TaxTMI 
TaxTMI 
2016 (3) TMI 640
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....s & law. 2. On the facts and in the circumstances of the case and in law, the learned CIT(Appeals) has erred in law by deleting the addition of Rs. 6,51,62,584/-made by the AO being 10% of the turnover. The Ld CIT(A) did not appreciate the fact that the book of accounts of the assessee were rejected by the AO u/s 145(3) of the IT Act after pointing out specific defect. 3. On the facts and circumstance of the case in law the Ld CIT(A) has erred in deleting the addition of Rs. 5,20,56,831/- made by the AO u/s 40(a)(1) of the IT Act when no tax was deducted at source on commission paid in India to foreign bank." B. I.T.A. No. 53/Del/2011 (A.Y. 2007-08): "That on the facts and circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of Rs. 5,52,49,559/- made by the Assessing Officer u/s 40(a)(ia) of the I.T. Act, 1961. C. I.T.A.No. 1815/Del/2011 (A.Y. 2008-09): "That the Ld. CIT(A) has erred in law as well as on facts and circumstances of the case in deleting ht addition of Rs. 4,77,71,123/- made by the Assessing Officer u/s 40(a)(ia) of the I.T. Act, 1961. 3. Briefly stated, the facts of this case are: during the p....
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....ed the bank guarantee commission paid by the assessee company as 'interest' on which, no advance tax deduction has been made in contravention to the provisions of Section 41(1)(a) of the Act and thereby disallowed the payment made by the assessee on account of bank guarantee commission. 4.2 The Assessing Officer assessed further income of the assessee at Rs. 11,72,19,415/- (for the Assessment Year 2006-07), at Rs. 17,00,240/- (for Assessment Year 2007-08) and at Rs. 1,38,97,400/- (for Assessment Year 2008-09). 5. The assessee carried the matter before Ld. CIT(A) who has allowed the appeals vide impugned orders. Feeling aggrieved, the Revenue has come up before the Tribunal by way of present appeals. 6. We have heard both the authorized representatives, perused the material on record in the light of facts and circumstances of the case and orders of authorities below. 7. Grounds No.1 and 2 of I.T.A.No. 3834/Del/2009 (A.Y. 2006-07): Undisputedly, the assessee has been adopting mercantile system of accounting which has been accepted by the Revenue for completion of assessment u/s 143(3) of the Act qua the Assessment Years 2001-02, 2002-03, 2003-04, 2004-05, 2005-06, 2007....
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.... as per law and relied upon the order passed by the Assessing Officer to support of his argument. 7.4 However, on the other hand, Ld. A.R. contended that when in assessee's own cases, factum of maintaining books of accounts in accordance with AS-7, has been duly accepted by the revenue in Assessment Year 2001-02 to 2011-12 (except Assessment Year 2006-07), the question of adopting best judgement assessment by the Assessing Officer does not arise. The assessee company on the basis of books of accounts maintained in the ordinary course of business in accordance with the accepted accounting method showing different profits in percentage, the Assessing Officer has arbitrarily rejected the books of accounts and calculated the profits @ 10% before whom the complete books of accounts were produced. Even rule of consistency has not been followed by the Assessing Officer in passing the impugned order. 7.5 However, on the other hand, Ld. CIT(A) had deleted the addition of Rs. 6,51,62,584/- made by the Assessing Officer being 10% of the turnover by adopting best judgement assessment u/s 145(3) of the Act. 7.6 Now, the first question arises for determination is, "as to whether Ld. CIT....
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....n for incoherent recognition of revenue and the profit of the different projects has been varied from year to year without any basis, 2. discrepancy in accounting of the closing inventory of bridge assembly and 3. no basis for allocating contract project overhead expenses" vi) that perusal of the project accounts lying at page 110 of the Paper Book, makes it clear that the consistent profits have been estimated in the project of Ballimella, Dahej, Barh-NTPC, NTPC-Singrauli RSA-2 and RSA-2 New, Kobra ATPS, Patratu etc. and the accounts of Kobra ATPS and Konaseema project prepared as per AS-7, which has been duly accepted by the Revenue during the preceding year while completing the assessment u/s 143(3) of the Act. Furthermore, the assessee company had come up before the Assessing Officer qua the alleged discrepancy in closing inventory leading to different profits of different projects only due to typographical error of the auditors and the said typographical error has been rectified vide certificate of auditors lying at page 447 of the Paper Book. When the different allocation of projects in the head of expenses to various projects has been brought on re....
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....of direct project overhead cost while accounting the project cost and because of these discrepancies the appropriate profit of the company cannot be ascertained from the books of accounts and hence the same has been rejected by invoking the provisions of section 145(3) of Act and the income was assessed @ 10% of the gross receipts." 7.8 So, in view of what has been discussed above, when error committed by the Assessing Officer because of wrong appreciation of percentage completion method, has been rectified by Ld. CIT(A), no ground is made out to interfere into the findings returned by Ld. CIT(A). Hence, grounds No.1 & 2 are determined against the Revenue. 8. Ground No.3 of I.T.A.No. 3834/Del/2009 (A.Y. 2006-07) and Ground No.1 of I.T.A.Nos. 53 and 1815/Del/2011 (A.Yrs. 2007-08 & 2008-09): Undisputedly, assessee company claimed Rs. 5,20,56,831/-, Rs. 5,52,49,559/- and Rs. 4,77,71,123/- on account of bank guarantee commission having been paid to a foreign bank on behalf of holding company of the assessee qua Assessment Years 2006-07, 2007-08 & 2008-09 respectively and the same have been disallowed by the Assessing Officers u/s 40(a)(1) of the Act because of non deduction of....
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....of the Act defines the 'interest' paid in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized. On the other hand, 'commission' is a specified sum in terms of percentage to be paid to an agent or salesman for services rendered. Since in this case, VTB Bank, Russia got bank guarantee issued by Canara Bank by tendering its own counter guarantee and charged the commission thereon irrespective of the fact that the bank guarantee has been utilized or not, we are of the considered view that by any stretch of imagination even the bank guarantee commission cannot be treated as interest as decided by the Assessing Officer. 8.5 Now, the next question arises for determination is, 'as to whether assessee company was liable to deduct the tax at source on the bank guarantee commission paid to VTB bank u/s 195 of the Act'. 8.6 In order to find out the answer to the aforesaid question, first of all, it is required to be decided, 'as to whether sum payable on a....