JORABAT SHILLONG EXPRESSWAY LTD, MUMBAI V. ITO 14(2)(1), MUMBAI

ITA 6695/MUM/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7255 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2012-2013
• Appeal Filed On: 23-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV GUBGOTRA
• Assessee Lawyers: NITI AGARWAL
• Keywords: Business income
• Section: 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER I.T.A. NO.6695/MUM/2017 (ASSESSMENT YEAR: 2012-13) JORABAT SHILLONG EXPRESSWAY LTD., THE IL&FS FINANCIAL CENTER, PLOT NO. C- 22, G BLOCK, BANDRA-KURLA COMPLEX, BANDRA (E), MUMBAI-400051 PAN : AACCJ3827H VS. ITO 14(2)(1) 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 APPELLANT RESPONDENT APPELLANT BY : MS. NITI AGARWAL (AR) RESPONDENT BY : SHRI RAJEEV GUBGOTRA (DR) DATE OF HEARING : 08.07.2019 DATE OF PRONOUNCEMEN T : 24.07.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. CIT(A)-22, MUMBAI DATED 03.08.2017 FOR ASSESSMENT YEAR 2012-13 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LEA RNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THAT T HE SUM OF RS. 72,73,294/- BE TAXED UNDER THE HEAD INCOME FROM OTH ER SOURCES. THE APPELLANT PRAYS THAT THE CONCLUSION REACHED BY THE LEARNED COMMR. OF INCOME TAX (APPEALS) THAT THE SUM OF RS.72,73,294/- IS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. I.T.A. NO.6695/MUM/2017- JORABAT SHILLONG EXPRESSWAY LTD. 2 2. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE APP ELLANT PRAYS THAT THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER AND CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AMOUNT ING TO RS. 72,73,294/- UNDER THE HEAD INCOME FROM OTHER SOURCE S MAY BE DELETED. 3. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE APP ELLANT PRAYS THAT THE SUM OF RS. 72,73,294/- MAY BE TREATED AS INCOME EARNED FROM BUSINESS AND PROFESSION AND MAY BE REDUCED FROM THE TOTAL VALUE OF THE CAPITAL WORK IN PROGRESS AND THE SAID AMOUNT IS NOT CHARGEABLE TO T AX UNDER THE HEAD INCOME FROM OTHER SOURCES. 4. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LEA RNED COMMR. OF INCOME TAX (APPEALS) HAS ERRED IN CONCLUDING THAT THE APPE LLANT IS NOT ENTITLED TO CLAIM THE DEDUCTION OF THE SUM OF RS. 1,14,40,9671- , BEING THE INTEREST PAID AGAINST THE INTEREST INCOME. 5. ON THE FACTS AND CIRCUMSTANCES THE APPELLANT PRA YS THAT THE SUM OF RS. 1,14,40,967/- BEING THE INTEREST PAYMENT MAY BE ALL OWED AS DEDUCTION AGAINST THE INTEREST OF RS. 72,73,294/- TREATED AS THE INCOME CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. 6. WITHOUT PREJUDICE TO GROUND 1 TO 5 THE APPELLANT PRAYS THAT IF THE SUM OF RS. 72,73,294/- IS TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES AND IF DEDUCTION OF INTEREST PAYMENT IS NOT ALLOWED TO BE SET OFF AGAINST THE SAID INCOME THEN THE SUM OF RS. 1,14,40,967/- MAY BE ADD ED TO THE CAPITAL WORK IN PROGRESS AS THE APPELLANT HAS REDUCED THE SAID AMOU NT WHILE COMPUTING THE CAPITAL WORK IN PROGRESS. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE A PPELLANT PRAYS THAT THE LEARNED COMMR. OF INCOME TAX (APPEALS) HAS ERRED IN ALLOWING THE DEDUCTION OF RS. 3,38,025/- U/S. 37(1) AS AGAINST T HE CLAIM OF THE APPELLANT OF RS. 10,10,740/-. THE APPELLANT PRAYS THAT THE APPEL LANT BE GRANTED DEDUCTION OF RS. 6,72,715/- US. 37(1). 8. WITHOUT PREJUDICE TO GROUND NO.7 IF THE CLAIM OF DEDUCTION OF RS. 6,72,715/- IS NOT ACCEPTED THEN THE SAID SUM OF RES . 6,72,715/- BE ADDED TO CAPITAL WORK IN PROGRESS. 9. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE A PPELLANT DENIES THE LIABILITY FOR PAYMENT OF INTEREST U/S. 234D AND PRAYS THAT TH E INTEREST LEVIED BY THE LEARNED ASSESSING OFFICER MAY BE DELETED. I.T.A. NO.6695/MUM/2017- JORABAT SHILLONG EXPRESSWAY LTD. 3 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF CONSTRUCTION OF ROAD ON BUILT OPERATE A ND TAX (BOT), FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2012-13 ON 24. 09.2012 DECLARING NIL INCOME. THE RETURN OF INCOME WAS SELECTED FOR S CRUTINY. THE ASSESSEE ENTERED INTO A CONCESSION AGREEMENT ON 16.07.2010 W ITH NATIONAL HIGHWAY AUTHORITY OF INDIA (NHAI) FOR REHABILITATIO N, STRENGTHENING AND FOUR LANING OF JORABAT SHILLONG SECTION OF HN-40 IN THE STATE OF ASSAM AND MEGHALAYA ON BOT BASIS. DURING THE ASSESSMENT, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS EARNED INTEREST INCOME OF RS. 72,73,294/- IN THE BANK ACCOUNT/DEPOSITED WITH INDI AN BANK, CONNAUGHT PALACE, NEW DELHI. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS NOT OFFERED THE INCOME FOR TAXATION BUT REDUCED THE SAM E FROM CAPITAL WORK- IN-PROGRESS. THE ASSESSEE WAS ASKED TO EXPLAIN AS T O WHY THE INCOME SHOULD NOT BE TREATED AS INCOME FROM OTHER SOURCES . THE ASSESSEE FILED ITS REPLY DATED 09.02.2015. IN THE REPLY, THE ASSES SEE STATED THAT THE ASSESSEE SETTING UP INFRASTRUCTURE FACILITY BEING C ONSTRUCTION OF TOLL ROAD IN THE STATE OF ASSAM AND MEGHALAYA. THE PROMOTERS OF COMPANY HAVE INTRODUCED MONEY BY WAY OF SHARE CAPITAL AND ALSO O BTAIN CREDIT FACILITY IN THE BANK FROM THE BANKS AND INSTITUTIONS. THE FU NDS ARE EXCLUSIVELY MEANT FOR SETTING UP INFRASTRUCTURE FACILITY. THE L ENDER DISBURSED THE FUNDS AT THE SPECIFIED INTERVAL AND THE SAID FUND ARE REQ UIRED TO BE USED FOR THE I.T.A. NO.6695/MUM/2017- JORABAT SHILLONG EXPRESSWAY LTD. 4 PURPOSE OF SETTING UP OF THE PROJECT DUE TO TIMING DIFFERENCE OF SOURCES AND APPLICATION OF THE FUND, THE ASSESSEE HAVE LIQU IDATED IN THIS FUNDS INVESTED IN THE SHORT TERM DEPOSIT. THE INTENTION O F ASSESSEE OF BORROWING OF FUNDS BY WAY OF FIXED DEPOSIT FOR THE SHORT TERM PERIOD TO UTILIZE THE FUND TO MAXIMIZE THE RETURN. THE ACTIVITIES OF BORR OWING OF THE FUNDS BY WAY OF FIXED DEPOSIT CAN BE CONSIDERED AS ACTIVITY WHICH IS EXTRICABLE LINKED WITH THE ACTIVITY OF SETTING OF PROJECT. THE ASSESSEE ALSO RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN INDIAN OIL PANIPAT POWER CONSORTIUM LTD. VS. ITO AND HONBLE SUPREME COURT I N CIT VS. BOKARO STEEL LTD. THE CONTENTION OF ASSESSEE WAS NOT ACCEP TED BY ASSESSING OFFICER. THE ASSESSING OFFICER CONCLUDED THAT INTER EST EARNED BY ASSESSEE WAS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURC ES. ON APPEAL BEFORE THE LD. CIT(A), THE ACTION OF ASSESSING OFFI CER WAS CONFIRMED. BEFORE THE LD. CIT(A), THE ASSESSEE RAISED THE ADDI TIONAL GROUND OF APPEAL FOR ALLOWING EXPENDITURE OF RS. 10,10,740/- ON ACCO UNT OF ADMINISTRATIVE & GENERAL EXPENSES. THE LD. CIT(A) AFTER ADMITTING THE ADDITIONAL GROUND OF APPEAL ALLOWED PART RELIEF TO THE ASSESSE E ALLOWING DIRECTORS FEES OF RS. 1,45,000/-, AUDIT FEES OF RS. 1,10,300/ - AND TAX AUDIT FEES OF RS. 82,725/- AND REMAINING BALANCE AMOUNT WAS NOT A LLOWED. FURTHER, AGGRIEVED BY THE PART RELIEF GRANTED BY THE CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE THIS TRIBUNAL. I.T.A. NO.6695/MUM/2017- JORABAT SHILLONG EXPRESSWAY LTD. 5 3. WE HAVE HEARD THE SUBMISSION OF LD. AUTHORIZED REPR ESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (D R) FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AT TH E OUTSET OF HEARING, THE LD. AR OF THE ASSESSEE SUBMITS THAT GROUND NO.1 TO 3 ARE COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF TRIBUNAL IN A SSESSEES OWN CASE FOR ASSESSMENT YEAR 2011-12 WHEREIN SIMILAR INTEREST IN COME WAS TREATED AS INCOME FROM OTHER SOURCES. HOWEVER, ON APPEAL BEF ORE THE TRIBUNAL, THE ASSESSEE WAS GRANTED RELIEF IN ITA NO. 3667/MUM /2016 DATED 12.09.2018. 4. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE AFTER GOING THROUGH THE CONTENTS OF THE DECISION OF TRIBUNAL DATED 12.09.20 18 IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011-12 CONCEDED THAT THIS GROUND OF APPEAL IS COVERED IN FAVOUR OF ASSESSEE. 5. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NO TED THAT SIMILAR GROUND INTEREST INCOME WAS TREATED AS INCOME FROM OTHER SOURCES IN ASSESSMENT YEAR 2011-12. HOWEVER, ON APPEAL BEFORE THE TRIBUNAL, THE SAME WAS ALLOWED IN FAVOUR OF ASSESSEE AS BUSINESS INCOME. THE TRIBUNAL WHILE ALLOWING THE INTEREST INCOME AS BUSI NESS INCOME FOLLOWED THE DECISION OF JAIPUR BENCH IN INFRASTRUCTURE DEVE LOPMENT COMPANY OF RAJASTHAN LTD. VS. DCIT IN ITA NO. 628/JP/2014 DATE D 11.08.2016, HONBLE DELHI HIGH COURT IN INDIAN OIL PANIPAT POWE R CONSORTIUM VS. I.T.A. NO.6695/MUM/2017- JORABAT SHILLONG EXPRESSWAY LTD. 6 ITO (355 ITR 255(DEL.), CIT VS. FACOR POWER LTD. [2 016] TAXMAN.COM 178 (DEL.). THEREFORE, CONSIDERING THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011-12 AND RESPECTFU LLY FOLLOWING THE SAME, GROUND NO.1 TO 3 OF APPEAL ARE ALLOWED. 6. GROUND NO. 4 & 5 ARE RAISED IN ALTERNATIVE TO GROUN D NO.1 TO 3, WHICH WE HAVE ALREADY ALLOWED. THEREFORE, THE DISCUSSIONS ON THESE GROUNDS OF APPEAL HAVE BECOME ACADEMIC. 7. GROUND NO.6 IS RAISED IN ALTERNATIVE TO GROUND NO. 1 TO 5, AS WE HAVE ALREADY ALLOWED GROUND NO. 1 TO 3, THEREFORE, DISCU SSION ON THIS GROUND OF APPEAL ARE ALSO BECOME ACADEMIC. 8. GROUND NO.7 & 8 RELATES TO DEDUCTION OF RS. 3,38,02 5/- UNDER SECTION 37 OF THE ACT AGAINST THE CLAIM OF RS. 10,10,740/-. TH E LD. AR OF THE ASSESSEE FURNISHED THE WRITTEN SUBMISSION. IN THE WRITTEN SU BMISSION, THE LD. AR OF THE ASSESSEE SUBMITS THAT IN APPEAL FOR ASSESSMENT YEAR 2010-11 SIMILAR GROUND OF APPEAL WAS RAISED AS THE SAME WERE NOT AD JUDICATED BY LD. CIT(A), THE TRIBUNAL REMANDED THE SAME TO THE FILE OF LD. CIT(A). HOWEVER, FOR THE YEAR UNDER CONSIDERATION, THE ASSE SSEE RAISED ADDITIONAL GROUND OF APPEAL BEFORE LD. CIT(A). THE LD. CIT(A) ALLOWED EXPENSES INCURRED ON DIRECTORS FEES OF RS. 1,45,000/-, AUDI T FEES OF RS. 1,10,300/- AND TAX AUDIT FEES OF RS. 82,725/- AND R EMAINING EXPENSES AGGREGATING OF RS. 6,72,715/- WAS NOT ALLOWED. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSEE-COMPANY WAS SET UP ONLY T O BUILD, OPERATE AND I.T.A. NO.6695/MUM/2017- JORABAT SHILLONG EXPRESSWAY LTD. 7 TRANSFER OF HIGHWAY. ALL THESE EXPENSES AGGREGATING TO RS. 6,72,715/-, DETAILS OF WHICH ARE PROVIDED IN THE NOTE 14 OF FIN ANCIAL STATEMENT, COPY OF WHICH ARE PLACED ON RECORD VIDE PAGE NO. 22 OF P APER BOOK. THE LD. AR OF THE ASSESSEE SUBMITS THAT ALL THESE EXPENSES ARE ALLOWABLE EXPENSES UNDER SECTION 37 AS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN ALTERNATIVE SUBMISSION, THE LD. AR SUB MITS THAT THESE EXPENSES WERE INCURRED TO BRING THE ASSET INTO EXIS TENCE AND HAS TO BE CAPITALIZED TO THE COST OF ASSET. 9. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF AUTHORITIES BELOW. 10. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE NOTED THAT IN THE STATEMENT OF FACT FILED BEFORE THE LD. CIT(A), THE ASSESSEE STATED TH AT THEY HAD INCURRED THE EXPENDITURE UNDER THE HEAD OTHER EXPENSES OF RS. 10 ,10,740/-. THE SAID EXPENDITURE WAS DEBITED IN THE PROFIT & LOSS ACCOUN T AND NOT TREATED AS A PART OF CAPITAL WORK-IN-PROGRESS WHILE FILING THE R ETURN OF INCOME. THE ASSESSEE HAD DISALLOWED THE SAME WHILE COMPUTING TH E INCOME UNDER THE HEAD INCOME FROM BUSINESS & PROFESSION. THE ASSESSE E BEFORE THE LD. CIT(A) RAISED FRESH CLAIM BY WAY OF ADDITIONAL GROU ND FOR CLAIMING EXPENDITURE OF RS. 10,10,740/- IS ALLOWABLE DEDUCTI ON UNDER SECTION 37 ON THE GROUND THAT THE ASSESSEE HAS ERRONEOUSLY DISALL OWED THE SAME IN COMPUTATION OF INCOME. THE LD. CIT(A) AFTER CONSIDE RING THE CONTENTION I.T.A. NO.6695/MUM/2017- JORABAT SHILLONG EXPRESSWAY LTD. 8 OF THE ASSESSEE ADMITTED THE ADDITIONAL CLAIM IN TH E FORM OF GROUNDS OF APPEAL AND ALLOWED RS. 1,45,000/- OF DIRECTORS FEE S, 1.10,000/- AUDIT FEES AND RS. 82,725/- ON ACCOUNT OF TAX AUDIT FEES HOLDING THAT THESE EXPENSES ARE REQUIRED TO MAINTAIN THE CORPORATE STA TUS OF THE ASSESSEE AND THE REMAINING EXPENDITURE WAS NOT RELATING TO THE C ORPORATE STATUS WAS NOT ALLOWED. THE ALTERNATIVE AND WITHOUT PREJUDICE GROU ND FOR ADDING THE SUM OF/REMAINING EXPENSES TO THE CAPITAL WORK-IN-PROGRE SS WAS NOT ALLOWED BY LD. CIT(A) HOLDING THAT THE EXPENSES ARE REVENUE EX PENDITURE AND HAS NO CONNECTION THAT CAPITAL WORK-IN-PROGRESS. 11. BEFORE US, THE LD. AR OF THE ASSESSEE IN HER WRITTE N SUBMISSION AS WELL AS DURING HER SUBMISSION SUBMITTED THAT ALL EXPENSES A RE ALLOWABLE EXPENSES UNDER SECTION 37 OF THE ACT. WE HAVE NOTED THAT OUT OF TOTAL CLAIM OF RS. 10,10,740/- THE LD. CIT(A) HAS ALREADY ALLOWED THE CLAIM OF AUDIT FEES, TAX AUDIT FEES AND DIRECTORS FEES AGGREGATING OF R S. 3,37,725/- AND REMAINING AMOUNT OF RS. 7,62,715/- WAS NOT ALLOWED. THE REMAINING EXPENDITURE CONSIST LEGAL AND CONSULTATION FEES OF RS. 1,00,000/- TRAVELLING AND CONVEYANCE FEES OF RS. 2,28,358/-, R ATES & TAXES OF RS. 2,680/-, BANK COMMISSION OF RS. 2,327/- AND FEES FO R OTHER SERVICES OF RS. 3,08,840/-. CONSIDERING THE NATURE OF EXPENSES INCURRED BY ASSESSEE AS NARRATED ABOVE ALL THE EXPENSES ARE NECESSARY FO R CORPORATE ENTITY, THEREFORE, ALL THE EXPENSES ARE ALLOWED. THE ASSESS ING OFFICER IS DIRECTED ACCORDINGLY. IN THE RESULT, GROUND NO.7 OF THE APPE AL IS ALLOWED. I.T.A. NO.6695/MUM/2017- JORABAT SHILLONG EXPRESSWAY LTD. 9 12. GROUND NO.8 IS RAISED IN ALTERNATIVE TO GROUND NO.7 , AS WE HAVE ALLOWED THE GROUND NO.7 OF THE APPEAL, THEREFORE, THE ADJUD ICATION OF GROUND NO.8 HAS BECOME ACADEMIC. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/07/2019. SD/- SD/- G.MANJUNATHA, PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 24.07.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR F BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI