The DY. CIT.,GNR Circle, Gandhinagar V. Dahez Sez Ltd., Gandhinagar

ITA 2353/AHD/2015

AI Insights

The case involves the Deputy Commissioner of Income Tax (DCIT) as the appellant and Dahez SEZ Ltd. as the respondent. The primary issues pertained to the treatment of Non-Agricultural Assessment (NAA) charges and infrastructure upgradation charges in the context of income tax assessments for the assessment years 2010-11 to 2012-13. The Assessing Officer (AO) had treated these charges as capital expenditures, leading to additions in the taxable income of Dahez SEZ Ltd. The CIT(A) reversed these additions, leading to the Revenue's appeal to the Tribunal. The Tribunal's decision focused on the nature of these charges and the appropriate assessment years for their taxability.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114301 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-03-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 06-08-2015
• Other Referred Cases: Hotel Rajmahal 152 ITR 218
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Capital expenditure
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: Smt. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member The Dy. CIT., GNR Circle, Gandhinagar (Appellant) Vs Dahez Sez Ltd., Block No.-14, 3 rd Floor, Udhyog Bhavan, Sector-11, Gadhinagar-382011 PAN: AACCD8098E (Respondent) Assessee Represented: Shri Mehul K. Patel, A.R. Revenue Represented: Shri Sudhendu Das, CIT-DR Date of hearing : 06-03-2023 Date of pronouncement : 24-03-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- These appeals are originally disposed of by the Co-ordinate Bench of this Tribunal vide order dated 30.04.2019. Thereafter the Revenue filed Miscellaneous Application Nos. 338 to 340/Ahd/2019 that two of the grounds raised by the Revenue are not adjudicated by the Tribunal. ITA No. 1020/Ahd/2014 for A.Y. 2010-11, ITA No. 127/Ahd/2015 for A.Y. 2011-12 & ITA No. 2353/Ahd/2015 for A.Y. 2012-13 I.T.A Nos. 1020/Ahd/2014 and Ors. A.Ys. 2010-11 to 2012-13 Page No DCIT vs. Dahez Sez Ltd. 2 2. After hearing both sides vide order dated 26/07/2022 in M.A. Nos. 338-340/Ahd/2019, the above order was being recalled to adjudicate the grounds namely NAA charges Payment and Infrastructure up gradation charges. 2.1. In ITA No. 1020/Ahd/2014, these are two grounds which is not adjudicated by the Tribunal are as follows: “....4. The learned CIT(Appeals) has erred in law in allowing the NA charges of Rs.82,08,000/-being the capital expenditure. 5. The learned CIT(Appeals) has erred in law and on facts in deleting the disallowance of infrastructure upgradation charges of Rs.4,40,70,975/- by ignoring that the assessee has made such a claim before it had reached finality and that true income of a particular year has to be taxed in that year only.” 3. The findings of the Ld. CIT(A) on NA permission is as follows: 7.1 The AO has held that expenditure incurred for getting NA permission for land incurred by the appellant is an expenditure of capital nature having benefit of enduring nature and relying on the decision of Karnataka High Court in the case of Hotel Rajmahal 152 ITR 218 disallowed the claim of Rs.82,08,000/- 7.2 Aggrieved with the Addition of Rs 82,08,000/-, appellant has come in appeal and its letter dt 20/01/2014 submitted as under: "The Assessing officer has without considering the appellant replied termed the NA expenditure as expenditure incurred towards getting permission for NON Agricultural Land. In fact the appellant has not applied for any permission for conversion of agricultural land in to non-agricultural land. The correct is NAA charges i.e. Non Agricultural Assessment. The appellant has reimbursed the said expenditure for to GIDC towards the land revenue tax payble to government on yearly basis. Therefore the addition made by the Assessing Officer considering the nature of expenditure on wrong footing should be deleted." 7.3 I have gone through the fact of the case, assessment order, the submission made by appellant and case relied upon. From the assessment order, I find that the AO has considered the NAA charges, reimbursed to GIDC as a capital expenditure considering that it is a charge paid towards conversion of Agricultural land to Non Agriculture. I.T.A Nos. 1020/Ahd/2014 and Ors. A.Ys. 2010-11 to 2012-13 Page No DCIT vs. Dahez Sez Ltd. 3 The AO has misinterpreted the nature of expenditure. As per appellant's submission, the charges paid towards Non-agricultural assessment and payable to government on yearly basis. Thus the expenditure incurred is business expenditure and is of recurring nature and revenue in nature. Therefore the addition made, considering the expenses incurred for conversion of land from agriculture to non-agriculture is not correct. The AO is therefore, directed to delete the addition made on this count. 4. Similarly, the findings of the Ld. CIT(A) on account of Infrastructure up gradation charges are as follows: 8.1 The AO has held that expenditure incurred for infrastructure upgradation incurred by the appellant is an expenditure of capital nature having benefit of enduring nature and waived by GIDC and made disallowance of Rs.4,40,70,975/-. 8.2 Aggrieved with the action of the AO in making addition of Rs.4,40,70,975/-, appellant has come in appeal and submitted as under: "Further the Assessing Officer has made addition on account of infrastructure up gradation charges Rs 4,40,70,975/-. The GIDC has issued the bill to the appellant to pay various charges including annual rent, NAA charges etc. The appellant has request to GIDC to waive the said expenditure as it is not related expenditure of the appellant. The GIDC has waived the expenditure in the year FY 2010-11 i.e AY2011-12. The GIDC by letter of feb 2011. Therefore the appellant has offered the said expenditure claimed as income in the next FY ie 2010-11 relevant Ay 2011-12. The said fact is also admitted by the Assessing Officer in para 11 of the assessment order. However the Assessing Officer has disallowed the same as the appellant has debited before it reaches to finality. In fact the year end of the appellant was 31.03.2010 and the letter was received on feb 2011. i.e. almost the after the 11 months. Further the appellant has credited its profit and loss account for AY 2011- 12 on receipt of the letter in the year of its receipts. Therefore it cannot be considered that appellant has claimed the expenditure before it reaches to finality. The necessary reply and supporting papers are on pages 93, 117 to 112 and 128 and 129 of paper book. 8.3 I have gone through the fact of the case, assessment order, submission made by appellant. From the assessment order, I find that appellant has put all the facts before the AO during the assessment proceeding. However, the AO has failed to consider the same. The expenditure claimed by the GIDC by way of reimbursement along with annual rent NAA charges. However, the said expenditure was waived by GIDC after 11 month i.e. in the next financial year and accordingly the appellant credited its P&L considering the same as income in AY 2011-12, as letter of GIDC I.T.A Nos. 1020/Ahd/2014 and Ors. A.Ys. 2010-11 to 2012-13 Page No DCIT vs. Dahez Sez Ltd. 4 was received in February, 2011 i.e. FY 2010-11. The AO has discussed this issue in his order para.no.11 that the appellant has offered the said claim as expenditure in the next year as 'Income' I therefore do not find any justification in the action of the A.O. in making such disallowance as this amount is already offered to tax in A.Y. 2011-12. 5. The Ld. D.R. appearing for the Revenue supported the order passed by the Assessing Officer and requested to uphold the disallowance of Non-agricultural assessment charges paid by the assessee. 6. Per contra, the Ld. A.R. Mr. Mehul K. Patel appearing for the assessee submitted before us a copy of the reply filed by the assessee dated 23.01.2013 in response to the 142(1) notice by the Assessing Officer wherein it is categorically submitted as follows: 1. NAA Charges of Rs.5,22,99,430/-: The said amount is comprises of Rs.20,455/- for lease rent, Rs.82,08,000/- for NAA and Rs.4,40,70,975/- for infrastructure up gradation charges which is required to be paid every year. As assesse has submitted in its early date submission that infrastructure up gradation charges was waived by GIDC letter on. The assesse company therefore credited Rs.4,40,70,975/- as income in the financial year 2010-11 i.e. AY 2011-12. The copy of profit and loss account for F.Y. 2010-11 is attached for your reference (Annexure –A). Moreover, Non Agriculture Assessment (NAA) charges as paid by GIDC to revenue department of Govt. Of Gujarat regularly and are reimbursed by Dahej SEZ Ltd. every year. Thus the amount reimbursed is not a lease rent or could be treated as part of lease rent. 6.1. Thus the Ld. A.R. pleaded that the Ld. CIT(A) correctly deleted the addition made by the Assessing Officer which is a business expenditure and which is of recurring in nature and a revenue receipt. 7. We have given our thoughtful consideration and perused the materials available on record. The Ld. CIT-DR could not bring I.T.A Nos. 1020/Ahd/2014 and Ors. A.Ys. 2010-11 to 2012-13 Page No DCIT vs. Dahez Sez Ltd. 5 before us any contra facts as recorded by the Ld. CIT(A) and no materials is also placed before us to the finding of the Assessing Officer. In absence of the same, we have no hesitation in deleting the addition made by the Assessing Officer on account of NAA charges. 7.1. In the result, the grounds raised by the Revenue is devoid of merits and therefore ground no. 4 is hereby dismissed. 8. Regarding ground no. 5 disallowance of Infrastructure up gradation charges of Rs. 4,40,70,975/-, the assessee has requested GIDC to waive the said expenditure as it is not related expenditure of the assessee. The GIDC has waived the expenditure in the Financial Year 2010-11 relevant to the Assessment Year 2011-12. Vide GIDC letter dated Feb 2011. Therefore the assessee has offered the said expenditure claimed as income in the next Financial Year 2010-11 relevant to the Assessment Year 2011-12. This fact is also admitted by the Assessing Officer in Para 11 of the Assessment order. However the Assessing Officer has disallowed the same since the assessee has debited before it reaches to finality. 8.1. Considering the above facts and the assessee has offered the income during the Assessment Year 2011-12 thereby the Ld. CIT(A) deleted the addition for the present Assessment Year 2010-11. The Ld. CIT-DR could not contravent the above factual position recorded by the Ld. CIT(A). I.T.A Nos. 1020/Ahd/2014 and Ors. A.Ys. 2010-11 to 2012-13 Page No DCIT vs. Dahez Sez Ltd. 6 9. We have given our thoughtful consideration and perused the materials available on record. As the assessee has offered the above income in the Assessment Year 2011-12, the A.O. is not justified in disallowing in the Assessment Year 2010-11. Therefore the order of the Ld. CIT(A) does not require any interference and the same is upheld. Thus the Revenue appeal in ground no. 5 is devoid of merits and the same is liable to be dismissed. 10. In the result, the appeal filed by the Revenue are hereby dismissed. ITA Nos. 727 & 2353/Ahd/2015 for A.Ys. 2011-12 & 2012-13 11. The only ground which was not considered by the Tribunal, the Ld. CIT(A) erred in law and on facts in allowing the NA charges. This issue has already been adjudicated by us in Paragraph No. 7 of this order. Respectfully following the same, we have no hesitation in dismissing the above ground no. 4 raised by the Revenue in the above appeals. 12. In the result, the appeals filed by the Revenue are hereby dismissed. Order pronounced in the open court on 24-03-2023 Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 24/03/2023 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee I.T.A Nos. 1020/Ahd/2014 and Ors. A.Ys. 2010-11 to 2012-13 Page No DCIT vs. Dahez Sez Ltd. 7 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