What did the Tribunal hold?

The Tribunal decided to add 50% of the machinery hire charges to the assessee's income, considering that the income had already been estimated at 8% and to balance the contentions of both parties.

The Assessing Officer (AO) added machinery hire charges to the assessee's income and estimated profit at 12.5% on gross receipts. The Commissioner (Appeals) reduced the estimated profit to 8% but sustained the addition for machinery hire charges, considering it a separate activity.

What were the issues?

Whether machinery hire charges, considered a separate business activity, should be added to income when the assessee's regular business income has already been estimated. The quantum of addition for such hire charges.

Mettupalayam Sabapati Palanivelu vs ITO | ITAT Visakhapatnam 2021

Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM

Before: SHRI N.K. CHOUDHRY, HON’BLE & SHRI D.S. SUNDER SINGH, HONBLE

For Appellant: Shri C.Subrahmanyam, FCA

For Respondent: Shri B.Rama Krishna, Sr.DR

Hearing: 13/09/2021

O R D E R PER BENCH

This appeal has been preferred by the Assessee against the order dated 03/05/2019 impugned herein passed by the ld. Commissioner of Income Tax (Appeals)-2 [for short, “ld. Commissioner”], Guntur u/sec. 250(6) of the Income Tax Act, 1961 (hereinafter referred to as "Act") for the A.Y. 2013-14.

Having heard the parties and perused the material available on record. Though, the Assessee has raised five grounds of (Mettupalayam Sabapati Palanivelu)

appeal, however, at the time of hearing, he confined only to ground No.2 which relates to confirmation of addition made by the AO on the gross receipts pertaining to machinery hire charges.

The AO considered the machinery hire charges at Rs.9,82,500/- and added the same to the income of the Assessee and also estimated the income @ 12.5% on the gross receipts, against which the Assessee went on appeal before the Ld. Commissioner. The Ld. Commissioner scaled down the estimated income to 8%, however, sustained the addition qua machinery hire charges received from others whenever the machinery is not used for his own business by holding that the Assessee’s regular business has no connection with the hiring machinery activity. Regular business is separate and hiring machinery is a separate activity. The Ld. Commissioner further held that the AO has estimated profit only on Assessee’s regular business.

Ld. AR during the course of argument emphasised that because income of the Assessee has been estimated at 8% by the Ld. Commissioner, therefore no separate addition is warranted. Ld. AR, alternatively, prayed for sustenance of addition @ 25% of the machinery hire charges.

On the other hand, ld. DR though refuted the claim of the Assessee, however contended for affirmation of addition at least to the extent of 50% of the receipts.

Considering the peculiar facts and circumstances as the income of the Assessee has already been estimated @8% and accepted by the parties, however, as prayed for by the Assessee

(Mettupalayam Sabapati Palanivelu) and agreed by the Ld DR, for the ends of justice we deem it appropriate to add 50% of the machinery higher charges in the income of the Assessee instead of 100% of the gross receipt on that account as done by the authorities below. Hence ordered accordingly.

In the result, appeal filed by the Assessee is partly allowed.

Order Pronounced in open Court on this 23rd day of Sep., 2021.

METTUPALAYAM SABAPATI PALANIVELU,VISAKHAPATNAM vs. THE INCOME TAX OFFICER, WARD-1, SRIKAKULAM

What did the Tribunal hold?

What were the facts?

What were the issues?

Which sections of the Income-tax Act were involved?

Recent GST High Court judgments