TMI Blog2022 (12) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... vour of the assessee by the decision of the coordinate bench of the Tribunal forpreceding assessment years. Thus, respectfully following the orders passed by the coordinate bench of the Tribunal in assessee s own case cited 2006 07, [ 2019 (4) TMI 873 - ITAT MUMBAI] , 2007 08 [ 2020 (7) TMI 189 - ITAT MUMBAI] , 2009 10 [ 2020 (8) TMI 842 - ITAT MUMBAI] , we uphold the plea of the assessee and delete the impugned disallowance of provision for costs incurred on completed contracts. Accordingly, grounds raised in assessee s appeal are allowed. Taxability of excess of progress billings over accumulated costs incurred - HELD THAT:- We find that the coordinate bench of the Tribunal in assessee s own case in Thyssenkrupp Industrial Solutions (India) Pvt. Ltd [ 2019 (4) TMI 873 - ITAT MUMBAI] decided similar issue in favour of the assessee. DR could not show us any reason to deviate from the aforesaid orders and no change in facts and law was alleged in the relevant assessment year. The issue arising in the present case is recurring in nature and has been decided in favour of the assessee by the decision of the coordinate bench of the Tribunal for preceding assessment years. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od, following his own method of accounting adopted by him in previous years. 8. The learned Deputy Commissioner of Income Tax-15(3)(1) erred in not deleting excess of progress billings over sales recognized in respect of contracts accounted under the Percentage of Completion Method amounting to Rs 3.98.88,530/- which has been taxed in the immediately preceding assessment year, and which were offered to tax as sales in the current year. 9. The learned Deputy Commissioner of Income Tax-15(3)(1) erred in confirming taxation of an amount of Rs.6,43,375/-, as income, in respect of contracts accounted under the Completed Contract Method where the progress billings were in excess of accumulated costs incurred. 10. The learned Deputy Commissioner of Income Tax-15(3)(1) erred in rejecting the regular method of accounting followed by the appellant and accepted by the Department in the past. 11. The learned Deputy Commissioner of Income Tax-15(3)(1) erred in not deleting excess of progress billings over accumulated costs incurred in respect of contracts accounted under the Completed Contract Method amounting to Rs.9,62,40,846/- which has been taxed in the immediat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TNMM 5 Availing of Email Services (Payment) 938407 TNMM 6 Royalty 11514563 TNMM 7 Availing of software licenses (Payment) 18152538 TNMM 8 Availing of guarantee 6160800 TNMM 9 IT Support services 22445815 10 Purchase of Book 5914 11 Deputation of Personnel (received) 855275 CUP 12 Reimbursement of expenses (received) 15157492 CUP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rises in the hands of the assessee. The learned AR further submitted that all back-to-back invoices are available and part of the paper book and since direct comparable transaction in terms of cost paid to the third party was available, this transaction was benchmarked by applying CUP method. 9. On the other hand, learned Departmental Representative ( learned DR ) vehemently relied upon the orders passed by the lower authorities. 10. We have considered the rival submissions and perused the material available on record. During the year under consideration, assessee reimbursed expenditures in the nature of salary, software expenses, telephone, travel, insurance, courier charges, training expenses, accommodation other expenses to the associated enterprise for the cost incurred on behalf of the assessee. Such reimbursement was made by the assessee without paying any markup on the cost. The TPO as well as the learned DRP treated the arm s length price of this transaction at NIL on the basis that assessee has failed to justify/prove rendition, necessity and benefit of this expenditure. The learned DRP termed it as benefit test and the willingness to pay test , which was alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the independent entity in a comparable transaction and the arm s length price of the international transaction was treated to be NIL. In the present case, no doubts about payments made by the assessee have been raised by the Assessing Officer under section 37 of the Act. Further, accrual of benefit to assessee or the commercial expediency of any expenditure incurred by the assessee cannot be the basis for disallowing the same, as held by Hon ble Delhi High Court in the case of EKL Appliances Ltd. [2012] 345 ITR 241 (Del.). 12. We further find that Hon ble jurisdictional High Court in CIT v/s Lever India Exports Ltd. [2017] 246 Taxmann 133 (Bombay), observed as under: 7. We note that the Tribunal has recorded the fact that the respondent assessee has launched new products which involved huge advertisement expenditure. The sharing of such expenditure by the respondent assessee is a strategy to develop its business. This results in improving the brand image of the products, resulting in higher profit to the respondent assessee due to higher sales Further, it must be emphasized that the TPO's jurisdiction was to only determine the ALP of an International Transaction. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnational transaction of Reimbursement of Expenses to be NIL, in the present case. Accordingly, grounds no. 1 to 3 raised in assessee s appeal are allowed. 15. The issue arising in grounds no. 4 and 5, raised in assessee s appeal, is pertaining to disallowance of provision for costs incurred on completed contracts. 16. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the course of assessment proceedings, it was observed that assessee has, inter-alia, made a provision for costs on completed contracts of Rs. 1,12,70,129. Accordingly, assessee was asked to furnish details and justification for claim of provision in the profit and loss account for the year under consideration. In reply, assessee submitted that as the contract reaches substantial completion, the assessee recognises total revenue and total contractual profits taking into account committed cost which are crystallised based on the expert advice of the engineering/Project departments of the company and the discussion with the client and punch list provided by the client. The assessee further submitted that at this stage, the final acceptance of the client is still pendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the probable future expenditure of an ongoing project or scheme. If it recognises income from such project in that year, it will have to make some reasonable provisions for the expenditure to be incurred in subsequent year Provision will vary from project to project and from year to year. It would also depend on stage of completion of the project. For that purpose assessee will have to rely on earlier years' experience and report of the technical personnel Question of provisions for warranty was discussed at length by the Hon'ble Apex Court in the matter of Rotork Controls India P. Ltd.(314 ITR 62) We are aware that warranty cannot be equated with provisions made for the projects to be completed by an assessee, but the principle laid down by the Hon'ble Court are applicable to the case under consideration Provision after all is only an estimation of probable expenditure to be incurred after the end of a particular year. Besides, in our opinion travelling cost of the engineers and technical staff, testing cost, supplies of replacement spares, site related costs, cost of completion of punch list work, cost of modification for uncompleted projects has to be considered wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der appeal Reversing his order we decide first effective ground of appeal (ground no. 1-3) in favour of the assessee. 20. Similarly, the coordinate bench of the Tribunal in assessee s own case for subsequent assessment years i.e. 2006 07, 2007 08 and 2009 10, in ITA No. 1691/Mum./2012, ITA no. 1904/Mum./2012 and ITA no. 1245/Mum./2014, respectively, decided similar issue in favour of the assessee. The learned Departmental Representative could not show us any reason to deviate from the aforesaid orders and no change in facts and law was alleged in the relevant assessment year. The issue arising in the present case is recurring in nature and has been decided in favour of the assessee by the decision of the coordinate bench of the Tribunal for preceding assessment years. Thus, respectfully following the orders passed by the coordinate bench of the Tribunal in assessee s own case cited (supra), we uphold the plea of the assessee and delete the impugned disallowance of provision for costs incurred on completed contracts. Accordingly, grounds no. 4 and 5 raised in assessee s appeal are allowed. 21. The issue arising in grounds no.9 and 10, raised in assessee s appeal, pertains t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate from the aforesaid orders and no change in facts and law was alleged in the relevant assessment year. The issue arising in the present case is recurring in nature and has been decided in favour of the assessee by the decision of the coordinate bench of the Tribunal for preceding assessment years. Thus, respectfully following the orders passed by the coordinate bench of the Tribunal in assessee s own case cited (supra), we uphold the plea of the assessee and delete the impugned addition made by the Assessing Officer. Accordingly, grounds no. 9 and 10 raised in assessee s appeal are allowed. 27. Grounds No. 6, 7, 8, 11 and 12 were not pressed during the course of hearing. Accordingly, the aforesaid grounds are dismissed as not pressed. 28. Ground No. 13 raised in assessee s appeal is pertaining to levy of interest under section 234B and 234C of the Act, which is consequential in nature. Thus, ground No. 13, is allowed for statistical purpose. 29. In this appeal, assessee has also filed an application seeking admission of additional ground of appeal. However, during the course of hearing the said application was not pressed by the learned AR. Accordingly, the applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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