2013 (4) TMI 963 - AT - Income Tax

Summary

Issues involved:
The appeal challenges the order of the Ld.CIT(A)-I, Nashik for the A.Y. 2008-09 regarding the depreciation claimed on the asset 'Licence to collect toll'.

Issue 1: Depreciation on 'Licence to collect toll'
The controversy revolves around the depreciation claimed by the assessee on the expenditure incurred on the Road Project, the Katni By Pass Road on N.H. 7 in Madhya Pradesh, treated as a 'Licence to collect toll'.

The assessee, engaged in the development, operation, and maintenance of the road on BOT basis, claimed depreciation on 'Licence to Collect Toll'. The Assessing Officer disallowed the claim, allowing amortization instead. The Ld.CIT(A) allowed the claim, considering the 'Right to Collect Toll' as an intangible asset eligible for depreciation under the Income Tax Rules, 1962. The Ld.CIT(A) held that the 'Right to Collect Toll' is a valuable right with commercial value, supported by precedents. The revenue appealed against this decision.

Issue 2: Nature of agreement and eligibility for depreciation
The Assessing Officer contended that the right of toll collection was a repayment agreement, not a licensing agreement. However, it was acknowledged that the assessee invested its funds for road construction, operated toll plazas, and collected toll as per the agreement with the Government. The Tribunal, in a similar case, upheld the eligibility for depreciation on the 'Right to collect Toll' as an intangible asset under section 32(1)(ii) of the Act.

Judgment Summary:
The Tribunal affirmed the Ld.CIT(A)'s decision, holding the assessee eligible for depreciation on the 'Right to collect Toll' as an intangible asset. The Tribunal found no reason to interfere with the Ld.CIT(A)'s order, confirming the allowance of depreciation in favor of the assessee. Consequently, the revenue's appeal was dismissed.