AI Drafter 
TaxTMI 
TaxTMI 
2018 (7) TMI 2181
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....s on the Second Vivekananda Bridge. The assessee's claim in question was raised u/s 32(1)(ii) of the Act. It sought to treat its right to collect toll to be an intangible asset. The Assessing Officer quoted the Board's Circular No. 9/2014 dated 23.04.2014 to observe that impugned claim was not allowable since it did not pertain to an infrastructure facility itself but it was regarding a licence granted by National Highway Authority to collect tollway charges. He further was of the view that assessee was also not the owner of infrastructure facilities in question. All this resulted in the impugned disallowance amounting to Rs.41,9,22,54/- being made in assessee's hand in assessment order dated 11.05.2015. 3. The CIT(A) confirms Assessing Officer's action as follows:- "I have carefully considered the material before me. The appellant company had developed the Second Vivekananda Bridge under the Build, Operate and Transfer (BOT) basis and it obtained from National Highways Authority of India (NHAI), the License to collect the Tollway Charges in relation to the said Bridge. A copy of the concerned Concessionaire Agreement (Extracts) is enclosed for ready reference. The Lice....
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....ssessment year, wherein the appellant had acquired a vested right for claim of depreciation on intangible assets in the form of right to collect Tollway Charges. The A.O had referred to CBDT's Circular issued in April, 2014, whereas the appellant had claimed deductions in years prior to the Assessment Year 2015-16 (relevant for the Financial Year 2014-15), in accordance with the CBDT Circular the procedure for amortisation could be made in relation to the total value as reduced by the claims of depreciation made by the appellant for and up to the Assessment Year 2014-15 which included the year under Appeal, viz., Assessment Year 2012-13. The A.R also stated that subsequently the A.O vide his Order dated 16/12/2015 u/s 154 allowed deduction towards amortization. However, while allowing the amortization, the A.O took into account only the deemed reduced cost at the end of the A.Y: 2008-09, It is found that the dispute relates to the appellant's claim for depreciation on the Intangible Assets, i.e. the appellant's right to collect the Tollway Charges of Rs. 41,99,22,054 u/s 32(1)(ii) @25% on the Total Cost incurred for developing the Infrastructure facility. The A....
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....ng the assessment or appellant proceedings. Accordingly, it is also found that there is no substance in the appellants claim for following the principle of consistency, regarding its claim for depreciation was stated to have been allowed by the AO in assessment orders for the proceeding AY 2009-10 & 2010-11. This is because the factual matrix of the appellant's case are found to be different from the findings of the A.O in the earlier A.Ys, wherein the appellant's claim for depreciation on intangible assets was accepted by the A.O without examining the nature of fixed assets in question. In this regard, it is well settled that the principle of res judicata, is not applicable to Income Tax proceedings, as issues for each assessment year are to be decided on the facts and circumstances of the case for that year only. Moreover, considering the fact that although the appellants claim was in respect of depreciation on license fee as intangible assets which was held to be not allowable on law and facts. Thus, the ratio of the decision in the case of Asoka Info Pvt. Ltd. - vs - ACIT (2009) 123 TTJ 77(Pune), dated 31.12.2008 of ITAT, Pune, relied upon by the A.O is found to be dist....
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....vernment of India in allowing the assessee to operate the road and collect toll charges during the concession period amounts to grant of license, hence is an intangible asset. He submitted, even assuming that the right acquired by the assessee to operate the road and collect toll charges is not in the nature of license, however, it certainly falls within the category of any other business or commercial right of similar nature as provided under section 32(1)(ii) of the act. He submitted, apart from the right to operate the road and collect toll charges the assessee was not given any other benefit under the C.A. Therefore, the right given for operating BOT-bridge and collecting toll charges for user of the road and bridge is a valuable commercial right acquired by the assessee by investing in the construction of the road and bridge. In support of his contention learned Authorised Representative relied upon the decision of the Tribunal, Pune Bench, in Ashoka Info Pvt. Ltd. vis ACIT, [2009] 123 TT] 77 (Pune). 8. We have patiently and carefully considered the rival submissions, perused the materials on record as well as the decision cited at the Bar. 9. The core issue ....
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....sed by the assessee in its business; ii) What is the nature of the asset that has come into being on account of the expenditure incurred by the assessee and what is the nature of such expenditure; iii) If an asset is created, whether it is a tangible asset or an intangible asset; iv) Whether the Concessionaire Agreement (CA) held by the assessee can be regarded as a commercial or business right akin to a license; v) If such CA. is akin to a license, what intangible asset has been created for the assessee and what is the expenditure incurred by the assessee for acquiring such intangible asset. 10. Before dealing with the issue, it is necessary to reiterate that the Government of India being desirous of implementing a project involving, construction, operation and maintenance of four lane Pune Hyderabad section of N. H. no. 9, with private sector participation of BOT invited tender from interested parties. The assessee being successful in the tender, the Government of India entered into a Concession Agreement (CA) with the assessee on 22nd December 2005. At this stage, it is necessary to look into some of the relevant clauses of C.A....
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....eedings but also keep the concessionaire indemnified against any direct or consequential loss or damage which it may suffer on account of any such right, title, interest or charge. As per clause 2.8 of the C.A., though, the concessionaire shall have exclusive right to use of the project site in accordance with the provisions of the agreement and for this purpose, it may regulate the entry and use of the same by the third parties, however, it shall not part with or create any encumbrance on the whole or any part of the project site save and except, as set forth and permitted under the agreement. Clause 4.1 of the C.A. entitles the concessionaire to levy, demand and collect fee for user of the roads by vehicles and persons in accordance with the fee notification to be issued by the Government of India. However, concessionaire cannot levy and collect any fee until it has received completion certificate. Clause 5.1 and 5.2 of the C.A. lays down the obligation of the concessionaire for execution and implementation of the project / project facility during the concession period. From the reading of the aforesaid clauses of the contract, following facts emerge:- i) The right, titl....
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....of which the assessee is not the owner but it is the Government of India is nobody's case. Further, the learned Senior Standing Counsel's apprehension that it will lead to a situation where both Government of India and the concessionaire will claim depreciation on the asset created with the very same expenditure, in our view, is not borne out from facts on record. At the cost of repetition we must observe, as per the terms of agreement the expenses incurred by the assessee towards construction of the roads, bridges, etc., were not going to be reimbursed by the Government of India. This fact was known to both the parties before the execution of the agreement as the tender itself has made it clear that the project is to be executed with private sector participation on BOT basis. Thus, from the very inception of the project, assessee was aware of the fact, it has to recoup the cost incurred in implementing the project along with the profit from operating the road and collecting toll charges during the concession period. Therefore, assessee has capitalized the cost incurred on the BOT project on which it has claimed depreciation. Thus, in our view, the expenditure incurred by t....
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....bsp;Depreciation. 32(1)(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 assessees and used for the purposes of the business67 or profession, the following deductions shall be a 110 wed- ] 12. Explanation 3 to section 32(1) defines intangible asset as under:- [Explanation 3. -For the purposes of this sub-section, 86[the expression "assets" ] shall mean- (a) tangible assets, being buildings, machinery, plant or furniture; (b) intangible assets, being know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature87. 13. A plain reading of the aforesaid provisions would indicate that certain kind of assets being knowhow, patents, copyrights, trademarks, license, franchise, or any other businesses or commercial rights of similar nature are to be treated as intangible asset and would be eligible for depreciation at the specified rate. It is the claim of the assessee that the r....
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....property. However, the right granted to the concessionaire has not created any right, title or interest over the property. The right granted by the Government of India to the assessee under the C.A. has a license permitting the assessee to do certain acts and deeds which otherwise would have been unlawful or not possible to do in the absence of the C.A. Thus, in our view, the right granted to the assessee under the C.A. to operate the project / project facility and collect toll charges is a license or akin to license, hence, being an intangible asset is eligible for depreciation under section 32(1)(ii) of the Act. 15. Even assuming that the right granted under the C.A. is not a license or akin to license, it requires examination whether it can still be considered as an intangible asset as described under section 32(1)(ii) of the Act. In this context, it has been the contention of the learned Senior Standing Counsel that the intangible asset mentioned under section 32( 1 )(ii) of the Act are specifically identified assets, except, the assets termed as "any other business or commercial rights of similar nature". He had submitted, applying the principle of ejusdem generis the....
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....s of similar nature", however, the Hon'ble Supreme Court held that 'goodwill' will come within the expression "any other business or commercial rights of similar nature", Therefore, the contention of the learned Senior Standing Counsel that to come within the expression "any other business or commercial rights of similar nature" the intangible asset should be akin to anyone of the specifically identifiable assets is not a correct interpretation of the statutory provisions, Had it been the case, then 'goodwill' would not have been treated as an intangible asset, The Hon'ble Delhi High Court in case of Areva T and D India Ltd. (supra), while interpreting the aforesaid expression by applying the principles of ejusdem generis observed, the right as finds place in the expression "business or commercial rights of similar nature" need not answer the description of knowhow, patents, trademarks, license or franchises, but must be of similar nature as the specified asset. The Court observed, looking at the meaning of categories of specified intangible assets referred to in section 32(1)(ii) of the Act preceding the term "business or commercial right of similar nature"....
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....er visible nor possible to exhaustively enumerate. The Hon'ble Court, therefore observed, in the circumstances the nature of business or commercial right cannot be restricted only to knowhow, patents, trademarks, copyrights, licence or franchise. The Court observed, any intangible assets which are invaluable and result in smoothly carrying on the business as part of the tool of the trade of the assessee would come within the expression "any other business or commercial right of similar nature". 25 M/s. Progressive Constructions Ltd. 17. In the case of Techno Shares and Stocks Ltd. v/s CIT, [2010] 327 ITR 323 (SC), the Hon'ble Supreme Court while examining the assessee's claim of depreciation on BSE Membership Card, after interpreting the provisions of section 32(1)(ii), held that as the membership card allows a member to participate in a trading session on the floor of the exchange, such membership is a business or commercial right, hence, similar to license or franchise, therefore, an intangible asset. In the present case, undisputedly by virtue of C.A. the assessee has acquired the right to operate the toll road / bridge and collect toll charges in lieu of....