Income Tax Appellate Tribunal - Pune
M/S P.C. Shah & Co, Mumbai vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
Pune Bench "A" , Pune
Before Shri I.C. Sudhir (JM)
and Shri G.S. Pannu (AM)
ITA Nos.601 & 602/MUM/2007
(Asstt. Years: 2000-01 & 2001-02)
Income Tax Officer, 24(2)(1), ... Appellant
6th Flr, C-13 Bldg., R.No.606,
Pratyakshakar Bhavan,
Bandra-Kurla Complex,
Bandra (E), Mumbai - 400 051
v.
M/s. P.C. Shah & Co., ... Respondent
B/104, Dwarkadevi Society,
1st Floor, Daftary Road,
Malad (E), Mumbai - 400 097
PAN: Not available
ITA No. 1269/PN/2006
(Asstt. Year : 2000-01 )
Income Tax Officer, Ward 2(1) ... Appellant
Jalgaon B.J. Market
Jilhapeth, Jalgaon
v.
P.C. Shah Developers Pvt. Ltd. ... Respondent
43/2, Pratap Nagar, Jilha Peth,
Jalgaon - 425 001
PAN : Not available
ITA No. 3889/MUM/2005
( Asstt.Year : 2001-02)
Income Tax Officer 9(2)(4), ... Appellant
Aayakar Bhavan,
Room No. 221, M.K. Road,
Mumbai - 400020
v.
M/s. P.C. Shah Developers Pvt. Ltd. ... Respondent
B/104, 3rd floor, Dwarkadevi Society,
Daftary Road,
Malad (East), Mumbai - 400 097
PAN: Not available
Appellant by : Shri S.K. Ambastha
Respondent by : S/Shri Sunil Pathak & Nikhil Pathak
Date of hearing :13.10.11
Date of Pronouncement: 17.11.11
2 ITA . Nos.601,602/Mum/2007,1269/PN/2006 &
ITA No. 3889/Mum2005
M/s. P.C. Shah & Co.etc.,
A.Ys. 2000-01 & 2001-02
Page of 13
ORDER
Per I.C. Sudhir, JM
The Revenue has questioned first appellate order in the case of M/s. P.C. Shah & Co. in following grounds (A.Y. 2000-01 & 2001-02) :
"1. On the facts & circumstances of the case, the CIT(A) erred in deleting the substantive assessment made in the hands of the assessee by stating that transfer of project by the assessee of M/s. P.C. Shah Developers P. Ltd. was valid ignoring the facts brought on records by the Assessing Officer.
2. On the facts and circumstances of the case, the CIT(A) erred in deleting the substantive addition on the basis of order of CIT(A)-IX, Mumbai which has not been accepted and contested before ITAT in the case of M/s. P.C. Shah Developers P. Ltd."
2. In the case of P.C. Shah Developers Pvt. Ltd., the Revenue has questioned first appellate order as under :
"A.Y. 2000-01 "1. On the facts and in circumstance of the case the CIT(A)-II erred in concluding that the Assessee Company was eligible for deduction u/s. 80IA(4).
2. On the facts and in the circumstance of the case the CIT(A)-II failed to appreciate the fact that since the Firm M/s. P.C. Shah & Co. was not eligible for deduction u/s. 80IA(4) the successor Company too was not eligible for deduction u/s. 80IA(4) since the proviso to the section, which relates to cases of transfer of the infrastructure facility, clearly states that the successor enterprise will be entitled to the deduction for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place and since in the present case the transferor enterprise is not eligible for the deduction the transferee enterprise would also not be entitled to the deduction.3 ITA . Nos.601,602/Mum/2007,1269/PN/2006 &
ITA No. 3889/Mum2005 M/s. P.C. Shah & Co.etc., A.Ys. 2000-01 & 2001-02 Page of 13
3. On the facts and in the circumstances of the case the CIT(A)-II erred in deleting the addition made by the Assessing Officer of Rs.40,88,524/- u/s 68 on account of excess toll receipts shown.
4. On the facts and in the circumstances of the case the CIT(A)-II erred in deleting the addition made by the Assessing Officer of Rs.11,88,610/- on account of income earned on the BOT Project."
A.Y. 2001-02 "1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in directing to the Assessing Officer to allow the claim of deduction u/s 80IA(4a) of the I T Act, 1961 without appreciating the facts brought on record by the Assessing Officer.
2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the estimation of BOT project income at Rs.21,40,000/- without appreciating the facts brought on record by the Assessing Officer.
3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition of Rs.81,52,001/- made to the total income of the assessee company u/s 68 of the I T Act, 1961 without appreciating the facts brought on record by the Assessing Officer."
3. Since the issue raised in the above appeals are inter-connected, these appeals are being disposed of by a consolidated order.
4. The relevant facts are that the firm M/s. P.C. Shah & Co. (henceforth referred to as firm) was engaged in the business of civil construction. The returns of income filed by it for the A.Ys. 2000-01 and 2001-02 were processed u/s. 143(1). Thereafter, an information was received by the A.O from the Addl. CIT, Range 9(2), Mumbai that P.C. Shah Developers Pvt. Ltd. (henceforth referred to as Company ) was assessed in his Range. He had completed the assessment of the said Company for the A.Y. 2001-02. The Project Bridge on Surat-Delhi-Edlabad-Nagpur Road in 4 ITA . Nos.601,602/Mum/2007,1269/PN/2006 & ITA No. 3889/Mum2005 M/s. P.C. Shah & Co.etc., A.Ys. 2000-01 & 2001-02 Page of 13 Dhule District, Maharashtra came under BOT and was categorized under the Infrastructure Development Scheme of the Government of Maharashtra. The construction of the bridge was done by the firm. After completion, it was transferred to the Company. The A.O. treated the transfer of the project from the firm to the Company as not a valid transfer and assessed the income from the Bridge in the hands of the Company on protective basis, leaving the substantive assessment in the name of the firm. The A.O. accordingly suggested to take action against the firm in both the A.Ys. The A.O. following the assessment completed in the case of the Company for the A.Y. 2001-02, computed the income from the Bridge at Rs.15,83,706/- by reducing the cost of Rs.65,16,764/- from the toll receipts of Rs.81,00,470/- for the A.Y. 2000-01 and at Rs.1,02,92,001/- by reducing cost of Rs. 28,47,723/- from the toll receipt of Rs. 1,31,39,724/- for A.Y. 2001-02. The A.O framed these assessments for both the A.Ys. u/s. 143(3) r.w. Section 147 of the Act by making the addition of aforesaid sums on substantive basis in the hands of the firm. She has however mentioned in the assessment orders that Ld CIT(A) -IX, Mumbai has already deleted the additions made by the A.O. in the case of the Company in the A.Y. 2001-02 on the basis of which the additions were made in the hands of the firm.
5. After considering the cases of the parties, the Ld CIT(A) has deleted the above additions against which the revenue is in appeals before us.
6. So far as case of the Company is concerned, the return of the Company for the A.Y. 2000-01 i.e. the first year after incorporation showing total income of Rs.4120/- after claiming exemption u/s. 80 IA(4) (i) of the Act, was processed u/s. 143(1)(a) of the Act on 10.1.2002. Since the assessment for the A.Y. 2001-02 was completed by the A.O on 31st March 2004 denying deduction u/s. 80IA of the Act, a notice u/s. 148 was issued in the A.Y. 2000-01 on 1.11.2004 and served upon the 5 ITA . Nos.601,602/Mum/2007,1269/PN/2006 & ITA No. 3889/Mum2005 M/s. P.C. Shah & Co.etc., A.Ys. 2000-01 & 2001-02 Page of 13 assessee company on 2.11.2004. Accordingly, assessment for A.Y. 2000-01 was framed.
7. The assessment for A.Y. 2001-02 in the case of Company was contested by the assessee in the appeal and the Ld CIT(A) allowed the appeal. On the basis of said first appellate order in the A.Y. 2001-02, the Ld CIT(A) has also allowed the appeal preferred in the A.Y. 2000-01. The order in these first appeals in the case of assessee company have also been questioned by the revenue before us.
8. We have heard and considered the arguments advanced by the parties in view of orders of authorities below, material available on record and the decisions relied upon. The issue involved in the case of the firm is regarding the toll collection from the Bridge constructed on Surat-Delhi-Edalabad-Nagpur Road in Dhule District, Maharashtra.
9. The relevant facts are that the contract was awarded to the assessee firm by the Public Works Department of Government of Maharashtra on 18.3.1996. The work of construction commenced on 25th March 1998 after the working drawing was received from PWD. Thereafter, the contract was converted into BOT on 12.5.1999. The construction of the Bridge was completed on 30th September 1999 and the toll collection started from 1.10.1999. Thereafter, the Bridge was transferred by the firm to the Company which was incorporated for the purpose of taking over of the business of the firm. The said transfer took place on 11.11.1999 for consideration of Rs. 36,93,428/- being the cost of construction of the bridge at Rs. 51,99,374/- less the toll of Rs. 15,05,946/- collected by firm for the period from 1.10.1999 to 10.11.1999. The said transfer had taken place as per the agreement between the Company and the Firm dated 15.11.1999. The change of name from M/s. P.C. Shah & Company to P.C. Shah Developers Pvt. Ltd. was permitted by the Chief Engineer, PWD for the purpose of collection of toll and maintenance of the 6 ITA . Nos.601,602/Mum/2007,1269/PN/2006 & ITA No. 3889/Mum2005 M/s. P.C. Shah & Co.etc., A.Ys. 2000-01 & 2001-02 Page of 13 Bridge. As the Bridge belonged to the Company w.e.f. 11.11.1999, the toll collected and the expenditure on maintenance incurred thereafter claimed belonged to the Company. The A.O, however, took these receipts and expenditure in the hands of the firm in the A.Ys. 2000-01 and 2001-02.
10. Before the Ld CIT(A), it was contended that the very basis of the assessment of the income in the hands of the firm remained the assessment order in the case of the Company for A.Y. 2001-02. The Ld CIT(A) has allowed appeal of the Company for the A.Y. 2001-02 and following the same, the appeal for the A.Y. 2000- 01 has also been allowed. As per the decision of the Ld CIT(A), in those appeals, the income and expenditure with respect to the Bridge after 11..11.1999 belonged to the Company. It was pleaded before the Ld CIT(A) that same income and expenditure cannot be considered in the hands of the firm also.
11. Thus, we find that the issue raised before the Ld CIT(A) in the case of the assessee firm remained that as to whether the transfer of the operation and maintenance of the Bridge by the Firm to the Company on 11.11.1999 was a valid transfer and accordingly, whether the toll received and the expenditure incurred on the maintenance of the Bridge w.e.f. 11.11.1999 should be considered in the hands of the firm or in the hands of the Company. The Ld CIT(A) has decided the first appeal in favour of the assessee in the A.Y by following findings :
"6. I have carefully considered the facts of the case and submissions of the appellant. I have also gone through all the relevant documents. The only issue involved is whether the transfer of the operation and maintenance of the bridge by the firm to the company on 11/11/1999 was a valid transfer and accordingly whether the toll received and expenditure incurred on the maintenance of the bridge w.e.f. 11/11/1999 should be considered in the hands of the firm or in the hands of the company. The issue of transfer has been discussed by the Ld. CsIT(A) in the case of the company for the A.Ys.2000-01 and 2001-02(supra). They have categorically held that the transfer was valid. The provision of the transfer of the project was duly 7 ITA . Nos.601,602/Mum/2007,1269/PN/2006 & ITA No. 3889/Mum2005 M/s. P.C. Shah & Co.etc., A.Ys. 2000-01 & 2001-02 Page of 13 incorporated in the original contract awarded to the appellant by the P.W.D. with the permission of the Chief Engineer. The Chief Engineer, P.W.D. allowed the change of name of the contractor in the record of the Government from M/s. P.C. Shah & Co. to M/s. P.C. Shah Developers Pvt. Ltd. and allowed the company to collect the toll and maintain the bridge w.e.f. 11/11/1999. The transfer was affected at the cost price i.e. the cost incurred on the construction of the bridge as reduced by the toll collected by the firm before the transfer. Considering all these facts, I do not find any reason to disagree with the findings of the Ld. CsIT(A) in their orders for the company and so the transfer is held as a valid transfer.
7. Both the CsIT(A) (supra), after detailed discussion of the facts and issues, held that the operation and maintenance of the bridge from the date of transfer i.e. 11/11/1999 belonged to the company. They accordingly rejected all the decisions of the Assessing Officers of the company for the A.Ys. 2000-01 and 2001-02 and held that the income on account of toll collected from 11/11/1999 should be assessed in the hands of the company. They also allowed the deduction u/s. 80IA to the company on the said income. As the operation and maintenance of the bridge was validly transferred by the firm to the company on 11/11/1999, all the rights and liabilities of the firm with respect to the bridge ceased from that date. It became the responsibility of the company to collect toll and maintain the bridge from that date. As such, the income from the toll collected w.e.f. 11/11/1999 was rightly held as assessable in the hands of the company by Ld. CsIT(A)(supra). The same income cannot be assessed in the hands of the firm also. By respectfully following their orders, the Assessing Officer is directed to consider the income and expenditure with respect to the bridge in the hands of the firm only upto 10/11/1999. Accordingly, the additions made on account of toll collected from 11/11/1999 in the hands of the firm are deleted."
12. We thus find that the very basis of allowing relief to the assessee in the present appeals of the firm is the first appellate order for the A.Ys. 2000-01 and 2001-02 in the case of the Company holding that the operation and maintenance of the Bridge from the date of transfer i.e. 11.11.1999 belonged to the Company. They also allowed the deduction u/s. 80IA to the Company on the said income 8 ITA . Nos.601,602/Mum/2007,1269/PN/2006 & ITA No. 3889/Mum2005 M/s. P.C. Shah & Co.etc., A.Ys. 2000-01 & 2001-02 Page of 13 holding that the operation and maintenance of the Bridge was validly transferred to the Company on 11.11.1999, all the rights and liabilities of the Firm with respect to the Bridge ceased from that date. We thus find that the assessment orders in the case of Firm are consequential to the assessments made in the case of the Company. Likewise, the first appellate order in the case of Firm are based upon the first appellate order in the case of the Company.
13. In the case of the Company, the issues have been discussed in detail by the Ld CIT(A). It is emerging there- from that the A.O after examining the various issues and correspondence between the Firm and the PWD authorities of Government of Maharashtra and also considering the statements on Oath that the assessee had incurred an amount of Rs. 31.13 Lakhs as unaccounted expenditure during the F.Ys. 1997-98 to 2000-01. Considering the total expenditure admitted by the assessee in the returns of income for the corresponding period, he arrived at the total cost of the project at Rs. 125.335 Lakhs.
14. The total receipt on account of toll collections shown by the assessee Company and also by the assessee Firm during the F.Ys. 1999-2000 to 2000-01 was Rs.2,12,40,194/-. The A.O disbelieved the toll collections shown by them and estimated the toll collections at Rs. 74.94 lakhs. While estimating the toll receipt, the A.O relied on a report received from the R.T.O. The A.O did not accept the collections as shown in the Books of Account and the monthly report of the toll collections sent to the PWD authorities. Since the A.O. had already determined the cost of project at Rs. 125.33 lakhs (including unaccounted expenses) and estimated the toll collection at Rs. 74.94 lakhs, he came to the conclusion that the total expenditure exceeded the toll collection receipt and claimed deduction u/s. 80IA was denied.
9 ITA . Nos.601,602/Mum/2007,1269/PN/2006 &
ITA No. 3889/Mum2005 M/s. P.C. Shah & Co.etc., A.Ys. 2000-01 & 2001-02 Page of 13
15. The A.O also considered the issue of transferring of the Bridge by the Firm to the Company. He examined correspondence between the two concerns and the PWD and came to the conclusion that the transfer took place w.e.f. 9.9.2000 as per the notification of the Government of Mahrashtra though approval was given by the Chief Engineer of PWD w.e.f. 18.11.1999. The A.O also discussed the provisions of Section 47(xiii) and based on the findings regarding the approval of the change of name, he concluded that the transfer of BOT project was complete only by 31st March 2002. Therefore, the benefit u/s. 80 I to the assessee Company were denied. However, it was stated by the Company that since the assessee company claimed that the BOT project was transferred to the assessee Company, the net receipt of BOT project was to be taxed in the hands of the assessee Company on protective basis and the balance receipts were to be taxed on substantive basis as unaccounted income of the assessee Company u/s. 68 for the A.Y. 2001-02. The facts and circumstances for these A.Ys. 2000-01 and 2001-02 are identical and inter connected.
16. Before the Ld CIT(A), the assessee made detailed submissions as discussed by the Ld CIT(A) in the first appellate order. On the issue of date of transfer of ownership of the project by the Firm to the Company, it was submitted that mere PWD notification could not change the situation as the defacto ownership of the project belongs to the assessee Company. On the issue of eligibility to the claimed deduction u/s. 80IA(4)(i) of the Act, it was contended that a deduction of 100% income is allowed if the enterprise carrying on the business of (a) developing or (b) maintaining and operating or (c) developing, maintaining and operating any infrastructure facility. It was submitted that the infrastructure facility means a road including toll road, a bridge or a rail system. It was submitted further that the assessee should have entered into an agreement with Central/State Government/other specified Authorities for the said infrastructural activity subject to 10 ITA . Nos.601,602/Mum/2007,1269/PN/2006 & ITA No. 3889/Mum2005 M/s. P.C. Shah & Co.etc., A.Ys. 2000-01 & 2001-02 Page of 13 the condition that such facility shall be transferred to the said authority within the stipulated period. The enterprise should have started operating and maintaining the infrastructural facility on / after 1.4.1995. It was submitted that where such facility is transferred after 1.4.1999 by an enterprise (which develop such facilities) to another enterprise for the purpose of operating and maintaining on behalf of any of the aforesaid authority, then the transferee enterprise is also eligible for deduction under this provision.
17. Considering the above contentions, we find that the Ld CIT(A) has rightly decided the issues in favour of the assessee Company. On the issue of eligibility of the claimed deduction u/s. 80IA(4)(i) of the Act, the Ld CIT(A) has given following finding vide para No. 13 of the first appellate order for the A.Y. 2000-01, which is being reproduced hereunder :
" I have gone through the assessment order, the detailed submissions made by the assessee. The assessee fulfilled all the conditions of the said provision. The infrastructure was developed by M/s. P.C. Shah & Co. and transferred validly to the assessee company. The ratio of the decisions quoted by the assessee are applicable to the assessee's case. Instead of examining the issues as per the provisions, the A.O. gone into the cost of construction. The cost of construction determined based on the correspondence between M/s. P.C. Shah & Co. and the P.W.D. authorities and concluded the cost of construction exceeded the estimated toll collections and deduction u/s. 80IA of the I.T. Act. The assessee company as per the agreement entered with M/s. P.C. Shah & Co. (the firm) got the rights to operate & maintain the bridge. The said firm assigned the right to the assessee which is legal. The A.O. also tried to examine the provisions of section 47(xiii) which are relating to the capital gains. The subsection 47(xiii) says nothing contained in section 45 shall apply to the cases mentioned in the said provisions regarding transfer in connection with capital gains. The issue under consideration is relating to transfer of infrastructure facility for the purpose of operating and maintenance under the provisions of section 80IA of the I.T. Act, whereas the A.O. unnecessarily taken pains to analyse the provisions of section 47(xiii) in this context. Therefore, I fully agree with the 11 ITA . Nos.601,602/Mum/2007,1269/PN/2006 & ITA No. 3889/Mum2005 M/s. P.C. Shah & Co.etc., A.Ys. 2000-01 & 2001-02 Page of 13 conclusions of the CIT(A)-IX, Mumbai in his order dated 23.03.2005 in concluding that the assessee is eligible for deduction u/s. 80IA(4)(I ) of the I.T. Act."
18. On the issue of estimation of the toll collection, the Ld CIT(A) has given his finding in para No. 15 of the first appellate order for the A.Y. 2000-01, reproduced hereunder :
" The assessee company maintained the regular books of accounts and got them audited as per the provisions of section 44AB of the I.T. Act. The A.O. has not rejected the books of accounts. While estimating the toll collections, the Addl. CIT relied on letter dated 24.03.04 received from the RTO Check Post, Navapur. The assessee maintained the complete details of the toll collections recorded in the books of accounts whereas the RTO based his details only in respect of the vehicles checked by their Inspectors. It is also stated in the said letter that all transport vehicles are not checked. The Addl. CIT without understanding the modus operandi followed by the assessee for maintaining the records relating to the toll receipts disbelieved the toll collections showed in the books of accounts. The assessee was also sending periodical statements to the P.W.D. authorities and able to prove majority of the such reports sent to the P.W.D. authorities with acknowledgements with contemporaneous records. The estimate arrived at by the A.O. is not IN ORDER. Therefore, I fully agree with the findings of the CIT(A)-IX, Mumbai in his order dated 25.03.05 in coming to the conclusion that the toll collections accounted by the appellant are evidenced by book entries and other cogent evidences whereas the A.O. based the figures of toll collections on estimate by stating figures given by the Inspector of Motor Vehicles which were not full and complete as confirmed by the Inspector of Motor Vehicles himself. Therefore, the amount of toll collections estimated by the A.O. is not correct and not acceptable."
19. In support of the ground, the D.R. has basically placed reliance on the assessment order which we have already discussed hereinabove. The Ld. A.R., on the other hand, tried to justify the first appellate orders on the issues raised in the grounds. We have also discussed the finding of the Ld CIT(A) on the issues raised in the grounds. As we have seen that there is no reason to doubt the genuineness 12 ITA . Nos.601,602/Mum/2007,1269/PN/2006 & ITA No. 3889/Mum2005 M/s. P.C. Shah & Co.etc., A.Ys. 2000-01 & 2001-02 Page of 13 of the transfer of the Firm into the Company as the same was also with the approval of the PWD meeting out the other requirement of the related provisions of law. There is also no substance in the contention of the Ld. D.R. that since assessee firm was not eligible for the deduction u/s. 80IA (4) of the Act, the assessee Company cannot be made entitled for the same since there is no dispute that an enterprise is entitled for the deduction under the said provision even for maintenance and operation of the project. The assessee Company was maintaining and operating the project after the project was transferred to it by the Firm. We thus do not find reason to interfere with the first appellate order in this regard which is speaking one. So far as estimation of toll collection made by the A.O is concerned, it was based on the figure given by the Inspector of Motor Vehicle which were not fully and complete as confirmed by the Inspector of Motor Vehicles himself. On the other hand, the toll collection as accounted by the assessee was evidenced by book entry and other cogent evidence. The cost of the project as incurred by the erstwhile firm was also supported by the books of account and relevant supporting evidence maintained by the assessee while the A.O had made estimate by taking the figure from the estimate and halfhazard information given by the Executive Engineer as well as figures of estimate mentioned in the bid tender. Keeping in view all these material aspects, we are of the opinion that the Ld CIT(A) has rightly deleted the additions made in this regard.
20. The grounds raised in the appeals are thus rejected.
21. In result, appeals are dismissed.
The order is pronounced in the open Court on 17th November 2011.
Sd/- Sd/-
(G.S. PANNU) (I.C. SUDHIR )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Pune, dated the 17th November, 2011
13 ITA . Nos.601,602/Mum/2007,1269/PN/2006 &
ITA No. 3889/Mum2005
M/s. P.C. Shah & Co.etc.,
A.Ys. 2000-01 & 2001-02
Page of 13
US
Copy of the order is forwarded to :
1. The Appellant
2. The Respondent
3. The CIT -II, Nashik
4. The CIT(A)-II, Nashik
4. The D.R. "A" Bench, Pune
5. Guard File
By order
Assistant Registrar
Income Tax Appellate Tribunal
Pune