TaxTMI 
TaxTMI 
TaxTMI 
2025 (6) TMI 617
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....e assesse is on record. 4. The Ld.DR on the other hand has opposed the contention for the delay and it was submitted that the delay in filing the appeal is not required to be condoned. 5. We have heard both the parties, gone through the affidavit filed and find there is a reasonable cause for the assessee to file the appeal belatedly, hence condone the delay and admit the appeal for hearing in the interest of justice. 6. The Ld.AR has submitted that the assesse is into development and construction of a project filed its return of income for A.Y.2017-18 on 31.10.2017, declaring loss of Rs. 197,63,34,479/-. Later a revised return was filed on 21.01.2019, admitting the loss of Rs. 197,66,10,848/-. The case was selected for scrutiny and the Assessing Officer issued notices u/s 142(1) and 143(2) of the Act, calling for certain details. In response, the assessee filed the details and the Assessing Officer completed the assessment u/s 143(3) of the Act, determining the loss at Rs. 93,28,65,450/-. The Assessing Officer disallowed the depreciation on the intangible asset amounting to Rs. 162,48,67,242/- and has only restricted to the amortization of Rs. 58,16,55,020/-. Relevant paragraph....
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.... Expressway Ltd. (supra) concludes the issue, we proceed to hear the Appeal finally. Mr. Dalal, the learned counsel for the Respondent sought to distinguish the decision of North Karnataka Expressway Ltd. (supra) by pointing out that in the present Appeal, there is a clause which provides that for the purpose of claiming tax depreciation, the property representing the capital investment made by the appellant shall be deemed to be acquired and owned by the Appellant. According to him such a clause was not present in the decision rendered by this Court in North Karnataka Expressway Ltd. (supra). This is not so. Paragraph 8 of the order passed in North Karnataka Expressway Ltd. (supra) specifically records that the appellant relied upon a clause which is identical to that pressed into service by Mr. Dalal. Thus, the aforesaid clause being relied upon by Mr. Dalal to distinguish the decision of this Court in North Karnataka Expressway Ltd. (supra) is not sustainable. This is so as the very clause was very much a subject matter of consideration by this Court in North Karnataka Expressway Ltd. (supra). We find that this Court had dealt with the issue arising herein on merits as is eviden....
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....ound that the same was not remitted within the due date - Rs. 5,33,179/- b) Disallowance of Depreciation claimed by treating the project developed by it as intangible asset. 3. Aggrieved with the order of assessment, the appellant filed an appeal before the learned CIT (Appeals) who dismissed the appeal. The appellant carried the matter further in appeal before the Hon'ble ITAT. 4. In so far as the disallowance of PF of Rs. 5,33,179/- is concerned, the appellant submitted that the amount was remitted to the authorities before the due date for filing the return of income u/s 139(1) of the I.T. Act and, therefore, no disallowance can be made on this account. 5. The next addition made by the Assessing officer is on account of disallowance of depreciation claimed on the BOT project developed by the appellant. The appellant treated the same as intangible asset and claimed depreciation at 25% of the total cost or Rs. 162,48,67,242/- The Assessing officer disallowed the depreciation and allowed amortisation of Rs. 58,16,55,020/- and the difference of Rs. 104,32,12,222/- (Rs. 162,48,67,242/- Rs. 58,16,55,020/-) is added. The learned CIT (Appeals) is also of the view that the ap....
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....d shall oblige or entitle (as the case may be) the Concessionaire to: (a) Right of Way, access and licence to the Site for the purpose of and to the extent conferred by the provisions of this Agreement. (b) Finance and construct the Project Highway (c) Manage, Operate and Maintain the Project Highway and regulate the use thereof by third parties. Clause No.4.1. Conditions Precedent 4.1.2. The Conditions Precedent required to be satisfied by the Authority shall be deemed to have been fulfilled when the Authority shall have a) Procured for the Concessionaire the Right of Way to the Site in accordance with the provisions of Clause 10.3.1. Clause No. 10.1. The Site 10.1. The site of the Project Highway shall comprise the real estate described in in Schedule-A and in respect of which the Right of Way shall be provided and granted by the Authority to the Concessionaire as a licensee under and in accordance with this Agreement (the "Site"). For avoidance of doubt, it is hereby acknowledged and agreed that references to the Site shall be construed as references to the real estate required for Four-Laning of the Project Highway as set forth in Schedule-A. 10.2.4. It is exp....
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....ect of all or any category of Users or vehicles. Clause No.32.1. Insurance during Concession Period 32.1. The Concessionaire shall effect and maintain at its own cost, during the Construction Period and the Operation Period, such insurances for such maximum sums as may be required under the Financing Agreements, and the Applicable Laws, and such insurances as may be necessary or prudent in accordance with Good Industry Practice. The Concessionaire shall also effect and maintain such insurances as may be necessary for mitigating the risks that may devolve on the Authority as a consequence of any act or omission of the Concessionaire during the Construction Period. The Concessionaire shall procure that in each insurance policy, the Authority shall be a co-insured and that the insurer shall pay the proceeds of insurance into the Escrow Account. For the avoidance of doubt, the level of insurance to be maintained by the Concessionaire after repayment of Senior Lender's dues in full shall be determined on the same principles as applicable for determining the level of insurance prior to such repayment of Senior Lender's dues. Clause No.37.3. Termination Payment 37.3.1. Upo....
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....such divestment shall be borne by the Authority. 10. It can be seen from the above-extracted clauses of the Concession Agreement, there is a clear distinction between the Site of Project Highway and the Infrastructure Facility of the Project Highway in as much as the ownership of the Site of Project Highway was always with the Authority (NHAI) and the Concessionaire (the Assessee Company) was provided with the Right of Way to the Site only and it was never transferred by the Authority to the Concessionaire. Since the ownership of the Site was always with the Authority (NHAI), upon Termination, the Authority shall be deemed to have taken possession and control of the Site without requiring any conveyance deed for its transfer back to the Authority from the Concessionaire. 11. However, unlike the Site of Project Highway, the Concessionaire (the Assessee company) has to Design, Build, Finance and Operate the Infrastructure Facility i.e., Project Highway, on its own during the Concession Period until termination and upon Termination, the Concessionaire (the Assessee Company) has to transfer the Project Highway to the Authority (NHAI) by executing/conveyancing required deeds & docum....
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.... Cycles Pvt Ltd & Ors 228 ITR 463 (SC), CCE v. Ratan Melting & Wire Industries [2008] 13 SCC 1 (SC) and CIT vs. West Gujarat Expressway Ltd. The Hon'ble Tribunal also considered coordinate benches (Delhi) decision in ITA.No.3801/Del/2018 in the case of DCIT v. M/s Telecommunication Consultants India Ltd decided on 26.07.2023 and ITA.No.5555/Del/2018 M/s Gwalior-Bypass Project Ltd v. DCIT. 16. In view of the above, the assessee prays the Hon'ble ITAT to kindly direct the Assessing officer to treat the amount spent on development of the BOT project as intangible asset and allow depreciation at 25% as claimed by the appellant in the return of income filed. COUNSEL FOR THE APPELLANT 8. Besides written submissions the assessee had also submitted Board Circular relied upon by the Ld.AO and the Ld.CIT(A), in fact operates in favour of the assessee and our attention was drawn to Clause 8 which is to the following effect : 8. It is hereby clarified that this Circular is applicable only to those infrastructure projects for development of road/ highways on BOT basis where ownership is not vested with the assessee under the concessionaire agreement 9. Ld.AR had also drawn our at....
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....(the "Concessionaire Default"), unless the default has occurred solely as a result of any breach of this Agreement by the Authority or due to Force Majeure. The defaults referred to herein shall include: (a) the Performance Security has been encashed and appropriated in accordance with Clause 9.2 and the Concessionaire fails to replenish or provide fresh Performance Security within a Cure Period of 30 (thirty) days; (b) subsequent to the replenishment or furnishing of fresh Performance Security in accordance with Clause 9.2, the Concessionaire fails to cure, within a Cure Period of 90 (ninety) days, the Concessionaire Default for which whole or part of the Performance Security was appropriated; (c) the Concessionaire does not achieve the latest outstanding Project Milestone due in accordance with the provisions of Schedule-G and continues to be in default for 120 (one hundred and twenty) days; (d) the Concessionaire abandons or manifests intention to abandon the construction or operation of the Project Highway without the prior written consent of the Authority; (e) Project Completion Date does not occur within the period specified in Clause 12.4.3; (f) the Punch List it....
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.... Concessionaire as at the Appointed Date; and (iii) each of the Project Agreements remains in full force and effect; (t) any representation or warranty of the Concessionaire herein contained which is, as of the date hereof, found to be materially false or the Concessionaire is at any time hereafter found to be in breach thereof; (u) the Concessionaire submits to the Authority any statement, notice or other document, in written or electronic form, which has a material effect on the Authority's rights, obligations or interests and which is false in material particulars; (v) the Concessionaire has failed to fulfil any obligation, for which failure Termination has been specified in this Agreement; or (w) the Concessionaire commits a default in complying with any other provision of this Agreement if such a default causes a Material Adverse Effect on the Authority. 37.1.2 Without prejudice to any other rights or remedies which the Authority may have under this Agreement, upon occurrence of a Concessionaire Default, the Authority shall be entitled to terminate this Agreement by issuing a Termination Notice to the Concessionaire; provided that before issuing the Termination....
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....ce Majeure. The defaults referred to herein shall include: (a) The Authority commits a material default in complying with any of the provisions of this Agreement and such default has a Material Adverse Effect on the Concessionaire; (b) the Authority has failed to make any payment to the Concessionaire within the period specified in this Agreement; (c) the Authority repudiates this Agreement or otherwise takes any action that amounts to or manifests an irrevocable intention not to be bound by this Agreement; or (d) the State commits a material default in complying with the provisions of the State Support Agreement if such default has a Material Adverse Effect on the Concessionaire and the breach continues for a period of 90 (ninety) days from the date of notice given in this behalf by the Concessionaire to the Authority. 37.2.2 Without prejudice to any other right or remedy which the Concessionaire may have under this Agreement, upon occurrence of an Authority Default, the Concessionaire shall, subject to the provisions of the Substitution Agreement, be entitled to terminate this Agreement by issuing a Termination Notice to the Authority; provided that before issuing the T....
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....ave taken possession and control of the Project Highway forthwith; (b) take possession and control of all materials, stores, implements, construction plants and equipment on or about the Site; (c) be entitled to restrain the Concessionaire and any person claiming through or under the Concessionaire from entering upon the Site or any part of the Project; (d) require the Concessionaire to comply with the Divestment Requirements set forth in Clause 38.1; and (e) succeed upon election by the Authority, without the necessity of any further action by the Concessionaire, to the interests of the Concessionaire under such of the Project Agreements as the Authority may in its discretion deem appropriate, and shall upon such election be liable to the Contractors only for compensation accruing and becoming due and payable to them under the terms of their respective Project Agreements from and after the date the Authority elects to succeed to the interests of the Concessionaire. For the avoidance of doubt, the Concessionaire acknowledges and agrees that all sums claimed by such Contractors as being due and owing for works and services performed or accruing on account of any act, omissio....
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....ot adjudicate or decide the fact of ownership. The land or infrastructure can only be transferred in the manner contemplated under the Transfer of Property Act. The Transfer of Property Act only determines the transfer of ownership and in the present case, there is no transfer of ownership by NHAI to the assessee. Furthermore, it was submitted that the assessee had merely laid down the roads on the land provided and therefore the road which is forming part and parcel of the building is only entitled to depreciation @10% as per the definition in Income Tax Rules, 1962, which defines as under : 13. The primary contention of the Revenue is that the assessee is not entitled to depreciation as there is no ownership over the land, infrastructure etc. of the property. Lastly it was submitted by the Ld.DR that the decision relied upon by the assessee are of the Tribunal whereas, the Ld.CIT(A) after relying upon the decision of the Hon'ble High Court of Mumbai in the case of North Karnataka Expressway Ltd. Vs. CIT [2014] 51 taxmann.com 214 (Bombay) and others have decided the issue in favour of the assessee. It was also the contention of the Ld.DR that in both the cases the issue befor....
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....ous year, the deduction under this sub-section in respect of such asset shall be restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause (i) or clause (ii) or clause (iia), as the case may be: Provided also that where an asset referred to in clause (iia)or the first proviso to clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business for a period of less than one hundred and eighty days in that previous year, and the deduction under this sub-section in respect of such asset is restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause (iia)for that previous year, then, the deduction for the balance fifty per cent of the amount calculated at the percentage prescribed for such asset under clause (iia)shall be allowed under this sub-section in the immediately succeeding previous year in respect of such asset: Provided also that where an asset being commercial vehicle is acquired by the assessee on or after the 1st day of October, 1998 but before the 1st day of April, 1999 and is put to use before the 1st ....
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....y them. Explanation 1.-Where the business or profession of the assessee is carried on in a building not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is incurred by the assessee for the purposes of the business or profession on the construction of any structure or doing of any work in or in relation to, and by way of renovation or extension of, or improvement to, the building, then, the provisions of this clause shall apply as if the said structure or work is a building owned by the assessee. Explanation 2.-For the purposes of this sub-section "written down value of the block of assets" shall have the same meaning as in clause (c) of sub-section (6) of section 43. Explanation 3.-For the purposes of this sub-section, 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, not being goodwill of a business or profession. Explanation 4.-For the purposes of this sub-section, the expression "know-how" ....
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....y one previous year; (iii) in the case of any building, machinery, plant or furniture in respect of which depreciation is claimed and allowed under clause (i) and which is sold, discarded, demolished or destroyed in the previous year (other than the previous year in which it is first brought into use), the amount by which the moneys payable in respect of such building, machinery, plant or furniture, together with the amount of scrap value, if any, fall short of the written down value thereof : Provided that such deficiency is actually written off in the books of the assessee. Explanation.-For the purposes of this clause,- (1) "moneys payable" in respect of any building, machinery, plant or furniture includes- (a) any insurance, salvage or compensation moneys payable in respect thereof; (b) where the building, machinery, plant or furniture is sold, the price for which it is sold, so, however, that where the actual cost of a motor car is, in accordance with the proviso to clause (1) of section 43, taken to be twenty-five thousand rupees, the moneys payable in respect of such motor car shall be taken to be a sum which bears to the amount for which the motor car is sold o....
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....ner of the building machinery, plant or furniture, either wholly owned by it or partially owned by it and is used for business purpose. In the present case the infrastructure is not either owned wholly or partially by the assessee. Merely the assessee has raised some construction with the permission of the licensor as a licensee. As per section 52 of Indian Easements Act, 1882, if the construction is in the nature of permanent and is erected with the permission of the licensor then the assessee would not become owner of the structure. In view of the above, we are of the considered opinion that the assessee is not the owner of the structure and is not entitled to any depreciation within the meaning of section 32 of the Act. Furthermore, the issue is no more res-integra and this issue has already been adjudicated by the Hon'ble High Court of Mumbai in the case of North Karnataka Expressway Ltd. Vs. CIT(supra), wherein, relevant finding given by the Hon'ble High Court is extracted as under: "32. To our mind, a reading of these sections together and harmoniously so also the Act as a whole, the National Highways vest in the union and for the purposes of the Act, they include all appur....