DCIT, Bangalore V. M/s RMZ Ecoworld Infrastructure Private Limited, Bangalore

ITA 814/BANG/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95316 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 28-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business expenditure; Revenue expenditure

Judgement Text

ITA.814/BANG/2015 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A', BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER I.T.A NO.814/BANG/2015 (ASSESSMENT YEAR : 2010-11) DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE -5(1)(1), BANGALORE ..APPELLANT V. M/S. RMZ ECOWORLD INFRASTRUCTURE P. LTD, (FORMERLY KNOWN AS M/S. ADARSH PRIME PROJECTS P. LT D), THE MILLENIA TOWER, B-LEVEL 12-14, NO.1 & 2, MURPHY ROAD, ULSOOR, BANGALORE 560 008 .. RESPONDENT PAN : AABCA7596B ASSESSEE BY : NONE REVENUE BY : DR. P. K. SRIHARI, ADDL. CIT HEARD ON : 21.10.2015 PRONOUNCED ON : 30 .10.2015 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY REVENUE ITS GRIEVANCE IS T HAT CIT (A) HELD EXPENDITURE INCURRED FOR WATER SUPPLY AND SEWERAGE AS REVENUE IN NATURE. ITA.814/BANG/2015 PAGE - 2 AS PER THE REVENUE THE PAYMENTS TO BANGALORE WATER SUPPLY & SEWERAGE BOARD (BWSSB) WAS ONE TIME AND ASSESSEE RECEIVED EN DURING BENEFITS. 02. LD. DR STRONGLY ASSAILING THE ORDER OF CIT (A) SUBMITTED THAT ASSESSEE HAD PAID RS.2,26,25,820/- TO M/S. BWSSB A ND THOUGH SUCH PAYMENT DID NOT RESULT IN ANY CAPITAL ASSET BEING A CQUIRED BY THE ASSESSEE, COULD NOT BE TREATED AS REVENUE EXPENDITURE. AS PE R THE LD. DR, THE DEMAND RAISED BY BWSSB WAS FOR RS.8,39,43,006/- OF WHICH RS.6,13,17,186/- WAS PAID BY ONE M/S. ADARSH DEVELO PERS, A GROUP CONCERN OF THE ASSESSEE. LD. DR FURTHER SUBMITTED THAT BAL ANCE WAS PAID BY THE ASSESSEE AND SUCH PAYMENT RESULTED IN ENDURING BENE FIT TO THE ASSESSEE. NONE APPEARED FOR THE ASSESSEE. 03. WE HAVE PERUSED THE ORDERS AND HEARD THE CONTEN TIONS OF THE LD. DR. DETAILS OF THE DEMAND RAISED BY M/S. BWSSB, AS IT A PPEARS AT PAGE 3 OF THE ASSESSMENT ORDER IS REPRODUCED HEREUNDER : ITA.814/BANG/2015 PAGE - 3 04. ASSESSEE WAS A DEVELOPER AND OUT OF THE TOTAL D EMAND, ASSESSEE HAD BORNE RS.2,05,63,655/- AS ITS SHARE SINCE FACILITIE S PROVIDED BY M/S. BWSSB WERE COMMON FOR THE PROJECTS OF THE ASSESSEE AS WELL AS ITS GROUP CONCERNS. AO HAD NOT QUESTIONED THE CORRECTNESS OF THE SHARING OF EXPENDITURE. HOWEVER ACCORDING TO HIM IT HAD TO BE TREATED AS CAPITAL OUTGO. AS PER THE AO THE AMOUNTS PAID FOR GETTING WATER CONNECTION AND RELATED EXPENDITURE WERE NECESSARILY CAPITAL IN NAT URE AND HAD TO BE CAPITALISED WITH THE COST OF CONSTRUCTION. ACCORDI NG TO HIM TIMING OF THE PAYMENT WAS IRRELEVANT SINCE ASSESSEE COULD NOT HAV E SOLD OR LEASED OUT THE PREMISES WITHOUT SUCH FACILITY. HOWEVER, LD. CIT ( A), ON ASSESSEES APPEAL HELD THAT ASSESSEE HAD NOT ACQUIRED ANY CAPI TAL ASSET BY VIRTUE OF THE ITA.814/BANG/2015 PAGE - 4 PAYMENTS TO BWSSB. WE FIND THAT AO HIMSELF HAS GIV EN A FINDING THAT ASSESSEE WAS A DEVELOPER AND NOT HOLDING THE PROJEC T AS ITS OWN FIXED ASSET. ASSESSEE WAS SELLING OR LEASING IT OUT AS A PART OF ITS BUSINESS ACTIVITIES. IN OUR OPINION ASSESSEE DID NOT DERIVE ANY BENEFIT WHI CH COULD BE TERMED AS ENDURINGLY BENEFICIAL IN NATURE BY THE PAYMENTS EFF ECTED FOR GETTING THE WATER CONNECTIONS. WE FIND THAT LD. CIT (A) HAD FO LLOWED THE HONBLE JURISDICTIONAL HIGH COURT JUDGMENT IN THE CASE OF H MT LTD V. CIT [(1989) 175 ITR 220], PERTINENT PARTS OF WHICH ARE REPRODUC ED HEREUNDER : 20. BEFORE CONCLUDING, IT IS NECESSARY TO REFER TO ONE MORE DECISION OF THIS COURT IN HINDUSTAN MACHINE TOOLS L TD. (NO. 3) VS. CIT (1989) 175 ITR 220 (KAR), WHEREIN THE ASSES SEE CONTRIBUTED TOWARDS THE FORMATION OF AN APPROACH RO AD WHICH RESULTED IN GREATER FACILITY TO ITS BUSINESS/ INDUSTRIAL ACTIVITIES. THIS COURT UPHELD THE ASSESSEES CLAIM THAT THE AMOUNT CONTRIBUTED FOR ROAD-MAKING WAS A BUSINESS EXPENDITURE. IT WAS HELD THAT (AT PP. 229, 233 AND 230): 'THE TEST OF ENDURING BENEFIT IS NOT A CONCLUSIVE T EST AND IT CANNOT BE APPLIED IN A MECHANICAL WAY WITHOUT REGAR D TO THE PARTICULAR FACTS AND CIRCUMSTANCES OF THE CASE ON H AND. 21. IN THE CIRCUMSTANCES AND FACTS OF THE INSTANT CASE : (A) THE CONSTRUCTION OF THE ROAD WHICH IS NOT THE PROPERTY OF THE ASSESSEE IS UNDOUBTEDLY CONNECTED WITH AND ADVANTAG EOUS TO THE BUSINESS ACTIVITY OF THE ASSESSEE ; (B) THE CON TRIBUTION OF RS.3,61,236 MADE BY THE ASSESSEE IS FOR THE CONSTRU CTION OF THE ROAD UNDER THE SCHEME SPONSORED BY THE STATE GOVERNMENT ; (C) THE COST OF CONSTRUCTION HAS BEEN PARTLY MET BY THE ASSESSEE ALONG WITH THE BANGALORE DEVELOPMENT AUTHORITY AND BHARAT ELECTRONICS LTD. ; (D) THOUGH IT CONFERRED U PON THE ASSESSEE AN ENDURING ADVANTAGE FOR THE BENEFIT OF I TS BUSINESS, IT ITA.814/BANG/2015 PAGE - 5 DID NOT SECURE TO THE ASSESSEE ANY TANGIBLE OR INTA NGIBLE. ASSET AND FURTHER THE ENDURING ADVANTAGE GAINED BY THE AS SESSEE IS CHIEFLY TO FACILITATE. THE ASSESSEE'S BUSINESS OPER ATIONS WITH GREATER EFFICIENCY AND PROFITABILITY WITHOUT TOUCHI NG THE FIXED CAPITAL OF THE ASSESSEE ; (E) THERE IS NO ADDITION TO, OR EXPANSION THE PROFIT-MAKING APPARATUS. FOLLOWING THE RATIO IN L. H. SUGAR FACTORY AND OIL MILLS (P) LTD. VS. CIT (1980) 19 CTR (SC) 185 : (1980) 125 IT R 293 (SC), HELD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE FOR THE FORMATION OF THE ROAD, NOT BELONGING TO THE ASSESSE E, IS AN ADMISSIBLE REVENUE EXPENDITURE. 22. IT IS THUS CLEAR THAT THE TEST OF ENDURING NATURE A PPLIED TO THE PURPOSE FOR WHICH A PARTICULAR EXPENDITURE IS I NCURRED IS NOT A CONCLUSIVE TEST ; IT IS ONLY ONE OF THE SEVERAL F ACTORS TO BE CONSIDERED WHILE ANSWERING THE QUESTION. EXPENDITUR E INCURRED WHICH DOES NOT RESULT IN THE ACQUISITION OF A PERMA NENT ASSET MAY INDICATE THAT THE EXPENDITURE INCURRED WAS OF A REV ENUE NATURE ..... WE DO NOT FIND ANY REASON TO INTERFERE. 05. IN THE RESULT, APPEAL OF THE REVENUE STANDS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30TH DAY OF O CTOBER, 2015. SD/- SD/- (SMT. ASHA VIJAYARAGHAVAN) (ABRAHAM P GEORGE) JUDICIAL MEMBER ACCOUNTA NT MEMBER MCN* ITA.814/BANG/2015 PAGE - 6 COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR