TMI Blog2019 (9) TMI 1224X X X X Extracts X X X X X X X X Extracts X X X X ..... y in his impugned order - Decided against revenue Disallowance on account of alleged unascertainable payments to subcontractors - said labour charges in the absence of TDS were not ascertainable - CIT(A) deleted the said disallowance - HELD THAT:- As explained by the assessee that the amount of unbilled sales represented revenue booked in the accounts on the percentage completion method for incomplete contracts at the end of the year. It was explained that corresponding expenditure incurred in relation to the unbilled sales including sub-contract charges for earning the revenue so booked was also provided for in the accounts. Since this method was followed by the assessee company consistently in the earlier years, the Ld. CIT(A) allowed the claim of the assessee as the same was made as per the method of accounting consistently followed by the assessee. Moreover, we are of the view that the said claim of the assessee is liable to be allowed even as per the matching principle. We, therefore, find no infirmity in the impugned order of the Ld. CIT(A) - Decided against revenue Disallowance on account of excise duty - as there was no corresponding credit made by the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) after having found that the said donations were made by the assessee to various local entities primarily towards community celebrations in order to build goodwill within the community and to ensure the smooth conduct of business. Being satisfied that the business expediency of the expenses incurred by the assessee on payment of the said donations, CIT(A) allowed the same u/s 37(1) of the Act and keeping in view the relevant facts of the case, we do not find any infirmity in the impugned order of the Ld. CIT(A) on this issue - I.T.A. No. 1515/Kol/2013 - - - Dated:- 22-3-2019 - Shri P.M. Jagtap, Vice President And Shri S.S. Viswanethra Ravi, JM For the Assessee : None For the Revenue : Shri C.J. Singh, Sr. DR (JCIT) ORDER PER P.M. JAGTAP, VICE PRESIDENT This appeal is preferred by the revenue against the order of Ld. CIT(A) 20, Kolkata dated 21.02.2013. 2. At the time of hearing fixed on 18.03.2019, none has appeared on behalf of the assessee in spite of the fact that the notice of the said hearing was sent to the assessee by RPAD. There was a similar non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rresponding works receipts were accounted for by it. On the other hand, tax was deducted and paid by the payee in the year in which the corresponding liability was booked by it, pr payment was made by it. In such event the year of claiming deduction for the works contract tax by the appellant and the year of payment of the corresponding amount by the payee might differ. As the liability for payment of works contract tax lies with the payee and not on the appellant, as and when the works was executed and the amount of erection sales was accounted for and offered to tax, the appellant claimed deduction for the corresponding amount of work contract tax incurred on such erection sales/works receipt. The AO had disallowed the claim for deduction on account of works contract tax as aforesaid amount on the sole ground that the same did not relate to the FY under consideration. The AO had come to the aforesaid conclusion because the corresponding certificate had been issued by the deductor in the subsequent year. The appellant had accounted for and claimed deduction for ₹ 5,55,561/- in the instant year as it pertained to the invoices raised in the instant year. I find merit in the ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance made by the AO for the following reasons given in paragraph No. 6.2 of his impugned order: I have perused the assessment order and considered the submission of the appellant. The appellant with supporting facts and figures/documents submitted that the contractors charges should be at ₹ 94,50,715/- as against taken at ₹ 1,11,68,443/- by the AO. After careful consideration of the details / documents, I agree with the submission of the appellant that these figures should be at ₹ 94,50,715/-- The appellant argued that out of total amount towards contract charges, ₹ 3,92,386/- pertains to payment made to the parties which was less than ₹ 20,000/-, ₹ 6,80,969/- was paid directly by the appellant s bankers, SBI in terms of the Session Court s order to T.K. Kar a sub-contractor of the appellant as the amount was paid by the bank sub-contractor debiting the bank account of the appellant there was no scope for the appellant to the effect to make deduction of tax at source. The relevant communication of the SBI intimating the above fact of payment was filed. Balance amount of ₹ 83,77,359/- represents provision in relation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, hence appeal on this ground is allowed. 10. We have heard the arguments of learned DR on this issue and also perused the relevant material available on record. Although the learned DR has strongly supported the order of the AO on this issue, it is observed that the relevant labour charges considered by the AO for disallowance were actually ₹ 94,50,715/- and not ₹ 1,11,68,443/- as found by the Ld. CIT(A) after verifying the relevant details and documents. As further found by the Ld. CIT(A), the said sum was inclusive of two amounts of ₹ 3,92,386/- and ₹ 6,80,989/- on which the assessee was not required to deduct tax at source. Regarding the balance amount of ₹ 83,77,359/-, the same was claimed by the assessee to be a provision in relation to unbilled sales. It was explained by the assessee that the amount of unbilled sales represented revenue booked in the accounts on the percentage completion method for incomplete contracts at the end of the year. It was explained that corresponding expenditure incurred in relation to the unbilled sales including sub-contract charges for earning the revenue so boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ished goods i.e. valuation of finished goods at year end was inclusive of excise duty. The difference between the closing and opening stock of finished goods had been duly credited to the P L account. In order to neutralise the excise duty element amounting to ₹ 44,707/- included in the value of Finished Products and credited in the P L account the corresponding liability was also debited to the P L account under the head Excise Duty . I find merit in the argument of the appellant in this regard, therefore, appeal on this ground is allowed. 14. We have heard the arguments of learned DR on this issue and also perused the relevant material available on record. It is observed that inclusive method was followed by the assessee in respect of excise duty and since the sales credited by the assessee to the profit and loss account as well as the stock of finished goods were inclusive of excise duty, there was no credit separately made on account of excise duty to the profit and loss account. It appears that this accounting treatment given by the assessee however was not appreciated by the AO while making the disallowance on account of excise duty. The Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se is that the liability of income tax in this case was calculated u/s 115JB of the I.T. Act. While calculating the book profit, the A.O had added profit on sale of fixed asset and investment. However, the appellant cited the following judgements in support of their claim. The ITAT Delhi Bench in the case of JCIT vs. Northern India Theatres Pvt. Ltd. (1996) 133 CTR 326 (Del) (TX). In the said case the Hon ble Tribunal has directly dealt with the question of parts II and III of schedule VI, and has held that profit derived on sale of fixed assets yield only capital gains and they do not partake the character of business profits and the same should not be shown as business profits in a properly prepared P L A/c as per provisions of parts II and III of Schedule VI of Companies Act. The Hon ble Tribunal has further held that if items of credit which do not relate to the business carried on by the assessee company are found included in its P L A/c, such a P L A/c cannot be called as P L A/c prepared in accordance with the requirements of part II and III of sixth schedule. Accordingly, profit derived on sale of fixed assets should not show as business profits i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Registrar of the Company, has to be taken as the starting point for computation of book profit u/s 115J and only the adjustments to the extent provided in the Explanation to Section 115J can be made. It appears that the Ld. CIT(A) however failed to consider this binding precedent and allowed the adjustment beyond what is provided in Explanation to Section 115JB by reducing the profit on sale of fixed assets which was credited by the assessee company to its profit and loss account. It is also observed that the Ld. CIT(A) erred in allowing this claim of the assessee by relying on certain decisions of the Tribunal which were rendered prior to the judgment in the case of Appollo Tyres Ltd. (Supra) came to be delivered by the Hon ble Supreme Court. The learned DR has also relied by the decision of Hon ble Kolkata High Court in the case of G.K.W. Ltd. vs CIT (2011) 12 taxmann.com 234 wherein it was held that it is absurd to suggest that the profit on sale of fixed assets do not form part of the book profit u/s 115JA of the Income Tax Act, 1961. Keeping in view the ratio of these decisions of the Hon ble Apex Court as well as Hon ble Jurisdictional High Court, we set aside the impugned o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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