TaxTMI 
TaxTMI 
2019 (9) TMI 977
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....015-16 and ITA No. 391/CIT(A)-11/BNG/2017-18. Out of these two appeals filed before ld. CIT(A), one appeal i.e. ITA No. 391/CIT(A)- 11/BNG/2017-18 was filed on 16.10.2017 before ld. CIT(A) and this appeal was directed against the order passed by the AO u/s. 143(3) r.w.s. 263 of the IT Act and the remaining one appeal is filed before ld. CIT(A) in ITA No. 70/CIT(A)- 11/BNG/2015-16 on 23.04.2015 against the original assessment order passed by the AO u/s. 143(3) of the IT Act. But in both the appeals filed before the Tribunal, the only issue on merit raised by assessee is regarding disallowance of depreciation amounting to Rs. 1,85,25,192/- in addition to the issue regarding charging of interest u/s. 234D of the IT Act of Rs. 11,18,296/- raised by the assessee in ITA No. 513/Bang/2019. The remaining one appeal i.e. ITA No. 514/Bang/2019 is for Assessment Year 2014-15 and the same is directed against the order of ld. CIT(A)- 11, Bangalore dated 17.01.2019. 2. The grounds raised by the assessee in ITA No. 511/Bang/2019 are as under. "1. That the order of the authorities below in so far as it is against the assessee is opposed to law, facts, circumstances, natural justice, equity all ....
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....ds raised by the assessee in ITA No. 512/Bang/2019 are as under. "1. That the order of the authorities below in so far as it is against the assessee is opposed to law, facts, circumstances, natural justice, equity all other known principles of law. 2. That the total income computed and the total tax computed is hereby disputed. 3. The order is based on surmise, suspicion and conjuncture and is in blatant disregard to the evidence on record, law, fact, and judicial pronouncement of higher authorities and courts, hence requires to be cancelled. 4. The authorities below erred in disallowing depreciation amounting to Rs. 1,85,25,192/-. 5. For the above and other grounds and reasons which may be submitted during the course of hearing of the appeal, the assessee requests that the appeal be allowed as prayed and justice be rendered." 4. The grounds raised by the assessee in ITA No. 513/Bang/2019 are as under. "1. That the order of the authorities below in so far as it is against the assessee is opposed to law, facts, circumstances, natural justice, equity all other known principles of law. 2. That the total income computed and the total tax computed is hereby disputed. 3.....
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....assed by the Learned CIT dt 28.03.2017 is against the law having regard to the facts, circumstances and law on the issue and hence liable to be cancelled as admittedly there were two views on the issue and when valid discretion is exercised no such order can be made. 7. The Learned CIT erred in issuing direction to the assessing officer to modify the assessment by withdrawing the deduction allowed u/s 35D of the Act. 8. The Learned CIT erred in issuing direction to the assessing officer to charge the interest leviable u/s 234D of the Act. 9. For the above and other grounds and reasons which may be submitted during the course of hearing of this appeal, the assessee requests that the appeal be allowed as prayed and justice be rendered." 7. The ld. AR of assessee has filed the written submissions which are reproduced hereinbelow for ready reference. "With reference to the above mentioned case heard on 18.07.2019, the appellant submits this written submission as directed by the Hon'ble Bench: I)In ITA 511/B/19 for the AY 2011-12 on the issue of assessment being completed invoking the provisions of section 147 of the Act, the assessment made by the AO is not sustainable ....
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.... The assessee has relied on the decision of the Delhi High Court in the case of Ranbaxy Laboratories Ltd vs CIT - 336 ITR 136 (PBI - I page 87, relevant page 95) wherein the Court concurring with the Jet Airways cited supra has held as under: " 21. In view of our above discussions, the Tribunal was right in holding that the AO had the jurisdiction to reassess issues other than the issues in respect of which proceedings are initiated but he was not so justified when the reasons for the initiation of those proceedings ceased to survive." The decisions of the Jet Airways & Ranbaxy Laboratories cited supra came up for consideration by the jurisdictional High Court in the case of N.Govindaraju vs ITO - 377 ITR 243 (PBI - 2 page 199, relevant page 211) and also relied on by the DR wherein the Court has observed as under: " 40. It is true that if the foundation goes, then the structure cannot remain. Meaning thereby, if notice has no sufficient reason or is invalid, no proceedings can be initiated. But the same can be checked at the initial stage by challenging the notice. If the notice is challenged and found to be valid, or where the notice is not at all challenged, then in either....
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....ssee the right to extract iron ore in the Donimalai Range. Thus the assessee has become the owner of such right. The mining lease and licence acquired by the assessee for extraction of iron ore is in the nature of business or commercial right falling under the category of intangible asset eligible for depreciation u/s 32(1)(ii) of the Act. Thus the Mining lease and licence is a capital asset which enables the assessee to do its business of Mining. On this issue the assessee has relied on the decision of the ITAT Delhi in the case of ONGC Videsh Ltd vs DCIT - 127 TTJ 497 (PBI - I page 100, relevant page 109,110) wherein the Tribunal in paras 14 & 14A has held as under: " 14.......If it is an asset being the right then it is obvious that same is commercial right, therefore in the nature of asset in the form of license. This right had been granted to the assessee by way of license and the assessee became owner of such right i.e., license to have an access and to carry on of business of exploration and development of mineral oil. Accordingly, as per our considered view such an asset falls within the category of asset falling under s. 32(1)(ii) of the Act. Accordingly, we are inclin....
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....ding identical issue on similar facts held that license fee paid by assessee was to acquire a commercial right to operate trains on Indian Railway track for 20 years which was transferable. It is also observed that such right is significant to the business of assessee and without the license assessee could not have run its container on railway track. This Tribunal for A.Y. 200809 in assessee's own case vide order dated 18/01/2017 held that, commercial right acquired by assessee by way of this license for earning enduring benefit for a period of 20 years would amount to capital asset. It is also observed that this view of Tribunal derives support from decision of Hon'ble Delhi High Court in the case of Areva T&D India Ltd. vs. DCIT reported in 345 ITR 421. Under such circumstances respectfully following the same view, we hold that the intangible asset acquired by assessee is eligible for depreciation @ 25% u/s 32(1)(ii) of the Act." The Learned DR has relied on the decision of Hon'ble ITAT Cuttak Bench in the case of Mahanadi Coalfields Ltd vs DCIT in ITA 325 & 377/Ctk/2013 dt.19,03.2018 wherein the Bench has relied on the Bombay High Court decision in the case of Tech....
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....rder). [Condition 1 - user agency shall transfer the cost of compensatory afforestation to the state forest department - Paid Rs. 72,62,800/- towards the same. Condition 2 - fencing, protection and regeneration of the safety zone area shall be done Paid Rs. 5,88,573/- towards the same. Condition 6 - state government shall charge the Net present value of the dead rent on area made available on lease under this proposal from the user agency as per orders of Supreme court - Paid Rs. 8,65,00,000/- towards the same as per demand notice raised by the Conservator of Forests, Bellary (copy of demand notice enclosed as Annexure D).] It is upon fulfilment of such conditions, the Principal Chief Conservator of Forests vide letter dt.21.11.2006 moved the matter with the Government of India to . accord clearance under Forest Act towards making available 134 hectares of forest range on Lease in favour of M.Srinivasulu for extraction of iron ore (Annexure E). The Government notification dt.24.05.2007 sanctioning the lease in favour of Srinivasulu is at PBI - 2 page 157. Subsequently the Mining lease was granted w.e.f 03.07.2007 (Annexure A). Apart from the above a sum of Rs. 1.,05,690/....
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....td (PBI - 2 page 253) and Karnataka High court in Sasken Communication Technologies Ltd (FBI - 2 page 259) ITA 513/B/19 AY 2012-13 143(3) rws 263 AO disallowed Depreciation and allowed amortisation at 1/20th Depreciation may be allowed on the Intangible asset on WDV basis ITA 514/B/19 AY 2014-15 143(3) AO disallowed Depreciation and allowed amortisation at 1/20th Depreciation may be allowed on the Intangible asset on WDV basis 8. The ld. DR of revenue supported the orders of authorities below. It is also submitted that the reasons recorded by the AO for reopening is not relevant and, in this regard, he placed reliance on the judgment of Hon'ble Karnataka High Court rendered in the case of Shri N. Govindaraju Vs. ITO & Anr. as reported in (2015) 377 ITR 0243 (Karn), copy available on pages 199 to 213 of the paper book. In particular, he drawn our attention to para no. 44 of this judgment. 9. We have considered the rival submissions. First of all, we decide the appeal of the assessee for Assessment Year 2011-12 in ITA No. 511/Bang/2019. As per ground nos. 1 to 10 of this appeal, the issue in dispute is regard....
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....idered opinion, this Tribunal order is not relevant for deciding the issue in the present case regarding the validity of reassessment proceedings. In addition to that, various other judgments are cited by ld. AR of assessee including that of Hon'ble Bombay High Court rendered in the case of CIT Vs. Jet Airways (I) Ltd. as reported in 331 ITR 236 and of Hon'ble Delhi High Court rendered in the case of Ranbaxy Laboratories Ltd. Vs. CIT as reported in 336 ITR 136 but the judgment of Hon'ble Karnataka High Court rendered in the case of Shri N. Govindaraju Vs. ITO & Anr. (supra) is available before us and as per this judgment, it was held that reopening is valid. In that case also, it was noted in para 1 of the judgment that if the reasons for reopening are (a) and (b) and during fresh assessment proceedings u/s. 147 of the Act, income is found to have escaped from assessment for some other reason say (c) and (d), then, if reasons (a) and (b) do not survive and no addition can be made for such reasons, can additions be made on the basis of reasons or grounds (c) and (d). In the present case also, this is the objection of the assessee before us that reasons were recorded in respect o....
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....s and stamp duty to Sub Registrar, Sandur. The AO states that appellant had not shown how the said expenditure can be classified as an intangible asset wherein depreciation can be claimed. It is noted that the amount was paid to Forest department for it to acquire compensatory aforestation and also as a Net Present Value. 21. Further the expenditure was originally incurred by mining licence holder Mr. M. Srinivasulu. The mining lease was transferred to the appellant later. Therefore, AO held that the said expenditure did not fall under the head preliminary and pre-operative expenditure as claimed in earlier years or as intangible asset as claimed in the current AY. The AO further states that transfer of mining lease no 2552 had taken place as per Rule 37 of MCR 1960 from Sh. M. Srinivasulu to the appellant on 27/01/2010 and the period of lease was specified as 20 years. As appellant derived 36% share in mining ore, the expenditure was amortised by AO and held to be allowable over a period of 20 years @ 1/20th for each year after commencement of business. 22. During appellate proceedings, appellant has not rebutted findings of AO with facts. The appellant failed to prove with ev....
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....tter from Government of India, Ministry of Environment & Forests dated 13.09.2006 and also letter dated 31.10.2006 submitted by Shri M. Srinivasulu to the Deputy Conservator of Forests, Bellary Circle, Bellary and the demand notice dated 26.10.2006 as per which a demand of Rs. 865 Lakhs has been raised. Along with the written submissions filed by ld. AR of assessee, these documents have been submitted and from the same, it is seen that Rs. 865 Lakhs has been recovered from the assessee on account of net present value of the forest area of 134 ha. Diverted to the assessee for mining purpose and this net present value has been fixed as per Government order dated 17.01.2004 at different rates for different types of forest area as per the details given in demand notice dated 26.10.2006 and for ready reference, we reproduce the contents of this demand notice as under. " DEMAND NOTICE Sub:- Diversion of 134 ha. of forest land in favour of M/s M.Srinivasulu for extraction of Iron Ore Mining in Donimalai Reserve Forest, Sandur taluk, Bellary Recovery of Net Present Value. Ref:- 1) Letter No.F No.8-672006-FC dated 13-09-2006 of Government of India, MOEF New Delhi. 2) Letter No FEE-72....
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....ted that this land of 134 ha. of forest land was diverted in favour of M/s. M. Srinivasulu Iron Ore Mining in Donimalai RF, Sandur Taluk, in Bellary district of Karnataka subject to various conditions and one such condition is this that the User Agency shall transfer the cost of Compensatory Afforestation to the State Forest Department. As per para 6 of this letter it is specified that the State Government shall charge the Net Present Value of the forest area diverted under this proposal from the User Agency as per the orders of the Hon'ble Supreme Court of India dated 30.10.2002 and 01.08.2003. Hence, it is seen that the payment in question is on account of net present value of the cost of Compensatory Afforestation to be incurred by the State Forest Department. In our considered opinion, this is not an acquisition of any intangible assets by the assessee. In our considered opinion, as per this mining license granted by the Government of India along with the Government of Karnataka, the payment in question is for cost of Compensatory Afforestation to the State Forest Department and not for acquiring any intangible asset. For ready reference, we reproduce the contents of this lette....
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.... area) shall be done at the project cost. Besides this. afforestation on degraded forest land, to be selected elsewhere, measuring one and a half times the area under safety zone, shall also be done at the project cost. 3. Following activities shall be undertaken by the State Forest Department at the project cost: (i) Proper mitigation measures to minimize soil erosion and choking of streams shall be prepared. (ii) Planting up of all vacant land and clumps with suitably. species to arrest soil erosion and its protection. (iii) Construction of a series of check dams and toe walls along the contour on the hill slopes to avoid rolling down of the excavated material. 4. Wherever possible and technically feasible, the User Agency shall in collaboration with the local community undertake afforestation measures in the blanks within the lease area, as well as along the roads outside the lease area diverted under this approval, in consultation with the State Forest Department at the project cost. 5. The period of diversion under this approval shall be twenty (20) years subject to possession of valid lease by the User Agency under the MMDR Act, 1957. 6. The State Government sha....
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....ation to the State Forest Department for 134 Ha. @ Rs. 54,200/ha and total amount of Rs. 72,62,800/- was paid by way of Demand Draft No. 8065 drawn at UTI Bank, Bellary Branch, Karnataka in favour of Principal Chief Conservator of Forests, Bangalore. The demand notice dated 20.10.2006 was raised raising demand of Rs. 865 Lakhs being the net present value of forest land of 134 ha. under different categories as prescribed by Government of Karnataka in Notification No. FEE-247-FGL- 2002 dated 17.01.2004. Hence, in our considered opinion, this payment of Rs. 865 Lakhs and Rs. 72,62,800/- is not for acquiring any intangible assets by assessee but the net present value of the Compensatory Afforestation to be incurred by the State Government later on. Deduction of this amount is already allowed by the AO to the extent of 1/20 of this expenditure incurred by the assessee although the assessee's claim is this that this is an intangible asset on which depreciation should be allowed. This stand of the AO is supported by the judgment of the Hon'ble Apex Court rendered in the case of Madras Industrial Investment Corporation Ltd. Vs. CIT as reported in 225 ITR 802 in which it was held that disco....
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....tion @ 25% should be allowed. This claim was rejected by the AO and also by ld. CIT(A). The Tribunal decided the issue in favour of the assessee on this basis that the assessee has acquired business/commercial rights of similar measure. In the present case, we have seen that the impugned expenditure is not for acquiring any intangible asset but the payment of net present value of Compensatory Afforestation in future for which deduction is allowed by the AO to the extent of 1/20 in the present year because the assessee is eligible for carrying on mining activities for 20 years. Hence, in our considered opinion, this Tribunal order does not help the assessee in the present case. Various other Tribunal orders are also cited by ld. AR of assessee. In our considered opinion, these Tribunal orders are also not applicable in the present case because the facts are different. 16. In the result, the appeal filed by the assessee for Assessment Year 2011-12 in ITA No. 511/Bang/2019 is dismissed. 17. Now we take up the appeals for A. Y. 2012 - 13. For this year, one appeal in ITA No. 863/B/2017 is directed against the order passed by CIT u/s 263. Regarding this appeal, as per the written subm....