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DNR Constructions Versus Income-Tax Officer

2016 (2) TMI 602 - ITAT HYDERABAD

Estimation of profit - Held that:- As relying on case of ACIT V/s. M/s Teja Constructions [2014 (1) TMI 832 - ITAT HYDERABAD] we direct Assessing Officer to estimate the profit from main contract work at 8% and on sub-contract work at 5% of the receipts.

Deduction towards interest and remuneration payment to partners - Held that:- It is seen that the Income-tax Appellate Tribunal, Hyderabad Bench in the case of M/s C. Eswara Reddy V/s. CIT (2011 (1) TMI 1238 - ITAT HYDERABAD ) after c .....

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w that deduction towards interest and remuneration payment to partners is to be allowed from profit estimated after rejecting books of account in case of a firm engaged in the business of works contract. In the aforesaid view of the matter, we direct the AO to allow deduction towards payment of interest and remuneration to the partners after estimating the profit - ITA No. 817/Hyd/2015 - Dated:- 22-1-2016 - P. Madhavi Devi, JM And S. Rifaur Rahman, AM For the Appellant : Shri S Rama Rao For the .....

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ued. The AO, thereafter, issued a notice u/s 148 of the Act after a period of four years. The assessee filed a letter requesting the AO to treat the return of income already filed as the return filed in response to the notice u/s 148 of the Act. The AO passed order u/s 144 r.w.s. 147 determining the income at ₹ 58,05,610/- by disallowing as under: a) Diesel and lubricant expenses ₹ 56,94,518 b) Penalty for short supply of material ₹ 15,000 Total Rs.57,09,518/- 2.1 The details o .....

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4,96,518/- towards diesel and lubricants was debited to profit and loss account by the assessee. 2.3 During the course of assessment proceedings the Assessing Officer has issued notice u/s. 133(6) to Sri Sai Sreenivasa Constructions Pvt.Ltd. and also to South Central Railway Guntakal calling for details on the recoveries made from the bills. 2.4 Sri Sai Sreenivasa Constructions confirmed recovery of ₹ 56,94,518/- towards diesel and lubricants 2.5 The Assessing Officer called for the detail .....

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th the evidences for the same. 2.7 The assessee vide letter dated 07.12.2012 during assessment proceedings submitted as under: "2. Basis for claiming Diesel Oil & Other recoveries of ₹ 56.94 lakhs : Our firm carried out work relating to digging of earth and importing the hard soil for construction of embankment for the tanks. Number of vehicles have to be used for this purpose for quantity wise. We engage the vehicle and when we require, on daily hire basis for which vehicles, mai .....

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the transfer, / have misplaced books of accounts, vouchers and other important papers / documents Of my own and firms also." 2.8 After considering the submissions of assessee, the Assessing Officer observed that the expenses towards diesel and lubricants constitute 38.6% of the gross contract receipts of ₹ 1,47,58,896/- for which no evidence was submitted either by the deductor or by the assessee firm. On the other hand the firm booked expenditure under the head hire of vehicles of & .....

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ping in view the facts and circumstances of the case, in the absence of books of accounts and evidence for incurring of expenses debited to profit and loss account the Assessing Officer is directed to estimate the profit @ 12.5% on contract receipt from South Central Railway and estimate the profit @ 4% On sub-contract works from Sri Sai Sreenivasa Construction Pvt. ltd. It is specifically to be mentioned that no separate deduction should be allowed towards remuneration and interest paid to the .....

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me-Tax (Appeals) is erroneous to the extent it is prejudicial to the appellant. 2. The learned Commissioner of Income-Tax (Appeals) erred in directing the Assessing Officer to estimate the income at 12.5% on the receipts from own contracts and profit at 4% on the sub-contract receipts. The learned Commissioner of Income-Tax (Appeals) ought to have seen that the contract works undertaken by the appellant is for the Government organization wherein the profit margin would be less. Even in the case .....

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uot; 6. The ld. counsel for the assessee submitted that the Tribunal uniformly estimating the profit from main contract at 8% to 12.5% depending upon the factual situation and 5% to 7% on the subcontract depending upon the factual situation. For these submissions, he relied on the decision of the coordinate bench of this Tribunal in case of M/s E. Eswara Reddy & Co. in ITA No. 668/Hyd/2009 and others vide order dated 31st January, 2011. A copy of the said order has been placed on record. He .....

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facts on record. So far as the first issue with regard to the rate of profit in estimating the income of the assessee is concerned, the CIT (A) is of the view that income in the case of the assessee had to be estimated due to unverifiable nature of expenditure claimed which does not give the correct book results. The assessee more or less had also accepted the estimation of profit. However, the dispute is with regard to the rate at which the profit is to be estimated. We find that, in a recent d .....

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