TaxTMI 
TaxTMI 
2021 (2) TMI 1229
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.... Ks.55.14.378/- on account of difference in closing without appreciating the fact that there is no typographical error and closing stock figure of Rs. 58,72,11,589/- is taken from the written submission dated 18.11.2014 of assessee showing detail of closing stock at page 250 to 273 of submission. 2. The CIT(A), Lucknow has erred in ia\v and on facts in deleting the addition of Rs. 13,99,33.507/- on account of prior period without appreciating the fact that the assessee has not produced documentary evidence before A.O. that income corresponding to expenditure of Rs. 13,99,33,507/- has already been recognized as income in contract account of earlier years. 2A The CIT(A), Lucknow has erred in law and on facts in deleting the addition of Rs. 13,99,33,507/- on account of prior period without appreciating the fact that the assessee was unable to prove before the assessing officer that the expenses crystallized during the year under consideration and thus are not allowable as assessee is following mercantile system of accounts. 3. The CIT(A), Lucknow has erred in law and on facts in deleting the addition of Rs. 1,12,00,000/- on account of provision for gratuity ....
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....-12 where the Hon'ble ITAT allowed relief to the assessee under similar facts and circumstances. Therefore, it was prayed that following the Tribunal's orders in the case of assessee itself, the appeal of the assessee may be allowed. The ld. DR fairly agreed that the issue under appeal is covered in favour of the assessee. 3. The ld. DR arguing the appeal in ITA No. 316/Lkw/2017 submitted that the ld. CIT(A) has wrongly allowed relief to the assessee on various issues and placed her reliance on the order of Assessing Officer. The ld. AR, on the other hand, submitted that the Ground Nos. 2 and 2A, Ground No.4, Ground No.6, Ground No.7 and Ground No.9 are already covered in favour of the assessee by orders of ITAT for AYs. 2010-11 and 2011-12 and in this respect filed a chart showing page numbers and para number of ITAT order wherein similar issues were already decided by the ITAT in favour of the assessee. 4. As regards Ground Nos. 1, 3, 5 and 8, the ld. AR submitted that detailed submissions were made before the ld. CIT(A) and ld. CIT(A) after going through the submissions of the assessee has allowed relief to the assessee as the Assessing Officer had wrongly made the additio....
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....on on account of expenses of labour Cess by holding as under: 5. Expenses on Labour Cess: The assesses has shown labour cess provision of Rs. 36,52,81,82/- in operating expenses in Schedule-11. The assesses was show caused to furnish proof of depositing Labour cess of Rs. 36,52,81,828/- in Govt. account vide questionnaire dated 21.10.2014 and 16.01.2015. The assesses reply dated 18.11.2014 is as under:- "In this regard it is submitted as under:- (i) That concept of the Labour cess was for the first time introduced in the financial Year 2009-10 by the Labour Department of the Government of U.P. vide notification dated 20.112009. (ii) That in light of this notification, the corporation vide its Circular dated 19.02.2010 informed all the unit Heads/General Managers to make provision for Labour Cess @ 1% of the cost of construction of the concerned work sanctioned by the Government and are in progress. Thus, the Labour Cess so charged on the work done by the corporation art' direct expenses in nature which are debited to the Contract Account for the purposes of charging centage on the work so done by the corporation. As the corp....
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....howing resulting profit or loss accruing during a construction period, which has a direct relation to the works dealt with in the business, which ascertains the cost of profit of the assessee Corporation. Thus, the contract account is, basically, accounting of work done where the gross profit worked out is the centage allowed towards the overheads and profits of the assessee Corporation. In the contract account, all direct costs, as are to be borne by the clients of the Corporation, are debited and the value of the work done is credited by adding 15% towards centage charges. As such, in case any disallowance is to be made in the cost debited to the contract account, a corresponding deduction is also required to be made in the cost debited to the work done, as this is a case of contra entries only. This accounting procedure of the assessee Corporation stands accepted by the Department in assessment year 1990-91, as taken note of by the Tribunal in the assessee's case for assessment year 1991-92, in its order dated 30/11/2006, passed in ITA No.714/LKW/2002. For assessment year 2000-01, the Tribunal, vide its order dated 18/12/2018, passed in ITA No.382/LKW/2004, also took note that a....
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....s findings of the Assessing Officer and the submissions of the appellant. I find that the appellant is a wholly owned undertaking of the U.P. Government. The appellant carries on the business of construction for Government. It receives orders for projects on behalf of the Government and executes the same. The inventory of stock is maintained at all units separately and is physically verified by an officer of the rank of a Gazetted officer. The closing stock as per profit and loss account for the year under consideration is Rs. 58,17,00,211/-. During the course of assessment proceedings the appellant filed inventor,' of closing stock which by typographical mistake was shown at Rs. 58,72,11,589/-. The AO instead of verifying the correct position with reference to opening stock, purchases and utilization in construction activities chose the easier way of rejecting the books of accounts under section 145(3) of the Act and making the addition for the difference. I find that the position has been explained by the appellant both during the assessment proceedings as well as appellate proceedings that the figure of Rs. 58,72,11,589/- is a typographical error and correct value of closing....
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....educed by like amount. 10(5) I find that the appellant has clearly brought out the fact that the bills were raised by the Electricity department on 30.10.2009, which means that the liability has arisen in the current year and therefore the expenses are allowable in the assessment year under consideration. Notwithstanding, the claim of the appellant that any addition made will result in reduction of work in progress is justified as the income corresponding to the said expenses of Rs. 23,54,235/- has already been accounted for in the contract account of earlier years. In this connection a reference may be made to the decision of Hon'ble ITAT, Lucknow in case of the appellant for the assessment year 1991-92 in ITA No 714/LUC/02 dated 30/11/2006, which has been followed in case of the appellant for the assessment year 2000-2001 in ITA No 382/LUC/04 dated 18/12/2008. While deciding a similar disallowance of prior period expenses the Hon'ble Court held that if any disallowance was to be made in the cost debited to the Contract account then corresponding reduction is required to be made in the work done also, this being a case of contra entries only. The decision....
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....he provision for gratuity as shown in schedule 4 of the balance sheet as at 31.03.2012 is Rs. 6,67,74,209/-. The issue has been dealt in detail in the appellate order for the assessment year 2011-2012 in case of the appellant wherein the details of provision for gratuity written back and added to the computation of income the years is as under - Assessment Year Provision for Gratuity added in Computation chart in Rs. Provision for Gratuity written back as no longer required in Rs. 2000-2001 1,09,15,481/- - 2001-2002 75,25,5267- - 2002-2003 38,56,755/- - 2003-2004 71,14,765/- - 2004-2005 43,43,921/- - 2005-2006 S3,16,192/- - 2006-2007 3,69,742/- - 2007-2008 18,38,1751/- - 2008-2009 2,90,67,063/- - 2009-2010 5,22,62,229/- - 2010-2011 2,65,73,248/- - 2011-2012 11,46,32,701/- 2012-2013 4,78,12,614/- TOTAL 16,87,26,673/- 16,24,45,315/- 8(5) In view of above I find that as against a provision of gratuity of Rs. 16.24.45.315/-upto assessment year 2012-2013 the appellant has already added back an amount of Rs. ....
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....with the appellant in the form of fixed deposits which earns interest. The appellant maintains its books of accounts on mercantile basis and it makes provisions of interest on accrual basis. The appellant credits such interest to the respective client's account in view of the Government Order No. A-1-FA-11/386/1976 dated 11.04.1976. 12(5) In view of my examination, I find that the interest accrued on deposits has been credited to the respective client account. The interest earned by the appellant on unutilized funds is therefore credited to the respective accounts and is income of the concerned client and not the appellant. The GO dated 11.04.1976 referred above supports the contention of the appellant. The addition of Rs. 39,46,18,444/- made by the A.O on account of interest accrued on deposits is deleted giving relief to the appellant." 41. Having considered the rival submissions and perusal of record, we find that the amount of Rs. 39,46,18,444/- shown in the balance sheet as interest accrued on deposits was the running balance of the accrued interest on the funds of the clients of the assessee. The assessee maintains its books of account on mercantile basi....
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....so dismissed. 21. Now coming to Ground No.6, we find that Assessing Officer had made an addition of Rs. 25,33,327/- on account of interest on unlisted machinery, which the CIT(A) has deleted. We find that similar issues arose in AYs. 2011-12 in ITA No. 315 and 318 and the Hon'ble ITAT allowed relief to the assessee by holding as under: "11. As regards ground No. 3 regarding deletion of addition on account of interest on unlisted machinery, we find that in schedule-12 to the profit & loss account, placed at page 28, the assessee, under the head 'other receipts', has declared as income of Rs. 19,34,458/- and the total of all other receipts including the interest on unlisted machinery has been declared as income in the contract account, which is placed at page 21 of the paper book. Therefore, learned CIT(A) has rightly allowed relief to the assessee. In view of the above, ground No. 3 of the Revenue is dismissed." 22. We find that during the year under consideration, the ld. CIT(A) has made a finding of fact that interest of Rs. 25,33,327/- on unlisted machinery is in the nature of notional interest being charged by assessee on the machinery used in the cons....
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.... 24. Now coming to Ground No.7, we find that Assessing Officer had made the addition on account of gratuity amounting to Rs. 4,78,12,614/- which the assessee had written back as no longer required. The assessee by writing back the excess provision of gratuity credited the other receipts and declared it as income as is evident from paper book Pg.52 and simultaneously the assessee reduced the same in the computation chart in computing net taxable income. The assessee had claimed that it never claimed the gratuity expenses and added back the same in computing of income and therefore, the addition was not justified. The Assessing Officer had wrongly made the addition, which the ld. CIT(A) has deleted by appreciating the facts correctly. The ld. CIT(A) has already dealt this issue in Para 8(4)(5) and has rightly deleted the addition. Finding no infirmity in the findings, Ground No.7 is also dismissed. 25. Now coming to Ground No.8, we find that the Assessing Officer made the additions on account of interest accrued on investment and other income which was shown in the balance sheet under the head current assets. Paper book Pg.49 under the head other current assets declares interest ....