TMI Blog2013 (1) TMI 538X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.5% to the direct contract receipts and rate of 5% to receipts of sub contract – revenue went in Tribunal - Tribulal adopted consolidated rate of 7% to be applied on the total contract receipts . Held that :- Nothing could be shown by either side that the rate was either arbitrary or irrational in the facts and circumstances, though some amount of guess work may necessarily be there in adopting the net profit rate as there is no definite method prescribed under the statute, the court shall interfere only where the same appears to be excessive or arbitrary or discriminatory, that being not the situation in the present case. Adoption of 7% rate by the Tribunal accepted. - ITA No. 646 of 2010 (O&M) - - - Dated:- 1-11-2012 - MR. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case as followed by the CIT(A) in applying a net profit rate of 6.5% to the direct receipts and 5% to sub-contract receipts, against 10% rate arbitrarily applied by the AO without any logical basis whatsoever? ii) Whether in the facts and circumstances of the case the Tribunal's findings are perverse and arbitrary in estimating the consolidated rate of 7% to the total contract receipts (including sub-contract receipts) ignoring the fact that in the case of sub-contract receipts, the profit is always shared between two or more persons and the same rate as applied to direct contract-receipts cannot be applied to the sub-contract receipts, despite the fact that the CIT(A) by following the judicious approach applied a net profit rate of 6.5% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) upheld the action of the Assessing Officer in invoking the provisions of Section 145(3) of the Act, following the ratio laid down by the Hon'ble Supreme Court in CIT v. British Paints India, 188 ITR 44. The CIT(A) also applied net profit rate of 6.5% to the direct contract receipts and rate of 5% to receipts of sub contract and further allowed deduction in respect of interest and salary to the partners, if any. Aggrieved by the order, the revenue went in appeal before the Tribunal. Vide order dated 29.12.2009, Anenxure A.3, the Tribunal adopted consolidated rate of 7% to be applied on the total contract receipts to estimate the income from contract business and found no merit in making additions on the issue of negative cash, the issue o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er rejecting the same had invoked the provisions of section 145(3) of the Act for working out the profits of the business. The assessee has not filed any appeal against the rejection of books of account. The issue which remains to be addressed is the rate to be applied for determining the profits of the business. The Assessing Officer had applied net profit rate of 10% whereas the CIT(A) had applied net profit rate of 6.5% on direct contract receipts and 5% on sub contract receipts. The first limb of dispute is with regard to the rate to be applied. The assessment had shown net profit rate of 6.5% in assessment year 2003-04 and net profit rate of 5.2% in assessment year 2004-05. However, during the year under consideration, where the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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