Income Tax Appellate Tribunal - Hyderabad
Bdr Projects (P) Ltd., Hyd, Hyderabad vs Assessee on 6 November, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "B" : HYDERABAD
BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER
AND
SHRI RIFAUR RAHMAN, ACCOUNTANT MEMBER
ITA.No.1065/Hyd/2015
Assessment Year 2007-08
BDR Projects (P) Ltd., ACIT, Circle 1(3)
Hyderabad vs. Hyderabad.
PAN AAACB8263D
(Appellant) (Respondent)
For Assessee : Mr. D.V. Anjaneyulu & Ms.
P. Pravallika
For Revenue : Mr. B. Kurmi Naidu
Date of Hearing : 04.11.2015
Date of Pronouncement : 06.11.2015
ORDER
PER SMT. P. MADHAVI DEVI, J.M.
This appeal filed by the assessee is against the order of the Ld. CIT(A)-I, Hyderabad dated 11.06.2015 for the A.Y. 2007-08.
2. The assessee is aggrieved by the order of the Ld. CIT(A)-I, Hyderabad in not considering the decision of jurisdictional High Court in assessee's own case in the previous assessment years wherein the Hon'ble High Court has held that where the profit of the assessee is determined on percentage basis also, deductions like depreciation is allowable. Assessee is also aggrieved by the order of the Ld. CIT(A) in confirming the disallowance 2 ITA.No.1065/Hyd/2015 BDR Projects (P) Ltd., Hyderabad.
made by the A.O. under section 40(a)(ia) of the Act on the ground that the assessee has not filed any bills and vouchers and hence, not allowable under section 37 as well.
3. The brief facts of the case are that the assessee company which is engaged in execution of civil contract works, filed its e-return of income on 31.10.1997 declaring an income of Rs.8,54,504. During the assessment proceedings under section 143(3) of the I.T. Act, the A.O., on verification of the ledger extracts produced by the assessee, observed that the assessee has not deducted TDS on various payments totaling to Rs.9,74,170. Therefore, the A.O. proposed to disallow the expenditure aggregating to Rs.9,74,150 in accordance with the provisions of section 40(a)(ia) of the Act. The assessee was required to furnish its objections and also to produce bills/vouchers relating to the said payments. In response to this, the assessee filed a letter dated 18.12.2009 stating that the proposed addition of expenses under section 40(a)(ia) is not correct since these expenses were already paid/incurred and were debited to their respective accounts and thus, amounts paid to the labourers as per the Muster Register and in the absence of any contract/sub-contract are not amenable to the provisions of section 40(a)(ia) and hence, the said addition is not maintainable.
3 ITA.No.1065/Hyd/2015BDR Projects (P) Ltd., Hyderabad.
3.1. The A.O., however, held that the assessee has not produced the bills/vouchers relating to the above payments and therefore, the said expenditure is not allowable under section 37 of the Act. Thereafter, he proceeded to consider the gross profit returned by the assessee at 3.9% and held it to be too low. He observed that in assessee's own case for the A.Y. 2004-05, the Tribunal has directed the A.O. to adopt gross profit of the assessee @ 8% without any allowance. He observed that on account of the disallowance of expenditure claimed under section 37 of the Act, the percentage of income against the gross receipts for the relevant assessment year worked out to 8.4% which is fair and reasonable and therefore, keeping in view the low margin of the profit shown by the assessee, he held that the disallowance of expenditure on account of assessee's failure to prove the expenditure incurred, by producing the relevant bills/vouchers, is justified.
3.2. Without prejudice to the above, the A.O. also disallowed the said expenditure under section 40(a)(ia) of the Act on the ground that the assessee has not produced the evidence of payments to labourers as per the Muster. Further, he held that the ledger account extract shows that each payment debited exceeded to Rs.20,000 per day and therefore, in view of that payment, he held that it is to be made through cheque. He therefore, held that the said payments amount to payments in pursuance of contract with the sub-contractor for carrying out the work 4 ITA.No.1065/Hyd/2015 BDR Projects (P) Ltd., Hyderabad.
undertaken by the contractor i.e., assessee herein, within the meaning of provisions of section 194(2) of the Act. Therefore, since the assessee failed to deduct TDS, he observed that the provisions of section 40(a)(ia) are attracted and accordingly, disallowed the same at Rs.9,74,150 and added it to the returned income of the assessee. Aggrieved, assessee preferred an appeal before the Ld. CIT(A) which was dismissed and the assessee is in second appeal before us.
4. The Ld. Counsel for the assessee has filed copies of the written submissions filed by the assessee before the Ld. CIT(A) as well as the computation of income for the A.Y. 2006-07, the depreciation statement as per I.T. Act and other financial documents as well as copy of the order of the Hon'ble High Court of A.P. in assessee's own case for the A.Y. 1998-99.
5. The Ld. D.R., on the other hand, has supported the orders of the authorities below and placed reliance upon the decision of Hon'ble High Court of Madhya Pradesh in the case of S.S. Crop Care Ltd., vs. CIT (2014) 41 taxmann.com 549 (M.P.).
6. Having regard to the rival contentions and the material on record, we find that assessee's claim of expenditure under section 37 of the I.T. Act has been disallowed by the A.O. on the grounds that (i) assessee has not produced the copies of the bills/vouchers in support of such claim ; and (ii) the assessee has not made 5 ITA.No.1065/Hyd/2015 BDR Projects (P) Ltd., Hyderabad.
TDS before making such payments under section 194(2) of the Act and hence has to be disallowed u/s.40(a)(ia) of the Act. The A.O. has justified the disallowance by observing that after the disallowance of the said expenditure, the gross profit of the assessee would come to 8.4% which is nearer to 8% directed to be adopted by the Tribunal in assessee's own case for the earlier assessment year. While making the disallowance of the expenditure, the A.O. has not allowed the claim of depreciation to the assessee. The Ld. CIT(A) also did not allow the claim of depreciation to the assessee. The decision of the Hon'ble High Court of A.P. in the case of the assessee for the earlier assessment year (relied upon by the assessee) is to the effect that where the income is estimated or assessed at a percentage of the turnover, then even in those circumstances, the claim of depreciation, interest etc., is allowable. It is the case of the Ld. Counsel for the assessee that in spite of bringing to the notice of the Ld. CIT(A), the directions of the Hon'ble High Court in assessee's own case, the Ld. CIT(A) has not allowed the claim of depreciation to the assessee. Having gone through the Form-35 and the grounds of appeal raised by the assessee before the Ld. CIT(A), we find that assessee's objection was only against the disallowance of the expenditure both under section 37(1) as well as under section 40(a)(ia) of the Act. The assessee has never made a claim for depreciation before the Ld. CIT(A). It is only before us that assessee has raised ground No.2 stating that the Ld. CIT(A) has ignored the 6 ITA.No.1065/Hyd/2015 BDR Projects (P) Ltd., Hyderabad.
direction of the Hon'ble High Court to allow eligible deductions like depreciation where profit of the assessee is determined on percentage basis. We find that in the case before us, the A.O. has not estimated the income @ 8% but has justified the disallowance by stating that the disallowance would result in the assessed income being 8% of the gross profit. Both the A.O. as well as the Ld. CIT(A) have not given any reasoning as to why the claim of depreciation has not been allowed. As rightly pointed out by the Ld. Counsel for the assessee, the provisions of section 40(a)(ia) are not applicable to the payments already made. Therefore, the disallowance under section 40(a)(ia) is not sustainable. However, in the absence of bills/vouchers produced by the assessee, we do not find any reason to interfere with the order of the Ld. CIT(A) that the disallowance under section 37(1) is justified. However, with regard to claim of depreciation, we deem it fit and proper to remit the issue back to the file of A.O. for consideration of the same in the light of judgment of the Hon'ble A.P. High Court in assessee's own case for A.Y. 1998-99.
7. In the result, appeal of the assessee is treated as partly allowed for statistical purposes.
Order pronounced in the open Court on 06.11.2015.
Sd/- Sd/-
(S. RIFAUR RAHMAN) (SMT. P. MADHAVI DEVI)
ACOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, Dated 06 November, 2015
th
VBP/-
7
ITA.No.1065/Hyd/2015
BDR Projects (P) Ltd., Hyderabad.
Copy to :
1. BDR Projects (P) Ltd., Hyderabad.
C/o. M/s. Anjaneyulu & Co. Chartered Accountants, 30, Bhagyalakshmi Nagar, Gandhi Nagar, Hyderabad - 500 080.
2. The ACIT, Circle-1(3), Hyderabad.
3. CIT(A)-1, Hyderabad
4. Pr. CIT-1, Hyderabad
5. D.R. ITAT 'B' Bench, Hyderabad.
6. Guard File