TaxTMI 
TaxTMI 
2026 (7) TMI 1072
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....essee M/s Hyderabad Ring Road Projects Pvt Ltd, i.e. is a private limited company incorporated on 13.07.2007. The Company is a Special Purpose Vehicle formed for the purpose of construction of Outer Ring Road Project in the city at Hyderabad. It was awarded a project of Design, Construction, Development, Finance, Operation and Maintenance of Eight lane access-controlled expressway under Phase II, in the state of Andhra Pradesh, India, for the package from Narsingi to Kollur from Km 0.00 to Km 12.00, on BOT (Build, Operate and Transfer) on Annuity basis. The project was awarded by the Hyderabad Urban Development Authority ("HUDA") a unit of Govt. of Andhra Pradesh, through its subsidiary company Hyderabad Growth Corridor Ltd ("HGCL"). 4. The assessee company filed its return of income on 28.10.2017 declaring a loss of Rs. 4,50,83,634/-. The assessee in its return of income declared annuity income of Rs. 61,80,00,000/- against which the company claimed depreciation of Rs. 35,07,52,546/-. 5. The case was selected for scrutiny and the assessment proceedings u/s. 143(3) of the Income-tax Act, 1961 [the Act, for short] were completed on 20.12.2019 wherein the claim of depreciation ....
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....ht/license to do certain acts/deed and to collect Annuity from HUDA during the specified period. The ld AR stated that the aforesaid Rights emerged as a result of the costs incurred as well as the risk borne by the assessee on development, construction and maintenance of the infrastructure facility. 10. Further, the ld. counsel for the assessee continued by saying that rights or the license granted for 15 years is an exclusive right referring to the relevant clause of the Concessionaire agreement. The ld. counsel for the assessee submitted that it is quite evident that assessee got the right for the specified period only after incurring expenditure through its own resources on development, construction and maintenance of the infrastructure facility. Scope of Project states that "The Concessionaire shall undertake its obligations at its own cost and risk". The ld AR submitted that such an exclusive right has been adjudicated to be in the nature of 'capital/intangible asset' falling within the purview of section 32(1)(ii) of the Act and has been found eligible for claim of depreciation and placed reliance on the decision of Special Bench of the Hon'ble Tribunal in the ....
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.... C&C Kurali Toll Road Ltd. Vs DCIT (ITAT Delhi) ITA Nos.1592 & 1593/Del/2017Date of Judgment/Order: 18/05/2021 (refer case law compilation • CIT vs ACP Tollways Private Limited (ITAT Lucknow) I.T.A. No.131/Lkw/2024 Date of Judgment 17/10/2025 13. Per contra, the ld. DR relied on the decision of the Hon'ble Madras High Court in the case of M/s. L & T Infrastructure Development V ACIT in TCA no 868 of 2009 dated 29.12.2022 wherein while dealing with the identical issue as to whether expenditure incurred under Concessionaire agreements results in the acquisition of an "intangible asset", has answered the substantial question of law against the assessee and in favour of the Revenue, holding that no depreciation is allowable under Section 32 on such expenditure. The ld. DR submitted that the Hon'ble Madras High Court in L & T Infrastructure Development Projects Ltd. (supra) held that the rights emanating from such agreements cannot be equated with licenses, franchises, or other business or commercial rights of similar nature so as to qualify for depreciation under the Act. The said ratio of a Hon'ble Madras High Court on the issue has consistently been follow....
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....e in the assessee's case it encompasses Design, Construction, Development, Finance, Operation and Maintenance. Secondly, in L & T Infrastructure Development Projects Ltd the project cost has been amortised in the books of account whereas in the assessee's case, it has been capitalized in the books of account as intangible asset and depreciation claimed. Thirdly, L & T Infrastructure Development Projects Ltd case, the assessee in consideration for building the Road, gets Right to collect toll and no separate consideration was given by Government whereas in the assessee's case, the assessee is given a separate consideration in the form of right to the annuity from Government and no right to receive toll as the same is given to the HUDA. Fourthly, there is no mention of license being granted to L & T Infrastructure Development Projects Ltd whereas the assessee has been granted exclusive rights and license by HUDA. 19. With respect to arguments that facts in the assessee's case are distinguishable as compared with the facts in L & T Infrastructure Development Projects Ltd, the ld DR vehemently submitted that a perusal of the Assessee's Concessionaire agreement (at Assessee's....
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....ee of charge/at NIL value and in consideration, HUDA was to provide cash support by way of grant called as Annuity of Rs 61.80 crore every year during the specified period. It is the claim of the assessee that the HUDA has granted exclusive rights, license and authority in return for incurring expenditure on development, construction and maintenance of the infrastructure facility at assessee's own cost and risk. It is this exclusive right which has been treated as 'capital/intangible asset', eligible for claim of depreciation under Explanation 3(b) r/w section 32(1)(ii) of the Act. 24. The question before us is whether this 'right' to get 'annuity' is 'intangible asset'. We find that the Hon'ble Madras High Court in the case of M/s. L & T Infrastructure Development V ACIT in TCA no 868 of 2009 dated 29.12.2022 wherein while dealing with the identical issue has answered the substantial question of law against the assessee and in favour of the Revenue, holding that rights emanating from Concessionaire agreements cannot be equated with "intangible asset", such as licenses, franchises, or other business or commercial rights of similar nature so as to qualify for deprecia....
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....In our opinion, in the context of the object and the-mischief of the enactment there is no room for the application of the rule of ejusdem generis. Hence it follows that the vacancy as declared by the order impugned in this case, even though it may not be covered by the specific words used, is certainly covered by the legal import of the words "or otherwise"." 126. Therefore, it cannot be construed that the respective assessees had acquired "intangible assets" within the meaning of the definition in Explanation 3(b) to section 32 of the Income Tax Act, 1961 under the respective concessionaire agreement for the purpose of claiming depreciation. 127. By no stretch of imagination can it be construed that the respective assessees have been conferred upon any "intangible assets" under the concessionaire agreements for the purpose of the aforesaid provision. 128. In the light of the above discussion we are constrained to answer the second part of the first substantial question of law also against the assessee and in favour of the revenue. 25. The decision of above hon'ble Madras High Court was followed by the Mumbai Tribunal in the case of Hazaribagh Ranchi ....
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....actor, in both cases, is that both the concessionaire has to build the road infrastructure on (BOT) basis i.e., build, operate and then transfer it to the respective organs of the government. The only difference is with regard to compensation for finance of the project. Whereas in L & T Infrastructure Development Projects Ltd, the cost is recouped from collection of toll whereas in the assessee's case, the cost is recouped from the grant given by HUDA in the nature of "Annuity". In the case of the assessee, for cost of construction is borne by assessee and thereafter remunerated by HUDA in the form of Annuity for the specified period. Again there is no material difference as both the procedure are designed to compensate the cost of the project. We are therefore of the considered view that "right to collect toll" is identical/similar to "right to get grant in the nature of Annuity". 28. As far as accounting treatment given to the cost of road infrastructure is concerned, we find that in L & T Infrastructure Development Projects Ltd, the project cost has been capitalized and amortised in the books of account but for the purpose of Income Tax, depreciation was claimed on the same t....
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....id Circular mandates furnishing of final completion of certificate. Therefore, the Assessing Officer rightly disallowed the depreciation fully in accordance with law and the ld. CIT(A)'s grant of amortization is factually and legally untenable. 33. Per contra, the ld AR reiterated that assessee has shown the project cost as an intangible asset in its books of account from its very inception and has not claimed the cost incurred as a deferred revenue expenditure subject to amortization. It is submitted that in the present year, the assessee is only claiming depreciation on the opening WDV. Hence, there is no scope now to examine the expenditure now as a deferred revenue expenditure subject to amortization when the same has been subject to depreciation in the preceding years. 34. Placing reliance on the CBDT Circular 9/19, the ld AR stated that the Circular itself states that in the BOT arrangement, assessee is entitled to recover the cost incurred on development of such project which brings to it an enduring benefit in the form of right to collect toll during the period of agreement and hence it should be considered capital in nature and not revenue thereby entitled for deprec....