ASSISTANT COMMISSIONER OF INCOME TAX 14(1)(2), MUMBAI, MUMBAI vs. EAST HYDERABAD EXPRESSWAY LIMITED, MUMBAI

ITA 9121/MUM/2025Status: DisposedITAT Mumbai22 September 2026AY 2011-128 pages
AI SummaryDismissed

What were the facts?

The Revenue is in appeal against the order of the CIT(A) for Assessment Year 2011-12. The appeal challenges the CIT(A)'s decision to allow depreciation on a toll road as an intangible asset and to treat certain expenditures as revenue expenses. The Assessing Officer had treated these expenditures as capital in nature and disallowed depreciation. The assessee, East Hyderabad Expressway Limited, had entered into a Build Operate Transfer (BOT) agreement with the Government of India (NHAI). The Commercial Operation Date (COD) for the project was March 1, 2011. The assessee claimed depreciation on the toll road as an intangible asset under Section 32(1)(ii) and claimed certain expenses incurred after the COD as revenue expenditure.

What did the Tribunal hold?

The Tribunal held that the issue regarding depreciation on the toll road as an intangible asset under Section 32(1)(ii) is squarely covered by the decision of a coordinate bench of the ITAT in the assessee's own case for AY 2011-12 and AY 2012-13. The coordinate bench had relied on the decision in North American Expressway Limited, holding that the assessee is entitled to depreciation on the cost incurred on toll roads, treating them as intangible assets. Therefore, the grounds raised by the Revenue concerning depreciation were dismissed. Regarding the treatment of expenditures totaling Rs. 3,92,02,640, the Tribunal affirmed the findings of the CIT(A). The Tribunal held that following the matching principle, these expenditures needed to be allowed. Since the Commercial Operation Date (COD) was achieved on March 1, 2011, and corresponding annuity income was recognized on an accrual basis for the post-COD period, expenses incurred for operation, maintenance, administration, and finance charges post-COD cannot be capitalized or amortized. They must be allowed as revenue expenditure under Section 37(1) to uphold the matching principle. The CIT(A)'s order was affirmed, and the grounds raised by the Revenue in this regard were dismissed.

What were the issues?

1. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the assessee is entitled to claim depreciation @ 25% on the Toll Road by treating it as an intangible asset under section 32(1)(ii) of the Act, considering that ownership of the road remains with the Government of India under the BOT agreement. 2. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the claim of depreciation of Rs. 58,09,73,288, failing to appreciate that ownership is a condition precedent for claiming depreciation under section 32 of the Act, and the expenditure is eligible only for amortization. 3. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 3,92,02,640 treated as capital expenditure by the Assessing Officer, by relying solely on the issuance of the Commercial Operation Date (COD) certificate. 4. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the expenditure of Rs. 3,92,02,640 incurred in March 2011 retains the character of capital expenditure and allowing it as revenue expenditure violates the matching principle. Revenue's Contentions: - Ownership of the asset is a condition precedent for depreciation under Section 32. The assessee is only a concessionaire. - Expenditure incurred during the construction period, even if close to COD, should be capitalized. - Allowing expenditure as revenue violates the matching principle as the benefit endures over the project life. Assessee's Contentions: - The issue of depreciation on intangible assets is covered by the decision of a coordinate bench in the assessee's own case. - Expenses incurred post-COD are revenue in nature and should be allowed as revenue expenditure to uphold the matching principle, especially since annuity income is offered on an accrual basis.

Which sections of the Income-tax Act were involved?

Section 32(1)(ii),Section 32,Section 37(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI

Before: SHRI AMIT SHUKLA & SHRI GIRISH AGRAWAL

For Respondent: Shri Bhupal Rapelli, CA
Pronounced: 22.09.2026

PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:

This appeal filed by Revenue is against the order of the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, Order No. ITBA/NFAC/S/250/2025-26/1081667653(1) dated 12.10.2025 passed against the assessment order by DCIT-14(1)(2), Mumbai, u/s. 143(3) r.w.s. 147 of the Income-tax Act, 1961 (‘the Act’) dated 25.12.2018, for Assessment Year 2011-12. 2. Revenue has raised the following gr

The order continues below.

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