TMI Blog2009 (12) TMI 966X X X X Extracts X X X X X X X X Extracts X X X X ..... at income to be estimated at 8% in respect of work executed by the assessee and at 5 % in the case of sub contract. 3. The learned DR submitted that in the assessment year 2003-04, the Tribunal held the income to be at 8% on contract receipts of own contracts and 5% on sub contract after allowing depreciation. But in the present case, the assessee claimed depreciation separately hence suitable orders may be passed. 4. We have heard both the parties and perused the material on record. The issue of rejection of books of account by the assessing officer was not challenged by the assessee. Once it is found that books of account does not reflect the true profit of the assessee, in such cases the provisions of the proviso to Sec. 145(1) becomes applicable and it becomes duty of the taxing authority to determine the true and correct profits of the assessee in the best possible manner though such determination must be on the basis of material on record. Now the question to be considered is whether the lower authorities was justified applying the profit rate at 12.5% of cross receipts of the income of the assessee. In the present case, the CIT(A) placed reliance on the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndings in Para 16 to 22 as follows: With due respect to my learned brother, I am inclined to disagree with the order of my learned brother in paras 10 and 11 above, in so far as it related to estimation of the profit of the assessee at 12% as against 12.5% adopted by the assessing officer and 10% adopted by the first appellate authority. My reasons for disagreement and decision in that behalf are discussed below: Assessee, admittedly, is a firm carrying on business in civil contract works. Assessee s net contract receipts for the ay 1991-92 were ₹ 9,10,18,512/- whereas the same for the ay 1992-93 were ₹ 8,37,19,315/-. In the cases of similar assessees, viz. civil contractors, the Tribunal Benches at Hyderabad, have been consistently approving estimation of profit at 12.5% of the net contract receipts. In assessee s own case for the ay 1988-89 in ITA No.1949/Hyd/91, the Tribunal vide its order dated 20.9.1995, a copy of which is filed before us, held that estimation of net profit at 12.5% by the authorities below was quite fair and reasonable. As such, unless there was exceptional circumstances warranting adopt on of a lower rate, profit of the assessee should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments. Further, I find much merit In the contention of the ld. DR that the assessee has gone In for substantial addition to plant and machinery from 2,07,14,420/- to ₹ 3,46,35,514/- which Is evident from the depreciation statement for the assessment year 1991-92 and as such there Is corresponding reduction In the revenue expenditure and having gone In for massive capital Investments and contracted for more outlay towards bank Interest payments, financial charges etc. Assessee cannot claim It to be exceptional circumstance warranting estimation of Income at a rate lower than the normal one. This Is all the more so, since the Interest commitments to bank etc. Undertaken by the assessee, on additions to plant and machinery etc. Would have their Impact for quite a few years to come, and It bank charges and Interest commitments are accepted as a exceptional circumstances warranting adoption of lower rate of estimation of the profit that would circumstance would prevail In the succeeding years as well, and for that matter, assessee would be encouraged, to go In for more Interest commitments by making additions to plant and machinery with borrowed capital so as to create genuin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate adopted In assessee s own cases for earlier years, but also In accordance with the rate normally approved by the Tribunal In similar cases. The circumstances of Incurrence of larger expenditure on account of bank Interest, bank charges and commissions, financial charges, etc. In my view cannot be accepted as an exceptional one warranting adoption of any lower rate. I accordingly set aside the orders of the CIT(A) on this aspect for both these years and restore the assessments made by the assessing officer, estimating the profit of the assessee at 12.5%. Before parting with the subject, I may point out that though It may appear that the differences between the rate of 12% adopted by my learned brother and the rate of 12.5% approved by me Is a mere 5% of the said difference of 0.5% Is applied to the net contract receipts disclosed by the assessee, It would work out to ₹ 4,55,092/- In considering these large amounts Involved In these two years, and the Impact of decision of approval of sub normal rate on account of larger Interest etc., commitments, In the succeeding years when such larger Interest commitment would continue to exist, I am constrained to dissent from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year under consideration. However, if the assessee give up the claim of depreciation in the assessment year under consideration, then the ratio laid down by the Tribunal in its own case for the ay 2003-04 could be applied. Alternatively, the decision of this Tribunal in the case of M/s Krishna Mohan Construction Company cited supra to be followed. Now, the assessee got two options to determine his taxable income for the year under consideration. Hence, we hold that the assessee can opt either one of the above. In the case of sub contracts, the assessee cannot expect the same ratio of profit, as in the contract carried out by the assessee by himself. Accordingly, in the case of sub contract, we direct the assessing officer to consider the net profit at 5%. According this ground of the assessee is partly allowed. 6. Now we will take up the ground No.3 that the CIT(A) not justified in not allowing the depreciation on vehicles used by the assessee in the contract business. The assessee is a closely held private limited company consists of Managing Director, and his wife as Director. On closure of the individual business of the managing director, the managing director has t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to be presumed that the assessee is the owner of the vehicle. Since as facts stand, depreciation has been disallowed merely on the ground that vehicles are not registered in the name of the assessee and no other facts about investment transfer of liability, usage of the vehicle for the purpose of business are not disputed. Other than that the assessee is to be treated as legal owner of the vehicle and claim of depreciation on it to be allowed at the prescribed rate. For this purpose we placed reliance on the judgement of the Supreme Court in the case of M/s Mysore Minerals Ltd. Vs. CIT (239 ITR 775). Accordingly this ground of the assessee is allowed with out prejudice to our findings in para (5) of this order. 8. The next grounds are as follows: 4. The CIT(A) erred in treating the assessee as assessee in default and upholding the recovery of the TDS from the assessee. 4.1. The demand made by the assessing officer for the TDS u/s 201(1) and for interest u/s 201 (1A) by the assessment order u/s 143(3) without passing separate orders under the respective sections is illegal. 4.2. Without prejudice to the above, the demands made u/s 201 (1) and 201 (1A) do no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gally correct. This shows that the assessing officer has not considered the facts properly. Hence the company is entitled for the credit for the total TDS made from the total receipts including the mobilization advance as the income of the assessee from the total receipts are offered to tax. As far as assessee is concerned, it does not matter whether the turnover or advance in the hands of sub contractors. 12.1 The AR further submitted that the assessee has offered the total TDS amount as profit that has been received from sub contractors and the assessing officer has also admitted the same in the assessment order and as such, there is no ambiguity on the commission offered by the assessee. He submitted that the amount assessed by the assessing officer as a profit to the assessee on the one hand surprisingly rejected to give the credit of the same TDS on the other is unjustified. 12.2 The AR further submitted that the assessee company has offered its total income in the form of sub contract commission to tax, it is entitled for the credit for the entire TDS amount made from the gross receipts. 13. On the other hand the learned departmental representative submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Department cannot refuse to credit merely by contending that the income had not been disclosed in the return filed by the assessee for the ay under consideration. Tax have been deducted at source, and paid to the government treasury and certificate issued by deduction mentioning the period relating to the assessment year under consideration, the assessing officer required to give credit for the same. In the present case, the argument of the assessee s counsel is that the assessee has accounted the mobilization advance in its books of account. But the findings of the CIT(A) is contrary to this. Before us, the assessee filed copy of TDS statement which is as follows: S.No. Gross Bills received TDS Sub contract commission received Name of the sub-contractor Gross bill to sub-contractors Mobilisation advance included in the bill 1. 24,631,293 528,601 528,601 D Rajasekar 66,813,199 10,195,000 31,766,518 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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