COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION Vs. SHANDONG TIEJUN ELECTRIC POWER ENGINEERING CO LTD

JUDGEMENT

(1.) Revenue is in appeal against the judgement of the Income Tax Appellate Tribunal dated 18.01.2017 raising the following questions for our consideration:

(2.) Respondent-assessee is a foreign company engaged in execution of turnkey projects. In terms of section 44BBB of the Act, the income of the assessee would be taxed at a presumptive rate of 10% of the amount paid or payable to the assessee or any person on behalf of the assessee under subsection (2) of section 44BBB of the Act if the assessee satisfies certain conditions therein. Assessee could claim lower profit and gain than what is referred in sub-section (1). Assessee availed of such provision of sub-section (2) of section 44BBB of the Act while filing the return before the Assessing Officer. The Assessing Officer was not satisfied on various grounds, principally, that the assessee had followed the accounting system of AS-7 which was not applicable, the assessee should have offered tax in terms of section 44BBB of the Act and lastly that in any case the assessee had not followed the correct method of determining the stage of completion of the contract and the accounts of the assessee were not reliable. The Assessing Officer after putting the assessee to notice rejected the assessee's accounts and taxed the assessee under sub-section (1) of section 44BBB of the Act.

(3.) The assessee carried the matter in appeal before the Commissioner. Commissioner held in favour of the assessee. The Commissioner held that the accounting standard AS-7 was applicable to the assessee. The assessee had pointed out to the Assessing Officer that the true cost of the project was estimated on the basis of experience of the assessee in executing similar works in the past. The assessee had also submitted detailed break-up of the estimated profit and loss account for the entire project for five financial years. The assessee had also submitted the details of the budgeted costs to the revenue. The assessee had produced the audited financial statements during all the financial years. The Commissioner had the benefit of further developments by the time the appeal was disposed of and noted that the financial statements of the financial years 2009-10 and 2010-11 were available which were submitted before him by the assessee which matched the estimated costs presented by the assessee before the Assessing Officer. The Commissioner also noted that the entire project was completed and the total income was offered to tax. The Commissioner therefore relied and referred to the decision of this Court in case of Commissioner of Income Tax v. Advanced Construction Co. (P) Ltd. reported in 2005 (275) ITR 30 and reversed the order of the Assessing Officer.