TaxTMI 
TaxTMI 
TaxTMI 
2017 (12) TMI 578
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....ontract basis by NECL, the holding company of the assessee. NECL completed the construction during the year 2002-03 and started collecting toll fee. It has shown it as a capital asset in its balance sheet and it was claiming depreciation from year to year, which was allowed by the department. 3. Since the assessee company is a wholly owned subsidiary of NECL and it was incorporated as a special purpose vehicle for the purpose of effective administration and management of the said bridge, NECL decided to transfer the right over BOT asset to the assessee and permitted them to operate, maintain and collect toll, vide a resolution passed in the meeting of its Board of Directors held on 31.3.2006. The Directors of assessee company also have accepted the resolution passed by NECL. 4. Since the assessee company owns a right over BOT asset during the previous year relevant to the assessment year 2007-08, it claimed depreciation on the toll bridge, u/s 32(1) of the Income Tax Act, 1961 (hereinafter called as 'the Act'). Since the assessee company is not the owner of the asset (toll bridge) but claimed depreciation on it, the A.O. was of the opinion that the income chargeable to ta....
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....s owner of the bridge so as to claim depreciation u/s 32 of the Act. 6. The claim of depreciation was based upon a decision of the ITAT, Hyderabad bench, wherein, under identical circumstances, the ITAT, Hyderabad bench declared that depreciation is allowable to the assessee, which is now managing the toll bridge. 7. The A.O. had taken into consideration the clauses of BOT agreement entered into with the owner of asset to highlight that the ownership of the land together with the bridge shall vest with the Government and the enterprise cannot impose any restrictions whatsoever in this regard. Assessee can only collect toll fee for a period of 15 years from the date of its operation and there after, it has to hand over the asset to the Government of Andhra Pradesh free of cost. Therefore, depreciation claimed u/s 32 of the Act was not accepted by the A.O. Though the Ld. Counsel relied upon the decision in the case of NECL (ITA No.1050 to 1053/Hyd/2009), the A.O. distinguished the decision on the ground that the department has not accepted the decision of ITAT and filed a reference appeal before the Hon'ble High Court of Andhra Pradesh and till reaches finality and the matter needs....
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....oration; in fact under the National Highways Act, 1956, the Central Government can issue a notification from time to time to entrust the National Highway Authority, the job of laying down the roads either on their own or through any agency. Therefore, at best, the National High way vesting in the Union may vest any such authority in terms of notification u/s 11 of the National Highways Act but merely because the Central Government or an authority causes development and maintenance of the National Highway by involving a private entity or private party does not mean that the said private party can enjoy or claim the rights of the Central Government. The Court also observed that the Hon'ble Allahabad High Court in the case of Noida Toll Bridge Company 213 Taxmann 333 has not properly appreciated the matter and thus, the Hon'ble Bombay High Court did not follow the said judgement. In this regard, the Hon'ble Bombay High Court observed as under: "50. None of the above material was placed before the Division Bench of Allahabad High Court which decided CIT v. Noida Toll Bridge Co. Ltd. [2013] 213 Taxman 333/30 taxmann.com207. With greatest respect, the conclusion of the Division Bench r....
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....angible asset; since the right is vested in the assessee to build, operate and maintain assessee is entitled to claim depreciation. Though he sought to distinguish the decision of the Hon'ble Bombay High Court on the ground that the issue was limited to the applicability of section 32 of the Act, nothing specific was pointed out as to how the judgement is distinguishable. The Ld. Counsel has mainly focused on the point that it is an intangible asset in the form of toll bridge project and it would come within the expression "any other business or commercial right of similar nature". He also pointed out that the claim of the assessee is also supported by the circular issued by CBDT (Circular No.9/2014 dated 23.4.2014), wherein the Central Board virtually accepted that it is a capital expenditure on which the assessee is entitled to the claim of amortisation. In the said circular, it was mentioned that in a case where an assessee claimed any deduction out of initial cost of development of infrastructure facility in the earlier years, the total deductions claimed in the assessment years under consideration may be deducted from the initial cost of the project and the cost so reduced sha....