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TMI Blog2011 (12) TMI 583X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,06,540/- in contract account. 3.2 The assessee is engaged in the execution of contract work. Before the AO, the assessee furnished comparative of gross profit and net profit for the last four years and the same is reproduced as under:- A.Y. Turnover G.P. G.P.% N.P.% 2002-03 5,27,32,870 53,36,566 10.12% 2.08% 2003-04 4,37,62,856 53,74,078 12.21% 1.03% 2004-05 4,50,07,549 54,98,488 12.22% 0.89% 2005-06 5,48,46,737 65,26,761 11.90% 0.84% 2006-07 14,01,79,045 1,71,15,840 12.21% 4.83% From the above chat, the AO noticed that the assessee has shown the gross profit at 12.21% which is better as compared to preceding year. It is lower than the gross profit rate disclosed in the assessment year 2004-05. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, upheld the addition of Rs. 4,06,540/- after observing as under:- "It is settled law that past history of the assessee is the best guide to determine the rate of profit. The past history of the assessee as appearing from the facts mentioned in the assessment order establishes that consistently in the past several years the gross profit of the appellant has been determined by applying a gross profit rate of 12.5%. As has been discussed above, the appellant has failed to point out any material fact which could distinguish the relevant facts during the current year from those in the past years in assessee's own case. Evidently, there is no scope but to uphold the application of the gross profit rate of 12.5% by the AO on the gross receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove referred addition is on account of enhancement of income by the ld.CIT(A). The ld.CIT(A) issued the show cause notice that the sublet commission is not to be allowed as deduction when net profit rate is being applied subject to deduction namely remuneration and interest to partners, depreciation and interest to third parties as also commission. 4.3 Before the ld.CIT(A), it was submitted that deduction on account of sublet commission was allowed by the ld.CIT(A) in the past and Tribunal upheld the action of the ld.CIT(A) in allowing deduction of sublet commission separately from the net profit. Reliance was placed upon the order of the ITAT in the case of M/s. Bhawan Va Path Nirman (Bohra) and Co.. The ld.CIT(A) enhanced the income aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Thus, the liability with regard to payment to sublet commission crystallizes prior to receipt of payment of bill and credits on account of execution of contract by the subcontractor. The gross receipt is also to be received by cheque in the bank account of the main contractor and at no stage the cheque of the gross amount is received by the sub contractor in his bank account. This clearly establishes that the gross receipt of the sub contractor is the receipt of payment received against bills from the contractee department as reduced by the amount of sublet commission. The method of accountancy as provided in the sublet contract according to which the gross amount received on account of work executed by the sub contractor shall be credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucted from the profit determined on application of gross profit rate. In view of this, I hold that the amount of receipt to which the gross profit rate of 12.5% is to be applied shall be the amount of gross receipt received by the assessee from the main contractor as reduced by the amount of sublet commission and that no further deduction of the amount of sublet commission is required to be allowed from the amount of profit determined by applying the gross profit rate. Accordingly, the Assessing Officer is directed to determine the gross profit of the assessee by applying the GP rate of 12.5% on the amount of gross receipt received from the main contractor as reduced by sublet commission without further allowing reduction of the amount of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue relates to the allowability of deduction on account of subletting commission separately from the income of the assessee from contracting business estimated by applying net profit rate . This issue has been raised in Revenue's appeal being ITA No. 17(JDPP)/98 in ground no. 2 (sub-part) 9. After considering the rival submissions and perusing the relevant material on record, it is observed that the assessee executed certain contracts received by other contractors and paid commission on such main contractor at the agreed rate on the value of relevant contract. Considering the nature of this expenditure, we are of the view that the same cannot be considered as a regular or routine contract expenses and n fact the payment of such commission ..... X X X X Extracts X X X X X X X X Extracts X X X X
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