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Income Tax Appellate Tribunal, MUMBAI BENCH “H”, MUMBAI
Before: SHRI AMIT SHUKLA & SHRI ASHWANI TANEJA
Date of hearing : 17-01-2017 Date of order : 15 -02-2017 O R D E R
Per Ashwani Taneja, AM :
This appeal and the cross objection are directed against the order of the Commissioner of Income-tax (Appeals)-22, Mumbai [hereinafter called CIT(A)] 2 ITA 2118/Mum/2015 dated 09-01-2015 passed against the order of the AO u/s 143(3) r.w.s. 147 dated 28-03-2013 for A.Y. 2007-08.
First, we shall take up the appeal filed by the Revenue on the following grounds:-
“On the facts and in the circumstances of the 1. case and in law, the CIT(A) has erred in allowing the claim of depreciation on the toll road, to the assessee, disregarding the fact that the AO has rightfully allowed the amortization claim of the toll road expenses for 5 months to the assessee since the toll road started operating from 22.10.2006.
2. O n t h e f a c t s a n d i n t h e c i r c u m s t a n c e s o f t h e c a s e a n d i n law, the CIT(A) has erred in treating the toll road being the national Highway belonging to the Government of India as if it is the capital asset owned and acquired by the assessee, so as to allow the assessee claim of depreciation on it.
O n t h e fa c ts an d i n t h e c ir cu ms t a n ce s of th e c a se a n d i n law, the CIT(A) has erred in treating the Toll road i.e. the National Highway as "Plant and machinery belonging to the assessee" instead of the Government Land, disregarding the fact that the stand adopted by the AO has been well endorsed by the Bombay High Court in the case of M/s North Karnataka Expressway Limited, a sister concern belonging to the assessee company being in the same line of business, that the National Expressway cannot be deemed to be treated as the Plant and Machinery belonging to the assessee company in light of the fact that the Toll Road Land / Expressway Land belongs to the Government of India. 2. In this case, it was stated at the very outset by the Ld. Counsel that this issue has been decided against assessee by Hon'ble Bombay High Court in assessee’s own case for A.Y. 2007-08 against the assessment order passed in 3 ITA 2118/Mum/2015 the original assessment proceedings, vide its order dated 05-04-2016 (Income Tax Appeal No.2367 of 2013). Therefore, as on date, the issue raised by the Revenue in its grounds may be decided against the assessee. 3. We have gone through the facts of the case and orders passed by the lower authorities as well as the judgement of the Hon'ble Bombay High Court passed in the proceedings against the original order passed u/s 143(3).
The brief background is that the assessee during the year was engaged in the business of development, operation and maintenance of road infrastructure. The assessee had right to collect toll. In the return of income, assessee claimed depreciation on the expenditure incurred on construction of toll road. The AO, in the original assessment order passed u/s 143(3) dated 29- 12-2009 disallowed the depreciation inter-alia on the ground that assessee was not owner of the toll road. But he allowed the alternative claim of the assessee for amortisation of expenses. Thus, AO allowed alternative deduction of amortisation but denied the benefit of depreciation. Against the original assessment order, assessee went in appeal wherein the claim of depreciation was allowed by the Tribunal. Against the order of the Tribunal, the Revenue filed appeal before the Hon'ble High Court. Hon'ble High Court reversed the order of the Tribunal and upheld the action of the AO and held that assessee was not entitled for the benefit of depreciation. Hon'ble High Court relied upon its another judgement rendered in the case of North Karnataka Expressway Ltd vs CIT 272 CTR 225 (Bom). 5. In the meanwhile, AO recorded ‘Reasons’ u/s 147 and issued notice u/s 148 to the assessee on the ground that benefit of amortisation was wrongly computed and allowed to the assessee. Thereafter, the AO passed re- assessment order u/s 147 r.w.s. 143(3) wherein the benefit of amortisation granted in the original assessment order for Rs.71,76,859/- was reduced to 4 ITA 2118/Mum/2015 Rs.49,83,876/-. Being aggrieved, assessee carried the matter to CIT(A). In the appeal before CIT(A), it was held that since Tribunal has allowed the impugned claim of depreciation in the appeal against original assessment order, the AO shall grant benefit of depreciation on the amount for which assessee was seeking amortisation of expenses. Being aggrieved, Revenue filed appeal before the Tribunal which is the impugned appeal before us.
We have gone through the orders passed by the lower authorities as well as orders passed by Hon'ble High Court. It is noted that since in the appeal filed against the original assessment order, Hon'ble High Court has held vide its judgement dated 05-04-2016 that claim of depreciation is not allowable to the assessee, the same decision would be applicable upon the issue raised by the Revenue before us. Once Hon'ble High Court has taken a view that depreciation is not allowable, the issue before us stands covered against the assessee for the reasoning given by the Hon'ble High Court in its order read along with the judgement relied upon by the Hon'ble High Court in its order. Thus, respectfully following the order of the Hon'ble High Court, we allow the appeal filed by the Revenue.
Now we shall take up Cross Objections filed by the assessee on the following grounds:- 1. “On the facts and circumstances of the case the appellant prays that the entire cost incurred for construction of "Project Road" amounting to Rs. 32,72,64,781/- may be allowed as deduction treating the same as revenue expenditure while computing the total income.
2. Without prejudice to Ground No. 1, on the facts and circumstances of the case, the appellant prays that, the depreciation may be granted treating the right to set up infrastructure facility being license/business of commercial rights, as intangible asset in terms of the provisions of Section 5 ITA 2118/Mum/2015 32(1)(ii) and the appellant may be granted the depreciation treating the said right as intangible right at the applicable rate. The appellant prays that the appellant be granted depreciation of Rs. 4,09,08,098/-.
3. Without prejudice to Ground No. 1 to 2 above , on the facts and circumstances of the case, the appellant prays that the appellant be granted amortization of Rs. 1,72,24,462/- in place of the amortization originally granted by the Learned Assessing Officer at Rs.71,76,859/-.”
8. It was argued by the Ld. Counsel before us that claims made by the assessee in its Cross Objection are alternative claims which have not been examined by us so far. The decision has been given by Hon'ble High Court on the main claim of the assessee only. These alternative claims are purely legal claims, therefore assessee is always entitled to raise the same on ‘without prejudice’ basis. It was also submitted that the objective of the income-tax proceedings is to compute the correct amount of taxable income assessable and tax payable thereon as per provisions of the Act. The doors of justice should not be shut without hearing the assessee. Further, these claims are legal claims, therefore this can be made at any stage.
9. Per contra, the Ld. DR submitted that fairly speaking, these issues have not been examined properly so far. Therefore, if these issues are to be examined, then, these need to be sent back to the file of the AO for proper examination. 10. We have gone through the submissions made by both sides before us. It is noted that the claims raised before us are alternative to the main claim made by the assessee. Since the main claim of the assessee has been rejected, in all fairness, justice demands that assessee should be given an opportunity to make his alternative claim in accordance with law. Thus, taking into account the 6 ITA 2118/Mum/2015 totality of facts and circumstances of the case, as have been brought before us, we find it appropriate to send these issues back to the file of the AO. The assessee shall be at liberty to raise all the legal and factual issue before the AO. The AO shall examine all the issues raised in the Cross Objection and decide them after taking into account all the submissions and evidences, as may be placed on record by the assessee. With these directions, the grounds raised
in the Cross Objection are restored to the file of the AO for their appropriate adjudication and these may be treated as allowed, for statistical purposes.
11. In the result, both the appeal filed by the Revenue is allowed and the Cross Objections filed by the assessee are treated as allowed for statistical purposes. Order was pronounced in the open court on the conclusion of hearing.