2013 (7) TMI 1013 - AT - Income Tax

Tribunal Affirms 5% Income Estimation for Subcontractor, Dismissing Revenue Appeals for AYs 2006-2007 & 2007-2008.

ACIT Versus M/s. MAA High Ways

The ITAT resolved cross appeals for AYs 2006-2007 and 2007-2008, focusing on income estimation for a sub-contractor. The Tribunal ruled that the ... AO estimated net profit at 12.5% of the gross contract receipts, rejecting books of accounts - Assessee being a subcontractor, lower rate should be applicable - HELD THAT - Assessee being a sub-contractor, its income should have been estimated at 5% on the subcontract receipts and the assessee is not entitled for any deduction towards depreciation. Decision in favor of assessee. Issues involved: Cross appeals by Revenue and assessee against CIT(A) order for assessment years 2006-2007 and 2007-2008, common issues clubbed together.Issue 1 - Assessment Year 2006-2007:The assessee, a sub-contractor, disputed net profit estimation by Assessing Officer at 12.5% of gross contract receipts. CIT(A) directed income estimation at 8% of gross receipts based on previous rulings. Tribunal held that sub-contractor's income should be estimated at 5% on subcontract receipts with no depreciation deduction allowed.Issue 2 - Assessment Year 2007-2008:Similar to 2006-2007, sub-contract works amounted to a significant sum. CIT(A) gave a similar direction as in the previous year. Tribunal followed the decision for 2006-2007, estimating income at 5% on subcontract receipts with no depreciation deduction allowed.Revenue's Appeals:Revenue appealed CIT(A)'s estimation of gross receipts at 8% instead of 12.5% by Assessing Officer. Tribunal dismissed Revenue's appeals based on the decision regarding sub-contractor income estimation at 5%.In conclusion, the appeals of the assessee for both years were allowed, while the Revenue's appeals were dismissed. The Tribunal emphasized the specific income estimation approach for sub-contractors and the inapplicability of depreciation deductions in such cases.