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TMI Blog2014 (5) TMI 1074X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of payments where the assessee failed to deduct TDS. These two sections are not para materia.- Decided in favour of assessee - ITA No. 959/Hyd/2013 - - - Dated:- 28-5-2014 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER For the Petitioner : Sri D. Sudhakar Rao For the Respondent : Sri K.A. Sai Prasad ORDER PER CHANDRA POOJARI, A.M.: This appeal by the Revenue is directed against the order of the CIT(A)-II, Hyderabad dated 28.3.2013. 2. The Revenue raised the ground the CIT(A) erred in deleting the disallowance made u/s. 40(a)(ia) of the Act at ₹ 16,05,80,987. 3. Brief facts of the case are that the assessee is a company engaged in the business of construction and sale of flats filed its return of income on 30.09.2009 admitting a total income of ₹ 59,68,667. The return was processed u/s 143(1) of IT Act, and the case was selected for scrutiny u/s 143(2) and the assessment was completed on a total income of ₹ 19,96,85,500. The assessee is in the business of construction and sale of flats and the expenditure incurred towards construction during the year was ₹ 170,61,37,363 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture is ₹ 23,38,41,519 i.e., 1.93% only and the balance of ₹ 1189,09,04,466 is treated as inventory (work-in-progress) under the head current assets. The items on which tax at source was not deducted and otherwise disallowable u/s. 40(a)(ia) (which formed part of ₹ 1212,47,48,985 i.e., the total project cost) amounted to ₹ 18,94,76,147. The break-up of which is as under: Rs. 1. M/s. Vinamra Universal Traders Pvt. Ltd. Interest Liability 15,36,78,432 2. UIOF Interest Liability 69,02,055 3. Genesis Premnath Architect fee advance 1,75,18,008 4. Consultancy Fee charges 30,70,394 5. Project expenses Sub-contractors 83,07,258 Total 18,94,76,147 6. The CIT(A) held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt the provisions of section 40(a)(ia) should be applied in the present case also. 9. The learned AR submitted that the observations of the Assessing Officer are factually incorrect and not legally justified which are as under: Para AO observations Assessee submissions 4.0 Two methods of presentation of Profit Loss a/c. Assessing Officer himself accepted that both types of presentation are valid. Hence what is to be seen is what is actually claimed as expenses. By no stretch of imagination one can say that the entire expenses is claimed as deduction in this year itself by the assessee. 5.0 Sale recognition on execution of sale deed only This is factually incorrect. The sale is recognized not only on the basis of execution of sale deed, but also on the receipt of more than 50% of the sale consideration. In fact for some villas even though sale deed was not executed, the sale was recognized, since the assessee received major portion of agreed sale price. Assessing Officer is trying to project the case as if the Assessee is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the P L A/ c. and Balance Sheet filed the assessee made a note in the P L A/c saying the rationale for doing so is that in the 2008-09, we are transferring only 1.93% of the total cost incurred. The expenditure on which TDS is not paid is part of the total cost incurred till date, from which the cost is being recognized in the C.Y. Hence, only that portion of expense should be disallowed which is being claimed against revenue in AY i.e., 1.93% of the expense. The assessee's Profit and Loss Account and Balance Sheet were prepared and audited by statutory auditors and the method of accounting is accepted by the Assessing Officer. For non-adherence to the TDS provisions remedy u/s. 201(1) and 201(lA) of the LT. Act, 1961 is available and the TDS Assessing Officer has taken action under sections 201(1) and 201(lA) of the Act for the F.Y. 2008-09 and levied interest u/s. 201(1) 201(lA) vide order dated 16.07.2012 raising a demand of ₹ 1,61,93,580/-. 12. The AR submitted that the Assessing Officer did not reject the method of accounting followed by the assessee and he accepted the income returned by the assessee but however, he disallowed the expenditure on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Bench in the case of Egwood Industries Pvt. Ltd. vs. DCIT (ITA No. 1230/Hyd/2013 Anr) order dated 13.12.2013 wherein held that : 7. We have heard both the parties and perused the material available on record. We find that the facts in the instant case are similar to that one which was decided by the Coordinate Bench of this Tribunal in the case of M/s. Narne Constructions (P) Ltd. in ITA. No. 1462 1463/Hyd/2011 for the assessment year 2004- 2005 by order dated 25.01.2012 wherein the Tribunal observed as follows : 10. We have heard both the parties on this issue. The contention of the assessee is that this item has not been debited to Profit and Loss a/c and this has been shown in the balance sheet and it cannot be considered for allowance or disallowances. We find force in the contention of the assessee's counsel that unless the assessee claims this item as expenditure / payment, the A.O. cannot allow or disallow the same. In that circumstances, we set aside this issue to the file of the A.O. to examine whether this is an expenditure/payment claimed by the assessee in the profit and loss account or shown as an item in the balance sheet. In the event, if it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is partly allowed for statistical purposes. 16. We have heard both the parties and perused the material on record. In this case as seen from the Profit and Loss A/c., the assessee had debited an expenditure of ₹ 23,38,41,519 out of total expenditure of ₹ 1212,47,48,985 and carried an amount of ₹ 1189,09,04,466 as work-in- progress in Balance Sheet. In other words, the assessee has not claimed this amount of ₹ 16,05,80,987 as an expenditure in the Profit and Loss A/c. In our humble opinion, unless and until the assessee claimed this as an expenditure while computing the income, the provisions of section 40(a)(ia) of the Act cannot be invoked. 17. The CIT(A) placed reliance on the decision of the ITAT, Hyderabad in the case of ACIT vs. Godavari Developers in ITA No. 918/Hyd/2012 dated 31.10.2012. In this case the Tribunal followed the decision of the Tribunal Mumbai 'J' Bench in the case of ITO vs. Savala Associates (cited supra) where it has been held that - In principle, one agrees with the above view of revenue that in case of 'completed contract method' the AO is empowered to examine the expenditures incurred during the year w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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