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Income Tax Appellate Tribunal, JAIPUR BENCHES, JAIPUR
Before: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA. No. 56/JP/2018
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA. No. 56/JP/2018 fu/kZkj.k o"kZ@Assessment Years : 2013-14 cuke M/s Rajasthan State Road The ITO, Vs. Development & Construction Ward-6(1), Corporation Ltd. Jaipur. Setu Bhawan, Jhalana Doongri, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCR 9650 F vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (C.A.) jktLo dh vksj ls@ Revenue by : Shri Ajay Malik (Addl. CIT) a lquokbZ dh rkjh[k@ Date of Hearing : 14/05/2018 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 17/05/2018 vkns'k@ ORDER
PER: VIKRAM SINGH YADAV, A.M.
This is an appeal filed by the assessee against the order of ld. CIT(A)-2, Jaipur dated 30.11.2017 for Assessment Year 2013-14 wherein the assessee has taken the following grounds of appeal as under:- “1. The Ld. CIT(A) has erred on facts and in law in not deciding the allowability of prior period expenses of Rs.10,22,608/- claimed on
ITA No. 56/JP/2018 2 M/s Rajasthan State Road Development & Construction Corporation Ltd. Vs. ITO account of overhead & plant running expenses which crystallized during the year on approval of the expenses.
The Ld. CIT(A) has erred on facts and in law in confirming the prior period expenses of Rs.2,04,87,540/- on account of interest on BOT asset ignoring that the said expenses is claimed on account of change in the method of depreciation on BOT asset vide Notification dt. 17.04.2012 which resulted in revision in the working of interest and thus, the claim has crystallized during the year. She has further erred in disallowing the expenditure but at the same time not excluding the prior period income of Rs.1187.70 Lacs declared during the year.
The Ld. CIT(A) has erred on facts and in law in holding that administrative expenses and the employees cost in respect of 5 units where toll collection takes place should be allocated against the BOT projects where deduction u/s 80-IA(4) has been claimed ignoring that all expenses has been considered in respect of the projects on which deduction u/s 80-IA(4) has been claimed.”
Regarding ground Nos. 1 and 2, briefly the facts of the case are that during the year, assessee claimed prior period expenses of Rs.10,90,32,614/- and offered for tax prior period income of Rs.12,03,52,172/-. Out of the prior period expenses of Rs.10,90,32,614/-, the assessee added depreciation of Rs. 8,55,54,748/- in the computation of total income. Thus, prior period expense is claimed at Rs.2,34,79,830/- which comprises of the following amounts:-
General Overhead & Plant Running Expenses Rs. 10,22,608/- Reversal of centage income Rs. 19,69,682/- Interest on BOT asset Rs.2,04,87,540/-
This amount of Rs.2,34,79,830/- was added by the Assessing officer in computing the total income by not accepting the explanation of assessee. The
ITA No. 56/JP/2018 3 M/s Rajasthan State Road Development & Construction Corporation Ltd. Vs. ITO Ld. CIT(A) deleted the addition of Rs.19,69,682/- by accepting the explanation of assessee. In respect of General Overhead & Plant Running Expenses of Rs. 10,22,608/-, no finding is given by the ld CIT(A). In respect of interest on BOT asset of Rs. 2,04,87,540/-, the ld CIT(A) accepted that due to amendment in the method of depreciation on BOT asset vide notification dated 17.04.2012, working of interest is revised but no break up of this interest and whether the same has been paid is provided and therefore, she confirmed the disallowance.
During the course of hearing, the ld. AR submitted that the in respect of the amount of Rs.10,22,608/-, the same comprise of general overhead expenses of Rs.2,96,486/- and plant running expenses of Rs.7,26,122/-. The general overhead expenses are mainly on account of legal expenses, staff welfare expenses, telephone expenses, travelling expenses, vehicle expenses, salary expenses, etc. pertaining to AY 2012-13, the expenditure for same was approved by the Appropriate Authority during the year and thus crystallized during the year. The same is the case in respect of plant running expenses. Thus, these expenses are allowable in the year under consideration. Otherwise also, the tax rate being the same, it makes no difference whether the expenditure is allowed in the current year or in the previous year. Further when the prior period income of Rs. 12,03,52,172/- is assessed to tax in the year under consideration, the prior period expenditure claimed by the assesse cannot be disallowed. Reliance is placed on the decision of the Hon’ble Rajasthan High Court in case of PCIT vs. Rajasthan State Seed Corporation Ltd. (2016) 386 ITR 267 wherein it was held as under:
“Insofar as the prior period expenses is concerned a finding of fact has been recorded by the Appellate Authorities that approval for payment of the said expenditure was given during the year under appeal therefore
ITA No. 56/JP/2018 4 M/s Rajasthan State Road Development & Construction Corporation Ltd. Vs. ITO the liability crystallized during the year and similar method was being regularly followed by the assessee consistently and when there is a finding recorded by the Appellate Authorities that the expenditure crystallized during the year, was written in the books this year and on year to year basis was claimed in the same manner and fashion was rightly claimed and allowed during the year, is a finding of fact.
In our view the deletion of disallowance is based on material evidence on record and is a finding of fact, no question of law much less substantial question of law can be said to emerge. We find no perversity or illegality in the order impugned so as to call for interference of this Court.”
The ld AR further placed reliance on CIT Vs. Excel Industries Ltd. 358ITR 295 (SC), Saurashtra Cement & Chemical Industries Ltd. Vs CIT 213 ITR 523 (Guj.) and Rajasthan State Industrial Development & Inv. Corpn. Ltd. Vs. ACIT (66 & 354/JP/08, dated 30-09-2008 for AY 2004-05 and 138 & 235/JP/09 for AY 05-06 dated 08-01-2010). It was further submitted that in assessee’s own case, the Tribunal for AY 2011-12 has allowed the prior period expenditure claimed by the assessee as per the finding given in Para 6.2, Pg 7-8 of its order.
In so far as claim of interest on BOT asset is concerned, it was further submitted that during the year under consideration because of amendment in Schedule XIV of the Companies Act, 1956, the method of recognition of revenue and amortization of toll asset was changed. As a result of such change, assessee recognized prior period toll income of Rs.1187.70 lacs and also the prior period interest expenditure of Rs.204.88 lacs. Thus, when the AO has tax the prior period toll income, the prior period interest expenditure cannot be disallowed. The relevant paper in this connection is placed at PB
ITA No. 56/JP/2018 5 M/s Rajasthan State Road Development & Construction Corporation Ltd. Vs. ITO 12-17. Since the notification for the change of the method of recognition of revenue/ amortization was notified on 17.04.2012, the prior period interest crystallized during the year and therefore, the same is allowable as expenditure during the year. It was submitted that the Ld. CIT(A) accepted this fact but still she disallowed the expenditure ignoring that the claim of interest is only in respect of the loan obtained for creation of the toll asset. Hence, the disallowance confirmed by Ld. CIT(A) in view of the above facts and also in view of the judgments referred above is unjustified and the same be deleted.
The ld DR is heard who has relied on the findings of the lower authorities.
We have heard the rival contentions and perused the material available on record. Firstly, regarding general overhead and plant running expenses, it has been contended that these expenditure were approved by the appropriate authority during the year and thus has crystallized during the year. It is noted that similar contention has been taken by the assessee before the lower authorities, however there is no finding which has been recorded which demonstrate that these expenses have been approved and crystallized during the year. In the result, we are setting aside the matter to the file of the AO to examine the said claim of the assessee and the latter shall be at liberty to raise the contentions so advanced before us including the legal precedents which have been relied upon.
Regarding interest on BOT asset is concerned, it is the contention of the ld AR that the same has been crystallized during the year and therefore, the same is allowable as expenditure during the year. The ld CIT(A) has accepted the said fact but at the same time, in absence of details of such
ITA No. 56/JP/2018 6 M/s Rajasthan State Road Development & Construction Corporation Ltd. Vs. ITO interest expenditure and whether the same has been actually paid or not has not allowed the claim of the assessee. The details of such interest expenditure is not available on record except the fact that such interest is in respect of loan obtained for creation of toll assets. Where such interest is paid to any public financial institution or state financial corporation or state industrial investment corporation as defined in section 43B, then in such a scenario, the ld CIT(A) is correct to hold that unless such interest has been shown as actually paid, the same cannot be allowed. However, in absence of specific details, it is difficult to determine the same. We are accordingly setting-aside the matter to the file of the AO to examine the same afresh. In the result, the ground of appeal is allowed for statistical purposes.
Regarding ground no. 3, briefly the fact of the case are that the assessee claimed deduction u/s 80IA at Rs.4,70,61,322/- in respect of toll project. The AO observed that establishment expenses of Rs.24,43,65,716/- and administrative expenses of Rs.5,11,24,469/- is not allocated against the income on which deduction u/s 80IA is claimed. He therefore, worked out proportionate indirect expenses against such income at Rs.2,58,80,837/- calculated as under and accordingly reduced the claim of deduction u/s 80IA to that extent:- (a) Net receipts from eligible projects Rs. 61,67,83,000/- (BOT Toll collections) (b) Total turnover Rs. 7,04,20,18,000/- (c ) Indirect Expenses (i) Other Expenses Rs. 5,11,24,469/-. (ii) Payment & provision for employees Rs. 24,43,65,716/- Total indirect expenses Rs. 29,54,90,185/- (Not allocated to 80IA units by assessee)
ITA No. 56/JP/2018 7 M/s Rajasthan State Road Development & Construction Corporation Ltd. Vs. ITO Proportionate indirect expenses to be apportioned to 80IA Units on the basis of Turnover: 29,54,90,185 x 61,67,83,000 = Rs.2,58,80,837/- 7,04,20,18,000
The relevant finding of the CIT(A) is reproduced as under:
“5.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. During the year, the assessee has claimed deduction under section 80IA at Rs.4,70,61,322/- in respect of toll project. The Assessing Officer held that the establishment expenses under the head "payment to and provision for employee" at Rs.24,43,65,716/- and "administrative expenses" at Rs. 5,11,24,469/- were not charged towards income disclosed from various toll road projects. The Assessing Officer allocated these expenses proportionately to Road/Bridge Projects. The CIT(A) in the previous year on identical facts dismissed the contention of the appellant that as no work or expenditure relating to BOT projects has been incurred, no proportionate allocation should be made. Further, the CIT(A) then determined the expenditure under these heads allocable to the BOT projects and deduction under section 80IA(4) was modified accordingly. In the present proceedings, it was submitted that the issue has been decided by the Hon'ble ITAT, Jaipur for assessment year 2011- 12 (in ITA No. 558/JP/2015).
In the present proceedings, it was submitted that the Hon'ble ITAT in its order for assessment year 2011-12 at set aside the matter to the file of the AO to apportion the expenditure on the basis of turnover and not income which has been done by the AO. The AR further submitted that the expenditure of Rs. 24.43 crores towards payment to provision for employees allocated by the AO related to the head office as well as 31
ITA No. 56/JP/2018 8 M/s Rajasthan State Road Development & Construction Corporation Ltd. Vs. ITO units of the assessee's Corporation and out of these 31 units, 26 units are related to the construction work and no toll collection takes place. It was contended that only in 5 units both construction and toll collection takes place, hence the expenditure of other 26 units should not be considered for allocation. This issue was also decided by my predecessor in favour of the assessee in A.Y11-12.The AO is directed to consider the allocation of these units only. It was further submitted that Rs. 25 Lacs paid for stamp duty for share included in the administrative expense of Rs. 5.11 crores has already been disallowed in the computation, AO to verify the same and modify accordingly. Thus the disallowance made by the AO is confirmed, subject to the above adjustments. The ground of appeal is partly allowed.”
During the course of hearing, the ld. AR submitted that the corporation is having unit wise as well as project wise accounting system. At the year end, accounts of the units are consolidated at Head Office and Balance Sheet and Profit & Loss account is prepared. In respect of BOT projects, company has awarded the work of toll collection to the contractor who pays the toll collection charges as per the terms of the award. All expenses on salary/administration etc. is born by the contractor. Therefore, the corporation does not incur any expenditure on salary or on administration of the BOT collection work project. Only small expenditure is incurred in the BOT collection work which is debited in working out the eligible profit of the BOT undertaking. Thus, the corporation incurs only meager toll expenditure, interest cost in respect of BOT assets and proportionate cost of BOT work in respect of BOT projects. All these expenses have been considered while working out the eligible profit. Once all the direct and indirect expenses incurred have been accounted for in calculating the eligible profit, there can’t be further allocation of proportionate expenses in respect of employees cost and administrative
ITA No. 56/JP/2018 9 M/s Rajasthan State Road Development & Construction Corporation Ltd. Vs. ITO expenses incurred at head office and at various unit offices. Hence, there cannot be any disallowance out of the claim u/s 80IA made by the assessee.
It was further submitted that similar issue was considered by the Tribunal in AY 2011-12 where the assessee has made 3 claims, firstly that the turnover taken by the AO is incorrect, secondly that assessee himself has considered the expenditure against the income eligible for deduction u/s 80IA and thirdly that the allocation of Head Office expenditure as done by the lower authorities is not correct. The Hon’ble ITAT found merit in the contention of assessee but set aside the issue to AO to verify the figures from the accounts of assessee. In the year under consideration, there is no dispute on the turnover. Therefore, the issue is when assessee has already allocated the indirect expenditure in relation to the toll project in working out the income, the establishment expenses and the administrative expenses incurred at Head Office and Unit Office cannot be allocated in arriving at the income of toll projects. Therefore, the direction of Ld. CIT(A) to consider the allocation of these expenditure in respect of 5 units where both the construction and toll collection takes place is unjustified.
The relevant finding of the Coordinate Bench in assessee’s own case for A.Y 2011-12 (ITA No. 558/JP/2015 and others dated 08.09.2016) is as under:-
“From the aforesaid submissions it is evident that the contention of the assessee against disallowance of deduction are three fold. Firstly, the turnover as taken by the AO and the ld. CIT (A) is incorrect. Secondly, the assessee himself has considered the expenditure against the income eligible for deduction under section 80IA. Thirdly, the allocation of head office expenditure as done by the lower authorities is not correct. Therefore, the authorities below were not justified in
ITA No. 56/JP/2018 10 M/s Rajasthan State Road Development & Construction Corporation Ltd. Vs. ITO disallowing the claim of deduction under section 80IA. We find merit in the contention of the ld. Counsel for the assessee. However, the figures are required to be verified from the accounts of the assessee. Therefore, the orders of the authorities below are set aside on this issue. The issue of claim of deduction under section 80IA is restored back to the file of the AO to verify the contention of the assessee as made in the written brief. In case the AO finds that the figures as given in the written brief matches with the books of account of the assessee, he would accordingly recompute the deduction allowable to the assessee. Needless to say that the AO would give sufficient opportunity to the assessee for furnishing the evidences in support of its claim. These grounds of the assessee are allowed for statistical purposes.”
The ld DR is heard who has relied on the order of the Assessing officer.
We have heard the rival contentions and perused the material available on record. The contention of the ld AR is that once all the direct and indirect expenses incurred have been accounted for in calculating the eligible profit, there can’t be further allocation of proportionate expenses in respect of employees cost and administrative expenses incurred at head office and at various unit offices. However, there is nothing available on record in terms of working of eligible profits and accounting of expenses in relation to eligible projects. Following the decision of the Coordinate Bench referred supra, the matter is remanded back to the file of the AO to examine the above said contentions of the ld AR and to see whether the assessee has made proper allocation of expenses. In the result, the ground is allowed for statistical purposes. In the result, the appeal of the assessee is allowed for statistical purposes.
ITA No. 56/JP/2018 11 M/s Rajasthan State Road Development & Construction Corporation Ltd. Vs. ITO
Order pronounced in the open Court on 17/05/2018.
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