TaxTMI 
TaxTMI 
2016 (4) TMI 388
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....wards preparatory work. 2. That on the facts and circumstances of the case as well as in law the CIT(A) has erred in deleting the disallowance of Rs. 240.52 lacs on the issue of Work in Progress expenses. 3. That on the facts and circumstances of the case as well as in law the CIT(A) has erred in deleting the disallowance of Rs. 49.31 lacs made by the A.O on account of prior period expenses. 3. The assessee company is a Government of India Undertaking under Ministry of Urban Development and is engaged in the business of execution of various types of civil/electrical/infrastructural/housing and environmental projects all over India and abroad pertaining to State/Central Governments/Public Sector Undertakings. The assessee company is en....
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....isallowed two third being Rs. 240.52 lacs and made addition to the income of the assessee towards the cost of preliminary expense i.e. expenditure on preparatory work. 5. The assessee also claimed in its Profit and Loss Account, Rs. 76.27 lacs on account of prior period expenditure. The same was disallowed to the extent of Rs. 49.31 lacs related to the payments as piece rate of labour and made and addition by the Assessing Officer. 6. The assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal, thereby allowing above mentioned disallowance made by the Assessing Officer in favour of the asssessee. The CIT(A) held that since the preparatory expenses either did not pertain to any particular project or were incurred prio....
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....s the main source of income of the assessee company, the expenses incurred in general on these projects commonly debited to the profit and loss account. 9. The Ld. AR submitted that the expenses disallowed by Assessing Officer aggregating to Rs. 49.31 lacs are on account of payment to subcontractors in lieu of work performed by them. These expenses pertain to the work done by the subcontractors beyond the original work order issued to them (sub-contractors). The expenditure was crystallized in the year in which the bill was submitted by the sub-contractor and clients have certified and accepted the extra work/claims by the sub-contractor. The assessee company raised bill upon concerned customer (i.e. PSU/Ministry/other government agency) o....
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....ited and these were disallowed but allowed by CIT(A) in Assessment Years 1986-87, 1987-88, 1988-89, 1989-90, 1990-91, 1991-92, 1992-93 and 2002-03. 11. The Ld. AR further submitted that in view of judgment of Hon'ble ITAT in the case of M/s Sudarshan Overseas Ltd., if any expenditure has to be disallowed, the corresponding income also cannot be taxed. Therefore, if prior period expenses of Rs. 49.31 lacs are disallowed, the income corresponding to these expenses i.e Rs. 76.53 lacs also cannot be taxed since if the expenses are disallowed being prior period, the corresponding income also admittedly pertaining to prior period also cannot be taxed. 12. The Ld. AR submitted that the CIT(A) has rightly taken into account the contentions of the....