ACIT, Circle-10(1), Hyderabad V. M/s. Ganesh Rolling Shutters & Engg. Works, Secunderabad

ITA 1949/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66601 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 23-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIDISHA KALRA
• Assessee Lawyers: H SRINIVASULU
• Keywords: Depreciation
• Section: 10; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICI AL MEMBER ITA NO.1949/HYD/2011 : A SSTT. YEAR 2006-07 ASST. COMMISSIONER OF INCOME- TAX CIRCLE 10(1), HYDERABAD. V/S. M/S. GANESH ROLLING SHUTTERS & ENGG. WORKS, SECUNDERABAD. ( PAN - AABFG 7891 C) (APPLLANT) (RESPONDENT) APPELLANT BY : SMT. VIDISHA KALRA DR RESPONDENT BY : SHRI H.SRINIVASULU DATE OF HEARING 30.10.2012 DATE OF PRONOUNCEMENT 20.12.2012 O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER: IN THIS APPEAL BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) VI, HYDERABAD D ATED 26.9.2011 FOR THE ASSESSMENT YEAR 2006-07, THE ONLY EFF ECTIVE GROUND OF THE REVENUE READS AS FOLLOWS- 1. . 2. THE CIT(A) ERRED IN ALLOWING DEDUCTION TOWARDS D EPRECIATION AND DEDUCTION U/S. 40(B) OF THE IT ACT, IN VIEW OF THE DECISION OF THE HONBLE HIGH COURT OF AP IN THE CASE OF M/S. INDWEL L CONSTRUCTIONS V/S. CIT(232 ITR 776) WHEREIN IT WAS HELD THAT WHE N NET INCOME IS ESTIMATED, ALL DEDUCTIONS COVERED BY THE SECTIONS 3 0 TO 43D OF THE IT ACT ARE DEEMED TO HAVE BEEN ALLOWED.. 3. . 2. AT THE OUTSET, WE MAY NOTE THAT NONE APPEARED ON BEHALF OF THE ASSESSEE-RESPONDENT, THOUGH ON THE PENULTIMATE DATE OF HEARING, VIZ. 24.7.2012, THE MATER WAS ADJOURNED TO 30.10.2012 AT THE REQUEST OF THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE, DUL Y ANNOUNCING THE ADJOURNED DATE IN THE OPEN COURT. IN THE CIRCUMSTANCES, WE ARE ITA NO.1949/ HYD/2011 M/S. GANESH ROLLING SHUTTERS & ENGG. WORKS, SECUNDERABAD. 2 CONSTRAINED TO DISPOSE OFF THIS APPEAL EX-PARTE -QUA THE ASSESSEE- ON THE BASIS OF THE MATERIAL ON RECORD. 3. BRIEFLY, THE FACTS ARE THAT THE ASSESSEE, A PARTNERSH IP FIRM, IS ENGAGED IN THE BUSINESS OF EXECUTING CIVIL CONTRACT WORKS. THERE WAS SURVEY IN THE CASE OF THE ASSESSEE UNDER S.133A OF THE ACT, ON 7.10.2004. DURING THE SURVEY, IT WAS NOTICED THAT ENTRIES IN THE B OOKS OF ACCOUNT WERE NOT UP TO DATE. THE CASH BALANCE AS ON 1.4.2004 WAS NOT BROUGHT FORWARD. NO STOCK REGISTER WAS MAINTAINED. SOME PURCHASE BILLS WHICH WERE FOUND WERE NOT ENTERED INTO THE CASH BOOK. AS A RESULT OF THE DEFICIENCIES AND DISCREPANCIES FOUND, THE BOOKS OF ACCOUNT, BILLS VOUCHERS AND OTHER DOCUMENTS WERE IMPOUNDED. THE ASSESSEE FILED ITS RETURN O F INCOME ON 22.3.2006, DISCLOSING A TOTAL INCOME OF RS.35,43,290. I N THE SCRUTINY ASSESSMENT PROCEEDINGS, WHICH ENSUED IN PURSUANCE OF NOTICE ISSUED UNDER S.143(2) AND 142(1), THE ASSESSING OFFICER CALLED FOR BOOKS OF ACCOUNT AND OTHER DOCUMENTS FROM TIME TO TIME. AFTER EX AMINING THE BOOKS OF ACCOUNT, THE ASSESSING OFFICER CAME TO A CONCLUSION, THAT THE BOOKS OF ACCOUNT WARE NOT RELIABLE. HENCE, HE REJECTED TH E SAME AND PROCEEDED TO ESTIMATE THE PROFIT AT 10% OF THE GROSS CON TRACT RECEIPTS, NET OF ALL DEDUCTIONS, INCLUDING DEPRECIATION AND REMUNERA TION AND INTEREST PAYMENTS TO PARTNERS. 4. THE ASSESSEE, BEING AGGRIEVED BY THE ASSESSMENT MADE A S ABOVE, FILED APPEAL BEFORE THE CIT(A). BEFORE THE C IT(A), THE ASSESSEE CHALLENGING THE ESTIMATION OF PROFIT NET OF ALL DEDUCT IONS, AT 10%, SUBMITTED THAT ITS PROFITS IN EARLIER ASSESSMENT YEARS RAN GED BETWEEN 6.5% TO 8%, WHICH SHOULD HAVE FORMED THE BASIS WHILE EST IMATING THE PROFITS FOR THE IMPUGNED ASSESSMENT YEAR ALSO. THE ASSESSEE FURTHER CONTENDED THAT EVEN IF THE PROFIT IS ESTIMATED, THE ASSE SSEE IS ENTITLED TO STATUTORY DEDUCTIONS LIKE DEPRECIATION AND REMUNERATIO N AND INTEREST PAYMENTS TO PARTNERS. INTEREST THIS CONTEXT, THE ASSESSEE RE LIED UPON THE DECISION OF THE INCOME-TAX APPELLATE TRIBUNAL HYDERA BAD BENCH IN THE ITA NO.1949/ HYD/2011 M/S. GANESH ROLLING SHUTTERS & ENGG. WORKS, SECUNDERABAD. 3 CASE OF M/S. C.ESHWAR REDDY AND CO. (ITA NOS.668 AND 67 0/HYD/2009), DATED 31.1.2011. THE CIT(A), AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AND EXAMINING THE MATERIAL ON RECORD, DID N OT FIND MERIT IN THE ASSESSEES CONTENTION THAT ITS PROFIT SHOULD BE ESTIMATE D AT A LOWER RATE, AND ACCORDINGLY SUSTAINED THE RATE ADOPTED BY TH E ASSESSING OFFICER FOR ESTIMATING THE PROFIT OF THE ASSESSEE. SO FAR AS TH E ASSESSEES CLAIM FOR FURTHER ALLOWANCE OF STATUTORY DEDUCTION LIKE DEPR ECIATION AND REMUNERATION AND INTEREST PAYMENTS TO PARTNERS IS CONCERN ED, THE CIT(A), FOLLOWING THE DECISION OF THE INCOME-TAX APPELLATE TRI BUNAL, HYDERABAD IN THE CASE OF C.ESHWAR REDDY AND CO. (SUPRA), DIRECTED TH E ASSESSING OFFICER TO ALLOW DEDUCTION TOWARDS REMUNERATION AND INTEREST PAYMENTS TO PARTNERS, FROM THE PROFIT ESTIMATED AT THE RATE OF 10 %. SO FAR AS DEPRECIATION IS CONCERNED, THE ASSESSEES CLAIM IN THAT BEHA LF IS DISALLOWED. 5. WE HAVE EHRD THE LEARNED DEPARTMENTAL REPRESENT ATIVE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS THE CA SE OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE HONBLE ANDHRA P RADESH HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS V/S. CIT (SUPRA) HAS H ELD THAT IN A CASE WHERE PROFIT IS ESTIMATED AFTER REJECTIONS OF THE B OOKS OF ACCOUNT, NO FURTHER DEDUCTIONS COVERED UNDER S.30 TO 43D OF THE ACT , CAN BE ALLOWED, AS THE ESTIMATION OF PROFIT PRESUPPOSES THAT ALL ELIGIB LE DEDUCTIONS ARE ALREADY ALLOWED. HENCE, ACCORDING TO THE LEARNED DEPAR TMENTAL REPRESENTATIVE, NO FURTHER DEDUCTION CAN BE ALLOWED TOWARDS DEPRECIATION, INTEREST OR REMUNERATION PAYMENTS TO PARTNERS. 6. ON CAREFUL CONSIDERATION OF THE SUBMISSION OF THE LEA RNED DEPARTMENTAL REPRESENTATIVE IN THE LIGHT OF THE MATE RIAL AVAILABLE ON RECORD, WE FIND THAT THIS TRIBUNAL IN THE CASE OF C.ESHW AR REDDY (SUPRA), AFTER TAKING INTO CONSIDERATION THE DECISION OF THE JUR ISDICTIONAL HIGH COURT IN THE CASE OF INDWELL CONSTRUCTION (SUPRA) AND THE PROV ISION CONTAINED S.44AD OF THE ACT, HAS HELD THAT REMUNERATION AND INT EREST PAYMENTS TO PARTNERS ARE TO BE ALLOWED EVEN AFTER ESTIMATION OF P ROFITS. HOWEVER, SO ITA NO.1949/ HYD/2011 M/S. GANESH ROLLING SHUTTERS & ENGG. WORKS, SECUNDERABAD. 4 FAR AS DEPRECIATION IS CONCERNED, THE TRIBUNAL HELD IN T HAT CASE, THAT IT CANNOT BE ALLOWED AS DEDUCTION FROM THE ESTIMATED PROFI TS. SUBSEQUENT TO THE AFORESAID DECISIONS, COORDINATE BENCHES OF THE TRIBU NAL, ON SEVERAL OCCASIONS HAVE CONSISTENTLY FOLLOWED THE VIEW TAKEN IN TH E CASE OF C.ESHWAR REDDY (SUPRA) WITH REGARD TO ALLOWABILITY O F DEDUCTION TOWARDS INTEREST AND REMUNERATION PAYMENTS TO PARTNERS FORM OU T OF THE ESTIMATED PROFITS. IT IS EVIDENT FORM RECORD THAT FOLLOWING THE AFORESAID VIEW OF THE TRIBUNAL, THE CIT(A) HAS ALLOWED THE CLAIM OF THE A SSESSEE WITH REGARD TO INTEREST AND REMUNERATION PAYMENTS TO PARTNERS, AND HA S DISALLOWED THE CLAIM WITH REGARD TO DEPRECIATION. THAT BEING SO, WE D O NOT FIND ANY INFIRMITY INTEREST HE IMPUGNED ORDER OF THE CIT(A), WHICH IS ACCORDINGLY CONFIRMED AND THE GROUNDS OF THE REVENUE IN THIS APPEA L ARE REJECTED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 20.12.2012 SD/- SD/- (CHANDRA POOJARI) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED/- 20 TH DECEMBER, 2012 COPY FORWARDED TO: 1. M/S. GANESH ROLLING SHUTTERS & ENGG. WORKS, 1-3-1024 . LOWER TANK BUND ROAD, KAVADIGUDA, SECUNDERABAD. 2. ASST. COMMISSIONER OF INCOME-TAX CIRCLE 10(1) HYDERABA D 3. COMMISSIONER OF INCOME-TAX(APPEALS) VI, HYDERABAD 4. COMMISSIONER OF INCOME-TAX V HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S