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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI INTURI RAMA RAO & SHRI S.S. VISWANETHRA RAVI
आदेश / ORDER
PER INTURI RAMA RAO, AM:
These are three appeals filed by the Revenue directed against different orders of the Commissioner of Income Tax (Appeals)-12, Pune and Commissioner of Income Tax (Appeals)-1, Nashik, dated 17.09.2018 and 13.11.2018 for the assessment years 2015-16 & 2014-15, respectively.
Since the identical facts and issues are involved in all these appeals, we proceed to dispose of them vide this common order.
For the sake of clarity and convenience, the facts relevant for the appeal in A.Y. 2015-16 in the case of M/s. Ashoka Dhankuni Kharagpur Tollway Ltd. are stated herein.
Briefly, the facts of the case are as under: The respondent-assessee is a company incorporated under the provisions of The Companies Act, 1956. It is a special company formed for the purpose of undertaking an infrastructure project of construction and maintenance of roads under the Build, Operate and Transfer (BOT) scheme of the Govt. of India. The return of income for the assessment year 2014- 15 was filed on 30.09.2015 declaring Nil income. Against the said return of income, the assessment was completed by the Assessing Officer (AO) at a total loss of (-) Rs.10,70,00,398/- vide order dated 16.10.2017 passed u/s 143(3) of the Act. While doing so, the AO disallowed depreciation claim of Rs.232,66,80,231/- claimed on intangible asset license to collect toll.
The factual matrix of the background of the claim is as under:
The assessee had constructed Dhankuni Khargpur road on BOT basis i.e. Build, Operate and Transfer basis. According to the arrangement, assessee had to arrange funds, for constructing the road, on its own and construct & maintain the road facility for the period specified in the concession agreement. On completion of the concession period, assessee has to hand over the road facility to government. In return of all this, assessee had been given the license to collect toll on the road facility for the period specified in the concession agreement. As correctly stated by AO, the road facility developed by assessee is not owned by it and therefore it is not its asset. In exchange of construction of road for the government, assessee is allowed to collect toll on the road facility. Therefore, it can be said that the huge cost incurred by assessee on construction of the road facility is, in commercial reality for acquiring the right to collect toll and therefore, the real asset for company is the right / license to collect toll, which is an intangible asset, as envisaged u/s 32(1)(ii). Accordingly, assessee had capitalized all the cost incurred on construction of the road facility, as the cost incurred to acquire the license to collect toll and has claimed depreciation @25% on the WDV of the capitalized value of the License, under the head of intangible assets. The notification issued by the Government, allowing assessee to collect toll, is in the name of assessee and therefore, it can be said that assessee is the owner of the intangible asset, which has been capitalized in the books of account as “License to collect Toll”. Therefore, the condition of “Ownership”, as envisaged in Sec. 32 is also fulfilled by assessee for claiming depreciation. The said claim was negated by the AO holding that it is not a case of license or commercial rights, hence the provisions of section 32(1)(ii) of the Act have no application. Being aggrieved by the decision, an appeal was preferred before the CIT(A), who vide impugned order held that the right to collect the toll is an “intangible asset” qualifies for depreciation @ 25% following certain judicial precedents of ITAT, Pune and accordingly allowed the claim.
Being aggrieved by the order of CIT(A), Revenue is in appeal before us in the present appeal. The ld. Sr.DR submits that the CIT(A) ought not to have granted depreciation in view of the fact that the respondent- assessee is not the owner of any asset and placing reliance on the CBDT Circular No.9/2014 dated 23.04.2014 prayed that the claim of the respondent-assessee not to be allowed.
On the other hand, the ld. counsel for the assessee placed reliance on the decisions of the Co-ordinate Bench of the Tribunal in the cases of (i) ACIT vs. M/s. Jaora Nayagaon Toll Road Company Private Ltd. (ITA Nos.379 & 380/PUN/2016, order dated 29.11.2017), (ii) ACIT vs. M/s. Jaora Nayagaon Toll Road Company Private Ltd. (ITA Nos.1525 to 1527/PUN/2018, order dated 11.01.2022), (iii) DCIT vs. Ashoka Highways (Bhandara) Ltd. & Anr. (ITA Nos.1388 & 1389/PUN/2018, order dated 01.11.2021), (iv) Ashoka Infrastructure Ltd. (ITA No.1452 to 1457/PUN/2014 dated 30.06.2017, (v) decision of ITAT (Special Bench) Hyderabad in the case of ACIT vs. Progressive Constructions Ltd. (92 taxmann.com 104) and (vi) decision of the Hon’ble Madras High Court in the case of Tamil Nadu Road Development Co. Ltd. (130 taxmann.com 63).
We have heard the rival contentions and perused material on record. The only issue in the present appeal relates to whether or not the cost of “Right to Collect Toll” qualifies as “intangible asset” as defined under clause (ii) of sub-section (1) of section 32 of the Act. There is no dispute about the cost of acquisition. The only dispute is with regard to the true nature of the rights acquired in terms of the contract awarded by the NHAI. The relevant provisions of section 32(1)(ii) are extracted herein below for ready reference:- “Depreciation. 32. (1) In respect of depreciation of— (i) ………. (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, [not being goodwill of a business or profession,]”
Now the question that comes up for our consideration is whether the “Right to Collect Toll” falls within the definition of commercial right or “intangible asset”? There can be no doubt that as result of developing this project, the respondent-assessee had acquired a commercial right to collect the toll in terms of the contract awarded by NHAI. This right definitely falls within the meaning of “commercial right” or “intangible asset”. This definitely would qualify for depreciation @ 25%. To the same effect is the decisions of the Hon’ble Rajasthan High Court in the case of GVK Jaipur Expressway Ltd., the High Court has taken into consideration all the decisions and more particularly the decisions of (i) Hon’ble Delhi High Court in the case of Moradabad Toll Road Co. Ltd.; (ii) Hon’ble Allahabad High Court in the case of CIT v. Noida Toll Bridge Co. Ltd. [reported in [2013] 30 taxmann.com 207]; (iii) Hon’ble Madras High Court in the case of CIT v. VGP Housing (P.) Ltd. [reported in [2016] 66 taxmann.com 354]; (iv) Hon’ble Rajasthan High Court in the case of CIT v. Jawahar Kala Kendra [reported in [2014] 43 taxmann.com 159]; (v) Hon’ble Rajasthan High Court in the case of CIT v. Mohd. Bux Shokat Ali [reported in [2001] 118 Taxman 712].
The decisions of the Hon’ble Jurisdictional High Court in the case of North Karnataka Expressway Ltd. vs. CIT, 372 ITR 145; (vii) CIT vs. West Gujarat Expressway Ltd. (No.1), 390 ITR 398 and (viii) CIT vs. West Gujarat Expressway Ltd. (No.2), 390 ITR 400 have no application to the facts of the present case, inasmuch as, the decision in the said two cases relates to the allowability of depreciation on roads treating as “building”. In the circumstances, we do not find any illegality in the order of the ld. CIT(A). Accordingly, we do not find any merit in the appeal filed by the Revenue. Hence, the grounds of appeal raised by the Revenue are dismissed.
In the result, the appeal filed by Revenue in is dismissed.
As mentioned earlier, the facts and issues involved in all the appeals are identical, therefore, our decision in & 188/PUN/2019. Accordingly, the grounds of appeal raised by the Revenue in ITA Nos.187 & 188/PUN/2019 are dismissed.
Resultantly, all the appeals of Revenue are dismissed.
Order pronounced in the open court on 19th July, 2022.