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2014 (11) TMI 354 - HC - Income TaxClassification of Bypass Toll Road – Building or Plant - Entitlement for higher rate of depreciation - Whether the Tribunal was correct in law in holding that Moradabad Bypass Toll Road (Highway) was a building and not a plant – Held that:- CIT(A) rightly was of the view that the road cannot be said to be ‘plant’ and was a ‘building’ for the purpose of allowing depreciation - in Commissioner of Income-Tax Versus Gwalior Rayon Silk Manufacturing Co. Limited [1992 (4) TMI 3 - SUPREME Court] it has been held that the ‘roads’ would be ‘buildings’ within the meaning of Section 32 of the Act - the real test to construe a structure as a ‘plant’, it is to be seen that the structure is used as a tool or apparatus in the business of the assessee - the structure is so constructed so as to serve the assessee’s special technical requirements which in normal parlance is called the functional test - the toll road has been executed by the assessee on built, operate and transfer basis (BOT) - BOT is a form of project financing wherein a private entity receives a concession from the public sector or for that matter private sector to finance, design, construct and operate a facility stated in the concession contract - This enables the project proponent to recover its investment, operating and maintenance expenses in the project. The facility shall be transferred to the public sector at the end of the concession period - The word ‘build’ signifies construction of a road, whereby the tax payer brings into existence a structure/surface and nothing more - The word ‘operate’ signifies the understanding between the assessee and the public authority to collect charges for the usage of the road - The road is a surface on which the vehicles ply - No special features have been pointed out which serves as tool or apparatus while operating the road - No doubt in some roads toll plazas are erected for collecting the usage charges - These are small booths which are manned at some places and unmanned at some, where the user deposits the money in a machine which opens the gate - To cut costs and minimize the time delay, the usage charges are collected by some form of automatic or electronic toll collection equipment - the manned toll booths/toll plazas are primarily a facility/convenience for collecting the usage charges of the road and nothing more - That would not change the characteristic of ‘road’. ‘Plant’ as defined and understood for tax purposes means tool or equipment used for purposes of business or profession - Toll road would not be a plant in that sense, for, it is a capital asset which when used by any person, who makes payment for the said use, generates and results in accrual of income - It is a capital asset which is the very business of the assessee and not a implement or a tool used by the assessee for his business - the toll road would not qualify as a ‘plant’ so as to entitle the assessee a higher rate of depreciation – Decided against assessee.
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