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TMI Blog2014 (12) TMI 1242X X X X Extracts X X X X X X X X Extracts X X X X ..... us countries in India and also from other countries were furnished before the AO. While making addition, the AO could not prove that this transaction is not part of the transactions which is shown by the assessee as Revenue which was built to Aker Kvaerner Pharmaceuticals which was on the same address i.e. Bridgewater, New Jersey, USA. We also found that the aggregate transaction value of USD 221,223 with its group company Aker Kvaerner Pharmaceuticals for the year reflected in contract revenue and offered to tax was much higher than the amount of USD 43,592 indicated in the notice. Thus, the aggregate contract revenue reflected by the assessee in its books and already offered to tax is more than the transaction value provided. Accordingly, the addition of USD 43,592 made by the AO is tantamount to double taxation of the very same income. The detailed finding recorded by the CIT(A) at para 4.3 has not been controverted. Accordingly, we do not find any reason to interfere in the order of CIT(A) for deleting the addition of USD 43,592. Disallowance u/s 14A - Held that:- We found that the CIT(A) while dealing with the issue has observed that assessee invested an amount of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on carried out with Bridgewater, New Jersey, USA amounting to US$ 43592. 2. On the facts and in 'the circumstances of the case and in law, the CIT(A)'s erred in not verifying the specific transaction by the assessee mentioned at ground No.1 above. 3. The appellant prays that the order of the CIT(A)'s on the above ground be set-aside and that of the assessing officer be restored. The assessee has also taken following grounds in its Cross Objections :- 1. The learned CIT(A) erred in confirming the re-opening of the assessment under section 147 of the Income-tax Act, 1961 after the expiry of four years from the end of the relevant assessment year. 2. The CIT(A) erred in observing that the assessing officer had received fresh tangible material to re-open the assessment. 3. Each one of the above grounds of cross-objections is without prejudice to the other. 3. In the appeal for A.Y.2004-05, the Revenue is aggrieved for deletion of addition of ₹ 19,83,972/-. The assessee has filed cross objection alleging reopening of assessment after expiry of four years from the end of the relevant assessment year. 4. We have heard rival contentions and fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n without stating any reason are not bringing any material on the record to show hat appellant's submissions are not correct. Hence addition on this issue cannot be sustained and appellant's this ground of appeal is allowed. Against the above order of CIT(A), before us, the Revenue is in appeals and the assessee has filed Cross objection challenging the validity of reopening. 6. We have considered rival contentions, carefully gone through the orders of the authorities below and found from the record that original assessment was completed u/s.143(3) on 30-11-2006. Thereafter notice was issued u/s.147 on 29-3-2011, after obtaining administrative permission of CIT-10. Since the AO s reopening was based on tangible material received by AO from US tax authorities, it cannot be said that there was mere change of opinion. After applying the proposition of law laid down by the Hon ble Supreme Court in the case of Kelvinator India ltd., 180 taxmann Kelvinator India ltd., 180 taxmann 312. The CIT(A) upheld the reopening of assessment. We also found that after receipt of information from US tax authorities, the AO compared the information which he had in the record and informed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leting the disallowance of ₹ 1,87,65,694/ - being stated by assessee to be reversal of Income of ₹ 82,90,255/- of earlier year/s and the expenses of ₹ 1,05,35,440/- of the earlier year/so This disallowance was made by AO since the assessee is following mercantile system of accounting. 3. The appellant prays that the order of Ld. CIT(A) on the above ground be set aside and that of the assessing offer be restored. 9. Rival contentions have been heard and record perused. Brief facts of the case are that the assessee is subsidiary of Multinational Company. It is engaged in providing engineering, designs and execution services in various sectors. During the assessment year, the assessee has invested in investment which are exempt from tax and received dividend of ₹ 1,52,60,049/-. The assessee himself disallowed ₹ 10,13,002/- for expenditure relating to administrative and managerial expenditure. These investment were only through own internal accruals and no amount was borrowed during the year. However, AO applied Rule 8D of Sec.14A and disallowed an amount of ₹ 22,76,773/- as expenditure incurred by the assessee for administrative and managerial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) observed that once prior period income is taxed, disallowance of prior period expenses is not called for and allowed the ground raised by the assessee after having following observations :- 5.3 I have considered the facts of the case, submissions of the appellant and case laws relied by the appellant. The appellant receives income for providing design engineering services and also assisting in construction and commissioning of industrial undertaking. The appellant appoints Branch Manager for each work assigned to them. The project Manager directly involves In the design executing, commissioning and billing to the customers. At the end of every year the appellant obtains estimated contract value completed by the Project Manager based on the invoices submitted by them. The appellant bills the customers based on the estimated contract value as estimated by the Project Manager. This income is taken into consideration for including the revenue in the year. This income is offered for tax. At most times customers find errors in their claims and minor dispute may be raised on the billing amount, customers will reduce the amount to be paid to the company. In order to have good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llow certain portions for reasons specified. In other words, the bills raised by the assessee . are passed for lesser amount. The assessee, out of commercial consideration and with a view to maintain customer relationship and not to lose valuable customers such as Bharati Cellular Ltd., Nestle Ltd. Hindustan Lever Limited, etc. goes for a negotiated settlement of claims and accepts short payments. A perusal c,f the quantum of billing and the amount of short payment demonstrate that the disallowance is minimal. For example the bill raised on 12th January 2006, on Black Box Research was INR 5,31,720, and the amount disallowed which is ultimately written off was INR 2,554. In the case of Hero Honda Motors Ltd. (sic), the billing was of INR 96,00,000 and the amount written off was INR 8.444. In the case of Glaxo Smith Kline Consumer Healthcare Ltd. v. Asstt. CIT [2007] 112. TTJ 94 (Chd.) (supra), the billing was of INR 21,25,000 and the amount written-off was INR 3,13,430. Similar is the figures in other cases. Thus, on these facts, we are unable to agree with the findings of the Revenue authorities that the write-off in question was not bonafide. It is borne out of a commercial consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had shown prior period expense of INR 1.34 crores against which the prior period income was shown as INR 83.21 lakhs and the net amount of INR 51.13 lakhs had been shown as expenditure in the account. The Commissioner (Appeals) held that if the assessee had shown prior period income and the Assessing Officer had not excluded it while working out the relevant current year's taxable income then there was no reason on' the part of the Assessing Officer to disallow only one part of the prior period adjustments, i.e., the prior period expenditure. Consequently, the addition made by the Assessing Officer could not be sustained. In any event, in view of the settled legal position, no substantial question of law arises in the present proceedings. Hence, the present appeal, being bereft of merit, is dismissed but with no order as to costs. On perusal of the above decisions, it is clear that prior period income was offered, prior period expenses though claimed in the later year has to be allowed. Hence, A.O is directed to allow the prior period expenses incurred by the appellant during the year. The appellant had claimed this negative contract income in two forms, o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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