TMI Blog2018 (5) TMI 2064X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Ld. AO on the plea that the assessee is not the owner of the toll road, hence not eligible for depreciation. To this extent, that the assessee is not the owner of the asset/road, we agree with the contention of the AO as well as the ld. CIT-DR/DR. The issue before us falls within the category of intangible asset. Commissioner of Income Tax (Appeal) allowed depreciation as a building instead of plant and machinery. We feel this is neither building nor a plant and machinery rather the claim of depreciation to the assessee is allowable in the category of commercial rights of similar nature being intangible asset as provided u/s 32 (1)(ii) of the Act. To this extent, only, the additional ground raised by the assessee is allowed at applicable rate of deprecation i.e. @ 25%. As further noted the present road is since 2008-09 and license was granted to the assessee in terms of collecting tax/tolls and the Tribunal for Assessment Year 2008-09, decided the issue in favour of the assessee. - ITA NO.622/Mum/2015, ITA NO.636/Mum/2015, ITA NO.4346/Mum/2015, C.O. No.25/Mum/2017 (Arising out of ITA NO.622/Mum/2015) - - - Dated:- 23-5-2018 - Shri Joginder Singh, Judicial Member And ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintenance of road infrastructure filed its return of income for assessment year 2010 -11 on 24 September 2010 declaring total loss at ₹ 118,89,65,269 /-. The assessment was completed on 21st March 2013 under section 143 (3) of the Act. The assessee entered into agreement dated 21st Oct 2006 with the National Highway authority for construction, operation and maintenance of road project in the state of Andhra Pradesh. The National Highway authority granted concession under the said agreement for a period of 20 years commencing from 15th September 2006. The assessee made a claim of depreciation in the return of income, on toll road for ₹ 129,43,68,083 /-by treating the road as plant and machinery . The assessing officer while passing assessment order disallowed the claim of depreciation holding that the ownership of the road is with the Government of India, however, the assessee was allowed amortization of cost at ₹ 28,58,11,556/-. On appeal before Commissioner (Appeals) the assessee was allowed depreciation on the basis of decision of Tribunal in case of Mumbai Tribunal in West Gujarat Expressway Ltd. dated 27th February, 2013. Hence, aggrieved, the Revenue has f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant be granted depreciation of ₹ 86,29,12,055/- . 4. On the facts and circumstances of the case, the appellant prays that the Learned Assessing Officer allowed amortization of ₹ 21,58,11,556/- considering the cost of road at ₹ 733,76,43,914/- instead of actual cost incurred by the appellant at ₹ 862,91,20,551/-. The appellant prays that the amortized cost to be modified to ₹ 50,75,95,326/- in place of ₹ 21,58,11,556/-. 4. We have heard the ld. Department Representative (DR) for revenue and the ld. Authorized Representative (AR) for the assessee and perused the material available on record. The ld DR for the revenue submits the ld Commissioner (Appeals) allowed the depreciation on the basis of decision of Tribunal in West Gujarat Expressway Ltd dated 27th February, 2013 , however, the decision of Tribunal has been reversed by Hon ble jurisdictional High Court in an appeal by the revenue in CIT Versus West Gujarat Expressway Ltd (2017) 82 taxman.com 224 (Bombay) vide order dated 5th April 2016 in ITA No. 2357 of 2013. The ld. DR further submits that once the Bombay High Court held that the owner ship is always vested with Government the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not pressed. Ground No.2 of Cross Objection by assessee relates to depreciation on license/ business of commercial right as intangible rights. The assessee-company is engaged in the business of setting of infrastructure facility, including of development operation and maintenance of road project. The assessee was assigned the work of widening the existing 2 lane highway from 135 km to 211 km (Kotakatta by pass road), covering 74.65 km on National Highway No.7 to 4 lane in State of Andhra Pradesh, vide agreement dated 20.03.2006 by National Highway Authority of India (NHAI). As per the condition of the agreement, the assessee has to built, maintain, operate and to handover the project to NHAI in the year 2026. The assessee is entitled to build, operate and transfer (BOT) annuity basis under the agreement. Thus, the assessee has license/ commercial right. This right is claimed as intangible right by the assessee. The co-ordinate bench of Tribunal while dealing with depreciation on intangible asset in ACIT vs. West Gujarat Expressway Ltd. in ITA No.5904/M/2012, ITA No. 6244/M/2012 dated 15.04.2015 after considering the decision of Hon ble Bombay High Court in CIT vs. West Gujarat E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art 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 alternative claim of the assessee that if the assessee is not found as owner of the toll road, his claim of depreciation be considered in relation to investments made as falling under the other categories of assets, is concerned, we would like to revert to the decision of the Hon'ble Bombay High Court in North Karnataka Expressway Ltd. (supra). in this respect. We find the Hon'ble Bombay High Court, in para 24 of the said decision, has catego ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 roads built upon the land/National Highways in agreement and through the private parties and such private parties cannot claim themselves to be the owner of the toll road. However, the Hon'ble Bombay High Court has left upon the issue relating to the claim of depreciation, if otherwise eligible under the other provisions of the Income Tax Act. 21. The Ld. A.R., before us, has put the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) Ltd. v. CIT' [2006] 284 ITR 323/157 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 v. ACIT [IT Appeal No.1820/M/2011 dated 05.05.2014] and in the case of Presidency Co-operative Housing Society Ltd. v. ACIT [IT Appeal No.4051/M/2011, dated 16.05.2014]. The present case is not a case where the assessee had not claimed any deduction on account of depreciation. The assessee has very much cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st 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. S.R. Koshti v. CIT [2005] 276 ITR 165/146 Taxman 335 (Guj), C.P.A. Yoosuf v. ITO [1970] 77 ITR 237 (Ker.), CIT v. Bharat General Reinsurance Co. Ltd. [1971] 81 ITR 303 (Delhi), CIT v. Smt. Archana R. Dhanwatey [1982] 136 ITR 355/[1981] 7 Taxman 121 (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, we now have to discuss as to under what head the said deductions can be claimed by the assessee. It is undisputed that in view of the agreement with the NHAI, the assessee has been given the right to develop and maintain the toll road and also the right to collect toll for a specified period without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chises 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.- (1) In respect of depreciation of - 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, 1988, 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 the right to collect the toll. The said right has been given to the assessee for a specified period with enduring benefit. It is also not disputed that on the expiry of the time period of the agreement, the said right of the assessee will cease to have effect whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. (supra) and Ashoka Info (P) Ltd. (supra). 9. On the other hand, the Ld. Representative for the respondent assessee pointed out that the aforesaid argument set up by the Revenue has also been considered in the aforesaid precedents before concluding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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' falling within the purview of section 32(1)(i1) of the Act following the aforesaid precedents. 7. In terms of the aforesaid precedent, the claim of the assessee in the present case for depreciation on 'License to collect Toll', bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r observations made above. 7. Considering the decision of co-ordinate bench referred above and respectfully following the same, the assessee is allowed depreciation on road constructed by it under BOT basis as an intangible asset falls within the scope of section 32(1)(ii) of the Act. No contrary decision or material brought to our notice. In the result, ground No.2 of Cross Objection raised by assessee is allowed. The assessee has raised ground no.3 in Cross Objection in alternative to ground no.2. Since, we have allowed the ground no.2 of the Cross Objection. Hence, discussions on ground no.3 have become academic. Ground No.4 of Cross Objection to amortization of cost, as we have already allowed the depreciation to the assessee, the discussions on this ground have also become academic. In the result, the appeal filed by Revenue is allowed for statistical purpose only since the claim of depreciation is ultimately allowed in the Cross Objection filed by assessee. 2.2. In the light of the above order, now, we shall examine section 32 of the Act, which deals with depreciation. It is reproduced hereunder:- 32. (1) In respect of depreciation of- (i) buildings, machinery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion for the balance fifty per cent of the amount calculated at the percentage prescribed for such asset under clause (iia)shall be allowed under this sub-section in the immediately succeeding previous year in respect of such asset: Provided also that where an asset being commercial vehicle is acquired by the assessee on or after the 1st day of October, 1998 but before the 1st day of April, 1999 and is put to use before the 1st day of April, 1999 for the purposes of business or profession, the deduction in respect of such asset shall be allowed on such percentage on the written down value thereof as may be prescribed. Explanation.-For the purposes of this proviso,- (a) the expression commercial vehicle means heavy goods vehicle , heavy passenger motor vehicle , light motor vehicle , medium goods vehicle and medium passenger motor vehicle but does not include maxi-cab , motor-cab , tractor and roadroller ; (b) the expressions heavy goods vehicle , heavy passenger motor vehicle , light motor vehicle , medium goods vehicle , medium passenger motor vehicle , maxi-cab , motor-cab , tractor and road roller shall have the meanings respectively as assig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anation 3.-For the purposes of this sub-section, the expression assets shall mean- (a) tangible assets, being buildings, machinery, plant or furniture; (b) intangible assets, being know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature. Explanation 4.-For the purposes of this sub-section, the expression know-how means any industrial information or technique likely to assist in the manufacture or processing of goods or in the working of a mine, oil-well or other sources of mineral deposits (including searching for discovery or testing of deposits for the winning of access thereto). Explanation 5.-For the removal of doubts, it is hereby declared that the provisions of this sub-section shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income; (iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing 33[or in the business of generation, transmissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in respect thereof; (b) where the building, machinery, plant or furniture is sold, the price for which it is sold, so, however, that where the actual cost of a motor car is, in accordance with the proviso to clause (1) of section 43, taken to be twenty-five thousand rupees, the moneys payable in respect of such motor car shall be taken to be a sum which bears to the amount for which the motor car is sold or, as the case may be, the amount of any insurance, salvage or compensation moneys payable in respect thereof (including the amount of scrap value, if any) the same proportion as the amount of twenty-five thousand rupees bears to the actual cost of the motor car to the assessee as it would have been computed before applying the said proviso; (2) sold includes a transfer by way of exchange or a compulsory acquisition under any law for the time being in force but does not include a transfer, in a scheme of amalgamation, of any asset by the amalgamating company to the amalgamated company where the amalgamated company is an Indian company or in a scheme of amalgamation of a banking company, as referred to in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s Andhra Pradesh Expressway by a later decision dated 28/02/2018 duly considered various decision including the decision reversed by Hon'ble High Court in CIT vs West Gujarat Expressway Ltd. (2016) 73 taxmann.com 139; (2017) 390 ITR 400 (Bom.), order dated 05/04/2016. Before us also, the Ld. CIT-DR/Ld. DR contended that in view of this decision from Hon'ble jurisdictional High Court, the assessee is not entitled to depreciation. We have gone through this order and found that the issue before the Hon'ble High Court was with respect to treating toll road as plant and machinery and if that situation decided in favour of the Revenue. So far as, the decision in the case of Dinesh Kumar Gulabchand Agarwal vs CIT ((supra)), relied upon by the Ld. DR, is concerned, the issue before Hon'ble High Court was with respect to actual use of the vehicle, kept ready for use in that situation, the Hon'ble High Court held that the assessee was not entitle to claim depreciation. Therefore, this decision may not help the Revenue being on different issue/facts. So far as, the decision from Hon'ble Bombay High Court in North Karnataka Expressway Ltd. vs CIT (2014) 51 taxmann.com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er deals with the stand of the Assessee and in detail. The Commissioner held that the Assessing Officer had not discussed this claim at all. He has granted it without any application of mind and mechanically. There is justification for such a conclusion by the Commissioner. 24. Then, the Commissioner discussed the claim on merits. He found that the ownership of the road cannot be claimed by the Assessee. The claim of depreciation is not based on treating it as an intangible asset with a right to use the asset without being actual owner thereof. In that regard, the Commissioner referred to the orders passed by the Bombay Bench of the Income Tax Appellate Tribunal in the case of Reliance Port and Terminals Ltd. and that of the Delhi Bench of the Tribunal dated 19th December, 2008 in the case of Noida Toll Bridge Company and held that firstly, the Assessing Officer did not apply his mind at all and secondly, the toll roads are not owned by the Assessee and he cannot claim any depreciation thereon. The Hon'ble Apex Court in the case of ICDS Ltd. vs CIT (2013) 350 ITR 527 (Supreme Court) while dealing with interpretation of section 32 of the Act held as under:- '10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le rate of deprecation i.e. @ 25%. It is further noted the present road is since 2008-09 and license was granted to the assessee in terms of collecting tax/tolls and the Tribunal for Assessment Year 2008-09, decided the issue in favour of the assessee. In the absence of contrary facts, no contrary decision is expected. 3. So far as, liability of interest u/s 234D of the Act is concerned, it is consequential in nature. 4. So far as, the appeal of the Revenue (ITA No.636/Mum/2015), is concerned, the first ground raised by the assessee pertains to interest income of ₹ 36,25,280/- whether taxable under the head business income and not income from other sources is concerned, we find that the Ld. Commissioner of Income Tax (Appeal) has followed the decision from Hon'ble Bombay High Court in CIT vs Lok Holding (308 ITR 356)(Bom.). Thus, we find no infirmity in the order. This ground of the Revenue is dismissed. 4.1. The next ground i.e. ground no.2, was sent to the file of the Ld. Assessing Officer, therefore, no grievance is caused to the Revenue. The Ld. Assessing Officer is directed to decide the issue in accordance with law. 4.2. So far as, the claim of deprec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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