Income Tax Appellate Tribunal - Chennai
Acit, Erode vs M/S. R.P.P. Infra Projects Ltd., Erode on 17 July, 2018
आयकर अपील
य अ धकरण, 'बी' यायपीठ, चे नई
IN THE INCOME TAX APPELLATE TRIBUNAL
'B' BENCH, CHENNAI
ी एन.आर.एस. गणेशन, या यक सद य एवं
ी ए. मोहन अलंकामणी, लेखा सद य केसम&
BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND
SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER
आयकर अपील सं./ITA No.2127/Chny/2016
नधा(रण वष( / Assessment Year : 2012-13
The Assistant Commissioner of M/s R.P.P. Infra Projects Ltd.,
Income Tax, Circle - 1, v. S.F.No.454,Raghupathynaickenpalayam,
Erode. Poondurai Road, Railway Colony Post,
Erode - 638 002.
PAN : AAACR 9307 E
(अपीलाथ,/Appellant) (-.यथ,/Respondent)
आयकर अपील सं./ITA No.3161/Chny/2017
नधा(रण वष( / Assessment Year : 2012-13
M/s R.P.P. Infra Projects Ltd.,
C/o Shri S. Sridhar,
Sh. A.S. Sriraman, Advocates, The Assistant Commissioner of
New No.14, Old No.82, Flat No.5, v. Income Tax, Circle - 1,
1st Avenue, Indira Nagar, Erode.
Adyar, Chennai - 600 020.
PAN : AAACR 9307 E
(अपीलाथ,/Appellant) (-.यथ,/Respondent)
राज व क0 ओर से /Revenue by : Shri Asish Tripathy, JCIT
नधा(2रती क0 ओर से /Assessee by : Shri S. Sridhar, Advocate
सन
ु वाई क0 तार
ख/Date of Hearing : 22.05.2018
घोषणा क0 तार
ख/Date of Pronouncement : 17.07.2018
2 I.T.A. No.2127/Chny/16
I.T.A. No.3161/Chny/17
आदे श /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
Both the Revenue and the assessee filed the appeals against the very same order of the Commissioner of Income Tax (Appeals)-3, Coimbatore, dated 29.04.2016 pertaining to assessment year 2012-13. Therefore, we heard both the appeals together and disposing of the same by this common order.
2. Let's first take the assessee's appeal in I.T.A. No.3161/Chny/2017.
3. There was a delay of 546 days in filing the appeal by the assessee before this Tribunal. Shri S. Sridhar, the Ld.counsel for the assessee, submitted that there was a search in the premises of the assessee on 24.03.2016 and the assessment order was passed by the Assessing Officer for the year under consideration. According to the Ld. counsel, the Department initiated post search enquiries, therefore, the assessee was fully focused in the assessment proceeding initiated by the Department after the search. In the process, according to the Ld. counsel, the order received by the assessee was inadvertently misplaced. The assessee could not locate the same inspite of best efforts. After completion of post search enquiries, the assessee traced out the impugned order of the CIT(Appeals). In fact, according to the Ld. 3 I.T.A. No.2127/Chny/16 I.T.A. No.3161/Chny/17 counsel, the assessee was advised by the Tax Consultant that in view of the proceeding initiated under Section 153A of the Income-tax Act, 1961 (in short 'the Act'), the regular assessment proceeding would stand terminated and there would not be any action taken on the assessment order passed in the regular course. According to the Ld. counsel, the assessee, thereafter consulted another Advocate and he advised the assessee that a separate appeal needs to be filed, therefore, there was a delay of 546 days. According to the Ld. counsel, the assessee was prevented from filing the appeal within the period of limitation. Therefore, the delay may be condoned.
4. On the contrary, Shri Asish Tripathy, the Ld. Departmental Representative, submitted that there was no reasonable cause on the part of the assessee for not filing the appeal within the period of limitation. According to the Ld. D.R., the search took place before the date of order of the CIT(Appeals), therefore, the assessee is not justified in filing the appeal belatedly.
5. We have considered the rival submissions on either side and perused the relevant material available on record. The order of the CIT(Appeals) is dated 29.04.2016 and admittedly, the search took place on 24.03.2016. Therefore, naturally the assessee has to focus only on the search assessment by reconciling the material found during the 4 I.T.A. No.2127/Chny/16 I.T.A. No.3161/Chny/17 course of search operation. Moreover, the assessee submits that there was legal advice that in view of the initiation of search proceeding, the pending assessment would stand terminated. This advice given by the consultant may be a wrong one. But, for the purpose of deciding the issue of condonation of delay, this Tribunal is of the considered opinion that the assessee was wrongly advised by a Tax Practitioner. Hence, the assessee has reasonable cause in not filing the appeal within the period of limitation. Therefore, the delay of 546 days is hereby condoned and the appeal of the assessee is admitted.
6. Now coming to the merit of the appeal, the only issue arises for consideration is the claim of deduction under Section 80-IA of the Act. According to the Ld. counsel, the assessee is a developer of housing projects, therefore, eligible for deduction under Section 80-IA of the Act. However, the lower authorities rejected the claim of the assessee on the ground that the assessee is a contractor. Therefore, deduction under Section 80-IA of the Act is not available. According to the Ld. counsel for the assessee, the assessee apart from developing eligible infrastructure facility, is also maintaining separate books of account for all such works. The assessee is taking a financial risk in developing the project. The contracts were entered into with State Government, more particularly with Irrigation Department. According to the Ld. counsel, the Assessing 5 I.T.A. No.2127/Chny/16 I.T.A. No.3161/Chny/17 Officer as well as the CIT(Appeals) have not gone into the development work executed by the assessee and simply rejected the claim of the assessee on the ground that the assessee is a contractor.
7. The Ld.counsel for the assessee further submitted that there are various types of contracts as follows:-
(i) Build Own Operate & Transfer (BOOT);
(ii) Build Own Lease & Transfer (BOLT);
(iii) Build Operate & Transfer (BOT)
Since, the assessee develops the infrastructure facility by taking financial risk, according to the Ld. counsel, the Revenue cannot say that the assessee is only a contractor and not a developer. Therefore, according to the Ld. counsel, the CIT(Appeals) is not justified in confirming the order of the Assessing Officer.
8. On the contrary, Shri Asish Tripathy, the Ld. Departmental Representative, submitted that the assessee is only a contractor and not developer of the infrastructure facility. According to the Ld. D.R., the assessee has not developed any project. For the purpose of considering the assessee as a developer of infrastructure facility, according to the Ld. D.R., the assessee need to execute the project on Build, Operate and Transfer mode or Build Own Lease & Transfer mode. The assessee has to invest its own funds for developing the infrastructure project. Besides entering into agreement with Government, according to the Ld. D.R., the 6 I.T.A. No.2127/Chny/16 I.T.A. No.3161/Chny/17 assessee need to undertake operation as well as maintenance contracts for claiming as a developer of the project. In the facts of the case, according to the Ld. D.R., the assessee is only executing works contract and not developing any project, therefore, not eligible for deduction under Section 80-IA of the Act.
9. We have considered the rival submissions on either side and perused the relevant material available on record. Whether the assessee is a developer or contractor would depend upon how the project was executed by the assessee. For the purpose of deciding whether the assessee is a contractor or developer, the agreement said to be entered into between the parties plays a major role. Unfortunately, there is no reference about the clauses or terms and conditions of agreement either in the assessment order or in the CIT(Appeals)'s order. Moreover, copies of the agreement for developing the so-called infrastructure project are not available before this Tribunal. Therefore, this Tribunal is of the considered opinion that the matter needs to be reconsidered. Accordingly, the orders of both the authorities below are set aside and the Assessing Officer is directed to re-examine the matter afresh considering the agreement entered into by the assessee with other parties, including the Government, and thereafter decide the issue 7 I.T.A. No.2127/Chny/16 I.T.A. No.3161/Chny/17 afresh in accordance with law, after giving a reasonable opportunity to the assessee.
10. Now coming the Revenue's appeal in I.T.A. No.2127/Chny/2016, the only issue arises for consideration is deduction claimed by the assessee under Section 35D(1)(ii) of the Act.
11. Shri Asish Tripathy, the Ld. Departmental Representative, submitted that the assessee has considered entire share premium collected on the IPO for working out the eligible deduction under Section 35D of the Act. According to the Ld. D.R., share premium cannot be included while calculating the capital employed in the business of the company in view of proviso (b)(ii) of Explanation to 35D(3) of the Act. Therefore, according to the Ld. D.R., the CIT(Appeals) ought not to have deleted the addition made by the Assessing Officer to the extent of ₹20 lakhs. According to the Ld. D.R., the CIT(Appeals) has also deleted the addition of ₹23,62,536/- without appreciating the facts of the case.
12. On the contrary, Shri S. Sridhar, the Ld.counsel for the assessee, submitted that the assessee-company wrote off ₹87,25,987/- being the preliminary expenses / share issue expenses. According to the Ld. counsel, the Assessing Officer found that the expenses wrote off cannot be allowed. According to the Ld. counsel, the assessee incurred capital 8 I.T.A. No.2127/Chny/16 I.T.A. No.3161/Chny/17 expenditure of ₹4,24,29,460/- written off over a period of five years. Correspondingly the Assessing Officer found that even if the assessee is eligible for deduction under Section 35D(1), then the same works out to ₹6,10,058/- only. According to the Ld. counsel, the Assessing Officer disallowed the entire share issue expenses of ₹84,89,892/- on the ground that the funds were not raised for carrying out any expansion work or setting up of any new unit. According to the Ld. counsel, the assessee is engaged itself in developing infrastructure facility and expansion could only include additional capital in the business. According to the Ld. counsel, the additional capital was instrumental for taking many projects and its execution. The capital employed by the assessee had been adopted as aggregate of the share capital and long term borrowings. According to the Ld. counsel, the expenditure incurred at Indonesia and Ivory Coast is directly relatable to the business of the assessee- company. The Ld.counsel further submitted that what was claimed by the assessee is 1/5th of total expenditure under Section 35D of the Act. If Section 35D is not applicable, then the entire expenditure has to be allowed under Section 37 of the Act. Therefore, according to the Ld. counsel, the CIT(Appeals) has rightly allowed the claim of the assessee.
13. We have considered the rival submissions on either side and perused the relevant material available on record. From the material 9 I.T.A. No.2127/Chny/16 I.T.A. No.3161/Chny/17 available on record it appears that the assessee has executed projects for Government of Tamil Nadu and maintains separate books of account. Section 35D(1)(ii) of the Act clearly says that after commencement of business if the assessee incurs any expenditure in connection with extension of undertaking or in connection with setting up of new unit, it is eligible for deduction under Section 35D of the Act. Since the assessee is engaged in development of infrastructure facilities, the CIT(Appeals) has rightly found that each project is to be treated as undertaking within the meaning of Section 35D of the Act. It is also not in dispute that the assessee is maintaining separate books of account for each project. Therefore, the CIT(Appeals) has rightly allowed the claim of the assessee. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
14. The next ground of appeal raised by the Revenue is with regard to addition of ₹20 lakhs.
15. The Assessing Officer made disallowance of ₹20 lakhs due to non-reconciliation of tax deducted at source. The assessee filed the details of reconciliation before the CIT(Appeals). Therefore, the CIT(Appeals) found that the reconciliation statement filed before him needs to be verified. This Tribunal is of the considered opinion that this is only a reconciliation with regard to tax deducted at source. The 10 I.T.A. No.2127/Chny/16 I.T.A. No.3161/Chny/17 Assessing Officer is directed to verify the reconciliation statement filed which was annexed to the impugned order of the CIT(Appeals) and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee. Thus, we confirm the order of the CIT(Appeals).
16. The next issue arises for consideration is with regard to disallowance of ₹23,62,536/-.
17. The expenditure of ₹23,62,536/- was incurred in connection with launching of project in Indonesia. The assessee admittedly is maintaining an establishment in Indonesia and incurred expenditure for floating tenders and preparing projects, etc. These expenses were incurred before commencement of business, therefore, it has to be capitalized and the assessee is eligible for deduction under Section 35D(i) of the Act. In view of this, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
18. In the result, Revenue's appeal in I.T.A. No.2127/Chny/2016 is dismissed, whereas, the assessee's appeal in I.T.A. No.3161/Chny/2017 is allowed for statistical purposes.
11 I.T.A. No.2127/Chny/16
I.T.A. No.3161/Chny/17 Order pronounced on 17th July, 2018 at Chennai.
sd/- sd/-
(ए. मोहन अलंकामणी) (एन.आर.एस. गणेशन)
(A. Mohan Alankamony) (N.R.S. Ganesan)
लेखा सद य/Accountant Member या यक सद य/Judicial Member
चे नई/Chennai,
7दनांक/Dated, the 17th July, 2018.
Kri.
आदे श क0 - त8ल9प अ:े9षत/Copy to:
1. नधा(2रती /Assessee
2. Assessing Officer
3. आयकर आयु;त (अपील)/CIT(A)-3, Coimbatore
4. Principal CIT-2, Coimbatore
5. 9वभागीय - त न ध/DR
6. गाड( फाईल/GF.