TaxTMI 
TaxTMI 
2019 (4) TMI 2118
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....ed under section 263 of the Income Tax Act, 1961 ('The Act') That on facts and under the circumstances of the case, learned Principal Commissioner of Income Tax - 11, Mumbai, [Ld, Pro CIT'], erred in setting aside the assessment order dated 10.03.2016 passed by the learned Assessing officer ['Ld. AO] under section 143(3) of the Act, treating the same as erroneous and prejudicial to the interest of revenue. 1.1. Ld. Pro CIT has erred in holding the order passed by Ld. AO as erroneous and prejudicial to the revenue while seeking to amortize cost of project over the project life (concessionaire period) as against depreciation claimed and allowed under section 32 of the Act by Ld. AO. on 'Concessionaire Rights' received under 'Concessionaire Agreement' entered with Madhya Pradesh Government (MPROC) to construct the road on Build Operate Transfer (BOT) basis. 1.2. Ld. Pr. CIT has erred in holding the order passed by ld. AO as erroneous and prejudicial to revenue by failing to appreciate that depreciation charged by Appellant on 'Concessionaire Rights' was fully in compliance with the applicable provisions of section 32 o....
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....r 15 years over the period of which, the assessee has right to collect the Toll and recover its project cost. The assessee filed its return of income for Assessment Year 201413 on 27.09.2013 declaring loss of Rs. 21,43,72,235/-. The return was selected for scrutiny and assessment order was passed under section 143(3) on 10.03.2016 accepting the loss declared by assessee. Subsequently, the assessment was revised by ld. PCIT by invoking his power under section 263 of the Act. 3. The ld. PCIT issued show-cause notice under section 263 dated 30.01.2018. In the show-cause notice, the ld. PCIT contended that assessee claimed a loss of Rs. 21.43 Crore. The assessee has considered the expenditure incurred on completion of the project as concessionary right and for Income-tax purpose claimed depreciation @ 25% as intangible asset. The Assessing Officer completed the assessment under section 143(3) and failed to carry out proper investigation of the matter and the order passed by Assessing Officer is erroneous and prejudicial to the interest of revenue. The ld. PCIT further mentioned that that Assessing Officer failed to follow the CBDT Circular No. 19/2014. As per said Circular No.9/2014....
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...." capitalized as 'intangible asset' by assessee and submitted during the assessment proceeding was available in the audited financial statement. For noncompliance of CBDT Circular, the assessee contended that under concessionary agreement, the assessee was given right to develop and maintain Toll Road and also right to collect the Toll for specific period. The assessee has an express right for recovery of Toll fees to recoup the expenditure. The said right brings to the assessee an enduring benefit during the period of agreement. The assessee may not be owner of the Toll Road, but certainly has right to collect the Toll which has given for specific period with enduring benefit. On the expiry of time limit of period of the contract, the right of the assessee will seize to have effect thereby it will slowly depreciate to Nil value. The assessee further contended that as per provisions of section 32(1)(ii) of the Act , the assessee is entitled to claim deprecation on such right, which have been described as 'intangible asset' under the Act and are eligible for claim of depreciation. 5. In support of its contention, the assessee relied upon the decision of Tribunal in ACIT vs. West ....
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....on of fixed assets, copy of audit report etc. vide reply dated 22.12.2015 and 08.01.2016. The Assessing Officer after verifying the details allowed the claim of assessee, thus, the contention of ld. PCIT that the Assessing Officer has not applied his mind is without any merit. In support of his submission, the ld. AR relied upon the decision of Hon'ble Bombay High Court in CIT vs. Gabriel India Ltd. (203 ITR 108). The ld. AR further submits that it is not a case where the claim of assessee is factually incorrect or not in accordance with law. It was submitted that where two views are possible on the matter, the view which is sustainable in law and supported by judicial decision and verified by Assessing Officer cannot be considered as erroneous or prejudicial to the interest of revenue. For invoking provision under section 263, the twin condition mentioned in section 263 must be satisfied, that the order of Assessing Officer sought to be revised is erroneous and the order is prejudicial to the interest of revenue. The ld. AR submits that the Hon'ble Supreme Court in Malabar Industrial Company Ltd. vs. CIT [243 ITR 83 (SC)] that the Commissioner has to be satisfied of the twin condi....
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....ssessee, it is regarding treatment of capitalization of cost incurred on BOT project, hence, the judgment is not applicable on the fact of the assessee's case. The cost of project worked out by ld. PCIT at Rs. 73.48 Crore against Rs. 98.45 Crore claimed by assessee. The ld. AR submits that the assessee vide agreement dated 18.05.2011 given the work to Valecha Engineering Ltd. (VEL) for a lump-sum price of Rs. 86.73 Crore. The assessee had entered expenses of Rs. 11.72 Crore. During the year, the assessee received bonus of Rs. 12.25 Crore from Madhya Pradesh Government for early competition of project, in accordance with term of agreement. The said bonus was given to VEL. The said bonus was included in operational income and the amount paid to VEL of Rs. 12.25 Crore was debited to the Profit & Loss Account under the head "Other Expenses". Accordingly, there was no impact on the Profit & Loss Account of the assessee, being business receipt relating to carrying on business. The details of operational income and early project completion bonus paid to VEL were submitted before the Assessing Officer along with reply dated 22.12.2015, therefore, the contention for reducing the early compl....
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.... of revenue and directed the Assessing Officer to examine the claim of depreciation with special emphasis in the light of CBDT Circular No. 9/2014 and the judgment of Hon'ble Bombay High Court in NorthKarnataka Expressway Ltd. (supra). 13. The co-ordinate bench of Mumbai Tribunal in ACIT vs. West Gujarat Expressway Ltd. (supra) while considering the alternative claim of assessee that the investment made by assessee under the asset building plant and machinery and depreciation be granted accordingly or the same may be treated as "Intangible asset" on the ground that assessee has been granted licence to collect the Toll tax for a fixed period, in view of the observation of Hon'ble Bombay High Court in North-Karnataka Expressway Ltd. (supra) passed the following order: "17. We have considered the rival contentions. So far as the reliance of the Ld. A.R. on the article/clause 38.4 of the concession agreement between the assessee and the NHAI is concerned, we find that the identical clause was also there and relied upon in the case of North Karnataka Expressway Ltd. (supra) which has also been reproduced in para 8 of the order of the Hon'ble Bombay High Court (supra). Th....
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.... Hence, the clause 38.4 relied upon by the assessee in the present case will not be of any help to the assessee in this regard. 19. However, so far as the alternative claim of the assessee that if the assessee is not found as owner of the toll road, his claim of depreciation be considered in relation to investments made as falling under the other categories of assets, is concerned, we would like to revert to the decision of the Hon'ble Bombay High Court in North Karnataka Expressway Ltd. (supra). in this respect. We find the Hon'ble Bombay High Court, in para 24 of the said decision, has categorically observed that the claim of depreciation in the said case was not based on treating it as an intangible asset with a right to use the asset without being actual owner thereof. The issue under consideration was that whether the toll roads are not owned by the assessee and that he cannot claim any depreciation thereupon. Hence, the Hon'ble Bombay High Court has not discussed the issue relating to the claim of depreciation on the license for right to collect the toll as intangible asset. Further, the Hon'ble Bombay High Court in para 39 of the decision (supra) has....
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....n'ble Bombay High Court has held that in view of the express provisions of the National Highway Act, 1956 and National Highway Authorities of India Act, 1988 the Union is the absolute owner of the National Highways as well as the toll roads built upon the land/National Highways in agreement and through the private parties and such private parties cannot claim themselves to be the owner of the toll road. However, the Hon'ble Bombay High Court has left upon the issue relating to the claim of depreciation, if otherwise eligible under the other provisions of the Income Tax Act. 21. The Ld. A.R., before us, has put the alternative claim that in view of the observations of the Hon'ble Bombay High Court either the investments made by the assessee be treated under the asset building, plant & machinery and depreciation be granted accordingly or the same be treated as intangible asset on the ground that the assessee has been granted license for right to collect the toll tax for a fixed period. Now the question before us is whether the assessee at this stage the can raise the alternative contention for claim of allowance of depreciation on the license authorizing him to c....
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....a revised return was limited to the powers of the Assessing Authority and the said judgment does not impinge on the power or negate the powers of the appellate authorities to entertain such claim by way of additional ground. Reliance can also be placed in this regard on the decisions of the Tribunal in the case of PV. Ananthkrishnan v. ACIT [IT Appeal No.1820/M/2011 dated 05.05.2014] and in the case of Presidency Co-operative Housing Society Ltd. v. ACIT [IT Appeal No.4051/M/2011, dated 16.05.2014]. The present case is not a case where the assessee had not claimed any deduction on account of depreciation. The assessee has very much claimed the deduction of depreciation. However, he has claimed the same treating itself to be the owner of the toll road. Such a claim of the assessee has been allowed in the previous assessment years. The assessee was under bonafide belief that he has correctly claimed the deduction of depreciation on the toll road in view of the consistent findings of the Tribunal on this issue. However, due to the change of legal position in view of the law laid down by the Hon'ble Bombay High Court (supra), the assessee cannot be treated as the owner of ....
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....d to put his alternate claim that the deduction allowable to him may be considered as allowable as depreciation treating the project/investments made under the head "Plant & machinery" or treating it as a right/license to collect the toll tax as intangible asset. 24. Having held that the assessee is entitled to the deduction on the investments made by him, we now have to discuss as to under what head the said deductions can be claimed by the assessee. It is undisputed that in view of the agreement with the NHAI, the assessee has been given the right to develop and maintain the toll road and also the right to collect toll for a specified period without having actual ownership over the said toll road. The assessee has an express right/license for recovery of toll fee to recoup the expenditure. The said right brings to the assessee an enduring benefit during the period of agreement. This fact has also been discussed by the CBDT in circular No.09/2014 dated 23.04.14. The para 4 of which, for the sake of convenience, is reproduced as under: "There is no doubt that where the assessee incurs expenditure on a project for development of roads/highways, he is entitled to re....
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...., wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed - ......." (Emphasis Supplied by us) 27. It is not disputed that the assessee has been given license/commercial right over the project to receive the toll. The assessee may not be the owner of the toll road, but he, certainly, is owner in possession of the right to collect the toll. The said right has been given to the assessee for a specified period with enduring benefit. It is also not disputed that on the expiry of the time period of the agreement, the said right of the assessee will cease to have effect which means it slowly will depreciate to the nil value. As per the provisions of the Income Tax Act, especially under section 32(1)(ii), the assessee is entitled to claim of depreciation on such type of rights. Such rights have been described as intangible assets under the Act and are eligible for claim of depreciation. 28. In view of the express provisions of the Act, we have no doubt to hold that the assessee is entitled to collect tax being an intangible commercial right under section 32(1)(ii) at the rate as has bee....
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....as allowed to be reimbursed by permitting the assessee a concession to collect toll/fees from the motorists using the road. Therefore, it could not be said that such a right was within the purview of section 32(1)(ii) of the Act. However, the Ld. CIT(DR) has not contested the factual matrix that identical issue has been considered by our coordinate Benches in the case of Ashoka Buildcon Ltd. (supra), Kalyan Toll Infrastructure Ltd. (supra), Dimension Construction Pvt. Ltd. (supra) and Ashoka Info (P) Ltd. (supra). 9. On the other hand, the Ld. Representative for the respondent assessee pointed out that the aforesaid argument set up by the Revenue has also been considered in the aforesaid precedents before concluding that the impugned 'Right to collect Toll' was an 'intangible asset' eligible for claim of depreciation @ 25% as per sec. 32(1)01) of the Act. 10. We have carefully considered the rival submissions. Factually speaking, there is no dispute to the fact that the costs capitalised by the assessee under the head 'License to collect Toll' have been incurred for development and construction of the infrastructure facility, i.e., Dewas By....
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.... being 'intangible assets' which are wholly or partly owned by the assessee and used for the purposes of its business. The aforesaid condition is fully satisfied by the assessee and therefore considered in the aforesaid perspective we find no justification for the plea raised by the Revenue before us. 12. In the result, we affirm the order of the CIT(A) in holding that the assessee was eligible for depreciation on the 'Right to collect Toll', being an 'intangible asset' falling within the purview of section 32(1)(i1) of the Act following the aforesaid precedents." 7. In terms of the aforesaid precedent, the claim of the assessee in the present case for depreciation on 'License to collect Toll', being an 'intangible asset' falling with the scope of Section 32(1)(ii) of the Act is liable to be upheld. We hold so. 8. In so far as the reliance placed by the CIT(A) on the judgement of the Hon'ble Bombay High Court in the case of Techno Shares And Stocks Ltd. (supra) is concerned it may only be noted that the said judgement has since been altered by the Hon'ble Supreme Court vide its order reported at (2010) 327 I....
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....pecified rate. The Special Bench also held that where the assessee never claimed expenditure incurred for construction of BOT as referred revenue expenditure, it could not have been amortized in terms of CBDT Circular No. 9 of 2014 dated 23.03.2014. 15. We have noted that on almost similar fact, the co-ordinate bench of Pune Tribunal while hearing appeal against the order passed by PCIT -2, Pune under section 263 passed the following order: "10. We have heard the rival submissions and perused the material on record. The issue in the present case is about the invoking of provisions of Section 263 by Ld PCIT. Sec. 263(1) of the Act, the powers under which Ld PCIT has assumed power for revision reads as under: "The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the ITO is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or....
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....s himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and, left to the Commissioner, he would have estimated the income at a higher figure than the one determined by the ITO. That would not vest the Commissioner with power to re- examine the accounts and determine the income himself at a higher figure. It is because the ITO has exercised the quasi- judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interest of the Revenue. But that by itself will not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, namely, the order is erroneous, is absent. Similarly if an order is erroneous but not prejudicial to the interest of the Revenue, then also the power of suo motu revision cannot be exercised. Any and every erroneous order cannot be subject-matter of revision because the sec....
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....l has been placed by the Revenue to demonstrate that the aforesaid decision of Pune Tribunal in the case of Ashoka Infrastructure (supra) has been set aside / overturned by higher judicial forum. Further, in view of the aforesaid facts, we are of the view that the view /opinion of the AO of holding the right to collect toll as an intangible asset, and therefore eligible for depreciation and allowing the claim of depreciation to the assessee was a possible view. It is a settled law that so long as the view taken by the Assessing Officer is a possible view then the same ought not to be interfered with by the Commissioner under Section 263 of the Act merely on the ground that there is another possible view on the matter. As far as the contention of the Revenue that on the issue of depreciation, there was no whisper of having being examined by the AO in the assessment proceedings, it has been held by various authorities that the mere fact that the issue did not fall for discussion in the assessment order would not ipso facto lead to the conclusion that the Assessing Officer did not apply his mind to the issue. 16. On the issue of assessee not being eligible for deduction u/s 8....
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....ast from A.Y. 2004-05 onwards. Further, Revenue has not brought on record any new facts in the year under consideration due to which the claim of deduction u/s 80IA(4) could be denied to the assessee. Before us, Revenue has not brought any material on record to demonstrate that the view taken by the AO was an impermissible view or was contrary to law or was upon erroneous application of legal principles necessitating the exercising of Revisionary powers u/s 263 of the Act. Further, the case laws relied upon by the Revenue are distinguishable on facts and therefore cannot be applied to the facts of the present case. Considering the totality of the aforesaid facts, we are of the view that in the present case the condition precedent for assuming the jurisdiction u/s 263 of the Act did not exist and therefore the Ld. PCIT was not justified in resorting to the revisionary powers u/s 263 of the Act. We therefore set aside the orders of Ld. PCIT whereby he has set aside the assessment order passed by the AO u/s 143(3) of the Act. Thus, the grounds the of assessee are allowed." 16. The Hon'ble Delhi High Court in PCIT vs. Delhi Airport Metro Express Pvt. Ltd. (supra) held if the PCIT is....