TaxTMI 
TaxTMI 
2024 (10) TMI 739
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.... up as a lead case and the decision rendered therein shall be applicable mutatis mutandis to the appeal for the assessment year 2014-15. The assessee has raised similar grounds in both appeals, therefore the grounds raised in ITA no. 3787/Mum./2023 are reproduced as follows:- "Disallowance of Depreciation: 1.1) On the facts and circumstances of the case and in law, the Learned Commissioner of income Tax (Appeals)-56 ("CIT-A') erred by upholding the order of Learned AD by erroneously rejecting the claim of the appellant that the appellant is entitled to claim depreciation on Project Road u/s 12 of Act, treating the same as "Intangible assets". The Appellant prays that the right to set up an "infrastructure facility' and collect annuity thereon being in the nature of a "license" or "business' or 'commercial right' be regarded as an "intangible asset in terms of the provision of Section 32(1)(ii) of the Income-tax Act, 1961 (the Act). The Appellant prays that they had constructed the road and have the right to earn revenue in the form of annuity from the use of such "intangible asset" being a 'license' or 'business' or ....
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....he year under consideration, the assessee filed its return of income on 29/11/2011 declaring a total loss of Rs. 141,07,38,604 and book profit under section 115JB at Rs. (-)23,24,33,095. The National Highway Authority of India awarded the assessee the bid for four-laning of the Hazaribagh - Ranchi section on NH-33 in the State of Jharkhand on a Build, Operate and Transfer ("BOT") basis. The assessee constructed the Expressway toll road as per the agreement with the principal being a State Authority. The assessee capitalised the cost of the project during the year and as per the Concession Agreement, it maintained an escrow account for depositing the receipts. During the assessment proceedings, from the perusal of the record, it was found that the assessee claimed depreciation on roads and bridges amounting to Rs. 153,56,83,533. Accordingly, the assessee was asked to furnish the details and explanation. In response thereto, the assessee submitted that it claimed depreciation at Rs. 152,56,62,864 treating the road as "plant and machinery" and depreciation @15% of the total cost of construction of the project facility amounting to Rs. 1017,10,85,761. By relying on various judicial pre....
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....concession period. Being aggrieved, the assessee is in appeal before us. 7. During the hearing, the learned Authorised Representative ("learned AR") submitted that while deciding the issue against the taxpayer the Hon'ble Madras High Court in L & T Infrastructure Development Projects Limited (supra) interpreted the term "any other business or commercial rights of similar nature" in Explanation 3(b) to section 32(1)(ii) of the Act by applying the principle of noscitur a sociis instead of applying the principle of ejusdem generis. In support of the aforesaid submission, the learned AR relied upon the decisions of the Hon'ble Supreme Court in CIT v/s Smifs Securities Ltd, reported in [2012] 348 ITR 302(SC) and Techno Shares and Stocks Ltd v/s CIT, reported in [2010] 327 ITR 323 (SC). The learned AR fairly agreed that the issue of whether depreciation is allowable on toll roads by considering the same as tangible assets has been decided against the taxpayer by the Hon'ble Jurisdictional High Court. The learned AR submitted that the depreciation on the toll road has been directed to be allowed by considering the same as an intangible asset by various decisions of the coordinate bench....
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....y the Government/notified authority for the purpose of a construction project without any actual transfer of ownership and such Concessionaire has only a right to develop and maintain such asset. The ownership of the land on which the road is constructed remains with the authority granting the development rights. The Concessionaire, doing development, enjoys the benefits arising from the use of assets through collection of toll/annuity (right) for a specified period without having actual ownership of land developed as a road. 11. The assessee capitalised the total costs of Rs. 1017,10,85,761 in its books of accounts. Accordingly, for the year under consideration, the assessee claimed depreciation amounting to Rs. 135,96,43,157 considering roads as "plant and machinery" which was disallowed by the AO. The assessee claimed aggregate depreciation of Rs. 135,96,43,157 on opening WDV as on April 2013 of Rs. 8,64,55,40,021 plus addition during the year of Rs. 39,05,57,529. The closing WDV as on 31/03/2014 is Rs. 767,64,54,397. 12. We find that in the case of North Karnataka Expressway Ltd (supra), the issue arose before the Hon'ble Jurisdictional High Court that when a taxpayer who....
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....her business or commercial rights of similar nature." 16. In support of the aforesaid plea, the learned AR placed reliance upon various decisions of the coordinate bench of the Tribunal, wherein this issue has been decided in favour of the taxpayer. Further, reliance was also placed upon the decision of the Special Bench of the Tribunal in DCIT v/s Progressive Constructions Ltd (supra), wherein it was held that expenditure incurred by the taxpayer for construction of road under BOT contract by the Government of India gives rise to an intangible asset as defined under the Explanation-3(b) read with section 32(1)(ii) of the Act and the assessee would be eligible to claim depreciation on such asset at a specified rate. The relevant findings of the Special Bench of the Tribunal, in the decision cited supra, are reproduced as follows: - "16. We have already held earlier in the order that by incurring the expenditure 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 co....
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....he 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 referred to in section 32(1)(ii) of the Act preceding the term "business or commercial right of similar nature", it could be seen that the said intangible assets are not of the same line and are clearly distinct from one another. The Court observed, the use of words "business or commercial rights of similar nature", after the specified intangible assets clearly demonstrates that the legislature did not intend to provide for depreciation only in respect of specified intangible assets but also to other categories of intangible assets 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 fra....
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....e for depreciation. While deciding this issue, the Hon'ble Supreme Court applied the principle of ejusdem generis and held in favour of the taxpayer. Further, in Techno Shares and Stocks Ltd (supra), the issue before the Hon'ble Supreme Court was whether the right of membership conferred upon a member under the BSE membership card was a "business or commercial right", and thus, is a depreciable asset. Therefore, it is evident that in none of the aforesaid decisions the issue before the Hon'ble Supreme Court was similar to the present case. 18. On the contrary, the Revenue has relied upon the decision of the Hon'ble Madras High Court in L & T Infrastructure Development Projects Limited (supra). The basic facts of the case, as noted by the Hon'ble Madras High Court in the judgment, are as follows: - "42. The these two assessee companies were conceived and incorporated as Special Purpose Vehicle (SPV) for the purpose of construction, operation and maintenance of the respective toll bridges and roads under Build Operate & Transfer (BOT) Scheme. 43. Concessionaire Agreements were entered into between the respective assessee with the Government of India and Governmen....
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.... We are of the view that the second part of the 1" substantial question of law as to whether the respective assessees have any "Intangible Assets" under the respective Concessionaire Agreements as per the definition in Explanation 3(b) to Section 32 of the Income Tax Act, 1961 also requires to be answered against the assessee. The definition of the above expression has already been extracted above. 121. The expression used in the last part of the definition of "Intangible Asset" is licenses, franchises or any other business or commercial rights of similar nature". 122. The meaning of the above expression "licenses" and the phrase" any other business or commercial rights of similar nature" has to be inferred from the meaning of the words along with which they have been used. Their meaning has to be inferred from the meaning of the expression "know-how", "patents", "copy rights", "trademark", "franchises" by applying the principle of nocitur a sociis. 123. In Maxwell's Interpretation of Statutes (12th Edition) at page 289, it has been stated as follows:- "Where two or more words which are susceptible of analogous meaning are coupled together, n....
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....upra), while deciding the issue in favour of the taxpayer. Both the principle of noscitur a sociis and the principle of ejusdem generis are the tools for the construction of general words as per the Principles of Interpretation of Statute. As noted by the Hon'ble Madras High Court, in the aforesaid decision, from Maxwell's Interpretation of Statutes (12th Edition), the meaning of the principle of noscitur a sociis is that when two or more words which are susceptible of analogous meaning are coupled together, they are understood to be used in their cognate sense. It means associated words take their meaning from another under the principle of noscitur a sociis. It is also well-settled that the principle of noscitur a sociis is wider than the principle of ejusdem generis and it means that when particular words pertaining to a class, category or genus are followed by general words, the general words are construed as limited to things of the same kind as those specified. Therefore, it is the plea of the assessee that while interpreting the term "any other business or commercial rights of similar nature" in Explanation 3(b) to section 32(1)(ii) of the Act, the principle of ejusdem gener....
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....e aforementioned decision, we find that the Third Member Bench of the Tribunal held that the judgment of the non-jurisdictional High Court, though only judgment on the point, which has been rendered without being informed about the statutory provision that is directly relevant or without noticing a previous binding precedent was held to have been rendered per incuriam, and thus not binding. Accordingly, the Third Member Bench of the Tribunal held that the decision of the Special Bench on the issue should be given preference over the sole decision of the non-jurisdictional High Court on the issue. The relevant findings of the Third Member Bench of the Tribunal, in the decision cited supra, are as follows: - "7. I have considered the rival arguments presented before me by both the sides. It all boils down to this, namely, whether the order of the Special Bench upholding the levy of interest in light of sub-section (4) of section 115JA should be followed or the judgment of the Bombay High Court in Snowcem India Ltd.'s case (supra), also rendered in the context of section 115JA, has to be applied. Both the decisions are under section 115JA with which we are concerned. One ....
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....y a lower court. In the present case, the attention of the Bombay High Court in Snowcem India Ltd. (supra) was not drawn to sub-section (4) of section 115JA, as has been pointed out by the learned AM in his dissent. The High Court therefore had no occasion to examine the question whether the decisions of the Karnataka High Court and the Supreme Court in Kwality Biscuits Ltd. (supra), rendered in the context of section 115J which did not have a sub-section similar to sub-section (4) of section 115JA would still be applicable as binding precedent in a case which arises under section 115JA. This aspect has also been highlighted by the learned AM. The argument on behalf of the assessee before me was that the section in its entirety was before the Bombay High Court in Snowcem India Ltd.'s case (supra), which includes sub-section (4). I am unable to accept this argument because the sub-section is considered crucial and it is the contention of the department that it has made all the differences between section 115J on the one hand and sections 115JA and 115JB on the other, and therefore non-advertance to the same makes it impossible for the assessee to rely on the judgment as authorit....