TaxTMI 
TaxTMI 
2018 (6) TMI 357
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....Business * Allowing as Revenue expenses amount incurred by assessee without appreciating that assessee has not started business & expenses ought to be capitalised. * Allowance of claim for exclusion of deemed export benefits * Adhoc Disallowance of 20% of travelling expenes 4. Rival contentions have been heard and record perused. Facts in brief are that assessee, M/s. Nathpa Jhakri Joint Venture was set up under Joint Venture Agreement between M/s. Hindustan Construction Co. Ltd., India and M/s. ImpregiloSpA of Italy for the purpose of executing Civil Works at Nathpajhakri Hydroelectric Power Project, of Satlujal Vidyut Nigam Ltd.,(formerly Nathpajhakri Power Corporation (NJPC) of Government of Himachal Pradesh. 5. As in earlier years, the assessee made certain payments, principally to the nonresident JV partner IGL and another Group concern without deducting tax at source u/s 195. As in the earlier years the AO disallowed the entire amount of such expenditure u/s 40a (i). The CIT(A) allowed relief following orders for earlier years. 6. Ground Nos. 1-5 in the A.Y.2007-08 are same as Ground No. 1-5 for AY 2006-07 concerning disallowance u/s 40a(i) 7. Grievance of Reven....
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....he decision of the Tribunal for the AY 2003-04 was taken basing on the comparing facts of the present case. It is not appropriate for us to go into the errors in the order of the Tribunal when the same were not removed through Miscellaneous Application u/s 254 of the Act. Now the matter is seized up by the Hon'ble High Court by way of admitting appeal of the Revenue. Therefore, the order of the Tribunal for the AY 2003-2004 will have a binding value . In these circumstances, we are of the opinion that the order of the CIT{A) is required to be reversed on the issue of disallowance of the Rs. 1,98,64,847 and the assessee gets relief accordingly. Thus, ground no. 1 raised by the assessee is allowed." 11. Learned DR fairly conceded that issue is covered in favour of the assessee. Respectfully following the same, we confirm the action of CIT(A) on this issue in all the years under consideration. 12. Next grievance of Revenue relates to treatment of interest income as „income from business‟. We have considered rival contentions and found from record that interest income was earned on FD kept with banks. The assessee is a single project joint venture. The purpose of whi....
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....pregilo (IPGL, for short) SPA, Italy formed to execute the contract for construction of Headrace Tunnel and Pressure Shaft at Rampur, Busher for SJVNL. During the course of the execution of the project certain disputes arose between the SJVN and assessee joint venture (NJJV) regarding the Extension of Time and on account of cost overrun. It is general practice in the construction industry that unresolved differences arising during the execution period, is never pressed for keeping in mind the overall interest/progress of the project. On completion of the projects, such unresolved issues are taken by either parties. The assessee has outstanding performance bank guarantees and retention bank guarantees of Rs. 125.17 crores issued to SJVN. The expenses incurred were on account of keeping the bonds and guarantees alive pending resolution of the disputes. The claims raised by the assessee joint venture and counter claim raised by project authority against NJJV, were pending before the Arbitrators. By keeping alive the Performance Guarantee and Retention Guarantee the assessee has continued to expose itself to financial and other obligations under contract, a significant feature of the p....
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....e factual position that the business of the assessee was continuing and has assessed the income of the assessee under the head Business income. The assessee being a single project joint venture it cannot be said that the assessee was not carrying on business in some intervening years but in business in earlier and later years. Earning of income during the year is not a prerequisite for coming to the conclusion that business is in fact carried on during the year. Accordingly the assessee is very much carrying on business in the years under appeal and the Ground raised by the Department is dismissed in all the years under consideration. 14. In the A.Y.2011-12, department is aggrieved by the action of CIT(A) allowing claim of exclusion of deemed export business benefits. We have considered rival contentions The facts in this regard are that the Assessee was engaged in the execution of a civil construction project for the Sutlej Jal Vidyut Nigam (earlier known as Nathpa Jhakri Power Corporation Limited). his was a World Bank aided project enjoying the category of a deemed export. The project started in 1993 and was substantially completed on 08.07.2002. The assessee was following the ....
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....uring the AY 2011-12, as claimed. Hence Grounds No. 2 & 3 are allowed, subject however to the decision of the Hon'ble Bombay High Court in appeal filed by the assessee against order of the ITAT in AY 2003-04. To the extent of relief allowed in that decision, necessary reversal should be made from the deduction allowed herewith." 15. As the deemed export benefits were taxed in the A.Y.2003-04 on accrual basis. There is no infirmity in the order of CIT(A) for excluding the deemed export benefits which have already been taxed in the A.Y.2003-04 and Tribunal have also confirmed the action of the AO. Accordingly, there is no infirmity in the order of CIT(A) for excluding deemed export business benefits. 16. In the A.Y.2011-12, department is also aggrieved for deleting the disallowance of 20% on travelling expenses. We found that all the expenses are primarily incurred in connection with the arbitration proceedings and other pending litigations. Keeping in view the totality of facts and circumstances of the case, vis-à-vis nature of expenses and the findings given by CIT(A), we do not find any infirmity in the order for restricting disallowance to 20% of expenses. 17. In t....