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Issues: (i) Whether depreciation under section 32 of the Income-tax Act, 1961 was allowable to a concessionaire on a toll road constructed on a Build, Operate and Transfer basis on land vested in the Union. (ii) Whether the Commissioner was justified in revising the assessment under section 263 of the Income-tax Act, 1961 on the ground that the Assessing Officer allowed the depreciation claim mechanically and without examination.
Issue (i): Whether depreciation under section 32 of the Income-tax Act, 1961 was allowable to a concessionaire on a toll road constructed on a Build, Operate and Transfer basis on land vested in the Union.
Analysis: Section 32 permits depreciation only in respect of assets owned by the assessee and used for the purposes of business. The toll road in question was constructed on national highway land, and the statutory scheme of the National Highways Act, 1956 and the National Highways Authority of India Act, 1988 shows that national highways vest in the Union. The concessionaire may be entrusted with development, maintenance, operation and fee collection, but such entrustment does not transfer ownership of the highway or road itself. The wider meaning of ownership under income-tax law does not override the special statutory vesting of national highways in the Union.
Conclusion: Depreciation on the toll road itself was not allowable and the issue was decided against the assessee.
Issue (ii): Whether the Commissioner was justified in revising the assessment under section 263 of the Income-tax Act, 1961 on the ground that the Assessing Officer allowed the depreciation claim mechanically and without examination.
Analysis: The record showed that the claim for depreciation on the toll road had not been examined by the Assessing Officer in a meaningful manner. The Commissioner found the assessment order to be erroneous and prejudicial to the interests of the Revenue, and the Tribunal accepted that the case was not one of two possible views after due examination, but of a mechanical allowance without enquiry. The notice and revisional order were not found to be at variance in any legally material sense.
Conclusion: The revision under section 263 was upheld and the issue was decided against the assessee.
Final Conclusion: The appeal failed, the challenge to the revisional and appellate orders was rejected, and the disallowance of depreciation on the toll road was sustained, while depreciation on other eligible assets was not affected.
Ratio Decidendi: For depreciation under section 32, the asset must be owned by the assessee in the relevant legal sense, and a private concessionaire's right to develop, operate and maintain a national highway under a BOT arrangement does not amount to ownership of the highway itself where the special statute vests it in the Union; a revision under section 263 is justified where the Assessing Officer allows such a claim without real enquiry.
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