Toll collection rights under NHAI contract held intangible business right eligible for 25% depreciation under s.32(1)(ii)

ITAT Pune held that the assessee's cost of acquiring the right to collect toll under an NHAI contract constitutes an "intangible asset" being a "business or commercial right" under s.32(1)(ii). Accordingly, depreciation at 25% is allowable on such right. The Tribunal relied on supportive HC precedents concerning similar toll collection and commercial rights, and distinguished Bombay HC decisions dealing with depreciation on roads as buildings, holding them inapplicable since the present case concerns the toll collection right, not the road itself. Finding no illegality or infirmity in the order of CIT(A) allowing depreciation, ITAT dismissed the Revenue's appeal in entirety.

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Issues:
- Disallowance of depreciation claim on intangible asset license to collect toll
- Whether the right to collect toll qualifies as an intangible asset for depreciation

Analysis:
1. The appeals were filed by the Revenue against orders of the Commissioner of Income Tax for different assessment years. The case involved the disallowance of a depreciation claim on an intangible asset license to collect toll.

2. The respondent-assessee, a company formed for an infrastructure project under the BOT scheme, claimed depreciation on the license to collect toll. The Assessing Officer disallowed the claim, stating the road facility was not owned by the assessee. The CIT(A) allowed the claim, considering the toll right as an intangible asset.

3. The main issue was whether the cost of the "Right to Collect Toll" qualified as an "intangible asset" under section 32(1)(ii) of the Income Tax Act. The Tribunal analyzed the nature of the rights acquired and relevant legal provisions.

4. The Tribunal held that the right to collect toll fell within the definition of a commercial right or intangible asset. It referenced judicial precedents and High Court decisions supporting the classification of toll rights as depreciable intangible assets.

5. The Tribunal distinguished the case from precedents related to depreciation on roads as buildings, finding no illegality in the CIT(A)'s order. Consequently, the appeal by the Revenue was dismissed, upholding the allowance of depreciation on the intangible asset license to collect toll.

6. The decision in ITA No.157/PUN/2019 was applied to appeals in ITA Nos.187 & 188/PUN/2019, leading to the dismissal of all Revenue appeals. The Tribunal pronounced the order on 19th July 2022, affirming the allowance of depreciation on the intangible asset license to collect toll.

7. In conclusion, the Tribunal upheld the assessee's claim for depreciation on the intangible asset license to collect toll, dismissing the Revenue's appeals based on the nature of the acquired rights and legal precedents supporting the classification of toll rights as depreciable assets.

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