TMI Blog2017 (4) TMI 655X X X X Extracts X X X X X X X X Extracts X X X X ..... nditions 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. Bonus paid is exclusively has to be dealt by Section 36(1)(ii) of the Act and which does not distinguish between capital and Revenue and therefore has to be allowed. Advance payments received on account of toll and advertisement - Held that:- In the instant case, the assessee recoqnised advertisement revenue proportionately on the basis of period falling under the particular financial year. So far as toll fee is concerned while issuing new cards (Silver and Gold cards) the assessee collects administration fees, security deposit and toll usage fees. While administration fees was recognised as revenue immediately, amounts received on account of toll fees from issuance I recharge of Silveri Gold Card was recognised as revenue on the basis of actual number of passages availed by the card users during a particular financial year. We have also noticed that the assessee has been following the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n constructed is not the property of the assessee, but has been given on lease by the NOIDA authority for a certain period i.e. 30 years. As per the agreement, the lease can be terminated earlier also, subject to certain conditions. Therefore, the ownership of the asset in the hands of the assessee is not established. 4. The CIT(A) has erred in law on facts in deleting addition of ₹ 91,21,413/- being 'Take Out Assistance Fee , which is the cost of agreement entered with IL FS IDFC for the issue of Deep Discount Bond having maturity value of 16 years without appreciating the fact that expense is related to the activities which spread over 16 years and in the nature of capital expenditure. 2. Grounds No.5 and 6 are general in nature, therefore, do not require any adjudication. 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 COMPANY LI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vis- -vis the cost involved. Hence the expense of ₹ 22,55,046/- pais as Agency fee and claimed as expenditure in P L account is not allowable since it is a capital expenditure. The same is treated as capital expenditure and the same is added back, to the income of the assessee. 4. Learned CIT(A) deleted the additions so made by the AO for the reasons mentioned in his order at pages 53 and 54 of his order. 5. We have heard the rival contentions and perused the facts of the case. 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 Februa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l during the FY 2005-06. The AO seems to have misread the Agreements to wrongly conclude that since the works assigned to independent Engineer, independent Auditor and, retainer is related to establishment, construction and commissioning of the DND Fly over and to oversee and review position of recovery for the fly over vis-a-vis the cost involved, the expenses incurred by the assesse in this regard is capital in nature. In this context it is also worthwhile to mention the fact 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 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. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds so raised. 11. We have heard the rival contentions and perused the facts of the case. The issue is directly covered by the decision of Hon ble ITAT vide order dated 19.12.2008 for the Assessment Year 2002-03 and 2003-04 in assessee s own case where the decision of learned CIT(A) has been upheld by the ITAT, which is reproduced hereinbelow. As far as the objection of learned DR with regard to ownership is concerned, the learned counsel for the assessee took us through clause 2.1 of the concession agreement. He pointed out that NOIDA has agreed to give exclusive rights and authority durina the concession period to development establish construct operate and maintain the NOIDA Bridge as an infrastructure facility. He took us through various clauses and pointed out that these clauses sufficiently enable the assessee to consider itself as owner of the assets. The lease period is for 30 years. Thus, it indicates that this capital asset is owned by the assessee for all the practical purposes. If the transporter refuses to pay the fees provided by the assessee for use of this, it has a right to confiscate the vehicle up to and only the fees is paid for the use of the road o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and to hold that the assets on which depreciation is claimed by the assessee are owned by it, whereas in the concession Agreement dated 12.11.1997 between NOIDA authority and the assessee, it is clearly mentioned that the land on which the toll bridge has been constructed is not a property of the assessee, but has been given on lease by the NOIDA authority for a certain period (30 years) and as per the agreement, the lease can be terminated earlier also, subject to certain conditions. Therefore, the ownership of the asset in the hands of the assessee is not established. 4. The Assessing Officer vide order under Section 143(3) of the Act dated 29.09.2006 disallowed the claim of the assessee on depreciation on toll roads bridge amounting to ₹ 19,14,43,827/- after considering decision of the Supreme Court in the case of Indore Municipal Corporation (SC) 247 ITR 803. The CIT(A) deleted the disallowance following the orders of Income Tax Appellate Tribunal, for the assessment year 2003-04. 5. The Income Tax Appellate Tribunal confirmed the order of CIT(A), and dismissed the appel by relying on its own decision in the case of assessee for the assessment years 2002-03 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o far as question no.1 is concerned, regarding the payment in connection of take out assistance fee for redemption of Deep Discount Bonds this Court has already decided the question in Income Tax Appeal No.44 of 2010 between the same parties relating to the assessment year 23002-03 in favour of the respondent-assessee and against the revenue. 15. The decision relied upon by the learned DR in the case of CIT vs. West Gujarat Expressway Ltd. reported in (2016) 73 taxmann.com 139 (Bombay) and in the case of North Karnataka Expressway Ltd. reported in 2014-TIOL- 1931 HC-MUM-IT is distinguishable on the facts that in the cases decided by the Bombay High Court the model of the contract was BOT whereas in the present case it is BOOT. Secondly, the case decided by the Hon ble Bombay High Court were with respect to National Highway whereas in the present case it is not a National Highway. In the facts and circumstances of the case, we find no infirmity in the order of learned CIT(A) and accordinlgy both the grounds of the Revenue are dismissed. 16. As regards ground no.4, the brief facts of the case as emanating from the order of the AO are reproduced herein. I have carefully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances of the case, we find that there is no infirmity in the order of the learned CIT(A) who has rightly deleted the addition so made. 18. In the result, the appeal of the Revenue is dismissed. 19. Now we take up the appeal of the assessee in ITA No.5286/Del/2012. The grounds raised are as under: 1. The order passed by the Learned Commissioner of Income Tax (Appeals) ( Ld. CIT(A) under section 250 of the Income Tax Act, 1961 ( the Act ) is bad in law and on facts and circumstances of the case. 2. The Ld. CIT(A) as well as Learned Assessing Officer (hereinafter referred as 'Ld. AO') have erred in law and on facts and circumstances of the case by alleging that the performance related bonus paid by the appellant to its employees was in relation to the listing of GDR of the appellant at London Stock Exchange notwithstanding the provisions of section 36(1)(ii) of the Act. 3. The Ld. CIT (A), as well as Ld. AO have erred in law and on the facts and circumstances of the case by disallowing the sum of ₹ 1,40,00,000 paid by the appellant as performance related bonus to its employees by treating the same as capital in nature. 4. All the aforesaid gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm consisted of sole seIling agency of one OCM in respect of yarn, cloth and blankets - Since assessee showed very satisfactory turnover, OCM started giving to assessee, in addition to usual commission, overriding commission at rate of two and a halfpercent on sales affected by assessee - Assessee in turn decided to give to 'S' and 'G' commission at rate of half percent out of two and a half percent overriding commission received from OCM - Assessee's claim for this amount of commission paid was rejected by revenue authorities On reference, High Court affirmed decision of authorities below holding that there was no evidence to show that any extra services were rendered by'S' and 'G' and that they were responsible for increase in sales and enlargement of overriding commission - On instant appeal, it was seen that'S' and 'G' were infact persons attending to business of assessee - 'G' was an experienced and seasoned businessman it was and he was also advising OCM in regard to designs etc., and he and'S' were primarily responsible for flourishing state of business - Whether, on facts. and having regard to aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and therefore, admissible as business expenditure under section 37(1). In view of the above, the instructions issued under the Board s earlier letter referred to above may be treated as withdrawn. Letter : F.No. 10/67/65-IT(A-I), dated 26.08.1965. 25. Learned DR, on the other hand, mainly relied upon the decision of Hon ble Supreme Court in the case of Punjab State Industrial Development Corp. Ltd. vs. CIT, reported in (1997) 93 Taxman 5 (SC) and relevant paragraph 7 of the said judgment is as under: 7. We do not consider it necessary to examine all the decision in extenso because we are of the opinion that the fee paid to the Registrar for expansion of the capital base of the company was directly related to the capital expenditure incurred bythe company and although incidentally that would cerainly help in the business of the company and may also help in profit-making, it still retains the character of a capital expenditure since the expenditure was directly related to the expansiion of the capital base of the company. We are therefore of the opinion that the view taken by the different High Courts in favour of the revenue in this behalf is the preferable view as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d discounst shown under the head liability. In response to the query, assessee has stated that this pertains to the toll receipts, which the customer has not used during the year under consideration. Assessee was further asked to explain as to why the reciepts received from the customer have been kept aside in the balance sheet. In response assessee stated that customer purchases card of tolls which is consumed on to and fro basis, and when the customer utilized full to and fro the receipts is taken into consideration. The assessee has also submitted the copy of refund being made by the company to the customer. The submission of the assessee is not tenable and convincing because the assessee received the tolls through electronic cards as revenue receipt and thereafter treatment thereof as liability is clear deferment of tax incidence on the ground of unutilization of to and from and other submission of refund to be made to customer in case the customer intends to take refund. The other submission is not acceptable because if a customer intends to take refund, which can be adjusted against the concerned year s receipt and after adjusting refund, net revenue toll receipts will be tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment. The Assessing Officer ought not to have disturbed the method of accounting adopted by the assessee in one assessment year when the same is accepted in the earlier as well as the subsequent assessment years as any change to the treatment would have a corresponding ripple impact on the other assessment years. Accordingly, the grounds of the Revenue are dismissed. 30. In the result, the appeal of the Revenue in ITA No.5247/Del/2012 is dismissed. 31. As regards appeal of the Revenue in ITA No.5248/Del/2012 and 5249/Del/2012 for the assessment years 2008-09 and 2009-10 which are dealing with the depreciation of toll bridge and agency fees the issues are identical to the issues raised by the Revenue in ITA No.5246/Del/2012 where the Revenue s grounds being dismissed by us hereinabove. 32. Following our order hereinabove, both the grounds in both the appeals are dismissed. 33. In the result, the appeals of the Revenue in both the years are dismissed. 34. To sum up, the appeal of the Revenue in ITAs No.5246 to 5249/Del/2012 are dismissed and appeal of the assessee in ITA No.5286/Del/2012 is allowed. Order pronounced in the open court on this day 10th April, 2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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