TMI Blog2011 (6) TMI 827X X X X Extracts X X X X X X X X Extracts X X X X ..... ny ground(s) either before or in the course of hearing of the appeal. 2. Adverting first to ground no.1 in the appeal, facts, in brief, as per relevant orders are that return declaring nil income filed on 26- 12-2006 by the assessee, engaged in dyeing and printing of synthetic fabric on job work basis, was selected for scrutiny with the service of a notice u/s 143(2) of the Income-tax Act,1961[hereinafter referred to as the 'Act'] on 24.8.2007.During the course of assessment proceedings, the Assessing office[AO in short] noticed that the assessee reflected gross profit[GP] @ 12.13% on turnover of ₹ 3,98,47,392/- as against GP@ 8.23% on turnover of ₹ 3,33,79,857/- in the immediately preceding year. Though the assessee had closing stock of ₹ 12,23,320/-,comprising colour and chemicals, coal, mill-gin etc., the assessee did not show any closing stock of work-in-progress. To a query by the AO, the assessee replied that it was their practice to clear all semi processed goods or stock of work in process during the last week of March of every year and in support enclosed a statement of sale invoices from 25th March to 31st March 2006,mentioining sale of 3790 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f processing. On the above basis, the work-in progress was valued by the Assessing Officer at ₹ 2,80,991/-and added to the total income of the appellant. The valuation of the work-in progress, as above, is not disputed by the appellant. Further, the aforesaid valuation only takes into account the cost of various inputs, like, colour, chemicals, labour charges, etc., that have gone into the processing of cloth, which was in process in the last 5 days of the relevant previous year, and does not include the cloth, which belongs to a third party for whom the job work is undertaken by the appellant. In view of the aforesaid facts and circumstances of the case and respectfully following the decision of the Hon'ble jurisdictional Tribunal in the case of Akruti Dyeing Printing Mills Pvt. Ltd.(supra), the addition of ₹ 2,80,991/- made by the Assessing Officer on account of work-in progress is found to be in order and is, therefore, confirmed. The Assessing Officer is, however, directed to adopt this closing stock of WIP as the opening stock of WIP in the immediately succeeding year. This ground of appeal is dismissed. 4. The assessee is now in appeal before us against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the cloth belonging to its customers did not arise as such cloth was required to be shown in the closing stock of the concerned customers. On the basis of the completion of work on the customers cloth, the appellant is entitled to receive its work charges. No interim payments or advances payments are received by the appellant from its customers during the pendency of the job work. The receipts from the job work are being accounted for by the appellant on completed contract method as per AS-9. The closing stock of materials used for processing of cloth, i.e. colour, chemicals etc. have been duly accounted for by the appellant in accordance with AS-9 In regard to the value addition made by the appellant on the customer's cloth, which may have been at different intermediate stages of processing as on 31.3.2003, neither any opening stock nor closing stock was ever shown by the appellant. As per the principles of accounting laid down by the ICAI, under the scope of Valuation of Inventories in item 1 (sub-item (b) of AS-2 (revised) the work-in-progress arising in the ordinary course of business of service provider has been specifically scoped out of the said statement. Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of estimated work in progress is therefore deleted. This ground of appeal is allowed Thus deletion was confirmed by the Tribunal. Therefore in, the present case also following the decision of the Tribunal confirm the order of the CIT(A), the addition on account of estimated value of work-in-progress is required to be deleted. 5.1 Following the view taken in the aforcited decision, the ITAT in their decision dated 16-07-2010 in the case of Krishna Art Silk Cloth (P) Ltd. vs. DCIT in ITA No.1264/Ahd/2010, in which case also, the ld. CIT(A) upheld the findings of the AO in the light of decision dated 26.10.2007 in the case of Akruti Dyeing Printing Mills Pvt. Ltd. in ITA No.2551/Ahd/2006, allowed the claim of the assessee. 5.2 In another decision dated 13-05-2011,following the view taken by the ITAT in their decision dated 3.04.09 in ITA No. 167/Ahd/2009 in the case of Kanhaiya Processors Pvt. Ltd. vs. ITO , we concluded as under: 7. Having heard both the sides, we have carefully gone through the orders of the authorities below. The Tribunal in the case of Kanhaiya Processors Private Ltd. (supra) observed that the AO could not be able to appreciate the true nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9; contribution towards PF/ESI , paid after the due date(s) was accordingly, disallowed by the AO u/s 36(1)(va) of the Act. 7. On appeal, the learned CIT(A) adjudicated the issue in the light of decision of the ITAT, Kolkata (Special Bench) in the case of JCIT Vs ITC Ltd.,112 ITD 57,followed by the ITAT, Ahmedabad Bench in their decision dated 30.5.2008 in the case of Jayant Paper Mills Ltd, in ITA No.l388/Ahd/2006. Accordingly, the ld. CIT(A) directed the AO to verify the facts regarding the dates of payment and to give deduction only in respect of such payments that have been made within the due date or within the grace period permitted. 8. The assessee is now in appeal before us against the aforesaid findings of the learned CIT(A). The learned AR on behalf of the assessee relied upon the decision of the Hon'ble Supreme Court in the case of CIT vs. Alom Extrusions Ltd. (2009) 319 ITR 306 (SC) and contended that their claim should be allowed in full. The learned DR, on the other hand, supported the findings of the learned CIT(A). 9. W e have heard both the parties and gone through the facts of the case as also the aforesaid decisions of the ITAT. As regards employer&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as income of the assessee u/s 36(1)(va) read with sec. 2(24)(x) in view of provisions of sec. 43B of the Act. 9.3 Hon'ble Delhi High Court in another decision dated 23.12.2009 in CIT Vs. AIMIL Ltd.(Delhi)in ITA no. 1063/2008 observed that sec. 2(24)(x) provides that amounts received by an assessee from employees towards PF contributions etc. shall be income . S. 36 (1) (va) provides that if such sums are contributed to the employees account in the relevant fund on or before the due date specified in the PF legislation, the assessee shall be entitled to a deduction. The second Proviso to s. 43B (b) provided that any sum paid by the assessee as an employer by way of contribution to any provident fund shall be allowed as a deduction only if paid on or before the due date specified in 36(1)(va) of the Act. After the omission of the second Proviso w.e.f 1.4.2004, the deduction is allowable under the first Proviso if the payment is made on or before the due date for furnishing the return of income. The Hon'ble High Court while considering whether the benefit of s. 43B can be extended to employees' contribution as well, which are paid after the due date under the PF law ..... X X X X Extracts X X X X X X X X Extracts X X X X
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