Madras High Court Denies Depreciation Claims on Build-Operate-Transfer Infrastructure Assets

The Madras High Court ruled against allowing depreciation claims on Build-Operate-Transfer toll roads and bridge infrastructure assets. The court analyzed the legal nature of concession agreements where developers build and operate infrastructure on behalf of the government without acquiring ownership of the underlying land or physical assets. This decision clarifies that such rights do not constitute tangible or intangible assets eligible for depreciation under the Income Tax Act. Infrastructure concessionaires typically incur substantial capital outlays to construct highways and bridges, recovering their investments through toll collections over a specified concession period.

Under tax law, depreciation is contingent upon ownership or specific statutory categorization of assets, which has triggered prolonged legal debates over whether concession rights qualify as depreciable capital assets. The High Court's ruling restricts tax savings for developers by barring depreciation deductions on these public-private partnership projects. Infrastructure developers, tax auditors, and corporate finance advisors must immediately review their financial models and current tax return filings.

Companies should assess their deferred tax liabilities and consult legal experts regarding potential appeals against the order. Bottom line: infrastructure firms operating under Build-Operate-Transfer models must adjust their tax planning to exclude depreciation claims on toll assets.