Dy. Commissioner Of Income Tax, Lucknow vs M/S U.P Project Corp. Ltd., Lucknow on 28 February, 2019

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Income Tax Appellate Tribunal - Lucknow

Dy. Commissioner Of Income Tax, Lucknow vs M/S U.P Project Corp. Ltd., Lucknow on 28 February, 2019

                                    I.T.A. No.330, 331, 332 &508/Lkw/2016
                                                                              1
                                     Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14



               IN THE INCOME TAX APPELLATE TRIBUNAL
                    LUCKNOW BENCH 'B', LUCKNOW

            BEFORE SHRI A. D. JAIN, VICE PRESIDENT
          AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER

                   I.T.A. Nos.330 to 332 & 508/Lkw/2016
                   Assessment Years:2010-11 to 2013-14

 Dy.C.I.T.,                        Vs. M/s U.P. Projects Corpn. Ltd.,
 Range-6,                              Gomti Barrage, Gomti Nagar,
 Lucknow.                              Lucknow.
                                       PAN:AAACU 3393 F
 (Appellant)                           (Respondent)

 Appellant by                     Shri A. K. Bar, CIT, (DR)
 Respondent by                    Shri Rakesh Garg, Advocate
 Date of hearing                  21/02/2019
 Date of pronouncement            28/02/2019

                                ORDER

PER T. S. KAPOOR, A.M.

This is a group of four appeals relating to assessment year 2010-11 to 2013-14 filed by the Revenue against the separate orders of learned CIT(A)-II, Lucknow dated 02/03/2016, 14/03/2016, 14/03/2016 and 17/06/2016. Some of the issues, involved in this appeals, are common therefore, these appeals were heard together and a common and consolidated order is being passed. The grounds of appeal taken by the Revenue are reproduced below:

I.T.A. No.330/Lkw/2016 (Assessment year 2010-11) "1. The CIT (A) has erred in law and on fact deleting the addition of Rs.73,97,943/- made on account of disallowance of I.T.A. No.330, 331, 332 &508/Lkw/2016 2 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 survey, testing and drawing expenses treating the same in the nature of preliminary expenses u/s 35 of the Act without appreciating the fact that the above expenses were incurred before the commencement of the project.

2. The CIT(A) has erred in law and on facts in deleting the addition of Rs.94,30,394/- made on account of excess expenditure claimed on project completed and handed over to client without appreciating the fact that the AO made addition in absence of documentary evidence to prove the justification of expenses claimed.

3. The CIT(A) has erred in law and on facts in deleting the addition of Rs.30,94,199/- without appreciating the fact that the AO made the addition on account of excess loss claimed on projects in the absence of complete documentary evidences for claiming of loss.

4. The CIT(A)has erred in law and on facts in deleting the additions of Rs.29,31,44,630/- on account of interest income without appreciating the fact that the AO made the addition of the interest income received from the FDRs and S.B. accounts in the name of the assessee, and the assessee claimed TDS deducted by the bank on interest which is against the provision of section 198 and 199 of I.T. Act.

5. The CIT(A) has erred in law and on facts in deleting the additions of Rs.54,15,933/- on disallowance u/s 40(a)(ia) without appreciating the fact that the Assessing Officer has made the addition for not deducting TDS on freight expenses, material supplied and labour charges.

6. The CIT (A) has erred in law and on facts in deleting the addition of Rs.15,36,760/- made on account of excess expenditure without appreciating the fact that the AO made addition in absence of documentary evidence to prove the justification of expenses claimed.

7. The CIT (A) has erred in law and on facts in restricting the addition to Rs.4,49,347/- as against Rs.5,71,922/- made on account of short computation of WIP without appreciating the fact that the Assessing Officer has made the addition in absence of reasons for short computation of WIP of I.T.A. No.330, 331, 332 &508/Lkw/2016 3 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 Rs.5,71,922/- as mentioned by Special Auditor in respect of Bareilly unit.

8. The CIT (A) has erred in law and on facts in restricting the addition to Rs.15,09,999/- as against Rs.18,58,061/- made on account of capital expenditure claimed as revenue expenditure without appreciating the fact that the assessee has incurred the expenditure on the renovation of building including civil work.

9. The CIT (A) has erred in law and on facts in restricting the additions of Rs.37,18,845/- as against Rs.53,81,981/-

disallowed u/s 43B of the Act in the absence of any documentary evidence of payment.

10. The CIT (A) has erred in law and on facts in deleting the additions of Rs.1,13,63,781/- on account of prior period expenses not deductable in mercantile system of accounting.

11. The CIT (A) has erred in and on facts in deleting the additions of Rs.6,32,63,235/- made on account of disallowance u/s 40(a)(ia) without appreciating the fact that the Assessing Officer has made the addition for not deducting TDS on POL of hired vehicles and TDS at the leser rate of 2%.

12. The CIT (A) has erred in law and on facts in deleting the addition of Rs.21,20,09,287/- without appreciating the fact that the AO made addition for not following percentage completion method recognition for revenue recognition as given in Accounting Standard-AS-7(Revised) and also, the assessee is deduction amounts from profits and crediting in retention reserve without any jurisdiction.

13. The CIT (A) has erred in law and on facts in deleting the additions of Rs. 17,68,458/- made on account of disallowance u/s 40(a)(ia) without appreciating the fact that the Assessing Officer has made the addition for short deduction of TDS.

14. The CIT(A) has erred in law and on facts in deleting the additions of Rs.13,75,49,494/- made on account of disallowance u/s 49(a)(ia) without appreciating the fact that the Assessing I.T.A. No.330, 331, 332 &508/Lkw/2016 4 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 Officer has made the addition for not deduction TDS on the payments covered u/s 194C of the Act."

I.T.A. No.331/Lkw/2016 (Assessment year 2011-12) "1. The CIT (A) has erred in law and on fact in directing the A.O. to accept revised income filed through revised computation by the assessee which is contradictory to the provision of section 139(4) of the I.T. Act that do not allow to accept revised income except only through filling of revised return of income.

2. The CIT (A) has erred in law and on facts in deleting the addition of Rs.25,12,26,591/- without appreciating the fact that the AO made the addition for not following percentage completion method recognition for revenue recognition as give in Accounting Standard-AS-7(Revised) and also, the assessee is deduction amount from profits and crediting in retention reserve without any jurisdiction.

3. The CIT (A) has erred in law and on facts in deleting the addition of Rs.39,88,10,901/- on account of interest income without appreciating the fact that the AO made the addition of the interest income revised from the FDRs and S.B. accounts in the name of the assessee, and the assessee claimed TDS deducted by the bank on interest which is against the provision of section 198 and 199 of I.T. Act.

4. The CIT (A)has erred in law and on facts in deleting the additions of Rs.34,77,796/- made on account of disallowance of survey, testing and drawing expenses treating the same in the nature of preliminary expenses u/s 35D of the Act without appreciating the fact that the above expenses were incurred before the commencement of the project.

5. The CIT(A) has erred in law and on facts in deleting the additions of Rs.50,62,979/- on disallowance u/s 40(a)(ia) without appreciating the fact that the Assessing Officer has made the addition for not deducting TDS on POL of hired vehicles and TDS at the leser rate of 2%.

I.T.A. No.330, 331, 332 &508/Lkw/2016 5 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14

6. The CIT (A) has erred in law and on facts in deleting the addition of Rs.12,24,49,122/- on disallowance u/s 40(a)(ia) without appreciating the fact that the Assessing Officer has made the addition for not deducting TDS on freight expenses, material supplied and labour charges."

I.T.A. No.332/Lkw/2016 (Assessment year 2012-13) "1. The CIT (A) has erred in law and on fact in deleting the addition of Rs.17,00,70,000/- without appreciating the fact that the A.O. made addition for not following percentage completion method recognition for revenue recognition as given in Accounting Standard-AS-7(Revised) and also, the assessee is deducting amounts from profits and crediting in retention reserve without any jurisdiction.

2. The CIT (A) has erred in law and on facts in deleting the addition of Rs.42,21,00,000/- on account of interest income without appreciating the fact that the AO made the addition of the interest income revised from the FDRs and S.B. accounts in the name of the assessee, and the assessee claimed TDS deducted by the bank on interest which is against the provision of section 198 and 199 of I.T. Act.

3. The CIT (A) has erred in law and on facts in deleting the additions of Rs.3,92,24,085/- on disallowance u/s 40(a)(ia) without appreciating the fact that the Assessing Officer has made the addition for not deducting TDS on POL of hired vehicles and TDS at the lesser rate of 2%.

4. The CIT (A) has erred in law and on facts in deleting the addition of Rs.6,19,18,021/- on disallowance u/s 40(a)(ia) without appreciating the fact that the Assessing Officer has made the addition for not deducting TDS on freight expenses, material supplied and labour charges.

5. The CIT (A) has erred in law and on facts in deleting the additions of Rs.1,63,386/- on account of loss against disposal of stock without appreciating the fact that the Assessing Officer made the addition in absence of any explanation provided by the assessee against the expenses claimed.

I.T.A. No.330, 331, 332 &508/Lkw/2016 6 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14

6. The CIT (A) has erred in law and on facts in deleting the additions of Rs.7,08,78,373/- on account of contribution/ provision to Provident Gratuity Fund in absence of any documentary evidence of payment for proof of contribution necessary as per section 43B.

7. The CIT (A) has erred in law and on facts in deleting the additions of Rs. 1,25,561/- on account of prior period expenses not deductable in mercantile system of accounting."

I.T.A. No.508/Lkw/2016 (Assessment year 2013-14) "1. The Commissioner of Income Tax (Appeal) has erred in law and on facts in deleting the addition of Rs.14,43,61,802/- without appreciating the fact that the assessee is not following percentage completion method as recognized in Accounting Standard-AS-7(revised) and also deduction amounts from profits and crediting in retention reserve without any justification.

2. The Commissioner of Income Tax (Appeals) Lucknow, has erred in law and on facts in deleting the addition of Rs.43,28,49,105/- made by the Assessing Officer as 'Income form Other Sources' without appreciating the fact, that all the FDR's and S.B. accounts were in the name of the assessee and assessee has claimed the TDS deducted by banks on above deposits which is against the provisions of See-198 and 199 of I.T.Act, 1961.

3. The Commissioner of Income Tax (Appeals)Lucknow, has erred in law and on facts in deleting the additions of Rs.3,58,85,285/- on disallowed by the Assessing Officer u/s 40(a)(ia) without appreciating the fact that the assessee has not deducted the TDS on POL of hired vehicles and TDS at the lesser rate of 2% was deducted on hire charges on vehicle.

4. The Commissioner of Income Tax (Appeals), Lucknow has erred in law and on facts in deleting the addition of Rs.1,86,20,613/- made u/s 68 of I.T. Act , 1961 without appreciating the fact that no reply was received by post in response to the notices issued u/s 133(3) of the I.T. Act , 1961 for verification of creditors.

I.T.A. No.330, 331, 332 &508/Lkw/2016 7 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14

5. The Commissioner of Income Tax(Appeals), Lucknow, has erred in law and on facts in deleting the additions of Rs.11,50,020/- made on account of prior expenses without appreciating the fact that the assessee company is following mercantile system of accounting and could not prove the expenses crystallized during the year."

2. At the outset, Learned D. R. invited our attention to the order of Assessing Officer and submitted that the Assessing Officer had made various additions which the learned CIT(A) has wrongly deleted and in this respect Learned D. R. also filed written synopsis. Learned A. R. also filed written submissions and heavily placed reliance on the order of learned CIT(A) and it was prayed by both the parties that the case of the Revenue be decided on the basis of written submissions filed by the respective parties. The written submissions filed by the Revenue, year-wise, are reproduced below:

ITA No. 330/LKW/2016-A.Y. 2010-11

U.P. PROJECT CORPORATION LTD.

BRIEF SYNOPSIS & WRITEEN SUBMISSION BY DR 1.Ground No. 1 The CIT(A) has erred in law and on fact deleting the addition of Rs.73,97,943/- made on account of disallowance of survey, testing and drawing expenses treating the same in the nature of preliminary expenses u/s 35 of the Act without appreciating the fact that the above expenses were incurred before the commencement of the project. [Para 6(b) pages 6-7 of AO's order] [Para 5(1) to 5(6) of CIT(A)'s order] The Assessing Officer had made the addition of Rs.73,97,943/- on account of testing and drawing expenses treating the same as preliminary expenses. He has applied the provisions of section 35 of the Act. The nature of the expenses themselves speak that they are expenses which have been incurred before the commencement of the project. The CIT(A) has held, that since the business of the assessee Corporation, is that of construction which is not a new business, the I.T.A. No.330, 331, 332 &508/Lkw/2016 8 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 expenses cannot be treated as preliminary expenses. The CIT(A) has deleted the same.

There is no dispute with respect to the expenses incurred and the purpose for which it has been incurred. The fact remains that the expenses incurred were before the commencement of the project which are proposed to be undertaken. The disallowance made by the Assessing Officer, therefore, be kindly sustained and the order of the Ld. CIT(A) be set-aside.

2. Ground No. 2

The CIT(A) has erred in law and on facts in deleting the addition of Rs.94,30,394/- made on account of excess expenditure claimed on project completed and handed over to client without appreciating the fact that the AO made addition in absence of documentary evidences to prove the justification of expenses claimed. [Para 6(c) pages 7-9 of AO's order] [Para 6(1) to 6(4) pages 6-9 of CIT(A)'s order] The Assessing Officer had disallowed a sum of Rs.94,30,394/- being excess expenditure claimed on project completed.

The CIT(A) has deleted the same holding, that there is no dispute that the expenditure had been incurred, and in real estate there is always a possibility of project cost being over run out price escalation and delay in project.

The CIT(A) has wrongly deleted the same. The project cost of the assessee is fixed pre-hand before the commencement of the project itself, the assesseee should ought to have completed the project within the financial limit as laid down for every particular project. There was no reason for escalation or cost over run, the CIT(A) was not justified in deleting the expenditure incurred and thus the order of the Ld. CIT(A) be reversed and that of the AO be substained.

3. Ground No. 3

The CIT(A) has erred in law and on facts in deleting the addition of Rs.30,94,199/- without appreciating the fact the AO made the addition on account of excess loss claimed on projects in the absence of complete documentary evidence for claiming of loss.

I.T.A. No.330, 331, 332 &508/Lkw/2016 9 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 This ground is not emerging from the CIT(A)'s order: There is no excess loss claimed on projects. The disallowance is out of expenses claimed. [Para 6(d) pages 9-10 of AO's order] [Para 7(1) to 7(4) pages 9-10 of CIT(A)'s order] The Assessing Officer added the amount of Rs.30,94,199/- being excess loss claimed on project in absence of documentary evidences. The CIT(A) has deleted the same holding, that he has verified the same and also there is no dispute that the loss had taken place. As per the CIT(A), the amount incurred in excess, is with reference to the business project only and hence, no disallowance be made.

The finding of the CIT(A) is erroneous. The addition made by the Assessing Officer be upheld.

4. Ground No. 4

The CIT(A) has erred in law and on facts in deleting the addition of Rs.29,31,44,630/- on account of interest income without appreciating the fact that the AO made the addition of the interest income received from the FDR's and SB accounts in the name of the assessee, and the assessee claimed TDS deducted by the bank on interest which is against the provision of section 198 and 199 of the IT Act. [Para 6(e) pages 10- 11 of AO's order] [Para 8(1) to 8(5) pages 11-13 of CIT(A)'s order] The Assessing Officer had made an addition of Rs.29,31,44,630/- on account of interest income on FDRs. The CIT(A) has deleted the same holding, that the funds granted to the assessee corporation were to be utilized for a particular purpose and in absence of the same being utilized for specific purpose, the same is to be refunded back to the Government with interest accrued thereon. The CIT(A) has relied upon the notification of the State Government and also the case laws of U.P. Police and that of the Gujarat Tribunal.

The addition made by the Assessing Officer has been wrongly deleted by the CIT(A). No doubt, the funds have to be returned back to the Government alongwith the interest accrued thereon, yet since the FDRs are in the name of the assessee corporation the interest would belong to the assesseee and the Assessing Officer has rightly taxed the same and therefore the same be upheld.

I.T.A. No.330, 331, 332 &508/Lkw/2016 10 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 5. Ground No. 5 The CIT(A) has erred in law and on facts in deleting the addition of Rs.54,19,933/- on disallowance u/s 40(a)(ia) without appreciating the fact the Assessing Officer has made the addition for not deducting TDS on freight expenses, material supplied and labour charges. [Para 6(f) page 11-13 of AO's order] [Para 9(1) to 9(4) pages 18-19 of CIT(A)'s order] The Assessing Officer had made an addition of Rs.54,15,933/- on acccount of non deduction of tax on freight expenses, material supplied and labour charges due to deduction of TDS provisions of Act. The CIT(A) has discussed the different heads of expenditure incurred by the assessee and has held, that out of the total disallowance of Rs.54,15,933/- only disallowance of Rs.4,08,525/- and Rs.5,70,000/- having made without deduction of TDS, is to be disallowed under section 40(a)(ia).

The CIT(A) has wrongly interpreted the provisions of the Act. Once if it is found the tax has not been deducted at source on the expenditure claimed as per the provisions of law, the disallowance is to be upheld.

6. Ground No. 6

The CIT(A) has erred in law and on facts in deleting the addition of Rs.15,36,760/- made on account of excess expenditure without appreciating the fact that the AO made addition in absence of documentary evidence to prove the justification of expenses claimed. [Para 6(g) pages 13 of AO's order] [Para 10(1) to 10(4) pages 18-19 of CIT(A)'s order] The Assessing Officer had made the disallowance of Rs.15,36,760/- by holding that excess expenses have been recorded in the books of account. The CIT(A) has deleted the same, based on the verification done by the field staff during the current year.

Admittedly, the expenditure does not relate to the year under consideration hence, the CIT(A) was not justified in deleting the same and therefore the disallowance made by the AO be upheld.

I.T.A. No.330, 331, 332 &508/Lkw/2016 11 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 7. Ground No. 7 The CIT(A) has erred in law and on facts in restricting the addition to Rs.4,49,347/- as against Rs.5,71,922/- made on account of short computation of WIP without appreciating the fact that the Assessing Officer has made the addition in absence of reasons of short computation of WIP of Rs.5,71,922/- as mentioned by Special Auditor in respect of Bareilly unit. [Para 6(h) pages 14 of AO's order] [Para 11(1) to 11(4) pages 19-21 of CIT(A)'s order] The Assessing Officer made the addition of Rs.5,71,922/- on account of short work in progress (WIP) in respect of Bareilly Project. The CIT(A) has deleted the same holding, that the expenses are neither excess nor non-related to business. However, the CIT(A) has upheld the addition to the extent of Rs.1,22,575/- as against Rs.5,71,922/-. The relief given by the CIT(A) is totally unjustified.

8. Ground No. 8

The CIT(A) has erred in law and on facts in restricting the addition to Rs.15,09,999/- as against Rs.18,58,061/- made on account of capital expenditure claimed as revenue expenditure without appreciating the fact that the assessee has incurred the expenditure on the renovation of building including civil work. [Para 6(i) pages 14-15 of AO's order] [Para 12(1-5) pages 21-23 of CIT(A)'s order] The Assessing Officer had disallowed a sum of Rs.18,58,061/- being expenditure claimed, treating the same as capital expenditure. The CIT(A) has deleted Rs.15,09,999/- out of the disallowance made by the Assessing Officer holding, that the repair and maintenance to the building are in the nature of current repairs. The CIT(A) has upheld the addition of Rs.3,48,062/-. The finding of the CIT(A) is not acceptable for the reason that once it is held, that the expenses have been incurred on maintenance of existing office building which are capital in nature giving enduring benefit to the assessee, the entire disallowance made by the Assessing Officer should have been sustained.

9. Ground No. 9

The CIT(A) has erred in law and on facts in restricting the addition of Rs.37,18,845/- as against Rs.53,81,981/- disallowed u/s 43B of the Act I.T.A. No.330, 331, 332 &508/Lkw/2016 12 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 in the absence of any documentary evidence of payment. [Para 6(i) pages 15-17 of AO's order] [Para 13(1) to 13(8) pages 23-26 of CIT(A)'s order] The Assessing Officer had disallowed a sum of Rs.53,81,981/- by applying the provisions of section 43B of the Act. The CIT(A) has restricted the disallowance at Rs.37,18,845/-. The CIT(A) has deleted the addition of Rs.17,15,898/-. The details have been mentioned in the appeal order.

Reliance is placed on the order of the Assessing Officer, the disallowance made by the Assessing Officer should be upheld.

10. Ground No. 10

The CIT(A) has erred in law and on facts in deleting the additions of Rs.1,13,63,781/- on account of prior period expenses not deductable in mercantile system of accounting. [Para 6(i) page 17-18 of AO's order] [Para 14(1) to 14(4) pages 26-28 of CIT(A)'s order] The Assessing Officer had disallowed a sum of Rs.1,13,63,781/- as prior period expenses not relatable to the year under consideration. The CIT(A) has deleted the same holding, that the nature of the work of the assessee is that of running of continuous work in progress.

Once it is held, that the expenses relate to prior period, admittedly, they are not for the year under consideration and hence, they cannot be allowed. The CIT(A) has therefore, erred in deleting the same. The additions made by the AO may be restored.

11. Ground No. 11

The CIT(A) has erred in law and on facts in additions of Rs.6,32,63,235/- made on account of disallowance u/s 40(a)(ia) without appreciating the fact that the Assessing Officer has made the addition for not deducting TDS on POL of hired vehicles and TDS at the leser rate of 2%. [Para 6(I) pages 18-19 of AO's order] [Para 15(1) to 15(4) pages 28-30 of CIT(A)'s order] The Assessing Officer made an addition of Rs.6,32,63,235/- by applying the provisions of section 40(a)(ia) of the Act due to failure to I.T.A. No.330, 331, 332 &508/Lkw/2016 13 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 deduct tax at source on the payment made. The CIT(A) has deleted the same holding, that the tax at source was deducted wherever the same was applicable. He has further held, that no deduction of TDS is required to be made on expenses incurred on petrol and diesel and these expenses were borne by the appellant.

Since the Assessee had taken the vehicle on hire, there was a liability on the part of the assessee to deduct tax at source, the disallowance made by the Assessing Officer and deleted by the CIT(A) be uphled.

12. Ground No. 12

The CIT(A) has erred in law and on facts in deleting the addition of Rs.21,20,09,287/- without appreciating the fact that the AO made addition for not following percentage completion method recognition for revenue recognition as given in Accounting Standard-AS-7 (Revised) and also, the assessee is deduction amounts from profits and crediting in retention reserve without any jrisdiction. [Para 6(m) pages 19-21 of AO's order] [Para 16(1) to 16(4) pages 30-32 of CIT(A)'s order] The Assessing Officer had made an addition of Rs.21,20,09,287/- on account of Percentage Completion Method. The CIT(A) has deleted the same. The CIT(A) has held, that the assessee is following the Revenue Recognition Method depending upon the stage on which the project is at the end of the year.

Once the assessee is following the Revenue Recognition Method, then revenue is to be recognized on the work done, irrespective of the stage of completion. Though, there is no change in the practice of accounting followed by the assessee, the addition made by the Assesing Officer and deleted by the CIT(A) be upheld.

13. Ground No. 13

The CIT(A) has erred in law and on facts in deleting the addition of Rs.17,68,458/- made on account of disallowance u/s 40(a)(ia) without appreciating the fact that the Assessing Officer has made the addition for short deduction of TDS. [Para 6(n) pages 22-23 of AO's order] [Para 17(1) to 17(4) pages 32-34 of CIT(A)'s order] I.T.A. No.330, 331, 332 &508/Lkw/2016 14 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 The Assessing Officer disallowed a sum of Rs.17,68,458/- by applying the provisions of section 40(a)(ia) on the ground that tax has not been deducted on vehicle hired. The CIT(A) has deleted the same holding, that no doubt there was short deduction of tax, but short deduction of tax itself would not be the cause for disallowance.

Once it is held that the assessee has made short deduction of TDS, then the expenditure to the extent relatable to tax deduction at source should have been allowed. The CIT(A) was not justified in deleting the entire disallowance.

14. Ground No. 14

The CIT(A) has erred in law and on facts in deleting the additions of Rs.13,75,49,494/- made on account of disallowance u/s 499a)(ia) without appreciating the fact that the Assessing Officer has made the addition for non deduction of TDS on the payments covered u/s 194C of the Act. [Para 6(o) pages 23-24 of AO's order] [Para 18(1) to 18(4) pages 35-36 of CIT(A)'s order] The Assessing Officer disallowed Rs.13,75,49,491/- on account of labour charges. The CIT(A) has deleted the same holding, that since no expenditure was incurred by the assessee on transportation of material, which was borne by the suppliers themselves, the assessee was under

no obligation to deduct tax at source. The addition deleted by the CIT(A) is totally unjustified and the addition made by the AO be restored.

Submitted for kind perusal and consideration.

(Dr. A.K. Bar) Commissioner of Income Tax(Dr)-1, ITAT, Lucknow ITA No. 331/LKW/2016-A.Y. 2011-12 U.P. PROJECT CORPORATION LTD.

BRIEF SYNOPSIS & WRITEEN SUBMISSION BY DR 1.Ground No. 1 The CIT(A) has erred in directing the AO to accept revised income filed through revised computation by the assessee which is contradictory to the provision of section 139(4) of the IT Act that do not I.T.A. No.330, 331, 332 &508/Lkw/2016 15 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 allow to accept revised income except only filing of revised return of income. [Para 2 pages 1-2 of AO's order] [Para 5(1) 5(6) page 2-4 of CIT(A)'s order] In this ground, the AO had ignored the revised computation of income filed by the assessee. The return was filed on 27.03.2012 declaring income of Rs.29,16,04,350/-. The assessee filed revised computation of income. As per the AO, in view in the income returned, then he has to file a revised return. Such computation is to be filed through the revised return. The CIT(A) has accepted the revised computation and directed the AO to make the computation of income on the basis of revised computation made. The CIT(A) while directing this has held, that the decision of Goetz India Ltd. Does not apply to any proceedings in appeal.

The decision of the CIT(A) is erroneous and the revised computation filed by the assessee should be ignored since it was not filed along with revised return.

2. Ground No. 2

The CIT(A) has erred in law and on facts in deleting the addition of Rs.25,12,26,591/- without appreciating the fact that the AO made addition for not following percentage completion method recognition for revenue recognition as given in Accounting Standard-AS-7 (Revised) and also, the assessee is deduction amounts from profits and creating in retention reserve without any jurisdiction. [Para 3 pages 2-3 of AO's order] [Para 6(1) to 6(4) pages 4-7 of CIT(A)'s order] The Assessing Officer had made an addition of Rs.25,12,26,591/- on account of Percentage Completion Method. The CIT(A) has deleted the same. The CIT(A) has held, that the assessee is following the Revenue Recognition Method depending upon the stage on which the project is at the end of the year.

Once the assessee is following the Revenue Recognition Method, then revenue is to be recognized on the work done, irrespective of the stage of completion. Though, there is no change in the practice of accounting followed by the assessee, the addition made by the Assessing Officer and deleted by the CIT(A) be upheld.

I.T.A. No.330, 331, 332 &508/Lkw/2016 16 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 3. Ground No. 3 The CIT(A) has erred in law and on facts in deleting the additions of Rs.39,88,10,901/- on account of interest income without appreciating the fact that the AO made the addition of the interest income received from the FDRs and SB accounts in the name of the assessee, and the assessee claimed TDS deducted by the bank on interest which is against the provision of section 198 and 199 of the IT Act [Para 4 pages 3-4 of AO's order] [Para 7(1) to 7(5) pages 8-10 of CIT(A)'s order] The Assessing Officer had made an addition of Rs.39,88,10,901/- on account of interest in FDRs. The CIT(A) has deleted the same holding, that the funds granted to the assessee corporation were to be utilized for a particular purpose and in absence of the same being utilized for specific purpose, the same is to be refunded back to the Government with interest accrued thereon. The CIT(A) has relied upon the Notification of the State Government and also the case laws of U.P. Police and that of the Gujarat Tribunal.

The addition made by the Assessing Officer has been wrongly deleted by the CIT(A). No doubt, the funds, have to be returned back to the Government along with interest accrued thereon, yet since the FDRs are in the name of the assessee corporation, the interest would belong to the assessee an the Assessing Officer has rightly taxed the same and therefore the addition of the AO be upheld.

4. Ground No. 4

The CIT(A) has erred in law and on fact deleting the addition of Rs.34,77,796/- made on account of disallowance of survey, testing and drawing expenses treating the same in the nature of preliminary expenses u/s 35 of the Act without appreciating the fact the above expenses were incurred before the commencement of the project. [Para 4 pages 4-5 of AO's order] [ Para 8(1) to 8(6) pages 11-16 of CIT(A)'s order] The Assessing Officer had made the addition of Rs.34,77,796/- on account of testing and drawing expenses treating the same as preliminary expenses. He has applied the provision of section 35 of the Act. The nature of the expenses themselves speak that they are expenses which have been incurred before the commencement of the I.T.A. No.330, 331, 332 &508/Lkw/2016 17 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 project. The CIT(A) has held, that since the business of the assessee Corporation, is that of construction which is not a new business, the expenses cannot be treated as preliminary expenses. The CIT(A) has deleted the same.

There is no dispute with respect to the expenses incurred and the purpose for which it has been incurred. The fact remains that the expenses incurred were before the commencement of the projects which are proposed to be under taken. The disallowance made by the Assessing Officer be upheld.

5. Ground No. 5

The CIT(A) has erred in law and on facts in addition of Rs.50,62,979/- made on account of disallowance u/s 40(a)(ia) without appreciating the fact that the Assessing Officer has made the addition for not deducting TDS on POL of hired vehicles and TDS at the leser rate of 2%. [Para 6 pages 5 of AO's order] [Para 9(1) to 9(7) pages 16-19 of CIT(A)'s order] The Assessing Officer made an addition of Rs.50,62,979/- by applying the provisions of section 40(a)(ia) of the Act and to failure to deduct tax at source on the payment made. The CIT(A) has deleted the same holding, that the tax at source was deducted wherever the same was applicable. He has further held, that no deduction of TDS is required to be made on expenses incurred on petrol and diesel and these expenses were borne by the appellant.

Since the assessee had taken the vehicle on hire, there was a liability on the part of the assessee to deduct tax at source, the disallowance made by the Assessing Officer and deleted by the CIT(A) be uphled.

6. Ground No. 6

The CIT(A) has erred in law and on facts in deleting the addition of Rs.12,24,49,122/- on disallowance u/s 40(a)(ia) without appreciating the fact that the Assessing Officer has made the addition for not deducting TDS on freight expenses, material supplied and labour charges. [Para 7 pages 5-6 of AO's order] [Para 10(1) to 10(4) pages 19-21 of CIT(A)'s order] I.T.A. No.330, 331, 332 &508/Lkw/2016 18 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 The Assessing Officer had disallowed Rs.12,24,49,122/- being expenses incurred without deduction of tax at source. The CIT(A) has held that the assessee makes the payments for supply of material to the supplier and no transportation charge is borne by the appellant, hence, that the appellant does not make any payment to the transporters and the payment is make to sppliers for purchase of goods. Further, he held that the question of any TDS being deducted by the appellant on the goods purchased does not arise. No such disallowance has been made by the AO in earlier years when also payment for purchase was made without deduction of TDS. Accordingly, the addition made at Rs.12,24,49,122/- made by the AO was deleted to giving relief to appellant. The CIT(A) has wrongly deleted the addition, the same be upheld.

7. Ground No. 7

The appellant were leaves to add or amend any on or more of the ground of appeals, as stated above, as and when need to doing so arises with the prior permission of the court. [Para 14 page 25 of CIT(A)'s order] T his ground is general in nature.

Submitted for kind perusal and consideration.

(Dr. A.K. Bar) Commissioner of Income Tax(Dr)-1, ITAT, Lucknow ITA No. 332/LKW/2016-A.Y. 2012-13 U.P. PROJECT CORPORATION LTD.

BRIEF SYNOPSIS & WRITEEN SUBMISSION BY DR 1. Ground No. 1 The CIT(A) has erred in law and on facts in deleting the addition of Rs.17,00,70,000/- without appreciating the fact that the AO made addition for not following percentage completion method recognition for revenue recognition as given in Accounting Standard-AS-7 (Revised) and also, the assessee is deduction amounts from profits and creating in retention reserve without any jurisdiction.

I.T.A. No.330, 331, 332 &508/Lkw/2016 19 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 The Assessing Officer had made an addition of Rs.17,00,70,000/- on account of Percentage Completion Method. The CIT(A) has deleted the same. The CIT(A) has held, that the assessee is following the Revenue Recognition Method depending upon the stage on which the project is at the end of the year.

2. Ground No. 2

The CIT(A) has erred in law and on facts in deleting the additions of Rs.42,21,00,000/- on account of interest income without appreciating the fact that the AO made the addition of the interest income received from the FDRs and SB accounts in the name of the assessee, and the assessee claimed TDS deducted by the bank on interest which is against the provision of section 198 and 199 of the IT Act [Para 4 pages 3-4 of AO's order] [Para 5(1) to 5(4) pages 3-4 of CIT(A)'s order] The Assessing Officer had made an addition of Rs.42,21,00,000/- on account of interest in FDRs. The CIT(A) has deleted the same holding, that the funds granted to the assessee corporation were to be utilized for a particular purpose and in absence of the same being utilized for specific purpose, the same is to be refunded back to the Government with interest accrued thereon. The CIT(A) has relied upon the Notification of the State Government and also the case laws of U.P. Police and that of the Gujarat Tribunal.

The addition made by the Assessing Officer has been wrongly deleted by the CIT(A). No doubt, the funds, have to be returned back to the Government along with interest accrued thereon, yet since the FDRs are in the name of the assessee corporation, the interest would belong to the assessee an the Assessing Officer has rightly taxed the same and therefore the addition of the AO be upheld.

I.T.A. No.330, 331, 332 &508/Lkw/2016 20 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 3. Ground No. 3 The CIT(A) has erred in law and on facts in addition of Rs.3,92,24,085/- made on account of disallowance u/s 40(a)(ia) without appreciating the fact that the Assessing Officer has made the addition for not deducting TDS on POL of hired vehicles and TDS at the leser rate of 2%. [Para 5 pages 4-5 of AO's order] [Para 6(1) to 6(9) pages 6- 9 of CIT(A)'s order] The Assessing Officer made an addition of Rs. 3,92,24,085/- by applying the provisions of section 40(a)(ia) of the Act and to failure to deduct tax at source on the payment made. The CIT(A) has deleted the same holding, that the tax at source was deducted wherever the same was applicable. He has further held, that no deduction of TDS is required to be made on expenses incurred on petrol and diesel and these expenses were borne by the appellant.

4. Ground No. 4

The CIT(A) has erred in law and on facts in deleting the addition of Rs.6,19,18,021/- on disallowance u/s 40(a)(ia) without appreciating the fact the Assessing Officer has made the addition for not deducting TDS on freight expenses, material supplied and labour charges. [Para 6 page 6-7 of AO's order] [Para 7(1) to 7(4) pages 9-12 of CIT(A)'s order] The Assessing Officer had disallowed Rs.6,19,18,021/- being expenses incurred without deduction of tax at source. The CIT(A) following his orders for A.Y. 2010-11 appeal no. 77/60/DCIT/R-6/Lko/13-14 and 2011-12 appeal no. 22/03/DCIT/R-6/Lko/14-15 as the same has deleted entire amount of addition of Rs.6,19,18,021/- made u/s 40(a)(ia).

The CIT(A) has wrongly interpreted the provisions of the Act. Once it is found the tax has not been deducted at source on the expenditure claimed as per the provisions of law, the disallowance is to be upheld.

I.T.A. No.330, 331, 332 &508/Lkw/2016 21 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 5. Ground No. 5 The CIT(A) has erred in law and on facts in deleting the additions of Rs.1,63,396/- on account of loss against disposal of stock without appreciating the fact that the AO has made the addition for not deducting TDS on freight expenses, material supplied and labor charges. [Para 7 page 7 of AO's order] [Para 8(1) to 8(4) pages 9-12 of CIT(A)'s order] The AO had made an addition of Rs.1,63,386/- being loss against disposal of stock for the reason that no tax was deducted at source. The CIT(A) has deleted the same. The deletion made by the CIT(A) is contrary to facts as well as law, in as much as, the provisions of TDS are applicable on freight expenses, material supplied and labour charges. Accordingly, the addition made by the AO be restored.

6. Ground No. 6

The CIT(A) has erred in law and on facts in restricting the addition of Rs.7,08,78,373/- as against Rs.53,81,981/- disallowed u/s 43B of the Act in the absence of any documentary evidence of payment. [Para 8 page 7 of AO's order] [Para 9(1) to 9(5) pages 3-6 of CIT(A)'s order] The Assessing Officer had disallowed a sum of Rs. 7,08,78,373/- by applying the provisions of section 43B of the Act. The CIT(A) has restricted the disallowance at Rs.37,18,845/-. The CIT(A) has deleted the addition of Rs.17,15,898/-. The details have been mentioned in the appeal order.

Reliance is placed on the order of the Assessing Officer, the disallowance made by the Assessing Officer should be upheld.

7. Ground No. 7

The CIT(A) has erred in law and on facts in deleting the additions of Rs.1,25,561/- on account of prior period expenses not deductable in mercantile system of accounting. [Para 9 page 7 of AO's order] [Para 10(1-4) pages 15-16 of CIT(A)'s order] The Assessing Officer had disallowed a sum of Rs. 1,25,561/- as prior period expenses not relatable to the year under consideration. The I.T.A. No.330, 331, 332 &508/Lkw/2016 22 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 CIT(A) has deleted the same holding, that the nature of the work of the assessee is that of running of continuous work in progress.

8. Ground No. 8

The appellant crave leaves to add or amend any on or more of the grounds of appeals, as stated above, as and when need to doing so arises with the prior permission of the court. [Para 13 page 18 of CIT(A)'s order] This ground is general in nature.

Submitted for kind perusal and consideration.

(Dr. A.K. Bar) Commissioner of Income Tax(Dr)-1, ITAT, Lucknow ITA No. 508/LKW/2016-A.Y. 2013-14 U.P. PROJECT CORPORATION LTD.

BRIEF SYNOPSIS & WRITEEN SUBMISSION BY DR 1. Ground No. 1 The CIT(A) has erred in law and on facts in deleting the addition of Rs.14,43,61,802/- without appreciating the fact that the AO made addition for not following percentage completion method recognition for revenue recognition as given in Accounting Standard-AS-7 (Revised) and also, the assessee is deduction amounts from profits and crediting in retention reserve without any jurisdiction. [Para 3 pages 2-3 of AO's order] [Para 5(1) to 5(4) pages 2-4 of CIT(A)'s order] The Assessing Officer had made an addition of Rs.21,20,09,287/- on account of Percentage Completion Method. The CIT(A) has deleted the same. The CIT(A) has held, that the assessee is following the Revenue Recognition Method depending upon the stage on which the project is at the end of the year.

I.T.A. No.330, 331, 332 &508/Lkw/2016 23 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 Once the assessee is following the Revenue Recognition Method, then revenue is to be recognized on the work done, irrespective of the stage of completion. Though, there is no change in the practice of accounting followed by the assessee, the addition made by the Assesing Officer and deleted by the CIT(A) be upheld.

2. Ground No. 2

The CIT(A) has erred in law and on facts in deleting the addition of Rs.43,28,49,105/- on account of interest income without appreciating the fact that the AO made the addition of the interest income received from the FDR's and SB accounts in the name of the assessee, and the assessee claimed TDS deducted by the bank on interest which is against the provision of section 198 and 199 of the IT Act. [Para 4 pages 3-5 of AO's order] [Para 7(1) to 7(5) pages 6-11 of CIT(A)'s order] The Assessing Officer had made an addition of Rs.29,31,44,630/- on account of interest income on FDRs. The CIT(A) has deleted the same holding, that the funds granted to the assessee corporation were to be utilized for a particular purpose and in absence of the same being utilized for specific purpose, the same is to be refunded back to the Government with interest accrued thereon. The CIT(A) has relied upon the notification of the State Government and also the case laws of U.P. Police and that of the Gujarat Tribunal.

3. Ground No. 3

The CIT(A) has erred in law and on facts in additions of Rs.3,58,85,285/- made on account of disallowance u/s 40(a)(ia) without appreciating the fact that the Assessing Officer has made the addition for not deducting TDS on POL of hired vehicles and TDS at the leser rate of 2%. [Para 5 pages 6-7 of AO's order] [Para 8(1) to 8(4) pages 11-13 of CIT(A)'s order] I.T.A. No.330, 331, 332 &508/Lkw/2016 24 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 The Assessing Officer made an addition of Rs.6,32,63,235/- by applying the provisions of section 40(a)(ia) of the Act due to failure to deduct tax at source on the payment made. The CIT(A) has deleted the same holding, that the tax at source was deducted wherever the same was applicable. He has further held, that no deduction of TDS is required to be made on expenses incurred on petrol and diesel and these expenses were borne by the appellant.

4. Ground No. 4

The CIT(A), Lucknow has erred in law and on facts in deleting the addition of Rs.1,86,20,613/- made u/s 68 of IT Act, without appreciating the fact that no reply was received by post in response to the notices issues u/s 133(3) of the IT Act, 1961 for verification of creditors. [Para 8 pages 8-9 of AO's order] [Para 11(1) to 11(4) pages 15-18 of CIT(A)'s order] The AO made the addition in respect of the outstanding creditors. Notice u/s 133(6) was issued by the AO to the creditors whose balance were outstanding. In response to notice u/s 133(6) out of the 14 creditors, only 1 creditor in the name of Ajay Associates responded. Other did not respond. The AO on the basis of test check method, out of 100 (hundred) creditors in various units, selected 14 (fourteen) parties and made an addition of Rs.1,86,20,613/- u/s 68 treating as unverifiable. In response to show cause notice to the assessee, the assessee filed confrmations from all the respective parties. Assessee also submitted explanation in respect to non compliance to the notice u/s 133(6).

The CIT(A) has held that the assessee had complied to the questionnaire and has filed confirmations of all the remaining creditors to whom notices were issued u/s 133(6) of the Act. CIT(A) has held that these creditors relate to normal business transaction and the credit have been given to the trade creditors for the contract work done by them. Payments are being made to these parties by cheque. The books of account have not been rejected. The transactions resulting as income I.T.A. No.330, 331, 332 &508/Lkw/2016 25 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 from contract for the work done by them have been accepted by the AO. The CIT(A) has deleted the addition.

The action of the CIT(A) is not acceptable for reasons that on enquiries by AO the creditors did not respond to the notices u/s 133(6). The credit balance cannot be said to be verifiable. The additions deleted be restored.

5. Ground No. 5

The CIT(A) has erred in law and on facts in deleting the additions of Rs.11,50,020/- on account of prior period expenses not deductable in mercantile system of accounting. [Para 7 page 7 of AO's order] [Para 10(1) to 10(4) pages 14-15 of CIT(A)'s order] The AO made addition of Rs.11,50,020/- on account of prior period expenditure. The CIT(A) has deleted the same relying on the decision of the Hon'ble ITAT, Lucknow in the appellant's own case for the A.Y. 2009-10.

The fact remains that the prior period expenses cannot be allowed as deduction in the subsequent years. The deletion made by the CIT(A) be restored.

6. Ground No. 6

The appellant crave leaves to add or amend any on or more of the grounds of appeals, as stated above, as and when need to doing so arises with the prior permission of the court. [Para 16 page 21 of CIT(A)'s order] This ground is general in nature.

Submitted for kind perusal and consideration.

(Dr. A.K. Bar) Commissioner of Income Tax(Dr)-1, ITAT, Lucknow I.T.A. No.330, 331, 332 &508/Lkw/2016 26 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 The written submissions filed by the assessee, year-wise, are reproduced below:

Assessment year:2010-11 BRIEF SYNOPSIS AND WRITTEN STATEMENT BY ASSESSEE

1. GROUND NO 1- Addition of an amt of Rs 73,97,943/-

From the Language of section 35D , the expenses which are falling under section 35D(2) are to be considered for amortization.

In case the business is already in existence then the revenue expenses cannot be disallowed on the ground that business has not commenced. The expenses on survey, testing & drawing etc have been incurred in connection with the construction projects undertaken by applicant. These do not relate to the applicants business coming into existence. An expenditure which is otherwise allowable cannot be considered under section 35D of the act . If the expenditure is allowable under section 37 of the act then the same is to be allowed. The expenses debited are mainly of revenue nature and it is not necessary that these expenses will be allowable only when there are receipts . In the instant case section 35D of the act is not applicable as the business has already commenced and it is not the case of extension of industrial undertaking.

Thus the order of CIT ( A) to be upheld.

2. GROUND NO 2- Addition of an amt of amt of Rs. 94,30,394.00 "We have already submitted that the sanctioned amount of the work allotted is fixed by Government on the estimations including centage. The actual amount Incurred towards the cost of construction as recorded in the books of account on day to day basis by the units of the Corporation ' total amount including Centage arrived on the basis of the book of accounts cannot tally with the estimations. The actual expenditure depends on number of factors including cost index, day to day rate fluctuations in material, delay in execution and rise in Prices for which there is no escalation clause and some time increase in labour cost due to technicality of work. All the expenditures are actually incurred in completion of the Project are duly supported by bills and vouchers and verifiable from the books of accounts. The Corporation is a Wholly owned Government corporation and is subject to audit by Statutory audit by Chartered accountants firm duly appointed by C & AG of India and as well as by C & AG of India.

As regards Loss of Rs. 85,65,495.00 in respect of Siswa Sagar Reservoir that unit no.-14, Lucknow has carried out. The unit has carried out two works namely Siswa Sager Reservoir and Bahaja Sagar Reservoir during the financial year 2004-05 to 2007-08 . Due to mistake in booking of expenditure on these works some payments pertaining to Bahaja Sagar Reservoir was wrongly debited to Siswa Sagar Reservoir . As a result against the expenditure of Rs. 1,30,56,475.97(Including centage), the profit I.T.A. No.330, 331, 332 &508/Lkw/2016 27 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 of Rs. 1,11,14,111.03, is appearing in cost sheet, which is approx 85% of the expenditure. Actual expenditure incurred from 2004-05 to 2007-08 and bill amount of these works are as under:

Name of Works Expenditure Centage Claimed Bill Amt Siswa Sagar 1,71,57,955.36 22,64,440.64 1,94,22,396.00 Reservoir Bahaja Sagar 2,13,00,300.71 28,70,269.29 2,41,70,570.00 Reservoir Total 3,84,58,256.07 51,34,709.93 4,35,92,966.00 Chart showing year wise expenditure incurred and centage charged thereon is enclosed. From the above, it is clear that loss on this work as appearing cost sheet is due to mistake only. However if expenditure on both the works and bill amount are taken together there is no loss and also there is no change in the expenditure and the bill amount. Thus the order of CIT ( A) to be upheld.

3. Ground No 3 The AO made an addition of Rs 30,94,199/- since the profit earned is lower than specified percentage of cost.

The disallowance has been made on the plea that excess expenditure has been incurred . In this respect it is to submit that the assessee accounts are subject to audit by Statutory auditors and also by the C & AG of India . The expenses are fully vouched and the learned AO has not pointed out any instance of expenses not being supported by vouchers. The expenses have actually been incurred by the assessee and are not bogus. Thus the order of CIT ( A) to be upheld.

4. Ground No 4 The assessee is a wholly owned government corporation and receives deposits and funds from the government for executing the deposit civil contract works . As per Government GO a copy of which was already provided to learned Assessing officer during the assessment proceedings along with reply explaining the treatment made by the assessee, the interest on such unutilized funds lying in bank fixed & saving deposits pertains to government and not to the assessee.

As per GO No B-1/564/10-7/97 dated 02.03.1998 it has been specifically mentioned that whatever interest income is accrued on advances /funds from banks it would be income of government and is to be remitted to government. Thus the interest accrued on the advances received by the assessee from the Government for construction activities would be the income of the Government and not of the assessee. On its accrual, it becomes a liability to the Government which is to be remitted by the assessee to the Government in due course. Since the income has not been accrued to the assessee it cannot be charged to tax in its hands. A I.T.A. No.330, 331, 332 &508/Lkw/2016 28 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 reference in this connection may be made to the decision of Hon'ble ITAT Lucknow in the case of UP Police Awas Nigam ltd Vs ACIT in ITA No 344 & 345 /LKW/1999 dated 22.08.2012. A reference may also be made to the decision of Hon'ble Gujrat Highcourt in the case of CIT Vs SAR Infracon (p) Ltd 222 taxman 294 wherein on considering stipulation of the central government while sanctioning the grant in favor of the assessee that interest earned on the central grant already released would form part of the central grant limit , the court laid down that Held, considering the condition imposed by the Central Government, while releasing the grant in favor of the Assessee, when the interest earned on the Central grant already released was required to be forming Part of the Central grant, Tribunal has rightly held that the interest earned on cannot be said to be the income of the Assessee-No error had been committed by the Tribunal in deleting the addition made by the Assessing officer.

Thus the order of CIT ( A) to be upheld.

5. Ground No 5 An addition of Rs 54,19,933 was made to income since either no TDS was deducted or short TDS was deducted or bills have not been produced .

a) Addition of Rs 7,05,920/- The AO disallowed a sum of Rs 3,52,960/- on the ground that bills are not available , though bills amounting to Rs 3,52,960/- each were available.

b) The AO disallowed sum of Rs 34,19,550 under section 40 (a) (ia) of the act for the reason that payment s were made without deduction of TDS or after deduction of TDS at lower rate.

i)A payment of Rs 16,54,500 was made to IIT Roorkie where a certificate no 2/2009-10 dated 24.07.2009 under section 197 of the act issued by ITO ( TDS) haridwar whereby payments to IIT Roorkie have been allowed to be made without deduction of TDS. This certificate has been issued on thye basis of CBDT Notification no SO 48 (E) dt 12.01.2004 and circular no 4/2002 dated 16.07.2002.

ii) The AO disallowed sums of Rs 8,28,712/- and Rs 7,68,338/- as payments have been made deducting tds @1% instead of 2% . In this connection reference can be made to decision of Hon'ble "A" Bench of ITA , Kolkatta in case of ITO Vs Premier Medical supplies & stores in IT appeal No 1061 & 1062 (KOL) of 2010 Co Nos 86 & 87 (KOL) of 2010 dt oct 28, 2011.

The case lays down that where tax is deducted by the assessee, even under bonafied wrong impression, under wrong provision of TDS, the provisions of section 40 (a) (ia) of the act cannot be invoked.

iii) The Ao disallowed a sum of Rs 60,000 and Rs 1,08,000 on the ground that tds has been deducted at lower rate. These payments were I.T.A. No.330, 331, 332 &508/Lkw/2016 29 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 for vehicle hired. The assessee was of the view that they were liable to TDS under section 194 C of the act whereas AO has taken the view that payment was on account of rent . A reference in this connection is may be made to the decision in DCIT Vs S K Tekriwal (2011) 48 SOT 515 (KOL) in this case the assessee paid machinery hire charges on which it deducted TDS at 1% under section 194C of the act. The AO claimed that the amount was in the nature of rent and tds @10% ought to have deducted under section 194I of the act. A proportionate disallowance under section 40(a) (ia) of the act was made on the ground that there was a failure to deduct TDS on the payment . The Hon'ble tribunal upheld the assessee ple that in section 40(a) (ia) of the act disallowance could not be made when there was a shortfall in TDS deduction . On appeal by department to the hon' ble high court , the high court upheld the Hon'ble tribunal order .

c) The AO disallowed sum of Rs 3,50,000/- as the payment has been made on the letter head of contractor without TIN/Bill No . No finding has been given by AO that the payment is bogus or payment was not actually made. The payment was made through banking channel by account payee cheque which establishes genuiness of transaction.

d) The AO disallowed sum of Rs 1,54,338 for the reason bill was not available , the payment relates to payment of trade tax a govt due and challan for same is available.

e) An amt of Rs 1,60,000 was disallowed for the reason voucher was not attached for the purpose of TDS deduction , TDS of Rs 16,480/- has already been deducted in the payment .

Thus the order of CIT ( A) to be upheld.

6. Ground No 6 The Learned Assessing officer has made an addition of Rs 15,36,760/- on the plea that excess expenditure has been recorded in the books of account. At the very outset, we would like to state that this amount has been included in Work in progress (WIP) and centage has also been charged on the same . As a corollary of making the addition the learned AO ought to have reduced it from WIP also along with centage . Thus the claim of expenditure is revenue neutral. Hence the order of CIT ( A) to be upheld.

7. The learned Assessing officer has made an addition of Rs 5,71,922 by stating that WIP has been taken short in respect of cost sheet of Barelli unit . However the at another place in the same cost sheet an excess amount of Rs 4,49,347 has been taken . As such the net effect shall be Rs 1,22,575/-. Thus the order of CIT ( A) to be upheld.

8. Repairs and maintenance expenditures I.T.A. No.330, 331, 332 &508/Lkw/2016 30 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 The assessee incurred expenditure of 18,58,061 /- on repairs and maintenance of existing office building , the nature of expenditure was revenue for Rs 15,09,999/-

The expenses been incurred were towards repairing the premises like painting , change of curtains etc . It has not brought about any new asset and more importantly it was not the intention of the appellant to bring about any new capital asset . The expenses incurred clearly fall within the expression of repairs to premises as appearing in section 30(a) of the act. Thus the order of CIT ( A) to be upheld.

9. a) Disallowance of expenditure under 43B of act has been made . VAT TDS of Rs 17,15,898 is not an expenditure it is a liability and moreover tds is not passed through profit and loss account hence cannot be disallowed under section 43 B of the act.

b) of the amount of Rs 10,85,878 an amount of Rs 4,61,559/- has been paid before the due date of filling return of income.

c) Relief of Rs 53,441/- has been provided since amt paid before due date of filling return of income

d) Relief of Rs 14,87,947 has been given since the nature of amount was retention money which are released once the supplier submits proof of payment of royalty .

Thus the order of CIT ( A) to be upheld.

10. The Learned Assessing officer has disallowed a sum of Rs 1,13,63,781 on the basis of special audit report. The Special auditors did not provide any opportunity to the assessee to explain the entities point of view and , thus ,the explanations of the assessee were not considered by the special auditors. The matter was explained to learned AO vide written submissions dated 20.09.2013 and the bill and vouchers were produced for verification in support of the contention of the assessee. However, without pointing out any flaw in the explanation of the assessee or in the vouchers produced the Learned assessing officer in a summary manner has stated that the assessee reply was examined but is not tenable . The Learned assessing officer also stated that the assessee follows mercantile system of accounting and therefore by period expenses are not allowable. It may be stated here that the assessee has demonstrated before the learned assessing officer that the liability has arisen in the previous years relevant to AY 2010-11 and hence it is liable to be allowed In any case , it is submitted that assessee recognized the expenditure in AY 2010-

11.Accordingly corresponding income in the shape of WIP and percentage of centage has been charged accordingly in the previous year relevant to AY 10-11 on the basis of recognition of Expenditure therefore the effect is revenue neutral. Thus the order of CIT ( A) to be upheld.

11. Addition of Rs 6,32,63,235 made on account of disallowance u/s 40 (a) (ia) I.T.A. No.330, 331, 332 &508/Lkw/2016 31 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 The assessee had filed a detailed list during hearing in assessment proceedings detailing the income tax deposited and the date of deposit of such tax as also mentioning the circumstances under which tax is not deducted eg. Bill amount was less than Rs 20,000/- or the payment was against supply of material on which TDS was not applicable or where the payee was exempt from income tax or where the payment was against the liability provided earlier and tds was deducted and paid at the time of booking the liability etc . With regard to expenses incurred on hired vehicles and booked under the head POL of hired vehicles, we have to state that we have deducted tax @2% on hiring of vehicles. The amount which has been subjected to disallowance pertains to the expenses on diesel and petrol charges of vehicles. It is submitted that this expenditure is borne by the assessee and hence it is submitted that it is not liable to for deduction under section 194C of the act .

The issue can be viewed from another angle also that if TDS is considered on the entire amount of Bill i.e consisting of hire charges and Petrol /diesel expenses of vehicles then it is only a matter of short deduction of tax on which the provisions of section 40(a) (ia) are not applicable hence the disallowance is liable to be deleted. Thus the order of CIT ( A) to be upheld.

12 The assessee is creating retention reserve on the basis of accounting policies (policy on revenue recognition in schedule B of schedule of significant accounting policies and notes annexed to and forming part of accounts for the year ended 31 st March 2010 ) followed by it for past several years which are in conformity with the requirements of AS-7 (Revised). The said Retention Reserve is in fact the amount of profits of future years deducted from the Work in Progress on the basis of stage of completion of work in accordance with the accounting policy of the corporation. Another important factor is that when the stage of completion is more than 50 % and less than 100% the assessee recognizes 2/3 of the profit and on completion of work the entire profit is accounted for. Thus in respect of those works which were more than 50% completed 2/3 rd of the profit or totally completed in subsequent years the entire profit stands accounted for and has been offered for taxation or actually assessed by the AO . Thus if same profit is taxed in AY 2010-11 also by making addition of retention reserves , it will amount to taxation of same income twice. Thus there is absolutely no justification for this addition as the reserves for contingencies pursuant to accounting policy consistently followed by the assessee is continuing for the past several years and there is no justification for making the addition of reserve for contingency which is in pursuance of accounting policy regularly followed by the assessee .

I.T.A. No.330, 331, 332 &508/Lkw/2016 32 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 Further the statutory auditors have not taken exception or qualification to creation of reserve and the C & AG of india have also not given any adverse comment on this issue. Thus the order of CIT ( A) to be upheld.

13. The learned assessing officer has made on addition of Rs 17,68,458 on the plea that it is a short deduction of TDS . If we refer to various decisions of tribunals and courts it is now settled that incase of variation of rate of TDS, the disallowance of section 40 (a) (ia) is not applicable .Further it also stands settled by several decisions that contracts for letting out of vehicles of the type entered into by assessee is covered u/s 194 C and not 194 I of the Act . Thus the order of CIT ( A) to be upheld.

14. Addition of Rs 13,75,49,494/-

The assessee purchases various items like sand, coarse sand, boulders , grits etc in its business of contract work . These items are supplied by the parties at the rate FOR at work sites. As such the transportation cost is borne by the supplier. The assessee makes payment for supply of material to supplier. Since no transportation charges are borne by the assessee ,hence the assessee does' nt makes any payment to transporters and the assessee makes payment to suppliers for goods. The question of any TDS doesn't arise. There is no provision in the act which requires for deduction of TDS on purchase of goods for which payment is made to suppliers. Thus the order of CIT ( A) to be upheld.

ASSESSMENT YEAR 2011-12 BRIEF SYNOPSIS AND WRITTEN STATEMENT BY RESPONDENT

12. GROUND NO 1 The Return of Income was a belated return being filed after the due date and hence cannot be revised , the assessee during the course of assessment proceedings submitted a revised computation of income rectifying certain mistakes appearing in the original return of income. However , the learned assessing officer rejected the revised computation of income filed during the assessment proceedings appantely because the total income as per revised computation of Income was less than the total income as per computation of income filed in the original return of Income . It may be stated here that assessment has been completed on the basis of accounts audited by statutory auditors who are duly appointed by C & AG of India and hence the income as per revised computation ought to have been accepted by learned AO.

Thus the order of CIT ( A) to be upheld.

I.T.A. No.330, 331, 332 &508/Lkw/2016 33 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 2 The assessee is creating retention reserve on the basis of accounting policies (policy on revenue recognition in schedule B of schedule of significant accounting policies and notes annexed to and forming part of accounts for the year ended 31 st March 2010 ) followed by it for past several years which are in conformity with the requirements of AS-7 (Revised). The said Retention Reserve is in fact the amount of profits of future years deducted from the Work in Progress on the basis of stage of completion of work in accordance with the accounting policy of the corporation. Another important factor is that when the stage of completion is more than 50 % and less than 100% the assessee recognizes 2/3 of the profit and on completion of work the entire profit is accounted for. Thus in respect of those works which were more than 50% completed 2/3 rd of the profit or totally completed in subsequent years the entire profit stands accounted for and has been offered for taxation or actually assessed by the AO . Thus if same profit is taxed in AY 2010-11 also by making addition of retention reserves , it will amount to taxation of same income twice. Thus there is absolutely no justification for this addition as the reserves for contingencies pursuant to accounting policy consistently followed by the assessee is continuing for the past several years and there is no justification for making the addition of reserve for contingency which is in pursuance of accounting policy regularly followed by the assessee .

Further the statutory auditors have not taken exception or qualification to creation of reserve and the C & AG of india have also not given any adverse comment on this issue. Thus the order of CIT ( A) to be upheld.

3 Ground No 3 The assessee is a wholly owned government corporation and receives deposits and funds from the government for executing the deposit civil contract works . As per Government GO a copy of which was already provided to learned Assessing officer during the assessment proceedings along with reply explaining the treatment made by the assessee, the interest on such unutilized funds lying in bank fixed & saving deposits pertains to government and not to the assessee.

As per GO No B-1/564/10-7/97 dated 02.03.1998 it has been specifically mentioned that whatever interest income is accrued on advances /funds from banks it would be income of government and is to be remitted to government. Thus the interest accrued on the advances received by the assessee from the Government for construction activities would be the income of the Government and not of the assessee. On its accrual, it becomes a liability to the Government which is to be remitted by the assessee to the Government in due course. Since the income has not been accrued to the assessee it cannot be charged to tax in its hands. A reference in this connection may be made to the decision of Hon'ble ITAT I.T.A. No.330, 331, 332 &508/Lkw/2016 34 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 Lucknow in the case of UP Police Awas Nigam ltd Vs ACIT in ITA No 344 & 345 /LKW/1999 dated 22.08.2012. A reference may also be made to the decision of Hon'ble Gujrat Highcourt in the case of CIT Vs SAR Infracon (p) Ltd 222 taxman 294 wherein on considering stipulation of the central government while sanctioning the grant in favor of the assessee that interest earned on the central grant already released would form part of the central grant limit , the court laid down that Held, considering the condition imposed by the Central Government, while releasing the grant in favor of the Assessee, when the interest earned on the Central grant already released was required to be forming Part of the Central grant, Tribunal has rightly held that the interest earned on cannot be said to be the income of the Assessee-No error had been committed by the Tribunal in deleting the addition made by the Assessing officer.

Thus the order of CIT ( A) to be upheld.

4 GROUND NO 4 From the Language of section 35D, the expenses which are falling under section 35D(2) are to be considered for amortization.

Thus the order of CIT ( A) to be upheld.

5 Ground No 5 - Addition of Rs 50,62,979 made on account of disallowance u/s 40 (a) (ia) The Ld AO disallowed Rs 50,62,979 u/s 40(a) (ia) of the Act in respect of POL expenses i.e petrol. Oil, lubricant etc of hired vehicles on the plea that the assessee had not deducted TDS on the same. It is noteworthy that expenditure on POL on hired vehicle has been incurred by the assessee. Obviously such expenses are not covered u/s 194 C of the Act . The assessee has not deducted TDS u/s 194 C on POL expenses i.e Petrol, oil , lubricant etc incurred on hired vehicles as such expenses have been paid on purchase of POL expenses i.e Petrol, oil , lubricant etc. These rae I.T.A. No.330, 331, 332 &508/Lkw/2016 35 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 reimbursement of expenses in respect of expenses incurred on these heads. As the payment of such expenses is not against any work contract but these are for purchase of items , tax deduction u/s 194 C is not applicable.

The Ld AO has misunderstood reimbursement of POL expenses of Rs 50,62,979 u/s 40 (a) (ia) . Such addition is liable to be deleted The issue can be viewed from another angle also that if TDS is considered on the entire amount of Bill i.e consisting of hire charges and Petrol /diesel expenses of vehicles then it is only a matter of short deduction of tax on which the provisions of section 40(a) (ia) are not applicable hence the disallowance is liable to be deleted.

Thus the order of CIT ( A) to be upheld.

6. Ground No 6- Purchases , addition The assessee purchases various items like sand, coarse sand, boulders , grits etc in its business of contract work . These items are supplied by the parties at the rate FOR at work sites. As such the transportation cost is borne by the supplier. The assessee makes payment for supply of material to supplier. Since no transportation charges are borne by the assessee ,hence the assessee does' nt makes any payment to transporters and the assessee makes payment to suppliers for goods. The question of any TDS doesn't arise. There is no provision in the act which requires for deduction of TDS on purchase of goods for which payment is made to suppliers. Thus the order of CIT ( A) to be upheld.

ASSESSMENT YEAR 2012-13 BRIEF SYNOPSIS AND WRITTEN STATEMENT BY ASSESSEE

13. GROUND NO 1 The assessee is creating retention reserve on the basis of accounting policies (policy on revenue recognition in schedule B of schedule of significant accounting policies and notes annexed to and forming part of accounts for the year ended 31 st March 2010 ) followed by it for past several years which are in conformity with the requirements of AS-7 (Revised). The said Retention Reserve is in fact the amount of profits of future years deducted from the Work in Progress on the basis of stage of completion of work in accordance with the accounting policy of the corporation. Another important factor is that when the stage of completion is more than 50 % and less than 100% the assessee recognizes 2/3 of the profit and on completion of work the entire profit is accounted for. Thus in respect of those works which were more than 50% completed 2/3 rd of the profit or totally completed in subsequent years the entire profit stands accounted for and has been offered for taxation or actually assessed by the AO . Thus if same profit is taxed in AY 2010-11 also by making addition of retention reserves , it will amount to taxation of same income twice. Thus there is absolutely no justification for this addition as the I.T.A. No.330, 331, 332 &508/Lkw/2016 36 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 reserves for contingencies pursuant to accounting policy consistently followed by the assessee is continuing for the past several years and there is no justification for making the addition of reserve for contingency which is in pursuance of accounting policy regularly followed by the assessee .

Further the statutory auditors have not taken exception or qualification to creation of reserve and the C & AG of india have also not given any adverse comment on this issue.

Thus the order of CIT ( A) to be upheld.

14. GROUND NO 2 The assessee is a wholly owned government corporation and receives deposits and funds from the government for executing the deposit civil contract works . As per Government GO a copy of which was already provided to learned Assessing officer during the assessment proceedings along with reply explaining the treatment made by the assessee, the interest on such unutilized funds lying in bank fixed & saving deposits pertains to government and not to the assessee.

As per GO No B-1/564/10-7/97 dated 02.03.1998 it has been specifically mentioned that whatever interest income is accrued on advances /funds from banks it would be income of government and is to be remitted to government. Thus the interest accrued on the advances received by the assessee from the Government for construction activities would be the income of the Government and not of the assessee. On its accrual, it becomes a liability to the Government which is to be remitted by the assessee to the Government in due course. Since the income has not been accrued to the assessee it cannot be charged to tax in its hands. A reference in this connection may be made to the decision of Hon'ble ITAT Lucknow in the case of UP Police Awas Nigam ltd Vs ACIT in ITA No 344 & 345 /LKW/1999 dated 22.08.2012. A reference may also be made to the decision of Hon'ble Gujrat Highcourt in the case of CIT Vs SAR Infracon (p) Ltd 222 taxman 294 wherein on considering stipulation of the central government while sanctioning the grant in favor of the assessee that interest earned on the central grant already released would form part of the central grant limit , the court laid down that Held, considering the condition imposed by the Central Government, while releasing the grant in favor of the Assessee, when the interest earned on the Central grant already released was required to be forming Part of the Central grant, Tribunal has rightly held that the interest earned on cannot be said to be the income of the Assessee-No error had been committed by the Tribunal in deleting the addition made by the Assessing officer.

Thus the order of CIT ( A) to be upheld.

I.T.A. No.330, 331, 332 &508/Lkw/2016 37 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14

15. Ground No 3 The company takes hired vehicles on contract basis . The basic term of the contract is that the running cost of the vehicle will be borne by the appellant corporation. This running cost comprises of the cost of petrol , diesel and lubricants being POL expenses. Hence the company from past several years have been deducting TDS @2% on the contractual cost paid for these hired vehicles owners where ever the payment was in excess of specified limit of Rs 20000/- on payments made for hiring of vehicles.

The amount which has been subjected to disallowance pertains to the expenses on diesel and petrol charges of vehicles. It is submitted that this expenditure is borne by the assessee and hence it is submitted that it is not liable to for deduction under section 194C of the act .

Accordingly , provisions of section 40(a)(ia) of the act are not applicable in the present case as it is not a case where TDS has not been deducted . On the contrary it is a case where TDS has been deducted . Thus the order of CIT ( A) to be upheld.

16. Ground No 4 The assessee purchases various items like sand, coarse sand, boulders, grits etc in its business of contract work . These items are supplied by the parties at the rate FOR at work sites. As such the transportation cost is borne by the supplier. The assessee makes payment for supply of material to supplier. Since no transportation charges are borne by the assessee, hence the assessee does' nt makes any payment to transporters and the assessee makes payment to suppliers for goods. The question of any TDS doesn't arise. There is no provision in the act which requires for deduction of TDS on purchase of goods for which payment is made to suppliers. However the Ld. Assessing officer overlooked the aforesaid fact and only followed his predecessors assessment order .

Thus the order of CIT ( A) to be upheld.

17. Ground No 5 In this respect we would like to submit that the corporation had sold scrap collected at site from past several years after taking due authorization from the concerned authorities . The old PVC pipes , rusted iron rods , pipes , I.T.A. No.330, 331, 332 &508/Lkw/2016 38 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 pump sets etc that were purchased in past years were as dead stock and were also of no use for the corporation . The stock value was declining day by day due to erosion. Thus the scrap when sold in open tender caused loss of Rs 1,63,386 which was accounted for in the books of the corporation. Thus the order of CIT ( A) to be upheld.

6 Ground No 6 An amount of Rs 7,08,78,737/- was disallowed on the ground that assessee has not furnished payment proof of contribution to provident fund and also no bifurcation of amt claimed as contribution and amt claimed as provision has been furnished.

The assessee has deposited Rs 7,08,78,737 on account of contributions to EPF act , Contribution towards Group gratuity , Group Leave encashment and contribution towards leave salary and pension contribution . Necessary documents along with copies of acknowledgement for payment to LIC of India on account of gratuity and GLES and copies of challan for payment to EPF contribution were produced . Further the provisions of section 43B of the act are not applicable to Leave salary and pension contribution.

Thus the order of CIT ( A) to be upheld.

7. Addition on account of Prior Period expenses Rs 1,25,561/- The assessee has already added back an amount of Rs 1,15,500/- to income as per computation as per details below Prior period expenses Amt Road tax and others 5500.00 Contract expenses 66531.00 Survey testing 53530.00 TOTAL 125561.00 Less Prior period Income 10061.00 Net expenses added back 115500.00 Adding the same amount gain is not logical on the part of AO. Thus the order of CIT (A) should be upheld .

ASSESSMENT YEAR 2013-14 BRIEF SYNOPSIS AND WRITTEN STATEMENT BY RESPONDENT

1. GROUND NO 1 The assessee is creating retention reserve on the basis of accounting policies (policy on revenue recognition in schedule B of schedule of significant accounting policies and notes annexed to and forming part of accounts for the year ended 31 st March 2010 ) followed by it for past several years which are in conformity with the requirements of AS-7 (Revised). The said Retention I.T.A. No.330, 331, 332 &508/Lkw/2016 39 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 Reserve is in fact the amount of profits of future years deducted from the Work in Progress on the basis of stage of completion of work in accordance with the accounting policy of the corporation. Another important factor is that when the stage of completion is more than 50 % and less than 100% the assessee recognizes 2/3 of the profit and on completion of work the entire profit is accounted for. Thus in respect of those works which were more than 50% completed 2/3 rd of the profit or totally completed in subsequent years the entire profit stands accounted for and has been offered for taxation or actually assessed by the AO . Thus if same profit is taxed in AY 2010-11 also by making addition of retention reserves , it will amount to taxation of same income twice. Thus there is absolutely no justification for this addition as the reserves for contingencies pursuant to accounting policy consistently followed by the assessee is continuing for the past several years and there is no justification for making the addition of reserve for contingency which is in pursuance of accounting policy regularly followed by the assessee .

Further the statutory auditors have not taken exception or qualification to creation of reserve and the C & AG of india have also not given any adverse comment on this issue.

Thus the order of CIT ( A) to be upheld.

2. GROUND NO 2 The assessee is a wholly owned government corporation and receives deposits and funds from the government for executing the deposit civil contract works . As per Government GO a copy of which was already provided to learned Assessing officer during the assessment proceedings along with reply explaining the treatment made by the assessee, the interest on such unutilized funds lying in bank fixed & saving deposits pertains to government and not to the assessee.

As per GO No B-1/564/10-7/97 dated 02.03.1998 it has been specifically mentioned that whatever interest income is accrued on advances /funds from banks it would be income of government and is to be remitted to government. Thus the interest accrued on the advances received by the assessee from the Government for construction activities would be the income of the Government and not of the assessee. On its accrual, it becomes a liability to the Government which is to be remitted by the assessee to the Government in due course. Since the income has not been accrued to the assessee it cannot be charged to tax in its hands. A reference in this connection may be made to the decision of Hon'ble ITAT Lucknow in the case of UP Police Awas Nigam ltd Vs ACIT in ITA No 344 & 345 /LKW/1999 dated 22.08.2012. A reference may also be made to the decision of Hon'ble Gujrat Highcourt in the case of CIT Vs SAR Infracon (p) Ltd 222 taxman 294 wherein on considering stipulation of the central government while sanctioning the grant in favor of the assessee that interest earned on the central grant already released would form part of the central grant limit , the court laid down that I.T.A. No.330, 331, 332 &508/Lkw/2016 40 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 Held, considering the condition imposed by the Central Government, while releasing the grant in favor of the Assessee, when the interest earned on the Central grant already released was required to be forming Part of the Central grant, Tribunal has rightly held that the interest earned on cannot be said to be the income of the Assessee-No error had been committed by the Tribunal in deleting the addition made by the Assessing officer.

Thus the order of CIT ( A) to be upheld.

3. Ground No 3 The company takes hired vehicles on contract basis. The basic term of the contract is that the running cost of the vehicle will be borne by the appellant corporation. This running cost comprises of the cost of petrol, diesel and lubricants being POL expenses. Hence the company from past several years have been deducting TDS @2% on the contractual cost paid for these hired vehicles owners where ever the payment was in excess of specified limit of Rs 20000/- on payments made for hiring of vehicles.

Accordingly, provisions of section 40(a)(ia) of the act are not applicable in the present case as it is not a case where TDS has not been deducted . On the contrary it is a case where TDS has been deducted.Thus the order of CIT ( A) to be upheld.

4. Ground No 4 The Ld. AO has made the addition of Rs 1,86,20,613 u/s 68 of the Act only on the plea that the parties failed to respond to notices issued u/s 133(6) of the Act. The assessee had provide full details of the sundry creditors with their names , addresses and amt outstanding as on 31.03.2013 and also furnished confirmation of balances of creditors to whom notices were issued by Ld AO. It may be stated here that in most of the cases there are regular transactions with the parties. No amt has been recd in cash by from them. They are trade creditors and credit has been given to them for contract works done by them and payments are being made by cheque. Thus the order of CIT ( A) to be upheld.

I.T.A. No.330, 331, 332 &508/Lkw/2016 41 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14

5. Ground No 5 The assessee has filed the original return of income on 29-09-2013 and subsequently the return of income was revised on 28-02-2015 on the basis of financial statements audited by the statutory auditors appointed by the Central government. It is obvious that various figures of original return of income would vary with the revised return of income. Accordingly in the revised return of income Rs. 3,60,210/- was added in the computation of income on account of prior period income/expenses. Ignoring the fact the learned assessing officer has added Rs. 11,50,020/- on account of prior period income/expenses on the basis of original return of income. Since the learned AO has done the assessment on the basis of revised return, hence addition made on the basis of original return which becomes non-est on filing the revised return, is liable to be deleted. We have also to point out that the details of expenditure shown under the head of "Prior Period Adjustments" included in extra ordinary items of Profit & Loss Account . It would be noticed that as against the expenditure of Rs. 13,20,796/- the income is Rs. 9,60,586/- resulting in net debit balance i.e. expenditure of Rs. 3,60,210/- which has been disallowed by the assessee on its own as would be seen in the Computation of Income.

We draw your kind attention to the ITAT decision in our own case in ITA No.547/LKW/2012 for A.Y.2009-10 in which in paragraph 4 on page 2 and 3 of the ITAT Order, it has been held that "where the net prior period income has been offered to tax, no addition is justified. We therefore decide the issue in favour of the assessee".

As such in this year also the offering of the net amount which is expenditure in this year is fully covered by the ITAT order. Thus the order of CIT ( A) to be upheld.

3. We have heard the rival parties and have gone through the material placed on record including the written submissions filed by both the parties. We find that the first ground taken in assessment year 2010-11 regarding deletion of addition made on account of disallowance of survey, testing and drawing expenses etc. are similar in I.T.A. No.331/Lkw/2016 for assessment year 2011-12 which the Revenue has taken in assessment year 2011-12 as ground No. 4. Similarly, ground No. 4 in assessment year 2010-11 is similar to ground No. 3 in assessment year 2011-12 and ground No. 2 in assessment year 2012-13 and 13-14. Ground No. 5 relating to disallowance u/s 40(a)(ia) in assessment year 2010-11 has also been taken in assessment I.T.A. No.330, 331, 332 &508/Lkw/2016 42 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 year 2011-12 and 2012-13 vide ground No. 6 & 4 respectively. Ground No. 11 in assessment year 2010-11 has also been taken by the Revenue in assessment year 2011-12, 2012-13 and 2013-14 vide ground No. 5, 3 & 3 respectively. Similar is the position with respect to ground No. 12 where the same issue has been taken by the Revenue in assessment year 2011-12, 2012-13 and 2013-14 vide ground No. 2, 1 & 1 respectively.

4. First we take up the appeal in I.T.A. No.330/Lkw/2016 for assessment year 2010-11. The first ground is for disallowance of survey, testing and drawing expenses as the Assessing Officer treated the same in the nature of preliminary expenses whereas the learned CIT(A) has held that since the assessee was already engaged in the business of construction, such expenses cannot be treated as preliminary expenses and therefore, he has rightly deleted the same holding the same to be of Revenue in nature. The relevant findings of learned CIT(A) are reproduced below:

"5(4) I have examined the facts and circumstances of the case. I have considered the findings of the Assessing Officer in the assessment order and the submissions of the appellant. I find that the appellant is a Government company within the meaning section 617 of the Companies Act, 1956 and its entire share capital is owned by the Government of Uttar Pradesh and Government of India. It is engaged in the business of civil works and construction of tube-wells mainly for Government Departments. The appellant claimed expenses of Rs.82,19,937/- on survey testing and drawing which were treated as preliminary expenses by the AO under section 35D of the Act. Section 35D of the Act was inserted by Taxation Laws Amendment Act, 1970 with effect from 01.04.1971. The CBDT issued Circular No. 56 dated 19th March, 1971 to explain the provisions in the Taxation Laws Amendment Act, 1970. Para 42 and 43 of the Circular are reproduced as under.-

"42. Section 8 of the Amending Act has introduced two new sections 35b and 35E with effect from 1/4/1971 New I.T.A. No.330, 331, 332 &508/Lkw/2016 43 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 section 35b provides for the amortisation of certain preliminary expenses incurred by an Indian company or a resident assessee other than a company before the commencement of business or in connection with the extension of an industrial undertaking or the setting up of a new industrial unit. The amortisation will be allowed against the profits of the company or other taxpayer in 10 equal installments over a period of 10 years beginning with the previous year in which the business commences or as the case may be, the previous year in which the extension of the industrial undertaking is completed or the new industrial unit commences production or operation. Such-amortisation will be allowed only in. respect of expenditure incurred after 31.3.1970 under specified heads. The heads of qualifying expenditure specified for this purpose are the following:

1. Expenditure in connection with : (i) preparation of feasibility report; (ii) I preparation of project report;

(Hi) conducting market survey or any other survey necessary for the business of the assessee; and (iv) engineering services relating to the business of the assessee. These items of expenditure will qualify for amortisation where the work in connection with the preparation of the feasibility report or the project report or the conducting of the market survey or other survey or the engineering services, is carried out within the organization of the company or other assessee himself, or, where it is entrusted to an outside concern, such concern is, for the time being, approved for the purpose of this provision by the Central Board of Direct Taxes,

2. Legal charges for drafting any agreement between the assessee and any other person for any purpose relating to the setting up or conduct of the business of the assessee .

3. In the case of a company, in addition to the expenditure falling under items (1) and (2) above, the following items of expenditure will also qualify for amortization: a)legal charges for drafting the memorandum and articles of association of the company; b) expenditure on printing of the memorandum and articles of association; c) fees for I.T.A. No.330, 331, 332 &508/Lkw/2016 44 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 registering the company under the provisions of the Companies Act, 1956; provisions of the Companies Act, 1956; d) expenditure in connection with the issue, for public subscription, of share in or debentures of the company, by way of underwriting commission, brokerage and charges for drafting, typing, printing and advertisement of the prospectus. This will include legal charges and auditors' fees for drafting of the prospectus]. The Central Board of Direct Taxes is also empowered to specify in the Income-tax Rules any other item or items of expenditure in respect of which the law does not provide for any allowance or deduction, and, thereupon the items of expenditure so specified will also be eligible for amortization under section 350.

43.The aggregate amount of the expenditure under all the specified heads will, for the purpose of amortisation be limited to 21/2 per cent of the cost of the project The 'cost of the project has been defined to mean the actual cost of the fixed assets, namely, land, buildings, leaseholds, plant, machinery, furniture, fittings and railway sidings (including expenditure on development of land and buildings), which are shown in the books of the assessee as on the last day of the previous year in which the business of the assessee commences. Where the amortisation is to be allowed with reference to expenditure incurred in connection with the extension of an existing industrial undertaking or in connection with the setting up of a new industrial unit, the 'cost of the project' is defined to mean the actual cost of the fixed assets as stated above which are shown in the books of the assessee as on the last day of the previous year in which the extension of the industrial undertaking is - completed or, as the case-may be, the new industrial unit commences production or operation insofar as such fixed assets have been acquired or developed in connection with the extension of the industrial undertaking or setting up of the new industrial unit of the assessee".

I.T.A. No.330, 331, 332 &508/Lkw/2016 45 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 5(5) From the language of the section as well as from the Circular, it is clear that the (expenses which are falling under section 35D(2) of the Act are to be considered for amortization under section 35D of the Act. In a case where the business is already in existence, then the revenue expenses cannot be disallowed on the ground that business has not commenced. It is not the case of the AO that business was not in existence. The expenses on survey testing and drawing etc. have been incurred in connection with the construction projects undertaken by the appellant. These do not relate to the appellant's business coming into existence. An expenditure which is otherwise allowable cannot be considered under section 35D of the Act. If the expenditure is allowable under section 37 of the Act then the same is to be allowed. The Hbn'ble Apex Court in the case of CIT v Swaraj Engineers Ltd. 171 Taxman 495 had an occasion to consider the applicability of section 35AB of the Act in respect of expenditure. The Hon'ble Apex Court observed as under:-

"At the same time it is important to note that even if the applicability of section 35AB, the nature of expenditure is required to be decided at the threshold because if the expenditure is found to be revenue in nature, then section 35AB may not apply. However, if it is found to be capital in nature, then the question of amortization and spread over as contemplated by section 35AB would certainty come into play".

5(6) One has to see the allowability of expenditure as per the provisions of the Act. The expenses debited are mainly of revenue nature and it is not necessary that these expenses will be allowable only when there are receipts. If the expenses are incurred for the are to be allowed. In the instant case section 35D of the Act is not applicable as the business has already commenced and it is not the case of the extension of industrial undertaking. The assessee was earlier carrying out construction activities is earlier years also when such expenditure was incurred in connection with construction activities under taken by the appellant. The expenses claimed are of revenue nature in connection with the continuing business activities of the appellant and is allowable under section 37 of the Act in computing the business income of the appellant and therefore I.T.A. No.330, 331, 332 &508/Lkw/2016 46 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 cannot be disallowed under section 35D of the Act. The Assessing Officer is directed to allow the expenditure as revenue and therefore, the addition of Rs.73,97,943/- made by the Assessing Officer is deleted giving relief to the appellant."

4.1 The above findings of learned CIT(A) are quite exhaustive. The learned CIT(A) has rightly deleted the addition by holding that assessee was already into business and therefore, disallowance was not warranted u/s 35D of the Act. The learned CIT(A) has rightly observed that expenses were incurred by assessee on its construction projects in which the assessee was already engaged. In view of the above, ground No. 1 of the appeal in I.T.A. No.330 for assessment year 2010-11 is dismissed. Similarly, ground No. 3 in assessment year 2011-12 relating to the same issue is also dismissed.

5. Vide Ground No. 2 the Revenue has challenged the action of learned CIT(A) in deleting the addition of Rs.94,30,394/- made by the Assessing Officer on account of alleged excess expenditure claimed on project completed and handed over to client without appreciating the fact that the Assessing Officer made addition in absence of documentary evidence to prove the justification of expenses claimed. Learned CIT(A) has held that the expenditure cannot be disallowed merely because the expenses incurred actually were more than the budgeted expenses. The disallowance made by the AO has no basis as the expenditure has actually been incurred and recorded in the books of accounts which have been subjected to multiple audits therefore, the learned CIT(A) has rightly deleted the same. The relevant findings of learned CIT(A) are reproduced below:

"6(4) I have examined the facts and circumstances of the case. I have considered the findings of the Assessing Officer in the assessment order and the submissions of the appellant. I find that the AO disallowed a sum of Rs. 94,30,394/- on the basis of I.T.A. No.330, 331, 332 &508/Lkw/2016 47 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 special audit report that in certain excess expenditure to the extent of Rs.94,30,394/- was incurred over and above the estimations on projects. A cost oerrun, also known as a cost increase or budget overrun, involves unexpected costs incurred in excess of budgeted amounts due to an underestimation of the actual cost during budgeting. Cost overrun includes cost escalation, which is used to express an anticipated growth in a budgeted cost due to factors such as inflation. Cost overrun is common in infrastructure, building, and technology project. The books of accounts of the appellant have been maintained and audited by the statutory auditor as well as the Comptroller and Auditor General of India (C&AG in short). The books of accounts have also been subjected to special audit by the auditor appointed by the Department. It is on the basis of the books of accounts audited by the special auditor that the cost overrun of Rs.94,30,394/- has been identified by the auditor. It is not the case that these expenses are bogus rather these expenses have actually been incurred by the appellant on the projects under taken. The expenditure cannot be disallowed merely because the expenses incurred actually are more than the budgeted expenses. If this was the case then there would be no cost and time over runs in the construction business. The disallowance made by the AO has no basis as the expenditure has actually, been incurred and recorded in the books of accounts which have been subjected to multiple audits. The addition of Rs.04,30,394/- made by the Assessing Officer is deleted giving relief to the appellant."

5.1 We find that learned CIT(A) has dealt with the issue exhaustively and has rightly deleted the addition which the Assessing Officer had wrongly made. We agree with the findings of learned CIT(A) that the expenditure cannot be disallowed merely because the expenses incurred actually were more than the budgeted expenses when the expenditure has actually been incurred and recorded in the books of accounts which have been subjected to multiple audits. In view of the above, ground No. 2 of the appeal in I.T.A. No.330 for assessment year 2010-11 is dismissed.

I.T.A. No.330, 331, 332 &508/Lkw/2016 48 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14

6. Vide Ground No. 3 the Revenue has challenged the action of learned CIT(A) in deleting the addition of Rs.30,94,199/- made by the Assessing Officer on account of excess loss claimed on projects in the absence of complete documentary evidences for claiming of loss. Learned CIT(A) has held that it is not the case that these expenses are bogus rather these expenses have actually been incurred by the assessee on projects under taken. This excess expenditure is related to projects which are about to be completed or even in some cases completed but not handed over to client therefore, the learned CIT(A) has rightly deleted the same. The relevant findings of learned CIT(A) are reproduced below:

"7(4) I have examined the facts and circumstances of the case. I have considered the findings of the Assessing Officer in the assessment order and the submissions of the appellant. I find that the books of accounts of the appellant have been maintained and audited by the statutory auditor as well as the C&AG. The books of accounts have also been subjected to special audit by the auditor appointed by the Department. It is on the basis of the books of accounts audited by the special auditor that the cost of Rs.30,94,199/- has been identified by the auditor. It is not the case that these expenses are bogus rather these expenses have actually been incurred by the appellant on projects under taken. This excess expenditure is related to projects which are about to be completed or even in some cases completed but not handed over to client. The assessment proceedings for the earlier years also have been completed by the AO vide order under section 143(3) of the Act wherein addition on account of centage was made. In view thereof and since the expenses have actually been incurred, the disallowance of Rs.30,94,199/- is deleted giving relief to the appellant."

6.1 The above findings of learned CIT(A) are quite exhaustive. The learned CIT(A) has rightly deleted the addition which the Assessing Officer had wrongly made. In view of the above, ground No. 3 of the appeal in I.T.A. No.330 for assessment year 2010-11 is dismissed.

I.T.A. No.330, 331, 332 &508/Lkw/2016 49 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14

7. Vide Ground No. 4, the Revenue has challenged the action of learned CIT(A) in deleting the addition of Rs.29,31,44,630/- made by the Assessing Officer on account of interest income from the FDRs and SB accounts. Learned CIT(A) has held that the interest earned by the assessee on bank fixed and savings deposits made out of funds received from the Government for executing the civil contract work is to be considered as income of the UP Government as per GO No. B-1/564/10-7/97 dated 02.03.1998 wherein it has been specifically mentioned that whatever interest income is accrued on the advances from the Bank, it would be remitted to the Government and therefore, the learned CIT(A) held that since the income has not been accrued to the assessee, it cannot be charged to tax in the hands of the assessee. The relevant findings of learned CIT(A) are reproduced below:

"8.4 I have examined the facts and circumstances of the case. I have considered the findings of the Assessing Officer in the assessment order and the submissions of the appellant. I find that the amount of interest of Rs.29,71,44,630/- earned by the appellant on bank fixed and savings deposits made out of funds received from the Government for executing the deposit civil contract work is to be considered as income of the UP Government as per GO No. B-1/564/10-7/97 dated 02.03.1998. In this letter, it has been specifically mentioned that whatever interest income is accrued on the advances from the Bank, it would be remitted to the Government. A reference in this connection may be made to the decision of Hon'ble ITAT, Luckow in the case of U.P. Police Avas Vikas Nigam Ltd Vs ACIT in ITA No. 344 & 345/LKW/1999 dated 22.08.2012. A reference may also be made to the decision of the Hon'ble Gujarat High Court in the case of CIT Vs SAR Infracon (P) Ltd 222 Taxman 294 wherein on considering stipulation of the Central Government while sanctioning the grant in favour of the assessee that interest earned on the central grant already released would form part of the central grant limit, the Court laid down that I.T.A. No.330, 331, 332 &508/Lkw/2016 50 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 Held, considering the condition imposed by the Central Government, while releasing the grant in favour of the Assessee, when the interest earned on the Central grant already released was required to be forming part of the Central grant, Tribunal has rightly held that the interest earned on cannot be said to be the income of the Assessee--No error had been committed by the Tribunal in deleting the addition made by the Assessing Officer.

8(5) In view thereof I am of the considered opinion that the interest accrued on the advances received by the appellant from the Government for construction activities would be the income of the Government and not of the appellant. On its accrual, it becomes a liability to the Government which is to be remitted by the appellant to the Government in due course. Since the income has not been accrued to the appellant, it cannot be charged to tax in its hands. The addition of Rs.29,31,44.630/- made by the Assessing Officer is deleted giving relief to the appellant."

7.1 The above findings of learned CIT(A) are quite exhaustive. The learned CIT(A) has rightly deleted the addition which the Assessing Officer had wrongly made. The learned CIT(A) has rightly relied on the case laws where the Hon'ble court had held that where the amount of interest on central grants has to be remitted back to Government for the same cannot be treated as income of the assessee. In view of the above, ground No. 4 of the appeal in I.T.A. No.330 for assessment year 2010-11 is dismissed. Similarly, ground No. 3 in assessment year 2011-12, ground No. 2 in assessment year 2012-13 and ground no. 2 in assessment year 2013-14 relating to the same issue is also dismissed.

8. Vide Ground No. 5, the Revenue has challenged the action of learned CIT(A) in deleting the addition of Rs.54,15,933/- made by the Assessing Officer for not deducting TDS on freight expenses, material supplied and labour charges. The learned CIT(A), while dealing with the additions made I.T.A. No.330, 331, 332 &508/Lkw/2016 51 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 under different heads, has reproduced a chart and has dealt with each issue in detail. The relevant findings of learned CIT(A) are reproduced below:

"9(4)(a) I have examined the facts and circumstances of the case. I have considered the findings of the Assessing Officer in the assessment order and the submissions of the appellant. The AO has disallowed a sum of Rs. 3,52,960/- on the ground that this was the payment out of Rs. 7,05,920/- which was approved. I find that there are two bills of Rs. 3,20,000/- each which inclusive of service tax @ 10.3% total Rs. 3,52,960/-. The two bills cumulatively are for the amount of Rs. 7,05,920/-. The bills show that the entire amount of Rs. 7,05,920/- was approved for the two bills separately. In view thereof the addition of Rs.3,52,960/- made by the Assessing Officer is deleted giving relief to the appellant.

9(4)(b) The AO disallowed a sum of Rs. 34,19,550/- under section 40(a)(ia) of the Act as per S. No. 2, 3, 4, 7 and 8 of the chart incorporated in the assessment order as reproduced above for the reason that the payments were made without deduction of TDS or after deduction of TDS at lower rate.I find that the payment of Rs. 16,54,500/- as per S. No. 2 has been made to Indian Institute of Technology, Roorkee (IIT, Roorkee in short) apparently without deduction of TDS. In this connection my attention has been drawn to the certificate No. 2/2009-10 dated 24.07.2009 under section 197 of the Act issued by Income Tax Officer (TDS), Haridwar whereby the payments to IIT, Roorkee have been allowed to be made without deduction of TDS. This certificate has been issued on the basis of CBDT Notification number S.O. 48(E) dated 12.01.2004 and circular No. 4/2002 dated. 16.07.2002. In view thereof there is no liability of deducting TDS on payments made to IIT, Roorkee and consequently, the payment of Rs. 16,54,500/- made without deduction of TDS shall not entail disallowance under section 40(a)(ia) of the Act. The addition of Rs. 16,54,500/- made by the AO is deleted giving relief to the appellant.

9(4)(c) The AO disallowed a sum of Rs. 8,28,712/- and Rs.7,68,338/- as per S. No. 3 and 4 of the chart incorporated in the assessment order as reproduced above as the payment has I.T.A. No.330, 331, 332 &508/Lkw/2016 52 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 been after deduction of TDS @1% instead of 2%. In this connection a reference may be made to the decision of Hon'ble 'A' Bench of ITAT, Kolkata in the case of ITO Vs Premier Medical Supplies & Stores in IT APPEAL NOS. 1061 & 1062 (KOL.) OF 2010 C.O. NOS. 86 & 87 (KOL) OF 2010 [ASSESSMENT YEARS 2006-07 & 2007-08] dated OCTOBER 28, 2011. It is laid down in the case as under-

We are of the view that the provisions of section 40(a)(ia) of the Act has two limbs, one is where, inter alia, assessee has to deduct tax and the second wherein after deducting tax, inter alia, the assessee has to pay into Government Account. There is nothing in the said section to treat, inter alia, the assessee as defaulter where there is a shortfall in deduction. With regard to the shortfall, it cannot be assumed that there is a default as the deduction is not as required by or under the Act, but the facts is that this expression, 'on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction has not been paid on or before the due date specified in sub-section (1) of section 139'. This section 40(a)(ia) of the Act refers only to the duty to deduct tax and pay to government account. If there is any shortfall due to any difference of opinion as to the taxability of any item or the nature of payments falling under various TDS provisions, the assessee can be declared to be an assessee in default u/s. 201 of the Act and no disallowance can be made by invoking the provisions of section 40(a)(ia) of the Act.

The case supra lays down that where tax is deducted by the assessee, even under bona fide wrong impression, under wrong provisions of TDS, the provisions of section 40(a)(ia) ef the Act cannot be invoked. Respectfully following the decision of Hon'ble ITAT (supra), I find that no disallowance is called for under section 40(a)(ia) of the Act as the amount of Rs.8,28,712/- and Rs. 7,68,338/- was paid during the year after deduction of TDS albeit incorrect amount has been deducted at a lower rate. The addition of Rs.8,28,712/- and Rs. 7,68,338/- made by the AO is deleted giving relief to the appellant.

I.T.A. No.330, 331, 332 &508/Lkw/2016 53 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 9(4)(d) The AO disallowed a sum of Rs. 60,000 and Rs.1,08,000/- as per S. No. 7 and 8 of the chart incorporated in the assessment order as reproduced above as the payment has been after deduction of TDS albeit at a lower rate. These payments are for vehicle hire and were subjected to service tax @ 2.27%. The appellant was of the view that such payments were liable to TDS under section 194C of the Act whereas the AO has taken the view that the payment was on account of rent. A reference in this connection may be made to the decision in DCIT Vs S.K.Tekeriwal (2011) 48 SOT 515 (Kol). In this case the assessee paid machinery hire charges on which it deducted TDS at 1% under section 194C of the Act. The AO claimed that the amount was in the nature of "rent" and TDS at 10% ought to have deducted under section 194I of the Act. A proportionate disallowance under section 40(a)(ia) of the Act was made on the ground that there was a "failure" to deduct TDS on the payment. The Hon'ble Tribunal upheld the assessee's plea that in section 40(a)(ia) of the Act disallowance could not be made when there was a shortfall in TDS deduction. On appeal by the department to the High Court, HELD dismissing the appeal:

S. 40(a)(ia) can be invoked only when the two conditions, namely, that tax is deductible at source and such tax has not been deducted is satisfied. Where tax is deducted by the assessee under a wrong provisions of TDS and there is a shortfall, s. 40(a)(ia) disallowance cannot be made.

Respectfully following the decision supra, I find that no disallowance is called for under section 40(a)(ia) of the Act as the amount of Rs.60,000 and Rs.1,08,000/- was paid during the year after deduction of TDS albeit incorrect amount has been deducted at a lower rate. The addition of Rs.60,000/- and Rs.1,08,000/- made by the Assessing Officer is deleted giving relief to the assessee.

9(4)(e) The AO disallowed a sum of Rs. 3,50,000/- as per S. No. 5 of the chart incorporated in the assessment order as reproduced above as the payment has been made on the letter head of contractor without TIN, Bill No. I find that the AO has not given any finding that the payment was bogus or that the payment was not actually made. The payment to the party has I.T.A. No.330, 331, 332 &508/Lkw/2016 54 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 been made through banking channels by account payee cheque which establishes the genuineness of the expenditure. In view thereof the disallowance of Rs.3,50,000/- is deleted giving relief to the appellant.

9(4)(f) The AO disallowed a sum of Rs.1,54,338/- as per S. No. 5 of the chart incorporated in the assessment order as reproduced above for the reason that the bill was not available.

I find that the impugned payment of Rs. 1,54,338/- relates to payment of trade tax as per challan. The question of bill does not make sense as the challan for payment of Government dues is available. The addition of Rs.1,54,338/- is therefore deleted giving relief to the appellant.

9(4)(g) The AO disallowed a sum of Rs. 4,08,535/-, Rs.5,70,000/- and Rs. 1,60,000/- as per S. No. 9, 10 and 11 of the chart incorporated in the assessment order as reproduced above for the reason that the vouchers were not attached for clarity of TDS deduction. I find that in respect of payment of Rs. 1,60,000/-, TDS of Rs. 16,480/- was deducted and balance amount of Rs. 1,43,520/- was paid. Further, the amount of Rs.4,08,525/- and Rs. 5,70,000/- are included in Work in Progress as the payments relate to Survey testing and drawing charges. I find that the appellant has not been able to demonstrate by evidence that these payments were made after deduction of TDS or that no TDS was deductible on these payments. Accordingly, the payments of Rs. 4,08,525/- and Rs.5,70,000/- having been made without deduction of TDS qualify for disallowance under section 40(a)(ia) of the act. The additions of Rs. 4,08,525/- and Rs. 5,70,000/- are therefore confirmed giving relief of Rs. 1,60,000/- the appellant."

8.1 The above findings of learned CIT(A) are quite exhaustive. The learned CIT(A), while dealing with the additions made under different heads, has reproduced a chart and has dealt with each issue in detail and has rightly deleted the addition which the Assessing Officer had wrongly made. We find that relying on a number of case laws he has rightly held that for a shortfall in deduction of tax at source, an assessee cannot be said to assessee in default and therefore, cannot be subjected to disallowance I.T.A. No.330, 331, 332 &508/Lkw/2016 55 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 u/s 40(a)(ia) of the Act. We find no infirmity in the findings of learned CIT(A). In view of the above, ground No. 5 of the appeal in I.T.A. No.330 for assessment year 2010-11 is dismissed. Similarly, ground No. 5 in assessment year 2011-12, ground No. 4 in assessment year 2012-13 relating to the same issue are also dismissed.

9. Vide Ground No. 6, the Revenue has challenged the action of learned CIT(A) in deleting the addition of Rs.15,36,760/- made by the Assessing Officer on account of excess expenditure. The learned CIT(A) has held that these payments include payments which have been rectified and reversed in financial year 2013-2014 relevant to assessment year 2014-2015 or are the payments which relate to final settlement after receipt of proper bills in case where the expenditure in earlier years was recorded in the books of accounts on estimate basis. The claim of expenditure is revenue neutral which is any case has been rectified in subsequent years. The relevant findings of learned CIT(A) are reproduced below:

10(4) I have examined the facts and circumstances of the case. I have considered the findings of the Assessing Officer in the assessment order and the submissions of the appellant. I find that these payments of Rs. 15,36,760/- include payments which have been rectified and reversed in financial year 2013-2014 relevant to assessment year 2014-2015 or are the payments which relate to final settlement after receipt of proper bills in case where the expenditure in earlier years was recorded in the books of accounts on estimate basis. This expenditure of Rs. 15,36,760/- is therefore included in the work in progress shown in the profit and loss account. In case the expenditure is disallowed the proper course would be to reduce the work in progress by equivalent amount. Hence, the claim of expenditure is revenue neutral which is any case has been rectified in subsequent years. The expenditure of Rs. 15,36,760/- having been included in work in progress is revenue neutral and therefore the addition of Rs.15,36,760/- is deleted giving relief to the appellant."

I.T.A. No.330, 331, 332 &508/Lkw/2016 56 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 9.1 The above findings of learned CIT(A) are quite exhaustive. The learned CIT(A) has held that these payments include payments which have been rectified and reversed in financial year 2013-2014 relevant to assessment year 2014-2015 or are the payments which relate to final settlement after receipt of proper bills in case where the expenditure in earlier years was recorded in the books of accounts on estimate basis. His findings, that in case the expenditure is disallowed, the proper course would be to reduce the work in progress by equivalent amount and therefore, would be revenue neutral are, correct. We find that learned CIT(A) has rightly deleted the addition which the Assessing Officer had wrongly made.

In view of the above, ground No. 6 of the appeal in I.T.A. No.330 for assessment year 2010-11 is dismissed.

10. Vide Ground No. 7, the Revenue has challenged the action of learned CIT(A) in restricting the addition to Rs.4,49,347/- as against Rs.5,71,922/- made by the Assessing Officer on account of short computation of WIP. The learned CIT(A) has given part relief to the assessee. The relevant findings of learned CIT(A) are reproduced below:

"11(4) I have examined the facts and circumstances of the case. I have considered the findings of the Assessing Officer in the assessment order and the submissions of the appellant. I find that as per page No.42, paragraph 7 of Special Audit report which is the cost sheet of Bareilly Unit-VI, the correct WIP as on 31.03.2010 has been computed at Rs.4,83,34,357/- as against calculation made by the appellant at Rs. 4,77,52,434/-. The work in progress has been taken short at Rs.5,71,9227-. At the same time the submissions of the appellant show that in the same cost sheet tabulated on Page 231 of the special audit report an excess amount of Rs.4,49,347/- has been taken. In view thereof the addition made by the AO is sustained to the extent of Rs.1,22,575/- (Rs.5,71,922/- less Rs.4,49,347/-) giving relief of Rs.4,49,347/- to the appellant."

I.T.A. No.330, 331, 332 &508/Lkw/2016 57 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 10.1 The above findings of learned CIT(A) are quite exhaustive. The learned CIT(A) has rightly restricted the addition to Rs.4,49,347/- as against Rs.5,71,922/- which the Assessing Officer had made. We find no infirmity in the findings arrived at by learned CIT(A). In view of the above, ground No. 7 of the appeal in I.T.A. No.330 for assessment year 2010-11 is dismissed.

11. Vide Ground No. 8, the Revenue has challenged the action of learned CIT(A) in restricting the addition to Rs.15,09,999/- as against Rs.18,58,061/- made by the Assessing Officer on account of capital expenditure claimed as revenue expenditure. The learned CIT(A) has given part relief to the assessee. The relevant findings of learned CIT(A) are reproduced below:

"12(4)I have examined the facts and circumstances of the case. I have considered the findings of the Assessing Officer in the assessment order and the submissions of the appellant. I find that the disallowance of Rs.18,58,061/- by treating the expenditure as capital as against of revenue nature has been made by the Assessing Officer only on the basis of the audit report without giving due consideration to the nature of expenditure claimed. I find that the appellant's claim for expenditure of the nature incurred under Section 30(a) of the Act has not been rightly disallowed by the AO. There is a clear distinction between the expression 'repairs' and the expression 'current repairs'. It is obvious that the word 'repairs' is much wider than the expression 'current repairs'. This fact has also been taken note of by the Supreme Court in the case of Saravana Spinning Mills P.Ltd. The expression 'current repairs' is much more restricted than the word 'repairs' because the latter is qualified by the word 'current'. What the appellant has done in the present case is to be construed to be repairs. It has not brought about any new asset and more importantly it was not the intention of the appellant to bring about any new capital asset. The expenses that were incurred by the appellant were towards repairing the premises like painting, change of curtains, fixing of tiles etc so as to make it more conducive to its I.T.A. No.330, 331, 332 &508/Lkw/2016 58 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 business activity. Such expenses would clearly fall within the expression of repairs to the premises as appearing in Section 30(a) of the Act. The legislature has made a distinction between i expenses incurred by a tenant for 'repairs' of the premises and expenses incurred by a person who is not a tenant towards 'current repairs' to the premises. This distinction has to be given meaning. Perhaps the logic behind the distinction was that a tenant would, by the very nature of his status as a tenant, not undertake expenditures as would endure beyond his likely period of tenancy or create a new asset. Whereas, an owner may undertake expenditures so as to even bring about new assets of capital nature. It was, therefore, necessary to qualify the expenditure on repairs. The deduction was, therefore, limited to expenditure on 'current repairs' only. The question of disallowing such expenditure and relegating the assessee to claim depreciation under Section 32 of the Act does not arise. The appellant has not claimed depreciation. It has claimed deduction under Section 30(a) of the Act.

12(5) However, the expenditure of Rs.3,48,062/- has been incurred on construction of a new guard room which gives rise to a capital asset of enduring nature. In view thereof the addition of Rs.18,58,061/- made by the Assessing Officer is restricted to Rs.3,48,062/- giving relief of Rs.15,09,999/- to the appellant. The Assessing Officer is however directed to allow depreciation at applicable rate on amount of Rs.3,48,062/-."

11.1 The above findings of learned CIT(A) are quite exhaustive. The learned CIT(A) has held that the expenditure of Rs.3,48,062/- has been incurred on construction of a new guard room which gives rise to a capital asset of enduring nature and the addition of Rs.18,58,061/- made by the Assessing Officer was restricted to Rs.3,48,062/- giving relief of Rs.15,09,999/- to the assessee. We find no infirmity in the findings arrived at by learned CIT(A). In view of the above, ground No. 8 of the appeal in I.T.A. No.330 for assessment year 2010-11 is dismissed.

I.T.A. No.330, 331, 332 &508/Lkw/2016 59 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14

12. Vide Ground No. 9, the Revenue has challenged the action of learned CIT(A) in restricting the additions of Rs.37,18,485/- as against Rs.53,81,981/- made by the Assessing Officer u/s 43B of the I.T. Act under different head. Learned CIT(A) has deleted the additions by observing as under:

"13(4) I have examined the facts and circumstances of the case. I have considered the findings of the Assessing Officer in the assessment order and the submissions of the appellant. I find that the AO has disallowed the following amounts under section 43B of the Act S. Description As per SAR Allowed by AO Disallowance No.

1. VAT TDS - 23,29,764 6,13,866 17,15,898

2. Trade Tax payable 10,85,878 Nil 10,85,878

3. Bonus 7,62,685 Nil 7,62,685

4. Service Tax Payable 18,424 Nil 18,424

5. EPF/GPF/VPF/GIS 3,11,148 Nil 3,11,148

6. Royalty Payable 17,63,610 2,75,663 14,87,947

7. Entry Tax 52,928 52,928 Nil Total Rs.53,81,981/-

13(5) Non-payment of any statutory liability that is otherwise allowable as expenditure will attract disallowance under section 43B of the Act if the payment is not made before the due date for filing the return of income under section 139(1) of the Act. The AO disallowed a sum of Rs.17,15,898/- under section 43B of the Act as per S. No. 1 of the chart above. I find that TDS is not a expenditure for the deductor; it is a liability. TDS is not passed through profit and loss account and hence cannot be disallowed under section 43B of the Act. Accordingly, the addition of Rs.17,15,898/- made by the Assessing Officer is deleted giving relief to the assessee.

I.T.A. No.330, 331, 332 &508/Lkw/2016 60 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 13(6) The AO disallowed a sum of Rs. 10,85,878/- under section 43B of the Act as per S. No. 2 of the chart above. I find that the appellant has filed challans dated 22.09.2010 for payment of trade tax of Rs.1,70,915/- and Rs. 2,90,644/- paid on 22.04.2010. These payments have been made before the due date of filing of return of income under section 139(1) of the Act. Accordingly, the addition of Rs.10,85,878/- made by the AO under section 43B of the Act is restricted to Rs.6,24,319/- giving relief of Rs.4,61,559/- (Rs.1,70,915/- + Rs. 2,90,644/-) to the appellant.

13(7) The AO disallowed a sum of Rs. 7,62,685/-, Rs. 18,424/- and Rs.3,11,148/- under section 43B of the Act as per S. No. 3, 4 and 5 of the chart above. I find that the appellant has not been able to demonstrate that the bonus and service tax were paid before the due date of filing of return of income under section 139(1) of the Act except for an amount of PF of Rs. 53,441/-. Accordingly, the addition of Rs. 7,62,685/-, Rs. 18,424/- and Rs. 2,57,707/- are confirmed giving relief of Rs. 53/441/- to the appellant. The AO is however directed to allow the aforesaid expenditure in the year in which it is paid.

13(8) The AO disallowed a sum of Rs. 14,87,947/- under section 43B of the Act as per S. No. 6 of the chart above. I find that the appellant as per its practice deducts an amount as royalty from the payments to be made to suppliers on the basis of bills raised by them. The amount so retained is the liability of the appellant which is discharged when the supplier submits proof of payment of royalty. The amount retained by the appellant is therefore not a payment covered under section 43B of the Act. Accordingly, the addition of Rs. 14,87,947/- made by the AO is deleted giving relief to the appellant."

12.1 We find that learned CIT(A) has dealt with the issue exhaustively and by reproducing a chart of all the heads where the disallowance has been made u/s 43B, the learned CIT(A) has dealt with all the heads separately and given a detailed finding and wherever the addition was required to be upheld, he has upheld the same. Finding no infirmity in his order, we confirm the order of learned CIT(A) on this issue. In view of the above, ground No. 9 of the appeal in I.T.A. No.330 for assessment year 2010-11 is I.T.A. No.330, 331, 332 &508/Lkw/2016 61 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 dismissed. Similarly, ground No. 6 in assessment year 2012-13 relating to the same issue are also dismissed.

13. Vide Ground No. 10, the Revenue has challenged the action of learned CIT(A) in deleting the addition of Rs1,13,63,781/- made by the Assessing Officer on account of prior period expenses. The learned CIT(A) has deleted the addition by observing as under:

"14(4) I have examined the facts and circumstances of the case. I have considered the findings of the Assessing Officer in the assessment order and the submissions of the appellant. I find that the appellant filed complete details of such expenditure before the AO vide letter dated 20.09.2013. The details show that the impugned expenditure crystallized in the year under consideration. The expenditure accrues in the year in which it crystallizes. Moreover, corresponding income in the shape of Work-in-Progress and percentage of Centage has been charged in the assessment year under consideration. Disallowance of such expenditure in the current year will result in reducing the corresponding work-in-progress and centage and therefore, the effect is revenue neutral. The addition of Rs.1,13,63,781/- made by the Assessing Officer is deleted giving relief to the appellant."

13.1 We find that the above findings of learned CIT(A) are quite exhaustive. We agree with the findings of learned CIT(A) that the assessee had filed complete details of expenditure before the Assessing Officer and the impugned expenditure crystallized in the year under consideration. The expenditure accrues in the year in which it crystallizes. Moreover, corresponding income in the shape of Work-in-Progress and percentage of Centage has been charged in the assessment year under consideration. Disallowance of such expenditure in the current year will result in reducing the corresponding work-in-progress and centage and therefore, the effect is revenue neutral. As such we find that learned CIT(A) has rightly deleted the I.T.A. No.330, 331, 332 &508/Lkw/2016 62 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 addition which the Assessing Officer had wrongly made. In view of the above, ground No. 10 of the appeal in I.T.A. No.330 for assessment year 2010-11 is dismissed. Similarly, ground No. 7 in assessment year 2012-13 and ground No. 5 in assessment year 2013-14 relating to the same issue are also dismissed.

14. Vide Ground No. 11, the Revenue has challenged the action of learned CIT(A) in deleting the addition of Rs.6,32,63,235/- made by the Assessing Officer on account of disallowance u/s 40(a)(ia) of the Act. Learned CIT(A) has held that the assessee has deducted TDS @2% wherever the payment was in excess of specified limit of Rs.20,000/- on payments made for hiring of vehicles. No deduction is required to be made on expenses incurred on petrol and diesel as these were borne by the assessee. The relevant findings of learned CIT(A) are reproduced below:

"15(4) I have examined the facts and circumstances of the case. I have considered the findings of the Assessing Officer in the assessment order and the submissions of the appellant. I find that the appellant has deducted IDS @2% wherever the payment was in excess of specified limit of Rs. 20,000/- on payments made for hiring of vehicles. No deduction is required to be made on expenses incurred on petrol and diesel as these were borne by the appellant. In this connection a reference may be made to the decision of Hon'ble Cochin Bench of ITAT in the case of M/s Three Star Granites (P) Ltd. Versus ACIT., Cir. 1 (1) Thrissur - 2014 (4) TMI 1058 - ITAT COCHIN - ITAT COCHIN wherein the issue involved and decision thereon was as under -

Disallowance made under section 40(a)(ia) - short deduction of tax - IDS at 10 per cent, under section 194- 1 OR at the rate of 2.06 per cent, under section 194C - Held that:- As relying on Apollo Tyres Ltd. v. Deputy CIT [2013 (11) TMI 209 - ITAT COCHIN ] this Tribunal is of the considered opinion that short deduction of tax cannot be a reason/basis for disallowance under section I.T.A. No.330, 331, 332 &508/Lkw/2016 63 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 40(a)(ia) of the Act. Accordingly, the orders of the lower authorities are set aside and the disallowance made under section 40(a)(ia) is deleted.

Respectfully relying on the decision above, the disallowance of Rs.6,32,63,235/- made by the Assessing Officer is deleted giving relief to the appellant."

14.1 We find that learned CIT(A) has dealt with the issue exhaustively and has observed that the assessee has deducted TDS @2% wherever the payment was in excess of specified limit of Rs.20,000/- on payments made for hiring of vehicles. No deduction is required to be made on expenses incurred on petrol and diesel as these were borne by the assessee. While deleting the addition, learned CIT(A) has relied on the order of the Cochin Bench of the Tribunal in the case of M/s Three Star Granites (P) Ltd. Versus ACIT., Cir. 1 (1) Thrissur - 2014 (4) TMI 1058 - ITAT COCHIN - ITAT COCHIN. In view of the above, ground No. 11 of the appeal in I.T.A. No.330 for assessment year 2010-11 is dismissed. Similarly, ground No. 5 in assessment year 2011-12, ground No. 3 in assessment year 2012-13 and ground No. 3 in assessment year 2013-14 relating to the same issue are also dismissed.

15. Vide Ground No. 12, the Revenue has challenged the action of learned CIT(A) in deleting the addition of Rs.21,20,09,287/- made by the Assessing Officer for not following percentage completion method recognition for revenue recognition. Learned CIT(A) has deleted the addition by observing as under:

"16(4) I have examined the facts and circumstances of the case. I have considered the findings of the Assessing Officer in the assessment order and the submissions of the appellant. I find that as per system of accounting consistently followed by the appellant while accounting for the income of a project as I.T.A. No.330, 331, 332 &508/Lkw/2016 64 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 per requirements of AS- 7(Revised), when the stage of completion of a project is more than 50% and less than 100% the appellant recognizes 2/3 of the profit and on completion of work the entire profit is accounted for. Thus, in respect of those works which were more than 50% completed in earlier years, 2/3 of the profit thereon or in respect of projects completed in subsequent years, the entire profit stands accounted for and has been offered for taxation or actually assessed by the assessing officer. Further, the statutory auditors have not taken exception or qualification to creation of reserve and the C&AG of India have also not given any adverse comment on this issue. In other words taxation of the retention reserve will lead to taxation of same amount twice and moreover no such addition was made in earlier years in respect of the retention reserve. In view thereof the addition of Rs.21,20,09,287/- on account of retention reserve is deleted giving relief to the appellant."

15.1 We find that learned CIT(A) has dealt with the issue exhaustively and has observed that as per system of accounting consistently being followed by the assessee while accounting for the income of a project as per requirements of AS-7(Revised), when the stage of completion of a project is more than 50% and less than 100% the assessee recognizes 2/3 of the profit and on completion of work the entire profit is accounted for. Thus, in respect of those works which were more than 50% completed in earlier years, 2/3 of the profit thereon or in respect of projects completed in subsequent years, the entire profit stands accounted for and has been offered for taxation or actually assessed by the assessing officer. Further, the statutory auditors have not taken exception or qualification to creation of reserve and the C&AG of India have also not given any adverse comment on this issue. We find ourselves in agreement with the findings of learned CIT(A) on this issue. In view of the above, ground No. 12 of the appeal in I.T.A. No.330 for assessment year 2010-11 is dismissed. Similarly, ground No. 2 in assessment year 2011-12, ground No. 1 in assessment year 2012- I.T.A. No.330, 331, 332 &508/Lkw/2016 65 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 13 and ground No. 1 in assessment year 2013-14 relating to the same issue are also dismissed.

16. Vide Ground No. 13, the Revenue has challenged the action of learned CIT(A) in deleting the addition of Rs.17,68,458/- made by the Assessing Officer on account of disallowance u/s 40(a)(ia) of the Act. The learned CIT(A) has deleted the addition by observing as under:

"17(4) I have examined the facts and circumstances of the case. I have considered the findings of the Assessing Officer in the assessment order and the submissions of the appellant. I find that the AO disallowed the expenditure of Rs.17,68,458/- under section 40(a)(ia) of the Act on the ground that the payment was made after deduction of TDS at a rate lower than that prescribed under the relevant provisions of the Act resorted to by the AO. At the outset I find that the case authority relied upon by the AO is not applicable in the instant case for the reason that the decision in the case of Frontier Offshore Exploration (India) Ltd. Vs DCIT (ITAT, Chennai) 118 ITD 494 is related to the liability of the assessee towards deduction of TDS on a specific payment whereas the issue involved is disallow-ability of the expenditure under section 40(a)(ia)of the Act on account of deduction of TDS at a lower rate. I have already discussed several case authorities in the paragraphs above which lay down that the short deduction of tax cannot be a reason/basis for disallowance under section 40(a)(ia) of the Act. In view of the decisions discussed supra the addition of Rs.17,68,458/- made by the AO is deleted giving relief to the appellant."

17. We find that while deleting the addition, the learned CIT(A) has observed that the short deduction of tax cannot be a reason/basis for disallowance under section 40(a)(ia) of the Act. The learned CIT(A) has rightly relied on a number of case laws for the proposition that in case of short deduction of tax, disallowance u/s 40(a)(ia) cannot be made. Finding no infirmity in the order of learned CIT(A), we confirm the same on this I.T.A. No.330, 331, 332 &508/Lkw/2016 66 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 issue. In view of the above, ground No. 13 of the appeal in I.T.A. No.330 for assessment year 2010-11 is dismissed.

18. Vide Ground No. 14, the Revenue has challenged the action of learned CIT(A) in deleting the addition of Rs.13,75,49,494/- made by the Assessing Officer on account of disallowance u/s 49(a)(ia) of the Act. The learned CIT(A) has deleted the addition by observing as under:

"18(4) I have examined the facts and circumstances of the case. I have considered the findings of the Assessing Officer in the assessment order and the submissions of the Appellant. I find that the AO has disallowed entire purchases of Rs.13,75,49,494/- for the reason that the payments included expenses on freight on which TDS was not deducted. The appellant purchases various items like sand, coarse sand, boulders, grits etc. in its business of contract work. These items are supplied by the parties at work sites. As such the transportation cost is borne by the supplier. The assessee makes payment for supply of material to the supplier. Since no transportation charge is borne by the appellant hence the appellant does not make any payment to the transporters and the payment is made to suppliers for purchase of goods. The question of any TDS being deducted by the appellant on the goods purchased does not arise. No such disallowance has been made by the AO in earlier years when also payment for purchases was made without deduction of IDS. There is no provision in the Act which requires for deduction of TDS on purchase of goods for which payment is made to suppliers. Accordingly, the addition of Rs.13,75,49,191/- made by the AO is deleted giving relief to the appellant."

18.1 We find that while deleting the addition, the learned CIT(A) has observed that no transportation charge is borne by the assessee and the assessee does not make any payment to the transporters and the payment is made to suppliers for purchase of goods. The question of any TDS being deducted by the assessee on the goods purchased thus does not arise. No such disallowance has been made by the Assessing Officer in earlier years I.T.A. No.330, 331, 332 &508/Lkw/2016 67 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 also when payment for purchases was made without deduction of TDS. Finding no infirmity in the order of learned CIT(A), we confirm the same on this issue. In view of the above, ground No. 14 of the appeal in I.T.A. No.330 for assessment year 2010-11 is dismissed.

19. The only ground which remains for adjudication in I.T.A. No.332/Lkw/2016 for assessment year 2012-13 is ground No. 5 by which the Revenue has challenged the action of learned CIT(A) in deleting the additions of Rs.1,63,386/- made by the Assessing Officer on account of loss against disposal of stock. The learned CIT(A), while deleting this addition, has observed as under:

"8(4) I have examined the facts and circumstances of the case. I have considered the findings of the Assessing Officer in the assessment order and the submissions of the appellant. I find that the appellant sold old unusable stock comprising of old pvc pipes, rusted iron rods, pipes, pump sets etc that were purchased in earlier years through open tender and suffered a loss of Rs. 1,63,386/- thereon. The loss is the value of the stock as per the books of accounts and the amount realized of sale thereof which was disallowed by the AO. In case of CIT Vs. Dhanrajgiriji Raja Narsinghgiri 91 ITR 544 (SC), while deciding allowability of certain expenditure claimed by the appellant under section 37(1) of the Act, the Hon'ble Supreme Court has observed that it was for the assessee to decide how best to protect his own interest. It is further held by the Hon'ble Apex Court that it is not open to the department to prescribe what expenditure an assessee should incur and in what circumstances he should incur that expenditure. Every businessman knows his interest best. In view of the above ratio laid down by the Hon'ble Supreme Court, it is for the assessee to decide about the market value of its stock looking to the condition of the stock lying with it. In the case under consideration, the AO put his legs to the shoes of the assessee and determined whether the stock of old unusable items sold was rightly sold or not. I find that the loss has been suffered on sale of old stock in the course of business of the appellant and I.T.A. No.330, 331, 332 &508/Lkw/2016 68 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 is allowable under the Act. The disallowance of Rs.1,63,386/- made by the AO is deleted giving relief to the appellant."

19.1 We find that while deleting the addition, the learned CIT(A) has observed that the assessee had sold old unusable stock which were purchased in earlier years. The loss is the value of the stock as per the books of accounts and the amount realized of sale thereof which was disallowed by the AO. In the present case, the Assessing Officer determined whether the stock of old unusable items sold was rightly sold or not. We also find that the loss has been suffered on sale of old stock in the course of business of the assessee and is allowable under the Act. In view of the above, ground No. 5 of the appeal in I.T.A. No.333 for assessment year 2012-13 is dismissed.

20. The only ground which remains for adjudication in I.T.A. No.508/Lkw/2016 for assessment year 2013-14 is ground No. 4 by which the Revenue has challenged the action of learned CIT(A) in deleting the additions of Rs.1,86,20,613/- made by the Assessing Officer u/s 68 of the Act. The learned CIT(A), while deleting this addition, has observed as under:

"11(4) I have examined the facts and circumstances of the case. I have considered the findings of the Assessing Officer in the assessment order and the submissions of the appellant. I find that the appellant has during the course of assessment proceedings filed confirmation of balances of creditors to whom notices were issued under section 133(6) of the Act by the Assessing Officer. These creditors relate to normal business transactions and credit has been given to these trade creditors for contract work done by them and payments are being made to the parties by cheques. The transactions resulting in income from contract work done by them have been accepted by the AO and therefore there is no justification in addition of the closing balances appearing in their accounts in the books of accounts of the appellant particularly as the balances stand I.T.A. No.330, 331, 332 &508/Lkw/2016 69 Asstt. Yrs.:2010-11, 11-12, 12-13, 13-14 confirmed. The addition of Rs.1,86,20,613/- made by the AO is deleted giving relief to the appellant."

20.1 We find that while deleting the addition, the learned CIT(A) has observed that the assessee, during the course of assessment proceedings, had filed confirmation of balances of creditors to whom notices were issued under section 133(6) of the Act by the Assessing Officer. These creditors relate to normal business transactions and credit has been given to these trade creditors for contract work done by them and payments are being made to the parties by cheques. The transactions resulting in income from contract work done by them have been accepted by the Assessing Officer and therefore, there is no justification in addition of the closing balances appearing in their accounts in the books of accounts of the assessee particularly as the balances stand confirmed. In view of the above, ground No. 4 of the appeal in I.T.A. No.508 for assessment year 2013-14 is dismissed.

21. In the result, all the appeals of the Revenue stand dismissed.

(Order pronounced in the open court on 28/02/2019) Sd/. Sd/.

  ( A. D. JAIN )                                        ( T. S. KAPOOR )
 Vice President                                      Accountant Member

Dated:28/02/2019
*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

                                                            Assistant Registrar

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Income Tax Appellate Tribunal - Lucknow

Dy. Commissioner Of Income Tax, Lucknow vs M/S U.P Project Corp. Ltd., Lucknow on 28 February, 2019