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TMI Blog2012 (11) TMI 556X X X X Extracts X X X X X X X X Extracts X X X X ..... s constructed at the landfall of the Delhi Noida Link Bridge. 4. For the assessment year 2005-06 the assessee filed a return showing a loss of Rs.30,90,02,565/- on 30.10.2005. The return was revised by the assessee declaring a loss of Rs. 29,25,38,781/- on 13.9.2006. The return was processed under Section 143 (1) of the Act on 19.9.2006, on which the case was selected for scrutiny. A notice under Section 143 (2) of the Act was issued and duly served on the assessee. Thereafter a questionnaire was issued under Section 142 (1) on 25.1.2007 in response to which the representative of the assessee appeared before the Income Tax authority. The Assessing Officer disallowed the depreciation on toll road/bridge amounting to Rs. 17,62,66,283/- under the Block-"Building" @ 10%, and the take out assistance fee claimed at 1,48,54,608/-. The business loss was accordingly reduced by adding the depreciation on roads and bridges; and take out assistance fee at Rs.10,14,17,890/-. The AO reduced the business loss by a short term capital gain as shown at Rs.58,64,907/-, and long term capital gains as shown at Rs. 4,02,822/- and accordingly calculated the net loss at Rs. 9,51,50,161/-. By the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subject to certain conditions. Therefore, the ownership of the asset in the hands of the assessee is not established? 4. Whether on the facts and circumstances of the case, the Hon'ble ITAT is justified in law in holding that payment made in connection with redemption of deep discount bonds can be claimed as revenue expenditure? 7. Shri Shambhu Chopra, appearing for the Income Tax Department submits that the assessee had constructed a road and a bridge across the river Yamuna connecting Delhi and NOIDA under the Build-Own-Operate-Transfer (BOOT) basis. The bridge and the adjoining roads in isolation do not come within the meaning of 'building', to claim depreciation. The road is not within the factory premises, which can be considered as a part of the plant or building. The building may include roads, bridges, culverts, wells and tube wells within the extended meaning given in Appendix-I of the Income Tax Rules; the road by itself is not included within the meaning of the word "building" and thus it is submitted that the ITAT committed an error of law in allowing depreciation on the building. 8. Shri Shambhu Chopra submits that the "Concession Agreement" entered into between re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income-tax v. Podar Cement Pvt. Ltd and others (supra) the Supreme Court considered the meaning of word "owner" in Section 22, and held that the owner is a person, who is entitled to receive income from the property in his own right. The Supreme Court held that though under the common law "owner" means a person, who has got valid title legally conveyed to him after complying with the requirements of law, such as the Transfer of Property Act, the Registration Act etc, in the context of section 22 of the Income Tax Act, 1961, having regard to the ground realities and further having regard to the object of the Income Tax Act namely to tax the income, "owner" is a person, who is entitled to receive income from the property in his own right. The requirement of registration of the sale deed in the context of Section 22 is not warranted. 12. In Indore Municipal Corporation v. Commissioner of Income-Tax (supra) a local body on the construction of metal roads on its trenching grounds for transport of night soil and compost income expenditure, it was held that the expenditure was incurred to gain an enduring benefit and was capital in nature and not deductible as revenue expenditure, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) of the Income-tax Act, 1922 held that s. 10(2) provides that such profits or gains shall be computed after making certain allowances. The object of giving these allowances is to determine the assessible income. Therein the question was whether the land on which the theatre was constructed is a building within the meaning of s. 10(2) of the Income-tax Act, 1922. This court held that land is not a building and, therefore, depreciation allowance for land separately is not admissible. The ratio therein has no application but the principle laid would be considered in the light of the purpose of the Act. In C.I.T. v. Taj Mahal Hotel, [1971] 82 ITR 44, this court adopting purposive approach held that sanitary and pipeline fittings fell within the definition of plant. 1922 Act intended to give wide meaning to the word "plant". The rules are meant only to carry out the provisions of the Act and cannot take away what is conferred by the Act or whittle down its effect. In the Municipal Corporation of Greater Bombay & Ors. v. Indian Oil Corporation Ltd., JT (1990) 4 SC 533, the oil tanks for storage of petrol were held to be buildings exigible to property tax. The question whether the roa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es roads and also alongated bridges, culverts, wells and tubewells as building but prescribed fixed rates of depreciation setting at rest the variable rates claimed by the assessee. Rules validly made have the same force as the sections in the Act. The contention of the respondents that unless the Act itself is amended, the rules would not cut down the meaning of the word `building' is without substance. The inclusive definition of the building to include roads etc. enlarges the scope of s. 32 and does not whittle down its effect. It is true that in C.I.T. v. Coromandel Fertilisers Ltd., [1985] 156 ITR 283, (A.P.), the High Court of Andhra Pradesh interpreted that roads fell within the meaning of "Plant" and granted depreciation at the rates admissible to plant. In C.I.T. v. Sanavik Asia Ltd., [1983] 144 ITR 585 (Bom.), took opposite view and held to be building. In view of the consistent view of the other High Courts and in our view which is the correct one, the view of the High Court of A.P. is not correct in law. It is true, as contended for the Revenue that the Income-tax 4th Amendment Rules 1983 were given effect from 2nd April, 1983 thereby manifested that the rates enumerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that where the assessee had entered into lease agreement with the State Electricity Board for generation and distribution of electricity in which the assessee leased out the electrical equipments to the Board, lease rentals paid by the board were not allowable deduction. The lease rentals were taxed as business income in the hands of the assessee. The High Court dismissed the appeal against the order of the Tribunal, which held that transaction was genuine and thus a direction to Assessing Officer to allow depreciation did not suffer from any error of law. 15. In Commissioner of Income Tax v. Anand Theatres (supra) the Supreme Court held that the meanings of the words "buildings" and "plant" have to be gathered in the context of the scheme of Section 32 and it is not necessary to adopt a judge-made sense, which is artificial and imprecise in application. There is a distinction between the premises in which the business is carried on and the plant with which the business is carried on. The fact, that the building in which a business is carried on is, by itself construction particularly well-suited to the business, or indeed was specially built for that business, does not make it a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bridge; (vi) enforce the collection of Fee from delinquent Users of the Noida Bridge and imposed on vehicles and goods of any such delinquent user for the purpose of enforcing collection; (vii) develop, establish, finance, design, construct, operate, maintain and use any facilities to generate Development Income arising out of the Development Rights that may be granted in accordance with the provisions of Article 4 herein; (viii) enter into private contracts with the Users for any use or any special use of Noida Bridge and to sell, distribute or issue at various outlets as may be determined by the Concessionaire, coupons or tokens against payment of Fee in advance, thus providing the Users with ready access to Noida Bridge without the necessity of paying Fee on each incidental use of the Noida Bridge; and (ix) appoint subcontractors or agents on its behalf to assist it in fulfilling its obligations under this Agreement." 17. Shri Patnaik submits that the concession period under clause 2.1 of the agreement commences from the effective date and extends for a period of 30 years, after which the concessionaire shall transfer the project asset to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emoved by Explanation-I. The assessee-company is a special purpose vehicle. Its business is to build, operate the roads and to generate revenue by collecting tolls to meet the cost of constructions and earns profits. The CIT (A) and ITAT thus did not commit any error in allowing the depreciation on the road. 19. Shri Patnaik has relies on the new Appendix-I under Rule-5 of the Income Tax Rules, 1962, which provides for the table of rates on which depreciation is admissible. Part-I 'Class of assets' includes building in Item-I, which refers to notes (1) to (4) under the table and on which note (1) provides 'buildings' which includes roads, bridges, culverts, wells and tube wells. The note has remained unchanged since it was added in Appendix-I w.e.f. 2.4.1997. In Mysore Mineral Ltd vs. CIT (1999) 239 ITR 775 the Supreme Court considered the meaning of the word 'owner' and after referring to R.B. Jodha Mal Kuthiala v. CIT (supra); CIT v. Podar Cement Pvt Ltd and others (supra); Badiyani P.K. v. CIT (1976) 105 ITR 642 and State of UP v. Renusagar Power Company, held "an overall view of the above said authorities shows that the very concept of depreciation suggests that the ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and bridges. Under the concession-agreement the land is provided on lease initially for a period of 30 years which can be extended. The respondent-assessee company is a special purpose vehicle, engaged in the business of building, infrastructure/roads to generate revenues by collecting tolls to meet the cost of constructions and to earn profits. The construction of road on the leased land is the capital asset of the company, which remains under its ownership for the concession period. The respondent-assessee exercises its full ownership rights on the road which include charging of tolls which is ordinarily a sovereign function. The operation, maintenance and use of the road during the concession period is with the respondent-assessee. It has been given exclusive rights to regulate the use of the Noida-Bridge. The road is not simply a road laid out on the land. It includes all allied constructions, which includes the bridge site. The control of the land identified as constituting the bridge site is in complete and uninterrupted possession and use of the respondent-company. It has powers to determine, demand, collect, retain and appropriate fees from the users of the bridge and als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lds a lease or other right of occupancy. The present case stands on a better footing, in which 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. Section 32 would, therefore, 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 in Note (1) to Appendix-I providing for the table of rates at which the depreciation is admissible. 26. The questions no. 1, 2 and 3 are thus decided in favour of the respondent-assessee and against the revenue. So far as question no. 1 is concerned, regarding the payment in connection of "take out assistance fee" for redemption of Deep Discount Bonds this Court has already decided the question in Income Tax Appeal No. 44 of 2010 between the same parties relating to the assessment year 2002- 03 in favour of the respondent-assessee and against the revenue. 27. All the four questions are thus decided in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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