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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 ..... essee of the building in which he carries on business which is not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is incurred by the assessee of any structure or doing of any work in or in relation to by way of renovation, extension or for improvement to the building, then the provisions of the Income Tax Act, will apply as if the said structure or work is a building owned by the assessee. Explanation-I may apply to renovation or extension or improvement to the building to extend the application of depreciation, if such buildings which are not owned by the assessee but in which the assessee holds 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 - in favour of assessee. The payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the net loss at Rs. 9,51,50,161/-. By the assessment order dated 28.12.2007 the AO also directed the charging of interest under Section 234-B, 234-C and 234-D and to draw penalty proceedings separately under Section 271 (1) (c) of the Act. Aggrieved with the assessment order the assessee filed appeal before the Commissioner of Income Tax (Appeals), Ghaziabad. The CIT (A) by his order dated 4.8.2010 allowed the appeal observing that since the issue involved in the assessment order is identical to that of the assessment years 2002-03 and 2003- 04, hence following the orders of ITAT and CIT (A), the assessee was entitled for depreciation on toll road/bridge. On the take out assistance fee also the CIT (A) found that the AO was not justified in treating the expenses as expenditure to be capital in nature and deleted the additions. 5. The Income-tax department filed a second appeal before the Income Tax Appellate Tribunal (ITAT). The ITAT has confirmed the order of CIT (A) and dismissed the appeal relying upon its own decision in the case of the assessee for the assessment years 2002-03 and 2003-04. 6. The CIT has preferred this appeal on the following substantial questions of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submits that the Concession Agreement entered into between respondent-assessee; Infrastructure Leasing Financial Services Limited and New Okhla Industrial Development Authority, confers the right to the respondent-assessee to implement the project, and to recover the project cost through the levy of fees/toll revenue over the period of 30 years beginning from 30.12.1998. The respondent-assessee, therefore, is not owner of the road to claim depreciation under Section 32 of the Act. The depreciation can be claimed in respect of a building, machinery, plant or furniture, being tangible assets owned wholly or partly by the assessee and used for the purposes of the business or profession. The road constructed by the respondent-assessee is not owned by it as the land has been provided on lease by the Government of UP and that the road along with the land has to be returned to the concessionaire-assessee after a period of 30 years. He submits that the road alone, unless it is included within the premises of the factory and leads to or adjoins any building, is not covered under Note-I to Appendix-I of the Income Tax Rules, 1962 which provides; 'Note:-1. Building includes roads, bridg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd was capital in nature and not deductible as revenue expenditure, and further that the construction of metal roads for hauling compost could not be considered as an expenditure on plant and machinery and that the assessee was not entitled to depreciation on the cost of construction of the metal roads on its trenching grounds. Such an expenditure was not a revenue expenditure. The Supreme Court further held that the roads were not buildings as there was no other constructions except the roads. The roads by themselves would not constitute buildings and the assessee was not entitled to depreciation on the cost of construction of roads. The Supreme Court in its earlier decision in CIT v. Gwalior Rayon Silk Manufacturing Co. Ltd (1992) 196 ITR 149 (SC) in which construing the expression building in Section 32 of the Act it was observed that the roads and roadways are adjuncts of the building lying within the factory area linking them together and are being used for carrying on its business by the assessee. Since there was no other construction except the roads, it could not be said that the roads by themselves would constitute buildings. 13. In Commissioner of Income-tax v. Gwal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld to be buildings exigible to property tax. The question whether the roads would include within the meaning of the word buildings was considered by various High Courts. The leading decision is of the Bombay High Court in C.I.T. v. Colour Chem Ltd., [1977] 106 ITR 323. While negativing the contention that roads are part of the plant, the Bombay High Court held that the roads within the factory premises are used for the purpose of carrying raw materials, finished products and workers. Therefore, it must be regarded as building or buildings within the meaning of sub- clause (iv) of s.10(2) of 1992 Act. It was also held that dictionary meaning of the word "building" cannot be confined to a structure or superstructure having walls and roof over it. The roads and roadways are adjuncts of the buildings lying within the factory area linking them together and are being used for carrying on its business by the assessee. Therefore, they must be regarded as forming part of the factory building. The expenditure incurred, therefore, will have to be regarded as expenditure on buildings and the depreciation must be allowed. The appeal filed against the judgment in Colour Chem Ltd. case the leav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re given effect from 2nd April, 1983 thereby manifested that the rates enumerated in the rules would be applicable prospectively from the later assessment years. It by no means be construed that the legislature expressed its intention that for the earlier period building does not include roads. If it were to be so it was open to the Parliament to expressly brought out an amendment to the Act to that effect. On the other hand we are of the view that the subordinate legislature accepted the interpretation given by the High Courts and included roads as integral part of the building. In Bangalore Turf Club Ltd. case 150 ITR 23, the Karnataka High Court held that the amendment was by way of clarification in confirmity with the law laid by the High Courts. It is also equally settled law that an interpretation consistently given over years and accepted and acted upon by the department may not normally be upset even though a different view of law may reasonably be possible unless the new perceptions and circumstances warrant fresh look. The ratio in Saharanpur Electric Supply Co. Ltd. v. C.I.T., [1992] 194 ITR 294, is not in conflict with the above view. It is also settled law that, unless ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business, or indeed was specially built for that business, does not make it a plant. Its suitability is simply the reason why the business is carried on there. But it remains the place in which the business is carried on and is not something with which the business is carried on, except in some rare cases where it plays an essential part in the operations which take place. The hotel premises are not considered to be an apparatus or tool for running the hotel business but are merely a shelter or home or setting to a theatre in which cinema business is carried on. The same would be the position with regard to a theatre in which cinema business is carried on. 16. Shri S.R. Patnaik, on the other hand, appearing for the assessee submits that under the Concession Agreement, the concessionaire has been given rights to develop, establish, finance, design, construct, own, operate and maintain the Noida bridge. He relies on the Section 2.1 of the Concession Agreement, which reads as follows:- Section 2.1 Grant of Concession (a) NOIDA hereby irrevocably grants to the Concessionaire the exclusive right and authority during the Concession Period to develop, establish, finance, desi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er which the concessionaire shall transfer the project asset to Noida in accordance with the terms of Article 19, which provides for details of the transfer of project on termination of the concession period. Clause 19.9 of the agreement provides for effect of transfer and which reads as follows:- 19.9 Effect of Transfer (a) The transfer of immovable property comprising the Project Assets shall be deemed to be a termination of all leasehold arrangements or licenses in relation to the Project Site and title to all such immovable property shall automatically revert to NOIDA. The movable property comprising the Project Assets shall be deemed to be transferred by delivery and possession. 18. Shri Patnaik submits that the respondent-company with exclusive rights and authority during the concession period, owns the Noida Bridge which is the infrastructure facility for the development of the residents and industries. The road is not just a road but is a part of the project which includes the Noida bridge and all other project assets. There are various constructions appended to the road and which supplement the road. The road has been built under the public-private partne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concept of depreciation suggests that the tax benefit on account of depreciation belongs to one who has invested in the capital asset, is utilising the capital asset and thereby loosing gradually investment cost by wear and tear and would need to replace the same by having lost its value fully over a period of time. . In this case the housing board had allotted the house for which part payment was received and the possession was delivered so as to conceive depreciation over the properties. The title deeds were not executed. The delivery of possession by the housing board was held to be a step towards conferring ownership. The documentation was delayed only with the idea of compelling the allottee to observe the schedule of payment. The Supreme Court allowed the appeal and set aside the judgment of the High Court and allowed the depreciation on the property. 20. Shri Patnaik has also submitted relying on C C Construction (P) Ltd v. CIT 2004 Taxman 363 (Del HC); CIT v. Indocount Finance Ltd 271 ITR 215 (Del HC); CIT v. Chand Ratan Bagri 329 ITR 356 (Del HC); Davangere Maganur Bassappa and Sons v. ITO 325 ITR 139 (Kar HC) and Anjuga Chit Fund (P) Ltd v. DCIT 318 IIT 121 (M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of the bridge and also has the power to restrict the use of the bridge to motorised vehicles, bicycle and pedestrians, and to debar animal driven vehicles, cycle rickshaw and cattle. 23. In Mysore Mineral Limited v. CIT (1999) 239 ITR 775 (SC), after considering all the previous cases decided by it, the Supreme Court considered the term owned as occurring in Section 32 (1) of the Act and held that it must be assigned a wider meaning. The Supreme Court held that any one 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 as contemplated by the Transfer of Property Act, the Registration Act etc. The person, who having acquired possession over the building in his own right, uses the same for the purposes of the business or profession though a legal title has not been conveyed to him, but nevertheless is entitled to hold the property to the exclusion of all others. 24. The Supreme Co ..... 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