TMI Blog2013 (9) TMI 397X X X X Extracts X X X X X X X X Extracts X X X X ..... o capital asset to be transferred cannot be accepted – Decided in favor of Assessee. Since, we have already considered the ownership of the asset and arrived at the conclusion that there is a capital asst, which is validly transferred to a 100% subsidiary company, there is no need to discuss the provisions of S.23 to 25 and S.65 of the Indian Contracts Act, to consider whether the agreement is void or not. In any case, an agreement does not become void only because one of the parties assigned part of the rights to its 100% subsidiary, since this is authorized by the agreement itself, Applicability of provisions of section 47(iv) of the Income Tax Act – Held that:- Assessee has right to collect toll and other fee and to develop way side facilities like advertisements, hoardings, etc. to generate revenue and also entitled to create additional structural facility to cater for the pipelines for oil, gas and water and at that time, they were envisaging establishing a pipeline for ONGC for transportation of gas by utilsiing this facility - Amount of toll collection is being assessed in the hands of GTBPL and the Commissioner has not considered the agreement as void and the toll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e project constructed including approach roads are under the ownership of Government of Andhra Pradesh, but said property was demised to the assessee during the contract period for collection of toll from the users of the bridge for a period of 15 years. The assessee completed the project in 1999, and was collecting toll for about four years. During the previous year relevant to the assessment year 2006-07, assessee company transferred this BOT Yanam Project' to its wholly owned subsidiary company, called Godavari Toll Bridge (P)Ltd (GTBPL), for a consideration of ₹ 125 crores. The assessee reduced the cost of construction and arrived at capital gains of ₹ 108.88 crores which was claimed as exempt under S.47(iv) of the Income-tax Act, as the assessee transferred the asset to a wholly owned subsidiary company. The Assessing Officer, noticing that there is reduction of the asset in the depreciation schedule, enquired about the nature of the transfer and the asset, and was submitted a detailed note on the transfer of the said asset to the wholly owned subsidiary and claim of exemption under S.47(iv). There is, however, no discussion by the Assessing Officer on this is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, as this income cannot be taxed under any other head of income. In view of these findings, he held that the order passed by the Assessing Officer has become erroneous and prejudicial to the interests of Revenue, and therefore, he set aside the assessment, and directed the Assessing Officer to decide the claim under S.47(iv) and issue of taxing the income under the head income from other sources' afresh. Assessee is aggrieved by the said directions/revision. 6. The learned counsel in his elaborate arguments referred to the agreement with Government of Andhra Pradesh, Minutes of Board of Directors transferring the right to collect toll of Yanam-Yedurlanka Bridge dated 25.3.2006 and also various orders of the Assessing Officer disallowing depreciation on the said BOT asset and the orders of the CIT(A) allowing depreciation for all the years from assessment year 2003-04 to 2006-07 and further, the consolidated order of the ITAT for assessment years 2003-04 to 2006-07 in assessee's own case confirming the orders of the CIT(A) allowing depreciation. He also placed on record, a paper-book running from pages 1 to 187. The learned counsel summarized various arguments into fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OIDA Toll Bridge Co. Ltd. and for AY. 2003-04 in ITA No. 3211/Del/2006 dated 19.12.2008. 8. He further placed before us the following chronology of events to submit that the orders of the ITAT dismissing the departmental appeal questioning allowance of depreciation on the BOT asset was prior to the issuance of show cause notice in this case by the Commissioner of Income-tax under S.263 of the Act. Sl. No. Date Particular 1. 06.10.1999 Agreement entered with Government of Andhra Pradesh for construction of bridge on BOT basis 2. 05.10.2002 Construction of bridge completed and toll collection started 3. 25.03.2006 Board resolution passed by the appellant company to transfer rights to subsidiary 4. 31.03.2006 Board Resolution passed by subsidiary company. Shares worth ₹ 114.760 cr. allotted and liability of ₹ 10.30 cr. taken over 5. 10.01.2007 Search u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight to collection of toll was transferred to the subsidiary company. He submitted that the case-law relied upon by the assessee is more with reference to allowance of depreciation, but not pertaining to the transfer of an asset There are various other parameters which are to be considered and not allowing the depreciation alone, and hence decisions in that context may not be invoked for the propose of considering the transfer of asset. He supported the order of the Commissioner to submit that since there is no transfer of an asset, assessee's claim under S.47(iv) does not arise, and therefore, the amount was rightly considered by the Commissioner as income under the head other sources'. He further contended that since the assessment was set aside to the Assessing Officer for fresh examination, the assessee should not have any grievance. He thus relied on the order of the Commissioner. 11. We have considered the issue. At the outset, we find that the BOT asset is figuring in the Balance Sheet at net cost price and the depreciation was being allowed to the assessee consequent to the orders of the CIT(A) and ITAT. Therefore, the issue that there is no capital asset in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ydurlanka Bridge with approaches and cross drainage works, construction of fee collection arrangeement, as well as maintenance of the facility and collection of fee till the recovery of investment made by the Enterprise and handing over the facility to the Government in proper condition as defined later. Therefore, collection of fee till the recovery of investment made by the enterprise and handing over of the facility to the Government is part of the project. Further, the learned Commissioner relied on clause 3.1.1 of the agreement which read as under- FUNDING ARRANGEMENTS: 3.1 .. 3.1.1 The Enterprise should not attempt to assign the project to others; Thus, as can be seen, the Enterprise should not attempt to assign the project to others, but as stated above the definition of enterprise is wide enough to include their legal representatives, successors, administrators, receivers and assignees as stated therein, and therefore, 100% subsidiary of the assessee also include within the definition of the term enterprise'. Therefore, in our view if the project was assigned to subsidiary, it may get included within the definition of the term 'enterprise& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has transferred was right of toll collection for the balance period along with the demised property. 14. We have also enquired about the price paid for transferring the above right. We were informed that the assessee has right to collect toll and other fee and to develop way side facilities like advertisements, hoardings, etc. to generate revenue and also entitled to create additional structural facility to cater for the pipelines for oil, gas and water and at that time, they were envisaging establishing a pipeline for ONGC for transportation of gas by utilsiing this facility. Therefore, in anticipation of higher toll collection, they have considered the amount and transferred to the sister concern as a Special Purpose Vehicle(SPV) for the toll collection business of the enterprise. It was also informed that the amount of toll collection is being assessed in the hands of GTBPL and the Commissioner has not considered the agreement as void and the toll collected thereon was not assessed in the hands of the assessee at all. This also indicates that there is a valid transfer to the 100% subsidiary company and since the provisions of S.47(iv) are directly applicable, this assignment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be invoked by the Commissioner to consider the transfer as void. 19. The arguments/contentions of the learned counsel for the assessee that the Assessing Officer has examined this issue at the time of completion of search assessment; that the Assessing Officer has taken an opinion in the course of assessment; the Commissioner cannot take a different opinion in a manner; and further objections that if the transfer was held as illegal, there is no consideration to be received as the entire money has to be refunded, and in that sense, there can be no addition of ₹ 125 crores; and that the money was not received on revenue account, but on capital account; will become academic in nature. Since we have already held that the assessee has a capital asset which was transferred to subsidiary company and the claim under S.47(iv) is validly made, there is no need to discuss and give findings on the other alternative contentions. 20. Looking at in any way, the order of the Commissioner of Income-tax cannot be upheld. Accordingly, the same is set aside. 21. In the result, appeal of the assessee is allowed. Order pronounced in the Court on 16.1.2013 - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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