Case Law Details
PR. CIT Vs Green Delhi BSQ Ltd. (Delhi High Court)
The respondent-assessee was to construct, operate and maintain bus shelters. The respondent-assessee was also under an obligation to pay Rs.4.09 crores per month to the Delhi Transport Corporation. The shelters were not owned by the respondent-assessee. The Central Board of Direct Taxes vide Circular No. 9/2014 has inter alia observed that under the BOT schemes the assessees are not entitled to depreciation as they are not owners of the project, which is only constructed by them. Ownership is vested with the Government or its agencies. Therefore, the respondent-assessee was entitled to amortize the amounts spent on construction over the tenure of the agreement.
Whether expenditure is capital or revenue in nature has to be looked at from a commercial point of view. In the present case as noticed there was failure on the part of respondent-assessee to perform its part of the agreement including operation and maintenance of bus shelters and pay concessionaire fee of Rs.4.09 crores per month. Any expenditure or payment of the said nature would necessarily be revenue in character. Even construction cost of the shelters had to be amortized over a period of 10 These would, therefore, not be expenditure of capital nature. In view of the aforesaid, decision in Saurashtra Cement (supra) would not be applicable to the present case as in Saurashtra Cement (supra) the assessee had received liquidated damages on account of failure to supply plant and machinery, a fixed asset. There are a number of cases holding that where the property constructed is not owned by the assessee but by third party, the expenditure incurred by the assessee would not be capital expenditure but revenue expenditure [see Lakshmi Sugar Mills Co.(P) Ltd. versus CIT, (197 1) 3 SCC 526, CIT versus Bombay Dyeing and Manufacturing Co. Ltd., (1996) 3 SCC 496].
In the present case as noticed there was the failure on the part of respondent-assessee to perform its part of the agreement including operation and maintenance of bus shelters and pay concessionaire fee of Rs.4.09 crores per month. Any expenditure or payment of the said nature would necessarily be revenue in character. Even construction cost of the shelters had to be amortized over a period of 10 years. These would, therefore, not be the expenditure of capital nature.
The Assessment Order does not refer to the enduring or permanent benefit acquired by the respondent-assessee and therefore on default and failure to abide by the terms, the expenditure or loss incurred by the respondent-assessee was capital expenditure/loss. Cost of construction as recorded and held above was not capital expenditure. Further, the respondent-assessee was liable to pay the monthly fee of Rs.4.09 crores to the Delhi Transport Corporation, which is certainly revenue expenditure. Additionally, the respondent-assessee was under obligation to maintain and operate shelters which again would be revenue expenditure.
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