Document Fragment View

Matching Fragments

5. At the outset, the learned CIT DR supported the order of the learned CIT(A) and argued that the learned CIT(A) has coterminous power with Assessing Officer and he had followed the required procedure for enhancement of income of the assessee.

6. We have heard the rival submissions of both the parties and perused the relevant material on record. As discussed above, the appellant made contract with NHAI to construct, operate and maintain 90 KMs N.H. between Jaipur to Kishangarh and incurred total cost more than Rs. 590 crores. The assessee collected total revenue from the toll is more than Rs. 136 crores and shown net income more than Rs. 59 crores from this project. The appellant had already got constructed earthen shoulder road on both sides of road and fencing but on used by the heavy traffic, it got damaged and is not remained in good condition to be used smoothly by the heavy traffic, therefore, nominal tear and wear is required. The assessee incurred 3.86 crores expenditure on 15 ITA 762 & 878/JP/2011 JVK Jaipur Expressway Vs. Addl.CIT normal repair and maintenance including expenditure on repairing of fencing. This highway was taken on contract on BOT basis for 18 years. The assessee has to recover his cost as well as profit on investment within given time, which hardly extended by the NHAI. The appellant had to maintain the national highway in good condition to attract the traffic to increase toll collection, so profit can be maximized. As the learned CIT(A) analysed the Section 31(1) of the Act with reference to current repair and replacement of existing assets but the Hon'ble Madras High Court in the case of CIT Vs. Southern Roadways (supra) held that expenditure on replacement is also a revenue expenditure. Further the Hon'ble Apex Court in the case of Ballimal Nawal Kishore & Another Vs. CIT (supra) has held that the expression "Current Repairs" means expenditure on buildings, machinery, plant or furniture which is not for the purpose of renewal or restoration but which is only for the purpose of preserving or maintaining an already existing asset and does not bring a new asset into existence or does not give to the assessee a new or different advantages." If this expenditure is treated capital expenditure, it cannot be recovered in 18 years of period of contract. Further it required to incur expenditure every year and under which section, the assessee would claim last years' repair and maintenance expenditure as full. Therefore, we are of the considered view that the normal repair expenditure on earthen shoulder road on both sides of highway with normal tear wear on fencing has been claimed 16 ITA 762 & 878/JP/2011 JVK Jaipur Expressway Vs. Addl.CIT by the assessee and allowable U/s 31(1) of the Act. Even this expenditure is allowable U/s 37 of the Act as it is not a capital expenditure, no personal expenditure, wholly and exclusively incurred for the purpose of business. The case laws relied upon by the learned CIT(A) are not squarely applicable in the case of the assessee as the assessee has exceptional circumstances of constructing highways on BOT basis. These expenditures are not capital expenditure as no new assets has been created. Further the assessee has only constructive ownership for the period of 18 years on it. Subsequently, the learned Assessing Officer has allowed these expenditures as revenue in A.Ys. 2009-10 and 2010-11. The learned CIT(A) has followed the due course of proceeding before enhancement as show cause notice was issued to the assessee on 10/12/2010 by the learned CIT(A). Thus, grounds No. 1 and 2 of the assessee's appeal are allowed and decided in favour of the assessee and ground No. 3 of assessee's appeal is dismissed and decided against the assessee.