2012 (12) TMI 1077 - AT - Income Tax

Gross receipts - issue of allowability of depreciation - estimated income of the assessee at 12.5% on contract receipts - deduction u/s. 80IA - TDS on royalty payment u/s. 194J - initiation of penalty proceedings u/s. 271(1)(c)

Summary

Issues Involved: Deduction under Section 80HHC, Deduction under Section 10B, Rejection of Books of Account, Estimation of Income, Allowability of Depreciation, Payment of Royalties, Allowability of Deduction under Section 80IA, Self-made Vouchers.

Issue-wise Detailed Analysis:

1. Deduction under Section 80HHC:
The assessee challenged the CIT's order directing the Assessing Officer to re-examine the deduction under Section 80HHC for A.Ys. 2000-01 to 2004-05. The AR conceded that the Assessing Officer granted the deduction in the consequential orders, thus the grounds were not pressed. The appeals were dismissed as not pressed.

2. Deduction under Section 10B:
For A.Ys. 2005-06 and 2006-07, the CIT directed the Assessing Officer to re-examine the allowability of deduction under Section 10B. The AR conceded that the deduction was granted in the consequential orders, and thus the grounds were not pressed. The appeals were dismissed as not pressed.

3. Rejection of Books of Account:
The CIT observed that the Assessing Officer did not make proper inquiries while estimating the income at 12.5% of the turnover and allowing depreciation. The CIT set aside the orders and directed the Assessing Officer to pass fresh orders after making necessary inquiries. The Tribunal upheld the rejection of books of account due to incomplete and self-made vouchers but modified the estimation of income to 8% on main contract receipts and 5% on sub-contract receipts, disallowing depreciation.

4. Estimation of Income:
The estimation of income at 12.5% by the Assessing Officer was considered high. The Tribunal modified it to 8% on main contract receipts and 5% on sub-contract receipts, citing the Special Bench decision in Arihant Builders Pvt. Ltd. vs. ACIT.

5. Allowability of Depreciation:
The Tribunal held that no separate deduction for depreciation is allowed once the income is estimated, following the jurisdictional High Court's decision in Indwell Constructions vs. CIT.

6. Payment of Royalties:
The CIT noted that the Assessing Officer did not examine the deductibility of royalty payments or the applicability of Section 40(a)(i). The Tribunal remitted the issue to the Assessing Officer to examine the records and allow deduction on eligible turnover.

7. Allowability of Deduction under Section 80IA:
The Tribunal remitted the issue to the Assessing Officer to examine whether the assessee carried on the development of infrastructure facilities cumulatively with activities like design, development, operation, maintenance, financial involvement, and defect correction. If so, the assessee would be eligible for deduction under Section 80IA.

8. Self-made Vouchers:
The Tribunal upheld the disallowance of expenditure supported by self-made vouchers, as there was a chance of inflating the expenditure.

Separate Judgments Delivered:
The Tribunal delivered separate judgments for different assessment years and issues, modifying some orders and remitting others for fresh consideration.

Conclusion:
The appeals were disposed of with specific directions to the Assessing Officer to re-examine certain issues and modify the estimation of income and allowability of deductions based on the Tribunal's findings. The Tribunal emphasized the need for proper inquiry and adherence to legal precedents in making assessments.