TMI Blog2021 (11) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... it is effectively meant to cover up for the expenses and investments incurred by the assessee for the said project. Hence we hold that the receipt of compensation would be capital in nature and would go to reduce the cost of project. As the business of assessee was set up and had started and there was huge investment made by assessee and the project was only temporarily suspended by the Boeing Co - Here what is received by the assessee is part of overall cost of project in the form of compensation from Boeing Co. which cannot be treated as interest. Accordingly, we hold that the compensation received in the sum would go to reduce the cost of aerospace project of the assessee company. Hence the Ground raised by the assessee disposed of. Claim of revenue expenditure - We find that the ld AO had given a categorical finding which remain uncontroverted by the ld AR before us, that the business in Boeing Project started from 10/09/2012 falling in Asst Year 2013-14 onwards. Hence all the expenditure and receipts upto 09/09/2012 pertaining to the project would have to be treated as capital in nature. Accordingly, we hold that the receipt of compensation should go to reduce the cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levied only on the returned income and not on the assessed income - See Smt Premlata Jalani [ 2003 (7) TMI 62 - RAJASTHAN HIGH COURT ] Decided in favour of assessee. - ITA No.3632/Mum/2014, 941/Mum/2016, 942/Mum/2016 1411/Mum/2016 & 1412/Mum/2016 (Assessment Year :2010-11, 2011-12 & 2012-13) - - - Dated:- 27-10-2021 - SHRI M.BALAGANESH, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER Assessee by: Shri Rajan Vora Revenue by: Shri Sanjeev Kashyap ORDER PER M. BALAGANESH (A.M): These appeals in ITA Nos.3632/Mum/2014, 941/Mum/2016, 942/Mum/2016, 1411/Mum/2016 1412/Mum/2016 for A.Y.2010-11, 2011-12 2012-13 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-6 in appeal No. CIT(A)-6/IT.145/Rg.2(3)/12-13, CIT(A)-6/IT.09 IT-153/2014-15 respectively dated 17/02/2014 11/12/2015 respectively (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 26/02/2013, 24/02/2014 27/02/2015 respectively by the ld. Asst. Commissioner of Income Tax-2(3)(hereinafter referred to as ld. AO). Identical issues are involved in all these appeals and hence th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losed in the notes to the annual report vide page 18 of the factual paperbook dated 04/01/2018. The relevant extract is reproduced below: The major contract signed with The Boeing Company for supply of Hybrid Titanium Floor Beams for its new 787 Dreamliner airplanes has undergone some changes in the definition of the product requirements, due entirely to the Boeing Company. The Company is continuing to work on setting up the facilities as per their modified requirement, in line with Boeing's new changed product configuration. This fact was also disclosed in the Director's report of the Financial Statements prepared for the year under consideration vide page 5 of the factual paperbook dated 04/01/2018). The relevant extract is reproduced below: As a part of a unique concurrent engineering work methodology, Boeing and TAL are working together to buildup the engineering technology, facilities and factory set-up to their new changed configuration. Though, Boeing have announced two set of delays and a new modified product configuration during the year, for their Dreamliner program, the current interactions indicate that there are no further major impacts on the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the long term supply contract executed with the Boeing Company, USA (Boeing) and towards this end the Company is incurring interalia borrowing cost and incidental expenses. The facility was expected to commence manufacture in April 2009, but has been delayed by almost two years due to delays at customer end. However, Boeing is compensating the Company for the delay in the overall project. Consequently, with effect from April 2009, the incidental expenses and borrowing cost on the facility are not capitalized but charged to the Profit and Loss account and the relevant compensation amounts credited to the Profit and loss account. 2.4. The ld AR submitted that the compensation received from Boeing Co. was in connection with interest expenditure of ₹ 15,80,29,570/- and insurance related expenses of ₹ 52,09,915/- related to the said project. The said compensation figure was determined by Boeing Co. based on the borrowing costs at approximate rate of 12 to 13% of the investment and other costs incurred by the assessee company on the project in the normal course of its business. Hence it was pleaded that the assessee was reasonably compensated as per the prevailing te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so called receipt of monies from Boeing Co. termed as compensation should be treated as interest earned prior to commencement of business and taxed separately under the head income from other sources in the light of decision of Hon ble Supreme Court in the case of Tuticorin Alkali Chemicals reported in 227 ITR 172 (SC). 2.8. It is not in dispute that the assessee had entered into aerospace project with Boeing Co. and started making investments in the said project. Though the assessee was ready to commence its activities from the said project during the year under consideration, the same got delayed at the behest of Boeing Co. as they were suggesting some modifications in the execution. Accordingly, Boeing Co. delayed the execution of the project and since the assessee had already spent substantial sums in the said project, Boeing Co. decided to compensate the assessee company reasonably. It is not in dispute that the entire interest expenditure together with insurance and other project related expenditure had been duly capitalized by the assessee to the cost of project and reflected as Capital Work in Progress. It is not in dispute that the aerospace project had indeed undergo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roject of the assessee company. Hence the Ground Nos. 1.1. to 1.8. raised by the assesseefor the Asst Year 2010-11 are disposed of in the aforesaid manner. 2.9. With regard to the interconnected issue of claiming a sum of ₹ 3,75,34,846/- as revenue expenditure by the assessee company, we find that the break up of the said expenditure are as under:- Particulars Actual Expense incurred for the period ended 31/03/2010 Personnel Expense - Salaries, Wages Bonus - Contributions to Provident and other funds - Staff Welfare expenses 2,05,51,712 19,07,488 35,03,635 Travelling conveyance 54,05,696 Cost of services procured 28,14,619 Postage Telephone expenses 3,40,591 Miscellaneous expenses 13,74,030 Depreciation 16,37,074 Total 3,75,34,846 2.10. We find that the assessee had incurred expenses amounting to ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .5. raised by the assessee for the Asst Year 2010-11 are disposed of in the aforesaid manner. 3. The Ground Nos. 3.1. to 3.3. raised by the assessee are challenging the disallowance of expenses incurred on account of repairs to buildings amounting to ₹ 47,45,546/-, correct figure being ₹ 17,76,404/-. 3.1. We have heard the rival submissions and perused the materials available on record. We find that the assessee entered into a license agreement with Tata Motors Ltd , wherein a plot of land along with buildings located in Pune-Chinchwad was leased to the assessee company for a period of 60 months. The assessee during the year under consideration operated from the said rented premises. As per the terms of the said agreement, the assessee at its own cost, was responsible: a) to keep the interiors of the said premises in good condition and routine maintenance ; b) to keep and maintain the said premises (i.e internal roads, painting of premises internal / outside, drainage lines, storm waterlines, etc) as also the drains, outlets and things appurtenant thereto in proper and good condition; and c) to execute necessary repairs (viz. civil works , flooring inside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd perused the materials available on record. During the year under consideration, the assessee incurred commission expenditure amounting to ₹ 43,33,367/- in order to increase its sales and hence the assessee claimed that such expenditure should be allowed considering section 37(1) of the Act. The details of such commission paid together with names and addresses of payees and purpose of commission were furnished before the ld AO vide letter dated 25/02/2013 as is evident from pages 79 to 80 of the paper book filed before us. The details filed are as under:- Name of the Party Amount Rs. Address New Cast India Private Limited 705,000 168, Kandaswamy Layout Sivanandha Colony, By-Pass Road, Coimbatore- 641 012 S Banjan Co. India Pvt. Ltd., 40,379 Shop No.3, Gauri Co-op Housing Society, 275, Shaniwar Peth, Pune 411 030 Sri Maha Ganapathy Marketing 614,351 168, Kandaswamy Layout, Sivanandha Colony, By-pass Road, Coimbatore 641 013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices (AGBPG1991K) - ₹ 1,57,024 Kriyas Engineering Works (AAAPE8353L) - ₹ 5,88,007 ------------------ ₹ 7,45,031 4.3. This action of the ld AO was upheld by the ld CIT(A). We find that the assessee had given an explanation that it had entered into agreement with those parties and commission is paid only if such agent solicits business for the assessee. The assessee also pointed out that due deduction of tax at source was made in accordance with provisions of Chapter XVIIB of the Act while making payment of such commission and payment made through regular banking channels. We find that the ld AO had merely followed his finding in Asst Year 2009-10 and made the disallowance for this year also in respect of the aforesaid two parties. No examination in any manner known to law was made by him for the year under consideration. We find that similar issue came up for consideration in the assessee s own case for the Asst Year 2009-10 by this tribunal ITA Nos. 3847 4083/Mum/2014 dated 28/12/2017, wherein after consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Asst Year 2011-12 is identical to Ground Nos. 2.1. to 2.5. raised by the assessee for the Asst Year 2010-11 and the decision rendered thereon would apply with equal force for Asst Year 2011-12 also except with variance in figures. 13. In the result, the appeal of the revenue in ITA No. 1411/Mum/2016 for the Asst Year 2011-12 is allowed. ITA No. 942/Mum/2016 Asst Year 2012-13 Assessee Appeal 14. The Ground Nos. 1.1. to 1.5. raised by the assessee for the Asst Year 2012-13 are identical to Ground Nos. 1.1. to 1.8. raised by the assessee for the Asst Year 2010-11 and the decision rendered thereon would apply with equal force for Asst Year 2012-13 also except with variance in figures. 15. In the result, the appeal of the assessee in ITA No. 942/Mum/2016 for the Asst Year 2012-13 is partly allowed. ITA No. 1412/Mum/2016 Asst Year 2012-13 Revenue Appeal 16. The Ground No. 1 raised by the revenue is general in nature and does not require any specific adjudication. 17. The Ground No. 2 raised by the revenue for the Asst Year 2012-13 is identical to Ground Nos. 2.1. to 2.5. raised by the assessee for the Asst Year 2010-11 and the decision rendered ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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