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DCIT, Circle-3 (1) , Visakhapatnam Versus Godavari Toll Bridge Pvt. Ltd. And Godavari Toll Bridge Pvt. Ltd. Versus ACIT, Circle-3 (1) , Visakhapatnam

2017 (12) TMI 578 - ITAT VISAKHAPATNAM

Disallow the claim of depreciation being no ownership - claim of amortisation - effective administration and management of the said bridge - transfer the right over BOT asset to the assessee - Held that:- Circular no.9 of 2014 issued by the Board permitting the assessee to claim amortisation of the expenditure also shows that the expenditure incurred by the assessee has to be treated as a capital expenditure and by treating it as intangible asset the expenditure has to be allowed as deduction in .....

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roper, for the interregnum period to disallow the claim of depreciation. Since there are two judgements of two different High Courts, we adopt the view, which is in favour of the assessee, in the backdrop of the facts and circumstances of the case and hold that the assessee is entitled to depreciation in the years under consideration. - I.T.A. Nos. 337, 338 & 339/Vizag/2012, C.O. Nos.37, 38 & 39/Vizag/2016 - Dated:- 8-12-2017 - Shri D. Manmohan, Vice President And Shri D. S. Sunder Singh, Accoun .....

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d style of Godavari Toll Bridge Private Limited and it was incorporated in the year 2006 as a wholly owned subsidiary of Navayuga Engineering Company Limited (NECL). A bridge was constructed across the Gautami branch of the river Godavari between Yanam and Yedurlanka on BOT contract basis by NECL, the holding company of the assessee. NECL completed the construction during the year 2002-03 and started collecting toll fee. It has shown it as a capital asset in its balance sheet and it was claiming .....

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see company also have accepted the resolution passed by NECL. 4. Since the assessee company owns a right over BOT asset during the previous year relevant to the assessment year 2007-08, it claimed depreciation on the toll bridge, u/s 32(1) of the Income Tax Act, 1961 (hereinafter called as 'the Act'). Since the assessee company is not the owner of the asset (toll bridge) but claimed depreciation on it, the A.O. was of the opinion that the income chargeable to tax escaped assessment and a .....

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L under Build, Operate and Transfer (BOT) scheme of Government of Andhra Pradesh under Public Private Participation (PPP) Mode with 80% of Government subsidy on the total cost of ₹ 86 crores, and an agreement dated 6.10.1999 with Government of Andhra Pradesh. The bridge was accordingly constructed during the year 2002-03 and it was opened to public w.e.f. 5.10.2002 and NECL started collecting the toll fees. Later on, the holding company transferred the right over the bridge to the assessee .....

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onverted into share application money as the loan was repaid by NECL and the balance of ₹ 114.70 crores paid was adjusted by way of allotment of fully paid equity shares of ₹ 10/- each at a premium of ₹ 990/-. 5. Though the value of the bridge is taken at ₹ 125 crores in the books of the assessee company, for the purpose of claiming depreciation under the Income Tax Act, the value of the bridge is taken at ₹ 13.46 crores only, which is the WDV as on the date of tran .....

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iation was based upon a decision of the ITAT, Hyderabad bench, wherein, under identical circumstances, the ITAT, Hyderabad bench declared that depreciation is allowable to the assessee, which is now managing the toll bridge. 7. The A.O. had taken into consideration the clauses of BOT agreement entered into with the owner of asset to highlight that the ownership of the land together with the bridge shall vest with the Government and the enterprise cannot impose any restrictions whatsoever in this .....

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rence appeal before the Hon ble High Court of Andhra Pradesh and till reaches finality and the matter needs to be kept alive. Accordingly, the claim of depreciation by the assessee company was rejected. 8. Aggrieved, assessee preferred appeals before the Ld. CIT(A) contending, inter-alia, that the sum and substance of the clauses of the concessional agreement between Government of Andhra Pradesh and NECL ought to have been taken into consideration by the assessing officer to appreciate that the .....

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bridge. Accordingly, the A.O. was directed to allow depreciation on the bridge, in the hands of the assessee company. 10. Aggrieved, revenue preferred appeals before the Tribunal. Since the claim of depreciation was allowed, the assessee did not chose to prefer appeals against the orders passed by the CIT(A) but by taking advantage of the appeals filed by the revenue, it chose to file cross objections to support the claim of deduction by raising the following ground: Alternatively, the responde .....

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t the assessee can never be considered to be owner of the roads either under general law or under the Income Tax Act. The Hon ble Court also referred to various judgements to hold that even Municipal Corporation, by laying roads, would not become owner of the land as their role is limited to laying down roads and not to have control over the public pathways. Thus, the court held that the claim of ownership of the assessee cannot be, by any stretch of imagination, better than the Municipal Corpor .....

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Highway by involving a private entity or private party does not mean that the said private party can enjoy or claim the rights of the Central Government. The Court also observed that the Hon ble Allahabad High Court in the case of Noida Toll Bridge Company 213 Taxmann 333 has not properly appreciated the matter and thus, the Hon ble Bombay High Court did not follow the said judgement. In this regard, the Hon ble Bombay High Court observed as under: 50. None of the above material was placed befor .....

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aim of depreciation on toll roads/bridge was allowed by the Commissioner of Income Tax (Appeals) and Revenue s Appeal before the Division Bench met with similar fate. We are unable to agree with the observations and conclusions of the Division Bench in para 25 of the judgement in Income Tax Appeal No.316 of 2011. 12. The Ld. D.R. vehemently argued that the earlier decision of the Hon ble Allahabad High Court cannot be treated as precedent on account of the fact that the provisions under the Nati .....

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ed depreciation on the toll bridge in the earlier years, which was rejected by the A.O. but ultimately accepted by the ITAT. Since the same asset has been transferred to the present assessee, the decision of the Hyderabad bench of ITAT is binding and needs to be followed. It was further contended that the A.O. is duty bound to follow the decision of superior authority and cannot ignore the said judgement merely because it is not accepting the view taken by the ITAT. It was also contended that id .....

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strict technical sense, it can always claim depreciation u/s 32 of the Act even on an intangible asset; since the right is vested in the assessee to build, operate and maintain assessee is entitled to claim depreciation. Though he sought to distinguish the decision of the Hon ble Bombay High Court on the ground that the issue was limited to the applicability of section 32 of the Act, nothing specific was pointed out as to how the judgement is distinguishable. The Ld. Counsel has mainly focused .....

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t in a case where an assessee claimed any deduction out of initial cost of development of infrastructure facility in the earlier years, the total deductions claimed in the assessment years under consideration may be deducted from the initial cost of the project and the cost so reduced shall be amortised equally over the remaining period of toll concessionaire agreement. Ld. Counsel submits that the spirit of the circular is that the right to operate the toll bridge gives the assessee a right to .....

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ended that when there is no decision of the jurisdictional High Court and when there are two views possible on the issue, the one which is in favour of the assessee should be adopted. 15. We have carefully considered the rival submissions and perused the record. We have also carefully perused the judgement of the Hon ble Bombay High Court as well as the Allahabad High Court referred to therein. It is no doubt true that the Hon ble Bombay High Court has considered the issue elaborately by referri .....

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