LIBRA TECHCON LTD, MUMBAI V. DCIT 1(2), MUMBAI

ITA 2475/MUM/2013

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3278 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 30-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 01-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M V RAJGURU
• Assessee Lawyers: PRAKASH JOTHWANI
• Keywords: Earning of tax free income; Services rendered outside India; Non-deduction of tax
• Section: 143(3); 142(1); 14A; 194C

Judgement Text

1 LIBRA TECHCON LTD IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH L, MUMBAI BEFORE SHRI MAHAVIR SINGH(JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.2475/MUM/2013 (ASSESSMENT YEAR: 2008-09) M/S LIBRA TECHCON LTD 805, HALLMARK BUSINESS PLAZA GURU NANAK HOSPITAL ROAD BANDRA (E), MUMBAI 400 051 PAN : AABCL0877G VS DY.CIT-1(2), MUMBAI APPELLANT RESPONDENT I.T.A NO.4480 /MUM/2013 (ASSESSMENT YEAR: 2008-09) DY.CIT-1(2), MUMBAI VS M/S LIBRA TECHCON LTD 805, HALLMARK BUSINESS PLAZA GURU NANAK HOSPITAL ROAD BANDRA (E), MUMBAI 400 051 APPELLANT RESPONDENT ASSESSEE BY SHRI PRAKASH JOTHWANI REVENUE BY SHRI M.V. RAJGURU DATE OF HEARING 26-07-2018 DATE OF PRONOUNCEMENT 24-08-2018 O R D E R PER G MANJUNATHA, AM : THESE CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS REVENUE ARE DIRECTED AGAINST THE ORDER OF CIT(A)-2, MUMBAI DATE D 021-03-2013 AND THEY PERTAIN TO AY 2008-09. SINCE FACTS ARE IDENTI CAL AND ISSUES ARE 2 LIBRA TECHCON LTD COMMON, FOR THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF PROJECT CONSULTANCY SERV ICES, FILED ITS RETURN OF INCOME FOR AY 2008-09 ON 25-09-2008 DECLARING TO TAL INCOME AT RS.6,01,81,774. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICES U/S 143(2) AND 142(1) OF THE ACT WERE ISSUED. IN RESPO NSE TO NOTICES, AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FILED VARIOUS DETAILS, AS CALLED FOR. THE ASSE SSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 22-12-2010 DETERMINING THE TOTAL INCOME AT RAS.23,85,36,030 BY MAKING ADDITIONS TOWARDS DISALL OWANCE OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME U /S 14A FOR RS.14,22,463, DISALLOWANCE OF CERTAIN EXPENSES U/S 40(A)(IA) FOR FAILURE TO DEDUCT TDS U/S 194C AND 194J OF THE INCOME-TAX A CT, 1961 FOR RS.1,56,83,873, DISALLOWANCE OF SPONSORSHIP EXPENSE S PAID TO NON RESIDENTS U/S 40(A)(I) FOR FAILURE TO DEDUCT TAX AT SOURCE U/S 195 OF THE INCOME-TAX ACT FOR RS.5,20,67,912, DISALLOWANCE OF SITE SERVICES AND PROJECT COMMISSION U/S 40(A)(I) FOR FAILURE TO DEDU CT TDS U/S 195 OF THE INCOME-TAX ACT, 1961 FOR RS.6,82,813 AND INCOME EST IMATED ON ADVANCES RECEIVED OF RS.10,84,97,194. 3. AGGRIEVED BY THE ASSESSMENT ORDER, ASSESSEE PREF ERRED APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), ASSESSEE HAS CHALLENGED 3 LIBRA TECHCON LTD ADDITIONS MADE BY THE AO IN RESPECT OF DISALLOWANCE OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME U/S 14A, DISA LLOWANCE OF EXPENDITURE U/S 40(A)(IA) AND 40(A)(I) FOR FAILURE TO DEDUCT TAX UNDER RESPECTIVE SECTIONS AND DETERMINATION OF INCOME ACC RUED ON ADVANCES RECEIVED FROM PROJECT CONSULTANCY. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMISSIONS OF THE ASSESSEE, PARTLY ALLOWE D APPEAL FILED BY THE ASSESSEE WHEREIN HE HAS ALLOWED PARTIAL RELIEF IN R ESPECT OF DISALLOWANCE OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOM E OF RS.2,15,123 AND CONFIRMED BALANCE DISALLOWANCE OF RS.12,07,340. IN RESPECT OF DISALLOWANCE OF EXPENDITURE INCURRED ON DRAWINGS, D ESIGN AND TECHNICAL ASSISTANCE, THE LD. CIT(A) HAS ALLOWED PARTIAL RELI EF, WHEREVER THE ASSESSEE HAS PROVED THAT EITHER TDS PROVISIONS IS N OT APPLICABLE OR TDS PROVISIONS ARE COMPLIED WITH AND ACCORDINGLY, OUT O F TOTAL DISALLOWANCE OF RS.1,56,83,873 SUSTAINED ADDITION OF RS.63,15,200 P AID TO SAUDI DESIGNER ENGINEERING CONSTRUCTIONS ON THE GROUND TH AT ALTHOUGH ASSESSEE REQUIRED TO DEDUCT TDS U/S 194J FAILED TO DEDUCT SUCH TDS, THEREFORE, THE AO WAS RIGHT IN DISALLOWING SUCH EXP ENDITURE FOR FAILURE TO DEDUCT TDS U/S 194J OF THE I.T. ACT, 1961. THE LD. CIT(A), HOWEVER, DELETED OTHER ADDITIONS MADE BY THE AO TOWARDS FREI GHT CHARGES, PACKING AND FORWARDING, TRANSPORTATION EXPENSES, CL EARING AND FORWARDING CHARGES, PRINTING AND STATIONERY, ADVERT ISEMENT EXPENSES AND OTHER CHARGES ON THE GROUND THAT THERE IS NO RE QUIREMENT OF 4 LIBRA TECHCON LTD DEDUCTION OF TDS ON SUCH PAYMENTS. INSOFAR AS DISA LLOWANCE OF LIAISONING SERVICES OF RS.5,20,67,912, THE LD.CIT(A ), FOR THE REASONS STATED IN HIS ORDER, DIRECTED THE AO TO MAKE ADHOC DISALLOWANCE OF 25% WHICH WORKED OUT TO RS.1,29,19,935 AND DIRECTED THE AO TO DELETE BALANCE DISALLOWANCE OF RS.3,91,48,377. SIMILARLY THE LD.CIT(A) DIRECTED THE AO TO DELETE ESTIMATION OF INCOME ON A DVANCES RECEIVED FROM PROJECTS ON THE GROUND THAT THE ASSESSEE IS FO LLOWING PERCENTAGE COMPLETION METHOD FOR RECOGNITION OF REVENUE AND AC CORDINGLY RECOGNIZED REVENUE OF RS.17.78 CRORES FROM PROJECTS ON THE BASIS OF WORK CARRIED OUT AT PROJECT SITE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFOR E US. 4. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM ASSESSEES APPEAL IS DISALLOWANCE OF EXPENDITURE INCURRED IN R ELATION TO EXEMPT INCOME. THE FACTS WITH REGARD TO THE IMPUGNED DISP UTE ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS RECE IVED DIVIDEND INCOME OF RS.1,26,05,919 WHICH WAS CLAIMED EXEMPT U /S 10(34) OF THE INCOME-TAX ACT, 1961. THE ASSESSEE DID NOT MAKE AN Y DISALLOWANCE TOWARDS EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME. THE AO HAS DETERMINED DISALLOWANCE OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME TOWARDS INTEREST EXPENSES AND OTHER EXPENSES BY INVOKING RULE 8D(2)(II) & 8D(2)(III) OF I.T. RULES, 1962. IT IS THE CONTENTION OF THE ASSESSEE THAT IT HAS NOT INCURRED ANY EXPENDITURE T OWARDS EARNING 5 LIBRA TECHCON LTD EXEMPT INCOME, THEREFORE, INVOKING RULE 8D(2) TO DI SALLOW SUCH EXPENDITURE WITHOUT ARRIVING AT A SATISFACTION AS T O HOW THE CLAIM OF THE ASSESSEE WITH REGARD TO NON INCURRING OF EXPENSES I S INCORRECT. THE ASSESSEE FURTHER CONTENDED THAT IT HAS ACCEPTED SUO MOTO DISALLOWANCE OF RS.50,000 BEFORE THE LD.CIT(A), HOWEVER, THE LD. CIT(A) HAS IGNORED THE CLAIM OF THE ASSESSEE AND ALLOWED PARTIAL RELIE F TOWARDS INTEREST DISALLOWANCE U/R 8D(2)(II); BUT, CONFIRMED ADDITION MADE BY THE AO TOWARDS DISALLOWANCE OF OTHER EXPENSES. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE AO HAS APPLIED PROVISIONS OF RULE 8 D(2)(II) & 8D(2)(III) TO DETERMINE DISALLOWANCE CONTEMPLATED U/S 14A OF I.T. ACT, 1961 IN RESPECT OF INTEREST EXPENDITURE AND OTHER ADMINISTR ATIVE EXPENDITURE. THE ASSESSEE HAS ACCEPTED ADHOC DISALLOWANCE OF RS. 50,000 CONSIDERING THE NATURE OF INVESTMENTS WHICH YIELD E XEMPT INCOME WITHOUT FURNISHING ANY WORKING AS TO HOW ADHOC DISA LLOWANCE OF RS.50,000 IS JUSTIFIED CONSIDERING HUGE DIVIDEND IN COME OF RS.1,26,05,919. THEREFORE, WE ARE OF THE CONSIDERE D VIEW THAT THERE IS NO MERIT IN THE ARGUMENTS OF THE ASSESSEE THAT IT H AS NOT INCURRED ANY EXPENDITURE IN RELATION TO EXEMPT INCOME, WHEN THE ASSESSEE HAS NOT MAINTAINED SEPARATE BOOKS OF ACCOUNT FOR INVESTMENT ACTIVITY AND ITS BUSINESS TRANSACTIONS. WE FURTHER OBSERVE THAT WHE N COMMON EXPENDITURE ARE INCURRED TOWARDS BUSINESS AS WELL A S INVESTMENT 6 LIBRA TECHCON LTD ACTIVITY, THEN POSSIBILITY OF CERTAIN EXPENDITURE A TTRIBUTABLE TO INVESTMENT SERVICES CANNOT BE RULED OUT. THEREFORE, KEEPING I N VIEW OF THE PROVISIONS OF SECTION 14A R.W.R. 8D(2), WE ARE OF T HE CONSIDERED VIEW THAT 5% OF EXEMPT INCOME TOWARDS EXPENDITURE WOULD MEE T THE ENDS OF JUSTICE. ACCORDINGLY, WE DIRECT THE AO TO MAKE ADD ITION OF 5% OF EXEMPT INCOME TOWARDS EXPENDITURE INCURRED IN RELATION TO EARNING OF EXEMPT INCOME. 6. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATIO N FROM ASSESSEE AS WELL AS REVENUES APPEAL IS DISALLOWANCE OF EXPENSE S U/S 40(A)(IA) TOWARDS LIAISONINGCHARGES @25% OF SUCH EXPENSES. T HE AO HAS MADE DISALLOWANCE OF RS.5,20,67,912 TOWARDS LIAISONING A ND SITE SERVICES AND PROJECT COMMISSION FOR THE REASON THAT THE ASSESSEE HAS FAILED TO DEDUCT TDS U/S 195 OF THE INCOME-TAX ACT, 1961. IT IS THE CONTENTION OF THE ASSESSEE THAT EXPENDITURE INCURRED UNDER THE HEAD LIAISONING SERVICES ARE PAID OUTSIDE INDIA FOR THE PROJECT SET UP OUTSI DE INDIA. THEREFORE, THE PROVISIONS OF SECTION 195 HAS NO APPLICATION WHEN P AYMENT IS MADE OUTSIDE INDIA TOWARDS SERVICES RENDERED OUTSIDE IND IA. THE ASSESSEE FURTHER CONTENDED THAT IT HAS ENTERED INTO AN AGREE MENT WITH INDUSTRIAL DEVELOPMENT & PROMOTION COMPANY LTD, A FOREIGN COMP ANY HAVING NO PE IN INDIA FOR PROVIDING PROJECT ASSISTANCE AND LI AISONING AND SUCH SERVICES ARE PROVIDED TO THE ASSESSEE DURING IMPLEM ENTATION OF ITS PROJECTS IN SAUDI ARABIA. SUCH SERVICES HAS BEEN R ENDERED BY THE 7 LIBRA TECHCON LTD SERVICE PROVIDER OUTSIDE INDIA. THEREFORE, THE QUE STION OF APPLICATION OF PROVISIONS OF SECTION 9(1)(VII) OF THE INCOME-TAX A CT, 1961 DOES NOT ARISE AND CONSEQUENTLY PROVISIONS OF SECTION 195 HAS NO A PPLICATION FOR WITHHOLDING TAX ON SUCH PAYMENTS. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE AO HAS MADE ADDITION TOWARDS LIAISO NING AND OTHER RELATED EXPENSES INCURRED IN SAUDI ARABIA WITHOUT R ECORDING ANY REASON AS TO HOW SUCH PAYMENT MADE OUTSIDE INDIA COMING WI THIN THE AMBIT OF PROVISIONS OF SECTION 195 OF THE INCOME-TAX ACT, 19 61. THE AO HAS MADE ADDITION TOWARDS LIAISONING AND OTHER SITE CHA RGES PAID TO A SERVICE PROVIDER, A FOREIGN COMPANY IN SAUDI ARABIA FOR RENDERING SERVICES TO THE ASSESSEES PROJECT LOCATED OUTSIDE INDIA FOR THE REASON THAT ENTIRE SERVICES ARE SOURCED FROM INDIA AND AS SUCH, THE EXPENDITURE IS INCURRED IN INDIA. THE ASSESSEE HAS NOT BROUGHT ANYTHING ON RECORD TO ESTABLISH THAT THE INCOME COMPONENT EMBEDDED AND AC CRUED TO THE PARTIES IN THE TRANSACTION WITH INDIAN PARTIES IS N OT TAXABLE IN INDIA UNDER THE I.T. ACT, 1961. 8. HAVING HEARD BOTH SIDES, WE DO NOT FIND ANY MERI T IN THE FINDINGS OF THE AO FOR THE REASON THAT ON PERUSAL OF DETAILS FI LED BY THE ASSESSEE, WE FIND THAT ALL PAYMENTS RELATED TO LIAISONING AND RE LATED SERVICES HAS BEEN PAID TO A NON RESIDENT COMPANY HAVING NO PE IN INDI A PROVIDING LOCAL ASSISTANCE AND LOCAL LIAISONING SERVICES TO THE ASS ESSEE FOR ITS PROJECT IN 8 LIBRA TECHCON LTD SAUDI ARABIA. ALL THESE PAYMENTS HAVE BEEN PAID OU TSIDE INDIA FOR RENDERING SUCH SERVICES TO THE PROJECT LOCATED OUTS IDE INDIA. NO PART OF SERVICES HAS BEEN EITHER RENDERED OR RECEIVED IN IN DIA. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE AO WAS ERRED IN DISALLOWING LIAISONING AND OTHER SERVICES U/S 40(A)(IA) FOR FAI LURE TO DEDUCT TDS U/S 195 OF THE INCOME-TAX ACT, 1961. THE LD.CIT(A), AF TER CONSIDERING RELEVANT FACTS IN PRINCIPLE, ACCEPTED THAT THE PROV ISIONS OF TDS IS APPLICABLE IN RESPECT OF PAYMENT MADE TO INDUSTRIAL DEVELOPMENT & PROMOTION COMPANY LTD OF RS.1,29,19,535 HAS DIRECTE D THE AO TO MAKE ADHOC DISALLOWANCE OF 25% OF THE PAYMENT ON THE GRO UND THAT THE BIFURCATION OF EXPENDITURE ATTRIBUTABLE TO TECHNICA L SERVICES IS NOT FURNISHED BY THE ASSESSEE. INSOFAR AS PAYMENT MADE TO LEGANE CONSULTANCY LTD, BY CONSIDERING THE AGREEMENT ENTER ED INTO BETWEEN THE ASSESSEE AND LEGANE CONSULTANCY LTD AND ALSO BY FOL LOWING THE DECISION OF ITAT JAIPUR BENCH IN THE CASE OF JCIT V S MODERN INSULATORS LTD (2011 140 TTJ 715 (JAIPUR) HELD THAT ONCE PAYME NT HAS BEEN MADE OUTSIDE INDIA TO ANY PERSON FOR RENDERING SERVICES OUTSIDE INDIA, THEN THE PROVISIONS OF SECTION 195 HAS NO APPLICATION, CONSE QUENTLY, DISALLOWANCE CANNOT BE MADE U/S 40(A)(I) OF THE INCOME-TAX ACT, 1961. WE FIND THAT IN RESPECT OF PAYMENT MADE TO INDUSTRIAL DEVELOPMENT & PROMOTION COMPANY LTD, THE ASSESSEE HAS FILED NECESSARY AGREE MENTS ENTERED INTO BETWEEN THE PARTIES TO PROVE THAT NO PART OF S ERVICES HAS BEEN 9 LIBRA TECHCON LTD RENDERED IN INDIA OR SOURCED IN INDIA, THEREFORE, T HE QUESTION OF ADHOC DISALLOWANCE OF SUCH PAYMENT U/S 40(A)(IA) DOES NOT ARISE. WE FIND THAT ANY PAYMENT MADE TO A NON RESIDENT FOR RENDERING SE RVICES IN INDIA WOULD COME WITHIN THE PROVISIONS OF SECTION 195 OF THE INCOME-TAX ACT, 1961. IN THIS CASE, THE PAYMENT HAS BEEN MADE OUTS IDE INDIA FOR RENDERING SERVICES OUTSIDE INDIA. THEREFORE, THE Q UESTION OF WITHHOLDING TAXES ON SUCH PAYMENT DOES NOT ARISE, CONSEQUENTLY, THE QUESTION OF DISALLOWANCE OF SUCH EXPENDITURE U/S 40(A)(IA) ALSO DOES NOT ARISE. THE LD.CIT(A) WITHOUT APPRECIATING THE FACTS HAS DIRECT ED THE AO TO MAKE ADHOC DISALLOWANCE OF 25% OF AMOUNT PAID TO INDUSTR IAL DEVELOPMENT & PROMOTION COMPANY LTD. HENCE, WE REVERSE THE FINDI NG OF LD.CIT(A) IN RESPECT OF ADHOC DISALLOWANCE OF 25% OF LIAISONING CHARGES PAID TO INDUSTRIAL DEVELOPMENT & PROMOTION COMPANY LTD AND DIRECT THE AO TO DELETE ADDITION MADE U/S 40(A)(IA) OF THE ACT. INS OFAR AS PAYMENT MADE TO LEGANE CONSULTANCY LTD, THE LD.CIT(A) HAS RECORD ED CATEGORICAL FINDING THAT PAYMENT MADE TO A NON RESIDENT HAVING NO PE IN INDIA FOR SERVICES RENDERED OUTSIDE INDIA, PROVISIONS OF SECT ION 195 HAS NO APPLICATION. CONSEQUENTLY, NO DISALLOWANCE COULD B E MADE U/S 40(A)(IA). WE DO NOT FIND ANY ERROR IN THE FINDINGS OF LD.CIT( A); HENCE, WE ARE INCLINED TO UPHOLD THE FINDINGS OF LD.CIT(A) AND RE JECT GROUND TAKEN BY THE REVENUE. 9. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATIO N IS ESTIMATION OF 10 LIBRA TECHCON LTD INCOME ON ADVANCE RECEIPTS RECEIVED FROM PROJECT AT RS.10,84,97,194. THE FACTS WITH REGARD TO THE IMPUGNED DISPUTE ARE T HAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS RECEIVED ADVA NCES OF RS.51.66 CRORES FROM THE PROJECT. THE ASSESSEE HAS RECOGNIZ ED REVENUE ON THE BASIS OF PERCENTAGE COMPLETION METHOD BY TAKING INT O ACCOUNT TOTAL ADVANCES RECEIVED FROM THE PROJECT. THE AO MADE AD DITION TOWARDS INCOME ACCRUED FROM ADVANCES RECEIVED FROM THE PROJ ECT ON THE GROUND THAT THE ASSESSEE HAS NOT FOLLOWED PERCENTAGE COMPL ETION METHOD TO RECOGNIZE REVENUE FROM THE PROJECT. ACCORDING TO T HE AO, THE ASSESSEE COMPANY HAS NOT COMPLIED WITH THE PRINCIPLE LAID DO WN IN AS-11 TO RECOGNIZE REVENUE, BUT FOLLOWED A METHOD WHICH SUIT S TO ITS CONVENIENCE TO POSTPONE THE REVENUE FROM THE PROJECT. ACCORDIN GLY, HE RE-WORKED PROFIT DERIVED FROM THE PROJECT BY TAKING 21% OF TH E ADVANCE RECEIVED DURING THE YEAR TO MAKE ADDITION OF RS.10,84,97,194 . THE ABOVE PROFITS WERE COMPUTED BY THE AO BY APPLYING THE GROSS PROFI T RATIO SHOWN BY THE ASSESSEE COMPANY ON THE COMPLETED PROJECT SHOWN IN THE P&L ACCOUNT FILED FOR THE YEAR. IT IS THE CONTENTION OF THE AS SESSEE THAT IT IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND HAS BEEN RECOGN IZING REVENUE ON PROPORTIONATE COMPLETION OF CONTRACT BASIS IN ACCOR DANCE WITH THE ACCOUNTING STANDARD PRESCRIBED BY INSTITUTE OF CHAR TERED ACCOUNTANTS OF INDIA. THIS METHOD OF ACCOUNTING HAS BEEN CONTINUO USLY FOLLOWED AND THE SAME HAS BEEN ACCEPTED BY THE DEPARTMENT IN THE PAST. IT IS FURTHER 11 LIBRA TECHCON LTD CLAIMED THAT REVENUE CAN BE BOOKED ONLY ON PROJECT WHICH HAS BEEN COMPLETED AND NO ADVANCE FROM A CLIENT CAN BE TAKEN TO REVENUE. IN THESE CIRCUMSTANCES, THE AO WAS NOT AT ALL JUSTIFIE D IN ADDING THE ADVANCE RECEIVED FROM THE CUSTOMERS TO THE INCOME O F THE ASSESSEE BY TAKING INTO ACCOUNT GROSS PROFIT RATIO OF COMPLETED PROJECTS IGNORING THE FACT THAT THESE TWO PROJECTS HAVE NOT BEEN COMPLETE D DURING THE YEAR. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS RECOGNIZED REVENUE FRO M THE INCOMPLETE PROJECTS ON PROPORTIONATE COMPLETION METHOD BY TAKI NG INTO ACCOUNT PERCENTAGE OF WORK DONE IN THE PROJECT. THE ASSESS EE IS FOLLOWING THIS METHOD OF ACCOUNTING CONTINUOUSLY FROM PAST SEVERAL YEARS AND THE SAME HAS BEEN ACCEPTED BY THE DEPARTMENT. DURING T HE YEAR UNDER CONSIDERATION, THE AO HAS DETERMINED INCOME FROM TH E PROJECT BY TAKING INTO ACCOUNT ADVANCE RECEIVED BY THE ASSESSEE FROM ITS PROJECT ON THE BASIS OF GROSS PROFIT DECLARED BY THE ASSESSEE FROM ITS COMPLETED PROJECTS WITHOUT ANY CHANGE IN FACTS AND CIRCUMSTAN CES. ONCE THE ASSESSEE IS FOLLOWING A METHOD OF ACCOUNTING WHICH IS IN ACCORDANCE WITH THE METHOD PRESCRIBED BY ICAI FOR RECOGNITION OF REVENUE FROM THE KIND OF PROJECTS THE ASSESSEE IS UNDERTAKING AND SU CH METHOD HAS BEEN ACCEPTED BY THE DEPARTMENT IN THE EARLIER YEAR, THE RE IS NO REASON FOR THE AO TO DEVIATE FROM THE METHOD FOLLOWED BY THE ASSES SEE WITHOUT ANY CHANGE IN FACTS AND CIRCUMSTANCES. IN THIS CASE, T HE AO HAS MADE 12 LIBRA TECHCON LTD ADDITION TOWARDS INCOME FROM THE PROJECT ON ADVANCE S RECEIVED WITHOUT RECORDING ANY REASONS AS TO HOW ADVANCE RECEIVED BY THE ASSESSEE FORMS PART OF REVENUE FOR THE CURRENT YEAR. THE LD .CIT(A), AFTER CONSIDERING RELEVANT SUBMISSIONS HAS RIGHTLY DELETE D ADDITION MADE BY THE AO. WE DO NOT FIND ANY ERROR IN THE ORDER OF T HE LD.CIT(A). HENCE, WE ARE INCLINED TO UPHOLD THE FINDINGS OF LD.CIT(A) AND REJECT GROUND TAKEN BY THE REVENUE. 11. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH AUGUST, 2018. SD/- SD/- (MAHAVIR SINGH) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 24 TH AUGUST, 2018 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER SR.PS, ITAT, MUMBAI