TaxTMI 
TaxTMI 
2017 (4) TMI 655
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....ing Officer who treated the expenditure as capital as nature. 2. The CIT(A) has erred in law and on facts in allowing depreciation claimed by the appellant for Rs. 15,84,60,192/- without appreciating the fact that the toll bridge is constructed on "Building Own Operate Transfer" basis and the assessee is not the owner, which is the first condition for allowing the depreciation u/s.32 of the IT Act, 1961. 3. The CIT(A) has erred in law on facts in allowing depreciation claimed by the appellant by holding that the assets on which depreciation is claimed by the assessee are owned by it, whereas in the concession Agreement dated 12-11-1997 between NOIDA authority and the assessee, it is clearly mentioned that the land on which the toll bridge has been constructed is not the property of the assessee, but has been given on lease by the NOIDA authority for a certain period i.e. 30 years. As per the agreement, the lease can be terminated earlier also, subject to certain conditions. Therefore, the ownership of the asset in the hands of the assessee is not established. 4. The CIT(A) has erred in law on facts in deleting addition of Rs. 91,21,413/- being 'Take O....
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.... and indepent Auditor are also requird to review cost and recovery position form time to time and be instrumental in determining whether development rights of the land around the Toll Bridge should or should not be granted to the concessionaire i.e. assessee, depending upon the recovery position. If recovery is slow Noida is required to allow assessee developmental rights of land around the flyway whereas if the recovery is fast the same is not required. When the in the same way concession agreement also mentions about retainers. All these details related to works assigned to independent Engineer, independent Auditor and, retainer is related to establishment, construction and commissioning of the DND Fly over to oversee and review position of recovery for the fly over vis-à-vis the cost involved. Hence the expense of Rs. 22,55,046/- pais as Agency fee and claimed as expenditure in P & L account is not allowable since it is a capital expenditure. The same is treated as capital expenditure and the same is added back, to the income of the assessee." 4. Learned CIT(A) deleted the additions so made by the AO for the reasons mentioned in his order at pages 53 and 54 of his orde....
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....contents of various clauses of the agreements, it is evident that the services of these agents were availed in order to ensure that the assessee has complied with the terms and conditions of the various agreements entered into by the assessee. The assessee was required to appoint these agents as a part of the agreements and in order to safeguard the interest of the stakeholders, was a business necessity for the assessee. The services were provided by these agents on a regular basis and thus were recurring in nature. The services of these agents helped the assessee in proper and efficient implementation of the agreements and thereby resulting in smooth functioning of the assessee's business. Further, the project got commissioned in February, 2001 and was fully operational during the FY 2005-06. The AO seems to have misread the Agreements to wrongly conclude that since the works assigned to independent Engineer, independent Auditor and, retainer is related to establishment, construction and commissioning of the DND Fly over and to oversee and review position of recovery for the fly over vis-a-vis the cost involved, the expenses incurred by the assesse in this regard is capital in nat....
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....tory premises or any other commercial complexes associated with that road, then depreciation cannot be allowed to the assessee. The DND Flyover is a product of the assessee company, which is now commercially exploited. Assessee itself in its submissions dated 19.11.2007 stated that principal business activityu of the assessee company is to construct toll bridges on build, own, operate and transfer (BOOT) basis. Thus, by no stretch of argument, the DND Toll bridge can be held as a depreciable capital asset. Keeping in view the above discussion and legal position, the assessee's claim of depreciation of Rs. 15,84,60,192/- is disallowed and the same is added back to its total income." 10. Learned CIT(A) allowed the claim of the assessee and accordingly allowed the grounds so raised. 11. We have heard the rival contentions and perused the facts of the case. The issue is directly covered by the decision of Hon'ble ITAT vide order dated 19.12.2008 for the Assessment Year 2002-03 and 2003-04 in assessee's own case where the decision of learned CIT(A) has been upheld by the ITAT, which is reproduced hereinbelow. "As far as the objection of learned DR with regard to ....
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.... 1. Whether on the facts and circumstances of the case, the Hon'ble ITAT is justified in law in dismissing the appeal of the revenue and to hold that in isolation, road can be considered as a building for the purpose of granting depreciation? 2. Whether on the facts and circumstances of the case, the Hon'ble ITAT is justified in law in dismissing the appeal of the revenue and to hold that "Buildings" include roads, birdges, culvers, wells and tube wells etc. as per provisions of Appendix-I of the IT Rules, 1962, whereas Appendix-I is effective from assessment year 2006-07 onwards and not applicable for A.Y. 2004-05, which is the year under appeal? 3. Whether on the facts and circumstances of the case, the Hon'ble ITAT is justified in law in dismissing the appeal of the revenue and to hold that the assets on which depreciation is claimed by the assessee are owned by it, whereas in the concession Agreement dated 12.11.1997 between NOIDA authority and the assessee, it is clearly mentioned that the land on which the toll bridge has been constructed is not a property of the assessee, but has been given on lease by the NOIDA authority for a certain period (30 yea....
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....ot onwed by the assessee but in which the assessee holds a lease or other right of occupancy. Thepresent case stands on a better footing, in which the land is hled on lease and the road as capital asset has been built on it with exclusive ownership of the road, and the bridge in the assessee-company for the concessiion period, and which also includes the right to collect tolls and to regulate use of the bridge. Section 32 would, therefore, apply for the purpose of providing depreciation to be worked out in accordance with the law. For removal of doubts the legislature has provided that the building includes roads in Note(1) to Appendix-I providing for the table of rates at which the depreciation is admissible. 26. The questions no.1, 2 and 3 are thus decided in favour of the respondent- assessee and aginst the revenue. So far as question no.1 is concerned, regarding the payment in connection of "take out assistance fee' for redemption of Deep Discount Bonds this Court has already decided the question in Income Tax Appeal No.44 of 2010 between the same parties relating to the assessment year 23002-03 in favour of the respondent-assessee and against the revenue." 15. The ....
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....sessee by way of fees being paid for the redemption of bonds. Here it is pertinent to mention that this issue was raised in earlier years and has duly been upheld oy Ld. CIT (Appeals) in those years. In view of the above, the amount of Rs. 91,21,413/- paid by the assessee as "Take out Assistance fee" is disallowed as an expenditure being capital in nature and added back to the total income of the assessee." 17. Learned CIT(A) deleted the addition so made by the AO. The issue is covered against the Revenue by the decision of Hon'ble Allahabad High Court in assessee's own case for the assessment year 2002-03 in Income Tax Appeal No.44 of 2010 dated 24.08.2012 placed at paper book page no.899 to 908 and for the assessment year 2003-04 in ITA No.273 of 2011 dated 24.08.2012 placed at paper book page 887 to 896. In the facts and circumstances of the case, we find that there is no infirmity in the order of the learned CIT(A) who has rightly deleted the addition so made. 18. In the result, the appeal of the Revenue is dismissed. 19. Now we take up the appeal of the assessee in ITA No.5286/Del/2012. The grounds raised are as under: 1. The order passed by the Learned Commi....
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.... to an employee as bonus or commission for services rendered is allowed. When specific section is there for allowance or an expenditure, then the general provision of the section as contained in Section 37(1) shall not apply. The learned counsel for the assessee relied upon the decision of Hon'ble Supreme Court in the case of Shahzada Nand & Sons vs. CIT reported in (1977) 108 ITR 358 (SC) and the relevant head notes are reproduced hereinbelow. "Section 36(1)(ii) of the Income-tax Act, 1961 - Bonus or commission - Assessment year 1963-64 - Whether it is not required that there should be any extra services rendered by an employee before payment of commission to him can be justified as an allowable expenditure - Held, yes - Assessee firm was carrying on business with help of two employees namely 'S' and 'G' - Business of assessee-firm consisted of sole seIling agency of one OCM in respect of yarn, cloth and blankets - Since assessee showed very satisfactory turnover, OCM started giving to assessee, in addition to usual commission, overriding commission at rate of two and a halfpercent on sales affected by assessee - Assessee in turn decided to give to 'S&....
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....s as being of a capital nature. The Tribunal was justified in taking the view that this expenditure does not create any asset of an enduring nature." 24. He also relied upon the letter no.F-No.10/67/05-IT(A)-1 issued by CBDT which is reproduced hereinbelow. " Letter F. No.10/67/65-IT(A-I) Listing fee paid annually to stock exchange - Whether admissible as business expenditure Attention is invited to the Board's Letter F. No.10/.44/64-IT(A-I), datred 14.1.1995 [Annex], on the above subject. The matter has been reconsidered by the Board. As the advantatges accruing to a company as a result of getting its hares listed on a stock exchange contain substantial advantages pertaining to its day to day business, it has been decided that such expenses should be considered as laid out wholly and exclusively for the purposes of the business and therefore, admissible as business expenditure under section 37(1). In view of the above, the instructions issued under the Board's earlier letter referred to above may be treated as withdrawn. Letter : F.No. 10/67/65-IT(A-I), dated 26.08.1965." 25. Learned DR, on the other hand, mainly relied upon the decision of Hon'....
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.... of business and is allowed as Revenue expenditure. Accordingly all the grounds of the assessee are allowed and appeal of the assessee in ITA No.5286/Del/12 is allowed. 27. Now we take up the appeal of the assessee for the assessment year 2007-08, in ITA No.5286/Del/2012 where the issue with regard to the agency fees is identical as in Revenue's Appeal in ITA No.5246/Del/2012, and therefore, following our own order hereinabove. The Revenue's ground is dismissed. 28. As regards the ground no.2 of the Revenue, the brief facts of the case as emanating from the order of the AO are reproduced hereinbelow. "12. On perusal of the balance sheet, it is seen that assessee has shown a sum of Rs. 2,00,57,868/- as Advance Payment and unexpired discouns shown under the head current liability. Accordingly, assessee was asked to explain the nature of this unexpired discounst shown under the head liability. In response to the query, assessee has stated that this pertains to the toll receipts, which the customer has not used during the year under consideration. Assessee was further asked to explain as to why the reciepts received from the customer have been kept aside in the balance s....