TaxTMI 
TaxTMI 
2016 (9) TMI 1306
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing the addition made by the AO by disallowing Rs. 1,94,34,645/- out of prior period expenses. 3. Whether on the facts and in the circumstances of the case and in law the ld. CIT (A) has erred in restricting the disallowance of deduction u/s 80IA to Rs. 6,98,93,301/- against Rs. 8,20,34,909/- made by the AO. 4. The appellant craves its rights to add, amend or alter any of the grounds on or before the hearing. 2. Briefly stated the facts of the case are that the case of the assessee was picked up for scrutiny assessment and the assessment was framed under section 143(3) of the IT Act, 1961 (hereinafter referred to as the Act) vide order dated 24.12.2013. While framing the assessment, the AO made disallowance in respect of a sum of Rs. 10,00,000/- claimed as contribution to State Renewal Fund account, disallowance of Rs. 14,16,45,738/- contribution to Unapproved Gratuity & Pension Fund, disallowance of Rs. 2,49,62,662/- being prior period expenses and also disallowed the claim of deduction u/s 80IA of Rs. 8,20,34,909/-. Therefore, the AO computed the total income at Rs. 23,86,28,557/- and accordingly computed the profit under section 115JB of the Act at Rs. 5,69,70,704/-. The as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sthan Spinning and Weaving Mills Ltd. 274 ITR 465 (Raj.). The facts of Hon'ble Rajasthan High Court judgment in case of Jodhpur Cooperative Marketing Society which is relied by the AO is distinguishable as in that case the amount was provided for the benefit of the employees. Since, in the present case also the amount was set apart not for shareholder but it was provided for the benefits of the employees, by following our earlier decisions, we uphold the order of CIT (A) on this issue. This ground of the department is dismissed." 5. Hence, the issue raised by the revenue has already been decided by the Tribunal in the case of the assessee for the AY 2006-07, therefore the issue in the assessment year under consideration is also decided against the Revenue." The above finding of the Coordinate Bench is not controverted by the revenue, hence taking a consistent view, we do not see any reason to interfere in the order of ld. CIT (A). This ground of the revenue is dismissed. 5. Ground No. 2 is against deletion of addition made by the AO of Rs. 1,94,34,645/- out of prior period expenses. 6. The ld. D/R supported the order of the AO. 6.1. On the contrary, ld. Counsel for the assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... expenses are accounted after getting approval from concerned authorities. Ld. Counsel submitted that this Tribunal in the case of other State Government Undertaking i.e. RIICO, RSEB, RSMDC, RBCC is consistently taking a view to allow such expenditure in the year when the expenses are finally sanctioned and approved. In the present case since the expenditure are approved during the year, the same is allowable as current year expenditure. Further the rate of tax being the same, it does not matter whether it is allowed as deduction in the year in which the expenditure is booked or in earlier year. Ld. Counsel placed reliance on the judgment of Hon'ble Supreme Court in the case of Excel Industries Ltd., 358 ITR 290 (SC) in support of the contention that when the rate of tax remained the same in the present assessment year as well as in subsequent assessment, the dispute raised by the revenue is entirely academic or at best may have a minor tax effect. Reliance is also placed on the decision of Hon'ble Delhi High Court in the case of CIT vs. Jagatjit Industries Ltd., 339 ITR 382 (Del.HC) in support of the contention that if a particular accounting system has been followed and accepted ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ar, which was originally recoverable from PWD but since the work got withdrawn and the amount could not be recovered from PWD, this amount has been debited in this year. This contention of the appellant is acceptable. In view of the above discussion, the disallowance made by the Assessing Officer, on account of the above prior period expenses to the tune of Rs. 1,94,34,645/- is directed to be deleted. With respect to the amount of Rs. 55,28,017/- pertaining to the Jodhpur unit, with respect to shuttering material, the explanation furnished by the appellant does not match the supporting order sheet entries submitted. Therefore, the nature of expenditure is not ascertainable and therefore this expenditure cannot be allowed. This disallowance made by the Assessing Officer is upheld. This ground is partly allowed." The ld. CIT (A) has given a finding of fact that with respect to the Head Office an amount of Rs. 96,08,000/- pertains to reversal of double income booked in F.Y. 2002-03 with respect to maintenance charges. The ld.CIT (A) has given further finding of fact that an amount of Rs. 2,94,25,000/- with respect to the Head Office pertains to wrong entry of interest income in F....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l submitted that these charges are in respect of cost plus fixed margin contract. In these contracts assessee charges fixed margin on the expenditure on contract incurred by it. The turnover in respect of these contracts is Rs. 394.48 crores as mentioned at page 21 of the financial statement page 23 of paper book. The working of this turnover is enclosed at pages 37 & 38 of the paper book. The ld. Counsel for the assessee, therefore, submitted that the correct turnover is Rs. 436,77,72,468/- and not Rs. 64,78,66,570/- as taken by the AO and Rs. 69,89,85,491/- as taken by the ld. CIT (A). He submitted that ld. CIT (A) is incorrect in considering the assessee's turnover at Rs. 69,89,85,491/- as against the correct turnover of Rs. 436,77,72,468/-. The ld. Counsel submitted that the AO has considered the expenditure of Rs. 32,68,44,701/- debited in Schedule-I towards payment to and provision for employee for allocation purposes. The ld. Counsel submitted that the allocation can at the most be made in respect of Head Office expenses and five units where toll collection work is also looked after. He submitted that the ld. CIT (A) held that entire expenditure of Rs. 32.68 crores cannot be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....thorities below. The AO observed that during the year under consideration, the Company has claimed establishment expenses under the head "Payment to and provision for employees" as per Schedule "I" at Rs. 32,68,44,701/- and "Administrative expenses" at Rs. 6,05,47,431/- as per Schedule "J" annexed to the Profit & Loss account. Total of these expenses comes to Rs. 38,73,92,132/-. The AO further observed that none of the expenses were charged towards income disclosed from various toll road projects eligible for claiming deduction u/s 80IA of the Act. He observed that assessee has claimed total 8 toll road/bridge projects eligible for deduction u/s 80IA of the Act within the meaning of section 80IA(4)(i) of the Act for developing, operating and maintaining of infrastructure facility i.e. Road/Bridge. These 8 projects are : (i) Bikaner Bypass, (ii) Hanumangarh-Suratgarh Road, (iii) Hanumangarh-Shriganganagar Road, (iv)Massi Bridge, (v) Chala Neem Ka Thana-Kotputli Road, (vi) Chomu-Ajitgarh-Shahpura Road, (vii) Chala Neem ka Thana-Kotputli Road (Improvement), (viii) Mangalwar Nimbahera Road. Out of these, two projects Bikaner Bypass & Chomu-AjitgarhShahpura Road have incu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aken the total turnover as Rs. 64,78,66,570/- whereas the correct turnover is Rs. 4,38,13,34,652/-, reflected in the inner column of Schedule-G of the final accounts relating to operating receipts. If the inner column of Schedule-G pertaining to operating receipts is totaled, the gross turnover amounts to Rs. 69,89,85,491/- as against Rs. 4,38,13,34,652/- claimed by the appellant. 5.6. The appellant has stated that the work of BOT projects is handled by only five divisions of the appellant and the remaining 26 divisions do not undertake any work relating to BOT projects. Therefore, payment to and provision for employees of these five divisions and the head office should only be taken. This contention of the appellant is correct and this expenditure relatable to BOT projects is taken as Rs. 16,98,40,588/-. 5.7. The appellant has stated that administrative expenses incurred at the head office of Rs. 6,05,47,731/- do not relate to BOT projects. Looking to the nature of administrative expenses, this contention of the appellant is without any basis and cannot be accepted. The administrative expenses which need to be apportioned to the BOT projects is Rs. 6,05,47,731/- - Rs. 1,80,00,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ses is covered by the decision of Coordinate Bench in ITA No. 26/JP/2014 for the assessment year 2007-08 in assessee's own case and in ITA No.759/JP/2013 for the A.Y. 2008-09. He submitted that from the tabulated expenses it can be noted that prior period expenditure booked in respect of head office and Jodhpur unit is a case of reversal of income already offered for tax in earlier years. Hence, these amounts cannot be held as prior period expenses rather it is a case of reversal of excess income taxed in earlier year. He submitted that ld. CIT (A) in respect of Jodhpur unit did not allow the prior period expenses by stating that explanation furnished by the assessee does not match with the supporting order sheet entries. In holding so, he has not elaborated as to how the explanation furnished by the assessee does not match with the order sheet entries. He submitted that sale of shuttering material in the year 2005-06 was credited to the account of corporation instead of according credit to the respective work as a result of which similar amount was shown outstanding against the PHED. Accordingly, the prior period expenses is debited by crediting to the account of PHED. Thus, it is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n't be further allocation of proportionate expenses in respect of employees cost and administrative expenses incurred at head office and at various unit offices. No such disallowance was made in the past. Hence the disallowance of deduction u/s 80IA made by AO and restricted by CIT(A) is incorrect, unjustified and not as per law. 2. Without prejudice to above, the total turnover and the manner of allocation of administrative expenses and payment to employee against the eligible undertaking as done by the lower authorities is incorrect for the following reasons:- (i) The AO has considered the total turnover of the assessee at Rs. 64,78,66,570/- and the Ld. CIT(A) at Rs. 69,89,85,491/- whereas the correct turnover of the assessee is Rs. 4,38,13,34,652/- computed as under:- Particular of turnover Turnover as per AO Correct Turnover Remarks Centage Charges 26,24,99,957/- 3,94,48,49,118/- These charges are in respect of cost plus fixed margin contract. In these contracts assessee charges fixed margin on the expenditure on contract incurred by it. In schedule G (PB 20), only the centage charges is shown. The turnover in respect of these contract is Rs. 394.48 crores as ment....
X X X X Extracts X X X X
X X X X Extracts X X X X
....out. The unit wise detail of the expenditure on salary and allowance is at PB 34. Hence salary/pension/gratuity/contribution to state renewal fund and staff welfare expenses paid/incurred to/on the employees of 26 units can't be considered for allocation to 80IA units. The allocation can at the most be made in respect of head office expenses and five units where toll collection work is also looked after. On this basis, the expenditure under the head payment to and provision for employees in respect of head office and these 5 units would be as under:- Particulars Total Amount Amount related to Head office and Five Units Salary wages and Bonus 17,73,86,515/- 9,21,76,591/- Contribution to pension and gratuity fund 14,16,45,738/- 7,36,04,361/- Contribution to State Renewal Fund 10,00,000/- 5,19,636/- Staff Welfare expenses 68,12,448/- 35,40,000/- 32,68,44,701/- 16,98,40,588/- The Ld. CIT(A) has therefore held that the entire expenditure of Rs. 32.68 crores cannot be apportioned to the projects eligible for deduction u/s 80IA(4) and thus apportioned only 16.98 crores to these eligible projects. However, in doing so, he ignored the fact that when the ent....