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TMI Blog2024 (10) TMI 739X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt on the issue under consideration before us, is binding on us in the absence of any contrary decision by any other Hon ble High Court including the Hon ble Jurisdictional High Court. Further, the decision in L T Infrastructure Development Projects Limited (supra) has been rendered by a forum higher in the judicial hierarchy as compared to the decision in DCIT v/s Progressive Constructions Ltd [ 2017 (3) TMI 1167 - ITAT HYDERABAD] rendered by the Special Bench of the Tribunal on this issue. Therefore, we are of the considered view that the learned CIT(A) correctly denied the claim of depreciation by the assessee on the right to collect toll on the roads developed by it on a BOT basis - claim of depreciation by treating the road as a tangible asset, has already been found to be covered against the assessee by the decisions of the Hon ble Jurisdictional High Court. Decided against assessee. - Shri Amarjit Singh, Accountant Member And Shri Sandeep Singh Karhail, Judicial Member For the Assessee : Shri Bhupal Rapelli, Shri Niranjan Govindekar For the Revenue : Shri Savya Sachi Kumar, Shri Biswanath Das ORDER PER SANDEEP SINGH KARHAIL, J.M. The present appeals have been filed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ground No.1.1 1.2, as an alternate claim, the Appellant prays that if depreciation is not allowed under the category of intangible asset then the depreciation may be granted treating the said Project Road under the category of plant and machinery @ 15%. The appellant prays that the depreciation may be allowed @ 15% at Rs. 1,52,56,83,533/-. 1.3) Without prejudice to the Ground No. 1.1 Ground No. 1.3, as an alternate claim, the Appellant prays that if the road is not treated under the category of plant and machinery or intangible assets for purpose of granting depreciation then the depreciation @ 10% may be granted treating the said road under the category of building . The appellant prays that the depreciation may be allowed @10% at Rs. 101,71,08,576/-. 1.4) Without prejudice to Ground No.1.1 to Ground No. 1.4, on the facts and in the circumstances of the case and in law, the Appellant prays that if the Project road is not treated under the category of Plant Machinery or Building or Intangible assets for the purpose of granting depreciation under section 32 then the entire cost incurred for construction of Project Road should be allowed as revenue expenditure. The appellant pray ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement, the AO held that after the lease term of 18 years, the cost of the asset will stand recovered by the assessee and assets will be transferred to the State Government. Therefore, the AO held that the depreciation claimed by the assessee is not admissible under section 32 of the Act. Accordingly, the AO disallowed the depreciation claim of ₹ 152,56,62,864 made by the assessee during the assessment year 2013-14. Further, the AO held that once the ownership itself is held to be not available with the assessee, the alternative claim regarding the treatment of the toll roads as plant and machinery becomes infructuous. However, the AO allowed the benefit of amortisation for the period of the concession agreement and allowed 1/18 th portion of the cost to be deferred revenue expenditure which works out to ₹ 56,50,60,320. 6. The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee and following the decision of the Hon ble Jurisdictional High Court in North Karnataka Expressway Ltd v/s CIT, reported in 372 ITR 145, and CIT v/s West Gujarat Expressway Ltd, reported in 82 taxmann.com 224, held that since the assessee is constructing a road on BOT b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed by the lower authorities and submitted that the decision of the Hon ble Jurisdictional High Court and Hon ble Madras High Court cited supra are squarely applicable to the present case. 9. We have considered the submissions and judgments/decisions relied on by both sides as well as perused the material available on record. In the present case, the assessee was incorporated as a Special Purpose Vehicle under the Companies Act, 1956 on 19/03/2009. The assessee entered into a Concession Agreement with the National Highway Authority of India ( NHAI ) on 08/10/2009 and the appointed date was 01/08/2010. Under the Concession Agreement, which forms part of the paper book from pages 96-223, the project was awarded by NHAI on a design, build, finance, operate and transfer annuity basis to the assessee. Under the said agreement, NHAI granted the assessee the right to investigate, study, design, engineer, produce, finance, construct, operate and maintain the project facilities for a period of 18 years commencing from the appointed date. Under the agreement, the assessee was required to bear and pay all costs, expenses and charges in connection with or incidental to the performance of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation is allowable on toll roads by considering the same as tangible assets, as this issue has been decided against the taxpayer by the Hon ble Jurisdictional High Court. 13. However, in the alternative, it is the plea of the assessee that since it has acquired the right to operate the project and collect the toll charges, such right acquired is a valuable business or commercial right through which it is going to recover the cost incurred and the said right is an intangible asset entitled to depreciation @25%. 14. Before proceeding further, it is pertinent to note the provisions of the Act which are relevant for deciding the issue at hand. Section 32 of the Act deals with the grant of depreciation in respect of tangible and intangible assets and the same reads as follows: 32. (1) In respect of depreciation of (i) buildings, machinery, plant or furniture, being tangible assets; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, 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 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' would fall under the expression any other business or commercial rights of similar nature . Thus, as could be seen, even though, 'goodwill' is not one of the specifically identifiable assets preceding the expressing any other business or commercial rights of similar nature , however, the Hon'ble Supreme Court held that 'goodwill' will come within the expression any other business or commercial rights of similar nature . Therefore, the contention of the learned Senior Standing Counsel that to come within the expression any other business or commercial rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Government of India has given rise to an intangible asset as defined under Explanation 3(b) r/w section 32(1)(ii) of the Act. Hence, assessee is eligible to claim depreciation on such asset at the specified rate. 17. The learned AR also relied upon the decisions of the Hon ble Supreme Court in Smifs Securities Ltd (supra) and Techno Shares and Stocks Ltd (supra) to support the submission that while interpreting the term any other business or commercial rights of similar nature principle of ejusdem generis should be applied and thus the rights as referred to in the term any other business or commercial rights of similar nature should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rat were for the above mentioned periods. 45. The concept of a BOT Agreement was introduced to increase private public participation in road projects. The arrangements allowed such infrastructure companies to collect toll from the vehicles plying on the roads and bridges laid and developed by them under the BOT Scheme as consideration for developing the transport infrastructure. 46. The respective assessees appear to have capitalized the cost incurred in their books of accounts. The capitalized cost by was also amortized in their Book of Account. 47. However, for the purpose of Income Tax, the respective assessees claimed depreciation at 25% as plants under Section 32 of the Income Tax Act, 1961 read with Rule 5 of the Income Tax Rules, 1962. 19. From the perusal of the aforesaid decision, we find that the Hon ble Madras High Court, inter-alia, following the decision of the Hon ble Bombay High Court inNorth Karnataka Expressway Ltd (supra) held that the toll bridge and the toll roads are not tangible assets of the taxpayer in terms of Explanation-3(a) to section 32(1)(ii) of the Act. Further, the Hon ble Madras High Court also rejected the plea that the taxpayer acquired intangible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e duty of the Courts to give these words their plain and ordinary meaning. In our opinion, in the context of the object and the-mischief of the enactment there is no room for the application of the rule of ejusdem generis. Hence it follows that the vacancy as declared by the order impugned in this case, even though it may not be covered by the specific words used, is certainly covered by the legal import of the words or otherwise . 126. Therefore, it cannot be construed that the respective assessees had acquired intangible assets within the meaning of the definition in Explanation 3(b) to section 32 of the Income Tax Act, 1961 under the respective concessionaire agreement for the purpose of claiming depreciation. 127. By no stretch of imagination can it be construed that the respective assessees have been conferred upon any intangible assets under the concessionaire agreements for the purpose of the aforesaid provision. 20. From the perusal of the aforesaid findings of the Hon ble Madras High Court, it is evident that the Hon ble Court while deciding the issue against the taxpayer had applied the principle of noscitur a sociis instead of applying the principle of ejusdem generis, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) is the sole decision by any Hon ble High Court in the country on the issue as to whether depreciation is allowable on the right to collect toll on the roads developed by the assessee on BOT basis by considering the same as an intangible asset. We find that the Hon ble Jurisdictional High Court inCIT v. Smt. Godavaridevi Saraf, reported in [1978] 113 ITR 589 (Bom.),held that an authority like an Income-tax Tribunal acting anywhere in the country has to respect the law laid down by the High Court, though of a different State, so long as there is no contrary decision of any other High Court on that question. It was further held that until a contrary decision is given by any other competent High Court, which is binding on a Tribunal in the State of Bombay, it has to proceed on the footing that the law declared by the High Court, though of another State, is the final law of the land. 22. During the hearing, the learned AR placed reliance upon the decision of the Third Member Bench of the Tribunal in Kenel Oil and Exports Industries Ltd v/s JCIT, reported in [2009] 121 ITD 596 (Ahd-ITAT) (TM) to support his submission that the judgment of the non-jurisdictional High Court, though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to be better and that in certain circumstances the view which was favourable to the taxpayer should be adopted . Following this case the Ahmedabad Bench in ChandulalVenichand v. ITO [1991] 38 ITD 138, which was cited before me on behalf of the assessee, came to the conclusion that amongst the several decisions cited before it, the decision of the Patna High Court appeared to be better and followed it. The Bench also observed that incidentally it was also in favour of the assessee. The Tribunal did not apply the rule that if different views are expressed on an issue the view that is favourable to the assessee should be adopted. The view expressed by the Patna High Court appeared to the Tribunal to be the better of the different views expressed by different High Courts and was hence followed. 8. The other exception is where the judgment of the non-jurisdictional High Court, though the only judgment on the point, has been rendered without having been informed about certain statutory provisions that are directly relevant. A judgment rendered without noticing a previous binding precedent or a relevant statutory rule is considered to have been rendered 'per incuriam'. It is eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mited (supra) interpreted the term any other business or commercial rights of similar nature in Explanation 3(b) to section 32(1)(ii) of the Act by applying the principle of noscitur a sociis instead of applying the principle of ejusdem generis as directed to be followed by the Hon ble Supreme Court inSmifs Securities Ltd (supra) and Techno Shares and Stocks Ltd (supra). As noted by us in the foregoing paragraph, in both the decisions the issue before the Hon ble Supreme Court was not similar to the present case, which was considered by the Hon ble Madras High Court in L T Infrastructure Development Projects Limited (supra). Therefore, we are of the considered view that reliance placed by the learned AR on the decision of the Third Member Bench of the Tribunal in Kenel Oil and Exports Industries Ltd (supra) is completely misplaced. 24. Therefore, in light of the detailed analysis of case law relied upon by both sides in the forgoing paragraphs, we are of the considered view that the decision of the Hon ble Madras High Court in L T Infrastructure Development Projects Limited (supra), being the sole decision by any Hon ble High Court on the issue under consideration before us, is bin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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