ACIT, Jaipur V. RCCL INFRASTRUCTURE LTD., Jaipur

ITA 428/JPR/2010

• Counselvise Citation: 42823114 RSA 2010
• Duration Of Justice: 3 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-11-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 30-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Keywords: Depreciation; Revenue expenditure
• Section: 32; 12

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JAIPUR BENCH JAIPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 428/JP/2010 (A.Y. 2005-06) ACIT, CIRCLE-4, VS. M/S RCCL INFRASTRUCTURE LTD. JAIPUR. C-74, AMBABARI, JAIPUR. PAN NO. AACCR 40181 M (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MUKESH KHANDELWAL DEPARTMENT BY : SHRI D.C. SHARMA - D.R. DATE OF HEARING : 16/01/2014. DATE OF PRONOUNCEMENT : 26/02/2014. O R D E R PER N.K.SAINI, A.M THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE OR DER DATED 16/02/2010 OF CIT(A)-II, JAIPUR. THE FOLLOWING GRO UNDS HAVE BEEN RAISED IN THIS APPEAL:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN:- 1. HOLDING THE PROVISION OF SECTION 40(A)(IA) ARE APPL ICABLE TO THE PROVISIONS OF SECTION 30 TO 38 BUT IN NOT CONSIDERI NG THAT IF THE AMOUNT IS PAID WITHOUT DEDUCTION OF TAX IN RESPECT OF CAPITAL 2 EXPENDITURE THAT DEPRECIATION ON SUCH AMOUNT IS REF IGURED TO BE DISALLOW SINCE SECTION 32 LIES BETWEEN SECTION S EC. 30 TO 38. 2. NOT WITHDRAWING DEPRECIATION ALLOWED ON ROAD AND IN NOT DIRECTING TO CLAIM AMORTIZATION OF EXPENSES IN RESP ECT OF ROAD PROJECT AS THE ASSESSEE DID NOT OWN THE ROAD. HE ON LY GOT TO RIGHT TO COLLECT TAX ON THE ROAD CONSTRUCTED UNDER BOT SCHEME. THIS SHOULD HAVE BEEN DONE SINCE CIT(A) IS ALSO EMPOWERED TO CORRECT THE MISTAKES OF AO IF THE ISSU E HAS BEEN CONSIDERED BY THE AO. 2 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE F ILED RETURN OF INCOME ON 28/10/2005 DECLARING A LOSS OF RS. 17, 19,564/-. THE CASE WAS SELECTED FOR SCRUTINY. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NOTICED THAT THE ASSESSEE S TARTED OPERATION ON ROAD FROM SIKAR TO JHUNJHUNU FOR 66.7 KMS AND FROM JHUNJHUNU TO CHIRAVA 35.00 KMS. THE ROAD FROM CHIR AWA TO LOHARU WAS UNDER IMPLEMENTATION. HE FURTHER OBSERV ED THAT OPERATION OF ROAD WAS ALLOWED UNDER BOT BASIS BY TH E GOVERNMENT OF RAJASTHAN AND THE COST INCURRED ON THE REACH UPT O CHIRAWA WAS CAPITALIZED DURING THE YEAR. THE AO OBSERVED THAT THE ASSESSEE HAD NOT DEDUCTED AND DEPOSITED TDS IN TIME AS PER T HE AUDIT REPORT ANNEXURE-D. HE ALSO OBSERVED THAT THE ASSES SEE WAS REQUIRED TO DEDUCT TAX AT SOURCE ON TRANSPORT WORK OF GROSS VALUE OF RS. 32,58,088/-. THEREFORE, THIS AMOUNT WAS NOT ALLOWABLE. HE ALSO OBSERVED THAT THE TDS AMOUNT OF RS. 68,084/- D EDUCTED ON THE PAYMENT MADE TO THE CONTRACTOR FOR RS. 60,68,06 4/- WAS NOT 3 PAID IN TIME AND, THEREFORE, AMOUNT CAPITALIZED BY THE ASSESSEE WAS DISALLOWED OUT OF COST OF THE ROAD. HE ALSO OB SERVED THAT THE ASSESSEE HAD PAID PROFESSIONAL FEES OF RS. 2,70,000 /- ON WHICH TDS WAS NOT DEDUCTED IN TIME. HE THEREFORE, DEDUCTED R S. 95,96,152/- (RS. 32,58,088/- + RS. 60,68,064/- + RS . 2,70,000/-) OUT OF THE COST OF ROAD FOR THE PURPOSE OF DEPRECIA TION CLAIMED AT THE RATE OF 5%. ACCORDINGLY, THE DEPRECIATION WAS WORKED OUT TO RS. 4,79,808/-. THE AO DISALLOWED THE AFORESAID AM OUNT OF RS. 95,96,152/-. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT THE ASSESSEE HAD NOT CLAI MED THE AMOUNT DISALLOWED AS REVENUE EXPENDITURE AND THAT T HE ALLOWABILITY OF THE CAPITALIZATION OF THE EXPENDITU RE WAS NOT HIT BY THE PROVISIONS OF SECTION 40 (A)(IA) OF THE I.T. AC T, 1961 (HEREINAFTER REFERRED TO AS ACT, IN SHORT). IT W AS CLARIFIED THAT THE ASSESSEE HAD PAID TDS THOUGH LATE, THEREFORE, T HE AMOUNT COULD NOT BE ADDED IN COMPUTATION OF THE TOTAL INCO ME. 4. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF TH E ASSESSEE OBSERVED THAT THE ASSESSEE HAD NOT CLAIMED THE AMOU NT OF RS. 95,16,152/- AS EXPENDITURE WHILE COMPUTING THE TOTAL INCOME. THEREFORE, THE PROVISIONS OF SECTION 40(A)(IA) OF T HE ACT WERE NOT 4 APPLICABLE. HE, ACCORDINGLY, DELETED THE ADDITION MADE BY THE AO. NOW THE DEPARTMENT IS IN APPEAL. 5. LD. D.R. SUPPORTED THE ORDER OF THE AO AND THE LEA RNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUPPORTED THE IMPUGNED OR DER. IT WAS STATED THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE APPLICABLE TO CERTAIN EXPENSES I.E. INTEREST COMMIS SION OR BROKERAGE, RENT, ROYALTY, FEES FOR PROFESSIONAL SER VICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO RESIDENT, AMOUNT PAYA BLE TO CONTRACTOR OR SUB-CONTRACTOR ETC., BUT NOT TO THE D EPRECIATION. RELIANCE WAS PLACED ON THE FOLLOWING CASE-LAWS:- 1) SHRI VISHNU ANANT MAHAJAN VS. ACIT (ITA NO. 3002 /AHD/2009) (SB ITAT, AHMEDABAD) VIDE ORDER DATED 25/05/2002) 2) NECTAR BEVERAGES P LTD. VS. DCIT REPORTED IN 314 ITR 314 (SC) 3) HOSHANG D NANAVATI VS. ACIT IN ITA NO. 3567/MUM/ 2007 (MUMBAI ITAT) IT WAS FURTHER STATED THAT THE ASSESSEE CONSTRUCTED THE ROAD FOR GOVERNMENT ON BOT BASIS, THE ASSESSEE HAD SPENT HIS SUM FOR CONSTRUCTION OF THE ROAD AND HE WAS GIVEN THE RIGHT TO COLLECT TOLL CHARGES FROM THE VEHICLES PASSING THROUGH THE ROAD FOR A PERIOD OF 12 YEARS, SO AS TO ENABLE THE ASSESSEE TO RECOVER H IS COST AND THE ROAD WAS TO BE TRANSFERRED TO THE GOVERNMENT AFTER RECOVERY OF 5 THE TOTAL CHARGES, THEREFORE, BEING AN OCCUPANT OF THE ROAD, THE ASSESSEE WAS ELIGIBLE TO CLAIM THE DEPRECIATION BEC AUSE THE ASSESSEE BY HOLDING THE RIGHT OF OCCUPANCY IS DEEME D TO BE THE OWNER FOR GRANTING THE DEPRECIATION UNDER SECTION 3 2 OF THE ACT. RELIANCE WAS PLACED ON THE FOLLOWING CASE-LAW S:- 1) M/S. MORADABAD TOLL ROAD COMPANY VS. ACIT, CIRCE-5( 1), (ITAT, NEW DELHI) I.T.A.NO. 1426/DEL/2011 ORDER DAT ED 15/06/2012. 2) ASHOKA INFRASTRUCTURE LTD. VS. DEPARTMENT OF INCOME TAX (ITAT, PUNE BENCH) ITA NO. 989/PN/2010 ORDER DATED 18/07/2013. 3) M/S. KALYAN TOLL INFRASTRUCTURE LTD. VS. ACIT-5(1), INDORE (ITAT, INDORE) I.T.A.NO. 201 & 247/IND/2008 ORDER D ATED 14/12/2010. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON TH E RECORD. IN THE PRESENT CASE, IT IS NOTICED THAT THE AO HIMSELF ADM ITTED THAT THE ASSESSEE CAPITALIZED THE EXPENSES FOR CONSTRUCTION OF THE ROAD FOR THE GOVERNMENT ON BOT BASIS WHICH WAS TO BE HANDED OVER TO THE GOVERNMENT AFTER RECOVERY OF THE CHARGES. THEREFOR E, THE ASSESSEE WAS DEEMED TO BE OWNER AND THE DEPRECIATIO N WAS RIGHTLY ALLOWED BY THE LD. CIT(A). AS REGARDS TO T HE DISALLOWANCE MADE BY THE AO UNDER SECTION 40(A)(IA) OF THE ACT IS CONCERNED, 6 WE ARE OF THE VIEW THAT THE PROVISIONS OF SAID SECT ION RELATES TO THE EXPENSES PAYABLE ON WHICH TAX WAS DEDUCTABLE AT SOURCE, BUT DEPRECIATION IS A STATUTORY DEDUCTION FOR WHICH DAY TO DAY EXPENSES ARE NOT TO BE INCURRED. THEREFORE, THE LD . CIT(A) WAS JUSTIFIED IN HOLDING THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WERE NOT APPLICABLE, THEREFORE, THE DISALLOWANC E MADE BY THE AO WAS RIGHTLY DELETED BY THE LD. CIT(A). WE DO NO T SEE ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). 7 . IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMIS SED. (ORDER PRONOUNCED IN THE COURT ON 26 TH FEBRUARY, 2014). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 26 TH FEBRUARY, 2014. VR/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R. BY ORDER ASSISTANT REGISTRAR, ITAT, JAIPUR.