Mumbai ITAT Allows Depreciation On 'Right To Collect Toll Tax' On Infrastructure Facilities

The ITAT also directed the AO to re-compute the deduction allowable to the assessee u/s 80IA (4) of the Income Tax Act, 1961, by replacing the amount of amortised value of deduction with allowable depreciation.

The Bench of the ITAT comprising of Prashant Maharishi (Judicial Member) and Sandeep Singh Karhail (Accountant Member) observed that, “it is clear that the right to set up infrastructure facility and collect toll on that is a commercial right, which is an intangible asset in terms of provisions under section 32(1) (ii) of the Act. Therefore, the Assessee is entitled to claim depreciation.” (Para 7)

As per the brief facts of the case, the assessee's return was selected for scrutiny, wherein the claim of the assessee for deduction u/s 80IA (4) was examined. During the assessment proceedings as well as in the return of income, the assessee has claimed amount of deduction on expenditure on road constructed for which right to collect toll was allotted to the assessee on amortized value. There was no claim before the AO to consider the depreciation on such intangible asset. The assessee challenged the assessment order passed u/s 143(3) before the CIT(A) wherein the assessee raised an additional ground of appeal that the assessee should be granted depreciation on right to collect toll on such road as intangible asset u/s 32(1)(ii). This ground was not admitted by the CIT (A). Hence, the assessee approached the Bench.

The Bench noted that whether the assessee is eligible for depreciation on right to collect toll tax on road developed by the assessee or not is already decided by the co-ordinate bench in assessee's own case.

The Bench emphasized that the right to set up infrastructure facility and collect toll on that is a commercial right, which is an intangible asset in terms of provisions under section 32(1)(ii), and therefore, the Assessee is entitled to claim depreciation.

The Bench observed that before the CIT(A), the assessee has made the claim by raising an additional ground, which was incorrectly not admitted.

The Bench further observed that as the issue is squarely covered in favour of the assessee and the ground should have been admitted by the CIT (A), therefore this non-admission is not sustainable.

Therefore, on finding that CIT(A) incorrectly not admitted the additional ground raised by assessee, ITAT allowed the assessee's appeal.

Counsel for Appellant/Taxpayer: Bhupal Rapelli

Counsel for Respondent/Department: Mahita Nair

Case Title: Roadstar Investment Managers Ltd. Verses The Assistant Commissioner of Income Tax

Case Number: ITA No.3311/Mum/2023

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