2016 (9) TMI 1306 - AT - Income Tax

Tribunal remands case for accurate expense verification and deduction allocation

Deputy Commissioner of Income-Tax, Circle-6, Jaipur Versus Rajasthan State Road Development & Construction Corpn. Ltd. and Vice Versa

Deputy Commissioner of Income-Tax, Circle-6, Jaipur Versus Rajasthan State Road Development & Construction Corpn. Ltd. and Vice Versa - TMI Issues Involved:1. Allowability of Rs. 10,00,000/- contribution to State Renewable Fund as expenditure.2. Deletion of addition of Rs. 1,94,34,645/- out of prior period expenses.3. Restriction of disallowance of deduction under section 80IA to Rs. 6,98,93,301/- against Rs. 8,20,34,909/-.4. Disallowance of prior period expenses of Rs. 55,28,017/- pertaining to Jodhpur Unit.5. Allocation of 'payment to and provision for employees' and 'administrative expenses' for determining income from BOT projects for deduction under section 80IA.Detailed Analysis:1. Allowability of Rs. 10,00,000/- Contribution to State Renewable Fund as Expenditure:The revenue contended that the CIT (A) erred in holding the contribution as allowable expenditure. The Tribunal referenced its earlier decisions in similar cases for previous years, where it was held that the contribution to the State Renewable Fund was allowable. The Tribunal found no reason to deviate from its earlier stance and dismissed the revenue's ground, confirming the CIT (A)'s decision to allow the expenditure.2. Deletion of Addition of Rs. 1,94,34,645/- Out of Prior Period Expenses:The revenue challenged the deletion of the addition made by the AO for prior period expenses. The Tribunal noted that the CIT (A) had accepted the assessee's explanation that the expenses were reversals of income wrongly booked in earlier years. The CIT (A) provided a detailed analysis, distinguishing between genuine prior period expenses and reversals of earlier income. The Tribunal upheld the CIT (A)'s decision, dismissing the revenue's ground.3. Restriction of Disallowance of Deduction Under Section 80IA to Rs. 6,98,93,301/- Against Rs. 8,20,34,909/-:The revenue argued that the CIT (A) was incorrect in reducing the disallowance. The Tribunal reviewed the detailed submissions and calculations provided by both the AO and the CIT (A). The CIT (A) had recalculated the turnover and expenses, leading to a revised disallowance. The Tribunal found the CIT (A)'s approach reasonable and dismissed the revenue's ground, affirming the revised disallowance.4. Disallowance of Prior Period Expenses of Rs. 55,28,017/- Pertaining to Jodhpur Unit:The assessee contended that the CIT (A) erred in not allowing the claim for prior period expenses, which were actually reversals of income wrongly booked in earlier years. The Tribunal acknowledged that the CIT (A) did not provide a detailed explanation for rejecting the assessee's claim. The Tribunal set aside the CIT (A)'s order on this issue and remanded it back to the AO for verification. The AO was instructed to verify if the expenses were indeed reversals of earlier income and, if so, allow the deduction.5. Allocation of 'Payment to and Provision for Employees' and 'Administrative Expenses' for Determining Income from BOT Projects for Deduction Under Section 80IA:The assessee argued against the allocation of these expenses, stating that the BOT projects were outsourced and did not incur such costs. The Tribunal found merit in the assessee's arguments but noted that the figures needed verification. The Tribunal set aside the orders of the lower authorities on this issue and remanded it back to the AO for verification. The AO was directed to recompute the deduction under section 80IA after verifying the figures provided by the assessee.Conclusion:The Tribunal dismissed the revenue's appeal and allowed the assessee's appeal for statistical purposes, remanding specific issues back to the AO for further verification and recomputation. The Tribunal emphasized the need for accurate verification of figures and proper allocation of expenses in determining the allowable deductions.