The Commissioner Of Income Tax, Patiala v. Shri Pran Nath Gupta

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH ITR No. 36 of 1996 (O&M)Date of decision: November 13, 2009 The Commissioner of Income Tax, Patiala ...Appellant Versus Shri Pran Nath Gupta ...Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOELHON'BLE MR. JUSTICE GURDEV SINGH Present: Ms. Urvashi Dhugga,Advocate for the appellant.Mr. Rajiv Sharma, Advocate, for Mr. S.K. Mukhi, Advocate, for the respondent. ORDER 1. Income-Tax Appellate Tribunal, Chandigarh Bench, hasreferred following question of law for opinion of this Court arising outof its order dated 28.7.1995 in ITA No. 424/Chandi/90 for theassessment year 1986-87:- “Whether, on the facts and in the circumstances of the case,the Tribunal was right in law in allowing the deduction ofRs. 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 workas a contractor and claimed deduction on account of payments made tosub-contractors. In absence of evidence to substantiate the saidpayments, the Assessing Officer made assessment by applying net profit rate of 10% of the contract receipts, disallowing deduction of theamount said to have been paid by him to sub-contractors. This viewwas upheld by CIT (A) but the Tribunal upheld the claim of theassessee by observing that the assessee had maintained account of thesub-contractors in the books of accounts and had sought appointmentof commission for examination of sub-contractors, who were located atdifferent stations. The Tribunal also followed its order in another caseand also referred to affidavit filed by the assessee that certain jobs hadbeen assigned to sub-contractors. The observations of the Tribunal areas under:- “5. We have considered the rival contentions and we are ofthe view that sufficient evidence was made available by theassessee to establish that the payments had been made tothe sub-contractors. Affidavits had been filed and theassessee had also agreed to bear the expenses on issuance ofcommission for the purpose of examining the sub-contractors. Copy of agreement dated 10.12.1984 made itclear 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 hastaken a consistent view that payments made to sub-contractors may be allowed as a deduction. We find thatground No. 2 must succeed. The A.O. is directed to deductRs. 6,20,000/- from total contract receipts.” 3. We have heard learned counsel for the parties. 4.Question whether a particular deduction is to be allowed or ITR No. 36 of 1996 not and whether material in support of claim was sufficient depends onthe facts and circumstances of each case. In the present case, theTribunal 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. (ADARSH KUMAR GOEL) JUDGE November 13, 2009 prem (GURDEV SINGH ) JUDGE