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TMI Blog2016 (9) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... various information/documents and clarifications were issued. In the course of assessment proceedings, the ld Assessing Officer observed that the work in progress included closing stock, which was shown on estimated basis, details regarding use of material at various sites were missing and cash vouchers for miscellaneous expenses were self made, which could not justify the connection of the same for the business purposes. On the basis of these observations, the ld Assessing Officer invoked the provisions of Section 145(3) of the Act and calculated the income from contract receipts @ 8% of the gross turnover of Rs. 47,00,13,786/-. The ld Assessing Officer also assessed the interest income on FDR at Rs. 92,62,914/- as income from other sources. Income of the assessee was assessed at Rs. 4,68,64,020/- by calculating business income at Rs. 3,76,01,102/- (@ 8% on total contractual receipts of Rs. 47,00,13,786/-) and interest income on FDR at Rs. 92,62,914/- assessed as income from other sources. 3. Aggrieved the assessee went in appeal before the ld CIT(A) but did not press the ground relating to treatment of FDR interest of Rs. 92,62,914/- as income from other sources and solitary gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this rate was confirmed by the Hon'ble ITAT in the preceding year i.e., A.Y. 2008-09. It is further noted that in the year under consideration the appellant has declared NP @ 3.36% on the gross receipts, after depreciation, interest and partners' remuneration, which is extremely low. Considering the submissions of the appellant and overall facts & circumstances of the case, it would be appropriate to apply NP rate of 4.75% on the gross contractual receipts of Rs. 47,00,13,786/- which results in the net profit of Rs. 2,23,25,654/-, after allowing depreciation, interest and partners remuneration. After setting off the net profit from contract business declared by the appellant, the addition comes to Rs. 66,04,948/- which is confirmed." 4. Aggrieved, the assessee and the revenue both are in appeals before the Tribunal. First we will take up the assessee's appeal. Following ground has been raised by the assessee in its appeal: "1. Under the facts and circumstances of the case, the ld CIT(A) is not justified in applying the NP rate of 4.75% of total contract receipts, considering the same to be after allowing depreciation, interest and partners remuneration and thereby in confirmin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y. 2006-07, 2007-08, and 2008-09 has allowed the appeal of the assessee and amended the order of Id. CIT(A) and held that "net profit rate of 8% further subject to Depreciation, Interest and partners' remuneration could be final finding" and dismissed the appeal of the department. 6. In succeeding A.Y. 2011-12 the ld. CIT (A) himself following the above said order of this Hon. Bench dated 15.01.2014 has upheld the NP rate of 8% subject to further allowance of Depreciation, Interest and partners' remuneration and this Hon'ble Bench vide order dated 18.11.2015 in ITA No.631/JP/2014 has sustained the order of ld. CIT(A). 7. The facts of the case are identical to that of preceding A.Y. 2006-07, 2007-08, 2008-09 and 2009-10 and succeeding A.Y.2011-12 and squarely covered with in the earlier orders passed by this Hon'ble Bench where the claim of depreciation, bank interest and partners remuneration has been specifically allowed out of the Net profit estimated by application of NP rate of 8%. 8. As held by this Hon'ble Bench in own case of the assessee for 4 consecutive preceding years and succeeding year also, the depreciation, bank interest and partners remuneration is allowable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observe that in the decision of the Coordinate Bench in ITA No. 949/JP/2009 for A.Y. 2006-07, which has been followed in the consecutive years, the Coordinate Bench has observed as under:- "15. In the present case as stated above, one of the partners agreed net profit rate of 8% subject to not allowing any other deduction under wrong notion. Perhaps he was of the view that administrative expenses such salary expenses, raw material expenses, electricity expenses, labour expenses etc. etc. may not be allowed. However, depreciation, interest and salary to partners which is otherwise allowable and moreover the partner has not specifically mentioned that these expenses will not be claimed. It seems that there is a bonafide mistake in not mentioning specifically these expenses because they are not administrative expenses but are allowable otherwise. For these reasons, we can say that ld. CIT (A) was justified in directing the AO to allow these expenses separately. Accordingly, we hold that ld. CIT (A) was justified in directing the AO to allow deduction of depreciation, interest and salary to partners, therefore, we confirm the order of ld. CIT (A)." 7.3 We further observed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts allowing depreciation, interest and remuneration paid to partners. In our considered opinion, the law demands consistency to avoid any future misunderstanding and to keep the findings in the same manner we hold that net profit rate of 8% further subject to depreciation, interest and remuneration paid to partner could be final finding. Accordingly, we hold as above and allow the appeal of the assessee to that extent. 7.4 Respectfully following the decision of the Coordinate Bench, we are of the considered view that the business income of the assessee from the contract work of erection and fabrication has to be calculated by first applying 8% of the gross contract receipts of Rs. 47,00,13,786/-which comes to Rs. 3,76,01,102.88 and from this amount, the assessee should be allowed deduction of depreciation at Rs. 76,11,318.77, remuneration to the partners at Rs. 4,80,000/- and interest of Rs. 1,60,89,158.44. The resultant figure of business income will come to Rs. 1,34,20,625.67. The total income of the assessee to be calculated by adding interest on FDR of Rs. 92,62,914/- to the figure of business income of Rs. 1,34,20,625.67. Accordingly, the total income by way of this calculat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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