News Flash June 2013

abm & associates
CHARTERED ACCOUNTANTS
NEWS FLASH
June 2013

abm & associates
Head Office : Navi Mumbai Branches : Pune | Kolhapur | Belgaum 1
Contents
OPERATION AND MAINTENANCE OF INFRASTRUCTURE FACILITY ON BOT BASIS – I.E. LICENSE TO
COLLECT TOLL IS “INTANGIBLE ASSET” ELIGIBLE FOR DEPRECIATION ___________________________ 2
IN BRIEF................................................................................................................................................................................2
FACTS ....................................................................................................................................................................................2
ISSUE UNDER CONSIDERATION............................................................................................................................................3
TRIBUNAL RULING ................................................................................................................................................................3
THE REAL ESTATE BILL, 2013 _____________________________________________________________________ 4
IN BRIEF................................................................................................................................................................................4
THE MAIN FEATURES OF THE DRAFT BILL...........................................................................................................................4
MAHARASHTRA LOCAL BODY TAX_________________________________________________________________ 7
INTRODUCTION .....................................................................................................................................................................7
WHAT IS LBT? .....................................................................................................................................................................7
WHO IS LIABLE TO REGISTER?............................................................................................................................................7
TAX RATES ............................................................................................................................................................................7
TAX PAYMENTS .....................................................................................................................................................................8
RETURN FILING.....................................................................................................................................................................8
RECORDS TO BE MAINTAINED..............................................................................................................................................8
INTEREST & PENALTY...........................................................................................................................................................8

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Operation and Maintenance of Infrastructure facility on BOT basis – i.e.
License to Collect Toll is “Intangible Asset” eligible for Depreciation
In Brief
Recently, ITAT Pune ‘B’ Bench in case of Ashoka
Infraways Pvt. Limited1
held that Cost Incurred for
Development and Construction of Infrastructure
facility on Build Operate and Transfer (BOT) basis
under “License to Collect Toll” is an Intangible
Asset and shall be entitled for depreciation under
section 32 of the Income Tax Act, 1961.
Facts
Assessee is engaged in the business of
construction, operation and maintenance of
Infrastructure facilities.
The assessee was awarded an infrastructure work
1 ITA.No.185 & 186/PN/12
of the Dewas By-pass Road in the State of
Madhya Pradesh on BOT basis. As terms of the
agreement with the Government of Madhya
Pradesh, assessee was required to develop,
construct and maintain the road at its own cost
for a specified period. On expiry of the specified
period, the infrastructural facility was to be
transferred to the Government of Madhya
Pradesh free of charge. In consideration of the
expenditure incurred on construction, operation
and maintenance of the road and handing it over
to the Government of Madhya Pradesh free of
charge, assessee was bestowed a right to collect
Toll from the motorists using the road during the
‘specified period’ i.e. approx. 11 Years.
Assessee had Invested Rs. 61.06 Crores on
development and construction infrastructure

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facility which it had capitalised in Books as assets
–‘License to Collect Toll’. Assessee claimed
depreciation on said asset being akin to a license,
being ‘intangible asset’ within the meaning of
section 32(1)(ii) of the Income Tax Act, 1961.
AO held that the ‘Right to collect Toll’ was neither
a license nor a valuable commercial or business
right covered in the expression ‘intangible asset’
for the purposes of section 32(1)(ii) of the Act and
hence disallowed the claim of Depreciation of Rs.
11.44 Crores. However, AO allowed proportionate
cost of development of Rs. 5.38 Crores on pro-
rata basis spread over the specified period.
Issue under consideration
Whether the assessee was eligible to claim
depreciation on ‘Right to Collect Toll’ as an
intangible asset in terms of section 32(1)(ii) of the
Income Tax Act, 1961.
Tribunal Ruling
Tribunal held that
Section 32(1)(ii) of the Act permits allowance of
depreciation on assets being ‘intangible assets’
which are wholly or partly owned by the assessee
and used for the purpose of its business.
Assessee had got the ‘Right to collect Toll for the
specified period only after incurring expenditure
through its own resources on development of
Infrastructure facility. Hence, ‘Right to Collect Toll’
being an intangible asset falls within the purview
of section 32(1)(ii) of the Act.

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The Real Estate Bill, 2013
In Brief
The Bill proposes to regulate transactions in the
real estate sector and is in pursuance of the
powers under Entries 6, 7 and 46 of the
Concurrent List of the Constitution, which deals
with Transfer of Property, Registration of Deeds
and Documents, and Contracts. The draft Bill has
been prepared after detailed deliberations with
the State Governments and concerned Central
Government Ministries, and after having suitably
incorporated the suggestions received from them.
The main features of the Draft Bill
 Applicability of the Bill:
The proposed Bill is limited in its applicability to
residential real estate i.e. housing and any other
independent use ancillary to housing. The two
important definitions in this regard are:
“real estate project means the development of a
building or a building consisting of apartments, or
converting an existing building or a part thereof
into apartments, or the development of a colony
into plots or apartments, as the case may be, for
the purpose of selling all or some of the said
apartments or plots or buildings and includes the
development works thereof”
“apartment whether called dwelling unit, flat,
premises, suite, tenement, unit or by any other
name, means a separate and self-contained part
of any immovable property located on one or
more floors or any part thereof, in a building or
on a plot of land, used or intended to be used for
residential purposes, or for any other type of
independent use ancillary to the purpose
specified and includes any covered garage,
whether or not adjacent to the building in which
such apartment is located which has been
provided by the promoter for the use of the
allottee for parking any vehicle, or as the case
may be, for the residence of any domestic help
employed in such apartment”

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 Establishment of Real Estate
Regulatory Authority:
Establishment of one or more ‘Real Estate
Regulatory Authority’ in each State/UT, or one
Authority for two or more States/UT, by the
Appropriate Government, with specified functions,
powers, and responsibilities to exercise oversight
of real estate transactions, to appoint adjudicating
officers to settle disputes between parties, and to
impose penalty and interest;
 Registration of Real Estate Projects
and Registration of Real Estate
Agents:
Mandatory registration of real estate projects and
real estate agents who intend to sell any
immovable property, with the Real Estate
Regulatory Authority;
 Mandatory Public Disclosure of all
project details:
Mandatory public disclosure norms for all
registered projects, including details of the
promoters, project, layout plan, plan of
development works, land status, carpet area and
number of the apartments booked, status of the
statutory approvals and disclosure of proforma
agreements, names and addresses of the real
estate agents, contractors, architect, structural
engineer etc.;
 Functions and Duties of Promoter:
Duty of promoters towards disclosure of all
relevant information and adherence to approved
plans and project specifications, obligations
regarding veracity of the advertisement for sale or
prospectus, responsibility to rectify structural
defects, and to refund moneys in cases of default;
 Compulsory deposit of seventy
percent or such lesser percent as
notified by the Appropriate
Government, to cover the
construction cost of the project, of
funds received by the Promoter, in a
separate bank account:
Provision to compulsorily deposit seventy percent
or such lesser percent as notified by the
Appropriate Government, of the amounts realized
for the real estate project from the allottees, from
time to time, shall be deposited in a separate
account to be maintained in a scheduled bank
within a period of fifteen days of its realization to
cover the cost of construction and shall be used
only for that purpose.
 Functions of Real Estate Agents:
Real estate agents not to facilitate the sale of
immovable property which are not registered with
the Authority required under the provisions of the
Act, obligation to keep, maintain and preserve
books of accounts, records and documents,
obligation to not involve in any unfair trade
practices, obligation to facilitate the possession of
documents to allottees as entitled at the time of
booking, and to comply with such other functions
as specified by Rules made in that regard;
 Rights and Duties of Allottees:
Right to obtain information relating to the
property booked, to know stage-wise time
schedule of project completion, claim possession
of the apartment or plot or building as per

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promoter declaration, refund with interest in case
of default by the promoter, and after possession
entitled to necessary documents and plans. Duty
of allottees to make necessary payments and
carry out other responsibilities as per the
agreement;
 Functions of Real Estate Regulatory
Authority:
The Authority to act as the nodal agency to co-
ordinate efforts regarding development of the
real estate sector and render necessary advice to
the appropriate Government to ensure the
growth and promotion of a transparent, efficient
and competitive real estate sector;
 Fast Track Dispute Settlement
Mechanism:
Establishment of fast track dispute resolution
mechanisms for settlement of disputes, through
adjudicating officers (an officer not below the rank
of Joint Secretary to the State Government) to be
appointed by the Authority, and establishment of
an Appellate Tribunal to hear appeals from the
orders of the Authority and the adjudicating
officer;
 Establishment of Central Advisory
Council:
Establishment of Central Advisory Council to
advise the Central Government on matters
concerning implementation of the Act, with a
mandate to make recommendations on major
questions of policy, protection of consumer
interest and to foster growth and development of
the real estate sector. The Council to have among
others, five representatives of State Governments,
to be selected by rotation;
 Establishment of Real Estate
Appellate Tribunal:
Establishment of Real Estate Appellate Tribunal,
by the appropriate government to hear appeals
from the orders or decisions or directions of the
Authority and the adjudicating officer. The
Appellate Tribunal is to be headed by a sitting or
retired Judge of the High Court with one judicial
and one administrative/technical member;
 Punitive Provisions:
Punitive provisions including de-registration of
the project and penalties in case of contravention
of the provisions of the Bill or the orders of the
Authority or the Tribunal;
 Power to make Rules and
Regulations:
Appropriate Government to have powers to make
rules over subjects specified in the Bill, and the
Regulatory Authority to have powers to make
regulations.

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Maharashtra Local Body Tax
Introduction
Recently, the Maharashtra Government
introduced Local Body Tax (LBT) in Pune, Pimpri-
Chinchwad, Navi Mumbai, Thane, and Nagpur
Municipal jurisdictions which is applicable from
April 1, 2013. LBT has been introduced in lieu of
Octroi / Cess in various cities.
What is LBT?
The LBT is payable on the entry of goods brought
into the areas of a municipal corporation for the
purpose of consumption, use or sale.
Who is liable to Register?
Dealers having turnover exceeding the threshold
limits are required to obtain registration. The
limits are as under:
Dealer
Turnover Criteria
Total Turnover Schedule A
Goods
Importer Sales / Purchases
of ₹ 1 Lakh
Sale / Purchase
of ₹ 5,000
Others Sales / Purchases
of ₹ 1 Lakh
Sale / Purchase
of ₹ 5,000
A dealer registered under Maharashtra Value
Added Tax Act, 2005, having a place of business
within the Municipal Corporation limits is deemed
to be registered for LBT.
Tax Rates
LBT is applicable on all goods as mentioned in
Schedule A. This Schedule provides the rates of
LBT, which varies from 0.1 % to 7%. Any goods
not mentioned in Schedule A or Schedule B would

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fall under 4% category. Goods specified under
Schedule B are exempt from LBT. These goods
include, basic necessities like Milk, Vegetables etc.
Tax Payments
The dealer is required to pay the LBT by 10th of
following month. Banks which accepts LBT
payments & Challans are mentioned in every
Municipal Corporations levying LBT.
Return Filing
The dealer is required to file returns as under
Periodicity Form
Type
Due Date
Six
Monthly
E- I 15 Days from the end
of such half year
Yearly E – II 15 Days from the end
of such year
Records to be maintained
Dealers are required to maintain a register in
prescribed format containing details of goods
imported, consumed, purchased or sold by him.
The dealer is also required to maintain a register
of purchases and receipt of goods on transfer
basis in form D.
He should also state the person deemed to be the
manager of business in Form F.
The dealer is also required to mention the
following certificate as declaration.
“I/We hereby certify that my/our registration
certificate under these rules is in force on the date
on which the sale of goods specified in this
bill/invoice/cash memorandum, is made by me/us
and that the transaction of sale covered by this
bill/invoice/cash memorandum, has been effected
by me/us in the course of my/our business.”
Interest & Penalty
When a dealer fails to pay the LBT on time, he is
liable to pay interest at 2% per month for the first
12 months and 3 % after that.
Failure to issue bills, invoice or cash memo is
subject to a maximum of double the tax payable.
Failure to apply for registration is subject to a
maximum of 10 times the LBT payable during the
unregistered period.
Failure to submit returns in prescribed time leads
to a maximum of ₹ 5,000 penalty. Failure to
maintain records in prescribed format leads to a
penalty of ₹ 5,000 or double the LBT payable
(whichever is less).

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Our Offices
Navi Mumbai
#NL 5/11/03, Sector 3
Next to Parsik Bank
Nerul East
Navi Mumbai – 400 706
: +91 22 2771 2275
Pune
#11/E-2, New Friends
Housing Society
Paul Road
Pune – 411 038
: +91 20 2539 7707
Kolhapur
#1-2, Atharva 7th
Avenue
C.S.No.2007, 7th
Lane
Rajarampuri
Kolhapur – 416 008
: +91 231 2531 707
The information contained herein is of general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor
to provide accurate and timely information, there can be no guarantee that such information is accurate as of date it is received or that it will continue to be accurate
in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
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News Flash June 2013

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