NOIDA TOLL BRIDGE CO. LTD.,NOIDA vs. ACIT, CIRCLE-18(2), NOIDA

That the Hon’ble CIT(A) has erred in upholding the action of the Ld. AO in bringing to tax the notional income on account of designated returns amounting to Rs. 435,11,79,406. (G. No. 3, 4 and 5 of the AM) 2.1. That without prejudice to the above, the Hon’ble CIT(A)/Ld. AO have erred in not allowing the benefit of deduction u/s 80-IA of the Act on the designated returns charged to tax under the head ‘Income from Business or Profession’. (G. No. 6 of the AM) 3. That the Hon’ble CIT(A) has erred in holding that Appellant has earned income by way of revenue subsidy and making addition to the total income. (Ground Nos. 7, 8 & 9 of the AM) 3.1 .That without prejudice to the above, the Hon’ble CIT(A) has erred in not allowing the benefit of deduction u/s 80-IA of the Act on the revenue subsidy charged to tax under the head ‘income from business or profession’. (G. No. 10 of the AM) 4. That Hon’ble CIT(A) erred in treating the rental income as income from business and profession as against income from income from house property returned by the appellant. (Ground No. 12 of the AM) 5. That the Hon’ble CIT(A) has erred in upholding the disallowance on account of unpaid interest of Rs. 1,30,14,412 made by the Ld. AO u/s 43B without appreciating that the provisions of section 43B were not applicable to the payment of interest. (Ground No. 13 of the AM) 6. That the Hon’ble CIT(A) has erred upholding the finding of the Ld. AO that Appellant is not entitled to claim benefit of unahsorbed depreciation pertaining to earlier years. (Ground No. 14 of the AM) 7. That the Hon’ble CIT(A) has erred in holding that the Appellant has received a capital subsidy of Rs. 10,02,09,78,602 being the value of land utilized and directing the same to be set-off against the value of block of assets to re-compute the amount of depreciation claim u/s 32 of the Act. (Ground Nos. 11,15 and 16 of the AM) 8. That the levy of interest u/s 234B of the Act is erroneous and deserves to be deleted. (Ground Nos. 17 and 18 of the AM) 9. That the levy of interest u/s 234C of the Act is erroneous and deserves to be deleted. (Ground Nos. 19 and 20 of the AM)

The above grounds of appeal are independent and without prejudice to one another. (Ground No. 21 of the AM)” 3. In , the following concise grounds have been raised by the assessee:

That the Ld. AO has erred in holding that the Appellant has earned income by way of revenue subsidy and making addition to the total income. (G. Nos. 16, 17 and 19 of the AM) 7.1. That without prejudice to the above, the Hon’ble AO has erred in not allowing the benefit of deduction u/s 80-IA of the Act on the revenue subsidy charged to tax under the head ‘income from business or profession’. (G. No. 18 of the AM) 8. That the Ld. AO has erred in not allowing the correct set off of unabsorbed depreciation from earlier years. (G. No. 20 of the AM) 9. That the levy of interest u/s 234B of the Act is erroneous and deserves to be deleted. (Ground No. 21 of the AM) 10. That the levy of interest u/s 234C of the Act is erroneous and deserves to be deleted. (Ground No. 22 of the AM) 11. That the Ld. AO has erred in initiating the penalty proceedings u/s 271(1)(c) of the Act. (Ground No. 23 of the AM)”

That the Hon’ble CIT(A) has erred in upholding the action of the Ld. AO in bringing to tax the notional income on account of designated returns amounting to Rs.502,78,96,600 where in fact, no income as arisen or accrued to the Appellant. (G. No. 3, 4 and 5 of the AM) 2.1. That without prejudice to the above, the Hon’ble CIT(A)/Ld. AO have erred in not allowing the benefit of deduction u/s 80-IA of the Act on the designated returns charged to tax under the head ‘Income from Business or Profession’. (G. No. 6 of the AM) 3. That the Hon’ble CIT(A) has erred in holding that Appellant has earned income by way of revenue subsidy and making addition to total income. (Ground Nos. 7, 8 & 9 of the AM)

At the outset, both the parties fairy submitted that the issue stands covered by the order of the Co-ordinate Bench of ITAT in assessee’s own case in to 4419 & 4420/Del/2018 SA No. 570, 571 & 572/Del/2018 Noida Toll Bridge Company Ltd. 4417/Del/2018 from A.Y. 2006-07 to A.Y. 2011-12 vide order dated 08.08.2023. The relevant part of adjudication is as under: The issue:

The bone of contention is the following certificate by a Chartered Accountant:

As required by you vide letter dated 28 August 2013 we have verified the Statement of Computation of 'Return in Arrears' as on 31 March 2013 (Statement") prepared by the management based on the revised project cost. We understand that this certificate will over-ride the certificate as on 31 March 2013 issued by us dated 27 June 2013 as that was on the basis of provisional cost (i.e. without including any cost incurred from the commission date to 31 March 2013). The Statement (refer to Annexure-1) has 4419 & 4420/Del/2018 SA No. 570, 571 & 572/Del/2018 Noida Toll Bridge Company Ltd. been prepared in accordance with Article 14.2 read with Appendix F of the "Concession Agreement dated 12 November 1997 entered into between New Okhla Industrial Development Authority (NOIDA"), Infrastructure Leasing Financial Services Limited ('Sponsor") and Noida Toll Bridge Company Limited (the Company"), for the purpose of computation of recovery of total project cost and return of 20% thereon for the year ended 31 March 2013.

On the basis of our verification of the aforementioned Statement, by carrying out such cheeks as we considered appropriate and on the basis of information and explanations given to us by the management, we certify that there is a shortfall in the recovery of total project cost and return of 20% thereon of INR 29,551,405,164 (INR 2,955 crores) as at 31 March 2013.

The Statement is to be read in conjunction with Notes 3, 4 and 5, which form part of the Statement These notes provide the break-up of various heads comprised in the Statement and explain the management rationale for 26 including or excluding certain items, which we have been informed, is consistent with the past practices…………….

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 Articled 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 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.”

In the absence of any change in the factual matrix and legal proposition, the appeal of the assessee on this ground is allowed.

At the outset, both the parties fairy submitted that the issue stands covered by the order of the Co-ordinate Bench of ITAT in assessee’s own case in to 4417/Del/2018 from A.Y. 2006-07 to A.Y. 2011-12 vide order dated 08.08.2023. The relevant part of adjudication is as under:

After arriving at the market value of the land, the ld. CIT(A) attributed a part of the same towards capital subsidy received to the extent the lands were utilized for the purpose of construction of the toll bridge. Balance amount, according to the ld. CIT(A), represented a compensation for possible or projected short fall in the revenue and treated the same as revenue subsidy and made enhancement of Rs. 1730.08 crores.

We have extracted the relevant articles of lease of land by Noida elsewhere. The very basis of the enhancement by the ld. CIT(A) that the lands were transferred to the assessee by Noida is fallacious and completely in disregard to the relevant articles mentioned elsewhere. The lands were given on lease and, therefore, there is no question of ownership being transferred to the assessee and, therefore, there is no question of any addition on this account. The same is directed to be deleted.”

In the absence of any change in the factual matrix and legal proposition, the appeal of the assessee on this ground is allowed.

On going through the record, we find that this issue has not been adjudicated by the ld. CIT(A). Since, the primary adjudication has not been done by the first appellate authorities, hence we deem it fit to remand the issue to the ld. CIT(A) for adjudication.

On going through the record, we find that this issue has not been adjudicated by the ld. CIT(A). Since, the primary adjudication has not been done by the first appellate authorities, hence we deem it fit to remand the issue to the ld. CIT(A) for adjudication.

The underlying facts in the issue are that the assessee issued deep discount bonds to the public on which interest was payable on maturity. The assessee had recognized the interest year on year as the liability accrues every year but however, is payable on maturity. During the year, the assessee debited such interest to the tune of Rs. 14.41 crores to the Profit and Loss account whereas it had paid Rs. 12.70 crores.

The Assessing Officer disallowed the difference of Rs. 1.71 crores for the reason that the same is unpaid.

In our understanding of the afore-mentioned facts, provisions of section 43B(e) of the Act apply only to loans/borrowings from any financial institutions. It does not apply to the deep discount bonds issued to the public. In our considered opinion, the amount over and above the face value which is payable on maturity is nothing but the interest amount which accrues to the assessee every year and recognized by the assessee in its books of account. Therefore, the interest payable on deep discount bonds is to be allowed on accrual basis and not on payment basis. The Assessing Officer is directed to delete the same.

In the result, the appeals of the assessee are allowed.”

In the absence of any change in the factual matrix and legal proposition, the appeal of the assessee on this ground is allowed.

On going through the record, we find that this issue has not been adjudicated by the ld. CIT(A). Since, the primary adjudication has not been done by the first appellate authorities, hence we deem it fit to remand the issue to the ld. CIT(A) for adjudication.

At the outset, both the parties fairy submitted that the issue stands covered by the order of the Co-ordinate Bench of ITAT in assessee’s own case in to 4417/Del/2018 from A.Y. 2006-07 to A.Y. 2011-12 vide order dated 08.08.2023. The relevant part of adjudication is as under:

Though the claim of depreciation was allowed to the assessee, as discussed in the aforementioned paras, the ld. CIT(A) treated the part market value of alleged transfer of land as capital receipt, he went on to reduce the written down value with the amount of capital subsidy and recomputed the depreciation and made the addition of Rs. 15.97 crores.

Since in the para above we have discarded the findings of the ld. CIT(A), for our detailed reasons therein, there is 4419 & 4420/Del/2018 SA No. 570, 571 & 572/Del/2018 Noida Toll Bridge Company Ltd. no capital subsidy to 49 be reduced and there is no basis for re-computing the depreciation. The same is deleted.”

In the absence of any change in the factual matrix and legal proposition, the appeal of the assessee on this ground is allowed.

On going through the record, we find that this issue has not been adjudicated by the ld. CIT(A). Since, the primary adjudication has not been done by the first appellate authorities, hence we deem it fit to remand the issue to the ld. CIT(A) for adjudication.

The appeals of the assessee are decided, the Stay Applications of the assessee are dismissed as infructuous.

In the result, the appeals of the assessee are allowed for statistical purpose and the Stay Applications of the assessee are dismissed.