2013 (9) TMI 347 - AT - Income Tax

Computation of income - works contract - determination of expenditure incurred for execution of works contract - Held that - Having taken 95% of the total contract amount receivable by the assessee from the society for determining the accrued income as on 31.3.2006 the Assessing Officer ought to have deducted 95% of the total expenditure incurred by the assessee for forming layout as accrued expenditure for the year ending 31.3.2006. The CIT(A) for determining the income had considered the entire contract receipt and total expenditure incurred by the assessee. We find that the action of CIT(A) cannot be faulted. - Decided against the revenue.

Summary

Issues Involved:
1. Escalation of Rs.85/sq.yd in respect of sites allotted to land-losers.
2. Deduction of Rs.79,564/- in respect of expenditure incurred during the year.
3. Allowance of depreciation on motor car omitted in the return of income.
4. Computation of income by taking into account the entire contract amount and closing work-in-progress.

Issue-Wise Detailed Analysis:

I. ITA No.381/B/11 - By the Assessee:

1. Escalation of Rs.85/sq.yd in respect of sites allotted to land-losers:
The assessee firm, engaged in developing housing layouts, contested the inclusion of Rs.8,98,110/- in the total consideration of Rs.8,00,44,828/- determined by the CIT (A). The CIT (A) confirmed the AO's view that the assessee should have disclosed income from the project for the period under consideration, noting that 95% of the project was completed by 31.3.2006. The CIT (A) referenced the MOU dated 1.1.2005, which stated that the enhanced rate of Rs.85/sq.yd excluded the sital value of the land losers. However, the CIT (A) did not consider this exclusion while calculating the total consideration, leading to the inclusion of Rs.8,98,110/- in the total amount.

2. Deduction of Rs.79,564/- in respect of expenditure incurred during the year:
The assessee argued that the CIT (A) failed to allow the deduction of Rs.79,564/- for expenditure incurred during the disputed year. The CIT (A) did not address this issue in its findings, which the Tribunal noted as an oversight that required rectification.

3. Allowance of depreciation on motor car omitted in the return of income:
The assessee also raised the issue of depreciation on a motor car, which was omitted in the return of income. This issue was brought before the CIT (A) but was not addressed in the final order. The Tribunal recognized this omission and deemed it necessary for the CIT (A) to reconsider the claim.

Tribunal's Decision on Assessee's Appeal:
The Tribunal found that the CIT (A) did not address the specific issues raised by the assessee regarding the escalation amount, expenditure deduction, and depreciation on the motor car. Therefore, these issues were restored to the file of the CIT (A) for fresh consideration and appropriate action in accordance with the provisions of the Act, ensuring a reasonable opportunity for the assessee to be heard.

II. ITA No.413/B/11 - By the Revenue:

4. Computation of income by taking into account the entire contract amount and closing work-in-progress:
The Revenue contended that the CIT (A) erred in computing the income by considering the entire contract amount of Rs.8,00,44,828/- and the closing work-in-progress amounting to Rs.7,39,57,562/-, arriving at a profit of Rs.60,87,266/-. The Revenue argued that the profit should have been Rs.1,07,06,336/-, based on their calculation of 95% completion of the project. The CIT (A) had considered both the anticipated receipts and outgoings, which the Tribunal found to be a reasonable approach. The Tribunal upheld the CIT (A)'s computation, agreeing that the CIT (A)'s method of considering the entire contract receipt and total expenditure incurred by the assessee was appropriate.

Tribunal's Decision on Revenue's Appeal:
The Tribunal dismissed the Revenue's appeal, sustaining the CIT (A)'s findings and computation of the assessee's profit from the project.

Conclusion:
- The assessee's appeal was allowed for statistical purposes, with specific issues restored to the CIT (A) for fresh consideration.
- The Revenue's appeal was dismissed, upholding the CIT (A)'s computation of income and profit.

Order Pronounced:
The order was pronounced in the open court on 22.3.2013.