2013 (4) TMI 796 - AT - Income Tax

Summary

Issues involved:
The judgment involves issues related to the disallowance of depreciation on intangible assets, entitlement to depreciation on the cost of a road, reliance on previous decisions, disallowance of supervision charges, and the method of accounting.

Issue 1: Disallowance of Depreciation on Intangible Assets:
The Revenue appealed against the deletion of disallowance of depreciation on intangible assets in the form of License Fee under BOT Scheme. The CIT(A) held that the right to collect toll was a valuable right with commercial value, making it an intangible asset eligible for depreciation. The ITAT found that the right to collect toll was acquired as per law and had commercial value, thus upholding the CIT(A)'s decision based on relevant precedents.

Issue 2: Entitlement to Depreciation on the Cost of Road:
The Revenue contested the CIT(A)'s decision to allow depreciation on the cost of the road, arguing that the assessee did not fulfill the conditions prescribed u/s. 32(1)(ii) as they were neither the owner of the road nor had put it for business purposes. However, the ITAT upheld the CIT(A)'s decision, stating that the right to collect toll was an intangible asset eligible for depreciation, supported by relevant case laws.

Issue 3: Reliance on Previous Decisions:
The Revenue challenged the CIT(A)'s reliance on previous decisions by the ITAT, D-Bench, Mumbai, arguing that they were distinguishable from the present case. The ITAT found that the CIT(A) was justified in relying on the precedents, as they supported the classification of the right to collect toll as an intangible asset eligible for depreciation.

Issue 4: Disallowance of Supervision Charges:
The dispute involved the disallowance of supervision charges paid on a cash basis, with the Assessing Officer claiming that the liability had not crystallized during the year. The CIT(A) overturned this decision, stating that the liability for supervision charges had crystallized in the relevant year, based on documentary evidence. The ITAT upheld the CIT(A)'s decision, emphasizing that the liability had indeed accrued during the assessment year.

Issue 5: Method of Accounting:
The Assessing Officer disallowed supervision charges on the basis that they were not accrued in the previous year, despite the assessee following the mercantile system of accounting. The CIT(A) allowed the claim, stating that the liability had crystallized during the relevant year. The ITAT upheld this decision, noting that the liability for supervision charges had indeed accrued in the assessment year.