TMI Blog2017 (6) TMI 1033X X X X Extracts X X X X X X X X Extracts X X X X ..... f five year contract which comes to ₹ 88.27%. Since the estimation is only pertaining to the year under consideration, the AO should have determined the sub-contract receipts pertaining to this year only on standalone basis, instead of the whole contract period. As assessee’s contention of estimating the profits for the whole contract and adjusting the profits declared in other years is not accepted the contention that the sub-contract percentage should be worked out on standalone basis on the receipts of this year alone has to be accepted. Therefore, modifying the order of AO, the profit should be estimated on receipts during the year- at 95.21% of the receipts at 5% being sub-contracted work and balance at 8% being contract work on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gross receipts declared by assessee at ₹ 46,47,32,596/-. On appeal, Ld.CIT(A) while upholding the rejection of books of account however, following the Special Bench decision of ITAT restricted the estimation of net profit to a rate of 8% (clear of all expenses and depreciation) on the contract receipts. Assessee however, preferred further appeal and ITAT vide its order in ITA No. 86/Hyd/2008, dt. 28-06-2013, directed the AO to estimate the profit on receipts from works contact in the following manner: i. Works executed as a main contractor 9% ii. Works executed as a sub-contractor 8% iii. Works executed by employing sub-contractors 5% 3. Consequent to that, the AO asked assessee to furnish necessary details so as to deter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor NIL 2. Works Executed on its own 11.73% of the Gross Receipts on which Income @8% 5,45,13,134 8% 43,61,050 3. Works Executed through subcontractors-88.27% of the Gross receipts on which Income @5% 41,02,19,462 5% 2,32,36,629 Net Taxable Income 2,75,97,679 4. Aggrieved on the above, assessee reiterated the objections stating that ITAT s direction of estimating contracts has to be con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the entire contract i.e., 88.27% of total receipts, as against the percentage of work sub-contracted for AY. 2004-05 on standalone basis (being 95.21% of the total receipts) for applying rate of 5%. 7. Ld.DR, however, relied on the orders of the AO and CIT(A). 8. We have considered the rival contention and perused the record and the order of ITAT. Assessee s contention that the estimation should be based on the total contract spread over five years is not valid, as the books of account were rejected only in the impugned assessment year and the entire appellate proceedings before the CIT(A) and the ITAT pertain only to the receipts during the year. The contention raised during the consequential order proceedings i.e. for the whol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear contract which comes to ₹ 88.27%. Since the estimation is only pertaining to the year under consideration, the AO should have determined the sub-contract receipts pertaining to this year only on standalone basis, instead of the whole contract period. As assessee s contention of estimating the profits for the whole contract and adjusting the profits declared in other years is not accepted in Ground No.2 to 4, the contention that the sub-contract percentage should be worked out on standalone basis on the receipts of this year alone has to be accepted. Therefore, modifying the order of AO, the profit should be estimated on receipts during the year- at 95.21% of the receipts at 5% being sub-contracted work and balance at 8% being cont ..... X X X X Extracts X X X X X X X X Extracts X X X X
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