2018 (9) TMI 412 - AT - Income Tax

Disallowance on account of difference between the depreciation claimed and depreciation allowed on the basis of amortization for the remaining part of the concessionaire agreement - Held that - A close reading of the CBDT Circular No. 09/2014 dated 23.04.2014 shows that deduction claimed out of initial cost of development of infrastructure, facility of roads/highway under BOT projects in earlier year may be deducted from the initial cost of infrastructure facility of roads/highway and the cost so reduced shall be amortized equally over the remaining period of the toll concessionaire agreement. This effectively means that the reduced cost is to be amortized equally over the remaining period. There is nothing in the Circular to suggest and the same shall be applicable on retrospective basis. In view thereof, the action of the AO in applying the Circular retrospectively is not in order. The disallowance of ₹ 23, 85, 71, 095/- made by the AO on account of difference between the depreciation claimed at ₹ 42. 48. 04. 025/- and depreciation allowed on the basis of amortization for the remaining part of the concessionaire agreement i. e. from 01. 04. 2011 to 24. 03. 2034 at ₹ 18, 62, 32, 930/- is directed to be deleted. These grounds of appeal are ruled in favour of the appellant.

Summary

Issues:
1. Disallowance of depreciation by the Assessing Officer
2. Interpretation of CBDT Circular No. 09/2014

Issue 1: Disallowance of depreciation by the Assessing Officer:
The appellant, a company involved in a BOT project, filed an appeal against the disallowance of depreciation amounting to &8377; 23,85,71,095 by the Assessing Officer. The project involved a concession agreement with NHAI for toll collection. The AO disallowed the depreciation based on amortization principles outlined in CBDT Circular No. 09/2014. The appellant contested this disallowance, citing case laws supporting depreciation claims on toll roads. The ld. CIT(A) allowed the appeal, emphasizing that the Circular could not be applied retrospectively. The Tribunal upheld the ld. CIT(A)'s decision, ruling in favor of the appellant and dismissing the Revenue's appeal.

Issue 2: Interpretation of CBDT Circular No. 09/2014:
The dispute centered on the applicability of the CBDT Circular No. 09/2014, which outlined the amortization of infrastructure costs over concessionaire agreement periods. The Revenue argued that the appellant did not qualify as the property owner for depreciation purposes. However, the Tribunal noted that the appellant's eligibility for depreciation on toll roads was not contested. The Tribunal emphasized that the Circular could not be applied retrospectively, as it was issued after the appellant filed its return. Citing relevant case laws and the non-retrospective nature of circulars, the Tribunal supported the appellant's claim for depreciation. The Tribunal's decision highlighted the importance of considering circulars' applicability timelines in tax assessments.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the arguments presented by both parties, and the Tribunal's reasoning leading to the final decision.