TMI Blog2017 (11) TMI 1998X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 01.12.2015 relating to assessment years 2010-11 2011-12 against order passed under section 143(3) r.w.s. 153C of the Income Tax Act, 1961 ( in short the Act‟). 2. In ITA No. 379/PUN/2016, the Revenue has raised following grounds of appeal: 1. On the facts and circumstances of the case and in law the Ld. CIT(A) has erred in allowing depreciation of Rs.45,83,21,687 @25% on License to collect toll. 2. On the facts and circumstances of the case and in law whether the Ld. CIT(A) was justified in holding that assessee was eligible to claim depreciation on License to collect toll‟ considering it as an intangible asset in terms of section u/s. 32(1) (ii) of the Act. 3. On the facts and circumstances of the case and in law the Ld. CIT(A) has failed to appreciate that the department has not accepted the decision of the ITAT, Pune and an appeal has been filed u/s. 260A of the Act before the Hon‟ble Bombay High Court. 4. The appellant craves to add, amend or delete any of the above grounds. 3. Both these appeals relating to the same assessee were heard together and are being disposed of by this consolidated order for the sake of convenience. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion u/s. 32(1) (ii) of the Act is challenged before us by the Revenue. We find that the said issue is squarely covered by the order of Tribunal in Ashoka Infrastructure Ltd. Vs. ACIT in ITA No. 1452 to 1457/PUN/2014 for assessment years 2006-07 to 2011-12 order dated 30.06.2017. The Tribunal vide Paras 17 to 23 held as under : 17. We have heard the rival contentions and perused the record. Search under section 132 of the Act was conducted at the premises of assessee on 20.04.2010. The assessee was incorporated for executing infrastructure project of laying down four lanes and for strengthening of Pune-Ahmednagar road with private finance on toll rights under Built-Operate-Transfer basis. On completion of the project, the operations started on 06.07.2005. The assessee for the year under consideration had collected toll to the extent of Rs.17.16 crores and had claimed depreciation to the extent of Rs.10,61,88,185/-. The said claim of depreciation on license to collect toll being an intangible asset, in view of Government notification granting such rights was claimed in the original return of income by the assessee. The assessment in the case of assessee for assessment year 2006- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue further arose before the Mumbai Bench of Tribunal in ACIT Vs. West Gujarat Expressway Ltd. (supra), which in turn, had referred to the ratio laid down by the Hon‟ble Bombay High Court in Karnataka Expressway Ltd. Vs. CIT (supra) and it was decided the issue relating to the allowability of depreciation on toll road, had left open, the issue of allowing depreciation on intangible asset being license granted to the assessee to collect toll over the road for particular period and it was held as under:- 17. We have considered the rival contentions. So far as the reliance of the Ld. A.R. on the article/clause 38.4 of the concession agreement between the assessee and the NHAI is concerned, we find that the identical clause was also there and relied upon in the case of North Karnataka Expressway Ltd. vs. CIT which has also been reproduced in para 8 of the order of the Hon‟ble Bombay High Court (supra). The relevant part of the order for the sake of convenience is reproduced as under: 8] The appellant claimed that it was the owner of the toll road and the entire cost incurred for construction thereof was capitalized by the Appellant in its books in the assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. vs. CIT (supra). in this respect. We find the Hon‟ble Bombay High Court, in para 24 of the said decision, has categorically observed that the claim of depreciation in the said case was not based on treating it as an intangible asset with a right to use the asset without being actual owner thereof. The issue under consideration was that whether the toll roads are not owned by the assessee and that he cannot claim any depreciation thereupon. Hence, the Hon‟ble Bombay High Court has not discussed the issue relating to the claim of depreciation on the license for right to collect the toll as intangible asset. Further, the Hon‟ble Bombay High Court in para 39 of the decision (supra) has observed that as per the provisions of National Highway Act, 1956 and National Highway Authorities of India Act, 1988, the ownership of the toll road vests in Union , however, the term owner as appearing in the Income Tax Act, 1961 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 alternative claim that in view of the observations of the Hon‟ble Bombay High Court either the investments made by the assessee be treated under the asset building, plant machinery and depreciation be granted accordingly or the same be treated as intangible asset on the ground that the assessee has been granted license for right to collect the toll tax for a fixed period. Now the question before us is whether the assessee at this stage the can raise the alternative contention for claim of allowance of depreciation on the license authorizing him to collect the toll being an intangible asset or treating the project as plant machinery? 22. We may observe that the Hon‟ble Bombay High Court in the case of Pruthvi Brokers Shareholders Pvt. Ltd.‟ (supra), while relyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard on the decisions of the Tribunal in the case of PV. Ananthkrishnan vs. ACIT in ITA No.1820/M/2011 decided on 05.05.2014 and in the case of The Presidency Co-operative Housing Society Ltd. vs. ACIT in ITA No.4051/M/2011 decided on 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 claimed the deduction of depreciation. However, he has claimed the same treating itself to be the owner of the toll road. Such a claim of the assessee has been allowed in the previous assessment years. The assessee was under bonafide belief that he has correctly claimed the deduction of depreciation on the toll road in view of the consistent findings of the Tribunal on this issue. However, due to the change of legal position in view of the law laid down by the Hon‟ble Bombay High Court (supra), the assessee cannot be treated as the owner of the toll road. But it is not disputed that the assessee has made investments on the project and he is entitled to claim deductions in this respect. The claim of deduction has been very much put by the assessee in the return of income but wrongly treating it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngible asset. 20. The Mumbai Bench of Tribunal then, referred to the circular issued by CBDT vide No.9/2014, dated 23.04.2014 and observed as under:- 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 having actual ownership over the said toll road. The assessee has an express right/license for recovery of toll fee to recoup the expenditure. The said right brings to the assessee an enduring benefit during the period of agreement. This fact has also been discussed by the CBDT in circular No.09/2014 dated 23.04.14. The para 4 of which, for the sake of convenience, is reproduced as under: There is no doubt that where the assessee incurs expenditure on a project for development of roads/highways, he is entitled to recover cost incurred by him towards development of such facility (comprising of construction cost and other pre-operative e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8, 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 which means it slowly will depreciate to the nil value. As per the provisions of the Income Tax Act, especially under section 32(1)(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 claim of depreciation. 28. In view of the express provisions of the Act, we have no doubt to hold that the assessee is entitled to collect tax being an intangible commercial right under section 32(1)(ii) at the rate as has been prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 that the impugned 'Right to collect Toll' was an 'intangible asset' eligible for claim of depreciation @ 25% as per sec. 32(1)01) of the Act. 10. We have carefully considered the rival submissions. Factually speaking, there is no dispute to the fact that the costs capitalised by the assessee under the head 'License to collect Toll' have been incurred for development and construction of the infrastructure facility, i.e., Dewas By-pass Road. It is also not in dispute that the assessee was to build, operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. 13. In terms of the aforesaid precedent, the claim of the assessee in the present case for depreciation on 'License to collect Toll', being an 'intangible asset' falling with the scope of Section 32(1)(ii) of the Act is liable to be upheld. We hold so. 14. In so far as the reliance placed by the CIT(A) on the judgement of the Hon'ble Bombay High Court in the case of Techno Shares And Stocks Ltd. (supra) is concerned it may only be noted that the said judgement has since been altered by the Hon'ble Supreme Court vide its order reported at (2010) 327 ITR 323 (SC). Accordingly, in view of the aforesaid discussion, we hereby allow the Ground of Appeal No. 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f intangible asset falling within purview of section 32(1)(ii) of the Act, the assessee was entitled to depreciation on such intangible asset. The assessee undoubtedly, had expended on development, construction and maintenance of infrastructure facility for a specified period out of its own funds and after the end of specified period, the assessee was to transfer the said infrastructure facility to the Government of Maharashtra free of charge. In consideration of developing, constructing and maintaining the facility for specified period and thereafter, transferring it to the State Government, the assessee was granted the right to collect toll from motorists whoever uses the said infrastructure facility during the specified period. The said right to collect toll was on account of assessee incurring the cost towards development, construction and maintenance of infrastructure facility, which was treated by the assessee as its intangible asset and on which, it claimed the depreciation under section 32(1)(ii) of the Act. Following the precedent referred to above, the assessee is entitled to claim the said deduction on intangible asset, in view of section 32(1)(ii) of the Act. The reason ..... X X X X Extracts X X X X X X X X Extracts X X X X
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