Madras High Court
Commissioner Of Income Tax-I vs M/S.L & T Transportation ... on 29 June, 2021
Tax Case Appeal Nos.
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated: 29.06.2021
CORAM
THE HON'BLE MR.JUSTICE M. DURAISWAMY
AND
THE HON'BLE MRS.JUSTICE R. HEMALATHA
Tax Case Appeal Nos.355 to 358 of 2011
Commissioner of Income Tax-I
Chennai. ... 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
the Income Tax Act, 1961 against the order of the Income Tax Appellate
Tribunal, Chennai "A" Bench, dated 30.11.2010 passed in
I.T.A.Nos.1692, 1693, 1694 and 1695/Mds/2010 for the assessment
years 2002-2003, 2003-2004, 2004-2005 & 2006-2007.
For Appellant : Mr.Karthik Ranganathan
in all the Appeals Senior Standing Counsel
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Tax Case Appeal Nos.
For Respondent : Mr.V. Balaji
in all the Appeals
COMMON JUDGMENT
(Common Judgment of the Court was delivered
by R.HEMALATHA, J.)
These four appeals of the Revenue are directed against the orders
dated 30.11.2010 passed by the Income Tax Appellate Tribunal Bench-
A, Chennai.
2. The matter in issue pertains to disallowance of depreciation of
project assets being road and bridge during the assessment years 2002-
2003, 2003-2004, 2004 - 2005 and 2006-2007 by the Assessing Officer
on the ground that the assessee is not the owner of the project assets and
hence is not eligible for claiming depreciation of such assets. However,
taking into account the fact that the entire cost of the project has to be
owned by the assessee and such cost has to be recovered from the users
of the project by way of toll fees prescribed by the Government, the
entire cost was amortized over the period of concession. Since the
assessee has claimed huge depreciation more than amortization value for
the assessment years 2002-2003, 2003-2004 and 2004-2005, notices
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Tax Case Appeal Nos.
under Section 148 were issued stating that the depreciation claimed was
far and excess of the amortization to be allowed as per the decision taken
in the assessment year 2006-2007. Thereafter, returns for those three
years were filed by the assesee and after hearing the assessee, the
assessments were finalised which were challenged in appeals before the
Commissioner of Income Tax (Appeals). The Appeals were allowed by
the Commissioner of Income Tax (Appeals). Aggrieved over the same,
the Revenue filed an appeal before the Income Tax Appellate Tribunal.
The Income Tax Appellate Tribunal, after considering the rival
submissions of both the parties dismissed the appeals. Now the present
appeals are filed on the following substantial question of law:-
"Whether on the facts and in the circumstances of
the case, the Income Tax Appellate Tribunal was right in
holding that the assessee was entitled claim depreciation
at the rate of 10% applicable to buildings on the roads
and bridge developed and maintained by the assessee
under the terms of "Build, Operate and Transfer (BOT)
agreement with the Government even though as per the
terms of the agreement the assessee could not be
considered as the owner of the assets?".
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Tax Case Appeal Nos.
3. Heard Mr.Karthik Ranganathan, learned Standing Senior
Counsel for the appellant and Mr.V. Balaji, learned counsel for the
respondent.
4. Both the counsels contended that the Hon'ble Supreme Court in
the decision in Principal Commissioner of Income Tax Vs. GVK Jaipur
Expressway Ltd., reported in [2018] 100 taxmann.com 96 (SC) has
settled the present substantial question of law in favour of the assessee.
The relevant portions of the decision of the Hon'ble Supreme Court is
extracted hereunder.
"14. In our opinion, the term owned as occurring
in Section 32 (1) of the Income-tax Act, 1961 must be
assigned a wider meaning. Any one in possession of
property in his own title exercising such dominion over
the property as would enable other being excluded
therefrom and having right to use and occupy the
property and/or to enjoy its usufruct in his own right
would be the owner of the buildings though a formal deed
of title may not have been executed and registered as
contemplated by Transfer of Property Act, Registration
Act, etc. 'Building owned by the assessee' the expression
as occurring in Section 32(1) of the Income-tax Act
means the person who having acquired possession over
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the building in his own right uses the same for the
purposes of the business or profession though a legal title
has not been conveyed to him consistently with the
requirements of laws such as Transfer of Property Act,
and Registration Act, etc. but nevertheless is entitled to
hold the property to the exclusion of all others.
15. Generally speaking depreciation is an
allowance for the diminution in the value due to wear
and tear of capital asset employed by an assessee in his
business. Black's Law Distionary (Fifty Edn.) defines
depreciation to mean, inter alia:
A fall in value, reduction of worth. The
deterioration or the loss or lessening in value, arising
from age, use, and improvements, due to better methods.
A decline in value of property caused by wear or
obsolescence and is usually measured by a set formula
which reflects these elements over a given period of
useful life of property.... Consistent gradual process of
estimating and allocating cost of capital investments over
estimated useful life of asset in order to match cost
against earnings............
19. It is well-settled that there cannot be two
owners of the property simultaneously and int he same
sense of the term. The intention of the Legislature in
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Tax Case Appeal Nos.
enacting Section 32 of the Act would be best fulfilled by
allowing deduction in respect of depreciation to the
person in whom for the time-being vests the dominion
over the building and who is entitled to use it in his own
right and is using the same for the purposes of his
business or profession. Assigning any different meaning
would not subserve the legislative intent. To take the
case at hand it is the appellant-assessee who having paid
part of the price, has been placed in possession of the
houses as an owner and is using the buildings for the
purpose of its business in its own right. Still the assessee
has been denied the benefit of Section 32. On the other
hand, the Housing Board would be denied the benefit of
Section 32 because inspite of its being the legal owner it
was not using the building for its business or profession.
We do not think such a benefit-to-none situation could
have been intended by the Legislature. The finding of
fact arrived at in the case at hand is that though a
document of title was not executed by Housing Board in
favour of the assessee, but the houses were allotted to the
assessee by the Housing Board, part payment received
and possession delivered so as to confer dominion over
the property on the assessee whereafter the assessee had
in its own right allotted the quarters to the staff and they
were being actually used by the staff of the assessee. It is
common knowledge, under the various scheme floated by
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bodies like housing boards, houses are constructed on
large scale and allotted on part payment to those who
have booked. Possession is also delivered to the allottee
so as to enable enjoyment of the property. Execution of
document transferring title necessarily follows if the
schedule of payment is observed by allottee. If only the
allottee may default the property may revert back to the
Board. That is a matter only between the Housing Board
and the allottee. No third person intervenes. the part
payment made by allottee are with the intention of
acquiring title. the delivery of possession by Housing
Board to allottee is also a step towards conferring
ownership. Documentation is delayed only with the idea
of compelling the allottee to observe the schedule of
payment."
5. After discussing the various decisions, the Hon'ble Supreme
Court clearly held that the assessee is entitled to claim depreciation of
public roads, treating the same as building.
6. In view of the decision of the Hon'ble Supreme Court, the
substantial question of law is answered against the Revenue.
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7. In the result, the appeals are dismissed. There shall be no order
as to costs.
[M.D., J.] [R.H., J.]
29.06.2021
Index : Yes/No
Internet : Yes
gv
To
Commissioner of Income Tax-I
Chennai.
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Tax Case Appeal Nos.
M. DURAISWAMY, J.
and
R. HEMALATHA, J.
gv
Tax Case Appeal Nos.355 to 358 of 2011
29.06.2021
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