Moradabad Toll Road Co. Ltd., New Delhi vs Assessee

ACIT, Circle 5(1) vs. M/s. Moradabad Toll Road Co. Ltd. New Delhi. G-5 & 6 Sector-10, Dwarka, New Delhi - 110 045. (PAN AABCM9154B)

(Appellant) (Respondent)

AND

ITA No. 67/Del/2009 Asstt. year 2004-05

Moradabad Toll Road Co. Ltd. vs. DCIT, G-5 & 6, Sector - 10, Dwarka, Circle 5(1), New Delhi - 110 075. New Delhi. (PAN AABCM9154B)

(Appellant) (Respondent)

Appellant by : Shri S.S. Gupta, CA, Shri Lokesh Gupta, CA Respondent by :Shri R.I. S Gill, CIT(DR) Date of hearing :20.5.2015 Date of pronouncement : 02.06.2015

ORDER

PER G.C. GUPTA, VICE PRESIDENT

These two appeals by the revenue and the assessee for the assessment

years 2003-04 and 2004-05 respectively are directed against the order of the CIT(A).

Since the identical issue of imposition of penalty u/s 271(1)(c) of the Act is involved

in both these appeals these are being disposed of with this consolidated order.

ITA Nos. 152, 67/Del/2009

2. The grounds of appeal of revenue for the assessment year 2003-04 are as

under :-

1. "The order of the learned CIT(A) is erroneous & contrary to facts & law.

2. On the facts and in the circumstances of the case the learned CIT(A) has erred in deleting penalty imposed u/s 271(1)(c) of the Rs. 5.50 crore ignoring that the provisions of section 271(1)(c) are attracted in this case as the assessee has filed inaccurate particulars of income by claiming depreciation on Road @ 25% treating the road as Plant & Machinery instead of " Building" on which depreciation is allowable @ 10%".

3. The grounds of appeal of assessee for the assessment year 2004-05 are as

under :-

1. "The Learned CIT(A) has erred on facts and in law in upholding the impugned order of penalty which is contrary to law, equity and justice and facts and material on record.

2. The Learned CIT(A) has erred in law and on facts in upholding imposition of the impugned penalty of Rs. 3,75,00,000/- on a national organization, constituted under an Act of the Parliament engaged in the development of infrastructure for the nation and exempted u/s 10(23G) and whose income is exempt from taxation u/s 10(23C)(iv) of the IT Act. Renewal of approval is pending with the DGIT Exemption, Delhi for no fault of the assessee."

4. The Ld. DR submitted that the facts of the case of the assessee for both the

relevant assessment years 2003-04 and 2004-05 are identical and a consolidated

order for both these assessment years was passed by the CIT(A). He submitted that

the penalty u/s 271(1)(c) of the Act was imposed for both the relevant assessment

years in this case on the disallowance of depreciation on Road. He submitted that

the assessee has claimed depreciation @ 25% under the head "plant and

machinery" treating toll road as the plant although the depreciation was allowable

@ 10% only as it was applicable to a "building". He submitted that the assessee has

taken the matter in quantum case to the Hon'ble High Court and the Hon'ble High

2 ITA Nos. 152, 67/Del/2009

Court has decided the case against the assessee and held that the assessee was

entitled to depreciation @ 10% on toll road and not 25% as claimed by the

assessee. The Ld. DR referred to the relevant portion of the assessment order as

well as the penalty order and the order of the CIT(A) for the assessment year 2004-

05 in which the penalty u/s 271(1)(c) was confirmed by him and submitted that

there was no valid reason for the assessee to claim a higher rate of depreciation on

toll road and the assessee could not discharge its burden for proving that the claim

made was bonafide. He relied on the order of the AO.

5. Ld. Counsel for the assessee has opposed the submission of the Ld. DR. He

submitted that all the material facts relevant for the assessment were disclosed by

the assessee at the time of assessment itself. The conduct and the explanation of

the assessee was bonafide. The issue that whether the toll road made by the

assessee were "plant" or were "building" is a highly debatable issue. The assessee

has taken the issue to the level of the Hon'ble Jurisdictional High Court and this

shows the bonafide conduct of the assessee as well as the fact that the issue was

highly debatable. Merely because the Hon'ble High Court ultimately in the quantum

appeal of the assessee has decided the issue in favour of the revenue and has held

that the assessee would be entitled to depreciation at 10% as applicable in the case

of "building", it does not follow that the assessee could be held guilty for

concealment of income or furnishing of inaccurate particulars of income. The Ld.

Counsel for the assessee submitted that in the case of the assessee the issue of

higher claim of depreciation @ 25% on the toll road was admitted by the Hon'ble

High Court being a substantial question of law in the quantum appeals of the

assessee and therefore this itself shows that the issue was debatable in nature. He

3 ITA Nos. 152, 67/Del/2009

relied the decision of Hon'ble Delhi High Court in the case of CIT vs. Liquid

Investment and Trading Co. ITA 240/2009 dated 5.10.2010 wherein held that the

assessee has preferred an appeal u/s 260A of the Act which was also been admitted

and substantial question of law framed and this itself shows that the issue is

debatable. Regarding the assessment year 2004-05, the Ld. Counsel for the

assessee submitted that though there was an amendment in the relevant provision

of definition of plant but the assessment year 2004-05 is the first assessment year

after the amendment and the assessee's mistake was bonafide and there was no

mens rea on the part of the assessee.

6. We have considered the rival submissions and have perused the order of

the CIT and AO. We find that the assessee has disclosed all the material facts for

both the relevant assessment years 2003-04 and 2004-05 before the AO at the time

of assessment itself. The assessee has filed the details of depreciation and also the

fact that it has treated the toll road as "plant" and has claimed a higher rate of

depreciation at 25%. The assessee has filed an explanation in this regard which

could not be said to be not bonafide. This is a case of difference of opinion between

the assessee and the department with regard to the correct rate of depreciation

allowable to the assessee on its toll road and that whether the toll road is a "plant"

or is a "building". It is not a case that revenue has gathered some material not

disclosed by the assessee. It is a case of furnishing of correct particulars of income,

but the difference was in the figure of allowance of deduction on account of

depreciation due to the difference in the interpretation of the relevant provision of

law. The issue that whether the toll road is a "plant" or a "building" is clearly

debatable in nature and it is further proved by the effect that the assessee's appeal

4 ITA Nos. 152, 67/Del/2009

to the Hon'ble Jurisdictional High Court was admitted in the quantum case of the

assessee for the relevant assessment years. Although the issue was decided against

the assessee by the Hon'ble High Court and it was held that the assessee was

entitled to depreciation @ 10% as applicable in the case of "building" and not 25%

as applicable to "plant" but it will not lead to the conclusion that the assessee was

guilty of concealment of income or filing of inaccurate particulars of income. Merely

because there was an amendment and the legal position was clarified by the Finance

Act 2003 w.e..f assessment year 2004-05 in this regard, it does not follow that the

conduct and explanation of the assesses for the assessment year 2004-05 was

malafide. The facts of the case of the assessee for both the assessment years 2003-

04 and 2004-05 were similar and there is no valid reason for the CIT(A) to confirm

the penalty imposed u/s 271(1)(c) for the later assessment year 2004-05, while

deleting the penalty for the earlier assessment year 2003-04 by the same order. We

find that the decision of the Hon'ble Delhi High Court in CIT vs. Liquid Investment

and Trading Company (supra) clinches the issue in favour of the assessee. In this

case it was held by the Hon'ble High Court that where the assessee has preferred an

appeal u/s 260A of the Act which has also been admitted and substantial question of

law framed, this itself shows that the issue is debatable. In our considered view no

penalty u/s 271(1)(c) of the Act could be imposed on a debatable issue. In this view

of the order we hold that the case of the assessee is not a fit case for levy of penalty

u/s 271(1)(c) of the Act and accordingly the grounds of the appeal of the revenue

for the assessment year 2003-04 are dismissed and the grounds of the appeal of the

assessee for the assessment year 2004-05 is allowed.

5

ITA Nos. 152, 67/Del/2009

7. In the result appeal filed by the revenue for the asstt. year 2003-04 is

dismissed and the appeal filed by the assessee for the asstt. year 2004-05 is

allowed.

Order pronounced in the Open Court on 02.06.2015.

Sd/- Sd/-

(T.S. KAPOOR) (G.C. GUPTA) ACCOUNTANT MEMBER VICE PRESIDENT

Dated: 02.06.2015 *veena

Copy of the Order forwarded to:

1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR 6. Guard File By Order Dy. Registrar

Sl. Description Date No.

1. Date of dictation by the Author 20.5.2015

2. Draft placed before the Dictating Member 21.5.2015

3. Draft placed before the Second Member

4. Draft approved by the Second Member

5. Date of approved order comes to the Sr. PS

6. Date of pronouncement of order

7. Date of file sent to the Bench Clerk

8. Date on which file goes to the Head Clerk

9. Date of dispatch of order

6 ITA Nos. 152, 67/Del/2009

7