ACIT CC -I, Nashik V. M/s Ashoka Infraways Pvt Ltd, Nashik

ITA 185/PUN/2012

• Counselvise Citation: 18524514 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 29-12-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 01-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ADITYA P RATHI
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER, AND SHRI R.S.PADVEKAR, JUDICIAL MEMBER. ITA.NO.185 & 186/PN/12 (ASSTT. YEAR : 2006-07 & 2007-08) ACIT, CENTRAL CIRCLE-1, NASHIK. .. APPELLANT VS. ASHOKA INFRAWAYS PVT. LTD., ASHOKA HOUSE, ASHOKA MARG, S.NO.861, WADALA, NASHIK. .. RESPONDENT ASSESSEE BY : SHRI ADITYA P.RATHI DEPARTMENT BY : SHRI ACHAL SHARMA DATE OF HEARING : 16.04.2013 DATE OF PRONOUNCEMENT : 29.04.2013 ORDER PER G.S.PANNU, AM : THESE TWO APPEALS PERTAINING TO THE SAME ASSESSEE HAVE BEEN PREFERRED BY THE REVENUE AGAINST SIMILARLY WORDED O RDERS DATED 24.11.2011 PASSED BY THE CIT(A) FOR A.YS. 2006-07 A ND 2007-08, WHICH INTER-ALIA, ARISE FROM ASSESSMENT ORDERS PASS ED BY THE ASSESSING OFFICER U/S.143(3) OF THE ACT DATED 31.1 2.2008 AND 16.12.2009 RESPECTIVELY. 2. IN BOTH THE APPEALS, REVENUE HAS RAISED A COMMON GRIEVANCE WHICH IS ON ACCOUNT OF THE ACTION OF THE CIT(A) IN HOLDING THAT ASSESSEE WAS ELIGIBLE TO CLAIM DEPRECIATION ON RIG HT TO COLLECT TOLL, AS AN INTANGIBLE ASSET IN TERMS OF SECTION 32(1)( II) OF THE ACT. IT WAS A COMMON POINT BETWEEN THE PARTIES THAT THE FACTS A ND CIRCUMSTANCES IN BOTH THE APPEALS STAND ON AN IDENT ICAL FOOTING, 2 THEREFORE, THE APPEAL OF THE REVENUE IN ITA.NO.185/ PN/2012 PERTAINING TO THE A.Y. 2006-07 IS TAKEN AS THE LEAD CASE. 3. BRIEFLY PUT, THE FACTS RELEVANT TO ADJUDICATE TH E PRESENT CONTROVERSY ARE AS FOLLOWS. THE RESPONDENT ASSESSE E IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956, AND IS INTER-ALIA, ENGAGED IN THE BUSINESS OF CONSTRUCTION, OPERATION AND MAINTENANCE OF INFRASTRUCTURE FACILITIES AND FINANC ING ACTIVITIES. IN TERMS OF THE AFORESAID, ASSESSEE WAS ENGAGED IN OPE RATION AND MAINTENANCE OF INFRASTRUCTURE FACILITY (DEWAS BY-PA SS ROAD) ON BUILD, OPERATE AND TRANSFER(BOT) BASIS. FOR THE A. Y. 2006-07, THE ASSESSEE COMPANY FILED A RETURN OF INCOME DECLARING A LOSS OF RS.9,24,33,233/- UNDER THE NORMAL PROVISIONS OF THE ACT, WHILE IT PAID THE MINIMUM ALTERNATE TAX (MAT) U/S.115JB OF T HE ACT. IN THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER N OTICED THAT ASSESSEE HAD CLAIMED DEPRECIATION @ 25% ON LICENSE TO COLLECT TOLL AMOUNTING TO RS.11,44,86,734/-, WHICH IS THE SUBJEC T-MATTER OF DISPUTE BEFORE US. 4. THE ASSESSEE WAS AWARDED AN INFRASTRUCTURE WORK OF DEVELOPMENT, OPERATION AND MAINTENANCE OF INFRASTRU CTURE PROJECT OF DEWAS BY-PASS ROAD IN THE STATE OF MADHYA PRADES H ON BOT BASIS. IN TERMS OF THE AGREEMENT WITH THE GOVERNME NT OF MADHYA PRADESH, ASSESSEE WAS REQUIRED TO DEVELOP, CONSTRUC T AND MAINTAIN THE ROAD AT ITS OWN COST FOR A SPECIFIED PERIOD. O N EXPIRY OF THE SPECIFIED PERIOD, THE INFRASTRUCTURAL FACILITY WAS TO BE TRANSFERRED TO THE GOVERNMENT OF MADHYA PRADESH FREE OF CHARGE. I N CONSIDERATION OF THE EXPENDITURE INCURRED ON CONSTRUCTION, OPERAT ION AND MAINTENANCE OF THE ROAD AND HANDING IT OVER TO THE GOVERNMENT OF MADHYA PRADESH FREE OF CHARGE, ASSESSEE WAS BESTOWE D A RIGHT TO COLLECT TOLL FROM THE MOTORISTS USING THE ROAD DURI NG THE SPECIFIED PERIOD, WHICH WAS FROM 24.05.2004 TO 06.05.2015. AS A PART OF ITS OBLIGATION UNDER THE TERMS OF AGREEMENT WITH THE GO VERNMENT OF MADHYA PRADESH, ASSESSEE MADE INVESTMENT OF RS.61.0 6 CRORES APPROXIMATELY, IN THE DEVELOPMENT AND CONSTRUCTION OF THE 3 INFRASTRUCTURAL FACILITY. THE ASSESSEE CAPITALISED THE COSTS INCURRED ON DEVELOPMENT AND CONSTRUCTION OF INFRASTRUCTURAL FACILITY UNDER THE HEAD LICENSE TO COLLECT TOLL FOR THE REASON T HAT BY INCURRING THE EXPENDITURE ON DEVELOPMENT AND CONSTRUCTION OF THE INFRASTRUCTURE FACILITY (I.E. DEWAS BY-PASS ROAD), ASSESSEE GOT AN ENDURING BENEFIT IN THE FORM OF A RIGHT TO COLLECT TOLL FROM THE MOT ORISTS USING THE ROAD FOR A PERIOD OF APPROXIMATELY 11 YEARS. IN T HIS BACKGROUND, THE ASSESSEE CLAIMED THAT THE RIGHT TO COLLECT TOLL OBTAINED BY IT WAS AKIN TO A LICENSE, BEING AN INTANGIBLE ASSET WITH IN THE MEANING OF SECTION 32(1)(II) OF THE ACT AND WAS THUS ELIGIBLE FOR DEPRECIATION @ 25%. THE ASSESSING OFFICER HELD THAT THE RIGHT TO COLLECT TOLL WAS NEITHER A LICENSE NOR A VALUABLE COMMERCIAL OR BUSI NESS RIGHT COVERED IN THE EXPRESSION INTANGIBLE ASSET FOR TH E PURPOSES OF SECTION 32(1)(II) OF THE ACT. ACCORDINGLY, HE HAS DISALLOWED THE CLAIM OF DEPRECIATION OF RS.11,44,86,734/- ON THE AMOUNT CAPITALISED UNDER THE HEAD LICENSE TO COLLECT TOLL. HOWEVER, AFTER DISALLOWING THE DEPRECIATION OF RS.11,44,86,734/-, THE ASSESSIN G OFFICER PERMITTED DEDUCTION OF RS.5,38,75,193/- BEING THE P ROPORTIONATE ACTUAL COST INCURRED ON DEVELOPMENT AND CONSTRUCTIO N OF THE ROAD SPREAD OVER ON A PRO-RATA BASIS OVER THE ENTIRE TOL L COLLECTION PERIOD FROM 25.04.2004 TO 06.05.2015. AGAINST THE AFORESA ID DENIAL OF DEPRECIATION, ASSESSEE WENT IN APPEAL BEFORE THE CI T(A). 5. IN APPEAL BEFORE THE CIT(A), ASSESSEE REITERATED ITS PLEA THAT THE CLAIM OF DEPRECIATION IN TERMS OF SECTION 32(1) (II) WAS JUSTIFIED. THE ASSESSEE POINTED OUT THAT BY INCURRING EXPENDIT URE ON CONSTRUCTION OF THE ROAD, IN COMMERCIAL REALITY, TH E UNDERLYING ASSET THAT CAME INTO EXISTENCE WAS THE RIGHT TO COLLECT TOLL WHICH WAS OWNED AND USED BY THE ASSESSEE FOR THE PURPOSES OF ITS BUSINESS. THE CIT(A) HAS SINCE ALLOWED THE CLAIM OF THE ASSES SEE BY HOLDING THAT THE RIGHT TO COLLECT TOLL WAS A VALUABLE RIG HT HAVING COMMERCIAL VALUE AND IT WAS AN INTANGIBLE ASSET C OVERED BY SECTION 32(1)(II) OF THE ACT. IN COMING TO SUCH CONCLUSION , THE CIT(A) RELIED UPON THE FOLLOWING DECISIONS OF THE TRIBUNAL:- 4 I) RELIANCE PORTS AND TERMINALS LTD. IN ITA.NO.1743 TO 1745/MUM/07 DATED 26.11.2007 OF THE MUMBAI BENCH; AND II) ASHOKA INFO PVT. LTD. IN ITA NO.44/PN/07 DATED 31.12.2008 OF THE PUNE BENCH. 6. ACCORDINGLY, THE CIT(A) DIRECTED THE ASSESSING O FFICER TO ALLOW DEPRECIATION @ 25% ON THE RIGHT TO COLLECT TOLL A MOUNTING TO RS.11,44,86,734/- AND SO FAR AS THE DEDUCTION OF RS .5,38,75,193/- ALLOWED BY THE ASSESSING OFFICER AS AMORTIZED PROPO RTIONATE COST WAS CONCERNED, THE SAME WAS DIRECTED TO BE WITHDRAW N. AGAINST THE ACTION OF THE CIT(A) IN ALLOWING THE CLAIM OF D EPRECIATION, THE REVENUE IS IN APPEAL BEFORE US. 7. BEFORE US, IT WAS A COMMON POINT BETWEEN THE PAR TIES THAT THE IMPUGNED ISSUE HAS BEEN ADJUDICATED IN FAVOUR OF TH E ASSESSEE IN THE FOLLOWING DECISIONS OF THE TRIBUNAL:- I) ASHOKA BUILDCON LTD. IN ITA.NO.1302/PN/09 DATED 20.03.2012. II) M/S.KALYAN TOLL INFRASTRUCTURE LTD. IN ITA.NOS. 201 & 247/IND/2008 DATED 14.12.2010. III) DIMENSION CONSTRUCTION PVT. LTD. IN ITA.NO.222, 223 , 233 & 857/PN/2009 DATED 18.03.2011. IV) ASHOKA INFO (P) LTD. (SUPRA) V) RELIANCE PORTS AND TERMINALS LTD. (SUPRA). 8. THE LD. CIT(DR) APPEARING FOR THE REVENUE, HAS S UBMITTED THAT THE INTANGIBLE ASSETS ELIGIBLE FOR DEPRECIAT ION IN SECTION 32(1)(II) OF THE ACT, ARE ONLY THOSE WHICH ARE OWNE D BY THE ASSESSEE AND HAVE BEEN ACQUIRED AFTER SPENDING MONEY. IN TH E CASE OF THE ASSESSEE, BY WAY OF AN AGREEMENT, ASSESSEE WAS AWAR DED A WORK TO CONSTRUCT A ROAD BY USING OWN FUNDS AND THE EXPENDI TURE INCURRED WAS ALLOWED TO BE REIMBURSED BY PERMITTING THE ASSE SSEE A CONCESSION TO COLLECT TOLL/FEES FROM THE MOTORISTS USING THE ROAD. THEREFORE, IT COULD NOT BE SAID THAT SUCH A RIGHT W AS WITHIN THE PURVIEW OF SECTION 32(1)(II) OF THE ACT. HOWEVER, T HE LD. CIT(DR) HAS NOT CONTESTED THE FACTUAL MATRIX THAT IDENTICAL ISS UE HAS BEEN CONSIDERED BY OUR COORDINATE BENCHES IN THE CASE OF ASHOKA 5 BUILDCON LTD. (SUPRA), KALYAN TOLL INFRASTRUCTURE L TD. (SUPRA), DIMENSION CONSTRUCTION PVT. LTD. (SUPRA) AND ASHOKA INFO (P) LTD. (SUPRA). 9. ON THE OTHER HAND, THE LD. REPRESENTATIVE FOR TH E RESPONDENT ASSESSEE POINTED OUT THAT THE AFORESAID ARGUMENT SE T UP BY THE REVENUE HAS ALSO BEEN CONSIDERED IN THE AFORESAID P RECEDENTS BEFORE CONCLUDING THAT THE IMPUGNED RIGHT TO COLLE CT TOLL WAS AN INTANGIBLE ASSET ELIGIBLE FOR CLAIM OF DEPRECIATI ON @ 25% AS PER SEC. 32(1)(II) OF THE ACT. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. FACTUALLY SPEAKING, THERE IS NO DISPUTE TO THE FACT THAT THE COSTS CAPITALISED BY THE ASSESSEE UNDER THE HEAD LICENSE TO COLLECT TOLL HAVE BEEN INCURRED FOR DEVELOPMENT AND CONSTRUCTION OF THE IN FRASTRUCTURE FACILITY, I.E., DEWAS BY-PASS ROAD. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE WAS TO BUILD, OPERATE AND TRANSFER THE SAI D INFRASTRUCTURE FACILITY IN TERMS OF AN AGREEMENT WITH THE GOVERNME NT OF MADHYA PRADESH. THE EXPENDITURE ON DEVELOPMENT, CONSTRUCT ION AND MAINTENANCE OF THE INFRASTRUCTURE FACILITY FOR A SP ECIFIED PERIOD WAS TO BE INCURRED BY THE ASSESSEE OUT OF ITS OWN FUNDS . MOREOVER, AFTER THE END OF THE SPECIFIED PERIOD, ASSESSEE WAS TO TR ANSFER THE SAID INFRASTRUCTURE FACILITY TO THE GOVERNMENT OF MADHYA PRADESH FREE OF CHARGE. IN CONSIDERATION OF DEVELOPING, CONSTRUCTI NG, MAINTAINING THE FACILITY FOR A SPECIFIED PERIOD AND THEREAFTER TRANSFERRING IT TO THE GOVERNMENT OF MADHYA PRADESH FREE OF CHARGE, ASSESS EE WAS GRANTED A RIGHT TO COLLECT TOLL FROM THE MOTORIST S USING THE SAID INFRASTRUCTURE FACILITY DURING THE SPECIFIED PERIOD . THE SAID RIGHT TO COLLECT THE TOLL IS EMERGING AS A RESULT OF THE CO STS INCURRED BY THE ASSESSEE ON DEVELOPMENT, CONSTRUCTION AND MAINTENAN CE OF THE INFRASTRUCTURE FACILITY. SUCH A RIGHT HAS BEEN ADJ UDICATED BY THE TRIBUNAL IN THE AFORESAID PRECEDENTS TO BE IN THE N ATURE OF INTANGIBLE ASSET FALLING WITHIN THE PURVIEW OF SE CTION 32(1)(II) OF THE ACT AND HAS BEEN FOUND ELIGIBLE FOR CLAIM OF DEPREC IATION. NO DECISION TO THE CONTRARY HAS BEEN CITED BY THE LD. DR BEFORE US AND, 6 THEREFORE, WE FIND NO REASONS TO DEPART FROM THE AC CEPTED POSITION BASED ON THE AFORESAID DECISIONS. 11. SO HOWEVER, THE PLEA OF THE LD. DR BEFORE US IS TO THE EFFECT THAT THE IMPUGNED RIGHT IS NOT OF THE NATURE REFERR ED TO IN SECTION 32(1)(II) OF THE ACT FOR THE REASON THAT THE AGREEM ENT WITH THE GOVERNMENT OF MADHYA PRADESH ONLY ALLOWED THE ASSES SEE TO RECOVER THE COSTS INCURRED FOR CONSTRUCTING THE ROA D FACILITY WHEREAS SECTION 32(1)(II) OF THE ACT REQUIRED THAT THE ASSE TS MENTIONED THEREIN SHOULD BE ACQUIRED BY THE ASSESSEE AFTER SP ENDING MONEY. THE SAID ARGUMENT IN OUR VIEW IS FACTUALLY AND LEGA LLY MISPLACED. FACTUALLY SPEAKING, IT IS WRONG TO SAY THAT IMPUGNE D RIGHT ACQUIRED BY THE ASSESSEE WAS WITHOUT INCURRENCE OF ANY COST. IN FACT, IT IS QUITE EVIDENT THAT ASSESSEE GOT THE RIGHT TO COLLEC T TOLL FOR THE SPECIFIED PERIOD ONLY AFTER INCURRING EXPENDITURE T HROUGH ITS OWN RESOURCES ON DEVELOPMENT, CONSTRUCTION AND MAINTENA NCE OF THE INFRASTRUCTURE FACILITY. SECONDLY, SECTION 32(1)(II ) PERMITS ALLOWANCE OF DEPRECIATION ON ASSETS SPECIFIED THEREIN BEING INTANGIBLE ASSETS WHICH ARE WHOLLY OR PARTLY OWNED BY THE ASSESSEE AN D USED FOR THE PURPOSES OF ITS BUSINESS. THE AFORESAID CONDITION I S FULLY SATISFIED BY THE ASSESSEE AND THEREFORE CONSIDERED IN THE AFORES AID PERSPECTIVE WE FIND NO JUSTIFICATION FOR THE PLEA RAISED BY THE REVENUE BEFORE US. 12. IN THE RESULT, WE AFFIRM THE ORDER OF THE CIT(A ) IN HOLDING THAT THE ASSESSEE WAS ELIGIBLE FOR DEPRECIATION ON THE RIGHT TO COLLECT TOLL, BEING AN INTANGIBLE ASSET FALLING WITHIN T HE PURVIEW OF SECTION 32(1)(II) OF THE ACT FOLLOWING THE AFORESAID PRECED ENTS. 13. IN THE RESULT, APPEAL OF THE REVENUE IS ITA NO. 185/PN/2012 IS DISMISSED. 14. SINCE IT WAS A COMMON POINT BETWEEN THE PARTIES THAT THE FACTS AND CIRCUMSTANCES IN THE OTHER APPEAL FOR ASSESSMEN T YEAR 2007-08 STAND ON AN IDENTICAL FOOTING TO THE APPEAL FOR ASS ESSMENT YEAR 2006-07, WHICH WE HAVE CONSIDERED IN THE EARLIER PA RAGRAPHS, 7 HENCE FOLLOWING OUR DECISION IN THE APPEAL FOR ASSE SSMENT YEAR 2006-07, APPEAL OF THE REVENUE FOR A.Y. 2007-08 IS ALSO DISMISSED. 15. RESULTANTLY, BOTH THE APPEALS ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 29 TH DAY OF APRIL, 2013. SD/- SD/- ( R.S.PADVEKAR ) ( G.S.PANNU ) JUDICIAL MEMBER ACCOUNTANT MEMBER GSPS PUNE, DATED THE 29 TH APRIL, 2013 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE ACIT, CENTRAL CIRCLE, NASHIK. 3. THE CIT(A)-I, NASHIK. 4. THE CIT(CENTRAL), NAGPUR. 5. THE DR B BENCH, PUNE. 6. GUARD FILE. BY ORDER //TRUE COPY// PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE.