TMI Blog2021 (12) TMI 444X X X X Extracts X X X X X X X X Extracts X X X X ..... al filed by the assessee is directed against the order dated 13th December, 2017 of the CIT(A)-38, New Delhi, relating to assessment year 2013- 14. 2. The grounds raised by the assessee are as under:- Appeal under section 253(1 )(a) of the Income-tax Act, 1961 ( the Act ) against the order dated December 13, 2017 (received on March 14, 2018) passed under section 250(6) of the Act by the Commissioner of Income Tax (Appeals) - 38, Delhi [ CIT(A) ] for assessment year 2013-14. 1. That on the facts and circumstances of the case and in law, the Assessing Officer ( AO ) erred in completing the assessment of the Appellant at a loss of INR 10,26,64,940 as against returned loss of INR 71,62,82,584. 2. That on facts and in the circumstances of the case and in law, the CIT(A) has erred in upholding the action of the AO disallowing the deprecation amounting to INR 61,36,17,642 claimed by the Appellant on toll road applying the Central Board of Direct Taxes Circular No. 9/2014 dated April 23, 2014. 3. That on facts and in the circumstances of the case and in law, the AO has erred in not appreciating that the Appellant is the owner of the toll road and, consequently, en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstructed by it apparently fell under the category of Buildings . ii. Whether the assessee is entitled to deprecation on carriageway as it is not the actual owner of the infrastructure facility. Since the assessee was not actual owner of the infrastructure facility, having only limited rights of use, it was asked to explain as to why cost of construction on development of infrastructure facility may not be allowed as amortized business expenditure as per the clarification issued by CBDT vide their Circular No. 09/2014 dated 23.04.2014. 4. He, therefore, asked the assessee to explain as to why depreciation as claimed by the assessee should be allowed as per Rules applicable to Plant Machinery. Rejecting the various explanations given by the assessee, the AO held that the assessee is not the owner of the project. He, therefore, disallowed the depreciation claimed by the assessee on the toll road under the block Buildings or Plant Machinery as the assessee is not the owner of the project. He, therefore, disallowed the depreciation claimed by the assessee on the toll road (carriage way) and added the same to the total income of the assessee. Further, the AO held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6424 days 3. Total operational period of the project during the year 55 days 4. Amortized expenditure allowable during the year ₹ 7,90,74,438 5.1 The AO accordingly made an addition of ₹ 61,36,17,642/- to the total income of the assessee. 6. In appeal, the ld.CIT(A) upheld the action of the AO in applying the Circular retrospectively by observing as under:- 3.2 I have carefully perused the assessment order and facts on record. The facts of the case are that appellant has entered into a concessionaire Build Own Transfer (BOT) agreement with NHAI on May 19, 2009 to design, build, finance, operate and widen to four lane the Pune Solapur section of National Highway 9for a period of 21 years from September 14, 2009. The operation of the toll road will be transferred to NHAI at the end of the concession period. Activities of the appellant during the year under consideration are in accordance with the objects stated in the memorandum of association. This right to develop and operate the facility is acquired for a fixed term ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not eligible for depreciation. I therefore, uphold the action of assessing officer in retrospectively applying circular no.9/2014. 6.1 So far as the issue of depreciation is concerned, here also, the ld.CIT(A) decided the issue against the assessee by observing as under:- 4.3 The appellant has contended that the Ld. Assessing officer has not commented upon the ownership of two distinct assets, viz (a) The toll road and (b) The right to collect toll on the toll road . The appellant has further submitted inter alia that 1.3 The AO completed the assessment in the instant case holding as under: a) Appellant is not entitled to claim depreciation on toll road under the block 'Plant Machinery as assesse is not the owner of the project. Therefore, the depreciation claimed by the Appellant on the toll road (Carriageway) was disallowed. b) The Appellant is not entitled to claim depreciation on toll road as 'intangible asset' due to the fact that right to collect does not fall under any of the categories of the intangible asset specified under section 32(1)(ii) of the Act. c) As per the extant clarification issued by the Central Board of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2013; A.Y 2008-09 and A.Y 2009-10] 8. M/s Infrastructure Leasing Financial Services Ltd. Vs. DCIT-14(2)(1) [ITA No. 7091, 7092, 7284 6829/Mum/2014; A.Y 2010-11 and A.Y 2011-12] 9. Selvel Advertising (P) Ltd. Vs. DCIT [58 taxmann.com 196 (Kolkata-Trib); A.Y 2006-07 to A.Y 2010-11 10. North Karnataka Expressway Ltd. Vs. CIT-10 [ITA No. 499/Mum/2012] 11. Godhra Expressway Private Ltd. Vs. DCIT [ITA No. 2123 2124/Hyd/2018; A.Y 2014-15 and A.Y 2015-16] 12. Second Vivekananda Bridge Tollway Co. Pvt. Ltd. Vs. DCIT 2(2) [ITA No. 19/Kol/2017; A.Y 2012-13] 9. He accordingly submitted that the grounds raised by the assessee should be allowed. 10. The ld. DR, on the other hand, heavily relied on the order of the CIT(A). 11. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find, the Hyderabad Bench of the Tribunal in the case of DCIT vs. M/s Madurai Tuticorin Expressways Ltd., vide ITA No.2119, 2120 2121/Hyd/2018 for AYs 2012-13 to 2014-15, order dated 9th June, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove view is further supported by the decision of the co-ordinate Pune bench of the Tribunal in the case of M/s. Ashoka Infrastructure Ltd. Vs. ITO in ITA No.989/PN/2010 ITA No.1105/PN/2010,wherein, the Tribunal while further relying upon another decision of the Co-ordinate Bench of the Tribunal in the case of 'Ashoka Infraways Pvt. Ltd. Vs. ACIT' in ITA No.185 186/PN/2012 dated 29.04.2013, has held in clear terms that the claim of the assessee for depreciation on licence to collect toll being an 'intangible asset' falling within the scope of section 32(1)(ii) of the Act is liable to be upheld. The relevant part of findings of the Tribunal for the sake of convenience is reproduced as under: 6. At the time of hearing, it was a common point between the parties that an identical issue has been considered by the Pune Bench of the Tribunal in the case of Ashoka Infraways Pvt. Ltd. vs. ACIT vide ITA Nos. 185 186/PN/2012 dated 29.04.2013. As per the Tribunal following the precedents by way of various decisions of different Benches of the Tribunal mentioned therein, the claim of the assessee for treating the 'License to collect Toll' as an intangible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operate and transfer the said infrastructure facility in terms of an agreement with the Government of Madhya Pradesh. The expenditure on development, construction and maintenance of the infrastructure facility for a specified period was to be incurred by the assessee out of its own funds. Moreover, after the end of the specified period, assessee was to transfer the said infrastructure facility to the Government of Madhya Pradesh free of charge. In consideration of developing, constructing, maintaining the facility for a specified period and thereafter transferring it to the Government of Madhya Pradesh free of charge, assessee was granted a Right to collect Toll' from the motorists using the said infrastructure facility during the specified period. The said Right to collect the Toll' is emerging as a result of the costs incurred by the assessee on development, construction and maintenance of the infrastructure facility. Such a right has been adjudicated by the Tribunal in the aforesaid precedents to be in the nature of 'intangible asset' falling within the purview of section 32(1)(i/) of the Act and has been found eligible for claim of depreciation. No decision to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground of Appeal No. 1.1 raised by the assessee. 29. In view of our observations made in the preceding paras and also agreeing with the above reproduced findings of the Tribunal, we hold that the assessee is entitled to the claim of depreciation on the road to collect toll being an intangible asset falling within the purview of section 32(1) (ii) of the Act. 30. So far as the other alternative contention of the assessee that the project be treated as plant machinery and the depreciation be accordingly allowed to it, we do not find that the said license of right to collect toll in any way falls in the definition of plant machinery. As held by the Hon'ble Bombay High Court, even the assessee is not the owner of the toll road. The assessee has been given only the right to develop, maintain and operate the toll road and further to collect the toll for the specified period. This right as discussed above is an intangible asset falling under section 32(1)(ii) of the Act. 13. We find, the Mumbai Bench of the Tribunal in the case of North Karnataka Expressway Ltd. vs. ACIT and vice versa, vide ITA Nos.4372 4373/Mum/2012, for AYs 2005-06 and 2006-07 and ITA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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