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2016 (10) TMI 556 - ITAT HYDERABAD

2016 (10) TMI 556 - ITAT HYDERABAD - TMI - Estimation of income - Deduction of expenditures from estimated income - Held that:- Estimation of income at 9% in respect of the contracts taken by the assessee itself and executed by it; at 8% in respect of receipts from sub-contract works taken from others and executed by the assessee; and 4% of the gross receipts in respect of contracts given by the assessee to third parties on sub-contract basis, as reasonable. In consonance with the view taken in .....

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income is concerned, we find that this Tribunal in similar matters, as in the case of M/s. Teja Constructions, Secunderabad, [2014 (1) TMI 832 - ITAT HYDERABAD] has been consistently holding that depreciation being an allowable deduction under S.32 of the Act, and since all out goings falling under S.30 to 38 are deemed to have been allowed while estimating the income, no separate deduction is allowable in respect of the same out of the estimated income in this respect. Depreciation should be ex .....

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a Rao ORDER PER S. RIFAUR RAHMAN, A.M.: Both these appeals are preferred by the assessee against a common order of the learned Commissioner of Income-tax(A) - IV, Hyderabad for AYs 2004-05 and 2005-06. 2. Briefly the facts of the case are that the assessee is a company engaged in the business of development and construction of real estate projects. In the course of the assessment proceedings, the Assessing Officer noted that the assessee was engaged in the following three projects during the AY .....

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en to the works account. The closing work-in-progress at the end of the year for each project was estimated by reducing 10% of estimated profit from gross receipts of the year. The resultant amount was then reduced from the estimated cost of project completed on the closing date to arrive at closing work-in-progress. Thus, the gross profit and closing work-in-progress adopted by the assessee was without any basis. The Assessing Officer observed that most of the bills and vouchers were self-made .....

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ls of recipient was not recorded in the vouchers and that many of the vouchers were not signed by the receivers. In view of these observations, the Assessing Officer rejected the books of account and estimated the profit at 15% of the gross receipts for both the years, relying on the following decisions: 1. CIT vs. British Paints (India) Limited [1991] 188 ITR 44(SC) 2. Champion Construction Co. vs. ITO (ITAT Bombay, 'B' Bench-104 Taxman 222). 3. Aggrieved, the assessee preferred appeal .....

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as on the higher side for the assessee's line of business, that rejection of books for this reason was unjustified and that the Assessing Officer had not considered the remuneration paid to Directors and interest on capital/unsecured loans of the shareholders. The· AR further submitted that assessment in the assessee's case had similarly been made for AY 2002-03 estimating the income at 15% of the gross receipts, and that the CIT(A) vide his order in ITA No. 128/CC-4, Hyd/CIT(A)-I .....

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d rejected the books of account and estimated the income at 15% of the gross receipts of ₹ 69,40,000. In his order in ITA No.128/CC- 4,Hyd/CIT(A)1/2005-06, dated 07.02.2006, the CIT(A) noted that the Gandhi Nagar project had got stuck in the beginning itself on account of legal problems and that as on 31.03.2002, It was a doubtful project. Therefore, the CIT (A) did not direct assessment of profits from this project for AY 200203. For the same reason, the CIT(A) also did not agree with the .....

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he CIT(A) gave the following directions in his order: "05(b) In the given facts and circumstances of the case, I am of the view that the correct profits can be computed by following the percentage completion method prescribed in Accounting Standard-7. The assessee has shown the total cost of project at ₹ 129.24 lakhs including the cost of land. The total revenue recognized on the sale of all the flats was of ₹ 148 lakhs. Hence, the profit of various years involved in this projec .....

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t ₹ 6,85,000. The miscellaneous receipts of ₹ 35,106 shown by the assessee is to be further added before allowing the overhead expenses to determine the net profit. The Assessing Officer is also directed to give consequential relief to the assessee in AY 2003-04 and AY 2004- 05." 6. The CIT(A) noted that the Banjara Hills project was completed during the AY 2004-05. Respectfully following the directions of the CIT(A) in his order for AY 2002-03, the CIT(A) directed the Assessing .....

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s engaged in the business of construction and development of residential apartments. He, therefore, held that estimation of the assessee's income at 12.5% of the gross receipts from the two projects, Gandhi Nagar and LB Nagar, net of all deduction including depreciation and remuneration and interest to partners, is fair and reasonable. 8. The CIT(A) observed that for Gandhi Nagar project, the assessee had not effected any sales for AY 2002-03 and 2003-04 and, therefore, not declared any prof .....

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and it would be reasonable to estimate the income on the basis of the percentage of completion method, as was done for the Banjara Hills project. The Assessing Officer was directed to assess the estimated income from this project as follows on the basis of the data furnished by the assessee: AY 2004-05 AY 2005-06 AY 2006-07 AY 2007-08 Total Cost of work done 15.72 42.94 126.77 81.34 266.77 % of work completed 5.90 16.10 47.52 30.48 100.00 Sales - 36.56 131.26 127.44 295.26 Advance received 4.46 .....

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s in question viz. Gandhi Nagar Project and L.B. Nagar Project(Block-A) for the AY 2006-07 and 2007-08. 11. Aggrieved by the order of the CIT(A), the assessee is in appeal before us raising the following grounds of appeal, which are common in both the appeals under consideration: 1. The Ld. CIT(A) did not fully followed the previous order of the CIT(A) given for the Ay.2002-03 to Ay.2003-04. 2. The Ld. CIT(A) estimated the appellants income at 12.5% of the gross receipts, net of all deductions w .....

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such income estimated. The assessing officer estimated the profit of the assessee at 15% clear of depreciation and 40(b) payments and determined the total income of ₹ 1,29,07,656. On appeal the CIT(A), directed estimation of profit at 12.5% of G.P., net of all deductions including depreciation and remuneration and interest to partners. 12.1 On careful consideration of the matter, we find that as far as rate to be adopted for estimation of income is concerned, this Tribunal has been consis .....

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