9911796707
TMI Blog2013 (9) TMI 397X X X X Extracts X X X X X X X X Extracts X X X X ..... the very same BOT asset. Therefore, the finding of the Commissioner of Income-tax that there is no capital asset to be transferred cannot be accepted – Decided in favor of Assessee. Since, we have already considered the ownership of the asset and arrived at the conclusion that there is a capital asst, which is validly transferred to a 100% subsidiary company, there is no need to discuss the provisions of S.23 to 25 and S.65 of the Indian Contracts Act, to consider whether the agreement is void or not. In any case, an agreement does not become void only because one of the parties assigned part of the rights to its 100% subsidiary, since this is authorized by the agreement itself, Applicability of provisions of section 47(iv) of the Income Tax Act – Held that:- Assessee has right to collect toll and other fee and to develop way side facilities like advertisements, hoardings, etc. to generate revenue and also entitled to create additional structural facility to cater for the pipelines for oil, gas and water and at that time, they were envisaging establishing a pipeline for ONGC for transportation of gas by utilsiing this facility - Amount of toll collection is being assessed in the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appurtenant land and the project constructed including approach roads are under the ownership of Government of Andhra Pradesh, but said property was demised to the assessee during the contract period for collection of toll from the users of the bridge for a period of 15 years. The assessee completed the project in 1999, and was collecting toll for about four years. During the previous year relevant to the assessment year 2006-07, assessee company transferred this BOT 'Yanam Project' to its wholly owned subsidiary company, called Godavari Toll Bridge (P)Ltd (GTBPL), for a consideration of ₹ 125 crores. The assessee reduced the cost of construction and arrived at capital gains of ₹ 108.88 crores which was claimed as exempt under S.47(iv) of the Income-tax Act, as the assessee transferred the asset to a wholly owned subsidiary company. The Assessing Officer, noticing that there is reduction of the asset in the depreciation schedule, enquired about the nature of the transfer and the asset, and was submitted a detailed note on the transfer of the said asset to the wholly owned subsidiary and claim of exemption under S.47(iv). There is, however, no discussion by the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me from other sources, as this income cannot be taxed under any other head of income. In view of these findings, he held that the order passed by the Assessing Officer has become erroneous and prejudicial to the interests of Revenue, and therefore, he set aside the assessment, and directed the Assessing Officer to decide the claim under S.47(iv) and issue of taxing the income under the head 'income from other sources' afresh. Assessee is aggrieved by the said directions/revision. 6. The learned counsel in his elaborate arguments referred to the agreement with Government of Andhra Pradesh, Minutes of Board of Directors transferring the right to collect toll of Yanam-Yedurlanka Bridge dated 25.3.2006 and also various orders of the Assessing Officer disallowing depreciation on the said BOT asset and the orders of the CIT(A) allowing depreciation for all the years from assessment year 2003-04 to 2006-07 and further, the consolidated order of the ITAT for assessment years 2003-04 to 2006-07 in assessee's own case confirming the orders of the CIT(A) allowing depreciation. He also placed on record, a paper-book running from pages 1 to 187. The learned counsel summarized various a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Bridge Co. Ltd. and for AY. 2003-04 in ITA No. 3211/Del/2006 dated 19.12.2008. 8. He further placed before us the following chronology of events to submit that the orders of the ITAT dismissing the departmental appeal questioning allowance of depreciation on the BOT asset was prior to the issuance of show cause notice in this case by the Commissioner of Income-tax under S.263 of the Act. Sl. No. Date Particular 1. 06.10.1999 Agreement entered with Government of Andhra Pradesh for construction of bridge on BOT basis 2. 05.10.2002 Construction of bridge completed and toll collection started 3. 25.03.2006 Board resolution passed by the appellant company to transfer rights to subsidiary 4. 31.03.2006 Board Resolution passed by subsidiary company. Shares worth ₹ 114.760 cr. allotted and liability of ₹ 10.30 cr. taken over 5. 10.01.2007 Search u/s. 132 of the I.T. Act 6. 28.11.2008 Orders passed u/s. 134(3) r.w.s. 153A of the Act for AYs 2003-04 to 2006-07 7. 14.08.2009 CIT(A) passed separate orders in appeal against orders u/s. 143(3)/153A of the Act for AYs 2003-04 to 2006-07 8. 08.10.2010 ITAT dismissed Department's appeals for AYs 203- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise, and therefore, the amount was rightly considered by the Commissioner as income under the head 'other sources'. He further contended that since the assessment was set aside to the Assessing Officer for fresh examination, the assessee should not have any grievance. He thus relied on the order of the Commissioner. 11. We have considered the issue. At the outset, we find that the BOT asset is figuring in the Balance Sheet at net cost price and the depreciation was being allowed to the assessee consequent to the orders of the CIT(A) and ITAT. Therefore, the issue that there is no capital asset in the books of the assessee cannot be accepted, as the very same Assessing Officer, who has completed the assessment under S.153A has considered the issue and rejected claim of depreciation in all these years on the very same asset, which is purportedly under the ownership of the Government of Andhra Pradesh. Therefore, consequent to the orders of the CIT(A) and ITAT in ITA Nos.1050 to 1053/yd/2009 dated 18.10.2009, the assessee was allowed depreciation on the very same BOT asset. Therefore, the finding of the Commissioner of Income-tax that there is no capital asset to be transferred c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip;.. 3.1.1 The Enterprise should not attempt to assign the project to others; Thus, as can be seen, the Enterprise should not attempt to assign the project to others, but as stated above the definition of enterprise is wide enough to include their legal representatives, successors, administrators, receivers and assignees as stated therein, and therefore, 100% subsidiary of the assessee also include within the definition of the term 'enterprise'. Therefore, in our view if the project was assigned to subsidiary, it may get included within the definition of the term 'enterprise' and can not be considered as transfer to others, a restriction/ condition placed by Govt.of AP. Not only the above, clause 4.1.iii is very specific that the ownership of the land together with the project and approaches shall vest with the Government and shall be demised to the enterprise for the concession period including any extension thereof granted. Entire clause 4.1.iii. is as under- 4. GOVERNMENT'S RESPONSIBILITY: 4.1. …. (i)…. (ii)… (iii) (a) Necessary land required for the formation of the bridge and the approaches shall be made available to the Ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... higher toll collection, they have considered the amount and transferred to the sister concern as a Special Purpose Vehicle(SPV) for the toll collection business of the enterprise. It was also informed that the amount of toll collection is being assessed in the hands of GTBPL and the Commissioner has not considered the agreement as void and the toll collected thereon was not assessed in the hands of the assessee at all. This also indicates that there is a valid transfer to the 100% subsidiary company and since the provisions of S.47(iv) are directly applicable, this assignment can not be considered as 'transfer' for the purpose of capital gains. There is no need for offering gain on this transaction as capital gain, as per the provisions of the Act. 15. In view of the above, we are of the opinion that the Ld. Commissioner erred in considering the order of the Assessing Officer as erroneous. There is no error in the order of the Assessing Officer, as the assessee has ownership on the BOT asset( Depreciation was disallowed but allowed by orders of CIT(A) and ITAT), and it has transferred the BOT asset, including the right to collect the toll, which is also an asset, to the 100% s ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
