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2024 Supreme(Online)(ITAT) 1607
INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH)
Shri Brajesh Kumar Singh, AM, Shri Saktiijit Dey, VP
ADDI. CIT SPL. RANGE-03 NEW DELHI – Appellant
Versus
DELHI AIRPORT METRO EXPRESS PVT. LTD. NEW DELHI – Respondent
ITA Nos.4102 & 4103/DEL/2019
For the Appellants/Petitioners: Sh. Rohit Jain, Adv., Sh. Deepesh Jain, Adv.
For the Respondents: Sh. T. James Singson, CIT-DR
Concessionaires under BOT schemes are entitled to depreciation claims for capital costs despite not owning the underlying infrastructure, supported by relevant case law and CBDT guidance.
Headnote:(A) Income Tax Act, 1961 - Section 32 - Depreciation claimed by a concessionaire for BOT project - The A.O. disallowed depreciation of Rs.297,86,65,783/- asserting the assessee was not the owner of the assets, instead allowing amortization of Rs.75,93,00,658/- according to CBDT circular no.9 dated 23.04.2014. The CIT(A) deleted the disallowance, citing precedent and holding the assessee eligible for depreciation on assets necessary for generating enduring benefits during the contract period. (Paras 3, 5, 9 and 10)
(B) Ownership and Depreciation - The Tribunal upheld that rights derived from BOT contracts entitle the concessionaire to amortize costs, validating the CIT(A)'s allowance aligning with established case law. (Paras 9.5, 10)
Facts of the case:
The assessee, a concessionaire for the Airport Metro Express Project, incurred significant capital expenditures and claimed substantial depreciation. The A.O. contended it lacked ownership of the assets, warranting disallowance and suggesting amortization under the Circular.
Findings of Court:
The Tribunal confirmed the CIT(A)'s deletions, supporting that the contract rights justified the depreciation claims.
Issues: Determining the nature of ownership concerning asset depreciation entitlements in BOT schemes, particularly regarding infrastructure projects.
Ratio Decidendi: The Tribunal emphasized the importance of longstanding judicial precedents affirming the concessionaire's rights in BOT schemes, hence entitling depreciation claims as amortization, validating the CIT(A)'s overturning of the A.O.'s decision.
Result: Appeals by the Revenue dismissed, upholding the deletion of disallowed depreciation.
| Table of Content |
|---|
| 1. revenue appeals against cit(a) order. (Para 1 , 2) |
| 2. claim of depreciation on assets under bot. (Para 3 , 4 , 5) |
| 3. recurring issue affected by prior rulings. (Para 7 , 8) |
| 4. court's rationale on depreciation eligibility. (Para 9 , 10) |
| 5. final dismissal of revenue's appeals. (Para 11 , 12) |
ORDER
PER BRAJESH KUMAR SINGH, AM,
These appeals by the Revenue are directed against the order of the Ld. CIT(A)-34, New Delhi, both dated 22.01.2019 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’) pertaining to Assessment Years 2012-13 & 2013-14 respectively.
2. Since, the issues are common and connected, hence, the appeals were heard together and are being consolidated and disposed of by this common order.
3. For the sake of reference, we are referring to grounds of appeal raised in ITA No.4102/Del/2019, for Assessment Year 2012-13, which reads as under:-
“1. Whether on facts and in circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the disallowance of Rs.221,93,65,125/- made by the AO on account of depreciation claimed, after allowing the benefit of amortization of Rs.75,93,00,658/- to the assessee, ignoring the vital facts that the assessee was not the owner of the assets on which depreciation was claimed.”
4. Brief facts of the case: During the relevant year under consideration, the assessee was engaged in the business of Metro Rail operations. The assessee was a concessionaire for the Airport Metro Express Project of Delhi Metro Rail Corporation (DMRC) and had, pursuant to Concession Agreement dated 25.08.2008, developed the Airport Metro Express Project under Build-Operate-Transfer (BOT) scheme. The assessee had been granted commercial right/concession to operate the project for a period 30 years. During the year, the assessee company had claimed depreciation of Rs.297,86,65,783/- on capital expenditure incurred for various assets for the project. The assessee company in its profit and loss account had debited amortization/depreciation of the cost of development incurred in Airport Metro Express Project at Rs.4,45,51,048/- whereas in the computation of income claimed depreciation at Rs. 297,86,65,783/-as per section 32 of Income Tax Act and declared loss of Rs.573,72,02,672/-in its return of income as against the loss of Rs.325,65,17,845/- as per its Profit and Loss Account. According to the AO, the assessee being a concessionaire cannot claim depreciation on the assets developed by it under BOT scheme since the infrastructure developed by the concessionaire was not owned by it and, therefore, depreciation on such assets was not admissible to it. The AO placed reliance on the circular no.9 issued by CBDT dated 23.04.2014, in which according to the AO the CBDT clarified that the cost of construction on development of infrastructure facility of roads/highways under BOT project may be amortized and claimed as allowable business expenditure under the Act. The Assessing Officer held that the said circular would be applicable to a case like that of an assessee company. The AO also received direction of Addl. CIT, Range-7, New Delhi vide letter dated 24.02.2015 u/s 144A of the Income Tax Act, 1961 . On the basis of the direction and relying on CBDT's circular no.09/2014 dated April 23, 2014, the Assessing Officer disallowed the claim of depreciation amounting to Rs.297,86,65,783/- and instead allowed the amortization of Rs.75,93,00,658/- for this year of entire expenditure over the period of concession agreement of 30 years and thereby made a net disallowance of Rs.221,93,65,125/- on account of depreciation claimed by the assessee company.
5. Against the said order, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) allowed the appeal of the assessee and deleted the disallowance of Rs.2,21,93,65,125/- on account of depreciation. 6. Against the said order, the Revenue is in appeal before us.
7. At the outset, the ld. AR submitted that this is a recurring issue and is co
