The order of the Bench was delivered by
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, Circle-12, Kolkata under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for the assessment years 2006-07 to 2008-09 separately vide his orders dated December 30, 2008 December 21, 2009 and December 21, 2010. I. T. A. No. 161/Kol/2012 filed by the Revenue and C.O. No. 26/Kol/2012 filed by the assessee are against the order of the Commissioner of Income-tax (Appeals)-XII, Kolkata in Appeal No. 287/CIT(A)-XII/10(3)/10-11 dated November 10, 2011. Assessment was framed by ITO, Ward-10(3), Kolkata under section 143(3) of the Act for the assessment year 2008-09 vide his order dated December 14, 2010. I.T.A. No. 1094/Kol/2012 filed by the Revenue is against the order of CIT(A)-XII, Kolkata in Appeal No. 459/CIT(A)-XII/12/2011-12 dated April 19, 2012. Assessment was framed by Additional Commissioner of Income- tax, Range-12, Kolkata under section 143(3) of the Act for the assessment year 2009-10 vide his order dated December 30, 2011. I. T. A. No. 2115/ Kol/2013 filed by the Revenue and C.O. No.128/Kol/2013 filed by the assessee are against the order of Commissioner of Income-tax (Appeals)-XII, Kolkata in Appeal No. 209/CIT(A)-XII/Cir-12/2012-13 dated April 23, 2013. Assessment was framed by Deputy Commissioner of Income-tax, Circle-12, Kolkata under section 143(3) of the Act for the assessment year 2010-11 vide his order dated February 22, 2013.
2. The first common issue of the Revenue's appeals in I. T. A. Nos. 657, 658, 659/K/2011 for the assessment years 2006-07, 2007-08, 2008-09, 1094/ Kol/2012 for the assessment year 2009-10 and I. T. A. No. 2115/Kol/2013 for the assessment year 2010-11 in the case of Selvel Advertising Pvt. Ltd. and in I. T. A. No. 161/Kol/2012 for the assessment year 2008-09 in the case of Selvel Transit Advertising Pvt. Ltd., is against the orders of the Commissioner of Income-tax (Appeals) allowing deduction under section 80-IA of the Act, on traffic signals and foot overbridge being not qualified as infrastructural facilities within the provisions of section 80-IA of the Act. As grounds are common and exactly identically worded in all these appeals of the Revenue, hence, for the sake of convenience and brevity, we are reproducing below the ground No. 1 as raised in I. T. A. No. 657/Kol/2011 (which is a lead year).
"1. On the facts and in the circumstances of the case, the learned Commissioner 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 construction of foot over bridge in lieu of obtaining advertisement/display rights did not amount to development; operation and maintenance of road or bridges as envisaged in section 80-IA(4). Traffic signal system is a facility which assists in regulating vehicular and pedestrian traffic on the road but by itself installation of such system does not amount to development of roads. Applying the functional test one can say that installation, operation and maintenance of traffic signal system does not constitute business of development of roads. Infrastructure facility such as road can function sans electric traffic signalling system also. It is not necessary for the developer of the road to install signalling system because roads can be used as infrastructure facility even without sophisticated electronic system. In the assessee's case, it was not all involved in construction or development of roads but it installed traffic signalling system on the preexisting road network and therefore the assessee's business cannot be equated with business development, operation and maintenance of roads as envisaged in section 80-IA(4)."
4. Aggrieved, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals), who allowed the claim of the assessee on the basis of the assessment year 2004-05, which was initial year, wherein the Tribunal allowed the claim of the assessee vide paragraph 5 of its order by quashing the revision order passed by CIT-IV, Kolkata under section 263 of the Act in I. T. A. No. 610/Kol/2009 for the assessment year 2004-05 vide order dated September 30, 2009 which reads as under :
"5. After hearing the rival submissions, perusing the material available on record and the case laws cited by learned counsel, we find that during the assessment proceedings the Assessing Officer issued a notice under section 142(1) on December 13, 2006, which is available at pages 16 to 19 of the paper book in which specific query in respect of claim of the assessee under section 80-IA was raised, which reads as under :
'(xxvi) With regard to the claim of deduction under section 80-IA, please furnish the following details.
(a) Nature of infrastructural facilities maintained clearly mentioning the details (No., size etc.) of structures on which advertisements are displayed.
(b) A chart showing the duration of each advertisement 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 bridges.
The details of the income of the publicity charges received on account of the road automatic traffic signals and foot overbridges are given under paragraphs 19 and 21 and in the profit and loss account attached to Form 10CCB (audit report under section 80-IA(7)) as filed with the return.'
The assessee vide its letter dated November 27, 2006 further sub mitted the details of nature of infrastructural facilities maintained i.e. No location and size of these facilities in response to item No. (xxvi-a) of the Assessing Officer's letter dated December 13, 2006 and details of publicity charges from infrastructural facilities showing number location, bill date, period and amount of publicity charges in response to item No. (xxvi-b) of the same letter of the Assessing Officer. The details are available at pages 21 to 27 of the paper book. The assessee- company vide its letter dated December 20, 2006 also submitted the details regarding the apportionment of common expenses to the infrastructural facilities which are available at pages 28 and 29 of the paper book. The apportionment of all the expenses have been shown in the profit and loss account which is evident from item No.(xxi) of Form 10CCB of the audit report under section 80-IA(7) of the Act. This report is also part of the paper book from pages 6 to 15. It is clear from this that there was application of mind on the part of the Assessing Officer before he accepted the claim of the assessee- company under section 80-IA of the Act. In respect of automatic traffic signals and pedestrian fee bridge this view of the Assessing Officer is inconformity with the ratio as laid down by this Tribunal in the cases of Vantage Advertising Pvt. Ltd. I. T. A. Nos. 1054 and 1055/Kol/ 2008 and Selvel Media Services Pvt. Ltd. in I. T. A. No. 1065/Kol/ 2008, wherein bus shelters and foot bridges were considered to be part of infrastructural facilities for claiming deduction under section 80-IA of the Act. Thus, in our considered opinion, the Assessing Officer has taken a possible view on the facts available on record. The law is well-settled that if the Assessing Officer has taken a possible view and the learned Commissioner of Income-tax has a different opinion on the same facts provisions of section 263 cannot be invoked and the order passed by the Assessing Officer cannot be held to be erroneous and prejudicial 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. Khaitan filed copy of the judgment of the hon'ble Calcutta High Court in the assessee's own case in I. T. A. T. No. 49 of 2010 for the assessment year 2004-05, G. A. No. 894 of 2010 dated April 22, 2010 whereby quashing of revision order under section 263 of the Act by the Tribunal was upheld as under :
"The court : The Revenue has preferred this appeal under section 260A of the Income-tax Act, 1961 against the order dated September 30, 2010 of the Income-tax Appellate Tribunal 'A' Bench, Kolkata for the assessment year 2004-05.
The appellant proposed the following substantial questions of law :
'(i) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is correct in quashing the revision order under section 263 of the Income-tax Act, 1961, passed by the Commissioner of Income-tax, on the ground that the Assessing Officer had taken one of the possible views while, in fact, the question is one of law and not fact and incorrect appreciation of law by the Assessing Officer is amenable to correction through the instrumentality of revision order under section 263 of the Act ?
(ii) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is correct in holding that automatic traffic signal and pedestrian foot bridge would constitute infrastructure facility defined in clause (a) of the Explanation below sub-section (4) of section 80-IA of the Income-tax Act, 1961?'
Since, we are inclined to take the view that the Tribunal was right in holding that the automatic traffic signal and pedestrian foot bridge would constitute infrastructure facility as contemplated in clause (a) of the Explanation to sub-section (4) of section 80-IA of the Income- tax Act, 1961, it is not necessary to answer question No. 1.
Section 80-IA provides that where the gross total income of an assessee includes any profit and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as "the eligible business"), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent. of the profits and gains derived from such business for ten consecutive 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 assessment year 2004-05 and this has become final after the decision of the hon'ble Calcutta High Court confirming the order of Income-tax Appellate Tribunal in quashing revision order passed by the Commissioner of Income-tax under section 263 of the Act.
7. However, learned counsel for the assessee stated that in sister concern's case, i.e., Selvel Transit Advertising Pvt. Ltd., the first year was the assessment year 2001-02 and for both assessment years 2001-02 and 2002-03 returns were filed by the assessee and the Revenue accepted the same under section 143(1) of the Act. However, assessments were taken up for scrutiny by issuing notice under section 143(2) of the Act for assessment years 2003-04, 2004-05, 2006-07 and 2007-08 and in each of the assessment year deduction under section 80-IA of the Act was allowed but for the assessment year 2003-04 there was dispute with regard to quantum of deduction under section 80-IA of the Act which was resorted to in favour of this assessee. Learned counsel for the assessee relied on the proposition laid down by various High Courts that once deduction available for a specified number of years is granted in the initial year in that eventuality the Assessing Officer cannot examine the question of allowability again and decide to withdraw the relief already granted, without disturbing the deduction granted in the initial year.
8. Learned counsel for the assessee relied on the decision of the hon'ble Gujarat High Court in the case of Saurashtra Cement and Chemical Industries Ltd. v. CIT [1980] 123 ITR 669 (Guj), wherein the ratio laid down was as under (page 674) :
"This takes us to the questions referred to us in Income-tax Reference No. 239 of 1975 at the instance of the Revenue. We do not find any justifying reasons to interfere with the order of the Tribunal so far as both these questions are concerned. The Tribunal was perfectly justified in taking the view that if the relief of tax holiday was granted to the assessee-company for the assessment year 1968-69, the assessee was entitled to continuance of that relief for the subsequent four years and the Income-tax Officer would not be justified in refusing to continue the allowance for the assessment year under reference, i.e., 1969-70, without disturbing the relief for the initial year. At this stage, it should be noted that for purposes 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 reference, that is, 1969-70, without disturbing the relief granted for the initial year. It should be stated that there is no provision in the scheme of section 80J similar to the one which we find in the case of development rebate which could be withdrawn in subsequent years for breach of certain conditions. No doubt, the relief of tax holiday under section 80J can be withheld or discontinued provided the relief granted in the initial year of assessment is disturbed or changed on valid grounds. But without disturbing the relief granted in the initial year, the Income- tax Officer cannot examine the question again and decide to withhold or withdraw the relief which has been already once granted. The learned advocate for the Revenue, invited our attention to certain observations made by this court in CIT v. Satellite Engineering Ltd. [1978] 113 ITR 208 (Guj), where the court was concerned with the question, whether an industrial undertaking which did not satisfy the prescribed conditions so as to entitle itself to the relief under section 80J in the initial year can successfully claim the relief, if the prescribed conditions are satisfied in the subsequent years. We do not think that this decision of this court in Satellite Engineering Ltd.'s case [1978] 113 ITR 208 (Guj) can be of any assistance to the cause of the Revenue, because the question with which this court was concerned in that case was altogether a different one in the context in which the Division Bench was speaking. It should be understood that this is subject to the right of the Income-tax Officer to adjust the relief by fixing the quantum having regard to the respective capital employed in the new undertaking in the year with which he is concerned. In that view of the matter, therefore, the Tribunal was perfectly justified in taking the view as it did and we answer question No. 1, in the affirmative, that is, against the Revenue and in favour of the assessee."
9. Learned counsel for the assessee also relied on the decision of the hon'ble Delhi High Court in the case of CIT v. Delhi Press Patra Prakashan Ltd. (No. 2) [2013] 355 ITR 14 (Delhi), wherein it has been held as under (page 45):
"The next controversy that needs to be addressed is whether it was open for the Assessing Officer to deny the benefit of section 80-I of the Act to the assessee having allowed the benefit 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 proceedings and assessment for each year is an independent proceeding. It is now equally well established that issues that have been settled and accepted over a period of time should not be revisited in subsequent assessment years in the absence of any material change which would justify the change in view.
The Supreme Court in the case of Radhasoami Satsang v. CIT [1992] 193 ITR 321 (SC) has held that unless there is a material change in justifying the Revenue to take a different view the earlier view which has been settled and accepted of a several years should not be disturbed. The relevant extract from the said judgment is quoted below (page 329) :
'We are aware of the fact that strictly speaking res judicata does not apply to Income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year.
On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter-and, if there was not change, it was in support of the assessee-we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income-tax in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under sections 11 and 12 of the Income-tax Act of 1961.'
The decision of the Supreme Court in the case of Radhasoami Satsang [1992] 193 ITR 321 (SC) was on the facts where the question as to the entitlement for exemption under section 4(3)(i) of the Indian Income-tax Act, 1922, had not been granted for the assessment year 1939-40. The assessee had challenged the assessment order which was accepted by the Appellate Assistant Commissioner who upheld the assessee's claim for exemption. This view was consistently followed by the successive 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 under section 80J of the Act was made by the assessee in the assessment year 1973-74. The assessee was denied that claim by the Assessing Officer. For this reason, the Assessing Officer denied the claim in this assessment year as well, taking note of the fact that the matter pertaining to 1973-74 was pending before the Income-tax Appellate Tribunal.
It is a matter of record that the appeal filed by the assessee for the assessment year 1973-74 was allowed by the Income-tax Appellate Tribunal. The effect thereof was that the assessee was granted the requisite deduction under section 80J of the Act for the assessment year 1973-74. The Department has sought reference under section 256(1) of the Act which reference application was also rejected by the Tribunal. Likewise, for the assessment years 1974-75 and 1975-76, the claims of the assessee were allowed. The assessee, once given the deduction under section 80J of the Act is entitled to such a deduction for a period of five years. If the assessee has been allowed the benefit of section 80J in the last three preceding years, there is no reason to deny the same for the instant assessment year. We, therefore, answer this issue also in favour of the assessee and against the Revenue.'
In the present case, the claim of the assessee under section 80-I of the Act was examined and allowed by the Assessing Officer for three years preceding the assessment year 1991-92. It is relevant to note that assessments in the earlier years, i.e., relating to the assessment years 1988-89, 1989-90 and 1990-91 has not been disturbed by the Assessing Officer and there has been no change that could justify the Assessing Officer adopting a different view in the assessment years 1991-92 and thereafter. As stated hereinbefore, in certain cases where the issues involved have attained finality on account of the subject matter of dispute having been finally adjudicated, the question of reopening and revisiting the same issue again in subsequent years would not arise. This is based on the principle that there should be finality in all legal proceedings. The Supreme Court in the case of Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 (SC) had held as under (page 10) :
'. . . that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond 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 vessels or other powered craft. Such deduction is also available for the seven assessment years immediately succeeding the initial assessment year. Surely in cases where an assessee is held to be eligible for deduction in the initial assessment year, the same cannot be denied in the subsequent assessment years on the ground of ineligibility since the set of facts which enable an assessee to claim to be eligible for deduction under section 80-I of the Act occur in the previous year relevant to the initial assessment year and have to be examined in the initial assessment year. In such cases, where the facts on the basis of which the deductions are claimed are subject matter of an earlier assessment year and do not arise in the current assessment year, it would not be possible for an Assessing Officer to take a different view in the current assessment year without altering or reopening the assessment proceedings in which the eligibility to claim the deduction has been established.
In cases where deduction is granted under section 80-I of the Act, the applicability of the section is determined in the year in which the new industrial undertaking is established. The qualification as to whether any industrial undertaking fulfils the condition as specified under section 80-I of the Act has to be determined in the year in which the new industrial undertaking is established. Although the deduction under section 80-I of the Act is available for the assessment years succeeding the initial assessment year, the conditions for availing of the benefit are inextricably linked with the previous year relevant to the assessment year in which the new undertaking was formed. In such circumstances, it would not be possible for an Assessing Officer to reject the claim of an assessee for deduction under section 80-I of the Act on the ground that the industrial undertaking in respect of which deduction is claimed did not fulfil the conditions as specified in section 80-I(2) of the Act, without undermining the basis on which the deduction was granted to the assessee in the initial assessment year. This, in our view, would not be permissible unless the past assessments are also disturbed.
The Assessing Officers over a period of three years being assessment years 1988-89, 1989-90 and 1990-91 have consistently accepted the claim of the assessee for deduction under section 80-I of the Act 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 relief of tax holiday granted to the asses see-company for the assessment year 1968-69, in the assessment year under reference, that is, 1969-70, without disturbing the relief granted for the initial year. It should be stated that there is no provision in the scheme of section 80J similar to the one which we find in the case of development rebate which could be withdrawn in subsequent years for breach of certain conditions. No doubt, the relief of tax holiday under section 80J can be withheld or discontinued provided the relief granted in the initial year of assessment is disturbed or changed on valid grounds. But without disturbing the relief granted in the initial year, the Income-tax Officer cannot examine the question again and decide to withhold or withdraw the relief which has been already once granted.'
The Division Bench of the Bombay High Court in the case of CIT v. Paul Brothers [1995] 216 ITR 548 (Bom) has also adopted the view expressed by the Gujarat High Court in the case of Saurashtra Cement and Chemical Industries Ltd. [1980] 123 ITR 669 (Guj)."
10. We have gone through the provision of section 80-IA of the Act and the relevant sub-section (2) gives mandate to the assessee that deduction as specified in sub-section (1) may at the option of the assessee be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops or begins to operate any infrastructure facility. Sub-section (5) says about initial assessment year and thereafter in subsequent assessment years for claim of deduction under this section by putting a ceiling of ten years. The period will be counted from the initial assessment year and the enterprise or the undertaking will be allowed to choose the initial year from which it wants to avail of deduction for further years. The concession has to be availed of within a span of 12 years beginning with the year of operation. This means that an enterprise or undertaking which chooses the fourth year of operation as the initial year will get deduction starting from that year. The Revenue can see the pre-requisite condition for allowance of deduction to an enterprise or an undertaking in the very first year the initial year of claim of deduction. In the present case before us, the assessee claimed deduction under section 80-IA 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 [1992] 193 ITR 321 (SC), and of the hon'ble Bombay High Court in the case of Paul Brothers [1995] 216 ITR 548 (Bom), and also Saurashtra Cement and Chemical Industries Ltd. v. CIT [1980] 123 ITR 669 (Guj). 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, we confirm the order of the Commissioner of Income- tax (Appeals) on this issue and dismiss this common issue of the Revenue's appeals.
11. The next issue in I. T. A. No. 657/Kol/2011 is as regards to the order of the Commissioner of Income-tax (Appeals) allowing the depreciation on LED video display board considering the same as temporary structure. For this the Revenue has raised following ground No. 2 :
"2. That the learned Commissioner of Income-tax (Appeals) erred in allowing depreciation on LED video display board considering the same as temporary structure without appreciating the facts and circumstances of the case."
12. We have heard rival submissions and gone through facts and circumstances of the case. We find that the Commissioner of Income-tax (Appeals) has allowed the claim of the assessee for the reason that LED video display board are purely temporary structures and hence, the assessee is entitled for the claim of depreciation at 100 per cent. For this, he gave following finding in para 6.2 of his appellate order :
"6.2 I have considered the submission of the appellant and perused the assessment order. I have also gone through the assessments completed in earlier years as well as the appellate orders. On careful consideration of the facts, I find force in the submission of the appel lant that LED video display boards are purely temporary structures and they cannot be equated with the plant and machinery. In earlier years such structures has been treated as temporary structures and if the assets were used for less than 180 days, the deduction at 50 per cent. was allowed to the appellant. It is observed that even in subsequent years, the appellant was allowed deduction either at 100 per cent. or at 50 per cent. depending on the period of installation and use. In view of above, the Assessing Officer is directed to allow deduction on LED video display board at 50 per cent. of Rs. 63,09,332. Ground No. 5 is allowed."
From arguments of both the sides and considering 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 the Revenue in I. T. A. No. 657/Kol/2011 is against the order of the Commissioner of Income-tax (Appeals) allowing depreciation on intangible assets considering the same as temporary structures. For this, the Revenue has raised following ground No. 3 :
"3. That the learned Commissioner of Income-tax (Appeals) erred in allowing depreciation on intangible assets considering the same as temporary structure without appreciating the facts and circumstances of the case."
14. We have heard rival submissions and gone through facts and circumstances of the case. We find that the Commissioner of Income-tax (Appeals) has allowed the claim of depreciation on intangible assets to the assessee for the reason that it has received right to display on bridges of Kolkata in view of agreement with Kolkata Municipal Corporation and hence, the assessee is entitled for the claim of depreciation at 12.5 per cent. For this, he gave following finding in para 7.2 of his appellate order :
"7.2. I have considered the submission of the appellant and perused the assessment order. I have also gone through the copy of agreement on account of which the appellant has shown addition to the intangible assets amounting to Rs. 49,91,012. On perusal of agreement dated August 29, 2005 the contention of the appellant is found to be correct that the agreement was made with Kolkata Municipal Corporation and not with Ranchi Regional Development Authority as observed by the Assessing Officer with regard to addition to the intangible assets. As per the agreement with Kolkata Municipal Corporation, the appellant received rights to display advertisements on said bridge for a period of 50 years and hence, the rights received by the appellant are to be treated as intangible assets. In view of the above, the Assessing Officer is directed to allow depreciation on Rs. 42,27,312 at 25 per cent. and on Rs. 7,63,700 at 12.5 per cent. Ground No. 6 is allowed."
15. We have heard rival submissions and gone through facts and circumstances of the case. First of all, it is to be seen that the claim of the assessee in regard to intangible assets, whether it is in the nature of commercial rights as envisaged in section 32(1)(ii) of the Act, the relevant provisions read as under :
"32. Depreciation.-(1) In respect of depreciation of-
(ii) know-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 Rs. 550 per sq. mtr. per annum, inclusive of all charges for a period of 10 (ten) years from the date of installation. At the end of this period of 10 (ten) years, the normal advertisement charge shall be levied at the usual prescribed rate of the Calcutta Municipal Corporation."
And finally agreement was entered between the assessee and KMC on December 20, 1995 and the relevant approvals for proposal of illuminated automatic traffic signals from DCP, Traffic Department, Lalbazar, Calcutta and the scheme and design approved by the Principal Transport Officer of Transportation Planning and Traffic Engineering Department of Transport Department of West Bengal was obtained. And the following are the covenants :
"And whereas the licensor vide Memo No. 118/Jt.C.P. (T.P) dated September 29, 1995, have given permission for installation of 'Automatic Traffic Signals' at the thirty five different intersections/locations as has been mentioned in schedule below in lieu of commercial advertisement on the body of such automatic traffic signals in favour of the licensee.
And whereas the hon'ble Mayor vide his order dated October 10, 1995 and Municipal Commissioner vide his order dated October 19, 1995 of the Calcutta Municipal Corporation which has been confirmed by the chief valuer and surveyor, the Calcutta Municipal Corporation, vide his letter No. CH. V/S. 1805 dated November 3, 1995 vide item No. 232.5 considering the proposal of Jt. C. P. (T. P) has granted and permitted to install 'Automatic Traffic Signal' of the schedule mentioned eleven intersections/locations on CMC Road mentioned in the schedule below in lieu of commercial advertisement to be given on the body of such automatic traffic signals in favour of the licensee.
And whereas the permission for installation of said automatic traffic signals in the city of Calcutta has been granted by the Transport Department, Government of West Bengal, vide Transport Deptt., Memo No. 4070-WT/TOIP-22/93, dated April 29, 1994. The said project/scheme has also duly approved by the Deputy Commissioner of Police, Traffic Department and Joint Commissioner of Police (T.P.), Lalbazar, Calcutta, vide Memo No. 119/Joint C.P.(T.P) dated September 29, 1995."
From the above factual aspects it is clear that the assessee has acquired commercial rights and used by it during the relevant year for the purposes of its business. In term of the above, we are of the 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 and perused the assessment order. I have also gone through the order of the hon'ble Income-tax Appellate Tribunal in the case of the appel lant for the assessment years 2003-04, 2004-05 and 2005-06 in I. T. A. Nos. 541/Kol/2008, 494/Kol/2008 and 820/Kol/2008 dated December 11, 2009. On appeal of the order of the hon'ble Income-tax Appellate Tribunal, it is observed that the similar issue was involved in the case of the appellant in earlier years which was allowed by the hon'ble Income-tax Appellate Tribunal in favour of the appellant. Respectfully following the order of the hon'ble Income-tax Appellate Tribunal in the case of the appellant, the Assessing Officer is directed to delete the disallowance of Rs. 5,14,502. Ground No. 7 is allowed."
We find that the assessee has produced complete details before the Commissioner of Income-tax (Appeals) in respect to expenses debited in the profit and loss account, on receipt of bills in the respective assessment years. Hence, we find no infirmity in the order of the Commissioner of Income-tax (Appeals) and even otherwise the issue is covered by the decision of the Income-tax Appellate Tribunal in the assessee's own case in earlier years. Hence, this issue of the Revenue's appeal is dismissed.
18The next issue in this appeal of the Revenue is against the order of the Commissioner of Income-tax (Appeals) deleting the disallowance made by the Assessing Officer on account of delayed deposit of employees' contribution towards provident fund. For this, the Revenue has raised following ground No. 5 :
"5. The learned Commissioner of Income-tax (Appeals) erred in deleting the disallowance under section 36(1)(va) for delayed deposit of employees contribution towards provident fund without appreciating the facts and circumstances of the case."
19. We have heard rival submissions and gone through the facts and circumstances of the case. We find that the issue is covered in favour of the assessee and against the Revenue by the decision of the hon'ble jurisdictional High Court in the case of CIT v. Vijay Shree Ltd. vide I. T. A. T. No.245 of 2011 in GA No. 2607 of 2011 dated September 7, 2011, wherein it has been held as under :
"After hearing Mr. Sinha, learned advocate, appearing on behalf of the appellant and after going through the decision of the 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 employees contribution before due date of filing of return under section 139(1) of the Act by the assessee and the details are available in the written submission of the assessee, hence, we dismiss this ground of appeal of the Revenue.
21. The next issue in this appeal of the Revenue is against the order of the Commissioner of Income-tax (Appeals) deleting the disallowance of bogus purchases. For this, the Revenue has raised following ground No. 6 :
"6. That the learned Commissioner of Income-tax (Appeals) erred in deleting addition on account of bogus purchase without appreciating the facts and circumstances of the cases."
22. 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 addition on account of bogus purchases made from M/s. Vijay Industrial Corporation, proprietor Shri S. K. Mohta after taking evidences from the assessee and by observing in para 10.2 as under :
"(10.2) I have considered the submission of the appellant and perused the assessment order. I have also gone through the letter dated December 29, 2008 submitted by the appellant-company before the Assessing Officer which was received by him on the same date, i.e., December 29, 2008. On perusal of the letter dated December 29, 2008 it is observed that the appellant's authorised representative has enclosed copies of documents as proof of address of M/s. Vijay Indus trial Corpn., proprietor Shri S. K. Mohta. The appellant enclosed a copy of trade licence issued by the KMC for the year 2008-09 wherein the same address has been given as mentioned on the copies of purchase bills. The appellant also produced copy of electricity bill for the month of November 2008 having the same address. The copy of driving licence and voter ID card of Shri S. K. Mohta were also enclosed with the said letter. It is not known as to how the Assessing Officer's Inspector could not locate the concern M/s. Vijay Industrial Corporation while the Kolkata Municipal Corporation has issued a trade licence for the year 2008-09 and the proprietor was also paying electricity bills from that address. The Assessing Officer has made the addition even without providing the copy of Inspector's report to the appellant so that any rebuttal of his report could be filed by the appellant. 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 Rs. 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. 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 Rs. 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 regard to existence of the party at the given address was produced, and hence, the Assessing Officer was not correct in making the observation that the purchases made by the assessee from M/s. Vijay Industrial Corporation were bogus purchases. Further, the assessee also contended that the entire purchases are made by bills and sales tax was paid. Even the payments to the party were made by account payee cheques as is evident from the copy of accounts of M/s. Vijay Industrial Corporation in the books of account of the assessee. In view of the above evidences, we are of the view that the Commissioner of Income-tax (Appeals) has rightly deleted the addition and we confirm the same. This issue of the Revenue's appeal is dismissed.
24. The next issue in C. O. No. 26/Kol/2012 arising out of I. T. A. No. 161/ Kol/2012 is as regards to the order of the Commissioner of Income-tax (Appeals) in confirming the action of the Assessing Officer in invoking the provisions of section 115JB of the Act and adding back the provision for diminution in value of investment for computing book profit under section 115JB of the Act. For this, the assessee has raised following ground Nos. 4 and 5 :
"4. For that the learned Assessing Officer has materially erred in law and on facts of the case in invoking the provisions of section 115JB in the case of the appellant even though there was no 'book profits' as per provisions of sub-sections (1) and (2) of section 115JB of the Income-tax Act, 1961.
5. For that the decision of the Income-tax Appellate Tribunal, Bombay in N. W. Exports Ltd. 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' Rs. 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 Rs. 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 which is related to provision of section 115J of the Income-tax Act, 1961. As per Explanation 1 of section 115JB(2) clause (i) have been inserted in the Income-tax Act, 1961 by the Finance (No. 2) Act, 2009 with effect from April 1, 2001. Therefore, because of this retrospective amendment of the Income-tax Act, 1961 provision for diminution in the value of investment is not allowable while computing income under section 115JB of the Income-tax Act, 1961. Therefore, the Assessing Officer's order is upheld and the assessee's appeal is dismissed. Hence, ground Nos. 4 and 5 are dismissed."
26. At the outset, learned counsel for the assessee very fairly conceded that yes there is retrospective amendment by inserting clause (i) in Explanation 1 of section 115JB(2) of the Act by the Finance (No. 2) Act, 2009 with effect from April 1, 2001, the provision for diminution in the value of investment is not allowable while computing income under section 115JB of the Act. Accordingly, this issue of the assessee's cross-objection is dismissed.
27. The next common issue in I. T. A. No. 1094/Kol/2012 and I. T. A. No. 2115/Kol/2013 is against the order of the Commissioner of Income-tax (Appeals) deleting the disallowance of depreciation at 100 per cent. on hoardings treated as temporary structures as against the treatment given by the Assessing Officer as plant and machinery allowing depreciation at 15per cent. The facts and circumstances in both years are exactly identical i.e., assessment years 2009-10 and 2010-11, hence we will take up the facts from the assessment year 2009-10.
28. We find that the Commissioner of Income-tax (Appeals) deleted the disallowance of depreciation for the reason that the issue is covered in the assessment year 2005-06. For this the Commissioner of Income-tax (Appeals) observed in para 4 as under :
"Grounds Nos. 1 to 5 of the appeal are related to the addition made by denying 100 per cent. depreciation on hoarding structures. I have considered the findings of the Assessing Officer on this issue and the submission made by the authorised representative. In fact this issue has been considered by my predecessor the learned Commissioner of Income-tax (Appeals) for the assessment year 2005-06 Appeal No. 518//XI/DCIT-12/07-08) dated February 26, 2008. The hon'ble Income-tax Appellate Tribunal has also considered 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 head 'temporary structure' upon which the Assessing Officer will allow the depreciation in the succeeding year as per provisions of the Act. Subject to the above direction, ground No. 2 of the Department's appeal for the assessment year 2005-06 is allowed."
In view of the above, we are of the view that the assessee is entitled for depreciation on hoardings, which are temporary structures, and the Commissioner of Income-tax (Appeals) has rightly allowed the same. This common issue of both the appeals of the Revenue is dismissed.
29. The next common issue in I. T. A. No. 1094/Kol/2012 and I. T. A. No.2115/Kol/2013 is against the order of the Commissioner of Income-tax (Appeals) deleting the disallowance of expenses by the Assessing Officer for short deduction of TDS by invoking the provisions of section 40(a)(ia) of the Act. For this, the Revenue has raised identical grounds in both the years and the relevant ground as raised in I. T. A. T. No. 1094/Kol/2012 reads as under :
"3. That on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in deleting the disallowance under section 40(a)(ia) ignoring the fact that the sites were taken on sublet basis for a longer period of time about 1 year and the maintenance and lighting were the responsibility of the assessee.
4. That on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in deleting the disallowance under section 40(a)(ia) without adjudicating the issue of allowability of expenses in the case of lower deduction of tax."
30. Brief facts are that during the course of survey under section 133A of the Act on the assessee by the Department on February 13, 2006 noticed that the assessee has deducted TDS under section 194C of the Act, i.e., at lower rate on payment made to the persons who has sublet the premises on whom rent was paid. According to the Revenue, the payment of rent attracts TDS under section 194-I of the Act and the assessee has deducted short TDS. Therefore, on account of short TDS, the Assessing Officer disallowed the payments made to co-traders by invoking the provisions of section 40(a)(ia) of the Act. Aggrieved the assessee preferred an appeal before the Commissioner of Income-tax (Appeals), who allowed the claim of the assessee by observing 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 advertising agencies they maintained all hoarding lighting etc. and as a matter of contract they allow the assessee to put up advertisement/banners for short time. In my opinion, deduction of TDS under section 194C on such contracts are justified. In any case it is an established position in law that an incidental of mere lower deduction of TDS does not make an assessee-in- default under section 201 of the Income-tax Act, 1961. As a result thereof addition made on the ground is deleted and the appeal of the assessee is allowed."
Aggrieved, the Revenue came in appeal before us.
31. We have heard rival submissions and gone through facts and circumstances of the case. The first contention of the assessee was that there is no change in facts since the assessment year 2003-04 and the assessee is paying these payments to co-traders and claiming the expenses. The assessee is deducting TDS qua these payments under section 194C of the Act and the Assessing Officer making assessment under section 143(3) of the Act for the relevant assessment years 2003-04, 2004-05 and 2005-06 before survey and subsequent to survey also in the assessment years 2006-07, 2007-08 and 2008-09 the position was accepted by the Assessing Officer as it is. All the assessments were completed under section 143(3) of the Act. No disallowance of these expenses was made all through. But in this year and in subsequent in the assessment year 2010-11 this disallowance was made. Learned counsel for the assessee first of all argued for the consistency as well as on merits that the Revenue has accepted this as a contractual payment and there is no change in facts and circumstances, hence, the disallowance be deleted. On the other hand, the learned senior Departmental representative accepted the argument of learned counsel qua the facts of the case. Once this is the position, we accept the contention of the assessee's counsel as regards to consistency that once on similar facts the Revenue has accepted the payments as contractual payments now they cannot deviate. This issue has been dealt with at length in paragraph 10 above and following the same proposition, we confirm the order of the Commissioner of Income-tax (Appeals) allowing the expenses.
32. Learned counsel for the assessee also made argument that on short deduction of TDS, no disallowance can be made by invoking the provisions of section 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 Rs. 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 the assessee has earned dividend at Rs. 44,100 and share of profit from partnership firm at Rs. 15,56,664 as income which does not form part of the total income. The Assessing Officer disallowed a sum of Rs. 2,51,495 being expenses incurred for earning exempted income by invoking section 14A of the Act read with rule 8D of the Income-tax Rules, 1962. Aggrieved, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals), who also confirmed the action of the Assessing Officer. Aggrieved, now the assessee is in cross-objection. Learned counsel for the assessee drew our attention to paper book page 7 wherein complete details of investment is reflected at Rs. 6,06,37,186. According to learned counsel, the first 6 parties are the assessee's sister concerns and party Nos. 7 to 9 viz., Godrej Consumer Product Ltd., UTI Mutual Growth Fund and Investment in Selvel Enkon Projects are outside parties. He stated that in respect to sister concerns for holding controlling stake the provisions of section 14A of the Act will not apply and for rest he agreed that yes the disallowance is to be made. For this proposition, he relied on the decision of the co-ordinate Bench of this Tribunal of the Mumbai Bench "G" in the case of Garware Wall Ropes Ltd. v. Addl. CIT [2014] 65 SOT 86 (Mumbai), wherein it is held as under :
"We find merit and substance in the contention of the assessee that no expenditure had been incurred by the assessee for earning the exempt income on this point because the investment has been made by the assessee in the group concern and not in the shares of any unrelated party. Therefore, the primary object of investment is holding and controlling stake in the group concern and not earning any income out of investment. Further, the investments were made long back and not in the year under consideration. Therefore, in view of the fact that the investment are in the group concern we do not find any reason to believe that the assessee would have incurred any administrative expenses in holding these investments. The Assessing Officer has not brought on record any material to show that the assessee has incurred any expenditure in relation to the income which does not form part of the total income. Section 14A has within it implicit the notion of apportionment in the cases where the expenditure is incurred 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 claimed that no expenditure has been incurred for earning the exempt income, therefore, it was incumbent on the Assessing Officer to find out as to whether the assessee has incurred any expenditure in relation to income which does not form part of the total income and if so to quantify the expenditure of disallowance. The Assessing Officer has not brought on record any fact or material to show that any expenditure has been incurred on the activity which has resulted into both taxable and non taxable income. Therefore, in our view when the assessee has prima facie brought out a case that no expenditure has been incurred for earning the income which does not form part of the total income then in the absence of any finding that expenditure has been incurred for earning the exempt income the provisions of section 14A cannot be applied. Accordingly we delete the addition/ disallowance made by the Assessing Officer under section 14A read with rule 8D."
In view of the above, and respectfully following the coordinate bench decision in the case of Garware Wall Ropes Ltd. [2014] 65 SOT 86 (Mumbai), we are also of the view that where the primary object of investment is 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, i.e., parties Nos. 6 to 8 as narrated above. Accordingly, the proportionate disallowance will be made. This issue of the assessee's cross-objection is partly allowed as indicated above.
36. In the result, all the appeals of the Revenue are dismissed and C.O. No.26/Kol/2012 is dismissed and C.O. No. 128/Kol/2013 is partly allowed.
The order pronounced in the open court on January 1, 2015.