The ACIT, Circle-1,, Rajahmundry v. M/s Hindustan Engg Syndicate., Rajahmundry

ITA 321/VIZ/2008 | 2005-2006
Pronouncement Date: 06-01-2010 | Result: Dismissed

Appeal Details

RSA Number 32125314 RSA 2008
Assessee PAN AABFA8177L
Bench Visakhapatnam
Appeal Number ITA 321/VIZ/2008
Duration Of Justice 1 year(s) 6 month(s) 26 day(s)
Appellant The ACIT, Circle-1,, Rajahmundry
Respondent M/s Hindustan Engg Syndicate., Rajahmundry
Appeal Type Income Tax Appeal
Pronouncement Date 06-01-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 06-01-2010
Assessment Year 2005-2006
Appeal Filed On 10-06-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO.321/VIZAG/2008 ASSESSMENT YEAR : 2005-06 ACIT CIRCLE-1 RAJAHMUNDRY M/S. HINDUSTAN ENGINEERING SYNDICATE RAJAHMUNDRY (APPELLANT) VS. (RESPONDENT) PAN NO.AABFA 8177L APPELLANT BY: SHRI G.S.S. GOPINATH DR RESPONDENT BY: SHRI A.V. RAGHURAM ADVOCATE ORDER PER SHRI S.K. YADAV JUDICIAL MEMBER:- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF THE CIT(A) ON A SOLITARY GROUND THAT CIT(A) HAS ERRED IN ALLOW ING THE INTEREST ON PARTNERS CAPITAL AND REMUNERATION PAID TO THE PART NERS FROM THE INCOME ESTIMATED AT 12.5% OF THE GROSS RECEIPT. WE HAVE H EARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND DOCUMENTS PLACED ON RECORD. THE FACTS IN BRIEF BOR NE OUT FROM THE RECORD ARE THAT THE ASSESSEE DID NOT MAINTAIN THE PROPER BOOKS OF ACCOUNTS AND THE EXPENDITURES CLAIMED BY THE ASSESSEES WERE NOT OPEN TO VERIFICATIONS ON ACCOUNT OF SELF-MADE VOUCHERS. THE ASSESSING OFFIC ER REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE INCOME OF THE ASSESSEES @ 12.5% ON THE GROSS RECEIPTS AS REDUCED BY THE SUB-CONTRACT WORKS ENTRU STED BY THE ASSESSEE FIRM TO OTHERS LESS DEPRECIATION. 2. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT( A) WITH THE SUBMISSIONS THAT ATLEAST THE INTEREST PAID ON THE B ORROWED CAPITALS AND THE PARTNERS REMUNERATIONS BE ALSO ALLOWED FROM THE EST IMATED INCOME. THE CIT(A) EXAMINED THIS ISSUE AND HAS DIRECTED THE A.O . TO ALLOW THE INTEREST RELATING TO CAPITALS OF THE PARTNERS AND REMUNERATI ONS PAID TO THEM. THE CIT HOWEVER DID NOT ALLOW THE OTHER CLAIM OF THE ASSESS EES FOR FURTHER DEDUCTION OF INTEREST ON LOAN TO THIRD PARTIES AND FINANCIAL INSTITUTIONS. 2 3. THE ORDER OF THE CIT(A) WAS NOT ACCEPTED BY THE REVENUE AND AN APPEAL AGAINST THE ORDER OF THE CIT(A) IS PREFERRED BEFORE THE TRIBUNAL. 4. DURING THE COURSE OF HEARING THE LD. D.R. HAS P LACED A RELIANCE UPON THE JUDGEMENT OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. GIAN CHAND LABOUR CONTRACTORS 316 ITR 127 IN SUPPOR T OF HIS CONTENTIONS THAT ONCE THE NET PROFIT IS ESTIMATED BY THE ASSESS ING OFFICER THE SEPARATE DEDUCTIONS UNDER DIFFERENT HEADS CANNOT BE ALLOWED. 5. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND HAS PLACED A RELIANCE UPON THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S. MANIKANTA CONSTRUCTIONS VS. ADDL. CIT ITA NO.580/HYD/09 IN SU PPORT OF HIS CONTENTIONS THAT IN THE CASE OF A CIVIL CONTRACTOR THE NET PROF IT IS BEING ESTIMATED AT 8% BEFORE DEPRECIATION INTEREST AND REMUNERATIONS TO THE PARTNERS. HE FURTHER CONTENDED THAT IF THE INTEREST AND REMUNERATIONS IS ALLOWED FROM THE ESTIMATED PROFIT THE NET PROFIT WOULD COME TO 8% O F THE GROSS RECEIPT. HE HAS ALSO FILED A COPY OF THE TRIBUNALS ORDER IN TH E CASE OF M/S. MANIKANTA CONSTRUCTIONS VS. ADDL. CIT ITA NO.580/HYD/09 AND A CIT VS. T. SUBBA RAO & CO. ITA NO.1670/HYD/08. 6. HAVING GONE THROUGH THE ORDERS OF THE LOWER AUTH ORITIES IN THE LIGHT OF RIVAL SUBMISSIONS AND THE ORDERS OF THE TRIBUNALS WE FIND THAT CIT(A) HAS EXAMINED THE ISSUE IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS AND ALSO PROVISIONS OF SECTION 44AD OF THE ACT. AS PER SECT ION 44AD THE NET PROFIT AT 8% OF THE GROSS RECEIPTS IS CONSIDERED TO BE REASON ABLE AND APPROPRIATE. DURING THE COURSE OF HEARING THE REVENUE HAS NOT P LACED ANYTHING ON RECORD TO ESTABLISH THAT IF THE REMUNERATIONS AND INTEREST ARE ALLOWED THE NET PROFIT ESTIMATED BY THE CIT(A) WOULD SUBSTANTIALLY BE REDU CED. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND HAS CONTENDED THAT E VEN AFTER ALLOWANCE OF THIS REMUNERATION INTEREST THE NET PROFIT RATE WOU LD NOT GO LESS THAN 8% OF THE GROSS RECEIPTS. IN THE LIGHT OF THESE FACTS W E FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) WHO HAS ADJUDICATED THE ISSUE I N THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS. WE ACCORDINGLY CONFIRM TH E SAME. 3 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DIS MISSED. PRONOUNCED IN THE OPEN COURT ON 6.1.2010 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM DATED 6 TH JANUARY 2010 COPY TO 1 THE ACIT CIRCLE-1 AAYAKAR BHAVAN VEERABHADRAPU RAM RAJAHMUNDRY 2 M/S. HINDUSTAN ENGINEERS SYNDICATE 74-5-9/1 PRA KASH NAGAR RAJAHMUNDRY 3 THE CIT RAJAHMUNDRY 4 THE CIT(A) RAJAHMUNDRY 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM