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TMI Blog2017 (11) TMI 1420X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount which is claimed in the income. In our considered opinion, CIT while considering the same has rightly held the profit rate and allowed the claim of the appellant as reproduced hereinabove. The tribunal has committed serious error in concluding that subsequent years expenses which are claimed ought not to be allowed in the relevant year . In view thereof, the income which has been incurred in the year 2006-07 is required to be allowed as expenses were not claimed in the earlier year. Since, no finding arrived by the AO whether the expenses are claimed or not for the A.Y. 2004-05. - Decided in favour of the assessee - D. B. Income Tax Appeal No. 19 / 2011 - - - Dated:- 30-8-2017 - K. S. Jhaveri And Inderjeet Singh, JJ. For the Appellant : Mr. N.M. Ranka, Sr. Adv. with Mr. N.K. Jain For the Respondent : Mrs. Parinitoo Jain with Ms. Shiva Goyal JUDGMENT 1. By way of this appeal, the appellant has assailed the judgment and order of the Tribunal whereby tribunal has partly allowed the appeal of the department and cross objection filed by the assessee were also allowed. 2. This court while admitting the appeal on 1.3.2012 framed following substan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60.00 By Gross Work receipts 4857976.00 To Depreciation 332756.00 By Closing Stock NIL To Net Profit @ 8.57% 83760.00 (Work in progress) 4857976.00 4857976.00 P L A/c for the A.Y. 1990-91 To Work Expenses 5936366.00 By Gross Work receipts 6354579.00 To Depreciation 390030.00 By FDR Interest 30116.00 To Net Profit @ 7.01% 57699.00 By Closing Stock NIL CIT(A) applied (Work in progress) 8.5% upheld by ITAT 6384695.00 6384695.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee cannot take the benefit of such expenses (by adopting the profit rate) on these receipts. Hence, after considering all facts and circumstances and verification as per the directions of the ITAT, it was held that the entire contract receipt of award from arbitration award has been rightly treated as income. (ii) Following the precedence of the final appeal effect of the ITAT order for A.Y. 2004- 05 in the case of assessee, show cause was given to the assessee to explain why not the entire receipts of arbitration received in this instant A.Y. 2006-07 be subjected to tax, since the assessee has not been able to prove with documentary evidence that expenses pertaining to A.Y. 1993-94 and 1990-91 were not claimed in those years. The reply furnished by the assessee on 8.8.2008 reproduced above was considered but is not satisfactory for the facts discussed above. (iii) Considering the above facts and circumstances it is logical to treat the entire receipts of ₹ 180514/- and 708360/- as the income in the instant A.Y. 2006-07. However, the assessee has already disclosed ₹ 157470/- and 60210/- out of the above receipts in the computation of income submitted wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same and by no stretch of imagination one can tax the entire receipts by way of income and not allow the expenses attributable to the said contract receipts. From P/L account for both the years it is seen that the appellant has already declared the net profit of 8.5% and 8.57% in A.Y. 1990-91 1993-94 , respectively it is not difficult to agree that NP of the order of 8% in cases of contractors is reasonable. In this view things, it is safe to presume that expenses pertaining to receipts from arbitration awards for not accounted for in the audited accounts for respective years. In the alternate scenario, with an assumption that expenses pertaining to receipts from arbitration awards were already debited and now only the receipts should be added, the NP shoots up to unusually high rates of 17.67% and 11.85% respectively. In the light of explanation of the appellant, the only logical inference from these two profit loss accounts is that expenses pertaining to the receipts under arbitration award were not included in the audit P/L account for respective years. To sum up, the AO has not given any reasons to hold the reply dt. 8.8.2008 of the appellat was...not sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inding that such expenses have not been entered in the books of account. Such an expenditure for which no details filed or not entered in the books of account is not allowable as per proviso to Sec. 69C of the IT Act. Hence even if for the argument it is accepted that assessee has incurred expenditure against such receipts even then such expenditure will not be allowable. It is not the case of the assessee that it has kept details of expenses related to the issues on which receipts were received as a result of arbitration award. The onus is on the assessee to estabish the outgoings and have to explain the source of such outgoings. We, therefore, hold that ld.CIT(A) was not justified in deleting the addition of ₹ 8,13,194/-. 4. Counsel for the appellant has relied upon the following decisions:- 4.1. In CIT vs. Govinda Choudhury Sons. 203 ITR 881 wherein Supreme Court held as under:- The assessee contended that the amount received by him by way of interest was really in the nature of damages and was not taxable as a revenue receipt. This contention was rejected by the Income-tax Officer as well as the Appellate Assistant Commissioner. Before the Tribunal, again, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same character as the receipts for the payment of which he was otherwise entitled under the contract and which; payment has been delayed as a result of certain disputes between the parties. It cannot be separated from the other amounts granted to the; assessee under the awards and treated as income from other sources . The second question is, therefore, answered in favour of the assessee and against the Revenue. 4.2 In CIT vs. N.C. Kaladharan, L/R Late Gowri ITA No.180 of 2002 decided on 31.1.2008 wherein it has been held as under:- 3. The question raised is whether the estimation of income at 10% as fixed by the Commissioner of Income Tax (Appeals) and confirmed by the Tribunal applies to interest element of the award amount According to the Revenue, interest is entirely taxable as it is an addition to the contract amount. However, we find that the issue is covered by the decision of the Supreme Court in Commissioner of Income Tax v. Govindar Choudhurg and Sons (203 ITR 881) wherein the Supreme Court held that the compensation as well as interest have to be treated as contract receipts. Since the issue raised is covered by the decision of the Supreme Court, we do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t have received the amount from the Lucknow Development Authority and the same might have been circulated in the business. Therefore, we are of the view that the interest payable to the assessee is at par with the business receipts, as it was not acquired separately as already held by Hon'ble Apex Court in the case of CIT vs. Govind Chaudhary, (1993) 203 ITR 881 SC. In view of the above, the interest earned along with the award is to be treated as income from the business already claimed by the assessee. 4.6 He relied upon the decision of Orissa High Court in CIT vs. A Lenka and Partners 215 ITR 298 wherein Orissa High Court held as under:- 3. In the course of hearing our attention has been drawn to the decision in CIT v. Govinda Choudhury and Sons [1993] 203 ITR 881 (SC). Our attention was also drawn to the decision in CIT v. Builders Union [1995] 211 ITR 993 (Orissa). It is held therein that the assessee had executed a civil contract for the Government during the financial years 1961- 62 to 1965-66. Disputes having arisen between the parties, in accordance with the arbitration clause in the agreement, the same were referred to the arbitrator. The arbitrator made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tled that interest can be assessed under the head Income from other sources only if it cannot be brought within one or the other of the specific heads of charges. We find it difficult to comprehend how the interest receipts by the assessee can be treated as receipts which flow to him de hors the business which is carried on by him. In our view, the interest payable to him certainly partakes of the same character as the receipts for the payment of which he was otherwise entitled under the contract and which payment has been delayed as a result of certain disputes between the parties. It cannot be separated from the other amounts granted to the assessee under the awards and treated as income from other sources. The second question is, therefore, answered in favour of the assessee and against the revenue. 5. Taking into consideration he contended that for the assessment year 2004-05, different issues were raised however tax appeal on 825/2008 preferred by the department came to be disposed of involving low tax effect in the said appeal following substantial questions of law were framed by the counsel for the appellant:- 1. Whether under the facts and circumstances of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idences and gave a factual finding that diesel has disturbed to JCB/tractor owners. However, in absence of copy of such register we are not in a position to see that the entire diesel purchased has been disturbed. Purchase of diesel per bill varies from ₹ 233 to ₹ 38034. Hence entire purchases are not in bulk. In the written submissions vide letters dt. 29.3.2009 filed before ld. CIT(A) that in the preceding year ₹ 70,000/- was disallowed out of tractor hire charges which was reduced to ₹ 35,000/- by the tribunal. Hence considering the non-availability of quantum of diesel disturbed vis-a-vis total purchase of diesel, purchase of diesel varying from ₹ 233 to 38034 per bill and disallowance of tractor hire charges to the extent of ₹ 35,000/- sustained by the tribunal in the case of the assessee for the earlier year, we feel that it will be fair and reasonable to estimate the disallowance of ₹ 35,000/-. Accordingly disallowance is restricted to ₹ 35,000/-. 6.1 He contended that the assessee has failed to produce on record whether expenses for the A.Y. 1990-91 1993-94 were claimed or not and what happened to the proceedings for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y dismissing the appeal of the revenue. 7. Before proceeding with the matter, counsel for the appellant relied on the finding of the AO recorded in the earlier appeal which is reproduced as under:- On perusal of balance sheet of the assessee, it is found that assessee has shown current liabilities which included liability of ₹ 35,83,978/- as arbitration receipts from XEN, Irrigation, Bundi. During the period relevant to the assessment year under consideration the assessee received contract receipts of ₹ 3583978/- on Court s order an appeal filed by the assessee against the decision of the arbitration. Since these are the receipts of the assessee and should be part of the income of the assessee therefore how this can be treated as liabilities. These assessee was required vide order sheet entry dt. 15.11.2006 to explain as to how this has been shown as liability whereas these contract receipts of ₹ 3583978/- have already been received by you during the period relevant to the assessment year and this your income and not liability. The assessee has in written reply dt. 17.11.06 stated that on request of the assessee the Hon ble Court directed the State for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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