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TMI Blog2015 (5) TMI 682X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee's own case. That means the initial assessment year i.e., 2004-05, once the claim of deduction in respect to pre-requisite conditions for allowance of deduction has been satisfied, the same cannot be questioned in future years unless and until the Revenue disturbs the initial assessment year . Similar are the facts in the case of sister concerns of the assessee, i.e., Selvel Transit Advertising Pvt. Ltd. In term of the above -Decided in favour of assesse. Depreciation on LED video display board - whether same be treated as temporary structure as held by CIT(A) in allowing the claim - Held that:- LED video display boards are temporary structures and they cannot be equated with plant and machinery for the reason that these structures are displayed outside in temporary locations and on land taken on lease for a temporary period. Once you dismantle these temporary structures, it will reduce its value to almost nil and it cannot be used second time or third time and life span of LED video display boards is also not more than 6 months to 1 year. The land is neither owned by the assessee nor it is held by the assessee on lease basis. The structures put on such land, whatever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that:- The assessee furnished proofs to substantiate the purchases made from M/s. Vijay Industrial Corporation, i.e., his permanent account number, sales tax registration, voter ID card and identity of Shri S. K. Mohta. But the Assessing Officer got enquired through his Inspector and Inspector could not locate the address given by the party in its bills. However, the copy of Inspector's report was not provided to the assessee. But the assessee again on December 29, 2008, submitted copy of trade licence issued by KMC to M/s. Vijay Industrial Corporation, copy of electricity bill in the name of proprietor Shri S. K. Mohta for the month of November 2008, copy of driving licence in the name of proprietor Shri S. K. Mohta and the copy of voter ID card of Shri S. K. Mohta. However, the Assessing Officer ignored all these documents which were produced before him on December 29, 2008 and he passed the assessment order on December 30, 2008 making the addition of ₹ 16,75,875 treating the purchases as bogus purchases. The assessee again produced the same evidences before the Commissioner of Income-tax (Appeals) and even now before us and argued that all the necessary evidences with rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for holding controlling stake in group concerns and not for earning an income out of that investment, then the provisions of section 14A cannot be invoked. Accordingly, we direct the Assessing Officer to recompute the disallowance under section 14A of the Act read with rule 8D of the Income-tax Rules, 1962 qua the non-related parties. Accordingly, the proportionate disallowance will be made - Decided partly in favour of assesse. - I.T.A Nos.657 to 659/Kol/2011, I.T.A No.161/Kol/2012, I.T.A No.1094/Kol/2012, I.T.A No.2115/Kol/2013 - - - Dated:- 1-1-2015 - Shri Mahavir Singh Shri Shamim Yahya, JJ. For the Appellant : Shri Varinder Mehta, CIT For the Respondent : S/Shri J. P. Khaitan, Adv., Tarun Kr. Banerjee, CA Sukanta Paul, Advocate ORDER Mahavir Singh (Judicial Member).- I. T. A. Nos. 657 to 659/K/2011 filed by the Revenue are against the separate orders of the CIT(A)-XII, Kolkata in Appeal Nos. 562/CIT(A)-XII/DCIT, Cir-12/08-09,923/CIT(A)- XII/DCIT, Cir-12/09-10 and 401/CIT(A)-XII/Addl.CIT, Range-12/10-11 dated February 24, 2011, February 24, 2011 and February 28, 2011 respectively. Assessments were framed by the Deputy Commissioner of Income-tax, C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Income-tax (Appeals) erred in allowing deduction under section 80-IA on traffic signals and foot overbridges when the same do not qualify as infrastructural facility as per provision of section 80-IA of the Income-tax Act. 3. Briefly stated the facts are that the assessee claimed deduction under section 80-IA of the Act and in support of the same filed a certificate from chartered accountant in Form No.10CCB in all the assessment years. The assessee claimed deduction on profit derived from the business of development of infrastructural facilities such as traffic signals and foot over bridges, but the Assessing Officer after examining in detail disallowed the claim by observing as under : On perusal of the explanation offered shows that the authorised representative did not adduce any cogent explanation to support the assessee's claim that it was engaged in the business of development ; operation and maintenance of an infrastructure facility as contemplated in section 80-IA(4). In the assessment order for the assessment year 2005-06, my predecessor elaborately discussed the reasons for concluding that installation of traffic signal system or constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertisement and the relevant income from publicity charges. (c) Please state whether common head office expenses have been apportioned to these infrastructural facilities if yes, please furnish the head wise details giving the basis of apportionment, if not, the reasons thereof.' In response to this notice, the assessee-company submitted the details regarding the nature of infrastructural facilities maintained which included road automatic traffic signals and foot bridge vide its letter November 20, 2006 (available at pages 47 and 48 of the paper book). Para 12 of this letter reads as under : '12. Nature of infrastructural facilities maintained- (i) Road automatic traffic signals located at different parts of Kolkata City as mentioned in the schedules of the agreements dated October 3, 1944, November 12, 1995 and December 3, 1997 already filed along with the return. The advertisements are displayed on structures of the said automatic traffic signals on the road. (ii) Two numbers foot overbridges at Ranchi as per details given in the agreement dated August 30, 2001 already filed with the return. The advertisements are displayed on the structures of the said b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicial to the interests of the Revenue. Since the learned Commissioner of Income-tax has done the same, the order passed by him is not sustainable in law and hence, is hereby quashed. Aggrieved, the Revenue came in the second appeal before the Tribunal. 5. The learned Commissioner of Income-tax, Departmental representative, Shri Varinder Mehta relied on the decision of the hon'ble Karnataka High Court in the case of CIT v. Skyline Advertising P. Ltd. [2015] 4 ITR-OL 1 (Karn), wherein it is held that the benefit under section 80-IA of the Act can be extended only to those assessees who have developed infrastructure facility as defined under section 80-IA(4) of the Act. The hon'ble High Court discussed the fact of the case that the assessee has not developed road or a toll road, bridge, highway or a rail system. However, it had developed the existing road median, erected bus shelters and light poles for its advertisement business, which, in any case cannot be treated as infrastructure development. Accordingly, the hon'ble High Court decided the question of law in favour of the Revenue and against the assessee. 6. Learned counsel for the assessee Shri J. P. Khait ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment years. The relevant portion of sub-section (4) reads as under : '(4) This section applies to- (i) any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfils all the following conditions, namely :- (a) to (c) Explanation defines infrastructure facility as under : '(a) road including toll road, a bridge or a rail system ;' The Tribunal took the view that installation of automatic traffic signal and pedestrian footbridge would be an integral part of road including a bridge. We do not find any fault with the interpretation placed by the Tribunal on clause (a) of the Explanation to sub-section (4) of section 80-IA of the Income-tax Act, 1961. In view of the above, the proposed question No. 1 is academic and, therefore, we are not inclined to entertain this appeal in respect of question No. 1. The appeal is, therefore, summarily dismissed. On this, learned counsel for the assessee stated that the first assessment year for allowance of deduction under section 80-IA of the Act in the case of the assessee was the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of entitlement to the relief under section 80J, which is corresponding to section 15C of the 1922 Act, an industrial unit claiming such relief must be new, in the sense, that new plants and machineries are erected for producing either the same commodities or some distinct commodities (vide Textile Machinery Corporation Ltd. v. CIT [1977] 107 ITR 195 (SC) and CIT v. Indian Aluminium Co. Ltd. [1977] 108 ITR 367 (SC). It should be emphasised that it was common ground between the parties that the assessee-company has increased the capacity of its cement manufacturing plant from 600 tonnes per day to 1,600 tonnes per day by setting up new machinery and plant necessary for that purpose. In our opinion, the Tribunal was right when it expressed its view that the question involved was not a question whether there would be no bar to the view which the Income-tax Officer has taken on the principle of res judicata. The next question to which the Tribunal addressed itself, and in our opinion rightly, was whether the Income- tax Officer was justified in refusing to continue the relief of tax holiday granted to the assessee-company for the assessment year 1968-69, in the assessment year under re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efit to the assessee in the preceding three years. It is contended on behalf of the assessee that it was necessary for the Assessing Officer to be consistent with the assessment for the earlier years. The question as to the qualification of units Nos. 2 and 3 as industrial undertakings arose in the earlier years and the Assessing Officer had accepted that units Nos. 2 and 3 qualified for a deduction under section 80-I of the Act in the earlier years. By virtue of section 80-I(5) of the Act deduction under section 80-I of the Act was available to an assessee in the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things (such assessment year being the initial assessment year) and each of the seven assessment years immediately succeeding the initial assessment year. This necessarily implied once the issue as to eligibility under section 80-I of the Act was examined and allowed in the initial assessment, the same was allowable in the subsequent years also unless there was any material change in the succeeding years. It is well-settled law that the principles of res judicata do not apply to Income-tax proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officers till 1963-64. In these circumstances, the Supreme Court held that the view that had been settled and accepted over a period of years should not be allowed to be disturbed. This court in the case of CIT v. Lagan Kala Upvan [2003] 259 ITR 489 (Delhi), following the decision of the Supreme Court in the case of Radhasoami Satsang [1992] 193 ITR 321 (SC) has also held that where a particular view has been accepted by the Assessing Officer to several years the same cannot be permitted to be departed from unless there is some material facts that justified such a change. Similar view has been expressed by this court in the case of CIT v. Modi Industries Ltd. [2010] 327 ITR 570 (Delhi). In this case, while considering a claim of deduction made by an assessee under section 80J of the Act, this High Court held as under (page 573) : 'The second question relates to the claim of the assessee for deduction under section 80J of the Income-tax Act in respect of its new unit, namely, 10 ton furnace division and steel unit B . This case pertains to the assessment year 1976-77. A perusal of the order of the Assessing Officer would reveal that for the first time, claim u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi judicial controversies as it must in other spheres of human activity.' In the facts of the present case, where although the Assessing Officer has allowed the assessee deduction under section 80-I of the Act in the preceding years, one may still have certain reservations as to whether the issue of eligibility of units Nos. 2 and 3 fulfilling the conditions has been finally settled, since the question has not been a subject matter of any appellate proceedings in the years preceding the assessment year 1991-92. However, there is yet another aspect which needs to be considered. By virtue of section 80-I(5) of the Act, deduction under section 80-I of the Act is available to an assessee in respect of the assessment year (referred to as the initial assessment year) relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things, or to operate its cold storage plant or plants or the ship is first brought into use or the business of the hotel starts functioning or the company commences work by way of repairs to ocean-going vess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and it would not be open for the Assessing Officer to deny the deduction under section 80-I of the Act on the ground of non-fulfilment of the conditions under section 80-I(2) of the Act without disturbing the assessment for the assessment years relevant to the previous year in which the units Nos. 2 and 3 were established. This view has also been accepted by a Division Bench of the Gujarat High Court in the case of Saurashtra Cement and Chemical Industries Ltd. v. CIT [1980] 123 ITR 669 (Guj). In that case, the Gujarat High Court held that where relief of a tax holiday had been granted to an assessee in an initial assessment year in which the conditions for grant of tax holiday had to be examined, denial of relief in the subsequent years would not be permissible without disturbing the assessment in the initial assessment year. The relevant extract from the decision of the Gujarat High Court in Saurashtra Cement and Chemical Industries Ltd. [1980] 123 ITR 669 (Guj) is quoted below (page 675): 'The next question to which the Tribunal addressed itself, and in our opinion rightly, was whether the Income-tax Officer was justified in refusing to continue the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act in the assessment year 2004-05, i.e., that was the initial assessment year and in that year the matter regarding the claim of deduction has become final for the reason that the hon'ble Calcutta High Court has confirmed the allowance of deduction and the Revenue has not carried the matter before the hon'ble Supreme Court. Whereas the Revenue has referred to the decision of hon'ble Karnataka High Court in the case of CIT v. Skyline Advertising P. Ltd. [2015] 4 ITR-OL 1 (Karn), but that cannot be considered as precedent because the jurisdictional High Court has taken a view in favour of the assessee and that also in the assessee's own case. That means the initial assessment year i.e., 2004-05, once the claim of deduction in respect to pre-requisite conditions for allowance of deduction has been satisfied, the same cannot be questioned in future years unless and until the Revenue disturbs the initial assessment year. The hon'ble Delhi High Court in the case of CIT v. Delhi Press Patra Prakashan Ltd. (No. 2) [2013] 355 ITR 14 (Delhi), has considered this issue by following the decision of the hon'ble Supreme Court in the case of Radhasoami Satsang [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dering the appellate order, we are of the view that the LED video display boards are temporary structures and they cannot be equated with plant and machinery for the reason that these structures are displayed outside in temporary locations and on land taken on lease for a temporary period. Once you dismantle these temporary structures, it will reduce its value to almost nil and it cannot be used second time or third time and life span of LED video display boards is also not more than 6 months to 1 year. The land is neither owned by the assessee nor it is held by the assessee on lease basis. The structures put on such land, whatever in nature, are purely temporary structures. Even sometimes, these structures are not taken by the assessee for reuse again. When such structures are put on land not belonging to the assessee, the expenditure is held to be the nature of revenue in view of the judgment of the hon'ble Supreme Court in the case of CIT v. Madras Auto Service P. Ltd. [1998] 233 ITR 468 (SC). In view of the above, we confirm the order of the Commissioner of Income-tax (Appeals) and this issue of the Revenue's appeal is dismissed. 13. The next issue in this appeal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1988, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed : As argued by learned counsel for the assessee that the assessee by way of agreement with KMC acquired commercial rights for fifty years to use the entire area allotted to it and according to him, this falls under the category of, any other business or commercial rights of similar nature . Learned counsel for the assessee argued that these rights for commercial uses are owned by the assessee and used by it during the relevant year for the purposes of business or profession. Learned counsel for the assessee referred to the particular clause 15 of the terms and conditions of the tender issued by KMC and the same reads as under : That the right of display of advertisement on the signal posts will be allowed at a reduce rate of ₹ 550 per sq. mtr. per annum, inclusive of all charges for a period of 10 (ten) years from the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view that the Commissioner of Income-tax (Appeals) has rightly allowed the claim of depreciation and we confirm the same. This issue of the Revenue's appeal is dismissed. 16. The next issue in this appeal of the Revenue is against the order of the Commissioner of Income-tax (Appeals) allowing expenditure on prior period expenses related to earlier years. For this, the Revenue has raised following ground No. 4 : 4. On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in allowing expenditure on account of prior period expenses related to earlier years. 17. We have heard rival submissions and gone through the facts and circumstances of the case. We find that the Commissioner of Income-tax (Appeals) has deleted the disallowance of prior period expenses relied on the assessee' s own case for assessment years 2003-04, 2004-05 and 2005-06 decided by the Income-tax Appellate Tribunal in I. T. A. Nos. 541, 494, 820/ Kol/2008 order dated December 11, 2009. The Commissioner of Income- tax (Appeals) observed in para 8.2 as under : 8.2. I have considered the submission of the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in the case of CIT v. Alom Extrusions Ltd. [2009] 319 ITR 306 (SC) we find that the Supreme Court in the aforesaid case has held that the amendment to the second proviso to section 43B of the Income-tax Act, as introduced by the Finance Act, 2003, was curative in nature and is required to be applied retrospectively with effect from April 1, 1988. Such being the position, the deletion of the amount paid by the employees' contribution beyond due date was deductible by invoking the aforesaid amended provisions of section 43B of the Act. We, therefore, find that no substantial question of law is involved in this appeal and consequently, we dismiss this appeal. 20. Once the issue is decided by the hon'ble jurisdictional High Court in the case of Vijay Shree Ltd., wherein it is held that the provident fund and employees State insurance are paid on or before the due date of filing of return under section 139(1) of the Act, deduction in respect to the amount on which provident fund and employees State insurance is so paid, is allowable. In the present case the assessee has paid the provident fund deducted on account of employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. On perusal of copies of bills issued by M/s. Vijay Industrial Corporation, it was observed that he was having value added tax registration and charging applicable value added tax on the sales made by him to the appellant-company. All the payments of purchases to M/s. Vijay Industrial Corporation, were made by the appellant-company through cheques. In view of documentary evidences produced by the appellant in support of existence of M/s. Vijay Industrial Corporation, I am of the opinion that there is no reason to hold that the purchases made by the appellant from him were bogus. In view of the above, the Assessing Officer is directed to delete the addition of ₹ 16,75,875. Ground No.11 is allowed. Aggrieved the Revenue came in appeal before us. 23. The assessee furnished proofs to substantiate the purchases made from M/s. Vijay Industrial Corporation, i.e., his permanent account number, sales tax registration, voter ID card and identity of Shri S. K. Mohta. But the Assessing Officer got enquired through his Inspector and Inspector could not locate the address given by the party in its bills. However, the copy of Inspector's report was not provided to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. v. Asst. CIT relied upon by the learned Assessing Officer is in fact in favour of the contention of the assessee as regards the adding back by the Assessing Officer at the 'provision for diminution in value of invest' ₹ 85,69,735 for computing book profit under section 115JB. 25. We have heard rival submissions and gone through facts and circumstances of the case. We find that the Commissioner of Income-tax (Appeals) has confirmed the action of the Assessing Officer for the simple reason that Explanation 1 of section 115JB(2) clause (i) was inserted by the Finance (No. 2) Act, 2009 with effect from April 1, 2001 retrospectively in respect to provision for diminution in the value of investment is to be included while computing income under section 115JB of the Act. For this, he observed in para 5 as under : 5. Regarding ground No. 4 relates to disallowance of ₹ 85,69,735 under section 115JB of the Income-tax Act, 1961 because the assessee has debited this amount towards provisions for diminution in the value of investment. The assessee has relied upon a judgment of the Income-tax Appellate Tribunal, Mumbai in its written submission whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this issue for the assessment year 2005-06 (I. T. A. No. 820/Kol/2008 dated December 11, 2009) when the Department had gone in appeal. Since this issue is covered, I do not find any reason to interfere in it. Therefore, addition made on this ground is deleted. As a result, the appeal is allowed. We find that this issue is now covered by the decision of this Tribunal in the assessment year 2005-06 in I. T. A. No. 820/Kol/2008 of the Revenue's appeal, wherein 100 per cent. depreciation on hoarding structure was claimed under the head temporary erections and the Tribunal vide order dated December 11, 2009 vide paragraph 13 directed the Assessing Officer to allow depreciation and held as under : 13. In view of the above submissions of both the parties, we reverse the order of the learned Commissioner of Income-tax (Appeals) on this point and restore that of the Assessing Officer. However, we direct the Assessing Officer to work out the written down value of the temporary structure from the cost of the temporary structure, the depreciation allowed in the year under consideration will be reduced and the remaining amount would be written down value under the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rving as under : 6. The third ground is related to TDS deducted by the assessee under section 194C on site hire charges paid to traders, i.e., advertising agency which the Assessing Officer has contended that the TDS deduction should have been under section 194-I of the Income- tax Act. I have considered the findings of the Assessing Officer and submission made by the authorised representative. I find that the assessee has deducted TDS under section 194-I on payments made to landlord for places taken on rent in order to put hoardings. However, where the assessee has entered into a contract with other advertising agency who have provided space to the assessee for putting advertisement and banners but the same are maintained, lighting arrangement etc. by those advertising agency only. The assessee has deducted TDS under section 194C. The authorised representative has also produced various bills and copy of contracts showing that the assessee had entered into contract for putting or hoarding for very short periods say 15 days or 1 month with various advertising agencies. In fact this places are not directly hired by the assessee but they have been hired by other a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 40(a)(ia) of the Act in view of the decision of the hon'ble Calcutta High Court in the case of CIT v. S. K Tekriwal [2014] 361 ITR 432 (Cal), wherein it is held that the no disallowance can be made due to short deduction of TDS. 33. In view of the above two propositions, we confirm the order of the Commissioner of Income-tax (Appeals) allowing the expenses. This common issue of the Revenue's appeals is dismissed. 34. The next issue in C.O. No. 128/Kol/2013 arising out of I. T. A. No. 2115/ Kol/2013 is against the order of the Commissioner of Income-tax (Appeals) confirming the action of the Assessing Officer in making disallowance of expenses for earning exempted income by invoking the provisions of section 14A of the Act read with rule 8D of the Income-tax Rules, 1962. For this, the assessee has raised following ground : For that the learned Assessing Officer has materially erred in law and on the facts of the case in disallowing an amount of ₹ 2,51,945 under section 14A of the Income-tax Act, 1961. 35. We have heard rival submissions and gone through facts and circumstances of the case. Learned counsel for the assessee stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for composite/indivisible activities in which taxable and non taxable income is received but when no expenditure has been incurred in relation to the exempt income then principle of apportionment embedded in section 14A has no application. The object of section 14A is not allowing to reduce tax payable on the non exempt income by deducting the expenditure incurred to earn the exempt income. In the case in hand it is not the case of the Revenue that the assessee has incurred any direct expenditure or any interest expenditure for earning the exempt income or keeping the investment in question. If there is expenditure directly or indirectly incurred in relation to exempt income the same cannot be claimed against the income which is taxable. For attracting the provisions of section 14A -there should be proximate cause for disallowance which has relationship with the tax exempt income as held by the hon'ble Supreme Court in the case of CIT v. Walfort Share and Stock Brokers P. Ltd. [2010] 326 ITR 1 (SC). Therefore, there should be a proximate relationship between the expenditure and the income which does not form part of the total income. In the case in hand the assessee has claim ..... 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