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Income Tax Appellate Tribunal, DELHI BENCH “G”, NEW DELHI
Before: SH. R. K. PANDA & SMT. BEENA A. PILLAI
ORDER
PER BEENA A PILLAI, JM:
The present appeal has been filed by revenue against 1. order dated 10.05.2013 passed by Ld. CIT(A)-XII, New Delhi for assessment 2010-11 on following grounds of appeal:
1. The Ld. CIT(A) erred in law and on the facts in deleting the additions on account of deferred revenue receipts of Rs. 63,26,5307- in the year under consideration."
2. The Ld. CIT(A) erred in law and on the facts in deleting the additions on account of interest amounting to Rs.46,22,754/-."
3. The appellant craves to amend modify, alter, add or forego any ground of appeal at any time before or during the hearing of this appeal."
Brief facts of the case are as under: Assessee had filed its return of income on 29.03.2012 declaring total loss of Rs.10,45,903/-. The return was processed under section 143(1) and subsequently selected for scrutiny. In response to statutory notices representative of assessee appeared before assessing officer and file details and documents as called for from time to time.
Ld. AO observed that assessee is a company and is in business of sale and installation of telecommunication towers, consultancy services for projects management and other allied services. Assessing officer concluded the assessment proceedings by making additions amounting to Rs.63,26,530/- on estimated income on contract advance received from Indu Projects Ltd., and an addition of Rs.46,22,754/- on account of interest paid to bank on ground that loan, not used for business purposes. 4. Aggrieved by assessment order, assessee preferred appeal before Ld. CIT (A) who deleted additions made by assessing officer. 5. Against order passed by Ld. CIT(A), revenue is in appeal before us now. 6. Ground No. 1 has been raised by revenue against addition of Rs.63,26,530/- being deleted.
Ld. DR submitted that assessing officer was right in following percentage completion method. He submitted that M/s Indu Projects made payment to assessee after deducting TDS. He submitted that assessee received income during year, on which TDS has been claimed by assessee in its return filed. Ld. DR thus submitted that assessee had concealed deferred revenue receipt and had not provided details of expenditure incurred on this account.
On the contrary Ld. AR submitted that assessee received advance of Rs.7,90,81,632/- from M/s Indu Projects Ltd., for carrying out land development work. He submitted that since project was not completed, neither revenue nor expenses in connection with the said advances was recognized in income or expenses. He submitted that entire amount was shown as work in progress, as per audited accounts, which have been accepted by assessing officer. Ld. AR further submitted that assessee followed completed contract method of accounting, and entire revenue and expenses are accounted for, at completion of projects. He submitted that assessee offered to tax income from the advances received in next year on completion of project, which is in fact more than the addition estimated by assessing officer in current year. Ld. AR further submitted that assessing officer had initiated enquiry under section 133(6) and had received reply from M/s Indu Projects Ltd., confirming that they have paid advance amount of Rs.7,90,81,632/- to assessee for land development work. Ld. AR placed his reliance upon decision of Hon’ble Supreme Court in the case of CIT vs. Bilahari Investments Pvt.Ltd., reported in 299 ITR 1. 9. We have perused submissions advanced by both sides in the light of records placed before us. 10. It is observed that Assessing officer has made addition on an estimated basis on advances received by assessee and brought to tax an amount of Rs.63,26,530/-, being 8% of advance received in year under consideration. Assessing Officer at this juncture ignored that assessee had actually earned profit on this advances in the next assessment year. 11. On perusal of audited accounts placed before us for year under consideration as well as in the next assessment year, it is correct that assessee declared profit on these advance in assessment year 2011-12. As assessee explained nature of payment along with confirmation from party who had advanced money, we do not find any infirmity in findings of Ld. CIT(A). Accordingly, this ground raised
by revenue stands dismissed.
12. Ground No. 2 raise in respect of addition of Rs. 46,22,754/- being deleted on account of interest paid to bank.
Ld. DR submitted that could not establish that borrowed funds had been utilized for its business activities undertaken during year under consideration. He submitted that assessee failed to establish any nexus of funds borrowed from bank during year under consideration from its business activities. Ld. DR supported the addition made by Ld. AO.
On the contrary, Ld. AR submitted that loan was used for business purposes which is very clear from balance sheet itself. He submitted that loan amount was mainly utilized for reduction of creditors which were of about Rs. 20 crore and been reduced to Rs. 8 crores, for year under consideration. We have perused the submissions advanced by both the sides in the light of records placed before us. 15. On perusal of balance sheet and audited accounts we agree with submissions made by Ld. AR that loan obtained from bank was utilised to reduce creditors and therefore, it cannot be said to have been used for any other purpose other than business. We therefore, do not find any infirmity in the addition being deleted by Ld. CIT(A). Accordingly, this ground raised by revenue stands deleted. In the result appeal filed by revenue stands dismissed. Order pronounced in the open court on 25th April, 2017. Sd/- Sd/- (R. K. PANDA) (BEENA A. PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER Date: 25.04.2017 @mit.