Deputy Commissioner of Income- tax, Circle - 1(1)(2), Bangalore V. M/s. Bangalore Airport Rail Link Limited, Bangalore

ITA 957/BANG/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0554 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 03-05-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: H N KHINCHA
• Assessee Lawyers: VINOD SHARMA
• Keywords: Business expenditure; Opportunity of being heard; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI B.R BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.957/BANG/2019 ASSESSMENT YEAR: 2013-14 THE DY. COMMISSIONER OF INCOME-TAX CIRCLE-1(1)(2), BENGALURU. VS. M/S BANGALORE AIRPORT RAIL LINK LTD., NO.1/1, KSFC BHAVAN, THIMMAIAH ROAD, BENGALURU-560 052. PAN AADCB 5017 G APPELLANT RESPONDENT APPELLANT BY : SHRI H.N KHINCHA, C.A RESPONDENT BY : SHRI VINOD SHARMA, JCIT (DR) DATE OF HEARING : 17.09.2019 DATE OF PRONOUNCEMENT : 17.09.2019 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER THE REVENUE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 05-03-2019 PASSED BY LD CIT(A)-12, BANGALORE AND IT RELATES TO THE ASSESSMENT YEAR 2013-14. THE REVENUE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN DELETING THE DISALLOWANCE OF BUSINE SS EXPENSES OF RS.188.75 LAKHS MADE BY THE AO. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD . THE ASSESSEE IS ENGAGED IN THE BUSINESS OF IMPLEMENTING A HIGH SPEE D RAIL LINK FROM THE CITY TO BANGALORE INTERNATIONAL AIRPORT. DURIN G THE YEAR UNDER CONSIDERATION, THE AO NOTICED THAT THE ASSESSEE HAS CLAIMED ITA NO.957/BANG/2019 PAGE 2 OF 5 BUSINESS EXPENSES AGGREGATING TO RS.188.75 LAKHS AS DEDUCTION AGAINST OTHER INCOME (CONSISTING OF MAINLY INTERE ST INCOME). THE AO TOOK THE VIEW THAT THE ASSESSEE HAS NOT SET UP O R COMMENCED ITS OPERATIONS AND HENCE THE EXPENSES CLAIMED BY THE AS SESSEE ARE NOT ALLOWABLE AS DEDUCTION. THE AO ALSO EXPRESSED THE V IEW THAT THESE EXPENSES MAY BE CAPITALISED. ACCORDINGLY HE DISALL OWED THE ENTIRE EXPENSES CLAIMED BY THE ASSESSEE. ACCORDINGLY THE AO ASSESSED ENTIRE OTHER INCOME AS TOTAL INCOME OF THE ASSESS EE. 3. THE LD CIT(A), HOWEVER, TOOK THE VIEW THAT TH E ASSESSEE HAS COMMENCED ITS OPERATIONS AND HENCE THE BUSINESS EXP ENSES CLAIMED BY THE ASSESSEE IS ALLOWABLE AS DEDUCTION. ACCORDINGLY HE DIRECTED THE AO TO ALLOW THE CLAIM OF THE ASSESSEE. 4. AFTER HEARING BOTH THE PARTIES, THE BENCH OBS ERVED THAT THE ENTIRE EXPENSES MAY BE REQUIRED TO BE CAPITALISED A GAINST THE FIXED ASSETS, AS THE ASSESSEE IS IN THE PROCESS OF IMPLEM ENTING THE RAIL LINK PROJECT, I.E., IT IS A CASE OF CONSTRUCTION OF PROJECT, IN WHICH CASE, THE ENTIRE PRE-CONSTRUCTION EXPENSES ARE REQU IRED TO BE CAPITALISED. 5. THE LD A.R SUBMITTED THAT BOTH THE AO/CIT(A) HAS EXAMINED THE ISSUE FROM THE ANGLE OF COMMENCEMENT OF BUSINES S ONLY. HOWEVER, THE LD D.R RIGHTLY POINTED OUT THAT THE AO HAS ALSO OBSERVED THAT THE IMPUGNED EXPENSES MAY BE CAPITALI SED. AT THIS STAGE, THE LD A.R SUBMITTED THAT THE OTHER INCOME EARNED BY THE ASSESSEE IS INTRICATELY CONNECTED WITH THE ACTIVITY OF IMPLEMENTATION OF PROJECT AND HENCE THE SAID INCOME SHOULD BE DEDU CTED FROM THE ITA NO.957/BANG/2019 PAGE 3 OF 5 PRE-CONSTRUCTION EXPENSES. ACCORDINGLY HE SUBMITTE D THAT THE AO WAS NOT CORRECT IN LAW IN ASSESSING THE OTHER INCOM E SEPARATELY. 6. THE LD D.R, HOWEVER, SUBMITTED THAT THE ASSESS EE HAS RAISED A NEW CLAIM AND THERE WAS NO OCCASION FOR THE AO TO E XAMINE THIS NEW CLAIM. 7. SINCE THE ASSESSEE IS IN THE PROCESS OF IMPL EMENTING A PROJECT, WHICH IS IN THE NATURE OF CONSTRUCTION OF PROJECT, THE QUESTION OF EXAMINING THE SETTING UP OF BUSINESS OR COMMENCEME NT OF BUSINESS DOES NOT ARISE IN THIS CASE. SINCE THE A SSESSEE IS CONSTRUCTING A PROJECT, ALL THE EXPENSES ARE INCURR ED IN CONNECTION THERE WITH ARE CALLED PRE-CONSTRUCTION EXPENSES AND THEY ARE REQUIRED TO BE CAPITALISED AS PER THE DECISION REND ERED BY HONBLE SUPREME COURT IN THE CASE OF CHALLAPALLI SUGAR LTD (1975 AIR 97, 98 ITR 167). HENCE THE ALTERNATIVE VIEW EXPRESSED BY THE AO IS ACCORDINGLY UPHELD. ACCORDINGLY, THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE IS SET ASIDE. 8. BEFORE US, THE LD A.R HAS RAISED A NEW CONTENT ION THAT THE OTHER INCOME SHOULD NOT BE ASSESSED SEPARATELY, B UT IT HAS TO BE REDUCED FROM THE PRE-CONSTRUCTION EXPENSES. HOWEVE R, WE NOTICE THAT THIS CLAIM OF THE ASSESSEE REQUIRES EXAMINATIO N OF FACTS RELATING TO OTHER INCOME AND ALSO THE LAW EXPLAINED BY HON BLE SUPREME COURT/HIGH COURTS IN THIS REGARD, WHICH IS ALSO DEP ENDENT UPON THE FACTS RELATING TO OTHER INCOME. THE ASSESSING OF FICER DID NOT EXAMINE THIS CLAIM OF THE ASSESSEE WITH REGARD TO O THER INCOME, EVEN THOUGH HE HAS OBSERVED THAT THE EXPENSES CAN B E CAPITALISED. ITA NO.957/BANG/2019 PAGE 4 OF 5 ACCORDINGLY, WE ARE OF THE VIEW THAT THIS CLAIM OF THE ASSESSEE REQUIRES EXAMINATION AT THE END OF THE AO. ACCORDI NGLY WE RESTORE THIS ISSUE TO THE FILE OF THE AO FOR EXAMINING THE ABOVE SAID CLAIM OF THE ASSESSEE. AFTER AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD, THE AO MAY TAKE APPROPRIATE DECISION IN ACCORDANCE WITH LAW. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH SEPTEMBER, 2019. SD/ - (BEENA PILLAI) JUDICIAL MEMBER SD/ - (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED, 17 TH SEPTEMBER, 2019. / VMS / COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.