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TMI Blog2021 (12) TMI 304X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of DCIT.Cent.Cir-7(2), Mumbai vs. Rajahmundry Expressway Ltd [ 2020 (3) TMI 632 - ITAT MUMBAI] as held entire investment/finance for developing the infrastructure facility was borne by the assessee. By making such investment what the assessee received in return was a right to collect annuity over the period of concession. Thus, the investment made by the assessee for acquiring such right certainly is an intangible asset coming within the purview of section 32(1)(ii) - Decided in favour of assessee. Disallowance on account of provision for periodic maintenance charges both under normal provisions of the Act as well as in the computation of book profits u/s.115JB - only argument advanced by the ld. DR before us was that the liability to incur periodic maintenance cost would arise to the assessee only in A.Y.2017-18 and the entire expenditure would get liable to be incurred only in A.Y.2017-18 - HELD THAT:- As pursuant to the concession agreement, the assessee is entitled to receive annuity income every year. It is not in dispute that as per the concession agreement, assessee is obliged to carry out the periodic maintenance cost on road pavement every five years and to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mum/2020, 846/Mum/2020 847/Mum2020 for A.Yrs.2013-14, 2014-15 2015-16 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-49, Mumbai in appeal No.CIT(A)-49/IT-175/2016-17, CIT(A)-49/IT-179/2016-17 CIT(A)-49/IT-109/2017-18 dated 06/11/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 21/03/2016, 08/11/2017 respectively by the ld. Dy. Commissioner of Income Tax, Central Circle- 7(2), Mumbai (hereinafter referred to as ld. AO). Identical issues are involved in all these appeals, hence, they are taken up together and disposed of by this common order for the sake of convenience. 2. The first identical issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in deleting the disallowance made on account of depreciation on the right to collect annuity on toll roads. 2.1. We have heard rival submissions and perused the materials available on record. We find that the assessee is engaged in the business of executing the project for design, construction, finance and maintenance of Gorakhpur By-pass on NH-28(Project Highway) in the state of Utt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is entitled to claim of depreciation on such type of rights. 6.3 Further, the aforementioned issue is now squarely covered by the decision of the Special Bench of Hyderabad Tribunal in the case of ACIT v. Progressive Constructions Ltd [2018] 92 taxmann.com 104 (Hyderabad - Trib.) wherein the Tribunal held that the only manner in which the assessee could recoup the cost incurred by it in implementing the project/project facility was to operate the road during the concession period, and collect the toll charges from user of the project facility. By investing huge cost, the assessee had obtained a valuable business/commercial right to operate the project facility and collect toll charges. Therefore, right required by the assessee for operating the project facility and collecting toll charges was an intangible asset created by the assessee by incurring the expenses. The Special Bench of the Hyderabad Tribunal accepted the fact that huge costs were incurred by the assessee in constructing, implementing and maintaining such projects. Considering that these costs do not get reimbursed, and the fact that the assessee was allowed to recover such costs by way of collecting toll charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... periodic maintenance charges both under normal provisions of the Act as well as in the computation of book profits u/s.115JB of the Act. 3.1. We have heard rival submissions and perused the materials available on record. We find that assessee is engaged in the business of executing the project for design, construction, finance and maintenance of Project Highway in the State of Uttar Pradesh on BOT basis under the annuity scheme. The operations and maintenance of the Project Highway is a key obligation of the assessee throughout the period of 20 years as per the concession agreement. The assessee is thus obliged to incur maintenance expenses on a periodic basis. The assessee s obligation for operations and maintenance are specified in Article XVIII of the concession agreement which are reproduced hereinabove:- The assessee in consultation with an Independent Consultant is required to prepare repairs and maintenance manual during the period of operations and to ensure that the Project Highway complies with the standards specified in the Concession Agreement. The assessee in consultation with an Independent Consultant is required to prepare and provide NHAI its preventiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintenance from F.Y.2011-12 to F.Y.2017-18 in a tabular form. The provision made for the maintenance expenses has been amortised by the assessee for a period of five years and claimed as deduction u/s.37(1) of the Act under normal provisions of the Act and the same was also claimed as deduction while computing the books profit u/s.115JB of the Act. The ld. AO however, sought to disallow the same on the ground that the said provision has been made by the assessee on an estimated basis for future cost to be incurred and hence, the provision made thereon is not an allowable deduction u/s. 37(1) of the Act under normal provisions of the Act. The ld. AO also treated the same as the provision made for unascertained liability and accordingly, sought to add the same while computing book profit u/s.115JB of the Act. The assessee placed reliance on the decision of the Hon ble Supreme Court in the case of Rotork Control India Pvt. Ltd., vs. CIT reported in 314 ITR 62 and Bharat Earth Movers Ltd., vs. CIT reported in 245 ITR 428, among other decisions, in support of its contention. The ld. CIT(A) duly appreciated the entire contentions of the assessee and deleted the disallowance made by the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintenance expense was not a contingent liability but it was liable to be considered while determining the income of the assessee for the period under consideration. Such losses were ascertained losses on the maintenance portion of the contract though it was an estimation made in the light of the available information. Therefore, the appellant has incurred a liability, on the facts and circumstances of this case, during the relevant assessment year which was entitled to deduction under Section 37 of the 1961 Act.lt is further seen that the identical issue had come up for consideration before the Hon'ble Pune Tribunal in the case of ACIT Vs. Ashoka Buildcon Ltd. [2015] 61 taxmann.com 330 wherein the Hon'ble ITAT has held that the foreseeable losses of future years could be recognized following rationale of AS-7 and hence such provision was an allowable deduction. Therefore, following the judicial precedents, I am of the opinion that the provision for periodic maintenance charges is to be allowed to the appellant and accordingly, the addition made amounting to ₹ 6,24,00,000/- is deleted. In view of the aforesaid facts, this ground of appeal is Allowed. Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paper book filed before us. The said document was duly placed on record before the lower authorities. We also find from page No.176 of the paper book that assessee has also provided the calculation on utilisation of periodic maintenance cost, from A.Y.2012-13 to A.Y.2018-19 in tabular form as under:- Gorakhpur Infrastructure Company Private Limited Calculation of utilisation of provision made for periodic maintenance Particulars FY11-12 FY12-13 FY 13-14 FY14-15 FY15-16 FY16-17 FY 17-18 Opening Balance (A) 6,24,00,000 14,53,00,000 22,67,75,000 30,69,65,207 35,25,48,764 Provision created for first PM (for first 5 years) (8} 6,24,00,000 8,29,00,000 8,14,75,000 8,01,90,207 8,01,90,207 96,95,301 Utilisation / pm reversed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. It is a fact that periodic maintenance cost is an integral part of the concession agreement and assessee is under a contractual obligation to incur the same and provision has been made by it on a scientific basis. Accordingly, the expenditure attributable to each year has been claimed as deduction both under normal provisions of the Act as well as in the computation of book profits u/s.115JB of the Act. Hence, it would not fall under the category of provision made for contingent liability or unascertained liability. We find that the ld. CIT(A) had rightly appreciated these contentions of the assessee and had rightly placed reliance on the decision of the Hon ble Supreme Court in the case of Rotork Controls India Pvt. Ltd., reported in 314 ITR 62 and on the Co-ordinate Bench decision of Pune Tribunal in the case of ACIT vs. Ashoka Buildcon Ltd., reported in 61 Taxmann.com 330. We hold that the ld. CIT(A) had passed a detailed order in this regard. Hence the order of ld. CIT(A) granting relief to the assessee does not warrant any interference. Accordingly, the ground Nos. 2 3 of the Revenue for all the years are dismissed. 4. In the result, all the appeals of the Revenue a ..... 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