HAZARIBAGH RANCHI EXPRESSWAY LTD.,MUMBAI vs. ACIT, CIR-14(1)(1), MUMBAI

ITA 3787/MUM/2023Status: DisposedITAT Mumbai17 September 2024AY 2013-1421 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal dismissed the assessee's appeals for both assessment years. The primary issue was the claim for depreciation on the Project Road. The Tribunal held that the decision of the Hon'ble Madras High Court in L & T Infrastructure Development Projects Limited vs. ACIT is binding as it is the sole decision by any Hon'ble High Court on the issue and there is no contrary decision from any other Hon'ble High Court, including the jurisdictional High Court. This decision held that the toll road is not an intangible asset. The Tribunal also noted that the claim of depreciation treating the road as a tangible asset (plant and machinery or building) was covered against the assessee by decisions of the Hon'ble Jurisdictional High Court. Therefore, the Tribunal found no infirmity in the CIT(A)'s order denying depreciation. The Tribunal upheld the benefit of amortization for the concession period granted by the AO and upheld by the CIT(A), finding it to be in consonance with CBDT Circular No. 9 of 2014. The Tribunal expressly left undecided the arguments concerning Section 115JA and the applicability of certain Supreme Court decisions, as these were not the core of the appeal before them.

What were the facts?

The assessee, Hazaribagh Ranchi Expressway Ltd., filed appeals for Assessment Years 2013-14 and 2014-15 challenging the orders of the CIT(A) which upheld the disallowance of depreciation. The assessee was awarded a contract by the National Highway Authority of India to four-lane the Hazaribagh-Ranchi section on a Build, Operate and Transfer (BOT) basis. The assessee capitalized the cost of constructing the expressway toll road. During assessment, the assessee claimed depreciation on roads and bridges amounting to ₹153,56,83,533, treating the road as 'plant and machinery' at 15% on the total cost of construction. Alternatively, it claimed depreciation treating the road as 'building' at 10% or as an 'intangible asset' at 25%. The Assessing Officer disallowed the depreciation claim, holding that the assessee was not the owner of the asset for the lease period of 18 years, but allowed amortization of 1/18th of the cost as deferred revenue expenditure.

What were the issues?

1. Whether the assessee is entitled to claim depreciation on the Project Road under Section 32(1)(ii) of the Income Tax Act, 1961, treating it as an 'intangible asset' (license, business, or commercial right)? - Assessee's contention: The right to set up an infrastructure facility and collect annuity is a 'license', 'business', or 'commercial right' and thus an 'intangible asset' under Section 32(1)(ii), entitling depreciation at 25% on the project road amounting to ₹254,27,71,440. They relied on various Tribunal decisions where licenses to set up infrastructure facilities were treated as intangible assets. - Revenue's contention: Not explicitly recorded, but implied by the AO's disallowance and CIT(A)'s order upholding it. 2. Whether, in the alternative, depreciation can be granted treating the Project Road as 'plant and machinery' at 15%? - Assessee's contention: Any asset that helps an assessee earn revenue should be treated as 'plant', entitling depreciation at 15% amounting to ₹1,52,56,83,533. - Revenue's contention: Not explicitly recorded. 3. Whether, in the further alternative, depreciation can be granted treating the Project Road as 'building' at 10%? - Assessee's contention: Depreciation at 10% amounting to ₹101,71,08,576 may be allowed if the road is not treated as an intangible asset or plant and machinery. - Revenue's contention: Not explicitly recorded. 4. Whether, in the ultimate alternative, the entire cost incurred for the construction of the Project Road should be allowed as revenue expenditure? - Assessee's contention: The cost of ₹1017,10,85,761 should be allowed as revenue expenditure if depreciation is not granted under any category. - Revenue's contention: Not explicitly recorded.

Which sections of the Income-tax Act were involved?

Section 32(1)(ii),Section 32,Section 115JB,Section 143(3),Section 92CA(4),Section 250,Section 115JA,Section 115J

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “E” BENCH, MUMBAI

Before: SHRI AMARJIT SINGH & SHRI SANDEEP SINGH KARHAIL

For Appellant: Shri Bhupal Rapelli, Shri Niranjan Govindekar
For Respondent: Shri Savya Sachi Kumar, Shri Biswanath Das

PER SANDEEP SINGH KARHAIL, J.M.

The present appeals have been filed by the assessee challenging the separate impugned orders of even date 28/08/2023 passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals) - 56, Mumbai, [“/earned CIT(A)"], for the assessment

years 2013-14 and 2014-15. Hazaribagh Ranchi Expressway Ltd. ITA n0.3787 & 3788/Mum/2023

2.

Since both appeals pertain to the same assessee and involve simila

The order continues below.

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