2016 (8) TMI 1555 - AT - Income Tax

Revision u/s 263 by CIT - Depreciation on hoardings - temporary v/s permanent structure - depreciation at the rate 100% by treating these hoardings to be temporary structures - HELD THAT - AO made enquiries on this issue and after being satisfied with the claim of the assessee allowed the cal of depreciation on hoardings at 100%. Order of the AO was in tune with the order of the tribunal in the past which has been accepted by the revenue. In fact even for the subsequent A.Y. 2009-10 the issue was before the tribunal and it had decided in favour of the assessee. In such circumstances we are of the view that the decision in the case of Russel Properties Pvt. Ltd. 1976 (5) TMI 111 - CALCUTTA HIGH COURT will be applicable and the CIT could not have invoked his jurisdiction u/s. 263. With regard to the policy guidelines on display of advertisement pointed out by the ld. DR as rightly contended by the ld. Counsel for the assessee this was only a draft policy 2009. In any event the CIT in the impugned order has not, on the basis of any material available before him, come to a conclusion that the hoardings on which the assessee claimed depreciation at 100% were structurally sound so as to be regarded any building. The decision in the case of Asian Advertising 2016 (5) TMI 158 - ITAT MUMBAI is a case where the question was whether hoardings constitute building or plant. In our view this cannot be said to be a precedent in so far as the issue involved in the present case is concerned. We are also of the view that the CIT in exercise of his powers u/s. 263 of the Act has to come to a definite conclusion as to how the order of the AO was erroneous. He cannot set aside the order of AO and direct an enquiry on the question whether hoarding structure would be in the nature of purely temporary erection - CIT could invoke the jurisdiction u/s. 263 of the Act only on a finding that hoardings were not purely temporary erection and such finding has to be sustainable in law. It is only then the CIT can make out a case that order of AO was erroneous. In the present case the CIT has not given such a finding. Even on this basis, we are of the view that order u/s. 263 of the Act cannot be sustained. Appeal of assessee allowed.

Summary

Issues Involved:
1. Whether the Assessing Officer's (AO) allowance of 100% depreciation on hoarding structures was erroneous and prejudicial to the interest of the revenue.
2. Whether the Commissioner of Income Tax (CIT) was justified in invoking powers under Section 263 of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Allowance of 100% Depreciation on Hoarding Structures

The Assessee, a company engaged in outdoor advertising, claimed 100% depreciation on hoarding structures for the Assessment Year (AY) 2008-09. The AO, during the assessment proceedings, issued a notice under Section 142(1) calling for details on additions to fixed assets and capital work-in-progress. The Assessee provided the necessary details and the AO allowed the 100% depreciation claim without any adverse inference. However, the CIT later viewed this allowance as erroneous and prejudicial to the revenue, arguing that the hoarding structures should not be considered purely temporary erections eligible for 100% depreciation. The CIT noted that technological advancements and the use of more sustainable materials in hoarding structures warranted a fresh examination of their nature.

Issue 2: Justification for Invoking Section 263 by CIT

The CIT issued a show-cause notice under Section 263, questioning the AO's decision and suggesting that the assessment order was erroneous and prejudicial to the interest of the revenue. The Assessee countered this by citing past assessments and tribunal decisions that consistently allowed 100% depreciation on hoarding structures, arguing that the AO had applied his mind and followed judicial precedents. The CIT, however, was not convinced and directed the AO to re-examine the issue, emphasizing the need to consider the nature of the hoarding structures used during the relevant financial year.

Tribunal's Decision:

The Tribunal examined the submissions and noted that the AO had made appropriate inquiries and allowed the depreciation claim based on past tribunal decisions, which had been accepted by the revenue. The Tribunal referenced the case of Russel Properties Ltd. Vs. A. Chowdhury, where the Calcutta High Court held that an AO following tribunal decisions cannot be deemed to have acted erroneously, even if the revenue challenges those decisions in higher courts. The Tribunal also dismissed the relevance of the policy guidelines on advertisement displays and the decision of the ITAT Mumbai in the case of Asian Advertising, emphasizing that the CIT must provide a definitive conclusion on the erroneous nature of the AO's order to invoke Section 263.

Conclusion:

The Tribunal concluded that the AO's order was not erroneous and the CIT's invocation of Section 263 was not justified. The Tribunal quashed the CIT's order and allowed the Assessee's appeal, reaffirming the allowance of 100% depreciation on hoarding structures for AY 2008-09.

Result:

The appeal of the Assessee was allowed, and the order under Section 263 of the Income Tax Act was quashed.