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

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:

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.

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.

6.The brief facts of the case are that assessee is EPC Contractor engaged to have certain preliminary site enabling assets for 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 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 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. 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.

12.In the case of ACIT, Circle 10(1), New Delhi vs Dredging International India Pvt. Ltd. & 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 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

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.

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.

14 payment brings in a capital asset, then that puts the business on another footing altogether.

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 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.

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.

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.

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.