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2005 (9) TMI 237 - AT - Income TaxCredit For TDS - rendering technical services and project execution services - liability towards payment of tax - deduction for the prior period expenses - maintaining its books of account on accrual system - work-in-progress - HELD THAT:- The execution of a project is a continuing process. The income/loss arising therefrom also generates contemporaneously/ simultaneously; even though such income/loss is finally measured as profit/loss only at the end of the project for the reason that the assessee is following project completion method for the recognition of profit/loss. In this context, it is always useful to remember that Courts have held that 'income' also includes loss. The set off of TDS would arise only when the income results in profits. Therefore, it is all the more clear that the income whether profit or loss impregnated in the value of working in progress is finally summed up to be the profit/loss of the contract which is answerable to the assessment to be made on the assessee. Therefore, we have to accept the proposition that in every assessment year, even though the final result is ascertained only on the completion of the project, an element of income is latent in the yearly working result. The distinction between the above conceptual profit and the ultimate de facto assessment of profit is because of the fine distinction existing between "income" and "profits". Therefore, we are of the considered opinion that the provisions of law contained in s. 199 do not stand in the way of the claim made by the assessee-company for credits in respect of TDS made during the relevant previous year. As such, it is our finding that the AO should give credit for the TDS. This issue is, therefore, decided in favour of the assessee. Prior-period expenses - It is quite natural that there would be, an amount of overflow of information after the close of the accounting year. Therefore, to certain extent, the claim of the assessee that the details of such expenditure were received only after the close of the accounting year, could be accepted. It is a continuous process to incur expenditure and to account (for) in the books of account. Therefore, even though they are treated technically, as prior period expenses, it relates to a continuous flow of expenditure. Therefore, there is no justification in disallowing the above expenditure, otherwise normally eligible for deduction. Therefore, the assessing authority is directed to examine the details of expenses and allow the same wherever applicable on satisfaction of the genuineness of the expenditure. The second item of expenditure included in the disallowance is the final settlement of payments made to staff. As the payments made to staff could be finalized only on settlement, the claim of the assessee is in order and the same has to be allowed as a deduction. The learned 'counsel appearing for the assessee-company himself fairly can ceded that the assessee-company should not have claimed deduction of the said amount. The said disallowance is confirmed. The bank advices relating to such debiting of interest were received belatedly and only because of that delay the assessee could not provide for such expenditure in the concerned assessment year. Therefore, it is to be seen that such expenses really crystallized in the hands of the assessee during the relevant previous year. Therefore, the claim far deduction is in order and the same has to be allowed. As seen from the above discussion, the disallowance has been considered by us and the claim has been partly allowed. In result, this appeal filed by the assessee is partly allowed.
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