BOT project amortization allowed, but deposit interest taxed as other sources and netting against interest paid denied.

BOT infrastructure project expenditure that does not create ownership of a capital asset in the assessee's hands was treated as allowable by amortization over the concession period as revenue expenditure; the Tribunal noted that balance-sheet classification did not determine tax character, and the claim was accepted because amortization, not depreciation, had been sought. Interest earned on deposits was assessed as income from other sources, and the assessee was not permitted to net that interest against interest paid for reduction of business income. The analysis therefore supports amortization of eligible BOT project cost while denying set-off of deposit interest against borrowing cost absent a business-head nexus.

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Issues: (i) Whether the BOT project expenditure incurred for infrastructure projects was allowable as amortization as revenue expenditure, and whether depreciation on the same cost could be claimed instead; (ii) Whether interest earned on deposits was assessable as income from other sources and whether such interest could be netted against interest paid.

Issue (i): Whether the BOT project expenditure incurred for infrastructure projects was allowable as amortization as revenue expenditure, and whether depreciation on the same cost could be claimed instead.

Analysis: The expenditure incurred on the BOT projects did not create a capital asset owned by the assessee, but only yielded an enduring business advantage through toll collections for the concession period. The accounts treatment or classification in the balance sheet did not control the tax character of the expenditure. The Tribunal followed the co-ordinate Bench view that such project cost could be allowed either as depreciation, as revenue expenditure, or by way of amortization, depending on the nature of the claim made. Since the assessee had claimed amortization and not depreciation, the expenditure was held to be allowable over the concession period as revenue expenditure.

Conclusion: The amortization claim was allowed in favour of the assessee, and the Revenue's challenge to the allowance of depreciation was rejected.

Issue (ii): Whether interest earned on deposits was assessable as income from other sources and whether such interest could be netted against interest paid.

Analysis: Following the assessee's own earlier year decision, the interest received on deposits was treated as income from other sources. On the same reasoning, the assessee was not entitled to net the interest income against interest expenditure for the purpose of reducing taxable income under the business head.

Conclusion: The interest income was held to be taxable under the head income from other sources, and netting of interest was denied.

Final Conclusion: The assessee succeeded on the BOT project amortization issue but failed on the interest and netting issue, resulting in a mixed outcome with the Revenue's appeals dismissed.

Ratio Decidendi: Expenditure incurred on a BOT infrastructure project that does not result in ownership of a capital asset in the assessee's hands may be allowed as revenue expenditure by amortization over the concession period, while interest earned on deposits remains taxable under income from other sources when no business-head nexus for netting is established.

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