TaxTMI 
TaxTMI 
2021 (9) TMI 393
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....he business of improvement, operation and maintenance, rehabilitation and strengthening of existing two lane road and widening to four lane divided carriageway from Km. 539.5 to Km. 440 (Vadape-Gonde Section) of NH-3 on Build, Operate and Transfer (BOT) basis in the State of Maharashtra. The assessee company had entered into a concessionaire agreement with National Highway Authority of India (NHAI) on 14th October, 2005, which laid down the rights, responsibilities and obligations of the assessee. The assessee company had filed its return of income for A.Y. 2012-13 on 27.09.2010, declaring a total loss of Rs. 153,87,93,284/- and 'book profit' u/s 115JB of Rs. 7,56,60,340/-. Original assessment was framed by the A.O u/s 143(3) of the Act, dated 30.03.2015 and the loss returned by the assessee company was accepted as such. 3. After culmination of the assessment proceedings, the Pr.CIT (Central)-4, Mumbai, called for the assessment records of the assessee company. Observing, that the A.O while framing the assessment vide his order passed u/s 143(3), dated 30.03.2015 had wrongly allowed the assessee's claim for depreciation u/s 32(1)(ii) of Rs. 182.79 crore, the Pr.CIT called upon the....
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....frastructure facility of roads/highways under BOT projects was to be amortized and claimed as allowable business expenditure under the Act. Backed by his aforesaid observation, the A.O disallowed the assessee's claim of depreciation of Rs. 182,79,39,359/-. Accordingly, the A.O vide his order passed u/s 143(3) r.w.s 263, dated 31.08.2017 assessed the income of the assessee company at Rs. 28,91,46,080/-. 5. Aggrieved, the assessee carried the matter in appeal before the CIT(A). It was observed by the CIT(A) that the order passed by the Pr. CIT-4, Mumbai, u/s 263 of the Act, dated 22.03.2017 had thereafter been quashed by the Tribunal, as under : "We noted that this issue is again decided by the Special Bench of ITAT Hyderabad in the case of ACIT vs. Progressive Construction Ltd. {2018) 92 taxmann.com 104 [Hyderabad-Trib.] SB, wherein it is held that the expenditure incurred by the assesses for construction of road under BOT contract by Gout, of India, have given rise to an intangible asset as defined under explanation 3(b) read with section 32(1)(iii) of the Act, assesses would be eligible to claim depreciation on such asset at specified rates. The Special Bench has finally held t....
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....ming the assessment u/s 143(3), dated 30.03.2015 had wrongly allowed the assessee's claim for depreciation of Rs. 182.79 crores u/s 32(1)(ii) i.e @ 25% with reference to the expenditure that was incurred by it for development of roads as per BOT agreement, the Pr.CIT-4, Mumbai had vide his order passed u/s 263 of the Act, dated 22.03.2017 set-aside the assessment order with a direction to the A.O to frame a de novo assessment after considering the CBDT Circular No. 9 of 2014, dated 23.04.2014 after verifying the factual position. Thereafter, the A.O vide his order passed u/s 143(3) r.w.s 263, dated 31.08.2017 giving effect to the directions of the Pr.CIT-4, Mumbai, had assessed the income of the assessee company at Rs. 28,91,46,080/-. In the meantime, the assessee had assailed the order passed by the Pr. CIT u/s 263 of the Act, dated 22.03.2017 before the Tribunal, which was set-aside by the Tribunal vide its order passed in Mumbai Nasik Expressway Limited Vs. The Pr. Commissioner of Income-tax, Central Circle 4, Mumbai in ITA No. 3910/Mum/2017; dated 15.04.2019, observing as under : "8. We have heard the rival contentions and gone through the facts and circumstances of the case.....
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....CIT v. West Gujarat Expressway Ltd. (2015) 154 lTD 103. The Tribunal in this case after considering the Circular has held that the expense incurred by the assessee for availing an enduring benefit is nothing but an intangible asset and that the assessee is entitled to depreciation on the same under section 32(1)(ii) of the Act. The extract of one of the important observations made by the Tribunal is reproduced below: "It is not disputed that the assessee has been given license/commercial right over the project to receive the toll. The assessee may be 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 which means it slowly will depreciate to the nil value. As per the provisions of the Income Tax Act, especially under section 32(l)(ii), the assessee is entitled to claim of depreciation on such type of rights. Such rights have been described as intangible assets under the Act and are eligible for cla....
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...., wherein it is held that the expenditure incurred by the assessee for construction of road under BOT contract by Govt. of India have given rise to an intangible asset as defined under explanation 3(b) read with section 32(1)(iii) of the Act, assessee would be eligible to claim depreciation on such asset at specified rates. The Special Bench has finally held that although the assessee is not the owner of the land but the right granted by the Govt. of India under the Concession Agreement (CA) has a license permitting the assessee to do certain acts and deeds which otherwise would have unlawful or not possible to do in the absence of CA. Thus, the right granted by the assessee under CA to operate the project/ project facility and collect toll charges is a lisence or akin to licence, hence, being an intangible asset eligible for depreciation under section 32(1)(ii) of the Act. Finally, the Tribunal decided the issue vide Para 14 to 17 as under: - "14. It has been the contention of the learned Senior Standing Counsel that as the term "license" has not been defined under the Income Tax Act, 1961, the definition of "license" under the Indian Easements Act, 1882, has to be looked into. ....
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....ness or commercial rights of similar nature". He had submitted, applying the principle of ejusdem generis the rights referred to in the expression "any other business or commercial rights of similar nature", should be similar to one or more of the specifically identified assets preceding such expression. The aforesaid contention of the learned Departmental Representative is unacceptable for the reasons enumerated hereinafter. 16. We have already held earlier in the order that by incurring the expenditure of Rs. 214 crore assessee has acquired the right to operate the project and collect toll charges. Therefore, such right acquired by the assessee is a valuable business or commercial right because through such means, the assessee is going to recoup not only the cost incurred in executing the project but also with some amount of profit. Therefore, there cannot be any dispute that the right to operate the project facility and collect toll charges therefrom in lieu of the expenditure incurred in executing the project is an intangible asset created for the enduring benefit of the assessee. Now, it has to be seen whether such intangible asset comes within the expression "any other busi....
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.... 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 specified intangible assets but also to other categories of intangible assets which were neither visible nor possible to exhaustively enumerate. The Hon'ble Court, therefore observed, in the circumstances the nature of business or commercial right cannot be restricted only to knowhow, patents, trademarks, copyrights, licence or franchise. The Court observed, any intangible assets which are invaluable and result in smoothly carrying on the business as part of the tool of the trade of the assessee would come within the expression "any other business or commercial right of similar nature". 17. In the case of Techno Shares and Stocks Ltd. (supra), the Hon'ble Supreme Court while examining the assessee's claim of depreciation on BSE Membership....