2018 (5) TMI 1321 - AT - Income Tax

Eligible for deduction u/s 80IA - allocation of proportionate expenses in respect of employees cost and administrative expenses incurred at head office and at various unit offices - Held that - There is nothing available on record in terms of working of eligible profits and accounting of expenses in relation to eligible projects. Following the decision of the Coordinate Bench referred supra, the matter is remanded back to the file of the AO to examine the above said contentions of the ld AR and to see whether the assessee has made proper allocation of expenses. In the result, the ground is allowed for statistical purposes.

Summary

Issues Involved:
1. Allowability of prior period expenses of ?10,22,608/- on account of overhead and plant running expenses.
2. Confirmation of prior period expenses of ?2,04,87,540/- on account of interest on BOT asset.
3. Allocation of administrative expenses and employee costs to BOT projects where deduction under section 80-IA(4) is claimed.

Detailed Analysis:

1. Allowability of Prior Period Expenses of ?10,22,608/-:
The assessee claimed prior period expenses amounting to ?10,22,608/- related to general overhead and plant running expenses. The assessee argued that these expenses crystallized during the year upon approval by the appropriate authority. The Ld. CIT(A) did not provide a finding on this claim. The Tribunal noted that the assessee had contended these expenses were approved during the year and thus crystallized. However, there was no recorded finding demonstrating such approval and crystallization. Consequently, the Tribunal remanded the matter back to the Assessing Officer (AO) for examination of the claim, allowing the assessee to present its contentions and legal precedents.

2. Confirmation of Prior Period Expenses of ?2,04,87,540/- on Account of Interest on BOT Asset:
The assessee claimed prior period expenses of ?2,04,87,540/- due to a change in the depreciation method on BOT assets as per a notification dated 17.04.2012. The Ld. CIT(A) acknowledged the revision in interest working but disallowed the expenditure due to a lack of detailed breakup and proof of payment. The assessee argued that the prior period interest crystallized during the year due to the amendment in Schedule XIV of the Companies Act, 1956, and should be allowable as expenditure. The Tribunal noted the absence of specific details and remanded the matter back to the AO to examine afresh, particularly whether the interest was paid to a public financial institution or similar entities as defined in section 43B. The Tribunal allowed this ground for statistical purposes.

3. Allocation of Administrative Expenses and Employee Costs to BOT Projects:
The assessee claimed a deduction under section 80IA amounting to ?4,70,61,322/- for toll projects. The AO observed that establishment and administrative expenses were not allocated against the income from these projects and proportionately allocated ?2,58,80,837/- of such expenses, reducing the deduction claim. The Ld. CIT(A) upheld this allocation but directed the AO to consider only the units where both construction and toll collection occurred. The assessee argued that all direct and indirect expenses were already accounted for in calculating the eligible profit, and further allocation was unjustified. The Tribunal referred to a prior decision for AY 2011-12, where the issue was remanded to the AO for verification of the figures from the accounts. Following this precedent, the Tribunal remanded the matter back to the AO to verify the proper allocation of expenses and recompute the deduction accordingly. This ground was also allowed for statistical purposes.

Conclusion:
The appeal was allowed for statistical purposes, with the Tribunal remanding the issues back to the AO for further examination and verification. The AO is directed to consider the assessee's contentions and legal precedents while re-evaluating the claims. The order was pronounced in the open court on 17/05/2018.