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2018 (10) TMI 124 - AT - Income TaxDisallowance of claim of depreciation on toll road u/s.32 by treating the same as plant and machinery - Held that - Issue under consideration is covered by the order of the Tribunal in assessee s own case for the A.Y.2009-10 2015 (5) TMI 305 - ITAT MUMBAI and also by the order for A.Y.2010-11 2017 (6) TMI 237 - ITAT MUMBAI as held assessee is entitled to the claim of depreciation on the road to collect toll being an intangible asset falling within the purview of section 32(1) (ii) of the Act. Even the assessee is not the owner of the toll road. The assessee has been given only the right to develop maintain and operate the toll road and further to collect the toll for the specified period. This right as discussed above is an intangible asset falling under section 32(1)(ii) of the Act. - Decided in favour of assessee. Treatment to interest income - income from business or other sources - Held that - Following the order of Tribunal in assessee s own case we do not find any merit in the action of lower authorities treating the interest income under the head of income from other sources. - Decided in favour of assessee.
Issues Involved:
1. Disallowance of claim of depreciation on toll road under Section 32 of the Income Tax Act by treating it as plant and machinery. 2. Treatment of interest income as income from business or income from other sources. Detailed Analysis: 1. Disallowance of Claim of Depreciation on Toll Road: The assessee was aggrieved by the disallowance of depreciation on the toll road under Section 32 of the Income Tax Act, which was treated as plant and machinery. The Tribunal had previously addressed this issue in the assessee's own cases for A.Y. 2009-10 and A.Y. 2010-11. As per Section 32(1)(ii), depreciation is allowable on intangible assets like licenses, franchises, or any other business or commercial rights of similar nature. The Tribunal noted that the assessee had a license/commercial right to collect toll, which is an enduring benefit and depreciates over time. This right qualifies as an intangible asset under Section 32(1)(ii), making the assessee eligible for depreciation. The Tribunal supported its view with precedents, including the case of M/s. Ashoka Infrastructure Ltd. vs. ITO, where similar rights were treated as intangible assets eligible for depreciation. The Tribunal directed the AO to allow the assessee’s claim of depreciation in line with previous orders. 2. Treatment of Interest Income: The second issue was whether the interest income should be assessed under the head "Income from other sources" or as "Business income." The AO had categorized the interest income from bank deposits as "Income from other sources," but the CIT(A) directed it to be assessed as business income. The CIT(A) relied on its own findings from earlier assessment years and the decision of the Hon'ble Bombay High Court in CIT vs. Lok Holdings, where interest income from business receipts deposited in banks was treated as business income. The Tribunal upheld the CIT(A)'s decision, noting that the interest income was derived from business receipts temporarily deposited in fixed deposits, aligning with the precedent set by the Hon'ble Bombay High Court and other relevant cases. Therefore, the interest income was to be treated as business income. Additional Observations: - The Tribunal noted that the assessee's right to collect toll did not fall under the definition of plant and machinery, as the assessee was not the owner of the toll road but had the right to develop, maintain, and operate it. - The Tribunal rejected the Revenue's contention to treat the investment as revenue expenditure to be amortized over the agreement period, affirming that the investment brought enduring benefits and was of capital nature, thus eligible for depreciation. Conclusion: The Tribunal allowed the assessee's appeal in part, directing the AO to allow depreciation on the toll road as an intangible asset and to treat the interest income as business income. The Revenue's appeal was also allowed in part, modifying the CIT(A)'s order to align with the Tribunal's previous directions. The judgment was pronounced on 24/09/2018.
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