TaxTMI 
TaxTMI 
2018 (6) TMI 1759
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...."Right to collect Toll". 2. Whether on the facts and in the circumstances of the case, the Ld.CIT(A)-1, Nashik was justified in holding that the assessee is eligible for depreciation on asset "Right to collect Toll". 3. The appellant prays the order of the Assessing Officer may be restored. 4. The appellant prays to adduce such further evidence to substantiate his case. 5. The appellant prays leave to add, alter, clarify, amend and or withdraw any grounds of appeal as and when the occasion demands." 3. Briefly stated relevant facts of the case include that the assessee is a company and is engaged in the business construction of infrastructure facility. Assessee filed the return of income on 21-09- 2012 declaring Nil income. During the year under consideration, assessee collected toll receipts of Rs. 7,59,15,286/- which includes other income of Rs. 2,23,919/-. Assessee claimed the total expenses of Rs. 12,11,69,088/-. After making adjustments on account of interhead adjustment of losses u/s.71 and unabsorbed depreciation, the total loss is arrived at Rs. 80,86,66,906/-. Assessee claimed depreciation on intangible asset termed as License to Collect Toll amounting to Rs. ....
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....d 31-12-2008 as well as M/s. Ashoka Bridgeways - ITA No.686/PN/12, dated 29-04- 2013, (sister concern of the assessee) and held that the "Right to Collect Toll" is an intangible right and the same is eligible for depreciation @25%. 5. Aggrieved with the above decision of CIT(A), the Revenue filed the present appeal in both the cases of the assessee stating that the decision of Pune Bench of the Tribunal in the case of M/s. Ashoka Info Pvt. Ltd. and M/s. Ashoka Bridgeways are admitted by the Hon'ble High Court for adjudication. 6. During the proceedings before the Tribunal, there is none to represent the assessee, however, assessee filed the written submissions vide letter dated 25-05-2018 and therefore, the submissions made by the assessee are extracted here as under : "The issue of depreciation on right to collect toll, as an intangible asset u/s 32(1)(ii), arising in the present appeal, is squarely covered in favour of respondent by the recent decision of the Honourable ITAT 'A' Bench in the group concern cases of Ashoka Highways (Bhandara) Ltd vs ITO in ITA No. 1299/PUN/2015 for Assessment year 2011-12, decided by the order dt 30.08.2017 & Ashoka Infraways Ltd vs ACI....
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....ion of the project, the operations started on 06.07.2005. The assessee for the year under consideration had collected toll to the extent of Rs. 17.16 crores and had claimed depreciation to the extent of Rs. 10,61,88,185/-. The said claim of depreciation on license to collect toll being an intangible asset, in view of Government notification granting such rights was claimed in the original return of income by the assessee. The assessment in the case of assessee for assessment year 2006-07 was completed under section 143(3) of the Act and the said claim was allowed. Further, in assessment year 2007-08, similar claim of depreciation on intangible asset was denied to the assessee. However, the Tribunal in ITA No.989/PN/2010, relating to assessment year 2007-08 vide order dated 18.07.2013 had allowed the claim of depreciation on license to collect toll @ 25% being intangible asset within the scope of section 32(1)(ii) of the Act. 18. The assessee made a similar claim in the return of income filed under section 143(3) r.ws 153A of the Act. However, the Assessing Officer denied the said claim of assessee in all the years under consideration holding that the assessee was not the owner of....
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....clause was also there and relied upon in the case of "North Karnataka Expressway Ltd. vs. CIT" which has also been reproduced in para 8 of 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....
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....he claim of depreciation on the license for right to collect the toll as intangible asset. Further, the Hon'ble Bombay High Court 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 t....
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.... contention for claim of allowance of depreciation on the license authorizing him to collect the toll being an intangible asset 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 statutor....
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....oad. But it is not disputed that the assessee has made investments on the project and he is entitled to claim deductions in 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 ....
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....the assessee incurs expenditure on a project for development of roads/highways, he is entitled to recover cost incurred by him towards development of such facility (comprising of construction cost and other pre-operative expenses) during the construction 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 a....
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....28. In view of the express provisions of the Act, we have no doubt to hold that the assessee is entitled to collect tax being an intangible commercial right under section 32(1)(ii) at the rate as has been prescribed under the relevant rules. Our above view is further supported by the decision of the co-ordinate Pune bench of the Tribunal in the case of M/s. Ashoka Infrastructure Ltd. Vs. ITO in 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 29.04.20....
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.... collect Toll' have been incurred for development and construction of the infrastructure facility, i.e., Dewas By-pass Road. It is also not in dispute that the assessee was to build, operate and transfer the said infrastructure facility in terms of an agreement with the Government of Madhya Pradesh. The expenditure on development, 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 prec....
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....ltered by the Hon'ble Supreme Court vide its order reported at (2010) 327 ITR 323 (SC). Accordingly, in view of the aforesaid discussion, we hereby allow the Ground of Appeal No. 1.1 raised by the assessee." 29. In view of our observations made in the preceding paras and also agreeing with the 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." 22. The Tribunal in ACIT Vs. West Gujarat Expressway Ltd. (supra) further referring to the ratio laid down by the Hon'ble Bombay High Court held that since the assessee is not the owner of toll road, but has been given the right to develop, maintain and operate the toll road and to further collect the toll for the specified period, then this right is an intangible asset falling under section 32(1)(ii) of the Act and the alternate contention of assessee that the project be treated as plant & machinery and depreciation be allowed, was rejected vide para 30 of the order. Further, vide para 31, the Tribunal considered the contention of Revenue that investment made by t....