TaxTMI 
TaxTMI 
2015 (5) TMI 305
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....siness activity of the assessee company. 2 On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition made by the Assessing Officer on account of depreciation on road of Rs. 40, 12,50,880/- without appreciating the facts that the toll road does not from a part of specified assets and the assessee was not the owner of toll roads. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored. The appellant craves leave to amend, or alter any grounds or add a new ground, which may be necessary." Ground No.1: 3. The issue raised vide ground No.1 is as to whether the interest income of Rs. 1,34,59,582/- is to be assessed under the head "Income from other sources" or as "Business income" of the assessee. The Assessing Officer (hereinafter referred to as the AO) found that the interest income of Rs. 1,34,59,582/- derived from bank deposits had been included by the assessee into its business income. He, however, observed that since the said income was not derived from business activity of the assessee company, hence the same was taxable under the head "Income from other sour....
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....e Ld. CIT(A), the Revenue has come in appeal on this issue before us. 5. We have heard the rival contentions of the Ld. Representatives of both the parties and have also gone through the records. A perusal of the above reproduced findings of the Ld. CIT(A) on this issue reveals that the Ld. CIT(A) has allowed the claim of the assessee directing that the interest income be treated as business income relying upon his own findings given in the earlier assessment year 2007-08 for which he had relied upon the decision of the Hon'ble Bombay High Court in the case of "CIT vs. Lok Holdings" 308 ITR 356. The Ld. A.R. of the assessee has stressed that the said findings of the Ld. CIT(A) given in relation to assessment year 2007-08 have been further upheld by the Tribunal vide order dated 27.02.13 passed in ITA No.1284/M/2011 & 14/M/2011. 6. We have perused the said order dated 27.02.1 3(supra) of the Tribunal. The relevant issue has been taken by the Tribunal vide para 21 of the said order. The Tribunal has allowed the claim of the assessee in view of the findings given while adjudicating the another issue relating to some other interest income of the assessee, the claim regarding trea....
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.... accepted as 'business income' in the earlier assessment years 2007-08 & 2008-09 by the Ld. CIT(A) which findings have been further upheld by the Tribunal vide orders dated 27.2.2013 for A.Y. 2007-08(supra) and order dated 5.4.2013 for A.Y. 2008-09. From the above submissions of the assessee, it is apparent on the record that the interest income has been earned by the assessee on the security deposits with the bank as per the Common Loan Agreement as discussed above. The said interest income had been earned by the assessee out of business compulsions of deposits in the 'Debit Service Reserve Account', hence the said interest income is linked to the business activities of the assessee. The issue is covered with the decisions of the Tribunal in the own case of the assessee for earlier assessment years. Hence, the interest income of the assessee is ordered to be assessed as Business Income. Ground No.1 of the Revenue's appeal is therefore dismissed. Ground No.2 8. Ground No.2 is relating to the claim of depreciation on road amounting to Rs. 40,12,50,880/-. The AO noticed that the assessee had claimed depreciation on toll roads amounting to Rs. Rs. 40,12,50,880/-. When asked to e....
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....assessee. He further observed that the toll roads did not form part of the specified assets covered by appendix-1 and rule 5 of the I.T. Rules. He therefore denied the claim of depreciation on the toll road. The AO also rejected the alternate claim of the assessee that the toll roads be treated as plant and machinery. He, however, observed that since it was a fact that the assessee company had incurred huge expenditure on the said road which otherwise could not be treated as Revenue's expenditure as the same had 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 A.Y. 2007-08 and 2008-09 also. 10. In appeal, the Ld. CIT(A) allowed the claim of depreciation on toll road observing as under: "6.1 I have considered the facts of the case. This issue was also there in A.Y. 2007-08 and 2008-09. In the appeal orders, the undersigned held that the appellant was entitled for depreciation on toll road. The undersigned also held that the depreciation allowable was at the rate of considering the toll road as part of building. The appellant's claim of allo....
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....in the case of 'Gujarat Road and Infrastructure Company Ltd.' of the Ahmedabad bench of Tribunal in ITA Nos.1450 to 1453/Ahd/2008. However, thereafter we came across the decision of the Hon'ble Jurisdictional High Court of Bombay in the case of "North Karnataka Expressway Ltd. vs. CIT" in ITA No.499/2012 decided on 14.10.14. The Hon'ble Bombay High Court, in the said case, has categorically held that in view of the provisions of National Highway Act, 1956 and National Highway Authorities of India Act, 1988, the ownership of the roads vests in the Union of India and further that the above said Acts are special statutes. It has been observed by the Hon'ble high Court that when the concept of ownership and vesting therein is of absolute nature that cannot be said to be in any manner restricted or curtailed by a general definition or understanding of the term owner as appearing in the Income Tax Act, 1961 and under such circumstances, the assessee's claim that he was the owner of the toll road was not acceptable and as such he was not entitled to claim the depreciation on the said road claiming itself to be owner of the road. 13.1 In view of the above decision of the Hon'ble Juri....
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....ad is a capital expenditure and the assessee is the owner in terms of the above clause of the agreement entered into by the assessee with the NHAI and has all the rights to claim the tax depreciation on the toll road constructed and capitalized in the books. He has further contended that the matter referred to the Hon'ble Bombay High Court in the case of "North Karnataka Expressway Ltd. vs. CIT" (supra) was on the question of justifiability of reopening and reassessment by the commissioner under section 263 of the Act and that the High Court suo moto decided the issue relating to the allowability of depreciation on toll road, hence the same should not be taken as binding precedent. The Ld. A.R. has further contended that the Hon'ble Bombay High Court in the case of "North Karnataka Expressway Ltd. vs. CIT" (supra) has left open the issue of treating the toll road project as plant & machinery or of the claim of depreciation in relation to investment made under other categories of assets as mentioned under section 32 of the Act. If the assessee is not found entitled to claim the ownership of the road, claim of the assessee may also be considered being intangible asset as the assessee....
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....ssionaire shall be deemed to be acquired and owned by the concessionaire'." (emphasis supplied by us) 18. The Hon'ble Bombay High Court, however, after discussing the provisions of National Highway Act, 1956 and National Highway Authorities of India Act, 1988 and various case laws including that are strongly relied upon by the Ld. A.R. e.g. "Mysore Minerals Ltd. vs. CIT" reported in (1999) 239 ITR 775 SC, "CIT vs Podar Cement Pvt. Ltd. & others" reported in (1997) 226 ITR 625 SC and "CIT vs. Noida Toll Bridge Company Ltd." (Allahabad HC) (supra), has held that the national highways vest in the Union of India and if the government for the purpose of development and maintenance of the whole or any part of the national highways enters into an agreement with private parties or that merely because the national highway is built, maintained, managed and operated by private entities, in no way affects the vesting of the national highway in the Union and that does not dilute or take away the ownership of the highway or its vesting in the Union. After discussing the various decisions of the Hon'ble Supreme Court and of the Hon'ble High Courts, the contention of the assessee in that cas....
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....ble Bombay High Court further, in para 47 of the said order, has observed that the assessee can definitely claim depreciation on the investments. He has definitely invested in the projects of construction development and maintenance of the National Highways and such of the assets in the form of building, plant & machinery etc. The claim for depreciation can be validly raised and granted. That the Hon'ble High Court in the said case was only concerned with the claim on the land or a road itself. Further, in concluding para 52 of the order, the Hon'ble Bombay High Court has categorically clarified that the assessee's claim for depreciation in respect of the building, plant & machinery and falling within the purview of sub section (1) of section 32 of the Income Tax Act, 1961, if considered and granted, shall not be affected by the decision of the Hon'ble Bombay High Court. 20. A careful reading of the entire decision of the Hon'ble Bombay High Court and in the light of the various observations made in judgment as discussed above, it is very clear that the Hon'ble Bombay High Court was concerned about the issue as to whether the assessee can claim itself as the owner of the toll ro....
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....dinate authority may have in the matter. An assessee is entitled to raise not merely additional legal submissions before the appellate authorities but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised. It cannot, however, be said that they have no jurisdiction to consider the same. The appellate authorities have jurisdiction to deal not merely with additional grounds which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed but could not have been raised at that stage. The words 'could not have been' raised must be construed liberally and not strictly. It is open to the assessee to claim a deduction before the appellate authority which could not have been claimed before the AO. The Hon'ble Bombay High Court has further observed that the decision of Hon'ble Supreme Court in the case of 'Goetze (India) Limited v. CIT' (2006) 157 Taxman 1, regarding the restriction of making the claim through a revised return was limited to the powers of the Assessing Authority and the said judgment does ....
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....ion the deduction is to be allowed to the assessee. The Hon'ble Jurisdiction High Court of Bombay in the case of "Balmukund Acharya vs. DCIT" reported in (2009) 221 CTR 440 (Bom.) has held that the Hon'ble Apex Court and the various High Courts have ruled that the authorities under the Act are under obligation to act in accordance with law. Tax can be collected only as provided under the Act. If the assessee, under a mistake, misconception or on not being properly instructed is over assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes dues are collected. While holding so, the Hon'ble Bombay High Court has relied upon the various decisions e.g. Koshti vs. CIT (2005) 193 CTR (Guj) 518 : (2005) 276 ITR 165 (Guj), C.P.A. Yoosuf vs. ITO (1970) 77 ITR 237 (Ker.), CIT vs. Bharat General Reinsurance Co. Ltd. (1971) 81 ITR 303 (Del), CIT vs. Archana R. Dhanwatey (1981) 24 CTR (Bom) 142 : (1982) 136 ITR 355 (Bom). In view of the above discussed factual and legal position, we have no hesitation to hold that the assessee is entitled to put his alternate claim that the deduction allowable to him may be considered as allowable as depreciatio....
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....of the circular reveals that it is not disputed even by the Revenue Authorities that in lieu of the investments made in the project, the assessee has been given right/license to collect the toll. It has also been specifically mentioned that it brings an enduring benefit in the form of right to the assessee. Having admitted the above position by the Revenue, now the question to be considered is whether any depreciation is allowable on such a right? 26. As per section 32(1)(ii) depreciation is allowable on intangible assets like licenses, franchises or any other business or similar commercial rights of similar nature. The relevant part of the section for the sake of convenience is reproduced as under: "Depreciation. 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 following deductions shall be allowed - ] ......
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....e order of the Tribunal dated 29.04.2013 (supra) is relevant :- "7. Before us, it was a common point between the parties that the impugned issue has been adjudicated in favour of the assessee in the following decisions of the Tribunal:- i) Ashoka Buildcon Ltd. in ITA.No.1302/PN/09 dated 20.03.2012. ii) M/s. Kalyan Toll Infrastructure Ltd. in ITA.Nos.201 & 247/Ind/2008 dated 14.12.2010. iii)Dimension Construction Pvt. Ltd. in 1TA.No.222, 223, 233 & 857/PN/2009 dated 18.03.2011. iv)Ashoka Info (P) Ltd. (supra) v) Reliance Ports and Terminals Ltd. (supra). 8. The Ld. CIT(DR) appearing for the Revenue, has submitted that the 'intangible assets' eligible for depreciation in section 32(1)(ii) of the Act, are only those which are owned by the assessee and have been acquired after spending money. In the case of the assessee, by way of an agreement, assessee was awarded a work to construct a road by using own funds and the expenditure incurred was allowed to be reimbursed by permitting the assessee a concession to collect toll/fees from the motorists using the road. Therefore, it could not be said that such a right was within the purview of section 32(1)(ii) of ....
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....So however, the plea of the Ld. DR before us is to the effect that the impugned right is not of the nature referred to in section 32(1)(ii) of the Act for the reason that the agreement with the Government of Madhya Pradesh only allowed the assessee to recover the costs incurred for constructing the road facility whereas section 32(1)(i1) of the Act required that the assets mentioned therein should be acquired by the assessee after spending money. The said argument in our view is factually and legally misplaced. Factually speaking, it is wrong to say that impugned right acquired by the assessee was without incurrence of any cost. In fact, it is quite evident that assessee got the right to collect toll for the specified period only after incurring expenditure through its own resources on development, construction and maintenance of the infrastructure facility. Secondly, section 32(1)(i1) permits allowance of depreciation on assets specified therein being 'intangible assets' which are wholly or partly owned by the assessee and used for the purposes of its business. The aforesaid condition is fully satisfied by the assessee and therefore considered in the aforesaid perspective ....
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....en to the assessee in lieu of the investments made and that such a right brings to the assessee an enduring benefit. The investments made under such circumstances cannot be said to be of revenue in nature but, as discussed above, are of capital in nature. The assessee, thus, is entitled to claim depreciation on such type of capital asset. 32. In view of our above findings, this ground of the Revenue is hereby dismissed but on a different footing as discussed above and in terms of our observations made above. 33. Now we take up the assessee's appeal bearing ITA No.6244/M/2012. ITA No.6244/M/2012 34. The assessee in its appeal has taken the following grounds of appeal: 1. On the facts and circumstances of the case the Learned Commissioner of Income Tax has erred in concluding that the "Toll Road" does not fall under the category of "plant & machinery". The Learned Commissioner of Income tax (Appeals) has erred in granting the depreciation on the toll road treating as "building". The appellant claims that depreciation on the toll road be granted treating the same as plant and machinery. 2. On the facts & circumstances of the case the appellant prays that the deprecia....
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....capitalized in A.Y. 2009-10, the assessee had claimed 1/5th of the expense incurred as deduction under section 35D of the Act. He has further submitted that the said additional share capital raised by way of issuance of Redeemable Optionally Convertible Cumulative Participating Preference Shares (ROCCPPS) and Unsecured Non Convertible Debentures was used by the company in connection with the extension of the undertaking. While inviting our attention to the provisions of section 35D, he has submitted that any expenditure incurred by the Indian company after commencement of its business in connection with the extension of its undertaking or in connection with setting up of a new unit is liable as a deduction. He has claimed that in the return of income for the year under consideration for A.Y. 2009-10, the assessee has claimed 1/5th of the total expenditure of Rs. 43,22,000/- on account of increase in authorized share capital amounting to Rs. 8,64,400/-. He has relied upon the decision of the co-ordinate Chennai bench of the Tribunal in the case of "M/s. Chiranjeevi Wind Energy vs. ACIT" in ITA No.342/MDS/2013 vide order dated 21.10.13, wherein, in relation to the issue of increase i....
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....ative expenses as well as consultancy and legal charges incurred towards private placement of shares." 39. The Ld. AR of the assessee has brought our attention to page 86 of the paper book filed with the appeal papers and has contended that as per the bifurcation/details provided, the expenses were incurred towards stamp duty and ROC registration fees for increase in authorized capital. The said expenditure was in the shape of legal/statutory registration fees and thus qualify for deduction either under clause(b) or sub clause (iii) of clause (c) of section 35D(2). He has further submitted that as per clause (d) to section 35D(2): 'such other items of expenditure not being expenditure eligible for any allowance on deduction under any other provisions of the Act is also allowable as deduction under this section'. He, therefore, has contended that any expenditure which has not been specifically mention under the other clauses of section 35D, will still be eligible for deduction, if the same has been incurred in relation to commencement of business or in connection with the expansion of the industrial undertaking, if otherwise not eligible for any allowance or deduction under any o....