TaxTMI 
TaxTMI 
2024 (10) TMI 739
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....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 'commercial right' as contemplated in section 32(1)(ii) of the Act. The Appellant prays that th....
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....t 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 precedents, the assessee submitted that any asset that helps an assessee to earn revenue should be treated as a "plant". In the alternative, the....
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....R") 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 of the Tribunal including the decision of the Special Bench of the Tribunal in DCIT v/s Progressive Constructions Ltd, reported in [2018] 63 ITR(T)....
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....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 is in the business of infrastructure development in the execution of an agreement constructs a road and on Build, Operate and Transfer (BOT) basis on the lan....
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....en 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 cost incurred in executing the project but also with some amount of profit. Therefore, there cannot be any dispute that the right to operate the project facility and collect toll charges therefrom in lieu of the expenditure ....
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....ts, 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 franchise. The Court observed, any intangible assets which are invaluable and result in smoothly carrying on the business as part of the tool of the trade of the assessee would come within the expression "any other business o....
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....ourt 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 Government of Gujarat as detailed under:- SI.No Name of the Assessee Date of the Concession Agreement Period Name of the Bridge 1 i) L&T Infrastructure Development Projects Ltd.(Formally M/s. Narmada Infrastructure Construction Enterprises Limited)# ....
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....nst 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, nocitur a sociis, they are understood to be used in their cognate sense. They take, as it were, their colour from each other, the meaning of the more general being restricted to a sense analogous to that of the less general." 124. As per the above principle the words must take colour from words with which they are associated. 125. In ....
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....ing 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 generisbe applied instead of the principle of noscitur a sociis. 21. In the present case, despite the grant of multiple opportunities, the assessee could not bring any decision of the Hon'ble Supreme Court or any other Hon'ble High Court which is contrary to the decision of the Hon'ble Madras High Court in L & T Infrastructure Development Projects Limited (supra) on the issue u....
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.... 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 is of a Special Bench of the Tribunal, Ahmedabad and the other is of a High Court, though not the jurisdictional High Court. A simple answer would be that the judgment of a High Court, though not of the jurisdictional High Court, prevails over an order of the Special Bench even though it is from the jurisdictional Bench (of the Tribunal) on the basis of the view that the High Court is....
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....d 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 authority on the interpretation of the sub-section. It is futile to speculate what would have been the decision if sub-section (4) of section 115JA had been brought to the notice of the Hon'ble Bombay High Court, but suffice to say, for the present purpose, that the judgment cannot be relied upon by the assessee as being entirely in its favour on all the aspects of section 115JA or, more particu....