UHDE India Pvt. Ltd. Vs Addl. Commissioner of Income Tax (ITAT Mumbai)
We find that the assessee has accumulated cost as well as revenue under these projects in the Balance Sheet by following completed contract method. The revenue has accepted such accumulation during AYs 2004-05 & 2005-06 and this is the third year of accumulation under the projects. It is not the case of the revenue that the income under these projects have not been offered to tax in subsequent years. No case of revenue leakage has been established before us. Therefore, the action of revenue in disturbing the consistent method of accounting being followed by the assessee could not be held to be justified. Hence, we delete the impugned additions and allow these grounds of appeal.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The captioned cross appeals-one filed by the assessee and the other by the Revenue – are directed against the order of the Commissioner of Income Tax (Appeals)-24, Mumbai [in short ‘CIT(A)’] and arise out of the assessment u/s 143(3) of the Income Tax Act 1961 (the ‘Act’). As common issues are involved, we are proceeding to dispose them off by this consolidated order for the sake of convenience.
2. Briefly stated the facts of the case are that the assessee-company filed
its return of income for the assessment year (AY) 2008-09 on 26.09.2008 declaring total income of Rs.39,02,18,840/-. The assessee is engaged in the business of supply of processes; designing, construction and commissioning of complete plants for chemical fertilizers, petrochemicals, refining and other related industries.
At the start of hearing, the Ld. counsel for the assessee submits that the assessee would not like to press the 5th and 10th to 14th grounds of appeal. Having considered the submission of the assessee, the above grounds of appeal are dismissed as not pressed.
3. The 1st to 4th ground of appeal, reproduced below, are discussed together, as they address a common issue:
1 The Ld. CIT(A) erred in confirming taxation of an amount of Rs.63,09,36,232/-as income, in respect of contracts accounted under “Percentage of Completion” (POC) Method.
2 The Ld. CIT(A) failed to consider that the appellant was following a regular method of accounting sanctified by Accounting Standards.
3 The Ld. CIT(A) failed to consider that the addition made of Rs.63,09,36,232/-has resulted in taxing gross receipts, without allowing deduction for expenditure required to earn such receipts.
4 Without prejudice to ground Nos 1 to 3 above, the Ld. CIT(A) erred in not allowing deduction (following his own method) where the sale proceeds recognized by the Appellant were higher than the billings done during the year.
4. In Schedule 6 of the Balance Sheet, the assessee has shown progressive billings on incomplete contracts at Rs.1,195,233,767/- as liability. The same is appearing under “advances received from clients”. The break-up of advances received against progressive billings is as under :
