ISSUE OF DEBENTURES. IN THAT CASE ALSO, THE ASSESSEE CLAIMED DEDUCTION OF THE ENTIRE EXPENSES IN THE YEAR OF ISSUE OF DEBENTURES WHEREAS THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE EXPENDITURE WOULD QUALIFY ONLY FOR AMORTIZATION UNDER SECTION 35D OF THE I.T. ACT. UNDER THESE FACTS, IT WAS HELD BY HONBLE DELHI HIGH COURT THAT THE TRIBUNAL WAS PERFECTLY JUSTIFIED IN HOLDING THAT THE EXPENDITURE WAS A PERMISSIBLE DEDUCTION AND ACCORDINGLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. SINCE THE FACTS IN THE PRESENT CASE ARE SIMILAR, WE DECIDE TH IS ISSUE IN THE PRESENT CASE ALSO IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE JUDGMENT OF HONBLE 7 DELHI HIGH COURT. GROUND NO. 2 OF THE ASSESSEES APPEAL IN ALL THE FOUR YEARS STAND ALLOWED. 16. SINCE THE ISSUE IS SQUARELY COVERED BY THE DECI SION OF THE ITAT IN THE ASSESSEES OWN CASE, RESPECTFULLY FOLLO WING THE PRECEDENT, IT IS HELD THAT BOND ISSUE EXPENSES WILL BE ALLOWABLE AS DEDUCTION AS REVENUE EXPENDITURE. THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION. 12.1. IT IS FURTHER CONTENDED THAT REVENUE APPEALED AGAINST THIS ORDER OF THE ITAT BEFORE THE HONBLE DELHI HIGH COURT WHICH VID E ORDER DATED 31-10- 2013 IN ITA NO. 1189/2011 FOR A.Y. 2001-02 UPHELD T HE ORDER OF THE ITAT BY FOLLOWING OBSERVATIONS: THE RESPONDENT ASSESSEE WAS/ IS A GOVERNMENT OF IN DIA UNDERTAKING AND WAS ENGAGED IN THE BUSINESS OF LEAS ING AND FINANCING TO INDIAN RAILWAYS. IT PROCURED FUNDS FRO M VARIOUS SOURCES AND ACQUIRED ROLLING STOCK WHICH WAS LEASED TO INDIAN RAILWAYS. THE EXPENDITURE WHICH WAS INCURRED ON BON DS WAS FOR ENSURING FINANCE AND AVAILABILITY OF FUNDS FOR CARRYING OUT THE BUSINESS OF FINANCE AND LEASING. TO PROCURE AND GET FUNDS IN THE FORM OF BONDS ETC. SOME EXPENDITURE HAD TO BE I NCURRED. THESE FUNDS, WHEN PROCURED, WERE USED FOR THE BUSIN ESS ACTIVITIES TO EARN INCOME. IT IS NOT A CASE WHEREIN THE RESPONDENT ASSESSEE WAS YET TO SET UP OR COMMENCE T HEIR BUSINESS. THE BUSINESS, IT IS ACCEPTED, HAD COMMENC ED MUCH EARLIER AND NOT DURING THE YEAR IN QUESTION. 13. LD. DR IS HEARD. 14. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE ENTIRE MATERIAL AVAILABLE ON RECORD. SINCE THE ISSUE IN QUESTION ST ANDS DECIDED BY ITAT AND CONFIRMED BY HONBLE HIGH COURT, AS MENTIONED ABOVE , RESPECTFULLY FOLLOWING THE SAME, THIS GROUND OF REVENUE IN THE A SSESSMENT YEARS IN QUESTION ARE DISMISSED. 8 15. IN REVENUES APPEAL FOR A.Y. 2006-07, GROUND N O. 3 IS AS UNDER: ON THE FACTS AND THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) HAS ERRED IN DELETING THE ADDITIO N OF RS. 1,10,10,876/- ( A.Y. 2006-07) MADE BY ASSESSING OFF ICER ON ACCOUNT OF DISALLOWANCE OF PRIOR PERIOD EXPENSES. 16. ON THIS GROUND ALSO LD. COUNSEL FOR THE ASSESSE E AT THE OUT SET CONTENDS THAT REVENUES GROUND IS MISCONCEIVED IN AS MUCH AS LD. CIT(A) HAS ACTUALLY RESTORED BACK THE ISSUE IN QUESTION TO THE FILE OF ASSESSING OFFICER FOLLOWING EARLIER ITAT ORDER AS UNDER: 5.3.2. FROM THE FACTS AVAILABLE ON RECORD IT IS SE EN THAT THE SIMILAR ISSUE HAS BEEN DECIDED BY THE HONBLE I TAT IN ITA NO. 1735/DEL/2006 FOR ASSESSMENT YEAR 2002-03 VIDE THEIR ORDER DATED 28-08-2009 WHEREIN THE HONBLE ITAT HAS OBSE RVED AS UNDER: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THERE IS NO DISPUTE ABOUT THE ALLOWABILITY OF EXPENSES. ONLY DISPUTE IS REGARDING THE YEAR OF ALLOWABILITY. IF THE ASSESSING OFFICER IS OF THE VIEW THAT THE EXPENSES ARE PERTAINING TO THE PRIOR PERIOD, THE SAME ARE REQUIRED TO BE CONSIDERED FOR THE PRIOR AND ALLOWED IN THAT YEAR. IF IT IS FOUND THAT THE EXPENSES ARE ALLOWABLE IN THIS YEAR ON THE BASIS OF CRYSTALLIZATION OF LIABILITY, THE SAME MAY BE CONSIDERED IN THE YEAR UNDER APPEAL. THE ASSESSEE IS THEREFORE, DIRECTED TO PLACE NECESSARY EVIDENCE IN SUPPORT OF CLAIM OF EXPENSES. THE ASSESSING OFFICER ON APPRECIATION OF EVIDENCE MAY DETERMINE THE YEAR OF ALLOWABILITY AND ALLOW THE SAME IN EITHER OF THE YEAR. FOLLOWING THE DECISION OF THE HONBLE ITAT, THE ASS ESSING OFFICER IS DIRECTED TO DETERMINE OF ALLOWABILITY AN D ALLOW IN THE YEAR TO WHICH IT PERTAINS. 9 17. LD. D.R. IS HEARD. 18. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSAL THE MATERIAL AVAILABLE ON RECORD. RESPECTFULLY FOLLOWING ITATS ORDER FOR A.Y . 2002-03 HEREIN ALSO WE RESTORE THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER WITH SAME DIRECTIONS. 19. NEXT COMMON GROUND RELATING TO DISALLOWANCE OF DEPRECIATION ON OFFICE BUILDING RAISED IN A.Y. 2006-07, 07-08, 08-0 9 & 09-10 IS AS UNDER: ON THE FACTS AND THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) HAS ERRED IN DELETING THE DISALLO WANCE OF DEPRECIATION OF RS. 86,29,626/-(A.Y. 2006-07); RS. 77,66,664/- (A.Y. 2007-08); RS. 69,89,997/- (A.Y. 2008-09); AND RS. 62,90,997/- (A.Y. 2009-10) ON OFFICE BUILDING MADE BY THE ASSESSING OFFICER. 20. LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT LD. CIT(A) IN A.Y. 2009-10 HAS CONSIDERED THE ISSUE AND REFERRED TO ALL THE EA RLIER ORDERS OF THE ITAT FROM A.Y. 2001-02 TO 2003-04 AND HELD THAT THE ASSE SSEE IS ELIGIBLE FOR DEPRECIATION IN VIEW OF HONBLE SUPREME COURT JUDGM ENT IN THE CASE OF MYSORE MINERALS 239 ITR 775 AND ALLOWED THE CLAIM O F DEPRECIATION BY FOLLOWING OBSERVATIONS: 5.4. REGARDING THE GROUND NUMBER 3 OF THE APPEAL, THE APPELLANT HAS CHALLENGED THE ACTION OF THE AO IN DI SALLOWING THE DEPRECIATION ON OFFICE BUILDING AT HUDCO PLACE NEW DELHI. IN THIS REGARD, THE FOLLOWING SUBMISSION WAS MADE 'THE ASSESSEE ACQUIRED THE OFFICE BUILDING DURING THE A. Y. 2001-02. THE COMPANY IS THE LEGAL OWNER OF THE PROPERTY, ONLY CERTAIN REGISTRATION FORMALITIES ARE YET TO BE COMPLETED. THE ASSESSEE IS A GOVT. OF INDIA UNDERTAKING AND HAS PURCHASED THE ABOVE OFFICE FROM NATIONAL BUILDING CONSTRUCTION CORPORATION LTD. (NBCC) WHICH IS ALSO A GOVT. OF INDIA ENTERPRISE. THE ASSESSEE IS ALREADY IN POSSESSION OF THE PREMISES WHICH IS 10 BEING USED AS ITS OFFICE. THE ASSESSEE HAD TAKEN TH E POSSESSION THE OFFICE PREMISES ON 29.03.2000. THE CHANGE OF REGD. OFFICE WAS ALSO INTIMATED TO ROC ON 13.11.2000. THE ASSESSEE WAS IN OCCUPATION OF THE PREMISES. THE INCOME TAX RETURNS AND OTHER STATUTORY RECORDS ARE EVIDENCE OF THE ABOVE ADDRESS. THE ABOVE FACTS CLEARLY INDICATE THAT THE OWNERSHIP VESTS WITH THE ASSESSEE AND ITS IS ENTITL ED TO CLAIM OF DEPRECIATION. BOTH THE TRANSFER AND TRANSFEREE ARE GOVT. OF INDIA UNDERTAKING. IN THIS REGARD WE WOULD LIKE TO INVITE YOUR ATTENTION THE FOLLOWING JUDGMENTS. CIT V PODAR CEMENT PVT. LTD. (1997) 226 ITR 625 CIT V. FAZILKA DABWALI TPT. COMPANY PVT. LTD. (2004) 270 398 WHERE IT HAS BEEN HELD THAT IF THE ASSESSEE IS IN OCCUPATION OF THE PREMISES AND IS USING THE SAME FOR HIS BUSINESS PURPOSES, THE CLAIM OF DEPRECIATION CANNOT BE DENIED. IN VIEW OF THE ABOVE THE ASSESSEE'S CLAIM OF DEPRECIATION ON OFFICE BUILDING IS ALLOWABLE.' 5.4.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE IN THE LIGHT OF THE SUBMISSION MADE BY THE APPELLANT. I FI ND THAT THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F MYSOR E MINERALS LTD. SUPRA) IS SQUARELY APPLICABLE IN THE CASE OF THE APPELLANT. IN THEIR DECISION, THE HON'BLE SUPREME C OURT IN THAT CASE HAS HELD AS UNDER: 'THE TERM OWNED AS OCCURRING IN SECTION 32(1) OF THE INCOME TAX ACT MUST BE ASSIGNED A WIDER MEANING. ANYONE IN POSSESSION OF PROPERTY IN HIS OWN TITLE EXERCISING SUCH DOMINION OVER THE PROPERTY AS WOULD ENABLE OTHERS BEING EXCLUDED THEREFROM AND HAVING THE RIGHT TO USE AND OCCUPY THE PROPERTY AND/OR TO ENJOY ITS USUFRUCT IN HIS OW N RIGHT WOULD BE THE OWNER OF THE BUILDING THOUGH A 11 FORMAL DEED OF TITLE MAY NOT HAVE BEEN EXECUTED AND REGISTERED AS CONTEMPLATED BY THE TRANSFER OF PROPERTY ACT, THE REGISTRATION ACT, ETC. 'BUILDING OWNED BY THE ASSESSEE', THE EXPRESSION AS OCCURRING IN SECTION 32(1) OF THE INCOME TAX ACT, MEANS THE PERSON WHO HAVING ACQUIRED POSSESSION OVER THE BUILDING IN HIS OWN RIGHT USES THE SAME FO R THE PURPOSES OF THE BUSINESS OR PROFESSION THOUGH A LEGAL TITLE HAS NOT BEEN CONVEYED TO HIM CONSISTENTLY WITH THE REQUIREMENTS OF LAWS SUCH AS THE TRANSFER OF PROPERTY ACT AND THE REGISTRATION ACT, ETC. GENERAL LY SPEAKING DEPRECIATION IS AN ALLOWANCE FOR THE DIMINUTION IN THE VALUE DUE TO WEAR AND TEAR OF A CAPITAL ASSET EMPLOYED BY AN ASSESSEE IN HIS BUSINE SS. THE VERY CONCEPT OF DEPRECIATION SUGGESTS THAT THE TAX BENEFIT ON ACCOUNT OF DEPRECIATION LEGITIMATELY BEL ONGS TO ONE WHO HAS INVESTED IN THE CAPITAL ASSET AND IS UTILIZING THE CAPITAL ASSET AND THEREBY LOSING GRAD UALLY THE INVESTMENT CAUSED BY WEAR AND TEAR, AND WOULD NEED TO REPLACE THE SAME BY HAVING LOST ITS VALUE F ULLY OVER A PERIOD OF TIME. IT IS WELL-SETTLED THAT THER E CANNOT BE TWO OWNERS OF THE PROPERTY SIMULTANEOUSLY AND IN THE SAME SENSE OF THE TERM. THE INTENTION OF THE LEGISLATURE IN ENACTING SECTION 32 OF THE ACT WOULD BE BEST FULFILLED BY ALLOWING DEDUCTION IN RESPECT OF DEPRECIATION TO THE PERSON IN WHOM FOR THE TIME-BEI NG VESTS THE DOMINION OVER THE BUILDING AND WHO IS ENT ITLED TO USE IT IN HIS OWN RIGHT AND IS USING THE SAME FO R THE PURPOSE OF HIS BUSINESS OR PROFESSION. ASSIGNING ANY DIFFERENT MEANING WOULD NOT SUB-SERVE THE LEGISLATIVE INTENT. 5.4.3 I FIND THAT THIS ISSUE HAS BEEN SUBJECT MATTE R OF APPEAL BEFORE THE HON'BLE ITAT DELHI IN THE CASE OF THE AP PELLANT FOR THE AYS 2001-02, 2002-03 AND 2003-04, WHO HAVE WHIL E DECIDING THE APPEAL IN FAVOUR OF THE APPELLANT HAS HELD AS UNDER: 'WE HAVE HEARD BOTH THE PARTIES. ITAT IN ORDER DATE D. 28/08/2009 FOR A. Y. 2003-04 IN ITA. NO. 1735(DEL) 12 OF 2006 HAS ALLOWED DEPRECIATION ON THE OFFICE SPACE TAKEN FROM NBCC. ITAT WHILE DECIDING THE ISSUE HAS OBSERVED AS UNDER:- ' 14 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WHEN THE POSSESSION WAS HANDED OVER BY THE NBCC TO THE ASSESSEE, THE POSSESSION LETTER NOTED AS UNDER:- 'POSSESSION OF THE FOLLOWING COMMERCIAL SPACE IS HANDED OVER TO INDIAN RAILWAY FINANCE CORPORATION LTD. NEW DELHI. (I) COMMERCIAL SPACE MEASURING 625.0104 SQ. M (APPROX.). UPPER GROUND FLOOR EAST TOWER OF NBCC PLACE, PRAGATI VIHAR, NEW DELHI. (REF. NBCC'S ALLOTMENT LETTER NO. REM&D:98:854 DT. 28.04.98 AND LETTER NO. REM&D:99:836 DATED. 5.11.1999 ) (II) COMMERCIAL SPACE MEASURING 284.9241 SQ.M. (PURCHASED BY MMTC AND SOLD TO IRFC; BY MMTC. REF:IRFC'S LETTER NO. IRFC/O. ACCO,/NBCC DT/ 14.01.2000 TO CE/REM&D/ NBCC) TOILET: COMPLETE FIRE FIGHTING POINTS = 49 . POSSESSION WITH REGARD TO 30 CAR PARKING AND 20 SCOOTER PARKING SLOTS WILL BE HANDED OVER SHORTLY. DRAWINGS FOR THE SAME ARE BEING OBTAINED FROM THE NBCC POSSESSION WI TH REGARD TO 30 CAR PARKING AND 20 SCOOTER PARKING SLOTS WILL BE HANDED OVER SHORTLY. DRAWINGS FOR THE SAME ARE BEIN G OBTAINED FROM THE NBCC HQ OFFICER. FIRE-FIGHTING LAYOUT DRAW ING WILL ALSO BE SUPPLIED SHORTLY AS DESIRED BY IRFC. IN RESPECT OF PROPERTY REFERRED IN PARA NO.2 OF THE ABOVE REFERRED POSSESSION LETTER THE ASSESSEE IS HELD TO BE THE OWNER AND WAS ALSO HELD TO BE ENTITLED FOR DEPRECIATION EVEN FOR A. Y. 13 2001-02. THEREFORE/ THERE CANNOT BE ANY DISPUTE ABO UT THE SPACE ALLOTTED TO THE ASSESSEE DIRECTLY BY NBCC WHICH IS ALSO CONFIRMED BY ALLOTMENT LETTER DATED 28.04.1998 REFE RRED IN THE POSSESSION LETTER AND IN RESPECT OF WHICH POSSESSIO N WAS HANDED OVER ON 29.03.2000. THE FORMALITIES WHICH AR E PENDING ARE IN RESPECT OF TRANSFER DEED PENDING FOR EXECUTI ON BUT NEITHER THE NOTES ON ACCOUNT NOT THE AUDITOR'S REPORT REVEA L THAT THE POSSESSION WAS NEVER TAKEN. ON THE CONTRARY PROVISI ON WAS MADE AND POSSESSION TAKEN OVER. WE/ THEREFORE/ HOLD THAT THE ASSESSEE IS ENTITLED TO DEPRECIATION CANNOT BE DISALLOWED IN VIEW OF THE DECISION OF HON'BLE SUPREMECOURT IN THE CASE OF MYSORE MINERALS 239 ITR 775 WHICH HAS BEEN FOLLOWED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF C/T VS. BHA RAT ALUMINIUM CO. LTD 293 ITR 600. SINCE THE ISSUE IS COVERED BY THE DECISION OF THE I TAT IN FAVOUR OF THE ASSESSEE, RESPECTFULLY FOLLOWING THE PRECEDE NT AND BY APPLYING THE ABOVE REFERRED DECISION OF THE HON'BLE SUPREME COURT, IT IS HELD THAT THE ASSESSEE IS ENTITLED FOR DEPRECIATION IN RESPECT OF OFFICE SPACE PURCHASED FROM NBCC. 20.1. FURTHER, HONBLE HIGH COURT WHILE DECIDING TH E ASSESSEES APPEAL FOR A.Y. 2001-02, OBSERVED AS UNDER: ISSUE NO. 4 WHETHER THE ASSESSEE IS ENTITLED TO DEPRECIATION ON OFFICE PREMISES AT NBCC PLACE, LODI ROAD; NEW DELHI? 19. THE CONTENTION OF THE REVENUE RAISED IS THAT TH E RESPONDENT- ASSESSEE WAS NOT THE OWNER OF THE BUILD ING OR IN POSSESSION IN PART PERFORMANCE UNDER SECTION 53A OF THE TRANSFER OF PROPERTY ACT. LEARNED SENIOR STANDING COUNSEL HAS REFERRED TO THE OBSERVATIONS AND THE CONTENTIONS RA ISED BY THE REVENUE IN PARAGRAPHS 17 AND 18 OF THE IMPUGNED ORD ER, WHEREIN REFERENCE IS MADE TO AGREEMENTS DATED 11 TH APRIL, 2002 AND 21 ST NOVEMBER, 2002. IN THE AGREEMENT DATED 21 ST NOVEMBER, 2002, IT STATED THAT NBCC HAD HANDED OVER VACANT 14 POSSESSION TO THE RESPONDENT-ASSESSEE. THE RESPONDE NT- ASSESSEE, ON THE OTHER HAND, HAD RELIED UPON LETTER DATED 29 TH MARCH, 2000 RECEIVED FROM NBCC WHEREIN IT WAS CLEAR LY MENTIONED THAT COMMERCIAL SPACE MEASURING 625 SQUAR E METERS WAS ALLOTTED TO THE RESPONDENT-ASSESSEE VIDE LETTER DAED 28 TH APRIL, 1998 AND COMMERCIAL SPACE MEASURING 285 SQUA RE METERS WAS INITIALLY PURCHASED BY MMTC BUT WA SOLD BY THEM TO THE RESPONDENT-ASSESSEE. AFTER NOTICING THE CONF LICTING POSITIONS, THE TRIBUNAL IN PARAGRAPH 20.1 HAS REFER RED TO THEIR DECISION DATED 28 TH AUGUST, 2009 FOR ASSESSMENT YEAR 2002-03. THEY HAVE QUOTED THE POSSESSION LETTER DATED 29 TH MARCH, 2000 AND REACHED A CONCLUSION THAT POSSESSION WAS IN FA T OR ACTUALLY WAS HANDED OVER TO THE ASSESSEE BEFORE THE END OF FINANCIAL YEAR ENDING 31 ST MARCH, 2000. THE RESPONDENT- ASSESSEE, THEREFORE, BECAME ENTITLED TO BENEFIT UND ER SECTION 53A OF TRANSFER OF PROPERTY AT AND ACCORDINGLY DECI SION OF THE SUPREME COURT IN MYSORE MINERALS VS. CIT (2009) 239 ITR 775 (SC) WAS APPLICABLE. 20. THE AFORESAID FINDINGS ARE FINDINGS OF FACT. TH E TRIBUNAL HAS TAKEN INTO ACCOUNT AND RELIED UPON THE POSSESSI ON LETTER DATED 28 TH APRIL, 1998 IN WHICH NBCC HAD ACCEPTED THAT THE POSSESSION OF THE SPACE MEASURING 625 SQUARE METER S AND 285 SQUARE METERS WAS HANDED OVER TO THE RESPONDENT ASS ESSEE ON 23 RD SEPTEMBER, 2000. NBCC WAS/ IS A GOVERNMENT OF INDI A UNDERTAKING AND IT IS DIFFICULT TO ACCEPT THE CONTE NTION OF THE REVENUE THAT THEY WOULD HAVE FUDGED OR MANIPULATED THE DATE OF POSSESSION. THE FACTUAL FINDING IS NOT PERVERSE. 20.2. SINCE THE CONSIDERATION FOR PURCHASE OF PROPE RTY WAS PAID AND THE POSSESSION THEREOF WAS ACHIEVED, THE ASSESSEE BECAM E CONSTRUCTIVE OWNER OF THE PROPERTY. IN VIEW OF THE ITAT AND HONBLE HIGH COURTS ORDER THERE IS NO MERIT IN THE GROUND OF THE REVENUE. 21. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSAL THE MATERIAL AVAILABLE ON RECORD. RESPECTFULLY FOLLOWING THE ITAT AND HONBLE HIGH COURTS ORDERS 15 WE HOLD THAT THE ASSESSEE IS ELIGIBLE TO DEPRECIATI ON. THERE IS NO INFIRMITY IN THE ORDER OF CIT(A) WHICH IS UPHELD. 22. THE SOLE GROUND TAKEN BY THE ASSESSEE IN ITS A PPEALS FOR A.Y. 2007-08 AND 2009-10 AND GROUND NO. 4 TAKEN BY THE REVENUE IN ITS APPEAL RELATE TO WORKING OF DISALLOWANCE U/S 14A READ WITH RULE 8D. BOTH THE PARTIES ADMITTED THAT FOR A.Y. 2007-08 IS NOT APPLICABLE WH EREAS FOR A.Y. 2009-10 THE SAME IS APPLICABLE. 23. AFTER HEARING BOTH THE PARTIES WE ARE INCLINED TO SET ASIDE THIS ISSUE IN BOTH THE YEARS BACK TO THE FILE OF ASSESSING OFFICE R TO REDECIDE THE SAME, KEEPING IN MIND THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENT LTD. 15 TAXMANN.COM 390 (DEL.). W E ORDER ACCORDINGLY. 24. IN THE RESULT REVENUES APPEALS BEING ITA NO. 3 499/DEL/2013 IS DISMISSED. ITA NOS. 3500, 3501, 3502 & 3503/DEL/201 3 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ASSESSEES APPEALS BEING ITA NOS. 3380 & 3381/DEL/2013 ARE ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN OPEN COURT ON 18/06/2014. SD/- SD/- ( T.S. KAPOOR ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 18-6-2014. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR 16