DCIT, CENTRAL CIRCLE -1, NASHIK vs. M/S MAHAKALESHWAR TOLLWAYS PVT LTD, MADHYA PRADESH

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ITA 282/PUN/2020Status: DisposedITAT Pune27 July 2022AY 2014-20154 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessee is entitled to claim depreciation on the 'right to collect toll' as an intangible asset under Section 32(1)(ii) of the Income Tax Act. This was supported by previous tribunal decisions and a Special Bench ruling.

What were the facts?

The Revenue appealed against the CIT(A)'s order allowing depreciation on 'Concessionaire Rights' for a BOT project. The Revenue argued that the assessee was not the owner of the road and therefore not eligible for depreciation.

What were the issues?

Whether depreciation is allowable on 'concessionaire rights' or 'right to collect toll' as an intangible asset under Section 32(1)(ii) of the Income Tax Act, even if the assessee is not the owner of the underlying physical asset.

Which sections of the Income-tax Act were involved?

Section 32(1)(ii)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, ‘A’ BENCH, PUNE

For Appellant: Shri Rajiv Kumar
For Respondent: Shri Ankit Gattani

ORDER

PER S.S. GODARA, JM :

1.

This Revenue’s appeal for A.Y. 2014-15 arises against the CIT(A)-12, Pune’s order dated 28-01-2020 passed in case No. CIT(A)- Pune- 12/170761/2016-17 involving proceedings u/s 143(3) of the Income-tax Act, 1961, in short “the Act”.

Both the parties heard. Case file perused.

2.

The Revenue raises the following substantive grounds in the instant appeal. 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in withdrawal of amortization claim amounting to Rs.7,50,01,996/- and correspondingly allowing claim for depreciation on the "Concessionaire Rights" @ 25% amounting to Rs. 39,67,40,009/-. 2. On the facts and circumstances of the case and in law, the Id. CIT(A) erred in allowing depreciation on the expenditure incurred by the Assessee Company on the 'Build, Operate, and Transfer' project, by considering such expenditure as on intangible asset, and within the meaning of Section 32(1)(ii) of the Income Tax Act, 1961 even when it is clear that assessee is not the owner of the asset and thus depreciation on the same cannot be allowed u/s 32 of the IT Act.

3.

On the facts and circumstances of the case and in law, the Id. CIT(A) has failed appreciating the fact that the depreciation is not allowable on toll road constructed under the Built, Operate and Transfer(BOT) basis, since the toll road belongs to the Government and the taxpayer was not the owner of the said road, thereby ignoring the Bombay High Court order in North Karnataka Expressway Ltd of 2012 dated 14th Oct.,2014 4. On the facts and circumstances of the case and in law, the Id. CIT(A)

2 Mahakaleshwar Tollways Pvt. Ltd. A.Y. 2014-15 erred in holding that the commercial rights are in the nature of license, and are therefore, to be held as intangible assets, and provisions of Section 32(1)(ii) are applicable even when it is clear that the Agreement is not in the form of licensing agreement, but in the form of repayment/reimbursement agreement.

5. On the facts and circumstances of the case and in law, the Id. CIT(A) erred in not considering the fact that permission granted by the State Government to collect toll, has no element of depreciation and that the project did bring some kind of enduring benefit to the assessee but it did not bring into existence any new capital asset for the assessee.

6.

On the facts and circumstances of the case and in law, the Id. CIT(A) erred in accepting fresh claim of depreciation at the time of appeal without giving opportunity to AO to examine the claim made by assessee in violation of Rule 46A of Income Tax Rules 1962.

7.

On the facts and circumstances of the case and in law, the Id. CIT(A) erred in allowing relief by relying on decision of M/s Ashoka Infraways(P.) Ltd failing to appreciate that the said decision of ITAT is pending before the Hon'ble Bombay High Court for adjudication.

8.

On the facts and in the circumstances of the case, the ld. ICIT(A) at best should have kept the appeal in abeyance, till the decision of appeal by Hon’ble High court.

9.

Any other grounds to be raised at the time of hearing.

10.

It is humbly prayed to set aside the order of CIT(A) and restore the order of the A.O.”

3. Suffice to say, it emerges during the course of hearing that the Revenue’s sole substantive grievance is that the CIT(A) has erred in law and on facts in granting depreciation relief to the tax-payer despite the fact that it was not the owner of the road/BOT project concerned.

4.

We find no merit in the Revenue’s instant arguments. The assessee had in fact claimed depreciation relief on the “right to collect toll” in the nature of an intangible asset u/s 32(1)(ii) of the Act which has been held as allowable not only in its own case for A.Y. 2011-12 before the tribunal involving Revenue’s appeal but also the tribunal’s Special Bench decision ACIT Cir. 16(2) Hyderabad Vs. Progressive Constructions Ltd. (2018) 92 taxmann.com 104 (Hyd- Trib)(SB) has rejected the Revenue’s identical arguments. This is coupled with the fact that their lordships in para 24 of foregoing case law have drawn a distinction that the assessee is entitled to claim

3 Mahakaleshwar Tollways Pvt. Ltd. A.Y. 2014-15 depreciation by treating the right to collect toll as a intangible asset u/s 32(1) of the Act. Faced with this situation, we reject the Revenue’s instant sole substantive ground as well as the main appeal. Ordered accordingly.

5.

This Revenue’s appeal is dismissed. Order pronounced in the open court on 27TH day of July 2022.

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