2018 (8) TMI 2037 - AT - Income Tax

Depreciation @ 25% on the license to collect tool - Stand of the assessee is that right to collect toll is as intangible asset and hence, the assessee is entitled to claim depreciation on same as per law - AO instead allowed amortization of development cost of infrastructure over the remaining period of toll concessionaire agreement - HELD THAT - Commissioner of Income Tax (Appeals) has allowed depreciation on right to collect toll by following the order of Tribunal in assessee s sister concerns. We observe that the Co-ordinate Bench of the Tribunal in assessee s own case DCIT Vs. Ashoka DSC Katni Bypass Road P. Ltd 2014 (1) TMI 443 - ITAT PUNE allowed depreciation to the assessee on right to collect toll Similar view has been taken by the Co-ordinate Bench 2018 (6) TMI 1759 - ITAT PUNE in the case of assessee s sister concerns. The Revenue has not brought on record any material to show any change in the facts in the assessment year under appeal. Under such circumstances we do not find any infirmity in the order of Commissioner of Income Tax (Appeals) in accepting assessee s claim. Accordingly, the findings of Commissioner of Income Tax (Appeals) are upheld and the appeal of the Revenue is dismissed.

Summary

Issues Involved:
1. Allowance of depreciation on the "right to collect toll" as an intangible asset under Section 32(1)(ii) of the Income Tax Act.

Detailed Analysis:

Issue 1: Allowance of Depreciation on the "Right to Collect Toll" as an Intangible Asset

Facts of the Case:
- The assessee, a special purpose company, was involved in the construction and maintenance of a road infrastructure facility under a Build, Operate, and Transfer (BOT) agreement with the Ministry of Road Transport Highways, Government of India.
- The assessee claimed depreciation at 25% on the "right to collect toll," treating it as an intangible asset.
- The Assessing Officer (AO) disallowed this claim and instead allowed amortization of the development cost over the remaining period of the toll concessionaire agreement.

Commissioner of Income Tax (Appeals) Decision:
- The Commissioner of Income Tax (Appeals) allowed the assessee’s claim for depreciation at 25% on the "right to collect toll" by relying on previous Tribunal decisions in similar cases involving the assessee’s sister concerns.

Tribunal’s Analysis and Findings:
- The Tribunal noted that the issue of depreciation on the "right to collect toll" as an intangible asset under Section 32(1)(ii) was already decided in favor of the assessee in its own case and in the cases of its sister concerns.
- The Tribunal referred to the decision in the case of DCIT Vs. Ashoka DSC Katni Bypass Road P. Ltd. (ITA No. 239/PN/2012), where it was held that the "right to collect toll" emerged as a result of the costs incurred by the assessee on the development, construction, and maintenance of the infrastructure facility. This right was considered an intangible asset eligible for depreciation under Section 32(1)(ii).
- The Tribunal also cited other relevant decisions, including those in the cases of Ashoka Infraways Pvt. Ltd. and Reliance Ports and Terminals Ltd., which supported the assessee’s claim for depreciation on the "right to collect toll."
- The Tribunal dismissed the Revenue’s argument that the right to collect toll was not an intangible asset as envisaged under Section 32(1)(ii) because the ownership of the asset did not vest with the assessee. The Tribunal clarified that the right to collect toll was acquired by the assessee after incurring significant costs on the construction of the road, and thus, it met the criteria for being considered an intangible asset under Section 32(1)(ii).

Conclusion:
- The Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) and allowed the assessee’s claim for depreciation at 25% on the "right to collect toll" as an intangible asset.
- The appeal of the Revenue was dismissed, reinforcing the position that the "right to collect toll" qualifies as an intangible asset eligible for depreciation under Section 32(1)(ii) of the Income Tax Act.

Order Pronouncement:
- The order was pronounced on Friday, the 31st day of August, 2018, dismissing the appeal of the Revenue and upholding the decision of the Commissioner of Income Tax (Appeals).