BOT highway project amortisation and penalty deletion followed recomputation on actual concession period and removal of the underlying addition.

Delay in filing the appeals was condoned on a liberal, pragmatic view of sufficient cause, where the explanation showed bona fide delay and no mala fides. In the BOT highway project dispute, amortisation of development cost had to be recomputed with reference to the actual concession end date reflected on the record, and the excess depreciation adjustment made in earlier years could not be sustained in the form adopted. Penalty under section 271(1)(c) was deleted because the underlying addition was removed and the issue was debatable. The result was condonation of delay, partial relief on the quantum issue, and deletion of penalty.

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Issues: (i) Whether the delay in filing the appeals deserved condonation on the basis of sufficient cause; (ii) whether the amortization of cost of development of the highway project had to be computed with reference to the actual end date of the concession period and whether the excess depreciation disallowance made in earlier years could be sustained; (iii) whether penalty under section 271(1)(c) of the Income-tax Act, 1961 could survive after deletion of the underlying addition.

Issue (i): Whether the delay in filing the appeals deserved condonation on the basis of sufficient cause.

Analysis: The explanation for delay was supported by the record and showed that the assessee was a special purpose vehicle with the project having ended and with delayed communication and professional advice. The governing approach to limitation required a liberal and pragmatic construction of sufficient cause where the explanation was bona fide and did not indicate mala fides or dilatory intent.

Conclusion: The delay was condoned in favour of the assessee.

Issue (ii): Whether the amortization of cost of development of the highway project had to be computed with reference to the actual end date of the concession period and whether the excess depreciation disallowance made in earlier years could be sustained.

Analysis: The concession agreement originally expired on 28.04.2013 and the proposed extension till 10.07.2024 was never effectively granted. The toll notification extended the operating period only up to 26.10.2013, and the assessee had terminated the agreement with effect from 28.04.2013. The CBDT circular on BOT road projects required amortization over the remaining period of the toll concessionaire agreement after reducing earlier deductions from the initial cost. On that basis, the end date used by the Assessing Officer was incorrect, and the earlier-year excess depreciation adjustment could not be sustained in the manner made by the appellate authority.

Conclusion: The amortization was to be recomputed with reference to 26.10.2013, and the addition relating to excess depreciation was deleted in favour of the assessee.

Issue (iii): Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 could survive after deletion of the underlying addition.

Analysis: Once the quantum addition was deleted, the foundation for the penalty disappeared. The issue giving rise to the claim was also debatable, and the CBDT clarification post-dated the return filing. In identical facts for the related year, no penalty had been levied, which further supported deletion.

Conclusion: The penalty was deleted in favour of the assessee.

Final Conclusion: The delay in filing the appeals was condoned, the quantum appeals were allowed to the extent of recomputation and deletion of the impugned addition, and the penalty appeal succeeded with deletion of the penalty.

Ratio Decidendi: In BOT road project cases, amortization must be computed with reference to the actual remaining concession period as established on the record, and penalty under section 271(1)(c) cannot survive once the substantive addition is deleted and the issue is debatable.

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