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Before: Shri Inturi Rama Rao & Shri Duvvuru RL Reddy
O R D E R
PER DUVVURU RL REDDY, JUDICIAL MEMBER:
Vide order dated 11.09.2019 in M.P. No. 413/Chny/2017 for the assessment year 2012-13 filed against the appeal of the Revenue in Tribunal in to 2879/Mds/2016 dated 24.05.2017 was recalled for limited purpose to adjudicate the additional ground of depreciation on roads.
Brief facts relating to the issue are that the assessee claimed depreciation on improvement to IT corridor (ECR) amounting to ₹.1,85,59,715/-. After considering the submissions of the assessee, the Assessing Officer held that the assessee is a nodal agency for implementation of the industrial policy in Tamil Nadu for creation of infrastructure facilities such as road systems highways, bridge projects in the State of Tamil Nadu by bring in private resources in the development of the said project. By holding that the assessee was not the owner of the asset i.e., the road and that it was not used by the assessee for the purpose of its business or profession, the Assessing Officer rejected the claim of depreciation.
The assessee carried the matter in appeal before the ld. CIT(A). By following the decision of the Tribunal in assessee’s own case for the assessment years 2003-04 and 2004-05, the ld. CIT(A) directed the Assessing Officer to allow depreciation @ 10% on the roads by treating it as building.
Aggrieved, the Revenue is in appeal before the Tribunal. The main argument advanced by the ld. DR is that the decision of the Tribunal in assessee’s own case for earlier assessment years was not accepted by the Department and the appeal filed before the Hon’ble Madras High Court in TCA No. 679/2009 is pending. Therefore, he pleaded that the order of the ld. CIT(A) should be reversed and restored that of the Assessing Officer. On the other hand, the ld. Counsel for the assessee strongly supported the order passed by the ld. CIT(A) and submitted that the issue is squarely covered by the decision of the Tribunal in assessee’s own case for earlier assessment years and prayed that the same should be followed for all the assessment years.
We have heard both sides, perused the materials available on record and gone through the orders of the authorities below. The issue before us is whether the assessee can claim depreciation on roads as plant and machinery or not. Similar issue was decided by the Tribunal in assessee’s own case for the assessment years 2003-04 and 2004-05 in & 817/Mds/2007 dated 24.10.2008, for the assessment year 2003-04, the Tribunal has observed at para 17 is reproduced as under: “17. In the above detailed discussion we have come to the conclusion that the Assessee has constructed only a road. Now, the question is whether the capital, as expenditure incurred on such road would make it eligible for depreciation under the head “building”. The same has been denied by the Department on the basis of the decision of the Hon’ble Supreme Court in the case of Indore Municipal Corporation v. CIT (supra). A careful perusal of this decision would show that this matter arose out of Special Leave by order dated 05.8.1983. Though the Asst. Year is not mentioned in the judgment but from the order regarding Special Leave, it becomes clear that it must be related to the earlier years because it would like some time for the matter to travel to the Supreme Court. A careful perusal of various Appendices which prescribe the table of rates by which depreciation is admissible would show that the Appendix I which was applicable to the Asst. Year 1984-85 to 1987- 88 did not mention in the Notes that buildings include Roads, bridges, culverts, wells and tube wells. In the later Appendices which is applicable from Asst. Year 1988-89 to 2002-03 and 2003-04 and 2005-06 and the latest Appendix which is applicable for the Asst. Year 2006-07 containing the following Note:- Note: Building includes, roads, bridges, culverts, wells and tube wells.
Therefore, it is absolutely clear that the Hon’ble Supreme Court has held in the case of Indore Municipal Corporation that the buildings would not include roads because Appendix I did not clarify that roads would be included in the building. As pointed out, after the Asst. Year 1988-89 all the Appendices have the note that building would include roads. Therefore, in our view, the assessee would become entitled to depreciation on the road in the category of building. In these circumstances, we set aside the order of the CIT(Appeals) on this issue and direct the AO to allow depreciation on the road at the rate applicable to the building”. In the same order, for the assessment year 2004-05, the Tribunal has held as under: “21. With regard to the second ground, identical issue has been adjudicated by us as above while adjudicating the Assessee’s appeal for the Asst. Year 2003-04 whereby after detailed discussion and analysis, we held that the Assessee’s capital expenditure incurred on road would be entitled to depreciation in the category of building. Following that decision for this year also, we hold that the road is eligible for depreciation in the category of building and accordingly direct the Assessing Officer to allow depreciation as directed above.”
Respectfully following the above decision of the Tribunal, the ld. CIT(A) has directed the Assessing Officer to allow depreciation @ 10% on the road by treating it as building. The only objection of the ld. DR is that the Department has not accepted the decision of the Tribunal and the Revenue has preferred further appeal before the Hon’ble Madras High Court, but could not be able to place on record any material to show that the order of the Tribunal, on the basis of which the ld. CIT(A) has passed the order, has been reversed or set aside by the Hon’ble Jurisdictional High Court. Moreover, similar issue was subject matter in appeal in the case of PCIT v. GVK Jaipur Expressway Ltd. [2018] 100 taxmann.com 96 (SC), the Hon’ble Supreme Court has decided the issue in favour of the assessee and against the Department after considering various judgements. Therefore, in view of the facts, circumstances and material on record, we do not find any valid reason to interfere in the orders passed by the ld. CIT(A) on this issue and accordingly, the additional ground raised by the Revenue stands dismissed.
In the result, the appeal filed by the Revenue is dismissed. Order pronounced on the 12th September, 2019 at Chennai.