TaxTMI 
TaxTMI 
2024 (8) TMI 1751
X X X X Extracts X X X X
X X X X Extracts X X X X
....9;ble Supreme Court in the case of Madras Industrial Investment Corporation Ltd. Vs. CIT 1997 225 ITR (SC) and following the CBDT Circular No. 09/2014 dat2d 3rd April, 2014, in the impugned order dated 26th August, 2020 passed d by the Learned CIT(A). b) On the facts and in the circumstance of the case, the Learned CIT(A) erred in concluding and upholding that the Appellant was neither the owner of the Intangible Asset by way of "Rights to collect Toll" nor did the "Rights to collect Toll" fall in any of the categories of "intangible assets" as defined under the Act, so as to be eligible for Depreciation thereon under Section 32(1)(ii) of the Act. c) On the facts and in the circumstances of the case, the Learned CIT(A) erred in confirming the disallowance of Depreciation on Intangible Assets by way of "Rights to collect Toll" under Section 32(1)(ii) of the Act on an unsustainable ground that the Appellant is not the owner of the toll road and the toll road belongs to the Government. d) ignoring and disregarding the fact that the "Rights to collect Toll", acquired by the Appellant in consideration of the various obligations undertaken by it under the Conce....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r of the assessee. The ld DR also produced the decision of Hon'ble Madras High Court in the case of M/s Narmada Infrastructure Construction Enterprise Ltd which was in favour of the Revenue. 9. We have heard the submissions and have perused the relevant material on record. The factual matrix in the instant case is that the assessee company has entered into a Concession Agreement dated 21st March, 2012 with National Highway Authority of India (NHAI) to build six lane road on Vijayawada-Gundugolanu of NH-5. Under the Concession agreement, the assessee is required to build the 103.59 Km road on Built Operate and Transfer Toll (BOT-Toll) basis. Under the Concession Agreement, the assessee is empowered to collect toll for 30 years from the appointed date which is 21st September, 2014. 10. During the year under consideration, the assessee company has treated the cost of constructing six lane Vijayawada-Gundugolanu Section of National Highway-5 as a cost for obtaining the right to collect toll. The assessee has treated the right to collect toll as "intangible asset" and on this "intangible asset", the assessee has claimed depreciation @ 25%. 11. The Assessing Officer held that th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in the project except recovery of toll fee to recoup the expenditure incurred and therefore, it cannot be treated as an owner of the property, either wholly or partly, for purposes of allowability of depreciation under section 32(1 )(ii) of the Act. However, the project brings to the taxpayer an enduring benefit and he is entitled to recover cost incurred by him towards development of such facility. The Supreme Court in the case of Madras Industrial Investment Corporation Ltd. allowed spreading over of liability over a number of years on the ground that there was continuing benefit to the company over a period. In view of the CBDT, such expenditure incurred on the infrastructure project may be treated as having been incurred for the purposes of business of the taxpayer and same may be allowed to be spread during the tenure of concessionaire agreement. In view of above, the CBDT clarified that the, cost of construction on development of infrastructure facility of roads/highways under BOT projects may be amortised and claimed as allowable business expenditure under the Act. The amortisation allowable may becomputed at the rate which ensures that the whole of the cost incurre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of M/s Progressive Construction Limited, Hyderabad(supra) dated 14.02.2017dealt with the question whether the expenditure incurred by the assessee for construction of Road gives rise to an intangible asset eligible for depreciation @ 25% and decided in favour of the assessee. The decision of Hon'ble Madras High Court dated 29.12.2022 in the case of M/s Narmada Infrastructure Construction Enterprises Limited Vs. ACIT order in TCA Nos. 868 to 870 of 2009 and others, on the other hand, decided this issue in favour of Revenue. It further held the CBDT Circular no 9 of 2014 as correctly clarifying the legal position. 14. On the question of whether expenditure incurred creates a tangible or intangible asset, the Hon'ble Madras High Court (supra)held as under: "101. Under the BOT arrangement/scheme, it can never be impugned and conceived that the respective assessee were the owners of the respective "Toll Roads" and "Toll Bridges" In fact, these infrastructures on the National Highway or State Highway or public road can never be treated as "Assets" of a private individual. 102. Public properties such as "Toll Roads" and "Toll Bridges" on the State/National Highway....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wered 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 (12 th 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 wo....