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2013 (11) TMI 409 - AT - Income TaxEstimation of income from works contract business - rejection of books of accounts - Disallowance of freight charges u/s 40(a)(ia) - TDS deduction u/s 194C - Held that:- CIT(A) has accepted the contentions of the assessee that the profit from sub-contract works will be lower than the main contract works and accordingly maintained a difference of 2% in the rate of profit estimated for main contract works and sub-contract works. There should not be any dispute that the income estimated for a particular assessee would depend upon the facts and circumstances prevailing in that case and such kind of estimates cannot be generalized or standardised - assessee himself has declared a profit of 5.20% after depreciation on the combined Gross receipts - assessee deserves further reduction in the estimate made by the Ld. CIT(A) in view of the huge depreciation benefit available to the assessee - the matter would meet the ends of justice if the profit from main contract works is estimated @ 6.5% of the relevant net contract receipts. Since the Learned CIT(A) has maintained a difference of 2% between the income estimated for main contract works and sub-contract works, we also direct the assessing officer to estimate the income sub-contract works @ 4.5% of the relevant net contract receipts - Decided in favour of assessee. Business income or capital gain - Income from other sources - Interest on Fixed deposit receipts - Held that:- facts were that on account of delay in payment of contract receipts, interest was paid additionally with reference to such delayed receipts, and, therefore, such interest was only accretion to the assessee’s receipts from the contract works and was attributable to and incidental to the business carried on by it. There being a direct nexus between the contract receipts and interest thereon in the said case, the interest income was held as business income, whereas in the appellant’s case, the interest income did not flow directly from the contract receipts, and, therefore, it cannot be said that the interest income had a direct nexus with such receipts, and, accordingly, it cannot be treated as business income of the appellant. Interest earned on bank deposits has to be assessed separately, even if the income from contract works is estimated - Following decision of CIT Vs. Govinda Choudhary and Sons [1992 (4) TMI 8 - SUPREME Court] - Decided against Assessee. Disallowance prescribed under section 40(a)(ia) is a technical disallowance, which shall be attracted only if there is a failure on the part of the assessee to deduct and pay the TDS amounts as per the relevant provisions of the Act. It is also further seen that the expenses so disallowed can be claimed as expenditure in the year in which such failure is made good. The modalities prescribed in sec. 40(a)(ia) would show that the disallowance prescribed in that section is not an absolute disallowance to be made once for all, but it is only deferment of allowance of expenditure for non-compliance of TDS provisions. Where as, in the case of disallowances prescribed in other provisions like sec. 40A(1), 40A(3) etc., they are absolute disallowances, which are not allowed as expenses at all in computing the business income. Further such disallowances shall apply uniformly to all assessees - disallowance can be made under section 40(a)(ia) of the Act independently, even if the business income is estimated after rejecting the book results.
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