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TMI Blog2019 (8) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... out a notional centage @12.5% - Cost related to Dr. B. R. Ambedkar Multi Speciality Hospital, Noida - HELD THAT:- We find from breakup of contract account, that amount of ₹ 16,78,78,589/- is mentioned under code 8357 under the head laboratory and testing charges, which in fact were contract expenses pertaining to Dr. B. R. Ambedkar Multi Specialty Hospital and which were wrongly clubbed with laboratory and testing expenses. The Assessing Officer though accepted this fact but made notional addition of 12.5% towards centage on these work expenses. While do so, he ignored the fact that centage on this work contract was already declared by the assessee in its contract account, a copy of which, declaring total receipt of ₹ 36,80,71,97,530/-. The break-up of this amount giving code wise and name wise jobs undertaken during the year has also been filed by Learned A.R., which tallies with the gross total of the turnover declared in contract account. The name of Dr. B. R. Ambedkar Project appears at page 20. Therefore, CIT(A) has rightly allowed relief to the assessee. Addition of prior period expenses - HELD THAT:- We find that the liability arose in the year under consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e addition made by the Assessing Officer for ₹ 3,57,97,224/- is therefore not sustainable and is deleted giving relief to the appellant - ITA No.315, 318/Lkw/2017 Assessment Year:2011-12 - - - Dated:- 26-7-2019 - Shri A. D. Jain, Vice President And Shri T. S. Kapoor, accountant member Revenue by: Shri A. K. Bar, CIT (D.R.) Assessee by: Shri K. R. Rastogi, C. A. Shri Shubham Rastogi, F.C.A. ORDER T. S. Kapoor, These are cross appeals, filed by the Revenue and the assessee, against the order of learned CIT(A) dated10/03/2017. The grounds of appeal taken by the Revenue as well as by the assessee are reproduced below: Ground of appeal taken by the Revenue are as under: 1. The CIT(A), Lucknow has erred in law and on facts in deleting the addition of ₹ 209,44,822/- by observing that cost of work done is shown in the contract account and centage is duly accounted for, without appreciating the fact that the assessee did not produce the proof before the Assessing Officer that centage has been charged on WIP of ₹ 16,78,589/-. 2. The CIT(A), Lucknow has erred in law and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ground of appeal taken by the assessee in I.T.A. No.318 is also covered in favour of the assessee by the same order of the Tribunal. 3. Learned D. R., on the other hand, fairly agreed that two issues raised by the Revenue and one issue raised by the assessee are duly covered in favour of the assessee. However, he stated that other issues raised by the Revenue are not covered. 3.1 As regards ground No. 1, Learned D. R. submitted that CIT(A) has deleted the addition of ₹ 2,09,44,822/- by observing that cost of work done is shown in the contract account and centage is duly accounted for without appreciating the fact that the assessee did not produce the proof before the Assessing Officer that centage has been charged on work-in-progress of ₹ 16,78,78,589/-. 3.2 Arguing ground No. 3, Learned D. R. submitted that CIT(A) has wrongly allowed relief to the assessee to the extent of ₹ 19,34,458/- on account of interest on unlisted machinery without appreciating the fact that assessee deducted the amount twice i.e. first in profit loss account and then in computation of income. 3.3 Arguing ground No. 5, Learned D. R. submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses as the centage on work done was already declared through contract account and therefore, it was argued that CIT(A) has rightly allowed relief to the assessee. 4.1 Arguing ground No. 2, Learned A. R. submitted that this ground is covered by the order of the Tribunal in I.T.A. No.317 and 314 and our specific attention was invited to para 35 to 37 of the paper book on pages 27 28 of that order. 4.2 Arguing ground No. 3, Learned A. R. submitted that assessee had already added back an amount of ₹ 19,34,458/- on account of interest on account of unlisted machinery and our attention was invited to copy of schedule forming part of the P L Account, placed at page 28 of the paper book, where under the head other receipts in schedule-12, the said amount was taken as part of income. 4.3 Coming to ground no. 4, Learned A. R. submitted that this issue is also covered by the order of the Tribunal in I.T.A. No.317 and 314 and our specific attention was invited to para 39 to 41 on pages 29 30 of such order. 4.4 Coming to ground No. 5, Learned A. R. submitted that it is wrong on the part of Learned D. R. to state that depreciation was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed towards the overheads and profits of the assessee Corporation. In the contract account, all direct costs, as are to be borne by the clients of the Corporation, are debited and the value of the work done is credited by adding 15% towards centage charges. As such, in case any disallowance is to be made in the cost debited to the contract account, a corresponding deduction is also required to be made in the cost debited to the work done, as this is a case of contra entries only. This accounting procedure of the assessee Corporation stands accepted by the Department in assessment year 199091, as taken note of by the Tribunal in the assessee s case for assessment year 1991-92, in its order dated 30/11/2006, passed in ITA No.714/LKW/2002. For assessment year 200001, the Tribunal, vide its order dated 18/12/2018, passed in ITA No.382/LKW/2004, also took note that all the expenditures incurred by the assessee Corporation on material consumed is recovered from its clients along with 15% profit thereon and that so, even if there is inflation in the expenses in material consumed, the same is recovered along with 15% profit thereon, resulting in no loss of profit or loss to the Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this amount giving codewise and namewise jobs undertaken during the year has also been filed by Learned A.R., which tallies with the gross total of the turnover declared in contract account. The name of Dr. B. R. Ambedkar Project appears at page 20. Therefore, CIT(A) has rightly allowed relief to the assessee. 9. In view of the above ground no.1 of Revenue s appeal is dismissed. 10. Coming to ground No. 2, which relates to prior period expenses, we find that this issue is covered in favour of the assessee by the order of the Tribunal in the case of the assessee itself for assessment year 2010-11. The detailed findings of the Tribunal, as contained in para 35 to 37 at pages 27 28, are reproduced below: 35. Ground No.6 relates to the deletion of addition of ₹ 23,54,235/- on account of prior period expenses. 36. The addition on account of prior period expenses made by the A.O was deleted by the ld. CIT(A), observing, as below: 10(4) I have examined the facts and circumstances of the case. I have examined the findings of the Assessing Officer and the submissions of the appellant. I find that the expenditure disallowed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reover, as claimed by the assessee, the amount pertains to the contract account and therefore, in case the addition is made, the equivalent amount is to be reduced from the work-in-progress. We, therefore, find no infirmity in the order of the ld. CIT(A) on this issue. Accordingly, we confirm his order on this issue and reject ground No.6 of the Revenue s appeal. 10.1 Respectfully following the aforesaid order of the Tribunal in assessee s own case, we do not find any infirmity in the order of learned CIT(A) which is confirmed and ground no.2 of the Revenue s appeal is dismissed. 11. As regards ground No. 3 regarding deletion of addition on account of interest on unlisted machinery, we find that in schedule-12 to the profit loss account, placed at page 28, the assessee, under the head other receipts , has declared as income of ₹ 19,34,458/- and the total of all other receipts including the interest on unlisted machinery has been declared as income in the contract account, which is placed at page 21 of the paper book. Therefore, learned CIT(A) has rightly allowed relief to the assessee. In view of the above, ground No. 3 of the Revenue is dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rival submissions and perusal of record, we find that the amount of ₹ 39,46,18,444/- shown in the balance sheet as interest accrued on deposits was the running balance of the accrued interest on the funds of the clients of the assessee. The assessee maintains its books of account on mercantile basis and it makes provision of interest on accrual basis. The assessee also credits such interest to the respective clients accounts as per Government Order dated 11/4/1076 (supra). The ld. CIT(A) has rightly observed that the interest earned by the assessee on unutilized fund is credited to the respective accounts and are the income of the concerned clients and not of the assessee. We do not find any infirmity in the well reasoned order of the ld. CIT(A) on this issue. We accordingly confirm his order on this issue and reject ground Nos.7 7.1 of the Revenue. 12.1 Respectfully following the aforesaid order of the Tribunal in assessee s own case, we do not find any infirmity in the order of learned CIT(A) which is confirmed and ground no.4 of the Revenue s appeal is dismissed. 13. Coming to ground No. 5, we find that Assessing Officer had made addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order, which are reproduced below: 11(4) I have examined the facts and circumstances of the case. I have examined the findings of the Assessing Officer and the submissions of the appellant. I find that the appellant has written back an amount of ₹ 11,46,32,701/- as provision for gratuity by treating it as excess provision no longer required. The AO allowed the deduction for the provision made in assessment year 2009-2010 of ₹ 5,22,62,229/- and in assessment year 2010-2011 of ₹ 2,65,73,248/- (Total: ₹ 7,88,35,477/-) and made the addition for balance of ₹ 3,57,97,224/- (₹ 11,46,32,701/- less ₹ 7,88,35,477/-). I find that the details of provision for gratuity written back and added to the computation of income over the years is as under- Assessment Year Provision for Gratuity added in Computation chart in Rs. Provision for Gratuity written back as no longer required in Rs. 2000-2001 1,09,15,481/- - 2001-2002 75,25,526/- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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