HARYANA STATE ROADS AND BRIDGES DEVL. CORP. vs. INCOME TAX TRIBUNAL, CHANDIGARH AND ORS.

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ITA/8/2013HC Punjab & HaryanaPHHC01105291201314 September 2015Author: MR. JUSTICE SURINDER GUPTA,MRS JUSTICE DAYA CHAUDHARY5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court allowed the assessee's application for leading additional evidence, finding that the documents sought to be produced (a recent CIT(A) order, PWD ownership certificate, loan agreement with HUDCO, and memorandum of association) were public documents whose authenticity was not in doubt. Consequently, the Court deemed it appropriate to reconsider the points raised in the appeal in light of this new evidence. The impugned order of the Tribunal was set aside, and the matter was remitted back to the Tribunal for a fresh decision. The Tribunal was directed to pass a speaking order in accordance with the law, considering the additional evidence and without being influenced by its previous order. The Court did not decide the merits of the appeal.

What were the facts?

The assessee, Haryana State Roads and Bridges Development Corporation, filed an appeal before the High Court against the Income Tax Tribunal's order for assessment year 2006-07. The Assessing Officer had disallowed expenditure of `14,79,23,322/- by capitalizing interest on loans. The CIT(A) partly allowed the appeal, deleting an addition of `86,40,770/- on account of interest income but upheld the capitalization of interest. The Tribunal dismissed the assessee's appeal. The assessee then filed an application before the High Court to lead additional evidence, including a recent CIT(A) order, ownership certificate, loan agreement, and memorandum of association. The High Court allowed the application for additional evidence.

What were the issues?

1. Whether the interest on loans is to be categorized as revenue expenditure under Section 37 of the Income Tax Act or as capital expenditure? (Question of law) 2. Whether the uses of roads for commercial purposes for revenue generation are distinct, and if income is not generated due to the absence of toll points, does this deprive the expenditure of its revenue nature? (Question of mixed law and fact) 3. Whether expenditure incurred for improving existing, in-use roads, and the interest paid thereon, constitute revenue expenditure rather than capital expenditure? (Question of mixed law and fact) 4. Whether the absence of the creation of a new asset is sufficient to deny expenditure on interest as capital expenditure? (Question of mixed law and fact) 5. Whether orders passed based on conjectures are invalid? (Question of law) 6. Whether findings based on misappreciation of facts are invalid? (Question of law) 7. Whether the Tribunal erred in dismissing the appeal as time-barred without sufficient cause? (Question of law) Assessee's Contention: The assessee argued that its memorandum of association indicates its main object is to develop and improve roads, not necessarily to create new assets. It also contended that the additional evidence, being public documents, should be admitted. The assessee implicitly argued that interest on loans for road improvement should be treated as revenue expenditure. Revenue's Contention: The revenue opposed the application for additional evidence, stating that the authorities below had made findings based on the material on record.

Which sections of the Income-tax Act were involved?

Section 37,Section 260A,Section 143(2),Section 142(1),Section 250(6)

AI-generated summary — verify with the full judgment below

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

ITA No. 8 of 2013 (O&M) Date of Decision : 14.09.2015

Haryana State Roads and Bridges Development Corporation

..... Appellant Versus Income Tax Tribunal, Chandigarh and others .... Respondents

1.

Whether the Reporters of the local papers may be allowed to see the judgment?

2.

To be referred to the Reporters or not?

3.

Whether the judgment should be reported in the Digest? CORAM: HON'BLE MR. JUSTICE AJAY KUMAR MITTAL

HON'BLE MR. JUSTICE RAMENDRA JAIN Present: Mr. Vinod S. Bhardwaj, Advocate for the appellant. Mr. Tejender K. Joshi, Advocate for the respondents. RAMENDRA JAIN, J.

1.

This appeal has been filed by the assessee under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the orders dated 17.2.2012 (Annexure P-3) passed by the Income Tax Appellate Tribunal, Chandigarh Bench “A”, Chandigarh (hereinafter referred to as “the Tribunal”) in ITA No. 84/CHD/2010 for the assessment year 2006- 07, dated 2.11.2009 (Annexure P-2) passed by the Commissioner of Income Tax (Appeals) [for brevity “the CIT(A)”] and dated 12.12.2008 (Annexure P-1) passed by the Assessing Officer. The following GURBACHAN SINGH 2015.11.26 16:50 authenticity of this document High Court Chandigarh -2- substantial questions of law have been claimed in this appeal:- (i) Whether the interest on loans is to be categorized as revenue expenditure under Section 37 of the Income Tax Act or the same is to be categorized as capital expenditure? (ii) Whether the uses of road as commercial uses for revenue generation are different uses and the mere non-generation of income on account of absence of setting up of toll points would deprive the expenditure to be in the nature of revenue expenditure? (iii) Whether the expenditure incurred towards improvement of existing roads that are in actual use and interest paid thereupon, amount to revenue expenditure and not capital expenditure? (iv) Whether the absence of generation of a new asset is sufficient to deny the expenditure on interest as capital expenditure? (v) Whether the orders passed upon the conjectures are bad and liable to be set aside? (vi) Whether the findings based upon mis- appreciation of the facts is bad and liable to be set asideTribunal erred on facts and in law in dismissing the appeal of the appellant on the ground that the same is time barred and no reasonable or sufficient cause has been shown GURBACHAN SINGH 2015.11.26 16:50 authenticity of this document High Court Chandigarh -3- in filing the appeal?

2.

A few facts necessary for adjudication of the instant appeal as narrated therein are that the return filed on 30.11.2006 for the assessment year 2006-07 declaring loss of ` 28,62,48,531/-. The revised return was filed on 17.6.2007 declaring loss of ` 29,23,18,828/-. A notice under Section 143(2) of the Act was issued to the assessee on 18.2.2008. A notice under Section 142(1) of the Act along with the questionnaire dated 14.11.2008 was issued to the assessee. The Assessing Officer vide assessment order dated 12.12.2008 (Annexure P-1) reduced the net loss from ` 29,23,18,828/- to ` 13,56,74,210/- by including interest income of ` 86,40,770/- on account of Pradhan Mantri Gramin Sadak Yojna (PMGSY) to the income and disallowed the expenditure of ` 80,527/-. The Assessing Officer also directed capitalization of interest of ` 14,79,23,322/- while disallowing the expenditure to the said extent. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who vide order dated 2.11.2009 (Annexure P- 2) partly allowed the appeal and deleted the addition of ` 86,40,770/- on account of interest income on PMGSY. The CIT(A) also directed the Assessing Officer to verify as to whether TDS had not been deducted of ` 63,437/- and not ` 80,587/-. Still dissatisfied, the assessee filed an appeal before the Tribunal. The Tribunal vide order dated 17.2.2012 dismissed the appeal upholding the order dated 02.11.2009 (Annexure P-2) passed by the CIT(A). Hence, the present appeal by the assessee.

3.

During the pendency of the present appeal, the appellant has filed an application under Order 41 Rule 27 read with Section 151 CPC for leading additional evidence in the shape of documents Annexures A-1 to A-4 i.e. (i) order dated 22.10.2014 under Section 250 GURBACHAN SINGH 2015.11.26 16:50 authenticity of this document High Court Chandigarh -4- (6) of the Act passed by the CIT (A), Panchkula; (ii) Certificate regarding ownership of records of PWD (B&R) in the State of Haryana; (iii) loan agreement of the appellant with the Haryana Urban Development Corporation Limited (HUDCO), New Delhi; and (iv) its memorandum of association.

4.

Learned counsel for the appellant submitted that the main object of the appellant-Corporation, according to its memorandum of association, is to erect, develop, improve, construct, repair, expressways, highways, roads, paths, streets, bridges etc. on behalf of the Haryana Public Works Department on Build-Operate and Transfer (BOT) or Build-Own-Operate and Transfer (BOOT) or Build-Operate- Lease and Transfer (BOLT) basis or any other scheme in a manner which facilitates to undertake the above-mentioned work and thus, apparently, creation of assets was not its principle objective. Since the order dated 22.10.2014 passed by the CIT (A), Panchkula (Annexure A- 1) was not in existence at the time when the appeal was adjudicated by the Tribunal, therefore, it could not have been produced. The loan agreement and memorandum of association (Annexures A-3 and A-4) could not be produced earlier before the Authorities bonafidely. All the aforesaid documents are either public documents or Government records, and thus, their authenticity and genuineness is not questionable and need no proof under the provisions of Indian Evidence Act, 1872, which would espouse the claim of the appellant. Thus, the appellant may be permitted to adduce additional evidence by producing the aforesaid documents.

5.

On the other hand, learned counsel for the respondent strongly opposed the aforesaid application for leading additional GURBACHAN SINGH 2015.11.26 16:50 authenticity of this document High Court Chandigarh -5- evidence and submits that the appeal deserves to be dismissed, inasmuch as, the authorities below have given findings on appreciation of material available on record.

6.

After giving our thoughtful consideration to the submissions made by both the learned counsel for the parties, we find that application for leading additional evidence deserves to be allowed, inasmuch as, all the documents (Annexures A-1 to A-4) sought to be produced by way of additional evidence are public documents i.e. order passed by the CIT (A), Panchkula, copy of owner certificate issued by the PWD (B&R), Haryana, loan agreement and memorandum of association. Hence, the authenticity and genuineness of the documents cannot be said to be doubtful. Accordingly, the present application for leading additional evidence is allowed.

7.

Accordingly, in view of allowing of application for additional evidence, in our opinion, it would be appropriate that the points raised in this appeal are liable to be re-considered by the Tribunal in the light of the additional evidence sought to be produced by the appellant and then to pass a fresh speaking order in accordance with law.

8.

Without touching on the merits of the appeal, the impugned order dated 17.02.2012 (Annexure P-3) is set aside. The matter is remitted to the Tribunal to re-decide the same and pass a fresh speaking order in accordance with law without being influenced by its earlier order.

9.

With the aforesaid observations, the appeal is disposed of.

( RAMENDRA JAIN )

JUDGE 14.09.2015

( AJAY KUMAR MITTAL ) ‘yogesh’/gbs

JUDGE GURBACHAN SINGH 2015.11.26 16:50 authenticity of this document High Court Chandigarh

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