ITO, New Delhi v. Calcutta Haldia Port Road Company Ltd., New Delhi

ITA 1769/DEL/2010 | 2006-2007
Pronouncement Date: 28-01-2011 | Result: Dismissed

Appeal Details

RSA Number 176920114 RSA 2010
Bench Delhi
Appeal Number ITA 1769/DEL/2010
Duration Of Justice 9 month(s) 9 day(s)
Appellant ITO, New Delhi
Respondent Calcutta Haldia Port Road Company Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 28-01-2011
Date Of Final Hearing 10-01-2011
Next Hearing Date 10-01-2011
Assessment Year 2006-2007
Appeal Filed On 19-04-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B DELHI BEFORE SHRI RAJPAL YADAV AND SHRI K.G. BANSAL ITA NO. 1769(DEL)/2010 ASSESSMENT YEAR: 2006-07 INCOME-TAX OFFICER (E) CA LCUTTA HALDIA PORT ROAD COMPANY TRUST WARD III LAXMI NAGAR VS. LTD. C /O NATIONAL HIGHWAY DISTT. CENTRE DELHI. AUTHORITY OF INDIA G5&6 SECTOR-10 DWARKA NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY :MS. MONA MOHANTY SR. DR RESPONDENT BY: SHRI S.S. GUPTA C.A. ORDER PER K.G. BANSAL ; AM THE FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY FILED ITS RETURN ON 12.10.2006 DECLARING NIL INCOME. THE RETURN WAS ACCOMPANIED BY AN AUDIT REPORT IN FORM NO. 10B U/S 12A(B). THE RETURN WAS PROCESSED U/S 143(1) ON 24.8.2007. THEREAFTER IT WAS S ELECTED FOR SCRUTINY AND STATUTORY NOTICES UNDER SECTIONS 143(2) AND 142 (1) WERE ISSUED. WHILE MAKING THE ASSESSMENT THE AO HELD THAT THE AS SESSEE IS NOT ENTITLED TO EXEMPTION UNDER SECTIONS 11 AND 12 OR U/S 10(23C) . IT HAD RECEIVED DAMAGES AMOUNTING TO RS. 41 29 666/- WHICH WERE REDUCED FROM THE VALUE OF CAPITAL WORK IN PROGRESS. THE AO BROU GHT THIS AMOUNT TO TAX UNDER THE HEAD OTHER SOURCES. ITA NO. 1769(DEL)/2010 2 2. AGGRIEVED BY THIS ORDER THE ASSESSEE MOVED AN APPEAL BEFORE THE CIT(APPEALS)-XXI NEW DELHI WHO DISPOSED IT OFF ON 29.1.2010 IN APPEAL NO. 186/08-09. THE TAXATION OF THE AFORESAID SUM OF RS. 41 29 666/- WAS AGITATED BEFORE HIM. IT IS MENTIONED IN THE IM PUGNED ORDER THAT THE ASSESSEE ENGAGED CONTRACTORS FOR CONSTRUCTION OF CAPITAL PROJECTS. THEY WERE PAID ADVANCES. UNDER THE TERMS OF AGREEM ENT THEY WERE RESPONSIBLE FOR DELAY IN THE CONSTRUCTION WORK AN D IN SUCH A CASE RECOVERIES WERE MADE FROM THEM ON ACCOUNT OF E XCESS COST INCURRED BY THE ASSESSEE. THE DAMAGES WERE COMPUTED IN THE MANNER INTEREST IS COMPUTED ON BORROWED FUNDS WHICH WERE UTILIZED F OR ADVANCES TO THE CONTRACTORS. THE CASE OF THE ASSESSEE WAS THAT SUCH RECOVERIES WERE NOT IN THE NATURE OF INTEREST. THEY WERE INTIMATELY LINKED WITH COST OF CONSTRUCTION AND THEREFORE SUCH RECOVERIES HAD TO BE REDUCED FROM THE COST OF CONSTRUCTION. THE LD. CIT(APPEALS) ACCEP TED THIS ARGUMENT BY RELYING ON THE DECISION OF HONBLE SUPREME COUR T IN THE CASE OF CIT VS. BOKARO STEEL LTD. (1999) 236 ITR 315 AND CIT V S. KARNATAKA POWER CORPORATION (2001) 247 ITR 268. 3. AGGRIEVED BY THE AFORESAID FINDING THE REVE NUE IS IN APPEAL BEFORE US. IT HAS TAKEN ONLY ONE SUBSTANTIVE GROUND TO THE EFFECT THAT THE LD. ITA NO. 1769(DEL)/2010 3 CIT(APPEALS) ERRED IN HOLDING THAT INTEREST INCO ME OF RS. 41 29 666/- IS IN THE NATURE OF EXTRA COST INCURRED DUE TO DELAY S ON PART OF CONTRACTORS WHICH WAS RECOVERED FROM THEM. IT IS MENTION ED THAT THE AUDITED ACCOUNTS AND DETAILS SHOW THAT THE INTEREST INCO ME RECEIVED ON RETENTION MONEY AND MOBILIZATION ADVANCE CANNOT BE HELD TO BE IN THE NATURE OF RECOVERIES AGAINST WORK-IN-PROGRESS. 3.1 A QUESTION WAS RAISED FROM THE LD. DR ON 5 .10.2010 AS TO WHETHER APPROVAL OF THE COD IS REQUIRED IN THIS CASE. N O REPLY COULD BE FURNISHED ON 10.1.2011 AS SHE SOUGHT ADJOURNMEN T WHICH WAS REJECTED. ON MERITS SHE RELIED ON THE ORDER OF THE AO. AS AGAINST THE AFORESAID THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE LD. CIT(APPEALS). 4. WE HAVE CONSIDERED THE FACTS OF THE CASE AND S UBMISSIONS MADE BEFORE US. FROM THE IMPUGNED ORDER IT IS CLEAR THAT THE CONTRACTORS WERE GIVEN ADVANCES FOR EXECUTION OF CAPITAL PROJECT S AND THEY WERE ALSO RESPONSIBLE FOR ANY DELAY IN THE COMPLETION OF TH E PROJECT. IN OTHER WORDS IF THE PROJECT COULD NOT BE COMPLETED WITHIN THE AGREED PERIOD THE CONTRACTOR WAS LIABLE TO PAY DAMAGES TO THE ASS ESSEE. THESE DAMAGES WERE CALCULATED ON THE BASIS OF BORROWED FUNDS US ED FOR ADVANCES AND ITA NO. 1769(DEL)/2010 4 PERIOD OF DELAY. THE COMPUTATION WAS MADE AS IF THESE AMOUNTED TO INTEREST RECEIVED ON THE FUNDS BORROWED BY THE A SSESSEE SO AS TO COMPENSATE IT FOR THE LOSSES ON ACCOUNT OF DEL AY. THE QUESTION BEFORE US IS REGARDING THE TRUE NATURE OF THE RECEIPT. THE ASSESSEE DID NOT ENGAGE THE CONTRACTORS TO EARN ANY INTEREST. THEY WER E ENGAGED TO CARRY OUT THE PROJECT WORK WITHIN A STIPULATED PERIOD SO THAT FINANCIAL VIABILITY OF THE PROJECT REMAINED INTACT. THE METHOD OF COMPUTAT ION OF DAMAGES IS A TOTALLY DIFFERENT MATTER AND IT HAS NOTHING TO DO WITH THE NATURE OF THE AMOUNT RECEIVED. THE LD. DR HAS NOT BEEN ABLE TO REBUT THE FINDINGS OF THE LD. CIT(A) IN ANY MANNER. ON THE BASIS OF FAC TS AVAILABLE IN THE IMPUGNED ORDER THE RECEIPTS ARE IN THE NATURE OF DAMAGES FOR DELAY IN EXECUTION OF PROJECTS. THEREFORE THE AMOUNT OF SUCH DAMAGES RECEIVED BY THE ASSESSEE IS TO BE REDUCED FROM THE RESPECTIV E PROJECT COST. 5. IN THE RESULT THE APPEAL IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 2 8 JANUARY 2011. SD/- SD/- (RAJPAL YADAV) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 28TH JANUARY 2011. SP SATIA ITA NO. 1769(DEL)/2010 5 COPY OF THE ORDER FORWARDED TO: CALCUTTA HALDIA PORT ROAD COMPANY LTD. NEW DELHI. ITO TRUST WARD-III LAXMI NAGAR DISTT. CENTRE D ELHI. CIT(A) CIT THE DR ITAT NEW DELHI. ASSISTANT REGISTRAR.