The Roads and Bridges Development Corpn. of Kerala Ltd, Cochin V. ACIT, Ernakulam

ITA 62/COCH/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64972 (ITAT-COCHIN)
• Duration Of Justice: 3 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 04-09-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 09-02-2009
• Court: TRIBUNAL
• Assessee Lawyers: VIVEK C GOVIND
• Keywords: Capital asset; Depreciation; Cost of acquisition; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO.59 /COCH/2009 ASSESSMENT YEAR: 2005-06 THE ASSISTANT COMMISSIONER OF INCOME-TAX,CIRCLE-1(3), ERNAKULAM. VS. M/S. ROADS AND BRIDGES DEVELOPMENT CORPORATION OF KERALA LTD., 2 ND FLOOR, PREETHY BUILDING, PALARIVATTOM, KOCHI-682 025. [PAN :AABCR 7841Q] (REVENUE-APPELLANT) (ASSESSEE-R ESPONDENT) I.T.A. NO.62 /COCH/2009 ASSESSMENT YEAR: 2005-06 M/S. ROADS AND BRIDGES DEVELOPMENT CORPORATION OF KERALA LTD., 2 ND FLOOR, PREETHY BUILDING, PALARIVATTOM, KOCHI-682 025. [PAN :AABCR 7841Q] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX,CIRCLE-1(3), ERNAKULAM. (ASSESSEE -APPELLANT) (REVENUE-R ESPONDENT) REVENUE BY SHRI PRATAP NARAYAN SHARMA, JR. DR ASSESSEE BY SHRI VIVEK C. GOVIND, CA DATE OF HEARING 04/09/2012 DATE OF PRONOUNCEMENT 16/11/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THESE CROSS APPEALS ARE DIRECTED AGAINST THE O RDER DATED 28-11-2008 PASSED BY THE LD. CIT(A)-II, KOCHI AND THEY RELATE TO THE ASSESSM ENT YEAR 2005-06. I.T.A. NOS.59 & 62/COCH/2009 2 2. THE ASSESSING OFFICER ASSESSED THE FOLLOWING ITE MS UNDER THE HEAD INCOME FROM OTHER SOURCES:- (A) INTEREST FROM SAVINGS BANK A/C RS. 31,863/- (B) INTEREST FROM BANK DEPOSITS RS. 3,27,925/- (C) INTEREST INCOME ON MOBILISATION ADVA NCE RS.27,23,187/- (D) INTEREST RECEIVED ON OTHER ADVANCES RS. 90,521/- (E) INCOME FROM AUCTIONING OF DEBRIS ETC. RS.11,50,296/- IN ADDITION TO THE ABOVE, THE ASSESSING OFFICER DIS ALLOWED THE CLAIM OF DEPRECIATION @ 25% ON INTANGIBLE ASSET, BEING DIRECT TOLL COLLEC TION RIGHT. 3. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) SUS TAINED THE DECISION OF THE ASSESSING OFFICER IN RESPECT OF INTEREST FROM SAVIN G BANK, INTEREST FROM FIXED DEPOSITS AND INCOME FROM AUCTIONING OF DEBRIS ETC. HE DELET ED THE ASSESSMENT OF INTEREST ON MOBILISATION ADVANCE AND IN RESPECT OF OTHER ADVANC ES. WITH REGARD TO THE CLAIM MADE BY THE ASSESSEE WITH REGARD TO THE INTANGIBLE ASSE T, THE LD CIT(A) NOTICED THAT THE ASSESSEE HAS ONLY CONVERTED THE INFRASTRUCTURE FAC ILITIES ASSETS ALREADY CREATED BY IT INTO INTANGIBLE ASSET. HENCE, THE LD. CIT(A) HEL D THAT THE ASSESSEE SHOULD CONTINUE TO CLAIM DEPRECIATION AT RATE OF 10% ON THE INFRAS TRUCTURE FACILITIES ASSET ALREADY CREATED AND OPERATED BY THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), BOTH THE PARTIES ARE IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. IN RESPECT OF INTEREST FROM SAVINGS BANK, INTEREST FROM FIXED DEP OSITS AND INTEREST FROM MOBILISATION ADVANCE AND OTHER ADVANCES, INCOME FROM AUCTIONING OF DEBRIS ETC., THIS BENCH TRIBUNAL HAS ALREADY CONSIDERED THESE ISSUES IN THE ASSESSEE S OWN CASE RELATING TO THE ASSESSMENT YEARS 2002-03 AND 2003-04 IN I.T.A. NOS. 353/COCH/2006 AND 479/COCH/2007. THE TRIBUNAL, VIDE ITS ORDER DATED 27-08-2012, HAS AFFIRMED THE ACTION OF ASSESSING OFFICER IN ASSESSING THE ABOVE SAID IT EMS UNDER THE HEAD INCOME FROM OTHER SOURCES. THE LD A.R FAIRLY CONCEDED THAT THE RE IS NO CHANGE IN THE FACTS PERTAINING TO THESE ISSUES. ACCORDINGLY, CONSISTEN T WITH THE VIEW TAKEN IN THE ORDER I.T.A. NOS.59 & 62/COCH/2009 3 DATED 27-08-2012 REFERRED SUPRA, WE MODIFY THE ORDE R PASSED BY THE LD. CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER IN RESPECT OF THE ABOVE SAID ITEMS. 6. THE REMAINING ISSUE PERTAINS TO THE RESTRICTION OF DEPRECIATION CLAIM MADE BY THE ASSESSEE AT THE RATE OF 10%. THE FACTS RELATING TO THIS ISSUE HAVE BEEN NARRATED BY THE LD. CIT(A) IN PARA 7.1 AND 7.2 OF HIS ORDER WHICH A RE EXTRACTED BELOW:- 7.1 THE NEXT GROUND OF APPEAL IS AGAINST THE DISAL LOWANCE OF DEPRECIATION OF RS. 20861530/-. THIS DISALLOWANCE IS MADE AGAINST CERTA IN FACTS WHICH HAVE BEEN STATED BY THE ASSESSING OFFICER IN PARA 12.1 TO 12. 6 OF THE ASSESSMENT ORDER (PAGES 8 TO 12). THE APPELLANT IS A STATE GOVERNME NT COMPANY ENGAGED IN THE BUSINESS OF CONSTRUCTION OF INFRASTRUCTURE FACILITI ES SUCH AS ROADS, BRIDGES AND OVER BRIDGES. THESE INFRASTRUCTURE FACILITIES WERE CONSTRUCTED BY THE APPELLANT ON THE LAND HANDED OVER TO THE APPELLANT COMPANY BY TH E GOVERNMENT OF KERALA. ACCORDINGLY, UP TO 31-3-2004, THE APPELLANT HAS COM PLETED CERTAIN PROJECTS. THESE PROJECTS ARE BUILD OPERATE TRANSFER PROJECTS (BOT PROJECTS), WHICH WERE CONSTRUCTED OUT OF OWN AND BORROWED FUND OF THE APPELLANT COMPANY. THE APPELLANT COMPANY WAS ALLOWED TO COLLECT TOLL AT THESE PROJECT SITE AFTER THE PROJECTS WERE OPENED FOR USE. UP TO A.Y. 04-05, THE APPELLANT TREATED THESE PROJECTS AS ITS OWN ASSETS ON WHICH IT CLAIMED DEPRECIATION . IT ALSO DISCLOSED INCOME WHICH ARE COLLECTED BY WAY OF TOLL. HOWEVER, DURING THE PERIOD RELEVANT TO THE A.Y. 05 -06 THE APPELLANT COMPANY MADE CERTAIN CHANGES IN ACCOUNTING OF THE ASSETS. THIS WAS DONE AFTER THE APPELLANT COMPANY HAS EXECUTED DIRECT TOLL CONCESSI ON AGREEMENT (DTCA) WITH KERALA ROADS FUND BOARD AND PUBLIC WORKS DEPARTMENT , GOVERNMENT OF KERALA. THE APPELLANT COMPANY TREATED THE WDV OF SOME ASSET S WHICH WERE PART OF DTCA AS INTANGIBLE ASSETS BEING THE RIGHT TO COLLECT USER FEE/TOLL FOR A PERIOD OF 15 YEARS. IN THE SCHEDULE OF ASSET ACCOUNT, IT TRANSFERRED THE WDV OF THE ASSETS TO INTANGIBLE ASS ETS CATEGORY ON WHICH THE APPELLANT CLAIMED DEPRECIATION @25% AS AG AINST THE DEPRECIATION OF 10% CALCULATED ON BLOCK OF SUCH ASS ETS IN EARLIER ASSESSMENT YEARS. THIS METHOD OF COMPUTING COST OF INTANGIBLE ASSE TS HAS BEEN STATED IN THE NOTES ON ACCOUNTING FORMING PAR T OF AUDIT REPORT WHERE THE AUDITORS HAVE REPORTED AS UNDER:- AS ON DATE, THE COMPANY HAS EXECUTED DIRECT TOLL C ONCESSION AGREEMENT (DTCA) WITH KERALA ROAD FUND BOARD AND PUBLIC WORK S DEPARTMENT, GOVERNMENT OF KERALA IN RESPECT OF ALL THE SEVEN C OMPLETED ROBS, A RIVER BRIDGE AND ROAD PROJECT INCLUDING THE ONES CAPITALIZED DU RING THE PREVIOUS YEAR. AS PER DTCA, THE COMPANY HAS ACQUIRED RIGHT TO COLLECT US ER FEE (TOLL) FOR A PERIOD OF 15 YEARS FROM THE DATE OF ITS EXECUTION. IN VIEW OF THE ABOVE, DURING THE YEAR IT HAS BEEN DECIDED TO TREAT THE EXPENDITURE INCURRED IN RESPECT OF SUCH ASSETS FOR WHICH DTCA HAS BEEN EXECUTED (INCLUDING THE ONES SIGNED AFTER THE BALANCE I.T.A. NOS.59 & 62/COCH/2009 4 SHEET DATE) AS AN INTANGIBLE ASSET AS REQUIRED U NDER AS 26 ISSUED BY ICAI. ACCORDINGLY DURING THE YEAR THE COMPANY HAS TRANSF ERRED VALUE OF NET BLOCK OF THE ROAD, RIVER BRIDGE AND ROAD OVER BRIDGE WHICH WERE CAPITALIZED AS FIXED ASSETS DURING THE PREVIOUS YEAR AND THOSE COMPLETED DURIN G THE CURRENT YEAR TO INTANGIBLE ASSETS. BESIDES THIS, THE COST OF LAND PERTAINING TO THESE ASSETS WHICH WERE CAPITALIZED AS FIXED ASSETS UNDER LAND COST A LSO HAS BEEN TRANSFERRED TO THE COST OF THE RESPECTIVE ASSETS AND ALSO TO CAPITAL WORK IN PROGRESS IN RESPECT OF ASSETS WHICH ARE NOT YET COMPLETED. IN TERMS OF AC COUNTING STANDARD 26, THE COSTS IN RELATION TO THESE INTANGIBLE ASSETS HAVE BEEN AMORTIZED OVER A PERIOD OF 15 YEARS BEING THE TENURE OF THE DTCA. IN THE CAS E OF DTCA EXECUTED DURING THE YEAR, AMORTIZATION HAS BEEN DONE ON PRO-RATA B ASIS FROM THE DATE OF THE AGREEMENT. 7.2 THE ASSESSING OFFICER IN COURSE OF ASSESSMENT PROCEEDINGS HAS DISCUSSED THE ISSUE AT LENGTH BY REFERRING TO VARIOUS TERMS AND CONDITIONS OF DTCA WHICH WAS EXECUTED BY THE APPELLANT COMPANY DURING THE YEAR. THE RELEVANT CONDITIONS HAVE BEEN QUOTED BY HIM IN PAGE 10 OF THE ASSESSME NT ORDER (PARA 12.4). ACCORDING TO HIM, THE APPELLANT IS NOT ENTITLED FO R DEPRECIATION ON INTANGIBLE ASSET OR THE RIGHT TO COLLECT TOLL ON THE FOLLOWIN G GROUNDS:- (A) THE APPELLANT DOES NOT OWN THE INTANGIBLE ASSE T OR THE RIGHT TO COLLECT TOLL BECAUSE IT IS AUTHORISED TO COLLECT TOLL FOR A PER IOD OF 15 YEARS AND SUCH RIGHT IS NOT TRANSFERABLE. (B) DEPRECIATION IS ALLOWABLE ON CERTAIN INTANGIB LE ASSETS LIKE KNOW HOW, PATENT, COPY RIGHT, LICENCES OR ANY OTHER BUSINESS COMMERC IAL RIGHTS OF SIMILAR NATURE BEING INTANGIBLE ASSETS OWNED BY THE ASSESSEE AN D USED FOR THE PURPOSE OF BUSINESS. IT IS A CASE OF MERE USER OF ASSET IRRE SPECTIVE OF OWNERSHIP OF SUCH ASSET. (C) SINCE THE APPELLANT HAS NOT OWNED THE INTANGIB LE ASSET OR RIGHT TO COLLECT TOLL, THE APPELLANT IS NOT ELIGIBLE FOR DEPRECIATION AS PER THE DECISION OF RAJASTHAN HIGH COURT IN THE CASE OF GOLCHA PROPERTIES (P) LTD. VS . CIT (1987) 166 ITR 259 AND PARTHAS TRUST VS. CIT (169 ITR 344). ACCORDINGLY, THE ASSESSING OFFICER DISALLO WED THE DEPRECIATION CLAIM OF RS.20861530/-. I.T.A. NOS.59 & 62/COCH/2009 5 7. IN THE APPELLATE PROCEEDINGS, THE ASSESSEE MADE DETAILED SUBMISSIONS BEFORE THE LD. CIT(A) AND THE SAME HAS BEEN DISCUSSED IN PARA 7.3 OF HIS ORDER AS UNDER:- 7.3 BEFORE ME IT IS SUBMITTED THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN DISALLOWING DEPRECIATION ON INTANGIBLE ASSETS FOR THE FOLLOWING REASONS:- (I) THE APPELLANT HAS UNDERTAKEN CONSTRUCTION OF C ERTAIN PROJECT ON BOT BASIS. AFTER CONSTRUCTION OF THE PROJECT IT COLLECTS TOLL . HOWEVER, DURING THE YEAR THE APPELLANT COMPANY EXECUTED DTCA WITH KERALA ROAD F UND BOARD AND PWD OF GOVERNMENT OF KERALA IN RESPECT OF FOUR PROJECTS A ND OBTAINED RIGHT TO COLLECT TOLL IN RESPECT OF THESE PROJECTS FOR A PERIOD OF 15 YE ARS. THIS RIGHT TO COLLECT TOLL HAS BEEN TREATED AS INTANGIBLE ASSETS IN THE ACCOUNTS. ACCORDINGLY, THE APPELLANT TRANSFERRED THE WDV OF THESE ASSETS FROM INTANGIB LE ASSET CATEGORY TO INTANGIBLE ASSET CATEGORY AND IT CLAIMED DEPRECI ATION ON INTANGIBLE ASSET @ 25%. (II) IN ACCORDANCE WITH AS 26 ISSUED BY ICAI WHICH IS MANDATORILY EFFECTIVE FROM 1-4-2004, THE RIGHT TO COLLECT TOLL UNDER BOT ARRA NGEMENT IS TO BE TREATED AND CLASSIFIED AS INTANGIBLE ASSET. ACCORDINGLY, TH E ASSETS WERE RE-CLASSIFIED AS INTANGIBLE ASSETS ON WHICH DEPRECIATION WAS CLAIME D. (III) THE ASSESSING OFFICER HAS DISALLOWED THE CLA IM OF DEPRECIATION ON THE GROUND THAT RIGHT TO COLLECT TOLL IS NOT A RIGHT OR INTAN GIBLE ASSET WHICH IS OWNED BY THE APPELLANT COMPANY. SINCE THESE ASSETS ARE NOT OWN ED, THE ASSESSING OFFICER HAS DISALLOWED THE DEPRECIATION BY RELYING ON CERTAIN DECISIONS. (IV) THE ASSESSING OFFICER IN TAKING THE ABOVE VIE W HAS NOT APPRECIATED THE FACTS OF THE CASE AND LAW FOR ALLOWANCE OF DEPRECIATION CORRECTLY. IN THE CASE OF THE APPELLANT, THERE IS NO DISPUTE THAT BUSINESS RIGHT AS PER DTCA IS USED FOR THE PURPOSE OF BUSINESS OR PROFESSION. THE ONLY DISPU TE IS REGARDING OWNERSHIP. THE ASSESSING OFFICER IS OF THE VIEW THAT THE APPE LLANT HAS NO ABSOLUTE OWNERSHIP OVER THE ASSETS CALLED INTANGIBLE ASSET AS IT CANN OT TRANSFER THIS RIGHT OR ASSET TO ANOTHER PERSON. HOWEVER, THIS VIEW OF THE ASSESSI NG OFFICER IS NOT CORRECT. (V) IT IS SUBMITTED THAT THE RIGHT TO TRANSFER AN ASSET IS NOT A CONDITION OF OWNERSHIP FOR THE PURPOSE OF SEC. 32(1) OF THE ACT . THE HONBLE HIGH COURT IN THE CASE OF GOVERSAN PUBLISHERS PVT. LTD. VS.CIT 240 ITR 191 (FB) HAVE INTERPRETED THE WORD OWNER AS ONE IN THE SEC. IN CONTEXT OF ENJOYMENT OF PROPERTY BY THE OWNER. WHILE MAKING THE ABOVE FIN DING, THE HONBLE HIGH COURT DID NOT AGREE WITH THE CONTENTION OF THE REVENUE T HAT AN ASSESSEE NOT HAVING RIGHT TO DISPOSE OFF THE PROPERTY IS NOT ENTITLED TO CLAIM DEPRECIATION UNDER SEC. 32(1) OF THE IT ACT. (VI) AS PER DTCA, THE APPELLANT HAS THE RIGHT TO C OLLECT TOLL WHICH MEANS IT DERIVES INCOME FROM EXPLORATION OF THIS RIGHT. AS THE APP ELLANT HAS RIGHT TO COLLECT THE I.T.A. NOS.59 & 62/COCH/2009 6 TOLL AND USE IT FOR THE PURPOSE OF BUSINESS, IT CA NNOT BE SAID THAT THE RIGHT IS EXCLUSIVELY OWNED BY THE APPELLANT BECAUSE SUCH IN TANGIBLE RIGHTS LIKE GRANT OF PATENT, KNOWHOW, LICENCES, TRADE MARKS OR OTHER CO MMERCIAL RIGHTS COME WITHOUT THE RIGHT TO TRANSFER. IN VIEW OF THESE FACTS, TH E APPELLANT IS ENTITLED FOR DEPRECIATION ON SUCH INTANGIBLE ASSETS. (VII) REGARDING THE DECISIONS IN THE CASE OF PARTH AS TRUST VS. CIT (169 ITR 344) AND GOLCHA PROPERTIES (P) LTD. VS CIT (1987) 166 I TR 259 RELIED UPON BY THE ASSESSING OFFICER, IT IS CONTENDED THAT THESE DECI SIONS ARE NOT APPLICABLE TO THE FACTS OF THE APPELLANTS CASE BECAUSE IN THESE DEC ISIONS, HONBLE COURT DID NOT CONSIDER THE ALLOWANCE OF DEPRECIATION ON INTANGIB LE ASSETS LIKE BUSINESS OR COMMERCIAL RIGHTS. FURTHER, IN THE CASE OF MYSORE MINERALS VS. CIT (239 ITR 775), HONBLE SUPREME COURT HAVE HELD THAT THE VER Y CONCEPT OF DEPRECIATION SUGGESTS THAT THE TAX BENEFIT ON ACCOUNT OF DEPREC IATION LEGITIMATELY BELONG TO ONE WHO HAS INVESTED IN A CAPITAL ASSET, UTILISING THE CAPITAL ASSET THEREBY LOSING GRADUALLY INVESTMENT CAUSED BY WEAR AND TEAR. COND ITIONS OF ABSOLUTE OWNERSHIP IS NOT REQUIRED FOR ALLOWING DEPRECIATION ON THESE ASSETS. (VIII) SINCE THE APPELLANT HOLDS LEGAL TITLE OVER THE BUSINESS RIGHT AS PER DTCA EXECUTED UNDER KERALA ROAD FUND ACT, THE APPELLANT IS ENTITLED FOR DEPRECIATION ON SUCH RIGHTS BECAUSE SUCH RIGHT IS USED FOR COLL ECTING TOLL OR IN OTHER WORDS, USED FOR THE PURPOSE OF BUSINESS. (IX) IT IS ALSO SUBMITTED THAT IF THE EXPENDITURE INCURRED BY THE APPELLANT WHICH IS SUBJECT MATTER OF DTCA IS NOT AN ASSET WHICH IS OW NED BY THE ASSESSEE EITHER WHOLLY OR PARTLY, THE EXPENDITURE SHOULD BE ALLOWE D AS A REVENUE EXPENDITURE U/S. 37 OF THE IT ACT AS THE SAME EXPENDITURE IS I NCURRED FOR THE PURPOSE OF BUSINESS OF THE APPELLANT. 8. THE DECISION TAKEN BY THE LD. CIT(A) IS DISCUSSE D IN PARA 7.4 TO 7.9 OF HIS ORDER AND THE SAME IS EXTRACTED BELOW:- 7.4 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE. THE ASSESSING OFFICER HAS DISCUSSED IN DETAIL THE TERMS OF DTCA WHICH ARE SU MMARISED AS UNDER:- (I) THE APPELLANT WILL CONSTRUCT THESE ASSETS OUT ITS OWN FUND AND AFTER 15 YEARS IT WILL TRANSFER THESE PROJECTS TO ROAD FUND BOARD OR GOVERNMENT OF KERALA FREE OF COST. (II) THE APPELLANT IS ENTITLED TO COLLECT TOLL FOR A PERIOD OF 15 YEARS. (III) ANOTHER CONDITION IS THAT THE APPELLANT CANN OT TRANSFER THE RIGHT TO COLLECT TOLL OR TRANSFER THE PHYSICAL ASSET TO ANY PERSON. I.T.A. NOS.59 & 62/COCH/2009 7 7.5 BEFORE GOING INTO THE ISSUE OF ALLOWANCE OF D EPRECIATION ON INTANGIBLE ASSET, IT IS NECESSARY TO EXAMINE HOW THE APPELLANT HAS ACQUIRED RIGHT TO COLLECT TOLL WHICH IS TREATED AS AN ACQUISITION OF INTANGIBLE A SSET. THE APPELLANT HAS IN EARLIER YEARS CONSTRUCTED THE PROJECTS LIKE ROADS, BRIDGES , OVER BRIDGES OUT OF ITS OWN FUND AND BORROWED FUNDS. 7.6 THE DETAILS OF SUCH PROJECTS COVERED UNDER D TCA DURING THE YEAR ARE STATED AS UNDER:- DESCRIPTION OF ASSET WDV AS ON 1-4-04 DT. OF EXECUTION OF DTCA DTE. OF TRANSFER TO INTANGIBLE ASSET. DEPRECIATION CLAIMED (1) (2) (3) (4) 1.ROAD OVERBRIDGE AT IRIMPANAM 12913937 17-12-2004 17-12-2004 1802800 2.OVERBRIDGE AT AN JUNCTION, TRIPUNITHURA (*)R 43701059 17-12-2004 17-12-2004 5462632 3.RIVER BRIDGE AT PULAMANTHOLE 23688704 8-12-2004 8-12-2004 3569754 4.AIRPORT SAPORT HIGHWAY PHASE-I 86121809 17-12-2004 17-12-2004 10126343 (*) ADDED DURING THE YEAR THESE PROJECTS WERE USED FOR THE BUSINESS OF THE AP PELLANT AS IT WAS ALLOWED TO COLLECT THE TOLL. THIS MEANS IN RESPECT OF THE ASSETS FOR WHICH DTCA IS EXECUTED, THE APPELLANT COMPANY HAS ALREADY THE RIGHT TO USE THE ASSETS FOR THE PURPOSE OF ITS BUSINESS. THE EXECUTION OF DTCA DOES NOT CHANGE THIS POSITION BECAUSE THERE IS NO SCOPE OF OBTAINING SUCH RIGHT WHICH WAS ALREADY THERE WITH THE APPELLANT CO MPANY. THIS IS APPARENT FROM THE FACT THAT UP TO A.Y. 2004-05, THE APPELLANT COMPANY TREATED THE ASSETS AS ITS OWN ASSETS, USED THESE ASSETS FO R ITS BUSINESS IN THE FORM OF COLLECTING TOLL AND CLAIMED DEPRECIATION ON THESE A SSETS. THE RIGHT WHICH WAS ALREADY THERE WITH THE APPELLANT COMPANY CANNOT BE AGAIN ACQUIRED BY EXECUTING THE DTCA. SUCH RIGHT MAY BE ACQUIRED IN RESPECT OF NEW PROJECTS AND NOT IN RESPECT OF THE PROJECTS WHICH A RE ALREADY COMPLETED AND USED FOR ITS BUSINESS. AS 26 PROVIDES FOR AMORTIZING THE INTANGIBLE ASSE T OVER A PERIOD OF TIME. IF THE APPELLANT ACQUIRES S OME BUSINESS RIGHT, THE SAME HAS TO BE CLASSIFIED AS INTANGIBLE ASSET AND VALUE OF SUCH ASSET HAS TO BE DETERMINED WITH REFERENCE TO COST OF ACQUISITION OF SUCH ASSETS AND PERIOD OF ITS USE. THEREFORE, THIS ACCOUNTING STANDARD WHICH IS M ANDATORY FOR ALL COMPANIES IS NOT APPLICABLE TO A CASE WHERE THE ASSESSEE HAS ALR EADY OWNED ANY TANGIBLE ASSET WHICH IS USED FOR ITS BUSINESS. I.T.A. NOS.59 & 62/COCH/2009 8 7.7 AS-26 DOES NOT PROVIDE FOR TRANSFERRING A BLOCK OF TANGIBLE ASSET TO INTANGIBLE ASSET CATEGORY. IN THE INSTANT CASE THE OWNERSHIP OF THE ASSETS I.E., IN THE FORM OF INFRASTRUCTURE FACILITIES WERE WITH THE ASSESSEE COMPANY AND THIS OWNERSHIP INCLUDES RIGHT TO USE THE ASSET FOR BUSINESS. THE RIGHT TO USE THESE ASSETS CANNOT BE SEPARATED FROM THE OWNERSHIP OF TH E ASSET. THEREFORE, THERE IS NOT ANY SEPARATE INTANGIBLE ASSET WHICH IS CLA IMED TO HAVE BEEN ACQUIRED BY THE ASSESSEE THROUGH DTCA. IT IS SO PARTICULARLY IN RESPECT OF ASSETS WHICH ARE CLAIMED TO BE OWNED AND USED FOR B USINESS BY THE ASSESSEE. THE FUTURE PROJECT MAY BE COVERED BY DTCA. 7.8 TO SUM UP, ON CONSIDERATION OF THE FACTS OF THE CASE, I AM OF THE VIEW THAT NO INTANGIBLE ASSET IN THE FORM OF RIGHT TO COL LECT TOLL IS ACQUIRED BY THE APPELLANT DURING THE YEAR. HENCE, THE APPELLANT I S NOT ENTITLED TO ANY DEPRECIATION ON THESE ASSETS. HOWEVER LIKE EARLIER YEARS THE APPELLANT COMPANY HAS USED THE ASSETS, I.E., FOUR INFRASTRUCTURAL FA CILITY, FOR THE PURPOSE OF ITS BUSINESS AS IT HAS COLLECTED TOLLS. THEREFORE, TH E APPELLANT IS ELIGIBLE FOR DEPRECIATION ON THESE ASSETS AT THE RATE OF 10% AS WAS CLAIMED AND ALLOWED IN EARLIER ASSESSMENT YEARS. THE ASSESSING OFFICER I S DIRECTED TO ALLOW DEPRECIATION @ 10% ON THE FOUR ASSETS AS PER IT RULES, 1962 7.9 I HAVE HELD THAT THERE IS NO CASE OF ACQUISIT ION OF ANY INTANGIBLE RIGHTS AND ASSETS USED FOR BUSINESS LIKE EARLIER YEARS ARE TA NGIBLE ASSET. IN VIEW OF THIS FINDING, I DO NOT CONSIDER IT NECESSARY TO GO INTO THE ISSUE OF OWNERSHIP OF INTANGIBLE ASSETS. 9. IN AS 26, INTANGIBLE ASSET IS DEFINED AS UNDE R:- AN INTANGIBLE ASSET IS AN IDENTIFIABLE NON-MONETAR Y ASSET, WITHOUT PHYSICAL SUBSTANCE , HELD FOR USE IN THE PRODUCTION OR SUPPLY OF GOODS OR SERVICES, FOR RENTAL TO OTHERS, OR FOR ADMINISTRATIVE PURPOSES. IN THE INSTANT CASE, AS OBSERVED BY THE LD CIT(A), THE ASSESSEE HAS ALREADY OWNED THE INFRASTRUCTURE FACILITIES WHICH WERE CONSTRUCTED BY IT BY USING ITS OWN FUNDS. THE GOVERNMENT HAS GIVEN THE RIGHT TO COLLECT THE TOLL TO THE ASSESSEE IN ORDER TO ENABLE IT TO RECOUP THE INVESTMENTS MADE BY IT IN THE CONSTRU CTION OF SUCH INFRASTRUCTURE FACILITIES. HENCE, AS OBSERVED BY LD CIT(A), IT CANNOT BE CONSI DERED AS ACQUISITION OF ANY INTANGIBLE RIGHT. WE ARE ALSO OF THE VIEW THAT A S 26 PROPOSES ANY CONVERSION OF THE TANGIBLE ASSET INTO INTANGIBLE ASSET. HENCE, ON A CONSPECTUS OF THE MATTER, WE ARE OF THE VIEW THAT THE LD CIT(A) HAS TAKEN A RATIONAL VI EW IN THIS MATTER AFTER DULY I.T.A. NOS.59 & 62/COCH/2009 9 CONSIDERING ALL THE FACTS PERTAINING THERETO. ACCO RDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THIS VIEW ON THIS ISSUE. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DIS MISSED AND THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY ON 16-11- 2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 16 TH NOVEMBER, 2012 GJ COPY TO: 1. M/S. ROADS AND BRIDGES DEVELOPMENT CORPORATION O F KERALA LTD., 2 ND FLOOR, PREETHY BUILDING, PALARIVATTOM, KOCHI-682 025. 2.THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE- 1(3), ERNAKULAM. 3.THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, KOCHI . 4.THE COMMISSIONER OF INCOME-TAX, KOCHI. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN