Grant to operate Project under Government is License, eligible for Depreciation of Intangible Asset: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the grant to operate a project under the government is a license and is eligible for depreciation of the intangible asset.

The assessee company, Gwalior Bypass Project Ltd a special purpose vehicle engaged in the business of development of highway projects, filed a return of income declaring a loss of Rs.30,30,15,025/- on 30.09.2015.  The AO disallowed the depreciation of Rs.49,32,87,659/- and allowed amortized cost of the facility amounting to Rs. 38,46,29,754/-. 

The assessee has acquired the right to operate the toll road/bridge and collect toll charges instead ofthe investment made by it in implementing the project and this right is as envisaged under section 32(1)(ii) r/w Explanation 3(b) of the provisions. The assessee was eligible to claim depreciation on Written Down Value (WDV) as an intangible asset.

It was observed that the provisions would indicate that certain kinds of assets know-how, patents, copyrights, trademarks, licenses, franchises, or any other businesses or commercial rights of similar nature are to be treated as an intangible assets and would be eligible for depreciation at the specified rate.

The Tribunal observed that the benefit in terms of the circular can be granted ifthe assessee claims in terms of it. Further observed thatto operate the project/project facility and collect toll charges is a license or akin to a license, hence, being an intangible asset is eligible for depreciation under section 32(1)(ii) of the Act.

The Coram consists of Shri Kul Bharat, judicial member & Shri Pradip Kumar Kedia, accountant member that the assessee was entitled to for depreciation as admissible on intangible assets and allowed the appeal of the assessee.

Ms Chinu Bhasin appeared for the appellant and Shri Ishtiyaque Ahmed appeared for the respondent.

To Read the full text of the Order CLICK HERE

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