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TMI Blog2009 (10) TMI 640X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 2006-07, the corresponding expenses were allowable in that assessment year, and since the closing work-in-progress in which those expenses were included formed the opening work-in-progress for the assessment year 2006-07, there was no warrant for any disallowance in the assessment year under appeal. 3.On the facts and in the circumstances of the case, the aforesaid disallowance to the extent the same relates to the expenses, for which the tax was deducted in the month of March 2005, was, in any event, not justified since the payments of the TDS were made before the due date under section 139(1), and, hence, the provisions of section 40(a)( ia) were not attracted in those cases, in view of the retrospective amendment made to section 40(a)( ia) by the Finance Act, 2008." 2. The assessee filed modified Ground No. 3, which reads as under:- "On the facts and in the circumstances of the case and in law, out of the total disallowance of Rs. 63,22,988, the disallowance relating to the expenses in respect of which the tax was deducted in the month of March 2005, was, in any event, not justified since the payments of the TDS were made before the due date under section 139(1), and hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequent year. The net result will be NIL; therefore, no addition is warranted. The learned AR submitted that amount paid in the month of which TDS is payable in next year. The assessee paid the TDS, before the time prescribed in section 40(a) itself, therefore, to that extent, no disallowance is warranted. The learned AR filed a chart which is reproduced below:- Details of amount paid under section 40(a) Particulars Amount TDS Due date Date of payment Disallowed u/s 40(a) in order Allowable expenditure for March 2005 RAJAWADI Transport 3480 71 07-10-04 09-06-05 3480 -do- 6863 140 07-11-04 -do- 6863 -do- 17598 359 07-12-04 -do- 17598 27941 - KURLA SAMTA Transport 16078 328 07-11-04 11-04-05 16078 -do- 6667 136 07-12-04 11-04-05 6667 -do- 1667 34 -do- 11-04-05 1667 -do- 13235 270 07-01-05 11-04-05 13235 -do- 6618 135 -do- -do- 6618 -do- 20588 420 07-03-05 25-05-05 20588 -do- 2696 55 07-04-05 -do- 2696 2696 -do- 686 14 -do- -do- 686 686 -do- 392 8 07-03-05 -do- 392 -do- 1520 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Particulars Amount TDS Due date Date of payment Disallowed u/s 40(a) in order Allowable expenditure for March 2005 -do- 30196 616 07-04-05 11-04-05 30196 30196 -do- 49265 1005 07-04-05 21-06-05 49265 49265 -do- 100490 2050 07-04-05 11-04-05 100490 100490 -do- 1229020 25072 07-04-05 21-06-05 1229020 1229020 3128529 2367304 PARSAWADA Labour 2157 44 07-01-05 21-04-05 2157 -do- 2157 44 07-02-05 -do- 2157 -do- 525980 10730 07-05-04 20-06-05 525980 530294 TOTAL 6322988 2553626 4.1 The learned AR conceded that Kurla Samata project was completed and the amount for which payment of TDS was not made, therefore, to that extent addition is warranted. In case of other project, no addition is warranted. The learned AR filed a summary Chart which is reproduced as under: Project Name Transport charges Labour charges Total Transport charges Labour charges March 2005 Others March 2005 Others Rajawadi (WIP) 27941 2037401 2065342 0 27941 113235 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sub-section (1) of section 9; (ia)any interest, commission or brokerage, [rent, royalty,] fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), 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,- (A)in a case where the tax was deductible and was so deducted during the last month of the previous year, on or before the due date specified in sub-section (1) of section 139; or (B)in any other case, on or before the last day of the previous year:] [Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted- (A)during the last month of the previous year but paid after the said due date; or (B)during any other month of the previous year but paid after the end of the said previous year, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid.] Explanation.-For the purposes of this sub-clause,- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A)outside India; or (B)to a non-resident, and if the tax has not been paid thereon nor deducted therefrom under Chapter XVII-B;] (iv)any payment to a provident or other fund established for the benefit of employees of the assessee, unless the assessee has made effective arrangements to secure that tax shall be deducted at source from any payments made from the fund which are chargeable to tax under the head "Salaries"; [(v)any tax actually paid by an employer referred to in clause (10CC) of section 10;]" 6.1 On plain reading of above section, we find that certain expenditures are not allowable if the assessee failed to deduct tax or after deduction same was not paid in time. However, such expenditures are allowable : Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted- (A)during the last month of the previous year but paid after the said due date; or (B)during any other month of the previous year but paid after the end of the said previous year. Such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. 6.2 The above provision is related to amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he activities of the contractor generally, or that relate to contract activity but cannot be related to specific contracts, include: general administration and selling costs; finance costs; research and development costs; depreciation of plant and equipment that cannot be allocated to a particular contract. In case of "completed contract method", the above expenses related to individual project have to be capitalized in work-in-progress which is similar to stock-in-trade, of respective individual project. Opening balance of work-in-progress of individual project will go up in the relevant year. When these projects were completed, in that year, income has to be computed after considering increased opening work-in-progress and receipts of the relevant project. Accordingly, in the year when these projects were completed, income on account of those projects is be computed after considering increased opening balance of work-in-progress due to addition of expenses for the period of project in work-in-progress. Contrary, if certain expenditures are not allowable under the Act, the work-in-progress will not increased by that amount. Such expenses are to exclude from the work-in-progress if ..... X X X X Extracts X X X X X X X X Extracts X X X X
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