Sales Tax Tribunal on BOT projects and HC ruling on toll rolls constructed under BOT

Maharashtra Sales Tax Tribunal rules BOT Project for road construction to be Works Contract
  

This Tax Alert summarizes the recent ruling of Maharashtra Sales Tax Tribunal in the case of M/s. Ashoka Infrastructures V. State Of Maharashtra.

The issue before the Tribunal was whether the contract undertaken by the assessee on “Build, Operate and Transfer” (BOT) basis could be said to be works contract and whether the assessee can be construed as a “dealer” in the context of the provisions of Maharashtra Sales Tax on Transfer of Property in Goods involved in

the Execution of Works Contract (Re-enacted) Act, 1989.

The Tribunal held in affirmative that the BOT project would be works contract, basis decisions of Supreme Court in the cases of Kone Elevators and Larsen and Toubro, also holding that the taxpayer would be covered under the definition of “dealer” under the Works Contract Act.

Delhi High Court rules toll roads constructed under BOT arrangement as “building”

This Tax Alert summarizes a recent ruling of the Delhi High Court (HC) in the case of Moradabad Toll Road Co. Ltd. (Taxpayer) on the eligibility to claim tax depreciation on development of toll road under Build-Operate-Transfer (BOT) arrangement under the Indian Tax Laws (ITL).

The HC considered the specific definitions of the terms, “building,” and “plant” under the ITL, whereby “building” has been defined to include roads within its fold, whereas, the term “plant” specifically excludes building from its ambit. The HC concluded that by implication, definition of “plant” excludes roads. Even otherwise, to qualify as “plant,” the functional test, i.e., usage as a tool or an apparatus in the business is to be satisfied. As the toll road does not satisfy the functional test, the same will not qualify as “plant.” Accordingly, the Taxpayer is not entitled to claim tax deprecation on road as plant (i.e., tax depreciation at the rate of 25%) but as building (i.e., tax depreciation at the rate of 10%).