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2017 (11) TMI 1998 - AT - Income TaxDepreciation on the Right to collect toll being an intangible asset - whether the Ld. CIT(A) was justified in holding that assessee was eligible to claim depreciation on License to collect toll considering it as an intangible asset in terms of section u/s. 32(1) (ii)? - HELD THAT - As decided in Ashoka Highways (Bhandara) 2017 (10) TMI 579 - ITAT PUNE that the cost of constructing road was akin to Right to collect toll being an intangible asset. The ld. DR fairly admitted the position in this regard. Respectfully following the same in parity of reasoning we hold that the assessee is entitled to the said claim. - Decided against revenue.
Issues Involved:
1. Eligibility of depreciation on "License to collect toll" as an intangible asset under Section 32(1)(ii) of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Eligibility of Depreciation on "License to Collect Toll" as an Intangible Asset: The Revenue filed two appeals against the consolidated order of the Commissioner of Income Tax (Appeals)-12, Pune, which allowed the assessee's claim for depreciation on the "License to collect toll" under Section 32(1)(ii) of the Income Tax Act, 1961. The primary issues raised by the Revenue were whether the "License to collect toll" qualifies as an intangible asset eligible for depreciation and the correctness of the CIT(A)'s reliance on previous Tribunal decisions. The assessee, a special purpose company, developed, operated, and maintained the Jaora Nayagaon Road on a Build, Operate & Transfer (BOT) basis. The cost of construction was capitalized under the head "License to Collect Toll" and treated as an intangible asset. The assessee claimed depreciation at 25% under Section 32(1)(ii) of the Act, which the Assessing Officer disallowed, arguing that the right to collect toll was not an intangible asset eligible for depreciation. Instead, the Assessing Officer allowed amortization of the construction cost over the permitted toll collection period. The CIT(A) allowed the assessee's claim, relying on various decisions of the Pune Bench of the Tribunal. The Tribunal referred to the precedent set in the case of Ashoka Infrastructure Ltd. Vs. ACIT, which held that the right to collect toll is an intangible asset eligible for depreciation under Section 32(1)(ii) of the Act. The Tribunal noted that the assessee's right to collect toll was granted in consideration of the expenditure incurred on developing, constructing, and maintaining the infrastructure facility. This right, having an enduring benefit, was categorized as an intangible asset. The Tribunal further discussed the CBDT Circular No. 9/2014, which clarified that expenditure on BOT projects should be treated as revenue expenditure and amortized over the concession period. However, the Tribunal held that the expenditure incurred by the assessee was capital in nature, entitling the assessee to depreciation on the intangible asset under Section 32(1)(ii). The Tribunal concluded that the assessee's right to collect toll, resulting from the capital expenditure on infrastructure development, qualifies as an intangible asset. Therefore, the assessee is entitled to claim depreciation on this asset. The Tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s order and directing the Assessing Officer to allow the claim of depreciation on the intangible asset. Conclusion: The Tribunal's comprehensive analysis and reliance on previous decisions established that the "License to collect toll" is an intangible asset eligible for depreciation under Section 32(1)(ii) of the Income Tax Act. The appeals filed by the Revenue were dismissed, affirming the assessee's entitlement to depreciation on the intangible asset.
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