Income Tax Appellate Tribunal - Delhi
Dcit, New Delhi vs M/S Paradip Port Road Co. Ltd.,, New ... on 4 September, 2018
In the Income-Tax Appellate Tribunal,
Delhi Bench 'G', New Delhi
Before : Shri Bhavnesh Saini, Judicial Member And
Shri L.P. Sahu, Accountant Member
ITA No. 2689/Del/2016
Assessment Year: 2012-13
DCIT, Circle 19(2), vs. Paradip Port Road Co. Ltd.,
New Delhi. G-5&6, Sector-10, Dwarka,
(Appellant) New Delhi PAN-AADCP2458F
(Respondent)
Appellant by Sh. S.S. Rana, CIT/DR
Respondent by Ms Khushboo Garg, CA
Date of Hearing 27.08.2018
Date of Pronouncement 04.09.2018
ORDER
Per L.P. Sahu, A.M.:
This is an appeal filed by the Revenue against the order of the ld. CIT(A)- 7, New Delhi dated 17.02.2016 for the assessment year 2012-13 on the following grounds :
1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance of Rs. 23,85,71,095/- made by the Assessing Officer on account of difference between the depreciation claimed at Rs 42,48,04,025/- and depreciation allowed on the basis of amortization for the remaining part of the concessionaire agreement i.e from 01.04.2011 to 24.03.20M at Rs 18,62,32,930/-."
2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in ignoring the Board's Circular No 9/2014 dated 23.04.2014 ITA No. 2689/Del/2016 2 wherein it has clarified disputes arisen by referring the case law of Hon'ble Supreme Court in the case of Madras Industrial Investment Corporation Ltd. vs CIT in 225 ITR 802 wherein it has allowed spreading over of liability over a number of years on the ground that there was containing benefit to the company over a period.
2. The brief facts of the case are that the assessee filed return on 28.09.2012 declaring loss of Rs.60,87,73,453/-. Subsequently, the case was selected for scrutiny and statutory notices were issued to the assessee. The assessee company has been set up to develop, establish, construct, operate and maintain a project relating to construction operation and maintenance of Paradip Port connectivity project under the Build Operate Transfer (BOT) basis. For this purpose a concession agreement was entered into between the assessee company and National Highways Authority of India (NHAI) on 24.02.2004. By this agreement, NHAI conferred the right to the assessee company to implement the project and levy toll/user charges over the long concession period after completion of construction. The project was completed on 15.06.2009. The toll collection started w.e.f. 04.07.2009. Subsequently, the assessee company entered into another agreement with M/s. AJ Tolls Pvt. Ltd. on 15.04.2011 for collection of user fee at Srirampur Toll Plaza located at Kilometer 4 for the section from Km 0.000 to Km 76.588 of National Highway No. 5A in the State of Orissa. The contract was for a period of 1 year from 27.01.2011 to 26.01.2012. The assessee company has shown revenue from operation in the form of toll revenue at Rs.20,42,35,715/-. Against the said Revenue, the assessee has debited expenses of Rs.60,91,76,754/- in the profit and loss account. The huge amount debited to profit and loss account relate to finance cost of Rs.37.35 crores and ITA No. 2689/Del/2016 3 depreciation ofRs.21.73 crores including depreciation towards toll road which alone was Rs.21.47 crores. In the computation of income, total depreciation was claimed of Rs.42,49,01,720/- which contained Rs.4,24,84,205 being the depreciation in respect of toll road. Regarding charging of depreciation on toll road, the assessee submitted the details. The AO followed the circular No. 09/2014 dated 23.04.2014 of CBDT, wherein the Board observed as under :
"6. The amortization allowable may be computed at the rate which ensures that the whole of the cost incurred in creation of infrastructural facility of road/highway is amortized evenly over the period of concessionaire agreement after excluding the lime take for creation of such facility.
7. In the case where an assessee has claimed any deduction out of initial cost of development of infrastructure facility of roads highways under BOT projects in earlier year, the total deduction so claimed for the Assessment Years prior to the Assessment Year under consideration maybe deducted from the initial cost of infrastructure facility of roads /highways and the cost 'so reduced' shall be amortized equally over the remaining period of toll concessionaire agreement. "
Accordingly, the AO disallowed the depreciation claimed of Rs.23,85,71,095/-. Aggrieved by the order of the AO, the assessee appealed before the ld. CIT(A) and made written submissions also and relied on some case laws. The ld. CIT(A), after considering the submissions of the assessee allowed the appeal of the assessee. Aggrieved from the order of the ld. CIT(A), the Revenue is in appeal before ITAT.
3. The learned DR submitted a written synopsis, which is as under :
ITA No. 2689/Del/2016 4"1. In the arrangement entered into by the assessee company with NHAI for development of road/ highways, the position of land is handed over to the assessee company by Government Authorities for the purpose of construction of the project without any actual transfer of ownership and therefore, the assessee company has only a right to develop and maintain such assets. In such circumstances, the assessee company cannot be treated as 'owner of the property' either wholly or partly for the purpose of allowing depreciation u/s 32(1) of IT Act.
2. Reliance is placed upon Circular No. 09/2014 dated 23.04.2014 in which CBDT clarified as under:
"6. The amortization allowable may be computed at the rate which ensures that the whole of the cost incurred in creation of infrastructural facility of road/highway is amortized evenly over the period of concessionaire agreement after excluding the time taken for creation of such facility.
7. In the case where an assessee has claimed any deduction out oj initial cost of development of infrastructure facility of roads/highways under BOT projects in earlier year, the total deduction so claimed for the Assessment Years prior to the Assessment Year under consideration may be deducted from the initial cost of infrastructure facility of roads/highways and the cost 'so reduced' shall be amortized equally over the remaining period of toll concessionaire agreement. "
3. The case laws relied upon by the assessee and CIT(A) are not applicable to facts of the case"
Reliance is placed on the following decisions :
(i). Madras Industrial Investment Corpn. Ltd. vs. CIT, 91 Taxman 340 (SC).
(ii). Moradabad Toll Road Co. Ltd. vs. ACIT, 52 taxmann.com 21 (Delhi)
(iii). Indore Municipal Corpn vs. CIT, 124 Taxman 128 (SC)
4. On the other hand, the ld. AR relied on the order of the ld. CIT(A) and she also reiterated the submissions made before the ld. CIT(A). She has also relied on the decision of Hon'ble Supreme Court in the case of CIT vs. M/s. Gemni Distilleries & others and submitted that the case laws relied by the ld. CIT/DR are not applicable to the present case.
ITA No. 2689/Del/2016 55. After hearing both the sides and perusing the entire material available on record and the orders of the authorities below, we observe that the ld. CIT(A) has done good reasoned order, which is as under :
"2.3. I have carefully considered the order passed by the AO and the submissions furnished by the Ld. AR. The AO has relied on CBDT Circular No. 09/2014 dated 23.04.2014 and allowed depreciation on the basis of amortization over the period of the concessionaire agreement. The undisputed fact is that depreciation is allowable to the appellant company on the toll road. The jurisdictional High Court in the case of Moradabad Toll Company Ltd. vs. ACIT has held that depreciation is allowable on toll road/bridges under Build-Operate-Transfer (BOT) arrangement @10%. The Hon'ble High Court of Allahabad in the case of Noida Toll Bridge Co. Ltd. had also held that depreciation is allowable on road constructed by respondent assessee under the concession agreement at the same rate i.e. 10%. In any case, the eligibility of the appellant company for claim of depreciation is not disputed by the AO. He has allowed the same on the basis of amortization over the balance period of the concessional agreement relying on Board's Circular referred above. The critical question, therefore, is whether the Board's Circular which is dated 23.04.2014 could have been applied retrospectively in the case of the appellant. Return of income was filed by the appellant on 28.09.2012 when the subject Circular was not available. The Ld. AR has stated that following the Circular, the appellant company has amortized WDV on 01.04.2014 over the remaining life of asset. A close reading of the Circular also shows that deduction claimed out of initial cost of development of infrastructure, facility of roads/highway under BOT projects in earlier year may be deducted from the initial cost of infrastructure facility of roads/highway and the cost so reduced shall be amortized equally over the remaining period of the toll concessionaire agreement. This effectively means that the reduced cost is to be amortized equally over the remaining period. There is nothing in the Circular to suggest and the same shall be applicable on retrospective basis. In view thereof, the action of the AO in applying the Circular retrospectively is not in order. The disallowance of Rs.23,85,71,095/- made by the AO on account of difference between the depreciation claimed at Rs.42.48.04.025/- and depreciation allowed on ITA No. 2689/Del/2016 6 the basis of amortization for the remaining part of the concessionaire agreement i.e. from 01.04.2011 to 24.03.2034 at Rs.18,62,32,930/- is directed to be deleted. These grounds of appeal are ruled in favour of the appellant."
The assessee has also submitted a paper book containing 172 pages. It is clear from the above order that the assessee has rightly claimed depreciation and considered the circulars as quoted above which are applicable from their date. The ld. AR has relied on the judgment of Hon'ble Supreme Court (supra), wherein it has been held as under :
"Leave granted.
The question raised in this batch of Appeals is as to whether the instructions/circular issued by the Central Board of Direct Taxes on 9.2.2011 will have retrospective operation or not.
This Court in Commissioner of Income Tax-VIII, New Delhi v. Suman Dhamija (Civil Appeal Nos.4919-4920/2015) has held that instructions/circular dated 9.2.11 is not retrospective in nature and they shall not govern cases which have been filed before 2011, and that, the same will govern only such cases which are filed after the issuance of the aforesaid instructions dated 9.2.2011.
Learned counsel for the respondents relied upon circular dated 10thDecember, 2015 and specifically relied upon paragraph 10. We are of the considered opinion that the central board of direct taxes cannot issue any circular having retrospective operation.
Respectfully following the above decision, we allow the instant Appeals. The impugned order passed by the High Court dated 2.11.2011 in ITA No.887/2006 is set aside. The matter(s) is/are remitted back to the High Court for re-adjudication on merits and in accordance with law.
The Civil Appeals are allowed in the above terms."ITA No. 2689/Del/2016 7
From the above order, it is clear that the circular issued by the CBDT cannot be applied retrospectively. In view of the above, the assessee has rightly claimed depreciation and the ld. CIT(A) has rightly allowed the appeal of the assessee.
6. In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 4th September, 2017.
Sd/- Sd/-
(Bhavnesh Saini) (L.P. Sahu)
Judicial member Accountant Member
Dated: 4th September, 2018
*aks*
Copy of order forwarded to:
(1) The appellant (2) The respondent
(3) Commissioner (4) CIT(A)
(5) Departmental Representative (6) Guard File
By order
Assistant Registrar
Income Tax Appellate Tribunal
Delhi Benches, New Delhi