TaxTMI 
TaxTMI 
2021 (12) TMI 304
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....for the sake of convenience. 2. The first identical issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in deleting the disallowance made on account of depreciation on the right to collect annuity on toll roads. 2.1. We have heard rival submissions and perused the materials available on record. We find that the assessee is engaged in the business of executing the project for design, construction, finance and maintenance of Gorakhpur By-pass on NH-28(Project Highway) in the state of Uttar Pradesh on Build, Operate and Transfer (BOT) basis under the annuity scheme. The assessee entered into concession agreement with National Highway Authority of India (NHAI) and as per concession agreement, NHAI had granted exclusive right, license and authority during the subsistence of the concession agreement to implement the project and the concession in respect of the Project Highway for a period of 20 years. The assessee had incurred total cost amounting to Rs. 721,28,78,487/- on construction and development of the Project Highway, pursuant to which the assessee was able to receive annuity from NHAI under the concession agreement. The assessee classified such ....
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....ity and collect toll charges. Therefore, right required by the assessee for operating the project facility and collecting toll charges was an intangible asset created by the assessee by incurring the expenses. The Special Bench of the Hyderabad Tribunal accepted the fact that huge costs were incurred by the assessee in constructing, implementing and maintaining such projects. Considering that these costs do not get reimbursed, and the fact that the assessee was allowed to recover such costs by way of collecting toll charges is nothing but a valuable right for an assessee. 6.4 Further, similar view has been taken by the Hon'ble Mumbai Tribunal in the case of DCIT (9(1)(2), Mumbai vs. Atlanta Ltd., Mumbai (ITA No.3415/M/2015). Since, the facts of the appellant's case are similar to the aforesaid case laws, I am of the considered opinion that the disallowance made u/s.32(1)(ii) of the Act amounting to Rs. 1,80,32,19,622/- is liable to be deleted. In view of the aforesaid facts, this ground of appeal is Allowed. 2.2. The facts stated hereinabove remain undisputed and hence, the same are not reiterated herein for the sake of brevity. We find that the ld. CIT(A) had placed re....
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....is. The assessee's obligation for operations and maintenance are specified in Article XVIII of the concession agreement which are reproduced hereinabove:- * The assessee in consultation with an Independent Consultant is required to prepare repairs and maintenance manual during the period of operations and to ensure that the Project Highway complies with the standards specified in the Concession Agreement. * The assessee in consultation with an Independent Consultant is required to prepare and provide NHAI its preventive and scheduled maintenance subject to standards specified in the Concession Agreement. * The assessee is responsible for maintenance of approach roads to and underpasses and overpasses upto 100 meters from the Project Highway in accordance with good industry practices. * In case, if the assessee fails to maintain Project Highway in accordance with the standards specified in the Concession Agreement and maintenance manual, NHAI has right to take up the repairs and maintenance of the Project Highway and shall recover the cost from the Appellant. * The assessee is obliged to carry out periodic maintenance every five years fro....
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....n u/s. 37(1) of the Act under normal provisions of the Act. The ld. AO also treated the same as the provision made for unascertained liability and accordingly, sought to add the same while computing book profit u/s.115JB of the Act. The assessee placed reliance on the decision of the Hon'ble Supreme Court in the case of Rotork Control India Pvt. Ltd., vs. CIT reported in 314 ITR 62 and Bharat Earth Movers Ltd., vs. CIT reported in 245 ITR 428, among other decisions, in support of its contention. The ld. CIT(A) duly appreciated the entire contentions of the assessee and deleted the disallowance made by the ld. AO by observing as under:- 8.2 I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. The AO has made an addition on account provision for periodic maintenance amounting to Rs. 6,24,00,000/- to the income of the appellant on the ground that the method adopted by the assessee for determining the provision of periodic maintenance expenses was not scientific or reasonable. During the course of the appellate proceedings, the assessee submitted that such a provision for periodic maintenance is in the nature of a....
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....nsideration before the Hon'ble Pune Tribunal in the case of ACIT Vs. Ashoka Buildcon Ltd. [2015] 61 taxmann.com 330 wherein the Hon'ble ITAT has held that the foreseeable losses of future years could be recognized following rationale of AS-7 and hence such provision was an allowable deduction. Therefore, following the judicial precedents, I am of the opinion that the provision for periodic maintenance charges is to be allowed to the appellant and accordingly, the addition made amounting to Rs. 6,24,00,000/- is deleted. In view of the aforesaid facts, this ground of appeal is Allowed. Further, with regard to the disallowance made by the Ld. AO while computing the book profits u/s. 115JB of the Act: 8.4 I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. The AO has made an addition of the provision for periodic maintenance charges while computing the book profits of the appellant u/s. 115JB on the grounds that the said expense was not arrived at by scientific methods. However, it has been decided in the above para that the provision calculated by the appellant was on scientific basis and accura....
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....14,53,00,000 22,67,75,000 30,69,65,207 35,25,48,764 Provision created for first PM (for first 5 years) (8} 6,24,00,000 8,29,00,000 8,14,75,000 8,01,90,207 8,01,90,207 96,95,301 Utilisation (c) / pm reversed 3,46,06,650 35,36,75,881 Provision created for second PM (for next 5 years) (D) 6,07,56,667 Closing Balance of provision (E) 6,24,00,000 14,53,00,000 2Z,67,75,OOG 30,69,65,207 35,25,48,764 6,93,24,851 % Utilisation (out of 1st provision} F=C/(A+B)*100 8.94% 97.63% 3.5. From the said table, it is evident that during A.Y.2017-18 (which is the end of first phase of five years for periodic maintenance) assessee had actually incurred Rs. 35,25,48,764/- as the expenditure and in A.Y.2017-18, a sum of Rs. 3,46,06,650/- was even sought to be reversed by the assessee as provision no longer required. Since the provision for periodic maintenance cost on year to year basis has been made based on technical valuation report on a scientific....