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TMI Blog2016 (6) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... Raj Rahul Garg, JJ. For the Appellant : Mr. Yogesh Putney, Advocate -revenue. For the Respondent : Ms. Radhika Suri, Sr. Advocate with Ms. Rinku Dahiya, Advocate with Ms. Rajni Pal, Advocate ORDER Ajay Kumar Mittal, J. 1. This order shall dispose of ITA Nos.411 and 420 of 2015 as learned counsel for the parties are agreed that the questions of law involved in both the appeals are identical. However, the facts are being extracted from ITA No.420 of 2015. 2. ITA No.420 of 2015 has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short, the Act ) against the order dated 5.6.2015, Annexure A.3 passed by the Income Tax Appellate Tribunal, Chandigarh Benches A and B , Chandigarh (in short, the Tribunal ) in ITA No.246/Chd/2013, for the assessment year 2010-11, claiming following substantial questions of law:- i) Whether on the facts and circumstances of the case, the learned ITAT has erred in deleting the addition made on account of disallowance of expenses incurred as maintenance of colonies of Rs. 3,25,96,429/-? ii) Whether the expenditure to the tune of Rs. 3,25,96,429/- incurred by the respondent assessee-Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 27.12.2013, Annexure A.2 holding that the expenditure on account of maintenance of colonies was revenue in nature and allowable under section 37 of the Act. Not satisfied with the order, the revenue filed appeal before the Tribunal. Vide order dated 5.6.2015, Annexure A.3, the Tribunal dismissed the appeal. Hence the instant appeals by the revenue. It may be noted that a corrigendum dated 2.9.2015, was issued by the Tribunal in the case of ITA No.741/Chd/2014 to the effect that since the appeal i.e. ITA No.741/Chd/2014 relates to assessment year 2011- 12, the assessment year in question at the title of the order be read as 2011- 12 instead of 2010-11. 4. We have heard learned counsel for the parties. 5. Learned counsel for the appellant-revenue relied upon judgment of the Apex court in Arvind Mills Limited vs. Commissioner of Income Tax, (1992) 197 ITR 422 to contend that the amount spent by the assessee for repair of roads was capital in nature. It was urged that in such circumstances, the CIT(A) as well as the Tribunal erred in allowing the same as revenue expenditure in the assessment year in question. 6. Controverting the aforesaid submission, learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cally in the nature of stock in trade as after development of these colonies these were not in possession of appellant. The expenses incurred on the existing infrastructure were in the nature of repair and maintenance which shows that there was no creation of any new asset and it was incurred for maintaining the business of appellant by providing better estate services. Even if, such expenditure gives enduring benefit, the benefit does not accrue to the appellant rather the benefit goes to the allottee. The AO s other reasoning that no income is being received against the expenditure does not have any relevance on the nature of expenditure and it is not a valid criteria to treat the expenditure as capital in nature. Further, no value addition by incurring such expenditure has accrued on any assets belonging to and/or held by the appellant. Considering the reasons discussed in above paras and judicial pronouncements cited by the appellant, I am of the view that the expenditure on account of maintenance of colonies is revenue in nature. Hence, the AO is directed to delete the addition of Rs. 3,21,25,745/-. 8. While concurring with the findings recorded by the CIT(A), the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be shown in the profit and loss account and should not be made as part of the contract. 112. The learned CIT(A) after considering the submissions observed that as per the decision of Hon ble Supreme Court in case of Tuticorin Alkali Chemicals and Fertilizers Limited vs. CIT, 227 ITR 172 (SC), Accounting Standards were made for general guidelines and accounting purposes and the same cannot be used for determining tax liability. He further observed that no project can be completed without general administration expenses and accordingly confirmed the addition. 113. Before us, the learned counsel for the assessee reiterated the submissions made before the learned CIT(A). He further submitted that the assessee was following cash system of accounting and the Assessing Officer has himself held that instalments received in cash on account of sale of houses and flats under hire purchase agreement were taxable which means he has totally followed cash system of accounting and therefore, he cannot take a U turn and deny the deduction on account of administrative expenses which have been incurred in cash. Alternatively, it was submitted that if these expenses are held to be on c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as carrying on business in manufacture and sale of sugar. The assessee contributed Rs. 50,000/- to the State of UP towards meeting the cost of construction of roads in the area around its factory under a sugarcane development scheme. After considering the matter, the Apex Court held that the construction of roads no doubt facilitated the business operations of the assessee and enabled the management and conduct of the assessee's business to be carried on more efficiently and profitably but it was not an advantage in the capital field because no tangible or intangible asset was acquired by the assessee nor was there any addition to or expansion of the profit making apparatus of the assessee. The relevant observations made by the Apex Court read thus:- Now it is clear on the facts of the present case that by spending the amount of Rs. 50,000, the assessee did not acquire any asset of an enduring nature. The roads which were constructed around the factory with the help of the amount of Rs. 50,000 contributed by the assessee belonged to the Government of Uttar Pradesh and not to the assessee. Moreover, it was only a part of the cost of construction of these roads that was c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egarding the nature of expenditure being capital or revenue relating to payment for the betterment charge required to be paid by the assessee. The Apex Court held that since the payment had no direct nexus with the day to day running of the business and as a result of the payment of the betterment charge, the value of the assessee's land had increased, the betterment charge was capital expenditure. 12. The position in the present case is different. Herein, the assessee's business was to provide housing to the general public in the State of Haryana after development of housing colonies. The maintenance work was to be carried out by the respective municipal committees or local authorities. With regard to particular colonies at South Vihar and Narnaul, as per decision of the Board, the assessee had to carry out the maintenance work like upgradation of roads, park, street light, boundary wall etc. The enduring benefit did not accrue to the appellant but to the allottee. Further, the assets did not belong to the assessee. Thus, the expenditure incurred by the assessee on maintenance work was held to be revenue in nature and, therefore, the judgment relied upon by the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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