TMI Blog2018 (7) TMI 2181X X X X Extracts X X X X X X X X Extracts X X X X ..... LCUTTA HIGH COURT] is both deleting the impugned disallowance as well as declaring the statutory provision itself as unconstitunal stands stayed in Revenue s appeal preferred in hon'ble apex court. We therefore direct the assessing authority to keep the instant issue in abeyance till hon'ble apex court s final verdict. This substantive ground is accepted for statistical purposes. - ITA No.19/Kol/2017 - - - Dated:- 11-7-2018 - Shri S.S.Godara, Judicial Member And Shri, M. Balaganesh, Accountant Member For the Appellant : Shri S. Rudra, Advocate For the Respondent : Shri G. Hangshing, CIT-DR ORDER PER S.S.Godara, Judicial Member:- This assessee s appeal for assessment year 2012-13 calls into question the Commissioner of Income Tax (Appeals)-1, Kolkata s order dated 04.11.2016 passed in case No.1221/CIT(A)-1/C-2(2)/2015-16 upholding Assessing Officer s action disallowing its depreciation claimed of ₹41,99,22,054 in respect of licence to collect the toll revenue of the Second Vivekananda Bridge (treated as the relevant intangible asset) and disallowing leave encashment provision of ₹1,84,562/- u/s 43B(f) in assessment order dated 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to claim depreciation on the Infrastructure facility. The appellant's A. R has contended through the written submissions that firstly, in earlier Assessment Years, i.e. A.Y: 2009-10, its claim for depreciation on the Intangible Asset, i.e. the appellant's right to collect the Tollway Charges as per the Concessionaire Agreement, had been examined in details by the then Assessing Officer and allowed vide Order u/s 143(3) dated 15/12/2011 the A.O had referred to the Pune ITAT's Order dated 31/12/2008 in the case of Ashoka Info Pvt. Ltd. [(2008) 123 TTJ 77 (Pune ITAT)] on similar facts to that of the case of the appellant. For the next Assessment Year, viz., 2010-11, also, the A.O after due examination of relevant details had accepted the appellant's claim for deduction of depreciation on Intangible Asset as made in the Return vide order u/s 143(3) dated 22/03/2013. Secondly, it was argued that the A.O erred by not following the principle of consistency, there being no change in facts as compared to these Assmt.Years. For this proposition, reliance was placed on the following decisions: Radhasoamy Satsang v. CIT [(1991) . 193 ITR 221(SC)]; and CIT v. Lagan K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture Fixture-₹ 0.23 crore (v) Vehicles/Motor Car ₹ 0.203 crore, Hence, it is inferred that contrary to the appellants claim the nature of the 'intangible assets' was not in the form of amortization of expenses for licence for Tollway as claimed by the appellant, which is contrary to the conditions for allowing depreciation as stipulated by provisions of section 32( 1)(ii) of the IT Act, i.e. know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, as the block of 'intangible assets' of the appellant is found to be in the nature of fixed assets and not on acquisition of intangible assets acquired on or after the 1st day of April, 19981 as stipulated by provisions of section 32(1)(ii) of the IT Act. In view of the above discussion, it is found that the A.O. was correct in holding that the appellant was not entitled to claim of depreciation on the various assets included in the category of intangible assets , whereby the appellant was not the owner either wholly or partly, for the purposes of allowability of depreciation. In addition, the appellant's claim for depreciation on &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue s similar arguments based on Board s circular (supra) as well as all the relevant legal or factual aspect as followed:- 7. Shri V. Raghavendra Rao, learned Authorised Representative, appearing for the assessee submitted, though, in the first year of claim of depreciation in assessment year 2009-10 the assessee had treated it as building, however, in assessment year 2010-11 as well as 2011-12, assessee had claimed depreciation by treating the right acquired for operating the BOT-bridge and collecting toll for user of such bridge by vehicles as intangible asset. He submitted, the assessee for constructing the road and bridge has invested huge amount of ₹ 214 crore. And under the terms of C.A. assessee was not going to be reimbursed the cost of construction. The only way the assessee can recover the cost of investment along with profit is by way of operating the bridge and collecting toll charges for user of the bridge by vehicles during the concession period of 11 years and seven months. Accepting the fact that assessee is not the owner of the road and bridge learned Authorised Representative submitted, the investment made by the assessee in constructing the road and brid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed by the Assessing Officer. However, the learned Commissioner (Appeals) allowed assessee's claim of depreciation as building in assessment year 2009-10 and as intangible asset in assessment year 2010-11. The aforesaid orders of the learned Commissioner (Appeals) were also upheld by the Tribunal while dismissing Department's appeals on the issue. It is stated that the Department has challenged the decisions of the Tribunal in assessment year 2009-10 and 2010-11 in further appeal before the High Court of Andhra Pradesh and Telangana and the matters are still pending. Be that as it may, the aforesaid facts clearly indicate that the impugned assessment year is not the first year of claim of depreciation on the BOT road / bridge. Rather, in the impugned assessment year, depreciation has been claimed on the opening WDV which has also been accepted by the learned Departmental Representative in the written submissions filed by him. Therefore, the nature of expenditure, whether capital or revenue, is not a subject matter of dispute arising in the present appeal. Bearing this in mind, we have to examine the validity of assessee's claim of depreciation qua the asset created. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... py and use the project site and to make at its costs, charges and expenses such development and improvement in the project site as may be necessary or appropriate to implement the project and to provide project facility in terms of the agreement. Clause- 2.5 of the agreement provides that the concessionaire without prior written consent or approval of the Government of India cannot use the project site for any purpose, other than, for the purpose of the project / project facilities as permitted under the C.A. Clause 2.7 of the C.A. makes it clear that the project site belongs to and has vested in Government of India and the Government of India has full power to hold, dispose off and deal with the same consistent with the provisions of the C.A. However, it also makes it clear that the concessionaire, subject to complying with the terms / conditions of the agreement remains in peaceful possession and enjoyment of the project site during the concession period. It further provides, in the event the concessionaire is obstructed by any person claiming any right, title or interest over the project site or any part thereof or in the event of any enforceable action including any attachment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obliged / required to reimburse the cost incurred by the assessee to execute / implement the project facilities. The only right / benefit allowed to the assessee by the Government of India is to operate the project / project facilities during the concession period of 11 years 7 months and to collect toll charges from vehicles / persons using the project / project facilities. Thus, as could be seen, the only manner in which the assessee can recoup the cost incurred by it in implementing the project / project facility is to operate the road during the concession period and collect the toll charges from user of the project facility by third parties. Admittedly, the assessee has taken up the project as a business venture with a profit motive and certainly not as a work of charity. Further, by investing huge some of ₹ 214 crore, the assessee has obtained a valuable business / commercial right to operate the project facility and collect toll charges. Therefore, in our considered opinion, right acquired by the assessee for operating the project facility and collecting toll charges is an intangible asset created by the assessee by incurring the expenses of ₹ 214 crore. The con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons assessee cannot collect toll charges for user of the project facilities. Thus, the right to operate the project facility and collect toll charges is integrally connected to the completion of the project facility which cannot be done unless the assessee invests its fund for completing the project. Therefore, keeping in view the aforesaid 'fact, it cannot be said that the right to collect toll has accrued to the assessee on the date of execution of the agreement. If we accept the aforesaid argument of the learned Senior Standing Counsel, in other words, it would mean that without even executing and completing the project facility, assessee would be collecting toll charges. Therefore, the contention of the learned Senior Standing Counsel that the expenditure incurred by the assessee till execution of the agreement can only be considered as an intangible asset, in our view, is illogical, hence, cannot be accepted. Thus, having held that the expenditure of ₹ 214 crore incurred by the assessee has resulted in creation of an intangible asset of enduring nature for the assessee, it is necessary now to examine whether such intangible asset comes within the scope and ambit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid contention of the learned Senior Standing Counsel, let us examine the definition of license extracted herein above. A plain reading of section 52 of the Act makes it clear, a right granted to a person to do or continue to do something in the immovable property of the grantor, which, in the absence of such right would be unlawful and such right does not amount to an easement or interest in the property, then such right is called a license. If we examine the facts of the present case, vis-a-vis, the definition of license under the Indian Easements Act, 1882, it would be clear that immovable property on which the project / project facility is executed / implemented is owned by the Government of India and it has full power to hold, dispose off and deal with the immovable property. By virtue of the C.A., assessee has only been granted a limited right to execute the project and operate the project facility during the concession period, on expiry of which the project / project facility will revert back to the Government of India. What the Government of India has granted to the assessee is the right to use the project site during the concession period and in the absence of such right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness or commercial rights of similar nature . As could be seen from the definition of intangible asset, specifically identified items like knowhow, patents, copyrights, trademarks, licenses, franchises are not of the same category, but, distinct from each other. However, one thing common amongst these assets is, they all are part of the tool of the trade and facilitate smooth carrying on of business, Therefore, any other intangible asset which may not be identifiable with the specified items, but, is of similar nature would come within the expression any other business or commercial rights of similar nature , The Hon'ble Supreme Court in CIT vis Smifs Securities (supra) after interpreting the definition of intangible asset as provided in Explanation 3 to section 32(1), while opining that principle of ejusdem generis would strictly apply in interpreting the definition of intangible asset as provided by Explanation 3(b) of section 32, at the same time, held that even applying the said principle 'goodwill' would fall under the expression any other business or commercial rights of similar nature , Thus, as .could be seen, even though, 'goodwill' is not one of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the intangible asset should be akin to any one of the specifically identifiable assets is not a correct interpretation of the statutory pros. Had it been the case, then goodwill would not have been treated as an intangible asset. The Hon'ble Delhi High Court in the case of Areva T and D India Ltd. Sup, while interpreting the aforesaid expression by applying the principles of ejusdem generis observed, the right as finds place in the expression business or commercial rights of similar nature need not answer the description of knowhow, patents, trademarks, license or franchises, but must be of similar nature as the specified asset. The Court observed, looking at the meaning of categories of specified intangible assets referred to in section 32(1)(ii) of the Act preceding the term business or commercial right of similar nature , it could be seen that the said intangible assets are not of the same line and are clearly distinct from one another. The Court observed, the use of words business or commercial rights of similar nature , after the specified intangible assets clearly demonstrates that the legislature did not intend to provide for depreciation only in respect of spe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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