Toll Way Rights are Intangible Assets: ITAT allows 25% Depreciation [Read Order]

Unabsorbed depreciation - Toll Way - Network Rights - Depreciation - Taxscan

The Income Tax Appellate Tribunal (ITAT), Chennai bench has held that the tollway charges, being an intangible asset, are eligible for 25% depreciation under the Income Tax Act, 1961.

The Assessing officer, while completing the assessment against the assessee, held that the tollway rights are not an intangible asset under section 32(1)(ii) of the Income Tax Act. However, the first appellate authority has deleted the original assessment and directed the assessing officer to allow 25% as depreciation on the same.

The department has contended that the assessee was not the owner of the impugned asset to allow depreciation on the same at applicable rates and that the asset has to be transferred back to the National Highways Authority of India after the end of the concession period as per the agreement entered into. It was the further submission that the vide Circular No. 9/2014 dated 23.04.2014, the CBDT has clarified that the cost of construction on development of infrastructure facilities of roads/highways under BOT projects may be amortized and claimed as allowable business expenditure under the Act and thus, pleaded for reversing the appellate order.

On the other hand, the assessee has submitted that the issue is squarely covered in favour of the assessee by the decision of the Tribunal in assessee’s own case for earlier assessment year and prayed that the same should be followed.

While granting relief to the assessee, the Tribunal held that “the ld. DR could not controvert the above decision of the Tribunal, wherein Hyderabad Special Bench decision has been followed. Respectfully following the above decisions, the ld. CIT(A) rightly directed the Assessing Officer to allow the assessee’s claim of depreciation @ 25% treating the tollway rights as an intangible asset under section 32(1)(ii) of the Act. Thus, we find no reason to interfere with the order passed by the ld. CIT(A). Thus, the ground raised by the Revenue stands dismissed.”

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