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Income Tax Appellate Tribunal, “J” BENCH, MUMBAI
This appeal is filed by Thiruvanthapuram Road development Co Ltd (assessee/appellant) against Assessment order passed by the Deputy Commissioner of income tax – 14 (3) (1), Mumbai (the learned assessing officer/AO) u/s 143 (3) read with Section 144C (13) of The Income Tax Act 1961 (The Act) on 14 October 2019 as per directions of The Dispute Resolution Panel – 2, Mumbai (The Learned DRP) dated 26/9/19 determining the total income of the assessee at ₹ 105,557,280/– against the returned loss of ₹ 85,666,301/–.
i. Disallowance of Depreciation on Project management and supervision fees of ₹ 28,11,247/- and ii. Disallowance of depreciation claimed by the assessee on toll roads. iii. Treating the income earned of Rs. 21,16,990 on fixed deposits as taxable income Under the head income from other sources instead of income from business iv. Addition of interest income of ₹ 43,946 as income from other sources by computing the total income of the assessee wherein such interest was neither credited to the bank account nor accounted in the books of accounts of the assessee
Assessee is engaged in business of development, widening, strengthening, operating, and construction and maintaining Thiruvanthapuram city Roads. It is improvement project under the annuity concession agreement.
It filed its return of income on 30/11/2015 declaring loss of ₹ 85,666,301/–. The return of income of the assessee was picked up for scrutiny. The assessee has entered into a specified domestic transaction [SDT] of project management fees of Rs 14966352/- and Project supervision fees of ₹ 37,75,196/- . Therefore, the SDT
The learned transfer-pricing officer rejected the contention of the assessee holding that assessee has neither benchmarked the transaction nor filed any details and supporting evidences to prove the correctness of arm’s- length price of the above transaction. Therefore, in absence of any documents to substantiate the assessee’s claim he considered that as assessee has capitalized total value of the assets in CWIP, which included this expenditure and claimed depreciation on it at the rate of 15% in the profit and loss account, it is disallowable. He
Consequently, draft assessment order was passed on 21 December 2018 wherein the above adjustment was included. The learned assessing officer further found that the assessee has claimed depreciation of ₹ 211,502,144 on toll road. The assessee was asked why depreciation should be allowed on the same. The assessee submitted that it is ‘plant and machinery’ and therefore depreciation is allowable on the same. The learned assessing officer rejected the contentions of the assessee and disallowed depreciation on Toll Road. Main reasons of disallowances were that [1] ownership of the road has always been vested with the government and further
[2] it was never transferred to the assessee company,
[3] toll road assets do not form part of the specified assets covered under rule 5 and the corresponding appendix for granting of the depreciation
[4] further followed the decision of the honourable Bombay High Court in case of West Gujarat Expressway Ltd wherein the depreciation on toll road
Assessee preferred objections before the learned dispute resolution panel. The directions were issued on 26/9/2019. On the issue of applicability of transfer pricing provisions, it rejected the contention of the assessee that the transfer pricing provisions now do not apply to the specified domestic transaction. With respect to the adjustment of ₹ 2,811,247 on disallowance of depreciation as capital work in progress treating ALP of Project Management and supervision fees as Rs Nil, as it was not benchmarked by the assessee in proper manner, the learned dispute resolution panel upheld the contentions of the learned transfer-pricing officer and confirmed the above adjustment. On disallowance of depreciation on toll road,
Based on above directions, learned assessing officer passed a final assessment order u/s 143 (3) read with Section 144C (13) of the act on 14 October 2019 in accordance with the direction issued by the learned dispute resolution panel. Accordingly the transfer pricing adjustment of ₹ 2,811,247/–, disallowance of depreciation on toll road disallowance of ₹ 211,502,144/–, addition on account of interest from Punjab National Bank not shown by the assessee of ₹ 43,946/– were made. Further the bank interest of ₹ 2,116,919/– was also taxed by the assessing officer as income from other sources against the contention of the assessee that it is a business income.
Aggrieved by assessment order, assessee is in appeal before us. The learned authorised representative submitted a chart of issues as well as a paper book containing 112 pages wherein the judicial precedents as
With respect to the first issue of transfer pricing adjustment of ₹ 2,811,247/– on account of specified domestic transaction, he submitted that the issue is squarely covered in favour of the assessee by the decision of the honourable Karnataka High Court in case of Principal Commissioner Of Income Tax Versus Export Overseas Ltd, wherein it has been held that due to omission of the clause (i) of Section 92 BA of The Act related to the specified domestic transaction, it never existed in the statute as there is no saving clause, therefore, transfer pricing adjustment on account of specified domestic transaction cannot be made. He even otherwise stated that it is not the ‘expenditure’, which is claimed by the assessee and therefore even otherwise, no adjustment could have been made. Therefore, this issue is covered in favour of assessee.
On the issue of disallowance of depreciation on toll roads, he submitted that the identical issue arose in the case of the assessee in earlier years wherein the claim of the depreciation was allowed to the assessee. He referred to the decisions of the coordinate bench in assessee’s own case for assessment year 2008 – 09, 2010 – 11, and 2011 – 12. He submitted that on identical basis the disallowance was made in earlier years of depreciation but is allowed by the coordinate benches. Therefore, this issue is covered in favour of assessee.
With respect to ground number 4 on account of addition of interest income of ₹ 43,946 from Punjab National Bank, it was stated that assessee not want to press it.
On the issue of short grant of tax deduction at source credit amounting to ₹ 68,566, it was stated that the grievance of the assessee would be addressed if a suitable directions were given to the learned assessing officer.
The learned departmental representative vehemently supported the orders of the lower authorities on all these issues.
We have carefully considered the rival contentions and perused the orders of the lower authorities. We have also carefully considered judicial precedents cited before us by the learned authorised representative in assessee’s own case for earlier years as well as of Honourable Karnataka High court.
First ground of appeal is general in nature, no arguments were advanced, and therefore, it is dismissed.
19. Ground number 3 of the appeal is with respect to disallowance of depreciation on toll road. The assessee has claimed the depreciation on the road at ₹ 211,502,144. This issue has been dealt with in the case of the assessee in ITA NO. 636/Mum/2015, ITA NO. 4346/Mum/2015, C.O. No. 25/Mum/2017 (Arising out of ITA NO. 622/Mum/2015) for assessment year 2010 – 11 and 2011 – 12 by order dated 23rd may 2018. As per
20. Ground number 4 is with respect correct head of income of interest on fixed deposits placed under the debt service obligation created by the lenders amounting to ₹ 2,116,919/–. Assessee offered it as income from business; the learned assessing officer and learned DRP charged it under the head income from other sources. The learned authorised representative has categorically submitted that this issue is also covered in favour of the assessee by the decision of the coordinate bench in assessee’s own case for assessment year 2010 – 11 and 2011 – 12. As per paragraph number 4 at page number 30
21. Ground number 5 is with respect to taxability of interest income of ₹ 43,946 received from Punjab National Bank which has not been accounted by the assessee in its books of account and consequently not offered for taxation but appearing in form number 26AS so added by the learned assessing officer and confirmed by the learned dispute resolution panel is not pressed, hence, dismissed.
22. Ground number 6 is with respect to short grant of tax credit of ₹ 68,566/–. We direct the assessee to submit the proof before the learned assessing officer about such credit available to the assessee and whether corresponding income has been recorded in the books of account of the assessee for the respective year or not, thereafter, the learned AO may examine the same and decide the issue in accordance with the law. Accordingly, ground number 6 is allowed.
Order pronounced in the open court on 21.09.2022.