THE PR. COMMISSIONER OF INCOME TAX - CENTRAL -3 vs. ORIENTAL PATHWAYS ( NAGPUR) PVT. LTD.

u return of income, in which again depreciation @ 10% under Section 32 of the Act was claimed. 4. In the present appeal, we are not concerned with the assessment proceedings and whether or not the respondent-assessee was entitled to claim depreciation on the NH-6 constructed by them on built, operate and transfer basis. In the present case, we are concerned with whether or not the Tribunal was right in upholding the order passed by the CIT (Appeals) deleting penalty under Section 271 (l)(c) of the Act imposed by the Assessirig-"Officer. I 5. The relevant portion ofithe order by the CIT'(Appeals) reads as under;- f .y '''Y -I,,! "7. The appellant return on 29.09.2009, 959/-. The same was assesse^^^ae^ i^gti^h^/43(3) of the Act on 23.12.2011 at a loss 200/-, by making disallowance of Rs.34,12,759/- on account of preliminary expenditure. During the said assessment proceedings, no interference was^frtddeifBy the^i'A&^on other issues including depreciation, though the appellant has claimed depreciation on road @ 10% of the capitalized cost. A Search was carried out in Bakshi group of cases on 10.12.2012 and the case of appellant was also covered in search. Accordingly, notice under section 153A was issued and appellant submitted return of income in response to the said notice on 03.02.2014, declaring loss of Rs.34,24,25,559/- which included depreciation amounting to Rs.30,63,57, 685/-, on roads. ITA 929/2018+connected Page 4 of 16

7.1 The appellant is stated to have been mainly engaged in the business of development, design, financing, procurement, engineering and construction, operation and maintenance of the project highway on NH-6, Maharashtra on build, operate and transfer basis and collecting, toll. During assessment proceedings the appellant was asked to substantiate the claim of depreciation on road @10%. The appellant submitted that it has claimed depreciation in view of the provisions of section 32 of the Act,as per its bona fide belief that depreciation is allowable to it as per law. However, it was submitted by the appellant before AO that in view of the circular no. 09/2014'dated, 23.04.2014, it has been clarified by the CBDT^thciffhe toll fpqds are intangible assets and therefore" po d^p/fcmtipn can be allowed however, the assessde cgn/clm off of capitalized expenditure equally : over tljb. . t6ff< concession period. Based on mentioned .cffcularf appellant withdrew the claim of depreciation pi vpridusliassessment years and I • ''H.:' i-'lt'. '' claimed the writingC:qffi0f., ei^nqitiire as per the said circular. The revfi^ti provided by the appellant. Accordiii^iyr^lkBi^ntk^fie submission of the appellant, the claim of deprecidtioh has been disallowed. It is observed from the assessment order that this addition is not based on dn^majemalor eyidgriqe found and seized during search as nothing ffds bieri brought out on record in this regard. The claim of the appellant with respect to the expenditure incurred has been allowed in view of the clarification by the CBDT in the above mentioned circular. Thus, net addition worked out at Rs.15,88,50,307/ -. The penalty for concealment of income/furnishing inaccurate particulars of income under section 271 (I)(c) was initiated. The appellant did not dispute the issue of addition made in the assessment order and no further appeal was filed. ITA 929/2018+connected Page 5 of 16

7.2 During penalty proceedings, the AO did not considered the submission by the appellant favourably. It was mentioned that the depreciation is allowable only on the assets which are owned wholly by any assessee and CBDT has only given its further clarification and not made any amendment in the existing law. It was also stated that appellant has only revised its claim on depreciation on the query of the AO, after a span of 11 months which indicates that appellant has made wrong claim willfully. After discussing in detail and relying upon various judgments the AO held that it is concealment of income and levied minimum penalty @100% of tax sought to be , evaded, which comes to Rs.4,90,84,745/-. ; 7.3 Before examming-^j^thfifjl-f^^^edient to reproduce the circular no. 09/2014 issuediby4heCBDTon23.04.2014 which is as follows:- v . i , ft;;- • . ' ' .T' '.i i}vv " Sub: Clarificdtidnfregarding treatment of expenditure for development of roads/highw@>s_:j.0u:,lB^;^^qgreement under Income Tax^i;f(^:0irpgi^mg^ It has come to the notice of the Board that disputes r . have arisen as to, whether the expenditureVinf.pr'^ed /development and construction of infrastructural facilities like roads/ highways on build operate-transfer (BOT) basis with right to collect toll is entitled for depreciation under section 32(I)(ii)of the Act or the same can be amortized by treating it as an allowable business expenditure under the relevant provisions of the Income Tax Act, 1961. ITA 929/2018+connected Page 6 of 16

authority for the purposes of construction of the project without any actual transfer of ownership and such assessee has only a right to develop and maintain such asset. It also enjoys the benefits arising from use of asset through collection of Toll for a specified period without having actual ownership over such asset. Therefore, the rights in the land remain vested with the Government or its agencies. Thus, as assessee does not hold any rights in the project except recovery of toll fee to recoup the expenditure incurred, it cannot therefore be treated as an owne.r of the property, either wholly or pai^ljffoiffnnrfids allowability of depreciation Under !sedtif)nfij2(l)(ii)of the Act. Thus, presentpvoyififfifj^iHe Act do not allow claim of deprecidHdn.pfiif0l ways due to non fulfillment of dwftehhip)erifieria in such cases. -j I' ' i - ii .L.. i I.'. 4. There is Jw/dp^Ujflfc^ the assessee incurs exp0hditfi0f$fy$t }fi project for development; of rpdfik/lii§^a^ he is entitled to recover-'cost^Tljwid0^by him towards development of such facility (comprising of construction cost and other, pre-operative expenses)' (^fiimh^0hP'ff(^fBiiction period. Further, expenditure incurred by the assessee on such EOT projects brings to it an enduring benefit in the form of right to collect the toll during the period of the agreement. Hon'ble Supreme Court in the case ofMadras Industrial Investment Corporation Ltd. vs. CIT in 225ITR 802 allowed spreading over of liability over a number of years on the ground that there was continuing benefit to the company over a ITA 929/2018+connected Page 8 of 16

period. Therefore, analogously, expenditure incurred on an infrastructure project for development of roads/ highways under BOT agreement may be treated as having been made/incurred for the purposes of business or profession of the assessee and same may be allowed to be spread during the tenure of concessionaire agreement. 5. In view of above. Central Board of Direct Taxes, in exercise of the powers conferred under section 119 of the Act hereby clarifies that the cost of construction on development of infrastructure facility., of roads/highways under BOT projects mpyfis-dinorfiz^ claimed as allowable business exppfidftUre under the Act, 6. The ainoftizatidn' ialjowable may be computed at tl^q rate^^^ ensures that the whole of ther cofi ipduifed in creation of irfiastructmfiy ^ili^:t^(^yoad/highway is amortized period of concessioncdfe^f^t0^^§^^^ excluding the time taken for credtion fifsuch facility. 7. In the r case where an assessee has claimed any deduction qufpf inifffiif^^^ of infrastructure facility of roads/highways under BOT project in earlier year, the total deduction so claimed for the assessment year to the assessment year under consideration may be deducted from the infrastructure facility of roads/highways and the cost so reduced shall be amortized equally over the remaining period of toll concessionaire agreement. ITA 929/2018+connected Page 9 of 16

V 8. It is hereby clarified that this circular is applicable only to those infrastructure projects for development of road/ highways on BOT basis where ownership is not vested with the assessee the concessionaire agreement. 9. This may be brought to the notice of all concerned." 7.4 It is observed from the above circular that the board was aware of the dispute regarding claim of depreciation with respect to the built operate transfer (BOT) agreement and this is squarely covered in the case of the appellant, which has also(been accepted by the AO. In the said circular, it is clearly .bfqught, out. that in return of income, assessee's are geherally(claim depreciation on such capitalized expendilufefffeM it as an intangible assets in terms of section 3f(l)(M)iff the Act. Therefore, the original claim /(^(fief^pellant to claim such depreciation was not /Tftdhdalorik case but seems to be the general practicerq^^qt/fjmu^py and the claim of depreciation by it y^ds-iYfadk^ di^jdef/fjie bona fide belief that it is an aUowdbM^3di00i^.M/Further, it is also clarified by the circulardhat^'^he/e the assessee incurs expenditure on a project, he is entitled to recover cost incurred by allowed such expenditure incurred, '^ spreading ^ over this liability in different years. 7.5 It is also observed that in the first round of scrutiny assessment, no such addition was made, but allowed depreciation as claimed by the appellant. It is only with respect to the assessment proceedings under section 153A of the Act that this issue has been raised by the AO and based on the circular by the CBDT, revision of the claim of the depreciation made before AO by the appellant. All ITA 929/2018+connected Page 10 of 16

the facts regarding claim of depreciation was before the AO during first round of scrutiny assessment as well as later on. 7.6 Here it is to be mentioned that penalty proceedings are different from the assessment proceedings and simply because an addition has been made and not challenged by the assessee shall not make a case for imposition of automatic penalty for concealment. Any claim which is found incorrect by the AO and disallowed will not attract the penalty for concealment in a routine manner. Merely, because the appellant had claimed the depreciation, which was not accepted in full, and disallowed, that itself would not attract the penal .under section 271(l)(c). In the present case, all tfie fdcis were disclosed to the AO and in fact in the first trpupdfi,cf scrutiny assessment, the .-•' -V' 'V^.. ''-'Vv ' t'-" '' said depreciation wdsP hoffidisdllowed and accepted. Therefore, in view off the rqtip daid down by Hon'ble Supreme Court in fidsdr^ p:'f CIT vs. Reliance j. i , !' * .'".t . 'i Petroproducts P. Ltd. AlfifiTRfPfSfiSC) and the decision of Hon'ble jiirisdicfi6hal70gHi^0d'f:Of Delhi in the case of CIT us. Brahmd^fiffi^pri^i^ (2012) 348ITR 339, the penalty is Liot'l^immfifihe same is applicable in the case of appellant. 7.7 It is also to'be mentioned that^mjkn the return was filed in response to'^ hofiee under section 153A on 3.02.2014, the matter was debatable due to the difference in legal interpretation between the assessee and the revenue authorities and the claim was made under bonafide belief that depreciation is allowable on such capitalized value of road. This has also been acknowledged as the practice of industry. The circular of CBDT, clarifying the issue has been issued on 23.04.2014, which is after the submission of return by the appellant. Since, the matter was clarified, the appellant ITA 929/2018+connected Page II of 16

opted to claim expenditure incurred on project for development, construction and other operative expenditure during construction period as per the said circular by spreading over to the different accounting years and accordingly, revised the claim of depreciation by not claiming on road. It is the appellant who brought this circular to the knowledge of AO, though during assessment proceedings it was asked by the AO to justify the same. Hence, during assessment proceedings, following the clarification of the CBDT, the appellant provided revised working and depreciation on road was withdrawn whereas the expenditure has been claimed. The same was accepted by the AO. The contention of the AO while levying penalty, \ that there was a delay in submission of revised working by the appellant is also not tenable because one cannot pxpect the appellant to act immediately suo-moto. This 'will - also not form the substantial reason to, imposed;,penalty for concealment because the appellant(;.iffe^f}^ brought this to the knowledge of AO and without disfmting, accepted the revised working. Since, it was a' ccepfyd by the appellant rather offered by iM0bre, no appeal was '' I l l r preferred. Therefore; 4HiM aTdr0^cannot be the basis for imposition of penalty. 7.8 In the penalty fffffer, the AO Hc^ffflied upon various case laws. The case of Clf vs. Usha International Ltd. 212 Taxman 519, 2013 relied upon by the AO relates to the revision of return consequent upon survey proceedings, which was disclosed after being detected during the course of survey is not applicable as the facts are distinguishable. The case of appellant is not related to survey proceedings nor a disclosure of additional income but claim of depreciation, revised in view of the Board's circular. With respect to the ratio laid down in ITA 929/2018+connected Page 12 of 16

the case of KP Madhusudan V5. CIT 251 ITR 99, it is seen that the same is not applicable in the present case because the appellant itself offered the withdrawal of depreciation, which was even not detected by the then AO in the first round of scrutiny proceedings. All the facts regarding claim of depreciation on road was clearly mentioned in the details submitted by the appellant and also mentioned in the audited accounts. Therefore, the appellant has not concealed any fact nor furnished any wrong particulars of income and, duly discharged its duty. Therefore, this is distinguishable. The AO has also relied upon the ratio in the case of CIT vs. Zoom Communication P. Ltd. ip ITA^i.Np.O of the said case is not-applicable to the case of appellant because in the said case it was foiind that the dssessee was not acting bonafide and ih'ere was a positive income and therefore lead fdl;;tax :evasibn:: In the case of the appellant, it was subf^j(kdfQ}scrutiny earlier and all the facts were on record with • respect to the claim of depreciation under .the bona fide belief. The matter was disputed as itself ifcknowledged in the circular by the CBDT and accordingly after.clarffication, the appellant has withdrawn its claim4n- the -ass proceedings. The case of CIT vs. Brahmaputra Consortium Ltd., relied upon by the appeUantJs mbsequentjddhe decision of CIT " l" h -11 ^ ' w-- -0- VS. Zoom Communication P. Ltd:-(supra) as mentioned by the AO. 7.9 It is also seen that the AO has not clearly brought out that whether it is a case of furnishing inaccurate particulars of income or concealment of income as it is stated in para 5 that: "Consequentially, as the default of the assessee under section 271(l)(c) is established, penalty of Rs.4,90,84,745/- @100% of the tax sought to be ITA 929/2018+connected Page 13 of 16

evaded for furnishing inaccurate particulars of income and thereby concealment of income as discussed above, is imposed under section 271(l)(c)oftheITAct, 1961." 7.10. In view of the above facts and discussions in foregoing paragraphs regarding position of law, considering the submission by the appellant and looking to the circumstance in which the appellant revised its claim, based on the clarification by the CBDT, the concealment of income for imposition of penalty under section 271 (l)(c) of the Act is not established. Therefore, relying upon the ratio laid down in the case of CIT V5. Brahmaputra Consortiuin ..Ltd f and CIT vs. Reliance PetroproductfiP. 'Bid/fSdpm) and on the facts and circumstances of thf 'case, .itds f eld that penalty for concealment of incomdMndef f' ectipn 271(l)(c)of the Act is not attracted in the - case and the same is deleted accordingly." , r- i'! ' ^ •' ;J jr-' t f"- \x 6. The aforesaid clearly and correctly elucidates on the differej^ce-^ proceedings and penalty proceedings and applieSx|^planation (1) to Section 271 (1) (c) of the Act. It refers to divergence of legal opinion on the question whether an assessee, wh6i%as, infrastructure project such as roads or highways on build, operate and transfer basis could claim depreciation or was entitled to treat the entire cost as amortized expenditure, an expression not used in the Act. These were highly debateable and contentious issues. Noticeably, the Assessing officer had allowed the claim for depreciation on roads @ 10% under Section 32 of the Act in the original assessment proceedings. ITA 929/2018+connected Page 14 of 16

^.h had already filed return for the year in question claiming deprecation, which had been allowed by the Assessing Officer. In the aforesaid position the respondent-assessee did not consider it appropriate to modify the claim that had been allowed and accepted in the regular assessment in the return filed pursuant to notice under Section 153A of the Act. The conduct of the respondent-assessee or examination of facts has been found and held to be bonafide. Facts of the case cannot and would not justify levy of penalty under Section 271(l)(c). 9. Findings of the CIT (Appeals) and the Tribunal deleting penalty are reasonable and justified and -primarily predicated on facts. No ground or reason to interfere with the prdef,of the Tribunal, affirming the order of the CIT (Appeals), is made 10. The appeal and pending applications are dismissed without any order as to costs. ^ -Lie .^ANJIVKHANNA, J. CHANDEl^ SHEKHAR, J. AUGUST 28, 2018 tp ITA 929/2018-Hconnected Page 16 of 16