ITO, WARD-1, JHARSUGUDA vs. UMESH KUMAR PODDAR, JHARSUGUDA

per the agreement with M/s. Odisha Bridge & Construction Corporation

Ltd., the assessee has to pay Bid money in different amounts in

scheduled periods. The assessee adhered to the agreement of payment

schedule and as per the schedule the amount paid to M/s. Odisha Bridge

& Construction Corporation Ltd. was Rs.1,34,00,062/-. The assessee

following payment on daily basis accounted for Rs.65,71,538/- as

advance carried forward to the next year. In the previous Financial year

2009-10, the assessee has worked for 229 days, the proportionate share

of Bid value being Rs.3,36,28,650/- which the assessee claimed in his P/L

account. But as per the schedule of payment agreed with M/s. Odisha

Bridge & Construction Corporation Ltd., he has paid Rs.4,02,00,188/- in

instalments. Thus the assessee has shown the difference amount of

Rs.65,71,538/- in his balance sheet as advance which he adjusted in the

3 ITA No. 138/CT K/ 2016 Asse ssment Year : 20 11- 201 2 impugned financial year. The Assessing Officer opined that the claim of

advance Bid Money of Rs.65,71,650/- was for the assessment year 2010-

11 and claiming the same during the assessment year 2011-12 is not

genuine. The Assessing Officer further gave a finding that the claim of

advance Bid Money of Rs.65,71,650/- paid during F.Y. 2009-10 cannot be

claimed in the F.Y. 2010-11. Since the assessee has paid Bid Money of

Rs.1,34,00,062/- during the impugned year, the assessee cannot claim

Rs.1,99,71,600/- in the profit and loss account. In view of above, the

Assessing Officer treated Rs.65,71,538/- as excess claim of Bid Money by

the assessee and disallowed the same.

assessee deleted the addition observing as under:

” I have carefully perused the assessment order made by the AO and the details submitted by the appellant. The appellant has consistently submitted that he follows the Mercantile method of accounting consistently. Out of the total contract value of Rs.S,36,250/- from the period 15.08.2009 to 14.08.2010 starting from the F.Y. 2009-10 and ending in F.Y.2010-11, the appellant has debited the total payments daily wise and claimed the same in his P/L account. The appellant was bound by agreement to pay M/s. Odisha Bridge & Construction Corporation Ltd. amount as per their schedule. Thus, the appellant has, claimed the total Bid amount proportionate to the days of Bid as expenses in his P/L account. For the F.Y. 2009-10, the appellant has debited expenses of Rs.3,36,28,650/- for i2JJ9.days of work proportionately whereas actual payment made to M/s. Odisha Bridge & Construction Corporation Ltd., was Rs.4,02,00,188/- as per M/s. Odisha Bridge & Construction Corporation Ltd., schedule. The appellant accounted for the advance payment of Rs.65,71,538/- in his balance sheet for the F.Y. 2009-10. For the impugned F.Y. 2010-11, the Appellant calculated the proportionate Toll gate expenses of Rs. 1,99,71,600/- and accounted for the same in his P/L account, whereas payments made by him to M/s. Odisha B ridge & Construction Corporation Ltd., according to their schedule was Rs. 1,34,00,062/-. It is evident from the accounting of both the years 2009- 10 and 2010-11 that the appellant has followed the same pattern of accounting. The appellant has also submitted that in the earlier years for such work he has followed the similar manner of accounting regarding the Bid amount paid. Since the total Bid amount to be paid and the total

4 ITA No. 138/CT K/ 2016 Asse ssment Year : 20 11- 201 2 number of days were fixed, he has accounted for the expenses proportionate to the days in the F.Y.. The agreement with M/s. Odisha Bridge & Construction Corporation Ltd., has stretched from 15.08.2009 to 14.08.2010 and schedule of payment was determined by M/s. Odisha Bridge &'Construction Corporation Ltd., which is independent of the accounting process of the appellant for both the F.Yrs.. If the contention of the AO shall be accepted for the impugned financial year, then the appellant has to be given credit of the amount of Rs.65,71,538/- in the assessment year 2010-11. Since the appellant was consistently following this method accounting, his process need not be questioned as the amounts paid has been accounted for in total. Considering the above, the AO is directed to delete the addition.”

whereas ld A.R. of the assessee relied on the order of the CIT(A).

authorities and materials available on record. In the instant case, the

assessee has been consistently following the Mercantile method of

accounting. Out of the total contract value of Rs.5,36,250/- from the

period 15.08.2009 to 14.08.2010 starting from the F.Y. 2009-10 and

ending in F.Y.2010-11, the assessee has debited the total payments daily

wise and claimed the same in his P/L account. The assessee was bound

by agreement to pay M/s. Odisha Bridge & Construction Corporation Ltd.

amount as per their schedule. Thus, the assessee has, claimed the total

Bid amount proportionate to the days of Bid as expenses in his P/L

account. In pursuance of the agreement, for the F.Y. 2009-10, the

assessee has debited expenses of Rs.3,36,28,650/- for 229 .days of work

proportionately whereas actual payment made to M/s. Odisha Bridge &

Construction Corporation Ltd., was Rs.4,02,00,188/- as per M/s.

5 ITA No. 138/CT K/ 2016 Asse ssment Year : 20 11- 201 2 Odisha Bridge & Construction Corporation Ltd., schedule. The assessee

accounted for the advance payment of Rs.65,71,538/- in his balance

sheet for the F.Y. 2009-10. For the impugned F.Y. 2010-11, and

calculated the proportionate Toll gate expenses of Rs. 1,99,71,600/- and

accounted for the same in his P/L account, whereas payments made by

him to M/s. Odisha B ridge & Construction Corporation Ltd., according to

their schedule was Rs. 1,34,00,062/-. We find that the above findings of

the CIT(A) has not been controverted by ld D.R. by placing any positive

material on record, excepting relying on the order of the Assessing officer.

Therefore, we find no infirmity in the order of the CIT (A), which is hereby

confirmed and ground of appeal of the revenue is dismissed.

reducing the addition of Rs.9,38,126/- on account of interest on

unsecured loan.

assessee has paid interest on unsecured loan for the whole year in the

financial year 2011-12, whereas the ongoing business income was carried

on upto 14.8.2010. The Assessing Officer further noted that as per the

principle of allowability of interest on borrowed capital u/s.36 of the Act,

the interest shall be allowed to the extent of period of utilisation in the

business for the purpose of business. In view of above, the Assessing

Officer allowed interest on unsecured loan upto 31.8.210 and disallowed

balance part of the financial year amounting to Rs.9,38,126/-.

6 ITA No. 138/CT K/ 2016 Asse ssment Year : 20 11- 201 2 9. Before the CIT(A), the assessee relied on the following decisions

stating that the addition made by the Assessing Officer is not in spirit of

section 36 of the Act:

i) CIT vs. Malayalam Plantation Ltd., 53 ITR 140(SC)

ii) Madhav Prasad jatia vs CIT, 118 itr 200 (SC)

iii) Regal Theatre vs CIT, 225itra 205 (Del)

iv) CIT vs. Indian Bank Ltd., 56 ITR 77 (SC)

v) CIT vs. Madan Lal Jain, 136 ITR 409(Del)

vi) Chhail Behari Lal vs CIT, 39 ITR 696 (All)

vii) Calico Dyeing & Printing Works vs CIT,59ITR 221 (Bom)

observing as under:

“I have perused the assessment order and the submission of the appellant. It is a fact that the ongoing work of the appellant terminated on 14.08.2011. But the appellant being in the business of execution of contract has tried participating in the bid process and deposited EMD for the process. The appellant has shown the EMD payment of Rs.53,60,025/- as advance in his balance sheet for the financial year 2010-11. The contention of the appellant that he was very much in the business for the whole year and exploring the business avenues by participating in the bid process and also deposited heavy amount of EMD for the same. Therefore, it can not be concluded that the assessee was not in business for the whole year. It may be that for the balance part of the year, the appellant has not earned any income from his activity. From the submissions of the appellant, it is evident that to make offer in the business also he has to utilize heavy amount of money. I had gone through the judicial pronouncements and legal provisions submitted by the appellant and I am of the view that the interest on borrowed capital cannot be disallowed. The AO is therefore directed to delete the addition.”

submitted that the assessee has given interest for the whole year to the

loan creditors and debited the same in the profit and loss account. He

7 ITA No. 138/CT K/ 2016 Asse ssment Year : 20 11- 201 2 referred to section 36 of the Act and stated that interest shall be allowed

to the extent of period of utilisation in the business. He submitted that as

per the book, the assessee has given aggregate interest to loan creditors

at Rs.15,66,490/- for the whole year but in view of the principle of

allowability, the interest only to the extent of Rs.6,28,364/- on unsecured

loan shall be allowable for the five months. Hence, he submitted that

disallowance made by the Assessing Officer be confirmed.

Officer.

authorities, we find that the assessee before the lower authorities has

been claiming that he was in the business for the whole year and

exploring the new business avenues by participating in the Bid process

and deposited heavy month of EMD for the same. Before us, ld D.R.

could not controvert this findings of the CIT(A) that the assessee was not

in the business of the whole year by bringing any material on record. It is

also not in dispute that the assessee has shown EMD of Rs.53,60,025/- as

advance in his balance sheet for the impugned year. Hence, we uphold

the findings of the CIT(A) and reject the ground of appeal of the revenue.

Order pronounced in the open court on 28 /08/2017. Sd/- sd/- (Pavan Kumar Gadale) (N.S Saini) JUDICIALMEMBER ACCOUNTANT MEMBER Cuttack; Dated 28/08/2017

8 ITA No. 138/CT K/ 2016 Asse ssment Year : 20 11- 201 2 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : ITO, Ward-1, Jharsuguda 2. The Respondent. Sri Umesh Kumar Poddar, Near Union Bank, Main Road, Jharsuguda 3. The CIT(A)- Cuttack 4. Pr.CIT-Cuttack 5. DR, ITAT, Cuttack 6. Guard file. //True Copy// BY ORDER,

SR.PRIVATE SECRETARY ITAT, Cuttack