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2023 (11) TMI 980 - AT - Income TaxAllowing depreciation after estimation of income - AO did not allow any depreciation claimed by the assessee, stating that such a claim for depreciation was taken care by the lower percentage of estimation - HELD THAT:- While dealing with this issue for the assessment year 2013-14, learned CIT(A) referred to the decision of the Third Member in assessee’s own case for the assessment year 1991-92 and 1992-93 wherein it was held that depreciation was allowable as a deduction after estimation is resorted to. He also referred to the Circular No. 29-D/XIX-14 in F.No. 45/239/65-ITJ dt 31/08/1965 issued by the CBDT. Learned CIT(A), then, followed the binding precedent of the Hon'ble jurisdictional High Court in the case of Y. Ramachandra Reddy [2014 (9) TMI 205 - ANDHRA PRADESH HIGH COURT] and granted relief to the assessee allowing depreciation after rejection of books of accounts and estimating the income. For this year, learned CIT(A) followed this view taken for the assessment year 2013-14 by his predecessor and allowed depreciation to the assessee. We, therefore, do not find anything illegality or irregularity in the order of the learned CIT(A), granting depreciation to the assessee by following the binding precedent. We, therefore, uphold the findings of the learned CIT(A) and dismiss this ground of appeal for all these years. Deduction u/s 80-IA - AO recorded that the assessee did not fulfil the essential conditions to be a developer like investment, entrepreneurial risk and using of facility – and, therefore, the assessee is only a work contractor - HELD THAT:- Tribunal in [2012 (5) TMI 181 - ITAT HYDERABAD], discussed the facts at length in the light of the case law available on this issue and reached to a conclusion that even where the assessee had carried out the development of infrastructure work in consortium or jointly with any other agency and not as a sub-contractor still the assessee is entitled for deduction under section 80-IA of the Act. Decided against revenue. Estimation of income - Receipts relating to the FMS as ‘income from other sources’ - as contended by the assessee before the learned CIT(A) that the assessee had to incur expenditure for deriving such an income and when the income earned from other projects was estimated, the income from FMS also needs to be estimated - CIT(A) held that expenditure in this service constitutes 90% and income is only at 10%, learned CIT(A) estimated the income from FMS at 15% - HELD THAT:- Though the Revenue challenged this estimate very vehemently, contending that the assessee did not incur any expenditure to render this service, we cannot accept the same because no service earning revenues could be rendered without expenditure. At the same time, no material is placed before us to show as to how this estimate went wrong. Hence, we find it difficult to hold that the estimate made by the learned CIT(A) suffers no infirmity. Exclusion of works allotted to subcontractors and other project works while estimating the income on contracts - HELD THAT:- There is no denial of the fact that in assessee’s own case for the earlier assessment years, AO and FAA held that the gross receipts shall be reduced by the recoveries were to be considered for estimation and also the works allotted to the subcontractors in respect of the SPVs. CIT(A) recorded as a matter of fact, on perusal of the orders of the assessment for the earlier assessment years for this purpose, that the Department is consistently adopting this procedure and there is no reason for deviating from the same. Since the CIT(A) followed the consistent view adopted by the Revenue for the earlier assessment years and also the binding precedent of the decision of Brij Bhushan Lal [1978 (10) TMI 2 - SUPREME COURT] we do not find anything illegality or irregularity in the findings returned by the learned CIT(A) and, accordingly, uphold the same. Adoption of profit rate of 12.5% on contract receipts and to tax the interest income as ‘income from other sources’ - HELD THAT:- As Profit percentage of an assessee with high financial charges cannot be compared with that of an assessee having zero financial charges or very less/negligible financial charges. Since in the case on hand, the finance charges have drastically gone up from 3.78% in assessment year 2007-08 to 19.72% in assessment year 2014-15, therefore, estimation of profit @ 11.5% as against 12.5% directed by CIT (A) for these years will be fair and reasonable estimation. We, therefore, modify the order of the learned CIT (A) accordingly and direct ao to estimate the profit @ 11.5% before depreciation on contract work executed by the assessee itself. Grounds raised by the assessee are accordingly allowed in part. Taxability of interest income as “income from other sources” - HELD THAT:- As relying on own case [2013 (12) TMI 19 - ITAT HYDERABAD] uphold the order of the learned CIT(A) confirming the action of the learned Assessing Officer in treating the interest income from Fixed Deposits as “income from other sources”. The ground raised by the assessee on this issue is dismissed.
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