ACIT, Cir-10(1), Hyderabad V. M/s, Essvy Constructions, Secunderabad

ITA 1544/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59361 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 26-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K VISWANATHAM
• Assessee Lawyers: P VINOD
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.1543/HYD/11 : A SSTT. YEAR 2007-08 ITA NO.1544/HYD/11 : A SSTT. YEAR 2008-09 ASSTT. COMMISSIONER OF INCOME- TAX, CIRCLE 10(1), HYDERABAD. V/S. M/S. ESVVY CONSTRUCTIONS, SECUNDERABAD. ( PAN - AAAFE 9281 F ) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.VISWANATHAM, RESPONDENT BY : SHRI P.VINOD DATE OF HEARING 20.3.2012 DATE OF PRONOUNCEMENT 20.3.2012 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE TWO APPEALS OF THE REVENUE FOR THE ASSESSM ENT YEARS 2007-08 AND 2008-09 ARE DIRECTED AGAINST A COMMON ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) VI , HYDERABAD, DATED 27.6.2011 . SINCE COMMON ISSUES ARE INVOLVED, THESE APPEALS ARE BEING DISPOSED BY T HIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. EFFECTIVE GROUNDS OF THE REVENUE, COMMON IN BOT H THE APPEALS, AS TAKEN FROM ITA NO.1543/HYD/2011 READ AS FOLLOWS- 1. THE LEARNED CIT(A) ERRED BOTH IN LAW AS WELL AS ON FACTS. 2. THE LEARNED CIT(A) ERRED IN DIRECTING TO ALLOW D EPRECIATION, PARTNERS REMUNERATION AND INTEREST FROM THE ESTIMAT ED PROFITS. 3. THE LEARNED CIT(A) OUGHT TO HAVE FOLLOWED THE DE CISION OF THE HONBLE AOP HIGH COURT IN THE CASE OF M/S. INDWELL CONSTRUCTIONS VS. CIT(232 ITR 776). 5. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE RATIO LAID DOWN BY HONBLE HIGH COURT IN THE CASE OF M/S. INDWELLL CON STRUCTIONS VS. CIT(232 ITR 776). 5. .. ITA NO.1543-1544 /HYD/11 M/S. ESVVY CONSTRUCTIONS, SECUNDERABAD. . 2 3. THE ONLY ISSUE INVOLVED IN THIS APPEAL RELATES TO ALLOWABILITY OF DEDUCTION IN RESPECT OF DEPRECIATION AND PARTNERS REMUNERATION AND INTEREST, FROM THE PROFITS DETERMINED ON ESTIMATE BASIS. FAC TS IN BRIEF RELATING TO THIS ISSUE AREE THAT THE ASSESSEE IS A CIVIL CONTRACTOR EXECUTING HIS OWN WORKS CONTRACTS AS WELL AS DOING SUB-CONTRACTS FROM OTHER S. THE ASSESSING OFFICER, HOLDING THAT THE PROFIT RETURNED BY THE ASSESSEE ON ITS BUSINESS WAS TOO LOW AND THAT BOOKS OF ACCOUNT WERE NOT COMPLETE IN ALL RESP ECTS, REJECTED THE BOOKS FO ACCOUNT AND ESTIMATED THE NET PROFIT OF THE BUSINES S AT 10% OF THE GROSS RECEIPTS, AFTER TAKING INTO ACCOUNT, DEPRECIATION, PARTNERS SALARY AND INTEREST. ON APPEAL, THE CIT(A), FOLLOWING THE DECISION OF T HE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07, GAVE CERTAIN RELIEF WITH REGARD TO ESTIMATION OF PROFIT MADE BY THE ASSESSING OFFICER. SIMILARLY, FOLLOWING THE DECISION OF THE TRIBUNAL DATED 23.10.2009 IN M/S. T EJA CONSTRUCTIONS (ITA NO.308/HYD/2009), DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCTION TOWARDS DEPRECIATION, PARTNERS REMUNERATION AND INTEREST. AGGRIEVED BY THE RELIEFS GRANTED BY THE CIT(A) WITH REGARD TO DEPRECIATION, INTEREST AND REMUNERATION PAYMENTS TO PARTNERS, REVENUE IS IN APPEAL BEFORE U S. 4. WE HEARD BOTH SIDES AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE IMPUGNED ORDER OF THE CIT(A) IN ALLOWING T HE CLAIM OF THE ASSESSEE FOR DEDUCTION IN RESPECT DEPRECIATION AND INTEREST AND REMUNERATION PAYMENTS TO PARTNERS, IS BASED, AS NOTED ABOVE, ON THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. TEJA CONSTRUCTIONS (SUPRA). AS FAR AS THE INT EREST AND REMUNERATION PAYMENTS TO PARTNERS ARE CONCERNED, THE RECENT DECI SION OF THIS TRIBUNAL DATED 21 ST JANUARY, 2011 IN THE CASE OF DCIT V/S. M/S. SRINIV ASA LAXMI CONSTRUCTIONS, ADILABAD (ITA NO.1347/HYD/2010 AND CO THEREIN) FOR THE ASSESSMENT YEAR 2007-08, ALSO SQUARELY COVERS THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE COORDINATE BENCH OF THE TRIBUNAL I N THAT CASE DISTINGUISHED THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF INDWELL CONSTRUCTION (SUPRA), OBSERVING THAT THE ASSESSMENT YEAR UNDER C ONSIDERATION BEFORE THE JURISDICTIONAL HIGH COURT WAS ASSESSMENT YEAR 1981- 82, WHEREAS THE PROVISIONS OF S.44AD WERE INTRODUCED IN THE STATUTE BOOK WITH EFFECT FROM 1.4.1994, AND AS ITA NO.1543-1544 /HYD/11 M/S. ESVVY CONSTRUCTIONS, SECUNDERABAD. . 3 SUCH THE JURISDICTIONAL HIGH COURT HAD NO OCCASION TO CONSIDER THE PROVISIONS OF S.44AD. IT WAS FURTHER HELD IN THE SAID DECISION D ATED 21.1.2011 THAT IN VIEW OF THE PROVISIONS OF S.44AD AS APPLICABLE TO THE ASSES SMENT YEAR 2007-08 AND THE AMENDMENT MADE WITH EFFECT FROM 1.4.2011, IT IS OBV IOUS THAT THE LEGISLATURE INTENDED TO ALLOW THE INTEREST AND SALARY SEPARATEL Y FROM THE ESTIMATED INCOME. IN THIS VIEW OF THE MATTER, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) INSOFAR AS HIS DIRECTIONS WITH REGARD TO INTEREST AND REMUN ERATION PAYMENTS TO PARTNERS ARE CONCERNED. 5. AS FAR AS THE CLAIM WITH REGARD TO DEPRECIATION IS CONCERNED, THE TRIBUNAL IN THE CASE OF SRINIVAS LAXMI CONSTRUCTION S (SUPRA), TAKING INTO ACCOUNT THE PRINCIPLE WITH REGARD TO DEDUCTIBILITY OF DEPRE CIATION WHILE ESTIMATING THE INCOME IN TERMS OF ANALOGOUS PROVISIONS OF S.44AD, HELD THAT THE DEDUCTION AVAILABLE UNDER SECTIONS 30 TO 33 SHALL BE DEEMED T O HAVE BEEN ALREADY GIVEN FULL EFFECT AND NO FURTHER DEDUCTION UNDER THOSE SE CTIONS SHALL BE ALLOWED. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE TRI BUNAL, WE SET ASIDE THE ORDER OF THE CIT(A), INSOFAR AS THE ISSUE RELATING TO DEPREC IATION IS CONCERNED, AND RESTORE THE DISALLOWANCES OF DEPRECIATION MADE BY THE ASSES SING OFFICER FOR BOTH THE YEARS. 6. IN THE RESULT, REVENUES APPEALS ARE PARTLY ALL OWED. ORDER PRONOUNCED IN THE COURT ON 20.3.2012 SD/- SD/- (ASHA VIJAYARAGHAVAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/- 20 TH MARCH, 2012 COPY FORWARDED TO: 1. M/S. ESVVY CONSTRUCTIONS, 199 SIKH VILLAGE, SECUNDE RABAD. 2 . ASST. COMMISSIONER OF INCOME - TAX CIRCLE 10(1), HYDERABAD 3. COMMISSIONER OF INCOME-TAX(APPEALS) VI, HYDERABAD. ITA NO.1543-1544 /HYD/11 M/S. ESVVY CONSTRUCTIONS, SECUNDERABAD. . 4 4 . COMMISSIONER OF INCOME - TAX V, HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S