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TMI Blog2013 (9) TMI 602X X X X Extracts X X X X X X X X Extracts X X X X ..... . 5,26,43,488 made on account of interest on deep discount bond. 2. The learned Commissioner of Income-tax (Appeals) has erred in law and on facts in deleting the addition of Rs. 14,67,03,030 made on account of depreciation." The assessee is a limited company engaged in the business of development, operation and maintenance of toll roads filed its return of income on October 31, 2002 declaring total loss at Rs. 29,52,46,692. The case was initially processed under section 143(1) of the Act and subsequently assessment under section 143(3) was completed on December 23, 2008. It was observed by the learned Assessing Officer that the assessee had claimed depreciation on road at 10 per cent. as applicable to non-residential building amounting to Rs. 14,67,03,030 which appeared to be against the decision of the hon'ble Supreme Court in the case of Indore Municipal Corporation v. CIT reported in [2001] 247 ITR 803 (SC). Further, the assessee claimed deduction for accrued interest payable of Rs. 5,26,43,488 for issue of debentures named "deep discount bond". These debentures were redeemable with interest over a period of sixteen years according to the terms of agreement. The learned Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer is deleted." Deleting the addition of Rs. 14,67,03,030 made on account of depreciation. '4.4 The matter has been considered. The Income-tax Appellate Tribunal's decision in the case of Noida Toll Bridge Co. Ltd. (copy of which has been filed in the paper book), has been pursued. The facts of the cases are identical. In that case also the concerned Assessing Officer had relied on the hon'ble Supreme Court's decision in the case of Indore Municipal Corporation v. CIT reported in [2001] 247 ITR 803 (SC), rejecting the claim of roads being buildings. The Tribunal, however, held that the Assessing Officer's action in following the depreciation was not justified. The operative portion of the decision reads as follows : "7. We have duly considered the rival contentions and gone through the records carefully. The only objection of the Assessing Officer for denying the depreciation to the assessee is that road in isolation does not constitute building. This road is not within the factory premises which can be considered as a part of the plant or of building. We find that expression 'building' has been given an extended meaning in the Appendix -I of the Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount of the provision made by the assessee in respect of interest accrued on bonds is not in dispute as excessive or not relating to the year under consideration. We, therefore, delete the disallowance of Rs. 6,08,03,230 in respect of the provisions made for interest in respect of deep discount bonds. Hence, these grounds of appeal of the assessee are allowed." On the issue with regard to allowability of depreciation on toll roads, the Tribunal in the assessee's own case in Gujarat Road and Infrastructure Co. Ltd. v. CIT [2011] 7 ITR (Trib) 730 (Ahd), I. T. A. No. 1453/Ahd/2008 for assessment year 2004-05, vide order dated February 12, 2010 held as under on page 744 of the order : "We find that the assessee is engaged in business of setting up of infrastructure facility by way of construction of toll roads and particularly this road known as 'Vadodara-Halol toll road', as per the policy of the Government of India in a public-private partnership. The Government of Gujarat has formed a SPV in joint venture with the assessee, i.e., between Gujarat Government and IL & FS group. As per the changed business scenario after economic liberalisation as per the policy of the Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the metal road for hauling compost could not be considered as expenditure and the assessee was not entitled to depreciation. The hon'ble Supreme Court also held that the said metal roads cannot be treated as buildings as there was no other construction on the open ground except roads and the roads by themselves cannot constitute building. We find that the facts before us, the toll road is constructed and there are toll plazas and administrative buildings and the roads are connected to these buildings on both ends having toll plazas as well as buildings. Another fact in the present case is that the definition of 'building' as applicable to section 32 of the Act has been substituted in rule 5 of the Income-tax Rules, 1962 by the Income-tax (Third Amendment) Rules, 1987, with effect from April 2, 1987, whereby Note 1 below the table of rates at which depreciation is admissible, constituting part of Appendix I to the Income-tax Rules, 1962 operative for and from the assessment year 1988-89, by virtue of which buildings includes roads, buildings culverts, wells and tube-wells. We find that Note 1 in the depreciation schedule clarifies that 'buildings include roads, bridges, culverts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ownership rest with the assessee for the purposes of claim of depreciation. Accordingly, this issue on merits is allowed in favour of the assessee." Considering the above decision of the Tribunal, the learned Commissioner of Income-tax (Appeals) has allowed the appeal of the assessee in its favour. In these circumstances, we do not find it necessary to interfere with his order. Therefore, we confirm the order of the learned Commissioner of Income-tax (Appeals) for both the issues, i.e., (a) allowability of interest on deep discount bonds as deduction and (b) allowability of depreciation on toll road. Accordingly, the appeal of the Revenue on both these issues is dismissed. I. T. A. No. 1730/Ahd/2010 (Assessee's appeal for the assessment year 2002-03) The assessee has raised four grounds in its appeal wherein ground No. 4 is general in nature and does not survive for adjudication. In grounds Nos.1 and 2 of the appeal, the assessee has challenged the validity of reassessment order passed by the learned Assessing Officer and in ground No.3, the assessee states that the learned Commissioner of Income-tax (Appeals) has erred in confirming the disallowance of Rs. 1,61,37,960 being th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal of the assessee is accordingly dismissed. I. T. A. No. 892/Ahd/2012 (Revenue's appeal for the assessment year : 2005-06) The only effective ground of appeal raised by the Revenue in its appeal read as under : "1. The learned Commissioner of Income-tax (Appeals) has erred in law and on facts in allowing the claim of depreciation amounting to Rs. 37,36,34,380 on toll roads even though toll road is not covered under 'assets', as enumerated in Appendix -I to the Income-tax Rules and also ownership of the same does not vest with the assessee, hence not eligible for depreciation." We have decided this issue against the Revenue and in favour of the assessee while disposing of ground No. 2 raised by the Revenue in its appeal in I. T. A. No. 1169/Ahd/2010 for the assessment year 2002-03 supra. Following the same decision on the identical issue, we hereby dismiss ground No. 1 of the appeal raised by the Revenue in the assessment year 2005-06. C. O. No. 105/Ahd/2012 (In I. T. A. No. 892/Ahd/2012)(Assessee's cross-objection for the assessment year : 2005-06) In this cross-objection the assessee has raised three grounds wherein grounds Nos. 2 and 3 are general in nature and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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