The DCIT, Circle-1(1)(2), Ahmedabad V. Chittorgarh Kota Toll Way Pvt. Ltd., Ahmedabad

ITA 2514/AHD/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3448 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 05-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Keywords: Revenue expenditure
• Section: 271(1)(c); 80IA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 2514/AHD/2016 (ASSESSMENT YEAR: 2013-14) DCIT, CIRCLE-1(1)(2), AHMEDABAD V/S M/S. CHITTORGARH KOTA TOLLWAY PVT. LTD. 222, ADWAIT COMPLEX, NR. SANDESH PRESS, VASTRAPUR, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAECC3027C APPELLANT BY : SHRI LALIT P. JAIN, SR. D .R. RESPONDENT BY : SHRI JAIMIN SHAH ( )/ ORDER DATE OF HEARING : 12 -02-201 9 DATE OF PRONOUNCEMENT : 26 -04-2019 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE LD. CIT(A)-1, AHMEDABAD DATED 22.07.2016 PERTAINING TO A.Y. 2013-14 AND FOLLOWING GROUND HAS BEEN TAKEN: ITA NO. 2514 /AHD/2016 . A.Y. 2013-14 2 1. THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 4,10,06,609/- MADE ON ACCOUNT OF DISALLOWANCE OF PR OJECT FACILITIES EXPENSES. 2. DISALLOWANCE OF PROJECT FACILITY FOR RS . 4.10.06,609/-: 3. THE LD. A.O HAS MADE THE OBSERVATION IN PARA NO. 3 OF THE ASSESSMENT ORDER AS UNDER: 'A CAREFUL PERUSAL OF THE EXPLANATION OF THE ASSESS EE, IT CAN BE SEEN THAT IT HAS BASED ITS CLAIM ON TWO COUNTS. FIRSTLY, IT IS THE C ONTENTION OF THE ASSESSEE THAT CONSTRUCTION OF METAL CRASH BARRIER IS A CONTRACTUA L OBLIGATION AND SECONDLY, THE PROJECT FACILITY DO NOT CREAT ANY ASSETS OR BENEFIT OF ENDURING NATURE TO THE ASSESSEE. BEFORE DISCUSSING THE ASSESSEE'S CONTRACT UAL LIABILITY, I WOULD LIKE TO DISCUSS FACTUAL POSITION OF EXPENDITURE OF RS. 4,83 ,71,954/-CLAIMED BY THE ASSESSEE. AS PER THE ASSESSEE'S OWN SUBMISSION, THE EXPENDITU RE CLAIMED IS REVENUE IN NATURE. FROM THE LEDGER ACCOUNT FILED BY THE ASSESS EE, IT IS SEEN THAT THERE IS AN OPENING BALANCE OF RS. 4,10,08,609/- AND DURING THE YEAR THE ASSESSEE HAS INCURRED EXPENDITURE MAINLY ON LABOUR CHARGES OF RS .73,65,345/-. IF THE ASSESSEE'S OWN SUBMISSION THAT THIS IS A REVENUE EXPENDITURE T HEN THE ASSESSEE OUGHT TO HAVE CLAIMED SUCH EXPENDITURE IN THE YEAR IN WHICH IT INCURRED. THE ASSESSEE FAILED TO OFFER ANY CONVINCING EXPLANATION FOR NOT CLAIMING SUCH EXPENDITURE IN THE YEAR IN WHICH IT INCURRED. AS STATED ABOVE, THE RE IS AN OPENING BALANCE OF RS. 4,70,06,609/-WHICH CLEARLY SHOWN THAT MAJORITY OF T HE EXPENDITURE CLAIMED DURING THE YEAR WAS INCURRED IN EARLIER YEARS. WHEN THE ASSESSES IS MAINTAINING ITS ACCOUNT IN MERCANTILE SYSTEM, SUCH EXPENDITURE WOULD HAVE BEEN CLAIMED IN THE . YEAR IN WHICH SUCH EXPENDITURE WAS INCURRED. FOR CLAIMING EXPENDITURE OF RS. 4,10,06,609/- DURIN G THE YEAR, IT IS THE EXPLANATION OF THE ASSESSEE THAT THE PROJECT IS COM PLETED DURING THE YEAR UNDER CONSIDERATION. A CAREFUL PERUSAL OF THE SCHEDULE-B TO CLAUSE-2.1 OF CONCESSION AGREEMENT, IT CAN BE SEEN THAT THE ASSESSEE HAS TO CONSTRUCT SAFETY BARRIER ITA NO. 2514 /AHD/2016 . A.Y. 2013-14 3 (METAL BEAM CRASH BARRIER), PAVEMENT MARKING, TRAFF IC SIGNAL ETC. FROM THE DETAILS OF WORK TO BE COMPLETED BY THE ASSESSEE, IT IS CRYSTAL CLEAR THAT THERE IS NO BIG PROJECT WHICH COULD BE COMPLETED IN A YEAR AND SUCH EXPENDITURE IS TO BE SHOWN AS WIP. FOR EXAMPLE, THE EXPENDITURE INCURRED ON MARKING OF PAVEMENT TO BE APPLIED NEED NOT BE SHOWN AS WIP. AS REGARDS, TH E CONSTRUCTION OF SAFETY BARRIER, AS PER THE TERMS OF CONTRACT THE ASSESSEE HAS TO PREPARE A SAFETY CRASH BARRIER ALONG THE HIGHWAY UPTO 20000 MTRS. THE ASSE SSEE FAILED TO OFFER ANY EXPLANATION WHY THE EXPENDITURE INCURRED IN THE EAR LIER YEARS HAS NOT BEEN CLAIMED IN THE YEAR IN WHICH IT INCURRED. THE ASSES SEE ITSELF ADMITTED THAT THE PROJECT FACILITY DO NOT CREATE ANY ASSETS TO THE AS SESSEE WHILE INCURRING THE EXPENSES. AT THIS JUNCTURE, IT IS WORTHWHILE TO POI NT OUT HERE THAT IN THE IMMEDIATELY PRECEDING YEAR THE ASSESSEE HAS SHOWN P ROFIT BEFORE TAX AT RS. 65.79 LAKH AND CLAIMED DEDUCTION OF RS. 46,50,756/- U/S. 801A OF THE ACT. HAD THE EXPENDITURE OF RS. 4,10,06,609/- WAS CLAIMED IN THE YEAR 2011-12, THE NET RESULT WOULD BE LOSS IN THAT YEAR AND THE ASSESSEE WAS NOT ENTITLED TO CLAIMED DEDUCTION U/S. 801A OF THE ACT. THIS CLEARLY SHOWS THAT THE A SSESSEE HAS MAINTAINING ITS BOOKS OF ACCOUNT IN SUCH A MANNER THAT IT TAKE UNDU E BENEFIT OF CONSTRUCTION GRANTED IN THE ACT. SUCH AN UNETHICAL PRACTICE HAS NO PLACE IN THE ACT. IT MAY FURTHER POINTED OUT HERE THAT AS PER THE CON CESSION AGREEMENT, THE ASSESSEE HAS TO COMPLETE, THE CONSTRUCTION OF CRASH BARRIER WITHIN 180 DAYS OF COD (COMMERCIAL OPERATION DATE). THE DATE OF COD OF THE PROJECT IS 01/08/2011 HENCE, THE ASSESSEE OUGHT TO HAVE COMPLETE THESE WO RKS BEFORE FEBRUARY - 2012. AS STATED ABOVE, THE PROFIT OF THE ASSESSEE FOR THE IMMEDIATELY PRECEDING YEAR WAS ONLY RS. 65.79 LAKH EXCLUDING THE EXPENDITURE O F RS. 4.16/- CRORE. THE EXPENDITURE OF RS. 4,10,06,609/-CLAIMED BY THE ASSE SSES IN THE F.Y. 2011-12 RELEVANT TO A.Y. 2012-13, THE CLAIM OF DEDUCTION OF RS. 65.79 LAKH U/S. 80IA OF THE ACT WOULD NOT HAVE ARISEN . FROM THE ABOVE IT IS CR YSTAL CLEAR THAT THE EXPENDITURE OF RS. 4,10,06,6097- WAS INCURRED IN THE EARLIER YE AR AND THE ASSESSEE HAS NOT CLAIMED THE SAME FOR OBTAINING UNDUE BENEFIT OF CLA IMING DEDUCTION U/S. 801A OF ITA NO. 2514 /AHD/2016 . A.Y. 2013-14 4 THE ACT BY MAINTAINING ITS BOOKS OF ACCOUNT TO SUIT E THE ASSESSEES CLAIM. AS STATED ABOVE, THE EXPENDITURE OF RS. 4,10,06,609/- CLAIMED BY THE ASSESSEE IS NOT INCURRED DURING THE YEAR AND AS SUCH THE SAME IS DI SALLOWED. THE ASSESSEE FURNISHED FROM NO. 10CCB AND AS PER THE FORM NO. 10 CCB, AND THE AUDITOR HAS WORKED OUT DEDUCTION U/S. 80IA OF THE ACT TO THE TU RN OF RS. 1,26,00,532/- AND AS SUCH THE DEDUCTION U/S. 80IA OF THE ACT IS ALLOWED TO THE EXTENT OF RS. 1,26,00,5327- AS WORKED OUT BY THE AUDITOR. PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT ARE BEING SEPARATELY INITIATED.' 4. THE LD. A.O. HAS NOT CONSIDERED THE SUBMISSION MADE BY APPELLANT ON 10.09.2015 WHEREIN THE APPELLANT HAS MENTIONED THAT THE EXPENDITURE WAS REQUIRED TO BE INCURRED AS PER THE CONTRACTUAL OBLI GATION AS THE AGREEMENT ENTERED IN TO WITH NHAI. 5. THE LD. A.O. HAS NOT CONSIDERED THE FACT THAT THE E XPENDITURE INCURRED FOR PROJECT METAL BARRIER WHICH WAS CONTRACTUAL OBLIGAT ION WHICH WAS REQUIRED TO BE FULFILLED BY THE COMPANY AS PER AGREEMENT ENTERED I N TO WITH NHAI. AS THESE PROJECT FACILITIES ARE REQUIRED TO BE BUILT UP ON T HE NATIONAL HIGHWAY OWNED BY THE GOVERNMENT, MANAGEMENT WAS OF THE OPINION THAT THESE PROJECT FACILITIES DO NOT CREATE ANY ASSET OR BENEFITS OF ENDURING NATURE AND HENCE ARE REVENUE EXPENDITURE AND ARE TREATED ACCORDINGLY AS AND WHEN THE PROJECT FACILITIES ARE READY FOR USE. 6. THE PART OF THE EXPENDITURE OF RS. 4,10,06,609/- ON PROJECT FACILITIES WERE INCURRED BY THE APPELLANT COMPANY IN PREVIOUS YEAR AND KEPT AS WORK IN PROGRESS UNDER NON -CURRENT EXPENSES AND DISCLOSED IN THE BALANCE SHEET OF PREVIOUS YEAR AND CLAIMED THE ENTIRE EXPENDITURE OF RS. 4,83,71,954/- ON COMPLETION OF THE PROJECT FACILITIES IN THE CURRENT YEAR. ITA NO. 2514 /AHD/2016 . A.Y. 2013-14 5 7. THE STATUTORY AUDITOR HAS ALSO CONSIDERED THE SAME AS CURRENT YEAR EXPENSES AND NO ADVERSE OR OTHER COMMENTS FOR THE SAID EXPEN SES AS PRIOR PERIOD EXPENSES WERE MADE IN THE AUDITED BALANCE SHEET OR TAX-AUDIT REPORT. BUT LD. A.O. WAS NOT AGREE WITH THE CONTENTION OF THE ASSES SEE AND DISALLOWED EXPENSES OF RS. 4,10,06,609/- . 8. AGAINST THE SAID ORDER, ASSESSEE PREFERRED FIRST ST ATUTORY APPEAL BEFORE THE LD. CIT(A) WHO PARTLY ALLOWED THE APPEAL OF THE ASSESSE E. 9. NOW REVENUE HAS COME BEFORE US. 10. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGN ED ORDER. ASSESSEE COMPANY CARRIES ON THE BUSINESS OF PROVIDING OPERAT ION, MAINTENANCE AND TRANSFER SERVICES (OMT) TO CHITTORGARH-KOTA NATIONA L HIGHWAY-76 IN THE RAJASTHAN STATE FOR COLLECTION OF TOLL TAX/FEE. ON VERIFICATION OF THE LEDGER ACCOUNT OF PROJECT FACILITIES EXPENSE, IT IS NOTICE D THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 4,83,71,954/- UNDER THE HEAD PROJE CT METAL CRASS BARRIER EXPENSE. THE EXPENDITURE INCURRED FOR PROJECT METAL CRASS BARRIER IS A CONTRACTUAL OBLIGATION TO BE FULFILLED BY COMPANY A S PER SCHEDULE-B OF THE CONCESSION AGREEMENT ENTERED IN TO WITH NHAI. COMPA NY DOES NOT HAVE RIGHT OF ANY REIMBURSEMENT OR CLAIM OF MONEY FROM NHAI F OR THE SAID FACILITIES. AS THESE PROJECT FACILITIES ARE REQUIRED TO BE BUILT U P ON THE NATIONAL HIGHWAY OWNED BY GOVERNMENT, MANAGEMENT IS OF OPINION THAT THESE PROJECT FACILITIES DO NOT CREATE ANY ASSETS OR BENEFIT OF ENDURING NAT URE AND ASSESSEE/ APPELLANT MADE EXPENSES OF RS. 4,10,06,609/- FOR SAFETY BARRI ER PAVEMENT MARKING, TRAFFIC SIGNAL ETC. AS PER TERM AND AGREEMENT OF THE CONTRA CT WITH THE NHAI. BUT LD. A.O. DISALLOWED THE CLAIM OF THE APPELLANT ON THE G ROUND THAT ABOVE SAID ITA NO. 2514 /AHD/2016 . A.Y. 2013-14 6 AMOUNT WAS SPENT IN EARLIER YEAR AND NOT IN THE YEA R UNDER CONSIDERATION. IN THIS CASE, THE RATE OF TAX ARE SAME AS COMPARED TO EARLIER YEAR AND THERE IS NO LOSS TO THE REVENUE. 11. IN SUPPORT OF ITS CONTENTION, LD. A.R. CITED A JUDG MENT OF DELHI HIGH COURT IN THE CASE OF VISHNU INDUSTRIAL GASES P. LTD. VS. CIT WHICH WAS FOLLOWED IN THE CASE OF CIT VS. NAGRI MILLS 33 ITR 681 WHEREIN IT I S HELD THAT WHERE THE DEPARTMENT HAD NOT DISPUTED THAT THE EXPENDITURE WA S DEDUCTIBLE IN PRINCIPLE BUT WAS ONLY DISPUTING THE YEAR IN WHICH THE DEDUCTION COULD BE ALLOWED. HELD, CASTIGATING THE DEPARTMENT, THAT AS THE TAX RATES WERE THE SAME IN BOTH YEARS, THE DEPARTMENT SHOULD NOT FRITTER AWAY ITS ENERGIES IN RAISING QUESTIONS AS TO THE YEAR OF DED UCTIBILITY/TAXABILITY. 12. RESPECTFULLY FOLLOWING THE AFORESAID JUDGMENT, WE D ISMISS APPEAL OF THE DEPARTMENT. 13. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN OPEN COURT ON 26 - 04- 2019 SD/- SD/- (PRADIP KUMAR KEDIA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 26/04/2019 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD