Examined Toll-Rights Depreciation Claim Cannot Be Revised Under Section 263: ITAT Mumbai

MSRDC Sea Link Limited Vs PCIT (ITAT Mumbai)

Summary : The Mumbai Bench of the Income Tax Appellate Tribunal allowed MSRDC Sea Link Limited’s appeal for AY 2020-21 and quashed the Principal Commissioner’s order dated 27.03.2025 under section 263 of the Income-tax Act, 1961. The dispute concerned depreciation of Rs.376,83,20,457 claimed on rights acquired for Rs.3,000 crore to collect toll and operate and maintain the Rajiv Gandhi Sea Link Bridge. The Tribunal found that the Assessing Officer had conducted detailed enquiries during scrutiny and that the circular relied upon by the PCIT did not apply to the assessee’s acquisition of rights in an already constructed project.

The Government of Maharashtra had originally awarded development, maintenance and operation of the bridge to Maharashtra State Road Development Corporation (MSRDC) on a Design, Build, Finance, Operate and Transfer basis. MSRDC constructed the bridge and received tolling rights extending to 31.03.2052. The assessee, its wholly owned subsidiary and special purpose vehicle, subsequently acquired toll-collection, operation and maintenance rights for the period from 02.02.2020 to 31.03.2029 under a concession agreement involving the Government, MSRDC and the assessee. It capitalised the consideration as the cost of an intangible asset. The scrutiny assessment dated 31.08.2022 under section 143(3) read with section 144B accepted its returned income.

The PCIT held that depreciation had been allowed without necessary enquiry and that, since the assessee did not own the bridge, its investment should instead be amortised under CBDT Circular No.9/2014 dated 23.04.2014. He directed withdrawal of depreciation and computed allowable amortisation for the year at Rs.26,21,44,031. The assessee submitted that the AO had specifically investigated the acquisition and depreciation claim, and that it claimed depreciation on the licence and commercial rights under section 32(1)(ii), rather than on ownership of the bridge. It also relied on decisions concerning section 263 and toll-related intangible assets and argued that a debatable issue could not justify revision. The Revenue maintained that toll rights did not fall within the statutory category of intangible assets and that the ownership condition was not satisfied.

On the enquiry issue, the Tribunal examined the statutory notices and replies exchanged during assessment. These included the notice under section 143(2) dated 29.06.2021, notices under section 142(1) dated 06.12.2021, 16.12.2021 and 18.01.2022, and the assessee’s explanations and supporting material, including the concession agreement. The record showed detailed examination of both the investment in intangible assets and the related depreciation. Consequently, the allegation that the AO had allowed the claim without enquiry was held to be baseless.

On the circular, the Tribunal distinguished expenditure incurred to construct or develop BOT infrastructure from consideration paid to acquire toll-collection and operation and maintenance rights. The concession agreement conferred a licence to collect and appropriate toll, regulate use of the bridge and operate and maintain it during the concession period. MSRDC, rather than the assessee, had constructed the project; the assessee had incurred no expenditure on its construction or development. The Tribunal therefore held that the BOT construction-cost circular was inapplicable and that the PCIT had misconstrued its scope.

The Tribunal additionally observed that initiation of revision was based on an audit objection and concluded that jurisdiction had been exercised at the audit party’s behest rather than through the PCIT’s independent decision. It further reasoned that, even on the Department’s approach, the investment cost remained deductible through amortisation, leaving only a timing difference compared with depreciation and causing no real prejudice to the Revenue on these facts. Given the distinction between this purchaser of rights and a developer of BOT infrastructure, the Tribunal considered detailed examination of the cited BOT depreciation decisions unnecessary. Holding that the assessment was neither erroneous nor prejudicial to the Revenue’s interests, it restored the assessment and allowed the appeal. The order was pronounced on 25.09.2026.

Cases Discussed

• Hampi Expressways Pvt. Ltd. Vs Pr. CIT — ITA No.3538/Mum/2025, order dated 21.05.2026 (ITAT Mumbai). Cited by the assessee in support of its challenge to revision and its toll-rights depreciation claim.
• Diwantham Tollway Private Limited Vs PCIT — ITA No.3711/Mum/2025, order dated 13.10.2025 (ITAT Mumbai). Cited by the assessee; the Tribunal resolved the present appeal on its own facts without separately examining the cited BOT decisions.
• Patna Bakhtiyarpur Tollway Vs ACIT — [2025] 170 Taxmann.com 586 (ITAT Hyderabad). Included among the authorities cited by the assessee on the depreciation dispute; not individually analysed by the Tribunal.
• PCIT Vs Paramount Propbuild — [2024] 161 taxmann.com 85 (Delhi High Court). Cited by the assessee in its submissions concerning the scope of revisionary jurisdiction.
• Hazaribagh Ranchi Expressway Ltd. Vs ACIT — [2024] 167 taxmann.com 571 (ITAT Mumbai). Cited by the assessee in the toll-rights depreciation dispute; not separately analysed in deciding this appeal.
• CIT Vs West Gujarat Expressway Vs ADIT — [2024] 167 Taxmann.com 571 (Mumbai Tribunal). The supplied authority list gives this identification and citation; the apparent citation conflict requires editorial verification.
• CIT Vs Paville Projects Pvt. Ltd. — [2023] 149 taxmann.com 115 (Supreme Court of India). Cited by the assessee concerning the conditions governing revision under section 263.
• M/s. L & T Infrastructure Development Projects Limited — TS-1043-HC-2022 (Mad) (Madras High Court). Cited by the assessee among the depreciation authorities. The supplied text does not identify the opposite party.
• Asst. CIT Vs M/s. Progressive Constructions Ltd. — ITA No.1845/Hyd./2014, order dated 14.02.2017 (ITAT Hyderabad). Cited by the assessee on depreciation arising from infrastructure concession rights.
• North Karnataka Expressway Ltd. Vs CIT — [2014] 51 taxmann.com 214 (Bombay High Court). The supplied citation is split across entries (iv) and (v); the case concerns depreciation on BOT road infrastructure.
• Malabar Industrial Co. Ltd. Vs CIT — [2000] 109 Taxmann 66 (Supreme Court of India). Cited by the assessee on the statutory conditions for revision under section 263.
• Madras Industrial Investment Corporation Ltd. Vs CIT — (1997) 225 ITR 802 (Supreme Court of India). Referred to in the reproduced CBDT circular for spreading expenditure over the period of continuing benefit.
• Gee Vee Enterprises Vs Addl. CIT — [1975] 99 ITR 375 (Delhi High Court). Cited by the assessee in its submissions on revisionary jurisdiction and enquiry.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

By filing the present appeal, the assessee has called into question the validity of order dated 27.03.2025 passed u/s. 263 of the Income Tax Act, 1961 (‘the Act’ for short) by learned Principal Commissioner of Income Tax, Mumbai (‘ld. PCIT’ for short), pertaining to Assessment Year (A.Y. for short) 2020-21.

2. Briefly the facts are, the Government of Maharashtra, intended to build/construct Rajiv Gandhi Sea Link Bridge in Mumbai to connect two different parts of Mumbai to alleviate traffic congestion. The work to develop, maintain and operate the Rajiv Gandhi Sea Link Bridge Project was awarded to Maharashtra State Road Development Corporation (‘MSRDC’ for short). Accordingly, a contract was executed between Government of Maharashtra and MSRDC on Design, Build, Finance, Operate and Transfer (DBFOT) basis. In terms with the contract, MSRDC undertook and completed the construction of Rajiv Gandhi Sea Link Bridge. As per the terms of the Agreement, Government of Maharashtra awarded the MSRDC tolling rights along with the operation and maintenance obligation for a period commencing from 24.03.2010 and expiring on 31.03.2052. MSRDC continued to operate and maintain the Rajiv Gandhi Sea Link Bridge till 2019. Subsequently, the present assessee was incorporated as a wholly owned subsidiary of MSRDC and was created as Special Purpose Vehicle (‘SPV’ for short) to Operate, Maintain and Transfer (‘OMT’ for short) the Rajiv Gandhi Sea Link Bridge project with assignment of toll rights, commencing from 02.02.2020 till 31.03.2029. Accordingly, a Concession Agreement was executed between Government of Maharashtra, MSRDC and MSRDC Sea Link Ltd. In terms with the Concession Agreement, the toll rights along with the work of operation and maintenance of Rajiv Gandhi Sea Link Bridge was transferred to the present assessee. As a consideration for acquiring the rights to collect toll and operate and maintain the sea link, the assessee paid an amount of Rs.30,00,00,00,000/- (Rs.3000 crores). The investment made by the assessee towards acquisition of the right to collect toll, operate and maintain the sea link was treated as ‘cost of acquisition’, of an intangible asset in the books of account. In the return of income filed for the assessment year under dispute, the assessee claimed depreciation of Rs.376,83,20,457/- on such intangible asset. The return of income so filed by the assessee was selected for scrutiny. After calling upon the assessee to furnish various details in connection with the return of income filed, the Assessing Officer (‘A.O.’ for short) ultimately completed the assessment u/s. 143(3) r.w.s. 144B of the Act on 31.08.2022, accepting the income returned by the assessee.

3. Post completion of assessment, as aforesaid, Id. PCIT called for and examined the assessment records and while doing so, he was of the view that the assessment order is not only erroneous, but prejudicial to the interest of revenue, as the A.O. without making necessary enquiry or verification on the issue of claim of depreciation on intangible asset has allowed the claim, though, the assessee is not entitled for depreciation. Accordingly, he issued a show cause notice to the assessee to explain why the assessment order should not be revised. Though, in response to the show cause notice, the assessee furnished a detailed submission, not only objecting to the exercise of jurisdiction u/s. 263 of the Act, but also justifying the claim of depreciation, however, ld. PCIT did not found merit in them. Ultimately, he proceeded to pass the impugned order, setting aside the assessment order with a direction to withdraw the benefit of deprecation claimed by the assesse, instead, allow amortization of cost of investment in terms with Circular No. 9/2014 dated 23.04.2014 issued by Central Board of Direct Taxes (‘CBDT’ for short).

4. Before us, ld. Counsel appearing for the assessee submitted that the allegation of ld. PCIT that the A.O. has allowed the claim of deprecation without making any enquiry is without any basis, as the A.O. has conducted thorough enquiry specifically on the issue of claim of deprecation on assets. In this context, he drew our attention to various notices issued by the A.O. in course of assessment proceedings and reply furnished by the assessee. Thus, he submitted, the A.O. did make full-fledged enquiry, so far as the claim of depreciation on intangible asset is concerned. Without prejudice, he submitted, even on merits, the assessee has a strong case, as the assessee had never claimed depreciation by claiming itself as the owner of the toll bridge. He submitted, through the Concession Agreement, the assessee has acquired the right to collect toll from the passengers travelling on the toll road. He submitted, the license to collect toll is nothing but an ‘intangible asset’ as per section 32(1)(ii) of the Act. To demonstrate that the investment made by the assessee is for acquiring intangible asset, ld. Counsel took us through various clauses of the Concession Agreement placed in the paper book as also the accounting treatment given in the book of accounts. Thus, he submitted, CBDT Circular referred to by the Revisionary Authority is not at all applicable to the assessee.

5. Proceeding further, ld. Counsel submitted since, the assessee had never claimed depreciation on the toll road, but has claimed depreciation on the right to collect toll as also to operate and maintain the sea link which is an intangible asset, ld. PCIT has erroneously exercised jurisdiction u/s. 263 of the Act, assuming that the assessee has claimed deprecation as owner of the toll road. Ld. Counsel submitted, the issue is otherwise covered by various decisions of the co-ordinate benches, insofar as it relates to claim of depreciation on the investment made towards acquiring right to collect toll. He submitted, in any case of the matter, the issue is highly debatable, where more than one view is possible. Therefore, the assessment order cannot be subjected to revisionary proceeding. In support of such contention, ld. Counsel relied upon the following judicial precedents:

i. CIT vs. Paville Projects Pvt. Ltd. [2023] 149 taxmann.com 115 (SC)

ii. Malabar Industrial Co. Ltd. vs. CIT [2000] 109 Taxmann 66 (SC)

iii. PCIT vs. Paramount Propbuild [2024] 161 taxmann.com 85 (Delhi)

iv. Gee Vee Enterprises vs. Addl. CIT [1975] 99 ITR 375 (Del) North Karnataka Expressway

v. CIT [2014] 51 Taxmann.com 214 (Bom)

vi. CIT vs. West Gujarat Expressway vs. ADIT [2024] 167 Taxmann.com 571 (Mum-Trib)

vii. Hazaribaug Ranchi Expressway vs. ACIT [20247] 167 Taxmann.com 571 (Mum-Trib)

viii. M/s. L & T Infrastructure Development Projects Limited (TS-1043-HC-2022 (Mad))

ix. Patna Bakhtiyarpur Tollway vs. ACIT [2025] 170 Taxmann.com 586 (Hyd. Trib)

x. Diwantham Tollway Private Limited vs. PCIT (in ITA No. 3711/Mum/2025 vide order dated 13.10.2025)

xi. Hampi Expressways Pvt. Ltd. vs. Pr. CIT (in ITA No.3538/Mum/2025 vide order dated 21.05.2026)

xii. Asst. CIT vs. M/s. Progressive Constructions Ltd. (in ITA No. 1845/Hyd./2014 vide order dated 14.02.2017)

3. Per contra, learned Departmental Representative (‘ld. DR’ for short) submitted that the right to collect toll and any other rights under the Concession Agreement cannot be treated as ‘intangible asset’ in terms with section 32(1)(ii) of the Act, as the definition of intangible asset therein refers to specific genus. He submitted, the right to collect toll does not fit into any other species mentioned therein. Without prejudice, ld. DR submitted that depreciation can be claimed only when the assets are either owned or partly owned by the assessee and are used for the purpose of its business. He submitted, in the facts of the present appeal, admittedly, the assessee is not the owner of the toll road. Hence, the assessee cannot claim depreciation either as an owner or user of the asset for its business. Ultimately, he submitted, learned PCIT has rightly directed the AO to allow amortization of cost over the concession period in terms with CBDT Circular No. 9/2014 dated 23.04.2014.

7. We have given a thoughtful consideration to rival contentions in the light of the judicial precedents cited before us and perused the materials available on record. It is manifest on record, learned PCIT has exercised jurisdiction u/s.263 of the Act and held the assessment order as erroneous and prejudicial to the interest of the revenue, primarily and only for the following two reasons:

i. Before allowing claim of depreciation, the AO has not made any inquiry.

ii. The assessee not being the owner of the asset, amortization of cost over the concession period is allowable in terms with CBDT Circular Number 9 of 2014 dated 23.04.2014.

8. At the outset, we will deal with the enquiry part, as it is a purely factual issue borne out on record. Undisputedly, the assessee had filed its return of income for the assessment year under dispute on 13.01.2021, declaring ‘nil’ income. The return of income filed by the assessee was selected for scrutiny, high creditor liability to investment in intangible asset. Thus, for examining these issues for which the return of income was picked up for scrutiny. The AO on 29.6.2021 issued a notice u/s. 143(2) of the Act, calling upon the assessee to furnish necessary details and evidences to justify its claim. In response to the said notice, the assessee on 09.08.2021 furnished reply with necessary details. Then on 06.12.2021, the AO issued a notice u/s.142(1) of the Act, requiring the assessee inter alia to furnish specific details relating to substantial investment/addition of intangible asset during the year in a tabular format. In response to the said notice, the assessee furnished its reply on 30.12.2021 with necessary details. On 16.12.2021, the AO again issued one more notice u/s.142(1) of the Act, calling upon the assessee to furnish details relating to investment made in the intangible asset. On 18.01.2022, one more notice u/s. 142(1) of the Act was issued by the AO, requiring the assessee to furnish further details in relation to the investment made in the intangible asset, as also the claim of depreciation. In response to the said notice, the assessee furnished reply on 04.02.2022, furnishing the factual details relating to the investment made and the depreciation claimed. The Concession Agreement and the investment made were also furnished before the AO. Thus, the aforesaid facts clearly demonstrate that in course of assessment proceeding, the AO did carry out detailed inquiry with regard to the investment made in intangible asset, as also the eligibility to claim depreciation thereon. Thus, the allegation of the Revisionary Authority that the AO has allowed depreciation without making any further inquiry appears to be baseless and not borne out from the facts and materials available on record. Therefore, we cannot subscribe to the view expressed by ld. PCIT that the assessment order has been passed without making any inquiry on the issue of claim of the depreciation.

9. Having held so, it is necessary to deal with the second aspect on which the Revisionary Authority has held the assessment order to be erroneous and prejudicial to the interest of revenue. Undisputedly, apart from the allegation of lack of inquiry, the other singular factor which influenced the decision-making process of the Revisionary Authority is CBDT Circular No.9/2014 dated 23.04.2014. Relying upon the aforesaid Circular, ld. Revisionary Authority has opined that Government of Maharashtra, being the owner of Toll Bridge and not the assesse, depreciation cannot be allowed in terms with section 32(1)(ii) of the Act. Rather, in terms with CBDT Circular No. 9/2014 dated 23/4/2014, the expenditure incurred by the assessee for development of roads/highways on Build-Operate-Transfer (‘BOT’) agreement has to be amortized over the concession period and allowed as ‘business expenditure’ u/s.37(1) of the Act. Accordingly, he has directed the AO to spread over the cost of investment made by the assessee for operation and maintenance over the entire concession period and allow amortization proportionately. Accordingly, he has worked out the amortization cost for the impugned assessment year at Rs.26,21,44,031/-, which according to him is to be allowed to the assessee as against the claim of depreciation.

10. It is a fact on record that the assessee has entered into a Concession Agreement with Government of Maharashtra and MSRDC, where-under, the assessee has been granted license not only to collect toll, but to operate and maintain the Toll Bridge during the concession period. For acquiring such right, the assessee has paid an amount of Rs.3000 crores, which has been capitalized in its books of accounts as cost of acquiring intangible asset in the form of collecting toll. Obviously, by making the investment the only source of income generated by the assessee is from the right to collect toll.

11. At this stage, it is necessary to look into some of the important clauses of the Concession Agreement. As per Clause 3.1 of the Concession Agreement, MSRDC was granted the concession rights, including the exclusive right, license and authority to toll, operate and maintain the sea link during the Concession Period. Under Article 3.1.3 (clause (d)), amongst others, MSRDC was granted the Right of Way, access and license to the Site for the purpose of and to the extent conferred by the Concession Agreement, to implement the project, to manage, operate and maintain the Project and regulate the use thereof by third parties, to demand, collect and appropriate fee from vehicles and users liable for payment of fee for using the Project or any part thereof and refuse entry to any vehicle if the fee due is not paid. Article 4 of the Concession Agreement lay down the Conditions Precedent to transfer of Concession rights to SPV. Thus, whatever rights MSRDC acquired under the agreement for collection of toll, as also operation and maintenance, were transferred to the present assessee. In other words, the assessee was granted license to operate and maintain the Sea Link with the right to collect toll. In this context, a reference can be made to Clauses 10.2 and 10.2.1 of the Concession Agreement. As per Article 11.3.1, other authorities intending to carry out any work on the Sea Link have to take permission of the assessee.

12. Thus, a reading of the Concession Agreement as a whole clearly demonstrates that the assessee was given the right to collect toll and operate and maintain the Sea Link over the Concession Period.

13. Having examined the nature and scope of mandate given to the assessee under the Concession Agreement and the right acquired by it thereunder, it is necessary to look to the applicability of CBDT Circular No. 9/2014. For better appreciation, the said Circular is reproduced hereunder:

Circular No. 09/2014

Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes

North Block, New Delhi
Dated the 23^rd of April, 2014

Subject: – Clarification regarding treatment of expenditure incurred for development of roads/highways in BOT agreements under Income-tax Act, 1961 – regarding-

It has come to the notice of the Board that disputes have arisen as to whether the expenditure incurred on development and construction of infrastructural facilities like roads/highways on Build-Operate-Transfer (‘BOT’) basis with right to collect toll is entitled for depreciation under section 32(1)(ii) of the Act or the same can be amortized by treating it as an allowable business expenditure under the relevant provisions of the Income-tax Act, 1961 (‘Act’).

2. In such projects, the developer (hereinafter referred to as ‘assessee’), in terms of concessionaire agreement with Government or its agencies is required to construct, develop and maintain the infrastructural facility of roads/highways which, inter-alia, includes laying of road, bridges, highways, approach roads, culverts, public amenities etc. at its own cost and its utilization thereof for a specified period. In lieu of consideration of the expenditure incurred on construction, operation and maintenance of the infrastructure facility covered by the period of the agreement, the assessee is accorded a right to collect toll from users of such facility. The expenditure incurred by such assessee on development and construction of such infrastructural facility are capitalized in the accounts. It is seen that in returns-of-income, assessees are generally claiming depreciation on such capitalized expenditure treating it as an ‘intangible asset’ in terms of section 32(1)(ii) of the Act while in assessments, such claims are being disallowed by the Assessing Officer on the grounds that such infrastructural facility is not owned, wholly or partly, by the taxpayer which is an essential condition for claiming depreciation and further right to collect toll does not fall in any of the categories of ‘intangible assets’ specified in sub-clause(ii) of sub-section (1) of section 32 of the Act.

3. In BOT arrangements for development of roads/highways, as a matter of general practice, possession of land is handed over to the assessee by the Government/notified authority for the purposes of construction of the project without any actual transfer of ownership and such assessee has only a right to develop and maintain such asset. It also enjoys the benefits arising from use of asset through collection of Toll for a specified period without having actual ownership over such asset. Therefore, the rights in the land remain vested with the Government or its agencies. Thus, as assessee does not hold any rights in the project except recovery of toll fee to recoup the expenditure incurred, it cannot therefore be treated as an owner of the property, either wholly or partly, for purposes of allowability of depreciation under section 32(1)(ii) of the Act. Thus, present provisions of the Act do not allow claim of depreciation on Toll ways due to non fulfillment of ownership criteria in such cases.

4. There is no doubt that where the assessee incurs expenditure on a project for development of roads/highways, he is entitled to recover cost incurred by him towards development of such facility (comprising of construction cost and other pre-operative expenses) during the construction period. Further, expenditure incurred by the assessee on such BOT projects brings to it an enduring benefit in the form of right to collect the toll during the period of the agreement. Hon’ble Supreme Court in the case of Madras Industrial Investment Corporation Ltd. vs. CIT in 225 ITR 802 allowed spreading over of liability over a number of years on the ground that there was continuing benefit to the company over a period. Therefore, analogously, expenditure incurred on an infrastructure project for development of roads/highways under BOT agreement may be treated as having been made/incurred for the purposes of business or profession of the assessee and same may be allowed to be spread during the tenure of concessionaire agreement.

5. In view of above, Central Board of Direct Taxes, in exercise of the powers conferred under section 119 of the Act hereby clarifies that the cost of construction on development of infrastructure facility of roads/highways under BOT projects may be amortized and claimed as allowable business expenditure under the Act.

6. The amortized evenly over the period of concessionaire agreement after excluding the time taken for creation of such facility.

7. In the case where an assessee has claimed any deduction out of initial cost of development of infrastructure facility of roads/highways under BOT projects in earlier years, the total deduction so claimed for the Assessment Years prior to the Assessment Year under consideration maybe deducted from the initial cost of infrastructure facility of roads/highways and the cost ‘so reduced’ shall be amortized equally over the remaining period of toll concessionaire agreement.

8. It is hereby clarified that this Circular is applicable only to those infrastructure projects for development of road/highways on BOT basis where ownership is not vested with the assessee under the concessionaire agreement.

.9. This may be brought to the notice of all concerned.

10. Hindi version to follow.

(Rohit Garg)
[Left edge cropped]puty Secretary to the Government of India

(F.No.225/182/2013/ITA.II)

14. On a reading of the Circular reproduced above, it is explicit that it was issued by way of clarification to the Departmental Officers, as to how the expenditure incurred for development of roads/highways on BOT basis is to be allowed. In other words, the Circular is applicable to an assessee, making investment in development and construction of infrastructure facility like roads and highways. This fact is further clarified in paragraph 5 of the Circular, wherein it has been specifically stated that the cost of construction on development of infrastructure facilities such as roads/highways under BOT project has to be amortized and claimed as ‘business expenditure’. In the facts of the present appeal, admittedly, MSRDC is the builder/developer of the project and not the assessee. The assessee has not incurred even a single penny in building/developing the project. The entire investment made by the assessee is for acquiring the right to collect toll and operate and maintain the Sea Link during the Concession Period. Thus, the right acquired by the assessee is nothing but a license to collect toll as also to operate and maintain the sea link. Thus, CBDT Circular under reference heavily relied upon by ld. PCIT, in the first place, is not at all applicable to the present assessee, as the assessee is not the builder/developer of the Sea Link. Thus, once it is held so, the entire case of ld. PCIT that the assessee is eligible for amortization of cost, rather than claim depreciation on intangible asset, vanishes into thin air. Thus, in our considered opinion, ld. PCIT has not only misconstrued the tone and tenor of CBDT Circular No. 9 of 2014 dated 23.04.2014 but has completely misdirected himself while applying it to the assessee. Thus, in our view, once it is held that the CBDT Circular relied upon by ld. PCIT is not applicable to the assesse, the impugned order u/s. 263 of the Act becomes unsustainable.

15. We may further add, on a perusal of the impugned order of learned PCIT, more particularly paragraph 2.1 of the order, it is abundantly clear that the initiation of proceedings u/s. 263 of the Act was based on audit objection. Therefore, we are persuaded to believe that the exercise of jurisdiction u/s.263 of the Act was not an independent decision of the Revisionary Authority, but was at the behest of the audit party. That being the case, the exercise of jurisdiction is vitiated and unsustainable.

16. Without prejudice to the observations made in the foregoing paragraph, it is a fact on record that ld. PCIT has agreed that the cost of investment of the assessee has to be allowed as ‘business expenditure’, through amortization over the concession period. Therefore, even according to the department, the assessee remains entitled to recoup the cost of investment, either by way of depreciation or through amortization. Therefore, there can only be a timing difference in allowability of expenditure. In case depreciation is allowed, the claim would be exhausted in a short duration. Whereas, in case of amortization, the expenditure would be spread over a longer period. However, the assessee will be entitled to claim it. That being the case, no real prejudice is caused to the revenue. Hence, one of the conditions of section 263 is not satisfied. Since, in the facts of the present appeal, the assessee is not a builder/developer of the toll road/bridge, but has made investment only for acquiring the right to collect toll and maintain the infrastructure facilities, in our view, there is no need to refer to the decisions cited by the parties on allowability or otherwise of depreciation in case of assessees’s developing toll road/bridge on BOT/DBOFT basis. Suffice to say, the decisions cited by ld. Counsel for assessee lay down the ratio that investments in infrastructure facilities on BOT/DBOFT basis with right to collect toll gives rise to an intangible asset on which depreciation is allowable.

17. Thus, on overall consideration of facts and materials available on record, we hold that the assessment order subjected to proceedings u/s.263 of the Act, cannot be considered as erroneous and prejudicial to the interest of the revenue. Hence, we quash the impugned order passed u/s.263 of the Act, while restoring the assessment order to its original position.

18. In the result, the appeal is allowed as indicated above.

Order pronounced in the open court on 25.09.2026