Tribunal affirms CIT(A)'s decisions on depreciation, maintenance, and interest converted to FITL.

The tribunal upheld the CIT(A)'s decisions, dismissing the Revenue's appeals on three issues: denial of depreciation claim, disallowance of provision for periodical maintenance, and disallowance of interest payment converted into FITL. The tribunal recognized the right to collect toll as an intangible asset, validated provisions for periodic maintenance based on contractual obligations, and deemed the conversion to FITL as constructive payment. The decisions were in line with established legal precedents and interpretations of the Income Tax Act, affirming the assessee's positions in all three matters.

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Issues Involved:
1. Denial of depreciation claim.
2. Disallowance of provision for periodical maintenance.
3. Disallowance of interest payment converted into Funded Interest Term Loans (FITL).

Issue-wise Detailed Analysis:

1. Denial of Depreciation Claim:
The Revenue's primary contention was the denial of the assessee's depreciation claims for the assessment years 2012-13 and 2013-14, amounting to Rs. 43,17,06,474/- and Rs. 1,41,73,68,447/- respectively. The Assessing Officer (AO) argued that the assessee, not being the owner of the road project, should have amortized the corresponding expenditure as per CBDT Circular No. 9/2014. The CIT(A) treated the assessee's depreciation claim as an intangible asset under Section 32(1)(ii) of the Income Tax Act, 1961, which was upheld by the ITAT. The tribunal referenced the Special Bench decision in M/s. Progressive Construction Ltd., which recognized the right to collect toll as an intangible asset. The tribunal concluded that the CBDT's circular did not negate the depreciation relief and affirmed the CIT(A)'s findings, rejecting the Revenue's grounds.

2. Disallowance of Provision for Periodical Maintenance:
The second issue involved the disallowance of Rs. 2,53,39,545/- and Rs. 3,54,98,306/- towards provision for periodical maintenance. The AO disallowed these amounts, arguing that the expenses were not incurred solely due to traffic in the fifth year but accumulated over five years. The CIT(A) reversed this disallowance, accepting the assessee's argument that the provision was based on the concession agreement with NHAI, which required periodic maintenance every five years. The tribunal upheld the CIT(A)'s decision, citing the Supreme Court's decision in Chainrup Sampatram Vs. CIT, which supports booking expenditure at the first sign of probability. The tribunal affirmed that the provision was based on a contractual obligation and not an estimation, thus allowing the assessee's claim.

3. Disallowance of Interest Payment Converted into FITL:
The third issue pertained to the disallowance of Rs. 21,35,00,000/- as interest payment converted into FITL. The AO invoked Section 43B, arguing that interest payments are allowable only on actual payment, not on conversion to FITL. The CIT(A) deleted the disallowance, reasoning that the conversion to FITL constituted constructive payment, as the financial institutions had agreed to convert the interest into a term loan. The tribunal upheld the CIT(A)'s decision, noting that the conversion to FITL was based on a contractual agreement and did not attract the actual payment requirement under Section 43B.

Conclusion:
The tribunal dismissed the Revenue's appeals, affirming the CIT(A)'s decisions on all three issues. The judgments emphasized the recognition of the right to collect toll as an intangible asset, the validity of provisions for periodic maintenance based on contractual obligations, and the constructive payment of interest through conversion to FITL. The tribunal's decisions were grounded in established legal precedents and interpretations of the Income Tax Act.

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