Plus BKSP Toll Limited Vs ACIT (ITAT Mumbai)
The ITAT Mumbai decided three appeals filed by the assessee relating to Assessment Years 2012-13 and 2013-14 concerning amortization of expenditure incurred on a highway project executed under a Build-Operate-Transfer (BOT) concession agreement with Maharashtra State Road Development Corporation Limited (MSRDC). The appeals also involved a penalty imposed under Section 271(1)(c) of the Income Tax Act.
The assessee, a special purpose vehicle formed by a Malaysian company and an Indian company, had entered into a concession agreement dated 25.08.2006 with MSRDC for four-laning, operation, maintenance, and toll collection of the Bhiwandi-Kalyan Shil Phata Highway. Under the original concession agreement, the project period ended on 28.04.2013. The assessee had claimed depreciation on infrastructure costs incurred for the project.
Following the Bombay High Court ruling in CIT v. West Gujarat Expressway Ltd., which held that depreciation on toll roads was not allowable where ownership did not vest with the contractor, CBDT issued Circular No. 9/2014 dated 23.04.2014 clarifying that expenditure incurred on BOT road projects could instead be amortized over the remaining period of the concession agreement.
Pursuant to revision proceedings under Section 263, the Assessing Officer rejected the depreciation claim and allowed amortization based on a concession period extending till 10.07.2024. The assessee contended that the concession agreement had actually terminated on 28.04.2013 because the proposed extension till 10.07.2024 never became effective. Although MSRDC proposed extension of the concession period, the required toll notification extending toll collection till 2024 was never issued. A later notification extended toll collection only till 26.10.2013 and imposed an escrow condition that was rejected by the assessee. The assessee terminated the agreement on 28.04.2013, and the arbitral tribunal subsequently upheld the validity of termination.
