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TMI Blog2015 (2) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... income of Rs. 1,03,21,866 on admitted sales of Rs. 31.82 crores. In the order under section 143(3) A.O. made additions of disallowance under section 40(a)(ia) to an extent of Rs. 64,57,440 and disallowance of Rs. 5 lakhs u/s 40(a)(iii). The matters were contested before Ld. CIT(A) unsuccessfully. Hence, the present appeal. 3. Coming to the facts of disallowance, assessee is following percentage/ project completion method and is accounting incomes and expenditure on proportionate basis. Assessee has spent an amount of Rs. 24,18,62,679 as expenses during the current year. These expenses were added to opening work in progress of Rs. 1198.09 crores. Assessee had shown sales to an extent of Rs. 30.24 crores and has shown direct expenses at Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that Ld. CIT(A) was wrong in giving a finding that assessee debited the full amount of Rs. 66 lakhs to P & L account by noting Schedule-N, which is not the amount debited to P & L account, but the total of the expenditure during the year spent on the project. It was submitted that Rs. 66 lakhs was interest on loans which was debited to cost of project and taken in the total work in progress out of which cost of sales at Rs. 26,15,44,799 were transferred to P & L account which was only 2.16% of the total project cost. Thus on facts, Ld. CIT(A) gave a wrong finding. 5. Coming to the issue of disallowance, Ld. Counsel relied in order of Coordinate Bench of ITAT in assessee's own case for A.Y. 2009-10 in ITA.959/Hyd/2013 given in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,00,000+5,00,000) A.Y. 2010-11 7,100,000 u/s. 143(3) & 250 153,055 Total 4,258,806 Less: disallowance as per ROI : A.Y. 2010-11 Balance 142,276 4,116,530 7. Learned D.R. however, fairly admitted that the issue is covered against the Revenue by the orders of ITAT in A.Y. 2009-2010 (supra). 8. After considering the rival contentions, we are of the opinion that order of Ld. CIT(A) cannot be upheld. As far as the issue of proportionate disallowance as claimed by assessee is concerned, this issue is held in favour of assessee by the Coordinate 'B' Bench of the Hyderabad Tribunal in ITA.No.959/Hyd/2013 dated 28th May, 2014 on the principle that only disallowance can be made out of the amounts claimed in the P & L account. The Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO should correct the amount of work-in-progress by reducing or enhancing work- in-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. The result of calculation of correct profit in case of 'completed contract method' could be attained by this procedure. In the case under consideration, the AO made addition in all the projects including incomplete projects, which is not warranted." 18. The CIT(A) also placed reliance on the decision of ITAT Hyderabad in the case of M/s. Narne Constructions Pvt. Ltd. in ITA Nos. 1462 & 1463/Hyd/2011 dated 25.01.2012 where it has been held that : "We have heard both the parties on this issue. The contenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otherwise than by a account payee cheque drawn on a bank or account payee bank draft exceeding Rs. 20,000, no deduction can be made in respect of such expenditure. On the other hand, section 40(a)(ia) is with regard to disallowance in respect of payments where the assessee failed to deduct TDS. These two sections are not para materia. Being so, we are inclined to decide the issue in favour of the assessee and against the Revenue. 9. Therefore, on principle, we agree with assessee's contentions that only proportionate amount claimed in P & L account has to be disallowed. 10. Now coming to the issue of quantum for disallowance as rightly admitted by Ld. Counsel, the amounts added to the work in progress in earlier year without TDS were als ..... X X X X Extracts X X X X X X X X Extracts X X X X
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