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2021 (6) TMI 94 - AT - Income TaxDepreciation u/s 32(1)(ii) in respect of its right to collect toll - whether or not the assessee s claim for depreciation on license to collect toll , an intangible asset, falls within the scope of Sec.32(1)(ii) ? - HELD THAT - We are of the considered view that the issue as to whether an Infrastructure Development company that had constructed a road on build, operate and transfer (BOT) basis on the land owned by the Central Government would be eligible for claim of depreciation in respect of its intangible rights i.e right to collect toll under Sec. 32(1)(ii) - See Progressive Construction Ltd. 2017 (3) TMI 1167 - ITAT HYDERABAD and also M/s Atlanta Ltd. Mumbai 2018 (2) TMI 1514 - ITAT MUMBAI , ACIT Vs. M/s PNG Tata Ltd. 2019 (8) TMI 347 - ITAT CHENNAI AND M/s Essel Sagar Damoh Toll Roads Ltd 2019 (9) TMI 1545 - ITAT MUMBAI We, thus, finding ourselves to be in agreement with the view taken by the Tribunal. Accordingly, the claim of the assessee towards depreciation under Sec.32(1)(ii) in respect of its intangible rights i.e right to collect toll being in conformity with the mandate of law is found to be in order. We thus not finding favour with the view taken by the CIT(A) therein set-aside the same. Levy of interest u/s 234B - HELD THAT - As the levy of interest is mandatory as held by the Hon ble Supreme Court in the case of CIT Vs. Anju M.H. Ghaswala 2001 (10) TMI 4 - SUPREME COURT therefore, the same being consequential, the A.O is directed to recompute the same while giving effect to our aforesaid order. Ad hoc disallowance on account of motor car expenses - HELD THAT - As the view taken by the CIT-10, Mumbai in his order passed u/s 263 that the assessee had not claimed depreciation on the Honda CRV vehicle that was purchased by it in A.Y 2004-05 is found to be incorrect, therefore, the very assumption drawn by him that the said vehicle was not used by the assessee for its business purposes falls to ground and cannot be sustained. As the assessee had duly claimed depreciation as regards the vehicle in question i.e Honda CRV both in the year of purchase i.e A.Y 2004-05 and the year in question which had been allowed by the department, thus, it can safely or in fact inescapably be concluded that the said vehicle was used by the assessee for its business purpose. We, thus, in terms of our aforesaid observations finding no infirmity in the view taken by the CIT(A) who in our considered view had rightly vacated the ad hoc disallowance of motor vehicle expenses.
Issues Involved:
1. Entitlement to depreciation on the toll road. 2. Deduction of ?6,38,88,323/-. 3. Deduction u/s 80G on donation of ?5,26,852/-. 4. Levy of interest u/s 234B. 5. Amortization period for toll road. 6. Ad hoc disallowance of motor car expenses. Issue-wise Detailed Analysis: 1. Entitlement to Depreciation on the Toll Road: The primary issue was whether the assessee was entitled to claim depreciation on the toll road constructed on a Build, Operate, and Transfer (BOT) basis. The CIT(A) had denied this claim, concluding that the toll road was not owned by the assessee but by the government. The assessee argued that even if the toll road was not considered a "building," it should be treated as an "intangible asset" under Explanation 3(b) r.w. Sec. 32(1)(ii) of the Income Tax Act, 1961, allowing for depreciation. The Tribunal, guided by previous judgments, including the Special Bench decision in ACIT vs. Progressive Construction Ltd., concluded that the right to collect toll constituted an intangible asset, thus allowing the depreciation claim. 2. Deduction of ?6,38,88,323/-: The assessee contested the disallowance of ?6,38,88,323/-, arguing that the payment of tax was made before the due date of filing the return. However, the Tribunal noted that the assessee's representative did not press this ground during the hearing, leading to its dismissal. 3. Deduction u/s 80G on Donation of ?5,26,852/-: The assessee claimed a deduction under Section 80G for donations amounting to ?5,26,852/-. This issue was not elaborately discussed in the judgment, and the Tribunal did not provide a specific ruling on this ground, indicating it was not pressed or considered significant in the final decision. 4. Levy of Interest u/s 234B: The assessee challenged the levy of interest under Section 234B. The Tribunal, citing the Supreme Court's decision in CIT vs. Anju M.H. Ghaswala, held that the levy of interest under Section 234B is mandatory and consequential. Therefore, the AO was directed to recompute the interest while giving effect to the Tribunal's order. 5. Amortization Period for Toll Road: The revenue's appeal included a grievance regarding the amortization period for the toll road, which the CIT(A) had allowed for 16 years instead of the agreement period of 17 years and 6 months. However, as the Tribunal allowed the depreciation claim under Section 32(1)(ii), the issue of amortization became infructuous. 6. Ad Hoc Disallowance of Motor Car Expenses: The AO had disallowed ?5 lakhs on account of motor car expenses, arguing that depreciation was claimed for only one car, implying the second car was not used for business purposes. The CIT(A) vacated this disallowance, noting that the AO's assumption was incorrect. The Tribunal upheld the CIT(A)'s decision, confirming that the second car was indeed used for business purposes, and thus, the expenses were legitimate. Conclusion: The Tribunal allowed the assessee's appeals for A.Y 2005-06 and A.Y 2006-07, granting depreciation on the intangible asset of the right to collect toll. The revenue's appeal was dismissed, and the issues regarding amortization and motor car expenses were resolved in favor of the assessee. The levy of interest under Section 234B was upheld as mandatory and consequential.
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