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2021 (5) TMI 659 - AT - Income TaxDepreciation on Toll Road developed - @ 25% OR 10% - availability of depreciation to the assessee whether it is to be allowed keeping the right to collect toll fee as intangible assets or it to be treated as building or plant machinery - HELD THAT - As relying on M/S. WEST GUJARAT EXPRESSWAY LTD. VERSUS ACIT -10(1), MUMBAI 2015 (5) TMI 305 - ITAT MUMBAI and M/S. PROGRESSIVE CONSTRUCTION LTD. 2014 (11) TMI 401 - ITAT HYDERABAD we hold that the assessee is eligible for depreciation @ 25% as claimed by the assessee. Thus, Ground of appeal No.1 raised by the assessee is allowed. Disallowance with regard to provision made for maintenance of the roads - HELD THAT - We are of the considered view that the claim of provision as made by the assessee is in accordance with settled principal of law. Therefore, the authorities below were not justified in making the disallowance.
Issues Involved
1. Reduction of depreciation on Toll Road from 25% to 10%. 2. Deduction of Grant received from NHAI from the total cost of the project. 3. Disallowance of provision made for major maintenance expenses. Detailed Analysis 1. Reduction of Depreciation on Toll Road from 25% to 10% The primary issue was whether the depreciation on the Toll Road developed by the assessee should be allowed at 25% under the head "Intangible Assets" or restricted to 10% as a "Building." The assessee argued that the right to collect toll fees is an intangible asset, citing various judicial pronouncements, including judgments from the Bombay High Court and other Tribunal benches. The Tribunal found that there were conflicting decisions but ultimately sided with the view that the right to collect toll is an intangible asset. It referenced the Special Bench decision in ACIT vs Progressive Construction Ltd. and held that the assessee is entitled to depreciation at 25%. Thus, the Tribunal allowed the assessee's appeal on this ground. 2. Deduction of Grant Received from NHAI from the Total Cost of the Project The assessee did not press this ground during the hearing. Consequently, the Tribunal dismissed this ground as not pressed. 3. Disallowance of Provision Made for Major Maintenance Expenses The assessee contended that the provision for major maintenance expenses was a mandatory liability as per the Concession Agreement with NHAI, and should be allowed as a deduction. The assessee cited the Supreme Court's decision in Rotork Controls India Pvt. Ltd. vs. CIT and Bharat Earth Movers vs. CIT to support its claim that the provision met the criteria for recognition of a liability. The Tribunal agreed with the assessee, noting that the obligation to maintain the road was a present obligation arising from past events, and the estimate of the maintenance costs was reliable. Therefore, the Tribunal found that the provision for major maintenance expenses should be allowed and overturned the disallowance made by the authorities below. Separate Judgments for Different Assessment Years For the assessment year 2013-14, the issues raised were identical to those for the assessment year 2012-13, with only changes in the figures. Both representatives adopted the same arguments as in the previous year. The Tribunal applied its findings from the assessment year 2012-13 to the assessment year 2013-14, thereby allowing the appeals for both years. Conclusion The Tribunal partly allowed the appeals for both assessment years, granting the assessee's claims for higher depreciation at 25% and the provision for major maintenance expenses while dismissing the ground related to the NHAI grant as not pressed.
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