Gujarat State Road Dev. Corp. Ltd., Gandhinagar V. The ACIT, Gandhinagar Circle, Gandhinagar

CO 319/AHD/2014

AI Insights

The case involves the Assistant Commissioner of Income-Tax, Gandhinagar Circle, as the appellant, and Gujarat State Road Development Corporation Ltd., as the respondent. The dispute centered on the assessment order for the year 2011-12, where the Assessing Officer had made several additions to the income of the assessee, including unutilized grants and unrecorded receipts. The Commissioner of Income Tax (Appeals) reversed these additions, leading to the Revenue's appeal to the Tribunal. The Tribunal, referencing previous decisions and the specific circumstances of the case, upheld the Commissioner's decision, dismissing the Revenue's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114188 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 year(s) 10 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-10-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-10-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 15-12-2014
• Other Referred Cases: Gujarat Safai Kamdar Vikas Nigam Vs. ACIT, Gujarat State Disaster Management Vs. ACIT, Gujarat State Police Housing Corporation Ltd. Vs ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Commercial expediency; TDS; Set aside; FORM 26AS
• Section: 143(3); 37(1); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “B” BENCH Before: Smt. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member Asstt. Commissioner of Income-Tax, Gandhinagar Circle, Gandhinagar Vs Gujarat State Road Development Corporation Ltd., Ground Floor, Nirman Bhavan, Sec-10A, Gandhinagar PAN: AABTA2713R Gujarat State Road Development Corporation Ltd., Ground Floor, Nirman Bhavan, Sec-10A, Gandhinagar PAN: AABTA2713R (Appellant) Asstt. Commissioner of Income-Tax, Gandhinagar Circle, Gandhinagar (Respondent Revenue Represented: Shri Sudhendu Das, CIT-DR Assessee Represented: Shri S.N. Divatia, A.R. & Shri Samir Vora, A.R. Date of hearing : 11-10-2023 Date of pronouncement : 31-10-2023 आदेश/ORDER ITA No. 2798/Ahd/2014 & C.O. No. 319/Ahd/2014 Assessment Year 2011-12 I.T.A No. 2798/Ahd/20194 & C.O. 319/Ahd/14 A.Y. 2011-12 Page No ACIT Vs. Gujarat State Road Development Corporation Ltd. 2 PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Revenue as against the appellate order dated 14.07.2014 passed by the Commissioner of Income Tax (Appeals), Gandhinagar, Ahmedabad arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2011-12. 2. The Grounds of Appeal filed by the Revenue are as follows: 1. The learned CIT(Appeals) has erred in law and on facts in deleting the adition made on account of unutilized grant of Rs.56,22,59,000/-. 2. The Ld.CIT(A) has erred in law and on facts in deleting the addition of unrecorded receipts amounting to Rs.1,08,22,957/-. 3. The Ld. CIT(A) has erred in law and on facts in deleting the addition on expenses claimed for which no income (Rs.6,48,02,554/-) was offered. 4. The Ld. CIT(A) has erred in law and on facts in deleting the addition of interest in deposits with GSFS amounting to Rs. 12,07,57,449/-. It is therefore prayed that the order of the learned CIT(Appeals) may be set aside and that of the A.O. be restored to the above extent. 3. The brief facts of the case is that the assessee is a Company engaged in building infrastructure projects namely roads. The assessee-company received grants from Government for carrying out infrastructure namely Roads projects. During the assessment proceedings, the Ld. A.O. noticed from the balance sheet, the grants received during the year an amount to the extent of Rs. 56,22,59,000/- had remained unutilized. The assessee had shown this current liability in its balance sheet. Therefore the A.O. held that this was to be treated as income of the assessee, as the same is not taken to the Profit and Loss account and added to the total income. I.T.A No. 2798/Ahd/20194 & C.O. 319/Ahd/14 A.Y. 2011-12 Page No ACIT Vs. Gujarat State Road Development Corporation Ltd. 3 4. Aggrieved against the same, the assessee filed an appeal before Commissioner (Appeals) who deleted the addition, on identical issue decided in assessee’s own case by the ITAT in Assessment Year 2008-09. 5. Aggrieved against the same, the Revenue is in appeal before us. Ld. Counsel for the assessee submitted that this issue is squarely covered in assessee’s favour by another recent decision of this Tribunal in assessee’s own case for the Assessment Year 2010-11 in ITA No. 136/Ahd/2014 dated 10.07.2023 and placed copy of the above judgment at Page Nos. 49 to 68 of the Paper Book. 6. Per contra, the Ld. D.R. could not contravent the above submission, but however supported the order passed by the Assessing officer. 7. We have given our thoughtful consideration and perused the materials available on record. The Co-ordinate Bench of this Tribunal in ITA No. 136/Ahd/2014 dated 10-07-2023 held as follows: “....31. We have noted that the identical issue had come up before the ITAT in the case of the assessee itself in Asst.Year 2008-09 wherein, following the order passed by the ITAT in the case of Gujarat Safai Kamdar Vikas Nigam Vs. ACIT, ITA No.3232/Ahd/2008 dated 17.4.2009 and Gujarat State Disaster Management Vs. ACIT in ITA No.949/Ahd/2009 dated 5.6.2009, the ITAT held that the said unspent grant could not be treated as income of the assessee. The ITAT noted that in the said decision also the unspent grant, treated as income of the assessee by the AO, was rejected by the ITAT noting that the assessee was a mere nodal agency to implement certain schemes of the Government of Gujarat and the unspent grant remained property of the Government and had to be returned to the Government as and when demanded; that therefore, there was no question of treating the grant as income of the assessee. 32. In view of the same, since the issue stands decided in favour of the assessee in earlier years by the ITAT, we see no reason to interfere in order of the ld.CIT(A), deleting the addition made on account of unspent grant to the tune of Rs.39,51,15,000/-.” I.T.A No. 2798/Ahd/20194 & C.O. 319/Ahd/14 A.Y. 2011-12 Page No ACIT Vs. Gujarat State Road Development Corporation Ltd. 4 8. Respectfully following the same, this ground no. 1 raised by the Revenue is hereby dismissed. 9. Ground No. 2 namely deletion the addition of unrecorded receipts amounting to Rs. 1,08,22,957/-. 9.1. The A.O. made addition on account of mismatch in the TDS detail as per Form 26AS of Rs. 1,08,22,957/-. During the appellate proceedings, the assessee submitted there are two parties one is Welspun Project Ltd. and other is Ranjit Toll Road Pvt. Ltd. It was submitted to the A.O. that interest income from Welspun Project Ltd. is already accounted for and disclosed as income in the books of account of the assessee. However the A.O. held that the same is not verifiable from the regular books of account. The assessee submitted that this interest is included in the interest income account and there is no question of disclosing the same as direct income. The amount received from Ranjit Toll Road Pvt. Ltd. is only reimbursement of expenditure paid by the assessee as per the agreement, but they have wrongly deducted TDS from such expenditure. The assessee submitted ledger account and pleaded that it cannot become the Income of the assessee. 10. The Ld. CIT(A) after considering the above submissions deleted the addition observing as follows: “....The appellant has submitted that there are two parties one is Welspun Projects Ltd who has paid interest to the appellant and is duly accounted as income which is accepted by the AO. The other is Ranjit Toll Road Pvt Ltd and payment received from them is only reimbursement of payment made by the appellant on their behalf. Appellant has produced copy of account of Ranjit Toll Road Pvt Ltd which clearly show that payments are received from them against debits made on account of payment made on their behalf from which TDS is deducted. This fact is apparent from copy of accounts. Accordingly, even though TDS is deducted from such payment, it is not income of the appellant. The payment are duly credited to I.T.A No. 2798/Ahd/20194 & C.O. 319/Ahd/14 A.Y. 2011-12 Page No ACIT Vs. Gujarat State Road Development Corporation Ltd. 5 party's account against debits. Accordingly, I hold that addition made is not justified and is deleted. The ground of appeal is allowed.” 11. The Ld. D.R. could not brought to our attention any infirmity in the order passed by the Ld. CIT(A). Therefore this ground of appeal raised by the Revenue is hereby dismissed. 13. Ground No. 3 namely deleting the addition on expenses claimed for which no income (Rs. 6,48,02,554/-) was offered. 13.1. Ld. Counsel submitted that this issue is also covered in favour of the assessee by the decision of this Tribunal in assessee’s own case in ITA No. 136/Ahd/2014 for the A.Y. 2010-11 as follows: “...21. We have heard both the parties and have carefully gone through the authorities below. The issue before us relates to the allowance of claim of expenses with respect to certain projects against which no income was allegedly booked by the assessee. The amount concerned being Rs. 2,10,53,596/- And the project wise details are reproduced above. 22. Firstly, we are in agreement with the ld.counsel of the assessee that for the allowance of claim of expenditure, the only requirement to be fulfilled as per the law is that it should have been incurred wholly and exclusively for the purpose of business of the assessee, i.e it should satisfy the test of commercial expediency. Section 37(1) of the Act clearly stipulates the same as the only condition to be fulfilled for claiming expenses while computing the income from business. There is no dispute vis-à-vis the same nor did the ld.DR state anything to contradict this position of the law, when pointed out by the ld.counsel for the assessee before us. 23. In the facts and circumstances of the case, it is not the case of the Revenue that these expenses have not been incurred wholly and exclusively for the purpose of business of the assessee. In fact admittedly these expenses relate to road and bridge construction which is the main object for which the assessee company has been incorporated and even as per the AO/CIT(A) these expenses relate to projects undertaken by the assessee. In the light of this fact alone, there is no case for disallowing the impugned expenses when admittedly they have been incurred wholly and exclusively for the purpose of carrying out the business of the assessee. The case of the Revenue being that no income has been booked against the same, then the logical course of action was to determine whether the assessee failed to book income against the same or has not treated a particular receipt as income .The entire effort of the Revenue ought to have been to bring the concerned income to tax. In the absence of the same, the Revenue could not have been gone on to disallow the expenses incurred by the assessee, which otherwise admittedly were incurred wholly and exclusively for the purpose of business. For this reason alone, we agree with the ld.counsel for the assessee that the disallowance made by the AO was rightly deleted by the ld.CIT(A). I.T.A No. 2798/Ahd/20194 & C.O. 319/Ahd/14 A.Y. 2011-12 Page No ACIT Vs. Gujarat State Road Development Corporation Ltd. 6 24. Even otherwise on facts, we find that the ld.CIT(A) has noted, that with respect to the Rajkot-Jamnagar project, the assessee had booked income also. This fact has not been controverted by the Revenue before us. Therefore, the very basis with the AO for disallowing the expenses incurred in relation to Rajkot- Jamnagar project does not survive, and the ld.CIT(A), therefore, we hold, has rightly deleted the disallowance of expenses relating to this project. 25. Vis-à-vis the railway over-bridge(ROB) projects, the ld.CIT(A), we hold, rightly appreciated the contentions of the assessee that this work was carried out by the assessee for the benefit of the public at large without any assistance from the Government by way of grants. The Revenue has not controverted this contention of the assessee that it carried out these projects without any assistance by way of grants from the Government or without any remuneration for the same. And as has been held by us above, the absence of any income against any expenditure incurred, would not invalidate the claim of expenditure, which otherwise has been undisputedly incurred wholly and exclusively for the purpose of business of the assessee. 26. In view of the same, we see no reason to interfere in the order of the ld.CIT(A) deleting the disallowance of expenses incurred on projects amounting to Rs.2,10,53,596/-.” 13.2. As the disallowance made by the A.O. is identical with that of earlier year, respectfully following the Co-ordinate Bench decision in assessee’s own case, the above disallowance made by the A.O. is hereby deleted. Thus this ground no. 3 raised by the Revenue is hereby dismissed. 14. Ground No. 4 addition of interest in deposits with GSFS amounting to Rs. 12.07 crores. 14.1. The A.O. treated the interest earned by the assessee on deposits made with Gujarat State Financial Services amounting to Rs. 12,07,57,449/- as income of the assessee from other sources. This interest had been earned by the assessee on the surplus grant received by it from State Government and it was required to park with GSFS. It was contended that the interest which was earned on the surplus grants partook the character of grants itself, which is asset of the State Government and not that of the assessee. Ld. I.T.A No. 2798/Ahd/20194 & C.O. 319/Ahd/14 A.Y. 2011-12 Page No ACIT Vs. Gujarat State Road Development Corporation Ltd. 7 Counsel submitted that this issue is also covered in favour of the assessee in assessee’s own case in ITA No. 136/Ahd/2014 as follows: “....40. We have heard the rival contentions and gone through the orders of authorities below. We have noted that the Hon’ble jurisdictional High Court in decisions referred to by the ld.counsel for the assessee before us, in the case of SAR Infracon P.Ltd. (supra) and in the case of Gujarat Municipal Finance Board (supra) has categorically held that the grants given by the State Governments stipulating deposits of the surplus grants in a particular mode and interest earned thereon ,also treated as part of the grants, the same could not be treated as income of the assessee. In the present case, the assessee has deposited surplus grants admittedly as per the directions of the State Government with GSFS and earned interest income amounting to Rs.2,54,85,315/-. 41. We have gone through the Memorandum and Articles of Association of the assessee-company, which was filed before us at PB Page No.117 to 159 and we find that clause 13A categorically states that surplus received by the assessee from the State Government have to be deposited as per the direction of the State Government and the company cannot make any profits out of this. The relevant clause 13A of the Memorandum is reproduced as under: 13A. Any surplus fund received from the State Government organisation Government PSUs in form of Share Capital, Loan, Grant, grant-in-aid, subsidy, subvention, financial assistance will be governed by the respective rules, guidelines, orders from the state government. Such surplus funds which have to be deposited as per the direction by the Goverment of Gujarat and the Company cannot make profit out of this. 42. It is evident from the above that the interest earned on surplus funds, was not freely available to the assessee so as to utilize it in the manner it desired and make profits out of it. 43. In view of the same, the aforestated decisions of the Hon’ble jurisdictional High Court, will clearly apply to the present case and ITA No.136 & 191/Ahd/2014 19 the interest received on the surplus funds by the assessee, therefore, cannot be treated as income of the assessee.” 14.2. Ld. Counsel further submitted that similar additions were deleted by Co-ordinate Bench of this Tribunal in Gujarat State Police Housing Corporation Ltd. Vs ACIT in ITA No. 2549/Ahd/2013 dated 18.07.2014. 15. Per contra, the Ld. D.R. appearing for the Revenue relied upon the order passed by the Assessing Officer. There is no change in the I.T.A No. 2798/Ahd/20194 & C.O. 319/Ahd/14 A.Y. 2011-12 Page No ACIT Vs. Gujarat State Road Development Corporation Ltd. 8 facts of the present case with that of the earlier year. Respectfully following the same, the above addition made by the Assessing Officer is liable to be deleted. Thus this Ground No. 4 raised by the Revenue is devoid of merits and the same is hereby dismissed. 16. In the result, the appeal filed by the Revenue is hereby dismissed. 17. C.O. No. 319/Ahd/2014 is filed by the assessee. The effective ground is that Ld. CIT(A) ought to have considered the arguments of the assessee on the disallowance of expenses of Rs. 6.48 crores where the A.O. held that no income was offered. We have already dealt with this issue in Para No. 13 to 13.2 of this order, following the same, this ground raised by the Assessee is hereby allowed. 18. In the result, the C.O. filed by the Assessee is allowed. Order pronounced in the open court on 31-10-2023 Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 31/10/2023 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद