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PER PAWAN SINGH, JUDICIAL MEMBER
This appeal by assessee is directed against the order of ld. CIT(A)-22, Mumbai dated 03.08.2017 for Assessment Year 2012-13. The assessee has raised the following grounds of appeal:
1. On the facts & circumstances of the case the Learned Commissioner of Income Tax (Appeals) has erred in confirming that the sum of Rs. 72,73,294/- be taxed under the head Income from other sources. The appellant prays that the conclusion reached by the Learned Commr. of Income Tax (Appeals) that the sum of Rs.72,73,294/- is chargeable to tax under the head Income from other sources.
2. On the facts & circumstances of the case the appellant prays that the addition made by the Learned Assessing Officer and confirmed by the Learned Commissioner of Income Tax (Appeals) amounting to Rs. 72,73,294/- under the head Income from other sources may be deleted.
3. On the facts & circumstances of the case the appellant prays that the sum of Rs. 72,73,294/- may be treated as income earned from business and profession and may be reduced from the total value of the capital work in progress and the said amount is not chargeable to tax under the head Income from other sources. 4. On the facts & circumstances of the case the Learned Commr. of Income Tax (Appeals) has erred in concluding that the appellant is not entitled to claim the deduction of the sum of Rs. 1,14,40,9671- , being the interest paid against the interest income. 5. On the facts and circumstances the appellant prays that the sum of Rs. 1,14,40,967/- being the interest payment may be allowed as deduction against the interest of Rs. 72,73,294/- treated as the income chargeable to tax under the head income from other sources. 6. Without prejudice to ground 1 to 5 the appellant prays that if the sum of Rs. 72,73,294/- is taxed under the head income from other sources and if deduction of interest payment is not allowed to be set off against the said income then the sum of Rs. 1,14,40,967/- may be added to the capital work in progress as the appellant has reduced the said amount while computing the capital work in progress. 7. On the facts and circumstances of the case the appellant prays that the Learned Commr. Of Income tax (Appeals) has erred in allowing the deduction of Rs. 3,38,025/- u/s. 37(1) as against the claim of the appellant of Rs. 10,10,740/-. The appellant prays that the appellant be granted deduction of Rs. 6,72,715/- us. 37(1). 8. Without prejudice to Ground No.7 if the claim of deduction of Rs. 6,72,715/- is not accepted then the said sum of Res. 6,72,715/- be added to capital work in progress. 9. On the facts and circumstances of the case the appellant denies the liability for payment of interest u/s. 234D and prays that the interest levied by the Learned Assessing Officer may be deleted. 2
Brief facts of the case are that the assessee is a company engaged in the business of construction of road on Built Operate and Tax (BOT), filed its return of income for Assessment Year 2012-13 on 24.09.2012 declaring Nil income. The return of income was selected for scrutiny. The assessee entered into a concession agreement on 16.07.2010 with National Highway Authority of India (NHAI) for rehabilitation, strengthening and four laning of Jorabat Shillong section of HN-40 in the state of Assam and Meghalaya on BOT basis. During the assessment, the Assessing Officer noted that the assessee has earned interest income of Rs. 72,73,294/- in the bank account/deposited with Indian Bank, Connaught Palace, New Delhi. The Assessing Officer noted that the assessee has not offered the income for taxation but reduced the same from capital work- in-progress. The assessee was asked to explain as to why the income should not be treated as “Income from Other Sources”. The assessee filed its reply dated 09.02.2015. In the reply, the assessee stated that the assessee setting up infrastructure facility being construction of Toll Road in the state of Assam and Meghalaya. The promoters of company have introduced money by way of share capital and also obtain credit facility in the bank from the banks and Institutions. The funds are exclusively meant for setting up infrastructure facility. The lender disbursed the funds at the specified interval and the said fund are required to be used for the 3 purpose of setting up of the project due to timing difference of sources and application of the fund, the assessee have liquidated in this funds invested in the short term deposit. The intention of assessee of borrowing of funds by way of Fixed Deposit for the short term period to utilize the fund to maximize the return. The activities of borrowing of the funds by way of Fixed Deposit can be considered as activity which is extricable linked with the activity of setting of project. The assessee also relied upon the decision of Hon’ble Delhi High Court in Indian Oil Panipat Power Consortium Ltd. vs. ITO and Hon’ble Supreme Court in CIT vs. Bokaro Steel Ltd. The contention of assessee was not accepted by Assessing Officer. The Assessing Officer concluded that interest earned by assessee was taxable under the head “Income from Other Sources”. On appeal before the ld. CIT(A), the action of Assessing Officer was confirmed.
Before the ld. CIT(A), the assessee raised the additional ground of appeal for allowing expenditure of Rs. 10,10,740/- on account of Administrative & General Expenses. The ld. CIT(A) after admitting the additional ground of appeal allowed part relief to the assessee allowing Director’s fees of Rs. 1,45,000/-, Audit Fees of Rs. 1,10,300/- and Tax Audit Fees of Rs. 82,725/- and remaining balance amount was not allowed. Further, aggrieved by the part relief granted by the CIT(A), the assessee has filed the present appeal before this Tribunal.
We have heard the submission of ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the revenue and perused the material available on record. At the outset of hearing, the ld. AR of the assessee submits that Ground No.1 to 3 are covered in favour of assessee by the decision of Tribunal in assessee’s own case for Assessment Year 2011-12 wherein similar interest income was treated as “Income from Other Sources”. However, on appeal before the Tribunal, the assessee was granted relief in dated 12.09.2018.
On the other hand, the ld. DR for the revenue after going through the contents of the decision of Tribunal dated 12.09.2018 in assessee’s own case for Assessment Year 2011-12 conceded that this ground of appeal
is covered in favour of assessee.
5. We have considered the submission of both the parties and have gone through the orders of authorities below. We have noted that similar ground interest income was treated as “Income from Other Sources” in Assessment Year 2011-12. However, on appeal before the Tribunal, the same was allowed in favour of assessee as “Business Income”. The Tribunal while allowing the interest income as Business Income followed the decision of Jaipur Bench in Infrastructure Development Company of Rajasthan Ltd. Vs. DCIT in ITA No. 628/JP/2014 dated 11.08.2016, Hon’ble Delhi High Court in Indian Oil Panipat Power Consortium vs. 5 ITO (355 ITR 255(Del.), CIT vs. Facor Power Ltd. [2016] taxman.com 178 (Del.). Therefore, considering the decision of Tribunal in assessee’s own case for Assessment Year 2011-12 and respectfully following the same, Ground No.1 to 3 of appeal are allowed.
6. Ground No. 4 & 5 are raised in alternative to Ground No.1 to 3, which we have already allowed. Therefore, the discussions on these grounds of appeal have become academic.
7. Ground No.6 is raised in alternative to Ground No. 1 to 5, as we have already allowed Ground No. 1 to 3, therefore, discussion on this ground of appeal are also become academic.
8. Ground No.7 & 8 relates to deduction of Rs. 3,38,025/- under section 37 of the Act against the claim of Rs. 10,10,740/-. The ld. AR of the assessee furnished the written submission. In the written submission, the ld. AR of the assessee submits that in appeal for Assessment Year 2010-11 similar ground of appeal was raised as the same were not adjudicated by ld. CIT(A), the Tribunal remanded the same to the file of ld. CIT(A).
However, for the year under consideration, the assessee raised additional ground of appeal before ld. CIT(A). The ld. CIT(A) allowed expenses incurred on Director’s Fees of Rs. 1,45,000/-, Audit Fees of Rs. 1,10,300/- and Tax Audit Fees of Rs. 82,725/- and remaining expenses aggregating of Rs. 6,72,715/- was not allowed. The ld. AR of the assessee submits that the assessee-company was set up only to build, operate and 6 transfer of highway. All these expenses aggregating to Rs. 6,72,715/-, details of which are provided in the Note 14 of financial statement, copy of which are placed on record vide page no. 22 of Paper Book. The ld. AR of the assessee submits that all these expenses are allowable expenses under section 37 as incurred wholly and exclusively for the purpose of business. In alternative submission, the ld. AR submits that these expenses were incurred to bring the asset into existence and has to be capitalized to the cost of asset.
9. On the other hand, the ld. DR for the revenue supported the order of authorities below.
10. We have considered the submission of both the parties and perused the material available on record. We have noted that in the statement of fact filed before the ld. CIT(A), the assessee stated that they had incurred the expenditure under the head other expenses of Rs. 10,10,740/-. The said expenditure was debited in the Profit & Loss Account and not treated as a part of capital work-in-progress while filing the return of income. The assessee had disallowed the same while computing the income under the head Income from Business & Profession. The assessee before the ld. CIT(A) raised fresh claim by way of additional ground for claiming expenditure of Rs. 10,10,740/- is allowable deduction under section 37 on the ground that the assessee has erroneously disallowed the same in computation of income. The ld. CIT(A) after considering the contention 7 of the assessee admitted the additional claim in the form of grounds of appeal and allowed Rs. 1,45,000/- of Director’s Fees, 1.10,000/- Audit Fees and Rs. 82,725/- on account of Tax Audit Fees holding that these expenses are required to maintain the corporate status of the assessee and the remaining expenditure was not relating to the corporate status was not allowed. The alternative and without prejudice ground for adding the sum of/remaining expenses to the capital work-in-progress was not allowed by ld. CIT(A) holding that the expenses are revenue expenditure and has no connection that capital work-in-progress.
11. Before us, the ld. AR of the assessee in her written submission as well as during her submission submitted that all expenses are allowable expenses under section 37 of the Act. We have noted that out of total claim of Rs. 10,10,740/- the ld. CIT(A) has already allowed the claim of Audit Fees, Tax Audit Fees and Director’s Fees aggregating of Rs. 3,37,725/- and remaining amount of Rs. 7,62,715/- was not allowed. The remaining expenditure consist Legal and Consultation Fees of Rs. 1,00,000/- Travelling and Conveyance fees of Rs. 2,28,358/-, Rates & Taxes of Rs. 2,680/-, Bank Commission of Rs. 2,327/- and Fees for other services of Rs. 3,08,840/-. Considering the nature of expenses incurred by assessee as narrated above all the expenses are necessary for corporate entity, therefore, all the expenses are allowed. The Assessing Officer is directed accordingly. In the result, ground no.7 of the appeal is allowed. 8
12. Ground No.8 is raised in alternative to ground no.7, as we have allowed the ground no.7 of the appeal, therefore, the adjudication of ground no.8 has become academic.
In the result, appeal of the assessee is allowed. Order pronounced in the open court on 24/07/2019.