T.c.a.nos.678 & 679 Of 2009: The Commissioner Of Income Tax, Chennai v. M/S.tamil Nadu Road Development Company Ltd., Sindhur Pantheon Plaza

IN THE HIGH COURT OF JUDICATURE AT MADRASDATE: 29.06.2021 CORAM: THE HON'BLE MR. JUSTICE M.DURAISWAMYAND THE HON'BLE MRS.JUSTICE R.HEMALATHA T.C.A.Nos.678, 679 of 2009 and 446 & 447 of 2010 T.C.A.Nos.678 & 679 of 2009:The Commissioner of Income Tax,Chennai. ... Appellant in both TCAs Vs.M/s.Tamil Nadu Road Development Company Ltd.,Sindhur Pantheon Plaza,346, Pantheon Road,Chennai – 600 008. ... Respondent in both TCAsT.C.A.Nos.678 & 679 of 2009 were preferred under Section260A of the Income Tax Act, 1961, against the order of theIncome Tax Appellate Tribunal, Madras, "C" Bench, dated24.10.2008 in I.T.A.No.2082/Mds/2008 and I.T.A.No.817/Mds/2007for the Assessment Years 2003-04 and 2004-05. TCA 678,679 of 2009:Against the Commissioner of Income-Tax (Appeals) III,Chennai 600 034 and made in ITA No.591/2005-06-A(III)/470/2006-2007-A III, dated 14.07.2006, 19.02.2007, for the Assessmentyear 2003-04, 2004-05 preferred against the AssistantCommissioner of Income Tax company circle (iii)(i)(i/c) Chennai,Income Tax officer (OSD) company circle III(i), Chennai and madein GIR No./PAN 31202-T/AABC13389H, and GIR No./PAN31203-T/ , dated 17.10.2006 and 13.10.2006 for the Assessmentyear 2003-04 and 2004-05. T.C.A.Nos.446 & 447 of 2010:The Commissioner of Income Tax-I,Chennai. ... Appellant in both TCAsVs.M/s.Tamil Nadu Road Development Co. Ltd.,Sindhur Pantheon Plaza, II Floor,No.346, Pantheon Road,Egmore, Chennai – 600 008. ... Respondent in both TCAs https://hcservices.ecourts.gov.in/hcservices/ T.C.A.Nos.446 & 447 of 2010 were preferred under Section260A of the Income Tax Act, 1961, against the order of theIncome Tax Appellate Tribunal, Madras, "D" Bench, dated25.08.2009 in I.T.A.Nos.660 & 661/Mds/2009 for the AssessmentYears 2002-03 and 2005-06. TCA 446,447 of 2010Against the Commissioner of Income-Tax (Appeals)VIII,121,Mahatma Gandhi Road, Chennai 600 034 and made in ITANo.241/2007-08,240/2007-2008, dated 10.02.2009, for theAssessment year 2002-03, 2005-06 preferred against the AssistantCommissioner of Income Tax company circle (iii)(i)(i/c) Chennai,dated 13.11.2007 and 14.11.2007, made in GIR No./PANAABCT3389H/31213-T and AABCT3389H/31203-T for the Assessmentyear 2002-03 and 2005-06. For Appellant : Ms.V.Pushpa,(in all 4 TCAs) Junior Standing CounselFor Respondent : Mr.Kaushik(in all 4 TCAs) for Mr.S.Sridhar COMMON JUDGMENT (Judgment was delivered by M.DURAISWAMY, J.) Challenging the order passed in I.T.A.No.2082/Mds/2008 onthe file of the Income Tax Appellate Tribunal, “C” Bench,Chennai, the Revenue has filed the appeal in T.C.A.No.678 of2009. Challenging the order passed in I.T.A.No.817/Mds/2007 onthe file of the Income Tax Appellate Tribunal, “C” Bench,Chennai, the Revenue has filed the appeal in T.C.A.No.679 of2009. Challenging the order passed in I.T.A.No.660/Mds/2009 onthe file of the Income Tax Appellate Tribunal, “D” Bench,Chennai, the Revenue has filed the appeal in T.C.A.No.446 of2010. Challenging the order passed in I.T.A.No.661/Mds/2009 onthe file of the Income Tax Appellate Tribunal, “D” Bench,Chennai, the Revenue has filed the appeal in T.C.A.No.447 of2010. 2.The assessee is engaged in the business of improvement anddevelopment of roads. The assessee claimed depreciation on roadsin the category of plant and machinery. The Assessing Officerheld that the assessee is not eligible for depreciation on roadseither as plant and machinery or as building. Aggrieved over thesame, the assessee preferred an appeal before the Commissionerof Income Tax (Appeals), who dismissed, holding that neither isthe road a plant or machinery nor is it owned by the assessee,since the roads on which depreciation was claimed were StateHighways. Aggrieved over the order passed by the Commissioner of 2.The assessee is engaged in the business of improvement anddevelopment of roads. The assessee claimed depreciation on roadsin the category of plant and machinery. The Assessing Officerheld that the assessee is not eligible for depreciation on roadseither as plant and machinery or as building. Aggrieved over thesame, the assessee preferred an appeal before the Commissionerof Income Tax (Appeals), who dismissed, holding that neither isthe road a plant or machinery nor is it owned by the assessee,since the roads on which depreciation was claimed were StateHighways. Aggrieved over the order passed by the Commissioner of Income Tax (Appeals), the assessee filed appeals before theIncome Tax Appellate Tribunal and the Tribunal held thatalthough the road is certainly not a plant or machinery, it canstill be eligible for depreciation as a building, as per theAppendix prescribing rate of depreciation which says buildingincludes roads. Challenging the orders passed by the Income TaxAppellate Tribunal, the Revenue has filed the above appeals. 3.The above appeals were admitted on the followingsubstantial question of law:“Whether on the facts and circumstances of thecase, the Tribunal was right in holding that roadsdeveloped and maintained by the assessee by agreementwith the Government on the State/National Highway iseligible for depreciation as “building”?” 4.When the appeals were taken up for hearing, Ms.V.Pushpa,learned standing counsel for the appellant-Revenue fairlysubmitted that the question of law that has been raised in theabove appeals was already decided, against the Revenue and infavour of the assessee, by the Division Bench of this Court inthe judgment made in T.C.A.Nos.220 to 225 of 2018 dated19.01.2021 [The Commissioner of Income Tax, Corporate Circle 3,Chennai-34 Vs. M/s.Tamil Nadu Road Development Company Ltd.,Chennai – 600 028] wherein the Division Bench held as follows: “... 12.Next, we take up for consideration the issuepertaining to the claim for depreciation on the roads,which have been developed and maintained by theassessee pursuant to the agreement entered into withthe State Government. 13.The assessee is a joint venture company formedby the Tamil Nadu Industrial Development CorporationLimited and the Tidel Park for creation ofinfrastructural facility such as road systems,highways, bridge system by bringing private resourcesin the development of the said projects. The assesseewas granted right to implement the East Coast Roadproject. The assessee, while filing the return ofincome for the relevant assessment years, claimeddepreciation at the rate of 15% on improvement to theIT Carridor (Road) considering the roads as 'plant andmachinery'. 14.The Assessing Officer did not accept the saidclaim, but allowed depreciation at the rate of 10%considering the roads to be a 'building' in terms ofthe definition contained in the Notes to New Appendix Iin the Income Tax Rules, 1962. 15.Aggrieved by the same, the assessee preferredappeals before the Commissioner of Income Tax(Appeals)-11, Chennai-34 [for brevity, the CIT(A)] bycontending that the depreciation should be granted atthe rate of 15% by treating road as 'plant andmachinery' for the assessment years 2007-08 to 2010-11.For the assessment year 2013-14, the assessee claimeddepreciation at 25% by treating investment in road asan intangible property. The CIT(A) partly allowed theappeals and directed the Assessing Officer to allowdepreciation at 10% on the road by treating it as a'building'. The claim made by the assessee for grant ofdepreciation at 25% by treating investment in road asan intangible property was rejected. 15.Aggrieved by the same, the assessee preferredappeals before the Commissioner of Income Tax(Appeals)-11, Chennai-34 [for brevity, the CIT(A)] bycontending that the depreciation should be granted atthe rate of 15% by treating road as 'plant andmachinery' for the assessment years 2007-08 to 2010-11.For the assessment year 2013-14, the assessee claimeddepreciation at 25% by treating investment in road asan intangible property. The CIT(A) partly allowed theappeals and directed the Assessing Officer to allowdepreciation at 10% on the road by treating it as a'building'. The claim made by the assessee for grant ofdepreciation at 25% by treating investment in road asan intangible property was rejected. 16.The Revenue carried the matter by way ofappeals before the Tribunal. However, the Tribunal, bythe impugned common order, rejected the appeals and indoing so, followed its earlier decision dated24.10.2008 in the assessee's own case for theassessment years 2003-04 and 2004-05 respectively madein ITA.Nos.2082/Mds/2008 and 817/Mds/2007. In paragraph6 of the impugned common order, the said decision ofthe Tribunal has been referred to. 17.The learnedJuniorStandingCounselappearingfortheappellant/Revenue has contended that the said decisionof the Tribunal has not been accepted by the Revenueand an appeal has been filed before this Court againstthe same. In fact, such a submission was made beforethe Tribunal, when the Tribunal heard the presentappeals. However, there was no material produced by theRevenue before the Tribunal to show that the commonorder dated 24.10.2008 passed for the earlierassessment years namely 2003-04 and 2004-05 has beenreversed or modified by this Court. Therefore, theTribunal chose to follow its earlier decision. 18.Hence, before us, the learned Junior StandingCounsel submits that she will make her submissions onmerits and this Court may take a decisionnotwithstanding the fact that the Revenue has notaccepted the decision of the Tribunal dated 24.10.2008in the assessee's own case for the earlier assessmentyears namely 2003-04 and 2004-05. Based on the saidsubmission, we have heard the matter on merits. 19.The learned Junior Standing Counsel appearingfor the appellant – Revenue has pitched her case byplacing strong reliance on the decision of the BombayHigh Court in the case of North Karnataka ExpresswayLtd. Vs. CIT [reported in (2014) 51 Taxmann.com 214].It is submitted by the learned Junior Standing Counselthat when the assessee was engaged in the business of infrastructural development in execution of agreementwith the National Highways Authority or as in thepresent case, with the State Government and hadconstructed a road on Build, Operate and Transfer (BOT)basis on the land owned by the Government, the 11/31https://www.mhc.tn.gov.in/judis/ TCA.Nos.220 to 225 of2018 assessee could not claim depreciation on the tollroad so constructed and operated by treating it as abuilding under Section 32 of the Act. 20.The learned Junior Standing Counsel has alsoplaced reliance on the decision of the High Court ofDelhi in the case of Moradabad Toll Road Co. Ltd. Vs.ACIT [reported in (2014) 52 Taxmann. com 21] to supportthe proposition that toll road would not qualify as aplant so as to entitle the assessee a higher rate ofdepreciation. infrastructural development in execution of agreementwith the National Highways Authority or as in thepresent case, with the State Government and hadconstructed a road on Build, Operate and Transfer (BOT)basis on the land owned by the Government, the 11/31https://www.mhc.tn.gov.in/judis/ TCA.Nos.220 to 225 of2018 assessee could not claim depreciation on the tollroad so constructed and operated by treating it as abuilding under Section 32 of the Act. 20.The learned Junior Standing Counsel has alsoplaced reliance on the decision of the High Court ofDelhi in the case of Moradabad Toll Road Co. Ltd. Vs.ACIT [reported in (2014) 52 Taxmann. com 21] to supportthe proposition that toll road would not qualify as aplant so as to entitle the assessee a higher rate ofdepreciation. 21.In the instant case, the assessee has notchallenged the decision of the CIT(A) or that of theTribunal granting depreciation at the rate of 10%.Therefore, we are not required to decide as to whetherthe assessee is entitled to a higher rate ofdepreciation. What is required to be decided in theinstant case is as to whether the CIT(A) and theTribunal were right in holding that the developmentdone by the assessee by forming the road would qualifyas a plant so as to be entitled to depreciation underSection 32 of the Act. 22. On a careful perusal ofthe decision of the Bombay High Court in the case ofNorth Karnataka Expressway Ltd., and more particularlythe finding rendered in paragraph 47 of the saidjudgment, it is clear that the Court has pointed outthat they were not concerned in the said case with theownership of a building or a land beneath which was notconveyed and sold or transferred by execution of aconveyance or a sale deed. It was further pointed outthat depending upon the facts and circumstances in eachcase, the claim of ownership could be made, that it wasnot that in every case the principles referred to bythe Hon'ble Supreme Court would apply and thatdepending on the nature of the claim, the context andthe circumstances, in which, it arose, these principleswould have to be invoked and applied. It was alsopointed out that there was no general rule, which couldbe said to be laid down. Ultimately, in the saiddecision, the Court held that the assessee definitelyinvested in the project of construction development andmaintenance of the National Highway and such of theassets in the form of building and plant and machineryetc., and that the claim for depreciation could bevalidly raised and granted. 23.In fact, the decision of the Bombay High Courtin the case of North Karnataka Expressway Ltd., wouldlend support to the case of the assessee as argued bythe assessee before the Assessing Officer by claimingit as plant and machinery. However, since the assesseeis not on appeal against the said finding, we are ofthe view that the decision of the Bombay High Court inthe case of North Karnataka Expressway Ltd., does notadvance the case of the Revenue before us. 24.On this issue, it would be beneficial to referto the decision of the Rajasthan High Court in the caseof PCIT Vs. GVK Jaipur Expressway Ltd. [reported in(2018) 100 Taxmann.com 95]. This decision was renderedby the Court on 10.10.2017, which was much after thedecision of the Bombay High Court in the case of NorthKarnataka Expressway Ltd., which was rendered on14.10.2014. 24.On this issue, it would be beneficial to referto the decision of the Rajasthan High Court in the caseof PCIT Vs. GVK Jaipur Expressway Ltd. [reported in(2018) 100 Taxmann.com 95]. This decision was renderedby the Court on 10.10.2017, which was much after thedecision of the Bombay High Court in the case of NorthKarnataka Expressway Ltd., which was rendered on14.10.2014. 25.In the decision of the Rajasthan High Court inthe case of GVK Jaipur Expressway Ltd., the Court hastaken into consideration all the decisions and moreparticularly the decisions of the (i) Delhi High Courtin the case of Moradabad Toll Road Co. Ltd.; (ii)Allahabad High Court in the case of CIT Vs. Noida TollBridge Co. Ltd. [reported in (2013) 30 Taxmann.com207]; (iii) Madras High Court in the case of CIT Vs.VGP Housing (P) Ltd [reported in (2016) 66 Taxmann.com354]; (iv) Rajasthan High Court in the case of CIT Vs.Jawahar Kala Kendra [reported in (2014) 43 Taxmann.com159]; and (v) Rajasthan High Court in the case of CITVs. Mohd. Bux Shokat Ali [reported in (2001) 118 Taxman712], and it was held that while considering the issueas to whether the national highway was a road or not,one had to go by the common parlance of road wherepublic at large had an access. As in the case on hand,the assessee therein was granted licence forconstruction, against which, they had a right to useand collect licence fee to use the land, that in thatview of the matter, they had a right to restrict thepeople without non payment of toll tax and that if thedefinition, which was given under the Act was lookedinto, even a development made while occupying thepremises and development of a road was the mainagreement between the parties and that therefore, theargument of the Revenue that it would not qualify fordepreciation was not sustainable. Accordingly, the viewtaken by the Tribunal was confirmed. 26.The specialleave petition filed by the Revenue against thedecision of the Rajasthan High Court in the case of GVKJaipur Expressway Ltd., was dismissed by the Hon'bleSupreme Court as reported in (2018) 100 Taxmann.com 96. 27.So far as decision of the Bombay High Court inthe case of North Karnataka Expressway Ltd. isconcerned, the said decision was followed in thedecision of the Bombay High Court in the case of CIT-10Vs. West Gujarat Expressway Ltd. [reported in (2017) 82Taxmann.com 224] and the appeal filed by the Revenuewas allowed against which, the assessee preferred anappeal to the Hon'ble Supreme Court, which has beenentertained, leave granted and tagged with otherappeals, which are pending as reported in (2016) 73Taxmann.com 150 (SC). 28.In the light of the above legal position, weare of the considered view that the reasons assigned bythe Tribunal in dismissing the appeals filed by theRevenue call for no interference. Accordingly,substantial question of law No.1 is also answeredagainst the Revenue and in favour of the assessee andit is held that the assessee is entitled fordepreciation at the rate of 10%.” 5.Mr.Kaushik, learned counsel appearing for the respondent-assessee submitted that in view of the ratio laid down by theDivision Bench of this Court in the judgment made inT.C.A.Nos.220 to 225 of 2018 dated 19.01.2021, cited supra, theappeals may be dismissed. 6.The 1[st] question of law that was decided by the DivisionBench in T.C.A.No.220 to 225 of 2018 is the same question of lawthat has been raised in the above appeals. The Division Benchdecided the said question of law against the Revenue and infavour of the assessee. 5.Mr.Kaushik, learned counsel appearing for the respondent-assessee submitted that in view of the ratio laid down by theDivision Bench of this Court in the judgment made inT.C.A.Nos.220 to 225 of 2018 dated 19.01.2021, cited supra, theappeals may be dismissed. 6.The 1[st] question of law that was decided by the DivisionBench in T.C.A.No.220 to 225 of 2018 is the same question of lawthat has been raised in the above appeals. The Division Benchdecided the said question of law against the Revenue and infavour of the assessee. 7.Having regard to the submissions made by the learnedcounsel on either side, following the ratio laid down by theDivision Bench of this Court made in T.C.A.Nos.220 to 225 of2018 dated 19.01.2021 [The Commissioner of Income Tax, CorporateCircle 3, Chennai-34 Vs. M/s.Tamil Nadu Road Development CompanyLtd., Chennai – 600 028] , the question of law is decidedagainst the Revenue and in favour of the assessee. Accordingly,the Tax Case Appeals are dismissed. No costs. //True Copy// va Sub Assistant Registrar To 1.The Income Tax Appellate Tribunal, Chennai, "C" Bench 2.The Income Tax Appellate Tribunal, Chennai, "D" Bench 3.The Commissioner of Income-Tax Appeals-III, Chennai 600 034. 4.The Assistant Commissioner of Income Tax company circle (iii)(i)(i/c) Chennai. 5.The Commissioner of Income Tax Appeal VIII, 121, MahatmaGandhi Road, Chennai 600 034.Gandhi Road, Chennai 600 034. +1CC to Mr.M.Swaminathan Advocate, SR No.29906 T.C.A.Nos.678, 679 of 2009 and 446 & 447 of 2010 JP (CO) B.VC (16/08/2021)