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TMI Blog2012 (10) TMI 512X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances of the case, the learned CIT (A) has erred both on facts and in law in confirming the action of A.O. in disallowing an amount of Rs.80.44 crores on account of provision for retired medical benefit scheme. 4. (i) On the facts and circumstances of the case, the learned CIT (A) has erred both on facts and in law in confirming the disallowance of Rs.2,09,38,390/- under section 40(a)(ia) of the Act. (ii) That the disallowances has been made by wrong interpretation of section 194C/194J read with section 40(a) (ia) of the Act." 2.1 The department has taken the following grounds in its appeal:- "1. The ld. CIT (A) has erred in law and on facts in directing to delete the addition of Rs.10,61,38,514/- made by the A.O. on estimate basis for the work undertaken on behalf of others agencies. The ld. CIT has failed to appreciate that though the assessee is following Mercantile systems of accounting, revenue has not been recognized in respect of deposit work undertaken. 2. The ld. CIT (A) has erred in law and on facts in directing to delete the addition of Rs.14,36,68,882/- netted off by the assessee against prior income under the head "prior period income." The ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id findings recorded by the Ld. CIT (A), placed reliance on the judgement dated 16.12.2011 passed by the Hon'ble Delhi High Court in the case of the assessee in ITA Nos. 432, 433, 437, 517, 792, 1250 and 1251 of 2008, in the assessee's own case. A copy thereof has been filed before us by way of pages 1-14 of the assessee's paper book. Therein, the Hon'ble High Court has observed as follows:- "19. It is a matter of record that certain Government Department like Customs, Immigration, Meteorological Department, Post Office, Police Agencies including BSF, CISF, Special Bureau of Govt., FRRO, Intelligence Bureau etc. have been provided accommodation in the terminal buildings and other technical areas by the assessee. It is the case of the assessee that these departments have their offices to facilitate the functioning of the assessee and they do not agree to pay any licence fee of the space occupied by them on the plea that they are regulatory bodies to provide special services in terms of the Government directions. Still the assessee had raised the proforma invoices in all these years and kept in memoranda account for example in the assessment year 1998-99. The proforma invoices were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s totaling Rs. 5.33 crores were made. However, in respect of assessment year 1998-99 against the total proforma invoice of Rs. 5.33 crores, the payment receipt was of a meager sum of Rs. 10.30 lacs. The same is the position in respect of earlier assessment years. 20. We are of the opinion that the Tribunal is not correct that merely because a meager sum of Rs. 10.33 lacs is received, the entire amount of Rs. 5.33 crores is to be treated as income and same treatment is to be given in other assessment years. What was to be seen as to which Government Department is remitting the amount. From the details furnished, it is obvious that some of the Departments have never made any payment. 21. We thus restore this issue back to the Assessing Officer to examine the matter in the light of our aforesaid discussion. In respect of the Government Agencies, like Police, Customs who have never paid any amount to the assessee, on the application of "real income" theory and taking a realistic view, it is held that no income has accrued merely because proforma advices were raised, that too, at the instance of the CAG of India. 22. This question of law is answered accordingly with the direction to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision for medical benefits only on estimate basis, which was not based on any scientific or actuarial valuation; that it was only at the time the appellate proceedings [before the Ld. CIT (A)] that the assessee had contended that the actuarial valuation for arriving at the provision was available and it ought to be considered; and that this was only an afterthought and the actual claim of provision for medical benefits was not based on any scientific or logical calculation. 12. In this regard, the ld. counsel for the assessee has contended that though both the authorities below, i.e., the Assessing Officer, in his remand report and the Ld. CIT (A) in the order under appeal, have concurrently held the expenditure by way of provision for retired medical benefit scheme to be an allowable expenditure, the Ld. CIT (A) has erred in not admitting the actuarial valuation report submitted by the assessee by way of additional evidence and in thereby rejecting the claim of the assessee. It has been submitted that the actuarial valuation report, even as per the impugned order, is to form the basis of the allowance/disallowance of the assessee's claim and so, the same needs to be taken in evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not attracted. The Tribunal held that the provisions of Section 40(a)(ia) can be invoked only in the event of non-deduction of tax, but not for lesser deduction of tax, which is also the case herein. Therefore, ground No.3 is accepted. 19. Accordingly, the appeal of the assessee is partly allowed as indicated. ITA No.3074/Del/2010 (Department's Appeal) 20. The first ground in the department's appeal states that the Ld. CIT (A) has erred in directing the Assessing Officer to delete the addition of Rs. 10,61,38,514/-, made on estimate basis, for the work undertaken by the assessee on behalf of other agencies, failing to appreciate that though the assessee was following the mercantile system of accounting, the revenue had not been recognized in respect of the deposit work undertaken. 21. The Assessing Officer made the addition on an estimate basis for the work undertaken by the assessee on behalf of other agencies. It was observed that the assessee was required to show work-in-progress for the various projects and jobs undertaken by it at the close of the financial year, which the assessee had not done. The Assessing Officer estimated the amount of work-in-progress as at the end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. CIT (A) has erred in directing the Assessing Officer to delete the addition of Rs. 14,36,68,882/- netted off by the assessee against prior income under the head "prior period income", failing to appreciate that in the mercantile system of accounting followed by the assessee, there is no provision to allow prior period expenses. 28. After adjusting prior period expenditure of Rs. 14,36,68,882, the assessee had declared a net amount of Rs. 7,79,85,811/-. The Assessing Officer, however, made addition of the amount netted off by the assessee against the prior period income under the head "prior period accounts against prior period income." The Assessing Officer observed that the assessee was required to maintain its accounts on the accrual basis of accounting and that there was no provision under the Income tax Act for allowing any expenditure which accrued in the financial year. 29. The Ld. CIT (A) followed the first appellate orders in the assessee's own case for A.Ys 2004-05 and 2005-06 while directing the Assessing Officer to delete the addition. It was also noted that the COD had refused permission to the department to file appeal before the Tribunal for A.Y. 2001-02. 30. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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