TMI Blog2011 (1) TMI 1213X X X X Extracts X X X X X X X X Extracts X X X X ..... executed with collaboration with another company M/s. IVRCL. In the course of scrutiny assessment proceedings, the Assessing Officer had detected that the company had debited huge expenses towards site expenses for Rs. 31,04,857 line and jointing expenses for Rs. 1,26,63,674, labour payments for Rs. 1,19,50,576 for which proper vouchers were not made available to the Assessing Officer. Most of the payments were made in cash only. The Assessing Officer also was of the view that the margins of profit from the execution of civil works relating to the manufacture and laying of pipes were quite low as compared to similar contractual profits of about 8 per cent over gross turnover applicable to various contractors. Taking into consideration the sum total of the above stated findings such as claiming of huge expenses not supported by external vouchers/payment by cash/low margin of profit the Assessing Officer had made disallowance of Rs. 50 lakhs to the returned profit and gains of business. The Assessing Officer had also found that the company had claimed depreciation of Rs. 41.15 lakhs on such leased machinery worth Rs. 1,64,60,003. During assessment proceedings the Assessing Officer ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with documentary evidence namely, vouchers, legal deeds, copy of accounts etc. It is further submitted that in para-5 of the impugned assessment order, the Assessing Officer seeks to make an addition of Rs. 50 lakhs by contending that the assessee, debited huge expenditure towards site expenses at Rs. 31,04,857 laying and jointing of Rs. 1,26,63,674, labour payment of Rs. 1,19,50,576 for which proper vouchers are not available and most of the payments by cash and no proper external vouchers are not available. Further, the assessee debited Rs. 12,97,079 towards supervision charges on cement and HT Wire Vedaranyam Rs. 25,12,038 towards sites supervision charges Vedaranyam and Rs. 75,11,437 towards laying and jointing, transportation, site expenses etc. For this expenditure, the only evidence available with the assessee is an account copy of M/s. IVRCL. The ledger account is not always the proof of revenue expenditure and the amounts debited under capital account also reflects in the ledger account. The assessee could not absolve its duty simply by stating that the amount was paid by M/s. IVRCL since the assessee's claim of deduction, it is the duty of the assessee to prove the genu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ete the assessment after computing the income in accordance with the books of account. In support of his contentions, he relied on the following case law. ( i ) Sri Har Sarup Cold Storage General Mills v. ITO [1988] 27 ITD 1 (Delhi)(TM) ( ii ) Anand Picture Palace v. ITO [IT Appeal No. 2088 (Hyd.) of 1985] ( iii ) Shiv Engg. Works v. ITO [1990] 53 Taxman 109 (Jp.) (Mag.) ( iv ) Sheikhar Chand Jain Sons v. IAC [1989] 45 Taxman 82 (Delhi) (Mag.). With regard to the account copy of M/s. IVRCL the assessee contended that the said account copy is self explanatory and is based on the agreement between the assessee and M/s. IVRCL and as such does not leave any room for ambiguity in respect of capital and revenue expenditure. In this regard the assessee contended that as the account copy is based on verifiable facts and the same can be considered as evidence for the purpose of section 143 of IT Act, 1961 because section 143 does not define word "material" the Assessing Officer not being a court can rely upon the material which may not strictly be evidence admissible under the Indian Evidence Act for the purposes of making an order of assessment. In support the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the statutory provisions and consequently keeping with equity. The authorized representative of the assessee submitted that M/s. IVRCL Infrastructure Projects Limited entered into Joint Venture with M/s. Taher Ali Industries Projects (P.) Ltd. To qualify themselves and to quote for clear water supply scheme to 222 habitations in Muthupettai union, Thiruvarur Municipality etc., and bulk provision to 306 way side habitations in Vedaranyam of Tamilnadu Water Supply Drainage Board and other projects, submitted tender for execution of the project and having been successful in the tender, M/s. IVRCL was awarded the work order for execution of the project. It is submitted that both the parties discussed the ways and means of executing the project as per the contract awarded to IVRCL and concluded that pipe manufacturing facility should be erected nearer to the project site by the assessee to save on cost of transportation, and accordingly at the request of the assessee M/s. IVRCL agreed to acquire machinery valued at Rs. 1,45,70,000 in its name and erect the same in the factory premises of the assessee vide mobilization advance agreement dated 30-3-2001 between both the parties. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y primary evidence in support of its claim. The assessee has not produced any evidence except filing account copy of M/s. IVRCL. The account copy of the IVRCL cannot be taken as proof of payment of expenditure. In some instances, the Assessing Officer noticed that the amounts debited in the capital accounts also reflected in the ledger account. The department rightly observed that the assessee could not absolve his duty simply by stating that the amount was paid by the IVRCL. Since the assessee company claimed the expenditure, in our considered view, it is the duty of the assessee company to prove the genuineness of the same. In the absence of the supporting evidence, the department rightly not certified the correctness of the expenditure incurred by the assessee company. The decision relied on by the learned counsel are all distinguishable on facts of the instant case. As most of the payments are made by the cash and as most of the expenditure was not properly supported by vouchers, the lower authorities are rightly disallowed the expenditure amounting to Rs. 50 lakhs on ad hoc basis and added the same to the income returned. In view of the above, we do not see any infirmity in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy who awarded the contracts to the assessee and ( c ) the assessee was involved in only repairing and improving the already existing infrastructural facility e.g., widening and strengthening of existing roads, augmentation of water supply revamping of existing sewerage system etc., and hence it cannot be said that the aforesaid contracts were for the development of a new infrastructure facility ( d ) it is evidence from the copies of agreements filed by the assessee that none of the infrastructure project built by it was operated by it. After the construction of the whole or part of the project, the same was transferred to the respective Government/local authority or statutory body. Lastly, the Assessing Officer has contended that of the projects executed during the year, some of the works have been taken by the assessee on sub-contract basis certain projects were awarded to the joint venture in which the assessee is one of the partner and subsequent to the allotments of the contract to the joint venture, the assessee has entered into separate contract agreement with the joint venture for executing some of the works which construes sub-contract. Finally, the Assessing Officer ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he impugned assessment order pertaining to the assessment year 2006-07 the condition that such infrastructure facility shall be transferred to the Central Government, State Government or local authority has also been removed. However, the agreement with such authorities for creation of such infrastructure will have to be entered into. With regard to the contention of the Assessing Officer that the assessee was not given the contract for building the entire facility, the assessee contends that the Assessing Officer has himself admitted in para XV( d ) of the impugned assessment order pertaining to the assessment year 2006-07 that after the construction of the whole or part of the project, the same was transferred to the respective Government bodies. According to the assessee the whole of the projects refer to the project which are considered for claiming under section 80-IA(4) of IT Act and hence the Assessing Officer has intentionally not categorized the same and the assessee contends that huge investments has been made by him towards various activities of development. In other words, there was huge financial involvement on account of mobilization of equipment, and synthesizing peo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansferred to the respective Government bodies whereas it is strongly contended by the assessee that the project which is partly developed is not considered for the benefit of section 80-IA of the Act. Due to the above reasons, the Assessing Officer has not provided the name and other details of the project to substantiate his above stand. The Assessing Officer has alleged that none of the infrastructure built by the assessee was operated by it since after the construction of the whole or part of the project the some was transferred to the respective Government bodies whereas in this regard the assessee would like to contend that the Assessing Officer has himself quoted under para 47.4 of the impugned assessment order pertaining to the assessment year 2006-07 that the condition that such infrastructure facility shall be transferred to the Central Government, State Government or local authority has also been removed. However, the agreement with such authority for creation of such infrastructure will have to be entered into and even other wise, the assessee has entered into the agreement for manufacture, supply, installation testing, commissioning and operation and maintenance for a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The said clause envisages the method of recoupment whereas section 80-IA of the Act itself provides that the assessee should develop the infrastructure facility as per the agreement which Central Government State Government or a local authority. So entering into a lawful agreement and thereby getting the recoupment of the investment through measurements in no way, is a bar to the one being a developer. The Assessing Officer is having wrong perception with regard to TDS provisions since according to him in the case of a transfer of an infrastructural facility, the consideration is not a contract amount to attract TDS the amount paid is a sale considerations which is incorrect since the TDS is mandatory in case the recoupment of investment is other than by way of toll. Merely because in the agreement for development of infrastructure facility assessee is referred to as contractor or because same basic clauses are laid down including advances against bank guarantee force, it does not detract the assessee from the position of being a developer, nor will it debar the assessee from claiming deductions under section 80-IA of the Act. Finally, the Assessing Officer has concluded that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue by the decision of Larger Bench of ITAT, Mumbai in the case of B.T. Patil Sons Belgaum Construction (P.) Ltd. v. Asstt. CIT [2010] 35 SOT 171 . 10. We have considered the rival submissions and perused the material available on record. We find that the Larger Bench of ITAT, Mumbai in the case of B.T. Patil Sons Belgaum Construction (P.) Ltd. ( supra ) wherein it was decided that the use of word "developing" in juxtaposition to infrastructure facility in section 80-IA(4) of the Act indicates that what is eligible for deduction under this sub-section is the profits and gains derived from the development of infrastructure facility and not something de hors it. So, in order to be eligible for deduction under section 80-IA of the Act, the development should be that of the infrastructure facility as a whole and not a particular part of it. It may be possible that some part of the development work is assigned by the developer to some contractor for doing it on his behalf and that will not put the doer of such work into the shoes of a developer. Therefore, a mere contractor cannot be conferred with the benefit as provided in section 80-IA of the Act. In the case und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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