TMI Blog2021 (9) TMI 461X X X X Extracts X X X X X X X X Extracts X X X X ..... to broadening the scope of jurisdiction that was originally vested with the A.O while framing the assessment u/s 143(3) of the Act in case of limited scrutiny case.. Claim of depreciation/amortization relating to two roads/highway stretches constructed by the assessee company under BOT agreement - As per claim of amortization as guided by CBDT circular no. 9/2014 dated 23.04.2014 where there is no dispute that two roads/highway stretches have been constructed/developed by the assessee under the BOT agreements, the assessee shall be eligible to claim amortization of the whole of the cost incurred in creation of infrastructural facility of road/highway evenly over the period of concessionaire agreement after excluding the time take for creation of such facility rather than the rate of depreciation as prescribed under section 32(1)(ii) of the Act. During the course of assessment proceedings, as noted that on enquiry by the Assessing officer, the assessee has submitted that this is the second year of claim of amortization wherein it has claimed amortization of ₹ 4,01,84,929 for a period of 365 days as against amortization of ₹ 3,22,32,261 for a period of 293 days cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T thereafter had issued a notice u/s 263 of the Act on two issues namely, deduction claim u/s 80IA and excess claim of depreciation on construction of road (As per BOT agreement). During the revision proceedings, the assessee had explained that its case was selected for limited scrutiny on the issues as mentioned above. Therefore the issue of deduction claimed u/s 80IA of the Act is beyond the jurisdiction of PCIT u/s 263 of the Act. Further the depreciation (amortization) claimed on road construction as per the CBDT circular No. 9/2014 dated 23/04/2014 and these facts were duly verified by the ld AO during the assessment proceedings. The ld PCIT in the impugned order u/s 263 of the Act however held that the assessment order passed by the ld AO was erroneous and prejudicial to the interest of the Revenue. 5. It was submitted that the order passed by the ld PCIT is not only contrary to the provisions of the law but also contrary to the decision of various Courts. It was submitted that as regards to the claim of deduction u/s 80IA, the issue raised by the PCIT is beyond the scope of limited scrutiny and therefore the said reason on which the ld PCIT had issued the notice u/s 263 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sriganganagar- Padampur Road 2,62,05,753 4,01,84,929 8. It was submitted that the assessee in response to the notice issued by ld AO u/s 142(1) had brought on record that the assessee company was incorporated on 12/06/2013 i.e. in AY 2014-15 and the assessee has claimed amortization in AY 2014-15 AY 2015-16 as per the CBDT circular No. 9/2014 dated 23/04/2014. It was submitted that the claim made by the assessee was duly certified by C.A. and was in accordance with the circular and decisions of Honorable Court. It was accordingly submitted that the observations of ld PCIT that As per CBDT circular No. 09/2014 dated 23.04.2014, depreciation is to be allowed to the assessee engaged in developing of road and highways in BOT agreements on the basis of provisions of section 32(1)(ii) of the Act. is clearly arbitrary and contrary to the CBDT circular. 9. It was submitted that the AO after due consideration the circular issued by the CBDT and the submission of the assessee had reached the judicial decision which cannot be branded as erroneous. Further, on the similar issues, the various Hon'ble Courts and Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed to verify the claim of the assessee viz-a-viz the conditions laid down in Income-ax Act and in Income-tax Rules as mentioned above. The AO was therefore rightly directed by ld PCIT to examine the claim of the assessee as per the conditions laid down u/s 80IA read with Rule 18BBB and Rule 18BBE of the Income-tax Rules. 13. It was submitted that as per depreciation and amortization chart of the audit report, the assessee has claimed the value of Padampur Toll road at ₹ 15,32,47,295/- as on 05.09.2012, written down value of which was shown at ₹ 15,20,30,334/- on 31.03.2014. The assessee has claimed depreciation and amortization at the rate of 9.12% on this Toll Road which comes to ₹ 1,39,79,176/- in the P L account,. Similarly, the assessee has shown the value of Salasar Toll Road at ₹ 10,68,69,665/- as on 09.08.2012, WDV of which as on 31.03.2014 was shown at ₹ 8,58,54,355/-. In the year under reference, the assessee has claimed depreciation and amortization of ₹ 2,62,05,753/- at the rate of 24.52% on this Toll Road. As per Note 20 given for depreciation and amortization expenses, the assessee has claimed an amount of ₹ 4,16,44,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... findings therein as the same are equally relevant in the context of the contentions advanced by the ld AR in the present case. In the said case, we have held as under: 17. There is no dispute that scope of enquiry in case of limited scrutiny is only to the extent of the issues for which case was selected for scrutiny under CASS. The CBDT has issued instructions from time to time in this respect and has specifically instructed the taxing authorities that scope of enquiry should be limited to verification of all the particulars for which limited scrutiny was taken up under CASS. However, in case during the assessment proceeding if the AO is of the view that substantial verification of other issue is also required then the case may be taken up for comprehensive scrutiny with the approval of the Pr.CIT/DIT concerned. It is also instructed that such an approval shall be accorded by the Pr.CIT/DIT in writing after being satisfied about the merits of the issue(s) necessitating wider and detailed scrutiny in the case. In the latest Instruction No. 5/ 2016 dated 14-07-2016, CBDT has again instructed the taxing authorities in para 2 to 4 as under:- 2. In order to ensure that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be exercised for broadening the scope of jurisdiction that was originally vested with the A.O while framing the assessment as also held consistently by various Benches of the Tribunal as referred supra. 19. A contention which has been raised by the ld CIT/DR is that where there is a potential escapement of income, the AO is required to convert the limited scrutiny case into a comprehensive scrutiny case after taking the prior approval of ld. PCIT and if the AO does not get the limited scrutiny case converted to comprehensive scrutiny case even though there are material on record, the assessment order becomes erroneous as it is prejudicial to the interest of Revenue and provisions of section 263 of the Act are applicable. For the purposes of converting limited scrutiny to complete scrutiny, what is relevant is that there must be some credible material or information on face of the record and basis review thereof during the assessment proceedings, the AO is required to form a reasonable view that there is possibility of under assessment of income if the case is not examined under Complete Scrutiny and after seeking approval from the competent authority, the case can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s specifically instructed the taxing authorities that scope of enquiry should be limited to verification of all the particulars for which limited scrutiny was taken up under CASS and the AO is duty bound to follow the said instructions. It was further held in the said case that the Pr. CIT u/s 263 cannot be permitted to traverse beyond the jurisdiction that was vested with the A.O while framing the assessment as what cannot be done directly cannot be done indirectly. Therefore, where the matter was selected for limited scrutiny, revisional jurisdiction cannot be exercised for broadening the scope of jurisdiction that was originally vested with the A.O while framing the assessment as also held consistently by various Benches of the Tribunal. Further, we have held in the said case that where there is material on record pointing towards potential escapement of income and which has escaped the attention of the AO during limited scrutiny assessment proceedings and no action has been taken by him, it is not that the Revenue doesn t have any recourse and correct course of action would have been for AO to record his satisfaction and invoke jurisdiction u/s 147 of the Act subject of course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of depreciation as per the provisions of Section 32(1)(ii) and allowed the same as claimed by the assessee. Per contra, the contention advanced by the assessee is that it has claimed amortization of the cost incurred in construction/development of these two stretches of the highways evenly over the period of concessionaire agreement in accordance with the CBDT circular no. 9/2014 dated 23.04.2014 and the matter was enquired and duly examined by the Assessing officer. 19. We therefore find that contentions advanced by both the parties as to the claim of amortization is guided by CBDT circular no. 9/2014 dated 23.04.2014 and it would therefore be appropriate to refer to the contents of the said circular as under: It has come to the notice of the Board that disputes have arisen as to whether the expenditure incurred on development and construction of infrastructural facilities like roads/highways on Build-Operate-Transfer (`BOT`) basis with right to collect toll is entitled for depreciation under section 32(1)(ii) of the Act or the same can be amortized by treating it as an allowable business expenditure under the relevant provisions of the Income-tax Act, 1961 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to non fulfillment of ownership criteria in such cases. 4. There is no doubt that where the assessee incurs expenditure on a project for development of roads/highways, he is entitled to recover cost incurred by him towards development of such facility (comprising of construction cost and other pre-operative expenses) during the construction period. Further, expenditure incurred by the assessee on such BOT projects brings to it an enduring benefit in the form of right to collect the toll during the period of the agreement. Hon'ble Supreme Court in the case of Madras Industrial Investment Corp Ltd 225 ITR 802 (SC) allowed spreading over of liability over a number of years on the ground that there was continuing benefit to the company over a period. Therefore, analogously, expenditure incurred on an infrastructure project for development of roads/highways under BOT agreement may be treated as having been made/incurred for the purposes of business or profession of the assessee and same may be allowed to be spread during the tenure of concessionaire agreement. 5. In view of above, Central Board of Direct Taxes, in exercise of the powers conferred under section 119 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essionaire agreement and the amount of amortization determined for the year under consideration. The same was duly examined by the Assessing officer and no adverse finding has been recorded by him. We therefore find that where the assessee is eligible for claim of amortization as per CBDT circular no. 9/2014 dated 23.04.2014 and the same has accordingly been claimed and allowed by the Assessing officer after due verification and examination, the order so passed by the Assessing officer cannot be held as erroneous in so far as prejudicial to the interest of the Revenue. 22. In light of aforesaid discussions and in the entirety of facts and circumstances of the case, we are of the considered view that the necessary enquiries and examination as reasonably expected have been carried out by the Assessing officer and he has taken a prudent, judicious and reasonable view after considering the entire material available on record and the order so passed u/s 143(3) cannot be held as erroneous in so far as prejudicial to the interest of Revenue. The impugned order passed by the ld PCIT u/s 263 is accordingly set aside and the order of the Assessing officer is sustained. In the resul ..... 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