Uttar Pradesh Rajkiya Nirman Nigam Limited, Lucknow V. DY. Commissioner of Income Tax, Lucknow

ITA 318/LKW/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7278 (ITAT-LUCKNOW)
• Duration Of Justice: 2 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 15-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AS WELL AS ARE REPRODUCED
• Keywords: Depreciation; Additional evidence; TDS
• Section: 43B; 32

Judgement Text

I.T.A. NO.315 & 318/LKW/2017 ASSESSMENT YEAR:2011-12 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI A. D. JAIN, VICE PRESIDENT AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER ITA NO.315/LKW/2017 ASSESSMENT YEAR:2011-12 DY.C.I.T., RANGE-6, LUCKNOW. VS. M/S U.P. RAJKIYA NIRMAN NIGAM LTD., VIBHUTI KHAND, GOMTI NAGAR, LUCKNOW. PAN:AAACU 5701 F (APPELLANT) (RESPONDENT) ITA NO.318/LKW/2017 ASSESSMENT YEAR:2011-12 M/S U.P. RAJKIYA NIRMAN NIGAM LTD., VIBHUTI KHAND, GOMTI NAGAR, LUCKNOW. PAN:AAACU 5701 F VS. DY.C.I.T., RANGE-6, LUCKNOW. (APPELLANT) (RESPONDENT) O R D E R PER T. S. KAPOOR:A.M. THESE ARE CROSS APPEALS, FILED BY THE REVENUE AND THE ASSESSEE, AGAINST THE ORDER OF LEARNED CIT(A) DATED10/03/2017 . THE GROUNDS OF APPEAL TAKEN BY THE REVENUE AS WELL AS BY THE ASSES SEE ARE REPRODUCED BELOW: REVENUE BY SHRI A. K. BAR, CIT (D.R.) ASSESSEE BY SHRI K. R. RASTOGI, C. A. SHRI SHUBHAM RASTOGI, F.C.A. DATE OF HEARING 22 / 07 /201 9 DATE OF PRONOUNCEMENT 26 / 07 /201 9 I.T.A. NO.315 & 318/LKW/2017 ASSESSMENT YEAR:2011-12 2 GROUND OF APPEAL TAKEN BY THE REVENUE ARE AS UNDER : 1. THE CIT(A), LUCKNOW HAS ERRED IN LAW AND ON FAC TS IN DELETING THE ADDITION OF RS.209,44,822/- BY OBSERVI NG THAT COST OF WORK DONE IS SHOWN IN THE CONTRACT ACC OUNT AND CENTAGE IS DULY ACCOUNTED FOR, WITHOUT APPRECIA TING THE FACT THAT THE ASSESSEE DID NOT PRODUCE THE PROO F BEFORE THE ASSESSING OFFICER THAT CENTAGE HAS BEEN CHARGED ON WIP OF RS.16,78,589/-. 2. THE CIT(A), LUCKNOW HAS ERRED IN LAW AND ON FACT S IN DELETING THE ADDITION OF RS.243288508/- ON ACCOUNT OF PRIOR PERIOD EXPENSES IGNORING THE FACT THAT THE AS SESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND ON LY THOSE PRIOR PERIOD EXPENSES WHICH CRYSTALLIZED DURI NG THE YEAR CAN BE CLAIMED. 3. THE CIT(A), LUCKNOW HAS ERRED IN LAW AND ON FACT S IN DELETING THE ADDITION OF RS.19,34,458/- ON ACCOUNT OF INTEREST ON UNLISTED MACHINERY WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE DEDUCTED THE AMOUNT TWICE I. E. FIRST IN P/L ACCOUNT AND THEN IN COMPUTATION OF INC OME. 4. THE CIT(A), LUCKNOW HAS ERRED IN LAW AND ON FACT S IN DELETING THE ADDITION OF RS.16,38,98,000/- ON ACCOU NT OF INTEREST ON 'CLIENTS INTEREST ACCOUNT' WITHOUT APPRECIATING THE FACT THAT ASSESSEE IS CLAIMING TDS RELATING TO FDRS OF UN-UTILIZED FUNDS BUT IS NOT SH OWING THE INTEREST INCOME OF FDRS IN ITS INCOME WHICH IS AGAINST PROVISIONS OF SECTION 198 AND 199 OF THE I.T.ACT, 1 961. 5. THE CIT(A), LUCKNOW HAS ERRED IN LAW AND ON FACT S IN DELETING THE ADDITION OF RS.2,41,64,170/- BY OBSERV ING THAT DEPRECIATION HAS BEEN CORRECTLY CLAIMED BY THE ASSESSEE IN CONTRACT ACCOUNT, WITHOUT APPRECIATING THE FACT THAT ASSESSEE CAN CLAIM DEPRECIATION ON ASSETS AS PER SECTION 32 OF I.T. ACT AND THE ASSESSEE DID NOT FUR NISH DEPRECIATION CHART SHOWING DETAILS OF ASSETS DURING THE COURSE OF ASSESSEE PROCEEDINGS. 6. THE CIT(A), LUCKNOW HAS ERRED IN LAW AND ON FACT S IN DELETING THE ADDITION OF RS.3,57,97,224/- ON ACCOUN T OF PROVISION FOR GRATUITY, AND ADMITTING FRESH EVIDENC E IN THE I.T.A. NO.315 & 318/LKW/2017 ASSESSMENT YEAR:2011-12 3 FORM OF DETAILED GRATUITY CHART IGNORING THE LEGAL POSITION AS PROVIDED IN RULE 46A OF I.T. RULES, 1962. GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE AS UN DER: 1. THE LEARNED CIT(A)-2, LKO ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT NO ADDITION SHOULD BE MADE W. R.T. DIRECT EXPENSES INCURRED ON BEHALF OF THE CLIENT SH OWN IN THE CONTRACT ACCOUNT. THUS, THE ADDITION ON ACCOUN T OF LABOUR CESS SHOULD NOT BE MADE. 2. AT THE OUTSET, LEARNED A. R. OF THE ASSESSEE FIL ED A CHART NARRATING THEREIN THAT OUT OF SIX GROUNDS TAKEN BY THE REVENU E, TWO WERE COVERED IN FAVOUR OF THE ASSESSEE BY AN EARLIER ORDER OF THE T RIBUNAL IN I.T.A. NO.317 AND 314 FOR ASSESSMENT YEAR 2010-11 AND OUR ATTENTI ON WAS INVITED TO COPY OF SUCH ORDER OF THE TRIBUNAL. LEARNED A. R. FURTH ER SUBMITTED THAT GROUND OF APPEAL TAKEN BY THE ASSESSEE IN I.T.A. NO.318 IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE SAME ORDER OF THE TRIBUNAL. 3. LEARNED D. R., ON THE OTHER HAND, FAIRLY AGREED THAT TWO ISSUES RAISED BY THE REVENUE AND ONE ISSUE RAISED BY THE ASSESSEE ARE DULY COVERED IN FAVOUR OF THE ASSESSEE. HOWEVER, HE STATED THAT OT HER ISSUES RAISED BY THE REVENUE ARE NOT COVERED. 3.1 AS REGARDS GROUND NO. 1, LEARNED D. R. SUBMITTE D THAT CIT(A) HAS DELETED THE ADDITION OF RS.2,09,44,822/- BY OBSERVI NG THAT COST OF WORK DONE IS SHOWN IN THE CONTRACT ACCOUNT AND CENTAGE IS DUL Y ACCOUNTED FOR WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE DID NOT PRO DUCE THE PROOF BEFORE THE ASSESSING OFFICER THAT CENTAGE HAS BEEN CHARGED ON WORK-IN-PROGRESS OF RS.16,78,78,589/-. 3.2 ARGUING GROUND NO. 3, LEARNED D. R. SUBMITTED T HAT CIT(A) HAS WRONGLY ALLOWED RELIEF TO THE ASSESSEE TO THE EXTEN T OF RS.19,34,458/- ON I.T.A. NO.315 & 318/LKW/2017 ASSESSMENT YEAR:2011-12 4 ACCOUNT OF INTEREST ON UNLISTED MACHINERY WITHOUT A PPRECIATING THE FACT THAT ASSESSEE DEDUCTED THE AMOUNT TWICE I.E. FIRST IN PR OFIT & LOSS ACCOUNT AND THEN IN COMPUTATION OF INCOME. 3.3 ARGUING GROUND NO. 5, LEARNED D. R. SUBMITTED T HAT CIT(A) HAS WRONGLY HELD THAT ASSESSEE HAS CORRECTLY CLAIMED DE PRECIATION TO THE EXTENT OF RS.2,41,64,170/- IGNORING THE FACT THAT THE ASSE SSEE CAN CLAIM DEPRECIATION ON ASSETS AS PER SECTION 32 OF THE ACT BUT THE ASSESSEE DID NOT FURNISH DEPRECIATION CHART SHOWING DETAILS OF ASSET S DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 3.4 ARGUING GROUND NO. 6, LEARNED D. R. SUBMITTED T HAT CIT(A) HAS WRONGLY ALLOWED RELIEF TO THE ASSESSEE ON ACCOUNT O F DELETION OF ADDITION WHICH THE ASSESSING OFFICER HAD MADE ON ACCOUNT OF PROVISION FOR GRATUITY AFTER ADMITTING FRESH EVIDENCE IN THE FORM OF DETAI LED GRATUITY CHART IGNORING THE LEGAL PROVISION AS CONTAINED IN RULE 46A OF THE I.T. RULES. 4. LEARNED A. R., IN HIS RESPONSE TO GROUND NO. 1, INVITED OUR ATTENTION TO THE DETAILED WRITTEN SUBMISSIONS PLACED AT PAGES 1 TO 12 OF THE PAPER BOOK AND SUBMITTED THAT DURING THE COURSE OF ASSESS MENT PROCEEDINGS THE ASSESSEE EXPLAINED THE CONTRACT EXPENSES PERTAINING TO DR. B. R. AMBEDKAR HOSPITAL, NOIDA, WHICH WERE WRONGLY CLUBBED WITH LA B EXPENSES AND WHICH WERE ACCEPTED BY THE ASSESSING OFFICER ALSO BUT HE MADE NOTIONAL ADDITION OF 12.5% TOWARDS CENTAGE ON THESE EXPENSES WITHOUT APPRECIATING THAT DUE CENTAGE ON WORK DONE HAS ALREADY BEEN SHOWN THROUGH CONTRACT ACCOUNT. IN THIS RESPECT, LEARNED A. R. TOOK US TO PAGE 13 O F THE PAPER BOOK WHERE UNDER UNIQUE CODE 8357, THE NAME OF PROJECT DR. B. R. AMBEDKAR HOSPITAL, NOIDA WAS MENTIONED. WE WERE FURTHER TAKEN TO PAGE NO. 14 OF THE PAPER BOOK WHERE UNDER THE HEAD LABORATORY AND TESTING C HARGES UNDER THE HEAD CONTRACT ACCOUNT AN AMOUNT OF RS.16,78,78,589/- U NDER THE PROJECT CODE I.T.A. NO.315 & 318/LKW/2017 ASSESSMENT YEAR:2011-12 5 8357 WAS MENTIONED. LEARNED A. R. FURTHER TOOK US TO PAGE NO. 20 OF THE PAPER BOOK WHERE THE COMPLETE CONTRACT ACCOUNT DECL ARING INCOME OF RS.36,80,71,97,530/- WAS PLACED. OUR ATTENTION WAS ALSO INVITED TO LIST OF JOBS HAVING TURNOVER FOR THE YEAR UNDER CONSIDERATI ON, THE TOTAL OF WHICH AMOUNTED TO RS. 36,80,71,97,529/- WHICH TALLIED WIT H THE TOTAL INCOME DECLARED BY THE ASSESSEE. OUR ATTENTION WAS ALSO I NVITED TO PAGE NO. 20 OF SUCH LIST WHERE UNDER THE CODE 8357, THE TURNOVER R ELATING TO DR. B. R. AMBEDKAR MULTI SPECIALITY HOSPITAL, NOIDA AMOUNTING TO RS.18,75,04,418/- WAS PLACED. THEREFORE, IT WAS PRAYED THAT THE ASSE SSING OFFICER HAD WRONGLY INCLUDED THE NOTIONAL INCOME TOWARDS CENTAG E ON THESE WORK EXPENSES AS THE CENTAGE ON WORK DONE WAS ALREADY DE CLARED THROUGH CONTRACT ACCOUNT AND THEREFORE, IT WAS ARGUED THAT CIT(A) HAS RIGHTLY ALLOWED RELIEF TO THE ASSESSEE. 4.1 ARGUING GROUND NO. 2, LEARNED A. R. SUBMITTED T HAT THIS GROUND IS COVERED BY THE ORDER OF THE TRIBUNAL IN I.T.A. NO.3 17 AND 314 AND OUR SPECIFIC ATTENTION WAS INVITED TO PARA 35 TO 37 OF THE PAPER BOOK ON PAGES 27 & 28 OF THAT ORDER. 4.2 ARGUING GROUND NO. 3, LEARNED A. R. SUBMITTED T HAT ASSESSEE HAD ALREADY ADDED BACK AN AMOUNT OF RS.19,34,458/- ON A CCOUNT OF INTEREST ON ACCOUNT OF UNLISTED MACHINERY AND OUR ATTENTION WAS INVITED TO COPY OF SCHEDULE FORMING PART OF THE P&L ACCOUNT, PLACED AT PAGE 28 OF THE PAPER BOOK, WHERE UNDER THE HEAD OTHER RECEIPTS IN SCHE DULE-12, THE SAID AMOUNT WAS TAKEN AS PART OF INCOME. 4.3 COMING TO GROUND NO. 4, LEARNED A. R. SUBMITTED THAT THIS ISSUE IS ALSO COVERED BY THE ORDER OF THE TRIBUNAL IN I.T.A. NO.317 AND 314 AND OUR SPECIFIC ATTENTION WAS INVITED TO PARA 39 TO 41 ON PAGES 29 & 30 OF SUCH ORDER. I.T.A. NO.315 & 318/LKW/2017 ASSESSMENT YEAR:2011-12 6 4.4 COMING TO GROUND NO. 5, LEARNED A. R. SUBMITTED THAT IT IS WRONG ON THE PART OF LEARNED D. R. TO STATE THAT DEPRECIATIO N WAS NOT CORRECTLY CLAIMED BY THE ASSESSEE. OUR ATTENTION WAS INVITED TO THE COPY OF COMPUTATION CHART, PLACED AT PAGES 18 TO 28, WHERE THE ASSESSEE HAS ADDED BACK DEPRECIATION AMOUNTING TO RS.7,31,66,085/- ON ITS OWN AND HAD CLAIMED THE DEPRECIATION WHICH WAS ALLOWABLE TO THE ASSESSEE AS PER THE PROVISIONS OF SECTION 32 OF THE ACT. OUR ATTENTION WAS INVITED TO THE FINDINGS OF LEARNED CIT(A) WHEREIN HE HAS NOTED THESE FACTS. 4.5 NOW COMING TO LAST GROUND, LEARNED A. R. SUBMIT TED THAT NO FRESH EVIDENCE WAS SUBMITTED. THE CHART CLAIMED TO HAVE BEEN FILED, AS ADDITIONAL EVIDENCE, IS NOTHING BUT FIGURES FROM THE EARLIER R ECORDS OF THE ASSESSING OFFICER RELATING TO EARLIER YEARS, WHICH WAS ALREAD Y AVAILABLE WITH THE ASSESSING OFFICER. HE SUBMITTED THAT IN THE CHART THE LEARNED CIT(A) HAS ONLY REPRODUCED THE FIGURES OF GRATUITY WRITTEN BAC K IN THE COMPUTATION OF EARLIER YEARS THEREFORE, IT WAS PRAYED THAT CIT(A) HAS RIGHTLY ALLOWED RELIEF TO THE ASSESSEE. 4.6 ARGUING APPEAL IN I.T.A. NO.318, LEARNED A. R. SUBMITTED THAT THERE WAS ONLY ONE ISSUE RAISED BY THE ASSESSEE WHICH REL ATES TO ADDITION ON ACCOUNT OF LABOUR CESS AND IT WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN I.T.A. NO.317 AND 314 AND OUR SPECIFIC ATTENTION WAS INVITED TO PARA NO. 9 AT PAGES 9 & 10 OF SUCH O RDER. 5. LEARNED D. R., ON THE OTHER HAND, HEAVILY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. FIRST WE TAKE UP THE APPEAL OF T HE ASSESSEE IN I.T.A. I.T.A. NO.315 & 318/LKW/2017 ASSESSMENT YEAR:2011-12 7 NO.318. WE FIND THAT THE ONLY ISSUE RAISED BY THE ASSESSEE IS WITH RESPECT TO ADDITION ON ACCOUNT OF LABOUR CESS. THE SAID IS SUE IS COVERED BY THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FO R ASSESSMENT YEAR 2010- 11. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE CONT AINED IN PARA 9 AT PAGES 9 & 10, WHICH FOR THE SAKE OF CONVENIENCE ARE REPRODU CED BELOW: 9. ACCORDINGLY, AS PER PARA 59 OF THE WORKING MANU AL, A CONTRACT ACCOUNT IS TO BE PREPARED, WHICH IS A STAT EMENT SHOWING RESULTING PROFIT OR LOSS ACCRUING DURING A CONSTRUCTION PERIOD, WHICH HAS A DIRECT RELATION TO THE WORKS DE ALT WITH IN THE BUSINESS, WHICH ASCERTAINS THE COST OF PROFIT OF TH E ASSESSEE CORPORATION. THUS, THE CONTRACT ACCOUNT IS, BASICA LLY, ACCOUNTING OF WORK DONE WHERE THE GROSS PROFIT WORK ED OUT IS THE CENTAGE ALLOWED TOWARDS THE OVERHEADS AND PROFI TS OF THE ASSESSEE CORPORATION. IN THE CONTRACT ACCOUNT, ALL DIRECT COSTS, AS ARE TO BE BORNE BY THE CLIENTS OF THE CORPORATIO N, ARE DEBITED AND THE VALUE OF THE WORK DONE IS CREDITED BY ADDIN G 15% TOWARDS CENTAGE CHARGES. AS SUCH, IN CASE ANY DISA LLOWANCE IS TO BE MADE IN THE COST DEBITED TO THE CONTRACT ACCO UNT, A CORRESPONDING DEDUCTION IS ALSO REQUIRED TO BE MADE IN THE COST DEBITED TO THE WORK DONE, AS THIS IS A CASE OF CONT RA ENTRIES ONLY. THIS ACCOUNTING PROCEDURE OF THE ASSESSEE CO RPORATION STANDS ACCEPTED BY THE DEPARTMENT IN ASSESSMENT YEA R 1990- 91, AS TAKEN NOTE OF BY THE TRIBUNAL IN THE ASSESSE ES CASE FOR ASSESSMENT YEAR 1991-92, IN ITS ORDER DATED 30/11/2 006, PASSED IN ITA NO.714/LKW/2002. FOR ASSESSMENT YEAR 2000- 01, THE TRIBUNAL, VIDE ITS ORDER DATED 18/12/2018, PASSED IN ITA NO.382/LKW/2004, ALSO TOOK NOTE THAT ALL THE EXPEND ITURES INCURRED BY THE ASSESSEE CORPORATION ON MATERIAL CO NSUMED IS RECOVERED FROM ITS CLIENTS ALONG WITH 15% PROFIT TH EREON AND THAT SO, EVEN IF THERE IS INFLATION IN THE EXPENSES IN MATERIAL CONSUMED, THE SAME IS RECOVERED ALONG WITH 15% PROF IT THEREON, RESULTING IN NO LOSS OF PROFIT OR LOSS TO THE REVENUE IN THE FORM OF TAX. THE LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE, HOLDING THAT THIS DISALLOWANCE WAS CORRECTLY MADE B Y INVOKING THE PROVISIONS OF SECTION 43B OF THE ACT. IT REMAI NS UNDISPUTED THAT THE LABOUR CESS IS PART OF THE CONTRACT ACCOUN T. THAT BEING SO, THE ASSESSEE IS CORRECT IN CONTENDING THAT THE ADDITION, IF ANY, IS MAINTAINABLE ONLY IN THE HANDS OF THE CLIEN T OF THE ASSESSEE CORPORATION AND NOT IN THE HANDS OF THE AS SESSEE. THE PROVISIONS MADE FOR LABOUR CESS, DO NOT STAND D EBITED TO I.T.A. NO.315 & 318/LKW/2017 ASSESSMENT YEAR:2011-12 8 THE PROFIT & LOSS ACCOUNT AND THE PROFITABILITY OF THE CORPORATION IN THE FORM OF CENTAGE EARNED AS GROSS PROFIT, IS N OT AFFECTED. THE ASSESSEE CORPORATION IS ONLY A COLLECTING AGENC Y FOR THE PURPOSES OF THE LABOUR CESS AND DEPOSIT THEREOF WIT H THE GOVERNMENT ACCOUNT. THUS, THE ACTION OF THE LD. CI T(A) IN CONFIRMING THE ADDITION FOR THE PROVISIONS FOR LABO UR CESS, IS REVERSED AND THE ADDITION IS DELETED. THE SOLE GRO UND RAISED BY THE ASSESSEE IN ITS APPEAL IS ALLOWED. 6.1 RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF T HE TRIBUNAL IN ASSESSEES OWN CASE, WE REVERSE THE ORDER OF LEARNED CIT(A) AN D DELETE THE ADDITION MADE BY THE ASSESSING OFFICER. 7. IN VIEW OF THE ABOVE, THE APPEAL FILED BY ASSESS EE IS ALLOWED. 8. NOW COMING TO THE APPEAL FILED BY THE REVENUE. GROUND NO. 1 RELATES TO THE DELETION OF ADDITION OF RS.2,09,44,822/-, WH ICH THE ASSESSING OFFICER HAD MADE BY WORKING OUT A NOTIONAL CENTAGE @12.5%. WE FIND THAT SUCH COST RELATED TO DR. B. R. AMBEDKAR MULTI SPECIALITY HOSPITAL, NOIDA AND WHICH THE ASSESSEE HAD NOTED UNDER CODE 8357, A COPY OF W HICH IS PLACED AT PAGE NO. 13 OF THE PAPER BOOK. WE FURTHER FIND FROM PA GE 14, WHICH IS A BREAK- UP OF CONTRACT ACCOUNT, THAT AMOUNT OF RS.16,78,78, 589/- IS MENTIONED UNDER CODE 8357 UNDER THE HEAD LABORATORY AND TEST ING CHARGES, WHICH IN FACT WERE CONTRACT EXPENSES PERTAINING TO DR. B. R. AMBEDKAR MULTI SPECIALTY HOSPITAL AND WHICH WERE WRONGLY CLUBBED WITH LABORA TORY AND TESTING EXPENSES. THE ASSESSING OFFICER THOUGH ACCEPTED TH IS FACT BUT MADE NOTIONAL ADDITION OF 12.5% TOWARDS CENTAGE ON THESE WORK EXPENSES. WHILE DO SO, HE IGNORED THE FACT THAT CENTAGE ON THIS WOR K CONTRACT WAS ALREADY DECLARED BY THE ASSESSEE IN ITS CONTRACT ACCOUNT, A COPY OF WHICH, DECLARING TOTAL RECEIPT OF RS.36,80,71,97,530/-, IS PLACED AT PAGE 20 OF THE PAPER BOOK. THE BREAK-UP OF THIS AMOUNT GIVING CODEWISE A ND NAMEWISE JOBS UNDERTAKEN DURING THE YEAR HAS ALSO BEEN FILED BY L EARNED A.R., WHICH TALLIES WITH THE GROSS TOTAL OF THE TURNOVER DECLAR ED IN CONTRACT ACCOUNT. THE I.T.A. NO.315 & 318/LKW/2017 ASSESSMENT YEAR:2011-12 9 NAME OF DR. B. R. AMBEDKAR PROJECT APPEARS AT PAGE 20. THEREFORE, CIT(A) HAS RIGHTLY ALLOWED RELIEF TO THE ASSESSEE. 9. IN VIEW OF THE ABOVE GROUND NO.1 OF REVENUES AP PEAL IS DISMISSED. 10. COMING TO GROUND NO. 2, WHICH RELATES TO PRIOR PERIOD EXPENSES, WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE AS SESSEE BY THE ORDER OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE ITSELF FOR ASS ESSMENT YEAR 2010-11. THE DETAILED FINDINGS OF THE TRIBUNAL, AS CONTAINED IN PARA 35 TO 37 AT PAGES 27 & 28, ARE REPRODUCED BELOW: 35. GROUND NO.6 RELATES TO THE DELETION OF ADDITIO N OF RS.23,54,235/- ON ACCOUNT OF PRIOR PERIOD EXPENSES. 36. THE ADDITION ON ACCOUNT OF PRIOR PERIOD EXPENSE S MADE BY THE A.O WAS DELETED BY THE LD. CIT(A), OBSERVING , AS BELOW: 10(4) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE EXAMINED THE FINDINGS OF THE ASSESSING OFFICER AND THE SUBMISSIONS OF THE APPELLANT. I FIND THAT THE E XPENDITURE DISALLOWED BY THE AO CONSISTS OF RS 19,01,616/- PAI D TO M/S DAKSHINANCHAL VIDYUT VITRAN NIGAM LIMITED, AGRA AGA INST THE BILL RAISED BY THE ELECTRICITY DISTRIBUTION DIVISIO N, ETAWAH AND THE BALANCE AMOUNT OF RS. 4,52,619/- IS ON ACCOUNT OF PAYMENT MADE TO THE M/S U.P. STATE BRIDGE CORPORATION LIMIT ED. THE AO DISALLOWED THE EXPENSES STATING THAT THESE DO NOT R ELATE TO THE YEAR UNDER CONSIDERATION WHEREAS THE APPELLANT CLAI MS THAT THE LIABILITY AROSE IN THE YEAR UNDER CONSIDERATION. AL TERNATIVELY, THE APPELLANT CLAIMS THAT THE AMOUNT PERTAINS TO CONTRA CT ACCOUNT AND THEREFORE IN CASE THE ADDITION IS MADE THEN SIM ULTANEOUSLY, THE WORK IN PROGRESS SHOULD BE REDUCED BY LIKE AMOU NT. 10(5) I FIND THAT THE APPELLANT HAS CLEARLY BROUGHT OUT THE FACT THAT THE BILLS WERE RAISED BY THE ELECTRICITY DEPAR TMENT ON 30.10.2009, WHICH MEANS THAT THE LIABILITY HAS ARIS EN IN THE CURRENT YEAR AND THEREFORE THE EXPENSES ARE ALLOWAB LE IN THE ASSESSMENT YEAR UNDER CONSIDERATION. NOTWITHSTANDIN G, THE CLAIM OF THE APPELLANT THAT ANY ADDITION MADE WILL RESULT IN REDUCTION OF WORK IN PROGRESS IS JUSTIFIED AS THE I NCOME CORRESPONDING TO THE SAID EXPENSES OF RS.23,54,235/ - HAS ALREADY BEEN ACCOUNTED FOR IN THE CONTRACT ACCOUNT OF EARLIER YEARS. IN THIS CONNECTION A REFERENCE MAY BE MADE T O THE DECISION OF HON'BLE ITAT, LUCKNOW IN CASE OF THE AP PELLANT FOR I.T.A. NO.315 & 318/LKW/2017 ASSESSMENT YEAR:2011-12 10 THE ASSESSMENT YEAR 1991-92 IN ITA NO 714/LUC/02 DA TED 30/11/2006, WHICH HAS BEEN FOLLOWED IN CASE OF THE APPELLANT FOR THE ASSESSMENT YEAR 2000-2001 IN ITA NO 382/LUC /04 DATED 18/12/2008. WHILE DECIDING A SIMILAR DISALLOW ANCE OF PRIOR PERIOD EXPENSES THE HON'BLE COURT HELD THAT IF ANY DISALLOWANCE WAS TO BE MADE IN THE COST DEBITED TO THE CONTRACT ACCOUNT THEN CORRESPONDING REDUCTION IS REQUIRED TO BE MADE IN THE WORK DONE ALSO, THIS BEING A CASE OF CONTRA ENTRIES ONLY. THE DECISION OF THE HON'BLE TRIBUNAL IS DISCUSSED AT LE NGTH IN PARAGRAPH 5(6) ABOVE. RELYING ON THE DECISION SUPRA AND FINDING THAT THE INCOME CORRESPONDING TO THE EXPEND ITURE OF RS.23,54,235/- HAS ALREADY BEEN RECOGNIZED IN CONTR ACT ACCOUNT OF EARLIER YEARS, THE ADDITION OF RS.23,54,235/- MA DE BY THE A.O IS DELETED GIVING RELIEF TO THE APPELLANT. 37. AS OBSERVED BY THE LD. CIT(A), WE FIND THAT THE LIA BILITY AROSE IN THE YEAR UNDER CONSIDERATION, AS IS EVIDEN T FROM THE BILL RAISED BY THE ELECTRICITY DEPARTMENT ON 30/10/2019. MOREOVER, AS CLAIMED BY THE ASSESSEE, THE AMOUNT PERTAINS TO THE CONTRACT ACCOUNT AND THEREFORE, IN CASE THE ADDITION IS MADE , THE EQUIVALENT AMOUNT IS TO BE REDUCED FROM THE WORK-IN -PROGRESS. WE, THEREFORE, FIND NO INFIRMITY IN THE ORDER OF TH E LD. CIT(A) ON THIS ISSUE. ACCORDINGLY, WE CONFIRM HIS ORDER ON T HIS ISSUE AND REJECT GROUND NO.6 OF THE REVENUES APPEAL. 10.1 RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(A) WHICH IS CONFIRMED AND GROUND NO.2 OF THE REVENUES APPEA L IS DISMISSED. 11. AS REGARDS GROUND NO. 3 REGARDING DELETION OF A DDITION ON ACCOUNT OF INTEREST ON UNLISTED MACHINERY, WE FIND THAT IN SCH EDULE-12 TO THE PROFIT & LOSS ACCOUNT, PLACED AT PAGE 28, THE ASSESSEE, UNDE R THE HEAD OTHER RECEIPTS, HAS DECLARED AS INCOME OF RS.19,34,458/- AND THE TOTAL OF ALL OTHER RECEIPTS INCLUDING THE INTEREST ON UNLISTED MACHINE RY HAS BEEN DECLARED AS INCOME IN THE CONTRACT ACCOUNT, WHICH IS PLACED AT PAGE 21 OF THE PAPER BOOK. THEREFORE, LEARNED CIT(A) HAS RIGHTLY ALLOWE D RELIEF TO THE ASSESSEE. IN VIEW OF THE ABOVE, GROUND NO. 3 OF THE REVENUE I S DISMISSED. I.T.A. NO.315 & 318/LKW/2017 ASSESSMENT YEAR:2011-12 11 12. NOW COMING TO GROUND NO. 4. WE FIND THAT THE A DDITION WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST ON CLI ENTS FUND ACCOUNT. THIS ISSUE HAS ALSO BEEN DEALT WITH BY THE TRIBUNAL IN A SSESSMENT YEAR 2010-11. THE FINDINGS OF THE TRIBUNAL, AS CONTAINED IN PARA 39 TO 41 AT PAGES 29 & 30, ARE REPRODUCED BELOW: 39. THE A.O MADE THE ADDITION OF RS.39,46,18,444/- BEING INTEREST ON CLIENT FUND AS INCOME OF THE ASSESSEE, WITHOUT APPRECIATING THE GOVERNMENT ORDER THAT INTEREST ON CLIENT FUNDS IS TO BE ADDED IN CLIENT FUND. 40. THE LD. CIT(A) DELETED THE ADDITION, OBSERVING, AS BELOW:- 12(4) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE EXAMINED THE FINDINGS OF THE ASSES SING OFFICER AND THE SUBMISSIONS OF THE APPELLANT. I FI ND THAT THE AMOUNT OF RS39,46,18,444/- SHOWN IN THE BALANCE SHEET AS INTEREST ACCRUED ON DEPOSITS IS THE RUNNIN G BALANCE OF ACCRUED INTEREST ON THE FUNDS OF THE CLI ENTS OF THE APPELLANT. THIS AMOUNT IS INCLUSIVE OF OPENING BALANCE NOT RECEIVED DURING THE YEAR AS WELL AS THE INTERES T ACCRUED ON THE ASSESSEE'S OWN FUNDS, WHICH HAVE ALR EADY BEEN ASSESSED TO TAX. THE APPELLANT UNDERTAKES CONSTRUCTION WORK AGAINST ADVANCES RECEIVED FROM TH E CLIENTS. EXPENSES ARE MET BY WITHDRAWING THE FUNDS FROM THE BANK ACCOUNTS WHEREIN THE FUNDS WERE DEPOSITED. THESE ARE RUNNING ACCOUNTS AND THE BALANCE LEFT IN THE BANK ACCOUNT EARNS INTEREST. THE CLIENTS ALSO KEEP MARGIN MONEY WITH THE APPELLANT IN THE FORM OF FIXE D DEPOSITS WHICH EARNS INTEREST. THE APPELLANT MAINTA INS ITS BOOKS OF ACCOUNTS ON MERCANTILE BASIS AND IT MAKES PROVISIONS OF INTEREST ON ACCRUAL BASIS. THE APPELL ANT CREDITS SUCH INTEREST TO THE RESPECTIVE CLIENT'S AC COUNT IN VIEW OF THE GOVERNMENT ORDER NO. A-1-FA-11/386/1976 DATED 11.04.1976. 12(5) IN VIEW OF MY EXAMINATION, I FIND THAT THE IN TEREST ACCRUED ON DEPOSITS HAS BEEN CREDITED TO THE RESPEC TIVE CLIENT ACCOUNT. THE INTEREST EARNED BY THE APPELLAN T ON UNUTILIZED FUNDS IS THEREFORE CREDITED TO THE RESPE CTIVE ACCOUNTS AND IS INCOME OF THE CONCERNED CLIENT AND NOT I.T.A. NO.315 & 318/LKW/2017 ASSESSMENT YEAR:2011-12 12 THE APPELLANT. THE GO DATED 11.04.1976 REFERRED ABO VE SUPPORTS THE CONTENTION OF THE APPELLANT. THE ADDI TION OF RS.39,46,18,444/- MADE BY THE A.O ON ACCOUNT OF INTEREST ACCRUED ON DEPOSITS IS DELETED GIVING RELI EF TO THE APPELLANT. 41. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND PER USAL OF RECORD, WE FIND THAT THE AMOUNT OF RS.39,46,18,444/ - SHOWN IN THE BALANCE SHEET AS INTEREST ACCRUED ON DEPOSITS W AS THE RUNNING BALANCE OF THE ACCRUED INTEREST ON THE FUND S OF THE CLIENTS OF THE ASSESSEE. THE ASSESSEE MAINTAINS IT S BOOKS OF ACCOUNT ON MERCANTILE BASIS AND IT MAKES PROVISION OF INTEREST ON ACCRUAL BASIS. THE ASSESSEE ALSO CREDITS SUCH I NTEREST TO THE RESPECTIVE CLIENTS ACCOUNTS AS PER GOVERNMENT ORDE R DATED 11/4/1076 (SUPRA). THE LD. CIT(A) HAS RIGHTLY OBSE RVED THAT THE INTEREST EARNED BY THE ASSESSEE ON UNUTILIZED FUND IS CREDITED TO THE RESPECTIVE ACCOUNTS AND ARE THE INCOME OF THE C ONCERNED CLIENTS AND NOT OF THE ASSESSEE. WE DO NOT FIND AN Y INFIRMITY IN THE WELL REASONED ORDER OF THE LD. CIT(A) ON THIS I SSUE. WE ACCORDINGLY CONFIRM HIS ORDER ON THIS ISSUE AND REJ ECT GROUND NOS.7 & 7.1 OF THE REVENUE. 12.1 RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(A) WHICH IS CONFIRMED AND GROUND NO.4 OF THE REVENUES APPEA L IS DISMISSED. 13. COMING TO GROUND NO. 5, WE FIND THAT ASSESSING OFFICER HAD MADE ADDITION OF RS.2,41,64,170/- BY DISALLOWING THE DE PRECIATION ON UNLISTED ASSETS. THE LEARNED CIT(A) HAS ALLOWED RELIEF TO T HE ASSESSEE BY HOLDING AS UNDER: 10(4) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE EXAMINED THE FINDINGS OF THE ASSESSING OFFICER AND THE SUBMISSIONS OF THE APPELLANT. I FIND THAT THE A PPELLANT CLAIMS DEPRECIATION IN CONTRACT ACCOUNT AS WELL AS IN THE PROFIT AND LOSS ACCOUNT. DEPRECIATION OF RS.2,41,64,170/- ADDED BY THE AO HAS BEEN CLAIMED IN THE CONTRACT ACCOUNT AND DEPRECIATION OF RS. 4,90,01,915/- HAS BEEN CLAIMED IN THE PROFIT AND LOSS ACCOUNT. IN THE COMPUTATION OF INCOME THE APPELLANT HAS WRITTEN BACK AN AMOUNT OF RS.7,31,66,085/- I.T.A. NO.315 & 318/LKW/2017 ASSESSMENT YEAR:2011-12 13 (RS.2,41,64,170/- + RS.4,90,01,915/-) AND HAS CLAIM ED DEPRECIATION AS PER INCOME TAX RULES AT APPLICABLE RATES OF RS.6,68,81,726/-. THERE IS THEREFORE NO JUSTIFICATI ON IN THE ADDITION MADE BY THE AO AS THE CORRECT DEPRECIATION HAS BEEN CLAIMED BY THE APPELLANT AS PER RULES AFTER ADDING BACK THE DEPRECIATION DEBITED TO THE CONTRACT ACCOUNT AND PR OFIT AND LOSS ACCOUNT. THE ADDITION OF RS.2,41,64,170/- MADE BY THE AO IS DELETED GIVING RELIEF TO THE APPELLANT. 13.1 THE ABOVE FINDINGS OF CIT(A) CLEARLY DEMONSTRA TE THAT ASSESSEE HAS ADDED BACK AT ITS OWN, AN AMOUNT OF RS.7,31,66,085/ - UNDER THE HEAD DEPRECIATION ADDED BACK, WHICH FACT IS ALSO VERIF IABLE FROM THE COMPUTATION OF INCOME PLACED AT PAGE 18 OF THE PAPER BOOK WHERE THE ASSESSEE ITSELF HAS ADDED BACK DEPRECIATION OF THE EQUIVALENT AMOUNT, W HICH INCLUDED THE DEPRECIATION OF RS.2,41,64,170/-. THEREFORE, THERE IS NO INFIRMITY IN THE ORDER OF CIT(A). ACCORDINGLY, GROUND NO. 5 IS DISM ISSED. 14. NOW COMING TO LAST GROUND RELATING TO PROVISION OF GRATUITY, WE FIND THAT ASSESSEE HAS SUBMITTED BEFORE LEARNED CIT(A) A CHART SHOWING THEREIN THE PROVISION OF GRATUITY ADDED BACK IN COMPUTATION CHART AND PROVISION FOR GRATUI8TY WRITTEN BACK WHICH WAS NO LONGER REQUIRED . THE REVENUE IN ITS GROUND OF APPEAL HAS CONTENDED THAT THIS CHART IS A DDITIONAL EVIDENCE WHICH IN OUR OPINION IS NOT AN ADDITIONAL EVIDENCE AS ALL THE DETAILS OF EARLIER YEARS ARE EXPECTED TO BE AVAILABLE ON THE FILE OF THE ASS ESSING OFFICER WHERE ASSESSING OFFICER HAD PASSED ASSESSMENT ORDER U/S 1 43(3) OF THE ACT. THE FINDINGS OF LEARNED CIT(A) IN THIS RESPECT ARE CONT AINED IN PARA 11.4 & 11.5 OF THE ORDER, WHICH ARE REPRODUCED BELOW: 11(4) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE EXAMINED THE FINDINGS OF THE ASSESSING OFFICER AND THE SUBMISSIONS OF THE APPELLANT. I FIND THAT THE A PPELLANT HAS WRITTEN BACK AN AMOUNT OF RS.11,46,32,701/- AS PROV ISION FOR GRATUITY BY TREATING IT AS EXCESS PROVISION NO LONG ER REQUIRED. THE AO ALLOWED THE DEDUCTION FOR THE PROVISION MADE IN I.T.A. NO.315 & 318/LKW/2017 ASSESSMENT YEAR:2011-12 14 ASSESSMENT YEAR 2009-2010 OF RS.5,22,62,229/- AND I N ASSESSMENT YEAR 2010-2011 OF RS.2,65,73,248/- (TOTA L: RS.7,88,35,477/-) AND MADE THE ADDITION FOR BALANCE OF RS.3,57,97,224/- (RS.11,46,32,701/- LESS RS.7,88,35 ,477/-). I FIND THAT THE DETAILS OF PROVISION FOR GRATUITY WRI TTEN BACK AND ADDED TO THE COMPUTATION OF INCOME OVER THE YEARS I S AS UNDER- ASSESSMENT YEAR PROVISION FOR GRATUITY ADDED IN COMPUTATION CHART IN RS. PROVISION FOR GRATUITY WRITTEN BACK AS NO LONGER REQUIRED IN RS. 2000-2001 1,09,15,481/- - 2001-2002 75,25,526/- - 2002-2003 38,56,755/- - 2003-2004 71,14,765/- - 2004-2005 43,43,921/- - 2005-2006 83,16,192/- - 2006-2007 3,69,742/- - 2007-2008 18,38,1751/- - 2008-2009 2,90,67,063/- - 2009-2010 5,22,62,229/- - 2010-2011 2,65,73,248/- - 2011-2012 11,46,32,701/- 2012-2013 4,78,12,614/- TOTAL 16,87,26,673/- 16,24,45,315/- 11(5) IN VIEW OF ABOVE I FIND THAT AS AGAINST A PRO VISION OF GRATUITY OF RS.16,24,45,315/- UPTO ASSESSMENT YEAR 2012-2013 THE APPELLANT HAS ALREADY ADDED BACK AN AMOUNT OF RS.16,87,26,673/- IN THE COMPUTATION OF INCOME. THE AMOUNT ADDED BACK IS MORE THAN THE AMOUNT CLAIMED AS PROVI SION FOR GRATUITY. THE ADDITION MADE BY THE ASSESSING OFFIC ER FOR RS.3,57,97,224/- IS THEREFORE NOT SUSTAINABLE AND I S DELETED GIVING RELIEF TO THE APPELLANT. I.T.A. NO.315 & 318/LKW/2017 ASSESSMENT YEAR:2011-12 15 15. THE ABOVE FINDINGS OF LEARNED CIT(A) ARE QUITE EXHAUSTIVE AND WE DO NOT FIND ANY INFIRMITY IN THE SAME. ACCORDINGLY, G ROUND TAKEN BY THE REVENUE IS DISMISSED. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 26/07/2019) SD/. SD/. ( A. D. JAIN ) ( T. S. KAPOOR ) VICE PRESIDENT ACCOUNTANT MEMBER DATED:26/07/2019 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW