Income Tax Appellate Tribunal - Pune
Viva Highways Pvt Ltd, Nashik vs Department Of Income Tax on 22 April, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
Before Shri Shailendra Kumar Yadav, Judicial Member,
and Shri G.S.Pannu, Accountant Member.
ITA.No.187/PN/2012
(Asstt. Year : 2006-07)
ACIT, Central Circle-1,
Nashik. .. Appellant
Vs.
Viva Heights Pvt. Ltd.,
Ashoka House, Ashoka Marg,
S.No.861, Wadala,
Nashik. .. Respondent
PAN: AABCV3827E
Assessee by : Shri Sheetal Gadiya
Department by : Shri Mukesh Verma and
Ms.Ann Kapthuama
Date of Hearing : 22.04.2013
Date of Pronouncement : 29.04.2013
ORDER
PER SHAILENDRA KUMAR YADAV, JM:
This appeal has been filed by the Revenue against the order of the CIT(A) on following grounds:
1. On the facts and in the circumstances of the case, the learned CIT(A) Nashik erred in deleting the disallowance of ₹ 6,79,82,973/- on account of depreciation in respect of "intangible assets" in the form of License Fee under BOT Scheme claimed by the assessee.
2. On the facts and in the circumstances of the case, the learned CIT(A)-I, Nashik erred in holding that assessee had acquired right to collect toll and this right was a valuable right having commercial value when in fact assessee was getting recoupment of expenditure incurred on construction of road.
3. On the facts and in the circumstances of the case, the learned CIT(A)-I, Nashik erred in holding that assessee was entitled to depreciation on the cost of the road when the assessee had failed to fulfill conditions prescribed u/s. 32(l)(ii)i.e. the assessee was neither owner of the road nor had put the road for the purpose of its business.
4. On the facts and in the circumstances of the case, the learned CIT(A)-I, Nashik erred in relying on the ratio of the decision rendered by the ITAT, D-Bench, 2 Mumbai in the case of Reliance Ports and Terminals Limited Which is distinguishable on the facts of the present case.
5. On the facts and in the circumstances of the case, the learned CIT(A)-I, Nashik erred in relying on the decision of the ITAT, D-Bench, Mumbai, even though the said decision can be distinguishable on fact in as much the matter involved in that case is related to license to pay landing/shifting fees whereas in the assessee's case the issue involves license fee acquired under BOT scheme which can not be termed as "intangible assets".
6. On the facts and in the circumstances of the case, the learned CIT(A)-I, Nashik erred in deleting the disallowance of ₹ 33,21,000/- on account of supervision charge paid on cash basis when the assessee was following mercantile system of accounting and such liability had not crystallized during the year.
2. Brief facts of the case are that the assessee is a company engaged in the business of operation and maintenance of infrastructure facility (Indore - Edlabad Road S.H.No.27) on Build Operate & Transfer (BOT) basis and the business of financing. The assessee paid minimum alternate tax u/s.115JB. The assessee claimed depreciation @ 25% on 'License to Collect Toll' amounting to Rs.16,79,82,973/-. The Assessing Officer disallowed the claim and instead allowed amortization of expenses at Rs.8,25,13,228/-, thus disallowed the depreciation at Rs.8,45,69,745/- and Rs.33,21,000/- on account of supervision fees as not accrued in the previous year and computed the total income accordingly. After allowing carry forward losses of Rs.8,82,18,383/- (the Assessing Officer also made disallowance of Rs.33,00,000/-) the income was assessed to Rs.Nil. Matter was carried before the first appellate authority on various Grounds including above discussed two issues.
3. The first issue is against Assessing Officer holding that 'Licence to collect Toll' is not an intangible asset eligible for depreciation @ 25%. Various contentions were raised before the CIT(A) in this regard who, having considered the same, has allowed the claim of the assessee. Same has been opposed before us by the 3 Ld. Departmental Representative, inter alia, submitted that the CIT(A) was not justified in deleting the disallowance of Rs.16,79,82,973/- on account of depreciation in respect of intangible assets in the form of license fee under BOT scheme claimed by the assessee. The CIT(A) erred in holding that assessee has acquired right to collect Toll and this right was valuable right having commercial value when in fact assessee was getting recoupment of expenditure incurred on construction of road. He also erred in holding that assessee was entitled to depreciation on cost of road when the assessee has failed to fulfil conditions prescribed u/s.32(1)(ii), i.e., the assessee was neither the owner of the road nor it had put road for purposes of its business. On the other hand, Ld. Authorised Representative for the assessee relied on the decision of the CIT(A).
4. After going through the above submissions and material on record, we find that the assessee has got right to collect toll for a specified period which was authorised by Madhya Pradesh Rajya Setu Nirman Nigam Ltd., a statutory body of Government of Madhya Pradesh. This right to collect toll was considered as asset by the assessee as same was acquired as per law. This right of assessee was having commercial value. The assessee raised loan by assigning this right to collect toll under BOT scheme. In this situation, it can be inferred that right to collect toll is an intangible asset covered by the Income Tax Rules, 1962. The CIT(A) has rightly held that assessee is eligible for depreciation on this asset. This view is fortified by the decision of the ITAT, Pune Bench, in case of sister-concern of the assessee viz. Ashoka Information Pvt. Ltd. in ITA.No.44/PN/07 dated 31.12.2008 and other decisions in the cse of Reliance Ports and Terminals Ltd. in ITA.No.1743 to 45/Mum/07 dated 26.11.2007. In this background, the CIT(A) was justified in holding that right to collect toll is an intangible asset eligible for depreciation @ 25%. Same is upheld.
45. The next issue is with regard to disallowance of supervision fees of Rs.33,21,000/-. The Assessing Officer has discussed this issue in para 4 of the assessment order as under:
"From the audit report in Form No.3CD at column No.22 read with Annexure F, it is seen that the assessee has debited certain expenses which relate to prior period as is pointed out by auditors. These amount in total to Rs.33,31,783/- out of these Rs.10,783/- have been disallowed by the assessee in the computation of income. But the rest Rs.33,21,000/- the assessee has claim that these expenses were ascertain during the concerned financial year on this issue the A.R. of the assessee were confronted and were asked to explain the stand of the assessee and why should it be allowed. In response to this in the hearing dated 06/11/2008 the A.R. of the assessee has contended that the liability towards supervision fees payable to M.P.R.D.C. crystallized on evaluation of maintenance issue, staff needs, scope of supervision and other factors and such evaluation was carried out by M.P.R.D.C. in F.Y. 2005-06 and accordingly the liability has accrued during the concerned financial year. Therefore this expenditure cannot be called as prior period expenditure as per Income Tax Act. The A.R. of the assessee has placed reliance on the judgement of Allahabad High Court in the case of CIT vs. Ashok Iron & Steel Rolling Mill 199 ITR 819. The contentions of the A.R. have been given due thought, the A.R. has filed one letter from M.P.R.D.C. in which the above discussed amount of supervision fees has been mentioned. From the study of the same alongwith the concession agreement with M.P.R.D.C. it is seen that the issue of payment of supervision fees was there very much and in clear language mentioned in the concession agreement at multiple times. Further from the study of both it can be seen that the deliberations on the concerned matter were going on in continuous manner. The above mentioned letter from M.P.R.D.C. speaks at point 4 that the divisional officers of M.P.R.D.C. will act as maintenance consultant for that purpose. Therefore from the above deliberation it is clear that the assessee needed to pay the supervision fees. Following this the assessee could have made the provision for these expenses and could have claimed the same in those concerned years. Further from the record submitted by the assessee it is no where seen that the assessee is having a dispute regarding the quantum of these payments. In such a situation it cannot be said that the liability to pay supervision fees has accrued in the concerned financial year. Therefore, contention of the assessee cannot be accepted and the amount of Rs.33,21,000/- is disallowed and added back to the returned income of the assessee."5
6. Matter was carried before the first appellate authority, who has granted relief to the assessee by observing as under:
"7.3. I have carefully considered the facts of the case, the assessment order and the rival submissions. On going through the relevant facts, it is evident that the liability in respect of the supervision charges for the financial year 2003- 04 and 2004-05 got crystallized vide letter dated 11/10/2005 of M.P.R.D.C. (Madhya Pradesh Rajya Sety Nirman Nigam Ltd., the statutory body of Govt. of Madhya Pradesh). This letter was also placed before the Assessing Officer during the assessment proceedings, which has clearly stated the fact that the Corporation has demanded the supervision charges @ 16,60,500/- for the year 2003-04 and has the supervision continued during F.Y. 2004-05, therefore, the liability for payment of Rs.33,21,000/- had crystallized vide letter dated 11/10/2005 that was received during the previous year relevant to the assessment year under appeal. Therefore, the claim is allowable this year and there is no justification for any disallowance on this account. Consequently, the impugned disallowance of Rs.33,21,000/- is unwarranted and the same is directed to be deleted. This ground of appeal is allowed."
7. Same has been opposed before us on behalf of the Revenue inter alia submitted that the CIT(A) erred in deleting the disallowance of Rs.33,21,000/- on account of supervision charges paid on cash basis when the assessee was following mercantile system of accounting and that liability had not crystallized during the year. On the other hand the Ld. Authorised Representative for assessee submitted that the Assessing Officer was not justified in disallowing supervision fees of Rs.33,21,000/- on the ground that fees accrued in earlier year, and the CIT(A) was justified in allowing the same. In sum and substance, the Ld. Authorised Representative for the assessee supported the order of the CIT(A) on the issue.
8. After going through the above submissions and material on record, we find that the liability in respect of supervision expenses in respect of F.Y. 2003-04 and 2004-05 crystallised vide letter dated 11.10.2005 of M.P.R.D.C. Though this letter was produced before the Assessing Officer during the assessment proceedings, inter alia 6 stated that the Corporation has demanded supervision charges @ Rs.16,60,500/- for F.Y. 2003-04 and as supervision continued during F.Y. 2004-05, therefore liability for payment of Rs.33,21,000/- in fact crystallised vide letter dated 11.10.2005 which was received during the previous year relevant to assessment year. Therefore, the CIT(A) held that claim was allowable under consideration. This reasoned finding of CIT(A) whereby he has held allowable to be crystallised in the year under consideration on the basis of letter dated 11.10.2005 is justified which needs no interference from our side. Accordingly same is upheld.
9. As a result, appeal filed by the assessee Revenue is dismissed.
Pronounced in the open court on this the 29th day of April, 2013.
Sd/- Sd/-
( G.S.PANNU ) ( SHAILENDRA KUMAR YADAV )
ACCOUNTANT MEMBER JUDICIAL MEMBER
gsps
Pune, dated the 29th April, 2013
Copy of the order is forwarded to:
1. The Assessee
2. The ACIT, Circle-1, Nashik.
3. The CIT(A)-I, Pune.
4. The CIT(Central), Nagpur.
5. The DR "A" Bench, Pune.
6. Guard File.
By Order
//TRUE COPY//
Private Secretary,
Income Tax Appellate Tribunal,
Pune.