2015 (4) TMI 1242 - AT - Income Tax

Expenses incurred on temporary errection/accommodation is fully allowable expenditure - Held that - 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 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. 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 Assessing Officer cannot blow hot 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. Claim of the assessee is reasonable and is allowable. Disallowance of expenses incurred on shuttering, centering, scaffolding, etc. - Held that - 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. No merit in the disallowance and we set aside the order of the ld. CIT(A) and delete the addition in this regard. Disallowance of prior period expenses - Held that - Similar arguments as raised before the ld. CIT(A), but could not place any documentary evidence to substantiate that the prior period expenses have been crystallized in the impugned assessment year. In the absence of any evidence, we find no merit in the contentions of the assessee. Accordingly, we confirm the order of the ld. CIT(A) who has rightly dealt with the issue. Disallowance of deduction under section 80-IA - Held that - In the light of the rival submissions, we find that the claim of deduction under section 80-IA of the Act was allowed in assessment years 2005-06 and 2007-08 by the Assessing Officer himself and in assessment year 2003-04 the claim was disallowed, but later on it was allowed by the ld. CIT(A) and the Revenue has not challenged the order of the ld. 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 CIT(A) who has rightly allowed the claim of the assessee under section 80-IA Disallowance of provision for foreseen loss - Held that - 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. Whenever loss is suffered, it can be debited to its profit and loss account and the Revenue may allow the same after making necessary verification. 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 year and the same would be allowed by the Revenue after making necessary verification. Disallowance of prior period expenses booked in this year - Held that - We have confirmed the addition having noted that the assessee could not place any evidence to establish that the prior period liabilities have been crystalised 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 crystalised in the impugned assessment year. Accordingly, following the view taken in the foregoing paras, we confirm the addition. Provisions of section 40(a)(ia) - Held that - We are of the view 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 CIT(A) and restore the matter to the file of the Assessing Officer 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.

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 pension contribution expenses.
5. Disallowance of provision for foreseen loss.
6. Deduction under section 80-IA of the Income Tax Act.
7. Disallowance under section 40(a)(ia) of the Income Tax Act.

Detailed Analysis:

1. Disallowance of Expenses on Temporary Erections/Site Accommodation:
The Assessing Officer (AO) disallowed Rs. 10,16,41,206/- on account of site accommodation expenses, allowing only 7.5% depreciation. The CIT(A) re-examined and allowed 1/5th of the total claim, reducing the disallowance to Rs. 8,79,05,908/-. The Tribunal found that the assessee, a government undertaking, consistently claimed similar expenses in previous years without disallowance. The Tribunal allowed the assessee's claim, setting aside the CIT(A)'s order and deleting the addition.

2. Disallowance of Expenses on Shuttering, Centering, Scaffolding, etc.:
The AO disallowed Rs. 24,59,61,124/- considering these items as 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 similar claims were allowed in previous years and by the Tribunal in earlier cases. The Tribunal allowed the expenses as claimed by the assessee, setting aside the CIT(A)'s order and deleting the addition.

3. Disallowance of Prior Period Expenses:
The AO disallowed Rs. 11,55,272/- as prior period expenses, noting the assessee follows a mercantile system of accounting. The CIT(A) confirmed the disallowance due to lack of evidence that these expenses crystallized in the relevant year. The Tribunal upheld the CIT(A)'s decision, finding no merit in the assessee's contentions without documentary evidence.

4. Disallowance of Pension Contribution Expenses:
The Revenue appealed against the CIT(A)'s deletion of Rs. 10,01,685/- disallowed by the AO under pension contribution expenses. The Tribunal dismissed the appeal, noting the tax effect was below the prescribed limit as per CBDT instructions.

5. Disallowance of Provision for Foreseen Loss:
The AO disallowed Rs. 12.80 crores for foreseen loss due to lack of evidence. The CIT(A) confirmed the disallowance. The Tribunal agreed, noting that provisions can only be made for ascertained liabilities and actual losses should be debited when incurred.

6. Deduction Under Section 80-IA:
The AO disallowed the deduction of Rs. 7,62,89,122/- under section 80-IA. The CIT(A) allowed the deduction, and the Tribunal upheld this decision, noting that similar deductions were allowed in previous years and attained finality.

7. Disallowance Under Section 40(a)(ia):
The AO disallowed Rs. 4.50 lakhs for non-deduction of TDS. The CIT(A) confirmed the disallowance. The Tribunal remanded the issue back to the AO for fresh adjudication, directing verification of the nature of payment to determine if it was an advance.

Conclusion:
The Tribunal allowed the assessee's claims for temporary erections and shuttering expenses, deleted the additions, and upheld the disallowance of prior period expenses and provisions for foreseen loss. The Tribunal dismissed the Revenue's appeal on pension contribution expenses due to low tax effect and upheld the CIT(A)'s decision on the section 80-IA deduction. The issue of disallowance under section 40(a)(ia) was remanded for fresh adjudication.

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