RDB Legand Infrastructure Private Limited , Hyderabad V. Income Tax Officer, Ward-3(2), Hyderabad

ITA 952/Hyd/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8233 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 15-07-2021
• Assessment Year: 2012-2013
• Appeal Filed On: 06-06-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VE GODESI
• Assessee Lawyers: T CHAITANYA KUMAR
• Keywords: Capital asset; Revenue expenditure; Capital expenditure; TDS
• Section: 143(3); 13

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH SMC, HYDERABAD (THROUGH VIRTUAL HEARING) BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO. 952/HYD/2019 A.Y. 2012 - 13 RDB LEGEND INFRASTRUCTURE PRIVATE LIMITED, HYDERABAD. PAN: AAECR 8628 Q VS. INCOME TAX OFFICER, WARD - 3(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI T. CHAITANYA KUMAR REVENUE BY: SHRI VE GODESI, DR DATE OF HEARING: 15/07/2021 DATE OF PRONOUNCEMENT: 11 /0 8 /2021 ORDER THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) - 3, HYDERABAD IN APPEAL NO. 0082/ITO - 3(2)/HYD/CIT(A) - 3/2015 - 16, DATED 06/02/2019 PASSED U/S. 143(3) R.W.S 250(6) OF THE ACT FOR THE A.Y. 2012 - 13. 2. THE ASSESSEE HAS RAISED SIX GROUNDS IN ITS APPEAL HOWEVER, THE GROUND NO.1 AND 6 ARE GENERAL IN NATURE AND THE LD. AR DID NOT PRESS THE GROUND NO.2 RAISED BY THE ASSESSEE AND THE CONCISE GROUND NO.3 , 4 AND 5 ARE STATED HEREIN BELOW FOR ADJUDICATION: - (I) THE LD. CIT (A) HAS ERRED IN CONFIRMING THE ADDITION MADE BY THE LD. AO TOWARDS DISALLOWANCE OF 2 RS.32,14,534/ - BEING EXPENSES INCURRED BY THE ASSESSEE TOWARDS PROCESSING FEE CHARGED BY THE BANK FOR ADVANCING TERM LOAN. (II) THE LD. CIT (A) AS ERRED IN CONFIRMING THE ADDITION MADE BY THE LD. AO TOWARDS DISALLOWANCE OF RS. 18,04,070/ - BEING ROAD DEVELOPMENT EXPENSES INCURRED BY THE ASSESSEE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN REAL ESTATE AND CONSTRUCTION BUSINESS FILED HIS RETURN OF INCOME FOR THE RELEVANT AY ON 26/09/2012. SUBSEQUENTLY, THE CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT VIDE ORDER DATED 27/03/ 2015 WHEREIN THE LD. AO MADE THE ABOVE - MENTIONED ADDITIONS AMONGST CERTAIN OTHER ADDITIONS. 4. GROUND NO.1: - DISALLOWANCE OF TERM LOAN PROCESSING FEE OF RS. 32,14,534/ - : 5. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE LD. AO THAT THE ASSESSEE HAD CLAIMED DEDUCTION OF RS. 32,14,534/ - AS EXPENDITURE INCURRED TOWARDS PROCESSING FEE TOWARDS TERM LOAN OBTAINED FROM ICICI BANK DURING THE RELEVANT PREVIOUS YEAR UNDER CONSIDERATION. THE LD. AO OPINED THAT SINCE THE EXPENDITURE WAS INCURRED TOWARDS OBTAINING TERM LOAN FOR INVESTMENT IN CAPITAL ASSET TH E 3 EXPENDITURE NEEDS TO BE CAPITALISED. THEREFORE, HE DISALLOWED THE CLAIM OF EXPENDITURE AS ALLOWABLE DEDUCTION AS HE WAS OF THE OPINION THAT IT IS NOT REVENUE EXPENDITURE . ON APPEAL, THE LD.CIT (A) CONFIRMED THE ORDER OF THE LD. AO BY AGREEING WITH HIS VIEW . 6. BEFORE ME , THE LD. AR VEHEMENTLY ARGUED STATING THAT THE LOAN WAS OBTAINED FROM ICICI TOWARDS WORKING CAPITAL F OR THE PURPOSE OF EXECUTING CIVIL CONTRACTS. IT WAS THEREFORE PLEADED THAT SUCH EXPENDITURE IS REVENUE IN NATURE AND THEREFORE ENTITLED FOR DEDUCTION. THE LD. DR COULD NOT CONTROVERT TO THE SUBMISSION OF THE LD. AR. ON PERUSING THE RECORDS ALSO, I FIND THAT THE ASSESSEE HAS NOT MADE ANY CAPITAL INVESTMENT AND THERE IS NO SUCH FINDING ALSO BY THE LD. REVENUE AUTHORITIES ON THAT REGARD . IN THIS SITUATION, ONE CANNOT PRESUME THAT THE TERM LOAN OBTAINED BY THE ASSESSEE IS TOWARDS INCURRING CAPITAL EXPE NDITURE. HENCE, I AM OF THE VIEW THAT THE LD. REVENUE AUTHORITIES IS NOT RIGHT IN TREATING THE EXPENDITURE INCURRED BY THE ASSESSEE AMOUNTING TO RS. 32,14,534/ - TOWARDS PROCESSING FEE FOR OBTAINING TERM LOAN FROM ICICI BANK AS CAPITAL EXPENDITURE. THEREFO RE, I HEREBY DIRECT THE LD. AO TO TREAT THE EXPENDITURE INCURRED BY THE ASSESSEE OF RS. 32,14,534/ - AS REVENUE EXPENDITURE AND GRANT DEDUCTION. 7. GROUND NO: - 2 DISALLOWANCE OF ROAD DEVELOPMENT EXPENDITURE OF RS. RS. 18,04,070/ - . 4 8. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE LD. AO THAT THE ASSESSEE HAS INCURRED EXPENSE OF RS. 18,04,070/ - TOWARDS ROAD WORK AT NARSING SITE. ON VISIT ING THE SITE BY THE INSPECTOR OF INCOME TAX NO SUCH ROAD WAS FOUND. THEREFORE, TH E LD. AO DISALLOWED THE CLAIM OF EXPENDITURE FOR RS. 18,04,070/ - . ON APPEAL, THE LD. CIT (A) CONFIRMED THE ORDER OF THE LD. AO BY AGREEING WITH HIS VIEW. 9. BEFORE ME , THE LD. AR VEHEMENTLY ARGUED STATING THAT THE PROJECT EXECUTED BY THE ASSESSEE IS ABOUT 1 KM FROM THE MAIN ROAD . THE DISTANCE BETWEEN THE MAIN ROAD AND THE PROJECT SITE DID NOT HAVE ANY APPROACH ROAD. THEREFORE, IN ORDER TO ENABLE THE ASSESSEE TO PERFORM THE CONTRACT, THE ROAD WAS LAID. THE LD. AR FURTHER SUBMITTED THAT ALL THE EXPEND ITURE INCURRED WERE PROPERLY DOCUMENTED WITH REQUISITE VOUCHERS AND TDS CERTIFICATES AND THE PAYMENTS WERE ALSO MADE BY CHEQUE TO SUB - CONTRACTORS. IT WAS THEREFORE PLEADED THAT THE DISALLOWANCE MADE BY THE LD. REVENUE AUTHORITIES ARE NOT APPROPRIATE. THE LD. DR COULD NOT CONTROVERT TO THE SUBMISSION OF THE LD. AO. ON PERUSING THE RECORDS ALSO, I FIND THA T THE LD. REVENUE AUTHORITIES HAD NOT MADE ANY ADVERSE FINDING ON THE AUTHENTICITY OF THE EXPENDITURE INCURRED BY THE ASSESSEE BUT HAS SIMPLY OBSERVED THAT THE ROAD WAS NOT LAID IN THE PREMISES WHERE THE PROJECT WAS EXECUTED. IT IS OBVIOUS THAT IF THE ROAD IS NOT LAID BETWEEN THE MAIN ROAD AND THE 5 PROJECT SITE , EXECUTION OF THE PROJECT COULD NOT HAVE BEEN POSSIBLE. THEREFORE, IT IS NECESSARY TO INCUR SUCH EXPENDITURE FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. HENCE, I HEREBY DIRECT THE LD. AO TO GRANT DEDUCTION OF RS. 18,04,070/ - TO THE ASSESSEE AS ALLOWABLE EXPENDITURE. 10. SINCE THE ASSESSEE HAS NOT PRESSED FOR GROUND NO.2, THE GROUND IS DISMI SSED AS SUCH. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THE 11 TH AUGUST , 2021. SD/ - ( A. MOHAN ALANKAMONY ) ACCOUNTANT MEMBER HYDERABAD, DATED: 11 TH AUGUST , 2021. OKK COPY TO: - 1) RDB LEGAND INFRASTRUCTURE PRIVATE LIMITED, C/O. T. CHAITANYA KUMAR, ADVOCATE, FLAT NO. 102, GOWRI APTS, H.NO. 3 - 6 - 195/B, URDU HALL LANE, HIMAYATNAGAR, HYDERABAD 500029. 2) THE INCOME TAX OFFICER, WARD - 3(2), HYDERABAD. 3) THE CIT (A) - 3, HYDERABAD. 4) THE PR. CIT - 3, HYDERABAD. 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE