Tribunal allows depreciation for toll collection rights under Income Tax Act

The Tribunal ruled in favor of the assessee, holding that the right to collect toll under the concessionaire agreement with NHAI constituted an intangible asset eligible for depreciation under section 32(1) of the Income Tax Act. The Tribunal found that the agreement conferred concessionary rights, distinguishing it from cases where ownership claims were denied. It concluded that the right to collect toll was an exclusive license and directed the deletion of the disallowed depreciation for the assessment years 2014-15 and 2015-16, allowing the assessee's appeals.

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Issues:
Challenge to disallowance of depreciation claim in assessment years 2014-15 and 2015-16.

Analysis:
In the present case, the assessee appealed against the disallowance of its depreciation claim in the assessment years 2014-15 and 2015-16. The dispute centered around the concessionaire agreement entered into by the assessee with the National Highway Authority of India (NHAI) on a build, operate, and transfer (BOT) basis. The Assessing Officer and the CIT(A) disallowed the depreciation claim based on CBDT Circular No.9/2014, which mandated amortization of expenditure incurred on road projects for the agreement's duration only. The authorized representative argued that the agreement conferred a right or commercial right under section 32(1) of the Income Tax Act, making it eligible for depreciation. The Revenue contended that the assessee did not own the road project nor acquired any commercial rights, citing legal precedents. The Tribunal noted that the concession agreement granted the assessee concessionary rights to operate and maintain the highway project, qualifying as an intangible asset for depreciation purposes. The Tribunal rejected the Revenue's arguments and allowed the assessee's depreciation claim.

The Tribunal emphasized that the assessee held concessionaire rights as a license to collect toll, constituting an intangible asset eligible for depreciation under section 32(1) of the Act. The Tribunal distinguished the case from legal precedents where ownership claims were denied under the NHAI Act, clarifying that the assessee's claim was based on the license to collect toll as an intangible asset. Additionally, the Tribunal found no evidence to suggest that anyone other than the assessee could dilute its rights to construct, operate, and maintain the project during the agreement period. Consequently, the Tribunal ruled in favor of the assessee, holding that the right to collect toll constituted an exclusive license eligible for treatment as an intangible asset, in line with the Special Bench's decision. As a result, the Tribunal directed the deletion of the disallowed depreciation in both assessment years, allowing the assessee's appeals.

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