Tribunal affirms depreciation for 'Right to collect Toll' as intangible asset

ASSTT COMMISSIONER OF INCOME TAX Versus ASHOKA INFRAWAYS PVT LTD

ASSTT COMMISSIONER OF INCOME TAX Versus ASHOKA INFRAWAYS PVT LTD - TMI Issues:
Appeal against CIT(A) order allowing depreciation on 'Right to collect Toll' as an intangible asset under section 32(1)(ii) of the Act for A.Ys. 2006-07 and 2007-08.

Detailed Analysis:

Issue 1: Eligibility of 'Right to collect Toll' for Depreciation
The appeals by the Revenue challenge the CIT(A) orders allowing depreciation on the 'Right to collect Toll' as an intangible asset under section 32(1)(ii) of the Act for A.Ys. 2006-07 and 2007-08. The Assessing Officer disallowed the depreciation claim, contending that the right was not an intangible asset. The CIT(A) held in favor of the assessee, considering the right as a valuable intangible asset eligible for depreciation.

Issue 2: Nature of the Infrastructure Project
The respondent company was engaged in the operation and maintenance of the Dewas By-pass Road infrastructure project on a BOT basis. The right to collect toll emerged from an agreement with the Government of Madhya Pradesh, where the company invested in the development and construction of the road, entitling it to collect toll for a specified period. The Assessing Officer disallowed the depreciation on this right, leading to the appeal.

Issue 3: Interpretation of Section 32(1)(ii) of the Act
The key contention revolved around whether the 'Right to collect Toll' qualified as an intangible asset under section 32(1)(ii) of the Act. The CIT(A) relied on precedents and held that the right had commercial value and fell within the ambit of the provision, justifying the depreciation claim. The Revenue argued that the right did not meet the criteria of being owned by the assessee after spending money, but the Tribunal found this argument factually and legally misplaced.

Issue 4: Precedents and Legal Justification
The Tribunal considered various precedents where similar rights were treated as intangible assets eligible for depreciation. The Tribunal affirmed the CIT(A) order, emphasizing that the costs incurred by the assessee for developing the infrastructure facility resulted in the right to collect toll, meeting the conditions for depreciation under section 32(1)(ii) of the Act.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A) decision to allow depreciation on the 'Right to collect Toll' as an intangible asset. The decision was based on the factual and legal analysis, along with the alignment with established precedents. Both appeals for A.Ys. 2006-07 and 2007-08 were consequently dismissed, affirming the eligibility of the right as an intangible asset for depreciation under the Act.