DCIT,Central Circle - 3, Hyderabad V. M/s. Patel KNR JV, Mumbai

ITA 1314/HYD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2651 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 09-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A SITARAMA RAO
• Assessee Lawyers: BHARGAVA VATSARAJ
• Keywords: Revised return
• Section: 37(1); 139(5)

Judgement Text

1 ITA.NO.1314/HYD/2014 M/S. PATEL KNR JV, JOGESHWARI (W), MUMBAI IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA.NO.1314/HYD/2014 ASSESSMENT YEAR 2009-2010 DCIT, CENTRAL CIRCLE-3 HYDERABAD. VS. M/S. PATEL KNR JV. MUMBAI 400 102. PAN AAAAP1496N (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI A. SITARAMA RAO FOR ASSESSEE : SHRI BHARGAVA VATSARAJ DATE OF HEARING : 04.04.2017 DATE OF PRONOUNCEMENT : 04.04.2017 ORDER PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY CIT(A)-34, MUMBAI AND IT PERTAINS TO THE A.Y. 2009-2010. 2. THOUGH THE APPEAL PERTAINING TO THE EARLIER YEARS WERE DISPOSED OF IN MUMBAI JURISDICTION, FOR THE YEAR UND ER CONSIDERATION, THE APPEAL BEFORE THE APPELLATE TRIBUNAL WAS TRANSFER RED TO HYDERABAD BENCHES WHICH WAS OBJECTED TO BY THE ASSESSEE. VIDE O RDER DATED 08.08.2016 THE HONBLE SUPREME COURT OBSERVED THAT IT WO ULD BE OPEN TO THE ASSESSEE TO MAKE A REPRESENTATION AGAINST THE TRAN SFER PROCEEDINGS FROM MUMBAI TO HYDERABAD IF SUCH REPRESE NTATION MADE BEFORE THE CIT, MUMBAI WITHIN TWO WEEKS FROM THAT DATE . LEARNED COUNSEL FOR THE ASSESSEE PLACED BEFORE US A COPY OF THE RECORD OF PROCEEDINGS IN SPECIAL LEAVE PETITION (APPEAL (C) NO. 10247/2014 TO 2 ITA.NO.1314/HYD/2014 M/S. PATEL KNR JV, JOGESHWARI (W), MUMBAI SUBMIT THAT THE ISSUE IS NOW SETTLED AND THE ASSESSEE ADMI TS THAT THE APPEAL CAN BE TAKEN-UP AT HYDERABAD. 3. WITH REGARD TO THE ADDITIONS MADE BY THE A.O BUT DELE TED BY THE CIT(A) THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITT ED THAT ALL THE ISSUES ARE COVERED BY THE DECISION OF THE TRIBUNAL I N ASSESSEES OWN CASE FOR THE EARLIER YEAR (PAGES 1 TO 6 OF THE PAPER BOOK) . THE LD. D.R. ALSO ADMITTED THAT THE ISSUES ARE COVERED BY THE DECISION OF I TAT C BENCH, MUMBAI IN ASSESSEES OWN CASE FOR THE A.Y. 2008-2009 (ITA.NO.5230/MUM/2012 DATED 26.09.2014) WHILE BRIEF LY EXPLAINING THE FACTS OF THE CASE IT WAS SUBMITTED THAT THE ASSESSEE I S A JOINT VENTURE BETWEEN PATEL ENGINEERING AND KNR CONSTRUCTIONS TO UNDERTAKE DEVELOPMENT AND ROAD HIGHWAYS AND OTHER ALLI ED INFRASTRUCTURE FACILITIES. DURING THE PREVIOUS YEAR RE LEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE EXEC UTED ROAD PROJECTS AT KRISHNAGIRI WHICH WERE AWARDED BY NATIONAL HIGHWAYS AUTHORITY OF INDIA. THOUGH THE ASSESSEE EARNED INCOME FOR THE YEAR UNDER CONSIDERATION, IN THE LIGHT OF DEDUCTION CLAIMED UNDER SECTION 80IA(4) OF THE ACT, ASSESSEE DECLARED NIL INCOME ON THE EIGHT ROAD PROJECTS IN HAND. IN THE SCRUTINY ASSESSMENT PROCEEDING S THE A.O. MADE CERTAIN DISALLOWANCES AND COMPLETED THE TOTAL ASSESSABL E INCOME OF RS.3.35 CRORES BY MAKING SEVERAL ADDITIONS WHICH ARE TAKEN-UP ITEM- WISE. 4. A.O NOTICED THAT ASSESSEE CLAIMED DEDUCTION OF SITE PREPARATORY EXPENSES INCURRED ON VARIOUS INFRASTRUCTUR E FACILITIES DEVELOPED BY IT. ACCORDING TO THE ASSESSEE, SUCH CLAI M IS ALLOWABLE AS DEDUCTION UNDER SECTION 37(1) OF THE ACT. ASSESSEE HAD ALSO INCURRED SITE PREPARATORY EXPENSES OF RS.63,41,989 FOR NS-32 P ROJECT ON WHICH DEDUCTION WAS NOT CLAIMED ORIGINALLY AND THEREFORE, A DDITIONAL CLAIM 3 ITA.NO.1314/HYD/2014 M/S. PATEL KNR JV, JOGESHWARI (W), MUMBAI WAS MADE BEFORE THE A.O. THE A.O. REJECTED THE CLAIM OF ADDITIONAL DEDUCTION ON THE GROUND THAT ASSESSEE IS NOT ENTITLED TO CLAIM ANY FURTHER DEDUCTION BEYOND THE TIME LIMIT PRESCRIBED UNDER LAW. AS PER THE PROVISIONS OF SECTION 139(5) OF THE ACT, THE REVISED RETURN OF INCOME SHOULD HAVE BEEN FILED ON OR BEFORE 31.03.2011. SIN CE ASSESSEE FAILED TO DO SO, CLAIMED DEDUCTION ONLY VIDE LETTERS DATED 29.0 7.2011 AND 23.12.2011 THE SAME WAS NOT ALLOWED BY PLACING RELIAN CE UPON THE DECISION OF THE APEX COURT IN THE CASE OF GOETZ (INDIA) LTD., VS. CIT 284 ITR 323. 5. ON AN APPEAL FILED BY THE ASSESSEE, LD. CIT(A) O BSERVED THAT THERE IS NO DISPUTE IN PRINCIPLE WITH REGARD TO DEDUCTI BILITY OF SITE PREPARATORY EXPENSES SINCE THE OTHER CLAIM WAS ACCEPTE D AS REVENUE IN NATURE. HOWEVER, THE ADDITIONAL CLAIM WAS DISALLOWED O NLY ON THE GROUND THAT IT WAS NOT CLAIMED BEFORE THE DUE DATE OF FI LING THE RETURN OF INCOME UNDER SECTION 139(5) OF THE ACT. THE LD. CI T(A) RELIED UPON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. PRITVI BROKERS & SHAREHOLDERS 349 ITR 336 AS WELL AS THE DECISION OF THE ITAT IN THE CASE OF FRANCO-INDIAN PHARMACEUTICALS (P) LTD., VS. ITO 3 ITR (TRIBU.) 754 TO HOLD THAT THE DECISION IN THE CASE OF GOETZ (INDIA) P. LTD., VS. CIT 284 ITR 323 DOES NOT IMPINGE ON THE POWE RS OF THE APPELLATE AUTHORITIES. ACCORDINGLY, THE LD. CIT(A) DIRE CTED THE A.O. TO ALLOW DEDUCTION OF THE ADDITIONAL CLAIM OF EXPENDITURE. 6. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US BY CO NTENDING THAT ANY CLAIM WHICH DOES NOT FORM PART OF THE RETURN OF INC OME CANNOT BE CONSIDERED EVEN BY THE APPELLATE AUTHORITY. 7. DURING THE COURSE OF HEARING, LEARNED COUNSEL FO R THE ASSESSEE PLACED RELIANCE UPON THE DECISION OF ITAT, MUMBAI BENCH IN THE CASE OF FRANCO-INDIAN PHARMACEUTICALS (P) LTD., VS . ITO (SUPRA) TO 4 ITA.NO.1314/HYD/2014 M/S. PATEL KNR JV, JOGESHWARI (W), MUMBAI SUBMIT THAT THE PRINCIPLE LAID DOWN BY THE APEX COURT IN THE CASE OF GOETZE (INDIA) LTD., VS. CIT (SUPRA) WAS NOT TO DISALL OW THE GENUINE CLAIM AND THE BENCH FURTHER OBSERVED THAT THE APPELLATE AUTHOR ITY HAS THE POWER TO ADMIT THE ADDITIONAL GROUND OR CLAIM WHEN ALL THE FACTS ARE ON RECORD. 8. LD. D.R. RELIED UPON THE ORDER PASSED BY THE A.O. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. AS RIGHTLY POINTED OUT BY THE LEARNED COUNSEL FOR THE AS SESSEE, THE TAX HAS TO BE COLLECTED IN ACCORDANCE WITH LAW AND ANY LE GAL CLAIM WHICH IS NOT PROPERLY MADE BY INADVERTENCE OR IGNORANCE SHOUL D NOT BE DENIED MERELY BECAUSE ASSESSEE DID NOT MAKE A CLAIM IN THE R ETURN OF INCOME. THE INCOME TAX IS MEANT FOR COLLECTION OF CORRECT TAX A ND IT CANNOT BE TREATED AS A LIS BETWEEN THE TWO PARTIES BUT A TAX ADJUS TMENT AS EXPLAINED BY THE HONBLE MADRAS HIGH COURT IN THE CASE INDIAN EXPRESS 140 ITR 705 AT 724. AT ANY RATE, THE APPELLATE AUTHORIT Y IS ENTITLED TO ADMIT ANY ADDITIONAL CLAIM AND THE CIT(A) HAVING DIREC TED THE A.O TO CONSIDER THE CLAIM OF DEDUCTION, IN EXERCISE OF THE PO WERS VESTED IN FIRST APPELLATE AUTHORITY TO ADMIT ANY ISSUE WHICH WAS NOT CON SIDERED BY THE A.O, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND ACCORDINGLY, WE REJECT GROUND NO.2 OF THE REVENUE. 10. THE NEXT ISSUE IS WITH REGARD TO DISALLOWANCE OF CLAIM OF TDS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O. NOTI CED THAT CERTAIN AMOUNT RECEIVED AS ADVANCE WAS ACCOUNTED FOR IN THE NE XT YEAR BUT THE BENEFIT OF TDS WAS CLAIMED IN THIS YEAR. ACCORDING TO THE A.O, THE INCOME HAVING NOT BEEN OFFERED FOR TAXATION IN THE YEAR UNDER CONSIDERATION THE TAX DEDUCTED AT SOURCE CANNOT BE ADJUS TED IN THIS YEAR. AS PER THE PROVISIONS OF SECTION 199 OF THE ACT, THE CREDIT FOR CLAIM OF TDS IS TO BE ALLOWED IN THE YEAR IN WHICH THE INCO ME IS OFFERED FOR 5 ITA.NO.1314/HYD/2014 M/S. PATEL KNR JV, JOGESHWARI (W), MUMBAI TAXATION. HE ACCORDINGLY DID NOT GIVE CREDIT FOR THE TDS CLAIM OF RS.66,64,499. ON AN APPEAL FILED BY THE ASSESSEE, THE LD. CIT(A) RELIED UPON THE DECISION OF ITAT, MUMBAI BENCH IN THE CASE OF TOYO ENGINEERING INDIA LTD., 5 SOT 616 TO HOLD THAT THE EXECU TION OF A PROJECT IS A CONTINUING PROCESS AND INCOME/LOSS ARISING THE REFROM ALSO GENERATES SIMULTANEOUSLY EVEN THOUGH SUCH INCOME/LOSS IS FINALLY MEASURED AS PROFIT/LOSS ONLY AT THE END OF THE PROJEC T ON ACCOUNT OF THE FACT THAT ASSESSEE FOLLOWED PROJECT COMPLETION METHOD FOR REVISION OF ITS PROFITS. LD. CIT(A) FURTHER OBSERVED THAT EVEN THOUGH TH E FINAL RESULT IS ASCERTAINED ONLY UPON THE COMPLETION OF THE PROJECT, AN ELEMENT OF INCOME IS RETAINED IN THE YEARLY WORKING RESULT. THER EFORE, THE PROVISIONS OF LAW CONTAINED IN SECTION 199 DO NOT STAND IN THE WAY OF CLAIM MADE BY THE ASSESSEE FOR CREDIT IN RESPECT OF TD S MADE DURING THE RELEVANT PREVIOUS YEAR. LD. CIT(A) DIRECTED THE A. O. TO GIVE CREDIT FOR THE REMAINING TDS BY OBSERVING IN PARA 4.6 AS UNDER : 4.6. THE PROFITS ON CONTRACTS ENTERED INTO BY THE ASSESSEE- COMPANY HAD BEEN ACCURATELY AND FINALLY RECOGNIZED ON COMPLETION OF THE ASSIGNMENT AND OFFERED FOR TAXATION ACCORDIN GLY. IT DID NOT MEAN THAT INCOME FROM A PROJECT WAS EARNED ONLY AT THE COMPLETION OF THE PROJECT. INCOME WAS EARNED BY THE ASSESSEE-C OMPANY SIMULTANEOUSLY WITH THE PROGRESS IN THE PROJECT EXE CUTION IN THE CONTEMPORANEOUS MANNER. THAT IS WHY THE ASSESSEE-CO MPANY WAS ACCOUNTING THE INVESTMENTS AND EXPENDITURE IN WORK- IN-PROGRESS ACCOUNT AND BEING CARRIED FORWARD FROM ASSESSMENT Y EAR TO ASSESSMENT YEAR TILL THE COMPLETION OF THE PROJECT. THE ASSESSEE-JV WAS CREDIT IN THE VALUE OF WORK-IN-PROGRESS ON THE CREDIT SIDE OF ITS PROFIT & LOSS ACCOUNT. THE WORK-IN-PROGRESS REFLECT ED IN THE ACCOUNTS OF THE APPELLANT COMPANY WAS IMPREGNATED W ITH THE COST AND EXPENDITURE OF THE PROJECT PLUS THE AMOUNT OF I NCOME EARNED OUT OF THE PROJECT TILL SUCH DATE. THE INCOME WAS T HEREFORE EARNED FROM YEAR TO YEAR EVEN THOUGH THE INCOME WAS FINALL Y ACCURATELY RECOGNIZED AS PROFITS ONLY ON THE COMPLETION OF THE PROJECT AND, THEREAFTER, OFFERED FOR ASSESSMENT. 6 ITA.NO.1314/HYD/2014 M/S. PATEL KNR JV, JOGESHWARI (W), MUMBAI 11. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. VID E GROUND NO.3, REVENUE CONTENDS THAT THOUGH ASSESSEE HAS NOT OFFERED CO RRESPONDING INCOME TO TAX IN THIS YEAR, ASSESSEE CANNOT CLAIM CREDI T TO THE TDS SINCE IT VIOLATES THE PROVISIONS OF SECTION 199 OF THE ACT. DUR ING THE COURSE OF HEARING, LEARNED COUNSEL FOR THE ASSESSEE PLACED BEF ORE US COPY OF THE ORDER OF THE ITAT FOR THE A.Y. 2008-09 (SUPRA) WHEREI N THE BENCH PLACED RELIANCE UPON THE DECISION OF THE ITAT, MUMBAI BENC H IN THE CASE OF TOYO ENGINEERING LTD, (SUPRA), TO HOLD THAT IT CANNOT BE POSSIBLE AT ALL TIMES TO CO-RELATE A SPECIFIC AMOUNT OF TDS WITH A SPEC IFIC AMOUNT OF INCOME EARNED IN A PARTICULAR YEAR NEXUS BETWEEN TH E TDS AND INCOME IS NOTIONAL OR CONCEPTUAL ARE NOT SPECIFIC OR IMMEDIA TE AND THUS TAX DEDUCTED DURING THE FINANCIAL YEAR HAD TO BE GIVEN CR EDIT FOR IN THAT A.Y. EVEN THOUGH INCOME WAS OFFERED TO TAX IN THE SUBSEQUENT YEAR BY FOLLOWING THE PROJECT COMPLETION METHOD. FACTS BEING I DENTICAL FOR THE YEAR UNDER CONSIDERATION, WE DO NOT FIND ANY INFIRMI TY IN THE ORDER PASSED BY THE LD. CIT(A) AND THEREFORE, WE, REJECT GR OUND NO.3 OF THE REVENUE. 12. THE LAST GROUND NO.4 IS WITH REGARD TO CLAIM OF DEDUCTION UNDER SECTION 80IA(4) OF THE ACT BY CONSIDERING THE ASS ESSEE AS DEVELOPER. THE A.O. TREATED THE ASSESSEE AS A WORK S CONTRACTOR AND NOT A DEVELOPER AND BY GIVING DETAILED REASONS THERE ON HE DISALLOWED CLAIM OF DEDUCTION UNDER SECTION 80IA(4) OF THE ACT SI NCE DEDUCTION CANNOT BE ALLOWED THE ASSESSEE WHO EXECUTES A WORKS C ONTRACT. 13. ON AN APPEAL FILED BY THE ASSESSEE, LD. CIT(A) OBSERVED THAT THE BENEFIT OF DEDUCTION IS AVAILABLE TO ANY ENTERPRIS E CARRYING ON THE BUSINESS OF DEVELOPING, MAINTAINING AND OPERATING ANY INFRASTRUCTURE FACILITIES. IN THE INSTANT CASE, IT WAS FURTHER OBSERVED THAT THOUGH THE ORIGINAL INTENTION WAS TO PERMIT DEDUCTION TO AN ENTERPR ISE CARRYING ON 7 ITA.NO.1314/HYD/2014 M/S. PATEL KNR JV, JOGESHWARI (W), MUMBAI BUSINESS OF BOT BASIS (BUILT, OPERATE AND TRANSFER) BUT IT WAS DILUTED SUBSEQUENTLY AND TO MEET THE INTENTION OF THE PARLIAMENT IS TO ALLOW DEDUCTION TO ANY ENTERPRISE DEVELOPING THE INFRASTRUCTU RE THOUGH IT NEED NOT NECESSARILY MAINTAIN AND OPERATE FACILITY IN ORDER TO CLAIM DEDUCTION. FURTHER AGGRIEVED, REVENUE IS IN APPEAL BE FORE US. 14. WE HAVE HEARD THE LD. D.R. AS WELL AS THE LEARNE D COUNSEL FOR THE ASSESSEE IN THIS REGARD. IT IS NOT IN DISPUTE THA T THIS ISSUE ALSO STANDS COVERED BY THE DECISION OF THE ITAT, MUMBAI BEN CH IN ASSESSEES OWN CASE FOR THE A.Y. 2008-09 (SUPRA), WHEREIN THE BE NCH OBSERVED THAT PROVISIONS OF SECTION 80IA(4) ARE PROGRESSIVELY LIBE RALISED WHEREBY EVEN A DEVELOPER IS ELIGIBLE FOR DEDUCTION AND FURTHER OBS ERVED THAT THE ASSESSEE WOULD FALL WITHIN THE MEANING OF THE EXPRESS ION DEVELOPER AND IN THIS CONTEXT REFERRED TO THE NATURE OF THE WORK OF THE ASSESSEE. FACTS BEING SAME EVEN IN THIS YEAR, THE VIEW EXPRESSED BY THE LD. CIT(A), BEING IN CONSONANCE WITH THE VIEW TAKEN BY THE ITAT IN ASSESSEES OWN CASE FOR THE EARLIER YEAR, WE ARE OF THE VIEW THAT THE G ROUND URGED BY THE REVENUE HAS NO MERIT. ACCORDINGLY, GROUND NO.4 IS DI SMISSED. 15. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 04.04.2017. SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER HYDERABAD, DATED 04 TH APRIL, 2017 VBP/- 8 ITA.NO.1314/HYD/2014 M/S. PATEL KNR JV, JOGESHWARI (W), MUMBAI COPY TO 1. DCIT, CENTRAL CIRCLE-3, 8 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2. M/S. PATEL KNR JV, PATEL ESTATE, JOGESHWARI (W), MUMBAI 400 102. 3. CIT(A)-34, MUMBAI 4. CCIT-XIII, MUMBAI 5. D.R. ITAT A BENCH, HYDERABAD. 6. GUARD FILE