The ACIT,GNR Circle, Gandhinagar V. Gujarat Road & Infrastructure Co.Ltd., Ahmedabad

ITA 1981/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85677 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 09-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P VAISHNAV
• Assessee Lawyers: DILIP V LAKHANI
• Keywords: Depreciation; Revised return
• Section: 32; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD , CH CHCH CH BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. ITA NOS. 1981/AHD/2011, 2528 & 2529/AHD/2014 (ASSESSMENT YEARS:2008-09, 2010-11 & 2011-12) ASSTT. COMMISSIONER OF INCOME TAX, GANDHINAGAR CIRCLE, BLOCK NO.14, 4 TH FLOOR, UDHYOG BHAVAN, SECTOR-11, GANDHINAGAR APPELLANT VS. GUJARAT ROAD & INFRASTRUCTURE CO. LTD., 301-306, SHAPATH-1, OPP. RAJPATH CLUB, SARKHEJ-GNR HIGHWAY, BODAKDEV, AHMEDABAD -380015 RESPONDENT PAN: AABCG9747N / BY REVENUE : SHRI O. P. VAISHNAV, CIT D.R. / BY ASSESSEE : SHRI DILIP V. LAKHANI, A.R. /DATE OF HEARING : 16.02.2015 !' /DATE OF PRONOUNCEMENT : 19.02.2015 I.T.A. NOS. 1981/AHD/11, 2528 & 2529/AHD/2014 FOR A.Y. 08-09, 10-11 & 11-12 ( ACIT VS. GUJARAT ROAD & INFRASTRUCTURE CO. LTD.) PAGE 2 ORDER PER SHAILENDRA KUMAR YADAV, J.M: ALL THESE APPEALS FILED BY REVENUE ARE PERTAINED TO SAME ASSESSEE FOR A.Y. 2008-09, 2010-11 & 2011-12, ARISI NG OUT FORM THE ORDERS OF CIT(A), GANDHINAGAR, DATED 02.05 .2011 FOR A.Y. 2008-09 AND ORDER DATED 04.06.2014 FOR A.Y. 20 10-11 & 2011-12 ON SIMILAR GROUNDS. SO, THEY ARE BEING DIS POSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENC E. 2. IN ITA NO. 1981/AHD/2011 FOR A.Y. 2008-09, REVEN UE HAS FILED APPEAL ON THE FOLLOWING GROUND: 1. THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.27,63,03,828/- MADE ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON ROADS. 2.1 IN ITA NO. 2528/AHD/2014 FOR A.Y. 2010-11, REVE NUE HAS FILED APPEAL ON THE FOLLOWING GROUND: 1. THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE ASSESSEE CLAIM OF DEPRECIATION AMOUNTING TO RS.22,59,22,061/-. 2.2 IN ITA NO. 2529/AHD/2014 FOR A.Y. 2011-12, REVE NUE HAS FILED APPEAL ON THE FOLLOWING GROUND: 1. THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE ASSESSEE CLAIM OF DEPRECIATION AMOUNTING TO RS.20,48,87,625/-. 3. ASSESSING OFFICER DISALLOWED THE CLAIM OF DEPREC IATION AMOUNTING TO RS. 22,59,22,061/- ON TOLL ROAD. CIT( A) ON THE ISSUE FOLLOWING ITAT DECISION FOR A.Y. 2004-05 HAS DECIDED IN FAVOUR OF ASSESSEE. TRIBUNAL HAS HELD THAT ; I.T.A. NOS. 1981/AHD/11, 2528 & 2529/AHD/2014 FOR A.Y. 08-09, 10-11 & 11-12 ( ACIT VS. GUJARAT ROAD & INFRASTRUCTURE CO. LTD.) PAGE 3 (A) AS ROAD IS INTEGRAL PART OF BUSINESS ACTIVITY O F THE ASSESSEE (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 A DMINISTRATIVE BUILDINGS AND AS PER NOTE 1 BELOW THE TABLE OF RATE S AT WHICH DEPRECIATION IS ADMISSIBLE MENTIONS THAT BUILDING I NCLUDE ROAD, THEREFORE THE TOLL ROAD IS BUILDING ON WHICH DEPREC IATION WAS AVAILABLE. SIMILAR VIEW HAS BEEN TAKEN BY ITAT IN A.Y. 03-04, 05-06 & 09-10 AND OTHER YEARS AS MENTIONED ABOVE, W HEREIN TRIBUNAL HAS SET ASIDE THE SIMILAR ISSUE IN FAVOUR OF ASSESSEE. IN A.Y. 02-03 & 05-06, TRIBUNAL HAS HELD AS UNDER: 6. ON THE ISSUE WITH REGARD TO ALLOWABILITY OF DEP RECIATION ON TOLL ROADS, THE TRIBUNAL IN ASSESSEE'S OWN CASE IN ITA NO.1453/AHD/2008 FOR ASSESSMENT YEAR 2004-05 VIDE O RDER DATED 12-02-2010 HELD AS UNDER ON PAGE 13 PARA 11 O F THE ORDER: '11. WE FIND THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SETTING UP OF INFRASTRUCTURE FACILITY B Y WAY OF CONSTRUCTION OF TOLL- ROADS AND PARTICULARLY THI S ROAD KNOWN AS 'VADODARA - HALOL TOLL - ROAD', AS PER THE POLICY OF THE GOVT. OF INDIA IN A PUBLIC PRIVAT E PARTNERSHIP. THE GOVT. OF GUJARAT HAS FORMED A SPV IN JOINT VENTURE WITH THE ASSESSEE I.E. BETWEEN GUJARA T GOVT. AND IL & FS GROUP. AS PER THE CHANGED BUSINES S SCENARIO AFTER ECONOMIC LIBERALIZATION AS PER THE P OLICY 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 VEHIC LES PASSING THROUGH THIS ROAD. THIS ROAD IS CONSTRUCTED BY THE ASSESSEE IN THE COURSE OF CARRYING OUT ITS BUSI NESS ACTIVITY AND THEREFORE THE TOLL-ROAD IS AN ASSET OW NED BY THE ASSESSEE ON BOOT BASIS, WITH WHICH BUSINESS IS CARRIED ON AND EXPLOITED THIS ASSET FOR GENERATING I.T.A. NOS. 1981/AHD/11, 2528 & 2529/AHD/2014 FOR A.Y. 08-09, 10-11 & 11-12 ( ACIT VS. GUJARAT ROAD & INFRASTRUCTURE CO. LTD.) PAGE 4 INCOME, WHICH IS OFFERED AS REVENUE RECEIPT FOR THE PURPOSE OF TAXATION. THE ASSESSING OFFICER DURING T HE COURSE OF ASSESSMENT PROCEEDINGS ALLOWED THE CLAIM OF DEPRECIATION AFTER CONSIDERING THE REVISED RETURN F ILED BY THE ASSESSEE. THE AO HAS ALLOWED THE CLAIM OF DEPRECIATION IN THE COMPUTATION OF INCOME AFTER CONSIDERING THAT THE ASSESSEE HAS CONSTRUCTED THE T OLL- 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 ACTIVI TY. WE FURTHER FIND THAT THE ASSESSEE IS OWNED A CAPITA L 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 TH AT THE ROAD CONSTRUCTED BY THE ASSESSEE FORMS MOST IMPORTANT SOURCE OF ITS REVENUE AND THE BASIC OBJEC TIVE 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 A SSETS, 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 W ITH THAT OF INDORE MUNICIPAL CORPORATION (SUPRA) BY STA TING THE FACT THAT IMC WAS A LOCAL BODY WHICH DERIVED INCOME FROM SALE OF MANURE PREPARED OUT OF WASTE AN D NIGHT OIL DUMPED IN THE TRENCHING GROUNDS OUTSIDE T HE MUNICIPAL LIMITS AND IT CONSTRUCTED A METAL ROAD OV ER 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 W AS NOT ENTITLED TO DEPRECIATION. THE HON'BLE SUPREME COURT ALSO HELD THAT THE SAID METAL ROADS CANNOT BE TREATED AS BUILDING AS THERE WAS NO OTHER CONSTRUCT ION ON THE OPEN GROUND EXCEPT ROADS AND ROADS BY I.T.A. NOS. 1981/AHD/11, 2528 & 2529/AHD/2014 FOR A.Y. 08-09, 10-11 & 11-12 ( ACIT VS. GUJARAT ROAD & INFRASTRUCTURE CO. LTD.) PAGE 5 THEMSELVES CANNOT CONSTITUTE BUILDING. WE FIND THAT THE FACTS BEFORE US, THE TOLL ROAD IS CONSTRUCTED A ND THERE ARE TOLL PLAZAS AND ADMINISTRATIVE BUILDINGS AND THE ROADS ARE CONNECTED TO THESE BUILDINGS ON THE B OTH 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. 1987, WHEREBY NOTE 1 BELOW THE TABLE OF RATS AT WHI CH DEPRECIATION IS ADMISSIBLE, CONSTITUTION PART OF APPENDIX I TO I. T. RULES, 1962 OPERATIVE FOR AND F ROM ASSESSMENT YEAR 1988-89, BY VIRTUE OF WHICH BUILDIN GS INCLUDES ROADS, BUILDING CULVERTS, WELLS AND TUBE W ELLS. 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 RAYAON SILK MFG. CO. L TD. (SUPRA) HAS ALSO HELD THAT ROADS LAID WITHIN THE FA CTORY PREMISES AS LINKS OR WHICH PROVIDES APPROACH TO THE BUILDINGS ARE NECESSARY ADJUNCTS TO THE FACTORY BUILDINGS TO CARRY ON THE BUSINESS ACTIVITIES OF TH E ASSESSEE, AND WOULD BE 'BUILDING' WITHIN THE MEANIN G OF SECTION 32 OF THE ACT. SIMILARLY, DELHI BENCH OF THIS TRIBUNAL IN ITA 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. TO LL- ROAD. NOW THE QUESTION ARISES WHETHER LEGAL TITLE I S NECESSARY OR NOT, AND THIS HAS BEEN ANSWERED BY THE HON'BLE APEX COURT IN THE CASE OF MYSORE MINERALS L TD. V. CIT (1999) 239 ITR 775 (SC), WHEREIN IT WAS HELD THAT THE TERM 'OWN', 'OWNERSHIP', 'OWNED' ARE GENER IC AND RELATIVE TERMS. THEY HAVE A WIDE AND ALSO A NAR ROW CONNOTATION. THE MEANING WOULD DEPEND ON THE CONTEXT IN WHICH THE TERMS ARE USED. THE TERM 'OWNE D' AS OCCURRING IN SECTION 32(1) MUST BE ASSIGNED A WI DER MEANING. ANYONE IN POSSESSION OF PROPERTY IN HIS OW N TITLE EXERCISING SUCH DOMINATION OVER THE PROPERTY AS I.T.A. NOS. 1981/AHD/11, 2528 & 2529/AHD/2014 FOR A.Y. 08-09, 10-11 & 11-12 ( ACIT VS. GUJARAT ROAD & INFRASTRUCTURE CO. LTD.) PAGE 6 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 OW NER OF THE BUILDING THOUGH A FORMAL DEDUCTION OF TITLE MAY NOT HAVE BEEN EXECUTED AND REGISTERED AS CONTEMPLATED TO THE TRANSFER OF PROPERTY ACT, 1882 REGISTRATION ACT ETC. IN THE PRESENT CASE NEITHER T HE 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 CATEGORICALLY STATED THAT THIS TOLL-ROAD W AS CONSTRUCTED ON BOOT BASIS, I.E. MEANS 'BUILD, 'OWN' , 'OPERATE' AND 'TRANSFER'. ACCORDING TO HIM, THE ENT IRE RESPONSIBILITY FOR MAINTAINING AND OPERATING THIS R OLL- ROAD FOR 31 YEARS IS ON ASSESSEE AS HE HAS TO COLLE CT TOLL-FEE. ONCE THIS CONCEPT OF BOOT HAS BEEN ACCEPT ED BY GOVT. OF INDIA UNDER INFRASTRUCTURE POLICY AND T HE GOVT. OF GUJARAT ALSO ENTERED IN A JOINT VENTURE WI TH THE ASSESSEE AND FORMED AN SVP THE QUESTION OF OWNERSHIP REST WITH THE ASSESSEE FOR THE PURPOSES O F CLAIM OF DEPRECIATION. ACCORDINGLY, THIS ISSUE ON M ERITS IS ALLOWED IN FAVOUR OF THE ASSESSEE.' 7. CONSIDERING THE ABOVE DECISION OF THE TRIBUNAL, THE LEARNED CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESS EE IN ITS FAVOUR. IN THESE CIRCUMSTANCES, WE DO NOT FIND IT N ECESSARY TO INTERFERE WITH HIS ORDER. THEREFORE, WE CONFIRM THE ORDER OF THE LEARNED CIT(A) FOR BOTH THE ISSUES I.E. (A) ALLOWABILITY OF INTEREST ON DEEP DISCOUNT BONDS AS DEDUCTION AND (B) ALLOWABILITY OF DEPRECIATION ON TOLL ROAD. ACCORDIN GLY, THE APPEAL OF THE REVENUE ON BOTH THESE ISSUES IS DISMI SSED. NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON BE HALF OF REVENUE. SIMILAR VIEW HAS BEEN TAKEN IN A.Y. 2009- 10, 03-04 & 04-05. FACTS BEING SIMILAR, SO FOLLOWING SAME RE ASONING, WE ARE NOT INCLINED TO INTERFERE IN THE FINDING OF CIT (A) WHO HAS ALLOWED THE ASSESSEES CLAIM OF DEPRECIATION OF RS.22,59,22,061/- ON TOLL ROADS. WE UPHOLD THE SAM E. I.T.A. NOS. 1981/AHD/11, 2528 & 2529/AHD/2014 FOR A.Y. 08-09, 10-11 & 11-12 ( ACIT VS. GUJARAT ROAD & INFRASTRUCTURE CO. LTD.) PAGE 7 4. SIMILAR ISSUE AROSE IN A.Y. 2008-09 & 2011-12. FACTS BEING SIMILAR, SO FOLLOWING SAME REASONING, WE ARE NOT INCLINED TO INTERFERE IN THE FINDING OF CIT(A) WHO HAS ALLOW ED THE ASSESSEES CLAIM OF DEPRECIATION OF RS.27,63,03,828 /- FOR A.Y. 2008-09 AND RS.20,48,87,625/- FOR A.Y. 2011-12 ON T OLL ROADS. SAME IS UPHELD. 5. IN RESULT, REVENUES APPEALS IN ALL THREE YEARS ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 19 TH DAY OF FEBRUARY, 2015. SD/- SD/- (ANIL CHATURVEDI) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 19/02/2015 TRUE COPY S.K.SINHA # # # # %& %& %& %& '&' '&' '&' '&' / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. ,, - / CONCERNED CIT 4. -- / CIT (A) 5. &12 %, , / DR, ITAT, AHMEDABAD 6. 256 78 / GUARD FILE. BY ORDER / # , 9/ , , ;