Income Tax Appellate Tribunal - Mumbai
Besix Kier Dabhol S.A- India Project ... vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH "L", MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI PRAMOD KUMAR(A.M) ITA NO.1037/MUM/2008(A.Y. 2000-01) ITA NO.1038/MUM/2008(A.Y. 2001-02) ITA NO.1039/MUM/2008(A.Y. 2002-03) ITA NO.1040/MUM/2008(A.Y.2003-04) ADIT(IT) 3(2), Scindia House, R.No.132, 1st Floor, N.M.Road, Mumbai - 38. (Appellant) Vs. Besix Kier Dabhol SA India Project Office, C/o. Navin Heavy Lifters, Jani Compound, Near Amar Cinema, W.T.Patil Marg, Chembur, Mumbai - 71. PAN: AAACB 6191J Appellant by : Shri Narender Singh Respondent by : S/Shri Sunil M.Lala /Pankaj Bagri ORDER
PER BENCH, These are appeals by the revenue against four orders all dated 29/11/07 of CIT(A)XXXIII, Mumbai relating to assessment year 2000-01 to 2003-04.
2. These appeal arise under the following circumstances.
3. The assessee is a company incorporated in Belgium. It was engaged in the business of construction for development and procurement of LNG unloading, re-gasification and storage facility. The assessee filed the return of income for assessment year 2000-01 declaring a total loss of Rs.303,310,761. The AO passed the order under section 143(3) of the Act, assessing the total loss to Rs.307,808,873/-. Thereafter, the learned Director of Income Tax (International Taxation),(DIT) Mumbai vide his order dated March, 28, 2005 under Section 263 of the Act set aside the assessment order passed by the AO under section 143(3) of the Act. The ld.DIT, directed the AO to conduct proper verifications and enquiries in respect of the issues mentioned in the DIT's order.
4. Thereafter, the AO passed the assessment order under section 143(3) r.w.s. 263 of the Act dated March, 13, 2006 and assessed the total loss at Rs.29,31,219/- for A.Y.2000-01. Aggrieved by the assessment order, the assessee preferred an appeal before CIT(A). Pending disposal of such appeal by the CIT(A), the assessee preferred a rectification application under section 154 of the Act requesting for rectification of errors arising out of the assessment order passed under section 143(3) r.w.s. 263 of the Act.
5. The issues raised by the Assessee in the application u/s.154 related to Additional depreciation allowable for A.Y 2000-01 due to disallowance of depreciation pertaining to A.Y. 1999-2000. The AO has, in the order for A.Y 2000-01 passed under section 143(3) read with section 263 of the Act, disallowed the adjustment of / for opening WIP/WDV as per tax runes and as per books for A.Y 1999-00. As a part of the aforesaid adjustment, no depreciation was allowed to the assessee for A.Y 1999-00 on the ground that the assessee company had carried out preparatory work under the contract and the assets were not put to use for the purpose of business. As a consequence of the aforesaid disallowance especially with regard to depreciation for A.Y 1999-00, the written down value of the block of assets as on April 1, 1999 would increase thus, resulting in a higher depreciation for A.Y 2000-01. However, the said additional depreciation for A.Y 2000-01 has remained to the allowed. According to the AO, the additional depreciation allowable for A.Y 2000-01 is only consequential to disallowance made in the said assessment order passed by the AO. Since the above is a mistake apparent from the records, it was prayed that the AO be directed to rectify the same under section 154 of the Act and grant the assessee additional depreciation of Rs. 2,90,12,609 for the A.Y 2000-01.
6. Another issue raised by the Assessee in the application u/s.154 was Depreciation on Temporary Site Installations. The assessee company had set up a project office in India under the sub- contract awarded by Lingtec Construction LP ('Lingtec) to perform all work necessary to construct a breakwater and a LNG fuel jetty for a LNG receiving and re-gasification facility(the Project) as a Phase II expansion of Dabhol Power Plant. For the project the assessee has set up the Project Office, under the approval of the RBI. Further, as per the permission granted by RBI, the assessee was not allowed to acquire any property in India. However, for the Project undertaken, the assessee had to house the engineers and other staff at the side and further, also set up temporary offices at the site. The housing units, storage tanks, containers, etc. were erected only for a temporary period i.e. for the duration of the contract and was not erected for any other purpose. Moreover, the housing units were constructed on the land belonging to Lingtec for whom the assessee was executing the contract. The entire cost of the temporary structures was borne by the assessee. Further, since the assessee was under obligation to vacate the land after the execution of the contract and dismantle the structures, the structures are to be held as temporary in nature and 100% depreciation was claimed by the assessee in its return of income. However, the AO in his order under Section 143(3) r.w.s. 263 of the Act, disallowed 100% depreciation on Temporary Site Installations contending that these assets do not come under the category of "purely temporary erections such as wooden structures". Alternatively it was prayed that in any event if the AO determined the classification of the installations under the categories of assets specified in Appendix 1 to the Income Tax Rules, 1962 he should have granted depreciation at the rates specified therein.
7. If the WDV of the assets is enhanced and if depreciation on temporary structures is allowed as per the alternative claim of the Assessee, then as a consequence the WDV of the block of assts as on 1/4/01, 1/4/02 and 1/4/03 would also change and accordingly application for rectification was made before the AO by the assessee in the AY 01-02 to 03-04 also.
8. All the applications by the Assessee were rejected by the AO. On appeal by the assessee the CIT(A) held that the assessee is entitled for depreciation on the basis of actual cost of assets since the Assessing Officer had not allowed any depreciation in assessment year 1999-2000. He also directed the AO to allow normal depreciation on assets, amounting to Rs.2,76,89,388/- on temporary structures.
9. Aggrieved by the aforesaid directions of the CIT(A), the revenue has preferred the present appeals before the Tribunal, raising the following common grounds of appeal:
"1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) failed to appreciate that the issue of allowability of depreciation is not a mistake apparent from records and has accordingly erred in adjudicating on this issue which was dealt with at the time of assessment under section 143(3) of the Act.
2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in holding that the assessee is entitled for depreciation on the basis of actual cost of assets since the Assessing Officer had not allowed any depreciation in assessment year 1999-2000.
3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in directing the Assessing Officer to allow normal depreciation on assets, amounting to Rs.2,76,89,388/- without appreciation the fact that the Assessing Officer had disallowed depreciation on many assets due to non-production of invoices and other documents as proof of purchase of assets."
10. At the time of hearing of these appeals it was brought to our notice by the ld. counsel for the assessee that against order of the CIT u/s. 263 of the Income Tax Act, 1961 dated 28/3/05, which has given rise to the consequential orders and application under section 154 of the Act for all these assessment years, the assessee filed an appeal before the ITAT in ITA No.3325/M/05 and the Tribunal by its order dated 23/6/08 allowed the appeal and held that the order under section 263 of the act cannot be sustained. Thus the order passed u/s.263 of the Act for AY 00-01 no longer survives. In view of the above the consequential order passed by the AO u/s. 143(3) r.w.s. 263 would not survive. Consequently, the application under section 154 seeking rectification of the order passed under section 143(3) r.w.s. 263 cannot also survive. The applications filed u/s.154 of the Act for AY 01-02 to 03-04 would also not survive as the very basis of these applications is the order passed u/s.143(3) read with Sec.263 of the Act for AY 00-01. Consequently, all these appeals by the revenue are dismissed as infructuous.
11. In the result, all the appeals of the revenue are dismissed.
Order pronounced in the open court on the 4th day of Nov.2010
Sd/- Sd/-
(PRAMOD KUMAR) (N.V.VASUDEVAN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated. 4th Nov.2010
Copy to: 1. The Appellant 2. The Respondent 3. The CIT City -concerned
The CIT(A)- concerned 5. The D.R"E" Bench.
(True copy) By Order
Asst. Registrar, ITAT, Mumbai Benches
MUMBAI.
Vm.
Details
Date
Initials
Designation
1
Draft dictated on
1/10/2010
Sr.PS/PS
2
Draft Placed before author
4/10/2010
Sr.PS/PS
3
Draft proposed & placed before the Second Member
JM/AM
4
Draft discussed/approved by Second Member
JM/AM
5.
Approved Draft comes to the Sr.PS/PS
Sr.PS/PS
6.
Kept for pronouncement on
Sr.PS/PS
7.
File sent to the Bench Clerk
Sr.PS/PS
8
Date on which the file goes to the Head clerk
9
Date of Dispatch of order
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ITA NO.1037 to 1040/M/08