2013 (6) TMI 565 - AT - Income Tax

Work in progress - whether be shown under the caption Land procurement and registration - CIT(A) deleted the addition - Held that - Assessee had shown a sum under the head land procurement and registration charges in the profit and loss account & had simultaneously included this amount in the work in progress in the profit and loss account. As entire amount of expenses were debited to the work in progress of the assessee thus it shows that the assessee has not claimed any deduction for a sum of Rs.42,36,000/- under the head land procurement and registration therefore no disallowance same could have been made by the AO while computing the income of the assessee. In favour of assessee. Non deduction of TDS - software development expenses, financial consultancy charges and Director s remuneration - Held that - As form paper book filed by the assessee profit and loss account for the period from 14.06.2006 to 31.03.2007 as filed that the entire expenditure of Rs.1,01,06,389 during the year has been shown as closing work in progress at Rs.1,01,04,668/-. Thus it is seen that no expenditure has been claimed as deduction in the profit and loss account by the assessee. Hence the question of making any disallowance of any expenditure for non deduction of tax at source by invoking the provisions of section 40(a)(ia) does not arise. In favour of assessee.

Summary

Issues Involved:
1. Appeal filed by Revenue barred by limitation.
2. Justification for deleting addition of Rs.42,96,000 under "Land procurement and registration."
3. Disallowance of expenses under different heads due to non-deduction of TDS.

Analysis:
1. The appeal filed by the Revenue was initially barred by a limitation of 5 days. However, the Revenue filed a condonation petition citing plausible reasons for the delay. The tribunal found the reason acceptable and condoned the delay, admitting the appeal for hearing.

2. The main issue raised by the Revenue was the deletion of the addition of Rs.42,96,000 under the head "Land procurement and registration." The Assessing Officer (AO) disallowed this amount as the assessee could not provide valid proof of land ownership. However, the Commissioner of Income Tax (Appeals) deleted the disallowance, stating that since the expenditure was included in the work-in-progress and not claimed as a business expense, no disallowance was justified.

3. The Cross Objection raised by the assessee involved the confirmation of additions under different heads due to non-deduction of Tax Deducted at Source (TDS). The AO disallowed expenses for software development, financial consultancy charges, and director's remuneration for not deducting TDS. The Commissioner upheld these disallowances under section 40(a)(ia) of the Income Tax Act.

4. The tribunal considered the submissions and evidence presented. It noted that the entire expenditure was debited in the work-in-progress account, with no deductions claimed in the profit and loss account. Therefore, the tribunal set aside the disallowances made by the AO and confirmed by the Commissioner, as no expenditure was claimed, and thus, no disallowance for non-deduction of TDS was warranted.

5. In conclusion, the appeal of the Revenue was dismissed, and the Cross Objection of the assessee was allowed based on the findings related to the treatment of expenses in the profit and loss account and work-in-progress. The tribunal's decision was pronounced on 18th June 2013.