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2017 (1) TMI 985 - ITAT DELHI

2017 (1) TMI 985 - ITAT DELHI - TMI - Revision u/s 263 - whether AO order is erroneous, as well as prejudicial to the interest of the revenue? - Assessing Officer did not consider the aspect of whether the depreciation was allowable to the assessee under the given set of circumstances - Held that:- In the present facts of the case, Ld. AO had made enquiries regarding the additions that has been made to the fixed assets and the assessee had given details including the bills of purchase of the pla .....

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d by Ld. AO is unsustainable in law. Moreover the view taken by Ld. AO is a plausible view, which is supported by various judicial precedents. The assessment order passed cannot be called to be erroneous though may be prejudicial to the interest of the revenue. As both the ingredients does not stand fulfilled of being erroneous, as well as prejudicial to the interest of the revenue, the order passed by Ld. PR. CIT is hereby quash and set-aside. - Decided in favour of assessee - I.T.A. No. 2813/D .....

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sideration on the following grounds of appeal: 1. That on the facts and circumstances of the case and in law, the impugned order dated 30.03.2016 passed by the Principal Commissioner of Income-tax (PCIT), under section 263 of the Income-tax Act, 1961 ('the Act') is without jurisdiction, illegal, bad in law and void-ab-initio. 2. That the Ld. PCIT erred in invoking revisionary proceedings under section 263 of the Act merely on the basis of CBDT Circular dated 23,4.2014, which was issued m .....

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which was not applicable to the facts of the appellant's case and was also contrary to the law laid down in various decisions, could not be the basis to set-aside the assessment concluded vide order dated 31.12.2013 under section 143(3) of the Act. 5. That the Ld. PCIT erred in invoking revisionary proceedings under section 263 of the Act ignoring the law laid down by the Hon'ble High Court which is binding on lower authorities in respect of eligibility of the assessee to claim depreciat .....

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interest of the revenue. 3. The brief facts of the case are as under: - Assessee had filed its return of income for the year under consideration declaring a total loss at ₹ 1,27,65,56,278/- on 28.09.2011, which was subsequently revised on 28.03.2013, declaring a total loss of ₹ 1,31,11,92,502/-. The assessment was completed under section 143 (3) of the Act on 31.12.2013 at the revised loss of ₹ 1,31,11,92,502/. Subsequently, on examination of records by Ld. PR. CIT, it was obs .....

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essee had accepted the concession for a period of 30 years and the concession period commenced on the available date and shall end on the termination date. The assessee had claimed depreciation of ₹ 112,29,74,447/- during the A.Y 2011-12 on fixed assets of ₹ 1560,48,17,189/- @ 50 % of the eligible depreciation rates, as the assets were used for less than 180 days which was allowed in the assessment. As the assets were developed under BOT scheme the assessee was not eligible to claim .....

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rogressively for design, supply, installation, commissioning and operation of system and related work, The assessee enjoyed the benefits arising from the use of asset through collection of fares for a specified period without having actual ownership over such assets. Therefore, the rights in the land remained vested with the Government/its agency(DMRC). Thus, as the assessee did not hold any rights in the project except recovery of fares to recoup the expenditure incurred, it cannot be treated a .....

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s) during the construction period. Further, expenditure incurred by the assessee on such BOT projects had brought an enduring benefit in the form of right to collect the fares during the period of the agreement. The Supreme Court in the case of Madras Industrial Investment Corporation Ltd vs CIT 225 ITR 802, allowed spreading over of liability over a number of years on the ground that there was a continuing benefit to the company over a period, Therefore, analogously, expenditure incurred on an .....

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n allowed excessive deduction of ₹ 60,28,13,875/-. To the extent the order passed by the A.O is found to be erroneous and prejudicial to the interests of revenue. 5. In view of the facts mentioned in Para 3 and para 4 above, it is evident that the assessment has been completed without due application of mind and requisite inquiry, which renders it erroneous in so far as it is prejudicial to the interest of revenue. As mentioned above, the assessment order for the A.Y 2011-12 Is erroneous a .....

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e assessee by DMRC, as laid down by the Hon ble Supreme Court in the case of Madras Industrial Investment Corporation Ltd vs. CIT reported in 225 ITR 802. He was of the opinion that the ratio laid down by Hon ble SC was applicable to the facts of assessee as assessee does not own the project wholly or partly, being an essential condition, for claiming the depreciation on the plant and machinery and therefore do not fall within the category of intangible assets specified in sub clause (ii) of sub .....

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s beyond the scope and ambit of the powers conferred on the board under section 119 of the Act Ld. Counsel for the assessee submitted that the case of assessee was where assessment was completed at the time of issuance of show cause notice under section 263, and unless two preconditions of the assessment order being prejudicial as well as erroneous to the interest of the revenue are satisfied, Ld. PR. CIT does not have the jurisdiction to initiate proceedings under section 263 of the Act. 7. On .....

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7; 1,560,48,17,189/- at the rate of 50% as the assets were put to use for less than 180 days, which has been rightly allowed in the assessment. Ld. Counsel for assessee submitted that assessing officer at the time of original assessment had raised a specific query in the questionnaire issued under section 142(1) dated 18.09.2013, wherein he had called for the details of additions made to the sale of fixed assets alongwith copies of bills/evidence of transactions more than ₹ 1 lakh and the .....

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ue in the books of accounts, treating the same as in the nature of intangible assets being business or commercial rights and in the return of income assessee had claimed depreciation with respect to the cost in terms of section 32 (1) (ii) of the Act. It has been submitted that as per the terms of the concession agreement, assessee was granted permission to set up, own and operate the project along with substantial commercial rights, including but not limited to the right to collect fares from t .....

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officer on the basis of the detailed documents submitted before the Ld. AO. Under such circumstances the Ld. Counsel for the assessee submitted that the Assessing Officer had taken a possible view in law and hands proceedings initiated under 263 of the Act was outside the scope of revisionary jurisdiction. Ld. Counsel for assessee relied upon the following decisions to substantiate his preposition: • Malabar industrial Co Ltd reported in 243 ITR 83 (SC) • CIT versus Max India Ltd repo .....

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ion of the project. She submitted that the scheme does not actually transfer the ownership and assessee has only the right to develop and maintain the asset. She submitted that the assessee enjoys the benefits arising from the use of asset through collection of tool for a specified period without having actual ownership over such asset and for the purposes of allowability of depreciation under section 32 (1) (ii) of the Act, the assessee cannot be treated as owner of the property either wholly o .....

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the decision of Bombay High Court in the case of North Karnataka express highway Ltd in ITA No. 499/2012, wherein the Hon ble Bombay High Court held that depreciation is not allowable on toll road constructed under BOT scheme since the toll road belonged to the government and the company taxpayer was not the owner of the said road. 13. Ld. DR submitted that the Assessing Officer during the assessment proceedings has failed to examine above issues and has passed a cryptic order without proper ap .....

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ted in (2005) 272 ITR 367 (ALL) • Pratap footwear vs. ACIT reported in (203) SOTA 638 (Jubbalpore) (Trib); 14. Ld. DR submitted that Assessing Officer is both an investigator and adjudicator, has to decide the issue by conducting proper investigation and enquiry. She submitted that in the present case Ld. AO has failed to investigate the issue of depreciation claimed by the assessee and has completed the assessment on the minimum amount of evidence that was placed before Ld. AO. She further .....

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en for assessee to make submissions before the assessing officer afresh and in the event the claim of the assessee is found to be correct, will be allowed. She submitted that at this juncture it would be incorrect to hold the order passed by Ld. PR. CIT as unjustified because the assessment order passed by the Ld. AO is without verification of various issues in accordance with law. She placed her reliance upon the following decision to substantiate this preposition: • Rampyari Devi Sarogi v .....

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in the light of the submissions advanced by both the sides and the judicial proceedings relied upon by them. 17. Ground no. 1 that arises for our consideration is about the exercise of the powers by Ld. PR. CIT under section 263 of the act. As noted above, the submissions by Ld. DR has been that, Ld. Assessing Officer did not consider the aspect of whether the depreciation was allowable to the assessee under the given set of circumstances and that if allowable. This argument predicates on the as .....

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ion of the CIT as to whether the order is erroneous insofar as it is prejudicial to the interest of the revenue, must be based on the materials available on record. There must be some prima facie material on record to show that, tax which was lawfully exiligible has not been imposed or that by the application of relevant statute on an incorrect or incomplete interpretation a lesser tax that was just, has been imposed. In the present facts of the case, Ld. AO had made enquiries regarding the addi .....

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