The Central Board of Direct Taxes has clarified that the expenditure incurred on development and construction of roads and highways on Build-Operate-Transfer basis is entitled for depreciation under Income Tax Act.
The depreciation can be amortised by treating it as an allowable business expenditure, the tax department said in a circular issued Wednesday. “The amortisation allowable may be computed at the rate which ensures that the whole of the cost incurred in creation of infrastructural facility of road/highway is amortised evenly over the period of concessionaire agreement after the time taken for creation of such facility,” CBDT said. There have been disputes over claims of the expenditure in a BOT project for depreciation under the Income Tax Act.
The tax department also clarified that the circular was only applicable to the projects where ownership of the project does not lie with the concessionaire under the agreement. -Cogencis