2014 (7) TMI 1261 - AT - Income Tax

Disallowance of expenses incurred on temporary erections and site accommodation - Held that - The assessee has been maintaining proper books of account and in the light of the nature of activities undertaken by the assessee, we find force in the contentions of the learned counsel for the assessee that at every site temporary constructions are made and a particular percentage of expenditure is debited to the account under the head temporary site accommodation and whatever materials were left out from the site they are being reutilized further. Therefore, no excess claim was raised by the assessee. Since no disallowance was ever made in earlier assessment years, we find no justification in the disallowance made in this very assessment year, as the AO cannot blow not and cold in the same breath by admitting the claim of the assessee in one assessment year and denying the same in the succeeding assessment year. We are, therefore, of the view that the claim of the assessee is reasonable and is allowable - Decided in favour of assessee. Disallowance of expenses incurred on shuttering, centering, scaffolding, etc. - Held that - The assessee has been debiting a particular amount per cubic metre to the cost of the project as expenses incurred in shuttering, centering, scaffolding, etc. keeping in view the complexity of nature of work. Copy of the office circular is available at p. 54 of the compilation of the assessee, in which guidelines have been laid down for debit of ₹ 600 per cubic metre on account of shuttering, centering, scaffolding, etc. Keeping in view the totality of the facts and circumstances of the case and the nature of complexity of the work, we are of the view that the assessee s claim of expenses on shuttering, centering, scaffolding, etc. raised as per circulars issued by the department is an allowable expenditure in the light of the order of the Tribunal in the assessee s own case. It is also evident from the record that in earlier year no disallowance was made on this account. Therefore, following the rule of consistency, disallowance cannot be made in the impugned assessment year without any valid reason. We accordingly find no merit in the disallowance and we set aside the order of the learned CIT(A) and delete the addition in this regard. Disallowance of deduction under s. 80-IA - Held that - We find that the claim of deduction under s. 80-IA of the Act was allowed in asst. yrs. 2005-06 and 2007-08 by the AO himself and in asst. yr. 2003-04 the claim was disallowed, but later on it was allowed by the learned CIT(A) and the Revenue has not challenged the order of the learned CIT(A) before the Tribunal. Therefore, it attained finality. Therefore, in the light of these facts, we find no infirmity in the order of the learned CIT(A) who has rightly allowed the claim of the assessee under s. 80-IA of the Act. Accordingly, we confirm the order of the learned CIT(A) on this issue. Addition of provision for foreseen loss - Held that - we find that the assessee has not placed any evidence on record to demonstrate the basis for making provision for foreseen loss . No doubt, foreseen loss may be possible in the business of the assessee as it is engaged in complicated construction work, but without any basis provision for foreseen loss cannot be created. We are, therefore, of the view that whenever loss is suffered, it can be debited to its P&L a/c and the Revenue may allow the same after making necessary verification. Accordingly, we hold that in the impugned assessment year provision for foreseen loss cannot be allowed, but the assessee will be allowed to debit the actual loss suffered by it in any of the assessment years and the same would be allowed by the Revenue after making necessary verification. Disallowance of prior period expenses booked in this year - Held that - As we have confirmed the addition having noted that the assessee could not place any evidence to establish that the prior period liabilities have been crystallised in the impugned assessment year. Similar is the position in the instant case, as nothing is placed on record to establish that the liabilities for earlier years have been crystallised in the impugned assessment year. Accordingly, following the view taken in the foregoing paras, we confirm the addition. Non-deduction of TDS - assessee has submitted that the payment was made in the nature of advance, therefore, the same cannot be disallowed on non-deduction of TDS - Held that - This issue requires a fresh adjudication by the lower authorities after necessary verification with regard to the nature of payment. Accordingly, we set aside the order of the learned CIT(A) and restore the matter to the file of the AO with a direction to adjudicate this issue in the light of evidence with regard to the nature of payment. Accordingly, this appeal of the assessee is disposed of.

Summary

Issues Involved:
1. Disallowance of expenses on temporary erections/site accommodation.
2. Disallowance of expenses on shuttering, centering, scaffolding, etc.
3. Disallowance of prior period expenses.
4. Disallowance of expenses under the head pension contribution for employees.
5. Disallowance of deduction under Section 80-IA.
6. Addition of provision for foreseen loss.
7. Disallowance under Section 40(a)(ia) for non-deduction of TDS.

Detailed Analysis:

1. Disallowance of Expenses on Temporary Erections/Site Accommodation:
The assessee contested the disallowance of Rs. 10,16,41,206 for site accommodation expenses by the AO, who allowed only 7.5% depreciation. The CIT(A) reexamined and allowed 1/5th of the total claim, restricting the disallowance to Rs. 8,79,05,908. The Tribunal found that similar claims were allowed in previous years without disallowance. It was concluded that the claim was reasonable and allowable, thus deleting the addition upheld by the CIT(A).

2. Disallowance of Expenses on Shuttering, Centering, Scaffolding, etc.:
The AO disallowed Rs. 24,59,61,124, treating these as part of plant and machinery, allowing only 7.5% depreciation. The CIT(A) allowed 15% depreciation, reducing the disallowance to Rs. 22,60,18,330. The Tribunal noted that in previous years, such expenses were allowed as 100% depreciation and followed the rule of consistency, deleting the addition.

3. Disallowance of Prior Period Expenses:
The AO disallowed Rs. 11,55,272 as prior period expenses, which the assessee claimed were crystallized in the current year. The CIT(A) confirmed the disallowance due to lack of evidence. The Tribunal upheld this decision, noting the absence of documentary evidence to substantiate the claim.

4. Disallowance of Expenses Under the Head Pension Contribution for Employees:
The Revenue's appeal against the deletion of Rs. 10,01,685 by the CIT(A) was dismissed by the Tribunal due to the tax effect being below the prescribed monetary limit, following CBDT instructions and Section 268A.

5. Disallowance of Deduction Under Section 80-IA:
The Revenue contested the CIT(A)'s allowance of Rs. 7,62,89,122 under Section 80-IA. The Tribunal upheld the CIT(A)'s decision, noting that similar claims were allowed in previous years and attained finality.

6. Addition of Provision for Foreseen Loss:
The AO disallowed Rs. 12.80 crores for foreseen loss due to lack of evidence. The CIT(A) upheld this disallowance. The Tribunal agreed, stating that provision for foreseen loss must be based on ascertained liabilities and allowed the assessee to debit actual losses in future years after verification.

7. Disallowance Under Section 40(a)(ia) for Non-Deduction of TDS:
The AO disallowed Rs. 4.50 lakhs for non-deduction of TDS. The CIT(A) confirmed this. The Tribunal remanded the issue back to the AO for fresh adjudication, directing verification of the nature of payment.

Conclusion:
The Tribunal allowed the assessee's claims for temporary site accommodation and shuttering, centering, scaffolding expenses, following the rule of consistency. However, it upheld the disallowance of prior period expenses and provision for foreseen loss due to lack of evidence. The appeal regarding pension contribution was dismissed due to the low tax effect. The deduction under Section 80-IA was allowed, following previous years' decisions. The issue of TDS disallowance was remanded for fresh adjudication.