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ACIT, Circle-2 (1) , Vijayawada Versus M/s. Agri Gold Constructions Pvt. Ltd., Vijayawada

2018 (1) TMI 598 - ITAT VISAKHAPATNAM

Estimation of income @ 12.5% on construction contracts and 8% on sale of plots clear of depreciation and all other expenses - Held that:- From the perusal of the assessment order, it is observed that the A.O. did not reject the books of accounts before resorting for estimation of income. In the absence of any evidence brought on record to hold that the expenditure claimed by the assessee is unreasonably high and quantification of unverifiable nature of expenditure and fresh facts to resort highe .....

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he business income but not as separate source of income. Hence, we uphold the order of the Ld. CIT(A) and dismiss the appeal of the revenue on this ground. See CIT Vs. LOK holdings [2008 (1) TMI 365 - BOMBAY HIGH COURT] and Eveready Industries Limited Vs. CIT and Anr (2009 (12) TMI 226 - CALCUTTA HIGH COURT). - I.T.A.No.505/Vizag/2014 - Dated:- 10-1-2018 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER For The Appellant : Shri Debakumar Sonowal, DR For The Respo .....

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hat some vouchers in respect of gravel, sand purchase, metal chip purchases and labour charges were incurred on self-made vouchers and some of them were not maintained properly. The assessee explained that the expenditure was incurred at various places at the field stations and it is not possible to maintain the vouchers properly and some of the vouchers made were misplaced. The A.O., considering the facts of the case held that assessee failed to substantiate expenses, accordingly estimated the .....

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Farm Estates India Pvt. Ltd. The assessee has transferred the liability along with collected amount on the corresponding expenses. The assessing officer treated the transferred amount of venture advances as deemed sales and estimated the income @ 8% on ₹ 155.96 crores, which worked out to ₹ 12,47,68,000/-. Similarly, the A.O. found that the assessee company has refunded ₹ 184.08 crores to the customers who have opted out or due to breach of contract from ventures. The A.O. tre .....

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ion of income, the Ld. CIT(A) followed earlier years assessments made by the A.O. in the assessee s own case. In respect to the interest income, the CIT(A) observed that the assessee company has included the interest earned from the deposits of ideal business funds in the business income and the treatment of including interest income in the business income has been followed consistently for the past so many years. Therefore, the Ld. CIT(A) found that there is no reason to disturb the consistent .....

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77; 155.96 crores to its sister company i.e. M/s. Agri Gold Farms India Pvt. Ltd. representing the instalments collected on its account after deducting the related marketing expenses as evidenced by the ledger extract produced by the assessee. Accordingly, held that it is not justified to hold the transferred amount as such and estimating the income on such amount. Similarly, in the case of refund of advances amounting ₹ 184.08 crores, the CIT(A) observed that the assessee has refunded the .....

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er of the learned Commissioner of income-Tax(Appeals), Vijayawada is erred both in law and on the facts of the case. 2.On the facts and circumstances briefly submitted in the statement of facts, the decision of the learned CIT(A) to assess the income from construction work © 8% & on the sale of plots © S% as against @ 12.5% & 8% as adopted by the AO, respectively, is neither based on any material nor on valid base and hence her decision is unjustified 3. On the facts and circum .....

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he ratio of a decision rendered by the Hon'ble ITAT on issues covered u/s.263 which is not justified on the facts and circumstances of this case. 6. The learned CIT(A), being the first appellate authority is duty bound to bring the facts and circumstances of the issues before her and apply the correct provisions of law which she has failed to do so in this case. 7. The ld.CIT(A) ought to have considered that the interest earned on the bank deposits is an income under the head 'other sour .....

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plots while it is not doing so on the transfers made on the transactions accounted under the current liabilities viz., sale attributable to transfer of venture to its sister concern and on the refund of advances, unjustifiably deleted the additions. 10. On the facts and circumstances briefly submitted in the statement of facts, it is prayed that the Hon'ble ITAT may restore the matters considered by it as just to the AO for appropriate examination and due assessment. 6. Ground Nos.1, 10 &am .....

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e heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The revenue s case is that the A.O. had considered all the facts and estimated the income @ 12.5% on construction contracts and 8% on sale of plots, hence the same required to be upheld. The assessee s case is that the assessee has maintained the books of accounts, which was duly audited and supported by vouchers and bills, hence there is no case for resorting for the estimat .....

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as not quantified by the A.O. In the earlier years the A.O. has accepted the estimation of income @ 8% on construction contracts and 5% on sale of plots, and the same is evidenced by the Ld. CIT(A) s order. The A.O. has not brought on record any major changes in the expenditure incurred by the assessee and any suspicious nature of expenditure, or inflation of expenditure. The assessee has maintained the regular books of accounts and the books of accounts were duly audited by the qualified Charte .....

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evidence brought on record to hold that the expenditure claimed by the assessee is unreasonably high and quantification of unverifiable nature of expenditure and fresh facts to resort higher estimation of income, we do not see any reason to interfere with the order of the Ld. CIT(A) and we hold that the Ld. CIT(A) has rightly applied the estimation of income @ 8% on contract receipts and 5% on sale of plots. Accordingly, the order of the Ld. CIT(A) is upheld and the revenue s appeal on these gr .....

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posits in banks for temporary period and earning interest income. Hence, the interest income earned by the assessee is inter-related to the business activity carried on by the assessee. Accordingly, the assessee has admitted the same as business income. The issue of assessment of interest under the head business income was considered by this Tribunal in the assessee s own case for the assessment year 2010-11 in ITA No.452/Vizag/2012 and held that the interest income on deposits made out of surpl .....

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urt in the case of LOK Holdings, has held as follows:- Interest earned by assessee a property developer, by making temporary deposits of surplus money out of advances received by it from intending purchases is business income and cannot be assessed as income from other sources. 6.7 The Hon ble Kolkata High Court in the case of Eveready Industries India Ltd. (supra) has held as follows: AO was right in treating the interest income earned by the assessee by investing surplus fund of the business i .....

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er with his own view in an order passed u/s 263 of the Act as held by various High Courts as well as the Hon ble Supreme Court. Thus, we uphold the contentions of the assessee and cancel the order OF the CIT. 11. Respectfully following the view taken by the ITAT and following order of the Hon ble Bombay High Court and Hon ble Kolkata High Court, we hold that the interest income received on deposits required to be assessed under the business income but not as separate source of income. Hence, we .....

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had transferred the advances so received from the customers to the group company M/s. Agri Gold Farms Pvt. Ltd. representing instalments collected on its behalf after deducting the marketing and collection expenses so that group company to allot plots or flats to their respective customers. The assessee has produced the ledger extract before the CIT(A) and the Ld. CIT(A) after examining the details furnished by the assessee concluded that there was no deemed sales and it is merely a transfer ent .....

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) or to substantiate the deemed sales. Therefore, we do not find any reason to interefere with the orders of the Ld. CIT(A) and the same is upheld. 13. The next issue in deemed sales is ₹ 184.08 crores relating to the refund of advances to the customers by the assessee. The assessee has received the booking advances and instalments against the purchase of property products and sale consideration. In case if the plots or flats are not available for whatever reasons in the existing project l .....

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