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Facts
The assessee, Etawah Chakeri Highway Pvt. Ltd, operating a BOT project, collected toll fees and earned interest on Fixed Deposits (FDs) made for bank guarantees during the construction period. The assessee treated these receipts as capital, reducing the project cost. However, the Assessing Officer deemed them revenue receipts and made additions, which the CIT(A) subsequently deleted, classifying them as capital in nature.
Held
The ITAT, relying on its own previous decision in the assessee's case for A.Y. 2015-16, upheld the CIT(A)'s ruling. It concluded that both the toll receipts and interest income on FDs were inextricably linked to the project's construction and thus constituted capital receipts, to be reduced from the project cost. Consequently, the Revenue's appeal was dismissed.
Key Issues
Whether toll receipts collected during the construction of a BOT project and interest income from Fixed Deposits (FDs) maintained for providing bank guarantees are to be treated as capital receipts or revenue receipts.
Sections Cited
148, 147, 143(3)
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Income Tax Appellate Tribunal, DELHI ‘B’ BENCH,
Before: SHRI SAKTIJIT DEY, & SHRI NAVEEN CHANDRA
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:-
This appeal by the Revenue is preferred against the order of the NFAC, Delhi dated 21.03.2023 pertaining to A.Y. 2014-15.
The Revenue has raised the following substantive grounds of appeal:
“1. Whether on the facts and in the circumstances of the case and in law, the NFAC has erred in deleting the addition on account of treatment of the toll receipts amounting to Rs. 81,12,03,141/- as revenue receipts.
2. Whether on the facts and in the circumstances of the case and in law, the NFAC has erred in deleting the addition on account of treatment of interest income on FD amounting to Rs. 88,48,299/- as income from other sources.”
Brief facts of the case are that the assessee company was incorporated on 15.02.2011 and was awarded Etawah Chakeri Highway Project on BOT basis. The assessee has filed e-return of income on 26.11.2014 declaring NIL income. Thereafter, notices u/s 148 of the Income-tax Act, 1961 [the Act, for short] were issued on the ground that the assessee was collecting Toll fees of Rs 81,12,03,141/- and earned interest on deposit of Rs 88,48,299/- during the year which was treated as capital receipt and not revenue receipt.
The assessing officer, in the proceedings u/s 147 r.w.s. 143(3) held the receipt of Toll fees of Rs 81,12,03,141/- and interest earned on deposit of Rs 88,48,299/- as revenue receipt. Aggrieved the assessee approached the CIT(A) who gave relief to the assessee holding that both the receipts are capital receipts and are to be reduced from the cost of project.
Aggrieved, the Revenue is before us.
At the very outset, the ld. counsel for the assessee vehemently stated that the issue of treating net toll charges of Rs. 81,12,03,141/- collected by the assessee as revenue receipts was decided by the ITAT Delhi Bench in favour of the assessee in assessee’s own case in for A.Y 2015-16 vide order dated 25.05.2023 wherein on similar facts and circumstances, the ITAT dismissed the ground raised by the Revenue. The ld. counsel for the assessee requested the Bench to follow the same and dismiss the ground of appeal taken by the Revenue.
Per contra, the ld. DR strongly supported the findings of the Assessing Officer but could not bring any distinguishing decision in favour of the Revenue.
We have heard the rival submissions and have perused the relevant material on record. We have also given thoughtful consideration to the orders of the authorities below. We find force in the contention of the ld. counsel for the assessee. The issue raised in the present appeal was also there in Assessment Year 2015-16 and the co-ordinate bench in has held as under:
“11. We have heard the rival submissions and perused the material available on record. The issue in the present ground is with respect to the treatment to the amount of toll collection charges received by the assessee. It is the contention of the assessee that the toll receipts are capital receipt as against the claim of the Revenue to be revenue receipts. We find that CIT(A) by detailed and well reasoned order which have been reproduced hereinabove has given a finding that during the construction of the 6 lane toll road, assessee was not free to utilize the toll receipts but was obliged to use the toll receipts in construction of the project as per the overriding obligation under the Concession Agreement and Escrow Agreement and assessee had in fact utilized the toll receipts in the project construction. He has further given a finding that toll receipts received during the period of project construction were inextricably linked to the project because it was mandatorily required to be used for the construction of the project. He accordingly concluded the receipts to be capital receipts and held that assessee had rightly reduced the same from the cost of project. Before us, Revenue has not pointed to any fallacy in the findings of CIT(A) nor has placed any material on record to demonstrate that the ratio of various decisions relied upon by the CIT(A) were not applicable to the facts of the present case. In such a situation, we find no reason to interfere with the order of CIT(A) and thus the ground of Revenue is dismissed.”
There is no change in the factual matrix of the case during the year under consideration. Respectfully following, therefore, the decision of the co-ordinate bench [supra], Ground No. 1 is decided in favour of the assessee and against the Revenue.
Ground No. 2 relates to interest income on FD amounting to Rs. 88,48,299/-.
At the very outset, the ld. counsel for the assessee stated that the issue is similar to the issue coming from A.Y 2015-16 wherein the Tribunal has decided it in favour of the assessee and against the Revenue. It is the say of the ld. counsel for the assessee that even the first appellate authority, while dismissing the appeal of the assessee has followed earlier order of his predecessor who rightly treated the interest income earned from fixed deposits maintained for providing bank guarantee as capital receipts.
The ld. DR fairly conceded to this fact of the case.
We have carefully perused the orders of the authorities below.
We find force in the contention of the ld. counsel for the assessee. At Para 6.3.4 of his order, the ld. CIT(A) has categorically mentioned that “my predecessor for A.Y 2015-16 in the appellant’s own case held that the appellant has rightly treated the interest earned from the fixed deposits maintained for providing bank guarantee as capital receipts and has reduced the same from the project cost.”
In A.Y 2015-16, this quarrel was settled in favour of the assessee by the Tribunal in [supra]. The relevant findings read as under:
“17. We have heard the rival submissions and perused the material available on record. The issue in the present ground is with respect to the deletion of interest income on fixed deposit. CIT(A) has noted that assessee was required to provide Bank Guarantee of Rs. 191.07 crores to NHAI for the performance of its obligations under the concession agreement and for the purpose of opening such bank guarantee, assessee had to open an Fixed Deposit worth Rs.9.55 crores with Canara Bank as margin money and on such margin money assessee had received impugned interest. He therefore agreed with the contention of assessee that interest earned was inextricably linked to the construction of the project. He thereafter placing reliance on the decisions of Hon’ble Delhi High Court in the case of Indian Oil Panipat Power Consortium Limited vs. ITO [2009] 315 ITR 255 (Delhi) had decided the issue in favour of the assessee. Before us, no fallacy in the findings of CIT(A) has been pointed out by Revenue nor has Revenue placed any material on record to point out that the reliance placed by the CIT(A) on the decisions cited in the order are not applicable to the present facts. In such a situation, we find no reason to interfere with the order of CIT(A) and thus the ground of Revenue is dismissed.”
As there is no change in the factual matrix of the case during the year in consideration, respectfully following, therefore, the findings of the coordinate bench [supra], we direct the Assessing Officer to delete the impugned addition. Ground No. 2 stands dismissed.
In the result, the appeal of the Revenue in stands dismissed.
The order is pronounced in the open court on 13.06.2024.