9911796707
TMI Blog2018 (9) TMI 1559X X X X Extracts X X X X X X X X Extracts X X X X ..... construction, operation and maintenance of the project highway of NH-6 in Maharashtra on build, operate and transfer basis. They were entitled to collect toll from the users to recoup the cost of reconstruction, maintenance and operations. The respondent/assessee had claimed depreciation on roads @ 10% under Section 32 of the Act. This claim of the assessee for depreciation was accepted by the Assessing Officer in the regular assessment under Section 143(3) of the Act for the assessment year 2009-2010. 3. Subsequently, there was a search and seizure operation under Section 132 of the Act on 10.12.2012 in case of Bakshi Group, wherein the premises of the respondent/assessee were also covered. Consequent to the said search, notice under Section 153A was issued. In response to the said notice, the respondent/assessee had filed their return of income, in which again depreciation @ 10% under Section 32 of the Act was claimed. 4. In the present appeal, we are not concerned with the assessment proceedings and whether or not the respondent-assessee was entitled to claim depreciation on the NH-6 constructed by them on built, operate and transfer basis. In the present case, we are concerne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his addition is not based on any material or evidence found and seized during search as nothing has been brought out on record in this regard. The claim of the appellant with respect to the expenditure incurred has been allowed in view of the clarification by the CBDT in the above mentioned circular. Thus, net addition worked out at Rs. 15,88,50,307/ -. The penalty for concealment of income/furnishing inaccurate particulars of income under section 271(l)(c) was initiated. The appellant did not dispute the issue of addition made in the assessment order and no further appeal was filed. 7.2 During penalty proceedings, the AO did not considered the submission by the appellant favourably. It was mentioned that the depreciation is allowable only on the assets which are owned wholly by any assessee and CBDT has only given its further clarification and not made any amendment in the existing law. It was also stated that appellant has only revised its claim on depreciation on the query of the AO, after a span of 11 months which indicates that appellant has made wrong claim willfully. After discussing in detail and relying upon various judgments the AO held that it is concealment of income a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment/notified authority for the purposes of construction of the project without any actual transfer of ownership and such assessee has only a right to develop and maintain such asset. It also enjoys the benefits arising from use of asset through collection of Toll for a specified period without having actual ownership over such asset. Therefore, the rights in the land remain vested with the Government or its agencies. Thus, as assessee does not hold any rights in the project except recovery of toll fee to recoup the expenditure incurred, it cannot therefore be treated as an owner of the property, either wholly or partly, for purposes of allowability of depreciation under section 32(1)(ii)of the Act. Thus, present provisions of the Act do not allow claim of depreciation on Toll ways due to non fulfillment of ownership criteria in such cases. 4. There is no doubt that where the assessee incurs expenditure on a project for development of roads/highways, he is entitled to recover cost incurred by him towards development of such facility (comprising of construction cost and other pre-operative expenses) during the construction period. Further, expenditure incurred by the assessee on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s are generally claiming depreciation on such capitalized expenditure, treating it as an intangible assets in terms of section 32(I)(ii)of the Act. Therefore, the original claim of the appellant to claim such depreciation was not a standalone case but seems to be the general practice of that industry and the claim of depreciation by it was made under the bona fide belief that it is an allowable expenditure. Further, it is also clarified by the circular that where the assessee incurs expenditure on a project, he is entitled to recover cost incurred by him and accordingly allowed such expenditure incurred, spreading over this liability in different years. 7.5 It is also observed that in the first round of scrutiny assessment, no such addition was made, but allowed depreciation as claimed by the appellant. It is only with respect to the assessment proceedings under section 153A of the Act that this issue has been raised by the AO and based on the circular by the CBDT, revision of the claim of the depreciation made before AO by the appellant. All the facts regarding claim of depreciation was before the AO during first round of scrutiny assessment as well as later on. 7.6 Here it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lay in submission of revised working by the appellant is also not tenable because one cannot expect the appellant to act immediately suo-moto. This will also not form the substantial reason to imposed penalty for concealment because the appellant itself has brought this to the knowledge of AO and without disputing, accepted the revised working. Since, it was accepted by the appellant rather offered by the appellant therefore, no appeal was preferred. Therefore, this alone cannot be the basis for imposition of penalty. 7.8 In the penalty order, the AO has relied upon various case laws. The case of CIT vs. Usha International Ltd. 212 Taxman 519, 2013 relied upon by the AO relates to the revision of return consequent upon survey proceedings, which was disclosed after being detected during the course of survey is not applicable as the facts are distinguishable. The case of appellant is not related to survey proceedings nor a disclosure of additional income but claim of depreciation, revised in view of the Board's circular. With respect to the ratio laid down in the case of KP Madhusudan vs. CIT 251 ITR 99, it is seen that the same is not applicable in the present case because the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is held that penalty for concealment of income under section 271(1)(c)of the Act is not attracted in the case and the same is deleted accordingly." 6. The aforesaid order in our opinion clearly and correctly elucidates on the difference between assessment proceedings and penalty proceedings and applies explanation (1) to Section 271 (1) (c) of the Act. It refers to divergence of legal opinion on the question whether an assessee, who has constructed an infrastructure project such as roads or highways on build, operate and transfer basis could claim depreciation or was entitled to treat the entire cost as amortized expenditure, an expression not used in the Act. These were highly debateable and contentious issues. Noticeably, the Assessing officer had allowed the claim for depreciation on roads @ 10% under Section 32 of the Act in the original assessment proceedings. 7. Learned counsel for the Revenue has drawn our attention to Circular No.9 of 2012 dated 23rd April, 2014, issued by the Central Board of Direct Taxes. This circular has been reproduced in the reasoning given by the CIT (Appeals) and hence, is not being referred to and quoted separately. Circular refers to disputes ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
