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TMI Blog2022 (8) TMI 1267X X X X Extracts X X X X X X X X Extracts X X X X ..... ction WIP of Rs.32,29,26,445/-. The addition be deleted. In the alternative, the same be directed to be allowed as a deduction in AY 2015-16 as cost of opening construction WIP. Amount of tax and interest u/s 234A and 234B be directly to be consequently recomputed. 2. On the facts and circumstances of the case and in lad, the Ld. CIT(A) erred in confirming the disallowance of Rs.5,65,933/- u/s 40(a)(ia) on reimbursement of salary of deputed staff paid to a sister concern, Alphine Samsung HCC Joint Venture. 3. The fact in brief of the case are that assessee is a joint venture (Association of persons for the purpose of status under the Income Tax Act, 1961) formed between M/s Hindustan Construction Company Ltd. (HCC) and Samsung C & T Corporation, Korea (Samsung) for the purpose of execution of design and construction of tunnels as part of Delhi MRTS Project of Delhi Metro Rail Corporation. The assessee filed its return of income on 24.11.2014 claiming loss of Rs.24,31,31,346/-. The return of income filed by the assessee was selected for scrutiny and statutory notices issued under the Act were complied. In the assessment completed u/s 143(3) of the Act on 30.12.2016, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial statement, (ii) the assessee has not furnished details of construction WIP of Rs.3229.26 lakhs. 5.2 Finally, the Assessing Officer made addition for the sum of Rs.3229.26 lakhs to the returned income, relevant to the construction WIP reported in second set of audited financial statement. It may be noted here that the Assessing Officer did not reject the books of account of the assessee in terms of section 145(3) of the Act. 6. Before the Ld. CIT(A), the assessee relied on the decision of Hon'ble Madras High Court in the case of CIT v. Shriram Transport Finance (ITA No. 621 of 2013) wherein the Hon'ble High Court has held that maintenance of two separate books of account for the purpose of Company Act and Income Tax Act was perfectly in order. In the set, for the purpose of Companies Act provision for doubtful debt was made whereas in the set for the purpose of Income-tax Act, the same doubtful debt was written off. It was also submitted by the assessee that the Assessing Officer has duly verified the books of account of the assessee however the AO neither found any additional expenditure claimed by the assessee as per WIP of Rs.3229.26 lakhs nor any fault in the accounting i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lacs, was required to be reflected in the MIS Financial Statements as profit for the year, thereby requiring Closing Construction WIP to be additionally valued at Rs. 3239.36 lacs being budgeted profit on inventory. The Annexure attached to this certificate reconciles the two sets of accounts which shows that the only difference is the addition of Construction WIP of Rs.3229.26 Lakhs under the head Inventories both in the Management Balance Sheet and in the Management Profit & Loss Account. This has resulted in the loss of Rs. 2230.14 Lakhs in the regular Profit & Loss Account being converted into a profit of R$. 999.13 Lakhs, requiring provision for taxation of Rs. 372.02 Lakhs in the profit & loss account, which is duly reflected in the Management Balance Sheet under the head Loans and Advances Schedule VI. The relevant entry was recorded only in the Management Financial Statements being Construction WIP A/c (Asset)..................Dr Rs 3229.26 Lakhs To Construction WIP A/c (P&L)... ........Rs. 3229.26 Lakhs 8. As explained by the Management, that though the financial statements show a loss of Rs.22.30 crores, the same is primarily on account of period costs such as em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; Total 295.01 922.12 627.11 8. On the contrary, the Ld. DR relied on the order of the lower authorities and submitted that the amount of construction WIP was not reported in the first set of financial statement, which is appearing in second set of the financial statement. According to him, the amount of construction of WIP Rs.32.29 crores has not been considered while filing the return of income and therefore, addition by the Assessing Officer is justified. 9. We have heard rival submissions of the parties on the issueindispute and perused the relevant material on record. The assessee has filed return of income on the basis of one set of audited financial statement reporting a loss of Rs.22.30 crores. However, during the scrutiny proceedings, the assessee filed another set of financial statement wherein additional amount of construction WIP of Rs.32.29 crores was reported. The contention of the assessee before us is that the additional amount of WIP is merely valuation difference. According to assessee, it has valued the construction WIP for the purpose of MIS financial statement at a higher value for the purpose of consolidation with the financial statement of jo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. 12. We have heard rival submission of the parties on the issue-indispute and perused the relevant material on record. The issue is of disallowance u/s 40(a)(ia) of the Act for non-deduction of tax at source, amount which has been claimed by the assessee as reimbursement of the salary to seconded employees. We find that the Ld. CIT(A) has sustained the disallowance in view of no evidence submitted by the assessee that same was taxed in the hands of the employees either on the payment made by it or by the related party. The relevant finding of the Ld. CIT(A) is reproduced as under: "The appellant has submitted the Debit Memos for the salary being debited and also a signed certificate by the related party to the effect that the invoices do not contain any mark-up or profit and is purely reimbursement of costs. It is observed that the invoices are towards the salary of an employee belonging to the related party and include his Salary, Provident Fund and Super Annuation Fund Contributions as well as some components such as leave travel assistance etc. It may be noted that these are taxable in the hands of the employee however, the appellant has not produced any evidence t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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