TaxTMI 
TaxTMI 
TaxTMI 
2022 (7) TMI 1440
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....nce with the provisions of the Act. The order so passed is erroneous, bad in law and must be quashed. 3. That the rejection of claim of depreciation on highway project amounting to Rs. 49,32,87,659/- on the basis of ownership issue and instead allowing deduction for amortization cost on highway project developed on BOT basis of Rs. 38,46,29,754/-, on the basis of CBDT circular is misconceived, erroneous and does not sustain in law. Hence, the disallowance sustained by the Ld. CIT(A) are illegal, bad in law and without jurisdiction. 4. The Ld. CIT(A) has grossly erred on facts and in law in sustaining the wrong amount of amortization expenditure taken by Ld. AO in the assessment order without appreciating the facts and submission of the appellant. 5. That on the facts & circumstances of the case, the both the lower Authorities has erred in law in not considering the correct amount of amortization expenditure of Rs. 39,63,46,436/- and allowing wrong amount of amortization cost of Rs. 38,46,29,754/-. The orders so passed by the learned CIT-(A) and Ld. AO are illegal, bad in law & deserves to be quashed. 6. That the documents, explanations filed by the assessee and the material....
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.....Y 2012-13 & A.Y 2013-14; [iii] Valecha Badwani Sendhwa Tollways v. PCIT-11, Mumbai (ITA No. 2848/MUM/2018) A.Y. 2013-14; [iv] ACIT-l0(l), Mumbai v. M/s West Gujarat Expressway Ltd. (ITA No. 5904/M/2012) A.Y 2009-10 and (ITA No. 6244/M/2012) A.Y. 200910; [v] M/s Mokama Munger Highway Ltd v. ACIT Hyderabad (ITA Nos. 1729, 2145 & 2146/Hyd/2018) A.Y. 2013-14 to 2015-16; [vi] DCIT Circle-16(2), Hyderabad v. M/s Madhurai Tuticorin Expressway Ltd., Hyderabad (ITA Nos. 2119, 2120 & 2121/HYD/2018) A.Y. 2012-13, 2013-14 & 2014-15; [vii] ACIT Corporate Circle 5(2), Chennai v. M/s PNG Tollway Ltd (ITA No. 238/Chny/2019) A.Y. 2014-15; [viii] M/s Kosi Bridge Infrastructure Company v. PCIT-6 (ITA No. 3471 /MUM/2019) A.Y. 2012-13 & (ITA No. 3578 /MUM/2019) A.Y-201415; [ix] M/s Madras Industrial Investment Corp. Ltd. v. Commissioner of Income Tax (Supreme Court of India) dated 04.04.1997; [x] Uco Bank, Calcutta v. CIT, Bengaluru (Civil Appeal No.235 of 1996) A.Y. 1981-82; [xi] CIT v. Mrs Avtar Mohan Singh (1983 6 ITD 465 Delhi); [xii] Catholic Syrian Bank Ltd v. CIT, Thrissur (Civil Appeal No.1143 of 2011) A.Y. 2002-03; [xiii] CIT, Mumbai v. Anjum M.H. Ghaswala & Ors. (Civil ....
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....m National Highway Authority of India (NHAI). 6.3 The company in the books of accounts treated the expenditure made on execution/ construction of such highway as fixed asset and amortized the said expenses incurred on the project over the life of the tender, i.e. over the period when the appellant company would be allowed to operate such highway and earn income from toll charges. The amortization expenses debited by the company in the books of accounts for the said project amounted to Rs.39,63,46,436/-. Further, while making the computation of income, the appellant company added the said amortization expense back to the net profit and instead treated the same as 'fixed asset being the road project' as 'building' and claimed depreciation at the rate of 10% amounting to Rs. 49,32,87,659/-. 6.4 The AO after considering the facts of the case and after placing reliance on the Circular Number 09/2014 issued by CBDT on 23/04/2014, has given a finding that depreciation at the rate of 10% cannot be claimed by the appellant company by treating the road project as building. The AO further stated that instead, as per circular, the expenditure incurred on the project should ....
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....te and Transfer (BOT) basis on land owned by Government, assessee could not claim depreciation on toll road so constructed and operated. 6.8 After considering the decision of the Hon'ble High Court, I am of the view that the AO was correct in making the adjustment and disallowing the depreciation and allowing the amortization expenses for the reasons discussed in the assessment order. 6.9 Furthermore, the amount of amortization allowed by the AO is different from the amortization amount claimed by the appellant company in the financial statement. The appellant though raised objection with regard to the same, however, failed to justify the said error. The appellant company failed to rebut the computation of amortization expense made by the AO in the order and only submitted that the AO mistakenly erred in treating an amount of Rs. 38,46,29,754/-instead of the amount of Rs. 39,63,46,436/-. The AO at Para 3.5 placed reliance on the previous year order for the computation of amortization expense amount and made the said adjustment. The appellant company failed to rebut the same. 6.10 Thus, in view of my aforesaid findings, the order of the AO is sustained and the appeal of th....
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....n, for the purpose of the project / project facilities as permitted under the C.A. Clause 2.7 of the C.A. makes it clear that the project site belongs to and has vested in Government of India and the Government of India has full power to hold, dispose off and deal with the same consistent with the provisions of the C.A. However, it also makes it clear that the concessionaire, subject to complying with the terms / conditions of the agreement remains in peaceful possession and enjoyment of the project site during the concession period. It further provides, in the event the concessionaire is obstructed by any person claiming any right, title or interest over the project site or any part thereof or in the event of any enforceable action including any attachment, distraint, appointment of receiver or liquidator being initiated by any person claiming interest over the project sites. Government of India not only will defend such claims or proceedings 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 ....
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....n recoup the cost incurred by it in implementing the project / project facility is to operate the road during the concession period and collect the toll charges from user of the project facility by third parties. Admittedly, the assessee has taken up the project as a business venture with a profit motive and certainly not as a work of charity. Further, by investing huge some of Rs.214 crore, the assessee has obtained a valuable business / commercial right to operate the project facility and collect toll charges. Therefore, in our considered opinion, right acquired by the assessee for operating the project facility and collecting toll charges is an intangible asset created by the assessee by incurring the expenses of 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....
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....f we accept the aforesaid argument of the learned Senior Standing Counsel, in other words, it would mean that without even executing and completing the project facility, assessee would be collecting toll charges. Therefore, the contention of the learned Senior Standing Counsel that the expenditure incurred by the assessee till execution of the agreement can only be considered as an intangible asset, in our view, is illogical, hence, cannot be accepted. Thus, having held that the expenditure of Rs.214 crore incurred by the assessee has resulted in creation of an intangible asset of enduring nature for the assessee, it is necessary now to examine whether such intangible asset comes within the scope and ambit 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 nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business67 or profession....
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....efinition of license under the Indian Easements Act, 1882, it would be clear that immovable property on which the project / project facility is executed / implemented is owned by the Government of India and it has full power to hold, dispose off and deal with the immovable property. By virtue of the C.A., assessee has only been granted a limited right to execute the project and operate the project facility during the concession period, on expiry of which the project / project facility will revert back to the Government of India. What the Government of India has granted to the assessee is the right to use the project site during the concession period and in 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 asses....
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.... would come within the expression "any other business or commercial rights of similar nature". The Hon'ble Supreme Court in CIT v/s Smifs Securities (supra) after interpreting the definition of intangible asset as provided in Explanation 3 to section 32(1), while opining that principle of ejusdem generis would strictly apply in interpreting the definition of intangible asset as provided by Explanation 3(b) of section 32, at the same time, held that even applying the said principle 'goodwill' would fall under the expression "any other business or commercial rights of similar nature". Thus, as could be seen, even though, 'goodwill' 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 inte....
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....ight to operate the toll road / bridge and collect toll charges is a business or commercial right as envisaged under section 32(1)(ii) r/w Explanation 3(b) of the said provisions. Therefore, in our considered opinion, the assessee is eligible to claim depreciation on WDV as an intangible asset. Thus, we answer the question framed by the Special Bench as under:- The expenditure incurred by the assessee for construction of road under BOT contract by the Government of India has given rise to an intangible asset as defined under Explanation 3(b) r/w section 32(1)(ii) of the Act. Hence, assessee is eligible to 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. 19. Insofar as ground no.4 is concerned, it is the contention of the Department that the learned Commissioner (Appeals) should have directed for amortization of the expenses incurred for construction of BOT road in terms of CBDT Circular no.9 of 2014 dated 23rd April 2014. 20. As already discussed in the earlier part of the order and dealt in detail in order dated 4th A....