TaxTMI 
TaxTMI 
2012 (8) TMI 983
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.... in law, the CIT(A) failed to appreciate the reality of the situation that liabilities actually arose during the year and the fact that the provision/liability was actually existing as on 31.03.2004 and were determined on the basis of technical assessment made by project manager upto acceptance of plant by the clients. 3. On the facts and in the circumstances of the case and in law, the CIT(A) erred in withdrawing credit for TDS amounting to ₹ 3,384,649/- by wrongly interpreting the provisions of Section 199 of the Income Tax Act. 4. On the facts and in the circumstances of the case and in law, the CIT(A) erred in disallowing software expenses of ₹ 5,926,204 and treating the same as capital in nature. 5. On the facts and in the circumstances of the case and in law, the CIT(A) erred in disallowing deduction u/s 80HHB of ₹ 3,405,207 (wrongly taken as ₹ 3,755,005/- by AO) on the ground that the company has a business loss by treating the income and miscellaneous receipts as income from other sources, and by excluding the profit on foreign exchange translation from business income. 6. On the facts and in the circumstances of the case and in law, the CIT(A) e....
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.... fully in compliance with the technical requirements of the Plant. The company had received an interim claim from Uhde, Gemany towards compensation for the efforts put in by them as well as for the various purchases made by them on behalf of the company such as: Claim for inspection carried out on our Behalf (Euro 29376) : 1,615,700 Claim for Purchase of items on our behalf (Euro 29707/-) : 1,633,900 Site Procurements and site services rendered (Euro 62000) : 2,790,000 Fabrication and supply of Pipe supports (US $ 168, 252) : 7,571,300 Claim for Transport cost in Europe (Euro 115, 000) : 6,325,000 Claim for issue rel. to safety Re-engineering : 1,100,000 Claim for proc. Of Instrumentation cables, Bulk materials Analyser etc. (Estimate Euro 100, 000) : 5,500,000 Further, in order to comply with certain technical requirements of the Plant, company had to additionally procure a new Heater, Dosing unit and Vibration Switches. The additional expenditure on this account was expected to be to the tune of ₹ 4,200,000. There had been delays in procurement and supply of various items as well as delay in completing the plant mechanically as per schedule guaranteed. The ....
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....5 ) The contract was for phase-Il of Caustic Soda Plant expansion in Andhra Pradesh and imported and indigenous supplies for cell elements. The scope of services included engineering services and supervision services for assembly of the plant. The company had used the services of a foreign delegate from M/s Uhde Nora who had visited the ASL site for site supervision for commissioning of the plant. The bill for the said services was not received as on 31.03.2004, hence a provision of ₹ 0.54 mio. was made for the same. Since the submission says that the final bill is yet to be ascertained, no finality can be arrived at, hence, the provision cannot be allowed. d) Larsen & Toubro Ltd. (Rs. 2,220,433) The contract was for supply of truck loading machines. As on 31.03.2004, some supplies had not yet been effected, hence the cost of the same was provided for at ₹ 1.45 mio. A further provision was made towards procurement hours of ₹ 21 ,000 and towards sub contracting costs of ₹ 700,000 and towards other expenses of ₹ 49,400. Thus a total provision of ₹ 2.22 mio. was made as on 31.03.2004. Since the final figure arrived as on 31.03.2004 has been asc....
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..... The provision was based on the estimates made by the Project Implementation team. Since the description talks about estimates, no finality can be said to have been arrived at, hence, cannot be allowed. h) Uhde GmbH - (66-6252) ₹ 23,548,956 The company had entered into a contract for rendering engineering services for Qafco- IV Ammonia Urea project at Qatar. The scope of detailed engineering services for the above project was completed as on 31.03.2004, but the plant was yet to be commissioned by Uhde GmbH. Also the final documentation was expected to be completed by the company only by July 2004. In the meantime, the company had received an interim claim from Uhde, Germany pointing out deficiencies / defects in the services rendered and claiming compensation from the company for the defects amounting to ₹ 45.9 mb. However, contractually the liability of the company towards repair, modification, and replacement of any equipment arising out of faulty or insufficient engineering was limited to a maximum of Euro 330,000 which was 10% of the contract value. In addition to the above, for wrong or deficient engineering, the company was obligated to carry out necessary eng....
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....377; 200,000 Civil cost for Compressor - ₹ 500,000 Other civil cost for Pipe support - ₹ 450,000 KSB Pump - supervision - ₹ 200,000 Jackson - erection supervision - ₹ 300,000 Total - ₹ 1,950,000 Engineering services 208 hours : ₹ 300,000 Site expenses : ERs. 200,000 Miscellaneous expenses at site : ₹ 183,000 Total Rs. : ₹ 683,000 The provision for escalation of costs looks to be definite, hence, we feel, can be allowed. k) VVF Limited- (Rs. 2,694,733) The company had entered into a contract with VVF Limited for engineering, procurement, inspection, expediting and construction supervision services for their 60,000 TPA Fatty Alcohol Plant at Taloja. This contract was expected to result in a loss considering the expected cost till the completion and contract revenue. Till 31 .03.2006 the company has suffered a loss of ₹ 1 1,649,443 which is much higher than the initial estimation of ₹ 9,298,588. Thus, the loss of ₹ 9.29 million has already crystallized as on 31.03.2004 (cost booked = ₹ 42,687,788 less proceeds realized = ₹ 33,389,200). Of the above loss ₹ 6,603,855 has been already....
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..... The set off of TDS would arise only when, the income results in profits. Therefore, it is all the more clear that the income whether profit or loss, impregnated in the value of working in process is finally summed up to be the profit/loss of the contract which is answerable to the assessment to be made on the assessee. Therefore, in every assessment year, even though the final result is, ascertained only on the completion of the project, an element of income is latent in the yearly working result. The distinction between the above conceptual profit and the ultimate de facto assessment of profit is because of the fine distinction existing between "income" and "profits". Therefore, in the facts and circumstances of the case, the provisions of law contained in s. 199 do not stand in the way of the claim made by the assessee-company for credits in respect of TDS made during the relevant previous year. As such, it is our finding that the AO should give credit for the TDS amounting to ₹ 2,28,37,491. This issue is, therefore decided in favour of the assessee". On the other hand the Senior Counsel conceded that in the assessee's own case in assessment year 2003-04, the coordinate B....
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....(A) observed, "The AO has noted that the business of the assessee includes interest, profit on foreign exchange and misc. receipts. Out of this, interest income and misc. income fall under the head Income from other sources' and hence not eligible for deduction. Regarding foreign exchange translation. AO noted that the assessee has failed to establish that the said exchange gain/translation relates to receipts from projects against which convertible foreign exchange received during the year for which no details or documentary evidence have been filed. Hence, after exclusion of these income no deduction was allowed since the profit showed the negative figure. Before me, it has simply been stated that the projects undertaken outside India are eligible for deduction u/s 80HHB without furnishing any details as was the position before the AO. Regarding interest income and misc. receipt, it was stated that the interest income as emanated from the surplus funds of the Company's business and hence should be treated as profit derived from assessee's business. However, in view of the judgments of Hon'ble courts as relied upon by AO and also decision of Apex Court in case of Pandian Chemi....