TMI Blog2018 (9) TMI 1559X X X X Extracts X X X X X X X X Extracts X X X X ..... nd accepted in the regular assessment in the return filed pursuant to notice under Section 153A of the Act. The conduct of the respondent-assessee or examination of facts has been found and held to be bonafide. Facts of the case cannot and would not justify levy of penalty under Section 271(1)(c). Findings of the CIT (Appeals) and the Tribunal deleting penalty are reasonable and justified and primarily predicated on facts - Decided against revenue - ITA 929/2018 & CM No.34866/2018, ITA 932/2018 & CM No.34867/2018, ITA 933/2018 & CM No.34868/2018, ITA 934/2018, ITA 941/2018 & CM No.34879/2018, ITA 940/2018 & CM No.34878/2018, - - - Dated:- 28-8-2018 - MR. SANJIV KHANNA AND MR. CHANDER SHEKHAR JJ. Appellant Through: Mr. Ruchir Bhatia, Advocate Respondent Through: None SANJIV KHANNA, J. (ORAL) Afore-captioned appeals by the Revenue under Section 260A of the Income Tax Act, 1961 ( Act for short) in the case of Oriental Pathways (Nagpur) Pvt. Ltd. relate to Assessment Years 2009-2010 to 2013-2014 and arise from a common order of the Income Tax Appellate Tribunal dated 28.2.2018. The impugned order upholds the order passed by the Commissioner of Income Tax (Appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s issued and appellant submitted return of income in response to the said notice on 03.02.2014, declaring loss of ₹ 34,24,25,559/- which included depreciation amounting to ₹ 30,63,57, 685/-, on roads. 7.1 The appellant is stated to have been mainly engaged in the business of development, design, financing, procurement, engineering and construction, operation and maintenance of the project highway on NH-6, Maharashtra on build, operate and transfer basis and collecting toll. During assessment proceedings the appellant was asked to substantiate the claim of depreciation on road @10%. The appellant submitted that it has claimed depreciation in view of the provisions of section 32 of the Act as per its bona fide belief that depreciation is allowable to it as per law. However, it was submitted by the appellant before AO that in view of the circular no. 09/2014 dated 23.04.2014, it has been clarified by the CBDT that the toll roads are intangible assets and therefore no depreciation can be allowed however, the assessee can claim right off of capitalized expenditure equally over the toll concession period. Based on mentioned circular, appellant withdrew the claim of depre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, (hereinafter referred as assessee) in terms of concessionaire agreement with government or its agencies is required to construct, develop and maintain the infrastructural facility of roads/highways which inter alia includes laying of road, bridges, highways, approach roads culverts, public amenities etc. at its own cost and its utilization thereof for a specified period. In lieu of consideration of the expenditure incurred on construction, operation and maintenance of the infrastructure facility covered by the period of the agreement, the assessee is accorded a right to collect toll from users of such facility. The expenditure incurred by such assessee on development and construction of such infrastructural facility are capitalized in the accounts. It is seen that in returns-of-income, assessees are generally claiming depreciation on such capitalized expenditure creating it as an 'intangible asset' in terms of section 32(I)(ii)of the Act while in assessments, such claims are being disallowed by the Assessing Officer on the grounds that such infrastructural facility is not owned, wholly or partly, by the taxpayer which is an essential condition for claiming depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n development of infrastructure facility of roads/highways under BOT projects may be amortized and claimed as allowable business expenditure under the Act. 6. The amortization allowable may be computed at the rate which ensures that the whole of the cost incurred in creation of infrastructural facility of road/highway is amortized evenly over the period of concessionaire agreement after excluding the time taken for creation of such facility. 7. In the case where an assessee has claimed any deduction out of initial cost of development of infrastructure facility of roads/highways under BOT project in earlier year, the total deduction so claimed for the assessment year to the assessment year under consideration may be deducted from the infrastructure facility of roads/highways and the cost so reduced shall be amortized equally over the remaining period of toll concessionaire agreement. 8. It is hereby clarified that this circular is applicable only to those infrastructure projects for development of road/ highways on BOT basis where ownership is not vested with the assessee the concessionaire agreement. 9. This may be brought to the notice of all concerned. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. 322 ITR 158 (SC) and the decision of Hon'ble jurisdictional High Court of Delhi in the case of CIT us. Brahmaputra Consortium Ltd. (2012) 348 ITR 339, the penalty is not leviable as the same is applicable in the case of appellant. 7.7 It is also to be mentioned that when the return was filed in response to notice under section 153A on 3.02.2014, the matter was debatable due to the difference in legal interpretation between the assessee and the revenue authorities and the claim was made under bonafide belief that depreciation is allowable on such capitalized value of road. This has also been acknowledged as the practice of industry. The circular of CBDT, clarifying the issue has been issued on 23.04.2014, which is after the submission of return by the appellant. Since, the matter was clarified, the appellant opted to claim expenditure incurred on project for development, construction and other operative expenditure during construction period as per the said circular by spreading over to the different accounting years and accordingly, revised the claim of depreciation by not claiming on road. It is the appellant who brought this circular to the knowledge of AO, though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant, it was subjected to scrutiny earlier and all the facts were on record with respect to the claim of depreciation under the bona fide belief. The matter was disputed as itself acknowledged in the circular by the CBDT and accordingly after clarification, the appellant has withdrawn its claim in the assessment proceedings. The case of CIT vs. Brahmaputra Consortium Ltd., relied upon by the appellant is subsequent to the decision of CIT vs. Zoom Communication P. Ltd. (supra) as mentioned by the AO. 7.9 It is also seen that the AO has not clearly brought out that whether it is a case of furnishing inaccurate particulars of income or concealment of income as it is stated in para 5 that: Consequentially, as the default of the assessee under section 271(1)(c) is established, penalty of ₹ 4,90,84,745/- @100% of the tax sought to be evaded for furnishing inaccurate particulars of income and thereby concealment of income as discussed above, is imposed under section 271(1)(c) of the IT Act, 1961. 7.10. In view of the above facts and discussions in foregoing paragraphs regarding position of law, considering the submission by the appellant and looking to the cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice and record that circular merely is an opinion and the assessee can contest and submit to the contrary. The issue in question was not covered by a decided judgment of the jurisdictional High Court or the Supreme Court. Pertinently, paragraph 7 of the circular states that assessee could have claimed deduction in an earlier year. This deduction would necessarily imply depreciation. In such cases, the assessee could deduct the amount of depreciation to compute the reduced cost of infrastructure facility for road/highway and amortized the reduced amount equally over the remaining period of the concessionaire agreement. In the present case, the respondent-assessee had already filed return for the year in question claiming deprecation, which had been allowed by the Assessing Officer. In the aforesaid position the respondent-assessee did not consider it appropriate to modify the claim that had been allowed and accepted in the regular assessment in the return filed pursuant to notice under Section 153A of the Act. The conduct of the respondent-assessee or examination of facts has been found and held to be bonafide. Facts of the case cannot and would not justify levy of penalty unde ..... 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