TMI Blog2023 (7) TMI 971X X X X Extracts X X X X X X X X Extracts X X X X ..... .2018 of the Ld. Commissioner of Income Tax (Appeals) - 35, New Delhi ( CIT(A) ) pertaining to assessment year ( AY ) 2014-15. 2. The assessee has taken the following grounds of appeal:- 1. That on the facts and circumstances of the case, the learned C.I.T.(A) erred in upholding the order of A.O. in disallowing depreciation of Rs. 54,80,97,399/- on the Highway Project on BOT basis and instead allowing amortization cost referring CBDT circular 09/2014 arbitrarily. 2. That on the facts circumstances of the case, the both the lower Authorities disallowed depreciation u/sec 32(1) holding that the appellant is not entitled to depreciation as it is not the owner of assets and hence Orders passed by the learned C.I.T.(A) and A.O. are illegal deserves to be quashed. 3. That the Orders passed by C.I.T.(A) and A.O. are contrary to the facts, bad in law and deserve to be quashed. 3. The brief facts are that the assessee company is a Special Purpose Vehicle incorporated for execution of the highway project. It was awarded the highway project for development of four lane road project of Gwalior Bypass in the state of Madhya Pradesh. For AY 2014-15 the assessee f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee on 22nd December 2005. At this stage, it is necessary to look into some of the relevant clauses of C.A., which in our opinion, will have a crucial bearing in deciding the issue. As per clause 2.1 of the C.A., the Government of India grants and authorises the concessionaire i.e., the assessee to investigate, study, design, engineer, procure, finance, construct, operate and maintain the project and to exercise and/or enjoy the rights, powers, privileges, authorizations and entitlements in terms of the agreement including the right to levy demand, collect and appropriate fee from vehicle and persons for using the project / project facilities or any part thereof. As per clause 2.2 of the C.A., the assessee is granted concession for a period of 11 years 7 months from the commencement date. As per clause 2.4, the Government of India was obliged to hand over to the assessee physical possession of the project site free from encumbrances within 30 days from the date of the agreement. It further provides, once the project site is handed over to the concessionaire, it shall have exclusive right to enter upon, occupy and use the project site and to make at its costs, charges and ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . From the reading of the aforesaid clauses of the contract, following facts emerge: i) The right, title and ownership of the project site vests absolutely with the Government of India and it has full powers to hold, dispose off and deal with the same; ii) The Government of India has handed over physical possession of the project site to the concessionaire for executing / implementing the project and operating the same during the concession period; iii) Concessionaire shall have exclusive right to use the project site for executing / implementing the project in terms of C.A; iv) Concessionaire shall, at its own costs and expenses, execute / implement the entire project and operate and maintain the same during the concession period; and v) The concessionaire shall have the right to levy / demand and collect fee as approved by the Government of India towards user of the project facilities by vehicles and persons. 11. Undisputedly, for executing the project, assessee has incurred expenses of Rs. 214 crore. It is also not disputed that as per the terms of the C.A., the Government of India is not obliged / required to reimburse the cost incurred by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich it has claimed depreciation. Thus, in our view, the expenditure incurred by the assessee of Rs. 214 crore for creating the project or project facilities has created an intangible asset in the form of right to operate the project facility and collect toll charges. Further, it is the contention of the learned Senior Standing Counsel that if at all any right is created under the C.A. for collecting toll, such right accrued to the assessee on the date of execution of agreement i.e., 22nd December 2005, therefore, the expenditure incurred by such date should be the value of intangible asset which can alone be considered for depreciation under section 32(1)(ii) of the Act. We are afraid, we cannot accept the above argument of the learned Senior Standing Counsel. When the C.A. confers a right on the assessee to operate the project facility and collect toll charges over the concession period of 11 years and 7 months, the assessee can start operating and collecting toll charges only when the project facility is ready for use. Therefore, until the project is completed and ready for use by vehicles or persons assessee cannot collect toll charges for user of the project facilities. Thus, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the right acquired under C.A. to operate the project facility and collect toll charges is in the nature of license. However, the learned Senior Standing Counsel has strongly countered the aforesaid claim of the assessee by referring to the definition of license as provided under the Indian Easements Act, 1882. For better appreciation, we intend to reproduce herein below the definition of license as provided under section 52 of the Indian Easements Act, 1882: License defined: Where on person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful and Page | 14 such right does not amount to an easement or an interest in the property, the right is called a license. 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. Accepting the aforesaid contention of the learned Senior Standing Counsel, let us examine the definition of license ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 business or commercial rights of similar nature . As could be seen from the definition of intangible asset, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gible 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. v/s CIT, [2010] 327 ITR 323 (SC), the Hon'ble Supreme Court while examining the assessee s claim of depreciation on BSE Membership Card, after interpreting the provisions of section 32(1)(ii), held that as the membership card allows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of nature of asset, whether tangible or intangible. In fact, the learned Departmental Representative has also accepted the aforesaid factual position. In any case of the matter, the assessee neither in the preceding assessment years nor in the impugned assessment year has claimed it as deferred revenue expenditure, hence, there is no scope to examine whether the expenditure could have been amortized over the concession period in terms of CBDT circular no.9. Moreover, the aforesaid CBDT circular is for the benefit of the assessee. Therefore, the benefit in terms of the circular can be granted, provided, assessee makes a claim in terms of it. The benefit of the circular cannot be thrust upon the assessee if it is not claimed. Therefore, since the issue, as raised in ground no.4, does not arise out of the orders of the Departmental Authorities, it cannot be the subject matter of adjudication in the present appeal. Accordingly, we dismiss ground no.4 raised by the Department. 6. Since the facts and circumstances of the case are similar to those in the succeeding AY 2015-16, following the order of the Tribunal (supra), we decide ground No. 1, 2 and 3 in favour of the assessee. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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