“4. There Is No Doubt That Where The Assessee Incurs Expenditure v. In View Of Above, Central Board Of Direct Taxes, In Exercise Ofthe Powers Conferred Under Section 119 Of The Act Herebyclarified That The Cost Of Construction O

OD-2 ORDER SHEETIN THE HIGH COURT AT CALCUTTAConstitutional Writ JurisdictionORIGINAL SIDEWPO 156 OF 2021 EMAS EXPRESSWAY PVT. LTD.VersusASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 8(1) KOLKATA AND ORS. BEFORE: The Hon'ble JUSTICE SHEKHAR B. SARAF Date : 12 April, 2021. Appearance :Mr. Ratnanko Banerjee, Sr. Adv.Mr. Asim Choudhury, Adv.Ms. Aesa Dey, Adv.…For the PetitionerMr. Dhiraj Kumar Trivedi, Adv.Mr. M. N. Bandopadhyay, Adv.…For the Respondents The Court : This is an application under Section 226 of the Constitution ofIndia wherein the writ petitioner is aggrieved by an order dated March 4, 2021passed by the Assistant Commissioner of Income Tax, Circle 7(1), Kolkatadisposing of the objections filed by the assessee with regard to reopening ofassessment under Sections 147 to 150 of the Income Tax in relation toassessment year 2015-16. The main reason for reopening of the assessment is that the assessee haserroneously applied CBDT Circular No.09/2014 dated 23/04/2014 and claimedamortization expenses for the financial year 2014-15. According to the IncomeTax Department, this Circular is not applicable to the assessee as the assessee is a BOT (Build –Operate- Transfer), who receives amenity while the circular appliesonly to BOT operators who are collecting toll. Mr. Banerjee, assisted by Mr. Asim Choudhury, has placed this circularand relied specifically on paragraphs 4 and 5 of the said circular. Paragraphs 4 and 5 are delineated below :- “4. There is no doubt that where the assessee incurs expenditure on a project for development of roads/highways, he is entitled torecover cost incurred by him towards development of suchfacility (comprising of construction cost and other pre-operativeexpenses) during the construction period. Further, expenditureincurred by the assessee on such BOT projects brings to it anenduring benefit in the form of right to collect the roll during theperiod of the agreement. Hon’ble Supreme Court in the case ofMadras Industrial Investment Corporation Ltd. Vs. CIT in 225ITR 802 allowed spreading over of liability over a number ofyears on the ground that there was continuing benefit to thecompany over a period. Therefore, analogously, expenditureincurred on an infrastructure project for development ofroads/highways under BOT agreement may be treated as havingbeen made/incurred for the purposes of business or professionof the assessee and same may be allowed to be spread duringthe tenure of concessionaire agreement. 5. In view of above, Central Board of Direct Taxes, in exercise ofthe powers conferred under section 119 of the Act herebyclarified that the cost of construction on development of infrastructure facilities of roads/highways under BOT projectsmay be amortized and claimed as allowable businessexpenditure under the Act.” Mr. Banerjee further submitted that since the assessee wasentitled to deduction under Section 80IA of the Income Tax Act, 1961,there was no question of any escapement of tax as increase in incomeby not claiming amortization would not result in the assessee payingany further tax as the same was 100% deductible under Section 80IA. Mr. Trivedi, learned Advocate appearing on behalf of therespondent relies on first paragraph of the circular and submits thatthe circular is not applicable to the assessee. The first paragraph isdelineated below : “It has come to the notice of the Board that disputes havearisen as to whether the expenditure incurred on developmentand construction of infrastructural facilities like roads/highwayson Build-Operate-Transfer (‘BOT’) basis with right to collect tollis entitled for depreciation under section 32(1)(ii) of the Act orthe same can be amortized by treating it as an allowablebusiness expenditure under the relevant provisions of theIncome-Tax Act, 1961 (‘Act’).” Mr. Trivedi, learned Senior Counsel submits that since thisinfrastructure facilities run by the assessee does not have any right forcollecting toll, this circular is not applicable to the assessee. “It has come to the notice of the Board that disputes havearisen as to whether the expenditure incurred on developmentand construction of infrastructural facilities like roads/highwayson Build-Operate-Transfer (‘BOT’) basis with right to collect tollis entitled for depreciation under section 32(1)(ii) of the Act orthe same can be amortized by treating it as an allowablebusiness expenditure under the relevant provisions of theIncome-Tax Act, 1961 (‘Act’).” Mr. Trivedi, learned Senior Counsel submits that since thisinfrastructure facilities run by the assessee does not have any right forcollecting toll, this circular is not applicable to the assessee. Mr. Trivedi, Learned Senior Counsel further relies on theimpugned order and submits that all the objections of the petitionerhave been taken care of. Upon perusal of the document, I find that the impugned orderdoes not address the issue in relation to the tax neutrality because ofthe fact that the assessee was eligible for deduction under Section 80IA.All other issues raised by the petitioner have been dealt with. Whetherthe same have been dealt with correctly or not, has not been gone intoby me in this writ petition. In my view, the Commissioner of Income Tax should have lookedinto the fact as to whether there could not be an escapement of taxbecause of the fact of the deduction available to the petitioner underSection 80IA. It is to be noted that this was the last year of deductionthat was available to the petitioner out of the ten consecutive years thatis available. As the reassessment proceeding is based on the fact thatthere was an escapement of tax, this issue was required to be answeredand taken care of by the Commissioner of Income Tax. This not havingbeen done, the impugned order is quashed and set aside with adirection upon the Officer to pass a further reasoned order aftergranting an opportunity of hearing to the petitioner. The Commissioner of Income Tax is specifically directed to dealwith all points including the point in relation to escapement of taxbecause of deduction available to the petitioner under Section 80 IA ofthe Act. The writ petition being WPO No.156 of 2021 is disposed ofaccordingly. Since no affidavits have been filed in this matter, the allegationsmade in the writ petition are deemed not to have been admitted by therespondent. Urgent xerox certified copy of this order, if applied for, be given tothe parties upon compliance of all formalities. S. De (SHEKHAR B. SARAF, J.)