ITAT affirms CIT(A)'s decisions for assessee on depreciation, interest, TDS credit.

The ITAT upheld the CIT(A)'s decisions in favor of the assessee on all issues, including allowing depreciation on the road as a building, interest on mobilization advances, and TDS credit. The ITAT dismissed both the Revenue's appeal and the assessee's cross-objection, affirming the CIT(A)'s orders.

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Issues Involved:
1. Claim of depreciation allowed on the road constructed by the assessee.
2. Allowance of interest on mobilization advances.
3. Disallowance under section 14A modified by the CIT(A).
4. Allowance of TDS credit.

Detailed Analysis:

1. Claim of Depreciation Allowed on the Road Constructed by the Assessee:
The Revenue contested the depreciation claim on the road/bridges constructed by the assessee, arguing that the assessee is not the owner of the building and the road does not form part of the assets within the meaning of building. The A.O. disallowed the depreciation of Rs.10,59,25,968/- claimed under "Road Bridge" described as building. The assessee contended that if the road is not treated as building, it should be treated as plant with a 25% depreciation rate or the entire expenditure should be allowed as revenue expenditure. The CIT(A) decided in favor of the assessee, referencing the ITAT's decisions in similar cases like Nyse Infrastructure Pvt. Ltd. and Navayuga Engineering Company Limited, and the Delhi High Court's decision in Noida Toll Bridge. The ITAT upheld the CIT(A)'s decision, confirming that the road qualifies for depreciation as a building.

2. Allowance of Interest on Mobilization Advances:
The A.O. disallowed the provision for interest on mobilization advances amounting to Rs.5,66,78,872/-, arguing that provisions are not allowable as deductions under the I.T. Act. The CIT(A) allowed the provision, stating that under the mercantile system of accounting, liabilities that accrue must be accounted for. The ITAT agreed with the CIT(A), noting that the A.O. failed to examine whether the interest liability had crystallized in the year. The issue was restored to the A.O. for verification of the quantified interest amount, but the ITAT dismissed the Revenue's argument that the amount was not debited to the P & L account.

3. Disallowance Under Section 14A Modified by the CIT(A):
The A.O. disallowed interest of Rs.3,37,60,799/- under section 14A, despite the assessee not having any exempt income, based on investments in joint venture companies. The CIT(A) partially upheld the assessee's contentions, adjusting the disallowance to interest on Rs.13.32 crores, which was accepted as diverted for investments in earlier years. The ITAT found the CIT(A)'s order reasonable and noted that the disallowance should have been considered under section 36(1)(iii) rather than section 14A. The ITAT upheld the disallowance of interest on the diverted amount, dismissing both the Revenue's and assessee's grounds.

4. Allowance of TDS Credit:
The A.O. disallowed TDS credit of Rs.1,22,50,395/- deducted from mobilization advances, allowing only Rs.2,65,771/- based on Form 26AS. The CIT(A) directed the A.O. to grant TDS credit, referencing the ITAT's earlier decision in the assessee's case. The ITAT upheld the CIT(A)'s decision, emphasizing the need for reconciliation of mobilization advances and TDS claims to prevent double claims. The ITAT affirmed the CIT(A)'s order, rejecting the Revenue's contentions.

In conclusion, the ITAT dismissed both the Revenue's appeal and the assessee's cross-objection, affirming the CIT(A)'s decisions on all issues. The order was pronounced in the open Court on 19th February, 2014.

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