TMI Blog2023 (11) TMI 980X X X X Extracts X X X X X X X X Extracts X X X X ..... books of accounts and estimating the income. For this year, learned CIT(A) followed this view taken for the assessment year 2013-14 by his predecessor and allowed depreciation to the assessee. We, therefore, do not find anything illegality or irregularity in the order of the learned CIT(A), granting depreciation to the assessee by following the binding precedent. We, therefore, uphold the findings of the learned CIT(A) and dismiss this ground of appeal for all these years. Deduction u/s 80-IA - AO recorded that the assessee did not fulfil the essential conditions to be a developer like investment, entrepreneurial risk and using of facility and, therefore, the assessee is only a work contractor - HELD THAT:- Tribunal in [ 2012 (5) TMI 181 - ITAT HYDERABAD] , discussed the facts at length in the light of the case law available on this issue and reached to a conclusion that even where the assessee had carried out the development of infrastructure work in consortium or jointly with any other agency and not as a sub-contractor still the assessee is entitled for deduction under section 80-IA of the Act. Decided against revenue. Estimation of income - Receipts relating to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT (A) for these years will be fair and reasonable estimation. We, therefore, modify the order of the learned CIT (A) accordingly and direct ao to estimate the profit @ 11.5% before depreciation on contract work executed by the assessee itself. Grounds raised by the assessee are accordingly allowed in part. Taxability of interest income as income from other sources - HELD THAT:- As relying on own case [ 2013 (12) TMI 19 - ITAT HYDERABAD] uphold the order of the learned CIT(A) confirming the action of the learned Assessing Officer in treating the interest income from Fixed Deposits as income from other sources . The ground raised by the assessee on this issue is dismissed. - SHRI RAMA KANTA PANDA, VICE PRESIDENT SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER For the Appellant : Shri S. Rama Rao, AR For the Respondent : Shri Jeevan Lal Lavidiya, CIT-DR ORDER PER BENCH: Aggrieved by the order(s) passed by the learned Commissioner of Income Tax (Appeals)-2, Hyderabad, ( Learned CIT(A) ), in the case of M/s. KMC Constructions Ltd., ( the assessee ) for the assessment years 2012-13, 2013-14, 2014-15, 2015-16 2017-18, both Revenue and Assessee prefe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned CIT(A) dealt with this issue in the light of the ITAT order for the earlier assessment years followed by his predecessor for the assessment year 2013-14 and observed that for the earlier assessment years, depreciation was allowed to the assessee by the learned Assessing Officer himself and for the assessment year 2013-14 also depreciation was allowed to the assessee, following the order of the Hon'ble High Court in the case of CIT vs. Y. Ramachandra Reddy, 50 taxmann.com 129. 6. It is contended by the Revenue that when the income of the assessee is estimated, allowing of depreciation goes against the decision of the Tribunal in assessee s own case for the assessment years 2001-02 and 2003-04; whereas it is submitted by the learned AR that for the assessment years 2004-05 to 2010-11, the learned Assessing Officer himself allowed depreciation after estimating the income of the assessee and, therefore, the issue before the learned CIT(A) and the Tribunal for those years was not in respect of the depreciation, but it was only focused on the estimate of income. 7. We have gone through the record in the light of the submissions made on either side. We perused the order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Year, he is entitled to carry it forward, for the subsequent years. In such an event, it assumes the character of unabsorbed depreciation. In this very case, the Assessing Officer permitted the allowance of unabsorbed depreciation to the respondent. However, he denied the benefit of the allowance of current depreciation and interest. No reference is made to any provision of law to make such distinction. His understanding of the matter is that Section 44AD of the Act, that provides for a comprehensive formula of determining net profit derived by a civil contract or at 8%, takes in its fold, allowance of depreciation, interest and other benefits. The fact, however, remains that such a provision was not in exercise in the Assessment Year 1994-95. 14. If an assessee is entitled to claim deduction of interest, be it under Section 36(1)(iii) of the Act or any other relevant provision and of depreciation under Section 37 of the Act, in the ordinary course of assessment, there is no reason why the same facilities be not extended to him, merely because the profit is determined on the basis of estimation as was done in the instant case. We are of the view that depreciation and interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 178/14/2010-ITA.1 and also the view taken by the Tribunal in assessee s own case for assessment years 2001-02 to 2007- 08 and held that in view of the facts and issue being identical with the earlier assessment years, deduction under section 80-IA of the Act has to be allowed. Insofar as this fact is concerned, absolutely there is no dispute. 13. Learned DR vehemently contends that the department did not accept the view taken by the Tribunal in the earlier assessment years and appeals are pending before the Hon'ble High Court and, therefore, the view taken by the Tribunal for the earlier assessment years cannot be taken as a precedent binding the subsequent Benches; whereas the learned AR contended that the Tribunal by order dated 16/03/2012 in ITA No. 996/Hyd/2003 elaborately discussed the facts and decided the issue in favour of the assessee and since there is no change in the factual matrix, the facts do not permit a different view. Learned AR submits that as on the date, there is a precedent in the findings of the Tribunal in assessee s own case un-disturbed and, therefore, the same may be followed. 14. We considered this issue. Facts of this year are identical to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contention of the assessee that expenditure in this service constitutes 90% and income is only at 10%, learned CIT(A) estimated the income from FMS at 15%. 19. Though the Revenue challenged this estimate very vehemently, contending that the assessee did not incur any expenditure to render this service, we cannot accept the same because no service earning revenues could be rendered without expenditure. At the same time, no material is placed before us to show as to how this estimate went wrong. Hence, we find it difficult to hold that the estimate made by the learned CIT(A) suffers no infirmity. We accordingly uphold the same and dismiss Ground No. 4 for assessment year 2012-13 and Ground Nos. 3 4 for assessment year 2014-15. 20. Now coming to the last issue raised by the Revenue and relevant for the assessment year 2012-13, it relates to the grievance of the Revenue that the learned CIT(A) erred in directing the exclusion of works allotted to subcontractors and other project works while estimating the income on contracts. It could be seen from the record that the learned Assessing Officer estimated the income of the assessee at 12.5% of the turnover, while rejecting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of the Hon ble Apex Court in the case of Brij Bhushan Lal (supra) to the above undisputed facts, directed the learned Assessing Officer to determine the business income of the assessee by considering the receipts from the own contracts after reducing the cost of recoveries and also the depreciation. Learned CIT(A) further directed the learned Assessing Officer to consider the receipts from the works entrusted by the SPVs, by reducing the value of the works allotted to subcontractors and then estimate the same at 8%; and commission received in respect of works given on sub contracts were to be added to the said amounts. In the same breath, the learned CIT(A) held that since the assessee had to incur expenditure for deriving income whether it is for facility management services or for earning the fees for project development, and when the income earned from the other projects is estimated, the income from the FMS and the fees for project development shall also be estimated. 24. On the face of these facts, Revenue contends that the learned CIT(A) was not correct in directing the exclusion of works allotted to subcontractors and also the other project works while estimating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s executed by the assessee and 5% executed through sub- contracts (inclusive of SPV) and 7.5% on works executed on behalf of the SPV and allowed depreciation thereafter. 30. Insofar as the profit of 12.5% on own work directed by the learned CIT (A) is concerned, learned AR submitted that it is an admitted fact that during the earlier years i.e. from assessment years 2001-02 to 2007-08, the Tribunal held that profit @12.5% on contracts executed by itself, and 4% on contracts executed through the sub-contractors before depreciation is a fair estimation. According to him, however, the position in the current years is different from those of the earlier year so far as the finance charges are concerned. Learned AR drew our attention to the table reproduced by the learned CIT(A) in the body of the appeal order and submitted that as against around 3 to 5.5% of the financial charges during the assessment years 2006-07 to 2009-10, such financial charges have gone upto more than 19% in the assessment years 2014-15and 2015-16. For the sake of convenience, we reproduce such table hereunder,- S. No. Asst. Year Gross Receipts Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation at 12.5% is not at all justified for the impugned assessment year especially when the financial charges had substantially gone up to almost 19.72% in financial year 2014-15 as against 3.78% in assessment year 2007-08. 34. We find some force in the above argument of the learned Counsel for the assessee. The details of financial charges and the percentage of interest in the earlier years as well as for the current year depicted in the above table clearly show that as against the finance charges of 3.78% in A.Y 2007-08, the same has gone up to 19.72% in assessment year 2014-15 and 19.32% in assessment year 2015-16. Under this circumstance, the estimation of profit at 12.5% cannot be applied merely because the same was directed by his predecessor learned CIT (A) in assessee s own case in the preceding years. 35. There are various factors that influence the profit percentage even when the books of account are rejected and financial charges are one of the major factors. Profit percentage of an assessee with high financial charges cannot be compared with that of an assessee having zero financial charges or very less/negligible financial charges. Since in the case on hand, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Constructions Ltd., Hyderabad assessee that the Assessing Officer, having estimated the assessee's income from business and assessed the same to tax, no separate addition is called for under S.56, for bringing to tax the interest income in question, under the head 'other sources'. In support of this contention, reliance is placed on the decisions of the Tribunal in assessee's own cases for the earlier years noted above. On careful consideration of the matter, we find no merit in the contentions of the assessee on this aspect. The issue as to the head under which the interest earned by the assessee, even in the course of carrying on the business, now stands settled by the decisions of the Apex Court in Tuticorin Alkali Chemicals Fertilisers Ltd. (227 ITR 172) and Pandian Chemicals V/s. CIT (262 ITR 278). In view of the ratio laid down by the Apex Court in these decisions, which in fact have been followed by the CIT(A) in the impugned orders, the decisions of the Tribunal in assessee's own cases for assessment years 1991-92 and 1992-93 and for assessment year 1995-96, noted (supra), as also the decision of the jurisdictional High Court in the case of CIT V/s. V ..... X X X X Extracts X X X X X X X X Extracts X X X X
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