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2021 (12) TMI 444
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....circumstances of the case and in law, the CIT(A) has erred in upholding the action of the AO disallowing the deprecation amounting to INR 61,36,17,642 claimed by the Appellant on toll road applying the Central Board of Direct Taxes Circular No. 9/2014 dated April 23, 2014. 3. That on facts and in the circumstances of the case and in law, the AO has erred in not appreciating that the Appellant is the owner of the toll road and, consequently, entitled to claim depreciation under the provisions of section 32 of the Act. The CIT(A) further erred in upholding 'the action of the AO. 4. That on facts and in the circumstances of the case and in law, the CIT(A) erred in upholding the action of the AO in not considering the toll road as a "Plant" for the purposes of allowing depreciation as per the provisions of the Act. 5. Without prejudice to ground of appeal No. 4, the CIT(A) erred in upholding the action of the AO in not considering the rights arising in relation to toll road as an intangible asset for the purposes of allowing depreciation as per the provisions of the Act Each of the above grounds is independent and without prejudice to the other g....
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....arious explanations given by the assessee, the AO held that the assessee is not the owner of the project. He, therefore, disallowed the depreciation claimed by the assessee on the toll road under the block 'Buildings' or 'Plant & Machinery' as the assessee is not the owner of the project. He, therefore, disallowed the depreciation claimed by the assessee on the toll road (carriage way) and added the same to the total income of the assessee. Further, the AO held that the assessee is not entitled to claim depreciation on the roll road as intangible asset due to the fact that the right to collect toll does not fall under any of the categories of 'intangible assets' specified in section 32(1)(ii) of the IT Act. Referring to the clarification issued by the CBDT, vide Circular No.09/2014, the AO held that the expenditure incurred by the assessee on development of the toll road under the BOT arrangement will have to be amortised fully over the period of concessionaire agreement after excluding the time taken for creation of such facility. 5. The AO accordingly held that the assessee is entitled for claim of amortized expenditure which has to be spread evenly over the period of concessi....
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....e appellant during the year under consideration are in accordance with the objects stated in the memorandum of association. This right to develop and operate the facility is acquired for a fixed term called the concession period. All these rights are however exercisable by the appellant strictly within the restricted framework of the concession agreement which provides for permissions and sanctions on a number of activities. At the end of the concession period, the project facility, in running condition is to be handed back to NHAI at NIL cost. No money is given by NHAI for the development of the project. The appellant has to perform many activities to complete all its obligations under the concession agreement before the sub-license fees earned by it can be claimed by it as its income. From the facts listed above, it can be seen that the appellant is carrying out a business and earning business income as there are regular and systematic activities required to be carried out to earn this income. Apart from the work of development of the project facility and the provision and maintenance of the infrastructural services thereat, the appellant has to on a regular basis, liaise with NH....
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.... the fact that right to collect does not fall under any of the categories of the 'intangible asset' specified under section 32(1)(ii) of the Act. c) As per the extant clarification issued by the Central Board of Direct Taxes (CBDT) vide Circular No. 9/2014, the expenditure incurred by the Appellant for development of the toll road under Build Operate and Transfer ("BOT") arrangement will have to be amortized evenly over the period of concessionaire agreement after excluding the time taken for constructing such facility." It has already been held in para 3.2 supra that in accordance with the terms of circular no. 9/2014, that the concession agreement confers upon the appellant the right to collect toll on the toll road. Since the appellant is fully covered by CBDT circular no. 9/2014, the assessing officer has correctly held that cost of development of the toll road has to be amortized in accordance with the above-mentioned circular. Since the expenditure incurred by the appellant for development of the toll road will have to be amortized evenly over the period of concessionaire agreement after excluding the time taken for constructing such facility, the appellant ....
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....have also considered the various decisions cited before us. We find, the Hyderabad Bench of the Tribunal in the case of DCIT vs. M/s Madurai Tuticorin Expressways Ltd., vide ITA No.2119, 2120 & 2121/Hyd/2018 for AYs 2012-13 to 2014-15, order dated 9th June, 2021, has decided identical issue in favour of the assessee by observing as under:- "3. We have given our thoughtful consideration to the rival contentions supporting and opposing the impugned depreciation disallowance. It has come on record that this tribunal's Special Bench's decision in M/s.Progressive Construction Ltd. (supra) has already settled the issue that such a license agreement amounts to an intangible asset in the nature of right to collect toll amounts to an intangible asset u/s.32(1)(ii) of the Act. The Revenue's stand that the assessee ought to have amortised the license fee paid to "NHAI" as per the CBDT's circular (supra) also fails to make any difference since the same could not be taken as an attempt at the Board's part to deny depreciation relief in any manner; whatsoever. Hon'ble apex court's decision Taparia Tools Ltd. Vs. JCIT (2015) [372 ITR 605] (SC) holds that the m....
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....de ITA Nos. 185 & 186/PN/2012 dated 29.04.2013. As per the Tribunal following the precedents by way of various decisions of different Benches of the Tribunal mentioned therein, the claim of the assessee for treating the 'License to collect Toll' as an intangible asset eligible for the claim of depreciation @ 25% as per Section 32(1)(ii) of the Act was justified. The following discussion in the order of the Tribunal dated 29.04.2013 (supra) is relevant :- "7. Before us, it was a common point between the parties that the impugned issue has been adjudicated in favour of the assessee in the following decisions of the Tribunal:- i) Ashoka Buildcon Ltd. in ITA No.1302/ PN/09 dated 20.03.2012. ii) M/s. Kalyan Toll Infrastructure Ltd. in ITA.Nos.201 & 247/Ind/2008 dated 14.12.2010. iii) Dimension Construction Pvt. Ltd. in ITA.No.222, 223, 233 & 857/PN/2009 dated 18.03.2011. iv) Ashoka Info (P) Ltd. (supra) v) Reliance Ports and Terminals Ltd. (supra). 8. The Ld. CIT(DR) appearing for the Revenue, has submitted that the 'intangible assets' eligible for depreciation in section 32(1)(ii) of the Act, are only those ....
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....tenance of the infrastructure facility. Such a right has been adjudicated by the Tribunal in the aforesaid precedents to be in the nature of 'intangible asset' falling within the purview of section 32(1)(i/) of the Act and has been found eligible for claim of depreciation. No decision to the contrary has been cited by the Ld. DR before us and, therefore, we find no reasons to depart from the accepted position based on the aforesaid decisions. 11. So however, the plea of the Ld. DR before us is to the effect that the impugned right is not of the nature referred to in section 32(1)(ii) of the Act for the reason that the agreement with the Government of Madhya Pradesh only allowed the assessee to recover the costs incurred for constructing the road facility whereas section 32(1)(i1) of the Act required that the assets mentioned therein should be acquired by the assessee after spending money. The said argument in our view is factually and legally misplaced. Factually speaking, it is wrong to say that impugned right acquired by the assessee was without incurrence of any cost. In fact, it is quite evident that assessee got the right to collect toll for the specified peri....
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....e specified period. This right as discussed above is an intangible asset falling under section 32(1)(ii) of the Act." 13. We find, the Mumbai Bench of the Tribunal in the case of North Karnataka Expressway Ltd. vs. ACIT and vice versa, vide ITA Nos.4372 & 4373/Mum/2012, for AYs 2005-06 and 2006-07 and ITA No. 4709/Mum/2012 for AY. 2005-06, order dated 24th May, 2021, while deciding identical issue, has observed as under:- "We find that the aforesaid order of the "Special bench" of the Tribunal, had thereafter been followed by the ITAT "J" bench, Mumbai, in the case of DCIT, Circle-9(1)(2),Mumbai Vs. M/s Atlanta Ltd. Mumbai (ITA No. 3415/Mum/2015, dated 24.01.2018). Also, a similar view had been taken by the ITAT, Chennai in the case of ACIT, Co-operative circle 5(2), Chennai Vs. M/s PNG Toll Way Ltd (ITA No. 238/CHNNY/2019, dated 26.07.2019; AND ITAT "E" Bench, Mumbai in the case of ACIT (Cir). 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. In the backdrop of the aforesaid judicial pronouncements, we are of the considered view that the issue as to whether an Infrastructure Development....