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2016 (5) TMI 1160 - ITAT AHMEDABADAddition u/s 68 - unsecured loans received - Held that:- The appellant has been able to prove the identity, genuineness and creditworthiness of Sanjay Patel HUF, Jayaben Patel and Bharti Patel repeatedly and certainly, when there is a provision of showing income @ 8% on the civil construction receipts u/s 44AD of the Act, then the parties taking sub-contract work are free enough to get themselves covered under the provisions embedded in the Statute. The ld. Assessing Officer has not raised any doubt in the books of accounts as the same have not been rejected u/s 145(3) of the Act and no specific defect in the actual working of the appellant has been pointed out in its books of accounts and above all construction work has been completed to the satisfaction of contract awarders, then in such situation ld. Assessing Officer was not correct in making the addition of ₹ 20,01,300/-. We accordingly delete the same - Decided in favour of assessee. Disallowance in respect of interest paid to depositors - Held that:- The same is consequential, because as we have already held that no addition is called for towards the unsecured loans of ₹ 20,01,300, then certainly assessee will be eligible for claiming interest of ₹ 3,79,616/- in respect of interest paid to depositors. - Decided in favour of assessee. Disallowance @ 15% of the labour expenses paid to five sub-contractors being related parties u/s 40A(2)(a) - Held that:- . For making any such addition, it will be necessary for the Assessing Officer to scrutinize the reasonableness of the expenditure and to exercise his judgment in a reasonable and fair manner and to satisfy that there is no attempt to evade taxes. In the case of the assessee, there has been no such exercise done by the Assessing Officer by way of scrutinizing the expenditure paid to the related parties and comparing the rates with the available market rates and further to ascertain that these related parties has been paid on a higher rate or excess amount in comparison to the general market rate. We also observe that the detailed ratewise chart is available on record which the related parties has provided to the assessee on the basis of which work has been awarded to them and the same have been completed to the satisfaction of the contract awarders. We also observe that no disallowance on payment to sub-contractors to related parties have been made u/s 40A(2)(b) of the Act during the assessment proceedings completed u/s 143(3) of the Act for Assessment Year 2005-06 and 2006-07. In such situation, when there is a complete absence of specific working which should have been carried on by the ld. Assessing Officer to arrive at a decision that excessive payments have been made to the related parties in comparison with the fair market rates as well as comparison with the rates of work awarded by the appellant to its other sub-contractors and also in the given situation when the books of accounts have not been rejected and all other expenditures have been accepted without pointing out any error, then in such situation estimated addition should not be called for. We, therefore, delete the addition - Decided in favour of assessee. Disallowance made u/s 40(ia) - Non deduction of tds u/s 194H on the deemed commission payment made - Held that:- We failed to understand that how such type of addition or disallowance can be made by ld. Assessing Officer without appreciating the fact that the complete value of contract received by PIPL from the Government has been shown as revenue in its books of accounts and thereafter complete contract has been sub-contracted to the appellant at 89.5% of the contract price by way of which 10.5% remained with PIPL as a part of its profit which have been subjected to tax. Further 89.5% of the contract price has been shown as Revenue by the appellant and together with this sub-contract, the appellant has carried on other contract work also and gross turnover of ₹ 5,19,71,858/- has been achieved by the appellant during the year under appeal and a net profit of ₹ 16,52,490/- has been shown in its return of income. There is no justification given by the ld. Assessing Officer that on what basis deemed commission payment has been calculated at ₹ 43,18,175/- and going a step further how can a provision of Section 40(a)(ia) can be applied for non-deduction of deduction u/s 194H of the Act on this deemed commission of ₹ 43,18,175/-, even when no such expenditure has been claimed by the assessee in its profit and loss account.- Decided in favour of assessee.
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