AI Drafter 
TaxTMI 
TaxTMI 
2021 (6) TMI 94
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....ces of the case and in law, the Learned Commissioner of Income tax (Appeal) has erred in concluding that the appellant is not entitled for depreciation on the toll road. The appellant prays that depreciation on the toll road may be granted treating the same as "building". 2. The Learned Commissioner of Income Tax (Appeals) has rejected the claim of depreciation without considering the merits of the case. The appellant prays that each year is a separate assessment year and the appellant is entitled to claim depreciation in A.Y 2005-06. The appellant prays that claim of depreciation of Rs. 59,92,08,840/- may be granted. 3. On the facts and the circumstances of the case and in law, the appellant is entitled to claim the deduction of Rs. 6,38,88,323/-. The disallowance of Rs. 6,38,88,323/- is not justified. The appellant prays that the addition be deleted. 4. On the facts and the circumstances of the case and in law, the addition made of Rs. 6,38,88,323/- is not justified as the appellant has made the payment of the tax before the due date of filing the return. The appellant prays that the addition of Rs. 6,38,88,323/- may be deleted. 5. On the facts....
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....vary and/or withdraw any or all the above grounds of appeal, which are without prejudice to one another." 2. We shall first take up the appeal of the assessee. At the very outset of the hearing of the appeal the ld. A.R had submitted that as per instructions the additional grounds of appeal no(s). 3 & 4 are not being pressed by him. The additional ground of appeal no. 5 being general is dismissed as not pressed. We, thus, confine ourselves to the admission of the additional grounds of appeal no(s). 1 and 2. As the assessee by raising the additional grounds of appeal no(s). 1 and 2 had sought adjudication of a legal issue based on the facts available on record for which no new facts are required to be looked into, we, thus, guided by the judgment of the Hon'ble Supreme Court in the case of National Thermal Power Company Ltd. vs. CIT (1998) 229 ITR 383 (SC) have no hesitation in admitting the same. 3. Briefly stated, the assessee company which is an infrastructure company had filed its return of income for A.Y. 2005-06 on 30.10.2005, declaring a loss of (-) Rs. 22,28,15,736/- under the normal provisions and book profit of Rs. 10,13,70,151/- under Sec. 115JB of the Act. The retu....
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.... ld. A.R dismiss the Grounds of appeal No(s). 3 and 4 as not pressed. It was candidly admitted by the ld. A.R that the order passed by the CIT-10, Mumbai under Sec. 263 had been upheld by the Tribunal in ITA NO. 3978/Mum/2010; dated 30th August, 2011. It was further submitted by him that the order of the Tribunal had thereafter been upheld by the Hon'ble High Court of Bombay in ITA No. 499 of 2012; dated 14th October, 2014 and the appeal filed by the assessee was dismissed. It was, however, submitted by the ld. A.R that the Hon'ble High Court while upholding the order of the Tribunal had categorically observed that the assessee's claim for depreciation in respect of the building, plant and machinery falling within the purview of sub-section (1) of Sec. 32 if considered and granted shall not be affected by its said order. It was submitted by the ld. A.R that as the assessee company had constructed a road on build, operate and transfer (BOT) basis on the land owned by the Central Government, therefore, it got vested with a right to an intangible asset under Explanation 3(b) r.w. Sec. 32(1)(ii) of the Act, pursuant whereto it was eligible to claim depreciation on such asset as per the....
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....assessee not being the owner of the toll road would not be eligible to claim depreciation on the same, however, its claim for depreciation if otherwise eligible under the other provisions of the Act were being left open. It was, thus, in the backdrop of his aforesaid contentions submitted by the ld. A.R that as the assessee company had constructed a road on build, operate and transfer (BOT) basis on the land owned by the Central Government, therefore, it got vested with a right to an intangible asset under Explanation 3(b) r.w. Sec. 32(1)(ii) of the Act, pursuant whereto it was eligible to claim depreciation on the same. 6. Per Contra, the ld. Departmental Representative (for short 'D.R') submitted that the lower authorities had rightly rejected the assessee's claim for depreciation under Sec. 32(1)(ii) in respect of its "right to collect toll", for the reason, that the ownership of the toll roads was not vested with the assessee. In order to support its aforesaid contention the ld. D.R had relied on the CBDT Circular No. 9/2014. Also, support was drawn by the ld. D.R from the judgments of the Hon'ble High Court of Bombay in the case of North Karnataka Expressway Ltd. Vs. CIT-10....
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....ible for claim of depreciation on the same. Our aforesaid view is fortified by the judgment of the Hon'ble High Court of Bombay in the assessee's own case for the year in question, viz. North Karnataka Expressway Ltd. Vs. CIT-10(2015) 272 ITR 145 (Bom). Hon'ble High Court in its said order had after exhaustively deliberating on the provisions of the National Highway Act, 1956, had therein observed, that though the Central Government as per Sec. 8-A of the National Highway Act, 1956 is empowered to enter into an agreement with any person in relation to the development and maintenance of the whole or any part of a National Highway, but that in no way would affect the vesting of the National Highways in the Union. It was observed by the Hon'ble High Court that the ownership of the National Highway as stands vested with the Central Government under Sec.4 of the National Highway Act, 1956 would not be diluted, for the reason, that the Central Government as per Sec.8-A (supra) had entered into an agreement with any person for development and maintenance of the whole or any part of the National Highway. To sum up, the Hon'ble High Court had concluded that an Infrastructure Development Com....
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.... Para 20 the Hon'ble High Court had observed that the question before them was as to when a person who is in the business of Infrastructure Development constructs a road on build, operate and transfer (BOT) basis on the land owned by the Government, then, can it claim depreciation on such 'toll road'. We find that the Hon'ble High Court had observed that though an Infrastructure Development company that had constructed a road on BOT basis on the land owned by the Central Government was not entitled to claim depreciation on the ''toll roads" as it was not owner of the same, however, it could definitely claim depreciation on its investments made in the project and such other assets in the form of building and plant and machinery etc. Accordingly, it was observed by the Hon'ble High Court at Para 47 of its order that the claim for depreciation could be validly raised and granted to the extent stated hereinabove. Also, it was observed by the Hon'ble High Court that it was concerned only with the claim of the assessee as regards depreciation on the road itself. To sum up, the Hon'ble High Court in its aforesaid judgment had confined its adjudication to the issue that as to whether or no....
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....respondent assessee. In our considered view, the Hon'ble High Court in its aforesaid order i.e CIT-10, Mumbai Vs. M/s West Gujarat Expressway Ltd., ITA No. 2357 of 2013, dated 05.04.2016, had confined its adjudication to the aforesaid two substantial questions of law which were raised by the revenue before it. Our aforesaid view is fortified by the order of a coordinate bench of the Tribunal, Mumbai in the case of Thiruvanthapuram Road Development Company Ltd. Vs. DCIT-14(3)(1), Mumbai [ITA NO. 622/Mum/2015, dated 23.05.2018]. In the aforesaid case involving facts identical to those as in the case of the assessee before us, we find that the assessee had claimed that it was entitled for depreciation on "right to collect toll" u/s 32(1)(ii) of the Act. Relying on the judgment of the Hon'ble High Court of Bombay in the case of CIT-10, Vs. M/s West Gujarat Expressway Ltd. (ITA No. 2357 of 2013, dated 05.04.2016), it was the claim of the revenue that the issue was covered against the assessee. We find, that the Tribunal rejected the aforesaid claim of the revenue, for the reason, that the issue as regards the entitlement of an Infrastructure Development company that had constructed a ro....
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....ch asset as per the specified rate. Apart from that, it was observed by the Tribunal, that where the assessee had never claimed expenditure incurred for construction of the road on build, operate and transfer (BOT) basis, as a deferred revenue expenditure, the same could not have been amortized in terms of CBDT Circular No. 9 of 2014, dated, 23.04.2014. The observations of the 'Special bench' of the Tribunal which seizes the issue under consideration before us are as under: "11. Undisputedly, for executing the project, assessee has incurred expenses of Rs. 214 crore. It is also not disputed that as per the terms of the C.A., the Government of India is not obliged / required to reimburse the cost incurred by the assessee to execute / implement the project facilities. The only right / benefit allowed to the assessee by the Government of India is to operate the project / project facilities during the concession period of 11 years 7 months and to collect toll charges from vehicles / persons using the project / project facilities. Thus, as could be seen, the only manner in which the assessee can recoup the cost incurred by it in implementing the project / project facility is to....
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....execution of agreement i.e., 22nd December 2005, therefore, the expenditure incurred by such date should be the value of intangible asset which can alone be considered for depreciation under section 32(1)(ii) of the Act. We are afraid, we cannot accept the above argument of the learned Senior Standing Counsel. When the C.A. confers a right on the assessee to operate the project facility and collect toll charges over the concession period of 11 years and 7 months, the assessee can start operating and collecting toll charges only when the project facility is ready for use. Therefore, until the project is completed and ready for use by vehicles or persons assessee cannot collect toll charges for user of the project facilities. Thus, the right to operate the project facility and collect toll charges is integrally connected to the completion of the project facility which cannot be done unless the assessee invests its fund for completing the project. Therefore, keeping in view the aforesaid fact, it cannot be said that the right to collect toll has accrued to the assessee on the date of execution of the agreement. If we accept the aforesaid argument of the learned Senio....
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....ided under section 52 of the Indian Easements Act, 1882: - "License" defined:- Where on person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful and such right does not amount to an easement or an interest in the property, the right is called a license." 14. It has been the contention of the learned Senior Standing Counsel that as the term "license" has not been defined under the Income Tax Act, 1961, the definition of "license" under the Indian Easements Act, 1882, has to be looked into. Accepting the aforesaid contention of the learned Senior Standing Counsel, let us examine the definition of "license" extracted herein above. A plain reading of section 52 of the Act makes it clear, a right granted to a person to do or continue to do something in the immovable property of the grantor, which, in the absence of such right would be unlawful and such right does not amount to an easement or interest in the property, then such right is called a license. If we examine the facts of the present case, vis-a-vis, the definiti....
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....ture of 'Rs. 214 crore assessee has acquired the right to operate the project and collect toll charges. Therefore, such right acquired by the assessee is a valuable business or commercial right because through such means, the assessee is going to recoup not only the cost incurred in executing the project but also with some amount of profit. Therefore, there cannot be any dispute that the right to operate the project facility and collect toll charges therefrom in lieu of the expenditure incurred in executing the project is an intangible asset created for the enduring benefit of the assessee. Now, it has to be seen whether such intangible asset comes within the expression "any other business or commercial rights of similar nature". As could be seen from the definition of intangible asset, specifically identified items like knowhow, patents, copyrights, trademarks, licenses, franchises are not of the same category, but, distinct from each other. However, one thing common amongst these assets is, they all are part of the tool of the trade and facilitate smooth carrying on of business. Therefore, any other intangible asset which may not be identifiable with the specified items, but,....
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....sets which were neither 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". 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 l....
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.... 6(2)(2), Mumbai Vs. M/s Essel Sagar Damoh Toll Roads Ltd, ITA No. 7114/Mum/2016 & C.O No. 84/Mum/2018; A.Y 2011-12, dated 20.09.2019. We, thus, finding ourselves to be in agreement with the view taken by the Tribunal in the aforesaid cases respectfully follow the same. Accordingly, the claim of the assessee towards depreciation under Sec.32(1)(ii) in respect of its intangible rights i.e "right to collect toll" being in conformity with the mandate of law is found to be in order. We thus not finding favour with the view taken by the CIT(A) therein set-aside the same. The Ground of appeal No. 1 is dismissed in terms of our aforesaid observations. The Ground of appeal No. 2 r.w additional ground of appeal no. 1 are allowed in terms of our aforesaid observations. 11. The additional ground of appeal No. 2 is dismissed in terms of our aforesaid observations. 12. The assessee has assailed the levy of interest u/s 234B of the Act. As the levy of interest is mandatory as held by the Hon'ble Supreme Court in the case of CIT Vs. Anju M.H. Ghaswala (2001) 252 ITR 1 (SC), therefore, the same being consequential, the A.O is directed to recompute the same while giving effect to our aforesai....
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.... had rightly concluded that as the second car was not used by the assessee for its business purposes, the motor car expenses pertaining to the same as were booked in the financial statements were liable to be disallowed. Per Contra, the ld. A.R relied on the order of the CIT(A). 18. On a perusal of the records it transpires that the assessee had purchased two vehicles, viz. (i). Terran; and (ii). Honda CRV. On a perusal of the depreciation chart it was observed by the A.O that the assessee had not claimed depreciation on the Honda CRV vehicle that was purchased by the assessee in the immediately preceding year i.e A.Y 2004-05. Backed by the aforesaid facts, the CIT-10, Mumbai in his order passed u/s 263 had directed that if the aforesaid vehicle i.e Honda CRV was not used by the assessee for its business purpose, then, the expenses on fuel, maintenance and expenditure on driver salary as was claimed by the assessee as a deduction while computing its income was liable to be disallowed. On the basis of the aforesaid directions of the CIT, the A.O vide his order passed u/s 143(3) r.w.s 263, dated 23.12.2010 disallowed the assessee's claim for expenditure incurred on fuel, maintenan....
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....wance of Rs. 5 lac made by the A.O as regards the expenses on fuel, maintenance and expenditure on driver's salary. 19. We have deliberated at length on the observations of the CIT(A) in context of the issue in question i.e disallowance on an ad hoc basis of the assessee's claim of motor vehicle expenses. As the view taken by the CIT-10, Mumbai in his order passed u/s 263 that the assessee had not claimed depreciation on the Honda CRV vehicle that was purchased by it in A.Y 2004-05 is found to be incorrect, therefore, the very assumption drawn by him that the said vehicle was not used by the assessee for its business purposes falls to ground and cannot be sustained. As the assessee had duly claimed depreciation as regards the vehicle in question i.e Honda CRV both in the year of purchase i.e A.Y 2004-05 and the year in question which had been allowed by the department, thus, it can safely or in fact inescapably be concluded that the said vehicle was used by the assessee for its business purpose. We, thus, in terms of our aforesaid observations finding no infirmity in the view taken by the CIT(A) who in our considered view had rightly vacated the ad hoc disallowance of motor vehi....
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....ting, developing, financing, building/constructing, modifying, operating and maintaining the Belgaum-Maharashtra Border Road on NH-4 and its ancillary facilities had raised a claim for depreciation of Rs. 53,92,87,956/- on the toll roads. Holding a conviction that the assessee did not own the toll roads as the same remained vested with the Government of India, the A.O disallowed the assessee's claim for depreciation of Rs. 53,92,87,956/-. However, the A.O allowed amortising of the total cost of the toll roads of Rs. 599,20,88,396/- over the concessionaire period of 17 years and 6 months and allowed the corresponding deduction of Rs. 34,24,05,051/- for the year under consideration. Resultantly, the net disallowance considering the rejection of depreciation was worked out by the A.O at Rs. 19,68,82,905/-. After inter alia disallowing the assessee's claim for depreciation on toll roads and substituting the same by the amortisation expenditure relatable to the year in question, the A.O vide his order passed u/s 143(3)(ii), dated 30.12.2008 assessed the loss of the assessee company at (Rs. 1,06,87,938/-). 24. Aggrieved, the assessee carried the matter in appeal before the CIT(A). ....