TaxTMI 
TaxTMI 
2019 (1) TMI 270
X X X X Extracts X X X X
X X X X Extracts X X X X
.... preliminary issue, and having regard to the reasons given in the petition, we condone the delay and admit the appeal of Revenue for hearing. 3. Since, the issue involved in these two cross appeals are common and identical therefore, these appeals have been heard together and are being disposed off by this consolidated order. For the sake of convenience, the grounds as well as facts narrated in I.T.A. No. 2414/Kol/2017, for assessment year 2012-13, have been taken into consideration for deciding the above appeals en masse. 4. We note that the assessee in his appeal raised a multiple grounds of appeal, but at the time of hearing, the solitary grievance of the assessee has been confined to the issue that out of total disallowance of Rs. 4,79,18,880/- made by the Assessing Officer, the ld. CIT(A) erred in confirming the disallowance of Rs. 94,51,860/- and Rs. 2,15,30,312/-,( being estimated expenditure still required to be incurred). On the other hand, the solitary grievance of the Revenue in its appeal in I.T.A. No. 2549/Kol/2017, is that the ld. CIT(A) has wrongly allowed the provisions for expenses amounting to Rs. 1,69,36,708/-, out of total disallowance of Rs. 4,79,18,88....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ponse, the assessee submitted a detailed list of provisional direct expenses during assessment year 2012-13, in which the following facts were noted by the assessing officer: i) That all the bills of expenditure namely superstructure, superstructure lift, sanitary and water supply, electrification etc, were received after 31/03/2012, majority of which are dated in the months between July, 2012 and March. 2013 and some are even dated between April, 2013 and November, 2013. ii) That the date of transactions on receipt of bills from various parties under the above heads of expenditure fall in the months as mentioned in Sl. No. (i) above. The payments on final settlement of bills have been made to the parties during the AY 2013-14 and also in AY2014- 15, not relevant to the impugned assessment year 2012-13. iii) That the TDS was deducted on such bills at the time of credits/ payments on the dates of transactions and therefore much beyond the end of the AY 2012-13. It was submitted by the assessee that all expenses related to project 'Anahita' were booked and were provided during the AY 2012-13 itself, as all expenses have to be booked, as the project was c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... CIT(A). 8. Shri S.K. Tulsiyan, the Ld. Counsel for the assessee, begins by pointing out that the assessee has made a provision for the expenses to be incurred / already incurred to the tune of Rs. 4,79,18,880/-. Out of the said total expenditure a sum of Rs. 1,69,36,708/- belongs to raw material purchased by the assessee, therefore no TDS is required to be deducted, as it relates to raw material purchased by the assessee. Therefore, on appeal by the assessee, the ld CIT(A) has rightly deleted the addition of Rs. 1,69,36,708/-. On the balance amount of Rs. 94,51,860/- the assessee has deducted TDS before 31.09.2012, i.e. before filing the return of income, for assessment year 2012-13, therefore the disallowance on account of TDS u/s 40a(ia) does not arise. On the remaining sum of Rs. 2,15,30,312/-( Rs. 4,79,18,880-Rs.1,69,36,708-Rs.94,51,860), since the assessee is following contract completed method, which is known as project completion method of accounting, in this method of accounting of construction contracts the assessee prepared the financial statement on substantial completion of the project. The assessee's substantial activities were completed before 31/03/2012, therefor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee has not produced before the Assessing Officer the project completion certificate and has also not submitted the bills and vouchers and the sufficient proof to substantiate these expenditures, hence the addition made by the AO should be sustained. Moreover, the assessee has not submitted the bills and invoices in relation to the raw material purchased to the tune of Rs. 1,69,36,708/-. He has also pointed out that these expenses were based on the provisions made in accounts, and these are not actual expenditure incurred by the assesseetherefore these should not allowed.The DR further pointed out that since the assessee has completed its project substantially therefore he supposed to deduct TDS on the entire expenditures which are to be incurred for ancillary or minor work, which are to be done after completion of the project. Since the assessee has failed to deduct TDS on Rs. 4,79,18,880/-, therefore the same should be disallowed. 10. We have given a careful consideration to the rival submissions and perused the material available on record. We note that recognition of contract revenue andexpenses are done by the contractors by following either percentage of completion metho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for the assessee to make provision for estimated expenditures which are to be incurred in subsequent years on account of minor/miscellaneous work. If the assessee does not make provision for estimated expenditures, like, exp. on minor/miscellaneous work, then in that case assessee will not able to show true profit and loss, in its profit and loss account.As we pointed out in our earlier para that in project completion method, the assessee prepares profit and loss account and other financial statements once in life of a project, therefore, these estimated expenditures, like, exp. on minor/miscellaneous work, can not be shown next year. Another important point is that in project completion method, the assessee has shown entire sales/Revenue therefore he is entitled to record the entire expenses which had incurred by him or to be incurred to earn the said entire sales/Revenue.Therefore, in order to derive the true net profit in project completion method it is necessary to show these estimated expenditures, like,Exp. on minor/miscellaneous work. Hence, we accept the treatment made by the assessee in respect of estimated expenditures, like, Exp.on minor/miscellaneous work, in its books ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... year under consideration though it should bedischarged at a future date.For that we rely on the judgment of the Hon'ble Supreme Court in the case of Bharat Earth Movers vs. CIT reported in 245 ITR 428, wherein the same facts and ratio was decided. 14. At the cost of repetition, we reiterate the facts that the assessee is following project completion method and in this method the revenue is recognized when a substantial portion of the construction work is completed although some unfinished ancillary works may remain pending. The total expenditure in respect of such ancillary unfinished work is estimated and a provision is made in the books of accounts. This principle is adopted when the assessee has recognized the entire income from the project and the same is credited in the books of accounts. Therefore in the assessee's case under consideration, since the assessee has disclosed its entire project receipts of its 'Anahita' project in the assessment under consideration, therefore,all the expenses incurred or to be incurred in connection with the said project were also taken into account so as to arrive at the correct net profit from this project. On the same facts, our views are....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted commercial practice and trading principles, was a deduction which, if there was no specific provision for it under section 10(2) of the Income-tax Act, was certainly an allowable deduction, in arriving at the profits and gains of the business of the appellant, under section 10(1) of the Act, there being no prohibition against it, express or implied, in the Act. The expression ''profits or gains" in section 10(1) of the Income-tax Act has to be understood in its commercial sense and there can be no computation of such profits and gains until the expenditure purpose of earning the receipts is deducted therefrom whether the expenditure is actually incurred or the liability in respect thereof has accrued even though it may have to be discharged at some future date." 15. We note that the grievance of the revenue is that the assessee has not deducted TDS on the sum of Rs. 94,51,860/- and Rs. 2,15,30,312/-. So far the sum of Rs. 94,51,860/- is concerned, we note that the assessee has deducted TDS and paid before 31.09.2012 i.e. before the due date of submission of return of income for assessment year 2012-13, therefore by no any stretch of imagination, the disallow....