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TMI Blog2017 (4) TMI 606X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. In a nutshell, the facts are that the assessee has debited provisional expenses of Rs. 1,15,00,000/- in his P&L A/c for Shyam Vihar Project. In response to a query raised by the Assessing Officer (AO), the assessee submitted that amount of Rs. 87,95,024/- was spent till 31.03.2012 and the remaining amount of Rs. 27,04,976/- remained unspent. The assessee submitted before the AO that the amount of Rs. 27,04,976/- is to be paid to Govt. Authorities for obtaining OC etc.. The AO observed that the liability of Rs. 27,04,976/- is to be paid to Govt. Authorities as fees and as per provisions of section 43B of the Act, such expenses are allowable only if paid before the due date of filing of return of income. As the assessee had not paid the above amount before filing the return of income, the AO made disallowance of Rs. 27,04,976/- u/s 43B of the Act. 4. Aggrieved by the order of the AO, the assessee filed an appeal before the learned CIT(A). We find that the learned CIT(A) has dismissed the appeal filed by the assessee on the reasons that (i) the amount of Rs. 27,04,976/- represents 50% of the balance as one time premium i.e. the difference demanded by the BMC which is payable by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding of the learned CIT(A) that the said provision is a contingent liability, the learned counsel submits that there is present obligation on the part of the assessee to make payment to BMC of the said FSI premium and this obligation is arising out of past event, wherein reasonable estimate has been made. 6. On the other hand, the learned DR supports the order of the learned CIT(A) confirming the disallowance of provision of expenses of Rs. 27,04,976/- made by the AO u/s 43B of the Act. 7. We have heard the rival submissions and perused the relevant material on record. Let us recapitulate the facts. The amount of Rs. 27,04,976/- is provided for the FSI premium to be paid when demanded by the BMC. The assessee had already paid first (50%) of the FSI premium in F.Y. 2007-08 amounting to Rs. 24,10,500/-. The balance 50% was to be paid when demanded by BMC which shall be before NoC to occupation/ BCC whichever is earlier. This has been stated by BMC in their letter dated 18.03.2008. Now we refer to section 43B which reads as under: "Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of- (a) any sum payabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to P&L A/c for the A.Y. 2011-12, TDS was required to be made on such payments and were to be paid before the due date of filing the return. iii. On the facts & in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering that the assessee is following mercantile system of accounting and since liaison work fee is in the nature of business income, the same was liable to be assessed on accrual basis. 9. We begin with the 1st & 2nd ground of appeal filed by the revenue as they address a common issue. The AO found from the details filed by the assessee that some contractual expenses were liable to TDS since debited in the P&L A/c for the A.Y. 2011-12. Provisions for TDS were required to be made on such payments and to be paid before the due date of filing the return of income. The AO disallowed the expenses where TDS amount was paid after the due date and its comes to Rs. 43,63,515/-. 10. On appeal, the learned CIT(A) observed that in the present case the AO had not disputed that the questioned amounts represented provision. Therefore, the said amounts could not have been credited to any individual payee's account nor could have been paid as the concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er XVII-B with regard to tax deduction at source, we agree with the views expressed by ITAT Mumbai Bench and ITAT Chennai Bench. As per the scheme of TDS under Chapter XVII-B Section 199, the credit for the TDS is to be given to the deductee. Thus, the identification of the person from whose account income tax was deducted at source is a pre-requisite condition so as to make the provision for Chapter XVII-B workable. Tax deducted at source is considered to be tax paid on behalf of the person from whose income the deduction was made and, therefore, the credit for the same is to be given to such person. When the payee is not identifiable, to whose account the credit for such TDS is to be given. Section 203(1) lays down that for all tax deductions at source, the tax deductor has to furnish a certificate to the person to whose account such credit is to be given. Therefore, when the tax deductor cannot ascertain the payee who is the beneficiary of a credit of tax deduction at source, the mechanism of Chapter XVII-B cannot be put into service. In view of the above, we, respectfully agreeing with the views of ITAT Chennai Bench in the case of Dishnet Wireless Ltd. (supra), set aside the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that he was following cash system of accounting in respect of his professional income from liaisoning services consistently year after year. The learned CIT(A) also observed that the assessee had accounted for this receipt towards liaison services of Rs. 4,40,000/- in the period corresponding to the A.Y. 2012-13 which was as per his regular method of accounting i.e. cash system of accounting. Therefore, the learned CIT(A) deleted the addition of Rs. 4,40,000/- made by the AO in the impugned assessment year. 16. Before us, the learned DR submits that as the assessee was following mercantile system of accounting for his construction business, the AO has rightly rejected his plea of maintaining accounts for liaison work on cash method and made an addition of Rs. 4,40,000/- in the impugned assessment year. 17. On the other hand, the learned DR submits that the assessee is engaged in the dual business of construction of building as developer / builder and providing services of building proposal liaison with regulatory authorities. In relation to providing services of building proposal liaison, the assessee follows cash system of accounting and in relation to business of construction ..... X X X X Extracts X X X X X X X X Extracts X X X X
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