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2015 (9) TMI 1103 - ITAT HYDERABAD

2015 (9) TMI 1103 - ITAT HYDERABAD - TMI - Estimation of income @ 8% on contract receipts - CIT(A) deleted the addition - Held that:- As can be seen, only on the basis of TDS certificate enclosed by assessee in the return of income, AO has concluded that the amount received by assessee from LAPPL is a contract receipt and accordingly proceeded to estimate the income. However, as can be seen from the terms of the relevant agreement between assessee and LAPPL, assessee is to receive 15% of the tot .....

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ortion of the work executed. Moreover, when assessee has shown the income on the contract work in the succeeding AY, which also includes work-inprogress of 16.22 crores, on which income has been estimated by AO in the impugned AY, in our view, there is no justifiable reason in interfering with the order of ld. CIT(A). In any case of the matter, there is no prejudice caused to revenue as the income assessable on the contract receipt has been offered by assessee for taxation, though, in a differen .....

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8% on contract receipts. 3. Briefly the facts relating to this issue are, assessee a company is engaged in business of execution of contract. For the AY under consideration, assessee filed its return of income on 13/11/06 declaring loss of ₹ 65,48,374. During the assessment proceeding, AO noticed that assessee in the relevant PY has obtained contract work relating to erection and procurement of 200 & 300 MW thermal power project and has sub-contracted the same to other contractors. Fu .....

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DS certificate, AO noticed that the payments made were on account of professional and technical services. He found that assessee has received 103.63 crores towards mobilization advances and at the same time has given loans and advances to subcontractors amounting to ₹ 28.66 crores. Whereas at the end of the year, assessee has disclosed work-in-progress at ₹ 16.22 crores. Considering the aforesaid facts, AO issued a show cause notice to assessee to explain why income should not be est .....

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submitted by assessee that bills were raised by assessee towards work executed only in FY 2006-07 and once bills were raised LAPPL started recovering the advance amount from the contract bills. Thus, it was submitted by assessee that advance cannot be treated as amount received towards contract receipt, hence, there cannot be any estimation of income. AO, however, was not convinced with the submissions of assessee. He observed that assessee has given on sub-contract whatever work it had obtained .....

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d accordingly completed the assessment. Being aggrieved of the assessment order, so passed, assessee preferred appeal before ld. CIT(A). 4. In course of hearing of appeal before ld. CIT(A), assessee apart from challenging the estimation of income on various other grounds contended that during the relevant PY assessee has only received 15% of the total contract value as mobilization advance. It was submitted that assessee has started raising bills only in FY 2006-07 and LAPPL also started recover .....

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ommissioning expenditure based on the sub-contract agreements separately entered with them. Assessee submitted that since the contract was not fully executed during the relevant FY, assessee has not raised any bill on the contractee and entire expenditure was shown as work-in-progress. Assessee also submitted that entire work-in-progress of ₹ 16.22 crores has been brought forward as opening work-in-progress in P&L A/c for the subsequent AY in which corresponding income arising from the .....

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nd Commissioning) contractor, rendering work to Lanco Amarkantak Power Private Ltd., (LAPPL). The appellant has given some works to other players subcontracts. For the year under consideration the appellant received advances from contractor in the months of July 2005 and March 2006 & by March 2006 the works were under progress. As per records the works assigned to the appellant by the Contractor Were completed in June 2006. After completion of works, bills were submitted and finally handed o .....

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on advances received from LAPPL for the year ending 31/03/2006 to tax, which is under challenge now. Either in the accounting principles or as is known in general parlance, income or curbing out income from advances is unheard of. For such a Proposition, no cogent material has been brought on record. Thus, fundamentally the AO Was in error in curbing out element of income from advances received as on 31.03.2006. It is also on record that in the next financial year relevant to the AY 2007-08, the .....

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ial has been brought on record by the AO for curbing out income from the advances received for the year ending 31.03.2006, the action of the AO is not sustainable. In the circumstances, the AO is directed to delete the same." 6. We have considered the submissions of the parties and perused the orders of revenue authorities as well as other materials on record. As can be seen, only on the basis of TDS certificate enclosed by assessee in the return of income, AO has concluded that the amount .....

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