ACIT, Erode V. M/s. R.P.P. Infra Projects Ltd., Erode

ITA 2127/CHNY/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7365 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-05-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 14-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASISH TRIPATHY
• Assessee Lawyers: S SRIDHAR
• Keywords: Period of limitation; Reasonable cause
• Section: 153A; 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.2127/CHNY/2016 ( )( / ASSESSMENT YEAR : 2012-13 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, ERODE. PAN : AAACR 9307 E V. M/S R.P.P. INFRA PROJECTS LTD., S.F.NO.454,RAGHUPATHYNAICKENPALAYAM, POONDURAI ROAD, RAILWAY COLONY POST, ERODE 638 002. (+,/ APPELLANT) (-.+,/ RESPONDENT) ./ ITA NO.3161/CHNY/2017 ( )( / ASSESSMENT YEAR : 2012-13 M/S R.P.P. INFRA PROJECTS LTD., C/O SHRI S. SRIDHAR, SH. A.S. SRIRAMAN, ADVOCATES, NEW NO.14, OLD NO.82, FLAT NO.5, 1 ST AVENUE, INDIRA NAGAR, ADYAR, CHENNAI - 600 020. PAN : AAACR 9307 E V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, ERODE. (+,/ APPELLANT) (-.+,/ RESPONDENT) / 0 1 /REVENUE BY : SHRI ASISH TRIPATHY, JCIT (23 0 1 /ASSESSEE BY : SHRI S. SRIDHAR, ADVOCATE 4 0 3% / DATE OF HEARING : 22.05.2018 5') 0 3% / DATE OF PRONOUNCEMENT : 17.07.2018 2 I.T.A. NO.2127/CHNY/16 I.T.A. NO.3161/CHNY/17 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: BOTH THE REVENUE AND THE ASSESSEE FILED THE APPE ALS AGAINST THE VERY SAME ORDER OF THE COMMISSIONER OF INCOME TAX ( APPEALS)-3, COIMBATORE, DATED 29.04.2016 PERTAINING TO ASSESSME NT YEAR 2012-13. THEREFORE, WE HEARD BOTH THE APPEALS TOGETHER AND D ISPOSING OF THE SAME BY THIS COMMON ORDER. 2. LETS FIRST TAKE THE ASSESSEES APPEAL IN I.T.A. NO.3161/CHNY/2017. 3. THERE WAS A DELAY OF 546 DAYS IN FILING THE APPE AL BY THE ASSESSEE BEFORE THIS TRIBUNAL. SHRI S. SRIDHAR, TH E LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THERE WAS A SEARCH IN THE PREMISES OF THE ASSESSEE ON 24.03.2016 AND THE ASSESSMENT ORDER WAS PASSED BY THE ASSESSING OFFICER FOR THE YEAR UNDER CONSIDERATION. ACCORDING TO THE LD. COUNSEL, THE DEPARTMENT INITIATED POST SEARCH ENQUI RIES, THEREFORE, THE ASSESSEE WAS FULLY FOCUSED IN THE ASSESSMENT PROCEE DING INITIATED BY THE DEPARTMENT AFTER THE SEARCH. IN THE PROCESS, ACCOR DING TO THE LD. COUNSEL, THE ORDER RECEIVED BY THE ASSESSEE WAS INA DVERTENTLY MISPLACED. THE ASSESSEE COULD NOT LOCATE THE SAME INSPITE OF BEST EFFORTS. AFTER COMPLETION OF POST SEARCH ENQUIRIES , THE ASSESSEE TRACED OUT THE IMPUGNED ORDER OF THE CIT(APPEALS). IN FAC T, ACCORDING TO THE LD. 3 I.T.A. NO.2127/CHNY/16 I.T.A. NO.3161/CHNY/17 COUNSEL, THE ASSESSEE WAS ADVISED BY THE TAX CONSUL TANT THAT IN VIEW OF THE PROCEEDING INITIATED UNDER SECTION 153A OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'), THE REGULAR ASSESSMENT PROCEE DING WOULD STAND TERMINATED AND THERE WOULD NOT BE ANY ACTION TAKEN ON THE ASSESSMENT ORDER PASSED IN THE REGULAR COURSE. ACCORDING TO T HE LD. COUNSEL, THE ASSESSEE, THEREAFTER CONSULTED ANOTHER ADVOCATE AND HE ADVISED THE ASSESSEE THAT A SEPARATE APPEAL NEEDS TO BE FILED, THEREFORE, THERE WAS A DELAY OF 546 DAYS. ACCORDING TO THE LD. COUNSEL, T HE ASSESSEE WAS PREVENTED FROM FILING THE APPEAL WITHIN THE PERIOD OF LIMITATION. THEREFORE, THE DELAY MAY BE CONDONED. 4. ON THE CONTRARY, SHRI ASISH TRIPATHY, THE LD. DE PARTMENTAL REPRESENTATIVE, SUBMITTED THAT THERE WAS NO REASONA BLE CAUSE ON THE PART OF THE ASSESSEE FOR NOT FILING THE APPEAL WITH IN THE PERIOD OF LIMITATION. ACCORDING TO THE LD. D.R., THE SEARCH TOOK PLACE BEFORE THE DATE OF ORDER OF THE CIT(APPEALS), THEREFORE, THE A SSESSEE IS NOT JUSTIFIED IN FILING THE APPEAL BELATEDLY. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ORDER OF THE CIT(APPEALS) IS DATED 29.04.2016 AND ADMITTEDLY, TH E SEARCH TOOK PLACE ON 24.03.2016. THEREFORE, NATURALLY THE ASSESSEE H AS TO FOCUS ONLY ON THE SEARCH ASSESSMENT BY RECONCILING THE MATERIAL F OUND DURING THE 4 I.T.A. NO.2127/CHNY/16 I.T.A. NO.3161/CHNY/17 COURSE OF SEARCH OPERATION. MOREOVER, THE ASSESSEE SUBMITS THAT THERE WAS LEGAL ADVICE THAT IN VIEW OF THE INITIATION OF SEARCH PROCEEDING, THE PENDING ASSESSMENT WOULD STAND TERMINATED. THIS AD VICE GIVEN BY THE CONSULTANT MAY BE A WRONG ONE. BUT, FOR THE PURPOS E OF DECIDING THE ISSUE OF CONDONATION OF DELAY, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE WAS WRONGLY ADVISED BY A TAX PRAC TITIONER. HENCE, THE ASSESSEE HAS REASONABLE CAUSE IN NOT FILING THE APP EAL WITHIN THE PERIOD OF LIMITATION. THEREFORE, THE DELAY OF 546 DAYS IS HEREBY CONDONED AND THE APPEAL OF THE ASSESSEE IS ADMITTED. 6. NOW COMING TO THE MERIT OF THE APPEAL, THE ONLY ISSUE ARISES FOR CONSIDERATION IS THE CLAIM OF DEDUCTION UNDER SECTI ON 80-IA OF THE ACT. ACCORDING TO THE LD. COUNSEL, THE ASSESSEE IS A DEV ELOPER OF HOUSING PROJECTS, THEREFORE, ELIGIBLE FOR DEDUCTION UNDER S ECTION 80-IA OF THE ACT. HOWEVER, THE LOWER AUTHORITIES REJECTED THE CLAIM O F THE ASSESSEE ON THE GROUND THAT THE ASSESSEE IS A CONTRACTOR. THEREFOR E, DEDUCTION UNDER SECTION 80-IA OF THE ACT IS NOT AVAILABLE. ACCORDI NG TO THE LD. COUNSEL FOR THE ASSESSEE, THE ASSESSEE APART FROM DEVELOPING EL IGIBLE INFRASTRUCTURE FACILITY, IS ALSO MAINTAINING SEPARATE BOOKS OF ACC OUNT FOR ALL SUCH WORKS. THE ASSESSEE IS TAKING A FINANCIAL RISK IN DEVELOPI NG THE PROJECT. THE CONTRACTS WERE ENTERED INTO WITH STATE GOVERNMENT, MORE PARTICULARLY WITH IRRIGATION DEPARTMENT. ACCORDING TO THE LD. COUNSE L, THE ASSESSING 5 I.T.A. NO.2127/CHNY/16 I.T.A. NO.3161/CHNY/17 OFFICER AS WELL AS THE CIT(APPEALS) HAVE NOT GONE I NTO THE DEVELOPMENT WORK EXECUTED BY THE ASSESSEE AND SIMPLY REJECTED T HE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE IS A CONTR ACTOR. 7. THE LD.COUNSEL FOR THE ASSESSEE FURTHER SUBMITTE D THAT THERE ARE VARIOUS TYPES OF CONTRACTS AS FOLLOWS:- (I) BUILD OWN OPERATE & TRANSFER (BOOT); (II) BUILD OWN LEASE & TRANSFER (BOLT); (III) BUILD OPERATE & TRANSFER (BOT) SINCE, THE ASSESSEE DEVELOPS THE INFRASTRUCTURE FAC ILITY BY TAKING FINANCIAL RISK, ACCORDING TO THE LD. COUNSEL, THE REVENUE CAN NOT SAY THAT THE ASSESSEE IS ONLY A CONTRACTOR AND NOT A DEVELOPER. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE CIT(APPEALS) IS NOT JUSTIFI ED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER. 8. ON THE CONTRARY, SHRI ASISH TRIPATHY, THE LD. DE PARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE IS ONLY A CONTRACTOR AND NOT DEVELOPER OF THE INFRASTRUCTURE FACILITY. ACCORDIN G TO THE LD. D.R., THE ASSESSEE HAS NOT DEVELOPED ANY PROJECT. FOR THE PU RPOSE OF CONSIDERING THE ASSESSEE AS A DEVELOPER OF INFRASTRUCTURE FACIL ITY, ACCORDING TO THE LD. D.R., THE ASSESSEE NEED TO EXECUTE THE PROJECT ON B UILD, OPERATE AND TRANSFER MODE OR BUILD OWN LEASE & TRANSFER MODE. THE ASSESSEE HAS TO INVEST ITS OWN FUNDS FOR DEVELOPING THE INFRASTR UCTURE PROJECT. BESIDES ENTERING INTO AGREEMENT WITH GOVERNMENT, ACCORDING TO THE LD. D.R., THE 6 I.T.A. NO.2127/CHNY/16 I.T.A. NO.3161/CHNY/17 ASSESSEE NEED TO UNDERTAKE OPERATION AS WELL AS MAI NTENANCE CONTRACTS FOR CLAIMING AS A DEVELOPER OF THE PROJECT. IN THE FACTS OF THE CASE, ACCORDING TO THE LD. D.R., THE ASSESSEE IS ONLY EXE CUTING WORKS CONTRACT AND NOT DEVELOPING ANY PROJECT, THEREFORE, NOT ELIG IBLE FOR DEDUCTION UNDER SECTION 80-IA OF THE ACT. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. WHETHER THE ASSESSEE IS A DEVELOPER OR CONTRACTOR WOULD DEPEND UPON HOW THE PROJECT WAS EXECUTED BY THE ASSESSEE. FOR THE PURPOSE OF DECID ING WHETHER THE ASSESSEE IS A CONTRACTOR OR DEVELOPER, THE AGREEMEN T SAID TO BE ENTERED INTO BETWEEN THE PARTIES PLAYS A MAJOR ROLE. UNFOR TUNATELY, THERE IS NO REFERENCE ABOUT THE CLAUSES OR TERMS AND CONDITIONS OF AGREEMENT EITHER IN THE ASSESSMENT ORDER OR IN THE CIT(APPEALS)S OR DER. MOREOVER, COPIES OF THE AGREEMENT FOR DEVELOPING TH E SO-CALLED INFRASTRUCTURE PROJECT ARE NOT AVAILABLE BEFORE THI S TRIBUNAL. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RECONSIDERED. ACCORDINGLY, THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO RE-EXAMINE THE MATTER AFRESH CONSIDERING THE AGREEMENT ENTERED INTO BY TH E ASSESSEE WITH OTHER PARTIES, INCLUDING THE GOVERNMENT, AND THEREA FTER DECIDE THE ISSUE 7 I.T.A. NO.2127/CHNY/16 I.T.A. NO.3161/CHNY/17 AFRESH IN ACCORDANCE WITH LAW, AFTER GIVING A REASO NABLE OPPORTUNITY TO THE ASSESSEE. 10. NOW COMING THE REVENUES APPEAL IN I.T.A. NO.21 27/CHNY/2016, THE ONLY ISSUE ARISES FOR CONSIDERATION IS DEDUCTIO N CLAIMED BY THE ASSESSEE UNDER SECTION 35D(1)(II) OF THE ACT. 11. SHRI ASISH TRIPATHY, THE LD. DEPARTMENTAL REPRE SENTATIVE, SUBMITTED THAT THE ASSESSEE HAS CONSIDERED ENTIRE S HARE PREMIUM COLLECTED ON THE IPO FOR WORKING OUT THE ELIGIBLE D EDUCTION UNDER SECTION 35D OF THE ACT. ACCORDING TO THE LD. D.R., SHARE P REMIUM CANNOT BE INCLUDED WHILE CALCULATING THE CAPITAL EMPLOYED IN THE BUSINESS OF THE COMPANY IN VIEW OF PROVISO (B)(II) OF EXPLANATION T O 35D(3) OF THE ACT. THEREFORE, ACCORDING TO THE LD. D.R., THE CIT(APPEA LS) OUGHT NOT TO HAVE DELETED THE ADDITION MADE BY THE ASSESSING OFFICER TO THE EXTENT OF 20 LAKHS. ACCORDING TO THE LD. D.R., THE CIT(APPEALS) HAS ALSO DELETED THE ADDITION OF 23,62,536/- WITHOUT APPRECIATING THE FACTS OF THE C ASE. 12. ON THE CONTRARY, SHRI S. SRIDHAR, THE LD.COUNSE L FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE-COMPANY WROTE OFF 87,25,987/- BEING THE PRELIMINARY EXPENSES / SHARE ISSUE EXPENSES. ACCOR DING TO THE LD. COUNSEL, THE ASSESSING OFFICER FOUND THAT THE EXPEN SES WROTE OFF CANNOT BE ALLOWED. ACCORDING TO THE LD. COUNSEL, THE ASSE SSEE INCURRED CAPITAL 8 I.T.A. NO.2127/CHNY/16 I.T.A. NO.3161/CHNY/17 EXPENDITURE OF 4,24,29,460/- WRITTEN OFF OVER A PERIOD OF FIVE YEA RS. CORRESPONDINGLY THE ASSESSING OFFICER FOUND THAT EV EN IF THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 35D(1), THEN T HE SAME WORKS OUT TO 6,10,058/- ONLY. ACCORDING TO THE LD. COUNSEL, THE ASSESSING OFFICER DISALLOWED THE ENTIRE SHARE ISSUE EXPENSES OF 84,89,892/- ON THE GROUND THAT THE FUNDS WERE NOT RAISED FOR CARRYING OUT ANY EXPANSION WORK OR SETTING UP OF ANY NEW UNIT. ACCORDING TO THE LD. C OUNSEL, THE ASSESSEE IS ENGAGED ITSELF IN DEVELOPING INFRASTRUCTURE FACILIT Y AND EXPANSION COULD ONLY INCLUDE ADDITIONAL CAPITAL IN THE BUSINESS. A CCORDING TO THE LD. COUNSEL, THE ADDITIONAL CAPITAL WAS INSTRUMENTAL FO R TAKING MANY PROJECTS AND ITS EXECUTION. THE CAPITAL EMPLOYED BY THE ASS ESSEE HAD BEEN ADOPTED AS AGGREGATE OF THE SHARE CAPITAL AND LONG TERM BORROWINGS. ACCORDING TO THE LD. COUNSEL, THE EXPENDITURE INCUR RED AT INDONESIA AND IVORY COAST IS DIRECTLY RELATABLE TO THE BUSINESS O F THE ASSESSEE- COMPANY. THE LD.COUNSEL FURTHER SUBMITTED THAT WHA T WAS CLAIMED BY THE ASSESSEE IS 1/5 TH OF TOTAL EXPENDITURE UNDER SECTION 35D OF THE ACT. IF SECTION 35D IS NOT APPLICABLE, THEN THE ENTIRE EXPE NDITURE HAS TO BE ALLOWED UNDER SECTION 37 OF THE ACT. THEREFORE, AC CORDING TO THE LD. COUNSEL, THE CIT(APPEALS) HAS RIGHTLY ALLOWED THE C LAIM OF THE ASSESSEE. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. FROM THE MATERIAL 9 I.T.A. NO.2127/CHNY/16 I.T.A. NO.3161/CHNY/17 AVAILABLE ON RECORD IT APPEARS THAT THE ASSESSEE HA S EXECUTED PROJECTS FOR GOVERNMENT OF TAMIL NADU AND MAINTAINS SEPARATE BOOKS OF ACCOUNT. SECTION 35D(1)(II) OF THE ACT CLEARLY SAYS THAT AFT ER COMMENCEMENT OF BUSINESS IF THE ASSESSEE INCURS ANY EXPENDITURE IN CONNECTION WITH EXTENSION OF UNDERTAKING OR IN CONNECTION WITH SETT ING UP OF NEW UNIT, IT IS ELIGIBLE FOR DEDUCTION UNDER SECTION 35D OF THE ACT . SINCE THE ASSESSEE IS ENGAGED IN DEVELOPMENT OF INFRASTRUCTURE FACILIT IES, THE CIT(APPEALS) HAS RIGHTLY FOUND THAT EACH PROJECT IS TO BE TREATE D AS UNDERTAKING WITHIN THE MEANING OF SECTION 35D OF THE ACT. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE IS MAINTAINING SEPARATE BOOKS OF ACCOUNT F OR EACH PROJECT. THEREFORE, THE CIT(APPEALS) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 14. THE NEXT GROUND OF APPEAL RAISED BY THE REVENUE IS WITH REGARD TO ADDITION OF 20 LAKHS. 15. THE ASSESSING OFFICER MADE DISALLOWANCE OF 20 LAKHS DUE TO NON-RECONCILIATION OF TAX DEDUCTED AT SOURCE. THE ASSESSEE FILED THE DETAILS OF RECONCILIATION BEFORE THE CIT(APPEALS). THEREFORE, THE CIT(APPEALS) FOUND THAT THE RECONCILIATION STATEMEN T FILED BEFORE HIM NEEDS TO BE VERIFIED. THIS TRIBUNAL IS OF THE CONS IDERED OPINION THAT THIS IS ONLY A RECONCILIATION WITH REGARD TO TAX DEDUCTE D AT SOURCE. THE 10 I.T.A. NO.2127/CHNY/16 I.T.A. NO.3161/CHNY/17 ASSESSING OFFICER IS DIRECTED TO VERIFY THE RECONCI LIATION STATEMENT FILED WHICH WAS ANNEXED TO THE IMPUGNED ORDER OF THE CIT( APPEALS) AND THEREAFTER DECIDE THE ISSUE AFRESH IN ACCORDANCE WI TH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. THUS, WE C ONFIRM THE ORDER OF THE CIT(APPEALS). 16. THE NEXT ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO DISALLOWANCE OF 23,62,536/-. 17. THE EXPENDITURE OF 23,62,536/- WAS INCURRED IN CONNECTION WITH LAUNCHING OF PROJECT IN INDONESIA. THE ASSESSEE AD MITTEDLY IS MAINTAINING AN ESTABLISHMENT IN INDONESIA AND INCUR RED EXPENDITURE FOR FLOATING TENDERS AND PREPARING PROJECTS, ETC. THES E EXPENSES WERE INCURRED BEFORE COMMENCEMENT OF BUSINESS, THEREFORE , IT HAS TO BE CAPITALIZED AND THE ASSESSEE IS ELIGIBLE FOR DEDUCT ION UNDER SECTION 35D(I) OF THE ACT. IN VIEW OF THIS, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 18. IN THE RESULT, REVENUES APPEAL IN I.T.A. NO.21 27/CHNY/2016 IS DISMISSED, WHEREAS, THE ASSESSEES APPEAL IN I.T.A. NO.3161/CHNY/2017 IS ALLOWED FOR STATISTICAL PURPOSES. 11 I.T.A. NO.2127/CHNY/16 I.T.A. NO.3161/CHNY/17 ORDER PRONOUNCED ON 17 TH JULY, 2018 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANE SAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 7 /DATED, THE 17 TH JULY, 2018. KRI. 0 -389 :9)3 /COPY TO: 1. (23 /ASSESSEE 2. ASSESSING OFFICER 3. 4 ;3 () /CIT(A)-3, COIMBATORE 4. PRINCIPAL CIT-2, COIMBATORE 5. 9< -3 /DR 6. =( > /GF.