2019 (4) TMI 2118 - AT - Income Tax

Tribunal upholds Assessing Officer's decision, rules in favor of assessee in section 263 appeal

Valecha Badwani Sendhwa Tollways Ltd. Versus PCIT-11, Mumbai.

Valecha Badwani Sendhwa Tollways Ltd. Versus PCIT-11, Mumbai. - TMI Issues Involved:1. Validity of the order passed under section 263 of the Income Tax Act, 1961.2. Compliance with CBDT Circular No. 9/2014.3. Treatment of depreciation on 'Concessionaire Rights' as intangible assets.4. Calculation of eligible project cost.5. Issuance of notice under section 263 close to the time limit for completion of revision proceedings.Detailed Analysis:1. Validity of Order Passed Under Section 263 of the Income Tax Act, 1961:The primary issue revolves around the Principal Commissioner of Income Tax (PCIT) setting aside the assessment order dated 10.03.2016, treating it as erroneous and prejudicial to the interest of revenue. The PCIT argued that the Assessing Officer (AO) failed to investigate properly and did not comply with the CBDT Circular No. 9/2014. The assessee contended that the assessment order was in compliance with applicable provisions and judicial decisions. The Tribunal found that the AO had indeed conducted a detailed investigation during the assessment proceedings, and the view taken by the AO was a possible view supported by judicial precedents. Therefore, the order passed by the AO was not erroneous, and the twin conditions under section 263 were not fulfilled.2. Compliance with CBDT Circular No. 9/2014:The PCIT held that the AO failed to follow CBDT Circular No. 9/2014, which mandates the amortization of expenditure incurred on construction of toll roads over the period of concession. The assessee argued that the circular was issued after the filing of the return for AY 2013-14 and should not apply retrospectively. The Tribunal noted that the circular was not applicable for the assessment year in question and that the assessee had correctly claimed depreciation on 'Concessionaire Rights' as intangible assets, which was in compliance with section 32 of the Act.3. Treatment of Depreciation on 'Concessionaire Rights' as Intangible Assets:The PCIT contended that the AO erred in allowing depreciation on 'Concessionaire Rights' under section 32 as intangible assets. The assessee argued that the right to collect toll fees was an enduring benefit and qualified as an intangible asset eligible for depreciation. The Tribunal supported this view, citing various judicial decisions, including those of the Bombay High Court and other Tribunals, which upheld the treatment of such rights as intangible assets eligible for depreciation under section 32(1)(ii).4. Calculation of Eligible Project Cost:The PCIT argued that the AO failed to calculate the exact eligible project cost, resulting in an excess computation of loss. The assessee contended that the project cost was correctly reported, and any bonus received for early completion was appropriately accounted for. The Tribunal found that the AO had verified the details during the assessment proceedings, and the PCIT's contention lacked merit. The Tribunal upheld the assessee's calculation of the project cost.5. Issuance of Notice Under Section 263 Close to the Time Limit for Completion of Revision Proceedings:The assessee argued that the notice under section 263 was issued close to the time limit for completion of revision proceedings, which was prejudicial. The Tribunal did not find this argument substantial enough to affect the validity of the proceedings but focused on the substantive issues raised.Conclusion:The Tribunal concluded that the assessment order passed by the AO was not erroneous and prejudicial to the interest of revenue. The AO had taken a possible view supported by judicial precedents, and the PCIT was not justified in invoking section 263. The Tribunal allowed the appeals of the assessee, setting aside the order of the PCIT.