Depreciation on highway concession rights recognised as an intangible asset under section 32(1)(ii).

Concession rights acquired under a DBFOT highway agreement were treated as an intangible asset for depreciation purposes. The concession gave the assessee exclusive rights, licence and authority to construct, operate and maintain the project during the concession period in return for its investment, and the valuable commercial right to operate the facility and recover the investment through annuity fell within section 32(1)(ii) as a licence or similar business right. The view that the claim was depreciation on the toll road itself was rejected as a misreading of the claim. The same expenditure could alternatively be amortised over the concession period, reinforcing the revenue-neutral character of the issue, and the depreciation disallowance was to be deleted.

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Issues: Whether the assessee was entitled to depreciation under section 32(1)(ii) on the concession rights acquired under the DBFOT concession agreement for construction, operation and maintenance of the highway project, including the right to receive annuity.

Analysis: The concession agreement granted the assessee exclusive rights, licence and authority to construct, operate and maintain the project for the concession period in return for investment made by it. The project itself belonged to the authority, but what the assessee acquired against its expenditure was a valuable commercial right to operate the facility and recover its investment through annuity. Such right was held to be an intangible asset within the scope of section 32(1)(ii), as a licence or, at the least, a business or commercial right of similar nature. The contrary view treating the claim as depreciation on the toll road itself was rejected as a misreading of the assessee's claim. The issue was also supported by the view that the same expenditure could alternatively be amortised over the concession period, making the matter revenue neutral in effect.

Conclusion: The assessee was held entitled to depreciation on the intangible concession right, and the disallowance was directed to be deleted.

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