Partnership firm entitled to tax deduction under Section 80IA(4) & allowed depreciation on toll rights

The Tribunal held that the assessee, a partnership firm with corporate entities as partners, was eligible for deduction under Section 80IA(4) of the Income Tax Act. It also allowed the claim of depreciation on toll rights at 25% on Written Down Value basis, rejecting the Principal Commissioner of Income Tax's invocation of powers under Section 263. The Tribunal found that the AO's decisions were permissible and not erroneous, leading to the setting aside of the PCIT's order and allowing the appeal of the assessee.

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Issues Involved:
1. Eligibility of the assessee for deduction under Section 80IA(4) of the Income Tax Act.
2. Claim of depreciation on toll rights at 25% on Written Down Value (WDV) basis.
3. Justification for invoking powers under Section 263 of the Income Tax Act by the Principal Commissioner of Income Tax (PCIT).

Detailed Analysis:

1. Eligibility of the Assessee for Deduction under Section 80IA(4):
The PCIT argued that the assessee, being a partnership firm, was not eligible for deduction under Section 80IA(4) of the Income Tax Act, which is available to a company or a consortium of companies. The assessee countered that it is a partnership firm with three companies as partners, making it a consortium eligible for the deduction. The Tribunal noted that the term "consortium" is not defined in the Income Tax Act but generally means a group formed to undertake an enterprise. The Tribunal found that the assessee's partnership firm, consisting only of corporate entities, fits this definition. The Tribunal also highlighted that the assessee had been allowed this deduction in previous years and that there was no change in the constitution of the partnership. Therefore, the Tribunal concluded that the assessee was eligible for the deduction under Section 80IA(4).

2. Claim of Depreciation on Toll Rights at 25% on WDV Basis:
The PCIT contended that the assessee’s claim for depreciation at 25% on toll rights was erroneous as per CBDT Circular No. 9/2014, which mandates that the cost of construction should be amortized over the concession period and allowed as a business expense under Section 37(1). The assessee argued that the right to collect toll is an intangible asset eligible for depreciation under Section 32(1)(ii). The Tribunal referred to its prior decisions, including Ashoka Infrastructure Pvt. Ltd., where it was held that the right to collect toll is a capital expenditure and thus eligible for depreciation. The Tribunal found that the AO's decision to allow depreciation was a possible and permissible view, and therefore, the PCIT’s invocation of Section 263 was not justified.

3. Justification for Invoking Powers under Section 263:
The Tribunal examined whether the conditions for invoking Section 263 by the PCIT were met. Section 263 allows the Commissioner to revise an order if it is erroneous and prejudicial to the interests of the Revenue. The Tribunal cited the Supreme Court’s decision in Malabar Industrial Co. Ltd. v. CIT, which requires both conditions to be satisfied. The Tribunal found that the AO had taken a permissible view on both the eligibility for deduction under Section 80IA(4) and the claim of depreciation on toll rights. Since the AO’s order was not unsustainable in law, it could not be considered erroneous. Therefore, the Tribunal held that the PCIT was not justified in invoking Section 263.

Conclusion:
The Tribunal concluded that the PCIT was not justified in invoking the revisionary powers under Section 263 of the Income Tax Act. The assessee was eligible for the deduction under Section 80IA(4) and entitled to claim depreciation on toll rights at 25% on WDV basis. The Tribunal set aside the PCIT’s order and allowed the appeal of the assessee.

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