Income Tax Appellate Tribunal - Chandigarh
Dcit, C-1(1), Chandigarh vs M/S H.S. Tuli & Sons Builders Pvt. Ltd., ... on 14 June, 2022
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ, च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL,
CHANDIGARH BENCH 'A',CHANDIGARH
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER
AND SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER
ITA No. 1516 & 1517/Chd/2019
(Assessment Years : 2010-11 & 11-12)
M/s. H.S. Tuli & Sons बनाम The Dy. Commissioner
Builders Pvt. Ltd., of Income Tax,
No. 359, Sector 9-D, Circle 1(1),
Chandigarh. Chandigarh.
थायी लेखा सं./PAN NO: AABCH 6642 P
ITA No. 1515/Chd/2019
(Assessment Year : 2011-12)
The Dy. Commissioner of बनाम M/s. H.S. Tuli & Sons
Income Tax, Builders Pvt. Ltd.,
Circle 1(1), No. 359, Sector 9-D,
Chandigarh. Chandigarh.
थायी लेखा सं./PAN NO: AABCH 6642 P
नधा रती क ओर से/Assessee by : Shri Tej Mohan Singh, Adv.
राज व क ओर से/ Revenue by : Shri Vivek Nangia, CIT D/R &
Smt. Priyanka Dhar, Sr. D.R
सन
ु वाई क तार ख/Date of Hearing: 04.04.2022
उदघोषणा क तार ख/Date of Pronouncement: 14.06.2022
आदे श/ORDER
Per Vikram Singh Yadav, Accountant Member:
These are three appeals filed by the assessee and revenue pertaining to assessment years 2010-11 and 2011-12 against the 2 ITA No 1516, 1517 & 1515/Chd/2019 M/s. H.S. Tuli & Sons Builders Pvt. Ltd.
consolidated order passed by the ld. CIT (Appeals)-1, Chandigarh dated 02.09.2019. Since common issues are involved, all these appeals were heard together and are being disposed off by this consolidated order.
2. With the consent of both the parties, the case of the assessee in ITA No. 1516/CHD/2019 is taken as the lead case where the grounds/revised grounds of appeal read as under:-
1. That the ld. Commissioner of Income Tax (Appeals) has erred in law and facts in upholding the finding of the assessing officer that the amount of Rs. 4,05,439/- received as arbitration award was a revenue receipt and not a capital receipt not exigible to tax which is illegal, arbitrary and unjustified.
2. That the ld. Commissioner of Income Tax (Appeals) has further erred in law and facts in bringing to tax 8% of the total amount of Rs. 4,05,439/- resulting in sustenance of addition of Rs. 32,435/- which is arbitrary and unjustified.
3. Without prejudice to the above, the rate of 8% applied by the Commissioner of Income Tax (appeals) is highly excessive despite all payments having been received by cheque in the facts of the case which renders the order arbitrary and unjustified.
4. That the ld. Commissioner of Income Tax (Appeals) has further erred in not allowing the expenditure of Rs. 15,00,000/- incurred to recover the amount of Rs. 4,05,439/- which is allowable and as such the order passed is arbitrary and unjustified.
5. That the ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in treating interest income as 3 ITA No 1516, 1517 & 1515/Chd/2019 M/s. H.S. Tuli & Sons Builders Pvt. Ltd.
income from other sources as against business income expended in running the business which is arbitrary and unjustified.
6. Without prejudice to the above, the ld. Commissioner of Income Tax (Appeals) has further erred in upholding the addition of Rs. 11,90,123/- made on account of interest received without giving benefit of the allowable deductions u/s 57 of the Act against the taxable interest income which ought to have been allowed and as such the order passed is arbitrary and unjustified.
7. That the ld. Commissioner of Income Tax (Appeals) has erred in not considering that interest paid is merely compensation for fall in value of rupee and as such there is no income per se which renders the order arbitrary and unjustified.
8. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.
9. That the order of the ld. Commissioner of Income Tax is erroneous, arbitrary, opposed to law and f acts of the case and is, thus, untenable."
3. Briefly the facts of the case are that certain information was received by the Assessing officer from DDIT-1, Chandigarh that Shri H.S. Tuli, Director of M/s. H.S. Tuli & Sons Builders Pvt. Ltd. has received a sum of Rs. 6,88,24,806/- as Arbitration Award from Government of India on behalf of M/s. H.S. Tuli & Sons Builders Pvt. Ltd. on account of various cases filed in the Civil Court of Chandigarh regarding cancellation of their projects by the Government of India pertaining to the period 1971 to 1973. Based on the said information and the fact that assessee had not filed its return of income, proceedings under section 147 were initiated and 4 ITA No 1516, 1517 & 1515/Chd/2019 M/s. H.S. Tuli & Sons Builders Pvt. Ltd.
notice under section 148 was issued which was duly served upon the assessee and in response to the notice, the assessee filed Nil return of income. During the course of assessment proceedings, the assessee was asked about the arbitration proceeds and why the same has not been offered to tax. In response, the assessee submitted that the amount of Rs. 6,88,24,806/- was received during the financial year relevant to assessment year 2011-12 and only a sum of Rs. 4,05,439/- was received during the financial year relevant to the impugned assessment year. The assessee further submitted that the receipt of Rs. 4,05,439/- being a capital receipt, same was accordingly not offered to tax in the return of income. It was further submitted that the money recovered through Court from Union of India was kept in reserve and cannot be considered as income till the claims of Union of India are satisfied or finally rejected. The reply so submitted by the assessee was considered but not found acceptable to the AO. As per the AO, based on the statement of Shri H.S. Tuli recorded under section 131 of the Act during the course of assessment proceedings and perusal of Arbitration Award, the assessee's contention that the Award receipt cannot be treated as income as the restitution application filed by the Union of India are still pending is not tenable as the said restitution application was in respect of Arbitration Award given to 5 ITA No 1516, 1517 & 1515/Chd/2019 M/s. H.S. Tuli & Sons Builders Pvt. Ltd.
the assessee company in the year 2002. The present case is with respect to Arbitration Award granted in financial year 2010-11 and financial year 2009-10 which is in respect of other contracts and has been finally settled by the Hon'ble Supreme Court vide its order dated 20.01.2010. Therefore, the claim of the assessee company that the income is capital nature was not found acceptable and amount of Rs. 4,05,439/- was brought to tax in the hands of the assessee company.
4. Being aggrieved, the assessee company carried the matter in appeal before the ld. CIT(A) and before the ld. CIT (A), the assessee company reiterated its contention regarding keeping the amount in reserve against pending restitution application and the fact that the amount is capital in nature. It was further contended that the entire amount of Rs. 4,05,439/- cannot be brought to tax and only the profit element embedded therein can be brought to tax and reference was drawn to the provisions of section 44AD of the Act which provides for taxation of 8% of the Net Profit in the hands of the assessee company. The contention so advanced by the assessee company was considered by the ld. CIT (A). The contention of the assessee that the Award was capital in nature and not revenue receipt was not found acceptable to the ld. CI T (A) and the said contention was dismissed. However, in respect of estimating the 6 ITA No 1516, 1517 & 1515/Chd/2019 M/s. H.S. Tuli & Sons Builders Pvt. Ltd.
N.P. as against bringing the whole receipt to tax, the ld. CI T (A) agreed to assessee's contention that only element of profit can be brought to tax and by following various jurisdictional High Court decisions, the ld. CIT (A) restricted the addition to 8% of N.P. in the hands of the assessee being engaged in the business of execution of Government contracts and the relevant finding of the ld. CI T (A) are contained in para 4.2.2 to 4.2.4 which reads as under:-
" 4.2.2. No w le t's understand the exac t nature of the Contr ac t on wh ich arb itr ation has been awarded. M/s. H arb ans Singh T uli & Sons, a sole propr ietor of Shri Harbans Singh T uli, entered in to var ious building construc tion contr ac ts with MES Depar tment of Union of India. Because of cancellation of two contr ac ts, one at Nahan and ano ther at Pithor agar h, dispu tes and dif f erences arose between the p arties and consequently runn ing or f in al paymen ts ag ainst work done were withheld on all con trac ts in an tic ip ation of alleged extr a cost involved in co mpleting lef t over work and wh ich resulted in multipl icity of arbitr ation/l itig ation. In vie w of these f acts and c ircu mstances, the claim of the appellan t th at the award is c apital in nature and not revenue rece ipts h as no iota of tru th that too in the absence of any docu mentary evidence because primar ily it is a payment agains t work done in respec t of a building cons truction contrac t and the amount received by any s tre tch of imag in ation c annot be coloured as capital in nature.7
ITA No 1516, 1517 & 1515/Chd/2019 M/s. H.S. Tuli & Sons Builders Pvt. Ltd.
4.2.3. It is undispu ted f ac t th at an amount of Rs. 405,439/-
was recovered/received f rom Union of India on 11.03.2010 i.e. during the AY 2010-11 f or work done at Kas auli in the year 1973-74 and an amount of Rs. 6,88,24,806/- was recovered/received f rom Union of India during the per iod 16.06.2010 to 07.09.2010 i.e. A.Y. 2011-12 f or wo rk done at A mbal a C ivil Construc tion Agree men t No. CENW-46/65-66 entered on 31.12.1966 by M/s. H.S. T uli & Sons Builders (P) Ltd. ag ainst work done by M/s. Harbans Singh T uli & Sons a sole proprie tor of Sh. Harbans Singh T uli through the appellan t.
T his arbitr ation a ward includes principle amoun t and simple in teres t @ 18% f or cl aim No. 1 to 35 f rom 31.03.1967 to the date of award i.e. 22.04.2008 and interest @ 15% f or Claim No. 1 to 37 f rom 22.04.2008 till payment or cour t decree. It has been dec ided by various judic ial authorities that in terest on arbitr ation a war d canno t be treated as Inco me f rom Other Sources as it p artakes colour of business receip ts. Hon'ble SUPREME COURT OF IND IA in the case of CIT vs. B.N. Agar wal a & Co. [2003] 129 T AXMAN 78 (SC) has dec ided th at -
"...3. We have heard counsel f or the parties. T he respondent- assessee entered in to a con trac t with the Govern ment f or executing certain works. A d ispute arose be tween the assessee 8 ITA No 1516, 1517 & 1515/Chd/2019 M/s. H.S. Tuli & Sons Builders Pvt. Ltd.
and the Government wh ich h as ref erred to arb itr ation. T he arbitr ator awarded cer tain amount by way of compensation f or the work done and also a warded in terest. T he question arose in the assess men t proceedings, whether the in terest a warded is inco me and is l iable to be included in his assess men t. T he Inco me- tax Off icer treated the same as inco me and included it af ter deducting the expenses. T he appeal pref erred by the assessee was allo wed hold ing th at in teres t is no t inco me. An appe al pref erred by the Revenue was d is missed by the T ribunal. On a ref erence, the Or issa High Cour t - CIT v. B.N. Agar wal a & Co. [1993] 200 IT R 246, ans wered the f ollo w3 ing ques tion in f avour of the assessee, f ollo wing its earlier decis ion in Gov ind a Choudhary & Sons v. CIT [1977] 109 IT R 497:
"Whe ther, on the f ac ts and in the circu ms tances of the case, in teres t awarded by an arbitr ator is inco me to be assessed to tax under the Act?"(p. 247). 4. It is no w brought to our no tice th at the decis ion of the Orissa H igh Court in Govinda Choudhary & Sons' case (supr a) was brought to th is Cour t in appe al and has since been disposed of , wh ich is C IT v. Gov ind Choudhary & Sons [1993) 203 IT R 881. In the said decis ion, it is recorded th at learned counsel f or the assessee conceded th at in teres t did constitu te a revenue rece ipt. T he court, ho wever, held on the o ther ques tion (ar is ing in that appeal) th at the said amount of in terest canno t be taxed under the head "Inco me f rom other sources" wh ich necess arily me an t th at it has to be taxed as a bus iness receip t. It is true th at on the question whe ther the in terest constitu tes inco me or not, the s aid decis ion is b ased upon a concess ion bu t we are of the opin ion that it was a concession rightly made and is correct in l aw. Accordingly, we hold that interest is inco me and it has to be 9 ITA No 1516, 1517 & 1515/Chd/2019 M/s. H.S. Tuli & Sons Builders Pvt. Ltd.
assessed as a business rece ipt. T he question ref erred is accordingly ans wered in f avour of the Revenue and ag ainst the assessee in the above ter ms. The appe als are disposed of accordingly." The appellan t has also received net Rs. 4,49,661/- as interest af ter deducting Rs. 15,65,323/- as in teres t paid on overdraf t, Rs. 3,11,494/- as T DS out of total in teres t on FDRs amounting to Rs. 23,26,478/-. Appell ant h as claimed th at the recovery of these amounts was no t f inal because due to setting as ide awar d in respect of Nah an work on 10.04.2009 i.e. A.Y.2010-11, Union of India has f iled appl ication d ated 08.03.2019 f or revival of res titution appl ication claiming Rs. 7,33,01,870.00 as on 02.03.2019. In addition, UO I is claiming over Rs. 73 lakhs with interest in respect of work at P ithorag arh. On caref ul perusal of docu men ts, I am in agree men t with AO's vie w th at the Co mp any had received t wo claims i.e. the claim of Rs. 6,88,24,806/- on account of Arbitration A ward dated 22.4.2008, wh ich was rece ived during F.Y. 2010-11 & F.Y. 2009-10 respectively, in respect of Contract Agree men t No. CENW-46/65-66 and o ther a ward received vide Court order dated 20.11.2002. T he order dated 20.01.2010 of the Hon'ble Supre me Court is clear that the Arbitr ation Award dated 22.04.2008 rece ived in the F. Y. 2010-11 & F. Y. 2009-10 was co mpletely se ttled ad no f urther appe al/res titu tion appl ication is pend ing in respect of this claim, whereas the Res titu tion applic ation f iled by the Govern ment was in respect of the claims rece ived by the assessee co mp any in the year 2002 or f or work execu ted at Nahan and P ithorag arh. Hence, award rece ived on work contr ac t at K aus ali and A mb ala are considered as f inal.10
ITA No 1516, 1517 & 1515/Chd/2019 M/s. H.S. Tuli & Sons Builders Pvt. Ltd.
4.2.4. T he undisputed f ac t is that there was cancellation of t wo contr acts i.e. one at Nah an and another at Pithor agarh, disputes and diff erences arose bet ween the parties and consequently running or f in al paymen ts agains t work-done were withheld on all contr acts in an tic ip ation of alleged extr a cost involved in co mpleting lef t over work and wh ich resulted in multipl icity of arbitr ation/l itig ation. T he moot charac ter of contr ac ts under arbitr ation is th at appellan t has executed the contr ac ts and in order to execute these con trac ts he h as to make necessary expenses. Durin g assess ment proceedings, appellan t has submitted that "(vi) That wh ile all the works were going on s moo thly, trouble star te d with the work at N aha in 1971. Due to site conditions, l arge scale extr a and addition al work was ordered and executed at site of work. The contr ac t amount of Rs. 24 lakhs al mos t doubled but the rev ised ad min is trative approv al could no t be obtained by the concerned paying au thority who in order to avoid mak ing payment, wrongf ully cancelled the contr act in Aug 1973. T he con trac tor had continued working f or al most two years without paymen t investing h is monies by selling his house in Delh i (no w v alued at about Rs. 20 crores), selling show-roo m plo t on Madhya Marg Chandig arh (no w valued at about Rs. 25 crores) and also mortg aged house4 No. 359, Sector -9D, Chandigarh. T he contr ac tor h ad also diverted f unds f rom his other works in the hope of getting paymen t and co mp leting the Nah an work. (v ii) T hat with great dif f icul ty and using je welry of f amil y me mbers, the work at Solan, Kas auli and Jhakhri were co mp leted under heavy losses but the work at Pithor agarh could not be co mpleted and was also cancelled. T he contr ac tor from plenty became penniless and suf f ered tragedy in the f amily in the 11 ITA No 1516, 1517 & 1515/Chd/2019 M/s. H.S. Tuli & Sons Builders Pvt. Ltd.
death of my gr andf ather. Unable to continue business, Lakhb ir Singh T uli wen t abro ad and is no w settled in C anada. (viii) T hat I 1978, one contr ac t at Dh arams al a and f ive contr acts in J&K were allotted and wh ile the wo rk was in progress the MES Off ice at Pithoragarh and Nah an sent letters f or recovery claiming damages and extr a cos t in execu ting cancelled works. Even the Inco me T ax Depar tmen t at Chandig arh also initiated certain recovery proceedings. Due to stopp age of running payment, the contractor was able to co mple te one work in J&K only but all other f ive con trac ts were c ancelled. While runn ing f rom pillar to post to get so me in terim relief to survive, great tr agedy struck the f amil y when I lost my only son in an acciden t. ( ix) T hat since f urther business stopped Maj. Balbir Singh T uli and Balkr ishen Singh T uli also lef t India and are no w in USA. S. Harb ans Singh T uli shattered due to loss in business built since 1936 and tr agedies in the f amily, died of hear t attack in June, 1982. In the me an time and in vie w of the f acts and circu ms tances, loss re turns were f iled but of the Act accepted and af ter depos it of tax, recovery was withdr awn by T ax Au thorities at Chandig arh....[T hough appellan t h as no evidence to support the sub miss ions on expenses]". In the nor mal circu ms tances, if af ter co mpletion of these contr acts he gets pay men t f rom the MES Dep artmen t he would have off ered excess of receip t and expenses as inco me f or tax atio n. Here in the ca se of the appellan t when dispute ar isen on Nahan & Pithorag arh Works running or f inal p ayments ag ainst work- done, the Works f rom where ar bitr ation award has been rece ived were also withheld in an ticipation of alleged ex tra cost involved in co mpleting lef t over wo rk. T his very f act envis ages th at though appellant h as incurred expenses but f inal pay men t 12 ITA No 1516, 1517 & 1515/Chd/2019 M/s. H.S. Tuli & Sons Builders Pvt. Ltd.
of Contrac t Works was not made to the appellant being withheld by the MES Depar tmen t. No w appell ant has received the s aid f inal payments by way of Arbitr ation A ward amounting to Rs. 4,05,439/- f or A.Y.2010-11 and Rs. 6,88,24,806/- f or A.Y.2011-12. It is my considered opin ion th at only ele ment of prof it can be brought to tax. Question ar ises that wh at should be the bas is of prof it ele ment I c ivil construc tion activity. Again th is depends on whe ther there is a f ierce co mpe tition f or the tender, whe ther the tender has been sub mitted as a desperate atte mp t to get the job. In th is case this f act cannot be established as no evidence is avail able either with the appellan t or with the AO. Moreover books of accounts are also not av ail able in the instan t case. It is gathered that in the case of Govern ment Civil Contr actor, prof it margin is generally conf ined to margin of 10% of the Project cos t and contr ac tor af ter deducting overhead expenses off ers surplus as Net Prof it. Appellan t has also sub mitted th at his prof it & gains should be chargeable to tax @ 8% under sec tion 44AD of the Act. Since appellan t w as a sole propr ietor at the time of entering in to the said contr acts he is covered u/s 44AD of the Act. Ho wever, I have caref ully considered the f ac ts and c ircu ms tances of the case and c ame to the conclusion th at in the absence of books of account and any other supporting evidence brought on record either of the p arty and in the inte rest of presen t vision of the Inco me T ax Dep artmen t i.e. "Litig ation Man age men t" it will be saf e to bring NET PROF IT ele ment @ 8% of the arbitration award to tax. T hough it is undispu ted f act th at appell ant must have incurred certain expenses to secure arb itr ation at dif f erent judic ial au thoritie s, but appl ication of Net Prof it @ 8% will take care of above expenses claimed by the appellan t to procure 13 ITA No 1516, 1517 & 1515/Chd/2019 M/s. H.S. Tuli & Sons Builders Pvt. Ltd.
arbitr ation a war d over and above regul ar expenses. Rate of prof it on Govt. Civil Con trac tor is also strength en by the f ollo wing cases i. e. Hon'ble High Court of Punjab an d Haryana in the c ase of CIT -II, A mr its ar vs. Vidya S agar S aini [2013] 35 tax mann.co m 411 (Pun jab & Haryana) h as decided in the case of a civ il con tractor working primar ily f or the govern ment depar tment that applying 8% as net prof it r ate is no t so arbitr ary or perverse. Same vie w was taken by the Hon'ble High Cour t of Himachal Pradesh, in the case of Commissioner of Inco me- tax vs. Rakesh Mah ajan [2015] 62 tax man n.co m 158 (Himach al Pradesh) wh ile deter min ing net prof it of Govt. Civ il contr ac tor. In the c ase of Co mmiss ioner of Inco me-tax vs. Bhullar Builders (P) Ltd. [2006] 286 IT R 686 (Pun jab & Haryana), it is held that in v ie w of non- main tenance of proper books of accoun t, T ribun al adopted net prof it rte of assessee at 8 per cen t. In addition, s ince assessee h ad f iled audit accounts along with aud it report, b alance-sheet, prof it and loss account, f ixed assets and depreciation ch art T ribun al h as rightly held th at assessee was entitled to depreciation in vie w of the decis ion in the case of Chopra Bros. India L td. [2001] 252 IT R
412. Ho wever in the case of present appell ant no such audit reports, bal ance shee t etc. was sub mitted bef ore the AO or during appellate proceedings. Commiss ioner of Inco me-tax-II, A mrits ar vs. Ear th T ech Engineers [2014] 46 tax mann.co m 287 (Pun jab & Haryana) has held that Prof it of contr actor depend upon v arious f actors like place of execution of contrac t, accessib il ity of labour, r aw mater ial, etc and would, theref ore, vary f rom contr actor to contr actor and conf ir med 8% net prof it I the case of assessee-f ir m who was engaged in business of execution of govern ment contr act. By f ollo wing ab ove judic ial 14 ITA No 1516, 1517 & 1515/Chd/2019 M/s. H.S. Tuli & Sons Builders Pvt. Ltd.
pronounce ments ad pecul iar f acts of the c ase, AO is directed to restr ic t the dis allo wance to Rs. 32,435/- f or A. Y. 2010-11. T he Grounds of Appeal Nos. 1 to 3 are par tly allo wed."
5. Against the aforesaid findings of the ld. CIT (A), both the assessee as well as the Revenue are in appeal before us.
6. During the course of hearing, the ld. A/R submitted that the assessee does not wish to press Ground No.1 relating to whether the arbitration receipts are revenue or capital in nature. Hence the same is dismissed as not pressed.
7. Regarding Ground Nos. 2 to 4, the ld. A/R submitted that the limited grievance of the assessee is that the estimation of 8% of N.P. is highly excessive and given the fact that all the payments have been received by cheque, the estimation of N.P. may be brought down to a reasonable level and submitted that the same may be brought down to 6% of N.P. relying on the amended provisions of section 44AD of the Act.
8. Per Contra, the ld. D/R submitted that though the Revenue is not in appeal in A.Y. 2010-11 due to low tax effect, however, for assessment year 2011-12 the revenue is in appeal against the arbitrary estimation of N.P. by the ld. CI T (A). It was submitted that the ld. CI T (A) has considered not just the contract receipt but 15 ITA No 1516, 1517 & 1515/Chd/2019 M/s. H.S. Tuli & Sons Builders Pvt. Ltd.
also the interest element which have been awarded as part of the arbitration as business receipt which is against the decision of Hon'ble Supreme Court in case of CIT vs. B.N. Agarwala & Co., 129 Taxman 78 (SC). It was further submitted that the various jurisdictional High Court decisions relied on by the ld. CIT (A) are distinguishable from the instant case as no issue of such Arbitration Award was involved in those cases. It was accordingly submitted that the estimation of N.P. of 8% was purely on estimation and surmises without any material on record and the said findings of the ld CI T(A) deserves to be set aside.
9. We have heard the rival contentions and purused the material available on record. The limited issue that arises for consideration is estimation of net profit @ 8% on the amount of arbitration award received by the assessee. The assessee is seeking for a lower estimation @ 6% relying on the amended section 44AD of the Act. The Revenue on the other hand is contending that the estimation of 8% is on an adhoc basis and the various decisions relied upon by the ld CI T(A) are distinguishable. Firstly, coming to the assessee's contention, we find that before the ld CI T(A), the assessee in its grounds of appeal had contended that the whole of the receipts towards the arbitration award cannot be brought to tax and it should be restricted to net profit rate of 8% as per section 44AD of 16 ITA No 1516, 1517 & 1515/Chd/2019 M/s. H.S. Tuli & Sons Builders Pvt. Ltd.
the Act. Therefore, we find that where the ld CI T(A) has accepted the assessee's contention and has applied net profit @ 8%, the assessee has come in appeal before us and has sought further relief which amounts to fresh claim and relief which was not raised before the ld CI T(A). Having said that, we find that the CI T(A) has stated that various factors are relevant for estimating net profit rate such as nature of competition at the time of tendering, the estimation of costs at the relevant point in time, actual incurrence of expenditure, maintenance of books of accounts etc. It was held by the ld CI T(A) that neither the assessee nor the AO has been able to bring into record these evidences and even the books of accounts are not available. In such circumstances, the ld CIT(A) has proceeded to seek guidance from the provisions of section 44AD as well as various judicial pronouncements of the higher authorities wherein the matter relating to estimation of profits in the case of assessee involved in civil contracts was concerned and has held that it would be reasonable to estimate net profit @ 8% of the arbitration receipts. Here, it is relevant to note that the ld CI T(A) has given due credence to the fact that the said estimation will take care of expenses that the assessee has incurred for the purpose of securing the arbitration award. Coming to the contention advanced by the ld CIT DR that the ld. CI T (A) has considered not just the 17 ITA No 1516, 1517 & 1515/Chd/2019 M/s. H.S. Tuli & Sons Builders Pvt. Ltd.
contract receipt but also the interest element which have been awarded as part of the arbitration as business receipt which is against the decision of Hon'ble Supreme Court in case of CIT vs. B.N. Agarwala & Co(Supr a). We have gone through the order of the ld CI T(A) and find that the ld CI T(A) infact has relied upon the said decision of the Hon'ble Supreme Court and held that interest on arbitration award cannot be treated as income from other sources as it partakes the colour of business receipts and has to be assessed as business receipts. We therefore find that the ld CIT(A) has passed a very reasoned order taking into consideration the peculiar facts and circumstances of the case and various judicial pronouncements on the subject and therefore, we don't find any justifiable basis to disturb the said findings of the ld CIT(A). In the result, the grounds of appeal taken by the assessee are dismissed.
10. In respect of ground nos. 5, 6 & 7, the ld. A/R basically submitted that the ld. CIT (A) has erred in confirming the interest income without giving the benefit of allowable deduction under section 57 of the Act.
11. Per Contra, the ld. D/R supported the findings of the ld. CI T (A) and submitted that the only contention which has been raised before the ld. CIT (A) relates to rate of interest being lower than the 18 ITA No 1516, 1517 & 1515/Chd/2019 M/s. H.S. Tuli & Sons Builders Pvt. Ltd.
rate of inflation and as a result the said amount was not offered to tax. It was submitted that the ld. CI T (A) has rightly held that there was no such provision in the Act to accept such arguments and the contention raised by the assessee was accordingly rejected.
12. We have heard rival contentions and perused the material available on record. We agree with the findings of the ld CI T(A) that one has to go by the provisions of the IT Act and has to see whether any expenditure has been incurred for the purposes of earning the interest income. In the instant case there is no such evidence which has been brought on record that the assessee has incurred any expenditure which calls for allowance under section 57 of the Act. In the result, the grounds of appeal taken by the assessee are dismissed.
13. In the result, the assessee's appeal in ITA No. 1516 for A.Y 2010-11 is dismissed.
14. For A.Y 2011-12, both the parties fairly submitted that the facts and circumstances of the case are exactly identical and contentions raised therein be considered for disposing off these appeals. Therefore, basis discussion and findings in I TA No. 1516/CHD/2019, the respective grounds of appeal taken by the 19 ITA No 1516, 1517 & 1515/Chd/2019 M/s. H.S. Tuli & Sons Builders Pvt. Ltd.
assessee in ITA No. 1515/CHD/2019 and by the Revenue in ITA No. 1515/CHD/2019 are dismissed and both the appeals are thus dismissed.
15. In the result, both the appeals are dismissed.
Order pronounced on 14.06.2022.
Sd/- Sd/-
( SANJAY GARG ) (VIKRAM SINGH YADAV)
याय क सद य/Judicial Member लेखा सद य/Accountant Member
Dated: 14.06.2022
*Das *
आदे श क % त&ल'प अ*े'षत/ Copy of the order forwarded to :
1. अपीलाथ+/ The Appellant
2. %,यथ+/ The Respondent
3. आयकर आय-
ु त/ CIT
4. आयकर आयु-त (अपील)/ The CIT(A)
5. 'वभागीय % त न0ध, आयकर अपील य आ0धकरण, च2डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File आदे शानस ु ार/ By order, सहायक पंजीकार/ Assistant Registrar Draft dictated 19.04.2022 Sr.PS Draft placed before author 20.04.2022 Sr.PS Approved Draft comes to the Sr.PS/PS 14.06.2022 Sr.PS Order signed and pronounced on 14.06.2022 File sent to the Bench Clerk 14.06.2022 Sr.PS Date on which file goes to the AR 20 ITA No 1516, 1517 & 1515/Chd/2019 M/s. H.S. Tuli & Sons Builders Pvt. Ltd.
Date on which file goes to the Head Clerk.
Date of dispatch of Order.
21
ITA No 1516, 1517 & 1515/Chd/2019 M/s. H.S. Tuli & Sons Builders Pvt. Ltd.