TaxTMI 
TaxTMI 
TaxTMI 
2021 (11) TMI 92
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....ax-2(3)(hereinafter referred to as ld. AO). Identical issues are involved in all these appeals and hence they are taken up together and disposed of by this common order for the sake of convenience. With the consent of both the parties, the appeal of the assessee for the Asst Year 2010-11 in ITA No. 3632/Mum/2014 is taken as the lead case and the decision rendered thereon would apply with equal force for other assessment years also in respect of identical issues, except with variance in figures. 2. The first identical issue to be decided in this appeal is with regard to taxability of compensation received by the assessee company from Boeing Co. during the Asst Year 2010-11 amounting to Rs. 16,32,39,485/-. The inter connected issue involved thereon is as to whether the assessee was justified in claiming the expenses pertaining to Boeing project of Rs. 3,75,34,846/- as revenue expenditure when the aerospace project had been suspended at the behest of Boeing Co. 2.1. We have heard the rival submissions and perused the materials available on record. We find that the assessee company is engaged in the business of manufacturing of machines, jigs, fixtures, equipment, material handling ....
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....gram, the current interactions indicate that there are no further major impacts on the program and the Company's supplies are expected to commence from 11-1-2012" 2.2. The assessee had made huge investments towards expansion of its business activities and total investment made in this project till 3103/2010 was Rs. 113.58 crore. The assessee submitted the details of such capital investment before the ld AO vide letter dated 21/12/2012 as under:- Sr. No. Particulars Amount (Rs) 1 Lease Hold Land - Nagpur (FA schedule 4A) (A) 16,20,70,296 2 Breakup of CWIP P&M Building Hardware & Software (B) 62,93,40,962 25,31,98,283 50,78,378 ---------------------- 88,76,17,624 3 Incidental expenditure construction period pending Fixed Assets - Schedule 4B Statements during allocation to of Financial (C) 8,61,22,048 Total Capital Investments as on 31.03.2010 (D=A+B+C) 1,13,58,09,968 2.3. Further, the assessee has also submitted before the ld. AO the reason for receiving the compensation and the treatment of compensation received in books of accounts of assessee vide its letter dated 08/01/2013 enclosed in pages 67 to 68 of the paper book. The ld AR b....
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....rations at the behest of Boeing Co. Moreover, it was also pleaded that the interest cost and all other incidental expenses incurred by the assessee for the said project had been capitalized and hence the receipt of compensation would only go to reduce the cost of project of the assessee company. 2.5. The plea of the assessee that the compensation received would be capital receipt not chargeable to tax was rejected by the ld AO on the ground that the compensation received is akin to interest loss borne by the assessee for the delay in execution of the project by the Boeing Co. and accordingly the ld AO held that the said interest would be liable to be taxed separately under the head 'income from other sources'. 2.6. With regard to expenses pertaining to Boeing Project, the assessee had incurred expenditure amounting to Rs. 4,79,10,331/- pertaining to Boeing Project, out of which, a sum of Rs. 1,03,75,485/- was capitalised by the assessee comprising of interest of Rs. 94,07,192/- and insurance of Rs. 9,68,293/- and the balance sum of Rs. 3,75,34,846/- pertaining mainly to employees and employee related expenses which were incurred in normal day to day basis towards business of the ....
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....lause 10.1. thereon reproduced supra. Therefore, it would be incorrect to say that there is no basis for compensation received by the assessee. It should be appreciated that when such events occur between parties, there is a lot of negotiations and mutual understanding between the parties to the agreement and basis the agreement and negotiations, the compensation, etc is decided. Accordingly, we do not find any abnormality in Boeing Co. coming forward to compensate the assessee company for the delay which happened at the behest of Boeing Co. and assessee could not be faulted at all for the same. What is relevant to decide is the nature of compensation received by the assessee. In the instant case, we find that the compensation so received by the assessee company from Boeing Co. would only go to reduce the cost of project as it is effectively meant to cover up for the expenses and investments incurred by the assessee for the said project. Hence we hold that the receipt of compensation would be capital in nature and would go to reduce the cost of project. The decision relied upon by the ld DR on Tuticorin Alkali Chemicals reported in 227 ITR 172 (SC) would not be applicable here as t....
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....d DR tried to question the commercial rationale of such expenses incurred by the assessee. But we find from the orders of the lower authorities that nowhere they had doubted the commercial rationale of incurrence of such expenses for the Boeing project. The ld DR cannot improve the case of the revenue and cannot travel beyond what is stated in the orders of the lower authorities. The only limited argument of the revenue is that the said expenses should be treated as capital expenditure. As a result of the temporary suspension of Boeing project due to the delay at the end of Boeing Co., compensation of Rs. 5,67,13,338/- (over and above compensation given of Rs. 16,32,39,485/-) was given towards day-to-day running expenses incurred by the assessee and the same were offered to tax in the return of income being expenses for recurring expenditure. We find that the ld AO had given a categorical finding in para 4.2. of his order , which remain uncontroverted by the ld AR before us, that the business in Boeing Project started from 10/09/2012 falling in Asst Year 2013-14 onwards. Hence all the expenditure and receipts upto 09/09/2012 pertaining to the project would have to be treated as cap....
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.... CIT(A). We find that the assessee had furnished the details of repairs together with the sample invoices before the ld CIT(A) which had been completely ignored. The explanation given in this regard before the ld CIT(A) was noticed by us and we find from the sample invoice enclosed in pages 93 & 94 of the paper book, that the assessee company had incurred repairs towards reconditioning / painting/ repair/ plumbing / civil maintenance work at the premises taken on lease which does not give any enduring benefit in the capital field to the assessee company as they are routine maintenance expenditure. These expenses were incurred by Tata Motors Ltd on behalf of assessee and were later on billed to the assessee. We also find that similar disallowance made by the lower authorities in assessee's own case for the Asst Year 2009-10 had been deleted by this Tribunal in ITA Nos. 3847 & 4083/Mum/2014 dated 28/12/2017 by placing reliance on the decision of Hon'ble Jurisdictional High Court in the case of CIT vs HEDE Consultancy Ltd reportedin 258 ITR 380 (Bom). In view of the aforesaid observations and also by placing reliance on the judicial precedent relied upon hereinabove, we direct the ld ....
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....at the assessee had furnished a copy of sample agreement entered into with Meprind Tex Services before the ld CIT(A), which is enclosed in pages 95 to 100 of the paper book filed before us. The ld. AO had issued notice under section 133(6) of the Act during the course of assessment proceedings for AY 2009-10 to all commission agents to whom commission was paid during AY 2009-10. However, barring three parties (i.e. Havian Merchantile, Kriyas Eng. Works and Meprind Tech Services) all parties to whom commission was paid, responded to the said notices. Hence, the learned AO disallowed the commission paid to these parties during AY 2009-10. The ld AO observed that from the above list, two parties to whom commission was paid by the assesseealso figured in Asst Year 2009-10 and hence by following his order for Asst Year 2009-10, proceeded to disallow the commission paid to them as unproved as under:- Meprind Tech Services (AGBPG1991K) - Rs. 1,57,024 Kriyas Engineering Works (AAAPE8353L) - Rs. 5,88,007 ------------------ Rs. 7,45,031 4.3. This action of the ld AO was upheld by the ld CIT(A). We find that the assessee had given an explanation that it had entered int....
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.... Year 2010-11 and the decision rendered thereon would apply with equal force for Asst Year 2011-12 also except with variance in figures. 9. The Ground No. 2 raised by the assessee for the Asst Year 2011-12 is identical to Ground No. 4 raised by the assessee for the Asst Year 2010-11 and the decision rendered thereon would apply with equal force for Asst Year 2011-12 also except with variance in figures. 10. In the result, the appeal of the assessee in ITA No. 941/Mum/2016 for the Asst Year 2011-12 is partly allowed. ITA No. 1411/Mum/2016 - Asst Year 2011-12 - Revenue Appeal 11. The Ground No. 1 raised by the revenue is general in nature and does not require any specific adjudication. 12. The Ground No. 2 raised by the revenue for the Asst Year 2011-12 is identical to Ground Nos. 2.1. to 2.5. raised by the assessee for the Asst Year 2010-11 and the decision rendered thereon would apply with equal force for Asst Year 2011-12 also except with variance in figures. 13. In the result, the appeal of the revenue in ITA No. 1411/Mum/2016 for the Asst Year 2011-12 is allowed. ITA No. 942/Mum/2016 - Asst Year 2012-13 - Assessee Appeal 14. The Ground Nos. 1.1. to 1.5. raised by the a....