TaxTMI 
TaxTMI 
2023 (8) TMI 1510
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....MBER:- The above cross appeals by the assessee and the Revenue are preferred against the order of the ld. CIT(A)-1, Noida dated 31.03.2018 pertaining to Assessment Years 2006-07 to 2011-12. Since common issues are involved in the captioned cross appeals and since the first appellate authority has decided the appeals by a consolidated order, all the appeals were heard together and are disposed of by this common order for the sake of convenience and brevity. ITA No. 4410/DEL/2018 [A.Y 2006-07] [Assessee's appeal] ITA No. 4411/DEL/2018 [A.Y 2007-08] [Assessee's Appeal] ITA No. 4412/DEL/2018 [A.Y 2008-09] [Assessee 's Appeal] 2. Challenge of the assessee is three-fold: (i) Reopening of the assessment; (ii) Enhancement by the ld. CIT(A); and (iii) Merits of the Addition. 3. The representatives of both the sides were heard at length, the case records carefully perused and with the assistance of the ld. Counsel, we have considered the documentary evidences brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules and have also perused the judicial decisions relied upon by both the sides. 4. Vide notice d....
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.... Chand Singhania that, in the absence of an allegation in the reasons recorded that the escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, any action taken by the Assessing Officer under section 147 beyond the four year period would be wholly without jurisdiction. Reiterating our viewpoint, we hold that the notice dated 29-3-2004 under section 148 based on the recorded reasons as supplied to the petitioner as well as the consequent order dated 2-3-2005 are without jurisdiction as no action under section 147 could be taken beyond the four year period in the circumstances narrated above." 8. In light of the decision of the Hon'ble High Court of Delhi [supra], we are of the considered view that the Assessing Officer has grossly erred in not pointing out the failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment framed vide order dated 31.12.2008 u/s 143(3) of the Act. This, in itself, is sufficient to quash the reopening of the assessment. 9. We further find that the issue of amortization of interest on zero coupon ....
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....writ jurisdiction; the objections of the appellant to assumption of jurisdiction by the Ld. AO. had become infructuous & needs to be given quietus. The challenge posed by the appellant to the assumption of jurisdiction by the Id. AO. u/s. 147 of I.T. Act, 1961 is, therefore, not maintainable in law and the ground taken by it is, therefore, rejected, 126. Therefore, the claim of the appellant that the Commissioner (Appeals) has the necessary appellate jurisdiction u/s. 246/246A of I.T. Act, 1961 r.w section 250 of LT. Act, 1961 to adjudicate the correctness of the assumption of the jurisdiction u/s. 147 of I.T. Act, 1961 & issuance of notice u/s 148 of LT. Act, 1961 that too in the course of the adjudication of the correctness of the assessment order is not correct and cannot be accepted by this office. The same is therefore, rejected & this office cannot adjudicate the correctness or otherwise of the assumption of jurisdiction by Ld. AO. u/s 147/148 of. Act, 1961. Appellant is free to seek its remedies in law before the appropriate forum but It cannot expect this office to go beyond the jurisdiction conferred upon this office. 127. The Hon'ble Supreme Court wh....
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....rejected." 15. Such observations/findings of the ld. CIT (A) are nothing short of travesty of justice and can be termed as "harassment" to the tax payer. 16. Considering the facts of the case from all possible angles, we are of the considered view that the Assessing Officer has erred in assuming jurisdiction u/s 148 of the Act. Notice issued u/s 148 of the Act is hereby set aside and the resultant assessment order is quashed. 17. For the sake of completeness, we will address the issues on merits of the case. 18. The ld. CIT (A) has enhanced the assessment in respect of the following incomes: (i) Arrear of designated return - Rs. 179.87 crores (ii Lease of land treated as revenue subsidy - Rs. 1730.08 crores (iii) Disallowance of depreciation claimed on toll bridge - Rs. 15.97 crores 19. Before embarking upon the merits of each issue, it would be pertinent to understand the powers of enhancement conferred upon the ld. CIT (A) by provisions of Section 251 of the Act. The relevant provisions of section 251(1a) read as under: "In disposing of the appeals, the Commissioner (Appeals) shall have the following powers: In app....
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....the case of Shapoorji Pallonji Mistry 44 ITR 891 held as under: "The question which arises in this appeal may be formulated thus: whether in an appeal filed by an assessee, the Appellate Assistant Commissioner can find a new source of income not considered by the Income-tax Officer and assess it under his powers granted by section 31 of the Income-tax Act? Section 31 reads as follows: "31.(1) The Appellate Assistant Commissioner shall fix a day and place for the hearing of the appeal, and may from time to time adjourn the hearing. (2) The Appellate Assistant Commissioner may, before disposing of any appeal, make such further inquiry as he thinks fit, or cause further inquiry to be made by the Income-tax Officer........... (3) In disposing of an appeal the Appellate Assistant Commissioner may, in the case of an order of assessment, - (a) confirm, reduce, enhance-or annul the assessment, or (b) set aside the assessment and direct the Income-tax Officer to make a fresh assessment after making such further inquiry as the Income-tax Officer thinks fit or the Appellate Assistant Commissioner may direct, and the Income-tax Officer shal....
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....f taxability or non-taxability of the amount, the AAC had no jurisdiction in the circumstances of the instant case to enhance the taxable income of the assessee on the basis of this amount or of any portion thereof. It is not open to the AAC to travel outside the record, i.e., the return made by the assessee or the assessment order of the ITO with a view to find out new sources of income and the power of enhancement under section 31(3) of the 1922 Act is restricted to the sources of income which have been the subject-matter of consideration by the ITO from the point of view of taxability. In this context 'consideration' does not mean 'incidental' or 'collateral' examination of any matter by the ITO in the process of assessment. There must be something in the assessment order to show that the ITO applied his mind to the particular subject-matter or the particular source of income with a view to its taxability or to its non-taxability and not to any incidental connection. In the instant case, it was manifest that the ITO had not considered the entry from the point view of its taxability and, therefore, the AAC had no jurisdiction, in an appeal under section 31 of the 1922 Act, to enh....
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....ssment or the source of income, which had been considered expressly or by clear implication by the assessing officer from the point of view of taxability and that the Appellate Assistant Commissioner had no power to assess the source of income, which had not been taken into consideration by the assessing officer. It is to be noted that strong reliance was placed by learned counsel for the revenue on the decision of the Apex Court in CIT v. Nirbheram Daluram (1997) 224 ITR 610. It was submitted that a different view was expressed about the scope and ambit of the power of the first appellate authority vis-a-vis the sources considered by the assessing officer and even if the action of the first appellate authority related to a new source of income not considered by the assessing officer, it was not impermissible. It is to be noted that in Union Tyres' case (supra), this decision was also considered by this court in the background of what had been stated in Daluram's case (supra) and it was observed that there was really no difference from the view expressed earlier in Shapoorji's case (supra) and Chamaria's case (supra). 7. Learned counsel for the revenue also....
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....t in the Jute Corporation's case (supra), the Apex Court, inter alia, observed as follows : "The Appellate Assistant Commissioner, on an appeal preferred by the assessed, had jurisdiction to invoke, for the first time, the provisions of rule 33 of the Indian Income Tax Rules, 1922 (hereinafter referred to as 'the Rules'), for the purpose of computing the income of a non-resident even if the Income Tax Officer had not done so in the assessment proceedings. But, in Shapoorji Pallonji Mistry's case (supra), this court, while considering the extent of the power of the Appellate Assistant Commissioner, referred to a number of cases decided by various High Courts including the Bombay High Court judgment in Narrondas' case (supra) and also the decision of this court in McMillan and Co.'s case (supra) and held that, in an appeal filed by the assessed, the Appellate Assistant Commissioner has no power to enhance the assessment by discovering new sources of income not considered by the Income Tax Officer in the order appealed against. It was urged on behalf of the revenue that the words 'enhance the assessment' occurring in section 31 were not confine....
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....ertificate as on 31 March 2013 issued by us dated 27 June 2013 as that was on the basis of provisional cost (i.e. without including any cost incurred from the commission date to 31 March 2013). The Statement (refer to Annexure-1) has been prepared in accordance with Article 14.2 read with Appendix F of the "Concession Agreement dated 12 November 1997 entered into between New Okhla Industrial Development Authority (NOIDA"), Infrastructure Leasing Financial Services Limited ('Sponsor") and Noida Toll Bridge Company Limited (the Company"), for the purpose of computation of recovery of total project cost and return of 20% thereon for the year ended 31 March 2013. 2. On the basis of our verification of the aforementioned Statement, by carrying out such cheeks as we considered appropriate and on the basis of information and explanations given to us by the management, we certify that there is a shortfall in the recovery of total project cost and return of 20% thereon of INR 29,551,405,164 (INR 2,955 crores) as at 31 March 2013. 3. The Statement is to be read in conjunction with Notes 3, 4 and 5, which form part of the Statement These notes provide the break-up of var....
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....ined as : "The returns of the Total Cost of Project recoverable by the Concessionaire from the effective date at a rate of 20% per annum, as defined in Section 14.2 of the Agreement". 33. Section 2.1 Provides for Grant of Concession and the same reads as under: "Section 2.1 Grant of Concession (a) NOIDA hereby weakly grants to the concessionare the exclusive right and authority during the Concession Period to develop, establish, finance, design, construct, operate and maintain the Noida Bridge as an Infrastructure Facility for the benefit of the residents, and industries, and for the development of commence in Noida and permits it to enter into the Ashram Flyover Construction Agreement and the Concessionaire hereby accepts the Concession granted to it by NOIDA and further agrees to implement the Project, in accordance with the terms and conditions of this Agreement. (b) NOIDA further grants to the Concessionaire the exclusive right and authority during the concession Period to in accordance with the terms and conditions at this Agreement : (i) develop, establish, finance, design, construct, own, operate, maintain use and regulate the ....
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...., NOIDA in consultation with the Independent Authority, may in its role discretion, grant to the concessionaire Development Rights for the generation of Development Income. (b) The Development Rights shall be granted under a separate agreement and shall be governed by the terms of agreement under which they are granted (c) The Concessionaire shall make use of all Development Rights granted to it in such a manner so as not to repair the general integrity of the Project and with full regard for the safety of all Users and shall implement the Development Rights so as to avoid danger to any such persons. 35. Section 5.1 specifically provides for Lease by Noida [This is relevant for issue No. 2 relating to addition of Rs. 1730.08 crores as revenue subsidy] as under: "Section 5.1 Lease by Noida (a) NOIDA shall, pursuant to the Project Site Lease Agreement, lease to Concessionaire the Bridge Site in form reasonably satisfactory to the Concessionaire in order to enable to construction and maintenance of the Facilities and enjoyment of Development Rights, as and when granted to the Concessionaire under Section 4.1 hereinabove, without limitin....
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.... Each of the agreements constituting the Project Site Lease Agreements are independent of each other, The termination of Delhi Land Sub Lease Agreement or any part thereof caused due to termination of the Delhi Land Lease Agreement or any part thereof shall not effect the continuation and effectiveness of the Noida Site Lease Agreement. 36. Section 5.4 provides for Adjacent Areas. 37. A perusal of the findings of the ld. CIT (A) shows that the basis on which the ld. CIT (A) held that the assessee is entitled to designated return of 20% from the Government is the report of the Chartered Accountant wherein the following chart has been annexed, which is also heavily relied upon by the ld. DR: 38. However, we find that the said certificate does not state that the assessee is entitled to the return @ 20% on the project cost. It appears that the ld. CIT (A) has completely misunderstood the entire arrangement with Noida and IL&FS. The relevant sections of the agreement are mentioned hereinabove. 39. As per section 2.3 of the Agreement, concession was granted for a period of 30 years or the date on which the assessee recovers the total cost of the project alongwith return which....
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....ccasion to consider the meaning of "earned", "accrued" and "right to receive". The Hon'ble Supreme Court observed as under: "The word "earned" has not been used in section 4 of the Income-tax Act. The section talks of " income, profits and gains " from whatever source derived which (a) are received by or on behalf of the assessee, or (b) accrue or arise to the assessee in the taxable territories during the chargeable accounting period. Neither the word " income " nor the words "is received," "accrues" and " arises " have been defined in the Act. The Privy Council in Commissioner of Income-tax, Bengal v. Shau Wallace & Co.(1) attempted a definition of the term income " in the words following :- "Income, their Lordships think, in the Indian Income-tax Act, connotes a periodical monetary return ' coming in' with some sort of regularity, or expected regularity from definite sources. The source is not necessarily one which is expected to be continuously productive, but it must be one whose object is the production of a definite return excluding anything in the nature of a mere windfall." Mukerji- J. has defined these terms in Rogers Pyatt Shellac &....
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....becomes receivable and connote a character of the income which is more or less inchoate. One other matter need be referred to in connection with the section. What is sought to be taxed must be income and it cannot be taxed unless it has arrived at a stage when it can be called 'income'." The observations of Lord Justice Fry quoted above by Mukerji J. were made in Colquhoun v. Brooks(1) while construing the provisions of 16 and 17 Victoria Chapter 34 section 2 schedule 'D'. The words to be construed there were' profits or gains, arising or accruing' and it was observed by Lord Justice Fry at page 59: "In the first place, I would observe that the tax is in respect of 'profits or gains arising or accruing.' I cannot read those words as meaning I received by.' If the enactment were limited to profits and gains 'received by' the person to be charged, that limitation would apply as much to all Her Majesty's subjects as to foreigners residing in this country. The result' would be that no income-tax would be payable upon profits 'which accrued but which were not actually received, although profits might have....
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.... right to receive the payment. Unless and until his contribution or parenthood is effective in bringing into existence a debt or a right to receive the payment or in other words a debitum in presenti, solvendum in futuro it cannot be said that any income has accrued to him. The mere expression "earned" in the sense of rendering the services etc., by itself is of no avail. If therefore on the construction of the Managing Agency Agreements we cannot come to the conclusion that the Sassoon's had created any debt in their favour or had acquired a right to receive the payments from the Companies as at the date of the transfers of the Managing Agencies -in favour of the transferees no income can be said to have accrued to them. They had no doubt rendered services as Managing Agents of the Companies for the broken periods. But unless and until they completed their performance, viz., the completion of the definite period of service of a year which was a condition precedent to their being entitled to receive the remuneration or commission stipulated thereunder, no debt payable by the Companies was created in their favour and they had no right to receive any payment from the Compani....
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....onclusion of the relevant account; that the profit in the form of commission was not ascertainable or earned, and did not arise, until that time and that the additional assessment which was made in the year in which the policies were underwritten should accordingly be discharged. The Special Commissioner allowed the assessee's contention and, discharged the additional assessment. The decision of the Special Commissioners was confirmed on appeal by Macnaghten J. in the King's Bench Division of the High Court. The Court of Appeal however reversed this decision and a further appeal was taken by the assessee to the House of Lords. The House of Lords held that on the true construction of the Agreements, the commissions in question were earned by the assessee in the year in which the policies were underwritten, and must be brought into account accordingly and confirmed the decision of the Court of Appeal. It may be noted that the charge was on profits arising in each chargeable accounting period and the profits were to be taken to be the actual profits arising in the chargeable accounting period. The ratio of the decision was that the commission paid was remuneration for services....
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....geable accounting period and the income had accrued to the assessee during that period. Learned counsel for the transferees also relied upon the decisions in Bangalore Woollen, Cotton and Silk Mills Co., Ltd. v. Commissioner of Income tax, Madras(1), and Turner Morrison and Co., Ltd. v. Commissioner of Income-tax, West Bengal(2), to show that as and when the sale proceeds were received by the Company the profits made by the Company were embedded in those sale proceeds and if that was so the percentage of the net profits which was payable by the Companies to the Managing Agents as and by way of commission was similarly embedded in those sale proceeds. If the profits thus accrued to the Company. during the chargeable accounting period the commission payable to the Managing Agents also could be said to have accrued to them during that period. It is no doubt true that the accrual of income does not depend upon its ascertainment or the accounts cast by assessee. The accounts may be made up at a much later date. That depends upon the convenience - of the assessee and also upon the exigencies of the situation. The amount of the income, profits or gains may thus be ascertained lat....
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....o the assessee to receive alleged designated return and, therefore, the entire addition is on notional basis in contrast with the concept of real income. 47. It is pertinent to mention here that the Hon'ble High Court of Allahabad vide its order in PIL No 60214 of 2012 dated 26.10.2016 held that Article 13 and Articled 14 of the Agreement are not valid and to be severed from the agreement. The Hon'ble Court had struck down the levy of fee for the reason that the assessee had already recovered the entire cost of the project on actual basis from collection of tolls, advertisement and rental income and, therefore, the assessee cannot collect the toll. 48. In this light, it can be safely concluded that the assessee did not earn 20% designated return on the cost of the project. Thus, addition on account of designated return amounting to Rs. 179.87 crores does not have any legs to stand and deserves to be deleted. We order accordingly. LEASE OF LAND TREATED AS REVENUE SUBSIDY-Rs. 1730.08 CRORES 49. The sole basis for this enhancement is that according to the ld. CIT(A), lands were transferred to the assessee by Noida without any consideration and that the assesse....
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....ty. During the year, the assessee debited such interest to the tune of Rs. 14.41 crores to the Profit and Loss account whereas it had paid Rs. 12.70 crores 56. The Assessing Officer disallowed the difference of Rs. 1.71 crores for the reason that the same is unpaid. 57. In our understanding of the afore-mentioned facts, provisions of section 43B(e) of the Act apply only to loans/borrowings from any financial institutions. It does not apply to the deep discount bonds issued to the public. In our considered opinion, the amount over and above the face value which is payable on maturity is nothing but the interest amount which accrues to the assessee every year and recognized by the assessee in its books of account. Therefore, the interest payable on deep discount bonds is to be allowed on accrual basis and not on payment basis. The Assessing Officer is directed to delete the same. 58. In the result, the appeals of the assessee are allowed. [Revenue's Appeals] ITA No. 4968/DEL/2018 A.Y 2006-07 ITA No. 4969/DEL/2018 A.Y 2007-08 ITA No. 4970/DEL/2018 A.Y 2008-09 59. The grievances of the Revenue read as under: 21. Whether on ....
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....granted by the CDR empowered group of the corporate debt restructuring cell (CDR) of the banks and financial institutions as capital expenditure as against the assessee's claim that it was a revenue expenditure. The A.O. was of the view that it was a capital expenditure. For the sake of convenience, the relevant findings of the A.O. are reproduced as under: 'The submissions made by the assessee company year considered. As admitted by the assessee company itself in its submissions that thee bonds, which would be redeemed not later than March 31, 2014, were issued to the lenders towards compensation for the loss of interest they have suffered from the documented rate. Thus, such amortization is not an expenditure of revenue in nature. Accordingly, the expenditure claimed towards amortization of zero coupon bonds amounting to Rs. 3,51,07,840/- (Rs.5,16,01,434-Rs.1,64,93,594/-) is disallowed being capital in nature and added to the total income of the assessee company.' XXXXXXX 12. Still aggrieved, the assessee has come up in further appeal and while reiterating the submissions as made before the A.O. and Ld. CIT(A), has pleaded for deletion of the addition ma....
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....s below and pleaded for its confirmation. When specifically asked whether the case of the assessee covered by decision cited by Ld. Counsel for the assessee, he could not be able to give any denial. 14. After haring both the sides and considering the material on record as well as the precedent relied upon by the Ld. counsel for the assessee, we are of the view that addition made by the A.O. and confirmed by Ld. CIT (A) could not be made in view of the facts and circumstances of the case in the light of the precedent relied upon by Ld. counsel for the assessee. We, therefore, while considering the entire facts and circumstances and material on record and the ratio of the decision relied upon by Ld. counsel for the assessee and not controverted by Ld. D.R., direct to delete the impugned addition made by the A.O. and confirmed by Ld. CIT(A)." 62. The ld. DR had raised strong objections on the reliance of the aforementioned judgment of the Tribunal stating that in that year, the Revenue failed to point out the glaring difference in the facts of the case in hand and the decision of the Hon'ble Delhi High Court relied upon by the ld. DR in the case of Gujarat Guardian Ltd....
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....ed in A.Y 2004-05 as advance payment, the zero coupon bonds have been issued for liability accrued earlier, but paid in subsequent year. 68. We find that this aspect has been explained in the Financial Statement for F.Y. 2005-06 under the head "Notes on Accounts". Clause (e) Debt Restructuring reads as under: Debt Restructuring: Pursuant to the approved Debt Restructuring package, the Company has issued Zero Coupon Bonds (ZCBs) (Series A) of face value of Rs. 100 each aggregating to Rs. 51.385 crores to Financial Institutions and others towards conversion of Term Loan. ZCBs aggregating to Rs. 25.693 Crores were repaid on March 31,2005 and the balance have been repaid on March 31, 2006 as per terms of Restructuring. Zero Coupon Bonds (Series B) of face value of Rs. 100 each aggregating to Rs. 55.5422 crores to Banks, Financial Institutions and others repayable no later than March 31,2014 towards the Net Present Value of the sacrifice made by them by way of reduction of interest rates from the contracted terms. The Company is creating provision on a year to year basis on the principle of Sinking Fund by applying the weighted aver....
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....rt in the case of M.M. Aqua Technologies Ltd 436 ITR 582. The relevant part reads as under: "18. As has been pointed out hereinabove, the Finance Act, 2006 inserted Explanation 3C w.e.f. 1st April, 1989. The scope and effect of this provision was explained by the Board in Circular No. 14/2006 dated 23rd December, 2006, as follows: "16.2 It has come to notice that certain assessees were claiming deduction under section 43B on account of conversion of interest payable on an existing loan into a fresh loan on the ground that such conversion was a constructive discharge of interest liability and, therefore, amounted to actual payment. Claim of deduction against conversion of interest into a fresh loan is a case of misuse of the provisions of section 43B. A new Explanation 3C has, therefore, been inserted to clarify that if any sum payable by the assessee as interest on any loan or borrowing, referred to in clause (d) of section 43B, is converted into a loan or borrowing, the interest so converted, shall not be deemed to be actual payment. 16.3 This amendment takes effect retrospectively from 1st April, 1989 i.e. the date from which clause (d) was inserte....
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....iability to pay interest. 21. Explanation 3C, which was introduced for the "removal of doubts", only made it clear that interest that remained unpaid and has been converted into a loan or borrowing shall not be deemed to have been actually paid. As has been seen by us hereinabove, particularly with regard to the Circular explaining Explanation 3C, at the heart of the introduction of Explanation 3C is misuse of the provisions of Section 43B by not actually paying interest, but converting such interest into a fresh loan. On the facts found in the present case, the issue of debentures by the assessee was, under a rehabilitation plan, to extinguish the liability of interest altogether. No misuse of the provision of Section 43B was found as a matter of fact by either the CIT or the ITAT. Explanation 3C, which was meant to plug a loophole, cannot therefore be brought to the aid of Revenue on the facts of this case. Indeed, if there be any ambiguity in the retrospectively added Explanation 3C, at least three well established canons of interpretation come to the rescue of the assessee in this case. First, since Explanation 3C was added in 2006 with the object of plugging a loophol....
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....ence sub-section (2) relieves the Revenue of all burden of proof regarding the extent of understatement or concealment and provides a statutory measure of the consideration received in respect of the transfer. It does not create any fictional receipt. It does not deem as receipt something which is not in fact received. It merely provides a statutory best judgment assessment of the consideration actually received by the assessee and brings to tax capital gains on the footing that the fair market value of the capital asset represents the actual consideration received by the assessee as against the consideration untruly declared or disclosed by him. This approach in construction of sub-section (2) falls in line with the scheme of the provisions relating to tax on capital gains. It may be noted that Section 52 is not a charging section but is a computation section. It has to be read along with Section 48 which provides the mode of computation and under which the starting point of computation is "the full value of the consideration received or accruing". What in fact never accrued or was never received cannot be computed as capital gains under Section 48. Therefore sub-section (2) canno....
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....r view, correctly, to mean as income "arising or accruing in India". The amendment to the section by way of an Explanation in 1983 effected a change in the scope of that judicial definition so as to include with effect from 1979, "income payable for service rendered in India". 19. When the Explanation seeks to give an artificial meaning to "earned in India" and brings about a change effectively in the existing law and in addition is stated to come into force with effect from a future date, there is no principle of interpretation which would justify reading the Explanation as operating retrospectively. 23. This being the case, Explanation 3C is clarificatory-it explains Section 43B(d) as it originally stood and does not purport to add a new condition retrospectively, as has wrongly been held by the High Court. 72. In light of our discussion above, in our considered opinion, the decision of the co-ordinate bench [supra] squarely apply and there are no new facts which makes the year under consideration different from A.Y 2004-05. Respectfully following the decision of the co-ordinate bench [supra] the appeal of the Revenue is dismissed. 73. In the result, the a....
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....ted under the Concession Agreement and due to the company till March 31, 2008 as Rs 12,841.30 million, The total amount to be recovered up to March 31, 2009 aggregates to Rs. 14,85.32 million as calculated by the Management and is subject to verification by the Independent Auditor". 81. Thus, it can be seen that there was a full disclosure in the account itself. The ld. DR has raised strong objections to such disclosure drawing full support from Explanation 1 to Section 147 of the Act wherein it has been provided that production before the Assessing Officer of Account Book or other evidence from which material evidence could, with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of Section 147 of the Act. 82. The issue which needs consideration is whether in the mentioned Notes forming part of the Account amounts to disclosure. This apprehension has been addressed by the Hon'ble Jurisdictional High Court of Delhi in the case of Sain Processing & Wing Mills Pvt Ltd 325 ITR 565 wherein the Hon'ble High Court was seized with the following question of law: "Whether the Income Tax Appella....
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....as near thereto as circumstances admit or in such other form as may be approved by the Central government either generally or in any particular case and in preparing the balance sheet due regard shall be had, as far as may be, to the general instructions for preparation of balance sheet under the heading "Notes" at the end of that part: Provided that nothing contained in this sub-section shall apply to any insurance or banking company or any company engaged in the generation or supply of electricity or to any other class of company for which a form of balance sheet has been specified in or under the Act governing such class of company. (2) Every profit and loss account of a company shall give a true and fair view of the profit or loss of the company for the financial year and shall, subject as aforesaid, comply with the requirement of part II of Schedule VI, so far as they are applicable thereto. (6) For the purpose of this section, except where the context otherwise requires any reference to a balance sheet or profit and loss account shall include any notes thereon or documents annexed thereto, giving information required by this Act and allowed by this ....
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....relevant assessment year. 4.10 To our minds, as long as the depreciation which is not charged to profit and loss account but is otherwise disclosed in the notes of the accounts, it would come within the ambit of the expression "shown" in the profit and loss account, as notes to the account, form part of the profit and loss account by virtue of a sub-section (6) of Section 211 of the Companies Act, 1956. This is quite evident if the provisions of sub- section (6) of the Section 211 of the Companies Act, are read in conjunction with, sub-section (1A), as well as, the explanation to Section 115J of the Act. 4.11 Another important aspect of the matter is that the expression used by legislature is "net profit"in contra distinction to the well-known accounting term "cash profit". The net profit of a company cannot be determined till all items of income and expenses as recognized, as well as, depreciation are taken into account. Depreciation is nothing but loss of value of an asset arising from its use, efflux of time or obsolescence over a period of its useful life. Depreciation, undoubtedly has a major impact in determination of the financial position of a company/ente....
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....Accounting Standard (AS-5) required prior period expenses/extraordinary items to be shown separately and the fact that these items were shown separately did not mean that they would not constitute part of the net profit. 4.14 The court also observed that the normal approach is to include prior period items in the determination of net profit or loss for the current period; however, the alternative approach was to show such items in the statement of profit and loss account after determination of current net profit or loss so as to indicate the effect of such items on the current profit and loss. 4.15 In our view, the ratio of the said judgment would apply notwithstanding the fact that there is no debit to the profit and loss account, in view of our discussion above that net profit cannot be determined without taking into account the information disclosed in the notes appended to the accounts which as observed by us hereinabove, form part of the accounts of the company/assessee. 5. The matter can be looked at from another angle. Under clause (iv) of the Explanation to Section 115J, the net profit as shown in the profit and loss account is to be reduced by, t....
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....ncy fee paid by the assessee to such persons was disallowed by the Assessing Officer. 88. A similar issue was considered by the co-ordinate bench in ITA No. 5246/DEL/2012. The relevant findings read as under: "3. As regards ground no.1, the brief facts of the case as emanating from the order of the AO are reproduced hereinbelow. "During the assessment proceedings assessee also filed concession Agreement. Perusal of concession agreement entered between NEW OKHLA INDUSTRIAL DEVELOPMENT AUTHORITY AND INFRASTRUCTURE LEASING & FINANCIAL SERVICES LIMITED AND NOIDA TOLL BRIDGE PROJECT ITAs No. 5246, 5247, 5248, 5249, 5286/Del/2012 3 COMPANY LIMITED reveals that independent Engineer is sole Authority to determine whether to issue or not issue certificate of compliance or conditional certificate of compliance contingent upon satisfaction of conditions mentioned in the concession agreement within 365 days from the date of signing of this agreement on 12.11.1997. Independent Auditor is required to give a reasoned decision on the basis of various submission made to him by the concessionaire i.e. assessee and NOIDA on non fulfillment of conditions on the certifica....
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.... 6. Learned CIT-DR, at the outset relied upon the order of the AO and page 547 of the concession agreement. 7. Learned AR, on the other hand, relied upon the order of the learned CIT(A). 8. After perusing the record, we are of the view that learned CIT (A) has passed a reasoned order and has rightly observed that the Independent Auditor and the Independent Engineer were to be appointed by the Lenders, NOIDA and the assessee were required to be there for the entire concession period. The Concession Agreement clearly differentiated between the activities of these agents during the pre-construction, commissioning and post commissioning period. Since the project got commissioned in February, 2001, the activities of these agents during the post commissioning period is of relevance to determine their deductibility while computing the taxable income of the AY 2006-07. As per Section 85 of Article 8 of the Concession Agreement, the function of Independent Engineer, post commissioning of the project, was to monitor that the maintenance of the Noida Bridge was being carried on in conformity with the terms of the agreement and to certify the cost of such maintenance while t....
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....that the Tax authorities never questioned the deductibility of above expense (i.e. Agency Fee) while dealing with assessee's case in respect of AY 2002-03 to 2005-06 which speaks for inconsistency in the approach and also go to support the claim of the assessee that the expenses in question were allowable revenue expenditure. In view of the above, we are of the considered view that the ITAs No. 5246, 5247, 5248, 5249, 5286/Del/2012 6 services performed by these agents are revenue in nature and fulfills the conditions prescribed under section 37(1) of the Act. Therefore, the agency fees incurred by the assessee during the F.Y. 2005-06 are allowed as revenue expenditure and the addition made by the Assessing Officer has rightly been deleted by the ld. CIT (A) and we find no infirmity in his order. Accordingly, Ground No. 1 of Revenue is dismissed." 89. Respectfully following the decision of the co-ordinate bench (supra) we direct the Assessing Officer to delete the agency fee. This ground is accordingly allowed. 90. In the result, the appeals of the assessee are allowed. ITA No. 4973/DEL/2018 A.Y 2009-10 [Revenue's Appeal] ITA No. 4971/DEL/2018 A.Y....
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....wed ITA No. 4411/DEL/2018 [A.Y. 2007-08] - Allowed ITA No. 4412/DEL/2018 [A.Y. 2008-09] - Allowed ITA No. 4413/DEL/2018 [A.Y. 2009-10] - Allowed ITA No. 4414/DEL/2018 [A.Y. 2010-11] - Allowed ITA No. 4416/DEL/2018 [A.Y. 2011-12] - Allowed ITA No. 4417/DEL/2018 [A.Y. 2011-12] - Allowed The appeals of the Revenue in : ITA No. 4968/DEL/2018 [A.Y. 2006-07] - Dismissed ITA No. 4969/DEL/2018 [A.Y. 2007-08] - Dismissed ITA No. 4970/DEL/2018 [A.Y. 2008-09] - Dismissed ITA No. 4973/DEL/2018 [A.Y. 2009-10] - Dismissed ITA No. 4971/DEL/2018 [A.Y. 2010-11] - Dismissed ITA No. 4972/DEL/2018 [A.Y. 2011-12] - Dismissed Order pronounced in the open court on 08.08.2023. ============= Document 1 REASONS UNDER SECTION 147 OF THE IT ACT. Return declaring a loss of Rs. 37,49,00,550/ was filed on 30.10.2004. The same was processed u/s 143(1) on 05.07.2005 and selected for scrutiny assessment by issue of notice u/s 143(2) of the IT Act dated 11.08.2005 duly served upon the assessee. Thereafter, assessment order u/....
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....laim an expenditure as deductible, the assessee must have incurred an expenditure and it should not be of the capital nature. The appellant do not fulfill these conditions. Since the amount was incurred for raising the capital, the same was in the nature of the capital expenditure. Therefore, the addition made by the AO is confirmed. This ground of appeal is rejected.. During the assessment year 2006-07, it's seen that AO has Inadvertently over looked this issue as the assessee seems to have twisted the interpretation of such amortization of ZCBS with regard to applicability of section 36(1) of IT Act and has managed to escape assessment which should otherwise have been brought to taxation. Hence, as discussed above, I have reasons to believe that income has escaped assessment of Rs.1,00,56,437/-. Issue notice u/s 148 for A.Y. 2006-07. (Abhishek Gautam) Asst Commissioner of Income -Tax Circle-1, Noida. Document 2 Year/period Opening balance of unrecovered project cost Noida Toll Bridge Company Limited Statement of computation of 'Returns in Arrears' as at 31 March 2013 (in accordance with Article 14.2 of the concessio....
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....,883 25,272,552,195 5,054,510,439 29,551,405,164 Notes referred to above form an integral part of the Statement For and on behalf of Noida Toll Bridge Company Limited Harish Mathur Chief Executive Officer Place: D15 2013 Date: 15 NOV Rajiv Jain Astt: Vice President (UP) DHANAN RN'S-CHARE NEW DELHI RTERED UNTANTS ACCOUNTA Document 3 ANNEXURE-'A' Name & address of assessee : PAN Assessment Year Date M/s Noida Toll Bridge Co. Ltd., Toll Road DND Flyover, Opposite-Sector-15A, Noida. AAACN3498A 2009-10 07.03.2016 REASONS UNDER SECTION 147 OF THE IT. ACT. Assessee was filed its Income Tax Return declaring taxable income of Rs. 1,49,80,613/- on 30.09.2009. The Case was selected for Scrutiny through CASS and assessment u/s 143(3) was completed on 23.12.2011. Further, it is noticed that the assessee company was to receive 20% of returns on its total cost of project as designated under the concession agreement dated 12.11.1997. The same was brought to notice of the department for the first time by means of report of independent auditor dated 15.11.2013 during F.Y. 2014-15 and showed ....
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....I have reasons to believe that receipts amounting to Rs. 319,02,49,598/- accruing to the assessee during A.Y. 2010-11 has escaped assessment within the meaning of section 147 of the I.T. Act, 1961.Therefore, proceeding u/s 148 for the A.Y. 2010-11 under consideration is to be initiated with the approval of the Pr. Commissioner of Income Tax, Noida as per provision of Section 151(2) of the Income Tax Act, 1961. Accordingly proposal is being submitted to the Pr. Commissioner of Income Tax, Noida and notice u/s 148 of the IT. Act, shall be issued accordingly. (Rajesh Kumar, I.R.S) Deputy Commissioner of Income Tax, Circle-2, Noida. Document 5 ANNEXURE-'A' Name & address of assessee PAN Assessment Year Date M/s Noida Toll Bridge Co. Ltd., Toll Road DND Flyover. Opposite-Sector-15A, Noida. AAACN3498A 2011-12 07.03.2016 REASONS UNDER SECTION 147 OF THE L.T. ACT. Assessee was filed its Income Tax Return declaring taxable income NII on 17.08.2012. The Case was selected for Scrutiny through CASS and assessment u/s 143(3) was completed on 14.03.2014. Further, it is noticed that the assessee company was to receive 20% o....