ITAT upholds decision on PCIT's order under Section 263 of Income Tax Act for AY 2011-12.

Pr. Commissioner of Income Tax - 3, New Delhi Versus Delhi Airport Metro Express Pvt. Ltd.

Pr. Commissioner of Income Tax - 3, New Delhi Versus Delhi Airport Metro Express Pvt. Ltd. - [2017] 398 ITR 8 Issues:
1. Justification of ITAT setting aside PCIT's order under Section 263 of the Income Tax Act, 1961.
2. Eligibility of the Assessee to claim depreciation on fixed assets under Section 32 of the Act.

Analysis:
1. The Revenue appealed against the ITAT's order in relation to the PCIT's order under Section 263 of the Income Tax Act for the Assessment Year 2011-12. The main issue was whether the ITAT was correct in setting aside the PCIT's order. The Assessee, a Concessionaire of a project, claimed depreciation on fixed assets. The Revenue argued that the Assessee was not eligible for depreciation as it did not own the assets developed under the BOT scheme. The PCIT's order was based on Circular No. 9 of 2014, stating that no depreciation would be allowed on infrastructure under such schemes.

2. The Assessee contended that it legally owned the plant and machinery used for its business during the relevant assessment year, justifying its claim for depreciation under Section 32 of the Act. The PCIT's order highlighted the excess depreciation allowed to the Assessee and the failure of the AO to follow the Circular. However, the Court found that the PCIT did not conduct a proper inquiry to determine the extent of excess depreciation claimed by the Assessee. The Court emphasized that for the PCIT to exercise jurisdiction under Section 263, a minimal inquiry was necessary, which was lacking in this case.

3. The PCIT's order was set aside by the ITAT, as it did not provide sufficient justification for its decision. The Court noted that the PCIT should have undertaken an inquiry to ascertain the assets purchased and installed by the Assessee, rather than solely relying on the Circular. The Court also highlighted that the PCIT's decision to send the matter back to the AO for a fresh assessment was premature without conducting a proper inquiry. Therefore, the ITAT's decision to set aside the PCIT's order was upheld, and the appeal was dismissed as no substantial question of law arose from the case.