DIRECTOR OF INCOME TAX Vs. SKANSKA CEMENTATION INTERNATIONAL LTD.
LAWS(GJH)-2016-7-387
HIGH COURT OF GUJARAT
Decided on July 28,2016

DIRECTOR OF INCOME TAX Appellant
VERSUS
Skanska Cementation International Ltd. Respondents

JUDGEMENT

K.S.JHAVERI,J. - (1.) By way of these appeals, the appellant - Department has challenged the order dated 05/03/2010 passed by the ITAT in ITA No.46/Ahd/2007 for assessment year 1998-99, whereby the appeal of the appellant-department came to be dismissed and the appeal of the assessee came to be allowed.
(2.) The facts of the case in nutshell are as under: 2.1. The assessment under Section 143 (3) of the Income Tax Act, 1961 was finalized on 28/03/2001 determining the total income of Rs. 9,57,330/- after rejecting the book results and estimating income at the rate of 6% of gross receipts. Against such action, the assessee preferred an appeal before the CIT (A), Baroda which had confirmed the said rejection of books results by directing not to estimate the profit and make lump sum disallowance of Rs. 10 Lacs. Aggrieved by the order of CIT (A), the Revenue as well as the assessee filed an appeal before the Tribunal which were disposed of by the Tribunal by its common order dated 25/08/2005 whereby partly setting aside the orders for the assessment year 1998-99 to 2000-01 to the file of the AO to decide the issues afresh after providing opportunity to the assessee. 2.2. Pursuant to the said directions of the Tribunal, the AO finalized the set aside assessment on 27/12/2005 arriving at the assessed loss of Rs. 4,39,089 after making certain additions and disallowances which reads thus: (1) Disallowance of Rs. 1,22,94,128 by applying the provisions of section 44C of the Act. (2) Disallowance of Rs. 87,47,333/- on account of expenses incurred by sub-contractor but claimed by the assessee being for execution of work project under sub-contract. 2.3. Against the aforesaid action of the AO, the assessee again preferred an appeal before the CIT (A) who vide his order dated 31/10/2006 has given partial relief and confirmed the following additions: , Relief given:- (i) Allowed 5% of salary of Rs. 82,07,238 i.e. Rs. 4,10,362/- on guess work and confirmed the balance amount of Rs. 77,96,876/-. (ii)Allowed 5% of expenses towards air fare, visa charges and medical expenses of Rs. 15,98,355 i.e. Rs. 79,918/- on guess work and confirmed the balance amount of Rs. 15,18,448/-. (iii) Allowed electricity charges, house maintenance charges, mess food charges and wages of staff of Rs. 13,97,050/-. Confirmed additions/disallowance:- (I) Confirmed the sum of Rs. 5,97,443/- being sundry expenses and hire charges considering it as expenses being the responsibility of the sub-contractor. (II) Treated the expenses 'reimbursed to Head Office' as Head Office Expenditure' under section 44C of the Act. (III) Confirmed the disallowance of Rs. 73,50,283/- being expenses out of Rs. 87,47,333/- that have been reimbursed to Kvaerner Cementation India Limited by holding that these expenses are the responsibility of the sub-contractor. 2.4. Aggrieved by aforesaid order of the CIT (A), the Department preferred an appeal before the Tribunal whereas cross appeal was also filed by the assessee against the said decision of the CIT (A) and the Tribunal vide its common order has dismissed the appeal of the revenue while allowing the appeal of the assessee which has given rise to the present appeal.
(3.) While admitting these appeals, following substantial questions of law are posed for our consideration: "[A] Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs. 1,22,94,128/- in respect of reimbursement of expenses to Head Office? [B] Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs. 87,47,333/- made in respect of reimbursement of expenses like sundry expenses, rent, travelling expenses, car hiring expenses, etc. to sub-contractor (i.e. Kvaerner Cementation India Limited)?" ;


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