9911796707
TMI Blog2017 (10) TMI 579X X X X Extracts X X X X X X X X Extracts X X X X ..... n amortizing the expenditure over the period of facility and allowing the same stands reversed. The Assessing Officer is thus, directed to allow the claim of assessee vis-à-vis depreciation on intangible asset under section 32(1)(ii) of the Act. - Decided in favour of assessee. - ITA No.1299/PUN/2015 - - - Dated:- 30-8-2017 - MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM For The Appellant : Shri Rajeev Kumar, CIT For The Respondent : Shri Pravin R. Rathi ORDER PER SUSHMA CHOWLA, JM: The appeal filed by the Revenue is against the order of CIT(A)-1, Nashik, dated 24.07.2015 relating to assessment year 2011-12 against the order passed under section 143(3) of the Income-tax Act, 1961 (in short the Act ). 2. The Revenue has raised the following grounds of appeal:- 1. Whether on the facts and in the circumstances of the case, and in law, the Ld. CIT(A)-I, Nashik was justified in allowing the depreciation of ₹ 63,05,34,911/- claimed on the asset Right to collect Toll . 2. Whether on the facts and in the circumstances of the case, and in law, the Ld. CIT(A)-I, Nashik was justified in holding that the assessee is eligible for deprec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted at the premises of assessee on 20.04.2010. The assessee was incorporated for executing infrastructure project of laying down four lanes and for strengthening of Pune-Ahmednagar road with private finance on toll rights under Built-Operate-Transfer basis. On completion of the project, the operations started on 06.07.2005. The assessee for the year under consideration had collected toll to the extent of ₹ 17.16 crores and had claimed depreciation to the extent of ₹ 10,61,88,185/-. The said claim of depreciation on license to collect toll being an intangible asset, in view of Government notification granting such rights was claimed in the original return of income by the assessee. The assessment in the case of assessee for assessment year 2006-07 was completed under section 143(3) of the Act and the said claim was allowed. Further, in assessment year 2007-08, similar claim of depreciation on intangible asset was denied to the assessee. However, the Tribunal in ITA No.989/PN/2010, relating to assessment year 2007-08 vide order dated 18.07.2013 had allowed the claim of depreciation on license to collect toll @ 25% being intangible asset within the scope of section 32(1)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee to collect toll over the road for particular period and it was held as under:- 17. We have considered the rival contentions. So far as the reliance of the Ld. A.R. on the article/clause 38.4 of the concession agreement between the assessee and the NHAI is concerned, we find that the identical clause was also there and relied upon in the case of North Karnataka Expressway Ltd. vs. CIT which has also been reproduced in para 8 of the order of the Hon‟ble Bombay High Court (supra). The relevant part of the order for the sake of convenience is reproduced as under: 8] The appellant claimed that it was the owner of the toll road and the entire cost incurred for construction thereof was capitalized by the Appellant in its books in the assessment year 2005-06 during which the construction of the toll road was completed. As the assessment year under consideration was the first year when the road became operational, the Appellant claimed Depreciation of ₹ 59.92 crores at the rate of 10% on the capitalized cost of the toll road. The Appellant also filed necessary details of the claim of depreciation and a note was appended to the depreciation schedule sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of depreciation in the said case was not based on treating it as an intangible asset with a right to use the asset without being actual owner thereof. The issue under consideration was that whether the toll roads are not owned by the assessee and that he cannot claim any depreciation thereupon. Hence, the Hon‟ble Bombay High Court has not discussed the issue relating to the claim of depreciation on the license for right to collect the toll as intangible asset. Further, the Hon‟ble Bombay High Court in para 39 of the decision (supra) has observed that as per the provisions of National Highway Act, 1956 and National Highway Authorities of India Act, 1988, the ownership of the toll road vests in Union, however, the term owner as appearing in the Income Tax Act, 1961 has been defined widely and broadly for the purpose of the provisions of the Income Tax Act so as not to allow anybody to escape the provisions thereof by urging that he has a limited right or which is not akin to ownership, therefore his income should not be brought to tax; Similarly, if he can claim any deductions from his income which is comprising of profit and gain from his business, then, that deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the alternative claim that in view of the observations of the Hon‟ble Bombay High Court either the investments made by the assessee be treated under the asset building, plant machinery and depreciation be granted accordingly or the same be treated as intangible asset on the ground that the assessee has been granted license for right to collect the toll tax for a fixed period. Now the question before us is whether the assessee at this stage the can raise the alternative contention for claim of allowance of depreciation on the license authorizing him to collect the toll being an intangible asset or treating the project as plant machinery? 22. We may observe that the Hon‟ble Bombay High Court in the case of Pruthvi Brokers Shareholders Pvt. Ltd.‟ (supra), while relying upon the various decisions of the Hon‟ble Supreme Court and other Hon‟ble High Courts, has held that even if a claim is not made before the AO it can be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim is not barred. The Hon‟ble Bombay High Court while relying upon the decision of the Hon‟ble Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed the deduction of depreciation. However, he has claimed the same treating itself to be the owner of the toll road. Such a claim of the assessee has been allowed in the previous assessment years. The assessee was under bonafide belief that he has correctly claimed the deduction of depreciation on the toll road in view of the consistent findings of the Tribunal on this issue. However, due to the change of legal position in view of the law laid down by the Hon‟ble Bombay High Court (supra), the assessee cannot be treated as the owner of the toll road. But it is not disputed that the assessee has made investments on the project and he is entitled to claim deductions in this respect. The claim of deduction has been very much put by the assessee in the return of income but wrongly treating itself as owner of the road which claim as observed above was under bonafide belief and in view of the settled legal position as was there at the time of putting the claim. Even the AO has also observed in the assessment order that it is a fact that the assessee company has incurred huge expenditure on the said project which cannot be treated as revenue expenditure allowable in one year as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of the agreement with the NHAI, the assessee has been given the right to develop and maintain the toll road and also the right to collect toll for a specified period without having actual ownership over the said toll road. The assessee has an express right/license for recovery of toll fee to recoup the expenditure. The said right brings to the assessee an enduring benefit during the period of agreement. This fact has also been discussed by the CBDT in circular No.09/2014 dated 23.04.14. The para 4 of which, for the sake of convenience, is reproduced as under: There is no doubt that where the assessee incurs expenditure on a project for development of roads/highways, he is entitled to recover cost incurred by him towards development of such facility (comprising of construction cost and other pre-operative expenses) during the construction period. Further, expenditure incurred by the assessee on such BOT projects brings to it an enduring benefit in the form of right to collect the toll during the period of the agreement. Hon‟ble Supreme Court in the case of Madras Industrial Investment Corporation Ltd. vs. CIT in 225 ITR 802 allowed spreading over of liability over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he owner of the toll road, but he, certainly, is owner in possession of the right to collect the toll. The said right has been given to the assessee for a specified period with enduring benefit. It is also not disputed that on the expiry of the time period of the agreement, the said right of the assessee will cease to have effect which means it slowly will depreciate to the nil value. As per the provisions of the Income Tax Act, especially under section 32(1)(ii), the assessee is entitled to claim of depreciation on such type of rights. Such rights have been described as intangible assets under the Act and are eligible for claim of depreciation. 28. In view of the express provisions of the Act, we have no doubt to hold that the assessee is entitled to collect tax being an intangible commercial right under section 32(1)(ii) at the rate as has been prescribed under the relevant rules. Our above view is further supported by the decision of the co-ordinate Pune bench of the Tribunal in the case of M/s. Ashoka Infrastructure Ltd. Vs. ITO in ITA No.989/PN/2010 ITA No.1105/PN/2010,wherein, the Tribunal while further relying upon another decision of the Co-ordinate Bench of the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Ashoka Buildcon Ltd. (supra), Kalyan Toll Infrastructure Ltd. (supra), Dimension Construction Pvt. Ltd. (supra) and Ashoka Info (P) Ltd. (supra). 9. On the other hand, the Ld. Representative for the respondent assessee pointed out that the aforesaid argument set up by the Revenue has also been considered in the aforesaid precedents before concluding that the impugned 'Right to collect Toll' was an 'intangible asset' eligible for claim of depreciation @ 25% as per sec. 32(1)01) of the Act. 10. We have carefully considered the rival submissions. Factually speaking, there is no dispute to the fact that the costs capitalised by the assessee under the head 'License to collect Toll' have been incurred for development and construction of the infrastructure facility, i.e., Dewas By-pass Road. It is also not in dispute that the assessee was to build, operate and transfer the said infrastructure facility in terms of an agreement with the Government of Madhya Pradesh. The expenditure on development, construction and maintenance of the infrastructure facility for a specified period was to be incurred by the assessee out of its own funds. Moreover, aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding that the assessee was eligible for depreciation on the Right to collect Toll', being an intangible asset' falling within the purview of section 32(1)(i1) of the Act following the aforesaid precedents. 13. In terms of the aforesaid precedent, the claim of the assessee in the present case for depreciation on 'License to collect Toll', being an 'intangible asset' falling with the scope of Section 32(1)(ii) of the Act is liable to be upheld. We hold so. 14. In so far as the reliance placed by the CIT(A) on the judgement of the Hon'ble Bombay High Court in the case of Techno Shares And Stocks Ltd. (supra) is concerned it may only be noted that the said judgement has since been altered by the Hon'ble Supreme Court vide its order reported at (2010) 327 ITR 323 (SC). Accordingly, in view of the aforesaid discussion, we hereby allow the Ground of Appeal No. 1.1 raised by the assessee. 29. In view of our observations made in the preceding paras and also agreeing with the above reproduced findings of the Tribunal, we hold that the assessee is entitled to the claim of depreciation on the road to collect toll being an intangible asset f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod out of its own funds and after the end of specified period, the assessee was to transfer the said infrastructure facility to the Government of Maharashtra free of charge. In consideration of developing, constructing and maintaining the facility for specified period and thereafter, transferring it to the State Government, the assessee was granted the right to collect toll from motorists whoever uses the said infrastructure facility during the specified period. The said right to collect toll was on account of assessee incurring the cost towards development, construction and maintenance of infrastructure facility, which was treated by the assessee as its intangible asset and on which, it claimed the depreciation under section 32(1)(ii) of the Act. Following the precedent referred to above, the assessee is entitled to claim the said deduction on intangible asset, in view of section 32(1)(ii) of the Act. The reason for which the said depreciation which was earlier allowed by the Tribunal in the case of assessee itself for assessment year 2007-08 and was allowed by the Assessing Officer in the order passed under section 143(3) of the Act relating to assessment year 2006-07, was den ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
