ACIT, Jabalpur V. M/s. M.K.S.Engineering Co. Pvt. Ltd., Jabalpur

ITA 6/JAB/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74785 (ITAT-JABALPUR)
• Duration Of Justice: 3 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 04-06-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 31-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K UPADHYAY
• Keywords: Business income; Depreciation
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, JABALPUR BENCH, JABALPUR BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER ITA NO.06/JAB/2011 ASSESSMENT YEAR: 2006-07 ASSTT. COMMISSIONER OF INCOME TAX, VS. M/S M.K.S. E NGINEERING CO. PVT. LTD. CIRCLE 2(1), JABALPUR. C/O. M.S. GUJRAL, PROP. M/S. RISHI BUILDERS, CIVIL LINES, JABALPUR. (PAN AADCM 1192 R). C.O. NO.04/JAB/2011 (IN ITA NO.06/JAB/2011) ASSESSMENT YEAR: 2006-07 M/S M.K.S. ENGINEERING CO. PVT. LTD., VS. ASSTT. C OMMISSIONER OF INCOME TAX, 1, NAMAK KOTHI, CIRCLE 2(1), JABALPUR. NORTH CIVIL LINES, JABALPUR. (PAN AADCM 1192 R). (APPELLANTS) (RESPONDENTS) REVENUE BY : SHRI K.K. UPADHYAY, D.R. ASSESSEE BY : SHRI VIJAY GUPTA, C.A. DATE OF HEARING : 25.03.2014 DATE OF PRONOUNCEMENT : 27 .03.2014 ORDER PER T.S. KAPOOR, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) DATED 24.11.2010. ITA NO.06 /JAB/2011 & C.O. NO.04/JAB/2011 A.Y. 2006-07 2 2. THE GROUNDS OF APPEAL TAKEN BY THE REVENUE ARE A S UNDER :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED :- (1) IN DIRECTING TO TREAT THE INTEREST INCOME, INSU RANCE CLAIM AND MACHINERY HIRE CHARGES AS PART OF BUSINESS, REC EIPTS, PARTICULARLY WHEN APPLICATION OF NET PROFIT RATE OF 5% WAS RESTRICTED TO BUSINESS RECEIPTS ONLY. (2) IN DIRECTING THE A.O. TO ALLOW THE DEPRECIATION OUT OF THE PROFIT ESTIMATED AT 5%. 2. THAT THE ORDER OF THE LD. CIT(A) IS ERRONEOUS BO TH ON FACTS AND IN LAW. 3. THAT THE APPELLANT RESERVES THE RIGHT TO AMEND/A LTER ANY OF THE GROUNDS OF APPEAL/ADD OTHER GROUNDS OF APPEAL AT TH E TIME OF HEARING. 3. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION VIDE WHICH IT HAD RAISED ONLY A SINGLE GROUND WHICH READS AS UNDER :- 1. THAT ON THE FACTS OF THE CASE HONBLE CIT(A) ER RED IN ADJUDICATING TO TREAT THE OTHER INCOME AS INCOME FR OM OTHER SOURCES. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A ROAD CONSTRUCTION CONTRACTOR AND DURING THE ASSESSMENT PROCEEDINGS HI S BOOKS OF ACCOUNTS WERE REJECTED AND NET INCOME WAS DETERMINED BY APPLYING A NET PROFIT RATE @ 7% ON ALL BUSINESS RECEIPTS AND FURTHER DEPRECIATION WAS ALLO WED OUT OF SUCH AMOUNT. THE LD. CIT(A) RELYING UPON ASSESSEES OWN CASE IN EARLIER YEAR RESTRICTED THE NET PROFIT AT ITA NO.06 /JAB/2011 & C.O. NO.04/JAB/2011 A.Y. 2006-07 3 @ 5% OF GROSS RECEIPT AND ALLOWED DEPRECIATION FROM SUCH AMOUNT. THE GRIEVANCE OF THE REVENUE AS ARGUED BEFORE US IS THAT LD. CIT( A) WHEN REDUCED THE NET PROFIT RATE TO 5% FROM 7% SHOULD NOT HAVE GIVEN THE BENEFI T OF DEPRECIATION. WHEREAS GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) SH OULD NOT HAVE TREATED OTHER INCOME AS INCOME FROM OTHER SOURCES. 5. AT THE OUTSET, THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ISSUES RAISED BY REVENUE WERE DULY COVERED IN FAVOUR OF TH E ASSESSEE AND INVITED OUR ATTENTION TO TRIBUNAL ORDER IN ITA NO.258/JAB/2008 FOR A.Y. 2005-06 PLACED AT PAPER BOOK PAGE NO.18 TO 24. 6. THE LD. DEPARTMENTAL REPRESENTATIVE FAIRLY CONCE DED THAT THE MATTER IS COVERED BY EARLIER DECISION BUT ARGUED THAT DEPRECA TION SHOULD NOT BE ALLOWED. 7. WE HAVE HEARD THE RIVAL PARTIES AND GONE THROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ISSUE RAISED IN THIS APPE AL IS SQUARELY COVERED BY THE DECISION OF THIS TRIBUNAL IN THE CASE OF ASSESSEE I TSELF AND LD. CIT(A) HAS FOLLOWED THE SAME. FOR CONVENIENCE, THE ORDER OF LD. CIT(A) IS REPRODUCED AS UNDER :- 5. FOR THE SAKE OF BREVITY IT MAY BE MENTIONED THA T IDENTICAL DISPUTES HAD ARISEN IN THE CASE OF APPELLANT IN THE PRECEDING THREE ASSESSMENT YEARS WHERE FOR IDENTICAL REASONS, BOOK RESULTS WERE ITA NO.06 /JAB/2011 & C.O. NO.04/JAB/2011 A.Y. 2006-07 4 REJECTED AND THE PROFIT WAS ESTIMATED @ 5% OF GROSS BUSINESS RECEIPTS AFTER EXCLUDING THE ITEMS OF INTEREST, RENT AND MAC HINERY HIRE CHARGES SHOWN AS OTHER INCOME. THE ISSUES INVOLVED IN A.Y. 2003-04, A.Y. 2004-05 & A.Y. 2005-06 WERE CONSIDERED BY THE HONB LE ITAT. IN ITA NO.258(JAB) 2008 ORDER DATED 13.05.2009 FOR A.Y .2005-06, THE HONBLE ITAT HAS UPHELD THE FINDINGS OF THE LD. CIT (A) THAT DEPRECIATION SHOULD BE ALLOWED FROM NET PROFIT RATE COMPUTED AT 5% OF THE GROSS CONTRACT RECEIPTS. HOWEVER, THE HONB LE ITAT AFTER REFERRING TO THE DECISION OF THE SPECIAL BENCH ITAT DELHI IN THE CASE OF CIT VS. ALLIED CONSTRUCTION 105 ITD 1 (SB) HELD THAT THE INCOME FROM INTEREST, RENT AND MACHINERY HIRE CHARGES CANN OT BE TREATED AS CONTRACT RECEIPTS. INTEREST INCOME HAS TO BE ASSES SED AS INCOME FROM OTHER SOURCES AND RENT AS INCOME FROM HOUSE PROPE RTY. THE HONBLE ITAT OBSERVED IN THIS REGARD AS UNDER:- AFTER CAREFUL CONSIDERATION OF RIVAL SUBMISSIONS, FACTS AND CIRCUMSTANCES OF THE CASE, ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE AND THE DECISION OF THE HONBLE SUPREME COURT RELIED UPON THE LD. D.R., WE ARE OF THE OPINI ON THAT SO FAR AS TAXABILITY OF INCOME FROM INTEREST, INSURANCE CL AIM, MACHINERY HIRE CHARGES AND RENT ARE CONCERNED, THE INCOME FROM RENT IS TO BE TAXED AS INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY SUBJECT TO DEDUCTIONS ADMISSIBLE UN DER THE LAW WHEREAS INCOME FROM OTHER SOURCES CANNOT BE TAXED AS BUSINESS INCOME, RATHER HAS TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES SINCE, FACTS OF THE CASE AND ISSUES INVOLVED ARE ID ENTICAL IN THE YEAR UNDER CONSIDERATION, RESPECTFULLY FOLLOWING THE DEC ISION OF HONBLE ITAT IN APPELLANTS OWN CASE, THE ACTION OF THE ASS ESSING OFFICER REJECTING THE BOOKS OF ACCOUNT U/S. 145 IS UPHELD. HOWEVER, SINCE, THERE IS NO CHANGE IN THE BUSINESS OF THE APPELLANT , I AM OF THE OPINION THAT IT WOULD BE JUSTIFIED IF NET PROFIT RATE OF 5% OF CONTRACT RECEIPTS BEFORE DEPRECIATION IS ESTIMATED THIS YEAR ALSO AS WAS DONE IN EARLIER YEARS. ACCORDINGLY, THE ASSESSING OFFICER IS DIREC TED TO ESTIMATE THE NET PROFIT @ 5% OF CONTRACT RECEIPTS BEFORE DEPRECI ATION. TOTAL CONTRACT RECEIPTS OF THE APPELLANT WERE OF RS.6,62, 34,127/- ONLY. ITA NO.06 /JAB/2011 & C.O. NO.04/JAB/2011 A.Y. 2006-07 5 8. WE FURTHER FIND THAT REVENUE HAS TAKEN A WRONG G ROUND THAT LD. CIT(A) HAS DIRECTED TO TREAT INTEREST INCOME, INSURANCE CLAIM AND MACHINERY HIRE CHARES AS PART OF BUSINESS RECEIPTS WHEREAS THE LD. CIT(A) IN HIS CONCLUDING PARAGRAPH HAS HELD AS UNDER :- AS HELD BY THE HONBLE ITAT IN EARLIER YEARS, THE ASSESSING OFFICER IS DIRECTED TO COMPUTE INCOME FROM HOUSE PR OPERTY IN RESPECT OF RENT RECEIVED OF RS.63,000/- AFTER DEDUCTING ALL OWABLE DEDUCTIONS AND THE OTHER ITEMS OF INCOME I.E. INTEREST; INTERE ST OF I.T. REFUND AND MACHINERY HIRE CHARGES ARE TO BE TREATED AS INCOME FROM OTHER SOURCES. ACCORDINGLY, THE ASSESSING OFFICER IS DI RECTED TO RE-COMPUTE THE TAXABLE INCOME OF THE APPELLANT. THUS, ALL THE SEVEN GROUNDS OF APPEAL ARE DISPOSED OF. 9. IN VIEW OF THE ABOVE, NO GRIEVANCE IS CAUSED TO REVENUE. 10. IN VIEW OF THE ABOVE, WE DO NOT SEE ANY INFIRMI TY IN THE ORDER OF LD. CIT(A). 11. THE CROSS OBJECTION FILED BY THE ASSESSEE IS AL SO NOT TENABLE AS THE LD. CIT(A) HAS FOLLOWED EARLIER ORDER OF ITAT IN TREATI NG THE INTEREST ON INCOME TAX REFUND, MACHINERY HIRE CHARGES ETC. AS INCOME FROM OTHER SOURCES. IN VIEW OF THE ABOVE, APPEAL FILED BY THE REVENUE AS WELL AS CROSS OBJECTION FILED BY THE ASSESSEE BOTH ARE DISMISSED. 10. IN THE RESULT, APPEAL AND C.O. BOTH ARE DISMISS ED. (ORDER PRONOUNCED IN THE OPEN COURT ON 27.03.2014) SD/- SD/- (BHAVNESH SAINI) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 27 TH MARCH, 2014 ITA NO.06 /JAB/2011 & C.O. NO.04/JAB/2011 A.Y. 2006-07 6 PBN/* COPY OF THE ORDER FORWARDED TO :- 1) APPELLANT 2) RESPONDENT 3) CIT (APPEALS) CONCERNED 4) CIT CONCERNED 5) D.R., ITAT, JABALPUR BENCH, JABALPUR 6) GUARD FILE. BY ORDER, SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, CAMP AT JABALPUR