Law: Income Tax Act, 1961

Section: 32A

(a) Income-tax-----Income---Service charges payable to assessee---Disallowance of deduction in the hands of payer was not relevant---Amount had accrued to assessee and was taxable in its hands---Indian Income Tax Act, 1961. (b) Income-tax--- ---Investment allowance---Industrial undertaking---Construction business--¬Business of construction is not an industrial undertaking---Assessee engaged in such business is not entitled to investment allowance ---Dumpers used in civil engineering contracts are not entitled to investment allowance---Indian Income Tax Act, 1961, S.32-A. The assessee was a company engaged in the business of construction. By an agreement of partnership, dated January 6, 1977, called "Protocol", the assessee was entitled to service charges calculated at the rate of 5 per cent. of contract value from Builders International (India) Ltd. By another agreement, dated June 3, 1980, Protocol No. III, which was stated to be in supersession of the earlier Protocol, it was provided that the agreement for payment of professional fees for rendering services as leader should be treated as cancelled. During the previous year relevant to the assessment year 1980-81 a sum of Rs.2,81,331 was receivable by the assessee as service charges from Builders International (India) Ltd. The assessee claimed that in view of the above agreement, dated June 3, 1980, the amount of Rs.2,81,331 receivable by it from Builders International (India) Ltd. should not be included in its income. The Income-tax Officer did not accept this claim of the assessee. While doing so, the Income-tax Officer pointed out that as the agreement was effective from June 3, 1980, it could not apply to the service charges received or receivable in the year ending June 30, 1979. The Commissioner of Income-tax (Appeals) upheld the order. The only ground of the assessee before the Tribunal in support of its claim was that in the assessment of Builders International (India) Ltd., the management fees having been disallowed by the Department, it could not be included in the case of the assessee. The Tribunal accepted the above contention of the assessee and held that the amount of service, charges receivable…

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