MBL Highway Development Co. Ltd. vs ITO Ward-16(3), Delhi

PER MANISH AGARWAL, AM :

The captioned appeals are filed by the assessee against two separate orders dated 28.11.2025 & 26.11.2025 of Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld. CIT(A)”] in Appeal No. CIT(A), Delhi-6/10328/2017-18 and CIT(A), Delhi-6/10305/2018-19 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of different assessment orders dated 12.12.2017 & 19.12.2018 both passed u/s 143(3) of the Act pertaining to Assessment Years 2015-16 & 2016-17 respectively.

Since the issues involved in both the captioned appeals are common, therefore, they were heard together and accordingly, adjudicated by a common order.

First we take the appeal of the assessee in ITA No. 782/Del/2026 for Assessment Year 2015-16.

Brief facts of the case are that assessee company was incorporated as Special Purpose vehicle (SPV) for built and operate the toll road and accordingly, constructing a State highway on BOT basis. As per the contract awarded to it from Madhya Pradesh Road Development Corporation Ltd. (“MPRDC”), during the year under appeal construction of road in sector Seoni-Katangi to Maharashtra Border section of State Highway-54 of Madhya Pradesh on BOT basis was under progress and therefore, no income was accrued as under BOT project scheme where the revenue comes from toll charges once the project is completed and highway is opened for the public commutation. The assessee filed its return of income on 27.02.2015, declaring NIL income and cost incurred on the construction of Toll road was taken to Work in Progress (WIP). The case was selected for limited scrutiny under CASS. The AO observed that as per information, assessee has certain contractual receipts amount to INR 1,70,27,934/- from its principal MPRDC and no income is offered in the return of income filed. The AO asked the assessee to reconcile the same with the financial statements based on which return of income was filed. In reply, assessee submits that since the construction of State Highway under BOT project was in progress and thus no revenue could be recognized and it is to be recognized once the toll road is completed and toll operations started. It was further stated that the amount appearing in the 26AS statement as paid by MPRDC was the reimbursement of various expenses incurred towards development of site for toll road construction however, the AO has not accepted the submission of the assessee and made the addition of INR 1,75,27,934/- being the gross amount of receipts (net of TDS of INR 5 Lakhs).

Against the said order, the assessee filed an appeal before Ld. CIT(A) who vide impugned order dated 28.11.2025, confirmed the order of AO and dismissed the appeal of the assessee.

Aggrieved by the said order, the assessee is in appeal before the Tribunal wherein all the Grounds of appeal taken by assessee are with respect to the addition of INR 1,75,27,930/- treating the same as contract receipt of the assessee ignoring the fact that the said sum was received as reimbursement of expenses incurred by the assessee towards development of the work site in terms of the concession agreement awarded to it as per which the same has to be compensated by the awarder.

Before us, Ld. AR submits that assessee has been awarded a contract in terms of the Concession Agreement entered into between M/s. MBL Infrastructure Ltd. and MPRDC, the assessee company is being incorporated as SPV to build and operate the toll road in terms of concession agreement dated 08.12.2011. As per Article 11.2 of the Concession Agreement, provided that the assessee has to shift the utility including electrical fitting etc. to other appropriate location and all the expenses incurred is to be reimbursed by the concessionaire i.e. MPRDC. Accordingly, the assessee has incurred expenses on the shifting of the utilities available at the work site and all such expenses were reimbursed by the MPRDC. However, MPRDC has deducted the TDS on the payments made which stood credited by the assessee in Work in progress account where all the cost incurred on the construction of Toll roads is debited. Thus, the assessee has reduced the total cost by the amounts so reimbursed to it. For this ld.AR drew our attention to the fact that in preceding assessment years, reimbursement of similar nature was made by the MPRDC which was reduced from the cost of WIP and which was accepted by the department and no doubts were raised by the AO in the order passed u/s 143(3) of the Act. He thus, prayed that the additions so made be deleted.

On the other hand, Ld. Sr. DR for the Revenue submits that there was a difference between the amount appearing in 26AS statement and amount of reimbursement reduced by the assessee. He further submits that these were the contract receipts which were not disclosed in the return of income and therefore, he requested for the confirmation of the order of the lower authorities who has rightly treated the same as income of the assessee.

Heard the contentions of both the parties and perused the material available on record. It is observed that assessee was awarded the work for shifting of electrical utility cables etc. available alongwith State Highway constructed by the assessee to M/s. R.S. Electricals & Company. During the year under appeal, M/s. R.S. Electricals & Company had raised a bill dated 17.03.2014 which was verified by the Chief Engineer, MPRDC, Bhopal as third running bill on 15.05.2014 and as per the contractual obligation provided sin clause 11.2 of the Concession agreement, the principal i.e. the MPRDC has paid a sum of INR 1,75,27,930/- after deducting the TDS of INR 3,40,559/- to the assessee as reimbursement. Copy of the bill is placed at pages 347 to 353 of the Paper Book. The receipts were duly credited in the books of accounts maintained by the assessee as placed at page 356 of PB. The amount is credited in WIP A/c and the necessary copy of the ledger accounts are placed at pages 347 onwards.

Before going further, we first refer the Clause 11.2 of the Concession Agreement which reads as under:-

As per clause 15.1 of the Concession Agreement, the commercial operation date is when route is completed and Completion Certificate is issued by Competent Authority. The relevant clause is reproduced as under:-

As per Clause 27.1.1 of the Concession Agreement, the assessee is entitled for collection and appropriation for tell fee which is reproduced as under:-

As could be evident that as per Clause 11.2, the principal i.e. MPRDC has an obligation to reimburse all the expenses incurred by the assessee for shifting of the utility available at the work site and assessee is entitled for collection of Toll charges only after commencing of commercial operations after getting Completion Certificate from the Competent Authority. Therefore, during the year under appeal, since the construction of road was under progress, the assessee was not entitled to receive any income from the operation of toll road. However, in terms of Clause 11.2, the assessee has received reimbursement of expenses incurred on the shifting of electrical lines for which all the necessary evidences were filed before the lower authorities which includes running bill submitted by the sub-contractor and duly verified by the Chief Engineer, MPRDC and corresponding payments received by the assessee and the ledger accounts indicating the incurring of expenses and reimbursement thereof, as filed placed before the lower are placed at pages 347 to 357 of Paper Book. It is further observed that expenses of similar nature were incurred by the assessee in preceding assessment year which were reimbursed by MPRDC and were reduced from the total cost of WIP which stood accepted by the AO in the order passed u/s 143(3) of the Act for AY 2015-16, copy of which is placed before us.

In view of the overall discussions made herein above and considering the facts and circumstances of the case, we are of the considered opinion that the amount received by the assessee as reimbursement in terms of the Concession agreement cannot be held as income from contractual activity and in fact it is reimbursement of expenses which were incurred by the assessee under obligation as per Concession Agreement. Further the Concession Agreement itself provides a clause No. 11.2 according to which the principal i.e. the MPRDC would reimburse the cost of shifting of utilities and therefore, whatever cost was incurred by the assessee, the same has to be reimbursed by the principal without any element of income accrued by the assessee. In view of these facts, we hold that no addition could be made for this reimbursement amount in the hands of the assessee, and accordingly the same is hereby, deleted. All the grounds of appeal of the assessee are thus allowed.

In the result, appeal of the assessee is allowed.

Now we take the appeal of the assessee in ITA No.783/Del/2026 for Assessment Year 2016-17.

In the above-mentioned paras, we have allowed the appeal of the assessee in ITA No.782/Del/2026 for Assessment Year 2015-16, where under identical circumstances addition made towards the reimbursement of expenses incurred is deleted and allowed all the Grounds of appeal of the assessee. In the instant appeal also, both the parties fairly agreed that the facts are similar to the facts in ITA No.782/Del/2026 for AY 2015-16 except difference in the figures of addition made, thus, by following the aforesaid observations made in ITA No.782/Del/2026 for AY 2015-16 which are Mutatis Mutandis applicable to the facts of this captioned appeal filed, the addition made is hereby deleted. Accordingly, all the Grounds of appeal raised by the assessee, are allowed.

In the result, appeal of the assessee is allowed.

In the final result, both appeals of the assessee in ITA Nos. 782 & 783/Del/2026 for Assessment Years 2015-16 & 2016-17 respectively, both are allowed.