NORTH KARNATAKA EXPRESSWAY LTD, MUMBAI V. ASST CIT 10(1), MUMBAI

ITA 4160/MUM/2013

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4524 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 23-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: THARIAN OOMMEN
• Assessee Lawyers: SHIR SANDEEP BHALLA
• Keywords: Business income; Depreciation; Search and seizure; Difference of opinion; Capital receipt; Revised return; Revenue expenditure; TDS; Set aside; CHAPTER IV
• Section: 143(3); 142(1); 115JB; 143(1); 250; 143(2); 191; 208; 73; 13; 22; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO.4160/MUM/2013 (A.Y: 2008-09) ITA NO.4161/MUM/2013 (A.Y: 2009-10) & ITA NO. 1230/MUM/2015 (A.Y: 2010-11) NORTH KARNATAKA EXPRESSWAY LTD., THE IL&FS FINANCIAL CENTRE, 8 TH FLOOR, PLOT NO. C-22, G BLOCK, BANDRA-KURLA COMPLEX, BANDRA (E) 400 051. VS. ACIT 10(1) 475, AAYAKAR BHAVAN, MK ROAD, MUMBAI 400 020. ./ ./ PAN/GIR NO. : AABCN3062F APPELLANT .. RESPONDENT APPELLANT BY : SHIR SANDEEP BHALLA . AR RESPONDENT BY : SHRI THARIAN OOMMEN . DR DATE OF HEARING 17 .0 8 .2021 DATE OF PRONOUNCEMENT 20 .0 9 .2021 / O R D E R PER PAVAN KUMAR GADALE JM: THESE ARE THE APPEALS FILED THE ASSESSEE AGAINST T HE DIFFERENT ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) -21, MUMBAI PASSED U/S 143(3) AND 250 OF THE ACT FOR THE A.YS 2008-09, 2009-10 & 2010-11. M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 2 - SINCE THE ISSUES INVOLVED IN THESE THREE APPEALS AR E IDENTICAL AND SIMILAR, HENCE ARE CLUBBED, HEARD AND CONSOLIDATED ORDER IS PASSED THE ASSESSEE HAS RAISED THE ADDITIONAL GROUND OF AP PEAL IN ALL THE ASSESSEEMENT YEARS. THE LD.AR MADE SUBMISSIONS AND THE LD. DR HAS NO SERIOUS OBJECTION S ON ADMISSION OF ADDITIONAL GROUND OF APPEAL. ACCORDING LY, THE ADDITIONAL GROUND OF APPEAL IS ADMITTED AND HEA RD. FOR THE SAKE OF CONVENIENCE, WE SHALL TAKE UP THE I TA NO. 4160/MUM/2013 FOR A.Y 2008-09 AS A LEAD CASE AND FA CTS NARRATED. THE ASSESSEE HAS RAISED THE FOLLOWING GR OUNDS OF APPEAL. '1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE LD. CIT(A) HAS ERRED IN CONFIRMING THAT THE INTEREST IN COME OF RS. 2,37,11,860/- IS CHARGEABLE TO TAX UNDER THE HEAD I NCOME FROM OTHER SOURCES. THE APPELLANT PRAYS THAT THE A DDITION CONFIRMED BY THE CIT(A) MAY BE DELETED. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE TH E APPELLANT PRAYS THAT THE INTEREST INCOME OF RS. 2,3 7,11,860/- BE TAXED UNDER THE HEAD INCOME FROM BUSINESS & PROF ESSION. 3. THE APPELLANT CRAVES THE PERMISSION TO ADD, ALTE R OR AMEND THE GROUND OF APPEAL AT THE TIME OF HEARING. THE ASSESSEE HAS RAISED THE ADDITIONAL GROUND OF AP PEAL. THE APPELLANT PRAYS THAT THE RIGHT TO SET UP AN IN FRASTRUCTURE FACILITY AND COLLECT ANNUITY THEREON BEING IN THE N ATURE OF A M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 3 - LICENSE OR BUSINESS OR COMMERCIAL RIGHT BE REGARDED AS AN INTANGIBLE ASSET IN TERMS OF THE PROVISION OF SEC. 32(1)(II). THE APPELLANT PRAYS THAT THEY HAD CONSTRUCTED THE ROAD AND HAVE THE RIGHT TO EARN REVENUE IN THE FORM OF ANNUITY FR OM THE USE OF SUCH INTANGIBLE ASSET BEING A LICENSE OR BUSINES S OR COMMERCIAL RIGHT AS CONTEMPLATED IN SEC 32(1)(II). THE APPELLANT PRAYS THAT DEPRECIATION ON SUCH LICEN SE OR BUSINESS OR COMMERCIAL RIGHT BE GRANTED AT THE RATE 25% TREATING THE SAME AS INTANGIBLE ASSET. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR WITHDRAWAL OF ADDITIONAL GROUND OF APPEAL HEREIN AN D TO SUBMIT SUCH STATEMENT DOCUMENTS AND PAPERS AS MAY B E CONSIDERED NECESSARY EITHER AT OR BEFORE THE APPEAL HEARING. 2. THE BRIEF FACTS OF THE CASE THAT, THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROMOTING & FINANCING INFRASTRUCTURE DEVELOPMENT PROJECTS. THE ASSESSEE HAS FILED THE RETURN OF INCOME FOR THE A.Y 2008- 09 ON 27.09.2008 DECLARING A TOTAL INCOME(LOSS) OF RS. 1,10,09,815/- AND THE RETURN OF INCOME WAS PROCESSE D U/S 143(1) OF THE ACT. FURTHER, THE ASSESSEE HAS FI LED THE REVISED RETURN OF INCOME ON 21.09.2009 DECLARING A TOTAL INCOME OF RS. NIL AFTER CLAIMING SET OFF OF BROUGHT FORWARD BUSINESS LOSS OF RS.5,13,20,549/-.SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) AND 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE WAS ISSU ED. IN COMPLIANCE THE LD. AR OF THE ASSESSEE APPEARED FROM TIME TO TIME AND SUBMITTED THE DETAILS AND THE CASE WAS DISCUSSED. THE A.O ON PERUSAL OF THE FINANCIAL STAT EMENTS M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 4 - FOUND THAT THE ASSESSEE HAS CLAIMED INTEREST EXPEND ITURE IN RESPECT OF THE INTEREST PAID @ 8.5% P.A. ON VARI OUS LOANS. WHEREAS IN RESPECT OF THE LOAN GIVEN TO M/S . IL&FS TRANSPORTATION NETWORKS LTD, THE ASSESSEE COMPANY IS CHARGING INTEREST @ 6% P.A. ONLY. THE ASSESSEE WAS CALLED FOR THE EXPLANATIONS AS TO WHY EXCESS CLAIM OF INTEREST PAID ON BORROWED CAPITAL USED FOR THE PURPOSE OF GIVING LOAN AT LOWER RATE SHOULD NOT DISALLOWED. IN COMPLIANCE, THE ASSESSEE HAS FILED T HE SUBMISSIONS ON 29.11.2010 EXPLAINING THE REASONS, B UT THE A.O WAS NOT SATISFIED WITH THE EXPLANATIONS AND DEALT ON THE FACTS AND HISTORY OF THE ASSESSEE COMPANY TRANSACTIONS AND MADE DISALLOWANCE OF EXCESS CLAIM OF INTEREST OF RS.76,48,793/-.(II) THE A.O. MADE AN A DDITION OF LOSS ON SALE OF FIXED ASSETS OF RS. 18,738/ AS NO EXPLANATIONS WERE FILED BY THE ASSESSEE. (III) THE A.O. PERUSED THE TAX AUDIT REPORT AND FIND THAT THE PAY MENTS MADE TO CONTRACTORS AND SUB CONTRACTORS ARE WITHOUT DEDUCTION OF TDS AND APPLIED THE PROVISIONS OF SEC.40(A)(IA) OF THE ACT AND DISALLOWED RS.24,120/- .(IV) THE A.O MADE DISALLOWANCE OF INADMISSIBLE EXPENSES OF WEALTH TAX DEBITED IN RATES & TAXES ACCOUNT U/SEC 40(A)(II) OF THE ACT OF RS. 13,004/-.(V) THE A.O. ON PERUSAL OF THE PROFIT AND LOSS ACCOUNT FOUND THAT THE ASSES SEE HAS DISCLOSED THE INTEREST INCOME OF RS. 2,37,11,860/- AS M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 5 - BUSINESS INCOME. THE A.O. OBSERVED THAT THE ASSESSE E COMPANY HAS NOT CARRIED OUT ANY BUSINESS ACTIVITIES AND INTEREST INCOME HAS TO BE TAXED UNDER INCOME FROM OTHER SOURCES. THE A.O. WAS NOT SATISFIED WITH THE EXPLA NATIONS FILED ON THE DISPUTED ISSUE AND OBSERVED THAT THE I NTEREST INCOME CANNOT BE TAXED AS A BUSINESS INCOME AND HAS TO BE TREATED AS INCOME FROM OTHER SOURCES.(VI) THE A. O. DISALLOWED MISCELLANEOUS EXPENSES TO THE EXTENT OF RS 1,35,003/- AS NO PROPER DOCUMENTARY EVIDENCES WAS PRODUCED. FINALLY THE ASSESSING OFFICER (A.O.) HAS ASSESSED THE TOTAL INCOME (LOSS) OF RS 4,34,81,491/ - AND CALCULATED BOOK PROFITS U/S 115JB OF THE ACT OF RS.41,902/- AND PASSED THE ORDER U/S 143(3) OF THE ACT DATED 31.12.2010. 3. AGGRIEVED BY THE ORDER, THE ASSESSEE HAS FILED A N APPEAL BEFORE THE CIT(A). THE CIT(A) CONSIDERED THE GROUNDS OF APPEAL, SUBMISSIONS OF THE ASSESSEE, FIN DINGS OF THE A.O AND THE JUDICIAL DECISIONS IN RESPECT OF TREATMENT OF INTEREST INCOME UNDER INCOME OTHER SOURCES. THE CIT(A) DEALT ON THE DISPUTED ISSUE AT PARA 4 OF THE ORDER AND WAS NOT CONVINCED WITH THE SUBMIS SIONS OF THE ASSESSEE IN RESPECT OF SOURCES AND UTILIZATI ON OF THE MONEY AND SUSTAINED THE ACTION OF THE A.O IN TREATI NG THE INTEREST INCOME ON DEPOSITS/LOANS BEING OUT OF SUR PLUS FUNDS OBTAINED AFTER COMPLETION OF THE BUSINESS AC TIVITIES M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 6 - AND THE INTEREST EARNED ON DEPOSITS/LOANS HAS TO B E TREATED AS INCOME FROM OTHER SOURCES. THE CIT(A) OBSERVED THAT THE INTEREST INCOME WAS EARNED FROM SURPLUS BUSINESS FUNDS AND DISMISSED THIS GROUND O F APPEAL. WHEREAS THE CIT(A) HAS GRANTED THE RELIEF IN OTHER GROUNDS OF APPEAL AND PARTLY ALLOWED THE APPE AL. AGGRIEVED BY THE CIT(A) ORDER, THE ASSESSEE HAS FIL ED AN APPEAL WITH THE HONBLE TRIBUNAL. 4. AT THE TIME OF HEARING THE LD. AR SUBMISSIONS ON FIRST DISPUTED ISSUE ARE THAT THE CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE A.O IN TREATING THE IN TEREST INCOME UNDER INCOME FROM OTHER SOURCES AND FURTHER ERRED IN OBSERVED THAT THE ASSESSEE HAS INVESTED SU RPLUS FUNDS IN FIXED DEPOSITS/LOANS AND NO BUSINESS ACTIV ITIES ARE CARRIED OUT. THE LD. AR SUBMITTED THAT THE FIXE D DEPOSITS/LOANS ARE MANDATORY REQUISITE FOR CARRYOUT THE BUSINESS PROJECTS AND THE INTEREST FORM PART OF BU SINESS INCOME. ON THE ADDITIONAL GROUND OF APPEAL OF ALLOW ING THE CLAIM OF DEPRECATION ON ROADS, THE LD.AR SUBM ITTED THAT THE ASSESSEE HAS CONSTRUCTED THE ROAD AND EAR NS REVENUE IN FORM OF ANNUITY FROM USE OF SUCH INTANGI BLE ASSET BEING A LICENSE OR BUSINESS OR COMMERCIAL RI GHT AND THE ASSET IS ELIGIBLE FOR DEPRECIATION @25% AS PER THE PROVISIONS OF SEC 32(1)(II) OF THE ACT. THE LD.AR SUBSTANTIATED THE SUBMISSIONS WITH THE FACTS, VOLUM INOUS M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 7 - PAPER BOOK AND CATENA OF THE JUDICIAL DECISIONS AND THE HONBLE TRIBUNAL DECISIONS IN ASSESSEE OWN CASE AND PRAYED FOR ALLOWING THE ASSESSEE APPEAL. 5. CONTRA, THE LD. DR SUPPORTED THE ORDER OF THE CI T(A) AND SUBMITTED THAT THE INTEREST INCOME CANNOT BE CHARACTERIZED AS A BUSINESS INCOME AS THE ASSESSEE COULD NOT SUBSTANTIATE BEFORE THE LOWER AUTHORITIES WITH EVIDENCES OF UTILIZATION. FURTHER, ON THE CLAIM OF DEPRECIATION ON ROADS THE LD. DR SUBMITTED THAT THE JUDICIAL DECISIONS RELIED BY THE LD.AR ARE DISTINGU ISHABLE ON FACTS AND PRAYED FOR DISMISSAL OF THE APPEAL. 6. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. ON THE FIRST DISPUTED ISSUE OF CHARGEABILITY OF INTEREST ON DEPOSITS/LOANS, THE LD .AR SUBMISSIONS ARE THAT THE ASSESSEE HAS BUSINESS FUN DS AND HAS INVESTED THE FUNDS IN SHORT TERM DEPOSITS A ND EXTENDED LOANS ON CALL MONEY BASIS AND THE INTERES T WAS EARNED/ACCRUED ON FINANCIAL INSTRUMENTS. THE ASSESS EE HAS BEEN FOLLOWING THIS SYSTEM FROM THE EARLIER YEA RS AND THE INTEREST INCOME HAS BEEN OFFERED AS A BUSINESS INCOME. WHEREAS THE ONLY DIFFERENCE OF OPINION WIT H THE CIT(A) THAT, THESE SURPLUS FUNDS ARE NOT NECESSARY TO THE ASSESSEE AND THERE IS NO REQUIREMENT FOR THE ASSESS EE TO MAKE DEPOSITS. WHEREAS THE LD. AR SUBMITTED THAT TH ERE M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 8 - ARE PREREQUISITES FOR MAKING DEPOSITS/LOANS FOR THE BUSINESS OPERATIONS /PROJECTS AND THE ASSESSEE HAS ALREADY SUFFERED FOR VARIOUS OTHER BUSINESS DELAYS. WE FIND ON THE SIMILAR ISSUE OF TREATMENT OF INTEREST INCOME AS BUSINESS INCOME AND SET OFF AGAINST CAPITAL WORK IN PROGRESS OR TO TAXED UNDER THE HEAD INCOME FROM OTH ER SOURCES, IN THE RECENT DECISION OF CO-ORDINATE BEN CH OF THE HONBLE TRIBUNAL IN A GROUP COMPANY CASE OF M/ S EAST HYDERABAD EXPRESSWAYS LTD IN ITA NO. 6694/MUM/2017 & 3670,3503/MUM/2016 DATED 30-08- 2021 HAS OBSERVED AT PARA 6.1 TO 6.4 OF THE ORDER, WHICH IS READ AS UNDER: 6.1. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED TH E MATERIALS AVAILABLE ON RECORD. WE FIND THAT ASSESSE E HAD REDUCED THE INTEREST INCOME OF RS.39,44,157/- FROM CAPITAL WORK IN PROGRESS. THE LD. AO OBSERVED THAT THE SAID INCOME WAS NOT DERIVED FROM THE BUSINESS ACTIV ITY OF THE ASSESSEE COMPANY AND ACCORDINGLY SOUGHT TO TREA T THE SAME AS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. IN RESPONSE TO SHOW-CAUSE NOTICE ISSUED B Y THE LD. AO, THE ASSESSEE VIDE LETTER DATED 08/03/2014 SUBMITTED THAT IT HAD EARNED INTEREST INCOME FROM F IXED DEPOSITS AMOUNTING TO RS.39,44,157/- AND THAT THE S AID FIXED DEPOSITS WERE PLACED OUT OF BUSINESS RECEIPTS OF THE ASSESSEE COMPANY AND HENCE THE SAID RECEIPT WOULD PARTAKE THE CHARECTER OF BUSINESS RECEIPT AND SINCE THE PROJECT WAS UNDER CONSTRUCTION DURING THE RELEVANT TIME, THE SAID RECEIPT WOULD ONLY GO TO REDUCE CAPITAL WO RK IN PROGRESS AND CANNOT BE INDEPENDENTLY TAXED AS INCOM E UNDER THE HEAD INCOME FROM OTHER SOURCES. IT WAS ALSO M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 9 - SPECIFICALLY POINTED OUT THAT THE SAID INTEREST INC OME WAS NOT EARNED BY THE ASSESSEE OUT OF IDLE FUNDS LYING IN THE BANK SO AS TO APPLY THE RATIO LAID DOWN BY THE HON BLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMI CALS AND FERTILIZERS LTD., REPORTED IN 227 ITR 172(SC). APART FROM THIS, THE ASSESSEE ALSO PLACED RELIANCE ON VAR IOUS OTHER DECISIONS OF THE HONBLE SUPREME COURT AND OT HER HIGH COURTS INCLUDING JURISDICTIONAL HIGH COURT TO DRIVE HOME ITS POINT THAT THE RECEIPTS FROM WHICH FIXED D EPOSITS WERE INVESTED WERE OUT OF BUSINESS EVENTS OF THE ASSESSEE AND THE INVESTMENT IN FIXED DEPOSIT WAS INEXTRICABLY LINKED WITH THE BUSINESS OF THE ASSESS EE COMPANY AND THAT THE SAID INVESTMENTS WERE EFFECTIV ELY MADE BY FORCE DUE TO BUSINESS EXIGENCIES. THESE CONTENTIONS DID NOT FIND FAVOUR WITH BOTH THE LOWER AUTHORITIES WHO PROCEEDED TO TREAT THE SAID RECEIPT AS INDEPENDENTLY TAXABLE UNDER THE HEAD INCOME FROM O THER SOURCES BY APPLYING THE RATIO LAID DOWN BY HONBLE APEX COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD., REFERRED TO SUPRA. 6.2. ADMITTEDLY THIS INTEREST INCOME OF RS.39,44,15 7/- ON FIXED DEPOSITS WAS EARNED BY THE ASSESSEE PRIOR TO OBTAINING COMMENCEMENT CERTIFICATE I.E. 01/03/2011. THE ASSESSEE HAD SOUGHT TO TREAT THE SAID INCOME AS BUS INESS INCOME AND SAME WAS REDUCED FROM TOTAL UNALLOCATED PRE- OPERATIVE EXPENSES WHICH WAS PART OF CAPITAL WORK I N PROGRESS. AGAINST THE SHARE CAPITAL OF RS.28.30 CRO RES, ASSESSEE HAD BORROWED FUNDS OF RS.363.18 CRORES AS ON 31/03/2011 FROM VARIOUS BANKS. WE FIND THAT AS A PR E- CONDITION TO GRANTING OF LOANS, THE CONSORTIUM BANK HAD IMPOSED A CONDITION THAT ASSESSEE SHOULD OPEN AN ES CROW AACCOUNT AND THAT THE LOAN AMOUNTS RECEIVED FROM TH E BANKS SHOULD BE DEPOSITED IN SUCH ESCROW ACCOUNT AN D THE MONIES LYING IN ESCROW ACCOUNT SHALL BE UTILISE D ONLY M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 10 - FOR THE PURPOSE OF ACQUIRING THE ASSETS IN THE PROJ ECT. HENCE, IT COULD BE SAFELY CONCLUDED THAT THE FUNDS LYING IN THE ESCROW ACCOUNT COULD NOT BE UTILISED BY THE ASSESSEE FOR ANY OTHER PURPOSE OTHER THAN FOR PROJE CT AND THE SAME CANNOT BE DIVERTED FOR NON-PROJECT EXPENDI TURE. TO PROVE THIS FACT, THE ASSESSEE DREW OUR ATTENTION TO ESCROW AGREEMENT DATED 01/02/2008 ENTERED INTO BY T HE ASSESSEE WITH (I) IL & FS TRUST COMPANY LTD., (II) ORIENTAL BANK OF COMMERCE, THE BANKING COMPANY WHO HAD ACTED AS ESCROW AGENT ; (III) HYDERABAD URBAN DEVELOPM ENT AUTHORITY (HUDA), A STATUTORY BODY CONSTITUTED UNDE R THE PROVISIONS OF ANDHRA PRADESH URBAN AREAS (DEVELOPME NT) 1975 AND (IV) HYDERABAD GROWTH CORRIDOR LIMITED (HGCL). HE DREW OUR ATTENTION SPECIFICALLY TO CLAUS E-3.2 OF THE SAID ESCROW AGREEMENT, WHEREIN IT WAS MANDATED THAT THE BORROWER I.E. THE ASSESSEE COMPANY, SHALL UNDERTAKE TO DEPOSIT AND CREDIT THE ESCROW ACCOUNT WITH (EMPHASIS SUPPLIED BY US) (I) ALL MONIES RECEIVED IN RELATION TO THE PROJECT FROM ANY SOURCE, INCLUDING THE SENIOR LENDERS, LENDERS OF SU B- ORDINATED DEBT AND HUDA; (II) ALL FUNDS RECEIVED BY THE CONCESSIONAIRE FROM ITS SHAREHOLDERS IN ANY MANNER OR FORM; (III) ALL ITS RECEIVABLES; (IV) ALL PROCEEDS RECEIVED PURSUANT TO ANY INSURANC E CLAIMS; AND (V) ALL MONIES RECEIVED FROM ANY OTHER SOURCES IN R ELATION TO AND IN RESPECT OF THE PROJECT; MAY MAKE OTHER DEPOSITS OF THE COMPANYS OTHER FUND S INTO ESCROW ACCOUNTS AT ANY TIME. PROVIDED HOWEVER THAT THE TERMS OF THIS AGREEMENT SHALL APPLY TO SUCH OTH ER FUNDS DEPOSITED IN THE ESCROW ACCOUNT BY THE COMPAN Y. 6.3. FROM THE AFORESAID CLAUSE, IT COULD BE SAFELY CONCLUDED THAT ASSESSEE COMPANY HAD NO OTHER CHOICE BUT M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 11 - TO DEPOSIT ALL THE RECEIPTS ONLY IN THE AFORESAID DESIGNATED ESCROW ACCOUNT MAINTAINED PURSUANT TO ESCROW AGREEMENT DATED 01/02/2008. SINCE THE FUNDS WERE NOT FETCHING ANY INTEREST TO THE ASSESSEE IN T HE ESCROW ACCOUNT, THE ASSESSEE CHOSE TO INVEST THE SA ID MONIES IN FIXED DEPOSIT FOR A TEMPORARY PERIOD IN O RDER TO REDUCE THE PROJECT COST. THIS INTEREST INCOME CLEAR LY ESTABLISHES A BUSINESS NEXUS AND GETS INEXTRICABLY LINKED WITH THE PROJECT ACTIVITY CARRIED OUT BY THE ASSESS EE IN THE ORDINARY COURSE OF ITS BUSINESS. THIS ACT OF THE AS SESSEE IS SQUARELY DISTINGUISHABLE FROM THE FACTS THAT WER E PREVAILING BEFORE THE HONBLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD., REPORTED IN 227 ITR 172, IN AS MUCH AS IN THAT CASE, THAT AS SESSEE WAS HAVING FLEXIBILITY TO USE THE LOAN FUNDS IN ANY MANNER AS IT DESIRES AND THAT SINCE THE LOAN FUNDS WERE LYING IDLE IN THE BANK, THAT ASSESSEE CHOSE TO MAKE INVESTMENT IN FIXED DEPOSITS AND EARN INTEREST INCO ME THEREON. UNDER THOSE FACTUAL CIRCUMSTANCES, THE HON BLE SUPREME COURT HELD THAT THE INTEREST INCOME DERIVED FROM INVESTMENT IN FIXED DEPOSITS MADE OUT OF IDLE FUNDS LYING WITH THE ASSESSEE WOULD GET SEPARATELY TAXED AS INC OME FROM OTHER SOURCES AND CANNOT BE REDUCED FROM THE PROJECT COST OF THE ASSESSEE. WHEREAS IN THE INSTAN T CASE, AS COULD BE SEEN FROM THE ESCROW AGREEMENT, THE FUN DS IN THE ESCROW ACCOUNT COULD NOT BE UTILIZED FOR ANY OT HER PURPOSE OTHER THAN FOR THE PROJECT. EVEN THE FIXED DEPOSITS WERE INVESTED WITH THE SAME BANK IN ORDER TO DERIVE SOME INTEREST INCOME AND THEREBY REDUCE THE PROJECT COST OF THE ASSESSEE. THIS CRUCIAL FACT OF DISTINCTION OF ASSES SEE HAVING NO FLEXIBILITY IN THE INSTANT CASE MAKES IT FACTUALLY DISTINGUISHABLE WITH THAT OF THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD., HENCE, THE DECISIO N RELIED UPON BY THE LD. DR IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD., REFERRED TO SUPRA DOES NOT M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 12 - ADVANCE THE CASE OF THE REVENUE. WE FIND THAT THE C ASE OF THE ASSESSEE SQUARELY FALLS WITHIN THE RATIO LAID D OWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF INDIAN OIL PANIPAT POWER CONSORTIUM LTD., VS. ITO REPORTED IN 315 ITR 255(DEL) WHEREIN IT WAS HELD AS UNDER:- 5. IN OUR OPINION THE TRIBUNAL HAS MISCONSTRUED TH E RATIO OF THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS (SUPRA) AND THAT OF BOKARO STEEL LTD. (SUPRA). THE TEST WHICH PERMEATES THROUGH THE JUDGMENT OF THE SUPREME COURT IN TUTICORIN ALKALI CHEMICALS (SUPRA) IS THAT IF FUNDS HAVE BEEN BORROWED FOR SETTING UP OF A PLANT AND IF THE FUNDS ARE SURPLUS AND THEN BY VIRTUE OF THAT CIRCUMSTANCE THEY ARE INVESTED IN FIXED DEPOSITS THE INCOME EARNED IN THE FORM OF INTEREST WILL BE TAXABLE UNDER THE HEAD 'INCOME FROM OTHER SOURCES . ON THE OTHER HAND THE RATIO OF THE SUPREME COURT JUDGMENT IN BOKARO STEEL LTD. (SUPRA) TO OUR MIND IS THAT IF INCOME IS EARNED, WHETHER BY WAY OF INTEREST OR IN ANY OTHER MANNER ON FUNDS WHICH ARE OTHERWISE INEXTRICABLY LINKED TO THE SETTING UP OF THE PLANT, SUCH INCOME IS REQUIRED TO BE CAPITALIZED TO BE SET OFF AGAINST PR E- OPERATIVE EXPENSES. 5.1 THE TEST, THEREFORE, TO OUR MIND IS WHETHER THE ACTIVITY WHICH IS TAKEN UP FOR SETTING UP OF THE BUSINESS AND THE FUNDS WHICH ARE GARNERED ARE INEXTRICABLY CONNECTED TO THE SETTING UP OF THE PLA NT. THE CLUE IS PERHAPS AVAILABLE IN SECTION 3 OF THE ACT WHICH STATES THAT FOR NEWLY SET UP BUSINESS THE PREVIOUS YEAR SHALL BE THE PERIOD BEGINNING WITH TH E DATE OF SETTING UP OF THE BUSINESS. THEREFORE, AS P ER THE PROVISION OF SECTION 4 OF THE ACT WHICH IS THE M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 13 - CHARGING SECTION INCOME WHICH ARISES TO AN ASSESSEE FROM THE DATE OF SETTING OF THE BUSINESS BUT PRIOR TO COMMENCEMENT IS CHARGEABLE TO TAX DEPENDING ON WHETHER IT IS OF A REVENUE NATURE OR CAPITAL RECEIPT. THE INCOME OF A NEWLY SET UP BUSINESS, POST THE DATE OF ITS SETTING UP CAN BE TAXED IF IT IS OF A REVENUE NATURE UNDER ANY OF THE HEADS PROVIDED UNDER SECTION 14 IN CHAPTER IV OF THE ACT. FOR AN INCOME TO BE CLASSIFIED AS INCOME UNDER THE HEAD 'PROFIT AND GAINS OF BUSINESS OR PROFESSION' IT WOULD HAVE TO BE AN ACTIVITY WHICH I S IN SOME MANNER OR FORM CONNECTED WITH BUSINESS. THE WORD 'BUSINESS' IS OF WIDE IMPORT WHICH WOULD ALSO INCLUDE ALL SUCH ACTIVITIES WHICH COALESCE INT O SETTING UP OF THE BUSINESS. SEE MAZAGAON DOCK LTD VS CIT & EXCESS PROFITS TAX ; (1958) 34 ITR 368 ( SC), AND NARAIN SWADESHI WEAVING MILLS VS COMMISSIONER OF EXCESS PROFITS TAX ; (1954) 26 ITR 765 (SC). ONCE IT IS HELD THAT THE ASSESSEES INCOM E IS AN INCOME CONNECTED WITH BUSINESS, WHICH WOULD BE SO IN THE PRESENT CASE, IN VIEW OF THE FINDING O F FACT BY THE CIT(A) THAT THE MONIES WHICH WERE INDUCTED INTO THE JOINT VENTURE COMPANY BY THE JOIN T VENTURE PARTNERS WERE PRIMARILY INFUSED TO PURCHASE LAND AND TO DEVELOP INFRASTRUCTURE - THEN IT CANNOT BE HELD THAT THE INCOME DERIVED BY PARKING THE FUNDS TEMPORARILY WITH TOKYO MITSUBISHI BANK, WILL RESULT IN THE CHARACTER OF THE FUNDS BEING CHANGED, IN AS MUCH AS, THE INTEREST EARNED FROM THE BANK WOULD HAVE A HUE DIFFERENT THAN THAT OF BUSINESS AND BE BROUGHT TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES'. IT IS WELL-SETTLED THAT AN INCOME RECEIVED BY THE ASSESSEE CAN BE TAXED UNDER THE HEAD 'INCOME FROM OTHER SOURCES' ONLY IF IT DOES NO T FALL UNDER ANY OTHER HEAD OF INCOME AS PROVIDED M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 14 - IN SECTION 14 OF THE ACT. THE HEAD 'INCOME FROM OTHER SOURCES' IS A RESIDUARY HEAD OF INCOME. SEE S.G. MERCANTILE CORPORATION P. LTD VS CIT, CALCUTTA ; (1972) 83 ITR 700 ( SC) AND CIT VS GOVINDA CHOUDHURY & SONS .; (1993) 203 ITR 881 (SC). 5.2 IT IS CLEAR UPON A PERUSAL OF THE FACTS AS FOUN D BY THE AUTHORITIES BELOW THAT THE FUNDS IN THE FORM OF SHARE CAPITAL WERE INFUSED FOR A SPECIFIC PURPOS E OF ACQUIRING LAND AND THE DEVELOPMENT OF INFRASTRUCTURE. THEREFORE, THE INTEREST EARNED ON FUNDS PRIMARILY BROUGHT FOR INFUSION IN THE BUSINES S COULD NOT HAVE BEEN CLASSIFIED AS INCOME FROM OTHER SOURCES. SINCE THE INCOME WAS EARNED IN A PERIOD PRIOR TO COMMENCEMENT OF BUSINESS IT WAS IN THE NATURE OF CAPITAL RECEIPT AND HENCE WAS REQUIRED TO BE SET OFF AGAINST PRE-OPERATIVE EXPENSES. IN THE CASE OF TUTICORIN ALKALI CHEMICALS (SUPRA) IT WAS FOUND BY THE AUTHORITIES THAT THE FUNDS AVAILABLE WITH THE ASSESSEE IN THAT CASE WERE SURPLUS AND, THEREFORE, THE SUPREME COURT HELD THAT THE INTEREST EARNED ON SURPLUS FUNDS WOULD HAVE TO BE TREATED AS INCOME FROM OTHER SOURCES . ON THE OTHER HAND IN BOKARO STEEL LTD (SUPRA) WHERE THE ASSESSEE HAD EARNED INTEREST ON ADVANCE PAID TO CONTRACTORS DURING PRE-COMMENCEMENT PERIOD WAS FOUND TO BE INEXTRICABLY LINKED TO THE SETTING UP OF THE PLANT OF THE ASSESSEE AND HENCE WAS HELD TO BE A CAPITAL RECEIPT WHICH WAS PERMITTED TO BE SET OFF AGAINST PRE-OPERATIVE EXPENSES. 6. THERE IS ANOTHER PERSPECTIVE FROM WHICH THE PRESENT ISSUE CAN BE EXAMINED. UNDER SECTION 208 OF THE COMPANIES ACT, 1956 A COMPANY CAN PAY INTEREST ON SHARE CAPITAL WHICH IS ISSUED FOR A SPECIFIC PURPOSE TO DEFRAY EXPENSES FOR CONSTRUCTIO N M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 15 - OF ANY WORK AND WHICH CANNOT BE MADE PROFITABLE FOR A LONG PERIOD SUBJECT TO CERTAIN RESTRICTIONS CONTAINED IN SECTION (2) TO (7) OF SECTION 208 . THIS SECTION WAS SPECIFICALLY NOTED BY THE SUPREME COURT IN CHALLAPALLI SUGARS LTD VS CIT (1975) 98 ITR 167. THE SUPREME COURT WENT ON TO OBSERVE AT PAGE 175 AS FOLLOWS: 'WE HAVE ALREADY REFERRED TO SECTION 208 OF THE COMPANIES ACT WHICH MAKES PROVISION FOR PAYMENT OF INTEREST ON SHARE CAPITAL IN CERTAIN CONTINGENCIES. CLAUSE (B) OF SUB- SECTION (1) OF THAT SECTION PROVIDES THAT IN CASE INTEREST IS PAID ON SHARE CAPITAL ISSUED FOR THE PURPOSE OF RAISING MONEY TO DEFRAY THE EXPENSES OF CONSTRUCTING ANY WORK OR BUILDING OR THE PROVISION OF ANY PLANT IN CONTINGENCIES MENTIONED IN THAT SECTION, THE SUM SO PAID BY WAY OF INTEREST MAY BE CHARGED TO CAPITAL AS PART OF THE COST OF CONSTRUCTION OF THE WORK OR BUILDING OR THE PROVISION OF THE PLANT. THE ABOVE PROVISION THUS GIVES STATUTORY RECOGNITION TO THE PRINCIPLE OF CAPITALIZING THE INTEREST IN CASE THE INTEREST IS PAID ON MONEY RAISED TO DEFRAY EXPENSES OF THE CONSTRUCTION OF ANY WORK OR BUILDING OR THE PROVISION OF ANY PLANT IN CONTINGENCIES MENTIONED IN THAT SECTION EVEN THOUGH SUCH MONEY CONSTITUTES SHARE CAPITAL. THE SAME PRINCIPLE, IN OUR OPINION, SHOULD HOLD GOOD IF INTEREST IS PAID ON MONEY NOT RAISED BY WAY OF SHARE CAPITAL BUT TAKEN ON LOAN FOR THE PURPOSE OF DEFRAYING THE EXPENSES OF THE CONSTRUCTION OF ANY WORK OR BUILDING OR THE PROVISION ANY PLANT. THE M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 16 - REASON INDEED WOULD BE STRONGER IN CASE SUCH INTEREST IS PAID ON MONEY TAKEN ON LOAN FOR MEETING THE ABOVE EXPENSES.' 6.1 IN OUR VIEW THE SITUATION IN THE INSTANT CASE I S QUITE SIMILAR EXCEPT HERE INSTEAD OF PAYING INTERES T ON FUNDS BROUGHT IN FOR SPECIFIC PURPOSE INTEREST I S EARNED ON FUNDS BROUGHT IN BY WAY OF SHARE CAPITAL FOR A SPECIFIC PURPOSE. COULD IT BE SAID THAT IN TH E FORMER SITUATION INTEREST COULD HAVE BEEN CAPITALIZ ED AND IN THE LATER SITUATION IT CANNOT BE CAPITALIZED . TO TEST THE PRINCIPLE WE COULD EXTEND THE EXAMPLE, THA T IS, WOULD OUR ANSWER BE ANY DIFFERENT HAD ASSESSEE PASSED ON THE INTEREST TO THE RESPECTIVE SHAREHOLDERS. IF NOT, THEN IN OUR VIEW THE ONLY CONCLUSION POSSIBLE IS THAT INTEREST EARNED IN THE PRESENT CIRCUMSTANCES OUGHT TO BE CAPITALIZED. 7. IN VIEW OF THE DISCUSSION ABOVE, IN OUR OPINION THE TRIBUNAL MISDIRECTED ITSELF IN APPLYING THE DECISION OF THE SUPREME COURT IN TUTICORIN ALKALI CHEMICALS (SUPRA) IN THE FACTS OF THE PRESENT CASE. IN OUR OPINION ON ACCOUNT OF THE FINDING OF FACT RETURNED BY THE CIT(A) THAT THE FUNDS INFUSED IN TH E ASSESSEE BY THE JOINT VENTURE PARTNER WERE INEXTRICABLY LINKED WITH THE SETTING UP OF THE PLAN T, THE INTEREST EARNED BY THE ASSESSEE COULD NOT BE TREATED AS INCOME FROM OTHER SOURCES. IN THE RESULT WE ANSWER THE QUESTION AS FRAMED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THESE APPEALS ARE ALLOWED AND THE IMPUGNED JUDGMENT IS SET ASIDE. 6.4. WE ALSO FIND THAT THE LD. AR DREW OUR ATTENTIO N TO THE CO-ORDINATE BENCH DECISION OF THIS TRIBUNAL IN THE M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 17 - CASE OF HAZARIBAG RANCHI EXPRESSWAY LTD., VS ITO IN ITA NO.3669/MUM/2016 FOR A.Y.2011-12 DATED 28/11/2018 WHEREIN SIMILAR VIEW WAS TAKEN UNDER SAME FACTS AND CIRCUMSTANCES BY PLACING RELIANCE ON THE DECISION O F THE HONBLE DELHI HIGH COURT REFERRED TO SUPRA, AMONG O THERS. RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE I NTEREST INCOME OF RS.39,44,157/- ON FIXED DEPOSITS EARNED B Y THE ASSESSEE WOULD ONLY GO TO REDUCE UNALLOCATED PRE- OPERATIVE EXPENSES OF THE PROJECT AND CANNOT BE TAX ED AS INCOME FROM OTHER SOURCES. ACCORDINGLY, THE GROUND NOS. V & VI RAISED BY THE ASSESSEE ARE ALLOWED. 7. WHEREAS, IN THE PRESENT CASE, THE ASSESSEE COMPA NY HAS EARNED INTEREST ON BANK DEPOSITS AND ON SHORT T ERM CALL MONEY LOAN. THE LD.AR DEMONSTRATED IN PAPER BO OK PAGE 36 & 37 WORKING OF INTEREST INCOME ON BANK DEP OSITS AND INTEREST ON TERM LOAN. FURTHER THE INTEREST INC OME EARNED ON THE TERM LOAN PROVIDED @6% P.A. IN THE AU GUST 2005 WAS CONTINUING AND INTEREST INCOME WAS OFFERED IN EARLIER FINANCIAL YEARS. FURTHER THE BARROWER OF LO AN HAS PROVIDED GUARANTEE TO LENDERS OF THE ASSESSEE COMPA NY WHICH BENEFITED SUBSTANTIALLY TO THE ASSESSEE BUSIN ESS PROJECTS AND OPERATIONS. SINCE THE TERM LOAN PROVID ED BY THE ASSESSEE TO THE BARROWER IS LINKED IN OBTAINING COUNTER GUARANTEE TO ASSESSEE BUSINESS PROSPECTS AN D THERE EXIST THE NEXUS OF BUSINESS TRANSACTIONS. WE FIND THE JUDICIAL DECISIONS RELIED BY THE HONBLE TRIBUNA L SHALL EQUALLY APPLICABLE IN PRINCIPLE EXCEPT THERE IS NO SET OFF OF INTEREST INCOME WITH WORK IN PROGRESS IN THE PRE SENT M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 18 - CASE. WE CONSIDERING THE FACTS, CIRCUMSTANCES, LEGA L DECISIONS AND JUDICIAL PRECEDENCE OF HONBLE TRIBUNA L DECISION ARE OF THE OPINION THAT INTEREST INCOME EA RNED BY THE ASSESSEE TAKE THE CHARACTER OF BUSINESS TRANSAC TION AND TO BE TREATED AS BUSINESS INCOME. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO TREAT THE INTEREST INCOME TAXABLE AS BUSINESS INCOME AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE. 8. NOW WE SHALL TAKE UP THE ADDITIONAL GROUND OF APPEAL WITH RESPECT OF CLAIM OF DEPRECIATION U/S 32 (1)(II) OF THE ACT THAT THE ASSESSEE HAD CONSTRUCTED THE RO AD AND HAVE THE RIGHT TO EARN REVENUE IN THE FORM OF A NNUITY FROM THE USE OF SUCH INTANGIBLE ASSET BEING LICENSE OR BUSINESS OR COMMERCIAL RIGHT CONTEMPLATED UNDER THE PROVISIONS OF THE ACT. THE ASSESSEE HAS RAISED THIS ADDITIONAL GROUND OF APPEAL FOR THE FIRST TIME BE FORE THE HONBLE TRIBUNAL AND THE LD. DR ACCEPTED THE FACT A ND MADE THE SUBMISSIONS. THE LD.AR SUBMITTED THAT TH E ASSESSEE COMPANY HAS CONSTRUCTED A ROAD ON BUILT- OPERATE-TRANSFER(B.O.T) BASIS ON THE LAND OWNED BY THE CENTRAL GOVERNMENT AND THEREBY, IT GOT VESTED WITH THE RIGHT TO EARN REVENUE IN THE FORM OF ANNUITY INCOME WHICH IS AN INTANGIBLE ASSET IN ACCORDANCE WITH THE EXPLANATION 3(B) OF SECTION 32(1)(II) OF THE ACT. W E FIND THE SIMILAR ISSUE IN RESPECT OF CLAIM OF DEPRECIATION O N ROAD M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 19 - ON (B.O.T) BASIS IN THE ASSESSEE OWN CASE FOR THE A.Y.2005-06 & 2006-07 WAS CONSIDERED IN THE RECENT DECISION OF THE HONBLE TRIBUNAL ITA NO. 6694/MUM/2 017 & 3670/MUM/2016 IN A GROUP COMPANY CASE OF M/S EAST HYDERABAD EXPRESSWAYS LTD IN ITA NO. 6694/MUM/2017 & 3670,3503/MUM/2016 DATED 30-08- 2021 HAS DEALT ON FACTS AND JUDICIAL DECISIONS AN D OBSERVED AT PARA 3.3 TO 3.5 OF THE ORDER ,WHICH IS READ AS UNDER: 3.3. DURING THE COURSE OF FIRST APPELLATE PROCEEDIN GS, THE ASSESSEE SUBMITTED THAT THE ASSESSEE COMPANY HAD EN TERED INTO A CONCESSION AGREEMENT WITH HYDERABAD URBAN DEVELOPMENT AUTHORITY (HUDA) AND HYDERABAD GROWTH CORRIDOR LIMITED (HGCL) ON 3RD AUGUST 2007 AND THE APPOINTED DATE WAS 10TH DECEMBER 2007. THE CONCESSI ON WAS FOR A PERIOD OF 15 YEARS COMMENCING FROM 10TH DECEM BER 2007 ; THAT THIS PROJECT WAS AWARDED ON BUILD, OPERATE AND TRANSFER (BOT) ANNUITY BASIS. UNDER THE SAID AGREEM ENT, HGCL HAD GRANTED THE RIGHT TO INVESTIGATE, STUDY, D ESIGN, ENGINEER, PRODUCE, FINANCE, CONSTRUCT, OPERATE AND MAINTAIN THE PROJECT FACILITIES. ASSESSEE ACCORDINGLY TREATE D THE RIGHT TO ACQUIRE ANNUITY PURSUANT TO THE PROJECT AWARDED TO IT ON BUILD, OPERATE AND TRANSFER (BOT) BASIS, AS A COMMERCIAL RIGHT AND THEREBY IT CONSTITUTES AN INTANGIBLE ASSET AND ACCO RDINGLY ELIGIBLE FOR DEPRECIATION U/S.32(1)(II) OF THE ACT. 3.4. WE FIND THAT THE VERY SAME ISSUE IN DISPUTE HA S BEEN CONSIDERED BY THE CO-ORDINATE BENCH OF THIS TRIBUNA L IN THE CASE OF NORTH AMERICA EXPRESSWAY LTD., VS. ACIT IN ITA NOS. 4372 AND 4373/MUM/2012 FOR A.Y.2005-06 DATED 24/05/2021 WHEREIN IT WAS HELD AS UNDER:- 2. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 20 - FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOW ER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD, A ND ALSO THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THEM. OUR INDULGENCE IN THE PRESENT APPEAL HAS BEEN SOUGHT FOR ADJUDICATING THE SOLITARY ISSUE, VIZ. TH AT AS TO WHETHER OR NOT THE ASSESSEE S CLAIM FOR DEPRECIATION ON LICENSE TO COLLECT TOLL, AN INTANGIBLE ASSET, FALLS WITHIN THE SCOPE OF SEC. 32(1)(II) OF THE ACT, AND THUS, IS AS PER THE MANDATE OF LAW. IT IS THE CLAIM OF THE REVENUE THAT THE ISSUE IN HAND IS COVE RED AGAINST THE ASSESSEE BY THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE ASSESSEES OWN CASE FOR THE YEAR IN QUESTION I.E NORTH KARNATAKA EXPRESSWAY LTD. VS. CIT-10 (2015) 272 ITR 145 (BOM) AND THAT PASSED IN THE CASE OF CIT VS. WEST GUJARAT EXPRESSWAY LTD. (2017) 390 ITR 398 (BOM). ON THE CONTRARY, IT IS THE CLAIM OF THE ASSESSEE THAT THE ISSUE RAISED IN THE AFORESAID CASES WAS CONFINED TO THE ASPECT THAT AS TO WHETHER OR NOT AN INFRASTRUCT URE DEVELOPMENT COMPANY WHICH HAD CONSTRUCTED A TOLL ROAD ON BOT BASIS ON LAND OWNED BY THE CENTRAL GOVERNMENT WOULD BE ENTITLED FOR DEPRECIATION ON TH E SAME. IT IS THE CLAIM OF THE LD. A.R THAT AS THE IS SUE AS TO WHETHER AN INFRASTRUCTURE DEVELOPMENT COMPANY WHICH HAD CONSTRUCTED A TOLL ROAD ON BOT BASIS ON LAND OWNED BY THE CENTRAL GOVERNMENT WOULD BE ENTITLED TOWARDS CLAIM OF DEPRECIATION UNDER SEC. 32(1)(II) IN RESPECT OF ITS INTANGIBLE R IGHTS I.E. RIGHT TO COLLECT TOLL WAS NEITHER RAISED BEF ORE OR ADJUDICATED UPON BY THE HONBLE HIGH COURT IN EITHE R OF THE AFORESAID CASES, THEREFORE, THE RELIANCE PLA CED BY THE REVENUE ON THE SAID JUDICIAL PRONOUNCEMENTS WOULD NOT ASSIST ITS CASE. 3. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ISSUE BEFORE US IN THE BACKDROP OF THE MATERIAL AVAILABLE ON RECORD AND THE CONTENTIONS ADVANCED BY THE LD. AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES. ADMITTEDLY, AS THE ASSESSEE WHICH BEING AN M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 21 - INFRASTRUCTURE DEVELOPMENT COMPANY HAD CONSTRUCTED THE TOLL ROAD ON BUILD, OPERATE AND TRANSFER (BOT) BASIS ON THE LAND OWNED BY THE CENTRAL GOVERNMENT, NOT BEING THE OWNER OF THE SAID ROAD WOULD NOT BE ELIGIBLE FOR CLAIM OF DEPRECIATIO N ON THE SAME. OUR AFORESAID VIEW IS FORTIFIED BY THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE ASSESSEES OWN CASE FOR THE YEAR IN QUESTION, VIZ. NORTH KARNATAKA EXPRESSWAY LTD. VS. CIT-10(2015) 272 ITR 145 (BOM). HONBLE HIGH COURT IN ITS SAID ORDER HAD AFTER EXHAUSTIVELY DELIBERATING ON THE PROVISIONS OF THE NATIONAL HIGHWAY ACT, 1956, HAD THEREIN OBSERVED, THAT THOUGH THE CENTRAL GOVERNMENT AS PER SEC. 8-A OF THE NATIONAL HIGHWAY ACT, 1956 IS EMPOWERED TO ENTER INTO AN AGREEMENT WITH ANY PERSON IN RELATION TO THE DEVELOPMENT AND MAINTENANCE OF THE WHOLE OR ANY PART OF A NATIONAL HIGHWAY, BUT THAT IN NO WAY WOULD AFFECT THE VESTIN G OF THE NATIONAL HIGHWAYS IN THE UNION. IT WAS OBSERVED BY THE HONBLE HIGH COURT THAT THE OWNERSHIP OF THE NATIONAL HIGHWAY AS STANDS VESTED WITH THE CENTRAL GOVERNMENT UNDER SEC.4 OF THE NATIONAL HIGHWAY ACT, 1956 WOULD NOT BE DILUTED, FO R THE REASON, THAT THE CENTRAL GOVERNMENT AS PER SEC.8-A (SUPRA) HAD ENTERED INTO AN AGREEMENT WITH ANY PERSON FOR DEVELOPMENT AND MAINTENANCE OF THE WHOLE OR ANY PART OF THE NATIONAL HIGHWAY. TO SUM UP, THE HONBLE HIGH COURT HAD CONCLUDED THAT AN INFRASTRUCTURE DEVELOPMENT COMPANY THAT HAD CONSTRUCTED A TOLL ROAD ON BUILD, OPERATE AND TRANSFER (BOT) BASIS ON THE LAND OWNED BY THE GOVERNMENT, NOT BEING THE OWNER OF THE SAID ROAD WOULD THUS NOT BE ENTITLED FOR DEPRECIATION ON THE SAME. AT THIS STAGE, WE MAY HEREIN OBSERVE, THAT TH E HONBLE HIGH COURT WHILE CONCLUDING AS HEREINABOVE HAD ALSO OBSERVED, THAT AS THE ASSESSEE HAD INVESTED IN THE PROJECT OF CONSTRUCTION, DEVELOPMEN T AND MAINTENANCE OF THE NATIONAL HIGHWAY, THEREFORE, M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 22 - CLAIM FOR DEPRECIATION ON THE ASSETS IN THE FORM OF BUILDING AND PLANT & MACHINERY ETC. CAN BE VALIDLY RAISED AND GRANTED. ALSO, THE HONBLE HIGH COURT IN ITS ORDER HAD REFERRED TO THE OBSERVATIONS RECORDED BY THE CIT IN HIS ORDER PASSED UNDER SEC.263 OF THE ACT, WHEREIN HE HAD WHILE DECLINING THE ASSESSES CLAIM FOR DEPRECIATION ON TOLL ROAD HAD CATEGORICALLY STATED THAT IT WAS NOT THE CASE OF TH E ASSESSEE THAT THE CLAIM OF DEPRECIATION WAS BEING RAISED IN RESPECT OF ITS INTANGIBLE RIGHTS I.E RIGH T TO USE THE ASSET WITHOUT BEING THE ACTUAL OWNER OF THE SAME. 4. AS OBSERVED BY US HEREINABOVE, THE VIEW TAKEN BY THE HONBLE HIGH COURT OF BOMBAY IN ITS ORDER PASSED IN THE ASSESSEES OWN CASE WAS THEREAFTER ONCE AGAIN REITERATED BY THE HONBLE COURT IN THE CASE OF CIT-10, VS. M/S WEST GUJARAT EXPRESSWAY LTD. (ITA NO. 2357 OF 2013, DATED 05.04.2016). WE FIND THAT BOTH OF THE AFOREMENTIONED JUDGEMENTS OF THE HONBLE JURISDICTIONAL HIGH COURT WERE RENDERED IN CONTEXT OF THE ISSUE THAT AS TO WHETHER OR NOT A N INFRASTRUCTURE DEVELOPMENT COMPANY WHICH HAD CONSTRUCTED A TOLL ROAD ON BOT BASIS ON THE LAND OWNED BY CENTRAL GOVERNMENT WOULD BE ENTITLED FOR DEPRECIATION ON SUCH TOLL ROAD. WE FIND THAT THE HONBLE HIGH COURT HAD OBSERVED THAT IN THE ABSENCE OF OWNERSHIP OF THE TOLL ROAD WHICH BELONGED TO THE CENTRAL GOVERNMENT, THE ASSESSEE WOULD NOT BE ENTITLED TO CLAIM DEPRECIATION ON THE SAME. THE ISS UE AS TO WHETHER OR NOT AN INFRASTRUCTURE DEVELOPMENT COMPANY THAT HAD CONSTRUCTED A TOLL ROAD ON BOT BASIS ON THE LAND OWNED BY CENTRAL GOVERNMENT WOULD BE ENTITLED TO CLAIM DEPRECIATION UNDER SEC.32(1)(II) IN RESPECT OF ITS RIGHT TO COLLECT T OLL I.E AN INTANGIBLE ASSET WAS HOWEVER NOT RAISED IN BOTH OF THE AFORESAID CASES. OUR AFORESAID VIEW STANDS FORTIFIED FROM A PERUSAL OF THE ORDER OF THE HONBL E HIGH COURT IN THE CASE OF NORTH KARNATAKA M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 23 - EXPRESSWAY LTD. VS. CIT-10 (2015) 272 ITR 145 (BOM), WHEREIN AT PARA 20 THE HONBLE HIGH COURT HAD OBSERVED THAT THE QUESTION BEFORE THEM WAS AS TO WHEN A PERSON WHO IS IN THE BUSINESS OF INFRASTRUCTURE DEVELOPMENT CONSTRUCTS A ROAD ON BUILD, OPERATE AND TRANSFER (BOT) BASIS ON THE LAND OWNED BY THE GOVERNMENT, THEN, CAN IT CLAIM DEPRECIATION ON SUCH TOLL ROAD . WE FIND THAT THE HONBLE HIGH COURT HAD OBSERVED THAT THOUGH AN INFRASTRUCTURE DEVELOPMENT COMPANY THAT HAD CONSTRUCTED A ROAD ON BOT BASIS ON THE LAND OWNED BY THE CENTRAL GOVERNMENT WAS NOT ENTITLED TO CLAIM DEPRECIATION ON THE TOLL ROADS AS IT WAS NOT OWNER OF THE SAME, HOWEVER, IT COULD DEFINITELY CLAIM DEPRECIATION ON ITS INVESTMENTS MADE IN THE PROJECT AND SUCH OTHER ASSETS IN THE FORM OF BUILDING AND PLANT AND MACHINERY ETC. ACCORDINGLY, IT WAS OBSERVED BY THE HONBLE HIGH COURT AT PARA 47 OF ITS ORDER THAT THE CLAIM FOR DEPRECIATION COULD BE VALI DLY RAISED AND GRANTED TO THE EXTENT STATED HEREINABOVE . ALSO, IT WAS OBSERVED BY THE HONBLE HIGH COURT THA T IT WAS CONCERNED ONLY WITH THE CLAIM OF THE ASSESSE E AS REGARDS DEPRECIATION ON THE ROAD ITSELF. TO SUM UP, THE HONBLE HIGH COURT IN ITS AFORESAID JUDGMEN T HAD CONFINED ITS ADJUDICATION TO THE ISSUE THAT AS TO WHETHER OR NOT AN INFRASTRUCTURE DEVELOPMENT COMPANY THAT HAD CONSTRUCTED A ROAD ON BOT BASIS ON LAND OWNED BY THE CENTRAL GOVERNMENT WOULD BE ELIGIBLE TO CLAIM DEPRECIATION ON SUCH TOLL ROAD SO CONSTRUCTED AND OPERATED BY IT. ACCORDINGLY, WE ARE OF THE CONSIDERED VIEW, THAT THE ISSUE AS TO WHETHE R AN INFRASTRUCTURE DEVELOPMENT COMPANY THAT HAD CONSTRUCTED A ROAD ON BUILD, OPERATE AND TRANSFER (BOT) BASIS ON THE LAND OWNED BY THE CENTRAL GOVERNMENT WOULD BE ENTITLED TO CLAIM DEPRECIATION UNDER SEC. 32(1)(II) IN RESPECT OF ITS INTANGIBLE R IGHTS I.E RIGHT TO COLLECT TOLL HAD NOT BEEN ADJUDICATE D BY THE HONBLE HIGH COURT IN ITS AFORESAID ORDER IN TH E M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 24 - CASE OF NORTH KARNATAKA EXPRESSWAY LTD. (SUPRA). WE FIND THAT THE HON BLE HIGH COURT OF BOMBAY HAD THEREAFTER ONCE AGAIN REITERATED ITS AFORESAID VIEW WHILE DISPOSING OFF THE APPEAL OF THE REVENUE IN TH E CASE OF CIT-10 VS. M/S WEST GUJARAT EXPRESSWAY LTD. (ITA NO. 2357 OF 2013, DATED 05.04.2016). AS I S DISCERNIBLE FROM THE ORDER, THE ONLY TWO ISSUES WHI CH WERE RAISED BY THE REVENUE IN ITS AFORESAID APPEAL BEFORE THE HIGH COURT WERE, VIZ. (I). WHETHER ON TH E FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL WAS RIGHT IN DIRECTING THE A.O TO GRANT DEPRECIATION ON ASSETS NOT OWNED BY THE RESPONDENT THAT GOES AGAINST PROVISIONS OF SECTION 32 OF THE I.T ACT?; AND (II). WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL WAS RIGHT IN ITS DECISION OF TREATING TOLL ROADS AS PLANT AND MACHINERY, WHEN THIS IS NOT AS PER RULE 5 OF NEW APPENDIX OF THE I.T RULES?. AS SUCH, WE FIND THAT THE REVENUE HAD ONLY SOUGHT THE ADJUDICATION OF THE ISSUE AS TO WHETHER THE TRIBUNA L WAS RIGHT IN ALLOWING DEPRECIATION TO THE ASSESSEE ON TOLL ROADS BY TREATING THE SAME AS PLANT AND MACHINERY. IT IS IN THE BACKDROP OF THE AFORESAID ISSUES WHICH WERE RAISED BY THE REVENUE THAT THE HONBLE HIGH COURT BY RELYING ON ITS EARLIER ORDER IN THE CASE OF NORTH KARNATAKA EXPRESSWAY LTD. VS. CIT-10 (2015) 372 ITR 145 (BOM), HAD CONCLUDED, THAT THE ISSUE THEREIN INVOLVED WAS SQUARELY COVERE D BY THE SAID DECISION. ACCORDINGLY, THE HONBLE HIGH COURT BY DRAWING SUPPORT FROM THE OBSERVATIONS RECORDED IN ITS EARLIER ORDER IN THE CASE OF NORTH KARNATAKA EXPRESSWAY LTD. (SUPRA) HAD THEREIN ANSWERED THE AFORESAID TWO SUBSTANTIAL QUESTIONS OF LAW IN THE NEGATIVE I.E IN FAVOUR OF THE APPELLANT REVENUE AND AGAINST THE RESPONDENT ASSESSEE. IN OUR CONSIDERED VIEW, THE HON BLE HIGH COURT IN ITS AFORESAID ORDER I.E CIT-10, MUMBAI VS. M/S WEST GUJARAT EXPRESSWAY LTD., ITA NO. 2357 OF 2013, M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 25 - DATED 05.04.2016, HAD CONFINED ITS ADJUDICATION TO THE AFORESAID TWO SUBSTANTIAL QUESTIONS OF LAW WHIC H WERE RAISED BY THE REVENUE BEFORE IT. OUR AFORESAID VIEW IS FORTIFIED BY THE ORDER OF A COORDINATE BENC H OF THE TRIBUNAL, MUMBAI IN THE CASE OF THIRUVANTHAPURAM ROAD DEVELOPMENT COMPANY LTD. VS. DCIT-14(3)(1), MUMBAI [ITA NO. 622/MUM/2015, DATED 23.05.2018]. IN THE AFORESAID CASE INVOLVING FACTS IDENTICAL TO THOSE AS IN THE CASE OF THE ASSE SSEE BEFORE US, WE FIND THAT THE ASSESSEE HAD CLAIMED THAT IT WAS ENTITLED FOR DEPRECIATION ON RIGHT TO COLLECT TOLL U/S 32(1)(II) OF THE ACT. RELYING ON THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT-10, VS. M/S WEST GUJARAT EXPRESSWAY LTD. (ITA NO. 2357 OF 2013, DATED 05.04.2016), IT WAS THE CLAIM OF THE REVENUE THAT THE ISSUE WAS COVERED AGAINST THE ASSESSEE. WE FIND, THAT THE TRIBUNAL REJECTED THE AFORESAID CLAIM OF THE REVENU E, FOR THE REASON, THAT THE ISSUE AS REGARDS THE ENTITLEMENT OF AN INFRASTRUCTURE DEVELOPMENT COMPANY THAT HAD CONSTRUCTED A ROAD ON BUILD, OPERATE AND TRANSFER (BOT) BASIS ON THE LAND OWNED BY THE CENTRAL GOVERNMENT TOWARDS CLAIM DEPRECIATION UNDER SEC. 32(1)(II) IN RESPECT OF ITS INTANGIBLE RIGHTS I.E RIGHT TO COLLECT TOLL HAD N OT BEEN ADJUDICATED BY THE HONBLE HIGH COURT IN ITS AFORESAID ORDER. IN FACT, IT WAS OBSERVED BY THE TRIBUNAL THAT THE HONBLE HIGH COURT IN THE AFORESA ID CASE HAD ADJUDICATED THAT AN INFRASTRUCTURE DEVELOPMENT COMPANY THAT HAD CONSTRUCTED A ROAD ON BUILD, OPERATE AND TRANSFER (BOT) BASIS ON THE LAND OWNED BY THE CENTRAL GOVERNMENT WOULD NOT BE ENTITLED TO CLAIM DEPRECIATION ON SUCH TOLL ROAD. THE OBSERVATIONS OF THE TRIBUNAL ARE AS UNDER: THE MUMBAI BENCH OF THE TRIBUNAL IN THE AFORESAID DECISION IN ACIT VS. M/S ANDHRA PRADESH EXPRESSWAY BY A LATER DECISION DATED 28/02/2018 DULY CONSIDERED VARIOUS DECISIONS INCLUDING THE M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 26 - DECISION REVERSED BY THE HONBLE HIGH COURT IN CIT VS. WEST GUJARAT EXPRESSWAY LTD. (2016) 73 TAXMANN.COM 139; (2017) 390 ITR 400 (BOM)., ORDER DATED 05/04/2016. BEFORE US ALSO, THE LD. CIT- DR/LD. D.R CONTENDED THAT IN VIEW OF THIS DECISION FROM THE HONBLE HIGH COURT, THE ASSESSEE IS NOT ENTITLED TO DEPRECIATION. WE HAVE GONE THROUGH THIS ORDER AND FOUND THAT THE ISSUE BEFORE THE HON BLE HIGH COURT WAS WITH RESPECT TO TREATING TOLL ROAD AS PLANT AND MACHINERY AND IF THAT SITUATION DECIDED IN FAVOUR OF THE REVENUE. IN THE BACKDROP OF THE AFORESAID FACTS, WE ARE OF T HE CONSIDERED VIEW THAT THE RELIANCE PLACED BY THE LD. D.R ON THE AFORESAID JUDGMENTS OF THE HON BLE HIGH COURT OF BOMBAY I.E NORTH KARNATAKA EXPRESSWAY LTD. VS. CIT-10 (2015) 372 ITR 145 (BOM) AND CIT- 10, VS. M/S WEST GUJARAT EXPRESSWAY LTD. (ITA NO. 2357 OF 2013, DATED 05.04.2016), WOULD NOT ASSIST THE CASE OF THE REVENUE FOR REBUTTING THE CLAIM OF THE ASSESSEE TOWARDS DEPRECATION U/S 32(1)(II) IN RESPE CT OF ITS INTANGIBLE RIGHTS I.E RIGHT TO COLLECT TOLL . 5. WE FIND THAT THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT, CIRCLE 10(2), HYDERABAD, VS. PROGRESSIVE CONSTRUCTION LTD. (2018) 191 TTJ 549 (HYD.) (SB), HAD CONCLUDED, THAT WHERE AN INFRASTRUCTURE DEVELOPMENT COMPANY THAT HAD CONSTRUCTED A ROAD ON BUILD, OPERATE AND TRANSFER (BOT) BASIS ON THE LAND OWNED BY THE CENTRAL GOVERNMENT GETS VESTED WITH A RIGHT TO AN INTANGIBL E ASSET UNDER EXPLANATION 3(B) R.W. SEC.32(1)(II) OF THE ACT, THE ASSESSEE WOULD BE ELIGIBLE TO CLAIM DEPRECIATION ON SUCH ASSET AS PER THE SPECIFIED RAT E. APART FROM THAT, IT WAS OBSERVED BY THE TRIBUNAL, THAT WHERE THE ASSESSEE HAD NEVER CLAIMED EXPENDITURE INCURRED FOR CONSTRUCTION OF THE ROAD O N BUILD, OPERATE AND TRANSFER (BOT) BASIS, AS A DEFERRED REVENUE EXPENDITURE, THE SAME COULD NOT M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 27 - HAVE BEEN AMORTIZED IN TERMS OF CBDT CIRCULAR NO. 9 OF 2014, DATED, 23.04.2014. THE OBSERVATIONS OF THE SPECIAL BENCH OF THE TRIBUNAL WHICH SEIZES THE ISSUE UNDER CONSIDERATION BEFORE US ARE AS UNDER: 11. UNDISPUTEDLY, FOR EXECUTING THE PROJECT, ASSES SEE 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 I S 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 BUSINES S / 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 M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 28 - APPREHENSION THAT IT WILL LEAD TO A SITUATION WHERE BOTH GOVERNMENT OF INDIA AND THE CONCESSIONAIRE WILL CLAIM DEPRECIATION ON THE ASSET CREATED WITH T HE 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 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 WI TH PRIVATE SECTOR PARTICIPATION ON BOT BASIS. THUS, FROM THE VERY INCEPTION OF THE PROJECT, ASSESSEE WA S AWARE OF THE FACT, IT HAS TO RECOUP THE COST INCURR ED IN IMPLEMENTING THE PROJECT ALONG WITH THE PROFIT FROM OPERATING THE ROAD AND COLLECTING TOLL CHARGES DURI NG 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 DAT E 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 SECT ION 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 COLLEC T TOLL CHARGES OVER THE CONCESSION PERIOD OF 11 YEARS AND 7 MONTHS, THE ASSESSEE CAN START OPERATING AND M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 29 - COLLECTING TOLL CHARGES ONLY WHEN THE PROJECT FACIL ITY IS READY FOR USE. THEREFORE, UNTIL THE PROJECT IS COMP LETED 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, KEE PING IN VIEW THE AFORESAID FACT, IT CANNOT BE SAID THAT THE RIGHT TO COLLECT TOLL HAS ACCRUED TO THE ASSESSEE O N THE DATE OF EXECUTION OF THE AGREEMENT. IF WE ACCEPT THE AFORESAID ARGUMENT OF THE LEARNED SENIOR STANDI NG COUNSEL, IN OTHER WORDS, IT WOULD MEAN THAT WITHOUT EVEN EXECUTING AND COMPLETING THE PROJECT FACILITY, ASSESSEE WOULD BE COLLECTING TOLL CHARGES. THEREFOR E, THE CONTENTION OF THE LEARNED SENIOR STANDING COUNS EL THAT THE EXPENDITURE INCURRED BY THE ASSESSEE TILL EXECUTION OF THE AGREEMENT CAN ONLY BE CONSIDERED A S AN INTANGIBLE ASSET, IN OUR VIEW, IS ILLOGICAL, HEN CE, 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 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 MARK S, LICENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE, BEING INTANGIBLE ASSETS A CQUIRED ON OR AFTER THE 1ST DAY OF APRIL, 1998, OWNED, WHOL LY OR PARTLY, BY THE ASSESSEE67 AND USED FOR THE PURPOSES OF M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 30 - THE BUSINESS OR PROFESSION, THE FOLLOWING DEDUCTION S SHALL BE ALLOWED] 12. EXPLANATION 3 TO SECTION 32(1) DEFINES INTANGIBLE A SSET AS UNDER:- 85[EXPLANATION 3.FOR THE PURPOSES OF THIS SUB-SECT ION, [THE EXPRESSION 'ASSETS'] SHALL MEAN (A) TANGIBLE ASSETS, BEING BUILDINGS, MACHINERY, PLANT OR FURNITURE; (B) INTANGIBLE ASSETS, BEING KNOW-HOW, PATENTS, COPYRIG HTS, 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 NA TURE 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 ASSES SEE 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 INDIA N EASEMENTS ACT, 1882: - 'LICENSE' DEFINED:- WHERE ON PERSON GRANTS TO ANOTH ER, OR TO A DEFINITE NUMBER OF OTHER PERSONS, A RIGHT TO DO, OR CONTINUE TO DO, IN OR UPON THE IMMOVABLE PROPERT Y OF THE GRANTOR, SOMETHING WHICH WOULD, IN THE ABSENCE OF SUCH RIGHT, BE UNLAWFUL AND SUCH RIGHT DOES NOT M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 31 - 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 THE INCOME TAX ACT, 1961, THE DEFINIT ION 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 P LAIN READING OF SECTION 52 OF THE ACT MAKES IT CLEAR, A RIGHT GR ANTED TO A PERSON TO DO OR CONTINUE TO DO SOMETHING IN THE IMMOVABLE PROPERTY OF THE GRANTOR, WHICH, IN THE ABSENCE OF S UCH RIGHT WOULD BE UNLAWFUL AND SUCH RIGHT DOES NOT AMOUNT TO AN EASEMENT OR INTEREST IN THE PROPERTY, THEN SUCH RIG HT IS CALLED A LICENSE. IF WE EXAMINE THE FACTS OF THE PRESENT C ASE, VIS- A-VIS, THE DEFINITION OF LICENSE UNDER THE INDIAN E ASEMENTS ACT, 1882, IT WOULD BE CLEAR THAT IMMOVABLE PROPERT Y ON WHICH THE PROJECT / PROJECT FACILITY IS EXECUTED / IMPLEMENTE D IS OWNED BY THE GOVERNMENT OF INDIA AND IT HAS FULL POWER TO HOLD, DISPOSE OFF AND DEAL WITH THE IMMOVABLE PROPE RTY. BY VIRTUE OF THE C.A., ASSESSEE HAS ONLY BEEN GRANT ED A LIMITED RIGHT TO EXECUTE THE PROJECT AND OPERATE TH E 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 DURIN G THE CONCESSION PERIOD AND IN THE ABSENCE OF SUCH RIGHT, IT WOULD HAVE BEEN UNLAWFUL ON THE PART OF THE CONCESSIONAIR E TO DO OR CONTINUE TO DO ANYTHING ON SUCH PROPERTY. HOWEVER, THE RIGHT GRANTED TO THE CONCESSIONAIRE HAS NOT CREATED ANY R IGHT, 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 N OT 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 M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 32 - 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 ST ANDING COUNSEL THAT THE INTANGIBLE ASSET MENTIONED UNDER S ECTION 32(1)(II) OF THE ACT ARE SPECIFICALLY IDENTIFIED AS SETS, EXCEPT, THE ASSETS TERMED AS ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE'. HE HAD SUBMIT TED, APPLYING THE PRINCIPLE OF EJUSDEM GENERIS THE RIGHT S REFERRED TO IN THE EXPRESSION 'ANY OTHER BUSINESS O R COMMERCIAL RIGHTS OF SIMILAR NATURE', SHOULD BE SIM ILAR TO ONE OR MORE OF THE SPECIFICALLY IDENTIFIED ASSETS PRECE DING 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.214 CRORE ASSESSEE HAS ACQUIRED THE RIGHT TO OPERATE THE PROJECT AND COLLE CT TOLL CHARGES. THEREFORE, SUCH RIGHT ACQUIRED BY THE ASSESSEE IS A VALUABLE BUSINESS OR COMMERCIAL RIGHT BECAUSE THROU GH 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 T HAT THE RIGHT TO OPERATE THE PROJECT FACILITY AND COLLECT TOLL CHARGES THERE FROM IN LIEU OF THE EXPENDITURE INCURRED IN E XECUTING THE PROJECT IS AN INTANGIBLE ASSET CREATED FOR THE ENDU RING BENEFIT OF THE ASSESSEE. NOW, IT HAS TO BE SEEN WHE THER SUCH INTANGIBLE ASSET COMES WITHIN THE EXPRESSION ' ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATU RE'. AS COULD BE SEEN FROM THE DEFINITION OF INTANGIBLE ASS ET, SPECIFICALLY IDENTIFIED ITEMS LIKE KNOWHOW, PATENTS , COPYRIGHTS, TRADEMARKS, LICENSES, FRANCHISES ARE NOT OF THE M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 33 - SAME CATEGORY, BUT, DISTINCT FROM EACH OTHER. HOWEV ER, 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 WHI CH MAY NOT BE IDENTIFIABLE WITH THE SPECIFIED ITEMS, B UT, IS OF SIMILAR NATURE WOULD COME WITHIN THE EXPRESSION AN Y 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 I N 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' WO ULD 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 I DENTIFIABLE 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 EXP RESSION '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 I NTERPRETATION OF THE STATUTORY PROVISIONS. HAD IT BEEN THE CASE, THEN GOODWILL' WOULD NOT HAVE BEEN TREATED AS AN INTANG IBLE ASSET. THE HON'BLE DELHI HIGH COURT IN CASE OF AREV A T AND D INDIA LTD. (SUPRA), WHILE INTERPRETING THE AFORES AID EXPRESSION BY APPLYING THE PRINCIPLES OF EJUSDEM GE NERIS OBSERVED, THE RIGHT AS FINDS PLACE IN THE EXPRESSIO N BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE NEED NOT AN SWER THE DESCRIPTION OF KNOWHOW, PATENTS, TRADEMARKS, LICENS E OR FRANCHISES, BUT MUST BE OF SIMILAR NATURE AS THE SP ECIFIED ASSET. THE COURT OBSERVED, LOOKING AT THE MEANING O F CATEGORIES OF SPECIFIED INTANGIBLE ASSETS REFERRED TO IN SECTION 32(1)(II) OF THE ACT PRECEDING THE TERM BU SINESS OR M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 34 - 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 SIMI LAR NATURE, AFTER THE SPECIFIED INTANGIBLE ASSETS CLEA RLY DEMONSTRATES THAT THE LEGISLATURE DID NOT INTEND TO PROVIDE FOR DEPRECIATION ONLY IN RESPECT OF SPECIFIED INTAN GIBLE ASSETS BUT ALSO TO OTHER CATEGORIES OF INTANGIBLE ASSETS WHICH WERE NEITHER VISIBLE NOR POSSIBLE TO EXHAUSTI VELY ENUMERATE. THE HON'BLE COURT, THEREFORE OBSERVED, I N THE CIRCUMSTANCES THE NATURE OF BUSINESS OR COMMERCIAL RIGHT CANNOT BE RESTRICTED ONLY TO KNOWHOW, PATENTS, TRAD EMARKS, COPYRIGHTS, LICENCE OR FRANCHISE. THE COURT OBSERVE D, ANY INTANGIBLE ASSETS WHICH ARE INVALUABLE AND RESULT I N SMOOTHLY CARRYING ON THE BUSINESS AS PART OF THE TO OL OF THE TRADE OF THE ASSESSEE WOULD COME WITHIN THE EXPRESS ION ANY OTHER BUSINESS OR COMMERCIAL RIGHT OF SIMILAR NATUR E. 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 DEPRECIATIO N 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 FRAN CHISE, THEREFORE, AN INTANGIBLE ASSET. IN THE PRESENT CASE , UNDISPUTEDLY BY VIRTUE OF C.A. THE ASSESSEE HAS ACQ UIRED THE RIGHT TO OPERATE THE TOLL ROAD / BRIDGE AND COLLECT TOLL CHARGES IN LIEU OF INVESTMENT MADE BY IT IN IMPLEME NTING THE PROJECT. THEREFORE, THE RIGHT TO OPERATE THE TOLL R OAD / BRIDGE AND COLLECT TOLL CHARGES IS A BUSINESS OR CO MMERCIAL RIGHT AS ENVISAGED UNDER SECTION 32(1)(II) R/W EXPL ANATION 3(B) OF THE SAID PROVISIONS. THEREFORE, IN OUR CONS IDERED OPINION, THE ASSESSEE IS ELIGIBLE TO CLAIM DEPRECIA TION ON WDV AS AN INTANGIBLE ASSET. THUS, WE ANSWER THE QUESTION FRAMED BY THE SPECIAL BENCH AS UNDER:- M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 35 - 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 T O CLAIM DEPRECIATION ON SUCH ASSET AT THE SPECIFIED RATE. 18. IN VIEW OF OUR AFORESAID CONCLUSION, THERE IS NO NE ED TO ANSWER THE SECOND PART OF THE QUESTION FRAMED. THIS DISPOSES OF GROUNDS NO.2, 3, 5 AND 6. WE FIND THAT THE AFORESAID ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL, HAD THEREAFTER BEEN FOLLOWED BY THE ITAT J BENCH, MUMBAI, IN THE CASE OF DCIT, CIRCLE-9(1)(2),MUMBAI VS. M/S ATLANTA LTD. MUMBAI (ITA NO. 3415/MUM/2015, DATED 24.01.2018). ALSO, A SIMILAR VIEW HAD BEEN TAKEN BY THE ITAT, CHENNAI IN THE CASE OF ACIT, CO-OPERATIVE CIRCLE 5(2), CHEN NAI VS. M/S PNG TOLL WAY LTD (ITA NO. 238/CHNNY/2019, DATED 26.07.2019; AND ITAT E BENCH, MUMBAI IN THE CASE OF ACIT (CIR). 6(2)(2), MUMBAI VS. M/S ESSEL SAGAR DAMOH TOLL ROADS LTD, ITA NO. 7114/MUM/2016 & C.O NO. 84/MUM/2018; A.Y 2011-12, DATED 20.09.2019. IN THE BACKDROP OF THE AFORESAID JUDICIAL PRONOUNCEMENTS, WE ARE OF TH E CONSIDERED VIEW THAT THE ISSUE AS TO WHETHER AN INFRASTRUCTURE DEVELOPMENT COMPANY THAT HAD CONSTRUCTED A ROAD ON BUILD, OPERATE AND TRANSFER (BOT) BASIS ON THE LAND OWNED BY THE CENTRAL GOVERNMENT WOULD BE ELIGIBLE FOR CLAIM OF DEPRECIATION IN RESPECT OF ITS INTANGIBLE RIGHTS I. E RIGHT TO COLLECT TOLL UNDER SEC. 32(1)(II) IS SQU ARELY COVERED BY THE AFORESAID ORDER OF THE SPECIAL BENC H OF THE TRIBUNAL IN THE CASE OF ACIT, CIRCLE 10(2), HYDERABAD, VS. PROGRESSIVE CONSTRUCTION LTD. (2018) 191 TTJ 549 (HYD.) (SB) AND ALSO THE ORDERS OF THE COORDINATE BENCHES OF THE TRIBUNAL VIZ. (I) DCIT, CIRCLE-9(1)(2),MUMBAI VS. M/S ATLANTA LTD. MUMBAI M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 36 - (ITA NO. 3415/MUM/2015, DATED 24.01.2018); (II) ACIT VS. M/S PNG TATA LTD. (ITA NO. 238/CHNNY/2019, DATED 26.07.2019); AND (III). ACIT (CIR). 6(2)(2), MUMBAI VS. M/S ESSEL SAGAR DAMOH TOLL ROADS LTD, ITA NO. 7114/MUM/2016 & C.O NO. 84/MUM/2018; A.Y 2011-12, DATED 20.09.2019. WE, THUS, FINDING OURSELVES TO BE IN AGREEMENT WITH THE VIEW TAKEN BY THE TRIBUNAL IN TH E AFORESAID CASES RESPECTFULLY FOLLOW THE SAME. ACCORDINGLY, THE CLAIM OF THE ASSESSEE TOWARDS DEPRECIATION UNDER SEC.32(1)(II) IN RESPECT OF ITS INTANGIBLE RIGHTS I.E RIGHT TO COLLECT TOLL BEING IN CONFORMITY WITH THE MANDATE OF LAW IS FOUND TO BE I N ORDER. WE THUS NOT FINDING FAVOUR WITH THE VIEW TAK EN BY THE CIT(A) THEREIN SET-ASIDE THE SAME. THE GROUND OF APPEAL NO. 1 IS DISMISSED IN TERMS OF OUR AFORESAID OBSERVATIONS. THE GROUND OF APPEAL NO. 2 R.W ADDITIONAL GROUND OF APPEAL NO. 1 ARE ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. 3.5. IN VIEW OF THE AFORESAID FACTS AND RESPECTFULL Y FOLLOWING THE CO-ORDINATE BENCH DECISION OF THIS TRIBUNAL REF ERRED TO SUPRA, WE HOLD THAT ASSESSEE WOULD BE ENTITLED FOR DEPRECIATION ON THE COST INCURRED ON THE TOLL ROADS TREATING THE SAME AS INTANGIBLE ASSET AND CLAIM THE DEPRECIATION IN TERMS OF SECTION 32(1)(II) OF THE ACT. THE LD. AO IS DIRE CTED ACCORDINGLY. ACCORDINGLY, GROUND NOS. I AND II RAIS ED BY THE ASSESSEE ARE ALLOWED. 9. WE FIND THE LD. AR HAS SUBSTANTIATED THE SUBMISSIONS WITH THE FACTS AND RELIED ON THE JUDICI AL DECISIONS AS UNDER: 1. WEST GUJARAT EXPRESSWAY LTD VS. ACIT, ITA NO. 5 904 & 6244/MUM/2012. M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 37 - 2. WEST GUJARAT EXPRESSWAY LTD VS. DCIT, ITA NO. 63 4 & 664/MUM/2015. 3. ANDHRA PRADES EXPRESSWAY LTD VS. ACIT, ITA NO. 6 55 & 146/MUM/2015. 4. THIRUVANANTHPURAM ROAD DVPMT CO. LTD VS. ACIT, I TA 6798 & 6837/MUM/2011. 5. THIRUVANANTHPURAM ROAD DVPMT CO. LTD VS. DCIT, 6 22, 636, 4346/M/2015 & CO NO. 25/M/2015. 6. WEST GUJARAT EXPRESSWAY LTD VS. DCIT, ITA NO. 36 68/ 4327/MUM/2016 A.Y 2011-12. 7. INFRASTRUCTURE LEASING & FINANCIAL SERVICES LTD VAS ACIT, ITA NO. 3699, 3700 & 3786/M/2013. 8. INFRASTRUCTURE LEASING & FINANCIAL SERVICES LTD VAS DCIT, ITA NO. 7091, 7092, 7284 & 6829/MUM/2014. 9. SELVEL ADVERTISING (P) LTD VS DCIT, 58 TAXMANN.C OM 196. 10. NORTH KARNATAKA EXPRESSWAY LTD VS CIT, ITA NO. 499/MUM/2012. 11. GODHRA EXPRESSWAY PVT LTD VS. DCIT, 2123 & 2124/HYD/2018. 10. WE FIND THE FACTS OF THE PRESENT CASE ARE SIMIL AR AND IDENTICAL TO THE HONBLE TRIBUNAL DECISION. WE CONS IDERING THE FACTUAL ASPECTS, CIRCUMSTANCES, LEGAL DECISIONS AND THE JUDICIAL PRECEDENCE OF HONBLE TRIBUNAL DECISION S ARE OF THE OPINION THAT THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION ON ROAD ON (B.O.T) BASIS TREATING IT A S INTANGIBLE ASSET UNDER SECTION 32(1)(II) OF THE ACT . M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 38 - ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO GRA NT DEPRECIATION AS DISCUSSED AND ALLOW THE ADDITIONAL GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE 11. IN RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ITA NOS. 4161/MUM/2013 (A.Y.2009-10) & ITA NO. 1230/MUM/2015 (2010-11). 12. AS THE FACTS AND CIRCUMSTANCES (INCLUDING ADDITIONAL GROUND OF APPEAL) IN THESE APPEALS ARE IDENTICAL TO ITA NO.4160/MUM/2013 FOR A.Y. 2008-09, THE DECISION RENDERED IN ABOVE PARAGRAPHS WOULD APPLY MUTATIS MUTANDIS FOR THESE APPEALS ALSO EXCEP T THE FIGURES. ACCORDINGLY, THE GROUNDS OF APPEAL IN THESE APPEALS ARE ALLOWED. 13. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E FOR THE A.Y.2008-09,2009-10 & 2010-11 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20.09.20 21. SD/- SD/- ( SHAMIM YAHYA ) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 20.09.2021 M/S. NORTH KARNATAKA EXPRESSWAY LTD., MUMBAI.ITA.NO.4160&4161/M/2013,ITA.NO.1230/M/2015. - 39 - KRK, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) 4. ( ) / CONCERNED CIT 5. '#$%&&' , )* , / DR, ITAT, MUMBAI 6. %-./0 / GUARD FILE. / BY ORDER, '& //TRUE COPY// 1. ( ASST. REGISTRAR) ITAT, MUMBAI