Depreciable intangible right to collect toll under BOT concession upheld; ad hoc motor car disallowance deleted.

The ITAT Mumbai held that a BOT concession holder's right to operate a road project and collect toll is a depreciable intangible asset under Explanation 3(b) read with Section 32(1)(ii), because it is a commercial right distinct from the underlying road, which remains the Government's asset. The Tribunal distinguished earlier rulings on depreciation of the physical toll road and followed the Special Bench view on depreciation of the toll-collection right. It also held that an ad hoc disallowance of motor car expenses could not survive where business use was supported by allowed depreciation on the vehicle, so the factual basis for non-business use failed.

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Issues: (i) Whether the right to collect toll arising from a BOT road project is an intangible asset eligible for depreciation under Section 32(1)(ii); (ii) whether the ad hoc disallowance of motor car expenses was sustainable.

Issue (i): Whether the right to collect toll arising from a BOT road project is an intangible asset eligible for depreciation under Section 32(1)(ii).

Analysis: The toll road itself belonged to the Government and depreciation on the road as such was not allowable. However, the right acquired by the assessee to operate the project facility and collect toll charges, being a valuable commercial right created by the concession arrangement, fell within the expression "any other business or commercial rights of similar nature" in Explanation 3(b) to Section 32(1)(ii). The earlier jurisdictional rulings relied upon by the Revenue were confined to depreciation on the toll road as a physical asset and did not decide the distinct question of depreciation on the intangible right to collect toll. The Tribunal followed the Special Bench view that such right constitutes an intangible asset eligible for depreciation.

Conclusion: The issue was answered in favour of the assessee, and depreciation on the right to collect toll was held allowable.

Issue (ii): Whether the ad hoc disallowance of motor car expenses was sustainable.

Analysis: The disallowance was founded on the assumption that the Honda CRV vehicle was not used for business purposes. That assumption was found to be incorrect because depreciation had been claimed and allowed on the vehicle in the relevant years, showing business use. Once the factual premise failed, the ad hoc disallowance could not stand.

Conclusion: The issue was decided in favour of the assessee and the disallowance was deleted.

Final Conclusion: The assessee's appeals succeeded on the principal depreciation issue and the Revenue's appeal failed, with the disputed motor car disallowance also set aside.

Ratio Decidendi: A BOT concession holder's right to operate the project and collect toll charges is a depreciable intangible asset under Explanation 3(b) read with Section 32(1)(ii), and an ad hoc disallowance cannot survive when the factual basis of non-business use is not established.

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