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TMI Blog2023 (8) TMI 1510X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee and the Revenue are preferred against the order of the ld. CIT(A)-1, Noida dated 31.03.2018 pertaining to Assessment Years 2006-07 to 2011-12. Since common issues are involved in the captioned cross appeals and since the first appellate authority has decided the appeals by a consolidated order, all the appeals were heard together and are disposed of by this common order for the sake of convenience and brevity. ITA No. 4410/DEL/2018 [A.Y 2006-07] [Assessee's appeal] ITA No. 4411/DEL/2018 [A.Y 2007-08] [Assessee's Appeal] ITA No. 4412/DEL/2018 [A.Y 2008-09] [Assessee 's Appeal] 2. Challenge of the assessee is three-fold: (i) Reopening of the assessment; (ii) Enhancement by the ld. CIT(A); and (iii) Merits of the Addition. 3. The representatives of both the sides were heard at length, the case records carefully perused and with the assistance of the ld. Counsel, we have considered the documentary evidences brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules and have also perused the judicial decisions relied upon by both the sides. 4. Vide notice dated 28.03.2013 issued u/s 148 of the Income-tax Act, 1961 [the Act, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, any action taken by the Assessing Officer under section 147 beyond the four year period would be wholly without jurisdiction. Reiterating our viewpoint, we hold that the notice dated 29-3-2004 under section 148 based on the recorded reasons as supplied to the petitioner as well as the consequent order dated 2-3-2005 are without jurisdiction as no action under section 147 could be taken beyond the four year period in the circumstances narrated above." 8. In light of the decision of the Hon'ble High Court of Delhi [supra], we are of the considered view that the Assessing Officer has grossly erred in not pointing out the failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment framed vide order dated 31.12.2008 u/s 143(3) of the Act. This, in itself, is sufficient to quash the reopening of the assessment. 9. We further find that the issue of amortization of interest on zero coupon bond was decided in favour of the assessee by the first appellate authority in A.Y 2004- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e infructuous & needs to be given quietus. The challenge posed by the appellant to the assumption of jurisdiction by the Id. AO. u/s. 147 of I.T. Act, 1961 is, therefore, not maintainable in law and the ground taken by it is, therefore, rejected, 126. Therefore, the claim of the appellant that the Commissioner (Appeals) has the necessary appellate jurisdiction u/s. 246/246A of I.T. Act, 1961 r.w section 250 of LT. Act, 1961 to adjudicate the correctness of the assumption of the jurisdiction u/s. 147 of I.T. Act, 1961 & issuance of notice u/s 148 of LT. Act, 1961 that too in the course of the adjudication of the correctness of the assessment order is not correct and cannot be accepted by this office. The same is therefore, rejected & this office cannot adjudicate the correctness or otherwise of the assumption of jurisdiction by Ld. AO. u/s 147/148 of. Act, 1961. Appellant is free to seek its remedies in law before the appropriate forum but It cannot expect this office to go beyond the jurisdiction conferred upon this office. 127. The Hon'ble Supreme Court while dealing with the issue of remedies available to an assessee in respect of re-opening of its assessment by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assment" to the tax payer. 16. Considering the facts of the case from all possible angles, we are of the considered view that the Assessing Officer has erred in assuming jurisdiction u/s 148 of the Act. Notice issued u/s 148 of the Act is hereby set aside and the resultant assessment order is quashed. 17. For the sake of completeness, we will address the issues on merits of the case. 18. The ld. CIT (A) has enhanced the assessment in respect of the following incomes: (i) Arrear of designated return - Rs. 179.87 crores (ii Lease of land treated as revenue subsidy - Rs. 1730.08 crores (iii) Disallowance of depreciation claimed on toll bridge - Rs. 15.97 crores 19. Before embarking upon the merits of each issue, it would be pertinent to understand the powers of enhancement conferred upon the ld. CIT (A) by provisions of Section 251 of the Act. The relevant provisions of section 251(1a) read as under: "In disposing of the appeals, the Commissioner (Appeals) shall have the following powers: In appeal against order of assessment, he may confirm/reduce, enhance or annul the assessment." 20. In our understanding, the ld. CIT (A) can enhance the assessment on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner can find a new source of income not considered by the Income-tax Officer and assess it under his powers granted by section 31 of the Income-tax Act? Section 31 reads as follows: "31.(1) The Appellate Assistant Commissioner shall fix a day and place for the hearing of the appeal, and may from time to time adjourn the hearing. (2) The Appellate Assistant Commissioner may, before disposing of any appeal, make such further inquiry as he thinks fit, or cause further inquiry to be made by the Income-tax Officer........... (3) In disposing of an appeal the Appellate Assistant Commissioner may, in the case of an order of assessment, - (a) confirm, reduce, enhance-or annul the assessment, or (b) set aside the assessment and direct the Income-tax Officer to make a fresh assessment after making such further inquiry as the Income-tax Officer thinks fit or the Appellate Assistant Commissioner may direct, and the Income-tax Officer shall thereupon proceed to make such fresh assessment and determine where necessary the amount of tax payable on the basis of such fresh assessment... There is no doubt that the Appellate Assistant Commissioner can "enhance the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de the record, i.e., the return made by the assessee or the assessment order of the ITO with a view to find out new sources of income and the power of enhancement under section 31(3) of the 1922 Act is restricted to the sources of income which have been the subject-matter of consideration by the ITO from the point of view of taxability. In this context 'consideration' does not mean 'incidental' or 'collateral' examination of any matter by the ITO in the process of assessment. There must be something in the assessment order to show that the ITO applied his mind to the particular subject-matter or the particular source of income with a view to its taxability or to its non-taxability and not to any incidental connection. In the instant case, it was manifest that the ITO had not considered the entry from the point view of its taxability and, therefore, the AAC had no jurisdiction, in an appeal under section 31 of the 1922 Act, to enhance the assessment." 25. Rebutting to the contentions of the ld. counsel for the assessee, the ld. DR placed strong reliance on the decision of the Hon'ble Supreme Court in the case of Nirbehram Deluram 224 ITR 610 and pointed out that the Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto consideration by the assessing officer. It is to be noted that strong reliance was placed by learned counsel for the revenue on the decision of the Apex Court in CIT v. Nirbheram Daluram (1997) 224 ITR 610. It was submitted that a different view was expressed about the scope and ambit of the power of the first appellate authority vis-a-vis the sources considered by the assessing officer and even if the action of the first appellate authority related to a new source of income not considered by the assessing officer, it was not impermissible. It is to be noted that in Union Tyres' case (supra), this decision was also considered by this court in the background of what had been stated in Daluram's case (supra) and it was observed that there was really no difference from the view expressed earlier in Shapoorji's case (supra) and Chamaria's case (supra). 7. Learned counsel for the revenue also submitted that this conclusion of the Division Bench needs a fresh look. We have considered this submission in the background of what had been stated by the Apex Court in Jute Corporation's case (supra) and Daluram's case (supra). In Jute Corporation's case (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les, 1922 (hereinafter referred to as 'the Rules'), for the purpose of computing the income of a non-resident even if the Income Tax Officer had not done so in the assessment proceedings. But, in Shapoorji Pallonji Mistry's case (supra), this court, while considering the extent of the power of the Appellate Assistant Commissioner, referred to a number of cases decided by various High Courts including the Bombay High Court judgment in Narrondas' case (supra) and also the decision of this court in McMillan and Co.'s case (supra) and held that, in an appeal filed by the assessed, the Appellate Assistant Commissioner has no power to enhance the assessment by discovering new sources of income not considered by the Income Tax Officer in the order appealed against. It was urged on behalf of the revenue that the words 'enhance the assessment' occurring in section 31 were not confined to the assessment reached through a particular process but the amount which ought to have been computed if the true total income had been found. The court observed that there was no doubt that this view was also possible, but having regard to the provisions of sections 34 and 33B, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tween New Okhla Industrial Development Authority (NOIDA"), Infrastructure Leasing Financial Services Limited ('Sponsor") and Noida Toll Bridge Company Limited (the Company"), for the purpose of computation of recovery of total project cost and return of 20% thereon for the year ended 31 March 2013. 2. On the basis of our verification of the aforementioned Statement, by carrying out such cheeks as we considered appropriate and on the basis of information and explanations given to us by the management, we certify that there is a shortfall in the recovery of total project cost and return of 20% thereon of INR 29,551,405,164 (INR 2,955 crores) as at 31 March 2013. 3. The Statement is to be read in conjunction with Notes 3, 4 and 5, which form part of the Statement These notes provide the break-up of various heads comprised in the Statement and explain the management rationale for including or excluding certain items, which we have been informed, is consistent with the past practices. 4. In respect of this certificate, we invite attention to the following - * As explained by the management in Note 1 of the Statement, Project Cost of INR 3,259,934,174 was incurred till th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Period to develop, establish, finance, design, construct, operate and maintain the Noida Bridge as an Infrastructure Facility for the benefit of the residents, and industries, and for the development of commence in Noida and permits it to enter into the Ashram Flyover Construction Agreement and the Concessionaire hereby accepts the Concession granted to it by NOIDA and further agrees to implement the Project, in accordance with the terms and conditions of this Agreement. (b) NOIDA further grants to the Concessionaire the exclusive right and authority during the concession Period to in accordance with the terms and conditions at this Agreement : (i) develop, establish, finance, design, construct, own, operate, maintain use and regulate the use by third parties of the Noida Bridge; (ii) Enjoy complete and uninterrupted possession and control of the lands identified as constituting the Bridge Site; (iii) Own all or any part of the Project Assets; (iv) determine, demand, collect, retain and appropriate a Fee from the Users of the Noida Bridge and apply the same in order to recover the Total Cost of Project and the Returns thereon; (v) restrict the use of the Noida Br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of all Users and shall implement the Development Rights so as to avoid danger to any such persons. 35. Section 5.1 specifically provides for Lease by Noida [This is relevant for issue No. 2 relating to addition of Rs. 1730.08 crores as revenue subsidy] as under: "Section 5.1 Lease by Noida (a) NOIDA shall, pursuant to the Project Site Lease Agreement, lease to Concessionaire the Bridge Site in form reasonably satisfactory to the Concessionaire in order to enable to construction and maintenance of the Facilities and enjoyment of Development Rights, as and when granted to the Concessionaire under Section 4.1 hereinabove, without limiting the generality of this Section 5.1(a), the terms of the Delhi Land Lease Agreement, Delhi Land Sub-Lease Agreement and Noida Site Lease Agreement shall be in the form and substance so as to further enable procurement of funds from Lenders for implementation of the Project. The said Project Site Lease Agreement shall be duly executed and registered with the Competent Authority as soon as practicable, but in any case within six months of the State hereof. (a) The Project Site Lease Agreement shall initially be for a period of 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is the report of the Chartered Accountant wherein the following chart has been annexed, which is also heavily relied upon by the ld. DR: 38. However, we find that the said certificate does not state that the assessee is entitled to the return @ 20% on the project cost. It appears that the ld. CIT (A) has completely misunderstood the entire arrangement with Noida and IL&FS. The relevant sections of the agreement are mentioned hereinabove. 39. As per section 2.3 of the Agreement, concession was granted for a period of 30 years or the date on which the assessee recovers the total cost of the project alongwith return which is also defined and mentioned elsewhere. The assessee was only authorized to collect fee from the users of Noida bridge during concession period and the same shall be retained by the assessee. 40. As per section 2.4 of the Agreement, in the event the assessee did not recover the total cost of the project plus 20% return, the agreement shall be extended by another two years or till the time the total cost of the project and return thereon was recovered by the assessee. 41. Further, section 4.1 of the Agreement provides that in a scenario where the assessee coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner of Income-tax, Bengal v. Shau Wallace & Co.(1) attempted a definition of the term income " in the words following :- "Income, their Lordships think, in the Indian Income-tax Act, connotes a periodical monetary return ' coming in' with some sort of regularity, or expected regularity from definite sources. The source is not necessarily one which is expected to be continuously productive, but it must be one whose object is the production of a definite return excluding anything in the nature of a mere windfall." Mukerji- J. has defined these terms in Rogers Pyatt Shellac & Co. v. Secretary of State for India(2): "Now what is income? The -term is nowhere defined in the Act...... In the absence of a statutory definition we must take its ordinary dictionary meaning that which comes in as the periodical produce of one's work, business, lands or investments (considered in reference to its amount and commonly expressed in terms of money) ; annual or periodical receipts accruing to a person or corporation " (Oxford Dictionary). The word clearly implies the idea of receipt, actual or constructive. The policy of the\ Act is to make the amount taxable when it is p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Lord Justice Fry at page 59: "In the first place, I would observe that the tax is in respect of 'profits or gains arising or accruing.' I cannot read those words as meaning I received by.' If the enactment were limited to profits and gains 'received by' the person to be charged, that limitation would apply as much to all Her Majesty's subjects as to foreigners residing in this country. The result' would be that no income-tax would be payable upon profits 'which accrued but which were not actually received, although profits might have been earned in the kingdom and might have accrued in the kingdom. I think, therefore, that the words I arising or accruing are general words descriptive of a right to receive profits." To the same effect are the observations of Satyanarayana Rao J. in Commissioner of Income-tax, Madras v. Anamallais Timber Trust Ltd.(1) and Mukherjea J. in Commissioner of Income-tax, Bombay v. Ahmedbhai Umarbhai & Co., Bombay(2) where this passage from the judgment of Mukerji J. in Roqers Pyatt Shellac & Co. v. Secretary of State for India(3), is approved and adopted. It is clear therefore that income may accrue to an assessee wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Managing Agencies -in favour of the transferees no income can be said to have accrued to them. They had no doubt rendered services as Managing Agents of the Companies for the broken periods. But unless and until they completed their performance, viz., the completion of the definite period of service of a year which was a condition precedent to their being entitled to receive the remuneration or commission stipulated thereunder, no debt payable by the Companies was created in their favour and they had no right to receive any payment from the Companies. No remuneration or commission could therefore be said to have accrued to them at the dates of the respective transfers. It was however urged that even though no income can be said to have accrued to the Sassoon's at the date of the respective transfers which could be the (1) [1900] A. C. 588 at p. 592, subject-matter of any assignment by them in favour of the transferees, the moment the remuneration or commission was ascertained at the end of the calendar year and became a debt due to the Managing Agents under the terms of the Managing Agency Agreements it could be referred back to the period in which it was earned and the port ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Lords held that on the true construction of the Agreements, the commissions in question were earned by the assessee in the year in which the policies were underwritten, and must be brought into account accordingly and confirmed the decision of the Court of Appeal. It may be noted that the charge was on profits arising in each chargeable accounting period and the profits were to be taken to be the actual profits arising in the chargeable accounting period. The ratio of the decision was that the commission paid was remuneration for services completely performed in the particular year, that, the assessee had at the end of the year done everything it had to do to earn it and that it was remuneration for work done and completely done in the particular year though it was ascertained and paid two years later. Viscount Simon in his speech at page 93 stated that the assessee had acquired a legal right to be paid in futuro and that the principle was to refer back to the year in which it was earned so far as possible remuneration subsequently received even though it could only be precisely calculated. afterwards. Lord Wright in his speech at page 94 said that it was necessary to determine i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accrued to the Company. during the chargeable accounting period the commission payable to the Managing Agents also could be said to have accrued to them during that period. It is no doubt true that the accrual of income does not depend upon its ascertainment or the accounts cast by assessee. The accounts may be made up at a much later date. That depends upon the convenience - of the assessee and also upon the exigencies of the situation. The amount of the income, profits or gains may thus be ascertained later on the accounts being made up. But when the accounts are thus made up the income, profits or gains ascertained as the result of the account are referred back to the chargeable accounting period during which they have accrued or arisen and the assessee is liable to tax in respect of the same during that chargeable accounting period. "The computation of the profits whenever it may take place cannot possibly be allowed to suspend their accrual..:... ................. ". "The quantification of the commission is not a condition precedent to' its accrual." (Per Ghulam Hassan J., in Commissioner of Income-tax, Madras v. K. B. M. T. T. Thiagaraja Chetty and Co.(1). See also Is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be safely concluded that the assessee did not earn 20% designated return on the cost of the project. Thus, addition on account of designated return amounting to Rs. 179.87 crores does not have any legs to stand and deserves to be deleted. We order accordingly. LEASE OF LAND TREATED AS REVENUE SUBSIDY-Rs. 1730.08 CRORES 49. The sole basis for this enhancement is that according to the ld. CIT(A), lands were transferred to the assessee by Noida without any consideration and that the assessee is the owner of the land and as the lands were transferred to commercially exploit for the purpose of development and that he assessee being the owner of the land, had not disclosed the same in the books of account. Therefore, the ld. CIT (A) ascertained the market value of the land by engaging a valuer for this purpose. 50. After arriving at the market value of the land, the ld. CIT (A) attributed a part of the same towards capital subsidy received to the extent the lands were utilized for the purpose of construction of the toll bridge. Balance amount, according to the ld. CIT(A), represented a compensation for possible or projected short fall in the revenue and treated the same as rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee in its books of account. Therefore, the interest payable on deep discount bonds is to be allowed on accrual basis and not on payment basis. The Assessing Officer is directed to delete the same. 58. In the result, the appeals of the assessee are allowed. [Revenue's Appeals] ITA No. 4968/DEL/2018 A.Y 2006-07 ITA No. 4969/DEL/2018 A.Y 2007-08 ITA No. 4970/DEL/2018 A.Y 2008-09 59. The grievances of the Revenue read as under: 21. Whether on the facts and circumstances of the case, the Ld. CIT (A) is legally justified in allowing expenses of Rs. 10056437/- on appeal of 'amortization of expenses incurred in respect of restructuring of loans against the findings of the Assessing Officer (herein after referred as "the AO) that the expenses incurred by the assessee company under this head were for raising the capital and so cannot be treated as revenue expenses? 22. Whether on the facts and circumstances of the case, the Ld CIT (A) is legally justified in the deleting the disallowance of Rs. 10056437/- on account of "amortization of expenses incurred in respect of restructuring of loans without appreciating the fact that the expenses were incurre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diture claimed towards amortization of zero coupon bonds amounting to Rs. 3,51,07,840/- (Rs.5,16,01,434-Rs.1,64,93,594/-) is disallowed being capital in nature and added to the total income of the assessee company.' XXXXXXX 12. Still aggrieved, the assessee has come up in further appeal and while reiterating the submissions as made before the A.O. and Ld. CIT(A), has pleaded for deletion of the addition made by the A.O. confirmed by Ld. CIT(A). It has been submitted that zero coupon bonds and amortization is nothing but revenue expenditure amounting to Rs. 5,16,01,434/- as zero coupon bonds (Series B) and zero coupon bonds issued to the lender as compensation towards the prevent value of loss of interest from the documents related as the part of relief. Concession granted by CDR empowered group of the Corporate Debt Restructuring Cell (CDR) of the banks and financial institutions vide their approval letter No. CDR/421 dated 6.1.2003 and letter No. CDR/461 dated 16.1.2003. As per the scheme, the assessee had issued Series B Zero Coupon Bonds of Rs. 100 each to Banks, Financial Institutions and others which could be redeemed not later than March 31, 2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned addition made by the A.O. and confirmed by Ld. CIT(A)." 62. The ld. DR had raised strong objections on the reliance of the aforementioned judgment of the Tribunal stating that in that year, the Revenue failed to point out the glaring difference in the facts of the case in hand and the decision of the Hon'ble Delhi High Court relied upon by the ld. DR in the case of Gujarat Guardian Ltd 222 CITR 526. 63. We have given thoughtful consideration to the contentions raised by the ld. DR. The points raised by the ld. DR emanate from the Restructuring Proposal approved under the CDR System by Corporate Debt Restructuring Cell dated 06.01.2003 by which restructuring package was approved by the CDR Empowered Group. The rate of interest was restructured as under: Rate of Interest : Part B (a) 12.5% p.a. payable as under at quarterly rests : Cash payment at 4% p.a. in FY 2002-03, at 8% p.a. in FY & 2003-04 & at 11% p.a. in FY 2004-05, (b) Balance interest of 8.5% in FY 2002-03, 4.5% in FY 2003-04 & 1.5% in FY 2004-05 would be converted into ZCD-II and shall be repaid in FY 2006-07. 64. Package of Reliefs and Concessions will be subject to the terms and condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 55.5422 crores to Banks, Financial Institutions and others repayable no later than March 31,2014 towards the Net Present Value of the sacrifice made by them by way of reduction of interest rates from the contracted terms. The Company is creating provision on a year to year basis on the principle of Sinking Fund by applying the weighted average interest rate on outstanding borrowings prior to restructuring as the discount rate and thereby arrive at the amount of the yearly charge. The Company has obtained confirmation from professional experts with respect to appropriateness of the Sinking Fund Method as well as the adequacy of the charge on a year to year basis to account for the liability towards the ZCBs in the books. Accordingly, the Profit and Loss account has been debited with Rs. 32,664,127 (Previous Year Rs. 29,615,900) being the required amount towards provision and the corresponding liability has been created under the head Secured Loans. The company has redeemed ZCBs (Series B) aggregating to Rs. 27,771,1001- during the year 2003-04 and the same has been adjusted against the face value of the Zero Coupon Bonds (Series B) issued by the Company. * ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on any loan or borrowing, referred to in clause (d) of section 43B, is converted into a loan or borrowing, the interest so converted, shall not be deemed to be actual payment. 16.3 This amendment takes effect retrospectively from 1st April, 1989 i.e. the date from which clause (d) was inserted in section 43B and applies in relation to the assessment year 1989-90 and subsequent years." 19. The object of Section 43B, as originally enacted, is to allow certain deductions only on actual payment. This is made clear by the non- obstante clause contained in the beginning of the provision, coupled with the deduction being allowed irrespective of the previous years in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by it. In short, a mercantile system of accounting cannot be looked at when a deduction is claimed under this Section, making it clear that incurring of liability cannot allow for a deduction, but only "actual payment", as contrasted with incurring of a liability, can allow for a deduction. Interestingly, the 'sum payable' referred to in Section 43B(d), with which we are concerned, does not refer to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndeed, if there be any ambiguity in the retrospectively added Explanation 3C, at least three well established canons of interpretation come to the rescue of the assessee in this case. First, since Explanation 3C was added in 2006 with the object of plugging a loophole-i.e. misusing Section 43B by not actually paying interest but converting interest into a fresh loan, bona fide transactions of actual payments are not meant to be affected. In similar circumstances, in K.P. Varghese v. ITO, (1981) 4 SCC 173, this Court construed Section 52 of the Income Tax Act as applying only to cases where 'understatement' is be found-an 'understatement' is not to be found in the literal language of Section 52, but was introduced by this Court to streamline the provision in the light of the object sought to be achieved by the said provision. This Court, therefore, held: 13. Thus it is not enough to attract the applicability of sub- section (2) that the fair market value of the capital asset transferred by the assessee as on the date of the transfer exceeds the full value of the consideration declared in respect of the transfer by not less than 15 per cent of the value so declared, but it is furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and under which the starting point of computation is "the full value of the consideration received or accruing". What in fact never accrued or was never received cannot be computed as capital gains under Section 48. Therefore sub-section (2) cannot be construed as bringing within the computation of capital gains an amount which, by no stretch of imagination, can be said to have accrued to the assessee or been received by him and it must be confined to cases where the actual consideration received for the transfer is understated and since in such cases it is very difficult, if not impossible, to determine and prove the exact quantum of the suppressed consideration, sub-section (2) provides the statutory measure for determining the consideration actually received by the assessee and permits the Revenue to take the fair market value of the capital asset as the full value of the consideration received in respect of the transfer. 22. Second, a retrospective provision in a tax act which is "for the removal of doubts" cannot be presumed to be retrospective, even where such language is used, if it alters or changes the law as it earlier stood. This was stated in Sedco Forex Internati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew facts which makes the year under consideration different from A.Y 2004-05. Respectfully following the decision of the co-ordinate bench [supra] the appeal of the Revenue is dismissed. 73. In the result, the appeals of the Revenue are dismissed. ITA No. 4413/DEL/2018 [A.Y 2009-10] [ASSESSEE's Appeal] ITA No. 4414/DEL/2018 [A.Y 2010-11] [ASSESSEE's Appeal] ITA No. 4415/DEL/2018 [A.Y 2010-11] [ASSESSEE's Appeal] 74. Challenge of the assessee is three-fold: (i) Reopening of the assessment; (ii) Enhancement by the ld. CIT(A); and (iii) Merits of the Addition. 75. Reasons for reopening the assessment in A.Y 2009-10 read as under: 76. Reasons for reopening the assessment in A.Y 2010-11 read as under: 77, The reopening was challenged before the ld. CIT (A) and the ld. CIT (A) has not adjudicated this ground for the reasons discussed by us in detail while deciding the appeal for A.Y 2006-07 vide Para 16 above. 78. Before us, the ld. counsel for the assessee vehemently stated that the Assessing Officer was well aware of the Concession Agreement and the terms thereof and the assessee has explained in detail in the financial Statement for F.Y. 2008-09 with p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessing & Wing Mills Pvt Ltd 325 ITR 565 wherein the Hon'ble High Court was seized with the following question of law: "Whether the Income Tax Appellate Tribunal was correct in law in allowing depreciation of Rs 16,47,417/- in computation of book profits under Section 115J, even though it was not debited in the profit and loss account, although mentioned in the notes to the account?" 83. The Hon'ble High Court answered as under: "4.5 There is no dispute that the assessee has prepared the profit and loss account in the form prescribed i.e. Part II and III of Schedule VI to the Companies Act, as also that, the assessee has not charged depreciation in the profit and loss account and instead, has disclosed this fact alongwith the quantum of current year depreciation computed in accordance Section 205(2) of the Companies Act, as per the requirement of clause 3(iv) of Part II of Schedule VI of the Companies Act, by way of a note to the accounts. The said note as appearing in the profit and loss account and in so far as it is relevant is extracted hereinbelow:- SAIN PROCESSING & WEAVING MILLS (P) LTD: DELHI CONTINGENT LIABILITIES & NOTES ON ACCOUNTS Annexed to the forming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information required by this Act and allowed by this Act to be given in the form of such notes or documents." xxxx xxxx xxxx xxxx "Part II REQUIREMENTS AS TO PROFIT AND LOSS ACCOUNT 1. xxxxxx 2. xxxxxx 3. The profit and loss account shall set out the various items relating to the income and expenditure of the company arranged under the most convenient heads; and in particular, shall disclose the following information in respect of the period covered by the account: I. xxxxxx II. xxxxxx III. xxxxxx IV. The amount provided for depreciation, renewals or diminution in value of fixed assets. If such provision is not made by means of a depreciation computed in accordance with Section 205(2) of the Act shall be disclosed by way of a note." 4.7 Thus disclosure, according to us, in the notes to the account is obligatory by virtue of the provision of sub-section (1A) of Section 115J of the Act which requires that every assessee shall prepare profit and loss account in accordance with the provision of Parts II and III of Schedule VI of the Companies Act, 1956. 4.8 Having said that, the issue still remains as to whether notes to accounts form part of the accounts, and w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ression "net profit" makes it clear that depreciation not debited to the profit and loss account will have to be taken into while determining "book profit" under Section 115J of the Act, as long as it forms part of the prescribed accounts. 4.13 This Bench, in the case of CIT Vs. Khaitan Chemicals Fertilizers Ltd; being ITA No 301/2007, in its judgment dated 27.09.2008 dealt with a similar situation. In that case the issue which arose for consideration of the Court was whether prior period expenses/extraordinary items were required to be reduced from "net profit" as shown in profit and loss account in arriving at "book profits" for the purposes of Section 115JA of the Act. The assessee in that case had shown prior period expenses/extraordinary items in the profit and loss account after the figure of net profit had been struck in the profit and loss account. In other words, prior period expenses/extraordinary items had been shown in the profit and loss account though separately from the figure of net profit, in consonance with the provisions of Accounting Standard 5 issued by the Council for the Chartered Accountants of India. The Revenue had submitted that no adjustment to the fig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit of the relevant previous year as if the provisions of clause (b) of the first proviso to sub- section (1) of Section 205 of the Companies Act, are applicable. In other words Section 205(1) proviso (b) of the Companies Act read with clause (iv) of the explanation to Section 115J, permits reduction in the "net profit" to the extent of past losses or unabsorbed depreciation whichever is less. This makes the legislative intent clear. According to us, if unabsorbed depreciation can be reduced from "net profit" to arrive at book profit we see no reason why current year's depreciation even though, not charged, to the profit and loss account though disclosed in the notes appended to the accounts cannot be deducted from the "net profit" in determining "book profit" for the purposes of Section 115J of the Act. In our opinion the assessee is entitled to seek deduction of current year depreciation from net profit to arrive at the "book profit" even though it is not charged to the profit and loss account, though disclosed in the notes appended to the accounts. 6. In view of the discussions above, we answer the question of law framed by us in favour of the assessee and against the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the Noida Toll Bridge. He would also take decisions related to the fact that the assessee has right to terminate the concession agreement or not. His work also involves revising terms and conditions of the concession agreement vide which assessee was given the Right to establish and operate DND flyway. There are several other duties of independent Engineers mentioned in the concession agreement which clearly establishes that the work of independent Engineer is related to establishment, construction and commission of the DND Fly over and after its establishment, construction and commissioning to see whether or Noida and concessionaire i.e. assessee follow terms and conditions of the agreement or not and to alter the same as and when required. As per concession agreement independent Auditors are required to determine the total cost of project from time to time and recovery vis a vis the project cost and give the estimated results thereof. Both independent Engineer and indepent Auditor are also required to review cost and recovery position form time to time and be instrumental in determining whether development rights of the land around the Toll Bridge should or should not be gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certify the recovery position of the assessee. The' reports of these agents were to be accessible to the Lenders, NOIDA and the other promoter shareholders only. Similarly, under the terms of the inter-se Agreement. the assessee was required to appoint Trust & Retention Agent. Security Agent, etc. for the purposes of administrating the secured loans and the secured property, to coordinate the enforcement of the respective rights, powers and remedies of the Lenders etc. While the Security Agent was required to ensure that all charges created were duly registered and secure and proper asset cover is maintained by the assessee, the Trust & Retention Agent was required to create, maintain and operate a Trust and Retention Account and ensure that the funds were being utilized as per the terms on which the funding was done by the lenders and that no terms had not been violated and that the rights of the parties were protected. In view of the functions of these agents and contents of various clauses of the agreements, it is evident that the services of these agents were availed in order to ensure that the assessee has complied with the terms and conditions of the various agreements e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... borately discussed and decided by us hereinabove in extension in A.Y 2006-07. For our detailed discussion therein, appeal of the Revenue are dismissed. 92. In the result, the appeals of the Revenue are dismissed. ITA No. 4416/DEL/2018 [A.Y 2011-12] [ASSESSEE's Appeal] 93. Challenge of the assessee is two-fold: (i) Addition on account of Agency Fee; (ii) Enhancement by the ld. CIT(A); and 94. The aforementioned challenge has been decided by us in detail vide ITA No. 4414/DEL/2018 for A.Y 2010-11. For our detailed discussion therein, the ground of appeal of the assessee is allowed. 95. In the assessee result, the appeal of the assessee is allowed ITA No. 4417/DEL/2018 [A.Y 2011-12] [ASSESSEE's Appeal] 96. Challenge of the assessee is two-fold: (i) Reopening of the assessment; (ii) Enhancement by the ld. CIT(A); and 97. Reasons for reopening the assessment read as under: 98. Similar reasons were considered by us while deciding the appeal for A.Y 2010-11. For our detailed discussion therein, reopening is held as invalid. 99. Enhancement made by the ld. CIT (A) has been elaborately discussed and decided by us hereinabove in extension in A.Y 2006-07. Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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