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2012 (12) TMI 295 - ITAT HYDERABADExpenditure incurred on land development - Failure to deduct tax as required u/s 194C - applicability of provisions of sec 40(a)(ia) - project completion method adopted by assessee in dispute - Rejection of Books of account - held that:- from the P&L Account, which was filed by the assessee at the time of hearing that it has not claimed the above amount of Rs. 44,01,500/- as expenditure and did not debit the same to the P&L A/c. When the assessee did not claim the said expenditure/payments by debiting P&L A/c, the question of disallowing this amount by invoking the provisions of section 40(a)(ia) does not arise. further view of revenue that in case of ‘completed contract method’ AO is empowered to examine the expenditures incurred during the year which increases the opening work-in-progress or addition in work-in-progress. But one does not agree with the view of revenue that addition is to be made in total income, if some expenditure were found not allowable. The correct procedure in ‘completed contract method’ is that instead of making addition, the AO should correct the amount of work-in-progress by reducing or enhancing workin- progress as the case may be. Such corrected WIP will be finally considered in P&L a/c /contract account for the year in which work is completed - AO made addition in all the projects including incomplete projects, which is not warranted - no infirmity in the order of the CIT(A) in deleting the addition of Rs. 44,01,500/- made by the AO invoking the provisions of section 40(a)(ia) of the Act, thus, the same is hereby upheld dismissing the ground of the revenue. Decision in the case of Savala Associates Versus Income-tax Officer, Navi Mumbai [2009(10) TMI 640 - ITAT MUMBAI] followed.
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