Tribunal Grants Depreciation on Toll Collection Rights; Revenue's Appeal Dismissed; Interest Levy Upheld.

The Tribunal allowed the assessee's appeals for A.Y 2005-06 and A.Y 2006-07, granting depreciation on the intangible asset of the right to collect toll. The revenue's appeal was dismissed, with issues regarding amortization and motor car expenses resolved in favor of the assessee. The levy of interest under Section 234B was upheld as mandatory and consequential, directing the AO to recompute the interest accordingly. The disallowance of Rs. 6,38,88,323/- was dismissed as it was not pressed, and the deduction under Section 80G was not specifically ruled on.

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Issues Involved:
1. Entitlement to depreciation on the toll road.
2. Deduction of Rs. 6,38,88,323/-.
3. Deduction u/s 80G on donation of Rs. 5,26,852/-.
4. Levy of interest u/s 234B.
5. Amortization period for toll road.
6. Ad hoc disallowance of motor car expenses.

Issue-wise Detailed Analysis:

1. Entitlement to Depreciation on the Toll Road:
The primary issue was whether the assessee was entitled to claim depreciation on the toll road constructed on a Build, Operate, and Transfer (BOT) basis. The CIT(A) had denied this claim, concluding that the toll road was not owned by the assessee but by the government. The assessee argued that even if the toll road was not considered a "building," it should be treated as an "intangible asset" under Explanation 3(b) r.w. Sec. 32(1)(ii) of the Income Tax Act, 1961, allowing for depreciation. The Tribunal, guided by previous judgments, including the Special Bench decision in ACIT vs. Progressive Construction Ltd., concluded that the right to collect toll constituted an intangible asset, thus allowing the depreciation claim.

2. Deduction of Rs. 6,38,88,323/-:
The assessee contested the disallowance of Rs. 6,38,88,323/-, arguing that the payment of tax was made before the due date of filing the return. However, the Tribunal noted that the assessee's representative did not press this ground during the hearing, leading to its dismissal.

3. Deduction u/s 80G on Donation of Rs. 5,26,852/-:
The assessee claimed a deduction under Section 80G for donations amounting to Rs. 5,26,852/-. This issue was not elaborately discussed in the judgment, and the Tribunal did not provide a specific ruling on this ground, indicating it was not pressed or considered significant in the final decision.

4. Levy of Interest u/s 234B:
The assessee challenged the levy of interest under Section 234B. The Tribunal, citing the Supreme Court's decision in CIT vs. Anju M.H. Ghaswala, held that the levy of interest under Section 234B is mandatory and consequential. Therefore, the AO was directed to recompute the interest while giving effect to the Tribunal's order.

5. Amortization Period for Toll Road:
The revenue's appeal included a grievance regarding the amortization period for the toll road, which the CIT(A) had allowed for 16 years instead of the agreement period of 17 years and 6 months. However, as the Tribunal allowed the depreciation claim under Section 32(1)(ii), the issue of amortization became infructuous.

6. Ad Hoc Disallowance of Motor Car Expenses:
The AO had disallowed Rs. 5 lakhs on account of motor car expenses, arguing that depreciation was claimed for only one car, implying the second car was not used for business purposes. The CIT(A) vacated this disallowance, noting that the AO's assumption was incorrect. The Tribunal upheld the CIT(A)'s decision, confirming that the second car was indeed used for business purposes, and thus, the expenses were legitimate.

Conclusion:
The Tribunal allowed the assessee's appeals for A.Y 2005-06 and A.Y 2006-07, granting depreciation on the intangible asset of the right to collect toll. The revenue's appeal was dismissed, and the issues regarding amortization and motor car expenses were resolved in favor of the assessee. The levy of interest under Section 234B was upheld as mandatory and consequential.

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