Foot over bridges and bus shelters are parts of infra facility

By | August 22, 2015

Construction of foot over bridges and bus shelters are parts of infra facility for claiming section 80IA Deduction

Q : Whether bus shelters  are part of a highway project as per clause (b) of the Explanation?

yes  Construction of foot over bridges and bus shelters are parts of infra facility for claiming section 80IA Deduction

Facts of the Case are

The assessee has claimed ‘bus shelter’ as an integral part of road system.

Assessee View point

For the purpose of highway system the building of the bus shelters are functional necessity and these are inextricably connected with the infrastructure required for highway. Without bus shelters the smooth movement of the vehicles and the operation of the vehicles through the highway shall not be of desired level. Thus the bus shelters are functionally necessary part and parcel of the highway infrastructure.

 

Revenue view Point :-

Bus shelters is an area on the side of the road where passengers wait for the arrival of their bus. The same is totally independent to the road. In other words the ‘bus shelters’ are constructed only on the roads where the buses run and without the bus shelters the roads have an independent identity and can function without them. The existence and functioning of a ‘road’ does not depend on the ‘bus shelter’ however, the vice versa is not true, i.e., the ‘bus shelters’ cannot run without the ‘road’. Though ‘bus shelters’ is an item of public utility but the same cannot form part of the ‘road’. In fact these days there are host of facilities which are provided on road sides such as toilet blocks, small eateries, drinking water facilities, etc., which are items of public utility and are spin off from the road project but they cannot form part of the ‘road’ as envisaged in the explanation.

The assessee has also claimed the said ‘bus shelters’ as part of a highway project as per clause (b) of the Explanation. However, the ‘bus shelters’ cannot be a part of highway project because they are not constructed on highways. The ‘bus shelters’ are constructed on city roads. Moreover, the meaning of ‘integral part’ is that if an entity is developing the highway project and if any activity being integral to it is also being developed then that activity will be included in the ‘highway project’. Hence the assessee is not developing any highway project.

In view of the above discussion the deduction claimed under section 80-IA for bus shelters is not allowable to the assessee

Decision

It has been held that development of foot overbridges and bus shelters do qualify for deduction under section 80-IA of the Act on account of infrastructure development. I. T. A. No.1055/Kol/2008, dated June 30, 2009.  Dy. CIT v. Selvel Advertising (P.) Ltd [2015]

IN THE ITAT KOLKATA BENCH ‘A’

Deputy Commissioner of Income-tax

v.

Vantage Advertising (P.) Ltd.

MAHAVIR SINGH, JUDICIAL MEMBER
AND SHAMIM YAHYA, ACCOUNTANT MEMBER

IT APPEAL NOS. 1388 TO 1392 (KOL.) OF 2012
[ASSESSMENT YEARS 2004-05, 2006-07 TO 2009-10]

MARCH  10, 2015

P. Mukherjee for the Appellant. J.P. Khaitan, Sr. Adv. for the Respondent.

ORDER

Shamim Yahya, Accountant Member – These appeals filed by the Revenue are directed against the orders of the learned Commissioner of Income-tax (Appeals)-XII, Kolkata, for the concerned assessment years. Since the issues are common and connected and the appeals were heard together these are being disposed of by this common order for the sake of convenience.

2. One common issue raised in all the appeals is that whether depreciation of hoardings is to be allowed at 100 per cent or 50 per cent as it was used for less than 180 days.

3. We have heard both counsel and carefully perused the records. Learned counsel for the assessee submitted that the issue involved is duly covered by the decision of the Tribunal in the assessee’s case for the assessment years 2004-05 and 2005-06 in I. T. A. Nos. 1054 and 1055/Kol/2008 vide order, dated June 30, 2009. Learned counsel submitted that the learned Commissioner of Income-tax (Appeals) has granted relief to the assessee on the basis of the said Tribunal’s order in the assessee’s own case. Hence learned counsel for the assessee submitted that there is no need to interfere with the order of the learned Commissioner of Income-tax (Appeals). The learned Departmental representative, on the other hand, relied upon the order of the Assessing Officer. However, he accepted that the issue has been decided in the assessee’s own case in favour of the assessee on the same issue. We find that the Tribunal in the order aforesaid has decided the issue in favour of the assessee by holding as under :

“15. After hearing both sides we find that the Revenue has not brought anything on records that the hoardings are having longer life than claimed by the assessee and giving benefit of enduring nature. The assessee’s claim is that these hoardings are having life of one to two months and less than a year. These hoardings are put in use for less than 180 days. The Assessing Officer has not brought any evidence regarding the durability of the hoardings. The Assessing Officer’s observations appears to be a guess work in respect of quality of structure of the boards. The assessee has asked for 100 per cent depreciation on the structure used for less than 180 days on account of non-durability of its structures. The Commissioner of Income-tax (Appeals)’s order get support from the Income-tax Appellate Tribunal, Jabalpur Bench decision relied upon. In that case the hon’ble Income-tax Appellate Tribunal, Jabalpur, has held as under :

‘8. The learned Departmental representative has claimed that there was no necessity of acquisition of any new cylinder, in view of the production of gases in the year under consideration compared to the preceding year. He has also doubted of all the cylinders in the year under consideration. We find that the assessee has given the complete data-wise details of purchase of cylinders which is detailed in page 1 in the assessment order itself. The Assessing Officer has also not doubted the user of all the cylinders for the purpose of business during the year under consideration. On the other hand, he disallowed the depreciation with the observation “50 per cent of the total amount of depreciation for using the plant and machinery for less than 180 days”. Thus, the Assessing Officer has himself accepted the user of all the cylinders for the purpose of business. He had disallowed 50 per cent depreciation because cylinders were used for less than 180 days. The learned Departmental representative is a representative of the Assessing Officer. He cannot dispute a fact, which is accepted by the Assessing Officer himself, therefore, when the Assessing Officer has accepted the user of the cylinders, the learned Departmental representative cannot dispute it. In view of the legal position and the facts as discussed above, we hold that the assessee is entitled to 100 per cent depreciation on gas cylinders purchased and used during the year under consideration amounting to Rs. 15,32,092. Ground Nos. 1, 2 and 3 of the assessee’s appeal are allowed.’

The Commissioner of Income-tax (Appeals) granted relief by allowing 100 per cent not as treating the expenditure as revenue in nature as claimed by the Revenue in its appeal ground. The ratio decided by the hon’ble Income-tax Appellate Tribunal, Jabalpur Bench, appears to be applicable in the assessee’s case.

Respectfully following the decision of the hon’ble Income-tax Appellate Tribunal, Jabalpur Bench, we uphold the order of the learned Commissioner of Income-tax (Appeals) on this issue and dismiss the Revenue’s ground of appeal on this issue.”

4. Since the aforesaid issue has been decided in favour of the assessee by the Tribunal in the assessee’s own case and it is not the case of the Revenue that the above decision has been set aside by the hon’ble High Court, adhering of the doctrine of stare decisis where uphold the order of the learned Commissioner of Income-tax (Appeals). The Revenue’s appeal on this account stands dismissed.

5. Another issue raised by the Revenue in this appeal is that the learned Commissioner of Income-tax (Appeals) was not justified in allowing the assessee deduction under section 80-IA of the Act for construction of foot overbridges as well as bus shelters.

6. In this case, the Assessing Officer has disallowed the assessee’s claim of deduction under section 80-IA of the Act on bus shelters and foot over-bridges. The Assessing Officer has made disallowances by observing as under :

“The assessee has claimed ‘bus shelter’ as an integral part of road system. However, ‘bus shelters’ is an area on the side of the road where passengers wait for the arrival of their bus. The same is totally independent to the road. In other words the ‘bus shelters’ are constructed only on the roads where the buses run and without the bus shelters the roads have an independent identity and can function without them. The existence and functioning of a ‘road’ does not depend on the ‘bus shelter’ however, the vice versa is not true, i.e., the ‘bus shelters’ cannot run without the ‘road’. Though ‘bus shelters’ is an item of public utility but the same cannot form part of the ‘road’. In fact these days there are host of facilities which are provided on road sides such as toilet blocks, small eateries, drinking water facilities, etc., which are items of public utility and are spin off from the road project but they cannot form part of the ‘road’ as envisaged in the explanation.

The assessee has also claimed the said ‘bus shelters’ as part of a highway project as per clause (b) of the Explanation. However, the ‘bus shelters’ cannot be a part of highway project because they are not constructed on highways. The ‘bus shelters’ are constructed on city roads. Moreover, the meaning of ‘integral part’ is that if an entity is developing the highway project and if any activity being integral to it is also being developed then that activity will be included in the ‘highway project’. Hence the assessee is not developing any highway project.

In view of the above discussion the deduction claimed under section 80-IA for bus shelters is not allowable to the assessee.”

7. Upon the assessee’s appeal the learned Commissioner of Income-tax (Appeals) accepted the assessee’s submissions that the issue is squarely by the decision of the Tribunal for the assessment year 2005-06 in I. T. A. No.1055/Kol/2008, dated June 30, 2009.

8. Against the above order, the Revenue is in appeal before us.

9. We have heard both counsel and carefully perused the records. The learned Departmental representative submitted that the assessee is not at all eligible for deduction under section 80-IA of the Act on bus shelters and foot overbridges. The learned Departmental representative submitted that as in this case it is not the case that the assessee has gained any profit or gain from the said business upon which deduction under section 80-IA of the Act is being claimed. The learned Departmental representative submitted that it is not the case that any toll/fee is being charged for the use of foot overbridges or bus shelter for which deduction under section 80-IA of the Act is being claimed. The learned Departmental representative submitted that the assessee is earning income by way of advertising on the foot overbridges and bus shelters which is the subject matter of the assessee’s claim of deduction under section 80-IA of the Act. The learned Departmental representative submitted that the income on account of advertisement cannot said to be an income derived by an undertaking from the business of infrastructure development. Hence he submitted that the assessee cannot be allowed deduction under section 80-IA of the Act. The learned Departmental representative made elaborate submissions with respect to meaning of phrase “derived from”. He also referred to several case law including the decision of the hon’ble apex court in the case of Liberty India v. CIT [2009] 317 ITR 218/183 Taxman 349 (SC). Referring to the ratio emanating from the aforesaid apex court’s decision the learned Departmental representative submitted that the profit of the assessee from the advertising business would certainly be profits and gains of the business in terms of section 28 of the Act, the same would not amount to profits or gains derived from the industrial undertaking. The learned Departmental representative further referred to the hon’ble Calcutta High Court’s decision in the case of Mukherjee Estate (P.) Ltd. v. CIT [2000] 244 ITR 1/113 Taxman 313 for the proposition that income mainly publicity charges by putting up hoarding/displaying advertisement from a building cannot be treated as income from property but income from other sources. The learned Departmental representative further submitted that the above proves that the assessee’s income does not include any profit which is derived from developing or (ii) operating and maintaining or (iii) developing, operating and maintaining foot overbridge and bus shelter. The learned Departmental representative further submitted that the hon’ble Karnataka High Court in the case of CIT v. Skyline Advertising (P.) Ltd. [2014] 225 Taxman 220 (Mag.)/45 taxmann.com 532 , has 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. In view of the above the learned Departmental representative prayed that the assessee cannot be allowed any deduction under section 80-IA of the Act.

10. Learned counsel for the assessee, on the other hand, submitted that the issue is squarely covered in favour of the assessee by the Tribunal’s decision as mentioned above. In the said order the Tribunal had held as under :

“After hearing both sides, we find that the assessee has claimed deduction under section 80-IA on bus shelters treating the same as integral part of highway and development infrastructure. For the purpose of highway system the building of the bus shelters are functional necessity and these are inextricably connected with the infrastructure required for highway. Without bus shelters the smooth movement of the vehicles and the operation of the vehicles through the highway shall not be of desired level. Thus the bus shelters are functionally necessary part and parcel of the highway infrastructure. By holding so we find that the learned Commissioner of Income-tax (Appeals) has rightly allowed the appeal of the assessee on this issue. We uphold the same and dismiss this ground of appeal taken by the Department.”

11. Learned counsel further submitted that the abovesaid order of the Tribunal had been appealed against by the Department in the hon’ble High Court and the hon’ble Calcutta High Court has not yet reversed the decision of the Income-tax Appellate Tribunal. Hence he submitted that the Tribunal’s orders should be sustained. Learned counsel further submitted that the issue involved is covered in favour of the assessee by the decision of the Tribunal in the case of Dy. CIT v. Selvel Advertising (P.) Ltd. [2015] 58 taxmann.com 196 (Kol.) wherein the identical issue has been decided in favour of the assessee. In that case it was also pointed out that the hon’ble Calcutta High Court had passed an order confirming the order of the Income-tax Appellate Tribunal in quashing a revision order passed by the learned Commissioner of Income-tax under section 263 of the Act whereby allowance of section 80-IA of the Act on bus shelters and foot overbridges was disallowed.

12. Learned counsel for the assessee further submitted that section 80-IA of the Act provides for deduction on account of profits and gains derived by an industrial undertaking from any business referred to therein. Learned counsel further submitted that the hon’ble apex court in the case of Liberty India (supra ) dealt with the question whether the profit from the Duty Entitlement Pass Book Scheme (DEPB) and the Duty Drawback Scheme could be said to be profit derived from the business of an industrial undertaking eligible for deduction under section 80-IB of the Income-tax Act. Hence he submitted that this case law does not support the case of the Department. He further submitted that the very agreements under which the assessee has developed, operated and maintained the infrastructure facility at its own cost provided for revenue generation by the assessee by the display of commercial advertisement on the infrastructure facility developed by it. Learned counsel further submitted that the assessee was also not to charge any amount from the public users of the infrastructure facility developed by it. That the assessee was however permitted to use the infrastructure facility developed by it to raise revenue by display of commercial advertisements on it. That the provision in the agreements relating to generation of revenue in the manner aforesaid is inextricably and directly connected with the development, operation and maintenance of the infrastructure facility provided for in the agreements. Learned counsel further submitted that the assessee did not merely develop the infrastructure facility but the assessee also operated and maintained the infrastructure facility which activity are also covered by section 80-IA of the Act. In this regard learned counsel further referred to the decision of the hon’ble Calcutta High Court in the case of CIT v. Cement Mfg. Co. Ltd. [ITAT No. 130 of 2014, dated 15-1-2015]. In this case the hon’ble Calcutta High Court has upheld the Income-tax Appellate Tribunal’s decision holding that the assessee was entitled to deduction under section 80-IC of the Act by treating the transport and interest subsidy as part of the business profit. Accordingly, learned counsel for the assessee submitted that the assessee’s claim of deduction under section 80-IA of the Act cannot be disallowed.

13. We have carefully considered the submissions and perused the records. We find that the issue on merits as to whether the assessee is entitled to deduction under section 80-IA of the Act for construction of foot over-bridge as well as bus shelter is covered in favour of the assessee by the decision of the Tribunal and the hon’ble Calcutta High Court as referred to in the submissions of learned counsel for the assessee. The Tribunal in the assessee’s own case as well as in the case of Selvel Advertising (P.) Ltd. (supra ) has held that bus shelters and foot overbridges should be considered as part of the infrastructure facility for claiming deduction under section 80-IA of the Act. This issue was also supported by the decision of the hon’ble Calcutta High Court in the case of Selvel Advertising (P.) Ltd. (supra ) wherein the hon’ble High Court has upheld the Income-tax Appellate Tribunal’s decision quashing the revision order passed by the learned Commissioner of Income-tax under section 263 of the Act wherein bus shelters and foot overbridges were not to be considered as part of the infrastructure facility for claiming deduction under section 80-IA of the Act.

14. As regards the issue raised by the learned Departmental representative that the income which is the subject matter of claim of deduction under section 80-IA of the Act was not derived from the business of advertising of bus shelters and foot overbridges, we find that this is altogether a new issue which is not even the case of the Assessing Officer. The Assessing Officer has made the disallowance only on the ground that construction of bus shelter and foot overbridge cannot be treated as development of infrastructure facility. Hence they do not qualify for deduction under section 80-IA of the Act. This aspect of the Assessing Officer’s disallowance has been duly overruled by the learned Commissioner of Income-tax (Appeals) as well as the Income-tax Appellate Tribunal. The same also draws support from the hon’ble Calcutta High Court decision in the case of Selvel Advertising (P.) Ltd. (supra ). In these cases it has been held that development of foot overbridges and bus shelters do qualify for deduction under section 80-IA of the Act on account of infrastructure development. When the Assessing Officer has not raised any issue as to whether the income of the assessee can be considered to be income derived from the industrial undertaking and the same was also not the subject-matter of consideration before the learned Commissioner of Income-tax (Appeals) nor any such ground has been raised before the Income-tax Appellate Tribunal, in our considered opinion the learned Departmental representative cannot now enlarge the scope of the Revenue’s appeal before us.

15. In this regard we also draw support from the hon’ble Madhya Pradesh High Court exposition in the case of Kamal Kishore & Co. v. CIT [1998] 232 ITR 668 for the following proposition (headnote) :

“Section 253 of the Income-tax Act, 1961, permits appeals to the Appellate Tribunal. Under sub-section (2) of this section, the Commissioner may, if he objects to any order, direct the Assessing Officer to appeal to the Appellate Tribunal against the order. It is thus clear that there has to be an appeal and there has to be a specific objection. Under Order 41, rule 2, of the Code of Civil Procedure also it is clear that the appellant shall not except by leave of the court, urge or be heard in support of any ground of objection not set forth in the memorandum of appeal.”

16. On the basis of the above ratio the hon’ble High Court had held that admittedly the ground of status was not taken by the Department in terms of section 253(2) of the Act. No leave was obtained to urge the ground in regard to the status as regards the liability to tax. The Tribunal erred in law in setting aside the findings given by the Appellate Assistant Commissioner that the assessee was a separate entity and the assessment made in the case of the assessee should be treated as substantive.

17. Thus from the above we hold that the issue which was not the basis of disallowance by the Assessing Officer and the same was not the subject-matter of consideration by the learned Commissioner of Income-tax (Appeals) and the same was also not the subject-matter of the ground of appeal taken before the Income-tax Appellate Tribunal the issue now being raised by the learned Departmental representative need not be adjudicated by us. Hence on the issue as to whether foot overbridges and bus shelters qualify for deduction of section 80-IA of the Act we hold that the learned Commissioner of Income-tax (Appeals) is correct in holding the assessee’s entitlement for deduction under section 80-IA of the Act. Accordingly, this ground of appeal raised by the Revenue stands dismissed.

18. In the result, these appeals filed by the Revenue stand dismissed.

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