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TMI Blog2024 (6) TMI 333X X X X Extracts X X X X X X X X Extracts X X X X ..... ract by the Government of India has given rise to an intangible asset as defined under Explanation 3(b) r/w section 32(1)(ii) of the Act. Hence, assessee is eligible to claim depreciation on such asset at the specified rate - Assessee is entitled to claim depreciation @25% on road construction as admissible on intangible assets. Assessee appeal allowed. - Shri M Balaganesh, Accountant Member And Shri Vimal Kumar, Judicial Member For the Assessee : Shri Neeraj Jain, Advocate, Shri Saksham Singhal, Advocate For the Department : Ms. Anu Krishna Aggarwal, CIT(DR) ORDER PER VIMAL KUMAR, JM The appeal of assessee is against order dated 16.10.2019 of the Learned Commissioner of Income Tax (Appeals) [hereinafter referred as Learned CIT(A) ] partly allowing appeal against order dated 28.12.2016 of the Deputy Commissioner of Income Tax, Rewari Circle (hereinafter referred to as Learned AO) setting aside interest and upholding disallowance of depreciation of Rs. 46,23,33,692/- claimed on intangible assets@ 25% taking addition of Rs. 22,52,009/- on account of interest income. 2. Brief facts of the case are that appellant/assessee is a Special Purpose Vehicle incorporated for carrying out con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the appellant regarding depreciation on intangible assets was denied by the Learned AO by relying on CBDT Circular No.9 of 2014. 8. The appellant filed a rejoinder to remand report dated 24.6.2019 submitting that (a) order sheet dated 16.12.2016 has been provided for the first time, and (b) Learned AO has merely relied on the CBDT circular 9/2014 without providing any reply on merits of issue. 9. Learned CIT(A) vide order dated 16.10.2019 denied the claim of depreciation @25% on the 'right to collect toll' by holding that there were no decision by jurisdictional Tribunal or High Court permitting the allowance of depreciation on 'right to collect toll' and the decisions of non-jurisdictional Tribunal and High Court are not binding on the Learned CIT(A). Learned CIT(A) relied upon CBDT Circular No. 9/2014 dated 23.04.2014 and held that the appellant is entitled to claim amortization of the expenditure incurred for development of the BOT project. 10. Being aggrieved / appellant assessee preferred present appeal. 11. Learned Representative for appellant/assessee submitted that ground No. 1 and 3 are general. The crux of ground No. 2 to 2.3 is; whether appellant as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial right eligible for depreciation @25% under section 32(1)(ii) of the Act. Section 32(1)(ii) of the Act permits allowance of depreciation on know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets owned by an assessee and used for purposes of business. 15. Learned representative for appellant/assessee submitted that under the Concession Agreement, the Appellant is vested with the license/ commercial rights relating to collection of toll, which is a separate/ distinct commercial asset. It is ex facie evident that the right to operate toll roads granted under the Agreement and the right collect toll is in the nature of license vested with the appellant. further, and in any case and in the alternative, such right/ license falls under the residuary category of any other business or commercial rights - accordingly, the appellant is eligible to claim depreciation @ 25% as Intangible under section 32(1)(ii) of the Act. Clause 27.1 which confers upon the appellant exclusive right, license and authority, to levy and collect toll fees from the vehicles utilizing the said roads - in other words, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 014. Hon ble Bombay High Court, in the case of North Karnataka Expressway Ltd., while considering the case of an assessee who had claimed to be the owner of the roads constructed by it and has claimed depreciation thereon u/s 32 of the I.T. Act held that the assessee is not the owner of the roads and therefore, is not entitled to the claim of depreciation thereon. It is also pertinent to mention here that the 'intangible assets' eligible for depreciation in section 32(1)(ii) of the Act, are only those which are owned by the assessee and have been acquired after spending money. In the case of the assessee, by way of an agreement, assessee was awarded a work to construct a road by using own funds and the expenditure incurred was allowed to be reimbursed by permitting the assessee a concession to collect toll/fees from the motorists using the road. Therefore, it could not be said that such a right was within the purview of section 32(1)(ii) of the Act. The issue has also been adjudicated in favour of the Revenue in the case of CIT vs. West Gujarat Expressway Ltd (Supra) whereas the learned ITA Nos 1729 2145 and 2146 of 2018. 19. From examination of record in light of aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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