2021 (5) TMI 798 - AT - Income Tax

Understatement of receipts in respect of the project by following percentage of completion method of accounting - HELD THAT - Tribunal has decided the issue in favour of the assessee in assessment year 2007-08 2020 (7) TMI 189 - ITAT MUMBAI and in assessment year 2009-10 2020 (8) TMI 842 - ITAT MUMBAI . Facts being identical, respectfully following the consistent view of the Tribunal expressed in assessee s own case in preceding assessment years referred to above, we delete the addition made by the assessing officer and sustained by learned Commissioner of Income Tax (Appeals). These grounds are allowed. Addition on account of excess of progress billing over inventories - HELD THAT - As relying on own case we find that the assessee has accumulated cost as well as revenue under these projects in the Balance Sheet by following completed contract method. The revenue has accepted such accumulation during AYs 2004-05 2005-06 and this is the third year of accumulation under the projects. It is not the case of the revenue that the income under these projects have not been offered to tax in subsequent years. No case of revenue leakage has been established before us. Therefore, the action of revenue in disturbing the consistent method of accounting being followed by the assessee could not be held to be justified. Hence, we delete the impugned additions and allow these grounds of appeal. Deduction of education cess and higher and secondary education cess - HELD THAT - We find that this issue is squarely covered by the decision of Hon ble jurisdictional High Court in case of Sesa Goa Ltd vs JCIT 2020 (3) TMI 347 - BOMBAY HIGH COURT wherein, the Hon ble Court has held that amount paid towards education cess and higher and secondary education cess on income-tax is an allowable deduction. The same view has been expressed by the co-ordinate bench in case of M/s Baroda Industries Pvt Ltd 2020 (11) TMI 943 - ITAT MUMBAI .Respectfully following the aforesaid decisions, we allow assessee s claim. These grounds are allowed. Depreciation on certain expenditure - HELD THAT - Admittedly, the assessee is contesting the issue before the Tribunal in assessment year 2008-09 and as submitted, the appeal has been heard. Therefore, assessee s claim of depreciation would depend on the outcome of the decision of the Tribunal regarding assessee s claim of revenue expenditure in assessment year 2008-09. In case, assessee s claim is accepted in assessment year 2008-09, this ground would become infructuous. Otherwise, if the Tribunal agrees with the departmental authorities that the expenditure is capital in nature, the assessee would be entitled to claim depreciation. Accordingly, this ground is restored back to the assessing officer for deciding afresh keeping in view the order of the Tribunal for assessment year 2008-09. This ground is allowed for statistical purposes. Short grant of TDS - HELD THAT - We direct the assessing officer to verify form 26AS and other materials on record and allow credit for TDS as may be admissible and in accordance with law. This ground is allowed for statistical purpose. Non grant of foreign tax credit - HELD THAT - It is the contention of the assessee that the entire income earned by the assessee, whether in India or from contracts executed in foreign countries have been offered to tax in India and the assessee has shown positive income. Hence, credit for tax paid in foreign countries should be given. Undisputedly, the aforesaid issue was not a subject matter of dispute before learned DRP. This issue has been raised for the first time before us. All relevant facts relating to assessee s claim have to be examined, as, they were never examined at any stage. Therefore, we restore the issue to the assessing officer for examining assessee s claim and deciding it in accordance with law. We make it clear, we have not expressed any opinion on the merits of assessee s claim which the assessing officer has to decide keeping in view the allowability of assessee s claim vis- -vis the legal position. Of course, the assessing officer has to provide a reasonable opportunity of being heard to the assessee before deciding the issue. Levy of interest under section 234A - HELD THAT - It is the claim of the assessee that the return of income having been filed within the time limit prescribed under section 139(1) of the Act, no interest under section 234A can be charged. Keeping in view the aforesaid submission of the learned Counsel, we direct the assessing officer to verify the date of filing of return and in case it is found that the return of income was filed within the due date as per section 139(1) of the Act, no interest under section 234A can be charged.

Summary

Issues Involved:
1. Maintainability of Revenue's appeal due to low tax effect.
2. Addition on account of alleged understatement of receipts.
3. Addition on account of excess of progress billing over inventories.
4. Non-grant of TDS credit.
5. Deduction of education cess and higher and secondary education cess.
6. Depreciation on certain expenditure.
7. Short grant of TDS.
8. Non-grant of foreign tax credit.
9. Levy of interest under section 234A of the Act.

Detailed Analysis:

1. Maintainability of Revenue's Appeal Due to Low Tax Effect:
The Revenue's appeal for the assessment year 2010-11 was dismissed as the tax effect was below the monetary limit of ?50 lakhs prescribed by the CBDT in circular No.17/2019 dated 08th August 2019. The disputed amount was ?1,08,24,657/- and the tax effect was much below the prescribed limit. Therefore, the appeal was not maintainable and was dismissed.

2. Addition on Account of Alleged Understatement of Receipts:
The assessee challenged the addition made by the assessing officer for alleged understatement of receipts by following the percentage of completion method of accounting. The Tribunal noted that the assessee had been consistently following this method since assessment year 2004-05 and similar disallowances in previous years (2006-07, 2007-08, and 2009-10) were deleted by the Tribunal. The Tribunal held that the consistent method of accounting should not be disturbed without evidence of revenue leakage. Consequently, the addition was deleted.

3. Addition on Account of Excess of Progress Billing Over Inventories:
The assessee challenged the addition of ?1,72,26,690/- towards excess of progress billing over inventories. The Tribunal found that the assessee had been consistently accumulating cost and revenue under projects in the balance sheet by following the completed contract method, and similar additions in previous years were deleted by the Tribunal. Therefore, the addition was deleted.

4. Non-Grant of TDS Credit:
The assessee raised the issue of non-grant of TDS credit of ?19,16,963/-. The Tribunal directed the assessing officer to verify form 26AS and other materials on record and grant credit for TDS in accordance with the law. This ground was allowed for statistical purposes.

5. Deduction of Education Cess and Higher and Secondary Education Cess:
The assessee claimed deduction of education cess and higher and secondary education cess on income-tax amounting to ?47,49,963/-. The Tribunal found that this issue was covered by the decision of the Hon'ble jurisdictional High Court in the case of Sesa Goa Ltd vs JCIT (2020) 423 ITR 426 (Bom), which held that such cess is an allowable deduction. The claim was allowed.

6. Depreciation on Certain Expenditure:
The assessee claimed depreciation on expenditure incurred in the assessment year 2008-09, which was treated as capital in nature by the assessing officer. The Tribunal noted that the issue was pending before the Tribunal for assessment year 2008-09. The Tribunal directed the assessing officer to decide the claim of depreciation afresh based on the outcome of the decision for assessment year 2008-09. This ground was allowed for statistical purposes.

7. Short Grant of TDS:
The assessee raised the issue of short grant of TDS. The Tribunal directed the assessing officer to verify form 26AS and other materials on record and allow credit for TDS as admissible and in accordance with the law. This ground was allowed for statistical purposes.

8. Non-Grant of Foreign Tax Credit:
The assessee claimed foreign tax credit of ?43,24,819/-. The Tribunal noted that this issue was raised for the first time and required examination of relevant facts. The issue was restored to the assessing officer for examination and decision in accordance with the law, providing a reasonable opportunity of being heard to the assessee.

9. Levy of Interest Under Section 234A of the Act:
The assessee challenged the levy of interest under section 234A, claiming that the return of income was filed within the time limit prescribed under section 139(1). The Tribunal directed the assessing officer to verify the date of filing of the return and, if filed within the due date, not to charge interest under section 234A.

Conclusion:
The Revenue's appeal was dismissed due to low tax effect. The assessee's appeals were partly allowed, with various additions deleted, TDS credit and deductions allowed, and certain issues restored to the assessing officer for fresh consideration based on the Tribunal's directions.