DCIT Vs Progressive Constructions Ltd. (ITAT Hyderabad)
Expenditure incurred for gaining right to operate the project facility and collect toll charges resulted into an intangible asset eligible for depreciation
Conclusion: Expenditure incurred by assessee of Rs.214 crore for creating the project or project facilities had created an intangible asset in the form of right to operate the project facility and collect toll charges and assessee was eligible for depreciation under section 32(i)(ii).
Held: Government of India being desirous of implementing a project involving, construction, operation and maintenance of four lane Pune Hyderabad section of N.H. no.9, with private sector participation of BOT invited tender from interested parties. Assessee being successful in the tender, the Government of India entered into a Concession Agreement (C.A) with assessee. The issue arose for consideration was whether investment of Rs. 214 crore by assessee in construction of National Highway No.9, on build, operate and transfer (BOT) basis with a right to collect toll charges from the user of road by vehicles over the concession period resulted into an asset eligible for depreciation under section 32(1)(ii). It was held, from the very inception of the project, assessee was aware of the fact, it had to recoup the cost incurred in implementing the project along with the profit from operating the road and collecting toll charges during the concession period. Therefore, such right acquired by the assessee was a valuable business or commercial right. Thus, the expenditure incurred by assessee of Rs.214 crore for creating the project or project facilities had created an intangible asset in the form of right to operate the project facility and collect toll charges and assessee was eligible for depreciation under section 32(i)(ii).
