DCIT,CIRCLE-1, KOLKATA, KOLKATA vs. M/S. CALCUTTA MUMBAI TRUCK TERMINAL LTD, HOWRAH

SHRI S.S VISWANETHRA RAVI, JM

These appeals of the revenue arise out of the order of the Learned CITA in Appeal No. 1104/CIT(A)-1/C-1/11-12 dated 7.5.2012 for Asst Year 2007-08,Appeal No. 305/CIT(A)-1/1(3)/2010-11 dated 11.2.2011 for Asst Year 2008-09 and Appeal No. 1105/CIT(A)-1/C-1/11-12 dated 7.5.2012 for Asst Year 2009-10against the orders of assessment framed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’).

ITA Nos. 1189/K/12, 736/K/11 & 1190/K/12-C-AM 1 Deptt Vs. M/s. Cal. Mum Truck Terminal Ltd & P.Ltd-

ITA No. 1189 / 2012 – Asst Year 2007-08

4.1. The brief facts of this issue is that the assessee company had set up a multifarious truck terminal at Dhulagori, Sankrail, Howrah in Joint Venture with West Bengal Transport Infrastructure Development Corporation Ltd under Ministry of Transport, Govt. of West Bengal. The said project is set up under the endeavour of Govt. of West Bengal to ease out the flow of heavy vehicles in the city of Kolkata. The project provides for the following capital assets in respect of buildings which has been shown in Fixed Assets and depreciation has been claimed on part of the assets which has been used : Truck Parking Area, Administrative Building, Bank Block, Boundary Walls, Dormitory, Electrical Installation Building, Electric Substation Building, Mini Theatre, Fire Brigade Office , Health Club, Medical Centre, Police Station, Post Office, Petrol Pump, Pump House, Toll gate Storage, Toilet, Water reservoir etc. During the year under consideration, the assessee sold commercial units being shops, show rooms, Dhaba/Restaurant & Warehouses at the Truck Terminal Complex. The assessee also sold some Building Materials during the year. Apart from above, the assessee earned parking fees and fees for use of other facilities at the Truck Terminial Complex and rentals from godowns situated in the Truck Terminal.

ITA Nos. 1189/K/12, 736/K/11 & 1190/K/12-C-AM 2 Deptt Vs. M/s. Cal. Mum Truck Terminal Ltd & P.Ltd-

4.2. The assessee debited a sum of Rs. 7,23,86,646/- in its profit and loss account under the head ‘cost of construction’ which admittedly includes a sum of Rs. 6,98,29,883/- transferred from work in progress account and Rs. 25,54,763/- which is the cost of sales of materials directly debited to cost of construction. The Learned AO found that the assessee had debited Rs. 7,23,86,646/- as cost of construction in profit and loss account for the year ending 31.3.2007. However, as per Schedule F annexed to the statement of accounts, this amount was shown at Rs. 6,98,29,883/- and the closing work in progress has been computed accordingly. Accordingly, the Learned AO held that the assessee had debited an excess amount of Rs. 25,54,763/- towards cost of construction in the profit and loss account and disallowed the same. On first appeal, the assessee pleaded that though a sum of Rs. 7,23,86,646/- was debited in profit and loss account by the assessee, it includes a sum of Rs. 6,98,29,883/- transferred from work in progress account during the year on completion of work and a sum of Rs. 25,54,763/- was directly debited to the cost of construction account by inadvertence instead of debiting to cost of goods sold. It was further pleaded that there was no excess cost debited in the profit and loss account warranting any disallowance / addition. It is only a unintentional error that had crept in while debiting the concerned account head. It was pleaded that this sum of Rs. 25,54,763/- represents building materials items purchased by the assessee and the same has been sold for Rs. 26,20,270/- to the following parties as below:- Tirupati Business Private Limited Rs.2,60,000/- 545, G.T Road(s), Howrah-1 PAN:AACT9576F

Vivekanand Construction Pvt. Ltd Rs.8,00,000/- 545, G.T Road(s), Howrah-1 PAN:AABCV0484B

Avadh Plantations Pvt. Ltd Rs.15,60,270/- 545, G.T Road(s), Howrah-1 PAN:AACCA6087G

ITA Nos. 1189/K/12, 736/K/11 & 1190/K/12-C-AM 3 Deptt Vs. M/s. Cal. Mum Truck Terminal Ltd & P.Ltd-

It was also pleaded that this sale of Rs. 26,20,270/- was duly included in the total sales figure of Rs. 8,97,04,478/- by the assessee and the materials which were purchased for resale as stated supra were not capitalized under project in progress and hence the amount could not have been transferred from the project in progress account to the profit and loss account but instead the said sum of Rs. 25,54,763/- was directly debited to cost of construction by inadvertence. This was duly appreciated by the Learned CITA who deleted the addition made in the sum of Rs. 25,54,763/-. Aggrieved, the revenue is in appeal before us on the following ground:- “1. That on the facts and in the circumstances of the case Ld. CIT(A) has erred in deleting addition of Rs.25,54,763/- being excess cost of construction debited in the accounts”.

4.3. The Learned AR reiterated the aforesaid facts before us. In response to this, the Learned DR vehemently relied on the order of the Learned AO.

4.4. We have heard the rival submissions and perused the materials on record. We find that the assessee had only made a clerical error in presentation of accounts by debiting a wrong head (i.e cost of construction) instead of debiting ‘cost of goods sold’ in respect of building materials purchased by it for the purpose of resale. We find that the assessee had sold the purchased building materials for Rs. 26,20,270/- to three parties and duly included the same in the total sales. Without the purchases being made, there cannot be any sales. It is not the case of the Learned AO that the purchase of building materials to the tune of Rs. 25,54,763/- were made by the assessee out of its undisclosed sources. We find that the assessee had filed the following details before the Learned AO which is not disputed by the Learned DR:- 1. Details of cost of construction 2. Details of sales 3. Details of purchases made which were debited to work in progress as well those which were directly debited to profit and loss account.

ITA Nos. 1189/K/12, 736/K/11 & 1190/K/12-C-AM 4 Deptt Vs. M/s. Cal. Mum Truck Terminal Ltd & P.Ltd-

We find that the assessee had duly explained the difference in the cost of construction account as being a clerical error and an error in presentation of the financial statements and we hold that there is no difference in the cost of construction and hence there is no case for the Learned AO to make any addition in this regard. Accordingly, the ground no. 1 raised by the revenue is dismissed.

5.1. This addition of Rs. 1,00,00,800/- has been made due to some sort of comparison of expenses with that of last year. The findings of the Learned AO with regard to this addition are as below:- “2. As per item(d) of Schedule-L forming part of the Balance Sheet as on 31.03.2008, it was mentioned that cost of construction for units sold was transferred to P & L A/c. Going by the ratio of expenditures to sells in respect of the F.Y 2007-08, the amount of expenditure during the F.Y 2006-07 should have been Rs.6,23,83,766/- instead of Rs.7,23,84,646/- which was actually debited to the P & L A/c for the F.Y 2006-07. Since the cost of construction was computed on the basis of allocation of actual expenditures proportionate to sale consideration, the assessee has debited an excess amount of Rs.1,,00,00,880/-. As such the said excess amount of Rs.1,00,00,880/- is disallowed and added to the returned income of the assessee.

Hence the addition has made only by comparing the ratio of expenditure to sales with that of the earlier year. The Learned AR argued that the ratios are to be measured in terms of Gross profit or Net Profit ratio as they would reflect whether the profit margin

ITA Nos. 1189/K/12, 736/K/11 & 1190/K/12-C-AM 5 Deptt Vs. M/s. Cal. Mum Truck Terminal Ltd & P.Ltd-

has come down or not after considering all the expenses and income of the business. The Learned AR took us to the relevant page of the Learned CITA order wherein the details of profits and percentage thereon on turnover for the assessment year under appeal and that of the previous year were reflected. The same are reproduced herein below for the sake of convenience:- Page 8 & 9 of the ld.CIT(A)’s order : “3.02 The Ld. AO has mentioned the following in the body of asst. Order: “Going by the ratio of expenditures to sells in respect of F.Y 2007-08, the amount of expenditure during the F.Y 2006-07 should have been Rs.6,23,83,766/-, instead of Rs.7,23,84,646/-, which was actually debited to the P & L A/c for the F.Y 2006-07. “

Your Honour, the Ld. AO has used the basis of ratio of Current year with that of preceding year for making the addition. We now beg to state that the ratios are measured in terms of Gross Profit Ratio and Net Profit Ratio and they would reflect whether the margin has come down or not. The same would cover the expenses claimed by the assessee. The following facts would reveal whether there were any such ratio which were adverse to the assessee:

F.Y 2006-07 F.Y 2005-06 Gross Profit(Rs.) 2,56,63,334/- 28,41,569/- Turnover(Rs) 10,60,65,717/- 2,26,97,432/- Gross profit Ratio 24.19% 12.52% Net Profit/(-)Loss (Rs.) 1,15,292/- (-)29,88,574/-(loss) Net Profit Ratio 1.15% (-)13.16%

5.2. The Learned AR further pleaded that the aforesaid figures would suggest that the assessee had earned higher income as compared to last year. If the gross profit rate of 12.52 % was applied to current year’s turnover, the gross profit of the current year would have been Rs. 1,32,79,428/- ( 10,60,65,717 * 12.52%) while the gross profit for the year is Rs. 2,56,63,334/- which is higher by Rs. 1,23,83,906/- as compared to last year. Similarly the net profit going by last year/s rate would have been a net loss of Rs. 1,39,58,248/- (10,60,65,717 * (-) 13.16%), while the net profit for the year is Rs. 1,15,292/- , which is higher by Rs. 1,40,73,540/- as compared to last year. It is thus

ITA Nos. 1189/K/12, 736/K/11 & 1190/K/12-C-AM 6 Deptt Vs. M/s. Cal. Mum Truck Terminal Ltd & P.Ltd-

clear that the application of ratio has been misapplied by the Learned AO and are against the facts of the ase. The Learned AR argued that if the Gross profit rate and Net profit rate would have been lower as compared to last year, then the Learned AO could have had a point. But the case here is just the opposite as the said ratios are much better than last year.

5.3. Before the Learned CITA, the Learned AR further filed break up of sales and cost of construction of each type of shop, warehouse / godown, showroom, Dhaba etc. The costs have been arrived on the basis of valuation report which is part of the record. The cost of sales of each type of unit is being taken on the basis of costs arrived through valuation report and the same is being followed in every year. Moreover, it is seen that the addition has been made without rejecting the explanation , submissions and accounts of the assessee and without pointing out any defects in the same, without bringing to light any material to show that the additions were warranted and without any basis of estimation. Based on these facts and submissions, the Learned CITA deleted the addition. Aggrieved, the revenue is in appeal before us on the following ground:- “2. That on the facts and in the circumstances of the case Ld.CIT(A) has erred in deleting the addition of Rs.1,00,00,880/- being cost of construction for units sold and transferred to P & L A/c”

5.4. The Learned AR reiterated the aforesaid facts before us. In response to this, the Learned DR vehemently relied on the order of the Learned AO.

5.5. We have heard the rival submissions and perused the materials on record. We find from the aforesaid facts that the addition has been made in the sum of Rs. 1,00,00,800/- on the basis of ratio of expenditure to sales in this assessment year year as compared to last year. It is not the case of the Learned AO that the assessee had made extra claim of expenses apart from what is reported in the profit and loss account.

ITA Nos. 1189/K/12, 736/K/11 & 1190/K/12-C-AM 7 Deptt Vs. M/s. Cal. Mum Truck Terminal Ltd & P.Ltd-

We find that both the gross profit and net profit rates are higher in this assessment year as compared to the last year. We hold that there is complete non-appreciation of the facts on record by the Learned AO and there is no case for making any addition in this regard. Accordingly, the ground no. 2 raised by the revenue is dismissed.

ITA No. 736 / Kol /2011 – Asst Year 2008-09

7.1. The issue to be decided in this appeal is as to whether in the facts and circumstances of the case, the rental income from godowns derived by the assessee is to be taxed as business income of the assessee or as income from house property.

7.2. The facts stated in para 4.1 of this order hereinabove is applicable for adjudication of this issue , but the same are not reiterated here for the sake of brevity. The assessee has let out several godowns that were constructed in the Truck Terminal Complex which were lying unsold with the assessee and the rental income derived thereon were shown as income from business. The said rental income was classified as business income in the preceding years as well in the subsequent year and also in view of the fact that renting of godowns / warehouses are part of trading operations of the assessee company. The assessee had sold several warehouses constructed at the Truck Terminal Complex and the unsold godowns being the business assets were let out to be

ITA Nos. 1189/K/12, 736/K/11 & 1190/K/12-C-AM 8 Deptt Vs. M/s. Cal. Mum Truck Terminal Ltd & P.Ltd-

commercially exploited by others. In this regard, the assessee placed reliance on the following decisions in support of its contentions:-

CIT vs Maheswari Devi Jute Mills Ltdd reported in (1965) 57 ITR 36 (SC) wherein the Hon’ble Supreme Court held that : “An asset acquired and used for the purpose of the business does not cease to be a commercial asset of that business as soon as it is temporarily put out of use or is let out to another person for use in his business of trade. Receipt by the exploitation of a commercial asset is the profit of the business, irrespective of the manner in which the asset is exploited by the owner of the business, for the owner is entitled to exploit it to his best advantage either by using it himself personally or by letting it out to somebody else” “The yield of income by a commercial asset is the profit of the business irrespective of the manner in which that asset is exploited by the owner of the business. He is entitled to exploit it to his best advantage and he may do so either by using it himself personally or by letting it out to somebody else-CEPT v. Shri Lakshmi Silk Mills Ltd [1951] 20 ITR 451(SC).”

7.3. The assessee submitted that the several shops in the complex which are remaining unsold, and wherever there is huge demand for respective godowns , the same were let out on rent for commercial exploitation of the godowns. The Learned AO treated the rental income as income from house property as against the claim of business income and thereby disallowing certain expenses that were debited on business account. On first appeal, it was pleaded by the assessee that the assessee has received rents from godowns that were meant for sale but had let out to earn income from the same pending its sale. It was further pleaded that the objects of the company is not to earn rental income but to run and operate the Truck Terminal which is a multifarious activity and the assessee had earned parking fees from Trucks, sold various shops / godowns etc in the said Terminal apart from earning rental income from the godowns lying unsold. It was stated before the Learned CITA that assessee was not the owner of the entire land on which the Truck Terminal has been constructed

ITA Nos. 1189/K/12, 736/K/11 & 1190/K/12-C-AM 9 Deptt Vs. M/s. Cal. Mum Truck Terminal Ltd & P.Ltd-

as the assessee had paid lease rent of Rs. 9.25 lacs to various land owners for several acres of land taken on lease and the same is being paid from Financial Year 2002-03 onwards. Hence it was argued that the assessee is not the owner of the entire lands and on that ground itself , the rental income could not be taxed as income from house property. It was further pleaded before the Learned CITA that the rental income from godowns remaining unsold were treated as business income in Asst Year 2006-07 u/s 143(3) proceedings by the Learned AO . The Learned CITA treated the rental income from godowns as income from business. Aggrieved, the revenue is in appeal before us on the following ground:- “1.The ld.CIT(A) erred in considering the Rental income against various capital assets as assessee’s business income.”

7.4. The Learned AR reiterated the aforesaid facts before us. In response to this, the Learned DR vehemently relied on the order of the Learned AO.

7.5 We have heard the rival submissions and perused the materials on record. On a specific query from the Bench to the Learned AR with regard to the status of the unsold godowns in the subsequent years, he stated that the unsold godowns were duly sold in the subsequent years and business income offered by the assessee. Before us, the counsel relied on the decision of the Jurisdictional High Court in the case of Azimganj Estate (P) Ltd vs CIT reported in 352 ITR 82 (Cal) , wherein it was held as below:- “11. In our opinion, we would have accepted the reasoning assigned by the Tribunal if the subject matter of stock-in-trade was not unsold flats simplicitor, but were plants, machinery, godown, etc and in those circumstances it could be reasonably argued that income by exploiting those stock-in-trade would come under the purview of income from business. Even in the decision of the Gujarat High Court relied upon by Mr. Nizamuddin and the Tribunal below, in paragraph (iii) at page 247 of the Report, it was pointed out that what was to be seen was whether the asset was being exploited commercially by the letting out or whether it was being let out for the purpose of enjoying the rent. According to the said decision, the distinction between the two

ITA Nos. 1189/K/12, 736/K/11 & 1190/K/12-C-AM 10 Deptt Vs. M/s. Cal. Mum Truck Terminal Ltd & P.Ltd-

is a narrow one and has to depend upon certain facts peculiar to each case. It was further pointed out that pure and simple, the commercial assets like machinery, plants tools, industrial sheds or godowns having high business potentials stand on a different footing from assets like land and building. In our view, in the case before us, the subject matter of exploitation being unsold flats still owned by the assessee, the Commissioner of income Tax (Appeals) rightly concluded that the same should be treated as income from house property by way of letting it out.

In the aforesaid judgement, the Hon’ble Calcutta High Court agrees to the fact that if the subject matter of stock in trade includes godowns then it could reasonably be argued that income by exploiting those stock in trade would come under the purview of income from business. Similarly in CIT vs Ajmera Industries (P) Ltd reported in (1976) 103 ITR 245 (Cal) relied upon hereinabove, the assesee was using and exploiting non-factory building including its godowns. In such a fact, the Division Bench was of the view that non-factory building including the godowns clearly constituted commercial assets of the assessee which amounted to exploiting major portion of the same by letting out to some others as business income of the assessee.

7.6. We hold that in order to be a business income within the meaning of section 28 of the Act, there must be evidence of exploitation of a commercial asset. Exploitation of a commercial asset does not necessarily mean exploitation by the assessee himself at all material times. The

ITA Nos. 1189/K/12, 736/K/11 & 1190/K/12-C-AM 11 Deptt Vs. M/s. Cal. Mum Truck Terminal Ltd & P.Ltd-

assessee may temporarily cause it to be exploited by another person against payment of consideration and for this purpose may also execute a lease for a fixed period even with clauses of option to renew. But in order that the income derived from the lease may be taxable it must be shown that the lessor’s intention was that during the period of the lease the asset leased out must remain and treated as a commercial asset and exploited as such. This intention of the lessor referred to above has to be ascertained from the cumulative effect of all the terms of the lease and other material circumstances.

We find that the subject mentioned godowns were sold subsequently after it was remaining unsold for some time and it was only during intervening period, the same were let out by the assessee and rental income derived thereon. We find that the assesee is not engaged in the business of simply letting out of land and building but is engaged in developing, running and operating a Truck Terminal with several amenities and naturally rents realized from such letting out are part of business operations. In this regard, we would like to place reliance on the decision of the co- ordinate bench of the Bangalore Tribunal in the case of ITO vs Information Technology Park Ltd reported in (2012) 49 SOT 491 (Bang.) (Trib.) wherein it was held that :- “Assessee had developed a technology park, and let out its building along with amenities and facilities. Since the assessee is carrying on a commercial complex activity of setting up software technology park with various facilities and amenities the income derived from lessees is to be taxed as business income and not as income from house property.

Hence in view of the aforesaid facts and circumstances and respectfully following the judicial precedents relied upon hereinabove, we hold that the rental income derived from godowns are to be taxed only as income from business. Accordingly, the ground no.1 raised by the revenue is dismissed.

ITA Nos. 1189/K/12, 736/K/11 & 1190/K/12-C-AM 12 Deptt Vs. M/s. Cal. Mum Truck Terminal Ltd & P.Ltd-

8.1. The brief facts of this issue is that the assessee claimed interest on loan amounting to Rs. 1,82,14,073/- as a revenue expenditure as admittedly the construction of Truck Terminal was completed on 31.12.2005. It is not in dispute that the interest on loan together with other expenditures were capitalized upto 31.12.2005 by the assessee. The Learned AO sought to disallow the interest on loan on the premise that the same are related to the work in progress. Before the Learned CITA, the assessee pleaded that the assessee borrowed term loans from UCO Bank, Punjab National Bank and State Bank of India in the years 2001-02 , 2002-03 & 2003-04 and the interest paid till 31.12.2005 has already been capitalized as the loans were utilized for acquiring capital assets and the capital assets were acquired and completed by 31.12.2005. The interest on loan after 31.12.2005 amounting to Rs. 58.07 lacs was charged to profit and loss account and allowed as a deduction in section 143(3) proceedings for Asst Year 2006-07. It was argued that the capital work in progress as on 31.3.2008 of Rs. 31.47 crores appearing in the balance sheet is in fact capital work in progress of units held for sale which comprise of warehouses, shops, business centre, fruits / vegetables / fish market, residential quarters, offices, restaurant and Dhaba, repair shops etc. It was argued that these amenities are not part of fixed assets but are part of stock and are being sold year to year. It was further stated that since the company was facing poor response from customers for these units, many of them still remain unfinished and as and when some customers are willing to take possession then balance finishing work is done as per specification, requirement and need of the customers and the unit is sold. The assessee also stated that many of the units which are ready are sold as it is. Thus the same has to be construed as stock and stock in process of units for sale. It was further argued that several of the units held for sale are also being utilized for letting out as godowns and warehouses and the company is earning rent from the same. The

ITA Nos. 1189/K/12, 736/K/11 & 1190/K/12-C-AM 13 Deptt Vs. M/s. Cal. Mum Truck Terminal Ltd & P.Ltd-

assessee also placed reliance on the certain decisions of the supreme court in support of its contentions which were duly appreciated and allowed the claim of the assessee towards interest on term loan as a revenue expenditure. Aggrieved, the revenue is in appeal before us on the following ground:- “2. The ld.CIT(A) erred in treating the interest expenses on Term Loan for various capital assets as a Revenue Expenditure. “ 8.2. We have heard the rival submissions and perused the materials available on record. We find that no clear finding was given by the Learned AO with regard to this addition in the assessment order. However, we find that the Learned CITA had proceeded to delete the addition by observing as under:-

“6. I have carefully gone through the assessment orders passed by the AO and the submission put forth by the Ld. AR, various explanations & details filed before the AO and the Assessment order passed in the case for A.Y 2006-07. 6.1 I find that there is enough force in the arguments put forth by the Ld. A.R. Firstly that There is no doubt that assessment of Rental Income either under Income From House Property or as Income from Business or Profession is not automatic. As has been held by various courts that it must emerge from the facts & circumstances of the case. The appellant’s only business is not of land owner but it is running a truck terminal with various facilities thrown in. The facts point out that apart from Renting of Godowns it is actually selling them too apart from selling shops etc. It has also collected parking fees from vehicles/trucks. Apart from the above it is also a fact that the godowns which were rented out are not part of Fixed assets and no depreciation is being charged on the same and the same are being held as trading asset and on exploitation of trading assets, what must result shall be part of trading operations. The AO has failed to properly analyze the case and his order is not based on proper findings. He has disallowed Depreciation without finding out whether the same was being claimed on the Godowns rented or some other building. He has disallowed Repairs & Maintenance expenses and commission brokerage as being the same related to earning rent, where as records clearly show that it is not related to earning rental income. He has disallowed interest on term loans paid as being related to WIP, thereby neither allowing it to be offset against House Property Income or business Income and

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instead capitalizing to WIP without finding out if the same specifically relates to bringing into existence any capital asset. It is a fact that the Loans were obtained in earlier years and there is no addition into new fixed assets during the year (except some computers of Rs.45698/-) then how could the interest on loans which were borrowed in earlier years could be disallowed or capitalized. 6.2 The AO has disallowed Cost of Construction, cost of goods sold & Cost of land without considering the fact that there are sales of godowns, shops & materials against the same. There is no basis for such disallowance. It appears that the facts of the case of the appellant have been totally misinterpreted by him. 6.3 It is also seen that in the appellant’s case for A.Y 2006-07 the Rent was treated as business Income and the Interest paid on terms loans were allowed as business expenditure. The AO has failed to bring to light why there is a change of opinion where the facts have remained the same. 6.4 I am thus inclined to uphold the contention of the appellant and direct the AO to treat the godown rents received by the appellant as Business Income and all the additions made (except the difference on Depreciation on electrical fittings which has been dealt in the next para of order) are deleted”.

We also find that the following decisions of the Hon’ble Apex Court supports the view of the assessee :-

CIT vs Associated Fibre & Rubber Industries (P) Ltd reported in (1999) 102 Taxman 700 (SC), wherein it was held that :-

“Where machinery was purchased out of borrowed amount for purpose of business and it was treated as business assets, merely because such machinery had not been actually used in business at the time when assessment was made, interest paid on amount borrowed could not be disallowed.’

CIT vs United Phosphorous Ltd reported in (2008) 167 Taxman 261 (SC) “In view of Supreme Court’s judgment in case of Dy. CIT v. Core health Care Ltd [2008] 167 Taxman 206, it was to be held that interest paid in respect of borrowing for purchasing capital assets, which are

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not put to use in concerned financial year, can be permitted as an allowable deduction”.

8.3. In view of the aforesaid facts and respectfully following the judicial precedents relied upon hereinabove, we do not find any reason to interfere with the findings of the Learned CITA and accordingly, the ground no.2 raised by the revenue is dismissed. Since we hold that the interest on term loan is allowable as a deduction from business income, the alternative argument of the Learned AR that the same is liable to allowed as deduction on actual basis against rental income if taxed under income from house property, does not require any adjudication.

ITA No. 1190 / Kol / 2012 – Asst Year 2009-10

ITA Nos. 1189/K/12, 736/K/11 & 1190/K/12-C-AM 16 Deptt Vs. M/s. Cal. Mum Truck Terminal Ltd & P.Ltd-

11.1 The brief facts of these additions are that the assessee has built huge facility at its Truck Terminal and expenses have to be incurred to maintain the same. All the expenses incurred upto the date of completion of construction of truck terminal were duly capitalized by the assessee (i.e upto 31.12.2005) and regular recurring revenue expenses incurred thereafter have been duly claimed by the assessee as a deduction. It was argued that the expenses apart from other repairs includes those which have been incurred for godowns which were let out. The basic nature of expenses are on air conditioner machines, electrical installations, chair, type machine, weigh bridge, sheds and godowns. With regard to the addition made towards cost of construction and cost of land (work in progress) , it was argued that the assessee had sold warehouses and carried out some extra work for a party as follows during the year :-

Sale of warehouse - 97,03,050 Extra work - 2,00,000 -------------- 99,03,050

The details of cost of construction of the same were filed before the Learned AO as below:-

Cost of godowns sold (semi finished) – 27723 sq.ft @ Rs 291 - 80,67,390 Cost of materials & labour consumed for repairs of warehouses Etc given on rent - 13,58,430 Cost of materials & labour consumed for extra finishing work done For parties - 1,75,000 ------------ Total 96,00,820 ------------

The details of the same were duly filed before the Learned AO together with the valuation report for calculating cost of construction of warehouses sold. It was further stated that the company had incurred an expenditure of Rs. 1,42,94,755/- during the year which was added to work in progress and out of total work in progress, the cost relating to the sale of warehouses / godowns etc were deducted and charged to profit

ITA Nos. 1189/K/12, 736/K/11 & 1190/K/12-C-AM 17 Deptt Vs. M/s. Cal. Mum Truck Terminal Ltd & P.Ltd-

and loss account. With regard to cost of land (work in progress) , it was stated that a sum of Rs. 2,936/- did not relate to current year but was due to rectification of an error made in financial year 2006-07 wherein a sum of Rs. 2,936/- was short debited to the cost of land in profit and loss account. It was further pleaded by the assessee that similar addition was made in Asst Year 2008-09 by the Learned AO was deleted by the Learned CITA and no further appeal was preferred by the revenue against that issue before Tribunal. With regard to the interest on term loan amounting to Rs. 1,52, 97,322/- , it was pleaded that the same relates to period subsequent to the date of completion of truck terminal and hence allowable as deduction. The revenue is in appeal before us on the following ground:- “2. That on the facts and in the circumstances of the case Ld.CIT(A) has erred in deleting the additions being capital expenditure under the head “cCost of construction, cost of land, repairs & maintenance and interest on loan”.

11.2. We have heard the rival submissions and perused the materials available on record. We have already held that the rental income derived from godowns are to be taxed only as income from business and hence the repairs activity carried out on the same are to be allowed only as a business expenditure. With regard to interest on term loan, we have already held in para 8.2 & 8.3 hereinabove in ITA No. 736/Kol / 2011 for Asst Year 2008-09 that the same is allowable as business expenditure and the said decision would apply in equal force for this assessment year also. With regard to the addition made towards cost of construction and cost of land (work in progress) , we are satisfied with the accounting treatment done by the assessee by deducting the cost attributable to the extent of godowns sold from the overall work in progress figure. Hence no addition is called for in this regard. Accordingly, the ground no. 2 raised by the revenue is dismissed.

ITA Nos. 1189/K/12, 736/K/11 & 1190/K/12-C-AM 18 Deptt Vs. M/s. Cal. Mum Truck Terminal Ltd & P.Ltd-

Sd/- Sd/- ( M. Balaganesh, Accountant Member ) ( S.S. Viswanethra Ravi, Judicial Member) Date 30 /10/2015

Copy of the order forwarded to:

1.. The Appellant/Department: DCIT,Cir-1 & ITO W 1(3) Aaykar Bhavan,P-7 Chowringhee Sq., Kol-69. 2 The Respondent/Assessee-M/s. Calcutta Mumbai Truck Terminal Ltd/ M/s. Calcutta Mumbai Truck Terminal Pvt.Ltd 545 G.T Road9S), Howrah-711101. 3 /The CIT, / 4.. The CIT(A)

** PRADIP SPS

ITA Nos. 1189/K/12, 736/K/11 & 1190/K/12-C-AM 19 Deptt Vs. M/s. Cal. Mum Truck Terminal Ltd & P.Ltd-