TaxTMI 
TaxTMI 
2022 (9) TMI 810
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....ntangible Assets (i.e. Concessionaire I Toll Collection Rights) and allowing amortization of construction cost of toll road over a period of toll collection rights i.e. 12 years, resulting in net disallowance of Rs.18,84,19,089 (depreciation claimed on intangible assets Rs.31 52,76,735!- and amortization allowed Rs.12,68,57,6461-). 2.2. The learned CIT(A) has erred in law and in facts and in circumstances of the case in not accepting the contention of the Appellant that Concessionaire I Toll Collection Rights falls within the definition of Intangible Assets as per section 32(1)(ii) of the Income tax Act, 1961 ('the Act') entitled for depreciation (c) 25%. The disallowance of depreciation made by the learned CIT(A) in the order passed under section 250 of the Act is required to be deleted. 2.3. The learned CIT(A) has erred in law and in facts and in circumstances of the case by not considering the CBDT Circular No. 9 of 2014 which itself clarifies that total deduction I depreciation claimed up to AY 2014-15 has to be reduced from the total cost and balance amount has to be amortized over the remaining period of toll concessionaire agreement. Thus, the said ....
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....ounds of appeal, submissions of the assessee and findings of the scrutiny assesseement and observed that the assessee is not entitled for claim of depreciation on toll collection rights and confirmed the action of the A.O. Further the CIT(A) has directed the A.O to verify the correct disallowance and partly allowed the appeal of the assessee. Aggrieved by the CIT(A) order, the assessee has filed an appeal before the Hon'ble Tribunal. 4. At the time hearing, the Ld. AR submitted that the CIT(A) has erred in sustaining the disallowance of depreciation on toll collections rights, as it is an intangible asset u/s 32(1)(ii) of the Act. The Ld. AR explained the factual aspects of the case with the synopsis and mentioned that in the earlier assessment year the claim was allowed and supported with catena of judicial decisions and voluminous paper book and prayed for allowing the appeal. 5. Contra, the Ld.DR submitted that the assessee is not entitled for depreciation on toll rights and in earlier assessment year the ITAT has not considered the fact of intangible asset. The Ld.DR emphasized that the issue has not attained the finality and SLP is pending before the Hon'ble Supreme cour....
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....lect toll", being an intangible asset, falling within the scope of Sec. 32(1)(ii) of the Act, was as per the mandate of law. It is the claim of the revenue, that the issue is covered against the assessee by the judgments of the Hon"ble High Court of Bombay in the case of North Karnataka Expressway Ltd. Vs. CIT-10 (2015) 272 ITR 145 (Bom) and CIT Vs. West Gujarat Expressway Ltd. (2017) 390 ITR 398 (Bom). On the contrary, it is the claim of the assessee that the issue raised in the aforesaid cases was confined to the aspect, as to whether an Infrastructure Development Company which had constructed a "toll road" on BOT basis on land owned by the Central Government would be entitled for depreciation on the same, or not. It is the claim of the ld. A.R, that as the issue as to whether an Infrastructure Development Company which had constructed a "toll road" on BOT basis on land owned by the Central Government would be entitled towards claim of depreciation under Sec. 32(1)(ii) in respect of its intangible rights i.e. "right to collect toll", was neither raised before or adjudicated upon by the Hon"ble High Court in either of te aforesaid cases, therefore, the reliance placed by the reven....
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....er had referred to the observations recorded by the CIT in his under passed under Sec.263 of the Act, wherein he had while declining the assesses claim for depreciation on "toll road" had categorically stated, that it was not the case of the assessee that the claim of depreciation was being raised in respect of its intangible rights i.e right to use the asset without being the actual owner of the same. 9. As observed by us hereinabove, the view taken by the Hon"ble High Court of Bombay in its order passed in the case of North Karnataka Expressway Ltd.(supra), was thereafter once again reiterated by the Hon"ble Court in the case of CIT-10, Vs. M/s West Gujarat Expressway Ltd. (ITA No. 2357 of 2013, dated 05.04.2016). We find that both of the aforementioned judgements of the Hon"ble jurisdictional High Court were rendered in context of the issue, as to whether an Infrastructure Development Company which had constructed a "toll road" on BOT basis on the land owned by Central Government would be entitled for depreciation on such "toll road", or not. We find that the Hon"ble High Court had observed that in the absence of ownership of the "toll road", which belonged to the Centr....
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....urt in its aforesaid order in the case of North Karnataka Expressway Ltd. (supra). We find that the Hon"ble High Court of Bombay had thereafter once again reiterated its aforesaid view, while disposing off the appeal of the revenue in the case of CIT-10 Vs. M/s West Gujarat Expressway Ltd. (ITA No. 2357 of 2013, dated 05.04.2016). As is discernible from the order, the only two issues which were raised by the revenue in its aforesaid appeal before the High Court, were viz. (i). Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in directing the A.O to grant depreciation on assets not owned by the Respondent that goes against provisions of Section 32 of the I.T Act?; and (ii). Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in its decision of treating toll roads as plant and machinery, when this is not as per rule 5 of New Appendix of the I.T Rules?. As such, we find, that the revenue had only sought the adjudication of the issue as to whether the Tribunal was right in allowing depreciation to the assessee on "toll roads" by treating the same as plant and machinery. It is in the backdrop of the afo....
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....of the Tribunal, are as under: "The Mumbai bench of the Tribunal in the aforesaid decision in ACIT Vs. M/s Andhra Pradesh Expressway by a later decision dated 28/02/2018 duly considered various decisions including the decision reversed by the Hon"ble High Court in CIT Vs. West Gujarat Expressway Ltd. (2016) 73 taxmann.com 139; (2017) 390 ITR 400 (Bom)., order dated 05/04/2016. Before us also, the Ld. CITDR/Ld. D.R contended that in view of this decision from the Hon"ble High Court, the assessee is not entitled to depreciation. We have gone through this order and found that the issue before the Hon"ble High Court was with respect to treating toll road as plant and machinery and if that situation decided in favour of the revenue." In the backdrop of the aforesaid facts, we are of the considered view that the reliance placed by the Ld. D.R on the aforesaid judgments of the Hon"ble High Court of Bombay i.e North Karnataka Expressway Ltd. Vs. CIT-10 (2015) 372 ITR 145 (Bom) and CIT-10, Vs. M/s West Gujarat Expressway Ltd. (ITA No. 2357 of 2013, dated 05.04.2016), would not assist the case of the revenue for rebutting the claim of the assessee towards deprecation u/s 32(1)(ii) in respect....
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....f Rs.214 crore. The contention of the learned Senior Standing Counsel that expenditure of Rs.214 crore has brought into existence a tangible asset in the form of roads and bridges 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 th....
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....of section 32(1)(ii) of the Act. For this purpose, it is necessary to look into the said provision which is reproduced hereunder for the sake of convenience. Depreciation. 32(1)(ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature67, being intangible assets acquired on or after the 1st day of April, 1998, owned67, wholly or partly, by the assessee67 and used for the purposes of the business67 or profession, the following deductions shall be allowed- ] 12. Explanation 3 to section 32(1) defines intangible asset as under:- ^85[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 nature^87 . 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 ar....
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.... the absence of such right, it would have been unlawful on the part of the concessionaire to do or continue to do anything on such 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 terme....
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....; is not one of the specifically identifiable assets preceding the expressing "any other business or commercial rights 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 any one 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 r....
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....claim depreciation on such asset at the specified rate. 18. In view of our aforesaid conclusion, there is no need to answer the second part of the question framed. This disposes of grounds no.2, 3, 5 and 6." 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, cooperative circle 5(2), Chennai Vs. M/s PNG Toll Way Ltd (ITA No. 238/CHNNY/2019, dated 26.07.2019. In the backdrop of the aforesaid judicial pronouncements, we are of the considered view that the issue as to whether an Infrastructure Development company which had constructed a road on build, operate and transfer (BOT) basis on the land owned by the Central Government would be eligible for claim of depreciation in respect of its intangible rights i.e "right to collect toll" under Sec. 32(1)(ii), is squarely covered by the aforesaid order of the "Special bench" of the Tribunal in the case of ACIT, Circle 10(2), Hyderabad, Vs. Progressive Construction....