Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(ITAT) 5283

INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH)
MADHUMITA ROY, Judicial Member, NAVEEN CHANDRA, Accountant Member
Hyderabad Ring Road Project Pvt Ltd – Appellant
Versus
The A.C.I.T – Respondent
ITA No. 4090/DEL/2025 [A.Y. 2017-18] | CO No. 81/DEL/2025 [A/o 3599/DEL/2025 (A.Y 2017-18)] | ITA No. 3599/DEL/2025 [A.Y. 2017-18]

Advocates:
For the Appellants/Petitioners: Shri Chinu Bhasin, Adv
For the Respondents: Shri Mahesh Kumar, CIT-DR

Rights under BOT annuity concessionaire agreements do not qualify as intangible assets for depreciation u/s 32(1)(ii); amortization allowed per CBDT Circular.

Headnote:Under Section 32(1)(ii) of the Income-tax Act, 1961 read with Explanation 3(b), the assessee, a special purpose vehicle for BOT annuity-based highway project, claimed depreciation on capitalized costs treated as intangible assets from annuity income. Lower authorities rejected depreciation but allowed amortization per CBDT Circular 9/2014 based on provisional completion certificate. Both parties appealed. Court examined if rights under concessionaire agreement qualify as intangible assets. Issues framed: Whether 'right to annuity' under BOT agreement is an intangible asset eligible for depreciation u/s 32(1)(ii); validity of amortization grant on provisional certificate. Ratio: Following Madras High Court in L&T Infrastructure, rights from concessionaire agreements do not qualify as licenses, franchises or similar intangible assets per noscitur a sociis; distinguished assessee's claims on scope, accounting, and consideration. Annuity right akin to toll collection right, not depreciable. Amortization valid per Circular 9/2014 and agreement treating provisional certificate at par. Appeals and cross-objection dismissed.

Table of Content
1. background and facts of bot annuity project depreciation dispute. (Para 1 , 2 , 3 , 4 , 5 , 6)
2. assessee argues exclusive rights as depreciable intangible assets. (Para 7 , 8 , 9 , 10 , 11 , 12)
3. revenue relies on hc precedents denying depreciation on bot rights. (Para 13 , 14 , 15 , 16)
4. assessee distinguishes madras hc; revenue refutes. (Para 17 , 18 , 19 , 20)
5. rights to annuity not intangible; depreciation claim rejected. (Para 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30)
6. amortization upheld on provisional certificate per circular. (Para 31 , 32 , 33 , 34 , 35)
7. all appeals and co dismissed. (Para 36)

ORDER

PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:-

The above captioned appeals by the assessee and Revenue and Cross Objection by the assessee are preferred against the separate orders of the NFAC dated 18.03.2025 pertaining to Assessment Year 2017-18.

2. Since the underlying appeals and cross objection were heard together and the facts in issues are identical, all these appeals and cross objections are being disposed off by this common order for the sake of convenience and brevity, though the quantum may differ.

ITA No. 4090/DEL/2025(Assessee’s appeal) [A.Y. 2017-18]

(Assessee’s CO 81/Del/2025 )[A.Y. 2017-18]

3. Brief facts of the case are that the assessee 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 was rejected in entirety. The assessee was also denied the benefit of amortization available by CBDT Circular 9/2014, on the ground that the assessee submitted only the provisional completion certificate. Accordingly, disallowance of depreciation of Rs. 35,07,52,546/- was made and the income was assessed at Rs. 30,56,68,912/-.

6. Aggrieved, the assessee filed an appeal before the ld. CIT(A) which was partly allowed. The CIT(A) upheld the disallowance of depreciation but allowed the benefit of amortization basis CBDT Circular 9/2014. The CIT(A) accepted the provisional certificate of completion issued by the Hyderabad Growth Corridor Ltd wherein it was certified that the project of highway was completed on 30.03.2012 and was in use by the general public. Now both the Revenue and the assessee have preferred appeals and the corresponding cross objection of assessee.

7. Grounds in CO and ITA of assessee are in respect of disallowance of depreciation @ 25% on intangible asset. With regards to the claim of depreciation, at the very outset, the ld. counsel for the assessee vehemently submitted that the instant issue is squarely covered by the recent order of the co-ordinate bench of the ITAT in the case of assessee's group concern i.e. M/s Gwalior Bypass Project Ltd case in ITA no. 2896/Del/2025 for A.Y 2016-17 order dated 07.01.2026 and in ITA no. 1297/Del/2019 for A.Y 2015-16 and ITA No. 5555 for A.Y 2014- 15.

8. The ld. counsel for the assessee further submitted that there is no dispute to the fact

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