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TMI Blog2018 (8) TMI 659X X X X Extracts X X X X X X X X Extracts X X X X ..... ountant Member For The Assessee : Shri P. Murali Mohan Rao For The Revenue : Shri M. Sitaram, DR ORDER Per Smt. P. Madhavi Devi, J.M. This appeal is filed by the assessee against the order of the CIT (A)-3, Hyderabad, dated 17/12/2015 confirming certain disallowances made by the AO u/s 143(3) r.w.s. 254 of the Act. 2. Brief facts of the case are that the assessee, engaged in business of civil construction, had filed its return of income for the A.Y 2007-08 on 31-10-2007 declaring income of ₹ 79,49,005. In the assessment order passed u/s 143(3) of the Act, the AO assessed the total income at ₹ 1,69,17,558 and the CIT (A) confirmed the same in the appeal filed by the assessee. The assessee preferred further appeal to ITAT, which set aside the same to the AO with certain directions. Consequent thereto, the AO has passed the assessment order dated 18.03.2014 again making the following disallowances: i) Bank guarantee commission of ₹ 56,51,347/- ii) Legal charges of ₹ 4,04,000 u/s 40(a)(ia) iii) Expenses of ₹ 15,00,000 on adhoc basis. 3. The assessee preferred its appeal to CIT (A), who allowed it in part i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iated that the Hon'ble ITAT vide their order dated 22-03-2012 has set aside the issue of disallowance u/s 40(a)(ia) of the Act to the file of the Assessing Officer with a direction to examine whether each payment made by the appellant was less than ₹ 20,000 j - or not and to decide the issue accordingly. 10. The Ld. CIT(A) ought to have appreciated that the Assessing officer vide his order u/s 143(3) rws 254 of the Act dated 18-03-2014 has ignored the directions of the Hon'ble ITAT contained in para Nos. 17 to 19 of their order and made the disallowance u/s 40(a)(ia) relying on the decision of Kolkata High Court in the case of CIT vs. Crescent Exports Syndicate [2013] 33 Taxmann.com 250 (Ca1.) and Gujarat High Court in the case of CIT vs. Sikandarkhan N. Tunvar [2013] 33 Taxmann.com 133 (Guj.). 11. The Ld. CIT(A) erred in conforming the disallowance of expenditure for ₹ 15,00,000/-. 12. The Ld. CIT(A) while confirming the disallowance of ₹ 15,00,000/-ought to have appreciated that the Assessing Officer has not appreciated the direction of the Hon'ble ITAT vide para No.16 of their order dated 22-03- 2012 before making the disallowance. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an amount of ₹ 59,33,240 is debited to the account of the assessee towards bank guarantees issued by it in favour of M/s. THDC for obtaining mobilization advance, machinery advance and performance guarantee. Observing that except for filing of this letter, the assessee has not demonstrated by way of any corroboratory evidence regarding furnishing of bank guarantee by M/ s. Progressive Constructions in favour of M/s. THDC on behalf of the assessee, the AO disallowed the same and brought to tax and the CIT (A) has confirmed this addition. On perusal of the order of the Tribunal dated 22.3.2012, we find that the Tribunal has considered the fact that M/ s. PCL, being the Principal Contractor, has issued the bank guarantee in favour of THDC on behalf of the assessee and after considering the jurisdictional High Court decision in the case of ACIT vs. Akkamba Textiles Ltd (117 ITR 294), Tribunal has held that the bank guarantee commission has to be treated as business expenditure if the bank guarantee has been given to M/s THDC by PCL on behalf of the assessee. The Tribunal has therefore, directed the AO to verify if the bank guarantee has been furnished by M/s PCL on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il [email protected]. navya.kallam@progressive constructions.com [email protected] on 14.02.2018 and the date of compliance was fixed for 23.02.2018. However, no compliance has been made by any of the parties till date. 2. In view of the above, as there was no compliance from assessee as well as from prime contractor, it is requested that the Hon'ble ITAT may kindly be requested that the issue of claim of bank guarantee commission by assessee may kindly be decided on merits and information available on- record. Assessment records in two volumes are enclosed herewith for kind reference. Yours faithfully, ( N.SRIKANTH) Dy. Commissioner of Income Tax, Circle-3(1), Hyderabad 7. Therefore, we proceed to dispose of the appeal on the basis of the material on record. We find that this Tribunal in ITA No.797/Hyd/2011 dated 22.03.2012 had considered this issue and had directed as under: 9. We have heard both the parties and perused the material on record. The claim of the assessee is that the bank guarantee has been given on behalf of the assessee by its principal M/s. PCL in favour of M/s. THDC. On this M/s. PCL incur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2002. On perusal thereof, it is noticed that M/s. PCL Intrtech Lenhydro Consortium JV was awarded the contract and constituent members agreed to demarcate and share, for operational convenience, their responsibilities in respect of execution of the work. It is also noticed that RSJV has taken on sub-contract the work of PCL. As per the said agreement, the margin money and bank guarantee commission is payable by the JV as under: 4. Margin Money and Bank Guarantee Commission: RSJV has agreed to pay margin money/deposit to Progressive and the details of which are given hereunder: a) An interest bearing deposit to 30% of Performance Bank Guarantee towards margin money for furnishing the performance bank guarantee to the Employer as per the Original Agreement. The said deposit shall be come refundable within 7 days of the performance guarantee being returned by the employer to progressive. b) An interest bearing deposit equivalent to 30% of the Advance Bank guarantee towards margin money for furnishing the mobilization advance guarantee to the Employer as per the original agreement. The said deposit shall become refundable, in proportion to the return of mobilizatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Counsel for the assessee had submitted that M/s. PCL was not able to provide the necessary details to the assessee inspite of request made by it. In these circumstances, we are constrained to decide the issue on the basis of the entries in the books of the assessee and the preponderence of probabilities. It is common knowledge that in civil contracts, bank guarantee has to be given and from the A/c of the assessee, it is seen that it has not provided any funds for the bank guarantee but has claimed only the Bank Guarantee commission. Since PCL-Intertech Consortium was the main contractor, the bank guarantee would have to be provided in its name. Since the assessee has not reflected the Bank Guarantee in its books, it has to be presumed that Bank Guarantee has been given by M/s. PCL and that the assessee is liable to pay the guarantee commission for availing the said service. In these circumstances, the Bank Guarantee commission is allowable as business expenditure. Thus, grounds 2 to 5 are allowed. 11. As regards grounds 6 to 10 against disallowance u/s 40(a)(ia) of the Act, we find that the assessee has filed additional grounds of appeal in support of these grounds. The addi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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