Gujarat Road and Infrastructure Co.Ltd.,(Earlier known as Gujarat Toll Road Inv.Co.Ltd.,), Ahmedabad v. The CIT., Gandhinagar Circle,, Gandhinagar

ITA 1450/AHD/2008 | 2003-2004
Pronouncement Date: 12-02-2010 | Result: Allowed

Appeal Details

RSA Number 145020514 RSA 2008
Assessee PAN AACCA5159K
Bench Ahmedabad
Appeal Number ITA 1450/AHD/2008
Duration Of Justice 1 year(s) 9 month(s) 18 day(s)
Appellant Gujarat Road and Infrastructure Co.Ltd.,(Earlier known as Gujarat Toll Road Inv.Co.Ltd.,), Ahmedabad
Respondent The CIT., Gandhinagar Circle,, Gandhinagar
Appeal Type Income Tax Appeal
Pronouncement Date 12-02-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 12-02-2010
Date Of Final Hearing 27-01-2010
Next Hearing Date 27-01-2010
Assessment Year 2003-2004
Appeal Filed On 24-04-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD BBENCH BEFORE DR. O.K. NARAYANAN VICE-PRESIDENT (AZ) AND SHRI MAHAVIR SINGH JUDICIAL MEMBER ITA NO.1450/AHD/2008 [ASSTT.YEAR:2003-04] DRAFTED:27.01.10 GUJARAT ROAD AND INFRASTRUCTURE VS. THE COMM R. OF INCOME TAX CO. LTD. (EARLIER KNOWN AS GUJARAT GANDHI NAGAR TOLL ROAD INVESTMENT CO. LTD.) SUCCESSOR OF AHMEDABAD MEHSANA TOLL ROAD CO. LTD. AHMEDABAD PAN NO.AACCA5159K (APPELLANT) (RESPONDENT) ITA NO.1451/AHD/2008 [ASSTT. YEAR:2004-05] GUJARAT ROAD AND INFRASTRUCTURE VS. THE COMM R. OF INCOME TAX CO. LTD. (EARLIER KNOWN AS GUJARAT GANDHI NAGAR TOLL ROAD INVESTMENT CO. LTD.) SUCCESSOR OF AHMEDABAD MEHSANA TOLL ROAD CO. LTD. AHMEDABAD PAN NO.AACCA5159K (APPELLANT) (RESPONDENT) ITA NO.1452/AHD/2008 [ASSTT.YEAR:2003-04] GUJARAT ROAD AND INFRASTRUCTURE VS. THE COMM R. OF INCOME TAX CO. LTD. (EARLIER KNOWN AS GUJARAT GANDHI NAGAR TOLL ROAD INVESTMENT CO. LTD.) SUCCESSOR OF VADODARA HALOL TOLL ROAD CO. LTD. AHMEDABAD PAN NO.AABCG2093H (APPELLANT) (RESPONDENT) ITA NO.1450-53/AHD/2008 & ITA1184/AHD/2009 A. YS. 03-04 & 04-05 GR & INFRA. CO.LTD. ABD V CIT GNR & ITO GNR PAGE 2 ITA NO.1453/AHD/2008 [ASSTT.YEAR:2004-05] GUJARAT ROAD AND INFRASTRUCTURE VS. THE COMM R. OF INCOME TAX CO. LTD. (EARLIER KNOWN AS GUJARAT GANDHI NAGAR TOLL ROAD INVESTMENT CO. LTD.) SUCCESSOR OF VADODARA HALOL TOLL ROAD CO. LTD. AHMEDABAD PAN NO.AABCG2093H (APPELLANT) (RESPONDENT) ITA NO.1184/AHD/2009 [ASSTT. YEAR:2004-05] GUJARAT ROAD AND INFRASTRUCTURE VS. INCOME TA X OFFICE OSD CO. LTD. (PREVIOUSLY KNOWN AS GUJARAT GANDHINAGA R TOLL ROAD INVESTMENT CO. LTD.) AHMEDABAD PAN NO.AABCG9747N (APPELLANT) (RESPONDENT) REVENUE BY: SHRI ANIL KUMAR CIT-DR ASSESSEE BY: SHRI DILIP LA KHANI AR DATE OF ORDER RESERVED: 27/01/10 O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THESE FIVE APPEALS BY THE ASSESSEE ARE ARISING OUT OF DIFFERENT REVISION ORDERS PASSED U/S.263 OF THE INCOME-TAX ACT 1961 (HEREINA FTER REFERRED TO AS THE ACT) BY THE COMMISSIONER OF INCOME-TAX GANDHINAGAR VIDE ORD ERS DATED 25-03-2008 AND 7- 02-2009. THE ASSESSMENTS WERE FRAMED BY THE ACIT G ANDHINAGAR CIRCLE AND ITO GANDHINAGAR WARD-1 U/S. 143(3) OF THE ACT VIDE THE IR DIFFERENT ORDERS DATE 23-03- 2006 01-09-2006 15-11-2006 AND 08-12-2006 RESPECT IVELY. 2. THE FIRST COMMON ISSUE IN ALL THE FIVE APPEALS O F THE ASSESSEE IS AGAINST THE REVISION ORDER PASSED U/S 263 OF THE ACT BY THE CIT GANDHINAGAR DIRECTING THE ASSESSING OFFICER TO RECONSIDER THE CLAIM OF DEPREC IATION ALLOWED ON TOLL ROAD WHICH IS A BUSINESS ASSET OF THE ASSESSEE. FOR THI S THE ASSESSEE HAS RAISED ITA NO.1450-53/AHD/2008 & ITA1184/AHD/2009 A. YS. 03-04 & 04-05 GR & INFRA. CO.LTD. ABD V CIT GNR & ITO GNR PAGE 3 COMMON GROUNDS IN ALL THE FIVE APPEALS RELATING TO THIS ISSUE. AS THE FACTS AND CIRCUMSTANCES ARE EXACTLY IDENTICAL IN ALL FIVE APP EALS ON THIS ISSUE ACCORDINGLY WE WILL TAKE UP THE APPEAL IN THE CASE OF GUJARAT ROAD AND INFRASTRUCTURE CO. LTD. (EARLIER KNOWN AS GUJARAT TOLL ROAD INVESTMENT CO. LTD. SUCCESSOR OF VADODARA HALOL TOLL ROAD CO. LTD.) AHMEDABAD IN ITA NO.1453/AHD/2008 AND THE RELEVANT GROUNDS AS RAISED BY THE ASSESSEE ARE BEING REPRODU CED FROM THE ASSESSMENT YEAR 2003-04:- 1) ON THE FACTS & CIRCUMSTANCES OF THE CASE THE AP PELLANT SUBMITS THAT THE ORDER PASSED BY THE LEARNED COMMR. OF INCOME TAX U/ S.263 IS BAD IN LAW AND THE COMMR. OF INCOME TAX HAS NO JURISDICTION TO PAS S THE ORDER U/S.263. THE APPELLANT PRAYS THAT THE ORDER PASSED U/S.263 MAY B E CANCELLED. 2) ON THE FACTS & CIRCUMSTANCES OF THE CASE THE APP ELLANT SUBMITS THAT THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER IS NO T ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE LEARNED COMMR. OF INCOME TAX HAS WRONGLY INVOKED THE PROVISIONS OF SECTION 263. THE APPELLANT PRAYS THAT ORDER PASSED U/S.263 MAY BE CANCELLED. 3) ON THE FACTS & CIRCUMSTANCES OF THE CASE THE APP ELLANT SUBMIT THAT BASIS CONDITIONS FOR INVOCATION OF THE PROVISIONS OF SECT ION 263 ARE NOT SATISFIED. THE ORDER PASSED BY THE LEARNED COMMR. OF INCOME TAX CA NCELING THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER IS NOT JUST IFIED. THE APPELLANT PRAYS THAT THE ORDER PASSED U/S.263 MAY BE CANCELLED. 4) ON THE FACTS & CIRCUMSTANCES OF THE CASE THE APP ELLANT SUBMIT THAT THE LEARNED COMMR. OF INCOME TAX HAS NOT GIVEN FINDING THAT THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. IT IS INCUMBENT UPON THE LEARNED COMMR . OF INCOME TAX TO CONCLUDE THAT THE ORDER PASSED BY THE LEARNED ASSES SING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. IN THE ABSENCE OF SUCH CONCLUSION THE APPELLANT PRAYS THAT THE ORDER PASSED U/S.263 I S BAD IN LAW AND MAY BE CANCELLED. 5) ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LEA RNED COMMR. OF INCOME TAX HAS ERRED IN CONCLUDING THAT THE ORDER OF THE L EARNED ASSESSING OFFICER HAS NOT MERGED WITH THE ORDER OF THE LEARNED COMMR. OF INCOME TAX (A). THE APPELLANT SUBMIT THAT THE ORDER OF THE LEARNED ASSE SSING OFFICER WHICH IS SOUGHT TO BE REVISED U/S.263 HAS MERGED WITH THE OR DER OF THE LEARNED COMMR. OF INCOME TAX (A) AND THE LEARNED COMMR. OF INCOME TAX HAS NO JURISDICTION TO INVOKE THE PROVISIONS OF SECTION 26 3. 6) THE LEARNED COMMISSIONER OF INCOME TAX HAS ERRED IN PASSING THE ORDER U/S.263 WITHOUT DEALING WITH THE FATS SUBMITTED BEF ORE HIM. THE APPELLANT HAD SUBMITTED THAT THERE ARE BUILDINGS TO WHICH THE TOL L ROAD IS CONNECTED. THIS ASPECT HAS NOT BEEN DEALT WITH BY THE LEARNED COMMI SSIONER OF INCOME TAX ITA NO.1450-53/AHD/2008 & ITA1184/AHD/2009 A. YS. 03-04 & 04-05 GR & INFRA. CO.LTD. ABD V CIT GNR & ITO GNR PAGE 4 THE APPELLANT SUBMITS THAT THE ORDER PASSED WITHOUT CONSIDERING FACTS IS BAD IN LAW AND MAY BE CANCELLED. 7) ON THE FACTS & CIRCUMSTANCES OF THE CASE THE APP ELLANT SUBMIT THAT THEY ARE ENTITLED TO DEPRECIATION ON THE TOLL ROAD. THE CONC LUSION REACHED BY THE LEARNED COMMR. OF INCOME TAX THAT THE LEARNED ASSES SING OFFICER HAS WRONGLY ALLOWED THE CLAIM OF DEPRECIATION IS ERRONE OUS. 3. THE BRIEF FACTS LEADING TO THE ABOVE COMMON ISSU E ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SETTING UP OF INFRASTRUC TURAL FACILITIES BY CONSTRUCTING ROADS. THE ASSESSEE-COMPANY HAS CONSTRUCTED OPERAT ED AND MANAGED VADODARA HALOL TOLL ROAD (VHTR IN SHORT) FOR 31.7 K.M. TOLL ROAD CONNECTING VADODARA TO HALOL. THE ASSESSEE-COMPANY HAS WIDENED AND STRENGTHEN THE EXISTING TWO LANE ROAD TO FOUR LANE ROAD VIDE PROJECT COMMENCED IN OCTOBER 2 000. THE ABOVE ROAD WAS CONSTRUCTED BY THE ASSESSEE AS PER POLICY OF GOVERN MENT OF INDIA IN A PUBLIC PRIVATE PARTNERSHIP (PPP IN SHORT) UNDER THE SPECIAL PURPOS E VEHICLES (SPV IN SHORT) GRANTING CONCESSION BY THE GOVERNMENT OF GUJARAT PE RMITTING THEM TO CONSTRUCT TOLL ROADS BY FORMING A SPV. THE ASSESSEE IS A PARTY IN THIS SPV WHICH IS A JOINT VENTURE BETWEEN GOVT. OF GUJARAT AND IL&FS GROUP. AS PER T HE POLICY OF GOVT. OF INDIA THE ASSESSEE HAS CONSTRUCTED A TOLL ROAD ON BOOT BASIS I.E. BUILT OWN OPERATE AND TRANSFER. THE TOLL ROADS WERE CONSTRUCTED BY THE A SSESSEE AND THESE WERE MAINTAINED & OPERATED BY THE ASSESSEE. THE ASSESSE ES BUSINESS PLANS AS APPROVED BY THE GOVERNMENT CLEARLY ESTABLISHMENTS T HAT IT HAS SET UP INFRASTRUCTURAL FACILITIES BY CONSTRUCTING TOLL ROADS. THE ASSESSEE HAS CONSTRUCTED THE ROAD IN THE COURSE OF CARRYING OUT ITS BUSINESS ACTIVITIES. AD MITTEDLY THE TOLL ROAD IS AN ASSET OWNED BY THE ASSESSEE WITH WHICH THE BUSINESS IS CA RRIED OUT AND THE TOLL IS COLLECTED WHICH IS A REVENUE RECEIPT. FOR THE ASS ESSMENT YEAR 2004-05 THE ASSESSEE FILED RETURN OF INCOME DECLARING LOSS AT R S.28 27 21 005/-. SUBSEQUENTLY THE ASSESSEE FILED ITS REVISED RETURN DECLARING NET LOSS OF RS.23 46 43 995/- ON 11- 02-2006 BY THE REASON THAT THE COMPANY WAS MERGED WITH GUJARAT TOLL ROAD INVESTMENT COMPANY LTD. (GTRICL IN SHORT) WITH EFFE CT FROM 01-10-2003 VIDE HONBLE HIGH COURTS ORDER DATED. 11-05-2005. THE A SSESSEE ALSO ENCLOSED THE LOSS DECLARED AS PER PROFIT & LOSS A/C. OF RS.10 01 59 6 36/- FOR THE PERIOD 01-04-2003 TO 30-09-2003 THE UNABSORBED BUSINESS LOSS AND UNABSOR BED BUSINESS DEPRECIATION TO BE CLAIMED BY THE ASSESSEE FROM ASSESSMENT YEAR 200 4-05. THE ASSESSMENT WAS FRAMED BY ISSUING NOTICE U/S.143(2) U/S.143(3) OF THE ACT VIDE ORDER DATED 15-11- ITA NO.1450-53/AHD/2008 & ITA1184/AHD/2009 A. YS. 03-04 & 04-05 GR & INFRA. CO.LTD. ABD V CIT GNR & ITO GNR PAGE 5 2006 IN WHICH THE CLAIM OF DEPRECIATION ON ROAD AT 10% WAS ALLOWED AS DECLARED BY THE ASSESSEE IN ITS ACCOUNTS. THE CIT GANDHINAGAR S UBSEQUENTLY ON GOING THROUGH THE ASSESSMENT RECORDS ISSUE SHOW CAUSED NOTICE DA TED 05-03-2008 AND INITIATED REVISION PROCEEDINGS U/S.263 OF THE ACT. THE RELEV ANT SHOW CAUSE NOTICE READS AS UNDER:- AN EXAMINATION OF YOUR ASSESSMENT RECORD FOR THE A CCOUNTING PERIOD RELEVANT TO A.Y. 2004-05 REVEALS THAT THE ASSESSMENT ORDER P ASSED BY THE ITO WARD- 1 GANDHINAGAR U/S.143(3) ON 15-11-2006 IS ERRONEOU S AND PREJUDICIAL TO THE INTEREST OF THE REVENUE FOR THE REASONS MENTIONED H EREINAFTER. THE FACTUAL CONSPECTUS SHOWS THAT YOUR COMPANY WAS FORMED FOR THE PURPOSE OF THE DEVELOPMENT AND MAINTENANCE OF VADODARA-HALO L TOLL ROAD STRETCHING 31.7 K.M FOR WHICH YOU HAVE BEEN ALLOWED TO COLLECT TOLL FROM THE VEHICLES RUNNING ON THE SAME FOR A PERIOD OF 30 YEARS WHICH CAN BE EXTENDED FURTHER IF THE INITIAL INVESTMENT MADE BY YOU IS NOT RECOVERED BY THE SAID PERIOD. IT IS NOTICED FROM THE DEPRECIATION CHART THAT YOU HAVE CLAIMED DEPRECIATION ON THE SAID ROAD @ 10% AS APPLICABLE TO NON-RESIDENTIA L BUILDING AMOUNTING TO RS.28 27 21 005/-. A REVISED RETURN WAS FLED BY YOU ON 11-2-2006 RETURNING THE LOSS OF RS.23 46 43 995/- STATING THAT THE COMP ANY HAS BEEN MERGED WITH GUJARAT TOLL ROAD INVESTMENT COMPANY LTD. W.E.F. 1. 10-2003 VIDE HONBLE HIGH COURTS ORDER DATED 11-5-2005. IT IS FURTHER STATED THAT THE LOSS AS PER PROFIT AND LOSS ACCOUNT OF RS.10 01 59 636/- PERTAI NED TO THE PERIOD 1-4-2003 TO 30-9-2003 AND THE UNABSORBED BUSINESS LOSS AND U NABSORBED DEPRECIATION WILL BE CLAIMED BY THE AMALGAMATED COMPANY FROM A.Y . 2004-05. THE REVISED RETURN WAS ACCEPTED BY THE ASSESSING OFFICER TAKING INTO ACCOUNT THE BUSINESS RESULTS OF SIX MONTHS BY ORDER DATED 15-11-2006 AND ALSO ALLOWED THE BENEFIT OF CARRY FORWARD OF ACCUMULATED BUSINESS LOSS AS WE LL AS UNABSORBED DEPRECIATION U/S.72A OF THE I.T. ACT. 1961 BY VIRT UE OF THE AMALGAMATION. IT WOULD BE PERTINENT TO MENTION HERE THAT SET OFF AND CARRY FORWARD CAN BE ALLOWED IN THE CASE OF AN INDUSTRIAL UNDERTAKING OR A SHIP OR A HOTEL WITH ANOTHER COMPANY FOR AN AMALGAMATION OF A BANKING CO MPANY. SUB-SECTION (7)(ASSESSEE) OF SECTION 72A DEFINES THE MEANING OF INDUSTRIAL UNDERTAKING WHICH DOES NOT ENCOMPASS THE ACTIVITY CARRIED ON BY YOU. IT IS FURTHER NOTICED FROM THE DEPRECIATION CHART T HAT YOU HAVE CLAIMED DEPRECIATION ON THE SAID ROAD @ 10% AS APPLICABLE T O NON-RESIDENTIAL BUILDING AMOUNTING TO RS.11 84 24 876/-. THE SAID CLAIM WAS ALSO ALLOWED BY THE A.O IN THE ASSESSMENT ORDER DATED 15-11-2006 WHICH IS F OUND TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE IN VIEW OF THE HONBLE SUPREME COURTS DECISION IN THE CASE OF INDORE MUNICIPAL CO RPORATION VS. CIT (2001) 247 ITR 803 (SC). IT IS FURTHER NOTICED THAT THE A.O HAS FAILED TO TA KE INTO ACCOUNT THE SIGNIFICANT ACCOUNTING POLICY IN RESPECT OF ROAD OVERLAY AND RE NEWAL EXPENSES AS LAID DOWN IN THE AGREEMENT BUILD-OWN-OPERATE-TRANSFER BASIS WHEREBY THE EXPENSES CLAIMED UNDER THE ROAD OVERLAY HAS NOT BEE N SCRUTINIZED. ITA NO.1450-53/AHD/2008 & ITA1184/AHD/2009 A. YS. 03-04 & 04-05 GR & INFRA. CO.LTD. ABD V CIT GNR & ITO GNR PAGE 6 IN VIEW OF THE ABOVE REASONS THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. YOU ARE THE REFORE HEREBY GIVEN AN OPPORTUNITY TO SHOW-CAUSE AS TO WHY THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER (SUPRA) SHOULD NOT BE CANCELLED A ND DIRECTED TO MAKE FRESH ASSESSMENT AS PER THE LAW. YOUR EXPLANATION IN THE MATTER SHOULD REACH THE UNDERSIGNED WITHIN 7 DAYS OF THE RECEIPT OF THIS NO TICE. 4. THE ASSESSEE-COMPANY REPLIED TO THE SHOW CAUSE N OTICE VIDE LETTER DATED 20- 03-2008 STATING THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST O F REVENUE. HE STATED THAT THE AO HAS APPLIED HIS MIND AT THE TIME OF GRANTING DEPREC IATION ON THE ROAD TO THE ASSESSEE AS THE AO HAS REVIEWED THE DEPRECIATION CL AIM BY SPECIFICALLY ALLOWING THE CLAIM ON ROAD AND DISALLOWING ON OTHER ITEMS. HE STATED THAT THE AO IN PARA-3 HAS CLEARLY ADMITTED THAT THE ASSESSEE HAS CONSTRUCTED THE TOLL-ROAD AND ALSO OPERATING TO COLLECT TOLL. HE ALSO STATED THAT CONSTRUCTION O F ROAD AND COLLECTION OF TOLL IS AN INTEGRAL PART OF THE BUSINESS ACTIVITIES OF THE ASS ESSEE AND WITHOUT WHICH IT COULD NOT CARRY OUT THE BUSINESS. HE STATED THAT THE ASSESSEE EARNED REVENUE DIRECTLY FOR OPERATION OF TOLL ROAD AND THE ASSESSEE HAS SATISFI ED THE FOLLOWING TEST TO CLAIM DEPRECIATION:- (I) IT IS A CAPITAL ASSES (II) THE ASSESSEE HAS OWNED THE ASSET FOR 30 YEARS OF MINIMUM PERIOD ; (III) THE ASSET HAS BEEN USED FOR THE PURPOSE OF T HE BUSINESS. HE STATED THAT ALL THE THREE CONDITIONS ARE FULLY S ATISFIED AND FOR THE ENTITLEMENT OF DEPRECIATION ON TOLL-ROAD THE ASSESSEE RELIED ON TH E DECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS. GWALIOR RAYON SILK MANUFACTURING CO. LTD. ( AND OTHER APPEALS) (1992) 196 ITR 149 (SC). HE ALSO SUBMITTED THAT T HE DEPRECIATION ON TOLL- ROAD HAS RIGHTLY BEEN ALLOWED BY THE ASSESSING OFFI CER ON THE FOLLOWING GROUNDS:- (I) ROAD CONSTRUCTED BY THE ASSESSEE FORMS THE MOS T IMPORTANT SOURCE OF ITS REVENUE; (II) THE BASIS OBJECTIVE OF THE ASSESSEE COMPANY IS TO CONSTRUCT THE TOLL ROAD UNDER BUILD-OWN-OPERATE TRANSFER SCHEME. (III) THUS THE BASIS CRITERIA OF CLAIMING DEPRECIA TION E.G. EXISTENCE OF A CAPITAL ASSET OWNERSHIP OF SUCH ASSETS AND THE ASSETS WERE PUT TO USE BY THE ASSESSEE COMPANY FOR ITS BUSINESS PURPOSES HAVE ALL BEEN MET. ITA NO.1450-53/AHD/2008 & ITA1184/AHD/2009 A. YS. 03-04 & 04-05 GR & INFRA. CO.LTD. ABD V CIT GNR & ITO GNR PAGE 7 (IV) ONCE HE ELIGIBILITY FOR DEPRECIATION HAS BEEN SATISFIED THE RATE HAS TO BE DETERMINED. ROAD BRIDGES AND BUILDINGS FORM PART O F THE BUILDINGS AS PER APPENDIX TO THE INCOME TAX RULES 1962. THUS THE C LAIM OF DEPRECIATION ON THE ROAD AND BRIDGES AS BUILDING AS PER APPENDIX TO INCOME TAX RULES 1962 HAS ALSO BEEN SATISFIED. HE DISTINGUISHED THE CASE LAW OF HONBLE APEX COURT IN THE CASE OF INDORE MUNICIPAL CORPORATION V. CIT (1997) 247 ITR 804 (SC) BY STATING THAT IT WAS A LOCAL BODY WHICH DERIVED INCOME FROM SALE OF MANURE PREPARED O UT OF WASTE AND NIGHT OIL DUMPED IN THE TRENCHING GROUNDS OUTSIDE THE MUNICIP AL LIMITS. IT CONSTRUCTED A METAL ROAD OVER THE TRENCHING GROUND AND CLAIMED THAT THE SAID EXPENDITURE SHOULD BE TREATED AS ROAD AND CLAIMED DEPRECIATION. THE HONB LE MADHYA PRADESH HIGH COURT HELD THAT THE METAL ROAD FOR HAULING COMPOST COULD NOT BE CONSIDERED AS EXPENDITURE AND THE ASSESSEE WAS NOT ENTITLED TO DEPRECIATION. THE HONBLE SUPREME COURT ALSO HELD THAT THE SAID METAL ROADS CANNOT BE TREATED AS ROADS AS THERE WAS NO OTHER CONSTRUCTION ON THE OPEN GROUND EXCEPT ROADS AND RO ADS BY THEMSELVES CANNOT CONSTITUTE BUILDING. HE STATED THAT IN THE FACTS BE FORE CIT THE TOLL-ROAD IS CONSTRUCTED AND THERE ARE TOLL PHASE AND ADMINISTRA TIVE BUILDINGS. THE ROADS ARE CONNECTED TO THESE BUILDINGS WHICH ARE TOLL PLAZAS AS WELL AS BUILDINGS. HE RELIED UPON THE DECISION IN THE CASE OF GWALIOR SILK MILLS MFGS. CO. LTD. (SUPRA). IN THIS IT HAS BEEN HELD THAT THE ROADS WHICH ARE ADJUNCT OF T HE BUILDING LYING WITHIN FACTOR AREA LINKING THEM TOGETHER AND BEING USED FOR CARRYING O N BUSINESS IS TO BE CONSTRUED AS BUILDING. HE STATED THAT THE FACTS OF THE PRESENT C ASE ARE IDENTICAL TO THE CASE OF GWALIOR SILK MILLS MFG. CO. LTD. (SUPRA) AND THE DEPRECIATION HAS BEEN RIGHTLY ALLO WED BY THE ASSESSING OFFICER TREATING THE TOLL-ROAD AS BUILDING. 5. THE CIT GANDHINAGAR HAS NO ACCEPTED THE CONTENT ION OF THE ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO REVIEW THE DEPREC IATION BY GIVING FOLLOWING FINDINGS IN PARA-10 TO 12 OF HIS REVISION ORDER PASSED U/S.263 OF THE ACT:- 10. I HAVE CAREFULLY GONE THROUGH THE WRITTEN SUBM ISSIONS ESPECIALLY THE STRING OF JUDICIAL DECISIONS CITED BY THE COUNSEL T HEREIN. I AM CONSTRAINED TO POINT OUT THAT THE FACTS OF THE ABOVE CITED DECISIO NS NAMELY OIL INDIA LTD. V. CIT (CALCUTTA) 138 ITR 836 MALABAR INDUSTRIAL CO. LTD. 243 ITR 83 AND CIT VS. MAX INDIA LTD. 268 ITR 128 ARE TOTALLY DISTING UISHABLE FROM THE FACTS OF THIS CASE. IN ADDITION TO THIS THE OTHER JUDICIAL DECISIONS RELIED UPON BY THE APPELLANT ALSO DO NOT SUPPORT THE AVERMENTS OF THE ASSESSEE. THE LEARNED COUNSEL HAS SIMPLY CULLED THE RATIO OF THE DECISION S FROM DIFFERENT JUDICIAL DECISIONS. IN THE FITNESS OF THINGS I AM TEMPTED T O ANALYSE THE CONCEPT OF RATIO ITA NO.1450-53/AHD/2008 & ITA1184/AHD/2009 A. YS. 03-04 & 04-05 GR & INFRA. CO.LTD. ABD V CIT GNR & ITO GNR PAGE 8 DECIDENDI IN A JUDICIAL DECISION. IT WOULD BE WORTH WHILE TO REFER TO ONE OF THE LOCUS CLASIUS ON THE SUBJECT. LEARNING THE LAW (ELE VENTH EDITION STEVENS AND SONS LONDON 1982) BY PROF. GLANVILLE WILLIAMS AT PAGE 67 THAT PART OF A CASE THAT IS SAID TO POSSESS AUTHORITY IS THE RATIO DECIDENDI THAT IS TO SAY THE RULE OF LAW UPON WHICH THE DECISION IS FOUNDS THE RATIO DECIDENTI OF A CASE AN BE DEFINED S THE MATERIAL FACTS OF THE CASE PLUS DECISION THEREON. THIS VIEW HAS BEEN APPROVED BY THE CONSTITUTION BENCH OF THE HONBLE SUPREME COURT IN KRISHNAKUMAR V UNION OF INDIA (1990) 4 SCC 207 (SC) AND ALSO IN (PER J.S. ANAND I). 11. AT THE OUTSET IT WOULD BE PERTINENT TO POINT O UT HERE THAT THE ASSESSEES RELIANCE UPON THE DOCTRINE OF MERGER OF THE ORDER O F THE ASSESSING OFFICER WITH THAT OF THE CIT(A) IN THE PRESENT CASE UNDER CONSID ERATION IS MISCONCEIVED AND MISPLACED. IT IS SEEN IN PARAS 5 5.1 5.2 AND 5 .3 OF THE ORDER OF THE CIT(A) GANDHINAGAR IN APPEAL NO.CITA/GNR/44/06-07 DATED 21 -9-2006 THAT THE CIT(A) HAS ONLY DEALT WITH THE CLAIM OF THE ASSESSE E IN RESPECT RATE OF DEPRECIATION OF ELECTRICAL INSTALLATIONS FROM 15% A S ADOPTED BY THE ASSESSING OFFICER TO 25% AS ALLOWED BY THE CIT(A). THE MATERI AL FACT WHICH PERTAINS HERE IS THE NON-ADMISSIBILITY OF DEPRECIATION TO NON-RES IDENTIAL BUILDING I.E. TOLL ROAD. HERE THE ASSESSING OFFICER HAD ALLOWED THE CLAIM OF THE DEPRECIATION AT THE RATE OF 10% APPLICABLE TO A NON RESIDENTIAL BUILDIN G AMOUNTING TO RS.13 18 05 418/-. THIS CRUCIAL FACT WAS NOT AGITAT ED BEFORE THE CIT(A) NOR DID HE GIVE ANY FINDING IN THIS RESPECT SO AS TO AVER T HAT THE ORDER OF THE ASSESSING OFFICER HAS MERGED WITH THE ORDER OF CIT( A). THE DOCTRINE OF MERGER WOULD CERTAINLY NOT APPLY TO THIS ERRONEOUS APPROACH ADOPTED BY THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER UNDER CON SIDERATION. 12. I AM AFRAID TO MENTION HERE THAT THE LEARNED CO UNSEL HAS FAILED TO FULLY APPRECIATE THE JUDICIAL ANALYSIS OF THE CASE OF IND ORE MUNICIPAL CORPORATION VS. CIT (2001) 247 ITR 803 (SC) . A BARE PERUSAL OF THIS 2 PAGE JUDGMENT RENDERED BY A DIVISION BENCH OF 2 JUDGES OF THE HON BLE SUPREME COURT SHOWS THAT THEY HAVE FOLLOWED THE VIEW LAID DOWN BY THE HONBLE APEX COURT IN TRAVANCORE COCHIN CHEMICAL VS. CIT (1977) 106 IT R 900 (SC) THAT THE ROADS WERE NOT BUILDINGS AND THERE WAS NO CONSTRUCT ION EXCEPT THE ROADS THE ROADS BY THEMSELVES COULD NOT CONSTITUTE BUILDINGS AND THE ASSESSEE WAS NOT ENTITLED TO DEPRECIATION ON THE COST OF CONSTRUCTIO N OF ROADS. FURTHER MORE THE JUDGMENT OF THE HONBLE APEX COURT IN CIT VS. GWALI OR RAYON SILK MFG. CO. LTD. (1992) 196 ITR 141 (SC)AS RELIED UPON BY THE COUNSEL HAS ALSO BEEN DISTINGUISHED IN THE AFORESAID CASE OF INDORE MUNIC IPAL CORPORATION (SUPRA). BY APPLYING THE RATIO OF THE SAID CASE OF INDORE MU NICIPAL CORPORATION (SUPRA) TO THE FACTS OF THIS CASE IT IS SEEN HAT THERE IS NO CONSTRUCTION EXCEPT THE TOLL ROAD. FURTHER MORE THERE IS NO FACTORY BUILDING WH ICH HAS ROADS IS ITS ADJUNCTS LYING WITHIN THE FACTORY AND LINKING THEM TOGETHER AND WHICH ARE BEING USED FOR CARRYING ON ITS BUSINESS BY THE ASSESSEE. THESE WER E THE FACTS OF THE CASE REPORTED IN 196 ITR 146 SC (SUPRA) WHICH ARE ALSO DISTINGUISHABLE FROM THE FACTS OF THE CASE UNDER CONSIDERATION. THEREFORE I T CANNOT BE SAID BY ANY STRETCH OF IMAGINATION THAT THE ROADS PER SE WOULD CONSTITUTE BUILDINGS. ITA NO.1450-53/AHD/2008 & ITA1184/AHD/2009 A. YS. 03-04 & 04-05 GR & INFRA. CO.LTD. ABD V CIT GNR & ITO GNR PAGE 9 6. AGGRIEVED AGAINST THE REVISION ORDER PASSED BY T HE CIT GANDHINAGAR U/S.263 OF THE ACT THE ASSESSEE PREFERRED APPEAL BEFORE US . BEFORE US THE LD. COUNSEL FOR THE ASSESSEE SHRI DILIP LAKHANI MADE THREE FOLD AR GUMENTS. FIST OF ALL HE STATED THE FACTS THAT AS PER THE POLICY OF GOVT. OF INDIA THE ASSESSEE HAS CONSTRUCTED A TOLL- ROAD ON BOOT BASIS BY RAISING THE RESOURCES. THE R ESPONSIBILITY TO MAINTAIN AND OPERATE AND TO COLLECT TOLL FROM THE VEHICLES WHIC H WILL USE THIS TOLL-ROAD IS ON THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE BUSINESS PLAN AS APPROVED BY THE GOVT. CLEARLY ESTABLISHES THAT THE ASSESSEE HAS SET UP INFRASTRUCTURE FACILITIES BY CONSTRUCTING A TOLL-ROAD IN THE COURS E OF CARRYING OUT ITS BUSINESS ACTIVITY AND TOLL-ROAD IS A MAIN ASSET BY THE ASSESSEE WITH WHICH BUSINESS IS CARRIED ON AND THE TOLL IS COLLECTED AS REVENUE RECEIPT. THE ASSESSEE HAS EXPLOITED THE ROAD AS INCOME GENERATED ASSET AND OFFERED THE REVENUE RECE IPTS COLLECTED AS TOLL FEE FOR TAX. THE LD. COUNSEL MADE FIRST FOLD OF ARGUMENTS THAT THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS DEALT WITH THE ISSUE OF DEPREC IATION CLAIMED BY THE ASSESSEE AND ALSO DISALLOWED DEPRECIATION PARTLY ON ELECTRIC AL INSTALLATIONS. THE ASSESSEE HAS CLAIMED DEPRECIATION AND PROVIDED WORKING BEFORE TH E AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE TOTAL CLAIM OF DEPRE CIATION WAS AT RS.14 73 91 510/- AND SUBSEQUENTLY THE CLAIM WAS RE VISED BY WAY OF RECTIFICATION APPLICATION MADE U/S.154 OF THE ACT AT RS.6 00 26 1 83/-. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE WHEN THE MATTER WAS ADJUDI CATED BEFORE THE ASSESSING OFFICER THE ASSESSEE PREFERRED APPEAL BEFORE CIT(A ) AGAINST DISALLOWANCE OF DEPRECIATION ON ELECTRICAL INSTALLATION. ONCE THE M ATTER IS BEFORE CIT(A) AND CIT(A) HAS ALSO DEALT WITH THE SUBJECT-MATTER OF DEPRECIAT ION THE ORDER OF THE AO HAS MERGED WITH THE ORDER OF CIT(A) AND ACCORDINGLY THE THEORY OF MERGER APPLIED IN THE PRESENT CASE. ACCORDING TO THE LD. COUNSEL ALL THE ASSET OF DEPRECIATION HAVE BEEN DEALT WITH BY THE CIT(A) AND IN VIEW OF THE MERGER THEORY NOR REVISION PROCEEDINGS CAN BE UNDERTAKEN BY THE CIT AS THE SUBJECT-MATTER HAS ALREADY BEEN DEALT WITH BY THE CIT(A). 7. THE SECOND FOLD OF THE ARGUMENT MADE BY THE LD. COUNSEL FOR THE ASSESSEE WAS THAT THE BASIC CONDITIONS OF SECTION 263 OF THE ACT ARE NOT SATISFIED AS THE ASSESSING OFFICER HAS APPLIED HIS MIND AT THE TIME WHEN THE DEPRECIATION WAS GRANTED AT THE TIME OF ORIGINAL ASSESSMENT. THE AS SESSING OFFICER AFTER REVIEWING THE DEPRECIATION CLAIM ON ELECTRICAL INSTALLATION HAS SPECIFICALLY ALLOWED THE CLAIM OF ITA NO.1450-53/AHD/2008 & ITA1184/AHD/2009 A. YS. 03-04 & 04-05 GR & INFRA. CO.LTD. ABD V CIT GNR & ITO GNR PAGE 10 DEPRECIATION ON ROAD. HE ARGUED THAT THE AO IN PARA-3 AS CLEARLY ADMITTED THAT THE ASSESSEE HAS CONSTRUCTED THE TOLL-ROAD AND ALSO OPE RATED AND COLLECTED TOLL FEE. ACCORDING TO THE LD. COUNSEL THE ORDER OF THE ASSES SING OFFICER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE IN V IEW OF THE FACT THAT HERE THE ASSESSING OFFICER HAS TAKEN A POSSIBLE VIEW AND ONC E TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW THEN THE ORDER PASSED BY HIM CANNOT BE TREATED AS ERRONEOUS. FOR THIS HE RELIED ON THE D ECISION OF HONBLE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. V. CIT (2000) 243 ITR 83 (SC). HE ALSO RELIED ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. MAX INDIA LTD. (2004) 268 ITR 128 (P & H). 8. ANOTHER FACET OF THE ARGUMENT MADE BY THE LD. CO UNSEL FOR THE ASSESSEE IS ON MERITS. HE STATED THAT THE TOLL-ROAD CONSTRUCTED B Y THE ASSESSEE IS AN INTEGRAL PART OF BUSINESS ACTIVITY AND WITHOUT WHICH IT COULD NOT CARRY ON THE BUSINESS ACTIVITY. ACCORDING TO THE LD. COUNSEL THE ENTIRE REVENUE EAR NED IS DIRECTLY FROM OPERATING THE TOLL-ROAD AND WITHOUT CONSTRUCTING THE SAME IT WOUL D NOT HAVE BEEN POSSIBLE TO CARRY ON THE BUSINESS ACTIVITY. HE SUBMITTED THAT THE FOLLOWING TESTS HAVE BEEN SATISFIED TO CLAIM DEPRECIATION IN THE CASE OF THE ASSESSEE:- (I) IT IS A CAPITAL ASSES (II) THE ASSESSEE HAS OWNED THE ASSET FOR 30 YEARS OF MINIMUM PERIOD ; (III) THE ASSET HAS BEEN USED FOR THE PURPOSE OF T HE BUSINESS. HE STATED THAT ALL THE THREE CONDITIONS ARE FULLY S ATISFIED AS THE PRINCIPLE ACTIVITY OF THE ASSESSEES BUSINESS IS TO CONSTRUCT THE ROAD ON BOO T BASIS AND THE PRIMARY SOURCE OF REVENUE IS THE TOLL FEE RECEIVED FROM THE PASSIN G VEHICLES. HE STATED THAT THE ONLY MAJOR ASSET IN THE FORM OF TOLL-ROAD CONSTRUCT ED BY THE ASSESSEE WHICH IS CAPITAL ASSET. HE STATED THAT WHILE CONSTRUCTING T OLL-ROAD THE ASSESSEE HAS CONSTRUCTED THE BUILDINGS WHICH ARE ADMINISTRATIVE BUILDINGS AND TOLL PLAZA WHERE THE STAFF IS LOCATED AND TOLL FEE IS COLLECTED FROM THE PASSING VEHICLES. THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE ASSESSEE IS ENTITL ED TO DEPRECIATION ON THE TOLL-ROAD AS ALL THE BASIC CONDITIONS OF SECTION 32 OF THE AC T ARE FULLY SATISFIED AND FOR THIS HE RELIED ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF GWALIOR RAON SILK MFG. CO. LTD. (SUPRA). HE ALSO RELIED ON THE CASE LAW OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. LUCAS TVS LIMITED 110 ITR 346 (MAD) AND ALSO OF HONBLE CALCUTTA ITA NO.1450-53/AHD/2008 & ITA1184/AHD/2009 A. YS. 03-04 & 04-05 GR & INFRA. CO.LTD. ABD V CIT GNR & ITO GNR PAGE 11 HIGH COURT IN THE CASE OF CIT V. INDO-BURMA PETROLEUM CO. LTD . 112 ITR 755 (CAL). HE ALSO RELIED ON THE CASE LAW OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. BANGALORE TURF CLUB LIMITED 150 ITR 23 (KAR) AND OF HONBLE APEX COURT IN THE CASE OF CIT V. HINDUSTAN AERONAUTICS LIMITED 178 ITR 72 (SC). 9. THE LD. COUNSEL FOR THE ASSESSEE MADE FURTHER SU BMISSION THAT THE CLAIM OF DEPRECIATION ON THIS TOLL-ROAD HAS RIGHTLY BEEN ALL OWED BY THE ASSESSING OFFICER. THE SUBMISSIONS ARE SUMMARIZED AS UNDER:- (I) ROAD CONSTRUCTED BY THE ASSESSEE FORMS THE MOST IMP ORTANT SOURCE OF ITS REVENUE; (II) THE BASIS OBJECTIVE OF THE ASSESSEE COMPANY IS TO CONSTRUCT THE TOLL ROAD UNDER BUILD-OWN-OPERATE TRANSFER SCHEME. (III) THUS THE BASIS CRITERIA OF CLAIMING DEPRECIA TION E.G. EXISTENCE OF A CAPITAL ASSET OWNERSHIP OF SUCH ASSETS AND THE ASSETS WERE PUT TO USE BY THE ASSESSEE COMPANY FOR ITS BUSINESS PURPOSES HAVE ALL BEEN MET. (IV) ONCE THE ELIGIBILITY FOR DEPRECIATION HAS BEEN SATISFIED THE RATE HAS TO BE DETERMINED. ROAD BRIDGES AND BUILDINGS FORM PART O F THE BUILDINGS AS PER APPENDIX TO THE INCOME TAX RULES 1962. THUS THE C LAIM OF DEPRECIATION ON THE ROAD AND BRIDGES AS BUILDING AS PER APPENDIX TO INCOME TAX RULES 1962 HAS ALSO BEEN SATISFIED. HE DISTINGUISHED THE CASE LAW RELIED ON BY THE CIT AND THE LD. CIT-DR IN THE CASE OF INDORE MUNICIPAL CORPORATION (SUPRA). HE STATED THAT IN THE CASE OF IMC IT WAS A LOCAL BODY WHICH DERIVED INCOME FROM SALE OF MANURE PREPARED OUT OF WASTE AND NIGHT OIL DUMPED IN THE TRENCHING GROUNDS OUTSIDE T HE MUNICIPAL LIMITS AND IT CONSTRUCTED A METAL ROAD OVER THE TRENCHING GROUND AND CLAIMED THAT THE SAID EXPENDITURE SHOULD BE TREATED AS ROAD AND CLAIMED D EPRECIATION. THE HONBLE MADHYA PRADESH HIGH COURT HELD THAT THE METAL ROAD FOR HAULING COMPOSED COULD NOT BE CONSIDERED AS EXPENDITURE AND THE ASSESSEE WAS N OT ENTITLED TO DEPRECIATION. THE HONBLE SUPREME COURT ALSO HELD THAT THE SAID METAL ROADS CANNOT BE TREATED AS ROADS AS THERE WAS NO OTHER CONSTRUCTION ON THE OPE N GROUND EXCEPT ROADS AND ROADS BY THEMSELVES CANNOT CONSTITUTE BUILDING. HE STATED IN THE FACTS BEFORE US THE TOLL ROAD IS CONSTRUCTED AND THERE ARE TOLL PLAZAS AND ADMINISTRATIVE BUILDINGS AND THE ROADS ARE CONNECTED TO THESE BUILDINGS WHICH ARE TO LL PLAZAS AS WELL AS BUILDINGS. ACCORDINGLY HE STATED THAT THE FACTS ARE TOTALLY D IFFERENT HE STATED THAT THE FACTS OF HIS CASE ARE IDENTICAL TO THE CASE OF GWALIOR SILK MILLS MFG. CO. LTD. (SUPRA) AND THE ITA NO.1450-53/AHD/2008 & ITA1184/AHD/2009 A. YS. 03-04 & 04-05 GR & INFRA. CO.LTD. ABD V CIT GNR & ITO GNR PAGE 12 DEPRECIATION HAS BEEN RIGHTLY ALLOWED BY THE ASSESS ING OFFICER. IN VIEW OF THESE ARGUMENTS THE LD. COUNSEL FOR THE ASSESSEE URGE TH E BENCH TO ALLOW THE CLAIM OF DEPRECIATION. 10. ON THE OTHER HAND THE LD. CIT-DR ARGUED ON BEH ALF OF THE REVENUE. HE STATED THAT THE ASSESSING OFFICER ORDER DATED 23-03 -2006 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AS THE ASSES SMENT HAS BEEN MADE WITHOUT MAKING RELEVANT INQUIRIES PARTICULARLY WITH REFEREN CE TO ADMISSIBILITY OF ASSESSEES CLAIM OF DEPRECIATION ON TOLL-ROAD. HE STATED THAT THE CIT AFTER CALLING THE RECORDS NOTICED THAT THE ASSESSING OFFICER FAILED TO MAKE I NQUIRIES AS THE AO IS NOT ONLY ADJUDICATOR BUT ALSO AN INVESTIGATOR PERFORMING QUA SI-JUDICIAL FUNCTION. HE STATED THAT THE AO CANNOT REMAIN PASSIVE IN THE FACE OF RETURN RATHER IT IS HIS DUTY ASCERTAIN THE TRUE FACTS AND CIRCUMSTANCES OF THE CASE SO AS TO PROVOKE AN INQUIRY. ACCORDING TO HIM THE ASSESSMENT ORDER FRAMED WITHOUT MAKING AN INQUIRY IS ERRONEOUS SO AS TO PREJUDICIAL TO THE INTEREST OF REVENUE. HE REFERRED TO CASE LAW OF HONBLE MADRAS HIGH COURT TO THE CASE LAW OF VENKATAKRISHNA RICE CO. V. CIT (1987) 163 ITR 189 (MAD). HE ALSO REFERRED TO THE CASE LAW OF HONBLE APEX CO URT OF MALABAR INDUSTRIAL CO. LTD. V CIT (2000) 243 ITR 83 (SC) WHEREIN IT IS STATED THAT T HE SCHEME OF THE ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE OF PROVISIONS OF ACT AND THIS TASK IS ENTRUSTED TO THE ASSESSING OFFICER. IT IS ALSO HELD THAT IF DUE TO ERRONEOUS OF THE ASSESSING OFFICER THE REVENUE IS LOOSING TAX LAWFULLY PAYABL E BY ANY PERSON AND IT WILL CERTAINLY BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. 10.1 ANOTHER FACET OF ARGUMENT HE MADE IS THAT THE ROAD IS NOT THE ASSET OF THE ASSESSEES BUSINESS AS THE ASSESSEE IS NOT THE OWNE R OF ROAD. HE STATED THAT THE ASSESSEE IS NOT ENTITLED FOR THE DEPRECIATION ON TH IS ROAD AS THE LAND HAS BEEN ALLOTTED TO THE ASSESSEE ON LEASE BASIS FOR A PERIO D OF 31 YEARS AND RATHER IT IS NOT LEASE BUT ONLY RIGHT TO COLLECT TO TOLL FROM THE VE HICLES PASSING THROUGH THIS ROAD. HE STATED THAT THE ASSESSEE CANNOT REFUSE ENTRY TO ANY VEHICLE ON THIS ROAD AS THIS ROAD OWNED BY GOVERNMENT AND NOT BY THE ASSESSEE. 10.2 ANOTHER FACET OF ARGUMENT MADE BY THE LD. CIT- DR IS THAT THE ROADS ARE NOT BUILDINGS FALLING UNDER THE DEFINITION AS PROVIDED U/S.32 OF THE ACT. HE REFERRED TO THE PROVISIONS OF SECTION 32(1) BY VIRTUE OF WHICH DEP RECIATION IS ALLOWED ON VARIOUS ITA NO.1450-53/AHD/2008 & ITA1184/AHD/2009 A. YS. 03-04 & 04-05 GR & INFRA. CO.LTD. ABD V CIT GNR & ITO GNR PAGE 13 ASSETS INCLUDING BUILDINGS IF OWNED BY THE ASSESSE E AND USED FOR THE PURPOSES OF HIS BUSINESS THE DEPRECIATION IS TO BE ALLOWED. B UT HERE ASSESSEE IS NEITHER OWN THE ROAD NOR THE ROAD FALLS UNDER THE DEFINITION OF BUI LDING AS THERE WAS NO OTHER CONSTRUCTION EXCEPT THE ROADS AND THE ROADS BY THEM SELVES COULD NOT CONSTITUTE BUILDINGS AND ACCORDINGLY ASSESSEE WAS NOT ENTITLED DEPRECIATION ON THE COST OF CONSTRUCTION OF THE ROAD. HE REFERRED TO THE CASE LAW OF HONBLE APEX COURT IN THE CASE OF INDORE MUNICIPAL CORPORATION (SUPRA). IN VIEW OF THESE ARGUMENTS LD. CIT- DR URGE THE BENCH TO UPHOLD THE ORDER OF CIT PASSED U/S.263 OF THE ACT. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO GONE THROU GH THE ASSESSMENT ORDERS THE REVISION ORDERS OF CIT PASSED U/S.263 OF THE ACT T HE PAPER BOOKS FILED BY THE LD. COUNSEL FOR THE ASSESSEE AND THE CASE LAWS REFERRED BY BOTH THE SIDES. WE FIND THAT THE ASSESSEE IS ENGAGED IN BUSINESS OF SETTING UP O F INFRASTRUCTURE FACILITY BY WAY OF CONSTRUCTION OF TOLL-ROADS AND PARTICULARLY THIS RO AD KNOWN AS VADODARA-HALOL TOLL- ROAD AS PER THE POLICY OF THE GOVT. OF INDIA IN A PUBLIC PRIVATE PARTNERSHIP. THE GOVT. OF GUJARAT HAS FORMED A SPV IN JOINT VENTURE WITH THE ASSESSEE I.E. BETWEEN GUJARAT GOVT. AND IL & FS GROUP. AS PER THE CHANGE D BUSINESS SCENARIO AFTER ECONOMIC LIBERALIZATION AS PER THE POLICY OF THE GO VT. OF INDIA THE ASSESSEE HAS CONSTRUCTED THIS TOLL-ROAD ON BOOT BASIS. THE ASSE SSEE RAISED FUNDS FOR THE CONSTRUCTION MAINTAIN AND TO OPERATE THIS TOLL-ROA D AND IS ENTITLED TO COLLECT TOLL FROM THE VEHICLES PASSING THROUGH THIS ROAD. THIS ROAD IS CONSTRUCTED BY THE ASSESSEE IN THE COURSE OF CARRYING OUT ITS BUSINESS ACTIVITY AN D THEREFORE THE TOLL-ROAD IS AN ASSET OWNED BY THE ASSESSEE ON BOOT BASIS WITH WHI CH BUSINESS IS CARRIED ON AND EXPLOITED THIS ASSET FOR GENERATING INCOME WHICH I S OFFERED AS REVENUE RECEIPT FOR THE PURPOSES OF TAXATION. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALLOWED THE CLAIM OF DEPRECIATION AFTER CONSIDERING THE REVISED RETURN FILED BY THE ASSESSEE. THE AO HAS ALLOWED THE CLAIM OF DEPRECIATION IN THE COMPUTATION OF INCOME AFTER CONSIDERING THAT THE AS SESSEE HAS CONSTRUCTED THE TOLL- ROAD AND IT IS OPERATED AND MANAGED BY THE ASSESSEE . WE FIND THE TOLL-ROAD IS AN INTEGRAL PART OF THE BUSINESS ACTIVITY OF THE ASSES SEE AND WITHOUT WHICH THE ASSESSEE COULD NOT CARRY ON ITS BUSINESS ACTIVITY. WE FURTH ER FIND THAT THE ASSESSEE IS OWNED A CAPITAL ASSET AND THE SAME IS USED FOR THE PURPOSES OF BUSINESS. IT IS ALSO A FACT THAT IN THE COURSE OF CONSTRUCTION OF TOLL-ROAD THE ASS ESSEE HAS CONSTRUCTED BUILDINGS ITA NO.1450-53/AHD/2008 & ITA1184/AHD/2009 A. YS. 03-04 & 04-05 GR & INFRA. CO.LTD. ABD V CIT GNR & ITO GNR PAGE 14 WHICH ARE ADMINISTRATIVE BUILDING TOLL PLAZAS ON B OTH ENDS OF ROAD FROM WHEREBY THE TOLL IS COLLECTED BY THE STAFF FROM THE PASSING VEHICLES. WE FURTHER FIND FROM THE FACTS THAT THE ROAD CONSTRUCTED BY THE ASSESSEE FOR MS MOST IMPORTANT SOURCE OF ITS REVENUE AND THE BASIC OBJECTIVE IS TO CONSTRUCT THE TOLL-ROAD UNDER BOOT SCHEME. THUS THE ASSESSEE HAS FULFILLED THE BASIC CRITERIA FOR CLAIMING DEPRECIATION I.E. EXISTENCE OF A CAPITAL ASSETS OWNERSHIP OF SUCH AS SET AND MOST IMPORTANT THAT THE ASSESSEE WERE PUT TO USE FOR ITS BUSINESS PURPOSE. WE FIND THAT THE LD. COUNSEL FOR THE ASSESSEE HAS MADE A FINE DISTINCTION IN THE FAC TS OF THE PRESENT CASE WITH THAT OF INDORE MUNICIPAL CORPORATION (SUPRA) BY STATING THE FACT THAT IMC WAS A LOCAL B ODY WHICH DERIVED INCOME FROM SALE OF MANURE PREPARED O UT OF WASTE AND NIGHT OIL DUMPED IN THE TRENCHING GROUNDS OUTSIDE THE MUNICIP AL LIMITS AND IT CONSTRUCTED A METAL ROAD OVER THE TRENCHING GROUND AND CLAIMED TH AT THE SAID EXPENDITURE SHOULD BE TREATED AS ROAD AND CLAIMED DEPRECIATION. THE HO NBLE MADHYA PRADESH HIGH COURT HELD THAT THE METAL ROAD FOR HAULING COMPOSED COULD NOT BE CONSIDERED AS EXPENDITURE AND THE ASSESSEE WAS NOT ENTITLED TO DE PRECIATION. THE HONBLE SUPREME COURT ALSO HELD THAT THE SAID METAL ROADS C ANNOT BE TREATED AS BUILDINGS AS THERE WAS NO OTHER CONSTRUCTION ON THE OPEN GROUND EXCEPT ROADS AND ROADS BY THEMSELVES CANNOT CONSTITUTE BUILDING. WE FIND THAT THE FACTS BEFORE US THE TOLL ROAD IS CONSTRUCTED AND THERE ARE TOLL PLAZAS AND ADMINI STRATIVE BUILDINGS AND THE ROADS ARE CONNECTED TO THESE BUILDINGS ON THE BOTH ENDS H AVING TOLL PLAZAS AS WELL AS BUILDINGS. 12. ANOTHER FACT IN THE PRESENT CASE IS THAT THE DE FINITION OF BUILDING AS APPLICABLE TO SECTION 32 OF THE ACT HAS BEEN SUBSTI TUTED IN RULE-5 OF I.T. RULES 1962 BY THE I.T. (THIRD AMENDMENT) RULES 1987 W.E.F. 2- 4-1987 WHEREBY NOTE 1 BELOW THE TABLE OF RATES AT WHICH DEPRECIATION IS ADMISSI BLE CONSTITUTION PART OF APPENDIX I TO I.T. RULES 1962 OPERATIVE FOR AND FROM ASSESSME NT YEAR 1988-89 BY VIRTUE OF WHICH BUILDINGS INCLUDES ROADS BUILDINGS CULVERS WELLS AND TUBE WELLS. WE FIND THAT NOTE 1 IN THE DEPRECIATION SCHEDULE CLARIFIES THAT BUILDINGS INCLUDE ROADS BRIDGES CULVERTS WELLS AND TUBE WELLS. THE HONBLE SUPREME COURT IN THE CASE OF GWALIOR RAYON SILK MFG. CO. LTD. (SUPRA) HAS ALSO HELD THAT ROADS LAID WITHIN THE F ACTORY PREMISES AS LINKS OR WHICH PROVIDES APPROACH TO THE BUILDINGS ARE NECESSARY ADJUNCTS TO THE FACTORY BUILDINGS TO CARRY ON THE B USINESS ACTIVITIES OF THE ASSESSEE AND WOULD BE BUILDING WITHIN THE MEANING OF SECTI ON 32 OF THE ACT. SIMILARLY DELHI ITA NO.1450-53/AHD/2008 & ITA1184/AHD/2009 A. YS. 03-04 & 04-05 GR & INFRA. CO.LTD. ABD V CIT GNR & ITO GNR PAGE 15 BENCH OF THIS TRIBUNAL IN ITA NO.3211 AND 1983/DEL/2006 IN THE CASE OF DCIT V. M/S. NOIDA TOLL BRIDGE CO. LTD. HAS ALSO ALLOWED THE CLAIM OF THE ASSESSEE ON TOLL - ROAD. 13. ANOTHER ARGUMENT MADE BY LD. CIT-DR WAS THAT TH E ASSESSEE IS NOT THE OWNER OF THE ASSET I.E. TOLL-ROAD. NOW THE QUESTIO N ARISES WHETHER LEGAL TITLE IS NECESSARY OR NOT AND THIS HAS BEEN ANSWERED BY THE HONBLE APEX COURT IN THE CASE OF MYSORE MINERALS LTD. V CIT (1999) 239 ITR 775 (SC) WHEREIN IT WAS HELD THAT THE TERMS OWN OWNERSHIP OWNED ARE GENERIC AND RE LATIVE TERMS. THEY HAVE A WIDE AND ALSO A NARROW CONNOTATION. THE MEANING WOULD DE PEND ON THE CONTEXT IN WHICH THE TERMS ARE USED. THE TERM OWNED AS OCCURRING I N SECTION 32(1) MUST BE ASSIGNED A WIDER MEANING. ANYONE IN POSSESSION OF PROPERTY I N HIS OWN TITLE EXERCISING SUCH DOMINATION OVER THE PROPERTY AS WOULD ENABLE OTHERS BEING EXCLUDED THEREFROM AND HAVING RIGHT TO USE AND OCCUPY THE PROPERTY AND / O R TO ENJOY ITS USUFRUCT IN HIS OWN RIGHT WOULD BE THE OWNER OF THE BUILDINGS THOUGH A FORMAL DEDUCTION OF TITLE MAY NOT HAVE BEEN EXECUTED AND REGISTERED AS CONTEMPLATED B THE TRANSFER OF PROPERTY ACT 1882 REGISTRATION ACT. ETC. IN THE PRESENT CASE NE ITHER THE CIT IN THE REVISION ORDER U/S.263 OF THE ACT OR BY THE ASSESSING OFFICER WHIL E FRAMING ORIGINAL ASSESSMENT HAS RAISED THIS ISSUE BUT THE LD. COUNSEL FOR THE ASSE SSEE CATEGORICAL STATED THAT THIS TOLL-ROAD WAS CONSTRUCTED ON BOOT BASIS I.E. MEANS BUILD OWN OPERATE AND TRANSFER. ACCORDING TO HIM THE ENTIRE RESPONSIBI LITY FOR MAINTAINING AND OPERATING THIS TOLL-ROAD FOR 31 YEARS IS ON ASSESSEE AS HE HAS TO COLLECT TOLL-FEE . ONCE THIS CONCEPT OF BOOT HAS BEEN ACCEPTED BY GOV. OF INDIA UNDER INFRASTRUCTURE POLICY AND THE GOVT. OF GUJARAT ALSO ENTERED IN A JOINT VENTUR E WITH THE ASSESSEE AND FORMED AN SVP THE QUESTION OF OWNERSHIP REST WITH THE ASSESS EE FOR THE PURPOSES OF CLAIM OF DEPRECIATION. ACCORDINGLY THIS ISSUE ON MERITS IS ALLOWED IN FAVOUR OF THE ASSESSEE. AS REGARDS TO THE ARGUMENT OF LD. COUNSEL FOR THE A SSESSEE AS REGARDS TO MERGER THEORY THE ARGUMENTS BECOME ACADEMIC HENCE NEEDS NO ANSWER. 14. COMING TO ISSUE IN ITA NO.1453/AHD/2008 FOR ASSESSMENT YEAR 2004-05 IS AS REGARDS TO THE ORDER OF CIT DEALT WITH THE ISSUE OF DISALLOWANCE OF UNABSORBED DEPRECIATION AS WELL AS UNABSORBED BUSINESS LOSS. FOR THIS THE ASSESSEE HAS RAISED GROUND NO.8 :- ITA NO.1450-53/AHD/2008 & ITA1184/AHD/2009 A. YS. 03-04 & 04-05 GR & INFRA. CO.LTD. ABD V CIT GNR & ITO GNR PAGE 16 8) ON THE FACTS & CIRCUMSTANCES OF THE CASE THE AP PELLANT SUBMITS THAT THE LEARNED COMMR. OF INCOME TAX HAS DEALT WITH THE ISS UE OF PROVISIONS OF SECTION 72A OF INCOME TAX ACT 1961 WHICH IS NOT AT ALL THE SUBJECT MATTER OF THE ASSESSMENT ORDER PASSED BY THE LEARNED INCOME T AX OFFICER. THE LEARNED COMMR. OF INCOME TAX HAS WRONGLY ASSUMED TH AT PROVISIONS OF SECTION 72A ARE APPLICABLE FOR A.Y 2004-05 AND HAS WRONGLY CONCLUDED THAT THE LEARNED ASSESSING OFFICER HAS ALLOWED UNABSORBE D DEPRECIATION AS WELL AS UNABSORBED BUSINESS LOSS IN A.Y. 2004-05. 15. HAVING HEARD THE RIVAL CONTENTIONS AND GOING TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND THAT THE CIT HAS NOTED IN HIS REVISION ORDER THAT ACCOUNTING YEAR OF THE ASSESSEE HAS BEEN ENDED BEFO RE THE AMALGAMATION SCHEME WAS PREFERRED BY THE ASSESSEE AND ACCORDING TO HIM THE IMPLICATION OF THE SCHEME OF AMALGAMATION UNDER THE INCOME-TAX ACT IS LIMITED TO SECTION 72A OF THE ACT. THE CIT FURTHER NOTED THAT THE ASSESSEE IS NOT ENTITLED FOR ANY SUCH BENEFIT AND THE ACCEPTANCE OF THE REVISED RETURN IS ALSO PREJUDICIA L TO THE INTEREST OF REVENUE BECAUSE THE AMALGAMATING COMPANY NAMELY GUJARAT T OLL ROAD INVESTMENT COMPANY LTD. (GTRICL IN SHORT) HAS TAKEN ADVANTAGE OF 50% OF THE INCOME FROM 01-10-2003 TO 31-03-2004 AND THE CONSEQUENTIAL LOSS HAS ALSO BEEN GOT ADJUSTED IN THE CASE OF THE AMALGAMATING COMPANY GTRICL. THE L D. COUNSEL FOR THE ASSESSEE ARGUED REGARDING THE VALIDITY OF THE ORDER PASSED B Y THE ASSESSING OFFICER AND STATED THE FACT THAT THE ASSESSEE WAS A PUBLIC LIMITED COM PANY AND THIS COMPANY IS AMALGAMATED WITH GTRICL AS PER THE ORDER OF JURISDI CTIONAL HIGH COURT DATED 11-05- 2005. HE FILED THE COPY OF HONBLE JURISDICTIONAL H IGH COURT AND AS PER THE COPY OF THE SAID ORDER VHTRL IS AMALGAMATED WITH GTRICL W.E .F. 1-10-2003. AFTER THE ORDER OF HONBLE JURISDICTIONAL HIGH COURT VHTRL CE ASES TO EXIST AND IS WOUND UP WITHOUT ANY FURTHER PROCESS OF LAW. ACCORDING TO HI M VHTRL LOSSES ITS IDENTITY AND EXISTENCE AND THE AO IS AWARE ABOUT THIS FACT AS CA N BE INFERRED FROM PAGE 1 OF THE ASSESSMENT ORDER. HE STATED THAT AFTER THE ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT DATED 11-05-2005 VHTRL IS NOT ANYMORE LEGAL E NTITY IN EXISTENCE AND NO PROCEEDINGS CAN TAKE PLACE AGAINST VHTRL. THE AO HA S ISSUED NOTICE U/S.143(2) TO VHTRL AND THIS FACT IS ALSO RECORDED BY THE AO ON P AGE 1 OF THE ASSESSMENT ORDER. THE ASSESSMENT ORDER IS PASSED AGAINST VHTRL AND TH IS FACT IS ALSO EVIDENT FROM PAGE 1 OF THE ASSESSMENT ORDER. HE FURTHER STATED THAT VHTRL HAD FILED THE RETURN OF INCOME ORIGINALLY FOR THE PERIOD 01-04-2003 TO 31-0 3-2004 AS THE DUE DATE OF FILING THE RETURN WAS 30-02-2004 AND THE HONBLE JURISDICT IONAL HIGH COURT HAD NOT PASSED ITA NO.1450-53/AHD/2008 & ITA1184/AHD/2009 A. YS. 03-04 & 04-05 GR & INFRA. CO.LTD. ABD V CIT GNR & ITO GNR PAGE 17 ANY ORDER TILL 30-10-2004 AND THE ORDER OF THE HON BLE JURISDICTIONAL HIGH COURT IS DATED 11-05-2005. IN RESPECT OF THE PREVIOUS YEAR 0 1-04-2003 TO 30-09-2003. VHTRL HAS OFFERED IN THE REVISED RETURN INCOME ONLY FOR T HE PERIOD FOR WHICH IT WAS LEGALLY IN EXISTENCE. THE ASSESSING OFFICER HAS ALSO MADE A RE FERENCE TO THE REVISED RETURN AND THE SAID FACTS ARE RECORDED ON PAGE 1 OF THE AS SESSMENT ORDER. THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THIS ISSUE WILL BE DEC IDED AT THE TIME OF ALLOWANCE OF SET OFF AND CARRY FORWARD OF LOSSES AND WHETHER THE PR OVISIONS OF SECTION 72A WILL APPLY OR NOT AND NOT AT THIS STAGE. WE FIND FORCE IN TH E ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT IN THE ABOVE GIVEN FACTS THE REVISED RETURN OF THE ASSESSEE IS A VALID RETURN AND THE ASSESSMENT FRAMED BY THE ASSESSING O FFICER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. EVEN OTHER WISE THE SET OFF AND CARRY FORWARD OF LOSS IN TERMS OF SECTION 72A OF THE ACT WILL BE DECIDED AT THE TIME OF ALLOWANCE OF LOSSES. ACCORDINGLY THIS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED. 15. COMING TO ISSUE IN ITA NO.1453/AHD/2008 FOR ASSESSMENT YEAR 2004-05 IS AS REGARDS TO THE ORDER OF CIT DEALT WITH THE ISSUE OF ALLOWANCES OF EXPENSES ON ROAD OVERLAY AND RENEWAL EXPENSES. FOR THIS THE ASSESSE E HAS RAISED GROUND NO.11 :- 11) THE LEARNED COMMISSIONER OF INCOME TAX HAS DIR ECTED THAT THE EXPENDITURE ON ROAD OVERLAY AND RENEWAL EXPENSES SH OULD BE THOROUGHLY EXAMINED BY THE ASSESSING OFFICER. THE APPELLANT SU BMITS THAT NO SUCH EXPENDITURE IS INCURRED OR CLAIMED BY THE APPELLANT IN A.Y 2004-05. ON THE FACTS AND CIRCUMSTANCES OF THE CASE HE APPELLANT PR AYS THAT THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX IS BAD IN LAW AND AGAINST THE PROVISIONS OF SECTION 263 OF INCOME TAX ACT 1961. THE APPELLANT PRAYS THAT THE ORDER PASSED U/S.263 MAY BE CANCELLED. 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND GOING T HROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE ORDERS OF THE LOWER AUTHORITIES THAT THE ASSESSEE HAS INCURRED EXPENDITURE UNDER THE HEAD RO AD OVERLAY AND RENEWABLE EXPENSES. THE ASSESSING OFFICER WHILE FRAMING THE ASSESSMENT HAS ALLOWED THE ASSESSEE BUT THE CIT JUST FOR MAKING ROWING INQUIRI ES HAS ALSO INCLUDED FOR REVISION U/S.263 OF THE ACT WHILE ISSUING NOTICE. THE RELE VANT TEXT OF THE NOTICE U/S.263 OF THE ACT READS AS UNDER:- 7. IT IS FURTHER NOTICED THAT THE A.O HAS FAILED T O TAKE INTO ACCOUNT THE SIGNIFICANT ACCOUNTING POLICY IN RESPECT OF ROAD OV ERLAY AND RENEWAL EXPENSES AS LAID DOWN IN THE AGREEMENT BUILD OWN OPERAT E TRANSFER BASIS WHEREBY THE EXPENSES CLAIMED UNDER THE ROAD OVERLAY HAS NOT BEEN SCRUTINIZED. ITA NO.1450-53/AHD/2008 & ITA1184/AHD/2009 A. YS. 03-04 & 04-05 GR & INFRA. CO.LTD. ABD V CIT GNR & ITO GNR PAGE 18 IN RESPONSE TO THIS QUERY THE ASSESSEE REPLIED THA T THE EXPENDITURE UNDER THE HEAD ROAD OVERLAY AND RENEWABLE EXPENSES THE SAME HAS N OT BEEN CLAIMED IN A.Y 2004- 05 RELEVANT TO PREVIOUS YEAR 01-04-2003 TO 30-09-2 003. BUT IN ANY CASE IN OTHER YEARS THE SAME WAS CLAIMED AS BUSINESS EXPENDITURE AND THE ASSESSING OFFICER AFTER VERIFYING THE SAME HAS ALLOWED THE CLAIM OF R OAD OVERLAY AND RENEWABLE EXPENSES AS BUSINESS EXPENSES. WE FIND FROM THE RE CORDS THAT THE CIT HAS ONLY REQUIRED THE ASSESSING OFFICER TO VERIFY THE EXPENS ES WE AFRAID WHETHER THE CIT HAS SUCH POWER OF VERIFICATION U/S.263 OF THE ACT OR NO T. WE FEEL THAT THE REVISION ORDER IN SUCH CIRCUMSTANCES IS UNWARRANTED. ACCORDINGLY AS SESSEE SUCCEEDS ON THIS ISSUE. 17. AS ALL THE THREE ISSUES IN THESE APPEALS OF THE ASSESSEE ARE DECIDED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY THE REVISION ORDER P ASSED BY CIT GANDHINAGAR U/S.263 OF THE ACT IS QUASHED IN VIEW OF THE REASON S STATED ABOVE. 18. IN THE RESULT ASSESSEES APPEALS ARE ALLOWED. ORDER PRONOUNCED ON THIS DAY OF 12 TH FEBRUARY 2010 SD/- SD/- (DR.O.K.NARAYANAN) (MAHAVIR SINGH) (VICE PRESIDENT) (JUDICIAL MEMBER) AHMEDABAD DATED : 12/02/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT GANDHINAGAR 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ / DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD