Commissioner Of Income Tax-Ichennai v. M/S.l & T Transportation Infrastructure Ltd.,Post Box

IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated: 29.06.2021 CORAM THE HON'BLE MR.JUSTICE M. DURAISWAMYANDTHE HON'BLE MRS.JUSTICE R. HEMALATHA Tax Case Appeal Nos.355 to 358 of 2011 Commissioner of Income Tax-IChennai. ...Appellant in all the Appeals Vs. M/s.L & T Transportation infrastructure Ltd.,Post Box No.979,Mount Poonamallee Road,Chennai - 600 089. ...Respondent in all the Appeals COMMON PRAYER: Tax Case Appeals filed under Section 260A of theIncome Tax Act, 1961 against the order of the Income TaxAppellate Tribunal, Chennai "A" Bench, dated 30.11.2010 passedin I.T.A.Nos.1692, 1693, 1694 and 1695/Mds/2010 for theassessment years 2002-2003, 2003-2004, 2004-2005 & 2006-2007. against the order passed by the Commissioner of Income Tax(Appeals) III, Chennai 34 dated 30/07/2010, 30/07/2010,07/07/2009 made in I.T.A.Nos.569, 570/2009-2010/A-III, 339/2008-2009-A-III for the Assessment year 2004-2005, 2003-2004 for the2006-2007, 2006-2007 against the order by the Income TaxOfficer, Company Ward II(1), Chennai 34 dated 18/12/2009,17/12/2009, 08/12/2008 made in PAN No. for theAssessment year 2004-2005, 2003-2004, 2002-2003, 2006-2007. These four appeals of the Revenue are directed against theorders dated 30.11.2010 passed by the Income Tax AppellateTribunal Bench-A, Chennai. 2. The matter in issue pertains to disallowance ofdepreciation of project assets being road and bridge during theassessment years 2002-2003, 2003-2004, 2004 - 2005 and 2006-2007 by the Assessing Officer on the ground that the assesseeis not the owner of the project assets and hence is noteligible for claiming depreciation of such assets. However,taking into account the fact that the entire cost of the projecthas to be owned by the assessee and such cost has to berecovered from the users of the project by way of toll feesprescribed by the Government, the entire cost was amortized overthe period of concession. Since the assessee has claimed hugedepreciation more than amortization value for the assessmentyears 2002-2003, 2003-2004 and 2004-2005, notices under Section148 were issued stating that the depreciation claimed was farand excess of the amortization to be allowed as per the decisiontaken in the assessment year 2006-2007. Thereafter, returns forthose three years were filed by the assesee and after hearingthe assessee, the assessments were finalised which werechallenged in appeals before the Commissioner of Income Tax(Appeals). The Appeals were allowed by the Commissioner ofIncome Tax (Appeals). Aggrieved over the same, the Revenue filedan appeal before the Income Tax Appellate Tribunal. The IncomeTax Appellate Tribunal, after considering the rival submissionsof both the parties dismissed the appeals. Now the presentappeals are filed on the following substantial question of law:- "Whether on the facts and in the circumstancesof the case, the Income Tax Appellate Tribunal wasright in holding that the assessee was entitledclaim depreciation at the rate of 10% applicable tobuildings on the roads and bridge developed andmaintained by the assessee under the terms of"Build, Operate and Transfer (BOT) agreement withthe Government even though as per the terms of theagreement the assessee could not be considered asthe owner of the assets?". 3. Heard Mr.Karthik Ranganathan, learned Standing SeniorCounsel for the appellant and Mr.V. Balaji, learned counsel forthe respondent. 4. Both the counsels contended that the Hon'ble SupremeCourt in the decision in Principal Commissioner of Income TaxVs. GVK Jaipur Expressway Ltd., reported in [2018] 100taxmann.com 96 (SC) has settled the present substantial question 3. Heard Mr.Karthik Ranganathan, learned Standing SeniorCounsel for the appellant and Mr.V. Balaji, learned counsel forthe respondent. 4. Both the counsels contended that the Hon'ble SupremeCourt in the decision in Principal Commissioner of Income TaxVs. GVK Jaipur Expressway Ltd., reported in [2018] 100taxmann.com 96 (SC) has settled the present substantial question of law in favour of the assessee. The relevant portions of thedecision of the Hon'ble Supreme Court is extracted hereunder."14. In our opinion, the term owned asoccurring in Section 32 (1) of the Income-tax Act,1961 must be assigned a wider meaning. Any one inpossession of property in his own title exercisingsuch dominion over the property as would enableother being excluded therefrom and having right touse and occupy the property and/or to enjoy itsusufruct in his own right would be the owner of thebuildings though a formal deed of title may not havebeen executed and registered as contemplated byTransfer of Property Act, Registration Act, etc.'Building owned by the assessee' the expression asoccurring in Section 32(1) of the Income-tax Actmeans the person who having acquired possessionover the building in his own right uses the same forthe purposes of the business or profession though alegal title has not been conveyed to himconsistently with the requirements of laws such asTransfer of Property Act, and Registration Act, etc.but nevertheless is entitled to hold the property tothe exclusion of all others. 15. Generally speaking depreciation is anallowance for the diminution in the value due towear and tear of capital asset employed by anassessee in his business. Black's Law Distionary(Fifty Edn.) defines depreciation to mean, interalia: A fall in value, reduction of worth. Thedeterioration or the loss or lessening in value,arising from age, use, and improvements, due tobetter methods. A decline in value of propertycaused by wear or obsolescence and is usuallymeasured by a set formula which reflects theseelements over a given period of useful life ofproperty....Consistentgradualprocessofestimating and allocating cost of capitalinvestments over estimated useful life of asset inorder to match cost against earnings............ 19. It is well-settled that there cannot be twoowners of the property simultaneously and int hesame sense of the term. The intention of theLegislature in enacting Section 32 of the Act wouldbe best fulfilled by allowing deduction in respectof depreciation to the person in whom for the time-being vests the dominion over the building and whois entitled to use it in his own right and is using 19. It is well-settled that there cannot be twoowners of the property simultaneously and int hesame sense of the term. The intention of theLegislature in enacting Section 32 of the Act wouldbe best fulfilled by allowing deduction in respectof depreciation to the person in whom for the time-being vests the dominion over the building and whois entitled to use it in his own right and is using the same for the purposes of his business orprofession. Assigning any different meaning wouldnot subserve the legislative intent. To take thecase at hand it is the appellant-assessee who havingpaid part of the price, has been placed inpossession of the houses as an owner and is usingthe buildings for the purpose of its business inits own right. Still the assessee has been deniedthe benefit of Section 32. On the other hand, theHousing Board would be denied the benefit of Section32 because inspite of its being the legal owner itwas not using the building for its business orprofession. We do not think such a benefit-to-nonesituation could have been intended by theLegislature. The finding of fact arrived at in thecase at hand is that though a document of title wasnot executed by Housing Board in favour of theassessee, but the houses were allotted to theassessee by the Housing Board, part payment receivedand possession delivered so as to confer dominionover the property on the assessee whereafter theassessee had in its own right allotted thequarters to the staff and they were being actuallyused by the staff of the assessee. It is commonknowledge, under the various scheme floated bybodies like housing boards, houses are constructedon large scale and allotted on part payment to thosewho have booked. Possession is also delivered tothe allottee so as to enable enjoyment of theproperty. Execution of document transferring titlenecessarily follows if the schedule of payment isobserved by allottee. If only the allottee maydefault the property may revert back to the Board.That is a matter only between the Housing Board andthe allottee. No third person intervenes. the partpayment made by allottee are with the intention ofacquiring title. the delivery of possession byHousing Board to allottee is also a step towardsconferring ownership. Documentation is delayed onlywith the idea of compelling the allottee to observethe schedule of payment." 5. After discussing the various decisions, the Hon'bleSupreme Court clearly held that the assessee is entitled toclaim depreciation of public roads, treating the same asbuilding. 6. In view of the decision of the Hon'ble Supreme Court,the substantial question of law is answered against theRevenue. 7. In the result, the appeals are dismissed. There shall beno order as to costs. s/d- Assistant Registrar(CS-IX) True Copy Sub-Assistant Registrar gv To1.The Commissioner of Income Tax-IChennai. 2. The Commissioner of Income Tax (Appeals)III Chennai 34. 3. The Income Tax Officer Company Ward II(1) Chennai 34. +1 CC to Mr.N.V. Balaji, Advocate sr 30168. Tax Case Appeal Nos.355 to 358 of 2011 KV(CO)SP(20/07/2021)