TaxTMI 
TaxTMI 
TaxTMI 
2014 (5) TMI 842
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....ering the facts of the case of the assessee and also the expenditure incurred by the assessee. (3) The Id. CIT (A) failed to note that section 145(3) empowers the AO to make a best judgment assessment and it is left to AO estimate the income of the assessee taking into account the totality of peculiar facts of each case differently and distinctly. (4) The Id. CIT (A) erred in adopting the profit at 8% from main contract works and 5% from subcontracts as against 12.5% from main contract works and 8% from sub contract works estimated by the AO in accordance with the rates adopted in this line of business and in conformity with various judicial pronouncements. (5) The ld. CIT(A) erred in estimating the income at 8% and 5% respectively where....
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....e. In any case, one has to remember here that any estimation is net of all expenses including that of depreciation. Since the appellant happens to be a firm, it is eligible for deductions of remuneration to working partners and interest on partner's capital. It may further be noted here that since the appellant is having contract works and he took sub contract works also from others, as per the precedents of the jurisdictional tribunal. the AO is directed to estimate income at 8% and 5% on contract works and sub contract works respectively." 5. We have heard both the parties and perused the material on record. The issue in dispute is squarely covered by the common order of this Tribunal in the case M/s. C. Eswara Reddy & Co. vs. The As....
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....ating the profit, the lower authorities may take into consideration the profit ratio of the similarly placed traders in the same locality and other factors such as availability of labour, demand in the market, etc., as discussed above. Therefore, the profit ratio of the other assessees in that locality may be one of the factors to be taken into consideration. However, that cannot be the sole criteria for fixing the profit ratio from the contract business. By keeping this factual situation in mind, let us now examine whether the estimation of profit by the CIT(A) at 8% on main contract and 5% on sub contract is justified or not. 8. We have carefully gone through the order of this Tribunal in the case of Krishnamohan Constructions (supra), K....
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.... estimating the profit various factors such as the profit ratio of the assessee in the earlier year, profit ratio of the similarly placed traders in the same locality, demand for the product, availability of labourers, raw materials, etc., and the time gap available for executing the contract work, etc., have to be taken into consideration. Therefore, in our opinion, reference to earlier order of this Tribunal alone for the purpose of estimating the profit at 12.5% may not be justified at all. 9. In fact, in the case of Krishnamohan Constructions in ITA Nos. 116 and 117/Hyd/2007 for A.Ys. 1993-94 and 1994-95 the Tribunal estimated the profit only at 8% even though the profit was estimated at 12.5% for A.Y. 1992-92. This itself shows that f....
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....sessing Officer while computing the total contract receipts the seigniorage charges shall be reduced from the total contract receipts for the purpose of estimating the profit. 12. Now coming to the depreciation. We have carefully gone through the judgement of the jurisdictional High Court in the case of Indwell Construction (supra). In the case before the jurisdictional High Court an addition was made towards interest and remuneration paid to the partner when the profit was estimated. The jurisdictional High Court after considering the provisions of section 29 and 40 found that no separate addition shall be made. The contention of the learned counsel for the assessee is that depreciation shall be on the WDV from the profit computed/estimat....
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....tract receipts exceed Rs. 40 lakhs, with effect from 1.4.2011 such restriction was removed by the Legislature. Moreover, the co-ordinate Bench this Tribunal in M. Bhaskar Reddy (supra) after taking a clue from section 44AD estimated the profit at 8% of the contract receipt. Therefore, by taking a clue from the provision of section 44AD as is applicable for the assessment year under consideration and the provisions which would come into operation with effect from 1.4.2011, in our opinion, the payment of interest and salary to the partner shall be allowed subject to limitation specified in section 40(b) of the Act from the estimated income. 15. We have carefully gone through the judgement of the jurisdictional High Court in the case of Indwe....