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

MA 86/HYD/2015

• Counselvise Citation: [2015] 124 COUNSELVISE.COM (IT) 3617 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s) 21 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 04-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 13-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER M.A. NO. 86/HYD/2015 (IN ITA NO. 915/HYD/2013 ASSESSMENT YEAR : 2009-10) M/S L.N. CONSTRUCTIONS, HYDERABAD PAN AACFL 4104 C ASST. COMMISSIONER OF INCOME- TAX, CIRCLE 6(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI K. A. SAI PRASAD REVENUE BY: SHRI M. SITARAM DATE OF HEARING: 16/10/2015 DATE OF PRONOUNCEMENT: 04/11/2015 PER S. RIFAUR RAHMAN, A.M.: THIS MISCELLANEOUS APPLICATION IS FILED BY THE ASSE SSEE SEEKING RECTIFICATION OF THE MISTAKE ALLEGED TO HAVE CREPT IN TO THE ORDER OF THE TRIBUNAL IN ITA NO. 915/HYD/2013 DATED 17/09/2013. 2. IT IS THE CASE OF THE ASSESSEE THAT IN THE APPE AL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUND (IN GROUN D NO. 2): THE LD. CIT(A) ERRED IN ESTIMATING THE INCOME AT 6% ON SUB- CONTRACTS. THE LD. CIT(A) OUGHT TO HAVE DIRECTED THE AO TO E STIMATE THE INCOME AT 5% OF THE NET CONTRACT RECEIPTS AFTER DEDUCTING RE COVERIES AMOUNTING TO RS. 64,52,314/- AND ALSO OUGHT TO HAVE DIRECTED D EDUCTION OF SALARY AND INTEREST TO PARTNERS AS PER THE PROVISIONS OF 40(B ) OF THE IT ACT. 3. THE ITAT DISPOSED OF THE SAID GROUND BY OBSERVIN G AS UNDER: '8; AS FOR THE DEDUCTION IN RESPECT OF INTEREST AND REMUNERATION TO PARTNERS, WE FIND THAT THE DIRECTION OF THE CIT(A) IN THIS BEHALF IS IN CONSONANCE WITH THE DECISION OF THE TRIBUNAL IN TH E CASE OF TEJA 2 M.A. NO. 86/HYD/2015 M/S LN CONSTRUCTIONS. CONSTRUCTIONS IN ITA NO. 1191/HYD/2011 FOR A Y 200 6-07. WE DIRECT THE AO TO FOLLOW THE DECISION OF TEJA CONSTRUCTION(SUP RA) AND 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 D EEMED TO HAVE BEEN ALREADY GIVEN FULL EFFECT WHILE ESTIMATING THE IN COME OF THE ASSESSEE. HENCE WITH RESPECT TO DEPRECIATION, THE GROUND OF APPEAL RAISED BY THE REVENUE IS ALLOWED. 10. AS REGARDS THE CLAIM OF THE ASSESSEE TOWARDS SE IGNIORAGE CHARGES, IT IS CLEAR THAT THE TURNOVER IS TO BE ADOPTED AFTER REDUCING THE RECOVERIES MADE BY THE PRINCIPAL CONTRACTOR. THE APEX COURT I N 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 BY THE GOVERNM ENT TO THE APPELLANT; THE INCOME OR PROFITS DERIVED BY THE APPELLANT FROM SU CH CONTRACTS HAD TO BE DETERMINED ON THE BASIS OF THE VALUE OF THE CONTR ACTS REPRESENTED BY THE CASH PAYMENTS RECEIVED BY THE APPELLANT FROM THE GOVERNMENT EXCLUSIVE OF THE COST OF THE MATERIALS RECEIVED FO R 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 THE TOTAL CONTR ACT RECEIPTS, THE SEIGNIORAGE CHARGES SHALL BE REDUCED BY HIM FROM T HE TOTAL CONTRACT RECEIPTS FOR THE PURPOSE OF ESTIMATING THE PROFIT. 4. THE LD. AR HAD PRESSED ONLY THE DEDUCTION OF RS. 64,52,314 OUT OF TOTAL CONTRACT RECEIPTS. THE LD. A R ARGUED THAT THE DIRECTION OF THE HONBLE ITAT TO THE AO IN PARA 11 IS AS UNDER: 11. ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT(A ) ON THIS ISSUE AND DIRECT THE AO THAT WHILE COMPUTING THE TOTAL CONTR ACT RECEIPTS, THE SEIGNIORAGE CHARGES SHALL BE REDUCED BY HIM FROM T HE TOTAL CONTRACT RECEIPTS FOR THE PURPOSE OF ESTIMATING THE PROFIT. 5. WHILE GIVING EFFECT TO THE ABOVE DIRECTION OF TH E ITAT, THE AO BY REFERRING TO THE EARLIER ORDER OF ITAT IN THE AS SESSEES OWN CASE IN ITA NO. 1695/HYD/2011 IN AY 2007-08 HAS GIVEN ADJU STMENT TO ONLY SEIGNIORAGE. WHEREAS THE ASSESSEE HAS INCURRED OTHE R NON-PROFIT TRANSACTIONS WITHOUT ANY PROFIT ELEMENT DURING THIS YEAR, WHICH THE AO HAS FAILED TO APPRECIATE AND GIVE DEDUCTION. THEY A RE AS UNDER: ROYALTY RS. 8,57,626 SEIGNIORAGE RS.21,33,147 VAT RS.17,10,473 OTHER DEPT. RECOVERIES RS.17,51,068 RS.64,52,314 ========== 3 M.A. NO. 86/HYD/2015 M/S LN CONSTRUCTIONS. 6. WE FIND THAT THERE IS A MERIT IN THE LD. ARS AR GUMENT. THE HONBLE SUPREME COURT IN THE CASE OF BRIJ BHUSHANLA L KUMAR, 115 ITR 524 HAS HELD AS UNDER: 'SINCE NO ELEMENT OF PROFIT WAS INVOLVED IN THE TUR NOVER REPRESENTED BY THE COST OF THE MATERIALS SUPPLIED BY THE GOVERNM ENT TO THE APPELLANT; THE INCOME OR PROFITS DERIVED BY THE APPELLANT FR OM SUCH CONTRACTS HAD TO BE DETERMINED ON THE BASIS OF THE VALUE OF THE CON TRACTS REPRESENTED BY THE CASH PAYMENTS RECEIVED BY THE APPELLANT FROM T HE GOVERNMENT EXCLUSIVE OF THE COST OF THE MATERIALS RECEIVED FO R BEING USED, FIXED OR INCORPORATED IN THE WORKS. 6.1 IN THE AY 2007-08, THE ONLY ISSUE WAS SEIGNORAG E AND THEREFORE FOLLOWING THE JUDGMENT OF THE HONBLE SUP REME COURT (SUPRA), THE ITAT HAD DIRECTED THE AO TO REDUCE THE SAME FROM THE TOTAL CONTRACT RECEIPTS BUT IN THE AY BEFORE US, TH E ASSESSEE HAD INCURRED OTHER EXPENDITURE ALSO WHICH NEEDS TO BE R EDUCED. THEREFORE, WE ARE OF THE OPINION THAT IN THE INTERE ST OF JUSTICE AND FOR THE SAKE OF CLARITY, OUR DIRECTION NEEDS TO BE MODI FIED BY SUBSTITUTING PARA 11 OF THE ORDER WITH THE FOLLOWING PARA: 11. ACCORDINGLY WE CONFIRM THE ORDER OF THE CIT(A) ON THIS ISSUE. THE AO IS DIRECTED TO VERIFY THE ABOVE SAID TRANSACTIONS WITHOUT THE PROFIT ELEMENT AND REDUCE APPLICABLE CHARGES TO THE ASSESSEE WHICH IS RELAT ING TO THE SUB-CONTRACTING BUSINESS OF THE ASSESSEE, NOT ONLY SIEGNIORAGE BUT INVOLVING ALL OTHER TRANSACTIONS W ITHOUT THE PROFIT ELEMENT OUT OF THE TOTAL CONTRACT RECE IPTS FOR THE PURPOSE OF ESTIMATING THE PROFIT. 7. IN THE RESULT, MA FILED BY ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 4 TH NOVEMBER, 2015. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 4 TH NOVEMBER, 2015 4 M.A. NO. 86/HYD/2015 M/S LN CONSTRUCTIONS. KV COPY TO:- 1) M/S LN CONSTRUCTIONS, PLOT NO. 20, RAGHVA COLON Y, PHASE 1, SIKH VILLAGE, SECUNDERABAD. 2) ACIT, CIRCLE 6(1), HYDERABAD. 3) CIT(A)-IV, HYDERABAD 4) CIT-III, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. DESCRIPTION D AT E INT 1 . DRAFT DICTATED ON SR.P.S./ P.S 2 . DRAFT PLACED BEFORE AUTHOR SR.P.S/P S 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./ P.S 6 . KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S . 7 . FILE SENT TO THE BENCH CLERK SR.P.S./ P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 5 M.A. NO. 86/HYD/2015 M/S LN CONSTRUCTIONS.