TaxTMI 
TaxTMI 
2013 (3) TMI 670
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..... Its main business is pavement of roads on contract basis and executing works on Build, Operate and Transfer (BOT) basis. For A.Y. 2006-07, the assessee-company filed its Return of Income (ROI) on 27.11.2006 declaring total income of Rs. 2,83,17,300/. The regular assessment was completed on 18.12.2008 at Rs. 4,61,51,149/- when computed under the normal provisions of the I.T. Act, 1961 ('the Act' for short). In doing so the A.O. has added the incomes: (i) on account of disallowance of depreciation Rs. 819074/- (ii) on account of disallowance of advances Rs. 421929/- written off (iii) on account of disallowance of consultancy charges u/s 40(a)(ia) Rs. 1346125/- (iv) on account of disallowances of expenses in respect of Sign Board u/s 40(a)(ia) Rs. 13082379/- Total Additions = Rs. 15669507/- 3. Being aggrieved, the assessee-company preferred appeal before ld. CIT(A), who has allowed a part relief. Against which the revenue is aggrieved and it has raised the following four grounds in its of appeal:- "On the facts and in the circumstances of the case, the ld. CIT(A) has erred in: 1. Deleting the disallowance of depreciation of Rs. 8,19,074/- made by the A....
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....which to also been confirmed and sustained without appreciating the complete fact brought on the record various cases law which is bad in law unjustified. "It is submitted that addition so made deserve to be deleted in view of the decision of Hon'ble ITAT Jaipur Bench Jaipur in the case of Jaipur Vidyut Nigam Limited Vs. DCIT 123 TTJ, Jaipur and recent decision of Special Bench ITAT Vishakha Patnam as that the shifting charges freight of plant so paid by the appellant company not remain outstanding as on 31.03.2007 (not payable as on 31.03.07) therefore it is respectfully submitted the addition so made deserve to be deleted." 2. That on the fact of the circumstances of the case as well as in law the Ld. A, O. grossly erred in making an addition of Rs. 57,46,311/- being 10% of total expenses of Rs. 5,74,63,117/- which has been incurred by the appellant company during the course of execution of BOT project at different places on the allege ground that some of the expenditure so incurred in cash is not completely verifiable, CIT (A) reduced expenses by adopting 5% of the total expenses resulted the confirming of addition of Rs. 27,93,477/- out of total addition of Rs.....
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....e of the assessee is that the assessee had purchased vehicles and these were ready for use during the year and that it does not matter if the assessee really used them or not. In this regard reliance was placed on numerous decisions to assert that if the asset is 'ready for use' it has to be treated as 'used' for depreciation purposes. Some of the decisions are enumerated below:- i) CIT Vs. Udaipur Distillery Co. Ltd. (2004) 134 Taxman 16 or 186 CTR 39 or 268 ITR 451; ii) M.M. Enterprises Vs. ACIT 92007) 12 SOPT 372; iii) NATCO Exports Vs. DCIT (2003) 85 ITD 445; iv) Packwell Printers Vs. ACIT (1996) 59 ITD 340; v) Capital Bus Services P. Ltd. Vs. CIT (1980) 123 ITR 404; vi) CIT Vs. Refrigeration & Allied Industries Ltd. (2001) 247 ITR 12 (Del). vii) CIT Vs. Air Travel Enterprises India Ltd. (2004) 265 ITR 537 or 136 Taxman 194; viii) Rajan H. Shinde Vs. DCST (2006) 103 ITD 360; ix) SIV Indsutries Ltd. Vs. DCIT (2008) 306 ITR 114; x) DCIT Vs. Finolex Cables Ltd. (Pune) 114 TTJ 785; xi) CIT Vs. Southern Petrechemical Industries (2008) 301 ITR 255; xii) CIT Vs. Premier Industries Ltd. (2008) 170 Taxman 407; xiii) Goetz (India) Ltd. Vs.....
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.... transacted in the contract business of infrastructure facility operated/ constructed by the company. The A.O. has doubted the very basis of these expenses so claimed for want of proof of their very advancement as bills/ vouchers or any other evidence to prove them were not produced before him. 7.1 On the contrary, ld. CIT(A) has allowed this claim of the assessee and the revenue has challenged this finding. Both the parties have reiterated their old stand taken on this issue. As per the details available on record the assessee has claimed to have advanced monies in respect of its trading business to the following parties:- a) Gem Management Services India P. Ltd Hoshangabad project Rs. 4 ,664/- b) Brij Mohan Babbar, Hoshangabad Rs. 865/- c) Mehar Chand Tehlani, Hoshangabad Rs. 3,204/- d) Concord Construction, Indore Rs. 4,256/- e) Shree Cement Ltd., Beawar Rs. 20,420/- f) Bhardawaj Transport Co. Mathura Rs. 4,00,000/- 7.2 We have found that the assessee was having day to day business transactions with the above parties. The old balances were being carried over from the earlier years and the management had decided to write them off when the chances of their ....
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....made during the period relevant to A.Y. 2009-10. So according to the assessee when no payment has been made during this year and no adjustment entry resulting into credit of this amount in the hands of payee has been passed. It was stated that as per the agreement the payee had to review maintenance of roads and give an inspection report to M.P. Rajya Sethu Nirman Nigam Ltd. (MPRSNNL) who, in turn, used to send the same to this assessee for removing defects, if pointed out. With reference to clause 20.4 of this Agreement, it was stated that remuneration cost and expenses are to be borne by this assessee. Thus, no direct payment has been made. But the A.O. was not satisfied and treated these payments to have been made in violation of the provisions of Section 194 J of the Act. 8.1 But, the ld. CIT(A) is satisfied that on the first amount TDS had been deducted in the year of payment and the regarding second amount he has agreed that the assessee is not liable to make this payment as the other company namely, MPRSNNL is liable to make the payment according to the agreement between the parties. Accordingly, he has deleted both the additions so made by the A.O. 8.2 Before us....
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....progress of the BOT-Hoshangabad. Further purchases are found to have been made from M/s M.B. Signs and Safely Systems Pvt. Ltd. of table-sign-boards and a sum of Rs. 1,28,66,535/- has been capitalized in the Hoshangabad BOT project. The assessee-company has produced the complete addresses of these parties alongwith their PANS, Sales Tax Registration Numbers and TAN-numbers. It is also noticed that the goods were supplied at concessional rates against Cforms. As per the assessee entire material required and labour charges for sign-boards were borne by the payee parties and there is no workcontract between the assessee and those parties. Thus, the assesseecompany has purchased goods worth Rs. 1.28 crores by way of invoices, charging sales-tax. The ld. CIT(A) has given his finding as under :- "9.3 I have considered the contentions of the appellant as well as assessment order. (i) It is seen that as per details recorded on page 14 to 15 of the assessment order, most of the bills are for fabrication or purchase of table sign boards or Retor reflective sign board. There is nothing on record to show that these payments are not for 'contract for sale' but are for &#....
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....nt has also contended that ITO, TDS has treated assessee in default u/s. 201 for expenses on sign boards, so whether appellant can be penalized twice. However as the present issue concerned is regarding deduction u/s. 40(a)(ia), above contention is not considered here as they operate in different sphere and issue, under consideration has been discussed on merits above u/s. 40(a)(ia). (iii) As regarding the appellant's contention that provisions of sec. 40(a)(ia) are applicable to only 'payable' amount and not on 'paid amount', this issue has been referred to Special Bench, hence this contention is not adjudicated as otherwise also, the deduction has been allowed. (iv) The appellant has further contended that an amount of Rs. 1,28,66,535/- has been capitalized hence it is not covered u/s. 40(a)(ia). In this context, the Profit & Loss account and computation of income was examined. It is seen that appellant has "debited operating expenses of Rs. 23.74 crores which have been bifurcated in 2 parts. One for BOT projects (2 in number) which were in progress which were capitalized and balance amount was on account of 4 other BOT projects which were already ope....
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....e other hand, the A.O. has examined this issue in depth and has found that this is nothing but a 'works-contract' between the assessee and the payee. But still we are of the opinion that this issue has not been correctly investigated into and examined by the A.O. This Tribunal being the final fact-finding body, it becomes imperative to get full and final facts of this issue. For that purpose, we need to restore this issue to the file of the A.O. for fresh adjudication as per law and keeping in view the relevant Circular and the precedents which are available. Therefore, we restore this issue back to the file of the A.O. with the direction that he shall decide this issue afresh after according proper opportunity of being heard to the assessee. Ground No. 4 of the revenue's appeal is therefore, allowed for statistical purposes. 10. The grounds No. 2 and 4 of revenue's appeal in ITA No. 207/JU/2012 (A.Y. 2007-08) have already been dismissed while deciding appeal for A.Y. 2006-07, as above. 11. Ground No. (1) of this year is in relation to sale of tippers. The facts of this ground are that the assessee had sold Tippers and disclosed a profit of Rs. 11,94,554/-. The tippers ....
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....ing to the circular No. 14 (XL-35) dated 11.4.1955 and circular No. FN-81/27/65/IT(B) dated 18.5.1965 held that claim made by the appellant is allowable as per above circulars. They cast a duty on the A.O. to collect only the legitimate tax. Similarly, in case of Gyanchand Batra Vs. ITO Jaipur in appeal No. 9/JP/2010 dated 13.8.2010, it has been mentioned after considering the decision in the case of Goetz (India) Ltd. that the claim was made before the CIT(A) u/s. 54F who has entertained the same. So assessee is entitled for deduction u/s. 54 of the Act. The appellant further relied upon decision in case of A.C.W.T. Vs. Kumari Raghini Singhi 120 TTJ 1116 and Moser Baer India Ltd. Vs. JCIT 295 ITR (AT) 148. In view of above, it was mentioned that the addition made by the A.O. amounts to double taxation. The assessee's claim is bonafide claim and the assessee is entitled to legitimate benefit. The law does not permit taxation on item of receipt which cannot be taxed as per law. 4.3 I have considered the contentions of the appellant as well as assessment order. The claim was made by the appellant during assessment proceedings for allowance of excess profits offered to....
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....part from the reasoning given by ld. CIT(A) as above, we are of the considered opinion that Goetz India's decision (supra) debars the A.O. from giving any relied if not sought but authorizes the Tribunal to undo any injustice so done. Therefore, we confirm the impugned deletion of the addition which has been made only on account of pedantic reasons. Accordingly, we dismiss ground No. (1) of revenue's appeal. 14. The facts of ground No. (5) of revenue's appeal and Ground No. (2) of assessee's appeal for A.Y. 2007-08 are that the A.O. has accepted the disclosed turnover and has also accepted the G.P. Rate declared by the assessee. The A.O. has disallowed unverifiable cash operated expenses claimed by the assessee. The A.O. has not pointed out any specific suppression of receipt or any other defect in the books of account. The A.O. has also not given reasons as to how the books are incorrect and incomplete on the basis of which correct income cannot be deduced except for the above reason. The A.O. has disallowed 10% of the cash expenses incurred. Accordingly the ld. CIT(A) has not approved rejection of the books of accounts. The cash payments are related to Forejpur -Fazi....
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....s 1363272.00 143-144 Plant shifting charges 771850.00 145-146 Site expenses 1283040.00 147-148 Staff welfare expenses 2353046.00 149-151 Repair to plant and machinery 1290886.00 152 Hire charges 2234418.00 153-154 Vehicle expenses 4667256.00 155-157 Two wheeler expenses 729352.00 158 Royalty expenses 2568073.00 159-160 Postage and telegram exn 1061860.00 161-162 Printing & stationery 321562.00 163 Travelling expenses 902556.00 164-165 Total -A 35079364.00 Total-B - Salary & wages 28588663.00 Total A+B 63668027.00 Sir, on perusal of the above it would observe that aforesaid cash expenses ranges from Rs. 100/-, Rs. 500/-, Rs. 2000/-, Rs. 5000/- and above Rs. 10000/- in respect of PMGSY project of Mandsaur. Nimbahera, Neemuch, Udaipur head office, Jodhpur and BOT project of Punjab. Detail in respect of expenses incurred above Rs. 10000/- headwise appear at P.B No. 124 Rs. 6641061/- which includes Government payment, royalty expenses, electric expenses, post and telegram aggregating to Rs. 1865462/-. That aforesaid c....
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.... explain the expenditure supported by bills and vouchers in respect of various PMGSY project. Mandsaur project Rs. 1149530/- Neemuch project Rs. 4755916/- Produced wages register to the extent of Rs. 23287937- in respect of Nimbahera and wages register of Hoshangabad BOT project. Total of these bills, vouchers and wages register produced works out to Rs. 9512038/- 9. A,O at page No. 55 out of total cash expenditure Rs. 57463117/- excluded Rs. 9512038/- and arrived that expenses to the extent of Rs. 47951079/- are not verifiable. 10. At page No. 56 A.O. asked why provision of section 145(3) may not be invoked and make addition being 10% of total expenditure Rs. 57463117/-. 11. That at page No. 59, para 7, A.O. mentioned that wages register produced in respect of 1 & 2 site remains absent of signature and thumb impression of workers for the period 16/5/2006 to 31/5/2006 amounting to Rs. 29409/- and other site for the same period amounting to Rs. 27458/-. On this point Accountant explained that this wages sheet pertain for initial period. 12. At page No. 60 of A.O. order, appellant bring on record G.P rate 15.74% as compared to last year G.P. rate 14.15% an....
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....s of Rs. 41547096/- and in respect of expenses pertain to BOT project of Rs. 12674767/- not provided any separate credit on the alleged ground that the expenses of capitalize is not fully proved. Alternative submitted if the claim is accepted then disallowance only 10% as proposed. B. This ground of addition of Rs. 5746311/- dealt with by the CIT(A) at page No. 23 to 32 vide para No. 9.1 and on perusal of the same, Respected Sir, more or less CIT(A) as a finding of fact accepted the fact stated before the A.O. referred supra. CIT(A) make reference to FBI tax, cash expenses of Rs. 12674767/- being capital expenditure on BOT project, accepted the G.P rate and ultimately at page No. 30 middle paragraph CIT (A) mentioned; That the rejection of books of account u/s 145(3) is not upheld. However, the disallowance made on cash payment is decided for specific addition. CIT (A) at page No. 31 mentioned as follows: In view of above that expenses of royalty of Rs. 1593560/- needs to be excluded out of the amount of Rs. 57463111/- leaving cash expenditure of Rs. 55869557/-. It is seen that the appellant has shown gross profit rate of 15.74% in respect of work other than unit....
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.... expenditure in cash could not rule out, neither there is a prohibition under the Act as not to incur cash payment. 8. That Id. A.O accepted the receipt shown, neither it is a case of revenue that assessee book bogus expenditure, inflated expenditure and some of the expenditure so incurred at all not related and pertain to business activity. 9. Sir, in case of payment to workers some time having regard to prevailing circumstances and apprehends and fear in the mind of workers they refuse to sign the wages sheet and put their thumb impression in as much as the Id. A.O. only on the basis of wages sheet of a particular place the payment of which represent about Rs. 50,000/- cannot arrive at a conclusion that the entire payment pertain to wages is not verifiable. 10. Sir, now, attention is being invited to the decision of Hyderabad Bench of ITAT in the case of Vishal Infrastructure Ltd vs. Asstt. Commissioner (2007) 104 ITD 537 wherein even the Id. Member at para No. 5.10 mentioned that even in Government offices most of the expenditure which is of petty in nature and which involve casual labour can be expected to have self made voucher, this voucher can only be justify throug....