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2014 (1) TMI 981 - AT - Income TaxDepreciation on roads - Held that - Though the NHAI remains legal owner of the site with full powers to hold, dispose of and deal with the site consistent with the provisions of the agreement, the assessee had been granted not merely possession but also right to enjoyment of the site and NHAI was obliged to defend this right and the assessee has the power to exclude others - In the case of assessee the land is held on lease and the road as capital asset has been built on it with exclusive ownership of the road, and the bridge in the assessee-company for the concession period, and which also includes the right to collect tolls and to regulate use of the bridge - Following Mysore Minerals Ltd. v. CIT 1999 (9) TMI 1 - SUPREME Court - the term owned as occurring in Section 32(1) of the Act and held that it must be assigned a wider meaning anyone in possession of property in his own title exercising such dominion over the property as would enable others being excluded there from and having the right to use and occupy the property and/or to enjoy its usufruct in his own right would be the owner of the buildings, though a formal deed of title may not have been executed and registered. Section 32 would apply for the purpose of providing depreciation to be worked out in accordance with the law - For removal of doubts the legislature has provided that the building includes roads at which the depreciation is admissible. Following CIT vs. Vegetable Products Ltd. 1973 (1) TMI 1 - SUPREME Court - if the court finds that the language of a taxing provision is ambiguous or capable of more meanings than one, then the court has to adopt that interpretation which favours the assessee, more particularly so where the provision relates to the imposition of penalty - The CIT(A) was correct in taking one view - Decided against Revenue.
Issues Involved:
1. Eligibility of the assessee company to claim depreciation under Section 32 of the Income Tax Act, 1961. Detailed Analysis: Issue 1: Eligibility for Claiming Depreciation under Section 32 of the Income Tax Act, 1961 Facts of the Case: The assessee is a private limited company incorporated as a Special Purpose Vehicle (SPV) promoted by CIDB Inventures Sdn Bhd. The company was awarded a contract by the NHAI for the widening, rehabilitation, and maintenance of certain highway sections on a Build-Operate-Transfer (BOT) basis. The entire cost of construction was borne by the assessee, and the construction was completed during the financial year 2004-05. The assessee started claiming depreciation from the assessment year 2005-06 onwards. However, the Assessing Officer (AO) disallowed the depreciation claim on the grounds that no ownership, leasehold, or tenancy rights were vested with the assessee for the roads in question. CIT(A) Decision: The CIT(A) allowed the depreciation claim, relying on various judgments, including: - Nyse Infrastructure Pvt. Ltd. vs. DCIT - ACIT vs. Navayuga Engineering Co. Ltd. - CIT v. Noida Toll Bridge Co. Ltd. - Tamil Nadu Road Development Co. Ltd. v. ACIT/ITO (OSD) - Ashoka Info (P.) Ltd. v. ACIT - Maharashtra State Road Development Corpn. Ltd. v. ACIT - Gujarat Road & Infrastructure Co. Ltd. v. CIT - Moradabad Toll Road Company Ltd. v. Addl. CIT - CIT v. Mother Hospital (P) Ltd. - Rajshree Roadways v. Union of India The CIT(A) observed that although NHAI remains the legal owner of the site, the assessee had been granted not merely possession but also the right to enjoyment of the site. NHAI was obliged to defend this right, and the assessee had the power to exclude others, thus making the assessee entitled to claim depreciation. Tribunal's Analysis: The Tribunal reviewed the material on record and found that the issue was covered by several Tribunal orders, including: - Reliance Ports and Terminals Ltd. - Ashoka Buildcon Ltd. - Kalyan Toll Infrastructure Ltd. - Dimension Construction (P.) Ltd. - Ashoka Info (P.) Ltd. v. ACIT - Gujarat Road & Infrastructure Co. Ltd. v. CIT - Maharashtra State Road Development Corpn. Ltd. v. ACIT - ACIT v. Ashoka Infraways (P.) Ltd. - M/s. Moradahad Toll Road Company Limited v. ACIT - Ashoka Infrastructure Ltd., Pune v. ITO - DCIT vs. Ashok Bridgeways, Nashik - ACIT vs. Viva Highways Pvt. Ltd., Nashik - Nyse Infrastructure (P) Ltd. v. Dy. CIT - ACT v. M/s. Navayuga Engineering Co. Ltd., Visakhapatnam - M/s. Navayuga Engg. Co. Ltd., Hyderabad v. ACIT - ACIT v. M/s. Navayuga Engg. Co. Ltd. - DCIT v. M/s. Navyua Engg. Co. Ltd. The Tribunal also referred to the Hon'ble Apex Court's decision in Mysore Minerals Ltd. v. CIT, which held that the tax benefit on account of depreciation belongs to one who has invested in the capital asset, is utilizing it, and thereby losing its value over time. Supreme Court's Interpretation: The Supreme Court in Mysore Minerals Ltd. v. CIT and other cases like R.B. Jodha Mal Kuthiala and Podar Cement Pvt. Ltd. interpreted the term "owner" to include anyone in possession of property in their own title, exercising dominion over it, and having the right to use and enjoy its usufruct in their own right. Allahabad High Court's Decision: The Allahabad High Court in CIT v. Noida Toll Bridge Co. Ltd. held that depreciation is allowable on assets like roads constructed on leased land, as the lessee exercises full ownership rights over the road during the concession period, including the right to collect tolls. Tribunal's Conclusion: The Tribunal concluded that the CIT(A) had taken a possible view based on the facts and circumstances of the case and the relevant judicial precedents. Therefore, the Tribunal did not interfere with the order of the CIT(A) and dismissed all the Revenue appeals. Final Order: All the Revenue appeals were dismissed, and the order was pronounced in the open court on 16th January 2014.
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