AI Drafter 
TaxTMI 
TaxTMI 
2018 (7) TMI 572
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....me from bogus sub-contract receipts and expenses, allowability of bad debts u/s 36(1)(vii) of the Act and lastly whether the income from lease of factory should be assessed under the head "income from house property" or under the head " income from other sources". The third issue referred above, is common for all the three Assessment Years. For the Assessment Year 2011-12, one more issue arises, which is regarding the allowability of commission expenses. 3. First we taken up the issue of sub-contract expenses. The findings of the Assessing Officer is that the, assessee was awarded a contract for land filling by M/s. J.KumarInfraprojects Ltd., Andheri, Mumbai (JKIL) and M/s. PACL India Ltd. (PACL), Barakhambha Road, New Delhi and M/s. Rajesh Projects (India) Pvt. Ltd. (RPPL) at Pitampura , New Delhi. The works so obtained was assigned on subcontract to M/s Safeco Projects Pvt. Ltd. at 7, Lyons Range, Kolkata- 700 001, on a back to back basis. The assessee had enclosed copy of the agreements entered with these parties, copies of invoices raised by the sub-contractor M/s. Safeco Projects, copy of certificate issue u/s 197(1) of the Act, in the case of M/s. Safeco Projects, by th....
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....ssessment proceedings respective legers in the books of M/s Rahee Industries i.e. the assessee upon the concern from whom this contract work was received. Similarly the bills raised by the Safeco upon the assessee for the same contract job was also reflected in the said statement. This statement is being made part of this order as per annexure-A. From the said statement it can be seen that before the bills raised by M/s Safeco Project Pvt Ltd. upon the assessee the assessee has raised bills upon the parties from whom it has received the work contract for earth filling which means that before the work being executed by the sub-contractors the assessee has raised bills upon the Principal. Moreover from the statement it is clear that on account of contract job it has received Rs. 19,65,76,691/- and paid Rs. 19,18,44,148/-. Therefore, the difference amount of Rs. 47,32,543/- is the margin of profit which is apparent from this statement. This amount of profit therefore has arised to the assessee company which is apparent from the account. There may be some hidden profit or some profit which by way of claiming cash expenditure by the sub-contractors may have passed on to the assessee com....
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....at the estimation is wrong and as there is no proof that money has flown into the company, the amounts disclosed under the books should be accepted. 5.1. The ld. D/R, relies on the findings of the Assessing Officer. 6. We have heard rival contentions. On a careful consideration of the facts and circumstances of the case, papers on record, orders of the authorities below as well as case-law cited, we hold as follows:- In our view, the factual finds of the Assessing Officer as well as the ld. CIT(A), could not be controverted by the ld. Counsel for the assessee. There is no explanation as to why the assessee chose not to cross-examine Mr. Aditya Chirimar despite the Assessing Officer providing adequate opportunity to the assessee. Number of contentions have been raised regarding the evidentiary value of the statements recorded. We rejected these contentions in view of the factual findings given by the Assessing Officer as confirmed by the ld. CIT(A) as the assessee has failed to controvert the same. 6.1. Now we come to the issue of estimation. During the course of examination on oath of the Directors of M/s. Safeco Projects, it was recorded that commission paid in such tr....
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....t with the machinery and premise only with the purpose of earning rental income. He submitted that the factory building is classified under the head "plant and machinery" for the purpose of claim of depreciation and hence, when it is let out, it should be considered as letting out of plant and machinery and depreciation be allowed thereon. Alternatively, he submitted that under the block of assets concept, depreciation on the WDV of the block has to be granted to the assessee. He relied on certain case-law on this issue. 8.3. The ld. D/R, relied on the order of the Assessing Officer. 8.4. On careful consideration, we find that the asset in question i.e. the factory building, is a part of the plant and building of the assessee. This is let out for commercial use. When the assessee earns income from utilization of this factory building, the income from the same is assessable under the head "income from business". This entitles the assessee to claim depreciation on the factory building. Even otherwise, the block of assets concept was brought into the statute by the Finance Act, 1998. After the introduction of this block of assets concept, depreciation on written down value has t....