2016 (4) TMI 1184 - HC - Income Tax

Depreciation on assets not owned by the respondent - whether the Tribunal was right in its decision of treating toll roads as plant and machinery? - Held that - Following the decision of this court in North Karnataka Expressway Ltd. (2014 (11) TMI 351 - BOMBAY HIGH COURT) wherein held that merely because the road is laid out does not mean that the Assessee is the owner thereof. He has laid it out for the purpose of the union and for its ultimate vesting in the public we answer substantial questions of law in the negative i.e. in favour of the appellant-Revenue and against the respondent-assessee.

Summary

Issues:
1. Interpretation of section 32 of the Income-tax Act regarding depreciation on assets not owned by the taxpayer.
2. Classification of toll roads as plant and machinery under rule 5 of New Appendix I of the Income-tax Rules.

Analysis:
1. The appeal challenged the Income-tax Appellate Tribunal's order regarding the assessment year 2007-08. The Revenue's counsel raised two questions of law for consideration. Firstly, whether the Tribunal was correct in directing the Assessing Officer to grant depreciation on assets not owned by the taxpayer, going against section 32 of the Income-tax Act. Secondly, whether toll roads could be treated as plant and machinery, contrary to rule 5 of New Appendix I of the Income-tax Rules.

2. The court noted that the issues raised were similar to a previous decision in North Karnataka Expressway Ltd. The respondent's counsel sought to distinguish the cases based on a clause related to tax depreciation ownership. However, the court found that the clause in question had already been considered in the earlier judgment. The court referred to specific paragraphs in the previous case where the issue had been discussed in detail.

3. Ultimately, the court relied on the precedent set by the North Karnataka Expressway Ltd. case and answered both questions of law in the negative, favoring the appellant-Revenue and ruling against the respondent-assessee. The court disposed of the appeal accordingly, with no order as to costs.