- (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-Board towards maintenance of colonies is a capital expenditure and not allowable under Section 37 of the Income Tax Act, 1961 -
(3.) A few facts relevant for the decision of the controversy involved as narrated in ITA No.420 of 2015 may be noticed. The respondent-assessee Board is engaged in providing housing to the general public in the State of Haryana. It filed its return of income on 5.10.2010 by declaring income at Rs. 69,46,65,250/- which was processed on 20.4.2011 under section 143(1) of the Act. The case of the assessee was selected for scrutiny and notice under section 143(2) of the Act was issued on 29.8.2011 to it. The assesee appeared before the Assessing officer. The Assessing officer asked for the details of maintenance of colonies. The assessee Board submitted its reply on 16.11.2012 and furnished the details of the maintenance of colonies. The assessee Board was called upon on 16.11.2012 to show cause as to why the expenditure claimed towards the maintenance of colonies be not capitalized as expenditure in the nature of capital expenditure. The assessee submitted its reply on 3.12.2012 stating that the expenditure incurred on maintenance of colonies should not be capitalized as the land is procured by it from the government agencies like HUDA, Municipal committees etc. for construction of Housing Board colonies and after construction of houses, these colonies are either handed over to concerned municipal committees or local authorities for future maintenance of estate services. It was also submitted that since Housing Board colonies at Charakpur (Gurgaon) and Narnaul did not fall within the municipal limits, the Board had to maintain these colonies. The Assessing Officer after considering the reply submitted by the assessee found the same to be not tenable and disallowed the expenditure to the tune of Rs. 3,25,96,429/- claimed as revenue expenditure under section 37 of the Act and held the expenditure as capital in nature on the grounds that the expenditure incurred was of enduring nature and will last for longer period; permanent assets were being created by incurring such expenditure and no income was being received against such expenditure vide order dated 14.1.2013 (Annexure A.1). Aggrieved by the said order, the assessee filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) allowed the appeal vide order dated 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.;