TaxTMI 
TaxTMI 
TaxTMI 
2015 (5) TMI 605
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.... the hands of the assessee even though the entire work has been sub-contracted". 3. "On the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in allowing the expenses of water charges and sewerage charges in the hands of the assessee AOP even though no TDS has been done on the payment of expenses". 4. "The appellant prays that the order of the CIT(A) on the above grounds be reversed and that of the Assessing Officer be restored". 3. The assessee in its appeal (i.e. ITA No.6264/M/2012) has taken following grounds :- "1. On given facts, circumstances, and judicial pronouncements Hon. CIT(Appeals) erred in framing the appellate order without considering the submission of the appellant and order of Hon. CIT (Appeals) is liable to be quashed. 2. On given facts, circumstances, and judicial pronouncements Hon. CIT(Appeals) erred in confirming in making addition made by Ld. AO on account of work contract tax refund which has already been duly offered for taxation by assessee which is bad in law and liable to be deleted." 4. Rival contentions have been heard and record perused. The assessee is a special purpose vehicle in the form....
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....thority; MCGM. However as. per A.O being a contractor the appellant was under obligation to follow Percentage Completion Method as per Accounting Standard-7 which they have not complied with and in view of this the A.O. has rejected the books of account and estimated the profit at 10% of the P&L Account. The basis and reasoning for estimating the profit at 10% have been discussed in para 3 of the order which is reproduced above. The A.O has further supported his action of rejection of books of accounts and estimating profit at 10% of turnover by making observation that appellant has not deducted TDS from water and sewerage charges paid of Rs.l,13,24.339/- and then refund receivable on account of work contract tax refund of Rs. 25,79,162/- has not been included in the income. The observations of A.O. are given in para 3.3 and 3.4. of the assessment order reproduced above. 3.4. On the other hand. the appellant has submitted that the revenue have been reflected on the basis of completion of work as appellant is following Accounting Standard-7 and according to which they are showing percentage completion method of accounting and recognizing 'revenue, The bills raised by Cons....
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....ermany, and Samsung Engineering Company Ltd., Korea and vide AAR NO.977 of 2010 in the case of Roxer Maximum Reservoir Performance WLl vs. DIT. In view of above judgments, your honour is kindly requested to decide the case in favour of revenue. " 3.6. I have gone through the submissions and I am in agreement with this part of the A.O's observation that in the case of contractor working of profit. has to be taken as per percentage completion method for the reason that there is certainty of revenue which is certified by the government authorities from time to time. In view of this the figure reflected by the appellant on the basis of bills raised and. certified so by the MCGM have to be taken as revenue recognized. Now coming to .the issue if profit can be estimated on the sales or revenue shown by the appellant in the case I find that the accounting method does allow the estimation of profit by adopting a particular percentage or on actual basis. The case of appellant is a case where profit has been reflected on actual basis by taking into account expenses and revenue on actual basis. Same is supported by books of accounts .ad audit report it cannot be brushed away in or....
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....s under.- "7.3. Contentions of Ld.AO is countered as hereunder:- a. Ld. AO has contended that water and sewerage charges are indirect expenses of subcontractors. hence. TDS should be deducted. But the contention of Ld.AO is not tenable as the said expenses are charged by MCGM on the assessee and such expenses are deducted by MCGM from the Gross Reciept. Receipts which are credited in the P&L account are net receipts i.e. the amount paid by the MCGM is after deducting water and sewerage charges. Therefore, water and sewerage charges are showin in P&L account of the assessee because such expenditure relates to business of assessee and allowable u/s.37 of Income Tax Act, 1961. b. Water and Sewerage Charges are paid by assessee to MCGM on principal to principal basis as assessee and MCGM are independent parties and there is no principal-agency relationship subsisting between the parties to constitute a work contract. Due to absence of contractorcontractee relationship. there is no liability to deduct TDS u/s 194C of Income Tax Act, 1961 and Reliance is also placed on judicia pronouncements of: 1. CIT vs. Glenmark Pharrnaceuricals Ltd (Bom HC) (191 TAXMAN 455....
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....BL PIL Consortium is association of person of Pratibha Industries Limited and Kirloskar Brothers Limited. KBL PIL Consortium is awarded contract for construction of 900 MLD capacity water pumping station at Bhandup complex by Municipal corporation of Brihanmumbai. The above contract awarded was further sub contracted by assessee to members of AOP i.e. Pratibha Industries Limited and Kirloskar Brothers Limited in an agreed ratio. Vide order sheet noting dated 05.12.2011, assessing officer asked assessee to explain whether there was any intention to earn profit at the time of taking contract by invoking section 44AD claiming that a contractor has to show income under Income Tax Act. Further, assessee is also required to justify as to why revenue has not been recognized as stated in notes to account and architect certificate for completion of work. In response to above notice, assessee replied that assessee; being a special purpose vehicle in form of joint venture of which legal status being association of persons, has no resource to execute the project on its own and thus the same has been sub contracted to the capable members and running bills of work completion is certified by engi....