KEC-PLR-KPIPL-JV Vs ITO ( ITAT Delhi)
The issue under consideration is whether the disallowance made u/s 40A(2)(b) by AO is justified in law?
ITAT states that, in the present case, it is an admitted position that the AO made the addition by invoking the provisions of Section 40A(2)(b) of the Act which are applicable to the expenses considered to be excessive or unreasonable having regard to the fair market value of the goods/services or facilities for which the payment is made. However, in the instant case, the AO estimated the profit of the assessee and determined the income, nowhere he doubted the expenses incurred by the assessee. Therefore, I am of the confirmed view that the AO was not justified in making the addition by invoking the provisions of Section 40A(2)(b) of the Act which are applicable to the expenditure and not to the receipts and the ld. CIT(A) rightly deleted the same. A similar issue having identical facts has already been adjudicated by the ITAT Delhi for the assessment year 2011-12 in the case of ITO, Ward-2(2), Gurgaon Vs KEC-Asiakom UB (JV). Therefore, respectfully following the same, ITAT set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition.
FULL TEXT OF THE ITAT JUDGEMENT
The above two appeals filed by the respective assessees are directed against the common order dated 28th September, 2018 of the CIT(A)-1, Gurgaon, relating to Assessment Year 2015-16.
2. Since identical grounds have been taken by the respective assessees, therefore, these were heard together and are being disposed of by this common order for the sake of convenience.
ITA No.7764/Del/2018 (KEC ASIAKOM UB JV)
3. Facts of the case, in brief, are that the assessee is a company and filed its return of income on 28th August, 2015 declaring a loss of Rs.29,295/-. The Assessing Officer noted that the assessee is a joint venture between M/s KEC International Ltd., M/s ASIA Communication & Electronic Sdn. Bhd. and M/s Unique Builders formed for the purpose of applying for tender to the Railways. The three joint venture partners had share of 60%, 25% and 15% respectively. The Assessing Officer noted that the work contract was awarded to the assessee by the RVNL. This work was in turn subcontracted by the assessee to M/s KEC International Ltd. Contract price receivable by the assessee from RVNL was Rs. 56,96,05,620/- and the sub contract amount payable to M/s KEC International was Rs. 56,88,08,170/- leaving an amount of Rs. 7,97,448/-. The Assessing Officer pointed out that as per audit report, the following payments were made to the persons specified u/s 40A(2)(b):-
