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Facts
The assessee, Gwalior Bypass Project Ltd, claimed depreciation of Rs. 44,39,58,893/- on highway project expenditure for AY 2016-17. The Assessing Officer disallowed this claim and instead allowed amortization, resulting in a net addition to income.
Held
The Tribunal held that the assessee was entitled to depreciation on highway projects. The issue was covered by previous decisions of the Tribunal in the assessee's own case and other relevant case laws.
Key Issues
Whether the assessee is entitled to depreciation on highway project expenditure when it is not the owner of the constructed road, and if the prior Tribunal decisions on depreciation are applicable.
Sections Cited
143(3), 32
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “B”: NEW DELHI
Before: SHRI C. N. PRASAD & SHRI M. BALAGANESH
AY 2016-17, arises out of 1. the order of the Jt. Commissioner of Income Tax (Appeals)-1, Chandigarh [hereinafter referred to as ‘ld. JCIT(A)’, in short] in Appeal No. ITBA/APL/S/250/2024-25/1073351291(1) dated 17.02.2025 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 19.01.2019 by the Assessing Officer, DCIT, Circle-10(2), New Delhi (hereinafter referred to as ‘ld. AO’).
The only issue to be decided in the appeal of this revenue, in this 2. appeal of the revenue is that whether the Learned CITA was justified in deleting the disallowance made on account of depreciation on highway projects by following the decision passed by the predecessor in Assessee’s own case for assessment years 2014-15 and 2015-16 in the facts and circumstances of the instant case. We have heard the rival submissions and perused the materials 3. available on record. The Assessee is a special purpose vehicle incorporated on 23-06-2006 for execution of highway project. The company was awarded project by National Highway Authority of India for development of four-lane road project of Gwalior Bypass in the State of Madhya Pradesh on Design, Build, Finance , Operate and Transfer (DBOT) basis. The Assessee placed on record the copy of the Concessionare Agreement entered into between the Assessee and the National Highway Authority of India in its paper book. According to the terms of the Concessionare Agreement, fixed annuity of Rs. 26.53 crores was to be received by the Assessee company on a half yearly basis after completion of the project. The Assessee company incurred a sum of Rs. 584,75,02,570/- on this project. The total cost of project including civil, engineering, administrative expenses and finance as incurred by the Assessee company was shown in Note no. 6 of the balance sheet. The same was capitalized as intangible assets in the books of accounts. The Assessee company filed its return of income on 17-10-2016 for the assessment year 2016-17 declaring total income of Rs. 49,12,66,773/-. The Assessee company claimed depreciation of Rs. 44,39,58,893/- on the return on value of the expenditure incurred on the development of the highway project. The assessment was completed under Section 143(3) of the Act on 16-12-2018 computing the business income at Rs. 55,05,95,912/- wherein the depreciation claim of Rs. 44,39,58,893/- claimed on the highway project expenditure was disallowed and instead granted amortization of Rs. 38,46,29,754/- was allowed by referring to CBDT Circular 9 /2014 thereby resulting in net addition of Rs. 5,93,29,139/- to the returned income.
The case of the revenue is that the Assessee is not entitled to 4. depreciation on highway project since it is not the owner of the road constructed by it and ownership of the asset is the sine qua non for claiming depreciation under Section 32 of the Act. The Learned AO relying on the CBDT Circular No. 9 / 2014 allowed amortization over the life of annuity. The Learned AO also relied on the decision of the Hon’ble Supreme Court in the case of Madras Industrial Investment Corporation vs CIT reported in 225 ITR 802 (SC) which is also cited in the said Circular. The Learned CITA by following the order of order passed by this Tribunal in Assessee’s own case for assessment years 2014-15 and 2015-16 deleted the disallowance made on depreciation on highway projects. We find that the issue in dispute is squarely covered by the Special Bench’s decision of Hyderabad Tribunal in the case of Progressive Constructions Limited reported in 161 DTR 289 (Hyderabad Tribunal) ( SB) and also by the decision of this Tribunal in Assessee’s own case for assessment year 2014-15 in dated 02-12-2022 and for assessment year 2015-16 in dated 26-07-2022. We find that the Assessee during the year had claimed depreciation on Highway projects on the opening WDV and that the depreciation had been duly allowed by this Tribunal in earlier two assessment years which Tribunal order has been followed by the Learned CITA while granting relief to the Assessee. Hence, we do not find any infirmity in the order of the Learned CITA. Accordingly the grounds raised by the revenue are dismissed.
In the result, the appeal of the revenue is dismissed. 5.
Order pronounced in the open court on 07/01/2026.