L.N.Constructions, Hyderabad V. ACIT, Circle-6(1), Hyderabad

ITA 915/HYD/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69821 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 30-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJENDRA PRASAD
• Assessee Lawyers: RAVI SHESHAGIRI RAO
• Keywords: Depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 915/HYD/2013 ASSESSMENT YEAR 2009-10 M/S. L.N. CONSTRUCTIONS HYDERABAD PAN: AACFL4104C VS. THE ACIT CIRCLE-6(1) HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SRI RAVI SHESHAGIRI RAO RESPONDENT BY: SRI RAJENDRA PRASAD DATE OF HEARING: 17.09.2013 DATE OF PRONOUNCEMENT: 17.09.2013 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-IV, HYDERABAD DATED 11.3.2013 FOR ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APP EAL: 1. THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS TO THE EXTENT IT IS PREJUDICIAL TO THE APPELLANT. 2. THE LEARNED CIT(A) ERRED IN ESTIMATING THE INCOM E AT 6% ON SUB CONTRACTS. THE LEARNED CIT(A) OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO ESTIMATE THE INCOME AT 5% OF THE NET CONTRACT RECEIPTS AFTER DEDUCTING RECOVERIES AMOUNTING TO RS. 64,52,314/- AND ALSO OUGHT TO HAVE DIRECTED DEDUCTION OF SALARY AND INTEREST TO PARTNERS AS PER THE PROVISIONS OF 4 0(B ) OF THE IT ACT. 3. IN THE PRESENT CASE, THE AO OBSERVED THAT MOST O F THE BILLS AND VOUCHERS SUBMITTED IN SUPPORT OF PURCHASE OF MATERI ALS LIKE METAL, BRICKS, CEMENT, GRAVEL, SAND AND STEEL WERE SELF-MA DE. HE FURTHER OBSERVED THAT THE VOUCHERS MAINTAINED FOR SITE EXPE NSES, REPAIRS AND MAINTENANCE, WADDERA CHARGES WERE SELF-MADE AND GEN UINENESS OF THE SAME IS DOUBTED. ACCORDINGLY, HE REJECTED THE BOOKS OF ACCOUNT ITA NO. 915/HYD/2013 M/S. L.N. CONSTRUCTIONS ================== 2 AND ESTIMATED THE INCOME OF THE ASSESSEE AT 8% OF G ROSS RECEIPTS. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). 4. THE CIT(A) FOLLOWING THE DECISION OF M/S. E. ESW ARA REDDY & CO. V. ACIT IN ITA NO. 668/HYD/2009 DATED 31.1.2011 AND ALSO THE ORDER OF THE CO-ORDINATE BENCH OF HYDERABAD IN THE CASE OF TEJA CONSTRUCTIONS (129 TTJ (HYD) (UO) 57), DIRECTED THE AO TO ESTIMATE THE INCOME OF THE ASSESSEE AT 8% OF MAIN CONTRACT R ECEIPTS AND 6% OF SUB-CONTRACT RECEIPTS. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED AR RELIED ON THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2007-08 IN ITA NO. 169 5/HYD/2011 DATED 28.9.2012 WHEREIN THE TRIBUNAL HELD AS FOLLOW S: '8. AS FOR THE DEDUCTION IN RESPECT OF INTEREST AND REMUNERATION TO PARTNERS, WE FIND THAT THE DIRECTIO N OF THE CIT(A) IN THIS BEHALF IS IN CONSONANCE WITH THE DEC ISION OF THE TRIBUNAL IN THE CASE OF TEJA CONSTRUCTIONS IN I TA NO. 1191/HYD/2011 FOR AY 2006-07. WE DIRECT THE AO TO FOLLOW THE DECISION OF TEJA CONSTRUCTION (SUPRA) AN D REWORK THE ASSESSMENT IN ACCORDANCE WITH LAW. 9. REGARDING DEPRECIATION, IT IS ALLOWABLE U/S 32 O F THE IT ACT AND IT FALLS UNDER THE PROVISIONS OF SECTION 30 TO 38 AND BE DEEMED TO HAVE BEEN ALREADY GIVEN FULL EFFEC T WHILE ESTIMATING THE INCOME OF THE ASSESSEE. HENCE WITH RESPECT TO DEPRECIATION, THE GROUND OF APPEAL RAISE D BY THE REVENUE IS ALLOWED. 10. AS REGARDS THE CLAIM OF THE ASSESSEE TOWARDS SEIGNIORAGE CHARGES, IT IS CLEAR THAT THE TURNOVER IS TO BE ADOPTED AFTER REDUCING THE RECOVERIES MADE BY THE PRINCIPAL CONTRACTOR. THE APEX COURT IN THE CASE OF BRIJ BHUSHANLAL (SUPRA) HELD AS UNDER: 'SINCE NO ELEMENT OF PROFIT WAS INVOLVED IN THE TUR NOVER REPRESENTED BY THE COST OF THE MATERIALS SUPPLIED B Y THE GOVERNMENT TO THE APPELLANT, THE INCOME OR PROFITS DERIVED BY THE APPELLANT FROM SUCH CONTRACTS HAD TO BE DETERMINED ON THE BASIS OF THE VALUE OF THE CONTRAC TS REPRESENTED BY THE CASH PAYMENTS RECEIVED BY THE APPELLANT FROM THE GOVERNMENT EXCLUSIVE OF THE COST OF ITA NO. 915/HYD/2013 M/S. L.N. CONSTRUCTIONS ================== 3 THE MATERIALS RECEIVED FOR BEING USED, FIXED OR INCORPORATED IN THE WORKS. ' 11. ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT(A) ON THIS ISSUE AND DIRECT THE AO THAT WHILE COMPUTING T HE TOTAL CONTRACT RECEIPTS, THE SEIGNIORAGE CHARGES SHALL BE REDUCED BY HIM FROM THE TOTAL CONTRACT RECEIPTS FOR THE PURPOSE OF ESTIMATING THE PROFIT.' 6. CONSIDERING THE EARLIER ORDER OF THE TRIBUNAL IN AS SESSEES OWN CASE, WE ARE INCLINED TO DIRECT THE AO TO RECOM PUTE THE INCOME OF THE ASSESSEE IN ACCORDANCE WITH THAT ORDER, AFTE R GIVING ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH SEPTEMBER, 2013. SD/- (SAKTIJIT DEY) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 17 TH SEPTEMBER, 2013 COPY FORWARDED TO: 1. M/S. L.N. CONSTRUCTIONS, C/O. SRI S. RAMA RAO, A DVOCATE, FLAT NO. 102, SHRIYA'S ELEGANCE, H. NO. 3-6-643, ST. NO. 9, HIMAYATHNAGAR, HYDERABAD-500 029. 2. THE ACIT, CIRCLE-6(1), HYDERABAD. 3. THE CIT(A)-IV, HYDERABAD. 4. THE CIT-III, HYDERABAD. 5. THE DR 'A' BENCH, ITAT, HYDERABAD. TPRAO