FCC

Rs 16,000 Crore Tax Relief Granted to DND Flyway Builder by ITAT

2023-08-22

The Income Tax Appellate Tribunal (ITAT) has granted relief of Rs 160 billion to the troubled IL&FS subsidiary, Noida Toll Bridge Company, which operates the Delhi-Noida Direct Flyway. This relief stems from the dismissal of the tax department's efforts to increase the assessment, justify additional charges, and reopen the evaluation.

The original demand amounted to Rs 79.83 billion, accompanied by an equivalent sum in penalties, spanning the assessment years 2006-07 to 2011-12. While the initial assessment was issued on December 31, 2008, the decision to initiate reevaluation proceedings, aimed at disallowing the amortization of interest on zero coupon bonds, occurred on March 28, 2013. The tribunal noted that this action took place "beyond four years" and stated that the issue of interest amortization had already been settled in favor of the company for assessment year 2004-05.

Noida Toll Bridge Company also contested the commissioner of income tax's heightened assessment on three grounds: an outstanding designated return (approximately Rs 180 crore), the treatment of leased land as revenue subsidy (Rs 17.3 billion), and the disallowance of depreciation (around Rs 160 million).

The tribunal determined that the commissioner (appeals) lacked the authority to "introduce a new income source" when the assessing officer had not evaluated any income. It pointed out that the three issues raised by the commissioner (appeals) were never considered by the assessing officer and were not part of the income return. Therefore, the tribunal deemed this enhancement legally flawed.

Furthermore, the tribunal rejected the commissioner (appeals)'s rationale for boosting the assessment. The commissioner had asserted that the company was entitled to a 20% return from the government, based on an accountant's report. Dismissing this, the tribunal emphasized that the certificate did not grant the company a 20% return on project costs. It clarified that the commissioner (appeals) misunderstood the arrangement between Noida and IL&FS and dismissed the Rs 180 crore addition.

The commissioner (appeals) also increased the assessment by Rs 17.3 billlion, contending that the land was transferred to Noida Toll Bridge Company without any consideration for commercial exploitation, a fact undisclosed in the books. The tribunal ruled against this, stating that the lands were leased and ownership transfer did not occur, thus negating the addition.

Lastly, the tribunal rejected the disallowance of depreciation, as it concluded that no capital subsidy was involved, since a portion of the land owned by the company was treated as a capital receipt.