Assistnat Commissioner of Income-tax 2(1), RAIPUR (CG) V. Landmark Infrastructure Projects, Dhamtari(C.G)

ITA 60/BIL/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2436 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 23-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P PHATAK
• Assessee Lawyers: S S RAO

Judgement Text

, RA IPUR IN THE INCOME TA X APPELL AT E TRIBUNA L, RA IPUR BEFORE S/SHRI MUKUL SHRA WA T (JM) SHAMIM YAHYA (AM) , , ./ I.T.A. NO. 6 0 / BLPR/2012 ( / ASSESSMENT YEAR :2009 - 2010 ) ASST COMMISSIONER OF INCOME TAX 2(1), CENTRAL REVENUE BUILDING, CIVIL LINES,RAIPUR. / VS. LANDMARK INFRASTRUCTURE PROJECTS NEAR GOVT. HIGHER SECONDARY SCHOOL, VINDHYA WA SINI W ARD, DHAMTARI C.G. ./ ./ PAN/GIR NO. : ADFL 014 H ( / AP PELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SH. O..P.PHATAK , DCIT / RESPONDENT BY : SH . S.S.RAO / DATE OF HEARING : 09 - 02 - 2016 / DATE OF PRONOUNCEMENT : 12 - 02 - 2016 / O R D E R PER MUKUL SHRAWAT, JM THIS IS AN APPEAL FILED BY THE REVENUE EMANATING FROM AN ORDER OF THE LD CIT(A), RAIPUR DATED.30.3.2012 FOR THE ASSESSMENT YEAR 2009 - 2010 . 2. THE SOLITARY GROUND RAISED BY THE REVENUE READS AS UNDER W HETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF R S.64,90,062/ MADE BY THE AO BY DISALLOWING PROVISION MADE UNDER THE HEAD PERFORMANCE GUARANTEE I THE P&L ACCOUNT FOR ROAD REPAIRS. 3. FACTS IN BRIEF A S EMERGED FRO M THE CORRESPONDING ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S.143(3) OF THE I.T.ACT, 1961 DATED 23.12.201 WERE THAT THE 2 I.T.A. NO. 6 0 / BLPR/2012 ASSESSMENT YEAR :2009 - 2010 ASSESSEE F IRM IS IN ROAD CONSTRUCTION BUSINESS. T HE AO HAS MENTIONED THAT RO AD CONTRACT WORKS WERE EXECUTED BY THE ASSESSEE ON SUB - CONTRACT BASIS . ON EXAMINATION OF ACCOUNTS, IT WAS FURTHER OBSERVED BY THE AO THAT THE ASSESSEE HAD CLAIMED E XPENDITURE OF RS.64,90,062/ UNDER THE H EAD WARRANTY REPAIR EXPENSES. THE EXPLANATION OF THE ASSESSEE WAS THAT IN ROAD CONSTRUCTIO N CONTRACT, AS PER THE TERMS AND CONDITION, THE CONTRACTOR IS RESPONSIBLE FOR PERFORMANCE OF THE WORK FOR A PERIOD OF THREE YEARS. THE RELEVANT C LAUSE S OF THE SAID AGREEMENT WERE REFERRED BEF ORE THE ASSESSING OFFICER. T HE AO WAS NOT CONVINCED AND HAVE NOTICED THAT UNDER THE SAID ACCOUNT OF WARRANT REPAIR EXPENSES THE TOTAL AMOUNT DEBITED WAS RS.74,83,409/ - . O UT OF T HIS , TH E FUNDS UTILIZED WERE OF RS.9,93,347/ - AND THE BALANCE AMOUNT OF RS.64,90,062/ - WAS CLAIMED. A CCORDING TO THE AO, OUT OF TOTAL PROVISION MADE, THE ASSESSEE WAS REQUIRED TO UTILIZE ABOUT 13.27%, HENCE, THE PROVISION MADE WAS EXCESSIVE AND REMAINED UNUTILIZ ED.. A NOTHER OBJECTION HAS ALSO BEEN RAISED THAT THE ASSESSEE HAD CARRIED OUT THE ROAD CONSTRUCTION IN THE CAPACITY OF SUB - CONTRACTOR OF M/S. SPECIAL PROJECTS, AND WAS NOT THE MAIN CONTRACTOR. O N THE BASIS OF SAID REASON, THE IMPUGNED CLAIM WAS DISALLO WED. BEING AGGRIEVED, THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 3.1 THE LD CITA) HAS EXAMINED THE FACTS OF THE CASE AND HELD AS UNDER: IN THE COURSE OF A PPEAL PROCEEDINGS BEF ORE ME, THE APPELLANT CONTENDED THAT HE IS EXEC UTING ROAD CONTRACT WORKS OBTAINED THROUGH M/ S SPECIAL PROJECT, THE MAIN CONTRACTOR AND AS PER TERMS OF CONTRACT, THE CONTRACTOR IS RESPONSIBLE FOR PERF ORMANCE OF R OADS FO R 3 YEARS AND THIS CONDITION EQUALLY IS APPLICABLE TO THE SUB - CONTRACTOR AND HE IS RE SPONSIBLE FO R PERFORMANCE OF QUALITY AND WORKING OF THE ROADS. THE APPELLANT EMPLOYS MERCANTILE SYSTEM OF ACCOUNTING. IT WAS, THEREFORE, CONTENDED THAT THE LIABILITY TO MAINTAIN THE ROADS FOR 3 YEAR HAS ACCRUED WITH THE SIGNING OF THE CONTRACT AGREEMENT AN D HE CANNOT CLAIM THE SAME UNLESS SUITABLE PROVISION IS MADE IN REGARD THERETO. SINCE THE LIABILITY HAS ACCRUED WITH SIGNING OF T HE AGREEMENT ACCEPTING ALL THE TERMS AND CONDITIONS INCLUDING 3 I.T.A. NO. 6 0 / BLPR/2012 ASSESSMENT YEAR :2009 - 2010 THE POST MAINTENANCE OF THE ROADS, THE LIABILITY HAS ACCRUED AND ONLY QUANTIFICATION IS DEF ERRED. THE APPELLANT FURTHER CONTENDED THAT THE ISSUE OF ADMISSIBILITY OF PERF ORMANCE WARRANTY HAS ATTAINED FINALITY AS PER ORDER OF T HE HON'BLE JURISDICTIONAL APPELLATE TRIBUNAL IN THE CASE OF SEWA SINGH OBEROI & CO IN IT APPEAL NO.L09/NAG/2006 AND THE SAME WAS FOLLOWED IN SUBSEQUENT ASSESSMENT YEARS AND IN OTHER CASES. COPY OF THE APPELLATE ORDER WAS ALSO FILED. I HAVE GONE THROUGH THE OBSERVATIONS OF AO AND SUBMISSIONS OF THE APPELLANT . THE .UNDISPUTED FACTS OF THIS CASE ARE THA T THE APPELLANT IS A ROAD CONSTRUCTION CONTRACTOR. HE HAD ENTERED INTO THE AGREEMENT WITH THE MAIN CONTRACTOR TO THE EFFECT THAT ALL TERMS AND CONDITIONS APPLICABLE TO THE MAIN CONTRACTOR AND THE PW D DEPARTMENT ARE APPLICABLE TO HIM. ACCORDINGLY, THE APPEL LANT WAS RESPONSIBLE FOR POST PERFORMANCE OF THE ROAD AS PER THE GUARANTEE CLAUSE. THIS LIABILITY STANDS ACCRUED WITH THE SIGNING OF T HE AGREEMENT. I T IS ONLY THE QUANTIFIC ATION OF T HE EXPENDITURE WH ICH IS DEF ERRED. AFTER CONSIDERING FA CTS AND CIRCUMST ANCES OF THE CASE AND THE BINDING ORDER OF THE HONBLE JURISDICTIONAL TRIBUN AL REFERRED SUPRA, THE CLAIM OF THE APPELLANT DESERVES TO BE D ALLOWED \ . THEREFORE, THE AO IS DIRECTED TO ALLOW THE CLAIM. A C CORDINGLY, THE APPEAL IS ALLOWE D ON THIS GROUND.` 4. WI TH THIS BRIEF FACTUAL BACKGROUND , WE HAVE HEARD BOTH THE SIDES. A T THE OUTSET, WE HAVE BEEN INFORMED THAT ON SIMILAR FACTS, THIS VERY ISSUE HAD GONE UPTO THE STAGE OF HONBLE CHATTISHGARH HIGH COURT AT (BILASPUR) AND VIDE ORDER DATED 12.11.2013 IN A GRO UP OF CASES, IT WAS , INTER ALIA, HELD AS UNDER: 3. UNDER THE TERMS OF THE CONTRACT AGREEMENT, THE ASSESSEES WERE RESPONSIBLE FO R PERFORMANCE OF THE WORK CARRIED OUT BY THEM FOR A PERIOD OF TH REE YEARS FOR WHICH THEY WERE SUPPOSED TO GIVE PERFORMANCE SECUR ITY AND THEY WERE REQUIRED TO CARRY OUT ALL NECESSARY REPAIRS WITHIN 15 DAYS OF THE RECEIPT OF THE COMMUNICATION FROM THE EXECUTIVE ENGINEER/SUB DIVISIONAL OFFICER, FAILING WHICH REPAIRS WERE TO BE CARRIED OUT BY THE DEPARTMENT AND THE COST WAS TO BE RECOV ERED FROM THE BANK GUARANTEES GIVEN BY THE ASSESSES. 4 TO 9. 10. THESE PARTIES WERE ADMITTED ON DIFFERENT DATES AND THE QUESTIONS WERE DIFFERENTLY FRA MED. H OWEVER, THE COUNSEL FOR THE PARTIES AGREE THAT THE BASIC QUESTION INVOLVED IN ALL THE AP PEALS IS ONE WHICH WAS MENTIONED IN THE OPENING PARAGRAPH. 4 I.T.A. NO. 6 0 / BLPR/2012 ASSESSMENT YEAR :2009 - 2010 11. IT IS NOT DISPUTED BETWEEN THE PARTIES THAT IN RESPECT OF AY 2003 - 04 AN APPEAL IN CASE OF M/ S. SEWA SINGH OBERAI & COMPANY WAS FILED BEFORE THIS COURT. HOWEVER, IT WAS DISMISSED ON THE GROUND OF LIMITATION. IN THE CASE OF M/ S KULKARNI & SAHU ASSOCIATES NO APPEAL WAS FILED AGAINST THE ORDER OF THE TRIBUNAL IN RESPECT OF AY 2003 - 04. 12. IN THE AF ORESAID TWO CASES THAT A RE BASIS FOR DECIDING THE CASES UNDER APPEAL, THE TRIBUNAL HAD TAKEN INTO CONSIDERATION THE PAST EXPENSES MADE BY THE ASSESSEES AND ON THE BASIS OF THOSE EXPENSES, IT CAME TO THE CONCLUSION THAT THESE ESTIMATES WERE CORRECT ESTIMATES OF THE PROBABLE LIABIL ITIES. IT IS FOR THIS REASON, THE LIABILITIES WERE HELD TO BE ASCERTAINED WITH REASONABLE CERTAINTY AND WAS HELD TO BE CAPABLE OF BEING THE LIABILITY AT PRESENT. 12. THE SUPREME COURT IN THE CASE OF M /S ROTORK CONTROLS INDIA (P ) LTD VS COMMISSIONER OF I NCO ME TAX, CHENNAI (34 ITR 62), OBSERVED TH AT: '12....FOR A LIABILITY TO QUALIFY FOR RECOGNITION THERE MUST BE NOT ONLY PRESENT OBLIGATION BUT I ALSO THE PROBABILITY OF AN OUTFLOW OF RESOURCES TO SETTLE THAT OBLIGATION 13. IT IS A COMMON KNOWLEDGE THAT THE ROADS GETS DETERIORATED WITH THE PASSAGE OF TIME AND REPAIRS AND MAINTENANCE IS REQUIRED. THE TRIBUNAL HAS HELD THAT THE LIABILITY FOR MAINTENANCE AND REPAIRS OF THE ROAD IS ASCERTAINED WITH REASONABLE CERTAINTY AND WAS A LIABILITY IN PRESENT TIME. THERE W AS NO DIFFERENCE IN THE PRECEDING YEARS. IN VIEW OF THIS, THE ORDER OF THE TRIBUNAL CANNOT BE FAULTED. 5. HENCE, IT IS VEHEMENTLY PLEADED THAT SINCE THIS VERY ISSUE NOW STOOD COVERED BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT, THEREFORE, THE CLA IM DESERVES TO BE ALLOWED. A NOTHER FACT HAS ALSO BEEN MENTIONED THAT IN TERMS OF A UDIT REPORT OF M /S. SPECIAL PROJECTS, NO SUCH CLAIM WAS EVER MADE FOR THE YEAR UNDER CONSIDERATION.. I T IS PLEADED BEFORE US THAT THE IMPUGNED DISALLOWANCE WAS NOT EVEN MAD E SOLELY ON THE SAID REASONING. HOWEVER IT IS STATED THAT THE EVIDENCES HAVE CLEARLY DEMONSTRATED THAT THE LIABILITY WAS ENTRUSTED UPON THE ASSESSEE WHICH WAS ALSO F ULF ILLED BY THE ASSESSEE. IN THE ABSENCE OF ANY CONTRARY DECISION OR MATERIAL FROM THE SI DE OF THE REVENUE, WE HEREBY APPROVE THE FI NDINGS OF LD CIT(A) BY FOLLOWING THE DECISION OF H ONBLE 5 I.T.A. NO. 6 0 / BLPR/2012 ASSESSMENT YEAR :2009 - 2010 JURISDICTIONAL HIGH COURT AS CITED SUPRA . W E , ACCORDINGLY, REJECT THE GROUND TAKEN BY THE REVENUE. 6. IN THE RESULT, APPEAL FI LED BY THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 /02/2016 . SD/ - SD/ - ( , ) ( , ) SHAMIM Y AHY A , ACCOUNT ANT MEMBER MUKUL SHRA WA T , JUDICIAL M EM BER RAIPUR , DATED 12 / 02/2016 . . ./ PARIDA , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT : ASST COMMISSIONER OF INCOME TAX 2(1), CENTRAL REVENUE BUILDING, CIVIL LINES,RAIPUR. 2. THE RESPONDENT : LANDMARK INFRASTRUCTURE PROJECTS NEAR GOVT. HIGHER SECONDARY SCHOOL, VINDHYA W ASINI W ARD, DHAMTARI C.G. 3. ( ) / THE CIT(A) - RAIPUR 4. / CIT , RAIPUR 5. , , / DR, ITAT, RAIPUR 6. / GUARD FILE. / BY ORDER, //TRUE COPY// SR. PS, ITAT, CAMP: RAIPUR