Tribunal affirms depreciation of toll collection rights as intangible asset under tax law

The Tribunal upheld the CIT(A)'s decision, affirming that the "Right to Collect Toll" is an intangible asset eligible for depreciation at 25%. The appeals filed by the Revenue were dismissed, and the AO was directed to allow the depreciation claim as per Section 32(1)(ii) of the Income Tax Act.

---

---

Issues involved:
1. Allowability of depreciation on the "Right to Collect Toll."

Detailed Analysis:

1. Allowability of Depreciation on the "Right to Collect Toll":

The Revenue filed two appeals against the orders of CIT(A)-1, Nashik, which allowed depreciation on the "Right to Collect Toll" for the Assessment Year 2012-13. The assessees engaged in collecting toll at Durg and Bhadara claimed depreciation on this intangible asset. The Assessing Officer (AO) disallowed the depreciation claim, arguing that it was not tenable and instead allowed proportional expenses based on amortization.

The AO's decision was based on CBDT Circular No. 09/2014, which suggested amortizing the expenses over the toll collection period rather than allowing depreciation. The AO calculated the proportional expenses and disallowed the remaining depreciation amount, initiating penalty proceedings under Section 271(1)(c) for concealing income and filing inaccurate particulars.

In the First Appellate proceedings, the CIT(A) allowed the assessees' claim, referencing favorable decisions from the Tribunal in similar cases, including M/s. Ashoka Info Pvt. Ltd. and M/s. Ashoka Bridgeways. The CIT(A) held that the "Right to Collect Toll" is an intangible asset eligible for depreciation at 25%.

During the Tribunal proceedings, the assessees submitted written submissions citing recent decisions supporting their claim. These included ITAT decisions in the cases of Ashoka Highways (Bhandara) Ltd. and Ashoka Infraways Ltd., which considered the CBDT Circular and upheld the claim of depreciation on the "Right to Collect Toll" as an intangible asset under Section 32(1)(ii).

The Tribunal reviewed the written submissions and the binding precedents, particularly the case of Ashoka Highways (Bhandara) Ltd., where it was held that the "Right to Collect Toll" is an intangible asset eligible for depreciation. The Tribunal extracted relevant paragraphs from previous orders, emphasizing that the right to collect toll, granted in exchange for developing and maintaining infrastructure, qualifies as an intangible asset under Section 32(1)(ii).

The Tribunal cited several decisions, including those of the Mumbai Bench and the Hon'ble Bombay High Court, which supported the view that the right to collect toll is an intangible asset eligible for depreciation. The Tribunal noted that the expenditure incurred for developing infrastructure, leading to the right to collect toll, brings enduring benefits and qualifies for depreciation under Section 32(1)(ii).

The Tribunal concluded that the assessees are entitled to claim depreciation on the "Right to Collect Toll" as an intangible asset. The AO's method of amortizing the expenses over the period of the toll collection facility was reversed. The Tribunal directed the AO to allow the depreciation claim under Section 32(1)(ii).

Conclusion:

The Tribunal upheld the CIT(A)'s decision, affirming that the "Right to Collect Toll" is an intangible asset eligible for depreciation at 25%. The appeals filed by the Revenue were dismissed, and the AO was directed to allow the depreciation claim as per Section 32(1)(ii) of the Income Tax Act.

---