Cobra Instalaciones Y Servicios Sa, New ... vs Department Of Income Tax
- CitationITA No. 3820/Del/2011
Ratio decidendi
The rule this decision rests on
The insertion of sub-section (2) in section 44BBB by the Finance Act, 2003 is to be construed as a clarificatory amendment and therefore applies retrospectively, so that the assessee may be assessed under that sub-section for assessment year 2003-04 even though the amendment was stated to take effect from assessment year 2004-05, the reasoning being that the provision is treated as clarifying the position on the same footing as the earlier decided analogous sub-section (3) of section 44BB, as already held in the assessee's own case for assessment years 1996-97 and 1997-98. Where the Assessing Officer has not disputed the genuineness of the expenditure claimed or the correctness of the books of account, and the assessee has maintained books and obtained an audit report as required under sections 44AA and 44AB, the assessee is entitled to the benefit of sub-section (2) of section 44BBB and the profits and gains from the erection part of the contract are to be recomputed on the basis of those books without applying the deeming provision of section 44BBB(1).
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
ADIT, vs. Cobra Instalaciones Y Servios SA, Circle 1(1), International B-324, New Friends Colony, Taxation, 204, Drum Shaped Bldg., New Delhi. I.P. Estate, New Delhi. AAACC3459Q (Appellant) (Respondent)
Appellant by: Smt. Parwinder Kaur, Sr. DR Respondent by: Sh. Hiren Mehta, CA
ORDER PER A.T. VARKEY, J.M.
This is an appeal preferred by the assessee against the order of the CIT(A)-XXIX, New Delhi dated 31.05.2011, for A.Y. 2003-04
2. The solitary issue raised in the departmental appeal relating to A.Y. 2003-04 is as under:
"On the facts and in the circumstances of the case, the ld. CIT(A) has erred in holding that sub-section (2) of section 44BBB is retrospective in nature and hence applicable for A.Y. 2003-04, without appreciating that the same has been inserted specifically w.e.f. 01.04.2011[applicable from A.Y. 2004-05]."
3. Dealing with the aforesaid issue, we find that CIT(A) has noted that sec. 44BBB(2) was inserted Finance Act, 2003, w.e.f. 1st April, 2004 and, therefore, he held that the only issue for consideration is whether provisions of sub-section (2) of section 44BBB would apply in relation to assessment year 2004-05 and onwards or insertion of sub-section (2) in section 44BBB by the Finance Act, 2003 should be construed as clarificatory amendment and, accordingly, to be applied retrospectively.
4. Thereafter he has adjudicated said issue was as under:
ITA No. 3820/D/2011 2 "Identical issue was involved in the A.Y. 1996-97 & 1997-98 in the appellant's own cases. The AO applied the provisions of section 44BBB and completed the assessments by estimating the income at the rate of 10% of the contract receipts. However, the assessments were set aside by the CIT(A) in the appeal filed by the appellant for both the assessment years. It was held that provisions of sec. 44BBB could not be applied to the case of the appellant on facts as well as law. The department preferred an appeal against the orders of the ld. CIT(A) for both the assessment years 1996-97 and 1997-98. The ITAT dismissed the appeals of the department vide order dated 10.03.2006 in ITA No. 3910/Del/2002 and confirmed the decision of CIT(A). The ITAT directed the AO to re-compute the income of the appellant, albeit on different ground. The ITAT, relying upon the decision of Delhi Bench of Tribunal in the case of Technip Italy Spa Vs. ACIT 150 Taxman 13, held that the amendment made by the Finance Act, 2003, i.e., insertion of sub-section (2) in section 44BB, was to be understood as a clarificatory amendment and thus was retrospective in operation. The relevant portion of the judgment of ITAT is reproduced below:
"We find that the position before us stands on a similar footing as was before the Tribunal in the case of Technip Italy Spa (supra). Before us also, sec. 44BB deals with presumptive taxation in case of non-residents, albeit in relation to business of civil construction, etc. Similarly, sub-section (2) in sec. 44BB, inserted from the assessment year 2004-05, allows an assessee to return income lower than the presumptive income specified thereon on conditions similar to those found in section 44BB(3) of the Act. Thus, it can be safely deduced that sub-section (3) of section 44BB and sub-section (2) of section 44BBB provide for computing income in the same manner and subject to same conditions, albeit in relation to different business. Thus, the decision of the Tribunal in the case of Technip Italy Spa (supra) to the effect that insertion of sub-section (3) of sec. 44BB is clarificatory in nature is fully applicable in order to understand the nature of insertion of sub-section ITA No. 3820/D/2011 3
(2) in sec. 44BBB of the Act, which is presently before us.
Thus, sub-section (2) of sec. 44BBB is held to be clearificatory in nature and is thus applicable retrospectively. The stand of the assessee, on this issue, is thus upheld."
The AO had not made out any case that the expenditure claimed by appellant in its P&L account against the receipts from the erection part of the contract were either (i) not genuine or (ii) not wholly and exclusively incurred for the purpose of the business of the appellant. It has also not been held by the ld. AO that the books of account of the appellant were not correct or the appellant has not followed the method of accounting provided in sub-section (1) of sec. 145 or the accounting standards notified under sub-section (2) of sec. 145. The ld. AO has rejected the loss claimed by the appellant from the erection part of the contract only on the ground that deeming provisions of sub-section (1) of sec. 44BB are attracted in this case and the appellant cannot be allowed the benefit of provisions of sub-section (2) of sec. 44BBB because it was inserted later by the Finance Act, 2003 w.e.f. 1.4.2004. This issue is squarely covered by the decision of jurisdictional bench of ITAT in the appellants own case for the A.Ys. 1996-97 and 1997-98 in favour of the appellant. It is not disputed that appellant has kept and maintained such books of account and other documents as required under sub-section (2) of section 44AA and got its accounts audited and furnished a report of such audit as required u/s 44AB of the Act in compliance of the provisions of sub-section (2) of sec. 44BBB. Therefore, the ld. AO is directed to allow benefit of the provisions of sub-section (2) of sec. 44BBB to the appellant and recomputed its profits and gains from the erection part of the contract in accordance with the books of account and other documents kept and maintained by it as required under sub-section (2) of sec. 44AA of the Act without applying the deeming provisions of sec. 44BBB(1)."
ITA No. 3820/D/2011 4 5. Having considered the above, we find that in assessee's own case for A.Y. 1996-97 and A.Y. 1997-98 has held that insertion of sub-section (2) in section 44BB, was to be understood as a clarificatory amendment and thus was retrospective in operation.
6. The ld. DR has not placed on record, any material before us, so as to take a different view. So we are inclined to uphold the order assailed before us and dismiss the appeal.
7. In the result, the Department's appeal is dismissed.
Order pronounced in the open court on 13.02.2015.
-Sd/- -Sd/- (S.V. MEHROTRA) (A.T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated:13.02.2015 *Kavita, P.S.
Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, New Delhi TRUE COPY
By Order
ASSISTANT REGISTRAR
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