Regulus Infrastructure Management Consultancy Pvt Ltd , Bangalore V. Income Tax Officer Ward-5(1)(4), Bangalore

ITA 2077/BANG/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5389 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 26-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K N DHANDA
• Assessee Lawyers: RAMADHYANI
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 194C; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH C - SMC BEFORE SHRI N.V VASUDEVAN, JUDICIAL MEMBER ITA NOS.2077 & 2078/BANG/2017 (ASST. YEARS - 2013-14 & 2014-15) REGULUS INFRASTRUCTURE MANAGEMENT CONSULTANCY PVT. LTD., NO.3, LAVELLE ROAD, BENGALURU. . APPELLANT VS. THE INCOME-TAX OFFICER, WARD-5(1)(4), BENGALURU. . RESPONDENT APPELLANT BY : SHRI RAMADHYANI, C.A RESPONDENT BY : SHRI K.N DHANDAPANI, JCIT DATE OF HEARING : 07-3-2018 DATE OF PRONOUNCEMENT : 28-3-2018 O R D E R PER N.V VASUDEVAN, JUDICIAL MEMBER : THESE ARE APPEALS FILED BY THE ASSESSEE AGAINST TH E ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS) - V, BENGALURU BOTH DATED 3 1.7.2017 RELATING TO THE ASSESSMENT YEARS 2013-14 AND 2014-15. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF PROVIDING MANAGEMENT SERVICES SUCH AS HOUSEKEEPING AND SECURITY SERVICES TO MALLS, RESIDENTIAL AND COMMERCIAL BUILDINGS. FOR ASSESSMENT YEAR 2013-14, ASSESSEE FILED RETURN OF INCOME DECLARING NIL INCOME AND CLAIMED THAT LOSS OF RS.5, 75,490 AND UNABSORBED DEPRECIATION OF RS.4,20,131, IN ALL A SUM OF RS.9,9 5,622/- HAS TO BE ALLOWED TO BE ITA NOS.2077 & 2 078/B/17 2 CARRIED FORWARD FOR SET OFF AGAINST INCOME FOR SUBS EQUENT ASSESSMENT YEAR. FOR ASSESSMENT YEAR 2014-15, RETURN OF THE INCOME WAS F ILED DECLARING LOSS OF RS.2,03,303 AND UNABSORBED DEPRECIATION OF RS.4,63,021 IN ALL A SUM OF RS.6,66,324/- HAS TO BE ALLOWED TO BE CARRIED FORWARD FOR SET OFF AGAINST I NCOME OF SUBSEQUENT ASSESSMENT YEAR. 3. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT ASSESSEE HAD PAID A SUM OF RS.33,92,698/- TO M/S GANGOTHRI WATER SUPPL Y IN ASSESSMENT YEAR 2013-14 AND A SUM OF RS.39,33,528/- IN ASSESSMENT YEAR 2014 -15. ACCORDING TO THE AO, THE AFORESAID PAYMENT MADE BY THE ASSESSEE TO M/S GANGO THRI WATER SUPPLY WAS PAYMENT TO A CONTRACTOR FOR CARRYING OUT WORK AND T HEREFORE THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE ON THE AFORESAID PAYMEN T AS PER THE PROVISIONS OF SEC.194-C OF THE ACT. ACCORDING TO THE AO, THE ASS ESSEE DID NOT DEDUCT TAX AT SOURCE ON SUCH PAYMENT AND THEREFORE, THE SUM PAID TO M/S GANGOTHRI WATER SUPPLY WAS LIABLE TO BE ADDED TO THE TOTAL INCOME IN VIEW OF T HE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT. AS PER THE PROVISION OF SEC. 40(A)(IA) OF THE ACT, WHERE TAX IS DEDUCTIBLE ON PAYMENT AND IF TAX HAS NOT BEEN DEDUCTED BY AN ASSE SSEE, THEN THE SUM PAID/PAYABLE, IF IT IS CLAIMED AS AN EXPENDITURE IN COMPUTING INC OME FROM BUSINESS, IT WILL NOT BE ALLOWED AS DEDUCTION TO AN ASSESSEE. 4. THE PLEA OF THE ASSESSEE BEFORE THE AO WAS THAT (I) THE SUM PAID TO M/S GANGOTHRI WATER SUPPLY WAS NOT CLAIMED AS A DEDUCT ION BY THE ASSESSEE IN COMPUTING INCOME FROM BUSINESS. (II) THE ASSESSEE W AS OBLIGED AS PER THE AGREEMENT WITH ITS CLIENTS TO PROVIDE WATER BY PURCHASING WAT ER AT ACTUAL COST. THE CLIENTS OF THE ASSESSEE REIMBURSE THE COST OF PROCURING WATER. SI NCE WATER WAS PURCHASED TO PROVIDE THE SAME TO THE CLIENT, THERE WAS NO OBLIGA TION TO DEDUCT TAX AT SOURCE AT THE TIME OF MAKING PAYMENT FOR PURCHASE OF WATER. TH E FURTHER SUBMISSIONS OF THE ASSESSEE WAS THAT AS PER THE KARNATAKA VAT ACT, 200 3 ['THE KVAT ACT], PURCHASE OF WATER IS IN THE NATURE OF PURCHASE OF 'GOODS' AND A CCORDINGLY OUGHT NOT TO ATTRACT THE ITA NOS.2077 & 2 078/B/17 3 PROVISIONS OF SECTION 194C OF THE ACT. THE LEARNED AO GROSSLY ERRED IN CONSIDERING SUPPLY AND SALE OF WATER AS A 'SERVICE' THAT HAS TH E ELEMENT OF IMPLICIT CONTRACT. AS PER THE KVAT ACT, 'GOODS' MEANS ALL KINDS OF MOVABLE PR OPERTY (OTHER THAN NEWSPAPER, ACTIONABLE CLAIMS, STOCKS AND SHARES AND SECURITIES ) AND INCLUDES LIVESTOCK, ALL MATERIALS, COMMODITIES AND ARTICLES (INCLUDING GOOD S, AS GOODS OR IN SOME OTHER FORM) INVOLVED IN THE EXECUTION OF A WORKS CONTRACT OR TH OSE GOODS TO BE USED IN THE FITTING OUT, IMPROVEMENT OR REPAIR OF MOVABLE PROPERTY, AND ALL GROWING CROPS, GRASS OR THINGS ATTACHED TO, OR FORMING PART OF THE LAND WHI CH ARE AGREED TO BE SEVERED BEFORE SALE OR UNDER THE CONTRACT OF SALE. WATER HAS BEEN CLASSIFIED AS 'GOODS' IN THE KVAT ACT AND AS PER ENTRY NUMBER 54 OF THE FIRST SCHEDUL E [DEALING WITH EXEMPTED 'GOODS'] OF THE KVAT ACT, WATER, OTHER THAN (I) AERATED, MIN ERAL, DISTILLED, MEDICINAL, IONIC, BATTERY AND DE-MINERALISED WATER; AND (II) WATER SO LD IN SEALED CONTAINERS ARE EXEMPTED FROM VAT. FURTHER, AERATED WATER HAS ALSO BEEN CLASSIFIED AS INPUT TAX RESTRICTED 'GOODS' IN THE FIFTH SCHEDULE OF THE KVA T ACT. 'GOODS' NOT FALLING IN THE FIRST SCHEDULE OR IN SCHEDULE 2. 3 OR 4 ARE TAXABLE AT TH E RATE OF 14.5%. AS SUCH, WATER, NOT COVERED BY THE FIRST SCHEDULE, IS TAXABLE UNDER THE KVAT ACT AT 14.5%. ACCORDINGLY, AS SUPPLY OF WATER IS ESSENTIALLY IN THE NATURE OF SUPPLY OF GOODS FOR SALE AND AS PER THE CBDT CIRCULAR NO. 13/2006, DATED 13TH DECEMBER 2006, WHEREIN IT HAS BEEN CLARIFIED THAT THE PROVISIONS OF SECTION 194C WOULD APPLY IN RESPECT OF A CONTRACT FOR SUPPLY OF ANY ARTICLE OR THING AS PER PRESCRIBED SP ECIFICATIONS ONLY IF IT IS A CONTRACT FOR WORK AND NOT A CONTRACT FOR SALE, THE PAYMENT I N QUESTION DOES NOT FALL WITHIN THE AMBIT OF SEC.194C OF THE ACT AND THEREFORE THERE WA S NO OBLIGATION ON THE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE. 5. THE ASSESSING OFFICER HOWEVER REJECTED THE CLAIM OF THE ASSESSEE AS ABOVE AND ADDED SUM PAID TO M/S GANGOTHRI WATER SUPPLY T O THE TOTAL INCOME OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SEC. 40(A)(I A) OF THE ACT. ON APPEAL BY THE ASSESSEE, THE CIT(A) UPHELD THE ORDER OF THE AO. THE CIT(A) FOUND THAT IN AY 2013-14, THE ASSESSEE HAD COLLECTED MORE SUM FROM I TS CLIENTS THAN WHAT IT HAD PAID ITA NOS.2077 & 2 078/B/17 4 TOWARDS THE WATER CHARGES TO GANGOTHRI WATER SUPPLY AND SUCH EXCESS WAS SHOWN AS INCOME IN ITS PROFIT AND LOSS ACCOUNT WHICH PROVED THAT THOUGH THE ASSESSEE HAS NOT SHOWN GROSS RECEIPTS AND PAYMENTS BUT HAS SHOWN THE NET RECEIPT ON PURCHASE OF WATER. HE THEREFORE HELD THAT THE ASSESSEE HAD IMPL IEDLY CLAIMED WATER CHARGES AS DEDUCTION WHILE COMPUTING ITS INCOME FROM BUSINESS. THE CIT(A) HELD THAT THE PURPOSE OF SECTION 40(A)(IA) IS TO ENSURE THE RECOV ERY OF TAX. THEREFORE, THE ACTION OF THE ASSESSING OFFICER INVOKING PROVISIONS OF SEC.40 (A)(IA) WAS UPHELD BY THE CIT(A). ON THE ARGUMENT OF THE ASSESSEE THAT THE SUM PAID T O GANGOTHRI WATER SUPPLY WAS A PAYMENT FOR PURCHASE OF WATER AND THEREFORE PROVISI ONS OF SEC.194C OF THE ACT WILL NOT APPLY, THE CIT(A) HELD SINCE THE ASSESSEE COLLE CTED AMOUNT IN EXCESS OF THE PURCHASE PRICE OF WATER, IT WAS NOT A CASE OF CONTR ACT OF SUPPLY BUT A CONTRACT FOR CARRYING OUT WORK. 6. SIMILAR ORDER WAS PASSED BY THE CIT(A) FOR ASSES SMENT YEAR 2014-15 ALSO, THOUGH THERE WAS NO EXCESS PRICE RECEIVED BY THE AS SESSEE FROM ITS CLIENTS OVER AND ABOVE THE SUM THE ASSESSEE PAID TO GANGOTRI WATER S UPPLY. 7. AGGRIEVED BY THE ORDERS OF THE CIT(A), ASSESEE H AS PREFERRED THE PRESENT APPEALS BEFORE THE TRIBUNAL. 8. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA DS AS FOLLOWS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE RE IS NO JUSTIFICATION FOR THE COMMISSIONER OF INCOME TAX (A PPEALS) TO CONFIRM THE ORDER OF THE ASSESSING OFFICER IN DISAL LOWING A SUM OF RS.39,33,528/- REPRESENTING WATER CHARGES PAID TO M /S. GANGOTHRI WATER SUPPLY (GANGOTHRI) UNDER SECTION 40(A) (IA) O F THE INCOME TAX ACT, 1961 (ACT). 2. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N NOT APPRECIATING THE CONTENTIONS OF THE COMPANY THAT TH E PAYMENT MADE TO GANGOTHRI REPRESENTS CONSIDERATION FOR PURE SUPP LY OF GOODS AND IS ACCORDINGLY NOT A PAYMENT FOR CARRYING ANY WORK (IN CLUDING SUPPLY OF ITA NOS.2077 & 2 078/B/17 5 LABOR), IN PURSUANCE TO A CONTRACT BETWEEN THE APPE LLANT AND GANGOTHRI AND IS COVERED BY CIRCULAR NO. 13, 2006 D ATED DECEMBER 13, 2006 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXE S. ACCORDINGLY, IN THE OPINION OF THE APPELLANT, THE PROVISIONS OF SEC TION 194C OF THE ACT IS NOT AT ALL APPLICABLE TO THE PAYMENT UNDER CONSI DERATION. 3. WITHOUT PREJUDICE TO THE FOREGOING CONTENTIONS, EVEN ASSUMING BUT WITHOUT ADMITTING THAT THE PROVISIONS OF SECTIO N 194C OF THE ACT IS APPLICABLE TO THE PAYMENT MADE TO GANGOTHRI, THE CO MMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT APPRECIATING THE CONTENTIONS OF THE COMPANY THAT THE APPELLANT MERELY COLLECTED MONIES FROM THE OCCUPANTS OF THE VARIOUS PREMISES WHERE IT WAS REND ERING PROPERTY MANAGEMENT SERVICES AND HANDED OVER THE SAME TO THE VENDOR, THAT IT WAS MERELY FUNCTIONING AS A REPRESENTATIVE OF THE P ROPERTY OCCUPANTS IN COLLECTING AND MAKING THE PAYMENT, THAT NO EXPEN DITURE HAD BEEN RECOGNIZED IN THE PROFIT AND LOSS ACCOUNT ON THIS A CCOUNT AND THAT THERE IS NO EXPENSE INCURRED BY THE APPELLANT ATTRA CTING THE PROVISIONS OF SECTION 40(A) (IA) OF THE ACT. THE APPELLANT DEN IES THAT IT COLLECTED ANY MONIES FROM THE PROPERTY OCCUPANTS IN EXCESS OF THAT DEFRAYED GANGOTRI AND MADE A SURPLUS IN THE TRANSACTION AS O BSERVED BY THE COMMISSIONER OF INCOME- TAX (APPEALS). YOUR APPELLANT SEEKS LEAVE TO ADD TO, TO AMEND ANY OF THE FOREGOING GROUNDS AS AND WHEN CONSIDERED NECESSARY/AT THE TIM E OF HEARING. 9. THE ASSESSEE HAS FILED AN APPLICATION FOR ADMISS ION OF THE FOLLOWING ADDITIONAL GROUNDS:- ADDITIONAL GROUNDS OF APPEAL 2.0 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT C ONSIDERING GROUND NO.3 RAISED IN RESPECT OF NOT SETTING OF CUR RENT YEAR LOSSES AND DEPRECIATION ALLOWANCE AGGREGATING TO RS.9,95,622/A GAINST THE ADDITION MADE, ON THE GROUND THAT THE SAME IS MISCE LLANEOUS AND GENERAL IN NATURE AND DID NOT NEED SEPARATE ADJUDIC ATION. 10. IN SUPPORT OF THE PLEA FOR ADMISSION OF ADDITI ONAL GROUND, IT HAS BEEN SUBMITTED HE ASSESSEE FILED ITS RETURN OF INCOME SHOWING A LOSS OF RS.9,95,622/- FOR THE ASSESSMENT YEAR 2013-14. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT ON 16.3.2016 DETERMINING THE TOTAL INCOME AT RS 33,92,700. THE ASSESSEE FILED A RECTIFICATION APPLICATION UNDER SECTION 154 OF THE INCOME TAX ACT , 1961 ON 11.04.2016 FOR NON- ITA NOS.2077 & 2 078/B/17 6 CONSIDERATION OF LOSS FOR THE YEAR OF RS.9,95,622/T HE SAME IS YET TO BE DISPOSED OFF. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, TH E ASSESSEE PREFERRED AN APPEAL TO THE COMMISSIONER OF INCOME TAX, APPEALS V, BANGALORE. G ROUND OF APPEAL 3 WAS IN RESPECT OF THE ASSESSING OFFICER'S ACTION IN NOT SETTING OF F THE RETURNED LOSS AGAINST THE ADDITION MADE. THE COMMISSIONER OF INCOME TAX, APPEALS WHIL E DISPOSING OFF THE APPEAL DID NOT ADJUDICATE GROUND 3 ON THE CONTENTION THAT THIS GROUND WAS MISCELLANEOUS AND GENERAL IN NATURE AND DID NOT NEED SEPARATE ADJUDIC ATION. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE HONOURABLE INCOME TAX APPELLATE T RIBUNAL. DUE TO OVERSIGHT, THE ACTION OF THE COMMISSIONER OF INCOME TAX, APPEALS IN NOT A DJUDICATING GROUND 3 WAS NOT INCLUDED IN THE GROUNDS OF APPEAL FILED. ACCORDING LY, THE ASSESSEE HAS JUSTIFIED IT CLAIM FOR ADMISSION OF THE ADDITIONAL GROUNDS OF APPEAL. 11. SIMILAR APPLICATION FOR ADMISSION OF ADDITIONAL GROUND HAS BEEN FILED IN ASSESSMENT YEAR 2014-15 ALSO. 12. I AM OF THE VIEW THAT THE ADDITIONAL GROUND SOU GHT TO BE RAISED BY THE ASSESSEE ARISES OUT OF THE ORDER OF THE CIT(A) AND IS THEREF ORE ADMITTED FOR ADJUDICATION. 13. I HAVE HEARD THE SUBMISSIONS OF THE LD AR AND L D DR. AS FAR AS THE QUESTION WHETHER THE MONEY PAID TO M/S GANGOTHRI WATER SUPP LY WAS CLAIMED AS A DEDUCTION BY THE ASSESSEE IN COMPUTING INCOME FROM BUSINESS I S CONCERNED, I FIND FROM THE LEDGER ACCOUNT OF WATER CHARGES FROM THE PERIOD 1/4 /2012 TO 31/3/2013 (A COPY OF WHICH PLACED AT PAGE 7 TO 11 OF THE ASSESSEES PAPE R BOOK) FOR ASSESSMENT YEAR 2013- 14, THAT THE ASSESSEE HAD PURCHASED WATER FROM M/S GANGOTHRI WATER SUPPLY. THE ASSESSEE AS PER THE TERMS OF THE AGREEMENT WITH A C LIENT HAD TO SUPPLY WATER TO THE COMMERCIAL ESTABLISHMENT OF THE CUSTOMER. PERUSAL OF THE LEDGER ACCOUNT OF WATER CHARGES SHOWS THAT THERE WERE 3 CUSTOMERS TO WHOM T HE ASSESSEE HAD DEBITED THE COST OF WATER PROCUREMENT FROM M/S GANGOTHRI WATER SUPP LY NAMELY ITA NOS.2077 & 2 078/B/17 7 1) NXP SEMICONDUCTORS INDIA PVT. LTD., 2) PACE MICRO TECHNOLOGY (INDIA) PVT. LTD., 3) PHILIPS ELECTRONICS INDIA LTD., 14. A COPY OF THE AGREEMENT BETWEEN THE ASSESSEE AN D PHILIPS ELECTRONICS INDIA LTD., IS AVAILABLE AT PAGE NO.92 TO 116 OF THE ASSE SSEES PAPER BOOK. AS PER THIS AGREEMENT, THE ASSESSEE HAS TO RENDER VARIOUS SERVI CES TO PHILIPS ELECTRONICS INDIA LTD., AS SET OUT IN EXHIBIT A IN THE AGREEMENT. TH E ASSESSEE HAS TO MAINTAIN ADEQUATE SUPPLY OF WATER TO THE COMMERCIAL ESTABLISHMENT. CL AUSE 4.2 OF THE AGREEMENT ON SUPPLY OF WATER READS AS FOLLOWS:- 4.2 ELECTRICITY AND WATER CHARGES A. THE CLIENT SHALL PAY ELECTRICITY CHARGES LEVIED BY BANGALORE ELECTRICITY SUPPLY COMPANY OR ANY SUCCESSOR-IN-INTE REST OR ASSIGN THEREOF ('BESCOM') AT ACTUALS, BASED ON THE CONNECT ED LOAD AND IN ACCORDANCE WITH THE RELEVANT METER READINGS, OR SUCH OTHER BASIS AS AGREED BY THE PARES, TO THE SERVICE PROVID ER WHO SHALL, UPON RECEIPT, AND IN ANY EVENT NO LATER THAN THE DU E DATE FOR PAYMENT, PAY THE MONIES RECEIVED FROM THE CLIENT TO BESCOM. B. THE CLIENT SHALL PAY WATER CHARGES LEVIED BY THE BANGALORE WATER SUPPLY AND SEWERAGE BOARD OR ANY SUCCESSOR-IN -INTEREST OR ASSIGN THEREOF ('BWSSB')/ OR ANY OTHER PARTIES SUPP LYING WATER AT ACTUALS , BASED ON CONSUMPTION AND IN ACCORDANCE WITH THE RELEVANT METER READINGS, OR SUCH OTHER BASIS AS AGR EED BY THE PARTIES, TO THE SET-VICE PROVIDER WHO SHALL, UPON R ECEIPT, AND IN ANY EVENT, NO LATER THAN THE DUE DATE FOR PAYMENT, PAY THE MONIES RECEIVED FROM THE CLIENT TO BWSSB/ANY OTHER PARTIES SUPPLYING WATER. 15. I FIND FROM THE AFORESAID CLAUSE IN THE AGREEME NT THAT THE ASSESSEE HAS TO SUPPLY WATER AND THE ACTUAL COST IN PROVIDING WATER ALONE CAN BE RECOVERED BY THE ASSESSEE FORM THE CLIENT. IN OTHER WORDS, THERE IS NO ELEMENT OF CONSIDERATION OVER AND ABOVE THE ACTUAL COST OF PROCURING WATER ARE RE IMBURSED BY THE CLIENT. IN THE LEDGER ACCOUNT OF WATER CHARGES, THE TOTAL MONEY PA ID OR PAYABLE TO M/S GANGOTHRI ITA NOS.2077 & 2 078/B/17 8 WATER SUPPLY WAS SUM OF RS.33,92,698/-. WHEREAS TH E ASSESSEE HAS RECEIVED FROM 3 OF HIS CLIENTS FOR WHOM WATER WAS SUPPLIED, A SUM O F RS.31,84,684/-. THERE IS THUS AN EXCESS SUM OF RS.91,986/- RECEIVED BY THE ASSESSEE. IT IS FROM THIS ENTRY THAT THE REVENUE AUTHORITIES HAVE CONCLUDED THAT THE ASSESSE E WAS GETTING A MARKUP ON SUPPLY OF WATER. IN MY OPINION THIS CONCLUSION DRAWN BY T HE REVENUE AUTHORITIES CANNOT BE SUSTAINED. IT IS CLEAR FROM THE TERMS OF THE AGREE MENT BETWEEN THE ASSESSEE AND HIS CLIENT THAT WATER CHARGES WILL BE RECOVERED AT ACTU ALS BY THE ASSESSEE FROM HIS CLIENTS. AS TO WHY THERE IS DIFFERENCE BETWEEN THE AMOUNT RE CEIVED BY THE ASSESSEE FROM THE CLIENTS AND THE AMOUNT PAID TO M/S GANGOTHRI WATER SUPPLY WAS EXPLAINED BY THE LD COUNSEL FOR THE ASSESSEE AS AN EXCESS PAYMENT RECEI VED WHICH THE CLIENTS DID NOT CLAIM FROM THE ASSESSEE. IN ASSESSMENT YEAR 2014-1 5, THERE IS NO SUCH EXCESS AND THE DEBIT AND CREDIT IN THE WATER CHARGES ACCOUNT TALLY . THIS PROVES THE CASE OF THE ASSESSEE AND THERE IS NO MARKUP IN PROCURING AND SU PPLYING WATER BY THE ASSESSEE TO HIS CLIENTS AND, THEREFORE, I AM OF THE VIEW THAT T HE CONTENTION PUT FORTH BY THE ASSESSEE THAT THE WATER CHARGES PAID TO M/S GANGOTH RI WATER SUPPLY WAS NEVER CLAIMED BY THE ASSESSEE AS A DEDUCTION IN THE PROFI T AND LOSS ACCOUNT AND, THEREFORE, THE SAME CANNOT BE SUBJECT MATTER OF ADDITION U/S 4 0A(IA) OF THE ACT, HAS TO BE ACCEPTED. I AM THEREFORE OF THE VIEW THAT THE ADDI TION MADE IN BOTH THE ASSESSMENT YEARS CANNOT BE SUSTAINED AND THE SAME IS DIRECTED TO BE DELETED. 16. AS FAR AS THE ARGUMENT OF THE LD AR THAT THE PR OVISION OF SEC. 194C OF THE ACT ARE NOT ATTRACTED IN A CASE OF TRANSACTION OF SALE, I AM OF THE VIEW THAT THE CONTENTIONS TO BE PUT FORTH BY THE LD COUNSEL FOR THE ASSESSEE IN THIS REGARD ARE ALSO ACCEPTABLE. SECTION 194C EXPLANATION (IV) WHICH DEFINES WORK FOR THE SEC. 194C OF THE ACT SPECIFICALLY EXCLUDES SUPPLY OF A PRODUCT ACCORDING TO THE REQUIREMENTS OF THE CUSTOMERS BY USING MATERIAL PURCHASED FROM A PERSON OTHER THAN SUCH CUSTOMERS. WATER IN THE PRESENT CASE WAS PURCHASED BY THE ASSE SSEE NOT FROM THE CUSTOMERS BUT FROM A 3 RD PARTY AND SUPPLIED TO ITS CLIENTS. THEREFORE, THE PRICE PAID FOR PURCHASE OF ITA NOS.2077 & 2 078/B/17 9 WATER IN MY VIEW CANNOT BE CONSTRUED AS A PAYMENT F OR PAYMENT TO A CONTRACTOR FOR CARRYING OUT ANY WORK. 17. I AM THEREFORE OF THE VIEW EVEN ON THIS BASIS T HE IMPUGNED DISALLOWANCE U/S 40A(IA) OF THE ACT CANNOT BE SUSTAINED. I, THEREFO RE, ALLOW THE APPEALS OF THE ASSESSEE FOR ASSESSMENT YEAR 2013-14 AND 2014-15 ALSO. 18. AS FAR AS ADDITIONAL GROUND OF APPEAL RAISED BY THE ASSESSEE IS CONCERNED, I AM OF THE VIEW THAT THE RETURN OF LOSS( BUSINESS LOSS AND UNABSORBED DEPRECIATION) FILED BY THE ASSESSEE HAD TO BE CONSIDERED BY THE AO AND IF THE RETURN OF LOSS IS ACCEPTED, THE SAME SHOULD BE ALLOWED TO BE CARRIED FORWARD IN ACC ORDANCE WITH LAW. SINCE IN THE PRESENT CASE, THE ADDITION IN THE ASSESSMENT WAS ON LY ON ACCOUNT OF DISALLOWANCE U/S 40A(IA) OF THE ACT AND SINCE SUCH DISALLOWANCE HAS BEEN DELETED, THE LOSS RETURNED BY THE ASSESSEE HAS TO BE ACCEPTED AND THE LOSS SHOULD BE PERMITTED TO BE CARRIED FORWARD FOR SET OFF IN FUTURE IN ACCORDANCE WITH PROVISIONS OF THE ACT. I ACCORDINGLY DIRECT THE AO TO DETERMINE THE LOSS AND ALLOW THE CARRY FORWAR D OF THE LOSS IN ACCORDANCE WITH LAW. 19. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH MARCH, 2018. SD/- (N.V VASUDEVAN) JUDICIAL MEMBER B ANGALORE DATED : 28/3/2018 VMS COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGALORE. ITA NOS.2077 & 2 078/B/17 10 1. DATE OF DICTATION .. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR. P. S... 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT.. 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. ..