Siddhartha Mahavir SPML (JV), Jalgaon V. JCIT, Range-1, Jalgaon

ITA 929/PUN/2013

• Counselvise Citation: 92924514 RSA 2013
• Duration Of Justice: 2 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-11-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 26-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Reasonable cause
• Section: 143(3); 142(1); 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE M S . SUSHMA CHOWLA , JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO S . 92 9 & 930 /PN/201 3 ITA NO S . 92 9 & 930 /PN/201 3 ASSESSMENT YEAR: 200 9 - 1 0 SIDDHARTHA MAHAVIR SPML (JV) SHOP NO.5, A - WING, STADIUM COMPLEX , JILHA PETH, JALGAON 1 . APPELLANT PAN: ABNFS2062C VS. THE JT . COMMISSIONER OF INCOME TAX, THE JT . COMMISSIONER OF INCOME TAX, RANGE 1, JALGAON . RESPONDENT A PPELLANT BY : SHRI NIKHIL PATHAK RESPONDENT BY : SHRI RAJESH DAMOR DATE OF HEARING : 2 1 - 0 5 - 20 1 5 DATE OF PRONOUNCEMENT : 27 - 0 5 - 201 5 ORDER PER SUSHMA CHOWLA, J.M : PER SUSHMA CHOWLA, J.M : BOTH THE APPEALS FILED BY THE SAME ASSESSEES ARE AGAINST THE SEPARATE ORDER S OF CIT(A) - II, NASHIK , DATED 18 . 04 .201 2 AND 18.01.2013 REL ATING TO SAME ASSESSMENT YEAR 2009 - 10 AGAINST LEVY OF PENALTY UNDER SECTION 271(1)( B ) OF THE ACT AND AGAINST ORDER PASSED UNDER SECTION 143(3) (II) OF THE INCOME TAX ACT , 1961 , RESPECTIVELY . 2. BOTH THE APPEALS RELATING TO SAME ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE ASSESSEE IN ITA NO. 929 /PN/2013 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND IN LAW THE CIT(A) HAS ERRED IN CONFIRMING THE PENALTY OF RS.30,000/ - U/S.271(1)(B) TOWARDS FAILURE TO COMPLY WITH STATUTORY NOTICES ISSUED BY THE DEPARTMENT. NOTICES ISSUED BY THE DEPARTMENT. 2. ON THE FACTS AND IN LAW THE CIT(A) HAS ERRED IN NOT APPRECIATING THE FACTS: ITA NO S. 929 & 930 /PN/201 3 SIDDHARTHA M SPML (JV) 2 I. THAT ASSESSMENT WAS MADE U/S. 143(3) AND NOT U/S. 144; II. THAT THE APPELLANT WAS PREVENTED BY REASONABLE AND SUFFICIENT CA USE; YOUR APPELLANT CRAVES , LEAVE TO ADD, ALTER , DELETE ABOVE OR ANY OF THE GROUND / S OF APPEAL. 4. THE ISSUE IN ITA NO.929/PN/2013 FILED BY THE ASSESSEE IS AGAINST LEVY OF PENALTY UNDER SECTION 271(1)(B) OF THE ACT. 5. THE ASSESSEE HAD FAILED TO COMPLY WITH THE NOTICES ISSUED UNDER SECTION 142(1) OF THE ACT ON VARIOUS DATES AND CONSEQUENTLY, THE ASSESSING OFFICER HELD THE ASSESSEE TO HAVE FAILED TO COMPLY WITH THE STATUTORY NOTICES WITHOUT ANY REASONABLE CAUSE MAKING IT LIABLE FOR LEVY OF PENALTY UNDER S ECTION 271(1)(B) OF THE ACT . C ONSEQUENTLY PENALTY OF RS.30,000/ - WAS LEVIED UNDER SECTION 271(1)(B) OF THE ACT . 6. THE PLEA OF THE ASSESSEE BEFORE THE CIT(A) WAS THAT IT HAD COMPLIED WITH THE NOTICES SUBSEQUENT THERETO AND THE ASSESSMENT HAVING BEEN CO MPLETED THE NOTICES SUBSEQUENT THERETO AND THE ASSESSMENT HAVING BEEN CO MPLETED UNDER SECTION 143(3) OF THE ACT, THERE WAS NO JUSTIFICATION FOR LEVY OF PENALTY UNDER SECTION 271(1)(B) OF THE ACT. THE CIT(A) NOTED THAT IT WAS UNDISPUTED THAT THE ASSESSEE HAD FAILED TO COMPLY WITH VARIOUS NOTICES ISSUED BY THE ASSESSING OFFICER UNDER SECTION 142(1) OF THE ACT. IN VIEW THEREOF, LEVY OF PENALTY UNDER SECTION 271(1)(B) OF THE ACT WAS UPHELD. 7. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE BEFORE US HAS PLACED RELIANCE ON THE SUBMISSIONS MADE BEFORE THE CIT(A). 8. THE L EARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE HAS PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 9. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WHERE THE ASSESSEE HAS FAILED TO EXPLAIN WITH REASONABLE CAUSE AS TO WHY IT HAD DEFAUL TED IN NOT COMPLYING WITH VARIOUS NOTICES ISSUED UNDER SECTION 142(1) OF THE ACT, WE ITA NO S. 929 & 930 /PN/201 3 SIDDHARTHA M SPML (JV) 3 FIND NO MERIT IN THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THIS REGARD. WHERE THE ASSESSEE HAS DEFAULTED IN COMPLYING WITH THE NOTICES UNDER SECTION 142(1) OF THE A CT, THE ASSESSEE IS EXIGIBLE TO LEVY OF PENALTY UNDER SECTION 271(1)(B) OF THE ACT. IN THE ABSENCE OF ANY REASONABLE EXPLANATION HAVING BEEN FURNISHED BY THE ASSESSEE, WE UPHOLD THE ORDER OF CIT(A) IN LEVYING PENALTY UNDER SECTION 271(1)(B) OF THE ACT AT RS.30,000/ - . THE APPEAL FILED BY THE ASSESSEE IS THUS, DISMISSED. 10. THE ASSESSEE IN ITA NO.930/PN/2013 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND IN LAW THE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.14,06,250/ - TOWARDS DIS ALLOWANCE OF CONSULTING & DESIGNING CHARGES. 2. ON THE FACTS AND IN LAW THE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.5,82,246/ - TOWARDS DISALLOWANCE OF SITE EXPENSES. 3. ON THE FACTS AND IN LAW THE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.6,76,558/ - TOWARDS DISALLOWANCE OF EXPENDITURE OF CONSULTING & DESIGNING CHARGES PAID TO EX.ENGINEER C.D.O. NASHIK. 4. ON THE FACTS AND IN LAW THE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.5,03,537/ - TOWARDS DISALLOWANCE OF EXPENDITURE OF BUILD ING AT SITE, GODOWN, RS.5,03,537/ - TOWARDS DISALLOWANCE OF EXPENDITURE OF BUILD ING AT SITE, GODOWN, OTHER EXPENSES AND CONSULTANCY CHARGES. YOUR APPELLANT CRAVES, LEAVE TO ADD, ALTER, DELETE ABOVE OR ANY OF THE GROUND/S OF A PPEAL . 11. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE JV WAS AWARDED WORK CONTRACT WORTH RS.282.67 CRORE S BY TAPI IRRIGATION DEVELOPMENT CORPORATION ( TIDC ), JALGAON VIDE LETTER DATED 24.10.2008. PURSUANT THERETO, THE ASSESSEE APPOINTED M/S. SIDDHARTH CONSTRUCTIONS AND M/S. MAHAV I R CIVIL ENGINEERING SERVICES LTD. AS ITS SUB - CONTRACTORS ON 01.11.2008 FOR RS.1 78.09 CRORES AND ON 29.10.2008 FOR RS.95.80 CRORES RESPECTIVELY. AS PER THE AGREEMENT WITH THE PARTIES, THE ASSESSEE WAS TO RETAIN 5% OF THE TOTAL WORK CONTRACT. THE ASSESSEE FURNISHED RETURN OF INCOME DECLARING INCOME OF RS.2,09,03,057/ - . THE ASSESSEE HAD CLAIMED EXPENSES UNDER TH E HEAD TRAVELLING SITE EXPENSES , CONSULTING AND DESIGNING CHARGES. THE ASSESSING OFFICER SHOW CAUSED THE ASSESSEE AS TO WHY THE SAID EXPENDITURE SHOULD BE ALLOWED IN ITS HANDS , AS THE SAID EXPENSES HAD TO BE BORNE BY THE SUB - C ONTRACTORS AND NOT BY THE ASSESSEE. IN REPLY, THE ASSESSEE ITA NO S. 929 & 930 /PN/201 3 SIDDHARTHA M SPML (JV) 4 POINTED OUT THAT OUT OF TOTAL TRAVELLING EXPENSES OF RS.2,78,609/ - EXPENSES TO THE TUNE OF RS.1,27,942/ - RELATED TO THE TRAVELLING OF JV STAFF OR THE PETROL / DIESEL EXPENSES OF VEHICLES OR HIRE C HARGES OF VEHICLES USED BY THE SITE ENGINEER EXPENDED WHOLLY FOR THE PURPOSE OF JV BUSINESS. THE BALANCE TRAVELLING EXPENSES OF RS.1,50,667/ - RELATED TO TRAVELLING BY JV PARTNERS ARE THE EXPENSES OF VEHICLES USED BY THE JV PARTNER AND THE SAME HAD TO BE B ORNE BY THE SUB - CONTRACTORS. IN RESPECT OF SITE EXPENSES DEBITED TO THE BOOKS OF ACCOUNT AT RS. 10,85,775/ - , THE CLAIM OF ASSESSEE WAS THAT THE JV HAD TO BUILD GODOWN, SHED AND SITE OFFICE ON THE SITE TO FACILITATE THE EXECUTION OF PROJECTS . SITE EXPENSES WERE TO THE TUNE OF RS.9,21,112/ - ARE RELATED TO CREATION OF FACILITIES. THE BALANCE SITE EXPENSES OF RS.1,64,663/ - RELATED TO LAND RENT, SITE WATER CHARGES AND EQUIPMENT HIRING AND WAS REQUIRED TO BE BORNE BY THE SUB - CONTRACTORS. ANOTHER EXPENDITURE BO OKED BY THE ASSESSEE WAS ON ACCOUNT OF CONSULTING AND DESIGNING CHARGES OF RS. 20,82,208/ - , OUT OF THIS , RS.6,78,558/ - RELATED TO BRO AD CONCEPTUAL LAYOUT CHARGES BY CENTRAL DESIGNING ORGANIZATION, NASHIK AND THE BALANCE EXPENDITURE OF RS.14 ,06,250/ - RELATED TO PREPARATION OF THE SAID LAYOUT, WHICH WAS DONE BY THE PRIVATE PARTIES AND WAS REQUIRED TO BE BORNE BY THE SUB - CONTRACTORS. THE ASSESSEE THEREAFTER, FILED ANOTHER SUBMISSION BEFORE THE ASSESSING OFFICER ON 06.09.2011 AND WORKED OUT THE DISALLOWANCE UND ER DIFFERENT HEADS TOTALING RS. 23,91,608/ - WHICH ARE TABULATED AT PAGE 4 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER REFERRED TO THE TERMS OF AGREEMENT AGREED UPON BETWEEN THE ASSESSEE AND M/S. SIDDHARTH CONSTRUCTIONS , UNDER WHICH IT WAS PROVIDED THAT ALL EXPENSES HAVE TO BE BORNE BY THE SUB - CONTRACTOR AND NOT BY THE ASSESSEE. THUS, THE ASSESSEE WAS NOT REQUIRED TO INCUR ANY EXPENDITURE OVER BUILDING AT SITE, GODOWNS AND OTHER EXPENSES CLAIMED , AS WELL AS CONSULTING AND DESIGNING CHARGES. THE ASSESSIN G OFFICER REFERRED TO ANOTHER CASE OF ARIHANTAM INFRAPROJECTS PVT. LTD. , WHERE M/S. SIDDHARTH CONSTRUCTIONS WAS A CONTRACTOR AND HE HAD SUB - CONTRACTED WORK TO M/S. ARIHANTAM INFRAPROJECTS PVT. LTD. ALL WORKS AT SITE INCLUDING BUILDING, GODOWNS, ROAD, ETC. HAD BEEN DONE BY THE SUB - CONTRACTOR ITA NO S. 929 & 930 /PN/201 3 SIDDHARTHA M SPML (JV) 5 AND NOT BY THE CONTRACTOR. THE ASSESSING OFFICER FURTHER HELD THAT EVEN THE EXPENDITURE RELATING TO C.D.O., NASHIK WAS NOT TO BE BORNE BY THE ASSESSEE BUT WAS TO BE INCURRED BY THE SUB - CONTRACTOR. IN VIEW THEREOF, THE EXPENSES CLAIMED BY THE ASSESSEE WERE DISALLOWED BY THE ASSESSING OFFICER. 12. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), IN WHICH IT CHALLENGED THE DISALLOWANCE OF RS.11,87,044 / - I.E. RS.6,76,558/ - DISALLOWED ON ACCOUNT OF EXPENDITURE OF CONS ULTING AND DESIGNING CHARGES, EXPENDITURE OF RS.5,03,537/ - ON ACCOUNT OF EXPENDITURE INCURRED ON BUILDING AT SITE, GODOWN, OTHER EXPENSES AND CONSULTING CHARGES AND VEHICLE REPAIR MAINTENANCE OF RS. 6,949/ - . THE ASSESSEE ALSO RAISED GROUNDS OF APPEAL AGAIN ST THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF TRAVELLING, CONSULTING AND DESIGNING CHARGES OF RS.14,06,250/ - AND EXPENDITURE AT SITE OF RS. 5,82,246/ - BESIDES OTHER DISALLOWANCES ON ACCOUNT OF VEHICLES. THE ASSESSEE SUBMITTED WRITTEN SUBM ISSIONS WHICH ARE INCORPORATED IN THE APPELLATE ORDER. THE ASSESSING OFFICER IN THE REMAND PROCEEDINGS OBJECTED TO THE SUBMISSIONS OF ASSESSING OFFICER IN THE REMAND PROCEEDINGS OBJECTED TO THE SUBMISSIONS OF ASSESSEE AND IT WAS POINTED OUT THAT ADDITION WAS MADE ON THE BASIS OF DISALLOWAB LE AMOUNTS GIVEN BY THE ASSESSEE ITSELF AND WHERE ONCE THE ASSESSEE AGREES FOR ADDITION, IT LOSES THE POWER TO RAISE THE MATTER IN APPELLATE PROCEEDINGS. THE CIT(A) WAS REQUESTED TO CONFIRM THE SURRENDERED ADMISSION AND NOT TO ENTERTAIN THE RETRACTED STATEMENTS. THE CIT(A) TOOK NOTE OF THE FAC T THAT THE ASSESSEE HAD RETRACTED ITS EARLIER SURRENDER WITH RESPECT TO THE CLAIM OF EXPENDITURE TOTALING RS. 31,68,591/ - ON ACCOUNT OF CONSULTING AND DESIGNING CHARGES AND SITE EXPENSES. THE CIT(A) NOTED FROM THE PERUSAL OF COPIES OF VOUCHERS OF SITE EXPE NSES INCLUDING BILLS FOR PURCHASE OF BRICKS, STEEL AND OTHER BUILDING MATERIAL SHOW THAT MANY OF THE VOUCHERS PERTAIN TO M/S. SIDDHARTHA CONSTRUCTIONS I.E. THE SUB - CONTRACTOR OF THE ASSESSEE AND ALSO A PARTNER OF THE ASSESSEE FIRM. THE CIT(A) ASKED THE AS SESSEE TO GIVE JUSTIFICATION FOR THE SAID VOUCHERS AND WAS ALSO ASKED TO FURNISH AUDIT REPORTS OF ITS SUB - CONTRACTORS. HOWEVER, THE ASSESSEE FAILED TO GIVE ANY CLARIFICATION / JUSTIFICATION OF THE ITA NO S. 929 & 930 /PN/201 3 SIDDHARTHA M SPML (JV) 6 EXPENSES CLAIMED BY IT. THE CIT(A) ALSO NOTED THE CONTENT S OF LETTER DATED 10.01.2013, IN WHICH THE ASSESSEE HAD CLEARLY STATED THAT IT HAD NOT INCURRED ANY EXPENSES DIRECTLY RELATED TO HIS BIDDING PROCESS AND AWARD OF CONTRACT TILL THE DATE OF AWARD OF WORK CONTRACT. REFERENCE WAS MADE TO THE AGREEMENT BETWEEN THE ASSESSEE JV AND M/S. SIDDHARTH CONSTRUCTIONS , UNDER WHICH IT WAS AGREED THAT THE COMPLETE DESIGNING, PLANNING AND EXECUTION WORK WAS SUB - CONTRACTED BY THE ASSESSEE . FURTHER, AS PER CLAUSE (13) OF TENDER DOCUMENT, THE CONTRACTOR WAS ENTITLED TO RECEIV E THREE SETS OF CONTRACT DRAWINGS AND WORKING DRAWINGS AS WELL AS CERTIFIED COPY OF ACCEPTED TENDER ALONG WITH WORK ORDER FREE OF COST. FURTHER, IT WAS ALSO PROVIDED THAT THE ADDITIONAL DETAILED DRAWINGS IF REQUIRED WOULD BE SUPPLIED BY TIDC . THE CIT(A) REJECTED THE CLAIM OF ASSESSEE VIS - - VIS SAID EXPENDITURE AND ALSO THE CLAIM OF PAYMENT MADE TO C .D.O., NASHIK HOLDING IT TO BE THE RESPONSIBILITY OF SUB - CONTRACTOR. ACCORDINGLY, EXPENDITURE OF RS.6,76,558/ - WAS HELD TO BE NOT ALLOWABLE UNDER SECTION 37(1 ) OF THE ACT. SIMILARLY, VOUCHERS RELATING TO SITE EXPENSES WERE IN THE NAME OF M/S.SIDDHARTH CONSTRUCTIONS AND IN ANY CASE, IT WAS HELD THAT THE SAID EXPENDITURE IS TO BE MET BY THE SUB - CONTRACTOR, WHERE THE CONTRACTOR HAD ALREADY AWARDED THE SUB - CONTRAC T TO VARIOUS PERSONS AND IT WAS ONLY SUPERVISING THE JOB. THE CIT(A) DISALLOWED THE SITE EXPENSES OF RS.31,68,591/ - , BUT ALLOWED TRAVELLING EXPENSES OF RS.2,49,417/ - , DEPRECIATION O N CAR OF RS. 1,39,695/ - , INTEREST ON CAR OF RS.14,000/ - AND REPAIR AND MAIN TENANCE OF RS. 6,949/ - . 13. THE ASSESSEE IS IN APPEAL AGAINST THE SAID ORDER OF CIT(A) . BY WAY OF GROUNDS OF APPEAL NOS.1 AND 3, THE ASSESSEE HAS RAISED THE ISSUE AGAINST THE DISALLOWANCE OF CONSULTING AND DESIGNING CHARGES AND THE EXPENDITURE INCURRED TOWARDS CONSULTING AND DESIGNING CHARGES PAID TO C.D.O., NASHIK. BY WAY OF GROUNDS OF APPEAL NOS.2 AND 4, THE ASSESSEE IS AGGRIEVED BY DISALLOWANCE OF SITE EXPENSES OF RS. 5,82,246/ - AND THE DISALLOWANCE OF EXPENDITURE OF BUILDING AT SITE, GODOWN, ETC. OF RS. 5,03,537/ - . ITA NO S. 929 & 930 /PN/201 3 SIDDHARTHA M SPML (JV) 7 14. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AFTER TAKING US THROUGH THE FACTS OF CASE POINTED OUT THAT THE ASSESSEE JV H AD RECEIVED THE SAID CONTRACT, WHICH IN TURN WAS SUBLET TO ITS PARTNER, BUT THE EXPENDITURE ON THE TOTAL LAYOUT PLAN OF THE SITE AND THE CHARGES FOR SANCTION OF SAID SANCTIONED PLAN WERE INCURRED BY THE ASSESSEE. IN RESPECT OF THE SITE EXPENSES, IT WAS CLAIMED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT FOR THE SUPERVISION OF WORK CONTRACT S, THE PERSONNEL OF ASSESSEE WERE DEPUTED AND FOR THEIR USE, THE SAID SITE OFFICE AND GODOWNS WERE CONSTRUCTED BY THE ASSESSEE. OUR ATTENTION WAS DRAWN TO THE EVIDENCE IN SUPPORT, FURNISHED IN THE PAPER BOOK . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER POINTED OUT THAT THE TRAVELLING EXPENSES AND INTEREST ON LOAN INCLUDING THE CAR EXPENSES WERE ALLOWED BY THE CIT(A), AGAINST WHICH THE REVENUE IS NOT IN APPEAL. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THOU GH THE ASSESSEE HAD MADE ADMISSION FOR DISALLOWANCE OF EXPENDITURE BEFORE THE ASSESSING OFFICER, BUT THE SAID ADMISSION WAS OF A LEGA L POINT, WHICH IN TURN WAS ON WRONG PRESUMPTION OF LAW, SO THE SAID ADMISSION CAN BE RETRACTED, AS HAS BEEN DONE BEFORE THE CIT(A) AND CERTAIN EXPENDITURE HAS BEEN ALLOWED BY HIM . 15. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE REFERRING TO THE TERMS OF AGREEMENT POINTED OUT THAT THE CIT(A) HAS COME TO A FINDING THAT ADMITTEDLY, THE EXPENDITURE HAD TO BE INCURRED, BUT THE SAID EXPENDITURE HAD TO BE BORNE BY THE SUB - CONTRACTOR AND AS A CONSEQUENCE, THERE WAS NO LIABILITY OF THE ASSESSEE TO INCUR THE SAME. OUR ATTENTION WAS DRAWN TO THE OBSERVATIONS OF CIT(A) AND ALSO THE QUERY RAISED BY THE CIT(A) THAT HOW MUCH THE ACTUAL EXPENDITURE INCURRED BY THE SUB - CONTRACTOR, WHICH HAS NOT BEEN REPLIED TO BY THE ASSESSEE. 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE BEFORE US IS A JOINT VENTURE COMPANY BETWEEN SIDDHART H CONSTRUCTION AND M/S. MAHAVIR CIVIL ENGINEERING SERVICES LTD. THE ASSESSEE HAD RECEIVED A ITA NO S. 929 & 930 /PN/201 3 SIDDHARTHA M SPML (JV) 8 WORK CONTRACT FROM TIDC FOR CONSTRUCTION OF IRRIGATI ON WORKS TOTALING RS.282 CRORES . I N TURN THE ASSESSEE SUB - LETTED THE WORK CONTRACT TO ITS MEMBERS I.E. M/S. SIDDHARTH CONSTRUCTION, C ONTRACT OF RS. 178.09 CRORES AWARDED AND TO M/S. M/S. MAHAVIR CIVIL ENGINEERING SERVICES LTD. , WORK CONTRACT TO THE EXTENT OF RS.95.80 CRORES WAS AWARDED. THE ASSESSEE AS PER AGREEMENT WAS TO RETAIN 5% OF RS.282 CRORES. IN THE PROFIT & LOSS ACCOUNT FILED FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE CLAIMED EXPENDITURE ON ACCOUNT OF VARIOUS HEADS. THE FIRST HEAD WAS THE EXPENDITURE INCURRED ON LAYOUT OF SITE AND CHARGES PAID FOR THE SANCTION OF THE SAID LAYOUT. ANOTHER EXPENDITURE CLAIMED BY THE ASSESSE E WAS IN RESPECT OF SITE CONSTRUCTION . THE THIRD ISSUE I.E. THE EXPENDITURE INCURRED ON TRAVELLING, INTEREST ON LOAN AND VEHICLE MAINTENANCE HAS BEEN ALLOWED BY THE CIT(A), AGAINST WHICH THE REVENUE IS NOT IN APPEAL. IT MAY BE POINTED OUT AT THIS JUNCTUR E THAT THE ASSESSEE ENTERED INTO AN AGREEMENT WITH ITS SUB - CONTRACTORS, WHO IN TURN WERE THE PARTNERS OF JV, UNDER WHICH CERTAIN TERMS AND CONDITIONS WERE AGREED UPON. THE COPY OF AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND M/S. SIDDHARTH CONSTRUCTION IS PL A CED AT PAGES 52 TO 59 OF THE PAPER BOOK AND THE COPY OF AGREEMENT ENTERED INTO BETWEEN ASSESSEE AND M/S. M/S. MAHAVIR CIVIL ENGINEERING SERVICES LTD. IS PLACED AT PAGES 60 TO 61 OF THE PAPER BOOK. THE COPY OF WORK ORDER IS PLACED AT PAGES 79 TO 82 OF THE PAPER BOOK. THE PERUSAL OF AGREEMENT BETWEEN THE ASSESSEE AND M/S. SIDDHARTH C ONSTRUCTIONS REFLECTS THAT AS PER SUB - CONTRACT, THE DESIGNING, PLANNING AND EXECUTION OF VARIOUS WORK CONTRACTS HAD TO BE UNDERTAKEN BY M/S. SIDDHARTH CONSTRUCTION . THE PREAMBLE OF THE AGREEMENT REFLECTS THAT M/S. SIDDHARTH CONSTRUCTION TO HAVE FAMILIARIZE ITSELF WITH THE PROJECT AND WAS FULLY AWARE OF THE TECH NICAL, COMMERCIAL AND OTHER OBLIGATIONS / RESPONSIBILITIES. AS PER THE SAID AGREEMENT, IT WAS THE OBLIGATION OF CONTRACTEE TO EXECUTE THE WORK WHICH HAS BEEN SUB - CONTRACTED TO IT INCLUDING FUTURE MODIFICATIONS, ALTERATIONS, D E VI AT ION IN THE DESIGN S. M/S. SIDDHARTH CONSTRUCTION WOULD MAKE CHANGES IN DESIGN, MATERIAL IN ALL RELATED WORK AS PER DIRECTIONS AND APPROVAL OF THE OWNER. FURTHER, ITA NO S. 929 & 930 /PN/201 3 SIDDHARTHA M SPML (JV) 9 THE TERM OF CONTRACT AND STATUTORY OBLIGATIONS OF THE EACH PARTY ARE PROVIDED IN THE SAID AGREEMENT. SIMILAR TERMS HAVE BEEN AGREED UPON BETWEEN THE ASSESSEE AND M/S. MAHAVIR CIVIL ENGINEERING AND SERVICES (P) LTD. 17. THE ASSE SSEE CLAIMS THAT IT HAD INCURRED EXPENDITURE OF RS.13,78,750/ - ON ACCOUNT OF CONSULTING CHARGES PAID TO SHINDE ASSOCIATES. THE ABOVE SAID PAYMENTS WERE MADE BY THE ASSESSEE TO THE SAID PARTY FOR THE PREPARATION OF THE LAYOUT PLAN, COPY OF WHICH IS PLACED AT PAGE 83 OF THE PAPER BOOK. THE PERUSAL OF LAYOUT PLAN REFLECTS THAT THE CONTRACTOR FOR THE SAID PROJECT WAS THE ASSESSEE JV AND THE LAYOUT PLAN WAS PREPARED BY SHINDE ASSOCIATES CONSULTING ENGINEERS PVT. LTD. THE SAID LAYOUT PLAN IS IN TWO STAGES I.E. THE WORK ALLOTTED TO M/S. MAHAVIR CIVIL ENGINEERING AND SERVICES (P) LTD. AND THE WORK ALLOTTED TO M/S. SIDDHARTH CONSTRUCTION. THE PRELIMINARY OBLIGATIONS OF EACH OF THE SUB - CONTRACTOR ARE DEFINED AS PER THE SAID LAYOUT PLAN. THE STAMP ON THE SAID DOCU MENT REFLECT S THAT IT WAS APPROVED BY THE CHIEF ENGINEER, T IDC. WE FIND MERIT IN THE CLAIM OF THE ASSESSEE VIS - - VIS EXPENDITURE INCURRED ON CONSULTANCY AND DESIGNING THE ASSESSEE VIS - - VIS EXPENDITURE INCURRED ON CONSULTANCY AND DESIGNING CHARGES PAID TO SHINDE ASSOCIATES CONSULTING ENGINEERS PVT. LTD. A SMALLER EXPENDITURE OF RS.27,500/ - HAS BEEN INCURRED BY THE ASSESSEE AGAINST PAYMENT TO SARATHI ENGINEERS. THE EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE IN ORDER TO PREPARE A LAYOUT PLAN, WHICH IN TURN WOULD DECIDE THE OBLIGATIONS OF THE SUB - CONTRACTORS IN ORDER TO CARRY OUT THE WORK CONTRACTS ALLOTTED TO THE ASSESSEE. HOWEVER, THE EXECUTION OF WORK CONTRACTS IS BY THE SAID SUB - CONTRACTORS AND CONSEQUENTLY, IT IS THEIR RESP O NS I BILITY TO INCUR THE EXPENDITURE FOR THE EXECUTION OF SAME. THE OBJECTIONS OF THE LEARNED DEPAR TMENTAL REPRESENTATIVE FOR THE REVENUE THAT WHERE THE ASSESSEE HAD ADMITTED TO THE SAID SURRENDER CANNOT BE NOW ADJUDICATED IN THE PRESENT APPEAL H AS NO MERIT SINCE REVENUE IS NOT IN APPEAL AGAINST THE ADDITIONS DELETED BY THE CIT(A), WHICH IN TURN, WERE A LSO SURRENDERED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE EXPEN DITURE IN RESPECT OF CONSULTING, DESIGNING CHARGES ITA NO S. 929 & 930 /PN/201 3 SIDDHARTHA M SPML (JV) 10 TOTALING RS. 14,06, 250/ - AND THE CHARGES PAID TO EXECUTIVE ENGINEER, CDO, NASHIK OF RS.6,76,558/ - . HOWEVER, WE FIND NO MERIT IN THE CLAIM OF EXPENDITURE OF RS.5,82,246/ - ON ACCOUNT OF SITE EXPENSES AND RS.5,03,537/ - ON ACCOUNT OF BUILDING AT SITE, GOWN, OTHER EXPENSES , WHIC H HAVE TO BORNE BY SUB - CONTRACTOR . CONSEQUENTLY, THE GROUNDS OF APPEAL NOS.1 AND 3 RAISED BY THE ASSESSEE ARE ALLOWED AND THE GROUNDS OF APPEAL NOS.2 AND 4 RAISED BY THE ASSESSEE ARE DISMISSED. 1 8 . IN THE RESULT, APPEAL OF THE ASSESSEE VIDE ITA NO.929/PN /2013 IS DISMISSED AND ANOTHER APPEAL OF THE ASSESSEE VIDE ITA NO.930/PN/2013 IS PARTLY ALLOWED. ORDER P RONOUNCED ON THIS 27 TH DAY OF MAY , 201 5 . SD/ - SD/ - ( R.K. PANDA ) ( SUSHMA CHOWLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER TH PUNE, DATED: 27 TH MAY , 201 5 . GCVSR COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A) - II , NASHIK ; 4) THE CIT - II, NASHIK ; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// //TRUE COPY // ASSISTANT REGISTRAR I.T.A.T., PUNE