PRAKASH M. E. J. V.,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX - CIRCLE 27(2), MUMBAI

AadoSa / O R D E R महावीर स िंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:

These two appeals filed by the assessee are arising out of the common order of Commissioner of Income Tax (Appeals)-25, Mumbai [in short CIT(A)], Appeal No. CIT(A)-25/IT-99 & 519/16-17/246 vide order ITAs No. 963 & 964/Mum/2018 dated 07.12.2017. The Assessments were framed by the Asst. Commissioner of Income Tax, Central Circle-27(2), and Mumbai (in short ACIT/ITO / AO’) for the A.Ys. 2013-14, 2014-15 vide orders dated 25.11.2016 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).

2. The only issue in these two appeals of assessee is as regards to the disallowance of supervision charges paid to supervise the work to sub-contractors as per the agreement entered with the contractor claiming a sum of Rs. 9.60 lacs in AY 2013-14 and a similar amount of 9.60 lacs in AY 2014-15. For this assessee has raised identical worded grounds and claimed that the facts and circumstances are exactly identical and hence, we will take the facts from AY 2013-14 and will decide the issue. The relevant ground for AY 2013-14 read as under: - “1. In the facts and circumstances of the case and in law, the learned AO erred in disallowing Rs. 9,60,000/- claimed as supervision charges paid to supervise the work of two sub- contractors as per the agreement entered with the sub-contractors.

ITAs No. 963 & 964/Mum/2018 During the course of assessment proceedings, the AO noted that the assessee has entered into a joint venture between two companies i.e. its constituents PEPIL and MEPIL. During the course of assessment proceedings before the AO, the assessee filed copy of joint venture agreement i.e. MOU. The Joint Venture has been floated to obtained contract from MCGM for the construction of roads. The AO on perusal of profit and loss account noticed that the assessee has debited a sum of Rs. 9.60 lacs as supervision charge and labour cess of Rs. 12,39,262/-. The AO was of the view that the assessee has not hired any labour nor carried out any work by itself but has sub contracted the same, there would be no need to pay any supervision charges or labour cess. Hence, according to AO, the claim of supervision charges of Rs. 9.60 lacs is not to be allowed. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) also confirmed the disallowance vide Para 8.4 as under: - “8.4 Inter alia, the appellant has also debited an amount of Rs.9,60,000/- on account of supervision charges. The AO has dealt with this issue in his order, strating that as the appellant has not hired any labour, nor carried out any work by itself but has sub-contracted the entire work to its constitutes/ members there could be no need to incur supervision charges. He appellant while justifying the other expenses has not submitted anything on the issue of supervision charges either in assessment/ remand proceedings before the AO or during the appellant proceedings. NO justification and/ or any proof regarding the incurring of ITAs No. 963 & 964/Mum/2018 supervision charges of Rs. 9,60,000/- has been submitted. Therefore, I uphold the disallowance to the extent of Rs. 9,60,000/- claimed to be incurred on supervision charges which remains to be substantiated by the appellant and the remaining addition made by the AO is deleted. Thus, the appellant and the remaining addition made by the AO is deleted. Thus, the addition to the extent of Rs. 9,60,000/- is confirmed and the appellant gets relief of Rs. 63,39,972/- (Rs.72,99,972 – Rs.9,60,000). Hence, an amount of Rs. 9,60,000/- shall be added to the returned income of Rs. 26,14,120/-.”

Aggrieved, now assessee is in appeal before Tribunal.