Income Tax Appellate Tribunal - Pune
Ashoka Infrastructure Ltd., Pune vs Department Of Income Tax on 16 July, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCHES "B", PUNE
BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER
AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER
ITA No. 989/PN/2010
(Assessment Year : 2007-08)
M/s Ashoka Infrastructure Ltd.
Ashoka Arc, Plot No. E 28/29,
Ground Floor, Opp. Darpan Hotel,
Market Yard, Gul Tekadi,
Pune - 411 037
PAN : AAECA5421G .... Appellant
Vs.
Income Tax Officer
Ward 8 (1), Akurdi, Pune .... Respondent
ITA No. 1105/PN/2010
(Assessment Year: 2007-08)
Income Tax Officer
Ward 8 (1), Akurdi, Pune .... Appellant
Vs.
Ashoka Infrastructure Ltd.
Ashoka Arch, Plot No. E 28/29
Ground Floor, Opp. Darpan Hotel,
Market Yard, Gul Tekadi,
Pune - 411 037
PAN : AAECA5421G .... Respondent
Assessee by : Mr. Sunil Pathak
Department by : Mr. Adarsh Kumar Modi
Date of hearing : 16-07-2013
Date of pronouncement : 18-07-2013
ORDER
PER G. S. PANNU, AM
The captioned cross-appeals, each by the assessee and the Revenue, pertaining to the assessment year 2007-08, were heard together and are being disposed-off by way of a consolidated order for the sake of convenience and brevity. The captioned appeals are directed against the order of the Commissioner of Income Tax (Appeals) - V, Pune dated 21.05.2010 which, in 2 ITA No. 989/PN/2010 ITA No. 1105/PN/2010 A.Y. 2007-08 turn, has arisen from an assessment order dated 29.12.2009 passed by the Assessing Officer, under Section 143(3) of the Income Tax Act, 1961 (in short "the Act"), for the assessment year 2007-08.
2. We shall take-up the appeal of the assessee in ITA No.989/PN/2010 wherein the substantive dispute raised is by way of Ground of Appeal No.1.1, which reads as under :-
"1.1 The learned CIT(A) erred in holding that the intangible asset in the form of 'license/right to collect toll' is not eligible to depreciation under the Income Tax Act as an intangible asset @ 25%. He erred in not considering the submissions made before him in their proper perspective. Therefore, it is prayed to hold that the 'license/right to collect toll' is an intangible asset under income tax, eligible for depreciation at 25%."
3. In brief, the facts relevant to the aforesaid Ground as follows. The assessee is a company incorporated under the provisions of the Companies Act, 1956 and is engaged in the business of construction, operation and maintenance of infrastructure facility on BOT (Build, Operate and Transfer) basis. In terms of the same, assessee was engaged in development, operation and maintenance of infrastructure project entitled "Four-laning and Strengthening of Pune-Ahmednagar Road" on BOT basis. For the assessment year under consideration, assessee filed a return of income declaring a loss of Rs.5,49,45,686/- which inter-alia included a claim of depreciation of Rs.30,04,85,739/- on "License to collect Toll" @ 25%. The said claim of the assessee is the subject matter of dispute before us.
4. The assessee was awarded the infrastructure project of development, operation and maintenance of the Pune-Ahmednagar Road by the Government of Maharashtra through its Public Works Department (PWD) on BOT basis. In terms of the tender conditions agreement entered into with the PWD, assessee was required to develop the said infrastructure facility by arranging funds on its own. The assessee was also under an obligation to maintain the said infrastructure facility (i.e. Road) at its own cost for a specified 3 ITA No. 989/PN/2010 ITA No. 1105/PN/2010 A.Y. 2007-08 period. At the end of the specified period, assessee was under an obligation to transfer the infrastructure facility to the Government of Maharashtra free of charge. In accordance with agreement, assessee incurred expenditure to the tune of Rs.152,50,36,995/- till the end of the preceding year and Rs.7,40,01,073/- during the year under consideration for the development of the said infrastructure facility. In consideration and in terms of the agreement with the Government of Maharashtra, assessee was bestowed with a right to collect toll from the motorists using the road facility during the specified period w.e.f. 06.07.2005. The assessee capitalized the construction and development cost of the infrastructure facility under the head 'License to collect Toll' and claimed the same to be an intangible asset within the meaning of Section 32(1)(ii) of the Act and thus claimed depreciation @ 25%, amounting to Rs.30,04,85,739/-. In the assessment proceedings, in terms of the directions of the Additional Commissioner of Income Tax under Section 144A of the Act, the Assessing Officer held that assessee was not entitled for depreciation on the 'License to collect Toll'. Accordingly, the depreciation claimed at Rs.30,04,85,739/- was denied. The aforesaid action of the Assessing Officer was carried in appeal before the CIT(A). Before the CIT(A), assessee justified its claim for depreciation in terms of Section 32(1)(ii) of the Act on the basis of the following decisions of the Tribunal :-
(i) Reliance Ports and Terminals Ltd. in ITA No. 1743 to 1745/Mum/07 dated 26.11.2007 of the Mumbai Bench; and,
(ii) Ashoka Info Pvt. Ltd. in ITA No. 44/PN/07 dated 31.12.2008 of the Pune Bench.
5. The CIT(A) however did not accept the plea of the assessee and held that the 'License to collect Toll' was not an intangible asset falling within the purview of Section 32(1)(ii) of the Act. In coming to such conclusion, the CIT(A) also referred to the judgement of the Hon'ble Jurisdictional High Court in CIT vs. Techno Shares and Stocks Ltd. (2009) 225 CTR 337 (Bom.). 4 ITA No. 989/PN/2010 ITA No. 1105/PN/2010
A.Y. 2007-08 Against the aforesaid decision of the CIT(A), assessee is in further appeal before us by way of the aforesaid Ground.
6. At the time of hearing, it was a common point between the parties that an identical issue has been considered by the Pune Bench of the Tribunal in the case of Ashoka Infraways Pvt. Ltd. vs. ACIT vide ITA Nos. 185 & 186/PN/2012 dated 29.04.2013. As per the Tribunal following the precedents by way of various decisions of different Benches of the Tribunal mentioned therein, the claim of the assessee for treating the 'License to collect Toll' as an intangible asset eligible for the claim of depreciation @ 25% as per Section 32(1)(ii) of the Act was justified. The following discussion in the order of the Tribunal dated 29.04.2013 (supra) is relevant :-
"7. Before us, it was a common point between the parties that the impugned issue has been adjudicated in favour of the assessee in the following decisions of the Tribunal:-
i) Ashoka Buildcon Ltd. in ITA.No.1302/PN/09 dated 20.03.2012.
ii) M/s.Kalyan Toll Infrastructure Ltd. in ITA.Nos.201 & 247/Ind/2008 dated 14.12.2010.
iii) Dimension Construction Pvt. Ltd. in ITA.No.222, 223, 233 & 857/PN/2009 dated 18.03.2011.
iv) Ashoka Info (P) Ltd. (supra)
v) Reliance Ports and Terminals Ltd. (supra).
8. The Ld. CIT(DR) appearing for the Revenue, has submitted that the 'intangible assets' eligible for depreciation in section 32(1)(ii) of the Act, are only those which are owned by the assessee and have been acquired after spending money. In the case of the assessee, by way of an agreement, assessee was awarded a work to construct a road by using own funds and the expenditure incurred was allowed to be reimbursed by permitting the assessee a concession to collect toll/fees from the motorists using the road.
Therefore, it could not be said that such a right was within the purview of section 32(1)(ii) of the Act. However, the Ld. CIT(DR) has not contested the factual matrix that identical issue has been considered by our coordinate Benches in the case of Ashoka Buildcon Ltd. (supra), Kalyan Toll Infrastructure Ltd. (supra), Dimension Construction Pvt. Ltd. (supra) and Ashoka Info (P) Ltd. (supra).
9. On the other hand, the Ld. Representative for the respondent assessee pointed out that the aforesaid argument set up by the Revenue has also been considered in the aforesaid precedents before concluding that the impugned 'Right to collect Toll' was an 'intangible asset' eligible for claim of depreciation @ 25% as per sec. 32(1)(ii) of the Act.
10. We have carefully considered the rival submissions. Factually speaking, there is no dispute to the fact that the costs capitalised by the 5 ITA No. 989/PN/2010 ITA No. 1105/PN/2010 A.Y. 2007-08 assessee under the head 'License to collect Toll' have been incurred for development and construction of the infrastructure facility, i.e., Dewas By-pass Road. It is also not in dispute that the assessee was to build, operate and transfer the said infrastructure facility in terms of an agreement with the Government of Madhya Pradesh. The expenditure on development, construction and maintenance of the infrastructure facility for a specified period was to be incurred by the assessee out of its own funds. Moreover, after the end of the specified period, assessee was to transfer the said infrastructure facility to the Government of Madhya Pradesh free of charge. In consideration of developing, constructing, maintaining the facility for a specified period and thereafter transferring it to the Government of Madhya Pradesh free of charge, assessee was granted a 'Right to collect Toll' from the motorists using the said infrastructure facility during the specified period. The said 'Right to collect the Toll' is emerging as a result of the costs incurred by the assessee on development, construction and maintenance of the infrastructure facility. Such a right has been adjudicated by the Tribunal in the aforesaid precedents to be in the nature of 'intangible asset' falling within the purview of section 32(1)(ii) of the Act and has been found eligible for claim of depreciation. No decision to the contrary has been cited by the Ld. DR before us and, therefore, we find no reasons to depart from the accepted position based on the aforesaid decisions.
11. So however, the plea of the Ld. DR before us is to the effect that the impugned right is not of the nature referred to in section 32(1)(ii) of the Act for the reason that the agreement with the Government of Madhya Pradesh only allowed the assessee to recover the costs incurred for constructing the road facility whereas section 32(1)(ii) of the Act required that the assets mentioned therein should be acquired by the assessee after spending money. The said argument in our view is factually and legally misplaced. Factually speaking, it is wrong to say that impugned right acquired by the assessee was without incurrence of any cost. In fact, it is quite evident that assessee got the right to collect toll for the specified period only after incurring expenditure through its own resources on development, construction and maintenance of the infrastructure facility. Secondly, section 32(1)(ii) permits allowance of depreciation on assets specified therein being 'intangible assets' which are wholly or partly owned by the assessee and used for the purposes of its business. The aforesaid condition is fully satisfied by the assessee and therefore considered in the aforesaid perspective we find no justification for the plea raised by the Revenue before us.
12. In the result, we affirm the order of the CIT(A) in holding that the assessee was eligible for depreciation on the 'Right to collect Toll', being an 'intangible asset' falling within the purview of section 32(1)(ii) of the Act following the aforesaid precedents."
7. In terms of the aforesaid precedent, the claim of the assessee in the present case for depreciation on 'License to collect Toll', being an 'intangible asset' falling with the scope of Section 32(1)(ii) of the Act is liable to be upheld. We hold so.
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A.Y. 2007-08
8. In so far as the reliance placed by the CIT(A) on the judgement of the Hon'ble Bombay High Court in the case of Techno Shares And Stocks Ltd. (supra) is concerned it may only be noted that the said judgement has since been altered by the Hon'ble Supreme Court vide its order reported at (2010) 327 ITR 323 (SC). Accordingly, in view of the aforesaid discussion, we hereby allow the Ground of Appeal No. 1.1 raised by the assessee.
9. Ground of Appeal Nos. 1.2 and 1.3 raised by the assessee are alternative pleas, which read as under :-
"1.2 The learned CIT(A) erred in rejecting appellant's claim to first credit the entire toll collection against the cost of construction of the road and not to treat the same as income till the entire cost of construction of the infrastructure facility is recouped. He failed to appreciate the provisions of section 43(1) of the Income Tax Act and the decision of the Hon'ble Supreme Court in the case of Hoshiarpur Electric Supply Co. vs. CIT (41 ITR 608). Therefore, it is prayed that, the net toll collection, remaining after expenses on collection, be allowed to be deducted first from the cost of construction of the infrastructure facility till its entire recoupment.
1.3 The learned CIT(A) erred in not considering the asset created on incurring of expenditure on construction of the infrastructure facility as 'Plant', eligible for depreciation @ 15%. He failed to appreciate the submissions made in this connection and the fact that the infrastructure facility constructed by the appellant constituted an apparatus used for the purposes of business. Therefore, it is prayed that the asset created on incurring expenditure of construction on infrastructure facility be held as 'Plant'."
10. At the time of hearing, the learned counsel fairly submitted that once the assessee succeeds on its substantive Ground of Appeal No. 1.1, the aforesaid alternative Ground becomes infructuous. Accordingly, the same is dismissed as infructuous.
11. By way of Ground of Appeal No. 2, assessee has claimed deduction under Section 80-IA(4) of the Act with respect to the profits from the infrastructure facility. The said claim was not made in the return of income as the assessee had declared a loss in the return on account of depreciation claimed on 'License to collect Toll' in terms of Section 32(1)(ii) of the Act. Since the claim of depreciation was disallowed in assessment proceedings 7 ITA No. 989/PN/2010 ITA No. 1105/PN/2010 A.Y. 2007-08 resulting in a positive income, assessee claimed deduction under Section 80- IA(4) of the Act with respect to the profits of the infrastructure facility before the CIT(A). The CIT(A) did not allow the claim of the assessee and the assessee is in further appeal before us.
12. On this point also the learned counsel for the assessee pointed out that the said issue would be rendered infructuous in case assessee succeeds on Ground of Appeal No. 1.1. Accordingly, the aforesaid Ground is also dismissed.
13. In this manner, the appeal of the assessee is partly allowed.
14. Now, we may take-up the cross-appeal of the Revenue wherein the following two Grounds have been raised by the Revenue :-
"1. Whether on the facts and circumstances of the case, and in law, the Ld. CIT(A) was justified in allowing the claim of unabsorbed depreciation of Rs.28,88,64,777/- pertaining to A.Y. 2006-07 when the assessee had not claimed the same in its return of income filed under Section 139 for A.Y. 2007-08 and thereby not applying the Law laid down by the Hon'ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT (2006) 284 ITR 323 (SC)?
2. Whether on the facts and circumstances of the case, and in law, the Ld. CIT(A) was justified in allowing the assessee the benefit of depreciation @ 10% eligible for buildings and mistakenly applying the ratio of the decision of the order of the ITAT C Bench of Chennai in the case of Tamil Nadu Road Development Co. Ltd. vs. ACIT 123 TTJ 702, when the assessee had not constructed the said road as a part of expansion of and to give access to buildings but had constructed the said road as a part of contract to construct highways?"
15. In so far as the first Ground is concerned it relates to the allowance of unabsorbed depreciation remaining after assessing the income for the earlier assessment year 2006-07. Before the CIT(A), assessee submitted that while determining the total income for the year under consideration, the Assessing Officer did not allow any allowance for unabsorbed depreciation brought forward from earlier years. As per the material on record, the CIT(A) found that unabsorbed depreciation to the tune of Rs.28,88,777/- for the assessment 8 ITA No. 989/PN/2010 ITA No. 1105/PN/2010 A.Y. 2007-08 year 2006-07 was available for adjustment against current year's income. He, therefore, directed the Assessing Officer to allow the benefit of the same to the assessee while determining the total income for the year under consideration. Against the aforesaid, Revenue is in appeal before us.
16. Apart from observing that there is no material to negate the factual appreciation made by the CIT(A), the learned CIT(DR) submitted that the aforesaid issue would be rendered infructuous once the claim of the assessee for depreciation @ 25% on the 'License to collect Toll' is allowed as the same would result into a negative total income for the year under consideration. Therefore, considering the aforesaid twin reasons the Ground of Appeal raised by the Revenue is dismissed.
17. The second Ground raised by the Revenue is with regard to the action of the CIT(A) in allowing depreciation @ 10% on the infrastructure facility considering the same as 'building'. Once the assessee was found not eligible for the claim for depreciation @ 25% on 'License to collect Toll' in terms of Section 32(1)(ii) of the Act, the CIT(A) proceeded to allow the depreciation on the road facility @ 10%, treating it to be in the nature of 'building'. Against such allowance, Revenue is in appeal before us.
18. It was a common point between the parties that the aforesaid issue is rendered infructuous as assessee has succeeded in its substantive claim of depreciation on 'License to collect Toll' @ 25% in terms of Section 32(1)(ii) of the Act. As a result, the aforesaid issue is dismissed as infructuous, in view of our decision on Ground of Appeal No. 1.1 in cross-appeal of the assessee.
19. Thus, the appeal of the Revenue is dismissed.
9 ITA No. 989/PN/2010ITA No. 1105/PN/2010
A.Y. 2007-08
20. Resultantly, whereas the appeal of the assessee is partly allowed that of the Revenue is dismissed.
Order pronounced in the open Court on 18 th July, 2013.
Sd/- Sd/-
(R.S. PADVEKAR) (G.S. PANNU)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune, Dated: 18 th July, 2013
Sujeet
Copy of the order is forwarded to: -
1) The Assessee;
2) The Department;
3) The CIT(A)-V, Pune;
4) The CIT-V, Pune;
5) The DR, "B" Bench, I.T.A.T., Pune;
6) Guard File.
By Order
//True Copy//
Sr. Private Secretary
I.T.A.T., Pune.