TaxTMI 
TaxTMI 
2020 (8) TMI 71
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....submitted that in the facts and the circumstances of the case, and in law, the order is required to be held as bad and illegal as the same is passed in breach of the principles of natural justice as well as due to non - application of mind to the facts and the contentions brought on record by the Appellant. WITHOUT PREJUDICE TO THE ABOVE 2. REVISION ILLEGAL 2.1 The Ld. CIT er red in passing the order u/s. 263 of the Act , revising the assessment order passed by the A.O. u/s. 143 (3) of the Act. 2.2 It is submitted that in the facts and the circumstances of the case, and in law, the order is bad, illegal and void as necessary pre - conditions for initiating the revision proceeding as well as the completion thereof were not fulfilled. 2.3 Without prejudice to the generality of the above, the CIT failed to appreciate that: (i) the assessment order framed was not "erroneous" within the meaning of section 263 of the Act; and (ii) in any case, the assessment order was not "prejudicial to the interest of the revenue" within the meaning of section 263 of the Act. 2.4 It is submitted that in the facts and the circumstances of th....
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....he records, it was observed by the Pr. CIT that the assessee company had executed a lease agreement with NTC ltd. (holding company) for a period of 33 years, which was further extendable for two additional terms of 33 years each. As per the terms of the lease agreement a lease rent of Rs. 100/- per annum was payable by the assessee to the holding company for leasing of land, building and structures constructed thereon. As observed by the Pr. CIT, the properties described in the lease agreement were comprised of land bearing CS No. 56 of Dadar Naigaon Division, admeasuring 30,148.615 sq. mtrs, along with built up area of 35,377.803 sq. mtrs situated at Dada Saheb Phalke Road, Dadar (East), Mumbai. It was noticed by the Pr. CIT that the assessee company had in the financial year 2010-11 deposited a stamp duty of Rs. 7,41,95,475/- as adjudicated by the Collector of Stamps, Maharashtra towards registration of the lease agreement, and had capitalised the same in its books of accounts. On a perusal of the records, it was observed by the Pr. CIT that the assessee treating the amount of stamp duty deposit of Rs. 7,41,95,475/- as an intangible asset had claimed depreciation of Rs. 1,39,11,6....
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....the scope of Sec. 32(1)(ii) of the Act, had by incorrectly applying the law allowed the assessee's claim for depreciation on the capitalized value of leasehold rights. Referring to the language used in Section 32(1)(ii) of the Act, the Pr. CIT was of the view that the term "any other business or commercial rights of similar nature" was to be construed by applying the rule of nosticur a sociis, as per which the words used in the statute would derive their meaning from the surrounding words and were to be given a similar meaning. On the basis of his aforesaid observation, the Pr. CIT held a strong conviction that as the stamp duty deposit in respect of the tenancy rights of the assessee was much different from the intellectual property rights, viz. intangible assets, being know-how, patents, copyrights, trademarks, licenses, franchisees or any other business or commercial rights of similar nature, the same would thus not fall within the realm of the 'intangible rights' contemplated in Sec. 32(1)(ii) of the Act. At this stage, we may herein observe, the fact that the lease agreement was not registered was also taken cognizance of by the Pr. CIT. Elaborating on the said fact, it was ob....
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....y concluding that the same did not fall within the meaning of "intangible assets" as contemplated in Sec. 32(1)(ii) of the Act. The ld. A.R took us through a short note, wherein the facts of the case were briefly culled out. It was submitted by the ld. A.R that a similar claim for depreciation on the leasehold rights was raised by the assessee in the immediately preceding year i.e A.Y. 2011-12, which after necessary deliberations was allowed by the A.O on the basis of a scrutiny assessment order passed under Sec. 143(3), dated 25.02.2014. However, the ld. A.R very fairly submitted that the case of the assessee for A.Y. 2011-12 was thereafter reopened and its claim for depreciation on leasehold rights was withdrawn vide an order passed under Sec. 147 r.w.s 143(3) in December, 2016. Assailing the validity of the jurisdiction assumed by the Pr. CIT under Sec. 263 of the Act, it was submitted by the ld. A.R, that in the course of the regular assessment proceedings the assessee had furnished complete details of its leasehold rights and claim of depreciation on the same with the A.O, who after necessary deliberations had found the same to be in order and allowed the deduction of the same....
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....rity had sought to revise the assessment order. The ld. A.R. submitted that the Pr. CIT had 'set aside' the assessment order passed by the A.O under Sec.143(3), dated 12.02.2015 for multiple reasons, viz. (i). that, the leasehold rights did not fall within the meaning of the term 'any other business or commercial rights of similar nature' contemplated in Sec. 32(1)(ii) of the Act, which as per the rule of nosticur a sociis was to be restricted to intangible assets of the nature of know-how, patents, copyrights, trademarks, licenses, franchisees etc.; (ii). that, as the statutory auditor in the depreciation chart filed under the companies act had categorized the stamp duty deposit as a 'tangible asset', and also no depreciation was claimed in the tax audit report, the assessee's claim of depreciation on leasehold rights was wrongly allowed by the A.O; and (iii) that, the Pr. CIT was of the view that the assessee had claimed depreciation on land, while for, as per the assessee, the fact was that such claim was with respect to intangible rights i.e leasehold rights, which included buildings, structures and other intangible rights. Also, it was submitted by the ld. A.R, that the Pr. CI....
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.... (vii) M. Rajashekhara Murthi Vs. Eleventh Ito-[(1984) 7 ITD 273 (Bang)] (viii) Rattan Trading Co. Vs. IAC - [(1992) 40 ITD 164 (Del)(TM)]." Apart from that, it was submitted by the ld. A.R. that in case the material which as per the CIT was not considered by the A.O while framing the assessment did not have any bearing on the conclusion arrived at by the A.O, then the CIT under such circumstances would be divested of his jurisdiction to revise the order under Sec. 263 of the Act. In support of his said contention the ld. A.R had relied on the order of the Hon'ble High Court of Madras in the case of CIT vs. Sakthi Charities (2000) 244 ITR 226 (Mad). Also, the ld. A.R drawing support from the order of the ITAT, Banglore in the case of M. Raja Sekhara Murthi Vs. Eleventh, ITO (1984) 7 ITD 277 (Bang) submitted, that in case if it is shown by the assessee that the tax was properly assessed, then though the process may be erroneous, the CIT in the absence of the order being prejudicial to the interest of the revenue could not exercise his revisional jurisdiction under Sec. 263 of the Act. On merits, the ld. A.R in order to support his claim that the stamp duty on leas....
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....m that the assessee was not entitled for claim of depreciation on the leasehold rights the ld. D.R had relied on the judgments of the Hon'ble Supreme Court in the case of M/s Mother Hospital Pvt. Ltd. Vs. CIT, Trichur (Civil Appeal No. 3360 of 2006, dated 08.03.2017), and R.K Palshikar (HUF) Vs. CIT, Madhya Pradesh (1988) SCR (3) 989. Further, reliance was also placed on the judgment of the Hon'ble High Court of Bombay in the case of CIT Vs. India Oil Corporation Ltd. (1996) 218 ITR 511 (Bom). Also, support was drawn from the order of the ITAT, Bangalore, in the case of M/s Cyber Park Development and construction Ltd. Vs. DCIT (ITA No. 1549/Bang/2012, dated 30.06.2010). In order to drive home his claim that de hors registration of the impugned lease agreement which was required to be compulsorily registered, the same as per the mandate of law could not be taken as an evidence of the transaction of lease under consideration, the ld. D.R had drawn support from Sec. 17 and Sec. 49 of the Indian Registration Act, 1908. Copies of the extract of the aforesaid statutory provisions were placed on our record. As such, it was the claim of the ld. D.R that de hors ownership of the leasehol....
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....d be related on the part of the A.O in allowing the assessee's claim for depreciation on the opening WDV of the said leasehold rights during the year under consideration. In sum and substance, it was the claim of the ld. A.R that as the A.O by taking cognizance of the view that was taken by him while framing the assessment for the immediately preceding year i.e A.Y 2011-12, had adopted a consistent approach and rightly allowed the assessee's claim for depreciation on the leasehold rights, vide his order passed under Sec. 143(3), dated 12.02.2015, thus, no infirmity did arise from his order. We have given a thoughtful consideration to the aforesaid claim raised by the ld. A.R but do not find favour with the same. In our considered view, the ld. A.R is correct in stating that in a case where a claim for depreciation is allowed by the A.O while framing the assessment for the preceding year, then, no infirmity would arise from allowing of such depreciation on the opening WDV of the said asset/assets in the immediately succeeding year. But then, we find that the facts in the case before us stand on a different footing. As observed by us hereinabove, or as a matter of fact fairly admi....
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....observed that it is not mandatory on the part of a revisional authority to issue a 'show cause' notice under Sec. 263 of the Act, it was submitted by the ld. A.R that the said judicial pronouncement in fact supported the case of the present assessee. In order to buttress his aforesaid claim the ld. A.R took us through the order of the Hon'ble Supreme Court in the case of Amitabh Bachchan(supra). It was submitted by the ld. A.R, that the Hon'ble Apex Court in its aforesaid order had drawn a distinction between a case where a non-reference of certain issue in the SCN was used as a ground to challenge the assumption of revisional jurisdiction by the CIT AND a case where such non-reference followed by non granting of proper opportunity was taken as a ground of violation of the Principle of natural justice. It was submitted by the ld. A.R, that the Hon'ble Apex Court relying on its earlier order in the case of CIT Vs. Electro House (1971) 82 ITR 824 (SC), had observed, that though Sec. 263, per se, did not prescribed any notice to be given to the assessee, but then, it required the commissioner to give an opportunity of being heard to the assessee. In sum and substance, it was the claim....
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....ld rights in the depreciation chart attached with the Form 3CD (Tax Audit Report); (iii). that, as per the 'Schedule 1' attached with the lease deed the property under consideration was shown as land with built up area; and (iv). that, the other clauses of the lease agreement reflected that the lease transaction was mainly related to land admeasuring 30,148 sq. mtrs, and no depreciation as per the Income tax Rules was allowed on land. On a perusal of the 'SCN', dated 23.03.2017, we find that the assessee was not called upon to put forth an explanation as regards the issues marked as S.No.(i) to (iv) hereinabove. It is the claim of the ld. A.R, that even in the course of the revisional proceedings the Pr. CIT had never confronted the aforesaid issues to the assessee. To sum up, it is the claim of the ld. A.R, that the adverse inferences as regards the aforesaid issues marked as S.No.(i) to (iv) were arrived at by the Pr. CIT at the back of the assessee. On being confronted with the said claim of the counsel for the assessee, the ld. D.R could not rebut the same. Rather, it was the claim of the ld. D.R, that the Pr. CIT had declined the assessee's claim for depreciation on the sta....
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.... re-assessment proceedings under Sec. 147 of the Act, there was thus no justification in withdrawing such claim of depreciation for the year under consideration by assumption of jurisdiction by the Pr. CIT under Sec. 263 of the Act. In support of his aforesaid contention the ld. A.R had relied on certain judicial pronouncements viz. (i) Karin Tharuvi T. States Ltd. Vs. State (1963) 48 ITR 83 (SC); (ii) CIT Vs. D.N. Dosani (2006) 280 ITR 275 (Guj); (iii) Samtalal Mehendi Ratta (HUF) Vs. CIT (2006) 143 STC 511 (Gau); and (iv) Hariom Bansal Vs. ITO (2012) 51 SOT 118 (Chennai). We have given a thoughtful consideration to the aforesaid contention of the ld. A.R, and perused the material available on record, as well as the judicial pronouncements relied upon by him. Admittedly, the powers vested with the respective authorities under Sec. 147 and under Sec. 263 of the Act, are separate and distinct, which subject to fulfilment of the requisite conditions contemplated in the said respective statutory provisions, operate in their respective fields. In so far, the powers vested with the A.O under Sec. 147 are concerned, the same can be exercised where the A.O has a reason to believe that any....
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....to be erroneous, insofar it was prejudicial to the interest of the revenue. (iv). We shall now take up the contention of the ld. A.R that the dual conditions set out in Sec. 263 viz. (i) that the assessment order passed by the A.O is erroneous; and (ii) prejudicial to the interest of the revenue, are required to be cumulatively satisfied for valid assumption of jurisdiction under the said statutory provision. Apart from that, it is the claim of the ld. A.R that an order can be held to be erroneous, only where the assessment framed by the A.O deviates from the law. In support of his contention that the aforesaid set of conditions are mandatorily required to be cumulatively satisfied, reliance has been placed by the ld. A.R on the judgements of the Hon'ble Supreme Court in the case of Malabar Industrial Company Ltd. Vs. CIT (2000) 243 ITR 83 (SC) and CIT Vs. Max India Ltd. (2007) 295 ITR 282 (SC). Also, support was drawn by him from the judgments of the Hon'ble High Court of Bombay in the case of viz. (i) CIT vs. Gabriel India Ltd. (1993) 203 ITR 108 (Bom); (ii) Grasim Industry Ltd. Vs. CIT (2010) 321 ITR 92 (Bom); (iii) CIT Vs. LIC Housing Finance Ltd. (2014) 367 ITR 458 (Bom); (....
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.... relied on the judgments of the Hon'ble High Court of Bombay in the case of CIT Vs. Gabriel India Ltd. (1993) 203 ITR 108 (Bom) and CIT Vs. Fine Jewellery (I) Ltd. (2015) 312 ITR 303 (Bom). 9. We have given a thoughtful consideration to the aforesaid contentions advanced by the ld. A.R, and find ourselves to be principally in agreement with the same. In our considered view, the Pr. CIT can assume jurisdiction under Sec. 263 only after carrying out a cumulative satisfaction of the two fold conditions therein prescribed viz. the order passed by the A.O is erroneous insofar it is prejudicial to the interest of the revenue. Also, in a case where the A.O had adopted one of the possible views which is permissible in law, the CIT would stand divested from assuming jurisdiction under Sec. 263, for the purpose of substituting his view as against that arrived at by the A.O. Further, there is no dispute on the aspect that unlike a case of lack of inquiry or no inquiry by the A.O, a case of inadequate inquiry by the A.O would not justify assumption of jurisdiction by the CIT under Sec. 263 of the Act. Also, we are in agreement with the claim of the ld. A.R, that merely because the A.O in hi....
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....fication, if any, would depend on the disposal of suit and removing of stay order on the property leased to the company related to heritage issue by Bombay High Court. (refer para 8 of Note 20)" Insofar, the aforesaid factual position is concerned, the same has not been disputed by the assessee. In the backdrop of the aforesaid facts, it was averred by the ld. D.R, that as per Sec. 17(1)(d) of the Indian Registration Act, 1908, the leases of immovable property from year to year or for any term exceeding one year, reserving an yearly rent, are mandatorily required to be registered. It was further submitted by the ld. D.R that as per Sec. 49 of the Indian Registration Act, 1908, in case of non-registration of a document which was mandatorily required to be registered under Sec. 17 of the Indian Registration Act, 1908, the same would neither be received as evidence of any transaction effecting such property or confer any power as regards the same. Elaborating on his aforesaid contention, it was submitted by the ld. D.R that as per Sec. 17(1)(d) of the Indian Registration Act, 1908, the lease deed executed by the assessee was mandatorily required to be registered. As submitted by the l....
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.... observe that there is substance in the aforesaid claim of the ld. D.R, which is further supported by the judgment of the Hon'ble Supreme Court in the case of M/s Mother Hospital Pvt. Ltd. Vs. CIT, Trichur (2017) 392 ITR 628 (SC), but then, in the backdrop of the fact that the said ground had not formed the basis of the decision given by the Pr. CIT in his order passed u/s 263, the same cannot be entertained on our part. As per the settled position of law, the Tribunal cannot uphold the order of the Pr. CIT/CIT on any other ground which, in its opinion, was available before the revisional authority. In fact, if the Tribunal is allowed to uphold the order passed by the revisional authority u/s 263 on any other ground, then it would amount to sharing of the exclusive jurisdiction vested in the commissioner, which we are afraid is not warranted under the Act. As per the mandate of Sec. 263 of the Act, it is only the Pr. CIT/CIT who is authorised to proceed in the matter and, therefore, it is his satisfaction according to which he may pass necessary orders thereunder in accordance with law. As such, if the grounds which were available to him at the time of passing of the order do not f....
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.... was capitalized as leasehold rights in its books of accounts. Also, a copy of the 'lease deed' was filed with the A.O in the course of the assessment proceedings. 13. We have deliberated at length on the issue under consideration, in the backdrop of the orders of the lower authorities and the material available on record, as well as the judicial pronouncements placed on our record. As observed by us hereinabove, the solitary issue that survives before us is that whether or not the A.O had taken a possible view that the assessee was entitled to claim depreciation on the amount of stamp duty paid in respect of the lease agreement, pending registration. Rebutting the said claim of the assessee, it is the case of the revenue that the leasehold rights do not fall within the meaning of the term 'any other business or commercial rights of similar nature' contemplated in Sec. 32(1)(ii) of the Act, which as per the rule of nosticur a sociis was to be restricted to intangible assets of the nature of know-how, patents, copyrights, trademarks, licenses, franchisees etc. We find that the Hon'ble High Court of Delhi in the case of Areva T & D India Ltd. Vs. DCIT (2012) 345 ITR 421 (Del), ....
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.... observed by the Hon'ble High Court, that in the absence of the aforesaid intangible assets, the assessee would have had to commence business from scratch and go through the gestation period, whereas by acquiring the aforesaid business rights along with the tangible assets, the assessee got an up and running business. The Hon'ble High Court while concluding as hereinabove had drawn support from the judgment of the Hon'ble Supreme Court in the case of Techno Shares and Stocks Ltd. v. CIT, (2010) 327 ITR 323, wherein it was held that intangible assets owned by the assessee and used for the business purpose which enables the assessee to access the market and has an economic and money value is a "license" or "akin to a license" which is one of the items falling in Sec. 32(1)(ii) of the Act. In the backdrop of its aforesaid observations, the Hon'ble High Court had concluded that the specified intangible assets which were acquired by the assessee before them under slump sale agreement were in the nature of "business or commercial rights of similar nature" specified in s 32(1)(ii) of the Act, and were accordingly eligible for depreciation under that section. As observed by the Hon'ble Hig....
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..... Hoechst Pharmaceuticals Ltd. (1978) 113 ITR 877 (Bom), as had been relied upon by the ld. A.R before us, in itself negates the claim of the assessee that the expenditure incurred towards stamp duty expenses in respect of a lease deed was to be construed as an "intangible asset" falling within the meaning of Sec. 32(1)(ii) of the Act, and would thus be eligible for depreciation. In the case of Cinecita (P) Ltd. (supra), it was observed by the Hon'ble High Court, that the expenditure incurred by an assessee on registration fee, solicitor's fee and stamp duty in connection with registration of lease deed was a revenue expenditure, irrespective of the period of lease. In the case of Hoechst Pharmaceuticals Ltd.(supra), the Hon'ble High Court had observed that brokerage and stamp duty expenditure incurred for obtaining a lease of office premises for a short duration of five years did not secure any advantage of enduring benefit, and thus was allowable as a revenue expenditure under s. 37. In the case of Richardson Hindustan Ltd.(supra), the Hon'ble High Court following its earlier view in the case of Cinecita (P) Ltd. (supra), had concluded, that stamp duty paid on execution of a ....
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....at as it may, in our considered view, as the allowing of the assessee's claim for depreciation on the stamp duty expenses (pending registration) by the A.O cannot be held to a possible view in law, therefore, no infirmity arises from the order passed by the Pr. CIT u/s 263, dated 30.03.2017, observing, that the allowing of the assessee's claim for depreciation of Rs. 1,39,11,652/- i.e @25% on the amount of stamp duty deposited, had rendered the order passed by the A.O u/s 143(3), dated 12.02.2015, as erroneous insofar it was prejudicial to the interest of the revenue. 15. On the basis of our aforesaid observations, finding no infirmity in the order passed by the Pr. CIT u/s 263 of the Act, dated 30.03.2017, we uphold the same. 16. Before parting, we may herein deal with a procedural issue that though the hearing of the captioned appeal was concluded on 06.03.2020, however, this order is being pronounced after the expiry of 90 days from the date of conclusion of hearing. We find that Rule 34(5) of the Incometax Appellate Tribunal Rules, 1962, which envisages the procedure for pronouncement of orders, provides as follows: (5) The pronouncement may be in any of the following man....
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....ns had been answered by a coordinate bench of the Tribunal viz. ITAT, Mumbai 'F' Bench in DCIT, Central Circle-3(2), Mumbai Vs. JSW Limited & Ors. [ITA No. 6264/Mum/18; dated 14/05/2020, wherein it was observed as under: "Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon'ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. The epidemic situation being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Hon'ble Supreme Court of India, in an unprecedented order in the history of India and vide order dated 6.5.2020 read with order dated 23.3.2020, extended the limitation to exclude not only this lockdown period but also a few more days prior to, and after, the lockdown by observing that "In case the limitation expired after 15.03.2020 then the period fro....