Intangible toll-collection rights and interest disallowance turn on commercial rights and availability of interest-free funds.

A BOT concessionaire's right to operate a road project and collect toll is treated as a valuable business or commercial right, and the text states that such a right falls within intangible assets eligible for depreciation under section 32(1)(ii). On interest disallowance under section 36(1)(iii), the governing principle is that no disallowance is warranted where sufficient interest-free funds are available to cover advances, but the factual record here was unclear, so the issue was sent back for fresh verification by the Assessing Officer.

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Issues: (i) Whether depreciation under section 32(1)(ii) was allowable on the intangible right to collect toll arising from a BOT road project; (ii) whether disallowance of interest under section 36(1)(iii) was sustainable where the assessee claimed availability of sufficient own funds and internal accruals.

Issue (i): Whether depreciation under section 32(1)(ii) was allowable on the intangible right to collect toll arising from a BOT road project.

Analysis: The right to operate the project and collect toll was held to be a valuable business or commercial right arising from the expenditure incurred on the BOT project. The earlier jurisdictional decisions relied on by the Revenue were found to concern depreciation on the toll road itself and not the separate intangible right to collect toll. The Tribunal followed the special bench ruling and coordinate bench decisions holding that such a right falls within the scope of intangible assets under section 32(1)(ii).

Conclusion: The claim for depreciation on the right to collect toll was allowed and the disallowance was set aside.

Issue (ii): Whether disallowance of interest under section 36(1)(iii) was sustainable where the assessee claimed availability of sufficient own funds and internal accruals.

Analysis: It was held that where sufficient interest-free funds are available, no disallowance of interest relatable to advances is warranted. However, the record did not clearly establish the assessee's claim regarding availability of such funds and accruals, so the issue required fresh examination by the Assessing Officer in light of the governing Supreme Court principle.

Conclusion: The issue was restored to the Assessing Officer for re-adjudication and the assessee obtained only conditional relief.

Final Conclusion: The appeal succeeded on the depreciation issue and the interest-disallowance issue was remitted for fresh decision, resulting in partial relief to the assessee.

Ratio Decidendi: A BOT concessionaire's right to operate the project and collect toll can constitute an intangible business or commercial right eligible for depreciation under section 32(1)(ii), and interest disallowance is not justified where sufficient interest-free funds are available to meet the advances, subject to factual verification.

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