DCIT, CIRCLE - 2(2), KOLKATA vs. NABA DIGANTA WATER MANAGEMENT LIMITED, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH “VIRTUAL COURT A” KOLKATA Before Shri P.M.Jagtap, Vice-President and Shri S.S.Godara, Judicial Member ITA No.1794/Kol/2019 Assessment Year:2013-14 DCIT, Circle-2(2) M/s Naba Diganta Water Aayakar Bhawan, Room Management Ltd., GN-11- बनाम / No. 24, 7th Floor, P-7, 19, Salt Lake, Sector-V, Vs. Chowringhee Square, Kolkata-700 091 Kolkata-700 069 [PAN No.AACCN 6958 P] .. अपीलाथ� /Appellant ��यथ� /Respondent

Shri Dhrubajyoti Ray, JCIT-SR-DR अपीलाथ� क� ओर से/By Appellant Shri Kirit Kamadar, FCA ��यथ� क� ओर से/By Respondent 07-10-2020 सुनवाई क� तार�ख/Date of Hearing 21-10-2020 घोषणा क� तार�ख/Date of Pronouncement आदेश /O R D E R PER S.S.Godara, Judicial Member:- This Revenue’s appeal for assessment year 2013-14 arises against the Commissioner of Income Tax (Appeals)-1, Kolkata dated 02.05.2019, passed in case No. 10167/CIT(A)-1/Kol/Circle-2(2)/2016-17 u/s 143(3) of the Income Tax Act, 1961; in short ‘the Act’. Heard both the parties. Case file perused.

ITA No.1794/Kol/2019 Assessment Year:2013-14 DCIT, Cir-2(2), Kol. Vs. M/s Naba Diganta Water Management Ltd. Page 2 concessionaire agreement. And that the same also is contravention of the CBDT’s Circular dated 23.04.2014 bearing No.9/2014[F.No.225/182/2013/ITA.II] dated 23.04.2014. Our attention invited to the CIT(A)’s appeal detailed discussion to this effect reading as under:- “4. I am adjudicating Ground of Appeal No. 1 at the very outset when Mr. Kirit Kamdar, F.C.A., appeared. The issue pertains to depreciation on intangible asset. The Id. A.O. stated that the assessee did not own the assets and, therefore, was not eligible for claim of any depreciation. An addition of Rs.2,67,26,848/- was made by the Id. A.O. 5. The Id. A.R. of the assessee appeared before me. He has relied on the decision issued by my Ld. Predecessor vide order dated 03.08.2017 for the Assessment Year 2012-13. 6. I have gone through the binding order of my Ld. Predecessor. The same states as follows at Page No. 27 to 29 of the appellate order for the Assessment Year 2012-13 (Page No. 146 to 148 of the Paper Book filed by the appellant): "In view of the above discussion and based upon inference drawn from material on record, it is found that there is substance in the contentions of the appellant. Firstly, its observed that admittedly the appellant company has claimed depreciation on tangible assets under section 32(1)(ii) of the Act, and not in respect of intangible assets as held by the A.O. The appellant is found to be "owner" jointly and partly of the fixed and "tangible" assets, on account of the fact of investment in the development and brining into existence of the "fixed assets", the WDV (Written Down Value) of the assets was Rs.35,10,61,555/ - and on additions made during the year aggregating to Rs.28,98,312/- shown in the Block of Assets i.e. infrastructure facilities comprising of water and sewerage network in Naba Diganta Industrial Township Authority (NBIDTA) in Sector- V, Salt Lake City, Kolkata. These assets are found to be duly accounted for in the company's books of accounts and also depicted in the Block of Assets in the Tax Audit Report filed with the return of income for the relevant AY. 2012-13 under consideration. From perusal of material on record its observed that the appellant company was required to "a. transfer, assign and deliver to NDITA or its nominated agency, free and clear of any Encumbrances, the vacant and peaceful possession of the Project Assets, the Lease Land along with the buildings, facilities and structures constructed on, over, at or under it and its right, title and interest in and to the Project and the Project Assets; b. Transfer all its right, titles and interest in or over the Project Assets (including movable assets which NDIT A agrees to take over) to NDITA or its nominated agency and execute such deeds and documents as may be necessary for the purpose and complete all legal or other formalities required in this regard. " Thus, ownership of the assets vests with the Appellant for the period of 30 years." Thus, it is found that the appellant company was vested with the ownership of the tangible assets comprising of infrastructural facilities, and was assigned the right as per contractual agreement to transfer the said project

ITA No.1794/Kol/2019 Assessment Year:2013-14 DCIT, Cir-2(2), Kol. Vs. M/s Naba Diganta Water Management Ltd. Page 3 and the project assets in question to NDITA or its nominated agency, and thus exercised the right of ownership to the exclusion of others including the right to transfer the said project assets. It is also observed that the A.O. had erred in treating the assets as intangible assets in his finding, without any basis, regarding the appellant's claim for depreciation, which is contrary to the inference drawn from facts on record. The appellant's AR. has contended that "ownership" is defined as "The collection of right to use and enjoy property, including right to transmit it to others .... The right of one or more persons or use a thing to the exclusion of others." The AR. has relied upon the decision of the Hon'ble Supreme Court in case of ICDS Ltd vs. CIT (2013) 350 ITR 527 (SC) and in Mysore Minerals v CIT [1999] 239 ITR 755, wherein the term "Owner" in the context of depreciation belongs to a person, who has invested in the assets; is utilizing the asset; thereby gradually losing the value of investment on account of wear and tear of the asset. Further, reliance written submission also placed on decision of the Hyderabad Tribunal in case of DCIT vs. Swarna Tollway Pvt. Ltd. (30 ITR 625), wherein it was held that, “Though the NHAI remains legal owner of thee site with full powers to hold, dispose of and deal with the site consistent with the provisions of the agreement, the assessee had been granted no merely the right to possession but also the right to enjoyment for the site and NHAI was obliged to defend this right and the assessee has the power to exclude others.... The term "owned" as occurring in Section 32(1) of the Act must be assigned a wider meaning. "Therefore, as regards the issue of legal "ownership" of the impugned assets, it is held that in view of the above facts and ratio of the cited case laws, the appellant is to be treated as the owner of the tangible assets brought into existence by investment and developed by the appellate company. This position is fortified by the decision of the Hon'ble Supreme Court in the case if CIT vs. Poddar Cement Pvt. Ltd. (1997) 226 ITR 625 (SC), because the assessee is entitled to receive income from the "infrastructure facility" i.e. tangible assets in its own right to the exclusion of others. Hence, it is held that the AO was not justified in denial of depreciation on the fixed assets during the AY. 2012-13 under consideration. The AO is directed to allow the appellant's claim of depreciation' amounting to Rs.15,12,44,334/- . This ground is allowed. " 3. It is crystal clear from a perusal of the above extracted lower appellate discussion that the CIT(A) has followed his order pertaining to the preceding assessment year 2012-13 qua the very issue. Learned authorized representative quoted this tribunal’s co-ordinate bench’s order in Revenue’s appeal ITA No.2301/Kol/2017 decided on 09.08.2019 upholding the CIT(A)’s identical findings deleting the impugned depreciation disallowance. The said co-ordinate bench quoted hon'ble apex court discussion Mysore Mineral Ltd. vs. Commissioner of Income Tax (1999) 239 ITR 755 (SC) that the legislative intention behind enactment of sec.32 in the Act was best fulfilled by allowing depreciation to the person; who for the time being, was

ITA No.1794/Kol/2019 Assessment Year:2013-14 DCIT, Cir-2(2), Kol. Vs. M/s Naba Diganta Water Management Ltd. Page 4 having dominance or control and entitled to use the relevant assets in his own right and had been using the same for the purpose of carrying out the business or profession. The tribunal’s said order examined the corresponding details of the “project” in question as well to conclude that the assessee only exercised control and dominance over the project assets for the purpose running / managing the water management facilities. Case records at page 19 indicate that the relevant block(s) of assets have remained the same since the assessee has made addition of ₹71,281/- only in the relevant previous year. We thus adopt judicial consistency to uphold the CIT(A)’s action deleting the impugned depreciation disallowance. The Revenue fails in its sole substantive grievance.