TaxTMI 
TaxTMI 
TaxTMI 
2016 (6) TMI 182
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....ed ITAT has erred in deleting the addition made on account of disallowance of expenses incurred as maintenance of colonies of Rs. 3,25,96,429/-? ii) Whether the expenditure to the tune of Rs. 3,25,96,429/- incurred by the respondent assessee-Board towards maintenance of colonies is a capital expenditure and not allowable under Section 37 of the Income Tax Act, 1961?" 3. A few facts relevant for the decision of the controversy involved as narrated in ITA No.420 of 2015 may be noticed. The respondent-assessee Board is engaged in providing housing to the general public in the State of Haryana. It filed its return of income on 5.10.2010 by declaring income at Rs. 69,46,65,250/- which was processed on 20.4.2011 under section 143(1) of the Act. The case of the assessee was selected for scrutiny and notice under section 143(2) of the Act was issued on 29.8.2011 to it. The assesee appeared before the Assessing officer. The Assessing officer asked for the details of maintenance of colonies. The assessee Board submitted its reply on 16.11.2012 and furnished the details of the maintenance of colonies. The assessee Board was called upon on 16.11.2012 to show cause as to ....
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....of roads was capital in nature. It was urged that in such circumstances, the CIT(A) as well as the Tribunal erred in allowing the same as revenue expenditure in the assessment year in question. 6. Controverting the aforesaid submission, learned counsel for the assessee placed reliance on judgment of the Apex Court in L.H.Sugar Factory and Oil Mills (P) Limited vs. Commissioner of Income Tax, UP, (1980) 125 ITR 293 to argue that the amount spent was revenue in nature. The roads for which repair had been carried out did not belong to the assessee and in such circumstances, the CIT(A) and the Tribunal were justified in deciding the issue in favour of the assessee. 7. The CIT(A) after examining the matter has recorded a categorical finding that the assessee is providing housing to the general public in the State of Haryana after development of housing colonies. Thereafter, the maintenance of colonies is undertaken by the respective municipal committees or local authorities. Since colonies at South Vihar and Narnaul were not falling in any municipal committee or local authority, the assessee had to take up the maintenance work also as per the decision of the Housing Board, Haryana. Th....
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....llant, I am of the view that the expenditure on account of maintenance of colonies is revenue in nature. Hence, the AO is directed to delete the addition of Rs. 3,21,25,745/-." 8. While concurring with the findings recorded by the CIT(A), the Tribunal noticed that the expenses were incurred by the assessee for maintenance of colonies. The assets i.e. the colonies did not belong to the assessee. Thus, it could not be concluded that the assessee had derived enduring benefit from such expenses. The findings recorded by the Tribunal read thus:- "7. We have considered the rival submission carefully and find that identical issue came up for consideration before the Tribunal in the case of Punjab Urban Development Authority, Mohali vs. ACIT, Chandigarh in ITA No.759/Chd/2008. This issue was decided vide paras 110 to 115 which reads as under:- "110. Ground No.4 - After hearing both the parties we find that during assessment proceedings the AO noticed that the assessee authority was in the business of acquiring land and developing it and after development of the land, the same was sold in auction. It was maintaining various sectors even after completion, for different time peri....
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....y followed cash system of accounting and therefore, he cannot take a "U" turn and deny the deduction on account of administrative expenses which have been incurred in cash. Alternatively, it was submitted that if these expenses are held to be on capital account then value of the opening stock and closing stock should be adjusted accordingly. 114. On the other hand, the learned DR for the revenue submitted that administrative expenses were incurred jointly for developed and developing sectors. The Assessing Officer has asked for bifurcation of the same which was not given. She further submitted that even if the assessee was following cash system of accounting and when the assessee was not showing receipt from a particular project then the expenses against the same could not be allowed. 115. We have heard the rival submissions carefully. We have already discussed the implications of cash system of accounting while adjudicating ground No.5 of revenue's appeal in ITA No.762/Chd/2008. Basically once the cash system of accounting is followed then all receipts which relate to the revenue field, have to be taxed. Similarly all cash outgoings which are in the revenue field, had to....
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....d around the factory with the help of the amount of Rs. 50,000 contributed by the assessee belonged to the Government of Uttar Pradesh and not to the assessee. Moreover, it was only a part of the cost of construction of these roads that was contributed by the assessee, since under the Sugarcane Development Scheme, one third of the cost of construction was to be borne by the Central Government, one third by the State Government and only the remaining one third was to be divided between the sugarcane factories and sugarcane growers. These roads were undoubtedly advantageous to the business of the assessee as they facilitated the transport of sugarcane to the factory and the outflow of manufactured of sugar from the factory to the market centres. There can be no doubt that the construction of these roads facilitated the business operations of the assessee and enabled the management and conduct of the assessee's business to be carried on more efficiently and profitably. It is no doubt true that the advantage secured for the business of the assessee was of a long duration in as much as it would last so long as the roads continued to be in motorable condition, but it was not an....