TaxTMI 
TaxTMI 
2024 (6) TMI 7
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....ef in respect of certain additions, while confirming some and modifying the others. Challenging the relief granted, Revenue preferred appeal in ITA No. 32/Hyd/2017; whereas aggrieved by the additions that are sustained, assessee preferred appeal in ITA No. 1734/Hyd/2016. 3. We shall proceed to discuss the merits of the appeal Ground-wise. Ground No. 1 & 10 of Revenue appeal, are general in nature, requires no adjudication. Ground No. 2 of Revenue's appeal and all the grounds of assessee's appeal are interconnected and those are in respect of the rejection of books of accounts and determination of income of the assessee at 12.5% before depreciation by the learned CIT(A), stating that when the books of accounts are not rejected by the learned Assessing Officer, the learned CIT(A) is not justified in making estimation that too basing on the additional information furnished by the assessee without calling for the remand report from the learned Assessing Officer in violation of Rule 46A of the Income Tax Rules, 1962 ("the Rules"). According to the Revenue, the expenditure was proved to be bogus and, therefore, the direction of the learned CIT(A) to the learned Assessing Officer to esti....
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....ards subcontract payments is not justified and hence, the AO is directed determine the income by adopting the above rates of profit and allowing deprecation from such gross profit. As a result, the grounds are partly allowed." 6. We, therefore, do not find any violation of Rule 46A of the Rules in this matter. Further, there is no denial of the fact that in assessee's own case right from the year 1999-2000, income of the assessee has been determined by resorting to estimation and dealing with other additions made. This fact is evident from the orders of the Tribunal for earlier assessment years and more particularly in ITA No. 1627 to 1634/Hyd/2013 dated 02/04/2014 and ITA No. 33/Hyd/2017 and batch by order dated 25/08/2023. No change of circumstances warranting a different view is brough to our notice. Since the learned CIT(A) followed the binding precedents in resorting to estimation of the income of the assessee, we do not find anything illegality or irregularity in the findings of the learned CIT(A) on this aspect. Hence, Ground No. 2 of Revenue's appeal is dismissed. 7. Turning to the grounds of assessee's appeal, the issue that is directly and substantially canvassed by th....
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....and submitted that as against around 3 to 5.5% of the financial charges during the assessment years 2006-07 to 2009-10, such financial charges have gone upto more than 19% in the assessment years 2014-15 and 2015-16. For the sake of convenience, we reproduce such table hereunder,- S. No. Asst. Year Gross Receipts Financial Charges % 1 2006-07 3030478531 130073134 4.29% 2 2007-08 6608057165 251905421 3.78% 3 2008-09 7282387944 229417743 3.14% 4 2009-10 8383903915 459420592 5.49% 5 2010-11 9990306241 928048909 9.30% 6 2011-12 10367247572 1384411485 13.32% 7 2012-13 10312117903 1195843322 11.65% 8 2013-14 10550944576 1121153378 10.62% 9 2014-15 6333085837 1249185853 19.72% 10 2015-16 7847091027 1516695115 19.32% 31. His argument is that when the assessee undisputedly incurring such huge financial charges, the estimation of profit at 12.5% on own contract works before depreciation is not justified. He accordingly submitted that the same should be reduced to 9% to 10%. 32. Per contra, learned DR heavily relied on the order of the learned CIT (A). He submitted that the learned CIT(A) h....
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....ssessing Officer to estimate the profit @ 11.5% before depreciation on contract work executed by the assessee itself. Grounds raised by the assessee are accordingly allowed in part." 8. In view of the fact that the figures relating to the assessment year 2011-12 also fallen for consideration in the above order, while respectfully following the same, we follow the findings given therein and hold that estimation of profit at 11.5% as against 12.5% directed by the learned CIT(A) for this year will be fair and reasonable estimation. We, therefore, modify the order of the learned CIT(A) accordingly and direct the learned Assessing Officer to estimate the profit at 11.5% before depreciation on contract work executed by the assessee itself. With this, assessee's appeal is accordingly allowed in part. 9. Now coming to Ground No. 3 and also the additional ground of Revenue's appeal, it relates to disallowance of claim for deduction of Rs. 8,45,39,638/- under section 80-IA(4) of the Act. It was brough to the notice of the learned Assessing Officer that this issue was covered in assessee's own case for the earlier assessment years, but the learned Assessing Officer observed that the assess....
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....ining from the earlier assessment years. In these circumstances, we find it difficult to take a different view for this assessment year. We, therefore, do not find any illegality or irregularity in the order of learned CIT(A) following the binding precedent in the well-considered view of a Co- ordinate Bench of the Tribunal taken for the earlier assessment years by orders dated 16/03/2012 and 25/08/2023. Accordingly, we uphold the findings of the learned CIT(A) for this assessment year also and dismiss the Ground No. 3 of Revenue's appeal. 15. Grounds No. 4, 8 and 9 of Revenue's are interrelated. These grounds relate to the issue of disallowance of interest of Rs. 9,54,48,642/- under section 14A of the Act read with Rule 8D of the Rules and also the disallowance of interest expense under section 36(1)(iii) of the Act at Rs. 8,38,75,714/-. According to the learned Assessing Officer, some of the borrowed funds were diverted to sister concerns and, therefore, such part of interest relatable to the diverted funds cannot be allowed. Learned Assessing Officer found that the assessee made investments in the subsidiaries in the shape of share application money to the tune of Rs. 75,86,88,....
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....enture for obtaining and executing works of NHAI and after being successful bidder, when the works were allotted to the SPV in accordance with the rules framed by the NHAI, the assessee being a constituent of joint venture, had to invest amounts through the constituents to further the process of business activity. 20. In this particular situation, in the absence of any material to prove contrary, we find it difficult to reach a different conclusion than the one reached by the learned CIT(A). Certainly, the constitution of the SPV in terms of the rules of NHAI, obtaining contracts there from and to pump the funds to the constituents for execution of such work allotted to the constituents, all is part of the business exigency. We, therefore, do not find anything illegality or irregularity in the learned CIT(A) following the decision of the Hon'ble Apex Court in the case of in the case of S.A. Builders (supra) and to delete the disallowance. On this score, we uphold the findings of the learned CIT(A) and dismiss Grounds No. 4, 8 and 9. 21. Turning to Ground No. 5 of Revenue's appeal, it relates to the taxing of the interest earned on FDs. On an examination of the trial balance of th....
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.... to justify the same. 26. In appeal, learned CIT(A) found from the details furnished that the cash payments were made at sites which are far away from the urban areas for providing housing accommodation and other facilities to the workers at sites and, therefore, directed the deletion of the addition. 27. Learned DR placed reliance on the assessment order to submit that the cash payments were made at Allahabad site, Kurnool site and Kalyan Manisha Constructions and, therefore, it cannot be said that such payments were justified. 28. Learned AR submitted that when once the income is estimated, disallowance under section 40A(3) of the Act cannot be made. He further submitted that after making thorough enquiry only learned CIT(A) reached a factual conclusion that these payments were made at sites which are far away from the urban areas for the purpose of providing housing accommodation and other facilities to the workers at the site. He submits that without contradicting this finding with reference to any material it is not open for the Revenue to say that such payments are not justified. 29. It is the settled principle of law as laid down by the Hon'ble High Courts in the cases o....
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....d reliance on the assessment order; whereas learned AR submitted that as rightly observed by the learned CIT(A), this amount was incurred by the Directors of the company and the officers and staff, when they visited sites, the details of this expenditure are separately recorded under each head which was verified by the learned CIT(A) and, therefore, no interference is needed. He brough to our notice that there is a typographical mistake in the Grounds of appeal relating to this ground wherein in the place of Rs. 33,77,260/- a sum of Rs. 332,77,260/- was typed. 34. There is no dispute that the details of the expenses to the tune of Rs. 33,77,260/- alone were disallowed by the learned Assessing Officer and allowed by the learned CIT(A). The figure mentioned in the Grounds of appeal is purely a typographical mistake. Assessee contended that this expenditure was met by the Directors, Officers and staff members at the time when they visited the sites and since it is connected to the business promotion of the assessee, the same is allowable. Learned Assessing Officer disallowed the same on the ground that no vouchers were produced for verification and the learned AR was unable to produc....