Depreciation on capitalised project expenditure upheld where precedent treats DBOT project costs as depreciable assets.

The issue concerns entitlement to depreciation on project expenditure capitalised as intangible assets by a special purpose vehicle undertaking a DBOT highway project. The Tribunal applied existing precedent, including a Special Bench ruling and the assessee's earlier-year tribunal decisions, treating the capitalised project cost as eligible for depreciation and recognising opening written down value treatment; ownership arguments relied on by the Assessing Officer were rejected in view of consistent precedent. The Commissioner (Appeals) deletion of the disallowance was found consistent with prior orders and thus sustained.

---

---

Issues: Whether the Learned Commissioner of Income Tax (Appeals) was justified in deleting the Assessing Officer's disallowance of depreciation claimed on expenditure incurred for construction of a highway project for assessment year 2016-17.

Analysis: The dispute required examination of whether the assessee, a special purpose vehicle undertaking a DBOT highway project, could claim depreciation under the Income-tax Act, 1961 on project expenditure capitalized as intangible assets. The Assessing Officer disallowed depreciation and allowed amortization by reference to CBDT Circular No. 9/2014 and supporting authority that ownership is a prerequisite for claiming depreciation under Section 32 of the Income-tax Act, 1961. The Commissioner (Appeals) deleted the disallowance by following this Tribunal's earlier orders in the assessee's own case for AY 2014-15 and AY 2015-16. The Tribunal found the issue squarely covered by prior tribunal precedent, including the Special Bench decision in Progressive Constructions Limited and this Tribunal's earlier decisions for the assessee, and noted that depreciation had been allowed in earlier assessment years on the opening written down value. Having regard to the consistent tribunal precedent and the facts of the case, the Tribunal saw no infirmity in the Commissioner (Appeals) order deleting the disallowance.

Conclusion: The deletion of the disallowance of depreciation by the Commissioner (Appeals) is upheld; the revenue's appeal is dismissed and the decision is in favour of the assessee.

---