2021 (7) TMI 999 - HC - Income Tax

Disallowance of depreciation of project assets being road and bridge - Addition on the ground that the assessee is not the owner of the project assets and hence is not eligible for claiming depreciation of such assets - HELD THAT - As decided in own case 2021 (7) TMI 32 - MADRAS HIGH COURT assessee is entitled to claim depreciation of public roads, treating the same as building. - Decided against the Revenue.

Summary

Issues Involved:
Challenging order on depreciation claim for road/bridge under BOT agreement.

Analysis:
1. The appellant challenged an order regarding the depreciation claim on a road/bridge developed under a Build, Operate, and Transfer (BOT) agreement. The Assessing Officer denied the depreciation claim, stating the assessee amortized the cost over the construction period. The Commissioner of Income Tax directed the allowance of the claim, leading to an appeal by the Revenue before the Income Tax Appellate Tribunal, which was dismissed. The Revenue then filed the current appeal challenging the Tribunal's decision.

2. The substantial question of law raised was whether the assessee was entitled to claim depreciation on roads and bridges developed and maintained under a BOT agreement, despite not being considered the owner of the assets as per the agreement terms. The appellant argued that the Tribunal erred in allowing depreciation, which was addressed by referring to a judgment in a different case where the Supreme Court clarified the concept of ownership for depreciation purposes.

3. The appellant's counsel acknowledged that the substantial question of law had been previously decided against the Revenue in a specific judgment dated 29.06.2021. The judgment referred to the Supreme Court's interpretation of ownership for depreciation purposes, emphasizing that possession and dominion over the property are crucial, even without a formal deed of title. The judgment highlighted that the legislative intent behind Section 32 of the Income-tax Act necessitates allowing depreciation to the entity exercising dominion over the property for business purposes, irrespective of formal ownership documentation.

4. The respondent's counsel relied on the aforementioned judgment and the Division Bench's decision to support dismissing the appeal. The court, considering the arguments from both sides and the precedent set by the previous judgment, ruled against the Revenue and in favor of the assessee. The court dismissed the Tax Case Appeal, following the established legal principles and the interpretation of ownership for depreciation purposes as clarified by the Supreme Court.

This detailed analysis of the judgment highlights the issues involved, the arguments presented, and the legal principles applied to resolve the matter regarding the depreciation claim for the road/bridge developed under a BOT agreement.