NTPC BHEL POWER PROJECTS PVT. LTD. ,DELHI V. ACIT CIRCLE-18(2), DELHI

ITA 1254/DEL/2022

AI Insights

The case revolves around NTPC BHEL Power Projects Pvt. Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals) that upheld the Assessing Officer's decision denying 100% depreciation on temporary structures. These structures were part of the preliminary site enabling facilities for a 500MW power plant. The Tribunal examined whether these assets, being temporary and used solely for the project, qualified for 100% depreciation. The Tribunal's decision was influenced by precedents where similar temporary structures were granted 100% depreciation, recognizing them as not contributing to any enduring benefit but serving a specific, temporary purpose.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 711661 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2015-2016
• Other Referred Cases: Navi Masjid Mahfile and Ors vs. ACIT(Exemption) Ahmedabad, Collector, Land Acquisition vs. MST. Katiji and Ors, ACIT, Circle 10(1), New Delhi vs Dredging International India Pvt. Ltd., CIT v. Madras Auto service, Commissioner of Income Tax v. Hindustan Zinc Ltd., CIT v. Associated Cement Companies, CIT vs. Industrial Cables I Ltd., Shalivahana Constructions Ltd. vs. DCIT, CIT vs. Print Systems and Products, CIT v. Bombay Dyeing and Manufacturing Co. Ltd
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: REVENUE; DHEERAJ KUMAR JAIN
• Assessee Lawyers: GAURAV GUPTA
• Keywords: Condonation of delay; Set aside; Capital asset; Revenue expenditure; Reasonable cause; Business expenditure; Depreciation; Period of limitation; Capital expenditure; Capital Gains; Principle of natural justice; TDS; Time period of passing order
• Section: 37; 115JB

Judgement Text

"1 THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH “E” NEWDELHI BEFORESHRISUDHIR KUMAR, JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.1254/Del/2022 Assessment Year: 2015-16 NTPC BHEL Power Projects Pvt. Ltd. Core 7 NTPC Bhawan Scope Complex Lodhi Road, New Delhi-110003 Vs. ACIT Circle -18 (2) Delhi PAN No.AACCN9505A (Appellant) (Respondent) ORDER PER SUDHIR KUMAR JM: The assesseepreferred the appeal, challenging the order dated passed by Commissioner of Income Tax, Delhi (in short “CIT(A)”) order dated 02.12.2019 for A.Y. 2015-16. Appellant by Sh. Gaurav Gupta, Advocate Respondent by Sh. Dheeraj Kumar Jain, Sr. DR Date of hearing 02.07.2025 Date of pronouncement 23.07.2025 Printed from counselvise.com 2 2. The assessee has raised following concise grounds of appeal: A. In view of the facts and circumstances of the case and in law, the impugned Order passed by Ld. CIT (A) dated 02.12.2019 is illegal, malafide, without application of mind and contrary to principles of natural justice, and contrary to settled principles of law; hence, the impugned order be set aside. B. In view of the facts and circumstances of the case and in law, Ld. CIT (A) has erred in upholding the order of Ld. Assessing Officer, denying the benefit of 100% deprecation on temporary structures; hence, the impugned order be set aside. C. In view of the facts and circumstances of the case and in law, Ld. CIT (A) has erred in holding that invoices are for designing, manufacturing and setting up main system for construction power supply whereas these invoices are for setting up \"preliminary site enabling facilities\" which are essential for providing services to Client but are temporary in nature; hence, the impugned order be set aside. D. In view of the facts and circumstances of the case and in law, Ld. CIT (A) has erred in holding that the invoices are for Transformers, cables, galvanised steel tubes, base plates, switchgear panels etc. which can in no way be classified as temporary structures as per the depreciation schedule whereas all such goods were required to create \"site enabling facilities and were to be dismantled after completion of the project; hence the impugned order be set aside. Printed from counselvise.com 3 E. In view of the facts and circumstances of the case and in law, the impugned order passed by Ld. CIT (A) fails to consider that site on which the temporary assets were erected does not belong to Appellant and that the contract itself considers the site enabling assets are dismantled once the project awarded in 2013 was commissioned in 2017; and hence, the impugned order be set aside. F. That, in view of the facts and circumstances of the case, and without prejudice, the Appellant is entitled to consider the expenditure on these assets as revenue expenditure. 3. The assessee has filed the application for condonation of delay of 852 days in filing the appeal. The assessee has submitted that the manager finance was official tour and leave during the period from 25- 12-2019 to 22-03-2020. There after cases of COVID -19 pandemicrisen andnation-wide lockdown was declared by the Central government. The Hon’ble Supreme court of India had directed that for computing the period of limitation period of COVID-19 should be exempted. He further submitted that there is no negligence on the part of the assessee in preferring the appeal before the Tribunal. He also submitted that the sufficient cause has been shown by the assessee for not filing the appeal within time. He also submitted that substantial justice should be done rather than deciding the matter on the basis of technical defect. In the support of the application the assessee has filed the affidavit of Ms. Shivani Saxena. Reliance has placed on the following decisions: Printed from counselvise.com 4 In the case of Navi Masjid Mahfile and Ors vs. ACIT(Exemption) Ahmedabad dated 13-04-2022 ITAT Ahmedabad the Co-ordinate bench held as under: 5.3 From the above judgment of the Hon’ble Apex Court, we note that the substantial justice deserves to be preferred rather than deciding the matter on the basis of technical defect. 6. The next controversy arises whether the delay of 838 days was excessive of inordinate. There is no question of any excessive or inordinate when there was reasonable cause which prevented the assessee in filing the appeal. AS such we need consider the cause for the delay and not the length of the delay. Accordingly in our consideration view when there was a reasonable cause, the period of delay may not be relevant factor. ……………. From the above we note that the Hon’ble Madras High Court in the above case was pleased to condone the delay for 20 years approximately by holding that there was sufficient and reasonable cause on the part of the assessee for not filing the appeal within the period of limitation. The delay in the instant case is just of 838 number of days which cannot be considered to be inordinate or excessive in comparison to the delay of 7330 days approximately. 6.1 In view of the above we are of the opinion that when there is sufficient cause for not filing the appeal within the period of limitation, the delay has to be condoned irrespective of the duration/ period of the delay. In this case, the non-filing of an affidavit by the Revenue for opposing the condonation of delay itself is sufficient for condonation the delay of 838 number of days. Thus, we condone the delay of 838 days in filing the appeal and proceed to hear the appeal on merit for the adjudication. Printed from counselvise.com 5 In the case of Collector, Land Acquisition vs. MST. Katiji and Ors reported in MANU /SC/0460/1987: 167 ITR 471 SC the Hon’ble Supreme Court held as under: The legislature has conferred power to condone delay by enacting section 5 of the Limitation Act, 1963 in order to enable the courts to do substantial justice to parties by disposing of matters on merits. The expression “sufficient cause” in section 5 is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice- that being the life-purpose of the existence of the institution of courts. A justifiably liberal approach has to be adopted on principle. Every day’s delay must be explained does not imply a pedantic approach. The doctrine must be applied in a rational, common sense and pragmatic matter. 4. The Ld. Sr. DR opposed the application and stated that no sufficient cause for condonation of delay has been shown by the assessee. He prayed for the dismissal of the application. 5. We have heard the rival contention of the parties and perused the material on record. In the application the assessee has shown the sufficient cause for not filing the appeal within time limit. Thus, we condone the delay of 852 days in filing the appeal and admitted for adjudication. 6.The brief facts of the case are that assessee is EPC Contractor engaged to have certain preliminary site enabling assets for Printed from counselvise.com 6 facilitating project construction of 500MW unit Power Plant at site. The assessee has filed its return of income on 30-09-2015 declaring loss of Rs. 9,53,32,467/- and income under section 115JB at Rs. 3,10,70,682/-. The case of the assessee was selected for scrutiny under CASS and notice under section 143(2) of the act was issued on 12-04-2016 which was duly served on the assessee. According to AO the assessee has claimed 100% depreciation on site enabling assets under ‘Building’in depreciation schedule. After considering the submission made by assessee the AO completed the assessment after allowing the 10% depreciation and made the addition of Rs. 1,33,80,234/-. 7. Aggrieved the order of the AO the assessee filed the appeal before the Ld. CIT(A) who vide his order dated 02-12-2019 dismissed the appeal. In the order the Ld. CIT(A) has observed as under: 4.2 From the invoices of the assets on which depreciation had been claimed at the rate of 100%, it was noticed that the bill/vouchers were for purchase of assets for design. manufacturing and setting up of main system for construction power supply. The contention of the assessee claiming depreciation on closed shed and porta cabins was accepted. The AO also noted that as per the accounts of the assessee for FY 2015-16 to 2017-18, assets like construction power facilities and chain-link fencing transit were in the nature of temporary assets continued to be with the assessee and the assessee failed to prove that Printed from counselvise.com 7 the assets use were for temporary purpose. The appellant has submitted that site enabling assets which are capitalised are purely temporary structures and these are not comparable to fixed assets which are constructed over longer duration of useful life. It has also been submitted that due to large work area all individual small components are required for huge numbers and the same are capitalized. 4.3 I have considered the assessment order and submissions of the appellant. As has been noted by the AO also, from the invoices it is noticed that the same are for design, manufacturing and setting up of main system for construction power supply. It was also noted that the invoices are for Transformers, cables, galvanised steel tubes, base plates, switchgear panels etc. which can in no way be classified as temporary structures as per the depreciation schedule. Hence, there appears to be no need to interfere with the order of the AO and the disallowance of depreciation made by the AO is upheld. The only ground of appeal is dismissed. 8. Being aggrieved by the order of the Ld. CIT(A) the assessee preferred the appeal before the Tribunal. 9. The Ld. AR of the assessee submitted that construction of closed shed and porta cabins were purely temporary assets. It was submitted that the assets used for construction power facilities and chain link facilities transit were in the nature of temporary assets and are eligible for 100 % depreciation. He also submitted that as per the agreement the assessee is responsible to make own arrangements for construction Printed from counselvise.com 8 power at various location as per his requirements and also for chain link fence between existing main plant facilities and areas identified. He further submitted the contractor is liable to make own arrangements for distribution of power from the point of electricity provided by the employer. It was also submitted that the land on is owned by the NTPC Ltd. and construction power facilities were purchased by the assessee at its own expense. The said construction removed from the site, once the contract was completed. Reliance has placed on the following decisions: (i) ACIT, Circle 10(1), New Delhi vs Dredging International India Pvt. Ltd. ITA NO 4442& 4443 /del/2010 (ii) CIT v. Madras Auto service (1998) 6, SCC 404 (iii) Commissioner of Income Tax v. Hindustan Zinc Ltd. (iv) CIT v. Associated Cement Companies 1988 (Supp) SCC 378 10. Ld. Departmental representative has relied the orders of the lower authorities and submitted that structures in this regard are not temporary in nature. He stated that the same was in capital expenditure and assessee derived enduring benefit from them. 11. We have heard the revival contention of the parties and gone through the material available on record. We find that the assessee’s temporary structure in this regard comprised of invoices for designing, manufacturing and setting up main system for construction power supply are for setting up the preliminary site enabling facilities was Printed from counselvise.com 9 essential for providing services are temporary in nature. The transformers cables galvanized steel tubes base plates, switchgear panels were also temporary nature to enabling the facilities, which were to be dismantled after completion of the project. We find that structures were constructed on the land which was not owned by the assessee company. The assessee company does not per-se have any legal rights with regards to these constructions. The temporary constructions required for only in connection with the execution of the contractual work and no other purpose. The cost of the temporary structures has been borne by the assessee company. Thetemporary structures to be removed from the site once the contract was concluded. The temporary constructions were made only for the purpose of execution of the contract. The land on which temporary construction was constructed is not leased to the assessee and after the completion of the contractual obligation the assessee would remove the alltemporary, constructions and vacate the land. 12.In the case of ACIT, Circle 10(1), New Delhi vs Dredging International India Pvt. Ltd. ITA NO 4442 & 4443 /del/2010 the Co- ordinate Delhi Bench held that : 7.2 We have carefully considered the submissions and perused the records. We find installation of water tank, etc. We find that the structures were erected on the land container units, installation of Instakabins, preparing foundation for the cabins, have any legal rights with regard to these structures. We further find that no Printed from counselvise.com 10 structures are not constructed or attached to land, le. they have no earth foundation and no earth which is not owned by the assessee company The assessee company does not per-se flooring. Contractor has made available the land to the assessee company for putting up temporary structures, etc. required for only in connection with the execution of the contractual work and not for other purposes. The cost of temporary structures has been borne entirely by the assessee company. The structures were used for a limited purpose mainly as accommodation for labour. The assessee is only allowednon-exclusive access contractor. The land is not leased to the assessee and the assessee has the access to the land only for the purposes specified in the contract. We further find that assessee company could be called upon to vacate the land at any time, upon which the assessee company would be obliged to remove all temporary structures. Furthermore, upon completion of the contract the assessee company is under an obligation to vacate the land and remove all structures. 7.3 From the above discussion, we find that Ld. Commissioner of Income Tax (A) is correct in holding that the structures were temporary structures and the assessee should have been allowed 100% depreciation thereon. The above view is further fortified by the fact that the containers purchased during the previous year under consideration, were sold by the assessee in FY 2005-06 at a sale consideration of Rs. 3,157,133/-. Since the value of block of asset was \"Nil\", the assessee has offered to tax, entire sales Consideration of Rs. 3,157,133/- as 'Short term capital gains' in assessment year 2006-07. 7.4 In this regard, we refer to the decision of the Hon'ble Punjab and Haryana High Court decision in the case of C.I.T. vs. Industrial Printed from counselvise.com 11 Cables I Ltd. MANU/PH/0161/2002: 254 ITR 267. In this case, it was held that assessee company had brought an industrial unit in the backward area and constructed temporary quarters for the workers, also provided a temporary (kacha) road for the quarters. As the construction were temporary, the entire amount was admissible as revenue expenditure u/s. 37 of 1.T. Act, 1961. Furthermore, in the case of Shalivahana Constructions Ltd. vs. DCIT12 SOT 406, it was held that in the case of assessee contractor had put up temporary structures on project site on the land given by the contractee and claimed depreciation 100% which was applicable to temporary construction. Since no lease hold on the land was acquired of material other than wooden. Again Hon’ble Madras High Court in the case of C.I. T. Vs. Print Systems and Products MANU / TN/8412 /2006 : 285 ITR 337, has held that assessee was entitled of 100% depreciation in respect of expenses incurred by it on construction of temporary structures in the lease property. 7.5 In the background of the aforesaid discussion, we hold that assessee has constructed purely temporary structures. Structures were primarily used for accommodation of the staff. Land beneath these structures is not owned by the connection with contractual work. These structures were not constructed or attached to land i.e. they have no earth foundation and no earth flooring. The cost of temporary structures has been borne entirely by the assessee. The assessee is only allowed non exclusive access to the land for the purpose specified in the contract with Hazira Port. The case laws mentioned above duly support the case of the assessee. Hence, in our considered opinion, there is no infirmity in the order of the Ld. Commissioner of Income Tax (A) on this issue and accordingly, we uphold the same. Printed from counselvise.com 12 (ii) In the case of CIT v. Madras Auto service (1998) 6, SCC 404 the Hon’ble Supreme Court held as under : 6. In order to decide whether this expenditure is revenue expenditure or capital expenditure, one has to look at the expenditure from a commercial point of view. What advantage did the assessee get by constructing a construction? The assessee got a long lease of a newly- constructed building building which belonged to somebody else and spending money for such suitable to its own business at a very concessional rent. The expenditure. therefore, was made in order to secure a long lease of new and more suitable business premises at a lower rent. In other words, the assessee made substantial savings these amounts. The saving inexpenditure was a saving in revenue expenditure in the form of rent. Whatever substitutes for revenue expenditure should normally tent considered as revenue expenditure. Moreover, the assessee in the present case did not get any capital asset by spending the said amounts. The assessee, therefore, could not have claimed any depreciation. Looking to the nature of the advantage which the assesseeobtained in a commercial sense, the expenditure appears to be revenue expenditure. 7. The test for distinguishing between capital expenditure and revenue expenditure in our country was laid down by this Court in Assam Bengal Cement Co. Ltd. v. CIT. In that case, the appellant-Company had acquired period of 20 years for the purpose of manufacture of cement. The lessee had. inter alia, agreed to pay an annual sum during the whole period of the lease from the Government of Assam lease of certain limestone quarries for a not to grant to any person any lease, permit or prospecting licence for as a protection fee and in consideration of that payment, the lessor undertook b distinguishing between capital expenditure and revenue expenditure. One of Printed from counselvise.com 13 limestone. This Court examined tests laid down in various cases for the standard tests now in use was laid down in the case of Atherton v. British Insulated andHelsby Cables Lid? It said: “When an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, I think that there is very good reason (in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital.” Whether by spending the money any advantage for the enduring benefit of a trade. I think that there is very good reason (in the absence \"When an expenditure is made, not only once and for all, but with a of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital.\" Whether by spending the money any advantage of an enduring nature has been obtained or not will depend upon the facts of each case. Moreover, as the above passage itself provides, this test would not apply if there are special circumstances pointing to the contrary. This Court in the above case summarised the tests as follows: (p. 44) 1. Outlay is deemed to be capital when it is made for the initiation of a business, for extension of a business, or for a substantial replacement of equipment. 2. Expenditure may be treated as properly attributable to capital when it is made not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade. If what is got rid of by a lump-sum payment is an annual f business expense chargeable against revenue, the lump-sum payment should equally be regarded as a business expense, but if the lump-sum Printed from counselvise.com 14 payment brings in a capital asset, then that puts the business on another footing altogether. 3. Whether for the purpose of the expenditure, any capital was withdrawn, or, in other words, whether the object of incurring the expenditure was to employ what was taken in as capital of the business. Again, it is to be seen whether the expenditure incurred was part of the fixed capital of the business or part of its circulating capital. Relying upon the second test enumerated above, learned counsel for a the appellant has submitted that the assessee got an enduring benefit of a building for a period of 39 years. The difficulty, however, in the present capital nature by spending the amount because the assessee obtained a new case, arises from the fact that this building was never to belong to the lessor. Therefore, by spending this money, the assessee did not acquire any assessee. Right from inception, the building was in the ownership of the capital asset. The only advantage which the assessee derived by spending the b money was that it got the lease of a new building at a low rent. From the business point of view, therefore, the assessee got the benefit of reduced rent. The High Court has, therefore, rightly considered this as obtaining a business advantage. The expenditure is therefore, to be treated as revenue expenditure. C 9. Although there are a number of cases dealing with this question, we expending money, created an asset of an enduring nature. However, the asset will limit ourselves to examining a few cases where the assessee, by so created did not belong to the assessee. In Printed from counselvise.com 15 such a situation, the courts have held that the expenditure was for better carrying on of the business of the assessee and could be allowed as revenue expenditure, looking to the circumstances of each of those cases. Thus in Lakshmiji Sugar Mills Co. (P) d Ltd. v. CIT the assessee-Company was carrying on the business of manufacture and sale of sugar. It paid to the Cane Development Council certain amounts by way of contribution for the construction and development of roads between various sugarcane-producing centres and the sugar factories of the assessee. The roads remained the property of the Government. This Court held that the expenditure was not of a capital nature and had to be allowed as an admissible deduction in computing the profits of the assessee's business. The expenditure was incurred for the purpose of facilitating the running of the assessee's motor vehicles and other means employed for transportation of sugarcane to its factories. 10. In the case of L.B. Sugar Factory and Oil Mills (P) Ltd. v. CIT the assessee was carrying on the business of manufacture and sale of sugar. It f had its factory in U.P. The assessee paid a contribution towards meeting the cost of construction of roads in the area around its factory under a sugarcane development scheme. The question was whether this amount was deductible in computing the assessee's profits. The Court held that it was. Because although the advantage secured was of long duration, it was not an advantage in the capital field because no tangible or intangible asset was acquired by the assessee; nor was there any addition to or expansion of the profit- making apparatus of the assessee. The amount was contributed for the purpose of facilitating the business of the assessee and making it more efficient and profitable. It was, therefore, revenue expenditure. Printed from counselvise.com 16 11. In the case of CIT v. Associated Cement Companies Ltds the respondent-Company entered into an agreement to supply water to the municipality and provide water pipelines as also to supply electricity for a streetlighting and put up a transmission line for that purpose. The assessee also agreed to concrete the main road from the factory to the railway station. The amounts expended for these purposes were held to be revenue municipality and not of the assessee. The expenditure, therefore, did not result in creating any capital asset for the Company. The advantage secured b expenditure since the installations and accessories were the assets of the taxes for a period of 15 been by the respondent was immunity from liability to pay municipal rates and paid, the payments would have been on revenue account. Therefore, the advantage secured was in the field of revenue and not capital. 12. In the case of CIT v. Bombay Dyeing and Manufacturing Co. Ltdthe Company contributed to the State Housing Board certain amounts for construction of tenements for its workers. The tenements remained the property of the Housing Board. It was held that the expenditure was incurred wholly and exclusively on the welfare of the employees and, therefore, acquired no ownership rights in the tenements, this Court said that the constituted legitimate business expenditure. As the assessee-Company expenditure was incurred merely with a view to carry on the business of the d Company more efficiently by having a contented labour force. e 13. All these cases have looked upon expenditure which did bring about some kind of an enduring benefit to the Company as a revenue Printed from counselvise.com 17 expenditure when the expenditure did not bring into existence any capital asset for the Company. The asset which was created belonged to somebody else and the Company derived an enduring business advantage by expending the amount. In all these cases, the expense has been looked upon as having been made for the purpose of conducting the business of the assessee more profitably or more successfully. In the present case also, since the asset created by spending the said amounts did not belong to the assessee but the assessee got the business advantage of using modern premises at a low rent, thus saving considerable revenue expenditure for the next 39 years, both the Tribunal as well as the High Court have rightly come to the conclusion that the expenditure should be looked upon as revenue expenditure. 13. From the aforesaid discussion we hold that the assessee has constructed purely temporary structures. Structures were made supply the electricity to the labour and staff and to complete the contractual obligation. The cost of the temporary structures has been borne by the assessee. The assessee is allowed to make the temporary construction, which is to be dismantled once the work is over. The case law mentioned above fully support the case of the assessee that assessee is entitled of 100 % depreciation in respect of the expenses incurred by it on construction of temporary structures. The grounds raised by the assessee are allowed. The appeal of the is allowed for statistical purpose. Printed from counselvise.com 18 14. In the result the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 23/07/2025. Sd/- Sd/- (MANISH AGARWAL) (SUDHIR KUMAR) ACCOUNTANT MEMBER JUDICIALMEMBER Dated:23 July,2025 “Neha, Sr. PS” Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, Delhi Printed from counselvise.com "