ACIT, Cir-6(1), Hyd, Hyderabad V. M/s Rhishi Projects, Hyderabad

ITA 982/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61832 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 20-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.982/HYD/2011 : ASSESSMENT YEAR 2 006-07 ASST. COMMISSIONER OF INCOME - TAX CIRCLE 6(1), HYDERABAD V/S. M/S. RISHI PROJECTS, HYDERABAD ( PAN - AAGFR 1047 Q ) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GANGADHAR PANDA RESPONDENT BY : SHRI K.A.SAI PRASAD DATE OF HEARING 1 2 .4.2012 DATE OF PRONOUNCEMENT 1 2 .4.2012 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGA INST THE ORDER OF THE CIT(A) GUNTUR DATED 28.1.2011 FOR THE ASSESSMENT YE AR 2006-07. 2. EFFECTIVE GROUNDS OF THE REVENUE IN THIS APPEAL READ AS FOLLOWS- 1) THE ORDER OF THE CIT(A) IS ERRONEOUS AND BAD IN LAW. 2) THE CIT(A) ERRED IN ESTIMATING THE PROFIT @ 5% O N THE SUB-CONTRACT RECEIPTS SINCE THE ITAT IN THE CASE OF SRI M.SRINIV ASA RAO, PROP. M/S. PAVITRA CONSTRUCTIONS IN ITA NO55/HYD/2010 DAT ED 30.12.2010 HAS HELD THAT ESTIMATION OF PROFIT @ 8% IS REASONABLE IN THE CASE OF A SUB-CONTRACTOR. 3) THE CIT(A) ERRED IN DIRECTING TO ALLOW DEPRECIAT ION AND REMUNERATION TO PARTNERS FROM THE PROFIT ESTIMATED. THE ITAT IN THE ITA NO982/HYD/11. M/S. RISHI PROJECTS, HYDERABAD 2 ABOVE REFERRED DECISION HAS HELD THAT NO FURTHER DE DUCTION CAN BE ALLOWED FROM THE PROFIT ESTIMATED @ 8% OF THE SUB-C ONTRACT RECEIPTS. 2. WE HEARD BOTH THE PARTIES AND PERUSED THE ORDER S OF THE LOWER AUTHORITIES. ASSESSEE IS ENGAGED IN THE EXECUTION O F CONTRACT WORKS/SUB-CONTRACT WORKS, AND THE DISPUTE INVOLVED IN THE PRESENT APPE AL, IN THE FIRST PLACE RELATES TO RATE TO BE ADOPTED FOR ESTIMATING THE INCOME OF THE ASSESSEE OUT OF THE CONTRACT RECEIPTS; AND THEN ALLOWABILITY OF DEPRECI ATION AND REMUNERATION TO PARTNERS OUT OF SUCH INCOME ESTIMATED. THE ASSESSIN G OFFICER ESTIMATED THE PROFIT OF THE ASSESSEE AT 12% FOR DIRECT WORKS EXECUTED BY THE ASSESSEE AND 8% ON SUB-CONTRACT WORKS, CLEAR OFF DEPRECIATION AND 40(B ) PAYMENTS AND DETERMINED THE TOTAL INCOME OF RS.1,29,07,656. ON APPEAL THE CIT(A), DIRECTED ESTIMATION OF PROFIT IN RESPECT OF DIRECT CONTRACT WORKS EXECU TED BY THE ASSESSEE ON ITS OWN AT 10%, AND THE WORKS EXECUTED BY THE ASSESSEE ON S UB-CONTRACT BASIS AT 5%, AND ALSO DIRECTED ALLOWANCE OF DEDUCTIONS TOWARDS D EPRECIATION AND REMUNERATION TO PARTNERS AGAINST THE INCOMES DETERM INED ON THAT BASIS. 3. ON CAREFUL CONSIDERATION OF THE MATTER, WE FIN D THAT AS FAR AS RATE TO BE ADOPTED FOR ESTIMATION OF INCOME IS CONCERNED, T HIS TRIBUNAL HAS BEEN CONSISTENTLY HOLDING, AS IN ITS RECENT DECISION IN ITA NO.1191/HYD.2011 IN ACIT V/S. TEJA CONSTRUCTIONS SECUNDERABAD FOR THE ASSESS MENT YEAR 2006-07 VIDE ORDER DATED 17 TH FEBRUARY, 2012, TO WHICH BOTH OF US ARE PARTIES, T HAT ESTIMATION OF INCOME AT 9% IN RESPECT OF THE CONTRACTS TAKEN B Y THE ASSESSEE ITSELF AND EXECUTED BY IT; AT 8% IN RESPECT OF RECEIPTS FROM SUB-CONTRACT WORKS TAKEN FROM OTHERS AND EXECUTED BY THE ASSESSEE; AND 4% OF THE GROSS RECEIPTS IN RESPECT OF CONTRACTS GIVEN BY THE ASSESSEE TO THIRD PARTIES ON SUB-CONTRACT BASIS, AS REASONABLE. IN CONSONANCE WITH THE VIEW TAKEN IN SIMILAR CASES, WE SET ASIDE THE IMPUGNED ORDER OF THE CIT(A) AND DIRECT THE ASS ESSING OFFICER TO RECOMPUTE ITA NO982/HYD/11. M/S. RISHI PROJECTS, HYDERABAD 3 THE INCOME OF THE ASSESSEE AT 9% OF THE GROSS RECEI PTS IN RESPECT OF CONTRACTS TAKEN ON ITS OWN AND EXECUTED BY THE ASSESSEE ITSEL F, AND AT 8% IN RESPECT TO RECEIPTS FROM SUB-CONTRACT WORKS TAKEN FROM OTHERS AND EXECUTED BY THE ASSESSEE. REVENUES GROUNDS ON THIS ASPECT ARE PAR TLY ALLOWED. 9. AS FOR THE ALLOWABILITY OF DEPRECIATION OUT OF ESTIMATED INCOME IS CONCERNED, WE FIND THAT THIS TRIBUNAL IN SIMILAR MA TTERS, AS IN ITA NO.1191/HYD/2011 IN THE CASE OF M/S. TEJA CONSTRUCT IONS, SECUNDERABAD, NOTED ABOVE, HAS BEEN CONSISTENTLY HOLDING THAT DEPRECIAT ION BEING AN ALLOWABLE DEDUCTION UNDER S.32 OF THE ACT, AND SINCE ALL OUT GOINGS FALLING UNDER S.30 TO 38 ARE DEEMED TO HAVE BEEN ALLOWED WHILE ESTIMATING TH E INCOME, NO SEPARATE DEDUCTION IS ALLOWABLE IN RESPECT OF THE SAME OUT O F THE ESTIMATED INCOME IN THIS RESPECT. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE ORDER OF THE CIT(A) ON THIS ASPECT, AND RESTORE THE ORDER OF THE DISALLOWANCE M ADE BY THE ASSESSING OFFICER. 10. AS FOR THE DEDUCTION IN RESPECT OF REMUNERATI ON TO PARTNERS, HOWEVER, WE FIND THAT THE DIRECTION OF THE CIT(A) I N THIS BEHALF IS IN CONSONANCE WITH THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS (SUPRA). IN THIS VIEW OF THE MATTER, WE UPHOLD THE ORDER OF THE CIT(A) ON THIS ASPECT. 11. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 12.4.2012 SD/- SD/- (ASHA VIJAYARAGHAVAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/- 12 TH APRIL, 2012 ITA NO982/HYD/11. M/S. RISHI PROJECTS, HYDERABAD 4 COPY FORWARDED TO: 1. M/S. RISHI PROJECTS, DOOR NO.6 - 3 - 1091/13 TO 15, F. NO.319, RAJBHAVAN ROAD, HYDERABAD 2 . ASST. COMMISSIONER OF INCOME - TAX , CIRCLE 6 (1) HYDERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) , GUNTUR 4. COMMISSIONER OF INCOME - TAX III HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S