Https://Hcservices.ecourts.gov.in/Hcservices v. M/S.tamilnaduindustrial Development Corporation Limited [T.c.a

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 19.1.2021CORAM Tax Case Appeal Nos.220 to 225 of 2018 The Commissioner of Income Tax,Corporate Circle 3, Chennai-34...Appellant in all CasesVsM/s.Tamilnadu Road DevelopmentCompany Ltd., Chennai-28. ...Respondent in all Cases APPEALS under Section 260A of the Income Tax Act, 1961against the common order dated 24.5.2017 passed by the IncomeTax Appellate Tribunal, 'B' Bench, Chennai made respectively inI.T.A.Nos. 2874 to 2879/Mds/2016 respectively for the assessmentyears 2007-08 to 2010-11, 2012-13 and 2013-14 against the commonorder of the Commissioner of Income Tax (Appeals)-II,Chennaidated 22.06.2016 in ITA.Nos.396 & 398/14-15/C IT (A-II),ITA.813/13-14/CIT(A)II,ITA.NO.164/15-16/CII(A)II,ITA.NO.52/16-17, CTI(A)-II relevant to the Assessment Years2007-2008 -2010-11 and 2012-2013 and 2013-14 against the order ofAssistant Commissioner of Income Tax Corporate Circle-3(I),Chennai 34 dated 18.11.2013,28/10/2011, 18.02.2013, 30.01.2015,30.01.2015,27.03.2015,30.03.2016. These appeals have been filed by the Revenue under Section260A of the Income Tax Act, 1961 ('the Act' for brevity)challenging the common order dated 24.5.2017 made respectivelyin I.T.A.Nos. 2874 to 2879/Mds/2016 on the file of the IncomeTax Appellate Tribunal, Chennai, 'B' Bench ('the Tribunal' forbrevity) respectively for the assessment years 2007-08 to 2010-11, 2012-13 and 2013-14. https://hcservices.ecourts.gov.in/hcservices/ 2. The appeals were admitted on 12.6.2018 on the followingsubstantial questions of law:“1. Whether the Tribunal was right inholding that roads developed and maintainedby the assessee by agreement with theGovernment on the State/National Highwaywereeligiblefordepreciationas'building'? And 2. Whether the Tribunalis correct in holding that the provisions ofSection 14A read with Rule 8D will have noapplicability if there is no exempt incomereceived ?” 3. After hearing the submissions of the learned counsel oneither side, we frame the following two other substantialquestions of law also for consideration :“1. Whether the Tribunal is legallyright in holding that the assessee iseligible for depreciation under Section 32(1)(ii) on lease hold rights obtained by theassessee for 99 years through leaseagreement ? And2. Whether the claim of depreciation onlease hold rights on land held by theassessee is allowable under Section 32(1) (ii) under the head 'intangible asset'?” 4. Accordingly, the substantial questions of law framed forconsideration are renumbered as follows :“1. Whether the Tribunal was right inholding that roads developed and maintainedby the assessee by agreement with theGovernment on the State/National Highwaywere eligible for depreciation as 'building'?2. Whether the Tribunal is legallyright in holding that the assessee iseligible for depreciation under Section 32(1)(ii) on lease hold rights obtained by theassessee for 99 years through leaseagreement ?3. Whether the claim of depreciation onlease hold rights on land held by theassessee is allowable under Section 32(1)(ii) under the head 'intangible asset'? And4. Whether the Tribunal is correct inholding that the provisions of Section 14Aread with Rule 8D will have no applicabilityif there is no exempt income received?” 5. We have elaborately heard Ms.V.Pushpa, learned JuniorStanding Counsel appearing for the appellant/Revenue and Mr.A.S.Sriraman, learned counsel appearing for the respondent/assessee. 5. We have elaborately heard Ms.V.Pushpa, learned JuniorStanding Counsel appearing for the appellant/Revenue and Mr.A.S.Sriraman, learned counsel appearing for the respondent/assessee. 7. First, we take up for consideration question No.4. 8. Mrs.V.Pushpa, learned Junior Standing Counsel appearingfor the appellant/Revenue has contended that the Tribunalcommitted an error in holding that the provisions of Section 14Aof the Act read with 8D of the Income Tax Rules (for short, theRules) would have no applicability if there was no exempt incomereceived though the disallowance was linked to expenditureincurred on investment fetching exempt income. The argument ofthe learned Junior Standing Counsel is that the Tribunal oughtto have appreciated that the disallowance under Section 14A ofthe Act did not depend upon the exempted income as Section 14Aof the Act and Rule 8D of the Rules never link the disallownacewith the exempted income earned. 9. She has referred to the concession agreement dated22.12.2000 entered into between the State of Tamil Nadu and therespondent/assessee in order to focus before this Court as tothe nature of work undertaken by the assessee. Therefore, it issubmitted that the issue has not been correctly decided by theTribunal. In fact, in the case of CIT Vs. M/s.TamilnaduIndustrial Development Corporation Limited [T.C.A.No.509 and 510of 2018], the issue pertaining to disallowance under Section 14Aof the Act was considered by a Division Bench of this Court, towhich, one of us (TSSJ) was a party, and by a common judgmentdated 07.7.2020, the appeals filed by the Revenue were allowed. 10. Rather, we had an occasion to consider a similar issuein the assessee's own case in TCA. No.485 of 2020 dated05.1.2021, the relevant portions of which read thus :“8. We need not labour much to decidethe substantial question of law framed, asidentical issue was considered in the caseof Commissioner of Income Tax, Chennai vs https://hcservices.ecourts.gov.in/hcservices/ M/s.Celebrity Fashion Ltd. in T.C.A.No.26 of2018 dated 21.09.2020. In the said appeal,which was filed by the Revenue, identicalquestion of law was framed for considerationand the same was answered against theRevenue and in favour of the assessee on thefollowing lines: "24. We had an occasion to consider asimilar question in the case of CIT,Corporate Circle-3, Chennai Vs. VisualGraphics Computing Services India Pvt. Ltd.[TCA.No. 414 of 2018 dated 19.8.2020]. Inthe said appeal, question of law No.5, whichwas framed for consideration, was as towhether the Tribunal was right in holdingthat the provisions of Section 14A of theAct read with Rule 8D of the said Rules willhave no applicability if there is no exemptincome earned or received during theprevious year though the disallowance islinked to expenditure incurred on investmentfetching exempt income. The said case wasdecided in favour of the assessee andagainst the Revenue and in doing so, we havefollowed the decision of the Hon'bleDivision Bench of this Court in the case ofCIT Vs. Chettinad Logistics Pvt. Ltd.[reported in (2017) 80 Taxmann.com 221].This decision would come to the aid andassistance of the assessee.........28. In fact, an identical argument wasraised for consideration before the Hon'bleDivision Bench of this Court in the case ofChettinad Logistics Pvt. Ltd., and such acontention was rejected by rendering thefollowing findings:“13. Mr.Senthil Kumar, seeks todistinguish the judgment in Redington(India) Ltd. case (supra) based on the factthat Rule 8D had not kicked-in by AY 2007-08, which was the AY being considered in thesaid case.14. According to us, this was not theargument, put forth, before the DivisionBench. As a matter of fact, the Revenuerelied heavily on Rule 8D. 14.1 Mr.Ravikumar, who appeared for theRevenue, in that matter and who is presentin this Court, informs us that he had in fact argued that the Rule was clarifactoryin nature and would apply retrospectively,and that, the Division Bench, therefore,discussed the impact of Rule 8D of the Rules.15. However, it is, our view, asindicated above, independent of thereasoning given in Redington (India) Ltd.case (supra) that Rule 8D cannot be read ina manner, which takes it beyond the scopeand content of the main provision, which is,Section 14 A of the Act. 15.1 Therefore, as adverted to above,Rule 8D, cannot come to the rescue of theRevenue. 15.2 In any event, the Tribunal, via,the impugned judgment has remitted thematter to the Assessing Officer. 15.3 Therefore, for the foregoingreasons, we are of the view, that nointerference is called for qua the impugnedjudgment.”As against the decision of this Courtin the case of Chettinad Logistics Pvt.Ltd., the Revenue preferred appeals beforethe Hon'ble Supreme Court and the specialleave petitions were dismissed on the groundof delay as well as merits in the decisionreported in (2018) 95 Taxmann.com 250." 9. Thus, by applying the above decision, this Tax Case Appeal is allowed and the substantial question of law isansweredinfavouroftheappellant/assessee.” 11. We do not find any justifiable reason to take adifferent view and the legal position in the assessee's owncase wholly covers the said question. Further, the decision inthe case of M/s.Tamilnadu Industrial Development CorporationLimited does not render assistance to the case of the Revenue.Accordingly, substantial question of law No.4 is answeredagainst the Revenue. 12. Next, we take up for consideration the issue pertainingto the claim for depreciation on the roads, which have beendeveloped and maintained by the assessee pursuant to theagreement entered into with the State Government. 13. The assessee is a joint venture company formed by theTamil Nadu Industrial Development Corporation Limited and theTidel Park for creation of infrastructural facility such as roadsystems, highways, bridge system by bringing private resourcesin the development of the said projects. The assessee wasgranted right to implement the East Coast Road project. The https://hcservices.ecourts.gov.in/hcservices/ assessee, while filing the return of income for the relevantassessment years, claimed depreciation at the rate of 15% onimprovement to the IT Carridor (Road) considering the roads as'plant and machinery'. 14. The Assessing Officer did not accept the said claim,but allowed depreciation at the rate of 10% considering theroads to be a 'building' in terms of the definition contained inthe Notes to New Appendix I in the Income Tax Rules, 1962. 15. Aggrieved by the same, the assessee preferred appealsbefore the Commissioner of Income Tax (Appeals)-11, Chennai-34[for brevity, the CIT(A)] by contending that the depreciationshould be granted at the rate of 15% by treating road as 'plantand machinery' for the assessment years 2007-08 to 2010-11. Forthe assessment year 2013-14, the assessee claimed depreciationat 25% by treating investment in road as an intangible property.The CIT(A) partly allowed the appeals and directed the AssessingOfficer to allow depreciation at 10% on the road by treating itas a 'building'. The claim made by the assessee for grant ofdepreciation at 25% by treating investment in road as anintangible property was rejected. 16. The Revenue carried the matter by way of appeals beforethe Tribunal. However, the Tribunal, by the impugned commonorder, rejected the appeals and in doing so, followed itsearlier decision dated 24.10.2008 in the assessee's own case forthe assessment years 2003-04 and 2004-05 respectively made inITA.Nos.2082/Mds/2008 and 817/Mds/2007. In paragraph 6 of theimpugned common order, the said decision of the Tribunal hasbeen referred to. 16. The Revenue carried the matter by way of appeals beforethe Tribunal. However, the Tribunal, by the impugned commonorder, rejected the appeals and in doing so, followed itsearlier decision dated 24.10.2008 in the assessee's own case forthe assessment years 2003-04 and 2004-05 respectively made inITA.Nos.2082/Mds/2008 and 817/Mds/2007. In paragraph 6 of theimpugned common order, the said decision of the Tribunal hasbeen referred to. 17. The learned Junior Standing Counsel appearing for theappellant/Revenue has contended that the said decision of theTribunal has not been accepted by the Revenue and an appeal hasbeen filed before this Court against the same. In fact, such asubmission was made before the Tribunal, when the Tribunal heardthe present appeals. However, there was no material produced bythe Revenue before the Tribunal to show that the common orderdated 24.10.2008 passed for the earlier assessment years namely2003-04 and 2004-05 has been reversed or modified by this Court.Therefore, the Tribunal chose to follow its earlier decision. 18. Hence, before us, the learned Junior Standing Counselsubmits that she will make her submissions on merits and thisCourt may take a decision notwithstanding the fact that theRevenue has not accepted the decision of the Tribunal dated24.10.2008 in the assessee's own case for the earlier assessmentyears namely 2003-04 and 2004-05. Based on the said submission,we have heard the matter on merits. 19. The learned Junior Standing Counsel appearing for theappellant – Revenue has pitched her case by placing strongreliance on the decision of the Bombay High Court in the case ofNorth Karnataka Expressway Ltd. Vs. CIT [reported in (2014) 51Taxmann.com 214]. It is submitted by the learned Junior Standing Counsel that when the assessee was engaged in the business ofinfrastructural development in execution of agreement with theNational Highways Authority or as in the present case, with theState Government and had constructed a road on Build, Operateand Transfer (BOT) basis on the land owned by the Government,the assessee could not claim depreciation on the toll road soconstructed and operated by treating it as a building underSection 32 of the Act. 20. The learned Junior Standing Counsel has also placedreliance on the decision of the High Court of Delhi in the caseof Moradabad Toll Road Co. Ltd. Vs. ACIT [reported in (2014) 52Taxmann. com 21] to support the proposition that toll road wouldnot qualify as a plant so as to entitle the assessee a higherrate of depreciation. 21. In the instant case, the assessee has not challengedthe decision of the CIT(A) or that of the Tribunal grantingdepreciation at the rate of 10%. Therefore, we are not requiredto decide as to whether the assessee is entitled to a higherrate of depreciation. What is required to be decided in theinstant case is as to whether the CIT(A) and the Tribunal wereright in holding that the development done by the assessee byforming the road would qualify as a plant so as to be entitledto depreciation under Section 32 of the Act. 21. In the instant case, the assessee has not challengedthe decision of the CIT(A) or that of the Tribunal grantingdepreciation at the rate of 10%. Therefore, we are not requiredto decide as to whether the assessee is entitled to a higherrate of depreciation. What is required to be decided in theinstant case is as to whether the CIT(A) and the Tribunal wereright in holding that the development done by the assessee byforming the road would qualify as a plant so as to be entitledto depreciation under Section 32 of the Act. 22. On a careful perusal of the decision of the Bombay HighCourt in the case of North Karnataka Expressway Ltd., and moreparticularly the finding rendered in paragraph 47 of the saidjudgment, it is clear that the Court has pointed out that theywere not concerned in the said case with the ownership of abuilding or a land beneath which was not conveyed and sold ortransferred by execution of a conveyance or a sale deed. It wasfurther pointed out that depending upon the facts andcircumstances in each case, the claim of ownership could bemade, that it was not that in every case the principles referredto by the Hon'ble Supreme Court would apply and that dependingon the nature of the claim, the context and the circumstances,in which, it arose, these principles would have to be invokedand applied. It was also pointed out that there was no generalrule, which could be said to be laid down. Ultimately, in thesaid decision, the Court held that the assessee definitelyinvested in the project of construction development andmaintenance of the National Highway and such of the assets inthe form of building and plant and machinery etc., and that theclaim for depreciation could be validly raised and granted. 23. In fact, the decision of the Bombay High Court in thecase of North Karnataka Expressway Ltd., would lend support tothe case of the assessee as argued by the assessee before theAssessing Officer by claiming it as plant and machinery.However, since the assessee is not on appeal against the saidfinding, we are of the view that the decision of the Bombay High Court in the case of North Karnataka Expressway Ltd., does notadvance the case of the Revenue before us. 24. On this issue, it would be beneficial to refer to thedecision of the Rajasthan High Court in the case of PCIT Vs. GVKJaipur Expressway Ltd. [reported in (2018) 100 Taxmann.com 95].This decision was rendered by the Court on 10.10.2017, which wasmuch after the decision of the Bombay High Court in the case ofNorth Karnataka Expressway Ltd., which was rendered on14.10.2014. 25. In the decision of the Rajasthan High Court in the caseof GVK Jaipur Expressway Ltd., the Court has taken intoconsideration all the decisions and more particularly thedecisions of the (i) Delhi High Court in the case ofMoradabad Toll Road Co. Ltd.;(ii) Allahabad High Court in the caseof CIT Vs. Noida Toll Bridge Co. Ltd.[reported in (2013) 30 Taxmann.com 207];(iii) Madras High Court in the case ofCIT Vs. VGP Housing (P) Ltd [reported in(2016) 66 Taxmann.com 354]; (iv) Rajasthan High Court in the caseof CIT Vs. Jawahar Kala Kendra [reported in(2014) 43 Taxmann.com 159]; and(v) Rajasthan High Court in the case ofCIT Vs. Mohd. Bux Shokat Ali [reported in(2001) 118 Taxman 712], 25. In the decision of the Rajasthan High Court in the caseof GVK Jaipur Expressway Ltd., the Court has taken intoconsideration all the decisions and more particularly thedecisions of the (i) Delhi High Court in the case ofMoradabad Toll Road Co. Ltd.;(ii) Allahabad High Court in the caseof CIT Vs. Noida Toll Bridge Co. Ltd.[reported in (2013) 30 Taxmann.com 207];(iii) Madras High Court in the case ofCIT Vs. VGP Housing (P) Ltd [reported in(2016) 66 Taxmann.com 354]; (iv) Rajasthan High Court in the caseof CIT Vs. Jawahar Kala Kendra [reported in(2014) 43 Taxmann.com 159]; and(v) Rajasthan High Court in the case ofCIT Vs. Mohd. Bux Shokat Ali [reported in(2001) 118 Taxman 712], and it was held that while considering the issue as to whetherthe national highway was a road or not, one had to go by thecommon parlance of road where public at large had an access. Asin the case on hand, the assessee therein was granted licencefor construction, against which, they had a right to use andcollect licence fee to use the land, that in that view of thematter, they had a right to restrict the people without nonpayment of toll tax and that if the definition, which was givenunder the Act was looked into, even a development made whileoccupying the premises and development of a road was the mainagreement between the parties and that therefore, the argumentof the Revenue that it would not qualify for depreciation wasnot sustainable. Accordingly, the view taken by the Tribunal wasconfirmed. 26. The special leave petition filed by the Revenue againstthe decision of the Rajasthan High Court in the case of GVKJaipur Expressway Ltd., was dismissed by the Hon'ble SupremeCourt as reported in (2018) 100 Taxmann.com 96.27. So far as decision of the Bombay High Court in the caseof North Karnataka Expressway Ltd. is concerned, the saiddecision was followed in the decision of the Bombay High Courtin the case of CIT-10 Vs. West Gujarat Expressway Ltd. [reported in (2017) 82 Taxmann.com 224] and the appeal filed by theRevenue was allowed against which, the assessee preferred anappeal to the Hon'ble Supreme Court, which has been entertained,leave granted and tagged with other appeals, which are pendingas reported in (2016) 73 Taxmann.com 150 (SC). 28. In the light of the above legal position, we are of theconsidered view that the reasons assigned by the Tribunal indismissing the appeals filed by the Revenue call for nointerference. Accordingly, substantial question of law No.1 isalso answered against the Revenue and in favour of the assesseeand it is held that the assessee is entitled for depreciation atthe rate of 10%. 29. Substantial question of law Nos.2 and 3 are identicaland virtually one and the same, questioning the correctness ofthe decision of the Tribunal in holding that the assessee iseligible for depreciation under Section 32(1)(ii) of the Act onthe lease hold rights obtained by the assessee for a period of99 years pursuant to an agreement entered into betweenthemselves and the SIPCOT. 30. To be noted, neither the Assessing Officer nor theTribunal had gone into the terms and conditions of the leaseagreement. This issue arises for consideration only for theassessment years 2007-08 and 2008-09. In respect of the otherassessment years, which are subject matter of consideration inthese batch of appeals, viz., 2009-10, 2010-11, 2012-13 and2013-14, the assessee had been granted a relief. 31. The issue would be as to whether the Tribunal was rightin confirming the order passed by the Commissioner of IncomeTax-III, Chennai dated 18.11.2013, granting the benefit ofdepreciation for the assessment year 2009-10 on the lease holdright obtained by the assessee from the SIPCOT. 30. To be noted, neither the Assessing Officer nor theTribunal had gone into the terms and conditions of the leaseagreement. This issue arises for consideration only for theassessment years 2007-08 and 2008-09. In respect of the otherassessment years, which are subject matter of consideration inthese batch of appeals, viz., 2009-10, 2010-11, 2012-13 and2013-14, the assessee had been granted a relief. 31. The issue would be as to whether the Tribunal was rightin confirming the order passed by the Commissioner of IncomeTax-III, Chennai dated 18.11.2013, granting the benefit ofdepreciation for the assessment year 2009-10 on the lease holdright obtained by the assessee from the SIPCOT. 32. The assessment for the years 2007-08 and 2008-09 wasreopened by issuance of notice. One of the reasons for reopeningthe assessment was on the claim for depreciation amounting toRs.19,29,341/- on the lease hold right of Rs.77,17,365/- for theassessment year 2007-08 and the claim for depreciation amountingto Rs.14,47,006/- on the lease hold rights of Rs.57,88,024/- forthe assessment year 2008-09. 33. In the proposal to reopen, the Assessing Officer statedthat a plain reading of Section 32 of the Act showed that toclaim depreciation, the assessee must have owned, wholly orpartly, the assets and should have used the same for the purposeof business of the assessee to be eligible for depreciation. Theassessee was called upon to explain. By a common reply dated25.6.2014, the assessee stated that they entered into anagreement with the SIPCOT, IT Park, Siruseri, over a landmeasuring 4.90 acres for a period of 99 years and such anagreement was executed on 21.9.2005 and registered as Doc.No.6285 of 2005 on the file of Sub Registrar, Tiruporur. Theassessee reproduced one of the covenants contained in the said agreement, viz., covenant No.8.34. The Assessing Officer, after referring to the replygiven by the assessee, extracted the said covenant and opinedthat the assessee, by his own admission, stated that the land inquestion was a lease land taken from the SIPCOT, that theassessee did not own the asset in question and that therefore,they failed to clear the qualifying benchmark for being eligiblefor depreciation. Accordingly, the claim for depreciation wasrejected and the return of income was added back to the incomeof the assessee. 35. The assessee filed appeal before the CIT(A) statingthat the assessee claimed depreciation at the rate of 25% onlease hold rights of land leased (20 years) by the SIPCOT. Theassessee referred to Section 32 of the Act and submitted that itprovided that the assessee should have owned, wholly or partly,the assets and should have used the assets for the purpose ofbusiness to be eligible to claim depreciation under the Act,which was rejected by the Assessing Officer without taking noteof the fact that the assessee became the eligible owner of thelease hold land and would be entitled to claim depreciation.Further, the assessee contended that they paid Rs.20,15,000/-per acre for 4.90 acres and acquired the lease hold rights,which essentially qualified the assessee for an allowablerevenue expenditure over a period of time as enumerated underlaw. Therefore, the assessee further contended that theconclusion arrived at by the Assessing Officer that the assesseewas not the owner of the asset and not eligible fordepreciation, was incorrect. 36. Further, the assessee stated that except the right ofalienation of the said asset, the assessee was conferred withall rights of enjoyment in respect of the lease property andtherefore, they would be entitled to claim depreciation. Theassessee placed reliance on the decision of the Hon'ble SupremeCourt in the case of Madras Industrial Investment CorporationLtd. Vs. CIT [reported in (1997) 225 ITR 802] wherein it washeld that the total amount of lease premium paid in respect ofsuch agreements should be amortized over the period of lease andonly the amount pertaining to the relevant previous year shouldbe allowed as deduction. Further, the assessee relied on thedecisions of the Hon'ble Supreme Court in the case of EmpireJute Co. Ltd. Vs. CIT [reported in (1980) 124 ITR 1] and in thecase of CIT Vs. Associated Cement Co. Ltd., [reported in (1988)172 ITR 257] wherein it was held that the expenditure, which didnot fall in the capital field, should be allowed as revenueexpenditure. 37. Further, the assessee submitted that the assessee, onacquiring the land on lease for a period of 99 years, makingpayment of advance rent to the tune of Rs.48 Crores and paying asum of Rs.40 lakhs per month as monthly rent, the advance leaserent paid by the assessee was allowable as revenue expenditure. To support such contention, the assessee placed reliance on thedecision of the Special Bench of the Mumbai Tribunal in the caseof JCIT Vs. Mukund Ltd. [reported in (2007) 291 ITR (AT) 249].Thus, the assessee pleaded before the CIT(A) that consideringthe nature of business of the assessee, it was essential toallow the expenditure incurred for operational purposes asrevenue expenditure in the computation of total income. Theassessee pointed out that the Assessing Officer neither alloweddepreciation on the lease hold rights nor treated the same asrevenue expenditure and in doing so, violated the principles ofnatural justice. 38. The CIT(A) took note of the submissions, but did notexamine the nature of transaction between the assessee and theSIPCOT and more particularly, the terms and conditions containedin the agreement dated 21.9.2005. In fact, even the AssessingOfficer did not go into the full contents of the agreement dated21.9.2005, but appears to have been guided only by the replygiven by the assessee dated 25.6.2014 in response to the noticeissued under Section 148 of the Act wherein the assesseeextracted Clause 8 of the agreement dated 21.9.2005. 39. In our considered view, there should have been a deeperexamination of the conditions contained in the agreement toarrive at a correct conclusion with regard to the nature oftransaction between the assessee and the SIPCOT. 40. The CIT(A) referred to Section 32(1)(ii) of the Act andobserved that in terms of the said provision, depreciation wasallowable for “any other business or commercial right of similarnature being intangible asset acquired on or after 01.4.1998”.Further, the CIT(A) referred to Rule 5 of the Rules and Part-Bof the Depreciation Table wherein the depreciation on intangibleassets was allowable at 25%. The CIT(A) referred to thesubmission of the assessee that the right to develop theproperty as per the agreement was an intangible asset andtherefore, the assessee was eligible for depreciation at 25%.The CIT(A) stated that the assessee relied on the decisions ofthe Hon'ble Supreme Court and following the said decisions, heldthat the assessee was entitled to depreciation on the lease holdright at 25%. 41. Aggrieved by the same, the Revenue was on appeal beforethe Tribunal contending that the CIT(A) erred in allowing theassessee's claim for depreciation on the ground that the leasehold land was an intangible asset without considering the factthat the lease hold right was not an intangible asset. In thisregard, reliance was placed on the decision of the BangaloreTribunal in the case of Cyber Park Development & ConstructionLtd. Vs. DCIT, Circle 11/(2), Bangalore [reported in (2016) 71taxmann.com 210]. 42. The Tribunal noted the submissions of the Revenue byplacing reliance on the decision of the Bangalore Tribunal in the case of Cyber Park Development & Construction Ltd., and heldthat transferring an immovable property by way of lease createdan interest in the land, as has been held in Cyber ParkDevelopment & Construction Ltd., and taking note of thedefinition of 'capital asset', as defined under Section 2(14) ofthe Act, the property need not be owned by the assessee, it washeld that the definition 'capital asset' could not be givenrestrictive meaning. 43. The Tribunal referred to the decision of this Court inthe case of A.R.Krishnamurthy and A.R.Rajagopalan Vs. CIT[reported in (1982) 133 ITR 922], the decision of the CalcuttaHigh Court in the case of in A.Gasper Vs. CIT [reported in(1979) 117 ITR 581] and the decision of the Hon'ble SupremeCourt in the case of R.K. Palshikar (HUF) Vs. CIT [reported in(1988) 172 ITR 311] and held that transfer by way of lease wasto be treated as a transfer of capital asset, as the leasecreated an interest in the land and therefore, to that extent,it extinguished the right of the transferor. 44. With regard to the assessee's case, the Tribunal heldthat when the assessee transferred his lease hold rights in theland in his occupation by way of lease to another person, itamounted to extinguishing his rights in the property and sincehis lease hold rights had created an interest in the land, i.e.an enjoyment and possession, it would fall within the definitionof 'capital asset' as defined under Section 2(14) of the Act.Thus, the Tribunal came to the conclusion that transfer of leasewould amount to a transfer of capital asset and hence, theassessee was eligible to claim depreciation on the asset, whichwas transferred to them by way of a lease deed. On the saidground, the appeal filed by the Revenue was dismissed. 45. As pointed out earlier, the factual aspect has not beenanalysed by the Assessing Officer though the assessment wasprimarily reopened for the reason to consider the correctness ofthe claim for depreciation on the lease hold right enjoyed bythe assessee. Unfortunately, the Assessing Officer was solelyguided by the reply given by the assessee dated 25.6.2014, inwhich, they have extracted condition No.8 of the agreement dated21.9.2005. On a plain reading of the said condition, at thefirst blush, one gets an impression that the assessee was also abeneficiary of a common facility, which the SIPCOT was obligedto provide all entrepreneurs, who have been allotted sites/unitsin the IT Park. 46. Even before us, the copy of the agreement dated21.9.2005, styled as a “lease deed” has not been placed forconsideration. The CIT(A) did not examine the obligations, whichwere to be fulfilled by the assessee under the lease agreement.In fact, in the strict sense, terming it as a lease agreementitself may be a misnomer because, such agreement is bound tocontain various conditions, which the assessee had to fulfil. https://hcservices.ecourts.gov.in/hcservices/ 46. Even before us, the copy of the agreement dated21.9.2005, styled as a “lease deed” has not been placed forconsideration. The CIT(A) did not examine the obligations, whichwere to be fulfilled by the assessee under the lease agreement.In fact, in the strict sense, terming it as a lease agreementitself may be a misnomer because, such agreement is bound tocontain various conditions, which the assessee had to fulfil. https://hcservices.ecourts.gov.in/hcservices/ 47. After hearing Mr.A.S.Sriraman, learned counsel appearingfor the assessee, we come to know that the land, on which, thefacility has been developed by the assessee, is owned by theSIPCOT and it appears that the development consists of providingroads inside the IT Park, establishment of a multi-level carparking, etc. Under the said agreement, the assessee had todevelop these facilities and maintain them and the period isstated to be 99 years, which is virtually perpetual. Therefore,a deeper examination of the factual issue would have given aquietus to the matter even at the level of the AssessingOfficer. 48. Before the Tribunal, the argument appears to have beenwhether the lease hold right would qualify as a 'capital asset'as defined under Section 2(14) of the Act. In our consideredview, such issue would not arise for consideration in the factsof the present case because what was required to be examined wasthe type of transaction between the assessee and the SIPCOT. 49. Interestingly, the assessee, in their appeal petitionbefore the CIT(A), made an alternate prayer while they wouldstate that their claim for depreciation on lease hold right wasallowable and alternatively they would state that it wasessential to allow the expenditure incurred for operationalpurposes as revenue expenditure. Their argument was that theAssessing Officer could not have denied both the reliefs. 50. One more interesting fact is that such depreciation hasbeen allowed on the lease hold land for the assessment years2009-10, 2010-11, 2012-13 and 2013-14. It is not clear as towhether in those years, there was any detailed considerationwith regard to the factual aspect, which is now being agitatedbefore us. 51. In our considered view, the decision in the case ofCyber Park Development & Construction Ltd., was couched on adifferent set of facts and would not be of assistance to thecase of the Revenue. 52. Ms.V.Pushpa, learned Junior Standing Counsel for theRevenue would place reliance on the decision of the Hon'bleSupreme Court in Mother Hospital (P.) Ltd., vs. CIT, Trichur[reported in (2017) 79 Taxmann.com 375]. In the said decision,it has been held that in terms of Explanation 1 to Section 32(1)of the Act, it is only when the assessee holds a lease right orother right of occupancy and any capital expenditure is incurredby it on construction or renovation or improvement of building,the assessee would be entitled to depreciation to the extent ofsuch expenditure incurred. It is the submission of the learnedJunior Standing Counsel that this decision will fully supportthe argument of the Revenue. 53. On the contrary, Mr.A.S.Sriraman, learned counsel forthe assessee would submit that the decision of the Hon'bleSupreme Court in the case of Mother Hospital (P.) Ltd., would support the case of the assessee and in this regard, referred toparagraph 10 of the judgment wherein it has been stated thatfrom the plain language of Explanation 1 to Section 32(1) of theAct, it was clear that when the assessee held a lease right orother right of occupancy and any capital expenditure wasincurred by the assessee on the construction of any structure ordoing of any work in or in relation to and by way of renovationor extension or improvement to the building and the expenditureon construction was incurred by the assessee, then the assesseewould be entitled to depreciation to the extent of any suchexpenditure incurred. support the case of the assessee and in this regard, referred toparagraph 10 of the judgment wherein it has been stated thatfrom the plain language of Explanation 1 to Section 32(1) of theAct, it was clear that when the assessee held a lease right orother right of occupancy and any capital expenditure wasincurred by the assessee on the construction of any structure ordoing of any work in or in relation to and by way of renovationor extension or improvement to the building and the expenditureon construction was incurred by the assessee, then the assesseewould be entitled to depreciation to the extent of any suchexpenditure incurred. 54. In our considered view, these decisions cannot bestraight away applied to the cases on hand without taking noteof the factual position, which, as already been pointed out, wasnot done by the Assessing Officer or the CIT(A) or for thatmatter, the Tribunal. In fact, the assessee has to be partiallyblamed for not submitting an effective reply to the noticeissued under Section 148 of the Act. 55. Further, we find that the decision of this Court in thecase of A.R.Krishnamurthy and A.R.Rajagopalan was in respect ofa lease-cum-licence granted by the State Government forconducting mining activities in favour of the assessee companyand it appears to be an exclusive right and the question was asto whether such a transaction would amount to transferring acapital asset and thereby attracting capital gains. This beingnot the case of the assessee, this decision is whollyinapplicable. 56. The decision of the Calcutta High Court in the case ofA.Gasper was in respect of right conferred on a statutory tenantand the question was when the right got extinguished on accountof a sublease, would it amount to extinguishment of the rightsin a capital asset to attract capital gains. This being not thecase of the assessee herein, this decision cannot be madeapplicable. 57. Similarly, in the decision of the Hon'ble Supreme Courtin the case of R.K.Palshikar, the question, which arose, was asto whether the transaction effected by the assessee would amountto transferring a capital asset warranting capital gains tax.58. In our considered view, the Tribunal need not have takenthe matter thus far to render a verdict in favour of theassessee especially when the Lower Authorities did not know thefactual position. Thus, we are of the firm opinion that thematter has to be re-adjudicated by the Assessing Officer, forwhich purpose, the Assessing Officer has to threadbare analysethe agreement dated 21.9.2005 entered into between the assesseeand the SIPCOT and not go merely by the nomenclature or thetitle of the document. But, the Assessing Officer should examinethe contents. It would also be well open to the assessee toraise the alternate plea, which they raised before the AssessingOfficer stating that the expenditure incurred for operational purposes ought to have been allowed as a revenue expenditure. 59. For the above reasons, the finding rendered by theTribunal, the CIT(A) and the Assessing Officer with regard tothe disallowance of depreciation on lease hold rights for theassessment years 2007-08 and 2008-09 is set aside and the matteris remanded to the Assessing Officer to take a fresh decision onmerits and in accordance with law, after due opportunity to theassessee. 60. In the result, the tax case appeals are partly allowedto the extent indicated hereinbelow:- (i) Substantial question of law No.1 isanswered against the Revenue and in favourof the assessee and it is held that theassessee is entitled for depreciation at therate of 10%. (ii)Substantial question of law Nos.2 and3 are left open, as the issue has beenremanded to the Assessing Officer for afresh consideration; and No costs. 60. In the result, the tax case appeals are partly allowedto the extent indicated hereinbelow:- (i) Substantial question of law No.1 isanswered against the Revenue and in favourof the assessee and it is held that theassessee is entitled for depreciation at therate of 10%. (ii)Substantial question of law Nos.2 and3 are left open, as the issue has beenremanded to the Assessing Officer for afresh consideration; and No costs. (iii) Substantial question of law No.4is answered against the Revenuefollowing the decision rendered by usin the assessee's own case inT.C.A.No.485 of 2020 dated 05.1.2021. Sd/- Assistant Registrar(CS IV) //True Copy// Sub Assistant Registrar ToTHE INCOME TAX APPELLATE TRIBUNAL, 'B' BENCH, CHENNAI.2.THE COMMISSIONER OF INCOME TAX (APPEALS)-II,CHENNAI3.THE COMMISSIONER OF INCOME TAX III,CHENNAI 344.THE ASSISTANT COMMISSIONER OF INCOME TAX CORPORATE CIRCLE-3(I),CHENNAI +1cc to Mr.M.Swaminathan, Advocate SR.No. 2447A.SK(23.03.2021) TCA.Nos.220 to 225 of 2018