ACIT, Noida V. M/s Noida Toll Bridge Co. Ltd., Noida

ITA 5247/DEL/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3648 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 06-04-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 11-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K SAROHA
• Assessee Lawyers: ATUL MITTAL; VIKAS SRIVASTAVA SUMIT MANGAL
• Keywords: Capital asset; Depreciation; Business expenditure; Avoidance of tax; Revenue expenditure; Capital expenditure
• Section: 37(1); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI B.P. JAIN, ACCOUNTANT MEMBER ITAS NO.5246, 5247, 5248 AND 5249/DEL/2012 ASSESSMENT YEARS 2006-07 TO 2009-10 ACIT, CIRCLE-1, G, BLOCK COMMERCIAL COMPLEX, SECTOR-20, NOIDA. VS. NOIDA TOLL BRIDGE CO. LTD., TOLL PLAZA, DND FLYWAY, OPP. SEC-15A, NOIDA PAN: AAACN 3498A (APPELLANT) (RESPONDENT) ITA NO.5286/DEL/2012 ASSESSMENT YEARS 2006-07 NOIDA TOLL BRIDGE CO. LTD., TOLL PLAZA, DND FLYWAY, OPP. SEC-15A, NOIDA PAN: AAACN 3498A VS. ACIT, CIRCLE-1, G, BLOCK COMMERCIAL COMPLEX, SECTOR-20, NOIDA. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI A.K. SAROHA, CIT-D.R ASSESSEE(S) BY : S/SHRI VIKAS SRIVASTAVA, SUMIT MANGAL AND ATUL MITTAL, ADV. / DATE OF HEARING : 06/04/2017 / DATE OF PRONOUNCEMENT: 10/04/2017 ORDER PER B.P. JAIN, ACCOUNTANT MEMBER THESE FOUR APPEALS OF REVENUE ARISE FROM FOUR DIFFE RENT ORDERS OF LEARNED CIT(A) NOIDA EACH DATED 06.07.2013 FOR THE ASSESSMENT YEARS 2006-07 TO 2009-10. SINCE THE ISSUES IN ALL THE APP EALS ARE IDENTICAL, ITAS NO.5246, 5247, 5248, 5249, 5286/DEL/2012 2 THEREFORE, ALL THE APPEALS ARE BEING TAKEN UP BY TH IS CONSOLIDATED ORDER. THE ASSESSEE HAS ALSO FILED THE APPEAL FOR THE ASSESSME NT YEAR 2006-07. 2. FIRST OF ALL WE TAKE UP THE APPEAL OF THE REVENU E FOR THE ASSESSMENT YEAR 2006-07 IN ITA NO.5246/DEL/2012 AND THE GROUND S OF APPEAL RAISED ARE REPRODUCED AS UNDER: 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE AMOUNT OF RS.22,55,046/- WITHOUT APPRECIATING THE FACTS PUT F ORTH BY THE ASSESSING OFFICER WHO TREATED THE EXPENDITURE AS CAPITAL AS N ATURE. 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALL OWING DEPRECIATION CLAIMED BY THE APPELLANT FOR RS.15,84,60,192/- WITH OUT APPRECIATING THE FACT THAT THE TOLL BRIDGE IS CONSTRUCTED ON BUILDI NG OWN OPERATE TRANSFER BASIS AND THE ASSESSEE IS NOT THE OWNER, WHICH IS THE FIRST CONDITION FOR ALLOWING THE DEPRECIATION U/S.32 OF T HE IT ACT, 1961. 3. THE CIT(A) HAS ERRED IN LAW ON FACTS IN ALLOWIN G DEPRECIATION CLAIMED BY THE APPELLANT BY HOLDING THAT THE ASSETS ON WHIC H DEPRECIATION IS CLAIMED BY THE ASSESSEE ARE OWNED BY IT, WHEREAS IN THE CONCESSION AGREEMENT DATED 12-11-1997 BETWEEN NOIDA AUTHORITY AND THE ASSESSEE, IT IS CLEARLY MENTIONED THAT THE LAND ON WHICH THE TOLL BRIDGE HAS BEEN CONSTRUCTED IS NOT THE PROPERTY OF THE ASSESSEE, BU T HAS BEEN GIVEN ON LEASE BY THE NOIDA AUTHORITY FOR A CERTAIN PERIOD I.E. 30 YEARS. AS PER THE AGREEMENT, THE LEASE CAN BE TERMINATED EARLIER ALSO , SUBJECT TO CERTAIN CONDITIONS. THEREFORE, THE OWNERSHIP OF THE ASSET I N THE HANDS OF THE ASSESSEE IS NOT ESTABLISHED. 4. THE CIT(A) HAS ERRED IN LAW ON FACTS IN DELETIN G ADDITION OF RS. 91,21,413/- BEING 'TAKE OUT ASSISTANCE FEE', WHICH IS THE COST OF AGREEMENT ENTERED WITH IL&FS & IDFC FOR THE ISSUE O F DEEP DISCOUNT BOND HAVING MATURITY VALUE OF 16 YEARS WITHOUT APPR ECIATING THE FACT THAT EXPENSE IS RELATED TO THE ACTIVITIES WHICH SPREAD O VER 16 YEARS AND IN THE NATURE OF CAPITAL EXPENDITURE. 2. GROUNDS NO.5 AND 6 ARE GENERAL IN NATURE, THEREF ORE, DO NOT REQUIRE ANY ADJUDICATION. 3. AS REGARDS GROUND NO.1, THE BRIEF FACTS OF THE C ASE AS EMANATING FROM THE ORDER OF THE AO ARE REPRODUCED HEREINBELOW. DURING THE ASSESSMENT PROCEEDINGS ASSESSEE ALSO FI LED CONCESSION AGREEMENT. PERUSAL OF CONCESSION AGREEMENT ENTERED BETWEEN NEW OKHLA INDUSTRIAL DEVELOPMENT AUTHORITY AND INFRASTRUCTURE LEASING & FINANCIAL SERVICES LIMITED AND NOIDA TOLL BRIDGE PR OJECT ITAS NO.5246, 5247, 5248, 5249, 5286/DEL/2012 3 COMPANY LIMITED REVEALS THAT INDEPENDENT ENGINEER I S SOLE AUTHORITY TO DETERMINE WHETHER TO ISSUE OR NOT ISSUE CERTIFICATE OF COMPLIANCE OR CONDITIONAL CERTIFICATE OF COMPLIANCE CONTINGENT UPON SATISFACT ION OF CONDITIONS MENTIONED IN THE CONCESSION AGREEMENT WITHIN 365 DAYS FROM THE D ATE OF SIGNING OF THIS AGREEMENT ON 12.11.1997. INDEPENDENT AUDITOR IS REQ UIRED TO GIVE A REASONED DECISION ON THE BASIS OF VARIOUS SUBMISSION MADE TO HIM BY THE CONCESSIONAIRE I.E. ASSESSEE AND NOIDA ON NON FULFILLMENT OF CONDITIONS ON THE CERTIFICATE. HENCE THE ABOVE CLEARLY SHOWS THAT THE WORK OF INDEPENDENT AU DITOR WAS RELATED TO SETTING UP AND COMMISSIONING OF THE NOIDA TOLL BRIDGE. HE W OULD ALSO TAKE DECISIONS RELATED TO THE FACT THAT THE ASSESSEE HAS RIGHT TO TERMINATE THE CONCESSION AGREEMENT OR NOT. HIS WORK ALSO INVOLVES REVISING T ERMS AND CONDITIONS OF THE CONCESSIOIN AGREEMENT VIDE WHICH ASSESSEE WAS GIVEN THE RIGHT TO ESTABLISH AND OPERATE DND FLYWAY. THERE ARE SEVERAL OTHER DUTIES OF INDEPENDENT ENGINEERS MENTIONED IN THE CONCESSION AGREEMENT WHICH CLEARLY ESTABLISHES THAT THE WORK OF INDEPENDENT ENGINEER IS RELATED TO ESTABLISHMENT, C ONSTRUCTION AND COMMISSIONF OF THE DND FLY OVER AND AFTER ITS ESTABLISHMENT, CO NSTRUCTION AND COMMISSIONING TO SEE WHETHER OR NOIDA AND CONCESSIONAIRE I.E. ASS ESSEE FOLLOW TERMS AND CONDITIONS OF THE AGREEMENT OR NOT AND TO ALTER THE SAME AS AND WHEN REQUIRED. AS PER CONCESSIION AGREEEMNT INDEPENDENT AUDITORS ARE REQUIRED TO DETERMINE THE TOTAL COST OF PROJECT FROM TIME TO TIME AND RECOVER Y VIS A VIS THE PROJECT COST AND GIVE THE ESTIMATED RESULTS THEREOF. BOTH INDEPENDEN T ENGINEER AND INDEPENT AUDITOR ARE ALSO REQUIRD TO REVIEW COST AND RECOVER Y POSITION FORM TIME TO TIME AND BE INSTRUMENTAL IN DETERMINING WHETHER DEVELOPM ENT RIGHTS OF THE LAND AROUND THE TOLL BRIDGE SHOULD OR SHOULD NOT BE GRAN TED TO THE CONCESSIONAIRE I.E. ASSESSEE, DEPENDING UPON THE RECOVERY POSITION. IF RECOVERY IS SLOW NOIDA IS REQUIRED TO ALLOW ASSESSEE DEVELOPMENTAL RIGHTS OF LAND AROUND THE FLYWAY WHEREAS IF THE RECOVERY IS FAST THE SAME IS NOT REQ UIRED. WHEN THE IN THE SAME WAY CONCESSION AGREEMENT ALSO MENTIONS ABOUT RETAINERS. ALL THESE DETAILS RELATED TO WORKS ASSIGNED TO INDEPENDENT ENGINEER, INDEPENDENT AUDITOR AND, RETAINER IS RELATED TO ESTABLISHMENT, CONSTRUCTION AND COMMISSI ONING OF THE DND FLY OVER TO OVERSEE AND REVIEW POSITION OF RECOVERY FOR THE FLY OVER VIS--VIS THE COST INVOLVED. HENCE THE EXPENSE OF RS.22,55,046/- PAIS AS AGENCY FEE AND CLAIMED AS EXPENDITURE IN P & L ACCOUNT IS NOT ALLOWABLE SINCE IT IS A CAPITAL EXPENDITURE. THE SAME IS TREATED AS CAPITAL EXPENDITURE AND THE SAME IS ADDED BACK, TO THE INCOME OF THE ASSESSEE. 4. LEARNED CIT(A) DELETED THE ADDITIONS SO MADE BY THE AO FOR THE REASONS MENTIONED IN HIS ORDER AT PAGES 53 AND 54 O F HIS ORDER. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. 6. LEARNED CIT-DR, AT THE OUTSET RELIED UPON THE OR DER OF THE AO AND PAGE 547 OF THE CONCESSION AGREEMENT. ITAS NO.5246, 5247, 5248, 5249, 5286/DEL/2012 4 7. LEARNED AR, ON THE OTHER HAND, RELIED UPON THE O RDER OF THE LEARNED CIT(A). 8. AFTER PERUSING THE RECORD, WE ARE OF THE VIEW TH AT LEARNED CIT(A) HAS PASSED A REASONED ORDER AND HAS RIGHTLY OBSERVED TH AT THE INDEPENDENT AUDITOR AND THE INDEPENDENT ENGINEER WERE TO BE APP OINTED BY THE LENDERS, NOIDA AND THE ASSESSEE WERE REQUIRED TO BE THERE FO R THE ENTIRE CONCESSION PERIOD. THE CONCESSION AGREEMENT CLEARLY DIFFERENTI ATED BETWEEN THE ACTIVITIES OF THESE AGENTS DURING THE PRE-CONSTRUCT ION, COMMISSIONING AND POST COMMISSIONING PERIOD. SINCE THE PROJECT GOT CO MMISSIONED IN FEBRUARY, 2001, THE ACTIVITIES OF THESE AGENTS DURING THE POS T COMMISSIONING PERIOD IS OF RELEVANCE TO DETERMINE THEIR DEDUCTIBILITY WHILE COMPUTING THE TAXABLE INCOME OF THE AY 2006-07 . AS PER SECTION 85 OF ARTICLE 8 OF THE CONCESSION AGREEMENT , THE FUNCTION OF INDEPENDENT ENGINEER , POST COMM I SSIONING OF THE PROJECT , WAS TO MON I TOR THAT THE MAINTENANCE OF THE NOIDA BRIDGE WAS BE I NG CARR I ED ON IN CONFORM I TY W I T H T HE TERMS OF THE AGREEMENT AND TO CERTIFY THE COST OF SUCH MA I NTENANCE WH I LE THE FUNCTION OF THE INDEPENDENT AUDITOR WAS TO INDEPENDENTLY AUDIT AND CERTIFY THE BOOKS OF ACCOUNT OF THE ASSESSEE ON A QUARTERLY BAS I S AND ALSO TO CERTIFY THE RECOVERY POS I TION OF THE ASSESSEE . THE ' REPORTS OF THESE AGENTS WERE TO BE ACCESSIBLE TO THE LENDERS , NOIDA AND THE OTHER PROMOTER SHAREHOLDERS ONLY. SIM ILARLY, UNDER THE TERMS OF THE INTER-SE AGREEMENT . THE ASSESSEE WAS REQUIRED TO APPO I NT TRUST & RETENT I ON AGENT . SECURITY AGENT , ETC . FOR THE PURPOSES OF ADMINISTRATING T HE SECURED L OANS AND THE SECURED PROPE R TY , TO COORDINATE THE ENFORCEMENT OF THE R ESPECT I VE RIGHTS , POWERS AND R EMED I ES OF T H E LENDERS ETC . WHILE THE SECURITY AGEN T W AS REQUIRE D TO E N SU R E THAT AL L CHA R GES CREA T ED WERE DU L Y REG I STERED AND SECURE AND P R OPE R ASSE T COVER I S MA I NTA I NED B Y THE ITAS NO.5246, 5247, 5248, 5249, 5286/DEL/2012 5 ASSESSEE , THE TRUS T & RETENTION AGENT WAS R E Q U I RED TO CREATE , MA I N TA I N AND OPE R ATE A TR U ST AND RETENT I ON ACCOUNT AND ENSURE THAT TH E FU N DS WERE BE I NG UT IL IZED AS PER THE TERMS ON WHICH THE FUNDING WAS DONE BY T H E LENDERS AND THAT NO TERMS HAD NOT BEEN VIOLATED AND THAT THE RI GHTS OF THE PARTIES WERE PROTECTED. IN VIEW OF THE FUNCTIONS OF THESE AGENTS AND CONTENTS OF VARIOUS CLAUSES OF THE AGREEMENTS, IT IS EVIDENT THAT THE S ERVICES OF THESE AGENTS WERE AVAILED IN ORDER TO ENSURE THAT THE ASSESSEE HAS CO MPLIED WITH THE TERMS AND CONDITIONS OF THE VARIOUS AGREEMENTS ENTERED INTO B Y THE ASSESSEE. THE ASSESSEE WAS REQUIRED TO APPOINT THESE AGENTS AS A PART OF THE AGREEMENTS AND IN ORDER TO SAFEGUARD THE INTEREST OF THE STAKEHOLD ERS, WAS A BUSINESS NECESSITY FOR THE ASSESSEE. THE SERVICES WERE PROVI DED BY THESE AGENTS ON A REGULAR BASIS AND THUS WERE RECURRING IN NATURE. TH E SERVICES OF THESE AGENTS HELPED THE ASSESSEE IN PROPER AND EFFICIENT IMPLEME NTATION OF THE AGREEMENTS AND THEREBY RESULTING IN SMOOTH FUNCTIONING OF THE ASSESSEES BUSINESS. FUR THER , THE PROJECT GOT COMMISSIONED IN FEBRUARY, 2001 AND WAS FULLY OPERATIONAL DUR I NG THE FY 2005-06 . THE AO SEEMS TO HAVE MISREAD THE AGREEMENTS TO WRONGLY CONCLUDE THAT SINCE THE WORKS ASSIGNED TO INDEPENDENT ENGINEER, INDEPENDENT AUDITOR AND, RETA INER IS RELATED TO ESTABLISHMENT , CONSTRUCTION AND COMMISSIONING OF THE DND FLY OVER AND TO OVERSEE AND REVIEW POSITION OF RECOVERY FOR THE FLY OVER VIS-A-VIS THE COST I NVOLVED , THE EXPENSES INCURRED BY THE ASSESSE IN THIS REGARD IS CAPITAL IN NATURE . IN THIS CONTEXT IT IS ALSO WORTHWHILE TO MENT I ON THE FACT THAT THE TAX AUTHORITIES NEVER QUESTIONED THE DEDUCTIBILITY OF A BOVE EXPENSE (I . E . AGENCY FEE) WHILE DEALING WITH ASSESSEE ' S CASE IN RESPECT OF AY 2002-03 TO 2005-06 WHICH SPEAKS FOR INCONSISTENCY IN THE APPROACH AND ALSO GO TO SUPPORT THE CLAIM OF THE ASSESSEE THAT THE EXPENSES IN QUESTION WERE ALLOWABLE REVENUE EXPENDITURE. IN VIEW OF THE ABOVE, WE ARE OF THE CO NSIDERED VIEW THAT THE ITAS NO.5246, 5247, 5248, 5249, 5286/DEL/2012 6 SERVICES PERFORMED BY THESE AGENTS ARE REVENUE IN N ATURE AND FULFILLS THE CONDITIONS PRESCRIBED UNDER SECTION 37(1) OF THE AC T. THEREFORE, THE AGENCY FEES INCURRED BY THE ASSESSEE DURING THE F.Y. 2005- 06 ARE ALLOWED AS REVENUE EXPENDITURE AND THE ADDITION MADE BY THE ASSESSING OFFICER HAS RIGHTLY BEEN DELETED BY THE LD. CIT(A) AND WE FIND NO INFIRMITY IN HIS ORDER. ACCORDINGLY, GROUND NO.1 OF REVENUE IS DISMISSED. 9. NOW WE TAKE UP GROUND NOS.2 AND 3. THE BRIEF FAC TS OF THE CASE IN GROUNDS NO.2 AND 3 OF THE REVENUE AS EMANATING FROM THE ORDER OF THE AO ARE REPRODUCED HEREINBELOW. THE A BOVE CONTENTION OF THE ASSESSEE CAN ONLY BE ACCEPTE D IF THE DND FLYOVER WAS A PART OF A FACTORY PREMISE OR ANY OTHER PREMISE OF THE ASSES SEE, IN WHICH THERE WERE OTHER CONSTRUCTION S BE I NG USED FOR THE PURPOSE OF THE BUSINESS OF THE ASSE SSEE AND IF THIS DND FLYOVER WAS BY WAY OF AN APPROACH ROAD TO THESE OTHER CONSTRUCTIONS, THEN MAY BE IT COULD HAVE BEEN ASSUMED THAT T HE FLYOVER, IN SUCH CIRCUMSTANCES WOULD HAVE BEEN E NT I TLED TO DEPRECIATION AS BUILDING @ 10%. H OWEVER, THE CASE OF THE ASSESSEE IS COMPLETELY DIFF ERENT AS I T IS CLAIMING DEPRECIATION ON THE D ND FLYOVER, WHICH IS IN FACT JUST A ROAD WHICH IS R UNNING FROM ONE END TO ANOTHER, CONNECTING D ELH I AND NOIDA . CONSIDERING THESE FACTS , THE RATIO OF THE JUDGMENT DELIVERED BY HON'BLE SU P R EME COURT IN THE CASE OF INDORE MUN I CIPAL CORPORAT I ON VS. CIT 247 ITR 803 IS FULLY APPLICAB L E I N TH E CASE OF THE ASSESSEE WHEREIN IT WAS HELD THAT EXPEND I TURE INCURRED BY THE ASSESSEE TO CON S T RUCT METAL R OAD ON TRENCHINQ AROUND WAS NOT A REVENUE EX PENDITURE AND THE ASSESSEE WAS N OT E NTITLED TO DEPRECIATION ON THE AMOUNT OF THE COST OF CONSTRUCTION OF SUCH R OADS. THUS, IT HAS B EEN H E L D BY THE HON'BLE SUPREME COURT THAT ROADS BY THEMSELVES WOUL D NAT CONSTITUTE BU I LDING, AN D I F T H ERE IS ' NO CANSTRUCTION EXCEPT THE ROOD, MEANING THEREBY , IF THERE ARE NO OTHER BUILDINGS OR FACT ORY PREMISE S OR ANY OTHER COMMERCIAL COMPLEXES ASSOCIATED WITH T HAT ROAD, THE N D EPR EC I AT I O N CANNOT BE ALLOWED TO THE ASSESSEE . THE DND FLYOVER IS A PRODUCT OF THE ASSESSEE COMPAN Y, WHICH IS NOW COMMERCIALLY EXPLOITED. ASSESSEE ITSELF IN ITS SUBM ISSIONS DATED 19.11.2007 STATED THAT PRINCIPAL BUSINESS ACTIVITYU OF THE ASSESSEE C OMPANY IS TO CONSTRUCT TOLL BRIDGES ON BUILD, OWN, OPERATE AND TRANSFER (BOOT) BASIS. THUS, BY NO STRETCH OF ARGUMENT, THE DND TOLL BRIDGE CAN BE HELD AS A DEPR ECIABLE CAPITAL ASSET. KEEPING IN VIEW THE ABOVE DISCUSSION AND LEGAL POSI TION, THE ASSESSEES CLAIM OF DEPRECIATION OF RS.15,84,60,192/- IS DISALLOWED AND THE SAME IS ADDED BACK TO ITS TOTAL INCOME. 10. LEARNED CIT(A) ALLOWED THE CLAIM OF THE ASSESSE E AND ACCORDINGLY ALLOWED THE GROUNDS SO RAISED. ITAS NO.5246, 5247, 5248, 5249, 5286/DEL/2012 7 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE ISSUE IS DIRECTLY COVERED BY THE DECISION OF HO NBLE ITAT VIDE ORDER DATED 19.12.2008 FOR THE ASSESSMENT YEAR 2002-03 AN D 2003-04 IN ASSESSEES OWN CASE WHERE THE DECISION OF LEARNED C IT(A) HAS BEEN UPHELD BY THE ITAT, WHICH IS REPRODUCED HEREINBELOW. AS FAR AS THE OBJECTION OF LEARNED DR WITH REGARD TO O WNERSHIP IS CONCERNED, THE LEARNED COUNSEL FOR THE ASSESSEE TOOK US THROUGH CL AUSE 2 . 1 OF THE CONCESSION AGREEMENT. HE POINTED OUT THAT NOIDA HAS AGREED TO GIVE EXCLUSIVE RIGHTS AND AUTHORITY DURINA THE CONCESSION PERIOD TO DEVELOPME NT ESTABLISH CONSTRUCT OPERATE AND MAINTAIN THE NOIDA BRIDGE AS AN INFRASTRUCTURE FACILITY. HE TOOK US THROUGH VARIOUS CLAUSES AND POINTED OUT THAT THESE CLAUSES SUFFICIENTLY ENABLE THE ASSESSEE TO CONSIDER IT SELF AS OWNER OF THE ASSETS . THE LEASE PERIOD IS FOR 30 YEARS. THUS, IT INDICATES THAT THIS C AP I T AL ASSET IS OWNED BY THE ASSESSEE FOR ALL THE PRACT ICAL PURPOSES. IF THE TRANSPORTER REFUSES TO PAY THE FEE S PRO V IDED BY THE ASSESSEE FOR USE OF THIS , IT HAS A RIGHT TO CON F I SCA T E THE VEH I C LE UP T O AND ONLY THE FEES IS PAID FOR THE USE OF THE ROAD OR R EA LI ZED. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AND GONE THROUGH THE RECORDS CAREFULLY. THE ONLY OBJECTION OF THE ASSESSING OFFI CER FOR DENYING THE DEPRECIATION TO THE ASSESSEE IS THAT ROAD IN ISOLATION, DOES NOT CONSTITUTE BUILDING. THIS ROAD IS NOT WITHIN THE FACTORY PREMISES WHICH CAN BE CONSID ERED AS A PART OF THE PLANT OR BUILDING. WE FIND THAT EXPRESSION BUILDING HAS BE EN GIVEN AN EXTENDED MEANING IN THE APPENDIX 1 OF THE IT RULES. NOW THE BUILDING INCLUDES ROADS, BRIDGES, CULVERTS WELL AND TUBE WELLS. THUS, THE JUDGMENT RE LIED UPON BY THE ASSESSING OFFICER IS NOT APPLICABLE ON THE FACTS OF THE PRESE NT CASE. THERE IS A CHANGE OF POISTION OF LAW. THE LEARNED IST APPELLATE AUTHORIT Y HAS CONSIDERED THIS ISSUE ELABORATELY IN THE FINDINGS SUPRA AND WE DO NOT FIN D ANY ERROR IN THIS FINDING. THEREFORE, BOTH THE APPEALS ARE DISMISSED. 12. SINCE THERE ARE NO CHANGE IN THE FACTS AND CIRC UMSTANCES OF THE CASE, WE FIND THAT LEARNED CIT(A) HAS RIGHTLY ALLOWED THE DEPRECIATION ON THE TOLL BRIDGE DURING THE IMPUGNED YEAR BY FOLLOWING THE DE CISION OF THE HONBLE ITAT DELHI BENCHES IN ASSESSEES OWN CASE FOR THE A SSESSMENT YEAR 2002- 03 TO 2005-06. 13. LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIED UP ON THE DECISION IN THE CASE OF ASSESSEE WHERE THE REVENUE WENT IN APPEAL F OR THE ASSESSMENT YEAR ITAS NO.5246, 5247, 5248, 5249, 5286/DEL/2012 8 2004-05 AND 2005-06 BEFORE THE HONBLE HIGH COURT A ND THE RELEVANT DECSION FOR THE ASSESSMENT YEAR 2004-05 BY THE HON BLE ALLAHABAD HIGH COURT IS REPRODUCED HEREINBELOW. 3. THE DEPARTMENT HAS PREFERRED THIS APPEAL ON THE FOLLOWING SUBSTANTIAL QUESTIONS OF LAW. 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HONBLE ITAT IS JUSTIFIED IN LAW IN DISMISSING THE APPEAL OF THE RE VENUE AND TO HOLD THAT IN ISOLATION, ROAD CAN BE CONSIDERED AS A BUILDING FOR THE PURPOSE OF GRANTING DEPRECIATION? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HONBLE ITAT IS JUSTIFIED IN LAW IN DISMISSING THE APPEAL OF THE RE VENUE AND TO HOLD THAT BUILDINGS INCLUDE ROADS, BIRDGES, CULVERS, WELLS AND TUBE WELLS ETC. AS PER PROVISIONS OF APPENDIX-I OF THE IT RULES, 1962, WHE REAS APPENDIX-I IS EFFECTIVE FROM ASSESSMENT YEAR 2006-07 ONWARDS AND NOT APPLICABLE FOR A.Y. 2004-05, WHICH IS THE YEAR UNDER APPEAL? 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HONBLE ITAT IS JUSTIFIED IN LAW IN DISMISSING THE APPEAL OF THE RE VENUE AND TO HOLD THAT THE ASSETS ON WHICH DEPRECIATION IS CLAIMED BY THE ASSE SSEE ARE OWNED BY IT, WHEREAS IN THE CONCESSION AGREEMENT DATED 12.11.199 7 BETWEEN NOIDA AUTHORITY AND THE ASSESSEE, IT IS CLEARLY MENTIONED THAT THE LAND ON WHICH THE TOLL BRIDGE HAS BEEN CONSTRUCTED IS NOT A PROPERTY OF THE ASSESSEE, BUT HAS BEEN GIVEN ON LEASE BY THE NOIDA AUTHORITY FOR A CE RTAIN PERIOD (30 YEARS) AND AS PER THE AGREEMENT, THE LEASE CAN BE TERMINAT ED EARLIER ALSO, SUBJECT TO CERTAIN CONDITIONS. THEREFORE, THE OWNERSHIP OF THE ASSET IN THE HANDS OF THE ASSESSEE IS NOT ESTABLISHED. 4. THE ASSESSING OFFICER VIDE ORDER UNDER SECTION 1 43(3) OF THE ACT DATED 29.09.2006 DISALLOWED THE CLAIM OF THE ASSESSEE ON DEPRECIATION ON TOLL ROADS & BRIDGE AMOUNTING TO RS.19,14,43,827/- AFTER CONSIDERING DECISION OF THE SUPREME COURT IN THE CASE OF INDORE MUNICIPAL CORPORATION (SC) 247 ITR 803. THE CIT(A) DELETED TH E DISALLOWANCE FOLLOWING THE ORDERS OF INCOME TAX APPELLATE TRIBUN AL, FOR THE ASSESSMENT YEAR 2003-04. 5. THE INCOME TAX APPELLATE TRIBUNAL CONFIRMED THE ORDER OF CIT(A), AND DISMISSED THE APPEL BY RELYING ON ITS OWN DECIS ION IN THE CASE OF ASSESSEE FOR THE ASSESSMENT YEARS 2002-03 AND 2003- 04. 6. THE QUESTION NOS.1, 2 AND 3 IN THIS APEAL ARE TH E SAME AS HAVE BEEN RAISED BY THE REVENUE IN INCOME TAX APPEAL NO.316 O F 2011 BETWEEN THE SAME PARTIES FOR THE ASSESSMENT YEAR 2005-06. 7. BY A JUDGMENT DELIVERED TODAY BETWEEN THE PARTIE S, WE HAVE ANSWERED ALL THE THREE QUESTIONS FOR THE ASSESSMENT YEAR 200 5-06 IN FAVOUR OF THE RESPONDENT-ASSESSEE, AND AGAINST THE REVENUE. ITAS NO.5246, 5247, 5248, 5249, 5286/DEL/2012 9 8. FOLLOWING THE JUDGMENT DELIVERED TODAY IN INCOME TAX APPEAL NO.316 OF 2011 BETWEEN THE SAME PARTIES, ALL THE THREE QUE STIONS ARE DECIDED IN FAVOUR OF THE RESPONDENT-ASSESSEE, AND AGAINST T HE REVENUE. 9. THE INCOME TAX APPEAL IS DISMISSED. 14. ALSO REPRODUCED HEREINBELOW THE DECISION OF HON BLE HIGH COURT OF ALLAHABAD IN ASSESSEES CASE FOR THE ASSESSMENT YEA R 2005-06 AS UNDER: 25. WITH THE INSERTION OF THE EXPLANATION-I TO SEC TION 32 W.E.F. 1.4.1998 THERE IS NO DOUBT THAT WHERE THE ASSESSEE IS THE LESSEE O F THE BUILDING IN WHICH HE CARRIES ON BUSINESS WHICH IS NOT OWNED BY HIM BUT I N RESPECT OF WHICH THE ASSESSEE HOLDS A LEASE OR OTHER RIGHT OF OCCUPANCY AND ANY CAPITAL EXPENDITURE IS INCURRED BY THE ASSESSEE OF ANY STRUCTURE OR DOING OF ANY WORK IN OR IN RELATION TO BY WAY OF RENOVATION, EXTENSION OR FOR IMPROVEMENT TO THE BUILDING,L THEN THE PROVISIONS OF THE INCOME TAX ACT, WILL APPLY AS IF THE SAID STRUCTURE OR WORK IS A BUILDING OWNED BY THE ASSESSEE. EXPLANATION-I MAY A PPLY TO RENOVATION OR EXTENSION OR IMPROVEMENT TO THE BUILDING, THE OBJEC T IS TO EXTEND THE APPLICATION OF DEPRECIATION, IF SUCH BUILDINGINS WHICH ARE NOT ONW ED BY THE ASSESSEE BUT IN WHICH THE ASSESSEE HOLDS A LEASE OR OTHER RIGHT OF OCCUPANCY. THEPRESENT CASE STANDS ON A BETTER FOOTING, IN WHICH THE LAND IS HL ED ON LEASE AND THE ROAD AS CAPITAL ASSET HAS BEEN BUILT ON IT WITH EXCLUSIVE O WNERSHIP OF THE ROAD, AND THE BRIDGE IN THE ASSESSEE-COMPANY FOR THE CONCESSIION PERIOD, AND WHICH ALSO INCLUDES THE RIGHT TO COLLECT TOLLS AND TO REGULATE USE OF THE BRIDGE. SECTION 32 WOULD, THEREFORE, APPLY FOR THE PURPOSE OF PROVIDIN G DEPRECIATION TO BE WORKED OUT IN ACCORDANCE WITH THE LAW. FOR REMOVAL OF DOUB TS THE LEGISLATURE HAS PROVIDED THAT THE BUILDING INCLUDES ROADS IN NOTE(1 ) TO APPENDIX-I PROVIDING FOR THE TABLE OF RATES AT WHICH THE DEPRECIATION IS ADM ISSIBLE. 26. THE QUESTIONS NO.1, 2 AND 3 ARE THUS DECIDED IN FAVOUR OF THE RESPONDENT- ASSESSEE AND AGINST THE REVENUE. SO FAR AS QUESTION NO.1 IS CONCERNED, REGARDING THE PAYMENT IN CONNECTION OF TAKE OUT ASSISTANCE F EE FOR REDEMPTION OF DEEP DISCOUNT BONDS THIS COURT HAS ALREADY DECIDED THE Q UESTION IN INCOME TAX APPEAL NO.44 OF 2010 BETWEEN THE SAME PARTIES RELAT ING TO THE ASSESSMENT YEAR 23002-03 IN FAVOUR OF THE RESPONDENT-ASSESSEE AND A GAINST THE REVENUE. 15. THE DECISION RELIED UPON BY THE LEARNED DR IN T HE CASE OF CIT VS. WEST GUJARAT EXPRESSWAY LTD. REPORTED IN (2016) 73 TAXMANN.COM 139 (BOMBAY) AND IN THE CASE OF NORTH KARNATAKA EXPRESS WAY LTD. REPORTED IN 2014-TIOL- 1931 HC-MUM-IT IS DISTINGUISHABLE ON THE FACTS THAT IN THE CASES DECIDED BY THE BOMBAY HIGH COURT THE MODEL OF THE CONTRACT WAS BOT WHEREAS IN THE PRESENT CASE IT IS BOOT. SECONDL Y, THE CASE DECIDED BY THE HONBLE BOMBAY HIGH COURT WERE WITH RESPECT TO NATIONAL HIGHWAY WHEREAS IN THE PRESENT CASE IT IS NOT A NATIONAL HI GHWAY. IN THE FACTS AND ITAS NO.5246, 5247, 5248, 5249, 5286/DEL/2012 10 CIRCUMSTANCES OF THE CASE, WE FIND NO INFIRMITY IN THE ORDER OF LEARNED CIT(A) AND ACCORDINLGY BOTH THE GROUNDS OF THE REVE NUE ARE DISMISSED. 16. AS REGARDS GROUND NO.4, THE BRIEF FACTS OF THE CASE AS EMANATING FROM THE ORDER OF THE AO ARE REPRODUCED HEREIN. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND NOT FOUND ANY FORCE IN THE SAME A S THE NATURE OF PAYMENT, WHICH IS BEING MADE UNDER TAKE OUT ASSISTANCE AGREEMENT IS NOT R EV ENUE BUT CAPITAL IN NATURE . IT IS A PAYMENT, WHICH IS TO BE MADE IN CONNECTION W I TH RED EMPTION OF DEEP DISCOUNT BONDS AND HENCE CANNOT BE CLAIMED AS A REVENUE EXPENSE . I T H A S BEEN HELD IN THE CASE OF GUJARAT MINERAL DEVELOPMEN T CARP . LTD., VS. E LT (1983) REPORTED AT 143 ITR 822 (GUJARAT) THAT WHERE EXPENDITURE IS INCURRED IN THE FIELD OF FIXED CAPITAL, BUT IS ON CA P I TAL ACCOUNT BUT IF I T IS IN THE FIELD OF CIRCULAT I NG CAPITAL, IT I S ON REVENUE ACCOUNT . IN THE CASE OF I NDIAN GINNING AND PRESSING CO. LTD . VS . C / T (2002) REPORTED AT 25 STC 503 (GUJ HC) : (2001) 2 52 ITR 577 (GUJ.) IT WAS HELD THAT I N RELAT I ON TO THE TEST OF ENDURING BENEFIT, WHAT IS MATERIAL I S TO C ONSIDE R THE NATURE OF THE ADVAN T AGE IN A COMME R C I AL SENSE AND IT IS ONLY WHERE THE A DVAN T AGE I S IN T HE CAPITAL F I ELD THAT THE EXPEN DITU RE WOULD BE DISALLOWABLE . IF THE ADVANTAGE C ONS I STS MERELY I N FAC I LITAT I NG THE ASSESSEE ' S TRAD I NG OPERATIONS OR ENABLING THE MANAGEMENT AN D CONDUCT OF THE ASSESSEE ' S BUSINESS TO BE CARR I ED ON MORE EFF I CIENTLY OR MORE PROFITABLY WHILE L E A VI NG THE FIXED CAP I TAL UNTOUCHED, THE E X PEND I TURE WOULD BE ON REVENUE ACCOUNT, EVEN THOUGH TH E ADVONTOQE MA Y ENDURE FOR AN I NDEF I NITE FUTU R E . FOLLOWING THE RAT I O OF THE JUDGMENT QUOTED ABO VE, I T I S CLEAR THAT THE NATURE OF PAYMENT UNDER CONSIDERATION, IS CAP I TAL I N NATURE, AS IT I S C ON N E C TED W I TH THE FIXED CAPITAL OF THE ASSESSEE BY WAY OF FEES BE I NG PA I D FOR THE REDEMPTION OF BON D S . HERE I T IS PERT I NE NT T O ME N T I ON THAT TH I S I SSUE WAS RAISED I N EARL I ER YEARS AND HAS DULY BEEN UPH E LD O Y L D . CIT ( APPEA L S ) I N THOSE Y EA R S . IN VI EW OF THE ABOVE , T HE A M OU N T O F R S. 9 1, 2 1,413/- P A I D BY T H E ASSESSEE AS TAKE OUT A SSISTANC E F E E ' IS DISALLOWED AS AN EXPENDITURE BEING CA P I TAL I N NATURE AN D ADDED BAC K TO T H E TOT A L I NCOME OF THE ASSESSEE. 17. LEARNED CIT(A) DELETED THE ADDITION SO MADE BY THE AO. THE ISSUE IS COVERED AGAINST THE REVENUE BY THE DECISION OF HON BLE ALLAHABAD HIGH COURT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEA R 2002-03 IN INCOME TAX APPEAL NO.44 OF 2010 DATED 24.08.2012 PLACED AT PAP ER BOOK PAGE NO.899 TO 908 AND FOR THE ASSESSMENT YEAR 2003-04 IN ITA NO.2 73 OF 2011 DATED 24.08.2012 PLACED AT PAPER BOOK PAGE 887 TO 896. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THERE IS NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) WHO HAS RIGHTLY DELETED THE ADDI TION SO MADE. 18. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ITAS NO.5246, 5247, 5248, 5249, 5286/DEL/2012 11 19. NOW WE TAKE UP THE APPEAL OF THE ASSESSEE IN IT A NO.5286/DEL/2012. THE GROUNDS RAISED ARE AS UNDER: 1. THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ('LD. CIT(A) UNDER SECTION 250 OF THE INCOME TAX AC T, 1961 ('THE ACT') IS BAD IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CA SE. 2. THE LD. CIT(A) AS WELL AS LEARNED ASSESSING OFFI CER (HEREINAFTER REFERRED AS 'LD. AO') HAVE ERRED IN LAW AND ON FACTS AND CIR CUMSTANCES OF THE CASE BY ALLEGING THAT THE PERFORMANCE RELATED BONUS PAID BY THE APPELLANT TO ITS EMPLOYEES WAS IN RELATION TO THE LISTING OF GDR OF THE APPELLANT AT LONDON STOCK EXCHANGE NOTWITHSTANDING THE PROVISIONS OF SE CTION 36(1)(II) OF THE ACT. 3. THE LD. CIT (A), AS WELL AS LD. AO HAVE ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE BY DISALLOWING THE SUM OF RS 1,40,00,000 PAID BY THE APPELLANT AS PERFORMANCE RELATED BONUS TO ITS E MPLOYEES BY TREATING THE SAME AS CAPITAL IN NATURE. 4. ALL THE AFORESAID GROUNDS ARE INDEPENDENT AND WI THOUT PREJUDICE TO ONE ANOTHER. 20. ALL THE GROUNDS ARE IN FACT RELATED TO ONE ISSU E AND THE BRIEF FACTS AS EMANATING FROM THE ORDER OF THE AO ARE REPRODUCED H EREINBELOW. ABOVE MENTIONED PERSONS ARE ALREADY RECEIVING REGU LAR REMUNERATION FROM THE COMPANY FOR THE SERVICES RENDERED BY THEM. SINCE THE PAYMEN TS UNDER OBOVE HEAD ARE RELATED TO RAISING OF ADDITIONAL . CAPITAL FOR THE COMPANY THE SAME CANNOT BE ACCEPTED AS A REVENUE EXPENDITURE . INSTEAD I T IS A CAPITAL - EXPENDITURE RELATED TO RISING OF ADDITIONAL CAPITAL OF THE COMPANY WHILE REMITTING GDR PROCEEDS INTO THE COUNTRY ASSESSEE HAS ITSELF REMIT TED GDR PROCEEDS NET OF EXPENSES RELATED TO FLOATING OF GDRS AND HAS ALSO NOT C L AI MED IT IN THE P& L ACCOUNT . PAYMENT OF PERFORMANCE RELATED PAY I S NOT DIFFERENT FROM EXPEN S E S RELATED TO F L OATING OF GDRS I . E . SHARE CAPITAL OF THE COMPANY AND HENCE IS HELD AS C APITAL EXPENSE RELATED TO RA I SING OF CAPITAL FOR THE COMPANY AND IS DISALLOWOBLE AS REVENUE EXPENSE AND ADDED IN THE HANDS OF THE ASSESSEE. I AM ALSO SAT I SF I ED THAT THE ASSESSEE COMPANY HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME THER EBY SUPPRESSED ITS TAXABLE INCOME, THEREFORE, PENALTY PROCEEDINGS U/S.271(1)(C) HAVE B EEN INITIATED SEPARATELY. 21. LEARNED CIT(A) HAS CONFIRMED THE ACTION OF THE AO. 22. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. IT WAS POINTED OUT BY THE LEARNED COUNSEL FOR THE A SSESSEE THAT THE SAID EXPENDITURE IS IN FACT COVERED SPECIFICALLY U/S.36( 1)(II) WHERE ANY SUM PAID TO AN EMPLOYEE AS BONUS OR COMMISSION FOR SERVICES RENDERED IS ALLOWED. WHEN SPECIFIC SECTION IS THERE FOR ALLOWANCE OR AN EXPENDITURE, THEN THE GENERAL PROVISION OF THE SECTION AS CONTAINED IN SE CTION 37(1) SHALL NOT ITAS NO.5246, 5247, 5248, 5249, 5286/DEL/2012 12 APPLY. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SHAHZADA NAND & SONS VS. CIT REPORTED IN (1977) 108 ITR 358 (SC) AND THE RELEVAN T HEAD NOTES ARE REPRODUCED HEREINBELOW. SECTION 3 6(1)(II) OF THE INCOME - TAX ACT , 1961 - BONUS OR COMMISSION - ASSESSMENT YEAR 1963-64 - WHETHER IT IS NOT REQUIRED THAT THERE SHO ULD BE AN Y EXTRA SERVICES RENDERED BY AN EMPLOYEE BEFORE PAYMENT OF COMMISSION TO HIM CAN BE JUSTIFIED AS AN ALLOWABLE EXPENDITURE - HELD, YES ASSESSE E FIRM WAS CARRYING ON B USINESS WITH HELP OF TWO EMPLOYEES NAMELY 'S' AND 'G' - BUSINESS OF ASSESSEE - FIRM CONSISTED OF SOLE SEILING AGENCY OF ONE OCM IN RESPECT OF Y ARN , CLOTH AND BLANKETS - SINCE ASSESSEE SHOWED VERY SAT ISFACTORY TURNOVER, OCM STARTED GIVING TO ASSESSEE, IN ADDITI ON TO USUAL COMMISSION , OVERRIDING COMMISSION AT RATE OF TWO AND A HALF PERCENT ON SALES AFFECTED BY ASSESSEE - ASSESSEE IN TURN DECIDED TO GIVE TO 'S' AND 'G' COMMISSION AT RATE O F HALF PERCENT OUT OF TWO AND A HALF PERCENT OVERRIDING COMMISSION RECEIVED FROM OCM - A SSESSEE'S CLAIM FOR THIS AMOUNT OF COMMISSION PAID WAS REJECTED BY REVENUE AUTHORITIES ON REFERENCE, HIGH COURT AFFIRMED DECISION OF AUTHORITIES BELOW HOLDING THAT THERE WA S NO EVIDENCE TO SHOW THAT ANY EXTRA SERVICES WERE RENDERED B Y 'S' AND ' G' AND THAT THEY WERE RESPONSIBLE FOR INCREASE IN S ALES AND ENLARGEMENT OF OVERRIDING COMMIS S ION - ON INSTANT APPEAL, IT WAS SEEN THAT'S' AND 'G ' WERE INFACT PERSONS ATTENDING TO BUSINESS OF ASSESS EE - 'G' WAS AN EXPERIENCED AND SEASONED BUSINESSMAN IT WAS AND HE WAS ALSO ADVISING OCM IN REGARD TO DESIGNS ETC. , AND HE AND'S' WERE PRIMARIL Y RESPONSIBLE FOR FLOURISHING STATE OF BUSINESS - WHE THER, ON FACTS . AND HAVING REGARD TO AFORESAID LEGAL POSITION , EX-GRATIA COMMISSION PAID TO'S' AND 'G' COULD NOT B E REGARDED AS UNREASONABLE - HELD, Y ES - WHETHER , THEREFORE, AMOUNT OF COMMISSION PAID TO THEM WAS TO BE ALLOWED AS DEDUCTIBLE EXPENDITURE UN DER SECTION 36(L)(II) - HELD, YES. 23. HE ALSO RELIED UPON THE DECISION OF HONBLE BOM BAY HIGH COURT IN THE CASE OF BOMBAY BURMAH TRADING CORPORATION LTD. VS. CIT REPORTED IN (1983) 12 TAXMAN 178 (BOM.) WHERE HE POINTED OUT AT PAGE 8 OF THE JUDGMENT WHICH IS REPRODUCED HEREINBELOW. MR. JOSHI, ON BEHALF OF THE REVENUE, HAD SERIOUSLY OBJECTED TO THE PRODUCTION OF THIS DOCUMENT. WE, HOWEVER, OVERRRULED THAT OBJECTI ON AND WE HAVE TAKEN THESE GROUNDS OF APPEAL AS ANNEX. F TO THE STATEMENT OF T HE CASE. GROUND NO.8 SHOWS THAT THE BREAK UP OF RS.31,899, I.E., RS.22,699, AR E EXPENSES UNDER THE HEAD PRINTING AND STATIONERY AND RS.9,200 ARE THE EXPE NSES UNDER THE HEAD POSTAGE & TELEGRAMS. NOW, OBVIOUSLY, THESE ARE EX PENSES WHICH ARE INCURRED CONSEQUENT UPON THE ISSUE OF BONUS SHARES. THESE AR E NOT EXPENSES WHICH CAN EVEN BE SAID TO HAVE BEEN INCURRED FOR THE PURPOSES OF RAISING ANY ADDITIONAL CAPITAL. THESE ARE EXPENSES WHICH HAVE BEEN INCURRE D IN THE NORMAL COURSE OF BUSINESS AND MERELY BECAUSE THE PRINTING WAS DONE, IN CONNECTION WITH BONUS SHARES OR THE STATIONERY WAS UTILIZED PROBABLY FOR PRINTING IN CONNECTION WITHBONUS SHARES AND THE P[OSTAGE AND TELEGRAMS ARE , IN SOME WAY OR OTHER, RELATED TO THE DECLARATION OF BONUS SHARES, IT IS N OT NECESSARY FOR US TO TREAT THESE EXPENSES AS BEING OF A CAPITAL NATURE. THE TRIBUNAL WAS JUSTIFIED IN TAKING THE VIEW THAT THIS EXPENDITURE DOES NOT CREATE ANY ASSE T OF AN ENDURING NATURE. ITAS NO.5246, 5247, 5248, 5249, 5286/DEL/2012 13 24. HE ALSO RELIED UPON THE LETTER NO.F-NO.10/67/05 -IT(A)-1 ISSUED BY CBDT WHICH IS REPRODUCED HEREINBELOW. LETTER F. NO.10/67/65-IT(A-I) LISTING FEE PAID ANNUALLY TO STOCK EXCHANGE WHETH ER ADMISSIBLE AS BUSINESS EXPENDITURE ATTENTION IS INVITED TO THE BOARDS LETTER F. NO.10 /.44/64-IT(A-I), DATRED 14.1.1995 [ANNEX], ON THE ABOVE SUBJECT. THE MATTER HAS BEEN RECONSIDERED BY THE BOARD. AS THE ADVANTATGES ACCRUING TO A COMPANY AS A RESULT OF GE TTING ITS HARES LISTED ON A STOCK EXCHANGE CONTAIN SUBSTANTIAL ADVANTAGES PERTAINING TO ITS DAY TO DAY BUSINESS, IT HAS BEEN DECIDED THAT SUCH EXPENSES SHOULD BE CONSIDERED AS LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS AND THEREFORE, ADMISSI BLE AS BUSINESS EXPENDITURE UNDER SECTION 37(1). IN VIEW OF THE ABOVE, THE INSTRUCTIO NS ISSUED UNDER THE BOARDS EARLIER LETTER REFERRED TO ABOVE MAY BE TREATED AS WITHDRAW N. LETTER : F.NO. 10/67/65-IT(A-I), DATED 26.08.1965. 25. LEARNED DR, ON THE OTHER HAND, MAINLY RELIED UP ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF PUNJAB STATE I NDUSTRIAL DEVELOPMENT CORP. LTD. VS. CIT, REPORTED IN (1997) 93 TAXMAN 5 (SC) AND RELEVANT PARAGRAPH 7 OF THE SAID JUDGMENT IS AS UNDER: 7. WE DO NOT CONSIDER IT NECESSARY TO EXAMINE ALL THE DECISION IN EXTENSO BECAUSE WE ARE OF THE OPINION THAT THE FEE PAID TO THE REGISTRAR FOR EXPANSION OF THE CAPITAL BASE OF THE COMPANY WAS DIRECTLY RELATE D TO THE CAPITAL EXPENDITURE INCURRED BYTHE COMPANY AND ALTHOUGH INCIDENTALLY TH AT WOULD CERAINLY HELP IN THE BUSINESS OF THE COMPANY AND MAY ALSO HELP IN PROFIT -MAKING, IT STILL RETAINS THE CHARACTER OF A CAPITAL EXPENDITURE SINCE THE EXPEND ITURE WAS DIRECTLY RELATED TO THE EXPANSIION OF THE CAPITAL BASE OF THE COMPANY. WE ARE THEREFORE OF THE OPINION THAT THE VIEW TAKEN BY THE DIFFERENT HIGH COURTS IN FAVOUR OF THE REVENUE IN THIS BEHALF IS THE PREFERABLE VIEW AS COMPARED TO THE VI EW BASED ON THE DECISION OF THE MADRAS HIGH COURTIN KISENCHAND CHELLARAM (INDIA) (P .) LTD.S CASE (SUPRA). WE THEREFORE ANSWER THE QUESTION RAISED FOR OUR DETERM INATION IN THE AFFIRMATIVE I.E. IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. 8. THE TAX REFERENCE WILL STAND ANSWERED ACCORDINGL Y WITH NO ORDER AS TO COSTS.. 26. ON PERUSAL OF THE FACTS ON RECORD, WE ARE OF TH E VIEW THAT BONUS PAID IS EXCLUSIVELY HAS TO BE DEALT BY SECTION 36(1)(II) OF THE ACT AND WHICH DOES NOT DISTINGUISH BETWEEN CAPITAL AND REVENUE AND THE REFORE HAS TO BE ALLOWED. IN VIEW OF THE DECISIONS CITED BY LEARNED COUNSEL FOR THE ASSESSEE, IT IS EVIDENT EXTRA SERVICES RENDERED BY EMPLOYEE IS J USTIFIED TO BE AN EMPLOYEE EXPENDITURE ESPECIALLY HELD BY HONBLE SUPREME COUR T IN THE CASE OF ITAS NO.5246, 5247, 5248, 5249, 5286/DEL/2012 14 SHAHZADNAD AND SONS (SUPRA). THE POSITION OF HONBL E SUPREME COURT IN THE CASE OF PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPN. LTD. VS. CIT REPORTED IN (1997) 93 TAXMAN 5 (SC) IS DISTINGUISHABLE ON THE F ACTS THAT THE ISSUE BEFORE THE HONBLE SUPREME COURT WAS WITH REGARD TO THE FE E PAID TO THE REGISTRAR FOR EXPANSION OF CAPITAL WHICH IS NOT IN THE PRESEN T CASE. MOREOVER, WE HAVE THE BENEFIT OF THE LETTER DATED 26.08.1965 WHERE EX PENSES LISTING ON STOCK EXCHANGE IS MAINLY FOR THE PURPOSE OF BUSINESS WHOL LY AND EXCLUSIVELY ALLOWABLE U/S.37(1) OF THE ACT AS WELL. THEREFORE, FROM ALL ANGLES PUT BEFORE US BY THE PARTIES, WE ARE OF THE CONSIDERED VIEW TH AT SUCH AN EXPENDITURE INCURRED IS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND IS ALLOWED AS REVENUE EXPENDITURE. ACCORDINGLY ALL THE GROUNDS OF THE ASSESSEE ARE ALLOWED AND APPEAL OF THE ASSESSEE IN ITA NO.5286/D EL/12 IS ALLOWED. 27. NOW WE TAKE UP THE APPEAL OF THE ASSESSEE FOR T HE ASSESSMENT YEAR 2007-08, IN ITA NO.5286/DEL/2012 WHERE THE ISSUE WI TH REGARD TO THE AGENCY FEES IS IDENTICAL AS IN REVENUES APPEAL IN ITA NO.5246/DEL/2012, AND THEREFORE, FOLLOWING OUR OWN ORDER HEREINABOVE. THE REVENUES GROUND IS DISMISSED. 28. AS REGARDS THE GROUND NO.2 OF THE REVENUE, THE BRIEF FACTS OF THE CASE AS EMANATING FROM THE ORDER OF THE AO ARE REPRODUCE D HEREINBELOW. 12. ON PERUSAL OF THE BALANCE SHEET, IT IS SEEN TH AT ASSESSEE HAS SHOWN A SUM OF RS.2,00,57,868/- AS ADVANCE PAYMENT AND UNEXPIRE D DISCOUNS SHOWN UNDER THE HEAD CURRENT LIABILITY. ACCORDINGLY, ASSESSEE WAS A SKED TO EXPLAIN THE NATURE OF THIS UNEXPIRED DISCOUNST SHOWN UNDER THE HEAD LIABI LITY. IN RESPONSE TO THE QUERY, ASSESSEE HAS STATED THAT THIS PERTAINS TO THE TOLL RECEIPTS, WHICH THE CUSTOMER HAS NOT USED DURING THE YEAR UNDER CONSIDERATION. ASSES SEE WAS FURTHER ASKED TO EXPLAIN AS TO WHY THE RECIEPTS RECEIVED FROM THE CU STOMER HAVE BEEN KEPT ASIDE IN THE BALANCE SHEET. IN RESPONSE ASSESSEE STATED THAT CUSTOMER PURCHASES CARD OF TOLLS WHICH IS CONSUMED ON TO AND FRO BASIS, AND WH EN THE CUSTOMER UTILIZED FULL TO AND FRO THE RECEIPTS IS TAKEN INTO CONSIDERATION. T HE ASSESSEE HAS ALSO SUBMITTED THE COPY OF REFUND BEING MADE BY THE COMPANY TO THE CUSTOMER. THE SUBMISSION OF THE ASSESSEE IS NOT TENABLE AND CONVINCING BECAUSE THE ASSESSEE RECEIVED THE TOLLS THROUGH ELECTRONIC CARDS AS REVENUE RECEIPT AND THE REAFTER TREATMENT THEREOIF AS ITAS NO.5246, 5247, 5248, 5249, 5286/DEL/2012 15 LIABILITY IS CLEAR DEFERMENT OF TAX INCIDENCE ON TH E GROUND OF UNUTILIZATION OF TO AND FROM AND OTHER SUBMISSION OF REFUND TO BE MADE TO CUSTOMER IN CASE THE CUSTOMER INTENDS TO TAKE REFUND. THE OTHER SUBMISSI ON IS NOT ACCEPTABLE BECAUSE IF A CUSTOMER INTENDS TO TAKE REFUND, WHICH CAN BE ADJ USTED AGAINST THE CONCERNED YEARS RECEIPT AND AFTER ADJUSTING REFUND, NET REVE NUE TOLL RECEIPTS WILL BE TAXABLE. THUS THE ENTIRE SUBMISSION OF THE ASSESSEE IS NOT T ENABLE, BUT IS A CLEAR CUT AVOIDANCE OF TAX INCIDENCE. ACCORDINGLY, A SUM OF R S.2,00,57,868/- IS ADDED TO THE INCOME OF ASSESSEE, FOR WHICH PENLATY PROCEEDINGS U /S.271(1)(C) ARE BEING INITIATED SEPARATELY. 29. LEARNED CIT(A) AT PAGE 45 DELETED THE ADDITION AND WE FIND NO INFIRMITY IN HIS ORDER. WE FIND THAT THE ASSESSEE H AD DISCLOSED THE ADVANCE PAYMENTS RECEIVED ON ACCOUNT OF TOLL AND ADVERTISEM ENT REVENUE AS ADVANCE PAYMENT/UNEXPIRED DISCOUNTS UNDER THE HEAD CURRENT LIABILITIES IN ITS BOOKS OF ACCOUNTS. OUT OF TOTAL AMOUNT OFRS. 2,00,57,868/-, RS.63,03,382/- REPRESENTED ADVANCE RECEIVED ON ACCO UNTOF ADVERTISEMENT F EES WHEREAS THE BALANCE AMOUNTING TO RS 1 , 37 , 54 , 486 REPRESENTED ADVANCE ON ACCOUNT OF TOLL FEES . THE ASSESS I NG OFFICER TREATED THE ENTIRE AMOUNT AS INCOME OF THE APPEAL ASSESSEE , BEING A CORPORATE ENTITY , IS REQUIRED TO MAINTAIN ITS BOOKS OF ACCOUNTS ON ACCRUAL BASIS AND IN COMPLIANCE WITH THE ACCOUNTING STANDARDS ISSUED BY THE INSTITUTE OF CHA RTERED ACCOUNTANTS OF INDIA . IN THIS REGARD ACCOUNTING STANDARD - AS9 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA , IS REQUIRED TO BE MANDATORILY FOLLOWED BY ALL CORPORATE ENTIT I ES . READING OF THE AFORESAID AS-9 , MAKES IT CLEAR THAT THE REVENUE SHOULD BE RECOGNIZED ONLY WHEN THE SERV I CES ARE RENDERED AND IN CASE WHERE SERVICES ARE RENDERED PARTIALLY , REVENUE SHOULD BE RECOGNISED PROPORTIONATE TO THE DEGREE OF COMPLETION OF THE SE RVICES . IN THE INSTANT CASE , THE ASSESSEE RECOQNISED ADVERTISEMENT REVENUE PROPO RTIONATELY ON THE BASIS OF PER I OD FALLING UNDER THE PARTICULAR FINANCIAL YEAR. SO FAR AS TOLL FEE IS CONCERNED WHILE ISSU I NG NEW CARDS (SILVER AND GOLD CARDS) THE ASSESSEE COLLECTS ADMINISTRAT I ON FEES , SECURITY DEPOSIT AND TOLL USAGE FEES . WHILE ITAS NO.5246, 5247, 5248, 5249, 5286/DEL/2012 16 ADMINISTRATION FEES WAS RECOGNISED AS REVENUE IMMED IATELY , AMOUNTS RECEIVED ON ACCOUNT OF TOLL FEES FROM I SSUANCE I RECHARGE OF S I LVE R I GOLD CARD WAS RECOGNISED AS REVENUE ON THE BASIS OF ACTU AL NUMBER OF PASSAGES AVAILED BY THE CARD USERS DURING A PARTICULAR FINAN CIAL YEAR. WE HAVE ALSO NOTICED THAT THE ASSESSEE HAS BEEN FOLLOWING THE SA ME PRACTICE CONSISTENTLY SINCE THE COMMENCEMENT OF ITS OPERATIONS AND THE SA ME HAD NEVER BEEN QUESTIONED BY I NCOME TAX DEPARTMENT . EVEN IN THE SUBSEQUENT FINANCIAL YEARS , THE ASSESSEE HAS FOLLOWED THE SAME PRACTICE AND WAS ALLOWED BY THE DEPARTMENT . THE ASSESSING OFFICER OUGHT NO T TO HAVE DISTURBED THE METHOD OF ACCOUNT I NG ADOPTED BY THE ASSESSEE IN ONE ASSESSMENT YEAR W HEN THE SAME IS ACCEPTED IN THE EARLIER AS WELL AS THE SUBS EQUENT ASSESSMENT YEARS AS ANY CHANGE TO THE T R EATMENT WOULD HAVE A CORRESPONDING RIPPLE I MPACT ON THE OTHER ASSESSMENT YEARS . ACCORDINGLY, THE GROUNDS OF THE REVENUE ARE DISMISSED. 30. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.5247/DEL/2012 IS DISMISSED. 31. AS REGARDS APPEAL OF THE REVENUE IN ITA NO.5248 /DEL/2012 AND 5249/DEL/2012 FOR THE ASSESSMENT YEARS 2008-09 AND 2009-10 WHICH ARE DEALING WITH THE DEPRECIATION OF TOLL BRIDGE AND AG ENCY FEES THE ISSUES ARE IDENTICAL TO THE ISSUES RAISED BY THE REVENUE IN IT A NO.5246/DEL/2012 WHERE THE REVENUES GROUNDS BEING DISMISSED BY US H EREINABOVE. 32. FOLLOWING OUR ORDER HEREINABOVE, BOTH THE GROUN DS IN BOTH THE APPEALS ARE DISMISSED. 33. IN THE RESULT, THE APPEALS OF THE REVENUE IN BO TH THE YEARS ARE DISMISSED. ITAS NO.5246, 5247, 5248, 5249, 5286/DEL/2012 17 34. TO SUM UP, THE APPEAL OF THE REVENUE IN ITAS NO .5246 TO 5249/DEL/2012 ARE DISMISSED AND APPEAL OF THE ASSES SEE IN ITA NO.5286/DEL/2012 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY 10 TH APRIL, 2017 SD/- SD/- (I.C. SUDHIR) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 10/04/2017 PRABHAT KUMAR KESARWANI, SR.P.S. COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(APPEALS) 5.DR: ITAT ASSTT. REGISTRAR, ITAT, NEW DELHI