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Showing contexts for: 44BBB in The Commissioner Of Income Tax vs M/S Franco Tossi Ingegneria on 5 January, 2010Matching Fragments
(Judgment of the Court was delivered by P.P.S.JANARTHANA RAJA,J.) The appeal is filed against the order of the Income Tax Appellate Tribunal, Chennai 'A' Bench dated 23.02.2004 made in ITA No.654/Mds/97.
2. The appeal was admitted on 18.08.2004 on the following substantial questions of law:
"1.Whether in the facts and circumstances of the case, the Tribunal was right in holding that Section 44BBB cannot be applied to the assessee?
2.Whether in the facts and circumstances of the case, the Tribunal was right in holding that the loss for the entire contract can be taken into account in the current assessment year, but the assessment cannot be done under Section 44BBB on the ground that the bills for payment were all raised prior to 01.04.1990?
Income Amount Erection payments from NLC 4,13,32,672/- Specialist Services 44,57,943/- Service charges 8,40,000/- Miscellaneous receipts 12,44,317/- Difference in Exchange 11,70,200/- ------------------ 4,90,45,132/- ------------------
The assessing officer applied the provision under Section 44BBB and completed the assessment under Section 143(3) of the Act and levied 10% of the payment made by the Neyveli Lignite Corporation to the assessee and the same was charged as deemed profit under Section 44 BBB of the Act and the same works out to Rs.49,04,510/-. Aggrieved by that, the assessee has filed appeal to the Commissioner of Income Tax (Appeals), contending that the provision of Section 44BBB is not applicable to the assessee. The CIT (Appeals) accepted the contention and allowed the appeal filed by the assessee. Aggrieved by that order, the revenue has filed an appeal to the Income Tax Appellate Tribunal. The Tribunal dismissed the appeal. As against the same, the revenue preferred the present appeal.
4. The learned counsel appearing for the revenue submitted that the Tribunal is wrong in invoking Section 44BBB of the Act on the ground that the bills for the payments were raised prior to 01.04.1990. He further submitted that all conditions laid down under Section 44BBB have been fulfilled and since the entire income relates to previous year, tax under Section 44BBB would have to be paid at this stage. He further submitted that the Tribunal ought to have considered that the contract had been completed only in November, 1993, which was proved by the assessee's own letter dated 24.01.1995 and therefore, the entire income of the contract has to be brought to tax on its completion, since the amounts received earlier were all treated as advance till then. He also submitted that the income from the project accrued to the assessee only during the accounting year and therefore, as per Section 44BBB, 10% of the payment shall be deemed to be the profit which was rightly assessed by the assessing officer and the order passed by the Tribunal is not in accordance with law and the same has to be set aside.
"We had perused the assessment orders for the assessment years 1988-89 and 1989-90 found at pages 70 and 75 of the paper book and note that these two assessments have not been completed on a "No Income No Loss"basis and computation of loss returned by the assessee is accepted."
During the above two assessment years, the assessee/respondent has received a sum of Rs.3,02,10,878.21. But the assssee has filed a return of loss and the same was accepted by the Department. The total amount received by the assessee/respondent was Rs.4,90,45,132.72. Out of the said sum, Rs.3,02,10,878.21/- was received during the assessment years 1988-1989 and 1989-1990 and the balance amount of Rs.1,88,34,254.51 was received and also the same was declared in the respective returns filed for the assessment years 1986-1987, 1987-1988, 1990-1991 and 1991-1992. The assessment for all these years were completed under the provision of Section 143(3) as "NA". From these facts, it is very clear that no amount was received during the accounting year and all these amounts were received much earlier to the concerned assessment year 1994-1995. During the relevant assessment year, the assessee has filed a return of loss at Rs.5,80,69,876/-. The assessing officer should have considered the return of loss and completed the assessment in accordance with law. The CIT (Appeals) also rightly had taken a view and made observation that the assessing officer is at liberty to scrutinise the said loss and follow the normal procedure of assessment and determine the amount of loss for being carried forward to the subsequent year for set off. Therefore, the assessing officer is not justified in levying tax of 10% on the amount of Rs..4,90,45,132.72, which was received much prior to the assessment year 1994-1995. The only reason given by the assessing officer is that the assessee has written a letter dated 24.01.1995, in which, it is stated that the contract had come to an end on 5.11.1993. Because of the same the assessing officer invoked Section 44BBB of the Act. It is pertinent to point out that the assessing officer has to consider the return of loss filed by the assessee for the relevant assessment year 1994-95 by following the procedure contemplated by the Act. The mere completion of the contract alone will not be sufficient to levy 10% on the consolidated amount paid to the assessee much earlier to the assessment year 1994-95 as a deemed profit under Section 44BBB of the Act. The assessing officer cannot rely on 44BBB of the Act and levy 10% on the consolidated amount paid to the assessee by the NLC. Section 44BBB of the Act is a deeming provision, which enables the revenue to levy 10% of the amount paid or payable to the assessee and the said 10% deemed to be the profits and gains of such business under the head "Profits and gains of business". From a reading of the above provision, it is clear that unless and until the amount is paid or payable to the assessee during the year, the revenue cannot levy 10% on the gross amount. In this case, the finding given by the authorities is that nothing was paid or payable during the accounting year. The finding is that the assessee has received a sum of Rs.4,90,45,132/- much prior to the assessment year 1994-1995. To invoke the said provision there should be amount paid or payable during the accounting year. Therefore, the assessing officer is wrong in taking the consolidated amount of Rs.4,90,45,132/-, which was paid by the NLC to the assessee over the period of assessment years 1987-1988 to 1991-1992. The said consolidated amount cannot be the basis for levying 10% on the amount under Section 44 BBB of the Act. Unless and until the conditions stipulated in the deeming provision are satisfied, the revenue cannot invoke Section 44 BBB of the Act. The finding given by both the authorities is that nothing was paid or payable during the accounting year. Therefore, the finding given by the authorities are based on valid materials and it is a question of fact. It is not a perverse order. In these circumstance, we confirm the order passed by the Tribunal and the assessing officer is not justified in levying 10% on the consolidated amount, which is received much earlier to the assessment year 1994-1995 and we do not find any error or illegality in the order of the Appellate Tribunal warranting interference. We answer the questions in favour of the assessee and against the revenue. Accordingly, the Tax Case (Appeal) is dismissed. No costs.