C.I.T. PATIALA vs. SH. PRAN NATH GUPTA

ITR No. 36 of 1996 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITR No. 36 of 1996 (O&M) Date of decision: November 13, 2009 The Commissioner of Income Tax, Patiala ...Appellant Versus Shri Pran Nath Gupta

...Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE GURDEV SINGH Present: Ms. Urvashi Dhugga,Advocate for the appellant. Mr. Rajiv Sharma, Advocate, for Mr. S.K. Mukhi, Advocate, for the respondent. ORDER 1. Income-Tax Appellate Tribunal, Chandigarh Bench, has referred following question of law for opinion of this Court arising out of its order dated 28.7.1995 in ITA No. 424/Chandi/90 for the assessment year 1986-87:- “Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing the deduction of Rs. 6,20,000/- on account of payments made to the sub- contractors from the gross contract receipts ? ” 2. The assessee was engaged in business of construction work as a contractor and claimed deduction on account of payments made to sub-contractors. In absence of evidence to substantiate the said payments, the Assessing Officer made assessment by applying net profit

ITR No. 36 of 1996 2 rate of 10% of the contract receipts, disallowing deduction of the amount said to have been paid by him to sub-contractors. This view was upheld by CIT (A) but the Tribunal upheld the claim of the assessee by observing that the assessee had maintained account of the sub-contractors in the books of accounts and had sought appointment of commission for examination of sub-contractors, who were located at different stations. The Tribunal also followed its order in another case and also referred to affidavit filed by the assessee that certain jobs had been assigned to sub-contractors. The observations of the Tribunal are as under:- “5. We have considered the rival contentions and we are of the view that sufficient evidence was made available by the assessee to establish that the payments had been made to the sub-contractors. Affidavits had been filed and the assessee had also agreed to bear the expenses on issuance of commission for the purpose of examining the sub- contractors. Copy of agreement dated 10.12.1984 made it clear that the assessee did assign certain job to the sub- contractors. We have already seen that the practice of sub- letting of contractor was common and the Tribunal has taken a consistent view that payments made to sub- contractors may be allowed as a deduction. We find that ground No. 2 must succeed. The A.O. is directed to deduct Rs. 6,20,000/- from total contract receipts.” 3. We have heard learned counsel for the parties. 4. Question whether a particular deduction is to be allowed or

ITR No. 36 of 1996 3 not and whether material in support of claim was sufficient depends on the facts and circumstances of each case. In the present case, the Tribunal has referred to material justifying deduction. In view thereof, the Tribunal was right in permitting the deduction. 5. Accordingly, reference is answered against the revenue and in favour of the assessee. 6. Reference is disposed of. (ADARSH KUMAR GOEL) JUDGE November 13, 2009 (GURDEV SINGH ) prem

JUDGE