TaxTMI 
TaxTMI 
2024 (12) TMI 1788
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The first issue in this appeal of Revenue is against the order of CIT (A) in deleting the addition made by Assessing Officer (AO), treating the financial assistance as capital in nature and not taxable. The Revenue has raised the following grounds of appeal: "1. Ld. CIT (A) has erred in law and on facts in allowing relief on account of revenue receipt of Rs. 52.10 Crore and unsubstantiated expenses without appreciation material on records. 2. Ld. CIT (A) has erred in law and on facts in considering the money received from NRDA has capital receipt whereas NRDA has substantially contributed funds for establishment of business of the assessee and, therefore, such money is revenue receipt in the hands of assessee. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....warded the contract on Build, Operate and Transfer (BOT) basis for development and operation of the water supply system, being the "Project". (c) The main objective of the concession was to first develop a water supply/treatment system along with Project facilities for provision of treated water to the consumers in Naya Raipur area and thereafter, operation and maintenance of the project facilities along with raising bills on consumers and its collection therefrom; (d) The Agreement was entered into for a period of 8 years commencing from the appointed date (the agreement date, i.e. 05.11.2009) and the date of expiry of the concession period was 04.11.2017 during which the assessee was authorized to design, finance, constr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oject was in the first stage of its development and was yet to be completed. In terms of the Concessionaire Agreement, NRDA released milestonebased financial assistance payments amounting to Rs. 52.10 crores on which TDS of Rs. 28,90,740/- was deducted. The Assessing Officer assessed the total income at Rs. 1,98,99,414/- while making following adjustments: "(a) the financial assistance of Rs 52.10 Crores received from NRDA was treated as revenue receipt of the assessee; and (b) An ad hoc disallowance of 20% was made out of total expenses incurred for the Project and debited in the CWIP account by the assessee. Aggrieved, the assessee preferred an appeal before the CIT(A). 5. The CIT(A), vide its order ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....paras 12 and 13 as follows: "12. As mentioned elsewhere the bone of contention is the treatment of financial assistance received by the assessee from NRDA. In our considered opinion, taxation of grant/subsidy by whatever name called is determined by the purpose for which the grant/subsidy is granted. This view is fortified by the decision of the Hon'ble Supreme Court in the case of V.S.S.V. Meenakshi Achi 60 ITR 253 in which the Hon'ble Supreme Court held that the character of the subsidy in the hands of the recipient is to be determined having regard to the purpose for which the subsidy has been given. This principle has been reiterated by the Hon'ble Supreme Court in the case of Sahni Steel & Press Works Ltd. 228 ITR ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 8. The second issue in this appeal of Revenue is as regards to the order of CIT (A) deleting the addition made by AO of the disallowance of expenses, as the assessee failed to substantiate the expenses or prove the genuineness and reasonableness of such expenses. For this, Revenue has raised the following ground no. 3 as under: "3. Ld. CIT (A) has erred in law and on facts in deleting the addition towards disallowance of expenses which the assessee failed to substantiate even though there was no material before the Ld. CIT (A) to prove genuineness and reasonableness of such expenses." 9. We have heard the rival contentions and gone through the facts and circumstances of the case. We noted that the assessee has shown expenditur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for development of the water supply/treatment plant as revenue expenditure as the assessee had debited the expenditure to CWIP a/c which was re-classified by the AO to Profit and Loss a/c. Thereafter, the AO, without even pointing out any specific instance of bogus/inflated expenditure, disallowed 20% of the total expenditure by making a bald assertion that complete veracity of expenses cannot be examined and there may be some leakage in the form of excess billing/ bogus expenditure. At the outset, as discussed hereinabove, the treatment undertaken by the assessee was in accordance with the relevant accounting principles and with the CBDT Circular No. 9 of 2014 dated 23.04.2014 which provides that the expenditure incurred for developme....