Tribunal permits toll road depreciation as intangible asset; interest income upheld as business income.

The Tribunal allowed depreciation on the toll road as an intangible asset despite the assessee not being the owner, based on commercial rights to collect tolls. Interest income was upheld as 'business income' following precedent. No specific ruling was provided on interest liability under section 234D. The ownership of the toll road was confirmed to be with the government, with the assessee possessing commercial rights eligible for depreciation. The Tribunal dismissed cross-objections and appeals, affirming depreciation as an intangible asset and tax treatment of interest income.

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Issues Involved:
1. Granting depreciation on the toll road as an intangible asset.
2. Taxability of interest income under 'business income' or 'income from other sources.'
3. Liability of interest under section 234D of the Income Tax Act.
4. Ownership of the toll road and its implications on depreciation claims.

Issue-wise Detailed Analysis:

1. Granting Depreciation on the Toll Road as an Intangible Asset:
The primary issue was whether the toll road should be treated as an intangible asset for the purpose of granting depreciation. The assessee argued for depreciation by treating the toll road under the category of 'intangible asset,' citing various tribunal decisions. The Revenue opposed, stating that the assessee was not the owner of the asset, hence depreciation should be denied. The Tribunal referred to several cases, including M/s Andhra Pradesh Expressway Ltd., which supported the assessee's claim. The Tribunal concluded that the assessee, although not the owner of the toll road, had commercial rights to collect tolls, which qualified as an intangible asset under section 32(1)(ii) of the Act. Therefore, depreciation was allowed at the applicable rate of 25%.

2. Taxability of Interest Income:
The Revenue contended that the interest income of Rs. 36,25,280 should be taxed under 'income from other sources.' However, the Tribunal upheld the decision of the Commissioner of Income Tax (Appeals), who had classified it under 'business income,' following the precedent set by the Hon'ble Bombay High Court in CIT vs Lok Holding. Thus, this ground of the Revenue was dismissed.

3. Liability of Interest Under Section 234D:
The Tribunal noted that the liability of interest under section 234D of the Act is consequential in nature. Therefore, no specific ruling was provided on this issue, as it would follow the outcomes of the other decisions.

4. Ownership of the Toll Road and Its Implications on Depreciation Claims:
The Tribunal acknowledged that the ownership of the toll road vested with the government, and the assessee was merely granted the right to collect tolls. This right was deemed an intangible asset, allowing the assessee to claim depreciation. The Tribunal referenced the decision of the Hon'ble Bombay High Court in CIT vs West Gujarat Expressway Ltd., which clarified that while the ownership of the toll road remained with the government, the commercial rights granted to the assessee could be treated as intangible assets eligible for depreciation.

Additional Observations:
The Tribunal also addressed the cross-objections and appeals for subsequent assessment years, reiterating that the assessee's claim for depreciation as an intangible asset was valid. The Tribunal dismissed the cross-objection regarding the classification of the toll road as 'plant and machinery' or 'building,' as it had already allowed depreciation under the category of 'intangible asset.'

Conclusion:
The appeals of both the assessee and the Revenue were disposed of, with the Tribunal granting depreciation on the toll road as an intangible asset and affirming the tax treatment of interest income as business income. The issue of interest under section 234D was deemed consequential, and the ownership of the toll road was clarified to be with the government, with the assessee holding commercial rights eligible for depreciation.

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