TaxTMI 
TaxTMI 
TaxTMI 
2019 (5) TMI 1999
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....n advance and no work is undertaken by the appellant during the relevant assessment year, ignoring the unbilled revenue recognized in the books of accounts. Setting up/Commencement of business 2. On the facts and circumstances of the case and in law, the learned Commissioner (Appeals) erred in holding that the business is set up on 12th March 2010. 3. On the facts and circumstances of the case and in law, the Commissioner (Appeals) erred in directing the AO to allow only pro rata expenses of Mr. I. Bannerjee 4. On the facts and circumstances of the case and in law, the learned Commissioner (Appeals) erred in upholding the action of the AO in not allowing an amount of Rs. 1,16,72,900 being expenditure incurred towards technical consultancy charges under section 37(1), 4.1 Without prejudice to the above, on the facts and circumstances of the case and in law, the learned Commissioner (Appeals) ought to have directed the AO to consider expenditure towards technical consultancy charges of Rs. 1,16,72,900 as work-in-progress to be allowed as deduction in the year in which income is recognised from the contract. Non grant of TDS credit on mobilization advance 5. On the facts....
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....e cost/expenses incurred till the end of the financial year as per Accounting Standards. The AO however noted that the submissions of the assessee reflected that the assessee had only prepared claim for mobilisation advance No. UGI/1 and invoice No. MOB/ADV/1 on 23/03/2010 for mobilisation advance of Rs. 93,79,58,000/- and that on receipt of the advance had given an amount of Rs. 91,67,93,872/- on 30/03/2010 to M/s. Afcons Infrastructure Ltd. As regards Accounting Standard 7, the AO observed that it was not notified by the Govt. of India and concluded that in such circumstances the amount credited by the assessee to the P & L Account could not be assessed as income for the year under consideration. During scrutiny proceedings, the AO also observed that the assessee had not given details of expenses of Rs. 116.73 crores paid as 'technical consultancy' charges or explained the nature of services rendered by the recipient and as such the amount could not be held as being wholly and exclusively for the purpose of business. The AO further examined the expenses claimed by the assessee, and as regards expenses on account of audit fees, observed that TDS had not been deducted on th....
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....00 received from KMRCL during the relevant assessment year. 5.1 Without prejudice to the above, on the facts and circumstances of the case and in law, the learned Commissioner (Appeals) ought to have directed the AO to allow credit for TDS in subsequent assessment years in proportion to the mobilization advance recovered against appellant's legitimate dues and offered to tax in such subsequent assessment years. 8. Assessing Officer's action on this issue is summarized as under:- During the course of assessment proceedings, the AO noted that the appellant had claimed TDS of Rs. 2,13,56,569/- deducted by KMRCL on mobilisation advance of Rs. 93,79,58,000/-. The AO observed that no regular billing was done by the appellant and unbilled revenue had simply been credited to the P & L account of appellant with the billed party being debited through book entry. The AO further noted that no income was therefore assessable in the hands of the appellant for the year under consideration and credit for TDS had been claimed in violation of section 199 and Rule 37BA. For these reasons the AO asked the appellant to explain why the credit of TDS of Rs. 2,13,56,559/- should not be withdr....
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.... In this context, it is seen that the terminology used under the agreement by KMRCL was "recovery of advance" and not "adjustment of advance" (refer clause 11.2.5 above in extract reproduced in appellant's submissions above).In appeal, the appellant has stated that the TDS was wrongly deducted by KMRCL on an amount which was loan and not any advance for future contractual dues. However, the appellant has been unable to show why in that case, it did not ask KMRCL to revise its TDS return and claim refund u/s. 200A of the I.T. Act or why it did not repay the mobilization advance to KMRCL only to the extent of net amount received after deduction of TDS? It also needs to be noted that if indeed TDS was wrongly deducted, there is no reason why Assessing Officer should have allowed claim of such TDS to the appellant anyway. Moreover, by claiming credit for TDS in the of income, appellant has clearly shown that in its view, the mobilization advance Is adjustable against future contractual dues irrespective of the provisions in agreement with KMRCL. This aspect is relevant because appellant was entitled to receive contractual dues from KMRCL subsequently and therefore the mobilization ....
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....it of Rs. 2,73,73,1621/- deducted from the advances received. It has been pointed out by the A.O. that TDS on advance have regularly been disallowed in the earlier years and the appellant is on further appeal. Consistent with the stand taken in earlier years the A.O. has not allowed credit with respect to the TDS on advances. However, the A.O. has himself agreed that the corresponding income for TDS advances amounting to Rs. 1,44,41,2621/- has been offered as income during the current year. Hence to the said extent, appellant is eligible for grant of credit of TOS as per law. The A.O. will grant credit, subject to the same not having been granted in the earlier years." 32. We have considered rival contentions and found that in terms of the contract agreement, the assessee receives advances/loans on which the payer deducts tax at source. Such loans and advances can broadly be classified as (i) Site Mobilisation loan granted to enable the assessee to mobilise the work site i.e. create access roads, mobilise men, equipments, establish and set up site office, etc., (ii) Machinery Mobilisation loan granted to enable the assessee to purchase machineries and equipments needed to carry o....
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....tion from construction work in progress, which itself is valued at contract rates i.e. selling price. In other words, the income pertaining to such advance is already impregnated in the work in progress offered for tax during the impugned year itself. The Tribunal in ACIT v. Patel KNR Joint Venture ITA 5230/Mum/2012, on identical facts, following Toyo Engineering Ltd., decided in favour of the assessee. Respectfully following the decision of the coordinate bench in the case of associate concern of the assessee vis-à-vis other decisions referred above, we direct the AO to allow the credit for TDS in year of deduction itself. We direct accordingly." 14. Upon careful consideration we find that authorities below have passed a self contradictory order in this case. On one hand it is the case of authorities below that assessee has not billed any revenue, so assessee credit in P & L account of income has been rejected. It has been mentioned that only a sum of Rs. 93,79,58,000/- mentioned as loan receipt in the balance sheet as liability is acceptable figure. These facts are elaborately detailed by learned CIT(A) after obtaining the remand report in paragraph 6.1.10 of his order as....