J.V. BULDANA URBAN CO-OPRATIVE SOCIETY LTD. AND NATIONAL BUILDING CONSTRUCTION., Buldhana V. ACIT, CENTRAL CIRCLE 1(4), Nagpur

ITA 402/NAG/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1576 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 26-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Assessee Lawyers: P R GANDHI
• Keywords: Depreciation; Business expenditure; Search and seizure; Opportunity of being heard; Additional evidence; Capital expenditure
• Section: 133A; 32; 37

Judgement Text

1 ITA NO. 402/NAG/2012 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 402/NAG/2012 ASSESSMENT YEAR : 2009 - 10. J.V. BULDHANA URBAN CO - OPERATIVE ASSTT. COMMISSIONER OF SOC IETY LTD. AND NATIONAL BUILDING VS. INCOME - TAX, CIRCLE - 1(4), CONSTRUCTION, BULD HANA. NAGPUR. PAN AAABB0753D APPELLANT. RESPONDENT. A PELLANT BY : SHRI P.R. GANDHI. RESPONDENT BY : SHRI A.R. NINAWE.. DATE OF HEARING : 24 - 11 - 2015. DATE OF PRONOUNCEMENT : 4 TH DEC., 2015. O R D E R PER SHRI SHAMIN YAHYA, A.M . THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) - I, NAGPUR DATED 31 - 10 - 2012 AND PERTAINS TO ASSESSMENT YEAR 2009 - 10. THE GROUNDS OF APPEAL READ AS UNDER : 1. THE LEARNED ASSESSING OFFICER BE DIRECTED TO ALLOW ASSESSEE, HIS CLAIM T O RECOVER THE INVESTMENT OF RS.80.26 CRORES MADE IN CONSTRUCTION OF THE ROAD AS GIVEN BELOW. BY WAY OF I) BALANCING CHARGE METHOD (ICA NORMS) OR II ) BY WAY OF DEPRECIATION @ 25%, EACH YEAR. OR III) BY WAY OF AMORTIZATION OR IV) AS PER PROVISIONS OF SECTION 37 OF INCOME - TAX ACT, 1961. 2 ITA NO. 402/NAG/2012 2. BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME HAS BEEN FILED ON 31 - 03 - 2011 OFFERING INCOME OF RS. NI L. THERE WAS A SEARCH AND SEIZURE OPERATION IN THE PREMISES OF THE BULDHANA URBAN CREDIT CO - OP. SOCIETY LTD. ON 20 - 03 - 2009. THE ASSESSEES PREMISES WAS ALSO COVERED U/S 133A OF THE ACT. THE ASSESSEE HAS UNDERTAKEN A JOINT VENTURE FOR CONSTRUCTION OF THE MA LKAPUR CHIKHALI ROAD FOR WHICH A CONTRACT HAS BEEN AWARDED BY PUBLIC WORKS DIVISION, BULDHANA ON BOT BASIS. THE AO HAS OBSERVED THAT THE A PPELLANT HAS CLAIMED EXPENDITURE OF RS.4,02,23,445/ - FOR FY 2008 - 09. THE TOTAL EXPENDITURE INCURRED IN THE EARLIER YEA RS BY THE ASSESSEE ON THIS PROJECT BEING CAPITAL EXPENDITURE WAS RS.80.26 CRORES. THIS CAPITAL EXPENDITURE HAS BEEN AMORTIZED OVER A PERIOD OF 15 YEARS AND CLAIMED AS DEPRECIATION. THE AO HAS DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSE SSEE IS NOT ENTITLED FOR THE DEDUCTION U/S 32 OR U/S 35D. 3. UPON ASSESSEES APPEAL IN THIS REGARD, LEARNED CIT(APPEALS) CONFIRMED THE ACTION OF THE AO. 4. AGAINST THE ABOVE ORDER, ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE COUNSEL AND PERU SED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEES SUBMISSION IN THIS REGARD ARE AS UNDER : THE ABOVE APPEAL IS FIXED FOR HEARING ON 5.8,.15. THE ONLY POINT INVOLVED IN APPEAL, IS WHETHER ASSESSEE IS ENTITLE D FOR DEPRECIATION/AMORTIZETION, OF CAPITAL EXPENDITURE, INCURRED BY HIM IN CONSTRUCTION OF THE ROAD ON BOT BASIS AS PER AGREEMENT WITH GOVT. OF MAHARASHTRA. THE CLAIM MADE BY ASSESSEE (P & L ACCOUNT AND LETTER DT. 9.12.11 FILED BY ASSESSEE ENCLOSED WITH PAPE R BOOK AT PAGE NO. 29) IS DISALLOWED BY LD A. O . AND ALSO HON. C LT (A). THE ASSESSEE HAS CLAIMED DEPRECIATION IN P&L A/E AND INSTA T E DEDUCTING SAME, FROM COST OF ASSET IT IS SHOWN IN B/S , AT LIABI L ITY SIDE. THIS METHOD IS APPROVED BY I NSTITUTE OF CHARTE RED ACCOUNTANTS. THE DETAIL SUBMISSION IS ALREADY GIVEN IN PAPER BOOK. 3 ITA NO. 402/NAG/2012 IN THE MEAN TIME, CENTRAL BROAD OF DIRECT TAXES HAS ISSUED CIRCULAR NO. 09/2014 ON 23.4.14. COPY OF CIRCULAR IS ENCLOSED HEREWITH. AS PER CIRCULAR, THE ASSESSEE IS ENTITLE D TO AMORT ISE THE EXPENDITURE INCURRED FOR CONSTRUCTION OF ROAD ON BOT BASIS. THE CIRCULAR UPHELD THE CLAIM OF THE ASSESSEE, FOR THIS YEAR ASSESSEE HAS CLAIMED RS. 402,23445/ - AS DEPRECIATION/ AMORTIZATION. TOTAL COST OF PROJECT IS 80.26 CRORES. THE GOVT. OF MAHAR ASHTRA PERMITTED ASSESSEE TO COLLECT EXPENSES BY WAY OF TOLL FOR THE PERIOD OF 15 YEARS. THUS AVERAGE FOR ONE YEAR COMES TO RS. 5.35 CRORES. DURING THIS YEAR ASSESSEE WAS ENTITLE TO COLLECT TOLL FOR 9 MONTH. HENCE PROPORTIONATE EXPENDITURE COME TO RS. 4.02 CR. W HICH ASSESSEE HAS CLAIMED AS DEPRECIATION/ AMORTIZATION. THE ASSESSEE, IN PAPER BOOK, HAS ENCLOSED DECISIONS OF SEVERAL AUTHORITIES, WHO HELD THAT ASSESSEE IS ENTITLE D FOR DEPRECIATION @ 25% OF COST INCURRED. TOTAL COST INCURRED BY ASSES SEE IS 80.02 CRORES, DEPRECIATION ALLOWABLE COMES TO RS. 20.004 CRORES. THIS VIEW IS UPHELD BY HON ITAT PUNE IN APPEAL NO, ITA NO. 44 (PN) OF 2007 COPY OF DECISION IS ENC L OSED IN PAPER BOOK. HENCE ASSESSEE MAY BE ALLOWED, THE CLAIM OF DEPRECIATION, @ 2 5% AND ALSO BE PERMI T TED TO CARRY FORWARD AND SET OFF IN SUBSEQUENT YEARS AS PER LAW. IN VIEW OF DECISION OF HON SUPREME COURT REPORTED IN THE CASE OF DIREN CHEMICAL INDUSTRIES. 254 ITR 554 , INSTRUCTION ISSUED BY BOARD ARE BINDING ON REVENUE. (COPIES OF DECISIONS ARE ENCLOSED HERE WITH). 6. PER CONTRA LEARNED D.R. RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 7. UPON CAREFUL CONSIDERATION WE FIND THAT THE AUTHORITIES BELOW HAVE DENIED THE ASSESSEE THE DEDUCTION CLAIMED ON ACCOUNT OF DEPRECIATION/AMORTIZATION OF THE CAPITAL EXPENDITURE INCURRED WITH RESPECT TO CONSTRUCTION OF ROAD ON BOT BASIS AS PER AGREEMENT WITH GOVERNMENT OF MAHARASHTRA. NOW IT IS THE CLAIM OF THE LEARNED COUNSEL OF THE ASSESSEE THAT THE LOWER AUTHORI TIES SHOULD HAVE ACCEPTED THE ASSESSEES CLAIM IN THE LIGHT OF CBDT CIRCULAR NO. 9/2014 ON THE SUBJECT. THE SAID CIRCULAR IN PARAGRAPH 5 HAS MENTIONED THAT THE CBDT IN 4 ITA NO. 402/NAG/2012 EXERCISE OF POWER CONFERRED U/S 119 OF THE ACT HEREBY CLARIFIES THAT THE COST OF CONSTRU CTION ON DEVELOPMENT OF INFRASTRUCTURE FACILITIES ROADS/HIGHWAYS UNDER BOT PROJECT MAY BE AMORTIZED AND CLAIMED AS ALLOWABLE BUSINESS EXPENDITURE UNDER THE ACT. IN THIS REGARD WE FIND THAT IT IS SETTLED LAW THAT THE CBDT CIRCULARS ARE BINDING UPON THE INC OME - TAX AUTHORITIES. HOWEVER, WE ALSO NOTE THAT THE SAID CIRCULAR WAS NOT AVAILABLE AT THE T IME OF AOS ORDER OR AT THE TIME OF ORDER OF LEARNED CIT(APPEALS). 8. FURTHER MORE WE NOTE THAT THE CASE LAW NOW BEING REFERRED BY THE LEARNED COUNSEL OF THE ASSESS EE IN THE DECISION OF ITAT, PUNE BENCH (SUPRA) WAS ALSO NOT BEFORE THE AUTHORITIES BELOW. IN OUR CONSIDERED OPINION, SINCE THE CBDT CIRCULAR NOW BEING FURNISHED BY THE LEARNED COUNSEL OF THE ASSESSEE IS AN ADDITIONAL EVIDENCE WHICH WAS NOT BEFORE THE AUT HORITIES BELOW, WE DEEM IT APPROPRIATE IN THE INTEREST OF JUSTICE TO REMIT THE ISSUE TO THE FILE OF THE AO. THE AO IS DIRECTED TO CONSIDER THE ISSUE AFRESH IN THE LIGHT OF SUBMISSIONS OF THE LEARNED COUNSEL OF THE ASSESSEE AS ABOVE. NEEDLESS TO ADD THE ASS ESSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. 9. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF DEC., 2015. SD / - SD/ - (MUKUL K. SHRAWAT) ( SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER. NAGPUR, DATED: 4 TH DEC., 2015. 5 ITA NO. 402/NAG/2012 COPY FORWARDED TO : 1. J.V. BULDHANA URBAN CO - OPERATIVE SOCIETY LTD. AND NATIONAL BUILDING CONSTRUCTION, HUTATMA CHOWK, BULDHANA. 2. A.C.I.T., CENTRAL CIRCLE - 1(4), NAGPUR. 3. C.I.T. , NAGPUR. 4. CIT(APPEALS) - I, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, NAGPUR WAKODE.