TN (DK) Express Ways Limited, Hyderabad, Hyderabad V. ACIT, Circle-2(2), Hyderabad, Hyderabad

ITA 557/HYD/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4695 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-10-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 27-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D J P ANAND
• Assessee Lawyers: P MURALI MOHANA RAO
• Keywords: Revised return
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 557 /HYD/201 7 ASSESSMENT YEAR: 20 1 2 - 1 3 TN(DK) EXPRESS WAYS LTD., HYDERABAD. PAN AACCT 5634J VS. ASST. COMMISSIONER OF INCOME - TAX , CIRCLE 2(2), HYDERABAD. ( APPELLANT ) (RESPONDENT) ASSESSEE BY : SHRI P. MURALI MOHANA RAO REVENUE BY : S HRI D.J.P. ANAND DATE OF HEARING : 1 6 / 1 0/2018 DATE OF PRONOUNCEMENT : 26 / 10 / 201 8 O R D E R PER S . RIFAUR RAHMAN , A .M. : T H IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) 2 , HYDERABAD DATED 1 7 /11/201 6 FOR AY 20 1 2 - 1 3 . 2. BRIEFLY THE FACTS OF THE CASE ARE, THE ASSESSEE COMPANY, ENGAGED IN THE BUSINESS OF EXECUTING CIVIL CONTRACTS, FILED I T S RETURN OF INCOME FOR AY 201 2 - 1 3 ON 29 / 09 /201 2 DECLARING TOTAL LOSS OF RS. 68,57,61 ,784/ - . LATER ON, THE ASSESSEE FILED TWO REVISED RETURNS ON 30/03/2013 AND 11/10/2013 DECLARING TOTAL LOSS OF RS. 68,58,81,648/ - AND RS. 68,55,44,263/ - . SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICES U/S 143(2) AND 142(1) OF THE INCOME - TAX AC T, 1961 (IN SHORT THE ACT) WERE ISSUED TO THE ASSESSEE. IN RESPONSE TO THE SAID NOTICES, THE AR OF THE ASSESSEE FAILED THE REQUIRED INFORMATION AS CALLED FOR. 2 ITA NO. 557 /HYD/1 7 TN(DK) EXPPRESS WAYS LTD., HYD. 2.1 ON PERUSAL OF SCHEDULE 1 (OPERATING EXPENSES), SCHEDULES FORMING PART OF PROFIT & LOSS AC COUNT, THE AO NOTICED THAT AN AMOUNT OF RS. 5,90,50,000/ - WAS DEBITED TOWARDS PERIODIC MAINTENANCE. WHEN THE AO ASKED TO FURNISH THE DETAILS OF PERIODIC MAINTENANCE EXPENSES DEBITED TO P&L ACCOUNT ALONG WITH LEGER ACCOUNT COPIES, THE ASSESSEE VIDE ITS LETT ER DATED 03/02/2015 STATED AS UNDER: AS PER CONCESSIONAIRE AGREEMENT WITH NHAI, TNDK HAS TO DO MAJOR MAINTENANCE WORK ONCE IN EVERY FIVE YEARS. AT THE END PERIOD OF 5 YEARS, TNDK WILL CARRY OUT MAJOR MAINTENANCE WORK BY ITSELF OR THROUGH OUTSIDE CONTRACTO R. IN FY 2010 - 11, NO PERIODIC MAINTENANCE WORK WAS DONE BY TNDK. BUT, IT HAS CREATED PROVISION FOR EXPENDITURE OF RS. 5,90,50,000/ - . IN SUPPORT OF ITS CLAIM, THE ASSESSEE PLACED RELIANCE ON THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF CALCUTTA CO. LTD., VS. CIT [1959] 37 ITR 1 AND IN THE CASE OF CIT VS. BURHWAL SUGAR MILLS CO. LTD., [1971] 82 ITR 784. 2.2 THE AO REJECTED THE ASSESSEES SUBMISSIONS AND CONTENTIONS FOR THE FOLLOWING REASONS: I) THE ASSES SEE COMPANY HAS ONLY CREATED A PROVISION AND HAS NOT INCURRED ANY EXPENDITURE ON MAINTENANCE WORK DURING THE YEAR UNDER CONSIDERATION. II) PROVISION MADE FOR PERIODIC MAINTENANCE IS NOT ALLOWABLE AS THE ASSESSEE HAS NOT INCURRED THE SAME AND IT IS MERELY A FUTURE LIABILITY. FURTHER, FUTURE LIABILITY/AMOUNT OF EXPENDITURE CANNOT BE DETERMINED WITH CERTAINTY DURING THE YEAR UNDER CONSIDERATION AND AT BEST CAN ONLY BE ESTIMATED. III) FURTHER THE CASE LAW RELIED UPON BY THE ASSESSEE WAS CONSIDERED AND FOUND TO BE NOT APPLICABLE FOR THE FACTS OF THE CASE. IN VIEW OF THE ABOVE REASONS, THE AO DISALLOWED THE PROVISION MADE BY THE ASSESSEE FOR PERIOD MAINTENANCE OF RS. 5,90,50,000/ - DEBITED TO THE PROFIT AND LOSS ACCOUNT. 3 ITA NO. 557 /HYD/1 7 TN(DK) EXPPRESS WAYS LTD., HYD. 2.3 THE AO ALSO DISALLOWED AN AMOUNT O F RS. 2,53,224/ - , U/S 36(1)(VA) R.W.S. 2(24(X), WHICH WAS PAID BY THE ASSESSEE TOWARDS EMPLOYEE CONTRIBUTION OF PF ON THE GROUND THAT THE SAME WAS PAID BELATEDLY I.E. AFTER THE DUE DATE PRESCRIBED IN THE PF ACT. 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), WHO CONFIRMED THE ORDER OF AO OBSERVING THAT DESPITE SUFFICIENT OPPORTUNITIES PROVIDED, NEITHER THE ASSESSEE NOR AR FURNISHED ANY EVIDENCE DURING APPELLATE PROCEEDING ALSO RE BUTTING THE CONCLUSIONS DRAWN BY THE AO. 4. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE DISALLOWANCE OF PROVISION FOR PERIODIC MAINTENANCE OF RS. 5,93,03,224/ - AND II) DISALLOWANCE OF RS. 2,53,224/ - PERTAINING TO EMP LOYEES CONTRIBUTION OF PF & E SI. 5. BEFORE US, LD. AR OF THE ASSESSEE SUBMITTED THAT AS PER THE CONTRACT WITH NHAI THE ASSESSEE IS UNDER OBLIGATION TO CARRY OUT REPAIRS SUCH AS RESURFACING OF PAVEMENTS, REPAIRS TO STRUCTURES, REPAIRS AND REFURBISHMENT OF TOLLING SYSTEM AND HARDWARE AND OTHER EQUIPMENT. HE SUBMITTED THAT FOR EVERY 5 YEARS, THE ASSESSEE WILL CARRY OUT MAJOR MAINTENANCE WORK BY ITSELF OR THROUGH OUTSIDE CONTRACTOR FOR WHICH HUGE EXPENDITURE IS REQUIRED TO BE INCURRED. HE SUBMITTED THAT THOUG H THE EXPENDITURE MAY BE INCURRED SUBSEQUENTLY, THE WEAR AND TEAR IS THERE THROUGHOUT THE PERIOD AND THEREFORE THE ASSESSEE HAD CREATED A PROVISION FOR MEETING THE EXPENDITURE ON PROPORTIONATE BASIS AS PER THE ACCRUAL SYSTEM OF ACCOUNTING. HE SUBMITTED THA T IN THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE CREATED A PROVISION OF RS.5,93,03,224 AND THE ASSESSING OFFICER FAILED TO APPRECIATE THAT SUBMISSION OF THE ASSESSEE AND HELD THAT SINCE NO EXPENDITURE WAS INCURRED DURING THE ASSESSMENT YEAR UNDER CONSIDERATION SUCH PROVISION CANNOT BE ALLOWED. HE RELIED ON THE FOLLOWING CASES: 4 ITA NO. 557 /HYD/1 7 TN(DK) EXPPRESS WAYS LTD., HYD. 1. ASHOK BUILDCON LTD., 61 TAXMAN 330 2. OM METALS & MINERAL, 60 TAXMAN 448 6. LD. DR, ON OTHER HAND, RELIED ON THE ORDERS OF REVENUE AUTHORITIES. 7. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE PROVISION CREATED BY THE ASSESSEE WAS DISALLOWED BY THE AO ON THE GROUND THAT NO EXPENDITURE WAS INCURRED DURING THE YEAR UNDER CONSIDERATION, THEREFORE, SUCH PROVISION CANNOT BE ALLO WED. IN THE CASE OF ASHOK BUILDCON LTD. (SUPRA), THE PUNE BENCH OF ITAT HELD THAT IT IS NOT IN DISPUTE THAT THE ASSESSEE IS EXECUTING FIXED PRICE CONTRACT WHICH MEANS THAT THE CONTRACTOR HAS AGREED TO A FIXED CONTRACT PRICE OR RATE IN SOME CASES SUBJECT T O COST ESCALATION PRICES. AS PER AS - 7, THE ASSESSEE IS ENTITLED TO MAKE PROVISION FOR FORESEEABLE LOSSES. IN THE CASE OF OM METALS & MINERALS (P) LTD. (SUPRA), THE HONBLE HIGH COURT OF RAJASTHAN UPHELD THE FINDINGS OF THE TRIBUNAL THAT ASSESSEE MADE PRO VISION OF SUPPLIES FOR POSSIBLE LOSS DUE TO DEDUCTION MADE BY GOVT FOR NOT KEEPING SUPPLIES TO SATISFACTION OF DEPARTMENT AND FURTHER ENTIRE AMOUNT WAS INCLUDED BY THE ASSESSEE IN TOTAL RECEIPTS AND ONCE ENTIRE RECEIPTS HAD BEEN SHOWN, EXPENDITURE OUGHT TO HAVE BEEN ALLOWED. 7.1 IN VIEW OF THE RATIOS LAID DOWN AS ABOVE, WE ARE IN AGREEMENT WITH THE ASSESSEE THAT IN THE MERCANTILE ACCOUNTING SYSTEM THE EXPENDITURE TO BE ABSORBED ON PERIOD IC BASIS. IN THE GIVEN CASE, THE EXPENDITURE TO BE INCURRED AFTER 5 YEARS AND ASSESSEE CANNOT CHARGE TO P&L ACCOUNT WHOLE 5 YEARS EXPENDITURE ON YEAR 5. RATHER, IT HAS TO CHARGE TO P&L A/C EVERY YEAR PROPORTIONATE TO THE YEAR OF LIABILITY. THEREFORE, WE SE T ASIDE THE ORDER OF CIT(A) AND ALLOW THE PROVISION MADE BY THE A SSESSEE TOWARDS PERIODIC MAINTENANCE. 8. AS REGARDS THE DISALLOWANCE OF EMPLOYEES CONTRIBUTION OF PF & ESI, T HE HONBLE DELHI HIGH COURT IN CIT VS. AIMIL LTD. & ORS. [(2010) 5 ITA NO. 557 /HYD/1 7 TN(DK) EXPPRESS WAYS LTD., HYD. 321 ITR 508 (DEL)] HA S HELD THAT IF THE EMPLOYEES SHARE OF CONTRIBUTION IS PAID BEFORE THE DUE DATE OF FILING THE RETURN U/S 139(1) OF THE INCOME - TAX ACT, 1961 THEN NO DISALLOWANCE CAN BE MADE. THEREFORE, WE DELETE THE DISALLOWANCE MADE BY THE AO U/S 36(1)(VA) RWS 2(24)(X) O F THE ACT. THIS IS ALSO THE CONSISTENT VIEW OF THE HYDERABAD BENCHES. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 26 TH OCTOBER , 2018 . SD/ - SD/ - ( P. MADHAVI DEVI ) (S . RIFAUR RAHMAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 26 TH OCTOBER, 2018 KV C OPY TO: - 1) TN(DK) EXPRESS WAYS LTD., C/O P. MURALI & CO., CAS, 6 - 3 - 655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 82 2) AC IT, CIRCLE 2(2), HYDERABAD. 3) CIT(A) 2, HYDERABAD. 4) PR. CIT - 2 , HYD. 5 ) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. 6 ) GUARD FILE