Income Tax Appellate Tribunal - Mumbai
M/S Western Mp Infrastructure & Toll ... vs Dcit-8(3)(2), Mumbai on 30 December, 2022
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "G" MUMBAI
BEFORE SHRI ABY T VARKEY (JUDICIAL MEMBER)
AND
SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER)
ITA No. 3140/MUM/2019
Assessment Year: 2014-15
Western MP Infrastructure & Dy. CIT Circle-8(3)(2),
Toll Roads Pvt. Ltd., Aayakar Bhavan, M.K. Road,
135, Continental Building Dr. Vs. Mumbai-400020.
Annie Besant Road, Worli,
Mumbai-400018.
PAN No. AAACW 7266 P
Appellant Respondent
Assessee by : Mr. Shashi Bekal
Revenue by : Mr. Satyapal Kumar, DR
Date of Hearing : 21/12/2022
Date of pronouncement : 30/12/2022
ORDER
PER OM PRAKASH KANT, AM
This appeal by the assessee is directed against order dated 5th of December 2018, passed by the Ld. Commissioner of Income-tax (Appeals)-14, Mumbai [in short 'the Ld. CIT(A)'] for assessment year 2014-15, raising following grounds:
GROUND NO. 1:
Western MP Infrastructure & Toll Roads Pvt. 2 Ltd.ITA No. 3140/M/2019
The learned Commissioner of Income Tax (Appeals) - 14, Mumbai (the learned CIT(A)) has erred in law and in facts and in circumstances of the case in confirming the assessed loss at Rs. 35,22,369 as against loss of Rs. 3,38,85,971 declared by the Appellant in the return of income filed for the assessment year under consideration.GROUND NO. 2
CIT(A) has erred in law and in facts and in
2.1 The learned CIT(A) circumstances of case in disallowing utility shifting expenditure which are not recoverable from the Madhya Pradesh Road Development Corporation Limited (MPRDC'), written off in the books of accounts and claimed in the return of income amounting to Rs. 3,03,63,602 in the order under section 250 of the Income Tax Act, 1961 (the Act').
2.2 The learned CIT(A) ought to have appreciated the fact that Appellant has incurred expenditure on utility shifting in Article 11 of Concession Agreement dated 30 pursuant to Article August 2007 entered with MPRDC and the aforesaid expenditure being not recoverable is written off in the books of accounts and claimed in the return of income.
2.3 The learned CIT(A) has erred in law and in facts a and in circumstances of case in disallowing utility shifting expenditure not recoverable from MPRDC written off and ignored the fact that such expenditure is incurred in the normal course of operations, wholly and exclusively for the purpose of business and allowable as per the provisions of the Act.
Western MP Infrastructure & Toll Roads Pvt. 3 Ltd.
ITA No. 3140/M/20192. In the grounds of the appeal, the assessee is aggrieved with disallowance of write off of utility shifting expenditure by the lower authorities.
3. Briefly stated facts of the case are that :
(i) The assessee company was incorporated on 28/08/2007.
company The assessee was awarded on Build, Operate and Transfer (BOT) basis four laning of Lebad-
Lebad Jalora Road ( 125 Kms) on section of State Highway No. 31 in the state 'the project') as per the concession of Madhya Pradesh (('the reement dated 30/08/2007 entered into with Madhya agreement Pradesh Road Development Corporation Ltd ( MPRDC).
(ii) For the year under consideration, the assessee company filed its original return of income on 30th Nov. 2014 claiming loss of ₹1,44,51,975/-,, which was further revised on 31/03/2016 at a revised loss of 85,971/-
₹3,38,85,971/
(iii) The return of income filed by the assessee was selected for scrutiny and the statutory notices under under the Income Income-
tax Act, 1961 (in ( short 'the Act')) were issued and complied w with.
(iv) In the assessment completed under section 143(3) of the Act,, the Assessing Officer disallowed the claim of write off of the utility expenditure of ₹ 3,03,63,602/ 3,03,63,602/-.
(v) On further appeal, Ld. CIT(A) upheld the disallowance.
Western MP Infrastructure & Toll Roads Pvt. 4 Ltd.
ITA No. 3140/M/2019(vi) Aggrieved, the assessee is in appeal peal before the Income-
tax Appellate Tribunal ((in short 'the Tribunal Tribunal') raising the grounds as reproduced above.
4. Before us the assessee has filed a paperbook containing pages 1 to 225 and also filed copy of decisions relied upon.
4. The facts qua the issue in dispute are that as per article 11 of the concession agreement entered into with MPRDC, MPRDC the assessee was required to undertake shifting of any utility including electric lines, waterr pipes and telephone cables etc. to appropriate location within orr outside the site. The cost of such shifting was to be born either by the MPRDC or by the entity owning such utility, if MPRDC so directs. In earlier years , the assessee made payment to two subcontractors namely M/s Adv energy solutions and M/s Sapna traders totalling to ₹12,87,60,110/-, ₹ , however could only recover ₹ 9,83,96,508/-from from MPRDC and therefore in the profit and loss account for the year under consideration, the assessee written off ₹3,03,63,602/-. It was contended before the Assessing Officer that th utility shifting was a part of contract for the expansion of the road and therefore write off is incurred wholly and exclusively for the purpose of its business and therefore allowable. However according to the Assessing Officer the very fact that MPRDC has not reimbursed the cost, suggest that such shifting was not material leading to the conclusion that amount under consideration was not spent for the purpose of the business. The Assessing Officer Western MP Infrastructure & Toll Roads Pvt. 5 Ltd.
ITA No. 3140/M/2019observed that shifting of the utilities was the responsibility respons of either the owner of the utility or MPRDC and therefore it was not the business expenditure of the assessee. Before the Ld. CIT(A), the assessee could not justify as s why the MPRDC had not reimbursed the assessee for the expenses of ₹3,03,63,602/- and therefore he sustained the disallowance made by the Assessing Officer, observing as under:
"3.2 3.2 Decision:
I have considered the submission made by the appellant and the reasons recorded by the AO. The first ground of appeal is general in nature and no separate adjudication is required in respect of the same So far as the second ground of appeal is concerned, it is seen from the terms of the agreement reproduced by the appellant that it was the responsibility of the appellant to incur the expenditure for utility shifting and subsequently that cost was to be recovered from MPRDC or the utility concerned, if so decided by MPRDC. Any cost which has been incurred by the appellant pursuant to the agreement and which could not be claimed as business loss. However, before recovered by it can be claimed the claim of business loss could be allowed, the appellant has to justify that it is actually a case of business loss and it has also to prove that the loss has crystallised during the year. It is not a write off of bad debts which the appellant can simple case of write claim in the year of write off. If the bill raised by the appellant has been accepted by the other party and for some reasons the party is unable to make the payment/is not making payment, can write off the debt and claim deduction for then the appellant can Western MP Infrastructure & Toll Roads Pvt. 6 Ltd.ITA No. 3140/M/2019
the same as bad debts written off in the books of account. But, if the bill itself is disputed by the other party, then in the opinion of the undersigned, the excess expenditure is to be claimed as loss It will not be a case of bad debt because there is business loss.
no acknowledged debt which is due from the other party. The debt is not created on raising of the bill, it is created when the bill is accepted by the other party. The appellant has brought nothing on record to explain as to why the other party has not record 3,03,63,602/--. The appellant made payment to the extent of Rs. 3,03,63,602/ has also not established as to how the loss has crystallised during the previous year under consideration, therefore, I'm of the amount of Rs. 3,03,63,602/-
the opinion that the 3,03,63,602/ has been rightly disallowed by the AO. Accordingly, disallowance of Rs. 3,03,63,602/ made by the AO is confirmed and second ground 3,03,63,602/-
of appeal is dismissed.
dismissed."
5. Before us, the Ld. counsel of the assessee referred to article 11.2 of the concession agreement, available on paperbook page 250 and submitted that shifting of utility was part of the requirement of execution of the contract and therefore expenses incurred were wholly and exclusively for the purpose of the business. The Ld. counsel referred to the ledger accounts filed in respect of the contractors who executed the work of shifting utilities, utilities which are available on page 252 to 261 of the paperbook. Further, Further he relied on the decision of coordinate bench of Bombay tribunal in the case of ITO Vs Mohanraj Trading and Exchange in ITA No. 6098/Mum/2016. The relevant part of the decision is reproduced as under :
Western MP Infrastructure & Toll Roads Pvt. 7 Ltd.ITA No. 3140/M/2019
"9. We find that the Hon'ble Madras High Court in the case of CIT vs Ramdas Pharmacy (1970] 77 IT 276 (Mad) had expounded that an appellate authority cannot decide only one issue arising out of many issues and decline to go into the other issues raised before it on the ground that further issues will not arise in view of the finding on the issue decided by it. It was expounded that if the appellate authority declines to consider and decide the other issues, it could only protract and delay the proceedings for the assessee has to get the decision of the appellate authority a on the initial point set aside by approaching a higher appellate authority and thereafter again go before the appellate authority for the decision on the other issues left undecided by it earlier. It was held that this will amount to n of proceedings under the Act. It was further multiplication expounded that the subordinate courts and tribunal's should as far as possible give their views on all the points raised before them so that the higher courts will have the benefit of points also, if the necessity arises."
the decision on other points arises.
5.1 The Ld. counsel also relied on the decision of Hon'ble Madhya Pradesh High Court in the case of Hemraj Nebhomal Sons reported in 197 CTR 329 to support the contention that for claiming expenses under section 37 of the e Act, the assessee is not required to establish whether the expenditure was legitimate or necessary.
6. The Ld. Departmental Representative (DR) on the other hand relied on the order of the lower authorities.
Western MP Infrastructure & Toll Roads Pvt. 8 Ltd.
ITA No. 3140/M/20197. We have heard rd rival submission of the parties on the issue in dispute and perused the relevant material on record. The issue in dispute is whether the write off the expenses in relation to shifting of the utility is allowable under section 37(1) of the Act as incurred for the purpose of the business. The relevant wholly and exclusively for part of the concession agreement regarding the utility expenditure is reproduced as under:
"11.2 Shifting of obstructing at The Concossionaire shall, subject to Applicable Laws and with undertake shifting of any utility assistance of the MPRDC, undertake including electrie lines, water pipes and telephone cables, to an appropriate location or alignment within or outside the site if and only if such utility causes a material adverse effect on the maintenance oF the Project lighway. construction, operation or maintenance The cost of such shifting shall be borne by the MPRDC or by the entity owning such utility, if the MPRDC so directs, and in the event of iny delay in shifting thereof, the Cencessionaire shall be perform any of its obligations hereunder if excused for failure to perform such failure is a direct consequence of delay on the part of the entity owning such electric lines. water pipes or telephone cables, as the case may be."
be.
7.1 Thus according to this agreement the work of shifting of the taken, if and only if such utility was causing a utility was to be taken material adverse effect on the carrying out of the project and the Western MP Infrastructure & Toll Roads Pvt. 9 Ltd.
ITA No. 3140/M/2019cost of such shifting was to be warm by the MPRDC or by the owner of such utility if the MPRDC had so directs.
7.2 ring the course of the hearing, tthe Ld. Counsel of the During assessee asked to produce any correspondence with MPRDC regarding shifting of particular utilities, for which payment has been denied to the assessee by MPRDC in the list of the term utility was causing g material advance effect on carrying out of the project.
project The Ld. counsel was also asked to produce the reasons cited by the reimbursement of expenses to the extent of write off MPRDC for non-reimbursement by the assessee. No such documentary evidences were produced her before the Ld. CIT(A) or before us. On perusal of the ledger either namely, Ave energy solutions available accounts of subcontractors namely on page 250 to 255 of the paperbook, we find that assessee has made advance payments to the said party in financial year 2008-09 200 of ₹2,48,25,470/-against against which credit of ₹36,65,151/ 151/- has only been only shown.. Similarly in financial year 2009-10 2009 cumulative payment up to ₹3,92,91, were 3,92,91,881/-were made against credit of ₹74,86,880/-.. In financial year 2010 11, payments are made of 2010-11, against which credit of ₹1,64,19, ₹2,07,75,62,612/-against 1,64,19,098/- are only shown cumulatively. In financial year 2011-12, 12, the total advances accumulated to , ₹08,71,68,880/-, ₹ against which credit of ₹1,20,78,859/- have been shown. In this manner advance of ₹7,50,90,021/- have been shown from said party. Similarly, advances have been given to another contractor party M/s sapana Western MP Infrastructure & Toll Roads Pvt. 10 Ltd.
ITA No. 3140/M/2019Traders and the opening of the year under consideration said advance amount was of ₹5,36,70,890/-.. Against these advances, the assessee shown amount amount received from MPRDC of ₹9,33,96,508/-.
7.3 The amount receivable from MPRDC has been written of in the year under consideration by way of entries in the books of accounts, which are reproduced as under:
7.4 Hon'ble Madhya Pradesh High Court in the case of Hemraj Nebhomal Sons (supra) has held as under:
"10. When we apply the aforesaid requirement of section 37(0) to the case of assessee in hand, we bodice that they have fulfilled assessee the criteria laid down section 37(1) for claiming deduction. In other words, the expenditure incurred by the assessce is essentially and or exclusively relates to their business. Any Western MP Infrastructure & Toll Roads Pvt. 11 Ltd.ITA No. 3140/M/2019
expenditure incurred for advertisement of Bid and or for promoling its sale, then in such case, it has to be so regarded as an expenditure incurred incurred for business carried on by the assessee. It being an admitted fact that the assessor is engeged in the business of purchase and sale of Bidi and secondly, the amount in question having been actually spent Le, incurred by the business, they yet entitled to claim assessee for their Bidi business, deduction of the amount so spent/incurred in the relevant assessment years.
11. In our opinion, once the aforementioned conditions are found satisfied then it is not proper on the part of Assessing Officer i.e. i.
taxing authorities to probe on the question as to whether the expenditure was legitimate or necessary etc. This type of inquiry is neither contemplated nor called for. In other words, in order to disallow the expenditure the inquiry has to confine to cases falling sub section (2B) of section 37. It is g in Explanation and sub-section only when the Assessing Officer finds that claim so made is bogus or false of not incurred as a fact, it can be disallowed, else not."
7.5 Respectfully, following the above ratio of the Hon'ble Hig High Court, the assessee was asked to provide details of the work of utility shifting particularly which had not been reimbursed by the MPRDC and justify whether the same is incurred wholly and exclusively for the purpose of the business, however in view of the t failure on the part of the assessee before the lower authorities as well as before us, we hold that assessee failed to establish that expenses in dispute were incurred wholly and exclusively for the Western MP Infrastructure & Toll Roads Pvt. 12 Ltd.
ITA No. 3140/M/2019purpose of the business and therefore disallowance mad made by the lower authorities is upheld. The grounds of appeal are accordingly dismissed.
8. In the result, the appeal of the assessee is dismissed.
Order pronounced under Rule 34(4) of the ITAT Rules, 1963 on 30/12/2022.
12/2022.
Sd/- Sd/-
(ABY
ABY T VARKEY)
VARKEY OM PRAKASH KANT)
(OM KANT
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai;
Dated: 30/12/2022
Rahul Sharma, Sr. P.S.
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A)-
4. CIT
5. DR, ITAT, Mumbai
6. Guard file.
BY ORDER,
//True Copy//
(Sr. Private Secretary)
ITAT, Mumbai