2013 (5) TMI 493 - AT - Income Tax

Addition of interest income - CIT(A) deleted the addition - Held that - There is no dispute that the assessee has already commenced its business and it is also not disputed that the assessee had earned interest from bank deposits temporarily made out of borrowed funds which has not been utilized in the business. CIT(A) has also allowed this issue following his own order for immediately preceding year i.e. for assessment year 2007-08, which has been confirmed by the Tribunal considering the decision of CIT Vs. Jhunjhunwala Vanaspati Limited 2008 (4) TMI 270 - HIGH COURT ALLAHABAD and CIT Vs. Varun Shipping Co. Ltd., 2008 (9) TMI 591 - Bombay High Court . In favour of assessee. Depreciation on road - Held that - This issue is also decided by the Tribunal for assessment year 2007-08 allowing the appeal as relying on case of CIT Vs. M/s Noida Toll Bridge Co. Ltd. 2012 (11) TMI 556 - ALLAHABAD HIGH COURT & Maharashtra State Road Development Corporation Limited 2008 (4) TMI 704 - ITAT MUMBAI to held that depreciation is allowable on roads. The Tribunal has held that roads, flyovers, bridges etc. constructed and owned by the assessee and utilized in its business of providing infrastructure were tools of its trade and essential adjuncts to its business and not merely a setting in which business was carried on and, therefore, would constitute plant and would be entitled to depreciation. In favour of assessee. Disallowance of the debenture issue expenses - Held that - Assessee has not claimed any interest but has claimed on account of various other expenditure on debenture issues. As the debentures issues are loan, and, therefore, whether it is convertible or non- convertible, does not militate against the nature of the debenture, being loan, and, therefore, the expenditure incurred would be admissible as revenue expenditure - allow this issue in favour of the assessee.

Summary

Issues involved: Appeals by department and assessee against CIT(A) order for assessment year 2008-09; deletion of interest income and depreciation on road; depreciation on tolled road; disallowance of debenture issue expenses; charging interest under Section 234 B & C.

Analysis:
1. Deletion of interest income and depreciation on road:
- Appeals by department and assessee against CIT(A) order.
- Tribunal found issues covered in favor of assessee by Tribunal's own case for assessment year 2007-08.
- Interest income treated as income from other sources based on precedents and business commencement.
- Depreciation on road allowed based on precedents and essentiality in business.
- Tribunal confirmed CIT(A) order, rejecting department's grounds.

2. Depreciation on tolled road:
- Assessee's appeal challenged non-allowance of depreciation on tolled road.
- Tribunal allowed depreciation following precedents and agreement with the Government.
- Tribunal directed AO to treat toll road as plant and machinery for depreciation.
- Tribunal considered and dismissed department's arguments, following previous decisions.

3. Disallowance of debenture issue expenses:
- Assessee appealed against disallowance of debenture issue expenses.
- AO and CIT(A) disallowed expenses as capital in nature.
- Assessee argued expenses were revenue in nature based on Supreme Court decision.
- Tribunal allowed expenses as revenue deduction, following Supreme Court precedent.

4. Charging interest under Section 234 B & C:
- Tribunal directed AO to give consequential relief to assessee under Section 234 B & C.
- Appeal of department dismissed, appeal of assessee allowed.

In conclusion, the Tribunal upheld the CIT(A) order in favor of the assessee, allowing depreciation on road and tolled road, debenture issue expenses, and providing consequential relief under Section 234 B & C. The decisions were based on legal precedents and agreements with the Government, ensuring a fair outcome for the parties involved.