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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 ..... s been valued higher by the amount of Rs.32.29 crores only, for the purpose of consolidated account of the venture partner. As in the case of CIT v. Laxmi Engineer Industries [ 2008 (3) TMI 288 - RAJASTHAN HIGH COURT] held that no addition could be made for higher valuation of the stock hypothecated to Bank if the AO had not been able to point out any discrepancy in the quantity of stock hypothecated to the Bank and the quantity of stock as per books of account. In this case also there is no observation of the AO that quantity of construction work-in-progress is more than the quantity valued as per first set of financial statement. In view of the above, we set aside the order of the Ld. CIT(A) on the issue-in-dispute and delete the addition made by the Assessing Officer. Disallowance u/s 40(a)(ia) - non-deduction of tax at source on reimbursement of employee cost/salary by the assessee to related party - 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 - HELD THAT:- In view of submission of the assessee, the matter is restored bac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. 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 Assessing Officer made various additions to the returned income and assessed the total income at Rs.9,45,17,862/-. On further appeal, the Ld. CIT(A) allowed part relief to the assessee. 4. Aggrieved, the assessee is in appeal before the Tribunal raising the grounds as reproduced above. 4.1 Before us, the assessee filed a Paper book containing pages 1 to 108 including copy of cases relied upon. 5. The Ground No. 1 of the appeal relates to addition of Rs.32,29,26,445/- in respect of closing construction work-in-progress (WIP). The facts qua, the assessee issue-in-dispute are that the return of income was filed by the assessee on the basis of one set of audited financial statement i.e. balance sheet, profit and loss account, computation of income, wherein during the assessment year consideration loss of Rs.22.30 crores was reported. But during the scrutiny proceeding before the Ld. Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 in terms of section 145 of the Act. The Ld. CIT(A) however upheld the addition holding that the return of income filed was not in line with the second set of accounts filed during the assessment. 7. Before us, the Ld. Counsel of the assessee has submitted that the said audited MIS financial statement was drawn up only to provide audited financial statements to Hindustan Construction Company Ltd. (HCC), one of the joint venture partner. It was submitted that HCC had disclosed in its mandatory published consolidated financial statement, interest in the joint venture on the basis of audited MIS financial statement. It was submitted that MIS financial statement had been drawn up so as to reflect various elements such as contract WIP, construction cost carried over as WIP as also pure construction material carried over as part of inventory as on 31.03.2014. It was submitted that the disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts 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 employee costs, Office and site expenses, financial expenses and depreciation together aggregating to Rs. 28.56 crores. Furthermore, the project has in fact ended in a loss to the joint venture. 9. I reiterate that, the audited Financial Statements of the JV have been correctly drawn consistent with accounting policies followed by it and that Management financial statements were prepared, on the representation by the Management, for the limited purpose of consolidation of the joint venture's interest into the books of Hindustan Construction Company (HCC) in order to align accounting policies in line with method of accounting followed by HCC. 10. I confirm that there is no other difference between the two sets of financial statements. 7.1 A comperative balance sheet and profit loss account of both the set of financial statement submitted by the auditor is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47.71 47.71 -0.00 Loans Advances VI 2,051.66 1,679.64 372.02 12,497.33 15,354.57 -2,857.24 Less: Current Liabilities Provisions Current Assets Net VII -24,915.18 -24,915.18 -12,417.85 -9,560.61 2,857.24 Profit and Loss Account [Dr. Balance] 2,230.13 - -2,230.13 2,230.13 - 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 statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. In view of the above, we set aside the order of the Ld. CIT(A) on the issue-in-dispute and delete the addition made by the Assessing Officer. 10. The ground No. 2 of the appeal relates to disallowance of Rs.5,65,933/- u/s 40(a)(ia) of the Act. The facts qua, the issue in dispute are that the Assessing Officer disallowed the amount u/s 40(a)(ia) of the Act for non-deduction of tax at source on reimbursement of employee cost/salary by the assessee to M/s Alphine Samsung HCC Joint Venture i.e. related party. 11. On further appeal, the assessee submitted before the Ld. CIT(A) that there was no employer employee relationship between employee and assessee and the assessee reimbursed on cost to cost basis. It was further submitted that tax was deducted at source u/s 192 of the Act by the employer M/s Alphine Samsung and taxable in the hand of salaried employees. The Ld. CIT(A) dismissed the ground of the 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 reimbur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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