TMI Blog2012 (10) TMI 611X X X X Extracts X X X X X X X X Extracts X X X X ..... as harvested by the land owner or by the assessee and in that situation, no compensation would have been required to be paid because there would have been no loss or damage to the crop or the assessee could have realized back by selling the crop but it would have resulted in delay of the project and to avoid this, assessee agreed to pay compensation for damage to the crop etc. hence, such compensation should be added to the cost of pipeline and not to the cost of land. No infirmity in the order of CIT(A) on this aspect. The grounds taken by the Revenue in respect of deletion of disallowance on depreciation claimed on crop compensation is dismissed and the ground in respect of deletion of disallowance of depreciation claim on Right of Way (ROW) other than security and cost of crop is allowed. - ITA Nos.2612, 2613, 2633 & 2634/Ahd/2010 - - - Dated:- 28-9-2012 - D K Tyagi and Anil Chaturvedi, JJ. Appellant Rep by: Shri B K S Pandya, CIT- DR Respondent Rep by: Shri Sanjay R Shah, AR ORDER Per: D K Tyagi: These are cross appeals against the common order of ld. CIT(A), Gandhinagar, Ahmedbad dated 30.06.2010. Since these cross appeals belong to the same ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use land for limited purpose of business which is eligible for depreciation at the prescribed rate for intangible assets. It is submitted it be so held now. 3.2.1 Ld. CIT(A) has erred in holding that limited right to use land is a tangible asset. It is submitted it be so held now. It is submitted that acquiring limited right to use the land is a completely distinct and independent right from the ownership right in the land itself. It is submitted it be so held now. 3. At the time of hearing ground No.3 relating to depreciation of ROU was not pressed and was withdrawn in view of the Tribunal s decision for the A.Y. 2006-07 in assessee s own case. The same is dismissed as withdrawn. 4. Ground Nos.1 and 2 relate to reopening of the assessment. 5. The facts, as they emerge in respect of these grounds from the order of ld. CIT(A) are as under:- 2.1 Reading the assessment order shows that the Assessing Officer has reopened the assessment u/s 147 consequent to finalization of assessment for assessment year 2006-07, wherein the claim of depreciation on pipelines was scrutinized in detail and the Assessing Officer came to the conclusion that certain expenses incurred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer had a definite belief in the form of finding in a subsequent assessment year about the manner of capitalization of assessee s expenses with respect to right of way/right of use expenses and the subsequently claim of depreciation, which as per him had not been correctly claimed. Therefore, there is a clear source of information for the Assessing Officer to form his belief. Also it would not be correct to say that he had gone through this issue and formed his opinion when completing the original assessment, because there is no reference to the issue either in the assessment order or in any communication issued by the Assessing Officer. It is now an established legal proposition that ere presence of a paper on record does not tantamount to the assessee having brought the relevant facts to the Assessing Officer s notice, unless the assessee had the occasion to specifically point that out. Therefore, seen whichever way, Assessing Officer was justified prima facie in forming a belief that income subject to taxation had escaped assessment. Therefore, the contention of the assessee is not accepted and the ground of appeal is dismissed. 6. Before us ld. counsel of the assessee, rei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiating reassessment proceedings as during the assessment proceedings for A.Y. 2006- 07 he found that assessee has claimed excessive depreciation and therefore he had material to have reason to believe that income chargeable to tax has escaped assessment. For making this submission reliance was placed on the decision of Hon ble Apex Court in the case of Kalyanji Mavji Co. vs. CIT (SC) reported in 102 ITR 287. He further submitted that the main argument advanced by ld. counsel of the assessee was that there was change of opinion on the part of the A.O. in initiating the re-assessment proceedings. According to him, in this case no opinion at all was formed in the original assessment as the A.O. had not gone into the issue at all. There was no enquiry made in respect of depreciation claimed by the assessee and no submission was made on behalf of the assessee in this respect. When there was no opinion formed, there is no question of change of opinion in this case. For making this submission he placed reliance on the decision of the ITAT, Calcutta in the case of Somdutt Builders Pvt. Ltd. vs. DCIT 1998 ITAT 78 and S.K. Engineering Pvt. Ltd. vs. CIT (sc) 247 ITR 818. He further sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per law and the same was disallowed by him. On the basis of this finding he initiated re-assessment proceedings for the years under appeal before us. It is thus not a case of change of opinion on the part of the A.O. as he has not specifically applied his mind during the original assessment proceedings on the depreciation claimed by the assessee. On these facts the ratio of the case laws relied by ld. counsel of the assessee is not applicable while the ratio in the cases of CIT Vs. N. Kishore Settlement (SC) reported in 236 ITR 34 and CIT Vs. United Trading Construction Co. (SC) reported in 247 ITR 818 relied by ld. D.R. is applicable. In the case of CIT Vs. N. Kishore Settlement (SC) (supra) following was held:- Held, that the case of the Revenue was that the assessee was charging to its profit and loss account, fiscal duties paid during the year as well as labour charges, power, fuel, wages, chemicals etc. However, while valuing its closing stock, the elements of fiscal duty and the other direct manufacturing costs were not included. This resulted in undervaluation of inventories and understatement of profits. This information was obtained by the Revenue in a subsequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree in nature- i) Crop compensation to those whose lands were used: ii) Compensation given for laying the pipelines underneath the lands of certain individuals, whose ownership continued to be to those individuals. iii) Right of way for the compensation to other Government agencies like Irrigation Department who owned the land, for taking the gas pipelines underneath their land. The detailed depreciation which could be attributed to the capitalization of these expenses was as follows:- For A.Y. 2004-05 Nature Original depreciation claim for A.Y. 2004-05 Crop compensation Rs.1,17,26,784 RoU-Compensation for Right of Use in land Rs.1,19,42,051 RoW Rs.1,09,75,520 Total Rs.3,46,44,355 For A.Y. 2005-06 Nature Original depreciation claim for A.Y. 2004-05 RoU-Crop compensation Rs.2,11,56,029 RoU-Compensation for Right of Use in land Rs.3,19,90,189 RoW Rs.2,17,94,959 Total Rs.7,49,41,177 The Assessing Officer relied on his a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the security deposit would be out of the ring for capitalization for gas pipelines but even the rental payment for those security deposits. However, as far as the appellant s alternative submission of these transactions having been resulted in intangible rights is concerned, as stated in appellate order for assessment year 2006-07, the rights in question are tangible rights and are not the intangible rights covered by section 32(i)(ii). Hence the alternative argument would also not apply. In view the above, the Assessing Officer is directed to re-compute the depreciation disallowable as per the directions above. The appellant is likely to get partial relief in the process. 14. At the time of hearing, both the parties agreed that the issue is covered by the order of the Tribunal in assessee s own case for the assessment year 2006-07 wherein following was held:- We have considered the rival sub missions, perused the material on record and have gone through the orders of authorities below. We find that the assessee company had to lay down the pipeline on land of 3rd party to whom three types of compensation were paid by the assessee. 1st is right to use of land, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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