2013 (4) TMI 795 - AT - Income Tax

Tribunal upholds depreciation allowance on Toll License as infrastructure intangible asset

DCIT Versus Ashoka Bridgeways

The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal and confirming the allowance of depreciation on the 'License to collect Toll' ... Depreciation - 'License/right to collect Toll' is an Intangible Asset u/s Section 32(1)(ii) or not - Assessee was a consortium of two companies, with the object of developing the infrastructure project of construction of Takli-Kasegaon-Anawali Road on Build, Operate and Transfer (BOT) basis for the Government of Maharasthra. He capitalised the cost incurred in the development and construction of the said project under the head ‘License to collect toll’. Further, in the return of income, assessee claimed depreciation @ 25% following section 32(1)(ii). - CIT(A) allowed the claim of depreciation - HELD THAT: - 'Right to collect the Toll’ is emerging as a result of the costs incurred by the assessee on development, construction and maintenance of the infrastructure facility. Such a right falls within the purview of section 32(1)(ii) .i.e 'License/right to collect Toll' is an Intangible Asset, thus, found eligible to claim depreciation. Decision in the case of Ashoka Info (P) ltd. v. Assistant Commissioner of Income Tax. [2008 (12) TMI 271 - ITAT PUNE-B] relied upon. Revenue appeal dismissed. Issues:Claim for depreciation on 'License to collect Toll' as an intangible asset.Analysis:The appeal by the Revenue challenges the CIT(A)'s order regarding the claim for depreciation on the 'License to collect Toll' as an intangible asset. The assessee, a consortium of two companies, capitalized the cost under this head for an infrastructure project. The Assessing Officer denied the claim, stating the 'License/right to collect Toll' was not an intangible asset under section 32(1)(ii) of the Income Tax Act, 1961. The CIT(A) allowed the claim, referencing precedents where similar issues were decided in favor of considering the 'Right/License to collect Toll' as an intangible asset eligible for depreciation under section 32(1)(ii) of the Act. The CIT(A) also noted that a judgment relied upon by the Assessing Officer had been overruled by the Supreme Court. The Revenue further appealed this decision.The Tribunal noted that the issue had been considered in another case of Ashoka Infraways Pvt. Ltd. and reproduced the relevant part of that decision. The Tribunal emphasized that the costs incurred for the 'License to collect Toll' were for developing an infrastructure facility, and the right emerged from these costs, making it an intangible asset eligible for depreciation. The Tribunal rejected the Revenue's argument that the right did not meet the criteria of section 32(1)(ii) since the asset was acquired after spending money. It was clarified that the right was acquired after incurring expenses on development, construction, and maintenance, satisfying the conditions for depreciation under section 32(1)(ii). Consequently, the Tribunal affirmed the CIT(A)'s decision to allow depreciation on the 'Right to collect Toll' as an intangible asset.In conclusion, the Tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeal and affirming the allowance of depreciation on the 'Right/License to collect Toll' as an intangible asset under section 32(1)(ii) of the Income Tax Act, 1961. The decision was pronounced on April 29, 2013.