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TMI Blog2023 (6) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... es can be substituted by the Arm s length price of purchase of such assets. We hold that AO is incorrect in determining the arm s-length price of specified domestic transaction after omission of clause (i) of Section 92BA - Hence, the action of the learned transfer-pricing officer in determining the arm s-length price of project management and supervision fees at Rs Nil and consequent disallowance of depreciation there on is not correct. Ground of the appeal of the assessee is allowed. Disallowance of depreciation on toll road - HELD THAT:- As decided in own case [ 2018 (5) TMI 2064 - ITAT MUMBAI] held that the claim of the assessee for depreciation on license to collect toll being an intangible asset is falling within the scope of Section 32 (1) (ii) of the act. Assessee was allowed depreciation on road constructed by it under built operates and transfer basis [BOT] was considered as an intangible asset . The coordinate bench also allowed the depreciation to the assessee at the rate of 25% thereon. Therefore, AO is directed to delete the disallowance of depreciation on toll roads - Ground of the appeal of the assessee is allowed. Correct head of income - interest o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e books of accounts of the assessee 03. Assessee is engaged in business of development, widening, strengthening, operating, and construction and maintaining Thiruvanthapuram city Roads. It is improvement project under the annuity concession agreement. 04. It filed its return of income on 30/11/2015 declaring loss of ₹ 85,666,301/ . The return of income of the assessee was picked up for scrutiny. The assessee has entered into a specified domestic transaction [SDT] of project management fees of Rs 14966352/- and Project supervision fees of ₹ 37,75,196/- . Therefore, the SDT entered into by the assessee were referred to the learned transfer-pricing officer for determination of Arm s length Price. The learned transfer-pricing officer found that assessee has entered into specified domestic transaction with IL FS transportation network Ltd and above fees were paid to it; assessee debited it as Capital work in Progress. Assessee claimed depreciation on it of Rs 28,11,247/-. Assessee did not benchmarked above transactions for its Arm s length price reason being aforementioned transactions are in the nature of capital expenditure and therefore no benchmarking is warra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee was allowed amortization on toll road. The learned AO further found that an amount of ₹ 43,946/ has been given interest by Punjab National Bank to the assessee on which tax has also been deducted but assessee has denied the receipt of the said interest and therefore same was included as income of the assessee Under the head income from other sources. The AO further disallowed the credit of tax deduction at source amounting to ₹ 58,566. Accordingly the total income of the assessee was computed at ₹ 114,085,694/ . There were other transfer pricing adjustment also, but those are not in dispute before us, therefore, facts related thereto are not discussed here. 07. Assessee preferred objections before the learned dispute resolution panel. The directions were issued on 26/9/2019. On the issue of applicability of transfer pricing provisions, it rejected the contention of the assessee that the transfer pricing provisions now do not apply to the specified domestic transaction. With respect to the adjustment of ₹ 2,811,247 on disallowance of depreciation as capital work in progress treating ALP of Project Management and supervision fees as Rs Nil, as it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of specified domestic transaction cannot be made. He even otherwise stated that it is not the expenditure , which is claimed by the assessee and therefore even otherwise, no adjustment could have been made. Therefore, this issue is covered in favour of assessee. 011. On the issue of disallowance of depreciation on toll roads, he submitted that the identical issue arose in the case of the assessee in earlier years wherein the claim of the depreciation was allowed to the assessee. He referred to the decisions of the coordinate bench in assessee s own case for assessment year 2008 09, 2010 11, and 2011 12. He submitted that on identical basis the disallowance was made in earlier years of depreciation but is allowed by the coordinate benches. Therefore, this issue is covered in favour of assessee. 012. On the third issue of treatment of interest of ₹ 2,116,919/ on FDR placed Under the debt service obligation passed by the lenders treated as income from other sources instead of business and profession, it was stated that identical issue in the assessee s own case has been decided by the coordinate bench for assessment year 2010 11 and 11 12 holding such inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work progress, which will translate into fixed assets whenever the project is completed. On the capital expenditure the provisions of Section 40A (2) (b) are not applicable and therefore benchmarking is not required under Section 92BA of the act. It was further stated that clause (i) of Section 92 BA of the income tax act has been omitted by The Finance Act, 2017 therefore; the courts have held that such Section was never there in the statute book. Assessee also relied on the decision of coordinate bench, which has been confirmed by the honourable Karnataka High Court. Despite this the learned assessing officer, as assessee has not benchmarked transaction, did not file the details of supporting evidences, correctness of the arm s-length price, the corresponding arm s-length price of the above sum considered at Rs Nil. Consequently, assessee has claimed depreciation on the rate of 15% on the above sum amounting to 28,11,247/ , was disallowed. The action of the learned assessing officer was confirmed by the learned dispute resolution panel. We find that honourable Karnataka High Court in case of PCIT V Texport Overseas Limited [2020] 114 taxmann.com 568 (Karnataka)/ [2020] 271 Taxma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee with respect to the depreciation treating the toll collection on road as intangible asset . As per para number 2 .1, coordinate bench relied upon the decision of the coordinate bench in case of Andhra Pradesh Expressway Ltd and later on per paragraph number 7, it held that the claim of the assessee for depreciation on license to collect toll being an intangible asset is falling within the scope of Section 32 (1) (ii) of the act. Assessee was allowed depreciation on road constructed by it under built operates and transfer basis [BOT] was considered as an intangible asset . The coordinate bench also allowed the depreciation to the assessee at the rate of 25% thereon. Therefore, respectfully following the decision of the coordinate bench in assessee s own case, the learned assessing officer is directed to delete the disallowance of depreciation of ₹ 211,502,144/ on toll roads. Ground number 3 is allowed. 020. Ground number 4 is with respect correct head of income of interest on fixed deposits placed under the debt service obligation created by the lenders amounting to ₹ 2,116,919/ . Assessee offered it as income from business; the learned assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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