ACIT, CIRCLE, PANCHKULA vs. HARYANA STATE ROADS AND BRIDGES DEVELOPMENT CORPORATION LTD., PANCHKULA

आदेश/Order

Per Sanjay Garg, Judicial Member: Out of the captioned appeals, ITA No. 533/Chd/2018 has been preferred by the assessee, whereas, ITA No.739/Chd/2018 has been

ITA Nos. 53 & 739-chd-2018 M//s Haryana State Roads & Bridge Development Corporation Ltd, Panchkula 2 preferred by the Revenue relating to different assessment years but

pertaining to the same assessee.

appeals were heard together and are being disposed of by this common

order.

Company incorporated by the Government of Haryana dealing in the

business of construction and up-gradation of Roads and Bridges in the

State of Haryana. During the assessment proceedings for the assessment

year under consideration, the Assessing Officer noticed that the assessee

had debited the interest expenditure of an amount of Rs. 72,44,13,474/-

in the previous year relevant to the assessment year 2013-14 and

further an amount of Rs. 99,66,91,956/- during the previous year

relevant to the assessment year 2014-15, however, the said expenditure

was relating to the interest liability of the earlier assessment years. He,

therefore, disallowed the aforesaid amount of Rs. 72.44 Crores for the

assessment year 2013-14 and Rs. 99.66 Crores for assessment year

2014-15, as prior period expenses.

In both the cases, the assessee preferred appeals before the Ld.

CIT(A). It was explained to the Ld. CIT(A) that the assessee for the

purpose of improvement /up-gradation of roads in the State of Haryana

ITA Nos. 53 & 739-chd-2018 M//s Haryana State Roads & Bridge Development Corporation Ltd, Panchkula 3 had taken loan from HUDCO in four projects. That out of the total

project cost, 80% was to be financed by HUDCO and balance 20% was

to be provided by the Government of Haryana as 'Counter Part Funding'.

The 'Counter Part Funding' to be provided by the Government of

Haryana was without any interest. That the loan due to HUDCO was to

be repaid from the collection from Toll Points on various roads

improved & maintained by the assessee Corporation. However, the Toll

point collection was not sufficient for the repayment of quarterly loan

installment to HUDCO during the year. Subsequently, the assessee

made request to the State Government for the release of 'Counter Part

Funding' for the repayment of the quarterly installments. The State

Government accordingly released the counterpart funding due to the

corporation time and again which was without any interest. However,

subsequently, in the month of March 2013 in the Board of Directors

meeting. Director of Finance Department Haryana conveyed the

decision of the Government to charge charge interest from the assessee

@12% per annum calculated on the monthly basis from the date of

advance taken from the State Government. Accordingly interest of Rs.

25 Crores had been provided for in F.Y. 2012-13 and interest of Rs.

72.44 Crores had been provided up to the extent of surplus available

(out of the interest of Rs. 172.66 cr.) totaling Rs. 97.44 crores during

the year with assessee. That decision to levy the interest @12% was

later on communicated to the assessee vide memo letter dated

ITA Nos. 53 & 739-chd-2018 M//s Haryana State Roads & Bridge Development Corporation Ltd, Panchkula 4 10.05.2013 No. 2/l/2013/SA/FA/HBPE(FD) by the Member Secretary,

Haryana Bureau of Public Enterprises, Finance Department.

The Ld. counsel, therefore, has submitted that though the decision

of the State Government to charge the interest on the amount funded by

the State Government was conveyed orally in a meeting of Board of

Directors, whereas, an express written communication was received by

the assessee to this effect vide letter dated 10.5.2013. The assessee,

therefore, has pleaded that since the liability to pay the interest to the

Government crystalized during the assessment years under

consideration, hence, the disallowance by the Assessing Officer on

these interest payments on the ground that these were prior period

expenses was not justified.

observed that the liability in fact was crystalized on receipt of the

written communication vide letter dated 10.5.2013, he, therefore, held

that the payment by the assessee of Rs. 72.44 crores during the

financial year 2012-13 relating to assessment year 2013-14 and relating

to the interest liability of earlier assessment year was not allowable as

such liability was crystalized in the subsequent year i.e. during the

previous year relevant to the assessment year 2013-14.

The CIT(A) however, allowed the remaining payment of Rs. 99.66

cores relating to the prior period interest expenditure while deciding

ITA Nos. 53 & 739-chd-2018 M//s Haryana State Roads & Bridge Development Corporation Ltd, Panchkula 5 the appeal of the assessee of assessment year 2014-15. Therefore, the

assessee has come in appeal against the findings of the CIT(A) for

assessment year 2013-14 rejecting the claim of expenditure, whereas,

the Revenue has come in appeal against the findings of the Ld. CIT(A)

dated 15.3.2018 allowing the claim of interest expenditure in

assessment year 2014-15.

record. It is apparent from the record that the decision to charge the

interest retrospectively was taken by the Government subsequently and

not during the prior assessment years, hence, the liability to pay the

interest had not accrued or crystalized during the years prior to the

assessment year 2013-14. In the assessment year 2013-14, the assessee

was conveyed in the meeting of Board of Directors in the month of

March 2013 about the decision of the Government to charge interest

retrospectively relating to the earlier assessment years, however,

formal communication was received by the assessee in this respect on

10.5.2013. The assessee, therefore, in the financial year 2012-13

relating the assessment year 2013-14 not only paid the interest relating

to the financial year 2012-13 but also paid an amount of Rs. 72.44 cores

which was extent to surplus available with the assessee at the end of the

year. The remaining amount of Rs. 99.66 cores was paid by the assessee

during the next financial year 2013-14 relating to assessment year 2014-

ITA Nos. 53 & 739-chd-2018 M//s Haryana State Roads & Bridge Development Corporation Ltd, Panchkula 6 15. Under the circumstances, it cannot be said that the liability to pay

the interest had accrued or crystalized during any of the year prior to the

financial year 2012-13 relating to assessment year 2013-14. The

assessee out of the accrued liability relating to the interest expenditure

of the earlier years paid the actual liability relating to the financial year

2012-13 as well the amount of surplus available to the assessee during

the financial year 2012-13 and paid the remaining amount in the next

financial year 2013-14 after receipt of the written communication dated

10.5.2013. The Assessing Officer, allowed the interest liability of

financial year 2012-13 which was paid during the year, however,

disallowed the remaining payment of interest being prior period

expenses. The Ld. CIT(A) surprisingly observed that the liability had

been actually crystallized on 10.5.2013 on receipt of the written

communication. However, he did not question the action of the

Assessing Officer to allow interest expenses of financial year 2012-13

amounting to Rs. 25 crores. If as per the CIT(A) the liability was

crystallized in the subsequent financial year 2013-14, then under the

circumstances, the assessee was not justified to pay any interest amount

in financial year 2012-13, however, the same has been allowed by both

the lower authorities.

The facts itself speaks that though the assessee was conveyed the

decision of the Government to charge the interest relating to the earlier

years in the meeting held in the month of March 2013 and the assessee

ITA Nos. 53 & 739-chd-2018 M//s Haryana State Roads & Bridge Development Corporation Ltd, Panchkula 7 accordingly paid the surplus available to it during the financial year

2012-13, however, the full an final liability was crystalized during the

financial year 2013-14 relating to assessment year 2014-15 and

accordingly paid the remaining amount out of the interest expenditure

relating to the earlier assessment years which was allowed by the

CIT(A).

We, therefore, do not find justification on the part of the CIT(A) in

disallowing the interest expenditure paid by the assessee during the

financial year 2012-13 relating to assessment year 2013-14. However,

the Ld. CIT(A) rightly deleted the disallowance made by the Assessing

Officer in the appeal relating to assessment year 2014-15. We

accordingly set aside the order of the Ld. CIT(A) dated 13.02.2018

relating to assessment year 2013-14 and delete the disallowance made

by the Assessing Officer on this issue, whereas, the findings of the

CIT(A) relating to assessment year 2014-15 are upheld.

In the result, the appeal of the assessee for assessment year 2013-

14 is allowed, whereas, the, appeal of the Revenue of assessment year

2014-15 is dismissed.

Order pronounced in the Open Court on 22.10.2019.

Sd/- Sd/- (संजय गग� / SANJAY GARG) (एन. के. सैनी / N.K. SAINI) उपा�य� /Vice President �या�यकसद�य/ Judicial Member Dated : 22.10.2019

ITA Nos. 53 & 739-chd-2018 M//s Haryana State Roads & Bridge Development Corporation Ltd, Panchkula 8 ‘Rkk ‘ आदेशक���त�ल�पअ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकरआयु�त/ CIT 4. आयकरआयु�त (अपील)/ The CIT(A) 5. �वभागीय��त�न�ध, आयकरअपील�यआ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड�फाईल/ Guard File

आदेशानुसार/ By order, सहायकपंजीकार/ Assistant Registrar