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Facts
Noida Toll Bridge Company Ltd., engaged in construction and maintenance of DND Flyway, filed returns for AYs 2016-17 to 2018-19. The Assessing Officer made additions of Rs. 602.21 crores for deemed designated returns and Rs. 113.81 crores for revenue subsidy. The CIT(A) subsequently deleted these additions, leading the Revenue to appeal.
Held
The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)'s decision, confirming the deletion of additions related to designated returns and revenue subsidy. The ITAT noted that coordinate benches had already decided identical issues in favor of the assessee in earlier assessment years, citing previous orders which relied on Supreme Court and Allahabad High Court rulings that no right accrued to the assessee for such returns.
Key Issues
Whether "designated returns" on total project cost and "lease hold / development rights" treated as revenue subsidy constitute taxable income for the assessee.
Sections Cited
139(1), 115JB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘G’ NEW DELHI
Before: SHRI MAHAVIR SINGH & SHRI S. RIFAUR RAHMAN
ORDER PER MAHAVIR SINGH, VP: These 03 appeals by the Revenue are arising out of the respective orders of the Ld. NFAC, Delhi pertaining to assessment years 2016-17 to 2018-19. Since common issues have been involved in all these appeals, except the difference in figures of additions, hence, all the appeals were heard together and disposed of by this common order for the sake of convenience, by dealing with (AY 2016-17), being lead case, wherein, following grounds have been raised by the Revenue:-
Whether on the facts and circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 602,21,48,736/- made by the AO on account of recoverable designated returns by ignoring the fact that the Concession Agreement clearly entitles the assessee to recover a designated return of 20% per annum on the total project cost, which constitutes accrued income and the same is taxable under the mercantile system of accounting followed by the assessee? 2. Whether on the facts and circumstances of the case the Ld. CIT(A) has erred in deleting the additions of Rs. 113.81 crores on account of lease hold / developments rights being treated as revenue subsidy by the AO by ignoring the facts that the main purpose of such grant was to augment the assessee’s revenue and the economic benefits accruing there from should be taxable in the hands of the assessee? 2. Brief facts of the case are that assessee is a public company incorporated in India and is a resident for the purpose of Income Tax Act, 1961. The assessee is engaged in the business of construction, operation and maintenance of the DND Flyway which is situated across river Yamuna and connects Delhi and Noida. The assessee filed its return of income under section 139(1) of the Act for the relevant assessment year on 15.10.2016, declaring total income of Rs. 3,69,27,430/- under the normal provisions of the Act. However, the assessee paid taxes according to the MAT provisions specified under section 115JB of the Act. The case of the assessee was selected for scrutiny through CASS. During the course of assessment proceedings, the AO has observed that the designated returns which accrue or deem to accrue to the assessee during this AY 2016-17 are to be brought to be taxed for this under consideration which are worked at Rs. 602.21 crores which shall be considered as accrued returns or deemed accrued returns and which falls within the scope of total income and accordingly the same is brought to tax and accordingly added of Rs.
602.21 crores to the total income of the Assessee. Against the above action, assessee preferred the appeal before the Ld. CIT(A), who vide his impugned order dated 4.7.2025 allowed the appeal of the assessee. Aggrieved, Revenue is in appeal before us.
Ld. DR relied upon the order of the AO, but did not controvert the factual position that Ld. CIT(A) has allowed the ground by respectfully following the decision of the Tribunal in assessee’s own case.
None appeared on behalf of the assessee, despite issue of notice for hearing, hence, we proceed exparte qua the assessee, after hearing the Ld. DR and perusing the records.
We have heard the Ld. DR and perused the records. As regards ground no. 1 is concerned, it is noted that the Coordinate Bench has decided the identical issue in favour of the assessee in earlier assessment years viz. AY 2006-07 to 2011-12 in Appeal Nos. 4410 to 4417/Del/2018 dated 8.8.2023 and also in Appeal No. 4418 to 4420/Del/2018 dated 21.8.2024 by holding as under:-
“46. In light of the ratio laid down by the Hon’ble Supreme Court (supra) we have no hesitation to hold that no right was accrued to the assessee to receive alleged designated return and, therefore, the entire addition is on notional basis in contrast with the concept of real income.
It is pertinent to mention here that the Hon’ble High Court of Allahabad vide its order in PIL No. 60214 of 2012 dated 26.10.2016 held that Article 13 and Article 14 of the Agreement are not valid and to be severed from the agreement. The Hon’ble Court had struck down the levy of fee for the reason that the assessee had already recovered the entire cost of the project on actual basis from collection of tolls, advertisement and rental income and, therefore, the assessee cannot collect the toll.
In this light, it can be safely concluded that the assessee did not even earn 20% designated return on the cost of the project. Thus, addition on account of designated return amounting to Rs. 179.87 crores does not have any legs to stand and deserves to be deleted. We order accordingly.”
Upon perusing the aforesaid findings of the Tribunal, we are of the considered view that Ld. CIT(A) by respectfully following the aforesaid precedent of the Tribunal in assessee’s own case, has rightly deleted the addition on the issue in dispute, hence, we affirm the findings of the Ld. CIT(A) on this issue and reject the common ground no. 1 raised by the Revenue in & 6176/Del/2025 relevant to assessment years 2016-17 & 2017-18 respectively.
As regards ground No. 2 is concerned, it is noted during the course of assessment proceedings, the AO has observed that the issue of revenue subsidy has been considered at length in earlier assessment years and after detailed analysis it was found that the assessee company has received a total benefit of Rs. 341.45 crores for a 30 year benefit. Since, for the current year, the toll operations/ concessionaire was in operation. Hence, it is prevalent that the assessee has received benefit in this as well.
Therefore, the addition of Rs. 113.81 crores is also being made in this year also.
Against the above, assessee preferred the appeal before the Ld. CIT(A) who allowed the appeal of the assessee on this issue. Aggrieved, revenue is in appeal before us.
We have heard the Ld. DR and perused the records. As regards ground no. 2 is concerned, it is noted that the Coordinate Bench has decided the identical issue in favour of the assessee in earlier assessment years viz. AY 2006-07 to 2011-12 in Appeal Nos. 4410 to 4417/Del/2018 dated 8.8.2023 and also in Appeal No. 4418 to 4420/Del/2018 dated 21.8.2024, which has been followed by the Ld. CIT(A) by holding that the addition against the revenue subsidy is decided in favour of the assessee and accordingly, he allowed the issue in dispute of the assessee.
Upon consideration, we are of the considered view that Ld. CIT(A) by respectfully following the aforesaid precedent of the Tribunal in assessee’s own case, has rightly deleted the addition on the issue in dispute, hence, we affirm the findings of the Ld. CIT(A) on this issue and reject the common ground no. 2 raised by the Revenue in & 6176/Del/2025 relevant to assessment years 2016-17 & 2017-18 and ground no. 1 in (AY 2018-19) respectively.
In the result, all the 03 appeals filed by the Revenue stand dismissed.
Order pronounced in the Open Court on 13.03.2026