Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2017 (5) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (5) TMI 5 - AT - Income TaxNature of the sales tax refund - Addition u/s 41 - Estimation of income where books of accounts have been rejected - Treating sales tax refund separately while determining the N.P rate - Held that:- The sales tax is payable on the sales affected by the assessee and the same is considered as deemed business receipts and the same is eligible as a business deduction in the year of payment in terms of section 43B of the Act. Where the sales tax which was paid earlier is refunded to the assessee in a subsequent financial year, it will therefore form part of the business receipts which is assessable under the head “profit and loss account of business and profession”. In the instant case, where the books of account have been rejected and the N.P. rate has been estimated by the Assessing Officer, the said receipts on accounts of sales tax refund have to be taken into consideration while determining the total business receipts/turnover and the estimation of N.P rate has to be determined accordingly. We are therefore of the view that the AO was not correct in treating sales tax refund separately while determining the N.P rate - Decided in favour of assessee Interest receipts - treated as “income from other sources” or “business income” - Held that:- Firstly, regarding interest on income tax refund and interest on sales tax refund, the same has rightly been treated by the Ld. CIT (A) as income from other sources and we donot see any infirmity in the same. Regarding interest on FDR, it is noted that the FDRs were placed with the Banks to obtain bank guarantee which was necessarily required to be furnished to the various government department and in absence of such bank guarantee, the assessee could not have proceeded with the execution of contracts with the government department. Further, there is no finding that the surplus funds have been invested by the assessee in the FDRs. Any interest on such FDR, therefore, must be treated as inextricably linked with the business of the assessee and therefore to be treated as business income and not as income from other sources. It is noted that similar view has been taken by Co-ordinate Bench in case of M/s Maya Construction (2014 (7) TMI 1237 - ITAT JODHPUR). The contention the ld. AR is therefore accepted and the order of ld CIT(A) to this extent stand modified. Addition by estimating N.P. rate - Held that:- After taking into consideration the sales tax refund, interest on FDR as business income, the N.P. rate declared by the assessee is better than the N.P. rate declared in the earlier years. Further, unlike A.Y. 2006-07 wherein specific instances have been highlighted by the Ld. CIT (A) in estimating the N.P. rate, no such instances which form the basis of reasonable estimation is seen in the year under consideration. Taken into consideration, all the facts and circumstances of the case, the trading addition made by the Assessing Officer is hereby deleted.- Decided in favour of assessee
|