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TMI Blog2017 (11) TMI 1998X X X X Extracts X X X X X X X X Extracts X X X X ..... et in terms of section u/s. 32(1) (ii) of the Act. 3. On the facts and circumstances of the case and in law the Ld. CIT(A) has failed to appreciate that the department has not accepted the decision of the ITAT, Pune and an appeal has been filed u/s. 260A of the Act before the Hon‟ble Bombay High Court. 4. The appellant craves to add, amend or delete any of the above grounds." 3. Both these appeals relating to the same assessee were heard together and are being disposed of by this consolidated order for the sake of convenience. However, reference is being made to the facts and issue in ITA No. 379/PUN/2016 to adjudicate the same. 4. Despite service of notice, none appeared on behalf of the assessee. However, written submissions have been filed and it has been pointed that the issue stands covered by the decision of Pune Bench of the Tribunal and copies of the order of Tribunal were enclosed. 5. The Ld. DR for the Revenue placed reliance on the orders of authorities below. 6. We have heard the submission of Ld. DR and perused the record. Briefly stated in the facts of the case, the assessee was a special purpose company, formed for development, operation & maintenance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs.17.16 crores and had claimed depreciation to the extent of Rs.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)(ii) of the Act. 18. The assessee made a similar claim in the return of income filed under section 143(3) r.ws 153A of the Act. However, the Assessing Officer denied the said claim of assessee in all the years under consideration h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs.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 stating that though the Appellant was entitled to higher claim of depreciation on toll road, the claim is made at the rate of 10%. The right to claim higher depreciation is reserved. The Appellant relied upon the standard concession document of the National Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 deduction can be availed by him. It is for that limited purpose that the term "onwer‟ is defined in this manner in Income Tax Act, 1961. The above observations of the Hon‟ble Bombay High Court reveal that for the purpose of claiming deduction under Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Court in the case of "Jute Corporation of India Limited vs. CIT‟ 1991 Supp (2) SCC 744 = (1991) 187 ITR 688 has observed that the power of the Appellate Commissioner is coterminous with that of the Income Tax Officer and an appellate authority while hearing appeal against the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the same has resulted into providing enduring benefit to the assessee company, hence, the said amount would be eligible for amortization for the period of the concession agreement as it was allowed in the A.Y. 2007-08 and 2008-09. It is also a fact that the said amortization of the expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 a number of years on the ground that there was continuing benefit to the company over a period. Therefore, analogously, expenditure incurred on an infrastructure project for development of roads/highways under BOT agreement may be treated as having been made/incurred for the purposes of business or profession o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciate 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 Tribunal in the case of "Ashoka Infraways Pvt. Ltd. Vs. ACIT‟ in ITA No.185 & 186/PN/2012 dated 29.04.2013, has held in clear terms that the claim of the assessee for depreciation on "licence to collect toll" being an "intangible asset‟ falling within the scope of section 32(1)(ii) of the Act is liable to be upheld. The relevant part of findings of the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lect 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, after the end of the specified period, assessee was to transfer the said infrastructure facility to the Government of Madhya Pradesh free of charge. In consideration of developing, constructing, maintaining the facility for a specified period and thereafter transferring it to the Government of Madhya Pradesh free of charge, assessee was granted a Right to collect Toll' from the motorists using the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 falling within the purview of section 32(1) (ii) of the Act." 22. The Tribunal in ACIT Vs. West Gujarat Expressway Ltd. (supra) further referring to the ratio laid down by the Hon‟ble Bombay High Court held that since the assessee is not the owner of toll road, but has been given the right to develop, maintain and operate the toll road and to further collect the toll for the specified period, then this right is an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty 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 denied by the Assessing Officer as the appeals were pending against the order of Tribunal is not correct approach. Further, the CIT(A) has relied on the CBDT circular dated 23.04.2014, wherein the CBDT has laid down that instead of depreciation on the cost incurred by the assessee, the said cost should be amortized over a specified period and allowed in the hands of assessee. However, the expenditure incurred by the assessee is not reven ..... X X X X Extracts X X X X X X X X Extracts X X X X
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