TMI Blog2014 (11) TMI 401X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure, the Board circular is in fact advantageous to the assessee who are in development of infrastructure facilities but not owning the property which was constructed - assessee has initially treated the entire cost as building and claimed 10% depreciation in A.Y. 2009-10 - Since the CIT(A) allowed depreciation as claimed by assessee there is no reason to interfere with the order of CIT(A) as the entire cost incurred on the project is to be allowed as deduction to assessee either as amortized revenue expenditure or as depreciation – Decided against Revenue. - ITA. No. 214/Hyd/2014 - - - Dated:- 7-11-2014 - Shri B. Ramakotaiah And Smt. Asha Vijayaraghavan,JJ. For the Petitioner : Mr. D. Sudhakar Rao For the Respondent : Mr. V. Raghavendra Rao ORDER Per B. Ramakotaiah, A. M. This is Revenue appeal against the order of Ld. CIT(A)-V, Hyderabad dated 21.10.2013. Revenue has raised 7 grounds on the issue of allowance of depreciation on roads/bridges constructed by assessee as part of National High-ways project. 2. Briefly stated, assessee is a company engaged in the business of civil construction. It has filed return of income admitting ₹ 13,81, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure incurred for the construction of the road on the basis that it had acquired an intangible asset and that therefore it is entitled to the depreciation u/s. 32(1)(ii) of the IT Act rather than under 32(1)(i) of the IT Act. The learned Counsel pointed out in his written submissions that the claim of the assessee is justified u/s 32(1)(ii). He says that Article 2.8(a) has to be read with Clause 4.1 of the Concession Agreement. According to that Article, the assessee-company was entitled to collect Toll Charges. Article 2.8(a) provides for this right. According to Article 2.8(a) the Concessioriaire shall have the right to use of the project site in accordance with the provisions of the Agreement. Article 2.8(a) r.w.s Article 4.1 of the Agreement confers on the assessee the right to collect Toll Charges. The period specified for collection of Toll Charges is 11 years. In so far as the findings of the AO that the asset is not entitled to depreciation on the ground that the road is neither a building nor the assessee its owner, the same have been considered in appeal in my order for the assessment year 2009-10. It has been held that the assessee is entitled to depreciation as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee to earn income, therefore, if the receipt generated from the exploitation of the asset is of revenue nature, then income embedded in such receipt has to be taxed on net basis only. 15. Although the observation was in connection with the claim of depreciation applicable to the building and accepted by the !TAT, the reasoning is well applicable to the claim of depreciation u/s. 32(I)(ii). In the instant case, the assessee had acquired the right of exploitation by constructing the road with its own monies. By reason of this connection, the assessee acquired the right to exploit the asset i.e., road for a period of an 11 years. The right to exploit is in the nature of a licence granted by the owner of the asset which is admittedly the NHAI or it is in the nature of a business right or a commercial right acquired by incurring the expenditure. Therefore the asset definitely is an intangible asset. The AO has erred in observing that it is a tangible asset. The tangible asset here is the road constructed by the assessee with its funds. The tangible asset is the right j licence granted by the owner i.e. NHAI to collect Toll for the period of 11 years which is in consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... collect Toll. In that case, the Hon'ble Bench followed the decision of Pune Bench of the Tribunal in the case of Ashoka Infraways (P) Limited Vs ACIT in ITA Nos. 185 186/Pn/2012, dt 29- 04-2013 which in turn considered several other similar cases by different benches of the Tribunal and held that the right to collect Toll is an intangible asset and eligible for depreciation u/s 32(1)(ii) of the IT Act. The learned counsel has also relied on the decision of the jurisdictional High Court of Andhra Pradesh in the case of State of Andhra Pradesh Vs Income Tax Officer (169 ITR 564, 571-2). In support of his submission, where a decision of the jurisdictional Bench or the Court is not available, a decision favourable to the assessee of the other benches or other courts must be followed in case of any conflict between the decisions of the non-jurisdictional benches of the Tribunal or the non-jurisdictional High Courts. 16. Having regard to the several Benches of the Hon'ble Tribunal, on similar facts, I hold that the right to collect toll fee granted to the assessee in consideration of constructing road for the NHAI is in the nature of licence or business right or commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim is in fact justified also. The Coordinate Bench in the case of PBR Industries Ltd., ITA.No.1171/H/07, 1175/H/07, 1176/H/08 and ITA.No.1196/H/08 dated 08.06.2011 allowed such expenditure incurred on BOT project as revenue expenditure amortized over a period of concession. However, they are also equally good number of cases as relied by Ld. CIT(A), that the same cannot be considered as an intangible asset. The Coordinate Benches in the case of Nyse Infrastructure P. Ltd., vs. DCIT ITA.No.301/H/2009 dated 05.06.2009 and other cases on similar facts allowed depreciation holding that entire asset is intangible asset. Since the Ld. CIT(A) allowed depreciation as claimed by assessee which is also supported by various case law, we do not see any reason to interfere with the order of Ld. CIT(A) as the entire cost incurred on the project is to be allowed as deduction to assessee either as amortized revenue expenditure or as depreciation. Since assessee choose to claim depreciation, we do not see any reason to disallow the same. Accordingly, there is no merit in Revenue grounds. 6. In the result, appeal of Revenue is dismissed. Order pronounced in the open Court on 07.11.2014. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
