2024 (2) TMI 390 - AT - Income Tax

Depreciation on right to collect toll tax on road developed by the Assessee - depreciation on right to collect toll on such road as intangible asset u/s 32(1)(ii) - Whether depreciation may be granted treating the said road under the category allowed as Intangible Assets @ 25%? - Disallowance of deduction allowable u/s 80IA (4) replacing the amount of amortised value of deduction with allowable depreciation - admission of additional ground - HELD THAT - Whether the Assessee is eligible for depreciation on right to collect toll tax on road developed by the Assessee or not is already decided by the co-ordinate bench in Assessee s own case bearing 2021 (6) TMI 94 - ITAT MUMBAI for assessment year 2005-06 and 2006-07. These orders of ITAT were followed by the co-ordinate benches in Assessee s case for assessment year 2008-09, 2009-10 and 2010-11 2021 (9) TMI 1536 - ITAT MUMBAI Thus, it is clear that the right to set up infrastructure facility and collect toll on that is a commercial right, which is an intangible asset in terms of provisions u/s 32(1) (ii) of the Act. Therefore, the Assessee is entitled to claim depreciation. Before CIT (A), the Assessee has made the claim by raising an additional ground, which was incorrectly not admitted. As the issue is squarely covered in favour of the Assessee and the ground should have been admitted by the CIT (A), therefore this non-admission is not sustainable. On the merits, in Assessee s own case we direct the Ld. AO to grant depreciation on the right to collect toll tax on infrastructure facilities considering same as intangible asset entitled to depreciation at the rate of 25%. We also direct the Ld. AO to re-compute the deduction allowable to the Assessee u/s 80IA (4) by replacing the amount of amortised value of deduction with allowable depreciation. Appeal of the Assessee is allowed.

Summary

Issues involved:
The appeal concerns the allowance of depreciation at the rate of 25% on the right to collect toll on a road as an intangible asset under section 32(1)(ii) of the Income Tax Act, 1961.

Issue 1: Additional Ground of Allowance of Depreciation
The Assessee raised an additional ground before the Commissioner of Income Tax (Appeals) regarding the claim of allowance of depreciation at 25% on the right to collect toll on the road as an intangible asset under section 32(1)(ii) of the Act. The Commissioner did not admit this ground, citing that it was not raised during the assessment proceedings or at the time of filing the appeal. Consequently, the claim was dismissed.

Issue 2: Claim for Depreciation on Intangible Asset
The Assessee contended that the right to collect toll on roads qualifies as an intangible asset eligible for depreciation at the rate of 25%. It was argued that this claim had been allowed in previous assessment years by a co-ordinate bench in the Assessee's own case.

Issue 3: Eligibility for Depreciation
The Tribunal considered whether the Assessee is entitled to depreciation on the right to collect toll tax on a road developed by them as an intangible asset under section 32(1)(ii) of the Act. Previous decisions by co-ordinate benches in the Assessee's case for various assessment years supported the view that the right to set up infrastructure and collect toll is a commercial right, qualifying as an intangible asset for depreciation purposes.

Judgment:
The Tribunal found that the right to collect toll on infrastructure facilities is indeed an intangible asset eligible for depreciation at 25% under section 32(1)(ii) of the Act, as established in previous decisions related to the Assessee's case. The failure of the Commissioner to admit the additional ground raised by the Assessee for claiming depreciation was deemed unsustainable. Consequently, the Tribunal directed the Assessing Officer to grant depreciation on the right to collect toll tax and re-compute the deduction allowable to the Assessee under section 80IA (4) by replacing the amount of amortized value with allowable depreciation. As a result, the appeal of the Assessee was allowed.