M/S WESTERN MP INFRASTRUCTURE & TOLL ROADS PVT LTD, MUMBAI V. DCIT-8(3)(2), MUMBAI

ITA 3140/MUM/2019

AI Insights

The case involves Western MP Infrastructure & Toll Roads Pvt. Ltd., the appellant, contesting the disallowance of a claimed business loss related to utility shifting expenses during the assessment year 2014-15. The expenses amounting to Rs. 3,03,63,602 were written off in the books as they were not recoverable from MPRDC, as per the terms of a concession agreement. The Assessing Officer and the Commissioner of Income Tax (Appeals) both disallowed the claim, leading to the appeal before the Tribunal. The Tribunal's decision focused on whether the expenses were incurred wholly and exclusively for the business purpose, a requirement under section 37(1) of the Income Tax Act.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 123560 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 20-12-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 09-05-2019
• Other Referred Cases: ITO Vs Mohanraj 6098/Mum/2016, CIT vs Ramdas Pharmacy (1970] 77 IT 276 (Mad), Hemraj Nebhomal Sons reported in 197 CTR 329
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SHASHI BEKAL; MPRDC
• Keywords: Bad and doubtful debts; Set aside
• Section: 37; 143(3); 37(1); 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “G” MUMBAI BEFORE SHRI ABY T VARKEY (JUDICIAL MEMBER) AND SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) ITA No. 3140/MUM/2019 Assessment Year: 2014-15 Western MP Infrastructure & Toll Roads Pvt. Ltd., 135, Continental Building Dr. Annie Besant Road, Worli, Mumbai-400018. Vs. Dy. CIT Circle-8(3)(2), Aayakar Bhavan, M.K. Road, Mumbai-400020. PAN No. AAACW 7266 P Appellant Respondent Assessee by : Mr. Shashi Bekal Revenue by : Mr. Satyapal Kumar, DR Date of Hearing : 21/12/2022 Date of pronouncement : 30/12/2022 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 5 th of December 2018, passed by the Ld. Commissioner of Income-tax (Appeals)-14, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2014-15, raising following grounds: GROUND NO. 1: The learned Commissioner of Income Tax (Appeals) Mumbai (the learned CIT(A)) has erred in law and in and in circumstances of the case in confirming the assessed loss at Rs. 35,22,369 as against loss of Rs. 3,38,85,971 declared by the Appellant in the return of income filed for the assessment year under consideration. GROUND NO. 2 2.1 The learned CIT circumstances of case in disallowing utility shifting expenditure which are not recoverable from the Madhya Pradesh Road Development Corporation Limited (MPRDC'), written off in the books of accounts and claimed in return of income amounting to Rs. 3,03,63,602 in the order under section 250 of the Income Tax Act, 1961 (the Act'). 2.2 The learned CIT(A) ought to have appreciated the fact that Appellant has incurred expenditure on utility shifting in pursuant to Ar August 2007 entered with MPRDC and the aforesaid expenditure being not recoverable is written off in the books of accounts and claimed in the return of income. 2.3 The learned CIT(A) has erred in law and in facts a circumstances of case in disallowing utility shifting expenditure not recoverable from MPRDC written off and ignored the fact that such expenditure is incurred in the normal course of operations, wholly and exclusively for the purpose of business and the Act. Western MP Infrastructure & Toll Roads Pvt. The learned Commissioner of Income Tax (Appeals) Mumbai (the learned CIT(A)) has erred in law and in and in circumstances of the case in confirming the assessed loss at Rs. 35,22,369 as against loss of Rs. 3,38,85,971 declared by the Appellant in the return of income filed for the assessment year under consideration. GROUND NO. 2 The learned CIT(A) has erred in law and in facts and in circumstances of case in disallowing utility shifting expenditure which are not recoverable from the Madhya Pradesh Road Development Corporation Limited (MPRDC'), written off in the books of accounts and claimed in return of income amounting to Rs. 3,03,63,602 in the order under section 250 of the Income Tax Act, 1961 (the Act'). The learned CIT(A) ought to have appreciated the fact that Appellant has incurred expenditure on utility shifting in pursuant to Article 11 of Concession Agreement dated 30 August 2007 entered with MPRDC and the aforesaid expenditure being not recoverable is written off in the books of accounts and claimed in the return of income. The learned CIT(A) has erred in law and in facts a circumstances of case in disallowing utility shifting expenditure not recoverable from MPRDC written off and ignored the fact that such expenditure is incurred in the normal course of operations, wholly and exclusively for the purpose of business and allowable as per the provisions of Western MP Infrastructure & Toll Roads Pvt. Ltd. ITA No. 3140/M/2019 2 The learned Commissioner of Income Tax (Appeals) - 14, Mumbai (the learned CIT(A)) has erred in law and in facts and in circumstances of the case in confirming the assessed loss at Rs. 35,22,369 as against loss of Rs. 3,38,85,971 declared by the Appellant in the return of income filed for (A) has erred in law and in facts and in circumstances of case in disallowing utility shifting expenditure which are not recoverable from the Madhya Pradesh Road Development Corporation Limited (MPRDC'), written off in the books of accounts and claimed in the return of income amounting to Rs. 3,03,63,602 in the order under section 250 of the Income Tax Act, 1961 (the Act'). The learned CIT(A) ought to have appreciated the fact that Appellant has incurred expenditure on utility shifting in ticle 11 of Concession Agreement dated 30 August 2007 entered with MPRDC and the aforesaid expenditure being not recoverable is written off in the books The learned CIT(A) has erred in law and in facts and in circumstances of case in disallowing utility shifting expenditure not recoverable from MPRDC written off and ignored the fact that such expenditure is incurred in the normal course of operations, wholly and exclusively for the allowable as per the provisions of 2. In the grounds of the appeal, the assessee is aggrieved with disallowance of write off of utility shifting expenditure by the authorities. 3. Briefly stated facts of the case are that (i) The assessee com The assessee was awarded on Build, Operate and Transfer (BOT) basis four laning of Lebad 125 Kms) on section of State Highway No. 31 in the state of Madhya Pradesh ( agreement dated 30/08/2007 entered into with Madhya Pradesh Road Development Corporation Ltd ( MPRDC). (ii) For the year under consideration, the assessee company filed its original return of income on 30 claiming loss of revised on 31/03/2016 at a revised loss of ₹3,38,85,971/ (iii) The return of income filed by the assessee was selected for scrutiny and the statutory notices u tax Act, 1961 ( complied w (iv) In the assessment completed under section 143(3) of the Act, the Assessing Officer disallowed the claim of write off of the utility expenditure of (v) On further appeal, Ld. CIT(A) upheld the disallowance. Western MP Infrastructure & Toll Roads Pvt. the grounds of the appeal, the assessee is aggrieved with disallowance of write off of utility shifting expenditure by the Briefly stated facts of the case are that : assessee company was incorporated on 28/08/2007. The assessee was awarded on Build, Operate and Transfer (BOT) basis four laning of Lebad 125 Kms) on section of State Highway No. 31 in the state Madhya Pradesh (‘the project’) as per the concession reement dated 30/08/2007 entered into with Madhya Pradesh Road Development Corporation Ltd ( MPRDC). For the year under consideration, the assessee company filed its original return of income on 30 claiming loss of ₹1,44,51,975/-, which was further revised on 31/03/2016 at a revised loss of 85,971/- return of income filed by the assessee was selected for scrutiny and the statutory notices under the Income tax Act, 1961 (in short ‘the Act’) were issued and complied with. In the assessment completed under section 143(3) of the , the Assessing Officer disallowed the claim of write off of the utility expenditure of ₹ 3,03,63,602/ On further appeal, Ld. CIT(A) upheld the disallowance. Western MP Infrastructure & Toll Roads Pvt. Ltd. ITA No. 3140/M/2019 3 the grounds of the appeal, the assessee is aggrieved with disallowance of write off of utility shifting expenditure by the lower pany was incorporated on 28/08/2007. The assessee was awarded on Build, Operate and Transfer (BOT) basis four laning of Lebad- Jalora Road ( 125 Kms) on section of State Highway No. 31 in the state ‘the project’) as per the concession reement dated 30/08/2007 entered into with Madhya Pradesh Road Development Corporation Ltd ( MPRDC). For the year under consideration, the assessee company filed its original return of income on 30 th Nov. 2014 , which was further revised on 31/03/2016 at a revised loss of return of income filed by the assessee was selected nder the Income- ) were issued and In the assessment completed under section 143(3) of the , the Assessing Officer disallowed the claim of write off 3,03,63,602/-. On further appeal, Ld. CIT(A) upheld the disallowance. (vi) Aggrieved, the tax Appellate Tribunal ( grounds as reproduced above. 4. Before us the assessee 1 to 225 and also filed 4. The facts qua the the concession agreement entered into with MPRDC was required to undertake shifting of any utility including electric lines, water pipes and telephone cables etc. within or outside the site. The cost of such shifting was to be born either by the MPRDC or by the entity owning such utility, if MPRDC so directs. In earlier years , the assessee made payment to two subcontractors namely M/s Adv energy solutions and M/s Sapna traders totalling to ₹ 9,83,96,508/-from MPRDC and therefore in the profit and loss account for the year under consideration, the assessee written off ₹3,03,63,602/-. It was contended before the Assessing Officer th utility shifting was a part of contract for the expansion of the road and therefore write off is purpose of its business and therefore allowable. However according to the Assessing Officer the very fact that MPRDC reimbursed the cost, suggest that such shifting was not material leading to the conclusion that amount under consideration was not spent for the purpose of the business. The Assessing Officer Western MP Infrastructure & Toll Roads Pvt. Aggrieved, the assessee is in appeal before the tax Appellate Tribunal (in short ‘the Tribunal grounds as reproduced above. Before us the assessee has filed a paperbook containing pages 1 to 225 and also filed copy of decisions relied upon. The facts qua the issue in dispute are that as per article 11 of the concession agreement entered into with MPRDC was required to undertake shifting of any utility including electric r pipes and telephone cables etc. to appropriate location r outside the site. The cost of such shifting was to be born either by the MPRDC or by the entity owning such utility, if MPRDC so directs. In earlier years , the assessee made payment to two subcontractors namely M/s Adv energy solutions and M/s Sapna ₹12,87,60,110/-, however could only recover from MPRDC and therefore in the profit and loss account for the year under consideration, the assessee written off It was contended before the Assessing Officer th utility shifting was a part of contract for the expansion of the road and therefore write off is incurred wholly and exclusively for the purpose of its business and therefore allowable. However according to the Assessing Officer the very fact that MPRDC the cost, suggest that such shifting was not material leading to the conclusion that amount under consideration was not spent for the purpose of the business. The Assessing Officer Western MP Infrastructure & Toll Roads Pvt. Ltd. ITA No. 3140/M/2019 4 peal before the Income- Tribunal’) raising the containing pages copy of decisions relied upon. issue in dispute are that as per article 11 of the concession agreement entered into with MPRDC, the assessee was required to undertake shifting of any utility including electric to appropriate location r outside the site. The cost of such shifting was to be born either by the MPRDC or by the entity owning such utility, if MPRDC so directs. In earlier years , the assessee made payment to two subcontractors namely M/s Adv energy solutions and M/s Sapna , however could only recover ₹ from MPRDC and therefore in the profit and loss account for the year under consideration, the assessee written off It was contended before the Assessing Officer that utility shifting was a part of contract for the expansion of the road incurred wholly and exclusively for the purpose of its business and therefore allowable. However according to the Assessing Officer the very fact that MPRDC has not the cost, suggest that such shifting was not material leading to the conclusion that amount under consideration was not spent for the purpose of the business. The Assessing Officer observed that shifting of the utilities the owner of the utility or MPRDC and therefore it was not the business expenditure of the assessee. Before the Ld. CIT(A), the assessee could not justify the assessee for the expenses of sustained the disallowance made by the Assessing Officer, observing as under: “3.2 Decision: I have considered the submission made by the appellant and the reasons recorded by the AO. The first ground of appeal is general in nature and respect of the same concerned, it is seen from the terms of the agreement reproduced by the appellant that it was the responsibility of the appellant to incur the expenditure cost was to be recovered from MPRDC or the utility concerned, if so decided by MPRDC. Any cost which has been incurred by the appellant pursuant to the agreement and which could not be recovered by it can be claim the claim of business loss could be allowed, the appellant has to justify that it is actually a case of business loss and it has also to prove that the loss has crystallised during the year. It is not a simple case of w claim in the year of write off. If the bill raised by the appellant has been accepted by the other party and for some reasons the party is unable to make the payment/is not making payment, then the appellant ca Western MP Infrastructure & Toll Roads Pvt. observed that shifting of the utilities was the respons the owner of the utility or MPRDC and therefore it was not the business expenditure of the assessee. Before the Ld. CIT(A), the assessee could not justify as why the MPRDC had not reimbursed the assessee for the expenses of ₹3,03,63,602/- and therefore sustained the disallowance made by the Assessing Officer, 3.2 Decision: I have considered the submission made by the appellant and the reasons recorded by the AO. The first ground of appeal is general in nature and no separate adjudication is required in respect of the same So far as the second ground of appeal is concerned, it is seen from the terms of the agreement reproduced by the appellant that it was the responsibility of the appellant to incur the expenditure for utility shifting and subsequently that cost was to be recovered from MPRDC or the utility concerned, if so decided by MPRDC. Any cost which has been incurred by the appellant pursuant to the agreement and which could not be recovered by it can be claimed as business loss. However, before the claim of business loss could be allowed, the appellant has to justify that it is actually a case of business loss and it has also to prove that the loss has crystallised during the year. It is not a simple case of write off of bad debts which the appellant can claim in the year of write off. If the bill raised by the appellant has been accepted by the other party and for some reasons the party is unable to make the payment/is not making payment, then the appellant can write off the debt and claim deduction for Western MP Infrastructure & Toll Roads Pvt. Ltd. ITA No. 3140/M/2019 5 the responsibility of either the owner of the utility or MPRDC and therefore it was not the business expenditure of the assessee. Before the Ld. CIT(A), the s why the MPRDC had not reimbursed and therefore he sustained the disallowance made by the Assessing Officer, I have considered the submission made by the appellant and the reasons recorded by the AO. The first ground of appeal is no separate adjudication is required in So far as the second ground of appeal is concerned, it is seen from the terms of the agreement reproduced by the appellant that it was the responsibility of the appellant to for utility shifting and subsequently that cost was to be recovered from MPRDC or the utility concerned, if so decided by MPRDC. Any cost which has been incurred by the appellant pursuant to the agreement and which could not be ed as business loss. However, before the claim of business loss could be allowed, the appellant has to justify that it is actually a case of business loss and it has also to prove that the loss has crystallised during the year. It is not a rite off of bad debts which the appellant can claim in the year of write off. If the bill raised by the appellant has been accepted by the other party and for some reasons the party is unable to make the payment/is not making payment, n write off the debt and claim deduction for the same as bad debts written off in the books of account. But, if the bill itself is disputed by the other party, then in the opinion of the undersigned, the excess expenditure is to be claimed as business loss no acknowledged debt which is due from the other party. The debt is not created on raising of the bill, it is created when the bill is accepted by the other party. The appellant has brought nothing on re made payment to the extent of Rs. 3,03,63,602/ has also not established as to how the loss has crystallised during the previous year under consideration, therefore, I'm of the opinion that t rightly disallowed by the AO. 3,03,63,602/ of appeal is dismissed. 5. Before us, the 11.2 of the concession agreement, available on paperbook page 250 and submitted that shifting of utility was part of the requirement of execution of the contract and therefore expenses incurred wholly and exclusively for the purpose of the business. The counsel referred to the ledger accounts filed in respect of the contractors who executed available on page 252 to 261 of the paperbook. Further the decision of coordinate bench of Bombay tribunal in the case of ITO Vs Mohanraj 6098/Mum/2016. The relevant part of the decision is reproduced as under : Western MP Infrastructure & Toll Roads Pvt. the same as bad debts written off in the books of account. But, if the bill itself is disputed by the other party, then in the opinion of the undersigned, the excess expenditure is to be claimed as business loss. It will not be a case of bad debt because there is no acknowledged debt which is due from the other party. The debt is not created on raising of the bill, it is created when the bill is accepted by the other party. The appellant has brought nothing on record to explain as to why the other party has not made payment to the extent of Rs. 3,03,63,602/- has also not established as to how the loss has crystallised during the previous year under consideration, therefore, I'm of the opinion that the amount of Rs. 3,03,63,602/ rightly disallowed by the AO. Accordingly, disallowance of Rs. 3,03,63,602/- made by the AO is confirmed and second ground of appeal is dismissed.” us, the Ld. counsel of the assessee referred to article 11.2 of the concession agreement, available on paperbook page 250 and submitted that shifting of utility was part of the requirement of of the contract and therefore expenses incurred wholly and exclusively for the purpose of the business. The referred to the ledger accounts filed in respect of the executed the work of shifting utilities on page 252 to 261 of the paperbook. Further the decision of coordinate bench of Bombay tribunal in the case of ITO Vs Mohanraj Trading and Exchange in ITA No. The relevant part of the decision is reproduced Western MP Infrastructure & Toll Roads Pvt. Ltd. ITA No. 3140/M/2019 6 the same as bad debts written off in the books of account. But, if the bill itself is disputed by the other party, then in the opinion of the undersigned, the excess expenditure is to be claimed as because there is no acknowledged debt which is due from the other party. The debt is not created on raising of the bill, it is created when the bill is accepted by the other party. The appellant has brought cord to explain as to why the other party has not -. The appellant has also not established as to how the loss has crystallised during the previous year under consideration, therefore, I'm of he amount of Rs. 3,03,63,602/- has been Accordingly, disallowance of Rs. made by the AO is confirmed and second ground of the assessee referred to article 11.2 of the concession agreement, available on paperbook page 250 and submitted that shifting of utility was part of the requirement of of the contract and therefore expenses incurred were wholly and exclusively for the purpose of the business. The Ld. referred to the ledger accounts filed in respect of the utilities, which are on page 252 to 261 of the paperbook. Further, he relied on the decision of coordinate bench of Bombay tribunal in the case of Trading and Exchange in ITA No. The relevant part of the decision is reproduced “9. We find that the Hon'ble Madras High Court in the case CIT vs Ramdas Pharmacy (1970] 77 IT 276 (Mad) had expounded that an appellate authority cannot decide only one issue arising out of many issues and decline to go into the other issues raised before it on the ground that further issues will not arise in decided by it. It was expounded that if the appellate authority declines to consider and decide the other issues, it could only protract and delay the proceedings for the assessee has to get the decision of the appellate a the initial point set aside by approaching a higher appellate authority and thereafter again go before the appellate authority for the decision on the other issues left undecided by it earlier. It was held that this will amount to multiplication of proceedings under the Act. It was further expounded that the subordinate courts and tribunal's should as far as possible give their views on all the points raised before them so that the higher courts will have the benefit of the decision on other poi 5.1 The Ld. counsel Pradesh High Court in the case of reported in 197 CTR 329 claiming expenses under section 37 required to establish whether the expenditure was legitimate or necessary. 6. The Ld. Departmental Representative (DR) relied on the order of the Western MP Infrastructure & Toll Roads Pvt. We find that the Hon'ble Madras High Court in the case CIT vs Ramdas Pharmacy (1970] 77 IT 276 (Mad) had expounded that an appellate authority cannot decide only one issue arising out of many issues and decline to go into the other issues raised before it on the ground that further issues will not arise in view of the finding on the issue decided by it. It was expounded that if the appellate authority declines to consider and decide the other issues, it could only protract and delay the proceedings for the assessee has to get the decision of the appellate a the initial point set aside by approaching a higher appellate authority and thereafter again go before the appellate authority for the decision on the other issues left undecided by it earlier. It was held that this will amount to n of proceedings under the Act. It was further expounded that the subordinate courts and tribunal's should as far as possible give their views on all the points raised before them so that the higher courts will have the benefit of the decision on other points also, if the necessity arises. Ld. counsel also relied on the decision of Hon’ble Madhya Pradesh High Court in the case of Hemraj Nebhomal Sons reported in 197 CTR 329 to support the contention that for claiming expenses under section 37 of the Act, the required to establish whether the expenditure was legitimate or Ld. Departmental Representative (DR) on the other hand relied on the order of the lower authorities. Western MP Infrastructure & Toll Roads Pvt. Ltd. ITA No. 3140/M/2019 7 We find that the Hon'ble Madras High Court in the case of CIT vs Ramdas Pharmacy (1970] 77 IT 276 (Mad) had expounded that an appellate authority cannot decide only one issue arising out of many issues and decline to go into the other issues raised before it on the ground that further view of the finding on the issue decided by it. It was expounded that if the appellate authority declines to consider and decide the other issues, it could only protract and delay the proceedings for the assessee has to get the decision of the appellate authority on the initial point set aside by approaching a higher appellate authority and thereafter again go before the appellate authority for the decision on the other issues left undecided by it earlier. It was held that this will amount to n of proceedings under the Act. It was further expounded that the subordinate courts and tribunal's should as far as possible give their views on all the points raised before them so that the higher courts will have the benefit of nts also, if the necessity arises.” also relied on the decision of Hon’ble Madhya Hemraj Nebhomal Sons to support the contention that for e Act, the assessee is not required to establish whether the expenditure was legitimate or on the other hand 7. We have heard rival submission of the dispute and perused the relevant material on record. The issue in dispute is whether the write off the expenses in relation to shifting of the utility is allowable under section 37(1) of the wholly and exclusively fo part of the concession agreement regarding the utility expenditure is reproduced as under: “11.2 Shifting of obstructing at The Concossionaire shall, subject to Applicable Laws and with assistance of the MPRDC, u including electrie lines, water pipes and telephone cables, to an appropriate location or alignment within or outside the site if and only if such utility causes a material adverse effect on the construction, operation or m The cost of such shifting shall be borne by the MPRDC or by the entity owning such utility, if the MPRDC so directs, and in the event of iny delay in shifting thereof, the Cencessionaire shall be excused for failure to pe such failure is a direct consequence of delay on the part of the entity owning such electric lines. water pipes or telephone cables, as the case may be. 7.1 Thus according to this agreement the work of shifting of utility was to be taken material adverse effect on the carrying out of the project and the Western MP Infrastructure & Toll Roads Pvt. rd rival submission of the parties dispute and perused the relevant material on record. The issue in dispute is whether the write off the expenses in relation to shifting of the utility is allowable under section 37(1) of the wholly and exclusively for the purpose of the business. part of the concession agreement regarding the utility expenditure is reproduced as under: Shifting of obstructing at The Concossionaire shall, subject to Applicable Laws and with assistance of the MPRDC, undertake shifting of any utility including electrie lines, water pipes and telephone cables, to an appropriate location or alignment within or outside the site if and only if such utility causes a material adverse effect on the construction, operation or maintenance oF the Project lighway. The cost of such shifting shall be borne by the MPRDC or by the entity owning such utility, if the MPRDC so directs, and in the event of iny delay in shifting thereof, the Cencessionaire shall be excused for failure to perform any of its obligations hereunder if such failure is a direct consequence of delay on the part of the entity owning such electric lines. water pipes or telephone cables, as the case may be.” according to this agreement the work of shifting of utility was to be taken, if and only if such utility was causing a material adverse effect on the carrying out of the project and the Western MP Infrastructure & Toll Roads Pvt. Ltd. ITA No. 3140/M/2019 8 on the issue in dispute and perused the relevant material on record. The issue in dispute is whether the write off the expenses in relation to shifting of the utility is allowable under section 37(1) of the Act as incurred r the purpose of the business. The relevant part of the concession agreement regarding the utility expenditure The Concossionaire shall, subject to Applicable Laws and with ndertake shifting of any utility including electrie lines, water pipes and telephone cables, to an appropriate location or alignment within or outside the site if and only if such utility causes a material adverse effect on the aintenance oF the Project lighway. The cost of such shifting shall be borne by the MPRDC or by the entity owning such utility, if the MPRDC so directs, and in the event of iny delay in shifting thereof, the Cencessionaire shall be rform any of its obligations hereunder if such failure is a direct consequence of delay on the part of the entity owning such electric lines. water pipes or telephone according to this agreement the work of shifting of the if and only if such utility was causing a material adverse effect on the carrying out of the project and the cost of such shifting was to be warm by the MPRDC or by the owner of such utility if the MPRDC had so directs. 7.2 During the course of the hearing, t assessee asked to produce any correspondence with MPRDC regarding shifting of particular utilities, for which payment has been denied to the assessee by MPRDC was causing material advance effect on carrying out of the project The Ld. counsel was also asked to produce the reasons cited by the MPRDC for non-reimbursement of expenses to the extent of write off by the assessee. No such documentary evidences were produced either before the Ld. CIT(A) or before us. On perusal of the ledger accounts of subcontractors namely on page 250 to 255 of the paperbook, we find that assessee has made advance payments to the of ₹2,48,25,470/-against which been only shown. Similarly in financial year 2009 payment up to ₹3,92,91, ₹74,86,880/-. In financial year 2010 ₹2,07,75,62,612/-against which shown cumulatively. accumulated to ₹ ₹1,20,78,859/- have been shown. In this manner advance of ₹7,50,90,021/- have advances have been given to another Western MP Infrastructure & Toll Roads Pvt. cost of such shifting was to be warm by the MPRDC or by the owner of such utility if the MPRDC had so directs. ring the course of the hearing, the Ld. Counsel assessee asked to produce any correspondence with MPRDC regarding shifting of particular utilities, for which payment has been denied to the assessee by MPRDC in the list of the term utility g material advance effect on carrying out of the project was also asked to produce the reasons cited by the reimbursement of expenses to the extent of write off by the assessee. No such documentary evidences were produced her before the Ld. CIT(A) or before us. On perusal of the ledger accounts of subcontractors namely, Ave energy solutions available on page 250 to 255 of the paperbook, we find that assessee has payments to the said party in financial year 200 against which credit of ₹36,65,151/ . Similarly in financial year 2009 3,92,91,881/-were made against . In financial year 2010-11, payments are made of against which credit of ₹1,64,19, cumulatively. In financial year 2011-12, the total advances ₹08,71,68,880/-, against which credit of have been shown. In this manner advance of have been shown from said party. Similarly, advances have been given to another contractor party M/s sapana Western MP Infrastructure & Toll Roads Pvt. Ltd. ITA No. 3140/M/2019 9 cost of such shifting was to be warm by the MPRDC or by the owner Ld. Counsel of the assessee asked to produce any correspondence with MPRDC regarding shifting of particular utilities, for which payment has in the list of the term utility g material advance effect on carrying out of the project. was also asked to produce the reasons cited by the reimbursement of expenses to the extent of write off by the assessee. No such documentary evidences were produced her before the Ld. CIT(A) or before us. On perusal of the ledger Ave energy solutions available on page 250 to 255 of the paperbook, we find that assessee has party in financial year 2008-09 151/- has only . Similarly in financial year 2009-10 cumulative were made against credit of 11, payments are made of 1,64,19,098/- are only 12, the total advances , against which credit of have been shown. In this manner advance of been shown from said party. Similarly, party M/s sapana Traders and the opening of the year under consideration said advance amount was of the assessee shown a ₹9,33,96,508/-. 7.3 The amount receivable from MPRDC has been written of in the year under consideration by way of entries in the books of accounts, which are reproduced as under: 7.4 Hon’ble Madhya Pradesh High Court in the Nebhomal Sons (supra) has held as under: “10. When we apply the aforesaid requirement of section the case of assesse the criteria laid down section 37(1) for claiming other words, the expenditure incurred by the assessce is essentially and or exclusively relates to their business. Any Western MP Infrastructure & Toll Roads Pvt. Traders and the opening of the year under consideration said advance amount was of ₹5,36,70,890/-. Against these advances, the assessee shown amount received from MPRDC of The amount receivable from MPRDC has been written of in the year under consideration by way of entries in the books of accounts, which are reproduced as under: Hon’ble Madhya Pradesh High Court in the case of Hemraj Nebhomal Sons (supra) has held as under: we apply the aforesaid requirement of section the case of assessee in hand, we bodice that they have fulfilled laid down section 37(1) for claiming words, the expenditure incurred by the assessce is essentially and or exclusively relates to their business. Any Western MP Infrastructure & Toll Roads Pvt. Ltd. ITA No. 3140/M/2019 10 Traders and the opening of the year under consideration said . Against these advances, mount received from MPRDC of The amount receivable from MPRDC has been written of in the year under consideration by way of entries in the books of case of Hemraj we apply the aforesaid requirement of section 37(0) to e in hand, we bodice that they have fulfilled laid down section 37(1) for claiming deduction. In words, the expenditure incurred by the assessce is essentially and or exclusively relates to their business. Any expenditure incurred for advertisement of Bid and or for promoling its sale, then in such case, it has to be so regarded as an expenditure inc It being an admitted fact that the assessor is engeged in the business of purchase and sale of Bidi and secondly, the amount in question having been actually spent Le, incurred by the assessee for their Bidi b deduction of the amount so spent/incurred in the relevant assessment years. 11. In our opinion, once the aforementioned conditions are found satisfied then it is not proper on taxing authorities expenditure was legitimate or necessary etc. This type of inquiry is neither contemplated nor called for. In other words, in order to disallow the expenditure the inquiry has to confine to cases falling in Explanation and sub only when the Assessing Officer finds that claim so made is bogus or false of not incurred as a fact, it can be disallowed, else not.” 7.5 Respectfully, following the above ratio of the Hon’ble Hig Court, the assessee was asked to provide details of the work of utility shifting particularly which had not been reimbursed by the MPRDC and justify whether the same is incurred wholly and exclusively for the purpose of the business, however in view of t failure on the part of the assessee before the well as before us, we hold that assessee failed to establish that expenses in dispute were incurred wholly Western MP Infrastructure & Toll Roads Pvt. expenditure incurred for advertisement of Bid and or for promoling its sale, then in such case, it has to be so regarded as an expenditure incurred for business carried on by the assessee. It being an admitted fact that the assessor is engeged in the business of purchase and sale of Bidi and secondly, the amount in question having been actually spent Le, incurred by the assessee for their Bidi business, they yet entitled to claim deduction of the amount so spent/incurred in the relevant assessment years. 11. In our opinion, once the aforementioned conditions are found satisfied then it is not proper on the part of Assessing Officer i. authorities to probe on the question as to expenditure was legitimate or necessary etc. This type of inquiry is neither contemplated nor called for. In other words, in order to disallow the expenditure the inquiry has to confine to cases g in Explanation and sub-section (2B) of section 37. It is only when the Assessing Officer finds that claim so made is bogus or false of not incurred as a fact, it can be disallowed, else Respectfully, following the above ratio of the Hon’ble Hig Court, the assessee was asked to provide details of the work of utility shifting particularly which had not been reimbursed by the MPRDC and justify whether the same is incurred wholly and exclusively for the purpose of the business, however in view of t failure on the part of the assessee before the lower we hold that assessee failed to establish that expenses in dispute were incurred wholly and exclusively Western MP Infrastructure & Toll Roads Pvt. Ltd. ITA No. 3140/M/2019 11 expenditure incurred for advertisement of Bid and or for promoling its sale, then in such case, it has to be so regarded as urred for business carried on by the assessee. It being an admitted fact that the assessor is engeged in the business of purchase and sale of Bidi and secondly, the amount in question having been actually spent Le, incurred by the usiness, they yet entitled to claim deduction of the amount so spent/incurred in the relevant 11. In our opinion, once the aforementioned conditions are found the part of Assessing Officer i.e. as to whether the expenditure was legitimate or necessary etc. This type of inquiry is neither contemplated nor called for. In other words, in order to disallow the expenditure the inquiry has to confine to cases section (2B) of section 37. It is only when the Assessing Officer finds that claim so made is bogus or false of not incurred as a fact, it can be disallowed, else Respectfully, following the above ratio of the Hon’ble High Court, the assessee was asked to provide details of the work of utility shifting particularly which had not been reimbursed by the MPRDC and justify whether the same is incurred wholly and exclusively for the purpose of the business, however in view of the lower authorities as we hold that assessee failed to establish that and exclusively for the purpose of the business and therefore disallowance mad lower authorities is upheld. dismissed. 8. In the result, the appeal of the assessee is dismissed. Order pronounced under Rule 34(4) of the ITAT Rules, 1963 on 30/12/2022. Sd/- (ABY T VARKEY JUDICIAL MEMBER Mumbai; Dated: 30/12/2022 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// Western MP Infrastructure & Toll Roads Pvt. purpose of the business and therefore disallowance mad authorities is upheld. The grounds of appeal are In the result, the appeal of the assessee is dismissed. Order pronounced under Rule 34(4) of the ITAT Rules, 12/2022. Sd/- ABY T VARKEY) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Sr. Private Secretary) ITAT, Mumbai Western MP Infrastructure & Toll Roads Pvt. Ltd. ITA No. 3140/M/2019 12 purpose of the business and therefore disallowance made by the appeal are accordingly In the result, the appeal of the assessee is dismissed. Order pronounced under Rule 34(4) of the ITAT Rules, OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Sr. Private Secretary) ITAT, Mumbai