In JCIT (OSD), Range-10, New Delhi v. Gwalior Bypass Project Ltd., the Delhi Bench of the Income Tax Appellate Tribunal considered whether depreciation under Section 32 of the Income-tax Act, 1961 could be allowed on expenditure incurred for development of a highway project executed on a Design, Build, Finance, Operate and Transfer (DBFOT) basis.

The assessee, a special purpose vehicle, had developed a four-lane highway project pursuant to a concession agreement with the National Highways Authority of India and capitalised the entire project cost as an intangible asset. Depreciation was claimed on the written down value of such asset. The Assessing Officer disallowed depreciation on the ground that the assessee was not the owner of the road and instead allowed amortisation in terms of CBDT Circular No. 9/2014, resulting in a net addition to income.

The Tribunal noted that the identical issue had already been decided in favour of the assessee in earlier assessment years and that the CIT(A) had followed those binding precedents. Placing reliance on the Special Bench decision in Progressive Constructions Ltd. and its own orders in the assessee’s case for prior years, the Tribunal held that the concessionaire’s right to operate and collect annuity constitutes a valuable commercial right eligible for depreciation, notwithstanding the absence of legal ownership of the highway.

Accordingly, the ITAT upheld the deletion of the disallowance and dismissed the Revenue’s appeal, reaffirming that depreciation on BOT highway projects is allowable under Section 32 where the asset represents an intangible right arising from the concession agreement.

Source Link- https://itat.gov.in/public/files/upload/1767778910-gUf6YT-1-TO.pdf

Disclaimer
This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.