Tribunal grants partial appeal, allows depreciation on roads as buildings, rejects revenue expenditure claim

The Tribunal allowed the Assessee's appeal in part, directing the depreciation on roads as buildings in accordance with amended schedules. The alternative claim for expenditure as revenue was rejected, and the provision for doubtful debts disallowed, aligning with High Court precedent. The Assessee's contentions were partially upheld, with instructions to permit depreciation on roads as buildings.

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Issues Involved:
1. Depreciation on plant and machinery, specifically roads.
2. Classification of roads as plant and machinery or building.
3. Alternative claim for expenditure as revenue expenditure.
4. Provision for doubtful debts.

Issue-wise Detailed Analysis:

1. Depreciation on Plant and Machinery, Specifically Roads:
The primary issue was whether the Assessee was entitled to depreciation on roads constructed under a concession agreement with the Government of Tamil Nadu. The Assessee claimed depreciation amounting to Rs. 12,09,08,953/-, with Rs. 11,78,04,917/- attributed to roads. The Assessing Officer denied this claim, stating that roads did not figure in the depreciation schedule as plant and machinery, relying on the Supreme Court decision in Indore Municipal Corporation v. CIT, which held that roads are not buildings. The Assessee argued that roads should be considered plant and cited several judicial precedents, but the Assessing Officer remained unconvinced.

2. Classification of Roads as Plant and Machinery or Building:
The CIT(Appeals) upheld the Assessing Officer's decision, stating that the Assessee did not own the road, nor was it used for the Assessee's business purposes. The road was constructed on government land, and the Assessee merely collected tolls as compensation for construction expenses. The CIT(Appeals) found that the Assessee did not meet the basic requirements for depreciation under Section 32 of the Act and dismissed the Assessee's contentions. The Tribunal, however, examined the agreement and project details, noting that the project involved significant infrastructure development. Despite this, the Tribunal concluded that the road could not be considered a plant but directed that depreciation be allowed under the category of building, as subsequent amendments to the depreciation schedule included roads under buildings.

3. Alternative Claim for Expenditure as Revenue Expenditure:
The Assessee alternatively contended that the entire expenditure should be allowed as revenue expenditure, citing the Supreme Court decision in CIT v. Madras Auto Services Pvt. Ltd. The CIT(Appeals) dismissed this claim, noting that the facts of the cited case differed significantly from the Assessee's case. The Tribunal also rejected this claim, pointing out that the Assessee's expenditure on government land could not be treated as revenue expenditure under the amended provisions of the Act.

4. Provision for Doubtful Debts:
In a separate ground, the Assessee challenged the disallowance of a provision for doubtful debts amounting to Rs. 1,22,02,790/-. The CIT(Appeals) had relied on the jurisdictional High Court decision in DCIT v. Beardsell Ltd., which held that a doubtful debt could not be considered an ascertained liability and thus could not be excluded from book profits. The Tribunal upheld the CIT(Appeals)' decision, finding no error in the application of this precedent.

Conclusion:
The Tribunal concluded that the Assessee's capital expenditure on roads should be eligible for depreciation under the category of building, following the amended depreciation schedules. The Assessee's alternative claim for treating the expenditure as revenue expenditure was rejected. The provision for doubtful debts was also disallowed, consistent with jurisdictional High Court precedent. The appeals filed by the Assessee were partly allowed, with the direction to the Assessing Officer to allow depreciation on roads as buildings.

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