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TMI Blog2021 (6) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... e coordinate benches of the Tribunal viz. (i) DCIT, Circle-9(1)(2),Mumbai Vs. M/s Atlanta Ltd. Mumbai [ 2018 (2) TMI 1514 - ITAT MUMBAI] and (ii) ACIT Vs. M/s PNG Tata Ltd. [ 2019 (8) TMI 347 - ITAT CHENNAI] We, thus, finding ourselves to be in agreement with the view taken by the Tribunal in the aforesaid cases, respectfully follow the same. Accordingly, the claim of the assessee towards depreciation under Sec.32(1)(ii) in respect of its intangible rights i.e right to collect toll , being in conformity with the mandate of law, is found to be in order. We thus not finding favour with the view taken by the CIT(A) therein set aside the same. The Ground of appeal No. 1 is allowed in terms of our aforesaid observations. Disallowance u/s 36(1)(iii) of interest - sufficient self-owned funds and internal accruals to give the advances - HELD THAT:- Admittedly, in case, if an assessee has sufficient interest free funds available with it which would suffice to meet its investments, then, no disallowance of any part of the interest expenditure pertaining to such investments would be called for in its hands. Our aforesaid view is fortified by the judgment of the Hon ble Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09] 178 TAXMAN 135 (BOM.) 3. The appellant craves leave to add, alter, delete or modify all or any of the above grounds of appeal. All the above grounds are without prejudice to each other. 2. Briefly stated, the assessee which is an infrastructure company had efiled its return of income for A.Y. 2012-13 on 27.09.2012, declaring a loss of (- ) ₹ 1,26,65,163/-. The return of income filed by the assessee was processed as such under Sec. 143(1) of the Act. Subsequently, the case of the assessee was taken up for scrutiny assessment under Sec. 143(2) of the Act. 3. During the course of the assessment proceedings, it was observed by the A.O that the assessee company had claimed depreciation of ₹ 3,09,04,333/- on carriage ways @ 25% by treating the same as intangible assets. Observing, that the cost of any infrastructure facility undertaken on BOT basis, specially a highway toll way project, de hors vesting of ownership of the same with the assessee i.e BOT operator would not qualify as an intangible asset, the A.O, was of the view that the assessee would not be eligible for claim of depreciation on the same under Sec. 32 of the Act. It was observed by the A.O tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 9/2014 the assessee was only entitled to claim amortization of the expenditure that was incurred by it on building infrastructure facility evenly over the period of the concessionaire agreement, the CIT(A) was of the view that the A.O had rightly rejected the assessee s claim for depreciation on right/license to collect toll under Sec. 32(1)(ii) of the Act. Also, the disallowance of the interest expenditure under Sec. 36(1)(iii) by the A.O was upheld by the CIT(A). 5. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Authorized Representative (for short A.R ) for the assessee at the very outset of the hearing of the appeal submitted that the issue pertaining to the entitlement of an assessee i.e BOT operator towards a claim of depreciation under Sec. 32(1)(ii) w.r.t the intangible right to collect toll was squarely covered by the order of the Tribunal in the case of ACIT, Circle 6(2)(2), Mumbai Vs. M/s Essel Sagar Damoh Toll Roads Ltd., ITA No. 7114/Mum/2016, dated 20.09.2019. As regards the issue pertaining to the disallowance of the assessee s claim for deduction under Sec. 36(1)(iii) of the Act, it was submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that as to whether an Infrastructure Development Company which had constructed a toll road on BOT basis on land owned by the Central Government would be entitled for depreciation on the same, or not. It is the claim of the ld. A.R, that as the issue as to whether an Infrastructure Development Company which had constructed a toll road on BOT basis on land owned by the Central Government would be entitled towards claim of depreciation under Sec. 32(1)(ii) in respect of its intangible rights i.e. right to collect toll , was neither raised before or adjudicated upon by the Hon ble High Court in either of te aforesaid cases, therefore, the reliance placed by the revenue on the said judicial pronouncements which were distinguishable in the backdrop of the issue involved in the said matters, would thus not assist its case. 8. We have given a thoughtful consideration to the issue before us in the backdrop of the material available on record and the contentions advanced by the authorized representatives for both the parties. Admittedly, as the assessee which being an Infrastructure Development Company had constructed the toll road on build, operate and transfer (BOT) basis on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of North Karnataka Expressway Ltd.(supra), was thereafter once again reiterated by the Hon ble Court in the case of CIT-10, Vs. M/s West Gujarat Expressway Ltd. (ITA No. 2357 of 2013, dated 05.04.2016) . We find that both of the aforementioned judgements of the Hon ble jurisdictional High Court were rendered in context of the issue that as to whether or not an Infrastructure Development Company which had constructed a toll road on BOT basis on the land owned by Central Government would be entitled for depreciation on such toll road . We find that the Hon ble High Court had observed that in the absence of ownership of the toll road , which belonged to the Central Government, the assessee would not be entitled to claim depreciation on the same. The issue as to whether an Infrastructure Development Company which had constructed a toll road on BOT basis on the land owned by Central Government would be entitled to claim depreciation under Sec.32(1)(ii) in respect of its right to collect toll i.e an intangible asset was however not raised in both of the aforesaid cases. Our aforesaid view stands fortified from a perusal of the order of the Hon ble High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and in the circumstances of the case and in law, the Tribunal was right in directing the A.O to grant depreciation on assets not owned by the Respondent that goes against provisions of Section 32 of the I.T Act?; and (ii). Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in its decision of treating toll roads as plant and machinery, when this is not as per rule 5 of New Appendix of the I.T Rules?. As such, we find that the revenue had only sought the adjudication of the issue as to whether the Tribunal was right in allowing depreciation to the assessee on toll roads by treating the same as plant and machinery. It is in the backdrop of the aforesaid issues which were raised by the revenue that the Hon ble High Court by relying on its earlier order in the case of North Karnataka Expressway Ltd. Vs. CIT-10 (2015) 372 ITR 145 (Bom), had concluded that the issue therein involved was squarely covered by the said decision. Accordingly, the Hon ble High Court by drawing support from the observations recorded in its earlier order in the case of North Karnataka Expressway Ltd. had therein answered the aforesaid two substantial questions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt, the assessee is not entitled to depreciation. We have gone through this order and found that the issue before the Hon ble High Court was with respect to treating toll road as plant and machinery and if that situation decided in favour of the revenue. In the backdrop of the aforesaid facts, we are of the considered view that the reliance placed by the Ld. D.R on the aforesaid judgments of the Hon ble High Court of Bombay i.e North Karnataka Expressway Ltd. Vs. CIT-10 (2015) 372 ITR 145 (Bom) and CIT-10, Vs. M/s West Gujarat Expressway Ltd. (ITA No. 2357 of 2013, dated 05.04.2016), would not assist the case of the revenue for rebutting the claim of the assessee towards deprecation u/s 32(1)(ii) in respect of its intangible rights i.e right to collect toll . 10. We find that the Special bench of the Tribunal in the case of ACIT, Circle 10(2), Hyderabad, Vs. Progressive Construction Ltd. (2018) 191 TTJ 549 (Hyd.) (SB), had concluded, that where an Infrastructure Development company that had constructed a road on build, operate and transfer (BOT) basis on the land owned by the Central Government gets vested with a right to an intangible asset under Explanation 3(b) r.w. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated with the very same expenditure, in our view, is not borne out from facts on record. At the cost of repetition we must observe, as per the terms of agreement the expenses incurred by the assessee towards construction of the roads, bridges, etc., were not going to be reimbursed by the Government of India. This fact was known to both the parties before the execution of the agreement as the tender itself has made it clear that the project is to be executed with private sector participation on BOT basis. Thus, from the very inception of the project, assessee was aware of the fact, it has to recoup the cost incurred in implementing the project along with the profit from operating the road and collecting toll charges during the concession period. Therefore, assessee has capitalized the cost incurred on the BOT project on which it has claimed depreciation. Thus, in our view, the expenditure incurred by the assessee of ₹ 214 crore for creating the project or project facilities has created an intangible asset in the form of right to operate the project facility and collect toll charges. Further, it is the contention of the learned Senior Standing Counsel that if at all any right i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for the purposes of the business67 or profession, the following deductions shall be allowed-] 12. Explanation 3 to section 32(1) defines intangible asset as under:- 85 [Explanation 3.-For the purposes of this sub-section, 86[the expression assets ] shall mean- (a) tangible assets, being buildings, machinery, plant or furniture; (b) intangible assets, being know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature87. 13. A plain reading of the aforesaid provisions would indicate that certain kind of assets being knowhow, patents, copyrights, trademarks, license, franchise, or any other businesses or commercial rights of similar nature are to be treated as intangible asset and would be eligible for depreciation at the specified rate. It is the claim of the assessee that the right acquired under C.A. to operate the project facility and collect toll charges is in the nature of license. However, the learned Senior Standing Counsel has strongly countered the aforesaid claim of the assessee by referring to the definition of license as provided under the Indian Easements Act, 1882. For better ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to do in the absence of the C.A. Thus, in our view, the right granted to the assessee under the C.A. to operate the project / project facility and collect toll charges is a license or akin to license, hence, being an intangible asset is eligible for depreciation under section 32(1)(ii) of the Act. 15. Even assuming that the right granted under the C.A. is not a license or akin to license, it requires examination whether it can still be considered as an intangible asset as described under section 32(1)(ii) of the Act. In this context, it has been the contention of the learned Senior Standing Counsel that the intangible asset mentioned under section 32(1)(ii) of the Act are specifically identified assets, except, the assets termed as any other business or commercial rights of similarnature . He had submitted, applying the principle of ejusdem generis the rights referred to in the expression any other business orcommercial rights of similar nature , should be similar to one or more of the specifically identified assets preceding such expression. The aforesaid contention of the learned Departmental Representative is unacceptable for the reasons enumerated hereinafter. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milar nature the intangible asset should be akin to any one of the specifically identifiable assets is not a correct interpretation of the statutory provisions. Had it been the case, then goodwill' would not have been treated as an intangible asset. The Hon'ble Delhi High Court in case of Areva T and D India Ltd. (supra), while interpreting the aforesaid expression by applying the principles of ejusdem generis observed, the right as finds place in the expression business or commercial rights of similar nature need not answer the description of knowhow, patents, trademarks, license or franchises, but must be of similar nature as the specified asset. The Court observed, looking at the meaning of categories of specified intangible assets referred to in section 32(1)(ii) of the Act preceding the term businessor commercial right of similar nature , it could be seen that the said intangible assets are not of the same line and are clearly distinct from one another. The Court observed, the use of words business orcommercial rights of similar nature , after the specified intangible assets clearly demonstrates that the legislature did not intend to provide for depreciati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 24.01.2018) . Also, a similar view had been taken by the ITAT, Chennai in the case of ACIT, cooperative circle 5(2), Chennai Vs. M/s PNG Toll Way Ltd (ITA No. 238/CHNNY/2019, dated 26.07.2019 . In the backdrop of the aforesaid judicial pronouncements, we are of the considered view that the issue as to whether an Infrastructure Development company which had constructed a road on build, operate and transfer (BOT) basis on the land owned by the Central Government would be eligible for claim of depreciation in respect of its intangible rights i.e right to collect toll under Sec. 32(1)(ii), is squarely covered by the aforesaid order of the Special bench of the Tribunal in the case of ACIT, Circle 10(2), Hyderabad, Vs. Progressive Construction Ltd. (2018) 191 TTJ 549 (Hyd.) (SB) and also the orders of the coordinate benches of the Tribunal viz. (i) DCIT, Circle-9(1)(2),Mumbai Vs. M/s Atlanta Ltd. Mumbai (ITA No. 3415/Mum/2015, dated 24.01.2018); and (ii) ACIT Vs. M/s PNG Tata Ltd. (ITA No. 238/CHNNY/2019, dated 26.07.2019. We, thus, finding ourselves to be in agreement with the view taken by the Tribunal in the aforesaid cases, respectfully follow the same. Accordingly, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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