Itta/295/2011 Of The Commissioner Of Income Tax -Iv v. M/S. Meghadoot Drillers

THE HON’BLE SHRI JUSTICE SANJAY KUMAR I.T.T.A. No. 295 OF 2011 DATED:22-11-2011 Between:Commissioner of Income Tax, Hyderabad. … Appellant And M/s. Meghadoot Drillers,Nagarkurnool, (PO),Mahabubnagar District. … Respondent THE HON’BLE THE CHIEF JUSTICE SHRI MADAN B. LOKURANDTHE HON’BLE SHRI JUSTICE SANJAY KUMAR I.T.T.A. No.295 OF 2011 JUDGMENT:(per the Hon’ble the Chief Justice Shri Madan B. Lokur) 1. The Revenue is aggrieved by an order dated 30.5.2008 passed bythe Income Tax Appellate Tribunal, Hyderabad Bench ‘B’ SMC,Hyderabad in I.T.A. No. 154/Hyd/2008 for the assessment years 1997-98to 2000-2001. 2. The only question that came up for consideration before theTribunal was whether the digging of bore wells amounts to a WorksContract within the meaning of Section 44AD of the Income Tax Act,1961 (for short ‘the Act’). 3. During the relevant period, in respect of an assessee engaged inthe business of civil construction or supply of labour for civilconstruction, a sum equivalent to 8 per cent of the gross receipts paid orpayable, to the assessee in the previous year on account of suchbusiness or, as the case may be, a sum higher than the aforesaid sumas declared by the assessee in his return of income, shall be deemed tobe the profits and gains of such business chargeable to tax under thehead “Profits and gains of business or profession”. 4. In the explanation to that Section, civil construction was defined toinclude the construction or repair of any building, bridge, dam or otherstructure or of any canal or road and the execution of any workscontract. ITTA No. 295 of 2011 page 1 of 3 5. The Central Board of Direct Taxes had issued Circular No. 684, dated 10.6.1994 in which it was stated that Works Contract willinclude works related to electrical fittings, plumbing job, landscapingetc. 6. Relying upon the aforesaid Circular, the Tribunal came to theconclusion that the works mentioned in the Circular are directlyconnected with civil construction and therefore they are to be consideredfor the application of Section 44AD of the Act. In so far as the digging ofborewells is concerned, that would not fall within any of the aforesaidcategories included in the Circular and therefore, could not be defined asa Works Contract. 7. The Tribunal also was of the opinion that digging of borewell is notall connected with civil construction since any borewell may be dug evenafter civil construction is completed and that this is altogether a differentjob, not connected with the civil construction. On the above basis, theTribunal decided in favour of the assessee and came to the conclusionthat the digging of borewell would not fall within the category of WorksContract within the meaning of Section 44AD of the Act. 8. Feeling aggrieved, the Revenue is before us and it is submittedby learned counsel that the Circular issued by the Board is broad enoughto include within it digging of borewells as a part of Works Contract. 9. We are not inclined to accept the contention of learnedITTA No. 295 of 2011 page 2 of 3 counsel for the Revenue. In our opinion, the interpretation givenby the Tribunal to the Circular is quite reasonable and in any event, evenif the interpretation may not be strictly in conformity with the Circular, nosubstantial question of law arises in this regard. 10. Under these circumstances, we are not inclined to entertainthis appeal. The appeal is accordingly dismissed. MADAN B. LOKUR, CJ 22-11-2011 SANJAY KUMAR, J pnb ITTA No. 295 of 2011 page 3 of 3