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2015 (5) TMI 305 - AT - Income TaxInterest income - Income from other sources or Business income - Held that - From the above submissions of the assessee, it is apparent on the record that the interest income has been earned by the assessee on the security deposits with the bank as per the Common Loan Agreement. The said interest income had been earned by the assessee out of business compulsions of deposits in the Debit Service Reserve Account , hence the said interest income is linked to the business activities of the assessee. The issue is covered with the decisions of the Tribunal in the own case of the assessee for earlier assessment years. Hence, the interest income of the assessee is ordered to be assessed as Business Income. - Decided against revenue. Depreciation on toll road - Held that - Factually speaking, it is wrong to say that impugned right acquired by the assessee was without incurrence of any cost. In fact, it is quite evident that assessee got the right to collect toll for the specified period only after incurring expenditure through its own resources on development, construction and maintenance of the infrastructure facility. Secondly, section 32(1)(i1) permits allowance of depreciation on assets specified therein being 'intangible assets' which are wholly or partly owned by the assessee 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. The assessee is entitled to the claim of depreciation on the road to collect toll being an intangible asset falling within the purview of section 32(1) (ii) of the Act. - So far as the other alternative contention of the assessee that the project be treated as plant & machinery and the depreciation be accordingly allowed to it, we do not find that the said license of right to collect toll in any way falls in the definition of plant & machinery. Even the assessee is not the owner of the toll road. The assessee has been given only the right to develop, maintain and operate the toll road and further to collect the toll for the specified period. This right as discussed above is an intangible asset falling under section 32(1)(ii) of the Act. - Decided in favour of assessee. Disallowance of claim of expenses incurred in relation to increase in authorized share capital - Held that - There is no dispute on the point that the authorized share capital was raised by the assessee in connection with the extension of the undertaking. The nature of the expenses indicates that the same were in the shape of stamp duty and registration charges. The cumulative reading of the entire provisions of section 35D would reveal that the nature of expenses in this case is such that it would fall within the purview of residuary clause (d) of section 35D(2). In the case in hand, admittedly, the assessee had incurred the expenditure for raising of share capital for the purpose of expansion of business. In view of the decision of the co-ordinate bench of the Tribunal in the case of M/s. Chiranjeevi Wind Energy vs. ACIT (2013 (12) TMI 905 - ITAT CHENNAI ) and also in view of our observations made above, we hold that the assessee is entitled to the amortization of the said expenses. - Decided in favour of assessee.
Issues Involved:
1. Classification of interest income as "Income from other sources" or "Business income." 2. Claim of depreciation on toll roads. 3. Disallowance of expenses related to the increase in authorized share capital. 4. Levy of interest under section 234B of the Income Tax Act. Issue-wise Detailed Analysis: 1. Classification of Interest Income: The primary issue was whether the interest income of Rs. 1,34,59,582/- should be assessed under "Income from other sources" or "Business income." The Assessing Officer (AO) classified it under "Income from other sources," arguing it was not derived from the assessee's business activities. The Commissioner of Income Tax (Appeals) [CIT(A)] directed the interest income to be assessed as business income, relying on the decision of the Hon'ble Bombay High Court in "CIT vs. Lok Holdings" and upheld by the Tribunal for previous assessment years. The Tribunal confirmed the CIT(A)'s decision, noting that the interest income was earned from business receipts deposited in the bank, thus linked to the business activities. Therefore, the interest income was ordered to be assessed as Business Income, dismissing the Revenue's appeal on this ground. 2. Claim of Depreciation on Toll Roads: The second issue concerned the claim of depreciation on toll roads amounting to Rs. 40,12,50,880/-. The AO denied the claim, stating the ownership of the toll roads vested with the Government of India/NHAI, not the assessee. The CIT(A) allowed the claim, treating the toll roads as part of the building. The Tribunal noted the Hon'ble Bombay High Court's decision in "North Karnataka Expressway Ltd. vs. CIT," which held that toll roads vest in the Union of India, and thus, the assessee could not claim ownership. However, the Tribunal allowed the assessee's alternative claim to treat the investment as an intangible asset, granting depreciation under section 32(1)(ii) of the Act. The Tribunal dismissed the Revenue's appeal but allowed the assessee's alternative claim, treating the right to collect toll as an intangible asset. 3. Disallowance of Expenses Related to Increase in Authorized Share Capital: The third issue was the disallowance of expenses incurred for increasing authorized share capital. The AO and CIT(A) treated these expenses as capital in nature. The assessee argued that the expenses were for the extension of the undertaking, thus deductible under section 35D. The Tribunal, relying on the decision in "M/s. Chiranjeevi Wind Energy vs. ACIT," allowed the claim, stating the expenses incurred for raising share capital for business expansion fell within the purview of section 35D. Consequently, the Tribunal allowed the assessee's appeal on this ground. 4. Levy of Interest under Section 234B: The fourth issue was the levy of interest under section 234B of the Income Tax Act. The Tribunal noted that this issue was consequential in nature and directed the AO to provide consequential relief to the assessee, if applicable. Conclusion: The Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal, providing relief on the classification of interest income, depreciation on toll roads as intangible assets, and the deductibility of expenses related to the increase in authorized share capital. The levy of interest under section 234B was directed to be consequentially adjusted.
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