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2010 (12) TMI 1181 - AT - Income TaxDepreciation on Toll Road developed by the appellant - HELD THAT - In terms of BOT scheme and entrepreneur is required to build an infrastructure facility by arranging its own finances. Thereupon the operation and maintenance is also the responsibility of the entrepreneur. In consideration thereupon such entrepreneur is entitled to collect on from the motor vehicle passing through such road/bridges etc. In view of these facts, we are of the considered opinion that the assessee is entitled to depreciation. Our view is further supported by the decision of the Pune Bench in the case of Ashoka Info (P) Ltd. vs. ACIT 2008 (12) TMI 271 - ITAT PUNE-B . Therefore, this ground of the assessee in both the appeals is allowed. Disallowance of vehicle running and maintenance expenses - HELD THAT - In the present appeals, the disallowance was made for want of log-book and other relevant record, meaning thereby, it was not explained by the assessee that the vehicles were exclusively used for business purposes. The personal use of vehicles is also not ruled out, therefore, keeping in view the totality of facts and circumstances, only 20% of the claimed expenses are disallowed, consequently, this ground of the assessee is party allowed. adhoc disallowance - HELD THAT - the disallowance is restricted to 50% of the claimed amounts, therefore, this ground of the assessee is partly allowed. Finally, the appeals of the assessee are partly allowed.
Issues Involved:
1. Depreciation on intangible asset (right to collect tax). 2. Adhoc disallowance of vehicle running and maintenance expenses. 3. Adhoc disallowance of general site expenses and labor welfare expenses. Issue-wise Detailed Analysis: 1. Depreciation on Intangible Asset: The primary issue is whether the assessee is entitled to claim depreciation on the right to collect tax as an intangible asset under Section 32 of the Income Tax Act. The assessee had incurred costs for constructing a toll road under a BOT (Build, Operate, Transfer) project and claimed depreciation on the capitalized cost of the project. The claim was initially rejected by the Assessing Officer and upheld by the CIT(A), leading to the appeal. The Tribunal examined the relevant provisions of Section 32, particularly the definitions and explanations related to intangible assets. It noted that the term "intangible asset" includes "any other business or commercial rights of similar nature," which is an inclusive definition. The Tribunal concluded that the right to collect toll, granted by the government, qualifies as an intangible asset eligible for depreciation under Section 32(1)(ii). The Tribunal relied on the Pune Bench's decision in Ashoka Info (P) Ltd. vs. ACIT, which supported the view that such rights are depreciable intangible assets. Consequently, the Tribunal allowed the assessee's claim for depreciation. 2. Adhoc Disallowance of Vehicle Running and Maintenance Expenses: The second issue pertains to the disallowance of vehicle running and maintenance expenses on an adhoc basis. The assessee argued that the vehicles were necessary for its business operations. The Tribunal considered the nature of the business and the necessity of vehicles for the assessee. It referred to the Indore Bench's decision in M/s. Keti Construction vs. ACIT and the Gujarat High Court's decision in Sayaji Iron & Engg. Co. vs. CIT, which held that adhoc disallowances without proper basis are not justified. However, the Tribunal noted that the disallowance was made due to the lack of log-books and relevant records, indicating that the vehicles might not have been used exclusively for business purposes. Therefore, the Tribunal partially allowed the assessee's claim by disallowing only 20% of the claimed expenses, acknowledging the possibility of personal use. 3. Adhoc Disallowance of General Site Expenses and Labor Welfare Expenses: The final issue involves the adhoc disallowance of general site expenses and labor welfare expenses. The assessee contended that similar disallowances were deleted in the previous assessment year due to the lack of basis for such adhoc disallowances. The Tribunal observed that the disallowance was made due to the absence of proper vouchers and necessary details in some vouchers. To resolve the matter, the Tribunal decided to restrict the disallowance to 50% of the claimed amounts, thereby partly allowing the assessee's claim. This approach balanced the need for proper documentation with the recognition that some expenses were legitimate business expenditures. Conclusion: The Tribunal's judgment resulted in a partial allowance of the assessee's appeals. The claim for depreciation on the intangible asset (right to collect tax) was fully allowed, while the adhoc disallowances for vehicle running and maintenance expenses and general site and labor welfare expenses were reduced, reflecting a balanced consideration of the facts and circumstances. The order was pronounced in open court on 14th December 2010.
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