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Income Tax Appellate Tribunal, JAIPUR BENCHES, JAIPUR
Before: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA. No. 981/JP/2016
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh fot; ikWy jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA. No. 981/JP/2016 fu/kZkj.k o"kZ@Assessment Years : 2013-14 cuke Kumawat Contractors, Deputy Commissioner of Vs. 48, Ram Nagar, Kalwar Road, Income Tax, Circle-03, Jhotwara, Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABFK8231C vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri S.L. Jain (Advocate) jktLo dh vksj ls@ Revenue by : Shri A.S.Nehara(JCIT) lquokbZ dh rkjh[k@ Date of Hearing : 14/12/2017 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 18 /12/2017 vkns'k@ ORDER
PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of Ld. CIT(A), Jaipur dated 06.09.2016 for Assessment Year 2013-14 wherein the assessee has taken the following grounds of appeal:- “1. That the ld. Appellate authority was not justified in disallowing the interest of Rs. 24,47,674 paid to third parties and adopting the rate of Profit higher @ 6% before allowing partner’s Salary, Interest and Depreciation.
2 ITA No. 981/JP/2016 Kumawat Contractors, Jaipur vs. DCIT, Jaipur
That Rs. 279,662/- wrongly added in Income instead of allowing set off from the Interest payment. 3. That Rs. 354,118/- wrongly confirmation of disallowance u/s 40(a)(ia) of the I.T. Act.”
In the Ground No. 1 of appeal, the assessee has challenged disallowance of interest paid to 3rd parties amounting to Rs. 24,47,674/- and also adoption of the net profit rate of 6% as against 5.26% declared by the assessee.
Briefly stated, the facts of the case are that the appellant is a civil Contractor carrying out construction work for Rajasthan Housing Board. During the year under consideration, the appellant has declared a turnover of Rs. 21,93,09,335/- and Net Profit of Rs. 1,15,51,587/- before allowance of interest, depreciation and remuneration to partners determining the NP rate of 5.26% as compared to 5.20% in immediately preceding year.
The AO rejected the books of accounts u/s 145(3) and applied NP rate of 8% subject to allowance of depreciation, interest to partners, and remuneration to partners and interest to banks and others. During the appellate proceedings before ld. CIT(A), it was admitted by the appellant that it was not maintaining stock register and has thus has not challenged the rejection of books of accounts which was confirmed by the ld. CIT(A) and is not therefore not under challenge before us.
Following the earlier orders of the Co-ordinate Bench for AY 2008-09 and 2009-10, the ld. CIT(A) estimated the N.P rate of 6%
3 ITA No. 981/JP/2016 Kumawat Contractors, Jaipur vs. DCIT, Jaipur
before interest, depreciation and remuneration as against 5.26% declared by the appellant.
During the course of hearing, the ld. AR submitted that there is increase in turnover from the previous year and which has resulted in slight reduction in N.P rate as compared to previous years but at the same time, the same is better than the N.P rate declared in the immediate preceding year. Hence, the N.P rate declared by the assessee should be confirmed.
We have heard the rival contentions, purused the material available on record and given a careful consideration to the factual matrix of the case. We find that in the past years, the Coordinate Benches have been taken a consistent view of determining the N.P rate of 6% in assessee’s own case. During the appellate proceedings, the assessee has himself submitted before the ld CIT(A) that the previous year order may be followed. Following the past history of the assessee and consistent position taken by the Co-ordinate Benches, we upheld the NP rate of 6% before depreciation, interest and remuneration.
Regarding further allowance of Rs. 24,47,674/- paid to banks and others by the assessee from the N.P rate so determined, the ld. CIT(A) has denied the said claim following earlier orders of the Co-ordinate Bench. In this regard, the contention of the ld. AR is that in the earlier years, the assessee had not claimed any interest payment to third parties, hence, there was no occasion for the Tribunal to consider any allowance in respect of such third party interest. It was accordingly submitted that the ld. CIT(A) was not correct in rejecting the claim of interest paid to third parties. We find that the said contention by the ld
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AR need further examination and in absence of sufficient evidence on record in terms of past returns of income as well as the orders of the Co-ordinate Benches, we set aside this matter to the file of ld. CIT(A) to verify the said contention of the ld.AR and decide the same afresh as per law.
Regarding the 2nd ground of appeal, the ld. CIT(A) has held that 9. the earning of interest income on income tax refund and sales tax refund has nothing to do with the business of the appellant. Further, the appellant has not placed on record any material to suggest that interest on bank deposit was linked to its business activities and thus it is held that the AO has rightly treated Rs. 2,79,662/- as non operating income and adding the same separately to the income of the appellant. We donot see any infirmity in the said findings of the ld CIT(A) and the same is hereby confirmed.
Regarding the 3rd ground of appeal, during the year under 10. consideration, the appellant had not deducted TDS on interest of Rs. 3,54,118/- paid to Religare Finvest Ltd. which was disallowed by the AO invoking section 40(a)(ia) of the Act. The ld CIT(A) upheld the disallowance following the decision of Hon’ble Punjab and Haryana High Court in the case of P.M.S. Diesels Vs. CIT (2015) 277 CTR 0491 (P&H). The said decision has since been affirmed by the Hon’ble Supreme Court in case of Palam Gas Services (civil appeal no. 5512 of 2017) dated 3.5.2017. Hence, respectfully following the same, the AO is held justified in making disallowance of Rs. 3,54,118/- u/s 40(a)(ia) of the Act.
5 ITA No. 981/JP/2016 Kumawat Contractors, Jaipur vs. DCIT, Jaipur In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 18/12/2017
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