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TMI Blog2014 (1) TMI 981X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose Vehicle (SPV) promoted by CIDB Inventures Sdn Bhd. The assessee was awarded the contract by the NHAI for widening, rehabilitation and maintenance of the existing two lane highway into a four lane one on the Tada-Nellore section of NH-5 and the existing two lane highway on the Nandigama-Ibrahimpatnam section of NH-9 on BOT basis. The entire cost of construction of Rs. 714,61,56,376 was borne by the assessee. The construction was completed during the F.Y. 2004-05 after which the highway was opened to traffic for use and the assessee started claiming depreciation from A.Y. 2005-06 onwards. The AO held that no ownership, leasehold or tenancy rights were ever vested with the assessee for the asset in question, i.e., roads, in respect of which it had claimed depreciation and, therefore, disallowed the depreciation claimed on the highways. 4. On appeal, the CIT(A) placed reliance on the following judgements: a) Nyse Infrastructure Pvt. Ltd. vs. DCIT (ITA No. 301/ H/2009, dated 5.6.2009). b) ACIT vs. Navayuga Engineering Co. Ltd. (ITA Nos. 1050 to 1053/H/2009, dated 8.10.2010). c) Navayuga Engineering Co. Ltd. vs. ACIT (ITA No. 989/ H/2011, dated 16.1.2013). d) ACIT vs. Navayug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ril, 2013 (Pune Trib.] m) Nyse Infrastructure (P) Ltd. v. Dy. CIT (ITA No. 301/Hyd/2009 - dated 05.06.2009 (Hyd. Trib.]. n) ACT v. M/s. Navayuga Engineering Co. Ltd., Visakhapatnam (ITA Nos. 1050/Hyd/2009 to 1053/Hyd/2009, dated 08,10,2010 Hyd. Trib.). o) M/s. Navayuga Engg. Co. Ltd., Hyderabad v. ACIT (ITA No. 989/Hyd/2011 dated 16.01.2013 Hyd. Trib.] p) ACIT v. M/s. Navayuga Engg. Co. Ltd. (ITA No. 1283/Hyd/2011 dated 08.06.2012) (Hyd. Trib.) q) DCIT v. M/s. Navyua Engg. Co. Ltd. (ITA No. 55/Hyd/2013, dated 05.04.2013 (Hyd. Trib.) 7. Further, we find that the Hon'ble Apex Court in the case of Mysore Minerals Ltd. v. CIT (239 ITR 775) (SC) had considered the meaning of word "owner" after referring to R.B. Jodha Mal Kuthiala v. CIT (82 ITR 570); CIT v. Podar Cement Pvt. Ltd. (226 ITR 625); P.K. Badiyani v. CIT (105 ITR 642) and State of UP v. Renusagar Power Co., AIR 1988 SC 1737, it was held that : "an overall view of the above said authorities shows that the very concept of depreciation suggests that the tax benefit on account of depreciation belongs to one who has invested in the capital asset, is utilizing the capital asset and thereby loosing gradually investment cost b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide paras 22, 23, 24 and 25 of the judgment:- "22. The depreciation represents the diminution in value of a capital asset when applied to the parties of making profit or gain. The object is to get the true picture of the real income of the business. The respondent-assessee is engaged in the business of constructing roads and bridges. Under the concession-agreement the land is provided on lease initially for a period of 30 years which can be extended. The respondent-assessee company is a special purpose vehicle, engaged in the business of building, infrastructure/roads to generate revenues by collecting tolls to meet the cost of constructions and earn profits. The construction of road on the leased land is the capital asset of the company, which remains under its ownership for the concession period. The respondent-assessee exercises its fully ownership rights on the road which include charging of tolls which is ordinarily a sovereign function. The operation, maintenance and use of the road during the concession period is with the respondent-assessee. It has been given exclusive rights to regulate the use of the Noida-Bridge. The road is not simply a road laid out on the land. It in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a building owned by the assessee. Explanation-I may apply to renovation or extension or improvement to the building; the object is to extend the application of depreciation, if such buildings which are not owned by the assessee but in which the assessee holds a lease or other right of occupancy. The present case stands on a better footing, in which the land is held on lease and the road as capital asset has been built on it with exclusive ownership of the road, and the bridge in the assessee-company for the concession period, and which also includes the right to collect tolls and to regulate use of the bridge. Section 32 would, therefore, apply for the purpose of providing depreciation to be worked out in accordance with the law. For removal of doubts the legislature has provided that the building includes roads in Note (1) to Appendix-I providing for the table of rates at which the depreciation is admissible. 26. The questions No. l, 2 and 3 are thus decided in favour of the respondent- assessee and against the revenue. ...." 12. It is also pertinent to mention herein the consolidated order of the Tribunal in ITA No. 1171/Hyd/07, 1175/Hyd/07, 1176/Hyd/08 and 1196/Hyd/08 in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is to be allowed. Moreover, we do not see any merit in the arguments of the learned departmental representative that the amortization of expenditure can be allowed under section 35D of the Act and not under any other provisions of the Act. In the case under consideration, the assessee never claimed any deduction under section 35D of the Act. We also do not see any merit in the arguments of the learned Departmental Representative that the assessee company itself classified the assets as capital assets in its balance-sheet. It is well settled law that the entries in the books of account and its treatment would not disentitle the assessee, in any way, to claim the expenditure to arrive its actual income for the purpose of taxation. It is case of the assessee that the expenditure incurred is in revenue nature and the same has to be allowed over a period 17/7 years as the case may be. In the case under consideration, the expenditure incurred by the assessee on BOT Project did bring some kind of an enduring benefit to the assessee; however, the said expenditure did not bring into existence any capital asset for the assessee. The asset which was created belongs to the Government a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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