TMI Blog2015 (5) TMI 305X X X X Extracts X X X X X X X X Extracts X X X X ..... through its own resources on development, construction and maintenance of the infrastructure facility. Secondly, section 32(1)(i1) permits allowance of depreciation on assets specified therein being 'intangible assets' which are wholly or partly owned by the assessee and used for the purposes of its business. The aforesaid condition is fully satisfied by the assessee and therefore considered in the aforesaid perspective we find no justification for the plea raised by the Revenue before us. 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. - 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of specified assets and the assessee was not the owner of toll roads. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored. The appellant craves leave to amend, or alter any grounds or add a new ground, which may be necessary. Ground No.1: 3. The issue raised vide ground No.1 is as to whether the interest income of ₹ 1,34,59,582/- is to be assessed under the head Income from other sources or as Business income of the assessee. The Assessing Officer (hereinafter referred to as the AO) found that the interest income of ₹ 1,34,59,582/- derived from bank deposits had been included by the assessee into its business income. He, however, observed that since the said income was not derived from business activity of the assessee company, hence the same was taxable under the head Income from other sources . 4. In the first appeal, the Ld. CIT(A) directed that the interest income be assessed as business income observing as under: 4. The 4th ground of appeal is that the A.O. erred in taxing the interest income of ₹ 1,34,59,582/- under the head income from other sources instead of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue reveals that the Ld. CIT(A) has allowed the claim of the assessee directing that the interest income be treated as business income relying upon his own findings given in the earlier assessment year 2007-08 for which he had relied upon the decision of the Hon ble Bombay High Court in the case of CIT vs. Lok Holdings 308 ITR 356. The Ld. A.R. of the assessee has stressed that the said findings of the Ld. CIT(A) given in relation to assessment year 2007-08 have been further upheld by the Tribunal vide order dated 27.02.13 passed in ITA No.1284/M/2011 14/M/2011. 6. We have perused the said order dated 27.02.1 3(supra) of the Tribunal. The relevant issue has been taken by the Tribunal vide para 21 of the said order. The Tribunal has allowed the claim of the assessee in view of the findings given while adjudicating the another issue relating to some other interest income of the assessee, the claim regarding treatment of which as business income was rejected by the Ld. CIT(A). The said issue has been discussed vide paras 2 to 8 of the assessee s appeal for assessment year 2007- 08. The Tribunal has observed that since it was a matter of short term deposit temporarily made out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmissions of the assessee, it is apparent on the record that the interest income has been earned by the assessee on the security deposits with the bank as per the Common Loan Agreement as discussed above. The said interest income had been earned by the assessee out of business compulsions of deposits in the Debit Service Reserve Account , hence the said interest income is linked to the business activities of the assessee. The issue is covered with the decisions of the Tribunal in the own case of the assessee for earlier assessment years. Hence, the interest income of the assessee is ordered to be assessed as Business Income. Ground No.1 of the Revenue s appeal is therefore dismissed. Ground No.2 8. Ground No.2 is relating to the claim of depreciation on road amounting to ₹ 40,12,50,880/-. The AO noticed that the assessee had claimed depreciation on toll roads amounting to Rs. ₹ 40,12,50,880/-. When asked to explain in this respect by the AO, the assessee made its submissions vide letter dated 16.11.11 which have been summarized by the AO in his order as under: (i) The assessee company has entered into an agreement dated 22.03.2005 with the National Highways ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee that the toll roads be treated as plant and machinery. He, however, observed that since it was a fact that the assessee company had incurred huge expenditure on the said road which otherwise could not be treated as Revenue s expenditure as the same had resulted into providing enduring benefit to the assessee company, hence, the said amount would be eligible for amortization for the period of the concession agreement as it was allowed in A.Y. 2007-08 and 2008-09 also. 10. In appeal, the Ld. CIT(A) allowed the claim of depreciation on toll road observing as under: 6.1 I have considered the facts of the case. This issue was also there in A.Y. 2007-08 and 2008-09. In the appeal orders, the undersigned held that the appellant was entitled for depreciation on toll road. The undersigned also held that the depreciation allowable was at the rate of considering the toll road as part of building. The appellant s claim of allowing depreciation considering the toll road as part of plant machinery was rejected. Following the appeal order of earlier years, the A.O. is directed to allow depreciation on toll road. The A.O. is directed to allow depreciation on toll road at the ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ataka Expressway Ltd. vs. CIT in ITA No.499/2012 decided on 14.10.14. The Hon ble Bombay High Court, in the said case, has categorically held that in view of the provisions of National Highway Act, 1956 and National Highway Authorities of India Act, 1988, the ownership of the roads vests in the Union of India and further that the above said Acts are special statutes. It has been observed by the Hon ble high Court that when the concept of ownership and vesting therein is of absolute nature that cannot be said to be in any manner restricted or curtailed by a general definition or understanding of the term owner as appearing in the Income Tax Act, 1961 and under such circumstances, the assessee s claim that he was the owner of the toll road was not acceptable and as such he was not entitled to claim the depreciation on the said road claiming itself to be owner of the road. 13.1 In view of the above decision of the Hon ble Jurisdictional High Court and since the matter was pending disposal before this Tribunal, hence the case was fixed for rehearing/clarification as the matter could not have been decided as covered by the decisions of the Tribunal in the light of the above decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks. He has further contended that the matter referred to the Hon ble Bombay High Court in the case of North Karnataka Expressway Ltd. vs. CIT (supra) was on the question of justifiability of reopening and reassessment by the commissioner under section 263 of the Act and that the High Court suo moto decided the issue relating to the allowability of depreciation on toll road, hence the same should not be taken as binding precedent. The Ld. A.R. has further contended that the Hon ble Bombay High Court in the case of North Karnataka Expressway Ltd. vs. CIT (supra) has left open the issue of treating the toll road project as plant machinery or of the claim of depreciation in relation to investment made under other categories of assets as mentioned under section 32 of the Act. If the assessee is not found entitled to claim the ownership of the road, claim of the assessee may also be considered being intangible asset as the assessee has been granted license to collect toll over the road for a particular period and the said right/license granted to the assessee falls in the definition of intangible asset. 16. The Ld. D.R., on the other hand, has relied upon the decision of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia Act, 1988 and various case laws including that are strongly relied upon by the Ld. A.R. e.g. Mysore Minerals Ltd. vs. CIT reported in (1999) 239 ITR 775 SC, CIT vs Podar Cement Pvt. Ltd. others reported in (1997) 226 ITR 625 SC and CIT vs. Noida Toll Bridge Company Ltd. (Allahabad HC) (supra), has held that the national highways vest in the Union of India and if the government for the purpose of development and maintenance of the whole or any part of the national highways enters into an agreement with private parties or that merely because the national highway is built, maintained, managed and operated by private entities, in no way affects the vesting of the national highway in the Union and that does not dilute or take away the ownership of the highway or its vesting in the Union. After discussing the various decisions of the Hon ble Supreme Court and of the Hon ble High Courts, the contention of the assessee in that case that it was the owner of the toll road has been rejected by the Hon ble Supreme Court. Hence, the clause 38.4 relied upon by the assessee in the present case will not be of any help to the assessee in this regard. 19. However, so far as the alter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghways and such of the assets in the form of building, plant machinery etc. The claim for depreciation can be validly raised and granted. That the Hon ble High Court in the said case was only concerned with the claim on the land or a road itself. Further, in concluding para 52 of the order, the Hon ble Bombay High Court has categorically clarified that the assessee s claim for depreciation in respect of the building, plant machinery and falling within the purview of sub section (1) of section 32 of the Income Tax Act, 1961, if considered and granted, shall not be affected by the decision of the Hon ble Bombay High Court. 20. A careful reading of the entire decision of the Hon ble Bombay High Court and in the light of the various observations made in judgment as discussed above, it is very clear that the Hon ble Bombay High Court was concerned about the issue as to whether the assessee can claim itself as the owner of the toll road and the Hon ble Bombay High Court has held that in view of the express provisions of the National Highway Act, 1956 and National Highway Authorities of India Act, 1988 the Union is the absolute owner of the National Highways as well as the toll roa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on whether or not to permit such additional claims to be raised. It cannot, however, be said that they have no jurisdiction to consider the same. The appellate authorities have jurisdiction to deal not merely with additional grounds which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed but could not have been raised at that stage. The words could not have been raised must be construed liberally and not strictly. It is open to the assessee to claim a deduction before the appellate authority which could not have been claimed before the AO. The Hon ble Bombay High Court has further observed that the decision of Hon ble Supreme Court in the case of Goetze (India) Limited v. CIT (2006) 157 Taxman 1, regarding the restriction of making the claim through a revised return was limited to the powers of the Assessing Authority and the said judgment does not impinge on the power or negate the powers of the appellate authorities to entertain such claim by way of additional ground. Reliance can also be placed in this regard on the decisions of the Tribunal in the case of PV. Ananthkrishnan vs. ACIT in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uled that the authorities under the Act are under obligation to act in accordance with law. Tax can be collected only as provided under the Act. If the assessee, under a mistake, misconception or on not being properly instructed is over assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes dues are collected. While holding so, the Hon ble Bombay High Court has relied upon the various decisions e.g. Koshti vs. CIT (2005) 193 CTR (Guj) 518 : (2005) 276 ITR 165 (Guj), C.P.A. Yoosuf vs. ITO (1970) 77 ITR 237 (Ker.), CIT vs. Bharat General Reinsurance Co. Ltd. (1971) 81 ITR 303 (Del), CIT vs. Archana R. Dhanwatey (1981) 24 CTR (Bom) 142 : (1982) 136 ITR 355 (Bom). In view of the above discussed factual and legal position, we have no hesitation to hold that the assessee is entitled to put his alternate claim that the deduction allowable to him may be considered as allowable as depreciation treating the project/investments made under the head Plant machinery or treating it as a right/license to collect the toll tax as intangible asset. 24. Having held that the assessee is entitled to the deduction on the investments made by him, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an enduring benefit in the form of right to the assessee. Having admitted the above position by the Revenue, now the question to be considered is whether any depreciation is allowable on such a right? 26. As per section 32(1)(ii) depreciation is allowable on intangible assets like licenses, franchises or any other business or similar commercial rights of similar nature. The relevant part of the section for the sake of convenience is reproduced as under: Depreciation. 32. (1) [In respect of depreciation of - (i) buildings, machinery, plant or furniture, being tangible assets; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed - ] . (emphasis supplied by us) 27. It is not disputed that the assessee has been given license/commercial right over the project to receive the toll. The assessee may not be the owner of the toll road, but he, certainly, is owner in possession of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ildcon Ltd. in ITA.No.1302/PN/09 dated 20.03.2012. ii) M/s. Kalyan Toll Infrastructure Ltd. in ITA.Nos.201 247/Ind/2008 dated 14.12.2010. iii)Dimension Construction Pvt. Ltd. in 1TA.No.222, 223, 233 857/PN/2009 dated 18.03.2011. iv)Ashoka Info (P) Ltd. (supra) v) Reliance Ports and Terminals Ltd. (supra). 8. The Ld. CIT(DR) appearing for the Revenue, has submitted that the 'intangible assets' eligible for depreciation in section 32(1)(ii) of the Act, are only those which are owned by the assessee and have been acquired after spending money. In the case of the assessee, by way of an agreement, assessee was awarded a work to construct a road by using own funds and the expenditure incurred was allowed to be reimbursed by permitting the assessee a concession to collect toll/fees from the motorists using the road. Therefore, it could not be said that such a right was within the purview of section 32(1)(ii) of the Act. However, the Ld. CIT(DR) has not contested the factual matrix that identical issue has been considered by our coordinate Benches in the case of Ashoka Buildcon Ltd. (supra), Kalyan Toll Infrastructure Ltd. (supra), Dimension Construction Pvt. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over the costs incurred for constructing the road facility whereas section 32(1)(i1) of the Act required that the assets mentioned therein should be acquired by the assessee after spending money. The said argument in our view is factually and legally misplaced. Factually speaking, it is wrong to say that impugned right acquired by the assessee was without incurrence of any cost. In fact, it is quite evident that assessee got the right to collect toll for the specified period only after incurring expenditure through its own resources on development, construction and maintenance of the infrastructure facility. Secondly, section 32(1)(i1) permits allowance of depreciation on assets specified therein being 'intangible assets' which are wholly or partly owned by the assessee and used for the purposes of its business. The aforesaid condition is fully satisfied by the assessee and therefore considered in the aforesaid perspective we find no justification for the plea raised by the Revenue before us. 12. In the result, we affirm the order of the CIT(A) in holding that the assessee was eligible for depreciation on the Right to collect Toll', being an intangible asset' f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee, thus, is entitled to claim depreciation on such type of capital asset. 32. In view of our above findings, this ground of the Revenue is hereby dismissed but on a different footing as discussed above and in terms of our observations made above. 33. Now we take up the assessee s appeal bearing ITA No.6244/M/2012. ITA No.6244/M/2012 34. The assessee in its appeal has taken the following grounds of appeal: 1. On the facts and circumstances of the case the Learned Commissioner of Income Tax has erred in concluding that the Toll Road does not fall under the category of plant machinery . The Learned Commissioner of Income tax (Appeals) has erred in granting the depreciation on the toll road treating as building . The appellant claims that depreciation on the toll road be granted treating the same as plant and machinery. 2. On the facts circumstances of the case the appellant prays that the depreciation @15% be granted on the toll road instead of @10% allowed by the learned Commissioner of Income tax (Appeal). 3. On the facts and in the circumstances of the case and in law, the Learned commissioner (Appeals) has erred in disallowing the claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Cumulative Participating Preference Shares (ROCCPPS) and Unsecured Non Convertible Debentures was used by the company in connection with the extension of the undertaking. While inviting our attention to the provisions of section 35D, he has submitted that any expenditure incurred by the Indian company after commencement of its business in connection with the extension of its undertaking or in connection with setting up of a new unit is liable as a deduction. He has claimed that in the return of income for the year under consideration for A.Y. 2009-10, the assessee has claimed 1/5th of the total expenditure of ₹ 43,22,000/- on account of increase in authorized share capital amounting to ₹ 8,64,400/-. He has relied upon the decision of the co-ordinate Chennai bench of the Tribunal in the case of M/s. Chiranjeevi Wind Energy vs. ACIT in ITA No.342/MDS/2013 vide order dated 21.10.13, wherein, in relation to the issue of increase in share capital by way of issuing equity shares by private placements for extension of project has come into consideration of the Tribunal and the Tribunal, after discussion of the matter at length, has held as under: 6. We have heard the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the bifurcation/details provided, the expenses were incurred towards stamp duty and ROC registration fees for increase in authorized capital. The said expenditure was in the shape of legal/statutory registration fees and thus qualify for deduction either under clause(b) or sub clause (iii) of clause (c) of section 35D(2). He has further submitted that as per clause (d) to section 35D(2): such other items of expenditure not being expenditure eligible for any allowance on deduction under any other provisions of the Act is also allowable as deduction under this section . He, therefore, has contended that any expenditure which has not been specifically mention under the other clauses of section 35D, will still be eligible for deduction, if the same has been incurred in relation to commencement of business or in connection with the expansion of the industrial undertaking, if otherwise not eligible for any allowance or deduction under any other provisions of the Act. Reliance in this respect can also be placed on the decisions of the Hon ble Madras High Court in the case of CIT vs. M/s. Ashok Leyland Ltd. Tax case appeal No.1253, 1254 1255 of 2005 decided on 20.06.2012. W ..... X X X X Extracts X X X X X X X X Extracts X X X X
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