2022 (9) TMI 1365 - AT - Income Tax

Depreciation on Toll Road - intangible asset - to be allowed @ 15% or 25% - HELD THAT - As it is evident that such a claim of the assessee has been allowed in the previous assessment years and therefore, it cannot be denied that the assessee was under a bona fide belief that it has correctly claimed deduction of depreciation on toll road by treating the same as plant and machinery at 15%, in view of the consistent findings in its own case. However, subsequently, due to change in legal position, the claim of deduction of depreciation by treating the road as plant and machinery was disallowed on the basis that assessee cannot be treated as owner of the toll road. The coordinate bench of the Tribunal in assessee s own case in ACIT vs M/s West Gujarat Expressway Ltd. 2015 (5) TMI 305 - ITAT MUMBAI for assessment year 2009 10, accepted the alternative plea of the assessee and in Para 28 of its order held that assessee is entitled to collect toll tax, which is an intangible commercial right under section 32(1)(ii) of the Act, at the rate as has been prescribed under the relevant rules. It is the golden rule of tax, as laid down in Article 265 of the Constitution of India that no tax can be collected except by authority of law. It is also well established that if the assessee, under a mistake, misconception or on not being properly instructed is over assessed, the authorities under the Act are required to assist him and ensure that only legitimate tax dues are collected. From the record, it is evident that it is not the case where the Revenue is alleging that rate of depreciation in case of intangible assets is 15% instead of 25% as claim by the assessee. Thus, once the right to collect the toll tax has been held to be intangible asset by the CIT(A), by following the judicial precedents in assessee s own case, we are of the considered view that the learned CIT(A) erred in denying deduction of depreciation at the rate of 25% and restricting the same to 15% by referring to the claim made under the return of income. We are further of the view that once asset has been characterised under the particular head i.e., intangible asset in the present case, all the other consequences including the rate at which depreciation is allowable under the law follows. Therefore, in view of the above, we direct the AO to grant depreciation on toll road at the rate applicable in case of intangible assets i.e. at 25%. As a result, grounds raised by the assessee are allowed. Taxability of interest income - whether interest income is linked to the business activities of the assessee? - HELD THAT - We find that while deciding similar issue in assessee s own case for assessment year 2009 10, the Co-ordinate Bench of the Tribunal 2015 (5) TMI 305 - ITAT MUMBAI held that interest income from fixed deposit is business income. - Decided against revenue.

Issues Involved:
1. Delay in filing appeals by the assessee and the Revenue.
2. Assessee's claim for depreciation on toll roads.
3. Revenue's challenge to the treatment of toll roads as intangible assets.
4. Taxability of interest income earned by the assessee.

Detailed Analysis:

1. Delay in Filing Appeals:
The appeals by the assessee and the Revenue were filed with delays of 170 and 444 days, respectively. However, the Supreme Court's order dated 10/01/2022, in Suo-Motu Writ Petition (Civil) no.3 of 2020, excluded the period from 15/03/2020 to 28/02/2022 from the limitation period for judicial and quasi-judicial proceedings. Consequently, there was no delay in filing the appeals, and they were considered on merits.

2. Assessee's Claim for Depreciation on Toll Roads:
The assessee, a public limited company engaged in road infrastructure, claimed depreciation on toll roads treating them as plant and machinery. The AO disallowed this claim, stating that the ownership of the roads remained with the Government/NHAI and allowed amortization instead. The CIT(A) upheld the disallowance of depreciation by treating the roads as plant and machinery but allowed depreciation on the 'right to collect toll' as an intangible asset at 15%, the rate claimed by the assessee.

The Tribunal, however, held that the assessee is entitled to depreciation at 25% for intangible assets, following the precedent in the assessee's own case for previous years. The Tribunal emphasized that tax must be collected as per the law, and the assessee's initial claim at 15% was based on a bona fide belief due to consistent findings in earlier years. The Tribunal directed the AO to grant depreciation at 25%.

3. Revenue's Challenge to Treatment of Toll Roads as Intangible Assets:
The Revenue contested the CIT(A)'s decision to treat the expenditure on toll roads as an intangible asset eligible for depreciation. The Tribunal referred to its earlier decisions in the assessee's own case, where it was held that the 'right to collect toll' is an intangible asset under section 32(1)(ii) of the Income Tax Act. The Tribunal reiterated that the right to collect toll, acquired through substantial expenditure, is an intangible asset eligible for depreciation at 25%. The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision.

4. Taxability of Interest Income:
The assessee earned interest on fixed deposits made from toll revenues and offered it as business income. The AO treated this interest as 'income from other sources'. The CIT(A), following earlier decisions, treated the interest as business income. The Tribunal upheld this view, noting that the interest income was linked to business activities and was earned out of business compulsions. The Tribunal referenced its earlier decisions and the jurisdictional High Court's affirmation, dismissing the Revenue's appeal on this ground.

Conclusion:
The Tribunal allowed the assessee's appeal, granting depreciation at 25% for intangible assets. The Revenue's appeal was dismissed, affirming the treatment of toll roads as intangible assets and the taxability of interest income as business income. The decisions were consistent with precedents in the assessee's own case for previous years.

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