TMI Blog2014 (7) TMI 803X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. Wharfage payment of claim u/s 37(1) – Disallowance u/s 43B – Held that:- CIT(A) was right in holding that it was the assessee who as SPV was constructing, operating and managing the port and was also having income from cargo handling and thus was liable to claim corresponding expenditure relating to the said income in the shape of wharfage/port dues expenditure payable as royalty to the MMB - it was the assessee who was entitled to develop, manage and operate the Dighi Port and the assessee has also offered income from the cargo handling at Dighi Port and even the disputed dues, for which the provision was made, have been offered as income in the subsequent assessment year after the settlement of dispute - it was the assessee who was liable to pay the port dues and the expenditure was rightly claimed by the assessee in its return of income - the AO is directed to verify as to whether the assessee has offered the expenditure – Decided against Revenue. Unexplained investment in plant and machinery u/s 69 – Genuineness of purchase not established – Held that:- It was the assessee who as SPV was constructing, operating and managing the port – there was no infirmity in the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d agreed to grant license for 50 years to BLICL to build a multipurpose common user port on Build, Own, Operate, Share and Transfer (BOOST) basis on the terms and conditions contained therein. Since the license was given to BLICL, the assessee company was not required to pay any dues in the nature of wharege/port dues to MMB as the agreement was between MMB and BLICL. The A.O. further noted that MMB was a Statutory Body incorporated under the Maharashtra Maritime Board Act, 1996. Hence any dues payable to MMB were statutory dues and were covered u/s. 43B. Hence, the provision made for the dues not paid to MMB because of any dispute of liability could not be allowed in the hands of the assessee. He therefore disallowed the expenditure of ₹ 82,92,783/- which was claimed to be payable by the assessee to MMB. Aggrieved against the order of the AO, assessee preferred appeal before the ld. CIT(A). 4. Before the ld. CIT(A) it was submitted by the assessee that the agreement dated 17.3.2002 entered in between MMB 'the licensor' and BLICL 'the licensee' contained a clause 'corporate structure in 11.1' wherein it had been provided that the project would be de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subject matter of violation of the contract. 2. Whether on facts and circumstances of the case and in law, the CIT(A)- 4 was justified in making an addition of ₹ 3,00,000/- to total income of assessee on the ground that there was no reconciliation in the TDS certificate. 3. The appellant craves leave to alter, amend, withdraw or substitute any ground or grounds or to add any ground or grounds of appeal. 5. We have heard the ld. representatives of the parties and have also gone through the records. The assessee vide ground No.1 of the appeal has agitated the action of the ld. CIT(A) for confirmation of the disallowance under section 43B of the Act holding that the assessee had made only a provision in the profit loss account about the said wharfage/port dues, however, the same were not actually paid during the year. The ld. A.R. has brought our attention to the observation of the Hon'ble Supreme Court made in the case of CIT vs. McDowell Co. Ltd. (2009) 180 Taxman 514, wherein the Hon'ble Supreme Court while interpreting the provisions of section 43B(a) of the Act has held as under: 10. It would be pertinent to note that the expression now used in S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of CIT vs. McDowell Co. Ltd. (supra) as well as by the Hon'ble Andhra Pradesh High Court in the case of CIT vs. Andhra Ferro Alloys (P.) Ltd. (supra), the section 43B of the Act is not attracted in this case. Hence, the disallowance made/confirmed in this case by the lower authorities under section 43B of the Act was not called for and thus the finding of the ld. CIT(A) in this respect is set aside and therefore ground No.1 of the assessee's appeal is allowed. 8. Vide ground No.2, the assessee has agitated the confirmation of disallowance of ₹ 3 lakh on account of non reconciliation in the TDS certificate. During the assessment proceedings, the AO noticed that the assessee had credited a sum of ₹ 85,65,512/- towards port rent received from Ashapura Minechem Ltd. The A.O. noted that the assessee had credited a sum of ₹ 85,65,512/- towards port rent received from Ashapura Minechem Ltd. However, from the TDS certificate it revealed that the amount of rent paid was ₹ 88,68,551/-. Since the assessee could not give any satisfactory explanation for this discrepancy, the A.O. added a sum of ₹ 3 lakh to the total income of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in deleting disallowance of ₹ 1,00,955/- without appreciating the fact that the assessee had not produced complete documentary evidence before the A.O. during the assessment proceedings. 5. For these and other grounds that may be urged at the time of hearing, the decision of the CIT(A) may be set aside and that of the AO restored. 14. Apart from the above grounds of appeal, Revenue has also taken further additional grounds as under: On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in allowing relief to the assessee to the extent impugned in the grounds enumerated below: 1. The order of the CIT(A) is opposed to law and facts of the case. 2. On the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) was correct in holding that in the previous year corresponding to the A.Y. 2005-06, M/s Dighi Port Ltd. had a locus standi in wharfage payment of ₹ 82,92,783/- and thereby implicity upholding assessee's claim u/s 37(1) in spite of confirming disallowance of the same u/s 43B? 3. For these and other grounds that may be urged at the time of hearing, the decision of the CIT(A) may be set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. Further, the perusal of the novation agreement dated 07.12.06 reveals that vide the said novation agreement, it was provided that the assessee would be the SPV to develop, manage and operate the Dighi Port. Though, the said novation agreement was executed later on, however it was specifically provided that the said novated agreement would be in force from the date of concession agreement ab initio i.e. from the date of inception of the agreement. We have also gone through the various letters and correspondence produced by the assessee company on the file. A perusal of copy of minutes of meeting held with the MMT as recorded vide letter No.MMB/Plan-2/Minutes (Dighi )/ 215 dated 22.07.04 reveals that in the meeting held on 29.07.04, it was agreed that the assessee was the SPV for construction, operation and management at Dighi Port and all the future correspondence relevant to the development of Dighi Port was to be addressed to the addressee. Further, the assessee has brought our attention to the letter dated 25.03.08 of the Income Tax Officer to the Director Revenue Audit relating to the audit objection, in case of assessee about the liability of the assessee to pay the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the profit and loss account but the deduction in respect of the same has been disallowed under section 43B for the relevant assessment year 2005-06. 21. Since it was the assessee who was entitled to develop, manage and operate the Dighi Port and the assessee has also offered income from the cargo handling at Dighi Port and even the disputed dues, for which the provision was made, have been offered as income in the subsequent assessment year after the settlement of dispute, hence we hold that it was the assessee who was liable to pay the port dues and the expenditure was rightly claimed by the assessee in its return of income. However, we direct the AO to verify as to whether the assessee has offered the said expenditure as mentioned above as its income in the assessment year 2008-09 after the settlement of the dispute, and if found correct, then no disallowance be made for the relevant assessment year 2005-06 on this account. Subject to our above observations, the additional grounds taken by the Revenue in its appeal are thus dismissed. 22. Now we take up the other/original grounds of Revenue's appeal. 23. Ground No. 1 is general in nature. 24. Through Ground No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of the assessee. 29. The ld. CIT(A) observed that the A.O. had disallowed the above mentioned expenses on adhoc basis without looking into documentary evidence available with the assessee. He therefore directed the A.O. to delete this addition. 30. The ld. DR has submitted before us that the details of the expenses were submitted before the ld. CIT(A) which were required to be verified by the AO. Whereas the ld. AR has contended that the claim has been rightly allowed by the CIT(A). 31. We may observe that the assessee, during the appellate proceedings before the ld. CIT(A), had produced all the details and supporting evidence in respect of general expenses claimed by it. The same requires verification by the AO. Accordingly, we remand the issue to the file of the AO with a direction to verify the details and evidences submitted by the assessee in this respect and decide the claim accordingly. 32. Ground No. 5 is general in nature and does not require any adjudication. 33. In the result, subject to the observations made above, the appeal of the assessee is partly allowed and whereas, the appeal of the Revenue is treated as dismissed. Order pronounced in the ope ..... X X X X Extracts X X X X X X X X Extracts X X X X
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