TaxTMI 
TaxTMI 
2021 (2) TMI 548
X X X X Extracts X X X X
X X X X Extracts X X X X
....iation as 'building'? And 2. Whether the Tribunal is correct in holding that the provisions of Section 14A read with Rule 8D will have no applicability if there is no exempt income received ?" 3. After hearing the submissions of the learned counsel on either side, we frame the following two other substantial questions of law also for consideration : "1. Whether the Tribunal is legally right in holding that the assessee is eligible for depreciation under Section 32(1)(ii) on lease hold rights obtained by the assessee for 99 years through lease agreement ? And 2. Whether the claim of depreciation on lease hold rights on land held by the assessee is allowable under Section 32(1)(ii) under the head 'intangible asset'?" 4. Accordingly, the substantial questions of law framed for consideration are renumbered as follows : "1. Whether the Tribunal was right in holding that roads developed and maintained by the assessee by agreement with the Government on the State/National Highway were eligible for depreciation as 'building'? 2. Whether the Tribunal is legally right in holding that the assessee is eligible for depreciation under Section 32(1)(ii) on leas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gment dated 07.7.2020, the appeals filed by the Revenue were allowed. 10. Rather, we had an occasion to consider a similar issue in the assessee's own case in TCA. No.485 of 2020 dated 05.1.2021, the relevant portions of which read thus : "8. We need not labour much to decide the substantial question of law framed, as identical issue was considered in the case of Commissioner of Income Tax, Chennai vs M/s.Celebrity Fashion Ltd. in T.C.A.No.26 of 2018 dated 21.09.2020. In the said appeal, which was filed by the Revenue, identical question of law was framed for consideration and the same was answered against the Revenue and in favour of the assessee on the following lines: "24. We had an occasion to consider a similar question in the case of CIT, Corporate Circle-3, Chennai Vs. Visual Graphics Computing Services India Pvt. Ltd. [TCA.No. 414 of 2018 dated 19.8.2020]. In the said appeal, question of law No.5, which was framed for consideration, was as to whether the Tribunal was right in holding that the provisions of Section 14A of the Act read with Rule 8D of the said Rules will have no applicability if there is no exempt income earned or received during the previous year th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... do not find any justifiable reason to take a different view and the legal position in the assessee's own case wholly covers the said question. Further, the decision in the case of M/s.Tamilnadu Industrial Development Corporation Limited does not render assistance to the case of the Revenue. Accordingly, substantial question of law No.4 is answered against the Revenue. 12. Next, we take up for consideration the issue pertaining to the claim for depreciation on the roads, which have been developed and maintained by the assessee pursuant to the agreement entered into with the State Government. 13. The assessee is a joint venture company formed by the Tamil Nadu Industrial Development Corporation Limited and the Tidel Park for creation of infrastructural facility such as road systems, highways, bridge system by bringing private resources in the development of the said projects. The assessee was granted right to implement the East Coast Road project. The assessee, while filing the return of income for the relevant assessment years, claimed depreciation at the rate of 15% on improvement to the IT Carridor (Road) considering the roads as 'plant and machinery'. 14. The Asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ased on the said submission, we have heard the matter on merits. 19. The learned Junior Standing Counsel appearing for the appellant - Revenue has pitched her case by placing strong reliance on the decision of the Bombay High Court in the case of North Karnataka Expressway Ltd. Vs. CIT [reported in (2014) 51 Taxmann.com 214]. It is submitted by the learned Junior Standing Counsel that when the assessee was engaged in the business of infrastructural development in execution of agreement with the National Highways Authority or as in the present case, with the State Government and had constructed a road on Build, Operate and Transfer (BOT) basis on the land owned by the Government, the assessee could not claim depreciation on the toll road so constructed and operated by treating it as a building under Section 32 of the Act. 20. The learned Junior Standing Counsel has also placed reliance on the decision of the High Court of Delhi in the case of Moradabad Toll Road Co. Ltd. Vs. ACIT [reported in (2014) 52 Taxmann. com 21] to support the proposition that toll road would not qualify as a plant so as to entitle the assessee a higher rate of depreciation. 21. In the instant case, the as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....his decision was rendered by the Court on 10.10.2017, which was much after the decision of the Bombay High Court in the case of North Karnataka Expressway Ltd., which was rendered on 14.10.2014. 25. In the decision of the Rajasthan High Court in the case of GVK Jaipur Expressway Ltd., the Court has taken into consideration all the decisions and more particularly the decisions of the (i) Delhi High Court in the case of Moradabad Toll Road Co. Ltd.; (ii) Allahabad High Court in the case of CIT Vs. Noida Toll Bridge Co. Ltd. [reported in (2013) 30 Taxmann.com 207]; (iii) Madras High Court in the case of CIT Vs. VGP Housing (P) Ltd [reported in (2016) 66 Taxmann.com 354]; (iv) Rajasthan High Court in the case of CIT Vs. Jawahar Kala Kendra [reported in (2014) 43 Taxmann.com 159]; and (v) Rajasthan High Court in the case of CIT Vs. Mohd. Bux Shokat Ali [reported in (2001) 118 Taxman 712], and it was held that while considering the issue as to whether the national highway was a road or not, one had to go by the common parlance of road where public at large had an access. As in the case on hand, the assessee therein was granted licence for construction, against which, they had....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tch of appeals, viz., 2009- 10, 2010-11, 2012-13 and 2013-14, the assessee had been granted a relief. 31. The issue would be as to whether the Tribunal was right in confirming the order passed by the Commissioner of Income Tax-III, Chennai dated 18.11.2013, granting the benefit of depreciation for the assessment year 2009-10 on the lease hold right obtained by the assessee from the SIPCOT. 32. The assessment for the years 2007-08 and 2008-09 was reopened by issuance of notice. One of the reasons for reopening the assessment was on the claim for depreciation amounting to Rs. 19,29,341/- on the lease hold right of Rs. 77,17,365/- for the assessment year 2007-08 and the claim for depreciation amounting to Rs. 14,47,006/- on the lease hold rights of Rs. 57,88,024/- for the assessment year 2008-09. 33. In the proposal to reopen, the Assessing Officer stated that a plain reading of Section 32 of the Act showed that to claim depreciation, the assessee must have owned, wholly or partly, the assets and should have used the same for the purpose of business of the assessee to be eligible for depreciation. The assessee was called upon to explain. By a common reply dated 25.6.2014, the asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... amount of lease premium paid in respect of such agreements should be amortized over the period of lease and only the amount pertaining to the relevant previous year should be allowed as deduction. Further, the assessee relied on the decisions of the Hon'ble Supreme Court in the case of Empire Jute Co. Ltd. Vs. CIT [reported in (1980) 124 ITR 1] and in the case of CIT Vs. Associated Cement Co. Ltd., [reported in (1988) 172 ITR 257] wherein it was held that the expenditure, which did not fall in the capital field, should be allowed as revenue expenditure. 37. Further, the assessee submitted that the assessee, on acquiring the land on lease for a period of 99 years, making payment of advance rent to the tune of Rs. 48 Crores and paying a sum of Rs. 40 lakhs per month as monthly rent, the advance lease rent paid by the assessee was allowable as revenue expenditure. To support such contention, the assessee placed reliance on the decision of the Special Bench of the Mumbai Tribunal in the case of JCIT Vs. Mukund Ltd. [reported in (2007) 291 ITR (AT) 249]. Thus, the assessee pleaded before the CIT(A) that considering the nature of business of the assessee, it was essential to allow ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e [reported in (2016) 71 taxmann.com 210]. 42. The Tribunal noted the submissions of the Revenue by placing reliance on the decision of the Bangalore Tribunal in the case of Cyber Park Development & Construction Ltd., and held that transferring an immovable property by way of lease created an interest in the land, as has been held in Cyber Park Development & Construction Ltd., and taking note of the definition of 'capital asset', as defined under Section 2(14) of the Act, the property need not be owned by the assessee, it was held that the definition 'capital asset' could not be given restrictive meaning. 43. The Tribunal referred to the decision of this Court in the case of A.R.Krishnamurthy and A.R.Rajagopalan Vs. CIT [reported in (1982) 133 ITR 922], the decision of the Calcutta High Court in the case of in A.Gasper Vs. CIT [reported in (1979) 117 ITR 581] and the decision of the Hon'ble Supreme Court in the case of R.K. Palshikar (HUF) Vs. CIT [reported in (1988) 172 ITR 311] and held that transfer by way of lease was to be treated as a transfer of capital asset, as the lease created an interest in the land and therefore, to that extent, it extinguished th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Therefore, a deeper examination of the factual issue would have given a quietus to the matter even at the level of the Assessing Officer. 48. Before the Tribunal, the argument appears to have been whether the lease hold right would qualify as a 'capital asset' as defined under Section 2(14) of the Act. In our considered view, such issue would not arise for consideration in the facts of the present case because what was required to be examined was the type of transaction between the assessee and the SIPCOT. 49. Interestingly, the assessee, in their appeal petition before the CIT(A), made an alternate prayer while they would state that their claim for depreciation on lease hold right was allowable and alternatively they would state that it was essential to allow the expenditure incurred for operational purposes as revenue expenditure. Their argument was that the Assessing Officer could not have denied both the reliefs. 50. One more interesting fact is that such depreciation has been allowed on the lease hold land for the assessment years 2009-10, 2010-11, 2012-13 and 2013-14. It is not clear as to whether in those years, there was any detailed consideration with regard to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....conducting mining activities in favour of the assessee company and it appears to be an exclusive right and the question was as to whether such a transaction would amount to transferring a capital asset and thereby attracting capital gains. This being not the case of the assessee, this decision is wholly inapplicable. 56. The decision of the Calcutta High Court in the case of A.Gasper was in respect of right conferred on a statutory tenant and the question was when the right got extinguished on account of a sublease, would it amount to extinguishment of the rights in a capital asset to attract capital gains. This being not the case of the assessee herein, this decision cannot be made applicable. 57. Similarly, in the decision of the Hon'ble Supreme Court in the case of R.K.Palshikar, the question, which arose, was as to whether the transaction effected by the assessee would amount to transferring a capital asset warranting capital gains tax. 58. In our considered view, the Tribunal need not have taken the matter thus far to render a verdict in favour of the assessee especially when the Lower Authorities did not know the factual position. Thus, we are of the firm opinion that ....