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TMI Blog2016 (3) TMI 640X X X X Extracts X X X X X X X X Extracts X X X X ..... P SINGH, JUDICIAL MEMBER For The Appellant :Sh. Syed Nasir Ali, CIT DR For The Respondent :Sh. Yogesh K Jogia, Adv ORDER PER KULDIP SINGH, JM: The aforesaid bunch of appeals is being decided by way of consolidated order as common question for determination has been raised, to avoid repetition of discussion. 2. The appellant, DCIT Circle 4(1), New Delhi (hereinafter referred to as the Revenue ), by filing the present appeals, sought to set aside the impugned orders dated 24.06.2009, 25.10.2010 and 31.01.2011 passed by Ld. CIT(A)s, New Delhi qua the Assessment Years 2006-07, 2007-08 2008-09 respectively on the grounds inter alia that: A. I.T.A.No. 3834/Del/2009 (A.Y. 2006-07): 1. The order of the learned CIT(APPEALS) is erroneous contrary to facts law. 2. On the facts and in the circumstances of the case and in law, the learned CIT(Appeals) has erred in law by deleting the addition of ₹ 6,51,62,584/-made by the AO being 10% of the turnover. The Ld CIT(A) did not appreciate the fact that the book of accounts of the assessee were rejected by the AO u/s 145(3) of the IT Act after pointing out specific defect. 3. On the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndered by the assessee has not been accepted by the A.O. on the ground that the selling price of ₹ 1,96,32,550/- of the said assembly is less than its cost price of ₹ 2,70,00,442/- irrespective of the quantity as claimed by the assessee company and even no stock records have been produced by the assessee to substantiate its claim. Hence, the Assessing Officer, by invoking the provisions contained u/s 145 of the Act, taken the NP rate at 10% of ₹ 65,16,25,838/- i.e. ₹ 6,51,62,584/-. 4.1 The Assessing Officer disallowed the amount of ₹ 5,20,56,831/- claimed by the assessee on account of bank guarantee issued by a foreign bank for and on behalf of holding assessee company on the ground that since no TDS was deducted on this payment, the same is liable to be disallowed. The Assessing Officer treated the bank guarantee commission paid by the assessee company as interest on which, no advance tax deduction has been made in contravention to the provisions of Section 41(1)(a) of the Act and thereby disallowed the payment made by the assessee on account of bank guarantee commission. 4.2 The Assessing Officer assessed further income of the assessee at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit has been declared in this year and entire profit was declared in the previous years. (e) SIPAT NTPC: It seems that WIP figures are merely adjusted to reflect desired percentage of profit or loss without any basis. No explanation regarding nature and manner of attribution of the general exp to project exist. (f) BRAH - NTPC: No revenue has been recognized whereas entire cost of ₹ 6.55 crore has been taken to WIP. (g) OTHER SMALL PROJECTS: No uniform policy for recognition of revenue existed and merely suitability of the assessee existed. (h) Discrepancy 10 accounting of closing inventory of bridge) assembly 7.3 Ld. D.R. challenging the impugned order, contended that when no invoice has been raised by the assessee company to show the loss, the assessment adopted by the Assessing Officer is as per law and relied upon the order passed by the Assessing Officer to support of his argument. 7.4 However, on the other hand, Ld. A.R. contended that when in assessee s own cases, factum of maintaining books of accounts in accordance with AS-7, has been duly accepted by the revenue in Assessment Year 2001-02 to 2011-12 (except Assessment Year 2006-07), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prove that the profits have been calculated in the projects of Ballimella, Dahej, Barh-NTPC, NTPCSingrauli RSA-2 and RSA-2 New, Kobra ATPS, Patratu etc. and due to loss in the projects of Kobra ATPS and Konaseema, loss has been accounted for as per AS07, so in these circumstances, there was no occasion for Assessing Officer to adopt the best judgement assessment method; iv) that the Assessing Officer rejected the books of account to adopt the best judgement assessment on the ground of discrepancy discussed at page 2 of the order, primarily on the ground that assessee company has not been following consistent method of accounting for recognition of revenue; v) that the Assessing Officer has primarily rejected the books of accounts on three grounds inter alia; 1. there is no justification for incoherent recognition of revenue and the profit of the different projects has been varied from year to year without any basis, 2. discrepancy in accounting of the closing inventory of bridge assembly and 3. no basis for allocating contract project overhead expenses vi) that perusal of the project accounts lying at page 110 of the Paper Book, makes it clear that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o PWIP. Ld. Assessing Officer also pointed out discrepancy in accounting of closing inventory of bridge assembly in the audit report. 27. The Ld. Assessing Officer further pointed out that in the detail of project work-in-progress (PWIP) furnished by assessee during the assessment proceedings several negative adjustments / additions have been made. He further pointed out that in Kona Seema Project exchange difference of ₹ 2.27 crore was offered to taxation in the year 2000 which has been negated with the project cost otherwise incurred by the assessee in the subsequent years and which is difficult to accept while following percentage completion method of mercantile accounting. The Ld. Assessing Officer pointed out that the assessee failed to provide basis of allocation of direct project overhead cost while accounting the project cost and because of these discrepancies the appropriate profit of the company cannot be ascertained from the books of accounts and hence the same has been rejected by invoking the provisions of section 145(3) of Act and the income was assessed @ 10% of the gross receipts. 7.8 So, in view of what has been discussed above, when error committ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any to deduct the tax at source (TDS)? For finding out the answer to the aforesaid question, we are required to decide first, as to whether the assessee company was liable to deduct the tax at source (TDS) on bank guarantee commission paid in India to VTB Bank, a foreign bank . 8.4 When the assessee company has placed on record for perusal of the revenue authorities cogent material that it has paid bank guarantee commission to a foreign bank, the Assessing Officer could not lay hands on any material to treat the bank guarantee commission as interest or deemed interest alleged to be paid by the assessee company to the foreign bank. Moreover, there is no dispute that the assessee company has not borrowed any funds form VTB Bank, Russia on which, it was required to pay the interest. Section 2(28A) of the Act defines the interest paid in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized. On the other hand, commission is a specified sum in ter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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