PCIT Vs ECA Infrastructure India Pvt Ltd (Bombay High Court)
Summary: The Bombay High Court rejected the Revenue’s appeal under Section 260A of the Income Tax Act, 1961, concerning Assessment Year 2015-16 and the allowability of a provision for major repairs made by ECA Infrastructure India Pvt Ltd. The Revenue challenged the Income Tax Appellate Tribunal, Mumbai order dated 8 February 2023, which had dismissed the Revenue’s appeal against the Commissioner of Income-tax (Appeals), Pune order dated 23 March 2022.
The assessee was a special purpose vehicle engaged in road construction on Build Operate Transfer (BOT) basis and collection of toll. For AY 2015-16, it returned a book loss of Rs.4,48,91,467/- and an income-tax loss of Rs.8,46,64,672/-. The Assessing Officer made an addition of Rs.7,47,00,000/- by disallowing the provision for major repairs.
The assessee relied upon its BOT agreement with the Government of Maharashtra, under which it had a 30-year concession and was contractually required to undertake major repairs during the concession period. The first major repair was to be undertaken after seven years, i.e. during the eighth year, while the last major repair was required in the 30th year. The assessee contended that the liability accrued over the period and that the expenditure could be provided for on the basis of reliable estimates. It also relied upon CBDT Circular No. 9/2014 concerning expenditure incurred for development of roads/highways under BOT agreements.
