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TMI Blog2022 (9) TMI 810X X X X Extracts X X X X X X X X Extracts X X X X ..... - BOMBAY HIGH COURT] . AR has demonstrated the voluminous information in the paper book supporting the claim - Whereas, in the present case the depreciation@25% was claimed treating the toll rights as intangible Assets. We find the present facts in respect of claim of depreciation on toll rights are similar to earlier assessment year. Accordingly we follow the judicial precedence and set aside the order of the CIT(A) and direct the assessing officer to allow the claim of depreciation and allow the grounds of appeal in favour of the assessee. - ITA No. 3147/Mum/2019 - - - Dated:- 29-3-2022 - Shri Prashant Maharishi , Accountant Member And Shri Pavan Kumar Gadale , Judicial Member For the Appellant : Shri . K. Shivaram . AR For the Respondent : Shri Ajay K. Shrivastava . DR ORDER PER PAVAN KUMAR GADALE JM: The assessee has filed the appeal against the order of the Commissioner of Income Tax (Appeals)-14, Mumbai passed 143(3) and 250 of the Act. The assessee has raised the following grounds of appeal: 1.0. GROUND NO. 1: 1.1. The learned Commissioner of Income Tax (Appeals) - 14, Mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny is engaged in the business of construction, maintenance and toll road collections on build operate and transfer(BOT) basis.The assessee has filed the return of income for the A.Y 2013-14 on 25.09.2013 disclosing a total loss of Rs. 35,14,65,037/-and the return of income was processed u/s 143(1) of the Act. Subsequently, the case was selected for scrutiny and notice u/s 143(2) and 142(1) of the Act are issued. In compliance, the Ld. AR of the assessee appeared from time to time and submitted the details and the case was discussed. The Assessing officer(A.O) on perusal of the financial statements and the Profit and loss account found that the assessee has claimed depreciation @ 25% on the concessional rights toll 1 treating as intangible asset and the assessee is going to operate two lane High way project for a period of 12 years. The A.O. has issued a show cause notice for disallowance of depreciation claim and alternatively allow the amortization as in earlier year. The assessee has filed a letter dated 02.03.2016 referred at 5.2 of the assessment order explaining the nature of works, claim of depreciation on toll right and the facts in respect of earlier assessement years and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the A.Y 2012-13 is the first year were the asset was put to use and the assessee has claimed the depreciation u/s 32(1)(ii) of the Act treating as the intangible asset and the A.O has made the disallowance of depreciation, and on appeal, the CIT(A) has allowed the claim of the assessee. On further appeal filed by the revenue before the Hon ble Tribunal, the ITAT has dismissed the revenue appeal considering the decisions of jurisdictional Honble High Court of Bombay in the case of North Karnataka Express Highway Ltd vs. CIT 372 ITR 145 (Bom, HC) and CIT Vs. West Gujarat Expressway Ltd, 390 ITR 398 (BOM HC). The Ld. AR has demonstrated the voluminous information in the paper book supporting the claim. The Ld.DR relied on the judicial decision were the roads developed and maintained by the asseessee are eligible for depreciation@10% by considering the roads as Buildings. Whereas, in the present case the depreciation@25% was claimed treating the toll rights as intangible Assets. 7. We find the Hon ble Tribunal has dismissed the revenue appeal in ITA No. 7114/Mum/2016 CO No. 84/Mum/2018 for the A.Y 2011-12 and observed at page 16 Para 7 to 14, which is read as under: 7. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of North Karnataka Expressway Ltd. Vs. CIT10(2015) 272 ITR 145 (Bom). A perusal of the order reveals, that the Hon ble High Court had after exhaustively deliberating on the provisions of the National Highway Act, 1956, had therein observed, that though the Central Government as per Sec. 8-A of the National Highway Act, 1956 is empowered to enter into an 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, 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 which 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ructs a road on build, operate and transfer (BOT) basis on the land owned by the Government, can it claim depreciation on such toll road . We find that the Hon ble High Court had observed that though an Infrastructure Development company which had constructed a road on BOT basis on land owned by the Central Government, was not entitled to claim 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 asset 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 as to whether an Infrastructure Development Company which had constructed a road on BOT basis on land owned by the Central Government would be eligible to claim depreciation on such t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 05.04.2016), had confined its adjudication to the aforesaid two substantial questions of law which were raised by the revenue before it. Our aforesaid view is fortified by the order of a coordinate bench of the Tribunal, Mumbai in the case of Thiruvanthapuram Road Development Company Ltd. Vs. DCIT-14(3)(1), Mumbai [ITA NO. 622/Mum/2015, 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 s regards the entitlement of an Infrastructure Development company which 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure incurred for construction of the road on build, operate and transfer (BOT) basis, as a deferred revenue expenditure, the same could not have been amortized in terms of CBDT Circular No. 9 of 2014, dated, 23.04.2014. The observations of the Special bench of the Tribunal, which seizes the issue under consideration before us, are as under: 11. Undisputedly, for executing the project, assessee has incurred expenses of Rs.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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by such date should be the value of intangible asset which can alone be considered for depreciation under section 32(1)(ii) of the Act. We are afraid, we cannot accept the above argument of the learned Senior Standing Counsel. When the C.A. confers a right on the assessee to operate the project facility and collect toll charges over the concession period of 11 years and 7 months, the assessee can 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defined:- Where on person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful and such right does not amount to an easement or an interest in the property, the right is called a license. . 14. It has been the contention of the learned Senior Standing Counsel that as the term license 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-avis, the definition of license under the Indian Easements Act, 1882, it would be clear tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the project and collect toll charges. Therefore, such right acquired by the assessee is a valuable business or commercial right because through such means, the assessee is going to recoup not only the cost incurred in executing the project but also with some amount of profit. Therefore, there cannot be any dispute that the right to operate the project facility and collect toll charges therefrom in lieu of the expenditure incurred in executing the project 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to exhaustively enumerate. The Hon'ble Court, therefore observed, in the circumstances the nature of business or commercial right cannot be restricted only to knowhow, patents, trademarks, copyrights, licence or franchise. The Court observed, any intangible assets which are invaluable and result in smoothly carrying on the business as part of the tool of the trade of the assessee would come within the expression any other business or commercial right of similar nature . 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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts i.e right to collect toll , being in conformity with the mandate of law, is found to be in order. We thus concur with the view taken by the CIT(A), and not finding any infirmity in his order, uphold the same. 11. The appeal filed by the revenue is dismissed. C.O. No. 84/Mum/2018 A.Y. 2011-12 12. 12 As we have dismissed the appeal of the revenue, therefore, finding no reason to advert the cross objections filed by the assessee , which are admittedly stated by the ld. A.R to be supportive in nature, we dismiss the same as having been rendered as academic in nature. 13. The Cross Objections filed by the assessee are dismissed in terms of our aforesaid observations. 14. The appeal filed by the revenue and the cross objections filed by the assessee , are both dismissed in terms of our aforesaid observations. 8. We find the present facts in respect of claim of depreciation on toll rights are similar to earlier assessment year. Accordingly we follow the judicial precedence and set aside the order of the CIT(A) and direct the assessing officer to allow the claim of depreciation and allow the grounds of appeal in favour of the assessee. 9. In the res ..... X X X X Extracts X X X X X X X X Extracts X X X X
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