Vyjayanthy Services, Hyderabad V. Income Tax Officer, Ward-15(4), Hyderabad

ITA 1868/Hyd/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6528 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 25-07-2018
• Assessment Year: 2014-2015
• Appeal Filed On: 15-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J PAVITRAN KUMAR
• Assessee Lawyers: G GIRIDHAR
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1868/HYD/2017 ASSESSMENT YEAR: 2014-15 M/S. VYJAYANTHY SERVICES, HYDERABAD [PAN: AAHFV7801M] VS THE INCOME TAX OFFICER, WARD-15(4), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI G. GIRIDHAR, AR FOR REVENUE : SHRI J. PAVITRAN KUMAR, DR DATE OF HEARING : 25-07-2018 DATE OF PRONOUNCEMENT : 31-07-2018 O R D E R THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-7, HYDERABAD, DATED 10-08-2017, ON THE ISSUE OF ALLOWING FURTHER DEDUCTIO N ON THE DISCOUNT ALLOWED TO ROAD TRANSPORT CORPORATION OF RS. 32,94,804/-. 2. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A PARTNERSH IP FIRM, DERIVING INCOME FROM SALE OF PETROLEUM PRODUC TS AS A DEALER OF HINDUSTAN PETROLEUM PRODUCTS. ASSESSEE EARNS COMMISSION ON KILO LITER (KL) BASIS. IT FILED ITS RETU RN OF INCOME ADMITTING AN INCOME OF RS. 3,92,050/-, AFTER CLAIMING PARTNERS REMUNERATION. AO COMPLETED THE ASSESSMENT BY ESTIMATING BUSINESS PROFIT AT 1.5% OF THE TOTAL TURNOVER OF ASSES SEE WHICH WAS DETERMINED AT RS. 56,99,09,359/-. IT WAS THE CONTE NTION OF I.T.A. NO. 1868/HYD/2017 :- 2 - : ASSESSEE THAT IT HAS PAID A SPECIAL DISCOUNT OF 50 PAIS A PER LITER TO APSRTC (NOW TSRTC) AND SOUGHT DEDUCTION OF THE ABOVE AMOUNT AND ALSO ESTIMATION OF PROFIT AT A LESSER PERCENTAGE, AS PETROLEUM DEALERS INCOME IS ONLY ON TH E COMMISSION EARNED NOT ON THE TOTAL SALES AS QUANTIFIED BY THE AO. ASSESSEE ALSO FURNISHED THAT EVIDENCE WITH REFERE NCE TO DISCOUNT ALLOWED TO RTC BEFORE THE LD.CIT(A), WHO SEN T THE MATTER TO AO ON REMAND. AO WHILE ACCEPTING THAT ASSESS EE HAS FURNISHED EVIDENCE WITH REFERENCE TO ALLOWING OF DISCOUNT TO TSRTC, HOWEVER, SUGGESTED THE ESTIMATION OF INCOME AT 1% ON THE TURNOVER. LD.CIT(A), HOWEVER, REDUCED THE ESTIM ATION TO 0.75% OF THE TURNOVER AND STATED THAT THE SAID ESTIMATION WOULD TAKE CARE OF THE DISCOUNT ALSO. 3. AGGRIEVED, ASSESSEE HAS RAISED THE FOLLOWIN G GROUNDS: 1. THE APPELLANT OBJECTS TO THE ORDER OF THE LEARN ED COMMISSIONER OF INCOME TAX (A)-7, HYDERABAD DATED 10.8.2017 FOR THE ASSESSMENT YEAR 2014-15 AS BAD IN LAW AND ON FACTS OF THE CASE . 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD CIT(A) ERRED IN NOT ALLOWING DEDUCTION FOR DISCOUNT OF RS. 32,94,804/- GIVEN TO THE STATE ROAD TRANSPORT UNDERTAKING (TSRTC) FRO M THE BUSINESS PROFIT ESTIMATED HOLDING THAT DETERMINATION OF PROF IT GENERALLY ASSUMES DEDUCTION OF ALL EXPENSES INCLUDING ANY SPE CIAL CLAIM WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE COU LD NOT HAVE ACHIEVED SUCH A HUGE PORTION OF SALES REVENUE WITHO UT OFFERING SUCH DISCOUNT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE CONSIDERED A LOWER RATE OF PROFIT FOR ESTIMATE INSTEAD OF 0.75% OF COST OF SALE DULY CONSIDERING THE FACT THA T THE APPELLANT OFFERED DISCOUNT TO TSRTC, WHICH IS NOT A USUAL EXP ENDITURE IN THE LINE OF APPELLANT'S BUSINESS IN ORDER TO MAKE THE E STIMATE FAIR AND JUDICIOUS. GROUND NO. 4 IS GENERAL IN NATURE. I.T.A. NO. 1868/HYD/2017 :- 3 - : 4. IN THE COURSE OF ARGUMENT, LD. COUNSEL SUBMITTED THAT ASSESSEE HAS EARNED THE GROSS PROFIT RATIO AT 1.73% ON THE INCREASED TURNOVER OF RS. 57.99 CRORES AS AGAINST RS. 25.10 CRORES IN EARLIER YEAR AND RS. 37.39 CRORES IN LATER YEAR. IT WAS SUBMITTED THAT AS ASSESSEE HAS GRANTED DISCOUNT OF 50 PAISA PER LITER TO RTC, TURNOVER HAS INCREASED AND NE T PROFIT HAS COME DOWN TO 0.10% AS AGAINST 0.15% IN EARLIER Y EAR AND 0.16% IN LATER YEAR. WHILE RECONCILING THE COMPUTATIO N OF GROSS PROFIT EARNED BY ASSESSEE, IT WAS THE SUBMISSION THAT GENERALLY 0.75% OF THE PROFIT CAN BE ESTIMATED ON SALE OF PETRO PRODUCTS BUT AS ASSESSEE HAS GIVEN SPECIAL DISCOUNT TO RTC, THE SAME SHOULD BE CONSIDERED WHILE ESTIMATING THE INC OME AT 0.75%. LD. COUNSEL SUBMITTED THE ALTERNATE CONTENTIONS A S UNDER: A) ALLOWING DEDUCTION OF DISCOUNT FROM ESTIMATED PROFI TS; OR B) CONSIDERING REDUCTION OF PERCENTAGE FOR ESTIMATION OF PROFIT ON TURNOVER ON SUPPLY OF DIESEL TO RTC DEPOSITS AS UND ER: SL NO. PARTICULARS TURNOVER RS IN LAKHS % OF PROFIT ESTIMATED PROFIT RS IN LAKHS 1 SALE TO RTC DEPOTS 3594.30 0.31%* 11.16 2 SALE TO OTHERS 2205.29 0.75% 16.54 TOTAL: 5799.59 27.70 *% OF PROFIT ON SALE TO RTC IS WORKED OUT AS UNDER: PERCENTAGE OF PROFIT PROPOSED FOR ESTIMATION BY CIT (A) 0.75% LESS: REDUCTION FOR DISCOUNT (0.50 AS PER LITER OF DIESEL OUT OF RS. 1.1375 (AVERAGE) COMMISSION PAID BY HPCL ) 0.44% NET PERCENTAGE 0.31% I.T.A. NO. 1868/HYD/2017 :- 4 - : 5. LD.DR, HOWEVER, SUBMITTED THAT LD.CIT(A) HAS CONSID ERED THE SUBMISSIONS OF ASSESSEE INCLUDING DISCOUNT ALLOWE D AND FOLLOWING THE PRINCIPLES LAID DOWN BY THE HON'BLE JUR ISDICTIONAL HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS VS. CI T [232 ITR 776] (AP), NO OTHER ALLOWANCE SHOULD BE CONSIDER ED. LD.DR ALSO RELIED ON THE CO-ORDINATE BENCH DECISION IN THE CASE OF M/S. AMSRI BUILDERS IN ITA NO. 866/HYD/2011 , DT. 30- 04-2012 AND ACIT VS. M/S. TEJA CONSTRUCTIONS IN ITA N O. 1191/HYD/2011, DT. 17-02-2012 FOR THE SAME PROPOSITI ON THAT ONCE INCOME IS ESTIMATED, PROVISIONS OF SECTION 30 TO 3 8 ARE DEEMED TO HAVE BEEN ALLOWED/ GIVEN FULL EFFECT. 6. I HAVE CONSIDERED THE RIVAL CONTENTIONS. AS SEEN FROM THE ASSESSMENT ORDER, IT IS NOTICED THAT ASSESSEES RECEIPT O F INCOME IS NOT BASED ON THE VALUE OF SALES MADE, BUT ON THE KILO LITERS SOLD, AS ASSESSEE GETS COMMISSION ON VARIOUS P ETRO PRODUCTS. IT WAS SUBMITTED THAT DURING THE YEAR, THE COMMISSION PER KILO LITER ON PETROL WAS RS. 1,794/- WHICH WAS INCREASED TO RS. 1,828/- FROM JANUARY TO MARCH, 2014. LIKEWISE, THE RATE OF COMMISSION ON HSD WAS RS. 1,08 9/- UPTO DECEMBER, 2013 PER KILO LITER WHICH WAS INCREASED TO RS. 1,186/- FROM JANUARY TO MARCH, 2014. THUS, ASSESSE E HAS EARNED COMMISSION TO THE TUNE OF RS. 1,16,86,821/-. THEREFORE, THE ENTIRE BASIS OF ESTIMATION OF PROFIT ON T HE TOTAL TURNOVER, IS NOT PROPER CONSIDERING THE BUSINESS MODE L OF ASSESSEE. HOWEVER, FACTORING THE SAME ASSESSEE HAS N O OBJECTION IF PROFIT WAS ESTIMATED AT 0.75% ON SALE TO OT HERS AND I.T.A. NO. 1868/HYD/2017 :- 5 - : 0.31% ON THE SALE TO RTC DEPOTS, WHICH WAS GIVEN IN TH E ALTERNATE CONTENTIONS. 6.1. CONSIDERING THE REQUEST OF ASSESSEE AND THE FAC TS OF THE CASE, I DIRECT THE AO TO ESTIMATE THE PROFIT AT 0.31% ON TURNOVER OF RS. 3,594.30 LAKHS [ON SALES TO RTC DEPO TS] AND 0.75% IN THE BALANCE OF TURNOVER AT RS. 2205.29 LAKHS [SALE TO OTHERS] AND RE-FIX THE NET PROFIT ACCORDINGLY AND THER EAFTER ADJUSTING REMUNERATION ALLOWED BY AO, DETERMINE THE TOTA L INCOME. THE GROUNDS ARE PARTLY ALLOWED. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2018 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 31 ST JULY, 2018 TNMM I.T.A. NO. 1868/HYD/2017 :- 6 - : COPY TO : 1. M/S. VYJAYANTHY SERVICES, # 301, PAVANI PLAZA, 6 -2-984, 3 RD FLOOR, KHAIRATABAD, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD-15(4), HYDERABAD. 3. CIT (APPEALS)-7, HYDERABAD. 4. PR.CIT-7, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.