ITO, New Delhi V. Sasan Power Ltd., New Delhi

ITA 2819/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4121 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 22-03-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 07-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G C SRIVASTAVA CAS
• Keywords: Capital receipt; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH : G NEW DELHI) (DELHI BENCH : G NEW DELHI) (DELHI BENCH : G NEW DELHI) (DELHI BENCH : G NEW DELHI) BEFORE SHRI A.D. JAIN , JUDICIAL MEMBER AND BEFORE SHRI A.D. JAIN , JUDICIAL MEMBER AND BEFORE SHRI A.D. JAIN , JUDICIAL MEMBER AND BEFORE SHRI A.D. JAIN , JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO.2819/DEL./2010 I.T.A. NO.2819/DEL./2010 I.T.A. NO.2819/DEL./2010 I.T.A. NO.2819/DEL./2010 (ASSESSMENT YEAR : 2007 (ASSESSMENT YEAR : 2007 (ASSESSMENT YEAR : 2007 (ASSESSMENT YEAR : 2007- -- -08) 08) 08) 08) ITO, WARD 7(3), ITO, WARD 7(3), ITO, WARD 7(3), ITO, WARD 7(3), VS. VS. VS. VS. SASAN POWER LTD., SASAN POWER LTD., SASAN POWER LTD., SASAN POWER LTD., NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. 3 33 3 RD RDRD RD FLOOR CHANDERLOK BUILDING, FLOOR CHANDERLOK BUILDING, FLOOR CHANDERLOK BUILDING, FLOOR CHANDERLOK BUILDING, 36, JANPATH, 36, JANPATH, 36, JANPATH, 36, JANPATH, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (PAN/GIR NO. : AAKCS0723M) (PAN/GIR NO. : AAKCS0723M) (PAN/GIR NO. : AAKCS0723M) (PAN/GIR NO. : AAKCS0723M) (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SHRI G.C. SRIVASTAVA, CAS ASSESSEE BY : SHRI G.C. SRIVASTAVA, CAS ASSESSEE BY : SHRI G.C. SRIVASTAVA, CAS ASSESSEE BY : SHRI G.C. SRIVASTAVA, CAS REVENUE BY : SHRI GAJANAND MEENA, CIT(DR) REVENUE BY : SHRI GAJANAND MEENA, CIT(DR) REVENUE BY : SHRI GAJANAND MEENA, CIT(DR) REVENUE BY : SHRI GAJANAND MEENA, CIT(DR) ORDER ORDER ORDER ORDER PER A.D. JAIN, JM THIS IS DEPARTMENTS APPEAL FOR ASSESSMENT YEAR 2007-08 TA KING THE FOLLOWING GROUNDS: 1. LD.CIT(A) ERRED IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF `1,36,11,665 MADE BY THE AO ON ACCOUNT OF NON- ALLOWABILITY OF DEDUCTION U/S 57(III) OF THE I.T.ACT . 2. LD.CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN HOLDING THAT HE INTEREST INCOME OF `1,36,11,665 WAS CAPITAL RECEIPT IN VIEW O F THE ABOVE, NATURE WHICH WAS SHOWN BY THE ASSESSEE ITSELF AS INCOME FROM OTHER SOURCES. 3. LD.CIT(A) RRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN DELETING THE ADDITION OF `1,35,81,234 MADE BY THE AO ON ACCOUNT OF SALE OF RFP/RFQ DOCUMENTS. 2 2. GROUND NOS.1 & 2 HAVE BEEN RAISED AGAINST THE ACTIO N OF THE CIT(A) IN DELETING THE ADDITION OF `13611865 ON ACC OUNT OF NON- AVAILABILITY OF DEDUCTION U/S 57(III) OF THE I.T. AC T. 3. THE ASSESSEE SHOWED INTEREST INCOME OF `13611865. AGA INST THIS, EXPENDITURE OF A SIMILAR AMOUNT WAS CLAIMED AS DE DUCTIBLE U/S 57(III) OF THE ACT, RESULTING IN NIL INCOME DECLARED . ON QUERY, THE ASSESSEE RESPONDED BY FILING A COPY OF THE MINUTES OF THE MEETING BETWEEN THE SECRETARY, POWER WITH THE MEMBER SECRET ARIES OF VARIOUS STATES ON 10.7.06, REGARDING THE DEVELOPMENT OF THE ULTRA MEGA POWER PROJECTS. AS PER THESE MINUTES, IT WAS AGREED THAT THE STATES WOULD PROVIDE FUNDS @ `1 CRORE PER 100 MW FOR STATE-WISE ALL OCATION CONCERNING ACQUISITION OF LAND FOR POWER PROJECT AND COALMINES, TO THE SPV, AS COMMITMENT ADVANCE FOR TEMPORARY INFUSION AS E QUATED IN THE SPV TO ENABLE IT TO LEVERAGE THESE FUNDS TO BORROW AN D PAY FULLY FOR LAND ACQUISITION AND R&R. 4. BESIDES THIS, AS PER SCHEDULE VIII, I.E., THE NOTES O N ACCOUNTS AT POINT NOS.5 & 6, THERE WAS AN AGREEMENT BETWEEN PFC A ND THE ASSESSEE, AS PER WHICH, THE ENTIRE EXPENDITURE ON DEVELO PMENT OF THE PROJECT WAS TO BE INCURRED BY PFC FROM ITS OWN FUNDS U NTIL RECEIPT OF THE COMMITMENT ADVANCE FROM THE POWER UTILITIES; THA T THE COMMITMENT ADVANCE RECEIVED HAD BEEN GIVEN TO THE H OLDING COMPANY FOR INCURRING EXPENDITURE FOR THE PROJECT ON BEHALF OF THE COMPANY FOR INVESTMENT OF THE UNUTILIZED PORTION OF ADVANCE; THA T ON THE UNUTILIZED PORTION OF THE COMMITMENT ADVANCE PLACED WITH PFC A S INTER-CORPORATE LOAN, INTEREST WAS RECEIVABLE FROM PFC AT THE MONTHLY AVERAGE SHORT TERM DEPOSIT RATE OF PFC; THAT THE ASSESSEE WAS TO PAY IN TEREST TO PFC ON THE EXPENDITURE INCURRED BY IT FROM THE COMPANY FROM ITS OWN FUNDS AND TO THE UTILITIES OF THE POWER PROCURING STATES, W HEN EXPENDITURE WAS INCURRED OUT OF THE COMMITMENT ADVANCE. FROM TH IS, THE AO OBSERVED THAT THE COMMITMENT ADVANCE WAS RECEIVED BY PFC AND 3 INTEREST WAS RECEIVABLE FROM PFC ON THE UNUTILIZED PO RTION OF THE COMMITMENT ADVANCE PLACED WITH PFC AS INTER-CORPORAT E LOANS, AT THE MONTHLY AVERAGE SHORT TERM DEPOSIT RATE OF PFC; THAT THE ASSESSEE WAS TO PAY INTEREST TO PFC ON THE EXPENDITURE INCURRED B Y IT WHEN SUCH EXPENDITURE WAS INCURRED OUT OF THE COMMITMENT ADVAN CE; THAT THE ASSESSEE WAS YET TO COMMENCE ITS BUSINESS OPERATION; THAT TH E ENTIRE EXPENDITURE WAS BEING SHOWN AS CAPITAL WORK IN PROGRESS; THAT THE EXPENDITURE WAS OF A CAPITAL NATURE, EXPRESSLY PROHIBI TED BY THE PROVISIONS OF SECTION 57(III) OF THE ACT, AND THAT THE RE WAS NO NEXUS BETWEEN THE EXPENDITURE INCURRED AND THE INCOME SOUG HT TO BE EARNED. 5. BY VIRTUE OF THE IMPUGNED ORDER, THE CIT(A) DELE TED THE ADDITION OF `13611865, MADE AS ABOVE, BY THE AO, ON ACCOUNT O F INTEREST. 6. THE LD.DR HAS CONTENDED CHALLENGING THE IMPUGNED ORDER IN THIS REGARD, THAT THE ASSESSEE, BEFORE THE AO, HAD CLAIMED I NTEREST EXPENDITURE, BUT BEFORE THE CIT(A), IT CLAIMED CA PITAL RECEIPT; AND THAT THE CIT(A) HAS GONE WRONG IN ALLOWING THE ASSESSEES CLAI M REGARDING CAPITAL EXPENDITURE, AS THERE WAS NO SUCH CLAIM BY THE ASSESSEE BEFORE THE AO. ON MERITS, IT HAS BEEN CONTENDED THAT THE CI T(A) HAS ERRED IN PLACING RELIANCE ON THE DECISION OF THE HONBLE DELH I HIGH COURT IN THE CASE OF INDIAN OIL PANIPAT POWER CONSORTIUM, NEW DEL HI VS. ITO, 315 I.T.R. 255(DEL.), EVEN THOUGH THE FACTS OF THE PRESEN T CASE ARE ENTIRELY DIFFERENT FROM THOSE OF INDIAN OIL PANIPAT POWER CO NSORTIUM(SUPRA); THAT THERE, THE INTEREST INVOLVED WAS LINKED WITH ACQ UISITION OF LAND, WHEREAS IN THE PRESENT CASE, UNUTILIZED AMOUNT WAS PUT IN FD AND INTEREST WAS EARNED THEREON; THAT IN THE FACTS OF THE PRESENT CASE, THE DECISION OF THE HONBLE SUPREME COURT IN TUTICORIN ALKALIES & FERTILISERS LTD. VS. CIT, 93 TAXMAN 502 (SC) IS DIRECT LY APPLICABLE; THAT IN TUTICORIN ALKALIES FERTILISERS LTD. (SUPRA), IT WA S HELD BY THE HONBLE SUPREME COURT THAT INTEREST EARNED ON SHORT TERM INV ESTMENT OF FUNDS 4 BORROWED FOR SETTING UP OF FACTORY DURING CONSTRUCTIO N OF FACTORY BEFORE COMMENCEMENT OF BUSINESS, HAS TO BE ASSESSED AS INCOME FROM OTHER SOURCES AND IT CANNOT BE SAID THAT THE INTEREST INCOME IS NOT TAXABLE ON THE GROUND THAT IT WOULD GO TO REDUCE INTEREST ON TH E BORROWED AMOUNT WHICH WOULD BE CAPITALIZED. IT HAS FURTHER BEEN CON TENDED THAT THE CIT(A) HAS WRONGLY OBSERVED THAT THE AO STATED THAT TH E INTEREST WAS OF CAPITAL NATURE. 7. THE LD.COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, H AS STRONGLY REFUTED THE AVERMENTS MADE ON BEHALF OF THE DEPARTME NT. IT HAS BEEN CONTENDED THAT BEFORE THE AO, THE ASSESSEE TREATED BOTH THE RECEIPT AS WELL AS THE EXPENDITURE AS OF CAPITAL NATURE; THAT TH ERE IS NOTHING ERRONEOUS ABOUT THE CIT(A) HAVING ENTERTAINED THE ASSE SSEES CLAIM REGARDING CAPITAL RECEIPT; AND THAT THE CIT(A) HAS R IGHTLY ALLOWED THE EXPENDITURE AS OF CAPITAL NATURE. 8. CONCERNING THE MERITS OF THE CASE, IT HAS BEEN ASSERT ED THAT THE FACTS IN THE PRESENT CASE ARE IN NO WAY DIFFERENT FROM THOSE IN THE CASE OF INDIAN OIL PANIPAT POWER CONSORTIUM(SUPRA). REL IANCE HAS BEEN PLACED ON CIT VS. BOKARO STEEL LTD., 236 I.T.R. 315 (SC), WHEREIN IT HAS BEEN HELD THAT IF MONEY IS BORROWED BY A NEWLY STARTE D COMPANY WHICH IS IN THE PROCESS OF CONSTRUCTING AND ERECTING ITS PLANT AND MACHINERY, THE INTEREST INCURRED BEFORE THE COMMENCEMENT OF PRO DUCTION ON SUCH BORROWED MONEY CAN BE CAPITALIZED AND ADDED TO THE COST OF THE FIXED ASSET CREATED AS RESULT OF SUCH EXPENDITURE; THAT LIKEWI SE, IF THE ASSESSEE RECEIVES ANY AMOUNT INEXTRICABLY LINKED WITH TH E PROCESS OF SETTING UP OF ITS PLANT AND MACHINERY, SUCH RECEIPTS WI LL GO TO REDUCE THE COST OF ITS ASSETS AND THESE ARE RECEIPTS OF A CAPITAL NATURE, NOT CAPABLE OF BEING TAXED AS INCOME. BOKARO STEEL LTD . (SUPRA) HAS BEEN FOLLOWED IN CIT VS. KARNAL COOPERATIVE SUGAR MILLS L TD., 243 I.T.R. 2 (SC). RELIANCE HAS ALSO BEEN PLACED ON ADD.CIT VS. I NDIAN DRUGS & PHARMACEUTICALS LTD., 144 I.T.R. 134 (DEL.) CONFIRM ING THE DECISION OF 5 THE TRIBUNAL THAT THE RECEIPTS WERE FROM SOURCES WHICH WERE NOT INDEPENDENT, BUT WHICH WERE INEXTRICABLY LINKED WIT H THE PROCESS OF SETTING UP OF THE BUSINESS; THAT SINCE THE BUSINESS HAD NOT BEEN FULLY SET UP, THE RECEIPTS WERE CAPITAL IN NATURE, AND THER EFORE, THE RECEIPTS DID NOT CONSTITUTE INCOME LIABLE TO TAX. 9. FURTHER, ATTENTION HAS BEEN DRAWN TO SCHEDULE VII I OF THE BALANCE SHEET OF THE ASSESSEE, A COPY WHEREOF HAS BEEN PLACED ON RECORD. PARA.5 OF THE SAID SCHEDULE VIII, I.E., NOTES ON ACCO UNT STATES AS FOLLOWS: PURSUANT TO AN AGREEMENT BETWEEN PFC AND SASAN POWER LTD., THE ENTIRE EXPENDITURE ON DVELOPMENT PROJECT SHALL BE INCURRED BY PFC FROM ITS OWN FUNDS UNTIL RECEIPT OF THE COMMIT MENT ADVANCE FROM THE POWER UTILITY COMMITMENT ADVANCE R ECEIVED FROM UTILITY HAS BEEN GIVEN TO THE HOLDING COMPANY F OR INCURRING EXPENDITURE FOR THE PROJECT ON BEHALF OF THE COMPAN Y AND FOR INVESTMENT OF UNUTILIZED PORTION OF ADVANCE ON THE U NUTILIZED PORTION OF THE COMMITMENT ADVANCE PLACED ON THE PFC AS INTER- CORPORATE LOAN, INTEREST IF RECEIVABLE FROM PFC AT M ONTHLY AVERAGE SHORT TERM DEPOSIT RATE OF PFC AS DETERMINED F ROM TIME TO TIME FURTHER, IT HAS BEEN CONTENDED THAT AS PER THE AGEEME NT WITH PFC, THE ENTIRE EXPENDITURE WAS TO BE REIMBURSED BY THE ASSESSEE. 10. WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSED T HE MATERIAL ON RECORD. IT IS SEEN THAT AS PER THE MINUTES OF THE M EETING BETWEEN THE SECRETARY, POWER WITH THE MEMBER SECRETARIES OF VARIOUS STATES, IT WAS AGREED THAT THE STATES WOULD PROVIDE FUNDS @ `1 CR ORE PER 100 MG FOR STATE-WISE ALLOCATION REGARDING ACQUISITION OF LAN D FOR POWER PROJECTS AND COALMINES. THESE FUNDS WERE TO BE PROVIDE D TO THE SPV IN THE FORM OF COMMITMENT ADVANCE. ALSO, AN AGREEMENT HAD BEEN ENTERED INTO BETWEEN PFC AND THE ASSESSEE. AS PER THIS A GREEMENT, THE ENTIRE EXPENDITURE ON DEVELOPMENT OF THE PROJEC T WAS TO BE INCURRED BY PFC OUT OF ITS OWN FUNDS, TILL IT RECEIVE D THE COMMITMENT ADVANCE FROM THE POWER UTILITIES, AS PROVIDED FOR IN SCHEDULE VIII TO THE 6 BALANCE SHEET OF THE ASSESSEE. THE COMMITMENT ADVANCE RECEIVED HAD BEEN GIVEN TO THE HOLDING COMPANY FOR INCURRING EXPENDITURE FOR THE PROJECT ON BEHALF OF THE COMPANY, FOR INVESTMENT OF THE UNUTILIZED PORTION OF THE ADVANCE. THIS UNUTILIZED PORTION OF THE ADVANCE, WAS PLACED WITH PFC AS AN INTER-CORPORATE LOAN, FOR WHI CH, THE INTEREST WAS RECEIVABLE FROM PFC AT THE MONTHLY AVERAGE SHORT TE RM DEPOSIT RATE OF PFC. THE ASSESSEE WAS TO PAY INTEREST TO PFC ON THE EXPE NDITURE INCURRED BY IT, OUT OF ITS OWN FUNDS, WHEN THE EXPEND ITURE WAS INCURRED OUT OF THE COMMITMENT ADVANCE. THE AO TREATED BOTH , THE RECEIPT, AS WELL AS THE EXPENDITURE, AS CAPITAL IN NATURE. THE I NTEREST INCOME HAD BEEN INADVERTENTLY SHOWN BY THE ASSESSEE AS INCOME FROM O THER SOURCES AND DEDUCTION WAS CLAIMED U/S 57 OF THE ACT CON CERNING THE INTEREST PAYMENT. 11. IN INDIAN OIL PANIPAT POWER CONSORTIUM LTD. (SU PRA), IT HAS BEEN HELD THAT WHERE INTEREST IS ON MONEY RECEIVED AS SHARE CAPITAL, WHICH IS TEMPORARILY PLACED IN FIXED DEPOSIT AWAITING ACQUI SITION OF LAND, THE CLAIM THAT THE INTEREST IS IN THE NATURE OF A CAPITAL RECEIPT LIABLE TO BE SET OFF AGAINST PRE-OPERATIVE EXPENSES, IS ACCEPTABLE, SI NCE THE FUNDS INFUSED IN THE ASSESSEE COMPANY BY THE JOINT VENTURE PAR TNERS ARE INEXTRICABLY LINKED WITH THE SETTING UP OF THE PLANT AND THE INTEREST EARNED CANNOT BE TREATED AS INCOME FROM OTHER SOURCES. INDIAN OIL PANIPAT POWER CONSORTIUM LTD.(SUPRA) IS SQUARELY APPLI CABLE TO THE PRESENT CASE, AS DISCUSSED. THIS IS IN CONSONANCE WITH BOK ARO STEEL LTD.(SUPRA), KARNAL COOPERATIVE SUGAR MILL(SUPRA), CIT VS. KARNATAKA POWER CORPORATION, 247 I.T.R. 268(SC) AND BONGAIG AON REFINERY AND PETRO CHEMICAL CO. LTD. VS. CIT, 251 I.T.R. 329(SC) , WHEREIN ALSO, IT HAS BEEN LAID DOWN THAT ANY RECEIPT INEXTRICABLY LINKED TO THE SETTING UP OF THE PROJECT IS CAPITAL RECEIPT NOT LIABLE TO TAX AND GOING TO REDUCE THE COST OF THE PROJECT. IN THE PRESENT CASE TOO, THE FUN DS INFUSED BY THE ASSESSEE COMPANY WERE INEXTRICABLY LINKED WITH THE SETTI NG UP OF THE 7 POWER PLANT. LIKEWISE, THE INTEREST PAYMENT WAS ALSO C APITAL EXPENDITURE, WHICH FACT WAS CONFIRMED BY THE AO, WH ILE OBSERVING THE ENTIRE INCOME OF THE ENTIRE EXPENDITURE WAS CAPITAL IN NATURE. 12. ALL THESE FACTS HAVE BEEN DULY TAKEN INTO CONSIDER ATION BY THE CIT(A) WHILE PASSING THE ORDER UNDER APPEAL. THEREFO RE, THERE IS NO MERIT IN THE GRIEVANCE RAISED BY THE DEPARTMENT BY W AY OF GROUND NOS.1 & 2. ACCORDINGLY, GROUND NOS.1 & 2 ARE REJECTE D. 13. APROPOS GROUND NO.3, THE AO OBSERVED THAT AS PER C LAUSE 13 OF SCHEDULE VIII TO THE BALANCE SHEET OF THE ASSESSEE, TH E ASSESSEE COMPANY HAD RECEIVED `1,35,81,234 ON ACCOUNT OF SALE OF RFP/RFQ (REQUEST FOR PARTICIPATION/REQUEST FOR QUALIFICATION) DOCUMENTS. IT WAS SEEN FROM THE ACCOUNT FILED BY THE ASSESSEE, THAT THE SE PAYMENTS RANGED FROM CONCERNS VARYING FROM M/S RELIANCE ENERGY GENERATION LTD. TO M/S L&T LTD. TO M/S LANCO GROUP TO M/S J.P. ASSO CIATES LTD. THE RFQS WERE SOLD TO PROSPECTIVE BIDDERS AT A COST FOR THEI R INITIAL SCREENING. IT WAS ONLY THEREAFTER THAT THE BIDDERS WH O FULFILLED THE REQUIRED CRITERIA UNDER THE RFQ BID BY PURCHASE OF R FP. THE AO NOTED THAT THE RFP/RFQ DOCUMENTS WERE DEVELOPED BY PFC, I. E., THE HOLDING COMPANY, ON BEHALF OF THE ASSESSEE COMPANY. THE ASSESSEE HAD FURTHER CLAIMED THAT THE COST OF DEVELOPMENT WAS FULL Y RECOVERED BY SALE OF THE RFP/RFQ DOCUMENTS AND THAT THE ASSESSEE HAD N OT EARNED ANY MARGIN THEREON. THE AO OBSERVED THAT THE ASSESSEE C OMPANY HAD AGREED TO PAY `5 CRORES TO PFC ON ACCOUNT OF FEE FOR PROVIDING ADVISORY AND PROFESSIONAL SERVICES RENDERED BY THEM AT THE TIME OF TRANSFER OF THE ASSESSEE COMPANY TO THE SELECTED DEVELOPER; THAT THE RELATED EXPENDITURE WAS INCURRED BY THE PFC COMPANY AND ALL OCATED TO THE SUBSIDIARY COMPANY, I.E., THE ASSESSEE, AS PART OF ADMINIST RATIVE EXPENSES; THAT AS PER THE ANNEXURE B TO THE CAPITAL WO RK IN PROGRESS, THERE WAS ALREADY A CLAIM OF `2,67,18,368 AS ADMINISTR ATIVE EXPENSES AS A SUB-HEAD, OUT OF A TOTAL CLAIM OF `374119939 UND ER THE MAIN HEAD 8 OF ADMINISTRATIVE EXPENSES; THAT THIS SHOWED THAT THE ASSE SSEE PAID LUMP SUM FEE TO PFC; THAT IN FACT, WHAT HAD BEEN TR IED TO BE SHOWN WAS THAT THE COMMITMENT ADVANCE WAS TAKEN AND BIDDING W AS DONE, THE DEVELOPER TOOK OVER AND THE CONSTRUCTION BEGAN; THAT THE HOLDING COMPANY MADE ARRANGEMENT FOR PROVIDING ADVISORY, PRO FESSIONAL AND OTHER SERVICES THEN OUT OF THE COMMON KITTY, EXPENSES W ERE TRANSFERRED BY PFC TO THE ASSESSEE COMPANY; THAT AS SUCH, THE EXPENDITURE COULD NOT BE CRYSTALLIZED; THAT A LUMP SU M PAYMENT HAVING BEEN MADE, WHICH WAS RECOVERED BY RFP/RFQ, THE ASSESSEE COULD NOT CLAIM A REPEAT EXPENDITURE OF THE SAME NATURE; AND T HAT THEREFORE, THE ENTIRE INCOME ON ACCOUNT OF SALE OF RFP/RFQ DOCUMENT S WAS TO BE TAXED AND NO DEDUCTION THEREON WAS TO BE ALLOWED UND ER DOCUMENT DEVELOPMENT EXPENDITURE. THE AO THUS MADE AN ADDITI ON OF `1,35,81,234 ON ACCOUNT OF SALE OF RFP/RFQ DOCUMENTS. 14. RELYING ON THE ASSESSMENT ORDER IN THIS REGARD, THE LD.DR HAS CONTENDED THAT THE CIT(A) ERRED IN DELETING THE ADD ITION OF `1,35,81,234 MADE BY THE AO ON ACCOUNT OF SALE OF RF P/RFQ DOCUMENTS. 15. RELYING ON THE IMPUGNED ORDER, ON THE OTHER HAN D, LD.COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE AGREEMENT OF THE ASSESSEE WITH PFC PROVIDED THAT THE ENTIRE EXPENDITURE TO BE REIMBURSED BY THE ASSESSEE. 16. IN THIS REGARD, IT IS SEEN THAT AS PER THE AGREEMEN T BETWEEN THE ASSESSEE AND PFC, IT WAS BINDING ON THE ASSESSEE TO REIMBURSE ALL EXPENSES TO PFC, BESIDES THE PAYMENT OF ` 5 CRORES ON AC COUNT OF FEES FOR PROVIDING ADVISORY AND PROFESSIONAL SERVICES TO PFC. IT WAS THE COST OF THE DEVELOPMENT OF BIDDING DOCUMENTS BY PFC, WHICH WAS RECOVERED THROUGH SALE OF THE RFP/RFQ DOCUMENTS TO PR OSPECTIVE BIDDERS. THE ASSESSEE HAS NOT BEEN SHOWN TO HAVE EARNED ANY 9 MARGIN ON THIS SALE. THE PFC INCURRED A SUM OF `1,35, 81,234 ON THE PREPARATION OF THE BID DOCUMENTS, WHICH WAS REIMBURSED BY THE ASSESSEE TO PFC, AS PER THE AGREEMENT. AS RIGHTLY OBSERVE D BY THE CIT(A), THE PAYMENT OF LUMP SUM FEE AND REIMBURSING T HE DOCUMENT DEVELOPMENT EXPENDITURE WERE TWO SEPARATE PAYMENTS AN D SO, THERE WAS NO DOUBLE DEBIT OF THE EXPENDITURE, WHICH WAS AS P ER THE TERMS OF THE AGREEMENT. 17. IN VIEW OF THE ABOVE, HERE ALSO, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE CIT(A) WHICH IS CONFIRMED AND GROUND NO .3 IS REJECTED. 18. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMEN T IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 29.04.2011. SD/- SD/- [SHAMIM YAHYA] [A.D. JAIN] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE APRIL 29, 2011. SKB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) . 5. CIT( ITAT) DEPUTY REGISTRAR, ITAT, DELHI BENCHES