11. We have carefully perused the agreement entered into by the assessee company with the Government of Tamil Nadu vide concession agreement dated 22-12-2000. In this agreement Article 1 deals with the definition of project as defined under:-
” Project” – means the project described in Appendix 1 which the concessionaire is required to design, engineer, procure, finance, construct, rehabilitate, repair, improve, operate, manage, maintain and transfer in accordance with the provisions of this Agreement”.
When we look at Appendix I, the detail of project are mentioned as under:-
Details of Project:
(1) widening of carriageway to 7 m width for almost the entire stretch except for portions where the carriageway width ranges from 6.8 m 7m in which case the existing width will be retained;
(2) Construction of following types of shoulders on three stretches of Project Road based on existing guidelines and traffic load construction.
(i) Paved shoulder of 1.75 m on either side from Km 22/300 to Km54/000.
(ii) Paver Block shoulder of 1.75 m width on either side from Km 54/000 to Km75/300
(iii) Gravel shoulder of 250 margin money thickness from Km 75/300 to KM135/500;
(3) Strengthening of pavement wherever necessary;
(4) Resurfacing with 25mm BC for the entire stretch of Project Road;
(5) Camber and super elevation correction;
(6) Geometric Improvements along the Project Road wherever necessary and possible, including the nine curves identified as critical;
(7) Junction/intersection improvement including provision of lighting arrangements and traffic control systems;
(8) Minor repair works on Bridges and Culverts;
(9) Pavement centre-line marking with reflective paint and edge-line marking with thermo plastic paint;
(10) Provision of Cat’s Eye and Road Studs;
(11) Installation of reflective sign boards/road furniture to improve road safety and enhance user comfort including provision of guide posts with reflectors and delineators at suitable intervals for the entire length;
(12) Provision for aesthetically designed primary toll plazas and secondary toll plazas, there shall be 2 nos. of primary toll plaza and 4 nos. of secondary toll plaza, but the same could be increased depending on toll strategy and traffic requirements in such numbers as may be required depending on traffic pattern and flow;
(13) Provision of road-side arboriculture and landscaping including tree plantation;
(14) Embankment repairs and turfing for stabilizing the slopes;
(15) Provision of bus bays/bus-stops and passenger shelters along Project Road;
(16) Optional establishment of up to two way-side amenities including restaurants;
(17) Installation of help-line and other communication systems of reasonable intervals;
(18) Establishment of systems/facilities for provision of 24 hours patrolling, vehicle break-down, tow-away and ambulance service on the Project Road;
(19) Establishment/ development of Site offices, control rooms, residential quarters and storage spaces/stock yards etc required for implementation of Project; and
(20) Establishment/ Installation/ Development of any other structures/ service/systems agreed to by the Parties as constituting the Project under this Agreement.
The above details of project clearly show that it is basically the project for
widening, strengthening etc., of the existing road. Clause (16) refers to Optional establishment of Two Way side amenities including restaurants. But on questioning, it was admitted that no such amenities have been created and the Assessee was not deriving any income from such amenities. Merely because some Optical Fiber lines or connection lines have been laid, the road cannot get converted into a plant. We do not find force in the statement that the Assessee has installed specialized automated toll plaza and, therefore, it should be construed as plant. As per agreement entered into Govt, of Tamil Nadu, the Assessee Company became entitled to collect fixed amount of toll per vehicle for which it could have created any kind of barrier for collection of such toll. If the Assessee has chosen to install automated toll plaza then the same was done for its own convenience and mere construction of one toll plaza will not change the nature of the asset which remains the road.
16. On a specific question by the Bench as to whether the Assessee has received any charges on account of other services towards any other services like telephone service by the Assessee, it was submitted and admitted that no other charges than toll charges have been received by the Assessee. Even if as provided in the agreement letter, the Assessee constructs some restaurant etc., on this particular road or provides some other amenities, then on such assets depreciation may be claimed as per appendix but that would not convert the nature of the main asset i.e., road into plant
17. In the above detailed discussion we have come to the conclusion that the Assessee has constructed only a road. Now, the question is whether the capital, as expenditure incurred on such road would make it eligible for depreciation under the head “building”. The same has been denied by the Department on the basis of the decision of the Hon’ble Supreme Court in the case of Indore Municipal Corporation v. CIT (Supra). A careful perusal of this decision would show that this matter arose out of Special Leave by order dated 05.8.1983. Though the Asst. Year is not mentioned in the judgment but from the order regarding Special Leave, it becomes clear that it must be related to the earlier years because it would take some time for the matter to travel to the Supreme Court. A careful perusal of various Appendices which prescribe the table of rates by which depreciation is admissible would show that old Appendix I, which was applicable to the Asst. Year 1984-85 to 1987-88 did not mention in the Notes that buildings include roads, bridges, culverts, wells and tube wells. In the later Appendices which is applicable from Asst. Year 1988-89 to 2002-03 and 2003-04 and 2005-06 and the latest Appendix which is applicable for the Asst. Year 2006-07 contain the following Note :-
Note : Building includes roads, bridges, culverts, wells and tube wells. Therefore, it is absolutely dear that the Hon’ble Supreme Court has held in the case of Indore Municipal Corporation that the buildings would not include roads because Appendix I did not clarify that roads would be included in the building. As pointed out, after the Asst. Year 1988-89 all the Appendices have the note that building would include roads. Therefore, in our view, the Assessee would become entitled to depreciation on the road in the category of building. In these circumstances, we set aside the order of the Commissioner (Appeals) on this issue and direct the Assessing Officer to allow depreciation on the road at the rate applicable to the building.