The DCIT, Gandhinagar Circle, Gandhinagar V. Gujarat Road and Infrastructure Company Ltd., Ahmedabad

ITA 534/AHD/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0874 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 07-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation
• Section: 143(3); 115JB; 32

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SMT. MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NOS. 534 & 2052/AHD/2018 & 2459/AHD/2017 ( ASSESSMENT YEARS : 2014-15, 2015-16 & 2013-14) D.C.I.T. GANDHINAGAR CIRCLE- GANDHINAGAR / VS. GUJARAT ROAD AND INFRASTRUCTURE CO. LTD. 301, SHAPATH-1, OPP. RAJPATH CLUB, SARKHEJ- GANDHINAGAR HIGHWAY, BODAKDEV, AHMEDABAD ./ ./ PAN/GIR NO. : AABCG9747N ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI ALOK SINGH, SR.D.R. / RESPONDENT BY : SHRI PARAS SAVLA, A.R. DATE OF HEARING 18/12/2019 !'# / DATE OF PRONOUNCEMENT 20/12/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEALS HAVE BEEN FILED AT THE INSTAN CE OF THE REVENUE AGAINST THE RESPECTIVE ORDERS OF THE COMMIS SIONER OF INCOME TAX (APPEALS), GANDHINAGAR (CIT(A) IN SHORT), DAT ED 12.07.2018, 26.12.2017 & 21.08.2017 ARISING IN THE RESPECTIVE A SSESSMENT ORDERS DATED 06.12.2017, 29.11.2016 & 29.03.2016 PASSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING AYS 2015-2016, 2014-15 & 2013-14; RESPEC TIVELY. ITA NOS. 534 & 2052/AHD/18 & 2459/AHD/2017 [DCIT VS. GUJARAT ROAD AND INFRASTRUCTURE CO. LTD.] - 2 - 2. AS CLAIMED ON BEHALF OF THE REVENUE, THE FACTS A RE SIMILAR AND COMMON ISSUES ARE INVOLVED IN ALL ASSESSMENT YEARS AND THEREFORE ALL THREE APPEALS WERE HEARD TOGETHER AND DISPOSED OF B Y COMMON ORDER. 3. WE SHALL TAKE REVENUES APPEAL IN ITA NO. 534/AH D/2018 CONCERNING AY 2014-15 AS A LEAD CASE FOR ADJUDICATI ON. ITA NO. 534/AHD/2018 - AY 2014-15 4. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS UNDER: 1. WHETHER ON THE FACTS & CIRCUMSTANCES OF THE CAS E, THE LD CIT(A) HAS ERRED IN LAW AND / OR FACTS IN DELETING THE ADD ITION OF RS.15,80,68,744/- ON DEPRECIATION ON ROADS CLAIMED BY THE ASSESSEE. 2. WHETHER ON THE FACTS & CIRCUMSTANCES OF THE CASE , THE LD CIT(A) HAS ERRED IN LAW AND / OR FACTS IN DELETING THE ADD ITION OF RS.13,57,00,000/- U/S 115JB OF THE ACT. 5. BRIEFLY STATED, THE ASSESSEE IS A LIMITED COM PANY ENGAGED IN THE BUSINESS OF SETTING UP OF INFRASTRUCTURE FACILITIES BY CONSTRUCTING ROADS. BEING A SPECIAL PURPOSE VEHICLE, IT HAS BEEN FORMED BY THE GOVERNMENT OF GUJARAT AND INFRASTRUCTURE LEASING & FINANCIAL S ERVICES LTD. FOR CONSTRUCTION, OPERATION AND MAINTENANCE OF THE TOLL ROAD PROJECTS I.E. VADODARA-HALOL ROAD AND AHMEDABAD-MEHSANA ROAD. TH E RETURN OF INCOME FOR AY 2014-15 WAS FILED WHEREIN THE ASSESSE E OFFERED INCOME FROM THE AFORESAID INFRASTRUCTURE FACILITY I.E. TOL L COLLECTED FROM THE USERS OF THE ROAD AS BUSINESS INCOME. AS STATED, THE TOL L ROAD IS USED EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND HAS BEE N CAPITALIZED IN THE BOOKS OF ASSESSEE. AS FURTHER STATED, ALL CONDITIO NS OF SECTION 32 OF THE ACT TO CLAIM DEPRECIATION ON TOLL ROAD ARE SATISFIE D AND THE ASSESSEE CLAIMED DEPRECIATION ON THE TOLL ROAD TREATING THE SAME AS BUILDING. THE AO DISPUTED THE CLAIM OF DEPRECIATION ON TOLL ROAD. ANOTHER DISPUTE EMERGED IN THE ASSESSMENT TOWARDS CALCULATION OF BO OK PROFIT UNDER S.115JB OF THE ACT. IT WAS NOTICED BY THE AO THAT DURING AY 2014-15, THE ASSESSEE HAD MADE PROVISION FOR TAX OF RS.13,78 ,00,000/- IN THE ITA NOS. 534 & 2052/AHD/18 & 2459/AHD/2017 [DCIT VS. GUJARAT ROAD AND INFRASTRUCTURE CO. LTD.] - 3 - FINANCIAL STATEMENT TOWARDS TAX LIABILITY FOR AY 20 14-15. THE ASSESSEE ALSO PASSED ENTRIES IN THE BOOKS TOWARDS MAT CREDIT RS.13,57,00,000/- BY CREDITING PROFIT AND LOSS APPROPRIATION ACCOUNT WITH THE AFORESAID CREDIT. THE AO WHILE COMPUTING THE BOOKS PROFIT HA S TAKEN INTO ACCOUNT THE AFORESAID SUM OF RS.13,57,00,000/- TOWARDS MAT CREDIT WITHOUT SETTING IT OFF WITH THE PROVISION FOR TAX LIABILITY . IT IS THE CASE OF THE ASSESSEE THAT PROVISION FOR TAXES AND MAT CREDIT BO TH REPRESENT THE INCOME TAX. THE PROVISION FOR TAX IS THE INCOME TA X LIABILITY UNDER S.115JB OF THE ACT AND MAT CREDIT IS ENTITLED FROM THE SAME AMOUNT UNDER S.115JAA. IT IS THUS THE CASE OF THE ASSESSE E THAT THE BOOK PROFIT COMPUTED BY THE AO COULD NOT BE INCREASED ON ACCOUN T OF CREDIT ENTRY TOWARDS MAT OF RS.13,57,00,000/-. 6. AGAINST THE DISPUTE RAISED BY THE AO, THE ASSESS EE PREFERRED THE APPEAL BEFORE THE CIT(A). THE CIT(A) CONSEQUENTLY ANALYZED BOTH THE ISSUES AND GRANTED RELIEF TO THE ASSESSEE ON BOTH C OUNTS AS UNDER: 4.2. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, ASSESSMENT ORDER AND SUBMISSION MADE BY THE APPELLANT. I FIND THAT THE IDENTICAL ISSUE WAS BEFORE MY PREDECESSOR FOR AY 2013-14 AND VIDE HIS ORDER NO,CIT(A)/423/2016-17 DATED 21/08/2017, HE HAS HELD AS UNDER: '5. I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESS MENT ORDER AND SUBMISSION MADE BY THE APPELLANT. AO ON VERIFICATIO N OF COMPUTATION OF INCOME, NOTICED THAT APPELLANT HAD C LAIMED TOTAL DEPRECIATION OF RS.16,97,27,280/-. ON FURTHER VERIF ICATION HE NOTICED THAT OUT OF THE TOTAL CLAIM OF DEPRECATION, APPELLANT HAD CLAIMED DEPRECIATION ON VADODARA HALOL ROAD AND AHM EDABAD MEHSANA ROAD AMOUNTING TO RS.5,03,23,144/- AND RS.11,51,68,730/- RESPECTIVELY-10% AS APPLICABLE TO BUILDING NON RESIDENTIAL TOTAL AMOUNTING TO RS. 16,54,91,874/-. A O HAS CONTENDED THAT APPELLANT IS ENGAGED IN DEVELOPMENT, OPERATION AND MAINTENANCE OF ROADS AND THE QUESTION OF ALLOWA BILITY OF DEPRECIATION ON ROADS HAS BEEN ANSWERED BY HON'BLE SUPREME COURT IN THE CASE OF LNDORE MUNICIPAL CORPORATION [ (2001) 247 ITR 403)], THAT A ROAD IS NOT TO BE TREATED AS BUIL DING. RELYING ON THIS, AO MADE ADDITION OF RS.126,54,91,874/- TO THE INCOME OF THE APPELLANT. FROM THE SUBMISSION FILED BY THE APP ELLANT, IT IS NOTICED THAT SIMILAR ISSUE WAS DISCUSSED ON MERITS IN APPEAL AGAINST 263 ORDER IN APPELLANT'S CASE FOR A Y 2004- 05 BY THE HON'BLE ITAT. THE TRIBUNAL HAS HELD THAT (A) AS ROA D IS INTEGRAL PART OF BUSINESS ACTIVITY OF THE ASSESSEE (B) IT OW NS THE ASSET ON BOOT BASIS (C) USED THE ASSET FOR ITS BUSINESS AND (D) AS THE ROADS ARE CONNECTED TO TOLL PLAZAS AND ADMINISTRATI VE BUILDINGS ITA NOS. 534 & 2052/AHD/18 & 2459/AHD/2017 [DCIT VS. GUJARAT ROAD AND INFRASTRUCTURE CO. LTD.] - 4 - AND AS PER NOTE 1 BELOW THE TABLE OF RATES AT WHICH DEPRECIATION IS ADMISSIBLE MENTIONS THAT BUILDING INCLUDE ROAD', THEREFORE THE TOLL ROAD IS BUILDING ON WHICH DEPRECIATION WAS AVA ILABLE. FOLLOWING THE ITA T'S ORDER, THE DEPRECIATION ON TO LL ROAD IS ALLOWED AS BUILDING FOR THE YEAR IN QUESTION. TH E GROUNDS ARE DECIDED IN FAVOUR OF THE APPELLANT FOLLOWING THE DE CISION RENDERED BY THE HON'BLE ITAT, AS ABOVE, AS WELL AS DECIDED BY MY PREDECESSORS IN AY 2008-09 & 2009- W AND BY THE UNDERSIGNED IN AYS 2010-11, 2011-12 AND 2012-13. TH E RELEVANT GROUNDS OF APPEAL ARE ALLOWED IN FAVOUR OF THE APPE LLANT.' RESPECTFULLY FOLLOWING THE ORDER OF THE HON'BLE ITA T IN THE APPELLANT'S OWN CASE FOR AY 2004-05 AND THE ORDER O F MY ID, PREDECESSOR FOR THE IMMEDIATELY PRECEDING YEAR, AND IN VIEW OF THE FACT THAT THE IDENTICAL ISSUE IS INVOLVED DURING THE YEA R UNDER CONSIDERATION AS WELL, THE ADDITION OF RS.15,80,68,744/- IS DELETED. GROUNDS OF APPEAL NOS.1, 2, 3 & 4 ARE ALLOWED. 5.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF TH E CASE, ASSESSMENT ORDER AND SUBMISSION MADE BY THE APPELLANT. I FIND THAT THE IDENTICAL ISSUE WAS BEFORE MY PREDECESSOR FOR AY 2013-14 AND VIDE HIS ORDER NO.CIT(A)/423/2016-17 DATED 21/08/2017 , HE HAS HELD AS UNDER: 5.2 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORD ER AND, SUBMISSION MADE BY THE APPELLANT. WHILE COMPUTING T HE BOOK PROFIT U/S 1153B, AO HAS MADE ADDITION OF MAT CREDI T ENTITLEMENT FOR RS.1,2,04,00,000/- SHOWN AS PART OF TAX EXPENSES. AS PER PROVISIONS OF SECTION 115JB READ WITH EXPLAN ATION J, SUCH ADJUSTMENT IS PROVIDED BY AO. IT IS ALSO OBSERVED T HAT APPELLANT HAS MADE PROVISION FOR TAX FOR RAS.1,20,00,000/- AN D INCREASED PROFIT BY RS.1,20,00,000/- BEING MAT CREDIT ENTITLE MENT IT IS OBSERVED THAT AS PER ITEM NO, (I) OF EXPLANATION 1, AS MENTIONED IN SECTION 115JB, INCOME TAX AMOUNT WILL BE ADDED A ND INCOME TAX MEANS CURRENT TAX LESS MA T CREDIT ENTITLEMENT AS BOTH ARE WORKED OUT BASED UPON CURRENT YEAR TAX LIABILITY AN D IN THE PRESENT ASSESSMENT YEAR, THE NET EFFECT IS NIL, APP ELLANT HAS CORRECTLY NOT MADE ANY ADJUSTMENT IN COMPUTATION OF 1153B. EVEN ITR-6 RELATING TO FILING OF RETURN OF INCOME O R 29B CERTIFYING MAT COMPUTATION DOES NOT REQUIRE ANY SUC H ADJUSTMENT. THE ADJUSTMENT SO MADE IS BEYOND THE SC OPE OF PROVISIONS OF SECTION 115JB, THUS, ADDITION MADE BY AO IS DIRECTED TO BE DELETED...' RESPECTFULLY FOLLOWING THE ORDER OF MY ID. PREDECES SOR FOR THE IMMEDIATELY PRECEDING YEAR AND IN VIEW OF THE FACT THAT THE ISSUE IS IDENTICAL DURING THE YEAR UNDER CONSIDERATION, THE ADDITION OF RS.13,57,00,000/- IS DELETED. GROUNDS OF APPEAL NOS.5, 6 & 7 ARE ALLOWED. ITA NOS. 534 & 2052/AHD/18 & 2459/AHD/2017 [DCIT VS. GUJARAT ROAD AND INFRASTRUCTURE CO. LTD.] - 5 - 7. WE FIND THAT THE CIT(A) HAS APPRECIATED BOTH THE CONTROVERSIES IN RIGHT PERSPECTIVE. THE CIT(A) HAS RELIED UPON THE DECISION OF THE CO- ORDINATE BENCH OF ITAT WHILE GRANTING DEPRECIATION ALLOWANCE ON TOLL ROAD. IN CONSONANCE WITH THE ORDER OF CO-ORDINATE B ENCH OF ITAT FOR AY 2003-04 TO AY 2012-13 IN FAVOUR OF ASSESSEE FOR ELI GIBILITY OF DEPRECIATION ALLOWANCE, THE VIEW EXPRESSED BY THE C IT(A) CANNOT BE FAULTED. SIMILARLY, THE CIT(A) HAS CORRECTLY APPLIE D THE LAWS RELATING TO COMPUTATION OF BOOK PROFIT. IN OUR CONSIDERED VIEW , MERE CREDIT IN THE BOOKS TOWARDS MAT ENTITLEMENT COULD NOT BE REGARDED AS ANY INCOME PER SE FOR THE PURPOSE OF COMPUTATION OF BOOK PROFIT. TH E AO, ACCORDING TO US, HAS ACTED MECHANICALLY WITHOUT TAKING NOTE OF S UCH GROUND REALITIES. LIKEWISE, WE CONCUR WITH THE VIEW OF CIT(A) FOR SET OFF MAT CREDIT AGAINST MAT PROVISIONS. WE FIND NO INFIRMITY IN TH E ORDER OF THE CIT(A) ON BOTH COUNTS. THUS, WE DECLINE TO INTERFE RE WITH THE ORDER OF THE CIT(A). 8. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR A Y 2014-15 IS DISMISSED. ITA NO. 2459/AHD/2017 - AY 2013-14 9. THE APPEAL OF THE REVENUE IN ITA NO. 2459/AHD/20 17 CONCERNING AY 2013-14 ALSO INVOLVES SAME ISSUES AS RAISED IN A PPEAL OF THE REVENUE FOR AY 2014-15. IN PARITY WITH THE OBSERVATIONS MA DE CONCERNING AY 2014-15, WE DECLINE TO INTERFERE WITH THE ORDER OF THE CIT(A). 10. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR AY 2013-14 IS ALSO DISMISSED. ITA NO. 2052/AHD/2018 - AY 2015-16 11. WE NOW TURN TO APPEAL OF THE REVENUE IN ITA NO. 2052/AHD/2018 CONCERNING AY 2015-16. ITA NOS. 534 & 2052/AHD/18 & 2459/AHD/2017 [DCIT VS. GUJARAT ROAD AND INFRASTRUCTURE CO. LTD.] - 6 - 12. THE SOLITARY ISSUE INVOLVED IN THIS CASE IS ELI GIBILITY OF DEPRECIATION ALLOWANCE ON TOLL ROAD WHICH IS IDENTI CAL TO THE FIRST ISSUE RAISED IN OTHER CAPTIONED APPEALS. IN PARITY WITH THE VIEW TAKEN TOWARDS ALLOWABILITY OF DEPRECIATION ON TOLL ROADS IN OTHER CAPTIONED APPEALS AS DISCUSSED ABOVE, WE SEE NO MERIT IN THE APPEAL OF T HE REVENUE AGAINST THE ORDER OF THE CIT(A). 13. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR AY 2015-16 IS DISMISSED. 14. IN THE COMBINED RESULT, ALL THREE APPEALS FILED BY THE REVENUE ARE DISMISSED. SD/- SD/- (MADHUMITA ROY) (PRADIP KUMAR KE DIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 20/12/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 20/12/2019