TaxTMI 
TaxTMI 
2026 (9) TMI 138
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....issing the appeal of the Revenue, without any finding on the subject matter, relying on the decision in the case of M/s Mokama Munger Highway Ltd. (ITA No. 1729, 2145 and 2146 0f 2018 dated 03.07.2019) wherein the issue was remitted back to the A.O., therefore vitiating the finding as perverse?" 2. Briefly the facts are that the Respondent-Assessee is a special purpose vehicle formed to engage in the business of road construction on Build Operate Transfer (BOT) basis and collection of toll. For the assessment year in question, the Assessee filed its return of income on 29th September 2015 declaring loss of Rs. 4,48,91,467/- in the books as maintained under the Companies Act, whereas the loss for the purpose of Income Tax Act is calculated at Rs. 8,46,64,672/-. During the assessment proceedings, the Assessing Officer passed an assessment order under Section 143(3) of the Act by making additions of Rs. 7,47,00,000/- on account of disallowance of provisions for major repairs. Aggrieved by the order passed by the Assessing Officer, the Assessee approached the CIT(Appeals) inter alia contending that the Assessing Officer was not justified in disallowing the provisions made by the Ass....
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....as not correct in disallowing the provisions so made on the ground that Sections 36 & 37 of the Act did not allow provisions to be made for the expenses which have not accrued to the Assessee during the relevant year and that liability to take the major repairs has not accrued to the Assessee and/or on the ground that there was no provision under the Income Tax Act to claim the expenses of future years in the current year considering the same as a contingent liability. 5. On perusal of the record it appears that there was substantial material which was placed before the Assessing Officer, as also before the CIT(Appeals), more importantly, on the test which needs to be recognized in law with regard to the present obligation to incur future expenditure on reliable estimates. Such materials formed part of the record before the authorities below. The Assessee relied on the decision of the Tribunal Bench (Hyderabad Bench) in the case of M/s. Mokama Munger Highway Limited Vs. DCIT (ITA No. 1729, 2145 and 2146 of 2018) and also referred to the decision of the Supreme Court in the case of Bharat Earth Movers Vs. CIT, 245 ITR 428 (SC) and the decision in the case of Rotork Controls India....
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....dering the aforesaid clear position in law and by recording the following findings, the CIT(Appeals) allowed the Assessee's appeal. "8. The second issue to be decided is as to whether the estimate made by the assessee is reasonable and on a scientific basis. The appellant has submitted that a copy of said working was submitted to the Assessing Officer and the Assessing Officer has not pointed out any error in the working of the appellant. A copy of this working has also been filed before me. As per this working, the appellant has worked out the quantity of bitumen, concrete, thermoplastic compound, etc., on the basis of length, breadth and depth of the road. After working out the quantity, the estimate has been arrived at by the appellant. The appellant has estimated the cost of major repairs at Rs. 22,26,47, 178/-. The appellant has also filed a chart containing the year wise details of provisions made and utilized. The appellant also explained that as per the provisions of lndAS accounting principles, reworking of provisions was done in A.Y. 2018-19. The appellant has also submitted that the major repair was carried in F.Y. 2019-20 and FY 2020-21 and the whole of provisi....
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.... in case of Bharat Earth Movers (supra) and in case of Rotork Controls India Limited (supra) and other decisions and accepting such clear position in law, has recorded a finding that in the case of the Assessee being a special purpose vehicle for road construction on Build, Operate and Transfer basis and collection of tolls, the Assessee was under an obligation to incur the expenditure for re-laying the whole road at the end of the specific period, more particularly, after 8 years. It was hence observed that there was a direct link with the toll collection and the expenditure to be incurred as per the agreement by the Assessee for which the provision had been made. Considering the observations as made in the M/s. Mokama Munger Highway Ltd.,(supra) and accepting the case of the Assessee as accepted by the CIT(Appeals), the Tribunal did not find any reason to interfere with the order passed by the CIT(Appeals). 9. Mr. Sharma, learned counsel for the Revenue has reiterated the contentions which in fact are contentions borne out of the order passed by the Assessing Officer. He would submit that the approach of the Assessing Officer is correct inasmuch as under the provisions in ques....