ACIT, Hyderabad V. M/s A Purshottam, Secunderabad

ITA 336/HYD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3338 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 25-01-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 03-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMLAN TRIPATHY
• Assessee Lawyers: S RAMA RAO
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B , HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.336/HYD/2010 : ASSESSMENT YEAR 2006-0 7 ITA NO.95/HYD/2011 : ASSESSMENT YEAR 2007-08 ASST. COMMISSIONER OF INCOME- TAX, CIRCLE 10(1), HYDERABAD VS M/S. A. PURUSHOTHAM, SECUDNERABAD. (PAN AAGFS 5371 A) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AMLAN TRIPATHY RESPONDENT BY : SHRI S.RAMA RAO O R D E R PER G.C.GUPTA, VICE PRESIDENT: THESE TWO APPEALS BY THE REVENUE FOR THE ASSESSME NT YEARS 2006-07 AND 2007-08 ARE DIRECTED AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME-TAX(APPEALS). SINCE IDENTICA L ISSUES ARE INVOLVED IN BOTH THESE APPEALS OF THE REVENUE, THES E ARE BEING DISPOSED OFF WITH THIS CONSOLIDATED ORDER. 2. THE FIRST COMMON ISSUE IN THESE APPEALS OF TH E REVENUE IS REGARDING NET PROFIT RATE ESTIMATED AT 7% BY THE CI T(A) AS AGAINST 10% APPLIED BY THE ASSESSING OFFICER ON THE GROSS R ECEIPTS OF THE ASSESSEE. 3. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMI TTED THAT THE ASSESSING OFFICER HAS APPLIED NET PROFIT RATE OF 10% AND THERE ITA NO.336/HYD/2010 & 95/HYD/2011 M/S. A.PURUSHOTAM, SECUNDERABAD. 2 WERE SUFFICIENT REASONS FOR REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. HE SUBMITTED THAT THE TRIBUNAL HAS UPHEL D A HIGHER RATE OF INCOME IN SOME CASES CITED IN THE GROUNDS OF APPEAL . HE SUBMITTED THAT THERE IS NO BASIS FOR THE CIT(A) TO REDUCE THE ESTIMATION OF INCOME MADE BY THE ASSESSING OFFICER. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT(A) HAS FOLLOWED THE DECISION OF THE TRIBUNAL IN TAHER ALI V/S. JCIT(ITA NO.527/HYD/2002) DATED 1.1.2006 WHEREIN PR OFIT RATE OF 7% ON THE GROSS TOTAL RECEIPTS WAS APPLIED BY THE TRIB UNAL. HE SUBMITTED THAT THERE IS NO JUSTIFICATION FOR APPLYING ANY HIG HER RATE OF PROFIT TO THE GROSS TRADING RECEIPTS OF THE ASSESSEE. 5. WE HAVE CONSIDERED THE RIVAL SUB MISSIONS. WE F IND THAT THE VALIDITY OF THE REJECTION OF BOOKS OF ACCOUNT I S NOT IN DISPUTE BEFORE US. AS FOR THE ESTIMATION OF PROFIT, WE FIN D THAT THE ASSESSEE WAS IN THE BUSINESS OF CONSTRUCTION OF QUARTERS FOR ARMY PERSONNEL DURING THE RELEVANT YEAR. THIS IS IN THE NATURE OF CIVIL CONTRACT WORK. IN THE FACTS OF THE CASE AND CONSIDERING THE NATURE OF BUSINESS UNDERTAKEN BY THE ASSESSEE DURING THE RELEVANT PERI OD, WE HOLD THAT REASONABLE RATE OF PROFIT TO BE APPLIED TO GROSS CO NTRACT RECEIPTS OF THE ASSESSEE SHALL BE 8% AS AGAINST 7% APPLIED BY T HE CIT(A) AND ACCORDINGLY, THE GROUNDS OF THE REVENUE ON THIS ISS UE ARE PARTLY ALLOWED. 6. THE OTHER ISSUE INVOLVED IN THE GROUNDS OF THE REVENUE IN THESE APPEALS IS REGARDING ALLOWABILITY OF INTEREST AND REMUNERATION TO THE PARTNERS OUT OF THE ESTIMATED INCOME OF THE ASS ESSEE. ITA NO.336/HYD/2010 & 95/HYD/2011 M/S. A.PURUSHOTAM, SECUNDERABAD. 3 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS RE LIED ON THE DECISION OF THE HONBLE ANDHRA PRADESH HIGH COU RT IN THE CASE OF INDWELL CONSTRUCTIONS V/S. CIT (232 ITR 777 IN SUPP ORT OF HIS ARGUMENT THAT WHEN ESTIMATION OF INCOME IS MADE ALL DEDUCTIONS SHALL BE DEEMED TO HAVE BEEN TAKEN INTO ACCOUNT AND HENCE NO FURTHER DEDUCTION TOWARDS INTEREST AND REMUNERATION TO PART NERS WAS ALLOWABLE. 8. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DECISION OF THE HONBLE A.P. HIGH COURT RELIED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE IS NOT APPLICABLE, SINC E IT PERTAINS TO A PERIOD PRIOR TO THE AMENDMENT TO THE RELEVANT PROVI SIONS OF LAW. HE SUBMITTED THAT NOW IT IS WELL SETTLED THAT INTEREST AND REMUNERATION TO THE PARTNERS IS ALLOWABLE OUT OF THE ESTIMATED IN COME OF THE ASSESSEE. HE RELIED ON THE DECISION OF THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT V/S. SUPREME BUILDERS (217 CTR 281) IN SUPPORT OF HIS ARGUMENTS. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSION. THE DECISION OF THE HONBLE ANDHRA PRADESH HIGH COURT RELIED UPO N BY THE LEARNED DEPARTMENTAL REPRESENTATIVE PERTAINS TO A PERIOD PR IOR TO THE AMENDMENT IN THE RELEVANT PROVISIONS OF LAW. THE C IT(A) HAS PASSED A SPEAKING ORDER ON THE ISSUE, WHILE ALLOWING DEDUC TIONS TOWARDS INTEREST AND REMUNERATION PAID TO THE PARTNERS, OUT OF THE ESTIMATED INCOME OF THE ASSESSEE AND HAS FOLLOWED THE DECIS ION OF THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT V/ S. SUPREME BUILDERS (SUPRA). IN THESE FACTS, WE HOLD THAT THE RE IS NO MISTAKE IN THE ORDER OF THE CIT(A) IN DIRECTING THE ASSESSING OFFICER TO ALLOW INTEREST AND REMUNERATION PAID TO THE PARTNERS AS DEDUCTION FROM THE ITA NO.336/HYD/2010 & 95/HYD/2011 M/S. A.PURUSHOTAM, SECUNDERABAD. 4 ESTIMATED INCOME, AND ACCORDINGLY THE GROUNDS OF AP PEAL OF THE REVENUE ON THIS ISSUE ARE REJECTED. 10. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE PARTLY ALLOWED. ORDER PRONOUNCED ON 13.5.2011 SD/- SD/- (CHANDRA POOJARI) ( G.C. G UPTA) A CCOUNTANT MEMBER V ICE PRESIDENT DATED THE 13.5.2011 COPY FORWARDED TO: 1. M/S. A. PURUSHOTAM, 2-2-231 TO 135, ROOM NO.2, SARV ODAYA COMPLEX, MG ROAD, SECUNDERABAD. 2. ASST . C OMMISSIONER OF INCOME - TAX, CIRCLE 1 0 ( 1 ), HYDERABAD 3. CIT (A) - V I , HYDERABAD. 4. COMMISSIONER OF INCOME-TAX V, HYDERABAD 5. THE D.R., ITAT, HYDERABAD. B.V.S.