TMI Blog2011 (6) TMI 1001X X X X Extracts X X X X X X X X Extracts X X X X ..... (BOT) basis and has filed its return of income on 25-11-2003 declaring a loss of ₹ 1,00,25,563/-. The return was processed under section 143(1) on 30-3-2004. As the case was selected for scrutiny, a notice under section 143(2) was issued on 27-11-2004. In response to the statutory notices issued by the assessing officer, the assessee s authorized representative attended from time to time and submitted the information called for. The assessee has been awarded a contract by Government of Andhra Pradesh for construction of Mini By-Pass Road at Eluru Town and also by the government of India for construction and maintenance of bridges over rivers at Manneru, Palleru, Musi, Gandlakamma and Mudigonda under BOT Scheme. During the year under consideration, the assessee got toll tax revenue of ₹ 5,01,87,874 from the above projects. After debiting various types of expenditure, the assessee has shown a loss of ₹ 99,67,719/- for the assessment year 2003-04. The assessing officer passed his assessment order dated 30-1-2006 under section 143(3) of the Act by arriving at the profit from the project at ₹ 2,15,54,972/- as against loss of ₹ 1,00,25,563/- by disallowing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount is the cost of development of infrastructure facility and the cost of recovery of the toll fee. In so far as the cost of construction is concerned the same has to be recovered over a period of time for 17 years in respect of Ongole project and 7 years in respect of Eluru Project. Therefore, the assessee claimed the expenses proportionately over a period commencing from assessment year 1999-2000 onwards in respect of both the projects. The proportionate amount is debited to the profit and loss account and the balance was shown in the balance sheet as a part of the block of assets. Up to the assessment year 2002-03, the department did not question the method of accounting adopted by the assessee and the assessments for the assessment years 2000-01 and 2002-03 were completed under section 143(3) of the Act. 4. For the assessment years i.e. 1999-2000 and 2001-02, the assessing officer did not convert the case to scrutiny and the department accepted the procedure adopted by the assessee herein the claiming the expenses towards cost of construction. The assessee filed the return of income by making adjustments to the net profit as per the profit and loss account after claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in nature. In both the cases the procedure of claiming the amortization expenses over a period of time is approved and therefore it is not correct for the department to mention that no amortization of expenditure can be allowed except under the provisions of section 35D of the Act. It is submitted further that to quality deduction of expenditure, it is not necessary that it should be fitting into sections 30 to 43 and it may be allowed either under section 28 or under section 37 of the Act. The provisions of section 28 of the Act mentioned that the profits and gains of business or profession shall be the income assessable under section 28 of the Act. For the purpose of determining the profits and gains of business or profession, one has to refer to the accounting principles. In so far as expenditure on construction is concerned, the same is revenue in nature and the said amount s reimbursed by way of toll fee collected over a period of 17/7 years. The toll fee is the amount received to compensate the expenditure incurred on construction of projects and the toll fee received is to be reduced by the said expenditure. Further, the said receipt is over a period of 17/7 years, the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of land required for the proposed project shall be handed over to the Entrepreneur for the construction of the project. This will not amount to transfer of ownership of the land to the Entrepreneur. From the above clauses of the agreement it is clear that the Government held rights in the land and the property and they were never transferred to the assessee herein and a reading of the agreement would clearly indicate that the responsibility of the construction of the projects to the specifications of the government is entrusted to the assessee. The assessee shall be responsible to construct such projects at its own cost. The cost so incurred shall be reimbursed by way of recovery of toll fee in accordance with the directions given by the Government in various notifications. The assessee would never become the owner of the property. Further, the ownership of the Highways is to be decided with reference to the enactments made by the Government. The learned counsel for the assessee drew our attention to section 4 of the National Highway Authority Act, 1956 and further mentioned that the fees for services rendered on National Highways also is to be charged in accordance with sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 5.16 crores was offered to tax as toll revenue as against which various items of expenditure to the extent of ₹ 6.16 crores was claimed. Out of these expenses, the claim of ₹ 3,30,17,934/- being the amortized cost of Eluru Bypass Road and Ongole sector bridges, was disallowed by the assessing officer. Similarly, in the year relevant to the assessment year 2004-05, an amount of ₹ 4.28 crores claimed along with other expenses against toll tax revenues of ₹ 5.41 crores was disallowed. The stand of the assessing officer is that amortized cost cannot be claimed because it does not qualify under section 35D or any of the other specific sections. The alternate claim of revenue expenditure cannot be considered because expenditure does not qualify in terms of sections 30 to 43 of the Act. It was also noted by the assessing officer that the assessee company itself classified the asset as a capital asset in its balance sheet. However, depreciation could not be allowed because the primary requirement of ownership is not satisfied for the purposes of section 32 of the Act. It is further contended that the learned authorized representative placed reliance on the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and there is therefore, no manifest inequity in the tax treatment of the assessee s receipts and the material cost of the project unlike in other cases, does not generate a saleable commodity that is being taxed on a gross basis. It is therefore submitted that the decision of the Tribunal in the case of Nyse Infrastructure Pvt. Ltd., supra would not have automatic application to the facts of the present case. It is submitted that the allowance of depreciation as directed by the first appellate authority may result in anomalous situation and the project is an ongoing activity with specific amounts being transferred from workin- progress from year to year. As could be seen from page 6 and 7 of the assessee s paper book, the construction activity is spread over several years and date of acquisition of any discrete item or asset cannot be ascertained with certainty. The other question that arises is one with reference to which block of assets should depreciation be claimed and in the above referred decision of Nyse Infrastructure Pvt. Limited the Tribunal suggests that roads can be considered as building and this decision did not have the benefit of considering the decision of the Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdinate Bench of the Tribunal in the case of Nyse Infrastructure (supra) held that the assessee has to be given deduction either of depreciation, or cost of construction as revenue expenditure or in the form of amortization of expenditure by following the judgment in the case of Madras Industrial Investment Corporation (supra). It is well settled that the Co-ordinate Bench s decision is binding and the same has to be followed in deciding the similar issues. In the case of Nyse Infrastructure (supra) the Tribunal allowed the deduction as depreciation as in that case, the assessee itself claimed depreciation. In the case under consideration, the assessee company claimed amortization of the BOT Project expenditure as revenue expenditure and as per the ratio of decision rendered by the Tribunal in the case of Nyse Infrastructure (supra) the amortization of expenditure is also one of the options and is being allowable as deduction. Hence, by following the decision of Coordinate Bench of the Tribunal in the case of Nyse Infrastructure (supra), amortization of BOT project expenditure claimed by the assessee is to be allowed. Moreover, we do not see any merit in the arguments of the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mortization of the expenditure, the ground raised by the revenue in challenging the findings of the CIT (A) in allowing the depreciation on the infrastructure facilities, stands rejected. 12. The other ground raised by the assessee remained to be adjudicated upon is with regard to the treatment of interest on deposits as income from other sources and not as business income and also with regard to the benefit of netting the interest income. On similar and identical issue, this Bench of the Tribunal in the assessee s own case for the assessment year 2000-01 vide order dated 30-11-2000 in ITA No.340/Hyd/2006 held against the assessee and in favor of the department. Following the reasoning given in the order of the Tribunal mentioned above, we reject the ground raised by the assessee on this issue and hold that the interest received by the assessee represents income from other sources and the benefit of netting of interest also cannot be extended to the assessee by following the decision of the Tribunal in the assessee s own case for the assessment year 2000-01 dated 30-11-2007. Accordingly, the ground raised by the assessee stands rejected. 13. In the result, both the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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