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Facts
The assessee company, engaged in civil work, filed its return of income for AY 2014-15, declaring income based on the Percentage of Completion Method (POCM). The Assessing Officer (AO) made an addition of Rs. 48,93,631/- for under-statement of profit, which was upheld by the CIT(A). The assessee also sought credit for TDS on advance receipts.
Held
The Tribunal noted that the addition made by the lower authorities regarding the POCM was essentially a timing difference. The Tribunal dismissed the assessee's second ground of appeal concerning the addition, subject to a direction for reduction in the final year of project completion to avoid double taxation. The Tribunal directed the AO to examine and grant TDS credit in the year the corresponding income is shown.
Key Issues
Whether the addition made on account of incorrect computation of income under POCM is sustainable and whether TDS credit for advance receipts is admissible in the year of receipt.
Sections Cited
143(3)
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Income Tax Appellate Tribunal, DELHI BENCH “E”: NEW DELHI
Before: SHRI MAHAVIR SINGH & SHRI M. BALAGANESH
O R D E R
PER M. BALAGANESH, AM
The appeal in AY 2015-16, arises out of the order of the Commissioner of Income Tax (Appeals)-34, New Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] in Appeal No. 25/18-19 dated 16.04.2019 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 29.12.2016 by the Assessing Officer, DCIT, Circle-8(2), New Delhi (hereinafter referred to as ‘ld. AO’).
At the outset, there is a delay in filing of appeal by the assessee by 235 days. Considering the reasons adduced in the condonation petition, in the interest of substantial justice, we are inclined to condone the delay and admit the appeal of the assessee for adjudication.
Ground No. 1 is general in nature and does not require any specific adjudication.
Ground No. 2 raised by the assessee is challenging the addition of Rs. 48,93,631/- made on account of alleged incorrect computation of income under Percentage Of Completion Method (POCM).
We have heard the rival submissions and perused the material available on record. The assessee is a company engaged in the business of carrying out civil work and labour work in Sunworld Vanalika Project. The return of income for AY 2014-15 was filed by the assessee company on 21.10.2014 declaring taxable income of Rs. 1,32,26,910/-. It is not in dispute that assessee had recognized income on Percentage of Completion Method. Accordingly, revenue recognized was to the tune of Rs. 43,15,00,741/- and after deduction of direct and indirect expenses of Rs. 41,85,10,678/-, the assessee declared profit of Rs. 1,29,94,843/- . The assessee was asked to file the complete details of computation of income in accordance with Accounting Standard-7 (AS-7) issued by the Institute of Chartered Accountants of India (ICAI). The assessee filed the workings and stated that project has been completed to the extent of 64.47% during the year and total cost of the project was estimated at Rs. 85,13,05,719/-. According to POCM, the assessee should have recognized gross income of Rs. 43,63,99,152/- instead of Rs. 43,15,00,741/- and expenses should have been claimed at Rs. 41,45,49,880/- instead of 41,85,10,678/-. Accordingly, the assessee should have been shown profit of Rs. 1,78,88,474/- as per POCM instead of Rs. 1,29,94,843/- thereby resulting in under-statement of profit to the tune of Rs. 48,93,631/- which was brought to tax by the ld AO. The assessee tried to explain that income has been recognized based on the works completed and subsequently certified by the Contractee based on the certificate of bill summary. The ld CIT(A) further observed that the exact income ought to have been recognized by the assessee during the year under consideration under POCM was given by the assessee before the ld AO which figure has been adopted by the ld AO. Hence, no error could be adopted in the order of the ld AO.
Before us, the ld AR submitted that whole project has been completed in subsequent years and income recognized accordingly after reducing the income already recognized in earlier years and any addition made in this year would only result into double addition. Considering the fact the project has been completed in subsequent years and income being recognized under POCM year on year, the addition made by the lower authorities using POCM in the year under consideration in the sum of Rs. 48,93,631/- is required to be sustained and the said figure has to be reduced in the final year in which the project was completed, so as to avoid double taxation of the same income. Either way, this is only a timing difference. Accordingly, Ground No. 2 raised by the assessee is dismissed subject to above mentioned direction for suitable reduction in subsequent years.
Ground No. 3 raised by the assessee is seeking credit for TDS on advance received by the assessee.
We have heard the rival submissions and perused the material available on record. It is trite law that TDS credit is to be given in the year in which corresponding income is shown. Hence, the ld AO is directed to examine the same and give credit as per law. Accordingly, Ground No. 3 raised by the assessee is allowed for statistical purposes.
In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 13/06/2025.