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