Assistant Commissioner of Income-Tax -1, Durg V. M/s Amar Builders, Durg

ITA 62/BIL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 85358 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 15-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHEETAL VERMA
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI REJENDRA, ACCOUNTANT MEMEBR ITA NOS.61 & 62/BLPR/2011 A.YS. 2006-07 & 2007-08 ASSTT. COMMISSIONER OF INCOME TAX-1, VS. M/S AM AR BUILDERS, BHILAI. NEAR JAINAM PALACE, MAHESH NAGAR, DURG. (PAN: AAJFA 0907 H) (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. SHEETAL VERMA, SR. D.R. RESPONDENT BY : NONE DATE OF HEARING : 17.12.2014 DATE OF PRONOUNCEMENT : 17.12.2014 ORDER PER H.L. KARWA, PRESIDENT THESE TWO APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE SEPARATE ORDER OF LD. CIT(A), RAIPUR, BOTH DATED 07.12.2010 RELATING TO A.YS. 2006-07 & 2007-08. 2. IN ITA NO.61/BLPR/2011, THE REVENUE HAS RAISED T HE FOLLOWING GROUNDS:- 1. WHETHER IN LAW AND ON FACTS AND CIRCUMSTANCES O F THE CASE, THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS .2,23,82,060/- MADE BY THE AO ON ACCOUNT OF PROVISION MADE BY ASSE SSEE FOR FUTURE REPAIR AND MAINTENANCE OF PWD ROADS.. 2. WHETHER IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE, THE 2 ITA NO. 61 & 62/BLPR/2011 A.YS. 2006-07 & 2007-08 CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS .52,51,094/- MADE BY THE AO ON ACCOUNT OF PROVISION MADE BY ASS ESSEE FOR FUTURE REPAIR AND MAINTENANCE OF NH, SADA & CSIDC R OADS. 3. IN ITA NO.62/BLPR/2011, THE REVENUE HAS RAISED T HE FOLLOWING GROUNDS:- 1. WHETHER IN LAW AND ON FACTS AND CIRCUMSTANCES O F THE CASE, THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS .3,72,61,187/- MADE BY THE AO ON ACCOUNT OF PROVISION MADE BY ASSE SSEE FOR FUTURE REPAIR AND MAINTENANCE OF PWD ROADS. 2. WHETHER IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS .4,08,65,785/- MADE BY THE AO ON ACCOUNT OF PROVISION MADE BY ASS ESSEE FOR FUTURE REPAIR AND MAINTENANCE OF PMGSY ROADS. 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE DERIVES INCOME FROM EXECUTION OF CIVIL CONSTRUCTION WORK MAINLY FROM CO NSTRUCTION OF ROADS. FOR THE A.Y. 2006-07 THE ASSESSEE FILED THE RETURN ON 31.10 .2006 DECLARING TOTAL INCOME AT RS.30,43,780/-. HOWEVER, THE A.O. COMPLETED THE AS SESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) ON 31.12.2006 AND TOTAL INCOME WAS ASSESSED AT RS.3,60,09,366/-. FOR THE A.Y. 200 7-08 THE ASSESSEE FILED RETURN OF INCOME ON 24.10.2007 DECLARING TOTAL INCOME AT RS.2 ,06,78,460/-. THE A.O. ASSESSED TOTAL INCOME OF THE ASSESSEE UNDER SECTION 143(3) OF THE ACT ON 25.09.2009 AT RS.9,88,05,432/-. THE A.O. OBSERVED THAT THE AS SESSEE HAS CREATED PROVISIONS IN THE BOOKS OF ACCOUNT TOWARDS FUTURE REPAIRS OF ROAD CONSTRUCTED BY HIM. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SECURED ROAD WORK CONTRACTS FROM STATE GOVERNMENT (PWD). THE ASSESSEE WAS EXECUTING SUCH C ONTRACT SINCE THE A.Y. 3 ITA NO. 61 & 62/BLPR/2011 A.YS. 2006-07 & 2007-08 2003-04. THESE CONTRACTS ARE GOVERNED BY THE ADDIT IONAL SPECIAL CONDITIONS (ASC) WHICH MANDATES THE CONTRACTOR TO CARRY OUT ALL NECE SSARY REPAIRS AND MAINTENANCE OF THE CONSTRUCTED ROADS FOR A PERIOD OF THREE YEARS. TO ENFORCE COMPLIANCE, THE CONTRACTOR IS REQUIRED TO FURNISH PERFORMANCE SECUR ITY IN THE SHAPE OF BANK GUARANTEE @ 15% OF THE CONTRACT AMOUNT FOR THE SPEC IFIED PERIOD. THE ASSESSEE HAD MADE DUE COMPLIANCE WITH THIS OBLIGATORY REQUIREMEN T. FOLLOWING THE ACCOUNTING STANDARD (AS-7), THE ASSESSEE FIRM MADE A PROVISIO N OF RS.2,23,82,060/- BEING 15% OF THE CONTRACT RECEIPTS SUBJECT TO ASC AND CLAIMED IT AS A DEDUCTION AS AN ACCRUED LIABILITY. FOR THE A.Y. 2007-08, THE ASSESSEE MADE PROVISION OF RS.3,72,61,187/- BEING 15% OF THE CONTRACT RECEIPTS SUBJECT TO ASC A ND DEBITED IT TO THE PROFIT & LOSS ACCOUNT AS DEDUCTION AS AN ACCRUED LIABILITY. THE A.O. DISALLOWED THE CLAIM STATING THAT THE PROVISIONS ARE IN THE NATURE OF CO NTINGENT LIABILITY. THE ASSESSEE HAD ALSO EXECUTED OTHER ROAD WORK CONTRACTS WITH SPECIA L AREA DEVELOPMENT AUTHORITY, NATIONAL HIGHWAY AUTHORITY AND CHHATTISGARH STATE I NDUSTRIAL DEVELOPMENT CORPORATION. LIKE IN THE CASE OF PWD AND PMGSY THE SE CONTRACTORS ARE ALSO GOVERNED BY RESPECTIVE PERFORMANCE SECURITY CLAUSES . THE ASSESSEE IS ACCORDINGLY MADE PROVISION IN THE ACCOUNT OF TOTAL AMOUNT OF RS .52,51,094/- FOR REPAIR AND MAINTENANCE OF CONSTRUCTED ROADS IN A.Y. 2006-07 AN D RS.4,08,65,785/- IN A.Y. 2007-08. THE A.O. DISALLOWED THE ABOVE CLAIMS OF T HE ASSESSEE FOR BOTH THE YEARS UNDER CONSIDERATION. 5. ON APPEAL, THE LD. CIT(A) ALLOWED THE CLAIM OF T HE ASSESSEE OBSERVING AS UNDER :- 4 ITA NO. 61 & 62/BLPR/2011 A.YS. 2006-07 & 2007-08 3.1 IN THE COURSE OF APPEAL PROCEEDINGS, THE APPEL LANT CONTENDED THAT ALL THE DISPUTED ADDITIONS RELATE TO BUSINESS OF ROAD CONTRACT WORK. PWD CONTRACTS ARE GOVERNED BY ADDITIONAL SPECIAL CO NDITIONS UNDER WHICH IT IS MANDATORY TO CARRY OUT ALL NECESSARY RE PAIRS AND MAINTENANCE OF ROADS FOR A PERIOD OF THREE YEARS AN D TO ENSURE COMPLIANCE, THE CONTRACTOR WAS REQUIRED TO FURNISH PERFORMANCE SECURITY IN THE SHAPE OF BANK GUARANTEE AT @ OF 15% OF THE CONTRACT AMOUNT FOR THE SPECIFIED PERIOD. IN RESPECT OF OTH ER CONTRACTS I.E., NATIONAL HIGHWAY DIVISION (NH), NAGAR PALIKA NIGAM (SADA), CHHATTISGARH STATE INDUSTRIAL DEVELOPMENT CORPORATI ON (SCIDC), THE CONTRACTS WERE GOVERNED BY RESPECTIVE PERFORMANCE S ECURITY CONDITIONS. IT IS FURTHER ADDED THAT IN THE CASE O F PMGPY AND CSIDC, THE APPELLANT WAS RESPONSIBLE FOR MAINTENANCE OF RO ADS FOR A PERIOD OF FIVE YEARS AS AGAINST THREE YEARS IN THE CASE OF NH AND SADA WORKS. THE APPELLANT FURTHER CONTENDED THAT IN VIEW OF THE BINDING CONDITIONS AND FOLLOWING ACCOUNTING STANDARD (A-7) ISSUED BY T HE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA AND CONFORMING TO TH E ACCOUNTING STANDARD NOTIFIED BY THE CENTRAL GOVERNMENT VIDE NO TIFICATION NO.5069 (E/A NO.9949) DATED 25.10.1996, THE APPELLANT MADE PROVISION @ 15% OF THE CONTRACT RECEIPTS TO TAKE CARE OF THE KNOWN FUTURE LIABILITY FOR REPAIRS AND MAINTENANCE OF ROADS FOR VARIOUS LENGTH S OF TIME. IN RESPECT OF DISALLOWANCE OF RS.53,32,342/-, IT WAS C ONTENDED THAT THE APPELLANT HAS NOT CLAIMED DEDUCTION OF REPAIR AND M AINTENANCE EXPENSES IN PROFIT AND LOSS A/C. THEREFORE, THE DI SALLOWANCE WAS NOT CALLED FOR. IN THIS CONNECTION, THE APPELLANT FILE D A COPY OF REPLY FURNISHED BEFORE THE AO DATED 24.12.2008, SHOWING T HE AMOUNT SPENT OUT OF PROVISION MADE EARLIER. FINALLY THE APPELLA NT RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF BH ARAT EARTH MOVERS VS. CIT 245 ITR 428 (SC) AND ON THE HONBLE ITATS ORDER IN APPELLANTS CASE FOR A.Y. 2003-04 IN ITA NO.64/NAG/ 07, DATED 05.10.2007, FOR A.YS. 2005-06 & 2004-05 ITA NO.350/ NAG/08 & ITA NO.60/NAG/09 DATED 22.01.2010. 3.2 I HAVE GONE THROUGH THE OBSERVATIONS OF THE AO AND SUBMISSIONS OF THE APPELLANT. THE ISSUE RELATING TO DISALLOWAN CE OF PROVISION IS COVERED BY THE DECISION OF THE HONBLE JURISDICTION AL BENCH OF THE ITAT IN THE APPELLANTS OWN CASE FOR THE PRECEDING ASSESSMENT YEARS. UNDER THESE CIRCUMSTANCES, THE ACTION OF AO IS NOT JUSTIFIED HENCE THE DISALLOWANCES ARE UNCALLED FOR AND ACCORDINGLY DELE TED. 6. AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATIV E AND PERUSING THE MATERIAL 5 ITA NO. 61 & 62/BLPR/2011 A.YS. 2006-07 & 2007-08 AVAILABLE ON RECORD, WE DO NOT FIND ANY INFIRMITY I N THE FINDINGS OF THE LD. CIT(A) ON THE ISSUES INVOLVED IN THESE CASES. THE LD. CIT (A) HAS CORRECTLY OBSERVED THAT THE ISSUES ARE SQUARELY COVERED IN FAVOUR OF THE AS SESSEE AND AGAINST THE REVENUE BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FO R A.Y. 2003-04, 2004-05 & 2005- 06 REFERRED TO BY THE LD. CIT(A) IN PARAGRAPH NO. 3 .1 OF THE IMPUGNED ORDER. AT THE TIME OF HARING OF THE APPEALS, SMT. SHEETAL VERMA, LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROVERT THE FINDINGS GIVEN BY THE LD. CIT(A). THEREFORE, WE HAVE NO HESITATION IN UPHOLDING THE ORDER OF LD. CIT(A) ON THESE ISSUES. RESULTANTLY, BOTH THE APPEALS OF THE REVENUE DESERVE TO BE DISMISSED. 7. IN THE RESULT, APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17.12.2014. SD/- SD/- (RAJENDRA) (H.L. KARWA) ACCOUNTANT MEMBER PRESIDENT RAIPUR, DATED: 17.12.2014 PBN/* COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. D.R. ITAT, RAIPUR BENCH, RAIPUR 6. GUARD FILE //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, RAIPUR