SIDDHANTHAM TOLLWAY PRVIATE LIMITED ,MUMBAI vs. PRINCIPAL COMMISSIONER OF INCOME TAX -6, MUMBAI

INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI BENCH: C BEFORE HON’BLE SHRI SAKTIJIT DEY, VICE PRESIDENT AND HON’BLE SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 3710/MUM/2025 (िनधा�रणवष�/Assmt. Year: 2020-21) Permanent Account Number: ABACS1921L SIDDHANTHAM TOLLWAY PRINCIPAL PRIVATE LIMITED COMMISSIONER OF INCOME TAX -6, MUMBAI UNIT NO. 603-B, 6TH FLOOR, ROOM NO. 501, 5TH PLOT C-68, G BLOCK, FLOOR, AAYAKAR GODREJ BKC, BANDRA Vs. BHAVAN, MAHARISHI KURLA COMPLEX, MUMBAI KARVE ROAD, MUMBAI 400051 PAN: ABACS2921L 400020 (��थ� Respondent) (अपीलाथ� Appellant)

िनधा�रती�ारा/Assessee represented Shri Vijay Mehta and Ms. Monika Jain, CA by: राज� व�ारा/Revenue represented by: Shri Rajdeep Singh, CIT DR

सुनवाईकीतारीख/Date of conclusion of hearing: 23.07.2026 घोषणाकीतारीख/Date of pronouncement: 19.10.2026 आदेश / ORDER PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the revisionary order of ld. Principal Commissioner of Income Tax, Mumbai-6 vide DIN: ITBA/REV/F/REV5/2024-25/1074588976(1) dated 17.03.2025 passed under section 263 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) against the assessment order passed by the Assessment Unit, Income Tax Department u/s 143(3) r.w.s. 144B dated 13.09.2022 for Assessment Year 2020-21.

2.2. Since the grounds are interlinked, they are taken up together for adjudication.

(i) claim of any other amount allowable as deduction in Schedule BP; (ii) high creditors/liabilities; (iii) business loss and (iv) investment in intangible assets. 3.1. Notice u/s 143(2) was issued on 29.06.2021 followed by notices u/s 142(1) dated 11.11.2021, 29.11.2021, 19.01.2022, 08.02.2022, 07.03.2022 and 23.03.2022. Assessee responded to these notices from time to time. Ld. AO thereafter passed the assessment order u/s 143(3) r.w.s. 144B on 13.09.2022 accepting the returned income wherein it was recorded that on the basis of the submissions and documents filed by the assessee, no adverse inference was drawn on the issues for which the case was selected.

3.2. Subsequently, ld. PCIT initiated the revisionary proceedings with reference to objections raised by Revenue Audit. The objections reproduced in para 2 of the impugned order are summarized as under:

3.2.1. Section 32 allows depreciation on assets owned by the assessee and used for business. There are divergent views on tax depreciation on the cost incurred for development of toll roads and toll bridges under Build-Operate-Transfer (“BOT”) arrangements. The Hon’ble Bombay High Court in North Karnataka Expressway Ltd. v. CIT [2014] 51 taxmann.com 214 (Bom) denied depreciation by holding that the toll road does not belong to the concessionaire. The Hon’ble Delhi High Court in Moradabad Toll Road Co. Ltd. [2014] 369 ITR 403 (Del) allowed depreciation by holding the toll road to be a tangible asset in the nature of building. Several Tribunals allowed depreciation by holding the right to collect toll as an intangible asset. CBDT Circular No. 9 of 2014, dated 23.04.2014 expressed the view that depreciation cannot be claimed as the toll road does not belong to the taxpayer but the cost can be amortized evenly over the concession period. Hon’ble Madras High Court in L&T Infrastructure Development Projects Ltd. and LTIDPL INDVIT Services Ltd. [TS-1043-HC-2022 (Mad)] held that toll roads are not intangible assets and are not owned by the developer so that depreciation is not allowable.

3.2.2. Applying these to the assessee, the objection noted that it had entered into the concession agreement with NHAI for a period of 30 years on Toll Operate Transfer (“TOT”) annuity model with provisional commercial operation date w.e.f. 29.08.2018. Assessee treated the license as an intangible right and w.e.f. 01.04.2019, claimed depreciation at 25% as stated in the notes to Form 3CD. During the year, it claimed aggregate depreciation of Rs. 43,31,64,098/- on this asset. The cost was amortized in the books of account but depreciation was claimed in the computation of income. Since the asset is not owned by the assessee, the objection held that only amortization is allowable. The excess claim was worked out at Rs. 36,45,49,535/-, being Rs. 43,31,64,098/- less Rs. 6,86,14,563/-, leading to under assessment of the said amount.

3.3. In para 3 of the impugned order, ld. PCIT invoked Explanation 2 to section 263. Clauses (a) and (b) thereof, on which the findings of ld. PCIT rest, are extracted below for ready reference.

“(a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim;” 3.4. Show cause notice u/s 263 dated 20.02.2025 was issued on the above lines. Assessee furnished a written submission dated 07.03.2025, both on the legality of the revisionary proceedings and on the merits. After considering it, ld. PCIT held the assessment order to be erroneous and prejudicial to the interest of Revenue. The assessment order was set aside on the issue of treatment of the road asset as intangible asset and the claim of depreciation at 25%. Ld. AO was directed to make an enquiry in the matter and re-assess the income after giving an opportunity of being heard to the assessee. Aggrieved, assessee is in appeal before the Tribunal.

4.1. In respect of enquiry made by the ld. AO in the course of original assessment proceedings, it was submitted that the case was selected for scrutiny and notice u/s 143(2) dated 29.06.2021 was issued followed by various notices u/s 142(1) which were responded to from time to time. By its submission dated 25.03.2022 in the original assessment proceedings, assessee had furnished the following documents in support of its claim of depreciation on intangible assets:

a. Concession agreement;

b. Detailed note on additions made to the block of intangible assets; c. Party-wise details of additions; d. Sample copies of contracts; and e. Sample copies of invoices.

4.2. On the twin conditions of section 263, it was submitted that the power can be invoked only where the order is both erroneous and prejudicial to the interest of Revenue as held in Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC). Explanation 2 inserted w.e.f. AY 2015-16 is only clarificatory and does not dilute this requirement. The expression prejudicial to the interest of Revenue involves a prejudice to the revenue administration and the section is not meant to bring more money into the treasury as held in Venkatakrishna Rice Co. v. CIT [1987] 163 ITR 129 (Mad). Mere absence of discussion in the assessment order does not make it erroneous as the entire record has to be examined. It was submitted that there is a distinction between lack of enquiry and inadequate enquiry and that revision is not permissible for inadequate enquiry. Where the ld. AO has taken one of the plausible views after enquiry the order cannot be revised as held in CIT v. Gabriel India Ltd. [1993] 203 ITR 108 (Bom) and CIT v. Nirav Modi [2016] 390 ITR 292 (Bom). Reliance was also placed on CIT v. Vikas Polymers [2010] 194 Taxman 57 (Del) and Narayan Tatu Rane v. ITO [2016] 70 taxmann.com 227 (Mum) on the scope of Explanation 2. On clause (d) of Explanation 2, it was submitted that the show cause notice does not refer to any decision of the jurisdictional High Court or the Hon’ble Supreme Court.

4.3. On the merits, it was submitted that the assessee was incorporated on 18.04.2018 and entered into the concession agreement on 26.04.2018 with NHAI for tolling, operation, maintenance and transfer of the stretch from km 950+542 to km 1022+494 of NH16 on TOT model. The concession period is 30 years commencing from 29.08.2018. The assessee was required to pay an upfront concession fee of Rs. 179,45,89,325/-. By virtue of clause 3.1.2 of the agreement the assessee is entitled to operate, maintain and collect toll. By making the upfront payment it acquired the right to collect toll which is a business or commercial right within section 32(1)(ii). The concession fee was capitalized in the block of intangible assets in AY 2019-20 and depreciation was claimed. Depreciation is not claimed on ownership of the road as the assessee has not acquired it. The claim is on a commercial right in the nature of a license as an intangible asset.

4.4. It was further submitted that as per the agreement the assessee is required to undertake EPC work for capacity augmentation of the project highway (clause 14); operate and maintain the project highway (clause 15); install and operate a surveillance and safety programme (clause 18) and install and operate electronic traffic counters (clause 19). The expenses incurred during the year as required under the agreement are tabulated below as per page 16 of the impugned order.

Particulars Amount (Rs.) Sr. No. 1 EPC works 35,62,16,999 2 Installation of Advanced Traffic Management 16,67,38,591 System 3 87,55,289 Interest expense on borrowed funds capitalised during the year Total 53,17,10,880

4.5. Assessee had incurred interest expense of Rs. 17,65,86,455/- on borrowed funds during the year of which Rs. 87,55,289/- relates to borrowed funds used for EPC works and installation of the traffic management system and was capitalised. Accordingly, during the year, it made additions to the block of intangible assets and claimed depreciation on the entire block at 25% amounting to Rs. 43,31,64,098/-. It was pointed out that the claim of depreciation on the same asset for the immediately preceding AY 2019-20 stood allowed. The expenses are incurred under the concession agreement and are integral to protecting the right to collect toll. Any right which is a tool of the trade and smoothens carrying on of business can be an intangible asset. CBDT Circular No. 20 of 2019 treats ‘Participation Interest (PI)’ in a production sharing contract as an intangible asset akin to a license notwithstanding the tangible infrastructure involved.

4.6. Reliance was placed on the Special Bench decision in ACIT v. Progressive Constructions Ltd. [2018] 191 TTJ 549 (Hyd)(SB) wherein it was held that the right granted under a concession agreement to operate the project facility and collect toll is a license or akin to license and in the alternative a business or commercial right of similar nature. The Special Bench relied on CIT v. Smifs Securities Ltd. [2012] 348 ITR 302 (SC), Areva T and D India Ltd. v. DCIT [2012] 345 ITR 421 (Del) and Techno Shares and Stocks Ltd. v. CIT [2010] 327 ITR 323 (SC). Reliance was also placed on Kurukshetra Expressway Pvt. Ltd. v. DCIT (ITA No. 9544/Del/2019 dated 06.06.2024) (Del Trib) and ACIT v. West Gujarat Expressway Ltd. [2015] 57 taxmann.com 384 (Mum Trib) besides several other decisions of the Tribunal. In the alternative, it was submitted that if depreciation is not allowed, amortization be allowed over the concession period as per Circular No. 9 of 2014.

4.7. Ld. PCIT did not accept the submission. It was held in para 6 that assessee claimed depreciation on the toll road as an intangible asset at 25% whereas as per CBDT Circular No. 9 of 2014, the expenditure on infrastructure development under a concession agreement does not result in an intangible asset eligible for depreciation. Such expenditure is to be treated as an allowable business deduction through amortization over the concession period. Ld. PCIT held that the principle of the Circular applies to the Toll Operate Transfer (TOT) model. It was observed that the right to collect toll under a concession agreement provides long term economic benefits rather than an immediate expense. Para 4 of the Circular was reproduced in support thereof.

4.8. In para 6.1, ld. PCIT held that the assessee does not fulfil the ownership criteria under section 32 as NHAI retains the ownership and the concessionaire merely holds an operating right. It was stated that judicial precedents including those of the Hon’ble Supreme Court and High Courts have upheld that BOT or TOT concessionaires are not entitled to depreciation on road infrastructure as an intangible asset. The decisions relied on by the assessee were not accepted as they overlook the issue of ownership which is critical under section 32. Reliance was placed on North Karnataka Expressway Ltd. (supra) and the decision of the Hon’ble Madras High Court in L&T Infrastructure Development Projects Ltd. (supra) and on Patna Bakhtiyarpur Tollway Ltd. v. ACIT [2025] 170 taxmann.com 586 (Hyd Trib).

4.9. In para 6.3, ld. PCIT held that ld. AO failed to conduct a proper inquiry into the nature of the expenditure and allowed the depreciation without examining its admissibility under the correct provisions of law. It was held that this constitutes an error under clauses (a) and (b) of Explanation 2 to section 263, rendering the assessment order erroneous and prejudicial to the interest of Revenue.

6.1. Ld. CIT DR submitted that CBDT Circular No. 9 of 2014 is binding on ld. AO who could not take a view contrary to it and that the Circular allows only amortization. Reliance was placed on North Karnataka Expressway Ltd. (supra) and CIT v. West Gujarat Expressway Ltd. [2016] 73 taxmann.com 139 (Bom) and Hazaribagh Ranchi Expressway Ltd. v. ACIT [2024] 167 taxmann.com 571 (Mum Trib) and the Madras High Court decision in L&T Infrastructure Development Projects Ltd. (supra) and Patna Bakhtiyarpur Tollway Ltd. (supra). Heavy reliance was placed on the Madras High Court decision. On Explanation 2(a), reliance was placed on PCIT v. Paramount Propbuild Pvt. Ltd. [2024] 161 taxmann.com 85 (Del) and Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 (Del) and it was submitted that ld. AO failed to verify the nature of rights transferred under the concession agreement and whether the assessee had acquired ownership or a mere temporary right and whether the Circular was complied with. Ld. CIT DR prayed that the appeal be dismissed.

7.1. We first take note of the relevant facts relating to the concession agreement which are not in dispute. Assessee entered into the concession agreement dated 26.04.2018 with NHAI for tolling, operation, maintenance and transfer of the Siddhantham to Gundugolanu section (km 950+542 to km 1022+494) of NH16 in the State of Andhra Pradesh for a period of 30 years on TOT annuity model. The agreement is placed in the paper book from page 139. Assessee received provisional commercial operation date w.e.f. 29.08.2018. The relevant clauses are extracted below for ready reference.

“3.1.1 Subject to and in accordance with the provisions of this Agreement, the Applicable Laws and the Applicable Permits, the Authority hereby grants to the Concessionaire the concession set forth herein including the exclusive right, license and authority to demand, collect and appropriate Fee, operate, manage and maintain the Project Highway (the ‘Concession’) subject to and in accordance with terms hereof, for a period of 30 (thirty years) commencing from the Appointed Date (the ‘Concession Period’) and the Concessionaire hereby accepts the Concession and agrees to implement the Project subject to and in accordance with the terms and conditions set forth herein. Notwithstanding anything to the contrary in this Agreement, the Parties expressly agree that the Concession Period shall not be reduced by more than 5 (five) years, or shall not be increased by more than 10 (ten) years on any account or for any reason whatsoever. 3.1.2 Subject to and in accordance with the provisions of this Agreement, the Concession hereby granted shall oblige or entitle (as the case may be) the Concessionaire to: (a) Right of Way, access and license to the Site for the purpose of and to the extent conferred by the provisions of this Agreement; (b) manage, operate and maintain the Project Highway and regulate the use thereof by third parties in accordance with terms hereof; (c) demand, collect and appropriate Fee from vehicles and Users liable for payment of Fee for using the Project Highway or any part thereof and refuse entry of any vehicle if the Fee due is not paid; (d) perform and fulfill all of the Concessionaire’s obligations under and in accordance with this Agreement; (e) bear and pay all costs, expenses and charges in connection with or incidental to the performance of the obligations of the Concessionaire under this Agreement; and (f) neither assign, transfer or sublet or create any lien or Encumbrance on this Agreement, or the Concession hereby granted or on the whole or any part of the Project Highway nor transfer, lease or part possession thereof, save and except as expressly permitted by this Agreement.”

…

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“10.1 The site of the Project Highway shall comprise the real estate described in Schedule-A and in respect of which the Right of Way shall be provided and granted by the Authority to the Concessionaire as a licensee under and in accordance with this Agreement (the ‘Site’). 10.2.2 In consideration of the Concession Fee, this Agreement and the covenants and warranties on the part of the Concessionaire herein contained, the Authority, in accordance with the terms and conditions set forth herein, hereby grants to the Concessionaire, commencing from the Appointed Date the license to undertake tolling activities in terms hereof, and the leave and license rights in respect of all the remaining land (along with any buildings, constructions or immovable assets, if any, thereon) comprising the Site which is described, delineated and shown in Schedule-A hereto (the ‘Licensed Premises’), on an ‘as is where is’ basis, free of any Encumbrances, to operate and maintain the said Licensed Premises, together with all and singular rights, liberties, privileges, easements and appurtenances whatsoever to the said Licensed Premises, hereditaments or premises or any part thereof belonging to or in any way appurtenant thereto or enjoyed therewith, for the duration of the Concession Period and, for the purposes permitted under this Agreement, and for no other purpose whatsoever.”

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“22.1.1 In consideration of the grant of Concession, the Concessionaire shall pay to the Authority, in accordance with terms hereof and prior to the Appointed Date, the lump sum upfront concession fee (‘Concession Fee’) of an amount equivalent to Rs. 179,45,89,325.66 (Rupees One Hundred Seventy Nine Crores Forty Five Lacs Eighty Nine Thousand Three Hundred Twenty Five and Sixty Six Paisa) out of Rs. 9,681.50 Crores (Rupees Nine Thousand Six Hundred Eighty One Crores and Fifty Lacs) for Bundle-1 (as per Selected Bidder’s quote in its financial bid), by way of a demand draft drawn on a Scheduled Commercial Bank in India, in favor of Authority i.e. National Highway Authority of India, payable at New Delhi. The Concessionaire expressly agrees that this constitutes essential condition of the Agreement, failing which the consequences set out under clause 4.2 shall apply. 23.1.1 On and from the Appointed Date till the Transfer Date, the Concessionaire shall have the sole and exclusive right to demand, collect and appropriate Fee from the Users subject to and in accordance with this Agreement and the National Highways Fee (Determination of Rates and Collection) Rules, 2008 read along with … and any further amendments till bid due date, (the ‘Fee Rules’); provided that for ease of payment and collection, such Fee shall be rounded off to the nearest 5 (five) rupees in accordance with the Fee Rules; provided further that the Concessionaire may determine and collect Fee at such lower rates as it may, by public notice to the Users, specify in respect of all or any category of Users or vehicles.”

7.2. A reading of the above clauses shows that NHAI has granted to the assessee the exclusive right, license and authority to demand, collect and appropriate fee and to operate manage and maintain the project highway for 30 years. The assessee holds the site only as a licensee. It has paid a lump sum upfront concession fee of Rs. 179,45,89,325.66 to NHAI for the grant. It has the sole and exclusive right to collect fee from users till the transfer date. It cannot assign or encumber the concession. The entire arrangement thus, centers on the right to collect toll acquired against an upfront consideration.

8.1. We first deal with the allegation of lack of enquiry as it is a factual aspect borne out on record. The return of the assessee was selected for complete scrutiny and ‘investment in intangible assets’ was one of the four issues for which it was selected. Ld. AO issued statutory notices as already noted above to which assessee responded by furnishing relevant documentary evidences. Ld. AO accepted the explanation and recorded that no adverse inference was drawn on the issues for which the case was selected. It is thus, evident that ld. AO examined the very issue of investment in intangible assets and the claim of depreciation thereon which is based on concession agreement and the supporting details.

8.2. It is not necessary that the assessment order should discuss the enquiry made. In Aroni Commercials Ltd. v. DCIT [2014] 44 taxmann.com 304 (Bom), Hon’ble Bombay High Court held that once a query is raised during the assessment proceedings and the assessee has replied, it follows that the query was a subject of consideration of ld. AO while completing the assessment. Ld. PCIT has not pointed out any specific enquiry which ld. AO should have made but did not make. The direction to ld. AO to make an enquiry in the matter does not identify the same. At the most, the allegation of ld. PCIT is of inadequacy of enquiry, which does not attract Explanation 2(a) or 2(b) to section 263. Therefore, we are unable to subscribe to the view that the assessment order was passed without making inquiries or verification or that the claim was allowed without inquiring into it.

8.3. We now turn to the genesis of the revisionary proceedings. Para 2 of the impugned order itself records that the assessment records were examined with reference to objections raised by Revenue Audit. Ld. PCIT has reproduced the objection which includes the preamble on divergent views of the Hon’ble High Courts and the reference to Circular No. 9 of 2014. The same objection is carried into the show cause notice. The precedents cited by ld. PCIT in para 6.2 are the same as those appearing in the audit objection. Thus, exercise of jurisdiction u/s 263 was not an independent decision of ld. PCIT but was at the behest of the audit party. The coordinate bench in Zensar Technologies Ltd. v. PCIT (ITA No. 4349/Mum/2025 dated 12.02.2026) (Mum Trib) held that where the genesis of the revisionary proceedings lies in an audit objection, the exercise of power u/s 263 is vitiated. Reference is also made to CIT v.

Sahara Wollen Mills [2008] 296 ITR 238 (P&H) and Neetu Hurkat v. PCIT (ITA No. 957/Ahd/2024 dated 14.11.2025) (Ahd Trib). In our view, the exercise of jurisdiction on this count alone is unsustainable.

8.4. The other plank of ld. PCIT is Circular No. 9 of 2014, dated 23.04.2014. Paras 3 to 5 of the Circular as reproduced in the written submission of ld. CIT DR which are extracted below for ready reference.

“3. In BOT arrangements for development of roads/highways, as a matter of general practice, possession of land is handed over to the assessee by the Government/ notified authority for the purposes of Construction of the project without any actual transfer of ownership and such assessee has only a right to develop and maintain such asset. It also enjoys the benefits arising from use of asset through collection of Toll for a specified period without having actual ownership over such asset. Therefore, the rights in the land remain vested with the Government or its agencies. Thus, as assessee does not hold any rights in the project except recovery of toll fee to recoup the expenditure incurred, it cannot therefore be treated as an owner of the property, either wholly or partly, for purposes of allowability of depreciation under section 32(1)(ii) of the Act. Thus, present provisions of the Act do not allow claim of depreciation on Toll ways due to non fulfillment of ownership criteria in such cases. 4. There is no doubt that where the assessee incurs expenditure on a project for development of roads/highways, he is entitled to recover cost incurred by him towards development of such facility (comprising of construction cost and other pre-operative expenses) during the construction period. Further, expenditure incurred by the assessee on such BOT projects brings to it an enduring benefit in the form of right to collect the toll during the period of the agreement. Hon’ble Supreme Court in the case of Madras Industrial Investment Corp Ltd 225 ITR 802 (SC) allowed spreading over of liability over a number of years on the ground that there was continuing benefit to the company over a period. Therefore, analogously, expenditure incurred on an infrastructure project for development of roads/highways under BOT agreement may be treated as having been made/incurred for the purposes of business or profession of the assessee and same may be allowed to be spread during the tenure of concessionaire agreement. 5. In view of above, Central Board of Direct Taxes, in exercise of the powers conferred under section 119 of the Act hereby clarifies that the cost of construction on development of infrastructure facility of roads/ highways under BOT projects may be amortized and claimed as allowable business expenditure under the Act.”

8.5. The said circular is a clarification on how the cost of construction or development of roads and highways under BOT projects is to be treated. The cost incurred by the assessee which is under dispute is mainly the upfront concession fee of Rs. 179,45,89,325.66 paid to NHAI to acquire the exclusive right to collect fee (toll) on an existing highway. The assessee is not the developer of the highway. The further expenditure on augmentation works and the traffic management system and the interest thereon is incurred under the obligations of the concession agreement to maintain and enhance the very right to collect toll. It forms part of the cost of acquiring and retaining that right. The Circular itself recognizes in para 4 that such expenditure brings an enduring benefit in the form of right to collect toll during the period of the agreement. Ld. PCIT has rightly observed that such right provides long term economic benefits but has drawn the wrong conclusion from it. An enduring benefit in the form of a right to collect toll is the hallmark of an intangible asset and not a ground to deny its recognition as such.

8.6. Even assuming that the Circular is attracted, its very basis erodes. The Circular is by way of a benefit to the assessee. It is available when the assessee claims it. The assessee did not claim amortization. It capitalized the expenditure as an intangible asset and claimed depreciation as provided for intangible assets. In CIT v. Hero Cycles (P.) Ltd. [1997] 228 ITR 463 (SC), it was held that circulars bind the Income- tax authorities but not the Tribunal or the Court or even the assessee. In UCO Bank v. CIT [1999] 237 ITR 889 (SC), Hon’ble Supreme Court held that circulars issued u/s 119 cannot be adverse to the assessee. The Special Bench in Progressive Constructions Ltd. (supra) also held that the benefit of the Circular cannot be thrust on the assessee if it is not claimed. Therefore, ld. AO cannot be said to have erred in not applying the Circular against the assessee. For the same reason, clause (c) of Explanation 2 to section 263 is also not attracted. The decision of the Hon’ble Bombay High Court in North Karnataka Expressway Ltd. (supra) and other High Courts on which ld. PCIT has relied are not shown to be decisions which prohibit the claim in the present facts and hence clause (d) of Explanation 2 to section 263 is also not attracted.

8.7. Without prejudice to the above, second condition of section 263 is also not satisfied. Ld. PCIT itself held that the cost of investment of the assessee is to be allowed as business expenditure through amortization over the concession period. The audit objection also works out the amortization allowable for the year at Rs. 6,86,14,563/-. Thus, even according to Revenue, assessee is entitled to recoup the entire cost either by depreciation or by amortization. The difference lies only in the timing of the deduction. In case of depreciation, the claim is exhausted in a shorter period whereas in case of amortization, it is spread over a longer period. This view was taken by the coordinate benches in Jorabat Shillong Expressway (supra) and Hampi Expressways Pvt. Ltd. (supra) holding the issue to be revenue neutral. No real prejudice is thus, caused to Revenue. The order can at best be regarded as erroneous in the eyes of ld. PCIT but certainly not prejudicial to the interest of Revenue. The department has also treated the claim as admissible in the immediately preceding year. Hence, the revisionary order stands vitiated.

9.1. Applying this, right granted to the assessee by NHAI to operate the highway and collect toll is a licence or akin to a licence. NHAI owns the highway and has granted to the assessee only a right to use the site and collect fee for the concession period without any right title or interest in the property. The Special Bench in Progressive Constructions Ltd. (supra) held that such a right is a licence or akin to licence and in any case, a business or commercial right of similar nature. It relied on the principle that the words ‘any other business or commercial rights of similar nature’ are not confined to assets resembling the specific items. Smifs Securities Ltd. (supra) treated goodwill as falling in that expression. Areva T and D India Ltd. (supra) held that any intangible asset which is a tool of the trade and smoothens carrying on of business falls within it. Techno Shares and Stocks Ltd. (supra) held a stock exchange membership card to be such a right. The right to collect toll for 30 years on payment of an upfront fee is the very source of the income of the assessee and is a tool of its trade. It is therefore, an intangible asset u/s 32(1)(ii). Similar views were taken in respect of airport concessions in Addl. CIT v. Mumbai International Airport (P) Ltd. [2017] 88 taxmann.com 663 (Mum) and Bangalore International Airport Ltd. v. DCIT [2023] 146 taxmann.com 206 (Karn).

9.2. The objection of ld. PCIT is on ownership. Assessee does not claim depreciation on the toll road. It claims depreciation on the right to collect toll which is an intangible asset acquired and owned by it under the concession. The asset on which depreciation is claimed is the right and not the road. An intangible asset cannot be physically owned and the assessee holds the right exclusively with a bar on assignment under clause 3.1.2(f). Reference in this regard is made to JCIT v. ACP Tollways Pvt. Ltd. [2025] 179 taxmann.com 660 (Lucknow Trib) followed in Jorabat Shillong Expressway (supra).

9.3. The decisions relied on by ld. PCIT and ld. CIT DR do not advance the case of Revenue. North Karnataka Expressway Ltd. (supra) and CIT v. West Gujarat Expressway Ltd. (supra) and Hazaribagh Ranchi Expressway Ltd. (supra) deal with claim of depreciation on the toll road as a tangible asset, treated as plant or building where ownership was the bone of contention. Hon’ble Bombay High Court in North Karnataka Expressway Ltd. (supra) kept open the claim of depreciation on the intangible asset. Moradabad Toll Road Co. Ltd. (supra) too concerned the toll road as a building.

9.4. Revenue has heavily relied on the decision of Hon’ble Madras High Court in L&T Infrastructure Development Projects Ltd. (supra) decided along with Narmada Infrastructure Construction Enterprises Ltd. v. ACIT (TCA Nos. 868 to 870 of 2009 and others dated 29.12.2022) (Mad). The same has been dealt with by the coordinate bench in Jorabat Shillong Expressway (supra) and followed in Hampi Expressways Pvt. Ltd. (supra). It was noted therein that the question posed before the Hon’ble High Court was whether the toll road and toll bridge laid and built by the assessees can be treated as tangible or intangible assets and whether depreciation can be claimed on them. Hon’ble High Court followed North Karnataka Expressway Ltd. (supra) and held that since the assessee is not the owner of the toll road or toll bridge, depreciation cannot be claimed. The issue whether the concessionaire right acquired by the assessee as an intangible asset can be subjected to depreciation over the concession period was not the subject matter of consideration.

The coordinate bench held the decision to be factually distinguishable. We respectfully follow the same. The present case is a step further as the assessee has not built the toll road but has paid an upfront fee to acquire the right to collect toll on an existing highway. This fact is evident from recitals contained in Part 1 of the Concession Agreement entered into by the assessee with NHAI. In recital at (B), it is stated, “The Authority has undertaken the development of the Project Highway through Item Rate, and intends to engage a private operator for undertaking operation, maintenance and management of the Project Highway subject to and in accordance with the terms hereof.” Further, in recital at (C), it is stated. “The Authority had invited proposals by its single stage RFP for selection of a suitable bidder for undertaking tolling operation, maintenance and transfer (“TOT”) for the above mentioned Project Highway”. The decision of the Hon’ble Madras High Court concerning assessees who built the roads and bridges under BOT is therefore not applicable. The decision in Patna Bakhtiyarpur Tollway Ltd. (supra) is of a coordinate bench of another city and cannot prevail over the view of the Special Bench in Progressive Constructions Ltd. (supra) as followed by the benches of this Tribunal.

9.5. In the conspectus of the above, we hold that –

(i) the assessment order was not passed without enquiry or verification;

(ii) the revisionary proceedings were initiated at the behest of the audit objection without independent application of mind;

(iii) the Circular does not apply to the assessee and in any case cannot be thrust on it;

(iv) the claim is revenue neutral and the order is not prejudicial to the interest of Revenue; and (v) the right to collect toll is an intangible asset eligible for depreciation u/s 32(1)(ii).

9.6. Accordingly, the assessment order dated 13.09.2022 cannot be considered erroneous and prejudicial to the interest of Revenue. We quash the impugned order passed u/s 263 and restore the assessment order. Ground Nos. 1 to 5 raised by the assessee are allowed.

Order pronounced in the open court on 19 October, 2026

Sd/- Sd/- Saktijit Dey Girish Agrawal Vice President Accountant Member MP, Sr.P.S. Mumbai Dated:19 October, 2026 Copy to:

SIDDHANTHAM TOLLWAY PRIVATE LIMITED UNIT NO. 603-B, 6TH FLOOR, PLOT C-68, G 1 BLOCK, GODREJ BKC, BANDRA KURLA COMPLEX, MUMBAI 400051

PRINCIPAL COMMISSIONER OF INCOME TAX -6, MUMBAI ROOM NO. 501, 5TH FLOOR, AAYAKAR 2 BHAVAN, MAHARISHI KARVE ROAD, MUMBAI 400020 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE