TMI Blog2020 (8) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... f Sec. 32(1)(ii) same being distinguishable on facts would thus not assist its case. A.R had not brought to our notice any judicial pronouncement/order, wherein it has been held that the stamp duty expenses incurred on a lease agreement (pending registration) was to be construed as an intangible asset eligible for depreciation u/s 32(1)(ii) - We are unable to comprehend that as to on what basis the A.O while framing the assessment had vide his order passed u/s 143(3), dated 12.02.2015, therein allowed the assessee s claim for depreciation on the capitalised amount of stamp duty expenses (pending registration). Allowing of the assessee s claim for depreciation on the stamp duty expenses (pending registration) by the A.O cannot be held to a possible view in law, therefore, no infirmity arises from the order passed by the Pr. CIT u/s 263, dated 30.03.2017, observing, that the allowing of the assessee s claim for depreciation of ₹ 1,39,11,652/- i.e @25% on the amount of stamp duty deposited, had rendered the order passed by the A.O u/s 143(3), dated 12.02.2015, as erroneous insofar it was prejudicial to the interest of the revenue. On finding no infirmity in the order pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directing the A.O. to disallow and back the claimed depreciation of ₹ 1,39,11,652/- in computation of Income from Business or Profession . 3.2 It is submitted that in the facts and the circumstances of the case, and in law, no such specific direction was permissible. 3.3 Without prejudice to the above, it is submitted that in the facts and the circumstances of the case, and in law, even on merits also no such direction was called for. 3.4 Without further prejudice to the above, it is submitted that in the facts and the circumstances of the case, and in law, assuming - but not admitting that the depreciation was not allowable, alternatively, the entire amount was allowable as revenue expenditure. 4. The appellant craves leave to add, alter delete or modify all or any of the above ground at the time of hearing. 2. Briefly stated, the assessee is a company registered under the Companies Act, 1956, which was formed in pursuance of the scheme of revival and rehabilitation of sick textile companies, as framed and approved by the Board for Industrial and Financial Reconstruction (BIFR). On a perusal of the records, we find, that the assessee company was incorpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per Note 8A under the Companies Act, 1956, wherein the leasehold rights/improvements were reflected at an opening balance of ₹ 7,41,95,475/- under the head tangible assets ; (ii) depreciation chart forming part of Form No. 3CD (Tax Audit Report), wherein the opening and closing balance of the leasehold rights were reflected at ₹ 5,56,46,606/-, and no claim for depreciation was raised on the same; and (iii) depreciation chart forming part of the computation of income along with details filed in the course of the assessment proceedings, vide a letter dated 09.09.2014, wherein the leasehold rights were reflected at an opening balance of ₹ 5,56,46,606/- and closing balance of ₹ 4,17,34,955/-, with a consequential claim of depreciation of ₹ 1,39,11,652/- i.e @ 25%. It was observed by the Pr. CIT that the A.O while framing the assessment, vide his order passed under Sec.143(3), dated 12.02.2015, had allowed the assessee s claim for depreciation of ₹ 1,39,11,652/-, as such. As was discernible from the assessment order, the Pr. CIT observed that the A.O after specifically raising a query as to how the depreciation claimed on leasehold rights (as capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt could not be registered. In the backdrop of his aforesaid deliberations the Pr. CIT concluded that as the stamp duty deposit in respect of the tenancy rights would have no significance whatsoever, either as regards the right to manufacture or actual manufacturing of the products or their sale carrying brand name or logo etc., the same could thus not be equated with any other business or commercial rights as envisaged in Sec. 32(1)(ii), which as per him were to be restricted to intangible assets akin to, or in the nature of know-how, patents, copyrights, trademarks, licenses, franchisees etc., or any other such similarly placed business or commercial rights. As such, the Pr. CIT concluded that the stamp duty deposit which was capitalized by the assessee as leasehold rights could not be construed as an intangible asset within the meaning of Sec. 32(1)(ii) of the Act. Observing, that as the order passed by the A.O allowing depreciation of ₹ 1,39,11,652/- i.e @ 25% on the amount of stamp duty deposited by the assessee had rendered the assessment order as erroneous insofar it was prejudicial to the interest of the revenue, the Pr. CIT directed the A.O to disallow the said c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the ld. A.R, that the A.O in the course of the regular assessment proceedings had specifically called upon the assessee to explain its claim for depreciation on the leasehold rights. It was submitted by the ld. A.R, that the assessee, vide its replies dated 07.10.2014 and 21.01.2015 had submitted before the A.O that it had executed a lease deed with NTC Ltd. on 15.11.2007, and had paid stamp duty of ₹ 7,41,95,475/- which was capitalized as leasehold rights in its books of accounts. Also, as submitted by the ld. A.R, the copy of the lease deed was filed with the A.O in the course of the assessment proceedings. In the backdrop of the aforesaid facts, it was submitted by the ld. A.R, that now when the A.O had in the course of the assessment proceedings queried as regards the assessee s claim for depreciation on leasehold rights and after necessary deliberations had arrived at a plausible view and accepted the same, the Pr. CIT merely on the basis of a different view could not have thereafter assumed jurisdiction under Sec.263 of the Act. Adverting to the SCN, dated 21.03.2017, it was submitted by the ld. A.R. that the only ground/reason on the basis of which the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions that were filed in the course of the revisional proceedings before him. 5. Objecting to the jurisdiction assumed by the Pr. CIT under Sec. 263 of the Act, it was further submitted by the ld. A.R that now when a similar claim for depreciation on leasehold rights that was allowed by the A.O vide his order passed under Sec. 143(3), dated 25.02.2014 for the immediately preceding year i.e A.Y. 2011-12, was subsequently withdrawn on the basis of an order passed under Sec.147 r.w.s 143(3), in December, 2016, it was beyond comprehension as to how the similarly placed claim of depreciation on the said leasehold rights could have been withdrawn during the year under consideration by taking recourse to the exercise of revisional jurisdiction by the Pr. CIT under Sec. 263 of the Act. It was further averred by the ld. A.R that in the SCN dated 23.03.2017 there was no whisper that there was any non-application of mind on the part of the A.O, which had led to assumption of jurisdiction by the Pr. CIT under Sec.263 of the Act. Order passed by the Pr. CIT under Sec. 263 was also assailed on the ground that certain adverse inferences had been drawn in respect of issues which were never ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) Richardson Hindustan ltd. Vs. CIT- [(1988) 169 ITR 516 (Bom)] (iii) CIT Vs. Madras Auto Services P. Ltd.- [(1998) 233 ITR 468 (SC) (iv) CIT Vs. H.M.T. LTd. [(1993) 203 ITR 820 (Karn)] (v) DCIT Vs. Sun Pharmaceutical Ind. Ltd. [(2010) 329 ITR 479 (Guj)] (vi) ACIT Vs. Delhi International Airport (P.) Ltd.- [(2018) 89 taxmann.com 326 (Del)] (vii) CIT Vs. Hari Vignesh Motors P. Ltd. [(2006) 282 ITR 338 (Madras)]. Alternatively, it was submitted by the ld. A.R that the aforesaid stamp duty expenses incurred by the assessee should be allowed as deferred revenue expenditure. In support of his said contention reliance was placed on the order of the Hon ble High Court of Karnataka in the case of S.M. Dayanand Vs. DCIT (2013) 220 taxman.com 104 (Kar). 6. Per contra, the ld. Departmental Representative (for short D.R ) relied on the order passed by the Pr. CIT. It was submitted by the ld. D.R, that the Pr. CIT observing that the stamp duty deposited by the assessee in respect of the leasehold rights for the property under consideration did not fall within the meaning of any other business or commercial rights as envisaged in Sec. 32(1)(ii), had thus rightl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the lease agreement executed by the assessee with NTC Ltd. was unregistered during the year under consideration, it was submitted by the ld. A.R that the same would have no bearing on the assessee s entitlement towards claim of depreciation on the leasehold rights. Rebutting the aforesaid claim of the revenue, the ld. A.R had drawn our attention to various judicial pronouncements, as under: (1) Podar Cement (P) ltd. (1997) 92 Taxman 541 (SC)/(1997) 226 ITR 625 (SC)/(1997) 141 CTR 67 (SC). (2) Mysore Minerals Ltd. [1999] 106 Taxman 166 (SC)/[1999] 239 ITR 775 (SC)/[1999] 156 CTR 1 (SC) (3) Dilip Singh Sardarsingg Bagga [1994] 77 Taxman 66 9Bombay)/[1993] 201 ITR 995 (Bombay) (4) Basti Sugar Mills Co. Ltd. [2002] 123 Taxman 693 (Delhi)/[2002] 257 ITR 88 (Delhi)/[2002] 176 CTR 294 (Delhi) (5) Varanasi Auto Sales (P) Ltd. [2010] 190 Taxman 60 (Allahabad)/[2020] 326 ITR 182 (Allahabad)/[2011] 238 CTR 107 (Allahabad) (6) Trio Elevators Company (India) Ltd. [2016] 67 taxmann.com 348 (Ahmedabad - Trib.)/[2016] 157 ITD 1170 (Ahmedabad Trib.)/[2010] 178 TTJ 258 (Ahmedabad Trib.) (7) Bhushan Steels Strips Ltd. [2017] 82 taxmann.com 79 9Delhi/[2017] 390 ITR 485 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ec. 143(3) r.w.s 147 in December, 2016. As such, on the date when the SCN dated 23.03.2017 was issued to the assessee for the year under consideration, the assessee s claim for depreciation that was earlier allowed in the course of the regular assessment for the immediately preceding year i.e A.Y. 2011-12, was already withdrawn pursuant to the reassessment order passed under Sec. 143(3) r.w.s 147 of the Act. In the backdrop of the aforesaid facts, we are unable to accept the claim of the ld. A.R that going by the principle of consistency, now when the claim of depreciation on leasehold rights was allowed by the A.O in the preceding year, no infirmity could be related to the allowing of the the assessee s claim for depreciation on the Opening WDV of the said leasehold rights for the year under consideration. In fact, the judicial pronouncements relied upon by the ld. A.R to drive home his aforesaid claim, viz. (i) DIT(IT) Vs. HSBC Asset Management (I) P. Ltd. (2014) 47 taxman.com 286 (Bom); (ii) CIT Vs. Hindustan Coca Cola Beverages Pvt. Ltd. (2011) 331 ITR 192 (Del); (iii) PIEM Hotels Ltd. Vs. DCIT (2011) 128 ITD 275 (Mum); and (iv) Century Enka Ltd. Vs. DCIT (2015) 37 ITR (T) 644 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evisional authority, failing which the revisional order therein passed would be rendered legally fragile, though not on the ground of lack of jurisdiction, but on the ground of violation of principles of natural justice. In the backdrop of his aforesaid contentions, it was submitted by the ld. A.R, that as in the present case the Pr. CIT without confronting the assessee had drawn adverse inferences on certain issues in his order passed u/s 263, the order so passed by him was thus not maintainable and was liable to be quashed on the said count itself. Admittedly, we are principally in agreement with the aforesaid claim of the ld. A.R that a revisional authority as per the mandate of law, or in fact as per the canons of natural justice is precluded from drawing of any adverse inferences as regards an issue in respect of which no opportunity of being heard was afforded to the assessee in the course of the revisional proceedings. On a perusal of the order passed by the Pr. CIT u/s 263 of the Act, it transpires that he had at length at Page 10-11 - Para 7 8 of his order observed, that as the leasehold rights did not fall within the meaning of intangible assets as contemplated in Sec. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to intangible assets of the nature of knowhow, patents, copyrights, trademarks, licenses, franchisees etc. We have given a thoughtful consideration to the aforesaid issue before us, and find substance in the claim of the ld. A.R, that the adverse inferences drawn by the Pr. CIT at the back of the assessee i.e without affording any opportunity to the assessee to rebut the same cannot be sustained. In our considered view, as the Pr. CIT had drawn adverse inferences as regards the issues stated at Sr.No.(i) to (iv), without calling for any explanation as regards the same from the assessee, the same cannot be sustained and are liable to be vacated. As such, the observations of the Pr. CIT recorded at the back of the assessee ,viz. (i). the A.O by not considering the depreciation chart prepared under the Companies Act; (ii). the A.O by not considering the depreciation chart attached with the audit report; (iii). the A.O by not considering the Schedule 1 attached with the lease deed, which revealed that the property under consideration was shown as land with built up area; and (iv). the A.O by not considering the lease deed which reflected that the transactions were mainly related to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is prejudicial to the interest of the revenue. As observed by us hereinabove, we are in agreement with the contention advanced by the ld. A.R that the powers vested with the respective authorities under the aforesaid statutory provisions, subject to satisfaction of the conditions therein envisaged, operate in their respective fields. In our considered view, as long as the conditions contemplated in the respective sections for assumption of jurisdiction by the concerned authorities are satisfied, there cannot be any bar on exercise of the same by the concerned revenue authority. In the case before us, the Pr. CIT held a conviction that the allowing of the assessee s claim for depreciation on the leasehold rights by the A.O, had rendered the latters order as erroneous to the extent it was prejudicial to the interest of the revenue. We are unable to persuade ourselves to subscribe to the contention of the ld. A.R, that as the assessee s claim for depreciation on leasehold rights was withdrawn by the A.O in the preceding year by taking recourse to proceedings under Sec. 147 of the Act, the said fact on a standalone basis would divest the Pr. CIT from exercising his revisional juris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le view in law, the Pr. CIT was divested of invoking his revisional jurisdiction under Sec. 263 of the Act. Apart from that, it has been the claim of the ld. A.R before us, that in case where the A.O had duly conducted an enquiry in respect of an issue, the revisional authority would thereafter not be vested with the jurisdiction for directing a fuller inquiry to find out if the view so taken is erroneous. In other words, it was the claim of the ld. A.R, that once the A.O was satisfied with the explanation offered by the assessee, it was not open to the CIT in exercise of his revisional powers to direct that a further inquiry be carried out. In sum and substance, as averred by the ld. A.R, though lack of enquiry would justify invoking of revisional jurisdiction by the CIT, but then, a case of inadequate inquiry cannot form the basis for assumption of jurisdiction under Sec. 263 of the Act. In support of his aforesaid contention the ld. A.R had relied on a host of judicial pronouncements. Also, it was the claim of the ld. A.R that merely because in the body of the assessment order there was an absence of an elaborate discussion by the A.O as regards the entitlement of the assessee t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e aforesaid contentions advanced by the ld. A.R, we find ourselves to be principally in agreement with the same. But at the same time, we are unable to comprehend as to where the Pr. CIT had contravened the aforesaid mandate of law, or traversed beyond the same. On a perusal of the order passed by the Pr. CIT under Sec. 263 of the Act, we find that the revisional authority observing that the leasehold rights do not fall within the meaning of intangible asset under Sec. 32(1)(ii) of the Act, had thus for the said reason concluded that the allowing of depreciation on the same by the A.O while framing the assessment had rendered his order erroneous insofar it was prejudicial to the interest of the revenue. We shall hereinafter address or in fact test the validity of the aforesaid observation of the Pr.CIT in the backdrop of the aforesaid principles as had been canvassed by the ld. A.R before us. 10. On a perusal of the records, we find that it is an admitted fact that the lease agreement dated 15.11.2007 executed by the assessee with NTC Ltd. was unregistered, though a stamp duty of ₹ 7,41,95,475/- was deposited by the assessee on 06.08.2010 (relevant to A.Y 2011-12), as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On a conjoint reading of Sec. 17 r.w.s. 49 of the Indian Registration Act, 1908, it was submitted by the ld. D.R that the unregistered lease agreement (which was required to be compulsorily registered) could thereafter only be taken as an evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877 (3 of 1877), or as an evidence of any collateral transaction not required to be effected by a registered document. In sum and substance, it was the claim of the ld. D.R, that the impugned lease agreement dated 15.11.2007(supra), de hors registration as per mandate of the Indian Registration Act, 1908, would fall short of a document evidencing vesting of any leasehold rights with the assessee for the aforesaid property under consideration, much the less in the latters status as that of an owner of the same. In order to fortify his aforesaid contention, the ld. D.R had relied on the judgment of the Hon ble Supreme Court in the case of M/s Mother Hospital Pvt. Ltd. Vs. CIT, Trichur (2017) 392 ITR 628 (SC) (copy placed on record). The ld. D.R drawing our attention to the aforesaid judgment of the Hon ble Apex Court submitted, that it was conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itute the grounds which the Pr. CIT/CIT himself did not think proper to form the basis of his order. Our aforesaid observations are fortified by the judgments of the Hon ble High Court of Punjab in the case of CIT Vs. Jagadhari Electric Supply Industrial Co. (1983) 140 ITR 490 (P H) and that of the Hon ble High Court of Andhra Pradesh in the case of Spectra Shares Scrips Pvt. Ltd. Vs. CIT (2013) 354 ITR 35 (AP). In the backdrop of our aforesaid deliberations, the contention raised by the revenue before us, a well reasoned one, that de hors registration of the lease agreement dated 15.11.2007 as per mandate of the Indian Registration Act, 1908, the assessee could not be held to be the owner of the leasehold rights of the property under consideration, cannot be accepted and has to fail. 12. We shall now focus on the contention of the ld. A.R, that now when, the A.O while framing the assessment vide his order passed u/s 143(3), dated. 12.02.2015, had after necessary deliberations arrived at a possible view that the assessee s claim for depreciation on the stamp duty paid as regards the lease agreement (as capitalised in the books of account) qualified for depreciation as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , licenses or franchises but must be of a similar nature as the specified assets. On a perusal of the meaning of the categories of specific intangible assets referred in s 32(1)(ii) of the Act preceding the term business or commercial rights of similar nature , it was observed by the Hon ble High Court that the aforesaid intangible assets were not of the same kind and were in fact clearly distinct from one another. It was further observed, that the fact that after the specified intangible assets the words business or commercial rights of similar nature had been additionally used, clearly demonstrated that the legislature did not intended to provide for depreciation only in respect of specified intangible assets but also for other categories of intangible assets, which were neither feasible nor possible to be exhaustively enumerated. As such, it was observed, that the nature of business or commercial rights cannot be restricted to only the aforesaid six categories of assets, viz., knowhow, patents, copyrights, trademarks, licenses or franchises. It was observed by the Hon ble High Court, that the nature of business or commercial rights can be of the same genus in which all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of similar nature as the specified assets, of the same genus in which the aforesaid specified six assets fall. Elaborating further, it was observed by the Hon ble High Court that all of the above fall in the genus of intangible assets that form part of the tool of trade of an assessee facilitating smooth carrying on of the business. 14. We shall now advert to the claim of the ld. A.R that no infirmity emerged from the order of the A.O, who vide his order passed u/s 143(3), dated 12.02.2015, had rightly allowed the assessee s claim for depreciation on the stamp duty expenses which were incurred by the assessee in respect of the lease agreement (pending registration), by treating the same as an intangible asset u/s 32(1)(ii) of the Act. As observed by us hereinabove, in order to fall within the realm of any other business or commercial rights of similar nature as contemplated in Sec. 32(1)(ii) of the Act, and therein to be construed as an intangible asset eligible for depreciation under the said statutory provision, the right under consideration would require to cumulatively satisfy a two fold test viz. (i). the right should be a business or commercial right; and (ii) the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier take by it in the aforesaid judgments, had observed, that where stamp duty was paid by the assessee in respect of a deed of lease for taking a property on a lease for a period of 30 years, the same was to be allowed as a revenue expenditure within the meaning of Sec. 37(1) of the Act. On a perusal of the aforesaid judicial pronouncements of the Hon ble High Court of jurisdiction, we are of the considered view, that the claim of the ld. A.R that the stamp duty expenses incurred for taking the property under consideration on lease for a period of 33 years was to be construed as an intangible asset within the meaning of Sec. 32(1)(ii), and thus eligible for depreciation, cannot be accepted. Apart from that, we are also unable to comprehend that as to how a simpliciter payment of stamp duty expenses on the lease agreement (pending registration), would bring into existence an intangible asset of the same genus, as that of the six specified categories of assets, viz., knowhow, patents, copyrights, trademarks, licenses or franchises, as contemplated in Sec. 32(1)(ii) of the Act. Insofar the plethora of judicial pronouncements that have been pressed into service by the assessee, in o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment is given by the Bench, every endeavour shall be made by the Bench to pronounce the order within 60 days from the date on which the hearing of the case was concluded but, where it is not practicable so to do on the ground of exceptional and extraordinary circumstances of the case, the Bench shall fix a future day for pronouncement of the order, and such date shall not ordinarily be a day beyond a further period of 30 days and due notice of the day so fixed shall be given on the notice board. As such, ordinarily the order on an appeal should be pronounced by the bench within no more than 90 days from the date of concluding the hearing. It is, however, important to note that the expression ordinarily has been used in the said rule itself. This rule was inserted as a result of directions of Hon ble High Court in the case of Shivsagar Veg Restaurant Vs ACIT [(2009) 317 ITR 433 (Bom)] wherein it was inter alia, observed as under: We, therefore, direct the President of the Appellate Tribunal to frame and lay down the guidelines in the similar lines as are laid down by the Apex Court in the case of Anil Rai (supra) and to issue appropriate administrative directions to all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s extending the validity of all interim orders, has also observed that, It is also clarified that while calculating time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly , and also observed that arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall continue further till 15th June 2020 . It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the coronavirus should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure . The term force majeure has been defined in Black s Law Dictionary, as an event or effect that can be neither anticipated nor controlled When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
