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TMI Blog2012 (10) TMI 658X X X X Extracts X X X X X X X X Extracts X X X X ..... - matter requires a re-visit by the A.O. for considering the issues de novo - IT APPEAL NOs. 1241, 1429 & 2132 TO 2135 (mad.) of 2010 - - - Dated:- 30-3-2012 - ABRAHAM P. GEORGE AND VIKAS AWASTHY, JJ. Nagendra Prasad for the Appellant. Dr. Yogesh Kamath for the Respondent. ORDER 1. Of the above appeals, the first two appeals are of the Department for assessment year 2006-07, whereas, other appeals are of assessees for assessment years 2004-05 and 2007-08. 2. Notice for hearing was served on both the assessees by registered post and acknolwedgements dated 28.12.2011 are on record for both the assessees. Despite such notice, nobody entered appearance for the assessees. 3. Appeals of the Revenue for assessment year 2006-07 are taken up first for disposal. Effective Ground taken by the Revenue are similar in both these appeals and is reproduced hereunder:- 2. The Learned CIT(A) has erred in directing the assessing officer to compute the total income of the assessee at 10% of the gross receipts. 2.1 The Learned CIT(A) has erred in holding that the total income of the assessee is to be computed on the basis of section 44BBB of the IT Act. 2.2 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der. (3) For these and other grounds that may be adduced at the time of hearing, it is prayed that the Order of the learned Commissioner of Income Tax (appeals) be set aside and that of the Assessing Officer be restored. 4. Short facts apropos are that both the assessees together formed a consortium and entered into an agreement on 30.7.2001 with Tamil Nadu Electricity Board (TNEB) for setting up 2x15 MW Hydro Electric Power Plant Project at Bhavani Kattalai Barriage-I in Erode District in Tamil Nadu. Two assessees mentioned are the only parties in the consortium which had entered into the agreement with TNEB. Returns for the impugned assessment year were filed by both the assessees on 14.11.2006. M/s Litostroj returned an income of Rs. 14,37,100/- after setting off earlier loss, whereas M/s Koncar Inzenjering returned a loss of Rs. 3,91,890/-. During the course of assessment proceedings, it seems both the assessees furnished revised computation of income. In such revised computation, assessees recomputed their income applying Section 44BBB of Income-tax Act, 1961 (in short 'the Act'). Accordingly, they considered 10% of gross erection income as their total income and thereaft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of technical services called for application of provisions of Section 44D read with Section 115A of the Act. Thus, effectively he denied the assessees their claim for computation of income under Section 44BBB of the Act and in respect of design engineering and technical services expenses made a further addition applying Section 44D read with Section 115A of the Act. 5. Assessees in their appeal before ld. CIT(Appeals), argued that the projects involved three categories of income. As per the assessees, first stream was for supply of machinery offshore, second stream was for the designing, detailing and offshore testing work and third stream was for erection and commissioning done in India. As per the assessees, for the last stream, they received payment in Indian rupee and this work was subcontracted to M/s Thirumagal Engineering. Argument of the assessees was that it was executing a turnkey power project approved by competent authority, and therefore, were eligible for computing income as per Section 44BBB of the Act. Assessees further argued that all the conditions laid down under Section 44BBB were satisfied and the A.O. had erroneously concluded that omission of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approval required under Section 44BBB of the Act. Placing a copy of letter dated 8th November, 2006 of Chief Engineer (HPM) of Central Electricity Authority, Ministry of Power, Government of India, learned D.R. submitted that this certificate clearly mentioned that the projects had to be treated at par with power projects approved by Government of India with applicable provisions of tax deducted at source, under Section 44BBB of the Act. According to him, "treatment at par with power project" mentioned in the said certificate could not be considered as an approval given under Section 44BBB of the Act. Further according to him, as on the date when assessees entered into the agreement with TNEB, the project was not financed under any international aid programme and therefore, one other essential condition laid down under Section 44BBB was also not satisfied. Again as per the learned D.R., assessees had initially returned their income based on books of accounts maintained, which were audited as prescribed under the Act and later on, it could not go back and prefer to be governed under the presumptive tax just because it was convenient for them. As per learned D.R., ld. CIT(Appeals) fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AS Litostroj E.I. and Koncar had participated in the above referred Bidding as "Consortium Bid" vide their proposal dt. 29.4.1999 and TNEB awarded the Contract to the Conortium of M/s Litostroj E.I. and M/s Koncar on terms and conditions contained in the Letter of Intent (LOI) No.SE/GTS/EM/A4/HY-Proj/F-BKB1/D.753/2001 dt. 3.4.2001 and Amendment No.1 vide Lr.No. SE/GTS/EM/A4/F.HY-Proj/F-BKB1/D.98/2001 dt. 08.06.2001 and Amendment No.2 vide Lr. No. SE/GTS/EM/A4/F.HY-Proj/F.BKB1/D.166/2001 dt. 18.07.2001 issued to LOI, therein which have been accepted by M/s Litostroj E.I. and M/s Koncar resulting into a "Contract". 1.0 AWARD OF CONTRACT 1.1 TNEB has awarded the contract to the CONSORTIUM for the above project on the terms and conditions contained in its Letter of Intent No. SE/GTS/EM/A4/Hy.Proj/F.BKB1/D753/2001 dated 3.4.2001 and Amendments No.1 dt. 08.06.2001 and No.2 dt. 18.07.2001 issued to LOI, and the documents referred to therein. The award has been taken effect from the date of signing of this Contract Agreement. The terms and expressions used in this agreement shall have the same meaning as are assigned to them in the "Contract Documents" referred to in the succeeding art ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.0(vi) of L.O.I. dated 3.4.2001. Exchange rate variation will be allowed for the imported components only on the C.I.F. value of DEM 2,42,58,748 (DEM two crores forty two lacs fifty eight thousand seven hundred and forty eight only) and shall be limited to a maximum of 5% of C.I.F. value of imported components as per Clause 4.0 (iv) of L.O.I. dated 3.4.2001." It is clear that the agreement was for a lump sum. No doubt, there was a break-up allotted between the two parties for such sum. But, in our opinion, this cannot lead to a conclusion that effectively there were separate agreements entered by TNEB with the assessees. The work was to be done together. The liability was undertaken together. We also find that both the assessees had filed revised computation during the course of assessment proceedings, applying Section 44BBB for computing their respective income, whereas initially they had returned their income based on the audited books of accounts. Application of Section 44BBB of the Act for computing the income was first made through such revised computation. Hon'ble jurisdictional High Court in the case of CIT v. Shriram Investments (TCA 344 of 2005 dated 16.6.2012) relying ..... X X X X Extracts X X X X X X X X Extracts X X X X
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