Toll collection right under BOT treated as depreciable intangible asset, a commercial right under section 32(1)(ii)

ITAT Pune-AT held that the assessee's right to collect toll from a road over bridge constructed under a BOT agreement with the State Government constitutes an intangible asset under s.32(1)(ii). Applying the doctrine of ejusdem generis and following its earlier decision in the assessee's own cases for prior years, the Tribunal held that the State-granted licence to collect toll is a "commercial right of similar nature" eligible for depreciation. As no contrary material was produced and facts were similar, ITAT allowed depreciation on the toll collection right and deleted the additions made on account of depreciation for both assessment years, dismissing the Revenue's grounds.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the "Right to Collect Toll" from a road over bridge acquired under a BOT arrangement constitutes an "intangible asset" eligible for depreciation under section 32(1)(ii) of the Income-tax Act.

1.2 Whether, on the facts and material on record, the assessee can be treated as the owner (legal or beneficial/constructive) of the "Right to Collect Toll" for purposes of section 32(1)(ii).

1.3 Whether, in the absence of any change in facts or contrary higher judicial precedent, the Tribunal's decisions in the assessee's own earlier assessment years allowing depreciation on the same right are binding and to be followed for the years under consideration.

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2. ISSUE-WISE DETAILED ANALYSIS

2.1 Characterisation of the Right to Collect Toll as an Intangible Asset Eligible for Depreciation u/s 32(1)(ii)

(a) Legal framework (as discussed)

2.1.1 The Court examined section 32(1)(ii) dealing with depreciation on "intangible assets" including, inter alia, licences and "any other business or commercial rights of similar nature".

2.1.2 The Court referred to and relied upon the earlier coordinate Bench decision in the assessee's own cases for prior assessment years and to the decision in another case where, applying the doctrine of ejusdem generis, the term "licence" was read along with the phrase "commercial rights of similar nature", and a toll collection right granted under a BOT agreement with the State Government for a fixed period was held to be an "intangible asset" eligible for depreciation.

(b) Interpretation and reasoning

2.1.3 The Court noted that in the prior years the Tribunal had held that the investment made in constructing a road on BOT basis, pursuant to an agreement with the State Government, resulted in an independent right in the nature of a licence to collect toll for a fixed period, and that such licence was an intangible asset within the meaning of section 32(1)(ii).

2.1.4 Applying the doctrine of ejusdem generis, the coordinate Bench had read "licence" as falling within "commercial rights of similar nature" and concluded that the toll collection right granted by the State Government was a depreciable intangible asset.

2.1.5 The Court found that the facts in the present assessment years were identical to those considered in the assessee's earlier years: the same BOT arrangement, the same nature of right to collect toll from the road over bridge, and the same mode of earning income from toll collections.

2.1.6 No contrary material or legal authority was produced by the Revenue to demonstrate that the earlier interpretation of section 32(1)(ii) was incorrect or inapplicable to the years under appeal.

(c) Conclusions

2.1.7 The "Right to Collect Toll" from the road over bridge, arising from the BOT agreement with the State Government, is an intangible asset in the nature of a licence and a "commercial right of similar nature" within the meaning of section 32(1)(ii), and is therefore eligible for depreciation.

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2.2 Ownership (Legal or Constructive) of the Toll Collection Right for Depreciation Purposes

(a) Interpretation and reasoning

2.2.1 The Revenue contended that the assessee was not the owner, either actually or constructively, of the "Right to Collect Toll" and that no proof of ownership had been furnished.

2.2.2 The Court noted that in the earlier years the Tribunal had already addressed the argument that the assessee was "not the owner" and, despite that contention, held that the depreciation was allowable on the intangible asset, being the right to collect toll, which was granted by the State Government and under which the toll collection was treated as the assessee's income.

2.2.3 The Court observed that for the present years, the Revenue did not point out any distinguishing factual feature from the earlier years nor produce any additional material to displace the earlier finding that the assessee possessed the relevant right under the BOT agreement and exploited it as its own commercial right.

2.2.4 The treatment of toll collection receipts as the income of the assessee and the recognition and approval of that position by the State Government, as noted in the earlier orders, were considered sufficient to sustain the assessee's status as holder/owner of the toll right for purposes of section 32(1)(ii).

(b) Conclusions

2.2.5 For purposes of allowing depreciation under section 32(1)(ii), the assessee is treated as the owner of the "Right to Collect Toll" (as an intangible asset) arising from the BOT arrangement, and the Revenue's challenge to ownership fails.

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2.3 Effect of Earlier Tribunal Decisions in Assessee's Own Case and Absence of Contrary Precedent

(a) Interpretation and reasoning

2.3.1 The Court noted that the very same issue-depreciation on the intangible asset being the right to collect toll from the road over bridge-had been decided in favour of the assessee for assessment years 2002-03, 2003-04, 2004-05 and 2006-07 by a coordinate Bench.

2.3.2 It was specifically recorded that those earlier Tribunal decisions had not been set aside, stayed, or overruled by any higher judicial authority.

2.3.3 The Revenue failed to bring on record any distinguishing features in the facts for the years under consideration or any binding contrary judicial decision to justify a departure from the earlier coordinate Bench view.

2.3.4 In view of identical facts and the binding nature of the earlier coordinate Bench orders in the assessee's own case, the Court found no reason to deviate from those decisions.

(b) Conclusions

2.3.5 The earlier Tribunal decisions allowing depreciation on the assessee's toll collection right are followed; the orders of the first appellate authority deleting the disallowance of depreciation are upheld; and the Revenue's grounds for both assessment years are dismissed.

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