Adani Port & Special Economic Zone Ltd., Ahmedabad V. The Addl. CIT, Range-1, Ahmedabad

ITA 3577/AHD/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0698 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 28-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 21-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR BANWARI LAL
• Assessee Lawyers: P M MEHTA
• Keywords: Depreciation; Earning of tax free income; Assessment record
• Section: 143(3); 14A; 32; 263; 63

Judgement Text

I TA NO . 3577 / AHD/20 1 5 A.Y. 200 9 - 10 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH, AHMEDABAD BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER I TA NO. 3577 / AHD /201 5 ASSESSMENT YEAR : 20 0 9 - 10 ADANI PORT & SPECIAL ECONOMIC ZONE LTD VS. ADDL. C.I.T. ADANI HOUSE, RANGE - 1, AHMEDABAD NR. MITHAKHALI SIX ROAD, NAVRANGPURA, AHMEDABAD 380 009. [PAN A A ACG 7917 K ] A PPELLANT BY : SHRI P.M. MEHTA , A.R. RE SPONDENT BY : DR. BANWARI LAL, C.I.T. (D.R.) DATE OF HEARING : 2 8 .0 6 . 20 16 DATE OF PRONOUNCEMENT : 23 . 0 8 .2016 O R D E R PER S.S. GODARA , J.M. : TH IS ASSESSEE S APPEAL FOR A SSESSMENT Y EAR 200 9 - 10 , ARISE S FROM ORDER OF THE PRINCIPAL CIT - 1 , AHMEDABAD DATED 2 7 . 10 .201 5 IN PROCEEDINGS UNDER SECTION 263 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE ASSESSEE S SOLE SUBSTANTIVE GROUND ASSAILS CORRECTNESS OF THE PRINCIPAL CIT S ORDER PASSED UNDER SECTION 263 OF THE ACT DIRECTING THE ASSESSING OFFICER TO COMPLETE A FRESH ASSESSMENT. WE COME TO FACTS O F THE CASE. 3. THIS ASSESSEE COMPANY IS AN INTEGRATED PORT AND SALES DEVELOPMENT BUSINESS. IT FILED RETURN ON 25.09.2009 STATING INCOME OF RS.21,50,85,734/ - . THE ASSESSING OFFICER COMPLETED REGULAR ASSESSMENT ON 15.05.2013 INTER ALIA MAKING TP ADJUSTM ENT OF RS.61,87,200/ - , SECTION 80 IAB DEDUCTION DISALLOWANCE OF RS.13,86,27,839/ - AND SECTION I TA NO . 3577 / AHD/20 1 5 A.Y. 200 9 - 10 PAGE 2 OF 6 14A DISALLOWANCE OF RS. 20,27,93,648; RESPECTIVELY. THE ASS ESSEE PREFERRED APPEAL. THE CIT (A) IN HIS ORDER DATED 10.10.2014 CONFIRMED SECTION 14A DISALLOWANCE HEREI NABOVE. HE HOWEVER ACCEPTED ASSESSEE S ALTERNATIVE CONTENTION AND DIRECTED THE ASSESSING OFFICER TO INCREASE ITS SECTION 80 IAB DEDUCTION ON ACCOUNT OF INCREASED INCOME DUE TO SECTION 14A DISALLOWANCE. 4. IT TRANSPIRES THAT THE CIT THEREAFTER FORMED REA SONS TO BELIEVE THE ABOVE STATED REGULAR ASSESSMENT FRAMED IN ASSESSEE S CASE WAS ERRONEOUS CAUSING PREJUDICE TO THE INTEREST OF THE REVENUE. HE ISSUED SECTION 263 SHOW CAUSE NOTICE DATED 20.07.2015 AS UNDER : - THE UNDERSIGNED, CALLED FOR AN EXAMINED THE ASSESSMENT RECORDS FOR A.Y. 2009 - 10. THE ASSESSMENT IN THIS CASE WAS COMPLETED UNDER SECTION 143(3) R.W.S. 144C OF THE I.T. ACT, 1961 ON 15.05.2013 DETERMINING TOTAL INCOME AT RS.61,90,96,520/ - . 1. IT IS SEEN THAT THE ASSESSEE HAD INVESTED RS.757.20 CROR E IN EXEMPTED INCOME A ND HENCE EXPENDITURE TO THE TUNE OF RS.32,84,78,040/ - WAS REQUIRED TO BE DISALLOWED U/S. 14A R.W.S. 8D OF THE ACT. HOWEVER, ONLY AN AMOUNT OF RS.20,27,94,648/ - WAS DISALLOWED BY THE AO. THE AO HAS COMPLETED THE ASSESSMENT WITHOUT AP PRECIATING THE PROVISIONS OF SECTION 14A. 2. IT IS FURTHER NOTICED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION @ 15% (RS.1,11,22,934/ - ) INSTEAD OF DEPRECIATION @ 10% (RS.74,15,309/ - ) ON OFFICE EQUIPMENT. IT APPEARS THAT THE AO HAS COMPLETED THE ASSESSMENT WITHOUT APPRECIATING THE PROVISIONS OF SECTION 32 OF THE ACT. 3. IT IS SEEN THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 35D AMOUNTING TO RS.14,74,336/ - WHICH IS NOT ALLOWABLE THE ASSESSEE IS IN THE BUSINESS OF PROVIDING SERVICES AND THE EXPENSES ARE INCU RRED PRIOR TO 1.4.2009. 4. IT APPEARS THAT THE AO HAS NOT NOTICED THE AMENDMENT IN SECTION 35D(1)(II) W.E.F. 1.4.2009 AND COMPLETED THE ASSESSMENT WITHOUT DISALLOWING THE ASSESSEE S CLAIM. 5. IN VIEW OF THE ABOVE, IT APPEARS TO THE UNDERSIGNED THAT THE ORD ER DATED 15.05.2013 PASSED UNDER SECTION 143(3) R.W.S. 144C OF THE I.T. ACT, 1961 BY THE DCIT, CIRCLE - 1, AHMEDABAD IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE WITHIN THE MEANING OF SECTION 263(1) OF THE I.T. ACT, 1961. I TA NO . 3577 / AHD/20 1 5 A.Y. 200 9 - 10 PAGE 3 OF 6 5. T HE ASSESSEE FILED R EPLY INTER ALIA PLEADING THAT THE ASSESSING OFFICER HAD FRAMED ASSESSMENT AS PER LAW AFTER MAKING ALL ENQUIRIES AND THE DISALLOWANCE IN QUESTION UNDER SECTION 14A OF THE ACT ALREADY STOOD CONFIRMED. THE CIT REJECTS THE SAME IN THE ORDER UNDER CHALLENGE AS FOLLOWS : - 5. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS MADE BY THE ASSESSEE. THE ASSESSEE HAS BASICALLY CONTESTED THE PROPOSED ACTION BY CLAIMING THAT THE AO HAD DULY CONSIDERED THE ISSUES INVOLVED. THEREFORE, NO RECOURSE TO SECTION 2 63 COULD BE TAKEN. IT IS ALSO SUBMITTED THAT EVEN AFTER PROPOSED DISALLOWANCES/ADDITIONS, THERE IS NO CASE OF REVENUE LOSS SINCE INCOME OF THE ASSESSEE COMPANY WOULD STILL BE ELIGIBLE FOR DEDUCTION U/S 80JAB OF THE ACT. 5.1 HOWEVER, I DO NOT FIND MERITS IN THE CONTENTION OF THE ASSESSEE IN AS MUCH AS THE AO HAS INCORRECTLY APPLIED SPECIFIC PROVISIONS OF LAW. THERE IS APPARENT INCORRECT CONCLUSION DRAWN EVEN IF HE DID CONSIDER THE ISSUES IN HAND. PROVISIONS OF SECTION 263 ARE CLEARLY ATTRACTED TO THE FACTS OF THE CASE AS INCORRECT APPRECIATION AND APPLICATION OF EXPRESS PROVISIONS OF LAW RENDERS THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. AS STATED ABOVE, ON THE INVESTMENT OF RS.757.2 CRORES EXEMPTED INCOME THE DISALLOWAN CE U/S 14A R.W. RULE 8D COMES TO RS.32,84,78,040/ - WHEREAS THE ASSESSING OFFICER HAS DISALLOWED AN AMOUNT OF RS.20,27,94,648 ONLY AND THE DIFFERENCE OF RS.11,86,83,392/ - REQUIRES TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. SIMILARLY ON OFFICE EQUIPMEN T, THE ASSESSEE HAS CLAIMED DEPRECIATION @ 15% AMOUNTING TO RS. 1,11,22,9247 - WHEREAS THE ASSESSEE IS ENTITLED TO DEPRECIATION @ 10% AMOUNTING TO RS.74,15,309/ - ONLY AND THE EXCESS DEPRECIATION ALLOWED OF RS.37,07,655/ - IS REQUIRED TO BE WITHDRAWN AND TO B E ADDED TO THE TOTAL INCOME OF THE ASSESSEE. FURTHER, AS PER THE AMENDED PROVISIONS OF SECTION 35D(L)(II) W.E.F. 1 - 4 - 2009, THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S 35D WHEREAS THE AO HAS ALLOWED THE DEDUCTION AMOUNTING TO RS.14,74,336/ - WHICH REQUIRES TO BE WITHDRAWN AND ADDED TO TOTAL INCOME OF THE ASSESSEE. ACCORDINGLY, IT IS HELD THAT THE ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 144C DATED 15.05.2013 WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. HENCE, THE SAID ASSESSMENT FOR A.Y.2009 - 10 IS CANCELLED AND THE AO IS DIRECTED TO MAKE FRESH ASSESSMENT OF THE T OTAL INCOME OF THE ASSESSEE AFTER TAKING INTO CONSIDERATION THE ISSUES DISCUSSED ABOVE FOR THE SAID ASSESSMENT YEAR AFTER GIVING PROPER OPPORTUN ITY TO THE ASSESSEE AS PER LAW. 6. W E HA VE HEARD BOTH THE PARTIES VEHEMENTLY ARGUING IN SUPPORT OF THEIR RESPECTIVE STANDS. WE COME TO THE FIRST ISSUE OF SECTION 14A DISALLOWANCE FORMING CIT S REVISION ADJUDICATION. THIS ASSESSEE HAD DECLARED EXEMPT INCOME FROM DIVIDEN D S AMOUNTING TO I TA NO . 3577 / AHD/20 1 5 A.Y. 200 9 - 10 PAGE 4 OF 6 RS.1,77,4 7,783/ - . THE AO INVOKED RULE 8D TO DISALLOW PROPORTIONATE INTER E ST AND ADM INISTRATIVE EXP ENSE OF RS.16, 49 ,33,648/ - AND RS.3,78,60, 000/ - AGGREGATING T O RS.20,27,93,648 / - IN QU ESTION . T HERE IS NO DISPUTE THAT THE CIT (A) CONFIRMED THE SAME IN PRINCIPLE I N HIS O RDER DATED 10.10.2014 FALLING MUCH BEFORE SECTION 263 SHOW CAUSE NOTICE ISSUED ON 20.07.2015. S ECTION 263 EXPLANATION ( C ) MAKES IT VERY CLEAR T HAT THIS REVISION JURISDICTION EXTENDS TO SUCH MATTERS AS HAD NOT B E EN CONSIDERED AND DECIDED IN AN APPEAL. IT HA S COME ON RECORD T HAT THE CI T (A) OR D ER DATED 10.10.2014 CONSIDER ED AS W E LL AS D E CIDED THE I SSUE IN QU ESTION . THE REV ENUE AT THIS STAG E SUPPORTS CIT S ORDER THAT THE IMPUGNED DISALLOWANCE OUGHT TO HAVE BEEN COMPUT E D BY ADOPTING NET INS T EAD OF ACTUAL DISALLOWAB LE SUM OF RS. 32,84,78,040 / - IN THE NATURE OF INTEREST. WE NOTICE T HAT HON BLE JURISDICTIONAL HIGH COURT IN NIRMA IN D USTRIES VS. DCIT ( 2006 ) 283 I TR 402 REJECTS SUCH A CONTENTION TO INVOKE M ERGER PRINCIPLE BY HOLDING THAT AN ASSESSMENT O R DER DO E S NOT HAVE ANY INDEPENDENT EXISTENCE AFTER THE SAME IS SUBJECTED TO APP E AL AND IT STANDS ADJUDICATED. OUR VIEW IN THIS BACKDROP OF FACTS IS THAT THE ASSESSMENT ORDER IN QUESTION S OUGHT TO BE REVISED DOES NOT HAVE ANY I NDEPENDENT EXISTENCE. EVEN THE ISSUE ON MERIT IS RENDERED ACADEMIC IN VIEW OF CIT S ORDER DIRECTING TH E A SSESSING OFFICER TO COMPUTE SECTION 80 IAB D EDUCTION (SUPRA). T H E R EVENUE FAILS TO POINT ANY DISTINCTION ON FACTS OR LAW. WE ACCEPT ASS ESSEE S FIRST ARGUMENT IN CHALLENGING TH E CI T S ORDER IN QUES TION. 7. WE COME TO CIT S SECOND REASON FOR INVOKING A REVISION J URISDICTION UNDER SECTION 263 OF THE AC T ON THE ISSUE OF DEPRECIATION. HE OBSERVES THAT T HE SAME OUGHT TO B E CLAIMED/GRANTED AT TH E RATE OF 10% INSTEAD OF 1 5% ON OFFICE EQUIPMENT S AMOUNTING TO RS.74,15,309/ - INSTEAD OF RS.1,11,22,924/ - RESPECTIVELY RESULTING IN EXCESS CLAM OF RS.37,07,655/ - THE CIT S VIEW THAT T HE RELEVANT DEPRECIATION SCHEDULE IN ANNEXURE - I [( R ULE 51)] IS ALLOWABLE ON WRITTEN DOWN VALUE @ 10% UNDER THE PRESCRIBED HEAD OF I TA NO . 3577 / AHD/20 1 5 A.Y. 200 9 - 10 PAGE 5 OF 6 FURNITURE/FITTINGS INCLUDING ELECTRICAL FITTINGS AS OFFICIAL EQUIPMENT AND NOT PLAN T AND MACHINERY. 8. WE COME TO THI R D AND FINAL ISSUE OF SECTION 35D(1) D E DUCTION OF RS.14,74,336/ - . THE C IT IS OF THE VIEW THAT THE SAME IS NOT ALLOWABLE SI NCE THE ASS ESSEE IS A SERVICE PROVIDER AND THE EXPENDITURE IN QUESTION WAS INCURRED MUCH PRIOR TO 01.04.2009. LEARNED COUNSEL AT THIS STAGE INVITES OUR A TTENTION TO THIS TRIBUNAL S DECISION IN AS SESSEE S OWN CASE IN ITA NO. 1362/AHD/2015 DECIDED ON 29.10.2015 IN IMM E DIATELY SUCCEEDING ASSESSMENT YEAR ADJUDICATING BOTH THESE LATTER ISSU E S AGAINST THE REVENUE AS FOLLOWS: - 15. ON THE MERITS ON THE ISSUE OF AMORTIZATION OF COST OF LEASE HOLD LAND, WE FIND ON PERUSING THE COMPUTATION OF TOTAL INCOME, WHICH IS PLACED AT PA GE 27 TO 30 OF THE PAPER BOOK, THAT THE CLAIM OF ASSESSEE OF AMORTIZED VALUE OF LEASE HOLD LAND DEVELOPMENT WAS NOT U/S. 35D WHEREAS LD. CIT IN THE ORDER HAS HELD THAT THE CLAIM OF ASSESSEE WAS U/S. 35D AND THEREFORE IN SUCH A SITUATION, A.O S ORDER ON THA T ISSUE CANNOT BE CONSIDERED TO BE ERRONEOUS MORE SO BECAUSE THERE WAS NO SUCH CLAIM U/S. 35D BY ASSESSEE. AS FAR AS THE CLAIM OF DEPRECIATION ON OFFICE EQUIPMENTS @ 15% IS CONCERNED, IT IS ASSESSEE S SUBMISSION THAT THE CLAIM OF DEPRECIATION AT 15% ON THE OFFICE EQUIPMENT WHICH COMPRISES OF SIMILAR ITEMS AS ARE IN THE PRESENT YEAR, HAS BEEN ALLOWED BY THE A.O IN EARLIER YEARS IN THE ASSESSMENT ORDER PASSED U/S. 143(3) AND THOSE ORDERS HAVE ATTAINED FINALITY. AS FAR AS THE CLAIM OF DEDUCTION U/S. 35D IS CON CERNED IT IS NOT THE CASE OF THE REVENUE THAT THE EXPENSES HAVE BEEN INCURRED IN THE YEAR UNDER CONSIDERATION BUT ON THE CONTRARY IT IS ASSESSEE S SUBMISSION THAT THE SAME HAVE BEEN INCURRED IN EARLIER YEARS AND THE DEDUCTION U/S. 35D HAS ALSO BEEN ALLOWED IN EARLIER YEARS. IT IS ALSO NOT A CASE OF THE REVENUE THAT ON THE ISSUE OF DEDUCTION UNDER 35D, DEDUCTION FOR EARLIER YEARS HAS BEEN WITHDRAWN BY REVENUE. IN SUCH A SITUATION, WITHOUT DISTURBING THE EARLIER YEARS, IT CANNOT BE SAID THAT THE CLAIM OF DEDU CTION U/S. 35D WAS NOT ALLOWABLE TO THE ASSESSEE. THE AFORESAID SUBMISSIONS OF LD. A.R HAS ALSO NOT BEEN CONTROVERTED BY REVENUE. FURTHER, BEFORE US REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO DEMONSTRATE THAT THE VIEW TAKEN BY THE A.O WAS IMPERMISSI BLE VIEW AND WAS CONTRARY TO LAW OR WAS UPON ERRONEOUS APPLICATION OF LEGAL PRINCIPLES INITIATING THE EXERCISING OF REVISIONARY POWERS U/S. 263. FURTHER THE CASE LAWS WAS ARE RELIED UPON BY THE REVENUE ARE DISTINGUISHABLE ON FACTS AND THEREFORE CANNOT BE A PPLIED TO THE FACTS OF THE PRESENT CASE. IN VIEW OF THE AFORESAID FACTS, WE ARE OF THE VIEW THAT LD.CIT WAS NOT JUSTIFIED IN RESORTING TO REVISIONARY POWERS U/S. 263 OF THE ACT. WE THEREFORE SET ASIDE THE ORDER OF LD. CIT SETTING ASIDE THE ASSESSMENT ORDER PASSED U/S. 143(3) OF THE ACT. THUS THE GROUNDS OF ASSESSEE ARE ALLOWED. I TA NO . 3577 / AHD/20 1 5 A.Y. 200 9 - 10 PAGE 6 OF 6 9. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO POINT OUT ANY EXCEPTION THERETO ON FACTS OR LAW. W E ACCEPT AS SESSEE S ARGUMENT QUA THESE TWO ISSUES AS WELL. THE CIT S ORDER UND ER CHALLENGE PASSED IN SECTION 263 REVISI ON JURISDICTION IS REVERSED. 10. THIS ASSESSEE S APPEAL IS ALLOWED. P RONOUNCED IN THE OPEN COURT TODAY ON THE 23 RD DAY OF AUGUST 2016. SD/ - SD/ - MANISH BORAD S.S. GODARA (ACCOUNTANT MEMBER) (JU DICIAL MEMBER) AHMEDABAD, THE 23 RD DAY OF AUGUST , 2016 PBN/* COPIES 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 AHMEDABAD BENCHES, AHMEDABAD