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TMI Blog2013 (11) TMI 409X X X X Extracts X X X X X X X X Extracts X X X X ..... produce full set of books of accounts, bills & vouchers. Hence the assessing officer rejected the book results and estimated income at 8% of net contract receipts. Besides the above, the assessing officer assessed the interest received on fixed deposit receipts separately under the head "Income from other sources". The assessing officer also noticed that the assessee had paid freight charges to the tune of Rs.54,88,106/- without deducting tax at source u/s 194C of the Act. Hence, the assessing officer disallowed the claim of freight charges by invoking provisions of section 40(a)(ia) of the Act. Aggrieved, the assessee carried the matter in appeal before Ld. CIT(A). 3. The first appellate authority, on considering the fact that the assessee has also executed works on sub-contract basis, estimated income from subcontract works @ 6% of sub-contract receipts. The Ld. CIT(A), however, confirmed the order of the assessing officer on income estimated on main contract works, i.e., 8%; assessment of interest on FDRs under income from other sources and also the disallowance of freight charges made u/s 40(a)(ia) of the Act. Still aggrieved, the assessee has filed this appeal before us. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly maintained a difference of 2% in the rate of profit estimated for main contract works and sub-contract works. There should not be any dispute that the income estimated for a particular assessee would depend upon the facts and circumstances prevailing in that case and such kind of estimates cannot be generalized or standardised. 7. In the instant case, it has been brought to our notice that assessee himself has declared a profit of 5.20% after depreciation on the combined Gross receipts. In our opinion, the assessee deserves further reduction in the estimate made by the Ld. CIT(A) in view of the huge depreciation benefit available to the assessee. Hence, on a conspectus of matter, in our view, the matter would meet the ends of justice if the profit from main contract works is estimated @ 6.5% of the relevant net contract receipts. Since the Learned CIT(A) has maintained a difference of 2% between the income estimated for main contract works and sub-contract works, we also direct the assessing officer to estimate the income sub-contract works @ 4.5% of the relevant net contract receipts. We order accordingly and the order of learned CIT(A) on this issue stands modified according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... structions (297 ITR 70) (Karnataka High Court). After hearing the learned authorized representative and on a careful consideration of the facts relating to the issue, it may, at the outset, be stated, with due respect to the decision of the Hon'ble Karnataka High Court in the case of CIT Vs. Chinna Nachimuthu Constructions (supra), that even if it is accepted that the appellant had made the said FDRs in order to secure contract works, yet the earning of interest income therefrom cannot be said to have a direct nexus with the income emanating from the undertaking of contract works, in the light of the decision of the Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. Vs. CIT (227 ITR 172) which held that interest earned on deposits placed for the purpose of obtaining loans for business cannot be treated as business income, but only as income from other sources. The said decision which was rendered in the context of sections 56 and 57 of the Act, has been followed in the case of CIT Vs. Autokast Ltd., (248 ITR 110) (Supreme Court). Likewise, in the case of CIT Vs. Dr. V. Gopinathan (248 ITR 449) (Supreme Court) interest on FDRs was held n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance with the following observations:- " 5.1. The learned authorized representative submitted that since the payments to individual truck owners did not exceed Rs.20,000, the provisions of section 194C of the Act could not have been invoked, and that, in the alternative, since the income from business has been estimated after rejection of books of accounts, no separate addition was called for on the basis of the same books of accounts, in the light of the decision of the Hon'ble ITAT., in the following cases :- (a) Jagdish Lal Vs. Income-Tax Officer (94 TTJ 1119) (Jodhpur Bench) and (b) DCIT Vs. Krishan Lal (ITA No.135 (CHD) of 2003 (Chandigarh Bench 'B'). 5.2. After hearing the learned authorized representative and on a careful consideration of the facts relating to the issue, the following observations made and decisions taken :- (i) Despite the Assessing Officer having given a finding after verification of the books of accounts to the effect that freight payments made to several parties on various dates with each payment exceeding Rs.20,000 and the aggregate of each payment exceeding Rs.50,000 during the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As such, the decision on this issue is also rendered against the appellant." 11. The Learned Counsel for the assessee relied upon the following decisions rendered by the Tribunals to contend that the provisions of sec. 40(a)(ia) of the Act cannot be invoked to make disallowance, if the income of the assessee is estimated after rejection of book results. (a) Teja Constructions Vs. ACIT (2010)(129 TTJ (Hyd)(UO) 57) (b) I.T.O. Vs. Sahadev Pradhan (2012)(18 ITR (Trib) 180 (Cuttack) On the contrary, the Learned D.R strongly supported the view expressed by Learned CIT(A) on this issue. 12. We have heard the rival contentions on this issue and carefully perused the record and the decisions relied upon by Learned A.R. We notice that the decision rendered by the Hyderabad bench of the Tribunal has been followed by the Cuttack bench of the Tribunal. The Hyderabad bench of the Tribunal, in the case of Teja Constructions (Supra) has taken the view that the rejection of books of accounts and the book results and consequent estimation of income takes care of the irregularities committed by the assessee. 13. However, we find that the disallowance prescribed under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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