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2023 (7) TMI 1081 - ITAT AHMEDABADDeduction u/s 80IA(4) - whether assessee is not a contractor, but developer of infrastructure facilities? - assessee, a private limited company, is engaged in the business of construction activity and development of infrastructure and other projects i.e., irrigation canal, road construction - HELD THAT:- The assessee has undertaken projects which are in the nature of infrastructure facilities in the capacity of the developer as admitted by the ld. CIT-A. Accordingly, we concur with the findings of the Ld. CIT(A) that the assessee has undertaken the projects of infrastructure facility as envisaged under the provisions of section 80 IA(4A) of the Act in the capacity of the developer. The explanation below to section 80IA(13) should be read in such a way that the object of the provisions of section 80IA (4) of the Act should not be defeated. As discussed above, the sole purpose of the benefit of deduction under section 80IA(4) of the Act was to bring the development in the area of infrastructure facilities for which the country was in deficient. Thus, if the literal meaning is drawn from the word of the developer and accordingly the deduction of the benefit given under section 80 IA of the Act is denied, then the object for which the provisions of section were brought under the statute will be defeated. Therefore, the provisions of section 80IA (4) of the Act should be read in such a way that the object of the statute should not be defeated. We are inclined to hold that the assessee who is only engaged in the activity of development of infrastructure facility is eligible to claim the deduction u/s 80IA(4). AR before us submitted `that projects in respect of which the deduction was claimed by the assessee were of identical nature. Therefore, we have analyzed one contract/agreement with the government on sample basis. The findings given with respect to the contract elaborated above shall also be applied in all the contracts which were subject to the deduction under section 80-IA(4) of the Act. In view of the above, the grounds of appeal of the Revenue with respect to the admissibility of the claim of the assessee under section 80-IA (4) of the Act are hereby dismissed. Decided in favour of assessee. Net interest income from the eligible profit for calculation of deduction u/s 80IA of the Act - We hold that only net interest income should be excluded while computing the eligible income u/s 80IA(4) of the Act. Hence, the ground of appeal of the Revenue is hereby dismissed. Disallowance of employee contribution to the provident fund u/s 36(1)(va) r.w.s. 2(24)(x) - HELD THAT:- The deduction for the payment made under section 36(1)(va) would be allowed in respect of employee’s contribution towards ESI if such payment is made on/before due date as specified under the relevant Act. Thus, the payment made by the assessee on account of employee contribution towards ESI after the due date stands disallowed in view of the judgment in the case of M/s Checkmate Facility and Electronics Solutions Pvt. Ltd. [2018 (10) TMI 994 - GUJARAT HIGH COURT] We uphold the order of the AO. Hence, the ground of appeal of the Revenue is allowed. GP estimation - best judgement - rejection of books of accounts - HELD THAT:- Best judgment assessments cannot be based on wild guess, rather it should be based on some materials available on hand relating to the assessee which should be taken into account and that too after providing the opportunity of being heard to the assessee as well as considering the provisions of the Act and Rules of Income Tax Rules. After rejecting book results, the Assessing Officer has to determine the income in reasonable and scientific manner after considering the results/ performance of the earlier years or some comparable cases. We note that the foundation of rejecting the books of accounts and estimating the gross profit of the assessee was based on the fact that the assessee has made purchases from the shell companies. However, we note that there was no purchase made by the assessee from the so-called alleged shell companies and therefore we are of the view that no addition is warranted in the year under consideration. As such the gross profit declared by the assessee in the books of accounts should be accepted as it is. Thus, the ground of appeal of the assessee for the AY 2009-10 is allowed and ground of appeal of the Revenue is dismissed. The average profit declared by the assessee in the last immediate three preceding year can be adopted as the parameter for determining the income of the assessee after rejecting the books of accounts. The average profit of the assessee in the last three years i.e. A.Y. 2007-08 to A.Y. 2009-10 stands at 19.30% (21.40 + 18.82 + 17.43) whereas the original Gross profit of A.Y. 2010-11 is declared at 18.95% of the gross turnover. On perusal of the order of the authorities below, nothing was found out whether there was any change in the facts and circumstances of the year under consideration viz a viz in the earlier years. There was no change in the business activity of the assessee. Accordingly, we workout the differential amount of gross profit at .35% (average gross profit of last 3 years @ 19.35% – current year GP @ 18.95) of the turnover and direct the AO to make an addition of Rs. 68,36,22056.00 being .35% of Rs. 201,06,53,107.00 only. Thus, the ground of appeal of the assessee for the AY 2010-11 is partly allowed and ground of appeal of the Revenue is dismissed. Likewise, for the AY 2011-12 we note that the average gross profit of the assessee in the last three years i.e. A.Y. 2008-09 to A.Y. 2010-11 stands at 18.52% (18.82 + 17.43 + 19.30) whereas the original Gross profit of A.Y. 2011-12 is declared at 18.95% of the gross turnover. Thus, it is seen that the assessee has declared greater gross profit than of the earlier years. Accordingly, we are of the view that no addition is warranted in the given facts and circumstances. Thus, the ground of appeal of the assessee for the AY 2011-12 is allowed and ground of appeal of the Revenue is dismissed.
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