The DCIT, Gandhinagar Circle, Gandhinagar V. M/s. Gujarat Road and Infrastructure Company Ltd., Ahmedabad

ITA 1455/AHD/2019

AI Insights

The case revolves around the dispute concerning the depreciation claimed by Gujarat Road and Infrastructure Company Ltd. on toll roads, which the Assessing Officer initially disallowed, treating them not as 'buildings'. The CIT(A) reversed this decision, allowing the depreciation, which led to the Revenue's appeal to the ITAT. The Tribunal, referencing its earlier decisions and the legal definition of 'building' under the Income Tax Act, upheld the CIT(A)'s decision, dismissing the Revenue's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131387 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-05-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 19-09-2019
• Other Referred Cases: Indore Municipal Corporation vs. Income Tax Officer, Gwalior Rayon Silk Mfg. Co. Ltd. vs. Income Tax Officer, DCIT vs. M/s. Noida Toll Bridge Co. Ltd., Mysore Minerals Ltd. vs. C/T
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Revised return
• Section: 32; 250

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “B” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Th e Dy. CIT, Gandhinagar Circle, Gandhinagar (Appellant) Vs Gu jarat Road And Infra structure Co mpany Ltd. Ah med abad-3800 15 PAN: AABCG974 7N (Resp ondent) Asses see b y : Shri Pa rimal M istry, A. R. & Shri Paras Savla, A. R. Revenue by : Shri S udhendu Das, CIT-D. R. Date of hearing : 16-05 -2 023 Date of pronouncement : 19-05 -2 023 आदेश /ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the Revenue against the order of the ld. Commissioner of Income Tax (Appeals), Gandhinagar Ahmedabad, in ITA No. 1455/Ahd/2019 Assessment Year 2016-17 I.T.A No. 1455/Ahd/2019 A.Y. 2016-17 Page No. DCIT vs. M/s. Gujarat Road and Infrastructure Company Ltd. 2 proceeding u/s. 250 vide order dated 09/08/2019 passed for the assessment year 2016-17. 2. The Department has taken the following grounds of appeal:- “i) Whether, the Ld. Commissioner of Income-Tax(appeals) has erred in law and on facts in deleting the addition of Rs.l8,70,48,295/~ on account of disallowance of depreciation on toll roads." ii) On the facts and circumstances of the case, the Ld. Commissioner of Income-Tax(appeals) ought to have upheld the order of the Assessing Officer. iii) It is, therefore prayed that the order of the Ld. Commissioner of Income-tax (Appeals) may be set aside and that of the Assessing Officer be restored. iv) The appellant prays for leave, to amend or alter any ground or add a new ground which may be necessary.” 3. The brief facts in relation to this ground of appeal are that during the course of assessment, the Assessing Officer observed that the assessee company has claimed total depreciation of Rs. 1,91,58,855/- out of which Rs. 187048295/- was claimed on toll road between Ahmedabad-Mehsana, Rs. 12,90,52,245/- and Vadodara Halol Rs. 5,79,96,054/-. The Assessing Officer disallowed the claim of depreciation on above toll roads (the assessee had claimed depreciation by treating the toll road as “building”) on the ground that the Department is in appeal before ITAT/Gujarat High Court with respect to the aforesaid issue. Accordingly, the Assessing Officer disallowed the assessee’s claim of depreciation on toll roads at Ahmedabad- I.T.A No. 1455/Ahd/2019 A.Y. 2016-17 Page No. DCIT vs. M/s. Gujarat Road and Infrastructure Company Ltd. 3 Mehsana and Vadodara-Halol, claimed at Rs. 187048295/- and added the same to the total income of the assessee. 4. The assessee filed appeal before the Ld. CIT(A). The ld. CIT(A) decided the appeal in favour of the assessee with the following observations:- “5. I have considered the facts of the case, assessment order and submission made by the appellant. In the appellant's own case for A.Y. 2013-14 on identical issue, my predecessor has held as under:- "I have considered the facts of the case, assessment order and submission made by the appellant. AO on verification of computation of income, noticed that appellant had claimed total depreciation of Rs.16,97,27,280/-. On further verification he noticed that out of the total claim of deprecation, appellant had claimed depreciation on Vadodara Halol Road and Ahmedabad Mehsana Road amounting to Rs.5,03,23,144/- and Rs.11,51,68,730/- respectively-10% as applicable to building non residential total amounting to Rs.16,54/91,874/-. AO has contended that appellant is engaged in development, operation and maintenance of roads and the question of allowability of depreciation on roads has been answered by Hon'ble Supreme Court in the case of Indore Municipal Corporation [(2001) 247 ITR 403)], that a road is not to be treated as building. Relying on this, AO made addition of Rs.126,54,91,874/- to the income of the appellant From the submission filed by the appellant, it is noticed that similar issue was discussed on merits in appeal against 263 order in appellant's case for AY 2004-05 by the Hon'ble ITA T. The Tribunal has held that (a) as road is integral part of business activity of the assesses (b) it owns the asset on BOOT basis (c) used the asset for its business and (d) as the roads are connected to toll plazas and administrative buildings and as per Note 1 below the table of rates at which depreciation is admissible mentions that building include road', I.T.A No. 1455/Ahd/2019 A.Y. 2016-17 Page No. DCIT vs. M/s. Gujarat Road and Infrastructure Company Ltd. 4 therefore the toll road is building on which depreciation was available. Following the ITAT's order, the depreciation on toll, road is allowed as building for the year in question. The grounds are decided in favour of the appellant following the decision rendered by the Hon'ble ITA T, as above, as well as decided by my predecessors in AY 2008-09 & 2009-10 and by the undersigned in A Ys 2010-11, 2011-12 and 2012-13. The relevant grounds of appeal are allowed in favour of the appellant." Considering the facts of the case and the decision given by my predecessor as above, the ground nos. 1 to 3 of the appeal are allowed.” 5. The Department is in appeal before us against the aforesaid relief granted by the ld. CIT(A) with respect to this issue. Before us, the ld. Departmental Representative submitted that CIT(A) erred in allowing relief to the assessee since the Department is in appeal on this issue before the Hon’ble Gujarat High Court. 6. In response, the counsel for the assessee submitted that from assessment year 2002-03 to assessment year 2015-16, the ITAT has decided this issue in favour of the assessee for all the assessment years. Accordingly, the counsel for the assessee submitted that this issue has been decided in favour of the assessee by the ITAT for the previous fourteen assessment years and accordingly there is no infirmity in the order of ld. CIT(A) so as to call for any interference. I.T.A No. 1455/Ahd/2019 A.Y. 2016-17 Page No. DCIT vs. M/s. Gujarat Road and Infrastructure Company Ltd. 5 7. We have heard the rival contentions and perused the material on record. We observe that the ITAT has decided this issue in favour of the assessee for assessment year 2002-03 to assessment year 2015-16. It would be useful to reproduce the relevant extracts of the judgment for ready reference. The ITAT vide order dated 27-01-2010 in assessee’s own case for assessment year 2003-04 and assessment year 2004-05 made the following observations:- “11. We have heard the rival contentions and gone through the facts and circumstances of the case. We have also gone through the assessment orders, the revision orders of CIT passed u/s.263 of the Act, the paper books filed by the Ld. counsel for the assessee and the case laws referred by both the sides. We find that the assessee is engaged in business of setting up of infrastructure facility by way of construction of Toll-Roads and particularly this road known as "Vadodara-Halol Toll-Road", as per the policy of the Govt. of India in a Public Private Partnership. The Govt. of Gujarat has formed a SPV in joint venture with the assessee, i.e. between Gujarat Govt. and IL & FS Group. As per the changed business scenario after economic liberalization as per the policy of the Govt. of India, the assessee has constructed this Toll-Road on BOOT Basis. The assessee raised funds for the construction, maintain and to operate this Toll-Road and is entitled to collect toll from the vehicles passing through this Road. This road is constructed by the assessee in the course of carrying out its business activity and therefore the Toll-Road is an asset owned by the assessee on BOOT basis, with which business is carried on and exploited this asset for generating income, which is offered as revenue receipt for the purposes of taxation. The Assessing Officer during the course of assessment proceedings allowed the claim of depreciation after considering the revised return filed by the assessee. The AO has allowed the claim of depreciation in the computation of income after considering that the assessee has constructed the Toll-Road and it is operated and managed by the assessee. We find the Toll-Road is an integral part of the business activity of the assessee and without which the assessee could not carry on its business activity. We further find I.T.A No. 1455/Ahd/2019 A.Y. 2016-17 Page No. DCIT vs. M/s. Gujarat Road and Infrastructure Company Ltd. 6 that the assessee is owned a capital asset and the same is used for the purposes of business. It is also a fact that in the course of construction of Toll-Road, the assessee has constructed buildings, which are administrative building, Toll Plazas on both ends of road, from whereby the toll is collected by the staff from the passing vehicles. We further find from the facts that the road constructed by the assessee forms most important source of its revenue and the basic objective is to construct the Toll-Road under BOOT Scheme. Thus, the assessee has fulfilled the basic criteria for claiming depreciation i.e. existence of a capital assets, ownership of such asset and most important that the assessee were put to use for its business purpose. We find that the Ld. counsel for the assessee has made a fine distinction in the facts of the present case with that of Indore Municipal Corporation (supra) by stating the fact that IMG was a local body which derived income from sale of manure prepared out of waste and night oil dumped in the trenching grounds outside the municipal limits and it constructed a metal road over the trenching ground and claimed that the said expenditure should be treated as road and claimed depreciation. The Hon'ble Madhya Pradesh High Court held that the metal road for hauling composed could not be considered as expenditure and the assessee was not entitled to depreciation. The Hon'ble Supreme Court also held that the said metal roads cannot be treated as buildings as there was no other construction on the open ground except roads and roads by themselves cannot constitute building. We find that the facts before us, the toll road is constructed and there are toll plazas and administrative buildings and the roads are connected to these buildings on the both ends having toll plazas as well as buildings. 12. Another fact in the present case is that the definition of "building" as applicable to Section 32 of the Act has been substituted in Rule-5 of I.T. Rules, 1962 by the I.T. (Third amendment) Rules 1987, w.e.f. 2-4- 1987, whereby Note 1 below the Table of rates at which depreciation is admissible, constitution part of Appendix I to I.T. Rules, 1962 operative for and from assessment year 1988-89, by virtue of which buildings includes roads, buildings culvers, wells and tube wells. We find that Note 1 in the Depreciation Schedule clarifies that 'buildings include roads, bridges, culverts, wells and tube wells. The Hon'ble Supreme Court in the case of Gwalior Rayon Silk Mfg. Co. Ltd. I.T.A No. 1455/Ahd/2019 A.Y. 2016-17 Page No. DCIT vs. M/s. Gujarat Road and Infrastructure Company Ltd. 7 (supra) has also held that roads laid within the factory premises as links or which provides approach to the buildings are necessary adjuncts to the factory buildings to carry on the business activities of the assessee, and would be 'building' within the meaning of section 32 of the Act. Similarly, Delhi Bench of this Tribunal in 1TA No.3211 and 1983/Del/2006 in the case of DCIT v. M/s. Noida Toll Bridge Co. Ltd. has also allowed the claim of the assessee on Toll-Road. 13. Another argument made by Ld. CIT-DR was that the assessee is not the owner of the asset, i.e. Toll-Road. Now the question arises whether legal title is necessary or not, and this has been answered by the Hon'ble apex court in the case of Mysore Minerals Ltd. v C/T(1999) 239 ITR 775 (SC), wherein it was held that the terms 'own', 'ownership' 'owned' are generic and relative terms. They have a wide and also a narrow connotation. The meaning would depend on the context in which the terms are used. The term 'owned' as occurring in section 32(1) must be assigned a wider meaning. Anyone in possession of property in his own title exercising such domination over the property as would enable others being excluded therefrom and having right to use and occupy the property and / or to enjoy its usufruct in his own right would be the owner of the buildings though a formal deduction of title may not have been executed and registered as contemplated b the Transfer of Property Act, 1882 Registration Act. etc. In the present case neither the CIT in the revision order u/s.263 of the Act or by the Assessing Officer while framing original assessment has raised this issue, but the Ld. counsel for the assessee categorical stated that this Toll-Road was constructed on BOOT basis i.e. means 'Build', 'Own', 'Operate' and Transfer'. According to him, the entire responsibility for maintaining and operating this Toll-Road for 31 years is on assessee as he has to collect toll-fee. Once this concept of BOOT has been accepted by Gov. of India under infrastructure policy and the Govt. of Gujarat also entered in a joint venture with the assessee and formed an SVP, the question of ownership rest with the assessee for the purposes of claim of depreciation. Accordingly, this issue on merits is allowed in favour of the assessee. As regards to the argument of Ld. counsel for the assessee as regards to merger theory, the arguments become academic, hence, needs no answer.” I.T.A No. 1455/Ahd/2019 A.Y. 2016-17 Page No. DCIT vs. M/s. Gujarat Road and Infrastructure Company Ltd. 8 8. Further we note that the ITAT vide order dated 20-12-2019 in assessee’s own for assessment year 2013-14, 2014-15 and 2015-16 made the following observations while allowing assessee’s appeal:- “7. We find that the CIT(A) has appreciated both the controversies in right perspective. The CIT(A) has relied upon the decision of the co- ordinate bench of ITAT while granting depreciation allowance on toll road. In consonance with the order of co-ordinate bench of ITAT for AY 2003-04 to AY 2012-13 in favour of assessee for eligibility of depreciation allowance, the view expressed by the CIT(A) cannot be faulted. Similarly, the CIT(A) has correctly applied the laws relating to computation of book profit. In our considered view, mere credit in the books towards MAT entitlement could not be regarded as any income per se for the purpose of computation of book profit. The AO, according to us. has acted mechanically without taking note of such ground realities. Likewise, we concur with the view of CIT(A) for set off MAT credit against MAT provisions. We find no infirmity in the order of the CIT(A) on both counts. Thus, we decline to interfere with the order of the CIT(A). 8. In the result, appeal filed by the Revenue for AY 2014-15 is dismissed.” 8.1 Respectfully following the aforesaid orders passed by ITAT in assessee’s own case in which this issue has been decided in favour of the assessee, the relevant extracts of the orders have been reproduced above, we are of the considered view that the ld. CIT(A) has not erred in facts and in law in deciding this issue in favour of the assessee. Accordingly, we are hereby dismissing the Revenue’s appeal with respect to this issue. I.T.A No. 1455/Ahd/2019 A.Y. 2016-17 Page No. DCIT vs. M/s. Gujarat Road and Infrastructure Company Ltd. 9 9. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 19-05-2023 Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 19/05/2023 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद