2009 (12) TMI 966 - AT - Income Tax

Summary

Issues Involved:
1. Estimation of income at 12.5% of gross contract receipts.
2. Depreciation on vehicles used in the contract business.
3. Treatment of the assessee as 'assessee in default' and recovery of TDS.
4. Credit for TDS made on mobilization advance.

Issue-wise Detailed Analysis:

1. Estimation of Income at 12.5% of Gross Contract Receipts:
The assessee contested the CIT(A)'s decision to uphold the estimation of income at 12.5% of gross contract receipts, arguing that a lower percentage should be applied based on previous Tribunal decisions. The Tribunal reviewed the case and noted that the assessee had not challenged the rejection of the books of account. Given that the books did not reflect true profits, the taxing authority had to determine the correct profits based on available material. The Tribunal referred to previous decisions, including the case of M/s Krishna Mohan Construction Company, which supported a 12.5% profit rate. However, the Tribunal acknowledged that in the assessee's own case for the assessment year 2003-04, a lower rate of 8% for own contracts and 5% for subcontracts was applied after allowing depreciation. The Tribunal offered the assessee two options: either to follow the 2003-04 decision if depreciation is not claimed or to adhere to the 12.5% rate as per the Krishna Mohan case. For subcontracts, the Tribunal directed a 5% profit rate.

2. Depreciation on Vehicles Used in the Contract Business:
The assessee claimed depreciation on a vehicle transferred from the managing director to the company, despite the vehicle not being registered in the company's name due to technical reasons. The Tribunal held that non-registration under the Motor Vehicles Act does not disqualify the claim for depreciation. Ownership should be determined based on financial control, management, and use of the vehicle. Since the vehicle was disclosed in the company's books and no counterclaims existed, the Tribunal allowed the depreciation claim, citing the Supreme Court judgment in M/s Mysore Minerals Ltd. vs. CIT.

3. Treatment of the Assessee as 'Assessee in Default' and Recovery of TDS:
The assessee challenged the CIT(A)'s decision to treat it as an 'assessee in default' and the recovery of TDS. The Tribunal noted that these grounds were raised for the first time and had not been considered by lower authorities. The Tribunal found no notification conferring jurisdiction on the assessing officer to address TDS issues. Therefore, the Tribunal set aside this issue to the assessing officer to confirm jurisdiction and adjudicate accordingly.

4. Credit for TDS Made on Mobilization Advance:
The assessee argued that it should receive credit for TDS made on mobilization advances, which were offered to tax as part of its turnover. The Tribunal noted discrepancies between the assessee's claims and the CIT(A)'s findings. The Tribunal emphasized that once tax is deducted and paid to the government, the assessee is entitled to credit for the TDS. The Tribunal set aside this issue to the CIT(A) to re-examine whether the mobilization advance was accounted for in the assessee's books and paid to subcontractors after retaining commission. If so, the assessee should receive credit for the TDS.

Conclusion:
The appeal was partly allowed, with specific directions for re-examination and adjudication on the issues of TDS recovery and credit for TDS on mobilization advances. The Tribunal provided options for the estimation of income and allowed the depreciation claim on the vehicle.