TaxTMI 
TaxTMI 
2012 (12) TMI 1077
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..... 1496/Hyd/11, ITA No. 1077/Hyd/12, ITA No. 1078/Hyd/12, ITA No. 1497/Hyd/11, ITA No. 1498/Hyd/11, ITA No. 800/Hyd/10, ITA No. 801/Hyd/10, ITA No. 802/Hyd/10, ITA No. 803/Hyd/10, ITA No. 804/Hyd/10, ITA No. 805/Hyd/10, ITA No. 806/Hyd/10 Appellant by: Shri P. Murali Mohan Rao Respondent by: Shri M. Ravinder Sai ORDER PER CHANDRA POOJARI, AM: All the above appeals, both by the assessee and the Revenue are directed against the different orders of the CIT/CIT(A) for the respective assessment years. Since the issues are common in nature and belong to the same group, these appeals are clubbed together, heard together and are being disposed of by this common order, for the sake of convenience. In certain appeals there are certain additional grounds raised before us which are either not in accordance with the ITAT Rules or irrelevant in view of our findings in respective appeals. Madhucon Granites Ltd., Khammam (Assessee appeals): ITA No. 666/Hyd/2010 - 2000-01 ITA No. 667/Hyd/2010 - 2001-02 ITA No. 674/Hyd/2010 - 2002-03 ITA No. 675/Hyd/2010 - 2003-04 ITA No. 684/Hyd/2010 - 2004-05 ITA No. 68....
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....or the A.Y. 2005-06 and 2006-07 in ITA Nos. 34 and 35/Hyd/2012 the Revenue challenged granting of deduction u/s. 10B of the Act on similar reasons. Further the Revenue challenged the returns filed in these cases is beyond the due date allowed u/s. 139(1) of the Act and hence as per the 4th provision to section 10(1) of the Act, the assessee is not entitled for deduction u/s. 10B of the Act for A.Y. 2005-06 being the return filed belatedly. 6. We have heard both the parties on this issue. For the A.Ys. 2000-01 to 2004-05, the assessee claimed deduction with regard section 80HHC of the Act. According to the Department rough granite is merely an unprocessed granite and in view of circular Nos. 693 dated 17.11.1994 and 729 dated 1.11.1995 the assessee is not entitled for deduction u/s. 80HHC of the Act. For clarity, we reproduce herein the provisions of section 80HHC and Board circular Nos. 693 dated 17.11.1994 and 729 dated 1.11.1995: S.80HHC(1) For the assessee to be eligible u/s 80HHC(1), where an assessee being an Indian Company or a person (other than a company) resident in India, is engaged in business of export out of India of any goods or mercha....
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....y and sales tax, as the case may be, but still these were mentioned in the invoices or in the director's report as "rough blocks" in sale invoices. But it does not mean that they are unprocessed granites. It was not disputed by the Department that the assessee is engaged in cutting and polishing and sizing of granites into required sizes. Once the assessee is engaged in cutting, polishing and sizing of the granite to the required sized and exporting the same, it is to be and it has to be concluded that the assessee is engaged in "production". In similar circumstances, the Bombay High Court in the case of CIT vs. Fateh Granites Pvt. Ld. (314 ITR 32) (Bom) held that the activity of cutting, polishing and sizing of granites would be covered within the meaning of expression "production". Therefore, the assessee is entitled to the benefit u/s. 80HHC/10B of the Act. Further, the Chennai Bench of this Tribunal in the case of ACIT vs. M/s. Janani Holdings, Chennai in ITA No. 1094/Mds/2010 vide order dated 25.2.2011 held that if the assessee in the sales invoices described the exported goods "as processed dimensional rough or crude granite" and the gr....
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....d/2010 - A.Y. 2003-04 ITA No. 682/Hyd/2010 - A.Y. 2004-05 ITA No. 683/Hyd/2010 - A.Y. 2005-06 ITA No. 702/Hyd/2010 - A.Y. 2006-07 10. These appeals by the assessee are directed against the order of the CIT dated 30.3.2010 passed u/s. 263 of the Income-tax Act, 1961 for A.Ys. 2000-01 to 2006-07 (7 years). The assessee is a public limited company engaged in the business of construction and execution of infrastructure projects like roads and highways, irrigation projects and canals. There was a search action u/s. 132 of the Act in the Madhucon group of companies on 20.10.2005 and subsequent to it assessment was framed u/s. 143(3) r.w.s. 153A of the Act for A.Ys. 2000-01 to 2006-07. According to the CIT the assessment orders passed for these assessment years are erroneous and prejudicial to the interest of revenue. Consequent to the search action, the assessee filed returns of income offering additional income of Rs. 9 crores the details are as follows: Sl. No. Assessment year Additional income disclosed (Rs.) 1. 2000-01 30,00,000 2. 2001-02 1,00,00,000 3. 2002-03 1,50,00,000 4. ....
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.... of Rs. 9 crores for the AY 2000-01 to 2005-06. In the assessment order, the Assessing Officer estimated the income at 12.5%. He had also added gratuitous payment of Rs. 5.34 crores. However, he had allowed telescoping of the balance income offered while computing the total income. As a result the Assessing Officer had not made addition of Rs. 3.67 crores for different assessment years. This action of the Assessing Officer in allowing telescoping of income had rendered the orders erroneous. For all the A.Ys. 2000-01 to 2006-07, the Assessing Officer estimated income a the rate of 12.5% on which he had allowed depreciation. The net income after allowance of depreciation is substantially lower as is evident from the table below: AY Turnover of contract work Income at 12.5% Depreciation Income assessed from contracts Income assessed as percentage of turnover. AY Turnover of contract work Income at 12.5% Depreciation Income assessed from contracts Income assessed as percentage of turnover. 2000-01 983469703 122933713 64434214 58499499 5.95 2001-02 1165820088 145727511 67648367 78079144 6.69 2002-03 2003284348 25041....
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....ome u/s. 153A. Out of this the AO has added Rs. 5.33 crores being gratuitous payment. By same logic he should have added Rs. 3.67 crores. Without addition of Rs. 3.67 crores the assessment orders have been rendered erroneous and prejudicial to the interests of revenue. c. Depreciation allowed from Estimated Income - Further, from estimated income of 12.5% of contract turnover, the AO has allowed depreciation. In the case of Indwell Construction vs CIT (232 ITR 776) Hon'ble A.P. High Court have held that if books of account are not correct or complete, the Income Tax Office may reject those books of account and estimate the income to the best of judgment. When such an estimate is made it is in substitution of the income that is to be computed u/s. 29. In other words, all the deductions which are referred to u/s. 29 are deemed to have been taken into consideration while making such estimate. This will also mean that there will be no further deduction u/s. 30 to 43D as required u/s. 29. The AO has allowed depreciation from estimated income which is against the decision of jurisdictional High Court. d. According to the CIT, the AO has followed ITAT decision ....
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..../s. 263 is that the Assessing Officer not made proper enquiry while passing the assessment orders u/s. 143(3) r.w.s. 153A of the Act and the orders are erroneous and prejudicial to the interest of revenue. According to the CIT once income is estimated at 12.5% the assessee is not entitled for deduction towards depreciation in view of the judgement of jurisdictional High Court in the case of Indwell Constructions vs. CIT (232 ITR 776). We have carefully gone through the submissions of both the parties. Admittedly seized material A/NS/ND/3 contains 158 self-made vouchers. Though the assessee stated that these vouchers are not debited in the books of account but the fact is that in the vouchers except the amount other description was not mentioned in the vouchers. Except voucher Nos. 157 and 158 all others are undated. These two vouchers are not accounted in the books of account. Self-made vouchers also found at the assessee's business premises. To the query, the assessee replied before the Assessing Officer as follows: " ... The general aspect that as a matter of common experience that all vouchers and supportin....
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.... Managing Director of the company, and also evidence and admission of self-made vouchers in support of expenses debited in the books, the explanation of the assessee to the effect that the books cannot be rejected is unacceptable and the books of account, it is evident, are not maintained properly and correctly." From the facts narrated above, I am of the view that the books maintained by the assessee are not correct and complete and therefore, the inescapable conclusion that can be drawn from the given facts of the case is to reject the books of account by invoking provisions of section 145 the Income-tax Act and estimate the net profit and determine the undisclosed income for the year." 20. In our opinion, rejection of books of account by the Assessing Officer is justified. Once the books of account are rejected income has to be estimated. At this stage the learned AR strongly opposed the rejection of books of account by the Assessing Officer by placing reliance on the various judgements, especially: a) ACIT vs. Intermedic cable Connections Pvt. Ltd., ITA No. 1043/09 Chennai order dated 31.1.2012. b) DCIT vs. Associated Petroleum Co....
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....ners when the profit was estimated. The High Court after considering the provisions of sections 29 and 40 found that no separate addition/ deduction shall be made. The contention of the Department is that no depreciation has to be allowed. The contention of the learned AR is that depreciation on the WDV of the assets shall be allowed. Estimation of income in these cases is taken clue from the provisions of section 44AD of the Act. Earlier this provision is applicable to cases where the contract receipts not exceeded Rs. 40 lakhs. However, by Finance (No. 2) Act, 2009 w.e.f. 1.4.2011 the Legislature removed the restriction of the total contract receipts of Rs. 40 lakhs. By taking clue from this provision u/s. 44AD as is applicable for the assessment year under consideration and the provisions which are applicable w.e.f. 1.4.2011, we find that the deduction available u/ss. 30 to 38 shall be deemed to have been given full effect and no further deduction under these provisions shall be allowed. Depreciation is allowable u/s. 32 of the Act. Therefore, as provided in section 44AD no other/separate deduction shall be allowed. However, ....
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....at 12.5% on contract receipts. On appeal, the CIT(A) directed the Assessing Officer to estimate the income at 10% of the gross receipts and allow depreciation. Against these orders, the Revenue is in appeal before us. 27. We have heard both the parties and perused the material on record. As we have given certain direction in the appeals by the assessee against the orders of CIT passed u/s. 263 of the Act, the consequential orders passed by the Assessing Officer have become infructuous. Accordingly, all the above 7 departmental appeals in ITA Nos. 1474 to 1480/Hyd/2011 are dismissed as infructuous. M/s. Madhucon Projects Ltd., Hyderabad (Assessee appeals) ITA No. 1829/Hyd/11 - 2000-01 ITA No. 1830/Hyd/11 - 2001-02 ITA No. 1831/Hyd/11 - 2002-03 ITA No. 1832/Hyd/11 - 2003-04 ITA No. 1833/Hyd/11 - 2005-06 ITA No. 1834/Hyd/11 - 2006-07 ITA No. 1835/Hyd/11 - 2004-05 28. All the above 7 appeals by the assessee are directed against the orders passed by the CIT(A) u/s. 154 of the Act. Brief facts of the issue are that the original orders passed by the Assessing Officer u/s....
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....the Tribunal given a finding in these cases. The same issue was considered by this Tribunal in the case of M/s. Maytas-NCC (JV) in ITA No. 1292/ Hyd/2010 for A.Y. 2007-08. The Tribunal vide order dated 27.8.2012 held as follows: "22. We have heard both the parties and perused the material on record. In our opinion, this issue came for consideration before this Tribunal in the case of M/s. Koya & Co. Construction (P) Ltd. v. ACIT, 51 SOT 203 (Hyd) (URO) wherein the Tribunal held as follows: "24. ... We find that the provisions of Section 80IA (4) of the Act when introduced afresh by the Finance Act, 1999, the provisions under section 80IA (4A) of the Act were deleted from the Act. The deduction available for any enterprise earlier under section 80IA (4A) are also made available under Section 80IA (4) itself. Further, the very fact that the legislature mentioned the words (i) "developing" or (ii) "operating and maintaining" or (iii) "developing, operating and maintaining" clearly indicates that any enterprise which carried on any of these three activities would become eligible for deduction. Therefore, there is no ambiguity ....
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....ture of the work undertaken by the assessee. Each of the work undertaken has to be analyzed and a conclusion has to be drawn about the nature of the work undertaken by the assessee. The agreement entered into with the Government or the Government body may be a mere works contract or for development of infrastructure. It is to be seen from the agreements entered into by the assessee with the Government. We find that the Government handed over the possession of the premises of projects to the assessee for the development of infrastructure facility. It is the assessee's responsibility to do all acts till the possession of property is handed over to the Government. The first phase is to take over the existing premises of the projects and thereafter developing the same into infrastructure facility. Secondly, the assessee shall facilitate the people to use the available existing facility even while the process of development is in progress. Any loss to the public caused in the process would be the responsibility of the assessee. The assessee has to develop the infrastructure facility. In the process, all the works are to be executed by the ....
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....er the provisions of the section 80IA of the Act, a person being a company has to enter into an agreement with the Government or Government undertakings. Such an agreement is a contract and for the purpose of the agreement a person may be called as a contractor as he entered into a contract. But the word "contractor" is used to denote a person entering into an agreement for undertaking the development of infrastructure facility. Every agreement entered into is a contract. The word "contractor" is used to denote the person who enters into such contract. Even a person who enters into a contract for development of infrastructure facility is a contractor. Therefore, the contractor and the developer cannot be viewed differently. Every contractor may not be a developer but every developer developing infrastructure facility on behalf of the Government is a contractor. 28. We find that the decision relied on by the learned counsel for the assessee in the case of CIT vs. Laxmi civil Engineering works [supra] squarely applicable to the issue under dispute which is in favour of the assessee wherein it was held that mer....
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....counsel broadly the technical nature of the work undertaken by the assessee is as follows: i) Designing and Manufacturing of pipes: The assessee specially designed and manufactured Pre-stressed concrete pipes and it has been done in accordance with specific requirements. ii) Design and manufacturing of pipe fittings or specials ii) Transporting, Laying and Joining of pipes conforming with specifications. The activity involves earth work excavation, trench excavation, hard rook blasting, lowering and laying of pipes, fitting of specials, fitting of rubber rings at the joints, testing pipe joints and pipeline. iii) Construction of pump house, providing and fitting of pump sets. Supply and fitting of submersible pumps, centrifugal pumps, turbine pumps, submersible motors, motors for turbines and centrifugal pump sets, transformer, generator, panel boards etc. iv) Design and construction of raw water pumping stations, water treatment plant, treated water pumping station, treated water transmission main, construction of surge tank and pipe connection arrangement, booster stations, internal transmission main....
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....maintenance, financial involvement, and defect correction and liability period is to be computed by assessing officer on pro-rata basis of turnover. The assessing officer is directed to examine the records accordingly and grant deduction on eligible turnover as directed above. It is needless to say that similar view has been taken by the Chennai Bench of the Tribunal and deduction u/s. 80IA was granted in the case of M/s. Chettinad Lignite Transport Services (P) Ltd., in ITA No. 2287/Mds/06 order dated 27th July, 2007 for the assessment year 2004-05. Later in ITA No. 1179/Mds/08 vide order dated 26th February, 2010 the Tribunal has taken the same view. ..." 23. In the case of GVPR Engineers Ltd. v. ACIT, 51 SOT 207 (Hyd) (URO) wherein the Tribunal held that deduction u/s. 80IA is available to developers who undertake entrepreneurial investment risk and not for the contractors, who undertake only business risk. Without any doubt, the assessee clearly demonstrated that the plant and machinery, technical know-how, expertise and financial resources. Therefore, if the contracts involve design, development, operation & maintenance, financial involvement a....
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....70 & 271/Hyd/ 2011. The Tribunal vide order dated 7.9.2012 held as follows: "8. We have heard both the parties and perused the material on record. In our opinion, as seen from the facts of the case, the assessee has not produced copies of tender/contract executed by it before the lower authorities. Before us the assessee filed certain copies of tenders suggesting nature of activity carried on by the assessee and argued that the issue is already decided by this Tribunal in favour of the assessee by various decisions cited supra. However, at this stage we are not in a position to express any opinion on the nature of activities carried on by the assessee. The lower authorities had no occasion to examine the nature of activities carried on by the assessee. Being so, in our opinion, it is appropriate to remit the issue back to the file of Assessing Officer for fresh consideration. While doing so, the Assessing Officer has to see whether the assessee carried on contract for sale or contract for work and the applicability of Explanation below section 80IA(13) of the Act. The Assessing Officer is directed to examine the terms of cont....
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..../s. 80IA of the Act. 37. The next ground in ITA No. 1499/Hyd/2011 is with regard to disallowance of other expenditure at Rs. 5 crores. In this assessment year, the expenditure of the assessee has been increased as compared with the gross receipts from 88% to 90.74%. The expenditure only supported by self-made vouchers. The total expenditure incurred by the assessee for this assessment year is Rs. 681.10 crores. Considering the quantum of expenditure and non maintenance of proper vouchers, the disallowance is justified because there is every chance of inflating the expenditure by self-made vouchers. The disallowance is justified. 38. The next ground in ITA No. 1499/Hyd/2011 is with regard to disallowance of royalty payment of Rs. 9,44,10,345 u/s. 40(a)(ia) of the Act. It is observed by the lower authorities that the assessee not made TDS on royalty payment u/s. 194J of the Act. The learned AR submitted that the assessee is not liable to deduct TDS on this royalty payment. He also relied on the order of the Special Bench in the case of Merilyn Shipping & Transports vs. Addl. CIT reported in (2012) 16 ITR (Trib) 1 (Visakhapatnam) (....
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....43. We have heard both the parties on this issue. Most of the vouchers relating to this expenditure are self-made vouchers. Being so, the Assessing Officer disallowed 3% on work expenses, 2% on purchase of sand and 1% on maintenance. As we have held in earlier paras of this order, when the expenditure is supported by self-made vouchers there is every chance of inflating expenditure. Accordingly, the disallowance is justified. Revenue appeal in ITA No. 469/Hyd/2011 is allowed. M/s. Madhucon Projects Ltd. (Assessee appeals) ITA No. 1494/Hyd/11 - A.Y. 2000-01 ITA No. 1495/Hyd/11 - A.Y. 2001-02 ITA No. 1496/Hyd/11 - A.Y. 2002-03 ITA No. 1077/Hyd/12 - A.Y. 2003-04 ITA No. 1078/Hyd/12 - A.Y. 2004-05 ITA No. 1497/Hyd/11 - A.Y. 2005-06 ITA No. 1498/Hyd/11 - A.Y. 2006-07 44. These appeals by the assessee are directed against the order passed by the CIT(A) u/s. 250 consequent to appeal against the order of Assessing Officer u/s. 143(3) r.w.s. 263 of the CIT. There is a delay of 350 days in filing ITA No. 1077/Hyd/2012 and 1078/ Hyd/2012. However, we are not going to adjudicate the i....
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..../12 Department Dismissed 12. ITA No. 33/Hyd/12 Department Dismissed 13. ITA No. 34/Hyd/12 Department Partly allowed for statistical purposes 14. ITA No. 35/Hyd/12 Department Dismissed 15. ITA No. 668/Hyd/10 Assessee Partly allowed 16. ITA No. 669/Hyd/10 Assessee Partly allowed 17. ITA No. 676/Hyd/10 Assessee Partly allowed 18. ITA No. 677/Hyd/10 Assessee Partly allowed 19. ITA No. 682/Hyd/10 Assessee Partly allowed 20. ITA No. 683/Hyd/10 Assessee Partly allowed 21. ITA No. 702/Hyd/10 Assessee Partly allowed 22. ITA No. 1474/Hyd/11 Department Dismissed 23. ITA No. 1475/Hyd/11 Department Dismissed 24. ITA No. 1476/Hyd/11 Department Dismissed 25. ITA No. 1477/Hyd/11 Department Dismissed 26. ITA No. 1478/Hyd/11 Department Dismissed 27. ITA No. 1479/Hyd/11 Department Dismissed 28. ITA No. 1480/Hyd/11 Department Dismissed 29. ITA No. 1829/Hyd/11 Assessee Dismissed 30. ITA No. 1830/Hyd/11 Assessee Dismissed 31. ITA No. 1831/Hyd/11 Assessee Dismiss....