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TMI Blog2024 (6) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... mation. We, therefore, modify the order of the learned CIT(A) accordingly and direct the AO to estimate the profit at 11.5% before depreciation on contract work executed by the assessee itself. With this, assessee s appeal is accordingly allowed in part. Disallowance of deduction u/s 80-IA(4) - HELD THAT:- Admittedly there is no change in the facts and circumstances of the case obtaining from the earlier assessment years. In these circumstances, we find it difficult to take a different view for this assessment year. We, therefore, do not find any illegality or irregularity in the order of CIT(A) following the binding precedent in the well-considered view of a Co- ordinate Bench of the Tribunal taken for the earlier assessment years by orders dated 16/03/2012 and 25/08/2023. Accordingly, we uphold the findings of the learned CIT(A) for this assessment year also and dismiss the Ground No. 3 of Revenue s appeal. Disallowance of interest u/s 14A r.w.r 8D of the Rules and also the disallowance of interest expense under section 36(1)(iii) - HELD THAT:- We find that there is nothing to contradict the findings of the learned CIT(A) on this aspect. CIT(A) on a comprehensive enquiry, found t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such places is not justified. We have to keep it in mind that the name of the site is only for identification purpose, but it does not indicate anything about the distance between such site and the urban areas with which those are identified. CIT(A) recorded that on verification of the details he found that there were no banking facilities at the sites at which the cash payments were made since those are far away from the urban areas and such expenses were made for providing housing accommodation and other facilities to the workers at the site and, therefore, such payments are justified. This finding of fact is not controverted with reference to any facts and figures and, therefore, it does not appear to us to disbelieve the same. We, therefore, do not find anything perverse in the findings of the learned CIT(A) and accordingly confirm the same. Disallowance of business promotion expenses - CIT(A) held that the said expenditure is not of suspicious nature and AO did not deal with the explanation offered by the assessee to the effect that such expenditure was incurred by the directors and Head Officer staff, accompanying them to the sites - HELD THAT:- CIT(A) recorded that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature, requires no adjudication. Ground No. 2 of Revenue s appeal and all the grounds of assessee s appeal are interconnected and those are in respect of the rejection of books of accounts and determination of income of the assessee at 12.5% before depreciation by the learned CIT(A), stating that when the books of accounts are not rejected by the learned Assessing Officer, the learned CIT(A) is not justified in making estimation that too basing on the additional information furnished by the assessee without calling for the remand report from the learned Assessing Officer in violation of Rule 46A of the Income Tax Rules, 1962 ( the Rules ). According to the Revenue, the expenditure was proved to be bogus and, therefore, the direction of the learned CIT(A) to the learned Assessing Officer to estimate the income, cannot be sustained. We shall therefore, answer this issue with the following common discussion: 4. On this aspect learned AR submitted that right from 1999-2000, in assessee s own case, the Revenue has been estimating the income and as is evidenced by the orders of the Tribunal from 1999-2000 consistently the income of the assessee is estimated at 12.5% and 7.5% before depre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the assessee has been determined by resorting to estimation and dealing with other additions made. This fact is evident from the orders of the Tribunal for earlier assessment years and more particularly in ITA No. 1627 to 1634/Hyd/2013 dated 02/04/2014 and ITA No. 33/Hyd/2017 and batch by order dated 25/08/2023. No change of circumstances warranting a different view is brough to our notice. Since the learned CIT(A) followed the binding precedents in resorting to estimation of the income of the assessee, we do not find anything illegality or irregularity in the findings of the learned CIT(A) on this aspect. Hence, Ground No. 2 of Revenue s appeal is dismissed. 7. Turning to the grounds of assessee s appeal, the issue that is directly and substantially canvassed by the assessee under all the grounds, is in respect of the rate of profit as estimated by the learned CIT(A). Learned AR submitted that this issue is squarely covered by the order dated 25/08/2023 of the Co-ordinate Bench of the Tribunal in assessee s own case for the assessment years 2014-15 and 2015-16 in ITA Nos. 635 636/Hyd/2019. On a perusal of the record including the order cited by the learned AR, we find th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 229417743 3.14% 4 2009-10 8383903915 459420592 5.49% 5 2010-11 9990306241 928048909 9.30% 6 2011-12 10367247572 1384411485 13.32% 7 2012-13 10312117903 1195843322 11.65% 8 2013-14 10550944576 1121153378 10.62% 9 2014-15 6333085837 1249185853 19.72% 10 2015-16 7847091027 1516695115 19.32% 31. His argument is that when the assessee undisputedly incurring such huge financial charges, the estimation of profit at 12.5% on own contract works before depreciation is not justified. He accordingly submitted that the same should be reduced to 9% to 10%. 32. Per contra, learned DR heavily relied on the order of the learned CIT (A). He submitted that the learned CIT(A) has followed the decision of his predecessor for the preceding year in assessee s own case, therefore, the same should be upheld. 33. We have gone through the record in the light of the submissions made on either side. We have also considered the various decisions cited before us by both sides. Only dispute in the grounds raised by the assessee in these appeals is regarding the estimation of profit @ 12.5% on contract executed by self. We find that the learned CIT(A), following the order of his predecessor learned CIT(A) in ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, modify the order of the learned CIT(A) accordingly and direct the learned Assessing Officer to estimate the profit at 11.5% before depreciation on contract work executed by the assessee itself. With this, assessee s appeal is accordingly allowed in part. 9. Now coming to Ground No. 3 and also the additional ground of Revenue s appeal, it relates to disallowance of claim for deduction of Rs. 8,45,39,638/- under section 80-IA(4) of the Act. It was brough to the notice of the learned Assessing Officer that this issue was covered in assessee s own case for the earlier assessment years, but the learned Assessing Officer observed that the assessee is only a works contractor, and the decision of the ITAT was not accepted by the department by preferring an appeal before the Hon ble High Court. He, therefore, proceeded to disallow the deduction claimed. 10. Learned CIT(A) held that for the assessment years 2002-03 to 2007- 08 it was held that the assessee is entitled to the deduction under section 80-IA(4) of the Act, and it was confirmed by a Co-ordinate Bench of the Tribunal for assessment year 2008-09 and 2009-10. While following the common order dated 16/03/2012, in ITA No. 996/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Grounds No. 4, 8 and 9 of Revenue s are interrelated. These grounds relate to the issue of disallowance of interest of Rs. 9,54,48,642/- under section 14A of the Act read with Rule 8D of the Rules and also the disallowance of interest expense under section 36(1)(iii) of the Act at Rs. 8,38,75,714/-. According to the learned Assessing Officer, some of the borrowed funds were diverted to sister concerns and, therefore, such part of interest relatable to the diverted funds cannot be allowed. Learned Assessing Officer found that the assessee made investments in the subsidiaries in the shape of share application money to the tune of Rs. 75,86,88,669/- and also advanced certain interest free loans to the sister concerns. In respect of investments, he invoked 14A of the Act read with Rule 8D of the Rules and determined disallowance under that provision at Rs. 9,54,48,642/- which is the subject matter of Ground No. 4; whereas he calculated the interest expense on the loans to be disallowed under section 36(1)(iii) of the Act at Rs. 8,38,75,714/-. 16. When the assessee appealed, learned CIT(A) found that the sister concerns are all joint ventures in which the assessee happens to be one of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of NHAI, obtaining contracts there from and to pump the funds to the constituents for execution of such work allotted to the constituents, all is part of the business exigency. We, therefore, do not find anything illegality or irregularity in the learned CIT(A) following the decision of the Hon ble Apex Court in the case of in the case of S.A. Builders (supra) and to delete the disallowance. On this score, we uphold the findings of the learned CIT(A) and dismiss Grounds No. 4, 8 and 9. 21. Turning to Ground No. 5 of Revenue s appeal, it relates to the taxing of the interest earned on FDs. On an examination of the trial balance of the assessee, learned Assessing Officer found that an amount of Rs. 2,88,53,061/- was shown towards interest on unsecured loans as other income category, but the same was not offered to tax. Learned Assessing Officer referred to the decision of the Co-ordinate Bench of the Tribunal in ITA Nos. 1247/Hyd/2012 and batch for the assessment year 2008-09 and 2009-10 and held that the interest income is income from other sources and accordingly brough it to tax. 22. Learned CIT(A) examined the details of the finance charges wherein a sum of Rs. 138,44,11,485/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat when once the income is estimated, disallowance under section 40A(3) of the Act cannot be made. He further submitted that after making thorough enquiry only learned CIT(A) reached a factual conclusion that these payments were made at sites which are far away from the urban areas for the purpose of providing housing accommodation and other facilities to the workers at the site. He submits that without contradicting this finding with reference to any material it is not open for the Revenue to say that such payments are not justified. 29. It is the settled principle of law as laid down by the Hon ble High Courts in the cases of CIT vs. Banwari Lal Banshidhar [1998] 229ITR229 (ALL.), Indwell Constructions vs. CIT [1998] 232 ITR 776 (Andhra Pradesh) and CIT vs. Smt. Santosh Jain [2007] 159 Taxman 392 (Punjab Haryana) that when once income of assessee was computed by applying gross profit rate or by estimation, provisions of section 40A(3) could not be invoked. Apart from this, the order of the learned Assessing Officer does not spell out as to the distance of the sites from the urban areas of Allahabad, Kurnool etc., but going by the name of the site, learned Assessing Officer concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There is no dispute that the details of the expenses to the tune of Rs. 33,77,260/- alone were disallowed by the learned Assessing Officer and allowed by the learned CIT(A). The figure mentioned in the Grounds of appeal is purely a typographical mistake. Assessee contended that this expenditure was met by the Directors, Officers and staff members at the time when they visited the sites and since it is connected to the business promotion of the assessee, the same is allowable. Learned Assessing Officer disallowed the same on the ground that no vouchers were produced for verification and the learned AR was unable to produce the same and, therefore, the justification for this expenditure is remained unverifiable. 35. Learned CIT(A) recorded that the assessee submitted before him that this expenditure was incurred in the process of visiting various sites by the Directors, Officers and staff members and since it is connected to the business promotion of the assessee, the same is allowable, and, therefore, the learned CIT(A) allowed the same. Further, learned CIT(A) recorded that when once the income is determined by resorting to the estimation by rejecting the books of accounts, no furt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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