DCIT, CIR-10(1), KOLKATA, Kolkata V. M/s Bridge & Roof Co. India Ltd., Kolkata

ITA 817/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1082 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 05-06-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANAND R BAIWAR
• Assessee Lawyers: P K AGARWWALLA
• Section: 43B; 2

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.817/KOL/2015 ASSESSMENT YEAR:2011-12 DCIT, CIRCLE-10(1), P- 7, CHOWRINGHEE SQUARE, 3 RD FLOOR, KOLKATA-69 / V/S . M/S BRIDGE & ROOF COMPANY INDIA LTD., KANKARIA CENTRE, 5 TH FLOOR, 2/1 RUSSEL STREET, KOLKATA-71 [ PAN NO.AABCB 3166 E ] /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI ANAND R. BAIWAR, DR /BY RESPONDENT SHRI P.K. AGARWWALLA, CA /DATE OF HEARING 29-08-2017 /DATE OF PRONOUNCEMENT 08-11-2017 /O R D E R PER S.S.VISWANETHRA RAVI, JUDICIAL MEMBER:- THIS APPEAL BY THE REVENUE AGAINST THE ORDER DATED 31.03.2015 PASSED BY COMMISSIONER OF INCOME TAX (APPEALS)-4, KOLKATA FOR ASSESSMENT YEAR 2011-12. 2. THE ONLY ISSUE IS TO BE DECIDED WHETHER THE CIT( A) IS JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT O F UNEXPLAINED PROVISION FOR LIQUIDATED DAMAGES IN THE FACTS AND CIRCUMSTANCES O F THE CASE. 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS PUB LIC LIMITED COMPANY ENGAGED IN CONSTRUCTION CONTRACTS MAINLY IN CIVIL, MECHANICAL, TURNKEY JOBS IN INDIA AND ABROAD. THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF 88,69,13,161/-. THE ITA NO. 817/KOL/2015 A.Y. 2011-12 DCIT, CIR-10(1) KOL. VS. M/S BRIDGE & ROOF CO. INDIA LTD. PAGE 2 NOTICES U/S. 143(2)/142(1) OF THE INCOME TAX ACT, 1 961 (HEREINAFTER REFERRED TO AS THE ACT) ISSUED IN RESPONSE TO WHICH ASSESSEE FURNISHE D REPLIES. ACCORDINGLY, AO DETERMINED THE INCOME OF THE ASSESSEE AT 96,65,51,665/- VIDE HIS ORDER DATED 25.02.2014 U/S.143(3) OF THE ACT. 4. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDIN GS FOUND THAT ASSESSEE DEBITED AN AMOUNT OF 674,31 AS LIQUIDATED DAMAGED TO THE PROFIT AND LOSS ACCOUNT. IN EXPLANATION TO THE OBJECTION RAISED BY AO THE ASSES SEE STATED THE SAID AMOUNT WAS HELD BY VARIOUS CLIENTS ON ACCOUNT OF WORK DONE AND ALL THE DETAILS INVOLVING LIQUIDATED DAMAGES WERE SUBMITTED TO THE AO. THE LIQUIDATED DA MAGES WERE DEDUCED BY ITS CLIENTS DUE TO NON-COMPLETION OF PROJECT BY THE ASS ESSEE WITHIN THE CONTRACTUAL COMPLETION TIME PERIOD AS PER CONTRACT AGREEMENT. T HE AO OPINED THAT THE SAID CLAIM IS LIKE A BAD AND DOUBTFUL DEBT AND BUT FOR NON SUB MISSION OF EVIDENCE SHOWING THE CLIENT DEDUCTED THE SAID AMOUNT AND ADDED THE SAID AMOUNT TO THE INCOME OF THE ASSESSEE. BESIDES THE AO ALSO OBSERVED THAT ASSESSE E CLAIMED THE DEDUCTION U/S VAT AND SERVICE TAX U/S. 43B OF THE ACT, THEREFORE IT W OULD BE A DOUBLE DEDUCTION IF THE CLAIM OF LIQUIDATED DAMAGES ARE ALLOWED. 5. BEFORE THE LD. CIT(A) ASSESSEE PRODUCED CHEQUE S LIP TO HAVE BEEN ISSUED BY ONE OF ITS CLIENTS DEFENCE ACCOUNT DEPARTMENT STATI NG THAT THE CLIENT DEDUCTED DAMAGES FOR DELAY IN SUPPLY BY THE ASSESSEE. CONSID ERING THE SAME, LD. CIT(A) DELETED THE SAID AMOUNT BY OBSERVING AS UNDER:- 5.3.1 I HAVE GONE THROUGH THE COPIES OF THE CONTRA CTS, THE PAYMENT INVOICES/INTIMATIONS, ETC. IN ALL THE CONTRACTS THE RE IS CLAUSE FOR LIQUIDATED DAMAGES. THIS IS ESTABLISHED STANDARD CONTRACT CLAU SE IN SUCH ENGINEERING CONTRACTS. SUCH RISKS ARE INHERENT IN THE VERY NATU RE OF THE BUSINESS CONTRACTS. THE ENGINEERING CONTRACTS INVOLVE NUMEROUS PROCESSE S OF PROCUREMENT, FABRICATION, DEVELOPMENT, TESTING ETC. ETC., THAT I S WHY THE CONTRACT AGREEMENTS THEMSELVES ARE VERY DETAILED AND DOCUMENTED. AND THE CLIENTS ARE ALL UNDERTAKINGS OF THE GOVERNMENT, RAILWAYS, DEFENCE. THE APPELLANT ITSELF IS ALSO AN UNDERTAKING OF THE GOVERNMENT OF INDIA. XXXXXXX 5.3.3 AS REGARDS PROOF, DOCUMENTATION, EVIDENCE ETC THE CONTRACT AGREEMENTS HAVE THE RELEVANT CLAUSE, THE PAYMENT INTIMATIONS M ENTIONING THE DISALLOWANCE ARE ADEQUATE PROOF. ITA NO. 817/KOL/2015 A.Y. 2011-12 DCIT, CIR-10(1) KOL. VS. M/S BRIDGE & ROOF CO. INDIA LTD. PAGE 3 5.3.4 THE JUDICIAL DECISION RELIED UPON BY THE LD. AR OF ITQT, DELHI C BENCH IN HUBER SUHNER ELECTRONICS PVT. LTD VS. DCIT [2013 ] 22 ITR (TRIB) 596 (DELHI) WHEREIN THE ITAT HAD HELD THAT LIQUIDATED D AMAGES ARE REVENUE EXPENSE DEDUCTIBLE U/S. 37, IS SQUARELY APPLICABLE TO THIS CASE. 5.3.5 AS REGARDS THE ALTERNATIVE ARGUMENT OF THE AS SESSING OFFICER OF THERE BEING COMPONENT OF SERVICE AX AND VAT, AND THEREFOR E THAT SINCE THESE TAXES ARE ALLOWED AS DEDUCTION U/S. 43B AND THEREFORE THA T THERE COULD BE DOUBLE DEDUCTION THIS HYPOTHESIS IS FAR-FETCHED AND JUST CANNOT BE. THESE TAXES ARE ACCOUNTED FOR SEPARATELY; SO THERE JUST CANNOT ARIS E MIX-UP. 6. LD. DR PRAYED BEFORE US THAT THE ISSUE MAY BE RE MITTED TO FILE OF AO TO CONSIDER THE CLAIM OF ASSESSEE IN THE LIGHT OF ADDI TIONAL EVIDENCE FILED BEFORE LD. CIT(A) AS IT WAS FILED FOR THE FIRST TIME IN SUPPO RT OF ASSESSEES CLAIM AND THERE WAS NO OPPORTUNITY TO AO TO VERIFY THE SAME. 7. LD. AR SUBMITS THAT THE CLIENTS OF THE ASSESSEE ARE ALL UNDERTAKINGS OF GOVERNMENT, DEFENCE AND RAILWAYS AND STANDARD PRACT ICE IN CONTRACTS THAT THERE IS CLAUSE FOR LIQUIDATED DAMAGES FOR DELAY IN PROJECT PHASE, COMPLETION, SUPPLY OF THE GOODS ETC., THE LD. AR SUBMITS THE CLIENTS USED TO DEDUCT AT THE TIME OF MAKING PAYMENT FOR DELAYS IN EXECUTION OF CONTRACT AND SUP PLY OF GOODS AND THE SAME WAS CLAIMED BY ASSESSEE UNDER THE HEAD LIQUIDATED, DAM AGES AND NOT AS A PROVISION AT ALL. LD. AR SUBMITS THAT THE EVIDENCE SHOWING THE D EDUCTION OF DAMAGES BY THE CLIENTS WERE NOT PRODUCED BEFORE THE AO ONLY FOR THE REASON THAT ASSESSEE WAS NOT HAVING SAID EVIDENCE DURING THE COURSE OF ASSESSMENT PROCEEDING S AND WAS SUBMITTED BEFORE CIT(A), AS WHEN THE ASSESSEE GOT SAID INFORMATION F ROM THE CLIENTS AND PRAYED TO DISMISS THE APPEAL BY THE REVENUE AND SUBMITTED ORD ER PASSED BY CIT(A) IS WELL CONSIDERED BASING ON THE MATERIAL AVAILABLE ON RECO RD IN THE FIRST APPELLATE PROCEEDINGS. 8 HEARD BOTH AND PERUSED MATERIAL AVAILABLE ON RECO RD. WE NOTICE THAT AO ADDED THE SAID AMOUNT FOR NON-SUBMISSION OF ANY EVIDENCE SHOWING THAT THE CLIENTS OF ASSESSEE DEDUCTED DAMAGES FROM THE PAYMENTS REQUIRE D TO BE PAID TO THE ASSESSEE UNDER AGREEMENT. THE CIT(A) EXAMINED THE SAID AGREE MENT AND INVOICE FILED BY THE ASSESSEE DURING THE FIRST APPELLATE PROCEEDINGS AND FOUND A CLAUSE ENABLING THE CLIENT TO DEDUCT MONEYS FROM THE PAYMENT FOR ANY BREACH OF CONTRACT SPECIFICALLY FOR NOT ITA NO. 817/KOL/2015 A.Y. 2011-12 DCIT, CIR-10(1) KOL. VS. M/S BRIDGE & ROOF CO. INDIA LTD. PAGE 4 SUPPLYING THE GOODS IN TIME. THE AO ALSO OPINED THA T SAID LIQUIDATED DAMAGES ALSO CONTAINS VAT AND SERVICE TAX FOR WHICH ASSESSEE CLA IMED DEDUCTION U/S 43B OF THE ACT FOR WHICH CIT FOUND SAID TAXES WERE ACCOUNTED B Y ASSESSEE SEPARATELY. THEREFORE, WE ARE OF THE VIEW THAT NO EVIDENCE WAS BEFORE THE AO SHOWING THE CLIENTS DEDUCTING SAID AMOUNT. THEREFORE IN THE LIGHT OF CIRCUMSTANCE S AND IN THE INTEREST OF JUSTICE WE DEEM IT PROPER TO REMIT THE ISSUE TO THE FILE OF AO FOR HIS CONSIDERATION TAKING INTO CONSIDERATION THE NEW EVIDENCE AS REFLECTED AT PAGE 9 OF ORDER OF CIT(A) FILED BY ASSESSEE IN SUPPORT ITS CLAIM. THE ASSESSEE AT LIBE RTY TO FILE EVIDENCES BEFORE THE AO AND AO SHALL CONSIDER THE SAME AND PASS ORDER IN AC CORDANCE WITH LAW. 7. IN THE RESULT, FOR STATISTICAL PURPOSE APPEAL OF RE VENUE IS TREATED IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 08/11/2017 SD/- SD/- ( &) (( &) (P.M.JAGTAP) (S.S.VISWANETHRA RAVI) ACCOUNTANT MEMBER JUDICIAL MEMBER *DKP-SR.PS ) - 08/11/2017 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DCIT, CIRCLE-10(1), P-7, CHOWRINGHEE SQU ARE, 3 RD FL,KOL-69 2. /RESPONDENT-M/S BRIDGE & ROOF CO. INDIA LTD., KANKA RIA CENTRE, 5 TH FLOOR, RUSSEL STREET, KOLKATA-71 3. , - / CONCERNED CIT 4. - - / CIT (A) 5. . ((, , , / DR, ITAT, KOLKATA 6. 2 / GUARD FILE. BY ORD ER/ , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO ,,