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TMI Blog2021 (2) TMI 1229X X X X Extracts X X X X X X X X Extracts X X X X ..... y auditor as well as by CAG and such inventory was physically verified therefore he has rightly allowed relief to the assessee and we do not find any reason to interfere with his finding and therefore Ground No.1 of the appeal is dismissed. Addition on account of prior period items - HELD THAT:- This issue is covered in favour of the assessee in the case of assessee itself in [ 2019 (5) TMI 1669 - ITAT LUCKNOW] and in [ 2019 (8) TMI 46 - ITAT LUCKNOW] . Addition on account of provision of gratuity - HELD THAT:- The written back provision has been taken in the P L account under the head other non operating income, which is apparent from paper book Pg. 52 where such schedule forming part of balance sheet is placed. The AO has wrongly made the addition of outstanding balance of provision for gratuity which the ld. CIT(A) has rightly deleted. Accrual of income - Addition on account of interest income earned on unutilized fund by holding that the assessee was claiming TDS relating to FDRs of unutilized fund - HELD THAT:- CIT(A) has held that the interest on unutilized funds which belonged to clients of the assessee were required to be credited to their account and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in favour of assessee by the Tribunal order in the case of assessee itself. Therefore, we do not find any reason to interfere in the same and therefore, Ground No.6 is also dismissed. Addition on account of gratuity which the assessee had written back as no longer required - HELD THAT:- The assessee by writing back the excess provision of gratuity credited the other receipts and declared it as income and simultaneously the assessee reduced the same in the computation chart in computing net taxable income. The assessee had claimed that it never claimed the gratuity expenses and added back the same in computing of income and therefore, the addition was not justified. The Assessing Officer had wrongly made the addition, which the ld. CIT(A) has deleted by appreciating the facts correctly. The ld. CIT(A) has already dealt this issue and has rightly deleted the addition. Additions on account of interest accrued on investment and other income which was shown in the balance sheet under the head current assets - HELD THAT:- As under the head other current assets declares interest accrued on investment at ₹ 299543067 and other income accrued but not received at ₹ 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n deleting the addition of ₹ 13,99,33.507/- on account of prior period without appreciating the fact that the assessee has not produced documentary evidence before A.O. that income corresponding to expenditure of ₹ 13,99,33,507/- has already been recognized as income in contract account of earlier years. 2A The CIT(A), Lucknow has erred in law and on facts in deleting the addition of ₹ 13,99,33,507/- on account of prior period without appreciating the fact that the assessee was unable to prove before the assessing officer that the expenses crystallized during the year under consideration and thus are not allowable as assessee is following mercantile system of accounts. 3. The CIT(A), Lucknow has erred in law and on facts in deleting the addition of ₹ 1,12,00,000/- on account of provision for gratuity without appreciating the fact that the assessee has made provisions of gratuity for muster roll employees amounting to ₹ 1.12 Crores in A.Y. 2012-13 but did not add it back in the computation of income of A.Y. 2012-13. 4. The CIT(A), Lucknow has erred in law and on facts in deleting the addition of ₹ 21,65,45,400/- on account of int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The ld. DR arguing the appeal in ITA No. 316/Lkw/2017 submitted that the ld. CIT(A) has wrongly allowed relief to the assessee on various issues and placed her reliance on the order of Assessing Officer. The ld. AR, on the other hand, submitted that the Ground Nos. 2 and 2A, Ground No.4, Ground No.6, Ground No.7 and Ground No.9 are already covered in favour of the assessee by orders of ITAT for AYs. 2010-11 and 2011-12 and in this respect filed a chart showing page numbers and para number of ITAT order wherein similar issues were already decided by the ITAT in favour of the assessee. 4. As regards Ground Nos. 1, 3, 5 and 8, the ld. AR submitted that detailed submissions were made before the ld. CIT(A) and ld. CIT(A) after going through the submissions of the assessee has allowed relief to the assessee as the Assessing Officer had wrongly made the additions. Explaining the facts of Ground No.1 the ld. AR submitted that there was a typographical mistake in the totaling of list of stock a copy of which was placed at paper book Pgs. 25 to 41 and ld. CIT(A) has rightly appreciated and has rightly allowed relief to the assessee. The ld. AR in this respect placed reliance on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,828/- in Govt. account vide questionnaire dated 21.10.2014 and 16.01.2015. The assesses reply dated 18.11.2014 is as under:- In this regard it is submitted as under:- (i) That concept of the Labour cess was for the first time introduced in the financial Year 2009-10 by the Labour Department of the Government of U.P. vide notification dated 20.112009. (ii) That in light of this notification, the corporation vide its Circular dated 19.02.2010 informed all the unit Heads/General Managers to make provision for Labour Cess @ 1% of the cost of construction of the concerned work sanctioned by the Government and are in progress. Thus, the Labour Cess so charged on the work done by the corporation art' direct expenses in nature which are debited to the Contract Account for the purposes of charging centage on the work so done by the corporation. As the corporation undertakes the works of Government departments only, the labour cess so charged on the work is recoverable from the concerned Government Department. (iii) That the most important fact that we would like to bring to the kind notice of your goodself that the corporation has never debited its profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ked out is the centage allowed 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 1990-91, 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 2000-01, 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 prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... executes the same. The inventory of stock is maintained at all units separately and is physically verified by an officer of the rank of a Gazetted officer. The closing stock as per profit and loss account for the year under consideration is ₹ 58,17,00,211/-. During the course of assessment proceedings the appellant filed inventor,' of closing stock which by typographical mistake was shown at ₹ 58,72,11,589/-. The AO instead of verifying the correct position with reference to opening stock, purchases and utilization in construction activities chose the easier way of rejecting the books of accounts under section 145(3) of the Act and making the addition for the difference. I find that the position has been explained by the appellant both during the assessment proceedings as well as appellate proceedings that the figure of ₹ 58,72,11,589/- is a typographical error and correct value of closing stock as per books of accounts and verified inventory is ₹ 58,17,00,211/-. The Law does not proceed from taking advantage of a genuine bonafide mistake of the appellant. The books of accounts of the appellant are audited by statutory auditors as well as CAG. Accordingl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble in the assessment year under consideration. Notwithstanding, the claim of the appellant that any addition made will result in reduction of work in progress is justified as the income corresponding to the said expenses of ₹ 23,54,235/- has already been accounted for in the contract account of earlier years. In this connection a reference may be made to the decision of Hon'ble ITAT, Lucknow in case of the appellant for the assessment year 1991-92 in ITA No 714/LUC/02 dated 30/11/2006, which has been followed in case of the appellant for the assessment year 2000-2001 in ITA No 382/LUC/04 dated 18/12/2008. While deciding a similar disallowance of prior period expenses the Hon'ble Court held that if any disallowance was to be made in the cost debited to the Contract account then corresponding reduction is required to be made in the work done also, this being a case of contra entries only. The decision of the Hon'ble Tribunal is discussed at length in paragraph 5(6) above. Relying on the decision supra and finding that the income corresponding to the expenditure of ₹ 23,54,235/- has already been recognized in contract account of earlier years, the additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of provision for gratuity written back and added to the computation of income 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 75,25,5267- - 2002-2003 38,56,755/- - 2003-2004 71,14,765/- - 2004-2005 43,43,921/- - 2005-2006 S3,16,192/- - 2006-2007 3,69,742/- - 2007-2008 18,38,1751/- - 2008-2009 2,90,67,063/- - 2009-2010 5,22,62,229/- - 2010-2011 2,65 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant. This amount is inclusive of opening balance not received during the year as well as the interest accrued on the assessee's own funds, which have already been assessed to tax. The appellant undertakes construction work against advances received from the clients. Expenses are met by withdrawing the funds from the bank accounts wherein the funds were deposited. These are running accounts and the balance left in the bank account earns interest. The clients also keep margin money with the appellant in the form of fixed deposits which earns interest. The appellant maintains its books of accounts on mercantile basis and it makes provisions of interest on accrual basis. The appellant credits such interest to the respective client's account in view of the Government Order No. A-1-FA-11/386/1976 dated 11.04.1976. 12(5) In view of my examination, I find that the interest accrued on deposits has been credited to the respective client account. The interest earned by the appellant on unutilized funds is therefore credited to the respective accounts and is income of the concerned client and not the appellant. The GO dated 11.04.1976 referred above supports the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and where the assessee had reduced depreciation as per income tax rules and added back the depreciation debited in the P L account. We find that ld. CIT(A) has made a finding of fact that assessee has claimed depreciation as per I.T. Rules on block of assets and has reduced the sale consideration of assets from gross block of assets and had claimed depreciation on net block therefore, he has rightly allowed relief to the assessee and we do not find any infirmity in the same and therefore, Ground No.5 is also dismissed. 21. Now coming to Ground No.6, we find that Assessing Officer had made an addition of ₹ 25,33,327/- on account of interest on unlisted machinery, which the CIT(A) has deleted. We find that similar issues arose in AYs. 2011-12 in ITA No. 315 and 318 and the Hon'ble ITAT allowed relief to the assessee by holding as under: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med and the centage is shown as income of the year. In view of above, I do not find justification of ₹ 25,33,327/- added by the AO as interest on unlisted machinery. The addition of ₹ 25,33,327/- made by the AO is therefore deleted giving relief to the appellant. 23. The findings of ld. CIT(A) are quite exhaustive and such addition is covered in favour of assessee by the Tribunal order in the case of assessee itself. Therefore, we do not find any reason to interfere in the same and therefore, Ground No.6 is also dismissed. 24. Now coming to Ground No.7, we find that Assessing Officer had made the addition on account of gratuity amounting to ₹ 4,78,12,614/- which the assessee had written back as no longer required. The assessee by writing back the excess provision of gratuity credited the other receipts and declared it as income as is evident from paper book Pg.52 and simultaneously the assessee reduced the same in the computation chart in computing net taxable income. The assessee had claimed that it never claimed the gratuity expenses and added back the same in computing of income and therefore, the addition was not justified. The Assessing Officer had w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of ₹ 35,4Q,40,952/- made by the AO is deleted giving relief to the appellant. 26. These findings of ld. CIT(A) are explanatory and he has rightly allowed relief to the assessee and therefore, Ground No.8 is dismissed. 27. Now coming to Ground No.9, we find that Assessing Officer had made addition of ₹ 1,19,55,313/- by disallowing depreciation in P L account under the head operating expenses which was added back while computing allowable depreciation as per I.T. Rules. At pg.42 is copy of computation of income, where the assessee had added back depreciation amounting to ₹ 63271390/- and which included depreciation in P L account amounting to ₹ 11955313/- therefore, assessee itself had added back depreciation which the Assessing Officer had wrongly again added back. The ld. CIT(A) has deleted the addition by holding as under: 13(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 claims depreciation in Contract account as well as in the profit and loss account. Depreciation of ₹ 5,13,16,077/- added by the AO has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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