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2017 (3) TMI 28 - AT - Income TaxRevision u/s 263 - in order which is erroneous and prejudicial to revenue - depreciation on Infrastructure usage facility - Held that - In case of CIT Vs. Nirma Chemicals Works (P.) Ltd. 2008 (2) TMI 373 - GUJARAT HIGH COURT in context of the Commissioner s power to revise the decision of the Assessing Officer under section 263 of the Act, has rejected the contention of the revenue that simply because the assessment order was silent on a particular claim made by the assessee, it would mean that such order does not reflect any application of mind. In the case of Techno Shares & Stocks Ltd. Vs. CIT (2010 (9) TMI 6 - SUPREME COURT OF INDIA ), wherein the Apex Court has held that membership card is entitled to depreciation. Here it is noteworthy that even though floor of exchange was owned by the stock exchange on the basis of right to use the floor of exchange, the depreciation was granted to the member. It was held that right of membership was license or akin to license and had a commercial value. The court also clarified that even though there was a clause that in case of default, the right would vest with the exchange, the same would not make no difference, because till the time the member was not defaulting, he was entitled to use the floor of exchange under the license. Recently the Bombay High Court in the case of Birla Global Assets Finance Co. Ltd. 2012 (10) TMI 1047 - HIGH COURT OF BOMBAY held that business and commercial brand equity is an intangible assets and therefore, the depreciation claim on the same is allowable under section 32 of the I.T. Act, 1961. The claim of the assessee, depreciation on Infrastructure usage facility has been made from the Assessment Year 2004-05 of the assessee s existence and in our considered opinion same should not be distributed in view of the foregoing observation and respectfully following the decision of the Higher Courts, we allow the appeal of the assessee.
Issues Involved:
1. Jurisdiction under Section 263. 2. Conditions for invoking Section 263. 3. Examination and acceptance of depreciation claim by the Assessing Officer (AO). 4. Consistency in allowing depreciation on "Infrastructure Usage Facility". 5. Invalidity of reopening notice under Section 148. 6. Distinction between "lack of inquiry" and "inadequate inquiry". 7. Assumption of power under Section 263. 8. Explanation 2 to Section 263. 9. Classification of "Infrastructure Usage Facility" as an intangible asset. 10. Scope of revision proceedings under Section 263. 11. Consideration of previous assessments and judicial precedents. Detailed Analysis: 1. Jurisdiction under Section 263: The Principal Commissioner of Income Tax (Pr. CIT) assumed jurisdiction under Section 263 of the Income Tax Act on the grounds that the assessment order was erroneous and prejudicial to the interests of the revenue. The Pr. CIT believed that the AO had not properly scrutinized the claim of depreciation on "Infrastructure Usage Facility". 2. Conditions for invoking Section 263: The Pr. CIT must satisfy two conditions to invoke Section 263: the assessment order must be erroneous, and the error must be prejudicial to the revenue. The Pr. CIT concluded that the AO's order was erroneous because it allowed depreciation without proper inquiry, thereby prejudicing the revenue's interest. 3. Examination and acceptance of depreciation claim by the AO: During the original assessment proceedings, the AO had called for justification from the appellant regarding the depreciation claimed on "Infrastructure Usage Facility". The appellant had provided detailed submissions, which the AO accepted without making any disallowance. The appellant argued that the AO had applied his mind and formed an opinion, thus the Pr. CIT should not have invoked revision proceedings. 4. Consistency in allowing depreciation on "Infrastructure Usage Facility": Since the inception of the appellant company in AY 2004-05, depreciation on "Infrastructure Usage Facility" had been consistently claimed and allowed by the department. The appellant contended that the original assessment order was not erroneous as the AO had consistently allowed such depreciation in previous years. 5. Invalidity of reopening notice under Section 148: The appellant highlighted that a reopening notice under Section 148 for disallowing depreciation on "Infrastructure Usage Facility" was previously issued but was held invalid by the Hon'ble Gujarat High Court. The High Court found that the AO had already formed an opinion on the matter in the original assessment proceedings, and reopening the assessment merely to re-appreciate or change the opinion was not permissible. 6. Distinction between "lack of inquiry" and "inadequate inquiry": The appellant argued that there is a distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even if inadequate, it would not justify the Pr. CIT's revision under Section 263 merely because he had a different view. 7. Assumption of power under Section 263: The appellant asserted that the assumption of power under Section 263 by the Pr. CIT was unjustified and bad in law. The AO had adopted a plausible view that was rational and logical, and thus, the revision proceedings should not have been invoked. 8. Explanation 2 to Section 263: The appellant argued that even after the insertion of Explanation 2 to Section 263, where the AO has made inquiries and verification of a particular claim, such an order cannot be treated as erroneous and prejudicial. Therefore, the Pr. CIT erred in passing the revision order under Section 263. 9. Classification of "Infrastructure Usage Facility" as an intangible asset: The appellant maintained that the "Infrastructure Usage Facility" was rightly classified as an intangible asset, and depreciation was claimed accordingly. The facility was considered a license or easement right, which is a commercial right eligible for depreciation under Section 32(1)(ii). 10. Scope of revision proceedings under Section 263: The Pr. CIT directed the AO to reframe the assessment after conducting necessary inquiries. The appellant argued that the Pr. CIT should have issued a direction limited to reframe only the appellant's claim of depreciation on the infrastructure usage facility. 11. Consideration of previous assessments and judicial precedents: The appellant relied on various judicial precedents to support their claim that once the AO examines a claim, raises queries, receives replies, and makes no disallowance, it is not permissible to revise the assessment merely because the AO did not apply his mind or frame his opinion in writing. The appellant cited decisions such as CIT v. Nirma Chemicals Works (P.) Ltd., Gujarat Power Corporation Ltd. vs. ACIT, and others to substantiate their arguments. Conclusion: The Tribunal allowed the appellant's appeal, concluding that the Pr. CIT's assumption of jurisdiction under Section 263 was not justified. The AO had examined the claim of depreciation on "Infrastructure Usage Facility" and formed an opinion. The consistent allowance of depreciation in previous years and the judicial precedents supported the appellant's case. The Tribunal held that the revision proceedings under Section 263 were unwarranted, and the original assessment order was not erroneous or prejudicial to the interests of the revenue.
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