DCIT - 9(1)(2), MUMBAI vs. ATLANTA INFRA ASSETS LTD., MUMBAI

आदेश / O R D E R PER R.C.SHARMA (A.M):

This is an appeal filed by the Revenue and Cross Objection by assessee against the order of CIT(A)-16, Mumbai dated 29/04/2016 for the A.Y.2012-13, in the matter of order passed u/s.143(3) of the Income Tax Act, 1961.

2 ITA No.4769/Mum/2016 M/s. Atlanta Infra Assets Ltd., 2. The following grounds have been taken by the Revenue:- i) "Whether on the facts and in the circumstances of the case, the Ld.CIT(A) has erred in facts and in law in accepting the version of the assessee that the subsidy I grant received from M/s, National Highway Authority of India is a capital receipt?" ii)" Whether on the facts and in the circumstances of the case, the Ld.CIT(A) has erred in wrongly appreciating the decision of Hon'ble Supreme Court in the case of Sahney Steel & Press Works Ltd CIT (1977) (228 ITR 253) which clearly lays down the law that subsidy received by the assessee for meeting the operational expenses are of the revenue in nature?" iii) "Whether on the facts and in the circumstances of the case, the CIT(A) has erred in relying on the version of the assessee that the subsidy received from NHAI is towards "Equity Contribution" when this is not factually supported by the accounts of the assessee, as the assessee has not credited this amount to its paid up share capital, rather the same has been credited directly to "Capital Reserve Account?" ^? iv) "Whether on the facts and in the circumstances of the\case, the Ld. CIT-(A) erred in deleting the disallowance of Rs.3.03 Crores u/s 14A without appreciating that rule 8D starts with heading "Formula for determination of expenditure" and the three steps prescribed under this rule to compute the expenditure in relation to exempt income and shall be applied collectively. Therefore, the total disallowance u/s 14A has to be the aggregate of the amounts determined by special bench of Hon'ble Tribunal in the case of ITO V/s Daga Capital Management (P) Ltd (2009) 117ITD 169?" v) "Whether on the facts and in the circumstances of the case, the Ld. CIT-(A) erred in ignoring the CBDT Circular No. 5 of 2014 dated 11.02.2014 wherein it has been clarified that the term "includible" in the Heading section 14A of the Act and the Heading to Rule 8D of I.T. Rules, 1962 indicates that for invoking disallowance u/s 14A, it is not material that the assessee should have earned sucl exempt income during the financial year under consideration?" 3. Rival contentions have been heard and record perused.

3 ITA No.4769/Mum/2016 M/s. Atlanta Infra Assets Ltd., 4. The assessee is engaged in the business of Builders and developers of property, civil construction, road construction and allied activities. 5. During the course of assessment, AO disallowed depreciation on BOT Rights of Nagpur-Kondhali Section Road of Rs.95,41,58,755/- and Reducing grant aggregating to Rs.53.68 crores received in the financial year 2008-09 and 2009-10 from cost of BOT project for computing deferred revenue expenditure. 6. By the impugned order CIT(A) declined assessee’s claim of depreciation after observing as under:- As regards the issue of claim of depreciation u/s 32, It is seen that the said ground has been adjudicated by this office in the case of the holding company of the appellant M/s. Atlanta Ltd. in AY 2010- 11 and in AY 2011-12 vide orders of the CIT(A)-16 dated 27.02.2015 and 28.04.2015. The facts case of appellant in the present appeal is peri-materia to that of M/s Atlanta Ltd. for AYs 2010-11 and 2011-12. The learned CIT(A) in those cases has held that the appellant cannot be considered as "owner" of the BOT rights. Reliance is placed on the jurisdictional Bombay High Court decision in the case of North Karnataka Expressway Ltd vs. CIT (2014) 51 Taxmann.com 214.

4 ITA No.4769/Mum/2016 M/s. Atlanta Infra Assets Ltd., dividend. Moreover, the total exempt income claimed during the year was only Rs.60,000/- as dividend from the co-operative banks which was otherwise not exempt u/s.10 of the I.T. Act and appellant had offered it for taxation Respectfully following the judgment of Hon'ble Delhi High Court in the case of Joint' Investments Pvt. Ltd. vs. CIT (supra), Hon'ble IT AT in the cases of Daga Global Chemicals Ltd. vs. Assessee (supra) and Pinnacle Brocom Pvt. Ltd. vs. ACIT 10(3) (supra), we disallowance U/S.14A is restricted upto Rs.60,000/- which was the exempt income claimed by the appellant. In view of it out of the addition made by the A.O. of Rs.3,03,49,568/-, Rs.60,000/- is confirmed and the balance of Rs.3,02,89,568/- is deleted. In the result, this ground of appeal is partly allowed.

5 ITA No.4769/Mum/2016 M/s. Atlanta Infra Assets Ltd., 6. Brief facts are, the assessee a company is engaged in the business of civil construction, road construction and allied activities. For the assessment year under dispute, the assessee filed its return of income on 27th September 2010, declaring income of Rs. 36,45,68,482, under the normal provisions of the Act and book profit of Rs. 51,49,82,757 under section 115JB of the Act. During the assessment proceedings, the Assessing Officer noticing that the assessee has claimed depreciation @ 25% on Mumbra bypass road called upon the assessee to furnish necessary details relating to its claim and also to explain why depreciation should not be restricted to 10% or 15%. In response to the query raised by the Assessing Officer it was submitted by the assessee that it has entered into a contract with the Government of Maharashtra on 12th July 2000, to construct a project involving the work of construction of Mumbra bypass of Mumbai Pune Road of National Highway-4 from kilometer 133.800 in Taluka Thane, on BOT basis. As per the terms of the agreement, assessee has to bear the entire cost of construction of project with a right conferred on it to collect revenue (Toll) from the users of the facilities during the construction period as per the rates specified in Government notification. The agreement further provided that after the end of concession period which was initially for a period of 25 years and subsequently reduced to 15 years, the assessee has to transfer the facility to the Government at zero cost. During the construction period, the assessee capitalized the entire cost for the construction of the facility by transferring to capital work-in- progress. After construction of the facility and during the concession period, the entire cost of construction was amortized and charge to Profit & Loss account as per AS-26 in a manner so as to reduce the value of the project in the books of account of the assessee to zero at the end of concession period. It was submitted by the assessee that the expenditure incurred for constructing Mumbra bypass road on BOT basis was on the understanding that by incurring such expenditure, the assessee will acquire the commercial rights to collect the toll from the user of the facility over the concession period. Thus, it was submitted by the assessee that such commercial rights acquired by the assessee is an intangible asset under section 32(1)(ii) and eligible for depreciation @ 25%. The Assessing Officer, however, did not find merit in the submissions of the assessee. Though, the Assessing Officer agreed that the expenditure incurred on the BOT project has been correctly entered by the assessee in

6 ITA No.4769/Mum/2016 M/s. Atlanta Infra Assets Ltd., the books of account, however, he observed that there is no need to give any different treatment for income tax purpose. He observed that the assessee had constructed the road on behalf of the Government. Therefore, the expenditure incurred on the construction of the road is in the nature of deferred revenue expenditure and has to be amortized over the concession period. The Assessing Officer observed, though, the assessee has correctly computed the amortization of expenditure for the year under consideration, however, it has claimed excess depreciation over the amortized expenditure which according to the Assessing Officer was Rs. 8,45,58,584. Accordingly, he disallowed an amount of Rs. 14,99,25,475, treating it as excess claim made by the assessee. Without prejudice to the reasoning on the basis of which the aforesaid disallowance was made, the Assessing Officer also held that even if the BOT road constitutes a capital asset, still, it cannot be considered as an intangible asset, hence, depreciation at the normal rate of 10% will be allowable. Being aggrieved of the disallowance made by the Assessing Officer, assessee preferred an appeal before the first appellate authority. 7. The learned Commissioner (Appeals) after considering the submissions of the assessee and verifying the facts on record was of the view that assessee's case is covered by the CBDT circular no.9 of 2014. As far as assessee's claim of depreciation is concerned, the learned Commissioner (Appeals) held that the assessee not being owner of the road constructed by it cannot claim depreciation on the BOT rights. However, he allowed assessee's revised claim of deferred revenue expenditure amounting to Rs. 21,18,70,983, relying upon the CBDT circular no.9 of 2014 and the decision of the Hon'ble Jurisdictional High Court in North Karnataka Express Way Ltd. v/s CIT, ITA no.499 of 2012, vide judgment dated 14th October 2014. Being aggrieved of the aforesaid decision of the first appellate authority both the Revenue and the assessee are before us. While the Revenue has challenged the decision of the learned Commissioner (Appeals) in accepting assessee's revised claim of deferred revenue expenditure of Rs. 21,18,70,983, the assessee is aggrieved with the decision of the learned Commissioner (Appeals) in not allowing assessee's claim of depreciation on BOT rights. 8. Learned Departmental Representative submitted that as per the agreement entered with the Government of Maharashtra, the concession period for the BOT facility was for a period of 15

7 ITA No.4769/Mum/2016 M/s. Atlanta Infra Assets Ltd., years. Therefore, the expenditure incurred by the assessee in construction of the BOT road was to be amortized and treated as deferred revenue expenditure and allowed over the entire concession period. He submitted, before the first appellate authority, the assessee submitted a revised claim by reducing the concession period of 15 years and considering such revised claim learned Commissioner (Appeals) has allowed the claim of the assessee without giving any opportunity to the Assessing Officer to examine assessee's claim. Learned Departmental Representative submitted, the first appellate authority while accepting the revised claim of the assessee has not followed the spirit of CBDT circular referred to by him. Therefore, he submitted, the order of the Assessing Officer on the issue should be restored. As far as the assessee's claim of depreciation on the right to collect toll on BOT road, the learned Departmental Representative relying upon the decision of the Hon'ble Jurisdictional High Court in North Karnataka Express Way Ltd. (supra) submitted that the assessee not being the owner of the road is not eligible to claim depreciation. 9. Learned Authorised Representative submitted, as per terms of the agreement, the assessee has to bear the entire cost of the Mumbra bypass road to be constructed BOT basis. He submitted, as per the terms of the agreement the cost incurred by the assessee was not to be reimbursed by the Government and in exchange what the assessee received was a right to collect toll from the persons using the road over the concession period. He submitted, after completion of the BOT facility the assessee started recognizing revenue from collection of toll in the assessment year 2008-09 and claimed depreciation for the first time on the commercial right acquired by it on incurring the expenditure by treating it as an intangible asset. In this context, he drew our attention to the audited financial statement for assessment year 2008-09 showing claim of depreciation. He submitted, assessee's claim of depreciation for the assessment year 2008-09 was examined by the Assessing Officer in scrutiny assessment proceedings and the claim was allowed. He submitted, in the assessment year 2009-10 also, the Assessing Officer accepted assessee's claim of depreciation on BOT rights as an intangible asset in an assessment completed under section 143(3) of the Act. He submitted, in the impugned assessment year, the assessee has claimed depreciation on the opening written down value (WDV) of the intangible asset, hence, there is no question of denying assessee's claim of depreciation as such claim has already been allowed by the

8 ITA No.4769/Mum/2016 M/s. Atlanta Infra Assets Ltd., Department in the preceding assessment years. Learned Authorised Representative submitted, in case of North Karnataka Express Way Ltd. (supra), the Hon'ble Jurisdictional High Court never decided the issue whether the assessee can claim depreciation on the right to collect toll on the BOT road as in that case, the assessee has claimed depreciation at the normal rate by treating the road as its own asset. He submitted, on the contrary, the issue is squarely covered by the Special Bench decision of the Tribunal, Hyderabad Bench, in ACIT v/s Progressive Construction Ltd., ITA no.1845/Hyd./2014 dated 14th February 2017. He also relied upon the decision of the Tribunal, Mumbai Bench, in ACIT v/s West Gujarat Express Way Ltd., ITA no.5904/Mum./2012 dated 15th April 2015. Thus, he submitted that assessee's claim of depreciation has to be allowed. 10. We have patiently and carefully considered the rival submissions, perused the material on record and have also applied our mind to the decisions relied upon. Undisputed facts are, the assessee entered into an agreement with Maharashtra Government for construction of Mumbra Bypass road on BOT basis. As per the terms of the agreement, the assessee was required to incur the entire cost of construction without it being reimbursed by the Government. However, the Government under the agreement conferred the rights on the assessee to collect revenue (toll) from persons utilizing the BOT facility at the rate prescribed through notification issued by the Government. Thus, from the terms of the agreement, it is very much clear that by investing money in construction of BOT facility the assessee obtained a commercial right to collect toll which is no doubt a valuable business right. The issue which, therefore, arises for consideration is, whether such valuable commercial right obtained by the assessee by investing in construction of BOT facility is an intangible asset as defined under section 32(1)(ii) of the Act. To answer this issue, we do not have to detain ourselves for far too long as the Special Bench of the Tribunal, Hyderabad Bench, in Progressive Construction Ltd. (supra) while dealing with identical issue has held that the right to collect toll is a valuable commercial or business right, hence, in the nature of intangible asset, as defined under section 32(1)(ii) of the Act. The observation of the Special Bench of the Tribunal in this regard is reproduced in extenso hereinafter as a matter of convenience.

9 ITA No.4769/Mum/2016 M/s. Atlanta Infra Assets Ltd., ―9. The core issue arising for consideration in this appeal is in relation to assessee's claim of depreciation on the asset created by investing an amount of Rs.214 crore in construction of Pune Hyderabad section of National Highway no.9, on build, operate and transfer (BOT) basis with a right to collect toll charges from the user of road by vehicles over the concession period of 11 years and 7 month. It is a fact on record that the assessee completed the construction of the project in the financial year 2008-09 and had started operating the same. It is also evident, in the assessment year 2009-10, the assessee had claimed depreciation @ 10% by treating the asset as building. However, from the assessment year 2010-11, the assessee had started claiming depreciation by treating the asset created as an intangible asset in terms of section 32(1)(ii) of the Act. We have also been informed that assessee's claim of depreciation in assessment year 2009-10 and 2010- 11, were disallowed by the Assessing Officer. However, the learned Commissioner (Appeals) allowed assessee's claim of depreciation as building in assessment year 2009-10 and as intangible asset in assessment year 2010-11. The aforesaid orders of the learned Commissioner (Appeals) were also upheld by the Tribunal while dismissing Department's appeals on the issue. It is stated that the Department has challenged the decisions of the Tribunal in assessment year 2009-10 and 2010-11 in further appeal before the High Court of Andhra Pradesh and Telangana and the matters are still pending. Be that as it may, the aforesaid facts clearly indicate that the impugned assessment year is not the first year of claim of depreciation on the BOT road / bridge. Rather, in the impugned assessment year, depreciation has been claimed on the opening WDV which has also been accepted by the learned Departmental Representative in the written submissions filed by him. Therefore, the nature of expenditure, whether capital or revenue, is not a subject matter of dispute arising in the present appeal. Bearing this in mind, we have to examine the validity of assessee's claim of depreciation qua the asset created. The learned Departmental Representative has opposed assessee's claim of depreciation on the following propositions:- i) Whether the expenditure claim of the assessee brings into being an asset which is owned and used by the assessee in its business;

10 ITA No.4769/Mum/2016 M/s. Atlanta Infra Assets Ltd., ii) What is the nature of the asset that has come into being on account of the expenditure incurred by the assessee and what is the nature of such expenditure; iii) If an asset is created, whether it is a tangible asset or an intangible asset; iv) Whether the Concessionaire Agreement (C.A) held by the assessee can be regarded as a commercial or business right akin to a license; v) If such C.A. is akin to a license, what intangible asset has been created for the assessee and what is the expenditure incurred by the assessee for acquiring such intangible asset. 10. Before dealing with the issue, it is necessary to reiterate that the Government of India being desirous of implementing a project involving, construction, operation and maintenance of four lane Pune Hyderabad section of N.H. no.9, with private sector participation of BOT invited tender from interested parties. The assessee being successful in the tender, the Government of India entered into a Concession Agreement (C.A) with the assessee on 22nd December 2005. At this stage, it is necessary to look into some of the relevant clauses of C.A., which in our opinion, will have a crucial bearing in deciding the issue. As per clause 2.1 of the C.A., the Government of India grants and authorises the concessionaire i.e., the assessee to investigate, study, design, engineer, procure, finance, construct, operate and maintain the project and to exercise and/or enjoy the rights, powers, privileges, authorizations and entitlements in terms of the agreement including the right to levy demand, collect and appropriate fee from vehicle and persons for using the project / project facilities or any part thereof. As per clause 2.2 of the C.A., the assessee is granted concession for a period of 11 years 7 months from the commencement date. As per clause 2.4, the Government of India was obliged to hand over to the assessee physical possession of the project site free from encumbrances within 30 days from the date of the agreement. It further provides, once the project site is handed over to the concessionaire, it shall have exclusive right to enter upon, occupy and use the project site and to make at its costs, charges and expenses such development and improvement in the project site as may be necessary or appropriate to implement the project and to provide project facility in terms of the agreement. Clause- 2.5 of the agreement provides that the concessionaire

11 ITA No.4769/Mum/2016 M/s. Atlanta Infra Assets Ltd., without prior written consent or approval of the Government of India cannot use the project site for any purpose, other than, for the purpose of the project / project facilities as permitted under the C.A. Clause 2.7 of the C.A. makes it clear that the project site belongs to and has vested in Government of India and the Government of India has full power to hold, dispose off and deal with the same consistent with the provisions of the C.A. However, it also makes it clear that the concessionaire, subject to complying with the terms / conditions of the agreement remains in peaceful possession and enjoyment of the project site during the concession period. It further provides, in the event the concessionaire is obstructed by any person claiming any right, title or interest over the project site or any part thereof or in the event of any enforceable action including any attachment, distraint, appointment of receiver or liquidator being initiated by any person claiming interest over the project sites. Government of India not only will defend such claims or proceedings but also keep the concessionaire indemnified against any direct or consequential loss or damage which it may suffer on account of any such right, title, interest or charge. As per clause 2.8 of the C.A., though, the concessionaire shall have exclusive right to use of the project site in accordance with the provisions of the agreement and for this purpose, it may regulate the entry and use of the same by the third parties, however, it shall not part with or create any encumbrance on the whole or any part of the project site save and except, as set forth and permitted under the agreement. Clause 4.1 of the C.A. entitles the concessionaire to levy, demand and collect fee for user of the roads by vehicles and persons in accordance with the fee notification to be issued by the Government of India. However, concessionaire cannot levy and collect any fee until it has received completion certificate. Clause 5.1 and 5.2 of the C.A. lays down the obligation of the concessionaire for execution and implementation of the project / project facility during the concession period. From the reading of the aforesaid clauses of the contract, following facts emerge:- i) The right, title and ownership of the project site vests absolutely with the Government of India and it has full powers to hold, dispose off and deal with the same; ii) The Government of India has handed over physical possession of the project site to the concessionaire for executing / implementing the project and operating the same during the concession period;

12 ITA No.4769/Mum/2016 M/s. Atlanta Infra Assets Ltd., iii) Concessionaire shall have exclusive right to use the project site for executing / implementing the project in terms of C.A; iv) Concessionaire shall, at its own costs and expenses, execute / implement the entire project and operate and maintain the same during the concession period; and v) The concessionaire shall have the right to levy / demand and collect fee as approved by the Government of India towards user of the project facilities by vehicles and persons. 11. Undisputedly, for executing the project, assessee has incurred expenses of Rs.214 crore. It is also not disputed that as per the terms of the C.A., the Government of India is not obliged / required to reimburse the cost incurred by the assessee to execute / implement the project facilities. The only right / benefit allowed to the assessee by the Government of India is to operate the project / project facilities during the concession period of 11 years 7 months and to collect toll charges from vehicles / persons using the project / project facilities. Thus, as could be seen, the only manner in which the assessee can recoup the cost incurred by it in implementing the project / project facility is to operate the road during the concession period and collect the toll charges from user of the project facility by third parties. Admittedly, the assessee has taken up the project as a business venture with a profit motive and certainly not as a work of charity. Further, by investing huge some of Rs.214 crore, the assessee has obtained a valuable business / commercial right to operate the project facility and collect toll charges. Therefore, in our considered opinion, right acquired by the assessee for operating the project facility and collecting toll charges is an intangible asset created by the assessee by incurring the expenses of Rs.214 crore. The contention of the learned Senior Standing Counsel that expenditure of Rs.214 crore has brought into existence a tangible asset in the form of roads and bridges of which the assessee is not the owner but it is the Government of India is nobody's case. Further, the learned Senior Standing Counsel's apprehension that it will lead to a situation where both Government of India and the concessionaire will claim depreciation on the asset created with the very same expenditure, in our view, is not borne out from facts on record. At the cost of repetition we must observe, as per the terms of agreement the expenses incurred by the assessee towards construction of the roads, bridges, etc., were not going to be

13 ITA No.4769/Mum/2016 M/s. Atlanta Infra Assets Ltd., reimbursed by the Government of India. This fact was known to both the parties before the execution of the agreement as the tender itself has made it clear that the project is to be executed with private sector participation on BOT basis. Thus, from the very inception of the project, assessee was aware of the fact, it has to recoup the cost incurred in implementing the project along with the profit from operating the road and collecting toll charges during the concession period. Therefore, assessee has capitalized the cost incurred on the BOT project on which it has claimed depreciation. Thus, in our view, the expenditure incurred by the assessee of Rs.214 crore for creating the project or project facilities has created an intangible asset in the form of right to operate the project facility and collect toll charges. Further, it is the contention of the learned Senior Standing Counsel that if at all any right is created under the C.A. for collecting toll, such right accrued to the assessee on the date of execution of agreement i.e., 22nd December 2005, therefore, the expenditure incurred by such date should be the value of intangible asset which can alone be considered for depreciation under section 32(1)(ii) of the Act. We are afraid, we cannot accept the above argument of the learned Senior Standing Counsel. When the C.A. confers a right on the assessee to operate the project facility and collect toll charges over the concession period of 11 years and 7 months, the assessee can start operating and collecting toll charges only when the project facility is ready for use. Therefore, until the project is completed and ready for use by vehicles or persons assessee cannot collect toll charges for user of the project facilities. Thus, the right to operate the project facility and collect toll charges is integrally connected to the completion of the project facility which cannot be done unless the assessee invests its fund for completing the project. Therefore, keeping in view the aforesaid fact, it cannot be said that the right to collect toll has accrued to the assessee on the date of execution of the agreement. If we accept the aforesaid argument of the learned Senior Standing Counsel, in other words, it would mean that without even executing and completing the project facility, assessee would be collecting toll charges. Therefore, the contention of the learned Senior Standing Counsel that the expenditure incurred by the assessee till execution of the agreement can only be considered as an intangible asset, in our view, is illogical, hence, cannot be accepted. Thus, having held that the expenditure of Rs.214 crore incurred by the assessee has resulted in creation of an intangible asset of enduring nature for the assessee, it is necessary now to examine whether such intangible asset comes within the scope

14 ITA No.4769/Mum/2016 M/s. Atlanta Infra Assets Ltd., and ambit of section 32(1)(ii) of the Act. For this purpose, it is necessary to look into the said provision which is reproduced hereunder for the sake of convenience. Depreciation. 32(1)(ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature67, being intangible assets acquired on or after the 1st day of April, 1998, owned67, wholly or partly, by the assessee67 and used for the purposes of the business67 or profession, the following deductions shall be allowed--] 12. Explanation 3 to section 32(1) defines intangible asset as under:- [Explanation 3.--For the purposes of this sub-section, 86[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 . 13. A plain reading of the aforesaid provisions would indicate that certain kind of assets being knowhow, patents, copyrights, trademarks, license, franchise, or any other businesses or commercial rights of similar nature are to be treated as intangible asset and would be eligible for depreciation at the specified rate. It is the claim of the assessee that the right acquired under C.A. to operate the project facility and collect toll charges is in the nature of license. However, the learned Senior Standing Counsel has strongly countered the aforesaid claim of the assessee by referring to the definition of license as provided under the Indian Easements Act, 1882. For better appreciation, we intend to reproduce herein below the definition of ―license‖ as provided under section 52 of the Indian Easements Act, 1882:- License defined:- Where on person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful and such right does not amount to an easement or an interest in the property, the right is called a license.‖ 14. It has been the contention of the learned Senior Standing Counsel that as the term ―license‖ has not been defined under

15 ITA No.4769/Mum/2016 M/s. Atlanta Infra Assets Ltd., the Income Tax Act, 1961, the definition of ―license‖ under the Indian Easements Act, 1882, has to be looked into. Accepting the aforesaid contention of the learned Senior Standing Counsel, let us examine the definition of ―license‖ extracted herein above. A plain reading of section 52 of the Act makes it clear, a right granted to a person to do or continue to do something in the immovable property of the grantor, which, in the absence of such right would be unlawful and such right does not amount to an easement or interest in the property, then such right is called a license. If we examine the facts of the present case, vis-a-vis, the definition of license under the Indian Easements Act, 1882, it would be clear that immovable property on which the project / project facility is executed / implemented is owned by the Government of India and it has full power to hold, dispose off and deal with the immovable property. By virtue of the C.A., assessee has only been granted a limited right to execute the project and operate the project facility during the concession period, on expiry of which the project / project facility will revert back to the Government of India. What the Government of India has granted to the assessee is the right to use the project site during the concession period and in the absence of such right, it would have been unlawful on the part of the concessionaire to do or continue to do anything on such property. However, the right granted to the concessionaire has not created any right, title or interest over the property. The right granted by the Government of India to the assessee under the C.A. has a license permitting the assessee to do certain acts and deeds which otherwise would have been unlawful or not possible to do in the absence of the C.A. Thus, in our view, the right granted to the assessee under the C.A. to operate the project / project facility and collect toll charges is a license or akin to license, hence, being an intangible asset is eligible for depreciation under section 32(1)(ii) of the Act. 15. Even assuming that the right granted under the C.A. is not a license or akin to license, it requires examination whether it can still be considered as an intangible asset as described under section 32(1)(ii) of the Act. In this context, it has been the contention of the learned Senior Standing Counsel that the intangible asset mentioned under section 32(1)(ii) of the Act are specifically identified assets, except, the assets termed as ―any other business or commercial rights of similar nature‖. He had submitted, applying the principle of ejusdem generis the rights referred to in the expression ―any other business or commercial rights of similar nature‖, should be similar to one or more of the

16 ITA No.4769/Mum/2016 M/s. Atlanta Infra Assets Ltd., specifically identified assets preceding such expression. The aforesaid contention of the learned Departmental Representative is unacceptable for the reasons enumerated hereinafter. 16. We have already held earlier in the order that by incurring the expenditure of Rs.Rs.214 crore assessee has acquired the right to operate the project and collect toll charges. Therefore, such right acquired by the assessee is a valuable business or commercial right because through such means, the assessee is going to recoup not only the cost incurred in executing the project but also with some amount of profit. Therefore, there cannot be any dispute that the right to operate the project facility and collect toll charges therefrom in lieu of the expenditure incurred in executing the project is an intangible asset created for the enduring benefit of the assessee. Now, it has to be seen whether such intangible asset comes within the expression ―any other business or commercial rights of similar nature‖. As could be seen from the definition of intangible asset, specifically identified items like knowhow, patents, copyrights, trademarks, licenses, franchises are not of the same category, but, distinct from each other. However, one thing common amongst these assets is, they all are part of the tool of the trade and facilitate smooth carrying on of business. Therefore, any other intangible asset which may not be identifiable with the specified items, but, is of similar nature would come within the expression ―any other business or commercial rights of similar nature‖. The Hon'ble Supreme Court in CIT v/s Smifs Securities (supra) after interpreting the definition of intangible asset as provided in Explanation 3 to section 32(1), while opining that principle of ejusdem generis would strictly apply in interpreting the definition of intangible asset as provided by Explanation 3(b) of section 32, at the same time, held that even applying the said principle ‗goodwill' would fall under the expression ―any other business or commercial rights of similar nature‖. Thus, as could be seen, even though, ‗goodwill' is not one of the specifically identifiable assets preceding the expressing ―any other business or commercial rights of similar nature‖, however, the Hon'ble Supreme Court held that ‗goodwill' will come within the expression ―any other business or commercial rights of similar nature‖. Therefore, the contention of the learned Senior Standing Counsel that to come within the expression ―any other business or commercial rights of similar nature‖ the intangible asset should be akin to any one of the specifically identifiable assets is not a correct interpretation of the statutory provisions. Had it been the case, then ‗goodwill' would not have been

17 ITA No.4769/Mum/2016 M/s. Atlanta Infra Assets Ltd., treated as an intangible asset. The Hon'ble Delhi High Court in case of Areva T and D India Ltd. (supra), while interpreting the aforesaid expression by applying the principles of ejusdem generis observed, the right as finds place in the expression ―business or commercial rights of similar nature‖ need not answer the description of knowhow, patents, trademarks, license or franchises, but must be of similar nature as the specified asset. The Court observed, looking at the meaning of categories of specified intangible assets referred to in section 32(1)(ii) of the Act preceding the term ―business or commercial right of similar nature‖, it could be seen that the said intangible assets are not of the same line and are clearly distinct from one another. The Court observed, the use of words ―business or commercial rights of similar nature‖, after the specified intangible assets clearly demonstrates that the legislature did not intend to provide for depreciation only in respect of specified intangible assets but also to other categories of intangible assets which were neither visible nor possible to exhaustively enumerate. The Hon'ble Court, therefore observed, in the circumstances the nature of business or commercial right cannot be restricted only to knowhow, patents, trademarks, copyrights, licence or franchise. The Court observed, any intangible assets which are invaluable and result in smoothly carrying on the business as part of the tool of the trade of the assessee would come within the expression ―any other business or commercial right of similar nature‖. 17. In the case of Techno Shares and Stocks Ltd. v/s CIT, [2010] 327 ITR 323 (SC), the Hon'ble Supreme Court while examining the assessee's claim of depreciation on BSE Membership Card, after interpreting the provisions of section 32(1)(ii), held that as the membership card allows a member to participate in a trading session on the floor of the exchange, such membership is a business or commercial right, hence, similar to license or franchise, therefore, an intangible asset. In the present case, undisputedly by virtue of C.A. the assessee has acquired the right to operate the toll road / bridge and collect toll charges in lieu of investment made by it in implementing the project. Therefore, the right to operate the toll road / bridge and collect toll charges is a business or commercial right as envisaged under section 32(1)(ii) r/w Explanation 3(b) of the said provisions. Therefore, in our considered opinion, the assessee is eligible to claim depreciation on WDV as an intangible asset. Thus, we answer the question framed by the Special Bench as under:-

18 ITA No.4769/Mum/2016 M/s. Atlanta Infra Assets Ltd., The expenditure incurred by the assessee for construction of road under BOT contract by the Government of India has given rise to an intangible asset as defined under Explanation 3(b) r/w section 32(1)(ii) of the Act. Hence, assessee is eligible to claim depreciation on such asset at the specified rate.‖ 11. The ratio laid down in the aforesaid decision of the Special Bench squarely applies to the facts of the present case. Therefore, in our considered opinion, the assessee is entitled to claim depreciation on the cost incurred on construction of the BOT facility, since, by incurring such investment the assessee has acquired a valuable commercial or business right in the nature described under section 32(1)(ii) r/w Explanation 32(1), Explanation-3(b) of the Act. 12. Even otherwise also, the assessee's claim of depreciation could not have been denied in the impugned assessment year. This is for the reason that in assessment year 2008-09, assessee had claimed depreciation on the investment made on BOT facility by treating it as a capital asset in the nature of intangible asset. The Assessing Officer after examining the claim of the assessee allowed the claim of depreciation. This fact is evident from the depreciation schedule forming part of financial statement as well as the assessment order passed under section 143(3) of the Act for the said assessment year. Again, in the assessment year 2009-10 also, the assessee claimed depreciation on the investment in BOT facility as an intangible asset and the Assessing Officer allowed assessee's claim of depreciation in an assessment order passed under section 143(3) of the Act. Thus, as could be seen from the facts on record, in the preceding assessment years the Assessing Officer after examining assessee's claim has not only accepted the expenditure incurred on BOT facility as capital in nature but has allowed depreciation by treating it as an intangible asset. In the impugned assessment year, the assessee has claimed depreciation on the opening WDV only. As far as the nature and character of the expenditure, whether capital or revenue, has attained finality in the preceding assessment years wherein, the Assessing Officer has allowed assessee's claim of deprecation. Therefore, it is not open to the Department to re-examine the nature of expenditure again in the impugned assessment year. The Assessing Officer having allowed assessee's claim of depreciation on the BOT facility by treating it as an intangible asset in the preceding assessment years, it cannot be denied in the impugned assessment year. Therefore, allowing assessee's claim we direct

19 ITA No.4769/Mum/2016 M/s. Atlanta Infra Assets Ltd., the Assessing Officer to allow depreciation as claimed by the assessee. The decision of the first appellate authority on this issue is reversed. Since, we have allowed assessee's claim of depreciation, the issue raised by the Department relating to allowance of deduction by learned Commissioner (Appeals) as revenue expenditure has become redundant, hence, no adjudication is required. The grounds raised by the assessee in the cross objection are allowed. Grounds raised by the Department are dismissed. 11. Rival contentions have been heard and record perused. 12. AO has declined assessee’s claim of depreciation and the CIT(A) has upheld the disallowance of depreciation by relying on the decision of the holding company in case of Atlanta Ltd., We found that against the order of CIT(A), assessee approached to the Tribunal and the Tribunal vide its order dated 24/01/2018 in the case of Atlanta Ltd, held that assessee is eligible for claim of depreciation. Respectfully following the decision of the Co-ordinate Bench in case of holding company, we direct the AO to allow assessee’s claim of depreciation as per law. 13. So far as reduction of subsidy from the cost of toll road is concerned, the CIT(A) has reduced the subsidy from the cost of the toll road and thereafter considered amortization. 14. By the impugned order, CIT(A) held that subsidy is capital receipt, therefore, not to be reduced from the cost of the toll road and assessee is eligible for amortization of the entire amount of the toll road. We found that in the assessee’s own case for the A.Y.2010-11, the Revenue has approached to the Tribunal against the order of CIT(A) for directing not to reduce subsidy from the cost of the toll road and the matter was restored

20 ITA No.4769/Mum/2016 M/s. Atlanta Infra Assets Ltd., back to the file of the Revenue authorities for deciding afresh after considering the contention of assessee with regard to the nature of such subsidy. Respectfully following the order of the Tribunal in assessee’s own case, we restore the matter back to the file of the AO for deciding afresh after considering the order of Tribunal and considering the assessee’s contention and verifying the nature of subsidy so received by the assessee. We direct accordingly. 15. So far as disallowance u/s.14A is concerned, we found that a categorical finding has been recorded by CIT(A) to the effect that during the year under consideration, assessee was in receipt of exempt income of Rs.60,000/-, therefore, he restricted the addition to the extent of Rs.60,000/-. It was contention of learned AR that amount of Rs.60,000/- so received by assessee was in respect of dividend from co-operative bank which is liable to tax, meaning thereby, there is no exempt income during the year. 16. We have considered rival contentions and found that during the year under consideration, assessee was in receipt of Rs.60,000/- as dividend from the Co-operative bank. In view of the judicial pronouncements laid down by the Jurisdictional High Court in case of Delite Enterprises ITA No.110 of 2009 and Hon’ble Delhi High Court in case of Cheminvest Ltd., 281 CTR 447 disallowance u/s.14A should not exceed the exempt income. Accordingly, we hold that disallowance u/s.14A should not exceed the exempt income. The AO is directed to

21 ITA No.4769/Mum/2016 M/s. Atlanta Infra Assets Ltd., verify as to whether Rs.60,000/- received by assessee as dividend from Co-operative Bank if liable to tax, thenno disallowance u/s.14A is to be made. We direct accordingly. 17. In the result, appeals of assessee and Revenue are allowed in part in terms indicated hereinabove. Order pronounced in the open court on this 30/07/2018 Sd/- Sd/- (RAM LAL NEGI) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 30/07/2018 Karuna Sr.PS Copy of the Order forwarded to : The Appellant 1. The Respondent. 2. The CIT(A), Mumbai. 3. CIT 4. DR, ITAT, Mumbai 5. BY ORDER, 6. Guard file. सत्यापित प्रतत //True Copy// (Asstt. Registrar) ITAT, Mumbai