ITAT Delhi Allows 25% Depreciation on Toll Collection Rights; Deletes Penalty Under Section 271(1)(c)

Key Facts and Tribunal Findings

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, partly allowed appeals of M/s Jalandhar Amritsar Tollways Ltd. for Assessment Years 2011–12 and 2012–13, while dismissing the Revenue’s penalty appeal and deleting penalty under Section 271(1)(c).

The primary issue before the Tribunal was the rate of depreciation applicable to “right to collect toll.” The Assessing Officer had restricted depreciation to 10% by treating it as a building (road), whereas the assessee claimed 25% treating it as an intangible asset. Relying on the Special Bench ruling in ACIT v. Progressive Construction, the Tribunal held that the right to collect toll qualifies as an intangible asset and allowed depreciation at 25%.

On the issue of subsidy received from NHAI amounting to ₹39.45 crore, the Tribunal upheld the action of the Assessing Officer in reducing the same from the project cost under Explanation 10 to Section 43(1), thereby sustaining disallowance of excess depreciation.

The Tribunal also upheld disallowance of provision for resurfacing expenses, holding that the provision was not based on a scientific or rational method and represented a contingent liability not allowable under law.

In respect of depreciation claimed on capitalised “negative grant” payable to NHAI, the Tribunal upheld disallowance, observing that the liability had not crystallised and could not be capitalised for depreciation purposes.

However, the Tribunal allowed the assessee’s claim that additions made would correspondingly enhance deduction under Section 80IA.

On penalty, the Tribunal deleted the entire penalty under Section 271(1)(c), holding that disallowance of claims, by itself, does not amount to concealment or furnishing of inaccurate particulars. The Revenue’s appeal on penalty was dismissed.