Haryana State Roads & Bridges Development Corpn. Ltd., Panchkula V. Addl. CIT, Panchkula

ITA 84/CHANDI/2010

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6513 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-02-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 18-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G K DHALL
• Keywords: Depreciation; Additional evidence; Revised return
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH A, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.84/CHD/2010 (ASSESSMENT YEAR : 2006-07) HARYANA STATE ROADS & BRIDGES VS. ADDL.CIT, DEVELOPMENT CORPORATION LIMITED, RANGE PANCHKULA. BAY NO.13-14, SECTOR 2, PANCHKULA. PAN: AAACH9435 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HARRY RIKHY RESPONDENT BY : SHRI G.K. DHALL, CIT DR DATE OF HEARING : 25.09.2017 DATE OF PRONOUNCEMENT : 21.12.2017 ORDER PER ANNAPURNA GUPTA, A.M.: THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST THE ORDER OF LD. COMMISSIONER OF INCOME TAX(APPEALS ), PANCHKULA [HEREINAFTER REFERRED TO AS CIT(APPEALS) ] DATED 2.11.2009 RELATING TO ASSESSMENT YEAR 2006-07. 2. THIS APPEAL HAS BEEN FIXED BEFORE US IN PURSUANC E TO THE DIRECTION OF THE HONBLE PUNJAB & HARYANA HIGH COURT TO RECONSIDER THE ISSUE OF DISALLOWANCE OF INTEREST EXPENDITURE IN THE LIGHT OF ADDITIONAL EVIDENCES FI LED BY THE ASSESSEE BEFORE THE HONBLE HIGH COURT VIDE THEIR O RDER IN ITA NO. 8 OF 2013, DATED 14-09-2015. 3. BRIEF FACTS LEADING TO THE AFORESAID DIRECTION A RE THAT THE ASSESSEE HAS FILED RETURN FOR THE IMPUGNED ASSE SSMENT YEAR DECLARING LOSS OF RS.28,62,48,531/- SUBSEQUENT LY REVISED RETURN WAS FILED DECLARING LOSS OF RS.29,23 ,18,828/- 2 THEREAFTER NOTICE U/S 143(2) OF THE ACT WAS ISSUED TO THE ASSESSEE FOLLOWED BY NOTICE U/S 142(1) OF THE ACT, ACCOMPANIED WITH DETAILED QUESTIONNAIRE. LD. A.O. THEREAFTER FRAMED ASSESSMENT REDUCING THE NET LOSS OF RS.13,15,67,4210/- BY INCLUDING INTEREST INCOME OF RS.86,40,770/- ON ACCOUNT OF PARDHAN MANTRI GRAMIN SARAK YOJNA (PMGSY) TO THE INCOME AND DISALLOWED EXPENDIT URE OF RS.80,527/-. THE A.O. HAD ALSO DIRECTED CAPITALIZA TION OF INTEREST OF RS.14,79,23,322/-, WHILE DISALLOWING TH E EXPENDITURE TO THE SAID EXTENT. FEELING AGGRIEVED T HE ASSESSEE FILED AN APPEAL BEFORE THE CIT((A), WHO VI DE HIS ORDER DATED 02-11-2009 PARTIALLY ALLOWED THE APPEAL DELETING THE ADDITION OF RS.86,40,770/- ON ACCOUNT OF INTEREST INCOME ON PMGSY. THE CTI(A) ALSO DIRECTED THE A.O. TO VERIFY AS TO WHETHER TDS HAD NOT BEEN DEDUC TED OF RS.63,437/- AND NOT RS.80,527/-. THE ASSESSEE FILED FURTHER APPEAL BEFORE THE ITAT WHO VIDE THEIR ORDER DATED 1 7-02- 2012 DISMISSED THE APPEAL UPHOLDING THE ORDER OF CI T(A). AGGRIEVED BY THE SAME THE ASSESSEE FILED AN APPEAL BEFORE THE HONBLE HIGH COURT CHALLENGING THE DISALLOWANCE OF INTEREST EXPENSES AMOUNTING TO RS.14,79,23,322/- CL AIMED AS REVENUE BY THE ASSESSEE AND TREATED TO BE CAPITA L EXPENDITURE BY THE AUTHORITY BELOW. 4. DURING THE PENDENCY OF THE APPEAL BEFORE THE HIG H COURT THE ASSESSEE FILED AN APPLICATION UNDER ORDER 41 RULE 27 R.W.S. 151 OF THE CPC FOR LEADING ADDITIONAL EVI DENCE FOR IN THE SHAPE OF DOCUMENTS : 3 1. ORDER DATED 22-10-2014, ORDER U/S 250(6) OF THE ACT PASSED BY THE CIT(A), PANCHKULA 2. CERTIFICATE REGARDING OWNERSHIP OF RECORDS OF PW D (B&R) IN THE STATE OF HARYANA 3. LOAN AGREEMENT OF THE ASSESSEE WITH THE HARYANA URBAN DEVELOPMENT CORPORATION LTD. (HUDCO), NEW DELHI. 4. MEMORANDUM OF ASSOCIATION OF THE ASSESSEE. 5. THE ASSESSEE SUBMITTED TO THE HIGH COURT THAT TH E ITS MAIN OBJECT, ACCORDING TO ITS MOA, WAS TO ERECT, D EVELOP, IMPROVE, CONSTRUCT, REPAIR, EXPRESSWAY, HIGHWAYS RO ADS, PARKS, STREETS AND BRIDGES ETC. ON BEHALF OF HARYAN A PUBLIC WORKS DEPARTMENT ON BUILD-OPERATE AND TRANSFER (BOT ) OR BUILD OWN OPERATE AND TRANSFER (BOOT) OR BUILD OPER ATE LEASE AND TRANSFER (BOLT) BASIS OR ANY OTHER SCHEME IN A MANNER WHICH WOULD FACILITATE TO UNDERTAKE THE ABOV E MENTIONED WORKS AND THUS CREATION OF ASSETS WAS NOT ITS PRINCIPLE OBJECTIVE. THE ASSESSEE CONTENDED THAT TH E ORDER OF THE HONBLE CIT(A) PUNCHKULA WAS NOT IN EXISTENC E WHEN THE APPEAL WAS ADJUDICATED BY THE TRIBUNAL AND THER EFORE, IT COULD NOT BE PRODUCED. AS FOR THE LOAN AGREEMENT AN D MOA THE ASSESSEE SUBMITTED THAT EARLIER IT COULD NOT BE PRODUCED BONAFIDELY. IT WAS ALSO SUBMITTED THAT ALL THE AFOR ESAID DOCUMENTS WERE EITHER PUBLIC DOCUMENTS OR GOVERNMEN T RECORDS AND THUS THEIR AUTHENTICITY, GENUINENESS WA S NOT QUESTIONABLE AND NEEDED NO PROOF UNDER THE PROVISIO N OF THE INDIAN EVIDENCE ACT, 1872 TO ESPOUSE THE CLAIM OF T HE ASSESSEE. IT WAS THEREFORE REQUESTED THAT THE ASSES SEE BE PERMITTED TO PRODUCE THE ADDITIONAL EVIDENCES. 4 6. THE HONBLE HIGH COURT AFTER CONSIDERING THE ASSEESSEES CONTENTIONS, ALLOWED THE ADMISSION OF TH E ADDITIONAL EVIDENCES AND SET ASIDE THE ISSUE RAISED BEFORE THE HIGH COURT TO THE TRIBUNAL FOR RE-CONSIDERING I T IN THE LIGHT OF THE ADDL. EVIDENCES FILED HOLDING AS UNDER : 6.AFTER GIVING OUR THOUGHTFUL CONSIDERATION TO THE SUBMISSIONS MADE BY BOTH THE LEARNED COUNSEL FOR THE PARTIES, WE FIND THAT APPLICATION FOR LEADING ADDITIONAL EVIDENCE DESERVES TO BE ALLOWED, IN AS MUCH AS, ALL THE DOCUMENTS (ANNEXURE A-1 TO A-4) SOUGHT TO BE PRODUCED BY WAY OF ADDITIONAL EVIDENCE ARE PUBLIC DOCUMENTS I.E. ORDER PASSED BY THE CIT(A), PANCHKULA, COPY OF OWNER CERTIFICATE ISSUED BY PWD (B&R), HARYANA, LOAN AGREEMENT AND MEMORANDUM OF ASSOCIATION. HENCE THE AUTHENTICITY AND GENUINENESS OF THE DOCUMENTS CANNOT BE SAID TO BE DOUBTFUL. ACCORDINGLY, THE PRESENT APPLICATION FOR LEADING ADDITIONAL EVIDENCE IS ALLOWED. ACCORDINGLY, IN VIEW OF ALLOWING FOR APPLICATION FO R ADDITIONAL EVIDENCE, IN OUR OPINION, IT WOULD BE APPROPRIATE THAT THE POINTS RAISED IN THIS APPEAL ARE LIABLE TO BE RE-CONSIDERED BY THE TRIBUNAL IN THE LIGHT OF THE ADDITIONAL EVIDENCE SOUGHT TO BE PRODUCED BY THE APPELLANT AND THEN TO PASS A FRESH SPEAKING ORDER IN ACCORDANCE WITH LAW. 7. COMING TO THE ISSUE IN APPEAL BEING TREATMENT OF INTEREST EXPENDITURE AMOUNTING TO RS. 14,79,23,322/- AS CAP ITAL AS AGAINST REVENUE TREATED BY THE ASSESSEE,BRIEF FACTS RELEVANT TO THE ISSUE ARE THAT DURING THE IMPUGNED ASSESSME NT YEAR THE ASSESSEE HAD CLAIMED FINANCIAL EXPENSES TO THE TUNE OF RS.14,79,23,322/- ON ACCOUNT OF INTEREST ON HUDCO LOAN FOR TWO PROJECTS NAMELY MDR /ODR -I AND MDR ODR-II. THE A.O. OBSERVED THAT THE ASSESSSEE HAD MADE CAPITAL INVESTMENT OF RS.206.28 CRORE ON THESE TWO PROJECTS UPTO S31-03-2006, HOWEVER THE ASESSSEE HAD NOT CLAIMED DEPRECIATION ON SUCH PROJECTS ON THE GROUND THAT TO LL POINTS 5 HAD NOT BEEN NOTIFIED ON THE SAID HIGHWAYS. CONSEQU ENTLY THE LD. A.O. HELD THAT SUCH PROJECTS HAD NOT BEEN COMMISSIONED OR PUT TO USE DURING THE YEAR UNDER RE FERENCE AND THEREFORE TREATED THE INTEREST EXPENSES AS CAPI TAL IN NATURE . BEFORE THE LD. CIT(A) THE ASSESSEE CONTEND ED THAT THE AMOUNT HAD NOT BEEN BORROWED FOR ACQUISITION OF ANY ASSET BUT FOR THE REPAIR OF EXISTING ASSETS. THE LD . CIT(A) DISMISSED THE APPEAL HOLDING THAT THERE WAS NO MERI T IN THE ASSESSEES CONTENTION THAT THE EXPENSES RELATED ONL Y TO MODIFICATION OF EXISTING ASSETS, SINCE NO EXISTING ROADS WERE INCLUDED AS PART OF ASSETS IN THE BALANCE SHEET OF THE ASSESSEE BUT IN FACT CAPITAL INVESTMENT OF RS. 206. 28 CRORES HAD BEEN MADE IN THE PROJECT WHICH SHOWED THAT NEW ASSETS HAD BEEN CREATED BY THE ASSESSEE. LD. CIT(A) HELD T HAT SINCE THE ASSESSEE HAD NOT CLAIMED DEPRECIATION ON THE RO AD ON THE GROUND THAT TOLL POINTS HAD NOT BEEN NOTIFIED, CLEARLY THE ASSETS HAD NOT BEEN PUT TO USE AND HENCE THE IN TEREST WAS LIABLE TO BE ADDED TO THE COST OF THE ASSET AS PER THE PROVISO TO SECTION 36(1)(III) OF THE ACT. AGGRIEVED BY THIS ORDER OF THE LD. CIT(A) THE ASSESSEE IS IN APPEAL B EFORE US. 8. BEFORE US LD. COUNSEL FOR THE ASSESSEE, REFERRIN G TO THE ADDITIONAL EVIDENCES FILED BEFORE THE HIGH COURT ST ATED THAT THE SAID EVIDENCES CLEARLY POINTED TO THE FACT OF R ENOVATION OF THE EXISTING ROADS UNDERTAKEN BY THE ASSESSEE BY UTILIZING THE IMPUGNED LOANS. COPY OF LOAN AGREEMENT DATED 10-10-2001 WITH HUDCO PLACED IN THE PAPER BOOK AT PAGE NO. 34 SHOWING THA T THE LOAN HAD BEEN SANCTIONED FOR IMPROVEMENT/ 6 UPGRADING OF MDR AND ODR IN HARYANA, PHASE-1 (SCHEME NO.16982). DETAIL OF THE ROADS TO BE IMPROVED BY UTILIZING THE SAID LOANS, FORMING PART OF THE LOAN AGREEMENT PLACED AT PB-46. COPY OF LOAN AGREEMENT WITH HUDCO DATED 15-10-2001 MENTIONING THE SCHEME NAME AS IMPROVEMENT/ UPGRADING OF MDR AND ODR IN HARYANA, PHASE -2, WHICH WAS PLACED AT PAPER BOOK PAGE NO.47 (SCHEME NO.17035). CERTIFICATE ISSUED BY THE EXECUTIVE ENGINEER, HARYA NA PUBLIC WORKS (B&R) DEPARTMENT LISTING THE MAJOR DISTRICT ROADS IN HARYANA, OWNERSHIP OF WHICH RESTE D WITH THE PWD (B&R) HARYANA PLACED AT PB 62-63 IN TH E PAPER BOOK. LD. COUNSEL FOR ASSESSEE POINTED OUT T HAT THE LIST INCLUDED ROADS FOR THE IMPROVEMENT OF WHIC H LOANS HAD BEEN TAKEN FROM HUDCO VIDE BOTH THE AGREEMENTS. CERTIFICATE ISSUED BY THE EXECUTIVE DIRECTOR HARYAN A STATE AND ROADS BRIDGES, HARYANA STATE CORPORATION STATING THAT ROADS COVERED IN THE SCHEME FOR WHICH LOAN WAS TAKEN FROM HUDCO (SCHEME NO.16982 & 17035), WERE EXISTING ROADS ALREADY IN USE BY TRAFF IC AND WERE IMPROVED BY TAKING LOAN FROM HUDCO AND THAT THE WORK OF IMPROVEMENT ON THESE ROADS WAS COMPLETED IN THE F.Y. 2005-06, PLACED AT PB 64 OF T HE PAPER BOOK. 9. THEREAFTER LD.COUNSEL FOR THE ASSESSEE STATED TH AT IN A.Y. 2005-06 ALSO IDENTICAL INTEREST EXPENDITURE HA D BEEN CAPITALIZED BY THE A.O. FOR IDENTICAL REASONS, WHI CH WAS DELETED BOTH BY THE CIT(A) AND ITAT, AFTER TAKING I NTO CONSIDERATION IDENTICAL DOCUMENTS FILED BEFORE THEM . COPY 7 OF BOTH THE AUTHORITIES ORDERS FOR THE A.Y. 2005-06 WERE PLACED BEFORE US. 10. LD. DR ON THE OTHER HAND RELIED UPON THE ORDER OF THE CIT(A). 11. WE HAVE HEARD THE CONTENTION OF THE BOTH THE PA RTIES AND GONE THROUGH ALL THE DOCUMENTS AND ORDERS TO WH ICH OUR ATTENTION WAS DRAWN. ON GOING THROUGH THE ORDER OF ITAT IN THE CASE OF THE ASSEESSE FOR A.Y. 2005-06, WE FIND THAT IN THE SAID CASE ALSO INTEREST ON LOAN TAKEN F ROM HUDCO HAD BEEN HELD TO BE CAPITAL IN NATURE, SINCE THE ROADS HAD BEEN FOUND TO BE NOT PUT TO USE AS THE TO LL POINTS HAD NOT BEEN SET UP. BEFORE THE LD. CIT(A), IN THE SAID ASSESSMENT YEAR, THE ASSESSEE HAD FILED CERTIFICATE S FROM THE ENGINEER-IN-CHIEF FROM HARYANA PWD, WHICH CLARI FIED THAT THE ROADS IN THE AFOREMENTIONED SCHEMES FOR WH ICH LOANS WERE TAKEN FROM HUDCO WERE EXISTING ROADS AND WERE IN USE BY TRAFFIC AND THAT LOAN WAS TAKEN FROM HUDC O FOR THEIR IMPROVEMENT. FURTHER LOAN AGREEMENT EXECUTED BETWEEN THE ASSESSEEE AND HUDCO WAS ALSO FILED WHIC H SHOWED THAT THE LOAN AGREEMENT WAS FOR THE IMPROVEM ENT OF STATE HIGHWAYS IN THE LOAN AGREEMENTS. IT WAS CLEAR LY MENTIONED THAT THE LOANS WERE SANCTIONED FOR IMPROV EMENT OF STATE HIGHWAY PHASE III & IV IN HARYANA. THESE A DDITIONAL EVIDENCES WERE SENT TO THE A.O. FOR FURTHER EXAMINA TION AND COMMENTS, BUT THE A.O. DID NOT MAKE ANY FURTHER ENQ UIRY NOR COMMENTED ON THE FACTUAL POSITION. THE LD. CIT( A) AFTER CONSIDERING THE MATERIAL ON RECORD HELD THAT THE LO AN HAD 8 BEEN TAKEN FOR IMPROVEMENT OF ROADS AND NOT FOR CRE ATING NEW ROADS AND THUS HELD THE INTEREST EXPENSES AS BE ING REVENUE IN NATURE. THE MATTER WAS CARRIED IN APPEAL BY THE REVENUE TO THE ITAT, WHO UPHELD THE ORDER OF THE LD . CIT(A) HOLDING AT PARA-9 AS UNDER:- 9. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND DO NOT FIND ANY MERIT IN THE DEPARTMENTAL APPEAL. THE ASSES SEE PRODUCED THE CERTIFICATE OF ENGINEER-IN-CHIEF, HARYAN A PWD (PB-6) IN WHICH IT WAS CERTIFIED THAT THE STATE HIG HWAYS PHASE III AND IV (SCHEME NO. 16977) IS EXISTING ROA DS AND WERE ALREADY IN USE BY THE TRAFFIC. THESE ROADS WERE IMPROVED, BY TAKING LOAN FROM HUDCO. THE LOAN AGREE MENT DATED 31.12.2003 (PB-7) IS ALSO FILED WHICH SH OWS THAT LOAN WAS GRANTED FOR IMPROVEMENT /UP-GRADATIO N OF THE SAME STATE THESE EVIDENCES WERE SENT TO THE ASSESSING OFFICER FOR HIS COMMENTS AND REPORT BUT ASSESSING OFFICER, INSTEAD OF EXAMINING THE SAME, MERELY REITERATED THE FACTS STATED IN THE ASSESSMEN T ORDER. THESE EVIDENCES ON RECORD CLEARLY SHOW THAT BORROWED FUNDS WERE USED FOR IMPROVEMENT/UP-GRADATI ON OF THE EXISTING STATE HIGHWAYS. THE ASSETS WERE, TH EREFORE, ALREADY EXISTING AND BORROWED CAPITAL WAS UTI LIZED FOR IMPROVEMENT OF THE EXISTING ASSET. THEREFORE, ID. CIT(APPEALS) WAS JUSTIFIED IN HOLDING THAT PROVISO TO SECTION 36(L)(III) OF THE ACT IS NOT APPLICABLE. FURTHER, THE LOAN WAS ACQUIRED FOR IMPROVEMENT OF EXISTING STATE HIGHWAYS WHICH DID NOT BRING OR ACQUIRE ANY NEW ASS ET. THEREFORE, IT WAS CERTAINLY REVENUE IN NATURE. WE D O NOT FIND ANY INFIRMITY IN THE ORDER OF THE ID. CIT(APPEALS ) IN ALLOWING THE APPEAL OF THE ASSESSEE. SINCE, ASSETS HAVE BEEN PUT TO USE IN THE ORDER UNDER CONSIDERATION, THEREFORE, CERTAINLY IT WAS REVENUE IN NATURE. SINCE ADDITIONAL EVIDENCES WERE NOT BEFORE THE AUTHORITIES BELOW AS HAVE BEEN CONSIDERED IN THE PRESENT PROCEE DINGS, THEREFORE, EARLIER DECISION OF THE TRIBUNAL IS CLEARLY D ISTINGUISHABLE ON FACTS. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE ID. CIT(APPEALS) IN DELETING T HE ADDITION. THE DEPARTMENTAL APPEAL IS ACCORDINGLY DISMISSED. 12. THE FACTS IN THE PRESENT CASE, WE FIND ARE IDEN TICAL TO THAT IN A.Y. 2005-06.THE ADDITIONAL EVIDENCES NOW F ILED BEFORE US SHOW THAT THE LOAN HAD BEEN GIVEN BY HUDC O FOR IMPROVEMENT/UPGRADING OF MDR AND ODR IN HARYANA PHASE-I AND PHASE II. FURTHER THE CERTIFICATE OF EX ECUTIVE ENGINEER HARYANA PWD (B&R) ALSO CERTIFIES THAT THE ROADS 9 FOR WHICH LOAN WAS TAKEN FROM HUDCO WERE OWNED BY PWD. THE CERTIFICATE OF THE EXECUTIVE DIRECTOR, HARYANA STATE ROADS & BRIDGES DEVELOPMENT CORPORATION LTD. ALSO C ERTIFIES THAT THE MDRS & ODRS, PHASE-I & II (SCHEME NO.169 82 & 17035) WERE EXISTING ROADS, ALREADY IN USE BY TRAF FIC AND THE LOAN AGREEMENT FILED SHOWS THAT LOAN HAD BEEN G IVEN FOR THESE VERY SCHEMES FOR IMPROVING THE ROADS. THE EVI DENCES ON RECORD CLEARLY SHOW THAT THE BORROWED LOANS WERE USED FOR IMPROVING EXISTING MDR AND ODR, AND THAT THE AS SETS WERE ALREADY EXISTING AND THE LD. CIT(A) THEREFORE HAD ERRED IN HOLDING THAT THE PROVISO TO SECTION 36(1)(III) W AS APPLICABLE IN THE PRESENT CASE TREATING THE INTERES T EXPENDITURE AS CAPITAL IN NATURE. THIS ISSUE OTHERW ISE BEING IDENTICAL TO THAT IN THE PRECEDING YEAR IS ALSO COV ERED BY THE ORDER OF THE ITAT IN THE CASE OF THE ASSESSEE FOR A .Y. 2005- 06, ITA NO.1153/ CHD/2014, DATED. 14-12-2015. 13. IN VIEW OF THE SAME THE ORDER OF THE LD. CIT(A ) ON THIS ISSUE IS SET ASIDE AND THE DISALLOWANCE MADE OF IN TEREST EXPENSES AMOUNTING TO RS.14,79,23,322/- DIRECTED TO BE DELETED. 14. THE APPEAL OF THE ASSESSEE THEREFORE STANDS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ( SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED 21 ST DECEMBER, 2017 *RATI* COPY TO: 10 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH