THE PR. COMMISSIONER OF INCOME TAX -7 vs. TUTICORIN PORT ROAD COMPANY LTD.
What did the High Court hold?
The High Court found no infirmity in the reasoning or conclusion reached by the Tribunal. The Tribunal had held that the amount of Rs. 3,05,64,085/- was not debited to the profit and loss account and always constituted work-in-progress. Furthermore, the Tribunal concluded that since the expense was incurred at the pre-operative stage, it was a capital expenditure and could not be treated as income of the assessee. The Revenue's counsel conceded that the addition could not have been made and suggested an alternative course of action for the AO, but the Court held that the Revenue could not change its stance at that stage. Consequently, the Court found no substantial question of law arising for consideration and closed the appeal.
What were the facts?
The appeal by the Principal Commissioner of Income Tax-7 (Revenue) challenges an Income Tax Appellate Tribunal (Tribunal) order dated February 28, 2020, pertaining to Assessment Year 2006-07. The case involved an addition of Rs. 30,06,70,521/- made by the Assessing Officer (AO) in the first round, which the assessee claimed was capitalized as work-in-progress. Following a remand by the Tribunal, the AO, in an order dated December 8, 2017, scaled down the addition to Rs. 3,05,64,085/-, citing a lack of supporting evidence from the assessee. The Commissioner of Income Tax (Appeals) sustained this addition. The assessee then appealed to the Tribunal, which found that the amount in dispute was not debited to the profit and loss account and always constituted work-in-progress. The Tribunal further held that as the expense was incurred at the pre-operative stage, it was a capital expenditure and not income.
What were the issues?
1. Whether the Tribunal erred in holding that the amount of Rs. 3,05,64,085/-, which was not debited to the profit and loss account and constituted work-in-progress, could not be treated as income of the respondent/assessee, and was indisputably a capital expenditure? (Question of law) Assessee's Contentions: The judgment does not record specific contentions from the assessee. However, the Tribunal's finding implies the assessee argued that the expenditure was capital in nature and not income. Revenue's Contentions: The Revenue, through its counsel, conceded that the addition of Rs. 3,05,64,085/- could not have been made to the returned income of the respondent/assessee. The counsel suggested that the AO should have reduced the amount from the block of assets instead of adding it to the returned income. However, the Revenue also acknowledged that the basis of any proceeding is the AO's order and that it could not change course at that stage.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
$~19 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 168/2023
THE PR. COMMISSIONER OF INCOME TAX -7..... Appellant Through: Mr Ruchir Bhatia, Sr Standing Counsel.
versus
TUTICORIN PORT ROAD COMPANY LTD. ..... Respondent
Through:
CORAM:
HON'BLE MR. JUSTICE RAJIV SHAKDHER
HON'BLE MS. JUSTICE TARA VITASTA GANJU
O R D E R %
21.03.2023 [Physical Hearing/Hybrid Hearing (as per request)] CM Appl.13591/2023 [Application filed on behalf of the appellant seeking condonation of delay of 245 days in re-filing the appeal] 1. This is an application moved on behalf of the appellant/revenue seeking condonation of delay in re-filing the appeal. 1.1 According to the appellant/revenue, there is a delay of 245 days. 2. Having regard to the reasons given in the application, the delay is condoned. 3. The application is, accordingly, disposed of. ITA 168/2023 4. This appeal is preferred against the order dated 28.02.2020 passed by the Income Tax Appellate Tribunal [in short, the “Tribunal”] concerning Assessment Year (AY) 2006-07. 5. Broadly, the facts of the case show that in the second round, the
ITA 168/2023
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Tribunal via the order dated 09.05.2016 had remitted the matter to the Assessing Officer (AO). 5.1 To be noted, in the first round, addition amounting to Rs.30,06,70,521/- had been made by the AO. The respondent/assessee had claimed that since this was expense incurred toward work-in-progress, it had been capitalized. 5.2 Upon remand, the AO passed an order under Section 143(3), read with Section 254 of the Income Tax Act, 1961 [in short, the “Act”] dated 08.12.2017. 5.3 The AO scaled down the addition to Rs.3,05,64,085/-. The rationale provided by the AO was that no supporting evidence had been provided by the respondent/assessee for the sum which was sought to be added to the returned income of the respondent/assessee. 5.4 Being aggrieved, the respondent/assessee preferred an appeal to the Commissioner of Income Tax (Appeals) [in short, “CIT(A)”]. The CIT(A), via order dated 18.03.2019, sustained the addition made by the AO. 5.5 This led to the respondent/assessee preferring an appeal with the Tribunal. 6. The Tribunal returned a finding of fact that the amount which was disallowed and thereupon added by the AO i.e., Rs.3,05,64,085/- was not debited to the profit and loss account of the respondent/assessee as it always constituted work-in-progress. 7. The Tribunal held that since the expense had been incurred by the respondent/assessee at the pre-operative stage, it could not be treated as
ITA 168/2023
2/3 This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 29/05/2026 at 16:17:05
income of the respondent/assessee, and hence was, indisputably, a capital expenditure. 8. Mr Ruchir Bhatia, learned senior standing counsel, who appears on behalf of the appellant/revenue, cannot but accept that the addition of Rs. Rs.3,05,64,085/- could not have been made to the returned income of the respondent/assessee. 8.1 Mr Bhatia says that, perhaps, the proper course of action that the AO should have followed was to reduce the amount from the block of assets, and not add the amount in issue to the returned income of the respondent/assessee. 9. That said, Mr Bhatia cannot but accept that the basis for every such proceeding is the AO’s order. At this stage, the appellant/revenue cannot change course and therefore, this submission cannot be accepted. 10. Having regard to the aforesaid, we find no infirmity either in the reasoning or the conclusion reached by the Tribunal. 11. According to us, no substantial question of law arises for our consideration. The appeal is, accordingly, closed.
RAJIV SHAKDHER, J
TARA VITASTA GANJU, J
MARCH 21, 2023/pmc
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ITA 168/2023
3/3
This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 29/05/2026 at 16:17:05
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