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(B) The assessee company is a Special Purpose Vehicle (SPV) for the purpose of development of a portion of four lanes Varanasi Shaktinagar Road in the state of Uttar Pradesh, for which the assessee had entered into contract with UP State Highways (UPSHA) on Design, Build, Finance, Operate and Transfer (DBFOT) basis. The return of income was filed by the assessee showing loss of Rs.1,20,20,10,587/-. Under the agreement with UPSHA, the assessee has been given the right to develop and maintain the toll road and also the right to collect toll for a specified period. At page 10 of the assessment order, the Assessing Officer acknowledges that under the agreement between the assessee and UPSHA, the project was deemed to be acquired and owned by the assessee. However, the Assessing Officer has taken the view that deemed ownership, in the absence of physical ownership of asset, does not qualify the assessee to claim depreciation. The Assessing Officer took the view that CBDT Circular dated 23/04/2014, which had provision for amortization of expenses in BOT contracts (Build, Operate, Transfer) was applicable in the case of the assessee also and the assessee was not entitled to depreciation. However, in the return of income filed by the assessee, the assessee claimed that "Right to Collect" toll was a capital asset which qualified for claim of depreciation u/s 32 of the I. T. Act. The assessee opted to claim depreciation amounting to Rs.1,49,17,94,856/- and opted out of claiming amortization of the capital expenditure. The I.T.A. No.131/Lkw/2024 Assessing Officer disallowed the assessee's claim for depreciation amounting to aforesaid amount of Rs.1,49,17,94,856/- and instead allowed amortization of expenses amounting to Rs.37,98,00,000/-. The assessee filed appeal in the office of learned CIT(A). Vide impugned order dated 18/01/2024, the learned CIT(A) partly allowed the assessee's appeal. The learned CIT(A) took the view that Right to Collect Toll was an intangible asset and the assessee was entitled to claim depreciation on the same. The relevant portion of the order of learned CIT(A) is reproduced as under:

I.T.A. No.131/Lkw/2024 (D.1) Further, the learned A.R. for the assessee also submitted that the Assessing Officer should be directed to allow brought forward business loss of Rs.5,40,48,933/- and unabsorbed depreciation of Rs.9,04,06,13,621/-. The aforesaid submissions covered the grounds taken in the appeal as well as in the Cross Objection before us.
(E) We have heard both sides. We have perused materials on record.

The Assessing Officer has taken the view that aforesaid CBDT Circular No. 9/2014, dated 23/04/2014 was applicable in the present case. On perusal of this circular, it is found that the circular was relevant for such cases in which the assessee was in BOT agreement for development of road public highways. In the present case before us, the assessee is in DBFOT contract and not BOT contract. A BOT contract encompasses Build, Operate and Transfer. However, the DBFOT contract is of a much wider scope as it also covers Design and Finance in addition to Build, Operate and Transfer. Since the assessee takes up additional responsibility towards design and finance in DBFOT contract, the aforesaid CBDT circular No.9/2024 dated 23/04/2014, which was issued for BOT contract is not applicable to the present case before us. Even otherwise, it is well settled and CBDT Circulars and Instructions are binding only to the extent they are beneficial for the assessee. If and when a CBDT Circular/Instruction is adverse to the assessee, it is not binding.

(E.2) The claim of the assessee for depreciation and the order of the learned CIT(A) directing the Assessing Officer to allow depreciation is supported by numerous precedents which have been referred to by the learned CIT(A) in the impugned appellate order 18/01/2024, contained in pages 48 to 69 of the impugned order of the learned CIT(A) and are reproduced below for the ease of reference:

I.T.A. No.131/Lkw/2024 I.T.A. No.131/Lkw/2024 I.T.A. No.131/Lkw/2024 I.T.A. No.131/Lkw/2024 I.T.A. No.131/Lkw/2024 I.T.A. No.131/Lkw/2024 I.T.A. No.131/Lkw/2024 I.T.A. No.131/Lkw/2024 I.T.A. No.131/Lkw/2024 I.T.A. No.131/Lkw/2024 I.T.A. No.131/Lkw/2024 I.T.A. No.131/Lkw/2024 I.T.A. No.131/Lkw/2024 I.T.A. No.131/Lkw/2024 I.T.A. No.131/Lkw/2024 I.T.A. No.131/Lkw/2024 I.T.A. No.131/Lkw/2024 I.T.A. No.131/Lkw/2024 I.T.A. No.131/Lkw/2024 I.T.A. No.131/Lkw/2024 I.T.A. No.131/Lkw/2024 I.T.A. No.131/Lkw/2024 (E.3) However, the Assessing Officer has failed to cite even one precedent in support of the view taken by him. Moreover, in the written submissions (referred to in foregoing paragraph (C) of this order, the learned D.R. has cited precedents, which are clearly distinguishable on facts. In the case of Patna Bakhtiyarpur Tollway Ltd. vs ACIT [2025] 170 taxmann.com 586 (Hyderabad-Trib.) on which the learned D.R. has placed reliance, the assets belonged to NHAI and not to the assessee. However, in the present case before us, as discussed in foregoing paragraph (E.1) of this order, the deemed ownership and acquisition coupled with possession of the asset is with the assessee. Further in the case of North Karnataka Expressway Ltd. vs. CIT (supra) and in the case of L&T Infrastructure Development Projects Ltd. (supra), on which the learned D.R. has placed reliance, the project was of BOT nature whereas in the present case before us, the contract is of DBFOT nature having much wider scope than BOT. As noted in foregoing paragraph (E) of this order, the scope of DBFOT contract, in as much as it also includes Design and Finance, is much wider than BOT contract. Moreover, as noted in foregoing paragraph (B) of this order, the project is deemed to be acquired and owned by the assessee. Further, as noted in paragraph (E.1) of this order, possession of the project by the assessee is also established. In view of these distinguishable facts and circumstances, we are of the opinion that the precedents relied upon by the learned D.R. in his written submissions have no application or relevance for the case before us. What the Assessing Officer has failed to appreciate, is that the asset on which the assessee has claimed depreciation, is "Right to Collect Toll", which is an intangible asset. By necessary implication, it is impossible for intangible asset to be "physically owned" in the sense in which the Assessing Officer expects. When the assessee has deemed ownership of I.T.A. No.131/Lkw/2024 physical assets corresponding to the 'intangible asset' as is the case here; it meets the requirement for eligibility for depreciation, as far as requirement of ownership is concerned. It is a settled position of law; that law does not require one to perform the impossible. In situations like this, which we faced with law is to be interpreted in a manner that reasonable compliance is to be treated as adequate. What strengthens the case of the assessee, is that in addition to deemed ownership, the assessee also has acquisition and physical possession of the physical assets corresponding to the intangible asset (Right to Collect Toll). Thus, the assessee meets the requirement of law for claim of depreciation. In view of the foregoing discussion, therefore, we hold that the claim of the assessee for depreciation, while foregoing amortization, is in accordance with law in the facts and circumstances of the present case before us. Therefore, we decline to interfere with the impugned order of learned CIT(A) on this issue and accordingly, the grounds taken in appeal filed by Revenue are hereby dismissed. In effect, appeal filed by Revenue is dismissed.