In a major relief to M/s Mumbai Nasik Expressway, the Mumbai Bench of Income Tax Appellate Tribunal (ITAT) allowed 25% depreciation regarding expenditure incurred for development of roads.
The assessee company, M/s Mumbai Nasik Expressway Ltd. is engaged in the business of improvement, operation and maintenance, rehabilitation and strengthening of existing two lane road and widening to four lane divided carriageway from Km. 539.5 to Km. 440 (Vadape-Gonde Section) of NH-3 on Build, Operate and Transfer (BOT) basis in the State of Maharashtra. The assessee company had entered into a concessionaire agreement with National Highway Authority of India (NHAI) on 14th October, 2005, which laid down the rights, responsibilities and obligations of the assessee. The assessee company had filed its return of income for A.Y. 2012-13, declaring a total loss of Rs.153,87,93,284/- and “book profit” under section 115JB of Rs.7,56,60,340/-. Original assessment was framed by the A.O under section 143(3) of the Act, and the loss returned by the assessee company was accepted as such.
The A.O issued a Show cause notice to the assessee company and called upon it to explain that as to why its claim for depreciation on roads at the rate of 25% amounting to Rs.182,79,39,359/- may not be disallowed under section 32(1)(ii) of the Act. In support of his aforesaid conviction, it was observed by the A.O that the CBDT vide Circular No. 9 of 2014, dated 23.4.2014, had clarified that in respect of BOT arrangements for development of roads/highways etc. the assessee undertaking the project of improvement, operation and maintenance etc. not being an owner of the property either wholly or partly, thus, would not be eligible for depreciation u/s 32(1)(ii) of the Act.
The assessee carried the matter in appeal before the CIT(A) wherein it was although the assesses is not the owner of the land but the right granted by the Gout, of India under the Concession Agreement (CA) has a license permitting the assesses to do certain acts and deeds which otherwise would have unlawful or not possible to do in the absence of CA. Thus, the right granted by the assesses under CA to operate the project/ project facility and collect toll charges is a lisence or akin to licence, hence, being an intangible asset eligible for depreciation under section 32(1)(ii) of the Act.
The appellant, Deputy Commissioner of Income Tax has raised the issue whether on the facts and circumstances of the case and in the law, the CIT(A) erred in deleting the disallowance made by the Assessing Officer without considering the fact that the matter is sub-judice and the department has not accepted the decision of the Hon’ble lTAT w.r.t order under section 263 of the Act passed by the CIT.
The coram of Accountant Member, S. Rifaur Rahman and Judicial Member Ravish Sood said that now when the order passed by the Pr. CIT-4, Mumbai u/s 263 of the Act in itself had been quashed by the Tribunal, therefore, as observed by him, and rightly so, the assessment order passed by the A.O in consequence thereto u/s 143(3) r.w.s 263, could not be sustained and was liable to be vacated. We, thus, in terms of our aforesaid observations finding no infirmity in the view taken by the CIT(A) uphold his order.
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