TaxTMI 
TaxTMI 
2017 (6) TMI 237
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....le under the head Business Income and not Income from other sources." 3. At the outset, the learned Counsel for the assessee stated that immediately preceding year i.e. AY 2009-10, the Tribunal in Assessee's own case in ITA No. 5904/Mum/2012 dated 15-04-2015 on the very same issue dismissed Revenue's appeal by holding that the interest income earned by assessee on the security deposits with the bank as per the common loan agreement is to be assessed as income from profits and gains of business or profession and not under the head income from other sources. The Tribunal in Para 7 of the order held as under: - "7. The ld. AR of the assessee has further submitted that the assessee has entered into an agreement dated 22.3.2005 with 'National Highways Authority of India (in short NHAI) vide which the assessee has been granted rights/license to collect toll for the period of 20 years for up gradation, operation, maintenance and implementation of Jetpur- Rajkot Road Project. The said project has been assigned to the assessee as a concessionaire on 'Built-Operate-Transfer (BOT) basis. The Ld. AR of the assessee has further brought our attention to the 'Common Loan Agreement' dated 20....
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....hold the order of CIT(A) and this issue of Revenue's appeal is dismissed. 5. The next issue in this appeal of Revenue's appeal is against the order of CIT(A) deleting the disallowance of claim of depreciation on Toll Road. For this Revenue has raised following grounds: - "2. 'On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating fact that the claim of depreciation on toll road amounting to Rs. 34,19,24,605/- is not allowable as the assessee is not the owner of that asset and that the conditions laid down in section 32 are not being fulfilled. 2.1 "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating fact that the claim of depreciation on toll road is not allowable since the assessee constructed and maintained the toll road on Build, Operate and Transfer (BOT) basis. 2.2 "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the claim of depreciation on toll road under the head Plant and Machinery to the extent of Rs. 16,08,78,657/- " 2.3 "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) in allowing....
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....f the order of the Hon'ble Bombay High Court (supra). The relevant part of the order for the sake of convenience is reproduced as under: "8] The appellant claimed that it was the owner of the toll road and the entire cost incurred for construction thereof was capitalized by the Appellant in its books in the assessment year 2005-06 during which the construction of the toll road was completed. As the assessment year under consideration was the first year when the road became operational, the Appellant claimed Depreciation of Rs. 59.92 crores at the rate of 10% on the capitalized cost of the toll road. The Appellant also filed necessary details of the claim of depreciation and a note was appended to the depreciation schedule stating that though the Appellant was entitled to higher claim of depreciation on toll road, the claim is made at the rate of 10%. The right to claim higher depreciation is reserved. The Appellant relied upon the standard concession document of the National Highway Authority of India and the clause therein that 'for the purpose of claiming tax depreciation, the property representing the capital investment made by the concessionaire shall be deemed to be a....
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....ourt in para 39 of the decision (supra) has observed that as per the provisions of National Highway Act, 1956 and National Highway Authorities of India Act, 1988, the ownership of the toll road vests in Union, however, the term owner as appearing in the Income Tax Act, 1961 has been defined widely and broadly for the purpose of the provisions of the Income Tax Act so as not to allow anybody to escape the provisions thereof by urging that he has a limited right or which is not akin to ownership, therefore his income should not be brought to tax; Similarly, if he can claim any deductions from his income which is comprising of profit and gain from his business, then, that deduction can be availed by him. It is for that limited purpose that the term 'onwer' is defined in this manner in Income Tax Act, 1961. The above observations of the Hon'ble Bombay High Court reveal that for the purpose of claiming deduction under Income Tax Act, the term 'owner' as defined under the Income Tax Act can be looked into. However, that cannot control, leave alone or overreach the National Highway Act, 1956 or the National Highway Authorities of India Act, 1988. The Hon'ble Bombay High Court further, in ....
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....et or treating the project as plant & machinery? 22. We may observe that the Hon'ble Bombay High Court in the case of 'Pruthvi Brokers & Shareholders Pvt. Ltd.' (supra), while relying upon the various decisions of the Hon'ble Supreme Court and other Hon'ble High Courts, has held that even if a claim is not made before the AO it can be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim is not barred. The Hon'ble Bombay High Court while relying upon the decision of the Hon'ble Supreme Court in the case of 'Jute Corporation of India Limited vs. CIT' 1991 Supp (2) SCC 744 = (1991) 187 ITR 688 has observed that the power of the Appellate Commissioner is coterminous with that of the Income Tax Officer and an appellate authority while hearing appeal against the order of the subordinate authority, has all the powers which the original authority may have in deciding the questions before it, subject to the restrictions or limitations, if any, prescribed by statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the m....
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.... this respect. The claim of deduction has been very much put by the assessee in the return of income but wrongly treating itself as owner of the road which claim as observed above was under bonafide belief and in view of the settled legal position as was there at the time of putting the claim. Even the AO has also observed in the assessment order that it is a fact that the assessee company has incurred huge expenditure on the said project which cannot be treated as revenue expenditure allowable in one year as the same has 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 the A.Y. 2007-08 and 2008-09. It is also a fact that the said amortization of the expenses has not been accepted by the Tribunal and the assessee in the earlier assessment years has been granted deduction as depreciation treating the road as a capital asset. 23. In view of the above facts, it is not disputed or contested by the Revenue that the assessee is not entitled to any deduction. The only issue in dispute is as to under what head/provision the deduction is to be allowed....
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....n period. Further, expenditure incurred by the assessee on such BOT projects brings to it an enduring benefit in the form of right to collect the toll during the period of the agreement. Hon'ble Supreme Court in the case of Madras Industrial Investment Corporation Ltd. vs. CIT in 225 ITR 802 allowed spreading over of liability over a number of years on the ground that there was continuing benefit to the company over a period. Therefore, analogously, expenditure incurred on an infrastructure project for development of roads/highways under BOT agreement may be treated as having been made/incurred for the purposes of business or profession of the assessee and the same may be allowed to be spread during the tenure of concessionaire agreement." 25. Having discussed the above stated factual position, the CBDT has directed to treat the above expenditure as revenue expenditure and to amortize the same over the period of the agreement as allowable business expenditure. The assessee, however, has claimed that the same is a capital expenditure and it is entitled to deductions over the investments made as depreciation. A perusal of the above reproduced para 4 of the circular reveals that it....
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....ITA No.989/PN/2010 & ITA No.1105/PN/2010,wherein, the Tribunal while further relying upon another decision of the Co-ordinate Bench of the Tribunal in the case of 'Ashoka Infraways Pvt. Ltd. Vs. ACIT' in ITA No.185 & 186/PN/2012 dated 29.04.2013, has held in clear terms that the claim of the assessee for depreciation on "licence to collect toll" being an 'intangible asset' falling within the scope of section 32(1)(ii) of the Act is liable to be upheld. The relevant part of findings of the Tribunal for the sake of convenience is reproduced as under: "6. At the time of hearing, it was a common point between the parties that an identical issue has been considered by the Pune Bench of the Tribunal in the case of Ashoka Infraways Pvt. Ltd. vs. ACIT vide ITA Nos. 185 & 186/PN/2012 dated 29.04.2013. As per the Tribunal following the precedents by way of various decisions of different Benches of the Tribunal mentioned therein, the claim of the assessee for treating the 'License to collect Toll' as an intangible asset eligible for the claim of depreciation @ 25% as per Section 32(1)(ii) of the Act was justified. The following discussion in the order of the Tribunal dated 29....
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....pment, construction and maintenance of the infrastructure facility for a specified period was to be incurred by the assessee out of its own funds. Moreover, after the end of the specified period, assessee was to transfer the said infrastructure facility to the Government of Madhya Pradesh free of charge. In consideration of developing, constructing, maintaining the facility for a specified period and thereafter transferring it to the Government of Madhya Pradesh free of charge, assessee was granted a Right to collect Toll' from the motorists using the said infrastructure facility during the specified period. The said Right to collect the Toll' is emerging as a result of the costs incurred by the assessee on development, construction and maintenance of the infrastructure facility. Such a right has been adjudicated by the Tribunal in the aforesaid precedents to be in the nature of 'intangible asset' falling within the purview of section 32(1)(i/) of the Act and has been found eligible for claim of depreciation. No decision to the contrary has been cited by the Ld. DR before us and, therefore, we find no reasons to depart from the accepted position based on the aforesa....
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....e above reproduced findings of the Tribunal, we hold that the assessee is entitled to the claim of depreciation on the road to collect toll being an intangible asset falling within the purview of section 32(1) (ii) of the Act. 30. So far as the other alternative contention of the assessee that the project be treated as plant & machinery and the depreciation be accordingly allowed to it, we do not find that the said license of right to collect toll in any way falls in the definition of plant & machinery. As held by the Hon'ble Bombay High Court, even the assessee is not the owner of the toll road. The assessee has been given only the right to develop, maintain and operate the toll road and further to collect the toll for the specified period. This right as discussed above is an intangible asset falling under section 32(1)(ii) of the Act. 31. So far as the contention of the Revenue that the investment made by the assessee be treated as a revenue expenditure and be amortized for the period of the agreement, is concerned, we do not find any force in the same on the ground that not only the AO but also the CBDT in the circular (supra) as discussed above has admitted that the licen....
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.... respect of O&M grant either in earlier assessment year or in subsequent assessment year and NHAI has also not paid any interest to the appellant. The Ld. Commissioner of Income Tax (A) has erred in confirming the addition of Rs. 19,97,260/- ignoring the principal that there is no income on notional basis 11. Briefly stated facts are that during FY 2009-10 relevant to this AY 2010-11, the O & M grant of Rs. 6 crores were sanctioned to the assessee and out of this 6 crores, Rs. 3 crores were received by the assessee and the balance of Rs. 3 crores were outstanding as on 31-03-2010. The following are the details of receipts and instalments: - "O&M Grant amount Due Date Date of Receipt a) Rs. 1,50,00,000/- 30/06/2009 10/12/2009 b) Rs. 1,50,00,000/- 30/09/2009 10/12/2009 c) Rs. 1,50,00,000/- 31/12/2009 07/10/2010 d) Rs. 1,50,00,000/- 31/03/2010 07/10/2010 Actually, the assessee is entitled to receive O & M grant from FY 2008-09 and the outstanding amount as on 31-03-2009 was Rs. 16 crores and the said amount was actually received in FY 2009-10, the AO calculated interest from 01-04-2009 to the date of receipt of grants and th....
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....s to be rightfully receive as per the agreement entered into with NHAI, hence, this income has to be considered as income accrued to the appellant. In view of the detailed agreement, I consider that this interest income was offered as interest income and has been approved to the appellant, hence, this has to be offered as income in the return of income filed. The appellant has failed to offer this income, hence, I find no error in A.Os addition in the assessment order as income is accrued to the appellant. The appellant had submitted the working of interest calculation on O&M grant received of Rs. 46,60,274/- of FY 2009-10 in page 55 of paper book and interest calculation on O&M grant received of Rs. 19,97,260/- of FY 2010-11 in page 56 of the paper book. The A.O. is directed to verify the correct interest income which is accrued to the appellant and add the same to the total income of the appellant. In view of the above discussion A.Os view is upheld. However, A,O. is directed to verify the amount to be added. This ground of appeal is partly a11owed." Aggrieved, assessee preferred the appeal before Tribunal. 12. Before us, the learned Counsel for the assessee first of all dr....
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....horities. This would be contrary to the ratio laid down by the Bench of five Judges in Navnitlal C. Javeri's case (supra). In fact, State Bank of Travancore's case (supra) has already been distinguished in the case of Keshavji Ravji & Co. (supra) by a Bench of three Judges in a similar fashion. It is held only as laying down that a circular cannot alter the provisions of the Act. It, being in the nature of a concession, could always be prospectively withdrawn. In the present case, the circulars which have been in force are meant to ensure that while assessing the income accrued by way of interest on a 'sticky' loan, the notional interest which is transferred to a suspense account pertaining to doubtful loans would not be included in the income of the assessee, if for three years such interest is not actually received. The very fact that the assessee, although generally using a mercantile system of accounting, keeps such interest amounts in a suspense account and does not bring these amounts to the profit and loss account, goes to show that the assessee is following a mixed system of accounting by which such interest is included in its income only when it is actually....
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....s received in FY 2010-11 exactly on 07-10-2010, but assessee never received any interest on this amount from NHAI and NHAI never claimed any expense on interest on this amount. Although in Para 23.9 of the concession agreement recognized the interest payment but NHAI has never paid any interest on the balance amount. Under the provisions of the Act, the income which is received or which is accrued or deemed to accrue or income which arises or deemed to arise can only be chargeable to tax but no interest has accrued to the assessee or is actually received and this fact is evident that in FY 2010-11 the assessee received a sum of Rs. 3 crores only without any interest. It was also clarified by the assessee's Counsel during the course of hearing that there is no claim pending against NHAI as the income has not accrued to the assessee and do not have a right to receive this notional interest. 15. In this similar circumstances the Hon'ble Delhi High Court in the case of CIT vs. Asian Hotels Ltd. (2010) 323 ITR 490 (Del) has held considering the provisions of section 28 (iv) of the Act that the question of any notional interest on an interest free deposits being added to the interest ....
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....t, unless such Losses/Expenses are expressly or by necessary implication disallowed by the Act. Therefore, even applying the theory of Real Income, a debit which is expressly disallowed by Explanation to section 36(1)(vii), if claimed, has got to be added back to the total income of the assessee because the said Act seeks to tax the "real income" which is income computed according to ordinary commercial principles but subject to the provisions of the Income-tax Act. Under section 36(1)(vii) read with the Explanation, a "write off" is a condition for allowance. If "real profit" is to be computed one needs to take into account the concept of "write off" in contradistinction to the "provision for doubtful debt". Applicability of section 145 39. At the outset, we may state that in essence RBI Directions, 1998 are Prudential/Provisioning Norms issued by RBI under Chapter III-B of the RBI Act, 1934. These Norms deal essentially with Income Recognition. They force the NBFCs to disclose the amount of NPA in their financial accounts. They force the NBFCs to reflect "true and correct" profits. By virtue of section 45Q, an overriding effect is given to the Directions, 1998 vis-à-vis....