High Court Of Punjab & Haryana
CIT vs. Pran Nath Gupta
Section 37
Asst. Year 1986-87
Adarsh Kumar Goel & Gurdev Singh, JJ.
IT Ref. No. 36 of 1996
13th November, 2009
Counsel Appeared :
Ms. Urvashi Dhugga, for the CIT : Rajiv Sharma for S.K. Mukhi, for the Assessee
JUDGMENT
By the court :
The Tribunal, Chandigarh Bench, has referred the following question of law for opinion of this Court arising out of its order dt. 28th July, 1995, in ITA No. 424/Chd/1990 for the asst. yr. 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 subcontractors. In the absence of evidence to substantiate the said payments, the AO made assessment by applying a net profit rate of 10 per cent, of the contract receipts, disallowing deduction of the amount said to have been paid by him to the sub-contractors. This view was upheld by the CIT(A) but the Tribunal upheld the claim of the assessee by observing that the assessee had maintained accounts of the sub- contractors in the books of account and had sought appointment of commission for examination of the sub- contractors, who were located at different stations. The Tribunal also followed its order in another case and also referred to the affidavits filed by the assessee that certain jobs had been assigned to the 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 subcontractors. 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 the agreement dt. 10th Dec., 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 AO is directed to deduct Rs. 6,20,000 from the total contract receipts.”
3. We have heard learned counsel for the parties.
4. The question whether a particular deduction is to be allowed or 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.
[Citation : 328 ITR 165]
