Case Law Details
Meja Urja Nigam Pvt. Ltd. Vs ITO (ITAT Allahabad)
In this case, we have observed that there is a clear finding by ld. Assessing Officer/ld. CIT(A) that earnest money(EMD) given by contractors was forfeited by assessee on account of non completion of work and other miscellaneous recoveries were made from contractors. It is undisputed that power plant project of the assessee was under implementation during the impugned ay: 2013-14 and commercial production has not yet started during the impugned assessment year. We have observed that the Hon’ble Supreme Court in the case of Bokaro Steel Ltd. (Supra) passed a detailed order in which it has been held that if the receipt are inextricably linked to the project under implementation then the same are be treated as capital receipt which will go on to reduce cost of project.
In this case, it is undisputed contractors has given earnest money (EMD) to the assessee and since they could not complete the work in time the assessee has forfeited the amount, and also there were miscellaneous recoveries from contractors. The commercial operations of the power plant has not yet commenced during the impugned ay and the project was under implementation. Thus, the receipts are inextricably linked to the project and the ratio of decision of Hon’ble Supreme Court in the case of Bokaro Steel Ltd. (Supra) shall be applicable and hence we are of the view that these are capital receipt and they cannot be brought to tax and shall go on to reduce the cost of the project . Hence , we reverse the appellate order passed by ld. CIT(A) and allow the appeal filed by the assessee on this issue. Thus, Assessee appeal for ay: 2013-14 is allowed. We order accordingly.
FULL TEXT OF THE ORDER OF ITAT ALLAHABAD
These three appeals, two filed by Revenue and one filed by assessee, being ITA Nos. 80 & 177/Alld/2018 for assessment year’s(ay’s) : 2013-14 and 2014-15 respectively filed by Revenue , and ITA No. 175/Alld/2018 for ay: 2013-14 filed by assessee are directed against two separate appellate orders , firstly appellate order dated 21.12.2017 in appeal no. 01/ITO/R-II(2)/Alld/16-17 passed by learned Commissioner of Income-tax (Appeals), Allahabad , U.P. (hereinafter called “ the CIT(A)”) for ay: 2013-14 and secondly appellate order dated 13.03.2018 passed by learned CIT(A) in appeal number CIT(A),Allahabad/10258/2016-17 for ay: 201415. The appellate proceedings has arisen before ld. CIT(A) from two separate assessment orders dated 25.02.2016 and 15.11.2016 for ay: 2013-14 and 2014-15 respectively, both passed u/s. 143(3) of the Income Tax Act, 1961 (hereinafter called “the Act”) by learned Assessing Officer(hereinafter called “ the AO”) . We have heard both the parties through video conferencing mode through virtual court.
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