TMI Blog2015 (2) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered for proportionate disallowance under section 40(a)(ia), being the amount included in the project cost was submitted by assessee as extracted above. AO directed to examine the same and then disallow the proportionate 2.16% under section 40(a)(ia) as in earlier year as per directions of ITAT on this issue. Decided partly in favour of assessee for statistical purposes. - ITA. No. 1366/Hyd/2014 - - - Dated:- 29-12-2014 - Shri B. Ramakotaiah And Shri Saktijit Dey,JJ. For the Petitioner : Mr. K.A. Saiprasad For the Respondent : Mr. Rajat Mitra ORDER Per B. Ramakotaiah, A.M. This appeal by assessee is directed against the order of Ld. CIT(A)-II, Hyderabad dated 12.05.2014. The issue in this appeal is with refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L account was only 2.16% of total expenditure. Assessee explained that out of the total project expenditure from opening work in progress as well as addition during the year only a proportionate amount was transferred to P L account as cost of expenditure on sales made. Therefore, disallowance under section 40(a)(ia) can only be made at 2.16% of the amount paid during the year, which assessee itself has disallowed it in the computation of income. It was submitted that balance amount of 97.84% i.e., ₹ 64,57,440 appearing as closing work in progress under current assets as inventory in the balance sheet does not call for any disallowance. Like wise, A.O. also considered an amount of ₹ 5 lakhs paid to M/s. MCH towards approvals a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of ₹ 18.11 crores in A.Y. 2009-2010 and disallowed an amount of 1.93% being amount claimed in P L account under section 40(a)(ia) in that year. When it was pointed out by Bench that the total disallowance during the year at 2.16% should have been claimed on the proportionate amount on which TDS was not made at ₹ 18.11 crores of last year plus the amount paid during the year without TDS on the same principle, the Ld. Counsel admitted that this amount also calls for proportionate disallowance and he has no objection if the matters are restored to the file of A.O for correct disallowance. Assessee furnished the following working quantifying the disallowance. Amount attracting the provisions of secs.40a(ia) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure of ₹ 23,38,41,519 out of total expenditure of ₹ 1212,47,48,985 and carried an amount of ₹ 1189,09,04,466 as work-in-progress in Balance Sheet. In other words, the assessee has not claimed this amount of ₹ 16,05,80,987 as an expenditure in the Profit and Loss A/c. In our humble opinion, unless and until the assessee claimed this as an expenditure while computing the income, the provisions of section 40(a)(ia) of the Act cannot be invoked. 17. The CIT(A) placed reliance on the decision of the ITAT, Hyderabad in the case of ACIT vs. Godavari Developers in ITA No. 918/Hyd/2012 dated 31.10.2012. In this case the Tribunal followed the decision of the Tribunal Mumbai 'J' Bench in the case of ITO vs. Sav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find force in the contention of the assessee's counsel that unless the assessee claims this item as expenditure, the assessing officer cannot allow or disallow the same. In the circumstances, we set aside this issue to the file of the assessing officer to examine whether this is an expenditure claimed by the assessee in the Profit Loss A/c or shown as an item in the balance- sheet. In the event, if it is claimed as an expenditure, the assessing officer could disturb the same and disallow an expenditure claimed in the P L A/c to the extent of 10%, which, in our opinion, is reasonable. On the other hand, if it is Balance-sheet item, the assessing officer is precluded from doing so. 19. The view of the CIT(A) is in conformity with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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