ACIT, JAIPUR vs. RAJASTHAN STATE ROAD DEVELOPMENT & CONSTRUCTION CORP. LTD., JAIPUR

PER SHRI KUL BHARAT, JM.

This appeal filed by the revenue is directed against the order of ld. CIT

(Appeals)-2, Jaipur dated 30.11.2016 pertaining to A.Y. 2012-13. The Revenue has

raised followings grounds of appeal.

“1 Whether one the facts and circumstances of the cae and in law, the ld. CIT(A) was justified in holding contribution of Rs. 20,00,000/- to State Renewal Fund as an allowable expenditure though it is not an actual expenditure. 2. Where on the facts and circumstances of the case in law, the ld. CIT(A) was justified in deleting the addition made by the AO by disallowing Rs. 1,97,491/- of prior period expenses. 3. Whether in the facts and circumstances of the case and in law, the ld. CIT(A) was justified restricting the disallowance of deduction u/s 80IA to Rs. 9.24 lacs against Rs. 3,84,50,924/-. 4. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) was justified in deleting the addition of Rs. 6,04,590/- made by the AO for depositing the employee’s contribution to PF beyond the prescribed time limit provided in respective Acts.

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scrutiny assessment and the assessment under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act) was framed vide order dated 31st

January 2015, while framing the assessement, the Assessing Officer made addition

on account of disallowance of contribution to State Renewal Funds of Rs.

20,00,000/-,prior period expenses of Rs. 1,97,491/- and delay in deposits in

provident fund of Rs. 6,04,590/-. The Assessing Officer also restricted the deduction

u/s 80IA of Rs. 36,32,87,646/-.

who after considering the submissions, allowed the appeal. Thereby, the ld. CIT (A)

deleted the disallowance made by the Assessing Officer in respect of contribution

towards State Renewal Fund, prior period expenses and delay in deposit of PF

contribution. However ld. CIT(A) restricted the disallowance of deduction u/s 80IA

to Rs. 9.24 lakhs against Rs. 3,84,50,924/-. Against this, the Revenue has preferred

the present appeal. At the outset, the ld. Counsel for the assessee submitted that all

the issues are covered in favour of the assessee. This fact is not controverted by

the ld. Departmental Representatives.

account of contribution to State Renewal Funds. We find that the similar issue has

been decided in favour of the assessee by the judgment of the Hon’ble Rajasthan

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High Court rendered in the case of CIT vs. Rajasthan State Seeds Corporation Ltd.

386 ITR 267. Respectively following the Judgment of the High Court, we do not see

any reason to interfere into the order of the ld. CIT (A), therefore, same is hereby

affirmed. Therefore, the ground raised by the Revenue is dismissed.

of prior period expenses of Rs. 1,97,491/-. At the outset, the ld. Counsel for the

assessee submitted that, this issue is also covered. The ld. DR conceded the facts,

however, he supported the order of the Assessing Officer.

5.1 We have heard the rival contentions, perused the material available on

record. The Co-ordinate Bench in assessee’s own case in ITA No. 558/JP/2015,

decided the issue by holding as under:-

“6.2 we have heard rival contentions and perused the material available on record. The ld. CIT(A) in para 4.3 of his order has decided the issue as under:-

4.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The appellant has given a break-up of the expenditure debited under the head prior expense. As per this break-up, an amount of Rs. 1,77,09,136/- with respect to the head office and an amount of Rs. 55,28,017/- with respect to the Jodhpur unit are reversal of entries of income, wrongly made in the preceding years. With respect to the head office, an amount of Rs. 96,08,000/- pertains to reversal of double income booked in F.Y. 2002-03 with respect to maintenance charges. Further an amount of Rs. 2,94,25,000/- with respect to the head office pertains to wrong entry of interest income in F.Y. 2002-03 & 2003-04 with respect to toll projects on capital deployed by the appellant. The above contentions of the appellant with respect to reversal of income wrongly declared in earlier years, is acceptable. Expenditure of Rs. 76,629/- with respect to Gurgaon and expenditure of Rs. 15,000/- with respect to the mechanical unit are in the nature of prior period expenses which covered in favour of the appellant by the orders of the CIT(A)-II, Jaipur for A.Y. 2009-10 & 2010-11. Following the above orders, this prior period expenditure is allowable. With respect to the expenditure of Rs. 16,33,880/- pertaining to the Bikaner Unit, this expenditure has been incurred on shifting of plan in an earlier year, which was

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originally recoverable from PWD but since the work got withdrawn and the amount could not be recovered from PWD, this amount has been debited in this years. This contention of the appellant is acceptable. In view, of the above discussion, the disallowance made by the Assessing Officer, on account of the above prior period expenses to the tune of Rs. 1,94,34,645/- is directed to be deleted. With respect to the amount of Rs. 55,28,017/- pertaining to the Jodhpur unit, with respect to shuttering material, the explanation furnished by the appellant does not match the supporting order sheet entries submitted. Therefore, the nature of expenditure is not ascertainable and therefore this expenditure cannot be allowed. This disallowance made by the Assessing Officer is upheld. This ground is partly allowed.

The ld. CIT(A) has given a finding of fact that with respect to the Head Office an amount of Rs. 96,08,000/- pertains to reversal of double income booked in F.Y. 2002-03 with respect to maintenance charges. The ld. CIT(A) has given further finding of fact that an amount of Rs. 2,94,25,000/- with respect to the head Officer pertains to wrong entry of interest income in FY 2002-03 & 2003-04 with respect to toll project on capital deployed by the appellant. This finding of fat is not controverted by the ld. D/R by placing any material on record. We are in agreement with the observations of the ld. CIT(A) that reversal of income wrongly declared in earlier years, is allowable. Hence, this ground of the revenue is dismissed.”

Therefore, taking a consistent view, this ground of the revenue’s appeal is

dismissed.

At the outset, the ld. Counsel for the assessee submitted that this issue is covered in

favour of the assessee reiterated the submissions as made in the written

submissions.

Ld. Departmental Representatives is conceded the facts, however he supported the

order of the Assessing Officer.

6.1 We have heard the rival contentions, perused the material available on

record. We find that the Co-ordinate Bench in assessee’s own case in pertaining to

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the assessment year 2011-12 in ITA No. 558/JP/2016, decided the issue by

observing as under:-

“8.2 We have heard the rival contentions, perused the material available on record and gone through the orders of the authorities below. The AO observed that during the year under consideration, the Company has claimed establishment expenses under the head “payment to and provision for employees” as per schedule “I” at Rs. 32,68,44,701/- and “Administrative expenses” at Rs. 6,05,47,431/- as per Schedule “J” annexed to the profit & loss account. Total of these expenses comes to Rs. 38,73,92,132/-. The AO further observed that none of the expenses were charged towards income disclosed from various toll road projects eligible for claiming deduction u/s 80IA of the Act. He observed that assessee has claimed total 8 toll road/bridge projects eligible for deduction u/s 80IA of the Act within the meaning of section 80IA(4)(i) of the Act for developing, operating and maintaining of infrastructure facility i.e. Road/Bridge. These 8 projects are : (i) Bikaner Bypass, (ii) Hanumangarh-Suratgarh Road, (iii) Hanumangarh- Shriganganagar Road, (iv) Massi Bridge, (v) Chala Neema Ka Thana-Kotputli Road, (vi) Chomu-Ajitgarh Shahpura Road, (vii) Chala Neem Ka Thana- Kotputli Road (Improvement) (viii) Mangalwar Nimbahera Road. Out of these, two projects Bikaner Bypass & Chomu- Ajitgarh-Shahpura Road have incurred losses. On balance 6 projects assessee has claimed deduction u/s 80IA of the Act to the tune of Rs. 8,20,34,909/-. As the establishment and administrative expense were utilized for the entire business activities of the company which includes road & bridge projects; as such the assessee was asked to show cause and explain as to why the establishment and administrative expense of Rs. 38,73,92,132/- should not be allocate proportionately to road/Bridge projects in proportion to their income of Rs. 23,00,24,830/- with total income of Rs. 64,78,66,500/- The assessee, in response to this query, made a detailed submission. However, the submissions of the assessee were not found acceptable by the AO. The AO, therefore, by relying on the provisions of section 80IA(5) allocated the direct expenses towards eligible units as well. The AO further observed that it is clear that many expenses of common nature i.e. head office and other day- to-day management and supervision expenses have not been apportioned amongst the unit claiming deduction u/s 80IA of the Act. The assessee has considered only direct operation and maintenance expenses for working out the profits of road and bridge project for claiming deduction u/s 80IA, as if these projects were automatically set up and running without any strategic planning, management, directions, supervision, marketing support, regular contract awarding, works tendering, control etc. by the head office/branch offices. The administrative, head office and other expenses have a direct nexus with the running of road/bridge projects of the assessee situated at various places and, therefore, the same are deductible on proportionate basis in computing the profits and gains from the eligible business for the purpose of sub-section (1) of Sec. 80IA of the Act. Therefore, the AO observed that a

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sum of Rs. 13,75,43,459/- is required to be apportioned to 80IA units, accordingly this will be deducted for the purpose of working out deduction under section 80IA of the Act. Thus the AO reduced the allowable deduction accordingly. However, the ld. CIT(A) after considering the submissions of the assessee, restricted the disallowance to Rs. 6,98,93,301/- against Rs. 8,20,34,909/-. The ld. CIT (A) by doing so has observed as under:-

“5.5. The appellant has stated that while apportioning the expenditure, the Assessing Officer has wrongly taken the total turnover as Rs. 64,78,66,570/- whereas the correct turnover is Rs. 4,38,13,34,652/-, reflected in the inner column of Schedule-G of the final accounts relating to operating receipts. If the inner column of Schedule-G pertaining to operating receipts is totaled, the gross turnover amounts to Rs. 69,89,85,491/- as against Rs. 4,38,13,34,652/- claimed by the appellant.

5.6. The appellant has stated that the work of BOT projects is handled by only five divisions of the appellant and the remaining 26 divisions do not undertake any work relating to BOT projects. Therefore, payment to and provision for employees of these five divisions and the head office should only be taken. This contentions of the appellant is correct and this expenditure relatable to BOT projects is taken as Rs. 16,98,40,588/-.

5.7. The appellant has stated that administrative expenses incurred at the head office of Rs. 6,05,47,731/- do not related to BOT projects. Looking to the nature of administrative expenses, this contentions of the appellant is without any basis and cannot be accepted. The administrative expenses which need to be apportioned to the BOT projects is Rs. 6,05,47,731/- - Rs. 1,80,00,500/- = Rs. 4,25,46,931/- (expenditure is Rs. 1,80,00,500/- has been disallowed by the appellant in the computation of income). Therefore, the total expenditure which needs to be apportioned to the BOT projects is Rs. 21,23,87,519/- (Rs. 16,98,40,588 + Rs. 4,25,46,931/-). 5.8. In this way, disallowance under section 80IA(4) will be computed as under:-

Rs. 21,23,87,519 x Rs. 23,00,24,830/ Rs. 69,89,85,491= Rs. 6,98,93,301/-.

The disallowance u/s 80IA of Rs. 8,20,34,909/- made by the assessing officer is restricted to the above amount of Rs. 6,98,93,301/-. Ground 4.1 is partly allowed.

The assessee has demonstrated that the authorities below have taken incorrect figure of turnover. Another contention of the assessee is that the amount related to Head Office is already apportioned and, therefore, there

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was no need for apportionment of the same. We find merit in the contention of the ld. Counsel for the assessee. Therefore, the ground raised in the appeal of the revenue is dismissed.”

made expenditure on account of depositing the employee’s contribution beyond the

prescribed time limit. Ld. Counsel for the assessee has no more res integra. The

issue has been decided by the Hon’ble Jurisdictional High Court rendered in the case

of CIT vs. State Bank of Bikaner & Jaipur (2014) 99 DTR 131 (Raj.) and also in the

case of CIT vs. Jaipur Vidyut Vitran Nigam Ltd. 98 DTR 105 (Raj.). The ld. DR

conceded the fact, that the issue is covered in favour of the assessee. Hence,

Ground Nos. 4 and 5 are dismissed.

Sd/- Sd/- ( HkkxpUn ½ ( dqy Hkkjr) ( BHAGCHAND) ( KUL BHARAT ) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Jaipur Dated:- 10/04/2017. Pooja/ आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू

vkns'kkuqlkj@ By order,

सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत

8 ITA No. 123/JP/2017 M/s Rajasthan State Road Development & Construction Corp.