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TMI Blog2021 (8) TMI 1035X X X X Extracts X X X X X X X X Extracts X X X X ..... in the earlier years. Admittedly, the amount of capital subsidy received by the assessee in the earlier years was shown under the head capital reserve in the financial statements prepared under the Companies Act - assessee, while amortizing the project expenses has adjusted the amount of subsidy in the profit and loss account. This fact can also be verified from the financial statement of the assessee which are placed on record. Accordingly we hold that the finding of the AO that assessee has not adjusted the amount of capital subsidy against the project expenses is devoid of any merit. At the time of hearing, the learned DR has also not brought anything on record contrary to the finding of the learned CIT(A). Undoubtedly, the assessee has incurred the expenses on the projects which were in the nature of BOT. Thus the assessee was entitled to amortize the expenses over the concession period of these projects. Decided against revenue. - ITA No. 3312/AHD/2014 - - - Dated:- 12-8-2021 - Mahavir Prasad, Member (J) And Waseem Ahmed, Member (A) For the Appellant : Virendra Ojha, CIT, D.R. and S.S. Shukla, Sr. D.R. For the Respondents : Vartik Chokshi, A.R. ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts every year. As per the AO the project cost was calculated by the assessee on notional basis which is unwarranted under the provision of law. b. The assessee fails to furnish the details of supporting evidences for the project cost vis- -vis the details showing the deduction of cash subsidy from the project cost. As such the assessee has proliferated the expenses artificially. c. There is no provision under the Income-tax Act, which authorizes the assessee to amortize the expenses which are yet to incur. 4.3. In view of the above, the AO held that the assessee should have reduced the amount of subsidy from the project expenses in the year in which it was received and remaining amount of cash subsidy should have been offered to tax. However, the assessee has not done so and has claimed the project expenses on notional basis. Accordingly, the AO treated the amount of cash subsidy of ₹ 83.80 crores transferred to capital reserve account as income and added to the total income of the assessee. 5. Aggrieved assessee preferred an appeal to the Ld. CIT(A), who deleted the addition made by the AO by observing as under: 5.3. I have considered the appellant' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sustained on both counts i.e. the cash subsidy even if taxable can be taxed only in the year of I receipt and secondly, the appellant has already reduced the cash subsidy from the expenditure incurred on the project in the earlier years and the net amount has been amortized over the concession period. Thus, there is no income which can be added to the income of the current year. Hence, the addition made by the AO is directed to be deleted and this ground of appeal is allowed. 6. Being aggrieved by the order of the Ld. CIT(A) the Revenue is in appeal before us. 7. The Ld. DR, before us submitted that the amount of cash subsidy should have been offered to tax instead of showing it in the balance sheet under the head Capital Reserve . It is because the amount of cash subsidy directly relates to the project of the assessee. 7.1. As such the assessee on one hand is claiming the expenses incurred on the project and that too without setting off the amount of cash subsidy received by it. 8. On the other hand the ld. AR, before us filed a paper book running from pages 1 to 333 and submitted that the amount of cash subsidy was received up-to the year 2005-2006 and therefore i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjudication so as to whether the amount of subsidy received by the assessee in the earlier years amounting to ₹ 83.80 crores is subject to tax in the year under consideration. There is no ambiguity to the fact that the assessee has received subsidy of ₹ 83.80 crores up to the year 2005-06 with respect to the projects as discussed above. This observation can also be seen from the order of the AO which is reproduced as under: Cash Subsidy Received It was noticed from the assessment records that the assessee had received cash subsidy of ₹ 83.80 crore upto 2005-06 in respect of their Hoshangabad-harda-Khandwa and Raisen-Tahatgarh road Projects and shown the same Capital Reserve in their accounts. 11.4. From the above observation of the AO, it is clear that the amount of subsidy was received by the assessee in the earlier years. Therefore, in our considered view same cannot be subject to tax in the year under consideration. Accordingly, we hold that the AO has exceeded his jurisdiction by adding the amount of subsidy received by the assessee in the earlier year to the total income of the assessee for the year under consideration. 11.5. Moving further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) during the construction period. Further, expenditure incurred by the assessee on such BOT projects brings to it an enduring benefit in the form of right to collect the toll during the period of the agreement. Hon'ble Supreme Court in the case of Madras Industrial Investment Corporation Ltd. vs. CIT in 225 ITR 802 : 2002-TIOL-290-SC-IT-LB allowed spreading over of liability over a number of years on the ground that there was continuing benefit to the company over a period. Therefore, analogously, expenditure incurred on an infrastructure project for development of roads/highways under BOT agreement may be treated as having been made/incurred for the purposes of business or profession of the assessee and same may be allowed to be spread during the tenure of concessionaire agreement. 5. In view of above, Central Board of Direct Taxes, in exercise of the powers conferred under section 119 of the Act hereby clarifies that the cost of construction on development of infrastructure facility of roads/highways under BOT projects may be amortized and claimed as allowable business expenditure under the Act. 6. The amortization allowable may be computed at the rate which ensures ..... X X X X Extracts X X X X X X X X Extracts X X X X
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