TMI Blog2021 (2) TMI 548X X X X Extracts X X X X X X X X Extracts X X X X ..... s confirmed.Tribunal were right in holding that the development done by the assessee by forming the road would qualify as a plant so as to be entitled to depreciation under Section 32 - Substantial question of law No.1 is also answered against the Revenue and in favour of the assessee and it is held that the assessee is entitled for depreciation at the rate of 10%. Disallowance u/s 14A - Revenue has contended that the Tribunal committed an error in holding that the provisions of Section 14A of the Act read with 8D Would have no applicability if there was no exempt income received though the disallowance was linked to expenditure incurred on investment fetching exempt income - HELD THAT:- As decided in own case [ 2021 (2) TMI 340 - MADRAS HIGH COURT] to apply the provisions of Section 14A AO should have recorded a finding as to how Sub-Section (1) of Section 14A would stand attracted. In the absence of any such finding, the disallowance made was not justifiable. AO straightaway proceeded to the second limb of Section 14(2) which is impermissible - provisions of Section 14A r.w.r 8D cannot be made applicable in vacuum i.e in the absence of exempt income. Decided in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n holding that the provisions of Section 14A read with Rule 8D will have no applicability if there is no exempt income received ? 3. After hearing the submissions of the learned counsel on either side, we frame the following two other substantial questions of law also for consideration : 1. Whether the Tribunal is legally right in holding that the assessee is eligible for depreciation under Section 32(1)(ii) on lease hold rights obtained by the assessee for 99 years through lease agreement ? And 2. Whether the claim of depreciation on lease hold rights on land held by the assessee is allowable under Section 32(1)(ii) under the head 'intangible asset'? 4. Accordingly, the substantial questions of law framed for consideration are renumbered as follows : 1. Whether the Tribunal was right in holding that roads developed and maintained by the assessee by agreement with the Government on the State/National Highway were eligible for depreciation as 'building'? 2. Whether the Tribunal is legally right in holding that the assessee is eligible for depreciation under Section 32(1)(ii) on lease hold rights obtained by the assessee for 99 years thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee in order to focus before this Court as to the nature of work undertaken by the assessee. Therefore, it is submitted that the issue has not been correctly decided by the Tribunal. In fact, in the case of CIT Vs. M/s.Tamilnadu Industrial Development Corporation Limited [T.C.A.No.509 and 510 of 2018], the issue pertaining to disallowance under Section 14A of the Act was considered by a Division Bench of this Court, to which, one of us (TSSJ) was a party, and by a common judgment dated 07.7.2020 , the appeals filed by the Revenue were allowed. 10. Rather, we had an occasion to consider a similar issue in the assessee's own case in TCA. No.485 of 2020 dated 05.1.2021, the relevant portions of which read thus : 8. We need not labour much to decide the substantial question of law framed, as identical issue was considered in the case of Commissioner of Income Tax, Chennai vs M/s.Celebrity Fashion Ltd. in T.C.A.No.26 of 2018 dated 21.09.2020. In the said appeal, which was filed by the Revenue, identical question of law was framed for consideration and the same was answered against the Revenue and in favour of the assessee on the following lines: 24. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew, that no interference is called for qua the impugned judgment. As against the decision of this Court in the case of Chettinad Logistics Pvt. Ltd. , the Revenue preferred appeals before the Hon'ble Supreme Court and the special leave petitions were dismissed on the ground of delay as well as merits in the decision reported in (2018) 95 Taxmann.com 250. 9. Thus, by applying the above decision, this Tax Case Appeal is allowed and the substantial question of law is answered in favour of the appellant/assessee. 11. We do not find any justifiable reason to take a different view and the legal position in the assessee's own case wholly covers the said question. Further, the decision in the case of M/s.Tamilnadu Industrial Development Corporation Limited does not render assistance to the case of the Revenue. Accordingly, substantial question of law No.4 is answered against the Revenue. 12. Next, we take up for consideration the issue pertaining to the claim for depreciation on the roads, which have been developed and maintained by the assessee pursuant to the agreement entered into with the State Government. 13. The assessee is a joint venture comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal to show that the common order dated 24.10.2008 passed for the earlier assessment years namely 2003-04 and 2004-05 has been reversed or modified by this Court. Therefore, the Tribunal chose to follow its earlier decision. 18. Hence, before us, the learned Junior Standing Counsel submits that she will make her submissions on merits and this Court may take a decision notwithstanding the fact that the Revenue has not accepted the decision of the Tribunal dated 24.10.2008 in the assessee's own case for the earlier assessment years namely 2003-04 and 2004-05. Based on the said submission, we have heard the matter on merits. 19. The learned Junior Standing Counsel appearing for the appellant Revenue has pitched her case by placing strong reliance on the decision of the Bombay High Court in the case of North Karnataka Expressway Ltd. Vs. CIT [reported in (2014) 51 Taxmann.com 214] . It is submitted by the learned Junior Standing Counsel that when the assessee was engaged in the business of infrastructural development in execution of agreement with the National Highways Authority or as in the present case, with the State Government and had constructed a road on B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of North Karnataka Expressway Ltd., would lend support to the case of the assessee as argued by the assessee before the Assessing Officer by claiming it as plant and machinery. However, since the assessee is not on appeal against the said finding, we are of the view that the decision of the Bombay High Court in the case of North Karnataka Expressway Ltd., does not advance the case of the Revenue before us. 24. On this issue, it would be beneficial to refer to the decision of the Rajasthan High Court in the case of PCIT Vs. GVK Jaipur Expressway Ltd. [reported in (2018) 100 Taxmann.com 95]. This decision was rendered by the Court on 10.10.2017, which was much after the decision of the Bombay High Court in the case of North Karnataka Expressway Ltd., which was rendered on 14.10.2014. 25. In the decision of the Rajasthan High Court in the case of GVK Jaipur Expressway Ltd., the Court has taken into consideration all the decisions and more particularly the decisions of the (i) Delhi High Court in the case of Moradabad Toll Road Co. Ltd.; (ii) Allahabad High Court in the case of CIT Vs. Noida Toll Bridge Co. Ltd. [reported in (2013) 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 10%. 29. Substantial question of law Nos.2 and 3 are identical and virtually one and the same, questioning the correctness of the decision of the Tribunal in holding that the assessee is eligible for depreciation under Section 32(1)(ii) of the Act on the lease hold rights obtained by the assessee for a period of 99 years pursuant to an agreement entered into between themselves and the SIPCOT. 30. To be noted, neither the Assessing Officer nor the Tribunal had gone into the terms and conditions of the lease agreement. This issue arises for consideration only for the assessment years 2007-08 and 2008-09. In respect of the other assessment years, which are subject matter of consideration in these batch of appeals, viz., 2009- 10, 2010-11, 2012-13 and 2013-14, the assessee had been granted a relief. 31. The issue would be as to whether the Tribunal was right in confirming the order passed by the Commissioner of Income Tax-III, Chennai dated 18.11.2013, granting the benefit of depreciation for the assessment year 2009-10 on the lease hold right obtained by the assessee from the SIPCOT. 32. The assessment for the years 2007-08 and 2008-09 was reopened by issuance of notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee for an allowable revenue expenditure over a period of time as enumerated under law. Therefore, the assessee further contended that the conclusion arrived at by the Assessing Officer that the assessee was not the owner of the asset and not eligible for depreciation, was incorrect. 36. Further, the assessee stated that except the right of alienation of the said asset, the assessee was conferred with all rights of enjoyment in respect of the lease property and therefore, they would be entitled to claim depreciation. The assessee placed reliance on the decision of the Hon'ble Supreme Court in the case of Madras Industrial Investment Corporation Ltd. Vs. CIT [reported in (1997) 225 ITR 802] wherein it was held that the total amount of lease premium paid in respect of such agreements should be amortized over the period of lease and only the amount pertaining to the relevant previous year should be allowed as deduction. Further, the assessee relied on the decisions of the Hon'ble Supreme Court in the case of Empire Jute Co. Ltd. Vs. CIT [reported in (1980) 124 ITR 1] and in the case of CIT Vs. Associated Cement Co. Ltd., [reported in (1988) 172 ITR 257] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was an intangible asset and therefore, the assessee was eligible for depreciation at 25%. The CIT(A) stated that the assessee relied on the decisions of the Hon'ble Supreme Court and following the said decisions, held that the assessee was entitled to depreciation on the lease hold right at 25%. 41. Aggrieved by the same, the Revenue was on appeal before the Tribunal contending that the CIT(A) erred in allowing the assessee's claim for depreciation on the ground that the lease hold land was an intangible asset without considering the fact that the lease hold right was not an intangible asset. In this regard, reliance was placed on the decision of the Bangalore Tribunal in the case of Cyber Park Development Construction Ltd. Vs. DCIT, Circle 11/(2), Bangalore [reported in (2016) 71 taxmann.com 210]. 42. The Tribunal noted the submissions of the Revenue by placing reliance on the decision of the Bangalore Tribunal in the case of Cyber Park Development Construction Ltd., and held that transferring an immovable property by way of lease created an interest in the land, as has been held in Cyber Park Development Construction Ltd., and taking note of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ease deed has not been placed for consideration. The CIT(A) did not examine the obligations, which were to be fulfilled by the assessee under the lease agreement. In fact, in the strict sense, terming it as a lease agreement itself may be a misnomer because, such agreement is bound to contain various conditions, which the assessee had to fulfil. 47. After hearing Mr.A.S.Sriraman, learned counsel appearing for the assessee, we come to know that the land, on which, the facility has been developed by the assessee, is owned by the SIPCOT and it appears that the development consists of providing roads inside the IT Park, establishment of a multi-level car parking, etc. Under the said agreement, the assessee had to develop these facilities and maintain them and the period is stated to be 99 years, which is virtually perpetual. Therefore, a deeper examination of the factual issue would have given a quietus to the matter even at the level of the Assessing Officer. 48. Before the Tribunal, the argument appears to have been whether the lease hold right would qualify as a ' capital asset' as defined under Section 2(14) of the Act. In our considered view, such issue would n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ructure or doing of any work in or in relation to and by way of renovation or extension or improvement to the building and the expenditure on construction was incurred by the assessee, then the assessee would be entitled to depreciation to the extent of any such expenditure incurred. 54. In our considered view, these decisions cannot be straight away applied to the cases on hand without taking note of the factual position, which, as already been pointed out, was not done by the Assessing Officer or the CIT(A) or for that matter, the Tribunal. In fact, the assessee has to be partially blamed for not submitting an effective reply to the notice issued under Section 148 of the Act. 55. Further, we find that the decision of this Court in the case of A.R.Krishnamurthy and A.R.Rajagopalan was in respect of a leasecum- licence granted by the State Government for conducting mining activities in favour of the assessee company and it appears to be an exclusive right and the question was as to whether such a transaction would amount to transferring a capital asset and thereby attracting capital gains. This being not the case of the assessee, this decision is wholly inapplicable. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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