9911796707
TMI Blog2020 (7) TMI 283X X X X Extracts X X X X X X X X Extracts X X X X ..... terest free funds are in excess of the investments, the presumption that arises is that interest free funds have been invested in investments which do not yield taxable income as held by the Hon'ble Bombay High Court in the case of CIT vs. Reliance Utilities & Power Ltd. reported in [2009] 313 ITR 340 (Bombay) order dated 09.01.2009. We find no infirmity in the order of the ld. CIT(A). Thus, we uphold the deletion of the disallowance made under Rule 8D(2)(ii) of the Rules. 3. Coming to disallowance made under Rule 8D(2)(iii), the ld CIT(A) has directed the AO to consider only those investments which have earned dividend during the year for the purpose of computation of disallowance under the Rules. This direction is in line with the propositions of law laid down by the Hon'ble Calcutta High Court in the case of CIT vs. M/s. REI Agro Ltd. in GA No. 3581 of 2013 I.T.A.T. No. 220 of 2013 order dated 09.04.2014 and the order of the Special Bench of the ITAT in the case of Vireet Investment Pvt. Ltd. Thus, we see no reason to interfere with the direction of the ld. CIT(A) on this issue. Thus we dismiss ground no. 1 of the Revenue. 4. Ground no. 2 is on the issue of deduction u/s 80-I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amage caused to am property/life in course of execution of works, further, it was responsible for the correct ion of defects arising in the works at it cost. Thus, it cannot he said that the assessee had not undertaken any risk. viii. The assessee was not a works contractor simplicitor and was a developer and hence Explanation to section 80- IA(13) does not apply to the assessee. On perusal of the above order it seen that the Hon'ble ITAT in the case of the assessee has discussed as to what are the ingredients for allowing deduction u/s 80-IA. It has been held that the appellant is not a mere works contractor. In this case it is observed that the appellant has been carrying out similar projects with similar functional responsibilities. Respectfully following the above findings of the Hon'ble ITAT I am of the considered opinion that the assessee is a developer, and not merely a works contractor and is eligible for deduction u/s. 80- IA. Accordingly, the claim for deduction u/s. 80-IA(4) is hereby allowed." 5. The ld. DR, though not leaving his ground, ultimately agreed that the issue is covered in favour of the assessee by the judgement of the Tribunal for the AY 2011-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came before the Hon'ble ITAT Mumbai Bench in the case of Dredging International N.V. [2011] 15 taxmann.com 198 (Mumbai). The facts in the said case were as follows: The assessee made provisions for foreseeable loss amounting to Rs. 32,86,17,293 and claimed deduction on same. The Assessing Officer disallowed said claim on the reason that the expenses were contingent upon occurrence or non-occurrence of certain events and assessee itself had classified it as a provision for future losses. The contingent liability did not constitute expenditure as the same could not be subject matter of deduction and the expenditure which was deductible for this purpose was only those liabilities which were not contingent. By holding this, Assessing Officer disallowed the provisions for future losses. The assessee raised objection against said disallowance before the DRP. The DRP however, rejected said objection with a single sentence that assessee did not file proper reply. The Hon'ble Tribunal on the said issue of claim for future losses has held as under: As far as the factual position is concerned assessee has given detailed explanation for estimating the future losses which in fact it had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is entitled to make provision for foreseeable losses. 16. A perusal of the accounting statement of the assessee for the year- under consideration snows that at para 1.6 to the notes to the financial statement, the auditors have provided as under: 'Revenue recognition on contracts Contract prices are either fixed or subject to price escalation clause. Revenue from contracts is recognized on the basis of percentage completion method, and the level of completion depends on the nature and type of each contract including: Unbilled work-in-progress valued at lower of cost and net realizable value upto the stage of completion. Cost includes direct material, labour cost and appropriate overheads; and Amounts due in respect of the price and ether escalation, bonus claims and/or variation in contract work approved by the customer/third parties etc. where the contract allows for such claims or variations and there is evidence that the customer/third party has accepted it. In addition, if it is expected that the contract will make a loss, the estimated loss is provided for in the books of account. Contractual liquidated damages, payable for delays in completion of contract wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce in the present context because if the loss had been properly estimated in the year in which the contract had been entered into, then it had to be allowed in that every year and could not be spread over the period of contract, the matching principle is of relevance where income and expenditure, both are to be considered together. However, in the instant case, the effect of valuation of WIP would automatically affect the profits of subsequent years accordingly. Therefore, there was no reason for not accepting in principle the assessee's claim as being allowable. However, in view of discrepancies pointed out by the CIT(A) for correct estimation of loss, the matter was to be restored to the file of the AO to examine the correctness of amount claimed.' 18. A similar view has been taken by the Tribunal in the case of Jacobs Engineering India (P.) Ltd. v. Asstt. CIT (supra) wherein the assessee's claims of foreseeable losses were allowed irrespective of method of accounting in terms of AS-7. In the case of Dredging International (supra), the issue before the Tribunal was whether under s. 37(1) of the Act provision for foreseeable loss made in accordance with guidelines of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section of the Act. The residuary expenses were allowable under section 37(1) only. He concluded that the assessee's claim of future losses was not fitting in the frame work of provisions of section 37(1). He observed that the provisions of accounting standards could not over write the statutory provisions of the Act. Accordingly, he directed to rework out the accounts/work in progress by excluding therefrom the claim of future losses. The Hon'ble Tribunal in this case has held as under: Section 145(2) provides that the Central Government may notify in the Official Gazette from time to time accounting standards to be followed by any class of assessees or in respect of any class of income. It is a fact that AS-7 has not been notified by the Central Government. This does not mean that the assessee is precluded from following AS-7. A perusal of the provisions of section 145 show that accounting standards which have been notified by the Central Government have to be mandatorily followed by the assessee. But this does not mean that the assessee cannot follow the other accounting standards issued by ICAI. The accounting standards issued by ICAI cannot be brushed aside lightly. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out any defect in the estimate or application of AS-7. 3. The sum and substance of the above decisions, is that in fixed price contracts, the appellant having credited all its revenue, as per the contract, has to provide for all the foreseeable expenses which it is bound to incur as per the contract. The accounting standard AS-7 provides for such an eventuality. In view of the facts discussed above it is observed that the; company has followed AS-7 and has debited the future losses. Respectfully following the various decisions as discussed above, I am of the considered opinion that deduction for Future loss of Rs. 4,73,81,883/- is allowable. Therefore, these grounds of appeal of the appellant ate hereby allowed." 9. Thus we find that this issue is covered in favour of the assessee by the order of the ITAT in his own case for the AY 2011-12. The ld. DR fairly agreed that the issue is covered in favour of the assessee. Consistent with the view taken therein we dismiss this ground of the Revenue. 10. In the result, the appeal of the Revenue is dismissed. 11. Now we take up ITA No. 1410/Kol/2018 for the AY 2013-14. 12. Ground no. 1 is against the disallowance made u/s 14A of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
