9911796707
TMI Blog2023 (4) TMI 1050X X X X Extracts X X X X X X X X Extracts X X X X ..... of drawing and design charges were paid in terms of agreement with McKeown international Inc, USA dated 01.02.2012 for sell / purchase of coal charging car under the obligations cast upon the assessee, the same shall be allowed in the year of completion of project under matching concept of accounting. Our view on matching concept of account has support of the view taken in the case of CIT Vs Taparia Tools Ltd [ 2003 (1) TMI 83 - BOMBAY HIGH COURT] - We are persuaded to restore this matter back to the file of AO for readjudication - Ground allowed for statistical purposes. Disallowance u/s.14A - Suo moto addition made by assessee rejected - HELD THAT:- Admittedly, in the present case there were certain expenditure incurred by the assessee to earn the exempted income which have suo moto disallowed by the assess, A.O. has rejected the contentions and explanations of the assessee without assigning any specific reasons for his dissatisfaction regarding rejecting the suo moto disallowance by the assessee and the disallowance was made by applying rule 8D. We hold that the disallowance made u/s 14A read with rule 8D of the income tax act is uncalled-for and is liable to be deleted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices of Rs. 5.87 crores and non-operation incomes. The net profit this year was shown at 8.04% as against 27.69% shown in the immediate preceding year, thus It is low. In the case of other sister concern M/s. Ashish Industrial Commercial Enterprises Pvt Ltd. on identical revenues from technical services from the same parent contractee company, the profit rate was shown at 29.58%. In the course of verification of the books of accounts and expenses claimed it is found that assessee has claimed drawing and designing payments- outside India expenses at Rs. 2,47,85,290/-and no such expenditure was claimed till the preceding year. Relevant details were called for and examined. It is found from the details filed that the expenses towards drawing and designing Coke Transfer Cars for NMDC Steel Plant, Engineering drawings for SAIL the principal contract for which allotted to Bhilai Engineering Corporation, Bhilai assessee renders only technical consultancy services erection and civil works on fixed remuneration of Rs.75,00,000/- per month plus applicable service tax vide agreement dated 01/04/2013, The assessee was asked to explain admissibility of the claim. It was contended that it f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subjected either to service tax @ 12.36% or TDS @ 20%. The drawings and designs for equipment were imported from various parties from outside India i.e. (a) Claus Bast (b) INU. Buro Ulke (IBU) (c) Homer Trading Ltd Nevis (d) Janusz Flieger. Ledger a/cs of these parties were produced by the ld. AR in its paper book. According to the ld. AR, drawing and designing services were received in FY 2012-13 and 2013-14 but the equipment was finally exported in FY 2013-14 for Rs.5,87,17,301.71, the relevant expenditure on drawing design charged to P L A/c in FY 2013-14 was Rs.2,47,85,290/- consisting of Rs. 1,88,99,712/- incurred in FY 2012-13 Rs.58,85,578/- incurred in FY 2013-14. The equipment was dispatched in FY 2013-14 and was booked as Export sale. Accordingly, the total expenditure was also charged to P LA/c in FY 2013-14 only. It was also the fact that the export proceeds were received from M/s Mckeown International INC USA in FY 2013-14. The expenses were charged to P L A/c in FY 2013-14 following the accounting principle of matching concept. Therefore, the disallowance made by the AO was uncalled for, however, the same was upheld by the ld. CIT(A) without appreciating th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Trading Ltd Nevis (d) Janusz Flieger. Ledger a/cs of these parties at S.No (a) (b) for FY 2012-13 and FY 2013-14 and that of parties at S.No. (c) (d) for FY 2012-13 form part of appellant s paper book. I) The equipment was finally exported in FY 2013-14 for Rs.5,87,17,301=71. m) The relevant expenditure on drawing design charged to P L A/c in FY 2013-14 was Rs.2,47,85,290/- consisting of Rs. 1,88,99,712/- incurred in FY 2012-13 Rs.58,85,578/- incurred in FY 2013-14. n) The equipment was dispatched in FY 2013-14 and was booked as Export sale. Accordingly, the total expenditure was also charged to P LA/c in FY 2013-14. o) The amount of export proceeds was received from M/s Mckeown International INC USA in FY 2013-14. p) The expenses were charged to P L A/c in FY 2013-14 following the accounting principle of matching concept. Hence allowable. q) The disallowance u/s.14A is uncalled for in view of assessee s reply dated 07/11/2016 (para-19) r) Appellant relies on following citations: (a) CIT vs. UP State Industrial Development Corpn. (1997) 225 ITR 703 (SC) (b) Taparia Tools Ltd. vs. Jt. CIT (2003) 260 ITR 102 (Bombay) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into an agreement for Mckeown International Inc. USA for sale of coal charging car for Ahamsa s Coke Plant (hereinafter referred to as equipment ) According to the terms of the agreement the said equipment has to be delivered within next 15 months of following the date of effectiveness of this agreement. On perusal of the Article 5 of the agreement available at page 102 of the Paper Book of the assessee in Section 5.4, Sub-Contractors and Vendors. BEC(I) may, under its responsibility and solely at its cost, engage Sub-Contractors and Vendors as required for the successful performance of this Agreement, provided that BEC(I) shall remain the sole responsible party before MCKEOWN for the quality and proper execution of the scope of work as per agreement and the performance of all applicable terms and conditions of the Agreement by any Sub-Contractor, Vendor or other person performing any part of the scope of work hereunder. In terms of Section 5.4 of the Article 5 of the Agreement, it transpires that the BEC India was allowed to sub-contract any responsibility pertaining to successful performance of the agreement and accordingly the BEC(I) has taken the services of drawing and desig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inciples as well as principles of accountancy have to be taken into account. It is a well accepted proposition that for the purposes of ascertaining profits and gains, the ordinary principles of commercial accounting should be applied, so long as they do not conflict with any express provision of the relevant statutes . 13. In view of the aforesaid observations, judicial principals, facts and circumstances of the issues, we are persuaded to restore this matter back to the file of AO for readjudication, in terms of our observations herein above. Reasonable opportunity of being heard to be provided to the assessee during the readjuducation process and allow submitting all the necessary information and evidence pertaining to the issue. Thus, the ground No.2 is partly allowed for statistical purposes. 14. The next ground is regarding disallowance u/s.14A of Rs.1,35,957/- 15. Ld. AR on this issue has submitted that the disallowance u/sd.14A of the Act is uncalled for. Ld. AR also submitted that there is interest expenses of Rs.672/- only on car loan shown in the profit and loss account. Apart from this there is interest expenses of Rs.1,85,171/- on late payment of TDS which h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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