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TMI Blog2021 (6) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Tribunal. 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. Levy of interest u/s 234B - HELD THAT:- As the levy of interest is mandatory as held by the Hon ble Supreme Court in the case of CIT Vs. Anju M.H. Ghaswala [ 2001 (10) TMI 4 - SUPREME COURT] therefore, the same being consequential, the A.O is directed to recompute the same while giving effect to our aforesaid order. Ad hoc disallowance on account of motor car expenses - HELD THAT:- As the view taken by the CIT-10, Mumbai in his order passed u/s 263 that the assessee had not claimed depreciation on the Honda CRV vehicle that was purchased by it in A.Y 2004-05 is found to be incorrect, therefore, the very assumption drawn by him that the said vehicle was not used by the assessee for its business purposes falls to ground and cannot be sustained. As the assessee had duly claimed depreciation as regards the vehicle in question i.e Honda CRV both in the year of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the due date of filing the return. The appellant prays that the addition of ₹ 6,38,88,323/- may be deleted. 5. On the facts and the circumstances of the case and in law, the appellant is entitled to claim deduction u/s 80G on the donation of ₹ 5,26,852/-. The appellant prays that deduction u/s 80G may be granted. 6. On the facts and the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) has erred in confirming levy of interest u/s 234B. The appellant denies the liability for payment of interest u/s 234B. The interest levied u/s 234B amounting to ₹ 29,08,178/- may be deleted. 7. The Appellant craves leave to add, amend, alter, vary and/or withdraw any or all the above grounds of appeal, which are without prejudice to one another. Further, the assessee has raised the following additional grounds of appeal before us : 1. Without prejudice to Ground No. 1 and 2 of the appeal filed on 27/06/2012, the appellant prays that if the Project Road is not treated under the category of Building for the purpose of granting depreciation then the depreciation may be granted treating the said road under the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laring a loss of (-) ₹ 22,28,15,736/- under the normal provisions and book profit of ₹ 10,13,70,151/- under Sec. 115JB of the Act. The return of income filed by the assessee was processed as such under Sec. 143(1) of the Act. Subsequently, assessment was framed vide order passed under Sec. 143(3), dated 28.12.2007 assessing the total income of the assessee company under Sec. 115JB at ₹ 10,13,70,151/-. Thereafter, the Commissioner of Income-tax -10, Mumbai vide his order passed u/s 263 held the order passed by the A.O u/s 143(3), dated 28.12.2007 as erroneous insofar it was prejudicial to the interest of the revenue and directed him to reframe the assessment inter alia on the ground that depreciation on the toll road constructed on Build, Operate and Transfer basis was wrongly allowed to the assessee as the toll road was not owned by the assessee but belonged to the Government. Backed by the order passed by the CIT, the A.O vide his order passed under Sec. 143(3) r.w.s 263, dated 23.12.2010 inter alia disallowed the assessee s claim for depreciation on toll roads amounting to ₹ 59,92,08,840/-. Income of the assessee company was assessed by the A.O vide his or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... got vested with a right to an intangible asset under Explanation 3(b) r.w. Sec. 32(1)(ii) of the Act, pursuant whereto it was eligible to claim depreciation on such asset as per the specified rate. In order to buttress his aforesaid claim the ld. A.R had drawn support from the following orders : Sr. No. Particulars 1. West Gujarat Expressway Ltd. Vs. ACIT -10(1) [ITA No. 5904 6244/Mum/2012; A.Y 2009-10] 2. West Gujarat Expressway Ltd. Vs. DCIT -14(3)(1) [ITA No. 634 664/Mum/2015; A.Y 2010-11] 3. Andhra Pradesh Expressway Ltd. Vs. ACIT 14(1)(1) [ITA No. 655 146/Mum/2015; A.Y 2010-11] 4. Thiruvananthapuram Road Development Co. Ltd. Vs. ACIT-10(1) [ITA No. 6798 6837/Mum/2011; A.Y 2008-09] 5. Thiruvananthapuram Road Development Co. Ltd. Vs. DCIT-14(3)(1) [ITA No. 622, 636, 4346/Mum/2015 C.O No. 25/Mum/201, A.Y 2010-11 and A.Y 2011-12] 6. West Gujarat Expressway Ltd. Vs. DCIT -14(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(b) r.w. Sec. 32(1)(ii) of the Act, pursuant whereto it was eligible to claim depreciation on the same. 6. Per Contra, the ld. Departmental Representative (for short D.R ) submitted that the lower authorities had rightly rejected the assessee s claim for depreciation under Sec. 32(1)(ii) in respect of its right to collect toll , for the reason, that the ownership of the toll roads was not vested with the assessee. In order to support its aforesaid contention the ld. D.R had relied on the CBDT Circular No. 9/2014. Also, support was drawn by the ld. D.R from the judgments of the Hon ble High Court of Bombay in the case of North Karnataka Expressway Ltd. Vs. CIT-10 (2015) 272 ITR 145 (Bom) and CIT Vs. West Gujarat Expressway Ltd. (2017) 390 ITR 398 (Bom). It was further submitted by the ld. D.R that amortisation may be allowed to the assessee w.r.t the toll roads. 7. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, and also the judicial pronouncements relied upon by them. Our indulgence in the present appeal has been sought for adjudicating the solitary issue, viz. that as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement with any person in relation to the development and maintenance of the whole or any part of a National Highway, but that in no way would affect the vesting of the National Highways in the Union. It was observed by the Hon ble High Court that the ownership of the National Highway as stands vested with the Central Government under Sec.4 of the National Highway Act, 1956 would not be diluted, for the reason, that the Central Government as per Sec.8-A (supra) had entered into an agreement with any person for development and maintenance of the whole or any part of the National Highway. To sum up, the Hon ble High Court had concluded that an Infrastructure Development Company that had constructed a toll road on build, operate and transfer (BOT) basis on the land owned by the Government, not being the owner of the said road would thus not be entitled for depreciation on the same. At this stage, we may herein observe, that the Hon ble High Court while concluding as hereinabove had also observed, that as the assessee had invested in the project of construction, development and maintenance of the National Highway, therefore, claim for depreciation on the assets in the form of buil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation on the toll roads as it was not owner of the same, however, it could definitely claim depreciation on its investments made in the project and such other assets in the form of building and plant and machinery etc. Accordingly, it was observed by the Hon ble High Court at Para 47 of its order that the claim for depreciation could be validly raised and granted to the extent stated hereinabove. Also, it was observed by the Hon ble High Court that it was concerned only with the claim of the assessee as regards depreciation on the road itself. To sum up, the Hon ble High Court in its aforesaid judgment had confined its adjudication to the issue that as to whether or not an Infrastructure Development Company that had constructed a road on BOT basis on land owned by the Central Government would be eligible to claim depreciation on such toll road so constructed and operated by it. Accordingly, we are of the considered view, that the issue as to whether an Infrastructure Development company that had constructed a road on build, operate and transfer (BOT) basis on the land owned by the Central Government would be entitled to claim depreciation under Sec. 32(1)(ii) in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 015, dated 23.05.2018]. In the aforesaid case involving facts identical to those as in the case of the assessee before us, we find that the assessee had claimed that it was entitled for depreciation on right to collect toll u/s 32(1)(ii) of the Act. Relying on the judgment of the Hon ble High Court of Bombay in the case of CIT-10, Vs. M/s West Gujarat Expressway Ltd. (ITA No. 2357 of 2013, dated 05.04.2016), it was the claim of the revenue that the issue was covered against the assessee. We find, that the Tribunal rejected the aforesaid claim of the revenue, for the reason, that the issue as regards the entitlement of an Infrastructure Development company that had constructed a road on build, operate and transfer (BOT) basis on the land owned by the Central Government towards claim depreciation under Sec. 32(1)(ii) in respect of its intangible rights i.e right to collect toll had not been adjudicated by the Hon ble High Court in its aforesaid order. In fact, it was observed by the Tribunal that the Hon ble High Court in the aforesaid case had adjudicated that an Infrastructure Development company that had constructed a road on build, operate and transfer (BOT) basis on the land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecuting the project, assessee has incurred expenses of ₹ 214 crore. It is also not disputed that as per the terms of the C.A., the Government of India is not obliged / required to reimburse the cost incurred by the assessee to execute / implement the project facilities. The only right / benefit allowed to the assessee by the Government of India is to operate the project / project facilities during the concession period of 11 years 7 months and to collect toll charges from vehicles / persons using the project / project facilities. Thus, as could be seen, the only manner in which the assessee can recoup the cost incurred by it in implementing the project / project facility is to operate the road during the concession period and collect the toll charges from user of the project facility by third parties. Admittedly, the assessee has taken up the project as a business venture with a profit motive and certainly not as a work of charity. Further, by investing huge some of ₹ 214 crore, the assessee has obtained a valuable business / commercial right to operate the project facility and collect toll charges. Therefore, in our considered opinion, right acquired by the assessee fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n start operating and collecting toll charges only when the project facility is ready for use. Therefore, until the project is completed and ready for use by vehicles or persons assessee cannot collect toll charges for user of the project facilities. Thus, the right to operate the project facility and collect toll charges is integrally connected to the completion of the project facility which cannot be done unless the assessee invests its fund for completing the project. Therefore, keeping in view the aforesaid fact, it cannot be said that the right to collect toll has accrued to the assessee on the date of execution of the agreement. If we accept the aforesaid argument of the learned Senior Standing Counsel, in other words, it would mean that without even executing and completing the project facility, assessee would be collecting toll charges. Therefore, the contention of the learned Senior Standing Counsel that the expenditure incurred by the assessee till execution of the agreement can only be considered as an intangible asset, in our view, is illogical, hence, cannot be accepted. Thus, having held that the expenditure of ₹ 214 crore incurred by the assessee has resulted i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been defined under the Income Tax Act, 1961, the definition of license under the Indian Easements Act, 1882, has to be looked into. Accepting the aforesaid contention of the learned Senior Standing Counsel, let us examine the definition of license extracted herein above. A plain reading of section 52 of the Act makes it clear, a right granted to a person to do or continue to do something in the immovable property of the grantor, which, in the absence of such right would be unlawful and such right does not amount to an easement or interest in the property, then such right is called a license. If we examine the facts of the present case, vis-a-vis, the definition of license under the Indian Easements Act, 1882, it would be clear that immovable property on which the project / project facility is executed / implemented is owned by the Government of India and it has full power to hold, dispose off and deal with the immovable property. By virtue of the C.A., assessee has only been granted a limited right to execute the project and operate the project facility during the concession period, on expiry of which the project / project facility will revert back to the Government o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is an intangible asset created for the enduring benefit of the assessee. Now, it has to be seen whether such intangible asset comes within the expression any other business or commercial rights of similar nature . As could be seen from the definition of intangible asset, specifically identified items like knowhow, patents, copyrights, trademarks, licenses, franchises are not of the same category, but, distinct from each other. However, one thing common amongst these assets is, they all are part of the tool of the trade and facilitate smooth carrying on of business. Therefore, any other intangible asset which may not be identifiable with the specified items, but, is of similar nature would come within the expression any other business or commercial rights of similar nature . The Hon'ble Supreme Court in CIT v/s Smifs Securities (supra) after interpreting the definition of intangible asset as provided in Explanation 3 to section 32(1), while opining that principle of ejusdem generis would strictly apply in interpreting the definition of intangible asset as provided by Explanation 3(b) of section 32, at the same time, held that even applying the said principle goodwill' w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature . 17. In the case of Techno Shares and Stocks Ltd. v/s CIT, [2010] 327 ITR 323 (SC), the Hon'ble Supreme Court while examining the assessee's claim of depreciation on BSE Membership Card, after interpreting the provisions of section 32(1)(ii), held that as the membership card allows a member to participate in a trading session on the floor of the exchange, such membership is a business or commercial right, hence, similar to license or franchise, therefore, an intangible asset. In the present case, undisputedly by virtue of C.A. the assessee has acquired the right to operate the toll road / bridge and collect toll charges in lieu of investment made by it in implementing the project. Therefore, the right to operate the toll road / bridge and collect toll charges is a business or commercial right as envisaged under section 32(1)(ii) r/w Explanation 3(b) of the said provisions. Therefore, in our considered opinion, the assessee is eligible to claim depreciation on WDV as an intangible asset. Thus, we answer the question framed by the Special Bench as under:- The expenditure incurred by the assessee for construction of road under BOT contract by the Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set-aside the same. The Ground of appeal No. 1 is dismissed in terms of our aforesaid observations. The Ground of appeal No. 2 r.w additional ground of appeal no. 1 are allowed in terms of our aforesaid observations. 11. The additional ground of appeal No. 2 is dismissed in terms of our aforesaid observations. 12. The assessee has assailed the levy of interest u/s 234B of the Act. As the levy of interest is mandatory as held by the Hon ble Supreme Court in the case of CIT Vs. Anju M.H. Ghaswala (2001) 252 ITR 1 (SC), therefore, the same being consequential, the A.O is directed to recompute the same while giving effect to our aforesaid order. The Ground of appeal No. 6 is disposed of in terms of our aforesaid observations. 13. The Ground of appeal No. 7 and the additional ground of appeal no. 5 being general in nature are dismissed as not pressed. 14. Resultantly, the appeal filed by the assessee is allowed in terms of our aforesaid observations. ITA No. 4709/Mum/2010 A.Y 2005-06 (Revenue s appeal) 15. We shall now take up the appeal of the department for A.Y 2005-06. The revenue has assailed the impugned order passed by the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation on the Honda CRV vehicle that was purchased by the assessee in the immediately preceding year i.e A.Y 2004-05. Backed by the aforesaid facts, the CIT-10, Mumbai in his order passed u/s 263 had directed that if the aforesaid vehicle i.e Honda CRV was not used by the assessee for its business purpose, then, the expenses on fuel, maintenance and expenditure on driver salary as was claimed by the assessee as a deduction while computing its income was liable to be disallowed. On the basis of the aforesaid directions of the CIT, the A.O vide his order passed u/s 143(3) r.w.s 263, dated 23.12.2010 disallowed the assessee s claim for expenditure incurred on fuel, maintenance and driver s salary of ₹ 5 lac on an ad hoc basis. On appeal, the CIT(A) observed that the CIT-10, Mumbai in his order passed u/s 263 had proceeded on incorrect facts for concluding that the assessee had not claimed depreciation on the Honda CRV vehicle that was purchased by the assessee in the immediately preceding year i.e A.Y 2004-05. It was observed by the CIT(A) that the CIT-10, Mumbai had erred in comparing the additions to vehicles of ₹ 40,96,398/- for 15 months period as per Schedule C to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und to be incorrect, therefore, the very assumption drawn by him that the said vehicle was not used by the assessee for its business purposes falls to ground and cannot be sustained. As the assessee had duly claimed depreciation as regards the vehicle in question i.e Honda CRV both in the year of purchase i.e A.Y 2004-05 and the year in question which had been allowed by the department, thus, it can safely or in fact inescapably be concluded that the said vehicle was used by the assessee for its business purpose. We, thus, in terms of our aforesaid observations finding no infirmity in the view taken by the CIT(A) who in our considered view had rightly vacated the ad hoc disallowance of motor vehicle expenses of ₹ 5 lac, sustain the same. The Ground of appeal No. 2 raised by the revenue is dismissed. 20. The Grounds of appeal No. 3 and 4 being general are dismissed as not pressed. 21. Resultantly, the appeal filed by the revenue is dismissed. A.Y 2006-07 ITA No. 4373/Mum/2010 (Assessee s appeal) 22. We shall now take up the assessee s appeal for A.Y 2006-07. The assessee has assailed the impugned order on the following grounds of appel befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed amortising of the total cost of the toll roads of ₹ 599,20,88,396/- over the concessionaire period of 17 years and 6 months and allowed the corresponding deduction of ₹ 34,24,05,051/- for the year under consideration. Resultantly, the net disallowance considering the rejection of depreciation was worked out by the A.O at ₹ 19,68,82,905/-. After inter alia disallowing the assessee s claim for depreciation on toll roads and substituting the same by the amortisation expenditure relatable to the year in question, the A.O vide his order passed u/s 143(3)(ii), dated 30.12.2008 assessed the loss of the assessee company at (₹ 1,06,87,938/-). 24. Aggrieved, the assessee carried the matter in appeal before the CIT(A). It was observed by the CIT(A) that the construction of the Belgaum-Maharashtra toll road was completed by the assessee company in the A.Y 2005-06. It was noticed by him that the assessee had claimed depreciation on the toll road for the very first time in A.Y 2005-06. It was observed by the CIT(A) that though the assessee during the year under consideration had raised a claim for depreciation on the toll roads however the same was disallowed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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