TaxTMI 
TaxTMI 
2019 (3) TMI 560
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....ct that the above expenses were incurred before the commencement of the project. 2. The CIT(A) has erred in law and on facts in deleting the addition of Rs. 94,30,394/- made on account of excess expenditure claimed on project completed and handed over to client without appreciating the fact that the AO made addition in absence of documentary evidence to prove the justification of expenses claimed. 3. The CIT(A) has erred in law and on facts in deleting the addition of Rs. 30,94,199/- without appreciating the fact that the AO made the addition on account of excess loss claimed on projects in the absence of complete documentary evidences for claiming of loss. 4. The CIT(A)has erred in law and on facts in deleting the additions of Rs. 29,31,44,630/- on account of interest income without appreciating the fact that the AO made the addition of the interest income received from the FDRs and S.B. accounts in the name of the assessee, and the assessee claimed TDS deducted by the bank on interest which is against the provision of section 198 and 199 of I.T. Act. 5. The CIT(A) has erred in law and on facts in deleting the additions of Rs. 54,15,933/- on disallowance u/s 40(a)(ia) ....
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....fficer has made the addition for short deduction of TDS. 14. The CIT(A) has erred in law and on facts in deleting the additions of Rs. 13,75,49,494/- made on account of disallowance u/s 49(a)(ia) without appreciating the fact that the Assessing Officer has made the addition for not deduction TDS on the payments covered u/s 194C of the Act." I.T.A. No.331/Lkw/2016 (Assessment year 2011-12) "1. The CIT (A) has erred in law and on fact in directing the A.O. to accept revised income filed through revised computation by the assessee which is contradictory to the provision of section 139(4) of the I.T. Act that do not allow to accept revised income except only through filling of revised return of income. 2. The CIT (A) has erred in law and on facts in deleting the addition of Rs. 25,12,26,591/- without appreciating the fact that the AO made the addition for not following percentage completion method recognition for revenue recognition as give in Accounting Standard-AS-7(Revised) and also, the assessee is deduction amount from profits and crediting in retention reserve without any jurisdiction. 3. The CIT (A) has erred in law and on facts in deleting the addition of Rs. 39,....
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....s erred in law and on facts in deleting the addition of Rs. 6,19,18,021/- on disallowance u/s 40(a)(ia) without appreciating the fact that the Assessing Officer has made the addition for not deducting TDS on freight expenses, material supplied and labour charges. 5. The CIT (A) has erred in law and on facts in deleting the additions of Rs. 1,63,386/- on account of loss against disposal of stock without appreciating the fact that the Assessing Officer made the addition in absence of any explanation provided by the assessee against the expenses claimed. 6. The CIT (A) has erred in law and on facts in deleting the additions of Rs. 7,08,78,373/- on account of contribution/ provision to Provident Gratuity Fund in absence of any documentary evidence of payment for proof of contribution necessary as per section 43B. 7. The CIT (A) has erred in law and on facts in deleting the additions of Rs. 1,25,561/- on account of prior period expenses not deductable in mercantile system of accounting." I.T.A. No.508/Lkw/2016 (Assessment year 2013-14) "1. The Commissioner of Income Tax (Appeal) has erred in law and on facts in deleting the addition of Rs. 14,43,61,802/- without appreciat....
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.... 1.Ground No. 1 The CIT(A) has erred in law and on fact deleting the addition of Rs. 73,97,943/- made on account of disallowance of survey, testing and drawing expenses treating the same in the nature of preliminary expenses u/s 35 of the Act without appreciating the fact that the above expenses were incurred before the commencement of the project. [Para 6(b) pages 6-7 of AO's order] [Para 5(1) to 5(6) of CIT(A)'s order] The Assessing Officer had made the addition of Rs. 73,97,943/- on account of testing and drawing expenses treating the same as preliminary expenses. He has applied the provisions of section 35 of the Act. The nature of the expenses themselves speak that they are expenses which have been incurred before the commencement of the project. The CIT(A) has held, that since the business of the assessee Corporation, is that of construction which is not a new business, the expenses cannot be treated as preliminary expenses. The CIT(A) has deleted the same. There is no dispute with respect to the expenses incurred and the purpose for which it has been incurred. The fact remains that the expenses incurred were before the commencement of the project which are propos....
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.... 4. Ground No. 4 The CIT(A) has erred in law and on facts in deleting the addition of Rs. 29,31,44,630/- on account of interest income without appreciating the fact that the AO made the addition of the interest income received from the FDR's and SB accounts in the name of the assessee, and the assessee claimed TDS deducted by the bank on interest which is against the provision of section 198 and 199 of the IT Act. [Para 6(e) pages 10- 11 of AO's order] [Para 8(1) to 8(5) pages 11-13 of CIT(A)'s order] The Assessing Officer had made an addition of Rs. 29,31,44,630/- on account of interest income on FDRs. The CIT(A) has deleted the same holding, that the funds granted to the assessee corporation were to be utilized for a particular purpose and in absence of the same being utilized for specific purpose, the same is to be refunded back to the Government with interest accrued thereon. The CIT(A) has relied upon the notification of the State Government and also the case laws of U.P. Police and that of the Gujarat Tribunal. The addition made by the Assessing Officer has been wrongly deleted by the CIT(A). No doubt, the funds have to be returned back to the Government alongwith t....
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....reasons of short computation of WIP of Rs. 5,71,922/- as mentioned by Special Auditor in respect of Bareilly unit. [Para 6(h) pages 14 of AO's order] [Para 11(1) to 11(4) pages 19-21 of CIT(A)'s order] The Assessing Officer made the addition of Rs. 5,71,922/- on account of short work in progress (WIP) in respect of Bareilly Project. The CIT(A) has deleted the same holding, that the expenses are neither excess nor non-related to business. However, the CIT(A) has upheld the addition to the extent of Rs. 1,22,575/- as against Rs. 5,71,922/-. The relief given by the CIT(A) is totally unjustified. 8. Ground No. 8 The CIT(A) has erred in law and on facts in restricting the addition to Rs. 15,09,999/- as against Rs. 18,58,061/- made on account of capital expenditure claimed as revenue expenditure without appreciating the fact that the assessee has incurred the expenditure on the renovation of building including civil work. [Para 6(i) pages 14-15 of AO's order] [Para 12(1-5) pages 21-23 of CIT(A)'s order] The Assessing Officer had disallowed a sum of Rs. 18,58,061/- being expenditure claimed, treating the same as capital expenditure. The CIT(A) has deleted Rs. 15,09,999/- out o....
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....Para 15(1) to 15(4) pages 28-30 of CIT(A)'s order] The Assessing Officer made an addition of Rs. 6,32,63,235/- by applying the provisions of section 40(a)(ia) of the Act due to failure to deduct tax at source on the payment made. The CIT(A) has deleted the same holding, that the tax at source was deducted wherever the same was applicable. He has further held, that no deduction of TDS is required to be made on expenses incurred on petrol and diesel and these expenses were borne by the appellant. Since the Assessee had taken the vehicle on hire, there was a liability on the part of the assessee to deduct tax at source, the disallowance made by the Assessing Officer and deleted by the CIT(A) be uphled. 12. Ground No. 12 The CIT(A) has erred in law and on facts in deleting the addition of Rs. 21,20,09,287/- without appreciating the fact that the AO made addition for not following percentage completion method recognition for revenue recognition as given in Accounting Standard-AS-7 (Revised) and also, the assessee is deduction amounts from profits and crediting in retention reserve without any jrisdiction. [Para 6(m) pages 19-21 of AO's order] [Para 16(1) to 16(4) pages 30-32....
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....kind perusal and consideration. (Dr. A.K. Bar) Commissioner of Income Tax(Dr)-1, ITAT, Lucknow ITA No. 331/LKW/2016-A.Y. 2011-12 U.P. PROJECT CORPORATION LTD. BRIEF SYNOPSIS & WRITEEN SUBMISSION BY DR 1.Ground No. 1 The CIT(A) has erred in directing the AO to accept revised income filed through revised computation by the assessee which is contradictory to the provision of section 139(4) of the IT Act that do not allow to accept revised income except only filing of revised return of income. [Para 2 pages 1-2 of AO's order] [Para 5(1) 5(6) page 2-4 of CIT(A)'s order] In this ground, the AO had ignored the revised computation of income filed by the assessee. The return was filed on 27.03.2012 declaring income of Rs. 29,16,04,350/-. The assessee filed revised computation of income. As per the AO, in view in the income returned, then he has to file a revised return. Such computation is to be filed through the revised return. The CIT(A) has accepted the revised computation and directed the AO to make the computation of income on the basis of revised computation made. The CIT(A) while directing this has held, that the decision of Goetz India Ltd. Does not apply ....
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....ted by the CIT(A). No doubt, the funds, have to be returned back to the Government along with interest accrued thereon, yet since the FDRs are in the name of the assessee corporation, the interest would belong to the assessee an the Assessing Officer has rightly taxed the same and therefore the addition of the AO be upheld. 4. Ground No. 4 The CIT(A) has erred in law and on fact deleting the addition of Rs. 34,77,796/- made on account of disallowance of survey, testing and drawing expenses treating the same in the nature of preliminary expenses u/s 35 of the Act without appreciating the fact the above expenses were incurred before the commencement of the project. [Para 4 pages 4-5 of AO's order] [ Para 8(1) to 8(6) pages 11-16 of CIT(A)'s order] The Assessing Officer had made the addition of Rs. 34,77,796/- on account of testing and drawing expenses treating the same as preliminary expenses. He has applied the provision of section 35 of the Act. The nature of the expenses themselves speak that they are expenses which have been incurred before the commencement of the project. The CIT(A) has held, that since the business of the assessee Corporation, is that of construction w....
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....AO in earlier years when also payment for purchase was made without deduction of TDS. Accordingly, the addition made at Rs. 12,24,49,122/- made by the AO was deleted to giving relief to appellant. The CIT(A) has wrongly deleted the addition, the same be upheld. 7. Ground No. 7 The appellant were leaves to add or amend any on or more of the ground of appeals, as stated above, as and when need to doing so arises with the prior permission of the court. [Para 14 page 25 of CIT(A)'s order] This ground is general in nature. Submitted for kind perusal and consideration. (Dr. A.K. Bar) Commissioner of Income Tax(Dr)-1, ITAT, Lucknow ITA No. 332/LKW/2016-A.Y. 2012-13 U.P. PROJECT CORPORATION LTD. BRIEF SYNOPSIS & WRITEEN SUBMISSION BY DR 1. Ground No. 1 The CIT(A) has erred in law and on facts in deleting the addition of Rs. 17,00,70,000/- without appreciating the fact that the AO made addition for not following percentage completion method recognition for revenue recognition as given in Accounting Standard-AS-7 (Revised) and also, the assessee is deduction amounts from profits and creating in retention reserve without any jurisdiction. The Assessing O....
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....der] The Assessing Officer made an addition of Rs. 3,92,24,085/- by applying the provisions of section 40(a)(ia) of the Act and to failure to deduct tax at source on the payment made. The CIT(A) has deleted the same holding, that the tax at source was deducted wherever the same was applicable. He has further held, that no deduction of TDS is required to be made on expenses incurred on petrol and diesel and these expenses were borne by the appellant. Since the assessee had taken the vehicle on hire, there was a liability on the part of the assessee to deduct tax at source, the disallowance made by the Assessing Officer and deleted by the CIT(A) be upheld. 4. Ground No. 4 The CIT(A) has erred in law and on facts in deleting the addition of Rs. 6,19,18,021/- on disallowance u/s 40(a)(ia) without appreciating the fact the Assessing Officer has made the addition for not deducting TDS on freight expenses, material supplied and labour charges. [Para 6 page 6-7 of AO's order] [Para 7(1) to 7(4) pages 9-12 of CIT(A)'s order] The Assessing Officer had disallowed Rs. 6,19,18,021/- being expenses incurred without deduction of tax at source. The CIT(A) following his orders for A.....
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....ning of continuous work in progress. Once it is held, that the expenses relate to prior period, admittedly, they are not for the year under consideration and hence, they cannot be allowed. The CIT(A) has therefore, erred in deleting the same. The additions made by the AO may be restrored. 8. Ground No. 8 The appellant crave leaves to add or amend any on or more of the grounds of appeals, as stated above, as and when need to doing so arises with the prior permission of the court. [Para 13 page 18 of CIT(A)'s order] This ground is general in nature. Submitted for kind perusal and consideration. (Dr. A.K. Bar) Commissioner of Income Tax(Dr)-1, ITAT, Lucknow ITA No. 508/LKW/2016-A.Y. 2013-14 U.P. PROJECT CORPORATION LTD. BRIEF SYNOPSIS & WRITEEN SUBMISSION BY DR 1. Ground No. 1 The CIT(A) has erred in law and on facts in deleting the addition of Rs. 14,43,61,802/- without appreciating the fact that the AO made addition for not following percentage completion method recognition for revenue recognition as given in Accounting Standard-AS-7 (Revised) and also, the assessee is deduction amounts from profits and crediting in retention reserve without an....
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....%. [Para 5 pages 6-7 of AO's order] [Para 8(1) to 8(4) pages 11-13 of CIT(A)'s order] The Assessing Officer made an addition of Rs. 6,32,63,235/- by applying the provisions of section 40(a)(ia) of the Act due to failure to deduct tax at source on the payment made. The CIT(A) has deleted the same holding, that the tax at source was deducted wherever the same was applicable. He has further held, that no deduction of TDS is required to be made on expenses incurred on petrol and diesel and these expenses were borne by the appellant. Since the Assessee had taken the vehicle on hire, there was a liability on the part of the assessee to deduct tax at source, the disallowance made by the Assessing Officer and deleted by the CIT(A) be upheld. 4. Ground No. 4 The CIT(A), Lucknow has erred in law and on facts in deleting the addition of Rs. 1,86,20,613/- made u/s 68 of IT Act, without appreciating the fact that no reply was received by post in response to the notices issues u/s 133(3) of the IT Act, 1961 for verification of creditors. [Para 8 pages 8-9 of AO's order] [Para 11(1) to 11(4) pages 15-18 of CIT(A)'s order] The AO made the addition in respect of the outstanding credi....
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....sal and consideration. (Dr. A.K. Bar) Commissioner of Income Tax(Dr)-1, ITAT, Lucknow The written submissions filed by the assessee, year-wise, are reproduced below: Assessment year:2010-11 BRIEF SYNOPSIS AND WRITTEN STATEMENT BY ASSESSEE 1. GROUND NO 1- Addition of an amt of Rs. 73,97,943/- From the Language of section 35D, the expenses which are falling under section 35D(2) are to be considered for amortization. In case the business is already in existence then the revenue expenses cannot be disallowed on the ground that business has not commenced. The expenses on survey, testing & drawing etc have been incurred in connection with the construction projects undertaken by applicant. These do not relate to the applicants business coming into existence. An expenditure which is otherwise allowable cannot be considered under section 35D of the act . If the expenditure is allowable under section 37 of the act then the same is to be allowed. The expenses debited are mainly of revenue nature and it is not necessary that these expenses will be allowable only when there are receipts . In the instant case section 35D of the act is not applicable as the business has....
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....ks and bill amount are taken together there is no loss and also there is no change in the expenditure and the bill amount. Thus the order of CIT (A) to be upheld. 3. Ground No 3 The AO made an addition of Rs. 30,94,199/- since the profit earned is lower than specified percentage of cost. The disallowance has been made on the plea that excess expenditure has been incurred. In this respect it is to submit that the assessee accounts are subject to audit by Statutory auditors and also by the C & AG of India. The expenses are fully vouched and the learned AO has not pointed out any instance of expenses not being supported by vouchers. The expenses have actually been incurred by the assessee and are not bogus. Thus the order of CIT (A) to be upheld. 4. Ground No 4 The assessee is a wholly owned government corporation and receives deposits and funds from the government for executing the deposit civil contract works . As per Government GO a copy of which was already provided to learned Assessing officer during the assessment proceedings along with reply explaining the treatment made by the assessee, the interest on such unutilized funds lying in bank fixed & saving deposi....
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....of the act issued by ITO ( TDS) haridwar whereby payments to IIT Roorkie have been allowed to be made without deduction of TDS. This certificate has been issued on thye basis of CBDT Notification no SO 48 (E) dt 12.01.2004 and circular no 4/2002 dated 16.07.2002. ii) The AO disallowed sums of Rs. 8,28,712/- and Rs. 7,68,338/- as payments have been made deducting tds @1% instead of 2%. In this connection reference can be made to decision of Hon'ble "A" Bench of ITA, Kolkatta in case of ITO Vs Premier Medical supplies & stores in IT appeal No 1061 & 1062 (KOL) of 2010 Co Nos 86 & 87 (KOL) of 2010 dt oct 28, 2011. The case lays down that where tax is deducted by the assessee, even under bonafied wrong impression, under wrong provision of TDS, the provisions of section 40 (a) (ia) of the act cannot be invoked. iii) The Ao disallowed a sum of Rs. 60,000 and Rs. 1,08,000 on the ground that tds has been deducted at lower rate. These payments were for vehicle hired. The assessee was of the view that they were liable to TDS under section 194 C of the act whereas AO has taken the view that payment was on account of rent. A reference in this connection is may be mad....
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....diture of 18,58,061 /- on repairs and maintenance of existing office building, the nature of expenditure was revenue for Rs. 15,09,999/- The expenses been incurred were towards repairing the premises like painting, change of curtains etc. It has not brought about any new asset and more importantly it was not the intention of the appellant to bring about any new capital asset. The expenses incurred clearly fall within the expression of repairs to premises as appearing in section 30(a) of the act. Thus the order of CIT (A) to be upheld. 9. a) Disallowance of expenditure under 43B of act has been made . VAT TDS of Rs. 17,15,898 is not an expenditure it is a liability and moreover tds is not passed through profit and loss account hence cannot be disallowed under section 43 B of the act. b) of the amount of Rs. 10,85,878 an amount of Rs. 4,61,559/- has been paid before the due date of filling return of income. c) Relief of Rs. 53,441/- has been provided since amt paid before due date of filling return of income d) Relief of Rs. 14,87,947 has been given since the nature of amount was retention money which are released once the supplier submits proof of payment of royalty .....
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....xpenditure is borne by the assessee and hence it is submitted that it is not liable to for deduction under section 194C of the act. The issue can be viewed from another angle also that if TDS is considered on the entire amount of Bill i.e consisting of hire charges and Petrol /diesel expenses of vehicles then it is only a matter of short deduction of tax on which the provisions of section 40(a) (ia) are not applicable hence the disallowance is liable to be deleted. Thus the order of CIT (A) to be upheld. 12 The assessee is creating retention reserve on the basis of accounting policies (policy on revenue recognition in schedule B of schedule of significant accounting policies and notes annexed to and forming part of accounts for the year ended 31st March 2010) followed by it for past several years which are in conformity with the requirements of AS-7 (Revised). The said Retention Reserve is in fact the amount of profits of future years deducted from the Work in Progress on the basis of stage of completion of work in accordance with the accounting policy of the corporation. Another important factor is that when the stage of completion is more than 50 % and less than 100% the as....
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....NO 1 The Return of Income was a belated return being filed after the due date and hence cannot be revised, the assessee during the course of assessment proceedings submitted a revised computation of income rectifying certain mistakes appearing in the original return of income. However, the learned assessing officer rejected the revised computation of income filed during the assessment proceedings appantely because the total income as per revised computation of Income was less than the total income as per computation of income filed in the original return of Income. It may be stated here that assessment has been completed on the basis of accounts audited by statutory auditors who are duly appointed by C & AG of India and hence the income as per revised computation ought to have been accepted by learned AO. Thus the order of CIT (A) to be upheld. 2 The assessee is creating retention reserve on the basis of accounting policies (policy on revenue recognition in schedule B of schedule of significant accounting policies and notes annexed to and forming part of accounts for the year ended 31 st March 2010 ) followed by it for past several years which are in conformity with the re....
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....nt in due course. Since the income has not been accrued to the assessee it cannot be charged to tax in its hands. A reference in this connection may be made to the decision of Hon'ble ITAT Lucknow in the case of UP Police Awas Nigam ltd Vs ACIT in ITA No 344 & 345 /LKW/1999 dated 22.08.2012. A reference may also be made to the decision of Hon'ble Gujrat Highcourt in the case of CIT Vs SAR Infracon (p) Ltd 222 taxman 294 wherein on considering stipulation of the central government while sanctioning the grant in favor of the assessee that interest earned on the central grant already released would form part of the central grant limit , the court laid down that Held, considering the condition imposed by the Central Government, while releasing the grant in favor of the Assessee, when the interest earned on the Central grant already released was required to be forming Part of the Central grant, Tribunal has rightly held that the interest earned on cannot be said to be the income of the Assessee-No error had been committed by the Tribunal in deleting the addition made by the Assessing officer. Thus the order of CIT (A) to be upheld. 4 GROUND NO 4 From the Language of se....
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....6. Ground No 6- Purchases, addition The assessee purchases various items like sand, coarse sand, boulders , grits etc in its business of contract work . These items are supplied by the parties at the rate FOR at work sites. As such the transportation cost is borne by the supplier. The assessee makes payment for supply of material to supplier. Since no transportation charges are borne by the assessee ,hence the assessee does'nt makes any payment to transporters and the assessee makes payment to suppliers for goods. The question of any TDS doesn't arise. There is no provision in the act which requires for deduction of TDS on purchase of goods for which payment is made to suppliers. Thus the order of CIT (A) to be upheld. ASSESSMENT YEAR 2012-13 BRIEF SYNOPSIS AND WRITTEN STATEMENT BY ASSESSEE 13. GROUND NO 1 The assessee is creating retention reserve on the basis of accounting policies (policy on revenue recognition in schedule B of schedule of significant accounting policies and notes annexed to and forming part of accounts for the year ended 31 st March 2010 ) followed by it for past several years which are in conformity with the requirements of AS-7 (Revised). The s....
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....come has not been accrued to the assessee it cannot be charged to tax in its hands. A reference in this connection may be made to the decision of Hon'ble ITAT Lucknow in the case of UP Police Awas Nigam ltd Vs ACIT in ITA No 344 & 345 /LKW/1999 dated 22.08.2012. A reference may also be made to the decision of Hon'ble Gujrat Highcourt in the case of CIT Vs SAR Infracon (p) Ltd 222 taxman 294 wherein on considering stipulation of the central government while sanctioning the grant in favor of the assessee that interest earned on the central grant already released would form part of the central grant limit , the court laid down that Held, considering the condition imposed by the Central Government, while releasing the grant in favor of the Assessee, when the interest earned on the Central grant already released was required to be forming Part of the Central grant, Tribunal has rightly held that the interest earned on cannot be said to be the income of the Assessee-No error had been committed by the Tribunal in deleting the addition made by the Assessing officer. Thus the order of CIT (A) to be upheld. 15. Ground No 3 The company takes hired vehicles on contract basis ....
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....ds , pipes , pump sets etc that were purchased in past years were as dead stock and were also of no use for the corporation . The stock value was declining day by day due to erosion. Thus the scrap when sold in open tender caused loss of Rs. 1,63,386 which was accounted for in the books of the corporation. Thus the order of CIT ( A) to be upheld. 6 Ground No 6 An amount of Rs. 7,08,78,737/- was disallowed on the ground that assessee has not furnished payment proof of contribution to provident fund and also no bifurcation of amt claimed as contribution and amt claimed as provision has been furnished. The assessee has deposited Rs. 7,08,78,737 on account of contributions to EPF act , Contribution towards Group gratuity , Group Leave encashment and contribution towards leave salary and pension contribution . Necessary documents along with copies of acknowledgement for payment to LIC of India on account of gratuity and GLES and copies of challan for payment to EPF contribution were produced . Further the provisions of section 43B of the act are not applicable to Leave salary and pension contribution. Thus the order of CIT (A) to be upheld. 7. Addition on account of Prior....
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....on and receives deposits and funds from the government for executing the deposit civil contract works . As per Government GO a copy of which was already provided to learned Assessing officer during the assessment proceedings along with reply explaining the treatment made by the assessee, the interest on such unutilized funds lying in bank fixed & saving deposits pertains to government and not to the assessee. As per GO No B-1/564/10-7/97 dated 02.03.1998 it has been specifically mentioned that whatever interest income is accrued on advances /funds from banks it would be income of government and is to be remitted to government. Thus the interest accrued on the advances received by the assessee from the Government for construction activities would be the income of the Government and not of the assessee. On its accrual, it becomes a liability to the Government which is to be remitted by the assessee to the Government in due course. Since the income has not been accrued to the assessee it cannot be charged to tax in its hands. A reference in this connection may be made to the decision of Hon'ble ITAT Lucknow in the case of UP Police Awas Nigam ltd Vs ACIT in ITA No 344 & 345 /LKW/19....
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....rties failed to respond to notices issued u/s 133(6) of the Act. The assessee had provide full details of the sundry creditors with their names , addresses and amt outstanding as on 31.03.2013 and also furnished confirmation of balances of creditors to whom notices were issued by Ld AO. It may be stated here that in most of the cases there are regular transactions with the parties. No amt has been recd in cash by from them. They are trade creditors and credit has been given to them for contract works done by them and payments are being made by cheque. Thus the order of CIT (A) to be upheld. 5. Ground No 5 The assessee has filed the original return of income on 29-09-2013 and subsequently the return of income was revised on 28-02-2015 on the basis of financial statements audited by the statutory auditors appointed by the Central government. It is obvious that various figures of original return of income would vary with the revised return of income. Accordingly in the revised return of income Rs. 3,60,210/- was added in the computation of income on account of prior period income/expenses. Ignoring the fact the learned assessing officer has added Rs. 11,50,020/- on account of pr....
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....T.A. No.330/Lkw/2016 for assessment year 2010-11. The first ground is for disallowance of survey, testing and drawing expenses as the Assessing Officer treated the same in the nature of preliminary expenses whereas the learned CIT(A) has held that since the assessee was already engaged in the business of construction, such expenses cannot be treated as preliminary expenses and therefore, he has rightly deleted the same holding the same to be of Revenue in nature. The relevant findings of learned CIT(A) are reproduced below: "5(4) I have examined the facts and circumstances of the case. I have considered the findings of the Assessing Officer in the assessment order and the submissions of the appellant. I find that the appellant is a Government company within the meaning section 617 of the Companies Act, 1956 and its entire share capital is owned by the Government of Uttar Pradesh and Government of India. It is engaged in the business of civil works and construction of tube-wells mainly for Government Departments. The appellant claimed expenses of Rs. 82,19,937/- on survey testing and drawing which were treated as preliminary expenses by the AO under section 35D of the Act. Sectio....
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....harges for drafting the memorandum and articles of association of the company; b) expenditure on printing of the memorandum and articles of association; c) fees for registering the company under the provisions of the Companies Act, 1956; provisions of the Companies Act, 1956; d) expenditure in connection with the issue, for public subscription, of share in or debentures of the company, by way of underwriting commission, brokerage and charges for drafting, typing, printing and advertisement of the prospectus. This will include legal charges and auditors' fees for drafting of the prospectus]. The Central Board of Direct Taxes is also empowered to specify in the Income-tax Rules any other item or items of expenditure in respect of which the law does not provide for any allowance or deduction, and, thereupon the items of expenditure so specified will also be eligible for amortization under section 350. 43.The aggregate amount of the expenditure under all the specified heads will, for the purpose of amortisation be limited to 21/2 per cent of the cost of the project The 'cost of the project has been defined to mean the actual cost of the fixed assets, namely, land, buil....
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....he question of amortization and spread over as contemplated by section 35AB would certainty come into play". 5(6) One has to see the allowability of expenditure as per the provisions of the Act. The expenses debited are mainly of revenue nature and it is not necessary that these expenses will be allowable only when there are receipts. If the expenses are incurred for the are to be allowed. In the instant case section 35D of the Act is not applicable as the business has already commenced and it is not the case of the extension of industrial undertaking. The assessee was earlier carrying out construction activities is earlier years also when such expenditure was incurred in connection with construction activities under taken by the appellant. The expenses claimed are of revenue nature in connection with the continuing business activities of the appellant and is allowable under section 37 of the Act in computing the business income of the appellant and therefore cannot be disallowed under section 35D of the Act. The Assessing Officer is directed to allow the expenditure as revenue and therefore, the addition of Rs. 73,97,943/- made by the Assessing Officer is deleted giving r....
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....nd Auditor General of India (C&AG in short). The books of accounts have also been subjected to special audit by the auditor appointed by the Department. It is on the basis of the books of accounts audited by the special auditor that the cost overrun of Rs. 94,30,394/- has been identified by the auditor. It is not the case that these expenses are bogus rather these expenses have actually been incurred by the appellant on the projects under taken. The expenditure cannot be disallowed merely because the expenses incurred actually are more than the budgeted expenses. If this was the case then there would be no cost and time over runs in the construction business. The disallowance made by the AO has no basis as the expenditure has actually, been incurred and recorded in the books of accounts which have been subjected to multiple audits. The addition of Rs. 04,30,394/- made by the Assessing Officer is deleted giving relief to the appellant." 5.1 We find that learned CIT(A) has dealt with the issue exhaustively and has rightly deleted the addition which the Assessing Officer had wrongly made. We agree with the findings of learned CIT(A) that the expenditure cannot be disallowed merely ....
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....peal in I.T.A. No.330 for assessment year 2010-11 is dismissed. 7. Vide Ground No. 4, the Revenue has challenged the action of learned CIT(A) in deleting the addition of Rs. 29,31,44,630/- made by the Assessing Officer on account of interest income from the FDRs and SB accounts. Learned CIT(A) has held that the interest earned by the assessee on bank fixed and savings deposits made out of funds received from the Government for executing the civil contract work is to be considered as income of the UP Government as per GO No. B-1/564/10-7/97 dated 02.03.1998 wherein it has been specifically mentioned that whatever interest income is accrued on the advances from the Bank, it would be remitted to the Government and therefore, the learned CIT(A) held that since the income has not been accrued to the assessee, it cannot be charged to tax in the hands of the assessee. The relevant findings of learned CIT(A) are reproduced below: "8.4 I have examined the facts and circumstances of the case. I have considered the findings of the Assessing Officer in the assessment order and the submissions of the appellant. I find that the amount of interest of Rs. 29,71,44,630/- earned by the appella....
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.... of the above, ground No. 4 of the appeal in I.T.A. No.330 for assessment year 2010-11 is dismissed. Similarly, ground No. 3 in assessment year 2011-12, ground No. 2 in assessment year 2012-13 and ground no. 2 in assessment year 2013-14 relating to the same issue is also dismissed. 8. Vide Ground No. 5, the Revenue has challenged the action of learned CIT(A) in deleting the addition of Rs. 54,15,933/- made by the Assessing Officer for not deducting TDS on freight expenses, material supplied and labour charges. The learned CIT(A), while dealing with the additions made under different heads, has reproduced a chart and has dealt with each issue in detail. The relevant findings of learned CIT(A) are reproduced below: "9(4)(a) I have examined the facts and circumstances of the case. I have considered the findings of the Assessing Officer in the assessment order and the submissions of the appellant. The AO has disallowed a sum of Rs. 3,52,960/- on the ground that this was the payment out of Rs. 7,05,920/- which was approved. I find that there are two bills of Rs. 3,20,000/- each which inclusive of service tax @ 10.3% total Rs. 3,52,960/-. The two bills cumulatively are for the amou....
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....With regard to the shortfall, it cannot be assumed that there is a default as the deduction is not as required by or under the Act, but the facts is that this expression, 'on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction has not been paid on or before the due date specified in sub-section (1) of section 139'. This section 40(a)(ia) of the Act refers only to the duty to deduct tax and pay to government account. If there is any shortfall due to any difference of opinion as to the taxability of any item or the nature of payments falling under various TDS provisions, the assessee can be declared to be an assessee in default u/s. 201 of the Act and no disallowance can be made by invoking the provisions of section 40(a)(ia) of the Act. The case supra lays down that where tax is deducted by the assessee, even under bona fide wrong impression, under wrong provisions of TDS, the provisions of section 40(a)(ia) ef the Act cannot be invoked. Respectfully following the decision of Hon'ble ITAT (supra), I find that no disallowance is called for under section 40(a)(ia) of the Act as the amount of Rs. 8,28,712/- and Rs....
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....any finding that the payment was bogus or that the payment was not actually made. The payment to the party has been made through banking channels by account payee cheque which establishes the genuineness of the expenditure. In view thereof the disallowance of Rs. 3,50,000/- is deleted giving relief to the appellant. 9(4)(f) The AO disallowed a sum of Rs. 1,54,338/- as per S. No. 5 of the chart incorporated in the assessment order as reproduced above for the reason that the bill was not available. I find that the impugned payment of Rs. 1,54,338/- relates to payment of trade tax as per challan. The question of bill does not make sense as the challan for payment of Government dues is available. The addition of Rs. 1,54,338/- is therefore deleted giving relief to the appellant. 9(4)(g) The AO disallowed a sum of Rs. 4,08,535/-, Rs. 5,70,000/- and Rs. 1,60,000/- as per S. No. 9, 10 and 11 of the chart incorporated in the assessment order as reproduced above for the reason that the vouchers were not attached for clarity of TDS deduction. I find that in respect of payment of Rs. 1,60,000/-, TDS of Rs. 16,480/- was deducted and balance amount of Rs. 1,43,520/- was paid. Further, the....
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....which have been rectified and reversed in financial year 2013-2014 relevant to assessment year 2014-2015 or are the payments which relate to final settlement after receipt of proper bills in case where the expenditure in earlier years was recorded in the books of accounts on estimate basis. This expenditure of Rs. 15,36,760/- is therefore included in the work in progress shown in the profit and loss account. In case the expenditure is disallowed the proper course would be to reduce the work in progress by equivalent amount. Hence, the claim of expenditure is revenue neutral which is any case has been rectified in subsequent years. The expenditure of Rs. 15,36,760/- having been included in work in progress is revenue neutral and therefore the addition of Rs. 15,36,760/- is deleted giving relief to the appellant." 9.1 The above findings of learned CIT(A) are quite exhaustive. The learned CIT(A) has held that these payments include payments which have been rectified and reversed in financial year 2013-2014 relevant to assessment year 2014-2015 or are the payments which relate to final settlement after receipt of proper bills in case where the expenditure in earlier years was record....
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....low: "12(4)I have examined the facts and circumstances of the case. I have considered the findings of the Assessing Officer in the assessment order and the submissions of the appellant. I find that the disallowance of Rs. 18,58,061/- by treating the expenditure as capital as against of revenue nature has been made by the Assessing Officer only on the basis of the audit report without giving due consideration to the nature of expenditure claimed. I find that the appellant's claim for expenditure of the nature incurred under Section 30(a) of the Act has not been rightly disallowed by the AO. There is a clear distinction between the expression 'repairs' and the expression 'current repairs'. It is obvious that the word 'repairs' is much wider than the expression 'current repairs'. This fact has also been taken note of by the Supreme Court in the case of Saravana Spinning Mills P.Ltd. The expression 'current repairs' is much more restricted than the word 'repairs' because the latter is qualified by the word 'current'. What the appellant has done in the present case is to be construed to be repairs. It has not brought about a....
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....is dismissed. 12. Vide Ground No. 9, the Revenue has challenged the action of learned CIT(A) in restricting the additions of Rs. 37,18,485/- as against Rs. 53,81,981/- made by the Assessing Officer u/s 43B of the I.T. Act under different head. Learned CIT(A) has deleted the additions by observing as under: "13(4) I have examined the facts and circumstances of the case. I have considered the findings of the Assessing Officer in the assessment order and the submissions of the appellant. I find that the AO has disallowed the following amounts under section 43B of the Act S. No. Description As per SAR Allowed by AO Disallowance 1. VAT TDS - 23,29,764 6,13,866 17,15,898 2. Trade Tax payable 10,85,878 Nil 10,85,878 3. Bonus 7,62,685 Nil 7,62,685 4. Service Tax Payable 18,424 Nil 18,424 5. EPF/GPF/VPF/GIS 3,11,148 Nil 3,11,148 6. Royalty Payable 17,63,610 2,75,663 14,87,947 7. Entry Tax 52,928 52,928 Nil Total Rs.53,81,981/- 13(5) Non-payment of any statutory liability that is otherwise allowable as expenditure will attract disallowance under section 43B o....
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....xhaustively and by reproducing a chart of all the heads where the disallowance has been made u/s 43B, the learned CIT(A) has dealt with all the heads separately and given a detailed finding and wherever the addition was required to be upheld, he has upheld the same. Finding no infirmity in his order, we confirm the order of learned CIT(A) on this issue. In view of the above, ground No. 9 of the appeal in I.T.A. No.330 for assessment year 2010-11 is dismissed. Similarly, ground No. 6 in assessment year 2012-13 relating to the same issue are also dismissed. 13. Vide Ground No. 10, the Revenue has challenged the action of learned CIT(A) in deleting the addition of Rs. 1,13,63,781/- made by the Assessing Officer on account of prior period expenses. The learned CIT(A) has deleted the addition by observing as under: "14(4) I have examined the facts and circumstances of the case. I have considered the findings of the Assessing Officer in the assessment order and the submissions of the appellant. I find that the appellant filed complete details of such expenditure before the AO vide letter dated 20.09.2013. The details show that the impugned expenditure crystallized in the year under....
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.... 20,000/- on payments made for hiring of vehicles. No deduction is required to be made on expenses incurred on petrol and diesel as these were borne by the appellant. In this connection a reference may be made to the decision of Hon'ble Cochin Bench of ITAT in the case of M/s Three Star Granites (P) Ltd. Versus ACIT., Cir. 1 (1) Thrissur - 2014 (4) TMI 1058 - ITAT COCHIN - ITAT COCHIN wherein the issue involved and decision thereon was as under - Disallowance made under section 40(a)(ia) - short deduction of tax - IDS at 10 per cent, under section 194- 1 OR at the rate of 2.06 per cent, under section 194C - Held that:- As relying on Apollo Tyres Ltd. v. Deputy CIT [2013 (11) TMI 209 - ITAT COCHIN ] this Tribunal is of the considered opinion that short deduction of tax cannot be a reason/basis for disallowance under section 40(a)(ia) of the Act. Accordingly, the orders of the lower authorities are set aside and the disallowance made under section 40(a)(ia) is deleted. Respectfully relying on the decision above, the disallowance of Rs. 6,32,63,235/- made by the Assessing Officer is deleted giving relief to the appellant." 14.1 We find that learned CIT(A) has dealt ....
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....erve is deleted giving relief to the appellant." 15.1 We find that learned CIT(A) has dealt with the issue exhaustively and has observed that as per system of accounting consistently being followed by the assessee while accounting for the income of a project as per requirements of AS-7(Revised), when the stage of completion of a project is more than 50% and less than 100% the assessee recognizes 2/3 of the profit and on completion of work the entire profit is accounted for. Thus, in respect of those works which were more than 50% completed in earlier years, 2/3 of the profit thereon or in respect of projects completed in subsequent years, the entire profit stands accounted for and has been offered for taxation or actually assessed by the assessing officer. Further, the statutory auditors have not taken exception or qualification to creation of reserve and the C&AG of India have also not given any adverse comment on this issue. We find ourselves in agreement with the findings of learned CIT(A) on this issue. In view of the above, ground No. 12 of the appeal in I.T.A. No.330 for assessment year 2010-11 is dismissed. Similarly, ground No. 2 in assessment year 2011-12, ground No. 1 ....
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....) of the Act. The learned CIT(A) has deleted the addition by observing as under: "18(4) I have examined the facts and circumstances of the case. I have considered the findings of the Assessing Officer in the assessment order and the submissions of the Appellant. I find that the AO has disallowed entire purchases of Rs. 13,75,49,494/- for the reason that the payments included expenses on freight on which TDS was not deducted. The appellant purchases various items like sand, coarse sand, boulders, grits etc. in its business of contract work. These items are supplied by the parties at work sites. As such the transportation cost is borne by the supplier. The assessee makes payment for supply of material to the supplier. Since no transportation charge is borne by the appellant hence the appellant does not make any payment to the transporters and the payment is made to suppliers for purchase of goods. The question of any TDS being deducted by the appellant on the goods purchased does not arise. No such disallowance has been made by the AO in earlier years when also payment for purchases was made without deduction of IDS. There is no provision in the Act which requires for deduction of....
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....e Court, it is for the assessee to decide about the market value of its stock looking to the condition of the stock lying with it. In the case under consideration, the AO put his legs to the shoes of the assessee and determined whether the stock of old unusable items sold was rightly sold or not. I find that the loss has been suffered on sale of old stock in the course of business of the appellant and is allowable under the Act. The disallowance of Rs. 1,63,386/- made by the AO is deleted giving relief to the appellant." 19.1 We find that while deleting the addition, the learned CIT(A) has observed that the assessee had sold old unusable stock which were purchased in earlier years. The loss is the value of the stock as per the books of accounts and the amount realized of sale thereof which was disallowed by the AO. In the present case, the Assessing Officer determined whether the stock of old unusable items sold was rightly sold or not. We also find that the loss has been suffered on sale of old stock in the course of business of the assessee and is allowable under the Act. In view of the above, ground No. 5 of the appeal in I.T.A. No.333 for assessment year 2012-13 is dismissed....