TMI Blog2018 (6) TMI 1759X X X X Extracts X X X X X X X X Extracts X X X X ..... ough its own resources on development, construction and maintenance of the infrastructure facility. Secondly, section 32(1)(ii) 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. We hold that the assessee is entitled to claim the depreciation on intangible assets as provided under section 32(1)(ii) of the Act. The second part of the order of Assessing Officer in amortizing the expenditure over the period of facility and allowing the same stands reversed. The Assessing Officer is thus, directed to allow the claim of assessee vis- -vis depreciation on intangible asset under section 32(1)(ii) of the Act. Thus we hold that the assessee is entitled to depreciation @25% on the Right to Collect Toll being an intangible asset. - Appeal of the Revenue is dismissed. - ITA No. 1629, 1630/PUN/2016 - - - Dated:- 8-6-2018 - SHRI D.KARUNAKARA RAO AND SHRI VIKAS AWA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 63,37,727/-. Assessee relied on various decisions in support of his claim including the decision of Pune Bench of the Tribunal in the case of DCIT Vs. Ashoka Bridgeways in ITA No.686/PN/2012, dated 29- 04-2013. However, on the ground that the said decision is challenged before the jurisdictional High Court, AO contended to deny the said claim of depreciation. Contents of Para No.16 of the assessment order are relevant. Eventually, at the end of the assessment, the AO disallowed depreciation amounting to ₹ 74,52,65,108/-. For the sake of completeness, Para No.16 of the assessment order is extracted below: 16. In view of the detailed discussion in the preceding paragraphs the claim of depreciation under Licence to Collect Toll is not tenable and is therefore rejected. Depreciation claimed by the company at ₹ 79,16,02,835/- is therefore not allowable. However as per CBDT Circular No.09/2014 dated 23/04/2014 as the Company has spent on the construction of the infrastructural facility viz the road suitable deduction on the account is to be granted. This would be by amortization of the expenses incurred by the Company for the project over the period of life of asset an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided by the order dt 30.08.2017 Ashoka Infraways Ltd vs ACIT in ITA Nos. 60 to 66 for Assessment Years 2005-06 to 2011-12, decided by the Order dt. 28.03.2018. Copies of the said Orders are enclosed for ready reference (Page Nos 11-31). Further, the Circular No. 9/2014 dt. 23.04.2014 is also duly considered by the Hon'ble ITAT 'A' Bench in these decisions. Further, respondent's claim is supported by the recent ITAT Special Bench decision in the case of Progressive Construction Ltd (Page Nos. 32 - 46). In this decision also the CBDT Circular No. 9/2014 dt. 23.04.2014 is duly considered. Therefore, it is prayed to dismiss the appeal of Department, by upholding the decision of the learned CIT(A) - I, Nashik. To support the above, assessee furnished the relevant orders of the Tribunal in the case of (1) ITO Vs. M/s. Ashoka Highways (Bhandara) Ltd. ITA No.1299/PUN/2015, dated 30-08-2017, (2) ACIT Vs. M/s. Ashoka Infraways Pvt. Ltd. ITA Nos. 60 to 66/PUN/2016 and CO Nos.114 to 119/PUN2017, dated 28-03-2018, (3) ACIT Vs. Progressive Constructions Ltd. 92 taxmann.com 104 (Hyderabad Trib.) evidencing the said right held as an intangible asset eligible for depr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the years under consideration holding that the assessee was not the owner of road attached to the said right and the asset road was not used in the business of assessee. The Assessing Officer also held that the right to collect toll was not a license. The CIT(A) on the other hand, relied on the circular issued by the CBDT giving clarification on treatment of expenditure incurred for development of roads / highways in BuiltOperate-Transfer agreement. The CBDT vide circular No.9/2014, dated 23.04.2014 gave clarification on claim of depreciation under section 32(1)(ii) of the Act and clarified that since the assessee does not hold any rights in the project except recovery of toll fees to recoup the expenditure incurred, it thus, cannot be treated as owner of property either wholly or partly for the purpose of allowability of depreciation under section 32(1)(ii) of the Act. The CBDT denied the claim of depreciation but held the persons to be eligible for deduction on account of amortized cost incurred in creation of infrastructure facility of roads / highways over the period of concessional agreement (AIR) after excluding the time taken for creation of such facilities. In view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the National Highway Authority of India and the clause therein that for the purpose of claiming tax depreciation, the property representing the capital investment made by the concessionaire shall be deemed to be acquired and owned by the concessionaire . (emphasis supplied by us) 18. The Hon ble Bombay High Court, however, after discussing the provisions of National Highway Act, 1956 and National Highway Authorities of India 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax Act can be looked into. However, that cannot control, leave alone or overreach the National Highway Act, 1956 or the National Highway Authorities of India Act, 1988. The Hon ble Bombay High Court further, in para 47 of the said order, has observed that the assessee can definitely claim depreciation on the investments. He has definitely invested in the projects of construction development and maintenance of the National Highways 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns or limitations, if any, prescribed by statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. An assessee is entitled to raise not merely additional legal submissions before the appellate authorities but is also entitled to raise additional claims before them. The appellate authorities have the discretion 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) Limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of the above facts, it is not disputed or contested by the Revenue that the assessee is not entitled to any deduction. The only issue in dispute is as to under what head/provision the deduction is to be allowed to the assessee. The Hon ble Jurisdiction High Court of Bombay in the case of Balmukund Acharya vs. DCIT reported in (2009) 221 CTR 440 (Bom.) has held that the Hon ble Apex Court and the various High Courts have ruled 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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above expenditure as revenue expenditure and to amortize the same over the period of the agreement as allowable business expenditure. The assessee, however, has claimed that the same is a capital expenditure and it is entitled to deductions over the investments made as depreciation. A perusal of the above reproduced para 4 of the circular reveals that it is not disputed even by the Revenue Authorities that in lieu of the investments made in the project, the assessee has been given right/license to collect the toll. It has also been specifically mentioned that it brings 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? 21. The Tribunal allowed the claim of assessee under section 32(1)(ii) of the Act i.e. depreciation on intangible assets holding as under:- 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench of the Tribunal in the case of Ashoka Infraways Pvt. Ltd. vs. ACIT vide ITA Nos. 185 186/PN/2012 dated 29.04.2013. As per the Tribunal following the precedents by way of various decisions of different Benches of the Tribunal mentioned therein, the claim of the assessee for treating the 'License to collect Toll' as an intangible asset eligible for the claim of depreciation @ 25% as per Section 32(1)(ii) of the Act was justified. The following discussion in the order of the Tribunal dated 29.04.2013 (supra) is relevant:- 7. Before us, it was a common point between the parties that the impugned issue has been adjudicated in favour of the assessee in the following decisions of the Tribunal:- i) Ashoka Buildcon 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction and maintenance of the infrastructure facility. Such a right has been adjudicated by the Tribunal in the aforesaid precedents to be in the nature of 'intangible asset' falling within the purview of section 32(1)(i/) of the Act and has been found eligible for claim of depreciation. No decision to the contrary has been cited by the Ld. DR before us and, therefore, we find no reasons to depart from the accepted position based on the aforesaid decisions. 11. So however, the plea of the Ld. DR before us is to the effect that the impugned right is not of the nature referred to in section 32(1)(ii) of the Act for the reason that the agreement with the Government of Madhya Pradesh only allowed the assessee to recover 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed, was rejected vide para 30 of the order. Further, vide para 31, the Tribunal considered the contention of Revenue that investment made by the assessee be treated as revenue expenditure and be amortized for the period of agreement, was rejected holding that the investment made under the circumstances could not be said to be revenue in nature but was capital in nature, on which the assessee was entitled to claim the depreciation. Para 31 of the order reads as under:- 31. So far as the contention of the Revenue that the investment made by the assessee be treated as a revenue expenditure and be amortized for the period of the agreement, is concerned, we do not find any force in the same on the ground that not only the AO but also the CBDT in the circular (supra) as discussed above has admitted that the license of right to collect toll free has been given to the assessee in lieu of the investments made and that such a right brings to the assessee an enduring benefit. The investments made under such circumstances cannot be said to be of revenue in nature but, as discussed above, are of capital in nature. The assessee, thus, is entitled to claim depreciation on such type of cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and consequently, the assessee is entitled to claim depreciation on such intangible assets as provided under section 32(1)(ii) of the Act. Accordingly, we hold s. The assessee is thus, entitled to its claim. Thus, the second part of the order of Assessing Officer in amortizing the expenditure over the period of facility and allowing the same stands reversed. The Assessing Officer is directed to allow the claim of assessee of depreciation on such intangible asset under section 32(1)(ii) of the Act. 9. Following the same parity of reasoning, we hold that the assessee is entitled to claim the depreciation on intangible assets as provided under section 32(1)(ii) of the Act. The second part of the order of Assessing Officer in amortizing the expenditure over the period of facility and allowing the same stands reversed. The Assessing Officer is thus, directed to allow the claim of assessee vis- -vis depreciation on intangible asset under section 32(1)(ii) of the Act. Following the same parity of reasoning, we hold that the assessee is entitled to depreciation @25% on the Right to Collect Toll being an intangible asset. Accordingly, the grounds raised by the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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