Infrastructure Companies laying Roads On BOT Basis Are Not Owners, Can't Claim Depreciation On Toll Roads: Mumbai ITAT
Emphasizing that ownership is a sine qua non for availing depreciation, and roads/ bridges are public properties, the Mumbai ITAT held that an infrastructural development company which has laid down roads cannot claim depreciation over same. The Division Bench comprising Amarjit Singh (Accountant Member) and Sandeep Singh Karhail (Judicial Member) denied depreciation claim on toll...
Emphasizing that ownership is a sine qua non for availing depreciation, and roads/ bridges are public properties, the Mumbai ITAT held that an infrastructural development company which has laid down roads cannot claim depreciation over same.
The Division Bench comprising Amarjit Singh (Accountant Member) and Sandeep Singh Karhail (Judicial Member) denied depreciation claim on toll road to a company engaged in the business of infrastructure development (assessee), who, in execution of agreement with NHAI had constructed a road on BOT (build, operate and transfer) basis on land owned by the Government.
Facts of the case:
The appellant/ assessee company, engaged in the business of infrastructure development, executed a concession agreement with NHAI to construct a four-lane road on NH-33 in the State of Jharkhand, based on build, operate and transfer (BOT) basis for a period of 18 years on the land owned by the Government. Upon completion of construction, the assessee capitalised the total expenditure and claimed depreciation treating roads/ bridges as 'plant and machinery'.
The AO however, disallowed the depreciation claim on the premise that the roads/ bridges are public properties and assessee cannot be considered as 'owner' to claim depreciation u/s 32.
Observation of the Tribunal
The Bench referred to the plea of the assessee that while interpreting the term “any other business or commercial rights of similar nature” in Explanation 3(b) to section 32(1)(ii) of the Act, the principle of ejusdem generis be applied instead of the principle of noscitur a sociis.
However, the claim of depreciation by treating the road as a tangible asset, has been covered against the assessee by the Jurisdictional High Court, added the Bench.
The Bench referred to the decision of Madras High Court in case of L&T Infrastructure Development Projects Limited, which had discussed the issue whether depreciation is allowable on the right to collect toll on the roads developed by the assessee on BOT basis by considering the same as an intangible asset.
Further, the Bench found that the benefit of amortisation for the period of the Concession Agreement granted by the AO and upheld by the CIT(A) is in consonance with CBDT Circular No. 9 of 2014, dated 23/04/2014.
Thus, the ITAT concluded that the CIT(A) had correctly denied the claim of depreciation on the right to collect toll on the roads developed by it on a BOT basis, and dismissed Assessee's appeal.
Case Distinguished:
CIT v/s Smifs Securities Ltd - [2012] 348 ITR 302(SC)
Kenel Oil and Exports Industries Ltd v/s JCIT - [2009] 121 ITD 596 (Ahd-ITAT) (TM)
Bangalore International Airport Ltd. v/s DCIT - [2023] 457 ITR 229 (Karn.)
Counsel for Appellant/ Assessee: Bhupal Rapelli and Niranjan Govindekar
Counsel for Respondent/ Revenue: Savya Sachi Kumar and Biswanath Das
Case Title: Hazaribagh Ranchi Expressway Ltd vs ACIT
Case Number: ITA no.3787/Mum/2023